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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-1
TENDER OFFER STATEMENT PURSUANT TO SECTION 14(D)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934
------------------------
DELCHAMPS, INC.
(Name of Subject Company)
DELTA ACQUISITION CORPORATION
A WHOLLY OWNED SUBSIDIARY OF
JITNEY-JUNGLE STORES OF AMERICA, INC.
(Bidders)
COMMON STOCK, $.01 PAR VALUE PER SHARE
(Title of Class of Securities)
246615 10 8
(CUSIP Number of Class of Securities)
------------------------
MICHAEL E. JULIAN
PRESIDENT AND CHIEF EXECUTIVE OFFICER
JITNEY-JUNGLE STORES OF AMERICA, INC.
1770 ELLIS AVENUE
SUITE 200
JACKSON, MISSISSIPPI 39204
(601) 965-8600
(Name, Address and Telephone Number of Persons Authorized to
Receive Notices and Communications on Behalf of Bidders)
------------------------
WITH A COPY TO:
DECHERT PRICE & RHOADS
4000 BELL ATLANTIC TOWER
1717 ARCH STREET
PHILADELPHIA, PA 19103
(215) 994-4000
ATTENTION: WILLIAM G. LAWLOR
DAVID E. SCHULMAN
------------------------
CALCULATION OF FILING FEE
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TRANSACTION VALUATION* AMOUNT OF FILING FEE**
$227,483,790 $45,497
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* For the purpose of calculating the fee only, this amount assumes the
purchase of 7,582,793 shares of Common Stock of Delchamps, Inc. at $30.00
per share. Such number of shares includes all outstanding shares as of July
8, 1997, and assumes the exercise of all stock options to purchase shares of
Common Stock issued by Delchamps, Inc. which were outstanding as of July 8,
1997.
** The amount of the filing fee, calculated in accordance with Rule 0-11(d) of
the Securities Exchange Act of 1934, as amended, equals 1/50th of one
percent of the aggregate value of cash offered by Delta Acquisition
Corporation for such number of Shares.
/ / Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the form
or schedule and the date of its filing.
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Amount Previously Paid: Not Applicable Filing Not Applicable
Party:
Form or Registration Not Applicable Date Filed: Not Applicable
No.:
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This statement relates to a tender offer by Delta Acquisition Corporation,
an Alabama corporation (the "Offeror") and a wholly owned subsidiary of
Jitney-Jungle Stores of America, Inc., a Mississippi corporation ("Parent"), to
purchase all outstanding shares of common stock, par value $.01 per share, of
Delchamps, Inc., an Alabama corporation (the "Company"), including the
associated preferred share purchase rights (the "Rights") issued pursuant to the
Rights Agreement dated as of October 14, 1988, as amended, between the Company
and the First Alabama Bank, as Rights Agent (collectively, the "Shares"), at a
purchase price of $30.00 per Share, net to the seller in cash, without interest
thereon, upon the terms and subject to the conditions set forth in the Offer to
Purchase, dated July 14, 1997 (the "Offer to Purchase"), and in the related
Letter of Transmittal (which, together with any amendments or supplements
thereto, collectively constitute the "Offer") copies of which are filed as
Exhibit (a)(1) and (a)(2) hereof, respectively and which are incorporated herein
by reference.
ITEM 1. SECURITY AND SUBJECT COMPANY.
(a) The name of the subject company is Delchamps, Inc., an Alabama
corporation. The address of the principal executive offices of the Company is
set forth in Section 8 ("Certain Information Concerning the Company") of the
Offer to Purchase and is incorporated herein by reference.
(b) The exact title of the class of equity securities being sought in the
Offer is the Common Stock, par value $.01 per share, including the associated
Rights, of the Company. The information set forth in the "Introduction" of the
Offer to Purchase is incorporated herein by reference.
(c) The information set forth in Section 6 ("Price Range of Shares;
Dividends") of the Offer to Purchase is incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
This Statement is being filed by the Offeror and Parent. The information set
forth in the "Introduction," Section 9 ("Certain Information Concerning Parent
and the Offeror") and in Annex I ("Certain Information Concerning the Directors
and Executive Officers of Parent and the Offeror") of the Offer to Purchase, is
incorporated herein by reference.
(a) through (d), (g): This Statement is being filed by the Offeror and
Parent. The name, residence or business address, citizenship, present principal
occupation or employment and material occupations during
the last 5 years of each executive officer and director of the Offeror and
Parent is set forth in Annex I hereto.
(e) through (f): During the past five years, neither the Offeror nor Parent
nor, to the best knowledge of the Offeror and Parent, any of the persons listed
in Annex I of the Offer to Purchase (i) has been convicted in a criminal
proceeding (excluding traffic violations or similar misdemeanors) or (ii) was a
party to a civil proceeding of a judicial or administrative body of competent
jurisdiction as a result of which any such person was or is subject to a
judgment, decree or final order enjoining future violations of, or prohibiting
activities subject to, federal or state securities laws or finding any violation
of such laws.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
(a) None.
(b) The information set forth in the "Introduction" and Section 11
("Background of the Offer; Past Contacts, Transactions or Negotiations With the
Company") of the Offer to Purchase is incorporated herein by reference.
1
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ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a) and (b): The information set forth in the "Introduction" and Section 10
("Source and Amount of Funds") of the Offer to Purchase is incorporated herein
by reference.
(c) Not applicable.
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER.
(a) through (e): The information set forth in the "Introduction," Section 11
("Background of the Offer; Past Contacts, Transactions or Negotiations With the
Company"), Section 12 ("Purpose of the Offer and the Merger; Plans for the
Company") and Section 13 ("The Merger Agreement") of the Offer to Purchase is
incorporated herein by reference.
(f) and (g): The information set forth in Section 7 ("Certain Effects of the
Transaction") of the Offer to Purchase is incorporated herein by reference.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a) and (b): The information set forth in the "Introduction," Section 9
("Certain Information Concerning Parent and the Offeror") and Section 13 ("The
Merger Agreement") of the Offer to Purchase is incorporated herein by reference.
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO
THE SUBJECT COMPANY'S SECURITIES.
The information set forth in the "Introduction," Section 9 ("Certain
Information Concerning Parent and the Offeror"), Section 11 ("Background of the
Offer; Past Contracts, Transactions or Negotiations With the Company"), Section
12 ("Purpose of the Offer and the Merger; Plans for the Company"), and Section
13 ("The Merger Agreement") of the Offer to Purchase is incorporated herein by
reference.
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth in the "Introduction" and in Section 17 ("Fees and
Expenses") of the Offer to Purchase is incorporated herein by reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
The information set forth in Section 9 ("Certain Information Concerning
Parent and the Offeror") of the Offer to Purchase is incorporated herein by
reference.
The incorporation by reference herein of the above-mentioned financial
information does not constitute an admission that such information is material
to a decision by a security holder of the Company whether to sell, tender or
hold Shares being sought in the Offer.
ITEM 10. ADDITIONAL INFORMATION.
(a) Not applicable.
(b) and (c). The information set forth in the "Introduction," and Section 16
("Certain Legal Matters") of the Offer to Purchase is incorporated herein by
reference.
(d) The information set forth in Section 7 ("Certain Effects of the
Transaction") of the Offer to Purchase is incorporated herein by reference.
(e) None.
2
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(f) The information set forth in the Offer to Purchase, the Letter of
Transmittal and the Agreement and Plan of Merger, dated as of July 8, 1997,
among Parent, the Offeror and the Company, copies of which are attached hereto
as Exhibits (a)(1), (a)(2) and (c)(1), respectively, is incorporated herein by
reference in its entirety.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
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(a) (1) Offer to Purchase, dated July 14, 1997.
(a) (2) Letter of Transmittal.
(a) (3) Letter from Donaldson, Lufkin & Jenrette Securities Corporation to Brokers,
Dealers, Commercial Banks, Trust Companies and Other Nominees.
(a) (4) Letter from Brokers, Dealers, Commercial Banks, Trust Companies, and Other
Nominees to Clients.
(a) (5) Notice of Guaranteed Delivery.
(a) (6) Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9.
(a) (7) Summary Advertisement, dated July 14, 1997.
(a) (8) Press Release issued by Parent and the Company on July 8, 1997.
(a) (9) Press Release issued by Parent on July 14, 1997.
(b) (1) Commitment Letter, dated as of July 3, 1997, between Parent and DLJ Bridge
Finance, Inc., as amended by the letter dated July 14, 1997 from DLJ Bridge
Finance, Inc. to Parent.
(b) (2) Commitment Letter, dated as of July 7, 1997, between Parent and Fleet
Capital Corporation.
(b) (3) Indenture dated March 5, 1996 between Jitney-Jungle Stores of America, Inc.
and Marine Midland Bank, as Trustee, relating to the issuance and sale of
$200,000,000 aggregate principal amount of 12% Senior Notes due 2006
(incorporated by reference to Exhibit No. 4.2 to Amendment No. 2 to Form S-1
(No. 33-80833) of JJ Acquisitions Corp. filed with the Securities and
Exchange Commission on February 27, 1996).
(c) (1) Agreement and Plan of Merger, dated as of July 8, 1997, among Parent, the
Offeror and the Company.
(c) (2) Confidentiality and Standstill Agreement, dated as of April 8, 1997, among
Parent, Bruckmann, Rosser, Sherrill & Co., Inc. and the Company.
(d) None.
(e) Not applicable.
(f) None.
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3
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SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify the
information set forth in this statement is true, complete and correct.
JITNEY-JUNGLE STORES OF AMERICA, INC.
By: /s/ MICHAEL E. JULIAN
---------------------------------------
Name: Michael E. Julian
Title: President and Chief Executive Officer
DELTA ACQUISITION CORPORATION
By: /s/ MICHAEL E. JULIAN
---------------------------------------
Name: Michael E. Julian
Title: President
Dated: July 14, 1997
4
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OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS)
OF
DELCHAMPS, INC.
AT
$30.00 NET PER SHARE
BY
DELTA ACQUISITION CORPORATION
A WHOLLY OWNED SUBSIDIARY OF
JITNEY-JUNGLE STORES OF AMERICA, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON FRIDAY, AUGUST 8, 1997, UNLESS THE OFFER IS EXTENDED. UNDER CERTAIN
CIRCUMSTANCES, THE OFFER WILL BE EXTENDED UNTIL SEPTEMBER 12, 1997 IF NECESSARY
TO MEET CERTAIN CONDITIONS, INCLUDING THE HSR CONDITION AND THE NOTEHOLDER
CONSENT CONDITION REFERRED TO IN THIS OFFER TO PURCHASE. IN ADDITION,
NOTWITHSTANDING THE SATISFACTION OR WAIVER OF ANY CONDITIONS OF THE OFFER, THE
OFFER MAY BE EXTENDED UNTIL SEPTEMBER 12, 1997 TO ENABLE PARENT AND THE OFFEROR
TO OBTAIN PERMANENT FINANCING FOR THE TRANSACTION. THE OFFER MAY BE EXTENDED IN
OTHER CIRCUMSTANCES AS DESCRIBED IN THIS OFFER TO PURCHASE. SEE SECTION 1.
THIS OFFER (THE "OFFER") IS BEING MADE PURSUANT TO THE AGREEMENT AND PLAN OF
MERGER, DATED AS OF JULY 8, 1997 (THE "MERGER AGREEMENT"), AMONG JITNEY-JUNGLE
STORES OF AMERICA, INC. ("PARENT"), DELTA ACQUISITION CORPORATION (THE
"OFFEROR"), AND DELCHAMPS, INC. (THE "COMPANY"). THE BOARD OF DIRECTORS OF THE
COMPANY HAS UNANIMOUSLY APPROVED THE OFFER, THE MERGER (AS DEFINED HEREIN) AND
THE MERGER AGREEMENT (AS DEFINED HEREIN), HAS DETERMINED THAT THE CONSIDERATION
TO BE PAID FOR THE SHARES IN THE OFFER AND THE MERGER IS FAIR TO THE
SHAREHOLDERS OF THE COMPANY AND THAT THE OFFER AND THE MERGER ARE OTHERWISE IN
THE BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS AND RECOMMENDS THAT ALL
SHAREHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER AND,
IF REQUIRED BY THE ALABAMA BUSINESS CORPORATION LAW, VOTE IN FAVOR OF THE
MERGER.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER A NUMBER OF
SHARES OF COMMON STOCK, $.01 PAR VALUE PER SHARE, OF THE COMPANY, INCLUDING THE
ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS (COLLECTIVELY, THE "SHARES"), SUCH
THAT THE OFFEROR AND ITS AFFILIATES WILL BENEFICIALLY OWN IN THE AGGREGATE NOT
LESS THAN TWO-THIRDS OF THE SHARES OUTSTANDING ON A FULLY DILUTED BASIS, (II)
ANY APPLICABLE WAITING PERIOD UNDER THE HSR ACT (AS DEFINED HEREIN) OR PERIOD
DURING WHICH PARENT SHALL HAVE CONSENTED OR OTHERWISE BE BARRED FROM PURCHASING
SHARES PURSUANT TO THE OFFER AS PART OF ANY AGREEMENT OR OTHER ARRANGEMENT WITH
ANY GOVERNMENTAL OR REGULATORY AUTHORITY INVOLVING THE HSR ACT OR ANY OTHER
APPLICABLE ANTITRUST LAWS HAVING EXPIRED OR HAVING BEEN TERMINATED PRIOR TO THE
EXPIRATION OF THE OFFER, (III) PARENT HAVING OBTAINED PRIOR TO THE EXPIRATION OF
THE OFFER AN AMENDMENT OR SUPPLEMENT TO THE INDENTURE GOVERNING ITS 12% SENIOR
NOTES DUE 2006 AS DESCRIBED HEREIN AND (IV) THE SATISFACTION OF CERTAIN OTHER
TERMS AND CONDITIONS. SEE SECTIONS 1 AND 15.
--------------------------
IMPORTANT
Any shareholder desiring to tender Shares should either (i) complete and
sign the Letter of Transmittal or a facsimile thereof in accordance with the
instructions in the Letter of Transmittal and deliver the Letter of Transmittal
with the Shares and all other required documents to the Depositary (as defined
herein) or follow the procedure for book-entry transfer set forth in Section 3
or (ii) request such shareholder's broker, dealer, commercial bank, trust
company or other nominee to effect the transaction for the shareholder.
Shareholders having Shares registered in the name of a broker, dealer,
commercial bank, trust company or other nominee must contact such person if they
desire to tender their Shares.
Any shareholder who desires to tender Shares and whose certificates
representing such Shares are not immediately available or who cannot comply with
the procedures for book-entry transfer on a timely basis or who cannot deliver
all required documents to the Depositary, in each case prior to the expiration
of the Offer, may tender such Shares pursuant to the guaranteed delivery
procedure set forth in Section 3.
Questions and requests for assistance may be directed to Donaldson, Lufkin &
Jenrette Securities Corporation, the Dealer Manager, or to MacKenzie Partners,
Inc., the Information Agent, at their respective addresses and telephone numbers
set forth on the back cover of this Offer to Purchase. Additional copies of this
Offer to Purchase, the Letter of Transmittal, the Notice of Guaranteed Delivery
and other related materials may be obtained from the Information Agent or from
brokers, dealers, commercial banks and trust companies.
--------------------------
THE DEALER MANAGER FOR THE OFFER IS:
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
July 14, 1997
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TABLE OF CONTENTS PAGE
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Introduction................................................................................ 1
1. Terms--The Offer................................................................. 3
2. Acceptance for Payment and Payment for Shares.................................... 6
3. Procedure for Tendering Shares................................................... 7
4. Withdrawal Rights................................................................ 10
5. Certain Federal Income Tax Consequences.......................................... 10
6. Price Range of Shares; Dividends................................................. 11
7. Certain Effects of the Transaction............................................... 12
8. Certain Information Concerning the Company....................................... 13
9. Certain Information Concerning Parent and the Offeror............................ 16
10. Source and Amount of Funds....................................................... 18
11. Background of the Offer; Past Contacts, Transactions or Negotiations With the
Company.......................................................................... 21
12. Purpose of the Offer and the Merger; Plans for the Company....................... 23
13. The Merger Agreement............................................................. 25
14. Dividends and Distributions...................................................... 35
15. Certain Conditions to the Offeror's Obligations.................................. 36
16. Certain Legal Matters............................................................ 38
17. Fees and Expenses................................................................ 41
18. Miscellaneous.................................................................... 42
Annex I --Certain Information Concerning the Directors and
Executive Officers of Parent and the Offeror.............................................. I-1
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i
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To the holders of Common Stock of Delchamps, Inc.:
INTRODUCTION
Delta Acquisition Corporation, an Alabama corporation (the "Offeror") and a
wholly owned subsidiary of Jitney-Jungle Stores of America, Inc., a Mississippi
corporation ("Parent"), hereby offers to purchase all outstanding shares of
Common Stock, $.01 par value per share, of Delchamps, Inc., an Alabama
corporation (the "Company"), including the associated preferred share purchase
rights (the "Rights") issued pursuant to the Rights Agreement dated as of
October 14, 1988, as amended (the "Rights Agreement"), between the Company and
First Alabama Bank, as Rights Agent (collectively, the "Shares"), at a purchase
price of $30.00 per Share (the "Offer Price"), net to the seller in cash,
without interest, upon the terms and subject to the conditions set forth in this
Offer to Purchase and in the related Letter of Transmittal (which, together with
any amendments or supplements hereto or thereto, collectively constitute the
"Offer"). Tendering holders of Shares will not be obligated to pay brokerage
fees or commissions or, except as set forth in the Letter of Transmittal, stock
transfer taxes on the purchase of Shares by the Offeror pursuant to the Offer.
The Offeror will pay all charges and expenses of Donaldson, Lufkin & Jenrette
Securities Corporation (the "Dealer Manager"), IBJ Schroder Bank and Trust
Company (the "Depositary") and MacKenzie Partners, Inc. (the "Information
Agent") in connection with the Offer. See Section 17.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE OFFER,
THE MERGER (AS DEFINED HEREIN), AND THE MERGER AGREEMENT (AS DEFINED HEREIN),
HAS DETERMINED THAT THE CONSIDERATION TO BE PAID FOR THE SHARES IN THE OFFER AND
THE MERGER IS FAIR TO THE SHAREHOLDERS OF THE COMPANY AND THAT THE OFFER AND THE
MERGER ARE OTHERWISE IN THE BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS
AND RECOMMENDS THAT ALL SHAREHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES
PURSUANT TO THE OFFER AND, IF REQUIRED BY THE ALABAMA BUSINESS CORPORATION LAW,
VOTE IN FAVOR OF THE MERGER.
The Company has advised the Offeror that Credit Suisse First Boston
Corporation ("CSFB"), the Company's financial advisor, has delivered to the
Company's Board of Directors its written opinion dated July 7, 1997 that, as of
such date and based upon and subject to the matters set forth therein, the
consideration to be received by the holders of Shares pursuant to the Offer and
the Merger was fair from a financial point of view to such holders. A copy of
such opinion is set forth in full as an exhibit to the Company's
Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9")
which is being mailed to the Company's shareholders with this Offer to Purchase,
and such shareholders are urged to read the opinion carefully and in its
entirety.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER A NUMBER OF
SHARES SUCH THAT THE OFFEROR AND ITS AFFILIATES WILL BENEFICIALLY OWN IN THE
AGGREGATE NOT LESS THAN TWO-THIRDS OF THE SHARES OUTSTANDING ON A FULLY DILUTED
BASIS (THE "MINIMUM CONDITION"), (II) ANY WAITING PERIOD UNDER THE
HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED (THE "HSR
ACT"), APPLICABLE TO THE PURCHASE OF SHARES PURSUANT TO THE OFFER OR PERIOD
DURING WHICH PARENT SHALL HAVE CONSENTED OR OTHERWISE BE BARRED FROM PURCHASING
SHARES PURSUANT TO THE OFFER AS PART OF ANY AGREEMENT OR OTHER ARRANGEMENT WITH
ANY GOVERNMENTAL OR REGULATORY AUTHORITY INVOLVING THE HSR ACT OR ANY OTHER
APPLICABLE ANTITRUST LAWS HAVING EXPIRED OR HAVING BEEN TERMINATED PRIOR TO THE
EXPIRATION OF THE OFFER (THE "HSR CONDITION"), (III) PARENT OBTAINING PRIOR TO
THE EXPIRATION OF THE OFFER AN AMENDMENT OR SUPPLEMENT TO THE SENIOR NOTES
INDENTURE (THE "SENIOR NOTES INDENTURE") GOVERNING ITS 12% SENIOR NOTES DUE 2006
(THE "SENIOR NOTES") (AND, TO THE EXTENT NECESSARY, THE SENIOR NOTES AND
GUARANTEES REFERRED TO THEREIN), ALL WITH THE CONSENT OF THE HOLDERS OF SUCH
SENIOR NOTES AND IN ACCORDANCE WITH THE TERMS OF SUCH SENIOR NOTES INDENTURE, TO
INCREASE THE AMOUNT OF PERMITTED INDEBTEDNESS, RESTRICTED PAYMENTS AND
INVESTMENTS PERMITTED TO BE INCURRED OR MADE, AS APPLICABLE, BY PARENT AND ITS
SUBSIDIARIES UNDER THE SENIOR NOTES INDENTURE AND TO MAKE SUCH OTHER CHANGES
THERETO AS ARE NECESSARY
1
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TO PERMIT IT TO CONSUMMATE THE OFFER, THE MERGER AND THE OTHER TRANSACTIONS
CONTEMPLATED BY THE MERGER AGREEMENT (THE "NOTEHOLDER CONSENT CONDITION") AND
(IV) THE SATISFACTION OF CERTAIN OTHER TERMS AND CONDITIONS. SEE SECTIONS 1 AND
15.
The Offer is being made pursuant to the Agreement and Plan of Merger, dated
as of July 8, 1997 (the "Merger Agreement"), among Parent, the Offeror and the
Company. The Merger Agreement provides that, among other things, after the
purchase of Shares pursuant to the Offer and the satisfaction of the other
conditions set forth in the Merger Agreement and in accordance with the relevant
provisions of the Alabama Business Corporation Act, as amended (the "ABCA"), the
Offeror will be merged with and into the Company (the "Merger"). Following
consummation of the Merger, it is anticipated that the Company will continue as
the surviving corporation (the "Surviving Corporation") and will be a wholly
owned subsidiary of Parent. The Merger is subject to a number of conditions,
including approval by shareholders of the Company. At the effective time of the
Merger (the "Effective Time"), each Share that is issued and outstanding (other
than Shares owned by the Company, Parent, the Offeror, any other wholly owned
subsidiary of Parent or by shareholders, if any, who are entitled to and who
properly exercise dissenters' rights under the ABCA), will be converted into and
become the right to receive from the Surviving Corporation $30.00 (or any higher
price that may be paid for each Share pursuant to the Offer) in cash, without
interest thereon. See Section 5 for a description of certain tax consequences of
the Offer and the Merger. Instead of merging the Offeror into the Company,
Parent may elect to merge the Company with and into Parent, the Offeror or
another direct or indirect wholly owned subsidiary of Parent.
The Merger Agreement provides that, promptly after the Offeror purchases
Shares pursuant to the Offer, the Offeror will be entitled to designate such
number of directors, rounded up to the next whole number, of the Board of
Directors of the Company as will give the Offeror representation on the Board of
Directors equal to at least that number of directors equal to the product of (i)
the total number of directors on the Board of Directors and (ii) the percentage
that the number of Shares so purchased bears to the number of Shares
outstanding. However, the Merger Agreement provides that the Board of Directors
of the Company shall have, to the extent they are willing to continue to serve,
at least three directors who were directors on the date of the Merger Agreement
and who are not designees nor officers, directors, employees or affiliates of
Parent or the Offeror nor employees of the Company and its subsidiaries. The
Company has agreed to use its best efforts to cause the appropriate number of
directors to resign and the Offeror's designees to be elected or appointed to
the Board of Directors of the Company. The Merger Agreement is more fully
described in Section 13.
The Company has represented to the Offeror that as of the date of the Merger
Agreement, there were 7,127,743 Shares issued and outstanding and there were
outstanding stock options and rights to purchase an aggregate of 455,050 Shares.
As a result, the Offeror believes the Minimum Condition will be satisfied if
5,055,196 Shares are validly tendered and not withdrawn pursuant to the Offer.
As of the date hereof, neither the Offeror nor Parent nor any of their
affiliates beneficially owns any Shares. If the Offeror acquires at least
5,055,196 Shares in the Offer, the Offeror will beneficially own two-thirds of
the outstanding Shares on a fully diluted basis. Accordingly, the Offeror would
have sufficient voting power to approve the Merger without the affirmative vote
of any other shareholder. Under the terms of the Merger Agreement, Parent and
the Offeror may reduce the Minimum Condition to a majority of the outstanding
Shares on a fully diluted basis. Parent and the Offeror currently do not intend
to reduce the Minimum Condition but reserve the right to do so, subject to the
terms of the Merger Agreement and the applicable rules and regulations of the
Securities and Exchange Commission (the "Commission").
Under the ABCA, if the Offeror acquires at least 80% of the outstanding
Shares pursuant to the Offer, the Offeror could elect to effect the merger of
the Company with and into Parent, the Offeror or another direct or indirect
wholly owned subsidiary of Parent without a vote of the shareholders of the
Company. If, however, the Offeror does not acquire at least 80% of the then
outstanding Shares pursuant to the Offer or otherwise and a vote of the
Company's shareholders is required under the ABCA, a longer period of time
generally will be required to effect the Merger. See Section 12.
2
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Under the terms of the Merger Agreement, the Offer is conditioned upon,
among other things, satisfaction of the Noteholder Consent Condition, which
provides that Parent obtain an amendment or supplement to the Senior Notes
Indenture governing its Senior Notes to increase the amount of permitted
indebtedness, restricted payments and investments permitted to be incurred or
made, as applicable, by Parent and its subsidiaries under the Senior Notes
Indenture and to make such other changes thereto as are necessary to permit it
to consummate the Offer, the Merger and the other transactions contemplated by
the Merger Agreement.
The Senior Notes Indenture currently contains restrictions upon the ability
of Parent and its subsidiaries to (i) incur additional indebtedness, unless
specified financial coverage ratios are met or such indebtedness is otherwise
permitted, and (ii) make investments in third persons in excess of permitted
amounts. Parent intends to solicit consents from holders of its Senior Notes to
make the following principal amendments to the Senior Notes Indenture: (i) to
permit Parent to issue up to $200.0 million of subordinated indebtedness and to
permit certain of Parent's subsidiaries to guarantee such indebtedness; (ii) to
permit Parent or certain of its subsidiaries to incur up to $75.0 million of
additional indebtedness, including borrowings under Parent's senior credit
facility; (iii) to provide that Parent's purchase of Shares will constitute a
permitted investment and that the Merger and the related payment of merger
consideration will not constitute a restricted payment under the Senior Notes
Indenture; and (iv) to amend the amount of annual fees payable by Parent to
Bruckmann, Rosser, Sherrill & Co., Inc., a financial advisor to Parent and an
affiliate of the majority shareholder of Parent, in view of the proposed
acquisition of the Company.
Under the terms of the Senior Notes Indenture, the foregoing amendments
require the consent of at least a majority in aggregate principal amount of the
holders of Senior Notes. The Senior Notes Indenture has been filed as an exhibit
to the Schedule 14D-1.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH SHOULD BE READ BEFORE ANY DECISION IS MADE WITH
RESPECT TO THE OFFER.
1. TERMS--THE OFFER.
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any extension or
amendment), the Offeror will accept for payment and pay for all Shares validly
tendered prior to the Expiration Date and not theretofore withdrawn in
accordance with Section 4. The term "Expiration Date" shall mean 12:00 Midnight,
New York City time, on Friday, August 8, 1997, unless and until the Offeror
shall have extended the period of time for which the Offer is open, in which
event the term "Expiration Date" shall mean the latest time and date at which
the Offer, as so extended by the Offeror, shall expire.
Under the terms of the Merger Agreement, subject to the applicable rules and
regulations of the United States Securities and Exchange Commission (the
"Commission"), the Offeror expressly reserves the right (but has no obligation)
to increase the consideration per Share payable in the Offer or amend, modify or
make any changes in the terms and conditions of the Offer except that the
Offeror shall not, without the prior written consent of the Company, impose
conditions to the Offer other than the conditions set forth in Section 15,
reduce the number of Shares sought to be purchased in the Offer, reduce the
Offer Price, change the form of consideration payable in the Offer, extend the
Expiration Date (except as set forth in the next paragraph), or otherwise change
any term of the Offer in any manner adverse to the holders of Shares.
The Offeror may, without the consent of the Company, extend the Offer (i) if
at the then scheduled Expiration Date of the Offer, any of the conditions set
forth in Section 15 shall not have been satisfied or waived, until such time as
such conditions are satisfied or waived, (ii) for any period required by any
rule, regulation, interpretation or position of the Commission or the Commission
staff applicable to the Offer,
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(iii) on one or more occasions for an aggregate period of not more than five
business days, if the Minimum Condition has been satisfied but less than 80% of
the outstanding Shares (on a fully diluted basis) have been validly tendered and
not withdrawn, (iv) for any reason on one or more occasions for an aggregate
period of not more than 10 business days beyond the initial Expiration Date or
the latest Expiration Date that would otherwise be permitted under clause (i),
(ii) or (iii) of this sentence, and (v) on one or more occasions for an
aggregate period of not more than 60 calendar days after the date hereof (I.E.,
September 12, 1997) in order for Parent to obtain financing on terms acceptable
to it; provided, however, that without the written consent of the Company,
Parent and the Offeror may not extend the Offer (A) for any period that would
end more than 60 calendar days after the date hereof (I.E., September 12, 1997),
unless on such sixtieth day any of the conditions in Section 15 are not
satisfied, or (B) for any period that would end more than 90 calendar days after
the date hereof (I.E., October 14, 1997); provided further that if, on the
initial Expiration Date of the Offer, or any extension thereof, the conditions
set forth in paragraphs (c)(iii) through (c)(ix) and (e) in Section 15 have been
satisfied or waived but any of the HSR Condition, the Noteholder Consent
Condition or the conditions set forth in paragraphs (c)(i) or (c)(ii) in Section
15 shall not have been satisfied or waived, Parent and the Offeror have agreed
to extend the Offer one or more times (for such periods as Parent and the
Offeror shall determine in their sole discretion) until 60 calendar days after
the date hereof (I.E., September 12, 1997); provided, further, that Parent and
the Offeror may extend the Offer beyond October 14, 1997 if the conditions set
forth in Section 15 shall not have been satisfied as a result of a breach by the
Company of its obligations under the Merger Agreement.
If the Offeror shall decide, in its sole discretion, to increase the
consideration offered in the Offer to holders of Shares and if, at the time that
notice of such increase is first published, sent or given to holders of Shares
in the manner specified below, the Offer is scheduled to expire at any time
earlier than the expiration of a period ending on the tenth business day from,
and including, the date that such notice is first so published, sent or given,
then, subject to the terms of the Merger Agreement, the Offer will be extended
until the expiration of such period of 10 business days. For purposes of the
Offer, a "business day" means any day other than a Saturday, Sunday or a federal
holiday and consists of the time period from 12:01 a.m. through 12:00 Midnight,
New York City time.
THE OFFER IS CONDITIONED UPON SATISFACTION OF THE MINIMUM CONDITION, THE HSR
CONDITION, THE NOTEHOLDER CONSENT CONDITION AND CERTAIN OTHER TERMS AND
CONDITIONS. THE MERGER AGREEMENT AND THE OFFER MAY BE TERMINATED BY THE OFFEROR
AND PARENT IF CERTAIN EVENTS OCCUR. SEE SECTION 15.
Subject to the applicable rules and regulations of the Commission, the
foregoing conditions are for the sole benefit of the Offeror and Parent and may
be asserted by the Offeror or Parent and may be waived by the Offeror or Parent,
in whole or in part, at any time and from time to time, in the sole discretion
of the Offeror or Parent; provided that, without the written consent of the
Company, the Offeror and Parent may not reduce the Minimum Condition to less
than a majority of the outstanding Shares on a fully diluted basis or waive the
condition relating to the expiration of the waiting period under the HSR Act.
For a discussion of certain agreements among the Offeror, Parent and the Company
relating to the satisfaction of the HSR Condition and certain other of the
conditions set forth in Section 15, see Section 13, "The Merger Agreement--HSR
MATTERS."
If the Minimum Condition or any other condition set forth in Section 15 has
not been satisfied by 12:00 Midnight, New York City time, on Friday, August 8,
1997 (or any other time then set as the Expiration Date), the Offeror reserves
the right (but shall not be obligated), subject to the terms and conditions
contained in the Merger Agreement (including the limitations described above)
and to the applicable rules and regulations of the Commission, (i) to terminate
the Offer and not accept for payment or pay for any Shares and return all
tendered Shares to tendering shareholders, (ii) to waive all the unsatisfied
conditions and accept for payment and pay for all Shares validly tendered prior
to the Expiration Date and not theretofore withdrawn, (iii) to extend the Offer
and, subject to the right of shareholders to withdraw Shares until the
Expiration Date, retain the Shares that have been tendered during the period or
periods for which the Offer is extended or (iv) to amend the Offer.
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Subject to the limitations set forth in this Offer and the Merger Agreement,
the Offeror reserves the right (but will not be obligated), at any time or from
time to time in its sole discretion, to extend the period during which the Offer
is open by giving oral or written notice of such extension to the Depositary and
by making a public announcement of such extension. Except to the extent required
by the Merger Agreement, there can be no assurance that the Offeror will
exercise its right to extend the Offer. See Section 13.
Subject to the applicable rules and regulations of the Commission and
subject to the limitations set forth in the Merger Agreement, the Offeror
expressly reserves the right, at any time and from time to time, in its sole
discretion, (i) to delay payment for any Shares regardless of whether such
Shares were theretofore accepted for payment, or to terminate the Offer and not
to accept for payment or pay for any Shares not theretofore accepted for payment
or paid for, upon the occurrence of any of the conditions set forth in Section
15, by giving oral or written notice of such delay or termination to the
Depositary, and (ii) at any time or from time to time, to amend the Offer in any
respect by giving oral or written notice of such amendment to the Depositary.
Under no circumstances will interest be paid on the purchase price of the Shares
to be paid by the Offeror, regardless of any extension of the Offer or any delay
in making any payment. The Offeror's right to delay payment for any Shares or
not to pay for any Shares theretofore accepted for payment is subject to the
applicable rules and regulations of the Commission, including Rule 14e-1(c)
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
relating to the Offeror's obligation to pay for or return tendered Shares
promptly after the termination or withdrawal of the Offer.
Any extension of the period during which the Offer is open, delay in
acceptance for payment or payment, termination or amendment of the Offer will be
followed, as promptly as practicable, by public announcement thereof, such
announcement in the case of an extension to be issued not later than 9:00 a.m.,
New York City time, on the next business day after the previously scheduled
Expiration Date in accordance with the public announcement requirements of Rules
14d-4(c), 14d-6(d) and 14e-1(d) under the Exchange Act. Without limiting the
obligation of the Offeror under such rule or the manner in which the Offeror may
choose to make any public announcement, the Offeror currently intends to make
announcements by issuing a press release to the Dow Jones News Service and
making any appropriate filing with the Commission.
If, subject to the terms of the Merger Agreement, the Offeror makes a
material change in the terms of the Offer or the information concerning the
Offer, or if it waives a material condition of the Offer (including, with the
consent of the Company, a waiver of the Minimum Condition), the Offeror will
disseminate additional tender offer materials and extend the Offer if and to the
extent required by Rules 14d-4(c), 14d-6(d) and 14e-1 under the Exchange Act or
otherwise. The minimum period during which the Offer must remain open following
material changes in the terms of the Offer or the information concerning the
Offer, other than a change in price or a change in percentage of securities
sought, will depend upon the facts and circumstances, including the relative
materiality of the terms or information changes. With respect to a change in
price or a change in percentage of securities sought, a minimum 10 business day
period is generally required to allow for adequate dissemination to shareholders
and investor response.
The Company has provided the Offeror with the Company's list of shareholders
and security position listings for the purpose of disseminating the Offer to
holders of Shares. This Offer to Purchase and the related Letter of Transmittal
will be mailed to record holders of Shares whose names appear on the Company's
shareholder list and will be furnished to brokers, dealers, commercial banks,
trust companies and similar persons whose names, or the names of whose nominees,
appear on the shareholder list or, if applicable, who are listed as participants
in a clearing agency's security position listing for subsequent transmittal to
beneficial owners of Shares.
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2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES.
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any such extension or
amendment), the Offeror will accept for payment and will pay for all Shares
validly tendered prior to the Expiration Date and not theretofore withdrawn in
accordance with Section 4 promptly after the later to occur of (i) the
Expiration Date and (ii) the satisfaction or waiver of the conditions set forth
in Section 15. Subject to compliance with Rule 14e-1(c) under the Exchange Act
and any other applicable rules of the Commission and the terms of the Merger
Agreement, the Offeror expressly reserves the right to delay acceptance for
payment of, or payment for, Shares in order to comply in whole or in part with
any applicable law, including the HSR Act. See Sections 1, 15 and 16. The
Company and Parent each filed a Premerger Notification and Report Form with
respect to the Offer under the HSR Act on July 11, and July 14, 1997,
respectively. The waiting period under the HSR Act with respect to the Offer
will expire at 11:59 p.m., New York City time, on July 29, 1997 unless early
termination of the waiting period is granted. However, the Antitrust Division of
the Department of Justice or the Federal Trade Commission may extend the waiting
period by requesting additional information or documentary material from Parent
or the Company. If such a request is made, such waiting period will expire at
11:59 p.m., New York City time, on the tenth day after substantial compliance by
Parent or the Company with such request. See Section 16 for additional
information concerning the HSR Act and the applicability of the antitrust laws
to the Offer and Section 13 for certain provisions of the Merger Agreement
applicable to such matters.
Payment for Shares accepted for payment pursuant to the Offer will in all
cases be made only after timely receipt by the Depositary of (i) certificates
for such Shares or timely confirmation (a "Book-Entry Confirmation") of a
book-entry transfer of such Shares into the Depositary's account at The
Depository Trust Company or the Philadelphia Depository Trust Company
(collectively, the "Book-Entry Transfer Facilities") pursuant to the procedures
set forth in Section 3, (ii) a properly completed and duly executed Letter of
Transmittal (or a manually signed facsimile thereof) with all required signature
guarantees or, in the case of a book-entry transfer, an Agent's Message (as
defined below) and (iii) any other documents required by the Letter of
Transmittal.
The term "Agent's Message" means a message transmitted by a Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that such Book-Entry Transfer Facility has
received an express acknowledgment from the participant in such Book-Entry
Transfer Facility tendering the Shares that such participant has received and
agrees to be bound by the terms of the Letter of Transmittal and that the
Offeror may enforce such agreement against the participant.
For purposes of the Offer, the Offeror will be deemed to have accepted for
payment, and thereby purchased, Shares validly tendered and not withdrawn as, if
and when the Offeror gives oral or written notice to the Depositary of the
Offeror's acceptance of such Shares for payment pursuant to the Offer. In all
cases, payment for Shares purchased pursuant to the Offer will be made by
deposit of the purchase price with the Depositary, which will act as agent for
tendering shareholders for the purpose of receiving payment from the Offeror and
transmitting such payment to tendering shareholders whose Shares have been
accepted for payment. If, for any reason whatsoever, acceptance for payment of
any Shares tendered pursuant to the Offer is delayed, or the Offeror is unable
to accept for payment Shares tendered pursuant to the Offer, then, without
prejudice to the Offeror's rights under Section 1, the Depositary may,
nevertheless, on behalf of the Offeror, retain tendered Shares, and such Shares
may not be withdrawn, except to the extent that the tendering shareholders are
entitled to withdrawal rights as described in Section 4 below and as otherwise
required by Rule 14e-1(c) under the Exchange Act. UNDER NO CIRCUMSTANCES WILL
INTEREST BE PAID ON THE PURCHASE PRICE OF THE SHARES TO BE PAID BY THE OFFEROR,
REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING ANY PAYMENT.
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If any tendered Shares are not accepted for payment pursuant to the terms
and conditions of the Offer for any reason, or if certificates are submitted for
more Shares than are tendered, certificates for such unpurchased or untendered
Shares will be returned, without expense to the tendering shareholder (or, in
the case of Shares delivered by book-entry transfer to a Book-Entry Transfer
Facility, such Shares will be credited to an account maintained within such
Book-Entry Transfer Facility), as promptly as practicable after the expiration
or termination of the Offer.
If, prior to the Expiration Date, the Offeror increases the price being paid
for Shares accepted for payment pursuant to the Offer, such increased
consideration will be paid to all shareholders whose Shares are purchased
pursuant to the Offer, whether or not such Shares were tendered prior to such
increase in consideration.
The Offeror reserves the right to transfer or assign, in whole or from time
to time in part, to one or more of its affiliates, the right to purchase Shares
tendered pursuant to the Offer, but any such transfer or assignment will not
relieve the Offeror of its obligations under the Offer or prejudice the rights
of tendering shareholders to receive payment for Shares validly tendered and
accepted for payment.
3. PROCEDURE FOR TENDERING SHARES.
VALID TENDERS. For Shares to be validly tendered pursuant to the Offer, a
properly completed and duly executed Letter of Transmittal (or a manually signed
facsimile thereof), with any required signature guarantees, or, in the case of a
book-entry transfer, an Agent's Message, and any other required documents, must
be received by the Depositary at one of its addresses set forth on the back
cover of this Offer to Purchase prior to the Expiration Date and either (i)
certificates representing such Shares must be received by the Depositary along
with the Letter of Transmittal or such Shares must be tendered pursuant to the
procedure for book-entry transfer set forth below, and a Book-Entry Confirmation
must be received by the Depositary, in each case prior to the Expiration Date or
(ii) the guaranteed delivery procedures set forth below must be complied with.
No alternative, conditional or contingent tenders will be accepted.
BOOK-ENTRY TRANSFER. The Depositary will make a request to establish an
account with respect to the Shares at each Book-Entry Transfer Facility for
purposes of the Offer within two business days after the date of this Offer to
Purchase. Any financial institution that is a participant in a Book-Entry
Transfer Facility's system may make book-entry delivery of Shares by causing a
Book-Entry Transfer Facility to transfer such Shares into the Depositary's
account at a Book-Entry Transfer Facility in accordance with such Book-Entry
Transfer Facility's procedures for transfer. Although delivery of Shares may be
effected through book-entry at a Book-Entry Transfer Facility prior to the
Expiration Date, (i) the Letter of Transmittal (or a manually signed facsimile
thereof), properly completed and duly executed, with any required signature
guarantees, or an Agent's Message in connection with a book-entry transfer, and
any other required documents, must, in any case, be transmitted to and received
by the Depositary at one of its addresses set forth on the back cover of this
Offer to Purchase or (ii) the guaranteed delivery procedures described below
must be complied with. DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY
IN ACCORDANCE WITH SUCH BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES NOT
CONSTITUTE DELIVERY TO THE DEPOSITARY.
SIGNATURE GUARANTEE. Signatures on the Letter of Transmittal must be
guaranteed by a member in good standing of the Securities Transfer Agents
Medallion Program, the New York Stock Exchange Medallion Signature Guarantee
Program, the Stock Exchange Medallion Program, or by any other bank, broker,
dealer, credit union, savings association or other entity which is an "eligible
guarantor institution," as such term is defined in Rule 17Ad-15 under the
Exchange Act (each of the foregoing being referred to as an "Eligible
Institution" and, collectively, as "Eligible Institutions"), unless the Shares
tendered thereby are tendered (i) by a registered holder of Shares who has not
completed either the box labeled "Special Delivery Instructions" or the box
labeled "Special Payment Instructions" on the Letter of Transmittal or (ii) for
the account of any Eligible Institution. If the certificates evidencing Shares
are registered in the
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name of a person or persons other than the signer of the Letter of Transmittal,
or if payment is to be made, or delivered to, or certificates for unpurchased
Shares are to be issued or returned to, a person other than the registered owner
or owners, then the tendered certificates must be endorsed or accompanied by
duly executed stock powers, in either case signed exactly as the name or names
of the registered owner or owners appear on the certificates, with the
signatures on the certificates or stock powers guaranteed by an Eligible
Institution as provided in the Letter of Transmittal. See Instructions 1 and 5
to the Letter of Transmittal.
GUARANTEED DELIVERY. Any shareholder who desires to tender Shares and whose
certificates for Shares are not immediately available or who cannot comply with
the procedures for book-entry transfer on a timely basis or who cannot deliver
all required documents to the Depositary, in each case prior to the Expiration
Date, may tender such Shares if all of the following guaranteed delivery
procedures are duly complied with:
(i) the tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form made available by the Offeror, is
received by the Depositary, as provided below, prior to the Expiration Date;
and
(iii) the certificates for all tendered Shares, in proper form for
transfer (or a Book-Entry Confirmation), together with a properly completed
and duly executed Letter of Transmittal (or a manually signed facsimile
thereof), and any required signature guarantees, or, in the case of a book-
entry transfer, an Agent's Message, and any other documents required by the
Letter of Transmittal are received by the Depositary within three trading
days of the date of such Notice of Guaranteed Delivery. The term "trading
day" is any day on which the Nasdaq National Market (the "Nasdaq National
Market") operated by the National Association of Securities Dealers, Inc.
(the "NASD") is open for business.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted by
facsimile transmission or mail to the Depositary and must include a guarantee by
an Eligible Institution in the form set forth in the Notice of Guaranteed
Delivery.
THE METHOD OF DELIVERY OF SHARES, THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER FACILITY,
IS AT THE OPTION AND RISK OF THE TENDERING SHAREHOLDER. SHARES WILL BE DEEMED
DELIVERED ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY (INCLUDING, IN THE CASE
OF A BOOK-ENTRY TRANSFER, BY BOOK-ENTRY CONFIRMATION). IF DELIVERY IS BY MAIL,
REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED.
IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
Notwithstanding any other provision hereof, payment for Shares accepted for
payment pursuant to the Offer will in all cases be made only after timely
receipt by the Depositary of (i) certificates for such Shares or a Book-Entry
Confirmation, (ii) a properly completed and duly executed Letter of Transmittal
(or a manually signed facsimile thereof), with all required signature guarantees
or, in the case of a book-entry transfer, an Agent's Message, and (iii) any
other documents required by the Letter of Transmittal. Accordingly, tendering
shareholders may be paid at different times depending upon when certificates for
Shares or Book-Entry Confirmations with respect to Shares are actually received
by the Depositary.
BACKUP FEDERAL INCOME TAX WITHHOLDING. IN ORDER TO AVOID "BACKUP
WITHHOLDING" OF FEDERAL INCOME TAX ON PAYMENTS OF CASH PURSUANT TO THE OFFER, A
SHAREHOLDER SURRENDERING SHARES IN THE OFFER MUST, UNLESS AN EXEMPTION APPLIES,
PROVIDE THE DEPOSITARY WITH SUCH SHAREHOLDER'S CORRECT TAXPAYER IDENTIFICATION
NUMBER ("TIN") ON A SUBSTITUTE FORM W-9 (WHICH HAS BEEN INCLUDED IN THE LETTER
OF TRANSMITTAL) AND CERTIFY UNDER PENALTIES OF PERJURY THAT SUCH TIN IS CORRECT.
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If a shareholder does not provide such shareholder's correct TIN, the
Internal Revenue Service (the "IRS") may impose a penalty on such shareholder
and payment of cash to such shareholder pursuant to the Offer may be subject to
backup withholding of 31%. All shareholders surrendering Shares pursuant to the
Offer should complete and sign the main signature form and the Substitute Form
W-9 included as part of the Letter of Transmittal to provide the information and
certification necessary to avoid backup withholding (unless an applicable
exemption exists and is proved in a manner satisfactory to the Offeror and the
Depositary). Certain shareholders (including, among others, all corporations and
certain foreign individuals and entities) are not subject to backup withholding.
Noncorporate foreign stockholders should complete and sign the main signature
form and a Form W-8, Certificate of Foreign Status, a copy of which may be
obtained from the Depositary, in order to avoid backup withholding. See
Instructions 8 and 9 set forth in the Letter of Transmittal.
DETERMINATION OF VALIDITY. All questions as to the form of documents and
the validity, eligibility (including time of receipt) and acceptance for payment
of any tender of Shares will be determined by the Offeror, in its sole
discretion, and its determination will be final and binding on all parties. The
Offeror reserves the absolute right to reject any or all tenders of any Shares
that are determined by it not to be in proper form or the acceptance of or
payment for which may, in the opinion of the Offeror, be unlawful. The Offeror
also reserves the absolute right to waive any of the conditions of the Offer,
subject to the limitations set forth in the Merger Agreement, or any defect or
irregularity in the tender of any Shares. The Offeror's interpretation of the
terms and conditions of the Offer (including the Letter of Transmittal and the
Instructions to the Letter of Transmittal) will be final and binding on all
parties. No tender of Shares will be deemed to have been validly made until all
defects and irregularities have been cured or waived. None of the Offeror,
Parent, the Dealer Manager, the Depositary, the Information Agent or any other
person will be under any duty to give notification of any defects or
irregularities in tenders or incur any liability for failure to give any such
notification.
APPOINTMENT. By executing the Letter of Transmittal as set forth above
(including through delivery of an Agent's Message), a tendering shareholder
irrevocably appoints designees of the Offeror as such shareholder's
attorneys-in-fact and proxies, each with full power of substitution, in the
manner set forth in the Letter of Transmittal, to the full extent of such
shareholder's right with respect to the Shares tendered by such shareholder and
accepted for payment by the Offeror (and any and all other Shares or other
securities or property (but excluding any regular quarterly dividend on the
Shares of not more than $0.11 per Share based on the declaration, record and
payment dates normally applicable to the Shares) issued or issuable in respect
of such Shares (any such Shares, other securities or property collectively,
"Distributions")). All such powers of attorney and proxies shall be considered
coupled with an interest in the tendered Shares. This appointment is effective
when, and only to the extent that, the Offeror accepts for payment the Shares
deposited with the Depositary. Upon acceptance for payment, all prior powers of
attorney and proxies given by the shareholder with respect to such Shares or
other securities or rights will, without further action, be revoked and no
subsequent proxies may be given or written consent executed (and, if given or
executed, will not be deemed effective). The designees of the Offeror will, with
respect to the Shares and other securities or rights, be empowered to exercise
all voting and other rights of such shareholder as they in their sole judgment
deem proper in respect of any annual or special meeting of the Company's
shareholders, or any adjournment or postponement thereof, any actions by written
consent in lieu of any such meeting or otherwise. The Offeror reserves the right
to require that, in order for Shares to be deemed validly tendered, immediately
upon the Offeror's payment for such Shares, the Offeror must be able to exercise
full voting and other rights with respect to such Shares and the other
securities or rights issued or issuable in respect of such Shares, including
voting at any meeting of shareholders (whether annual or special or whether or
not adjourned) in respect of such Shares.
OTHER REQUIREMENTS. A tender of Shares pursuant to any one of the
procedures described above will constitute the tendering shareholder's
acceptance of the terms and conditions of the Offer, as well as the tendering
shareholder's representation and warranty that (i) such shareholder has the full
power and
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authority to tender, sell, assign and transfer the tendered Shares (and all
Distributions), and (ii) when the same are accepted for payment by the Offeror,
the Offeror will acquire good and unencumbered title thereto, free and clear of
all liens, restrictions, charges and encumbrances and not subject to any adverse
claims. The Offeror's acceptance for payment of Shares tendered pursuant to the
Offer will constitute a binding agreement between the tendering shareholder and
the Offeror upon the terms and subject to the conditions of the Offer.
4. WITHDRAWAL RIGHTS.
Except as otherwise provided in this Section 4, tenders of Shares made
pursuant to the Offer are irrevocable. Shares tendered pursuant to the Offer may
be withdrawn at any time prior to the Expiration Date and, unless theretofore
accepted for payment pursuant to the Offer, may also be withdrawn at any time
after September 11, 1997. If purchase of or payment for Shares is delayed for
any reason or if the Offeror is unable to purchase or pay for Shares for any
reason, then, without prejudice to the Offeror's rights under the Offer,
tendered Shares may be retained by the Depositary on behalf of the Offeror and
may not be withdrawn except to the extent that tendering shareholders are
entitled to withdrawal rights as set forth in this Section 4, subject to Rule
14e-1(c) under the Exchange Act, which provides that no person who makes a
tender offer shall fail to pay the consideration offered or return the
securities deposited by or on behalf of security holders promptly after the
termination or withdrawal of the Offer.
For a withdrawal of Shares tendered pursuant to the Offer to be effective, a
written, telegraphic, telex or facsimile transmission notice of withdrawal must
be timely received by the Depositary at one of its addresses set forth on the
back cover of this Offer to Purchase. Any notice of withdrawal must specify the
name of the person who tendered the Shares to be withdrawn, the number of Shares
to be withdrawn and the name of the registered holders of the Shares, if
different from that of the person who tendered the Shares. If certificates for
Shares to be withdrawn have been delivered or otherwise identified to the
Depositary, then, prior to the physical release of such certificates, the serial
numbers shown on such certificates must be submitted to the Depositary and,
unless such Shares have been tendered by an Eligible Institution, the signatures
on the notice of withdrawal must be guaranteed by an Eligible Institution. If
Shares have been tendered pursuant to the procedures for book-entry transfer set
forth in Section 3, any notice of withdrawal must also specify the name and
number of the account at the Book-Entry Transfer Facility to be credited with
the withdrawn Shares and must otherwise comply with such Book-Entry Transfer
Facility's procedures. All questions as to the form and validity (including time
of receipt) of notices of withdrawal will be determined by the Offeror, in its
sole discretion, and its determination will be final and binding on all parties.
None of the Offeror, Parent, the Dealer Manager, the Depositary, the Information
Agent or any other person will be under any duty to give notification of any
defects or irregularities in any notice of withdrawal or incur any liability for
failure to give any such notification.
Any Shares properly withdrawn will be deemed not validly tendered for
purposes of the Offer, but may be retendered at any subsequent time prior to the
Expiration Date by following any of the procedures described in Section 3.
5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES.
The following is a summary of certain United States federal income tax
consequences of the Offer and the Merger to beneficial owners of Shares whose
Shares are purchased pursuant to the Offer or whose Shares are converted to cash
in the Merger. The discussion is for general information only and does not
purport to consider all aspects of federal income taxation that might be
relevant to beneficial owners of Shares. The discussion is based on current
provisions of the Internal Revenue Code of 1986, as amended (the "Code"),
existing regulations promulgated thereunder and administrative and judicial
interpretations thereof, all of which are subject to change. The discussion
applies only to beneficial owners of Shares in whose hands Shares are capital
assets within the meaning of Section 1221 of the Code, and may not apply to
Shares received pursuant to the exercise of employee stock options or otherwise
as compensation, or to
10
<PAGE>
certain types of beneficial owners of Shares (such as insurance companies,
tax-exempt organizations and broker-dealers) who may be subject to special
rules. This discussion does not discuss the federal income tax consequences to a
beneficial owner of Shares who, for United States federal income tax purposes,
is a non-resident alien individual, a foreign corporation, a foreign partnership
or a foreign estate or trust, nor does it consider the effect of any foreign,
state or local tax laws.
BECAUSE INDIVIDUAL CIRCUMSTANCES MAY DIFFER, EACH BENEFICIAL OWNER OF SHARES
SHOULD CONSULT SUCH BENEFICIAL OWNER'S OWN TAX ADVISOR TO DETERMINE THE
APPLICABILITY OF THE RULES DISCUSSED BELOW TO SUCH BENEFICIAL OWNER AND THE
PARTICULAR TAX EFFECTS TO SUCH BENEFICIAL OWNER OF THE OFFER AND THE MERGER,
INCLUDING THE APPLICATION AND EFFECT OF STATE, LOCAL AND OTHER TAX LAWS.
The receipt of cash for Shares pursuant to the Offer or the Merger will be a
taxable transaction for federal income tax purposes. In general, for federal
income tax purposes, a beneficial owner of Shares will recognize gain or loss
equal to the difference between the beneficial owner's adjusted tax basis in the
Shares sold pursuant to the Offer or converted to cash in the Merger and the
amount of cash received therefor. Gain or loss must be determined separately for
each block of Shares (I.E., Shares acquired at the same cost in a single
transaction) sold pursuant to the Offer or converted to cash in the Merger. Such
gain or loss will be capital gain or loss, and will be long-term capital gain or
loss if the beneficial owner held the Shares for more than one year as of the
date of sale (in the case of the Offer) or the Effective Time (in the case of
the Merger).
A long-term capital gain of individuals currently is taxed at a maximum rate
of 28%. Various legislative proposals, including separate versions of the
Revenue Reconciliation Bill of 1997 recently passed by the House of
Representatives and the Senate (the "Bills") would reduce the long-term capital
gains rates applicable to individuals. It is uncertain whether, in what form,
and with what effective date any such legislation will be enacted. However, the
preferential long-term capital gain treatment under the Bills would be effective
for sales occurring on or after May 7, 1997, and the chairmen of the House Ways
and Means Committee and the Senate Finance Committee have stated their present
intention that any capital gains legislation will be effective with respect to
transactions occurring on or after that date.
Payments in connection with the Offer or the Merger may be subject to
"backup withholding" at a rate of 31%, unless a beneficial owner of Shares (i)
is a corporation or comes within certain exempt categories and, when required,
demonstrates this fact or (ii) provides a correct TIN to the payor, and
otherwise complies with applicable requirements of the backup withholding rules.
A beneficial owner who does not provide a correct TIN may be subject to
penalties imposed by the IRS. Any amount paid as backup withholding does not
constitute an additional tax and will be creditable against the beneficial
owner's federal income tax liability. Each beneficial owner of Shares should
consult with his or her own tax advisor as to his or her qualification for
exemption from backup withholding and the procedure for obtaining such
exemption. Those tendering their Shares in the Offer may prevent backup
withholding by completing the Substitute Form W-9 included in the Letter of
Transmittal. See Section 3. Similarly, those who convert their Shares into cash
in the Merger may prevent backup withholding by completing a Substitute Form W-9
and submitting it to the paying agent for the Merger.
Parent and the Offeror will be entitled to deduct and withhold from the
consideration otherwise payable pursuant to the Merger Agreement to any holder
of Shares such amounts as Parent or the Offeror is required to deduct and
withhold with respect to the making of such payment. To the extent that amounts
are so withheld by Parent or the Offeror, such withheld amounts shall be treated
for all purposes of the Merger Agreement as having been paid to the holder of
the Shares in respect of which such deduction and withholding was made by Parent
or the Offeror.
6. PRICE RANGE OF SHARES; DIVIDENDS.
According to the Company's Annual Report on Form 10-K for the fiscal year
ended June 29, 1996 (the "Company 1996 10-K"), the Shares (including the
associated Rights) are included for quotation in the
11
<PAGE>
Nasdaq National Market, under the symbol "DLCH". The following table sets forth
for the periods indicated the high and low sales prices per Share on the Nasdaq
National Market and the cash dividends declared on the Company's common stock as
reported in the Company 1996 10-K with respect to the years ended July 1, 1995
and June 29, 1996, and as reported by published financial sources with respect
to periods after June 29, 1996.
<TABLE>
<CAPTION>
HIGH LOW CASH DIVIDENDS
--------- --------- -----------------
<S> <C> <C> <C>
Year Ended July 1, 1995:
First Quarter............................................. $24 $20 1/2 $ 0.11
Second Quarter............................................ 21 14 1/2 0.11
Third Quarter............................................. 18 1/2 14 3/4 0.11
Fourth Quarter............................................ 22 1/2 17 5/8 0.11
Year Ended June 29, 1996:
First Quarter............................................. $21 3/4 17 1/4 $ 0.11
Second Quarter............................................ 20 3/4 16 3/4 0.11
Third Quarter............................................. 25 1/8 20 1/4 0.11
Fourth Quarter............................................ 24 1/2 20 1/2 0.11
Year Ended June 28, 1997:
First Quarter............................................. $25 1/4 $18 1/4 $ 0.11
Second Quarter............................................ 21 3/4 19 1/4 0.11
Third Quarter............................................. 25 1/8 18 3/4 0.11
Fourth Quarter............................................ 31 3/4 23 0.11
</TABLE>
On July 7, 1997, the last full day of trading prior to the public
announcement of the execution of the Merger Agreement, the last reported sales
price per Share on the Nasdaq National Market was $32 1/4. On July 11, 1997, the
last full day of trading prior to the commencement of the Offer, the last
reported sales price per Share was $29 3/4. Shareholders are urged to obtain
current market quotations for the Shares.
7. CERTAIN EFFECTS OF THE TRANSACTION.
The purchase of the Shares by the Offeror pursuant to the Offer will reduce
the number of Shares that might otherwise trade publicly and may reduce the
number of holders of Shares, which could adversely affect the liquidity and
market value of the remaining Shares held by shareholders other than the
Offeror. The Offeror cannot predict whether the reduction in the number of
Shares that might otherwise trade publicly or possible reduction in numbers of
holders thereof would have an adverse or beneficial effect on the market price
for or marketability of the Shares or whether it would cause future market
prices to be greater or less than the Offer Price.
MARKET FOR SHARES. Depending upon the number of Shares purchased pursuant
to the Offer, the Shares may no longer meet the requirements of the NASD for
continued inclusion in the Nasdaq National Market, which require that an issuer
have at least 200,000 publicly held shares, held by at least 400 shareholders or
300 shareholders of round lots, with a market value of at least $1,000,000, and
have net tangible assets of at least $1,000,000, $2,000,000 or $4,000,000,
depending on profitability levels during the issuer's four most recent fiscal
years. If these standards are not met, the Shares might nevertheless continue to
be included in the NASD's Nasdaq Stock Market with quotations published in the
Nasdaq "additional list" or in one of the "local lists," but if the number of
holders of the Shares were to fall below 300, or if the number of publicly held
Shares were to fall below 100,000 or there were not at least two registered and
active market makers for the Shares, the NASD's rules provide that the Shares
would no longer be "qualified" for Nasdaq Stock Market reporting and the Nasdaq
Stock Market would cease to provide any quotations. Shares held directly or
indirectly by directors, officers or beneficial owners of more than 10% of the
Shares are not considered as being publicly held for this purpose. The Company
has advised Parent and the Offeror that, as of July 8, 1997, there were
approximately 1,524 holders of record of
12
<PAGE>
Shares and there were 7,127,743 Shares outstanding. If, as a result of the
purchase of Shares pursuant to the Offer or otherwise, the Shares no longer meet
the requirements of the NASD for continued inclusion in the Nasdaq National
Market or in any other tier of the Nasdaq Stock Market and the Shares are no
longer included in the Nasdaq National Market or in any other tier of the Nasdaq
Stock Market, as the case may be, the market for Shares could be adversely
affected.
In the event that the Shares will no longer be listed or traded on the
Nasdaq National Market or meet the requirements of the NASD for continued
inclusion in any tier of the Nasdaq Stock Market, it is possible that the Shares
would continue to trade in the over-the-counter market and that price quotations
would be reported by other sources. The extent of the public market for the
Shares and the availability of such quotations would, however, depend upon the
number of holders of Shares remaining, at such time, the interest in maintaining
a market in Shares on the part of securities firms, the possible termination of
registration of the Shares under the Exchange Act, as described below, and other
factors.
EXCHANGE ACT REGISTRATION. The Shares are currently registered under the
Exchange Act. Such registration may be terminated upon application by the
Company to the Commission if there are fewer than 300 record holders of such
Shares. It is the intention of the Offeror to seek to cause an application for
such termination to be made as soon after consummation of the Offer as the
requirements for termination of registration of such Shares are met. If such
registration were terminated, the Company would no longer legally be required to
disclose publicly in proxy materials distributed to shareholders the information
which it now must provide under the Exchange Act or to make public disclosure of
financial and other information in annual, quarterly and other reports required
to be filed with the Commission under the Exchange Act; the Company would no
longer be subject to Rule 13e-3 under the Exchange Act relating to "going
private" transactions; and the officers, directors and 10% shareholders of the
Company would no longer be subject to the "short-swing" insider trading
reporting and profit recovery provisions of the Exchange Act. Furthermore, if
such registration were terminated, persons holding "restricted securities" of
the Company may be deprived of their ability to dispose of such securities under
Rule 144 or Rule 144A promulgated under the Securities Act of 1933, as amended
(the "Securities Act").
If registration of the Shares is not terminated prior to the Merger, then
the Shares will be delisted from all stock exchanges and the registration of the
Shares under the Exchange Act will be terminated following the consummation of
the Merger.
MARGIN REGULATIONS. The Shares are currently "margin securities" under the
regulations of the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board"), which has the effect, among other things, of allowing
brokers to extend credit on the collateral of such Shares. Depending upon
factors similar to those described above regarding listing and market
quotations, it is possible that, following the Offer, the Shares would no longer
constitute "margin securities" for the purposes of the margin regulations of the
Federal Reserve Board and therefore could no longer be used as collateral for
loans made by brokers. If registration of Shares under the Exchange Act were
terminated, such Shares would no longer be "margin securities."
8. CERTAIN INFORMATION CONCERNING THE COMPANY.
Except as otherwise set forth herein, the information concerning the Company
contained in this Offer to Purchase, including financial information, has been
furnished by the Company or has been taken from or based upon publicly available
documents and records on file with the Commission and other public sources. None
of the Offeror, Parent and the Dealer Manager assumes any responsibility for the
validity, reasonableness, accuracy or completeness of the information concerning
the Company or for any failure by the Company to disclose events which may have
occurred or may affect the significance or accuracy of any such information but
which are unknown to the Offeror, Parent or the Dealer Manager.
13
<PAGE>
The Company is an Alabama corporation with its principal executive offices
located at 305 Delchamps Drive, Mobile, Alabama 36602. The Company operates 118
supermarkets in Louisiana, Mississippi, Alabama and Florida and 10 liquor stores
in Florida.
Set forth below is certain summary consolidated financial data with respect
to the Company excerpted or derived from financial information contained in the
Company's Annual Report on Form 10-K for the fiscal year (52 weeks) ended June
29, 1996 and the Company's Quarterly Reports on Form 10-Q for the quarters (13
weeks) ended March 29, 1997 and March 30, 1996. More comprehensive financial
information is included in such reports and other documents filed by the Company
with the Commission, and the following summary is qualified in its entirety by
reference to such reports and such other documents and all the financial
information (including any related notes) contained therein. Such reports and
other documents should be available for inspection and copies thereof should be
obtainable in the manner set forth below.
DELCHAMPS, INC.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
(39 WEEKS) (52 WEEKS)
NINE MONTHS ENDED YEAR ENDED
---------------------- ----------------------------------------
MARCH 29 MARCH 30 JUNE 29 JULY 1 JULY 2
1997 1996 1996 1995 1994
---------- ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
STATEMENT OF EARNINGS DATA:
Sales........................................ $ 836,054 $ 841,967 $ 1,126,629 $ 1,054,088 $ 1,067,191
Operating income (loss)...................... 9,068 7,387 13,119 (34,991) 22,019
Net earnings (loss).......................... 3,093 1,199 3,852 (25,666) 10,951
COMMON STOCK DATA:
Net earnings (loss) per common share......... $ 0.43 $ 0.17 $ 0.54 $ (3.61) $ 1.54
BALANCE SHEET DATA:
Working capital.............................. $ 23,628 $ 18,536 $ 22,067 $ 22,920 $ 54,926
Total assets................................. 245,769 264,458 255,183 269,412 263,269
Long-term debt and obligations under capital
leases, excluding current installments..... 17,882 22,436 21,237 25,745 32,169
Restructure obligation, excluding current
portion.................................... 12,388 14,046 15,668 19,219 --
Stockholders' equity......................... 113,884 109,019 112,925 110,042 136,300
</TABLE>
The Company is subject to the informational requirements of the Exchange Act
and in accordance therewith files periodic reports, proxy statements and other
information with the Commission relating to its business, financial condition
and other matters. The Company is required to disclose in such proxy statements
certain information, as of particular dates, concerning the Company's directors
and officers, their remuneration, stock options granted to them, the principal
holders of the Company's securities and any material interests of such persons
in transactions with the Company. Such reports, proxy statements and other
information may be inspected at the public reference facilities maintained by
the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and
at the regional offices of the Commission located at Seven World Trade Center,
13th Floor, New York, New York 10048 and Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Copies of such material may also be
obtained at prescribed rates from the Public Reference Section of the
Commission, 450 Fifth Street, N.W., Washington,
14
<PAGE>
D.C. 20549. The Commission also maintains a World Wide Web site on the internet
at http://www.sec.gov that contains reports and other information regarding
registrants that file electronically with the Commission. Such material may also
be inspected at the offices of the Nasdaq National Market.
CERTAIN COMPANY FORECASTS.
To the knowledge of Parent and the Offeror, the Company does not as a matter
of course make public forecasts as to its future financial performance. However,
during the course of the discussions between Parent and the Company that led to
the execution of the Merger Agreement, the Company provided Parent with certain
information about the Company and its financial performance which is not
publicly available.
The information provided included forecasts of the Company's fiscal 1998,
1999 and 2000 results of operations as an independent company (I.E. without
regard to the impact to the Company of a transaction with Parent). The forecasts
presented in the tables below (the "Forecasts") are derived or excerpted from
the information provided by the Company and are based on numerous estimates and
assumptions concerning future events, none of which is susceptible of accurate
prediction. According to the Company, the Forecasts assumed, among other things,
that (i) comparable store sales growth would be 4.9%, 3.0% and 3.4% for each
respective fiscal year of the Forecasts, (ii) gross margins would be 24.60%,
25.45% and 25.90% for each respective fiscal year of the Forecasts, (iii)
capital expenditures would be $40 million in fiscal year 1998 and $25 million
each in fiscal years 1999 and 2000, (iv) operating improvements would be
generated from management's new corporate and store-level initiatives and (v)
the Company would continue to open new stores and remodel existing stores. The
Forecasts have not been adjusted to reflect the effects of the Offer or the
Merger or the incurrence of indebtedness in connection therewith.
Parent has been advised by the Company that management of the Company
prepared the Forecasts in January 1997 based on factual circumstances known or
believed to exist at the time and on assumptions as to future events deemed
reasonable at the time. Subsequent to the delivery of the Forecasts to Parent, a
number of important factual circumstances changed, including a continuing
decline in the Company's same store sales and a reduction in management's
estimates of the financial benefit of the planned frequent shopper program.
Parent did not ask the Company to update the Forecasts prior to the execution of
the Merger Agreement. The Company has advised Parent that any update of the
Forecasts based on currently known facts and current assumptions regarding
future events would be less favorable as to the Company's future financial
performance than the Forecasts. The Forecasts should be read together with the
other information contained in this Section 8.
DELCHAMPS, INC.
SELECTED FORECASTS
(IN MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
(FISCAL YEAR ENDED IN JUNE)
-------------------------------
<S> <C> <C> <C>
1998 1999 2000
--------- --------- ---------
Sales.......................................................................... $ 1,163.2 $ 1,237.2 $ 1,284.3
Gross profit................................................................... 286.1 314.9 332.6
Selling, general and administrative expenses (excluding depreciation and
amortization)................................................................ 242.0 249.8 254.2
Earnings before interest, taxes, depreciation and amortization................. 44.2 65.1 78.4
Depreciation and amortization.................................................. 25.4 26.6 27.1
Earnings before interest and taxes............................................. 18.8 38.5 51.3
</TABLE>
15
<PAGE>
THE FORECASTS WERE NOT PREPARED WITH A VIEW TO PUBLIC DISCLOSURE OR
COMPLIANCE WITH THE PUBLISHED GUIDELINES OF THE COMMISSION OR THE GUIDELINES
ESTABLISHED BY THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS REGARDING
PROJECTIONS OR FORECASTS, WERE NOT REVIEWED BY THE COMPANY'S INDEPENDENT
AUDITORS AND ARE INCLUDED HEREIN ONLY BECAUSE SUCH INFORMATION WAS PROVIDED TO
PARENT. THESE FORWARD-LOOKING STATEMENTS ARE SUBJECT TO CERTAIN RISKS AND
UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THE
FORECASTS. THE FORECASTS REFLECT NUMEROUS ASSUMPTIONS, ALL MADE BY MANAGEMENT OF
THE COMPANY, WITH RESPECT TO INDUSTRY PERFORMANCE, GENERAL BUSINESS, ECONOMIC,
MARKET AND FINANCIAL CONDITIONS AND OTHER MATTERS, INCLUDING ASSUMED INTEREST
EXPENSE AND EFFECTIVE TAX RATES CONSISTENT WITH HISTORICAL LEVELS FOR THE
COMPANY, ALL OF WHICH ARE IMPOSSIBLE TO PREDICT WITH ANY DEGREE OF ACCURACY,
MANY OF WHICH ARE BEYOND THE COMPANY'S CONTROL AND NONE OF WHICH WERE SUBJECT TO
APPROVAL BY PARENT OR THE OFFEROR. ACCORDINGLY, THERE CAN BE NO ASSURANCE THAT
THE ASSUMPTIONS MADE IN PREPARING THE FORECASTS WILL PROVE ACCURATE, AND ACTUAL
RESULTS MAY BE MATERIALLY GREATER OR LESS THAN THOSE CONTAINED IN THE FORECASTS.
THE INCLUSION OF THE FORECASTS HEREIN SHOULD NOT BE REGARDED AS AN INDICATION
THAT ANY OF PARENT, THE OFFEROR, THE COMPANY OR THEIR RESPECTIVE FINANCIAL
ADVISORS CONSIDERED OR CONSIDER THE FORECASTS TO BE A RELIABLE PREDICTION OF
FUTURE EVENTS, AND THE FORECASTS SHOULD NOT BE RELIED UPON AS SUCH. NONE OF
PARENT, THE OFFEROR, THE COMPANY AND THEIR RESPECTIVE FINANCIAL ADVISORS ASSUMES
ANY RESPONSIBILITY FOR THE VALIDITY, REASONABLENESS, ACCURACY OR COMPLETENESS OF
THE FORECASTS. NONE OF PARENT, THE OFFEROR, THE COMPANY AND ANY OF THEIR
FINANCIAL ADVISORS HAS MADE, OR MAKES, ANY REPRESENTATION TO ANY PERSON
REGARDING THE INFORMATION CONTAINED IN THE FORECASTS AND NONE OF THEM INTENDS TO
UPDATE OR OTHERWISE PUBLICLY REVISE THE FORECASTS TO REFLECT CIRCUMSTANCES
EXISTING AFTER THE DATE WHEN MADE OR TO REFLECT THE OCCURRENCE OF FUTURE EVENTS
EVEN IN THE EVENT THAT ANY OR ALL OF THE ASSUMPTIONS UNDERLYING THE FORECASTS
ARE SHOWN TO BE IN ERROR, OR EXPERIENCE OR FUTURE CHANGES MADE IT CLEAR THAT
SUCH FORECASTS WILL NOT BE REALIZED.
9. CERTAIN INFORMATION CONCERNING PARENT AND THE OFFEROR.
The Offeror is a newly incorporated Alabama corporation. To date, the
Offeror has not conducted any business other than that incident to its
formation, the execution and delivery of the Merger Agreement and the
commencement of the Offer. Accordingly, no meaningful financial information with
respect to the Offeror is available. The Offeror is a wholly owned subsidiary of
Parent. The principal executive office of the Offeror is located at 1770 Ellis
Avenue, Suite 200, Jackson, Mississippi 39204.
Parent, a Mississippi corporation, has its principal executive office at
1770 Ellis Avenue, Suite 200, Jackson, Mississippi 39204. Jitney-Jungle operates
a chain of 23 discount stores, 77 conventional stores and 4 combination stores
for a total of 104 supermarkets and 52 gasoline stations located throughout
Mississippi and in Tennessee, Arkansas, Alabama, Louisiana and Florida.
16
<PAGE>
Set forth below are certain summary consolidated financial data with respect
to Parent excerpted or derived from financial information contained in Parent's
Annual Report on Form 10-K for the fiscal year (52 weeks) ended April 27, 1996,
Parent's Quarterly Report on Form 10-Q for the quarter (12 weeks) ended January
4, 1997 and the Registration Statement on Form S-1 of JJ Acquisitions Corp. (No.
33-80833). More comprehensive financial information is included in such reports
and other documents filed by Parent with the Commission, and the following
summary is qualified in its entirety by reference to such reports and such other
documents and all the financial information (including any related notes)
contained therein.
JITNEY-JUNGLE STORES OF AMERICA, INC.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
(36 WEEKS) (52 WEEKS)
NINE MONTHS ENDED YEAR ENDED
----------------------- ----------------------------------------
JAN. 4 JAN. 6 APRIL 27 APRIL 29 APRIL 30
1997 1996 1996 1995 1994
----------- ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
OPERATING RESULTS DATA:
Net sales................................... $ 832,905 $ 822,513 $ 1,179,318 $ 1,173,927 $ 1,152,333
Earnings before income taxes and
extraordinary item........................ 563 16,915 24,977 30,220 27,135
Net earnings................................ 353 10,574 14,459 18,803 17,179
COMMON STOCK DATA:
Net earnings (loss) per common and common
equivalent share before extraordinary
item...................................... $ (11.08) $ 519.15 $ 162.88 $ 923.15 $ 843.42
Extraordinary item.......................... -- -- (15.96) -- --
Net earnings (loss) per common and common
equivalent share.......................... (11.08) 519.15 146.92 923.15 843.42
FINANCIAL POSITION DATA:
Total assets................................ $ 281,556 $ 313,953 $ 279,003 $ 312,415 $ 296,803
Working capital............................. 23,362 78,702 28,077 71,929 60,385
Long-term debt.............................. 233,590 33,226 239,059 38,727 40,628
Shareholders' equity (deficit).............. (147,178) 148,912 (144,815) 140,216 124,857
</TABLE>
Parent files periodic reports and other information with the Commission
relating to its business, financial condition and other matters. Such reports
and other information are available for inspection and copying at the offices of
the Commission in the same manner as set forth with respect to the Company in
Section 8.
RECENT DEVELOPMENTS. On June 17, 1997, Parent issued a press release with
respect to its financial results for the fiscal year (53 weeks) ended May 3,
1997.
As set forth in the press release, net sales for the 53 weeks ended May 3,
1997 were $1,228.5 million compared with $1,179.3 million for the prior year (52
weeks ended April 27, 1996), an increase of 4.2%. Same store sales increased by
0.2% over the prior year. Fourth quarter sales were $395.6 million compared to
$356.8 million a year ago and same store sales increased 2.0% over the
comparable prior year period.
Earnings before income taxes and extraordinary item and net earnings for the
53 weeks ended May 3, 1997 were $3.2 million and $0.3 million, respectively,
compared with $25.0 million and $14.4 million for the prior year.
In the press release, Parent stated that gross profits decreased as a
percentage of net sales in the fiscal year to 23.6% as compared to 23.9% for the
prior year. The decrease in gross profit was principally due to increased
promotional activities and the effect of the new Jitney-Jungle Gold Card which
is Parent's new
17
<PAGE>
frequent shopper card launched in January 1997. Selling, general and
administrative expenses as a percentage of net sales decreased to 20.4% for the
fiscal year as compared to 20.6% for the prior year.
Earnings before interest, income taxes, LIFO provision, depreciation and
amortization increased $5.5 million in the fiscal year to $70.4 million or 5.7%
of net sales as compared to $64.9 million or 5.5% of net sales for the prior
year. The increase was principally due to the improvement in selling, general
and administrative expenses.
OTHER. The name, citizenship, business address, present principal
occupation and material positions held during the past five years of each of the
directors and executive officers of Parent and the Offeror are set forth in
Annex I to this Offer to Purchase.
Except as described in this Offer to Purchase, none of the Offeror, Parent,
or to the best knowledge of the Offeror and Parent, any of the persons listed in
Annex I hereto or any associate or majority-owned subsidiary of the Offeror,
Parent or any of the persons so listed benefically owns or has any right to
acquire, directly or indirectly, any Shares and none of the Offeror or Parent,
or to the best knowledge of the Offeror and Parent, any of the persons or
entities referred to above nor any director, executive officer or subsidiary of
any of the foregoing has effected any transaction in the Shares during the past
60 days.
Except as set forth in this Offer to Purchase, none of the Offeror, Parent
or, to the best knowledge of the Offeror or Parent, any of the persons listed in
Annex I hereto, has any contract, arrangement, understanding or relationship
with any other person with respect to any securities of the Company, including,
but not limited to, any contract, arrangement, understanding or relationship
concerning the transfer or the voting of any such securities, joint ventures,
loan or option arrangements, puts or calls, guaranties of loans, guaranties
against loss or the giving or withholding of proxies. Except as set forth in
this Offer to Purchase, since July 3, 1994, there have been no contacts,
negotiations or transactions between the Offeror or Parent, or, to the best of
their knowledge, any of the persons listed in Annex I hereto, on the one hand,
and the Company or its affiliates, on the other hand, concerning a merger,
consolidation or acquisition, a tender offer or other acquisition of securities,
an election of directors or a sale or other transfer of a material amount of
assets. Except as described in this Offer to Purchase, since July 3, 1994, none
of the Offeror, Parent or, to the best knowledge of Parent or the Offeror, any
of the persons listed in Annex I hereto, has had any transaction with the
Company or any of its executive officers, directors or affiliates that would
require disclosure under the rules and regulations of the Commission applicable
to the Offer.
10. SOURCE AND AMOUNT OF FUNDS.
The total amount of funds required by the Offeror to consummate the Offer
and the Merger is expected to be approximately $270 million, which amount
includes the acquisition of all of the Shares (net of proceeds received upon the
exercise of outstanding options), and certain refinancing obligations and
estimated financing and transaction fees and expenses. The Offeror plans to
obtain the necessary funds under the Senior Credit Facility and proceeds from
the sale of Bridge Notes or Senior Subordinated Notes (all as described below).
Parent has received a written financing commitment (the "Credit Facility
Commitment Letter") from Fleet Capital Corporation ("Fleet") consisting of a
$150 million senior credit facility ("Senior Credit Facility") and a written
financing commitment (the "Bridge Commitment Letter") from DLJ Bridge Finance,
Inc. ("DLJ Bridge") to purchase up to $200 million of senior subordinated
increasing rate notes of Parent (the "Bridge Notes"). Although Fleet has
committed to provide the entire Senior Credit Facility, Fleet expects to
assemble a syndicate of financial institutions (the "Lenders") to fund the
Senior Credit Facility prior to the initial funding under the Senior Credit
Facility. The terms of the definitive agreement providing for the Senior Credit
Facility (the "Loan Agreement") and the documentation governing the Bridge Notes
(the "Bridge Documentation") have not yet been finalized. The following is a
summary of the anticipated principal terms of the Senior Credit Facility and the
Bridge Documentation based upon the Credit Facility Commitment Letter and the
Bridge Commitment Letter, respectively. This summary is
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subject to completion of the Loan Agreement and the Bridge Documentation and is
qualified in its entirety by reference to the Credit Facility Commitment Letter
and the Bridge Commitment Letter, respectively, which are filed as exhibits to
the Schedule 14D-1 of which this Offer to Purchase is an exhibit.
SENIOR CREDIT FACILITY
Loans under the Senior Credit Facility may be borrowed, repaid and
reborrowed by Parent (and certain of its subsidiaries) from time to time for the
purpose of providing funds to consummate the Offer and the Merger, to refinance
certain indebtedness, to pay certain fees and expenses incurred in connection
with the Offer and the Merger and to provide working capital from time to time.
The Senior Credit Facility will mature in six and one-half years and will
have scheduled reductions of the commitment under the Senior Credit Facility, in
years two through six and in the first and second quarters of year seven of $5,
$7, $8, $9, $11, $6.5 and $6.5 million, respectively. Availability under the
Senior Credit Facility will be subject to a borrowing base comprised of 65% of
the eligible inventory of the borrower plus $53 million, amortizing as set forth
above. The commitment will be subject to mandatory prepayments and reductions in
the event of certain extraordinary transactions and issuances of debt and equity
and by the amount of 50% of annual cash flow.
Borrowings under the Senior Credit Facility will bear interest at a floating
rate based upon, at the borrower's option, (i) Fleet's prime rate, or (ii) the
London Interbank Offered Rate ("LIBOR"), plus, through January 31, 1998 in each
case, a margin equal to .75% over the prime rate and a margin equal to 2.00%
over LIBOR, and thereafter prime rate plus margins ranging from .25% to 1.00%
and LIBOR plus margins ranging from 1.25% to 2.25% per annum, depending upon
Parent's debt to earnings ratio. An unused commitment fee will accrue on the
unused portion of the Senior Credit Facility at a rate ranging from .25% to .50%
per annum, depending upon Parent's debt to earnings ratio. Parent will also pay
Fleet syndication and administration fees, reimburse certain expenses and
provide certain indemnities, all of which Parent believes to be customary for
commitments of this type.
The Loan Agreement will contain conditions precedent, representations and
warranties, covenants (including financial covenants), events of default and
other provisions customary for such financings.
Fleet's commitment to provide the Senior Credit Facility is conditioned on,
among other things: the Merger Agreement being entered into by Parent, the
Offeror and the Company in form, scope and substance satisfactory to Fleet, and
being approved by the Boards of Directors of Parent, the Offeror and the
Company; absence of any material restriction under any applicable law on the
consummation of the Merger or the ability of the Offeror to vote the Shares held
by it in favor of the Merger; amendment of the Rights Agreement to make it
inapplicable to the Offer and the Merger; the Offer and the Merger not being
subject to the provisions of any applicable state antitakeover law; satisfaction
of the Minimum Condition; review by and satisfaction of Fleet with the documents
relating to the Offer; the Offeror purchasing the Shares pursuant to the Offer
on or before September 30, 1997 at an Offer Price not in excess of $30.00 per
Share; satisfaction of the Lenders with the corporate, legal and capital
structure of Parent and its subsidiaries; receipt by the Lenders of a valid and
perfected first priority lien and security interest in the Shares held by Parent
or any of its affiliates and all other assets of Parent and its subsidiaries
(subject to certain exceptions); absence of any material adverse change in the
business, condition (financial or otherwise), operations, performance,
properties or prospects of Parent and its subsidiaries, taken as a whole, since
May 3, 1997, or the Company and its subsidiaries, taken as a whole, since March
29, 1997, or from that previously described to Fleet; absence of any material
pending or threatened litigation; receipt of all governmental and third party
consents and approvals necessary in connection with each aspect of the
transaction (including the financing and under any existing indebtedness of
Parent); review of and satisfaction of the Lenders with the terms of the Bridge
Notes or any securities issued by Parent in lieu of the Bridge Notes; receipt of
customary closing documents, including solvency certificates and opinions, in
form and substance satisfactory to Fleet; receipt of satisfactory results of an
environmental analysis of the property and business of the Company and its
subsidiaries; satisfaction of the Lenders with the ability of Parent and its
subsidiaries to fulfill their obligations under and with their regulatory
compliance in respect
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of all employee benefit plans; satisfaction of the Lenders with the amount,
types and terms and conditions of all insurance maintained by Parent, the
Company and their respective subsidiaries; receipt by the Lenders of all fees
and expenses required to be paid; and availability to Parent and its
subsidiaries under the Senior Credit Facility plus available cash on hand in an
aggregate amount not less than $35,000,000 (giving effect to consummation of the
Offer and the Merger on a pro forma basis).
It is anticipated that the indebtedness incurred through borrowings under
the Senior Credit Facility will be repaid from funds generated internally by
Parent and its subsidiaries, including the Company and its subsidiaries, and
from other sources that may include the proceeds of the private or public sale
of debt or equity securities. No final decisions have been made concerning the
method Parent will employ to repay such indebtedness. Such decisions when made
will be based on Parent's review from time to time of the advisability of
particular actions, as well as on prevailing interest rates and financial and
other economic conditions.
BRIDGE NOTES
Under the terms of the Bridge Commitment Letter, DLJ Bridge would purchase
the Bridge Notes pursuant to a Securities Purchase Agreement (the "Securities
Purchase Agreement"). DLJ Bridge intends to offer to Credit Suisse First Boston,
an affiliate of CSFB, the opportunity to participate as a co-purchaser in up to
thirty percent of DLJ Bridge's commitment to purchase the Bridge Notes. The
Bridge Notes will initially bear interest at the prime rate plus 3%. If the
Bridge Notes are not retired in whole by the end of the first six-month period
following the date of issuance, the interest rate will increase by another 1%
and will continue to increase by an additional .5% at the end of each subsequent
three-month period until the first anniversary of the issuance of the Bridge
Notes. Commencing on the first anniversary of the date of issuance of the Bridge
Notes, interest shall be payable at the greater of the following as of the
beginning of each quarterly period: (i) the prime rate plus 5%, increasing by an
additional .5% at the end of each subsequent three-month period; (ii) the
treasury rate plus 7%, increasing by an additional .5% at the end of each
subsequent three-month period; (iii) the DLJ High Yield Index Rate plus 2.5%,
increasing by an additional .5% at the end of each subsequent three-month
period; and (iv) the rate in effect on the day immediately preceding the first
anniversary of the date of issuance of the Bridge Notes plus .5%, increasing by
an additional .5% at the end of each subsequent three-month period; provided,
however, that the per annum interest rate will not exceed 18% and that portion,
if any, of any interest representing a per annum interest rate in excess of 16%
will be paid by issuing Bridge Notes with a principal amount equal to such
excess portion of interest. Interest will be payable in cash, quarterly in
arrears (except to the extent paid in additional Bridge Notes as set forth in
the foregoing sentence).
The Bridge Notes will mature on the first anniversary of the date of
issuance, subject to extension if certain conditions are satisfied. Parent will
be required to redeem the Bridge Notes with, subject to certain exceptions, the
net proceeds from certain issuances of debt or equity securities or sales of
assets. Parent may redeem the Bridge Notes at any time at 103% of par plus
accrued interest. Under certain circumstances, the Bridge Notes may be sold to
third party purchasers. The Bridge Notes will be subordinated to the Senior
Credit Facility and certain refinancings thereof.
In addition, warrants to purchase common stock of Parent representing 20% of
the fully-diluted common stock of Parent (the "Escrowed Warrants") will be
placed in an escrow account. The Escrowed Warrants will be exercisable at a
price equal to $.01 per share for a period of seven years from the date such
Escrowed Warrants are released from escrow and will have customary anti-dilution
provisions and demand and piggy-back registration rights. If the refinancing of
the Bridge Notes is not completed within certain periods over a two-year period
following the first anniversary of the issuance of the Bridge Notes, Escrowed
Warrants shall be released from escrow in certain specified amounts to DLJ
Bridge and DLJ Bridge shall be entitled to retain such released Escrowed
Warrants. Commencing on the first anniversary of the issuance of the Bridge
Notes, Parent will make available to DLJ Bridge such of the Escrowed Warrants as
are needed to facilitate the resale of the Bridge Notes to third parties on a
fixed rate basis;
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provided, however, that DLJ Bridge shall not retain any such equity provided
specifically to facilitate the resale of the Bridge Notes.
The Bridge Notes will contain certain representations, warranties, covenants
and events of default customary for securities of this type. Parent will pay DLJ
Bridge certain fees, reimburse certain expenses and provide certain indemnities,
all of which Parent believes to be customary for commitments of this type.
DLJ Bridge's commitment to purchase the Bridge Notes is conditioned on,
among other things: consummation of the Offer and the Merger in accordance with
the terms of the Offer to Purchase and the Merger Agreement at an aggregate cost
for the Common Stock of the Company not in excess of $228.0 million; execution
of the Loan Agreement (the covenants, terms and conditions of which shall be
satisfactory in all respects to DLJ Bridge) with borrowings outstanding under
the Senior Credit Facility not in excess of $75.0 million; indebtedness of
Parent not in excess of $549.2 million; satisfactory completion by DLJ Bridge of
its due diligence and receipt of financial information; satisfactory completion
of loan documentation; receipt of all governmental, regulatory, shareholder and
third party consents and approvals (including under the HSR Act) necessary or
desirable in connection with the Offer and the Merger; absence of any material
adverse change in the business, condition (financial or otherwise), operations,
performance, properties or prospects of Parent, Offeror and the Company and
their subsidiaries since the end of the most recently ended fiscal year for
which audited financial statements are available or in the facts and information
as represented to DLJ Bridge; absence of material pending or threatened
litigation; receipt of customary closing documents in form and substance
satisfactory to DLJ Bridge; absence of any event of default under the Bridge
Documentation; execution of an engagement letter between Parent and the Dealer
Manager engaging the Dealer Manager as exclusive investment banker for Parent
for all purposes until the date the Bridge Notes have been paid in full; receipt
of all fees and expenses required to be paid; absence of material disruption or
adverse change in the financial or capital markets; receipt of consent from the
Senior Credit Facility lenders concerning the terms of the Bridge Notes and
financing anticipated to replace the Bridge Notes; receipt of consent from the
holders of Parent's Senior Notes allowing Parent to incur the indebtedness under
the Senior Credit Facility and the Bridge Notes; and in the event Credit Suisse
First Boston, an affiliate of CSFB, elects to participate in the purchase of the
Bridge Notes, a certificate from Credit Suisse First Boston stating that the
conditions to funding the Bridge Notes have been satisfied. Subsequent to the
execution of the Credit Facility Commitment Letter, DLJ Bridge confirmed to
Parent that the senior bank facility described in the Bridge Commitment Letter
refers to a $150 million senior secured financing consisting of a six and
one-half year amortizing revolving credit facility.
It is anticipated that the indebtedness incurred under the Bridge Notes will
be refinanced with an offering of senior subordinated notes ("Senior
Subordinated Notes") by Parent which would be underwritten by the Dealer
Manager. Parent may elect not to draw on the commitment for the Bridge Notes and
instead obtain the remainder of the financing through the issuance of Senior
Subordinated Notes on such terms as may be available in the market. Under the
Merger Agreement, the Offer may be extended until September 12, 1997 to enable
Parent and the Offeror to obtain permanent financing for the transaction. See
Section 1.
11. BACKGROUND OF THE OFFER; PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS
WITH THE COMPANY.
Parent's business strategy is focused on enhancing revenues and
profitability by taking advantage of its leading market positions and continuing
its growth in certain attractive Southeast markets. Parent's management
identified the Company as an attractive merger candidate which would further
these strategic objectives.
From time to time over the past two years, Mr. Bruce C. Bruckmann, a
director of Parent and a principal in Bruckmann, Rosser, Sherrill & Co., Inc.
("BRS"), an affiliate of Parent's majority shareholder, and Mr. Timothy E.
Kullman, the Company's chief financial officer, had general discussions
regarding recent developments and trends in the supermarket industry and the
strategic direction of Parent and the Company. In mid-January, 1997, Mr.
Bruckmann contacted Mr. Kullman to arrange a meeting between representatives of
Parent and the Company to discuss the possibility of a friendly business
combination between Parent and the Company.
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On January 31, 1997, Mr. Bruckmann and Mr. Harold O. Rosser, II and Mr.
Stephen C. Sherrill, also directors of Parent and principals in BRS, met with
Mr. David W. Morrow, the Company's Chairman and Chief Executive Officer, Mr.
Kullman and Mr. Richard W. La Trace, the Company's President, to discuss
generally the companies' businesses and philosophies and the framework for a
potential transaction. During the meeting, Parent's representatives discussed
generally the possibility of a strategic merger of the two companies in which
the Company would acquire Parent for common stock under terms to be negotiated.
Mr. Morrow indicated the Company would review the matter and inform Parent if
the Company wished to further pursue a possible transaction.
In mid-February, Mr. Kullman called Mr. Bruckmann and informed him that the
Company had retained CSFB as its financial advisor to assist the Company in
reviewing and evaluating its strategic alternatives and that the Company or CSFB
would contact Parent if appropriate.
In early April, at the Company's direction CSFB contacted Mr. Bruckmann to
ascertain whether Parent would be interested in pursuing the acquisition of the
Company as part of a managed sale process. Mr. Bruckmann indicated that Parent
would be interested in participating in the process.
On April 8, Parent, BRS and the Company executed the Confidentiality and
Standstill Agreement (the "Confidentiality and Standstill Agreement"), which
contained customary confidentiality and standstill provisions. See Section 13.
Thereafter, the Company's management and CSFB provided detailed information
about the Company to Parent and met with its representatives to answer questions
and provide additional due diligence information.
Later that month, representatives of another supermarket chain approached
Parent through Donaldson, Lufkin & Jenrette Securities Corporation (an affiliate
of a shareholder of Parent) regarding the possibility of a joint acquisition of
the Company and, at Parent's request, the Company waived the standstill
provisions of the Confidentiality and Standstill Agreement to permit Parent to
pursue such discussions.
In early May, at CSFB's request as part of the sale process, Parent
submitted a non-binding indication of interest expressing Parent's willingness
to pursue jointly with such other supermarket chain an acquisition of the
Company for approximately $27 to $31 per Share in cash. Thereafter, Parent
conducted additional due diligence, including reviewing the Company's data room
records and inspecting selected stores.
On June 2, CSFB requested as part of the sale process that Parent submit a
formal proposal to acquire the Company, and provided Parent with the Company's
draft of the proposed Merger Agreement.
In early June, Parent and the other supermarket chain terminated their
discussions and Parent advised CSFB that it wished to pursue on its own an
acquisition of the Company.
On June 18, Parent submitted a proposal to acquire the Company in a cash
merger for a price of $27 per Share. Shortly thereafter, CSFB advised Parent
that its proposed price and the financing condition which was contained in
Parent's proposal were unacceptable and that the transaction would have to be
structured as a tender offer in order to accelerate the closing of the
transaction. Following additional negotiations, Parent eliminated the financing
condition and offered the Company a choice between a tender offer at $28.50 per
Share or a merger transaction at $30 per Share, reflecting Parent's higher
estimated costs to finance a tender offer.
After further negotiations, Parent proposed a tender offer for all Shares at
$30 per Share in cash, followed by a merger in which non-tendering shareholders
would also receive $30 per Share in cash. Parent's proposal did not contain a
financing condition but required a tender offer period of up to 60 calendar days
to provide Parent with sufficient time to obtain permanent financing. Parent
also advised the Company that the transaction would be subject to Parent's
ability to obtain the consent of the holders of at least a majority in aggregate
principal amount of the Senior Notes. In addition, Parent informed the
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Company that it was unwilling to proceed with further discussions unless the
Company provided it with a five-day period to negotiate with the Company on an
exclusive basis.
On June 30, the Company provided Parent with a revised draft Merger
Agreement and related documents reflecting the status of negotiations to date.
Thereafter, representatives of Parent and the Company negotiated these documents
and held discussions regarding various legal and business issues, and
representatives of Parent continued due diligence activities.
On July 2 and 3, representatives of Parent and the Company met to continue
negotiations on the Merger Agreement. The principal issues discussed included
the conditions to the Offer generally; the time periods and terms upon which
Parent could or would be required to extend the Offer; the conditions upon which
Parent would be required to pursue antitrust approval; the conditions upon which
the Company could entertain third party offers for the Company after the
execution of the Merger Agreement; the bases upon which the Company could modify
its position with respect to the Offer or terminate the Merger Agreement as a
result of certain third party offers; and the amount of the termination and
expense fees and the circumstances under which they would be payable by the
Company.
Over the next four days, representatives of the Company and Parent continued
these discussions and finalized the Merger Agreement and related documentation.
The Merger Agreement was executed and publicly announced on the morning of
July 8, 1997.
On July 11, the Company filed a Premerger Notification and Report Form under
the HSR Act with respect to the Offer and the Merger. On July 14, the Parent
filed its Premerger Notification and Report Form and the Offeror commenced the
Offer.
12. PURPOSE OF THE OFFER AND THE MERGER; PLANS FOR THE COMPANY.
The purpose of the Offer, the Merger, the Merger Agreement and the other
transactions contemplated thereby, is to enable Parent to acquire control of,
and the entire equity interest in, the Company. The Offer is intended to
increase the likelihood that the Merger will be completed promptly.
Pursuant to the ABCA and the Articles of Incorporation (the "Charter") of
the Company, adoption by the Board of Directors of the Company and the
affirmative vote of the holders of two-thirds of the outstanding shares of the
Company entitled to vote thereon and, if a class or series is entitled to vote
as a class, the affirmative vote of the holders of two-thirds of the outstanding
shares of the class or series, is required to approve the Merger Agreement. The
Board of Directors of the Company has unanimously approved the Offer, the Merger
and the Merger Agreement, and, unless the Merger is consummated pursuant to the
short form merger provisions under the ABCA as described below, the only
remaining required corporate action of the Company is the approval of the Merger
Agreement by the affirmative vote of the holders of two-thirds of the
outstanding Shares. If the Minimum Condition is satisfied, the Offeror will have
sufficient voting power to cause the approval of the Merger Agreement without
the affirmative vote of any other shareholder. Under the terms of the Merger
Agreement, Parent and the Offeror may reduce the Minimum Condition to a majority
of the outstanding Shares on a fully diluted basis. Parent and the Offeror
currently do not intend to reduce the Minimum Condition but reserve the right to
do so, subject to the terms of the Merger Agreement and the applicable rules and
regulations of the Commission.
In the Merger Agreement, the Company has agreed that, promptly after
consummation of the Offer, the Company will take all action necessary, in
accordance with the ABCA and the Company's Charter and Bylaws, to convene a
special meeting of the Company's shareholders at which such shareholders will be
asked to approve the Merger (the "Special Meeting"). Parent has agreed that all
Shares owned by Parent, and its direct and indirect subsidiaries will be voted
in favor of the Merger. If the Offeror owns two-thirds of the outstanding
Shares, approval of the Merger can be obtained without the affirmative vote of
any other shareholder of the Company.
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Under the Merger Agreement, Parent has retained the right to elect at any
time after consummation of the Offer (or prior to consummation of the Offer and
with the written consent of the Company, which shall not be withheld
unreasonably) to merge the Company with and into Parent, the Offeror or another
direct or indirect wholly owned subsidiary of Parent. Under the ABCA, if the
Offeror acquires at least 80% of the outstanding Shares pursuant to the Offer,
the Offeror could elect to effect the merger of the Company with and into
Parent, the Offeror or another direct or indirect wholly owned subsidiary of
Parent without a vote of the shareholders of the Company. If, however, the
Offeror does not acquire at least 80% of the then outstanding Shares pursuant to
the Offer or otherwise and a vote of the Company's shareholders is required
under the ABCA, a longer period of time generally will be required to effect the
Merger.
DISSENTERS' RIGHTS. Holders of Shares do not have dissenters' rights in
connection with the Offer. If the Merger is consummated, holders of Shares at
the effective time of the Merger will have certain rights pursuant to the
provisions of Article XIII of the ABCA ("Article XIII") to dissent and demand
appraisal of their Shares. Under Article XIII, dissenting shareholders who
comply with the applicable statutory procedures will be entitled to obtain
payment for the fair value of their Shares immediately prior to the
effectiveness of the Merger (exclusive of any appreciation or depreciation
arising in anticipation of the Merger unless exclusion would be inequitable) in
cash, together with accrued interest from the effective date of the Merger.
Assuming compliance with the statutory procedures, a dissenting shareholder will
also be entitled, in the absence of agreement between the Company and the
shareholder regarding the fair value of his Shares, to receive a judicial
determination of such value. Any such judicial determination of the fair value
of Shares could be based upon factors other than, or in addition to, the price
per Share to be paid in the Merger or the market value of the Shares. The value
so determined could be more or less than the price per Share to be paid in the
Merger.
The foregoing summary of Article XIII does not purport to be complete and is
qualified in its entirety by reference to Article XIII. FAILURE TO FOLLOW THE
STEPS REQUIRED BY ARTICLE XIII FOR PERFECTING DISSENTERS' RIGHTS MAY RESULT IN
THE LOSS OF SUCH RIGHTS.
RULE 13E-3. The Commission has adopted Rule 13e-3 under the Exchange Act
which is applicable to certain "going private" transactions and which may, under
certain circumstances, be applicable to the Merger or another business
combination in which the Offeror seeks to acquire the remaining Shares not held
by it following the purchase of Shares pursuant to the Offer. The Offeror
believes, however, that Rule 13e-3 will not be applicable to the Merger if the
Merger is consummated within one year after the termination of the Offer at the
Offer Price. If applicable, Rule 13e-3 requires, among other things, that
certain financial information concerning the Company and certain information
relating to the fairness of the proposed transaction and the consideration
offered to minority shareholders in such transaction be filed with the
Commission and disclosed to shareholders prior to consummation of the
transaction.
PLANS FOR THE COMPANY. Parent will continue to evaluate the business and
operations of the Company during the pendency of the Offer and after the
consummation of the Offer and the Merger. Parent intends to seek additional
information about the Company during this period. Thereafter, Parent intends to
review such information as part of a comprehensive review of the Company's
business, assets, operations, corporate structure, dividend policy,
capitalization, policies, management and personnel with a view to optimizing the
Company's potential contribution to Parent's business. Although Parent and the
Offeror are still developing their business plan with respect to the Company
after the consummation of the Offer, Parent and the Offeror generally intend to
integrate the Company's operations with the operations of Parent as soon as
practicable to achieve operating synergies. At this time, Parent and the Offeror
have not specifically determined how this integration will be structured. The
combining of the Company's business with Parent's business could, among other
things, involve consolidating and streamlining certain operations and
reorganizing other businesses and operations.
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Except as indicated in this Offer to Purchase, Parent does not have any
current plans or proposals which relate to or would result in any of the
following: an extraordinary corporate transaction, such as a merger,
reorganization or liquidation involving the Company or any of its subsidiaries;
a sale or transfer of a material amount of assets of the Company or any of its
subsidiaries; any change in the present Board of Directors or management of the
Company; any material change in the Company's present capitalization or dividend
policy; or any other material change in the Company's corporate structure or
business. Notwithstanding the foregoing, following the acquisition of Shares
pursuant to the Offer, the Offeror may designate up to that number of directors
of the Board of Directors of the Company as will make the percentage of the
Company's directors designated by the Offeror equal to the aggregate voting
power of the Shares held by Parent and any of its subsidiaries. In addition,
assuming the designation of directors as aforesaid and so long as there are
holders of Shares other than Parent or any of its subsidiaries, Parent expects
that the Board of Directors would not declare dividends on the Shares.
Subject to the terms of the Merger Agreement and the Confidentiality and
Standstill Agreement referred to in Section 13, the Offeror or an affiliate of
the Offeror may, following the consummation or termination of the Offer, seek to
acquire additional Shares through open market purchases, privately negotiated
transactions, a tender offer or exchange offer or otherwise, upon such terms and
at such prices as it shall determine, which may be more or less than the price
to be paid pursuant to the Offer. The Offeror and its affiliates also reserve
the right to dispose of any or all Shares acquired by them, subject to the terms
of the Merger Agreement.
13. THE MERGER AGREEMENT.
The following summary of certain provisions of the Merger Agreement, a copy
of which is filed as an exhibit to the Schedule 14D-1, is qualified in its
entirety by reference to the text of the Merger Agreement.
THE MERGER AGREEMENT
THE OFFER. The Offeror commenced the Offer in accordance with the terms of
the Merger Agreement. Pursuant to the terms and conditions of the Merger
Agreement, each of the Company, Parent and the Offeror have agreed, subject to
certain exceptions, to cooperate with each other and use their respective
commercially reasonable best efforts to cause the conditions to the Offer to be
met as soon as reasonably practicable. The Offeror and Parent intend to
consummate the Offer and the Merger as soon as reasonably practicable. To that
end (provided that the conditions set forth in paragraphs (c)(iii) through
(c)(ix) and (e) of Section 15 have been met), Parent and Offeror have agreed to
use commercially reasonable best efforts, subject to the terms of the Merger
Agreement, to consummate the Offer within 30 business days following the date
hereof, including the obtaining of requisite financing as discussed in Section
10, the receipt of the consent of the holders of the Senior Notes as discussed
in Section 1 and the receipt of requisite governmental approvals (including in
respect of the HSR Act) as discussed in Section 16. If the conditions set forth
in paragraphs (c)(iii) through (c)(ix) and (e) of Section 15 have been met but
the HSR Condition or Noteholder Consent Condition are not met within 30 business
days following the date hereof, Parent and the Offeror have agreed to use
commercially reasonable best efforts, subject to the terms of the Merger
Agreement, to consummate the Offer on or prior to the sixtieth calendar day
following the date hereof. See "HSR MATTERS" below.
The Offeror reserves the right (but shall not be obligated), in accordance
with applicable rules and regulations of the Commission, subject to the
limitations set forth in the Merger Agreement and described below, to reduce the
Minimum Condition or to waive any other condition to the Offer (other than the
condition relating to the expiration of the waiting period under the HSR Act).
If the Minimum Condition or any condition set forth in Section 15 has not been
satisfied by 12:00 Midnight, New York City time, on Friday, August 8, 1997 (or
any other time then set as the Expiration Date), the Offeror may, subject to the
terms of the Merger Agreement as described below, elect to (i) extend the Offer
and, subject to applicable withdrawal rights, retain all tendered Shares until
the expiration of the Offer, as extended, (ii) subject to
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complying with applicable rules and regulations of the Commission, accept for
payment all Shares so tendered and not extend the Offer or (iii) terminate the
Offer and not accept for payment any Shares and return all tendered Shares to
tendering shareholders.
Under the terms of the Merger Agreement, the Offeror may not (except as
described in the next sentence), without the consent of the Company's Board of
Directors, impose conditions to the Offer in addition to the conditions set
forth in Section 15, decrease the Offer Price, change the form of consideration,
reduce the number of Shares to be purchased in the Offer (provided that Parent
and Offeror may reduce the Minimum Condition to a majority of the outstanding
shares on a fully diluted basis), extend the expiration date of the Offer
(except as provided below in this paragraph) or otherwise change any term of the
Offer in any manner adverse to the holders of Shares. Parent, the Offeror and
the Company have acknowledged their intention to consummate the transactions
contemplated by the Merger Agreement as soon as reasonably practicable. To that
end (provided that the conditions set forth in paragraphs (c)(iii) through
(c)(ix) and (e) as set forth in Section 15 have been met), Parent and the
Offeror have agreed to use commercially reasonable best efforts, subject to the
terms of the Merger Agreement, to consummate the Offer within 30 business days
following commencement of the Offer, including the obtaining of requisite
financing, the receipt of the consent of the holders of the Senior Notes as
contemplated by the Noteholder Consent Condition and receipt of requisite
governmental approvals (including in respect of the HSR Act) as contemplated by
Section 15. If the conditions set forth in paragraphs (c)(iii) through (c)(ix)
and (e) as set forth in Section 15 have been met but either the HSR Condition or
the Noteholder Consent Condition are not met within 30 business days following
commencement of the Offer, Parent and the Offeror have agreed to use
commercially reasonable best efforts, subject to the terms of the Merger
Agreement, to consummate the Offer on or prior to the sixtieth calendar day
following commencement of the Offer. Notwithstanding the foregoing, Parent and
the Offeror may, without the consent of the Company, extend the Offer on one or
more occasions (i) if at the then scheduled Expiration Date of the Offer, any of
the conditions to the Offeror's obligations to accept for payment and pay for
Shares shall not have been satisfied or waived, until such time as such
conditions are satisfied or waived, (ii) for any period required by any rule,
regulation, interpretation or position of the Commission or the Commission staff
applicable to the Offer, (iii) on one or more occasions for an aggregate period
of not more than five business days, if the Minimum Condition has been satisfied
but less than 80% of the outstanding Shares (on a fully diluted basis) have been
validly tendered and not withdrawn, (iv) for any reason on one or more occasions
for an aggregate period of not more than 10 business days beyond the initial
expiration date or the latest expiration date that would otherwise be permitted
under clause (i), (ii) or (iii) of this sentence, and (v) on one or more
occasions for an aggregate period of not more than 60 calendar days after the
date of the commencement of the Offer in order for Parent to obtain financing on
terms acceptable to it; provided, however, that without the written consent of
the Company, Parent and the Offeror may not extend the Offer (A) for any period
that would end more than 60 calendar days after the date of the commencement of
the Offer unless on such sixtieth day any of the conditions set forth in Section
15 are not satisfied, or (B) for any period that would end more than 90 calendar
days after the date of the commencement of the Offer; provided further that if
on the initial expiration date of the Offer, or any extension thereof, the
conditions set forth in paragraphs (c)(iii) through (c)(ix) and (e) as set forth
in Section 15 have been satisfied or waived but any of the conditions set forth
in paragraphs (b), (c)(i), (c)(ii) or (d) as set forth in Section 15 shall not
have been satisfied or waived, Parent and the Offeror have agreed to extend the
Offer one or more times (for such periods as Parent and the Offeror shall
determine in their sole discretion) until 60 calendar days after the date of the
commencement of the Offer; provided, further, that Parent and the Offeror may
extend the Offer beyond such 90 calendar day period if the conditions set forth
in Section 15 shall not have been satisfied as a result of a breach by the
Company of its obligations under the Merger Agreement.
Under the terms of the Merger Agreement, in the event the number of
outstanding Shares or Shares issuable upon the exercise of, or subject to,
options or other agreements exceeds the amounts specifically set forth in the
Merger Agreement by more than 10,000 Shares (including without limitation as a
result of
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any stock split, reverse stock split, stock dividend, including any dividend or
distribution of securities convertible into Shares, recapitalization, or other
like change occurring after July 8, 1997), the Offer Price shall be
appropriately adjusted downward.
THE MERGER. The Merger Agreement provides that, at the Effective Time, in
accordance with the Merger Agreement and the ABCA, the Offeror shall be merged
with and into the Company, the separate corporate existence of the Offeror shall
cease and the Company shall continue as the Surviving Corporation.
Notwithstanding the foregoing, Parent may elect at any time after consummation
of the Offer (or prior to the consummation of the Offer and with the written
consent of the Company, which shall not be withheld unreasonably) and prior to
the fifth business day immediately preceding the date of the notice of the
meeting of shareholders of the Company to consider approval of the Merger and
the Merger Agreement, to merge the Company with and into Parent, the Offeror or
another direct or indirect wholly owned subsidiary of Parent. At the Effective
Time, the Charter and Bylaws of the Company, as in effect immediately prior to
the Effective Time, shall be the Charter and Bylaws of the Surviving
Corporation, until thereafter amended as provided therein and under the ABCA.
The directors of the Offeror immediately prior to the Effective Time will be the
initial directors of the Surviving Corporation and the officers of the Company
immediately prior to the Effective Time (unless any directors or officers of
Parent or the Offeror are so designated in writing by Parent prior to the
Effective Time) will be the initial officers of the Surviving Corporation, in
each case until their successors are elected or appointed.
CONVERSION OF SECURITIES. At the Effective Time, by virtue of the Merger
and without any action on the part of Parent, the Offeror, the Company or the
holder of any securities of the Offeror or the Company, each Share issued and
outstanding immediately prior to the Effective Time (other than Shares owned by
the Company as treasury stock, Parent, the Offeror, or any other wholly owned
subsidiary of Parent or by shareholders, if any, who are entitled to and who
properly exercise dissenters' rights under the ABCA) shall be converted into and
become the right to receive the Offer Price. Each share of stock of the Offeror
issued and outstanding immediately prior to the Effective Time shall be
converted into and become one validly issued, fully paid and nonassessable share
of common stock, $.01 par value, of the Surviving Corporation.
REPRESENTATIONS AND WARRANTIES. In the Merger Agreement, the Company has
made customary representations and warranties to Parent and the Offeror. The
representations and warranties of the Company relate, among other things, to its
organization and qualification; subsidiaries; capital structure; authority to
enter into the Merger Agreement and to consummate the transactions contemplated
thereby; non-contravention of any laws or regulations with respect to the
transactions contemplated; required consents and approvals; absence of any
liability for brokerage or finders' fees; filings made by the Company with the
Commission under the Securities Act or the Exchange Act (including financial
statements included in the documents filed by the Company under these Acts);
absence of any material adverse change; absence of material adverse legal
proceedings; compliance with laws; tax matters; liabilities; benefit plans and
employees and employment practices; environmental matters; information supplied;
real property; labor matters; contracts and certain agreements; absence of
certain liabilities; opinion of a financial advisor; state takeover statutes;
insurance; intellectual property; certain agreements; indemnification claims;
and prior negotiations.
The Offeror and Parent have also made customary representations and
warranties to the Company. Representations and warranties of the Offeror and
Parent relate, among other things, to: their organization and authority to enter
into the Merger Agreement and to consummate the transactions contemplated
thereby; non-contravention of any laws or regulations with respect to the
transactions contemplated; required consents and approvals; absence of any
adverse legal proceedings; financing; and information supplied.
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CONDUCT OF BUSINESS BY THE COMPANY PENDING THE MERGER. Except as otherwise
contemplated by the Merger Agreement, prior to the Effective Time, unless the
Offeror shall otherwise agree in writing (provided, however, that following the
appointment of the Offeror's designees to the Company's Board of Directors
pursuant to the Merger Agreement, the Offeror shall be deemed to have consented
to all actions taken by the Company thereafter, except actions, if any, directed
or caused by those directors who were not so designated by the Offeror or by the
Board of Directors of the Company prior to the appointment of such designees):
(a) The business of the Company and its subsidiaries will be conducted
only in the ordinary course consistent with past practices.
(b) The Company will use all commercially reasonable efforts to preserve
intact in all material respects the business organization of the Company and
its subsidiaries, to keep available the services of its and their present
officers and employees and to preserve the goodwill of those having business
relationships with it and its subsidiaries.
(c) Except as otherwise permitted in the Merger Agreement, the Company
will not, and will not permit any of its subsidiaries to (i) amend its
articles of incorporation or bylaws (or comparable charter documents); (ii)
split, combine, reclassify or take similar action with respect to any of its
capital stock; (iii) issue or agree to issue any additional shares of, or
rights of any kind to acquire any shares of, its capital stock of any class,
other than, in the case of the Company, shares of capital stock and Rights
issuable pursuant to the Rights Agreement and Shares issuable upon the
exercise of outstanding options to purchase an aggregate of 455,050 Shares
pursuant to certain employees and director plans; (iv) purchase, redeem or
otherwise acquire any Shares or any other shares of its capital stock of any
class; or (v) declare, set aside or pay any dividend payable in cash, stock
or property or make any other distributions with respect to Shares or any
other shares of its capital stock of any class; or (vi) make any commitment
to do any of the foregoing, except for (A) the declaration and payment of
dividends by a wholly owned subsidiary of the Company solely to the Company
and (B) the declaration and payment of regular quarterly cash dividends by
the Company consistent with past practices (including as to declaration,
record and payment date) in no event to exceed $0.11 per Share per fiscal
quarter.
(d) The Company will not, and will not permit any of its subsidiaries to
(i) acquire (by merger, consolidation or acquisition of stock or assets) any
corporation, partnership or other business organization or division thereof
or make any investment in any other person, either by purchase of stock or
securities, contribution to capital (other than to wholly owned
subsidiaries), property transfer or purchase of any material amount of
property or assets; (ii) other than sales of inventory in the ordinary
course of its business consistent with past practices and other than the
sale of surplus real estate, sell, lease, grant any security interest in or
otherwise dispose of or encumber any material amount of its assets or
properties; (iii) incur any indebtedness for borrowed money other than
borrowings in the ordinary course of business under existing lines of credit
(or under any refinancing of such existing lines of credit), or issue any
debt securities, or assume, guarantee, endorse or otherwise as an
accommodation become responsible for the obligations of any other person
(other than a wholly owned subsidiary); (iv) make any capital expenditure or
commitment for additions to plant, property or equipment constituting
capital assets except expenditures pursuant to commitments existing as of
the date of the Merger Agreement and as disclosed to Parent in the Merger
Agreement or included in the Company's budgets for fiscal years 1997 and
1998 as described in the Merger Agreement; (v) change any assumption
underlying, or method of calculating, any bad debt, contingency or other
reserve (except changes that may be necessary or appropriate in order to
comply with a change in generally accepted accounting principles that takes
effect after the date of the Merger Agreement); (vi) pay, discharge or
satisfy any material claims, liabilities or obligations (absolute, accrued,
contingent or otherwise) other than (A) the payment, discharge or
satisfaction of liabilities in the ordinary course consistent with past
practices and (B) costs relating to the Merger Agreement and
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the transactions contemplated thereby; (vii) waive, release, grant or
transfer any rights of material value or modify or change in any material
respect any existing material license, lease, contract or other document; or
(viii) enter into any contract, agreement, commitment or arrangement with
respect to any of the foregoing; provided, however, that, notwithstanding
the foregoing, the Company will not be prohibited from financing,
constructing, equipping, supplying, staffing and opening new stores and
remodeling existing stores for which commitments have been entered into by
the Company prior to the date of the Merger Agreement and which commitments
are disclosed to Parent in the Merger Agreement.
(e) Neither the Company nor any of its subsidiaries will (i) enter into
any new severance or change of control agreement, or any employment
agreement; (ii) amend any existing employment contract or change of control
or severance agreement; (iii) grant any increases in compensation or
benefits other than increases in the ordinary course consistent with past
practices; (iv) adopt any new employee plan or benefit arrangement; (v) make
any change in or to any existing employee plan or benefit arrangement, other
than such changes as are required by law or that, in the opinion of its
counsel, are necessary or advisable to maintain the tax-qualified status of
such employee plan or benefit arrangement; (vi) make any grants, awards or
distributions under any employee plan or benefit arrangement, other than
those grants, awards or distributions required to be made under such
employee plans or benefit arrangements as in effect on the date of the
Merger Agreement; or (vii) make any amendment to any provision of any
outstanding grant or award.
(f) The Company will not cause any of the Company's representations or
warranties that are subject to a materiality qualification to become untrue
and will not cause any of the Company's representations and warranties that
are not so qualified to become untrue in any material respect.
NO SOLICITATION. The Merger Agreement provides that the Company will not,
nor will it permit any of its subsidiaries to, nor will it authorize or permit
any officer, director or employee of, or any investment banker, attorney or
other advisor or representative of, the Company or any of its subsidiaries to,
directly or indirectly, (i) solicit, initiate or encourage the submission of any
takeover proposal, or (ii) participate in any discussions or negotiations
regarding, or furnish to any "person" or "group" (as such terms are defined in
the Merger Agreement) any information with respect to, or take any other action
to facilitate any inquiries or the making of any proposal that constitutes or
may reasonably be expected to lead to any takeover proposal, provided, however,
that prior to the expiration of the Offer, upon receipt by the Company of a bona
fide written unsolicited takeover proposal to purchase all the Shares
outstanding for (A) a cash amount per Share in excess of the Offer Price or (B)
consideration which is not all cash that the Company has determined reasonably
and in good faith to be in excess of the Offer Price and that CSFB has advised
the Company in writing is in excess of the Offer Price (a copy of which advice
has been furnished by the Company to Parent), in either case by a group or
person (or any of their respective affiliates or associates) who (x) within the
past 12 months has not executed and delivered to the Company a confidentiality
agreement and whose failure to execute a confidentiality agreement does not
constitute a breach of the Merger Agreement (any such person or group a "New
Bidder") and (y) in the good faith reasonable judgment of the Board of Directors
after consultation with CSFB possesses the financial wherewithal reasonably to
be capable of consummating the takeover proposal (a "superior proposal"),
following notice to Parent, the Company may participate in negotiations with a
New Bidder regarding the superior proposal and furnish information with respect
to the Company pursuant to a customary confidentiality agreement (containing
"standstill" provisions no less onerous than in the Confidentiality and
Standstill Agreement between Parent and Company). Without limiting the
foregoing, any violation of the restrictions set forth in the preceding sentence
by any officer, director or employee of the Company or any of its subsidiaries
or any investment banker, attorney or other advisor or representative of the
Company or any of its subsidiaries, will be deemed to be a breach of the
foregoing provision by the Company. Under the Merger Agreement, "takeover
proposal" means any proposal for a tender offer, merger or other transaction
involving any Change in Control (as defined below under "Fees and Expenses").
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The Merger Agreement provides further that neither the Board of Directors
nor any committee thereof shall (i) withdraw or modify, in a manner adverse to
Parent or the Offeror, the approval or recommendation by the Board of Directors
nor any such committee of the Merger Agreement, the Offer or the Merger, (ii)
approve or recommend any takeover proposal, (iii) enter into any agreement with
respect to any takeover proposal, (iv) amend the Rights Agreement, redeem the
Rights or waive any other anti-takeover provisions (including Article Eleven of
the Company's Articles of Incorporation) or otherwise facilitate any other
takeover proposal in any respect, or (v) terminate the Merger Agreement in
connection with any takeover proposal. Notwithstanding the foregoing, in the
event the Board of Directors receives a superior proposal from a New Bidder or
any other group or person which the Board of Directors determines in its good
faith reasonable judgment (and based on the written advice of CSFB) to be more
favorable to the Company's shareholders than the Offer and Merger, the Board of
Directors may (subject to the following sentence): (A) withdraw or modify its
approval or recommendation of the Merger Agreement, the Offer and the Merger
taken together, (B) recommend any such superior proposal, or (C) solely with
respect to such a superior proposal submitted by a New Bidder, terminate the
Merger Agreement in order to enter into an agreement with respect to such a
superior proposal or amend the Rights Agreement, redeem the Rights or waive any
other anti-takeover provisions in respect of such superior proposal and
otherwise facilitate such proposal, in each case (subject to the Company's
obligations to pay the Termination Fee and Expense Fee as described below under
"Fees and Expenses") at any time following Parent's receipt of written notice of
the Company's intent to take the actions described in clauses (A), (B) and/or
(C) above (a "Superior Proposal Notice") advising Parent that the Board of
Directors has received a superior proposal, specifying the material terms and
conditions of such superior proposal and identifying the person or group making
such superior proposal. The Company may deliver the Superior Proposal Notice and
take any of the foregoing actions described in clauses (A), (B) and/or (C) only
if (i) the Company is not otherwise in material breach of the Merger Agreement
and (ii) the Company pays to Parent concurrent with the delivery of the Superior
Proposal Notice the Termination Fee and the Expense Fee (as described below
under "Fees and Expenses").
In addition to the foregoing obligations of the Company, the Company has
agreed to promptly advise Parent orally and in writing of any takeover proposal,
or any inquiry with respect to or which could reasonably be expected to lead to
any takeover proposal, the material terms and conditions of such takeover
proposal or inquiry, and the identity of the person making any such takeover
proposal or inquiry. The Company will keep Parent fully informed of the status
and details of any such takeover proposal or inquiry and the Company's responses
and other actions with respect thereto. The Merger Agreement provides that the
Company shall be entitled to disclose to its shareholders any such information
which is required by applicable law (including without limitation the Exchange
Act) regarding any takeover proposal.
HSR MATTERS. Neither Parent nor any of its subsidiaries is obligated in
connection with obtaining any required HSR Act consent (i) to initiate or defend
any litigation to which any governmental or regulatory authority (including the
Department of Justice ("DOJ") and the Federal Trade Commission ("FTC")) is a
party, (ii) to agree or otherwise become subject to any material limitations on
(A) the right of Parent or the Offeror, or their affiliates effectively to
control or operate the business, assets, or operations of the Company, (B) the
right of Parent, the Offeror, or its affiliates to acquire or hold the business,
assets, or operations of the Company, or (C) the right of Parent or the Offeror
to exercise full rights of ownership of the Shares acquired by Parent or the
Offeror including, without limitation, the right to vote any shares held by
Parent or the Offeror on all matters properly presented to the Company's
shareholders, or (iii) to agree or otherwise be required to sell or otherwise
dispose of, hold separate (through the establishment of a trust or otherwise),
or divest itself of all or any portion of the business, assets, or operations of
the Company, the Offeror or Parent, except, in connection with the proposed
resolution of any objections that may be asserted by the FTC or the DOJ with
respect to the transactions contemplated by the Merger Agreement, for the sale
or disposal of such of the Company's supermarkets (or, in lieu thereof,
supermarkets of Parent) that did not in the aggregate generate in excess of $2.7
million of net earnings before interest, tax,
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depreciation and amortization for the fiscal year ended June 29, 1997 (based
upon the Company's books and records for such supermarkets by location)
("EBITDA"). If Parent is required to divest a Parent store, the EBITDA of the
closest Company store will be used in calculating the $2.7 million.
THIRD PARTY STANDSTILL AGREEMENTS. The Company has agreed not to amend,
modify, waive, or terminate any of the provisions of any confidentiality
agreement or "standstill" agreement with any group or person to which the
Company or any of its subsidiaries is a party and shall request the return of
any confidential information pursuant to the terms thereof. The Company agreed
that Parent will be permitted to enforce such agreements on the Company's behalf
including seeking equitable relief to the extent available.
INDEMNIFICATION. Pursuant to the Merger Agreement, the Company, and from
and after the Effective Time, the Surviving Corporation (each, an "Indemnifying
Party"), will indemnify, defend and hold harmless each person who is now, or has
been at any time prior to the date hereof or who becomes prior to the Effective
Time, a director or officer of the Company or any of its subsidiaries (the
"Indemnified Parties") against all losses, claims, damages, costs and expenses
(including attorneys' fees), liabilities, judgments and settlement amounts that
are paid or incurred in connection with any claim, action, suit, proceeding or
investigation (whether civil, criminal, administrative or investigative and
whether asserted or claimed prior to, at or after the Effective Time) that is
based in whole or in part on, or arises in whole or in part out of, the fact
that such Indemnified Party is or was a director or officer of the Company or
any of its subsidiaries and (i) relates to or arises out of any action or
omission occurring or allegedly occurring at or prior to the Effective Time, or
(ii) is based in whole or in part on, arises in whole or in part out of, or
pertains in whole or in part to, the Merger Agreement or the transactions
contemplated thereby, in each case to the full extent a corporation is permitted
under applicable law to indemnify its own directors or officers, as the case may
be; provided that no Indemnifying Party shall be liable for any settlement of
any claim effected without its written consent, which consent will not be
unreasonably withheld. Without limiting the foregoing, in the event that any
such claim, action, suit, proceeding or investigation is brought against any
Indemnified Party (whether arising prior to or after the Effective Time), the
Indemnifying Parties will pay expenses in advance of the final disposition of
any such claim, action, suit, proceeding or investigation to each Indemnified
Party to the full extent permitted by applicable law.
Except as required by applicable law or legal process, Parent, the Offeror
and the Company have agreed in the Merger Agreement not to take any action so as
to amend, modify or repeal the provisions for exculpation of directors or
indemnification of directors or officers contained in the articles of
incorporation or bylaws (or other comparable charter documents) of the Surviving
Corporation and its subsidiaries in such a manner as would adversely affect in
any material respect the rights of any individual who shall have served as a
director or officer of the Company or any of its subsidiaries prior to the
Effective Time to be exculpated or to be indemnified by such corporations in
respect of their serving in such capacities prior to the Effective Time. The
Company will honor in accordance with their respective terms each of the
indemnity agreements between the Company and each of its directors as in effect
on the date of the Merger Agreement and will not terminate such agreements prior
to the Effective Time. The Company will, and after the consummation of the
Offer, Parent will cause the Company to, until the sixth anniversary of the
Effective Time and for so long thereafter as any claim asserted prior to such
date has not been fully adjudicated by a court of competent jurisdiction, cause
to be maintained in effect the policies of directors' and officers' liability
insurance maintained by the Company and its subsidiaries as of the date of the
Merger Agreement (or policies providing at least the same coverage amounts and
containing terms that are no less advantageous to the insured parties) with
respect to claims arising from facts or events that occurred or are alleged to
have occurred at or prior to the Effective Time; provided that the Company shall
endeavor to obtain such coverage at the lowest premium cost reasonably available
and that the Company shall not, and Parent shall not be obligated to cause the
Surviving Corporation to pay an aggregate (whether over time or on a one-time
basis) premium in excess of $600,000.
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BOARD REPRESENTATION. The Merger Agreement provides that promptly upon
payment by the Offeror for the Shares pursuant to the Offer, the Offeror will be
entitled to designate such number of directors, rounded up to the next whole
number, as will give the Offeror representation on the Board of Directors of the
Company equal to at least that number of directors equal to the product of (i)
the total number of directors on the Board of Directors and (ii) the percentage
that the number of Shares so purchased bears to the number of Shares
outstanding, and the Company will, at such time, use its best efforts to cause
the appropriate number of directors who are members of the Board of Directors as
of the date of the Merger Agreement to resign and the Offeror's designees to be
appointed or elected; provided, however, that notwithstanding the foregoing,
until the Effective Time, there shall be, to the extent they are willing to
continue to serve, at least three directors on the Board of Directors who were
directors on the date of the Merger Agreement and who are not designees nor
officers, directors, employees or affiliates of Parent or the Offeror nor are
employees of the Company or any of its subsidiaries (the "Independent
Directors"); provided, further, that if the number of Independent Directors
shall be reduced below three for any reason, the Board of Directors will,
subject to the approval of the remaining Independent Directors, if any,
designate a person or persons to fill the vacancy or vacancies who are directors
on the date of the Merger Agreement and not an officer, director, employee or
affiliate of Parent or the Offeror nor an employee of the Company. Any vacancies
that cannot be filled in the foregoing manner shall be filled by the Board of
Directors at its discretion. The Company's obligations to appoint the Offeror's
designees to the Board of Directors is subject to Section 14(f) of the Exchange
Act and Rule 14f-1 thereunder. Following the election of the Offeror's designees
pursuant to the Merger Agreement and until the Effective Time, any amendment of
the Merger Agreement or the Charter or Bylaws of the Company, any termination of
the Merger Agreement by the Company, any extension by the Company of the time
for the performance of any of the obligations or other acts of Parent or the
Offeror, any waiver of any of the Company's rights under the Merger Agreement,
or any transaction between Parent (or any affiliate or associate thereof) and
the Company will require the concurrence of a majority of the Independent
Directors. The Independent Directors will have the authority to retain such
counsel and other advisors at the expense of the Company as are reasonably
appropriate to assist them in the exercise of their duties in connection with
the Merger Agreement. In addition, the Independent Directors will have the
authority to institute any action on behalf of the Company to enforce
performance of the Merger Agreement.
OPTIONS; EMPLOYEE BENEFITS; SEVERANCE AND OTHER AGREEMENTS. The Merger
Agreement provides that prior to the Effective Time, the Company may elect to
accelerate the exercisability of options granted and outstanding prior to the
date of the Merger Agreement under the Company's Directors' Stock Option Plan
and the Company's 1993 Stock Incentive Plan and the vesting of restricted shares
granted and outstanding prior to the date of the Merger Agreement under the
Company's 1987 Restricted Stock Plan and may waive the two-year holding period
for stock issued pursuant to the Company's Director Compensation Plan. In
addition, the Company will have the right prior to the Effective Time to pay to
any holder of an outstanding option to purchase Common Stock an amount equal to
the difference between the Offer Price and the per Share exercise price of a
stock option held by such holder multiplied by the number of Shares then subject
to such option (whether or not then exercisable), less any amounts required to
be withheld under the Code, as amended, or any provision of state, local or
foreign tax law, in exchange for the surrender and cancellation of such stock
option. The Company will use its commercially reasonable best efforts to cause
all options to be exercised prior to the Effective Time. The Company has been
advised by its directors that they will exercise all options held by them prior
to the consummation of the Offer. Prior to the Effective Time, the Company may
adopt any amendments to its Directors' Stock Option Plan, 1993 Stock Incentive
Plan or 1987 Restricted Stock Plan or any agreements thereunder as may be
necessary or appropriate to effectuate the foregoing, provided that no such
amendment may reduce the per Share exercise price of such options. In addition,
the Company may terminate or amend its Director Compensation Plan to eliminate
future issuances of stock.
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Parent has agreed to honor or cause the Offeror to honor, in accordance with
their respective terms, certain specified severance agreements and employment
agreements relating to officers, directors and employees that have previously
been disclosed by the Company to Parent, as in effect on the date of the Merger
Agreement.
CONDITIONS PRECEDENT. The respective obligation of each party to effect the
Merger is subject to the fulfillment, at or prior to the Effective Time, of each
of the following conditions: (i) the Offeror shall have purchased all Shares
validly tendered pursuant to the Offer; (ii) the Merger Agreement shall have
been adopted by the requisite vote of the shareholders of the Company under the
ABCA; (iii) no governmental or regulatory authority shall have issued an order
or ruling or taken any other action declaring illegal or otherwise prohibiting
the Merger; and (iv) all governmental consents, orders and approvals legally
required for the consummation of the Merger and the transactions contemplated by
the Merger Agreement shall have been obtained and be in effect at the Effective
Time.
TERMINATION. The Merger Agreement provides that it may be terminated at any
time (upon written notice to the other parties thereto) prior to the Effective
Time, whether before or after approval by the shareholders of the Company, (i)
by mutual written consent of the Boards of Directors of the Company, Parent and
the Offeror; (ii) by the Company, (A) if the Offer has not been commenced timely
in accordance with the provisions of the Merger Agreement, provided that such
failure shall not have been corrected on the next business day; (B) if any
representation or warranty made by Parent and/or the Offeror in the Merger
Agreement shall not be true and correct, which materially and adversely affects
the consummation of the Offer, and such breach is not capable of being cured or
is not cured by Parent and/or the Offeror prior to the expiration of the Offer;
(C) if Parent or the Offeror shall not have performed and complied with, in all
material respects (without reference to any materiality qualifications contained
therein), each agreement and covenant required by the Merger Agreement to be
performed or complied with by it, and such breach is not capable of being cured
by Parent and/or the Offeror or is not cured prior to the expiration of the
Offer; and (D) in respect of a superior proposal (as described above under "No
Solicitation"), provided that (x) the Company shall have paid Parent the
Termination Fee and the Expense Fee (as described below under "Fees and
Expenses") and (y) Parent or the Offeror does not make, within three business
days of receipt of a Superior Proposal Notice, an offer that the Company's Board
of Directors believes, in good faith after consultation with its legal counsel
and financial advisors, is at least as favorable, from a financial point of
view, to the Company's shareholders as such other bidder's offer; provided,
however, that if subsequent to the payment of the Termination Fee and the
Expense Fee and prior to the termination of the Merger Agreement, Parent or the
Offeror makes an offer that the Company's Board of Directors believes in good
faith after consultation with its legal counsel and financial advisors, is at
least as favorable, from a financial point of view, to the Company's
shareholders as such other bidder's offer, Parent and the Offeror shall, upon
written request of the Company, return the Termination Fee and the Expense Fee
once the Company shall have approved and recommended Parent's and the Offeror's
amended offer and shall have rescinded certain actions taken with respect to
such superior proposal; (iii) prior to the purchase of Shares by the Offeror
pursuant to the Offer, by Parent or the Offeror, if (A) any representation or
warranty made by the Company in the Merger Agreement that contains a materiality
qualification shall not be true and correct, or any representation or warranty
made by the Company in the Merger Agreement that is not so qualified shall not
be true and correct in any material respect, and, in each case, such breach of
the representation or warranty is not capable of being cured by the Company or
is not cured prior to the expiration of the Offer; (B) the Company shall not
have performed and complied with, in all material respects (without reference to
any materiality qualifications contained therein), each agreement and covenant
required by the Merger Agreement to be performed or complied with by it and such
breach of the agreement or covenant is not capable of being cured by the Company
or is not cured prior to the expiration of the Offer; and (iv) by Parent, the
Offeror or the Company, if (A) (x) the Offer shall be terminated or expire in
accordance with its terms without the purchase of any Shares pursuant thereto or
(y) the Offeror shall not have accepted for payment any Shares pursuant to the
Offer within 90 calendar days following the commencement of the Offer; provided,
that
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Parent and the Offeror shall not be entitled to terminate for such reason if the
cause thereof is a breach by Parent or the Offeror of any of their obligations
under the Merger Agreement and the Company shall not be entitled to terminate
for such reason if the cause thereof is a breach by the Company of any of its
obligations under the Merger Agreement; (B) any governmental or regulatory
authority shall have issued an order or ruling or taken any other action
declaring illegal or otherwise prohibiting the consummation of the Offer or the
Merger and such order shall have become final and nonappealable; (C) if, at the
Special Meeting (including any adjournment or postponement thereof), the
requisite shareholder approval is not obtained, except that the right to
terminate the Merger Agreement under this clause (C) will not be available to
any party whose willful failure to perform any material obligation or to perform
any material condition under the Merger Agreement has been the proximate cause
of, or resulted in, the failure to obtain the requisite shareholder approval.
If the Merger Agreement is validly terminated by either the Company or
Parent or the Offeror, the Merger Agreement will forthwith become null and void
and there will be no liability or obligation on the part of either the Company
or Parent or the Offeror (or any of their respective representatives or
affiliates), except that (i) the provisions relating to confidentiality, no
solicitation, fees and expenses and certain other provisions will continue to
apply following any such termination and (ii) nothing shall relieve any party
from liability for wilful breach of its representations, warranties, covenants
or agreements contained in the Merger Agreement.
FEES AND EXPENSES. Except as provided in the Merger Agreement, whether or
not the Offer or the Merger is consummated, all costs and expenses incurred in
connection with the Merger Agreement shall be paid by the party incurring such
costs and expenses.
The Merger Agreement provides that: (i) if (A) Parent or the Offeror shall
have provided the Company with an irrevocable written notice of termination of
the Merger Agreement based upon a material willful breach by the Company of the
Merger Agreement (provided that such notice may state that it is subject to
payment of the Termination Fee and the Expense Fee by the Company) or (B) any
Change in Control shall have occurred during the term of the Merger Agreement or
within 180 days following termination of the Merger Agreement (other than
pursuant to (1) clause (i) as described above under "Termination", (2) clause
(ii) as described above under "Termination", (3) clause (iv)(A) as described
above under "Termination" if the Offer has expired due to the failure to satisfy
any of the conditions in paragraphs (b), (c)(i), (c)(ii), (c)(iii) or (d) as set
forth under Section 15, unless in the case of the conditions set forth in
paragraphs (b), (c)(i), (c)(ii) or (c)(iii) as set forth under Section 15,
Parent and the Offeror are diligently pursuing the satisfaction of such
conditions and the Company shall not have agreed to Parent's or the Offeror's
written request to extend the Offer beyond the periods prescribed by the Merger
Agreement, or (4) clause (iv)(B) as described above under "Termination", so long
as the Company shall not be in breach of this Agreement) then the Company shall
promptly, but in no event later than five business days after the first to occur
of any such event described in clauses (A) and (B) above (the "Payment Date"),
pay Parent a fee of $7,000,000 (the "Termination Fee") and shall also reimburse
Parent and the Offeror for all out-of-pocket expenses and fees payable by them
or their affiliates up to an aggregate of $3,000,000 (including without
limitation fees and expenses of all counsel, printers, banks, investment banking
firms, and other financial institutions, and their respective agents directly
related to the transactions contemplated by the Merger Agreement (including the
financing of the transactions contemplated by the Merger Agreement by Parent and
the Offeror (see Section 10) or obtaining the required consents of Parent's
noteholders (see Sections 1 and 15)) (the "Expense Fee"). The Termination Fee
and the Expense Fee shall, in the alternative, be due under the circumstances
described above under "No Solicitation." In no event will the Company be
obligated to pay the Termination Fee and the Expense Fee more than once, unless
Parent and the Offeror have previously refunded such Termination Fee and Expense
Fee as provided above in which case the Termination Fee and Expense Fee shall
continue to be payable in the circumstances provided in the Merger Agreement.
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"Change in Control" means any of the following: (i) any person or group
(other than Parent or the Offeror) acquires or beneficially owns, or enters into
an agreement with the Company or any of its subsidiaries to acquire, directly or
indirectly, 25% or more of the outstanding Shares or 25% or more of the assets
(including shares of subsidiaries), revenues or earning power of the Company and
its subsidiaries, taken as a whole; (ii) the Company distributes or transfers,
or publicly announces its intention to distribute or transfer, to its
shareholders, by dividend or otherwise, assets constituting 25% or more of the
market value or earning power of the Company on a consolidated basis; or (iii)
any person or group (other than Parent or the Offeror) enters into an agreement
with the Company or any of its subsidiaries to consummate, or consummates,
directly or indirectly, a tender offer or exchange offer for any Shares or
involving a merger, consolidation or other business combination or similar
transaction with or involving the Company.
THE CONFIDENTIALITY AND STANDSTILL AGREEMENT
The Company and Parent are also parties to a Confidentiality and Standstill
Agreement dated April 8, 1997 containing customary terms, including a standstill
provision which, as modified by the Merger Agreement, terminates if the
Termination Fee and Expense Fee are, or are required to be, paid. The
Confidentiality and Standstill Agreement is filed as an exhibit to the Schedule
14D-1 and is incorporated herein by reference.
14. DIVIDENDS AND DISTRIBUTIONS.
If, on or after the date of the Merger Agreement, the Company should (i)
split, combine or otherwise change the Shares or the Company's capitalization,
(ii) issue or sell any additional securities of the Company or otherwise cause
an increase in the number of outstanding securities of the Company (except for
Shares issuable upon the exercise of director or employee stock options
outstanding on the date of the Merger Agreement) or (iii) acquire currently
outstanding Shares or otherwise cause a reduction in the number of outstanding
Shares, then, without prejudice to the Offeror's rights under Sections 1 and 15,
the Offeror, in its sole discretion, subject to the terms of the Merger
Agreement, may make such adjustments as it deems appropriate in the purchase
price and other terms of the Offer.
If, on or after the date of the Merger Agreement, the Company should declare
or pay any dividend on the Shares or make any distribution (including, without
limitation, cash dividends, the issuance of additional Shares pursuant to a
stock dividend or stock split, the issuance of other securities or the issuance
of rights for the purchase of any securities, but excluding any regular
quarterly dividend on the Shares of not more than $0.11 per Share based on the
declaration, record and payment dates normally applicable to the Shares) with
respect to the Shares, that is payable or distributable to shareholders of
record on a date prior to the transfer to the name of the Offeror or its nominee
or transferee on the Company's stock transfer records of the Shares purchased
pursuant to the Offer, then, without prejudice to the Offeror's rights under
Sections 1 and 15, any such dividend, distribution or right to be received by
the tendering shareholders will be received and held by the tendering
shareholders for the account of the Offeror and will be required to be promptly
remitted and transferred by each tendering shareholder to the Depositary for the
account of the Offeror, accompanied by appropriate documentation of transfer.
Pending such remittance and subject to applicable law, the Offeror will be
entitled to all rights and privileges as owner of any such dividend,
distribution or right and may withhold the entire purchase price or deduct from
the purchase price the amount or value thereof, as determined by the Offeror in
its sole discretion.
The Merger Agreement provides that neither the Company nor any of its
subsidiaries will, among other things, from the date of the Merger Agreement
until the Effective Time, (i) split, combine, reclassify or take similar action
with respect to any of its capital stock; (ii) issue or agree to issue any
additional shares of, or rights of any kind to acquire any shares of, its
capital stock of any class, other than, in the case of the Company, shares of
capital stock and Rights issuable pursuant to the Rights Agreement and Shares
issuable upon the exercise of outstanding options pursuant to existing employee
benefit plans and director option plans; (iii) purchase, redeem or otherwise
acquire any Shares or any other shares of its capital stock
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of any class; or (iv) declare, set aside or pay any dividend payable in cash,
stock or property or make any other distributions with respect to Shares or any
other shares of its capital stock of any class; or (v) make any commitment to do
any of the foregoing, except for (A) the declaration and payment of dividends by
a wholly owned subsidiary of the Company solely to the Company and (B) the
declaration and payment of regular quarterly cash dividends by the Company
consistent with past practices (including as to declaration, record and payment
dates) in no event to exceed $0.11 per Share per fiscal quarter.
15. CERTAIN CONDITIONS TO THE OFFEROR'S OBLIGATIONS.
Notwithstanding any other provision of the Offer, the Offeror shall not be
required to accept for payment or pay for any tendered Shares (subject to Rule
14e-1(c) under the Exchange Act (relating to the Offeror's obligation to pay for
or return tendered Shares after the termination or withdrawal of the Offer)) and
may delay (subject to the provisions of the Merger Agreement, see Section 13)
the acceptance for payment of, or the payment for, any Shares, amend the Offer
as provided in the Merger Agreement or terminate the Offer as provided in the
Merger Agreement, if
(a) immediately prior to the expiration of the Offer (as it may be extended
in accordance with the terms of the Merger Agreement), there shall not have been
validly tendered and not withdrawn pursuant to the Offer a number of Shares such
that, upon consummation of the Offer, the Offeror and its affiliates will
beneficially own in the aggregate not less than two-thirds of the Shares
outstanding on a fully diluted basis;
(b) any applicable (i) waiting period under the HSR Act or (ii) period
during which Parent shall have consented or otherwise be barred from purchasing
Shares pursuant to the Offer as part of any agreement or other arrangement with
any governmental or regulatory authority involving the HSR Act or any other
applicable antitrust laws shall not have expired or terminated prior to the
expiration of the Offer (as it may be extended in accordance with the terms of
the Merger Agreement);
(c) at any time on or after the date of the Merger Agreement and before the
time of payment for any Shares, any of the following events shall have occurred
and be continuing:
(i) there shall be threatened or pending by any governmental or
regulatory authority (or the staff of the FTC or the staff of the Antitrust
Division of the DOJ (the "Antitrust Division") shall have recommended the
commencement of) any suit, action or proceeding, or there shall be pending
by any other person any suit, action or proceeding which has a reasonable
possibility of success, (A) challenging the acquisition by Parent or the
Offeror of any Shares, seeking to restrain or prohibit the making or
consummation of the Offer or the Merger or the performance of any of the
other transactions contemplated by the Merger Agreement or seeking to obtain
from the Company, Parent or the Offeror any damages or otherwise imposing
financial burdens, penalties or fines that are material in relation to the
Company and its subsidiaries, or Parent and its subsidiaries, in each case
taken as a whole, (B) seeking to prohibit or limit the ownership or
operation by the Company, Parent or any of their respective subsidiaries of
a material portion of the business or assets of the Company or its
subsidiaries, or Parent or its subsidiaries, as a result of the Offer, the
Merger or any of the other transactions contemplated by the Merger
Agreement, (C) seeking to impose limitations on the ability of Parent or the
Offeror to acquire or hold, or exercise full rights of ownership of, any
Shares accepted for payment pursuant to the Offer including, without
limitation, the right to vote the Shares accepted for payment by it on all
matters properly presented to the shareholders of the Company, (D) seeking
to prohibit Parent or any of its subsidiaries from effectively controlling
or operating in any material respect the business or operations of the
Company or its subsidiaries, or (E) which otherwise is reasonably likely to
have a Material Adverse Effect. As used herein, "Material Adverse Effect"
means any change or effect that is materially adverse to the condition
(financial or otherwise), total assets, total liabilities, business, results
of operations or prospects of the Company and its subsidiaries taken as a
whole, including without limitation any such change or effect that prevents
Parent and the Offeror from obtaining their contemplated financing for the
Offer and the Merger;
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(ii) there shall be any statute, rule, regulation, judgment, order or
injunction enacted, entered, enforced, promulgated or deemed applicable to
the Offer or the Merger, or any other action shall be taken by any
governmental or regulatory authority or court, other than the application to
the Offer or the Merger of applicable waiting periods under the HSR Act,
that is reasonably likely to result, directly or indirectly, in any of the
consequences referred to in clauses (A) through (E) of paragraph (i) above,
or any governmental consents, orders and approvals legally required for the
consummation of the Offer or the Merger shall not have been obtained, and
such failure is reasonably likely to result, directly or indirectly, in any
of the consequences referred to in clauses (A) through (E) of paragraph (i)
above;
(iii) (A) a general suspension of trading in, or limitation on prices
for, securities on any national securities exchange or in the over the
counter market, (B) any change in general, financial, bank or capital market
conditions which materially affects the ability of financial institutions to
extend credit or syndicate loans, (C) a decline in the Standard & Poor's 500
Index by an amount in excess of 25%, measured from July 3, 1997, (D) a
declaration of a banking moratorium or any suspension of payments in respect
of banks in the United States or any material limitation (whether or not
mandatory) imposed by any governmental or regulatory authority that is
reasonably likely to affect the extension of credit by lending institutions
in general, or (E) a commencement of a war or armed hostilities or other
national or international crisis directly or indirectly involving the United
States which war, hostilities or crisis is reasonably likely to have a
Material Adverse Effect or adversely affect the ability of the Company to
perform its obligations under the Merger Agreement or to consummate the
Merger or to materially affect Parent's ability to obtain the consents
referred to in paragraph (d) below; or in the case of any of the events
described in (A) through (E) above existing as of the date of the Merger
Agreement, a material acceleration or worsening thereof;
(iv) any of the representations and warranties made by the Company in
the Merger Agreement that are subject to a materiality qualification shall
not be true and correct, or any of the representations and warranties made
by the Company in the Merger Agreement that are not so qualified shall not
be true and correct in any material respect, in each case at any time prior
to the consummation of the Offer as though made on and as of such date or,
in the case of representations and warranties made as of a specific date
earlier than the date of the consummation of the Offer, on and as of such
earlier date; provided, however, that if the Company discovers such a breach
of a representation or warranty, the Company shall promptly notify Parent
and the Offeror of the nature of such breach and if Parent or the Offeror
discovers such a breach of a representation or warranty, Parent or the
Offeror shall promptly notify the Company of the nature of such breach and
provided further that, in the case of breaches that are reasonably capable
of being cured prior to the expiration of the Offer, the Company shall have
failed to diligently proceed to effect a cure of such breach and, in any
event, to cure such breach prior to the expiration of the Offer (including
any extensions thereof);
(v) the Company shall not have performed and complied with, in all
material respects (without reference to any materiality qualifications
contained therein), each agreement and covenant required by the Merger
Agreement to be performed or complied with by it; provided, however, that if
the Company discovers such a breach of an agreement or covenant, the Company
shall promptly notify Parent and the Offeror of the nature of such breach
and if Parent or the Offeror discovers such a breach of an agreement or
covenant, Parent or the Offeror shall promptly notify the Company of the
nature of such breach and provided further that, in the case of breaches
that are reasonably likely to be cured prior to the expiration of the Offer,
the Company shall have failed to diligently proceed to effect a cure of such
breach and, in any event, to cure such breach prior to the expiration of the
Offer (including any extensions thereof);
(vi) there shall have occurred any change (or any development that,
insofar as reasonably can be foreseen, is reasonably likely to result in any
change) that is materially adverse to the condition (financial or
otherwise), total assets, total liabilities, business, results of operations
or prospects of the Company and its subsidiaries taken as a whole, including
without limitation any such change that
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prevents Parent and the Offeror from obtaining the contemplated financing
for the Offer and the Merger;
(vii) the Company shall have delivered (or been obliged to deliver) to
Parent a Superior Proposal Notice or there shall have been a Change in
Control (see Section 13);
(viii) prior to the purchase of Shares pursuant to the Offer, the Board
of Directors (or any committee thereof) of the Company shall have withdrawn
or modified (including by amendment of its Schedule 14D-9) in a manner
adverse to Parent or the Offeror, its approval or recommendation of the
Offer, the Merger Agreement or the Merger or shall have recommended another
takeover proposal, or shall have adopted any resolution to effect any of the
foregoing; or
(ix) the Merger Agreement shall have been terminated in accordance with
its terms, or Parent or the Offeror have reached an agreement in writing
with the Company providing for termination of the Offer or delay in
acceptance of, or payment for, the Shares;
(d) Parent shall not have obtained prior to the expiration of the Offer an
amendment or supplement to the Senior Notes Indenture (and, to the extent
necessary, the Notes and Guarantees referred to therein), all with the consent
of the holders of such Notes and in accordance with the terms of such Indenture,
to increase the amount of permitted indebtedness, restricted payments and
investments permitted to be incurred or made, as applicable, by Parent and its
subsidiaries under the Senior Notes Indenture and to make such other changes
thereto as are necessary to permit Parent to consummate the Offer, the Merger
and the other transactions contemplated by the Merger Agreement; or
(e) Prior to the expiration of the Offer, all of the Company's directors and
substantially all of the holders of the Company's outstanding Options who are
employees of the Company shall have exercised such Options or shall have entered
into agreements with the Company to exercise such Options prior to the Effective
Time of the Merger (or such later time as may be specified by Parent) or
otherwise permit the Company to "cash-out" the Options as provided in the Merger
Agreement;
which (in the case of each of paragraphs (a), (b), (c)(i) through (c)(viii), (d)
and (e) above) makes it inadvisable, as determined by the Offeror in its sole
judgment to proceed with the Offer or with such acceptance for payment of, or
payment for, Shares.
The foregoing conditions are for the sole benefit of the Offeror and Parent
and may be asserted by the Offeror or Parent and may be waived by the Offeror or
Parent, in whole or in part, at any time and from time to time, in the sole
discretion of the Offeror or Parent; provided that, without the written consent
of the Company, Parent and the Offeror may not reduce the Minimum Condition to
less than a majority of the outstanding Shares on a fully diluted basis or waive
the condition set forth in (b) above. The failure by the Offeror or Parent at
any time to exercise any of the foregoing rights will not be deemed a waiver of
any right and each right will be deemed an ongoing right which may be asserted
at any time and from time to time.
Should the Offer be terminated pursuant to the foregoing provisions, all
tendered Shares not theretofore accepted for payment shall forthwith be returned
by the Depositary to the tendering shareholders.
Under certain circumstances, the Offer will be extended until September 12,
1997 if necessary to meet certain conditions, including the conditions set forth
in paragraphs (b) and (d) above. In addition, notwithstanding the satisfaction
or waiver of any conditions of the Offer, the Offer may be extended until
September 12, 1997 to enable Parent and the Offeror to obtain permanent
financing for the transaction. The Offer may also be extended in other
circumstances. See Section 1.
16. CERTAIN LEGAL MATTERS.
Except as otherwise disclosed herein, the Offeror is not presently aware of
any consent, order, approval or other action by any governmental or regulatory
authority which would be required for the
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consummation of the Offer or the Merger or the acquisition or ownership of
Shares by the Offeror as contemplated herein and, if not obtained, is reasonably
likely to result, directly or indirectly, in any of the consequences referred to
in clauses (A) through (E) of paragraph (c)(i) of Section 15. Should any
consent, order, approval or other action be required (other than as set forth in
this Section), the Offeror currently contemplates that it would seek such
consent, order, approval or action. The Company's pharmacists are required to be
licensed by the appropriate state board of pharmacy and the Federal Drug
Enforcement Administration (the "FDEA"). The Company's pharmacies are also
registered with the FDEA and licensed under state law. Many of the Company's
stores sell alcoholic beverages and are subject to various state and local
licensing requirements as a result. By virtue of these license and registration
requirements, the Offeror, Parent or the Company may be obligated to obtain
certain governmental consents and approvals in order to comply with applicable
law. The Offeror believes that such approvals can be obtained in due course, and
that the Company will continue to conduct its operations substantially in the
same manner as before the transfer. While except as described in this Offer to
Purchase, the Offeror does not presently intend to delay the acceptance for
payment of, or payment for, Shares tendered pursuant to the Offer pending the
outcome of any such matter, there can be no assurance that any such approval or
action, if needed, would be obtained or would be obtained without substantial
conditions, or that adverse consequences might not result to the business of the
Company, the Offeror or Parent or that certain parts of the business of the
Company or Parent might not have to be disposed of or held separate in order to
obtain such approval or in the event that such approvals were not obtained or
any other actions were not taken.
U.S. ANTITRUST. Under the provisions of the HSR Act applicable to the
Offer, the acquisition of Shares under the Offer may be consummated following
the expiration of a 15-day waiting period following the filing of a Premerger
Notification and Report Form with respect to the Offer, unless Parent receives a
request for additional information or documentary material from the Antitrust
Division or the FTC or unless early termination of the waiting period is
granted. The Company and Parent each made such a filing on July 11 and July 14,
1997, respectively, and, accordingly, the initial waiting period will expire at
11:59 p.m., New York City time, on July 29, 1997 unless early termination of the
waiting period is granted. If, within the initial 15-day waiting period, either
the Antitrust Division or the FTC requests additional information or documentary
material concerning the Offer, the waiting period will be extended through the
tenth day after the date of substantial compliance by the Offeror. Complying
with a request for additional information or documentary material can take a
significant amount of time. In addition, if the Antitrust Division or the FTC
raises substantive issues in connection with the proposed transaction, the
parties frequently engage in negotiations with the relevant government agency
concerning possible means of addressing those issues and may agree to delay
consummation of the transaction while such negotiations continue.
The Antitrust Division and the FTC frequently scrutinize the legality under
the antitrust laws of transactions such as the Offeror's proposed acquisition of
the Company, and there are certain locations in Florida and Mississippi in which
both the Company and Parent have stores in close proximity. At any time before
or after the Offeror's acquisition of Shares pursuant to the Offer, the
Antitrust Division or the FTC could take such action under the antitrust laws as
either deems necessary or desirable in the public interest, including seeking to
enjoin the purchase of Shares pursuant to the Offer or the consummation of the
Merger, or seeking the divestiture of Shares acquired by the Offeror or the
divestiture of substantial assets of the Company or its subsidiaries or Parent
or its subsidiaries. Private parties or state attorneys general may also bring
legal action under the antitrust laws under certain circumstances. There can be
no assurance that a challenge to the Offer or the consummation of the Merger on
antitrust grounds will not be made, or, if such a challenge is made, of the
result thereof.
If any applicable waiting period under the HSR Act applicable to the Offer
has not expired or been terminated prior to the Expiration Date, or any period
during which Parent shall have consented or otherwise been barred from
purchasing Shares pursuant to the Offer as part of any agreement or arrangement
with any governmental or regulatory authority involving the HSR Act or any other
applicable
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antitrust laws shall not have expired or terminated prior to the Expiration
Date, the Offeror will not be obligated to proceed with the Offer or the
purchase of any Shares not theretofore purchased pursuant to the Offer. See
Section 15. The Offeror, Parent and the Company have entered into certain
agreements regarding the HSR Act and other antitrust matters. See Section 13
under "The Merger Agreement--HSR MATTERS."
STATE TAKEOVER LAWS. Various states have adopted takeover laws and
regulations applicable to attempts to acquire securities of corporations which
are incorporated, or have substantial assets, shareholders, principal executive
offices or principal places of business or whose business operations otherwise
have substantial economic effects in such states. In EDGAR V. MITE CORP., in
1982, the Supreme Court of the United States (the "U.S. Supreme Court")
invalidated on constitutional grounds the Illinois Business Takeover Act, which,
as a matter of state securities law, made takeovers of corporations meeting
certain requirements more difficult. However in 1987, in CTS CORP. V. DYNAMICS
CORP. OF AMERICA, the U.S. Supreme Court held that the State of Indiana may, as
a matter of corporate law and, in particular, with respect to those aspects of
corporate law concerning corporate governance, constitutionally disqualify a
potential acquirer from voting on the affairs of a target corporation without
the prior approval of the remaining shareholders. The state law before the U.S.
Supreme Court was by its terms applicable only to corporations that had a
substantial number of shareholders in the state and were incorporated there.
The Company, directly or through subsidiaries, conducts business in a number
of states throughout the United States, some of which have enacted takeover
laws. The Offeror does not know whether any of these laws will, by their terms,
apply to the Offer or the Merger and has not complied with any such laws. Should
any person seek to apply any state takeover law, the Offeror will take such
action as then appears desirable, which may include challenging the validity or
applicability of any such statute in appropriate court proceedings. In the event
it is asserted that one or more state takeover laws is applicable to the Offer
or the Merger, and an appropriate court does not determine that it is
inapplicable or invalid as applied to the Offer, the Offeror might be required
to file certain information with, or receive approvals from, the relevant state
authorities. In addition, if enjoined, the Offeror might be unable to accept for
payment any Shares tendered pursuant to the Offer, or be delayed in continuing
or consummating the Offer and the Merger. In such event, the Offeror may not be
obligated to accept for payment any Shares tendered. See Section 15.
CERTAIN CHARTER PROVISIONS. Article Eleven of the Company's Charter
provides that in addition to any action required by law or the Company's
Charter, and except as otherwise expressly provided therein (as discussed
below), the approval or authorization of (i) any merger or consolidation of the
Company or any subsidiary of the Company with (A) any Interested Shareholder (as
defined below) or (B) any other corporation (whether or not itself an Interested
Shareholder) which is, or after such merger or consolidation would be, an
affiliate of an Interested Shareholder; or (ii) any sale, lease, exchange,
mortgage, pledge, transfer or other disposition (in one transaction or a series
of transactions) to or with any Interested Shareholder or any affiliate of any
Interested Shareholder of any assets of the Company or any subsidiary of the
Company having an aggregate fair market value of $10,000,000 or more; or (iii)
the issuance or transfer by the Company or any subsidiary of the Company (in one
transaction or a series of transactions) of any securities of the Company or any
subsidiary of the Company to any Interested Shareholder or any affiliate of any
Interested Shareholder in exchange for cash, securities or other property (or a
combination thereof) having an aggregate fair market value of $10,000,000 or
more; or (iv) the adoption of any plan or proposal for the liquidation or
dissolution of the Company proposed by or on behalf of an Interested Shareholder
or any affiliate of any Interested Shareholder; or (v) any reclassification of
securities (including any reverse stock split), or any merger or consolidation
of the Company with any of its subsidiaries or any other transaction (whether or
not with or into or otherwise involving an Interested Shareholder) which has the
effect, directly or indirectly, of increasing the proportionate share of the
outstanding shares of any class of equity or convertible securities of the
Company or any subsidiary of the Company which is directly or indirectly owned
by any Interested Shareholder or any affiliate of any Interested Shareholder
shall require the affirmative vote of the holders of at least 80% of the voting
power
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of the then outstanding shares of capital stock of the Company entitled to vote
generally in the election of directors (the "Voting Stock"), voting together as
a single class, (it being understood that for purposes of the foregoing
provision, each share of the Voting Stock shall have the number of votes granted
to it generally in the election of directors). Such affirmative vote shall be
required notwithstanding the fact that no vote may be required, or that a lesser
percentage may be specified, by law or in any agreement with any national
securities exchange or otherwise.
For purposes of such Article Eleven, "Interested Shareholder" is defined as
any person (other than the Company or any subsidiary of the Company) who or
which: (i) is the beneficial owner, directly or indirectly, of more than 20% of
the outstanding voting stock of the Company; or (ii) is an affiliate of the
Company and at any time within the two-year period immediately prior to the date
in question was the beneficial owner, directly or indirectly, of 20% or more of
the outstanding Voting Stock of the Company; or (iii) is an assignee of or has
otherwise succeeded to any Voting Stock of the Company which at any time within
the two-year period immediately prior to the date in question was beneficially
owned by any Interested Shareholder, if such assignment or succession shall have
occurred in the course of a transaction or a series of transaction not involving
a public offering within the meaning of the Securities Act.
The foregoing provisions of the Company's Charter are applicable to any
particular business combination. However, such business combination requires
only such affirmative vote as is required by law and any other provision of the
Company's Charter, if the business combination has been approved by a majority
of the Disinterested Directors (as defined below).
For purposes of such Article Eleven, "Disinterested Director" is defined as
any member of the Board of Directors of the Company who is unaffiliated with the
Interested Shareholder and was a member of the Board of Directors prior to the
time that the Interested Shareholder became an Interested Shareholder, and any
successor of a Disinterested Director who is unaffiliated with the Interested
Shareholder, and is recommended to succeed a Disinterested Director by a
majority of Disinterested Directors then on the Board of Directors.
The Merger of the Offeror with and into the Company would trigger the
requirements of Article Eleven of the Company's Charter. In accordance with the
Company's Charter, the required approval by the Board of Directors of the
Company of the Merger Agreement has been obtained.
RIGHTS AGREEMENT. The Rights Agreement contains certain provisions that may
delay, defer or prevent a takeover of the Company. In connection with the Merger
Agreement, the Company's Board of Directors has amended the Rights Agreement to
provide that, so long as the Merger Agreement has not been terminated, such
provisions will not apply to the Offer, the Merger and the Merger Agreement and
the transactions contemplated thereby. The provisions of the Rights Agreement
are described in the Company's Schedule 14D-9.
17. FEES AND EXPENSES.
Neither the Offeror nor Parent, nor any officer, director, shareholder,
agent or other representative of the Offeror or Parent will pay any fees or
commissions to any broker, dealer or other person (other than the Information
Agent and the Depositary) for soliciting tenders of Shares pursuant to the
Offer. Brokers, dealers, commercial banks and trust companies and other nominees
will, upon request, be reimbursed by the Offeror for customary mailing and
handling expenses incurred by them in forwarding materials to their customers.
Donaldson, Lufkin & Jenrette Securities Corporation is acting as Dealer
Manager in connection with the Offer and is providing certain financial advisory
services to Parent and the Offeror in connection with the Offer. DLJ Bridge, an
affiliate of the Dealer Manager, has provided Parent with the Bridge Commitment
Letter and will receive fees pursuant to the financing contemplated thereby. See
Section 10. In addition, Parent has agreed to indemnify the Dealer Manager and
certain affiliated persons against
41
<PAGE>
certain liabilities and expenses in connection with its services, including,
without limitation, certain liabilities under the federal securities laws.
The Offeror has retained MacKenzie Partners, Inc. as Information Agent and
IBJ Schroder Bank & Trust Company as Depositary in connection with the Offer.
The Information Agent and the Depositary will receive reasonable and customary
compensation for their services hereunder and reimbursement for their reasonable
out-of-pocket expenses. The Depositary will also be indemnified by the Offeror
against certain liabilities in connection with the Offer. The Information Agent
may contact holders of Shares by mail, telex, telegraph and personal interviews
and may request brokers, dealers and other nominee shareholders to forward
materials relating to the Offer to beneficial owners of Shares.
18. MISCELLANEOUS.
The Offer is being made to all holders of Shares. The Offeror is not aware
of any state where the making of the Offer is prohibited by administrative or
judicial action pursuant to a valid state statute. If the Offeror becomes aware
of any valid state statute prohibiting the making of the Offer, the Offeror will
make a reasonable good faith effort to comply with such statute or seek to have
such statute declared inapplicable to the Offer. If, after such reasonable good
faith effort, the Offeror cannot comply with such statute, the Offer will not be
made to (nor will tenders be accepted from or on behalf of) the holders of
Shares in such state. In those jurisdictions where the securities, blue sky or
other laws require the Offer to be made by a licensed broker or dealer, the
Offer shall be deemed to be made on behalf of the Offeror by the Dealer Manager
or one or more registered brokers or dealers licensed under the laws of such
jurisdiction.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF THE OFFEROR OTHER THAN AS CONTAINED IN THIS OFFER TO
PURCHASE OR IN THE LETTER OF TRANSMITTAL AND, IF ANY SUCH INFORMATION OR
REPRESENTATION IS GIVEN OR MADE, IT SHOULD NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE OFFEROR OR PARENT.
The Offeror and Parent have filed with the Commission the Schedule 14D-1,
pursuant to Section 14(d)(1) of the Exchange Act and Rule 14d-3 promulgated
thereunder, furnishing certain information with respect to the Offer, and may
file amendments thereto. The Schedule 14D-1 and any amendments thereto,
including exhibits, may be examined and copies may be obtained at the same
places and in the same manner as set forth with respect to the Company in
Section 8 (except that they will not be available at the regional offices of the
Commission).
DELTA ACQUISITION CORPORATION
July 14, 1997
42
<PAGE>
ANNEX I
CERTAIN INFORMATION CONCERNING THE DIRECTORS
AND EXECUTIVE OFFICERS OF PARENT AND THE OFFEROR
1. DIRECTORS AND EXECUTIVE OFFICERS OF PARENT. Set forth below are the
name, current business address, citizenship, present principal occupation or
employment and employment history (covering a period of not less than five
years) of each executive officer and director of Parent. Unless otherwise
indicated, each such person's business address is 1770 Ellis Avenue, Suite 200,
Jackson, Mississippi 39204. All persons listed below are citizens of the United
States of America.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
NAME AND MATERIAL POSITIONS HELD DURING PAST FIVE YEARS
- ------------------------------ ---------------------------------------------------------------------------------
<S> <C>
W.H. Holman, Jr. Chairman of the Board since 1967. Chief Executive Officer of Parent from 1967
until January 1997. Member of the Board of Directors of two private companies.
Roger P. Friou Director of Parent since June 1984. President of Parent from March 1996 to May
1997. Prior to 1996 served as Vice Chairman, Chief Financial Officer, and
Secretary of Parent since 1991. Prior to that time he served as Executive Vice
President from 1984. Member of the Board of Directors of Parkway Properties, Inc.
Bruce C. Bruckmann Director of Parent since March 1996 and a principal in Bruckmann, Rosser,
Sherrill & Co., Inc. ("BRS"). He was an officer and subsequently a Managing
Director of Citicorp Venture Capital, Ltd. ("CVC") from 1983 through 1994. Member
of the Board of Directors of AmeriSource Distribution Corporation, CORT Business
Services Corporation, Chromcraft Revington, Inc., Mohawk Industries, Inc. and
Anvil Knitwear, Inc. as well as several private companies.
Harold O. Rosser, II Director of Parent since March 1996 and a principal in BRS. He was an officer and
subsequently a Managing Director of CVC from 1987 through 1994. Member of the
Board of Directors of DavCo Restaurants, Inc., as well as several private
companies.
Stephen C. Sherrill Director of Parent since March 1996 and a principal in BRS. He was an officer and
subsequently a Managing Director of CVC from 1983 through 1994. Member of the
Board of Directors of Galey & Lord, Inc., and of several private companies.
Michael E. Julian President of Parent since May 1997 and Chief Executive Officer since January
1997. Director of Parent since April 1996. Prior to January 1997 served as
Director, Chairman, President and Chief Executive Officer of Farm Fresh, Inc.
since 1988. Member of the Board of Directors of Jackson Hewitt Inc. and one
private company.
John M. Moriarty, Jr. Director of Parent since April 1996. A Managing Director of Donaldson, Lufkin &
Jenrette Securities Corporation since 1989 and a Managing Director of DLJ
Merchant Banking, Inc. since January 1996. Member of the Board of Directors of a
private company.
Ronald E. Johnson Director of Parent since May 1996. Member of the Board of Directors, President
and Chief Executive Officer of Farm Fresh, Inc. since January 1997. Prior to that
served as Chairman, President and Chief Executive Officer of Kash n' Karry from
1995 to 1997 and Executive Vice President and Chief Operating Officer of Farm
Fresh, Inc. from 1988 to 1995.
</TABLE>
I-1
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
NAME AND MATERIAL POSITIONS HELD DURING PAST FIVE YEARS
- ------------------------------ ---------------------------------------------------------------------------------
<S> <C>
Bernard J. Ebbers Director of Parent since August 1996. President and Chief Executive Officer of
WorldCom, Inc. since 1983. Member of the Board of Directors of WorldCom, Inc.
David K. Essary Executive Vice President since March 1996. Previously served as Executive Vice
President--Retail Operations since 1991. From 1985 to 1991 served as Senior Vice
President--Marketing.
Jerry L. Jones Senior Vice President--Administrative Operations since April 1997. Senior Vice
President--Retail Operations from March 1996 to April 1997. Previously served as
Senior Vice President--Human Resources since 1991. Prior to that, served as Vice
President--Human Resources from 1989.
Harold D. Evans Senior Vice President--Store Operations since 1993. Previously served as Vice
President--Store Operations from 1986.
David R. Black Senior Vice President--Finance/Chief Financial Officer since 1996. Previously
served as Treasurer and Controller from 1986.
J.R. Hansbrough Senior Vice President--Information Services since 1996. Previously served as Vice
President--Information Services from 1994. Prior to that, Consultant and
Marketing Representative with IBM Corporation from 1982.
James P. Riley Senior Vice President--Engineering since 1996. Previously served as Vice
President--Engineering from 1991 and Director of Engineering Services from 1985.
Clyde D. Staley Senior Vice President--Real Estate since 1996. Previously served as Vice
President--Real Estate from 1985.
W.H. Holman, III Secretary of Parent since 1996 and also serves as President of Pump and Save,
Inc. Previously served as Senior Vice President--Sales and Marketing from 1992
and Vice President--Sales and Marketing from 1991 and is the son of W.H. Holman,
Jr. Member of the Board of Directors of one private company.
</TABLE>
2. DIRECTORS AND EXECUTIVE OFFICERS OF OFFEROR. Since July 1997, Michael
E. Julian has served as the Director, President, and Secretary of the Offeror.
Set forth above is his current business address, citizenship, present principal
occupation or employment and employment history (covering a period of not less
than five years).
3. BRUCKMANN, ROSSER, SHERRILL & CO., L.P. Bruckmann, Rosser, Sherrill &
Co., L.P., the majority shareholder of Parent, is a limited partnership, the
sole general partner of which is BRS Partners, L.P. and the general manager of
which is BRS. The sole general partner of BRS Partners, L.P. is BRSE Associates,
Inc. Bruce C. Bruckmann, Harold O. Rosser, II, Stephen C. Sherrill and Stephen
F. Edwards are the only stockholders of BRS and BRSE Associates, Inc. Set forth
above is the current business address, citizenship, present principal occupation
or employment and employment history (covering a period of not less than five
years) for Bruce C. Bruckmann, Harold O. Rosser, II and Stephen C. Sherrill.
Stephen F. Edwards is a principal in BRS, was an officer of CVC from 1993 to
1995 and is a citizen of the United States of America. Each of the foregoing
person's business address is 126 East 56th Street, 29th Floor, New York, NY
10022.
I-2
<PAGE>
Facsimile copies of the Letter of Transmittal, properly completed and duly
executed, will be accepted. The Letter of Transmittal and certificates for
Shares and any other required documents should be sent or delivered by each
shareholder of the Company or such shareholder's broker, dealer, commercial
bank, trust company or other nominee to the Depositary at one of the addresses
set forth below:
THE DEPOSITARY FOR THE OFFER IS:
IBJ SCHRODER BANK & TRUST COMPANY
<TABLE>
<S> <C> <C>
BY MAIL: FACSIMILE TRANSMISSION: BY HAND OR OVERNIGHT COURIER:
P.O. Box 84 (for Eligible Institutions 1 State Street
Bowling Green Station Only) New York, New York 10004
New York, New York 10274-0084 (212) 858-2611 Attention: Reorganization
Attention: Reorganization Confirmation Telephone: Department
Department (212) 858-2103 Securities Processing Window
SC-1
</TABLE>
Questions or requests for assistance may be directed to the Information
Agent or the Dealer Manager at their respective addresses or telephone numbers
and locations set forth below. Additional copies of this Offer to Purchase, the
Letter of Transmittal and the Notice of Guaranteed Delivery may be obtained from
the Information Agent. Shareholders may also contact their broker, dealer,
commercial bank, trust company or other nominee for assistance concerning the
Offer.
THE INFORMATION AGENT FOR THE OFFER IS:
[LOGO]
156 FIFTH AVENUE
NEW YORK, NY 10010
(212) 929-5500 (CALL COLLECT)
OR
CALL TOLL-FREE: (800) 322-2885
THE DEALER MANAGER FOR THE OFFER IS:
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
277 PARK AVENUE
NEW YORK, NY 10172
(212) 892-7099 (CALL COLLECT)
<PAGE>
LETTER OF TRANSMITTAL
TO TENDER OF SHARES OF COMMON STOCK
OF
DELCHAMPS, INC.
PURSUANT TO THE OFFER TO PURCHASE
DATED JULY 14, 1997
BY
DELTA ACQUISITION CORPORATION
A WHOLLY OWNED SUBSIDIARY OF
JITNEY-JUNGLE STORES OF AMERICA, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON FRIDAY, AUGUST 8, 1997, UNLESS THE OFFER IS EXTENDED. UNDER CERTAIN
CIRCUMSTANCES, THE OFFER WILL BE EXTENDED UNTIL SEPTEMBER 12, 1997 IF NECESSARY
TO MEET CERTAIN CONDITIONS, INCLUDING THE HSR CONDITION AND THE NOTEHOLDER
CONSENT CONDITION REFERRED TO IN THE OFFER TO PURCHASE (AS DEFINED BELOW). IN
ADDITION, NOTWITHSTANDING THE SATISFACTION OR WAIVER OF ANY CONDITIONS OF THE
OFFER, THE OFFER MAY BE EXTENDED UNTIL SEPTEMBER 12, 1997 TO ENABLE PARENT AND
THE OFFEROR TO OBTAIN PERMANENT FINANCING FOR THE TRANSACTION. THE OFFER MAY BE
EXTENDED IN OTHER CIRCUMSTANCES AS DESCRIBED IN THE OFFER TO PURCHASE.
<TABLE>
<S> <C> <C>
THE DEPOSITARY FOR THE OFFER IS:
IBJ SCHRODER BANK & TRUST COMPANY
BY MAIL: FACSIMILE TRANSMISSION: BY HAND OR OVERNIGHT COURIER:
P.O. Box 84 (for Eligible Institutions 1 State Street
Bowling Green Station Only) New York, New York 10004
New York, New York (212) 858-2611 Attention: Reorganization
10274-0084 Department
Attention: Reorganization FOR CONFIRMATION TELEPHONE: Securities Processing Window
Department (212) 858-2103 SC-1
</TABLE>
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS, OR TRANSMISSION OF
INSTRUCTIONS VIA A FACSIMILE OTHER THAN AS SET FORTH ABOVE, DOES NOT CONSTITUTE
A VALID DELIVERY TO THE DEPOSITARY. YOU MUST SIGN THIS LETTER OF TRANSMITTAL IN
THE APPROPRIATE SPACE THEREFOR PROVIDED BELOW AND COMPLETE THE SUBSTITUTE FORM
W-9 SET FORTH BELOW.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
This Letter of Transmittal is to be completed by shareholders of Delchamps,
Inc. (the "Company") if certificates evidencing Shares are to be forwarded
herewith or, unless an Agent's Message (as defined in the Offer to Purchase) is
utilized, if delivery of Shares (as defined below) is to be made by book-entry
transfer to the Depository's account at The Depository Trust Company or the
Philadelphia Depository Trust Company (hereinafter collectively referred to as
the "Book-Entry Transfer Facilities") pursuant to the procedures set forth in
Section 3 of the Offer to Purchase (as defined below). DELIVERY OF DOCUMENTS TO
A BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
Shareholders whose certificates for Shares are not immediately available or
who cannot deliver their Shares and all other documents required hereby to the
Depositary by the Expiration Date (as defined in the Offer to Purchase), or who
cannot comply with the book-entry transfer procedures on a timely basis, may
nevertheless tender their Shares pursuant to the guaranteed delivery procedures
set forth in Section 3 of the Offer to Purchase. See Instruction 2.
<PAGE>
<TABLE>
<S> <C> <C> <C>
DESCRIPTION OF SHARES TENDERED
<CAPTION>
NAME(S) AND ADDRESS(ES) OF REGISTERED
HOLDER(S) SHARES TENDERED
(PLEASE FILL IN, IF BLANK) (ATTACH ADDITIONAL LIST, IF NECESSARY)
<S> <C> <C> <C>
<CAPTION>
SHARE NUMBER OF SHARES NUMBER OF
CERTIFICATE REPRESENTED BY SHARES
NUMBER(S)* CERTIFICATE(S)* TENDERED**
<S> <C> <C> <C>
Total Shares.........................
* Need not be completed by shareholders tendering by book-entry transfer.
** Unless otherwise indicated, it will be assumed that all Shares represented by any certificate
delivered to the Depositary are being tendered. See Instruction 4.
</TABLE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
<TABLE>
<S> <C>
/ / CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO THE DEPOSITARY'S
ACCOUNT AT ONE OF THE BOOK-ENTRY TRANSFER FACILITIES AND COMPLETE THE FOLLOWING:
Name of Tendering Institution
Account No. at
/ / The Depository Trust Company
/ / Philadelphia Depository Company
Transaction Code Number
/ / CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY
PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s)
Date of Execution of Notice of Guaranteed Delivery
Window Ticket Number (if any)
Name of Institution which Guaranteed Delivery
If delivery is by book-entry transfer:
Name of Tendering Institution
Account No. at
/ / The Depository Trust Company
/ / Philadelphia Depository Company
Transaction Code Number
</TABLE>
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to Delta Acquisition Corporation (the
"Offeror"), an Alabama corporation and a wholly owned subsidiary of
Jitney-Jungle Stores of America, Inc., a Mississippi corporation ("Parent"), the
above-described shares of common stock, $.01 par value per share of Delchamps,
Inc., an Alabama corporation (the "Company"), including the associated preferred
share purchase rights issued pursuant to the Rights Agreement dated as of
October 14, 1988, as amended, between the Company and First Alabama Bank, as
Rights Agent (collectively, the "Shares"), pursuant to the Offeror's offer to
purchase all of the outstanding Shares at a purchase price of $30.00 per Share,
net to the seller in cash, without interest thereon, upon the terms and subject
to the conditions set forth in the Offer to Purchase, dated July 14, 1997 (the
"Offer to Purchase"), receipt of which is hereby acknowledged, and in this
Letter of Transmittal (which, together with the Offer to Purchase, and any
amendments or supplements hereto or thereto, collectively constitute the
"Offer"). The Offer is being made in connection with the Agreement and Plan of
Merger, dated as of July 8, 1997 (the "Merger Agreement"), among Parent, the
Offeror and the Company.
Subject to and effective upon acceptance for payment of, and payment for,
the Shares tendered herewith, the undersigned hereby sells, assigns and
transfers to or upon the order of the Offeror all right, title and interest in
and to all the Shares that are being tendered hereby (and any and all other
Shares or other securities or property (but excluding any regular quarterly
dividend on the Shares of not more than $0.11 per Share based on the
declaration, record and payment dates normally applicable to the Shares) issued
or issuable in respect thereof (any such Shares, other securities or property
collectively, "Distributions")) and appoints the Depositary the true and lawful
agent and attorney-in-fact of the undersigned with respect to such Shares (and
all Distributions), with full power of substitution (such power of attorney
being deemed to be an irrevocable power coupled with an interest), to (a)
deliver certificates for such Shares (and all Distributions), or transfer
ownership of such Shares (and all Distributions) on the account books maintained
by any of the Book-Entry Transfer Facilities, together, in any such case, with
all accompanying evidences of transfer and authenticity, to or upon the order of
the Offeror, (b) present such Shares (and all Distributions) for transfer on the
books of the Company and (c) receive all benefits and otherwise exercise all
rights of beneficial ownership of such Shares (and all Distributions), all in
accordance with the terms of the Offer.
The undersigned hereby irrevocably appoints each designee of the Offeror as
the attorney-in-fact and proxy of the undersigned, each with full power of
substitution, to exercise all voting and other rights of the undersigned in such
manner as each such attorney and proxy or his substitute shall in his sole
judgment deem proper, with respect to all of the Shares tendered hereby which
have been accepted for payment by the Offeror prior to the time of any vote or
other action (and any Distributions) at any meeting of Shareholders of the
Company (whether annual or special and whether or not an adjourned meeting), any
actions by written consent in lieu of any such meeting or otherwise. This proxy
is irrevocable and is granted in consideration of, and is effective upon, the
acceptance for payment of such Shares by the Offeror in accordance with the
terms of the Offer. Such acceptance for payment shall revoke any other proxy or
written consent granted by the undersigned at any time with respect to such
Shares (and all Distributions), and no subsequent proxies will be given or
written consents will be executed by the undersigned (and if given or executed,
will not be deemed effective).
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, sell, assign and transfer the Shares tendered
hereby (and all Distributions) and that when the same are accepted for payment
by the Offeror, the Offeror will acquire good and unencumbered title thereto,
free and clear of all liens, restrictions, charges and encumbrances and not
subject to any adverse claims. The undersigned, upon request, will execute and
deliver any additional documents deemed by the Depositary or the Offeror to be
necessary or desirable to complete the sale, assignment and transfer of the
Shares tendered hereby (and all Distributions).
All authority herein conferred or agreed to be conferred shall survive the
death or incapacity of the undersigned, and any obligation of the undersigned
hereunder shall be binding upon the heirs, personal representatives, successors
and assigns of the undersigned. Except as stated in the Offer, this tender is
irrevocable.
The undersigned understands that tenders of Shares pursuant to any one of
the procedures described in Section 3 of the Offer to Purchase and in the
instructions hereto will constitute an agreement between the undersigned and the
Offeror upon the terms and subject to the conditions of the Offer. The Offeror's
acceptance of such Shares for payment will constitute a binding agreement
between the undersigned and the Offeror upon the terms and subject to the
conditions of the Offer, including, without limitation, the undersigned's
representation and warranty that the undersigned owns the Shares being tendered.
Unless otherwise indicated under "Special Payment Instructions," please
issue the check for the purchase price of any Shares purchased, and return any
certificates evidencing Shares not tendered or not purchased, in the name(s) of
the undersigned. Similarly, unless otherwise indicated under "Special Delivery
Instructions," please mail the check for the purchase price of any Shares
purchased and return any certificates for Shares not tendered or not purchased
(and accompanying documents, as appropriate) to the undersigned at the address
shown below the undersigned's signature(s). In the event that both "Special
Payment Instructions" and "Special Delivery Instructions" are completed, please
issue the check for the purchase price of any Shares purchased and return any
Shares not tendered or not purchased in the name(s) of, and mail said check and
any certificates to, the person(s) so indicated. The undersigned recognizes that
the Offeror has no obligation, pursuant to the "Special Payment Instructions,"
to transfer any Shares from the name of the registered holder(s) thereof if the
Offeror does not accept for payment any of the Shares so tendered.
<PAGE>
<TABLE>
<S> <C>
SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7) (SEE INSTRUCTIONS 5 AND 7)
To be completed ONLY if the check for the purchase price To be completed ONLY if the check for the purchase price
of Shares purchased or certificates for Shares not of Shares purchased or certificates for Shares not
tendered or not purchased are to be issued in the name of tendered or not purchased are to be mailed to someone
someone other than the undersigned, or if Shares tendered other than the undersigned, or the undersigned at an
hereby and delivered by book-entry transfer which are not address other than that shown below the undersigned's
accepted for payment are to be returned by credit to an signature(s).
account at one of the Book-Entry Transfer Facilities other
than that designated above.
Issue / / check / / Certificate to: Mail check and/or Certificates to:
Name Name
PLEASE PRINT PLEASE PRINT
Address Address
(ZIP CODE) (ZIP CODE)
TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER (SEE (TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER) (SEE
SUBSTITUTE FORM W-9) SUBSTITUTE FORM W-9)
/ / CREDIT SHARES DELIVERED BY BOOK-ENTRY TRANSFER AND NOT
PURCHASED TO THE ACCOUNT SET FORTH BELOW:
CHECK APPROPRIATE BOX:
/ / THE DEPOSITORY TRUST COMPANY
/ / PHILADELPHIA DEPOSITORY TRUST COMPANY
ACCOUNT NUMBER
</TABLE>
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. Except as otherwise provided below, signatures
on all Letters of Transmittal must be guaranteed by a firm that is a bank,
broker, dealer, credit union, savings association or other entity which is a
member in good standing of the Securities Transfer Agents Medallion Program, the
New York Stock Exchange Medallion Signature Guarantee Program, the Stock
Exchange Medallion Program, or by any other bank, broker, dealer, credit union,
savings association or other entity which is an "eligible guarantor
institution," as such term is defined in Rule 17Ad-15 under the Securities
Exchange Act of 1934, as amended (each of the foregoing constituting an
"Eligible Institution"), unless the Shares tendered thereby are tendered (i) by
a registered holder of Shares who has not completed either the box labeled
"Special Payment Instructions" or the box labeled "Special Delivery
Instructions" on the Letter of Transmittal or (ii) for the account of an
Eligible Institution. See Instruction 5. If the certificates are registered in
the name of a person or persons other than the signer of this Letter of
Transmittal, or if payment is to be made or delivered to, or certificates
evidencing unpurchased Shares are to be issued or returned to, a person other
than the registered owner or owners, then the tendered certificates must be
endorsed or accompanied by duly executed stock powers, in either case signed
exactly as the name or names of the registered owner or owners appear on the
certificates or stock powers, with the signatures on the certificates or stock
powers guaranteed by an Eligible Institution as provided herein. See Instruction
5.
2. DELIVERY OF LETTER OF TRANSMITTAL AND SHARES. This Letter of Transmittal
is to be used either if certificates are to be forwarded herein or, unless an
Agent's Message (as defined in the Offer to Purchase) is utilized, if the
delivery of Shares is to be made by book-entry transfer pursuant to the
procedures set forth in Section 3 of the Offer to Purchase. Certificates for all
physically delivered Shares, or a confirmation of a book-entry transfer into the
Depositary's account at one of the Book-Entry Transfer Facilities of all Shares
delivered electronically, as well as a properly completed and duly executed
Letter of Transmittal (or a manually signed facsimile thereof) and any other
documents required by this Letter of Transmittal, or an Agent's Message in the
case of a book-entry delivery, must be received by the Depositary at one of its
addresses set forth on the front page of this Letter of Transmittal by the
Expiration Date. If certificates are forwarded to the Depositary in multiple
deliveries, a properly completed and duly executed Letter of Transmittal must
accompany each such delivery. Shareholders who cannot deliver their Shares and
all other required documents to the Depositary by the Expiration Date must
tender their Shares pursuant to the guaranteed delivery procedures set forth in
Section 3 of the Offer to Purchase. Pursuant to such procedures: (a) such tender
must be made by or through an Eligible Institution; (b) a properly completed and
duly executed Notice of Guaranteed Delivery, substantially in the form provided
by the Offeror, must be received by the Depositary prior to the Expiration Date;
and (c) the certificates for all tendered Shares, in proper form for tender, or
a confirmation of a book-entry transfer into the Depositary's account at one of
the Book-Entry Transfer Facilities of all Shares delivered electronically, as
well as a properly completed and duly executed Letter of Transmittal (or a
manually signed facsimile thereof), and any other documents required by this
Letter of Transmittal must be received by the Depositary within three trading
days after the date of such Notice of Guaranteed Delivery, all as provided in
Section 3 of the Offer to Purchase. The term "trading day" is any day on which
the NASDAQ National Market operated by the National Association of Securities
Dealers, Inc. is open for business.
THE METHOD OF DELIVERY OF CERTIFICATES EVIDENCING SHARES, THE LETTER OF
TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH A
BOOK-ENTRY TRANSFER FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING
SHAREHOLDER. SHARES WILL BE DEEMED DELIVERED ONLY WHEN ACTUALLY RECEIVED BY THE
DEPOSITARY (INCLUDING, IN THE CASE OF A BOOK-ENTRY TRANSFER, BY A CONFIRMATION
OF A BOOK-ENTRY TRANSFER). IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN
RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT
TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
No alternative, conditional or contingent tenders will be accepted, and no
fractional Shares will be purchased. By executing this Letter of Transmittal (or
a manually signed facsimile thereof), the tendering Shareholder waives any right
to receive any notice of the acceptance for payment of the Shares.
<PAGE>
3. INADEQUATE SPACE. If the space provided herein is inadequate, the
certificate numbers and/or the number of Shares should be listed on a separate
schedule attached hereto.
4. PARTIAL TENDERS (NOT APPLICABLE TO SHAREHOLDERS WHO TENDER BY BOOK-ENTRY
TRANSFER). If fewer than all the Shares represented by any certificate delivered
to the Depositary are to be tendered, fill in the number of Shares which are to
be tendered in the box entitled "Number of Shares Tendered." In such case, a new
certificate of the remainder of the Shares represented by the old certificate
will be sent to the person(s) signing this Letter of Transmittal unless
otherwise provided in the appropriate box on this Letter of Transmittal, as
promptly as practicable following the expiration or termination of the Offer.
All Shares evidenced by certificates delivered to the Depositary will be deemed
to have been tendered unless otherwise indicated.
5. SIGNATURES ON LETTER OF TRANSMITTAL; STOCK POWERS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder(s) of the Shares
tendered hereby, the signature(s) must correspond with the name(s) as written on
the face of the certificate without alteration, enlargement or any change
whatsoever.
If any of the Shares tendered hereby are held by record by two or more
persons, all such persons must sign this Letter of Transmittal.
If any of the Shares tendered hereby are registered in different names on
different certificates, it will be necessary to complete, sign and submit as
many separate Letters of Transmittal as there are different registrations of
certificates.
If this Letter of Transmittal is signed by the registered holder(s) of the
Shares tendered hereby, no endorsements of certificates or separate stock powers
are required unless payment of the purchase price is to be made, or certificates
evidencing Shares not tendered or not purchased are to be returned, in the name
of any person other than the registered holder(s), in which case the
certificate(s) for such Shares tendered hereby must be endorsed, or accompanied
by, appropriate stock powers, in either case signed exactly as the name(s) of
the registered holder(s) appear(s) on the certificate for such Shares.
Signatures on any such certificates or stock powers must be guaranteed by an
Eligible Institution.
If this Letter of Transmittal or any certificate evidencing Shares or stock
power is signed by a trustee, executor, administrator, guardian,
attorney-in-fact, officer of a corporation or other person acting in a fiduciary
or representative capacity, such person should so indicate when signing, and
proper evidence satisfactory to the Offeror of the authority of such person so
to act must be submitted.
6. STOCK TRANSFER TAXES. Except as otherwise provided in this Instruction 6,
the Offeror will pay any stock transfer taxes with respect to the sale and
transfer of any Shares to it or its order pursuant to the Offer. If, however,
payment of the purchase price is to be made to, or Shares not tendered or not
purchased are to be returned in the name of, any person other than the
registered holder(s), then the amount of any stock transfer taxes (whether
imposed on the registered holder(s), such other person or otherwise) payable on
account of the transfer to such person will be deducted from the purchase price
unless satisfactory evidence of the payment of such taxes, or exemption
therefrom, is submitted.
Except as provided in this Instruction 6, it will not be necessary for
transfer tax stamps to be affixed to the certificates listed in this Letter of
Transmittal.
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTION. If the check for the purchase
price of any Shares purchased is to be issued, or any Shares not tendered or not
purchased are to be returned, in the name of a person other than the person(s)
signing this Letter of Transmittal or if the check or any certificates for
Shares not tendered or not purchased are to be mailed to someone other than the
person(s) signing this Letter of Transmittal or to the person(s) signing this
Letter of Transmittal at an address other than that shown above, the appropriate
boxes on this Letter of Transmittal should be completed. Shareholders tendering
Shares by book-entry transfer may request that Shares not purchased be credited
to such account at any of the Book-Entry Transfer Facilities as such Shareholder
may designate under "Special Payment Instructions." If no such instructions are
given, any such Shares not purchased will be returned by crediting the account
at the Book-Entry Transfer Facilities designated above.
<PAGE>
8. SUBSTITUTE FORM W-9. The tendering Shareholder is required to provide the
Depositary with such Shareholder's correct TIN on Substitute Form W-9, which is
provided below, unless an exemption applies. Failure to provide the information
on the Substitute Form W-9 will subject the tendering Shareholder to a $50
penalty and to 31% federal income tax backup withholding on the payment of the
purchase price for the Shares.
9. FOREIGN HOLDERS. Foreign holders must submit a completed IRS Form W-8 to
avoid 31% backup withholding. IRS Form W-8 may be obtained by contacting the
Depositary at one of the addresses on the face of this Letter of Transmittal.
10. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests for
assistance may be directed to the Dealer Manager or the Information Agent at
their respective addresses or telephone numbers set forth below. Additional
copies of the Offer to Purchase, this Letter of Transmittal and the Notice of
Guaranteed Delivery may be obtained from the Information Agent or from brokers,
dealers, commercial banks or trust companies.
11. WAIVER OF CONDITIONS. The conditions of the Offer may be waived by the
Offeror (subject to certain limitations in the Merger Agreement), in whole or in
part, at any time or from time to time, in the Offeror's sole discretion.
12. LOST, DESTROYED OR STOLEN CERTIFICATES. If any certificate representing
Shares has been lost, destroyed or stolen, the Shareholder should promptly
notify the Depositary. The Shareholder will then be instructed as to the steps
that must be taken in order to replace the certificate. This Letter of
Transmittal and related documents cannot be processed until the procedures for
replacing lost, destroyed or stolen certificates have been followed.
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A MANUALLY SIGNED FACSIMILE COPY
HEREOF (TOGETHER WITH CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND
ALL OTHER REQUIRED DOCUMENTS) OR A NOTICE OF GUARANTEED DELIVERY MUST BE
RECEIVED BY THE DEPOSITARY ON OR PRIOR TO THE EXPIRATION DATE (AS DEFINED IN THE
OFFER TO PURCHASE).
IMPORTANT TAX INFORMATION
Under federal income tax law, a shareholder whose tendered Shares are
accepted for payment is required to provide the Depositary with such
shareholder's correct TIN on the Substitute Form W-9. If such Shareholder is an
individual, the TIN is such shareholders' Social Security Number. If the
Depositary is not provided with the correct TIN, the shareholder may be subject
to a $50 penalty imposed by the Internal Revenue Service. In addition, payments
that are made to such shareholder with respect to Shares purchased pursuant to
the Offer may be subject to backup withholding.
Certain shareholders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an exempt
recipient, that shareholder must submit a statement, signed under penalties of
perjury, attesting to that individual's exempt status. Such statements may be
obtained from the Depositary. All exempt recipients (including foregoing persons
wishing to qualify as exempt recipients) should see the enclosed Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9 for
additional instructions.
If backup withholding applies, the Depositary is required to withhold 31% of
any payments made to the shareholder. Backup withholding is not an additional
tax. Rather, the tax liability of persons subject to backup withholding will be
reduced by the amount of tax withheld. If backup withholding results in an
overpayment of taxes, a refund may be obtained.
<PAGE>
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup federal income tax withholding on payments that are made
to a shareholder with respect to Shares purchased pursuant to the Offer, the
shareholder is required to notify the Depositary of such shareholder's correct
TIN by completing the form certifying that the TIN provided on the Substitute
Form W-9 is correct.
WHAT NUMBER TO GIVE THE DEPOSITARY
The shareholder is required to give the Depositary the Social Security
Number or Employer Identification Number of the record owner of the Shares. If
the Shares are in more than one name or are not in the name of the actual owner,
consult the enclosed Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9 for additional guidelines on which number to
report.
<PAGE>
SIGN HERE
(Complete Substitute Form W-9 below)
________________________________________________________________________________
________________________________________________________________________________
(Signature(s) of Owner(s))
________________________________________________________________________________
Name(s) ________________________________________________________________________
________________________________________________________________________________
Capacity (full title) __________________________________________________________
Address ________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Include Zip Code)
________________________________________________________________________________
Area Code and Telephone Number _________________________________________________
Taxpayer Identification or Social Security Number ______________________________
(See Substitute Form W-9)
Dated: ___________________________________________________________________, 1997
(Must be signed by registered holder(s) exactly as name(s) appear(s) on
stock certificate(s) or on a security position listing or by the person(s)
authorized to become registered holder(s) by certificates and documents
transmitted herewith. If signature is by a trustee, executor, administrator,
guardian, attorney-in-fact, agent, officer of a corporation or other person
acting in a fiduciary or representative capacity, please set forth full title
and see Instruction 5).
GUARANTEE OF SIGNATURE(S)
(See Instructions 1 and 5)
FOR USE BY FINANCIAL INSTITUTIONS ONLY. PLACE MEDALLION GUARANTEE IN SPACE
BELOW.
Authorized signature(s) ________________________________________________________
Name ___________________________________________________________________________
Name of Firm ___________________________________________________________________
Address ________________________________________________________________________
________________________________________________________________________________
(Include Zip Code)
Area Code and Telephone Number _________________________________________________
Dated: ___________________________________________________________________, 1997
<PAGE>
<TABLE>
<S> <C> <C>
PAYOR'S NAME: IBJ SCHRODER BANK & TRUST COMPANY
SUBSTITUTE Part I -- PLEASE PROVIDE YOUR TIN TIN:
FORM W-9 IN THE BOX AT THE RIGHT AND CERTIFY Social Security
BY SIGNING AND DATING BELOW. Number or Employer
Identification Number
DEPARTMENT OF THE TREASURY, Part II -- For Payees exempt from backup withholding, see
INTERNAL REVENUE SERVICE the enclosed Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 and complete as
instructed therein.
PAYOR'S REQUEST FOR TAXPAYER Certification -- Under penalties of perjury, I certify that
IDENTIFICATION NUMBER ("TIN") the number shown on this form is my correct TIN (or I am
AND CERTIFICATION waiting for a number to be issued to me).
SIGNATURE: Date:
</TABLE>
CERTIFICATION INSTRUCTIONS -- See the enclosed "Guidelines for Certification of
Taxpayer Identification Number on Substitution Form W-9" for the appropriate TIN
and signature for the certification. Persons awaiting a taxpayer identification
number should complete the additional certification described below. Foreign
persons claiming exemption from these requirements should consult the Depositary
regarding proper establishment of the exemption.
NOTE: FAILURE TO COMPLETE AND RETURN THIS SUBSTITUTE FORM W-9 MAY RESULT IN
BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE
OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF
TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL
DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU ARE AWAITING YOUR
TIN.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a TIN has not been issued to me,
and either (1) I have mailed or delivered an application to receive a TIN to the
appropriate IRS Center or Social Security Administration Officer or (2) I intend
to mail or deliver an application in the near future. I understand that if I do
not provide a TIN by the time of payment, 31% of all payments pursuant to the
Offer made to me thereafter will be withheld until I provide a number.
SIGNATURE:_____________________________________________ Date:_____________
THE INFORMATION AGENT FOR THE OFFER IS:
[LOGO]
156 FIFTH AVENUE
NEW YORK, NY 10010
(212) 929-5500 (CALL COLLECT)
OR
CALL TOLL-FREE: (800) 322-2885
THE DEALER MANAGER FOR THE OFFER IS:
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
277 PARK AVENUE
NEW YORK, NY 10172
(212) 892-7099 (CALL COLLECT)
<PAGE>
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS)
OF
DELCHAMPS, INC.
AT
$30.00 NET PER SHARE
BY
DELTA ACQUISITION CORPORATION
A WHOLLY OWNED SUBSIDIARY OF
JITNEY-JUNGLE STORES OF AMERICA, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON FRIDAY, AUGUST 8, 1997, UNLESS THE OFFER IS EXTENDED. UNDER CERTAIN
CIRCUMSTANCES, THE OFFER WILL BE EXTENDED UNTIL SEPTEMBER 12, 1997 IF NECESSARY
TO MEET CERTAIN CONDITIONS, INCLUDING THE HSR CONDITION AND THE NOTEHOLDER
CONSENT CONDITION REFERRED TO IN THE OFFER TO PURCHASE. IN ADDITION,
NOTWITHSTANDING THE SATISFACTION OR WAIVER OF ANY CONDITIONS OF THE OFFER, THE
OFFER MAY BE EXTENDED UNTIL SEPTEMBER 12, 1997 TO ENABLE PARENT AND THE OFFEROR
TO OBTAIN PERMANENT FINANCING FOR THE TRANSACTION. THE OFFER MAY BE EXTENDED IN
THE OTHER CIRCUMSTANCES AS DESCRIBED IN THE OFFER TO PURCHASE.
July 14, 1997
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
We have been appointed by Delta Acquisition Corporation, an Alabama
corporation (the "Offeror") and a wholly-owned subsidiary of Jitney-Jungle
Stores of America, Inc., a Mississippi corporation ("Parent"), to act as Dealer
Manager in connection with the Offeror's offer to purchase all outstanding
shares of Common Stock, $.01 par value per share, of Delchamps, Inc., an Alabama
corporation (the "Company"), including the associated preferred share purchase
rights issued pursuant to the Rights Agreement dated as of October 14, 1988, as
amended, between the Company and First Alabama Bank, as Rights Agent
(collectively, the "Shares"), at a purchase price of $30.00 per Share, net to
the seller in cash, without interest, upon the terms and subject to the
conditions set forth in the Offer to Purchase, dated July 14, 1997 (the "Offer
to Purchase"), and in the related Letter of Transmittal (which, together with
any amendments or supplements thereto, collectively constitute the "Offer")
enclosed herewith. The Offer is being made in connection with the Agreement and
Plan of Merger, dated as of July 8, 1997, among Parent, the Offeror and the
Company (the "Merger Agreement"). Any shareholder who desires to tender Shares
and whose certificates representing such Shares (the "Certificates") are not
immediately available or who cannot comply with the procedures for book-entry
transfer on a timely basis or who cannot deliver all required documents to IBJ
Schroder Bank & Trust Company (the "Depositary"), in each case prior to the
Expiration Date (as defined in Section 1 of the Offer to Purchase), may tender
their Shares pursuant to the guaranteed delivery procedures set forth in Section
3 of the Offer to Purchase.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER A NUMBER OF
SHARES SUCH THAT THE OFFEROR AND ITS AFFILIATES WILL BENEFICIALLY OWN IN THE
<PAGE>
AGGREGATE NOT LESS THAN TWO-THIRDS OF THE SHARES OUTSTANDING ON A FULLY DILUTED
BASIS, (II) ANY APPLICABLE WAITING PERIOD UNDER THE HSR ACT (AS DEFINED IN THE
OFFER TO PURCHASE) OR PERIOD DURING WHICH PARENT SHALL HAVE CONSENTED OR
OTHERWISE BE BARRED FROM PURCHASING SHARES PURSUANT TO THE OFFER AS PART OF ANY
AGREEMENT OR OTHER ARRANGEMENT WITH ANY GOVERNMENTAL OR REGULATORY AUTHORITY
INVOLVING THE HSR ACT OR ANY OTHER APPLICABLE ANTITRUST LAWS HAVING EXPIRED OR
HAVING BEEN TERMINATED PRIOR TO THE EXPIRATION OF THE OFFER, (III) PARENT HAVING
OBTAINED PRIOR TO THE EXPIRATION OF THE OFFER AN AMENDMENT OR SUPPLEMENT TO THE
INDENTURE GOVERNING ITS 12% SENIOR NOTES DUE 2006 AS DESCRIBED IN THE OFFER TO
PURCHASE AND (IV) THE SATISFACTION OF CERTAIN OTHER TERMS AND CONDITIONS AS
DESCRIBED IN THE OFFER TO PURCHASE.
Please furnish copies of the enclosed materials to those of your clients for
whose accounts you hold Shares in your name or in the name of your nominee.
For your information and for forwarding to your clients for whom you hold
Shares registered in your name or in the name of your nominee, or who hold
Shares registered in their own names, we are enclosing the following documents:
1. The Offer to Purchase, dated July 14, 1997.
2. The Letter of Transmittal to be used by holders of Shares in accepting
the Offer and tendering Shares. Facsimile copies of the Letter of Transmittal
(with manual signatures) may be used to tender Shares.
3. A letter to shareholders of the Company from David W. Morrow, the
Chairman of the Board and Chief Executive Officer of the Company, together with
a Solicitation/Recommendation Statement on Schedule 14D-9 filed with the
Securities and Exchange Commission (the "Commission") by the Company and mailed
to the shareholders of the Company.
4. The Notice of Guaranteed Delivery for Shares to be used to accept the
Offer if neither of the two procedures for tendering Shares set forth in the
Offer to Purchase can be completed on a timely basis.
5. A printed form of letter which may be sent to your clients for whose
accounts you hold Shares registered in your name, with space provided for
obtaining such clients' instructions with regard to the Offer.
6. Guidelines of the Internal Revenue Service for Certification of Taxpayer
Identification Number on Substitute Form W-9.
7. A return envelope addressed to the Depositary.
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any such extension or
amendment), the Offeror will accept for payment and will pay for all Shares
validly tendered prior to the Expiration Date and not theretofore withdrawn in
accordance with Section 4 of the Offer to Purchase. Payment for Shares accepted
for payment pursuant to the Offer will in all cases be made only after timely
receipt by the Depositary of (i) certificates for such Shares or a Book-Entry
Confirmation (as defined in Section 2 of the Offer to Purchase), (ii) a properly
completed and duly executed Letter of Transmittal (or a manually signed
facsimile thereof) with all required signature guarantees or, in the case of a
book-entry transfer, an Agent's Message (as defined in Section 2 of the Offer to
Purchase) and (iii) any other documents required by the Letter of Transmittal.
Neither the Offeror nor Parent, nor any officer, director, shareholder,
agent or other representative of the Offeror or Parent will pay any fees or
commissions to any broker, dealer or other person (other than the Information
Agent and the Depositary as described in Section 17 of the Offer to Purchase)
for
2
<PAGE>
soliciting tenders of Shares pursuant to the Offer. The Offeror will, however,
upon request, reimburse you for customary mailing and handling expenses incurred
by you in forwarding the enclosed materials to your clients.
Tendering holders of Shares will not be obligated to pay brokerage fees or
commissions or, except as set forth in Instruction 6 of the Letter of
Transmittal, stock transfer taxes on the purchase of Shares by the Offeror
pursuant to the Offer.
YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS
PROMPTLY AS POSSIBLE. PLEASE NOTE THAT THE OFFER AND WITHDRAWAL RIGHTS WILL
EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, AUGUST 8, 1997, UNLESS
THE OFFER IS EXTENDED.
In order to take advantage of the Offer, (i) a properly completed and duly
executed Letter of Transmittal (or a manually signed facsimile thereof), with
any required signature guarantees, or, in the case of a book-entry transfer, an
Agent's Message (as defined in the Offer to Purchase), and any other required
documents must be received by the Depositary and (ii) Certificates representing
the tendered Shares must be received by the Depositary or a Book-Entry
Confirmation (as defined in the Offer to Purchase) must be received by the
Depositary in accordance with the instructions set forth in the Offer.
If holders of Shares wish to tender, but it is impracticable for them to
forward their Certificates or other required documents or complete the
procedures for book-entry transfer prior to the Expiration Date, a tender may be
effected by following the guaranteed delivery procedures specified in Section 3
of the Offer to Purchase.
Any inquiries you may have with respect to the Offer should be addressed to
Donaldson, Lufkin & Jenrette Securities Corporation, the Dealer Manager, or
MacKenzie Partners, Inc., the Information Agent, at their respective addresses
and telephone numbers set forth on the back cover of the Offer to Purchase.
Additional copies of the enclosed materials may be obtained from MacKenzie
Partners, Inc., the Information Agent.
Very truly yours,
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
OR ANY OTHER PERSON AS AN AGENT OF PARENT, THE OFFEROR, THE COMPANY, THE
DEPOSITARY, THE INFORMATION AGENT, THE DEALER MANAGER OR ANY AFFILIATE OF ANY OF
THE FOREGOING, OR AUTHORIZE YOU OR ANY OTHER PERSON TO MAKE ANY STATEMENT OR USE
ANY DOCUMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN
THE ENCLOSED DOCUMENTS AND THE STATEMENTS CONTAINED THEREIN.
3
<PAGE>
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS)
OF
DELCHAMPS, INC.
AT
$30.00 NET PER SHARE
BY
DELTA ACQUISITION CORPORATION
A WHOLLY OWNED SUBSIDIARY OF
JITNEY-JUNGLE STORES OF AMERICA, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON FRIDAY, AUGUST 8, 1997, UNLESS THE OFFER IS EXTENDED. UNDER CERTAIN
CIRCUMSTANCES, THE OFFER WILL BE EXTENDED UNTIL SEPTEMBER 12, 1997 IF NECESSARY
TO MEET CERTAIN CONDITIONS, INCLUDING THE HSR CONDITION AND THE NOTEHOLDER
CONSENT CONDITION REFERRED TO IN THE OFFER TO PURCHASE. IN ADDITION,
NOTWITHSTANDING THE SATISFACTION OR WAIVER OF ANY CONDITIONS OF THE OFFER, THE
OFFER MAY BE EXTENDED UNTIL SEPTEMBER 12, 1997 TO ENABLE PARENT AND THE OFFEROR
TO OBTAIN PERMANENT FINANCING FOR THE TRANSACTION. THE OFFER MAY BE EXTENDED IN
OTHER CIRCUMSTANCES AS DESCRIBED IN THE OFFER TO PURCHASE.
July 14, 1997
To Our Clients:
Enclosed for your consideration are the Offer to Purchase, dated July 14,
1997 (the "Offer to Purchase"), and the related Letter of Transmittal (which,
together with any amendments or supplements thereto, collectively constitute the
"Offer") relating to the offer by Delta Acquisition Corporation, an Alabama
corporation (the "Offeror") and a wholly owned subsidiary of Jitney-Jungle
Stores of America, Inc., a Mississippi corporation ("Parent"), to purchase all
outstanding shares of Common Stock, $.01 par value per share, of Delchamps,
Inc., an Alabama corporation (the "Company"), including the associated preferred
share purchase rights issued pursuant to the Rights Agreement dated as of
October 14, 1988, as amended (the "Rights Agreement"), between the Company and
First Alabama Bank, as Rights Agent (collectively, the "Shares"), at a purchase
price of $30.00 per Share, net to the seller in cash, without interest, upon the
terms and subject to the conditions set forth in the Offer. The Offer is being
made in connection with the Agreement and Plan of Merger, dated as of July 8,
1997, among Parent, the Offeror and the Company (the "Merger Agreement"). Any
shareholder who desires to tender Shares and whose certificates representing
such Shares (the "Certificates") are not immediately available or who cannot
comply with the procedures for book-entry transfer on a timely basis or who
cannot deliver all required documents to IBJ Schroder Bank & Trust Company (the
"Depositary"), in each case prior to the Expiration Date (as defined in Section
1 of the Offer to Purchase), may tender their Shares pursuant to the guaranteed
delivery procedures set forth in Section 3 of the Offer to Purchase.
THIS MATERIAL IS BEING FORWARDED TO YOU AS THE BENEFICIAL OWNER OF SHARES
CARRIED BY US IN YOUR ACCOUNT BUT NOT REGISTERED IN YOUR NAME. A TENDER OF SUCH
SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF RECORD AND PURSUANT TO YOUR
INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR YOUR INFORMATION
ONLY AND CANNOT BE USED BY YOU TO TENDER SHARES HELD BY US FOR YOUR ACCOUNT.
Accordingly, we request instructions as to whether you wish to tender any or
all of the Shares held by us for your account, upon the terms and conditions set
forth in the Offer.
<PAGE>
Please note the following:
1. The Offer Price is $30.00 per Share, net to the seller in cash
without interest, upon the terms and subject to the conditions of the Offer.
2. The Offer is being made for all of the outstanding Shares.
3. The Board of Directors of the Company has unanimously approved the
Offer, and the Merger Agreement, has determined that the consideration to be
paid for the Shares in the Offer is fair to the shareholders of the Company
and that the Offer is otherwise in the best interests of the Company and its
shareholders and recommends that all shareholders accept the Offer and
tender their Shares pursuant to the Offer.
4. The Offer and withdrawal rights will expire at 12:00 Midnight, New
York City time, on Friday, August 8, 1997, unless the Offer is extended.
5. The Offer is conditioned upon, among other things, (i) there being
validly tendered and not withdrawn prior to the expiration of the Offer a
number of Shares such that the Offeror and its affiliates will beneficially
own in the aggregate not less than two-thirds of the Shares outstanding on a
fully diluted basis, (ii) any applicable waiting period under the HSR Act
(as defined in the Offer to Purchase) or period during which Parent shall
have consented or otherwise be barred from purchasing Shares pursuant to the
Offer as part of any agreement or other arrangement with any governmental or
regulatory authority involving the HSR Act or any other applicable antitrust
laws having expired or having been terminated prior to the expiration of
Offer, (iii) Parent having obtained prior to the expiration of the Offer an
amendment or supplement to the Indenture governing its 12% Senior Notes due
2006 as described in the Offer to Purchase and (iv) the satisfaction of
certain other terms and conditions as described in the Offer to Purchase.
Tendering holders of Shares will not be obligated to pay brokerage fees or
commissions or, except as set forth in Instruction 6 of the Letter of
Transmittal, stock transfer taxes on the purchase of Shares by the Offeror
pursuant to the Offer.
The Offer is made only by the Offer to Purchase and the related Letter of
Transmittal and is being made to all holders of Shares. The Offeror is not aware
of any state where the making of the Offer is prohibited by administrative or
judicial action pursuant to a state statute. If the Offeror becomes aware of any
valid state statute prohibiting the making of the Offer, the Offeror will make a
reasonable good faith effort to comply with such statute or seek to have such
statute declared inapplicable to the Offer. If, after such reasonable good faith
effort, the Offeror cannot comply with such statute, the Offer will not be made
to (nor will tenders be accepted from or on behalf of) the holders of Shares in
such State. In those jurisdictions where the securities, blue sky or other laws
require the Offer to be made by a licensed broker or dealer, the Offer shall be
deemed to be made on behalf of the Offeror by Donaldson, Lufkin & Jenrette
Securities Corporation or one or more registered brokers or dealers licensed
under the laws of such jurisdiction.
If you wish to have us tender any or all of the shares, please so instruct
us by completing, executing, detaching and returning to us the instruction form
contained in this letter. An envelope in which to return your instruction to us
is enclosed. If you authorize the tender of your Shares, all such Shares will be
tendered unless otherwise indicated in such instruction form. PLEASE FORWARD
YOUR INSTRUCTIONS TO US AS SOON AS POSSIBLE TO ALLOW US AMPLE TIME TO TENDER
YOUR SHARES ON YOUR BEHALF PRIOR TO THE EXPIRATION OF THE OFFER.
<PAGE>
INSTRUCTIONS WITH RESPECT TO
THE OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS)
OF
DELCHAMPS, INC.
BY
DELTA ACQUISITION CORPORATION
A WHOLLY OWNED SUBSIDIARY OF
JITNEY-JUNGLE STORES OF AMERICA, INC.
The undersigned acknowledge(s) receipt of your letter, and the enclosed
Offer to Purchase dated July 14, 1997 (the "Offer to Purchase"), and the related
Letter of Transmittal (which, together with any amendments or supplements
thereto, collectively constitute the "Offer"), in connection with the offer by
Delta Acquisition Corporation, an Alabama corporation (the "Offeror") and a
wholly owned subsidiary of Jitney-Jungle Stores of America, Inc., a Mississippi
corporation, to purchase all outstanding shares of Common Stock, $.01 par value
per share, of Delchamps, Inc., an Alabama corporation (the "Company"), including
the associated preferred share purchase rights issued pursuant to the Rights
Agreement dated as of October 14, 1988, as amended, between the Company and
First Alabama Bank, as Rights Agent (collectively, the "Shares"), at a purchase
price of $30.00 per Share, net to the seller in cash, without interest, upon the
terms and subject to the conditions set forth in the Offer.
This will instruct you to tender to the Offeror the number of Shares
indicated below (or if no number is indicated below, all Shares) which are held
by you for the account of the undersigned, upon the terms and subject to the
conditions set forth in the Offer.
Number of Shares to be Tendered:* ___________________
SIGN HERE
<TABLE>
<S> <C>
Account Number:
Signature(s)
Date: , 1997
(Print Name(s))
(Print Address(es))
(Area Code and Telephone Number(s))
(Taxpayer Identification or
Social Security Number(s))
</TABLE>
- ------------------------
* Unless otherwise indicated, it will be assumed that all Shares held by us for
your account are to be tendered.
3
<PAGE>
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF SHARES OF COMMON STOCK
OF
DELCHAMPS, INC.
TO
DELTA ACQUISITION CORPORATION
A WHOLLY OWNED SUBSIDIARY OF
JITNEY-JUNGLE STORES OF AMERICA, INC.
(NOT TO BE USED FOR SIGNATURE GUARANTEES)
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON FRIDAY, AUGUST 8, 1997, UNLESS THE OFFER IS EXTENDED. UNDER CERTAIN
CIRCUMSTANCES, THE OFFER WILL BE EXTENDED UNTIL SEPTEMBER 12, 1997 IF NECESSARY
TO MEET CERTAIN CONDITIONS, INCLUDING THE HSR CONDITION AND THE NOTEHOLDER
CONSENT CONDITION REFERRED TO IN THE OFFER TO PURCHASE (AS DEFINED BELOW). IN
ADDITION, NOTWITHSTANDING THE SATISFACTION OR WAIVER OF ANY CONDITIONS OF THE
OFFER, THE OFFER MAY BE EXTENDED UNTIL SEPTEMBER 12, 1997 TO ENABLE PARENT AND
THE OFFEROR TO OBTAIN PERMANENT FINANCING FOR THE TRANSACTION. THE OFFER MAY BE
EXTENDED IN OTHER CIRCUMSTANCES AS DESCRIBED IN THE OFFER TO PURCHASE.
This form, or one substantially equivalent hereto, must be used to accept
the Offer (as defined below) if certificates for shares of common stock, par
value $.01, per share, of Delchamps, Inc., an Alabama corporation (the
"Company"), including the associated preferred share repurchase rights issued
pursuant to the Rights Agreement dated as of October 14, 1988, as amended,
between the Company and First Alabama Bank, as Rights Agent (collectively, the
"Shares"), are not immediately available or if the procedure for book-entry
transfer cannot be completed on a timely basis or time will not permit all
required documents to reach the Depositary on or prior to the Expiration Date
(as defined in the Offer to Purchase). Such form may be delivered by hand,
facsimile transmission, or mail to the Depositary. See Section 3 of the Offer to
Purchase.
THE DEPOSITARY FOR THE OFFER IS:
IBJ SCHRODER BANK & TRUST COMPANY
<TABLE>
<CAPTION>
BY MAIL: FACSIMILE TRANSMISSION: BY HAND OR OVERNIGHT COURIER:
<S> <C> <C>
P.O. Box 84 (for Eligible Institutions Only) 1 State Street
Bowling Green Station (212) 858-2611 New York, New York 10004
New York, New York 10274-0084 Attention: Reorganization Department
Attention: Reorganization Department FOR CONFIRMATION TELEPHONE: Securities Processing Window SC-1
(212) 858-2103
</TABLE>
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS, OR
TRANSMISSION OF INSTRUMENTS VIA A FACSIMILE, OTHER THAN AS SET FORTH ABOVE, DOES
NOT CONSTITUTE A VALID DELIVERY TO THE DEPOSITARY.
THIS NOTICE OF GUARANTEED DELIVERY IS NOT TO BE USED TO GUARANTEE SIGNATURES
IF A SIGNATURE ON A LETTER OF TRANSMITTAL IS REQUIRED TO BE GUARANTEED BY AN
"ELIGIBLE INSTITUTION" (AS DEFINED IN THE OFFER TO PURCHASE) UNDER THE
INSTRUCTIONS THERETO, SUCH SIGNATURE GUARANTEES MUST APPEAR IN THE APPLICABLE
SPACE PROVIDED IN THE SIGNATURE BOX ON THE LETTER OF TRANSMITTAL.
The Eligible Institution that completes this form must communicate the
guarantee to the Depositary and must deliver the Letter of Transmittal or an
Agent's Message and certificates for Shares to the Depositary within the time
period shown herein. Failure to do so could result in a financial loss to such
Eligible Institution.
THE GUARANTEE ON THE REVERSE SIDE MUST BE COMPLETED.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tender to Delta Acquisition Corporation, an Alabama
corporation and a wholly owned subsidiary of Jitney-Jungle Stores of America,
Inc., a Mississippi corporation, upon the terms and subject to the conditions
set forth in the Offer to Purchase, dated July 14, 1997 (the "Offer to
Purchase"), and the related Letter of Transmittal, receipt of which are hereby
acknowledged, Shares of the Company, pursuant to the guaranteed delivery
procedure set forth in Section 3 of the Offer to Purchase.
<TABLE>
<CAPTION>
Number of Shares Tendered: SIGN HERE
<S> <C>
Certificate No(s) (if available): Name(s) of Record Holder(s)
(Please Print)
If securities will be tendered by Address(es):
book-entry transfer:
(Zip Code)
Name of Tendering Institution:
Area Code and Telephone No(s):
Account No.: at
/ / The Depository Trust Company
/ / Philadelphia Depository Trust Company Signature(s):
Dated:, 1997
</TABLE>
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a bank, broker, dealer, credit union, savings association
or other entity which is a member in good standing of the Securities Transfer
Agents Medallion Program, the New York Stock Exchange Medallion Signature
Guarantee Program, the Stock Exchange Medallion Program, or a bank, broker,
dealer, credit union, savings association or other entity which is an "eligible
guarantor institution," as such term is defined in Rule 17Ad-15 under the
Securities Exchange Act of 1934, as amended, guarantees the delivery to the
Depositary of the Shares tendered hereby, together with a properly completed and
duly executed Letter of Transmittal (or manually signed facsimile(s) thereof)
and any other required documents, or an Agent's Message (as defined in the Offer
to Purchase) in the case of a book-entry delivery of Shares, all within three
trading days (as defined in Section 3 of the Offer to Purchase) of the date
hereof.
<TABLE>
<CAPTION>
Name of Firm: Title:
<S> <C>
Name:
(Authorized Signature) (Please Print or Type)
Address: Area Code and Telephone No.:
Dated:
(Zip Code)
</TABLE>
DO NOT SEND CERTIFICATES FOR SHARES WITH THIS FORM -- CERTIFICATES SHOULD BE
SENT WITH LETTER OF TRANSMITTAL.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER -- Social Security numbers have nine digits separated by two hyphens:
I.E., 000-00-0000. Employer identification numbers have nine digits separated by
only one hyphen: I.E., 00-0000000. The table below will help determine the
number to give the Payer.
<TABLE>
<CAPTION>
- -----------------------------------------------------
<S> <C> <C>
GIVE THE NAME AND
SOCIAL SECURITY
FOR THIS TYPE OF ACCOUNT: NUMBER OF --
<CAPTION>
- -----------------------------------------------------
<S> <C> <C>
1. Individual The individual
2. Two or more The actual owner of
individuals (joint the account or, if
account) combined funds, the
first individual on
the account(1)
3. Custodian account of The minor(2)
a minor (Uniform
Gift to Minors Act)
4. a. The usual The grantor-
revocable savings trustee(1)
trust (grantor is
also trustee)
b. So-called trust
account that is The actual owner(1)
not a legal or
valid trust under
state law
5. Sole proprietorship The owner(3)
<CAPTION>
- -----------------------------------------------------
GIVE THE NAME AND
SOCIAL SECURITY
FOR THIS TYPE OF ACCOUNT: NUMBER OF --
- -----------------------------------------------------
<S> <C> <C>
6. Sole proprietorship The owner(3)
7. A valid trust, The legal entity (Do
estate or pension not furnish the
trust identifying number
of the personal
representative or
trustee unless the
legal entity itself
is not designated in
the account
title.)(4)
8. Corporate The corporation
9. Association, club, The organization
religious,
charitable,
educational, or
other tax-exempt
organization
10. Partnership The partnership
11. A broker or The broker or
registered nominee nominee
12. Account with the The public entity
Department of
Agriculture in the
name of a public
entity (such as a
State or local
government, school
district, or prison)
that receives
agricultural program
payments
</TABLE>
- ---------------------------------------------
- ---------------------------------------------
(1) List first and circle the name of the person whose number you furnish. If
only one person on a joint account has a SSN, that person's number must be
furnished.
(2) Circle the minor's name and furnish the minor's social security number.
(3) You must show your individual name, but you may also enter your business or
"doing business as" name. You may use either your social security number or
employment identification number (if you have one).
(4) List first and circle the name of the legal trust, estate or pension trust.
NOTE: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Card, or Form SS-4,
Application for Employer Identification Number (for businesses and all other
entities), or Form W-7 for Individual Taxpayer Identification Number (for alien
individuals required to file U.S. tax returns), at an office of the Social
Security Administration or the Internal Revenue Service.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on all payments include the
following:
- A financial institution.
- An organization exempt from tax under section 501(a), or an individual
retirement plan, or a custodial account under Section 403(b)(7).
- The United States or any agency or instrumentality thereof.
- A State, the District of Columbia, a possession of the United States, or
any political subdivision or instrumentality thereof.
- A foreign government, a political subdivision of a foreign government, or
any agency or instrumentality thereof.
- An international organization or any agency, or instrumentality thereof.
Payees that may be exempted from backup withholding:
- A corporation.
- A registered dealer in securities or commodities registered in the U.S. or
a possession of the U.S.
- A real estate investment trust.
- A common trust fund operated by a bank under section 584(a).
- An entity registered at all times during the tax year under the Investment
Company Act of 1940.
- A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
- Payments to nonresident aliens subject to withholding under section 1441.
- Payments to partnerships not engaged in a trade or business in the U.S.
and which have at least one nonresident alien partner.
- Payments of patronage dividends where the amount received is not paid in
money.
- Payments made by certain foregoing organizations.
Payments of interest not generally subject to backup withholding include the
following:
- Payments of interest on obligations issued by individuals.
NOTE: You may be subject to backup withholding if this interest is $600 or more
and is paid in the course of the payer's trade or business and you have not
provided your correct taxpayer identification number to the payer.
- Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
- Payments described in section 6049(b)(5) to non-resident aliens.
- Payments on tax-free covenant bonds under section 1451.
- Payments made by certain foreign organizations.
- Mortgage interest paid to you.
Exempt payees described above should file a Substitute Form W-9 to avoid
possible erroneous backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH
YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND
RETURN IT TO THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS OR PATRONAGE
DIVIDENDS, ALSO SIGN AND DATE THE FORM.
Certain payments other than interest, dividends and patronage dividends that
are not subject to information reporting are also not subject to backup
withholding. For details, see sections 6041, 6041A(a), 6042, 6044, 6045, 6049,
6050A, and 6050N, and their regulations.
PRIVACY ACT NOTICE.--Section 6109 requires most recipients of dividend, interest
or other payments to give taxpayer identification numbers to payers who must
report the payments to the IRS. The IRS uses the numbers for identification
purposes and to help verify the accuracy of your tax return. Payers must be
given the numbers whether or not recipients are required to file tax returns.
Payers must generally withhold 31% of taxable interest, dividend and certain
other payments to a payee who does not furnish a taxpayer identification number
to a payer. Certain penalties must also apply.
PENALTIES.
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER. -- If you
fail to furnish your correct taxpayer identification number to a payer, you are
subject to a penalty of $50 for each such failure unless your failure is due to
reasonable cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. -- If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. -- Falsifying certifications
or affirmations may subject you to criminal penalties including fines and/or
imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
<PAGE>
EXHIBIT 99.(A)(7)
THIS ANNOUNCEMENT IS NEITHER AN OFFER TO PURCHASE NOR A SOLICITATION OF AN
OFFER TO SELL SHARES. THE OFFER IS MADE ONLY BY THE OFFER TO PURCHASE DATED
JULY 14, 1997, AND THE RELATED LETTER OF TRANSMITTAL AND IS BEING MADE
TO ALL HOLDERS OF SHARES. THE OFFEROR IS NOT AWARE OF ANY STATE WHERE
THE MAKING OF THE OFFER IS PROHIBITED BY ADMINISTRATIVE OR JUDICIAL
ACTION PURSUANT TO A STATE STATUTE. IF THE OFFEROR BECOMES AWARE
OF ANY VALID STATE STATUTE PROHIBITING THE MAKING OF THE OFFER,
THE OFFEROR WILL MAKE A REASONABLE GOOD FAITH EFFORT TO COMPLY
WITH SUCH STATUTE OR SEEK TO HAVE SUCH STATUTE DECLARED
INAPPLICABLE TO THE OFFER. IF, AFTER SUCH REASONABLE GOOD
FAITH EFFORT, THE OFFEROR CANNOT COMPLY WITH SUCH STATUTE,
THE OFFER WILL NOT BE MADE TO (NOR WILL TENDERS BE
ACCEPTED FROM OR ON BEHALF OF) THE HOLDERS OF SHARES
IN SUCH STATE. IN THOSE JURISDICTIONS WHERE THE
SECURITIES, BLUE SKY OR OTHER LAWS REQUIRE THE
OFFER TO BE MADE BY A LICENSED BROKER OR DEALER,
THE OFFER SHALL BE DEEMED TO BE MADE ON BEHALF
OF THE OFFEROR BY DONALDSON, LUFKIN &
JENRETTE SECURITIES CORPORATION (THE
"DEALER MANAGER") OR ONE OR MORE
REGISTERED BROKERS OR DEALERS LICENSED
UNDER THE LAWS OF SUCH JURISDICTION.
NOTICE OF OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS)
OF
DELCHAMPS, INC.
AT
$30.00 NET PER SHARE
BY
DELTA ACQUISITION CORPORATION
A WHOLLY OWNED SUBSIDIARY OF
JITNEY-JUNGLE STORES OF AMERICA, INC.
Delta Acquisition Corporation, an Alabama corporation (the "Offeror") and a
wholly owned subsidiary of Jitney-Jungle Stores of America, Inc., a Mississippi
corporation ("Parent"), is offering to purchase all outstanding shares of Common
Stock, $.01 par value per share, of Delchamps, Inc., an Alabama corporation (the
"Company"), including the associated preferred share purchase rights issued
pursuant to the Rights Agreement dated as of October 14, 1988, as amended,
between the Company and First Alabama Bank, as Rights Agent (collectively, the
"Shares"), at a purchase price of $30.00 per Share, net to the seller in cash,
without interest, upon the terms and subject to the conditions set forth in the
Offer to Purchase, dated July 14, 1997 (the "Offer to Purchase"), and in the
related Letter of Transmittal (which, together with any amendments or
supplements thereto, collectively constitute the "Offer").
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON FRIDAY, AUGUST 8, 1997, UNLESS THE OFFER IS EXTENDED.
UNDER CERTAIN CIRCUMSTANCES, THE OFFER WILL BE EXTENDED UNTIL SEPTEMBER
12, 1997 IF NECESSARY TO MEET CERTAIN CONDITIONS, INCLUDING THE HSR
CONDITION AND THE NOTEHOLDER CONSENT CONDITION REFERRED TO IN THE OFFER
TO PURCHASE. IN ADDITION, NOTWITHSTANDING THE SATISFACTION OR WAIVER OF
ANY CONDITIONS OF THE OFFER, THE OFFER MAY BE EXTENDED UNTIL SEPTEMBER
12, 1997 TO ENABLE PARENT AND THE OFFEROR TO OBTAIN PERMANENT FINANCING
FOR THE TRANSACTION. THE OFFER MAY BE EXTENDED IN OTHER CIRCUMSTANCES AS
DESCRIBED IN THE OFFER TO PURCHASE.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER A NUMBER OF
SHARES SUCH THAT THE OFFEROR AND ITS AFFILIATES WILL BENEFICIALLY OWN IN THE
AGGREGATE NOT LESS THAN TWO-THIRDS OF THE SHARES OUTSTANDING ON A FULLY DILUTED
BASIS, (II) ANY APPLICABLE WAITING PERIOD UNDER THE HSR ACT (AS DEFINED IN THE
OFFER TO PURCHASE) OR PERIOD DURING WHICH PARENT SHALL HAVE CONSENTED OR
OTHERWISE BE BARRED FROM PURCHASING SHARES PURSUANT TO THE OFFER AS PART OF ANY
AGREEMENT OR OTHER ARRANGEMENT WITH ANY GOVERNMENTAL OR REGULATORY AUTHORITY
INVOLVING THE HSR ACT OR ANY OTHER APPLICABLE ANTITRUST LAWS HAVING EXPIRED OR
HAVING BEEN TERMINATED PRIOR TO THE EXPIRATION OF THE OFFER, (III) PARENT HAVING
OBTAINED PRIOR TO THE EXPIRATION OF THE OFFER AN AMENDMENT OR SUPPLEMENT TO THE
INDENTURE GOVERNING ITS 12% SENIOR NOTES DUE 2006 AS DESCRIBED IN THE OFFER TO
PURCHASE AND (IV) THE SATISFACTION OF CERTAIN OTHER TERMS AND CONDITIONS AS
DESCRIBED IN THE OFFER TO PURCHASE.
The Offer is being made pursuant to the Agreement and Plan of Merger, dated
as of July 8, 1997 (the "Merger Agreement"), among Parent, the Offeror and the
Company. The Merger Agreement provides that, among other things, after the
purchase of Shares pursuant to the Offer and the satisfaction of the other
conditions set forth in the Merger Agreement and in accordance with the relevant
provisions of the Alabama Business Corporation Act, as amended (the "ABCA"), the
Offeror will be merged with and into the Company (the "Merger"). Following
consummation of the Merger, it is anticipated that the Company will continue as
the surviving corporation (the "Surviving Corporation") and will be a wholly
owned subsidiary of Parent. The Merger is subject to a number of conditions,
including approval by the shareholders of the Company. At the effective time of
the Merger (the "Effective Time"), each Share that is issued and outstanding
(other than Shares owned by the Company, Parent, the Offeror, any other wholly
owned subsidiary of Parent or by shareholders, if any, who are entitled to and
who properly exercise dissenters' rights under the ABCA) will be converted into
and become the right to receive from the Surviving Corporation $30.00 (or any
higher price that may be paid for each Share pursuant to the Offer) in cash,
without interest thereon.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE OFFER,
THE MERGER AND THE MERGER AGREEMENT, HAS DETERMINED THAT THE CONSIDERATION TO BE
PAID FOR THE SHARES IN THE OFFER AND THE MERGER IS FAIR TO THE SHAREHOLDERS OF
THE COMPANY AND THAT THE OFFER AND THE MERGER ARE OTHERWISE IN THE BEST
INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS AND RECOMMENDS THAT ALL
SHAREHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER AND,
IF REQUIRED BY THE ABCA, VOTE IN FAVOR OF THE MERGER.
For purposes of the Offer, the Offeror will be deemed to have accepted for
payment, and thereby purchased, Shares validly tendered and not withdrawn as, if
and when the Offeror gives oral or written notice to IBJ Schroder Bank & Trust
Company (the
<PAGE>
"Depositary") of the Offeror's acceptance of such Shares for payment pursuant to
the Offer. In all cases, payment for Shares purchased pursuant to the Offer will
be made by deposit of the purchase price with the Depositary, which will act as
agent for tendering shareholders for the purpose of receiving payment from the
Offeror and transmitting such payment to tendering shareholders whose Shares
have been accepted for payment. Under no circumstances will interest be paid on
the purchase price of the Shares to be paid by the Offeror, regardless of any
extension of the Offer or any delay in making any payment. Payment for Shares
accepted for payment pursuant to the Offer will in all cases be made only after
timely receipt by the Depositary of (i) certificates for such Shares or a
Book-Entry Confirmation (as defined in the Offer to Purchase), (ii) a properly
completed and duly executed Letter of Transmittal (or a manually signed
facsimile thereof), with all required signature guarantees or, in the case of a
book-entry transfer, an Agent's Message (as defined in the Offer to Purchase),
and (iii) any other documents required by the Letter of Transmittal.
If any condition set forth in the Offer to Purchase has not been satisfied
by 12:00 Midnight, New York City time, on Friday, August 8, 1997 (or any other
time then set as the Expiration Date), the Offeror reserves the right (but shall
not be obligated), subject to the terms and conditions contained in the Merger
Agreement and to the applicable rules and regulations of the Securities and
Exchange Commission, (i) to terminate the Offer and not accept for payment or
pay for any Shares and return all tendered Shares to tendering shareholders,
(ii) to waive all the unsatisfied conditions and accept for payment and pay for
all Shares validly tendered prior to the Expiration Date and not theretofore
withdrawn, (iii) to extend the Offer and, subject to the right of shareholders
to withdraw Shares until the Expiration Date, retain the Shares that have been
tendered during the period or periods for which the Offer is extended or (iv) to
amend the Offer. The term "Expiration Date" shall mean 12:00 Midnight, New York
City time, on Friday, August 8, 1997, unless the Offeror shall have extended the
period of time for which the Offer is open, in which event the term "Expiration
Date" shall mean the latest time and date at which the Offer, as so extended by
the Offeror, shall expire.
Subject to the limitations set forth in the Offer and the Merger Agreement,
the Offeror reserves the right (but will not be obligated), at any time or from
time to time in its sole discretion, to extend the period during which the Offer
is open by giving oral or written notice of such extension to the Depositary and
by making a public announcement of such extension. Except to the extent required
by the Merger Agreement, there can be no assurance that the Offeror will
exercise its right to extend the Offer. Any extension of the period during which
the Offer is open, delay in acceptance for payment or payment, termination or
amendment of the Offer will be followed, as promptly as practicable, by public
announcement thereof, such announcement in the case of an extension to be issued
not later than 9:00 a.m., New York City time, on the next business day after the
previously scheduled Expiration Date. During any such extension, all Shares
previously tendered and not withdrawn will remain subject to the Offer, subject
to the rights of a tendering shareholder to withdraw such shareholder's Shares.
Except as otherwise provided in the Offer to Purchase, tenders of Shares
made pursuant to the Offer are irrevocable. Shares tendered pursuant to the
Offer may be withdrawn at any time prior to the Expiration Date and, unless
theretofore accepted for payment pursuant to the Offer, may also be withdrawn at
any time after September 11, 1997. For a withdrawal of Shares tendered pursuant
to the Offer to be effective, a written, telegraphic, telex or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover of the Offer to Purchase. Any
notice of withdrawal must specify the name of the person who tendered the Shares
to be withdrawn, the number of Shares to be withdrawn and the name of the
registered holder of the Shares, if different from that of the person who
tendered the Shares. If certificates for Shares to be withdrawn have been
delivered or otherwise identified to the Depositary, then, prior to the physical
release of such certificates, the serial numbers shown on such certificates must
be submitted to the Depositary and, unless such Shares have been tendered by an
Eligible Institution (as defined in the Offer to Purchase), the signatures on
the notice of withdrawal must be guaranteed by an Eligible Institution. If
Shares have been tendered pursuant to the procedures for book-entry transfer,
any notice of withdrawal must also specify the name and number of the account at
the Book-Entry Transfer Facility to be credited with the withdrawn Shares and
must otherwise comply with such Book-Entry Transfer Facility's procedures. All
questions as to the form and validity (including time of receipt) of notices of
withdrawal will be determined by the Offeror, in its sole discretion, and its
determination will be final and binding on all parties. Any Shares properly
withdrawn will be deemed not validly tendered for purposes of the Offer, but may
be retendered at any subsequent time prior to the Expiration Date by following
any of the procedures described in the Offer to Purchase.
The information required to be disclosed by Rule 14d-6 (e)(1)(vii) of the
General Rules and Regulations under the Securities Exchange Act of 1934, as
amended, is contained in the Offer to Purchase and is incorporated herein by
reference.
The Company has provided the Offeror with the Company's list of shareholders
and security position listings for the purpose of disseminating the Offer to
holders of Shares. The Offer to Purchase and the related Letter of Transmittal
will be mailed to record holders of Shares whose names appear on the Company's
shareholder list and will be furnished to brokers, dealers, commercial banks,
trust companies and similar persons whose names, or the names of whose nominees,
appear on the shareholder list or, if applicable, who are listed as participants
in a clearing agency's security position listing for subsequent transmittal to
beneficial owners of Shares.
THE OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION THAT SHOULD BE READ BEFORE ANY DECISION IS MADE WITH
RESPECT TO THE OFFER.
Questions or requests for assistance may be directed to the Information
Agent or the Dealer Manager at their respective addresses or telephone numbers
and locations set forth below. Neither the Offeror nor Parent, nor any officer,
director, shareholder, agent or other representative of the Offeror or Parent
will pay any fees or commissions to any broker, dealer or other person (other
than the Information Agent and the Depositary) for soliciting tenders of Shares
pursuant to the Offer. Additional copies of the Offer to Purchase, the Letter of
Transmittal and the Notice of Guaranteed Delivery may be obtained from the
Information Agent. Shareholders may also contact their broker, dealer,
commercial bank, trust company or other nominee for assistance concerning the
Offer.
THE INFORMATION AGENT FOR THE OFFER IS:
[LOGO]
156 Fifth Avenue
New York, NY 10010
(212) 929-5500 (call collect)
or
Call Toll-Free: (800) 322-2885
THE DEALER MANAGER FOR THE OFFER IS:
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
277 Park Avenue
New York, New York 10172
(212) 892-7099 (call collect)
July 14, 1997
<PAGE>
FOR IMMEDIATE RELEASE
DELCHAMPS, INC.
AND
JITNEY-JUNGLE STORES OF AMERICA, INC.
ANNOUNCE MERGER AGREEMENT
MOBILE, ALABAMA, and JACKSON, MISSISSIPPI, July 8, 1997: Delchamps, Inc.
(Nasdaq NMS: DLCH) and Jitney-Jungle Stores of America, Inc. announced today
that they have entered into a definitive merger agreement under which
Jitney-Jungle will acquire Delchamps.
Under the merger agreement, Jitney-Jungle will commence, within five
business days, an all-cash tender offer for all of Delchamps' outstanding
common stock at a price of $30 per share. Following successful completion of
the tender offer, Jitney-Jungle will acquire for the same cash price any
shares that are not tendered by means of a merger of Delchamps with a wholly
owned subsidiary of Jitney-Jungle.
Delchamps' Board of Directors has approved the transaction unanimously
and has recommended approval by the Delchamps stockholders. Credit Suisse
First Boston Corporation is acting as financial advisor to Delchamps in the
transaction.
David W. Morrow, Chairman and Chief Executive Officer of Delchamps, said:
"The combination of these two excellent regional supermarket chains will
create a very strong competitor capable of meeting the increasing challenges
of the intensely competitive market in the Gulf South region. We expect the
combination to benefit our employees and customers, as well as our
stockholders."
"This transaction unites two leading supermarket chains in the
southeast," said Michael E. Julian, President and Chief Executive Officer of
Jitney-Jungle. "We are excited about the opportunity to better serve the
Jitney-Jungle and Delchamps customers by combining the employees, managers
and resources of two leading retail companies and building one of the premier
supermarket chains."
The tender offer is conditioned upon, among other things, there being
tendered and not withdrawn prior to the expiration date of the offer at least
two-thirds of the outstanding Delchamps shares. The offer initially will
expire 20 business days after it is commenced, but under certain
circumstances will be extended by Jitney-Jungle for up to 60 calendar days
from the commencement date if necessary to meet certain conditions, including
receipt of regulatory approval under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 and the consent of holders of Jitney-Jungle's
outstanding senior notes. The offer may be
<PAGE>
extended by Jitney-Jungle for up to the same period to enable it to obtain
permanent financing for the acquisition. In addition, Jitney-Jungle may
extend the offer for up to 90 calendar days from the commencement date under
certain other circumstances.
Jitney-Jungle has obtained commitment letters from Fleet Capital
Corporation and from an affiliate of Donaldson, Lufkin & Jenrette Securities
Corporation to provide senior bank and subordinated debt financing to fund
the tender offer and the merger.
Delchamps operates 118 supermarkets in Louisiana, Mississippi, Alabama
and Florida, and 10 liquor stores in Florida.
Jitney-Jungle operates a chain of 21 discount stores, 77 conventional
stores and 7 combination stores for a total of 105 supermarkets and 53
gasoline stations located throughout Mississippi and in Tennessee, Arkansas,
Alabama, Louisiana and Florida.
#####
FOR FURTHER INFORMATION CONTACT:
Delchamps, Inc.:
Timothy E. Kullman, Chief Financial Officer
(334) 433-0437, ext. 217
Jitney-Jungle Stores of America, Inc.:
Michael E. Julian, President and Chief Executive Officer
(601) 346-2116
<PAGE>
JITNEY-JUNGLE COMMENCES TENDER OFFER FOR DELCHAMPS
JACKSON, MISSISSIPPI, July 14, 1997: Jitney-Jungle Stores of America, Inc.
announced today that its subsidiary, Delta Acquisition Corporation, commenced
its previously announced tender offer for all of the outstanding shares of
common stock of Delchamps, Inc. (NASDAQ: DLCH) for $30.00 per share in cash.
The Boards of Directors of both companies have approved the transaction.
The tender offer is conditioned upon, among other things, there being
tendered and not withdrawn prior to the expiration date of the offer at least
two-thirds of the outstanding Delchamps shares. The offer initially will
expire at 12:00 midnight, NYC time, on Friday, August 8, 1997, but under
certain circumstances will be extended by Jitney-Jungle until September 12,
1997 if necessary to meet certain conditions, including receipt of regulatory
approval under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and
the consent of holders of Jitney-Jungle's outstanding senior notes. The
offer may be extended by Jitney-Jungle until September 12, 1997 to enable it
to obtain permanent financing for the acquisition. The offer may be extended
in other circumstances as described in the offer to purchase.
Following successful completion of the tender offer, Jitney-Jungle will
acquire for the same cash price any Delchamps shares that are not tendered by
means of a merger of Delchamps with a wholly owned subsidiary of
Jitney-Jungle.
Jitney-Jungle has obtained commitment letters from Fleet Capital Corporation
and from an affiliate of Donaldson, Lufkin & Jenrette Securities Corporation
to provide senior bank and subordinated debt financing to fund the tender
offer and the merger.
Donaldson, Lufkin & Jenrette Securities Corporation will serve as dealer
manager for the tender offer. MacKenzie Partners is the information agent.
Jitney-Jungle operates a chain of 23 discount stores, 77 conventional stores,
and 4 combination stores for a total of 104 supermarkets and 52 gasoline
stations located throughout Mississippi and in Tennessee, Arkansas, Alabama,
Louisiana, and Florida.
# # #
FOR FURTHER INFORMATION CONTACT:
Jitney-Jungle Stores of America, Inc.:
Michael E. Julian, President and Chief Executive Officer
(601) 346-2116
MacKenzie Partners, Inc.:
Steven C. Balet
(212) 929-5500
<PAGE>
[Letterhead]
July 3, 1997
Jitney-Jungle Stores of America, Inc.
1770 Ellis Avenue
Suite 200
Jackson, Mississippi 39204
Attention: Mr. Michael E. Julian
President & Chief Executive Officer
Gentlemen:
You have advised DLJ Bridge Finance, Inc., a Delaware corporation ("DLJ
Bridge"), that Jitney-Jungle Stores of America, Inc. (together with its
subsidiaries, "Jitney-Jungle" or the "Company") proposes to acquire (the
"Acquisition") 100% of the issued and outstanding common stock of Delchamps,
Inc. (together with its subsidiaries, "Delchamps" and together with
Jitney-Jungle, the "Credit Group") from the public shareholders thereof pursuant
to a tender offer (the "Tender Offer") for $30.00 per share, equating to a total
purchase price for 100% of the issued and outstanding common stock of Delchamps
of approximately $228.0 million ($220.9 million net of option exercises). The
Tender Offer will be initiated pursuant to a merger agreement (the "Merger
Agreement") to be negotiated and entered into between Jitney-Jungle and the
board of directors of Delchamps (collectively, the "Seller") which will be
conditioned upon the successful consummation of the Tender Offer and pursuant to
which Delchamps will merge, (the "Merger") with a newly-formed special purpose
subsidiary of Jitney-Jungle, with Delchamps being the surviving entity. We
further understand that concurrent with the consummation of the Acquisition
certain other transactions will occur including: (i) the Merger; (ii) the
refinancing (the "Refinancing") of approximately $34.4 million of existing debt
of Delchamps (including $9.8 million of capitalized leases); and (iii) the
payment of approximately $36.0 million of financing fees and other expenses to
be incurred in connection with the Acquisition and the Merger (collectively, the
"Expense Payments"). As used herein, the term "Transaction" shall refer,
collectively, to the Tender Offer, the Acquisition, the Merger, the Refinancing
and the Expense Payments.
We understand that the total cash proceeds required to consummate the
Transaction are approximately $281.4 million and that such funds will be
provided as follows: (i) borrowings by the Company of approximately $75.0
million under a $175.0 million senior secured financing (the "Bank Credit
Facility") consisting of an -eight-year $75.0 million amortizing term loan
facility and a six-year $100.0 million non-amortizing revolving credit facility
(none of which shall be drawn at closing); (ii) the issuance by the Company, for
cash, of up to $200.0 million of senior subordinated increasing rate notes (the
"Bridge Notes"); and (iii) approximately $6.4 million of available cash.
I am pleased to advise you that DLJ Bridge hereby commits (the "Commitment")
that it or one of its affiliates will purchase up to $200.0 million of Bridge
Notes, the proceeds of which will be used to finance in part the consummation of
the Transaction.
You have advised us that a copy of this letter (the "Bridge Commitment
Letter") and the attached Summary of Terms and Conditions (the "Summary of Terms
and Conditions"), which is incorporated into and made a part of this Bridge
Commitment Letter, will be provided to the Seller but that you understand that
our obligation to make any monies available to the Company is subject expressly
to (i) the execution and delivery of definitive documentation, including without
limitation a definitive securities purchase agreement (the "Securities Purchase
Agreement"), satisfactory to us and covering the matters expressly referred to
herein and covering such other
1
<PAGE>
matters as we may request (collectively, the "Definitive Documents") and (ii)
the satisfaction of the other conditions precedent set out in the Summary of
Terms and Conditions.
Jitney-Jungle agrees to pay to DLJ Bridge a non-refundable cash commitment
fee (the "Commitment Fee") in an amount equal to one percent (1.00%) of the
principal amount of the Bridge Notes subject to this Commitment. Jitney-Jungle
also agrees to pay to DLJ Bridge a cash takedown fee (the "Takedown Fee") in an
amount equal to two percent (2.00%) of the principal amount of Bridge Notes
purchased by DLJ Bridge.
The Commitment Fee set forth above will be earned upon acceptance of the
Commitment and will be payable only upon (i) the closing of the Transaction;
(ii) the closing of any other transaction or series of transactions in which
Jitney-Jungle or any of its affiliates acquires Delchamps within the next two
years; or (iii) the payment to Jitney-Jungle of any break-up fee or similar
reimbursement pursuant to the Merger Agreement. The Takedown Fee set forth above
will be earned and payable upon the issuance of the Bridge Notes.
The Commitment is not assignable by you. Nothing in this Bridge Commitment
Letter, expressed or implied, shall give any person, other than the parties
hereto, any benefit or any legal or equitable right, remedy or claim under this
Bridge Commitment Letter.
DLJ Bridge is prepared to offer (the "Co-Purchase Offer") to CS First Boston
("CSFB" or the "Co-Purchaser"), or an affiliate of CSFB reasonably acceptable to
DLJ Bridge, the opportunity to participate, as a co-purchaser, in up to thirty
percent (30.0%) of the Commitment. In the event that the Co-Purchaser accepts
the Co-Purchase Offer: (i) Donaldson, Lufkin & Jenrette Securities Corporation's
("DLJSC") right to act as exclusive agent or sole underwriter in the offering of
the Permanent Financing (as defined in the attached Summary of Terms and
Conditions) shall become the right, but not the obligation, to act as lead agent
or lead manager, as the case may be, in such offering (but only to allow the
participation of the Co-Purchaser in such offering, as set forth herein); (ii)
the Co-Purchaser shall have the right, but not the obligation, to act as
co-agent or co-manager, as the case may be, along with DLJ in the offering of
the Permanent Financing; (iii) if DLJSC and the Co-Purchaser act as lead manger
or lead agent and co-manager or co-agent, respectively, the Co-Purchaser shall
be entitled to a share of the gross underwriting spread or placement fee, as the
case may be (in either case, the "Underwriter's Compensation"), payable by the
issuer of such Permanent Financing from such offering, net of unreimbursed
expenses, equal to the Co-Purchaser's ratable participation in the Commitment;
(iv) any reference in the Bridge Commitment Letter or the attached Summary of
Terms and Conditions to a transaction in which DLJSC has acted as exclusive
agent or sole underwriter shall be deemed to have been amended to permit such
participation by the Co-Purchaser; (v) DLJ Bridge's obligation to purchase
Bridge Notes under the Commitment shall be reduced an obligation to purchase
seventy percent (70.0%) of Bridge Notes issued pursuant to the Commitment; and
(vi) CSFB shall become a co-party to the Engagement Letter (as defined in the
attached Summary of Terms and Conditions) and shall have the right, but not the
obligation, to act as co-agent or co-manager (with 30% of the economics), as the
case may be, along with DLJ in any transaction thereunder. The foregoing is
subject, in its entirety, to the execution of definitive documentation between
DLJ Bridge, CSFB and the Company setting forth the foregoing and in form and
substance satisfactory to DLJ Bridge.
Jitney-Jungle agrees to indemnify and hold the DLJ Bridge Group, as defined
in Exhibit A hereto, harmless to the extent set forth in Exhibit A to this
Bridge Commitment Letter and, upon demand from time to time, to reimburse DLJ
Bridge for all reasonable out-of-pocket costs, expenses and other payments,
including but not limited to reasonable legal fees and disbursements incurred or
made in connection with the Commitment, and the preparation, execution and
delivery of the Definitive Documents, regardless of whether or not the
Definitive Documents are executed.
Jitney-Jungle hereby represents that, based on its review and analysis, to
its knowledge (a) all information, other than Projections (as defined below),
which have been made available to DLJ Bridge by any member of the Credit Group
or any of its representatives in connection with the transactions contemplated
hereby (together with information hereafter made available, the "Information")
have been reviewed and analyzed by Jitney-Jungle in
<PAGE>
connection with the performance of its own due diligence and, as supplemented
as contemplated by the next sentence, is (or will be, in the case of
Information made available after the date hereof) complete and correct in all
material respects and does not (or will not, as the case may be) contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements contained therein not materially misleading
in light of the circumstances under which such statements were or are made;
and (b) all financial projections concerning the Credit Group that have been
or are hereafter made available to DLJ Bridge by an member of the Credit
Group or its representatives in connection with the transactions contemplated
hereby (the "Projections") have been (or will be, in the case of Projections
made available after the date hereof) prepared in good faith based upon
reasonable assumptions. Jitney-Jungle agrees to supplement the Information
and Projections, to the extent Jitney-Jungle becomes aware of or is furnished
with such Information and Projections, from time to time until the closing of
the Transaction so that the representation and warranty in the preceding
sentence is correct on the closing date.
This Bridge Commitment Letter and the attached Summary of Terms and
Conditions set forth the entire understanding of the parties as to the scope of
the Commitment and DLJ Bridge's obligations thereunder. This Commitment will
expire at 5:00 PM New York City time on July 7, 1997 unless accepted prior to
such time. This Commitment will also expire at the earlier of: (i) the
termination of the Merger Agreement; (ii) the closing of the Transaction without
the issuance of any Bridge Notes; (iii) the commencement by the Credit Group of
the marketing of any securities pursuant to the Transaction in which Donaldson,
Lufkin & Jenrette Securities Corporation ("DLJSC") is not sole manger or sole
agent, as the case may be; or (iv) 5:00 PM New York City time on September 30,
1997 if the closing of the Transaction has not occurred by such time.
This Bridge Commitment Letter shall be governed by, and construed in
accordance with, the laws of the State of New York as applied to contracts made
and performed within such state, without giving effect to the principles of
conflicts of laws thereof. To the fullest extent permitted by applicable law,
each of the parties hereto hereby irrevocably submits to the jurisdiction of any
New York State court or Federal court sitting in the Borough of Manhattan in New
York City in respect of any suit, action or proceeding arising out of or
relating to the provisions of the Commitment and irrevocably agrees that all
claims in respect of any such suit, action or proceeding may be heard and
determined in any such court. Each of the parties hereto waives to the fullest
extent permitted by applicable law, any objection which it may now or hereafter
have to the laying of the venue of any such suit, action or proceedings brought
in any such court, and any claim that any such suit, action or proceeding
brought in any such court has been brought in an inconvenient forum.
Please indicate your acceptance of the Commitment and your agreement to the
matters contained in this Bridge Commitment Letter by executing this document
and returning it to us prior to the time of expiration set forth above.
Sincerely,
DLJ Bridge Finance, Inc.
/s/ Robert C. Grien
----------------------------
By: Robert C. Grien
Title: Senior Vice President
Accepted and Agreed to this
July 3, 1997
Jitney-Jungle Stores of America, Inc.
/s/ Michael Julian
- -------------------------------------
By: Michael Julian
Title: President and Chief Executive Officer
<PAGE>
SUMMARY OF TERMS AND CONDITIONS
Set forth below is a summary of the terms of the Bridge Notes and the
conditions to the obligation of DLJ Bridge to purchase any Bridge Notes.
Capitalized terms used herein and not otherwise defined have the meaning set
forth in the Bridge Commitment Letter to which this Summary of Terms and
Conditions is attached and of which it forms a part.
Senior Subordinated Increasing Rate Notes
<TABLE>
<S> <C>
Issuer: Jitney-Jungle Stores of America, Inc. or, at the option
of DLJ Bridge, such other entity(ies) as shall be the
borrower(s) under the Bank Credit Facility.
Issue: Senior Subordinated Increasing Rate Notes (the "Bridge
Notes").
Use of Proceeds: Proceeds will be used to finance in part the
consummation of the Transaction.
Principal Amount: Up to $200,000,000.
Price: 100% of principal amount.
Interest Rate: Interest shall be payable at the prime rate plus a
spread (the "Spread"). The Spread will initially be 300
basis points. If the Bridge Notes are not retired in
whole by the end of the first six month period following
the date of their issuance (the "Issuance Date"), the
Spread will increase by 100 basis points and shall
continue to increase by an additional 50 basis points at
the end of each subsequent three month period until the
first anniversary of the issuance of the Bridge Notes.
Commencing on the first anniversary of the Issuance
Date, interest shall be payable at the greater of the
following as of the beginning of each quarterly period:
(i) the prime rate plus 500 basis points, increasing by
an additional 50 basis points at the end of each
subsequent three month period for so long as the Bridge
Notes are outstanding; (ii) the Treasury Rate (as
defined below) plus 700 basis points, increasing by an
additional 50 basis points at the end of each subsequent
three month period for so long as the Bridge Notes are
outstanding; (iii) the DLJ High Yield Index Rate plus
250 basis points, increasing by an additional 50 basis
points at the end of each subsequent three month period
for so long as the Bridge Notes are outstanding; and
(iv) the rate in effect on the day immediately preceding
the first anniversary of the Issuance Date plus 50 basis
points, increasing by an additional 50 basis points at
the end of each subsequent three month period for so
long as the Bridge Notes are outstanding. For purposes
of this Summary of Terms and Conditions, the "prime
rate" means the prime or reference rate as announced
from time to time by The Bank of New York and the
"Treasury Rate" means the rate applicable to the most
recent auction of direct obligations of the United
States having a maturity closest to the Bridge Notes, as
published by the Board of Governors of the Federal
Reserve System.
</TABLE>
1
<PAGE>
<TABLE>
<S> <C>
Notwithstanding anything to the contrary set forth
above, at no time shall the per annum interest rate on
the Bridge Notes exceed eighteen percent (18.00%). In
addition, that portion, if any, of any interest payment
representing a per annum interest rate in excess of
sixteen percent (16.00%) shall be paid by issuing Bridge
Notes with a principal amount equal to such excess
portion of interest.
Maturity: The Bridge Notes will mature on the first anniversary of
the Issuance Date, provided however, that the maturity
of the Bridge Notes will be automatically extended until
the date which is six (6) months after the date of the
original final stated maturity of the Bank Credit
Facility if, on the first anniversary of the Issuance
Date, the following conditions are met: (i) there shall
exist no default under the Bridge Notes; (ii) there
shall have been no acceleration under the Bank Credit
Facility or any other debt instrument of the Company;
and (iii) all fees due to DLJ Bridge and DLJSC as of
such date shall have been paid in full.
Mandatory Redemption: The Company will redeem the Bridge Notes with, subject
to certain agreed exceptions, (i) the net proceeds from
the issuance of any subordinated debt or equity
securities by any member of the Credit Group (the
"Permanent Financing"), (ii) the net proceeds from the
issuance of any other debt by any member of the Credit
Group to the extent permitted by the Bank Credit
Facility, or (iii) the net proceeds from asset sales by
any member of the Credit Group in excess of the amount
thereof required to be paid to the banks under the Bank
Credit Facility, in each case at par plus accrued
interest, provided, that the redemption price shall be
one hundred three percent (103.0%) of par plus accrued
interest if the Bridge Notes are redeemed with or in
anticipation of funds raised by any means other than a
transaction in which DLJSC has acted as exclusive agent
or sole underwriter to the Credit Group; and provided
further, that after twelve (12) months from the date of
their issuance, the Bridge Notes may be redeemed at 100%
of principal plus accrued interest unless (a) (i) within
such twelve-month period DLJSC delivered to the Credit
Group a proposal to market securities of the Credit
Group to one or more financially responsible
institutional investors (or a commitment from DLJSC or
another nationally recognized investment banking firm to
underwrite the public sale of securities of the Credit
Group, on a firm commitment basis), on financial and
other terms and conditions no less favorable to the
issuer of such securities than those generally available
in the United States capital markets to issuers of
securities having a creditworthiness comparable to that
of the issuer of such securities, in an amount
sufficient to redeem all the Bridge Notes (a "Bona Fide
Proposal"), and (ii) the Credit Group did not authorize
DLJSC to execute such Bona Fide Proposal; it being
understood that no such proposal shall be deemed to be a
Bona Fide Proposal if DLJSC fails to execute such
proposal on substantially the terms proposed, or (b) the
Company and DLJSC have agreed in their reasonable
judgment that no such Bona Fide Proposal could be made.
</TABLE>
2
<PAGE>
<TABLE>
<S> <C>
Interest Payments: Interest on the Bridge Notes will be payable in cash,
quarterly in arrears (except as provided elsewhere
herein).
Optional Redemption: The Bridge Notes will be callable, in whole or in part,
upon not less than 10 days written notice, at the option
of the Company, at any time at par plus accrued interest
to the redemption date; provided, that the redemption
price shall be one hundred three percent (103.0%) of par
plus accrued interest if the Bridge Notes are refunded
(whether at the time of redemption or maturity) with or
in anticipation of funds raised by any means other than
a transaction in which DLJSC has acted as exclusive
agent or sole underwriter to the Company; provided
further, that after twelve (12) months from the date of
their issuance, the Bridge Notes may be redeemed at 100%
of principal plus accrued interest unless DLJSC has
delivered a Bona Fide Proposal or the Company and DLJSC
have agreed in their reasonable judgment that no such
Bona Fide Proposal could be made.
Commencing on the earliest to occur of (i) the first
anniversary of the Issuance Date and (ii) refusal by the
Company to execute a Bona Fide Proposal (such event, a
"Refusal Event" and such earlier date, the "First
Anniversary"), the Bridge Notes may be sold to third
party purchasers on a fixed rate basis at a rate no
greater than the then applicable rate of interest. In
such event, the Bridge Notes will be non-callable until
the fifth anniversary of the Issuance Date and will be
callable thereafter at par plus accrued interest plus a
premium equal to the coupon in effect on the date on
which such Bridge Notes were sold to third party
purchasers with such premium declining ratably to par
one year prior to the maturity of the Bridge Notes. DLJ
Bridge shall agree that no such third party sales shall
take place unless the Company has been given ten (10)
days prior notice.
Subordination: The Bridge Notes will be subordinated to the Bank Credit
Facility and certain refinancings thereof (collectively,
the "Designated Senior Debt"). See Exhibit B to the
Bridge Commitment Letter.
Guarantees: Delchamps will issue a senior subordinated guarantee in
favor of the Bridge Notes. The Company's other direct
and indirect affiliates which are guarantors of the Bank
Credit Facility will also issue senior subordinated
guarantees in favor of the Bridge Notes. In addition, in
the event the Company is not the issuer of the Bridge
Notes, the Company will issue senior subordinated
guarantees in favor of the Bridge Notes.
Registration Rights: The Company will file, and will use its best efforts to
cause to become effective, a "shelf" registration
statement with respect to the Bridge Notes as soon as
practicable after the First Anniversary. The Company
will keep the registration statement for the Bridge
Notes effective until all of the Bridge Notes have been
redeemed. If a "shelf" registration statement for the
Bridge Notes has either (i) not been filed within 60
days after the First Anniversary, or (ii) not been
declared effective 120 days after the First Anniversary,
the Company will pay liquidated damages thereafter of
$.192 per
</TABLE>
3
<PAGE>
<TABLE>
<S> <C>
week per $1,000 principal amount of Bridge
Notes outstanding until such time as such registration
statement has become effective. The Company will also
pay such liquidated damages for any period of time
following the effectiveness of such registration
statement that the registration statement is not
available for resales thereunder. In addition, the
holders of the Bridge Notes will have the right to
"piggy-back" in the registration of any debt securities
which are registered by the Company unless all of the
Bridge Notes will be redeemed from the proceeds of such
securities.
Rollover Fee: On the date of the First Anniversary, the Company shall
pay to DLJ Bridge a cash fee (the "Rollover Fee") in an
amount equal to three percent (3.00%) of the principal
amount of the Bridge Notes outstanding on such date;
provided however, that the portion of such Rollover Fee
set forth below will be creditable against the fees
earned due to DLJSC (and CSFB, to the extent they accept
the Co-Purchase Offer) in connection with the placement
of the Permanent Financing in the event that such
placement occurs during the corresponding period from
the First Anniversary set forth below:
</TABLE>
<TABLE>
<CAPTION>
Period from Amount
First of
Anniversary credit
----------- ----------
<S> <C> <C>
0-89 days 2.50%
90-179 days 2.00%
180-269 days 1.50%
270-359 days 1.00%
360-449 days 0.50%
450 days and thereafter 0.00%
</TABLE>
<TABLE>
<S> <C>
Equity Amount Escrowed: On the Issuance Date, warrants (the "Escrowed Warrants")
representing twenty percent (20%) of the fully-diluted
common stock of the Company will be placed in an escrow
account.
The Escrowed Warrants will be exercisable at a price
equal to $0.01 per share for a period of seven (7)
years from the date such Escrowed Warrants are
released from escrow and will have customary
anti-dilution provisions and demand and "piggy-
back" registration rights.
If the refinancing of 100% of the Bridge Notes is not
completed within the periods following the
First Anniversary set forth in Column A below,
Escrowed Warrants exercisable into the
percentage of the Company's fully-diluted
common stock set forth in Column B shall be released
from escrow to DLJ Bridge and DLJ Bridge shall be
entitled to retain such released Escrowed
Warrants.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
A B
------ ------
<S> <C> <C>
0-90 days 1.0%
91-180 days 1.0%
181-270 days 1.5%
271-360 days 1.5%
361-450 days 2.5%
451-540 days 2.5%
541-630 days 3.0%
631-720 days 3.0%
721 days and thereafter 4.0%
----
20.0%
-----
-----
</TABLE>
<TABLE>
<S> <C>
Any Escrowed Warrants to which DLJ Bridge is not
entitled as set forth above shall be returned to the
Company for cancellation following a determination
thereof.
Escrow: The Escrowed Warrants will be held, undated, in
escrow by Snoga, Inc., an affiliate of DLJ Bridge
or a bank mutually acceptable to DLJ Bridge and
the Company, from the Issuance Date.
Right to Resell Bridge Notes: DLJ Bridge shall have the absolute and unconditional
right to resell Bridge Notes in compliance with
applicable law to any third party. Commencing on the
First Anniversary, the Company shall make available
to DLJ Bridge such of the Escrowed Warrants as are
needed to facilitate the resale of the Bridge Notes
to third parties on a fixed rate basis; provided,
however that DLJ Bridge shall agree that it shall
not retain any such equity provided specifically to
facilitate the resale of the Bridge Notes as set forth
in this provision.
Representations and Warranties: The Securities Purchase Agreement will contain
representations and warranties to DLJ Bridge and
holders of the Bridge Notes which are usual and
customary for transactions of this nature or
required by DLJ Bridge for this Transaction in
particular as to the Credit Group, including
but not limited to: (i) Corporate Existence
and Power; (ii) Authorization, Execution and
Enforceability of Material Agreements; (iii)
Governmental Authorization; (iv) Non-Contravention
of Laws or Material Agreements; (v) Financial
Information; (vi) Litigation; (vii) Taxes; (viii)
Subsidiaries; (ix) Not an Investment Company; (x)
ERISA; (xi) Environmental; (xii) Permits; (xiii)
Leases; (xiv) Full Disclosure; (xv) Capitalization;
(xvi) Solicitation; Access to Information; (xvii)
Absence of Any Undisclosed Liabilities; (xviii)
Historical and Pro Forma Financial Statements;
(xix) No Material Adverse Change; and (xx)
Governmental Regulations.
Covenants: The Securities Purchase Agreement will contain
usual and customary covenants for securities of
this nature including covenants with respect to:
(i) Furnishing of Information; (ii) Use of
Proceeds; (iii) Wholly Owned Subsidiaries; (iv)
Restrictions on Indebtedness; (v) Restrictions
on Dividends and Redemptions and Repayment of
Subordinated Debt or Pari Passu Debt; (vi)
Restrictions on the Sale of Assets; (vii)
Restrictions on Business
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
Activities; (viii) Restrictions on Transactions
with Affiliates; (ix) Restrictions on Merger or
Consolidation; (x) Restrictions on Liens; (xi)
Refinancing of Bridge Notes (including providing
such of the Escrowed Warrants as are needed in
order to facilitate such refinancing); (xii)
Restrictions on Investments and Acquisitions and
(xiii) Additional Covenants which will not
include any financial maintenance covenants or
covenants regarding accelerated buy-back or
sinking fund requirements.
Event of Default: An Event of Default as defined for the Bridge
Notes will include but not be limited to: (i)
the failure of the Company to pay principal on
the Bridge Notes when due; (ii) the failure of
the Company to pay interest or fees on the
Bridge Notes and the continuance of such failure
for 5 days; (iii) the failure of the Credit
Group to comply with any other provision,
condition, covenant, promise, warranty or
representation in the Securities Purchase
Agreement or the Bridge Notes, provided that in
certain cases such failure continues for 30 days
after notice; (iv) a default under any
instrument or instruments governing indebtedness
of any member of the Credit Group when such
default causes such indebtedness to become due
prior to its stated maturity or failure to pay
any such indebtedness at its stated maturity in
an aggregate principal amount exceeding a
threshold amount to be agreed; (v) final
judgments aggregating in excess of a threshold
amount to be agreed rendered against any member
of the Credit Group and not discharged or stayed
within 60 days; (vi) certain events of
bankruptcy, insolvency or reorganization with
respect to any member of the Credit Group ;
(vii) material misrepresentations in the
Securities Purchase Agreement; (viii)
unenforceability of any Guarantee; (ix) certain
ERISA defaults; or (x) Change of Control of the
Company.
In case an Event of Default shall occur
and be continuing, the holders of at least 33
1/3% (a majority where DLJ Bridge, or its
affiliates, hold a majority of the aggregate
principal amount of the Bridge Notes) in
aggregate principal amount of the Bridge Notes
then outstanding, by notice in writing to the
Company and the agent bank under the Bank Credit
Facility (the "Agent Bank") may declare the
principal of and all accrued interest on all
Bridge Notes to be due and payable immediately,
provided that for so long as the Bank Credit
Facility is in effect, such acceleration shall
not become effective until the earlier of (i)
five days after the notice of acceleration is
received or (ii) the date on which the
Designated Senior Debt is accelerated. If an
Event of Default specified in clause (vi)
occurs, the principal of and accrued interest on
the Bridge Notes will be immediately due and
payable without any declaration or other act on
the part of the holders of the Bridge Notes. An
acceleration notice may be annulled and past
defaults (except for monetary defaults not yet
cured) may be waived by the holders of a
majority in aggregate principal amount of the
Bridge Notes. In the event that the Bridge
Notes have accelerated as a result of an
acceleration under the Designated Senior Debt
and such acceleration of Designated Senior Debt
is rescinded within
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
five days, the acceleration under the Bridge
Notes will be automatically rescinded.
If an Event of Default shall occur and for as long as such
Event of Default shall be continuing, DLJ Bridge shall have
the right to appoint one (1) representative to sit on the
Company's Board of Directors provided, however, that such
right shall terminate if DLJ Bridge no longer retains at
least 50% of the outstanding Bridge Notes.
Defeasance Provision: None.
Expiration Date: The obligation of DLJ Bridge to purchase the
Bridge Notes will expire upon the earliest of:
(i) the completion of the Transaction without
the use of the Bridge Notes; (ii) termination of
the Merger Agreement; (iii) the commencement by
the Company of the marketing of any securities
pursuant to the Transaction in which Donaldson,
Lufkin & Jenrette Securities Corporation
("DLJSC") is not sole manger or sole agent, as
the case may be; and (iv) September 30, 1997.
Governing Law: New York.
</TABLE>
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Securities Purchase Agreement
The Commitment of DLJ Bridge to purchase the Bridge Notes will be subject
to the execution of definitive documentation including a definitive securities
purchase agreement (the "Securities Purchase Agreement") which will contain the
terms and conditions set forth herein and such other conditions precedent,
covenants, representations, warranties, events of default and other provisions
are as customary for financings of this kind.
Conditions to Funding: The funding of the Bridge Notes will be subject to
satisfaction of the conditions precedent deemed
appropriate by DLJ Bridge for leveraged financing
generally and for this transaction in particular,
including the following:
(i) The Transaction shall have been
consummated in accordance with the terms of
each of the Tender Offer and the Merger
Agreement and the aggregate payment for the
common stock of the Company shall not have
exceeded $228.0 million. The Merger Agreement
and other documentation (including the Tender
Offer) shall be satisfactory in form and
substance to DLJ Bridge, without any
amendment, modification or waiver of any of
the terms or conditions thereof without the
prior written consent of DLJ Bridge;
(ii) The Company shall have in place the Bank
Credit Facility of which not more than $75.0
million shall be drawn and the covenants and
other terms and conditions of which shall be
satisfactory in all respect to DLJ Bridge.
The Credit Group shall have not more than
$549.2 million of aggregate indebtedness,
which shall include only the following: (i)
not more than $75.0 million borrowed under
the Bank Credit Facility, (ii) not more than
$200.0 million of Bridge Notes, (iii) not
more than $200.0 million of Senior Notes of
Jitney-Jungle existing as of the date hereof
(the "Jitney Senior Notes"), and (iv) capital
lease obligations in an aggregate amount not
exceeding $74.2 million.;
(iii) DLJ Bridge shall have completed its
tax, legal and environmental due diligence
investigations of the Credit Group and the
results of such investigations shall be
satisfactory to DLJ Bridge;
(iv) Receipt of (a) consolidated financial
statements of the Credit Group including
balance sheets and income and cash flow
statements as of the end of and for each of
the last three fiscal years of the Credit
Group (which shall not differ materially from
the information supplied to date to DLJ
Bridge) and its affiliates, audited by
independent public accountants of recognized
national standing and prepared in conformity
with GAAP, together with the report thereon;
(b) unaudited selected financial information
of the Credit Group meeting the requirements
of Item 301 (a) of Regulation S-K for the two
fiscal years immediately preceding the last
three fiscal years of the Credit Group; and
(c) unaudited interim financial statements of
the Credit Group, prepared in the same manner
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<PAGE>
as the historical audited statements for the
most recently ended quarterly period and for
the same quarterly period during the most
recently ended fiscal year;
(v) The corporate, tax, capital and
ownership structure (including articles of
incorporation and by-laws), shareholders
agreements and management of the Company and
its subsidiaries before and after the
Transaction shall be consistant with that
previously disclosed to DLJ Bridge or its
affiliates, and shall not have been modified
other than without the prior written consent
of DLJ Bridge;
(vi) Receipt of a consolidating pro forma
balance sheet of the Credit Group as of the
Closing Date, giving effect to the
Transaction and the transactions contemplated
by the Merger Agreement and the Securities
Purchase Agreement and reflecting estimated
purchase price accounting adjustments,
prepared by independent public accountants of
recognized national standing;
(vii) Satisfactory completion of all loan
documentation and other documentation
relating to the Bridge Notes in form and
substance satisfactory to DLJ Bridge and in
compliance with all applicable laws and
regulations;
(viii) Receipt of all governmental,
regulatory, shareholder and third party
consents (including Hart-Scott-Rodino
clearance) and approvals necessary or
desirable in connection with the Transaction
and the related financings and other
transactions contemplated hereby and
expiration of all applicable waiting periods
without any action being taken by any
competent authority that could restrain,
prevent or impose any materially adverse
conditions on the Transaction or such other
transactions or that could seek or threaten
any of the foregoing, and no law or
regulation shall be applicable which in the
judgment of DLJ Bridge could have any such
effect;
(ix) Absence of any material adverse change
in the business, condition (financial or
otherwise), operations, performance,
properties or prospects of the Credit Group
since the end of the most recently ended
fiscal year for which audited financial
statements have been provided to DLJ Bridge
or in the facts and information as
represented to date;
(x) Absence of any action, suit,
investigation, litigation or proceeding
pending or threatened in any court or before
any arbitrator or governmental
instrumentality that purports to affect the
Transaction or the Bridge Notes or any of the
other transactions contemplated hereby, or
that could have a material adverse effect on
the Transaction or the Bridge Notes or any of
the other transactions contemplated hereby;
(xi) DLJ Bridge shall have received satisfactory
opinions of counsel to the Company as to the
transactions contemplated hereby
9
<PAGE>
(including without limitation the tax
aspects thereof and compliance with all
applicable securities laws), and such
corporate resolutions, certificates and other
documents as DLJ Bridge shall reasonably
request;
(xii) Absence of any Event of Default or
event that, with notice and/or the passage of
time, could become an Event of Default and
accuracy of all representations and
warranties;
(xiii) A letter (the "Engagement Letter")
shall have been executed between the Company
and DLJSC engaging DLJSC as exclusive
investment banker to theCredit Group, for all
purposes until the date on which the Bridge
Notes have been repaid in full;
(xiv) All fees and expenses due to DLJ
Bridge in connection with the purchase of the
Bridge Notes or to DLJSC as set forth in the
Engagement Letter or otherwise shall have
been paid in full;
(xv) Absence of any disruption or adverse
change in the financial or capital markets
generally which could reasonably be expected
to materially adversely affect the purchase
of the Bridge Notes or the refinancings
thereof;
(xiv) DLJ Bridge shall have received
consent from the Bank Credit Facility
lenders, if any, concerning the anticipated
terms and conditions of the Bridge Notes, and
the Permanent Financing including the
application of the proceeds from any such
financing. Such terms will include usual and
customary terms for securities of this type;
(xv) The Company shall have received consent
from the holders of the Jitney Senior Notes
allowing the Company to incur the
indebtedness contemplated by the Transaction
and such consent shall be acceptable to DLJ
Bridge in all respects; and
(xvi) In the event CSFB accepts the
Co-Purchase Offer, CSFB shall have delivered
to DLJ Bridge an irrevocable certificate
stating that the conditions to funding their
Bridge Notes have been satisfied and that
they are prepared to fund their ratable share
of the takedown.
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EXHIBIT A
In consideration of the commitment given by DLJ Bridge Finance, Inc., a
Delaware limited partnership ("DLJ Bridge"), with respect to the Transaction
involving Jitney-Jungle, (the "Indemnifying Party") and Delchamps pursuant to
the Bridge Commitment Letter between Jitney-Jungle and DLJ Bridge of which this
Exhibit is a part (such Bridge Commitment Letter, together with all Exhibits
attached thereto, is referred to herein as the "Commitment"), the Indemnifying
Party agrees to indemnify and hold harmless DLJ Bridge, its affiliates, and each
person, if any, who controls DLJ Bridge, or any of its affiliates, within the
meaning of the Securities Act of 1933, as amended (the "Act") or the Securities
Exchange Act of 1934, as amended (a "Controlling Person"), and the respective
partners, agents, employees, officers and directors of DLJ Bridge, its
affiliates, and any such Controlling Person (each an "Indemnified Party" and
collectively, the "Indemnified Parties" or the "DLJ Bridge Group"), from and
against any and all losses, claims, damages, liabilities and expenses
(including, without limitation and as incurred, reasonable costs of
investigating, preparing or defending any such claim or action, whether or not
DLJ Bridge Group is a party thereto) arising out of, or in connection with any
activities contemplated by, the Commitment or any other services rendered in
connection therewith, including, but not limited to, losses, claims, damages,
liabilities or expenses arising out of or based upon any untrue statement or any
alleged untrue statement of a material fact or any omission or any alleged
omission to state a material fact in any of the disclosure or offering or
confidential information documents (the "Disclosure Documents") pertaining to
any of the transactions or proposed transactions contemplated by the Commitment,
including any eventual resale or refinancing of any Bridge Notes (as defined in
the Commitment), provided that the Indemnifying Party will not be responsible
for any claims, liabilities, losses, damages or expenses that are determined by
final judgment of a court of competent jurisdiction to result solely from DLJ
Bridge Group's gross negligence, willful misconduct or bad faith. The
Indemnifying Party also agrees that DLJ Bridge Group shall have no liability
(except for breach of provisions of the Bridge Commitment Letter for which this
Exhibit A is a part) for claims, liabilities, damages, losses or expenses,
including legal fees, incurred by the Indemnifying Party unless they are
determined by final judgment of a court of competent jurisdiction to result
solely from DLJ Bridge Group's gross negligence, willful misconduct or bad
faith.
In case any action shall be brought against DLJ Bridge Group with respect
to which indemnity may be sought against the Indemnifying Party under this
agreement, DLJ Bridge Group shall promptly notify the Indemnifying Party in
writing and the Indemnifying Party shall, if requested by DLJ Bridge or if the
Indemnifying Party desires to do so, assume the defense thereof, including the
employment of counsel reasonably satisfactory to DLJ Bridge and payment of all
reasonable fees and expenses. The failure to so notify the Indemnifying Party
shall not affect any obligations the Indemnifying Party may have to DLJ Bridge
Group under the Commitment or otherwise unless the Indemnifying Party is
materially adversely affected by such failure. DLJ Bridge Group shall have the
right to employ separate counsel in such action and participate in the defense
thereof, but the fees and expenses of such counsel shall be at the expense of
DLJ Bridge Group, unless: (i) the Indemnifying Party has failed to assume the
defense and employ counsel reasonably satisfactory to DLJ Bridge or (ii) the
named parties to any such action (including any impleaded parties) include DLJ
Bridge Group and the Indemnifying Party, and DLJ Bridge Group shall have been
advised by counsel that there may be one or more legal defenses available to it
which are different from or additional to those available to the Indemnifying
Party, in which case, if such Indemnified Party notifies the Indemnifying Party
in writing that it elects to employ separate counsel at the expense of the
Indemnifying Party, the Indemnifying Party shall not have the right to assume
the defense of such action or proceeding on behalf of such Indemnified Party,
provided, however, that the Indemnifying Party shall not, in connection with any
one such action or proceeding or separate but substantially similar or related
actions or proceedings in the same jurisdiction arising out of the same general
allegations or circumstances, be responsible hereunder for the reasonable fees
and expenses of more than one such firm of separate counsel, in addition to any
local counsel, which counsel shall be designated by DLJ Bridge and reasonably
acceptable to the Indemnifying Party. The Indemnifying Party shall not be
liable for any settlement of any such action effected without the written
consent of the Indemnifying Party (which shall not be unreasonably withheld) and
the Indemnifying Party agrees to indemnify and hold harmless DLJ Bridge Group
from and against any loss or liability by reasons of settlement of any action
effected with the
11
<PAGE>
consent of the Indemnifying Party. In addition, the Indemnifying Party will
not, without the prior written consent of DLJ Bridge, settle or compromise or
consent to the entry of any judgment in or otherwise seek to terminate any
pending or threatened action, claim, suit or proceeding in respect to which
indemnification or contribution may be sought hereunder (whether or not DLJ
Bridge is a party thereto) unless such settlement, compromise, consent or
termination includes an express unconditional release of DLJ Bridge and the
other Indemnified Parties, satisfactory in form and substance to DLJ Bridge,
from all liability arising out of such action, claim, suit or proceeding.
If for any reason the foregoing indemnity is unavailable to an Indemnified
Party or insufficient to hold an Indemnified Party harmless, then in lieu of
indemnifying such Indemnified Party, the Indemnifying Party shall contribute to
the amount paid or payable by such Indemnified Party as a result of such claims,
liabilities, losses, damages, or expenses (i) in such proportion as is
appropriate to reflect the relative benefits received by the Indemnifying Party
on the one hand and by DLJ Bridge on the other from the Transaction contemplated
by the Commitment or (ii) if the allocation provided by clause (i) is not
permitted under applicable law, in such proportion as is appropriate to reflect
not only the relative benefits received by the Indemnifying Party on the one
hand and DLJ Bridge on the other, but also the relative fault of the
Indemnifying Party and DLJ Bridge as well as any other relevant equitable
considerations. Notwithstanding the provisions of this Exhibit A, the aggregate
contribution of all Indemnified Parties shall not exceed the amount of fees
actually received by DLJ Bridge pursuant to the Commitment. It is hereby
further agreed that the relative benefits to the Indemnifying Party on the one
hand and DLJ Bridge on the other with respect to any Transaction shall be deemed
to be in the same proportion as (i) the total value of the Transaction bears to
(ii) the fees paid to DLJ Bridge with respect to such Transaction. The relative
fault of the Indemnifying Party on the one hand and DLJ Bridge on the other with
respect to the Transaction shall be determined by reference to, among other
things, whether any untrue or alleged untrue statement of material fact or the
omission or alleged omission to state a material fact related to information
supplied by the Indemnifying Party or by DLJ Bridge and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. No Indemnified Party shall have any liability to
the Indemnifying Party or any other person in connection with the services
rendered pursuant to the Commitment except for the liability for claims,
liabilities, losses or damages finally determined by a court of competent
jurisdiction to have resulted from action taken or omitted to be taken by such
Indemnified Party in bad faith or to be due to such Indemnified Party's willful
misconduct, or gross negligence. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11 (f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation.
The indemnity, contribution and expense reimbursement obligations set forth
herein (i) shall be in addition to any liability the Indemnifying Party may have
to any Indemnified Party at common law or otherwise, (ii) shall survive the
termination of the Commitment and (iii) shall remain operative and in full force
and effect regardless or any investigation made by or on behalf of the DLJ
Bridge or any other Indemnified Party.
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EXHIBIT B
SUBORDINATION PROVISIONS
Set forth below is substantially the form of subordination provisions for
each of the Subordinated Bridge Notes (the "Notes") which will be set forth in
the Definitive Documents, subject to conforming changes.
(a) Notes Subordinated to Designated Senior Debt. The Issuer for
itself and its successors, and each Holder, by its acceptance of
the Notes, agrees that the payment of the Subordinated
Obligations [to be defined to mean principal and interest
(including post-petition interest as provided below) on the
Subordinated Bridge Notes and any claim for rescission or damages
in respect thereof under any applicable law] by the Issuer is
subordinated, to the extent and in the manner provided in this
Section, to the prior payment of Designated Senior Debt; provided
that the provisions of this Section do not apply to, and the
Notes are not subordinated in respect of, the proceeds of the
Permanent Financing.
This Section will constitute a continuing offer to all persons
who, in reliance upon its provisions, become holders of, or
continue to hold, Designated Senior Debt, and such provisions are
made for the benefit of the holders of Designated Senior Debt,
and such holders are made obligees under this Section and they
and/or each of them may enforce its provisions.
(b) No Payment on Notes in Certain Circumstances.
(i) No payment will be made on account of the Subordinated
Obligations, or to acquire any of the Notes for cash or property
other than capital stock of the Issuer, or on account of the
redemption provisions of the Notes (x) upon the maturity of any
Designated Senior Debt by lapse of time, acceleration or
otherwise, unless and until all such Designated Senior Debt shall
first be paid in full or provided for in cash or cash equivalents
or such payment duly provided for or (y) in the event that the
Issuer defaults in the payment of any principal of or interest on
or any other amounts payable on or due in connection with any
Designated Senior Debt when it becomes due and payable, whether
at maturity or at a date fixed for prepayment or by declaration
or otherwise, unless and until such default has been cured or
waived in writing.
(ii) Upon the happening of any event of default (or if an event of
default would result upon any payment with respect to the
Subordinated Obligations) with respect to any Designated Senior
Debt, as such event of default is defined in the instruments
evidencing such Designated Senior Debt or under which it is
outstanding, permitting the holders to accelerate its maturity
(if the default is other than default in payment of the principal
of or interest on or any other amount due in connection with such
Designated Senior Debt) upon written notice of the event of
default given to the Issuer by the holders of such Designated
Senior Debt, then, unless and until such event of default has
been cured or waived in writing, no payment will be made by the
Issuer with respect to the Subordinated Obligations or to acquire
any of the Notes for cash, property or securities other than
capital stock of the Issuer or with regard to redemption of
Notes; provided that this paragraph (ii) will not prevent the
making of any payment for a period of more than 179 days after
the date the written notice of the default is given unless such
Designated Senior Debt in respect of which such event of default
exists has been declared due and payable in its entirety within
that period, and that declaration has not been rescinded. If
such Designated Senior Debt is not declared due and payable
within 179 days after the written notice
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of the default is given, promptly after the end of the 179 day
period the Issuer will pay all sums not paid during the 179-day
period because of this paragraph (ii) unless paragraph (i) above
is then applicable. During any 360-day consecutive period only
one such period during which payment of principal of, or interest
on, the Notes may not be made may commence and the duration of
such period may not exceed 179 days.
(iii)If any payment or distribution of assets of the Issuer is
received by any Holder in respect of the Subordinated Obligations
at a time when that payment or distribution should not have been
made because of paragraph (i) or (ii), such payment or
distribution will be received and held in trust for and will be
paid over to the holders of Designated Senior Debt which is due
and payable and remains unpaid or unprovided for (pro rata as to
each of such holders on the basis of the respective amounts of
Designated Senior Debt which is due and payable held by them)
until all such Designated Senior Debt has been paid in full or
provided for in cash or cash equivalents, after giving effect to
any concurrent payment or distribution or provision therefor to
the holders of such Designated Senior Debt.
(c) Notes Subordinated to Prior Payment of all Designated Senior Debt on
Dissolution, Liquidation or Reorganization. Upon any distribution of
assets of the Issuer upon any dissolution, winding up, liquidation or
reorganization of the Issuer (whether in bankruptcy, insolvency,
receivership or similar proceeding related to the Issuer or its property or
upon an assignment for the benefit of creditors or otherwise):
(i) the holders of all Designated Senior Debt will first be entitled
to receive payment in full or provision for payment in full in
cash or cash equivalents of the principal of and interest due on
Designated Senior Debt and other amounts due in connection with
Designated Senior Debt (including interest accruing subsequent to
an event specified in Sections _____ [certain bankruptcy events]
and ___________ [winding up] at the rate provided for in the
documents governing such Designated Senior Debt, whether or not
such interest is an allowed claim enforceable against the debtor
in a Bankruptcy case under Title 11 of the United States Code),
before the Holders are entitled to receive any payment on account
of the principal of or interest on the Notes;
(ii) any payment or distribution of assets of the Issuer of any kind
or character, whether in cash, property or securities, to which
the Holders would be entitled except for the provisions of this
Section will be paid by the liquidating trustee or agent or other
person making such a payment or distribution directly to the
holders of Designated Senior Debt or their representatives to the
extent necessary to make payment in full or provision for payment
in full in cash or cash equivalents of all Designated Senior Debt
remaining unpaid, after giving effect to any concurrent payment
or distribution or provision therefor to the holders of such
Designated Senior Debt ; and
(iii)if, notwithstanding the foregoing, any payment or
distribution of assets of the Issuer of any kind or character,
whether in cash, property or securities is received by the
Holders on account of the Subordinated Obligations before all
Designated Senior Debt is paid in full or provided for in cash or
cash equivalents, such payment or distribution will be received
and held in trust for and will be paid over to the holders of the
Designated Senior Debt remaining unpaid or unprovided for or
their representatives for application to the payment of such
Designated Senior Debt until all such Designated Senior Debt has
been paid in full or provided for in cash or cash
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equivalents, after giving effect to any concurrent payment or
distribution or provision therefor to the holders of such
Designated Senior Debt.
The Issuer will give prompt written notice to the Holders of any
dissolution, winding up, liquidation or reorganization of it or
any assignment for the benefit of its creditors and of any event
of default in respect of Designated Senior Debt.
(d) For purposes of this Section, the words "cash, property or securities"
shall not be deemed to include (x) shares of capital stock of the Issuer as
reorganized or readjusted, (y) securities of the Issuer or any other
corporation provided for by a plan of reorganization or readjustment which
are subordinated, to at least the same extent as the Notes, to the payment
of all Designated Senior Debt then outstanding or (z) any payment or
distribution of securities of the Issuer or any other corporation
authorized by an order or decree giving effect, and stating in such order
or decree that effect has been given, to subordination of the Notes to
Designated Senior Debt and made by a court of competent jurisdiction in a
reorganization proceeding under any applicable bankruptcy, insolvency or
similar law. For purposes of this Section, "payment on the account of the
Subordinated Obligations" shall not include the Warrants, any shares issued
upon exercise of the Warrants or any sale or transfer of any of the
foregoing.
(e) Holders to be Subrogated to Rights of Holders of Designated Senior
Debt. Following the payment in full or provision for payment in full of
all Designated Senior Debt, the Holders will be subrogated to the rights of
the holders of Designated Senior Debt to receive payments or distributions
of assets of the Issuer applicable to the Designated Senior Debt until all
amounts owing on the Notes have been paid in full, and for the purpose of
such subrogation no such payments or distributions to the holders of
Designated Senior Debt by or on behalf of the Issuer or by or on behalf of
the Holders by virtue of this Section which otherwise would have been made
to the Holders will, as between the Issuer and the Holders, be deemed to be
payment by the Issuer to or on account of the Designated Senior Debt, it
being understood that the provisions of this Section are and are intended
solely for the purpose of defining the relative rights of the Holders, on
the one hand, and the holders of Designated Senior Debt, on the other hand.
(f) Obligations of the Issuer Unconditional. Nothing contained in this
Section or elsewhere in the Notes is intended to or will impair, as between
the Issuer and the Holders, the obligations of the Issuer, which are
absolute and unconditional, to pay to the Holders the Subordinated
Obligations as and when they become due and payable in accordance with
their terms, or is intended to or will affect the relative rights of the
Holders and creditors of the Issuer other than the holders of the
Designated Senior Debt, nor will anything herein or therein prevent any
Holder from exercising all remedies otherwise permitted by applicable law
upon default under this Note, subject to the rights if any, under this
Section of the holders of Designated Senior Debt in respect of cash,
property or securities of the Issuer received upon the exercise of any such
remedy.
(g) Subordination Rights not Impaired by Acts or Omissions of the Issuer
or Holders of Designated Senior Debt. No right of any present or future
holders of any Designated Senior Debt to enforce subordination as provided
herein will be any time in any way be prejudiced or impaired by any act or
failure to act on the part of the Issuer or by any act or failure to act by
any such holder, or by any noncompliance by the Issuer with the terms of
this Note, regardless of any knowledge thereof which any such holder may
have or otherwise be charged with. The holders of Designated Senior Debt
may extend, renew, modify or amend the terms of the Designated Senior Debt
or any security therefor and release, sell or exchange such security and
otherwise deal freely with the Issuer, all without affecting the
liabilities and obligations of the parties to the document or the Holders.
No amendment to
3
<PAGE>
these provisions will be effective against the holders of
the Designated Senior Debt who have not consented thereto in writing.
(h) Not to Prevent Events of Default. The failure to make a payment on
account of the Subordinated Obligations by reason of any provision of
this Section will not be construed as preventing the occurrence of an
Event of Default.
4
<PAGE>
[Letterhead]
July 14, 1997
Jitney-Jungle Stores of America, Inc.
1770 Ellis Avenue
Suite 200
Jackson, Mississippi, 39204
Attention: Mr. Michael E. Julian
President & Chief Executive Officer
Gentlemen:
This will confirm our agreement to modify the second paragraph of the
letter agreement between us dated July 3, 1997 to read as set forth below.
"We understand that the total cash proceeds required to consummate the
Transaction are approximately $281.4 million and that such funds will be
provided as follows: (i) borrowings by the Company of approximately $75.0
million under a $150.0 million senior secured financing (the "Bank Credit
Facility") consisting of a six and one half-year amortizing revolving credit
facility; (ii) the issuance by the Company, for cash, of up to $200.0 million
of senior subordinated increasing rate notes (the "Bridge Notes"); and (iii)
approximately $6.4 million of available cash."
Please indicate your agreement to the foregoing by executing this
document.
Sincerely,
DLJ Bridge Finance, Inc.
/s/ Paul Thompson III
-------------------------
By: Paul Thompson III
Title: Chief Operating Officer
Accepted and Agreed to this
July 3, 1997
Jitney-Jungle Stores of America, Inc.
/s/ Michael Julian
- -------------------------------------
By: Michael Julian
Title: President and Chief Executive Officer
<PAGE>
July 7, 1997
Jitney-Jungle Stores of America, Inc.
1770 Ellis Avenue
Suite 200
Jackson, MS 39204
Attention: Mr. Michael E. Julian
President and Chief Executive Officer
Dear Michael:
Based on our discussions concerning the proposed acquisition (the
"Acquisition") by Jitney-Jungle Stores of America, Inc. ("Jitney") of Delchamps,
Inc. (the "Target" or the "Company"), Fleet Capital Corporation ("Fleet") is
pleased to provide you with financing commitments for, and its agreement to act
as administrative and collateral agent (the "Administrative Agent") in
connection with,$150,000,000 of Senior Facilities (as hereinafter defined)
described in this letter and in the attached summary of terms and conditions
(the "Annex" and, together with this letter, the "Commitment Letter"), and its
undertaking to syndicate (in such capacity, the "Arranger") the Senior
Facilities to the Lenders (as defined under the section "Lenders" in the Annex).
As Fleet presently understands the transaction, Jitney will enter into
a merger agreement (the "Merger Agreement") with Target. Jitney will form a
single purpose wholly owned subsidiary ("Newco") and, pursuant to the Merger
Agreement, Newco will commence a cash tender offer (the "Tender Offer") for all
outstanding shares of stock of Target. As soon as practicable following the
purchase of stock pursuant to the Tender Offer, pursuant to the Merger
Agreement, Newco will be merged with and into Target (the "Merger"). The
aggregate consideration per share paid pursuant to the Tender Offer and the
Merger shall not exceed $30 and the purchase price for all outstanding shares of
stock on a fully diluted basis shall not exceed $228,000,000. In connection
with the Acquisition, approximately $34,400,000 of Target's debt will be
refinanced and Jitney and Target will incur costs and expenses as described in
the projections provided to Fleet not to exceed $45,300,000. The Acquisition,
the Merger, the costs and expenses and the financings contemplated in connection
therewith are collectively referred to as the "Transaction."
<PAGE>
You have asked Fleet to provide you with commitments for senior
secured debt facilities aggregating $150,000,000 (the "Senior Facilities")
required in connection with the Transaction and to provide working capital for
Jitney and its subsidiaries (including Target following consummation of the
Acquisition), consisting of a six and one-half year amortizing revolving credit
facility in the amount of $150,000,000 (the "Revolving Credit Facility"), with a
$30,000,000 sublimit for the issuance of standby and trade letters of credit.
To finance the Acquisition, to pay fees and expenses incurred in
connection with the Transaction and to refinance existing debt of Target and
existing senior secured debt of Jitney, we understand that (a) immediately prior
to or concurrently with the closing of the Senior Facilities Jitney will receive
$200,000,000 in gross proceeds from its issuance of $200,000,000 fixed rate
senior subordinated debt securities (the "Subordinated Debt") requiring
amortization no earlier than six months following the scheduled final maturity
of the Senior Facilities in the event the Subordinated Debt is issued as a
bridge loan, and otherwise (including under any facility that refinances any
such bridge loan) no earlier than the maturity of Jitney's existing senior
unsecured notes and bearing interest (cash) in any year during which any portion
of the Senior Facilities is scheduled to remain outstanding at an aggregate rate
per annum not to exceed in the event the Subordinated Debt is issued as a bridge
loan, the rates set forth in the draft term sheet previously submitted to Fleet,
and otherwise (including under any facility that refinances any such bridge
loan) 15% and (b) the Lenders will provide up to $115,000,000 under the Senior
Facilities.
Subject to the satisfaction of the conditions contained in this
Commitment Letter and your acceptance hereof, Fleet commits to lend the entire
amount of the Senior Facilities, on the terms and conditions referred to in this
Commitment Letter, and undertakes in its capacity as the Arranger to arrange a
syndicate of lenders to act as Lenders under the Senior Facilities.
Please note, however, that the terms and conditions of this commitment
and undertaking are not limited to those set forth in this Commitment Letter.
Those matters that are not covered or made clear herein or in the attached Annex
are subject to mutual agreement of the parties. The terms and conditions of
this commitment and undertaking may be modified only in writing. In addition,
this commitment and undertaking is subject to: (a) the preparation, execution
and delivery of mutually acceptable loan documentation, including a credit
agreement incorporating substantially the terms and conditions outlined herein
and in the Annex, (b) the absence of (i) a material adverse change in the
business, condition (financial or otherwise), operations, performance,
properties or prospects of Jitney and its subsidiaries taken as a whole since
May 3, 1997, or Target and its subsidiaries taken as a whole since March 29,
1997, and
2
<PAGE>
(ii) the absence of any material disruption of or material adverse
change in current financial, banking or capital market conditions that, in the
good faith judgment of Fleet, could materially impair the satisfactory
syndication of the Senior Facilities, (c) the material accuracy and completeness
of all representations that you make to us and all information that you furnish
to us in connection with this commitment and undertaking and your compliance
with the terms of this Commitment Letter, (d) no development or change occurring
after the date hereof, and no information becoming known after the date hereof,
that (i) results in or could reasonably be expected to result in a material
change in, or material deviation from, the Pre-Commitment Information (as
hereinafter defined), including, without limitation, a material change in the
terms of the Transaction or any part thereof that is or could reasonably be
expected to be adverse: to Jitney and its subsidiaries taken as a whole or to
Target and its subsidiaries taken as a whole or to the Administrative Agent or
the Lenders; or in the legal, tax, accounting or financial aspects of the
Transaction or any part thereof; or to the post-Transaction corporate or capital
structure of Jitney and its subsidiaries contemplated in this Commitment Letter
and in the Pre-Commitment Information, or (ii) has had or could reasonably be
expected to have a Material Adverse Effect (as defined under the section
"Conditions Precedent to Initial Extension of Credit" in the Annex) and (e) a
closing of the Tender Offer on or before September 30, 1997 and the Merger on or
before the six month anniversary of the closing of the Tender Offer.
Fleet's commitment and undertaking set forth in this Commitment Letter
may also be terminated upon written notice by Fleet if any event occurs or any
information becomes available that, in its judgment, results or is reasonably
likely to result in the failure to satisfy on a timely basis any condition set
forth in the immediately preceding paragraph.
Fleet's agreement herein is to provide the entire amount of the Senior
Facilities on a fully underwritten basis. Fleet, however, reserves the right,
in its capacity as the Arranger, to syndicate the Senior Facilities to
additional Lenders with a corresponding reduction in Fleet's commitment
hereunder. The Arranger will manage all aspects of the syndication in
consultation with you, including the timing of all offers to potential Lenders
and the acceptance of commitments, the amounts offered and the compensation
provided. By acceptance of this Commitment Letter, you agree to take all
actions that the Arranger may reasonably request to assist it in forming a
syndicate acceptable to it and you. Your assistance in forming such a syndicate
shall include but not be limited to: (a) making your senior management and
representatives and senior management and representatives of the Company and its
subsidiaries available to participate in information meetings with potential
Lenders at such times and places as the Arranger may reasonably request; (b)
using your best efforts to ensure that the syndication efforts of the Arranger
benefit from your lending relationships and those of the Target; and
3
<PAGE>
(c) providing the Arranger with all information reasonably deemed necessary by
it to complete a successful syndication.
To ensure an orderly and effective syndication of the Senior
Facilities, you agree that until the termination of the syndication (as
evidenced by written notification received by you from the Arranger), you will
not, and will not permit any of your affiliates to, syndicate or issue, attempt
to syndicate or issue, announce or authorize the announcement of the syndication
or issuance of, or engage in discussions concerning the syndication or issuance
of, any debt facility or debt security of Jitney or any of its subsidiaries
(including any renewals thereof), without the prior written consent of the
Arranger, other than the issuance and sale of the Subordinated Debt and the
consent solicitation with respect to Jitney's existing $200,000,000 principal
amount of senior unsecured notes.
You agree that Fleet will act as the sole administrative and
collateral agent for the Senior Facilities and as the sole arranger for the
Senior Facilities and that no additional agents, co-agents or arrangers will be
appointed, or other titles conferred, without the prior consent of Fleet. You
agree that no Lender will receive any compensation of any kind for its
participation in the Senior Facilities, except as expressly provided for in the
Fee Letter or in the Annex; provided that Fleet acknowledges it is Fleet's
intention to invite participation in the Senior Facilities from both CS First
Boston and DLJ Capital Funding, Inc., with tier 1 titles as documentation agents
and with commitment amounts to be mutually agreeable to you and Fleet.
In addition to the fees described in the Annex, you hereby confirm
your agreement to pay Fleet when due the nonrefundable fees for the Senior
Facilities (the "Agreed Fees") set forth in the Fee Letter.
You agree to indemnify and hold harmless Fleet, individually and in
its capacity as the Administrative Agent and the Arranger, each Lender and each
of their affiliates and their officers, directors, employees, agents, advisors
and other representatives (each an "Indemnified Party") from and against any and
all claims, damages, losses, liabilities and expenses (including, without
limitation, reasonable fees and expenses of counsel) that may be incurred by or
asserted or awarded against any Indemnified Party, in each case arising out of
or in connection with or by reason of, or in connection with the preparation for
a defense of, any investigation, litigation or proceeding arising out of,
related to or in connection with (a) the Transaction or any similar transaction
and any of the other transactions contemplated hereby and thereby, (b) any
acquisition or proposed acquisition or similar business combination or proposed
business combination by you or any of your subsidiaries or affiliates of all or
any portion of the shares of
4
<PAGE>
capital stock or substantially all of the assets of the Target or any of its
subsidiaries or (c) the Senior Facilities and any other financings, or any
use made or proposed to be made with the proceeds thereof, in each case
whether or not such investigation, litigation, or proceeding is brought by
you, your shareholders or creditors or an Indemnified Party or an Indemnified
Party is otherwise a party thereto and whether or not the Transaction is
consummated, except to the extent such claim, damage, loss, liability or
expense is found in a final, nonappealable judgment by a court of competent
jurisdiction to have resulted from such Indemnified Party's gross negligence
or willful misconduct. You also agree that no Indemnified Party shall have
any liability (whether direct or indirect, in contract or tort or otherwise)
to you or your subsidiaries or affiliates or to your or their respective
security holders or creditors arising out of, related to or in connection
with the Transaction, except for actual and direct damages, as opposed to
consequential, special, exemplary, indirect, punitive or other damages,
determined in a final nonappealable judgment by a court of competent
jurisdiction to have resulted from such Indemnified Party's gross negligence
or willful misconduct.
In further consideration of the commitment and undertaking of Fleet
hereunder, and recognizing that in connection herewith Fleet is incurring
substantial costs and expenses, including, without limitation, fees and expenses
of counsel and due diligence, syndication (including printing, distribution and
bank meetings), transportation, computer, duplication, appraisal, audit,
insurance, consultant, search, filing and recording fees, you agree to pay, from
time to time upon request, such costs and expenses (whether incurred before or
after the date hereof), regardless of whether the Transaction (or any part
thereof) is consummated or any loan documentation is entered into. You also
agree to pay all costs and expenses of Fleet (including, without limitation,
fees and expenses of counsel) incurred in connection with the enforcement of
this Commitment Letter and the Fee Letter. Fleet will endeavor to notify you
when in its good faith judgment expenses (other than legal fees) exceed $50,000.
You may from time to time request from Fleet a good faith estimate of expenses
incurred to any date.
You should be aware that Fleet or one or more of its affiliates may be
providing financing or other services to parties whose interests may conflict
with yours. However, be assured that, consistent with Fleet's longstanding
policy to hold in confidence the affairs of its customers, neither Fleet nor any
of its affiliates will furnish confidential information obtained from you to any
of its other customers. By the same token, Fleet and its affiliates will not
make available to you confidential information that they have obtained or may
obtain from any other customer.
5
<PAGE>
You agree that this Commitment Letter and the Fee Letter are for your
confidential use only and neither their existence nor the terms hereof or
thereof will be disclosed by you to any person or entity other than your
officers, directors, accountants, attorneys and other advisors, and then only on
a "need to know" basis in connection with the Transaction and on a confidential
basis, except that, following your return of an executed counterpart hereof to
Fleet, you may (a) make public disclosure of the existence and amount of Fleet's
commitment and undertaking under this Commitment Letter, (b) file a copy of this
Commitment Letter in any public record in which it is required by law to be
filed, (c) provide a copy of this Commitment Letter on a confidential basis to
the Target and its officers, directors, accountants, attorneys and other
advisors and (d) make such other public disclosures of the terms and conditions
of this Commitment Letter as you are required by law, in the opinion of your
counsel, to make. You agree that you will permit Fleet to review and approve
any reference to Fleet or any of its affiliates or to any other agent or
arranger under the Senior Facilities contained in any press release or similar
public disclosure prior to public release.
Your obligations under this Commitment Letter and the Fee Letter with
respect to fees, indemnification, costs and expenses and confidentiality shall
survive the expiration or termination of this Commitment Letter.
You represent and warrant that (a) all written information that has
been or will hereafter be made available by you or on your behalf or by any of
your representatives in connection with the Transaction and the other
transactions contemplated hereby to Fleet or any of its affiliates or
representatives or to any Lender or any potential Lender is and will be, taken
as a whole, complete and correct in all material respects and does not and will
not contain any untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements contained therein not misleading
in light of the circumstances under which such statements were or are made and
(b) all financial projections, if any, that have been or will be prepared by you
or on your behalf or by any of your representatives and made available to Fleet
or any of its affiliates or representatives or to any Lender or any potential
Lender in connection with the Transaction and the other transactions
contemplated hereby have been or will be prepared in good faith based upon
reasonable assumptions (it being understood that such projections are subject to
significant uncertainties and contingencies, many of which are beyond your
control, and that no assurance can be given that any particular projections will
be realized). You agree to supplement the information and projections from time
to time so that the representations and warranties contained in this paragraph
remain complete and correct.
6
<PAGE>
In issuing this commitment and undertaking, Fleet is relying on the
accuracy of the information furnished to it by or on behalf of you or any of
your subsidiaries or by or on behalf of the Target or any of its subsidiaries
(collectively, the "Pre-Commitment Information"). The business and financial
terms set forth in this Commitment Letter have been established based on the
Pre-Commitment Information.
The obligations of Fleet under this Commitment Letter and of any
Lender that issues a commitment for the Senior Facilities are made solely for
your benefit and may not be relied upon or enforced by any other person or
entity.
This Commitment Letter shall be governed by, and construed in
accordance with, the laws of the State of New York.
This Commitment Letter may be executed in any number of counterparts,
each of which when so executed shall be deemed to be an original and all of
which, taken together, shall constitute one and the same Commitment Letter.
Delivery of an executed counterpart of this Commitment Letter by telecopier
shall be effective as delivery of a manually executed counterpart of this
Commitment Letter.
Each of you and Fleet hereby irrevocably waives all right to trial by
jury in any action, proceeding or counterclaim (whether based on contract, tort
or otherwise) arising out of or relating to this Commitment Letter, the
transactions contemplated hereby or the actions of Fleet in the negotiation,
performance or enforcement hereof.
Please evidence your acceptance of the provisions of this Commitment
Letter (including, without limitation, the attached Annex) and the other
transactions referred to above
7
<PAGE>
by signing the enclosed copy of this Commitment Letter and returning it to
the undersigned together with the accepted Fee Letter at or before 9:00 P.M.
(New York City time) on July 8, 1997, the time at which Fleet's commitments
and undertaking set forth above (if not so accepted prior thereto) will
expire.
Very truly yours,
FLEET CAPITAL CORPORATION
By /s/ Patrick R. Brocker
----------------------------------
Name: Patrick R. Brocker
Title: Senior Vice President
ACCEPTED this ___ day of
July, 1997
JITNEY-JUNGLE STORES OF
AMERICA, INC.
By: /s/ Michael E. Julian
----------------------------
Name: Michael E. Julian
Title: President
8
<PAGE>
JITNEY-JUNGLE STORES OF AMERICA, INC.
Summary of Terms and Conditions
(Capitalized terms used herein and not otherwise defined shall
have the meanings assigned to them in the attached Commitment Letter.)
Borrowers: Jitney-Jungle Stores of America, Inc. and certain of
its subsidiaries (including Target), as determined by
Agent and Jitney.
Guarantors: All of the existing and future direct and indirect
subsidiaries of Jitney.
Administrative Agent
and Arranger: Fleet Capital Corp. (individually, "Fleet").
Lenders: Fleet, and other banks, financial institutions and
institutional lenders acceptable to Fleet and Jitney
(the acceptance by Jitney not to be unreasonably
withheld or delayed). Prior to receipt of
written notice from Fleet that the syndication
of the Senior Facilities has been completed, no
Lender may assign any part of its share thereof
to any other potential Lender. Following
receipt of the notice referred to in the
immediately preceding sentence, each Lender may
assign all or any part of its share thereof to
one or more other banks, financial institutions
and institutional lenders that are Eligible
Assignees (to be defined in the loan
documentation) and, upon such assignment, such
banks, financial institutions or institutional
lenders, as the case may be, shall become
Lenders for all purposes under the loan
documentation.
Senior Facilities: Up to $150,000,000 at any time outstanding as a six and
one-half year amortizing Senior Secured Revolving
Credit facility (the "Revolving Credit Facility"),
with a $30,000,000 sublimit for standby and trade
letters of credit.
The maximum amount available to the Borrowers under
the Revolving Credit Facility and the Supplemental
Availability will be reduced in equal quarterly
installments during each year following the Closing
Date ("Year 1", "Year 2," etc.) as follows:
Year 1 $0
Year 2 $5 million
<PAGE>
Year 3 $7 million
Year 4 $8 million
Year 5 $9 million
Year 6 $11 million
First quarter
Year 7 $6.5 million
Second quarter
Year 7 $6.5 million
Letters of Credit: The expiration date of any trade Letter of Credit
shall be not more than 180 days after the date of
issuance thereof, the expiration date of any standby
Letter of Credit shall be not more than one year
after the date of issuance thereof (although any
such Letter of Credit may be renewable for an
additional one-year period on terms to be set forth
in the loan documentation) and the expiration date
of any Letter of Credit shall not occur on or after
the final maturity date of the Revolving Credit
Facility.
Purpose: To (i) refinance indebtedness under the existing credit
agreement by and among Jitney and certain of its
subsidiaries, Fleet Bank, N.A. (as successor to
NatWest Bank N.A.) as Agent and the lenders party
thereto (the "Existing Credit Agreement"), (ii)
finance in part the Transaction and to pay fees and
expenses incurred in connection therewith, (iii)
refinance indebtedness of Target in an amount
approximating $34,400,000 and (iv) to provide
working capital from time to time for Jitney and its
subsidiaries.
Closing Date: On or before September 30, 1997.
Termination Date: Six and one-half years following the Closing Date.
Security: The Borrowers and each of the Guarantors shall grant
the Administrative Agent and the Lenders a valid and
perfected first priority (subject to certain
exceptions to be set forth in the loan documentation)
lien and security interest in all of the following:
(a) All shares of capital stock of each of Jitney's
present and future subsidiaries.
2
<PAGE>
(b) All other present and future property and assets,
wherever located, real and personal, of such
Borrower or such Guarantor, including, but not
limited to, machinery and equipment, inventory
and other goods, accounts receivable, owned real
estate, leaseholds, fixtures, bank accounts,
general intangibles, license rights, patents,
trademarks, tradenames, copyrights, chattel paper,
instruments, insurance proceeds, contract rights,
hedge agreements, documents, instruments,
indemnification rights, tax refunds and
cash; provided that with respect to leased retail
facilities of such Borrower or such Guarantor,
leasehold mortgages will only be required on such
stores which in the Administrative Agent's
reasonable judgment generate significant revenue,
and Borrowers and Guarantors will have 90 days
from the Closing Date to provide such leasehold
mortgages.
(c) All proceeds and products of the property and
assets described in clauses (a) and (b) above.
The priority of the lien and security interest of
the Administrative Agent and the Lenders shall be
supported by such landlord and mortgagee waivers,
warehousemen and bailee letters, bank consent
agreements, third party consents, intercreditor
agreements and other agreements as shall be
requested by the Administrative Agent, in each case
in form and substance satisfactory to the
Administrative Agent.
Availability: In multiple drawings from time to time at the time of
and following the consummation of the Transaction.
Each borrowing under the Revolving Credit Facility,
subject to a swing line to be incorporated into the
final loan documentation, shall be an amount of
$1,000,000 or an integral multiple of $100,000 in
excess thereof, and in each case shall be made on
not less than one business day's notice in the case
of Prime Rate advances and on not less than three
business day's notice in the case of Eurodollar Rate
advances.
Availability under the Revolving Credit Facility to
each Borrower shall be subject to a borrowing base
comprised of the following:
Advances to any Borrower up to 65% of eligible
inventory of such Borrower plus, for all Borrowers
in the aggregate an amount equal to the Supplemental
Availability. The maximum Supplemental
3
<PAGE>
Availability shall be an amount equal to $53,000,000
and the Supplemental Availability shall amortize as
set forth above under the description of Senior
Facilities.
Eligibility will be defined in the loan
documentation. Eligible inventory of Jitney and its
subsidiaries (including Target and its subsidiaries)
shall be defined as set forth in the Existing Credit
Agreement. Eligible Inventory of Target and its
subsidiaries shall be determined initially based
upon a collateral audit conducted by Fleet.
Amortization/
Repayment of
Senior Facilities: As set forth under the description of Senior
Facilities.
Mandatory
Prepayment
and Commitment
Reduction: All net cash proceeds (a) from sales of property and
assets of Jitney and its subsidiaries (excluding
sales of inventory in the ordinary course of
business and excluding sales of obsolete and other
equipment (and certain retail store and wholesale
operations properties previously identified to the
Administrative Agent) not to exceed an amount to be
agreed upon in the aggregate until the Termination
Date; provided that an amount equal to the net cash
proceeds received from each such sale of equipment
and other properties is reinvested as a capital
expenditure within 12 months from receipt), (b) of
Extraordinary Receipts (to be defined in the loan
documentation and to exclude cash receipts in the
ordinary course of business) of Jitney and its
subsidiaries and (c) from the issuance of debt or
equity of Jitney and its subsidiaries otherwise
permitted under the loan documentation.
The lesser of (a) 50% of annual Excess Cash Flow (to
be defined in the loan documentation) of Jitney and
its subsidiaries on a consolidated basis and (b)
$7,000,000, except to the extent that the ratio of
Indebtedness to EBITDA (such terms to be defined in
the loan documentation) for the subject year is at
or below 3.5 to 1.0, in which event no Excess Cash
Flow prepayment shall be required.
All of the foregoing mandatory prepayments shall be
applied to the Senior Facilities, shall permanently
reduce the commitment under the Revolving Credit
Facility and shall reduce the Supplemental
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<PAGE>
Availability pro rata with respect to the remaining
amortization schedule.
Interest Rates and
Interest Periods: At the Borrower's option, any advance made to it will
be available at the rates and for the Interest Periods
stated below:
(a) Prime Rate - a fluctuating rate equal to (i)
Fleet's "Prime Rate" (360 day basis) plus (ii)
the Applicable Margin (as hereinafter defined).
Fleet's "Prime Rate" is a fluctuating
interest rate equal to the higher from time to
time of (A) the rate of interest announced
publicly by Fleet in Boston, Massachusetts, as
its prime rate and (B) a rate equal to 1/2 of
1% per annum above the weighted average of the
rates on overnight federal funds transactions
with members of the Federal Reserve System
arranged by federal funds brokers, as
determined for any day by Fleet.
Interest based on the Prime Rate shall be
payable monthly in arrears.
(b) Eurodollar Rate - a periodic fixed rate equal to
---------------
(i) LIBOR (360 day basis) plus (ii) the
Applicable Margin. LIBOR is the average rate
per annum (rounded upward to the nearest of
1/16 of 1%) at which deposits in U.S. dollars
as offered by Fleet to prime banks in the
London interbank market at 11:00 A.M. (London
time) two business days before the first day of
the applicable Interest Period and in amounts
substantially equal to the Eurodollar Rate
advance to be made by Fleet as part of the
applicable borrowing and with a maturity equal
to such Interest Period, adjusted for reserve
requirements.
Interest Periods for Eurodollar Rate borrowings
shall be one, two, three or six months, as selected
by the Borrower. Interest based on the Eurodollar
Rate shall be payable in arrears on the earlier of
(A) the last day of the applicable Interest Period
and (B) quarterly.
The "Applicable Margin" means, at any time and from
time to time prior to Jitney's fiscal quarter ending
on or about January 31, 1998 (the "Initial Test
Date"), with respect to the Revolving Credit
Facility, 0.75% per annum for Prime Rate borrowings
and 2.00% per annum for Eurodollar Rate borrowings.
After the Initial Test Date, the Applicable Margin
for the Revolving Credit Facility will
5
<PAGE>
be adjusted on a fiscal quarterly basis as set forth
in the loan documentation in accordance with Schedule
A hereto.
During the continuance of any default under the loan
documentation, the Applicable Margin on all
obligations owing under the loan documentation and
the letter of credit fees shall increase by 2% per
annum.
Unused
Commitment Fee: 0.425% per annum on the unused portion of each
Lender's share of the Senior Facilities from the
Closing Date until the Initial Test Date and
adjusted thereafter on a fiscal quarterly basis as
set forth in the loan documentation in accordance
with Schedule A, payable quarterly in arrears and on
the date of the termination or expiration of the
commitments.
Letter of Credit Fees: Fees for letters of credit issued as part of the
Revolving Credit Facility (each a "Letter of Credit")
shall be determined based on margins comparable to the
Applicable Margin for Eurodollar Rate borrowings under
the Revolving Credit Facility and shall be payable on
the average daily outstanding undrawn amount of all
Letters of Credit. A separate fee of 0.25% shall be
payable to the fronting bank for the Letters of Credit,
payable on the date of issuance thereof.
Agent's Fees: As set forth in the Fee Letter.
Conditions Precedent
to Initial Extension
of Credit: Those customarily found in credit agreements for
similar secured financings and others appropriate in
the judgment of Fleet for the Transaction, including,
without limitation, the following:
(a) (i) The Boards of Directors of the Target and
Jitney shall have approved the Acquisition, (ii)
the Target, Jitney and Newco shall have entered
into the Merger Agreement which agreement shall be
in form, scope and substance reasonably
satisfactory to the Administrative Agent, and the
Merger Agreement shall have been approved by the
Boards of Directors of Target, Newco and Jitney,
(iii) in the judgment of the Agent and its
counsel, there shall be no material restriction
under any applicable law on (x) the ability of the
Target, Newco or Jitney to authorize, approve or
consummate the Merger or (y) the ability of Newco
to
6
<PAGE>
vote shares of capital stock of the Target held
by Newco (including those acquired under the
Tender Offer) in favor of the Merger and to have
such votes included among those necessary for
approval of the Merger, (iv) (x) the Board of
Directors of the Target shall have waived or
redeemed all of the Target's common stock purchase
rights, if any, or other "poison pill" at a price
not to exceed an amount to be agreed upon between
Jitney and Fleet or (y) such common stock purchase
rights or other poison pills shall be made
inapplicable to the Tender Offer and the Merger in
a manner satisfactory in all respects to Fleet,
and (v) neither the Tender Offer nor the Merger
shall be subject to the provisions of any
applicable state antitakeover law.
(b) Newco shall have acquired and shall hold the
unrestricted right to vote that number of the
fully diluted shares of capital stock of Target
necessary under applicable law for approval of the
Merger by the Target's shareholders, free and
clear of any lien, charge or encumbrance, other
than the security interests securing the Senior
Facilities created under the loan documentation
(to the extent permitted under applicable law).
(c) The Agent shall have received and been reasonably
satisfied with the offer to purchase and all
related materials pursuant to which the Tender
Offer is made (collectively, the "Offering
Materials"), and the Offering Materials shall
provide in any event, among other things, for the
purchase for cash of any and all shares of common
stock of Target up to $30 per share, and the
Tender Offer made thereunder shall have closed,
without waiver, amendment or modification, except
with the prior written consent of Fleet.
(d) The final terms and conditions of the Transaction
(including, without limitation, the terms and
conditions of the Merger Agreement), including,
without limitation, all legal and tax aspects
thereof, (i) shall be as described herein and
otherwise consistent in all material respects with
the description thereof received in writing as
part of the Pre-Commitment Information and (ii)
shall be otherwise satisfactory to the Lenders;
and all documentation relating to the Transaction
shall be in form and substance reasonably
satisfactory to the Lenders. The Transaction
shall have been consummated on the Closing Date
(except
7
<PAGE>
for the Merger which shall be required to
be effected on or prior to the six month
anniversary of the Closing Date) in accordance
with the documentation previously reviewed by and
satisfactory to the Lenders, without any waiver or
amendment of any term or condition therein not
consented to by the Lenders and in compliance with
all applicable laws and all necessary approvals.
(e) All documentation relating to the Senior
Facilities, including a credit agreement
incorporating substantially the terms and
conditions outlined herein, shall be in form and
substance satisfactory to the Lenders.
(f) The Lenders shall be reasonably satisfied with the
corporate, legal and capital structure of each
Borrower and each of the Guarantors, including,
without limitation, the charter and bylaws of each
Borrower and each such Guarantor and each
agreement or instrument relating thereto.
(g) After giving effect to the consummation of the
Acquisition, the Lenders shall have a valid and
perfected first priority (subject to certain
exceptions to be set forth in the loan
documentation) lien and security interest in all
capital stock of Target held by Jitney or any of
its affiliates and in the other collateral
referred to under the section "Security" above;
all filings, recordations and searches necessary
or desirable in connection with such liens and
security interests shall have been duly made; and
all filing and recording fees and taxes shall have
been duly paid.
(h) There shall have occurred no material adverse
change in the business, condition (financial or
otherwise), operations, performance, properties or
prospects (i) of Jitney and its subsidiaries,
taken as a whole, since May 3, 1997 or Target and
its subsidiaries, taken as a whole, since March
29, 1997 or (ii) of Jitney and its subsidiaries,
taken as a whole, or Target and its subsidiaries,
taken as a whole, from that described in the
Pre-Commitment Information.
(i) There shall exist no action, suit, investigation,
litigation or proceeding pending or threatened in
any court or before any arbitrator or governmental
or regulatory agency or authority that (i) could
reasonably be expected to (A) have a material
8
<PAGE>
adverse effect on the business, condition
(financial or otherwise), operations, performance,
properties or prospects of Jitney and its
subsidiaries, taken as a whole or Target and its
subsidiaries, taken as a whole, (B) materially
adversely affect the ability of any Borrower or
any Guarantor to perform its obligations under the
loan documentation or (C) materially adversely
affect the rights and remedies of the
Administrative Agent and the Lenders under the
loan documentation or (ii) purports to adversely
affect any aspect of the Transaction (including,
without limitation, the Tender Offer and the
Merger) or the Senior Facilities (each of the
foregoing, a "Material Adverse Effect").
(j) All governmental and third party consents and
approvals necessary in connection with each aspect
of the Transaction and the Senior Facilities shall
have been obtained (without the imposition of any
conditions that are not acceptable to the Lenders)
and shall remain in effect; all applicable waiting
periods shall have expired without any adverse
action being taken or threatened by any competent
authority; and no law or regulation shall be
applicable in the judgment of the Lenders that
restrains, prevents or imposes materially adverse
conditions upon any aspect of the Transaction or
the Senior Facilities.
(k) All of the Pre-Commitment Information shall be
true and correct in all material aspects; and no
development or change shall have occurred that (i)
has resulted in or could reasonably be expected to
result in a material adverse change in, or
material adverse deviation from, the
Pre-Commitment Information or (ii) has had or
could reasonably be expected to have a Material
Adverse Effect.
(l) The Lenders shall be satisfied with the terms and
conditions of (A) the long-term fixed rate
subordinated debt securities (the "Subordinated
Debt") to be issued by the Borrower on the Closing
Date, the amortization of which shall not commence
earlier than 6 months after the scheduled
Termination Date in the event the Subordinated
Debt is issued as a bridge loan, and otherwise
(including under any facility that refinances any
such bridge loan) no earlier than the maturity of
Jitney's existing senior unsecured notes, and the
interest (cash or otherwise) on which in any year
during
9
<PAGE>
which any portion of the Senior Facilities
is scheduled to remain outstanding shall not
exceed an aggregate rate of, in the event the
Subordinated Debt is issued as a bridge loan, the
rates set forth in the draft term sheet previously
submitted to Fleet, and otherwise (including under
any facility that refinances any such bridge loan)
15% per annum, (B) all existing indebtedness of
Jitney and its subsidiaries (including without
limitation the existing $200,000,000 senior
unsecured notes of Jitney) and any consents or
other solicitations required in connection
therewith in order to consummate the Transaction.
The Borrower shall have received at least
$200,000,000 in gross cash proceeds from the sale
of the Subordinated Debt, and all such proceeds,
shall have been used or shall be used
simultaneously with the initial extension of
credit under the loan documentation for the
purchase of shares of stock of Target pursuant to
the Tender Offer.
(m) All loans made by the Lenders to Jitney or any of
its affiliates shall be in full compliance with
all applicable margin and other regulations
promulgated by the Board of Governors of the
Federal Reserve System (including without
limitation Regulations G, U, T and X).
(n) The Borrower and each of the Guarantors shall have
delivered letters from their respective chief
financial officers, in form and substance
satisfactory to the Lenders, attesting to the
Solvency (as hereinafter defined) of the Borrower
and such Guarantor, as the case may be, in each
case individually and together with its
subsidiaries, taken as a whole, immediately before
and immediately after giving effect to the
Transaction. As used herein, the term "Solvency"
of any person means (i) the fair value of the
property of such person exceeds its total
liabilities (including, without limitation,
contingent liabilities), (ii) the present fair
saleable value of the assets of such person is not
less than the amount that will be required to pay
its probable liability on its debts as they become
absolute and matured, (iii) such person does not
intend to, and does not believe that it will,
incur debts or liabilities beyond its ability to
pay as such debts and liabilities mature and (iv)
such person is not engaged, and is not about to
engage, in business or a transaction for which its
property would constitute an unreasonably small
capital. At the
10
<PAGE>
request of the Administrative Agent, the Borrower
will cause an independent third party firm
acceptable to the Administrative Agent to issue
a solvency opinion, attesting to the Borrower's
and each Guarantor's Solvency, in form and
substance satisfactory to the Administrative
Agent.
(o) An environmental consultant engaged by Jitney and
acceptable to the Administrative Agent shall have
conducted an environmental analysis of the
property and business of Target and its
subsidiaries and such analysis shall be
satisfactory to the Lenders in all respects.
(p) The Lenders shall be satisfied that (i) Jitney and
its subsidiaries (including Target) will be able
to meet their respective obligations under all
employee and retiree welfare plans, (ii) the
employee benefit plans of Target and its
subsidiaries are, in all material respects, funded
in accordance with the minimum statutory
requirements, (iii) no material "reportable event"
(as defined in ERISA, but excluding events for
which reporting has been waived) has occurred as
to any such employee benefit plan and (iv) no
termination of, or withdrawal from, any such
employee benefit plan has occurred or is
contemplated that could reasonably be expected to
result in a material liability.
(q) The Lenders shall be satisfied with the amount,
types and terms and conditions of all insurance
maintained by Jitney, the Target and their
respective subsidiaries, and the Lenders shall
have received one or more endorsements naming the
Administrative Agent, on behalf of the Lenders, as
an additional insured and loss payee under all
insurance policies to be maintained with respect
to the properties of Jitney, the Target and their
respective subsidiaries forming part of the
Lenders' collateral described under the section
"Security" above.
(r) The Lenders shall have received all additional
financial, business and other information
regarding Jitney, the Target and their respective
subsidiaries and properties as they shall have
reasonably requested. The Administrative Agent
shall have had the opportunity to audit the books
and records of Target and its subsidiaries and the
results of such audit shall be satisfactory to the
Administrative Agent. The Administrative Agent
shall have received evidence
11
<PAGE>
satisfactory to it that the existing indebtedness
of Target immediately prior to consummation of
the Acquisition is approximately $34,400,000.
(s) The Lenders shall have received (i) satisfactory
opinions of counsel for the Borrowers and the
Guarantors, and of local counsel for the Lenders
as to the Transaction (including, without
limitations, the tax aspects thereof and
compliance with all applicable securities laws)
and (ii) such corporate resolutions, certificates
and other documents as the Lenders shall
reasonably request.
(t) There shall exist no default under any of the loan
documentation, and the representations and
warranties of the Borrowers, each of the
Guarantors and each of their respective
subsidiaries therein shall be true and correct
immediately prior to, and after giving effect to,
the initial extension of credit under the loan
documentation.
(u) All accrued fees and expenses of the
Administrative Agent and the Lenders (including
the fees and expenses of counsel and local
counsel) shall have been paid.
(v) The Borrowers will have availability under the
Revolving Credit Facility plus available cash on
hand in an aggregate amount not less than
$35,000,000 (giving effect to consummation of the
Transaction on a pro forma basis (including,
without limitation, payment of the aggregate
consideration payable to acquire all outstanding
shares of capital stock of Target pursuant to the
Tender Offer and the Merger) and to all payables
being current and all transaction fees, costs and
expenses in connection with the Transaction being
paid). The Administrative Agent shall be
satisfied that Jitney will at all times prior to
consummation of the Merger have availability under
the Revolving Credit Facility plus cash on hand in
an aggregate amount sufficient to acquire all
outstanding shares of capital stock of Target
pursuant to the Tender Offer and the Merger (other
than shares previously acquired by Jitney or
Newco).
12
<PAGE>
Conditions Precedent
to Subsequent
Extensions of Credit: There shall exist no default under any of the loan
documentation, and the representations and
warranties of the Borrowers, each of the
Guarantors and each of their respective
subsidiaries therein shall be true and correct in
all material respects immediately prior to, and
after giving effect to, such extension of credit.
Representations and
Warranties: Those customarily found in credit agreements for
similar secured financings and others appropriate
in the judgment of Fleet for the Transaction,
including, without limitation, absence of any
material adverse change in the business, condition
(financial or otherwise), operations, performance,
properties or prospects of Jitney and its
subsidiaries, taken as a whole, since May 3, 1997.
Covenants: Those affirmative, negative and financial
covenants customarily found in credit agreements
for similar secured financings (including, without
limitation, covenants of the type set forth in the
Existing Credit Agreement), applicable to Jitney
and each of its subsidiaries, and others
appropriate in the judgment of Fleet for the
Transaction, including, without limitation,
financial covenants of the type set forth in the
Existing Credit Agreement.
Events of Default: Those customarily found in credit agreements for
similar secured financings and others appropriate
in the judgment of Fleet for the Transaction.
Expenses: The Borrowers shall pay all of the Administrative
Agent's due diligence, syndication (including
printing, distribution and bank meetings),
transportation, computer, duplication,
appraisal, audit, insurance, consultant,
search, filing and recording fees and all other
out-of-pocket expenses (including the fees and
expenses of counsel for the Administrative
Agent), whether or not any of the transactions
contemplated hereby are consummated, as well as
all expenses of the Administrative Agent in
connection with the administration of the loan
documentation. The Borrowers shall also pay
the expenses of the Administrative Agent and
the Lenders in connection with the enforcement
of any of the loan documentation (including the
fees and expenses of counsel).
Indemnity: The Borrowers and the Guarantors, jointly and
severally, will indemnify and hold harmless the
Administrative Agent, each Lender and each of
their affiliates and their officers, directors,
13
<PAGE>
Schedule A
- -------------------------------------------------------------------------------
Indebtedness/EBITDA Eurodollar Rate Prime Rate Unused
Applicable Margin Applicable Margin Commitment Fee
- -------------------------------------------------------------------------------
> 5.0 2.25% 1.00% .50%
-
- -------------------------------------------------------------------------------
> 4.25 but < 5.0 2.00 .75 .425
-
- -------------------------------------------------------------------------------
> 3.75 but < 4.25 1.75 .50 .375
-
- -------------------------------------------------------------------------------
> 3.25 but < 3.75 1.50 .25 .25
-
- -------------------------------------------------------------------------------
< 3.25 1.25 0 .25
- -------------------------------------------------------------------------------
Indebtedness and EBITDA will be defined in the loan documents. Indebtedness
will be defined in a manner consistent with the Existing Credit Agreement.
EBITDA will be calculated on a trailing four fiscal quarter basis in a manner
set forth in the loan documents.
<PAGE>
employees, agents and advisors (each an
"Indemnified Party") from and against any and
all claims, damages, losses, liabilities and
expenses (including, without limitation,
reasonable fees and expenses of counsel) that
may be incurred by or asserted or awarded
against any Indemnified Party, in each case
arising out of or in connection with or by
reason of, or in connection with the
preparation for a defense of, any
investigation, litigation or proceeding arising
out of, related to or in connection with (a)
the Transaction or any similar transaction of
Jitney or any of its subsidiaries or its other
affiliates and any of the other transactions
contemplated in the loan documentation, (b) any
acquisition or proposed acquisition or similar
business combination or proposed business
combination by Jitney or any of its
subsidiaries or affiliates of all or any
portion of the shares of capital stock or
substantially all of the property and assets of
any other person, (c) the Senior Facilities and
any use made or proposed to be made with the
proceeds thereof or (d) the actual or alleged
presence of hazardous materials on any property
of Jitney or any of its subsidiaries or any
environmental action or proceeding relating in
any way to Jitney or any of its subsidiaries or
any of their respective properties, in each
case, whether or not such investigation,
litigation or proceeding is brought by Jitney,
any of its subsidiaries, its shareholders or
creditors or an Indemnified Party or an
Indemnified Party is otherwise a party thereto
and whether or not the Transaction is
consummated, except to the extent such claim,
damage, loss, liability or expense is found in
a final, nonappealable judgment by a court of
competent jurisdiction to have resulted from
such Indemnified Party's gross negligence or
willful misconduct. Each Borrower and
Guarantor will further agree that no
Indemnified Party shall have any liability
(whether direct or indirect, in contract or
tort or otherwise) to Jitney or any of its
subsidiaries or to their respective security
holders or creditors arising out of, related to
or in connection with the Transaction, except
for actual and direct damages, as opposed to
special, exemplary, indirect, consequential,
punitive or other damages, determined in a
final nonappealable judgment by a court of
competent jurisdiction to have resulted from
such Indemnified Party's gross negligence or
willful misconduct.
Required Lenders: Majority of commitments.
Assignments and
Participation: Assignments, with Jitney's consent (not to be
unreasonably withheld or delayed) and the
consent of the Administrative Agent
14
<PAGE>
(not to be unreasonably withheld or delayed),
must be to Eligible Assignees and, in each case
other than an assignment to a Lender or an
assignment of the entirety of a Lender's
interest in the Senior Facilities, in a minimum
amount of $10,000,000. Each Lender will also
have the right, without consent of the Borrower
or the Administrative Agent, to assign (i) as
security all or part of its rights under the
loan documentation to any Federal Reserve Bank
and (ii) all or part of its rights or
obligations under the loan documentation to any
of its affiliates. No participation shall
include voting rights, other than for
reductions or postponements of amounts payable
or release of all or substantially all of the
collateral. A processing and recordation fee
of $3,000 shall be payable to the
Administrative Agent for each assignment by the
assignor or assignee bank.
Taxes: All payments to be free and clear of any present
or future taxes, withholdings or other
deductions whatsoever (other than income taxes
in the jurisdiction of the Lender's applicable
lending office). The Lenders will use
reasonable efforts (consistent with their
respective internal policies and legal and
regulatory restrictions and so long as such
efforts would not otherwise be disadvantageous
to such Lenders) to minimize to the extent
possible any applicable taxes, and the Borrower
will indemnify the Lenders and the
Administrative Agent for such taxes paid by the
Lenders or the Administrative Agent.
Miscellaneous: Standard yield protection (including compliance
with risk-based capital guidelines, increased
cost, payments free and clear of withholding
taxes and interest period breakage
indemnities), Eurodollar illegality and similar
provisions, defaulting lender provisions,
waiver of jury trial and submission to
jurisdiction.
Governing Law: New York.
Counsel for the
Administrative Agent: Kaye, Scholer, Fierman, Hays & Handler, LLP.
15
<PAGE>
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
JITNEY-JUNGLE STORES OF AMERICA, INC.,
DELTA ACQUISITION CORPORATION
and
DELCHAMPS, INC.
July 8, 1997
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
THE OFFER.................................................................1
1.1 The Offer............................................................1
1.2 Company Action.......................................................3
1.3 Directors............................................................5
ARTICLE II
THE MERGER................................................................6
2.1 The Merger...........................................................6
2.2 Effect of the Merger.................................................6
2.3 Closing; Consummation of the Merger..................................6
2.4 Articles of Incorporation; Bylaws; Directors and Officers............6
2.5 Conversion of Securities.............................................7
2.6 Exchange of Certificates.............................................8
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY.............................9
3.1 Organization and Qualification; Subsidiaries.........................9
3.2 Capitalization......................................................10
3.3 Authority Relative to this Agreement................................11
3.4 Non-Contravention; Approvals and Consents...........................11
3.5 Brokers and Finders.................................................12
3.6 SEC Filings.........................................................12
3.7 Absence of Certain Changes or Events................................13
3.8 Legal Proceedings...................................................13
3.9 Compliance with Law.................................................13
3.10 Taxes...............................................................13
3.11 ERISA and Related Matters...........................................15
3.12 Environmental Matters...............................................16
3.13 Information Supplied................................................18
3.14 Real Property.......................................................18
3.15 Labor Matters.......................................................19
3.16 Contracts; Certain Agreements.......................................20
3.17 Absence of Certain Liabilities......................................21
3.18 Opinion of Financial Advisor........................................21
3.19 Takeover Statute....................................................21
3.20 Insurance...........................................................21
3.21 Intellectual Property...............................................21
3.22 Certain Agreements..................................................22
i
<PAGE>
3.23 Indemnification Claims..............................................22
3.24 Prior Negotiations..................................................22
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB.........................23
4.1 Organization of Parent and Sub......................................23
4.2 Authority Relative to this Agreement................................23
4.3 Non-Contravention; Approvals and Consents...........................23
4.4 Legal Proceedings...................................................24
4.5 Financing...........................................................24
4.6 Information Supplied................................................25
ARTICLE V
COVENANTS OF THE COMPANY.................................................25
5.1 Conduct of Business by the Company Pending the Merger...............25
5.2 No Solicitation.....................................................27
5.3 Company Stock Plans.................................................29
ARTICLE VI
ADDITIONAL COVENANTS.....................................................29
6.1 Proxy Statement and Special Meeting.................................29
6.2 HSR Matters.........................................................30
6.3 Publicity...........................................................31
6.4 Investigation; Confidentiality......................................32
6.5 Directors' and Officers' Indemnification and Insurance..............32
6.6 Change of Control Agreements........................................34
6.7 Fees and Expenses...................................................34
6.8 Conduct of Business of Sub..........................................34
6.9 Cooperation.........................................................34
6.10 Post-Offer Action...................................................34
6.11 Transaction Litigation..............................................35
ARTICLE VII
CONDITIONS TO THE MERGER.................................................35
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER .......................................35
8.1 Termination.........................................................35
8.2 Effect of Termination...............................................37
8.3 Termination Payment.................................................37
8.4 Amendment...........................................................39
8.5 Waiver..............................................................39
ii
<PAGE>
ARTICLE IX
GENERAL PROVISIONS.......................................................39
9.1 Non-Survival of Representations, Warranties and Agreements..........39
9.2 Certain Definitions.................................................39
9.3 Notices.............................................................40
9.4 Headings............................................................41
9.5 Applicable Law......................................................41
9.6 No Assignment; Binding Effect.......................................41
9.7 Counterparts........................................................41
9.8 Third Party Beneficiaries...........................................41
9.9 Invalid Provisions..................................................41
9.10 Specific Performance................................................41
9.11 Entire Agreement....................................................42
9.12 Days................................................................42
9.13 Jurisdiction........................................................42
iii
<PAGE>
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (the "Agreement"), dated as of July 8,
1997, is by and among Jitney-Jungle Stores of America, Inc., a Mississippi
corporation ("Parent"), Delta Acquisition Corporation, an Alabama corporation
and a wholly-owned subsidiary of Parent ("Sub"), and Delchamps, Inc., an Alabama
corporation (the "Company").
WHEREAS, the respective Boards of Directors of Parent, Sub and the Company
have each determined that it is advisable and in the best interests of their
respective shareholders, on the terms and subject to the conditions in this
Agreement (i) for Sub to make a cash tender offer to purchase all issued and
outstanding shares of the Company's common stock, $.01 par value per share (the
"Common Stock") and associated preferred share purchase rights (the "Rights")
issued pursuant to the Rights Agreement (defined in Section 1.2) (such shares of
Common Stock and associated Rights, the "Shares"), and (ii) following the
consummation of the cash tender offer, for Sub to merge with and into the
Company, with the result that the Company will become a wholly-owned subsidiary
of Parent (the "Merger").
NOW THEREFORE, the parties hereto agree as follows:
ARTICLE I
THE OFFER
1.1 The Offer.
(a) Provided that this Agreement shall not have been terminated in
accordance with Section 8.1 and none of the events set forth in paragraph (c) of
Annex A hereto shall have occurred and be existing, and subject to the
provisions of this Agreement, no later than five business days after the date
hereof, Parent shall cause Sub to, and Sub shall, commence (within the meaning
of Rule 14d-2 under the Securities Exchange Act of 1934 (the "Exchange Act")) a
tender offer (the "Offer") to purchase all of the issued and outstanding Shares,
at a price per Share of $30.00 (such amount, or any greater amount per Share
paid pursuant to the Offer, the "Per Share Price") net to each seller in cash.
Subject to the provisions of this Agreement, Sub shall, and Parent shall cause
Sub to, accept for payment and pay the Per Share Price for any Shares validly
tendered and not withdrawn pursuant to the Offer as soon as practicable after
the expiration of the Offer.
(b) The obligation of Parent and Sub to consummate the Offer, and to
accept for payment and pay for Shares tendered pursuant to the Offer, shall be
subject to only those conditions set forth in Annex A. Parent and Sub may waive
any such condition other than (i) the Minimum Condition (defined in Annex A),
provided that Parent and Sub may reduce the Minimum Condition to a majority of
the outstanding Shares on a fully diluted basis, or (ii) the condition relating
to the expiration of the waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"). Parent and Sub expressly
reserve the right (but have no obligation) to increase the consideration per
share payable in the Offer or amend, modify or make any changes in the terms and
conditions of the Offer except that neither Parent nor Sub shall, without the
prior
<PAGE>
written consent of the Company's Board of Directors, (i) impose conditions
to the Offer in addition to those set forth in Annex A, (ii) decrease the Per
Share Price, (iii) change the form of consideration, (iv) reduce the number of
Shares sought to be purchased in the Offer, (v) extend the expiration date of
the Offer (except as provided below in this paragraph), or (vi) otherwise change
any term of the Offer in any manner adverse to the holders of Shares. The Offer
shall expire on the twentieth business day after its commencement, except as
provided below. The parties acknowledge their intention to consummate the
transactions contemplated hereby as soon as reasonably practicable. To that end
(provided that the conditions set forth in paragraphs (c)(iii) through (c)(ix)
and (e) of Annex A have been met), Parent and Sub shall use commercially
reasonable best efforts, subject to the terms of this Agreement (including
Section 6.2 and Annex A), to consummate the Offer within 30 business days
following commencement of the Offer, including the obtaining of requisite
financing, the receipt of the consent of the holders of its 12% Senior Notes due
2006 as contemplated by Annex A and receipt of requisite governmental approvals
(including in respect of the HSR Act) as contemplated by Annex A. If the
conditions set forth in paragraphs (c)(iii) through (c)(ix) and (e) of Annex A
have been met but the conditions set forth in either or both of paragraphs (b)
or (d) of Annex A are not met within 30 business days following commencement of
the Offer, Parent and Sub shall use commercially reasonable best efforts,
subject to the terms of this Agreement (including Section 6.2 and Annex A), to
consummate the Offer on or prior to the sixtieth calendar day following
commencement of the Offer. Notwithstanding the foregoing, the parties
acknowledge Parent's and Sub's right, without the consent of the Company, to
extend the Offer on one or more occasions as follows: (i) extend the Offer, if
at the then-scheduled expiration date of the Offer, any of the conditions to
Sub's obligations to accept for payment and pay for Shares shall not be
satisfied or waived, until such time as such conditions are satisfied or waived,
(ii) extend the Offer for any period required by any rule, regulation,
interpretation or position of the Securities and Exchange Commission ("SEC") or
the staff thereof applicable to the Offer, (iii) extend the Offer on one or more
occasions for an aggregate period of not more than 5 business days if the
Minimum Condition has been satisfied but less than 80% of the outstanding Shares
(on a fully diluted basis) have been validly tendered and not withdrawn, (iv)
extend the Offer for any reason on one or more occasions for an aggregate period
of not more than 10 business days beyond the initial expiration date or the
latest expiration date that would otherwise be permitted under clause (i), (ii)
or (iii) of this sentence, and (v) extend the Offer on one or more occasions for
an aggregate period of not more than 60 calendar days after the date of the
commencement of the Offer in order for Parent to obtain financing on terms
acceptable to it; provided, however, that without the written consent of the
Company, Parent and Sub may not extend the Offer (A) for any period that would
end more than 60 calendar days after the date of the commencement of the Offer,
unless on such sixtieth day any of the conditions on Annex A are not satisfied,
or (B) for any period that would end more than 90 calendar days after the date
of the commencement of the Offer; provided further that if on the initial
expiration date of the Offer, or any extension thereof, the conditions set forth
in paragraphs (c)(iii) through (c)(ix) and (e) of Annex A have been satisfied or
waived but any of the conditions set forth in paragraphs (b), (c)(i), (c)(ii) or
(d) in Annex A shall not have been satisfied or waived, Parent and Sub agree to
extend the Offer one or more times (for such periods as Parent and Sub shall
determine in their sole discretion) until 60 calendar days after the date of the
commencement of the Offer; provided, further, that Parent and Sub may extend the
Offer beyond such 90 calendar day period if
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the conditions set forth in Annex A shall not have been satisfied as a result
of a breach by the Company of its obligations under this Agreement.
(c) On the date of commencement of the Offer, Parent and Sub shall file
with the Securities and Exchange Commission (the "SEC") with respect to the
Offer a Tender Offer Statement on Schedule 14D-1 (together with all amendments
and supplements thereto, the "Schedule 14D-1"), and shall take such steps as are
reasonably necessary to cause the Offer to Purchase (defined below) to be
disseminated to the holders of Shares as and to the extent required by
applicable federal securities laws. The Schedule 14D-1 shall contain an offer
to purchase (the "Offer to Purchase") and forms of the related letter of
transmittal and summary advertisement (the Offer to Purchase and such other
documents, together with any amendments or supplements thereto, collectively,
the "Offer Documents"). The Company and its counsel shall be given a reasonable
opportunity to review and comment on the Schedule 14D-1 and the Offer Documents
prior to their being filed with the SEC or disseminated to the Company's
shareholders. Parent and Sub shall provide the Company and its counsel with a
copy of any written comments that Parent or Sub receives from the SEC or its
staff with respect to the Schedule 14D-1 and the Offer Documents promptly after
receipt of any such comments.
(d) Parent shall provide or cause to be provided to Sub on a timely basis
the funds necessary to accept for payment, and pay for, any Shares that Sub
becomes obligated to accept for payment, and pay for, pursuant to the Offer.
(e) The parties understand and agree that the Per Share Price has been
calculated based upon the accuracy of the representation and warranty set forth
in Section 3.2(a) and that, in the event the number of outstanding Shares or
Shares issuable upon the exercise of, or subject to, options or other agreements
exceeds the amounts specifically set forth in Section 3.2(a) by more than 10,000
Shares (including without limitation as a result of any stock split, reverse
stock split, stock dividend, including any dividend or distribution of
securities convertible into Shares, recapitalization, or other like change
occurring after the date of this Agreement), the Per Share Price shall be
appropriately adjusted downward. The provisions of this paragraph (e) shall
not, however, affect the representation set forth in Section 3.2(a).
1.2 Company Action.
(a) The Company represents that (i) the Board of Directors of the Company
(the "Board of Directors") has by unanimous vote of those present at the meeting
at which the Offer and the Merger were considered duly approved the Offer and
the Merger and this Agreement and has resolved to recommend acceptance of the
Offer and approval of the Merger by the Company's shareholders; (ii) the
affirmative vote of the holders of record of at least two-thirds of the Shares
outstanding on the record date for the Special Meeting (defined below) and
entitled to vote (the "Requisite Shareholder Approval") is the only vote of the
holders of any class or series of the capital stock of the Company required to
approve the Merger; and (iii) the Company has taken all necessary actions so
that the provisions of Article Eleven of the Company's Articles of Incorporation
will not
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apply to this Agreement, the Offer, the Merger, or the acquisition of Shares
by Parent or Sub pursuant to this Agreement. In addition, the Company
represents that it has adopted Amendment No. 2 to the Rights Agreement dated
as of October 14, 1988 by and between the Company and First Alabama Bank as
Rights Agent, as amended by the Amendment to Rights Agreement dated as of
October 16, 1992 by and between the Company and the Rights Agent (as so
amended, the "Rights Agreement") and that a copy of such Amendment No. 2 has
been delivered by the Company to Parent; that as of the date hereof and after
giving effect to the execution and delivery of this Agreement, each Right is
represented by the certificate representing the associated Share and is not
exercisable or transferable apart from the associated Share; that there has
not been a "Distribution Date" or "Shares Acquisition Date," and that the
Company has taken all necessary actions so that the execution and delivery of
this Agreement and the consummation of the Offer and the Merger will not
result in the triggering of the provisions of Section 11 or Section 13 of the
Rights Agreement or the occurrence of a "Distribution Date" or "Shares
Acquisition Date" and will not result in Parent, Sub or any of their
affiliates or associates becoming an "Acquiring Person" (as such terms are
defined in the Rights Agreement) and that upon consummation of the Offer the
Rights will no longer be outstanding and the former holders of the Rights
will not have any claims or rights thereunder (without any necessity to
redeem the Rights to effectuate the foregoing). The Company has been advised
that all of its directors intend either to tender their Shares pursuant to
the Offer or (solely in the case of directors who would as a result of the
tender incur liability under Section 16(b) of the Exchange Act) to vote in
favor of the Merger.
(b) On the date the Schedule 14D-1 is filed with the SEC, the Company
shall file with the SEC a Solicitation/Recommendation Statement on Schedule
14D-9 (together with all amendments and supplements thereto, the "Schedule
14D-9") and shall take such steps as are reasonably necessary to cause the
Schedule 14D-9 to be disseminated to the holders of the Shares as and to the
extent required by applicable federal securities laws. Subject to the
provisions of Sections 5.2 and 8.3, the Offer Documents and the Schedule 14D-9
shall contain the recommendation of the Board of Directors that the Company's
shareholders accept the Offer and vote to approve the Merger. Parent and its
counsel shall be given a reasonable opportunity to review and comment on the
Schedule 14D-9 prior to its being filed with the SEC or disseminated to the
Company's shareholders. The Company shall provide Parent and its counsel with a
copy of any written comments that the Company receives from the SEC or its staff
with respect to the Schedule 14D-9 promptly after receipt of any such comments.
(c) The Company shall promptly furnish Sub with mailing labels containing
the names and addresses of the record holders of Shares and with lists of
securities positions of Shares held in stock depositories, each as of a recent
date, and shall furnish Sub with such additional information, including updated
lists of shareholders, mailing labels and lists of securities positions, as Sub
may reasonably request for the purpose of communicating the Offer to the holders
of Shares. Except as and to the extent required by law and except for such
steps as are necessary to disseminate the Offer Documents and any other
documents necessary to consummate the Offer or the Merger, Parent and Sub shall
hold in confidence the information contained in such labels and listings, and
any other information relating to the holders of Shares received from the
Company or its transfer agent, shall
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use such information only in connection with the Offer and the Merger, and,
if this Agreement is terminated in accordance with Section 8.1, shall deliver
to the Company all such information, including all copies of and extracts or
summaries from such information, then in their possession or control.
1.3 Directors.
(a) Promptly upon payment by Sub for the Shares pursuant to the Offer, Sub
shall be entitled to designate such number of directors, rounded up to the next
whole number, as will give Sub representation on the Board of Directors equal to
at least that number of directors equal to the product of (i) the total number
of directors on the Board of Directors and (ii) the percentage that the number
of Shares so purchased bears to the number of Shares outstanding, and the
Company shall, at such time, use its best efforts to cause the appropriate
number of directors who are members of the Board of Directors as of the date
hereof to resign and Sub's designees to be appointed or elected; provided,
however, that notwithstanding the foregoing, until the Effective Time (defined
in Section 2.3), there shall be, to the extent they are willing to continue to
serve, at least three directors on the Board of Directors who are directors on
the date hereof and who are not designees nor officers, directors, employees or
affiliates of Parent or Sub nor are employees of the Company or any of its
Subsidiaries (the "Independent Directors"); provided, further, that if the
number of Independent Directors shall be reduced below three for any reason, the
Board of Directors shall, subject to the approval of the remaining Independent
Directors, if any, designate a person or persons to fill the vacancy or
vacancies who are directors on the date hereof and not an officer, director,
employee or affiliate of Parent or Sub nor an employee of the Company. Any
vacancies that cannot be filled in the foregoing manner shall be filled by the
Board of Directors at its discretion.
(b) The Company's obligations to appoint Sub's designees to the Board of
Directors shall be subject to Section 14(f) of the Exchange Act and Rule 14f-1
thereunder. Parent and Sub shall supply and shall be solely responsible for all
information with respect to themselves, their officers, directors and
affiliates, and Sub's designees required by Section 14(f) and Rule 14f-1.
(c) Following the election of Sub's designees pursuant to this Section and
until the Effective Time, any amendment of this Agreement or the Articles of
Incorporation or Bylaws of the Company, any termination of this Agreement by the
Company, any extension by the Company of the time for the performance of any of
the obligations or other acts of Parent or Sub, any waiver of any of the
Company's rights hereunder, or any transaction between Parent (or any affiliate
or associate thereof) and the Company shall require the concurrence of a
majority of the Independent Directors. The Independent Directors shall have the
authority to retain such counsel and other advisors at the expense of the
Company as are reasonably appropriate to assist them in the exercise of their
duties in connection with this Agreement. In addition, the Independent
Directors shall have the authority to institute any action on behalf of the
Company to enforce performance of this Agreement.
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ARTICLE II
THE MERGER
2.1 The Merger. At the Effective Time (defined in Section 2.3), in
accordance with this Agreement and the provisions of the ABCA, Sub shall be
merged with and into the Company, the separate existence of Sub shall cease, and
the Company shall continue as the surviving corporation under the corporate name
it possesses immediately prior to the Effective Time. The Company hereinafter
sometimes is referred to as the "Surviving Corporation." Notwithstanding the
foregoing, Parent may elect at any time after consummation of the Offer (or
prior to the consummation of the Offer and with the written consent of the
Company, which shall not be withheld unreasonably) and prior to the fifth
business day immediately preceding the date of the notice of the meeting of
shareholders of the Company to consider approval of the Merger and this
Agreement that instead of merging Sub into the Company as hereinabove provided,
to merge the Company with and into Parent, Sub or another direct or indirect
wholly-owned subsidiary of Parent; provided however that each representation,
warranty, covenant and agreement of Parent and Sub contained herein and relating
to Sub shall thereupon be deemed to be made by Parent and such subsidiary and to
relate to such subsidiary, and provided further that the Company shall not be
deemed to have breached any of its representations, warranties or covenants
herein solely by reason of such election. In such event the parties shall
execute an appropriate amendment to this Agreement in order to reflect the
foregoing and to provide that Parent, Sub or such other subsidiary of Parent
shall be in all respects substituted for Sub and shall be the Surviving
Corporation.
2.2 Effect of the Merger. At the Effective Time, the effect of the Merger
shall be as provided in the applicable provisions of the ABCA.
2.3 Closing; Consummation of the Merger.
(a) The closing of the Merger (the "Closing") shall take place at 10:00
a.m. local time at the New York or Philadelphia offices of Dechert Price &
Rhoads, or at such other location as specified by Sub and on a date to be
specified by Sub, which date shall be as promptly as practicable after the
satisfaction or waiver of the conditions to the Merger set forth herein (the
"Closing Date").
(b) As soon as practicable after the satisfaction or waiver of the
conditions to the Merger set forth herein, the parties shall cause the Merger to
be consummated by delivering to the Secretary of State of the State of Alabama
for filing articles of merger and any other documents in such form as required
by the relevant provisions of the ABCA and shall cause the Merger to take effect
on the date of such filing (the time at which the Merger takes effect, the
"Effective Time").
2.4 Articles of Incorporation; Bylaws; Directors and Officers. The
Articles of Incorporation of the Surviving Corporation shall be the Articles of
Incorporation of the Company, as in effect immediately prior to the Effective
Time, until thereafter amended as provided therein and
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under the ABCA. The Bylaws of the Surviving Corporation shall be the Bylaws
of the Company, as in effect immediately prior to the Effective Time, until
thereafter amended as provided therein and under the ABCA. The directors of
Sub immediately prior to the Effective Time will be the initial directors of
the Surviving Corporation, and the officers of the Company immediately prior
to the Effective Time (unless any directors or officers of Parent or Sub are
so designated in writing by Parent prior to the Effective Time) will be the
initial officers of the Surviving Corporation, in each case until their
successors are elected or appointed.
2.5 Conversion of Securities. At the Effective Time, by virtue of the
Merger and without any action on the part of Parent, Sub, the Company or the
holder of any of the securities of the Company or Sub:
(a) Each Share issued and outstanding immediately prior to the Effective
Time (other than Shares to be canceled pursuant to Section 2.5(b) and Dissenting
Shares as defined in Section 2.5(d)), together with associated Rights, shall be
converted into and become the right to receive the Per Share Price. All such
Shares and associated Rights shall no longer be outstanding and shall
automatically be canceled and retired and shall cease to exist, and each holder
of a certificate representing any such Shares and associated Rights shall cease
to have any rights with respect thereto, except the right to receive the Per
Share Price, less any required withholding taxes, upon the surrender of such
certificate in accordance with Section 2.6, without interest.
(b) All Shares, together with associated Rights, that are owned by the
Company as treasury stock and all Shares, together with associated Rights, owned
by Parent, Sub or any other wholly-owned Subsidiary of Parent shall be canceled
and retired and shall cease to exist and no consideration shall be delivered in
exchange therefor.
(c) Each share of common stock, par value $.01 per share, of Sub issued
and outstanding immediately prior to the Effective Time shall be converted into
and become one validly issued, fully paid and nonassessable share of common
stock, par value $.01 per share, of the Surviving Corporation. Each certificate
representing outstanding shares of the common stock of Sub at the Effective
Time shall thereafter represent an equal number of shares of the common stock of
the Surviving Corporation.
(d) (i) Notwithstanding any provision of this Agreement to the contrary,
each outstanding Share the holder of which has perfected such holder's right to
demand payment for such holder's Shares in accordance with Article 13 of the
ABCA and has not effectively withdrawn or lost such right (a "Dissenting
Share"), shall not be converted into or represent the right to receive the Per
Share Price, but the holder thereof shall be entitled only to such rights as are
granted by Article 13 of the ABCA; provided, however, that any Dissenting Share
held by a person at the Effective Time who shall, after the Effective Time and
in accordance with the ABCA, withdraw such person's demand for payment or lose
such person's dissenters' rights, shall be deemed to be converted as of the
Effective Time into the right to receive the Per Share Price pursuant to Section
2.5(a).
(ii) The Company shall give Parent (A) prompt notice and a copy of any
written notice of a shareholder's intent to demand payment, of any request to
withdraw a demand for
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payment and of any other instruments delivered to it pursuant to Article 13
of the ABCA and (B) the opportunity to direct all negotiations and
proceedings with respect to demands for payment under Article 13 of the ABCA.
The Company shall not voluntarily make any payment with respect to any
demand for payment and shall not, except with the prior written consent of
Parent, settle or offer to settle any such demands.
2.6 Exchange of Certificates.
(a) At such times as shall be necessary to make the payments pursuant to
Section 2.5 to holders of Shares, Parent shall make available to the Surviving
Corporation, and the Surviving Corporation shall deposit with a bank or trust
company designated by Parent before the Closing Date and reasonably acceptable
to the Company (the "Payment Agent") an amount in cash equal to the aggregate
Per Share Price to which holders of Shares shall be entitled upon consummation
of the Merger, to be held for the benefit of and distributed to such holders in
accordance with this Section. The Payment Agent shall agree to hold such funds
(such funds, together with earnings thereon, being referred to herein as the
"Payment Fund") for delivery as contemplated by this Section and upon such
additional terms as may be agreed upon by the Payment Agent, the Company and
Parent. If for any reason (including losses) the Payment Fund is inadequate to
pay the cash amounts to which holders of Shares shall be entitled, Parent and
the Surviving Corporation shall in any event remain liable, and Parent shall
make available to the Surviving Corporation additional funds for the payment
thereof. The payment Agent shall invest portions of the Payment Fund as Parent
directs. All interest and other income earned in respect of the Payment Fund
shall inure to the benefit of, and shall be paid to, the Surviving Corporation.
The Payment Fund shall not be used for any purpose except as expressly provided
in this Agreement.
(b) As soon as practicable after the Effective Time, Parent and the
Surviving Corporation shall cause the Payment Agent to mail to each record
holder of one or more certificates (the "Certificates") that immediately prior
to the Effective Time represented outstanding Shares and associated Rights that
have been converted pursuant to Section 2.5(a) into the right to receive the Per
Share Price (i) a letter of transmittal (which shall specify that delivery shall
be effected, and risk of loss and title to the Certificates shall pass, only
upon receipt of the Certificates by the Payment Agent and shall be in such form
and have such other provisions as the Surviving Corporation may reasonably
specify) and (ii) instructions for use in effecting the surrender of the
Certificates in exchange for the Per Share Price. Upon surrender of a
Certificate to the Payment Agent for cancellation, together with such letter of
transmittal duly executed and completed in accordance with its terms, the holder
of such Certificate shall be entitled to receive in exchange therefor a check
representing the Per Share Price for each Share represented thereby, and the
Certificate so surrendered shall forthwith be canceled. In no event shall the
holder of any Certificate be entitled to receive interest on any funds to be
received by reason of the Merger, including any interest earned by the Payment
Fund. In the event of a transfer of ownership of Shares that is not registered
in the transfer records of the Company, the Per Share Price may be paid to a
transferee if the Certificate representing such Shares is presented to the
Payment Agent accompanied by all documents required to evidence and effect such
transfer and by evidence that any applicable stock transfer taxes have
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been paid. Until surrendered as contemplated by this Section, each
Certificate shall be deemed after the Effective Time to represent only the
right to receive upon such surrender the Per Share Price for each Share
represented thereby as contemplated by this Article II.
(c) All cash paid upon the surrender for exchange of Certificates in
accordance with the terms hereof shall be deemed to have been paid in full
satisfaction of all rights pertaining to the Shares and the Rights represented
thereby. From and after the Effective Time, the stock transfer books of the
Company shall be closed and there shall be no further registration of transfers
on the stock transfer books of the Surviving Corporation of the Shares that were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to the Surviving Corporation for any reason,
they shall be canceled and exchanged as provided in this Section, subject in the
case of Dissenting Shares, to applicable law and the provisions of this
Agreement.
(d) Any portion of the Payment Fund that remains unclaimed by the
Company's shareholders six months after the Effective Time shall be delivered to
the Surviving Corporation upon demand, and any of the Company's shareholders who
have not theretofore complied with this Section shall thereafter look only to
the Surviving Corporation (subject to abandoned property, escheat and other
similar laws) as general creditors for payment of their claim for the Per Share
Price. Neither Parent nor the Surviving Corporation shall be liable to any
holder of Shares for cash representing the Per Share Price delivered to a public
official in accordance with any applicable abandoned property, escheat or
similar law.
(e) The Surviving Corporation shall be entitled to deduct and withhold
from the Per Share Price or any payment made in respect of Dissenting Shares
such amounts as the Surviving Corporation is required to deduct and withhold
with respect to the making of such payment under the Internal Revenue Code of
1986, as amended (the "Code"), or any provision of state, local or foreign tax
law. Such withheld amounts shall be treated for all purposes of this Agreement
as having been paid to the holder of the Shares in respect of which such
deduction and withholding was made.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth on the Disclosure Schedule attached as Annex B (the
"Disclosure Schedule") in a manner that makes reasonably apparent that such
matter relates to the particular representation or warranty below, the Company
represents and warrants to each of Parent and Sub as follows:
3.1 Organization and Qualification; Subsidiaries.
(a) The Company has one Significant Subsidiary (defined in Section 9.2),
Supermarket Cigarette Sales, Inc., a Louisiana corporation. The Company and its
Significant Subsidiary are corporations duly incorporated, validly existing and
in good standing under the laws of their respective jurisdictions of
incorporation and have all requisite corporate power and authority to own
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their respective properties and carry on their respective businesses as now
being conducted. The Company and its Significant Subsidiary are duly
qualified as foreign corporations to do business, and are in good standing,
in each jurisdiction where the character of their properties owned or held
under lease or the nature of their activities makes such qualification
necessary, except to the extent that any failure to so qualify or be in good
standing would not have a Material Adverse Effect or adversely affect the
ability of the Company to perform its obligations hereunder or to consummate
the Merger. As used herein, "Material Adverse Effect" means any change or
effect that is materially adverse to the condition (financial or otherwise),
total assets, total liabilities, business, results of operations or prospects
of the Company and its Subsidiaries taken as a whole, including without
limitation any such change or effect that prevents Parent and Sub from
obtaining their contemplated financing for the Offer and the Merger. The
Company has made available to Parent correct and complete copies of the
articles of incorporation and bylaws of the Company and the Significant
Subsidiary.
(b) The only Subsidiaries of the Company are those set forth in Section
3.1 of the Disclosure Schedule. Except as set forth in Section 3.19 of the
Disclosure Schedule, neither the Company nor any of its Subsidiaries owns,
directly or indirectly, any interest or investment (whether equity or debt) in
any corporation, partnership, limited liability company, joint venture,
business, trust or other person (other than the Company's Subsidiaries).
3.2 Capitalization.
(a) The authorized capital stock of the Company consists of (i) 25,000,000
shares of Common Stock, of which as of the date hereof, 7,127,743 shares were
issued and outstanding (including 10,800 shares that were issued and outstanding
under the 1987 Restricted Stock Plan and remained subject to a repurchase option
thereunder) and no shares were held as treasury shares and (ii) 5,000,000 shares
of Preferred Stock, no par value, of which, as of the date hereof, no shares
were issued and outstanding and 80,000 shares were reserved for issuance
pursuant to the Rights Agreement. Except as provided in the Rights Agreement
and except for Shares issuable upon the exercise of outstanding options to
purchase an aggregate of 455,050 Shares (the "Options") pursuant to the 1993
Stock Incentive Plan and the Directors' Stock Option Plan, there are no options,
warrants or other rights, agreements or commitments obligating the Company to
issue any shares of its capital stock or any securities convertible into its
capital stock or to repurchase or redeem any shares of its capital stock. All
Shares outstanding are, and all Shares subject to issuance as aforesaid, when
issued on the terms and conditions specified in the instruments pursuant to
which they are issuable, will be, duly authorized, validly issued, fully paid,
non-assessable and free of preemptive rights. There are no shareholder, voting
trust, or other agreements or understandings to which the Company or any of its
Subsidiaries is a party or to which any of them are bound relating to the voting
of any shares of the capital stock of the Company or any of its Subsidiaries.
(b) All of the outstanding capital stock of the Significant Subsidiary is
duly authorized, validly issued, fully paid and non-assessable and free of
preemptive rights and is owned by the Company free and clear of any claim, lien
or encumbrance. There are no outstanding options, calls
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or commitments of any kind relating to the issued or unissued capital stock
or other securities of the Significant Subsidiary.
3.3 Authority Relative to this Agreement. The Company has all requisite
corporate power and authority to enter into this Agreement and, subject to the
receipt of the Requisite Shareholder Approval of the Merger, to perform its
obligations hereunder and to consummate the transactions contemplated hereby.
The execution, delivery and performance of this Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby have been
duly authorized by all necessary corporate (including shareholder) action on the
part of the Company, except for the Requisite Shareholder Approval of the
Merger. This Agreement has been duly and validly executed and delivered by the
Company. Subject to receipt of the Requisite Shareholder Approval of the
Merger, and assuming the due authorization, execution and delivery of this
Agreement by Parent and Sub, this Agreement constitutes the legal, valid and
binding agreement of the Company enforceable in accordance with its terms.
3.4 Non-Contravention; Approvals and Consents.
(a) The execution and delivery of this Agreement by the Company do not,
and the performance by the Company of its obligations hereunder and the
consummation of the transactions contemplated hereby will not, conflict with,
result in a violation or breach of, constitute (with or without notice or lapse
of time or both) a default under, permit the termination of any provision of, or
result in the termination of, the acceleration of the maturity of, or the
acceleration of the performance of, or result in the creation or imposition of
any lien upon any of the assets or properties of the Company or any of its
Subsidiaries under, any of the terms, conditions or provisions of (i) the
articles of incorporation or bylaws of the Company or any of its Subsidiaries,
or (ii) subject to receipt of the Requisite Shareholder Approval and the taking
of the actions described in paragraph (b) of this Section, (x) any statute, law,
rule, regulation or ordinance (together, "Laws"), or any judgment, decree,
order, writ, permit or license (together, "Orders"), of any court, tribunal,
arbitrator, authority, agency, commission, official or other instrumentality of
the United States or any state, county, city or other political subdivision in
the United States, or of any foreign country (a "Governmental or Regulatory
Authority") applicable to the Company or any of its Subsidiaries or any of their
respective assets or properties, or (y) any note, bond, mortgage, security
agreement, indenture, license, franchise, contract, lease or other instrument,
obligation or agreement of any kind (together, "Contracts") to which the Company
or any of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries or any of their respective assets or properties is bound, or (z)
any Employee Plan or Benefit Arrangement (defined in Section 3.11); except, with
respect to the foregoing clauses (ii) (x), (y) and (z) those which, individually
or in the aggregate, (I) could not reasonably be expected to have a Material
Adverse Effect or adversely affect the ability of the Company to perform its
obligations hereunder or to consummate the Merger or (II) occur as a result of
the regulatory status of Parent, Sub or their Subsidiaries.
(b) Except for (i) the premerger notification requirements of the HSR Act,
(ii) the requirements of the Exchange Act and the Nasdaq Stock Market, (iii) the
filing of appropriate
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documents relating to the Merger required by the ABCA, and (iv) requirements
of Law necessary to transfer liquor licenses and pharmacy licenses, WIC
permits and Food Stamp permits, no consent, approval or action of, filing
with or notice to any Governmental or Regulatory Authority or other person is
required, under any Law or Order or any Contract to which the Company or any
of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries or any of their respective assets or properties is bound, for
the execution and delivery of this Agreement by the Company, the performance
by the Company of its obligations hereunder or the consummation of the
transactions contemplated hereby, except those that the failure to make or
obtain, individually or in the aggregate, (I) could not reasonably be
expected to have a Material Adverse Effect or adversely affect the ability of
the Company to perform its obligations hereunder or to consummate the Merger
or (II) occur as a result of the regulatory status of Parent, Sub or their
Subsidiaries.
3.5 Brokers and Finders. The Company has not employed any broker or finder
to act on its behalf and has not incurred and will not incur any liability for
any brokerage fees or finders' fees in connection with the transactions
contemplated hereby, other than pursuant to the letter agreement between the
Company and Credit Suisse First Boston Corporation ("CSFBC") dated as of
February 12, 1997, a copy of which has previously been delivered to Parent.
3.6 SEC Filings. The Company has heretofore made available to Parent and
Sub its (i) Annual Report on Form 10-K for the year ended June 29, 1996, (ii)
Quarterly Reports on Form 10-Q for the quarters ended September 28, 1996,
December 28, 1996 and March 29, 1997, (iii) proxy statements relating to all of
the Company's meetings of shareholders (whether annual or special) held or
scheduled to be held since June 29, 1996 and (iv) each other registration
statement, proxy or information statement, form, report and other document filed
by the Company with the SEC since June 29, 1996 (collectively, the "SEC
Filings"). At the time it was filed, each SEC Filing (including all exhibits and
schedules thereto and documents incorporated by reference therein) and, at the
time it is filed, any SEC Filing filed by the Company with the SEC after the
date of this Agreement (i) complied, or with respect to those not yet filed will
comply, in all material respects with the requirements of the Exchange Act and
(ii) did not, or with respect to those not yet filed will not, contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements made, in light of
the circumstances under which they were made, not misleading. The audited
consolidated financial statements and unaudited consolidated interim financial
statements of the Company and its consolidated Subsidiaries included in the SEC
Filings (including, in each case, the notes and schedules, if any, thereto) (the
"Company Financial Statements"), were and will be prepared in accordance with
generally accepted accounting principles applied on a consistent basis during
the periods involved (except as may be indicated therein or in the notes thereto
or, in the case of the unaudited statements, as permitted by Form 10-Q of the
SEC), complied as of their respective dates in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, and fairly presented and will present fairly in
all material respects the consolidated financial position of the Company and its
consolidated Subsidiaries as of the dates thereof and the consolidated results
of their operations and cash flows for the periods then ended (subject, in the
case of any unaudited interim financial statements, to normal recurring year-end
adjustments (which are not expected to
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be, individually or in the aggregate, materially adverse to the Company and
its Subsidiaries taken as a whole)).
3.7 Absence of Certain Changes or Events. Since June 29, 1996, except as
reflected in subsequent SEC Filings filed prior to the date of this Agreement,
(i) there has not been any change, event or development having, or that could
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect or adversely affect the ability of the Company to perform its
obligations hereunder or to consummate the Merger, (ii) the Company and its
Subsidiaries have conducted their respective businesses only in the ordinary
course consistent with past practices; and, since March 29, 1997, neither the
Company nor any of its Subsidiaries has taken any action that, if taken after
the date hereof, would constitute a breach of any provision of Section 5.1.
3.8 Legal Proceedings. (i) There are no actions, suits, arbitrations,
proceedings or investigations pending or, to the knowledge of the Company,
threatened, against the Company or any of its Subsidiaries or any of their
respective assets and properties that, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect or adversely affect the
ability of the Company to perform its obligations hereunder or to consummate the
Merger, and (ii) neither the Company nor any of its Subsidiaries is subject to
any Order that, individually or in the aggregate, is having or could reasonably
be expected to have a Material Adverse Effect or adversely affect the ability of
the Company to perform its obligations hereunder or to consummate the Merger.
3.9 Compliance with Law. Neither the Company nor any of its Subsidiaries
has violated or failed to comply with, or has received any notice from any
Governmental or Regulatory Authority asserting a failure to comply with, any Law
or Order, except where a violation or failure to comply would not have a
Material Adverse Effect or adversely affect the ability of the Company to
perform its obligations hereunder or to consummate the Merger. The Company and
its Subsidiaries have and are in compliance with all permits, licenses and
franchises from Governmental or Regulatory Authorities required to conduct their
businesses as now being conducted, except to the extent that the failure to have
or comply with such permits, licenses and franchises would not have a Material
Adverse Effect or adversely affect the ability of the Company to perform its
obligations hereunder or to consummate the Merger.
3.10 Taxes.
(a) As used herein, "Taxes" means all taxes of any kind, including those
on, measured by or referred to as income, gross receipts, sales, use, ad
valorem, franchise, profits, license, withholding, payroll, employment, excise,
severance, stamp, occupation, premium, value added, property or windfall profits
taxes, and all customs, duties and similar fees, assessments and charges of any
kind whatsoever, together with any interest thereon and any penalties, additions
to tax and additional amounts imposed with respect thereto by any Governmental
or Regulatory Authority. As used herein, "Tax Return" means any return, report,
declaration, information statement and other document with respect to Taxes
required to be filed by the Company or any of its Subsidiaries with
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the Internal Revenue Service or any other Governmental or Regulatory
Authority, including all accompanying schedules.
(b) The Company and its Subsidiaries have timely filed all federal and
state income Tax Returns and all other material Tax Returns required to be filed
by them and have paid all Taxes shown thereon to be due and all other Taxes for
which a notice of assessment or demand for payment has been received by the
Company or its Subsidiaries, except for such Taxes as to which the failure to
pay, individually or in the aggregate, would not be material. There are no
other material Taxes that would be due if asserted by a Governmental or
Regulatory Authority. Neither the Company nor any of its Subsidiaries has
granted any waiver of any statute of limitations with respect to, or any
extension of a period for the assessment of, any Tax. True, correct and
complete copies of the federal and state income Tax Returns of the Company and
its consolidated Subsidiaries for the fiscal years ended June 29, 1996, July 1,
1995, July 2, 1994 and July 3, 1993 have been made available to Parent.
(c) (i) No material claim for unpaid Taxes has become a lien against the
property of the Company or any of its Subsidiaries or is being asserted against
the Company or any of its Subsidiaries nor, to the Company's knowledge, are
there pending any material proposed adjustments to the manner in which any Tax
of a Company or a Subsidiary is determined; (ii) to the knowledge of the
Company, no audit of any Tax Return of the Company or any of its Subsidiaries is
being conducted by a Governmental or Regulatory Authority; (iii) except with
respect to the Change of Control Agreements listed in the Disclosure Schedule
(the "Change of Control Agreements"), the 1993 Stock Incentive Plan, the
Directors' Stock Option Plan and the 1987 Restricted Stock Plan, neither the
Company nor any of its Subsidiaries is a party to any agreement or arrangement
that would result, individually or in the aggregate, in the actual or deemed
payment by the Company or a Subsidiary of any "excess parachute payments" within
the meaning of Section 280G of the Code; and (iv) except with respect to the
1993 Stock Incentive Plan, the Directors' Stock Option Plan and the 1987
Restricted Stock Plan, no acceleration of the vesting schedule for any property
that is substantially unvested within the meaning of the regulations under
Section 83 of the Code will occur in connection with the transactions
contemplated by this Agreement. No claim has been made by a Governmental or
Regulatory Authority in a jurisdiction where the Company or a Subsidiary does
not file Tax Returns that the Company or such Subsidiary is or may be subject to
taxation by that jurisdiction.
(d) Neither the Company nor any Subsidiary has ever (i) joined in or been
required to join in the filing of a consolidated or combined federal, state or
local income Tax Return with respect to which the Company or a Subsidiary could
be liable for the Taxes of a person other than the Company or the Subsidiaries
or (ii) been the subject of a Tax ruling or a closing agreement with respect to
Taxes with any Governmental or Regulatory Authority that has continuing effect.
Neither the Company nor any Subsidiary is a party to any tax sharing or tax
allocation agreement or arrangement pursuant to which it could be liable for
Taxes of a person other than the Company or the Subsidiaries. Neither the
Company nor any Subsidiary has agreed to make nor is it required to
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make any adjustment under Section 481 of the Code by reason of a change in
accounting method or otherwise.
3.11 ERISA and Related Matters.
(a) Each Employee Plan (defined below) has been maintained and
administered in compliance with its terms and with the requirements of
applicable Laws, including the Employee Retirement Income Security Act of 1974,
as amended ("ERISA") and the Code, except where the failure to comply would not
have a Material Adverse Effect. There is no litigation, administrative or
arbitration proceeding, or other dispute pending or, to the Company's knowledge,
threatened that involves any Employee Plan or Benefit Arrangement (defined
below) that could reasonably be expected to have a Material Adverse Effect or a
material adverse effect on any employee or director of the Company or its
Subsidiaries or on any fiduciary (as defined in ERISA Section 3(21)) of such
Employee Plan or Benefit Arrangement.
(b) The Company and its Subsidiaries do not maintain and have never
maintained nor been required to contribute to an "employee benefit plan" as
defined in Section 3 of ERISA that is or was (i) a plan subject to Title IV of
ERISA or (ii) a "multiemployer plan" as defined in Section 3(37) of ERISA.
(c) Neither the Company, its Subsidiaries nor any of their shareholders,
directors, officers or employees has engaged in any transaction with respect to
an Employee Plan that could subject the Company or any of its Subsidiaries to a
tax, penalty or liability for a prohibited transaction, as defined in Section
406 of ERISA or Section 4975 of the Code, except for such taxes, penalties or
liabilities that would not have a Material Adverse Effect.
(d) As used herein:
(i) "Benefit Arrangement" means any employment, severance or similar
contract, or any other contract, plan, policy or arrangement (whether or not
written) providing for compensation, bonus, profit-sharing, stock option or
other stock related rights or other forms of incentive or deferred compensation,
vacation benefits, insurance coverage (including any self-insured arrangement),
health or medical benefits, cafeteria plan benefits, disability benefits,
severance benefits and post-employment or retirement benefits (including
compensation, pension, health, medical and life insurance benefits), other than
an Employee Plan, that is maintained, administered or contributed to by the
Company or any of its Subsidiaries and covers any employee or former employee of
the Company or any of its Subsidiaries.
(ii) "Employee Plan" means a plan or arrangement as defined in Section
3(3) of ERISA that (A) is subject to any provision of ERISA, (B) is maintained,
administered or contributed to by the Company or any of its Subsidiaries and (C)
covers any employee or former employee of the Company or any of its
Subsidiaries.
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3.12 Environmental Matters.
(a) Each of the Company and its Subsidiaries has obtained all material
licenses, permits, authorizations, approvals and consents from all Governmental
or Regulatory Authorities ("Environmental Permits") that are required in respect
of its business or operations under any applicable Environmental Law (defined
below), and each of such Environmental Permits is in full force and effect.
(b) Each of the Company and its Subsidiaries is in compliance with the
terms and conditions of all such Environmental Permits and with all applicable
Environmental Laws, except for such failures that, individually or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect or
adversely affect the ability of the Company to perform its obligations hereunder
or to consummate the Merger.
(c) (i) No site or facility now or previously owned, operated or leased
by the Company or any of its Subsidiaries is listed or proposed for listing on
the National Priorities List or CERCLIS, promulgated pursuant to the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended ("CERCLA"), and the rules and regulations thereunder or on any similar
state or local list of sites requiring investigation or remediation.
(ii) Neither the Company nor any of its Subsidiaries has received any
written notice of any actual or alleged violation of any Environmental Law with
respect to any of its facilities, except a violation or violations that,
individually, or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect or adversely affect the ability of the Company to
perform its obligations hereunder or to consummate the Merger.
(iii) The Company and its Subsidiaries are not subject to any
material outstanding agreements or orders with any Governmental or Regulatory
Authority or other person respecting (A) Environmental Laws, (B) Remedial Action
or (C) any Release of a Hazardous Material.
(iv) Neither the Company nor any of its Subsidiaries has received any
written notice or request for information pertaining to a response action (as
defined by CERCLA), with respect to any of its sites or facilities now or
previously owned, operated or leased by them, except for notices or requests
that individually or in the aggregate could not reasonably be expected to have a
Material Adverse Effect or adversely affect the ability of the Company to
perform its obligations hereunder or to consummate the Merger.
(v) No Hazardous Material is present (except in quantities for retail
sale to consumers or for store maintenance) or has been Released (defined below)
at, on, about, under, or from any of the Company or any of its Subsidiaries'
sites or facilities, now or previously owned, operated or leased by them, except
in compliance with Environmental Law (defined below), and except for the
presence of Hazardous Material or such Release(s) which individually or in the
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aggregate could not reasonably be expected to have a Material Adverse Effect or
adversely affect the ability of the Company to perform its obligations hereunder
or to consummate the Merger.
(d) No liens have arisen under or pursuant to any Environmental Law on any
site or facility owned, operated or leased by the Company or any of its
Subsidiaries, other than liens that individually or in the aggregate could not
reasonably be expected to have a Material Adverse Effect or adversely affect the
ability of the Company to perform its obligations hereunder or to consummate the
Merger.
(e) There have been no material environmental investigations, studies,
audits, tests, reviews or other analyses conducted by, or which are in the
possession of, the Company or any of its Subsidiaries in relation to any site or
facility owned, operated or leased by the Company or any of its Subsidiaries,
except for those the reports of which have been made available to Parent prior
to the execution of this Agreement.
(f) No sites or facilities, now or previously owned, operated or leased by
the Company or any of its Subsidiaries, have or had at the time of ownership,
operation, or leasing, any (i) underground storage tanks, (ii) friable asbestos,
(iii) polychlorinated biphenyls ("PCBs"), or (iv) chlorofluorocarbons ("CFCs"),
except in circumstances which could not reasonably be expected to have
individually or in the aggregate a Material Adverse Effect or adversely affect
the ability of the Company to perform its obligations hereunder or to consummate
the Merger.
(g) As used herein:
(i) "Environmental Law" means any Law or Order relating to the
environment or to emissions, discharges or Releases of pollutants, contaminants,
or chemicals, or industrial, toxic or hazardous substances or wastes, into the
environment (including structures, ambient air, soil, surface water, ground
water, wetlands, land or subsurface strata), or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants, chemicals or industrial,
toxic or hazardous substances or wastes.
(ii) "Hazardous Material" means (A) any chemicals or other materials
or substances that are defined as or included in the definition of "hazardous
substances," "hazardous wastes," "hazardous materials," "extremely hazardous
wastes," "restricted hazardous wastes," "toxic substances," "pollutants,"
"contaminants," or words of similar import under any Environmental Law,
including petroleum, friable asbestos, PCBs, and CFCs; and (B) any other
chemical, material or substance, the presence of or exposure to which is
prohibited, limited or regulated by any Governmental or Regulatory Authority
under any Environmental Law.
(iii) "Release" means any actual or threatened (as defined under
CERCLA) release, spill, effluent, emission, leaking, pumping, injection,
deposit, disposal, discharge, dispersal, leaching or migration into the
environment or any structure.
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(iv) "Remedial Action" means all actions, including any capital
expenditures, required by a Governmental or Regulatory Authority, required under
any Environmental Law or voluntarily undertaken to (A) clean up, remediate,
remove, treat, or in any other way ameliorate or address any Hazardous Materials
Released into the environment; (B) prevent the Release, or minimize the further
Release of any Hazardous Material so it does not endanger or threaten to
endanger public health or the environment; (C) perform pre-remedial studies and
investigations or post-remedial monitoring and care relating to a Release; or
(D) bring the applicable party into compliance with any Environmental Law.
3.13 Information Supplied.
(a) The Schedule 14D-9 will not, on the date of its filing with the SEC
and the date it is first published, sent or given to shareholders, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading, except
that no representation is made by the Company with respect to information
supplied in writing by or on behalf of Parent or Sub expressly for inclusion
therein and information incorporated by reference therein from documents filed
by Parent or any of its Subsidiaries with the SEC. The Schedule 14D-9 will
comply as to form in all material respects with the requirements of the Exchange
Act and the rules and regulations thereunder.
(b) Neither the information supplied or to be supplied in writing by or on
behalf of the Company for inclusion in, nor the information incorporated by
reference from documents filed by the Company or any of its Subsidiaries with
the SEC into, the Schedule 14D-1 and the Offer Documents will, on the date the
Schedule 14D-1 and the Offer Documents are filed with the SEC or on the date
they are first published, sent or given to shareholders, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading.
(c) The Company (and Parent and Sub, with respect to written information
supplied by either of them specifically for use in the Schedule 14D-9) shall
promptly correct the Schedule 14D-9 if and to the extent that it shall have
become false or misleading in any material respect and the Company shall take
all steps necessary to cause such document as so corrected to be filed with the
SEC and disseminated to the Company's shareholders to the extent required by
applicable federal securities laws.
3.14 Real Property.
(a) Section 3.14(a) of the Disclosure Schedule contains a list of all real
property or interests in real property owned or leased by the Company and its
Subsidiaries. Copies of all leases so listed, including all modifications,
amendments and supplements thereto, have heretofore been
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made available to Parent and all such leases are in full force and effect in
accordance with their respective terms.
(b) There are no existing defaults or events that, with notice or lapse of
time or both, would constitute defaults, under any such leases, except for
defaults that individually or in the aggregate could not reasonably be expected
to have a material adverse effect on the Company's ability to continue to
operate the relevant properties as currently operated. Neither the consummation
of the Offer nor the Merger shall cause the termination of any such leases, or
have a material adverse effect on the rights thereunder of the Company or its
Subsidiaries.
(c) The Company and its Subsidiaries enjoy peaceful and undisturbed
possession of the leased properties. The Company or its relevant Subsidiary has
good and valid title to the leasehold estate in each property leased by it,
except for (i) mortgages and encumbrances that secure indebtedness that are
properly reflected on the Company Financial Statements; (ii) liens for taxes
accrued but not yet payable; (iii) liens arising as a matter of Law in the
ordinary course of business with respect to obligations incurred after the date
of the Company Financial Statements, provided that the obligations secured by
such liens are not delinquent or are being contested in good faith; and (iv)
such imperfections of title and encumbrances, if any, as do not, individually or
in the aggregate, materially detract from the value or materially interfere with
the present use of such property.
(d) The Company has good and marketable fee title to the real property
interests owned by it, except for (i) mortgages and encumbrances that secure
indebtedness that are properly reflected on the Company Financial Statements;
(ii) liens for taxes accrued but not yet payable; (iii) liens arising as a
matter of Law in the ordinary course of business with respect to obligations
incurred after the date of the Company Financial Statements, provided that the
obligations secured by such liens are not delinquent or are being contested in
good faith; and (iv) such imperfections of title and encumbrances, if any, as do
not, individually or in the aggregate, materially detract from the value or
materially interfere with the present use of such property.
(e) The Company or its Subsidiaries are not in material violation of any
zoning, building or safety ordinance, regulation or requirement or other Law
applicable to the operation of the owned real properties or leased properties
likely to impede the normal operation of the business of the Company or its
Subsidiaries, and the Company or its Subsidiaries have not received any written
notice of any such violation with which such recipient has not complied.
(f) There are no pending, or, to the knowledge of the Company, threatened
condemnation or similar proceedings relating to any of the owned real properties
or leased properties of the Company or its Subsidiaries.
3.15 Labor Matters. Except as set forth in Section 3.15 of the Disclosure
Schedule, (a) there is no unfair labor practice complaint against the Company or
any Subsidiary pending or to the knowledge of the Company threatened before the
National Labor Relations Board; (b) there is no labor strike, dispute, slow down
or stoppage actually pending or, to the knowledge of the Company,
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threatened against or involving the Company or any Subsidiary; and (c) no
private agreement restricts the Company or any Subsidiary from relocating,
closing or terminating any of their operations or facilities. There are no
controversies pending or, to the knowledge of the Company, threatened between
the Company or any of its Subsidiaries and any representatives of its
employees, and, to the knowledge of the Company, there are no organizational
efforts underway involving employees of the Company or any of its
Subsidiaries, except in each case activities that would not, individually or
in the aggregate, have a Material Adverse Effect or adversely affect the
ability of the Company to perform its obligations hereunder or to consummate
the Merger.
3.16 Contracts; Certain Agreements.
(a) Except (i) as disclosed in the SEC Filings, (ii) documents identified
in Section 3.16(a) of the Disclosure Schedule, (iii) the leases identified in
Exhibit 3.14 to the Disclosure Schedule and (iv) purchase orders issued for
inventory and supplies in the ordinary course of business, there is no contract
or agreement that is material to the business, financial condition or results of
operations of the Company and its Subsidiaries taken as a whole. Neither the
Company nor any of its Subsidiaries nor, to the knowledge of the Company, any
other party thereto is in breach or violation of, or in default in the
performance or observance of any term or provision of, and no event has occurred
that, with notice or lapse of time or both, could reasonably be expected to
result in a default under, any Contract to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries or
any of their respective assets or properties is bound, except for breaches,
violations and defaults that individually or in the aggregate, are not having
and could not reasonably be expected to have a Material Adverse Effect or
adversely affect the ability of the Company to perform its obligations hereunder
or to consummate the Merger.
(b) Neither the Company nor any of its Subsidiaries is a party to any oral
or written (i) union or collective bargaining agreement, (ii) agreement with any
executive officer or other key employee of the Company or any of its
Subsidiaries the benefits of which are contingent or vest, or the terms of which
are materially altered, upon the occurrence of a transaction involving the
Company or any of its Subsidiaries of the nature contemplated by this Agreement,
except for the Change of Control Agreements and agreements pursuant to the
Directors' Stock Option Plan, the 1993 Stock Incentive Plan and the 1987
Restricted Stock Plan, (iii) employment agreement with respect to any executive
officer or other key employee of the Company or any of its Subsidiaries, except
for the Company's employment agreement with David W. Morrow dated as of
January 1, 1997, or (iv) agreement or plan, including any stock option, stock
appreciation right, restricted stock, stock purchase plan or Benefit
Arrangement, any of the benefits of which will be increased, or the vesting of
the benefits of which will be accelerated, by the occurrence of any of the
transactions contemplated by this Agreement, or the value of any of the benefits
of which will be calculated on the basis of any of the transactions contemplated
by this Agreement, except for those listed in clause (ii) above. Each of the
Agreement among Shareholders dated October 8, 1987 and the Agreement among
Shareholders dated October 14, 1988, each by and among the Company and the
shareholders named therein, as amended, are terminated in their entirety and
have no further force or effect.
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(c) Except as set forth in Section 3.16(c) of the Disclosure Schedule, the
consummation of the Offer, the Merger and the other transactions contemplated by
this Agreement will not result in payments (including any gross-up payments in
respect of any "excess parachute payments" within the meaning of Section 280G of
the Code) under the agreements referred to in Section 3.16(b)(ii).
3.17 Absence of Certain Liabilities. Except for matters reflected or
reserved against in the balance sheet for the period March 29, 1997 included in
the Company Financial Statements, neither the Company nor any of its
Subsidiaries had at that date, or has incurred since that date, any liabilities
or obligations (whether absolute, accrued, contingent, fixed or otherwise, or
whether due or to become due) of any nature, whether or not required by
generally accepted accounting principles to be reflected in a consolidated
balance sheet of the Company and its consolidated Subsidiaries (including the
notes thereto), except liabilities or obligations that (i) were incurred in the
ordinary course of business consistent with past practices and (ii) have not
had, and could not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect or adversely affect the ability of the
Company to perform its obligations hereunder or to consummate the Merger.
3.18 Opinion of Financial Advisor. The Company has received a written
opinion dated July 7, 1997 from its financial advisor, CSFBC that, as of such
date, and on the basis of and subject to the matters set forth therein, the Per
Share Price was fair from a financial point of view to the Company's
shareholders and such opinion shall not have been (i) withdrawn or (ii) modified
or amended in a manner that is adverse to Parent, Sub or the Offer, it being
understood by the Company, Parent and Sub that CSFBC has not been, and is not
expected to be, asked to update its opinion and shall have no express or implied
obligation to do so, and provided that any advice of CSFBC contemplated by
Section 5.2(a) shall not be deemed to be such a withdrawal, modification or
amendment. A copy of such opinion has been provided to Parent.
3.19 Takeover Statute. The execution, delivery and performance of this
Agreement and consummation of the transactions contemplated hereby will not
cause to be applicable to the Company any "fair price," "moratorium," "control
share acquisition" or other similar anti-takeover statute or regulation enacted
under Alabama law.
3.20 Insurance. There are no material retroactive premium adjustments
under any of the Company's insurance policies or other insurance arrangements
with third parties.
3.21 Intellectual Property.
(a) The Company, directly or indirectly, owns, licenses or otherwise
possesses (or has applied for), legally enforceable rights to use as they are
currently used in the conduct of the Company's business all trademarks, trade
names, service marks, trade dress, logos and designs and any and all
registrations and applications therefor (and all goodwill associated therewith),
all copyrights, whether or not registered, all patents and any applications
therefor, computer software and tangible or intangible proprietary information
or material (the "Company Intellectual Property
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Rights"), except where the failure to so own, be licensed or otherwise
possess legally enforceable rights to use could not reasonably be expected to
have a Material Adverse Effect.
(b) Section 3.21 (b) of the Disclosure Schedule sets forth a complete and
accurate list of the Company's (i) registered trademarks, trade names, service
marks and copyrights, and (ii) patent applications or issued patents. Except as
set forth in Section 3.21(b) of the Disclosure Schedule, no claims with respect
to the Company Intellectual Property Rights have been asserted or, to the
knowledge of the Company, are threatened by any person, (i) that the
manufacture, use, sale or licensing by the Company or any of its Subsidiaries
infringes on any copyright, patent, trademark, trade secret, service mark, or
other proprietary right of any person, (ii) against the use by the Company or
any of its Subsidiaries of any material trademarks, service marks, trade names,
trade secrets, copyrights, patents, technology, know-how or computer software
programs and applications used in the business of the Company and its
Subsidiaries as currently conducted, or (iii) challenging the ownership,
validity or effectiveness of any of the Company Intellectual Property Rights.
All registered trademarks, service marks, patents, and copyrights owned or held
by the Company are valid and subsisting and not subject to cancellation or
abandonment proceedings. No claims or actions have been asserted or are
threatened by the Company against any person with regard to the Company
Intellectual Property Rights and, to the knowledge of the Company, there is no
unauthorized use, infringement or misappropriation of any of the Company
Intellectual Property Rights by any third party, including any employee or
former employee of the Company or any of its subsidiaries, that could reasonably
be expected to have a Material Adverse Effect or adversely affect the ability of
the Company to perform its obligations hereunder or to consummate the Merger.
No Company Intellectual Property Right or product of the Company or any of its
Subsidiaries is subject to any outstanding decree, order, judgment, or
stipulation restricting in any manner the licensing thereof by the Company or
any of its Subsidiaries.
3.22 Certain Agreements. Neither the Company nor any of its Subsidiaries
is a party to, or bound by, any contract or agreement that materially limits the
ability of the Company directly or through any of its Subsidiaries to compete in
any line of business or with any person in any geographic area during any period
of time.
3.23 Indemnification Claims. The Company is not aware of any
indemnification, breach of contract or similar claim by or against the Company
or any of its Subsidiaries that is pending or threatened (or that could be
reasonably expected to be made in the future), in each case in excess of
$250,000 in amount, with respect to any acquisition by the Company after
January 1, 1992.
3.24 Prior Negotiations. The Company, CSFBC and the Company's other
advisors and representatives have not been involved in substantive discussions
with any group or person (or any of their respective affiliates or associates)
or their representatives, or furnished material confidential information
(including the offering memorandum prepared by the Company) to any such group or
person (or any of their respective affiliates or associates) or their
representatives, in connection with a possible takeover proposal except for such
groups or persons which have executed and delivered to the Company a customary
confidentiality agreement (containing "standstill" provisions that are
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substantially similar to the analogous provisions in the Confidentiality
Agreement (as defined in Section 9.11)).
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Each of Parent and Sub represents and warrants to the Company as follows:
4.1 Organization of Parent and Sub. Parent and Sub are corporations duly
incorporated, validly existing and in good standing under the laws of their
respective jurisdictions of incorporation and have all requisite corporate power
and authority to own their respective properties and carry on their respective
businesses as now being conducted. Parent and Sub are duly qualified as foreign
corporations to do business, and are in good standing, in each jurisdiction
where the character of their properties owned or held under lease or the nature
of their activities makes such qualification necessary, except to the extent
that any failure to so qualify or be in good standing would not have a material
adverse effect on Parent or Sub. Parent has delivered to the Company correct
and complete copies of the certificates of incorporation and bylaws of Parent
and Sub. Sub was formed solely for the purpose of engaging in the transactions
contemplated by this Agreement, has engaged in no other business activities and
has conducted only such operations as are required for the execution, delivery
and performance of this Agreement and the consummation of the transactions
contemplated hereby.
4.2 Authority Relative to this Agreement. Each of Parent and Sub has all
requisite corporate power and authority to enter into this Agreement, to perform
its obligations under this Agreement and to consummate the transactions
contemplated hereby. The execution, delivery and performance of this Agreement
by each of Parent and Sub and the consummation by each of Parent and Sub of the
transactions contemplated hereby have been duly authorized by all necessary
corporate (including shareholder) action on the part of Parent and Sub. This
Agreement has been duly and validly executed and delivered by each of Parent and
Sub, and, assuming the due authorization, execution and delivery of this
Agreement by the Company, constitutes the legal, valid and binding agreement of
Parent and Sub enforceable in accordance with its terms.
4.3 Non-Contravention; Approvals and Consents.
(a) The execution and delivery of this Agreement by each of Parent and Sub
do not, and the performance by Parent and Sub of its obligations hereunder and
the consummation of the transactions contemplated hereby will not, conflict
with, result in a violation or breach of, constitute (with or without notice or
lapse of time or both) a default under, permit the termination of any provision
of, or result in the termination of, the acceleration of the maturity of, or the
acceleration of the performance of, or result in the creation or imposition of
any lien upon any of the assets or properties of the Parent or any of its
Subsidiaries under, any of the terms, conditions or provisions of (i) the
certificates of incorporation or bylaws (or other comparable charter documents)
of the Parent or any of its Subsidiaries, or (ii) subject to the taking of the
actions described in paragraph
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(b) of this Section, (x) any Law or Order applicable to Parent or any of its
Subsidiaries or any of their respective assets or properties, (y) any
Contract to which Parent or any of its Subsidiaries is a party or by which
Parent or any of its Subsidiaries or any of their respective assets or
properties is bound, or (z) any employee benefit plan of Parent or any
Subsidiaries; except, with respect to the foregoing clauses (x), (y) and (z)
those that, individually or in the aggregate, (I) could not reasonably be
expected to adversely affect the ability of Parent and Sub to consummate the
transactions contemplated hereby or (II) occur as a result of the regulatory
status of the Company or its Subsidiaries, and except for the consent of the
holders of a majority in principal amount outstanding of its 12% Senior Notes
due 2006 issued pursuant to the Indenture dated as of March 5, 1996 described
on Annex A.
(b) Except for (i) the premerger notification requirements of the HSR Act,
(ii) the requirements of the Exchange Act, any relevant national securities
exchange and the Nasdaq Stock Market, (iii) the filing of appropriate documents
relating to the Merger required by the ABCA, and (iv) the consent of the holders
of a majority in principal amount outstanding of its 12% Senior Notes due 2006
issued pursuant to the Indenture dated as of March 5, 1996 described on Annex A,
no consent, approval or action of, filing with or notice to any Governmental or
Regulatory Authority or other person is necessary or required, under any of the
terms, conditions or provisions of any Law or Order or any Contract to which
Parent or any of its Subsidiaries is a party or by which Parent or any of its
Subsidiaries or any of their respective assets or properties is bound, for the
execution and delivery of this Agreement by each of Parent and Sub, the
performance by each of Parent and Sub of its obligations hereunder or the
consummation of the transactions contemplated hereby, except those that the
failure to make or obtain, individually or in the aggregate, (I) could not
reasonably be expected to adversely affect the ability of Parent and Sub to
consummate the transactions contemplated hereby or (II) occur as a result of the
regulatory status of the Company or its Subsidiaries.
4.4 Legal Proceedings. (i) There are no actions, suits, arbitrations,
proceedings or investigations pending or, to the knowledge of Parent,
threatened, against Parent or any of its Subsidiaries or any of their respective
assets and properties that, individually or in the aggregate, could reasonably
be expected to adversely affect the ability of Parent and Sub to consummate the
transactions contemplated hereby, and (ii) neither Parent nor any of its
Subsidiaries is subject to any Orders that, individually or in the aggregate,
could reasonably be expected to adversely affect the ability of Parent and Sub
to consummate the transactions contemplated hereby.
4.5 Financing. Parent has received bridge financing commitments
aggregating at least $350 million, which is sufficient to pay the aggregate
amount payable in respect of the Shares upon the consummation of the Offer and
the Merger.
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4.6 Information Supplied.
(a) The Schedule 14D-1 and the Offer Documents will not, on the date filed
with the SEC and first published, sent or given to shareholders of the Company,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading, except that no representation is made by Parent or Sub with respect
to information supplied in writing by or on behalf of the Company expressly for
inclusion therein and information incorporated by reference therein from
documents filed by the Company or any of its Subsidiaries with the SEC. The
Schedule 14D-1 and the Offer Documents will comply as to form in all material
respects with the requirements of the Exchange Act.
(b) Neither the information supplied or to be supplied in writing by or on
behalf of Parent or Sub for inclusion in, nor the information incorporated by
reference from documents filed by Parent or any of its Subsidiaries with the SEC
into, the Schedule 14D-9 will, on the date the Schedule 14D-9 is filed with the
SEC and first published, sent or given to shareholders of the Company, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading.
(c) Parent and Sub (and the Company, with respect to written information
supplied specifically for use in the Schedule 14D-1 and the Offer Documents)
shall promptly correct the Schedule 14D-1 and the Offer Documents if and to the
extent that they shall have become false or misleading in any material respect
and Parent and Sub shall take all steps necessary to cause such documents as so
corrected to be filed with the SEC and disseminated to the Company's
shareholders to the extent required by applicable federal securities laws.
ARTICLE V
COVENANTS OF THE COMPANY
5.1 Conduct of Business by the Company Pending the Merger. Except as
described on the Disclosure Schedule or as otherwise contemplated by this
Agreement, prior to the Effective Time, unless Sub shall otherwise agree in
writing (provided, however, that following the appointment of Sub's designees to
the Company's Board of Directors pursuant to Section 1.3, Sub shall be deemed to
have consented to all actions taken by the Company thereafter, except actions,
if any, directed or caused by those directors who were not so designated by the
Sub or by the Board of Directors of the Company prior to the appointment of such
designees):
(a) The business of the Company and its Subsidiaries shall be conducted
only in the ordinary course consistent with past practices.
(b) The Company shall use all commercially reasonable efforts to preserve
intact in all material respects the business organization of the Company and its
Subsidiaries, to keep available
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the services of its and their present officers and employees and to preserve
the goodwill of those having business relationships with it and its
Subsidiaries.
(c) Except as permitted in Section 5.3, the Company shall not, and shall
not permit any of its Subsidiaries to (i) amend its articles of incorporation or
bylaws (or comparable charter documents); (ii) split, combine, reclassify or
take similar action with respect to any of its capital stock; (iii) issue or
agree to issue any additional shares of, or rights of any kind to acquire any
shares of, its capital stock of any class, other than, in the case of the
Company, shares of capital stock and Rights issuable pursuant to the Rights
Agreement and Shares issuable upon the exercise of outstanding options to
purchase an aggregate of 455,050 Shares pursuant to the 1993 Stock Incentive
Plan and the Directors' Stock Option Plan; (iv) purchase, redeem or otherwise
acquire any Shares or any other shares of its capital stock of any class; or (v)
declare, set aside or pay any dividend payable in cash, stock or property or
make any other distributions with respect to Shares or any other shares of its
capital stock of any class; or (vi) make any commitment to do any of the
foregoing, except for (A) the declaration and payment of dividends by a
wholly-owned Subsidiary of the Company solely to the Company and (B) the
declaration and payment of regular quarterly cash dividends by the Company
consistent with past practices (including as to declaration, record and payment
dates) in no event to exceed $0.11 per Share per fiscal quarter.
(d) The Company shall not, and shall not permit any of its Subsidiaries to
(i) acquire (by merger, consolidation or acquisition of stock or assets) any
corporation, partnership or other business organization or division thereof or
make any investment in any other person, either by purchase of stock or
securities, contribution to capital (other than to wholly-owned Subsidiaries),
property transfer or purchase of any material amount of property or assets; (ii)
other than sales of inventory in the ordinary course of its business consistent
with past practices and other than the sale of surplus real estate, sell, lease,
grant any security interest in or otherwise dispose of or encumber any material
amount of its assets or properties; (iii) incur any indebtedness for borrowed
money other than borrowings in the ordinary course of business under existing
lines of credit (or under any refinancing of such existing lines of credit), or
issue any debt securities, or assume, guarantee, endorse or otherwise as an
accommodation become responsible for the obligations of any other person (other
than a wholly-owned Subsidiary); (iv) make any capital expenditure or commitment
for additions to plant, property or equipment constituting capital assets except
expenditures pursuant to commitments existing as of the date of this Agreement
and reflected in Section 5.1(d) of the Disclosure Schedule or included in the
Company's budgets for fiscal years 1997 and 1998 as described in Section 5.1(d)
of the Disclosure Schedule; (v) change any assumption underlying, or method of
calculating, any bad debt, contingency or other reserve (except changes that may
be necessary or appropriate in order to comply with a change in generally
accepted accounting principles that takes effect after the date of this
Agreement); (vi) pay, discharge or satisfy any material claims, liabilities or
obligations (absolute, accrued, contingent or otherwise) other than (A) the
payment, discharge or satisfaction of liabilities in the ordinary course
consistent with past practices and (B) costs relating to this Agreement and the
transactions contemplated hereby; (vii) waive, release, grant or transfer any
rights of material value or modify or change in any material respect any
existing material license, lease, contract or other document; or (viii) enter
into any
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contract, agreement, commitment or arrangement with respect to any of the
foregoing; provided, however, that, notwithstanding the foregoing, nothing
herein shall prohibit the Company from financing, constructing, equipping,
supplying, staffing and opening new stores and remodeling existing stores for
which commitments have been entered into by the Company prior to the date
hereof and which commitments are reflected in Section 5.1(d) of the
Disclosure Schedule.
(e) Neither the Company nor any of its Subsidiaries shall (i) enter into
any new severance or change of control agreement, or any employment agreement;
(ii) amend any existing employment contract or change of control or severance
agreement; (iii) grant any increases in compensation or benefits other than
increases in the ordinary course consistent with past practices; (iv) adopt any
new Employee Plan or Benefit Arrangement; (v) make any change in or to any
existing Employee Plan or Benefit Arrangement, other than such changes as are
required by Law or that, in the opinion of its counsel, are necessary or
advisable to maintain the tax-qualified status of such Employee Plan or Benefit
Arrangement; (vi) make any grants, awards or distributions under any Employee
Plan or Benefit Arrangement, other than those grants, awards or distributions
required to be made under such Employee Plans or Benefit Arrangements as in
effect on the date of this Agreement; or (vii) make any amendment to any
provision of any outstanding grant or award.
(f) The Company shall not cause any of the Company's representations or
warranties that are subject to a materiality qualification to become untrue and
shall not cause any of the Company's representations and warranties that are not
so qualified to become untrue in any material respect.
5.2 No Solicitation
(a) The Company shall not, nor shall it permit any of its Subsidiaries to,
nor shall it authorize or permit any officer, director or employee of, or any
investment banker, attorney or other advisor or representative of, the Company
or any of its Subsidiaries to, directly or indirectly, (i) solicit, initiate or
encourage the submission of any takeover proposal, or (ii) participate in any
discussions or negotiations regarding, or furnish to any person or group (as
those terms are defined in Section 9.2) any information with respect to, or take
any other action to facilitate any inquiries or the making of any proposal that
constitutes or may reasonably be expected to lead to any takeover proposal,
provided, however, that prior to the expiration of the Offer, upon receipt by
the Company of a bona fide written unsolicited takeover proposal to purchase all
the Shares outstanding for (A) a cash amount per Share in excess of the Per
Share Price or (B) consideration which is not all cash that the Company has
determined reasonably and in good faith to be in excess of the Per Share Price
and that CSFBC has advised the Company in writing is in excess of the Per Share
Price (a copy of which advice has been furnished by the Company to Parent), in
either case by a group or person (or any of their respective affiliates or
associates) who (x) within the past 12 months has not executed and delivered to
the Company a confidentiality agreement and whose failure to execute a
confidentiality agreement does not constitute a breach of Section 3.24 hereof
(any such person or group a "New Bidder") and (y) in the good faith reasonable
judgment of the Board of Directors after consultation with CSFBC possesses the
financial wherewithal reasonably to be capable of consummating the takeover
proposal (a "superior proposal"), following notice to Parent as required
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by Section 5.2(c), the Company may participate in negotiations with a New
Bidder regarding the superior proposal and furnish information with respect
to the Company pursuant to a customary confidentiality agreement (containing
"standstill" provisions no less onerous than in the Confidentiality Agreement
(as defined in Section 9.11)). Without limiting the foregoing, it is
understood that any violation of the restrictions set forth in the preceding
sentence by any officer, director or employee of the Company or any of its
subsidiaries or any investment banker, attorney or other advisor or
representative of the Company or any of its Subsidiaries, shall be deemed to
be a breach of this Section 5.2(a) by the Company. For purposes of this
Agreement, "takeover proposal" means any proposal for a tender offer, merger
or other transaction involving any Change in Control described in Section
8.3(b)(i) or (iii).
(b) Neither the Board of Directors nor any committee thereof shall (i)
withdraw or modify, in a manner adverse to Parent or Sub, the approval or
recommendation by the Board of Directors nor any such committee of this
Agreement, the Offer or the Merger, (ii) approve or recommend any takeover
proposal, (iii) enter into any agreement with respect to any takeover
proposal, (iv) amend the Rights Agreement, redeem the Rights or waive any
other anti-takeover provisions (including Article Eleven of the Company's
Articles of Incorporation) or otherwise facilitate any other takeover
proposal in any respect, or (v) terminate this Agreement in connection with
any takeover proposal. Notwithstanding the foregoing, in the event the Board
of Directors receives a superior proposal from a New Bidder or any other
group or person which the Board of Directors determines in its good faith
reasonable judgment (and based on the written advice of CSFBC) to be more
favorable to the Company's shareholders than the Offer and Merger, the Board
of Directors may (subject to the following sentence): (A) withdraw or modify
its approval or recommendation of this Agreement, the Offer and the Merger
taken together, (B) recommend any such superior proposal, or (C) solely with
respect to such a superior proposal submitted by a New Bidder, terminate this
Agreement in order to enter into an agreement with respect to such a superior
proposal or amend the Rights Agreement, redeem the Rights or waive any other
anti-takeover provisions in respect of such superior proposal and otherwise
facilitate such proposal, in each case (subject to Section 8.1(b)(iv)) at any
time following Parent's receipt of written notice of the Company's intent to
take the actions described in clauses (A), (B) and/or (C) above (a "Section
5.2(b) Notice") advising Parent that the Board of Directors has received a
superior proposal, specifying the material terms and conditions of such
superior proposal and identifying the person or group making such superior
proposal. The Company may deliver the Section 5.2(b) Notice and take any of
the foregoing actions described in clauses (A), (B) and/or (C) only if (i)
the Company is not otherwise in material breach of this Agreement and (ii)
the Company pays to Parent concurrent with the delivery of the Section 5.2(b)
Notice the Termination Fee and the Expense Fee (as defined in Section 8.3).
(c) In addition to the obligations of the Company set forth in paragraph
(b) above, the Company shall promptly advise Parent orally and in writing of
any takeover proposal, or any inquiry with respect to or which could
reasonably be expected to lead to any takeover proposal, the material terms
and conditions of such takeover proposal or inquiry, and the identity of the
person making any such takeover proposal or inquiry. The Company will keep
Parent fully informed of the status and
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details of any such takeover proposal or inquiry and the Company's responses
and other actions with respect thereto. The parties understand and agree
that the Company shall be entitled to disclose to its shareholders any such
information which is required by applicable law (including without limitation
the Exchange Act) regarding any takeover proposal. The Company will not
amend, modify, waive, or terminate any of the provisions of any
confidentiality agreement or "standstill" agreement with any group or person
to which the Company or any of its Subsidiaries is a party and shall request
the return of any confidential information pursuant to the terms thereof.
The Company agrees that Parent shall be permitted to enforce such agreements
on the Company's behalf including seeking equitable relief to the extent
available.
(d) Notwithstanding anything to the contrary contained herein, during
the period commencing on the date hereof and ending 180 calendar days
following the date of this Agreement, the Company shall not permit any of the
actions described in Section 5.2(a) or Section 5.2(b) (except the actions
described in clauses (A) and (B) of Section 5.2(b)) involving any person or
group, together with their affiliates or associates, who is or should be
listed in or referred to in Section 3.24 of the Disclosure Schedule.
5.3 Company Stock Plans. Prior to the Effective Time, the Company may
elect to accelerate the exercisability of options granted and outstanding
prior to the date of this Agreement under the Directors' Stock Option Plan
and the 1993 Stock Incentive Plan and the vesting of restricted shares
granted and outstanding prior to the date of this Agreement under the 1987
Restricted Stock Plan and may waive the two-year holding period for stock
issued pursuant to the Director Compensation Plan. In addition, the Company
shall have the right prior to the Effective Time to pay to any holder of an
outstanding option to purchase Common Stock an amount equal to the difference
between the Per Share Price and the per Share exercise price of a stock
option held by such holder multiplied by the number of Shares then subject to
such option (whether or not then exercisable), less any amounts required to
be withheld under the Code or any provision of state, local or foreign tax
law, in exchange for the surrender and cancellation of such stock option.
The Company shall use its commercially reasonable best efforts to cause all
options to be exercised prior to the Effective Time. The Company has been
advised by its directors that they will exercise all options held by them
prior to the consummation of the Offer. Prior to the Effective Time, the
Company may adopt any amendments to its Directors' Stock Option Plan, 1993
Incentive Compensation Plan or 1987 Restricted Stock Plan or any agreements
thereunder as may be necessary or appropriate to effectuate the foregoing,
provided that no such amendment may reduce the per Share exercise price of
such options. In addition, the Company may terminate or amend the Director
Compensation Plan to eliminate future issuances of stock.
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ARTICLE VI
ADDITIONAL COVENANTS
6.1 Proxy Statement and Special Meeting.
(a) Promptly after consummation of the Offer, the Company shall prepare
and file with the SEC, if required by the rules of the SEC, a preliminary
proxy statement, together with a form of proxy, or information statement,
with respect to the special meeting of the Company's shareholders at which
the shareholders of the Company will be asked to approve the Merger (the
"Special Meeting"). The Company shall use its best efforts to have the proxy
statement or information statement cleared by the SEC and, as promptly as
practicable thereafter, subject to compliance with the rules and regulations
of the SEC, the Company shall mail a definitive proxy statement or
information statement to shareholders of the Company (such proxy or
information statement and all amendments or supplements thereto, if any, the
"Proxy Statement"). Parent, Sub and the Company shall cooperate with each
other in the preparation of the Proxy Statement. The Company shall notify
Parent of the receipt of any comments of the SEC with respect to the Proxy
Statement and of any requests by the SEC for additional information, and
promptly shall provide to Parent copies of all correspondence between the
Company or any representative of the Company and the SEC with respect to the
Proxy Statement. The Company shall give Parent and its counsel the
opportunity to review the Proxy Statement and all responses to SEC comments
and requests for additional information before they are sent to the SEC.
Each of the Company, Parent and Sub agrees to use its best efforts, after
consultation with the other parties hereto, to respond promptly to all such
comments of and requests for information from the SEC and to cause the Proxy
Statement to be mailed at the earliest practicable time to the Company's
shareholders entitled to vote at the Special Meeting.
(b) Promptly after consummation of the Offer, the Company shall take all
action necessary, in accordance with the ABCA and its Articles of
Incorporation and Bylaws, to convene the Special Meeting.
(c) Subject to the fiduciary obligations of the Board of Directors under
applicable law, (i) the Proxy Statement shall contain the recommendation of
the Board of Directors that the shareholders of the Company vote to approve
the Merger, and (ii) the Company shall, if proxies are solicited, use its
best efforts to solicit from its shareholders proxies in favor of such
approval and to take all other action reasonably necessary or helpful to
secure the vote or consent of shareholders required to effect the Merger.
(d) At the Special Meeting, Parent and its direct and indirect
Subsidiaries shall vote, or cause to be voted, all of the Shares then owned
by any of them in favor of the Merger.
6.2 HSR Matters.
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(a) No later than seven business days after the date of this Agreement,
Parent, Sub and the Company shall file (or cause their Ultimate Parent Entities
as defined in the HSR Act to file) with the Federal Trade Commission ("FTC") and
the Antitrust Division of the United States Department of Justice ("DOJ") the
appropriate notification and report forms under the HSR Act with respect to the
transactions contemplated by this Agreement. Parent, Sub and the Company shall
comply, and Parent and Sub shall cause their Ultimate Parent Entities to comply,
at the earliest practicable date with any request from the FTC or the DOJ for
additional information or documentation with respect to such filing. To the
extent permitted by law, Parent, Sub and the Company shall request, and Parent
and Sub shall cause their Ultimate Parent Entities to request, that the FTC and
DOJ treat as confidential the information so submitted.
(b) Subject to the terms and conditions of this Section 6.2, Parent and
Sub shall, and shall cause their Ultimate Parent Entities to, use their
commercially reasonable best efforts to (i) resolve diligently and expeditiously
any objections that may be asserted by the FTC or the DOJ with respect to the
transactions contemplated by this Agreement ("Objections"), and (ii) obtain the
termination of the waiting period under the HSR Act, in each case prior to the
initial expiration date of the Offer or, if not possible by such date, as soon
as practicable thereafter.
(c) Parent, Sub and the Company shall cooperate fully and in good faith in
connection with overcoming Objections, and (i) each of Parent, Sub and the
Company shall promptly inform the other of any material communication made by
such party to, or received by such party from, the FTC or the DOJ, and (ii)
Parent shall keep the Company informed of any material discussions between
Parent and/or Sub and the FTC and/or the DOJ regarding this Agreement. Parent
and Sub shall cause their Ultimate Parent Entities to cooperate fully in
connection with the foregoing matters in this Section.
(d) Notwithstanding the foregoing, nothing contained in this Agreement
will require or obligate Parent or Sub (i) to initiate or defend any litigation
to which any Governmental or Regulatory Authority (including the DOJ and the
FTC) is a party, (ii) to agree or otherwise become subject to any material
limitations on (A) the right of the Parent or Sub, or their affiliates
effectively to control or operate the business, assets, or operations of the
Company, (B) the right of Parent, Sub, or its affiliates to acquire or hold the
business, assets, or operations of the Company, (C) the right of Parent or Sub
to exercise full rights of ownership of the shares of Common Stock of the
Company acquired by Parent or Sub including, without limitation, the right to
vote any shares held by Parent or Sub on all matters properly presented to the
Company's shareholders, or (iii) to agree or otherwise be required to sell or
otherwise dispose of, hold separate (through the establishment of a trust or
otherwise), or divest itself of all or any portion of the business, assets, or
operations of the Company, Sub or the Parent, except, in connection with the
proposed resolution of any Objections, for the sale or disposal of such of the
Company's supermarkets (or, in lieu thereof, supermarkets of Parent) that did
not in the aggregate generate in excess of $2.7 million of net earnings before
interest, tax, depreciation and amortization for the fiscal year ended June 29,
1997 (based upon the Company's books and records for such supermarkets by
location) ("EBITDA"). (If Parent is required to divest
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a Parent store, the EBITDA of the closest Company store shall be used in
calculating the $2.7 million.)
6.3 Publicity. Neither Parent, Sub or their respective representatives nor
the Company or its representatives shall disclose to any person (including by
means of a press release) any information relating to this Agreement and the
transactions contemplated hereby, except as expressly permitted hereby or to the
extent reasonably appropriate to accomplish the purposes of this Agreement,
without obtaining the prior consent of Parent or the Company, as the case may
be, which shall not be unreasonably withheld; provided, however, that nothing in
this Section shall prohibit any party from making any disclosure that its
counsel deems necessary or advisable in order to fulfill such party's disclosure
obligations imposed by law or the applicable rules of the SEC, any state
securities authority, any securities exchange or the Nasdaq Stock Market, as
long as such party makes a good faith effort to consult with the other party
prior to such disclosure. This Section shall supersede the provisions of
paragraph 2 of the Confidentiality Agreement (defined in Section 9.11).
6.4 Investigation; Confidentiality.
(a) The Company shall give to Parent and Sub and their respective
representatives full access upon reasonable prior notice and during normal
business hours, to all officers, employees, agents, attorneys, accountants,
assets, properties, books and records of the Company and its Subsidiaries, and
shall cause its and its Subsidiaries' officers and independent auditors to
furnish to such persons such financial and operating data and other information,
including access to the working papers of its independent auditors, with respect
to its business and properties and the business and properties of its
Subsidiaries as such persons shall from time to time reasonably request;
provided, however, that in conducting their investigation, Parent and Sub and
such representatives may not interfere unreasonably with the business and
operations of the Company and its Subsidiaries. Information obtained pursuant
to the immediately preceding sentence shall constitute "Confidential
Information" under the Confidentiality Agreement, subject to paragraph 4 of such
Agreement. This Section shall supersede the first sentence of paragraph 6 of
the Confidentiality Agreement and the Company shall not be entitled to request
the return of Confidential Information pursuant to paragraph 3 of such Agreement
unless and until this Agreement terminates.
(b) Parent and Sub shall, upon request by the Company, provide the
Company, its counsel, accountants and other authorized representatives with such
information concerning Parent or Sub as may be reasonably necessary for the
Company to ascertain the accuracy and completeness of the information supplied
by or on behalf of Parent or Sub for inclusion in the Schedule 14D-1, Schedule
14D-9 and the Proxy Statement and to verify Parent's and Sub's performance of
and compliance with their respective representations, warranties and covenants
herein contained. Except as and to the extent required by law, the Company
shall keep confidential any information furnished to it pursuant to the
preceding sentence that is reasonably designated as confidential at the time of
delivery.
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6.5 Directors' and Officers' Indemnification and Insurance.
(a) The Company, and from and after the Effective Time, the Surviving
Corporation (each, an "Indemnifying Party"), shall indemnify, defend and hold
harmless each person who is now, or has been at any time prior to the date
hereof or who becomes prior to the Effective Time, a director or officer of
the Company or any of its Subsidiaries (the "Indemnified Parties") against
all losses, claims, damages, costs and expenses (including attorneys' fees),
liabilities, judgments and settlement amounts that are paid or incurred in
connection with any claim, action, suit, proceeding or investigation (whether
civil, criminal, administrative or investigative and whether asserted or
claimed prior to, at or after the Effective Time) that is based in whole or
in part on, or arises in whole or in part out of, the fact that such
Indemnified Party is or was a director or officer of the Company or any of
its Subsidiaries and (i) relates to or arises out of any action or omission
occurring or allegedly occurring at or prior to the Effective Time, or (ii)
is based in whole or in part on, arises in whole or in part out of, or
pertains in whole or in part to, this Agreement or the transactions
contemplated hereby, in each case to the full extent a corporation is
permitted under applicable law to indemnify its own directors or officers, as
the case may be; provided that no Indemnifying Party shall be liable for any
settlement of any claim effected without its written consent, which consent
shall not be unreasonably withheld. Without limiting the foregoing, in the
event that any such claim, action, suit, proceeding or investigation is
brought against any Indemnified Party (whether arising prior to or after the
Effective Time), the Indemnifying Parties will pay expenses in advance of the
final disposition of any such claim, action, suit, proceeding or
investigation to each Indemnified Party to the full extent permitted by
applicable law. To the extent that any indemnification is sought pursuant to
this Section 6.5(a), the Indemnified Party will promptly notify the Parent of
any claim, action, suit, proceeding, or investigation for which it may seek
indemnification under this Section 6.5; and in the event of any such claim,
action, suit, proceeding, or investigation (whether arising before or after
the Effective Time), (i) Parent or the Surviving Corporation will have the
right to assume the defense thereof, and neither Parent nor the Surviving
Corporation will be liable to such Indemnified Parties for any legal expenses
of other counsel subsequently incurred thereafter by such Indemnified Parties
in connection with the defense thereof, except that an Indemnified Party will
have the right to retain separate counsel, reasonably acceptable to the
Parent, at the expense of the Indemnifying Party if the named parties to any
such proceeding include both the Indemnified Party and the Company or Parent,
or their respective successors, and the representation of such parties by the
same counsel would be proscribed under applicable standards of professional
conduct; provided that, (i) neither the Parent nor the Surviving Corporation
will be responsible for the legal expenses of more than one law firm in
connection with any one matter, (ii) the Indemnified Parties will cooperate
in the defense of any such matter, and (iii) neither the Parent nor the
Surviving Corporation will be liable for any settlement effected without its
prior written consent; provided, however, that notwithstanding the foregoing,
neither the Parent nor the Surviving Corporation will have any obligation
under this Section 6.5 to indemnify an Indemnified Party when and if a court
of competent jurisdiction ultimately determines, and such determination
becomes final, that the indemnification of such Indemnified Party in the
manner contemplated hereby is prohibited by applicable law.
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(b) Except as required by applicable Law or legal process, Parent, Sub
and the Company will not take any action so as to amend, modify or repeal the
provisions for exculpation of directors or indemnification of directors or
officers contained in the articles of incorporation or bylaws (or other
comparable charter documents) of the Surviving Corporation and its
Subsidiaries in such a manner as would adversely affect in any material
respect the rights of any individual who shall have served as a director or
officer of the Company or any of its Subsidiaries prior to the Effective Time
to be exculpated or to be indemnified by such corporations in respect of
their serving in such capacities prior to the Effective Time. The Company
will honor in accordance with their respective terms each of the indemnity
agreements between the Company and each of its directors as in effect on the
date of this Agreement and shall not terminate such agreements prior to the
Effective Time.
(c) The Company shall, and after the consummation of the Offer, Parent
shall cause the Company to, until the sixth anniversary of the Effective Time
and for so long thereafter as any claim asserted prior to such date has not been
fully adjudicated by a court of competent jurisdiction, cause to be maintained
in effect the policies of directors' and officers' liability insurance
maintained by the Company and its Subsidiaries as of the date hereof (or
policies providing at least the same coverage amounts and containing terms that
are no less advantageous to the insured parties) with respect to claims arising
from facts or events that occurred or are alleged to have occurred at or prior
to the Effective Time; provided that the Company shall endeavor to obtain such
coverage at the lowest premium cost reasonably available and that the Company
shall not, and Parent shall not be obligated to cause the Surviving Corporation
to, pay an aggregate (whether over time or on a one-time basis) premium in
excess of $600,000.
(d) The provisions of this Section are intended to be for the benefit of,
and shall be enforceable by, each Indemnified Party and each party entitled to
insurance coverage under paragraph (c) above, respectively, and his or her heirs
and legal representatives, and shall be in addition to any other rights an
Indemnified Party may have under the ABCA, any indemnity agreement, the articles
of incorporation or bylaws of the Surviving Corporation or any of its
Subsidiaries, or otherwise.
6.6 Change of Control Agreements. The Company will, and after the
consummation of the Offer Parent shall cause the Company to, honor in accordance
with their respective terms each of the Change of Control Agreements (defined in
Section 3.10) as in effect on the date of this Agreement.
6.7 Fees and Expenses. Whether or not the Offer or the Merger is
consummated, all costs and expenses incurred in connection with this Agreement
shall be paid by the party incurring such cost or expense, subject to Sections
5.2, 8.1, 8.2 and 8.3.
6.8 Conduct of Business of Sub. Parent shall cause Sub to perform its
obligations under this Agreement in accordance with its terms.
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6.9 Cooperation. Subject to the terms and conditions of this Agreement
(including, without limitation, Sections 1.1 and 6.2 and Annex A) Parent, Sub
and the Company shall cooperate with each other and use their respective
commercially reasonable best efforts to cause the conditions to the Offer in
Annex A to be met as soon as reasonably practicable. The Company shall
cooperate with Parent's reasonable requests for assistance in connection with
Parent's transition planning and related activities prior to the Effective Time.
6.10 Post-Offer Action. As soon as practicable following consummation of
the Offer, Parent and Sub shall use their commercially reasonable best efforts
to cause the conditions to the Merger set forth in Article VII to be met and to
consummate the Merger, subject to the terms of this Agreement.
6.11 Transaction Litigation. The Company shall give Parent the opportunity
to participate in the defense or settlement of any litigation against the
Company and its directors directly relating to any of the transactions
contemplated by this Agreement until the purchase of Shares pursuant to the
Offer, and thereafter shall give Parent the opportunity to direct the defense of
such litigation and, if Parent so chooses to direct such litigation, Parent
shall give the Company and its directors an opportunity to participate in such
litigation; provided, however, that no such settlement shall be agreed to
without Parent's consent, which consent shall not be unreasonably withheld; and
provided further that no settlement requiring a payment by a director shall be
agreed to without such director's consent.
ARTICLE VII
CONDITIONS TO THE MERGER
The respective obligation of each party to effect the Merger is subject to
the fulfillment, at or prior to the Closing, of each of the following
conditions:
(i) Sub shall have purchased all Shares validly tendered pursuant to the
Offer;
(ii) This Agreement shall have been adopted by the requisite vote of the
shareholders of the Company under the ABCA;
(iii) No Governmental or Regulatory Authority shall have issued an
Order or ruling or taken any other action declaring illegal or otherwise
prohibiting the Merger; and
(iv) All governmental consents, orders and approvals legally required for
the consummation of the Merger and the transactions contemplated hereby shall
have been obtained and be in effect at the Effective Time.
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ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.1 Termination. Subject, in the case of the Company, to any approval of
Independent Directors required by Section 1.3(c), this Agreement may be
terminated at any time (upon written notice to the other parties hereto) prior
to the Effective Time, whether before or after approval by the shareholders of
the Company:
(a) by mutual written consent of the Boards of Directors of the Company,
Parent and Sub;
(b) by the Company,
(i) if the Offer has not been commenced timely in accordance with
Section 1.1, provided that such failure shall not have been corrected on the
next business day;
(ii) if any representation or warranty made by Parent and/or Sub in
this Agreement shall not be true and correct, which materially and adversely
affects the consummation of the Offer, and such breach is not capable of being
cured or is not cured by Parent and/or Sub prior to the expiration of the Offer;
(iii) if Parent or Sub shall not have performed and complied with,
in all material respects (without reference to any materiality qualifications
contained therein), each agreement and covenant required by this Agreement to be
performed or complied with by it, and such breach is not capable of being cured
by Parent and/or Sub or is not cured prior to the expiration of the Offer;
(iv) as provided in Section 5.2 in respect of a superior proposal,
provided that (x) the Company shall have paid Parent the Termination Fee and the
Expense Fee and (y) Parent or Sub does not make within three business days of
receipt of the Section 5.2(b) Notice an offer that the Company's Board of
Directors believes in good faith after consultation wih its legal counsel and
financial advisors, is at least as favorable, from a financial point of view, to
the Company's shareholders as such other other bidder's offer; provided,
however, that if subsequent to the payment of the Termination Fee and the
Expense Fee and prior to the termination of this Agreement, Parent or Sub makes
an offer that the Company's Board of Directors believes in good faith after
consultation with its legal counsel and financial advisors, is at least as
favorable, from a financial point of view, to the Company's shareholders as such
other bidder's offer, Parent and Sub shall, upon written request of the Company,
return the Termination Fee and the Expense Fee once the Company shall have
approved and recommended Parent's and Sub's amended offer and shall have
rescinded any actions taken with respect to such superior proposal pursuant to
clauses (A), (B) and (C) of Section 5.2(b);
(c) prior to the purchase of Shares by Sub pursuant to the Offer, by
Parent or Sub, if
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(i) any representation or warranty made by the Company in this
Agreement that contains a materiality qualification shall not be true and
correct, or any representation or warranty made by the Company in this Agreement
that is not so qualified shall not be true and correct in any material respect,
and, in each case, such breach of the representation or warranty is not capable
of being cured by the Company or is not cured prior to the expiration of the
Offer;
(ii) the Company shall not have performed and complied with, in all
material respects (without reference to any materiality qualifications contained
therein), each agreement and covenant required by the Agreement to be performed
or complied with by it and such breach of the agreement or covenant is not
capable of being cured by the Company or is not cured prior to the expiration of
the Offer.
(d) by Parent, Sub or the Company, if
(i) (x) the Offer shall be terminated or expire in accordance with
its terms without the purchase of any Shares pursuant thereto or (y) Sub shall
not have accepted for payment any Shares pursuant to the Offer within 90
calendar days following the commencement of the Offer; provided, that Parent and
Sub shall not be entitled to terminate for such reason if the cause thereof is a
breach by Parent or Sub of any of their obligations under this Agreement and the
Company shall not be entitled to terminate for such reason if the cause thereof
is a breach by the Company of any of its obligations under this Agreement;
(ii) any Governmental or Regulatory Authority shall have issued an
Order or ruling or taken any other action declaring illegal or otherwise
prohibiting the consummation of the Offer or the Merger and such Order shall
have become final and nonappealable;
(iii) if, at the Special Meeting (including any adjournment or
postponement thereof), the Requisite Shareholder Approval is not obtained,
except that the right to terminate this Agreement under this Section 8.2(d)(iii)
will not be available to any party whose willful failure to perform any material
obligation or to perform any material condition under this Agreement has been
the proximate cause of, or resulted in, the failure to obtain the Requisite
Shareholder Approval.
8.2 Effect of Termination. If this Agreement is validly terminated by
either the Company or Parent or Sub pursuant to Article VIII, this Agreement
will forthwith become null and void and there will be no liability or obligation
on the part of either the Company or Parent or Sub (or any of their respective
representatives or affiliates), except that (i) the provisions of Sections 6.3
and 6.4 relating to confidentiality, and 6.7 relating to fees and expenses, and
Section 5.2, Section 8.3, Section 9.11, and, insofar as they relate to the other
provisions of this Agreement that survive termination, Sections 9.3 through 9.7,
Sections 9.9 and 9.10 and Sections 9.12 and 9.13, and this Section 8.2 will
continue to apply following any such termination and (ii) nothing contained
herein shall relieve any party hereto from liability for wilful breach of its
representations, warranties, covenants or agreements contained in this
Agreement.
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8.3 Termination Payment.
(a) If (i) Parent or Sub shall have provided the Company with an
irrevocable written notice of termination of this Agreement pursuant to Section
8.1 based upon a material wilful breach by the Company of this Agreement
(provided that such notice may state that it is subject to payment of the
Termination Fee and the Expense Fee by the Company and that, in the event the
Termination Fee and Expense Fee are not paid to Parent and Sub within five
business days, such termination notice shall be deemed not to have been given
and this Agreement shall not terminate as a result of such notice and the
Company shall continue to be subject to its obligations to pay the Termination
Fee and the Expense Fee as set forth in this Section 8.3) or (ii) any Change in
Control shall have occurred during the term of this Agreement, or within 180
days following termination of this Agreement (other than pursuant to (w) Section
8.1(a), (x) Section 8.1(b), (y) Section 8.1(d)(i) if the Offer has expired due
to the failure to satisfy any of the conditions in paragraphs (b), (c)(i),
(c)(ii), (c)(iii) or (d) of Annex A, unless in the case of the conditions set
forth in paragraphs (b), (c)(i), (c)(ii) or (c)(iii) of Annex A Parent and Sub
are diligently pursuing the satisfaction of such conditions and the Company
shall not have agreed to Parent's or Sub's written request to extend the Offer
beyond the periods prescribed by Section 1.1(b), or (z) Section 8.1(d)(ii), so
long as the Company shall not be in breach of this Agreement), then the Company
shall promptly, but in no event later than five business days after the first to
occur of any such event described in clauses (i) and (ii) above (the "Payment
Date"), pay Parent a fee of $7,000,000 (the "Termination Fee") and shall also
reimburse Parent and Sub for all out-of-pocket expenses and fees payable by them
or their affiliates up to an aggregate of $3,000,000 (including without
limitation fees and expenses of all counsel, printers, banks, investment banking
firms, and other financial institutions, and their respective agents directly
related to the transactions contemplated by this Agreement (including the
financing of the transactions contemplated by this Agreement by Parent and Sub
or obtaining the required consents of Parent's noteholders) (the "Expense Fee"),
such amounts to be paid on the Payment Date in cash in immediately available
funds (United States Dollars) by wire transfer to an account designated by
Parent in writing not less than one business day prior to the Payment Date. The
Termination Fee and the Expense Fee shall, in the alternative, be due under the
circumstances provided in Section 5.2. In no event shall the Company be
obligated to pay the Termination Fee and the Expense Fee more than once, unless
Parent and Sub have previously refunded such Termination Fee and Expense Fee
pursuant to Section 8.1(b)(iv) in which case the Termination Fee and Expense Fee
shall continue to be payable in the circumstances provided in Section 5.2 and
this Section 8.3.
(b) As used herein, "Change in Control" means any of the following:
(i) any person or group (other than Parent or Sub) acquires or
beneficially owns, or enters into an agreement with the Company or any of its
Subsidiaries to acquire, directly or indirectly, 25% or more of the outstanding
Shares or 25% or more of the assets, revenues or earning power of the Company
and its Subsidiaries, taken as a whole (it being understood that shares of
Subsidiaries constitute assets of the Company for purposes of this Section 8.3);
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(ii) the Company distributes or transfers, or publicly announces its
intention to distribute or transfer, to its shareholders, by dividend or
otherwise, assets constituting 25% or more of the market value or earning power
of the Company on a consolidated basis; or
(iii) any person or group (other than Parent or Sub) enters into
an agreement with the Company or any of its Subsidiaries to consummate, or
consummates, directly or indirectly, a tender offer or exchange offer for any
Shares or involving a merger, consolidation or other business combination or
similar transaction with or involving the Company.
The Company agrees to notify Parent and Sub within five business days of the
occurrence of any Change in Control and Parent and Sub shall be entitled to
provide wire transfer instructions after receipt of such notice and the Payment
Date shall be the next business day after Parent or Sub delivers such wire
instructions to the Company.
(c) The Company acknowledges that the agreements contained in this Section
8.3 are an integral part of the transactions contemplated by this Agreement, and
that without these agreements Parent and Sub would not enter into this
Agreement. The parties understand and agree that payment of the Termination Fee
and Expense Fee are in addition to all other rights and remedies available to
Parent and Sub hereunder, at law or in equity, and that Parent and Sub shall
retain and apply the Termination Fee and Expense Fee against all direct and
indirect damages suffered by Parent and Sub, whether or not as a result of the
occurrence of the events described under Section 8.3(a) above.
8.4 Amendment. Subject in the case of the Company to Section 1.3(c),
this Agreement may be amended, supplemented or modified by action taken by the
respective Boards of Directors of the parties hereto at any time prior to the
Effective Time, whether prior to or after the Requisite Shareholder Approval
shall have been obtained, but after such approval only to the extent permitted
by applicable law. No such amendment, supplement or modification shall be
effective unless set forth in a written instrument duly executed by each party
hereto.
8.5 Waiver. Subject in the case of the Company to Section 1.3(c), at any
time prior to the Effective Time, any party hereto, by action taken by its Board
of Directors, may to the extent permitted by applicable law (i) extend the
time for the performance of any of the obligations or other acts of the other
parties hereto, (ii) waive any inaccuracies in the representations and
warranties of the other parties hereto contained herein or (iii) waive
compliance with any of the covenants, agreements or conditions of the other
parties hereto contained herein. No such extension or waiver shall be effective
unless set forth in a written instrument duly executed by the party extending
the time of performance or waiving any such inaccuracy or non-compliance. No
waiver by any party of any term or condition of this Agreement shall be deemed
to be or construed as a waiver of the same or any other term or condition of
this Agreement on any future occasion.
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ARTICLE IX
GENERAL PROVISIONS
9.1 Non-Survival of Representations, Warranties and Agreements. The
representations and warranties of the Company in this Agreement shall not
survive the consummation of the Offer, and the other representations and
warranties, and the covenants and agreements in this Agreement shall not survive
the Effective Time, except for the agreements contained in Article II and
Section 6.5 (relating to directors' and officers' indemnification and insurance)
and any other agreement contained herein that expressly contemplates performance
after the Effective Time.
9.2 Certain Definitions. For purposes of this Agreement, the following
terms have the following meanings:
(a) "affiliate" means a person that directly or indirectly, through one or
more intermediaries, controls, is controlled by, or is under common control with
the first mentioned person;
(b) "associate" when used to indicate a relationship with any person, has
the meaning specified in Rule 405 promulgated under the Securities Act of 1933,
as amended;
(c) "group" includes the meaning specified in Section 13(d)(3) of the
Exchange Act;
(d) "person" includes an individual, corporation, partnership,
association, trust, other entity or any unincorporated organization;
(e) "Significant Subsidiary" means any Subsidiary of the Company that is a
"Significant Subsidiary" as such term is used in Regulation S-X or that
contributed in excess of $500,000 to the Company's consolidated earnings before
income taxes in any of the Company's fiscal years 1995, 1996 or 1997 or would be
reasonably likely to contribute such amount in the Company's fiscal year 1998;
and
(f) a "Subsidiary" of a person is any corporation or other incorporated or
unincorporated organization more than 50% of the equity interests of which are
beneficially owned directly or indirectly by such person or with respect to
which such person has the right to exercise control.
9.3 Notices. Any notices or other communications hereunder shall be in
writing and shall be deemed to have been duly given when delivered in person or
by a nationally recognized overnight delivery service, or transmitted by
facsimile transmission (with confirmation of receipt), or five days after
dispatch by registered or certified mail, postage prepaid, addressed to the
parties at the following addresses or facsimile numbers:
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(a) If to the Company, to: Delchamps, Inc.
305 Delchamps Drive
Mobile, AL 36602
Attention: Chief Executive Officer
Facsimile: (334) 438-4586
with a copy to: Jones, Walker, Waechter, Poitevent,
Carrere & Denegre, L.L.P.
201 St. Charles Avenue
New Orleans, LA 70170
Attention: L. R. McMillan, II
Facsimile: (504) 582-8012
(b) If to Parent or Sub, to: Jitney-Jungle Stores of America, Inc.
1770 Ellis Avenue, Suite 200
Jackson, MS 39204
Attention: Mr. Michael E. Julian
Facsimile: (601) 346-2158
with a copy to: Dechert Price & Rhoads
4000 Bell Atlantic Tower
1717 Arch Street
Philadelphia, PA 19103
Attention: William G. Lawlor and
David E. Schulman
Facsimile: (215) 994-2222
or such other address as shall be furnished in writing by any party.
9.4 Headings. The descriptive headings of the several Articles and
Sections of this Agreement are inserted for convenience only and do not
constitute a part of this Agreement.
9.5 Applicable Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Alabama without giving effect to the
conflict of laws provisions thereof.
9.6 No Assignment; Binding Effect. Subject to Section 2.1, neither
this Agreement nor any right, interest or obligation hereunder may be assigned,
by operation of law or otherwise, by any party hereto without the prior written
consent of the other parties hereto, and any attempt to do so will be void.
Subject to the preceding sentence, this Agreement is binding upon, inures to the
benefit of and is enforceable by the parties hereto and their respective
successors and assigns.
9.7 Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
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9.8 Third Party Beneficiaries. The terms and provisions of this
Agreement are intended solely for the benefit of each party hereto and their
respective successors or permitted assigns, and except as otherwise expressly
provided for herein, it is not the intention of the parties to confer
third-party beneficiary rights upon any other person.
9.9 Invalid Provisions. If any provision of this Agreement is held to
be illegal, invalid or unenforceable under any present or future Law or Order,
and if the rights or obligations of any party hereto under this Agreement will
not be materially and adversely affected thereby, (i) such provision will be
fully severable, (ii) this Agreement will be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part hereof,
and (iii) the remaining provisions of this Agreement will remain in full force
and effect and will not be affected by the illegal, invalid or unenforceable
provision or by its severance herefrom.
9.10 Specific Performance. Nothing in this Agreement shall preclude a
party from seeking specific performance, injunctive relief or any other remedies
not involving the payment of monetary damages in the event of any breach or
violation (or threatened breach or violation) of any provision of this Agreement
by the other party and each party acknowledges that, in light of the unique
benefit to it of its rights under this Agreement, such remedies shall be
available in respect of any such breach or violation by it in any suit properly
instituted in a court of competent jurisdiction and shall be in addition to any
other remedies available at law or in equity to such party.
9.11 Entire Agreement. The Confidentiality and Standstill Agreement dated
as of April 8, 1997 between Parent and the Company (the "Confidentiality
Agreement") shall remain in full force and effect except as expressly superseded
hereby; provided that if the Company has paid (or is obligated to pay) the
Termination Fee and the Expense Fee, the standstill provisions of the
Confidentiality Agreement shall terminate. This Agreement (including the
Annexes, exhibits, schedules, documents and instruments referred to herein) and
the Confidentiality Agreement constitute the entire agreement and supersede
(with prospective effect only) any other prior agreements and understandings,
both written and oral, between the parties with respect to the subject matter
hereof.
9.12 Days. As used herein "day" means calendar day unless business day is
expressly specified, and if the last day for timely performance falls on a day
that is not a business day, performance may be timely made on the first business
day following.
9.13 Jurisdiction. The parties to this Agreement, acting for themselves
and for their respective successors and assigns, hereby irrevocably and
unconditionally consent to submit to the non-exclusive jurisdiction of both the
courts of the States of Delaware and Alabama and of the United States of America
located in such States for any actions, suits or proceedings arising out of or
relating to this Agreement (and none of such persons shall commence any action,
suit or proceeding relating thereto except in such courts). Each such person
hereby irrevocably and unconditionally waives any objection to the laying of
venue of any action, suit or proceeding arising out of this Agreement, in either
the courts of the States of Delaware and Alabama or of the United States of
America located in such States.
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IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed on its behalf by its officers thereunto duly authorized, all as of
the date first written above.
JITNEY-JUNGLE STORES OF AMERICA, INC.
By: /s/ Michael E. Julian
-------------------------------------
Name: Michael E. Julian
Title: President/CEO
DELTA ACQUISITION CORPORATION
By: /s/ Michael E. Julian
-------------------------------------
Name: Michael E. Julian
Title: President/CEO
DELCHAMPS, INC.
By: /s/ David W. Morrow
-------------------------------------
Name: David W. Morrow
Title: Chairman of the Board and
Chief Executive Officer
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Annex A
CONDITIONS TO THE OFFER
Notwithstanding any other provision of the Offer, Sub shall not be
required to accept for payment or pay for any tendered Shares (subject to Rule
14e-1(c) under the Exchange Act) and may delay in accordance with Section 1.1(b)
the acceptance for payment of, or the payment for, any Shares, amend the Offer
in accordance with Section 1.1(b) or terminate the Offer (subject to Section
1.1(b)), if
(a) immediately prior to the expiration of the Offer (as it may be
extended in accordance with Article I of the Agreement), there shall not have
been validly tendered and not withdrawn pursuant to the Offer a number of Shares
such that, upon consummation of the Offer, Sub and its affiliates will
beneficially own in the aggregate not less than two-thirds of the Shares
outstanding on a fully diluted basis (the "Minimum Condition");
(b) any applicable (i) waiting period under the HSR Act or (ii)
period during which Parent shall have consented or otherwise be barred from
purchasing Shares pursuant to the Offer as part of any agreement or other
arrangement with any Governmental or Regulatory Authority involving the HSR Act
or any other applicable antitrust laws shall not have expired or terminated
prior to the expiration of the Offer (as it may be extended in accordance with
Article I of the Agreement);
(c) at any time on or after the date of this Agreement and before the
time of payment for any Shares, any of the following events shall have occurred
and be continuing:
(i) there shall be threatened or pending by any Governmental or
Regulatory Authority (or the staff of the Federal Trade Commission or the staff
of the Antitrust Division of the Department of Justice shall have recommended
the commencement of) any suit, action or proceeding, or there shall be pending
by any other person any suit, action or proceeding which has a reasonable
possibility of success, (A) challenging the acquisition by Parent or Sub of any
Shares, seeking to restrain or prohibit the making or consummation of the Offer
or the Merger or the performance of any of the other transactions contemplated
by this Agreement or seeking to obtain from the Company, Parent or Sub any
damages or otherwise imposing financial burdens, penalties or fines that are
material in relation to the Company and its Subsidiaries, or Parent and its
Subsidiaries, in each case taken as a whole, (B) seeking to prohibit or limit
the ownership or operation by the Company, Parent or any of their respective
Subsidiaries of a material portion of the business or assets of the Company or
its Subsidiaries, or Parent or its Subsidiaries, as a result of the Offer, the
Merger or any of the other transactions contemplated by this Agreement, (C)
seeking to impose limitations on the ability of Parent or Sub to acquire or
hold, or exercise full rights of ownership of, any Shares accepted for payment
pursuant to the Offer including, without limitation, the right to vote the
Shares accepted for payment by it on all matters properly presented to the
shareholders of the Company, (D) seeking to prohibit Parent or any of its
Subsidiaries from effectively controlling or operating in any material respect
the business or operations of the
<PAGE>
Company or its Subsidiaries, or (E) which otherwise is reasonably likely to
have a Material Adverse Effect;
(ii) there shall be any statute, rule, regulation, judgment,
order or injunction enacted, entered, enforced, promulgated or deemed applicable
to the Offer or the Merger, or any other action shall be taken by any
Governmental or Regulatory Authority or court, other than the application to the
Offer or the Merger of applicable waiting periods under the HSR Act, that is
reasonably likely to result, directly or indirectly, in any of the consequences
referred to in clauses (A) through (E) of paragraph (i) above, or any
governmental consents, orders and approvals legally required for the
consummation of the Offer or the Merger shall not have been obtained, and such
failure is reasonably likely to result, directly or indirectly, in any of the
consequences referred to in clauses (A) through (E) of paragraph (i) above;
(iii) (A) a general suspension of trading in, or limitation
on prices for, securities on any national securities exchange or in the over the
counter market, (B) any change in general, financial, bank or capital market
conditions which materially affects the ability of financial institutions to
extend credit or syndicate loans, (C) a decline in the Standard & Poor's 500
Index by an amount in excess of 25%, measured from July 3, 1997, (D) a
declaration of a banking moratorium or any suspension of payments in respect of
banks in the United States or any material limitation (whether or not mandatory)
imposed by any Governmental or Regulatory Authority that is reasonably likely to
affect the extension of credit by lending institutions in general, or (E) a
commencement of a war or armed hostilities or other national or international
crisis directly or indirectly involving the United States which war, hostilities
or crisis is reasonably likely to have a Material Adverse Effect or adversely
affect the ability of the Company to perform its obligations hereunder or to
consummate the Merger or to materially affect Parent's ability to obtain the
consents referred to in paragraph (d) below; or in the case of any of the events
described in (A) through (E) above existing as of the date hereof, a material
acceleration or worsening thereof;
(iv) any of the representations and warranties made by the
Company in the Agreement that are subject to a materiality qualification shall
not be true and correct, or any of the representations and warranties made by
the Company in the Agreement that are not so qualified shall not be true and
correct in any material respect, in each case at any time prior to the
consummation of the Offer as though made on and as of such date or, in the case
of representations and warranties made as of a specific date earlier than the
date of the consummation of the Offer, on and as of such earlier date; provided,
however, that if the Company discovers such a breach of a representation or
warranty, the Company shall promptly notify Parent and Sub of the nature of such
breach and if Parent or Sub discovers such a breach of a representation or
warranty, Parent or Sub shall promptly notify the Company of the nature of such
breach and provided further that, in the case of breaches that are reasonably
capable of being cured prior to the expiration of the Offer, the Company shall
have failed to diligently proceed to effect a cure of such breach and, in any
event, to cure such breach prior to the expiration of the Offer (including any
extensions thereof);
2
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(v) the Company shall not have performed and complied with, in
all material respects (without reference to any materiality qualifications
contained therein), each agreement and covenant required by the Agreement to be
performed or complied with by it; provided, however, that if the Company
discovers such a breach of an agreement or covenant, the Company shall promptly
notify Parent and Sub of the nature of such breach and if Parent or Sub
discovers such a breach of an agreement or covenant, Parent or Sub shall
promptly notify the Company of the nature of such breach and provided further
that, in the case of breaches that are reasonably likely to be cured prior to
the expiration of the Offer, the Company shall have failed to diligently proceed
to effect a cure of such breach and, in any event, to cure such breach prior to
the expiration of the Offer (including any extensions thereof);
(vi) there shall have occurred any change (or any development
that, insofar as reasonably can be foreseen, is reasonably likely to result in
any change) that is materially adverse to the condition (financial or
otherwise), total assets, total liabilities, business, results of operations or
prospects of the Company and its Subsidiaries taken as a whole, including
without limitation any such change that prevents Parent and Sub from obtaining
the contemplated financing for the Offer and the Merger;
(vii) the Company shall have delivered (or been obliged to
deliver) to Parent a Section 5.2 Notice or there shall have been a Change in
Control;
(viii) prior to the purchase of Shares pursuant to the Offer,
the Board of Directors (or any committee thereof) shall have withdrawn or
modified (including by amendment of its Schedule 14D-9) in a manner adverse to
Parent or Sub its approval or recommendation of the Offer, this Agreement or the
Merger or shall have recommended another takeover proposal, or shall have
adopted any resolution to effect any of the foregoing; or
(ix) the Agreement shall have been terminated in accordance with
its terms, or Parent or Sub have reached an agreement in writing with the
Company providing for termination of the Offer or delay in acceptance of, or
payment for, the Shares.
(d) Parent shall not have obtained prior to the expiration of the
Offer an amendment or supplement to the Indenture dated as of March 5, 1996
among Parent, Interstate Jitney Jungle Stores, Inc., an Alabama corporation and
successor by merger to JJ (Interstate), Inc., Southern Jitney Jungle Company, a
Mississippi corporation and successor by merger to JJ (Southern), Inc.,
McCarty-Holman Co., Inc., a Mississippi corporation and successor by merger to
JJ (McCarty-Holman), Inc., Pump and Save, Inc., a Mississippi corporation and
successor by merger to JJ (Pump and Save), Inc., Jitney-Jungle Bakery, Inc., a
Mississippi corporation and successor by merger to JJ (Bakery), Inc., and Marine
Midland Bank, as Trustee, (and, to the extent necessary, the Notes and
Guarantees referred to therein), all with the consent of the holders of such
Notes and in accordance with the terms of such Indenture, to increase the amount
of permitted indebtedness, restricted payments and investments permitted to be
incurred or made, as applicable, by Parent and its Subsidiaries under the
Indenture and to make such other changes thereto as are necessary to permit
3
<PAGE>
Parent to consummate the Offer, the Merger and the other transactions
contemplated by this Agreement.
(e) Prior to the expiration of the Offer, all of the Company's
directors and substantially all of the holders of the Options who are employees
of the Company shall have exercised such Options or shall have entered into
agreements with the Company to exercise such Options prior to the Effective Time
(or such later time as may be specified by Parent) or otherwise permit the
Company to "cash-out" the Options as provided in the second sentence of
Section 5.3 of the Agreement.
which (in the case of each of paragraphs (a), (b), (c)(i) through (c)(viii), (d)
and (e) above) makes it inadvisable, as determined by Sub in its sole judgment,
to proceed with the Offer or with such acceptance for payment of, or payment
for, Shares.
The foregoing conditions are for the sole benefit of Sub and Parent
and may be asserted by Sub or Parent and may be waived by Sub or Parent, in
whole or in part, at any time and from time to time, in the sole discretion of
Sub or Parent; provided that, without the written consent of the Company, Parent
and Sub may not reduce the Minimum Condition to less than a majority of the
outstanding Shares on a fully diluted basis or waive the condition set forth in
(b) above. The failure by Sub or Parent at any time to exercise any of the
foregoing rights will not be deemed a waiver of any right and each right will be
deemed an ongoing right which may be asserted at any time and from time to time.
4
<PAGE>
Annex B
DISCLOSURE SCHEDULE
3.1 The Company's only Subsidiary is Supermarket Cigarette Sales, Inc., a
Louisiana corporation. The Company has a 50% interest in a real estate
partnership in Mobile, Alabama. Pursuant to an Aircraft Joint Ownership
Agreement dated May 13, 1996, a Purchase Agreement dated April 12, 1996 and
an Agreement to Repurchase dated April 12, 1996, the Company purchased a
20% interest in a 1976 Cessna Citation 500 Airplane and agreed to certain
terms governing its operation. The Company has an interest in Topco
Associates, Inc., a cooperative purchasing organization of which the
Company is a shareholding member.
3.2 The Company's Employee Stock Ownership Plan contains provisions relating to
the voting of shares of the Company's capital stock.
3.4 The Company makes no representation regarding the effect of the financing
transactions contemplated by Parent or Sub in connection with this
Agreement.
The transactions contemplated by this Agreement will breach a covenant in
the Loan Agreement dated June 29, 1995 between the Company and Hibernia
National Bank, as agent for itself and other banks. Compliance with such
covenant has been waived under the conditions described in a letter dated
July 2, 1997, a copy of which has been provided to Parent.
The Company must give the holders of its 5.51% Senior Notes notice of any
person becoming a 50% shareholder within 30 days.
The transactions contemplated by this Agreement will conflict with the
leases for Stores No. 24 and 94.
The transactions contemplated by this Agreement will constitute a "Change
of Control" pursuant to the Company's Change of Control Agreements, which
will give persons who are parties to such agreements certain rights as
provided therein.
The transactions contemplated by this Agreement will cause the restrictions
to lapse on 10,800 restricted Shares subject to the 1987 Restricted Stock
Plan and will accelerate the exercisability of options to purchase 101,250
Shares outstanding under the Directors' Stock Option Plan and the 1993
Stock Incentive Plan (not included in the 101,250 Shares are options for
31,333 Shares that will vest on July 29, 1997).
The Company makes no representation with respect to the effect of the
consummation of the Offer or the Merger on its insurance policies except
that, to the Company's knowledge, there are no material insurance policies
that will terminate or expire as a result of the
<PAGE>
consummation of the Offer or the Merger that could not be replaced with
similar policies on customary commercial terms.
The Company owns a one-half interest in a partnership which owns and has
developed a site near Mobile consisting of 22 acres, more or less. The
transactions contemplated by this Agreement will give the other partner the
right to initiate a buy-sell process, pursuant to which the Company must
choose either to buy or sell the other partner's interest at the price
specified by the partner, and will terminate the Company's right to
initiate such a process. Alternatively, the partner may elect to offer to
buy the Company's interest at an appraised value. The Company shall not
initiate any such process without Parent's consent, which shall not be
unreasonably withheld.
Upon consummation of the Offer, Topco Associates, Inc. may require that the
Company withdraw.
3.7
From March 29, 1997 to the date of this Agreement, the Company has taken
the following actions that, if taken after the date of the Agreement, would
or may constitute a breach of Section 5.1:
o Issued Shares under the Directors Compensation Plan and upon option
exercises under the 1993 Stock Incentive Plan and Directors Stock
Option Plan.
o Paid a regular quarterly dividend.
o Entered into lease agreements with respect to Stores No. 36 and 91 and
an expansion agreement with respect to Store No. 3.
o Made capital expenditures reflected in the 1997 fiscal year capital
budget.
o Finalized the settlement agreement in the Williams case.
o Reduced Michael Doan's Change of Control Agreement to writing.
3.10 The federal income Tax Returns for the Company's fiscal years ended
July 3, 1993, July 2, 1994 and July 1, 1995 are currently being
audited.
List of Change of Control Agreements (1):
Change of control agreement between the Company and David W. Morrow dated
December 13, 1995.
Change of control agreement between the Company and Richard W. La Trace dated
June 7, 1995.
Change of control agreement between the Company and Timothy E. Kullman dated
August 2, 1994.
Change of control agreement between the Company and Thomas P. Robbins dated
October 8, 1995.
Change of control agreement between the Company and Frank I. Bennen dated June
29, 1995.
Change of control agreement between the Company and Larry S. Griffin dated
September 11, 1989.
2
<PAGE>
Change of control agreement between the Company and Thomas R. Trebesh dated June
8, 1993.
Change of control agreement between the Company and Vernell L. Abreo, Jr. dated
January 24, 1992.
Change of control agreement between the Company and Dennis Smith dated April 29,
1996.
Change of control agreement between the Company and Fred Rayle dated December 4,
1995.
Change of control agreement between the Company and Joel D. Cambron dated
September 11, 1989.
Change of control agreement between the Company and W. David Whatley dated
September 11, 1989.
Change of control agreement between the Company and Lester Holland dated
November 8, 1994.
Change of control agreement between the Company and Michael Doan dated April 15,
1996.
Change of control agreement between the Company and Stanley Ewell dated January
22, 1997.
Change of control agreement between the Company and Lewis R. Loeb dated October
10, 1994.
Change of control agreement between the Company and Robert W. Hyde, Jr. dated
August 10, 1995.
Change of control agreement between the Company and Jerry D. Fussell dated
September 11, 1989.
Change of control agreement between the Company and Terral E. Layton dated
September 11, 1989.
Change of control agreement between the Company and Harry S. Pollard dated
September 11, 1989.
Change of control agreement between the Company and James D. Mashburn dated
November 23, 1994.
Change of control agreement between the Company and Dallas Hastings dated
September 11, 1989.
Change of control agreement between the Company and Richard G. Bonner dated
September 11, 1989.
Change of control agreement between the Company and Carolyn H. Jones dated
September 11, 1989.
Change of control agreement between the Company and Joseph K. Burnett dated
September 11, 1989.
Change of control agreement between the Company and Gerald N. Davis dated
September 11, 1989.
Change of control agreement between the Company and Ruth D. Peden dated
September 11, 1989.
Change of control agreement between the Company and Michael W. Yohn dated
September 11, 1989.
Change of control agreement between the Company and Russell A. Boltz dated
September 11, 1989.
Change of control agreement between the Company and Thomas W. Delchamps dated
January 3, 1995.
Change of control agreement between the Company and David M. Middleton dated
November 23, 1994.
Change of control agreement between the Company and Brian W. Patterson dated
November 23, 1994.
3
<PAGE>
Change of control agreement between the Company and Charles R. Powell dated
September 11, 1989.
Change of control agreement between the Company and Ray F. Lewis dated September
11, 1989.
Change of control agreement between the Company and William Bailey dated
September 11, 1989.
Change of control agreement between the Company and Leon (Wayne) Wiggins dated
November 23, 1994.
Change of control agreement between the Company and James Applin dated September
11, 1989.
Change of control agreement between the Company and James Giddeon, II dated
September 11, 1989.
Change of control agreement between the Company and David McPherson dated
September 11, 1989.
______________________
(1) One person who was terminated and rehired by the Company has claimed that
he has in effect a Change of Control Agreement. He did have a Change of
Control Agreement prior to his termination of employment. He claims that
the Company promised when it rehired him that he would be provided with the
same benefits he had prior to his termination of employment and that,
therefore, he is entitled to a Change of Control Agreement. The Company
has informed him that he does not have a Change of Control Agreement;
however, if he were entitled to such an agreement, the Company's payment
obligations thereunder would not exceed $200,000.
______________________
3.11 The Company shall not take action or fail to take any action that would
cause it to become a participant in a multiemployer plan.
See footnote (1) to the list of Change of Control Agreements in Section
3.10 relating to an employee who has asserted a right to a Change of
Control Agreement.
3.12(c)
Crichton property, designated as Parcels C and D, Delchamps Commercial
Subdivision, Mobile County, Alabama, and also referred to as 551 Western
Drive, is listed on the Alabama Department of Environmental Management's
inventory for reported leaking underground storage tanks. All tanks are
out of service. This property was sold to the Finch Companies, Inc. in
June 1996, and it is subject to environmental indemnities by the Company.
The costs for monitoring the underground storage tank system are eligible
for reimbursement under the Alabama Tank Trust Fund Act of 1988.
The Hammond Distribution Center, located at 407 Pride Ave., and also
referred to as 1721 S. Airport Road, Hammond, Louisiana, is listed on a
Resource Conservation Recovery Act Corrective Action Record. The Center
is separately undergoing a Phase II investigation by Delchamps, for
solvents and petroleum. No corrective action order is pending.
4
<PAGE>
The Adams Street property, designated as Lot 2, Distributors Subdivision,
Mobile, Alabama is listed on the Alabama Department of Environmental
Management's inventory for reported leaking underground storage tanks.
The ADEM in 1996 required no further action
Delchamps' stores 123 (200 West Willow, St., Lafayette, LA) and 302
(corner of Airport and McGregor, Mobile, ALA) are reported in the
emergency response notification system each for a diesel truck fuel
leak in 1993 and 1995, respectively.
3.12(e)
The Company has ordered Phase I Environmental Site Assessments on several
store locations, several owned parcels of raw land and the headquarters
site in Mobile, Alabama that have not yet been completed. The Company
will provide Parent with access to such assessments as soon as they are
received by the Company. The Company has materials relating to the 551
Western Drive location sold by the Company, which shall be provided to
Parent.
3.12(f)
The Company represents that the stores listed on Exhibit 3.12(f) are the
only Company stores that have not been retrofitted with current
refrigerant.
To the Company's knowledge, the matters described in Sections 3.12(c),
(e) and (f) above are not material.
3.14(a)
List of real property owned or leased by the Company and its
Subsidiaries:
See the list of leased stores attached as Exhibit 3.14 hereto.
List of real property locations and approximate descriptions:
Louisiana
1. Hammond Property. A tract of land, together with improvements
thereon, situated in Hammond, Tangipahoa Parish, Louisiana, lying north
of U.S. Highway 190, in T-6-S, R-8-E, Sections 17 and 20, consisting of
272 acres, more or less.
2. Mandeville Property. A tract of land, together with improvements
thereon, situated in Mandeville, St. Tammany Parish, Louisiana, lying
south of U.S. Highway 190, in T-7-S, R-11-E, Section 38, consisting of
22 acres, more or less.
3. Jones Creek Road Property. A tract of land, together with
improvements thereon, situated in Baton Rouge, East Baton Rouge Parish,
Louisiana, in T-7-S, R-2-E, Section 60,
5
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designated as Lot A-3-A-2, Woodlawn Estates, 2nd Filing, consisting of
1.2 acres, more or less.
4. Bluebonnet Boulevard Property. Two tracts of land, together with
improvements thereon, situated in Baton Rouge, East Baton Rouge Parish,
Louisiana, in T-7-S, R-1-E, Sections 8 and 9, designated as Tracts B-1 and
C-1-B, Greensburg Land District, consisting of 2.4 acres, more or less.
Mississippi
1. D'Iberville Property. Two tracts of land, together with improvements
thereon, situated in D'Iberville, Harrison County, Mississippi, lying west
of Highway 69 and south of Popps Ferry Road, in T-7-S, R-9-W, Sections 8
and 9.
2. Courthouse Road Property. A tract of land, together with improvements
thereon, situated in Gulfport, Harrison County, Mississippi, lying east
Courthouse Road and south of Pass Christian Road, in T-7-S, R-11-W,
consisting of 5.67 acres, more or less.
NOTE: This tract is currently under option.
Alabama
1. Headquarters. A building of approximately 65,000 square feet in which
the corporate headquarters is located, situated at 305 Delchamps Drive,
Mobile, Alabama and the land on which it is situated.
2. Adams Street Property. A tract of land, together with improvements
thereon, situated in Mobile, Mobile County, Alabama, designated as Lot 2,
Distributors Subdivision, forming the corner of Delchamps Drive and Adams
Street, consisting of 2.69 acres, more or less.
3. Crichton Property. A tract of land, together with improvements
thereon, situated in Mobile, Mobile County, Alabama, designated as Parcels
C and D, Delchamps Commercial Subdivision, lying northeast of Moffett Road
and west of Western Drive, consisting of 24 acres, more or less.
NOTE: This tract is currently under option.
4. Broad and Elmira Streets Property. A tract of land, together with
improvements thereon, situated in Mobile, Mobile County, Alabama, forming
the corner of Broad and Elmira Streets, with an adjoining lot providing
frontage on Marine Street, consisting of 1.21 acres, more or less.
NOTE: A sale of this tract is pending.
6
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5. 109 Broad Street Property. A tract of land, together with
improvements thereon, situated in Mobile, Mobile County, Alabama, forming
the northeast corner of Broad and Church Streets. Improvements thereon
bear municipal number 109 Broad Street.
6. Store No. 39 Property. The Company owns the land on which Store No.
39 is situated; consisting of 3 acres, more or less.
7. Mobile Partnership. The Company owns a one-half interest in a
partnership which owns and has developed a site near Mobile consisting
of 22 acres, more or less and upon which Store No. 8 is situated. The
Company leases Store No. 8 from the partnership.
Florida
Panama City Property. A fifty percent (50%) interest as tenant-in-common
in a tract of land, together with improvements thereon, situated in
Panama City, Bay County, Florida, lying east of Thomas Drive and north
of Magnolia Beach Road, in T-4-S, R-15-W, Section 9, consisting of 18.7
acres, more or less.
3.14(b)
The transactions contemplated by this Agreement will conflict with the
leases for Stores No. 24 and 94.
3.14(c)
The Company has subleased the locations indicated on Exhibit 3.14 hereto.
3.15
The Company is involved in a unionization effort at the Hammond
distribution center and has challenged the election that occurred in
December 1996.
Delchamps, Inc. and General Truck Drivers, Chauffeurs, Warehousemen &
Helpers Local No. 270 and Wilburn Ray Young, Jr. and Ivy H. Tate and
David Aranyosi (Before the National Labor Relations Board Region 15)
3.16(a)
The Company makes no representation regarding the effect of the financing
transactions contemplated by Parent or Sub in connection with this
Agreement.
The transactions contemplated by this Agreement will breach a covenant in
the Loan Agreement dated June 29, 1995 between the Company and Hibernia
National Bank, as agent for itself and other banks. Compliance with such
covenant has been waived under the conditions described in a letter dated
July 2, 1997, a copy of which has been provided to Parent.
7
<PAGE>
The Company must and will give the holders of its 5.51% Senior Notes
notice of any person becoming a 50% shareholder within 30 days.
The transactions contemplated by this Agreement will conflict with the
leases for Stores No. 24 and 94.
The Company owns a one-half interest in a partnership which owns and has
developed a site near Mobile consisting of 22 acres, more or less. The
transactions contemplated by this Agreement will give the other partner
the right to initiate a buy-sell process, pursuant to which the Company
must choose either to buy or sell the other partner's interest at the
price specified by the partner, and will terminate the Company's right to
initiate such a process. Alternatively, the partner may elect to offer
to buy the Company's interest at an appraised value.
Upon consummation of the Offer, Topco Associates, Inc. may require that
the Company withdraw.
The contracts and agreements listed on the Data Room Index dated July 5,
1997 are incorporated by reference herein.
3.16(c)
$12.2 million (not including amounts up to $200,000 described in footnote
(1) in Disclosure Schedule Section 3.10).
3.21(b)
None.
3.24 The standstill provisions of one of the agreements will not by its terms
apply to the transactions contemplated by this Agreement.
5.1(d)
The Company's fiscal year 1997 capital budget, as amended during the
fiscal year, covered nine store expansions, six minor store remodels,
three combo conversions, and various store equipment, warehouse equipment
and administrative equipment items, aggregating approximately $25.2
million, of which approximately $13.7 million had been spent at May 31,
1997. A portion of the remainder was spent in June 1997 and the rest
has been carried over to fiscal year 1998.
The Company's fiscal year 1998 capital budget includes three store
expansions, thirteen major store remodels, four combo conversions, and
various store equipment, warehouse equipment and administrative equipment
items aggregating approximately $48.5 million, including amounts carried
over from the fiscal year 1997 capital budget. The store
8
<PAGE>
expansion, remodel and conversion schedule for fiscal year 1998 was
previously submitted to Parent.
The Company will consult with Parent prior to making any such capital
expenditures in excess of $500,000.
The Company shall retain the right to make bonus payments pursuant to its
Cash Incentive Compensation Plan not to exceed $2.6 million.
The Company shall be entitled to make expenditures in connection with its
Frequent Shopper Program; provided, that the Company shall delay the
introduction of the program for four weeks from July 10, 1997 and shall
thereafter consult with Parent prior to such introduction.
5.1(e)
The Company shall retain the right to make bonus payments pursuant to its
Cash Incentive Compensation Plan not to exceed $2.6 million.
The Company shall be entitled to enter into new agreements or amend
existing agreements, including employment, severance and change of
control agreements, and to grant new awards or benefits, excluding
stock options and other long term incentive compensation arrangements,
to the extent reasonably necessary to provide equivalent compensation
to the replacement (including by way of internal promotion) of any
employee at the Vice President level or above who terminates employment
with the Company prior to the Effective Time; provided, that the Company
shall consult with Parent prior to taking any of the foregoing actions.
9
<PAGE>
CONFIDENTIALITY AND STANDSTILL AGREEMENT
April 8, 1997
Mr. Bruce C. Bruckmann
Bruckmann, Rosser, Sherrill & Co., Inc.
126 East 56th Street
New York, NY 10022
Dear Mr. Bruckmann:
Delchamps, Inc. ("DLCH"), Bruckmann, Rosser, Sherrill & Co., Inc. and
Jitney-Jungle Stores of America, Inc. (Bruckmann, Rosser, Sherrill & Co.,
Inc. and Jitney-Jungle Stores of America, Inc., together, "BRS") are prepared
to engage in discussions with respect to a possible negotiated business
combination involving BRS and DLCH (the "Transaction"), and during the course
of such discussions DLCH may disclose and make available to BRS certain
information concerning DLCH's business, prospects, financial condition,
operations, assets and liabilities. All such information furnished to BRS or
its Representatives (as defined below) by or on behalf of DLCH (irrespective
of the form of communication and whether such information is so furnished on
or after the date hereof), and all analyses, compilations, data, studies,
notes, interpretations, memoranda or other documents prepared by BRS or its
Representatives containing or based in whole or in part on any such furnished
information are collectively referred to herein as the "Confidential
Information." As a condition to being furnished with the Confidential
Information, BRS agrees as follows:
1. Non-Disclosure of Confidential Information. (a) BRS shall (i) use the
Confidential Information solely for the purpose of evaluating a possible
Transaction and for no other competitive or other purpose; (ii) not disclose
the Confidential Information to any third party, except for disclosures to
its directors, officers, employees and representatives of its advisors (such
as independent accountants, investment bankers, attorneys and financing
sources) acting on its behalf (such directors, officers, employees and
representatives being referred to hereinafter collectively as its
"Representatives") who in each case, in its reasonable judgment, need to know
such information for the purpose of evaluating a possible Transaction; (iii)
inform its Representatives of the confidential nature of the Confidential
Information and direct its Representatives to treat the Confidential
Information confidentially; (iv) take all additional reasonable precautions
necessary to prevent the disclosure of the Confidential Information by its
Representatives to any third party; and (v) be responsible for any breach of
this Agreement by its respective Representatives who have not entered into a
written agreement with DLCH to be bound by the terms hereof.
<PAGE>
Mr. Bruce C. Bruckmann
April 8, 1997
Page 2
(b) If BRS or its Representatives is requested (by interrogatories,
requests for information or documents, subpoena, civil investigative demand
or similar process) to disclose any Confidential Information, it is agreed
that BRS will provide DLCH with prompt notice of such request so that DLCH
may seek an appropriate protective order and/or waive BRS's compliance with
the provisions of this Agreement. BRS and its Representatives may disclose
without liability hereunder only that portion of the Confidential Information
that BRS is advised by written opinion of counsel is legally required to be
disclosed; provided that BRS gives to DLCH written notice of the information
to be disclosed as far in advance of its disclosure as is practicable and,
upon DLCH's request and at DLCH's expense, uses reasonable efforts to obtain
assurances that confidential treatment will be accorded to such information.
2. Non-Disclosure of Negotiations or Agreements. Except as required by
law, or in circumstances where the law is unclear as advisable in the written
opinion of counsel in order to protect the disclosing party, neither BRS or
its Representatives, on the one hand, nor DLCH or its Representatives, on the
other hand, shall disclose to any person the existence, status or terms of
any discussions, negotiations or agreements concerning a possible
Transaction, including without limitation any offer, letter of intent,
proposal, price, value or valuation, or any similar terms, agreements or
understandings between BRS and DLCH with respect thereto, or that BRS has
received from DLCH Confidential Information, without obtaining the prior
written consent of DLCH or BRS, as the case may be, which consent will not be
unreasonably withheld.
3. Return of Confidential Information. All written Confidential
Information delivered by or on behalf of DLCH to BRS pursuant to this
Agreement shall be and remain the property of DLCH, and upon the written
request of DLCH, BRS shall (i) promptly return such Confidential Information
and shall not retain any copies or other reproductions or extracts thereof,
(ii) destroy or have destroyed all memoranda, notes, reports, analyses,
compilations, studies, interpretations, or other documents derived from or
containing Confidential Information, and all copies and other reproductions
and extracts thereof, and (iii) provide a certificate to DLCH certifying that
the foregoing materials have, in fact, been destroyed or returned, signed by
an authorized officer supervising such destruction or return. Notwithstanding
the return or destruction of the Confidential Information, BRS and its
Representatives will continue to be bound by the confidentiality and other
obligations hereunder.
4. Information Not Deemed Confidential Information. The term
"Confidential Information" does not include information that (i) is or
becomes generally available to the public other than as a result of a
disclosure by BRS or its Representatives in violation of this Agreement; or
(ii) was or becomes available to BRS on a non-confidential basis from a source
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Mr. Bruce C. Bruckmann
April 8, 1997
Page 3
other than DLCH or its Representatives, provided that such source is not
known by BRS to be bound by an obligation of confidentiality to DLCH or its
Representatives.
5. No Representations or Warranties. Neither DLCH nor any of its
respective officers, directors, employees, representatives or agents makes
any representation or warranty, express or implied, as to the accuracy and
completeness of any Confidential Information provided by it, and no liability
shall result to DLCH from its use, except as set forth in a definitive
agreement for a Transaction. Only the representations and warranties that are
made in a definitive agreement for a Transaction, when, as, and if it is
executed, and subject to such limitations and restrictions as may be
specified therein, shall have any legal effect.
6. No Agreement. DLCH has the absolute right to determine what
information, properties and personnel it wishes to make available to BRS.
Unless a definitive agreement regarding a Transaction between BRS and DLCH
has been executed and delivered, neither DLCH, BRS nor any of their
stockholders or affiliates will be under any legal obligation of any kind
whatsoever with respect to such a Transaction by virtue of this letter
Agreement or any other written or oral expression with respect to such
Transaction except, in the case of this Agreement, matters specifically
agreed to herein. Each party further acknowledges and agrees that each party
reserves the right, in its sole discretion, to reject any and all proposals
made by the other party or any of its Representatives with regard to a
Transaction, and to terminate discussion and negotiations with the other
party at any time.
7. Contact Persons: No Solicitation. All requests by BRS for
Confidential Information, meetings with personnel or inspection of properties
and all other communications regarding a possible Transaction shall be made
only to the contacts designated by DLCH (the "Contact Persons"). BRS agrees
that, for a period of two years from the date of this Agreement, it will not
initiate contact (except in the ordinary course of business and except to the
extent permitted by paragraph 9) with any director, officer, employee,
distributor or customer of DLCH regarding its business operations, prospects
or finances, except as may be permitted by the Contact Persons for due
diligence purposes. It is expressly understood that this Agreement is not
intended to preclude the ability of the companies to compete with one another
in the ordinary course. BRS further agrees that, for a period of two years
from the date hereof, it will not hire any of DLCH's officers, zone managers
and/or district managers without DLCH's written consent and will not solicit
for hire (other than by means of a general advertisement) any of DLCH's
non-store level employees other than clerical and administrative employees.
8. Non-public information. DLCH has outstanding publicly-held securities
and the Confidential Information contains material non-public information.
BRS acknowledges that it is (i) aware, and has advised or will advise its
Representatives, that the United States
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Mr. Bruce C. Bruckmann
April 8, 1997
Page 4
securities laws prohibit any person in possession of material non-public
information about a company from purchasing or selling securities of such
company, and from communicating such information to any other person under
circumstances in which it is reasonably foreseeable that such person may
purchase or sell such securities and (ii) familiar with the Securities and
Exchange Act of 1934, as amended, and the rules and regulations thereunder,
and BRS agrees that it will neither use nor permit any of its Representatives
to use any Confidential Information in violation of such Act or rules or
regulations, including without limitation, Rule 10b-5.
9. Standstill. BRS agrees that, until the expiration of two years from
the date of this Agreement, without prior written invitation (on an
unsolicited basis) of DLCH's Board of Directors, it and its affiliates will
not (i) in any manner acquire, agree to acquire or make any proposal or offer
or otherwise seek to acquire, directly or indirectly, any securities (or
rights in respect thereof), assets or property of DLCH or any of its
subsidiaries or of any successor thereto or person in control thereof,
whether such agreements or proposals or offers are made with or to DLCH or
any of its subsidiaries (or a successor thereto or person in control thereof)
or a third party; (ii) enter into or agree, offer, seek or propose to enter
into or otherwise be involved in or part of, directly or indirectly, any
merger, acquisition transaction or other business combination relating to
DLCH or any of its subsidiaries or any of their respective assets; (iii)
make, or in any way participate in, directly or indirectly, and
"solicitation" of "proxies" (as such terms are used in the proxy rules of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) to vote,
or seek to advise or influence any person with respect to the voting of, any
voting securities of DLCH or any of its subsidiaries or of any successor
thereto or person in control thereof, (iv) form, join or in any way
participate in a "group" (within the meaning of Section 13(d)(3) of the
Exchange Act) with respect to any voting securities of DLCH or any of its
subsidiaries or of any successor thereto or person in control thereof; (v)
seek or propose, alone or in concert with others, to control or influence the
management, Board of Directors or policies of DLCH; (vi) directly or
indirectly enter into any discussions, negotiations, arrangements or
understandings with any other person (except internal discussions and
planning activities involving its Representatives) with respect to any of the
foregoing activities or propose any of such activities to any other person
(other than its Representatives); (vii) directly or indirectly advise,
encourage, assist, act as a financing source for or otherwise invest in any
other person in connection with any of the foregoing; (viii) publicly
disclose any intention, plan or arrangement inconsistent with the foregoing.
BRS also agrees that, during such two-year period, neither it nor any of its
affiliates will: (i) request DLCH or its advisors, directly or indirectly, to
(1) amend or waive any provision of this paragraph (including this sentence)
or (2) otherwise consent to any action inconsistent with any provision of
this paragraph (including this sentence); or (ii) take any initiative with
respect to DLCH or any of its subsidiaries that could be reasonably be
expected to require DLCH to make
<PAGE>
Mr. Bruce C. Bruckmann
April 8, 1997
Page 5
a public announcement regarding (1) such initiative, (2) any of the
activities referred to in this paragraph, (3) the possibility of a
Transaction or any similar transaction or (4) the possibility of BRS or any
other person acquiring control of DLCH, whether by means of a business
combination or otherwise. Additionally, BRS's Chief Executive Officer may
contact DLCH's Chief Executive Officer for the purpose of expressing
continuing or renewed interest in a Transaction or in any other business
relationship, provided that, unless invited to do so by DLCH's Chief
Executive Officer, no offer or proposal shall be made that would require
disclosure or formal consideration by DLCH or its Board of Directors.
10. Person. The term "person" as used in this Agreement will be
interpreted broadly to include the media and any corporation, company, group,
partnership, governmental body or other entity or individual,
11. No Waiver. No failure or delay by DLCH or BRS in exercising any
right, power or privilege hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise thereof preclude any other or further
exercise thereof, or the exercise of any right, power or privilege hereunder.
12. Remedies. It is understood and agreed that money damages would not
be a sufficient remedy for any breach of this Agreement and that the
non-breaking party shall be entitled to equitable relief, including specific
performance and injunction, as a remedy for any such breach or threatened
breach. Each party agrees to waive, and use its best efforts to cause its
directors, officers, employees or agents to waive, any requirement for the
securing or posting of any bond or other security in connection with such
remedy. Such remedies shall not be deemed to be the exclusive remedies for a
breach of this Agreement, but shall be in addition to all other remedies
available at law or in equity, including remedies pursuant to applicable laws
relating to trade secrets.
13. Benefits: Governing Law. This Agreement is for the benefit of DLCH
and its respective directors, officers, employees, representatives and agents
and its respective successors and assigns and shall be governed by and
construed in accordance with the internal substantive laws and not the choice
of law rules of the State of Alabama.
14. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, and all such
counterparts together shall constitute but one of the same Agreement.
15. Severability. If any provision of this Agreement is invalid
or unenforceable, such invalidity or unenforceability shall not be deemed to
affect any other provision hereof or
<PAGE>
Mr. Bruce C. Bruckmann
April 8, 1997
Page 6
the validity of the remainder of this Agreement, and such invalid or
unenforceable provision shall be deemed deleted herefrom to the minimum extent
necessary to cure such invalidity or unenforceability.
16. Modifications. No provision of this Agreement may be waived, amended
or modified except by the written agreement of BRS and DLCH.
Please confirm your agreement with the foregoing by signing and
returning one copy of this letter to the undersigned, whereupon this letter
Agreement shall become a binding agreement between us.
DELCHAMPS, INC.
By: /s/ Timothy E. Kullman
------------------------
Timothy E. Kullman
Senior Vice President and
Chief Financial Officer
Accepted and agreed to as of the
____ day of April 1997.
BRUCKMANN ROSSER, SHERRILL & CO., INC.
By: /s/ Bruce C. Bruckmann
--------------------------
Bruce C. Bruckmann
Authorized Signatory
and
JITNEY-JUNGLE STORES OF AMERICA, INC.
By: /s/ Roger P. Friou
---------------------
Name: Roger P. Friou
Title: President
