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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO
SECTION 14(D)(4) OF THE SECURITIES EXCHANGE ACT OF 1934
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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)
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088891106
(CUSIP NUMBER OF CLASS OF SECURITIES)
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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)
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COPIES TO:
RICHARD COHN, ESQ. AND RANDALL H. DOUD, ESQ.
SIROTE & PERMUTT, P.C. SKADDEN, ARPS, SLATE, MEAGHER &
2222 ARLINGTON AVENUE SOUTH FLOM
BIRMINGHAM, AL 35205 919 THIRD AVENUE
(205) 930-5130 NEW YORK, NY 10022
(212) 735-3000
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ITEM 1. SECURITY AND SUBJECT COMPANY
The name of the subject company is Big B, Inc., an Alabama corporation ("Big
B"), and the principal executive offices of Big B are located at 2600 Morgan
Road, S.E., Bessemer, Alabama 35023. The title of the class of equity
securities to which this Statement relates is the common stock, par value
$0.001 per share, of Big B (the "Big B Common Stock").
ITEM 2. TENDER OFFER OF THE BIDDER
This Statement relates to the tender offer disclosed in a combined Tender
Offer Statement on Schedule 14D-1 and Statement on Schedule 13D, dated
September 10, 1996 (the "Schedule 14D-1"), by Revco D.S., Inc., a Delaware
corporation ("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 conditions set forth in
the Offer to Purchase, dated September 10, 1996 (the "Offer to Purchase"), and
the related Letter of Transmittal (which, together with any amendments and
supplements thereto, collectively constitute the "Offer") included in the
Schedule 14D-1.
According to the Offer to Purchase, Revco intends, as soon as practicable
after consummation of the Offer, to act to have its nominees elected to Big
B's board of directors (the "Big B Board"), to replace the current members of
the Big B Board and to propose and seek to have Big B consummate a merger or
similar business combination with RDS Acquisition or another direct or
indirect wholly-owned subsidiary of Revco.
According to the Schedule 14D-1, the principal executive offices of Revco
and RDS Acquisition are located at 1925 Enterprise Parkway, Twinsburg, Ohio
44087.
ITEM 3. IDENTITY AND BACKGROUND
(a) The name and business address of Big B, which is the person filing this
Statement, are set forth in Item 1 above.
(b) Except as set forth in this Item 3(b), to the knowledge of Big B, there
are no material contracts, agreements, arrangements or understandings and no
actual or potential conflicts of interest between Big B or its affiliates and
(i) Big B's executive officers, directors or affiliates or (ii) Revco or RDS
Acquisition or their respective executive officers, directors or affiliates.
Certain contracts, agreements, arrangements and understandings between Big B
or its affiliates and certain of Big B's directors and executive officers are
described under the headings "COMPENSATION TO EXECUTIVE OFFICERS,"
"COMPENSATION REPORT," "STOCK OPTION GRANTS," "AGGREGATE OPTION EXERCISES AND
OPTION VALUES," "RETIREMENT PLANS," and "INTERESTS OF OFFICERS, DIRECTORS AND
OTHERS IN CERTAIN TRANSACTIONS" at pages 8-15 in the Proxy Statement of Big B,
dated April 27, 1996, sent by Big B to its shareholders in connection with the
annual meeting of Big B shareholders held on May 28, 1996 (the "Proxy
Statement"). A copy of such portions of the Proxy Statement is filed as
Exhibit 1 hereto and is incorporated herein by reference.
At the September 20, 1996 meeting of the Big B Board, the Big B Board
adopted a plan providing severance benefits to certain employees of Big B,
none of whom are executive officers, who are terminated or given good cause to
terminate their employment (as defined in the plan) after a change in control
of Big B. This plan is in addition to the Severance Agreements already in
place for the nine senior executives of Big B, which agreements are described
in the portion of the Proxy Statement included as Exhibit 1 hereto. Under such
plan, 21 key employees would receive one year's salary, health insurance and
life insurance following such a termination after a change in control. In
addition, all other salaried employees in corporate headquarters would receive
in such circumstances a benefit equal to four weeks' salary for each full year
of service to Big B, subject to a minimum of four weeks' salary and a maximum
of 24 weeks' salary, plus health and life insurance for the benefit period.
All office and certain other administrative hourly personnel in corporate
headquarters would receive in such circumstances a benefit equal to one week's
salary for each full year of service to Big B, subject to a minimum of two
weeks' salary and a maximum of 13 weeks' salary, plus health and life
insurance for the benefit period. The maximum aggregate value of all benefits
payable to all employees under such plan would be approximately $2.0 million.
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In addition, the Big B Board is reviewing in connection with the events
described in this Schedule 14D-9 other compensation and benefits arrangements
relating to Big B's directors, officers and employees and may determine to
make changes or additions to such arrangements.
ITEM 4. THE SOLICITATION OR RECOMMENDATION
(a) AND (b)
BACKGROUND. On July 29, 1996, Mr. D. Dwayne Hoven, President and Chief
Executive Officer of Revco telephoned Mr. Anthony J. Bruno, Chairman and Chief
Executive Officer of Big B and requested that the two executives meet because
they had never met before. Mr. Hoven said that he would be travelling to
Alabama for a wedding and could arrange to meet with Mr. Bruno during that
trip. Mr. Bruno agreed to meet with Mr. Hoven.
On August 1, 1996, Mr. Bruno and Mr. Hoven met in Birmingham. At this
meeting, Mr. Hoven indicated Revco's interest in purchasing all of the stock
of Big B for cash or a combination of cash and securities. Mr. Bruno stated
that he believed that the Big B Common Stock was undervalued by the market and
that, as a result, Big B was not interested in selling at the present time.
Mr. Hoven stated that the Revco board had already met and approved an offer.
On August 5, 1996, Mr. Bruno received a letter from Mr. Hoven whereby Revco
proposed to acquire all of the outstanding shares of Big B Common Stock for
$14.00 per share payable in cash, stock or a combination of cash and stock.
On August 7, 1996, Mr. Hoven telephoned Mr. Bruno to confirm receipt of
Revco's offer. Mr. Bruno explained that Revco's proposed offer was not
adequate in light of his view that the Big B Common Stock was undervalued in
the market. Mr. Bruno also explained that he would prefer that Big B remain
independent.
On August 19, 1996, Big B retained The Robinson-Humphrey Company, Inc. ("R-
H") to render financial advisory services to Big B.
On September 4, 1996, Mr. Bruno received a letter from Mr. Hoven (copies of
which letter were also sent to all other directors of Big B) repeating Revco's
offer to acquire all of the outstanding shares of Big B Common Stock for
$14.00 per share in cash, stock or a combination of cash and stock. The letter
also stated that Revco had already purchased in the open market approximately
4.9% of the outstanding shares of Big B Common Stock and intended to purchase
additional shares if market conditions allowed. Mr. Hoven further stated that,
in the event Mr. Bruno chose not to commence negotiations with Revco, Revco
would consider making a proposal directly to Big B's shareholders.
On September 5, 1996, Mr. Hoven telephoned Mr. Bruno. In that call, Mr.
Bruno stated his belief that Big B would benefit from remaining an independent
company.
On September 9, 1996, Revco issued a press release announcing that it
intended to commence the Offer whereby RDS Acquisition would offer to buy all
of the outstanding shares of Big B Common Stock, which constitutes the entire
equity interest in Big B, for $15.00 per share in cash, or an aggregate equity
value of approximately $330 million on a fully diluted basis. Also on
September 9, 1996, Mr. Bruno received a letter from Mr. Hoven stating the
foregoing.
On September 10, 1996, Revco filed the Schedule 14D-1 with the Securities
and Exchange Commission.
According to the Schedule 14D-1, between August 13 and September 6, 1996,
RDS Acquisition purchased in open market transactions, including block trades,
a total of 1,190,000 of the outstanding shares of Big B Common Stock,
representing approximately 6.4% of the shares outstanding on September 9, 1996
(the date of the public announcement of the Offer), at prices, including
brokers' commissions, ranging from $10.75 to $12.625 per share.
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On September 15, 1996, the Big B Board met to consider the Offer and related
matters. At such meeting, the Big B Board received presentations from Big B's
management, from R-H, and from Big B's legal advisors, Sirote & Permutt, P.C.
and Skadden, Arps, Slate, Meagher & Flom. During the course of such
presentations, the Big B Board reviewed Big B's financial performance, the
Offer, including the Offer's terms and conditions, and certain inquiries
received from third parties after the announcement of the Offer regarding
Big B's interest in discussing alternatives to the Offer. In addition, the Big
B Board discussed potential actions that could be utilized to allow Big B to
explore such alternatives with greater time than contemplated by the Offer,
including the possible implementation of a shareholder rights plan.
On the afternoon of September 20, 1996, the Big B Board met to further
consider the Offer and to make a determination as to its recommendation to Big
B shareholders. As part of such process, the Big B Board considered both
further contacts from certain third parties regarding Big B's interest in
discussing alternatives to the Offer and Big B's business, financial
condition, current business strategy and future prospects. The Big B Board
also received and considered the written opinion of R-H, its financial
advisor, that the consideration of $15.00 in cash per share of Big B Common
Stock to be received by holders of such stock (other than Revco and its
affiliates) pursuant to the Offer was inadequate from a financial point of
view. After taking into account these matters, the Big B Board determined by a
unanimous vote that the Offer is inadequate and not in the best interests of
Big B's shareholders and that such interests would be best served if Big B
were to actively explore alternatives to maximizing shareholder value.
Although the Big B Board made no decision to sell Big B at its September 20,
1996 meeting, Big B's management and R-H were instructed to contact parties
potentially interested in acquiring Big B, including Revco and parties in
addition to those parties that had previously contacted Big B. Subject to
obtaining confidentiality agreements from such parties, Big B's management was
authorized to furnish those parties with such information as they shall
reasonably request.
In order to afford sufficient time to consider its alternatives in a
diligent and orderly manner, the Big B Board also unanimously approved at its
September 20, 1996 meeting a Shareholder Rights Plan (the "Rights Plan") and
instructed management to implement such plan. The Rights Plan and a form of
confidentiality agreement which is acceptable to Big B (and which form of
confidentiality agreement Big B will provide to all interested parties) are
described herein under Item 8, "Additional Information to be Furnished."
On September 23, 1996, the next business day after the September 20, 1996
meeting of the Big B Board, Big B publicly announced that it had rejected the
Offer and recommended that holders of Big B Common Stock not tender their
shares pursuant to the Offer. Big B also announced that it was implementing
the Rights Plan and was exploring various alternative transactions to the
Offer.
Also on September 23, 1996, Mr. Bruno sent the following letter to Mr.
Hoven:
September 23, 1996
Mr. D. Dwayne Hoven
President and Chief Executive Officer
Revco D.S., Inc.
1925 Enterprise Parkway
Twinsburg, Ohio 44087
Dear Dwayne:
The Board of Directors of Big B, Inc. has carefully
considered the terms and conditions of Revco's pending tender
offer for Big B common stock and the proposed subsequent
merger of Big B with a subsidiary of Revco. On behalf of the
Board of Directors, I wish to advise you that the Board of
Directors has unanimously determined that Revco's pending
tender offer and related merger, as was the case with Revco's
previous acquisition proposal, is not in the best interests of
Big B's shareholders.
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The foregoing conclusion is based on the Board of Director's
determination that the per share consideration in Revco's
tender offer and proposed merger of $15.00 in cash is
inadequate.
The Board of Directors has authorized Big B's management,
with the assistance of its financial and legal advisors, to
actively explore alternatives to maximizing Big B shareholder
value. We have already received inquires from other interested
parties. The Board of Directors has authorized Big B's
management to provide confidential information concerning Big
B's business and operations to any interested party, including
Revco, who enters into a Confidentiality Agreement which is
acceptable to us. In addition, in order to allow sufficient
time to develop and consider possible alternatives, the Board
has directed Big B's management to implement a Shareholder
Rights Plan. Although the Board of Directors has made no
decision to sell the Company, the Board will give careful
consideration to any acquisition proposal that appropriately
reflects Big B's intrinsic value.
We note that Revco has indicated in its Offer to Purchase
that it "intends to seek to negotiate with" Big B. If this
remains the case, we invite you to enter into a
Confidentiality Agreement with us. In such circumstances, we
would be happy to meet with you, to make our advisors
available to you and to provide you access to our confidential
financial information. For your convenience, we have enclosed
a form of Confidentiality Agreement which is acceptable to us
and which we will propose be executed by all interested
parties.
Very truly yours,
/s/ ANTHONY J. BRUNO
Anthony J. Bruno
Chairman of the Board and
Chief Executive Officer
In addition, on September 23, 1996, Big B and R-H will contact those parties
who had previously expressed interest in acquiring Big B to inform them of the
foregoing and will begin the process of contacting other parties who might
also be potentially interested in acquiring Big B.
THE RECOMMENDATION. THE BIG B BOARD UNANIMOUSLY RECOMMENDS THAT ALL HOLDERS
OF BIG B COMMON STOCK REJECT THE OFFER AND NOT TENDER THEIR SHARES PURSUANT TO
THE OFFER.
In addition to the factors set forth above and considered by the Big B Board
in reaching the conclusions with respect to the Offer described above, the Big
B Board considered a number of factors, including, but not limited to, the
following:
(i) Big B's business, financial condition, results of operations, current
business strategy and future prospects, including the nature of the markets
in which Big B operates, Big B's position in such markets, the historical
and current market prices for the Big B Common Stock and certain legal
considerations;
(ii) presentations by Big B's management relating to Big B's financial
performance and future prospects and the opinion of Big B's management that
the proposed consideration in the Offer of $15.00 in cash per share of Big
B Common Stock is inadequate;
(iii) the fact that Big B has had communications from other parties who
have indicated their potential interest in acquiring Big B;
(iv) presentations by R-H, financial advisor to Big B, concerning the
financial aspects of the Offer;
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(v) the written opinion of R-H that, as of the date of such opinion, the
proposed consideration of $15.00 in cash per share of Big B Common Stock to
be received by the shareholders (other than Revco and its affiliates) is
inadequate from a financial point of view to such shareholders of Big B
pursuant to the Offer; the full text of such opinion, dated September 20,
1996, which sets forth the assumptions made and matters considered and
limitations set forth by R-H, is included as Annex A hereto and should be
read in its entirety; and
(vi) the Big B Board's belief, based in part on the factors referred to
above, that the consideration in the Offer of $15.00 in cash per share of
Big B Common Stock does not reflect the current value inherent in Big B and
that the shareholders' interests would be best served if Big B were to
actively explore alternatives to maximize shareholder value.
The foregoing discussion of the information and factors considered and given
weight by the Big B Board is not intended to be exhaustive. In view of the
variety of factors considered in connection with its evaluation of the Offer,
the Big B Board did not find it practicable to and did not quantify or
otherwise assign relative weights to the specific factors considered in
reaching its determinations and recommendations. In addition, individual
members of the Big B Board may have given different weight to different
factors.
A copy of the letter to Big B's shareholders, the letter to Big B's
employees and the press release relating to the foregoing recommendation are
filed as Exhibits 2, 3 and 4 hereto, respectively, and are incorporated herein
by reference.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED
Pursuant to the terms of an engagement letter dated August 19, 1996, Big B
has retained R-H to render financial advisory services to Big B, and, in
accordance with such engagement, R-H has advised Big B with respect to the
Offer and certain related matters. Big B has agreed in the engagement letter
to pay R-H (i) a $75,000 retainer fee, (ii) an additional fee of $100,000 for
work performed by R-H in response to a specific overture from a third party
concerning a business combination with Big B (such as the Offer), (iii) a fee
of $400,000 upon the delivery of R-H's opinion, including any updates thereof,
with respect to the fairness to Big B's shareholders of a transaction
involving any sale of Big B, and (iv) a transaction fee equal to a percentage
of the consideration received by Big B's shareholders in the event of a sale
of Big B against which all of the above fees will be credited. Such percentage
shall be based upon the price per share of Big B Common Stock in any such
transaction as follows:
<TABLE>
<CAPTION>
TRANSACTION FEE AS A
PRICE PER SHARE OF PERCENTAGE
BIG B COMMON STOCK OF CONSIDERATION
------------------ --------------------
<S> <C>
$16.00 or less................... 0.40%
$16.01 to $18.00................. 0.45%
$18.01 or higher................. 0.50%
</TABLE>
Big B has also agreed to reimburse R-H for its reasonable out-of-pocket
expenses and to indemnify R-H and certain related persons against certain
liabilities in connection with its engagement, including certain liabilities
under the federal securities laws.
In the past, R-H and its affiliates have provided financial advisory
services to Big B and its affiliates and have received fees for the rendering
of the services.
Big B has retained MacKenzie Partners, Inc. to assist Big B in connection
with its communications with its shareholders with respect to, and to provide
other services to Big B in connection with, the Offer. Such firm will receive
reasonable and customary compensation for its services and will be reimbursed
for its out-of-pocket expenses in connection therewith. Big B has agreed to
indemnify such firm against certain liabilities arising out of or in
connection with its engagement.
Except as set forth above, neither Big B nor any person acting on its behalf
has employed, retained or compensated any person to make solicitations or
recommendations to shareholders of Big B with respect to the Offer.
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ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES
(a) Other than as described in the next paragraph, there have been no
transactions in shares of Big B Common Stock which were effected during the
past 60 days by Big B, or, to the best knowledge of Big B, any executive
officer, director, affiliate or subsidiary of Big B.
On August 27, 1996, the following non-employee directors each received in
lieu of directors' fees 181 shares of Big B Common Stock pursuant to Big B's
Non-Employee Director Compensation Plan: Richard Cohn, Charles A. McCallum,
and Susan W. Matlock.
(b) To the best knowledge of Big B, none of its executive officers,
directors, affiliates or subsidiaries presently intends to tender shares of
Big B Common Stock to Revco or RDS Acquisition pursuant to the Offer or to
sell any shares of Big B Common Stock that are owned beneficially or held of
record by such persons, in each case, subject to and consistent with any
fiduciary obligations in the case of shares of Big B Common Stock held by a
fiduciary.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY
(a) AND (b)
Since the announcement of the Offer on September 9, 1996, Big B has received
inquiries from parties other than Revco regarding Big B's interest in
entertaining proposals for possible alternative transactions involving the
acquisition of Big B. Although no definite proposals have yet been received
from such other parties, such other parties have generally expressed a
willingness to consider potential transactions with Big B involving a total
consideration in excess of that contained in the Offer.
In addition, as described above in Item 4, the Big B Board has authorized
Big B's management, together with its financial and legal advisors, to
consider various possible alternatives to maximizing shareholder value. Big B
expects that an exploration of such possible alternatives will involve, among
other things, furnishing non-public information to certain parties, possibly
including Revco, upon the execution of confidentiality agreements with respect
thereto, responding to due diligence inquiries, assessing the feasibility and
desirability of such alternatives, and engaging in discussions and
negotiations with such third parties, as appropriate. Although the Big B Board
has made no decision to sell the company, the Big B Board will give careful
consideration to any acquisition proposal that appropriately reflects Big B's
intrinsic value.
At its September 20, 1996 meeting, the Big B Board determined that public
disclosure with respect to the parties to, and the possible terms of any
proposals made in connection with, or agreements that may result from, any
discussions or negotiations referred to in this Item 7 might jeopardize the
continuation of such discussions or negotiations and, accordingly, authorized
and directed management not to make any such public disclosure unless and
until an agreement in principle may be reached.
There can be no assurance that any of the foregoing will result in any
alternative transaction to the Offer being recommended to the Big B Board or
that any such transaction that may be recommended will be authorized or
consummated, or that a transaction other than those described herein will not
be proposed, authorized or consummated. The initiation or continuation of any
of the foregoing may be dependent upon the future actions of Revco with
respect to the Offer. The proposal, authorization, announcement or
consummation of any transaction of the type referred to in this Item 7 could
adversely affect or result in the withdrawal of the Offer.
Except as described above, Big B is not engaged in any negotiation in
response to the Offer which relates to or would result in (i) an extraordinary
transaction, such as a merger or reorganization, involving Big B or any of its
subsidiaries, (ii) a purchase, sale or transfer of a material amount of assets
of Big B or any of its subsidiaries, (iii) a tender offer for or other
acquisition of securities by or of Big B or (iv) a material change in the
present capitalization or dividend policy of Big B.
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ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED
SHAREHOLDER RIGHTS PLAN. On September 20, 1996, the Big B Board adopted the
Rights Plan. Under the Rights Plan, rights ("Rights") will be distributed at
the close of business on October 3, 1996 as a dividend at the rate of one
Right for each share of Big B Common Stock held by shareholders of record as
of the close of business on October 3, 1996. Each Right entitles the
registered holder to purchase from Big B one share of Big B Common Stock at a
purchase price of $40.00 per share (the "Purchase Price"), subject to
adjustment. The description and terms of the Rights are set forth in the
Rights Agreement, dated as of September 23, 1996 (the "Rights Agreement"),
between Big B and First National Bank of Boston, as Rights Agent (the "Rights
Agent").
A copy of the Rights Agreement is filed as Exhibit 6 hereto. This summary
description of the Rights does not purport to be complete and is qualified in
its entirety by reference to the Rights Agreement, which is incorporated
herein by reference.
Initially, the Rights will be attached to all Big B Common Stock
certificates representing shares then outstanding, and no separate Rights
Certificate will be distributed. The Rights will separate from the Big B
Common Stock and a distribution date will occur upon the earlier of (i) 10
days following a public announcement that a person or group of affiliated or
associated persons (an "Acquiring Person") has acquired, or obtained the right
to acquire, beneficial ownership of 10% or more of the outstanding shares of
Big B Common Stock (the "Stock Acquisition Date"), or (ii) such date as the
Board shall determine during the pendency of a tender or exchange offer
(including the Offer) that would result in a person or group beneficially
owning 10% or more of such outstanding shares of Big B Common Stock (the
earlier of (i) and (ii), the "Distribution Date"). The foregoing
notwithstanding, the definition of "Acquiring Person" shall not include any
member of the Bruno family (consisting of Anthony J. Bruno, Vincent J. Bruno,
James A. Bruno and any of their siblings, lineal descendants, lineal
descendants of such siblings, any of their respective spouses, or any trust
established for any of their benefit) who might otherwise be an Acquiring
Person by reason of any deemed beneficial ownership arising from arrangements
which may be entered into among members of such family. Until the Distribution
Date, (i) the Rights will be evidenced by the Big B Common Stock certificates
and will be transferred with and only with such Big B Common Stock
certificates, (ii) new Big B Common Stock certificates will contain a notation
incorporating the Rights Agreement by reference and (iii) the surrender for
transfer of any certificates for Big B Common Stock outstanding will also
constitute the transfer of the Rights associated with the Big B Common Stock
represented by such certificate.
The Rights are not exercisable until the Distribution Date and will expire,
unless earlier redeemed by Big B as described below, at the close of business
on the earlier of (i) June 30, 1997 or (ii) the consummation date of a
transaction pursuant to which Big B merges or consolidates with another
entity, which transaction shall have been approved by the Big B Board if at
the time of such approval the Big B Board then includes one or more
"Continuing Directors" and a majority of such Continuing Directors shall have
joined in such approval.
The term "Continuing Director" means any member of the Big B Board who was a
member of the Big B Board prior to the date of the Rights Agreement and any
person who is subsequently elected to the Big B Board if such person is
recommended or approved by a majority of the Continuing Directors, but such
term shall not include an Acquiring Person, or an affiliate or associate of an
Acquiring Person, or any representative of the foregoing entities.
As soon as practicable after the Distribution Date, Rights Certificates will
be mailed to holders of record of the Big B Common Stock as of the close of
business on the Distribution Date and, thereafter, the separate Rights
Certificates alone will represent the Rights.
In the event that an Acquiring Person becomes the beneficial owner of 10% or
more of the then outstanding shares of Big B Common Stock (unless such
acquisition is made pursuant to a tender or exchange offer for all outstanding
shares of Big B Common Stock, at a price determined by a majority of the
independent directors of Big B who are not representatives, nominees,
affiliates or associates of an Acquiring Person to be fair and
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otherwise in the best interest of Big B and its shareholders), each holder of
a Right will thereafter have the right to receive, upon exercise, Big B Common
Stock (or, in certain circumstances, cash, property or other securities of Big
B), having a value equal to two times the Exercise Price of the Right. The
Exercise Price is the Purchase Price times the number of shares of Big B
Common Stock associated with each Right (initially, one). Notwithstanding any
of the foregoing, following the occurrence of any of the events set forth in
this paragraph (the "Flip-In Events"), all Rights that are, or (under certain
circumstances specified in the Rights Agreement) were, beneficially owned by
any Acquiring Person will be null and void. However, Rights are not
exercisable following the occurrence of any of the Flip-In Events set forth
above until such time as the Rights are no longer redeemable by Big B as set
forth below.
In the event that following the Stock Acquisition Date, (i) Big B engages in
a merger or business combination transaction in which Big B is not the
surviving corporation (other than a merger that follows a tender offer
determined to be fair to the shareholders of Big B, as described in the
preceding paragraph); (ii) Big B engages in a merger or business combination
transaction in which Big B is the surviving corporation and the Big B Common
Stock is changed or exchanged; or (iii) 50% or more of Big B's assets, cash
flow or earning power is sold or transferred, each holder of a Right (except
Rights which have previously been voided as set forth above) shall thereafter
have the right to receive, upon exercise of the Right, common stock of the
acquiring corporation having a value equal to two times the Exercise Price of
the Right.
The Purchase Price payable, and the number of shares of Big B Common Stock
or other securities or property issuable upon exercise of the Rights, are
subject to adjustment from time to time to prevent dilution (i) in the event
of a stock dividend on, or a subdivision, combination or reclassification of,
the Big B Common Stock, (ii) if holders of the Big B Common Stock are granted
certain rights or warrants to subscribe for Big B Common Stock, or (iii) upon
the distribution to holders of the Big B Common Stock of evidences of
indebtedness or assets (excluding regular quarterly cash dividends) or of
subscription rights or warrants (other than those referred to above).
With certain exceptions, no adjustments in the Purchase Price will be
required until cumulative adjustments amount to at least 1% of the Purchase
Price. No fractional shares will be issued and, in lieu thereof, an adjustment
in cash will be made based on the market price of the Big B Common Stock on
the last trading date prior to the date of exercise.
At any time until 10 days following the Stock Acquisition Date, the Big B
Board may redeem the Rights in whole, but not in part, at a price of $0.01 per
Right. Under certain circumstances set forth in the Rights Agreement, the
decision to redeem shall require the concurrence of a majority of the
Continuing Directors. Immediately upon the action of the Big B Board ordering
redemption of the Rights, the Rights will terminate and the only right of the
holders of Rights will be to receive the $0.01 redemption price.
The Big B Board has the right to redeem all or a portion of the Rights
following the occurrence of a Flip-In Event by exchanging shares of Big B
Common Stock for outstanding Rights at a ratio of one to one. Upon exercise of
the exchange feature, Rights held by all shareholders will be exchanged (on a
pro rata basis if less than all of the Rights are to be exchanged), other than
those held by an "Acquiring Person" which in accordance with the terms of the
plan would have become null and void.
Until a Right is exercised, the holder thereof, as such, will have no rights
as a shareholder of Big B, including, without limitation, the right to vote or
to receive dividends. While the distribution of the Rights will not be taxable
to shareholders or to Big B, shareholders may, depending upon the
circumstances, recognize taxable income in the event that the Rights become
exercisable for Big B Common Stock (or other consideration) of Big B as set
forth above.
Any of the provisions of the Rights Agreement may be amended by the Big B
Board prior to the Distribution Date. After the Distribution Date, the
provisions of the Rights Agreement may be amended by the Big B Board in order
to cure any ambiguity, to make changes which do not adversely affect the
interests of
8
<PAGE>
holders of Rights (excluding the interests of any Acquiring Person), or to
shorten or lengthen any time period under the Rights Agreement; provided,
however, that no amendment to adjust the time period governing redemption
shall be made at such time as the Rights are not redeemable.
CONFIDENTIALITY AGREEMENT. In connection with Big B's effort to evaluate
possible alternatives to maximizing shareholders value, Big B intends to enter
into confidentiality agreements with all parties, possibly including Revco,
interested in pursuing an alternative transaction to the Offer (a
"Transaction") who agree to be bound by the terms of such an agreement. A form
of confidentiality agreement (the "Confidentiality Agreement") which is
acceptable to Big B and which Big B will provide to all interested parties is
filed as Exhibit 7 hereto and is incorporated herein by reference.
The Confidentiality Agreement provides, among other things, that such
interested party will not disclose, except with the written consent of Big B,
any non-public, confidential and proprietary information of Big B furnished to
the interested party in connection with a Transaction, except to the extent
that disclosure of such information is required to comply with federal
securities laws, and not to use any such information except in connection with
a Transaction. The Confidentiality Agreement also provides that the interested
party will agree not to acquire, other than pursuant to a cash tender offer
for all of the outstanding shares of Big B Common Stock at a price of not less
than $15.00 per share or pursuant to a transaction approved by the Big B
Board, any additional voting securities of Big B or rights to acquire such
voting securities. The Confidentiality Agreement also prohibits the interested
party from soliciting proxies or written shareholder consents with respect to
the voting securities of Big B, calling or seeking to call a shareholder
meeting or executing any written consent or initiating any shareholder
proposal for action by shareholders, challenging the Rights Plan or seeking a
redemption of the Rights, or otherwise acting to seek to control or influence
the Big B Board or the management of Big B. The foregoing restrictions would
continue from the date of the Confidentiality Agreement through June 30, 1997
except that if by January 31, 1997, Big B has not publicly announced that it
has entered into a definitive agreement relating to the acquisition of Big B
(whether by sale, merger or otherwise), then all of the foregoing restrictions
would cease to apply. The interested party and Big B will agree that, except
as may be provided in a definitive agreement relating to a Transaction between
Big B and such interested parties, Big B shall have no liability resulting
from the use of the confidential information. The Confidentiality Agreement
also requires the interested party to acknowledge that persons with material
non-public information about Big B may be prohibited from buying or selling
securities of Big B or communicating such information to certain other
persons.
CERTAIN LITIGATION. On September 17, 1996, Big B filed a Verified Complaint
For Temporary Restraining Order, Preliminary and Permanent Injunctions, and
Complaint for Declaratory Judgment in the Circuit Court of Jefferson County,
Alabama, Bessemer Division (the "Court"), Civil Action No. CV96-796, against
RDS Acquisition. The Complaint alleges, among other things, that there exists
a justiciable controversy between Big B and RDS Acquisition in that RDS
Acquisition has made certain immediate demands on Big B related to the
inspection of certain corporate books and records of Big B pursuant to Alabama
Code (S) 10-2B-16.02 and that Big B is uncertain of its legal rights and
obligations pursuant to RDS Acquisition's demands. Big B requested that the
Court construe such statutory provisions to clarify its legal obligation
pursuant to RDS Acquisition's demand. Big B requested the Court to enter an
immediate Temporary Restraining Order: (a) restraining RDS Acquisition from
reviewing any records other than those specifically called for in Ala. Code
Section 10-2B-16.02(a) until the respective rights of the parties are
determined as requested in the Complaint; and (b) tolling the operation of the
statutory period of time in which Big B is obligated to respond to RDS
Acquisition's demand, pending the Court's final ruling. Big B also requested
that, after a proper hearing, the Court enter an Order construing the
applicable Alabama statutes and preliminarily and permanently enjoining RDS
Acquisition as requested in the Complaint, and granting such other and further
relief as the Court deems reasonable and equitable under the circumstances.
RDS Acquisition filed a Notice of Removal in the United States District Court
for the Northern District of Alabama on September 18, 1996, asserting that
diversity of citizenship exists between Big B and RDS Acquisition and that the
amount in controversy in the litigation exceeds $50,000. No dates have been
set for hearings on either the Notice of Removal or Big B's request for a
temporary restraining order. The
9
<PAGE>
parties have commenced informal discussions regarding resolution of this
matter. Copies of such Verified Complaint and Notice of Removal are filed as
Exhibits 8 and 9, respectively, and are incorporated herein by reference.
On September 23, 1996, Big B filed a Complaint for Declaratory and
Injunctive Relief in the Circuit Court of Jefferson County, Alabama, Bessemer
Division, against Revco and RDS Acquisition. Big B alleges, among other
things, that the defendants, or persons or entities acting in concert with
them or on their behalf, will contest the validity of the Rights Plan adopted
by the Big B Board on September 20, 1996 and will assert that the Rights Plan
was adopted in violation of applicable law or in violation of the Big B's
directors' fiduciary duties. Big B sought a judgment declaring that the Rights
Plan adopted by the Big B Board is valid and lawful and adopted in full
conformance with the laws of Alabama or any other applicable law; temporarily,
preliminarily and permanently enjoining the defendants, their affiliates,
subsidiaries, officers, directors and all others acting in concert with them
or on their behalf from bringing any action in any other court attacking the
Rights Plan or the adoption of the Rights Plan by the Big B Board under
Alabama law or any other applicable law; and granting such further relief,
including payment of the expenses (including attorneys' fees) incurred by the
plaintiff in the action, as may be just and proper under the circumstances. A
copy of such Complaint is filed as Exhibit 10 hereto and is incorporated
herein by reference.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS
<TABLE>
<C> <S>
Exhibit 1: Pages 8-15 from the Proxy Statement.
Exhibit 2: Letter to Big B, Inc. Shareholders, dated September 23, 1996.*
Exhibit 3: Letter to Big B, Inc. Employees, dated September 23, 1996.
Exhibit 4: Press Release of Big B, Inc., dated September 23, 1996.
Exhibit 5: Opinion of The Robinson-Humphrey Company, Inc., dated September
20, 1996.**
Exhibit 6: Rights Agreement, dated September 23, 1996, between Big B, Inc.
and First National Bank of Boston, as Rights Agent.***
Exhibit 7: Form of Confidentiality Agreement.
Exhibit 8: Complaint filed by Big B, Inc. against RDS Acquisition, Inc.
(dated September 17, 1996, C.A. No. CV-96-796, Circuit Court of
Jefferson County, Alabama, Bessemer Division).
Exhibit 9: Notice of Removal filed by RDS Acquisition, Inc. in Big B, Inc. v.
RDS Acquisition, Inc. (dated September 18, 1996, CV-96-ETC-2446-S,
U.S. District Court (N.D. Ala.)).
Exhibit 10: Complaint filed by Big B, Inc. against RDS Acquisition, Inc.
(dated September 23, 1996, C.A. No. CV-96-821, Circuit Court of
Jefferson County, Alabama, Bessemer Division).
</TABLE>
- --------
* Included in Schedule 14D-9 mailed to shareholders.
** Included as Annex A to Schedule 14D-9 mailed to shareholders.
*** Incorporated by reference to Exhibit 1 to the Registration Statement on
Form 8-A of Big B, Inc., dated September 23, 1996.
10
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this Statement is true, complete and
correct.
BIG B, INC.
/s/ Arthur M. Jones, Sr.
By: _________________________________
Name: Arthur M. Jones, Sr.
Title:President and Chief Operating Officer
Dated: September 23, 1996
11
<PAGE>
ANNEX A
September 20, 1996
Board of Directors
Big B, Inc.
2600 Morgan Road
Bessemer, Alabama 35023
Members of the Board of Directors:
On September 9, 1996, RDS Acquisition Inc., a wholly-owned subsidiary of
Revco D.S., Inc. ("Revco"), commenced a tender offer (the "Revco Offer") to
purchase for cash all outstanding shares of common stock, par value $.001 per
share (the "Common Stock") of Big B, Inc. ("Big B" or the "Company") at a
price of $15.00 per share. The terms of the Revco Offer are more fully set
forth in an Offer to Purchase, dated September 10, 1996, and the related
Letter of Transmittal, both of which are included in a Schedule 14D-1, as
amended to date (the "Schedule 14D-1"), originally filed by Revco with the
Securities and Exchange Commission on September 10, 1996.
You have asked for our opinion, as to whether the consideration to be
received by the holders of Common Stock (other than Revco and its affiliates)
pursuant to the Revco Offer is adequate from a financial point of view to such
holders.
For purposes of the opinion set forth herein, we have:
(i) analyzed certain publicly available financial statements and other
information of the Company;
(ii) analyzed those financial statements and certain other information
of Revco which are publicly available;
(iii) analyzed certain internal financial statements and other
financial and operating data concerning the Company prepared by
the management of the Company;
(iv) analyzed certain financial projections prepared by the management
of the Company;
(v) discussed the past and current operations and financial condition
and the prospects of the Company with senior executives of the
Company;
(vi) reviewed the reported prices and trading activity for the Common
Stock;
(vii) compared the financial performance of the Company and the prices
and trading activity of the Common Stock with that of certain
other comparable publicly-traded companies and their securities;
(viii) reviewed the financial terms, to the extent publicly available,
of certain comparable acquisition transactions;
(ix) responded to inquiries from certain third parties concerning a
possible transaction involving the Company;
(x) reviewed the Offer to Purchase, the Schedule 14D-1 and certain
related documents; and
(xi) performed such other analyses and examinations and considered such
other factors as we have deemed appropriate.
We have assumed and relied upon, without independent verification, the
accuracy and completeness of the information reviewed by us for the purposes
of this opinion. With respect to the financial projections, we have assumed
that they have been reasonably prepared on bases reflecting the best currently
available estimates and judgments of the Company's management and others as to
the future financial performance of the Company. In
A-1
<PAGE>
addition, we have not made an independent evaluation or appraisal of the
assets of the Company, nor have we been furnished with any such appraisals.
Our opinion is necessarily based on economic, market and other conditions as
in effect on, and the information made available to us as of, the date hereof.
It is understood that this letter is for the information of the Board of
Directors of the Company and may not be used for any other purpose without our
prior written consent. We hereby consent to the inclusion of this opinion in
the Schedule 14D-9 filed by the Company in response to the Revco Offer. This
opinion is not intended to be and shall not constitute a recommendation to any
stockholder of the Company as to whether to tender shares of Common Stock
pursuant to the Revco Offer.
We have acted as a financial advisor to the Board of Directors of the
Company in connection with this matter and will receive a fee for our
services. In the past, The Robinson-Humphrey Company, Inc. and its affiliates
have provided financial advisory services to the Company and its affiliates
and have received fees for the rendering of these services.
Based on the foregoing, we are of the opinion on the date hereof that the
consideration to be received by the holders of Common Stock (other than Revco
and its affiliates) pursuant to the Revco Offer is inadequate from a financial
point of view to such holders.
Very truly yours,
The Robinson-Humphrey Company, Inc.
A-2
<PAGE>
Exhibit 1
COMPENSATION TO EXECUTIVE OFFICERS
The following table is a summary of certain information concerning the
compensation earned by the Company's chief executive officer and each of the
other five most highly compensated executive officers during the last three
fiscal years.
<TABLE>
<CAPTION>
Long- All other
Term Com- Compen-
pensa- sation
Annual Compensation tion (2)
------------------------------------------- ----------- --------------
Other No. of
Annual Securi-
Compen- ties Un-
Name/ sation derlying
Position Year Salary Bonus (1) Options
- -------- ---- ----------- ----------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Anthony J. Bruno 1996 $ 266,000 $ -- __ -- $ 523,000
Chairman of the -- --
Board 1995 256,000 98,000 45,000
CEO 1994 244,000 125,000 -- -- 48,000
Arthur M. Jones,
Sr. 1996 216,000 __ $ 41,000 22,000 60,000
President and 1995 205,000 79,000 32,000 -- 29,000
Chief Operating
Officer 1994 185,000 100,000 11,000 18,000 24,000
James A. Bruno 1996 140,000 -- 30,000 10,000 19,000
Executive Vice
President; 1995 107,000 47,000 -- -- 9,000
Secretary 1994 82,000 43,000 -- 7,000 8,000
Vincent J. Bruno 1996 127,000 -- 38,000 7,000 68,000
Senior Vice Presi-
dent 1995 120,000 46,000 -- -- 27,000
of Purchasing and
Advertising 1994 114,000 59,000 40,000 8,000 30,000
Bobby W. Little 1996 118,000 -- 16,000 7,000 54,000
Senior Vice Presi-
dent 1995 109,000 42,000 12,000 -- 25,000
of Store Opera-
tions 1994 101,000 53,000 -- 7,000 21,000
</TABLE>
<PAGE>
(1) Reflects amounts reimbursed by the Company for the payment of taxes
resulting from the exercise of stock options issued under the Company's Employee
Stock Option Plan. No amounts for executive perquisites and other personal
benefits, securities or property are shown because the aggregate dollar amount
per executive is the lesser of either $50,000 or 10% of annual salary and bonus.
(2) The amounts listed in this column represent (i) the Company's contributions
under its Profit Sharing Plan for the benefit of the following executives for
1996, 1995, and 1994: Anthony J. Bruno $6,000, $6,000 and $6,000; Arthur M.
Jones, Sr. $6,000, $6,000 and $6,000; James A. Bruno $6,000, $5,000 and $4,000;
Vincent J. Bruno $4,000, $6,000 and $6,000; and Bobby W. Little $6,000, $4,000
and $4,000; (ii) amounts accrued by the Company in 1996, 1995, and 1994 under
Employment and Deferred Compensation Agreements to provide future retirement
benefits for its executives as follows: Anthony J. Bruno $390,000, $20,000 and
$25,000; Arthur M. Jones, Sr. $47,000, $20,000 and $25,000; James A. Bruno
$10,000, $2,000 and $2,000; Vincent J. Bruno $56,000, $18,000 and $21,000; and
Bobby W. Little $40,000, $18,000 and $14,000; and (iii) annual premiums paid by
the Company on life insurance provided by the Company in 1996, 1995 and 1994 for
the benefit of its executives as follows: Anthony M. Jones, Sr. $7,000, $3,000
and $3,000; James A. Bruno $3,000, $2,000 and $2,000; Vincent J. Bruno $8,000,
$3,000 and $3,000; and Bobby W. Little $8,000, $3,000 and $3,000.
COMPENSATION REPORT
The Company's Compensation Committee has established for executives specific
compensation policies which seek to enhance the profitability of the Company
with an appropriate balance between long-term and short-term profitability goals
and to assure the ability of the Company to attract and retain executive
employees with compensation packages competitive in the marketplace.
The compensation program of the Company seeks specifically to motivate the
executives of the Company to achieve objectives which benefit the Company within
their respective areas of responsibility, with particular emphasis, in the
following order of priority, on the ultimate realization of profits for the
Company, continued growth in revenues, and control over operating expenses
through the achievement of operating efficiencies.
2
<PAGE>
The key elements of the Company's compensation program include base
compensation, an incentive bonus, a Stock Option Plan and retirement benefits
typically offered to executives of similar businesses.
The Company has also sought to align the interests of the executives with
the long-term interests of the shareholders through its Stock Option Plan and an
attractive deferred compensation plan for the executives.
The fiscal 1996 compensation of Anthony J. Bruno, the Company's Chief
Executive Officer, was based on a review of salaries paid by other retail drug
companies of a similar size to that of the Company, taking into account the
successful performance of the Company during the preceding year and the
leadership provided by him in his role as CEO. The base salaries of all of the
executives are set on a general and subjective basis after a review of certain
factors, including salaries paid by other retail drug companies of a similar
size to that of the Company for executives of similar experience and skills, the
overall performance by each executive during the preceding year, the Company's
financial performance during the preceding year, and any changes in the scope of
the executive's responsibilities from the preceding year. In addition to base
salary, each executive, including the CEO, may earn a cash bonus of up to 50% of
base pay if certain earnings objectives, established at the beginning of each
fiscal year, are achieved with the maximum potential bonus being reduced in
proportion to any shortfall in these set earnings objectives.
COMPENSATION COMMITTEE
Richard Cohn
Charles A. McCallum, D.M.D., M.D.
Susan W. Matlock
* * *
STOCK OPTION GRANTS
PRIVATE OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
% of Total Potential Value
Options at Assumed
Granted to Exercise Rates of
Options Employees or Base Stock Price
Granted in Fiscal Price Expiration Appreciation
Name (#)(1) Year ($/Share) Date for Option
- ---------------------- ------------ ------------ ------------ ------------ Terms (2)
5%($) 10%($)
-------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Anthony J. Bruno 0 0 0 --- --- ---
</TABLE>
3
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Arthur M. Jones, Sr. 22,000 22% 10.00 1/31/98 156,000 212,000
Vincent J. Bruno 7,000 7% 10.00 1/31/98 50,000 67,000
James A. Bruno 10,000 10% 10.00 1/31/98 71,000 96,000
Bobby W. Little 7,000 7% 10.00 1/31/98 50,000 67,000
Total 46,000 46% 327,000 442,000
</TABLE>
(1) All options outstanding were issued under the Company's Employee Stock
Option Plan. Options are exercisable 50% on January 31, 1996, and 50% on
January 31, 1997, at a price of $10.00 per share, with the options expiring
January 31, 1988.
(2) Based upon the market price on the date of grant and an annual appreciation
at the rate stated of such market price through the expiration date of such
options. The dollar amounts under these columns are the result of calculations
at the 5% and 10% rates set by the SEC and, therefore, are not intended to
forecast possible future appreciation, if any, of the Company's stock price.
The Company did not use an alternative formula for a grant date valuation, as
the Company is not aware of any formula which will determine with reasonable
accuracy a present value based on future unknown or volatile factors.
AGGREGATE OPTION EXERCISES AND OPTION VALUES
The following table shows information concerning the exercise of stock
options during the fiscal year 1996 by each of the named executive officers and
the fiscal year-end value of unexercised options.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
Number Number Value Value
of of of of
securities securities unexercised unexercised
Shares underlying underlying in-the- in-the-
acquired unexercised unexercised money money
on Value options at options at options at options at
exercise realized FY-end (#) FY-end (#) FY-($) FY-end
Name (#) ($) exercisable unexercisable exercisable unexercisable
- ----------------------- ------------ ------------ ------------- --------------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Anthony J. Bruno 0 0 0 0 0 0
</TABLE>
4
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Arthur M. Jones, Sr. 16,000 135,000 17,000 11,000 17,000 0
Vincent J. Bruno 8,000 75,000 13,500 3,500 29,000 0
James A. Bruno 7,000 60,000 9,000 5,000 12,000 0
Bobby W. Little 3,500 32,000 3,500 3,500 0 0
Total 34,500 302,000 43,000 23,000 58,000 0
</TABLE>
RETIREMENT PLANS
Profit Sharing 401(k) Retirement Plan
The Company maintains a profit sharing cash and deferred retirement plan
pursuant to Section 401(k) of the Internal Revenue Code of 1986, as amended.
All employees who are not eligible to participate in a union-sponsored or co-
sponsored qualified retirement plan will participate after one year of service
and attainment of age 21.
The Company may make discretionary contributions in an amount determined
annually by the Board of Directors. Company contributions are allocated to each
participant on the basis of compensation. Participants may make contributions
to the Plan on a payroll deduction basis and the Company may make matching
contributions on behalf of each participant. A separate salary reduction
account and matching employer contribution account are maintained for each
participant. All contributions are paid to NationsBank, as Trustee, to hold,
invest and reinvest the funds. All accounts are vested at retirement, death or
disability. Upon any other termination of employment, matching and
discretionary contributions are vested after the fifth year of service. Subject
to certain restrictions and tax penalties, participants may make early
withdrawals from their salary reduction accounts.
Severance Agreements
The executive officers of the Company are parties to Employment Continuity
Agreements with the Company. Under the terms of the Employment Continuity
Agreements, a participating executive will generally become entitled to receive
benefits if the executives employment is terminated by the Company for "Good
Reason" or by the Company without "Cause" within two years following a "Change
of Control." For purposes of the Agreements, a "Change of
5
<PAGE>
Control" is deemed to include (i) any acquisition of stock if the acquiring
person would thereafter be the beneficial owner of 25% or more of the Company's
voting stock, (ii) a merger or consolidation of the Company in which the Company
is not the surviving corporation, (iii) a sale or exchange of all or
substantially all of the property and assets of the Company, or (iv) any change
over a two-year period or less in a majority of the Board of Directors that is
not approved by 2/3 of the Directors either in office at the commencement of
such two-year period or who were elected with the approval of a majority of
Directors in office at the commencement of such two-year period. The term
"Cause" is defined to mean the commission of certain crimes or a willful breach
of duty if such neglect is not cured within 30 days of notice. An executive's
termination of employment is deemed for "Good Reason" if any of the following
occurred within two years of such termination; (i) a substantial change in the
nature, or diminution in the status, of the individual's duties or position,
(ii) a reduction in the annual base salary provided to the individual, (iii)
removal from the then current executive position, (iv) a failure to provide
substantially the same support staff, (v) a material reduction in other
benefits, (vi) relocation of the executives principal place of business outside
Birmingham, Alabama, or (vii) a failure to assume the Employment Continuity
Agreement. The Company considers it unlikely that the employment of all of the
executives anticipated to be covered under these Agreements would be terminated
following a Change of Control.
The benefits payable under these Employment Continuity Agreements consist of
a lump sum cash payment equal to three times, for Anthony J. Bruno, Arthur M.
Jones, Sr. and James A. Bruno, two times for Vincent J. Bruno, Bobby W. Little
and Michael Tortorice, and one times for Eugene Beckmann, Steven Taylor and Paul
Bruno, the sum of the executive's average annual compensation at the time of
termination and his average incentive compensation bonus for the three years
preceding termination. Other benefits provided include the continuation of
certain health, disability, and life insurance benefits for ten years.
Employment and Deferred Compensation Agreement
Employment and Deferred Compensation Agreements between the Company and the
executive officers of the Company provide that certain retirement benefits are
to be paid to those officers upon their retirement after age 65 or after 1.5
years of employment with the Company. These benefits become vested in the
employee ratably over a 25 year period until age 68 is reached at which
6
<PAGE>
time full vesting is achieved. Cash retirement benefits in a monthly amount
equal to 4.2% of his average annual compensation for the three fiscal years
ended immediately prior to his retirement date are to be paid to the employee
for a period of 120 months following the date of his retirement. In addition,
he is entitled to participate in the Company's health insurance plan for the
remainder of his life. In the event of his death after retirement and during
such 120-month period, the Company will be obligated to continue the payments to
his spouse or heirs for the remainder of the 120-month term. In the event an
officer becomes permanently disabled or dies prior to attaining age 65, the
Company will be obligated to make the monthly cash payments to him, or to his
wife or heirs in the event of his death, for such 120-month period. The Company
accrues the present value of such retirement benefits from the date of such
agreement to the normal retirement date. The occurrence of any event which
entitles an executive officer to receive payment under his Employment Continuity
Agreement is treated as a "retirement" under his Employment and Deferred
Compensation Agreement, entitling him to receive payments thereunder and a right
to elect to receive a present value lump sum payment.
INTEREST OF OFFICERS, DIRECTORS AND OTHERS IN CERTAIN TRANSACTIONS
Big B leases a drug store in Hoover, Alabama, from Nancy Bruno, the mother
of Vincent Bruno, Senior Vice President of Purchasing and Advertising and a
Director of the Company. The annual minimum rental is $55,000, plus 2% of store
sales (excluding sales of beer, wine or tobacco products) in excess of
$2,750,000. For the last fiscal year, Nancy Bruno received no payments under
provisions relating to sales in excess of the specified minimum. The term of
this lease is through 2005.
The Company leases from Theresa L. Bruno, the sister-in-law of Anthony J.
Bruno, Chairman and CEO of the Company, five Big B Drug Stores, located in
Birmingham, Gadsden, Clanton and Talladega, Alabama, and in Pensacola, Florida,
under long-term leases with remaining terms ranging from 5 to 10 years and with
three to four five-year renewal options. Each of the leases provides for an
annual minimum guaranteed rent, plus an additional rent equal to 2% of annual
sales in excess of a specified amount for each of the five drug stores. 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 1996, $257,000 in fiscal 1995,
7
<PAGE>
and $244,000 in fiscal 1994. No excess rentals were paid in fiscal 1996, 1995,
or 1994.
The Company utilizes the services of Perry Harper & Perry, Inc., an
advertising agency, located in Birmingham, Alabama, of which Theresa Bruno, the
wife of James A.Bruno, Executive Vice President, Secretary and a Director of the
Company, is a shareholder and employee. In fiscal 1996, the Company paid to
Perry Harper & Perry approximately $234,800 of commissions for its services.
In the opinion of Management and a majority of the disinterested members of
the Board of Directors, the terms of each of these leases and the Company's
arrangement with its advertising agency are no less favorable than terms that
could have been obtained from unaffiliated parties.
8
<PAGE>
September 23, 1996
To our Shareholders:
On September 9, 1996, a subsidiary of Revco D.S., Inc. announced a tender
offer (the "Offer") for all of the outstanding shares of Big B's common stock
at a price of $15.00 per share in cash. YOUR BOARD OF DIRECTORS HAS
UNANIMOUSLY DETERMINED THAT THE OFFER IS INADEQUATE AND NOT IN THE BEST
INTERESTS OF BIG B OR ITS SHAREHOLDERS. ACCORDINGLY, THE BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS THAT YOU REJECT THE OFFER AND NOT TENDER YOUR SHARES TO
REVCO.
In reaching the determination that the Offer is inadequate and not in the
best interests of Big B or its shareholders, your Board gave careful
consideration to, among other things, Big B's financial performance, its
future prospects, expressions of interest from certain other parties and the
opinion of The Robinson-Humphrey Company, Inc., Big B's financial advisor,
that the consideration offered to Big B's shareholders pursuant to the Offer
is inadequate to such shareholders (other than Revco and its affiliates) from
a financial point of view. We urge you to read carefully the attached Schedule
14D-9 in its entirety, including the opinion of The Robinson-Humphrey Company,
Inc. which is included as Annex A, so that you will be fully informed as to
the Board's recommendation.
Your Board of Directors believes that the Offer fails to recognize the
current value of Big B. The Board concluded that the interests of the
shareholders would be best served by Big B exploring alternatives to
maximizing shareholder value, and the Company is actively engaged in that
effort. Although the Board has made no decision to sell the Company, the Board
will give careful consideration to any acquisition proposal that appropriately
reflects Big B's intrinsic value.
In order to allow sufficient time to develop and consider possible
alternatives, the Board has approved a Shareholder Rights Plan. The Rights
Plan is designed to allow the Company the flexibility to pursue any potential
transaction which in the judgment of your Board is in the best interests of
Big B and its shareholders. A detailed description of the Rights Plan is
included in the attached Schedule 14D-9. You should read it carefully.
Your Directors thank you for your support.
On behalf of the Board of Directors,
[SIGNATURE APPEARS HERE]
Anthony J. Bruno
Chairman of the Board and Chief
Executive Officer
<PAGE>
EXHIBIT 3
September 23, 1996
To our Employees:
On September 9, 1996, a subsidiary of Revco D.S., Inc. announced an
unsolicited tender offer (the "Offer") for all of the outstanding shares of the
Company's common stock at a price of $15.00 per share in cash. The Company's
Board of Directors has unanimously determined that the Offer is inadequate and
not in the best interests of the Company or its shareholders. Accordingly, the
Board has unanimously recommended that shareholders reject the Offer and not
tender their shares to Revco.
In reaching the determination that the Offer is inadequate and not in the
Company's best interests, the Board of Directors gave careful consideration to,
among other things, the Company's financial performance, its future prospects,
expressions of interest from certain other parties and the opinion of The
Robinson-Humphrey Company, Inc., the Company's financial advisor, that the
consideration offered to our shareholders pursuant to the Offer is inadequate.
In view of Revco's Offer, the Board has concluded that the Company's interests
would be best served if the Company were to explore various possible
alternatives to the Offer. Although the Board has made no decision to sell the
Company, the Board will give careful consideration to any acquisition proposal
that appropriately reflects Big B's intrinsic value.
I want to emphasize that in considering any of these potential
alternatives, the Company will pay careful attention to the concerns and
interests of our employees, and any decision to sell the Company will be made
only after careful consideration of the issues affecting our employees.
<PAGE>
We will keep you informed as this process unfolds. Thank you in advance
for your loyalty, support and understanding during this process.
Very truly yours,
[SIG]
Anthony J. Bruno
Chairman of the Board and
Chief Executive Officer
2
<PAGE>
EXHIBIT 4
DATE: September 23, 1996
CONTACT: Arthur M. Jones, Sr.
PHONE: (205) 424-3421 ext. 202
FAX: (205) 425-3525
FOR IMMEDIATE RELEASE
BIG B REJECTS REVCO OFFER; ACTIVELY EXPLORING ALTERNATIVES; IMPLEMENTS
SHAREHOLDER RIGHTS PLAN
BIRMINGHAM, ALABAMA--September 23, 1996--Big B, Inc. (NASDAQ: BIGB)
announced that its Board of Directors has unanimously voted to reject the
offer of a subsidiary of Revco D.S., Inc. (NYSE: RXR) to acquire all of the
outstanding shares of Common Stock of Big B at a price of $15.00 in cash per
share and to recommend to Big B's shareholders that they not tender any shares
to Revco pursuant to the Revco tender offer.
After considering a variety of factors, including the opinion of The
Robinson-Humphrey Company, Inc., Big B's financial advisor, that the
consideration to be received by Big B shareholders (other than Revco and its
affiliates) pursuant to Revco's offer is inadequate from a financial point of
view, the Board of Directors concluded that the Revco offer is inadequate and
not in the best interests of Big B's shareholders.
The Board of Directors also concluded that the interests of Big B's
shareholders would best be served if Big B were to actively explore
alternatives to maximizing shareholder value. Big B has already received
inquiries from other interested parties. The Board has authorized Big B to
provide confidential information about the Company to interested parties who
agree to enter into a confidentiality agreement in a form acceptable to Big B.
Although the Board has made no decision to sell the Company, the Board will
give careful consideration to any acquisition proposal that appropriately
reflects Big B's intrinsic value.
In order to allow sufficient time to develop and consider possible
alternatives, the Board has approved a Shareholder Rights Plan. Under the
Rights Plan, rights will be distributed as a dividend at the rate of one Right
for each share of Big B common stock held by shareholders of record as of the
close of business on October 3, 1996. The Rights Plan also provides that in
certain circumstances in which an "Acquiring Person" attains a 10% or greater
ownership interest in Big B or otherwise tries to gain control of Big B, in
either case without the prior approval of the Big B Board of Directors, the
Rights will allow holders of Big B common stock (other than the Acquiring
Person) to acquire at a discount shares of Big B common stock or, in certain
circumstances, shares of the Acquiring Person. The Rights Plan will expire on
June 30, 1997, or earlier in certain circumstances.
Details of the foregoing, including a detailed description of the Rights
Plan, are outlined in the Company's Schedule 14D-9 which is being filed today
with the Securities and Exchange Commission and which will be mailed shortly
to all shareholders.
Big B, Inc. is the nation's 10th largest drug store chain operating 397
units throughout the southeastern United States.
<PAGE>
BIG B, INC.
2600 Morgan Road S.E.
Bessemer, Alabama 35023
_______________ , 1996
___________________
___________________
___________________
Attention:
CONFIDENTIALITY AGREEMENT
-------------------------
______________ 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, without limitation, financial advisors, attorneys
and accountants) or agents (collectively, "our Representatives") to you and your
directors, officers, employees, affiliates, representatives (including, without
limitation, financial advisors, attorneys and accountants) or agents
(collectively, "your Representatives") and all analyses, compilations,
forecasts, studies or other notes or documents prepared by your or your
Representatives which contain or reflect, or are generated from, any such
information or which reflect you or your Representatives' review of, or your
interest in, the Transaction is hereinafter referred to as the "Information."
The term Information will not, however, include information which (i) is already
in your possession (other than information provided to you or your
Representatives by the Company), (ii) is or becomes publicly available other
than as a result of a disclosure by you or your Representative in breach of this
Agreement, (iii) is or becomes available to you on a nonconfidential 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 or (iv) any analysis or
<PAGE>
_______________
____________, 1996
Page 2
other documents prepared by you or your Representatives from the information
described in clauses (i), (ii) or (iii), 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 connection with the
Transaction. You further agree to disclose the Information only to your
Representatives (a) who need to know the Information in connection with
negotiating or evaluating the Transaction, (b) who are informed by you of
the confidential 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 permitted to disclose such of
the Information as you are advised by counsel is legally required to be
disclosed under the United States securities laws. You agree that you will
be responsible for any breach of this letter agreement by any of your
Representatives.
2. In the event that you or any of your Representatives are requested or
required (by oral questions, interrogations, requests for information
documents, subpoena, civil investigative demand, any informal or formal
investigation by any government or governmental agency or authority or
otherwise) to disclose any of the Information, 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
<PAGE>
_______________
____________, 1996
Page 3
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 Information 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 reproductions of the
Information shall be retained by you or your Representatives. Any portion
of the Information that consists solely of analyses, compilations,
forecasts, schedules or other notes or documents prepared by you or your
Representatives, in lieu of being returned to the Company, may be destroyed
by you, in which every one of your authorized officers shall provide
certification to the Company that materials have in fact been so destroyed.
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
controlling persons within the meaning of Section 20 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), makes any express or
implied representation or warranty as to the accuracy or completeness 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
Representatives on any basis (including, without limitation, 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 participation in
evaluating the Transaction, your review of the Company, the use of the
Information by you or your representatives, any errors therein or omission
from the Information, or otherwise. Nothing in the foregoing provision
shall be
<PAGE>
______________
___________, 1996
Page 4
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 Transaction, 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 agreement, 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 June 30, 1997,
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
other than pursuant to a cash tender offer for all of the outstanding
shares of common stock, par value $0.001 per share, of the Company at a
price of not less than $15.00 per share or pursuant to a transaction
approved by the Company's Board of Directors; (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
<PAGE>
_______________
____________, 1996
Page 5
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 if, by January 31, 1997, the
Company has not publicly announced that it has entered into a definitive
agreement relating to the acquisition of the Company (whether by sale,
merger or otherwise), then all restrictions imposed by this paragraph 6
shall cease to apply.
7. (a) You agree that the Company will be irreparably injured by a
breach of this letter agreement by you or your Representatives, that
monetary remedies are inadequate to protect us against any actual or
threatened breach of this letter agreement by you or by your
Representatives, and that the Company shall be entitled to specific
performance or other equitable 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
privilege 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
principles 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 previous
agreements, written or oral, relating to
<PAGE>
_______________
____________, 1996
Page 6
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
unenforceable, 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 counterparts, 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 benefit of and be binding
upon our respective successors 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 Company, Big B, Inc., Attention:
Chief Executive Officer, 2600 Morgan Road S.E., Bessemer, Alabama
35023, telecopier: (205) 425-3525, or, in the case of you, ___________
______________________________________________________________.
<PAGE>
_______________
____________, 1996
Page 7
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:
-------------------------------------
Name:
Title:
Accepted and Agreed
as of the date first
written above:
[BIDDER]
By:
-------------------------
Name:
Title:
<PAGE>
EXHIBIT 8
IN THE CIRCUIT COURT OF JEFFERSON COUNTY, ALABAMA
BESSEMER DIVISION
BIG B, INC., )
)
Plaintiff, )
)
v. ) CIVIL ACTION NO. CV-96-796
)
RDS ACQUISITION, INC., )
)
Defendant. )
VERIFIED COMPLAINT FOR TEMPORARY RESTRAINING ORDER,
---------------------------------------------------
PRELIMINARY AND PERMANENT INJUNCTIONS, AND
------------------------------------------
COMPLAINT FOR DECLARATORY JUDGMENT
----------------------------------
1. Plaintiff Big B, Inc. ("Big B") is a corporation organized and
existing under the laws of the State of Alabama, whose principal place of
business is located at 2600 Morgan Road, S.E., Bessemer, Alabama.
2. Defendant RDS Acquisition, Inc. ("RDS") has alleged through a
"Demand for Inspection of Corporate Records" that it is a "holder of record" of
certain shares of the common stock of Big B.
3. This action is brought pursuant to Alabama Code (S) 6-6-20, et
seq. (1993 and Cum. Supp. 1995). There exists a justiciable controversy between
Big B and RDS in that RDS has made certain immediate demands on Big B related to
the inspection of certain corporate books and records pursuant to Alabama Code
(S) 10-2B-16.02, and Big B is uncertain of its legal rights and obligations
pursuant thereto.
<PAGE>
4. A construction of the statute in question is in order for Big B
and its officers to fully understand Big B's rights and obligations and
particularly in view of the significant penalties which are provided for in Ala.
Code (S) 10-2B-16.02(c), for failure to properly comply with the statute.
5. The demand for inspection of corporate books and records ("the
demand") submitted by RDS to Big B, considered in light of the relevant
provisions of Alabama Business Corporation Act creates at least five substantial
ambiguities and uncertainties related to Big B's obligations under the statute.
Big B requests that this Court construe the statute to clarify its legal
obligations pursuant to the demand.
6. The first uncertainty arises in that the demand attached hereto
as Exhibit "A" from RDS seeks to require the production and inspection of
voluminous materials beginning on September 20, 1996, and continuing thereafter.
Defendant RDS claims that it is the "holder of record" of more than five (5)
----------------
percent of the outstanding shares of common stock of Big B and is entitled
therefore to review the documents described in Ala. Code (S) 10-2B-16.02(b).
Subsection (b) of section 16.02 provides that the records required to be
produced under that section are only required to be produced to a shareholder
"who shall have been a holder of record of shares for 180 days immediately
preceding his or her demand or who is the holder of record of at least five
percent of the outstanding shares" (emphasis added) of the corporation. However,
the stock transfer records of Big B reflect that as of September 16, 1996, RDS
was not a "holder of record." (See Affidavit of David E. White, attached hereto
---
as Exhibit "B"). There is, therefore, a genuine dispute about whether defendant
RDS is entitled to the records encompassed within the provisions of (S) 10-2B-
16.02(b).
2
<PAGE>
7. The transfer agent's records reflect that RDS is not a
shareholder "of record" and Big B contends that many of the documents requested
----
in the demand are not due to be produced for inspection. Construction of the
statute is essential so that Big B is fully aware of its legal rights and
obligations in this regard.
8. A second uncertainty arises upon a consideration of the terms of
the demand, as juxtaposed with Section 16.02(a) of the statute. Subsection (a)
of Section 10-2B-16.02 requires that a corporation allow inspection of specific
kinds of documents (listed in 10-2B-16.01(e)). Those documents will be delivered
by Big B to counsel for inspection by RDS in accordance with the demand. The
uncertainty is created because the demand seeks inspection of and review of
voluminous documents not described in subsection (a). Those demands are the
subject of this Complaint and give rise to Big B's request for construction of
the statute.
9. Big B will provide to RDS for inspection those documents under
subsection (a) of 10-2B-16.02 requested in paragraphs (a), (b), (d), (f), (g),
(h) and (s) of RDS's demand. Big B has compiled the remainder of the documents
described in Section 10-2B-16.02(a) (and 16.01(e)) for inspection by RDS or in
the alternative for delivery to counsel for RDS prior to Friday, September 20,
1996.
10. A third area of uncertainty arises should the Court determine
------
that Big B must respond to RDS's demand under subsection (b) of 16.02. A number
of the requested documents are beyond the purview of those required to be
provided under subsection (b) of 16.02. The documents described in paragraphs
(j), (k), (l), (m), (n), and (p) of RDS's demand are not a part of Big B's books
and records. Paragraphs (o) and (q) of RDS's demand describe
3
<PAGE>
documents in terms so vague and ambiguous that Big B cannot confidently comply
with its statutory obligations.
11. The demands requested in paragraphs (c), (e), and (i) of RDS's
demand are not required to be produced under subsection (a). And, if subsection
(b) is applicable, these requests are phrased in terms so broad that strict
compliance therewith is a virtual impossibility.
12. A fourth issue for construction by the Court is created by RDS's
demand that
"Modifications, additions or deletions to any and all information
referred to in paragraph (a) and paragraphs (i)-(p) above as of the
date of the list referred to in paragraph (i) above be immediately
furnished to the holder [RDS] as such modifications, additions or
deletions become available to the company [Big B] or its agents or
representatives through the date of expiration of the offer [the
tender offer by RDS] and that the information and records specified in
paragraph (l) above be furnished on a weekly basis until the
expiration of the offer.
Neither subsection (a) nor (b) of Section 16.02 creates any continuing
obligation to make available for inspection documents which came into existence
after the original inspection date. RDS apparently contends otherwise.
Therefore, the Court must construe the statute to clarify Big B's obligations in
this regard.
13. A fifth area for construction is presented by RDS's demand that
the records be provided for inspection in a manner other than that required by
the statute. RDS demands that Big B deliver reports referred to in paragraph
(m) of the demand to D.F. King & Company, Inc. RDS also demands to inspect the
documents in paragraphs (b), (d), (f), (g), (h) and (s) of the demand at the
corporation's principal offices. Subsection (a) of 16.02 requires only that
those records be provided for inspection "during regular business hours at the
corporation's
4
<PAGE>
principal office." Subsection (b) requires that those corporate records be
available for inspection "during regular business hours at a reasonable location
within this state specified by the corporation." (emphasis added). RDS's
----------------------------
demand is in contravention of the statutory requirements.
14. Absent the issuance of a temporary restraining order, Big B will
suffer immediate and irreparable injury in that the failure to allow inspection
of the requested records, by Friday, September 20, 1996 requires the imposition
of a penalty against Big B not to exceed ten percent (10%) of the value of
shares owned by RDS pursuant to Section 10-2B-16.02(c).
15. Big B has attempted to notify RDS of this action by telephoning
its counsel of record at the law firm of Bradley, Arant, Rose & White. Big B is
also contemporaneously with the filing of this Complaint hand delivering a copy
of it to said counsel.
WHEREFORE, PREMISES CONSIDERED, Big B requests this Court to enter an
immediate Temporary Restraining Order as follows:
a. restraining RDS from reviewing any records other than those
specifically called for in Ala. Code Section 10-2B-16.02(a) until the respective
rights of the parties are determined as requested in Plaintiff Big B's
Complaint; and
b. tolling the operation of the statutory period of time in
which Big B is obligated to respond to the demand, pending this Court's final
ruling.
Big B further requests the following:
c. that after a proper hearing, the Court enter an Order
construing the applicable Alabama statutes and preliminarily and thereafter
permanently enjoining RDS as requested herein; and
5
<PAGE>
d. any such other and further relief as this Court deems
reasonable and equitable under the circumstances.
BIG B, INC.
By: /s/ Arthur M. Jones
-----------------------------------------
Its /s/ President
-------------------------------------
STATE OF ALABAMA )
)
JEFFERSON COUNTY )
I, Michael A. Catalano, a notary public in and for said county, in
-------------------
said state, hereby certify that Arthur M. Jones, whose name as President of Big
--------------- ---------
B, Inc., a corporation, is signed to the foregoing Verified Complaint, and who
is known to me, acknowledged before me on this date that being informed of the
contents of such instrument, he as such officer and with full authority,
executed the same voluntarily for and as the act of said corporation on the date
the same bears date.
Given under my hand this 17th day of September, 1996.
---- ---------
/s/ Michael A. Catalano
--------------------------
Notary Public
My Commission Expires: March 16, 1999
----- --- ----
6
<PAGE>
/s/ Kaye H. Turberville
----------------------------
Kaye H. Turberville (HOU002)
Samuel M. Hill (HIL025)
Attorneys for Big B, Inc.
OF Counsel:
- ----------
SIROTE & PERMUTT, P.C.
2222 Arlington Avenue S.
P. O. Box 55727
Birmingham, AL 35255-5727
(205) 933-7111
PLAINTIFF DEMANDS TRIAL BY JURY
-------------------------------
/s/ Kaye H. Turberville
------------------------------------------
Of Counsel
SERVE DEFENDANT BY CERTIFIED MAIL AS FOLLOWS:
- ---------------------------------------------
RDS Acquisition, Inc.
1925 Enterprise Parkway
Twinsburg, OH 44087
7
<PAGE>
RDS Acquisition Inc.
1925 Enterprise Parkway
Twinsburg, Ohio 44087
September 13, 1996
BY HAND
- -------
Big B, Inc.
2600 Morgan Road, S. E.
Bessemer, Alabama 35023
Attention: Mr. James A. Bruno
Secretary
Re: Demand for Inspection of Corporate Records
------------------------------------------
Dear Mr. Bruno:
RDS Acquisition Inc. (the "Holder") is the holder of record of more
than five percent of the outstanding shares of Common Stock, par value $.001 per
share (the "Common Stock"), of Big B, Inc. an Alabama corporation (the
"Company"). Pursuant to Section 10-2B-16.02 0f the Alabama Business Corporation
Act (the "ABCA"), the Holder hereby demands the right to inspect the following
books, papers, records of account, minutes and record of shareholders of the
Company and to make copies and extracts therefrom during regular business hours
commencing on Friday, September 20, 1996 and continuing on Monday, September 23,
1996 and thereafter, during regular business hours, until complete:
(a) a copy of the Company's record of shareholders that complies
with the requirements of Section 10-2B-16.01(c) and Section 10-2B-16.03(d) of
the ABCA, in all forms available;
(b) the Company's articles or restated articles of incorporation
and all amendments to them currently in effect;
(c) any papers or records related to issuances of or plans to
issue any class or series of shares, or rights to receive shares, and their
relative rights, preferences, and limitations, and related to any options,
warrants or rights to acquire the same;
(d) the minutes of all shareholders' meetings, and records of all
actions taken by shareholders without a meeting, for the past three years;
(e) the minutes of all board of directors' meetings or any
committee thereof, and records of all actions taken by the board of directors or
any committee thereof without a meeting, for the past three years;
<PAGE>
(f) all written communication to shareholders generally within the
past three years, including the financial statements furnished for the past
three years under Section 10-2B-16.20 of the ABCA;
(g) a list of the names and business addresses of the Company's
current directors and officers;
(h) the Company's most recent annual report delivered to the Secretary
of State under Section 10-2B-16.22 of the ABCA, or public record information
filed with the Alabama Department of Revenue in lieu thereof;
(i) a complete record or list of holders of the Company's Common Stock
and holders of the Company's Debentures (as defined below) certified by the
Company or its transfer agent, showing the name, account number and address of
each shareholder and Debenture holder and the number of shares or Debentures
registered in the name of such holder, as of the most recent date available;
(j) a magnetic computer tape list of the Company's shareholders and
Debenture holders as of the most recent date available, showing the name,
account number, address and number of shares or Debentures held by each such
shareholder or Debenture holder as of the most recent date available and such
computer processing data, file layouts and instructions as is necessary to make
use of such magnetic computer tape, and a printout of such magnetic computer
tape for verification purposes;
(k) all daily transfer sheets showing changes in the shareholder list
or Debenture holder list referred to above that are in or come into the
possession or control of the Company or its transfer agent or other agents, or
that can reasonably be obtained from brokers, dealers, banks, clearing agencies
or voting trustees or their nominees, from the date of the shareholder lists and
Debenture holder lists referred to in paragraphs (i) and (j) above to the
expiration of the Offer (as defined below);
(l) all information in or that comes into the Company's possession or
control (or the possession or control of its agents), or that can reasonably be
obtained from brokers, dealers, banks, clearing agencies, proxy agents or voting
trustees or their nominees, concerning the names and addresses of and the number
of shares of Common Stock held by, and the names and addresses of and the number
of Debentures held by, the participating brokers and banks named in the
individual nominee names of Code & Co., Kray & Co., Philadep, Donaldson, Lufkin
& Jenrette and other similar nominees, including omnibus proxies and all "Weekly
Security Position Listing Daily Closing Balances" reports issued by The
Depository Trust Company; and a list or lists containing the name, address and
number of shares attributable to any participant in any Company employee stock
ownership, dividend reinvestment, stock purchase, stock option or comparable
plan, name of the trustee and
<PAGE>
methodology for voting such plans, if applicable, and the method by which the
Holder may communicate with such participants;
(m) all information in or that comes into the Company's possession or
control (or the possession or control of its agents), or that can reasonably be
obtained from brokers, dealers, banks, clearing agencies or voting trustees or
their nominees relating to the names of the non-objecting beneficial owners and
acquiecting beneficial owners of shares of Common Stock in the format of a
printout in descending order balance or zip code order, magnetic computer tape
and such computer processing data, file layouts and instructions as is necessary
to make use of such magnetic computer tape, and printout of such magnetic
computer tape for verification purposes (such information is readily available
to the Company under Rule 14b-1(b) under the Securities Exchange Act of 1934
from A.D.P. Proxy Services);
(n) all information in or that comes into the Company's possession or
control (or the possession or control of its agents), or that can reasonably be
obtained from brokers, dealers, banks, clearing agencies or voting trustees, or
their nominees relating to the names of the non-objecting beneficial owners and
acquiescing beneficial owners of the Debentures in the format of a printout in
descending order balance or zip code order, magnetic computer tape and such
computer processing data, file layouts and instructions as is necessary to make
use of such magnetic computer tape, and a printout of such magnetic computer
tape for verification purposes (such information is readily available to the
Company under Rule 14b-1(b) under the Securities Exchange Act of 1934 from
A.D.P. Proxy Services);
(o) a stop list or stops lists relating to the shares of Common Stock or
Debentures and any changes, corrections, additions or deletions from such
list(s), from the date of the shareholder lists referred to in paragraphs (i)
and (j) above to the expiration of the Offer.
(p) lists of the date of the lists referred to in paragraph (i) above of all
holders of 1,000 or more shares of Common Stock or $10,000 aggregate principal
amount of Debentures, in each case arranged in descending order;
(q) all respondent bank lists and ommibus proxies for such lists (such
information is readily available to the Company under Rule 14b-2 of the
Securities Exchange Act of 1934);
(r) the information and records specified in paragraphs (a), (i), (j), (k),
(l), (m), (n), (o), (p) and (q) above as of the any record date for shareholder
action set after August 1, 1996, by the board of directors of the Company, by
operation of law or otherwise; and
(s) a correct and complete copy of the bylaws of the Company as in effect on
the date hereof and any and all changes of any sort to the bylaws of the Company
hereafter made through the expiration of the Offer, including,
<PAGE>
without limitation, any amendment to existing bylaws, any adoption of
new bylaws or deletions of existing bylaws.
For the purpose of this letter, "Debentures" means the Company's
6.5% Convertible Subordinated Debentures due 2003.
The Holder further demands that modifications, additions or
deletions to any and all information referred to in paragraph (a) and paragraphs
(i) through (p) above as of the date of the list referred to in paragraph (i)
above be immediately furnished to the Holder as such modifications, additions or
deletions became available to the Company or its agents or representatives
through the date of expiration of the Offer and that the information and records
specified in paragraph (l) above be furnished on a weekly basis until the
expiration of the Offer.
The purposes of this demand are to enable the Holder to
communicate with its fellow Company securityholders on matters relating to their
mutual interests as securityholders, including but not limited to (a)
communicating with the shareholders and Debenture holders of the Company
regarding the tender offer (the "Offer") by Holder for all outstanding shares of
Common Stock of the Company and the transactions contemplated thereby and (b)
furnishing to the securityholders of the Company copies of the Holder's tender
offer materials, including but not limited to Holder's Offer to Purchase dated
September 10, 1996 and other documents and materials related thereto.
The Holder hereby designates and authorizes Cravarh, Swaine &
Moore, Bradley, Aram, Rose & White and D.F. King & Co. Inc., their respective
partners, officers and employees and any other persons to be designated by them,
acting together, singly or in combination, to conduct as its agents, the
inspection and copying herein requested. The Holder hereby authorizes and
requests the Company to deliver the reports referred to in paragraph (m) to
D.F. King & Co. Inc. directly.
With respect to the documents specified in paragraphs (b), (d),
(f), (g), (h) and (s), the Holder hereby demands, pursuant to Section 10-2B-
16.02(a) of the ABCA, to inspect and copy such documents at the corporation's
principal office at 2600 Morgan Road, S.E. Bessemer, Alabama, during regular
business hours commencing on Friday, September 20, 1996 and continuing on
Monday, September 23, 1996, and thereafter, during regular business hours, until
complete. With respect to the items specified in paragraphs (a), (c), (e), (i),
(j), (k), (l), (m), (n), (o), (p), (q), and (r), please advise Jack A. Staph,
Esq. of the Holder (telephone number (216) 487-1009, fax number (216) 487-1679)
where the items demanded above pursuant to Section 10-2B-16.02(b) of the ABCA
will be made available during regular business hours commencing on Friday,
September 20, 1996 and continuing on Monday, September 23, 1996, and thereafter,
during regular business hours, until complete.
<PAGE>
Please note that pursuant to Section 10-2B-16.02(c) of the ABCA, any
officer or agent who, or a corporation which, without reasonable cause, refuses
to allow any proper shareholder or his or her agent or attorney so to examine
and make copies of and extracts from its books, papers, records of account,
minutes and record of shareholders, for any proper purpose, is liable to such
shareholder for a penalty of an amount not to exceed 10 percent of the value of
the shares owned by such shareholder, in addition to any other damages or remedy
afforded to such shareholder by law.
Very truly yours,
RDS ACQUISITION INC.
By: /s/ Jack A. Staph
-------------------------------------
Name: Jack A. Staph
Title: Vice President and Secretary
<PAGE>
IN THE CIRCUIT COURT FOR
JEFFERSON COUNTY, ALABAMA
BESSEMER DIVISION
BIG B, INC., )
)
Plaintiff, )
)
v. ) CIVIL ACTION NO. CV-96-796
)
RDS ACQUISITION INC., )
)
Defendant. )
NOTICE OF FILING NOTICE OF REMOVAL
----------------------------------
TO: Earl N. Carter, Jr., Clerk of Court
Jefferson County Courthouse, Bessemer Division
1801 North 3rd Avenue
Bessemer, Alabama 35020
Pursuant to 28 U.S.C. (S) 1446(d), the defendant hereby gives notice to the
Circuit Court of Jefferson County Alabama, Bessemer Division and to counsel for
the plaintiff that the defendant has filed a notice of removal with the United
States District Court for the Northern District of Alabama, Southern Division,
and that this case has been removed to that Court. Attached is a copy of this
notice of removal.
/s/ Hobart A. McWhorter, Jr.
-----------------------------------
Hobart A. McWhorter ,Jr.
McW001
/s/ Philip J. Carroll, III
-----------------------------------
Philip J. Carroll, III
CAR076
1
<PAGE>
/s/ Matthew A. Aiken
-------------------------------
Matthew A. Aiken
Attorneys for
RDS Acquisition Inc.
OF COUNSEL:
BRADLEY, ARANT, ROSE & WHITE
P.O. Box 830709
Birmingham, Alabama 35283-0709
(205) 521-8000
CERTIFICATE OF SERVICE
----------------------
I hereby certify that I have this date served the foregoing Notice of
Removal on Kaye H. Turberville, Esq., Sirote & Permutt, P.C., 2222 Arlington
Avenue South, Birmingham, Alabama 35255 by delivering a copy of same to her on
this 18 day of September, 1996.
--
/s/ [SIGNATURE APPEARS HERE]
-------------------------------
OF COUNSEL
2
<PAGE>
EXHIBIT 9
[FILED SEPTEMBER 10 AM 9:14
U.S. DISTRICT COURT N.D.
OF ALABAMA APPEARS HERE]
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ALABAMA
SOUTHERN DIVISION
BIG B, INC., )
)
Plaintiff, )
) CIVIL ACTION NO.
v. )
)
RDS ACQUISITION INC., ) CV-96-ETC-2446-S
)
Defendant )
NOTICE OF REMOVAL
-----------------
TO: CLERK, U.S. DISTRICT COURT, NORTHERN DISTRICT OF ALABAMA,
SOUTHERN DIVISION
Please take notice that pursuant to 28 U.S.C. (S)(S) 1441, et seq.
--------
defendant RDS Acquisition Inc. ("RDS"), hereby removes to the United States
District Court for the Northern District of Alabama, Southern Division, an
action presently pending in the Circuit Court of Jefferson County, Alabama,
Bessemer Division, entitled, BIG B. INC. v RDS ACQUISITION INC., Civil Action
----------------------------------
No. 96-796, filed on September 17, 1996, in the Circuit Court of Jefferson
County, Alabama, Bessemer Division, upon the following grounds:
1. This action was commenced by the filing of the Verified Complaint for
Temporary Restraining Order, Preliminary and Permanent Injunctions, and
Complaint for Declaratory Judgment on September 17, 1996. Copies of all process,
pleadings and orders
1
<PAGE>
served upon RDS or present in the state court clerk's file in this action are
attached hereto as Exhibit "A."
2. There is one named Plaintiff to this action. Plaintiff Big B, Inc.
("Big B") alleges that it is a corporation organized and existing under the laws
of the State of Alabama with its principal place of business located at
2600 Morgan Road, S.E., Bessemer, Alabama. Complaint., [P] 1.
3. There is one named Defendant to this action. Defendant RDS is a
Delaware corporation with its principal place of business in Twinsburg, Ohio.
4. The first notice to the defendant of this action was on
September 17, 1996, when defendant RDS received a copy of the complaint. This
action is removed within thirty days of notice thereof to RDS, pursuant to
28 U.S.C. (S) 1446(b).
5. This Court has jurisdiction over this action pursuant to 28 U.S.C.
(S)1332. In relevant part, 28 U.S.C. section 1441(a) provides that "any civil
action brought in a State court of which the district courts of the United
States have original jurisdiction, may be removed by the defendant...to the
district court of the United States...." Article III, (S)2 of the United States
Constitution confers federal judicial power to controversies between the
citizens of different states. Federal district courts are granted original
jurisdiction over diversity cases in which the amount in controversy exceeds
$50,000.00 28 U.S.C. (S)1332.
2
<PAGE>
6. For purposes of diversity of citizenship federal jurisdiction,
diversity exists whenever all of the plaintiffs are of different citizenship
than all of the defendants. Lane v. Champion Intern. Corp., 827 F. Supp. 701
------------------------------
(S.D. Ala. 1993) (citing Strawbridge v. Curtiss, 7 U.S. 267 (1806)). This
----------------------
requirement is satisfied here. Big B is an Alabama corporation with its
principal place of business in Alabama. RDS is a Delaware corporation with its
principal place of business in Twinsburg, Ohio.
7. In addition to the requirement that parties be diverse citizens, the
amount of controversy must exceed $50,000.00. 28 U.S.C. (S)1332. Plaintiff Big B
seeks a temporary restraining order, preliminary and permanent injunctions, and
a declaratory judgement. "The purpose of an amount in controversy requirement is
to ensure the substantiality of the suit itself, not solely the amount which the
plaintiff stands to recover." 1 J. Moore, Moore's Federal Practice [P]91[1] at
819 (2 ed. 1991). In a diversity case, the amount in controversy is "measured
not by the monetary result of determining the principle involved but by its
pecuniary consequence to those involved in the litigation." Thomson v. Gaskill,
------------------
315 U.S. 442, 447 (1942). Duderwicz v. Sweerwater Sav. Ass'n. 595 F.2d 1008,
----------------------------------
1014 (5th Cir. 1979). Therefore, in an action for injunctive relief, "it is well
established that the amount in controversy is measured by the value of the
object of the litigation." Hunt v. Washington State Apple Adv. Comm'n. 432 U.S.
------------------------------------------
333, 347-48 (1977).
8. In this case, the value of the requested injunctive relief far exceeds
the $50,000.00 requirement for diversity. In paragraph fourteen of plaintiff's
complaint, plaintiff states that it "will suffer immediate and irreparable
injury in that the failure to allow
3
<PAGE>
inspection of the requested records, by Friday September 20, 1996 requires the
---
imposition of a penalty against Big B not to exceed ten percent (10%) of the
- ----------------------------------------------------------------------------
value of shares owned by RDS pursuant to Section 10-2B-16.02(c)." Complaint,
- ---------------------------------------------------------------
Para. 14 (emphasis added). This penalty could potentially exceed one million
dollars. Furthermore, this litigation involves a tender offer for all the
outstanding shares of plaintiff's common stock, which has an announced equity
value of approximately $330 million dollars. Delay in receiving the information
at issue in plaintiff's complaint, and thus compliance with the requested
injunction relief, could cost RDS significantly more than the $50,000.00
jurisdictional amount. See In re Ford Motor Co. Bronco II Products Liability
--- -------------------------------------------------
Litigation, 1996 WL 257570 (E.D. La. 1996) (value of an injunction for removal
- ----------
may properly be based on defendant's cost of compliance); Earnest V. General
------------------
Motors Corp., 1996 WL 224507, at *3 (N.D. Ala. 1996) ("[C]ompliance with the
- -----------
requested relief would cost the defendants much more than fifty thousand
dollars. Therefore, the court finds the amount in controversy requirement of 28
U.S.C. S 1332 satisfied").
9. Because the amount in controversy exceeds $50,000.00 and complete
diversity exists, this case is a civil action of which the United States
District Courts have original jurisdiction under 28 U.S.C. S 1332(a), and is
therefore properly removable pursuant to 28 U.S.C. S 1441.
10. Pursuant to 28 U.S.C. S 1446(d), a copy of this Notice of Removal is
being filed with the Clerk of the Circuit Court of Jefferson County, and served
upon counsel for the only adverse party.
4
<PAGE>
WHEREFORE, RDS Acquisition Inc. hereby removes this action, now pending in
the Circuit Court of Jefferson County, Alabama, Bessemer Division, to this Court
pursuant to 28 U.S.C. Section 1441(b) and respectfully requests that this Court
take cognizance, accept jurisdiction, and enter such orders or take such steps
as may be necessary to effect a true record of such proceedings as may have been
had in the Circuit Court of Jefferson County, Alabama, Bessemer Division.
/s/ Hobart A. McWhorter, Jr.
----------------------------------
Hobart A.. McWhorter, Jr.
/s/ Philip J. Carroll, III
----------------------------------
Philip J. Carroll, III
/s/ Matthew A. Aiken
----------------------------------
Matthew A. Aiken
Attorneys for
RDS Acquisition Inc.
OF COUNSEL:
BRADLEY, ARANT, ROSE & WHITE
P.O. Box 830709
Birmingham, Alabama 35283-0709
(205) 521-8000
5
<PAGE>
CERTIFICATE OF SERVICE
----------------------
I hereby certify that I have this date served the foregoing Notice of
Removal on Kaye H. Turberville, Esq., Sirote & Permutt, P.C., 2222 Arlington
Avenue South, Birmingham, Alabama 35255 by delivering a copy of same to her on
this 18 day of September, 1996.
--
[SIGNATURE APPEARS HERE]
--------------------------
OF COUNSEL
6
<PAGE>
EXHIBIT 10
IN THE CIRCUIT COURT OF JEFFERSON COUNTY, ALABAMA
BESSEMER DIVISION
BIG B, INC., )
)
Plaintiff, )
)
v. ) Civil Action CV-96-821
)
REVCO D.S., INC., a )
Delaware corporation, and )
RDS ACQUISITION, INC. a, )
Delaware corporation, )
)
Defendants. )
COMPLAINT FOR DECLARATORY AND INJUNCTIVE RELIEF
-----------------------------------------------
Plaintiff Big B, Inc. ("Big B" or the "Company"), by and through its
undersigned attorneys, alleges, upon knowledge as to itself and its own acts,
and upon information and belief as to all other matters, as follows:
1. Plaintiff Big B is an Alabama corporation with its principal
executive offices in Bessemer, Alabama. Big B and its subsidiaries operate a
chain of more than 380 drug stores and stores that sell and rent medical
equipment for home use throughout the state of Alabama and in certain other
states. Big B stores also offer pharmacy related products and services, health
and beauty aids, and other products. As of May 11, 1996, the Company had
outstanding 22,010,310 shares of common stock. Shares of Big B's common stock
are traded in the NASDAQ National Market.
<PAGE>
2. Defendant Revco D.S., Inc. ("Revco") is a Delaware corporation
with its principal executive offices in Twinsburg, Ohio.
3. On or about September 10, 1996, Revco and its wholly-owned
subsidiary, defendant RDS Acquisition Inc. ("RDS" or "Purchaser"), also a
Delaware corporation, commenced a tender offer to purchase all outstanding
shares of Big B common stock at a price of $15 per share. According to the
Offer to Purchase filed with the Securities and Exchange Commission, the
"purpose of the offer is to enable Revco to acquire control of, and the entire
equity interest in, the Company."
4. The Big B Board of Directors gave careful and extensive
consideration to the Revco offer at both formal and informal meetings, and
received detailed financial advice from its financial advisors, The Robinson-
Humphrey Company, Inc. ("Robinson-Humphrey"). Following these meetings, on
September 23, 1996, the Board announced its intention to explore alternatives to
the Revco offer as well as its willingness to receive proposals from both Revco
and other parties which may be more advantageous to shareholders than the
current Revco offer.
5. The Board also recognized, however, that the Revco offer is
currently scheduled to close on October 7, 1996 and that, without the benefit of
a rights plan, there could be certain unnecessary pressure on shareholders to
make a decision before the Big B Board has had time to explore alternatives that
may be more advantageous to shareholders. The Board further concluded that the
adoption of a rights plan would allow additional time for the
2
<PAGE>
exploration of alternatives in a deliberate manner without the coercive effect
of an impending conclusion of the Revco offer.
6. Consequently, on September 23, 1996, the Big B Board of
Directors, after careful consideration and consultation with its advisors,
announced the adoption of a Shareholder Rights Plan (the "Rights Plan"). The
Rights Plan is designed, among other things, to encourage third parties
interested in acquiring the Company to negotiate with the Board, and to deter
certain coercive or abusive takeover tactics. Through adoption of the Rights
Plan, the Big B Board of Directors sought to reduce the risk of less than all of
the Company's common stock being acquired in a transaction which could result in
a change of control without full and fair value being offered to all Big B
shareholders. Big B's Board also sought to preserve its bargaining power and
flexibility to deal with third-party acquirors, including Revco.
7. The adoption of rights plans similar to the one adopted by Big B
has been approved by courts across the United States, including the Delaware
Supreme Court. Indeed, over 1600 companies, many of whom are Fortune 500
companies, have adopted Rights Plans.
8. Pursuant to the Rights Plan, the Board declared a dividend
distribution of one Right for each outstanding share of Big B common stock.
Each Right presently represents the right to purchase, if and when the Right
becomes exercisable, shares of common stock of Big B at a specified price (the
"Purchase Price"). The Rights will expire on June 30, 1997, unless earlier
redeemed by the Big B Board.
3
<PAGE>
9. The Rights will become exercisable and transferable apart from
the common stock only if a person or group acquires beneficial ownership of 10%
or more of Big B's common stock, or such earlier time as may be determined by
the Board during the pendency of a tender offer that would result in a third
party owning 10% or more of the outstanding common stock. Upon the occurrence of
a "flip-in" or "flip-over" event (described below), each Right would become the
right to purchase common stock of the Company or, in certain circumstances, the
acquiring person, at a substantial discount.
10. Specifically, a flip-in will occur in the event that any person
becomes the beneficial owner of 10% or more of the common stock of Big B (other
than pursuant to certain types of offers). Under such circumstances, each of
the Rights (other than Rights held by the party triggering the Rights which are
voided) becomes a discount right entitling the holder to acquire common stock
having a value equal to twice the Right's Purchase Price. A flip-over event
will be deemed to have occurred if, following acquisition of 10% or more of the
common stock by any person, the Company engages in a merger or certain other
business combinations in which the Company does not survive. Under such
circumstances, each right becomes the right to acquire common shares of the
other party to the transaction having a value equal to twice the Purchase Price.
In other words, the flip-in right entitles the Rights holder to purchase Big B
common stock for half price. The flip-over right entitles the Rights holder to
purchase the common stock of the acquiring party for half price.
4
<PAGE>
11. The flip-over rights may also be triggered if the Company
engages in a merger or business combination in which Big B's common stock is
changed or exchanged or if the Company transfers more than 50% or its assets,
earning power or cash flow in one transaction or a series of related
transactions.
12. Subject to certain extension rights, the Big B Board of
Directors is entitled to redeem the Rights at a price of $0.01 per Right at any
time prior to the expiration of the tenth day following the acquisition of
beneficial ownership of 10% or more of the common stock of Big B. The Rights
Plan may be amended by the Board subject to certain conditions.
13. As described above, the Rights Plan is intended to enable the
Big B Board of Directors to respond to unsolicited acquisition proposals in a
manner which is in the best interests of the Company and its shareholders.
Accordingly, if there is a proposed takeover which the Board deems advantageous,
the Board would be in a position to redeem the outstanding Rights at a nominal
consideration.
14. Big B believes and alleges that the Rights Plan is valid and
lawful and was adopted in full conformance with applicable Alabama law.
15. Big B believes and alleges that the defendants, or persons or
entities acting in concert with them or on their behalf, will contest the
validity of the Rights Plan and will assert that the Rights Plan was adopted in
violation of applicable law or in violation of Big B's board of directors'
fiduciary duties. Thus, an actual controversy exists between the parties to
this action which is within the power of this Court to determine pursuant to
Ala. Code
5
<PAGE>
(S) 6-6-222. Determination of the issues presented herein will afford relief
from uncertainty and insecurity with respect to rights, status, and legal
relations between the parties.
16. Big B has no adequate remedy at law.
WHEREFORE, the plaintiff Big B, Inc. hereby requests that the Court
enter a judgment against the defendants:
A. Declaring the Rights Plan adopted by the Big B Board of Directors
valid and lawful and adopted in full conformance with the laws of the State of
Alabama or any other applicable law;
B. Temporarily, preliminarily and permanently enjoining the
defendants, their affiliates, subsidiaries, officers, directors and all others
acting in concert with them or on their behalf from bringing any action in any
other court attacking the Rights Plan or the adoption of the Rights Plan by the
Big B Board under Alabama law or any other applicable law; and
C. Granting such further relief, including payment of the expenses
(including attorneys' fees) incurred by the plaintiff in this action, as may be
just and proper under the circumstances.
/s/ Kaye Houser Turberville
---------------------------------------------
Kaye Houser Turberville (HOU002)
Samuel M. Hill (HIL025)
Attorneys for Plaintiff
Big B, Inc.
6
<PAGE>
OF COUNSEL:
SIROTE & PERMUTT
2222 Arlington Avenue South
Post Office Box 55727
Birmingham, AL 35255-5727
(205) 930-5130
Plaintiff demands trial by jury.
/s/ Kaye Houser Turberville
----------------------------------
Kaye Houser Turberville
Serve Defendants by
Certified Mail as follows:
- -------------------------
RDS Acquisition, Inc.
1925 Enterprise Parkway
Twinsburg, Ohio 44087
Revco D.S., Inc.
1925 Enterprise Parkway
Twinsburg, Ohio 44087
7
