UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. __)*
Quality Food Centers, Inc.
- --------------------------------------------------------------------------------
(Name of Issuer)
Common Stock, $0.001 par value
- --------------------------------------------------------------------------------
(Title of Class of Securities)
747565109
------------------------------
(CUSIP Number)
Roger A. Cooke, Senior Vice President
Fred Meyer, Inc.
3800 SE 22nd Avenue
Portland, Oregon 97242
(503) 232-8844
- --------------------------------------------------------------------------------
(Name, Address and Telephone Number
of Person Authorized to Receive
Notices and Communications)
November 6, 1997
-------------------------------
(Date of Event which Requires
Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ].
NOTE: Six copies of this statement, including all exhibits, should be filed
with the Commission. See Rule 13d-1(a) for other parties to whom copies are
to be sent.
*The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which
would alter the disclosures provided in a prior cover page.
The information required in the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities
Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of
that section of the Act but shall be subject to all other provisions of the
Act (however, see the Notes).
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SCHEDULE 13D
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CUSIP No. 747565109 Page 2 of 6 Pages
1) Name of Reporting Person; S.S. or I.R.S. Identification No.
of Above Person:
Fred Meyer, Inc.
91-1826443
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2) Check the Appropriate Box if a Member of a Group
(See Instructions)
(a) [ ]
(b) [ ]
3) SEC Use Only _____________________________________________________________
4) Source of Funds
OO
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5) Check Box if Disclosure of Legal Proceedings Is Required
Pursuant to Items 2(d) or 2(e) [ ]
6) Citizenship or Place of Organization
Delaware
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7) Sole Voting Power
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Number 8) Shared Voting Power
of
Shares 5,473,982**
Beneficially --------------------------------------------------
Owned by
Each 9) Sole Dispositive Power
Reporting
Person
With --------------------------------------------------
10) Shared Dispositive Power
5,473,982**
--------------------------------------------------
11) Aggregate Amount Beneficially Owned by Each Reporting Person
5,473,982**
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12) Check if the Aggregate Amount in Row (11) Excludes Certain
Shares* [ ]
13) Percent of Class Represented by Amount in Row (11)
26.1%
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14) Type of Reporting Person*
CO
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Item 1. Security and Issuer
This Statement relates to shares of Common Stock, $0.001 par value
("Common Stock"), of Quality Food Centers, Inc., a corporation organized under
the laws of Washington ("QFC"). QFC's principal executive offices are located at
10112 N.E. 10th Street, Bellevue, Washington 98004.
Item 2. Identity and Background
This Statement is filed by Fred Meyer, Inc., a corporation organized
under the laws of Delaware ("Fred Meyer"), whose business address is 3800 SE
22nd Avenue, Portland, Oregon 97202. Fred Meyer's principal business is
retailing a wide range of food, apparel, fine jewelry and products for the home.
During the past five years, Fred Meyer has not been convicted in a criminal
proceeding (excluding traffic violations or similar misdemeanors), nor has it
been a party to a civil proceeding of a judicial or administrative body of
competent jurisdiction and as a result of such proceeding was or is subject to a
judgment, decree or final order enjoining future violations of, or prohibiting
or mandating activities subject to, federal or state securities laws or finding
any violation with respect to such laws.
Set forth below are the names, principal occupations and business
addresses of the executive officers and directors of Fred Meyer. Each executive
officer and director is a citizen of the United States of America. During the
past five years, none of the executive officers or directors has been convicted
in a criminal proceeding (excluding traffic violations or similar misdemeanors),
or been a party to a civil proceeding of a judicial or administrative body of
competent jurisdiction and as a result of such proceeding was or is subject to a
judgment, decree or final order enjoining future violations of, or prohibiting
or mandating activities subject to, federal or state securities laws or finding
any violation with respect to such laws.
Executive Officers of Fred Meyer:
Name Position with Fred Meyer
- ---- ------------------------
Robert G. Miller President and Chief Executive Officer
Sammy K. Duncan Executive Vice President, Food Group
Kenneth Thrasher Executive Vice President and Chief Administrative Officer
Mary F. Sammons Executive Vice President, Apparel, PEM and Home Group
Roger A. Cooke Senior Vice President, Director of Legal Group and
General Counsel and Secretary
David R. Jessick Senior Vice President, Director of Finance Group and
Chief Financial Officer
The business address of each executive officer is 3800 SE 22nd Avenue, Portland,
Oregon 97202.
Directors of Fred Meyer:
Principal Occupation, Address of Employer and Business
Name Address of Director
- ---- -------------------
Ronald W. Burkle General Partner, The Yucaipa Companies
10000 Santa Monica Boulevard, Fifth Floor, Los Angeles,
California 90067
Robert G. Miller* President and Chief Executive Officer, Fred Meyer, Inc.
Vivian A. Bull President, Linfield College
900 S.E. Baker Street, McMinnville, Oregon 97128-6894
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James J. Curran* Retired Chairman of the Board and Chief Executive Officer
of First Interstate Bank, Northwest Region
A. M. Gleason* Retired Chief Executive Officer of PacifiCorp
Roger S. Meier President, AMCO, Inc.
1211 SW Fifth Avenue, Ste. 2900, Portland, Oregon 97204
Steven R. Rogel President and Chief Executive Officer, Willamette
Industries, Inc.
1300 S.W. Fifth Avenue, Suite 3800, Portland, Oregon
97201
John G. King President and Chief Executive Officer, Legacy Health
System
1919 NW Lovejoy, Portland, Oregon 97209
Bruce Karatz Chairman of the Board, President and Chief Executive
Officer, Kaufman and Broad Home Corporation
10990 Wilshire Boulevard, Seventh Floor, Los Angeles,
California 90024
Fred L. Smith Retired President of Fred Smith's Honda Automobiles of
Palm Springs and Retired President of Fred Smith's
Jaguar/Rolls Royce of Rancho Mirage
2000 Strada Mia, Las Vegas, Nevada 89117
Jeffrey P. Smith Retired Chairman of the Board and Chief Executive Officer
of Smith's Food & Drug Centers, Inc.
32 Burning Tree Court, Las Vegas, Nevada 89113
* Business address is 3800 SE 22nd Avenue, Portland, OR 97202
Item 3. Source and Amount of Funds or Other Consideration
See Item 4 below.
Item 4. Purpose of Transaction
On November 6, 1997, QFC, Fred Meyer and Q-Acquisition Corp., a
Washington corporation and wholly-owned subsidiary of Fred Meyer
("Q-Acquisition"), entered into an Agreement and Plan of Merger (the "Merger
Agreement"), a copy of which is attached hereto as Exhibit 7.3 and incorporated
by reference herein. Pursuant to the terms of the Merger Agreement,
Q-Acquisition would merge with and into QFC (the "Merger"), subject to certain
conditions being satisfied or waived. Pursuant to the Merger Agreement, each
outstanding share of QFC Common Stock, $.001 par value, would be converted into
the right to receive the greater of either (i) 1.9 shares of Fred Meyer common
stock, $.01 par value ("Fred Meyer Common Stock"), or (ii) the lesser of (A) 2.3
shares of Fred Meyer Common Stock or (B) a number of shares equal to $55 divided
by the average closing price of the Fred Meyer Common Stock on the New York
Stock Exchange for 15 out of the 35 trading days ending on the second trading
day preceding the effective date of the Merger, subject to certain adjustments
if any divestitures are required under the antitrust laws. Conditions to the
consummation of the Merger include the receipt of regulatory approvals and
approval by the shareholders of Fred Meyer and QFC.
Also on November 6, 1997, Fred Meyer entered into Shareholders
Agreements (the "Shareholders Agreements") with certain shareholders of QFC
("Shareholders"), pursuant to which, in consideration of the covenants and
agreements of Fred Meyer contained therein and in the Agreement, and as an
inducement to Fred Meyer to enter into the Merger Agreement, Shareholders agreed
to vote at any meeting of QFC shareholders all of Shareholders' shares of QFC's
voting securities (i) in favor of approving the Merger Agreement and the
transactions contemplated thereby, (ii) against any other merger agreement or
merger, consolidation, combination, dissolution, liquidation or winding up by
QFC, or any other acquisition proposal, and (iii) against any amendment to QFC's
certificate of incorporation or bylaws or other proposal or transaction that
would in any
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manner impede, frustrate, prevent, or nullify the Merger. The Shareholders
Agreements also impose restrictions upon the transfer of the shares, options and
warrants subject to the Shareholders Agreements. The Shareholders Agreements
will terminate upon the earlier of (a) the date on which the Merger Agreement
terminates, (b) the date on which QFC's Board of Directors withdraws, modifies
or amends its approval or recommendation of the Merger Agreement, the Merger or
any of the transactions contemplated by the Merger Agreement in such a way as to
be adverse to Fred Meyer or Q-Acquisition or (c) the effective time of the
Merger. Copies of the Shareholders Agreements are included as Exhibits 7.1 and
7.2 to this Schedule 13D and are specifically incorporated herein by reference.
The foregoing summaries of the Merger Agreement and the Shareholders
Agreements are qualified in their entirety by reference to the full agreements
which are filed as exhibits.
Other than the transactions contemplated by the Merger Agreement and
Shareholders Agreements, Fred Meyer has no plans or proposals required to be
disclosed in this Item 4.
Item 5. Interest in Securities of the Issuer
(a) - (c) By reason of the Shareholders Agreements, Fred Meyer may be
deemed to be the beneficial owner of 5,473,982 shares (the "Shares") of QFC
Common Stock. Fred Meyer disclaims beneficial ownership of the Shares. The
Shares represent approximately 26.1% of the outstanding shares of QFC Common
Stock. Except as described in this Schedule 13D, neither Fred Meyer nor, to the
best knowledge of Fred Meyer, any of the persons listed in Item 2 above
beneficially owns any shares of QFC Common Stock. Except as described in this
Schedule 13D, neither Fred Meyer nor, to the best of its knowledge, any of the
persons listed in Item 2 above has effected any transactions in QFC Common Stock
during the past 60 days. By virtue of the limited nature of the Shareholders
Agreements, Fred Meyer expressly disclaims beneficial ownership of the Shares.
(d) Not applicable.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships with
Respect to Securities of the Issuer
See Item 4 with respect to the Merger Agreement and the Shareholder
Agreements.
Item 7. Material to be Filed as Exhibits
The following agreements are filed as exhibits:
7.1 Shareholders Agreement dated as of November 6, 1997 between Fred
Meyer, Inc. and Stuart M. Sloan.
7.2 Shareholders Agreement dated as of November 6, 1997 between Fred
Meyer, Inc. and Zell/Chilmark Fund L.P.
7.3 Agreement and Plan of Merger by and among Quality Food Centers,
Inc., Fred Meyer, Inc. and Q-Acquisition Corp., dated November 6,
1997. (Incorporated by reference to Exhibit 99.1 of Fred Meyer,
Inc.'s Form 8-K (File No. 1-13339) filed November 13, 1997).
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Signature
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Date: November 13, 1997 FRED MEYER, INC.
By: THOMAS R. HUGHES
-------------------------------------
Thomas R. Hughes
Vice President and
Controller
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EXHIBIT INDEX
Sequential
Exhibit No. Description Page No.
- ----------- ----------- --------
7.1 Shareholders Agreement dated as of November 6,
1997 between Fred Meyer, Inc. and Stuart M.
Sloan.
7.2 Shareholders Agreement dated as of November 6,
1997 between Fred Meyer, Inc. and
Zell/Chilmark Fund L.P.
7.3 Agreement and Plan of Merger by and among
Quality Food Centers, Inc., Fred Meyer, Inc.
and Q-Acquisition Corp., dated November 6,
1997. (Incorporated by reference to Exhibit
99.1 of Fred Meyer, Inc.'s Form 8-K (File No.
1-13339) filed November 13, 1997).
SHAREHOLDERS AGREEMENT, dated as of November 6, 1997, between FRED
MEYER, INC., a Delaware corporation ("Parent"), and Stuart M. Sloan
("Shareholder").
WHEREAS, Parent, Q-Acquisition Corp., a Washington corporation and a
wholly owned subsidiary of Parent ("Sub"), and Quality Food Centers, Inc., a
Washington corporation (the "Company"), propose to enter into an Agreement and
Plan of Merger dated as of the date hereof (as the same may be amended or
supplemented, the "Merger Agreement"; capitalized terms used but not defined
herein shall have the meanings set forth in the Merger Agreement) providing for
the merger of Sub with and into the Company (the "Merger"), upon the terms and
subject to the conditions set forth in the Merger Agreement;
WHEREAS, Shareholder owns 1,498,982 shares of Common Stock, par value
$.001 per share, of the Company (the "Company Common Stock") (such shares of
Company Common Stock, together with any other shares of capital stock of the
Company acquired by such Stockholder after the date hereof and during the term
of this Agreement, being collectively referred to herein as the "Subject
Shares"); and
WHEREAS, as a condition to its willingness to enter into the Merger
Agreement, Parent has requested that Shareholder enter into this Agreement;
NOW, THEREFORE, to induce Parent to enter into, and in consideration
of its entering into, the Merger Agreement, and in consideration of the premises
and the representations, warranties and agreements contained herein, the parties
agree as follows:
1. Representations and Warranties of Shareholder. Shareholder hereby
represents and warrants to Parent as of the date hereof in respect of himself as
follows:
(a) Authority. The Shareholder has all requisite power and authority
to enter into this Agreement and to consummate the transactions
contemplated hereby. This Agreement has been duly authorized, executed and
delivered by the Shareholder and constitutes a valid and binding obligation
of the Shareholder enforceable in accordance with its terms. Except for the
Standstill Agreement, dated as of January 14, 1995 (the "Standstill
Agreement"), by and between the Company and Shareholder (the relevant
provisions of which have been waived by the Company to permit Shareholder
to enter into and perform this Agreement, as set forth in the agreement
between the Company and Shareholder dated November 6, 1997', the execution
and delivery of this Agreement do not, and the consummation of the
transactions contemplated hereby and compliance with the terms hereof will
not, conflict with, or result in any violation of, or default (with or
without notice or lapse of time or both) under any provision of, any trust
agreement, loan or credit agreement, note, bond, mortgage, indenture, lease
or other
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2
agreement, instrument, permit, concession, franchise, license, judgment,
order, notice, decree, statute, law, ordinance, rule or regulation
applicable to the Shareholder or to the Shareholder's property or assets.
If Shareholder is married and the Shareholder's Subject Shares constitute
community property or otherwise need spousal or other approval to be legal,
valid and binding, this Agreement has been duly authorized, executed and
delivered by, and constitutes a valid and binding agreement of, the
Shareholder's spouse, enforceable against such spouse in accordance with
its terms. No trust of which Shareholder is a trustee requires the consent
of any beneficiary to the execution and delivery of this Agreement or to
the consummation of the transactions contemplated hereby.
(b) The Subject Shares. The Shareholder is the record and beneficial
owner of, and has good and marketable title to, the Subject Shares, free
and clear of any Encumbrances. The Shareholder does not own, of record or
beneficially, any shares of capital stock of the Company other than the
Subject Shares. The Shareholder has the sole right to vote, and the sole
power of disposition with respect to, such Subject Shares, and none of such
Subject Shares is subject to any voting trust or other agreement,
arrangement or restriction with respect to the voting or disposition of
such Subject Shares, except for the Standstill Agreement and except as
contemplated by this Agreement.
2. Representations and Warranties of Parent. Parent hereby represents
and warrants to Shareholder that Parent has all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by Parent, and
the consummation of the transactions contemplated hereby, have been duly
authorized by all necessary corporate action on the part of Parent. This
Agreement has been duly executed and delivered by Parent and constitutes a valid
and binding obligation of Parent enforceable in accordance with its terms. The
execution and delivery of this Agreement do not, and the consummation of the
transactions contemplated hereby and compliance with the terms hereof will not,
conflict with, or result in any violation of, or default (with or without notice
or lapse of time or both) under any provision of, the certificate of
incorporation or by-laws of Parent, any trust agreement, loan or credit
agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise, license, judgment, order, notice,
decree, statute, law, ordinance, rule or regulation applicable to Parent or to
Parent's property or assets.
3. Covenants of Shareholder. Until the termination of this Agreement
in accordance with Section 7, Shareholder agrees as follows:
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3
(a) At any meeting of shareholders of the Company called to vote upon
the Merger and the Merger Agreement or at any adjournment thereof or in any
other circumstances upon which a vote, consent or other approval with
respect to the Merger and the Merger Agreement is sought, the Shareholder
shall be present (in person or by proxy) and shall vote (or cause to be
voted) the Subject Shares in favor of the Merger, the adoption by the
Company of the Merger Agreement and the approval of the terms thereof and
each of the other transactions contemplated by the Merger Agreement.
(b) At any meeting of shareholders of the Company or at any
adjournment thereof or in any other circumstances upon which the
Shareholder's vote, consent or other approval is sought, the Shareholder
shall vote (or cause to be voted) the Subject Shares against (i) any merger
agreement or merger (other than the Merger Agreement and the Merger),
consolidation, combination, sale of substantial assets, reorganization,
recapitalization, dissolution, liquidation or winding-up of or by the
Company or any other takeover proposal (collectively, "Takeover Proposal")
or (ii) any amendment of the Company's certificate of incorporation or
by-laws or other proposal or transaction involving the Company or any of
its subsidiaries, which amendment or other proposal or transaction would in
any manner impede, frustrate, prevent or nullify the Merger, the Merger
Agreement or any of the other transactions contemplated by the Merger
Agreement or change in any manner the voting rights of any class of capital
stock of the Company. The Shareholder further agrees not to commit or agree
to take any action inconsistent with the foregoing.
(c) Except as provided in the immediately succeeding sentence of this
Section 3(c), the Shareholder agrees not to (i) sell, transfer, pledge,
assign or otherwise dispose of (including by gift) (collectively,
"Transfer"), or enter into any contract, option or other arrangement
(including any profit-sharing arrangement) with respect to the Transfer of,
the Subject Shares to any person other than pursuant to the terms of the
Merger or (ii) enter into any voting arrangement, whether by proxy, voting
agreement or otherwise, in connection with, directly or indirectly, any
Takeover Proposal and agrees not to commit or agree to take any of the
foregoing actions. Notwithstanding the foregoing, the Shareholder shall
have the right, for estate planning purposes, to Transfer Subject Shares to
a transferee only following the due execution and delivery to Parent by
each transferee of a legal, valid and binding counterpart to this
Agreement.
(d) During the term of this Agreement, the Shareholder shall not, nor
shall he permit any of his affiliates or any director, officer, employee,
investment banker, attorney or
<PAGE>
4
other adviser or representative of the Shareholder to, (i) directly or
indirectly solicit, initiate or encourage the submission of, any Takeover
Proposal or (ii) directly or indirectly participate in any discussions or
negotiations regarding, or furnish to any person 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. Notwithstanding the foregoing provisions of
this Section 3(d), Shareholder and all other persons described in the first
sentence of this Section 3(d), shall be entitled to take all actions and to
exercise all rights with respect to any Transaction as the Company may take
or exercise pursuant to Section 5.4 of the Merger Agreement; provided, that
the Company, in connection with such actions and the exercise of such
rights, complies with Section 5.4 of the Merger Agreement.
(e) Until after the Merger is consummated or the Merger Agreement is
terminated, the Shareholder shall use all reasonable efforts to take, or
cause to be taken, all actions, and to do, or cause to be done, and to
assist and cooperate with the other parties in doing, all things necessary,
proper or advisable to consummate and make effective, in the most
expeditious manner practicable, the Merger and the other transactions
contemplated by the Merger Agreement.
4. Affiliate Letter; Tax Certificates. Shareholder shall execute and
deliver the agreement contemplated by the last sentence of Section 5.11(a) of
the Merger Agreement and, if requested by tax counsel of Parent or for the
Company in connection with the rendering of the tax opinions contemplated by the
Merger Agreement, a tax certificate substantially in the form attached hereto as
Exhibit A.
5. Further Assurances. Shareholder will, from time to time, execute
and deliver, or cause to be executed and delivered, such additional or further
consents, documents and other instruments as Parent may reasonably request for
the purpose of effectively carrying out the transactions contemplated by this
Agreement.
6. Assignment. Neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned by any of the parties without the
prior written consent of the other parties. Subject to the preceding sentence,
this Agreement will be binding upon, inure to the benefit of and be enforceable
by the parties and their respective successors and assigns.
7. Termination. This Agreement shall terminate upon the earlier of (a)
the termination of the Merger Agreement, (b) the withdrawal, modification or
amendment by the Board of Directors of the Company in any respect adverse to
Parent or Sub
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5
of its approval or recommendation of the Merger Agreement, the Merger or any of
the transactions contemplated by the Merger Agreement or (c) the Effective Time.
8. Waiver of Appraisal and Dissenter's Rights. Until the termination
of this Agreement in accordance with Section 7, Shareholder hereby waives and
agrees not to exercise any rights of appraisal or rights to dissent from the
Merger that Shareholder may have with respect to Shareholder's Subject Shares.
9. General Provisions.
(a) Amendments. This Agreement may not be amended except by an
instrument in writing signed by each of the parties hereto.
(b) Notice. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or sent by
overnight courier (providing proof of delivery) to Parent in accordance
with Section 8.2 of the Merger Agreement and to the Shareholders at their
respective addresses set forth on Schedule A attached hereto (or at such
other address for a party as shall be specified by like notice).
(c) Interpretation. When a reference is made in this Agreement to
Sections, such reference shall be to a Section to this Agreement unless
otherwise indicated. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Wherever the words "include", "includes"
or "including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation".
(d) Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement,
and shall become effective when two or more of the counterparts have been
signed by each of the parties and delivered to the other party, it being
understood that each party need not sign the same counterpart.
(e) Entire Agreement; No Third-Party Beneficiaries. This Agreement
(including the documents and instruments referred to herein) (i)
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to
the subject matter hereof and (ii) is not intended to confer upon any
Person other than the parties hereto any rights or remedies hereunder.
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6
(f) Governing Law. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of Delaware regardless of the
laws that might otherwise govern under applicable principles of conflicts
of law thereof.
10. Shareholder Capacity. No person executing this Agreement who is or
becomes during the term hereof a director or officer of the Company makes any
agreement or understanding herein in his capacity as such director or officer.
Shareholder signs solely in his capacity as the record holder and beneficial
owner of Shareholder's Subject Shares and nothing herein shall limit or affect
any actions taken by a Shareholder in his or her capacity as an officer or
director of the Company to the extent specifically permitted by the Merger
Agreement.
11. Enforcement. The parties agree that irreparable damage would occur
in the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any court of the United States
located in the State of Delaware or in a Delaware state court, this being in
addition to any other remedy to which they are entitled at law or in equity. In
addition, each of the parties hereto (i) consents to submit such party to the
personal jurisdiction of any Federal court located in the State of Delaware or
any Delaware state court in the event any dispute arises out of this Agreement
or any of the transactions contemplated hereby, (ii) agrees that such party will
not attempt to deny or defeat such personal jurisdiction by motion or other
request for leave from any such court; (iii) agrees that such party will not
bring any action relating to this Agreement or the transactions contemplated
hereby in any court other than a Federal court sitting in the state of Delaware
or a Delaware state court and (iv) waives any right to trial by jury with
respect to any claim or proceeding related to or arising out of this Agreement
or any of the transactions contemplated hereby.
<PAGE>
7
IN WITNESS WHEREOF, Parent has caused this Agreement to be signed by
its officer thereunto duly authorized and the Shareholder has signed this
Agreement, all as of the date first written above.
FRED MEYER, INC.
By: KENNETH THRASHER
-------------------------------------
Name: Kenneth Thrasher
Title: EVP
Shareholder:
STUART M. SLOAN
-----------------------------------------
Name: Stuart M. Sloan
SHAREHOLDERS AGREEMENT, dated as of November 6, 1997, between FRED
MEYER, INC., a Delaware corporation ("Parent"), and Zell/Chilmark Fund L.P.
("Shareholder").
WHEREAS, Parent, Q-Acquisition Corp., a Washington corporation and a
wholly owned subsidiary of Parent ("Sub"), and Quality Food Centers, Inc., a
Washington corporation (the "Company"), propose to enter into an Agreement and
Plan of Merger dated as of the date hereof (as the same may be amended or
supplemented, the "Merger Agreement"; capitalized terms used but not defined
herein shall have the meanings set forth in the Merger Agreement) providing for
the merger of Sub with and into the Company (the "Merger"), upon the terms and
subject to the conditions set forth in the Merger Agreement;
WHEREAS, Shareholder owns 3,975,000 shares of Common Stock,
par value $.001 per share, of the Company (the "Company Common Stock") (such
shares of Company Common Stock, together with any other shares of capital stock
of the Company acquired by such Stockholder after the date hereof and during the
term of this Agreement, being collectively referred to herein as the "Subject
Shares"); and
WHEREAS, as a condition to its willingness to enter into the Merger
Agreement, Parent has requested that Shareholder enter into this Agreement;
NOW, THEREFORE, to induce Parent to enter into, and in consideration
of its entering into, the Merger Agreement, and in consideration of the premises
and the representations, warranties and agreements contained herein, the parties
agree as follows:
1. Representations and Warranties of Shareholder. Shareholder hereby
represents and warrants to Parent as of the date hereof in respect of itself as
follows:
(a) Authority. The Shareholder has all requisite power and authority
to enter into this Agreement and to consummate the transactions
contemplated hereby. This Agreement has been duly authorized, executed and
delivered by the Shareholder and constitutes a valid and binding obligation
of the Shareholder enforceable in accordance with its terms. Except for the
Standstill Agreement, dated as of January 14, 1995 (the "Standstill
Agreement"), by and between the Company and Shareholder (the relevant
provisions of which have been waived by the Company to permit Shareholder
to enter into and perform this Agreement, as set forth in the agreement
between the Company and Shareholder dated November 6, 1997', the execution
and delivery of this Agreement do not, and the consummation of the
transactions contemplated hereby and compliance with the terms hereof will
not, conflict with, or result in any violation of, or default (with or
without notice or lapse of time or both)
<PAGE>
2
under any provision of, any trust agreement, loan or credit agreement,
note, bond, mortgage, indenture, lease or other agreement, instrument,
permit, concession, franchise, license, judgment, order, notice, decree,
statute, law, ordinance, rule or regulation applicable to the Shareholder
or to the Shareholder's property or assets.
(b) The Subject Shares. The Shareholder is the record and beneficial
owner of, and has good and marketable title to, the Subject Shares, free
and clear of any Encumbrances. The Shareholder does not own, of record or
beneficially, any shares of capital stock of the Company other than the
Subject Shares. The Shareholder has the sole right to vote, and the sole
power of disposition with respect to, such Subject Shares, and none of such
Subject Shares is subject to any voting trust or other agreement,
arrangement or restriction with respect to the voting or disposition of
such Subject Shares, except for the Standstill Agreement and except as
contemplated by this Agreement.
2. Representations and Warranties of Parent. Parent hereby represents
and warrants to Shareholder that Parent has all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by Parent, and
the consummation of the transactions contemplated hereby, have been duly
authorized by all necessary corporate action on the part of Parent. This
Agreement has been duly executed and delivered by Parent and constitutes a valid
and binding obligation of Parent enforceable in accordance with its terms. The
execution and delivery of this Agreement do not, and the consummation of the
transactions contemplated hereby and compliance with the terms hereof will not,
conflict with, or result in any violation of, or default (with or without notice
or lapse of time or both) under any provision of, the certificate of
incorporation or by-laws of Parent, any trust agreement, loan or credit
agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise, license, judgment, order, notice,
decree, statute, law, ordinance, rule or regulation applicable to Parent or to
Parent's property or assets.
3. Covenants of Shareholder. Until the termination of this Agreement
in accordance with Section 7, Shareholder agrees as follows:
(a) At any meeting of shareholders of the Company called to vote upon
the Merger and the Merger Agreement or at any adjournment thereof or in any
other circumstances upon which a vote, consent or other approval with
respect to the Merger and the Merger Agreement is sought, the Shareholder
shall be present (in person or by proxy) and shall vote (or cause to be
voted) the Subject Shares in favor of the Merger, the adoption by the
Company of the Merger Agreement and the approval of the terms thereof and
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3
each of the other transactions contemplated by the Merger Agreement.
(b) At any meeting of shareholders of the Company or at any
adjournment thereof or in any other circumstances upon which the
Shareholder's vote, consent or other approval is sought, the Shareholder
shall vote (or cause to be voted) the Subject Shares against (i) any merger
agreement or merger (other than the Merger Agreement and the Merger),
consolidation, combination, sale of substantial assets, reorganization,
recapitalization, dissolution, liquidation or winding-up of or by the
Company or any other takeover proposal (collectively, "Takeover Proposal")
or (ii) any amendment of the Company's certificate of incorporation or
by-laws or other proposal or transaction involving the Company or any of
its subsidiaries, which amendment or other proposal or transaction would in
any manner impede, frustrate, prevent or nullify the Merger, the Merger
Agreement or any of the other transactions contemplated by the Merger
Agreement or change in any manner the voting rights of any class of capital
stock of the Company. The Shareholder further agrees not to commit or agree
to take any action inconsistent with the foregoing.
(c) Except as provided in the immediately succeeding sentence of this
Section 3(c), the Shareholder agrees not to (i) sell, transfer, pledge,
assign or otherwise dispose of (including by gift) (collectively,
"Transfer"), or enter into any contract, option or other arrangement
(including any profit-sharing arrangement) with respect to the Transfer of,
the Subject Shares to any person other than pursuant to the terms of the
Merger or (ii) enter into any voting arrangement, whether by proxy, voting
agreement or otherwise, in connection with, directly or indirectly, any
Takeover Proposal and agrees not to commit or agree to take any of the
foregoing actions.
(d) During the term of this Agreement, the Shareholder shall not, nor
shall it permit any of its affiliates or any director, officer, employee,
investment banker, attorney or other adviser or representative of the
Shareholder to, (i) directly or indirectly solicit, initiate or encourage
the submission of, any Takeover Proposal or (ii) directly or indirectly
participate in any discussions or negotiations regarding, or furnish to any
person 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.
Notwithstanding the foregoing provisions of this
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4
Section 3(d), Shareholder and all other persons described in the first
sentence of this Section 3(d), shall be entitled to take all actions and to
exercise all rights with respect to any Transaction as the Company may take
or exercise pursuant to Section 5.4 of the Merger Agreement; provided, that
the Company, in connection with such actions and the exercise of such
rights, complies with Section 5.4 of the Merger Agreement.
(e) Until after the Merger is consummated or the Merger Agreement is
terminated, the Shareholder shall use all reasonable efforts to take, or
cause to be taken, all actions, and to do, or cause to be done, and to
assist and cooperate with the other parties in doing, all things necessary,
proper or advisable to consummate and make effective, in the most
expeditious manner practicable, the Merger and the other transactions
contemplated by the Merger Agreement.
4. Affiliate Letter. Shareholder shall execute and deliver the
agreement contemplated by the last sentence of Section 5.11(a) of the Merger
Agreement.
5. Further Assurances. Shareholder will, from time to time, execute
and deliver, or cause to be executed and delivered, such additional or further
consents, documents and other instruments as Parent may reasonably request for
the purpose of effectively carrying out the transactions contemplated by this
Agreement.
6. Assignment. Neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned by any of the parties without the
prior written consent of the other parties. Subject to the preceding sentence,
this Agreement will be binding upon, inure to the benefit of and be enforceable
by the parties and their respective successors and assigns.
7. Termination. This Agreement shall terminate upon the earlier of (a)
the termination of the Merger Agreement, (b) the withdrawal, modification or
amendment by the Board of Directors of the Company in any respect adverse to
Parent or Sub of its approval or recommendation of the Merger Agreement, the
Merger or any of the transactions contemplated by the Merger Agreement or (c)
the Effective Time.
8. Waiver of Appraisal and Dissenter's Rights. Until the termination
of this Agreement in accordance with Section 7, Shareholder hereby waives and
agrees not to exercise any rights of appraisal or rights to dissent from the
Merger that
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5
Shareholder may have with respect to Shareholder's Subject Shares.
9. General Provisions.
(a) Amendments. This Agreement may not be amended except by an
instrument in writing signed by each of the parties hereto.
(b) Notice. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or sent by
overnight courier (providing proof of delivery) to Parent in accordance
with Section 8.2 of the Merger Agreement and to the Shareholders at their
respective addresses set forth on Schedule A attached hereto (or at such
other address for a party as shall be specified by like notice).
(c) Interpretation. When a reference is made in this Agreement to
Sections, such reference shall be to a Section to this Agreement unless
otherwise indicated. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Wherever the words "include", "includes"
or "including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation".
(d) Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement,
and shall become effective when two or more of the counterparts have been
signed by each of the parties and delivered to the other party, it being
understood that each party need not sign the same counterpart.
(e) Entire Agreement; No Third-Party Beneficiaries. This Agreement
(including the documents and instruments referred to herein) (i)
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to
the subject matter hereof and (ii) is not intended to confer upon any
Person other than the parties hereto any rights or remedies hereunder.
(f) Governing Law. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of Delaware regardless of the
laws that might otherwise govern under applicable principles of conflicts
of law thereof.
10. Shareholder Capacity. No designee of Shareholder who is or becomes
during the term hereof a director or officer of the Company makes any agreement
or understanding herein in its
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6
capacity as such director or officer. Shareholder signs solely in his capacity
as the record holder and beneficial owner of Shareholder's Subject Shares and
nothing herein shall limit or affect any actions taken by any designee of
Shareholder in his or her capacity as an officer or director of the Company to
the extent specifically permitted by the Merger Agreement.
11. Enforcement. The parties agree that irreparable damage would occur
in the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any court of the United States
located in the State of Delaware or in a Delaware state court, this being in
addition to any other remedy to which they are entitled at law or in equity. In
addition, each of the parties hereto (i) consents to submit such party to the
personal jurisdiction of any Federal court located in the State of Delaware or
any Delaware state court in the event any dispute arises out of this Agreement
or any of the transactions contemplated hereby, (ii) agrees that such party will
not attempt to deny or defeat such personal jurisdiction by motion or other
request for leave from any such court; (iii) agrees that such party will not
bring any action relating to this Agreement or the transactions contemplated
hereby in any court other than a Federal court sitting in the state of Delaware
or a Delaware state court and (iv) waives any right to trial by jury with
respect to any claim or proceeding related to or arising out of this Agreement
or any of the transactions contemplated hereby.
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7
IN WITNESS WHEREOF, Parent has caused this Agreement to be signed by
its officer thereunto duly authorized and the Shareholder has signed this
Agreement, all as of the date first written above.
FRED MEYER, INC.
By: KENNETH THRASHER
-------------------------------------
Name: Kenneth Thrasher
Title: EVP
Shareholder:
ZELL/CHILMARK FUND L.P.
By: ZC Limited Partnership,
general partner
By: ZC Partnership,
general partner
By: ZC Inc., general partner
By: SHELI Z. ROSENBERG
-------------------------------------
Name: Sheli Z. Rosenberg
Title: V.P.
