<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 21, 1995
REGISTRATION NO. 33-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
BIG B, INC.
(Exact name of registrant as specified in governing document)
<TABLE>
<S> <C>
ALABAMA 63-0632551
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
</TABLE>
2600 MORGAN ROAD, S.E.
BIRMINGHAM, ALABAMA 35023
(205) 424-3421
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
ANTHONY J. BRUNO
2600 MORGAN ROAD, S.E.
BIRMINGHAM, ALABAMA 35023
(205) 424-3421
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
---------------------
COPIES TO:
<TABLE>
<S> <C>
RICHARD COHN, ESQ. RANDOLPH C. COLEY, ESQ.
SIROTE & PERMUTT, P.C. KING & SPALDING
2222 ARLINGTON AVENUE SOUTH 191 PEACHTREE STREET
BIRMINGHAM, ALABAMA 35205 ATLANTA, GEORGIA 30303
</TABLE>
---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable after the Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box: / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box: / /
---------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
PROPOSED
PROPOSED MAXIMUM
MAXIMUM AGGREGATE
TITLE OF SHARES AMOUNT TO BE OFFERING PRICE OFFERING AMOUNT OF
TO BE REGISTERED REGISTERED(1) PER SHARE(2) PRICE(2) REGISTRATION FEE
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, Par Value $.001
Per Share..................... 3,110,750 shares $14.875 $46,272,406 $15,956
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes 405,750 shares that may be purchased by the Underwriters, in whole
or in part, to cover over-allotments, if any.
(2) Estimated solely for the purpose of calculating the registration fee,
pursuant to Rule 457; based on the average of the high and low sale prices
for the registrant's common stock, as reported on the Nasdaq National
Market on March 15, 1995.
---------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD
BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES
LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED MARCH 21, 1995
PROSPECTUS
2,705,000 SHARES
[BIG B INC. LOGO]
COMMON STOCK
---------------------
Of the 2,705,000 shares of common stock, par value $.001 per share (the
"Common Stock"), offered hereby (the "Offering"), 2,500,000 shares are being
sold by Big B, Inc. ("Big B" or the "Company") and 205,000 shares are being sold
by certain shareholders of the Company named herein (the "Selling
Shareholders"). The Company will not receive any of the proceeds from the sale
of the shares of Common Stock being sold by the Selling Shareholders. See
"Selling Shareholders."
The Company's Common Stock is quoted on the Nasdaq National Market under
the symbol "BIGB." The last sale price of the Common Stock on March 17, 1995, as
reported on the Nasdaq National Market, was $14.125 per share. See "Price Range
of Common Stock."
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
UNDERWRITING PROCEEDS TO PROCEEDS TO SELLING
PRICE TO PUBLIC DISCOUNT(1) COMPANY(2) SHAREHOLDERS(2)
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share $ $ $ $
- ---------------------------------------------------------------------------------------------------
Total(3) $ $ $ $
- ---------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
</TABLE>
(1) The Company and the Selling Shareholders have agreed to indemnify the
Underwriter against certain liabilities, including liabilities under the
Securities Act of 1933. See "Underwriting."
(2) Before deducting expenses of the Company estimated to be $275,000 and
expenses payable by the Selling Shareholders estimated to be $1,052.
(3) The Company has granted the Underwriter an option to purchase up to 405,750
additional shares on the same terms and conditions as set forth above. If
all of the additional shares are purchased by the Underwriter, the total
Price to Public, the total Underwriting Discount, the total Proceeds to
Company and the total Proceeds to Selling Shareholders will be $ ,
$ , $ , and $ , respectively. See "Underwriting."
---------------------
The Common Stock is offered by the Underwriter, subject to prior sale,
when, as and if issued and accepted by the Underwriter, and subject to approval
of certain legal matters by counsel for the Underwriter and to certain other
conditions. The Underwriter reserves the right to withdraw, cancel or modify
such offer and to reject orders in whole or in part. It is expected that
delivery of the shares of Common Stock offered hereby will be made on or about
April , 1995.
MORGAN KEEGAN & COMPANY, INC.
THE DATE OF THIS PROSPECTUS IS APRIL , 1995.
<PAGE> 3
(INSIDE FRONT COVER)
(Photo - top) - Shown is a graph of the Company's pharmacy sales as a
percentage of total sales for fiscal years 1991
through 1995, represented by pill boxes as total sales
and the level of pills inside as total pharmacy sales.
(Photo - bottom left) - Shown is a graph of the Company's total prescriptions
filled for fiscal years 1993-1995, represented by
numbers of pills.
(Photo - bottom right) - Shown is a comparison of the Company's third party
sales as a percentage of total pharmacy sales,
represented by two medicine bottles as total pharmacy
sales and percentages as amount of third party sales.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS (AND SELLING GROUP
MEMBERS) MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON STOCK ON
THE NASDAQ NATIONAL MARKET IN ACCORDANCE WITH RULE 10B-6A UNDER THE SECURITIES
EXCHANGE ACT OF 1934. SEE "UNDERWRITING."
2
<PAGE> 4
PROSPECTUS SUMMARY
Big B, Inc. operates the Alabama stores and a wholly owned subsidiary, Big
B Drugs, Inc., operates all other stores. Reference to Big B or the Company in
this Prospectus includes Big B, Inc. and its subsidiaries. This summary is
qualified in its entirety by the detailed information and financial statements
appearing elsewhere or incorporated by reference in this Prospectus. The
information in this Prospectus has been restated to reflect a two-for-one stock
split in the form of a stock dividend distributed to holders of record on
September 17, 1993. Unless otherwise indicated, the information in this
Prospectus assumes that the Underwriters' over-allotment option will not be
exercised.
THE COMPANY
Big B, Inc. ("Big B" or the "Company") was organized in 1972 and operates a
chain of 367 stores throughout the southeastern United States. The Company
operates 339 conventional drug stores under the "Big B Drugs" format, 23 deep
discount drug stores under the "Drugs for Less" format, and five stores under
the "Big B Home Health Care Center" format. The Company is the largest drug
store chain in both Alabama and metropolitan Birmingham with 157 and 60 stores,
respectively. Big B also is one of the largest drug store chains in the state of
Georgia with 158 stores, and the Company believes it is the second largest drug
store chain in the metropolitan Atlanta market with 102 stores. The Company also
operates 24 stores in Florida, 21 in Tennessee and seven in Mississippi. The
typical Big B drug store offers pharmacy products and services, health and
beauty aids and other products.
The Company's business strategy is designed to maintain a strong pharmacy
and healthcare related business, increase the Company's market share in each
existing market and improve profitability. In implementing its business
strategy, the Company intends to focus on the Company's pharmacy operations,
emphasize market concentration, continue investment in information systems,
maintain a high level of customer service and convenience and continue
cost-control efforts.
The Company's primary business focus is the sale of prescription drugs.
During fiscal 1995, sales of prescription drugs generated 49.1% of the Company's
net sales, as compared to 41.7% in fiscal 1991. Management expects the
prescription drug business will continue to increase as a percentage of the
Company's sales and profits as a result of increased participation by the
Company in third-party payment plans, the demographic trend towards an aging
population and the continued development of new pharmaceutical products.
Third-party payment plan sales accounted for approximately 56% of the Company's
prescription sales in fiscal 1995, compared to 25% of the Company's prescription
sales in fiscal 1991.
The Company also has initiated other prescription services and programs in
an effort to increase the Company's prescription drug sales. The Company offers
employee prescription benefit programs directly to individual employers or
groups of employers, a mail-order prescription drug program, and a nursing home
pharmacy service. The Company believes there are significant opportunities for
increasing prescription drug sales through these services. The Company's
pharmacy computer system, which the Company plans to upgrade beginning in the
current fiscal year, will also be significant to the success of the Company's
pharmacy operations.
In an effort to increase sales and to take advantage of the available
economies of scale in advertising, distribution and supervision and the
competitive advantages for the Company in marketing to third-party payment
plans, the Company seeks to achieve and maintain a leading market share in each
market in which it operates by developing and acquiring stores at strategic
locations in those markets. The Company has grown from 188 stores at the
beginning of fiscal 1988 to 367 stores at the end of fiscal 1995. The Company
opened 16 drug stores in fiscal 1995 and intends to open approximately 20 to 25
new stores in fiscal 1996 and 25 to 30 new stores in fiscal 1997. The Company
acquired 13 stores in fiscal 1989, 85 stores in fiscal 1990 (including 65 stores
in metropolitan Atlanta), eight stores, primarily in Alabama, in fiscal 1991,
and certain assets of 45 stores located principally in metropolitan Atlanta in
fiscal 1994. Also, the Company acquired the inventory and pharmacy files of 25
and 31 drug stores in fiscal 1994 and fiscal 1995, respectively, for the purpose
of consolidating the inventory and pharmacy files to increase sales volume in
its existing stores in a cost effective
3
<PAGE> 5
manner. The Company intends to emphasize the development of new stores as its
primary means of expansion, but believes further consolidation of the drug store
industry may result in additional acquisition opportunities.
The Company believes that customer service and convenience are critical to
maintaining the Company's competitive advantage. The Company will continue to
emphasize service and convenience through store location and design,
merchandising programs and operating hours geared to the needs of each store's
particular market. In addition, the Company will continue to emphasize cost
control at all levels of operations. The Company intends to continue to evaluate
and pursue additional cost savings which can be obtained without affecting the
Company's customer service, quality or sales growth potential.
The Company has experienced significant growth in sales and earnings in
recent years. Net sales have increased from $488 million in fiscal 1992 to $668
million in fiscal 1995, representing an 11.1% compound annual growth rate.
Comparable store sales increased 3.1%, 8.3% and 7.1% in fiscal 1993, 1994 and
1995, respectively. Net income and net income per share (fully diluted)
increased from $6.5 million and $0.43, respectively, in fiscal 1992 to $15.1
million and $0.89, respectively, in fiscal 1995. During this period, net income
and net income per share increased at an annual rate of 32.1% and 27.4%,
respectively.
The Company is an Alabama corporation, its principal executive office is
located at 2600 Morgan Road, S.E., Birmingham, Alabama 35023, and its telephone
number is (205) 424-3421.
THE OFFERING
<TABLE>
<S> <C>
Common Stock Offered by the Company................... 2,500,000 shares
Common Stock Offered by the Selling Shareholders...... 205,000 shares
Common Stock to be outstanding after the Offering..... 18,136,510 shares(1)
Use of Proceeds....................................... To repay outstanding bank debt and to
purchase a new pharmacy computer
system. See "Use of Proceeds."
Nasdaq National Market Common Stock Symbol............ BIGB
</TABLE>
- ---------------
(1) Based on 15,636,510 shares of Common Stock outstanding at March 17, 1995,
and does not include 3,299,180 shares of Common Stock reserved for issuance
upon conversion of the Company's outstanding 6 1/2% convertible
subordinated debentures, 164,200 shares of Common Stock reserved for
issuance upon exercise of stock options granted under the Company's
employee stock option plan or 724,397 shares of Common Stock available for
the future grant of stock options under the Company's employee stock option
plan.
4
<PAGE> 6
SUMMARY FINANCIAL INFORMATION
The Company's fiscal year ends on the Saturday closest to January 31 of
that year. "Fiscal 1991" ended February 2, 1991; "fiscal 1992" ended February 1,
1992; "fiscal 1993" ended January 30, 1993; "fiscal 1994" ended January 29,
1994; "fiscal 1995" ended January 28, 1995 and "fiscal 1996" will end on
February 3, 1996. Fiscal years 1991 through 1995 include results for 52 weeks.
Fiscal 1996 will include results for 53 weeks.
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
-----------------------------------------------------------------------
FEBRUARY 2, FEBRUARY 1, JANUARY 30, JANUARY 29, JANUARY 28,
1991 1992 1993 1994 1995
----------- ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Net sales............................... $ 463,689 $ 487,890 $ 502,712 $ 595,712 $ 668,205
Gross profit............................ 135,266 146,519 153,118 183,152 207,280
Income from operations.................. 5,068 15,810 17,538 22,448 29,401
Interest expense........................ 7,382 5,660 3,582 3,909 4,435
Income (loss) before income taxes....... (2,561) 10,079 13,950 18,434 23,775
Net income (loss)....................... (1,465) 6,542 9,205 11,752 15,097
Net income (loss) per common share
Primary(1)............................ $ (0.10) $ 0.43 $ 0.60 $ 0.76 $ 0.97
Fully Diluted(2)...................... $ (0.10) $ 0.43 $ 0.60 $ 0.72 $ 0.89
OPERATING DATA(3):
Number of stores at end of period....... 310 304 304 354 367
Average net sales per store(4).......... $ 1,496 $ 1,605 $ 1,654 $ 1,683 $ 1,821
Average gross profit per store(4)....... $ 436 $ 482 $ 504 $ 517 $ 565
Comparable store sales percentage
increase(5)........................... 7.9% 4.6% 3.1% 8.3% 7.1%
Prescription sales as a percentage of
net
sales................................. 41.7% 43.4% 44.4% 46.7% 49.1%
</TABLE>
<TABLE>
<CAPTION>
JANUARY 28, 1995
-------------------------
ACTUAL AS ADJUSTED(6)
-------- --------------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital...................................................... $120,670 $132,242
Total assets......................................................... 273,492 278,064
Long-term debt and capitalized lease obligations..................... 74,268 52,568
Shareholders' investment............................................. 106,733 140,005
</TABLE>
- ---------------
(1) Primary net income (loss) per common share was computed by dividing net
income by weighted average number of primary shares of common stock
outstanding during the periods. Outstanding stock options are common stock
equivalents but were excluded from the primary net income per common share
computations as their effect was not material.
(2) Fully diluted net income (loss) per common share was determined on the
assumption that all convertible subordinated debentures were converted and
all stock options outstanding were exercised. Conversion was assumed during
the portion of each period that the debentures and the options were
outstanding. For the debentures, net income was adjusted for interest, net
of the income tax effects; for stock options, outstanding shares were
decreased by the number of shares that could have been purchased with the
proceeds from the exercise, using the end of the period price.
(3) For purposes of calculating operating data, stores include Big B Home Health
Care Centers.
(4) Averages are computed based on the number of stores open at the end of
period.
(5) The comparable store sales percentage increases are computed on the basis of
quarterly sales for stores that were open for full quarters in the
applicable fiscal year and the prior fiscal year.
(6) Adjusted to give effect to the sale of the Common Stock offered hereby by
the Company at an assumed offering price of $14.125 per share and the
application of the net proceeds therefrom. See "Use of Proceeds."
5
<PAGE> 7
USE OF PROCEEDS
The net proceeds from the sale of the 2,500,000 shares offered hereby by
the Company, at an assumed offering price of $14.125 per share, are estimated to
be $33.3 million ($38.7 million if the Underwriter's over-allotment option is
exercised in full). The Company will not receive any proceeds from the sale of
shares of Common Stock by the Selling Shareholders.
The Company will use a portion of the net proceeds from this Offering to
repay all indebtedness outstanding under the Company's revolving credit facility
and the Company's line of credit. As of March 17, 1995, $21.7 million was
outstanding under the Company's $50 million revolving credit facility, and the
rate of interest on such borrowings was 6.0% per annum. All amounts outstanding
under the revolving credit facility are due on September 1, 1996. As of March
17, 1995, $5.7 million was outstanding under the Company's $15 million line of
credit, and the rate of interest on such borrowings was 6.25% per annum. The
line of credit expires on June 1, 1995, unless renewed by the parties for
successive one-year terms. The balance of the net proceeds, along with
borrowings under the Company's credit facilities and internal cash flow, will be
used to purchase and install the new pharmacy computer system. See
"Business -- Business Strategy -- Invest in Information and Technology." The
cost of the new pharmacy system is estimated to be approximately $10 million.
Pending such uses, the net proceeds will be invested in short-term,
interest-bearing accounts and securities.
The repayment of indebtedness with a portion of the net proceeds of this
Offering will enhance the Company's financial flexibility and liquidity, and the
Company believes that this enhanced flexibility will facilitate the
implementation of its expansion strategy. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources." This expansion may include the opening of new drug stores
and the acquisition of existing drug stores. The Company periodically acquires
operating assets of individual stores or stores in the markets in which it
operates. Such acquisitions are not, either individually or in the aggregate,
material to the Company's results of operations in any given fiscal year. Except
for such acquisitions, the Company currently has no understandings, arrangements
or agreements with respect to the acquisition of any particular existing drug
store locations or drug store chains.
PRICE RANGE OF COMMON STOCK
The Company's Common Stock is traded in the over-the-counter market and is
quoted on the Nasdaq National Market under the symbol BIGB. The following table
sets forth, for the fiscal periods indicated, the reported high and low closing
sale prices, as reported by the Nasdaq National Market.
<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
FISCAL 1994
First quarter (ended May 8, 1993).......................................... $11 $ 8 3/8
Second quarter (ended July 29, 1993)....................................... 10 3/1 9 1/16
Third quarter (ended October 23, 1993)..................................... 12 3/4 9 3/16
Fourth quarter (ended January 29, 1994).................................... 13 3/8 10 1/2
FISCAL 1995
First quarter (ended May 7, 1994).......................................... 12 1/2 9 7/8
Second quarter (ended July 30, 1994)....................................... 12 1/8 10 5/8
Third quarter (ended October 22, 1994)..................................... 12 1/8 10 3/8
Fourth quarter (ended January 28, 1995).................................... 14 1/2 11 1/2
FISCAL 1996
First quarter (through March 17, 1995)..................................... 15 13 1/4
</TABLE>
On March 17, 1995, the last sale price, as reported on the Nasdaq National
Market, for the Company's Common Stock was $14.125 per share. As of March 17,
1995, there were 2,392 holders of record of the Company's Common Stock.
6
<PAGE> 8
CAPITALIZATION
The following table sets forth the short-term debt and capitalization of
the Company at January 28, 1995, and as adjusted to give effect to the sale of
the 2,500,000 shares of Common Stock offered by the Company hereby at an assumed
offering price of $14.125 per share and the application of the net proceeds
therefrom. See "Use of Proceeds." The information set forth below should be read
in conjunction with the Financial Statements and Notes thereto included herein
and with "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
<TABLE>
<CAPTION>
JANUARY 28, 1995
------------------------
ACTUAL AS ADJUSTED
-------- -----------
(IN THOUSANDS)
<S> <C> <C>
Short-term debt:
Current maturities of long-term debt and capitalized lease
obligations...................................................... $ 1,028 $ 1,028
Notes payable to banks(1)........................................... 7,000 0
-------- --------
Total short-term debt....................................... $ 8,028 $ 1,028
======== ========
Long-term debt:
Revolving credit facility(2)........................................ $ 21,700 $ 0
Industrial development revenue bonds................................ 10,800 10,800
Long-term capitalized lease obligations............................. 1,282 1,282
6 1/2% Convertible Subordinated Debentures.......................... 40,250 40,250
Other debt.......................................................... 236 236
-------- --------
Total long-term debt........................................ 74,268 52,568
-------- --------
Shareholders' investment:
Common stock, $.001 par value; 40,000,000 shares authorized(3);
15,586,575 shares issued and outstanding(4)...................... 16 18
Paid-in capital..................................................... 35,327 68,597
Retained earnings................................................... 71,390 71,390
-------- --------
Total shareholders' investment.............................. 106,733 140,005
-------- --------
Total capitalization........................................ $181,001 $192,573
======== ========
</TABLE>
- ---------------
(1) As of March 17, 1995, notes payable outstanding under the Company's line of
credit were $5.7 million. The Company's borrowings under its line of credit
vary materially as the Company's cash needs fluctuate.
(2) As of March 17, 1995, $21.7 million was outstanding under the revolving
credit facility.
(3) At the annual meeting of shareholders scheduled for May 30, 1995, the
Company's shareholders will consider the recommendation of the Board of
Directors to increase the Company's authorized shares from 40,000,000 to
100,000,000 shares.
(4) Does not include 3,299,180 shares of Common Stock reserved for issuance upon
conversion of the Company's outstanding 6 1/2% convertible subordinated
debentures, 104,800 shares of Common Stock reserved for issuance upon
exercise of stock options granted under the Company's employee stock option
plan or 824,397 shares of Common Stock available for the future grant of
stock options under the Company's employee stock option plan.
DIVIDEND POLICY
The Company paid dividends of $.03 per share on its Common Stock for each
quarter of fiscal 1994 and $.04 per share on its Common Stock for each of the
first three quarters of fiscal 1995. The Board of Directors has approved the
payment of a dividend of $.04 per share for the fourth quarter of fiscal 1995
payable on April 7, 1995 to shareholders of record on March 24, 1995. The
Company's current revolving credit facility agreement limits the Company's
annual dividends to 50% of net income (as defined in the agreement). The Company
intends to continue its policy of paying quarterly cash dividends. Future cash
dividends, however, will be dependent upon the Company's earnings, financial
condition and other relevant factors.
7
<PAGE> 9
SELECTED FINANCIAL DATA
The following table sets forth selected financial data for each of the
Company's most recent five fiscal years. The selected financial data in the
table are derived from the financial statements of the Company, which have been
audited by Arthur Andersen LLP, independent public accountants. The data should
be read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the Company's Financial Statements and
Notes thereto appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
-------------------------------------------------------------------
FEBRUARY 2, FEBRUARY 1, JANUARY 30, JANUARY 29, JANUARY 28,
1991 1992 1993 1994 1995
----------- ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Net sales.............................................. $ 463,689 $ 487,890 $ 502,712 $ 595,712 $ 668,205
Cost of products sold, including warehouse expense..... 328,423 341,371 349,594 412,560 460,925
----------- ----------- ----------- ----------- -----------
Gross profit........................................... 135,266 146,519 153,118 183,152 207,280
Store operating, selling and administrative expenses... 122,971 122,529 127,530 151,072 166,670
Depreciation and amortization.......................... 7,227 8,180 8,050 9,632 11,209
----------- ----------- ----------- ----------- -----------
Income from operations................................. 5,068 15,810 17,538 22,448 29,401
Loss on sale and disposition of property, net.......... 328 210 95 257 1,214
Interest expense....................................... 7,382 5,660 3,582 3,909 4,435
Interest income........................................ (81) (139) (89) (152) (23)
---------- ---------- ---------- ---------- ----------
Income (loss) before income taxes...................... (2,561) 10,079 13,950 18,434 23,775
Provision (credit) for income taxes.................... (1,096) 3,537 4,745 6,682 8,678
---------- ---------- ---------- ---------- ----------
Net income (loss)...................................... $ (1,465) $ 6,542 $ 9,205 $ 11,752 $ 15,097
========== ========== ========== ========== ==========
PER COMMON SHARE DATA:
Net income (loss)
Primary(1)........................................... $ (0.10) $ 0.43 $ 0.60 $ 0.76 $ 0.97
Fully diluted(2)..................................... $ (0.10) $ 0.43 $ 0.60 $ 0.72 $ 0.89
Dividends.............................................. $ 0.06 $ 0.06 $ 0.10 $ 0.12 $ 0.15
Weighted average number of common shares outstanding
Primary(1)........................................... 15,060,442 15,293,706 15,375,766 15,471,402 15,561,205
Fully diluted(2)..................................... 15,060,442 15,293,706 15,375,766 18,301,980 18,921,613
OPERATING DATA(3):
Number of stores at end of period...................... 310 304 304 354 367
Average net sales per store(4)......................... $ 1,496 $ 1,605 $ 1,654 $ 1,683 $ 1,821
Average gross profit per store(4)...................... $ 436 $ 482 $ 504 $ 517 $ 565
Comparable store sales percentage increase(5).......... 7.9 % 4.6 % 3.1 % 8.3 % 7.1 %
Prescription sales as a percentage of net sales........ 41.7 % 43.4 % 44.4 % 46.7 % 49.1 %
</TABLE>
<TABLE>
<CAPTION>
FEBRUARY 2, FEBRUARY 1, JANUARY 30, JANUARY 29, JANUARY 28,
1991 1992 1993 1994 1995
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital........................................ $ 73,956 $ 61,210 $ 85,277 $ 107,165 $ 120,670
Total assets........................................... 190,449 179,774 181,915 233,100 273,492
Long-term debt and capitalized lease obligations....... 56,098 31,854 40,618 63,476 74,268
Shareholders' investment............................... 67,717 74,297 82,470 93,105 106,733
</TABLE>
- ---------------
(1) Primary net income (loss) per common share was computed by dividing net
income by weighted average number of primary shares of common stock
outstanding during the periods. Outstanding stock options are common stock
equivalents but were excluded from the primary net income per common share
computations as their effect was not material.
(2) Fully diluted net income (loss) per common share was determined on the
assumption that all convertible subordinated debentures were converted and
all stock options outstanding were exercised. Conversion was assumed during
the portion of each period that the debentures and the options were
outstanding. For the debentures, net income was adjusted for interest, net
of the income tax effects; for stock options, outstanding shares were
decreased by the number of shares that could have been purchased with the
proceeds from the exercise, using the end of the period price.
(3) For purposes of calculating operating data, stores include Big B Home Health
Care Centers.
(4) Averages are computed based on the number of stores open at the end of
period.
(5) The comparable store sales percentage increases are computed on the basis of
quarterly sales for stores that were open for full quarters in the
applicable fiscal year and the prior fiscal year.
8
<PAGE> 10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company was organized in 1972 and operates a chain of 367 stores in the
southeastern United States. The Company operates 339 conventional drug stores
under the "Big B Drugs" format and 23 deep discount drug stores under the "Drugs
for Less" format. The Company also operates five home healthcare stores under
the name "Big B Home Health Care Centers." All of the Company's stores are
served by an approximately 440,000 square foot distribution center located in
Birmingham, Alabama.
The Company has increased net sales primarily in three ways. First, the
Company attempts to achieve sales growth in existing stores by monitoring
product mix, by effective promotional advertising, by marketing to third-party
payment plans and by acquiring the inventory and prescription files of
individual competitor drug stores to be consolidated into the Company's existing
stores. Comparable store sales increased 7.1% in fiscal 1995, 8.3% in fiscal
1994 and 3.1% in fiscal 1993. Second, the Company increases sales through the
opening of new stores. Generally, the Company works with commercial retail
developers who develop the stores and lease them to the Company. The Company
opened 16 new stores in fiscal 1995, ten in fiscal 1994, and six in fiscal 1993.
Third, the Company from time-to-time makes strategic acquisitions of chains of
stores in order to penetrate new markets or to increase concentration in
existing markets. The Company acquired 13 stores in Alabama from the Jack Eckerd
Corporation in fiscal 1989, 85 stores from The Reed Drug Company in fiscal 1990
(including 65 stores in metropolitan Atlanta), eight stores, primarily in
Alabama, from Revco, D.S., Inc. in fiscal 1991, and certain assets of 45
Treasury drug stores located principally in metropolitan Atlanta in fiscal 1994.
Each of these acquisitions has positively impacted the Company's results of
operations, except the Reed acquisition which, as a result of certain
inefficiencies subsequently corrected, negatively impacted fiscal 1990 and
fiscal 1991 results of operations. Historically, the Company has financed its
expansion from internally generated cash flow, the net proceeds of securities
offerings and borrowed funds.
Prescription drug sales have grown as a percentage of net sales, increasing
to 49.1% in fiscal 1995 from 46.7% in fiscal 1994 and 44.4% in fiscal 1993. The
Company believes prescription drug sales as a percentage of total sales will
continue to increase as a result of increased participation by the Company in
third-party payment plans, the demographic trend towards an aging population and
the continued development of new pharmaceutical products. The growth of
third-party payment plans (including insurance companies, HMOs, PPOs, other
managed care providers and government agencies) and the Company's direct
marketing program to employers have put increasing downward pressure on prices
for prescription drugs and, therefore, the Company's gross margin on
prescription drug sales. The Company expects the downward pressure on margins to
be offset by increased sales, buying arrangements, operating efficiencies in the
filling of prescriptions expected from new technology, the automation of
reconciliation and collection of third-party payment plan receivables, and
increased efficiencies at the Company's distribution center.
9
<PAGE> 11
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the percentages
of net sales represented by certain items in the Company's statements of
operations:
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
---------------------------------------
JANUARY 30, JANUARY 29, JANUARY 28,
1993 1994 1995
----------- ----------- -----------
<S> <C> <C> <C>
Net sales............................................. 100.0% 100.0% 100.0%
Cost of products sold, including warehouse expense.... 69.5 69.3 69.0
----------- ----------- -----------
Gross profit........................................ 30.5 30.7 31.0
Store operating, selling and administrative
expenses............................................ 25.4 25.4 24.9
Depreciation and amortization......................... 1.6 1.6 1.7
----------- ----------- -----------
Income from operations.............................. 3.5 3.7 4.4
Loss on sale and disposition of property, net......... 0.0 0.0 0.1
Interest expense, net................................. 0.8 0.7 0.7
----------- ----------- -----------
Income before income taxes.......................... 2.7 3.0 3.6
Provision for income taxes............................ 0.9 1.1 1.3
----------- ----------- -----------
Net income.......................................... 1.8% 1.9% 2.3%
======== ======== ========
</TABLE>
Net Sales
Net sales for fiscal 1995 increased 12.2% to $668.2 million from $595.7
million in fiscal 1994. The increase in net sales for the year resulted
primarily from sales increases in existing stores. Comparable store sales
increased 7.1% during the year ended January 28, 1995. Net sales also were
positively impacted by the addition of new stores. The Company operated 354
stores at January 29, 1994, compared to 367 stores operated at January 28, 1995.
Net sales increased 18.5% to $595.7 million in fiscal 1994 from $502.7
million in fiscal 1993. The increase in net sales in fiscal 1994 was the result
of an increase in comparable store sales of 8.3% and sales attributable to 55
new stores opened or acquired, including 45 Treasury stores added in fiscal
1994.
Store Costs and Expenses
Cost of products sold, including warehouse expense, as a percentage of net
sales declined slightly to 69.0% in fiscal 1995 from 69.3% in fiscal 1994 and
69.5% in fiscal 1993. The declines in cost of products sold as a percentage of
net sales resulted primarily from improved distribution center efficiencies.
Store operating, selling and administrative expenses as a percentage of net
sales declined to 24.9% in fiscal 1995 from 25.4% in fiscal years 1993 and 1994.
The decrease in fiscal 1995 was due to growth in the Company's net sales and
continued expense controls.
Depreciation and amortization as a percentage of net sales increased
slightly in fiscal 1995 to 1.7% from 1.6% in fiscal years 1994 and 1993. The
slight increase in fiscal 1995 was due to the completion of an enhanced
point-of-sale system at a cost of approximately $9.0 million and modest store
expansion.
Loss on Sale and Disposition of Property
Loss on the disposal of property was $1.2 million, $0.3 million, and $0.1
million in fiscal years 1995, 1994, and 1993, respectively. The increase in
fiscal 1995 was due to the disposal of the old register systems upon the
installation of a new point-of-sale system for all of the Company's stores. The
Company does not expect the installation of the enhanced pharmacy computer
system in fiscal 1996 to result in any significant loss on sale or disposition
of property.
10
<PAGE> 12
Interest Expense
Interest expense during the periods related primarily to a $40.3 million
6 1/2% convertible subordinated debenture offering in fiscal 1994, a revolving
credit facility and a bank line of credit. Interest expense increased to $4.4
million in fiscal 1995 from $3.9 million in fiscal 1994. This increase was due
primarily to higher short term borrowings and generally higher interest rates
during the period. Interest expense remained relatively stable in fiscal 1994 at
$3.9 million compared to fiscal 1993 at $3.6 million.
Provision for Income Taxes
The Company's effective tax rate was 37% in fiscal 1995, 36% in fiscal 1994
and 34% in fiscal 1993. The tax rate in fiscal 1995 and 1994 remained relatively
stable. The increase from fiscal 1993 to fiscal 1994 was due to the Omnibus
Budget Reconciliation Act of 1993 which increased the maximum corporate federal
income tax rate to 35%. This increased the fiscal 1994 tax provision on current
year earnings and also required an additional tax provision to properly state
the cumulative deferred tax liability at the newly enacted rate.
LIQUIDITY AND CAPITAL RESOURCES
The Company's capital requirements relate primarily to opening and stocking
new stores, acquiring stores, and refurbishing existing stores. Capital is also
required to support inventory for the Company's existing stores. Historically,
the Company has been able to lease its store locations and has financed its
expansion and operations from internally generated cash flows, the net proceeds
of securities offerings and borrowed funds. Currently, the Company owns the land
and buildings of only one of its drug stores.
Net cash provided by operations was $13.8 million, $1.1 million, and $12.8
million in fiscal 1995, 1994 and 1993, respectively. These amounts primarily
represent net income adjusted for the non-cash charges of depreciation and
amortization, provisions for losses on receivables and provisions to value
inventories at LIFO cost. The substantial decline for fiscal 1994 resulted from
increases in inventories.
Net cash used in investing activities was $22.6 million, $19.5 million, and
$5.4 million in fiscal 1995, 1994 and 1993, respectively. These amounts
primarily reflect capital expenditures for new stores as well as continued
improvements to existing stores and the Company's distribution center. In fiscal
1994, $16.5 million of the $19.5 million represented the net cash payment for
the Treasury acquisition.
In fiscal 1995, net cash provided by financing activities was $12.4 million
and consisted of $15.6 million in net borrowings under line of credit
agreements, $.3 million in proceeds from the issuance of long-term debt, offset
by $2.3 million of dividends paid, and $1.2 million in principal payments on
long-term debt and capital lease obligations. In fiscal 1994, net cash provided
by financing activities was $17.8 million and consisted of a $40.3 million
6 1/2% convertible subordinated debenture offering, offset by $19.1 million of
net line of credit repayments, $1.8 million of dividends paid, and $1.6 million
in principal payments on long-term debt and capital lease obligations. In fiscal
1993, net cash used in financing activities was $6.6 million and consisted of
$21.9 million in principal payments on long-term debt and capital lease
obligations, $1.5 million in dividends paid, offset by $16.8 million in net
borrowings under line of credit agreements.
In fiscal 1993, certain debt was refinanced from funds borrowed under a new
revolving credit facility. At January 28, 1995, $21.7 million was outstanding
under this facility, which has a maximum borrowing capacity of $50.0 million.
The Company also had $7.0 million outstanding at January 28, 1995 under a $15.0
million unsecured bank line of credit which is renewable annually on June 1.
Borrowings under the Company's credit facilities bear interest at variable
rates. As of January 28, 1995, the interest rates under the revolving credit
facility and bank line of credit were 6.0% and 6.25% per annum, respectively.
The Company plans to open 20 to 25 new stores in fiscal year 1996 and 25 to
30 new stores in fiscal year 1997 at an anticipated aggregate capital outlay of
$8.0 to $10.0 million and $10.0 to $12.0 million, respectively. Most of the new
stores will be Big B Drugs stores. The cost of fixtures, equipment and inventory
to open a new drug store is approximately $400,000 for a Big B Drugs store and
approximately $1.1 million for a Drugs for Less store. Additionally, in fiscal
1996, the Company plans to install an enhanced pharmacy computer system at a
cost of approximately $10.0 million. The Company believes that internally
generated funds, the proceeds from this offering, and borrowings on its line of
credit and revolving credit facility will be adequate to fund the capital
requirements noted above.
11
<PAGE> 13
BUSINESS
GENERAL
The Company operates a chain of 367 stores throughout a five state area in
the southeastern United States. The Company operates its drug stores under the
names "Big B Drugs" and "Drugs for Less". Also, the Company operates five home
healthcare stores under the name "Big B Home Health Care Center." The Company is
one of the largest drug store chains in this five state area with 158 stores in
Georgia, 157 in Alabama, 24 in Florida, 21 in Tennessee and seven in
Mississippi. All of the Company's stores are within a 400 mile radius of its
distribution center in Birmingham, Alabama. In addition to prescription drugs
and services, the Company's drug stores offer a broad range of health and beauty
aids, cosmetics, greeting cards, convenience foods, photo processing services
and other general merchandise. The Company intends to continue to concentrate
its future growth in this five state area to take advantage of the available
economies of scale in advertising, distribution and supervision and the
competitive advantage for the Company in marketing to third-party payment plans.
THE DRUG STORE INDUSTRY
In recent years, the drug store industry has undergone several significant
changes, including: (i) the increase in third-party payment plans for
prescription drugs, (ii) the consolidation within the drug store industry, (iii)
the aging of the United States population and (iv) the increase in competition
from non-traditional retailers of prescription and over-the-counter drugs.
During the last several years, a growing percentage of prescription drug
sales throughout the industry has been accounted for by sales to customers who
are covered by third-party payment plans. According to IMS America, in 1994,
third-party payment plan sales represented approximately 58.3% of total
prescription drug sales in the United States. In a typical third-party payment
plan, the drug store company has a contract with a third-party payor, such as an
insurance company, HMO, PPO, other managed care provider, government agency or
private employer, which agrees to pay for part or all of a customer's eligible
prescription purchases. Although third-party payment plans often provide a high
volume of prescription sales, such sales typically generate lower gross margins
than other prescription sales due principally to the highly competitive nature
of this business and recent efforts by third-party payment plans to contain
costs. The Company believes larger drug store chains, such as the Company, are
better able to service the growing third-party payment plan segment than
independent drug stores and smaller chains as a result of the larger chains'
more sophisticated technology systems, larger number of stores and greater
penetration within their markets.
As a result of the economies of scale from which larger drug store chains
benefit as well as the third-party payment plan trend, the number of independent
drug stores and smaller drug store chains has decreased as a result of
acquisitions by larger drug store chains. This trend is expected to continue
because larger chains are better positioned to handle the increased third-party
payment plan sales, purchase inventory on more advantageous terms and achieve
other economies of scale with respect to their marketing, advertising,
distribution and other expenditures. The Company believes that independent drug
stores and smaller drug store chains may provide significant acquisition
opportunities for larger drug store chains, such as the Company.
Strong demographic trends have also contributed to changes in the drug
store industry, as a significant portion of the United States population ages.
This trend has had, and is expected to continue to have, a marked effect on the
pharmacy business in the United States because consumer prescription and
over-the-counter drug usage generally increases with age. The group of persons
over age 40 is a rapidly growing segment of the U.S. population. According to
industry sources, in 1994, this segment represented approximately 39% of the
population, although it consumed approximately 58% of all prescriptions sold in
the United States. This segment is projected to increase to 43% of the
population by the year 2000. The average per person prescription usage in the
United States is approximately 3.9 prescriptions per year, which increases to
approximately 4.1, 7.4 and 9.1 prescriptions filled per year for persons ages
40-59, 60-74 and 75 and over, respectively.
12
<PAGE> 14
In 1993, drug store chains and independent drug stores represented
approximately 33% and 28%, respectively, of the U.S. retail pharmacy market,
which includes mass merchandisers, food stores, staff model HMOs, clinics, mail
order companies, independent pharmacies and chain pharmacies. In response to a
number of factors, including the aging of the United States population, mass
merchandisers (including discounters and deep discounters), supermarkets,
combination food and drug stores, mail order distributors, hospitals, HMOs and
other managed care providers have entered the pharmacy industry. Supermarkets,
including combination food and drug stores, and mass merchandisers each
represented approximately 9.5% of the retail pharmacy market in the United
States in 1993.
BUSINESS STRATEGY
The Company's business strategy is designed to maintain a strong pharmacy
and healthcare related business, increase the Company's market share in each
existing market and improve profitability. In implementing the Company's
business strategy, the Company intends to:
- Focus on the Company's pharmacy operations;
- Emphasize market concentration;
- Continue investment in information systems;
- Maintain a high level of customer service and convenience; and
- Continue cost-control efforts.
Focus on Pharmacy Operations. The Company's primary business focus is the
sale of prescription drugs. During fiscal 1995, the Company estimates that more
than 13.6 million prescriptions were filled by the Company, compared to an
estimated 10.2 million prescriptions in fiscal 1993. During fiscal 1995, sales
of prescription drugs generated 49.1% of the Company's net sales compared to
41.7% in fiscal 1991. Management expects that the Company's prescription drug
business will continue to represent a significant portion of the Company's sales
and profits as a result of increased participation by the Company in third-party
payment plans, the demographic trend towards an aging population and the
continued development of new pharmaceutical products.
In emphasizing its pharmacy operations, the Company intends to continue to
provide high quality service to the Company's traditional customer base and to
pursue new opportunities for pharmacy growth. For example, the Company intends
to increase its participation in third-party payment plans by aggressively
marketing itself with all types of third-party payment plans, including
insurance companies, HMOs, PPOs, other managed care providers and government
agencies. The Company believes that the number and concentration of its stores
within existing markets and the Company's experience and reputation in the drug
store industry give the Company advantages over independent drug stores, small
drug store chains, mass merchandisers and food stores in competing for the
increasing amount of third-party payment plan sales. Third-party payment plan
sales accounted for approximately 56% of the Company's prescription sales in
fiscal 1995, as compared to 25% of the Company's prescription sales in fiscal
1991.
The Company also offers employee prescription benefit programs directly to
individual employers or groups of employers as a low cost alternative for
pharmaceutical products. The pricing offered by the Company under these direct
programs is similar to the pricing arrangements offered to third-party payment
plans. Sales under these direct employer programs accounted for approximately 3%
of the Company's prescription sales in fiscal 1995, as compared to 0.8% of the
Company's prescription sales in fiscal 1994, its first year of operation. The
Company has direct contracts with employers covering over 190,000 lives.
The Company has also initiated other prescription services and programs in
an effort to increase the Company's prescription drug sales. In fiscal 1992, the
Company began a mail-order prescription drug program, which has grown from
approximately $100,000 in prescription drug sales in fiscal 1993, to $1.3
million in fiscal 1995. In fiscal 1993, the Company began its nursing home
pharmacy service, which now provides pharmacy services to nursing homes with
approximately 3,000 beds. The Company believes there are significant
opportunities for increasing prescription drug sales through these services.
13
<PAGE> 15
Emphasize Market Concentration. In an effort to take advantage of the
available economies of scale in advertising, distribution and supervision and
the competitive advantages for the Company in marketing to third-party payment
plans, the Company seeks to achieve and maintain a leading market share in each
market in which it operates by developing and acquiring stores at strategic
locations in those markets. The Company's first store was opened in Birmingham,
Alabama in 1968. Thereafter, the Company expanded to become the largest drug
store chain in Alabama, with its stores concentrated primarily in metropolitan
areas, including Birmingham with 60 stores, Mobile with 18 stores, Huntsville
with 16 stores and Montgomery with 15 stores. Beginning in fiscal 1990, the
Company developed a major presence in the Atlanta, Georgia metropolitan area,
the nation's 9th largest metropolitan area, by acquiring 65 drug stores in
Atlanta from the Reed Drug Company and emphasizing the development of additional
new stores in that market. In fiscal 1993, the Company acquired certain assets
of 45 stores in Atlanta from the Thrift Drug Company (a subsidiary of the J.C.
Penney Company, Inc.). As a result of these acquisitions and the new stores
developed by the Company, the Company is now the second largest drug store chain
in Atlanta, with 102 stores. The Company believes that there is opportunity for
additional expansion, and it will continue to benefit from the economies of
scale associated with expansion in its present market areas.
Invest in Information and Technology. The Company intends to continue its
investment in information systems to improve customer service, reduce operating
costs, provide information to support management decisions and enhance the
Company's competitive position with third-party payment plans. In fiscal 1995,
the Company completed the installation of point-of-sale ("POS") product scanning
equipment in all of its stores. Scanning is a system which inputs POS
information by reading the universal product code of merchandise sold with
either a hand-held or slot scanner to capture information on each specific item
or product (a stock-keeping unit or "SKU"), sales data and pricing information.
The Company's POS system allows management to analyze sales, gross profits,
inventory movement and direct product profitability by category, department and,
in certain instances, SKU. The Company believes that use of the POS system will
improve customer service by decreasing customer checkout time, provide an
opportunity to improve margins by more accurately reflecting the prices of
merchandise, improve adherence to advertised sale or promotional prices and
provide enhanced inventory control and merchandise information.
The Company's pharmacy computer system and customer account records system,
which the Company plans to upgrade beginning in the current fiscal year, is
significant to the success of its pharmacy operations. This system calculates
the prices of all prescriptions filled. The system also maintains current
customer information, including medical history and other information furnished
by the customer and a list of all prescription medicine purchased by the
customer from the Company. Each time a new prescription is filled by the
Company, the patient information is updated and the prescription is analyzed in
an attempt to assure its compatibility with other medication prescribed for the
customer. In addition, the system supplies information concerning drug purchases
to customers for income tax purposes, prepares prescription labels and receipts,
and expedites the collection of amounts due the Company under third-party
payment plans by providing on-line adjudication. On-line adjudication permits
the Company and the third-party payment plans to determine electronically at the
time of sale, customer eligibility, prescription coverage, pricing and
co-payment requirements.
The Company plans to install a new pharmacy computer system in all of its
stores at a cost of approximately $10 million. See "Use of Proceeds." The
installation and testing of the new pharmacy computer system is scheduled to
begin in a limited number of stores in May 1995, and the Company anticipates
that the new pharmacy computer system will be installed in all stores by the end
of fiscal 1996. The Company believes that its new pharmacy computer system will
benefit the Company by providing additional support to pharmacists, meeting the
increasing complexity of third-party payment plans and enhancing the Company's
competitive position through advanced technology. The new pharmacy system is
expected to provide numerous improvements over the Company's existing pharmacy
computer system, including faster prescription processing, chain-wide
prescription transfer capability, capability of direct interfacing with
physician offices for new prescriptions and refill approval, better inventory
control, more accurate sales information and improved capability for on-line
adjudication with third-party payment plan claims.
14
<PAGE> 16
Maintain Customer Service and Convenience. The Company believes that
customer service and convenience are critical to maintaining the Company's
competitive advantage. The Company will continue to emphasize service and
convenience through store location and design, merchandising programs and
operating hours geared to the needs of each store's particular market. The
Company currently has a program underway to improve the efficiency of the store
pharmacies by improving the physical design and layout of those departments and
by training and placing pharmacy technicians in the stores to assist its
pharmacists. The purpose of these efforts is to make the store pharmacists more
available to assist and consult with customers. In addition, the Company has
employee award and recognition programs which recognize excellence in customer
service, and the Company maintains incentive based compensation programs for all
levels of employees based on employee productivity. These programs are designed
to emphasize the importance of the Company's customer service philosophy.
The Company regularly remodels and remerchandises its stores to provide
modern, well-identified stores with convenient parking, and will seek to open
new stores in easily accessible, high traffic locations. The Company tailors its
merchandising to provide the product mix and selection to best serve its
customers. The drug stores are generally open every day of the year except
Christmas. A select number of strategically located stores stay open until
midnight or 24 hours a day.
Continue Cost Control. The Company will continue to emphasize cost control
at all levels of operations. The Company intends to continue to evaluate and
pursue additional cost savings which can be obtained without affecting the
Company's customer service, quality or sales growth potential. The Company
believes that enhanced computer technology being implemented by the Company will
be valuable in enabling the Company to control its costs. There can be no
assurance, however, that these additional cost reductions will be realized.
GROWTH STRATEGY
The Company has grown from 304 stores at the beginning of fiscal 1994 to
367 stores at the end of fiscal 1995. The Company's growth strategy is to
continue to increase sales through expansion, primarily in the Company's
existing markets. The Company believes it's distribution center is capable of
accommodating the Company's foreseeable future expansion. In implementing its
growth strategy, the Company intends to:
- Develop new stores;
- Acquire existing drug store chains and independent drug stores; and
- Acquire the inventory and prescription files of other drug stores for
consolidation into existing Company stores.
Develop New Stores. The Company opened 16 drug stores in fiscal 1995 and
intends to open approximately 20 to 25 new stores in fiscal 1996 and 25 to 30
new stores in fiscal 1997. The Company intends to emphasize the development of
new stores as its primary means of expansion and seeks new sites for future new
store development. Generally, the Company works with commercial retail
developers who develop the stores and lease them to the Company. Prior to
developing a new store, the Company analyzes available market, demographic and
competitive data to evaluate the suitability of the potential site. New store
site selection criteria include, among other factors, market demographics,
traffic counts, visibility, overall retail activity of the area, and lease
terms.
Acquire Existing Stores. The Company from time-to-time makes strategic
acquisitions of existing chains of stores and independent drug stores in order
to penetrate new markets or to increase the concentration in existing markets of
the Company's stores. The Company acquired 13 stores in Alabama from the Jack
Eckerd Corporation in fiscal 1989, 85 stores from The Reed Drug Company in
fiscal 1990 (including 65 stores in metropolitan Atlanta), eight stores,
primarily in Alabama, from Revco, D.S., Inc. in fiscal 1991, and certain assets
of 45 Treasury drug stores located principally in metropolitan Atlanta in fiscal
1994. The Company intends to continue to consider acquisition opportunities as
they arise. The Company believes that further consolidation of the drug store
industry will result in additional acquisition opportunities, both within and
outside the Company's existing markets. The Company periodically acquires
individual stores in the markets
15
<PAGE> 17
in which it operates. Such acquisitions are not, either individually or in the
aggregate, material to the Company's results of operations in any given fiscal
year. Except for individual store acquisitions, the Company currently has no
understandings, arrangements or agreements with respect to the acquisition of
any particular existing drug store locations or drug store chains.
Consolidate Acquired Pharmacy Files. The Company has acquired the
inventory and pharmacy files of other drug stores, for the purpose of
consolidating the inventory and pharmacy files into one of the existing Company
stores located in the same vicinity. These consolidations enable the Company to
increase sales volume in its existing stores in a cost effective manner. The
Company completed 25 such consolidation acquisitions in fiscal 1994 and 31 in
fiscal 1995 and anticipates completing 25 to 30 in fiscal 1996.
The following table sets forth, for the periods indicated, certain
information concerning the Company's drug stores:
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
------------------------------------------------------
JANUARY 30, 1993 JANUARY 29, 1994 JANUARY 28, 1995
---------------- ---------------- ----------------
<S> <C> <C> <C>
Stores open, beginning of period........... 304 304 354
Stores added(1)............................ 6 55 16
Stores closed.............................. 6 5 3
--- --- ---
Stores open, end of period................. 304 354 367
============ ============ ============
</TABLE>
- ---------------
(1) In addition to stores opened or acquired by the Company, the Company
completed the acquisitions of inventory and prescription files, for
consolidation into its existing stores, of 11 stores in fiscal 1993, 25
stores in fiscal 1994, and 31 stores in fiscal 1995.
PHARMACY PRODUCTS AND SERVICES
The primary focus of the Company's business is its pharmacy operations,
which offer both brand name and generic prescription drugs. The Company strives
to improve these operations in an effort to build customer loyalty and increase
customer traffic in its stores. The Company believes that its prescription drug
business will continue to represent a significant portion of its sales and
profits due to the demographic trend towards an aging population, the continued
development of new pharmaceutical products and changing trends in the delivery
of healthcare. Prescription sales have grown to 49.1% of the Company's net sales
for fiscal 1995, as compared to 41.7% for 1991.
The Company has contracts with third-party payment plans and is actively
seeking to increase its participation in third-party payment plans. While
third-party payment plans provide an increase in the volume of prescription
sales, these sales typically generate lower gross margins than other sales due
to the highly competitive nature of pricing for this business. The Company
expects its pharmacy operations to benefit from increased sales, buying
arrangements, operating efficiencies in the filling of prescriptions expected
from new technology, the automation of reconciliation and collection of
third-party payment plan receivables, and the increased efficiency of the
distribution center. In fiscal 1995, third-party payment plans represented
approximately 56% of the Company's prescription business, compared to
approximately 25% for fiscal 1991.
The Company is also actively marketing a program under which it offers
employee prescription benefit programs directly to individual employers or
groups of employers. The pricing offered by the Company under these direct
employer programs is similar to the pricing arrangements offered to third-party
payment plans. The Company has contracts directly with employers covering over
190,000 lives.
In addition to its efforts to increase its participation in third-party
payment plans and in its direct employer programs, the Company has also
initiated other prescription services and programs to enhance its prescription
drug sales, including a mail order prescription drug program which has grown
from approximately $100,000 in prescription drug sales in fiscal 1993 to $1.3
million in fiscal 1995 and a nursing home pharmacy service which was started in
fiscal 1992 and now services approximately 3,000 beds.
16
<PAGE> 18
In an effort to make the licensed pharmacists more accessible to customers
for consultation, the Company has implemented a program to train and place in
its stores pharmacy technicians to assist the licensed pharmacists. Also, the
Company is redesigning the layout of the pharmacies in its stores to increase
the efficiency of the pharmacy departments.
OTHER PRODUCTS AND SERVICES
General Merchandise. The Company's typical drug store emphasizes brand
name merchandise and offers a broad range of nonprescription medications and
general merchandise at competitive prices that are generally at or below those
of other conventional drug stores. Major year-round product lines include health
and beauty aids, cosmetics, tobacco products, convenience foods, greeting cards,
toys, small electrical appliances, electronics, photo processing services, books
and magazines, and household items. The Company's drug stores also feature
seasonal merchandise such as Christmas items, holiday greeting cards, special
candies, beach and pool supplies and other seasonal products. The Company
revises and updates the product mix in its stores to suit customer needs and
reflect retail trends.
In addition to brand name merchandise, the Company has a private label
merchandise program which includes health and beauty aids, household products
and nonprescription drugs. The Company's private label merchandise program
offers quality merchandise at prices substantially lower than comparable brand
name merchandise. The Company's private label program does not represent a
material portion of the Company's nonprescription sales.
Photo Processing. The Company offers overnight photo processing services
in all of its stores. During the last fiscal year, the Company began to place
increased emphasis on its photo processing services by installing one-hour photo
processing equipment in many of its stores. At present, the Company has one-hour
photo processing equipment in 25 of its stores and plans to have this equipment
in a total of 50 stores by the end of fiscal 1996 and 100 stores by the end of
fiscal 1997. The Company believes that this equipment will produce revenues for
the stores, not only as a result of photo processing sales, but also as a result
of increased sales of ancillary items, such as film and batteries, and as a
result of increased store traffic, generally. In addition, the Company has begun
offering its overnight processing service on a seven-day-a-week basis and has
begun offering a wider variety of print sizes. The Company markets its photo
processing services directly to commercial accounts in an effort to attract high
volume customers. The Company also offers frequent buyer discount programs and
other sales incentives in promoting its photo processing services.
ADVERTISING
The Company promotes its merchandise primarily through a combination of
newspaper advertising and full color inserts. The Company also uses direct mail
circulars, television advertising and radio advertising. The Company's
concentration of stores within its markets enables it to achieve economies of
scale in advertising and marketing expenditures and also enables the Company to
negotiate favorable rates for advertising time and print production. The Company
believes that its current level of advertising expenditures is appropriate to
support its existing marketing strategies.
PURCHASING AND DISTRIBUTION
The Company centrally purchases most of its merchandise, including
prescription drugs, directly from manufacturers, allowing it to take advantage
of promotional and volume discount programs that certain manufacturers offer to
retailers. During fiscal 1995, approximately 66% of the merchandise purchased by
the Company for its drug stores was received at the Company's distribution
center for redistribution to its drug stores. The balance of store merchandise
is shipped directly to the Company's drug stores from manufacturers and
distributors at prices negotiated at the corporate level. The Company does not
have any long-term contracts with suppliers and believes it has numerous
alternative sources of supply for the merchandise sold in its stores.
Store orders are processed by computer and assembled at the distribution
center for delivery to stores. The Company contracts with a third party to
provide inventory delivery service to all stores. If this agreement
17
<PAGE> 19
was terminated for any reason, the Company believes replacement services are
available so there would be no interruption in delivery of inventory to Company
stores. The distribution center utilizes computer and conveyor systems to
monitor the amount and location of inventory within the distribution center and
to handle the movement of items from the receiving dock, to the racks, to the
loading dock for delivery to the stores. The distribution center's computer
system also assists in planning and monitoring the utilization of distribution
center personnel. The Company's stores typically receive deliveries from the
distribution center weekly.
STORE OPERATIONS
Non-pharmacy operations are the responsibility of the Senior Vice
President -- Store Operations, who supervises the Company's two regional
managers and fifteen district managers. Each district manager is responsible for
the stores in his district and regularly visits those stores to assure quality
of merchandise presentation, appropriate staffing and adherence to the Company's
operating policies. The Company's pharmacy operations are the responsibility of
the Vice President -- Professional Relations who supervises the Company's
pharmacy operations manager and eight pharmacy district managers. The pharmacy
district managers supervise the pharmacy operations in the Company's individual
stores. In an effort to increase employee productivity, improve employee
retention, and enhance customer service, the Company utilizes an incentive
compensation plan with established goals for each level of employees, including
store clerks, under which bonuses are based on these goals. The management staff
of a typical drug store includes a manager, an assistant manager and two
pharmacists, whose incentive compensation is based upon the profitability of the
store.
STORE FORMATS
Big B Drugs. The Company's 339 Big B Drugs stores are generally located in
strip shopping centers or are freestanding and generally range in size from
approximately 7,000 to 12,000 square feet, with an average size of approximately
9,000 square feet. The typical Big B Drugs store is open every day of the year,
except Christmas, generally from 8:00 A.M. until 9:00 P.M. (10:00 A.M. until
7:00 P.M. on Sundays). Stores at selected locations are open until midnight or
on a 24 hour basis, depending upon local market needs. Big B Drugs stores
generally are operated on a self-service basis for non-pharmacy items, with
customer assistance available when required. The pharmacy departments are
staffed by registered pharmacists and in high volume stores, also by pharmacy
technicians.
Drugs for Less. The Company operates 23 deep discount drug stores under
the name "Drugs for Less." Each store contains a pharmacy and emphasizes higher
turnover merchandise such as health and beauty aids, cosmetics, tobacco
products, photo processing services, stationery, household items, greeting
cards, snacks and candies. The Company attempts to achieve higher sales volume
in its Drugs for Less stores by offering its products at every day low prices
competitive with other deep discount operations. The Drugs for Less stores range
in size from approximately 10,000 to 29,000 square feet, with an average size of
approximately 20,000 square feet, and are generally located on major traffic
arteries in the Company's larger metropolitan markets.
Big B Home Health Care Centers. The Company operates five home healthcare
stores under the name "Big B Home Health Care Center." These stores offer home
health care products for sale or rent, including oxygen concentrators,
wheelchairs, hospital beds, other convalescent equipment and accessories, and
diabetic supplies. Each store is staffed by trained technicians offering
services ranging from home delivery and set-up of equipment to completion of
necessary forms for insurance and Medicare claims. Many of the products sold by
the home healthcare stores can be purchased at the Company's drug stores, and
all of these products can be ordered by catalog through the drug stores.
PROPERTIES
The Company owns the furniture and fixtures in each of its stores. However,
with the exception of one store owned by the Company, the Company leases the
land and buildings for all of its stores under leases with terms of typically
between 15 to 20 years and renewal provisions for additional terms. The leases
provide for the payment of either a fixed rental or a fixed rental plus a
percentage of gross sales in excess of a specified
18
<PAGE> 20
amount. Certain of the leases also provide for the payment by the Company of
increases in real estate taxes and insurance premiums. Big B is continuing to
make lease payments under leases for certain store locations at which the
Company's drug stores have been closed. No single lease is material to the
Company's operations. The Company leases its distribution center, located in
Birmingham, Alabama, from the Industrial Development Board of the City of
Bessemer. Upon the expiration of the lease, the Company has the right to
purchase the distribution center for nominal consideration.
REGULATION AND HEALTHCARE REFORM
The Company's pharmacists and pharmacies are required to be licensed by the
appropriate state boards of pharmacy. The Company's drug stores and its
distribution center are also registered with the Federal Drug Enforcement
Administration. Certain of the stores sell beer and wine and are subject to
various state and local licensing requirements. By virtue of these licenses and
registration requirements, the Company is obligated to observe certain rules and
regulations, and a violation of such rules and regulations could result in a
suspension or revocation of the licenses or registrations. Under the Omnibus
Budget Reconciliation Act of 1990, the Company's pharmacists are required to
offer counseling to customers covered by Medicaid about the medication, dosage,
delivery system, common side effects and other information deemed significant by
the pharmacists.
The Company relies on prescription drug sales for a significant portion of
its revenues and profits, and prescription drug sales represent a growing
segment of the Company's business. These revenues are affected by changes within
the healthcare industry, including changes in programs providing for
reimbursement of the cost of prescription drugs by third-party payment plans,
such as government and private plans, and regulatory changes relating to the
approval process for prescription drugs. Between October 1993 and the end of
1994, President Clinton and various U.S. Senators and Representatives introduced
in Congress a number of healthcare reform proposals. The proposals ranged from
the Clinton Administration's comprehensive healthcare reform proposal that would
have restructured the financing and delivery of healthcare services through a
combination of managed competition and mandated employer coverage of employees
to less comprehensive proposals that would have required private health
insurance to be "portable" and eliminated coverage limitations for pre-existing
health conditions. No proposal was adopted by either house of Congress. The
Company anticipates that additional healthcare reform proposals may be
introduced in the current session of Congress. It is difficult to predict
whether any proposal will be adopted or the effect on the Company of any
proposal that does become law. The Company believes, however, that distributors
of pharmaceutical products, like the Company, generally are low on the reform
priority list. A number of states in which the Company has operations have
either adopted or are considering healthcare reform proposals at the state
level. Various reform measures have been adopted in Florida and Tennessee. These
state reform laws have, in many cases, not been fully implemented. The Company
does not expect these state laws to have a material adverse effect on the
operations of the Company. See "Business -- Regulation."
COMPETITION
The Company's business is highly competitive. In each of its markets, the
Company competes directly with a number of national, regional and local drug
store chains, independent drug stores, deep discount drug stores, supermarkets,
combination food and drug stores, discount department stores, mass merchandisers
and other retail stores and mail order operations. Certain of these competitors
have financial resources that are substantially greater than those of the
Company. Competition among drug stores generally takes the form of price
competition, store location, product selection and customer service. The Home
Health Care Center stores compete with certain chain operations and independent
single unit stores.
EMPLOYEES
As of January 28, 1995, the Company employed approximately 5,700 persons.
The Company believes that its relationship with its employees is good.
19
<PAGE> 21
MANAGEMENT
Certain information concerning directors and officers of the Company is set
forth below.
<TABLE>
<CAPTION>
YEAR EMPLOYED
NAME AGE BY COMPANY POSITION WITH THE COMPANY(1)
- ----------------------------------- --- ------------- -------------------------------------
<S> <C> <C> <C>
Joseph S. Bruno.................... 82 (2) Chairman Emeritus of the Board of
Directors
Anthony J. Bruno................... 68 1972 Chairman of the Board of Directors
and Chief Executive Officer
Arthur M. Jones, Sr................ 47 1975 President, Chief Operating Officer
and Director
James A. Bruno..................... 34 1983 Executive Vice President, Secretary
and Director
Vincent J. Bruno................... 52 1972 Senior Vice
President -- Merchandising and
Advertising and Director
Bobby W. Little.................... 52 1972 Senior Vice President -- Store
Operations
Timothy N. Burelle................. 48 1990 Vice President -- Professional
Relations
Michael J. Tortorice............... 49 1972 Vice President -- Finance, Treasurer
and Chief Financial Officer
S. Steven Taylor................... 44 1982 Vice President -- Real Estate and
Store Development
Eugene Beckmann.................... 46 1984 Vice President -- Human Resources
Richard Cohn....................... 51 (2) Director
Isaac L. Alderman.................. 75 (2) Director
Charles A. McCallum, D.M.D., 69 (2) Director
M.D..............................
</TABLE>
- ---------------
(1) Each director and officer serves for a term of one year or until his or her
successor is duly elected and qualified.
(2) Serves in capacity of director of the Company only.
Joseph S. Bruno has served on the Board of Directors of the Company since
1977 and was named Chairman Emeritus in 1993. He is also a member of the Board
of Directors of Bruno's, Inc.
Anthony J. Bruno has served on the Board of Directors of the Company since
1979. He served as President from 1977 to 1993 and was elected Chairman and
Chief Executive Officer in January 1993. He is also a member of the Board of
Directors of First Alabama Bank.
Arthur M. Jones, Sr. has served on the Board of Directors of the Company
since 1981 and has served as President and Chief Operating Officer since 1993.
He served as Executive Vice President, Secretary and Treasurer from 1985 to
1993.
James A. Bruno has served on the Board of Directors since 1993 and was
elected Executive Vice President in 1994 and Secretary in 1993. From 1987 to
1994 he served as Vice President of Marketing.
Vincent J. Bruno has served on the Board of Directors of the Company since
1981 and was elected Senior Vice President -- Merchandising and Advertising in
1994. From 1981 until 1994 he served as Vice President -- Merchandising and
Advertising.
Bobby W. Little was elected Senior Vice President -- Store Operations in
1994. From 1984 to 1994 he served as Vice President -- Store Operations.
Timothy N. Burelle was elected Vice President -- Professional Relations in
1990. Prior to coming to the Company, Mr. Burelle was Dean of the School of
Pharmacy at Samford University from 1985 to 1990.
20
<PAGE> 22
Michael J. Tortorice was elected Vice President -- Finance in 1988,
Treasurer in 1993 and Chief Financial Officer in 1994.
S. Steven Taylor was elected Vice President -- Real Estate and Store
Development in 1987.
Eugene A. Beckmann was elected Vice President -- Human Resources in 1987.
Richard Cohn has served on the Board of Directors of the Company since
1981. Since 1967, Mr. Cohn has been a practicing attorney in Birmingham,
Alabama, and a member of the law firm of Sirote & Permutt, P.C., which is
general counsel to the Company. He is also a member of the Board of Directors of
Bruno's, Inc.
Isaac L. Alderman has served on the Board of Directors of the Company since
1981. Mr. Alderman served as a consultant to Dairymen, Inc., a dairy
cooperative, from 1977 to 1992.
Charles A. McCallum has served on the Board of Directors of the Company
since 1993. Dr. McCallum is Professor of Medicine and Dentistry at the
University of Alabama at Birmingham of which he served as President from 1987 to
1993.
Joseph S. Bruno and Anthony J. Bruno are brothers, and Vincent J. Bruno is
their nephew. James A. Bruno is the son of Anthony J. Bruno.
SELLING SHAREHOLDERS
The following table sets forth information regarding the ownership of the
Common Stock of the Company as of March 17, 1995, and as adjusted to reflect the
sale of shares in this Offering, by the Selling Shareholders. Unless otherwise
noted in the footnotes in the table, the Selling Shareholders have sole voting
and dispositive power with respect to all shares of Common Stock shown as
beneficially owned. Under the rules of the Commission, a person is deemed to be
a "beneficial owner" of a security if such person has or shares the power to
vote or direct the voting of such security or the power to dispose of or to
direct the disposition of such security. Accordingly, more than one person may
be deemed to be a beneficial owner of the same security.
<TABLE>
<CAPTION>
BENEFICIAL BENEFICIAL
OWNERSHIP OWNERSHIP
PRIOR TO OFFERING AFTER OFFERING
------------------- NUMBER OF -------------------
NUMBER OF SHARES BEING NUMBER OF
NAME OF BENEFICIAL OWNER SHARES PERCENT OFFERED SHARES PERCENT
- ---------------------------------------------- --------- ------- ------------ --------- -------
<S> <C> <C> <C> <C> <C>
Joseph S. Bruno(1)............................ 559,122 3.6% 65,000 494,122 2.7%
Anthony J. Bruno(2)........................... 1,043,888 6.7% 60,000 983,888 5.4%
Vincent J. Bruno(3)........................... 1,226,112 7.8% 80,000 1,146,112 6.3%
</TABLE>
- ---------------
(1) Includes 473,522 shares owned directly by Joseph S. Bruno; 70,100 shares
owned by his wife, as to which he may be deemed to share voting and
investment power; and 15,500 shares owned by the Joseph S. Bruno Charitable
Foundation, a private charitable foundation, of which he is a Director,
with respect to which shares he disclaims any beneficial interest, but as
to which he shares voting and investment power.
(2) Includes 791,504 shares owned directly by Anthony J. Bruno; and 67,200
shares owned by his wife, 26,800 shares held in the name of his wife as
custodian for their children, nephew, and grandchild, and 158,384 shares
held in the name of his wife as co-trustee of a trust for the benefit of
their children, as to which he may be deemed to share voting and investment
power.
(3) Includes 507,936 shares owned directly by Vincent J. Bruno (of which 18,000
shares are represented by options exercisable within sixty days by him
under the Company's Employee Stock Option Plan); 114,100 shares held by him
as custodian for his minor children; 391,633 shares held by him as
co-trustee of trusts for the benefit of his minor children, as to which he
shares voting and investment power, 1,600 shares held jointly with his
wife, as to which he shares voting and investment power, 174,964 shares
owned by his wife, 16,735 shares held in the name of his wife as trustee of
a trust for the benefit of his minor children, and 10,900 shares held in
the names of his minor children, as to which he may be deemed to share
voting and investment power; and 8,244 shares owned by the Lee Bruno
Foundation, a private
21
<PAGE> 23
charitable foundation, of which he is a Director, with respect to which
shares he disclaims any beneficial interest, but as to which he shares
voting and investment power.
DESCRIPTION OF COMMON STOCK
The authorized capital stock of the Company consists of 40,000,000 shares
of Common Stock, $.001 par value per share. The outstanding shares of Common
Stock are, and the shares of Common Stock to be outstanding upon completion of
this Offering will be, fully paid and non-assessable. Each holder of shares of
Common Stock is entitled to such dividends on the Common Stock as the Board of
Directors may lawfully declare out of funds legally available for such purpose,
and, upon liquidation, to share ratably in all assets available for distribution
to holders of Common Stock. Each holder is also entitled to one vote per share
of Common Stock on all matters submitted to a vote of shareholders. No
shareholder has any preemptive right to subscribe for or purchase any securities
of the Company. The Company's Board of Directors is not classified and all
directors are elected by the shareholders annually. The Common Stock does not
have cumulative voting rights.
UNDERWRITING
Morgan Keegan & Company, Inc. (the "Underwriter") has agreed, subject to
the terms and conditions contained in the Underwriting Agreement, to purchase
2,500,000 shares of Common Stock from the Company and 205,000 shares of Common
Stock from the Selling Shareholders.
The Underwriting Agreement provides that the Underwriter is obligated to
purchase all of the shares of Common Stock offered hereby (other than those
covered by the over-allotment option described below) if any such shares are
purchased. The Company and the Selling Shareholders have been advised that the
Underwriter proposes to offer the Common Stock to the public at the offering
price set forth on the cover page of this Prospectus and to certain dealers at
such price less a concession not in excess of $. per share of Common Stock.
The Underwriter may allow, and such dealers may reallow, a discount not in
excess of $. per share to other dealers. The public offering price and the
concessions and discount to dealers may be changed by the Underwriter after the
public offering.
The Company has granted to the Underwriter an option, exercisable for 30
days from the date of this Prospectus, to purchase up to 405,750 additional
shares of Common Stock at the public offering price, less underwriting
discounts, as shown on the cover page of this Prospectus. The Underwriter may
exercise such option solely for the purpose of covering over-allotments incurred
in the sale of the shares of Common Stock offered hereby.
The Company and the Selling Shareholders have agreed to indemnify the
Underwriter or to contribute to losses arising out of certain liabilities,
including liabilities under the Securities Act of 1933, as amended.
Each of the Company, the Selling Shareholders and the Company's officers
and directors have agreed that, for a period of 180 days from the date of this
Prospectus, they will not, directly or indirectly, offer, sell, offer to sell,
contract to sell, grant any option to purchase or otherwise dispose (or announce
any offer, sale, grant of any option to purchase or other disposition) of any
additional shares of Common Stock, or any securities convertible into, or
exercisable or exchangeable for, shares of Common Stock, without the prior
written consent of the Underwriter.
The Underwriter makes a market in the Company's Common Stock. During the
two days immediately prior to the offer and sale of the Common Stock,
regulations under the Exchange Act impose restrictions on the market making
activities of the Underwriter, including price and volume limitations. The
Underwriter may engage in permitted passive market making activities during the
two business days immediately prior to the offer and sale of the Common Stock.
22
<PAGE> 24
EXPERTS
The financial statements of the Company and certain Selected Financial Data
included or incorporated by reference in this Prospectus and elsewhere in the
Registration Statement have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their reports with respect thereto appearing
and incorporated by reference herein, and are included or incorporated by
reference herein in reliance upon the authority of said firm as experts in
giving said reports.
LEGAL MATTERS
The validity of the shares being offered hereby will be passed upon for the
Company by Sirote & Permutt, P.C., 2222 Arlington Avenue South, Birmingham,
Alabama 35205, general counsel for the Company. Richard Cohn, a member of that
firm, is a director of the Company. As of March 17, 1995, lawyers of that law
firm who have participated in the preparation of this registration statement
beneficially owned an aggregate of 7,344 shares of Common Stock of the Company
individually or in various fiduciary capacities. Other members of the firm may
also own securities of the Company, but no inquiry as to this has been made.
King & Spalding, Atlanta, Georgia, will pass upon the validity of the shares
being offered hereby for the Underwriter. In rendering such opinion, King &
Spalding will rely upon the opinion of Sirote & Permutt, P.C. as to all matters
of Alabama law.
STATEMENT OF AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company with the Commission can be
inspected and copied at the office of the Commission at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, or at its Regional
Offices located at 7 World Trade Center, 13th Floor, New York, New York 10048;
and Suite 1400, 500 West Madison Street, Chicago, Illinois 60661, and copies of
such material can be obtained from the Public Reference Section of the
Commission, at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates.
This Prospectus constitutes a part of a Registration Statement filed by the
Company with the Commission under the Securities Act of 1933, as amended. This
Prospectus omits certain information contained in the Registration Statement,
and reference is hereby made to the Registration Statement and related exhibits
for further information with respect to the Company and the securities offered
hereby. Any statements contained herein concerning the provisions of any
document are not necessarily complete, and in each instance reference is made to
the copy of such document filed as an exhibit to the Registration Statement or
otherwise filed with the Commission. Each such statement is qualified in its
entirety by such reference.
DOCUMENTS INCORPORATED BY REFERENCE
The Company's Annual Report on Form 10-K for the fiscal year ended January
28, 1995 filed pursuant to Section 13 of the Exchange Act is incorporated in
this Prospectus by reference. All documents subsequently filed by the Company
pursuant to Section 13(a), 13(c), 14, or 15(d) of the Exchange Act, prior to
termination of this Offering, shall be deemed to be incorporated by reference
into this Prospectus.
Any statement contained in a document incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Prospectus to
the extent that a statement contained herein modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this Prospectus. The
Company will provide without charge to each person, including any beneficial
owner, to whom a copy of this Prospectus is delivered, upon the written or oral
request of such person, a copy of any document incorporated by reference in this
Prospectus (other than exhibits, unless such exhibits are expressly incorporated
by reference in such documents). Requests should be directed to Big B, Inc.,
2600 Morgan Road, S.E., Birmingham, Alabama 35023, (205) 424-3421, Attention:
President.
23
<PAGE> 25
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants.............................................. F-2
Consolidated Balance Sheets........................................................... F-3
Consolidated Statements of Operations................................................. F-4
Consolidated Statements of Shareholders' Investment................................... F-5
Consolidated Statements of Cash Flows................................................. F-6
Notes to Consolidated Financial Statements............................................ F-7
</TABLE>
F-1
<PAGE> 26
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of
Big B, Inc.:
We have audited the accompanying consolidated balance sheets of BIG B, INC.
(an Alabama corporation) and subsidiaries as of January 29, 1994 and January 28,
1995 and the related consolidated statements of operations, shareholders'
investment, and cash flows for each of the three fiscal years in the period
ended January 28, 1995. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Big B, Inc. and subsidiaries
as of January 29, 1994 and January 28, 1995 and the results of their operations
and their cash flows for each of the three fiscal years in the period ended
January 28, 1995 in conformity with generally accepted accounting principles.
We have also audited, in accordance with generally accepted auditing
standards, the consolidated balance sheets as of February 2, 1991, February 1,
1992, and January 30, 1993, and the related consolidated statements of
operations, shareholders' investment, and cash flows for each of the two fiscal
years in the period ended February 1, 1992 (none of which are presented herein),
and have expressed unqualified opinions on those financial statements. In our
opinion, the information set forth in "Selected Financial Data" under the
captions "Statements of Operations Data, " "Per Common Share Data" and "Balance
Sheet Data" for each of the five fiscal years in the period ended January 28,
1995, appearing on page 8, is fairly stated, in all material respects, in
relation to the financial statements from which it has been derived.
ARTHUR ANDERSEN LLP
Birmingham, Alabama
March 10, 1995
F-2
<PAGE> 27
BIG B, INC.
CONSOLIDATED BALANCE SHEETS
JANUARY 29, 1994 AND JANUARY 28, 1995
<TABLE>
<CAPTION>
1994 1995
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and temporary cash investments........................... $ 419,000 $ 4,076,000
Accounts receivable, net (Notes 1 and 2)...................... 18,332,000 20,317,000
Inventories (Notes 1 and 2)................................... 146,495,000 169,473,000
Prepaid expenses and other.................................... 5,026,000 3,750,000
Deferred income taxes, net (Notes 1 and 9).................... 2,100,000 2,146,000
------------ ------------
Total current assets.................................. 172,372,000 199,762,000
------------ ------------
PROPERTY AND EQUIPMENT (Notes 1 and 2):
Land.......................................................... 958,000 958,000
Buildings..................................................... 7,942,000 9,114,000
Store fixtures and equipment.................................. 65,874,000 81,393,000
Warehouse and office equipment................................ 11,181,000 12,692,000
Leaseholds and leasehold improvements......................... 10,902,000 11,345,000
------------ ------------
96,857,000 115,502,000
Less accumulated depreciation and amortization................ (42,130,000) (49,774,000)
------------ ------------
54,727,000 65,728,000
Investment in property under capital leases, net (Note 3)..... 969,000 1,316,000
------------ ------------
55,696,000 67,044,000
------------ ------------
OTHER ASSETS (Note 1)........................................... 5,032,000 6,686,000
------------ ------------
$233,100,000 $273,492,000
=========== ===========
LIABILITIES AND SHAREHOLDERS' INVESTMENT
CURRENT LIABILITIES:
Current maturities of long-term debt and capitalized lease
obligations (Notes 2 and 3)................................ $ 903,000 $ 1,028,000
Notes payable to banks (Note 2)............................... 2,400,000 7,000,000
Accounts payable.............................................. 48,364,000 56,071,000
Accrued payroll and related expenses.......................... 7,214,000 7,220,000
Other accrued expenses........................................ 5,026,000 6,327,000
Accrued income taxes (Notes 1 and 9).......................... 1,300,000 1,446,000
------------ ------------
Total current liabilities............................. 65,207,000 79,092,000
------------ ------------
NONCURRENT LIABILITIES:
Long-term debt (Note 2)....................................... 62,450,000 72,986,000
Capitalized lease obligations (Note 3)........................ 1,026,000 1,282,000
Deferred income taxes, net (Notes 1 and 9).................... 5,560,000 6,653,000
Deferred compensation (Note 4)................................ 1,079,000 1,205,000
Other......................................................... 4,673,000 5,541,000
------------ ------------
74,788,000 87,667,000
------------ ------------
COMMITMENTS AND CONTINGENCIES (Notes 2, 3, 4, 6, 7, and 8)
SHAREHOLDERS' INVESTMENT (Notes 1, 2, 5, and 6):
Common stock, $.001 par value; 40,000,000 shares authorized;
15,586,575 shares issued and outstanding in 1995 and
15,503,797 shares issued and outstanding in 1994........... 16,000 16,000
Paid-in capital............................................... 34,462,000 35,327,000
Retained earnings............................................. 58,627,000 71,390,000
------------ ------------
Total shareholders' investment........................ 93,105,000 106,733,000
------------ ------------
$233,100,000 $273,492,000
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
F-3
<PAGE> 28
BIG B, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE FISCAL YEARS ENDED JANUARY 30, 1993, JANUARY 29, 1994 AND JANUARY 28,
1995
<TABLE>
<CAPTION>
1993 1994 1995
------------ ------------ ------------
(52 WEEKS) (52 WEEKS) (52 WEEKS)
<S> <C> <C> <C>
Net sales............................................ $502,712,000 $595,712,000 $668,205,000
Cost of products sold, including warehouse expense... 349,594,000 412,560,000 460,925,000
------------ ------------ ------------
Gross profit.................................... 153,118,000 183,152,000 207,280,000
Store operating, selling and administrative
expenses........................................... 127,530,000 151,072,000 166,670,000
Depreciation and amortization........................ 8,050,000 9,632,000 11,209,000
------------ ------------ ------------
Income from operations.......................... 17,538,000 22,448,000 29,401,000
Loss on sale and disposition of property, net........ 95,000 257,000 1,214,000
Interest expense..................................... 3,582,000 3,909,000 4,435,000
Interest income...................................... (89,000) (152,000) (23,000)
------------ ------------ ------------
Income before income taxes...................... 13,950,000 18,434,000 23,775,000
Provision for income taxes (Notes 1 and 9)........... 4,745,000 6,682,000 8,678,000
------------ ------------ ------------
Net income...................................... $ 9,205,000 $ 11,752,000 $ 15,097,000
=========== =========== ===========
Net income per common share (Note 1):
Primary............................................ $ 0.60 $ 0.76 $ 0.97
Fully diluted...................................... 0.60 0.72 0.89
=========== =========== ===========
Average common shares and equivalents outstanding
(Note 1):
Primary............................................ 15,375,766 15,471,402 15,561,205
Fully diluted...................................... 15,375,766 18,301,980 18,921,613
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-4
<PAGE> 29
BIG B, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' INVESTMENT
FOR THE FISCAL YEARS ENDED JANUARY 30, 1993, JANUARY 29, 1994, AND JANUARY 28,
1995
<TABLE>
<CAPTION>
COMMON STOCK
-----------------------
NUMBER OF PAID-IN RETAINED
SHARES AMOUNT CAPITAL EARNINGS
---------- --------- ----------- -----------
<S> <C> <C> <C> <C>
BALANCE, February 1, 1992.................. 7,670,321 $ 77,000 $33,234,000 $40,986,000
Net income............................... 0 0 0 9,205,000
Cash dividends ($.10 per share).......... 0 0 0 (1,537,000)
Exercise of stock options (Note 5)....... 18,089 0 245,000 0
Common stock issued to 401(k) profit
sharing plan (Note 4)................. 20,000 0 260,000 0
---------- --------- ----------- -----------
BALANCE, January 30, 1993.................. 7,708,410 77,000 33,739,000 48,654,000
Net income............................... 0 0 0 11,752,000
Cash dividends ($.12 per share).......... 0 0 0 (1,779,000)
Exercise of stock options (Note 5)....... 33,061 1,000 266,000 0
Common stock issued to 401(k) profit
sharing plan (Note 4)................. 20,000 0 395,000 0
Issuance of shares in connection with a
two-for-one stock split (Note 1)...... 7,742,326 78,000 (78,000) 0
Effect of recapitalization (Note 1)...... 0 (140,000) 140,000 0
---------- --------- ----------- -----------
BALANCE, January 29, 1994.................. 15,503,797 16,000 34,462,000 58,627,000
Net income............................... 0 0 0 15,097,000
Cash dividends ($.15 per share).......... 0 0 0 (2,334,000)
Exercise of stock options (Note 5)....... 27,778 0 267,000 0
Common stock issued to 401(k) profit
sharing plan (Note 4)................. 55,000 0 598,000 0
---------- --------- ----------- -----------
BALANCE, January 28, 1995.................. 15,586,575 $ 16,000 $35,327,000 $71,390,000
========== ========= ========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-5
<PAGE> 30
BIG B, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE FISCAL YEARS ENDED JANUARY 30, 1993, JANUARY 29, 1994, AND JANUARY 28,
1995
INCREASE (DECREASE) IN CASH
<TABLE>
<CAPTION>
1993 1994 1995
----------- ----------- -----------
<S> <C> <C> <C>
(52 WEEKS) (52 WEEKS) (52 WEEKS)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income...................................................... $ 9,205,000 $11,752,000 $15,097,000
----------- ----------- -----------
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization................................. 8,050,000 9,632,000 11,209,000
Provision (credit) for deferred income taxes.................. 3,000 (532,000) 1,047,000
Provision for losses on receivables........................... 7,266,000 6,211,000 8,713,000
Provision to value inventories at LIFO cost................... 1,368,000 1,449,000 303,000
Loss on sale and disposition of property, net................. 95,000 257,000 1,214,000
Provision for nonqualified stock options...................... 231,000 345,000 433,000
Provision for deferred compensation........................... 273,000 193,000 126,000
Recognition of deferred gains................................. (29,000) (41,000) (52,000)
Changes in assets and liabilities:
Increase in receivables..................................... (6,810,000) (12,201,000) (10,698,000)
(Increase) decrease in refundable income taxes.............. (441,000) 441,000 0
Increase in inventories..................................... (2,513,000) (33,322,000) (23,281,000)
Increase in other assets.................................... (890,000) (4,187,000) (796,000)
Increase (decrease) in accounts payable..................... (4,905,000) 15,612,000 7,707,000
Increase (decrease) in accrued income taxes................. (2,130,000) 1,300,000 146,000
Increase (decrease) in other liabilities.................... 4,009,000 4,196,000 2,659,000
----------- ----------- -----------
Total adjustments...................................... 3,577,000 (10,647,000) (1,270,000)
----------- ----------- -----------
Net cash provided by operating activities................ 12,782,000 1,105,000 13,827,000
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures............................................ (5,459,000) (20,098,000) (22,685,000)
Proceeds from sale of property.................................. 18,000 580,000 109,000
----------- ----------- -----------
Net cash used in investing activities.................... (5,441,000) (19,518,000) (22,576,000)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt........................ 0 40,250,000 375,000
Net (repayments) borrowings under line of credit agreements..... 16,758,000 (19,058,000) 15,600,000
Principal payments under long-term debt and capital lease
obligations................................................... (21,871,000) (1,608,000) (1,235,000)
Proceeds from issuance of common stock.......................... 12,000 4,000 0
Dividends paid.................................................. (1,537,000) (1,779,000) (2,334,000)
----------- ----------- -----------
Net cash provided by (used in) financing activities...... (6,638,000) 17,809,000 12,406,000
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH AND TEMPORARY CASH INVESTMENTS.... 703,000 (604,000) 3,657,000
CASH AND TEMPORARY CASH INVESTMENTS AT BEGINNING OF YEAR.......... 320,000 1,023,000 419,000
----------- ----------- -----------
CASH AND TEMPORARY CASH INVESTMENTS AT END OF YEAR................ $ 1,023,000 $ 419,000 $ 4,076,000
============ ============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest...................................................... $ 3,684,000 $ 3,094,000 $ 4,903,000
Income taxes, net of refunds received......................... 7,313,000 5,473,000 7,485,000
============ ============ ============
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING
ACTIVITIES:
Noncash consideration of stock issued under stock option plans
(Note 5)...................................................... $ 233,000 $ 263,000 $ 267,000
Stock issued to benefit plans................................... 260,000 395,000 598,000
Capital lease transactions...................................... 191,000 380,000 777,000
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-6
<PAGE> 31
BIG B, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Business
Big B, Inc. and subsidiaries (the "Company") operates a chain of retail
drug stores and stores that sell and rent medical equipment for home use. The
Company's fiscal year ends on the Saturday closest to January 31 of each year.
Principles of Consolidation
The consolidated financial statements of the Company include its accounts
and the accounts of all wholly owned subsidiaries. All significant intercompany
balances and transactions have been eliminated in consolidation.
Accounts Receivable
The Company uses the allowance method of accounting for uncollectible
accounts. Accounts receivable are stated net of an allowance for uncollectible
accounts of $975,000 and $987,000 as of January 28, 1995 and January 29, 1994,
respectively. A majority of the Company's accounts receivable are due from third
party providers (various insurance companies and governmental agencies) under
third party payment plans. As is industry practice, these receivables are
uncollateralized.
Inventories
Substantially all inventories are valued at last-in, first-out cost, which
is not in excess of market. Under the first-in, first-out cost method of
accounting, inventories would have been $22,080,000 and $21,777,000 higher than
reported at January 28, 1995 and January 29, 1994, respectively.
Property and Equipment
Property and equipment are recorded at cost. Depreciation is provided on a
straight-line basis over the estimated service lives of depreciable assets (40
years for buildings, 10 years for store fixtures and equipment, and three to 10
years for other equipment) or, in the case of leaseholds and leasehold
improvements, 10 to 15 years or over the lives of the respective leases, if
shorter. Properties included in the financial statements under capital leases
are amortized over the related lease terms. Maintenance and repairs are charged
to expense as incurred; expenditures for renewals and betterments are
capitalized. When assets are retired or otherwise disposed of, the property
accounts are relieved of costs and accumulated depreciation and any resulting
gain or loss is credited or charged to income.
Intangibles
Other assets include an intangible estimated for "pharmacist work force in
place" that is being amortized on a straight-line basis over seven years and
goodwill that is being amortized on a straight-line basis over 40 years.
Intangibles are shown net of accumulated amortization of $1,375,000 and
$1,160,000 as of January 28, 1995 and January 29, 1994, respectively.
Insurance
The company is self insured for its health and dental programs and workers
compensation in certain states. Stop loss insurance coverage is maintained.
Management believes its reserves for claims reported and claims incurred but not
reported is adequate.
Income Taxes
Deferred income taxes for fiscal 1995 and 1994 reflect the impact of
"temporary differences" between the amounts of assets and liabilities for
financial reporting purposes and such amounts as measured by the tax laws and
regulations. Income taxes were provided in fiscal 1994 using the asset and
liability method prescribed by Statement of Financial Accounting Standards
("SFAS") No. 109, "Accounting for Income Taxes," which
F-7
<PAGE> 32
BIG B, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
the Company adopted in 1994. Income taxes provided in years prior to fiscal 1994
using the asset and liability method prescribed by SFAS No. 96 were not
restated. The effect of the change in accounting method on the financial
statements of the Company was not material.
Net Income Per Common Share
Primary net income per common share was computed by dividing net income by
the weighted average number of primary shares of common stock outstanding during
the periods. Outstanding stock options are common stock equivalents but were
excluded from the primary net income per common share computations as their
effect was not material. Fully diluted net income per common share was
determined on the assumption that all convertible subordinated debentures were
converted and all stock options outstanding were exercised. Conversion was
assumed during the portion of each period that the debentures and the options
were outstanding. For the debentures, net income was adjusted for interest, net
of income tax effects; for the stock options, outstanding shares were decreased
by the number of shares that could have been purchased with the proceeds from
the exercise, using the end of the period market price.
Shareholders' Investment Transactions
On September 7, 1993, the Company's Board of Directors declared a
two-for-one stock split in the form of a 100% stock dividend which was
distributed on October 1, 1993 to holders of record on September 17, 1993. The
par value of the additional 7,742,326 shares of common stock issued in
connection with the stock split was credited to common stock and a like amount
charged to paid-in capital. All references in the financial statements to
average common shares and equivalents outstanding and related prices, net income
per common share, dividend amounts per share, and stock option plan data have
been restated to reflect the stock split.
In November 1993, the Company's shareholders approved a Plan of
Recapitalization (the "Recapitalization"). The Recapitalization became effective
November 17, 1993. On the effective date, the number of shares authorized
increased from 20,000,000 shares to 40,000,000 shares and par value was
decreased from $.01 per share to $.001 per share. The Recapitalization
authorized the designation of the outstanding shares of $.01 par value common
stock as $.001 par value common stock until replaced by new $.001 par value
common stock through the ordinary course of reissuance through sales and other
transfers. The decrease in par value of the outstanding shares on the effective
date was charged to common stock and a like amount credited to paid-in capital.
Consolidated Statements of Cash Flows
For purposes of the consolidated statements of cash flows, the Company
considers all highly liquid investments to be temporary cash investments.
Fair Value of Financial Instruments
The Company has evaluated fair values of its financial instruments based on
the current interest rate environment and current pricing of debt instruments
with comparable terms and has addressed the fair value of debt in the debt
disclosure (see Note 2). The carrying value of other financial instruments are
considered to approximate fair value.
Prior Year Reclassifications
Certain prior year amounts have been reclassified to conform to the current
year presentation.
F-8
<PAGE> 33
BIG B, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. DEBT:
Long-term debt consists of the following at January 29, 1994 and January
28, 1995:
<TABLE>
<CAPTION>
1994 1995
----------- -----------
<S> <C> <C>
Convertible Subordinated Debentures, interest at 6.5%,
principal due on March 15, 2003, interest payable
semiannually on each March 15 and September 15.......... $40,250,000 $40,250,000
Notes payable to commercial banks:
Revolving Credit Facility, interest at variable rates
(ranging from 5.9% to 6.1% at January 28, 1995)
payable monthly, principal due September 1996,
collateralized by receivables and inventories........ 10,700,000 21,700,000
Term loan, interest at 7.3%, payable monthly, principal
due April 1999, collateralized by certain property
and equipment........................................ 0 311,000
Industrial Development Revenue Bonds, Series B, interest
at variable rates (6.1% at January 28, 1995), principal
due on May 1, 2005, interest payable quarterly, secured
by a letter of credit................................... 8,000,000 8,000,000
Industrial Development Revenue Bonds, Series A, interest
at variable rates (5.8% at January 28, 1995), due in
quarterly installments of $175,000 plus interest through
December 1, 1999, secured by a letter of credit......... 4,200,000 3,500,000
----------- -----------
63,150,000 73,761,000
Less current maturities................................... (700,000) (775,000)
----------- -----------
$62,450,000 $72,986,000
========== ==========
</TABLE>
In March 1993, the Company issued unsecured convertible subordinated
debentures (the "Debentures"); net proceeds were $39,043,000. Proceeds of the
issuance were used to reduce existing debt, to fund the acquisition of certain
assets from certain Thrift Drug Company ("Treasury Drug") stores, to fund the
cost of conversion of the Treasury Drug stores to the "Big B" format, and to
fund the enhancement of the Company's point of sale system. The Debentures are
convertible into common stock at any time prior to redemption or final maturity,
initially at the conversion price of $12.20 per share.
The revolving credit facility consists of a $50,000,000 revolving line of
credit supported by a commercial paper program. During fiscal 1995, the Company
borrowed $36,700,000 and repaid $25,700,000 under the revolving credit facility.
The revolving credit facility and both industrial development revenue bond
agreements contain restrictive covenants which require the Company to maintain
certain financial ratios and minimum levels of tangible net worth; limit capital
expenditures, other investments, dividends, stock repurchases and additional
debt; and other covenants generally common to such agreements. The Company was
in compliance with all such covenants at January 28, 1995.
The net book value of land, building, and equipment subject to the
industrial development revenue bond agreements is approximately $10,090,000 and
$11,057,000 at January 28, 1995 and January 29, 1994, respectively.
Long-term debt maturing in each of the next five fiscal years is as
follows: $775,000 in 1996, $22,475,000 in 1997, $775,000 in 1998, $775,000 in
1999, $727,000 in 2000, and $48,234,000 thereafter.
F-9
<PAGE> 34
BIG B, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company has a $15,000,000 unsecured bank line of credit which expires
in June 1995 (subject to renewal), of which $7,000,000 was outstanding at
January 28, 1995. The interest rate on the line of credit was 6.3% at year-end.
The maximum and average amounts of borrowings outstanding under this line of
credit during fiscal 1995 were $17,800,000 and $9,808,000, respectively. The
weighted average interest rate on these borrowings during fiscal 1995 was 5.4%.
The estimated fair value of the Company's debt at January 28, 1995 was
$69,000,000.
3. CAPITALIZED AND OPERATING LEASES:
The Company has a number of leases for store properties, warehouses and
delivery equipment. See Note 7 regarding store leases with related parties. The
initial terms of the real property leases will expire within the next 20 years;
however, most of the leases have options providing for additional lease terms
from five to 25 years at terms substantially the same as the initial terms. It
is expected that the real property leases will be renewed upon expiration. The
leases for the delivery equipment are from six to ten years, and it is expected
that most will be replaced by leases on similar equipment. The Company also
rents various items of machinery and equipment on a monthly basis.
In addition to fixed minimum rentals, many of the Company's leases require
contingent rental payments. Contingent rentals for real property leases are on a
percentage of sales basis. Contingent rentals for delivery equipment are based
on the number of miles driven.
As required by the provisions of SFAS No. 13, the Company has included in
its financial statements those leases which meet the criteria for
capitalization. An analysis of the property under capital leases and the related
capitalized lease obligations included in the January 29, 1994 and January 28,
1995 balance sheets follows:
<TABLE>
<CAPTION>
1994 1995
---------- ----------
<S> <C> <C>
Property under capital leases:
Real property........................................... $ 630,000 $ 630,000
Delivery equipment...................................... 1,341,000 1,646,000
---------- ----------
1,971,000 2,276,000
Less accumulated amortization........................... (1,002,000) (960,000)
---------- ----------
$ 969,000 $1,316,000
========= =========
Capitalized lease obligations (interest at 9% to 13.5% on
real property and 10% to 23% on delivery equipment):
Current................................................. $ 203,000 $ 253,000
Noncurrent.............................................. 1,026,000 1,282,000
---------- ----------
$1,229,000 $1,535,000
========= =========
</TABLE>
F-10
<PAGE> 35
BIG B, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following is a schedule of future minimum lease payments required under
capital leases, together with the present value of the lease payments, and
operating leases having initial or remaining noncancelable lease terms in excess
of one year at January 28, 1995:
<TABLE>
<CAPTION>
OPERATING CAPITAL
LEASES LEASES
------------ ----------
<S> <C> <C>
Fiscal year ending in:
1996.................................................. $ 20,629,000 $ 642,000
1997.................................................. 20,119,000 642,000
1998.................................................. 19,092,000 585,000
1999.................................................. 17,575,000 484,000
2000.................................................. 14,701,000 280,000
Subsequent............................................ 63,648,000 557,000
------------ ----------
Total future minimum lease payments................ $155,764,000 3,190,000
===========
Less estimated executory costs included in total minimum
lease payments........................................ (923,000)
----------
Net minimum lease payments.............................. 2,267,000
Less amount representing interest....................... (732,000)
----------
Present value of net future minimum lease payments...... $1,535,000
=========
</TABLE>
Contingent rentals for the preceding capital leases and rental expense for
the operating leases are as follows:
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
---------------------------------------
1993 1994 1995
----------- ----------- -----------
<S> <C> <C> <C>
Contingent rentals on capital leases
Real property................................. $ 63,000 $ 19,000 $ 22,000
Delivery equipment............................ 692,000 774,000 1,059,000
----------- ----------- -----------
$ 755,000 $ 793,000 $ 1,081,000
========== ========== ==========
Rental expense for operating leases:
Real property:
Minimum rentals............................ $17,948,000 $20,241,000 $22,258,000
Contingent rentals......................... 634,000 806,000 896,000
Equipment:
Minimum rentals............................ 439,000 513,000 510,000
----------- ----------- -----------
$19,021,000 $21,560,000 $23,664,000
========== ========== ==========
</TABLE>
4. EMPLOYEE BENEFIT PLANS:
The Company sponsors a defined contribution pension plan known as the Big
B, Inc. 401(k) Profit Sharing Plan. The Plan covers substantially all employees
that meet certain service and age requirements who are not members of a
collective bargaining unit. The Company makes both an annual profit sharing
contribution and an annual 401(k) matching contribution up to specified levels
as approved, each at the discretion of the Board of Directors.
The Company has an unfunded deferred compensation agreement with its key
officers whereby they or their beneficiaries will be provided specific amounts
of annual retirement income for a period of ten years following retirement. The
Company is accruing the present value of such retirement benefits from the date
of the agreement to the normal retirement date. Assuming retirement at the
normal retirement date, the
F-11
<PAGE> 36
BIG B, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
obligation under this agreement (approximately $8,588,000 in total for all
officers covered) would be paid over the ten year period following the date of
the officer's retirement.
Two of the Company's Stores employ union employees. The Company's union
employees are covered under a multiemployer defined benefit pension plan
administered by the union. The Company is obligated under this plan to make
monthly payments of specified amounts for each union employee as provided in the
labor contract.
The Company has an incentive plan covering store management personnel,
pharmacists and other key employees. The incentive is paid annually based on
achievement of established profit goals.
The expenses applicable to the above plans are as follows:
<TABLE>
<CAPTION>
401(K) DEFERRED
PROFIT COMPENSATION
SHARING PLAN PLAN UNION PLAN INCENTIVE PLAN
------------ ------------ ---------- --------------
<S> <C> <C> <C> <C>
Fiscal years ended:
1995........................... $2,200,000 $126,000 $9,000 $2,397,000
1994........................... 1,800,000 194,000 9,000 2,772,000
1993........................... 1,558,000 273,000 9,000 1,449,000
========= ========== ======== ==========
</TABLE>
5. STOCK OPTIONS:
The Big B, Inc. Employee Stock Option Plan (the "Plan") authorizes the
granting of stock options for the purchase of up to 1,000,000 shares of common
stock. As of January 28, 1995, a total of 824,397 shares of the Company's
authorized and unissued common stock were reserved for future grants under the
Plan and options for 104,800 shares were outstanding at that date. Options may
be granted to officers or key employees at prices determined by the Board of
Directors.
Options granted prior to fiscal 1989 were granted at a price not less than
market value on the date of the grant (incentive) and became exercisable
cumulatively at a rate of 25% each year beginning one year after the date of
grant, and expire ten years from the date of grant.
Options granted in fiscal 1992 and 1994 were granted at a price less than
market value on the date of grant (nonqualified). Options granted in fiscal 1992
became exercisable upon issuance and expired March 13, 1993. Options granted in
fiscal 1994 become exercisable 50% each in February 1994 and February 1995 with
all options expiring in May 1995. Compensation expense of $433,000, $345,000,
and $231,000 was accrued in fiscal 1995, 1994, and 1993, respectively, and
related to the difference in the estimated market value of the stock and the
nonqualified option exercise price, including the related tax bonus. Upon
exercise of stock options, the excess of the proceeds and accruals over par
value is credited to paid-in capital.
The Company received 14,122 shares, 19,451 shares, and 10,411 shares of
stock in lieu of cash for a portion of the exercise price of options exercised
in fiscal years 1995, 1994, and 1993, respectively. These shares were
immediately reissued upon the exercise of other options.
F-12
<PAGE> 37
BIG B, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Information with respect to stock options is summarized as follows:
<TABLE>
<CAPTION>
GRANT DATE
------------------------------------------------
INCENTIVE
NONQUALIFIED ------------------------
--------------------- APRIL
MARCH 1991 MAY 1993 NOVEMBER 1983 1986
---------- -------- ------------- --------
<S> <C> <C> <C> <C>
Market price at date of grant............. $ 4.69 $ 9.38 $ 5.07 $ 7.10
========= ======== =========== ========
Average exercise price per share*......... $ 2.50 $ 5.00 $ 5.07 $ 7.10
========= ======== =========== ========
Shares under options outstanding:
Balance, February 1, 1992............... 36,187 0 17,950 38,000
Exercised............................ (23,500) 0 (5,000) 0
Canceled............................. (1,000) 0 0 (2,000)
---------- -------- ------------- --------
Balance, January 30, 1993............... 11,687 0 12,950 36,000
Granted.............................. 0 48,600 0 0
Effect of two for one stock split.... 0 48,600 11,675 32,000
Exercised............................ (11,687) 0 (23,825) (17,000)
Canceled............................. 0 0 (800) 0
---------- -------- ------------- --------
Balance, January 29, 1994............... 0 97,200 0 51,000
Exercised............................ 0 (29,900) 0 (12,000)
Canceled............................. 0 (1,500) 0 0
---------- -------- ------------- --------
Balance, January 28, 1995............... 0 65,800 0 39,000
========= ======== =========== ========
</TABLE>
- ---------------
* Exercise price per share for incentive options equals market price at grant
date, except for 14,000 shares in the April 1986 grant having a per share
exercise price of $7.80 (110% of market price at grant date).
6. STOCK REDEMPTION AGREEMENT:
The Company has agreements with two major shareholders/officers under which
the Company will, if requested, purchase (at fair market value, as defined) up
to a specified maximum amount of the Company's common stock held by them upon
their death. The Company's commitment at January 28, 1995, under these
agreements is $1,500,000. The Company carries insurance on the lives of the
individuals to provide funds with which to meet this commitment.
7. RELATED PARTY TRANSACTIONS:
The Company leases five stores from a major shareholder and one store from
the relative of a major shareholder. Future minimum lease payments under these
net operating leases with noncancelable terms in excess of one year aggregate
$1,816,000. Minimum lease payments were $266,000 in fiscal 1995, $257,000 in
fiscal 1994, and $244,000 in fiscal 1993. No excess rentals were paid in fiscal
1995, 1994, or 1993. In addition, at January 28, 1995, the Company is
contingently liable for future minimum lease payments of $1,329,000 on stores
sold to a related party in a prior year.
8. LITIGATION:
Pending legal proceedings not covered by insurance or other indemnity are
substantially limited to litigation incidental to the business in which the
Company is engaged. In the opinion of management, after consultation with
counsel, the ultimate resolution of these matters will not have a material
effect on the financial statements of the Company.
F-13
<PAGE> 38
BIG B, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
9. INCOME TAXES:
Details of federal and state income tax provisions (credits) are as
follows:
<TABLE>
<CAPTION>
1993 1994 1995
---------- ---------- ----------
<S> <C> <C> <C>
Federal:
Current.......................................... $4,265,000 $6,581,000 $6,590,000
Deferred*........................................ 3,000 (495,000) 904,000
State:
Current.......................................... 477,000 633,000 1,041,000
Deferred*........................................ 0 (37,000) 143,000
---------- ---------- ----------
Total.................................... $4,745,000 $6,682,000 $8,678,000
========= ========= =========
* Deferred Taxes:
Depreciation and amortization.................... $ 631,000 $ 604,000 $1,229,000
Accrued liabilities.............................. (76,000) (164,000) (51,000)
Reserves for doubtful accounts................... (86,000) 2,000 5,000
Deferred compensation............................ (99,000) (81,000) (46,000)
Deferred gains................................... 0 (283,000) (64,000)
Inventory........................................ 0 (9,000) 0
Other, net....................................... (367,000) (601,000) (26,000)
---------- ---------- ----------
$ 3,000 $ (532,000) $1,047,000
========= ========= =========
</TABLE>
A reconciliation of the statutory federal income tax rate to the Company's
effective tax rate is as follows:
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
------------------------------------------------------------------
1993 1994 1995
-------------------- -------------------- --------------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
---------- ------- ---------- ------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
Statutory Rate....................... $4,743,000 34% $6,452,000 35% $8,321,000 35%
Increase (decrease) resulting from:
Effect of state taxes.............. 315,000 2 387,000 2 752,000 3
Other.............................. (313,000) (2) (157,000) (1) (395,000) (1)
-- -- --
---------- ---------- ----------
$4,745,000 34% $6,682,000 36% $8,678,000 37%
========= ===== ========= ===== ========= =====
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amount of assets and liabilities for financial statement
and income tax purposes, as determined under enacted tax laws and rates. The
financial effect of changes in tax laws or rates is accounted for in the period
of enactment.
F-14
<PAGE> 39
BIG B, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Significant components of the Company's current and noncurrrent deferred tax
assets and liabilities, net as of January 29, 1994 and January 28, 1995 were as
follows:
<TABLE>
<CAPTION>
1994 1995
------------------------ ------------------------
CURRENT NONCURRENT CURRENT NONCURRENT
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Depreciation and amortization......... $ 0 $ 6,195,000 $ 0 $ 7,424,000
Other................................. 0 61,000 0 98,000
---------- ----------- ---------- -----------
Deferred tax liabilities.... 0 6,256,000 0 7,522,000
---------- ----------- ---------- -----------
Accrued liabilities................... 1,359,000 0 1,410,000 0
Reserves for doubtful accounts........ 367,000 0 362,000 0
Deferred compensation................. 0 402,000 0 448,000
Deferred gains........................ 0 283,000 0 219,000
Inventory............................. 374,000 0 374,000 0
Other................................. 0 11,000 0 202,000
---------- ----------- ---------- -----------
2,100,000 696,000 2,146,000 869,000
Less valuation allowance.............. 0 0 0 0
---------- ----------- ---------- -----------
Deferred tax assets......... 2,100,000 696,000 2,146,000 869,000
---------- ----------- ---------- -----------
Deferred tax assets
(liabilities), net........ $2,100,000 $(5,560,000) $2,146,000 $(6,653,000)
========= ========== ========= ==========
</TABLE>
F-15
<PAGE> 40
(INSIDE BACK COVER)
(Photo-top) - Shown is a map of the Company's distribution and marketing area
with different colored dots showing locations of the Company's
different store formats.
(Photo-bottom) - Shown are four tables describing the locations of each of the
Company's stores by city and by format.
<PAGE> 41
- ------------------------------------------------------
- ------------------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR ANY OF THE UNDERWRITERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY SECURITY
OTHER THAN THE SHARES OF COMMON STOCK OFFERED BY THIS PROSPECTUS, NOR DOES IT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY OFFER TO BUY THE SHARES OF
COMMON STOCK BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION
IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS
NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Use of Proceeds....................... 6
Price Range of Common Stock........... 6
Capitalization........................ 7
Dividend Policy....................... 7
Selected Financial Data............... 8
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 9
Business.............................. 12
Management............................ 20
Selling Shareholders.................. 21
Description of Common Stock........... 22
Underwriting.......................... 22
Experts............................... 23
Legal Matters......................... 23
Statement of Available Information.... 23
Documents Incorporated by Reference... 23
Index to Financial Statements......... F-1
</TABLE>
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
2,705,000 SHARES
[BIG B INC. LOGO]
COMMON STOCK
-------------------------
PROSPECTUS
-------------------------
MORGAN KEEGAN & COMPANY, INC.
April , 1995
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 42
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The estimated expenses of issuance and distribution of the Common Stock,
other than underwriting discounts, are as follows:
<TABLE>
<CAPTION>
AMOUNT TO BE
AMOUNT TO BE PAID BY THE
PAID BY THE SELLING
COMPANY SHAREHOLDERS
------------ ------------
<S> <C> <C>
Securities and Exchange Commission Registration Fee.......... $ 14,904 $ 1,052
Nasdaq National Market Notification Fee...................... 17,500 --
National Association of Securities Dealers, Inc. Filing
Fee........................................................ 5,128 --
Legal Fees and Expenses...................................... 85,000 --
Accounting Fees and Expenses................................. 70,000 --
Printing and Engraving....................................... 65,000 --
Blue Sky Fees and Expenses (including counsel's fees and
expenses).................................................. 15,000 --
Transfer Agent and Registrar Fees............................ 1,500 --
Miscellaneous................................................ 968 --
------------ ------------
Total.............................................. $275,000 $ 1,052
========== ==========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Sections 10-2B-8.51 and 10-2B-8.56, Code of Alabama 1975 (the "Code"),
allow indemnification by a corporation, under certain circumstances, of any
person who was or is a party (or is threatened to be made a party) to any
threatened, pending or completed claim, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that he is or
was a director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise; provided, that such person acted in good faith
and in a manner he reasonably believed to be, in the case of conduct in his or
her official capacity with the corporation, in its best interests, and, in all
other cases, in or not opposed to its best interests and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful. A corporation also has the power under Section 10-2B-8.57 of the
Code to purchase and maintain indemnity insurance against such threatened,
pending or completed claim, action, suit or proceeding on behalf of any person
who is or was a director, officer, employee or agent of the corporation, or who
is or was serving at the request of the corporation as a director, officer,
partner, trustee, employee or agent of another corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise.
Article XVII of the Certificate of Incorporation of Big B provides that the
Company may, at the discretion of the Board of Directors, indemnify any
director, officer or employee of the Company against expenses reasonably
incurred by him in connection with any action, suit or proceeding to which he is
a party by reason of his being or having been a director, officer or employee of
the Company or, at the Company's request, a director, officer or employee of any
corporation of which the Company is a shareholder or creditor, provided such
director, officer or employee of the Company acted in good faith in what he
reasonably believed to be the best interests of the Company, and in addition, in
any criminal action or proceeding, had no reasonable cause to believe that his
conduct was unlawful.
II-1
<PAGE> 43
ITEM 16. EXHIBITS
The following exhibits are filed as part of this Registration Statement.
<TABLE>
<CAPTION>
S-K REFERENCE
NUMBER DESCRIPTION
- ------------- ------------------------------------------------------------------------------
<C> <C> <S>
1 -- Form of Underwriting Agreement
4(a) -- Specimen of Common Stock Certificate of the Company.
4(b) -- Articles of Incorporation
4(c) -- Bylaws
5 -- Opinion of Sirote and Permutt, P.C., counsel for the Registrant, as to the
legality of the securities being registered.
23(a) -- Consent of Sirote & Permutt, P.C. (included in Opinion of Counsel attached as
Exhibit 5).
23(b) -- Consent of Arthur Andersen LLP
24 -- Power of attorney (included on signature page)
</TABLE>
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b) (1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(3) For purposes of determining any liability under the Securities Act
of 1933, each filing of the registrant's annual report pursuant to Section
13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
II-2
<PAGE> 44
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Birmingham, State of Alabama, on this 21st day of
March, 1995.
BIG B, INC.
By: /s/ ARTHUR M. JONES, SR.
------------------------------------
Arthur M. Jones, Sr.
President
KNOW ALL MEN BY THESE PRESENT that each person whose signature appears
below constitutes and appoints Arthur M. Jones, Sr., James A. Bruno and Richard
Cohn, and each of them, his true and lawful attorneys-in-fact and agents, with
full power of substitution and resubstitution, for such person and in such
person's name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration Statement,
and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about the
premises, as fully and to all intents and purposes as such person might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, or their substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- ------------------------ ---------------------
<C> <S> <C>
/s/ JOSEPH S. BRUNO Chairman Emeritus of the March 21, 1995
- --------------------------------------------- Board
Joseph S. Bruno
/s/ ANTHONY J. BRUNO Chairman of the Board of March 21, 1995
- --------------------------------------------- Directors, and Chief
Anthony J. Bruno Executive Officer
/s/ ARTHUR M. JONES, SR. President, Chief March 21, 1995
- --------------------------------------------- Operating Officer and
Arthur M. Jones, Sr. Director
/s/ MICHAEL J. TORTORICE Vice March 21, 1995
- --------------------------------------------- President -- Finance,
Michael J. Tortorice Treasurer and Chief
Financial Officer
/s/ VINCENT J. BRUNO Senior Vice President of March 21, 1995
- --------------------------------------------- Merchandising and
Vincent J. Bruno Advertising and
Director
/s/ JAMES A. BRUNO Executive Vice March 21, 1995
- --------------------------------------------- President, Secretary
James A. Bruno and Director
</TABLE>
II-3
<PAGE> 45
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- ------------------------ ---------------------
<C> <S> <C>
/s/ ISAAC ALDERMAN Director March 21, 1995
- ---------------------------------------------
Isaac Alderman
/s/ CHARLES A. MCCALLUM, D.M.D., M.D. Director March 21, 1995
- ---------------------------------------------
Charles A. McCallum, D.M.D., M.D.
/s/ RICHARD COHN Director March 21, 1995
- ---------------------------------------------
Richard Cohn
</TABLE>
II-4
<PAGE> 46
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
S-K REFERENCE NUMBERED
NUMBER DESCRIPTION PAGE
- ------------- -------------------------------------------------------------------- ------------
<C> <C> <S> <C>
1 -- Form of Underwriting Agreement
4(a) -- Specimen of Common Stock Certificate of the Company.
4(b) -- Articles of Incorporation
4(c) -- Bylaws
5 -- Opinion of Sirote and Permutt, P.C., counsel for the Registrant, as
to the legality of the securities being registered.
23(a) -- Consent of Sirote & Permutt, P.C. (included in Opinion of Counsel
attached as Exhibit 5).
23(b) -- Consent of Arthur Andersen LLP
24 -- Power of attorney (included on signature page)
</TABLE>
<PAGE> 1
EXHIBIT 1
BIG B, INC.
(AN ALABAMA CORPORATION)
COMMON STOCK
UNDERWRITING AGREEMENT
DATED: APRIL ___, 1995
<PAGE> 2
BIG B, INC.
COMMON STOCK
UNDERWRITING AGREEMENT
April ___, 1995
MORGAN KEEGAN & COMPANY, INC.
50 Front Street
Memphis, Tennessee 38103
Dear Sirs:
Big B, Inc., an Alabama corporation (the "Company"), proposes to issue
and sell to Morgan Keegan & Company, Inc. (the "Underwriters") an aggregate of
2,500,000 shares of Common Stock, $.001 par value per share (the "Common
Stock"), of the Company (the "Firm Company Shares") and Joseph S. Bruno,
Anthony J. Bruno and Vincent J. Bruno (collectively, the "Selling
Shareholders") propose to sell to the Underwriters an aggregate of 205,000
shares of Common Stock (the "Firm Selling Shareholder Shares" and, together
with the Firm Company Shares, the "Firm Shares"), as reflected in Schedule A.
The Company also grants to the Underwriters, the option described in
Section 3 to purchase, on the same terms as the Firm Shares, up to 405,750
additional shares of Common Stock (the "Option Shares") solely to cover
over-allotments. The Firm Shares, together with all or any part of the Option
Shares, are collectively herein called the "Shares."
Section 1. Representations and Warranties of the Company. The
Company represents and warrants to and agrees with the
Underwriters that:
(a) A registration statement on Form S-3 (File No.
33-________) with respect to the Shares, including a preliminary form
of prospectus, has been prepared by the Company in conformity with the
requirements of the Securities Act of 1933, as amended (the "1933
Act"), and the applicable rules and regulations (the "1933 Act
Regulations") of the Securities and Exchange Commission (the
"Commission"), and has been filed with the Commission; and such
amendments to such registration statement as may have been required
prior to the date hereof have been filed with the Commission, and such
amendments have been similarly prepared. Copies of such registration
statement and amendment or amendments and of each related preliminary
prospectus, and the exhibits, financial statements and schedules, as
finally amended and revised, have been delivered to you. The Company
has prepared in the same manner, and proposes so to file with the
Commission, one of the following: (i) prior to effectiveness of such
registration statement, a further amendment thereto, including the
form of final prospectus, or (ii) a final prospectus in accordance
with Rules 430A and 424(b) of the 1933 Act Regulations. As filed,
such amendment and form of final prospectus, or such final prospectus,
shall include all Rule 430A Information (as defined below) and, except
to the extent that you shall agree in writing to a modification, shall
be in all respects in the form furnished to you prior to the date and
time that this Agreement was executed and delivered by the parties
hereto, or, to the extent not completed at such date and time, shall
contain only such specific additional information and other changes
(beyond that contained in the latest preliminary prospectus) as the
Company shall have previously advised you in writing would be included
or made therein.
The term "Registration Statement" as used in this Agreement
shall mean such registration statement at the time such registration
statement becomes effective and, in the event any post-effective
amendment thereto becomes effective prior to the Closing Time (as
hereinafter defined), shall also mean such registration statement as
so amended; provided, however, that such term shall also include (i)
all Rule
<PAGE> 3
430A Information deemed to be included in such registration statement
at the time such registration statement becomes effective as provided
by Rule 430A of the 1933 Act Regulations and (ii) all documents (or
portions thereof) incorporated by reference therein filed under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). The
term "Preliminary Prospectus" shall mean any preliminary prospectus
referred to in the preceding paragraph and any preliminary prospectus
included in the Registration Statement at the time it becomes
effective that omits Rule 430A Information, including all documents
(or portions thereof) incorporated by reference therein filed under
the Exchange Act. The term "Prospectus" as used in this Agreement
shall mean the prospectus relating to the Shares in the form in which
it is first filed with the Commission pursuant to Rule 424(b) of the
1933 Act Regulations or, if no filing pursuant to Rule 424(b) of the
1933 Act Regulations is required, shall mean the form of final
prospectus included in the Registration Statement at the time such
Registration Statement becomes effective, in either case, including
all documents (or portions thereof) incorporated by reference therein
filed under the Exchange Act. The term "Rule 430A Information" means
information with respect to the Shares and the offering thereof
permitted pursuant to Rule 430A of the 1933 Act Regulations to be
omitted from the Registration Statement when it becomes effective.
Any reference in this Agreement to an "amendment or supplement" to any
Preliminary Prospectus or the Prospectus or an "amendment" to any
registration statement (including the Registration Statement) shall be
deemed to include any document incorporated by reference therein and
filed with the Commission under the Exchange Act after the date of
such Preliminary Prospectus, Prospectus or Registration Statement, as
the case may be. For purposes of the preceding sentence, any
reference to the "effective date" of an amendment to a registration
statement shall, if such amendment is effective by means of the filing
with the Commission under the Exchange Act of a document incorporated
by reference in such registration statement, be deemed to refer to the
date on which such document was so filed with the Commission. As
used herein, any reference to any statement or information as being
"made," "included," "contained," "disclosed," or "set forth" in any
Preliminary Prospectus, a Prospectus or any amendment or supplement
thereto, or the Registration Statement or any amendment thereto (or
other similar references) shall refer both to information and
statements actually appearing in such document as well as information
and statements incorporated by reference therein.
(b) No order preventing or suspending the use of any
Preliminary Prospectus has been issued by the Commission, and no
proceedings for that purpose have been instituted or threatened by the
Commission or the state securities or blue sky authority of any
jurisdiction, and each Preliminary Prospectus and any amendment or
supplement thereto, at the time of filing thereof, conformed in all
material respects to the requirements of the 1933 Act and the 1933 Act
Regulations, and did not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; provided,
however, that this representation and warranty shall not apply to any
statements or omissions made in reliance upon and in conformity with
information furnished in writing to the Company by an Underwriter
expressly for use in the Registration Statement.
(c) When the Registration Statement shall become effective,
when the Prospectus is first filed pursuant to Rule 424(b) of the 1933
Act Regulations, when any amendment to the Registration Statement
becomes effective, and when any supplement to the Prospectus is filed
with the Commission and at the Closing Time and Date of Delivery (as
hereinafter defined), (i) the Registration Statement, the Prospectus
and any amendments thereof and supplements thereto will conform in all
material respects with the applicable requirements of the 1933 Act and
the 1933 Act Regulations, and (ii) neither the Registration Statement,
the Prospectus nor any amendment or supplement thereto will contain
any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make the
statements therein not misleading; provided, however, that this
representation and warranty shall not apply to any statements or
omissions made in reliance upon and in conformity with information
furnished in writing to the Company by an Underwriter expressly for
use in the Registration Statement.
(d) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the state
of Alabama with all requisite corporate power and authority to own,
lease and operate its properties and to conduct its business as now
conducted. The Company has been duly
-2-
<PAGE> 4
qualified to do business and is in good standing as a foreign
corporation in each other jurisdiction in which the ownership or
leasing of its properties or the nature or conduct of its business as
now conducted requires such qualification, except where the failure to
do so would not have a material adverse effect on the Company.
(e) Each of Big B Drugs, Inc., a Georgia corporation, Drug
World, Inc., an Alabama corporation, Drugs for Less, Inc., an Alabama
corporation, and Big B Express, Inc., also an Alabama corporation
(each a "Subsidiary" and collectively, the "Subsidiaries") is validly
existing as a corporation in good standing under the laws of the state
of its incorporation. Each such entity has all requisite corporate
power and authority to own, lease and operate its properties and
conduct its business as now conducted. Each such entity is duly
qualified to do business and is in good standing as a foreign
corporation in each other jurisdiction in which the ownership or
leasing of its properties or the nature or conduct of its business as
now conducted requires such qualification, except where the failure to
do so would not have a material adverse effect on such Subsidiary.
(f) The Company has full corporate right, power and
authority to enter into this Agreement, to issue, sell and deliver the
Firm Company Shares and the Option Shares as provided herein and to
consummate the transactions contemplated herein. Big B Drugs, Inc.
has full corporate right, power and authority to enter into this
Agreement and to consummate the transactions contemplated herein.
This Agreement has been duly authorized, executed and delivered by
each of the Company and Big B Drugs, Inc. and constitutes a valid and
binding agreement of each of the Company and Big B Drugs, Inc.,
enforceable in accordance with its terms, except to the extent that
enforceability may be limited by bankruptcy, insolvency,
reorganization or other laws of general applicability relating to or
affecting creditors' rights, or by general equity principles and
except to the extent the indemnification provisions set forth in
Section 8 of this Agreement may be limited by federal or state
securities laws or the public policy underlying such laws.
(g) Each consent, approval, authorization, order, license,
certificate, permit, registration, designation or filing by or with
any governmental agency or body necessary for the valid authorization,
issuance, sale and delivery of the Shares, the execution, delivery and
performance of this Agreement, and the consummation by the Company of
the transactions contemplated hereby has been made or obtained and is
in full force and effect.
(h) Neither the issuance, sale and delivery by the Company
of the Firm Company Shares or the Option Shares, nor the execution,
delivery and performance of this Agreement, nor the consummation of
the transactions contemplated hereby will conflict with or result in a
breach or violation of any of the terms and provisions of, or (with or
without the giving of notice or the passage of time or both)
constitute a default under the articles of incorporation or bylaws of
the Company or any Subsidiary; any indenture, mortgage, deed of trust,
loan agreement, note, lease or other agreement or instrument to which
the Company or any Subsidiary is a party or to which they, any of
their properties or other assets is subject; or any applicable
statute, judgment, decree, order, rule or regulation of any court or
governmental agency or body applicable to any of the foregoing or any
of the Company's or Subsidiaries' properties; or result in the
creation or imposition of any lien, charge, claim or encumbrance upon
any property or asset of any of the foregoing.
(i) The Shares to be issued and sold to the Underwriters
hereunder have been validly authorized by the Company. When issued
and delivered against payment therefor as provided in this Agreement,
the Shares will be duly and validly issued, fully paid and
nonassessable. No preemptive rights of shareholders exist with
respect to any of the Shares. No person or entity holds a right to
require or participate in the registration under the 1933 Act of the
Shares pursuant to the Registration Statement. No person or entity
has a right of participation or first refusal with respect to the sale
of the Shares by the Company. The form of certificates evidencing the
Shares complies with all applicable requirements of Alabama law.
-3-
<PAGE> 5
(j) The Company's authorized, issued and outstanding
capital stock is as disclosed in the Prospectus. All of the issued
shares of capital stock of the Company have been duly authorized and
validly issued, are fully paid and nonassessable. None of the issued
shares of capital stock of the Company has been issued or is owned or
held in violation of any preemptive rights of shareholders. Except as
disclosed in the Prospectus, there is no outstanding option, warrant
or other right calling for the issuance of, and no commitment, plan or
arrangement to issue, any shares of capital stock of the Company or
any security convertible into or exchangeable for capital stock of the
Company.
(k) All offers and sales of the Company's capital stock
prior to the date hereof were at all relevant times duly registered
under the 1933 Act or exempt from the registration requirements of the
1933 Act by reason of Sections 3(b), 4(2) or 4(6) thereof and were
duly registered or the subject of an available exemption from the
registration requirements of the applicable state securities or blue
sky laws.
(l) All of the issued shares of capital stock of each of
the Subsidiaries have been duly authorized and validly issued, are
fully paid and nonassessable and are owned beneficially and of record
by the Company, free and clear of all liens, security interests,
pledges, charges, encumbrances, defects, shareholders' agreements,
voting trusts, equities or claims of any nature whatsoever. Other
than the Subsidiaries, the Company does not own, directly or
indirectly, any capital stock or other equity securities of any other
corporation or any ownership interest in any partnership, joint
venture or other association.
(m) The financial statements of the Company included in the
Registration Statement and Prospectus present fairly the financial
position of the Company as of the dates indicated and the results of
operations and cash flows for the Company for the periods specified,
all in conformity with generally accepted accounting principles
applied on a consistent basis. The amounts in the Prospectus under
the captions "Prospectus Summary -- Summary Financial Information" and
"Selected Financial Data" fairly present the information shown therein
and have been compiled on a basis consistent with the financial
statements included in the Registration Statement and the Prospectus.
No other financial statements or schedules are required by Form S-3 or
otherwise to be included in the Registration Statement, the Prospectus
or any Preliminary Prospectus.
(n) Arthur Andersen LLP, who have examined and are
reporting upon the audited financial statements included in the
Registration Statement, are, and were during the periods covered by
their reports included in the Registration Statement and the
Prospectus, independent public accountants within the meaning of the
1933 Act, the Exchange Act and the respective rules and regulations of
the Commission thereunder.
(o) None of the Company or any Subsidiary has sustained,
since January 28, 1995, any material loss or interference with its
business from fire, explosion, flood, hurricane, accident or other
calamity, whether or not covered by insurance, or from any labor
dispute or arbitrators' or court or governmental action, order or
decree; and, since the respective dates as of which information is
given in the Registration Statement and the Prospectus, and except as
otherwise stated in the Registration Statement and Prospectus, there
has not been (i) any material change in the capital stock, long-term
debt, obligations under capital leases or short-term borrowings of the
Company or any Subsidiary, (ii) any material adverse change, or any
development which could reasonably be seen as involving a prospective
material adverse change, in or affecting the business, prospects,
properties, assets, results of operations or condition (financial or
other) of the Company or any Subsidiary, (iii) any liability or
obligation, direct or contingent, incurred or undertaken by the
Company or the Subsidiaries, which is material to the business or
condition (financial or other) of such entity, except for liabilities
or obligations incurred in the ordinary course of business, (iv) any
declaration or payment of any dividend or distribution of any kind on
or with respect to the capital stock of the Company or any Subsidiary,
except as disclosed in the Registration Statement and the Prospectus,
or (v) any transaction that is material to the Company or the
Subsidiaries, except transactions in the ordinary course of business
or as otherwise disclosed in the Registration Statement and the
Prospectus.
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<PAGE> 6
(p) The Company and the Subsidiaries have good and
marketable title in fee simple to all real property and good title to
all personal property owned by them, in each case free and clear of
all liens, security interests, pledges, charges, encumbrances,
mortgages and defects, except such as are disclosed in the Prospectus
or do not materially and adversely affect the value of such property
and do not interfere with the use made of such property by the Company
and the Subsidiaries. All real property and buildings held under
lease by the Company or any Subsidiary are held under valid,
subsisting and enforceable leases, with such exceptions as are
disclosed in the Prospectus or are not material and do not interfere
with the use made of such property and buildings by the Company or
such Subsidiary. No single lease of real property is material to the
operations of the Company or any Subsidiary.
(q) Neither the Company nor any Subsidiary is in violation
of its respective articles of incorporation or by- laws, and no
default exists, and no event has occurred, nor state of facts exists,
which, with notice or after the lapse of time to cure or both, would
constitute a default in the due performance and observance of any
obligation, agreement, term, covenant, consideration or condition
contained in any indenture, mortgage, deed of trust, loan agreement,
note, lease or other agreement or instrument to which any such entity
is a party or to which any such entity or any of its properties is
subject. Neither the Company nor any Subsidiary is in violation of,
or in default with respect to, any statute, rule, regulation, order,
judgment or decree, except as may be properly described in the
Prospectus or such as in the aggregate do not now have and will not in
the future have a material adverse effect on the financial position,
results of operations or business of each such entity, respectively.
(r) There is not pending or, to the knowledge of the
Company, threatened, any action, suit, proceeding, inquiry or
investigation against the Company, any Subsidiary or any of their
respective officers and directors or to which the properties, assets
or rights of any such entity are subject, before or brought by any
court or governmental agency or body or board of arbitrators, which
could result in any material adverse change in the business,
prospects, properties, assets, results of operations or condition
(financial or otherwise) of any such entity or which could adversely
affect the consummation of the transactions contemplated by this
Agreement.
(s) The descriptions in the Registration Statement and the
Prospectus of the contracts, leases and other legal documents therein
described present fairly the information required to be shown, and
there are no contracts, leases, or other documents of a character
required to be described in the Registration Statement or the
Prospectus or to be filed as exhibits to the Registration Statement
which are not described or filed as required. To the best knowledge
of the Company, there are no statutes or regulations applicable to the
Company or any Subsidiary or certificates, permits or other
authorizations from governmental regulatory officials or bodies
required to be obtained or maintained by the Company or any Subsidiary
of a character required to be disclosed in the Registration Statement
or the Prospectus which have not been so disclosed and properly
described therein.
(t) The Company and each Subsidiary owns, possesses or has
obtained all material permits, licenses, franchises, certificates,
consents, orders, approvals and other authorizations of governmental
or regulatory authorities or other entities as are necessary to own or
lease, as the case may be, and to operate its respective properties
and to carry on its business as presently conducted, and neither the
Company nor any Subsidiary has received any notice of proceedings
relating to revocation or modification of any such licenses, permits,
franchises, certificates, consents, orders, approvals or
authorizations. Each of the pharmacists employed by the Company has
obtained all permits, certificates, licenses and other authorizations
of governmental or regulatory authorities applicable to pharmacists.
(u) The Company owns or possesses adequate license or other
rights to use all patents, trademarks, service marks, trade names,
copyrights, software and design licenses, trade secrets, manufacturing
processes, other intangible property rights and know-how (collectively
"Intangibles") necessary to entitle the Company and each Subsidiary to
conduct its respective business and neither the Company nor any
Subsidiary has received notice of infringement or of conflict with
(and knows of no such infringement of or conflict with) asserted
rights of others with respect to any Intangibles which could
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<PAGE> 7
materially and adversely affect the business, prospects, properties,
assets, results of operation or condition (financial or otherwise) of
the Company or any Subsidiary.
(v) To the best of the Company's knowledge, the Company's
system of internal accounting controls taken as a whole is sufficient
to meet the broad objectives of internal accounting control insofar as
those objectives pertain to the prevention or detection of errors or
irregularities in amounts that would be material in relation to the
Company's financial statements; and, to the best of the Company's
knowledge, neither the Company nor any Subsidiary or any employee or
agent thereof, has made any payment of funds of the Company or any
Subsidiary, or received or retained any funds and no funds of the
Company or any Subsidiary have been set aside to be used for any
payment, in each case in violation of any law, rule or regulation.
(w) The Company and each Subsidiary has filed on a timely
basis all necessary federal, state, local and foreign income and
franchise tax returns required to be filed through the date hereof and
have paid all taxes shown as due thereon; and no tax deficiency has
been asserted against any such entity, nor does any such entity know
of any tax deficiency which is likely to be asserted against any such
entity which if determined adversely to any such entity, could
materially adversely affect the business, prospects, properties,
assets, results of operations or condition (financial or otherwise) of
any such entity, respectively. All tax liabilities are adequately
provided for on the books of the Company.
(x) The Company and each Subsidiary maintains insurance
(issued by insurers of recognized financial responsibility) of the
types and in the amounts generally deemed adequate for their
respective businesses and, to the best of the Company's knowledge,
consistent with insurance coverage maintained by similar companies in
similar businesses, including, but not limited to, insurance covering
real and personal property owned or leased by the Company and each
Subsidiary, against theft, damage, destruction, acts of vandalism and
all other risks customarily insured against, all of which insurance is
in full force and effect.
(y) To the best of the Company's knowledge, no general
labor problem exists or is imminent with the employees of the Company
or any Subsidiary.
(z) Each of the Company, the Subsidiaries, and their
officers, directors or affiliates has not taken and will not take,
directly or indirectly, any action designed to, or that might
reasonably be expected to, cause or result in or constitute the
stabilization or manipulation of any security of the Company or to
facilitate the sale or resale of the Shares.
(aa) The Common Stock is registered pursuant to Section
12(g) of the Exchange Act and is listed on the Nasdaq National Market.
(bb) The Company has not incurred any liability for a fee,
commission or other compensation on account of the employment of a
broker or finder in connection with the transactions contemplated by
this Agreement other than as contemplated hereby or as described in
the Registration Statement.
(cc) Except as otherwise disclosed in the Prospectus,
neither the Company nor any Subsidiary has authorized or conducted or
has knowledge of the generation, transportation, storage, presence,
use, treatment, disposal, release, or other handling of any hazardous
substance, hazardous waste, hazardous material, hazardous constituent,
toxic substance, pollutant, contaminant, asbestos, radon,
polychlorinated biphenyls ("PCBs"), petroleum product or waste
(including crude oil or any fraction thereof), natural gas, liquefied
gas, synthetic gas or other material defined, regulated, controlled or
potentially subject to any remediation requirement under any
environmental law (collectively, "Hazardous Materials"), on, in, under
or affecting any real property currently leased or owned (or proposed
to be leased or owned) or by any means controlled by the Company and
any Subsidiary (the "Real Property") except as in material compliance
with applicable laws; to the knowledge of the Company, the Real
Property and the Company's and the Subsidiaries' operations with
respect to the Real Property are in compliance with all federal, state
and local laws, ordinances, rules, regulations and other governmental
requirements relating to pollution,
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<PAGE> 8
control of chemicals, management of waste, discharges of materials
into the environment, health, safety, natural resources, and the
environment (collectively, "Environmental Laws"), and the Company and
the Subsidiaries have, and are in compliance with, all licenses,
permits, registrations and government authorizations necessary to
operate under all applicable Environmental Laws. Except as otherwise
disclosed in the Prospectus, none of the Company or any Subsidiary has
received any written or oral notice from any governmental entity or
any other person and there is no pending or threatened claim,
litigation or any administrative agency proceeding that: alleges a
violation of any Environmental Laws by the Company or any Subsidiary;
alleges that the Company or any Subsidiary is a liable party or a
potentially responsible party under the Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C. Section 9601, et
seq., or any state superfund law; has resulted in or could result in
the attachment of an environmental lien on any of the Real Property;
or alleges that the Company or any Subsidiary is liable for any
contamination of the environment, contamination of the Real Property,
damage to natural resources, property damage, or personal injury based
on their activities or the activities of their predecessors or third
parties (whether at the Real Property or elsewhere) involving
Hazardous Materials, whether arising under the Environmental Laws,
common law principles, or other legal standards.
(dd) None of the Company or any Subsidiary is, will become
as a result of the transactions contemplated hereby, or will conduct
their respective businesses in a manner in which any such entity would
become, "an investment company," or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act
of 1940, as amended.
(ee) The conditions for use of a Registration Statement on
Form S-3 set forth in the General Instructions to Form S-3 have been
satisfied with respect to the Company and the transactions
contemplated by this Agreement and the Registration Statement.
(ff) The Subsidiaries are not currently prohibited,
directly or indirectly, from making distributions to the Company, from
repaying to the Company any loans or advances to any Subsidiary or
from transferring any of the Subsidiaries' property or assets to the
Company, except as disclosed in the Prospectus.
Any certificate signed by any officer of the Company on behalf of the
Company and delivered to you or to counsel for the Underwriters shall be deemed
a representation and warranty by such entity to each Underwriter as to the
matters covered thereby.
Section 2. Representations and Warranties of the Selling
Shareholders. Each of the Selling Shareholders severally represents and
warrants to, and agrees with, the Underwriters and the Company that:
(a) Such Selling Shareholder has full right, power and
authority to enter into this Agreement, the Power of Attorney (as
hereinafter defined) and the Custody Agreement (as hereinafter
defined) and to sell, assign, transfer and deliver to the Underwriters
the Shares to be sold by such Selling Shareholder hereunder;
(b) Such Selling Shareholder has duly executed and
delivered this Agreement, the Power of Attorney and the Custody
Agreement, and each constitutes the valid and binding agreement of
such Selling Shareholder enforceable against such Selling Shareholder
in accordance with its terms, subject, as to enforcement, to
applicable bankruptcy, insolvency, reorganization and moratorium laws
and other laws relating to or affecting the enforcement of creditors'
rights generally and to general equitable principles.
(c) No consent, approval, authorization, order or
declaration of or from, or registration, qualification or filing with,
any court or governmental agency or body is required for the sale of
the Shares to be sold by such Selling Shareholder or the consummation
of the transactions contemplated by this Agreement, the Power of
Attorney or the Custody Agreement, except the registration of such
Shares under the 1933 Act (which, if the Registration Statement is not
effective as of the time of execution hereof, shall
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<PAGE> 9
be obtained as provided in this Agreement) and such as may be required
under state securities or blue sky laws in connection with the offer,
sale and distribution of such Shares by the Underwriters.
(d) The sale of the Shares to be sold by such Selling
Shareholder and the performance of this Agreement, the Power of
Attorney and the Custody Agreement and the consummation of the
transactions herein and therein contemplated will not conflict with,
or (with or without the giving of notice or the passage of time or
both) result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any indenture, mortgage,
deed of trust, loan agreement, lease or other agreement or instrument
to which such Selling Shareholder is a party or to which any of its
properties or assets is subject, nor will such action conflict with or
violate any statute, rule or regulation or any order, judgment or
decree of any court or governmental agency or body having jurisdiction
over such Selling Shareholder or any of such Selling Shareholder's
properties or assets.
(e) Such Selling Shareholder has, and immediately prior to
the Closing Time (as defined in Section 3 hereof), such Selling
Shareholder will have, good and valid title to the Shares to be sold
by such Selling Shareholder hereunder, free and clear of all liens,
security interests, pledges, charges, encumbrances, defects,
shareholders' agreements, voting trusts, equities or claims of any
nature whatsoever; and, upon delivery of such Shares against payment
therefor as provided herein, good and valid title to such Shares, free
and clear of all liens, security interests, pledges, charges,
encumbrances, defects, shareholders' agreements, voting trusts,
equities or claims of any nature whatsoever; and, upon delivery of
such Shares against payment therefor as provided herein, good and
valid title to such Shares, free and clear of all liens, security
interests, pledges, charges, encumbrances, defects, shareholders'
agreements, voting trusts, equities or claims of any nature
whatsoever, will pass to the several Underwriters.
(f) Such Selling Shareholder has not (i) taken, directly or
indirectly, any action designed to cause or result in, or that has
constituted or might reasonably be expected to constitute, the
stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Shares or (ii) since
the filing of the Registration Statement (A) sold, bid for, purchased
or paid anyone any compensation for soliciting purchases of, the
Shares or (B) paid or agreed to pay to any person any compensation for
soliciting another to purchase any other securities of the Company.
(g) When any Preliminary Prospectus was filed with the
Commission it (i) contained all statements required to be stated
therein in accordance with, and complied in all material respects with
the requirements of, the Act and the rules and regulations of the
Commission thereunder, and (ii) did not include any untrue statement
of a material fact or omit to state any material fact necessary in
order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. When the
Registration Statement or any amendment thereto was or is declared
effective and at the Closing Time it (i) contained or will contain all
statements required to be stated therein in accordance with, and
complied or will comply in all material respects with the requirements
of, the Act and the rules and regulations of the Commission thereunder
and (ii) did not or will not include any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein not misleading. When the Prospectus or any
amendment or supplement thereto is filed with the Commission pursuant
to Rule 424(b) (or, if the Prospectus or such amendment or supplement
is not required to be so filed, when the Registration Statement or the
amendment thereto containing such amendment or supplement to the
Prospectus was or is declared effective), and at the Closing Time, the
Prospectus, as amended or supplemented at any such time, (i) contained
or will contain all statements required to be stated therein in
accordance with, and complied or will comply in all material respects
with the requirements of, the Act and the rules and regulations of the
Commission thereunder and (ii) did not or will not include any untrue
statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. The
foregoing provisions of this paragraph (g) do not apply to statements
or omissions made in any Preliminary Prospectus, the Registration
statement or any amendment thereto or the Prospectus or any amendment
or
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<PAGE> 10
supplement thereto in reliance upon and in conformity with written
information furnished to the Company by any Underwriter through you
specifically for use therein.
In order to document the Underwriters' compliance with the reporting
and withholding provisions of the Internal Revenue Code of 1986, as amended,
with respect to the transactions herein contemplated, each of the Selling
Shareholders agrees to deliver to you prior to or at the Closing Time (as
hereinafter defined) a properly completed and executed United States Treasury
Department Form W-9 (or other applicable form or statement specified by
Treasury Department regulations in lieu thereof).
Each Selling Shareholder represents and warrants that certificates in
negotiable form representing all of the Shares to be sold by such Selling
Shareholder hereunder have been placed in custody under a Custody Agreement, in
the form heretofore furnished to and approved by you, duly executed and
delivered by such Selling Shareholder to First Alabama Bank, Montgomery,
Alabama, as custodian (the "Custodian"), and that such Selling Shareholder has
duly executed and delivered a Power of Attorney, in the form heretofore
furnished to and approved by you, appointing each of Arthur M. Jones, James A.
Bruno, and Richard Cohn as such Selling Shareholder's attorneys-in-fact (the
"Attorneys-in-Fact") with authority to execute and deliver this Agreement on
behalf of such Selling Shareholder, to determine the purchase price to be paid
by the Underwriters to the Selling Shareholders as provided in Section 3
hereof, to authorize the delivery of the Shares to be sold by such Selling
Shareholder hereunder and otherwise to act on behalf of such Selling
Shareholder in connection with the transactions contemplated by this Agreement
and the Custody Agreement.
Each Selling Shareholder specifically agrees that the Shares
represented by the certificates held in custody for such Selling Shareholder
under the Custody Agreement are subject to the interests of the Underwriters
hereunder, and that the arrangements made by such Selling Shareholder for such
custody, and the appointment by such Selling Shareholder of the Attorneys-in
Fact by the Power of Attorney, are irrevocable. Each of the Selling
Shareholders specifically agrees that the obligations of the Selling
Shareholders hereunder shall not be terminated by operation of law, whether by
the death or incapacity of any individual Selling Shareholder or, in the case
of an estate or trust, by the death or incapacity of any executor or trustee or
a termination of such estate or trust. If any individual Selling Shareholder
or any executor or trustee should die or become incapacitated, or if any such
estate or trust shall be terminated, or if any other such event should occur,
before the delivery of the Firm Selling Shareholder Shares hereunder,
certificates representing such shares shall be delivered by or on behalf of the
Selling Shareholders in accordance with the terms and conditions of this
Agreement and the Custody Agreements, and actions taken by the
Attorneys-in-Fact pursuant to the Powers of Attorney shall be as valid as if
such death, incapacity, termination or other event had not occurred, regardless
of whether or not the Custodian, the Attorneys-in-Fact, or any of them, shall
have received notice of such death, incapacity, termination, or other event.
Section 3. Sale and Delivery of the Shares to the Underwriters;
Closing.
(a) On the basis of the representations and warranties
herein contained, and subject to the terms and conditions herein set
forth, the Company agrees to sell to the Underwriters the Firm Company
Shares, and the Selling Shareholders agree to sell to the Underwriters
the Firm Selling Shareholder shares, and the Underwriters agree to
purchase from the Company and the Selling Shareholders the Firm Shares
at a purchase price of $_________ per share.
(b) In addition, on the basis of the representations and
warranties herein contained, and subject to the terms and conditions
herein set forth, the Company hereby grants an option to the
Underwriters to purchase up to an additional ______________ Option
Shares at the same purchase price as shall be applicable to the Firm
Shares. The option hereby granted will expire if not exercised within
the thirty (30) day period after the date of the Prospectus by giving
written notice to the Company. The option granted hereby may be
exercised in whole or in part (but not more than once), only for the
purpose of covering over-allotments that may be made in connection
with the offering and distribution of the Firm Shares. The notice of
exercise shall set forth the number of Option Shares as to which the
Underwriters are exercising the option, and the time and date of
payment and delivery thereof. Such time and date of delivery (the
"Date of Delivery") shall be determined by you but shall not be later
than seven full business days after the
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<PAGE> 11
exercise of such option, nor in any event prior to the Closing Time.
If the option is exercised as to all or any portion of the Option
Shares, the Option Shares as to which the option is exercised shall be
purchased by the Underwriters.
(c) Payment of the purchase price for and delivery of
certificates in definitive form representing the Firm Shares shall be
made at the offices of Morgan Keegan & Company, Inc., 50 Front Street,
Memphis, Tennessee 38103 or at such other place as shall be agreed
upon by the Company and you, at 10:00 a.m., either (i) on the fifth
full business day after the execution of this Agreement, or (ii) at
such other time not more than ten full business days thereafter as
you and the Company shall determine (unless, in either case, postponed
pursuant to Section 10), (such date and time of payment and delivery
being herein called the "Closing Time"). In addition, in the event
that any or all of the Option Shares are purchased by the
Underwriters, payment of the purchase price for and delivery of
certificates in definitive form representing the Option Shares shall
be made at the offices of Morgan Keegan & Company, Inc. in the manner
set forth above, or at such other place as the Company and you shall
determine, on the Date of Delivery as specified in the notice from you
to the Company. Payment for the Firm Shares and the Option Shares
shall be made to the Company and the Selling Shareholders,
respectively, by certified or official bank checks in New York
Clearing House next day funds payable to the order of the Company,
against delivery to you for the respective accounts of the
Underwriters of the Shares to be purchased by them.
(d) The certificates representing the Shares to be
purchased by the Underwriters shall be in such denominations and
registered in such names as you may request in writing at least three
full business days before the Closing Time or the Date of Delivery, as
the case may be. The certificates representing the Shares will be
made available at the offices of Morgan Keegan & Company, Inc. or at
such other place as Morgan Keegan & Company, Inc. may designate for
examination and packaging not later than 10:00 a.m. at least two full
business days prior to the Closing Time or the Date of Delivery as the
case may be.
(e) After the Registration Statement becomes effective, you
intend to offer the Shares to the public as set forth in the
Prospectus, but after the initial public offering of such Shares you
may in your discretion vary the public offering price.
Section 4. Certain Covenants of the Company. The Company covenants
and agrees with the Underwriters as follows:
(a) The Company will use its best efforts to cause the
Registration Statement to become effective (if not yet effective at
the date and time that this Agreement is executed and delivered by the
parties hereto). If the Company elects to rely upon Rule 430A of the
1933 Act Regulations or the filing of the Prospectus is otherwise
required under Rule 424(b) of the 1933 Act Regulations, and subject to
the provisions of Section 4(b) of this Agreement, the Company will
comply with the requirements of Rule 430A and will file the
Prospectus, properly completed, pursuant to the applicable provisions
of Rule 424(b) within the time period prescribed. The Company will
file promptly all reports and any definitive proxy or information
statements required to be filed by the Company with the Commission
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act
subsequent to the date of the Prospectus and for so long as the
delivery of a prospectus is required in connection with the offering,
sale and distribution of the Shares. The Company will notify you
immediately, and confirm the notice in writing, (i) when the
Registration Statement, or any post-effective amendment to the
Registration Statement, shall have become effective, or any supplement
to the Prospectus or any amended Prospectus shall have been filed,
(ii) of the receipt of any comments from the Commission, (iii) of any
request by the Commission to amend the Registration Statement or amend
or supplement the Prospectus or for additional information, and (iv)
of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or of any order preventing
or suspending the use of any Preliminary Prospectus or the suspension
of the qualification of the Shares for offering or sale in any
jurisdiction, or of the institution or threatening of any proceeding
for any such purposes. The Company will use every reasonable effort
to prevent the issuance of any such stop order or of any order
preventing or suspending such use and, if any such order is issued, to
obtain the withdrawal thereof at the earliest possible moment.
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<PAGE> 12
(b) The Company will not at any time file or make any
amendment to the Registration Statement, or any amendment or
supplement (i) to the Prospectus, if the Company has not elected to
rely upon Rule 430A, or (ii) if the Company has elected to rely upon
Rule 430A, to either the prospectus included in the Registration
Statement at the time it becomes effective or to the Prospectus filed
in accordance with Rule 424(b), in either case if you shall not have
previously been advised and furnished a copy thereof a reasonable time
prior to the proposed filing, or if you or counsel for the
Underwriters shall object to such amendment or supplement.
(c) The Company has furnished or will furnish to you, at
its expense, as soon as available, as many signed copies of the
Registration Statement as originally filed and of all amendments
thereto, whether filed before or after the Registration Statement
becomes effective, including all documents or information incorporated
by reference therein, copies of all exhibits and documents filed
therewith and signed copies of all consents and certificates of
experts, as you may reasonably request, and has furnished or will
furnish to each Underwriter, one conformed copy of the Registration
Statement as originally filed and of each amendment thereto (without
exhibits but including all documents or information incorporated by
reference therein).
(d) The Company will deliver to each Underwriter, at the
Company's expense, from time to time, as many copies of each
Preliminary Prospectus as such Underwriter may reasonably request, and
the Company hereby consents to the use of such copies for purposes
permitted by the 1933 Act. The Company will deliver to each
Underwriter, at the Company's expense, as soon as the Registration
Statement shall have become effective and thereafter from time to time
as requested during the period when the Prospectus is required to be
delivered under the 1933 Act, such number of copies of the Prospectus
(as supplemented or amended) as each Underwriter may reasonably
request. The Company will comply to the best of its ability with the
1933 Act and the 1933 Act Regulations so as to permit the completion
of the distribution of the Shares as contemplated in this Agreement
and in the Prospectus. If the delivery of a prospectus is required at
any time prior to the expiration of nine months after the time of
issue of the Prospectus in connection with the offering or sale of the
Shares and if at such time any events shall have occurred as a result
of which the Prospectus as then amended or supplemented would include
an untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements therein, in light of
the circumstances under which they were made when such Prospectus is
delivered not misleading, or, if for any reason it shall be necessary
during such same period to amend or supplement the Prospectus or to
file under the Exchange Act any document incorporated by reference in
the Prospectus in order to comply with the 1933 Act or the Exchange
Act or the respective rules and regulations thereunder, the Company
will notify you and upon your request prepare and furnish without
charge to each Underwriter and to any dealer in securities as many
copies as you may from time to time reasonably request of an amended
Prospectus or a supplement to the Prospectus or an amendment or
supplement to any such incorporated document which will correct such
statement or omission or effect such compliance, and in case any
Underwriter is required to deliver a prospectus in connection with
sales of any of the Shares at any time nine months or more after the
time of issue of the Prospectus, upon your request but at the expense
of such Underwriter, the Company will prepare and deliver to such
Underwriter as many copies as you may request of an amended or
supplemented Prospectus complying with Section 10(a)(3) of the 1933
Act.
(e) The Company will use its best efforts to qualify the
Shares for offering and sale under the applicable securities laws of
such states and other jurisdictions as you may designate and to
maintain such qualifications in effect for as long as may be necessary
to complete the distribution of the Shares; provided, however, that
the Company shall not be obligated to file any general consent to
service of process or to qualify as a foreign corporation in any
jurisdiction in which it is not so qualified or to make any
undertakings in respect of doing business in any jurisdiction in which
it is not otherwise so subject. The Company will file such statements
and reports as may be required by the laws of each jurisdiction in
which the Shares have been qualified as above provided.
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<PAGE> 13
(f) The Company will make generally available to its
securityholders as soon as practicable, but in any event not later
than the end of the fiscal quarter first occurring after the first
anniversary of the "effective date of the Registration Statement" (as
defined in Rule 158(c) of the 1933 Act Regulations), an earnings
statement (in reasonable detail but which need not be audited)
complying with the provisions of Section 11(a) of the 1933 Act and
Rule 158 thereunder and covering a period of at least 12 months
beginning after the effective date of the Registration Statement.
(g) The Company will use the net proceeds received by it
from the sale of the Shares in the manner specified in the Prospectus
under the caption "Use of Proceeds."
(h) The Company will furnish to its securityholders, as
soon as practicable after the end of each respective period, annual
reports (including financial statements audited by independent public
accountants) and unaudited quarterly reports of operations for each of
the first three quarters of the fiscal year. During a period of five
years after the date hereof, the Company will furnish to you: (i)
concurrently with furnishing such reports to its securityholders,
statements of operations of the Company for each of the first three
quarters in the form furnished to the Company's securityholders; (ii)
concurrently with furnishing to its securityholders, a balance sheet
of the Company as of the end of such fiscal year, together with
statements of operations, of cash flows and of securityholders' equity
of the Company for such fiscal year, accompanied by a copy of the
certificate or report thereon of independent public accountants; (iii)
as soon as they are available, copies of all reports (financial or
otherwise) mailed to securityholders; (iv) as soon as they are
available, copies of all reports and financial statements furnished to
or filed with the Commission, any securities exchange or the NASD; (v)
every material press release in respect of the Company or its affairs
which is released by the Company; and (vi) any additional information
of a public nature concerning the Company or its business that you may
reasonably request. During such five-year period, the foregoing
financial statements shall be on a consolidated basis to the extent
that the accounts of the Company are consolidated with any
subsidiaries, and shall be accompanied by similar financial statements
for any significant subsidiary that is not so consolidated.
(i) For a period of one hundred eighty (180) days from the
date hereof, the Company will not, without your prior written consent,
directly or indirectly, sell, offer to sell, grant any option for the
sale of, or otherwise dispose of, any shares of Common Stock or
securities convertible into Common Stock, other than to the
Underwriters pursuant to this Agreement and up to 100,000 shares which
may be issued in connection with acquisitions.
(j) The Company will maintain a transfer agent and, if
necessary under the jurisdiction of incorporation of the Company, a
registrar (which may be the same entity as the transfer agent) for its
Common Stock.
(k) The Company will use its best efforts to maintain the
listing of its shares of Common Stock on the Nasdaq National Market.
(l) The Company is familiar with the Investment Company Act
of 1940, as amended, and the rules and regulations thereunder, and has
in the past conducted its affairs, and will in the future conduct its
affairs, in such a manner so as to ensure that the Company is not and
will not be an "investment company" or an entity "controlled" by an
"investment company" within the meaning of the Investment Company Act
of 1940, as amended.
(m) The Company will not, and will use its best efforts to
cause its officers, directors and affiliates not to, (i) take,
directly or indirectly prior to termination of the underwriting
syndicate contemplated by this Agreement, any action designed to
stabilize or manipulate the price of any security of the Company, or
which may cause or result in, or which might in the future reasonably
be expected to cause or result in, the stabilization or manipulation
of the price of any security of the Company, to facilitate the sale or
resale of any of the Shares, (ii) sell, bid for, purchase or pay
anyone any
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<PAGE> 14
compensation for soliciting purchases of the Shares or (iii) pay or
agree to pay to any person any compensation for soliciting any order
to purchase any other securities of the Company.
(n) If at any time during the 30-day period after the
Registration Statement becomes effective, any rumor, publication or
event relating to or affecting the Company shall occur as a result of
which in your reasonable opinion the market price of the Common Stock
has been or is likely to be materially affected (regardless of whether
such rumor, publication or event necessitates a supplement to or
amendment of the Prospectus) and after written notice from you
advising the Company to the effect set forth above, the Company agrees
to forthwith prepare, consult with you concerning the substance of,
and disseminate a press release or other public statement, reasonably
satisfactory to you, responding to or commenting on such rumor,
publication or event.
(o) The Company will notify the Nasdaq National Market of
the proposed issuance of the Shares.
(p) The Company will file timely with the Commission and
the NASD a report on Form 10-C in accordance with the rules and
regulations of the Commission under the 1934 Act.
Section 5. Payment of Expenses. The Company will pay and bear all
costs, fees and expenses incident to the performance of its obligations under
this Agreement (excluding fees and expenses of counsel for the Underwriters,
except as specifically set forth below), including (a) the preparation,
printing and filing of the Registration Statement (including financial
statements and exhibits), as originally filed and as amended, the Preliminary
Prospectuses and the Prospectus and any amendments or supplements thereto, and
the cost of furnishing copies thereof to the Underwriters, (b) the preparation,
printing and distribution of this Agreement, any Agreement Among Underwriters,
any Selected Dealers Agreement, the certificates representing the Shares, the
Blue Sky Memoranda and any instruments relating to any of the foregoing, (c)
the issuance and delivery of the Shares to the Underwriters, including any
transfer taxes payable upon the sale of the Shares to the Underwriters (other
than transfer taxes on resales by the Underwriters), (d) the fees and
disbursements of the Company's counsel and accountants, (e) the qualification
of the Shares under the applicable securities laws in accordance with Section
4(e) of this Agreement, including filing fees and fees and disbursements of
counsel for the Underwriters in connection therewith and in connection with the
Blue Sky Memoranda, (f) all costs, fees and expenses in connection with the
notification to the Nasdaq National Market of the proposed issuance of the
Shares, (g) filing fees relating to the review of the offering by the NASD, (h)
the transfer agent's and registrar's fees and all miscellaneous expenses
referred to in Item 14 of the Registration Statement, (i) costs related to
travel and lodging incurred by the Company and its representatives relating to
meetings with and presentations to prospective purchasers of the Shares
reasonably determined by the Underwriters to be necessary or desirable to
effect the sale of the Shares to the public, and (j) all other costs and
expenses incident to the performance of the Company's obligations hereunder
(including costs incurred in closing the purchase of the Option Shares, if any)
that are not otherwise specifically provided for in this section. The Company,
upon your request, will provide funds in advance for filing fees in connection
with "blue sky" qualifications.
If the sale of the Shares provided for herein is not consummated
because any condition to the obligations of the Underwriters set forth in
Section 6 hereof is not satisfied, because of any termination pursuant to
Section 10 hereof or because of any refusal, inability or failure on the part
of the Company to perform any agreement herein or comply with any provision
hereof other than by reason of default by any of the Underwriters, the Company
will reimburse the Underwriters severally on demand for all reasonable
out-of-pocket expenses, including fees and disbursements of Underwriters'
counsel, reasonably incurred by the Underwriters in reviewing the Registration
Statement and the Prospectus, and in investigating and making preparations for
the marketing of the Shares.
Section 6. Conditions of Underwriters' Obligations. The obligations
of the Underwriters to purchase and pay for the Shares that they have agreed to
purchase pursuant to this Agreement (including any Option Shares as to which
the option granted in Section 3 has been exercised and the Date of Delivery
determined by you is the same as the Closing Time) are subject to the accuracy
of the representations and warranties of the Company and the Selling
Shareholders contained herein or in certificates of any officer of the Company
or of any Selling Shareholder
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<PAGE> 15
delivered pursuant to the provisions hereof, to the performance by the Company
and the Selling Shareholders of their obligations hereunder, and to the
following further conditions:
(a) The Registration Statement shall have become effective
not later than 5:30 p.m. on the date of this Agreement or, with your
consent, at a later time and date not later, however, than 5:30 p.m.
on the first business day following the date hereof, or at such later
time or on such later date as you may agree to in writing; and at the
Closing Time no stop order suspending the effectiveness of the
Registration Statement shall have been issued under the 1933 Act and
no proceedings for that purpose shall have been instituted or shall be
pending or, to your knowledge or the knowledge of the Company, shall
be contemplated by the Commission, and any request on the part of the
Commission for additional information shall have been complied with to
the satisfaction of counsel for the Underwriters. If the Company has
elected to rely upon Rule 430A, a prospectus containing the Rule 430A
Information shall have been filed with the Commission in accordance
with Rule 424(b) (or a post-effective amendment providing such
information shall have been filed and declared effective in accordance
with the requirements of Rule 430A).
(b) At the Closing Time, you shall have received a
favorable opinion of Sirote & Permutt, P.C., counsel for the Company
and the Selling Shareholders, dated as of the Closing Time in form and
substance satisfactory to counsel for the Underwriters, to the effect
that:
(i) The Company has been duly incorporated and is
validly existing as a corporation in good standing under the
laws of the State of Alabama with the corporate power and
authority to own, lease and operate its properties and to
conduct its business as now conducted. The Company is
qualified to transact business as a foreign corporation and
is in good standing in each of the jurisdictions in which
the ownership or leasing of the Company's properties or the
nature or conduct of its business as now conducted or
proposed to be conducted as described in the Registration
Statement and the Prospectus which requires such
qualification, except where the failure to do so would not
have a material adverse effect on the Company.
(ii) Each of the Subsidiaries has been duly
incorporated and is validly existing as a corporation in
good standing under the laws of the state of its
incorporation. Each such entity has all requisite corporate
power and authority to own, lease and operate its properties
and conduct its business as now conducted and as proposed to
be conducted as described in the Registration Statement and
the Prospectus. Each such entity is duly qualified to do
business and is in good standing as a foreign corporation in
each other jurisdiction in which the ownership or leasing of
its properties or the nature or conduct of its business as
now conducted or proposed to be conducted as described in
the Registration Statement and the Prospectus requires such
qualification, except where the failure to do so would not
have a material adverse effect on such Subsidiary.
(iii) The Company has full corporate right, power
and authority to enter into this Agreement, to issue, sell
and deliver the Shares as provided herein and to consummate
the transactions contemplated herein. Big B Drugs, Inc. has
full corporate right, power and authority to enter into this
Agreement and to consummate the transactions contemplated
herein. This Agreement has been duly authorized, executed
and delivered by each of the Company and Big B Drugs, Inc.
and, assuming due authorization, execution and delivery by
the Underwriters, constitutes a valid and binding agreement
of each such entity, enforceable in accordance with its
terms, except to the extent enforceability may be limited by
bankruptcy, insolvency, moratorium, reorganization or other
laws affecting creditors' rights or by general principles of
equity whether considered at law or in equity and except to
the extent that enforcement of the indemnification
provisions set forth in Section 8 of this Agreement may be
limited by federal or state securities laws or the public
policy underlying such laws.
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<PAGE> 16
(iv) Each consent, approval, authorization,
order, license, certificate, permit, registration,
designation or filing by or with any governmental agency or
body necessary for the valid authorization, issuance, sale
and delivery of the Shares, the execution, delivery and
performance of this Agreement and the consummation by the
Company of the transactions contemplated hereby, has been
made or obtained and is in full force and effect, except
such as may be necessary under state securities or required
by the National Association of Securities Dealers, Inc. in
connection with the purchase and distribution of the Shares
by the Underwriters, as to which such counsel need express
no opinion.
(v) Neither the issuance, sale and delivery by
the Company of the Shares, nor the execution, delivery and
performance of this Agreement, nor the consummation of the
transactions contemplated hereby will conflict with or
result in a breach or violation of any of the terms and
provisions of, or (with or without the giving notice or the
passage of time or both) constitute a default under the
articles of incorporation or by-laws of the Company or the
Subsidiaries, respectively, or, to the best of such
counsel's knowledge under any indenture, mortgage, deed of
trust, loan agreement, note, lease or other agreement or
instrument to which the Company or the Subsidiaries,
respectively, are a party or to which the Company or the
Subsidiaries, respectively, any of their respective
properties or other assets, is subject; or, any applicable
statute, judgment, decree, order, rule or regulation of any
court or governmental agency or body; or result in the
creation or imposition of any lien, charge, claim or
encumbrance upon any property or asset of the Company or the
Subsidiaries, respectively.
(vi) The Shares to be issued and sold to the
Underwriters hereunder have been validly authorized by the
Company. When issued and delivered against payment therefor
as provided in this Agreement, such shares will be validly
issued, fully paid and nonassessable. No preemptive rights
of shareholders exist with respect to any of the Shares
which have not been satisfied or waived. To the best of
such counsel's knowledge, no person or entity holds a right
to require or participate in the registration under the 1933
Act of the Shares pursuant to the Registration Statement
which has not been satisfied or waived. No person or entity
has a right of participation or first refusal with respect
to the sale of the Shares by the Company which has not been
satisfied or waived. The form of certificates evidencing
the Shares complies with all applicable requirements of
Alabama law.
(vii) The Company has an authorized
capitalization as set forth in the Prospectus under the
caption "Capitalization." All of the issued shares of
capital stock of the Company have been duly authorized and
validly issued, are fully paid and nonassessable. None of
the issued shares of capital stock of the Company has been
issued or is owned or held in violation of any preemptive
rights of shareholders. All offers and sales of the
Company's capital stock prior to the date hereof were at all
relevant times duly registered under the Act or were exempt
from the registration requirements of the Act by reason of
Sections 3(b), 4(2) or 4(6) thereof and were duly registered
or the subject of an available exemption from the
registration requirements of the applicable state securities
or blue sky laws. Except as disclosed in the Prospectus, to
the best of such counsel's knowledge there is no outstanding
option, warrant or other right calling for the issuance of,
and no commitment, plan or arrangement to issue, any shares
of capital stock of the Company or any security convertible
into or exchangeable for capital stock of the Company.
(viii) All of the issued shares of capital stock
of each of the Subsidiaries have been duly authorized and
validly issued, are fully paid and nonassessable and are
owned beneficially and of record by the Company free and
clear of all liens, security interests, pledges, charges,
encumbrances, defects, shareholders' agreements, voting
trusts, equities or claims of any nature whatsoever. To the
best of such counsel's knowledge, other than the
Subsidiaries, the Company does not own, directly or
indirectly, any capital stock or other equity securities of
any other corporation or any ownership interest in any
partnership, joint venture or other association.
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<PAGE> 17
(ix) To the best of such counsel's knowledge
except as disclosed in the Prospectus, there are no
outstanding (i) securities or obligations of the Company or
any of its subsidiaries convertible into or exchangeable for
any capital stock of the Company or any such subsidiary,
(ii) warrants, rights or options to subscribe for or
purchase from the Company or any such subsidiary any such
capital stock or any such convertible or exchangeable
securities or obligations, or (iii) obligations of the
Company or any such subsidiary to issue any shares of
capital stock, any such convertible or exchangeable
securities or obligation, or any such warrants, rights or
options.
(x) Neither the Company nor its Subsidiaries is
in violation of their respective articles of incorporation
or by-laws, and no material default exists, and no event has
occurred nor state of facts exist which, with notice or
after the lapse of time to cure or both, would, to the best
of such counsel's knowledge, constitute a material default
in the due performance and observance of any obligation,
agreement, term, covenant, or condition contained in any
indenture, mortgage, deed of trust, loan agreement, note,
lease or other agreement or instrument to which any such
entity is a party or to which any such entity or any of its
properties is subject. To the best of such counsel's
knowledge, neither the Company nor any Subsidiary is in
violation of, or in default with respect to, any statute,
rule, regulation, order, judgment or decree, except as may
be properly described in the Prospectus or such as in the
aggregate do not now have and will not in the future have a
material adverse effect on the financial position, results
of operations or business of each such entity, respectively.
(xi) There is not pending or, to the best of such
counsel's knowledge, threatened any action, suit,
proceeding, inquiry or investigation against the Company,
the Subsidiaries or any of their respective officers and
directors or to which the properties, assets or rights of
any such entity are subject, before or brought by any court
or governmental agency or body or board of arbitrators,
which could result in any material adverse change in the
business, prospects, properties, assets, results of
operations or condition (financial or otherwise) of any such
entity or which could adversely affect the consummation of
the transactions contemplated by this Agreement.
(xii) The descriptions in the Registration
Statement and the Prospectus of the contracts, leases and
other legal documents therein described present fairly the
information required to be shown and there are no contracts,
leases or other documents known to such counsel of a
character required to be described in the Registration
Statement or the Prospectus or to be filed as exhibits to
the Registration Statement which are not described or filed
as required. There are no statutes or regulations
applicable to the Company or certificates, permits or other
authorizations from governmental regulatory officials or
bodies required to be obtained or maintained by any such
entity, known to such counsel, of a character required to be
disclosed in the Registration Statement or the Prospectus
which have not been so disclosed and properly described
therein.
(xiii) The Common Stock has been approved for
trading in the Nasdaq National Market.
(xiv) The Registration Statement has become
effective under the 1933 Act and, to the knowledge of such
counsel, no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceeding for
that purpose has been instituted or is pending or
contemplated under the 1933 Act. Other than financial
statements and other financial and operating data and
schedules contained therein, as to which counsel need
express no opinion, the Registration Statement, all
Preliminary Prospectuses, the Prospectus and any amendment
or supplement thereto, appear on their face to conform as to
form in all material respects with the requirements of the
1933 Act and the rules and regulations thereunder.
(xv) Such counsel has no reason to believe that
the Registration Statement, or any further amendment thereto
made prior to the Closing Time, on its effective date and as
of the Closing Time, contained or contains any untrue
statement of a material fact or omitted or omits to
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<PAGE> 18
state any material fact required to be stated therein or
necessary to make the statements therein not misleading, or
that the Prospectus, or any amendment or supplement thereto
made prior to the Closing Time, as of its issue date and as
of the Closing Time, contained or contains any untrue
statement of a material fact or omitted or omits to state a
material fact necessary in order to make the statements
therein, in light of the circumstances under which they were
made, not misleading (provided that such counsel need
express no belief regarding the financial statements and
related schedules and other financial data contained in the
Registration Statement, any amendment thereto, or the
Prospectus, or any amendment or supplement thereto).
(xvi) The Company is not, or solely as a result
of the consummation of the transactions contemplated hereby
will not become, an "investment company," or a company
"controlled" by an "investment company," within the meaning
of the Investment Company Act of 1940, as amended.
(xvii) The descriptions in the Prospectus of
statutes, regulations, legal or governmental proceedings
described are accurate and present fairly a summary of the
information required to be shown under the 1933 Act and the
1933 Act Regulations.
(xviii) To such counsel's knowledge, the
conditions for use of a Registration Statement on Form S-3
have been satisfied with respect to the Company and the
transactions contemplated by this Agreement and the
Registration Statement.
(xix) A Power of Attorney and a Custody Agreement
have been duly executed and delivered by each Selling
Shareholder, each of which is enforceable against each
Selling Shareholder in accordance with its terms subject, as
to enforcement, to applicable bankruptcy, insolvency,
reorganization and moratorium laws and other laws relating
to or affecting the enforcement of creditors' rights
generally and to general equitable principles.
(xx) This Agreement has been duly executed and
delivered by or on behalf of each Selling Shareholder; the
sale of the Shares to be sold by each Selling Shareholder at
the Closing Time and the performance of this Agreement, the
Power of Attorney and the Custody Agreement and the
consummation of the transactions herein and therein
contemplated will not, to the best of such counsel's
knowledge, conflict with or (with or without the giving of
notice or the passage of time or both) result in a breach or
violation of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of
trust, loan agreement, lease or other agreement or
instrument to which any Selling Shareholder is a party or to
which any of their respective properties or assets is
subject, nor will such action conflict with or violate any
statute, rule or regulation or any order, judgment or decree
of any court or governmental agency or body having
jurisdiction over any Selling Shareholder or any of the
Selling Shareholders' properties or assets.
(xxi) No consent, approval, authorization, order
or declaration of or from, or registration, qualification or
filing with, any court or governmental agency or body is
required for the issue and sale of the Shares being sold by
each Selling Shareholder or the consummation of the
transactions contemplated by this Agreement, the Power of
Attorney or the Custody Agreement, except the registration
of such Shares under the Act and such as may be required
under state securities or blue sky laws in connection with
the offer, sale and distribution of such Shares by the
Underwriters.
(xxii) Each Selling Shareholder has, and
immediately prior to the Closing Time each Selling
Shareholder will have, good and valid title to the Shares to
be sold by the Selling Shareholder hereunder, free and clear
of all liens, security interests, pledges, charges,
encumbrances, defects, shareholders' agreements, voting
trusts, equities or claims of any nature whatsoever; and,
upon delivery of such Shares against payment therefor as
provided herein, good and valid title to such Shares, free
and clear of all liens, security interests, pledges,
charges,
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<PAGE> 19
encumbrances, defects, shareholders' agreements, voting
trusts, equities or claims of any nature whatsoever, will
pass to the several Underwriters.
In rendering the foregoing opinions, such counsel may rely
on the following:
(A) as to matters involving the application of
laws other than the laws of the United States and
jurisdictions in which they are admitted, to the extent such
counsel deems proper and to the extent specified in such
opinion, upon an opinion or opinions (in form and substance
reasonably satisfactory to Underwriters' counsel) of other
counsel familiar with the applicable laws, and
(B) as to matters of fact, to the extent they
deem proper, on certificates of responsible officers of the
Company, the Subsidiaries and the Selling Shareholders and
certificates or other written statements of officers or
departments of various jurisdictions having custody of
documents respecting the existence or good standing of the
Company, the Subsidiaries and the Selling Shareholders
provided that copies of all such opinions, statements or
certificates shall be delivered to Underwriters' counsel.
The opinion of counsel for the Company shall state that the
opinion of any other counsel, or certificate or written
statement, on which such counsel is relying is in form
satisfactory to such counsel and that you and they are
justified in relying thereon.
(c) At the Closing Time, you shall have received a
favorable opinion from King & Spalding, counsel for the Underwriters,
dated as of the Closing Time, with respect to the incorporation of the
Company, the issuance and sale of the Shares, the Registration
Statement, the Prospectus and other related matters as the
Underwriters may reasonably require, and the Company shall have
furnished to such counsel such documents as they may reasonably
request for the purpose of enabling them to pass on such matters; and,
in rendering such opinion, such counsel shall be entitled to rely on
the opinion of Sirote & Permutt, P.C. as to all matters covered by the
laws of the State of Alabama.
(d) At the Closing Time, (i) the Registration Statement and
the Prospectus, as they may then be amended or supplemented, shall
contain all statements that are required to be stated therein under
the 1933 Act and the 1933 Act Regulations and in all material respects
shall conform to the requirements of the 1933 Act and the 1933 Act
Regulations; the Company shall have complied in all material respects
with Rule 430A (if it shall have elected to rely thereon) and neither
the Registration Statement nor the Prospectus, as they may then be
amended or supplemented, shall contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading,
(ii) there shall not have been, since the respective dates as of which
information is given in the Registration Statement, any material
adverse change in the business, prospects, properties, assets, results
of operations or condition (financial or otherwise) of the Company,
whether or not arising in the ordinary course of business, (iii) no
action, suit or proceeding at law or in equity shall be pending or, to
the best of Company's knowledge, threatened against the Company that
would be required to be set forth in the Prospectus other than as set
forth therein and no proceedings shall be pending or, to the best
knowledge of the Company, threatened against the Company before or by
any federal, state or other commission, board or administrative agency
wherein an unfavorable decision, ruling or finding could materially
adversely affect the business, prospects, assets, results of
operations or condition (financial or otherwise) of the Company, other
than as set forth in the Prospectus, (iv) the Company shall have
complied with all agreements and satisfied all conditions on its part
to be performed or satisfied at or prior to the Closing Time, and (v)
the representations and warranties of the Company set forth in Section
1 shall be accurate as though expressly made at and as of the Closing
Time. At the Closing Time, you shall have received a certificate
executed by the President and Chief Financial Officer of the Company,
dated as of the Closing Time, to such effect and with respect to the
following additional matters: (A) the Registration Statement has
become effective under the 1933 Act and no stop order suspending the
effectiveness of the Registration Statement or preventing or
suspending the use of the Prospectus has been issued, and no
proceedings for that purpose have been instituted or are pending or,
to the best of their knowledge, threatened under the 1933 Act; and (B)
they have reviewed the Registration Statement and the Prospectus
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<PAGE> 20
and, when the Registration Statement became effective and at all times
subsequent thereto up to the delivery of such certificate, the
Registration Statement and the Prospectus and any amendments or
supplements thereto contained all statements and information required
to be included therein or necessary to make the statements therein not
misleading and neither the Registration Statement nor the Prospectus
nor any amendment or supplement thereto included any untrue statement
of a material fact or omitted to state any material fact required to
be stated therein or necessary to make the statements therein not
misleading, and, since the effective date of the Registration
Statement, there has occurred no event required to be set forth in an
amended or supplemented Prospectus that has not been so set forth.
(e) At the time that this Agreement is executed by the
Company, you shall have received from Arthur Andersen LLP a letter,
dated the date hereof (or, if the Registration Statement has been
declared effective prior to the execution and delivery of this
Agreement, dated such effective date), in form and substance
satisfactory to you, together with signed or reproduced copies of such
letter for each of the other Underwriters, confirming that they are
independent public accountants with respect to the Company within the
meanings of the 1933 Act and the rules and regulations thereunder, and
stating in effect that:
(i) in their opinion, the financial
statements and any supplementary financial information and
schedules included in the Registration Statement and covered
by their opinions therein comply as to form in all material
respects with the applicable accounting requirements of the
1933 Act, the Exchange Act and the rules and regulations
thereunder;
(ii) on the basis of limited procedures (set
forth in detail in such letter and made in accordance with
such procedures as may be specified by you) not constituting
an audit in accordance with generally accepted auditing
standards, consisting of (but not limited to) a reading of
the latest available internal unaudited financial statements
of the Company, a reading of the minute books of the
Company, inquiries of officials of the Company responsible
for financial and accounting matters and such other
inquiries and procedures as may be specified in such letter,
nothing came to their attention that caused them to believe
that:
(A) at a specified date not more than
five days prior to the date of delivery of
such letter, there was any change in the
capital stock, any increase in debt and any
decrease in net current assets, net assets or
shareholders' equity from that set forth in
the Company's balance sheet at January 28,
1995, except as described in such letter; and
(B) for the period from January 28,
1995 to a specified date not more than five
days prior to the date of delivery of such
letter, there were any decreases in revenues
or operating income or the total per share
amounts of net income or other items
specified by the Representative, in each case
as compared with the corresponding period of
the preceding year, except in each case for
decreases which the Prospectus discloses have
occurred or may occur or which are described
in such letter; and
(iii) in addition to the procedures referred
to in clause (ii) above and the examination referred to in
their reports included in the Registration Statement, they
have carried out certain specified procedures, not
constituting an audit in accordance with generally accepted
auditing standards, with respect to certain amounts,
percentages and financial information specified by you which
appear in the Registration Statement or the exhibits or
schedules thereto and are specified by you, and have
compared such amounts, percentages and financial information
with the accounting records of the Company and with material
derived from such records and have found them to be in
agreement.
(f) At the Closing Time, you shall have received from
Arthur Andersen LLP a letter, in form and substance satisfactory to
you and dated as of the Closing Time, to the effect that they reaffirm
the
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<PAGE> 21
statements made in the letter furnished pursuant to subsection (e)
above, except that the specified date referred to shall be a date not
more than five days prior to the Closing Time.
(g) In the event that either of the letters to be delivered
pursuant to subsections (e) and (f) above sets forth any such changes,
decreases or increases, it shall be a further condition to your
obligations that you shall have reasonably determined, after
discussions with officers of the Company responsible for financial and
accounting matters and with Arthur Andersen LLP, that such changes,
decreases or increases as are set forth in such letters do not reflect
a material adverse change in the capital stock, debt, net current
assets, net assets or shareholders' equity of the Company as compared
with the amounts shown in the latest consolidated audited balance
sheet of the Company, or a material adverse change in revenues,
operating income or total or per share amounts of net income, as
compared with the corresponding period of the prior year.
(h) At the Closing Time, counsel for the Underwriters shall
have been furnished with all such documents, certificates and opinions
as they may request for the purpose of enabling them to pass upon the
issuance and sale of the Shares as contemplated in this Agreement and
the matters referred to in Section 6(c) and in order to evidence the
accuracy and completeness of any of the representations, warranties or
statements of the Company, the performance of any of the covenants of
the Company, or the fulfillment of any of the conditions herein
contained; and all proceedings taken by the Company at or prior to the
Closing Time in connection with the authorization, issuance and sale
of the Shares as contemplated in this Agreement shall be reasonably
satisfactory in form and substance to you and to counsel for the
Underwriters. The Company and the Selling Shareholders will furnish
you with such number of conformed copies of such opinions,
certificates, letters and documents as you shall reasonably request.
(i) The NASD, upon review of the terms of the public
offering of the Shares, shall not have objected to such offering, such
terms or the Underwriters' participation in the same.
(j) Subsequent to the date hereof there shall not have
occurred any of the following: (i) a suspension or material
limitation in trading in securities generally or in the Common Stock
on the New York Stock Exchange or American Stock Exchange or the
Nasdaq National Market, (ii) a general moratorium on commercial
banking activities in Tennessee or New York declared by either Federal
or state authorities, as the case may be, or (iii) the outbreak or
escalation of hostilities involving the United States or the
declaration by the United States of a national emergency or war if the
effect of any such event specified in this clause (iii) in your
reasonable judgment makes it impracticable or inadvisable to proceed
with the public offering or the delivery of the Shares on the terms
and in the manner contemplated in the Prospectus.
If any of the conditions specified in this Section 6 shall not have
been fulfilled when and as required by this Agreement to be fulfilled, this
Agreement may be terminated by you on notice to the Company at any time at or
prior to the Closing Time, and such termination shall be without liability of
any party to any other party, except as provided in Section 5. Notwithstanding
any such termination, the provisions of Section 8 shall remain in effect.
Section 7. Conditions to Purchase of Option Shares. In the event that
the Underwriters exercise the option granted in Section 3 hereof to purchase
all or any part of the Option Shares and the Date of Delivery determined by you
pursuant to Section 3 hereof is later than the Closing Time, the obligations of
the several Underwriters to purchase and pay for the Option Shares that they
shall have respectively agreed to purchase pursuant to this Agreement are
subject to the accuracy of the representations and warranties of the Company
herein contained, to the performance by the Company of its obligations
hereunder and to the following further conditions:
(a) The Registration Statement shall remain effective at
the Date of Delivery, and, at the Date of Delivery, no stop order
suspending the effectiveness of the Registration Statement shall have
been issued under the 1933 Act and no proceedings for that purpose
shall have been instituted or shall be pending or, to your knowledge
or the knowledge of the Company, shall be contemplated by the
Commission, and any
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<PAGE> 22
request on the part of the Commission for additional information shall
have been complied with to the reasonable satisfaction of counsel for
the Underwriters.
(b) At the Date of Delivery, the provisions of Sections
6(d)(i) through 6(d)(v) shall have been complied with at and as of the
Date of Delivery and, at the Date of Delivery, you shall have received
a certificate executed by the President and Chief Financial Officer of
the Company, dated as of the Date of Delivery, to such effect and to
the effect set forth in clauses (A) and (B) of Section 6(d).
(c) At the Date of Delivery, you shall have received an
opinion of Sirote & Permutt, P.C., counsel for the Company, together
with signed or reproduced copies of such opinion for each of the other
Underwriters, in form and substance satisfactory to counsel for the
Underwriters, dated as of the Date of Delivery, relating to the Option
Shares and otherwise to the same effect as the opinions required by
Section 6(b).
(d) At the Date of Delivery, you shall have received an
opinion of King & Spalding, counsel for the Underwriters, dated as of
the Date of Delivery, relating to the Option Shares and otherwise to
the same effect as the opinion required by Section 6(c).
(e) At the Date of Delivery, you shall have received a
letter from Arthur Andersen LLP, in form and substance satisfactory to
you and dated as of the Date of Delivery, to the effect that they
reaffirm the statements made in the letter furnished pursuant to
Section 6(e), except that the specified date referred to shall be a
date not more than five days prior to the Date of Delivery.
(f) At the Date of Delivery, counsel for the Underwriters
shall have been furnished with all such documents, certificates and
opinions as they may reasonably request for the purpose of enabling
them to pass upon the issuance and sale of the Option Shares as
contemplated in this Agreement and the matters referred to in Section
7(a) and in order to evidence the accuracy and completeness of any of
the representations, warranties or statements of the Company, the
performance of any of the covenants of the Company, or the fulfillment
of any of the conditions herein contained; and all proceedings taken
by the Company at or prior to the Date of Delivery in connection with
the authorization, issuance and sale of the Option Shares as
contemplated in this Agreement shall be reasonably satisfactory in
form and substance to you and to counsel for the Underwriters.
Section 8. Indemnification and Contribution. (a) The Company and Big
B Drugs, Inc., jointly and severally, will indemnify and hold harmless each
Underwriter against any losses, claims, damages or liabilities, joint or
several, to which such Underwriter may become subject under the 1933 Act, the
Exchange Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) (i) arise out of or are based upon
any breach of any warranty or covenant of the Company herein contained, (ii)
arise out of or are based upon any untrue statement or alleged untrue statement
of a material fact contained in (A) any Preliminary Prospectus, the
Registration Statement or the Prospectus, or any amendment or supplement
thereto, or (B) any application or other document, or any amendment or
supplement thereto, executed by the Company or based upon written information
furnished by or on behalf of the Company filed in any jurisdiction in order to
qualify the Shares under the securities or blue sky laws thereof or filed with
the Commission or any securities association or securities exchange (each an
"Application"), or (iii) arise out of or are based upon the omission or alleged
omission to state in any Preliminary Prospectus, the Registration Statement,
the Prospectus, or any amendment or supplement thereto, or any Application a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse each Underwriter for any legal or
other expenses reasonably incurred by such Underwriter in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the Company or Big B Drugs, Inc. shall not be liable in
any such case to the extent that any such loss, claim, damage or liability
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in any Preliminary Prospectus, the
Registration Statement or the Prospectus, or any such amendment or supplement,
in reliance upon and in conformity with written information furnished to the
Company by any Underwriter expressly for use therein; provided, further,
however, that the Company or Big B Drugs, Inc. shall not be liable to any
Underwriter in respect of any untrue statement or alleged
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<PAGE> 23
untrue statement or omission or alleged omission made in any Preliminary
Prospectus (other than in documents, information or statements incorporated by
reference therein) to the extent that (i) the Prospectus (other than any
documents, information or statements incorporated by reference therein) did not
contain such untrue statement or alleged untrue statement or omission or
alleged omission, (ii) the Prospectus was not sent or given to the purchaser of
the Shares in question at or prior to the time at which the written
confirmation of the sale of such Shares was sent or given to such person, and
(iii) the failure to deliver such Prospectus was not the result of the
Company's noncompliance with its obligations under Section 4(a), (b) and (d)
hereof. In addition to their other obligations under this Section 8(a), the
Company and Big B Drugs, Inc. agree that, as an interim measure during the
pendency of any such claim, action, investigation, inquiry or other proceeding
arising out of or based upon any statement or omission, or any alleged
statement or omission, described in this Section 8(a), they will reimburse the
Underwriters on a monthly basis for all reasonable legal and other expenses
incurred in connection with investigating or defending any such claim, action,
investigation, inquiry or other proceeding, notwithstanding the absence of a
judicial determination as to the propriety and enforceability of the Company's
and Big B Drugs, Inc.'s obligation to reimburse the Underwriters for such
expenses and the possibility that such payments might later be held to have
been improper by a court of competent jurisdiction. Any such interim
reimbursement payments that are not made to an Underwriter within 30 days of a
request for reimbursement shall bear interest at the prime rate (or reference
rate or other commercial lending rate for borrowers of the highest credit
standing) published from time to time by The Wall Street Journal (the "Prime
Rate") from the date of such request. This indemnity agreement shall be in
addition to any liabilities that the Company and Big B Drugs, Inc. may
otherwise have. The Company and Big B Drugs, Inc. will not, without the prior
written consent of each Underwriter, settle or compromise or consent to the
entry of any judgment in any pending or threatened action or claim or related
cause of action or portion of such cause of action in respect of which
indemnification may be sought hereunder (whether or not such Underwriter is a
party to such action or claim), unless such settlement, compromise or consent
includes an unconditional release of such Underwriter from all liability
arising out of such action or claim (or related cause of action or portion
thereof).
The indemnity agreement in this Section 8(a) shall extend upon the
same terms and conditions to, and shall inure to the benefit of, each person,
if any, who controls any Underwriter within the meaning of the 1933 Act or the
Exchange Act to the same extent as such agreement applies to the Underwriters.
(b) Each of the Selling Shareholders, severally and not jointly, will
indemnify and hold harmless each Underwriter against any losses, claims,
damages or liabilities, joint or several, to which such Underwriter may become
subject under the 1933 Act, or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) (i) arise out of or are
based upon any breach of any warranty or covenant of such Selling Shareholder
herein contained, (ii) arise out of or are based upon any untrue statement or
alleged untrue statement of a material fact contained in any Preliminary
Prospectus, the Registration Statement or the Prospectus, or any amendment or
supplement thereto, or (iii) arise out of or are based upon the omission or
alleged omission to state in any Preliminary Prospectus, the Registration
Statement, the Prospectus, or any amendment or supplement thereto, a material
fact required to be stated therein or necessary to make the statements therein
not misleading, and will reimburse each Underwriter for any legal or other
expenses reasonably incurred by such Underwriter in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the Selling Shareholder shall not be liable in any such
case to the extent that any such loss, claim, damage or liability arises out of
or is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in any Preliminary Prospectus, the Registration Statement
or the Prospectus, or any such amendment or supplement, in reliance upon and in
conformity with written information furnished to the Company by any Underwriter
expressly for use therein; provided, further, that the liability of each
Selling Shareholder hereunder shall be limited to the amount of proceeds
received in connection with the sale of such shareholder's shares hereunder.
In addition to their other obligations under this Section 8(b), the Selling
Shareholders agree that, as an interim measure during the pendency of any such
claim, action, investigation, inquiry or other proceeding arising out of or
based upon any statement or omission, or any alleged statement or omission,
described in this Section 8(b), the Selling Shareholders will reimburse the
Underwriters on a monthly basis for all reasonable legal and other expenses
incurred in connection with investigating or defending any such claim, action,
investigation, inquiry or other proceeding, notwithstanding the absence of a
judicial determination as to the propriety and enforceability of the Selling
Shareholders' obligation to reimburse the Underwriters for such expenses and
the possibility that such payments might later be held to have been improper by
a court of competent jurisdiction. Any
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<PAGE> 24
such interim reimbursement payments that are not made to an Underwriter within
30 days of a request for reimbursement shall bear interest at the prime rate
(or reference rate or other commercial lending rate for borrowers of the
highest credit standing) published from time to time by The Wall Street Journal
(the "Prime Rate") from the date of such request. This indemnity agreement
shall be in addition to any liabilities that the Selling Shareholders may
otherwise have. The Selling Shareholders will not, without the prior written
consent of each Underwriter, settle or compromise or consent to the entry of
any judgment in any pending or threatened action or claim or related cause of
action or portion of such cause of action in respect of which indemnification
may be sought hereunder (whether or not such Underwriter is a party to such
action or claim), unless such settlement, compromise or consent includes an
unconditional release of such Underwriter from all liability arising out of
such action or claim (or related cause of action or portion thereof).
The indemnity agreement in this Section 8(b) shall extend upon the
same terms and conditions to, and shall inure to the benefit of, each person,
if any, who controls any Underwriter within the meaning of the 1933 Act to the
same extent as such agreement applies to the Underwriters.
(c) Each Underwriter, severally but not jointly, will indemnify and
hold harmless the Company and each Selling Shareholder against any losses,
claims, damages or liabilities to which the Company or any Selling Shareholder
may become subject, under the 1933 Act, the Exchange Act or otherwise, insofar
as such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any breach of any warranty or covenant by such
Underwriter herein contained or any untrue statement or alleged untrue
statement of a material fact contained in any Preliminary Prospectus, the
Registration Statement or the Prospectus, or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, in each case to the extent, but
only to the extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in any Preliminary Prospectus, the
Registration Statement or the Prospectus or any such amendment or supplement
thereto in reliance upon and in conformity with written information furnished
to the Company by such Underwriter expressly for use therein; and will
reimburse the Company and the Selling Shareholders for any legal or other
expenses reasonably incurred by the Company and the Selling Shareholders in
connection with investigating or defending any such loss, claim, damage,
liability or action. In addition to its other obligations under this Section
8(c), the Underwriters agree that, as an interim measure during the pendency of
any such claim, action, investigation, inquiry or other proceeding arising out
of or based upon any statement or omission, or any alleged statement or
omission, described in this Section 8(c), they will reimburse the Company and
the Selling Shareholders on a monthly basis for all reasonable legal and other
expenses incurred in connection with investigating or defending any such claim,
action, investigation, inquiry or other proceeding, notwithstanding the absence
of a judicial determination as to the propriety and enforceability of their
obligation to reimburse the Company and the Selling Shareholders for such
expenses and the possibility that such payments might later be held to have
been improper by a court of competent jurisdiction. Any such interim
reimbursement payments that are not made to the Company and the Selling
Shareholders within 30 days of a request for reimbursement shall bear interest
at the Prime Rate from the date of such request. This indemnity agreement shall
be in addition to any liabilities that the Underwriters may otherwise have. No
Underwriter will, without the prior written consent of the Company, settle or
compromise or consent to the entry of judgment in any pending or threatened
action or claim or related cause of action or portion of such cause of action
in respect of which indemnification may be sought hereunder (whether or not the
Company is a party to such action or claim), unless such settlement, compromise
or consent includes an unconditional release of the Company from all liability
arising out of such action or claim (or related cause of action or portion
thereof).
The indemnity agreement in this Section 8(c) shall extend upon the
same terms and conditions to, and shall inure to the benefit of, each officer
and director of the Company and each person, if any, who controls the Company
within the meaning of the 1933 Act or the Exchange Act to the same extent as
such agreement applies to the Company.
(d) Promptly after receipt by an indemnified party under subsection
(a), (b) or (c) above of notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made against
the indemnifying party under such subsection, notify the indemnifying party in
writing of the commencement thereof;
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<PAGE> 25
no indemnification provided for in Section 8(a), 8(b) or 8(c) shall be
available to any party who shall fail to give notice as provided in this
Section 8(d) if the party to whom notice was not given was unaware of the
proceeding to which such notice would have related and was prejudiced by the
failure to give such notice, but the omission so to notify the indemnifying
party will not relieve the indemnifying party from any liability that it may
have to any indemnified party otherwise than under Section 8. In case any such
action shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it shall wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof with counsel satisfactory to such indemnified party (who shall not,
except with the consent of the indemnified party, be counsel to the
indemnifying party), and, after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party under such
subsection for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation, except that if the indemnified party has been advised
by counsel in writing that there are one or more defenses available to the
indemnified party which are different from or additional to those available to
the indemnifying party, then the indemnified party shall have the right to
employ separate counsel and in that event the reasonable fees and expenses of
such separate counsel for the indemnified party shall be paid by the
indemnifying party; provided, however, that if the indemnifying party is the
Company or the Selling Shareholders, the Company or the Selling Shareholders
shall only be obligated to pay the reasonable fees and expenses of a single law
firm (and any reasonably necessary local counsel) employed by all of the
indemnified parties and the persons referred to in Section 8(a) hereof. The
indemnifying party shall not be liable for any settlement of any proceeding
effected without its written consent, but if settled with such consent or if
there be a final judgment for the plaintiff, the indemnifying party agrees to
indemnify the indemnified party from and against any loss or liability by
reason of such settlement or judgment.
(e) It is agreed that any controversy arising out of the operation of
the interim reimbursement arrangements set forth in Sections 8(a), 8(b) and
8(c) hereof, including the amounts of any requested reimbursement payments, the
method of determining such amounts and the basis on which such amounts shall be
apportioned among the indemnifying parties, shall be settled by arbitration
conducted pursuant to the Code of Arbitration Procedure of the National
Association of Securities Dealers, Inc. Any such arbitration must be commenced
by service of a written demand for arbitration or a written notice of
intention to arbitrate, therein electing the arbitration tribunal. In the
event the party demanding arbitration does not make such designation of an
arbitration tribunal in such demand or notice, then the party responding to
said demand or notice is authorized to do so. Any such arbitration will be
limited to the operation of the interim reimbursement provisions contained in
Sections 8(a), 8(b) and 8(c) hereof and will not resolve the ultimate propriety
or enforceability of the obligation to indemnify for expenses that is created
by the provisions of Sections 8(a), 8(b) and 8(c).
(f) In order to provide for just and equitable contribution in
circumstances under which the indemnity provided for in this Section 8 is for
any reason judicially determined (by the entry of a final judgment or decree by
a court of competent jurisdiction and the expiration of time to appeal or the
denial of the right of appeal) to be unenforceable by the indemnified parties
although applicable in accordance with its terms, the Company, Big B Drugs,
Inc. and the Selling Shareholders, on the one hand and the Underwriters on the
other shall contribute to the aggregate losses, liabilities, claims, damages
and expenses of the nature contemplated by such indemnity incurred by the
Company, Big B Drugs, Inc. and the Selling Shareholders and one or more of the
Underwriters, as incurred, in such proportions that (a) the Underwriters are
responsible pro rata for that portion represented by the percentage that the
underwriting discount appearing on the cover page of the Prospectus bears to
the public offering price (before deducting expenses) appearing thereon, and
(b) the Company, Big B Drugs, Inc. and the Selling Shareholders are responsible
for the balance, provided, however, that no person guilty of fraudulent
misrepresentations (within the meaning of Section 11(f) of the 1933 Act) shall
be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation; provided, further, that if the allocation
provided above is not permitted by applicable law, the Company, Big B Drugs,
Inc. and the Selling Shareholders, on the one hand and the Underwriters on the
other shall contribute to the aggregate losses in such proportion as is
appropriate to reflect not only the relative benefits referred to above but
also the relative fault of the Company, Big B Drugs, Inc. and the Selling
Shareholders, on the one hand and the Underwriters on the other in connection
with the statements or omissions which resulted in such losses, claims, damages
or liabilities, as well as any other relevant
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<PAGE> 26
equitable considerations. Relative fault shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a
material fact or the omission to state a material fact relates to information
supplied by the Company, Big B Drugs, Inc. and the Selling Shareholders on the
one hand or by the Underwriters on the other hand and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The Company, Big B Drugs, Inc. and the Selling
Shareholders and the Underwriters agree that it would not be just and equitable
if contributions pursuant to this Section 8(f) were determined by pro rata
allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of
the equitable considerations referred to above in this Section 8(f). The
amount paid or payable by a party as a result of the losses, claims, damages or
liabilities referred to above shall be deemed to include any legal or other
fees or expenses reasonably incurred by such party in connection with
investigating or defending such action or claim. Notwithstanding the
provisions of this Section 8(f), no Underwriter shall be required to contribute
any amount in excess of the amount by which the total price at which the Shares
underwritten by it and distributed to the public were offered to the public
exceeds the amount of any damages which such Underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. The Underwriters' obligations in this Section
8(f) to contribute are several in proportion to their respective underwriting
obligations and not joint. For purposes of this Section 8(f), each person, if
any, who controls an Underwriter within the meaning of Section 15 of the 1933
Act shall have the same rights to contribution as such Underwriter, and each
director of the Company, each officer of the Company who signed the
Registration Statement, and each person, if any, who controls the Company or
the Partnership within the meaning of Section 15 of the 1933 Act shall have the
same rights to contribution as the Company.
Section 9. Representations, Warranties and Agreements to Survive
Delivery. The representations, warranties, indemnities, agreements and other
statements of the Company, its officers or the Selling Shareholders set forth
in or made pursuant to this Agreement will remain operative and in full force
and effect regardless of any investigation made by or on behalf of the Company,
the Selling Shareholders or any Underwriter or controlling person, with respect
to an Underwriter or the Company or the Selling Shareholders, and will survive
delivery of and payment for the Shares or termination of this Agreement.
Section 10. Effective Date of Agreement and Termination. (a) This
Agreement shall become effective immediately as to Sections 5 and 8 and, as to
all other provisions, (i) if at the time of execution of this Agreement the
Registration Statement has not become effective, at 10:00 a.m., on the first
full business day following the effectiveness of the Registration Statement, or
(ii) if at the time of execution of this Agreement the Registration Statement
has been declared effective, at 10:00 a.m. on the first full business day
following the date of execution of this Agreement; but this Agreement shall
nevertheless become effective at such earlier time after the Registration
Statement becomes effective as you may determine on and by notice to the
Company or by release of any of the Shares for sale to the public. For the
purposes of this Section 10, the Shares shall be deemed to have been so
released upon the release of publication of any newspaper advertisement
relating to the Shares or upon the release by you of telegrams (i) advising the
Underwriters that the Shares are released for public offering, or (ii) offering
the Shares for sale to securities dealers, whichever may occur first. By giving
notice before the time this Agreement becomes effective, you, as Representative
of the several Underwriters, or the Company, may prevent this Agreement from
becoming effective, without liability of any party to any other party, except
that the Company shall remain obligated to pay costs and expenses to the extent
provided in Section 4 hereof.
(b) You may terminate this Agreement, by notice to the Company, at
any time at or prior to the Closing Time (i) in accordance with the last
paragraph of Section 6 of this Agreement, or (ii) if there has been since the
respective dates as of which information is given in the Registration
Statement, any material adverse change, or any development involving a
prospective material adverse change, in or affecting the business, prospects,
management, properties, assets, results of operations or condition (financial
or otherwise) of the Company, whether or not arising in the ordinary course of
business, or (iii) if there has occurred or accelerated any outbreak of
hostilities or other national or international calamity or crisis or change in
economic or political conditions the effect of which on the financial markets
of the United States is such as to make it, in your judgment, impracticable to
market the Shares or enforce contracts for the sale of the Shares, or (iv) if
trading in any securities of the Company has been suspended by the Commission
or by the NASD, or if trading generally on the New York Stock Exchange or in
the over-the-counter market has been suspended, or limitations on prices for
trading (other than limitations on hours or
-25-
<PAGE> 27
numbers of days of trading) have been fixed, or maximum ranges for prices for
securities have been required, by such exchange or the NASD or by order of the
Commission or any other governmental authority, or (v) if a banking moratorium
has been declared by federal or New York or Tennessee authorities, or (vi) any
federal or state statute, regulation, rule or order of any court or other
governmental authority has been enacted, published, decreed or otherwise
promulgated which in your reasonable opinion materially adversely affects or
will materially adversely affect the business or operations of the Company, or
(vii) any action has been taken by any federal, state or local government or
agency in respect of its monetary or fiscal affairs which in your reasonable
opinion has a material adverse effect on the securities markets in the United
States.
(c) If this Agreement is terminated pursuant to this Section 9, such
termination shall be without liability of any party to any other party, except
to the extent provided in Section 5. Notwithstanding any such termination, the
provisions of Section 8 shall remain in effect.
Section 11. Default by One or More of the Underwriters. If one or
more of the Underwriters shall fail at the Closing Time to purchase the Shares
that it or they are obligated to purchase pursuant to this Agreement (the
"Defaulted Securities"), you shall have the right, within 36 hours thereafter,
to make arrangements for one or more of the non-defaulting Underwriters, or any
other underwriters, to purchase all, but not less than all, of the Defaulted
Securities in such amounts as may be agreed upon and upon the terms set forth
in this Agreement; if, however, you have not completed such arrangements within
such 36-hour period, then:
(a) If the aggregate number of Firm Shares which are
Defaulted Securities does not exceed 10% of the aggregate number of
Firm Shares to be purchased pursuant to this Agreement, the
non-defaulting Underwriters shall be obligated to purchase the full
amount thereof in the proportions that their respective underwriting
obligation proportions bear to the underwriting obligations of all
non-defaulting Underwriters, and
(b) If the aggregate number of Firm Shares which are
Defaulted Securities exceeds 10% of the aggregate number of Firm
Shares to be purchased pursuant to this Agreement, this Agreement
shall terminate without liability on the part of any non-defaulting
Underwriter.
No action taken pursuant to this Section 11 shall relieve any
defaulting Underwriter from liability in respect of its default.
In the event of any such default that does not result in a termination
of this Agreement, either you or the Company shall have the right to postpone
the Closing Time for a period not exceeding seven days in order to effect any
required changes in the Registration Statement or Prospectus or in any other
documents or arrangements, and the Company agrees promptly to file any
amendments to the Registration Statement or supplements to the Prospectus that
may thereby be made necessary. As used in this Agreement, the term
"Underwriter" includes any person substituted for an Underwriter under this
Section 11.
Section 12. Default by the Company. If the Company or the Selling
Shareholders shall fail at the Closing Time to sell and deliver the aggregate
number of Firm Shares that they are obligated to sell, then this Agreement
shall terminate without any liability on the part of any non-defaulting party,
except to the extent provided in Section 5 and except that the provisions of
Section 8 shall remain in effect.
No action taken pursuant to this Section shall relieve the Company or
the Selling Shareholders from liability, if any, in respect to such default.
Section 13. Notices. All notices and other communications under this
Agreement shall be in writing and shall be deemed to have been duly given if
delivered, mailed or transmitted by any standard form of telecommunication.
Notices to the Underwriters shall be directed c/o Morgan Keegan & Company,
Inc., 50 Front Street, Memphis, Tennessee 38103, Attention: Mr. Minor Perkins,
Managing Director (with a copy sent in the same manner to King & Spalding, 191
Peachtree Street, Atlanta, Georgia 30303, Attention: Randolph C. Coley); and
notices to the Company and the Selling Shareholders shall be directed to them
at Big B, Inc., 2600 Morgan
-26-
<PAGE> 28
Road, S.E., Birmingham, Alabama 35023, attention: president (with a copy sent
in the same manner to Sirote & Permutt, P.C., 2222 Arlington Avenue South,
Birmingham, Alabama 35205, attention: Richard Cohn).
Section 14. Parties. This Agreement is made solely for the benefit
of and is binding upon the Underwriters, the Company, Big B Drugs, Inc. and the
Selling Shareholders and, to the extent provided in Section 8, any person
controlling the Company, or any of the Underwriters, the officers and directors
of the Company, and their respective executors, administrators, successors and
assigns and subject to the provisions of Section 8, no other person shall
acquire or have any right under or by virtue of this Agreement. The term
"successors and assigns" shall not include any purchaser, as such purchaser,
from any of the several Underwriters of the Shares.
All of the obligations of the Underwriters hereunder are several and
not joint.
Section 15. Governing Law and Time. This Agreement shall be governed
by the laws of the State of Tennessee. Specified time of the day refers to
United States Eastern Time. Time shall be of the essence of this Agreement.
Section 16. Counterparts. This Agreement may be executed in one or
more counterparts and when a counterpart has been executed by each party, all
such counterparts taken together shall constitute one and the same agreement.
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us a counterpart hereof, whereupon this
instrument will become a binding agreement among the Company, Big B Drugs,
Inc., the Selling Shareholders and the several Underwriters in accordance with
its terms. It is understood that your acceptance of this letter on behalf of
the Underwriters is pursuant to the authority set forth in a form of Agreement
among Underwriters, the form of which shall be submitted to the Company for
examination, upon request, but without warranty on your part as to the
authority of the signers thereof.
Very truly yours.
BIG B, INC.
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
BIG B DRUGS, INC.
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
-27-
<PAGE> 29
----------------------------------------
Joseph S. Bruno
----------------------------------------
Anthony J. Bruno
----------------------------------------
Vincent J. Bruno
Confirmed and accepted as of the date first above written:
MORGAN KEEGAN & COMPANY, INC.
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
-28-
<PAGE> 30
SCHEDULE A
<TABLE>
<CAPTION>
Number of Firm
Selling Shareholders (1) Shares to be Sold
- ------------------------ -----------------
<S> <C>
Joseph S. Bruno . . . . . . . . . . . . . . . . 65,000
Anthony J. Bruno . . . . . . . . . . . . . . . 60,000
Vincent J. Bruno . . . . . . . . . . . . . . . 80,000
</TABLE>
<PAGE> 1
<TABLE>
<S> <C> <C>
EXHIBIT 4(a)
BIG B INC.
[logo]
COMMON STOCK COMMON STOCK
NUMBER SHARES
19288
INCORPORATED UNDER THE LAWS OF THE STATE OF ALABAMA
SEE REVERSE FOR
CERTAIN DEFINITIONS
THIS CERTIFIES THAT CUSIP 088891 10 6
***SPECIMEN CERTIFICATE***
is the owner of
FULLY PAID AND NONASSESSABLE SHARES OF THE PAR of which are on file with the Transfer Agent,
VALUE OF $.01 EACH OF THE COMMON STOCK of BIG B, INC., to all provisions of which the holder hereof by
transferable on the books of the Corporation by the acceptance of this Certificate assents. This
holders hereof in person or by duly authorized attorney certificate is not valid until countersigned by
upon surrender of this certificate properly endorsed. the Transfer Agent.
This Certificate and the shares represented hereby are
issued and shall be held subject to all provisions of WITNESS the facsimile seal of the Corporation
the Corporation's Articles of Incorporation and By-laws and the facsimile signatures of its duly
and any amendments thereto, copies authorized officers.
Dated
(Seal)
Arthur M. Jones, Sr. Anthony J. Bruno
Secretary President
Countersigned
FIRST ALABAMA BANK OF BIRMINGHAM
Transfer Agent
By
Authorized Officer
</TABLE>
<PAGE> 2
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C> <C>
TEN COM --as tenants in common UNIF GIFT MIN ACT -- ........Custodian.........
(Cust) (Minor)
under Uniform Gifts to Minors
TEN ENT --as tenants by the entireties
JT TEN --as joint tenants with right of
survivorship and not as tenants Act............
in common (State)
Additional abbreviations may also be used though not in the above list.
</TABLE>
For value received, ____________________ hereby sell, assign and
transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
______________________
/ /
______________________
______________________________________________________________________________
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF ASSIGNEE
______________________________________________________________________________
______________________________________________________________________________
_______________________________________________________________________ Shares
of the Common Stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint ________________________________________
______________________________________________________________________________
Attorney to transfer the said stock on the books of the within named Corporation
with full power of substitution in the premises.
Dated ________________________________
_____________________________________________
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST
CORRESPOND WITH THE NAME AS WRITTEN UPON THE
FACE OF THE CERTIFICATE, IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT, OR ANY
CHANGE WHATEVER.
<PAGE> 1
EXHIBIT 4(b)
STATE OF ALABAMA )
JEFFERSON COUNTY )
ARTICLES OF AMENDMENT TO ARTICLES (CERTIFICATE)
OF INCORPORATION
OF
BIG B, INC.
KNOW ALL MEN BY THESE PRESENTS: That we, the undersigned, as
President and Secretary of BIG B, Inc., a corporation organized and existing
under the laws of the State of Alabama, hereby certify that, in accordance with
Code of Alabama 1975, Sections 10-2A-110 and 10-2A-113, the Articles
(Certificate) of Incorporation were amended on the 17th day of November, 1993,
by a vote of the Shareholders of the Corporation, pursuant to a resolution
adopted by the Board of Directors of the Corporation and voted upon by the
Shareholders of the Corporation, the vote being 9,203,648 for, 174,627 against
and 111,651 abstaining, out of a total of 15,484,652 shares issued and
outstanding and entitled to vote thereon, as follows:
The first paragraph of ITEM IV of the Articles
(Certificate) of Incorporation is hereby deleted in its
entirety, and there is substituted in lieu thereof the
following:
"The total number of shares which the Corporation
shall have authority to issue is Forty Million (40,000,000)
shares of Common Stock of the par value of $0.001 per share,
constituting a total authorized capital of $40,000 and
consisting of such one class only."
"The Corporation shall issue one share of the
One-Tenth of One Cent ($.001) par value Common Stock of the
Corporation in exchange
<PAGE> 2
for and in cancellation of each one share of the presently
outstanding One Cent ($.01) par value Common Stock of the
Corporation."
The above Amendment effects a change in the amount of stated
capital of the Corporation. The stated capital of the Corporation is currently
$200,000. This Amendment will decrease the stated capital of the Corporation
to $40,000. The manner in which this change is effected is as follows:
The par value shall be decreased from One Cent ($.01) per
share to One-Tenth of One Cent ($.001) per share, and subsequently the total
authorized capital stock of Two Hundred Thousand Dollars ($200,000), divided
into twenty million (20,000,000) shares of One Cent ($.01) par value Common
Stock, will be changed to a total authorized capital stock of Forty Thousand
Dollars ($40,000.00), divided into Forty Million (40,000,000) shares of
One-Tenth of One Cent ($.001) par value Common Stock.
The above Amendment provides for an exchange of issued shares.
The manner in which this exchange is to be effected is as follows:
The Corporation shall issue one share of the One-Tenth of One
Cent ($.001) par value Common Stock of the Corporation in exchange for and in
cancellation of each one share of the presently outstanding One Cent ($.01) par
value common shares of the Corporation.
We further certify that the within Articles of Amendment are
being filed in the Office of the Judge of Probate of Jefferson County, Alabama,
for the purpose of effecting such amendment in accordance with the requirements
of Code of Alabama 1975, Section 10-2A-114.
IN WITNESS WHEREOF, we have hereunto set our hands and seals
this 17th day of November, 1993.
/s/ Arthur M. Jones, Sr. (SEAL)
Arthur M. Jones, Sr.,
President
2
<PAGE> 3
/s/ James A. Bruno (SEAL)
James A. Bruno,
Secretary
VERIFICATION
I, the undersigned, as President of Big B, Inc., do hereby
verify that the above and foregoing instrument represents Articles of Amendment
to the Articles (Certificate) of Incorporation of Big B, Inc., an Alabama
corporation, duly approved and adopted by the holders of a majority of the
shares entitled to vote thereon, and that the statements therein are true and
correct.
This 17th day of November, 1993.
/s/ Arthur M. Jones, Sr.
Arthur M. Jones, Sr.,
President
Sworn to and subscribed before me on this 17th day of November, 1993.
/s/ Kay E. Ellis
Notary Public
My Commission Expires: 1/12/96
3
<PAGE> 4
STATE OF ALABAMA
JEFFERSON COUNTY
ARTICLES OF AMENDMENT TO ARTICLES (CERTIFICATE)
OF INCORPORATION
OF
BIG B, INC.
KNOW ALL MEN BY THESE PRESENTS: That we, the undersigned, as
President and Secretary of Big B, Inc., a corporation organized and existing
under the laws of the State of Alabama, hereby certify that, in accordance with
Code of Alabama 1975, Sections 10-2A-110 and 10-2A-113, the Articles
(Certificate) of Incorporation were amended on the 20th day of May, 1988, by a
vote of the Shareholders of the Corporation, the vote being 4,376,014 for,
96,190 against, and 6,378 abstained, with a total of 7,393,003 shares of Common
Stock issued and outstanding, with a total of 7,393,003 shares of Common Stock
entitled to vote thereon, as follows:
The first and second paragraphs of ARTICLE IV of the Articles
(Certificate) of Incorporation are hereby deleted in their entirety, and there
is substituted in lieu thereof the following:
"The total number of shares which the Corporation
shall have authority to issue is 20,000,000 shares of Common
Stock of the par value of $0.01 per share, constituting a
total authorized capital of $200,000, and consisting of such
one class of Common Stock only."
We further certify that the within Articles of Amendment are
being filed in the Office of the Judge of Probate of Jefferson County, Alabama,
for the purpose of effecting such amendment in
4
<PAGE> 5
accordance with the requirements of Code of Alabama 1975, Section 10-2A-114.
IN WITNESS WHEREOF, we have hereunto set our hands and seals
this 20th day of May, 1988.
/s/ Anthony J. Bruno (SEAL)
Anthony J. Bruno,
President
/s/ Arthur M. Jones, Sr. (SEAL)
Arthur M. Jones, Sr.,
Secretary
5
<PAGE> 6
VERIFICATION
I, the undersigned, as President of Big B, Inc., do hereby
verify that the above and foregoing instrument represents Articles of Amendment
to the Articles (Certificate) of Incorporation of Big B, Inc., an Alabama
corporation, duly approved and adopted by holders of a majority of the shares
entitled to vote thereon, and that the statements contained therein are true
and correct.
This 20th day of May, 1988.
/s/ Anthony J. Bruno
Anthony J. Bruno,
President
Sworn to and subscribed before me on this 20th day of May, 1988.
/s/ Janice K. Hunt
Notary Public
My Commission Expires:
6-3-89
6
<PAGE> 7
This instrument was prepared
by Carol G. Caldwell, Esq.
2222 Arlington Avenue South
Birmingham, Alabama 35205
STATE OF ALABAMA )
COUNTY OF JEFFERSON )
ARTICLES OF AMENDMENT TO ARTICLES (CERTIFICATE)
OF INCORPORATION
OF
BIG B, INC.
KNOW ALL MEN BY THESE PRESENTS: That we, the undersigned, as
President and Secretary of Big B, Inc., a corporation organized and existing
under the laws of the State of Alabama (the "Corporation"), hereby certify
that, in accordance with Code of Alabama, 1975, Sections 1O-2A-110 and
10-2A-113, the Articles (Certificate) of Incorporation of the Corporation were
amended on the 22nd day of May, 1984, by a vote of the Shareholders of the
Corporation, the vote being 4,153,612 for, 9,329 against and 8,269 abstain, out
of a total of 6,563,828 shares of Common Stock issued and outstanding, with a
total of 6,563,828 shares of Common Stock entitled to vote thereon, as follows:
The first paragraph of Article IV of the Articles
(Certificate) of Incorporation of the Corporation is hereby deleted in its
entirety, and there is substituted in lieu thereof the following:
<PAGE> 8
"The total number of shares which the Corporation shall have
authority to issue is 12,000,000 shares of Common Stock of the
par value of $0.01 per share, constituting a total authorized
capital of $120,000, and consisting of such one class of
Common Stock only.
"The Corporation shall issue one share of the One Cent ($0.01)
par value Common Stock of the Corporation in exchange for and
in cancellation of each one share of the presently outstanding
Five Cents ($0.05) par value common shares of the
Corporation."
The above Amendment effects a change in the amount of stated
capital of the Corporation. The stated capital of the Corporation is currently
$328,191.40. This Amendment will decrease the stated capital of the
Corporation to $65,638.28. The manner in which this change is effected is as
follows:
The total authorized capital stock of Six Hundred Thousand
Dollars ($600,000.00), divided into twelve million (12,000,000) shares of Five
Cents ($0.05) par value Common Stock, will be changed to a total authorized
capital stock of One Hundred Twenty Thousand Dollars ($120,000.00), divided
into twelve million (12,000,000) shares of One Cent ($0.01) par value Common
Stock.
The above Amendment provides for an exchange of issued shares.
The manner in which this exchange is to be effected is as follows:
The Corporation shall issue one share of the One Cent ($0.01)
par value Common Stock of the Corporation in exchange for and in cancellation
of each one share of the presently outstanding Five Cents ($0.05) par value
common shares of the Corporation.
2
<PAGE> 9
We further certify that the within Articles of Amendment are
being filed in the Office of the Judge of Probate of Jefferson County, Alabama,
for the purpose of effecting such amendment in accordance with the requirements
of Code of Alabama 1975, Section 10-2A-114.
IN WITNESS WHEREOF, we have hereunto set our hands and seals
this 22nd day of May, 1984.
/s/ Anthony J. Bruno (SEAL)
Anthony J. Bruno,
President
/s/ Arthur M. Jones, Sr. (SEAL)
Arthur M. Jones, Sr.,
Secretary
3
<PAGE> 10
VERIFICATION
I, the undersigned, as President of Big B, Inc., do hereby
verify that the above and foregoing instrument represents Articles of Amendment
to the Articles (Certificate) of Incorporation of Big B, Inc., an Alabama
corporation, duly approved and adopted by the holders of a majority of the
shares entitled to vote thereon, and that the statements contained therein are
true and correct.
This 22nd day of May, 1984.
/s/ Anthony J. Bruno (SEAL)
Anthony J. Bruno,
President
Sworn to and subscribed before me on this 22nd day of May,
1984.
/s/ Susan deVille Perkins
Notary Public
My Commission expires: 3/13/88
4
<PAGE> 11
STATE OF ALABAMA )
COUNTY OF JEFFERSON )
ARTICLES OF AMENDMENT TO ARTICLES (CERTIFICATE)
OF INCORPORATION
OF
BIG B, INC.
KNOW ALL MEN BY THESE PRESENTS: That we, the undersigned, as
President and Secretary of Big B, Inc., a corporation organized and existing
under the laws of the State of Alabama, hereby certify that, in accordance with
Code of Alabama, 1975, Sections 10-2A-110 and 10-2A-113, the Articles
(Certificate) of Incorporation were amended on the 30th day of August, 1983, by
a vote of the Shareholders of the Corporation, the vote being 2,180,969 for,
678 against and 1,030 abstain, out of a total of 3,281,914 shares issued and
outstanding, with a total of 3,281,914 shares entitled to vote thereon, as
follows:
The first paragraph of ARTICLE IV of the Articles
(Certificate) of Incorporation is hereby deleted in its entirety, and there is
substituted in lieu thereof the following:
"The total number of shares which the Corporation shall have
authority to issue is 12,000,000 of Common of the par value of $0.05 per share,
constituting a total authorized capital of $600,000 and consisting of such one
class only. Each presently outstanding share of capital stock of the
Corporation shall be split on a two for one basis, and, in furtherance thereof,
the Corporation shall issue two shares of the Five Cents ($0.05) par value
common shares of the Corporation in exchange for and in cancellation of each
one share of the presently outstanding Ten Cents ($0.10) par value common
shares of the Corporation."
<PAGE> 12
The above Amendment provides for an exchange of issued shares.
The manner in which the same shall be effected is as follows:
Each presently outstanding share of capital stock of the
Corporation shall be split on a two for one basis, and, in furtherance thereof,
the Corporation shall issue two shares of the Five Cents ($0.05) par value
common shares of the Corporation in exchange for and in cancellation of each
one share of the presently outstanding Ten Cents ($0.10) par value common
shares of the Corporation.
We further certify that the within Articles of Amendment are
being filed in the Office of the Judge of Probate of Jefferson County, Alabama,
for the purpose of effecting such amendment in accordance with the requirements
of Code of Alabama, 1975, Section 10-2A-114.
IN WITNESS WHEREOF, we have hereunto set our hands and seals
this 30th day of August, 1983.
/s/ Anthony J. Bruno (SEAL)
Anthony J. Bruno,
President
/s/ Arthur M. Jones, Sr. (SEAL)
Arthur M. Jones, Sr.,
Secretary
2
<PAGE> 13
VERIFICATION
I, the undersigned, as President of Big B, Inc., do hereby
verify that the above and foregoing instrument represents Articles of Amendment
to the Articles (Certificate) of Incorporation of Big B, Inc., an Alabama
corporation, duly approved and adopted by the holders of a majority of the
shares entitled to vote thereon, and that the statements contained therein are
true and correct.
This 30th day of August, 1983.
/s/ Anthony J. Bruno (SEAL)
Anthony J. Bruno, President
Sworn to and subscribed before me on this 30th day of August,
1983.
/s/ Kathleen B. Polk
Notary Public
My commission expires: 9/10/86
3
<PAGE> 14
This instrument was prepared by Donald
B. Henderson, Jr. 2222
Arlington Avenue South
Birmingham, Alabama 35205
ARTICLES OF CORRECTION
OF
BIG B, INC.
KNOW ALL MEN BY THESE PRESENTS: That, I, Anthony J. Bruno, as
President of Big B, Inc., a corporation organized and existing under the laws
of the State of Alabama, hereby certify that, in accordance with Code of
Alabama of 1975, Section 10-2A-95, the Articles of Amendment to (Articles)
Certificate of Incorporation, was filed in the Office of the Judge of Probate
of Jefferson County, Alabama, on April 20, 1981. Item III of said Articles of
Amendment which effected a change in the amount of stated capital of the
Corporation, failed to state the manner in which the change is effected. Item
III of the Articles of Amendment to (Articles) Certificate of Incorporation is
hereby corrected to read as follows:
"The first paragraph of ARTICLE IV is hereby deleted in its
entirety and there is substituted in lieu thereof the
following:
'The total number of shares which the Corporation shall have
the authority to issue is twelve million (12,000,000) shares
of Common of the par value of ten cents ($.10) per share,
constituting a total authorized capital of One Million Two
Hundred Thousand Dollars ($1,200,000) and consisting of such
one class only.'
The above constitutes an increase in the amount of the stated
capital of the Corporation from 500 shares of Common of a par
<PAGE> 15
value of $10.00 per share, amounting in the aggregate to
$5,000 to 12,000,000 shares of Common of a par value of ten
cents per share, amounting in the aggregating to $1,200,000."
I further certify that the within Articles of Correction is
being filed in the Office of the Judge of Probate of Jefferson County, Alabama,
for the purpose of correcting an omission in the Articles of Amendment to
(Articles) of Incorporation as originally filed in said Office, in accordance
with the requirements of the laws of the State of Alabama.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this
15th day of June, 1981.
/s/ Anthony J. Bruno (SEAL)
Anthony J. Bruno,
President
2
<PAGE> 16
STATE OF ALABAMA )
JEFFERSON COUNTY )
I, the undersigned, a Notary Public in and for said County and
said State, hereby certify that Anthony J Bruno, whose name as President of Big
B, Inc., an Alabama Corporation, is signed to the foregoing Certificate of
Correction, and who is known to me, acknowledged before me on this day that,
being informed of the contents of said Certificate, he, as such officer and
with full authority executed the same voluntarily for and as the act of said
Corporation.
Given under my hand and official seal this the 15th day of
June, 1981.
/s/ Linda S. Blake
Notary Public
My Commission Expires: 4/3/84
3
<PAGE> 17
This Instrument was prepared
by Donald B. Henderson, Jr.
2222 Arlington Avenue South
Birmingham, Alabama 35205
STATE OF ALABAMA )
COUNTY OF JEFFERSON )
ARTICLES OF AMENDMENT TO (ARTICLES) CERTIFICATE OF INCORPORATION
OF
BIG "B" DISCOUNT DRUGS, INC.
************
KNOW ALL MEN BY THESE PRESENTS: That we, the undersigned, as
President and Secretary of Big "B" Discount Drugs, Inc., a corporation
organized and existing under the laws of the State of Alabama, hereby certify
that, in accordance with the provisions of Sections 69 and 72 of the Alabama
Business Corporation Act effective January I, 1981 (Sections 10-2A-110 and
10-2A-113 of the Code of Alabama), the (Articles) Certificate of Incorporation
was amended by the unanimous consent of the Directors and the sole Shareholder
on the 7th day of April, 1981, as follows:
I
ARTICLE I of the Certificate of Incorporation is hereby
deleted in its entirety, and there is substituted in lieu thereof the
following:
"ARTICLE I
The name of the Corporation shall be Big B, Inc., and any and
all references to Big "B" Discount Drugs, Inc. shall hereafter be deemed to
refer to Big B, Inc."
<PAGE> 18
II
Subparagraph (a) of ARTICLE II is hereby deleted in its
entirety, and there is substituted in lieu thereof the following:
"(a) To carry on the business of a drug store and other retail
businesses, and to manufacture, buy, sell and deal in all kinds of drugs,
medicines, chemicals, oils, paints and patent and other medicines, sanitary
appliances, tobaccos, cigars, and other goods and merchandise used in and
pertaining to the said business, and to deal in and carry on a general
merchandise business and do all acts and things reasonable and necessary for
the conduct of such business."
III
The first paragraph of ARTICLE IV is hereby deleted in its
entirety and there is substituted in lieu thereof the following:
"The total number of shares which the Corporation shall have
the authority to issue is twelve million (12,000,000) shares of Common of the
par value of ten cents (10c.) per share, constituting a total authorized
capital of One Million Two Hundred Thousand Dollars ($1,200,000) and consisting
of such one class only."
IV
There shall be added to the Certificate of Incorporation a new
ARTICLE VII-A which shall read as follows:
2
<PAGE> 19
"ARTICLE VII-A
NUMBER OF DIRECTORS
The number of Directors constituting the Board of Directors
shall be not less than three (3) and not more than twelve (12)."
V
There shall be added to the Certificate of Incorporation a new
ARTICLE XVIII which shall read as follows:
"ARTICLE XVIII
DENIAL OF PREEMPTIVE RIGHTS
No holder of shares of any class of this Corporation shall, as
such holder, have any preemptive rights in, or preemptive rights to purchase or
subscribe to, any shares of this Corporation, or any bonds, debentures or other
securities or obligations convertible into or exchangeable with any shares of
this Corporation, other than such rights of conversion or exchange and such
rights under options or warrants or purchase or subscription arrangements, as
shall be expressly granted by the Board of Directors or shareholders at such
prices and upon such other terms and conditions as the Board of Directors, in
its discretion, or the shareholders may fix or designate."
We further certify that the within Articles of Amendment are
being filed in the Office of the Judge of Probate of Jefferson County, Alabama,
for the purpose of effecting such amendment in
3
<PAGE> 20
accordance with the requirements of Section 73 of said Act (Section 10-2A-114
of the Code of Alabama).
IN WITNESS WHEREOF, we have hereunto set our hands and seals
this 7th day of April, 1981.
/s/ Anthony J. Bruno (SEAL)
Anthony J. Bruno,
President
/s/ Arthur Jones (SEAL)
Arthur Jones,
Secretary
4
<PAGE> 21
VERIFICATION
I, the undersigned, as President of Big "B" Discount Drugs,
Inc., do hereby verify that the above and foregoing instrument represents
Articles of Amendment to the (Articles) Certificate of Incorporation of Big "B"
Discount Drugs, Inc., an Alabama corporation, duly approved and adopted by the
unanimous consent of the Directors and the sole Shareholder of the Corporation
and that the statements contained therein are true and correct.
This 7th day of April, 1981.
/s/ Anthony J. Bruno (SEAL)
Anthony J. Bruno,
President
Sworn to and subscribed before me on this 7th day of April, 1981.
/s/ Mary Elaine Murray
Notary Public
My commission expires: 10/22/84
5
<PAGE> 22
STATE OF ALABAMA
I, Don Siegelman, Secretary of State, of the State of Alabama, having
custody of the Great and Principal Seal of said State, do hereby certify that
pursuant to the provisions of Section 8 of Act No. 80-633 the corporate name,
Big B, Inc., is reserved as available based only upon an examination of the
corporation records on file in this office for the exclusive use of Big B, Inc.
for a period of one hundred twenty days from this date. (In the case of a
domestic corporation, the name of the county in which the corporation was or is
proposed to be incorporated is Jefferson.) I further certify that as set out
in the application for reservation of a corporate name the Secretary of State's
office does not assume any responsibility for the availability of the corporate
name requested nor for any duplication which might occur.
In Testimony Whereof, I have hereunto
set my hand and affixed the Great
Seal of the State, at the Capitol,
in the City of Montgomery, on this
day.
April 15, 1981
Date
/s/ Don Siegelman
Don Siegelman, Secretary of State
<PAGE> 23
ARTICLES OF CORRECTION
OF
BIG "B" DISCOUNT DRUGS, INC.
KNOW ALL MEN BY THESE PRESENTS: That, I, Anthony J. Bruno, as
President of Big "B" Discount Drugs, Inc., a corporation organized and existing
under the laws of the State of Alabama, hereby certify that, in accordance with
Code of Alabama of 1975, Section 1O-2A-95, the Certificate of Incorporation, as
amended, was filed in the Office of the Judge of Probate of Jefferson County,
Alabama, on July 25, 1972, and included an error in the designation of the
incorporators. The Certificate of Incorporation is hereby corrected as
follows:
Wherever, in the Certificate of Incorporation the name
"Bruno's Inc." appears as an incorporator, such name or reference shall be
deemed to be or refer to "Linda S. Blake".
I further certify that the within Articles of Correction is
being filed in the Office of the Judge of Probate of Jefferson County, Alabama,
for the purpose of correcting an error in the Certificate of Incorporation as
originally filed in said Office, in accordance with the requirements of the
laws of the State of Alabama.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this
7th day of April, 1981.
/s/ Anthony J. Bruno (SEAL)
Anthony J. Bruno,
President
2
<PAGE> 24
STATE OF ALABAMA )
JEFFERSON COUNTY )
I, the undersigned, a Notary Public in and for said County and
said State, hereby certify that Anthony J. Bruno, whose name as President of
Big "B" Discount Drugs, Inc., an Alabama Corporation, is signed to the
foregoing Certificate of Correction, and who is known to me, acknowledged
before me on this day that being informed of the contents of said Certificate,
he, as such officer and with full authority executed the same voluntarily for
and as the act of said Corporation.
Given under my hand and official seal this the 7th day of
April, 1981.
/s/ Mary Elaine Murray
Notary Public
My Commission Expires: 10/22/84
(SEAL)
3
<PAGE> 25
CERTIFICATE OF AMENDMENT TO
CERTIFICATE OF INCORPORATION OF
BIG "B" DISCOUNT DRUGS, INC.
KNOW ALL MEN BY THESE PRESENTS:
That we, Anthony Bruno, as President, and Arthur "Mac" Jones,
as Secretary, of Big "B" Discount Drugs, Inc., a corporation organized and
existing under the laws of the State of Alabama, hereby certify that, in
accordance with the provisions of Section 20 of the "Alabama Business
Corporation Act", being Act No. 414, enacted by the Legislature of Alabama,
Regular Session 1959, on November 13, 1959, the Certificate of Incorporation
was amended by the written consent of all of the directors and stockholders of
the corporation, as follows:
The first paragraph of Article IV of the Certificate of
Incorporation is hereby deleted in its entirety, and there is
substituted in lieu and instead thereof the following:
"ARTICLE IV
The amount of the total authorized capital stock of this
corporation shall be $5,000 divided into 500 shares of common
stock of the par value of $10.00 per share."
We further certify that the foregoing amendment to the
Certificate of Incorporation was duly adopted in accordance with the provisions
of Section 20 of the "Alabama Business Corporation Act", being Act No. 414, as
enacted by the Legislature of Alabama, Regular Session 1959, on November 13,
1959, and that the within Certificate is being filed in the Office of the Judge
of Probate of Jefferson County, Alabama, for the purpose of effecting such
<PAGE> 26
amendment in accordance with the requirements of the State of Alabama.
IN WITNESS WHEREOF, we have hereunto set our hands and seals
this 1st day of July, 1977.
/s/ Anthony J. Bruno (SEAL)
President
/s/ Arthur M. Jones (SEAL)
Secretary
2
<PAGE> 27
CERTIFICATE OF INCORPORATION
OF
BIG "B" DISCOUNT DRUGS, INC.
KNOW ALL MEN BY THESE PRESENTS: That we, the undersigned
incorporators, do hereby associate ourselves together for the purpose of
forming a corporation under the laws of the State of Alabama, and do declare:
ARTICLE I
The name of the corporation shall be Big "B" Discount Drugs,
Inc.
ARTICLE II
The objects for which this corporation is formed are:
(a) To carry on the business of a drug store and to
manufacture, buy, sell and deal in all kinds of drugs, medicines, chemicals,
oils, paints and patent and other medicines, sanitary appliances, tobaccos,
cigars, and other goods and merchandise used in and pertaining to the said
business, and to deal in and carry on a general merchandise business and do all
acts and things reasonable and necessary for the conduct of such business.
(b) To manufacture, purchase, acquire, hold, maintain,
improve, construct, pledge, hypothecate, exchange, sell, invest and deal in and
otherwise dispose of, alone or in syndicate or otherwise in conjunction with
others, commodities, merchandise and other personal property of every kind,
character, and description whatsoever and wheresoever situated, and any
interest therein.
(c) To purchase, acquire, lease, own, hold, sell, convey or
mortgage and otherwise deal in real estate, property, tenements, and
hereditaments, as well as any interest therein, and directly or through the
ownership of stock in any corporation, to maintain and improve the same by
erecting, constructing, rebuilding, repairing, equipping, any and all kinds of
buildings and other structures and erections, and to install therein such
furniture and appliances which at any time may be necessary to the conduct
thereof.
<PAGE> 28
(d) To acquire bonds or stocks of this corporation or
otherwise, the good will, rights, assets and property, and to undertake or
assume the whole or any part of the obligations or liabilities of any person,
firm, association or corporation; to pay for the same in cash, the stock or
other securities of the corporation or otherwise; to hold, or in any manner
dispose of the whole or any part of the property so acquired; to conduct in any
lawful manner the whole or any part of the business so acquired, and to
exercise all the powers necessary or convenient in and about the conduct and
management of any such business.
(e) To acquire, hold, use, sell, assign, lease, grant
licenses in respect of, mortgage or otherwise dispose of letters patent of the
United States of America or any foreign country, patent rights, licenses and
privileges, inventions, improvements and processes, copyrights, trademarks and
trade names, relating to or useful in connection with any business of this
corporation.
(f) To acquire by purchase, subscription, contract,
underwriting or otherwise, to hold for investment or otherwise, to pledge,
hypothecate, exchange, sell, deal in and with and dispose of or to turn to
account or to realize upon, alone or in syndicate or otherwise in conjunction
with others, stocks, securities and investments of every kind and description,
including, but not by way of limitation, shares, stocks, scrip, notes, bonds,
debentures, rights, participating certificates, certificates of interest,
mortgages, acceptances, commercial paper and choses in action, evidence of
indebtedness and other obligations of every kind and description (all of which
is hereinafter sometimes called "securities") of any private, public or
quasi-public corporation, association, partnership, common law trust,
syndicate, firm or individual or of any combinations, organizations or entities
whatsoever, irrespective of their form or the names by which they may be
described; and, while the owner or holder of any such securities, to exercise
all the rights, powers and privileges of ownership in respect thereto; and, to
the extent now or hereafter permitted by law, to aid by loan, guarantee or
otherwise those issuing, creating or responsible for any such securities.
(g) To borrow and lend money and to give or take security
therefor by way of mortgage, pledge, transfer or assignment of real or personal
property, of every nature and description.
(h) To enter into, make and perform contracts of every
kind for any lawful purpose without limit as to amount with any person, firm,
association or corporation, town, city, county, state, territory, government or
governmental subdivision.
(i) To draw, make, accept, endorse, discount, execute and
to issue promissory notes, drafts, bills of exchange, warrants, debentures and
other negotiable or transferable instruments.
2
<PAGE> 29
(j) To issue bonds, debentures or obligations of this
corporation from time to time, for any of the objects or purposes of the
corporation, and to secure the same by mortgage, pledge, deed of trust or
otherwise.
(k) To have one or more offices to carry on all or any of
its operations and business and, without restriction or limit as to amount, to
purchase or otherwise acquire, hold, own, mortgage, pledge, sell, assign and
transfer, convey or otherwise dispose of, invest, trade, deal in and deal with
goods, wares and merchandise, and real and personal property of every class and
description in any of the states, districts, territories or colonies of the
United States, and in any and all foreign countries, subject to the laws of
such state, district, territory, colony and country.
(l) To purchase or otherwise acquire its own shares of
stock (so far as may be permitted by law) and its bonds, debentures, notes,
scrip or other securities, or evidence of indebtedness, and to hold, sell,
transfer, or reissue the same.
(m) To enter into any plan or project for the assistance
and welfare of its employees.
(n) To enter into any legal arrangements for sharing of
profits, union of interests, reciprocal concessions or cooperation with any
person, partnership, corporation, association, combination, organization,
entity or body whatsoever domestic or foreign, carrying on or proposing to
carry on any business which this corporation is authorized to carry on, or any
business or transaction deemed necessary, convenient or incidental to carrying
out any of the objects of this corporation.
(o) To assume, guarantee or become surety for the payment
and performance of any and all debts and obligations of another or others, and
to guarantee the payment of dividends upon any security or securities.
(p) To do all and everything necessary and proper for the
accomplishment of the objects herein enumerated or necessary or incidental to
the protection and benefit of the corporation, and in general, to carry on any
lawful business necessary or incidental to the protection and benefit of the
corporation, and in general, to carry on any lawful business necessary or
incidental to the attainment of the purposes of the corporation, whether such
business is similar in nature to the objects and powers hereinabove set forth
or otherwise; but nothing herein contained is to be construed as authorizing
this corporation to carry on the business of banking or that of a trust company
or that of the business of insurance in any of its branches.
3
<PAGE> 30
The foregoing clauses shall be construed as objects and
purposes of the corporation, in addition to those powers specifically conferred
upon the corporation by law, and it is hereby expressly provided that the
foregoing specific enumeration of powers shall not be held to limit or restrict
in any manner the powers of the corporation otherwise granted by law.
ARTICLE III
The location of the principal office of the corporation shall
be at 2620 West 13th Street, Birmingham, Alabama 35208.
ARTICLE IV
The amount of the total authorized capital stock of this
corporation shall be One Thousand Dollars ($1,000.00), divided into one hundred
(100) shares of Common Stock, of the par value of Ten Dollars ($10.00) per
share.
The amount of the total authorized capital stock with which
this corporation shall begin business shall be One Thousand Dollars
($1,000.00), divided into one hundred (100) shares of Common Stock of the par
value of Ten Dollars ($10.00) per share, all of said stock being issued as
shown by the subscription list hereto attached and marked Exhibit "A" and being
paid for by cash or the transfer to the corporation of property having a cash
market value equal to or in excess of the total par value of said stock.
4
<PAGE> 31
ARTICLE V
The name and address of the officer and agent designated by
the incorporators to receive subscriptions to the capital stock of this
corporation is Joseph Bruno, 2620 West 13th Street, Birmingham, Alabama 35208.
ARTICLE VI
The names and post office addresses of the incorporators and
the number of shares subscribed and paid for by each are, respectively, as
follows:
<TABLE>
<CAPTION>
NAME NUMBER OF SHARES ADDRESS
---- ---------------- -------
<S> <C> <C>
Bruno's, Inc. 98 2620 W. 13th Street
Birmingham, Alabama 35208
Celeste Carroll 1 2030 - 1st Avenue, North
Birmingham, Alabama 35203
Sue Parnell 1 2030 - 1st Avenue, North
Birmingham, Alabama 35203
</TABLE>
ARTICLE VII
The names and post office addresses of the officers of the
corporation chosen for the first year are as follows:
<TABLE>
<CAPTION>
NAME OFFICE ADDRESS
---- ------ -------
<S> <C> <C>
Joseph Bruno President 2620 W. 13th Street
Birmingham, Alabama 35208
Angelo Bruno Vice President 2620 West 13th Street
Birmingham, Alabama 35208
James C. Baldone Secretary 2620 West 13th Street
Birmingham, Alabama 35208
J. L. Gordon Treasurer 2620 West 13th Street
Birmingham, Alabama 35208
</TABLE>
5
<PAGE> 32
ARTICLE VIII
The names and post office addresses of the Directors of the
corporation chosen for the first year are as follows:
<TABLE>
<CAPTION>
NAME OFFICE ADDRESS
---- ------ -------
<S> <C> <C>
Joseph Bruno Director 2620 W. 13th Street
Birmingham, Alabama 35208
Angelo Bruno Director 2620 West 13th Street
Birmingham, Alabama 35208
James C. Baldone Director 2620 West 13th Street
Birmingham, Alabama 35208
J. L. Gordon Director 2620 West 13th Street
Birmingham, Alabama 35208
</TABLE>
Notwithstanding any contrary provisions contained in this
Certificate of Incorporation, the stockholders holding the majority of
outstanding Common Stock of the corporation may remove all or any of the
Directors of the corporation, before the expiration of their term, at any
regular or special stockholders' meeting.
ARTICLE IX
The duration of this corporation shall be perpetual.
ARTICLE X
The corporate powers shall be exercised by the Board of
Directors, except as otherwise provided by statute, by this Certificate of
Incorporation, or by By-Laws hereafter adopted, and any amendments to the
foregoing.
6
<PAGE> 33
In furtherance, and not in limitation, of the powers conferred
by statute, the Board of Directors is expressly authorized:
(a) To make and alter the By-Laws of this corporation,
but By-Laws so made by the Directors may be altered or
repealed by the Directors or Stockholders;
(b) To fix and determine and to vary the amount of
working capital of the corporation; to determine whether any,
and if any, what part of any, accumulated profits shall be
declared and paid as dividends, to determine the date or dates
for the declaration and payment of dividends; to direct and
determine the use and disposition of any surplus or net
profits over and above the capital stock paid in;
(c) To make, from time to time (so far as may be
permitted by Law), temporary secured or unsecured loans when,
in the judgment of the Board of Directors, the money so loaned
is not at the time required in the conduct of the business of
the corporation.
The corporation may, in its By-Laws, confer powers upon its
Board of Directors in addition to the foregoing and in addition to the powers
and authorities expressly conferred upon it by statute.
ARTICLE XI
This corporation may from time to time issue its shares of
stock for such consideration (but not less than par so long as the corporation
be solvent), as may be fixed from time to time by the Board of Directors, and
may receive in payment thereof, in whole or in part, cash, labor done, personal
property, or real property, or leases thereof. In the absence of actual fraud
in the
7
<PAGE> 34
transaction, the judgment of the Board of Directors as to the value of such
labor, property, real estate or leases thereof, shall be conclusive. Any and
all shares so issued for which the consideration so fixed shall have been paid
or delivered shall be deemed fully paid stock and shall not be liable to any
further call or assessment thereon, and the holders of such shares shall not be
liable for any further payment in respect thereof.
This corporation may, from time to time, lawfully enter into
any agreement to which all, or less than all, the holders of record of the
issued and outstanding shares of its capital stock shall be parties restricting
the transfer of any or all shares of its capital stock represented by
certificates there for.
ARTICLE XII
Any and every statute of the State of Alabama hereafter
enacted whereby the rights, powers and privileges of the stockholders of
corporations organized under the general laws of the State of Alabama are
increased, diminished or in any way affected, or whereby effect is given to the
action taken by any part less than all of the stockholders of any such
corporation, shall apply to this corporation and shall be binding upon not only
this corporation but upon every stockholder thereof, to the same extent as if
such statute had been in force at the date of the making and filing of this
Certificate of Incorporation.
ARTICLE XIII
8
<PAGE> 35
The corporation shall have a lien on its shares of stock for
any debt or liability incurred to it by a stockholder, before notice of a
transfer or levy on such shares.
ARTICLE XIV
The corporation shall have the right to purchase, take,
receive or otherwise acquire, hold, own, pledge, transfer or otherwise dispose
of its own shares, but purchases of its own shares, whether direct or indirect,
shall be made only to the extent of earned surplus or capital surplus available
there for.
ARTICLE XV
All persons who shall acquire stock in this corporation shall
acquire it subject to the provisions of this Certificate of Incorporation, as
the same from time to time may hereafter be amended. So far as not otherwise
expressly provided by the laws of the State of Alabama, the corporation shall
be entitled to treat the person or entity in whose name any share of its stock
is registered as the owner thereof for all purposes and shall not be bound to
recognize any equitable or other claim to or interest in said share on the part
of any other person, whether or not the corporation shall have notice thereof.
9
<PAGE> 36
ARTICLE XVI
The President or any Vice President shall have authority to
execute all deeds, mortgages, bonds and other contracts requiring a seal, under
the seal of the corporation, and the Secretary or any Assistant Secretary shall
have authority to affix said seal to instruments requiring it, and attest the
same.
ARTICLE XVII
Every person (and the heirs, executors and administrators of
such person) who is or was an officer, director or employee of the corporation,
or of any other corporation which he served as such at the request of the
corporation, and of which the corporation directly or indirectly is a
stockholder or creditor, or in which, or in the stocks, bonds, securities or
other obligations of which it is in any way interested, may in accordance with
the second paragraph of this Article be indemnified by the corporation against
any and all liability and reasonable expense that may be incurred by him in
connection with or resulting from any claim, action, suit or proceeding
(whether brought by or in the right of the corporation or such other company or
otherwise), civil or criminal, or in connection with an appeal relating
thereto, in which he may become involved, as a party or otherwise, by reason of
his being or having been an officer, director or employee of the corporation or
such other corporation, or by reason of any action taken or not taken by him in
such capacity, whether he continues to be such officer, director or employee at
the time such liability or
10
<PAGE> 37
expense shall have been incurred, provided he acted in good faith in what he
reasonably believed to be the best interests of the corporation or such other
corporation, as the case may be, and, in addition, in any criminal action or
proceeding, had no reasonable cause to believe that his conduct was unlawful.
As used herein the terms "liability" and "expense" shall include, but shall not
be limited to, counsel fees and disbursements and amounts of judgments, fines
or penalties against, and amounts paid and settlements by or for such person.
The termination of any claim, action, suit or proceeding, civil or criminal by
judgment, settlement (whether with or without court approval) or conviction
shall not create a presumption that such person does not meet the standards of
conduct set forth herein.
Any indemnification hereunder shall be made at the discretion
of the corporation, but only if the Board of Directors (with no director who is
a party to or interested in such claim, action, suit or proceeding,
Participating) shall find that such person has met the standards of conduct set
forth in the preceding paragraph. If two-thirds or more of the Board of
Directors are parties to or interested in such claim, action, suit or
proceeding, the regular counsel for the corporation shall determine whether
such person has met such standards.
Expenses incurred with respect to any such claim, action, suit
or proceeding may be advanced by the Corporation prior to the final disposition
thereof upon receipt of an undertaking by or on behalf of such Person to repay
such amount unless it shall
11
<PAGE> 38
ultimately be determined that he is entitled to indemnification hereunder.
The rights of indemnification provided in this Article shall
be in addition to any rights to which any such person may otherwise be entitled
under any by-law, agreement, vote of Stockholders, or otherwise.
IN WITNESS WHEREOF, we have hereunto set our hands and seals
on this 25th day of July, 1972.
/s/ Celeste Carroll (SEAL)
Celeste Carroll
/s/ Sue Parnell (SEAL)
Sue Parnell
BRUNO'S, INC.
By /s/ Joseph Bruno
Attest: Its President
/s/ James C. Baldone
Its Secretary
12
<PAGE> 39
EXHIBIT "A"
All of the shares of stock subscribed for by the subscribers
listed below are issued and hereby declared to be fully paid stock:
<TABLE>
<CAPTION>
NAME NO. OF SHARES AMOUNT ADDRESS
- ---- ------------- ------ -------
<S> <C> <C>
Bruno's, Inc. 98 $980.00 Birmingham, Alabama
Celeste Carroll 1 $ 10.00 Birmingham, Alabama
Sue Parnell 1 $ 10.00 Birmingham, Alabama
</TABLE>
STATE OF ALABAMA )
COUNTY OF JEFFERSON )
Before me, the undersigned Notary Public in and for said
County in said State, personally appeared Joseph Bruno, who, being by me first
duly sworn, deposes and says that he is the agent of Big "B" Discount Drugs,
Inc., designated by the incorporators to receive subscriptions to the capital
stock of said corporation; that the foregoing is a true and correct list of the
subscriptions to the capital stock of said corporation, together with the
number of shares subscribed for by each and the amount paid therefor, and that
all of said subscriptions have been paid for in cash.
/s/ Joseph Bruno
Joseph Bruno
Sworn to and subscribed before me, this 25th day of July, 1972.
/s/ Paschal P. Vacca
Notary Public
<PAGE> 1
EXHIBIT 4(c)
AMENDMENT TO
BY-LAWS OF
BIG B, INC.
Section 2 of Article II shall be deleted in its entirety, and
there shall be substituted in lieu thereof the following:
"Section 2. Number, Tenure and Qualifications. The number of
Directors which shall constitute the whole Board of Directors shall be fixed
from time to time by a resolution of the Board of Directors or shareholders
(any such resolution of either the Board of Directors or shareholders being
subject to any later resolution or either of them). However, in no event shall
the number of Directors be fewer than three (3) or more than twelve (12). The
members of the Board of Directors shall be elected annually by the shareholders
at the annual meeting of shareholders, or at a special meeting of the
shareholders held pursuant to the laws of the State of Alabama, and shall hold
office at the pleasure of the of the shareholders and until their respective
successors are elected. Directors need not be residents of the State of
Alabama or shareholders of the Corporation. The property of the Corporation
shall be managed by the Board of Directors."
The above Amendment to the By-Laws was approved by resolution
of the Board on the 21st day of August, 1984.
1
<PAGE> 2
BY-LAWS
OF
BIG B, INC.
*****************
ARTICLE I
SHAREHOLDERS
Section 1. Place and Time for Annual Meeting. - The annual
meeting of the shareholders shall be held at the registered office of the
Corporation in Birmingham, Alabama, unless otherwise specified in appropriate
notice. The meeting shall be held at such time as shall be determined by the
Board of Directors of the Corporation within a period of four (4) months
following the close of the Corporation's year for reporting federal income
taxes. The annual meeting shall be held for the purpose of electing Directors
and for the transaction of such other business as may come before the meeting.
Failure to elect the Board of Directors at the annual meeting shall not cause a
dissolution of the Corporation, but the Directors thereof shall continue to
hold office until their successors are elected and qualified. A special
meeting for the purpose of holding such election shall be called as soon
thereafter as convenient.
Section 2. Special Meeting. - Special meetings of the
shareholders, for any purpose unless otherwise prescribed by statute, may be
called by the President or by the Board of Directors and shall be called by the
President at the request of
2
<PAGE> 3
the holders of not less than one-tenth of all shares entitled to vote at the
meeting.
Section 3. Notice of Meeting. - Written or printed notice
stating the place, day and hour of the meeting and, in case of a special
meeting, the purpose or purposes of the meeting, shall be delivered not less
than ten (10) nor more than fifty (50) days before the date of the meeting,
either personally or by mail, to each shareholder of record entitled to vote at
such meeting. If mailed, such notice shall be deemed to have been given when
deposited in the United States mail, addressed to the shareholder at his
address as it appears on the stock transfer books of the Corporation, with
postage thereon prepaid. Notwithstanding the provisions of this section, the
stock or bonded indebtedness of the Corporation shall not be increased at a
meeting unless notice of such meeting shall have been given as may be required
by Section 234 of the Constitution of Alabama as the same may be amended from
time to time.
Section 4. Closing of Transfer Books and Fixing Record Date.
- - For the purpose of determining shareholders entitled to notice of or to vote
at any meeting of the shareholders, or any adjournment thereof, or entitled to
receive payment of any dividend, or in order to make a determination of
shareholders for any other proper purpose, the Board of Directors of the
Corporation may provide that the stock transfer books shall be closed for a
stated period, but not to exceed, in any case, fifty (50) days. If the stock
transfer books shall be closed for the purpose of
3
<PAGE> 4
determining shareholders entitled to notice of or to vote at a meeting of
shareholders, such books shall be closed for at least ten (10) days immediately
preceding such meeting. In lieu of closing the stock transfer books, the Board
of Directors may fix in advance a date as the record date for any such
determination of shareholders, such date in any case to be not more than fifty
(50) days and in case of a meeting of shareholders not less than ten (10) days
prior to the date on which the particular action requiring such determination
of shareholders is to be taken. If the stock transfer books are not closed and
no record date is fixed for the determination of shareholders entitled to
receive payment of a dividend, the date on which notice of the meeting is
mailed or the date on which resolution of the Board of Directors declaring such
dividend is adopted, as the case may be, shall be the record date for such
determination of shareholders. When a determination of shareholders entitled to
vote at any meeting of shareholders has been made as provided in this section,
such determination shall apply to any adjournment thereof except where the
determination has been made through the closing of the stock transfer books and
the stated period of closing has expired.
Section 5. Voting List. - The officer or agent having charge
of the stock transfer books for shares of the Corporation shall make, at least
ten (10) days before each meeting of shareholders, a complete list of the
shareholders entitled to vote at such meeting or any adjournment thereof,
arranged in alphabetical order with the address of and the number of shares
4
<PAGE> 5
held by each, which list, for a period of ten (10) days prior to such meeting,
shall be kept on file at the registered office of the Corporation and shall be
subject to inspection by any shareholder making written request therefor at any
time during usual business hours. Such list shall also be produced and kept
open at the time and place of the meeting and shall be subject to the
inspection of any shareholder during the whole time of the meeting. The
original stock transfer books shall be prima facie evidence as to who are the
shareholders entitled to examine such list or transfer books or to vote at any
meeting of shareholders.
Section 6. Quorum. - A majority of the outstanding shares of
the Corporation entitled to vote, represented in person or by proxy, shall
constitute a quorum at a meeting of the shareholders, but in no event shall a
quorum consist of less than one-third of the shares entitled to vote at the
meeting. No business may be transacted without a quorum. Any business may be
transacted at any meeting of the shareholders at which a quorum is present,
except that no business at a special meeting of shareholders shall be
transacted unless notice thereof is given as required by the provisions of
Section 3 hereof. If a quorum is present, the affirmative vote of the majority
of the shares represented at the meeting and entitled to vote on the subject
matter shall be the act of the shareholders, except, however that pursuant to
Section 237 of the constitution of Alabama, the Corporation shall have no
authority to issue any class of preferred
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shares without the consent of the owners of two-thirds of all of the
shareholders of the Corporation.
Section 7. Proxies. - A shareholder may vote either in
person or by proxy executed in writing by the shareholder or by his duly
authorized attorney-in-fact. The proxy shall be voted only for the meeting
specified in said proxy and in no event shall a proxy be valid after eleven
(11) months from the date of its execution, unless otherwise provided in the
proxy. A proxy is revocable at the pleasure of the shareholder executing it
and is revocable by the transfer of shares by the shareholder executing it.
Section 8. Voting of Shares. - Each outstanding share,
regardless of class, shall be entitled to one vote on each matter submitted to
a vote at a meeting of shareholders, except to the extent that the voting
rights of the shares are limited or denied by statute, by the Articles of
Incorporation or any amendments thereto, or by the certificate representing
such shares.
Section 9. Unanimous Consent. - Any action required or
permitted to be taken at any meeting of the shareholders may be taken without a
meeting, if prior to such action a written consent thereto is signed by all the
shareholders entitled to vote thereon, and if such written consent is filed
with the minutes of proceedings of the shareholders.
Section 10. Conduct of Meeting. - The following rules shall
apply to the conduct of shareholders' meetings:
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(a) The Chairman of the meeting shall have absolute authority
over matters of procedure, and there shall be no appeal from the ruling of the
Chairman. If the Chairman, in his absolute discretion, deems it advisable to
dispense with the rules of parliamentary procedure as to any one meeting of the
shareholders, or part thereof, the Chairman shall so state and shall clearly
state the rules under which the meeting or the appropriate part thereof shall
be conducted.
(b) If disorder should arise which prevents continuation of
the legitimate business of the meeting, the Chairman may quit the chair and
announce the adjournment of the meeting; and upon his so doing, the meeting is
immediately adjourned.
(c) The Chairman may ask or require that anyone not a bona
fide shareholder or proxy leave a meeting.
(d) A resolution or motion shall be considered for vote only
if proposed by a shareholder or duly authorized proxy, and seconded by an
individual who is a shareholder or duly authorized proxy, other than the
individual who proposed the resolution or motion.
ARTICLE II
BOARD OF DIRECTORS
Section 1. General Powers. - The business and affairs of the
Corporation shall be managed by its Board of Directors.
Section 2. Number, Tenure and Qualifications. -The number of
Directors constituting the Board of Directors shall be not less than three and
not more than twelve (12), who shall be
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elected annually by the shareholders at their annual meeting and shall hold
office at the pleasure of the shareholders and until respective successors are
elected. Directors need not be residents of the State of Alabama or
shareholders of the Corporation.
Section 3. Regular Meeting. - A regular meeting of the Board
of Directors shall be held immediately after, and at the same place as, the
annual meeting of the shareholders. The Board of Directors may provide, by
resolution, the time and place for the holding of additional regular meetings
without other notice than such resolution.
Section 4. Special Meetings. - Special meetings of the Board
of Directors may be called by or at the request of the President or any two
Directors.
Section 5. Notice. - Notice of meetings, both regular and
special, shall be given not less than two (2) days in advance of said meeting.
Such notice may be by mail, telegram, telephone or may be verbal. If mailed,
such notice shall be deemed to be delivered when deposited in the United States
mail so addressed, with postage thereon prepaid. If notice is given by
telegram, such notice shall be deemed to be delivered when the telegram is
delivered to the telegraph company. Any Director may waive notice of any
meeting. The attendance of a Director at a meeting shall constitute a waiver
of notice of such meeting, except where a Director attends a meeting for the
express purpose of objecting to the transaction of any business because the
meeting is not lawfully called or convened. The business to be transacted, or
the purpose
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of, any regular or special meeting of the Board of Directors need not be
specified in the notice or waiver of notice of such meeting.
Section 6. Quorum. - A majority of the Board of Directors
shall constitute a quorum for the transaction of business. The act of a
majority of the Directors present at a meeting at which a quorum is present
shall be the act of the Board of Directors. If a quorum is present when a
meeting is convened, the Directors present may continue to do business, taking
action by a vote of the quorum, until adjournment, notwithstanding the
withdrawal of enough Directors to leave less than a quorum, or the refusal of
any Director present to vote.
Section 7. Vacancies and Removal. - Any vacancy occurring in
the Board of Directors may be filled for the unexpired term by the remaining
Directors by the shareholders at any meeting of the Board of Directors or the
shareholders. Any directorship to be filled by reason of an increase in the
number of Directors shall be filled by election at an annual or special meeting
of the shareholders called for that purpose. The shareholders may remove any
Director or the entire Board of Directors, with or without cause, at a meeting
of the shareholders expressly called for that purpose, by a majority vote of
the holders of stock present at said meeting.
Section 8. Compensation. - By resolution of the Board of
Directors, the Directors may be paid their expenses, if any, of attendance at
each meeting of the Board of Directors, and may be paid a fixed sum for
attendance at each meeting of the Board of
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Directors or a stated salary as a Director. No such payment shall preclude any
Director from serving the Corporation in any other capacity and receiving
compensation therefor. The Board of Directors shall fix the compensation of
the officers of the Corporation.
Section 9. Eligibility. - A Director who has a personal
interest in a matter before a Directors' meeting will, by reason of such
personal interest, lose his eligibility for quorum purposes in order to take
action prerequisite to the submission of the matter for shareholder approval or
for any other purposes, and such Director shall be disqualified because of such
personal interest from voting on such matter in which he has a personal
interest.
Section 10. Committees. The Board of Directors shall have
power, by resolution or resolutions passed by a majority of the Board, to
designate one or more committees, each committee to consist of two or more
Directors of the Corporation, which to the extent provided in the resolutions
shall have and may, during the intervals between the meetings of the Board,
exercise the powers of the Board of Directors in the management of the business
and affairs of the Corporation, and may have power to authorize the seal of the
Corporation to be affixed to all papers which may require it. Such committee
or committees shall have such name or names as may be determined from time to
time by resolution of the Board of Directors.
Section 11. Unanimous Consent. Any action required or
permitted to be taken at any meeting of the Board of Directors may
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be taken without a meeting, if prior to such action a written consent thereto
is signed by all members of the Board, and if such written consent is filed
with the minutes of proceedings of the Board of Directors.
ARTICLE III
OFFICERS
Section 1. Number. - The officers of the Corporation shall
be a President, one or more Vice Presidents, a Secretary and a Treasurer, each
of whom shall be elected by the Board of Directors. Such other officers and
assistant officers as may be deemed necessary may be elected or appointed by
the Board of Directors. Any number of offices may be held by the same person.
Section 2. Election and Term of Office. - The officers of
the Corporation shall be elected annually by the Board of Directors at the
regular meeting of the Board held pursuant to Article II, Section 3, of these
By-Laws. Such officers shall hold office at the pleasure of the Board of
Directors and until their successors are elected and qualified. In its
discretion, the Board of Directors by a vote of a majority thereof may leave
unfilled for such period as it may fix by resolution any offices except those
of President, Treasurer and Secretary.
Section 3. Vacancies and Removal. - Vacancies in any office
arising from any cause may be filled by the Board of Directors at any regular
or special meeting. The Board of
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Directors may remove any officer, with or without cause, at any time by an
affirmative vote of a majority of the Board.
Section 4. President. - The President shall be the principal
executive officer of the Corporation and shall have in his charge the general
direction and promotion of its affairs with authority to do such acts and to
make such contracts as are necessary or proper to carry on the business of the
Corporation. He shall preside over all official meetings of the Corporation
provided no one has been specifically elected to the office of Chairman of the
Board, and shall also perform those duties which usually devolve upon a
president of a Corporation under the laws of the State of Alabama. The
President may, during the absence of any officer, delegate said officer's
duties to any other officer or director.
Section 5. Vice-President. - The Vice-President in the
absence or disability of the President shall perform the duties of the
President and shall perform such other duties as may be delegated to him from
time to time by the Board of Directors or by the President.
Section 6. Secretary. - The Secretary shall issue notices of
all meetings of shareholders and all meetings of the Board of Directors, shall
keep the minutes of all such meetings, shall have charge of the seal of the
Corporation, shall serve as custodian for all corporate records, and shall make
such reports and perform such duties as are incident to his office or which may
be delegated to him by the President or Board of Directors.
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Section 7. Treasurer. - The Treasurer shall render to the
President and Board of Directors at such times as may be requested an account
of all transactions as Treasurer and of the financial condition of the
Corporation. The Treasurer shall perform such other duties as are incident to
the office or as may be delegated to that office by the President or by the
Board of Directors.
Section 8. Salaries. - The salaries of the officers shall be
fixed from time to time by the Board of Directors and no officer shall be
prevented from receiving such salary by reason of the fact that he is also a
director or shareholder of the Corporation.
ARTICLE IV
CONTRACTS, LOANS, CHECKS AND DEPOSITS
Section 1. Contracts. - The Board of Directors may authorize
any officer or officers, agent or agents, to enter into any contract or execute
and deliver any instrument in the name of and on behalf of the Corporation, and
such authority may be general or confined to specific instances.
Section 2. Loans. - No loans shall be contracted on behalf of
the Corporation and no evidences of indebtedness shall be issued in its name
nor shall any loan be made to any Director of the Corporation unless authorized
by a resolution of the Board of Directors. Such authority may be general or
confined to specific instances.
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Section 3. Checks, Drafts, etc. - All checks, drafts or
other orders for the payment of money, notes or other evidences of indebtedness
issued in the name of the Corporation shall be signed by such officer or
officers, agent or agents of the Corporation and in such manner as shall from
time to time be determined by resolution of the Board of Directors.
Section 4. Deposits. - All funds of the corporation not
otherwise employed shall be deposited from time to time to the credit of the
Corporation in such banks, trust companies or other depositories as the Board
of Directors may select.
ARTICLE V
CERTIFICATES FOR SHARES AND THEIR TRANSFER
Section I. Certificates. - Ownership of the capital shares
of the Corporation shall be represented by certificates, in such form as shall
be determined by the Board of Directors. Each certificate shall be signed by
two of the officers of the Corporation and the seal of the Corporation shall be
affixed thereon. A record of such certificates shall be kept.
Section 2. Cancellation. - All certificates transferred on
the books of the Corporation shall be surrendered and cancelled. No new
certificates shall be issued until the former certificate, or certificates, for
the same number of shares have been surrendered and cancelled except in case of
lost or destroyed certificates when new certificates therefor may be issued
under such conditions as the Board of Directors may prescribe.
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Section 3. Transfer of Shares. - Transfer of shares of the
Corporation shall be made only on the stock transfer books of the Corporation
by the holder of record thereof or by his legal representatives, who shall
furnish proper evidence of his authority in writing, upon the surrender for
cancellation of the certificate for such shares.
ARTICLE VI
DIVIDENDS
The Board of Directors may from time to time declare, and the
Corporation may pay, dividends on its outstanding shares in the manner and upon
the terms and conditions provided by law and its Articles of Incorporation.
ARTICLE VII
AMENDMENTS
These By-Laws may be altered, amended or repealed and new
By-Laws may be adopted by the Board of Directors at any regular or special
meeting of the Board of Directors, provided, however, the Board of Directors
may not alter, amend or repeal Section 6 of Article I establishing what
constitutes a quorum at shareholders' meetings.
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ARTICLE VIII
EMERGENCY BY-LAWS
The Emergency By-Laws provided in this Article shall be
operative during any emergency in the conduct of the business of the
Corporation resulting from an attack on the United States or any nuclear or
atomic disaster or during the existence of any catastrophe or other similar
emergency condition, as a result of which a quorum of the Board of Directors or
a standing committee thereof cannot readily be convened for action,
notwithstanding any different provision in these By-Laws or in the Articles of
Incorporation of the Corporation or in the Alabama Business Corporation Act.
To the extent not inconsistent with the provisions of this Article, the By-Laws
provided in all other Articles shall remain in effect during such emergency and
upon its termination the Emergency By-Laws shall cease to be operative.
During any such emergency:
(a) A meeting of the Board of Directors may be called by any
officer or Director of the Corporation. Notice of the time and place of the
meeting shall be given by the person calling the meeting to such of the
Directors as it may be feasible to reach by any available means of
communication. Such notice shall be given at such time in advance of the
meeting as circumstances permit in the judgment of the person calling the
meeting.
(b) At any such meeting of the Board of Directors, a quorum
shall consist of such number of Directors as are present at such meeting.
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(c) The Board of Directors, either before or during any such
emergency, may provide, and from time to time modify, lines of succession in
the event that during such an emergency any or all officers or agents of the
Corporation shall for any reason be rendered incapable of discharging their
duties.
(d) The Board of Directors, either before or during any such
emergency, may, effective in the emergency, change the head office or designate
several alternative head offices or regional offices, or authorize the officers
so to do.
No officer, Director or employee acting in accordance with
these Emergency By-Laws shall be liable except for willful misconduct.
These Emergency By-Laws shall be subject to repeal or change
by further action of the Board of Directors or by action of the shareholders,
but no such repeal or change shall modify the provisions of the next preceding
paragraph with regard to action taken prior to the time of such repeal or
change. Any amendment of these Emergency By-Laws may make any further or
different provision that may be practical and necessary for the circumstances
of the emergency.
ARTICLE IX
MISCELLANEOUS
The Alabama Business Corporation Act effective January 1,
1981, provides that the number of Directors to be elected by the shareholders
of the Corporation may be one or more. In the event
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the Board of Directors shall consist of only one Director, or in the event
there shall be only one shareholder of the Corporation, then all references to
more than one Director or shareholder or a majority of Directors or
shareholders shall be inapplicable, such references in such events being deemed
to refer to the sole Director or sole shareholder. In the event there shall be
only one shareholder who shall be the sole Director of the Corporation, then
upon the death of such shareholder, the personal representatives of the estate
of such deceased shareholder shall elect a successor Director.
In the event the Board of Directors shall consist of only two
Directors, then all references in these By-Laws to a majority of the Directors
shall be inapplicable.
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SIROTE
&
PERMUTT
A PROFESSIONAL CORPORATION
2222 Arlington Avenue South
Reply To:
Post Office Box 55727
Birmingham, Alabama 35255-5727
Telephone (205) 933-7111
Facsimile (205) 930-5301
Writer's direct dial number:
(205) 930-5133
March 21, 1995
Big B, Inc.
2600 Morgan Road, S.E.
Birmingham, Alabama 35023
Re: Registration Statement on Form S-3
Gentlemen:
We have acted as your counsel in connection with the preparation of a
registration statement on Form S-3 (the "Registration Statement") to be filed
with the Securities and Exchange Commission on March 21, 1995, of up to
2,905,750 shares of Common Stock, $.001 par value, of Big B, Inc. (the
"Company") to be sold by the Company, and 205,000 shares to be sold by Joseph
S. Bruno, Anthony J. Bruno and Vincent J. Bruno (collectively the "Shares"), to
Morgan Keegan & Company, Inc. (the "Underwriter"), pursuant to the Underwriting
Agreement between the Company and the Underwriter filed as Exhibit 1 to the
Registration Statement (the "Underwriting Agreement").
In connection with this opinion, we have examined and relied upon such
records, documents and other instruments as in our judgment are necessary and
appropriate in order to express the opinions hereinafter set forth and have
assumed the genuineness of all signatures, the authenticity of all documents
submitted to us as originals, and the conformity to original documents of all
documents submitted to us as certified or photostatic copies.
Based upon the foregoing, we are of the opinion that the Shares, when
issued and delivered in the manner and on the terms described in the
Registration Statement and the Underwriting Agreement (after the Registration
Statement is declared effective), will be duly authorized, validly issued,
fully paid and non-assessable.
<PAGE> 2
Big B, Inc.
March 21, 1995
Page 2
We hereby consent to the filing of this opinion as an exhibit to
the Registration Statement and further consent to the reference to us under the
caption "Legal Matters" in the prospectus included in the Registration
Statement.
Very truly yours,
SIROTE & PERMUTT, P.C.
<PAGE> 1
EXHIBIT 23(B)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports (and to all references to our Firm) included in or made a part of this
registration statement.
ARTHUR ANDERSEN LLP
Birmingham, Alabama
March 20, 1995
