UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO.-----------)*
FRED MEYER, INC.
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(Name of Issuer)
COMMON STOCK, PAR VALUE $0.01 PER SHARE
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(Title of Class of Securities)
592907109
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(CUSIP Number)
PAUL W. HELDMAN, ESQ.
SENIOR VICE PRESIDENT, SECRETARY AND GENERAL COUNSEL
THE KROGER CO. 1014 VINE STREET CINCINNATI, OHIO 45202 (513) 762-4421
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(Name, Address and Telephone Number of Person Authorized to Receive
Notices and Communications)
OCTOBER 18, 1998
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(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(b)(3) or (4), check the
following box [ ].
Check the following box if a fee is being paid with the statement [ ]. (A
fee is not required only if the reporting person: (1) has a previous
statement on file reporting beneficial ownership of more than five percent
of the class of securities described in Item 1; and (2) has filed no
amendment subsequent thereto reporting beneficial ownership of five percent
or less of such class.) (See Rule 13d-7.)
NOTE: Six copies of this statement, including all exhibits, should be filed
with the Commission. See Rule 13d-1(a) for other parties to whom copies are
to be sent.
*The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which
would alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities
Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of
that section of the Act but shall be subject to all other provisions of the
Act (however, see the Notes).
<PAGE>
SCHEDULE 13D
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CUSIP NO. 592907109 PAGE 2 OF 12 PAGES
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1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS
THE KROGER CO. 31-034-5740
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [ ]
3 SEC USE ONLY
4 SOURCE OF FUNDS*
N/A
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
OHIO
NUMBER OF 7 SOLE VOTING POWER
SHARES 30,799,665**
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY EACH 14,633,672***
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON WITH 30,799,665**
10 SHARED DISPOSITIVE POWER
14,633,672****
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
45,433,337
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) [ ]
EXCLUDES CERTAIN SHARES*
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
26.1%
14 TYPE OF REPORTING PERSON*
CO
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
<PAGE>
SCHEDULE 13D
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CUSIP NO. 592907109 PAGE 3 OF 12 PAGES
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** The shares of common stock, par value $.01 per share ("Fred
Meyer Common Stock"), of Fred Meyer, Inc. ("Fred Meyer") covered
by this item are purchasable by The Kroger Co. ("Kroger") upon
exercise of an option granted to Kroger on October 18, 1998 and
described in Item 4 of this Statement. Prior to the exercise of
the option, Kroger is not entitled to any rights as a stockholder
of Fred Meyer with respect to the shares of Fred Meyer Common
Stock covered by the option. Kroger disclaims any beneficial
ownership of the shares of Fred Meyer Common Stock which are
purchasable by Kroger upon exercise of the option on the grounds
that the option is not presently exercisable and only becomes
exercisable upon the occurrence of the events referred to in Item
4 of this Statement. If the option were exercised, Kroger would
have the sole right to vote and to dispose of the shares of Fred
Meyer issued as a result of such exercise.
*** Pursuant to (i) a voting agreement (the "Miller Voting Agreement"),
dated as of October 18, 1998, between Robert G. Miller and
Kroger, Mr. Miller has agreed to vote 132,973 shares
of Fred Meyer Common Stock over which he has voting power in
favor of the Merger Agreement (as defined in response to Item 4
of this Statement) and the Merger (as described in the response
to Item 4 of this Statement) and, if requested by Kroger, to
grant to Kroger an irrevocable proxy with respect to such shares
for such purpose and (ii) a voting agreement (the "Yucaipa Voting
Agreement"; together with the Miller Voting Agreement, the
"Voting Agreements"), dated as of October 18, 1998, among certain
stockholders of Fred Meyer (as listed on Annex A thereon) (the
"Yucaipa Stockholders") and Kroger, the Yucaipa Stockholders have
agreed to vote the 14,500,699 shares of Fred Meyer Common Stock
over which they have voting power in favor of the Merger
Agreement (as defined in the response to Item 4) and the Merger
(as defined in the response to Item 4) and, if requested by
Kroger, to grant to Kroger an irrevocable proxy with respect to
such shares for such purpose.
**** Pursuant to (i) the Miller Voting Agreement (but subject to certain
exceptions), Mr. Miller may not dispose of 132,973 shares of Fred
Meyer Stock that are directly held by him (until the consummation
of the Merger or the termination of the Merger Agreement), and
(ii) the Yucaipa Voting Agreement (but subject to certain
exceptions), the Yucaipa Stockholders may not dispose of the
14,500,699 shares of Fred Meyer Common Stock that are directly
held by them (until the consummation of the Merger or the
termination of the Merger Agreement).
<PAGE>
SCHEDULE 13D
RELATING TO THE COMMON STOCK OF
FRED MEYER, INC.
Item 1. Security and Issuer
-------------------
This Statement on Schedule 13D (this "Statement") relates to
the common stock, par value $.01 per share ("Fred Meyer Common Stock"), of
Fred Meyer, Inc., a Delaware corporation ("Fred Meyer"). The principal
executive offices of Fred Meyer are located at 3800 S.E. 22nd Avenue,
Portland, Oregon 97202.
Item 2. Identity and Background
-----------------------
This Statement is being filed by The Kroger Co., an Ohio
corporation ("Kroger"). The principal business address of Kroger is 1014
Vine Street, Cincinnati, Ohio 45202. Kroger is engaged principally in the
retail food business.
(a)-(c); (f) The name, business address, present principal
occupation or employment, and the name and principal business of any
corporation or other organization in which such employment is conducted of
each of the directors and executive officers of Kroger is set forth in
Schedule I hereto, which is incorporated herein by reference. Each person
listed in Schedule I hereto is a citizen of the United States.
(d)-(e) During the last five years, neither Kroger nor, to
the knowledge of Kroger, any of the persons listed on Schedule I hereto (i)
has been convicted in a criminal proceeding (excluding traffic violations
or similar misdemeanors) or (ii) has been a party to a civil proceeding of
a judicial or administrative body of competent jurisdiction and as a result
of such proceeding was or is subject to a judgment, decree or final order
enjoining future violations of, or prohibiting or mandating activities
subject to, federal or state securities laws or finding any violation with
respect to such laws.
Item 3. Source and Amount of Funds or Other Consideration
-------------------------------------------------
As more fully described below, pursuant to the terms of the
Fred Meyer Stock Option Agreement (as defined in the response to Item 4),
Kroger will have the right, upon the occurrence of certain events specified
therein, to purchase from time to time up to 30,799,665 shares of Fred
Meyer Common Stock (subject to adjustment as provided in the Fred Meyer
Stock Option Agreement) at a price of $44.125 per share. If Kroger
purchases Fred Meyer Common Stock pursuant to the Fred Meyer Stock Option
Agreement, Kroger anticipates that the funds to finance such purchase would
come from a combination of working capital and borrowings, although no
definitive determination has been made at this time as to the source of
such funds. However, pursuant to the terms of the Fred Meyer Stock Option
Agreement, Kroger can perform a cashless exercise of the Option (as defined
in the response to Item 4), requiring no funds to gain the benefits of the
Option.
As described in the response to Item 4, (i) Robert G. Miller
has entered into the Miller Voting Agreement, pursuant to which Mr. Miller
has agreed to vote 132,973 shares of Fred Meyer Common Stock over which he
has voting power in favor of adoption of the Merger Agreement and approval
of the Merger, and if requested by Kroger, to grant to Kroger an
irrevocable proxy with respect to such shares for such purpose, and (ii)
the Yucaipa Stockholders have entered into the Yucaipa Voting Agreement
pursuant to which the Yucaipa Stockholders have agreed to vote 14,500,699
shares of Fred Meyer Common Stock over which they have voting power in
favor of adoption of the Merger Agreement and approval of the Merger, and
if requested by Kroger, to grant to Kroger an irrevocable proxy with
respect to such shares for such purpose. In addition, subject to certain
exceptions, each of Miller and the Yucaipa Stockholders have agreed not to
dispose of the shares of Fred Meyer Common Stock held directly by them
(until the consummation of the Merger or the termination of the Merger
Agreement).
Item 4. Purpose of the Transaction
--------------------------
(a)-(j) On October 18, 1998, Kroger, Fred Meyer, and Jobsite
Holdings, Inc., a Delaware corporation and a wholly-owned subsidiary of
Kroger ("Merger Sub"), entered into an Agreement and Plan of Merger, dated
as of October 18, 1998 (the "Merger Agreement"), a copy of which is
attached hereto as Exhibit 1 and is incorporated herein by reference. The
Merger Agreement provides, among other things, for the merger of Merger Sub
with and into Fred Meyer (the "Merger") with Fred Meyer being the
corporation surviving the Merger (the "Surviving Corporation").
Pursuant to the Merger Agreement, at the Effective Time (as
defined in the Merger Agreement), each share of Fred Meyer Common Stock
issued and outstanding immediately prior to the Effective Time (excluding
those held in the treasury of Fred Meyer, by any subsidiary of Fred Meyer
or by Kroger or any subsidiaries of Kroger (collectively, the "Excluded
Shares")) will cease to exist and be converted into the right to receive
one share of common stock, par value $1.00 per share, of Kroger, together
with the associated preferred stock purchase rights (the "Kroger Common
Stock"). The Merger Agreement also provides that each Excluded Share will
be canceled and retired without the payment of any consideration therefor.
At the Effective Time, Fred Meyer will become a wholly-owned subsidiary of
Kroger. As a consequence of the Merger, Kroger will own 100% of the Fred
Meyer Common Stock. The Fred Meyer Common Stock will be delisted from
trading on the New York Stock Exchange and Fred Meyer will no longer be
required to file periodic reports under Section 12(b) of the Act (although
Fred Meyer may have continuing reporting obligations under Section 12(g) of
the Act by reason of various outstanding notes).
Consummation of the Merger is subject to the satisfaction or
waiver at or prior to the Effective Time of certain conditions, including,
but not limited to, approval of the Merger and the Merger Agreement by the
holders of shares of Fred Meyer Common Stock, approval of the issuance of
shares of Kroger Common Stock in accordance with the terms of the Merger
Agreement by the holders of shares of Kroger Common Stock, expiration or
termination of the applicable waiting periods under the Hart-Scott-Rodino
Anti-Trust Improvements Act of 1976, as amended (the "HSR Act"), and
various other customary conditions.
Pursuant to the Merger Agreement, (i) the certificate of
incorporation attached as Exhibit A to the Merger Agreement and the by-laws
of Merger Sub as in effect immediately prior to the Effective Time will be
the certificate of incorporation and by-laws of the Surviving Corporation,
(ii) the directors of Merger Sub immediately prior to the Effective Time
shall be the directors of the Surviving Corporation until their successors
have been duly elected or appointed and have qualified or until their
resignation or removal and (iii) the officers of Fred Meyer immediately
prior to the Effective Time shall continue to serve as the officers of the
Surviving Corporation until their successors have been duly elected or
appointed and have qualified or until their resignation or removal.
The Merger Agreement contains certain customary restrictions
on the conduct of the business of Fred Meyer pending the Merger, including,
without limitation, not declaring, setting aside or paying any dividend or
distribution payable in cash, stock or property in respect of any capital
stock of Fred Meyer.
Concurrent with the execution of the Merger Agreement,
Kroger and Fred Meyer entered into a Stock Option Agreement, dated as of
October 18, 1998 (the "Fred Meyer Stock Option Agreement"), a copy of which
is attached hereto as Exhibit 2 and is incorporated herein by reference.
Pursuant to the Fred Meyer Stock Option Agreement, Fred Meyer granted
Kroger an unconditional, irrevocable option (the "Option") to purchase,
pursuant to the terms and conditions thereof, up to 30,799,665 (subject to
adjustment as provided in the Fred Meyer Option Agreement) fully paid and
nonassessable shares of Fred Meyer Common Stock at a price of $44.125 per
share (the "Option Price"). The Stock Option Agreement provides that Kroger
may exercise the Option in whole or in part at any time from time to time
following the occurrence of a Triggering Event (as defined below) by
delivering a written notice to Fred Meyer in accordance with the terms of
the Fred Meyer Stock Option Agreement. The right to exercise the Option
shall terminate upon either (i) the occurrence of the Effective Time or
(ii) (x) if a Notice Date (as defined in the Fred Meyer Option Agreement)
has not previously occurred, the close of business on the earlier of (A)
the day that is 150 days after the date of a Triggering Event, (B) the date
upon which the Merger Agreement is terminated if no termination fees (under
Section 8.2 of the Merger Agreement) could be payable by Fred Meyer
pursuant to the terms of the Merger Agreement upon the occurrence of
certain events or the passage of time, and (C) 700 days following the date
upon which the Merger Agreement is terminated, and (y) if a Notice Date has
previously occurred, 150 days after the Notice Date (the events in (i) and
(ii) being referred to as "Exercise Termination Events").
For purposes of the Fred Meyer Stock Option Agreement, a
"Triggering Event" will be deemed to have occurred at such time at which
Kroger becomes entitled to be paid from Fred Meyer the Additional
Termination Fee (as defined in the Merger Agreement) from Fred Meyer.
Pursuant to the Merger Agreement, the Additional Termination Fee is payable
to Kroger by Fred Meyer if (i) (a) the Merger Agreement is terminated by
Kroger because of Fred Meyer's failure to comply (and, if capable of being
cured, failure to cure such non-compliance within 30 days notice of the
same) in all material respects with its covenants under the Merger
Agreement, or (b) the Merger Agreement is terminated by either Fred Meyer
or Kroger because of the failure of Fred Meyer to obtain stockholder
approval for the Merger Agreement and the transactions contemplated thereby
at a duly held stockholders' meeting, (ii) prior to the meeting of the Fred
Meyer's stockholders there has been a Fred Meyer Business Combination
Proposal (as defined in the Merger Agreement) (whether or not such offer
has been rejected or withdrawn prior to the time of such termination or of
the meeting) and (iii) within eighteen months of such termination Fred
Meyer or a Subsidiary of Fred Meyer consummates, or enters into an
agreement to consummate, a Fred Meyer Business Combination Proposal.
Pursuant to the Fred Meyer Stock Option Agreement, Kroger
and Fred Meyer have agreed that if a filing or any clearance is required
under the HSR Act or prior notification to or prior approval from any
regulatory authority is required under any other law, statute, rule or
regulation (including applicable rules and regulations of national
securities exchanges) in connection with the exercise of the Option, Kroger
or any other person that shall become a holder of all or part of the Option
in accordance with the terms of the Fred Meyer Stock Option Agreement (each
such person, including Kroger, being referred to as "Holder") or Fred
Meyer, as required, promptly after the Notice Date, shall file all
necessary notices and applications for approval and shall expeditiously
process the same.
Fred Meyer has agreed that at any time after a Triggering
Event occurs and prior to an Exercise Termination Event, it shall, if
requested by Kroger, in the written notice of exercise of the Option
provided for in Section 2(d) of the Fred Meyer Stock Option Agreement, as
promptly as practicable, prepare, file and keep current a shelf
registration statement under the Securities Act of 1933, as amended (the
"Securities Act"), covering any or all shares of Fred Meyer Common Stock
issued and issuable pursuant to the Option. Fred Meyer has also agreed to
use its reasonable best efforts to cause such registration statement to
remain effective for a period of 365 days or such shorter time as is
reasonably appropriate to permit the sale of other disposition of any
shares of Fred Meyer Common Stock issued upon total or partial exercise of
the Fred Meyer Option in accordance with any plan of disposition requested
by Kroger. Kroger has the right to make two such demands.
Fred Meyer has agreed that upon the occurrence of a
Triggering Event and prior to an Exercise Termination Event, (i) at the
written request of a Holder delivered within 150 days of such occurrence
(or such later period as permitted in the Fred Meyer Stock Option
Agreement), to repurchase the Option from such Holder, in whole or in part,
at a price equal to the number of shares of Fred Meyer Common Stock then
purchasable upon exercise of the Option (or such lesser number of shares as
may be designated in the Repurchase Notice (as defined in the Fred Meyer
Stock Option Agreement)) multiplied by the amount by which the Market/Offer
Price (as defined in the Fred Meyer Stock Option Agreement) exceeds the
exercise price or (ii) at the written request of any owner of shares of
Fred Meyer Common Stock issued under the Option (an "Owner") delivered
within 150 days of occurrence (or such later period as permitted in the
Fred Meyer Stock Option Agreement), to repurchase from such Owner such
number of shares as is designated in the repurchase notice at a price per
share equal to the Market/Offer Price (the "Put Right").
Kroger has agreed that, from the date of exercise of the
Option and for as long as Kroger owns the shares of Fred Meyer Common Stock
acquired pursuant to the exercise of the Option that represent at least 2%
of the then outstanding voting securities of Fred Meyer, it will not, nor
will it permit any of its affiliates to, without the prior consent of the
Board of Directors of Fred Meyer, (i) acquire or agree, offer, seek or
propose to acquire, ownership of more than 20% of any class of voting
securities of Fred Meyer or any rights or options to acquire such
ownership; (ii) propose a merger, consolidation or similar transaction
involving Fred Meyer; (iii) offer, seek or propose to purchase, lease or
otherwise acquire all or a substantial portion of the assets of Fred Meyer;
(iv) seek or propose to influence or control the management or policies of
Fred Meyer or to obtain representation on the board of directors of Fred
Meyer, or solicit or participate in the solicitation of any proxies or
consents with respect to the securities of Fred Meyer; (v) enter into any
discussions, negotiations, arrangements or understandings with any third
party with respect to any of the foregoing; or (vi) seek or request
permission to do any of the foregoing or seek any permission to make any
public announcement with respect to any of the foregoing. The above
provision will not apply to the actions taken pursuant to the Merger
Agreement. Additionally, Kroger has agreed not to sell, transfer any
beneficial interest in, pledge, hypothecate or otherwise dispose of any
voting securities at any time except pursuant to a tender offer, exchange
offer, merger or consolidation of Fred Meyer, or in connection with a sale
of all or substantially all of the assets of Fred Meyer, pursuant to a
registered public offering or in compliance with Rule 144 of the General
Rules and Regulations under the Securities Act (or any similar rule).
Kroger agrees to be present in person or to be represented by proxy at all
stockholder meetings of Fred Meyer so that all shares of voting securities
beneficially owned by it or its affiliates may be counted for the purpose
of determining the presence of a quorum at such meetings. Kroger also
agrees to vote or cause to be voted all voting securities beneficially
owned by it or its affiliates proportionately with the votes cast by all
other stockholders present and voting. The provisions of this paragraph
shall terminate at such time as Kroger beneficially owns more than 50% of
the outstanding Common Stock of Fred Meyer.
Notwithstanding any other provision of the Fred Meyer Stock
Option Agreement, the Option may not be exercised so as to result in a
Total Profit (as defined in the Fred Meyer Stock Option Agreement) derived
from shares acquired pursuant to the Option (including pursuant to the Put
Right), together with any fees or expense reimbursement paid pursuant to
the Merger Agreement, that exceeds $275 million.
Concurrent with the execution of the Merger Agreement and
the Fred Meyer Stock Option Agreement, Kroger and Fred Meyer also entered
into another Stock Option Agreement, dated as of October 18, 1998 (the
"Kroger Stock Option Agreement"), a copy of which is attached hereto as
Exhibit 3 and is incorporated herein by reference. Pursuant to the Kroger
Stock Option Agreement, Kroger granted Fred Meyer an option to purchase,
pursuant to the terms and subject to the conditions thereof, up to
55,906,472 shares of Kroger Common Stock at a price of $50 per share, on
terms and conditions that substantially correspond to the Fred Meyer Stock
Option Agreement, except that notwithstanding any other provision of the
Kroger Stock Option Agreement, in no event shall the Total Profit (as
defined in the Kroger Stock Option Agreement) derived from shares acquired
pursuant to the Option together with any fees or expense reimbursement paid
pursuant to the Merger Agreement exceed in the aggregate $460 million.
The foregoing summaries of the Merger Agreement, the Fred
Meyer Stock Option Agreement and the Kroger Stock Option Agreement do not
purport to be complete and are qualified in their entirety by reference to
the text of such agreements attached as Exhibits 1, 2 and 3 hereto,
respectively.
Concurrent with the execution of the Merger Agreement, the
Fred Meyer Stock Option Agreement and the Kroger Stock Option Agreement,
Kroger also entered into (i) the Miller Voting Agreement with Robert G.
Miller, a copy of which is attached hereto as Exhibit 4 and is incorporated
herein by reference in its entirety, and (ii) the Yucaipa Voting Agreement
with the Yucaipa Stockholders, a copy of which is attached hereto as
Exhibit 5 and is incorporated herein by reference in its entirety. Pursuant
to the Miller Voting Agreement and the Yucaipa Voting Agreement, each of
Robert G. Miller and the Yucaipa Stockholders, respectively, have agreed to
vote, or if applicable, give consents with respect to, the 132,973 shares
of Fred Meyer Common Stock held by Mr. Miller and the 14,500,699 shares of
Fred Meyer Common Stock held by the Yucaipa Stockholders, respectively
(collectively, the "Subject Shares") in favor of the Merger Agreement and
the Merger, and if requested by Kroger, to grant to Kroger an irrevocable
proxy with respect to the Subject Shares for such purpose. In addition,
subject to certain exceptions, both of Mr. Miller and the Yucaipa
Stockholders have agreed not to dispose of the Subject Shares (until the
consummation of the Merger or the termination of the Merger Agreement).
The foregoing summaries of the Miller Voting Agreement and
the Yucaipa Voting Agreement do not purport to be complete and are
qualified in their entirety by reference to the text of such agreements
attached as Exhibits 4 and 5 hereto, respectively.
Except as set forth in this Statement, the Merger Agreement,
the Fred Meyer Stock Option Agreement, the Kroger Stock Option Agreement,
the Miller Voting Agreement or the Yucaipa Voting Agreement, neither Kroger
nor, to the best of Kroger's knowledge, any of the individuals named in
Schedule I hereto has any plans or proposals which relate to or which would
result in or relate to any of the actions specified in subparagraphs (a)
through (j) of Item 4 of Schedule 13D.
Item 5. Interest in Securities of the Issuer
------------------------------------
(a) - (b) By reason of its execution of the Fred Meyer Stock
Option Agreement, Kroger may be deemed to have beneficial ownership of, and
sole voting and dispositive power with respect to, the shares of Fred Meyer
Common Stock subject to the Option and, accordingly, might be deemed to
beneficially own 30,799,665 shares of Fred Meyer Common Stock as a result
of the Fred Meyer Stock Option Agreement. Based on the number of shares of
Fred Meyer Common Stock subject to the Option, Kroger may be deemed to
beneficially own approximately 16.6% of the outstanding Fred Meyer Common
Stock (based upon (i) the 154,772,188 shares of Fred Meyer Common Stock
outstanding on October 15, 1998, as represented to Kroger by Fred Meyer in
the Merger Agreement, plus (ii) an additional 30,799,665 that Fred Meyer
will issue to Kroger in the event that the Option is exercised) following
the exercise in whole of the Option for 30,799,665 shares of Fred Meyer
Common Stock. However, Kroger expressly disclaims any beneficial ownership
of the shares of Fred Meyer Common Stock which are purchasable by Kroger
upon exercise of the Option, on the grounds that the Option is not
presently exercisable and only becomes exercisable upon the occurrence of
the events referred to in Item 4 above. If the Option were exercised,
Kroger would have the sole right to vote and to dispose of the shares of
Fred Meyer issued as a result of such exercise.
In addition, pursuant to (i) the Miller Voting Agreement,
the Subject Shares held by Robert G. Miller may be deemed to be
beneficially owned by Mr. Miller and Kroger; and (ii) the Yucaipa Voting
Agreement, the Subject Shares held by the Yucaipa Stockholders may be
deemed to be beneficially owned by the Yucaipa Stockholders and Kroger.
Based on the number of shares of Fred Meyer Common Stock subject to the
Voting Agreements, Kroger may be deemed to beneficially own approximately
9.5% of the outstanding Fred Meyer Common Stock as a result of the Voting
Agreements (based upon the 154,772,188 shares of Fred Meyer Common Stock
outstanding on October 15, 1998, as represented to Kroger by Fred Meyer in
the Merger Agreement).
Insomuch as the Miller Voting Agreement is limited to the
vote of the Subject Shares held by Robert G. Miller with respect to the
Merger Agreement and the Merger, Mr. Miller and Kroger may be deemed to
have shared power to vote or to direct the vote with respect to the Subject
Shares held by Mr. Miller. Robert G. Miller may not dispose of the 132,973
shares of Fred Meyer Common Stock that constitute the Subject Shares held
by Mr. Miller, and because the covenant may be waived by Kroger, Robert G.
Miller and Kroger may be deemed to have shared power to dispose or direct
the disposition of the Subject Shares held by Mr. Miller (until the
consummation of the Merger or the termination of the Merger Agreement).
Insomuch as the Yucaipa Voting Agreement is limited to the
vote of the Subject Shares held by the Yucaipa Stockholders with respect to
the Merger Agreement and the Merger, the Yucaipa Stockholders and Kroger
may be deemed to have shared power to vote or to direct the vote with
respect to the Subject Shares held by the Yucaipa Stockholders. The Yucaipa
Voting Agreement also provides that, subject to certain exceptions, the
Yucaipa Stockholders may not dispose of the 14,500,699 shares of Fred Meyer
Common Stock that constitute the Subject Shares held by the Yucaipa
Stockholders and because the covenant may be waived by Kroger, the Yucaipa
Stockholders and Kroger may be deemed to have shared power to dispose or
direct the disposition of the Subject Shares (until the consummation of the
Merger or the termination of the Merger Agreement).
(c) Neither Kroger nor, to the best of Kroger's knowledge,
any of the individuals named in Schedule I hereto, has effected any
transaction in Fred Meyer Common Stock during the past 60 days.
(d) So long as Kroger has not exercised the Option (and
prior to the consummation of the Merger), Kroger does not have the right to
receive or the power to direct the receipt of dividends from, or the
proceeds from the sale of, any shares of Fred Meyer Common Stock.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships with
Respect to Securities of the Issuer
-------------------------------------------------------------
Except as provided in the Merger Agreement, the Fred Meyer
Stock Option Agreement, the Kroger Stock Option Agreement, the Miller
Voting Agreement or the Yucaipa Voting Agreement or as set forth in this
Statement, neither Kroger nor, to the best of Kroger's knowledge, any of
the individuals named in Schedule I hereto has any contracts, arrangements,
understandings or relationships (legal or otherwise) with any person with
respect to any securities of Fred Meyer, including, but not limited to,
transfer or voting of any of the securities, finder's fees, joint ventures,
loan or option arrangements, puts or calls, guarantees of profits, division
of profits or loss, or the giving or withholding of proxies.
Item 7. Material to be filed as Exhibits
--------------------------------
Exhibit 1 -- Agreement and Plan of Merger, dated as of
October 18, 1998, among The Kroger Co., Jobsite
Holdings, Inc. and Fred Meyer, Inc. Incorporated by
reference to Exhibit 99.3 of The Kroger Co.'s current
report on Form 8-K, dated October 20, 1998, SEC
No. 1-303.
Exhibit 2 -- Stock Option Agreement, dated as of October 18,
1998 between The Kroger Co. and Fred Meyer, Inc.
Company (Fred Meyer, Inc. as Issuer).
Exhibit 3 -- Stock Option Agreement, dated as of October 18,
1998, between The Kroger Co. and Fred Meyer, Inc. (The
Kroger Co. as Issuer).
Exhibit 4 -- Voting Agreement, dated as of October 18, 1998,
between The Kroger Co. and Robert G. Miller.
Exhibit 5 -- Voting Agreement, dated as of October 18, 1998,
between The Kroger Co. and the stockholders listed on
Annex A thereto.
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.
Dated: October 28, 1998
The Kroger Co.
By: /s/ Paul W. Heldman, Esq.
-------------------------------
Name: Paul W. Heldman
Title: Senior Vice President,
Secretary and General Counsel
<PAGE>
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF
THE KROGER CO.
The name, present principal occupation or employment, and the
name of any corporation or other organization in which such employment is
conducted, of each of the directors and executive officers of The Kroger Co.
("Kroger") is set forth below. Each of the directors and executive officers
is a citizen of the United States. Unless otherwise indicated below, the
business address of each director and executive officer is The Kroger Co.,
1014 Vine Street, Cincinnati, Ohio 45202.
Name and Business Present Principal Occupation or Employment
- ----------------- ------------------------------------------
Directors
- ---------
Reuben V. Anderson A member, in the Jackson, Mississippi
office, of Phelps Dunbar, a New Orleans law
firm; Director of Trustmark National Bank
and BellSouth Corporation
John L. Clendenin Chairman Emeritus of BellSouth Corporation;
Director of Wachovia Corp.; Equifax
Incorporated; RJR Nabisco Holdings Corp.;
Springs Industries, Inc.; Coca Cola
Enterprises, Inc.; The Home Depot, Inc.;
and National Service Industries, Inc.
David B. Dillon President and Chief Operating Officer of
Kroger; Advisory Director of the First
National Bank of Hutchinson, Kansas
John T. LaMacchia President, Chief Executive Officer, and a
Director of Cincinnati Bell, Inc.; Director
of Burlington Resources, Inc.
Edward M. Liddy Chairman and Chief Executive Officer of The
Allstate Corporation
Clyde R. Moore President, Chief Executive Officer, and
Director of Thomas & Betts Corporation
T. Ballard Morton, Jr. Executive in Residence of the College of
Business & Public Administration of the
University of Louisville; Director of LG&E
Energy Corp.
Thomas H. O'Leary Retired Chairman of Burlington Resources
Inc.
John D. Ong Chairman Emeritus of The BFGoodrich
Company; Director of Cooper Industries,
Inc.; Defiance, Inc.; Ameritech
Corporation; The Geon Company; ASARCO
Incorporated; and TRW Inc.
Katherine D. Ortega Director of Ultramar Diamond Shamrock
Corporation; Ralston Purina Co.; and
Rayonier Inc.; served as an Alternate
Representative of the United States to the
45th General Assembly of the United Nations
in 1990-1991; prior to that, she served as
Treasurer of the United States.
Joseph A. Pichler Chairman of the Board and Chief Executive
Officer of Kroger; Director of Cincinnati
Milacron; and Federated Department Stores,
Inc.
Martha Romayne Seger Distinguished Visiting Professor at Central
Michigan University; Director of Amerisure
Companies; Amoco Corporation; Fluor
Corporation; Tucson Electric Power Company;
and Xerox Corporation
James D. Woods Chairman Emeritus and Consultant of Baker
Hughes Incorporated; Director of: Howmet
International Inc.; Varco International;
and Wynn's International Inc.
Executive Officers
- ------------------
Warren F. Bryant President and Chief Executive
Officer-Dillon Companies, Inc.
Geoffrey J. Covert President-Manufacturing, Group Vice
President
David B. Dillon President and Chief Operating Officer
Paul W. Heldman Senior Vice President, Secretary and
General Counsel
Michael S. Heschel Executive Vice President and Chief
Information Officer
Lynn Marmer Group Vice President
Don W. McGeorge Senior Vice President
W. Rodney McMullen Senior Vice President and Chief Financial
Officer
Joseph A. Pichler Chairman of the Board and Chief Executive
Officer
James R. Thorne Senior Vice President
Lawrence M. Turner Vice President and Treasurer
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
- ----------- ------------
1 Agreement and Plan of Merger, dated as of October 18,
1998, among The Kroger Co., Jobsite Holdings, Inc. and
Fred Meyer, Inc. Incorporated by reference to
Exhibit 99.3 of The Kroger Co.'s current report on Form
8-K, dated October 20, 1998, SEC No. 1-303.
2 Stock Option Agreement, dated as of October 18, 1998
between The Kroger Co. and Fred Meyer, Inc. Company (Fred
Meyer, Inc. as Issuer).
3 Stock Option Agreement, dated as of October 18, 1998,
between The Kroger Co. and Fred Meyer, Inc. (The Kroger
Co. as Issuer).
4 Voting Agreement, dated as of October 18, 1998, between
The Kroger Co. and Robert G. Miller.
5 Voting Agreement, dated as of October 18, 1998, between
The Kroger Co. and the stockholders listed on Annex A
thereto.
EXHIBIT 2
THE TRANSFER OF THIS AGREEMENT IS
SUBJECT TO CERTAIN PROVISIONS
CONTAINED HEREIN AND TO RESALE
RESTRICTIONS UNDER THE SECURITIES
ACT OF 1933, AS AMENDED
STOCK OPTION AGREEMENT, dated as of October 18, 1998 (this
"Agreement"), between Fred Meyer, Inc., a Delaware corporation ("Issuer"),
and The Kroger Co., an Ohio corporation ("Grantee").
WHEREAS, Issuer, Grantee, and a wholly owned subsidiary of
Grantee (the "Merger Sub") propose to enter into an Agreement and Plan of
Merger, to be dated as of this date (the "Merger Agreement"), pursuant to
which Merger Sub is to merge with and into Issuer, with Issuer continuing
as the surviving corporation and a wholly owned subsidiary of Grantee after
such merger, and in such merger, each share of common stock, par value $.01
per share, of Issuer ("Common Stock") will be converted to a right to
receive one share of common stock, par value $1.00 per share, of Grantee as
provided in the Merger Agreement;
WHEREAS, as an inducement and condition to Grantee's willingness
to enter into the Merger Agreement and in consideration thereof, Issuer is
granting to Grantee, pursuant to the terms and subject to the conditions
contained in this Agreement, an option to purchase 19.9% of the
outstanding shares of Common Stock; and
WHEREAS, the Board of Directors of Issuer has approved the grant
by Issuer to Grantee of the Option (defined below) pursuant to this
Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements set forth in this Agreement and in the Merger
Agreement, the parties agree as follows:
1. The Option. Issuer hereby grants to Grantee an unconditional,
irrevocable option (the "Option") to purchase, pursuant to the terms and
subject to the conditions hereof, up to 30,799,665 fully paid and
nonassessable shares of Common Stock at a price of $44.125 per share (the
"Option Price"); provided, however, that in no event shall the number of
shares for which the Option is exercisable exceed 19.9% of the shares of
Common Stock issued and outstanding at the time of exercise (without giving
effect to the shares of Common Stock issued or issuable under the Option).
The number of shares of Common Stock purchasable upon exercise of the
Option and the Option Price are subject to adjustment as set forth in this
Agreement.
2. Exercise; Closing.
-----------------
(a) Conditions to Exercise; Termination. Grantee or any other
person that shall become a holder of all or a part of the Option in
accordance with the terms of this Agreement (each such person, including
Grantee, being referred to as "Holder") may exercise the Option, in whole
or in part, from time to time, if but only if a Triggering Event has
occurred, and prior to the occurrence of an Exercise Termination Event (as
defined below). The right to exercise the Option shall terminate upon
either (i) the occurrence of the Effective Time (as defined in the Merger
Agreement) or (ii) (x) if a Notice Date (as defined in Section 2(d)) has
not previously occurred, the close of business on the earlier of (A) the
day that is 150 days after the date of a Triggering Event, (B) the date
upon which the Merger Agreement is terminated if no Termination Fee (as
defined in the Merger Agreement) could be payable by Issuer pursuant to the
terms of the Merger Agreement upon the occurrence of certain events or the
passage of time, and (C) 700 days following the date upon which the Merger
Agreement is terminated, and (y) if a Notice Date has previously occurred,
150 days after that Notice Date (the events in (i) or (ii) being referred
to as "Exercise Termination Events").
(b) Triggering Event. A "Triggering Event" shall have occurred at
such time at which Grantee becomes entitled to receive the Additional Fred
Meyer Termination Fee from Issuer pursuant to Section 8.2(b) of the Merger
Agreement.
(c) Notice of Trigger Event by Issuer. Issuer shall notify
Grantee promptly in writing of the occurrence of any Triggering Event (it
being understood that the giving of the notice by Issuer shall not be a
condition to the right of Holder to exercise the option).
(d) Notice of Exercise. If Holder shall be entitled to and
desires to exercise the Option, in whole or in part, it shall send to
Issuer a written notice (any date on which this notice is given, in
accordance with Section 15, is referred to as a "Notice Date") specifying
(i) the total number of shares that Holder will purchase pursuant to the
exercise and (ii) a place and date (a "Closing Date") not earlier than
three business days nor later than 60 business days from the related Notice
Date for the closing of the purchase (a "Closing"); provided, that if a
filing or any approval is required under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), or prior notification
to or prior approval from any regulatory authority is required under any
other law, statute, rule or regulation (including applicable rules and
regulations of national securities exchanges) in connection with this
purchase, Holder or Issuer, as required, promptly after the Notice Date,
shall file all necessary notices and applications for approval and shall
expeditiously process the same and the period of time referred to in clause
(ii) shall commence on the date on which all required notification and
waiting periods, if any, shall have expired or been terminated and all
required approvals, if any, shall have been obtained. Any exercise of the
Option shall be deemed to occur on the date of the Notice Date relating
thereto. Each of Holder and Issuer agrees to use its reasonable best
efforts to cooperate with and provide information to the other, for the
purpose of any required notice or application for approval.
(e) Payment of Purchase Price; Delivery of Common Stock. (i) At
each Closing, Holder shall pay to Issuer the aggregate purchase price for
the shares of Common Stock purchased pursuant to the exercise of the Option
in immediately available funds by a wire transfer to a bank account
designated by Issuer; provided, that failure or refusal of Issuer to
designate a bank account shall not preclude Holder from exercising the
Option, in whole or in part.
(ii) At each Closing, simultaneously with the payment of the
aggregate purchase price by Holder, Issuer shall deliver to Holder a
certificate or certificates representing the number of shares of Common
Stock purchased by Holder and, if the Option shall be exercised in part
only, a new Agreement providing for an Option evidencing the rights of
Holder to purchase the balance (as adjusted pursuant to the terms hereof)
of the shares then purchasable hereunder and the Holder shall deliver this
Agreement and a letter agreeing that the Holder will not offer to sell or
otherwise dispose of such shares in violation of applicable laws or the
provisions of this Agreement.
(iii) Notwithstanding anything to the contrary contained in
paragraphs (i) and (ii) of this Section 2(e), Holder shall have the right
(a "Cashless Exercise Right") to direct the Issuer, in the written notice
of exercise referred to in Section 2(d), to reduce the number of shares of
Common Stock required to be delivered by Issuer to Holder at any Closing by
such number of shares of Common Stock that have an aggregate Market/Offer
Price (as defined in Section 9(a)) equal to the aggregate purchase price
payable at such Closing (but for this paragraph (iii)), or any portion
thereof, in lieu of Holder paying to the Issuer at such Closing such
aggregate purchase price or portion thereof, as the case may be. Any
exercise of the Option in which, and to the extent to which, Holder
exercises its Cashless Exercise Right pursuant to this paragraph (iii)
shall be referred to as a "Cashless Exercise."
(f) Restrictive Legend. Certificates for Common Stock delivered
at a Closing may be endorsed at the option of Issuer with a restrictive
legend that shall read substantially as follows:
"The transfer of the shares represented by this certificate
is subject to certain provisions of an agreement between the
registered holder hereof and Issuer, a copy of which agreement is
on file at the principal office of Issuer, and to resale
restrictions arising under the Securities Act of 1933, as
amended. A copy of the aforementioned agreement will be mailed to
the holder without charge promptly after receipt by Issuer of a
written request therefor."
It is understood and agreed that: (i) the reference to the resale
restrictions of the Securities Act of 1933, as amended (the "Securities
Act"), in the above legend shall be removed by delivery of substitute
certificate(s) without this reference if Holder shall have delivered to
Issuer a copy of a letter from the staff of the Securities and Exchange
Commission, or a written opinion of counsel, in form and substance
reasonably satisfactory to Issuer, to the effect that this legend is not
required for purposes of the Securities Act; (ii) the reference to the
provisions of this Agreement in the above legend shall be removed by
delivery of substitute certificate(s) without such reference if the shares
have been sold or transferred in compliance with the provisions of this
Agreement and under circumstances that do not require the retention of such
reference; and (iii) the legend shall be removed in its entirety if the
conditions in the preceding clauses (i) and (ii) both are satisfied. In
addition, the certificates shall bear any other legend as may be required
by applicable law.
(g) Ownership of Record; Tender of Purchase Price; Expenses. Upon
the giving by Holder to Issuer of the written notice of exercise referred
to in Section 2(d) and, except to the extent this notice relates to a
Cashless Exercise, the tender of the applicable purchase price in
immediately available funds, Holder shall be deemed to be the holder of
record of the shares of Common Stock issuable upon the exercise,
notwithstanding that the stock transfer books of Issuer shall then be
closed or that certificates representing the shares of Common Stock shall
not have been actually delivered to Holder. Issuer shall pay all expenses,
and any and all United States federal, state and local taxes and other
charges that may be payable in connection with the preparation, issuance
and delivery of stock certificates under this Section 2 in the name of
Holder or its assignee, transferee or designee.
3. Covenants of Issuer. In addition to its other agreements and
covenants, Issuer agrees:
(a) Shares Reserved for Issuance. To maintain, free from
preemptive rights, sufficient authorized but unissued or treasury shares of
Common Stock so that the Option may be fully exercised without additional
authorization of Common Stock after giving effect to all other options,
warrants, convertible securities and other rights of third parties to
purchase shares of Common Stock;
(b) No Avoidance. Not to avoid or seek to avoid (whether by
charter amendment or through reorganization, consolidation, merger,
issuance of rights, dissolution or sale of assets, or by any other
voluntary act) the observance or performance of any of the covenants,
agreements or conditions to be observed or performed hereunder by Issuer
and not to take any action which would cause any of its representations or
warranties not to be true in any material respect; and
(c) Further Assurances. Promptly after this date to take all
actions as may from time to time be required (including (i) complying with
all applicable premerger notification, reporting and waiting period
requirements under the HSR Act and (ii) in the event that any other prior
approval of or notice to any regulatory authority is necessary under any
applicable federal, state or local law before the Option may be exercised,
cooperating fully with Holder in preparing and processing the required
applications or notices) in order to permit Holder to exercise the Option
and purchase shares of Common Stock pursuant to such exercise.
4. Representations and Warranties of Issuer. Issuer hereby
represents and warrants to Holder that Issuer has all requisite corporate
power and authority and has taken all corporate action necessary to
authorize, execute, deliver and perform its obligations under this
Agreement and to consummate the transactions contemplated hereby; and that
this Agreement has been duly and validly authorized, executed and delivered
by Issuer. Issuer hereby further represents and warrants to Holder that it
has taken all necessary corporate action to authorize and reserve for
issuance upon exercise of the Option the number of shares of Common Stock
equal to the maximum number of shares of Common Stock at any time or from
time to time issuable upon exercise of the Option and that all shares of
Common Stock, upon issuance pursuant to the Option, will be delivered free
and clear of all claims, liens, encumbrances, and security interests (other
than those created by this Agreement and the Securities Act) and not
subject to any preemptive rights. Issuer has taken all action necessary to
make inapplicable to Grantee any state takeover, business combination,
control share or other similar statute and any charter provisions which
would otherwise be applicable to Grantee or any transaction involving
Issuer and Grantee by reason of the grant of the Option, the acquisition of
beneficial ownership of shares of Common Stock as a result of the grant of
the Option, or the acquisition of shares of Common Stock upon exercise of
the Option.
5. Representations and Warranties of Grantee. Grantee hereby
represents and warrants to Issuer that Grantee has all requisite corporate
power and authority and has taken all corporate action necessary in order
to authorize, execute, deliver and perform its obligations under this
Agreement and to consummate the transactions contemplated hereby. This
Agreement has been duly and validly authorized, executed and delivered by
Grantee. Grantee represents and warrants to Issuer that any shares of
Common Stock acquired upon exercise of the Option will be acquired for
Grantee's own account, and will not be, and the Option is not being,
acquired by Grantee with a view to the distribution thereof in violation of
any applicable provision of the Securities Act. Grantee has such knowledge
and experience in business and financial matters as to be capable of
utilizing the information which is available to Grantee to evaluate the
merits and risks of an investment by Grantee in the Common Stock and
Grantee is able to bear the economic risks of any investment in the shares
of Common Stock which Grantee may acquire upon exercise of the Option.
6. Exchange; Replacement. This Agreement and the Option are
exchangeable, without expense, at the option of Holder, upon presentation
and surrender of this Agreement at the principal office of Issuer, for
other Agreements providing for Options of different denominations entitling
the holder thereof to purchase on the same terms and subject to the same
conditions as set forth in this Agreement in the aggregate the same number
of shares of Common Stock purchasable at such time hereunder, subject to
corresponding adjustments in the number of shares of Common Stock
purchasable upon exercise so that the aggregate number of such shares under
all Agreements issued in respect of this Agreement shall not exceed 19.9%
of the outstanding shares of Common Stock of the Issuer (without giving
effect to shares of Common Stock issued or issuable pursuant to the
Option). Unless the context shall require otherwise, the terms "Agreement"
and "Option" as used in this Agreement include any Agreements and related
options for which this Agreement (and the Option granted hereby) may be
exchanged. Upon (i) receipt by Issuer of reasonably satisfactory evidence
of the loss, theft, destruction, or mutilation of this Agreement, (ii)
receipt by Issuer of reasonably satisfactory indemnification in the case of
loss, theft or destruction and (iii) surrender and cancellation of this
Agreement in the case of mutilation, Issuer will execute and deliver a new
Agreement of like tenor and date. Any new Agreement executed and delivered
shall constitute an additional contractual obligation on the part of
Issuer, whether or not the Agreement so lost, stolen, destroyed or
mutilated shall at any time be enforceable by any Person other than the
holder of the new Agreement.
7. Adjustments. The total number of shares of Common Stock
purchasable upon the exercise of the Option and the Option Price shall be
subject to adjustment from time to time as follows:
In the event of any change in, or distribution in respect
of, the outstanding shares of Common Stock by reason of stock dividends,
split-ups, mergers, recapitalizations, combinations, subdivisions,
conversions, exchanges of shares or the like, the type (including, in the
event of any Major Transaction described in Section 9(d) hereof in which
Issuer is not the surviving or continuing corporation, to provide that the
Option shall be exercisable for shares of common stock of the surviving or
continuing corporation in such Major Transaction) and number of shares of
Common Stock purchasable upon exercise of the Option and the Option Price
shall be appropriately adjusted in such manner as shall fully preserve the
economic benefits contemplated hereby, and proper provision shall be made
in the agreements governing any such transactions to provide for the proper
adjustment and the full satisfaction of Issuer's obligation hereunder.
8. Registration. At any time after a Triggering Event occurs and
prior to an Exercise Termination Event, Issuer shall, at the request of
Grantee delivered in the written notice of exercise of the Option provided
for in Section 2(d), and, with respect to the first demand registration as
to which the Grantee exercises its demand rights under this Section 8,
delivered no later than 90 days following such Triggering Event, as
promptly as practicable, prepare, file and keep current a shelf
registration statement under the Securities Act covering any or all shares
issued and issuable pursuant to the Option and shall use its reasonable
best efforts to cause this registration statement to become effective and
remain current in order to permit the sale or other disposition of any
shares of Common Stock issued upon total or partial exercise of the Option
("Option Shares") in accordance with any plan of disposition reasonably
requested by Grantee; provided, however, that Issuer may postpone filing a
registration statement relating to a registration request by Grantee under
this Section 8 or suspend effectiveness of that registration statement, in
each case for a period of time (not in excess of 90 days) if in Grantee's
judgment this filing or continued effectiveness would require the
disclosure of material information that Issuer has a bona fide business
purpose for preserving as confidential. Issuer will use its reasonable best
efforts to cause such registration statement to remain effective for a
period of 365 days or such shorter time as is reasonably appropriate to
effect such sales or other dispositions. Grantee shall have the right to
demand two such registrations. In connection with any such registration,
Issuer and Holder shall provide each other with representations,
warranties, indemnities and other agreements customarily given in
connection with such registrations. To the extent reasonably requested by
Holder in connection with this registration, Issuer shall (x) become a
party to any underwriting agreement relating to the sale of such shares,
but only to the extent of obligating Issuer in respect of representations,
warranties, indemnities, contribution and other agreements (in each case
reasonably acceptable to Issuer) customarily made by issuers in these
underwriting agreements, and (y) use its reasonable best efforts to take
all further actions which shall be reasonably necessary to effect such
registration and sale (including participating in road-show presentations
and causing to be delivered customary certificates, opinions of counsel and
"comfort letters"). Notwithstanding anything to the contrary contained in
the Agreement, in no event shall Issuer be obligated to effect more than
two registrations pursuant to this Section 8 by reason of the fact that
there shall be more than one Grantee as a result of any assignment or
division of this Agreement. Upon the effectiveness of a registration
statement demanded pursuant to this Section 8, the Holder of the Option
Shares that are the subject of such registration may not thereafter require
the Issuer to repurchase such Option Shares so long as Issuer complies with
its obligations under this Section 8.
9. Repurchase of Option and/or Shares.
----------------------------------
(a) Repurchase; Repurchase Price. Upon the occurrence of a
Triggering Event and prior to an Exercise Termination Event, (i) at the
request of Holder, delivered in writing within 150 days of this occurrence
(or such later period as provided in Section 2(d) with respect to any
required notice or application or in Section 10), Issuer shall repurchase
the Option from Holder, in whole or in part, at a price (the "Option
Repurchase Price") equal to the number of shares of Common Stock then
purchasable upon exercise of the Option (or such lesser number of shares as
may be designated in the Repurchase Notice (as defined in Section 9(b))
multiplied by the amount by which the Market/Offer Price (as defined below)
exceeds the Option Price or (ii) at the request of any owner of Option
Shares (an "Owner") delivered in writing within 150 days of this occurrence
(or such later period as provided in Section 2(d) with respect to any
required notice or application or in Section 10), Issuer shall repurchase
such number of Option Shares from the Owner as the Owner shall designate in
the Repurchase Notice at a price (the "Option Share Repurchase Price")
equal to the number of shares designated multiplied by the Market/Offer
Price. The term "Market/Offer Price" shall mean the highest of (x) the
price per share of Common Stock at which a tender or exchange offer for
Common Stock either has been consummated, or at which a Person has publicly
announced its intention to commence a tender or exchange offer, after the
date of this Agreement and prior to the delivery of the Repurchase Notice,
and which offer either has been consummated and not withdrawn or terminated
as of the date payment of the Repurchase Price is made, or has been
publicly announced and the intention to make a tender or exchange offer has
not been withdrawn as of the date payment of the Repurchase Price is made,
(y) the price per share of Common Stock to be paid by any third party
pursuant to a valid agreement with Issuer for a merger, share exchange,
consolidation or reorganization entered into after the date hereof and on
or prior to the delivery of the Repurchase Notice or (z) the average
closing price for shares of Common Stock on the New York Stock Exchange
(the "NYSE") (or, if the Common Stock is not then listed on the NYSE, any
other national securities exchange or automated quotation system on which
the Common Stock is then listed or quoted) for the twenty consecutive
trading days immediately preceding the delivery of the Repurchase Notice.
In the event that a tender or exchange offer is made for the Common Stock
or an agreement is entered into for a merger, share exchange, consolidation
or reorganization involving consideration other than cash, the value of the
securities or other property issuable or deliverable in exchange for the
Common Stock shall be determined in good faith by a nationally recognized
investment banking firm mutually selected by Issuer and Holder or Owner, as
the case may be.
(b) Method of Repurchase. Subject to the terms of Section 9(a),
Holder or Owner, as the case may be, may exercise its right to require
Issuer to repurchase the Option, in whole or in part, and/or any Option
Shares then owned by Holder or Owner pursuant to this Section 9 by
surrendering for this purpose to Issuer, at its principal office, this
Agreement or certificates for Option Shares, as applicable, accompanied by
a written notice or notices stating that Holder or Owner elects to require
Issuer to repurchase the Option and/or such Option Shares in accordance
with the provisions of this Section 9 (each such notice, a "Repurchase
Notice"). Within four business days after the surrender of the Agreement
for the Option and/or certificates representing Option Shares and the
receipt of the Repurchase Notice, Issuer shall deliver or cause to be
delivered to Holder or Owner of Option Shares, as the case may be, the
applicable Option Repurchase Price and/or the Option Share Repurchase Price
or, in either case, the portion that Issuer is not then prohibited under
applicable law and regulation from so delivering, in immediately available
funds by a wire transfer to a bank account designated by Grantee. In the
event that the Repurchase Notice shall request the repurchase of the Option
in part, Issuer shall deliver with the Option Repurchase Price a new
Agreement evidencing the right of the Holder to purchase that number of
shares of Common Stock purchasable pursuant to the Option at the time of
delivery of the Repurchase Notice minus the number of shares of Common
Stock represented by that portion of the Option then being repurchased.
(c) Effect of Statutory or Regulatory Restraints on Repurchase.
To the extent that, upon or following the delivery of a Repurchase Notice,
Issuer is prohibited under applicable law or regulation from repurchasing
the Option (or a portion thereof) and/or any Option Shares subject to this
Repurchase Notice (and Issuer hereby undertakes to use its reasonable best
efforts to obtain all required regulatory and legal approvals and to file
any required notices as promptly as practicable in order to accomplish this
repurchase), Issuer shall promptly so notify Holder or Owner, as the case
may be, in writing and thereafter deliver or cause to be delivered, from
time to time, to Holder or Owner, as the case may be, the portion of the
Option Repurchase Price and the Option Share Repurchase Price that Issuer
is no longer prohibited from delivering, within four business days after
the date on which it is no longer so prohibited; provided, however, that
upon notification by Issuer in writing of this prohibition, Holder or
Owner, as the case may be, may, within five days of receipt of this
notification from Issuer, revoke in writing its Repurchase Notice, whether
in whole or to the extent of the prohibition, whereupon, in the latter
case, Issuer shall promptly (i) deliver to Holder or Owner, as the case may
be, that portion of the Option Repurchase Price and/or the Option Share
Repurchase Price that Issuer is not prohibited from delivering; and (ii)
(a) deliver to Holder with respect to the Option, a new Agreement
evidencing the right of Holder to purchase that number of shares of Common
Stock for which the surrendered Agreement was exercisable at the time of
delivery of the Repurchase Notice less the number of shares as to which the
Option Repurchase Price has theretofore been delivered to Holder, and/or
(b) deliver to the owner of Option Shares, with respect to its Option
Shares, a certificate for the Option Shares as to which the Option Share
Repurchase Price has not theretofore been delivered to such owner.
Notwithstanding anything to the contrary in this Agreement, including,
without limitation, the time limitations on the exercise of the Option,
Holder may exercise the Option at least until 150 days after the date upon
which Issuer is no longer prohibited from delivering all of the Option
Repurchase Price.
(d) Major Transactions. Issuer hereby agrees that, prior to the
occurrence of an Exercise Termination Event, Issuer shall not enter into or
agree to enter into any agreement for a Major Transaction (defined below)
unless the other party or parties thereto agree to assume in writing
Issuer's obligations under this Agreement. "Major Transaction" shall mean
any merger or consolidation involving the Issuer and any transaction
involving a sale, transfer or other disposition of a majority of the assets
or shares of capital stock of the Issuer.
10. Extension of Exercise Periods. The 150 and 700 day periods
for exercise of certain rights under Sections 2 and 9 shall be extended in
each such case at the request of Holder or Owner to the extent necessary to
avoid liability by a Holder or Owner under Section 16(b) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), by reason of this
exercise.
11. Assignment. Neither party may assign any of its rights or
obligations under this Agreement or the Option to any other person without
the express written consent of the other party except that Holder or Owner
may assign its rights in whole or in part to any of its affiliates and, in
the event that a Triggering Event shall have occurred prior to the
occurrence of an Exercise Termination Event, Holder or Owner may within 90
days following this Triggering Event assign the Option or any of its other
rights hereunder, in whole or in part, to one or more third parties,
provided that the affiliate and any such third party shall execute this
Agreement and agree to become subject to its terms. Any attempted
assignment in contravention of the preceding sentence shall be null and
void.
12. Filings; Other Actions. Each party will use its reasonable
best efforts to make all filings with, and to obtain consents of, all third
parties and governmental authorities necessary for the consummation of the
transactions contemplated by this Agreement.
13. Specific Performance. The parties acknowledge that damages
would be an inadequate remedy for a breach of this Agreement by either
party and that the obligations of the parties shall be specifically
enforceable through injunctive or other equitable relief.
14. Severability; Etc. If any term, provision, covenant, or
restriction contained in this Agreement is held by a court or a federal or
state regulatory agency of competent jurisdiction to be invalid, void, or
unenforceable, the remainder of the terms, provisions, covenants, and
restrictions contained in this Agreement shall remain in full force and
effect, and shall in no way be affected, impaired, or invalidated. If for
any reason a court or regulatory agency determines that Holder is not
permitted to acquire, or Issuer is not permitted to repurchase pursuant to
Section 9, any portion of the Option or the full number of shares of Common
Stock provided in Section l(a) (as adjusted pursuant to Sections 1(b) and
7), it is the express intention of the parties to allow Holder to acquire
or to require Issuer to repurchase such lesser portion of the Option or
number of shares as may be permissible, without any amendment or
modification of this Agreement.
15. Notices. All notices, requests, instructions, or other
documents to be given hereunder shall be furnished in accordance with
Section 9.2 of the Merger Agreement.
16. Expenses. Except as otherwise expressly provided in this
Agreement or in the Merger Agreement, all costs and expenses incurred in
connection with this Agreement and the transactions contemplated by this
Agreement shall be paid by the party incurring the expense, including fees
and expenses of its own financial consultants, investment bankers,
accountants, and counsel.
17. Entire Agreement, Etc. This Agreement and Merger Agreement
constitute the entire agreement, and supersede all other prior agreements,
understandings, representations and warranties, both written and oral,
between the parties, with respect to the subject matter of this Agreement.
The terms and conditions of this Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective successors and
permitted assigns. Nothing in this Agreement, expressed or implied, is
intended to confer upon any party, other than the parties, and their
respective successors and permitted assigns, any rights, remedies,
obligations or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement.
18. Limitation on Profit. (a) Notwithstanding any other provision
of this Agreement, in no event shall the Total Profit (as defined) plus any
Liquidation Amounts (as defined) exceed in the aggregate $275,000,000 and,
if it otherwise would exceed this amount, the Grantee, at its sole
election, shall either (i) reduce the number of shares of Common Stock
subject to this Option, (ii) deliver to the Issuer for cancellation Option
Shares previously purchased by Grantee or any other Holder or Owner, (iii)
pay to the Issuer cash or refund in cash Liquidation Amounts previously
paid or reduce or waive the amount of any Liquidation Amount payable
pursuant to Section 8.2 of the Merger Agreement, or (iv) any combination
thereof, so that Grantee's realized Total Profit, when aggregated with any
Liquidation Amounts so paid or payable to Grantee, shall not exceed
$275,000,000 after taking into account the foregoing actions.
The term "Liquidation Amounts" means the aggregate amount of any
Initial Fred Meyer Termination Fee and Additional Fred Meyer Termination
Fee (each as defined in the Merger Agreement) payable or paid to Grantee
and its assigns pursuant to Section 8.2 of the Merger Agreement (and not
repaid or refunded to the Issuer pursuant to this Section 18 or otherwise).
(b) Notwithstanding any other provision of this Agreement, the
Option may not be exercised for a number of shares as would, as of the date
of exercise, result in a Notional Total Profit (as defined) which, together
with any Liquidation Amount theretofore paid or then payable to Grantee
(and not repaid or refunded to the Issuer pursuant to Section 18 or
otherwise), would exceed $275,000,000 provided, that nothing in this
sentence shall restrict any exercise of the Option permitted hereby on any
subsequent date.
(c) As used in this Agreement, the term "Total Profit" shall mean
the aggregate amount (before taxes) of the following: (i) (x) the amount
received by Grantee, any other Holder and any Owner pursuant to Issuer's
repurchase of the Option (or any portion) or any Option Shares pursuant to
Section 9, less, in the case of any repurchase of Option Shares, (y) the
Grantee's, any other Holder's and any Owner's purchase price for such
Option Shares, as the case may be, (ii) (x) the net cash amounts (and the
fair market value of any other consideration) received by Grantee, any
other Holder and any Owner pursuant to the sale of Option Shares (or any
other securities into which such Option Shares are converted or exchanged)
to any unaffiliated party, less (y) the Grantee's (or any other Holder's or
Owner's) purchase price of such Option Shares, and (iii) the net cash
amounts (and the fair market value of any other consideration) received by
Grantee (or any other Holder) on the transfer of the Option (or any portion
thereof) to any unaffiliated party. In the case of clauses (ii)(x) and
(iii) above, the Grantee and each Holder and Owner agrees to furnish as
promptly as reasonably practicable after any disposition of all or a
portion of the Option or Option Shares a complete and correct statement,
certified by a responsible executive officer or partner of Grantee, Holder
or Owner, as applicable, of the net cash amounts (and the fair market value
of any other consideration) received in connection with any sale or
transfer of the Option or Option Shares.
(d) As used in this Agreement, the term "Notional Total Profit"
with respect to any number of shares as to which Grantee and any other
Holder may propose to exercise the Option shall be the Total Profit
determined as of the date of such proposal (taking into account the
provision of Section 18(a)) assuming that the Option was exercised on such
date for such number of shares and assuming that such shares, together with
all other Option Shares held by Grantee and any other Holders and Owners
and their respective affiliates as of such date was sold for cash at the
closing market price for the Common Stock on the NYSE Composite Transaction
Tape as of the close of business on the preceding trading day (less
customary brokerage commissions).
19. Captions. The section, paragraph and other captions in this
Agreement are for convenience of reference only, do not constitute part of
this Agreement and shall not be deemed to limit or otherwise affect any of
the provisions of this Agreement.
20. Counterparts. This Agreement may be executed in one or more
counterparts, and by both parties in separate counterparts, each of which
when exercised shall be deemed to be an original, but all of which shall
constitute one and the same agreement.
21. Restrictions on Certain Actions; Covenants of Grantee. From
and after the date of exercise of the Option in whole or part, and for as
long as Grantee owns shares of Common Stock acquired pursuant to the
exercise of the Option that represent at least 2% of the then outstanding
Voting Securities:
(a) Without the prior consent of the Board of Directors of Issuer
specifically expressed in a resolution, Grantee will not, and will not permit
any of its Affiliates (as defined) to:
(i) acquire or agree, offer, seek or propose to acquire,
ownership (including, but not limited to, beneficial
ownership as defined in Rule 13d-3 under the Exchange
Act) of more than 20% of any class of Voting
Securities (as herein defined), or any rights or
options to acquire such ownership (including from a
third party);
(ii) propose a merger, consolidation or similar
transaction involving the Issuer;
(iii) offer, seek or propose to purchase, lease or
otherwise acquire all or a substantial portion of the
assets of the Issuer;
(iv) seek or propose to influence or control the
management or policies of the Issuer or to obtain
representation on the Issuer's Board of Directors, or
solicit or participate in the solicitation of any
proxies or consents with respect to the securities of
the Issuer;
(v) enter into any discussions, negotiations,
arrangements or understandings with any third party
with respect to any of the foregoing; or
(vi) seek or request permission to do any of the foregoing
or seek any permission to make any public
announcement with respect to any of the foregoing.
The provisions of this Section 21 shall not apply to actions
taken pursuant to the Merger Agreement; and
(b) Grantee may not sell, transfer any beneficial interest in,
pledge, hypothecate or otherwise dispose of any Voting Securities at any
time except as follows:
(i) pursuant to a tender offer, exchange offer, merger or
consolidation of the Issuer, or in connection with a
sale of all or substantially all of the Issuer's
assets; or
(ii) pursuant to a registered public offering under
Section 8; or
(iii) in compliance with Rule 144 of the General Rules and
Regulations under the Securities Act (or any similar
successor rule); and
(c) (i) Grantee agrees to be present in person or to be
represented by proxy at all stockholder meetings of Issuer so that all
shares of Voting Securities beneficially owned by it or its Affiliates may
be counted for the purpose of determining the presence of a quorum at such
meetings.
(ii) Grantee agrees to vote or cause to be voted all Voting
Securities beneficially owned by it or its Affiliates proportionately with
the votes cast by all other stockholders present and voting.
(iii) The provisions of this Section 21 shall terminate at
such time as Grantee beneficially owns more than 50% of the outstanding
Common Stock of Issuer.
22. Governing Law. This Agreement shall be governed by and
continued in accordance with the internal law of the State of New York.
23. Definitions. For the purposes of this Agreement the following
terms shall have the meanings specified below:
"Affiliate" shall mean, as to any Person, any other Person
which directly or indirectly controls, or is under common control with, or
is controlled by, such Person. As used in this definition, "control"
(including, with its correlative meanings, "controlled by" and "under
common control with") shall mean the possession, directly or indirectly, of
the power to direct or cause the direction of management or policies,
whether through ownership or securities or partnership or other ownership
interest, by contract or otherwise.
"Voting Securities" means the shares of Common Stock,
preferred stock and any other securities of Issuer entitled to vote
generally for the election of directors or any other securities (including
rights and options), convertible into, exchangeable into or exercisable
for, any of the foregoing (whether or not presently exercisable,
convertible or exchangeable).
"Person" means an individual, corporation, partnership,
limited liability company, association, trust, unincorporated organization,
entity or group (as defined in the Exchange Act).
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the duly authorized officers of the parties hereto as of the
date first written above.
THE KROGER CO.
By: /s/ Paul W. Heldman
-----------------------------
Name: Paul W. Heldman
Title: Senior Vice President,
Secretary and General Counsel
FRED MEYER, INC.
By: /s/ Robert G. Miller
-----------------------------
Name: Robert G. Miller
Title: President and Chief
Executive Officer
EXHIBIT 3
THE TRANSFER OF THIS AGREEMENT IS
SUBJECT TO CERTAIN PROVISIONS
CONTAINED HEREIN AND TO RESALE
RESTRICTIONS UNDER THE SECURITIES
ACT OF 1933, AS AMENDED
STOCK OPTION AGREEMENT, dated as of October 18, 1998 (this
"Agreement"), between The Kroger Co., an Ohio corporation ("Issuer"), and
Fred Meyer, Inc., a Delaware corporation ("Grantee").
WHEREAS, Issuer, Grantee, and a wholly owned subsidiary of Issuer
(the "Merger Sub") propose to enter into an Agreement and Plan of Merger,
to be dated as of this date (the "Merger Agreement"), pursuant to which
Merger Sub is to merge with and into Grantee, with Grantee continuing as
the surviving corporation and a wholly owned subsidiary of Issuer after
such merger, and in such merger, each share of common stock, par value $.01
per share, of Grantee will be converted to a right to receive one share of
common stock, par value $1.00 per share, of Issuer ("Common Stock") as
provided in the Merger Agreement;
WHEREAS, as an inducement and condition to Grantee's willingness
to enter into the Merger Agreement and in consideration thereof, Issuer is
granting to Grantee, pursuant to the terms and subject to the conditions
contained in this Agreement, an option to purchase 19.9% of the
outstanding shares of Common Stock; and
WHEREAS, the Board of Directors of Issuer has approved the grant
by Issuer to Grantee of the Option (defined below) pursuant to this
Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements set forth in this Agreement and in the Merger
Agreement, the parties agree as follows:
1. The Option. Issuer hereby grants to Grantee an unconditional,
irrevocable option (the "Option") to purchase, pursuant to the terms and
subject to the conditions hereof, up to 55,906,472 fully paid and
nonassessable shares of Common Stock at a price of $50 per share (the
"Option Price"); provided, however, that in no event shall the number of
shares for which the Option is exercisable exceed 19.9% of the shares of
Common Stock issued and outstanding at the time of exercise (without giving
effect to the shares of Common Stock issued or issuable under the Option).
The number of shares of Common Stock purchasable upon exercise of the
Option and the Option Price are subject to adjustment as set forth in this
Agreement.
2. Exercise; Closing.
-----------------
(a) Conditions to Exercise; Termination. Grantee or any other
person that shall become a holder of all or a part of the Option in
accordance with the terms of this Agreement (each such person, including
Grantee, being referred to as "Holder") may exercise the Option, in whole
or in part, from time to time, if but only if a Triggering Event has
occurred, and prior to the occurrence of an Exercise Termination Event (as
defined below). The right to exercise the Option shall terminate upon
either (i) the occurrence of the Effective Time (as defined in the Merger
Agreement) or (ii) (x) if a Notice Date (as defined in Section 2(d)) has
not previously occurred, the close of business on the earlier of (A) the
day that is 150 days after the date of a Triggering Event, (B) the date
upon which the Merger Agreement is terminated if no Termination Fee (as
defined in the Merger Agreement) could be payable by Issuer pursuant to the
terms of the Merger Agreement upon the occurrence of certain events or the
passage of time, and (C) 700 days following the date upon which the Merger
Agreement is terminated, and (y) if a Notice Date has previously occurred,
150 days after that Notice Date (the events in (i) or (ii) being referred
to as "Exercise Termination Events").
(b) Triggering Event. A "Triggering Event" shall have occurred at
such time at which Grantee becomes entitled to receive the Additional
Kroger Termination Fee from Issuer pursuant to Section 8.2(b) of the Merger
Agreement.
(c) Notice of Trigger Event by Issuer. Issuer shall notify
Grantee promptly in writing of the occurrence of any Triggering Event (it
being understood that the giving of the notice by Issuer shall not be a
condition to the right of Holder to exercise the option).
(d) Notice of Exercise. If Holder shall be entitled to and
desires to exercise the Option, in whole or in part, it shall send to
Issuer a written notice (any date on which this notice is given, in
accordance with Section 15, is referred to as a "Notice Date") specifying
(i) the total number of shares that Holder will purchase pursuant to the
exercise and (ii) a place and date (a "Closing Date") not earlier than
three business days nor later than 60 business days from the related Notice
Date for the closing of the purchase (a "Closing"); provided, that if a
filing or any approval is required under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), or prior notification
to or prior approval from any regulatory authority is required under any
other law, statute, rule or regulation (including applicable rules and
regulations of national securities exchanges) in connection with this
purchase, Holder or Issuer, as required, promptly after the Notice Date,
shall file all necessary notices and applications for approval and shall
expeditiously process the same and the period of time referred to in clause
(ii) shall commence on the date on which all required notification and
waiting periods, if any, shall have expired or been terminated and all
required approvals, if any, shall have been obtained. Any exercise of the
Option shall be deemed to occur on the date of the Notice Date relating
thereto. Each of Holder and Issuer agrees to use its reasonable best
efforts to cooperate with and provide information to the other, for the
purpose of any required notice or application for approval.
(e) Payment of Purchase Price; Delivery of Common Stock. (i) At
each Closing, Holder shall pay to Issuer the aggregate purchase price for
the shares of Common Stock purchased pursuant to the exercise of the Option
in immediately available funds by a wire transfer to a bank account
designated by Issuer; provided, that failure or refusal of Issuer to
designate a bank account shall not preclude Holder from exercising the
Option, in whole or in part.
(ii) At each Closing, simultaneously with the payment of the
aggregate purchase price by Holder, Issuer shall deliver to Holder a
certificate or certificates representing the number of shares of Common
Stock purchased by Holder and, if the Option shall be exercised in part
only, a new Agreement providing for an Option evidencing the rights of
Holder to purchase the balance (as adjusted pursuant to the terms hereof)
of the shares then purchasable hereunder and the Holder shall deliver this
Agreement and a letter agreeing that the Holder will not offer to sell or
otherwise dispose of such shares in violation of applicable laws or the
provisions of this Agreement.
(iii) Notwithstanding anything to the contrary contained in
paragraphs (i) and (ii) of this Section 2(e), Holder shall have the right
(a "Cashless Exercise Right") to direct the Issuer, in the written notice
of exercise referred to in Section 2(d), to reduce the number of shares of
Common Stock required to be delivered by Issuer to Holder at any Closing by
such number of shares of Common Stock that have an aggregate Market/Offer
Price (as defined in Section 9(a)) equal to the aggregate purchase price
payable at such Closing (but for this paragraph (iii)), or any portion
thereof, in lieu of Holder paying to the Issuer at such Closing such
aggregate purchase price or portion thereof, as the case may be. Any
exercise of the Option in which, and to the extent to which, Holder
exercises its Cashless Exercise Right pursuant to this paragraph (iii)
shall be referred to as a "Cashless Exercise."
(f) Restrictive Legend. Certificates for Common Stock delivered
at a Closing may be endorsed at the option of Issuer with a restrictive
legend that shall read substantially as follows:
"The transfer of the shares represented by this certificate
is subject to certain provisions of an agreement between the
registered holder hereof and Issuer, a copy of which agreement is
on file at the principal office of Issuer, and to resale
restrictions arising under the Securities Act of 1933, as
amended. A copy of the aforementioned agreement will be mailed to
the holder without charge promptly after receipt by Issuer of a
written request therefor."
It is understood and agreed that: (i) the reference to the resale
restrictions of the Securities Act of 1933, as amended (the "Securities
Act"), in the above legend shall be removed by delivery of substitute
certificate(s) without this reference if Holder shall have delivered to
Issuer a copy of a letter from the staff of the Securities and Exchange
Commission, or a written opinion of counsel, in form and substance
reasonably satisfactory to Issuer, to the effect that this legend is not
required for purposes of the Securities Act; (ii) the reference to the
provisions of this Agreement in the above legend shall be removed by
delivery of substitute certificate(s) without such reference if the shares
have been sold or transferred in compliance with the provisions of this
Agreement and under circumstances that do not require the retention of such
reference; and (iii) the legend shall be removed in its entirety if the
conditions in the preceding clauses (i) and (ii) both are satisfied. In
addition, the certificates shall bear any other legend as may be required
by applicable law.
(g) Ownership of Record; Tender of Purchase Price; Expenses. Upon
the giving by Holder to Issuer of the written notice of exercise referred
to in Section 2(d) and, except to the extent this notice relates to a
Cashless Exercise, the tender of the applicable purchase price in
immediately available funds, Holder shall be deemed to be the holder of
record of the shares of Common Stock issuable upon the exercise,
notwithstanding that the stock transfer books of Issuer shall then be
closed or that certificates representing the shares of Common Stock shall
not have been actually delivered to Holder. Issuer shall pay all expenses,
and any and all United States federal, state and local taxes and other
charges that may be payable in connection with the preparation, issuance
and delivery of stock certificates under this Section 2 in the name of
Holder or its assignee, transferee or designee.
3. Covenants of Issuer. In addition to its other agreements and
covenants, Issuer agrees:
(a) Shares Reserved for Issuance. To maintain, free from
preemptive rights, sufficient authorized but unissued or treasury shares of
Common Stock so that the Option may be fully exercised without additional
authorization of Common Stock after giving effect to all other options,
warrants, convertible securities and other rights of third parties to
purchase shares of Common Stock;
(b) No Avoidance. Not to avoid or seek to avoid (whether by
charter amendment or through reorganization, consolidation, merger,
issuance of rights, dissolution or sale of assets, or by any other
voluntary act) the observance or performance of any of the covenants,
agreements or conditions to be observed or performed hereunder by Issuer
and not to take any action which would cause any of its representations or
warranties not to be true in any material respect; and
(c) Further Assurances. Promptly after this date to take all
actions as may from time to time be required (including (i) complying with
all applicable premerger notification, reporting and waiting period
requirements under the HSR Act and (ii) in the event that any other prior
approval of or notice to any regulatory authority is necessary under any
applicable federal, state or local law before the Option may be exercised,
cooperating fully with Holder in preparing and processing the required
applications or notices) in order to permit Holder to exercise the Option
and purchase shares of Common Stock pursuant to such exercise.
4. Representations and Warranties of Issuer. Issuer hereby
represents and warrants to Holder that Issuer has all requisite corporate
power and authority and has taken all corporate action necessary to
authorize, execute, deliver and perform its obligations under this
Agreement and to consummate the transactions contemplated hereby; and that
this Agreement has been duly and validly authorized, executed and delivered
by Issuer. Issuer hereby further represents and warrants to Holder that it
has taken all necessary corporate action to authorize and reserve for
issuance upon exercise of the Option the number of shares of Common Stock
equal to the maximum number of shares of Common Stock at any time or from
time to time issuable upon exercise of the Option and that all shares of
Common Stock, upon issuance pursuant to the Option, will be delivered free
and clear of all claims, liens, encumbrances, and security interests (other
than those created by this Agreement and the Securities Act) and not
subject to any preemptive rights. The execution and delivery of this
Agreement, the grant of the Option hereunder and the exercise in whole or
in part of the Option in accordance with this Agreement, will not (i)
result in the occurrence of any "Distribution Date" or "Stock Acquisition
Date" under the Kroger Rights Agreement (as defined in the Merger
Agreement), (ii) permit any Person to exercise any rights issued under any
rights agreements of Issuer, or (iii) cause the separation of any such
rights from the shares of Common Stock to which they are attached or such
rights becoming exercisable. Issuer has taken all action necessary to make
inapplicable to Grantee any state takeover, business combination, control
share or other similar statute and any charter provisions which would
otherwise be applicable to Grantee or any transaction involving Issuer and
Grantee by reason of the grant of the Option, the acquisition of beneficial
ownership of shares of Common Stock as a result of the grant of the Option,
or the acquisition of shares of Common Stock upon exercise of the Option.
5. Representations and Warranties of Grantee. Grantee hereby
represents and warrants to Issuer that Grantee has all requisite corporate
power and authority and has taken all corporate action necessary in order
to authorize, execute, deliver and perform its obligations under this
Agreement and to consummate the transactions contemplated hereby. This
Agreement has been duly and validly authorized, executed and delivered by
Grantee. Grantee represents and warrants to Issuer that any shares of
Common Stock acquired upon exercise of the Option will be acquired for
Grantee's own account, and will not be, and the Option is not being,
acquired by Grantee with a view to the distribution thereof in violation of
any applicable provision of the Securities Act. Grantee has such knowledge
and experience in business and financial matters as to be capable of
utilizing the information which is available to Grantee to evaluate the
merits and risks of an investment by Grantee in the Common Stock and
Grantee is able to bear the economic risks of any investment in the shares
of Common Stock which Grantee may acquire upon exercise of the Option.
6. Exchange; Replacement. This Agreement and the Option are
exchangeable, without expense, at the option of Holder, upon presentation
and surrender of this Agreement at the principal office of Issuer, for
other Agreements providing for Options of different denominations entitling
the holder thereof to purchase on the same terms and subject to the same
conditions as set forth in this Agreement in the aggregate the same number
of shares of Common Stock purchasable at such time hereunder, subject to
corresponding adjustments in the number of shares of Common Stock
purchasable upon exercise so that the aggregate number of such shares under
all Agreements issued in respect of this Agreement shall not exceed 19.9%
of the outstanding shares of Common Stock of the Issuer (without giving
effect to shares of Common Stock issued or issuable pursuant to the
Option). Unless the context shall require otherwise, the terms "Agreement"
and "Option" as used in this Agreement include any Agreements and related
options for which this Agreement (and the Option granted hereby) may be
exchanged. Upon (i) receipt by Issuer of reasonably satisfactory evidence
of the loss, theft, destruction, or mutilation of this Agreement, (ii)
receipt by Issuer of reasonably satisfactory indemnification in the case of
loss, theft or destruction and (iii) surrender and cancellation of this
Agreement in the case of mutilation, Issuer will execute and deliver a new
Agreement of like tenor and date. Any new Agreement executed and delivered
shall constitute an additional contractual obligation on the part of
Issuer, whether or not the Agreement so lost, stolen, destroyed or
mutilated shall at any time be enforceable by any Person other than the
holder of the new Agreement.
7. Adjustments. The total number of shares of Common Stock
purchasable upon the exercise of the Option and the Option Price shall be
subject to adjustment from time to time as follows:
In the event of any change in, or distribution in respect
of, the outstanding shares of Common Stock by reason of stock dividends,
split-ups, mergers, recapitalizations, combinations, subdivisions,
conversions, exchanges of shares or the like, the type (including, in the
event of any Major Transaction described in Section 9(d) hereof in which
Issuer is not the surviving or continuing corporation, to provide that the
Option shall be exercisable for shares of common stock of the surviving or
continuing corporation in such Major Transaction) and number of shares of
Common Stock purchasable upon exercise of the Option and the Option Price
shall be appropriately adjusted in such manner as shall fully preserve the
economic benefits contemplated hereby, and proper provision shall be made
in the agreements governing any such transactions to provide for the proper
adjustment and the full satisfaction of Issuer's obligation hereunder.
8. Registration. At any time after a Triggering Event occurs and
prior to an Exercise Termination Event, Issuer shall, at the request of
Grantee delivered in the written notice of exercise of the Option provided
for in Section 2(d), and, with respect to the first demand registration as
to which the Grantee exercises its demand rights under this Section 8,
delivered no later than 90 days following such Triggering Event, as
promptly as practicable, prepare, file and keep current a shelf
registration statement under the Securities Act covering any or all shares
issued and issuable pursuant to the Option and shall use its reasonable
best efforts to cause this registration statement to become effective and
remain current in order to permit the sale or other disposition of any
shares of Common Stock issued upon total or partial exercise of the Option
("Option Shares") in accordance with any plan of disposition reasonably
requested by Grantee; provided, however, that Issuer may postpone filing a
registration statement relating to a registration request by Grantee under
this Section 8 or suspend effectiveness of that registration statement, in
each case for a period of time (not in excess of 90 days) if in Grantee's
judgment this filing or continued effectiveness would require the
disclosure of material information that Issuer has a bona fide business
purpose for preserving as confidential. Issuer will use its reasonable best
efforts to cause such registration statement to remain effective for a
period of 365 days or such shorter time as is reasonably appropriate to
effect such sales or other dispositions. Grantee shall have the right to
demand two such registrations. In connection with any such registration,
Issuer and Holder shall provide each other with representations,
warranties, indemnities and other agreements customarily given in
connection with such registrations. To the extent reasonably requested by
Holder in connection with this registration, Issuer shall (x) become a
party to any underwriting agreement relating to the sale of such shares,
but only to the extent of obligating Issuer in respect of representations,
warranties, indemnities, contribution and other agreements (in each case
reasonably acceptable to Issuer) customarily made by issuers in these
underwriting agreements, and (y) use its reasonable best efforts to take
all further actions which shall be reasonably necessary to effect such
registration and sale (including participating in road-show presentations
and causing to be delivered customary certificates, opinions of counsel and
"comfort letters"). Notwithstanding anything to the contrary contained in
the Agreement, in no event shall Issuer be obligated to effect more than
two registrations pursuant to this Section 8 by reason of the fact that
there shall be more than one Grantee as a result of any assignment or
division of this Agreement. Upon the effectiveness of a registration
statement demanded pursuant to this Section 8, the Holder of the Option
Shares that are the subject of such registration may not thereafter require
the Issuer to repurchase such Option Shares so long as Issuer complies with
its obligations under this Section 8.
9. Repurchase of Option and/or Shares.
----------------------------------
(a) Repurchase; Repurchase Price. Upon the occurrence of a
Triggering Event and prior to an Exercise Termination Event, (i) at the
request of Holder, delivered in writing within 150 days of this occurrence
(or such later period as provided in Section 2(d) with respect to any
required notice or application or in Section 10), Issuer shall repurchase
the Option from Holder, in whole or in part, at a price (the "Option
Repurchase Price") equal to the number of shares of Common Stock then
purchasable upon exercise of the Option (or such lesser number of shares as
may be designated in the Repurchase Notice (as defined in Section 9(b))
multiplied by the amount by which the Market/Offer Price (as defined below)
exceeds the Option Price or (ii) at the request of any owner of Option
Shares (an "Owner") delivered in writing within 150 days of this occurrence
(or such later period as provided in Section 2(d) with respect to any
required notice or application or in Section 10), Issuer shall repurchase
such number of Option Shares from the Owner as the Owner shall designate in
the Repurchase Notice at a price (the "Option Share Repurchase Price")
equal to the number of shares designated multiplied by the Market/Offer
Price. The term "Market/Offer Price" shall mean the highest of (x) the
price per share of Common Stock at which a tender or exchange offer for
Common Stock either has been consummated, or at which a Person has publicly
announced its intention to commence a tender or exchange offer, after the
date of this Agreement and prior to the delivery of the Repurchase Notice,
and which offer either has been consummated and not withdrawn or terminated
as of the date payment of the Repurchase Price is made, or has been
publicly announced and the intention to make a tender or exchange offer has
not been withdrawn as of the date payment of the Repurchase Price is made,
(y) the price per share of Common Stock to be paid by any third party
pursuant to a valid agreement with Issuer for a merger, share exchange,
consolidation or reorganization entered into after the date hereof and on
or prior to the delivery of the Repurchase Notice or (z) the average
closing price for shares of Common Stock on the New York Stock Exchange
(the "NYSE") (or, if the Common Stock is not then listed on the NYSE, any
other national securities exchange or automated quotation system on which
the Common Stock is then listed or quoted) for the twenty consecutive
trading days immediately preceding the delivery of the Repurchase Notice.
In the event that a tender or exchange offer is made for the Common Stock
or an agreement is entered into for a merger, share exchange, consolidation
or reorganization involving consideration other than cash, the value of the
securities or other property issuable or deliverable in exchange for the
Common Stock shall be determined in good faith by a nationally recognized
investment banking firm mutually selected by Issuer and Holder or Owner, as
the case may be.
(b) Method of Repurchase. Subject to the terms of Section 9(a),
Holder or Owner, as the case may be, may exercise its right to require
Issuer to repurchase the Option, in whole or in part, and/or any Option
Shares then owned by Holder or Owner pursuant to this Section 9 by
surrendering for this purpose to Issuer, at its principal office, this
Agreement or certificates for Option Shares, as applicable, accompanied by
a written notice or notices stating that Holder or Owner elects to require
Issuer to repurchase the Option and/or such Option Shares in accordance
with the provisions of this Section 9 (each such notice, a "Repurchase
Notice"). Within four business days after the surrender of the Agreement
for the Option and/or certificates representing Option Shares and the
receipt of the Repurchase Notice, Issuer shall deliver or cause to be
delivered to Holder or Owner of Option Shares, as the case may be, the
applicable Option Repurchase Price and/or the Option Share Repurchase Price
or, in either case, the portion that Issuer is not then prohibited under
applicable law and regulation from so delivering, in immediately available
funds by a wire transfer to a bank account designated by Grantee. In the
event that the Repurchase Notice shall request the repurchase of the Option
in part, Issuer shall deliver with the Option Repurchase Price a new
Agreement evidencing the right of the Holder to purchase that number of
shares of Common Stock purchasable pursuant to the Option at the time of
delivery of the Repurchase Notice minus the number of shares of Common
Stock represented by that portion of the Option then being repurchased.
(c) Effect of Statutory or Regulatory Restraints on Repurchase.
To the extent that, upon or following the delivery of a Repurchase Notice,
Issuer is prohibited under applicable law or regulation from repurchasing
the Option (or a portion thereof) and/or any Option Shares subject to this
Repurchase Notice (and Issuer hereby undertakes to use its reasonable best
efforts to obtain all required regulatory and legal approvals and to file
any required notices as promptly as practicable in order to accomplish this
repurchase), Issuer shall promptly so notify Holder or Owner, as the case
may be, in writing and thereafter deliver or cause to be delivered, from
time to time, to Holder or Owner, as the case may be, the portion of the
Option Repurchase Price and the Option Share Repurchase Price that Issuer
is no longer prohibited from delivering, within four business days after
the date on which it is no longer so prohibited; provided, however, that
upon notification by Issuer in writing of this prohibition, Holder or
Owner, as the case may be, may, within five days of receipt of this
notification from Issuer, revoke in writing its Repurchase Notice, whether
in whole or to the extent of the prohibition, whereupon, in the latter
case, Issuer shall promptly (i) deliver to Holder or Owner, as the case may
be, that portion of the Option Repurchase Price and/or the Option Share
Repurchase Price that Issuer is not prohibited from delivering; and (ii)
(a) deliver to Holder with respect to the Option, a new Agreement
evidencing the right of Holder to purchase that number of shares of Common
Stock for which the surrendered Agreement was exercisable at the time of
delivery of the Repurchase Notice less the number of shares as to which the
Option Repurchase Price has theretofore been delivered to Holder, and/or
(b) deliver to the owner of Option Shares, with respect to its Option
Shares, a certificate for the Option Shares as to which the Option Share
Repurchase Price has not theretofore been delivered to such owner.
Notwithstanding anything to the contrary in this Agreement, including,
without limitation, the time limitations on the exercise of the Option,
Holder may exercise the Option at least until 150 days after the date upon
which Issuer is no longer prohibited from delivering all of the Option
Repurchase Price.
(d) Major Transactions. Issuer hereby agrees that, prior to the
occurrence of an Exercise Termination Event, Issuer shall not enter into or
agree to enter into any agreement for a Major Transaction (defined below)
unless the other party or parties thereto agree to assume in writing
Issuer's obligations under this Agreement. "Major Transaction" shall mean
any merger or consolidation involving the Issuer and any transaction
involving a sale, transfer or other disposition of a majority of the assets
or shares of capital stock of the Issuer.
10. Extension of Exercise Periods. The 150 and 700 day periods
for exercise of certain rights under Sections 2 and 9 shall be extended in
each such case at the request of Holder or Owner to the extent necessary to
avoid liability by a Holder or Owner under Section 16(b) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), by reason of this
exercise.
11. Assignment. Neither party may assign any of its rights or
obligations under this Agreement or the Option to any other person without
the express written consent of the other party except that Holder or Owner
may assign its rights in whole or in part to any of its affiliates and, in
the event that a Triggering Event shall have occurred prior to the
occurrence of an Exercise Termination Event, Holder or Owner may within 90
days following this Triggering Event assign the Option or any of its other
rights hereunder, in whole or in part, to one or more third parties,
provided that the affiliate and any such third party shall execute this
Agreement and agree to become subject to its terms. Any attempted
assignment in contravention of the preceding sentence shall be null and
void.
12. Filings; Other Actions. Each party will use its reasonable best
efforts to make all filings with, and to obtain consents of, all third
parties and governmental authorities necessary for the consummation of the
transactions contemplated by this Agreement.
13. Specific Performance. The parties acknowledge that damages
would be an inadequate remedy for a breach of this Agreement by either
party and that the obligations of the parties shall be specifically
enforceable through injunctive or other equitable relief.
14. Severability; Etc. If any term, provision, covenant, or
restriction contained in this Agreement is held by a court or a federal or
state regulatory agency of competent jurisdiction to be invalid, void, or
unenforceable, the remainder of the terms, provisions, covenants, and
restrictions contained in this Agreement shall remain in full force and
effect, and shall in no way be affected, impaired, or invalidated. If for
any reason a court or regulatory agency determines that Holder is not
permitted to acquire, or Issuer is not permitted to repurchase pursuant to
Section 9, any portion of the Option or the full number of shares of Common
Stock provided in Section l(a) (as adjusted pursuant to Sections 1(b) and 7),
it is the express intention of the parties to allow Holder to acquire or to
require Issuer to repurchase such lesser portion of the Option or number of
shares as may be permissible, without any amendment or modification of this
Agreement.
15. Notices. All notices, requests, instructions, or other
documents to be given hereunder shall be furnished in accordance with
Section 9.2 of the Merger Agreement.
16. Expenses. Except as otherwise expressly provided in this
Agreement or in the Merger Agreement, all costs and expenses incurred in
connection with this Agreement and the transactions contemplated by this
Agreement shall be paid by the party incurring the expense, including fees
and expenses of its own financial consultants, investment bankers,
accountants, and counsel.
17. Entire Agreement, Etc. This Agreement and Merger Agreement
constitute the entire agreement, and supersede all other prior agreements,
understandings, representations and warranties, both written and oral,
between the parties, with respect to the subject matter of this Agreement.
The terms and conditions of this Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective successors and
permitted assigns. Nothing in this Agreement, expressed or implied, is
intended to confer upon any party, other than the parties, and their
respective successors and permitted assigns, any rights, remedies,
obligations or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement.
18. Limitation on Profit. (a) Notwithstanding any other provision
of this Agreement, in no event shall the Total Profit (as defined) plus any
Liquidation Amounts (as defined) exceed in the aggregate $460,000,000 and,
if it otherwise would exceed this amount, the Grantee, at its sole
election, shall either (i) reduce the number of shares of Common Stock
subject to this Option, (ii) deliver to the Issuer for cancellation Option
Shares previously purchased by Grantee or any other Holder or Owner, (iii)
pay to the Issuer cash or refund in cash Liquidation Amounts previously
paid or reduce or waive the amount of any Liquidation Amount payable
pursuant to Section 8.2 of the Merger Agreement, or (iv) any combination
thereof, so that Grantee's realized Total Profit, when aggregated with any
Liquidation Amounts so paid or payable to Grantee, shall not exceed
$460,000,000 after taking into account the foregoing actions.
The term "Liquidation Amounts" means the aggregate amount of any
Initial Kroger Termination Fee and Additional Kroger Termination Fee (each
as defined in the Merger Agreement) payable or paid to Grantee and its
assigns pursuant to Section 8.2 of the Merger Agreement (and not repaid or
refunded to the Issuer pursuant to this Section 18 or otherwise).
(b) Notwithstanding any other provision of this Agreement, the
Option may not be exercised for a number of shares as would, as of the date
of exercise, result in a Notional Total Profit (as defined) which, together
with any Liquidation Amount theretofore paid or then payable to Grantee
(and not repaid or refunded to the Issuer pursuant to Section 18 or
otherwise), would exceed $460,000,000 provided, that nothing in this
sentence shall restrict any exercise of the Option permitted hereby on any
subsequent date.
(c) As used in this Agreement, the term "Total Profit" shall mean
the aggregate amount (before taxes) of the following: (i) (x) the amount
received by Grantee, any other Holder and any Owner pursuant to Issuer's
repurchase of the Option (or any portion) or any Option Shares pursuant to
Section 9, less, in the case of any repurchase of Option Shares, (y) the
Grantee's, any other Holder's and any Owner's purchase price for such
Option Shares, as the case may be, (ii) (x) the net cash amounts (and the
fair market value of any other consideration) received by Grantee, any
other Holder and any Owner pursuant to the sale of Option Shares (or any
other securities into which such Option Shares are converted or exchanged)
to any unaffiliated party, less (y) the Grantee's (or any other Holder's or
Owner's) purchase price of such Option Shares, and (iii) the net cash
amounts (and the fair market value of any other consideration) received by
Grantee (or any other Holder) on the transfer of the Option (or any portion
thereof) to any unaffiliated party. In the case of clauses (ii)(x) and
(iii) above, the Grantee and each Holder and Owner agrees to furnish as
promptly as reasonably practicable after any disposition of all or a
portion of the Option or Option Shares a complete and correct statement,
certified by a responsible executive officer or partner of Grantee, Holder
or Owner, as applicable, of the net cash amounts (and the fair market value
of any other consideration) received in connection with any sale or
transfer of the Option or Option Shares.
(d) As used in this Agreement, the term "Notional Total Profit"
with respect to any number of shares as to which Grantee and any other
Holder may propose to exercise the Option shall be the Total Profit
determined as of the date of such proposal (taking into account the
provision of Section 18(a)) assuming that the Option was exercised on such
date for such number of shares and assuming that such shares, together with
all other Option Shares held by Grantee and any other Holders and Owners
and their respective affiliates as of such date were sold for cash at the
closing market price for the Common Stock on the NYSE Composite Transaction
Tape as of the close of business on the preceding trading day (less
customary brokerage commissions).
19. Captions. The section, paragraph and other captions in this
Agreement are for convenience of reference only, do not constitute part of
this Agreement and shall not be deemed to limit or otherwise affect any of
the provisions of this Agreement.
20. Counterparts. This Agreement may be executed in one or more
counterparts, and by both parties in separate counterparts, each of which
when exercised shall be deemed to be an original, but all of which shall
constitute one and the same agreement.
21. Restrictions on Certain Actions; Covenants of Grantee. From
and after the date of exercise of the Option in whole or part, and for as
long as Grantee owns shares of Common Stock acquired pursuant to the
exercise of the Option that represent at least 2% of the then outstanding
Voting Securities:
(a) Without the prior consent of the Board of Directors of Issuer
specifically expressed in a resolution, Grantee will not, and will not permit
any of its Affiliates (as defined) to:
(i) acquire or agree, offer, seek or propose to acquire,
ownership (including, but not limited to, beneficial
ownership as defined in Rule 13d-3 under the Exchange
Act) of more than 20% of any class of Voting Securities
(as herein defined), or any rights or options to
acquire such ownership (including from a third party);
(ii) propose a merger, consolidation or similar transaction
involving the Issuer;
(iii) offer, seek or propose to purchase, lease or otherwise
acquire all or a substantial portion of the assets of
the Issuer;
(iv) seek or propose to influence or control the management
or policies of the Issuer or to obtain representation
on the Issuer's Board of Directors, or solicit or
participate in the solicitation of any proxies or
consents with respect to the securities of the Issuer;
(v) enter into any discussions, negotiations, arrangements
or understandings with any third party with respect to
any of the foregoing; or
(vi) seek or request permission to do any of the foregoing
or seek any permission to make any public announcement
with respect to any of the foregoing.
The provisions of this Section 21 shall not apply to actions
taken pursuant to the Merger Agreement; and
(b) Grantee may not sell, transfer any beneficial interest in,
pledge, hypothecate or otherwise dispose of any Voting Securities at any
time except as follows:
(i) pursuant to a tender offer, exchange offer, merger or
consolidation of the Issuer, or in connection with a
sale of all or substantially all of the Issuer's
assets; or
(ii) pursuant to a registered public offering under Section
8; or
(iii) in compliance with Rule 144 of the General Rules and
Regulations under the Securities Act (or any similar
successor rule); and
(c) (i) Grantee agrees to be present in person or to be
represented by proxy at all stockholder meetings of Issuer so that all
shares of Voting Securities beneficially owned by it or its Affiliates may
be counted for the purpose of determining the presence of a quorum at such
meetings.
(ii) Grantee agrees to vote or cause to be voted all Voting
Securities beneficially owned by it or its Affiliates proportionately with
the votes cast by all other stockholders present and voting.
(iii) The provisions of this Section 21 shall terminate at
such time as Grantee beneficially owns more than 50% of the outstanding
Common Stock of Issuer.
22. Governing Law. This Agreement shall be governed by and
continued in accordance with the internal law of the State of New York.
23. Definitions. For the purposes of this Agreement the following
terms shall have the meanings specified below:
"Affiliate" shall mean, as to any Person, any other Person
which directly or indirectly controls, or is under common control with, or
is controlled by, such Person. As used in this definition, "control"
(including, with its correlative meanings, "controlled by" and "under
common control with") shall mean the possession, directly or indirectly, of
the power to direct or cause the direction of management or policies,
whether through ownership or securities or partnership or other ownership
interest, by contract or otherwise.
"Voting Securities" means the shares of Common Stock,
preferred stock and any other securities of Issuer entitled to vote
generally for the election of directors or any other securities (including
rights and options), convertible into, exchangeable into or exercisable
for, any of the foregoing (whether or not presently exercisable,
convertible or exchangeable).
"Person" means an individual, corporation, partnership,
limited liability company, association, trust, unincorporated organization,
entity or group (as defined in the Exchange Act).
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the duly authorized officers of the parties hereto as of the
date first written above.
FRED MEYER, INC.
By: /s/ Robert G. Miller
-----------------------------
Name: Robert G. Miller
Title: President and Chief
Executive Officer
THE KROGER CO.
By: /s/ Paul W. Heldman
-----------------------------
Name: Paul W. Heldman
Title: Senior Vice President,
Secretary and General Counsel
EXHIBIT 4
VOTING AGREEMENT
VOTING AGREEMENT, dated as of October 18, 1998 (this "Agreement"),
between Robert G. Miller (the "Stockholder") and The Kroger Co., an Ohio
corporation ("Kroger").
WHEREAS, Fred Meyer, Inc., a Delaware corporation ("Fred Meyer"),
Kroger and Jobsite Holdings, Inc., a Delaware corporation and a wholly
owned subsidiary of Kroger ("Merger Sub"), are contemporaneously entering
into an Agreement and Plan of Merger, dated as of this date (the "Merger
Agreement"), which provides, among other things, for the merger of Merger
Sub with and into Fred Meyer (the "Merger");
WHEREAS, as a condition to their willingness to enter into the Merger
Agreement, Kroger and Merger Sub have requested that the Stockholder make
certain agreements with respect to certain shares of Common Stock, par
value $.01 per share ("Shares"), of Fred Meyer beneficially owned by him,
upon the terms and subject to the conditions of this Agreement; and
WHEREAS, in order to induce Kroger and Merger Sub to enter into the
Merger Agreement, the Stockholder is willing to make certain agreements
with respect to the Subject Shares (as defined);
NOW, THEREFORE, in consideration of the promises and the mutual
covenants and agreements set forth in this Agreement, the parties agree as
follows:
1. Voting Agreements; Proxy.
------------------------
(a) For so long as this Agreement is in effect, in any meeting of
stockholders of Fred Meyer, and in any action by consent of the
stockholders of Fred Meyer, the Stockholder shall vote, or, if applicable,
give consents with respect to, all of the Subject Shares that are held by
the Stockholder on the record date applicable to the meeting or consent in
favor of the Merger Agreement and the Merger contemplated by the Merger
Agreement, as the Merger Agreement may be modified or amended from time to
time in a manner not adverse to the Stockholder. The Stockholder shall use
his best efforts to cast that Stockholder's vote or give that Stockholder's
consent in accordance with the procedures communicated to that Stockholder
by Fred Meyer relating thereto so that the vote or consent shall be duly
counted for purposes of determining that a quorum is present and for
purposes of recording the results of that vote or consent.
(b) Upon the reasonable written request of Kroger, in furtherance of
the transactions contemplated in this Agreement and by the Merger Agreement
and in order to secure the performance of the Stockholder's duties under
Section 1(a) of this Agreement, the Stockholder shall promptly execute, in
accordance with the provisions of Section 212 of the Delaware General
Corporation Law, and deliver to Kroger an irrevocable proxy, substantially
in the form attached as Exhibit A, and irrevocably appoint Kroger or its
designees, with full power of substitution, its attorney and proxy to vote
or, if applicable, to give consent with respect to, all Shares constituting
Subject Shares at the time of the relevant record date with regard to any
of the matters referred to in paragraph (a) above at any meeting of the
stockholders of Fred Meyer, or in connection with any action by written
consent by the stockholders of Fred Meyer. The Stockholder acknowledges and
agrees that this proxy, if and when given, shall be coupled with an
interest, shall constitute, among other things, an inducement for Kroger to
enter into the Merger Agreement, shall be irrevocable and shall not be
terminated by operation of law or otherwise upon the occurrence of any
event and that no subsequent proxies with respect to such Subject Shares
shall be given (and if given shall not be effective); provided, however,
that any such proxy shall terminate automatically and without further
action on behalf of the Stockholder upon the termination of this Agreement.
2. Covenants. For so long as this Agreement is in effect, the
Stockholder agrees not to (i) sell, transfer, pledge, assign, hypothecate,
encumber, tender or otherwise dispose of, or enter into any contract with
respect to the sale, transfer, pledge, assignment, hypothecation,
encumbrance, tender or other disposition of (each such disposition or
contract, a "Transfer"), a number of Subject Shares in excess of 10% of the
total number of (A) Subject Shares plus (B) any Shares the Stockholder then
has the right to acquire, or will have the right to acquire within 60 days,
pursuant to options to purchase Shares granted to the Stockholder by Fred
Meyer; (ii) grant any proxies with respect to any shares that then
constitute Subject Shares, deposit any of the Subject Shares into a voting
trust or enter into a voting or option agreement with respect to any of the
Subject Shares; (iii) subject to Section 6, directly or indirectly,
solicit, initiate, encourage or otherwise facilitate any inquiries or the
making of any proposal or offer with respect to an Acquisition Proposal (as
defined in the Merger Agreement) or engage in any negotiation concerning,
or provide any confidential information or data to, or have any discussions
with any person relating to, an Acquisition Proposal; or (iv) take any
action which would make any representation or warranty of the Stockholder
in this Agreement untrue or incorrect or prevent, burden or materially
delay the consummation of the transactions contemplated by this Agreement;
provided, however, that nothing in the foregoing provisions of this Section
2 shall prohibit the Stockholder from effecting any Transfer of Subject
Shares (A) pursuant to any bona fide charitable gift or by will or
applicable laws of descent and distribution, (B) for estate planning
purposes, if the transferee pursuant to this clause (B) agrees in writing
to be bound by the provisions of this agreement, or (C) pursuant to a
pledge for purposes of securing customary margin or similar loans or
pursuant to the writing of options or in connection with any hedging,
derivative or similar transaction (and taking other necessary or customary
steps related thereto, including, without limitation, Transferring any
certificate evidencing the shares to a lender or trustee or a nominee
thereof), if notwithstanding such Transfer made pursuant to this clause
(C), the Stockholder retains the power to vote such Shares in accordance
with the terms of this Agreement and for as long as this Agreement is in
effect. No Transfer made pursuant to the proviso of the immediately
preceding sentence shall be counted in determining whether the Stockholder
is in compliance with the 10% limitation set forth in clause (i) of the
immediately preceding sentence. Notwithstanding anything to the contrary
contained in this Agreement, the Stockholder shall not effect any Transfer
of Subject Shares that would prevent the business combination to be
effected pursuant to the Merger from being accounted for as a
"pooling-of-interests" under GAAP (as defined in the Merger Agreement) or
the rules and regulations of the SEC (as defined in the Merger Agreement).
As used in this Agreement, "person" shall have the meaning specified in
Sections 3(a)(9) and 13(d)(3) of the Securities Exchange Act of 1934, as
amended.
3. Representations and Warranties of the Stockholder. The Stockholder
represents and warrants to Kroger that:
(a) Capacity; No Violations. The Stockholder has the legal capacity to
enter into this Agreement and to consummate the transactions contemplated
by this Agreement. This Agreement has been duly executed and delivered by
the Stockholder and constitutes a valid and binding agreement of the
Stockholder enforceable against the Stockholder in accordance with its
terms except as such enforceability may be limited by applicable
bankruptcy, insolvency and similar laws affecting creditors' rights
generally and general principles of equity (whether considered in a
proceeding in equity or at law). The execution, delivery and performance by
the Stockholder of this Agreement will not (i) conflict with, require a
consent, waiver or approval under, or result in a breach or default under,
any of the terms of any contract, commitment or other obligation to which
the Stockholder is a party or by which the Stockholder is bound; (ii)
violate any order, writ, injunction, decree or statute, or any law, rule or
regulation applicable to the Stockholder or the Subject Shares; or (iii)
result in the creation of, or impose any obligation on the Stockholder to
create, any Lien upon the Subject Shares that would prevent the Stockholder
from voting the Subject Shares. In this Agreement, "Lien" shall mean any
lien, pledge, security interest, claim, third party right or other
encumbrance.
(b) Subject Shares. As of the date of this Agreement, the Stockholder
is the beneficial owner of and has the power to vote or direct the voting
of the Subject Shares free and clear of any Liens that would prevent the
Stockholder from voting such Subject Shares. As of the date of this
Agreement, the Subject Shares are the only shares of any class of capital
stock of Fred Meyer which the Stockholder has the right, power or authority
(sole or shared) to sell or vote, and, other than options or warrants to
purchase Shares held by the Stockholder as of this date, the Stockholder
does not have any right to acquire, nor is it the beneficial owner of, any
other shares of any class of capital stock of Fred Meyer or any securities
convertible into or exchangeable or exercisable for any shares of any class
of capital stock of Fred Meyer. The Stockholder is not a party to any
contracts (including proxies, voting trusts or voting agreements) that
would prevent the Stockholder from voting the Subject Shares.
4. Expenses. Each party to this Agreement shall pay its own expenses
incurred in connection with this Agreement.
5. Specific Performance. The Stockholder acknowledges and agrees that
if he fails to perform any of its obligations under this Agreement,
immediate and irreparable harm or injury would be caused to Kroger for
which money damages would not be an adequate remedy. In that event, the
Stockholder agrees that Kroger shall have the right, in addition to any
other rights it may have, to specific performance of this Agreement.
Accordingly, if Kroger should institute an action or proceeding seeking
specific enforcement of the provisions of this Agreement, the Stockholder
hereby waives the claim or defense that Kroger has an adequate remedy at
law and hereby agrees not to assert in that action or proceeding the claim
or defense that a remedy at law exists. The Stockholder further agrees to
waive any requirements for the securing or posting of any bond in
connection with obtaining any equitable relief.
6. Stockholder Capacity. No person bound by this Agreement who is or
becomes during the term hereof a director or officer of the Company makes
any agreement or understanding herein in his capacity as such director or
officer. The Stockholder signs solely in his capacity as the beneficial
owner of, or the general partner of a partnership which is the beneficial
owner of, the Stockholder's Subject Shares and nothing herein shall limit
or affect any actions taken by the Stockholder in his capacity as an
officer or director of Fred Meyer to the extent specifically permitted by
the Merger Agreement. Nothing in this Agreement shall be deemed to
constitute a transfer of the beneficial ownership of the Subject Shares by
the Stockholder.
7. Notices. All notices and other communications given or made
pursuant to this Agreement shall be in writing and shall be deemed to have
been duly given or made as of the date of receipt and shall be delivered
personally or mailed by registered or certified mail (postage prepaid,
return receipt requested), sent by overnight courier or sent by telecopy,
to the applicable party at the following addresses or telecopy numbers (or
at any other address or telecopy number for a party as shall be specified
by like notice):
If to Kroger:
The Kroger Corp.
1014 Vine Street
Cincinnati, Ohio 45202
Attention: Paul W. Heldman, Esq.
Telecopy: (513) 762-1400
With a copy to:
Fried, Frank, Harris, Shriver & Jacobson
1 New York Plaza
New York, New York 10004
Attention: Arthur Fleischer, Jr., Esq.
Telecopy: (212) 859-4000
If to the Stockholder:
Robert G. Miller
c/o Fred Meyer, Inc.
3800 SE 2nd Avenue
Portland, Oregon 97202
Telecopy: (503) 797-7385
With a copy to:
Fred Meyer, Inc.
3800 SE 2nd Avenue
Portland, Oregon 97202
Attention: Roger A. Cooke, Esq.
Telecopy: (503) 797-7385
With a copy to:
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
Attention: Daniel S. Sternberg, Esq.
Telecopy: (212) 225-3999
8. Parties in Interest. This Agreement shall inure to the benefit of
and be binding upon the parties and their respective successors and
assigns; provided, however, that any successor in interest or assignee
shall agree to be bound by the provisions of this Agreement. Nothing in
this Agreement, express or implied, is intended to confer upon any Person
other than Kroger, the Stockholder or their successors or assigns, any
rights or remedies under, or by reason, of this Agreement.
9. Entire Agreement; Amendments. This Agreement contains the entire
agreement between the Stockholder and Kroger with respect to the subject
matter of this Agreement and supersedes all prior and contemporaneous
agreements and understandings, oral or written, with respect to these
transactions. This Agreement may not be changed, amended or modified
orally, but may be changed only by an agreement in writing signed by the
party against whom any waiver, change, amendment, modification or discharge
may be sought.
10. Assignment. No party to this Agreement may assign any of its
rights or obligations under this Agreement without the prior written
consent of the other party to this Agreement, except that (a) Kroger may
assign its rights and obligations under this Agreement to any of its direct
or indirect wholly owned subsidiaries (including Merger Sub), but no
transfer shall relieve Kroger of its obligations under this Agreement if
the transferee does not perform its obligations, and (b) the Stockholder
may transfer Subject Shares to the extent permitted by Section 2 of this
Agreement.
11. Headings. The section headings in this Agreement are for
convenience only and shall not affect the construction of this Agreement.
12. Counterparts. This Agreement may be executed in any number of
counterparts, each of which, when executed, shall be deemed to be an
original and all of which together shall constitute one and the same
document.
13. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware without regard to its
principles of conflicts of laws.
14. Termination. This Agreement shall terminate automatically and
without further action on behalf of any party at the earlier of (i) the
Effective Time (as defined in the Merger Agreement) and (ii) the date the
Merger Agreement is terminated pursuant to its terms.
15. Subject Shares. The term "Subject Shares" shall mean the Shares
set forth opposite the Stockholder's name on Schedule A hereto, together
with any Shares of capital stock of Fred Meyer acquired by the Stockholder
after the date hereof over which the Stockholder has the power to vote or
power to direct the voting.
IN WITNESS WHEREOF, Kroger and the Stockholder have caused this
Agreement to be duly executed and delivered on the day and year first above
written.
THE KROGER CO.
By: /s/ Paul W. Heldman
-----------------------------
Name: Paul W. Heldman
Title: Senior Vice President,
Secretary and General Counsel
ROBERT G. MILLER
/s/ Robert G. Miller
----------------------------------
Robert G. Miller
<PAGE>
SCHEDULE A
----------
STOCKHOLDER SHARES OWNED
- ----------- ------------
Robert G. Miller.......................................... 132,973
<PAGE>
EXHIBIT A
IRREVOCABLE PROXY
In order to secure the performance of the duties of the undersigned
pursuant to the Director Voting Agreement, dated as of October __, 1998
(the "Voting Agreement") between the undersigned and The Kroger Co., an
Ohio corporation ("Kroger"), a copy of such agreement being attached hereto
and incorporated by reference herein, the undersigned hereby irrevocably
appoints Joseph A. Pichler, John T. La Macchia and T. Ballard Morton, Jr.,
and each of them, the attorneys, agents and proxies, with full power of
substitution in each of them, for the undersigned and in the name, place
and stead of the undersigned, to vote or, if applicable, to give written
consent, in such manner as each such attorney, agent and proxy or his
substitute shall in his sole discretion deem proper to record such vote (or
consent) in the manner set forth in Section 1 of the Voting Agreement with
respect to all shares of Common Stock, par value $.01 per share (the
"Shares"), of Fred Meyer, Inc., a Delaware corporation (the "Company"),
which the undersigned is or may be entitled to vote at any meeting of the
Company held after the date hereof, whether annual or special and whether
or to an adjourned meeting, or, if applicable, to give written consent with
respect thereto. This Proxy is coupled with an interest, shall be
irrevocable and binding on any successor in interest of the undersigned and
shall not be terminated by operation of law or otherwise upon the
occurrence of any event (other than as provided in Section 15 of the Voting
Agreement), including, without limitation, the death or incapacity of the
undersigned. This Proxy shall operate to revoke any prior proxy as to the
Shares heretofore granted by the undersigned. This Proxy shall terminate
upon the termination of the Voting Agreement. This Proxy has been executed
in accordance with Section 212 of the Delaware General Corporation Law.
Dated: October ___, 1998
------------------------
[Name]
EXHIBIT 5
VOTING AGREEMENT
VOTING AGREEMENT, dated as of October 18, 1998 (this "Agreement"),
among the stockholders identified on Annex A (each, a "Stockholder";
collectively, the "Stockholders") and The Kroger Co., an Ohio corporation
("Kroger").
WHEREAS, Fred Meyer, Inc., a Delaware corporation ("Fred Meyer"),
Kroger and Jobsite Holdings, Inc., a Delaware corporation and a wholly
owned subsidiary of Kroger ("Merger Sub"), are contemporaneously entering
into an Agreement and Plan of Merger, dated as of this date (the "Merger
Agreement"), which provides, among other things, for the merger of Merger
Sub with and into Fred Meyer (the "Merger");
WHEREAS, as a condition to their willingness to enter into the Merger
Agreement, Kroger and Merger Sub have requested that the Stockholders make
certain agreements with respect to certain shares of Common Stock, par
value $.01 per share ("Shares"), of Fred Meyer beneficially owned by the
Stockholders, upon the terms and subject to the conditions of this
Agreement; and
WHEREAS, in order to induce Kroger and Merger Sub to enter into the
Merger Agreement, the Stockholders are willing to make certain agreements
with respect to the Subject Shares (as defined);
NOW, THEREFORE, in consideration of the promises and the mutual
covenants and agreements set forth in this Agreement, the parties agree as
follows:
1. Voting Agreements; Proxy.
------------------------
(a) For so long as this Agreement is in effect, in any meeting of
stockholders of Fred Meyer, and in any action by consent of the
stockholders of Fred Meyer, each Stockholder shall vote, or, if applicable,
give consents with respect to, all of the Subject Shares that are held by
that Stockholder on the record date applicable to the meeting or consent in
favor of the Merger Agreement and the Merger contemplated by the Merger
Agreement, as the Merger Agreement may be modified or amended from time to
time in a manner not adverse to the Stockholders. Each Stockholder shall
use his best efforts to cast that Stockholder's vote or give that
Stockholder's consent in accordance with the procedures communicated to
that Stockholder by Fred Meyer relating thereto so that the vote or consent
shall be duly counted for purposes of determining that a quorum is present
and for purposes of recording the results of that vote or consent.
(b) Upon the reasonable written request of Kroger, in furtherance of
the transactions contemplated in this Agreement and by the Merger Agreement
and in order to secure the performance of each Stockholder's duties under
Section 1(a) of this Agreement, each Stockholder shall promptly execute, in
accordance with the provisions of Section 212 of the Delaware General
Corporation Law, and deliver to Kroger an irrevocable proxy, substantially
in the form attached as Exhibit A, and irrevocably appoint Kroger or its
designees, with full power of substitution, its attorney and proxy to vote
or, if applicable, to give consent with respect to, all Shares constituting
Subject Shares at the time of the relevant record date with regard to any
of the matters referred to in paragraph (a) above at any meeting of the
stockholders of Fred Meyer, or in connection with any action by written
consent by the stockholders of Fred Meyer. Each Stockholder acknowledges
and agrees that this proxy, if and when given, shall be coupled with an
interest, shall constitute, among other things, an inducement for Kroger to
enter into the Merger Agreement, shall be irrevocable and shall not be
terminated by operation of law or otherwise upon the occurrence of any
event and that no subsequent proxies with respect to such Subject Shares
shall be given (and if given shall not be effective); provided, however,
that any such proxy shall terminate automatically and without further
action on behalf of the Stockholders upon the termination of this
Agreement.
2. Covenants. For so long as this Agreement is in effect, each
Stockholder agrees not to (i) sell, transfer, pledge, assign, hypothecate,
encumber, tender or otherwise dispose of, or enter into any contract with
respect to the sale, transfer, pledge, assignment, hypothecation,
encumbrance, tender or other disposition of (each such disposition or
contract, a "Transfer"), a number of Subject Shares which, when aggregated
with all Transfers made after the date hereof by other Stockholders who are
party to this Agreement, would exceed 10% of the total number of (A)
Subject Shares set forth on Schedule A hereto plus (B) any Shares the
Stockholders then have the right to acquire, or will have the right to
acquire within 60 days, pursuant to options to purchase Shares granted to
the Stockholders by Fred Meyer; (ii) grant any proxies with respect to any
shares that then constitute Subject Shares, deposit any of the Subject
Shares into a voting trust or enter into a voting or option agreement with
respect to any of the Subject Shares; (iii) subject to Section 6, directly
or indirectly, solicit, initiate, encourage or otherwise facilitate any
inquiries or the making of any proposal or offer with respect to an
Acquisition Proposal (as defined in the Merger Agreement) or engage in any
negotiation concerning, or provide any confidential information or data to,
or have any discussions with any person relating to, an Acquisition
Proposal; or (iv) take any action which would make any representation or
warranty of any Stockholder in this Agreement untrue or incorrect or
prevent, burden or materially delay the consummation of the transactions
contemplated by this Agreement; provided, however, that nothing in the
foregoing provisions of this Section 2 shall prohibit any Stockholder from
effecting any Transfer of Subject Shares (A) pursuant to any bona fide
charitable gift or by will or applicable laws of descent and distribution,
(B) for estate planning purposes, if the transferee pursuant to this clause
(B) agrees in writing to be bound by the provisions of this agreement, or
(C) pursuant to a pledge for purposes of securing customary margin or
similar loans or pursuant to the writing of options or in connection with
any hedging, derivative or similar transaction (and taking other necessary
or customary steps related thereto, including, without limitation,
Transferring any certificate evidencing the shares to a lender or trustee
or a nominee thereof), if notwithstanding such Transfer made pursuant to
this clause (C), the Stockholder retains the power to vote such Shares in
accordance with the terms of this Agreement and for as long as this
Agreement is in effect. No Transfer made pursuant to the proviso of the
immediately preceding sentence shall be counted in determining whether the
Stockholders are in compliance with the 10% limitation set forth in clause
(i) of the immediately preceding sentence. Notwithstanding anything to the
contrary contained in this Agreement, no Stockholder shall effect any
Transfer of Subject Shares that would prevent the business combination to
be effected pursuant to the Merger from being accounted for as a
"pooling-of-interests" under GAAP (as defined in the Merger Agreement) or
the rules and regulations of the SEC (as defined in the Merger Agreement).
As used in this Agreement, "person" shall have the meaning specified in
Sections 3(a)(9) and 13(d)(3) of the Securities Exchange Act of 1934, as
amended.
3. Representations and Warranties of Stockholders. Each Stockholder
severally and not jointly represents and warrants to Kroger that:
(a) Capacity; No Violations. The Stockholder has the legal capacity to
enter into this Agreement and to consummate the transactions contemplated
by this Agreement. This Agreement has been duly executed and delivered by
the Stockholder and constitutes a valid and binding agreement of the
Stockholder enforceable against the Stockholder in accordance with its
terms except as such enforceability may be limited by applicable
bankruptcy, insolvency and similar laws affecting creditors' rights
generally and general principles of equity (whether considered in a
proceeding in equity or at law). The execution, delivery and performance by
the Stockholder of this Agreement will not (i) conflict with, require a
consent, waiver or approval under, or result in a breach or default under,
any of the terms of any contract, commitment or other obligation to which
the Stockholder is a party or by which the Stockholder is bound; (ii)
violate any order, writ, injunction, decree or statute, or any law, rule or
regulation applicable to the Stockholder or the Subject Shares; or (iii)
result in the creation of, or impose any obligation on the Stockholder to
create, any Lien upon the Subject Shares that would prevent the Stockholder
from voting the Subject Shares. In this Agreement, "Lien" shall mean any
lien, pledge, security interest, claim, third party right or other
encumbrance.
(b) Subject Shares. As of the date of this Agreement, the Stockholder
is the beneficial owner of and has the power to vote or direct the voting
of the Subject Shares free and clear of any Liens that would prevent the
Stockholder from voting such Subject Shares. As of the date of this
Agreement, the Subject Shares are the only shares of any class of capital
stock of Fred Meyer which the Stockholder has the right, power or authority
(sole or shared) to sell or vote, and, other than options or warrants to
purchase Shares held by the Stockholder as of this date, the Stockholder
does not have any right to acquire, nor is it the beneficial owner of, any
other shares of any class of capital stock of Fred Meyer or any securities
convertible into or exchangeable or exercisable for any shares of any class
of capital stock of Fred Meyer. The Stockholder is not a party to any
contracts (including proxies, voting trusts or voting agreements) that
would prevent the Stockholder from voting the Subject Shares.
4. Expenses. Each party to this Agreement shall pay its own expenses
incurred in connection with this Agreement.
5. Specific Performance. The Stockholder acknowledges and agrees that
if he fails to perform any of its obligations under this Agreement,
immediate and irreparable harm or injury would be caused to Kroger for
which money damages would not be an adequate remedy. In that event, the
Stockholder agrees that Kroger shall have the right, in addition to any
other rights it may have, to specific performance of this Agreement.
Accordingly, if Kroger should institute an action or proceeding seeking
specific enforcement of the provisions of this Agreement, the Stockholder
hereby waives the claim or defense that Kroger has an adequate remedy at
law and hereby agrees not to assert in that action or proceeding the claim
or defense that a remedy at law exists. The Stockholder further agrees to
waive any requirements for the securing or posting of any bond in
connection with obtaining any equitable relief.
6. Stockholder Capacity. No person bound by this Agreement who is or
becomes during the term hereof a director or officer of the Company makes
any agreement or understanding herein in his capacity as such director or
officer. Each Stockholder signs solely in his capacity as the beneficial
owner of, or the general partner of a partnership which is the beneficial
owner of, that Stockholder's Subject Shares and nothing herein shall limit
or affect any actions taken by a Stockholder in his or its capacity as an
officer or director of Fred Meyer to the extent specifically permitted by
the Merger Agreement. Nothing in this Agreement shall be deemed to
constitute a transfer of the beneficial ownership of the Subject Shares by
any Stockholder.
7. Registration Rights Agreement. Kroger acknowledges that Fred Meyer
and the Stockholders are party to a Registration Rights Agreement dated as
of September 9, 1997, as amended by the Amendment to Registration Rights
Agreement dated March 10, 1998 (as amended, the "Stockholder Registration
Rights Agreement") pursuant to which Fred Meyer agreed to provide certain
registration rights to the Stockholders. Kroger hereby agrees that,
effective as of the Effective Time of the Merger, it shall assume the
obligations of Fred Meyer under the Stockholder Registration Rights
Agreement.
8. Notices. All notices and other communications given or made
pursuant to this Agreement shall be in writing and shall be deemed to have
been duly given or made as of the date of receipt and shall be delivered
personally or mailed by registered or certified mail (postage prepaid,
return receipt requested), sent by overnight courier or sent by telecopy,
to the applicable party at the following addresses or telecopy numbers (or
at any other address or telecopy number for a party as shall be specified
by like notice):
If to Kroger:
The Kroger Corp.
1014 Vine Street
Cincinnati, Ohio 45202
Attention: Paul W. Heldman, Esq.
Telecopy: (513) 762-1400
With a copy to:
Fried, Frank, Harris, Shriver & Jacobson
1 New York Plaza
New York, New York 10004
Attention: Arthur Fleischer, Jr., Esq.
Telecopy: (212) 859-4000
If to any Stockholder:
The Yucaipa Companies, LLC
1000 Santa Monica Boulevard, Fifth Floor
Los Angeles, California 90067
Attention: Ronald W. Burkle
Telecopy: (310) 789-7201
With a copy to:
Latham & Watkins
633 West Fifth Street, Suite 4000
Los Angeles, California 90071
Attention: Thomas C. Sadler, Esq.
Telecopy: (213) 891-8763
With a copy to:
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
Attention: Daniel S. Sternberg, Esq.
Telecopy: (212) 225-3999
9. Parties in Interest. This Agreement shall inure to the benefit of
and be binding upon the parties and their respective successors and
assigns; provided, however, that any successor in interest or assignee
shall agree to be bound by the provisions of this Agreement. Nothing in
this Agreement, express or implied, is intended to confer upon any Person
other than Kroger, the Stockholders or their successors or assigns, any
rights or remedies under, or by reason, of this Agreement.
10. Entire Agreement; Amendments. This Agreement contains the entire
agreement between the Stockholders and Kroger with respect to the subject
matter of this Agreement and supersedes all prior and contemporaneous
agreements and understandings, oral or written, with respect to these
transactions. This Agreement may not be changed, amended or modified
orally, but may be changed only by an agreement in writing signed by the
party against whom any waiver, change, amendment, modification or discharge
may be sought.
11. Assignment. No party to this Agreement may assign any of its
rights or obligations under this Agreement without the prior written
consent of the other party to this Agreement, except that (a) Kroger may
assign its rights and obligations under this Agreement to any of its direct
or indirect wholly owned subsidiaries (including Merger Sub), but no
transfer shall relieve Kroger of its obligations under this Agreement if
the transferee does not perform its obligations, and (b) any Stockholder
may transfer Subject Shares to the extent permitted by Section 2 of this
Agreement.
12. Headings. The section headings in this Agreement are for
convenience only and shall not affect the construction of this Agreement.
13. Counterparts. This Agreement may be executed in any number of
counterparts, each of which, when executed, shall be deemed to be an
original and all of which together shall constitute one and the same
document.
14. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware without regard to its
principles of conflicts of laws.
15. Termination. This Agreement shall terminate automatically and
without further action on behalf of any party at the earlier of (i) the
Effective Time (as defined in the Merger Agreement) and (ii) the date the
Merger Agreement is terminated pursuant to its terms.
16. Subject Shares. The term "Subject Shares" shall mean the Shares
set forth opposite each Stockholder's name on Schedule A hereto, together
with any Shares of capital stock of Fred Meyer acquired by the Stockholder
after the date hereof over which the Stockholder has the power to vote or
power to direct the voting.
IN WITNESS WHEREOF, Kroger and the Stockholders have caused this
Agreement to be duly executed and delivered on the day and year first above
written.
THE KROGER CO.
By: /s/ Paul W. Heldman
----------------------------------
Name: Paul W. Heldman
Title: Senior Vice President,
Secretary and General Counsel
THE YUCAIPA COMPANIES
By: /s/ Ronald W. Burkle
----------------------------------
Name: Ronald W. Burkle
Title: General Partner
YUCAIPA SSV PARTNERS, L.P.
By: The Yucaipa Companies
Its: General Partner
By: /s/ Ronald W. Burkle
----------------------------------
Name: Ronald W. Burkle
Title: General Partner
YUCAIPA SMITTY'S PARTNERS, L.P.
By: The Yucaipa Companies
Its: General Partner
By: /s/ Ronald W. Burkle
----------------------------------
Name: Ronald W. Burkle
Title: General Partner
YUCAIPA SMITTY'S PARTNERS II, L.P.
By: The Yucaipa Companies
Its: General Partner
By: /s/ Ronald W. Burkle
----------------------------------
Name: Ronald W. Burkle
Title: General Partner
YUCAIPA ARIZONA PARTNERS, L.P.
By: The Yucaipa Companies
Its: General Partner
By: /s/ Ronald W. Burkle
----------------------------------
Name: Ronald W. Burkle
Title: General Partner
F4L EQUITY PARTNERS, L.P.
By: Yucaipa Capital Advisors, Inc.
as general partner
By: /s/ Ronald W. Burkle
-----------------------------
Name:
Title:
RONALD W. BURKLE
/s/ Ronald W. Burkle
-------------------------------------
Ronald W. Burkle, as an individual
FFL PARTNERS
By: /s/ Ronald W. Burkle
----------------------------------
Name: Ronald W. Burkle
Title:
YUCAIPA CAPITAL FUND, L.P.
By: Yucaipa Capital Advisors, Inc.
as general partner
By: /s/ Ronald W. Burkle
-----------------------------
Name: Ronald W. Burkle
Title:
YUCAIPA/F4L PARTNERS
By: The Yucaipa Companies
as general partner
By: /s/ Ronald W. Burkle
-----------------------------
Name: Ronald W. Burkle
Title:
By: Yucaipa Capital Fund, L.P.,
as general partner
By: Yucaipa Capital Advisors, Inc.
as general partner
By: /s/ Ronald W. Burkle
------------------------
Name: Ronald W. Burkle
Title:
<PAGE>
SCHEDULE A
STOCKHOLDER NAME SHARES OWNED
- ---------------- ------------
The Yucaipa Companies.................................. 4,856,2111*
Yucaipa SSV Partners, L.P.............................. 2,744,595
Yucaipa Smitty's Partners, L.P......................... 631,400
Yucaipa Smitty's Partners II, L.P...................... 287,264
Yucaipa Arizona Partners, L.P.......................... 574,522
F4L Equity Partners, L.P............................... 3,798,526
Ronald W. Burkle....................................... 827,321
FFL Partners........................................... 365,429
Yucaipa Capital Fund, L.P.............................. 335,712
Yucaipa/F4L Partners................................... 79,719
------------
14,500,699
- ---------------------
* Includes 3,869,366 shares issuable upon exercise of a
currently-exercisable warrant.
<PAGE>
EXHIBIT A
IRREVOCABLE PROXY
In order to secure the performance of the duties of the undersigned
pursuant to the Director Voting Agreement, dated as of October __, 1998
(the "Voting Agreement") between the undersigned and The Kroger Co., an
Ohio corporation ("Kroger"), a copy of such agreement being attached hereto
and incorporated by reference herein, the undersigned hereby irrevocably
appoints Joseph A. Pichler, John T. La Macchia and T. Ballard Morton, Jr.,
and each of them, the attorneys, agents and proxies, with full power of
substitution in each of them, for the undersigned and in the name, place
and stead of the undersigned, to vote or, if applicable, to give written
consent, in such manner as each such attorney, agent and proxy or his
substitute shall in his sole discretion deem proper to record such vote (or
consent) in the manner set forth in Section 1 of the Voting Agreement with
respect to all shares of Common Stock, par value $.01 per share (the
"Shares"), of Fred Meyer, Inc., a Delaware corporation (the "Company"),
which the undersigned is or may be entitled to vote at any meeting of the
Company held after the date hereof, whether annual or special and whether
or to an adjourned meeting, or, if applicable, to give written consent with
respect thereto. This Proxy is coupled with an interest, shall be
irrevocable and binding on any successor in interest of the undersigned and
shall not be terminated by operation of law or otherwise upon the
occurrence of any event (other than as provided in Section 15 of the Voting
Agreement), including, without limitation, the death or incapacity of the
undersigned. This Proxy shall operate to revoke any prior proxy as to the
Shares heretofore granted by the undersigned. This Proxy shall terminate
upon the termination of the Voting Agreement. This Proxy has been executed
in accordance with Section 212 of the Delaware General Corporation Law.
Dated: October , 1998
--- -----------------------------
[Name]
