SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
___________________________
AMENDMENT NO. 2 TO
SCHEDULE 14D-9
Solicitation/Recommendation Statement Pursuant to
Section 14(d)(4) of the Securities Exchange Act of 1934
___________________________
BIG B, INC
(Name of Subject Company)
BIG B, INC
(Name of Person Filing Statement)
COMMON STOCK, PAR VALUE $0.001 PER SHARE
(Title of Class of Securities)
___________________________
088891106
(CUSIP Number of Class of Securities)
___________________________
ANTHONY J. BRUNO
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
BIG B, INC.
2600 MORGAN ROAD, S.E.
BESSEMER, AL 35023
(205) 424-3421
(Name, address and telephone number of person authorized
to receive notice and communications on behalf
of the person filing statement)
___________________________
COPIES TO:
RICHARD COHN, ESQ. AND RANDALL H. DOUD, ESQ.
SIROTE & PERMUTT, P.C. SKADDEN, ARPS, SLATE
2222 ARLINGTON AVENUE SOUTH MEAGHER & FLOM
BIRMINGHAM, AL 35205 919 THIRD AVENUE
(205) 930-5130 NEW YORK, NY 10022
(212) 735-3000
This statement amends and supplements the
Solicitation/Recommendation Statement on Schedule 14D-9
(the "Schedule 14D-9") of Big B, Inc., an Alabama corpo-
ration ("Big B"), filed with the Securities and Exchange
Commission on September 23, 1996, with respect to the
tender offer made by Revco D.S., Inc., a Delaware corpo-
ration ("Revco"), and RDS Acquisition Inc., a Delaware
corporation and a wholly-owned subsidiary of Revco ("RDS
Acquisition"), to purchase all outstanding shares of Big
B Common Stock at a price of $15 per share, net to the
seller in cash, upon the terms and subject to the condi-
tions set forth in the Offer to Purchase, dated September
10, 1996, of Revco and RDS Acquisition and the related
Letter of Transmittal of Revco and RDS Acquisition.
Capitalized terms used and not defined herein
shall have the meanings ascribed to such terms in the
Schedule 14D-9.
ITEM 4. THE SOLICITATION OR RECOMMENDATION
and
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE
SUBJECT COMPANY
Following several days of further discussions
between their representatives, on the evening of October
3, 1996, Big B and Revco entered into a confidentiality
agreement (the "Revco Confidentiality Agreement") which
differs in various respects from the form of Confidenti-
ality Agreement filed as Exhibit 7 to the Schedule 14D-9.
The most significant differences between the Revco Confi-
dentiality Agreement and the form of Confidentiality
Agreement filed as Exhibit 7 to the Schedule 14D-9 are in
the "standstill" provisions of paragraph 6 and new para-
graph 7, the text of each of which is set forth below
("you" and "the Company" referring respectively to Revco
and Big B):
"6. You agree that, from the date of this Agreement
through the Termination Date (as defined be-
low), neither you nor any of your affiliates
will, without the prior written consent of the
Company: (i) acquire, offer to acquire, or
agree to acquire, directly or indirectly, by
purchase or otherwise, any voting securities or
direct or indirect rights to acquire any voting
securities of the Company; (ii) make, or in any
way participate in, directly or indirectly, any
"solicitation" of "proxies" (as such terms are
used in the rules of the Securities and Ex-
change Commission) whether before or after the
formal commencement of any such solicitation,
or seek to advise or influence any person or
entity with respect to the voting of, any vot-
ing securities of the Company; (iii) call, or
seek to call, a meeting of the Company's share-
holders or execute any written consent or ini-
tiate any shareholder proposal for action by
shareholders of the Company; (iv) otherwise
act, alone or in concert with others, to seek
to acquire control of the Company or influence
the Board of Directors, management or policies
of the Company; (v) bring any action, or other-
wise act through judicial process, to contest
the validity of the Company's shareholder
rights plan or to seek the redemption of the
rights issued thereunder; or (vi) induce any
other person or entity to do any of the forego-
ing; provided, however, that the foregoing
shall not prevent (x) any cash tender offer for
all the outstanding shares of common stock, par
value $0.001 per share, of the Company at a
price of not less than $15 per share, and any
filings required in connection therewith, (y)
any transaction approved by the Company's Board
of Directors or (z) any action or other legal
proceeding to enforce this Agreement or any
other action or legal proceeding not restricted
pursuant to clause (v) above. In furtherance
of the agreement set forth in clause (v) above,
the Company and you agree to seek from the
relevant courts a stay of the proceedings in
the action entitled Big B, Inc. v. Revco D.S.,
Inc. and RDS Acquisition Inc. in the Circuit
Court of Jefferson County, Alabama, Bessemer
Division as removed to the United States Dis-
trict Court for the Northern District Court of
Alabama, Southern Division, and to take no
action to seek a lifting of such stay until the
Termination Date. For purposes of this Agree-
ment, "Termination Date" shall mean the earli-
est to occur of (w) November 30, 1996, (x) the
execution by the Company of a definitive and
binding agreement providing for the acquisition
of the Company, (y) the adoption of any amend-
ment to the Company's existing shareholder
rights plan in any manner adverse to you or the
adoption of any new shareholder rights plan, or
(z) any public announcement by the Company of
any proposal to amend its articles of incorpo-
ration.
7. The Company represents that it is the Company's
intention to conduct an orderly process with a
goal of maximizing value to its shareholders.
To the extent consistent with its conduct of
the orderly process developed by it and with
the Company's preservation of its attorney
client, work product and other privileges, the
Company will afford to you, and to your Repre-
sentatives, reasonable access prior to the
Termination Date to the Company's properties,
books, management, records, counsel and accoun-
tants for the purpose of evaluating a Transac-
tion and will furnish to you such information
concerning the Company's business, assets and
liabilities as you may reasonably request."
Following the execution of the Revco Confiden-
tiality Agreement, Big B's financial advisor began to
make available to Revco the confidential information that
such financial advisor had already made available to
other parties that had previously executed confidentiali-
ty agreements with Big B.
Beginning in the morning of October 4, 1996,
Big B communicated to the various parties which had
previously executed confidentiality agreements Big B's
offer to revise their confidentiality agreements in
accordance with the Revco Confidentiality Agreement.
A copy of the Revco Confidentiality Agreement
has been filed as Exhibit 13 and is incorporated herein
by reference.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED
On October 2, 1996, the District Court held a
hearing to consider the Motion to Remand filed in connec-
tion with the Rights Plan Litigation and indicated that a
ruling on the Motion to Remand would be issued on October
4, 1996. The District Court also set a hearing date of
October 18, 1996, assuming that Big B's Motion to Remand
is not granted, for its consideration of Revco's motion
for a preliminary injunction enjoining the Rights Plan
from impeding the Offer.
On October 3, 1996, a purported class action
entitled Brickell Partners v. Anthony Bruno et al. was
filed in the District Court. The action claims, among
other things, that certain individual directors of Big B
as well as Big B itself have unlawfully refused to con-
sider the Offer and have taken improper defensive actions
including the adoption of the Rights Plan and the adop-
tion of certain severance agreements designed to thwart
the Offer while at the same time entrenching current Big
B's management. The complaint seeks declaratory and
injunctive relief and attorneys' fees and experts' fees.
Big B intends to vigorously defend against such action.
A copy of such complaint has been filed as Exhibit 14 and
is incorporated herein by reference.
As contemplated by the Revco Confidentiality
Agreement, on October 4, 1996, Big B and Revco will be
jointly applying to the District Court to stay the Rights
Plan Litigation.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS
The following Exhibits are filed herewith:
Exhibit 13: Revco Confidentiality Agreement, dated
October 3, 1996.
Exhibit 14: Complaint filed by Brickell Partners
against Anthony Bruno et al. (dated Octo-
ber 3, 1996, C.A. No. CV-96-AR-2594-S,
U.S. District Court (N.D. Ala.)).
SIGNATURE
After reasonable inquiry and to the best of his
knowledge and belief, the undersigned certifies that the
information set forth in this Statement is true, complete
and correct.
BIG B, INC.
By: /s/ ARTHUR M. JONES, SR.
Name: Arthur M. Jones, Sr.
Title: President and Chief
Operating Officer
Dated: October 4, 1996
Exhibit Index
Page
Exhibit 13: Revco Confidentiality
Agreement, dated October 3,
1996.
Exhibit 14: Complaint filed by Brickell
Partners against Anthony
Bruno et al. (dated October
3, 1996, C.A. No. CV-96-AR-
2594-S, U.S. District Court
(N.D. Ala.)).
EXHIBIT 13
BIG B, INC.
2600 Morgan Road S.E.
Bessemer, Alabama 35023
October 3, 1996
Revco D.S., Inc.
1925 Enterprise Parkway
Twinsburg, Ohio 44087
Attention: Mr. D. Dwayne Hoven
CONFIDENTIALITY AGREEMENT
Revco D.S., Inc. has requested that Big B, Inc.
(the "Company") furnish it with certain information as it
may reasonably request relating to the Company which is
non-public, confidential and proprietary in nature in
connection with its proposed transaction with the Company
(the "Transaction"). All such information (whether
written or oral) furnished (whether before or after the
date hereof) by the Company or its directors, officers,
employees, affiliates, representatives (including, with-
out limitation, financial advisors, attorneys and accoun-
tants) or agents (collectively, "our Representatives") to
you and your directors, officers, employees, affiliates,
representatives (including, without limitation, financial
advisors, attorneys, proxy solicitors, public relations
consultants and accountants) or agents (collectively,
"your Representatives") and all analyses, compilations,
forecasts, studies or other notes or documents prepared
by you or your Representatives which contain or reflect,
or are generated from, any such information is hereinaf-
ter referred to as the "Information." The term Informa-
tion will not, however, include (i) information which is
already in your possession (other than information pro-
vided to you or your Representatives by the Company),
(ii) information which is or becomes publicly available
other than as a result of a disclosure by you or your
Representative in breach of this Agreement, (iii) infor-
mation which is or becomes available to you on a noncon-
fidential basis from a source (other than the Company or
our Representatives) which, to the best of your knowledge
after due inquiry, is not prohibited from disclosing such
information to you by a legal, contractual, fiduciary or
other obligation to the Company, (iv) is or becomes
available to you on a nonconfidential basis from the
Company or its Representatives pursuant to statutory or
other legal rights to inspect or receive information or
(v) any analysis or other documents prepared by you or
your Representatives from the information described in
clauses (i), (ii), (iii) or (iv), above.
As a condition to, and in consideration of the Company
providing you with Information, you acknowledge and agree
as follows:
1. You and your Representatives (i) will keep the
Information confidential and will not (except as
required by applicable law, regulation or legal
process, and only after compliance with paragraph 2
below), without our prior written consent, disclose
any Information in any manner whatsoever, and (ii)
will not use any Information other than in connec-
tion with the Transaction. You further agree to
disclose the Information only to your Representa-
tives (a) who need to know the Information in con-
nection with negotiating or evaluating the Transac-
tion, (b) who are informed by you of the confiden-
tial nature of the Information and (c) who have
agreed to be bound by the terms of this letter
agreement. You agree to prepare a list of those
individuals and entities to whom any Information has
been disclosed and present the list to the Company
promptly upon request. The Company will keep the
list confidential. Notwithstanding any provision to
the contrary contained herein, you shall be permit-
ted to disclose such of the Information as you are
advised by counsel is legally required to be dis-
closed under the United States securities laws, and
paragraph 2 shall not apply to such disclosure. You
agree that you will be responsible for any breach of
this letter agreement by any of your Representa-
tives.
2. In the event that you or any of your Representatives
are requested or required (by oral questions, inter-
rogations, requests for information documents,
subpoena, civil investigative demand, any informal
or formal investigation by any government or govern-
mental agency or authority or otherwise) to disclose
any of the Information (other than in any litigation
between the Company, or any of its Representatives,
on the one hand, and you or any of your Representa-
tives, on the other hand), you will notify the
Company promptly in writing so that we may seek a
protective order or other appropriate remedy or, in
our sole discretion, waive compliance with the terms
of this letter agreement. You agree not to oppose
any action by the Company to obtain a protective
order or other appropriate remedy. In the event
that no such protective order or other remedy is
obtained, or that the Company waives compliance with
the terms of this letter agreement, you agree that
you will furnish only that portion of the Informa-
tion which you are advised by counsel is legally
required.
3. You shall keep a record of each location of the
Information. You agree, immediately upon a request
from the Company, to return to the Company all
Information, and no copies, extracts or other repro-
ductions of the Information shall be retained by you
or your Representatives. Any portion of the Infor-
mation that consists solely of analyses, compila-
tions, forecasts, schedules or other notes or docu-
ments prepared by you or your Representatives, in
lieu of being returned to the Company, may be de-
stroyed by you or such Representative, in which
event one of your authorized officers shall provide
certification to the Company that materials have in
fact been so destroyed; provided, however, that your
financial advisors and legal advisors may retain for
their files, in accordance with their usual prac-
tice, one copy of any Information prepared by them.
Any oral Information that is retained by you or your
Representatives will continue to be subject to this
letter agreement.
4. You acknowledge that none of the Company, nor our
Representatives, nor any of our or their respective
officers, directors, employees, agents or control-
ling persons within the meaning of Section 20 of the
Securities Exchange Act of 1934, as amended (the
"Exchange Act"), makes any express or implied repre-
sentation or warranty as to the accuracy or com-
pleteness of the Information, and you agree, to the
fullest extent permitted by law, that no such person
will have any liability to you or any of your Repre-
sentatives on any basis (including, without limita-
tion, in contract or tort, under federal or state
securities laws or otherwise) with respect to the
Transaction as a result of this letter agreement,
your review of the Company, the use of the Informa-
tion by you or your representatives, or any errors
therein or omission from the Information. Nothing
in the foregoing provision shall be deemed to waive
or limit in any respect any rights or claims you may
have based on any actual or alleged breaches of the
fiduciary duties owed by the Company's Board of
Directors to the Company and its shareholders. You
further agree that you are not entitled to rely on
the accuracy or completeness of the Information and
that you will be entitled to rely solely on such
representations and warranties as may be included in
any definitive agreement with respect to the Trans-
action, subject to such limitations and restrictions
as may be contained therein.
5. You acknowledge that you are aware, and you will
advise your Representatives who are informed of the
matters that are the subject of this letter agree-
ment, of the restrictions imposed by the United
States securities laws on the purchase or sale of
securities by any person who has received material,
non-public information from the issuer of such
securities, which may include certain portions of
the Information, and on the communication of such
information to any other person.
6. You agree that, from the date of this Agreement
through the Termination Date (as defined below),
neither you nor any of your affiliates will, without
the prior written consent of the Company: (i)
acquire, offer to acquire, or agree to acquire,
directly or indirectly, by purchase or otherwise,
any voting securities or direct or indirect rights
to acquire any voting securities of the Company;
(ii) make, or in any way participate in, directly or
indirectly, any "solicitation" of "proxies" (as such
terms are used in the rules of the Securities and
Exchange Commission) whether before or after the
formal commencement of any such solicitation, or
seek to advise or influence any person or entity
with respect to the voting of, any voting securities
of the Company; (iii) call, or seek to call, a
meeting of the Company's shareholders or execute any
written consent or initiate any shareholder proposal
for action by shareholders of the Company; (iv)
otherwise act, alone or in concert with others, to
seek to acquire control of the Company or influence
the Board of Directors, management or policies of
the Company; (v) bring any action, or otherwise act
through judicial process, to contest the validity of
the Company's shareholder rights plan or to seek the
redemption of the rights issued thereunder; or (vi)
induce any other person or entity to do any of the
foregoing; provided, however, that the foregoing
shall not prevent (x) any cash tender offer for all
the outstanding shares of common stock, par value
$0.001 per share, of the Company at a price of not
less than $15 per share, and any filings required in
connection therewith, (y) any transaction approved
by the Company's Board of Directors or (z) any
action or other legal proceeding to enforce this
Agreement or any other action or legal proceeding
not restricted pursuant to clause (v) above. In
furtherance of the agreement set forth in clause (v)
above, the Company and you agree to seek from the
relevant courts a stay of the proceedings in the
action entitled Big B, Inc. v. Revco D.S., Inc. and
RDS Acquisition Inc. in the Circuit Court of Jeffer-
son County, Alabama, Bessemer Division as removed to
the United States District Court for the Northern
District Court of Alabama, Southern Division, and to
take no action to seek a lifting of such stay until
the Termination Date. For purposes of this Agree-
ment, "Termination Date" shall mean the earliest to
occur of (w) November 30, 1996, (x) the execution by
the Company of a definitive and binding agreement
providing for the acquisition of the Company, (y)
the adoption of any amendment to the Company's
existing shareholder rights plan in any manner
adverse to you or the adoption of any new sharehold-
er rights plan, or (z) any public announcement by
the Company of any proposal to amend its articles of
incorporation.
7. The Company represents that it is the Company's
intention to conduct an orderly process with a goal
of maximizing value to its shareholders. To the
extent consistent with its conduct of the orderly
process developed by it and with the Company's
preservation of its attorney client, work product
and other privileges, the Company will afford to
you, and to your Representatives, reasonable access
prior to the Termination Date to the Company's
properties, books, management, records, counsel and
accountants for the purpose of evaluating a Transac-
tion and will furnish to you such information con-
cerning the Company's business, assets and liabili-
ties as you may reasonably request.
8. (a) You agree that either party will be irreparably
injured by a breach of this letter agreement by
the other party or its Representatives, that
monetary remedies are inadequate to protect
against any actual or threatened breach of this
letter agreement by either party or by its
Representatives, and that either party shall be
entitled to specific performance or other equi-
table relief as a remedy for any breach. Such
remedy shall not be deemed to be the exclusive
remedy for a breach of this letter agreement
but shall be in addition to all other remedies
available at law or equity.
(b) It is further agreed that no failure or delay
in exercising any right, power or privilege
hereunder will operate as a waiver thereof, nor
will any single or partial exercise thereof
preclude any other or further exercise thereof
or the exercise of any right, power or privi-
lege hereunder.
(c) This letter agreement will be governed by and
construed in accordance with the laws of the
State of Alabama, without regard to the princi-
ples of conflict of laws thereof.
(d) This letter agreement contains the entire
agreement between you and us concerning the
subject matter hereof and supersedes all previ-
ous agreements, written or oral, relating to
the subject matter hereof. No modifications of
this letter agreement or waiver of the terms
and conditions hereof will be binding upon you
or us, unless approved in writing by each of
you and us.
(e) If any provision of this letter agreement shall
for any reason, be adjudged by any court of
competent jurisdiction to be invalid or unen-
forceable, such judgment shall not affect,
impair or invalidate the remainder of this
letter agreement but shall be confined in its
operation to the provision of this agreement
directly involved in the controversy in which
such judgment shall have been rendered.
(f) This letter agreement may be executed in coun-
terparts, each of which shall be deemed to be
an original, but both of which shall constitute
the same agreement.
(g) This letter agreement shall inure to the bene-
fit of and be binding upon our respective suc-
cessors and assigns; provided, however, that
neither this letter agreement nor any of the
rights, interests or obligations hereunder
shall be assigned by either of us without the
prior written consent of the other party.
(h) All notices hereunder shall be made in writing,
by first class mail, by courier or by
telecopier (with a confirming copy sent by
first class mail) to, in the case of the Compa-
ny, Big B, Inc., Attention: Chief Executive
Officer, 2600 Morgan Road S.E., Bessemer, Ala-
bama 35023, telecopier: (205) 425-3525, or, in
the case of you, Revco D.S., Inc., Attention:
President and Chief Executive Officer, 1925
Enterprise Parkway, Twinsburg, Ohio 44087,
telecopier: (216) 487-1679.
Please confirm your agreement with the foregoing by
signing and returning to the undersigned the duplicate
copy of this letter enclosed herewith.
Very truly yours,
Big B, Inc.
By:/s/ ARTHUR M. JONES SR.
Name: Arthur M. Jones Sr.
Title: President
Accepted and Agreed
as of the date first
written above:
Revco D.S., Inc.
By:/s/ BRIAN P. CARNEY
Name: Brian P. Carney
Title: Senior Vice President
- Finance
Exhibit 14
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ALABAMA
SOUTHERN DIVISION
BRICKELL PARTNERS, A Florida |
Partnership, |
|
Plaintiff, |
| Case No. CV-96-AR-2594-5
v. |
|
ANTHONY J. BRUNO, JAMES A BRUNO, |
ARTHUR M. JONES, VINCENT J. BRUNO |
and BIG B, INC., |
|
Defendants. |
CLASS ACTION COMPLAINT FOR INJUNCTIVE RELIEF
Plaintiff, for its complaint, alleges the following
upon information and belief, except for those allegations that
pertain to plaintiff, which are alleged upon personal knowledge.
Plaintiff's information and belief is based upon, inter alia, the
investigation made by and through counsel, including counsel's
review of the public filings of Big B, Inc. ("Big B" or the
"Company"), articles in the financial news media, and other
publicly available information.
NATURE OF THE ACTION
1. This is a shareholders' class action lawsuit
brought on behalf of the public shareholders of Big B, Inc. ("Big
B" or the "Company") who have been, and continue to be, deprived
of the opportunity to realize fully the benefits of their invest-
ment in the Company. The individual defendants, officers and
directors of Big B, have wrongfully refused to properly consider
a bona fide offer for the Company from Revco D.S., Inc. ("Revco")
worth $330 million, and have taken reactive defensive actions
which are wrongfully designed to entrench the individual defen-
dants in their lucrative positions of control of Big B, and which
are unreasonable in relation to any perceived threat posed by
Revco's offer. In response to the Revco offer, the individual
defendants adopted and implemented an anti-takeover shareholder-
rights plan dated on or about September 23, 1996 (known in the
parlance of the financial marketplace as a "Poison Pill"), which
is designed to thwart Revco's offer by creating economic penal-
ties for anyone attempting to effect a business combination
without approval of the individual defendants, thereby making any
merger or acquisition not approved of by the individual defen-
dants prohibitively expensive. The poison pill implemented by
the defendants contains an unusual "dead-hand" provision which is
particularly chilling of shareholder rights in that it permits
the individual defendants, if ousted from office by a vote of the
shareholders, to control when and if the Poison Pill will be
removed, thereby permitting the individual defendants to thwart a
merger or acquisition proposal from the "grave". The actions of
the individual defendants constitute self-dealing, a breach of
fiduciary duty to maximize shareholder value, and an impermissi-
ble interference with the shareholder franchise. The individual
defendants are using their fiduciary positions of control over
Big B to thwart Revco in its legitimate attempts to acquire Big B
and are trying to entrench themselves in their positions with the
Company.
JURISDICTION AND VENUE
2. This Court has jurisdiction over the subject
matter of this complaint pursuant to 28 U.S.C. SECTION SECTION
1332(a). This action is based upon complete diversity between
plaintiff and defendants in that plaintiff and defendants are
citizens of different states. Although the matter in controversy
likely exceeds the sum of $50,000, exclusive of interest and costs,
plaintiff seeks only injunctive and declaratory relief.
3. Venue is proper in this district pursuant to 28
U.S.C. SECTION 1391(a) and (c), because many of the acts, conduct and
transactions alleged herein occurred in this District. Big B's
principal offices are located in this District and the Company
does substantial business in this District. In addition, many of
the individual defendants transact business or reside in this
District.
PARTIES
4. Plaintiff, Brickell Partners ("Brickell") is a
Florida limited partnership and, at all relevant times, has been
the owner of shares of Big B common stock.
5. Defendant Big B is a corporation duly organized
and existing under the laws of the State of Alabama. Big B
operates a chain of 397 retail drug stores offering a broad range
of health and beauty aids, cosmetics, greeting cards, convenience
foods, photo finishing services and other general merchandise, as
well as nine Home Health Care stores, in Alabama and four other
southeastern states. Big B maintains its principal executive
offices at 2600 Morgan Road Southeast, Birmingham, Alabama. Big
B has approximately 18.8 million shares of common stock outstand-
ing.
6. Defendant Anthony J. Bruno ("Anthony Bruno") is a
citizen of the State of Alabama and is Chairman of the Board of
Directors and Chief Executive Officer of Big B. In fiscal year
1996, Anthony Bruno received $789,000 in cash compensation from
Big B. As of April 1, 1996, Anthony Bruno owned 816,129 shares
of Big B common stock or 4.4% of the Company's outstanding stock.
7. Defendant Arthur M. Jones ("Jones") is a citizen
of the State of Alabama and is President and Chief Operating
Officer of Big B and a member of the Company's board of direc-
tors. In fiscal year 1996, Jones received from Big B $317,000 in
cash compensation. As of April 1, 1996, Jones owned 85,680
shares of Big B common stock.
8. Defendant James A. Bruno ("James Bruno") is a
citizen of the State of Alabama and is Executive Vice President
and Secretary of Big B and a member of Company's board of direc-
tors. In fiscal year 1996, James Bruno received $189,000 in cash
compensation from Big B. As of April 1, 1996, James Bruno owned
100,403 shares of Big B common stock.
9. Defendant Vincent J. Bruno ("Vincent Bruno") is a
citizen of the State of Alabama and is Senior Vice President of
Big B and member of the Company's board of directors. In fiscal
year 1996, Vicent Bruno received $233,000 in cash compensation
from Big B. As of April 1, 1996, Vincent Bruno owned 1,117,530
shares of Big B common stock or 6.0% of the Company's outstanding
stock.
10. The defendants named in paragraphs 4 through 7 are
hereinafter referred to as the "individual defendants."
11. Big B is dominated and controlled by the Bruno
family or its close affiliates who comprise the Company's Board
of Directors and hold virtually every office of significance.
Collectively, the Bruno's and certain other friendly insiders own
12.2% of the outstanding common stock of the Company.
12. Because of their positions as officers/directors
of the Company, the Individual Defendants owe a fiduciary duty of
loyalty and due care to plaintiff and the other members of the
Class.
13. Each defendant herein is sued individually as a
conspirator and aider and abettor, as well as in his capacity as
an officer and/or director of the Company, and the liability of
each arises from the fact that he has engaged in all or part of
the unlawful acts, plans, schemes, or transactions complained of
herein.
CLASS ACTION ALLEGATIONS
14. Plaintiff brings this case in his own behalf and
as a Class action, pursuant to Rule 23 of the Federal Rules of
Civil Procedure, on behalf of all stockholders of the Company,
except defendants herein and any person, firm, trust, corpora-
tion, or other entity related to or affiliated with any of the
defendants, or any of the Company's principal stockholders, who
will be threatened with injury arising from defendants' actions
as is described more fully below (the "Class").
15. This action is properly maintainable as a Class
action.
16. The Class is so numerous that joinder of all
members is impracticable. The Company has thousands of stock-
holders who are scattered throughout the United States.
17. There are questions of law and fact common to the
Class that predominate over questions affecting any individual
Class member. The common questions include, inter alia, whether:
a. defendants have breached their fiduciary
duties owed by them to plaintiff and other members of the Class
by refusing to attempt in good faith to maximize shareholder
value in the sale of Big B;
b. Big B's Poison Pill, including its "dead
hand" restriction, was defensively enacted and implemented to
entrench defendants in their office and deprive Big B public
shareholders of the maximum value of their holdings;
c. defendants have irreparably impaired the
shareholder franchise;
d. defendants have breached or aided and abetted
the breach of the fiduciary duties owed by them to plaintiff and
other members of the Class;
e. defendants engaged in a plan and scheme to
thwart and reject offers and proposals from third parties;
including Revco; and
f. plaintiff and the other members of the Class
are being and will continue to be injured by the wrongful conduct
alleged herein.
18. Plaintiff is committed to prosecuting the action
and has retained competent counsel experienced in litigation of
this nature. Plaintiff's claims are typical of the claims of the
other members of the Class and plaintiff has the same interest as
the other members of the Class. Plaintiff does not have inter-
ests antagonistic to or in conflict with those who its seeks to
represent the interests of the Class. Plaintiff is an adequate
representative of the Class.
19. The likelihood of individual Class members prose-
cuting separate actions is remote due to the relatively small
injury suffered by each Class member as compared to the burden
and expense of prosecuting litigation of this nature and magni-
tude. Absent a class action, defendants are likely to avoid
accounting for their wrongdoing, and Class members are unlikely
to obtain redress for the wrongs alleged herein. There are no
difficulties likely to be encountered in the management of the
Class claims. This Court is an appropriate forum for this
dispute.
SUBSTANTIVE ALLEGATIONS
20. By the acts, transactions, and courses of conduct
alleged herein, defendants, individually and as part of a common
plan and scheme and/or aiding and abetting one another in total
disregard of their fiduciary duties, are attempting to impair the
franchise rights of plaintiff and the Class and deprive them of
the opportunity to maximize the value of their investment in Big
B.
The Revco Offer
21. On September 9, 1996, Revco, the nation's second
largest drugstore chain, announced its intention to commence a
tender offer for all the outstanding shares of Big B common stock
for $15.00 per share in cash (the "Offer"). Big B has approxi-
mately 22 million shares outstanding on a diluted basis, making
the Offer worth approximately $330 million. The Offer represents
a premium of 53% over the $9.81 per share average closing price
of Big B for the 90-day period ending September 6, 1996, the
Friday before the Revco offer was announced, and, according to
analysts, is nine times Big B's peak cash flow per share of
approximately two years preceding the Offer and 17 times Big B's
peak earnings per share.
22. The announcement of the Offer followed a series of
overtures made to the individual defendants by Revco for a
friendly merger, all of which were rebuffed by the individual
defendants.
23. Revco had previously made the necessary filings
under the Hart-Scott-Rodino Act and has obtained antitrust
clearance such that the Offer may proceed and be consummated
without further waiting periods for antitrust approval.
24. Revco is a Fortune 500 company and is the second
largest drugstore chain in the United States, operating 2,184
stores in 14 contiguous Midwestern, Southeastern and Eastern
states. Revco's stores sell prescription and over-the-counter
drugs, health and beauty aids and other consumer products. Revco
employs more than 32,000 associates in its stores, five distribu-
tion centers, regional offices and corporate offices in
Twinsburg, Ohio. Revco currently owns approximately 1.2 million
shares of Big B common stock, or 5.4 percent of the outstanding
shares of Big B.
The Individual Defendants' Rejection of the Offer
25. Despite the significant value to Big B sharehold-
ers, defendants have acted without regard to the fiduciary duties
they owe Big B's shareholders and have acted solely in their
interests by rejecting the Offer without negotiation with Revco.
On September 23, 1996, Big B announced that the individual
defendants had voted to recommend that Big B shareholders reject
the Offer, prompting financial analysts to question whether the
individual defendants gave the Offer any serious consideration at
all. For example, as reported in the September 24, 1996 edition
of The Wall Street Journal, an analyst for J.P. Morgan Securities
Inc. noted: "They evaluated this very quickly -- in about 3 1/2
seconds."
The Poison Pill
26. At the same time the individual defendants an-
nounced their rejection of the Offer, the individual defendants
announced their adoption of a shareholder-rights plan, known as a
"Poison Pill", in response to the Offer. The Poison Pill effec-
tively prevents consummation of the Offer and proposed merger
with Revco without the approval of the individual defendants,
regardless of the wishes and interests of the shareholders and
prevents the shareholders from deciding the value and merits of
Revco's offer for themselves. The adoption of a Poison Pill in
direct response to Revco's offer is a blatant attempt by the
individual defendants to entrench themselves in office regardless
of the interests and wishes of the true owners of the Company --
the shareholders.
27. Under the Poison Pill, the shareholders are given
a dividend of one share purchase right (a "Right") for each
common share outstanding at the close of business October 3,
1996. The Rights expire on June 30, 1997, unless the individual
defendants extend the expiration date, and do not become exercis-
able until after the "Distribution Date," which is defined as the
earlier of (a) the close of business on the tenth day after the
first public announcement that a person has acquired 10% or more
of the outstanding shares of Big B common stock, or (b) the close
of business on such date as determined by the Board during the
pendency of a tender or exchange offer the consummation of which
would result in the beneficial ownership by a person of 10% or
more of the outstanding shares of common stock. Under the Poison
Pill's "flip-in" feature, if any person or group beneficially
acquires 10% or more of Big B's voting power without board
approval (such as Revco), all other stockholders, except that
non-approved acquiror (Revco), will be entitled to purchase Big B
common shares having a market value equal to two times the
purchase price, which the individual defendants set at $40.
Thus, each holder of a Right, upon the "flip-in" feature being
triggered, could purchase Big B common stock having a value of
$80 for only $40. Moreover, under the plan's "flip-over" fea-
ture, if Big B is acquired pursuant to a merger or other business
combination, all shareholders other than the non-approved
acquiror (Revco) are entitled to purchase common stock of the
acquiring company having a market value equal to two times the
Purchase Price.
The Dead Hand Restriction
28. In the Poison Pill, the individual defendants
adopted a highly unusual provision known in the parlance of the
financial community as a "dead hand" restriction. The Dead Hand
restriction gives the individual defendants the right to control
whether and when the Poison Pill will be removed (by redeeming
the Rights at a price of $0.01 per Right), even if they are
ousted from office by a vote of the shareholders. Under the Dead
Hand provision, redemption of the Rights is effective only if the
Board includes "Continuing Directors" (directors who were members
of the Board on September 23, 1996, or their hand-picked succes-
sors) and a majority of the "Continuing Directors" concurs in the
decision to redeem the Rights.
29. As reported in the October 1, 1996 edition of The
Wall Street Journal, Mr. John Coffee, professor of law at Colum-
bia University, stated that the Poison Pill adopted by the
defendants "impermissibly chills the shareholders' right to vote
. . . ." As explained by Professor Coffee, the type of Pill
implemented by defendants "not only sterilizes the newly elected
directors, but also annuls the statutory right of any shareholder
. . . to call a special shareholder meeting." Professor Coffee
describes the Dead Hand Pill adopted by defendants as "a particu-
larly noxious variant of that defense tactic."
30. The Poison Pill, and in particular the Dead Hand
restriction, nullifies the shareholder franchise and serves no
other purpose than to entrench the individual defendants in their
positions of control. Thus, the individual defendants have taken
action which is unreasonable in light of any threat to corporate
management and which has elevated their interests over the
interests of the Company's shareholders in violation of their
fiduciary duties and Alabama law.
31. The adoption of the Poison Pill has the force and
effect of entrenching the Individual Defendants in their corpo-
rate offices against any real or perceived threat to their
control, and dramatically impairs the rights of Class members to
exercise freedom of choice in a proxy contest or to avail them-
selves of a bona fide offer to purchase their shares by an
acquiror, such as Revco, unfavored by incumbent management. This
fundamental shift of control of the Company's destiny from the
hands of its shareholders to the hands of the Individual Defen-
dants works an impermissible impediment of the shareholder
franchise.
32. The purpose, intent and effect of the Poison Pill,
in the face of a pending offer for the Company, is to thwart,
deter, impede, and delay the acquisition of Big B by Revco.
Other Defensive Measures Adopted By Defendants
33. In addition to the Poison Pill, the individual
defendants have in place other defensive measures, including
severance agreements (known as "Golden Parachutes"), which would
greatly increase the cost of a business combination with Revco by
requiring the payment of substantial lump sum payments to each of
the individual defendants who are not retained in their positions
following the merger or acquisition. Under the Golden Parachutes
currently in place, the Company would have to pay an amount equal
to three times, for defendants Anthony Bruno, Arthur Jones and
James Bruno, and two times for defendant Vincent Bruno, the sum
of these defendants' (a) average annual compensation at the time
of termination and (b) his average incentive compensation bonus
for the three years preceding termination. In addition, defen-
dants would receive a continuation of expensive health benefits
and other benefits for a period of ten years after their ouster.
Thus, the individual defendants have sought to ensure that any
attempt to oust them from their positions of control by virtue of
a business combination or acquisition would cost the Company many
millions of dollars. Defendants have failed to waive the Golden
Parachutes or otherwise indicate that they would not enforce the
severance agreements if the shareholders desired to accept
Revco's offer.
34. Big B represents a highly attractive acquisition
candidate. Defendants' conduct would deprive Big B's public
shareholders of the very substantial control premium that Revco
is prepared to pay, or of the enhanced premium that further
negotiation or exposure of Big B to the market could provide.
35. Though the defendants maintain that shareholders
would be better served by Big B maintaining its independence, the
Company's recent financial performance suggests otherwise and
demonstrates the value of Revco's Offer and control premium. As
reported in the September 24, 1996 Dow Jones News Wire:
Wall Street appeared skeptical that Big B's value can
rise much further. The stock already has nearly dou-
bled in value since July 26 [1996], driven by specula-
tion of a possible takeover attempt and the company's
first good earnings report in several quarters. Ana-
lysts said it is uncertain whether any bidder would
offer more than $15 to $16 a share.
In its most recent fiscal year, ended Feb. 3, Big B
reported net income of $2.6 million, or 15 cents a
share, down from $15.1 million, or 97 cents a share, in
the previous year.
36. Defendants owe fundamental fiduciary obligations
to Big B's shareholders to take all necessary and appropriate
steps to maximize the value of their shares. In addition, the
Individual Defendants have the responsibility to act independent-
ly so that the interests of Big B's public shareholders will be
protected, to seriously consider all bona fide offers for the
Company, and to conduct fair and active bidding procedures or
other mechanisms for checking the market to assure that the
highest possible price is achieved. Further, the directors of
Big B must adequately ensure that no conflict of interest exists
between the Individual Defendants' own interests and their
fiduciary obligations to maximize stockholder value or, if such
conflicts exist, to insure that all such conflicts will be
resolved in the best interests of the Company's shareholders.
37. Because defendants dominate and control the
business and corporate affairs of Big B and because they are in
possession of private corporate information concerning Big B's
assets, business and future prospects, there exists an imbalance
and disparity of knowledge of economic power between defendants
and the public shareholders of Big B. This discrepancy makes it
grossly and inherently unfair for defendants to entrench them-
selves at the expense of its public shareholders.
38. The individual defendants have breached their
fiduciary and other common law duties owed to plaintiff and other
members of the Class in that they have not and are not exercising
independent business judgment and have acted and are acting to
the detriment of plaintiff and the Class.
39. In connection with the conduct described herein,
the individual defendants breached their fiduciary duties by,
among other things:
a. rejecting the Big B proposal without fully
informing themselves about or intentionally ignoring the future
prospects of a combined Big B/Revco company, or the intrinsic
worth of Revco;
b. failing and refusing to meet with representa-
tives of Revco; and
c. erecting defensive measures such as Big B's
Poison Pill, which was designed to make it prohibitively expen-
sive for an unapproved third party from acquiring the assets or
control of the Company, and to chill shareholder voting rights.
40. The individual defendants are acting to entrench
themselves in their offices and positions and maintain their
substantial salaries and perquisites, all at the expense and to
the detriment of the public shareholders of Big B.
41. By the acts, transactions and courses of conduct
alleged herein, the individual defendants, individually and as
part of a common plan and scheme in breach of their fiduciary
duties and obligations, are attempting unfairly to deprive
plaintiff and other members of the Class of the premium they
could realize in an acquisition transaction and to ensure contin-
uance of their positions as directors and officers, all to the
detriment of Big B public shareholders. The individual defen-
dants have been engaged in a wrongful effort to entrench them-
selves in their offices and positions of control and prevent the
acquisition of Big B, except on terms which would further their
own personal interests.
42. As a result of the actions of the individual
defendants, plaintiff and the other members of the Class have
been and will be damaged in that they have not and will not
receive their fair proportion of the value of Big B's assets and
businesses and/or have been and will be prevented from obtaining
a fair and adequate price for their shares of Big B's common
stock.
43. Defendants' defensive and entrenching activities,
including its implementation of the Poison Pill with the Dead
Hand provision, violate various provisions of Alabama law,
including:
a. ABCA SECTION 10-2B-6.01(a), which provides that
common stock of a single Class, such as Big B's, must have
identical preferences, limitations and relative rights. The
Poison Pill adopted by the individual defendants has the discrim-
inatory effect of diluting the equity and voting rights of
potential acquirors, such as Revco (but not the individual
defendants, who under the Pill are excluded from the definition
of "Acquiring Persons"), and was adopted precisely for this
effect.
b. Alabama Constitution, Art. XII, Sec. 234,
which prohibits fictitious increases in the price of stock. The
Flip-in provision of the Poison Pill allows Rights holders to
acquire $80 worth of stock for the payment of $40, thereby
violating this provision of the Alabama Constitution.
c. ABCA SECTION 10-2B-8.32, which prohibits any presi-
dent, director or officer from taking any action with the intent
to depreciate the market value of the company's stock and with
the further intent to permit any such person or any other person
to buy the company's stock at less than its real value. The
Poison Pill violates Alabama law because the effect of the Flip-
in provision is to depreciate the market value of each share of
Big B common stock and to enable officers, directors and other
persons to buy the stock at less than its real value.
d. ABCA SECTION 10-2B-7.02(a)(2), which provides that
shareholders holding 10% or more of the Company's stock have a
right to demand a special shareholders meeting to replace the
current Board of Directors or for any other purpose. The Poison
Pill's 10% threshold is designed to prevent Revco or any other
shareholder other than the individual defendants and certain
other insiders from purchasing sufficient shares to enable them
to demand a special meeting, since doing so would make them an
Acquiring Person and would trigger the Poison Pill. The effect
and purpose of the Poison Pill is to deter or prevent Revco or
any other shareholder other than the individual defendants and
certain other insiders from exercising their right to demand a
special meeting of shareholders to, inter alia, oust the individ-
ual defendants and/or consummate the merger with Revco.
e. ABCA SECTION 10-2A-8.08(a), which provides that
shareholders have the right to elect and remove directors and
further provides that duly elected directors are empowered to
exercise all corporate powers and to direct the management of the
business and affairs of the corporation, subject only to the
limitations contained in the articles of incorporation or in a
shareholder agreement. The Dead Hand provision, which is not
contained in Big B's articles of incorporation, directly inter-
feres with the right of Big B shareholders to remove the individ-
ual defendants and replace them, and further interferes with the
right of the newly elected board members to direct the management
and business affairs of the Company. This provision is a blatant
manipulation of the corporate machinery, an interference with and
nullification of the shareholder franchise, and nothing more than
an attempt by the individual defendants to entrench themselves in
office, in violation of Alabama law.
Irreparable Injury
44. Plaintiff seeks preliminary and permanent injunc-
tive relief and declaratory relief preventing defendants from
inequitably and unlawfully depriving plaintiff and the Class of
their rights to realize the full and fair value of their stock at
a substantial premium over the market price, by unlawfully
entrenching themselves in their positions of control, and to
compel defendants to carry out their fiduciary duties to maximize
shareholder value.
45. Only through the exercise of this Court's equita-
ble powers can plaintiff be fully protected from the immediate
and irreparable injury that defendants' actions threaten to
inflict. Defendants are impairing shareholders' voting rights
and precluding the shareholders' enjoyment of the full economic
value of their investment by, among other things, failing to
proceed expeditiously and in good faith to evaluate and pursue a
premium acquisition proposal, which would provide consideration
for all shares at a very attractive price.
46. Unless enjoined by the Court, defendants will
continue to breach their fiduciary duties owed to plaintiff and
the members of the Class, and/or aid and abet and participate in
such breaches of duty, and will deprive plaintiff and other Big B
shareholders of the fundamental right to (a) decide for them-
selves whether to accept the Offer and to sell their shares at a
substantial premium, (b) call a special meeting of shareholders,
(c) and elect officers and directors of their own choosing, all
to the irreparable harm of plaintiff and other members of the
Class.
47. Plaintiff and the Class have no adequate remedy at
law.
WHEREFORE, plaintiff demands judgment as follows:
a. declaring this to be a proper Class action and
certifying plaintiff as a Class representative;
b. preliminarily and permanently enjoining the
implementation of the Poison Pill;
c. ordering the Individual Defendants to carry
out their fiduciary duties to plaintiff;
d. enjoining the individual defendants from
taking any steps to impede or frustrate the ability of plaintiff
and the Class to (a) make their own determination as to whether
to accept the Revco offer, (b) demand a special meeting of
shareholders, or (d) fully and effectively exercise their voting
rights;
e. declaring that the Poison Pill and the Dead
Hand Restriction are null and void as being in violation of
Alabama law and the fiduciary duties owed to plaintiff and the
Class by the individual defendants;
f. ordering the defendants to redeem the Rights
associated with the Poison Pill or to amend the Pill so as to
make them inapplicable to the Revco offer;
g. ordering the defendants to renounce their
Golden Parachutes or to amend the severance agreements so as to
make them inapplicable to the Revco offer;
h. ordering the individual defendants to cooper-
ate fully with Revco in pursuing any transactions which would
maximize shareholder value, including but not limited to, a
merger or acquisition of Big B by Revco;
i. ordering the individual defendants to take
immediate steps to maximize shareholder value for the benefit of
plaintiff and the members of the Class;
j. ordering the individual defendants to act
independently so that the interests of the Company's public
shareholders will be protected;
k. ordering the individual defendants to act in
such a fashion as to eliminate any conflicts of interest between
their own interests and their fiduciary obligation to maximize
shareholder value or, in the event such conflicts exist, to
ensure that all conflicts of interest are resolved in the best
interests of the public shareholders of Big B;
l. awarding plaintiff the costs and disbursements
of this action, including a reasonable allowance for plaintiffs
attorneys' and expert' fees; and
m. granting such other and further relief as may
be just and proper.
Dated: October 3, 1996
By: /s/ BARRY RAGSDALE
Barry Ragsdale
KING, IVEY & JUNKIN
600 North 20th Street
Suite 200
Birmingham, Alabama 35203
(205) 327-5223
Attorneys for Plaintiff
Of Counsel:
WECHSLER HARWOOD HALEBIAN
& FEFFER
805 Third Avenue
New York, New York 10022
(212) 935-7400
