UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. 1)*
KASH N' KARRY FOOD STORES, INC.
(Name of Issuer)
Common Stock
(Title of Class of Securities)
48577P106
(CUSIP Number)
Dhananjay M. Pai, PaineWebber Capital Inc., 1285 Avenue of the Americas,
New York, NY 10019
(Name, Address and Telephone Number of Persons Authorized to Receive Notices
and Communications)
October 31, 1996
(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 <square>.
Check the following box if a fee is being paid with the statement <square>.
(A fee is not required only if the reporting person: (1) has a previous
statement on file reporting beneficial ownership of more than five percent of
the class of securities described in Item 1; and (2) has filed no amendment
subsequent thereto reporting beneficial ownership of five percent or less of
such class.) (See Rule 13d-7.)
NOTE: Six copies of this statement, including all exhibits, should be filed
with the Commission. See Rule 13d-1(a) for other parties to whom copies are to
be sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities,
and for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 ("Act") or otherwise subject to the liabilities of that section of
the Act but shall be subject to all other provisions of the Act (however, see
the Notes).
Page 1 of 33 Pages
<PAGE>
SCHEDULE 13D
CUSIP No.48577P106 Page 2 of 33 Pages
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
PaineWebber Capital Inc. IRS #13-3261841
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP{*}(A) [ ]
(B) [ ]
3 SEC USE ONLY
4 SOURCE OF FUNDS{*}
WC
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
7 SOLE VOTING POWER
553,601
NUMBER OF shares of
SHARES Common Stock
BENEFICIALLY (See Item 5)
OWNED BY EACH
REPORTING
PERSON
WITH
8 SHARED VOTING POWER
- 0 -
(See Item 5)
9 SOLE DISPOSITIVE POWER
553,601
shares of
Common Stock
10 SHARED DISPOSITIVE POWER
- 0 -
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
553,601 shares of Common Stock
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES{*} [ ]
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
11.8%
14 TYPE OF REPORTING PERSON{*}
Co
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Page 3 of 33 Pages
Amendment No. 1 to Schedule 13D
Name of Issuer: Kash N' Karry Food Stores, Inc.
Name of Reporting Person: PaineWebber Capital Inc.
This Amendment No. 1 amends the Schedule 13D (the "Statement") of
the Reporting Person, dated April 11, 1996 (March 29, 1996 being the date
of the event which required the filing thereof), to the extent set forth
herein.
Item 4.PURPOSE OF TRANSACTION
The first paragraph of Item 4 of the Statement is amended and
restated in its entirety as follows:
"PWC acquired the Shares on March 29, 1996, as part of its
investment program. Pursuant to an Agreement and Plan of Merger, dated
as of October 31, 1996 (the "Merger Agreement"), by and among Food Lion,
Inc., a North Carolina corporation (the "Parent"), KK Acquisition Corp.,
a Delaware corporation and wholly-owned subsidiary of Parent (the "Sub"),
and the Issuer, the Issuer has agreed that the Sub will be merged into
the Issuer, with the result that the Issuer will become a wholly-owned
subsidiary of Parent (the "Merger"). In the Merger, each issued and
outstanding share of Common Stock will be converted into the right to
receive $26 in cash. In connection therewith, on October 31, 1996, PWC
entered into a Stockholders Agreement (the "Stockholders Agreement") (a
copy of which is attached to this Statement as an exhibit and the
provisions of which are incorporated by reference into this Statement)
with the Sub, the Parent, the Issuer, BankAmerica Capital Corporation,
Citicorp North America, Inc., Landmark Equity Partners III, L.P.,
Landmark Equity Partners IV, L.P., Prudential Insurance Company of
America, UBS Capital LLC, American Express Financial Corporation, The
Prudential Insurance Company of America, Pruco Life Insurance and Wells,
Fargo Company. As further described in Item 6 of this Statement,
pursuant to the Stockholders Agreement, PWC has, among other things, (i)
agreed to vote in favor of the Merger, (ii) except as agreed to by
Parent, agreed to vote against any other extraordinary corporate
transactions involving the Issuer and against any of the matters
described in clause (iii) of the second paragraph of Item 6 of this
Statement, (iii) granted to the Sub a voting proxy with respect to the
matters described in the foregoing clauses (i) and (ii) and certain
related matters described in Item 6 of this Statement, (iv) granted an
irrevocable option to the Sub to purchase the Shares and (v) agreed, to
the extent described in Item 6 of this Statement, not to transfer the
Shares. The purpose of the transactions contemplated by the Stockholders
Agreement is to facilitate the consummation of the Merger. It is the
understanding of PWC that, upon the consummation of the Merger, the
Common Stock will become eligible for termination of registration under
Section 12(g)(4) of the Exchange Act."
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Page 4 of 33 Pages
Item 5. INTEREST IN THE SECURITIES OF THE ISSUER
The second paragraph of Item 5 of the Statement is hereby amended
and restated as follows:
"PWC beneficially owns 553,601 shares of Common Stock
representing approximately 11.8% of the outstanding shares of Common
Stock (based on the number of shares of Common Stock outstanding as of
October 31, 1996, as represented by the Issuer in the Merger Agreement).
Subject to the rights of the Sub pursuant to the proxy, as described in
Item 6 of this Statement, PWC has the sole power to vote the Shares. PWC
has the sole power to dispose of the Shares."
Item 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO SECURITIES OF THE ISSUER.
The first paragraph of Item 6 of the Statement is amended and
restated in its entirety as set forth in the first paragraph below, and
the following additional paragraphs are added to Item 6 of the Statement:
"Except as described in the following six paragraphs and
elsewhere in this Statement, to the best knowledge of the Reporting
Person, there exist no contracts, arrangements, understandings or
relationships (legal or otherwise) among the persons named in Item 2 and
between such persons and any person with respect to securities of the
Issuer including but not limited to transfer or voting of any securities
of the Issuer, finder's fees, joint ventures, loan or option
arrangements, puts or calls, guarantees of profits, diversion of profits
or loss, or the giving or withholding of proxies.
Pursuant to the Stockholders Agreement, PWC has agreed, together
with the other stockholders of the Company that are party to the
Stockholders Agreement (PWC and such stockholders are referred to
collectively as the "Stockholders"), that during the period commencing on
the date of the Stockholders Agreement and continuing until the first to
occur of the effective time of the Merger or termination of the
Stockholders Agreement, at any meeting of holders of Common Stock, or in
connection with any written consent of holders of Common Stock, each of
PWC and the other Stockholders will vote (or cause to be voted) the
number of shares of Common Stock owned by it: (i) in favor of the Merger
and execution and delivery by the Issuer of the Merger Agreement and the
Stockholders Agreement; (ii) against any action, any failure to act or
agreement that would result in a breach in any respect of any covenant or
representation or warranty or any other obligation or agreement of the
Issuer under the Merger Agreement or the Stockholders Agreement (before
giving effect to any materiality or similar qualification contained
therein); and (iii) except as otherwise agreed to in writing in advance
by the Parent, against the following actions (other than the Merger and
the transactions contemplated by Merger Agreement): (A) any extraordinary
corporate transactions, such as a merger, consolidation or other business
combination involving the Issuer or its
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Page 5 of 33 Pages
subsidiaries; (B) a sale, lease or transfer of a material amount of assets
of the Issuer or its subsidiaries, or reorganization, recapitalization,
dissolution or liquidation of the Issuer or its subsidiaries; (C)(1) any
change in the majority of the persons that constitute the board of
directors of the Issuer; (2) any change in the present capitalization of
the Issuer or any amendment of the Issuer's Certificate of Incorporation
or bylaws; (3) any other material change in the Issuer's corporate structure
or business; or (4) any other action involving the Issuer or its subsidiaries
which is intended, or could reasonably be expected, to impede, interfere
with, delay, postpone or materially adversely affect the Merger and
the transactions contemplated by the Stockholders Agreement and Merger
Agreement. PWC and the other Stockholders further agreed that they would
not enter into any agreement or understanding with any person or entity
the effect of which would be to violate the foregoing. PWC and the other
Stockholders granted to the Sub an irrevocable proxy (the "Proxy") with
respect to the foregoing matters.
Pursuant to the Stockholders Agreement, PWC and the other
Stockholders granted to the Sub an irrevocable option (the "Option") to
purchase the shares of Common Stock owned by it at a price per share
equal to $26 or such higher price as is paid by the Sub for shares of
Common Stock in a tender offer, the Merger or otherwise (other than
pursuant to payments made with respect to the exercise of certain
appraisal rights and other than in the settlement or other resolution of
litigation). The Option will become exercisable, in whole but not in
part, when all waiting periods under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, required for the purchase of such
shares upon such exercise shall have expired or have been waived, unless
there shall then be in effect any preliminary or final injunction or
other order issued by any court or governmental, administrative or
regulatory agency or authority prohibiting the exercise of the Option
pursuant to the Stockholders Agreement, and the Option shall remain
exercisable, in whole but not in part, until termination of the
Stockholders Agreement in accordance with the terms thereof.
Pursuant to the Stockholders Agreement, until the earlier of the
effective time of the Merger or termination of the Stockholders Agreement
in accordance with its terms, PWC and the other Stockholders agreed not,
in its capacity as such, directly or indirectly, to solicit (including by
way of furnishing information) or respond to any inquiries or the making
of any proposal by any person or entity, or enter into any negotiations,
agreements, or understanding with any person (other than Parent, Sub or a
person designated by the Parent) with respect to the Issuer, or with
respect to any transactions (other than the transactions contemplated
between the Issuer, the Parent, the Sub and the Stockholders pursuant to
the Stockholders Agreement) involving the Issuer or any of its
subsidiaries with respect to: (i) any merger, consolidation, share
exchange, recapitalization, business combination, or other similar
transactions; (ii) any sale, lease, exchange, mortgage, pledge, transfer
or other disposition of 10% or more of the assets of the Issuer and its
subsidiaries taken as a whole in a single transaction or series of
transactions; (iii) any tender offer or exchange offer for or other
purchase of 10% or more of the outstanding shares of capital stock of the
Issuer or the filing of a registration
<PAGE>
Page 6 of 33 Pages
statement under the Securities Act of 1933 in connection therewith; or (iv)
any public announcement of a proposal, plan or intention to do any of the
foregoing.
Pursuant to the Stockholders Agreement, PWC and the Other
Stockholders agreed that, beginning on the date of Stockholders Agreement
and ending on the earlier of the effective time of the Merger or
termination of the Stockholders Agreement, except as required to comply
with the provisions of the Stockholders Agreement or the Proxy, it will
not (i) directly or indirectly, offer for sale, transfer, tender, pledge,
encumber, assign or otherwise dispose of, or enter into any contract,
option or other arrangement or understanding with respect to or consent
to the offer for sale, transfer, tender, pledge, encumbrance, assignment
or other disposition of, any or all shares of Common Stock owned by such
Stockholder or any interest therein, (ii) grant any proxies or powers of
attorneys, deposit any such shares into a voting trust or enter into a
voting agreement with respect to any such shares; or (iii) take any
action that would make any representation or warranty of such Stockholder
contained in the Stockholders Agreement untrue or incorrect or have the
effect of preventing or disabling such Stockholder from performing such
Stockholder's obligations under the Stockholders Agreement or the Proxy.
Notwithstanding the foregoing, any Stockholder may sell such
Stockholder's shares of Common Stock in a privately-negotiated
transaction to any person who, as a condition to such purchase, (i)
becomes a party to the Stockholders Agreement with the same effect as
though an original signatory thereto and (ii) delivers to the Parent a
proxy with respect to such shares identical to the Proxy.
Pursuant to the Stockholders Agreement, PWC and the other
Stockholders agreed to validly tender (and not withdraw) pursuant to and
in accordance with the terms of any tender offer for the Common Stock
made by the Parent (provided such offer is commenced and not amended in
a manner adverse to such Stockholder) not later than the tenth business
day after commencement of such offer pursuant to the Merger Agreement and
Rule 14d-2 under the Exchange Act, the shares of Common Stock owned by
it.
The Stockholders Agreement may be terminated, and the
transactions contemplated thereby may be abandoned, by any Stockholder at
any time prior to the exercise of the Option granted with respect to such
Stockholder's shares of Common Stock: (i) at any time after the Merger
Agreement is terminated in accordance with its terms by the Issuer due
the material breach of any representation, warranty, covenant or
agreement on the part of the Parent or Sub set forth in the Merger
Agreement or (ii) at any time after the earlier of (x) 5:00 p.m. Eastern
Time on the date which is five business days after the date of
termination of the Merger Agreement for any reason not specified in the
foregoing clause (i) and (y) 5:00 p.m. Eastern Time on March 7, 1997."
The following is added as the final paragraph to Item 6 of the
Statement:
"Pursuant to an agreement, dated June 5, 1996 ("Engagement
Letter"), between PaineWebber Incorporated, an affiliate of PWC, and the
Issuer, PaineWebber
<PAGE>
Page 7 of 33 Pages
Incorporated rendered an opinion to the Issuer on October 31, 1996,
that the consideration to be received in the Merger is fair, from a
financial point of view, to the Issuer. PaineWebber Incorporated
was paid a fee of $250,000 by the Issuer for rendering such opinion."
Item 7. MATERIAL TO BE FILED AS EXHIBITS
The following exhibits to this amendment are added as exhibits to
the Statement.
1. Stockholders Agreement
2. Engagement Letter
<PAGE>
Page 8 of 33 Pages
SIGNATURE
After reasonable inquiry into the best of its knowledge and belief, the
undersigned certifies that the information set forth in this Amendment
No.1 is true, complete and correct.
Date: November 11, 1996
PAINEWEBBER CAPITAL INC.
By:______________________________
Title:
Page 9 of 33 Pages
TENDER OPTION
STOCKHOLDERS AGREEMENT
<PAGE>
Page 10 of 33 Pages
STOCKHOLDERS AGREEMENT
AGREEMENT dated October 31, 1996, among FOOD LION, INC., a
corporation organized under the laws of North Carolina ("Parent"), KK
ACQUISITION CORP., a Delaware corporation and an indirect wholly owned
subsidiary of Parent ("Sub"), KASH N' KARRY FOOD STORES, INC., a Delaware
corporation (the "Company"), and the other parties signatory hereto
(individually a "Stockholder" and collectively, the "Stockholders").
WITNESSETH:
WHEREAS, concurrently herewith, Parent, Sub and the Company,
are entering into an Agreement and Plan of Merger (as such agreement may
hereafter be amended from time to time, the "Merger Agreement"), pursuant
to which Sub will be merged with and into the Company (the "Merger"); and
WHEREAS, as an inducement and a condition to entering into the
Merger Agreement, Parent has required that the Company and Stockholders
agree, and the Company and Stockholders have agreed, to enter into this
Agreement;
NOW, THEREFORE, in consideration of the foregoing and the
mutual premises, representations, warranties, covenants and agreements
contained herein, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. DEFINITIONS. For purposes of this Agreement:
1.1 "Company Common Stock" shall mean at any time the
Common Stock, $.01 par value, of the Company.
1.2 "Person" shall mean an individual, corporation,
partnership, joint venture, association, trust, unincorporated
organization, limited liability company or other entity.
1.3 Capitalized terms used and not defined herein have
the respective meanings ascribed to them in the Merger Agreement.
2. PROVISIONS CONCERNING COMPANY COMMON STOCK. Each
Stockholder hereby agrees that, during the period commencing on the date
hereof and continuing until the first to occur of the Effective Time or
termination of this Agreement, at any meeting of the holders of Company
Common Stock, however called, or in connection with any written consent
of the holders of Company Common Stock, such Stockholder shall vote (or
cause to be voted) the number of shares of Company Common Stock
(collectively with the associated Company Rights, the "Shares") set forth
opposite such Stockholder's name on Schedule 1 hereto (collectively with
the associated Company Rights, the "Existing Shares") and any Shares
acquired by such Stockholder after the date hereof (collectively with the
Existing Shares, the "Option Shares"): (i) in favor of the
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Page 11 of 33 Pages
Merger, the execution and delivery by the Company of the Merger Agreement
and the approval of the terms thereof and each of the other actions
contemplated by the Merger Agreement and this Agreement and any actions
required in furtherance thereof and hereof; (ii) against any action, any
failure to act, or agreement that would result in a breach in any
respect of any covenant, representation or warranty or any other obligation
or agreement of the Company under the Merger Agreement or this Agreement
(before giving effect to any materiality or similar qualifications
contained therein); and (iii) except as otherwise agreed to in writing
in advance by Parent, against the following actions (other than the Merger
and the transactions contemplated by the Merger Agreement):
(A) any extraordinary corporate transaction, such as a merger, consolidation
or other business combination involving the Company or its Subsidiaries;
(B) a sale, lease or transfer of a material amount of assets of the
Company or its Subsidiaries, or a reorganization, recapitalization,
dissolution or liquidation of the Company or its Subsidiaries; (C) (1)
any change in a majority of the persons who constitute the board of
directors of the Company; (2) any change in the present capitalization of
the Company or any amendment of the Company's Certificate of
Incorporation or Bylaws; (3) any other material change in the Company's
corporate structure or business; or (4) any other action involving the
Company or its Subsidiaries which is intended, or could reasonably be
expected, to impede, interfere with, delay, postpone, or materially
adversely affect the Merger and the transactions contemplated by this
Agreement and the Merger Agreement. Each Stockholder agrees that it
shall not enter into any agreement or understanding with any person or
entity the effect of which would be to violate the provisions and
agreements contained in this Section 2.
3. PURCHASE RIGHT.
3.1 OPTION SHARES. In order to induce Parent and Sub to
enter into the Merger Agreement, each Stockholder hereby grants to Sub an
irrevocable option (the "Stock Option") to purchase the Option Shares at
a cash purchase price per share equal to $26.00 or such higher price as
is paid by Sub for Shares in the Offer, the Merger or otherwise (other
than pursuant to Section 3.01(d) of the Merger Agreement and other than
in the settlement or other resolution of litigation) (the "Purchase
Price"). The Stock Options shall become exercisable, in whole but not in
part as to all then outstanding Stock Options, when all waiting periods
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), required for the purchase of the Option Shares
upon such exercise shall have expired or been waived, unless there shall
then be in effect any preliminary or final injunction or other order
issued by any court or governmental, administrative or regulatory agency
or authority prohibiting the exercise of the Stock Option pursuant to
this Agreement, and shall remain exercisable, in whole but not in part as
to all then outstanding Stock Options, until termination of this
Agreement in accordance with Section 8.15 hereof. In the event that Sub
wishes to exercise the Stock Options, Sub shall send a written notice
(the "Notice") to the Stockholders identifying the place for the closing
of such purchase (the "Closing") at least three (3) but not more than
five (5) business days prior to the Closing.
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Page 12 of 33 Pages
3.2 PAYMENT OF PURCHASE PRICE. The payment of the
Purchase Price shall be made by wire transfer in immediately available
funds on the date of Closing; PROVIDED, HOWEVER, that, in the event the
Purchase Price is increased pursuant to Section 3.1 to more than $26.00
per Share, the amount of such increase per Share shall be paid to each
Stockholder in immediately available funds within one business day after
the Effective Time.
4. OTHER COVENANTS, REPRESENTATIONS AND WARRANTIES. Each
Stockholder hereby represents and warrants to Parent with respect to such
Stockholder as follows:
4.1 OWNERSHIP OF SHARES. Stockholder is the record or
beneficial owner of the number of Shares set forth opposite such
Stockholder's name on Schedule I hereto. On the date hereof, the
Existing Shares set forth opposite such Stockholder's name on Schedule I
hereto constitute all of the Shares owned of record by such Stockholder.
Stockholder has sole voting power and sole power to issue instructions
with respect to the matters set forth in this Agreement and the Proxy (as
defined below), sole power of disposition, sole power of conversion, sole
power to demand appraisal rights and sole power to agree to all of the
matters set forth in this Agreement and Proxy, in each case with respect
to all of the Existing Shares set forth opposite Stockholder's name on
Schedule I hereto, with no limitations, qualifications or restrictions on
such rights, subject to applicable securities laws and the terms of this
Agreement and the Proxy. Following the date hereof, Stockholder will
cooperate with Parent and use its reasonable best efforts as soon as
possible to become the record owner of any Shares referred to on Schedule
I hereto as to which Stockholder is the beneficial owner and to cause
certificates representing the Shares to be affixed with a legend
reasonably satisfactory to Parent referencing this Agreement and the
Stockholder's obligations hereunder.
4.2 POWER; BINDING AGREEMENT. Stockholder has the legal
capacity, power and authority to enter into and perform all of
Stockholder's obligations under this Agreement and the Proxy. The
execution, delivery and performance of this Agreement and the Proxy have
been duly authorized by such Stockholder and do not and will not violate
any other agreement to which Stockholder is a party including, without
limitation, any voting agreement, stockholders agreement or voting trust.
This Agreement and the Proxy have been duly and validly executed and
delivered by Stockholder and constitute valid and binding agreements of
such Stockholder, enforceable against such Stockholder in accordance with
their terms, except as enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
the enforcement of creditors' rights generally and by general equitable
principles (regardless of whether such enforceability is considered in a
proceeding in equity or at law). There is no beneficiary or holder of a
voting trust certificate or other interest of any trust of which
Stockholder is trustee whose consent is required for the execution and
delivery of this Agreement, the Proxy or the consummation by the
Stockholder of the transactions contemplated hereby and thereby.
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4.3 NO CONFLICTS. Except for filings under the HSR Act,
the Exchange Act and any applicable state antitrust laws (i) no filing
with, and no permit, authorization, consent or approval of, any state or
federal public body or authority or any other person is necessary for the
execution of this Agreement and the Proxy by Stockholder and the
consummation by Stockholder of the transactions contemplated hereby and
thereby and (ii) none of the execution and delivery of this Agreement and
the Proxy by Stockholder, the consummation by such Stockholder of the
transactions contemplated hereby and thereby or compliance by Stockholder
with any of the provisions hereof or thereof shall (A) conflict with or
result in any breach of any applicable organizational documents
applicable to Stockholder, (B) result in a violation or breach of, or
constitute (with or without notice or lapse of time or both) a default
(or give rise to any third party right of termination, cancellation,
material modification or acceleration) under any of the terms, conditions
or provisions of any note, bond, mortgage, indenture, license, contract,
commitment, arrangement, understanding, agreement or other instrument or
obligation of any kind to which Stockholder is a party or by which such
Stockholder or any of such Stockholder's properties or assets may be
bound, or (C) violate any order, writ, injunction, decree, judgment,
order, statute, rule or regulation applicable to Stockholder or any of
Stockholder's properties or assets.
4.4 NO ENCUMBRANCES. Except pursuant to this Agreement
and the Proxy, Stockholder's Shares and the certificates representing
such Shares are now, and at all times during the term hereof will be,
held by such Stockholder, or by a nominee or custodian for the benefit of
such Stockholder, free and clear of all Liens, hypothecations, claims,
security interests, proxies, voting trusts or agreements, understandings
or arrangements or any other encumbrances whatsoever, except for any such
encumbrances or proxies arising hereunder. The transfer by Stockholder
of its Shares to Sub in the Offer or otherwise hereunder shall pass to
and unconditionally vest in Sub good and valid title to the number of
Shares to be transferred by Stockholder thereunder or hereunder, free and
clear of all claims, Liens, restrictions, security interests, pledges,
hypothecations, limitations and encumbrances whatsoever.
4.5 NO SOLICITATION. Until the earlier of the Effective
Time or termination of this Agreement in accordance with its terms,
Stockholder shall not, in its capacity as such, directly or indirectly,
solicit (including by way of furnishing information) or respond to any
inquires or the making of any proposal by any person or entity, or enter
into any negotiations, agreements or understandings with any Person
(other than Parent, Sub or a person designated by Parent) with respect to
the Company that constitutes an Alternative Proposal. If Stockholder
receives any such inquiry or proposal, then Stockholder shall promptly
inform Parent of the existence thereof.
4.6 RESTRICTION ON TRANSFER, PROXIES AND NON-
INTERFERENCE. Beginning on the date hereof and ending on the earlier of
the Effective Time or termination of this Agreement, except as required
to comply with the provisions of this Agreement or the Proxy, the
Stockholder shall not (i) directly or indirectly, offer for sale, sell,
transfer, tender, pledge, encumber, assign or otherwise dispose of, or
enter into any contract, option or other arrangement or understanding
with respect to or
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Page 14 of 33 Pages
consent to the offer for sale, sale, transfer, tender,
pledge, encumbrance, assignment or other disposition of, any or all of
such Stockholder's Shares or any interest therein; (ii) grant any proxies
or powers of attorney, deposit any Shares into a voting trust or enter
into a voting agreement with respect to any shares; or (iii) take any
action that would make any representation or warranty of such Stockholder
contained herein untrue or incorrect or have the effect of preventing or
disabling Stockholder from performing Stockholder's obligations under
this Agreement or the Proxy. Notwithstanding the foregoing, any
Stockholder may sell such Stockholder's Shares in a privately-negotiated
transaction to any person who, as a condition to such purchase, (i)
becomes a party to this Agreement with the same effect as though an
original signatory hereto by a written instrument in form and substance
satisfactory to Parent and (ii) delivers to Parent a Proxy (as defined in
Section 8.18) with respect to such Shares.
4.7 WAIVER OF APPRAISAL RIGHTS. Stockholder hereby
waives any rights of appraisal or rights to dissent from the Merger that
Stockholder may have.
4.8 RELIANCE BY PARENT. Stockholder understands and
acknowledges that Parent is entering into, and causing Sub to enter into,
the Merger Agreement in reliance upon Stockholder's execution and
delivery of this Agreement and the Proxy.
4.9 FURTHER ASSURANCES. From time to time, at any other
party's request and without further consideration, each party hereto
shall execute and deliver such additional documents and take all such
further lawful action as may be reasonably necessary or desirable to
consummate and make effective, in the most expeditious manner
practicable, the transactions contemplated by this Agreement and the
Proxy.
4.10 NO FINDER'S FEES. Other than existing financial
advisory and investment banking arrangements and agreements entered into
by the Company, no broker, investment banker, financial adviser or other
person is entitled to any broker's, finder's, financial adviser's or
other similar fee or commission in connection with the transactions
contemplated hereby based upon arrangements made by or on behalf of such
Stockholder.
5. TENDER OF SHARES.
5.1 TENDER REQUIREMENT. Each Stockholder hereby agrees
to validly tender (and not to withdraw) pursuant to and in accordance
with the terms of the Offer (provided that the Offer is commenced and not
amended in a manner adverse to Stockholder), not later than the tenth
business day after commencement of the Offer pursuant to Section 10.1 of
the Merger Agreement and Rule 14d-2 under the Exchange Act, the Option
Shares owned by it. Each Stockholder hereby acknowledges and agrees that
the obligation of Parent or Sub to accept for payment and pay for Company
Common Stock in the offer, including the Shares, is subject to the terms
and conditions
<PAGE>
Page 15 of 33 Pages
of the Offer. Each Stockholder shall be entitled to
receive the highest price paid by Sub pursuant to the Offer, the Merger
or otherwise (other than pursuant to Section 3.01(d) of the Merger
Agreement and other than in the settlement or other resolution of
litigation).
5.2 PERMISSION TO DISCLOSE. Each Stockholder hereby
agrees to permit Parent and Sub to publish and disclose in any documents
filed with any Governmental or Regulatory Authority in connection with
the Merger, including, if Company Stockholders' Approval is required
under applicable law, the Proxy Statement (including all documents and
schedules filed with the SEC), its identity and ownership of Company
Common Stock and the nature of its commitments, arrangements and
understandings under this Agreement.
6. STOP TRANSFER; CHANGES IN SHARES. Each Stockholder agrees
with, and covenants to, Parent that beginning on the date hereof and
ending on the date of termination of the Agreement, such Stockholder
shall not request that the Company, and the Company hereby agrees with,
and covenants to, Parent that beginning on the date hereof and ending on
the date of termination of this Agreement it will not, register the
transfer (book-entry or otherwise) of any certificate or uncertificated
interest representing any of such Stockholder's Shares, unless such
transfer is made in compliance with this Agreement. In the event of a
dividend or distribution, or any change in the Company Common Stock by
reason of any dividend, split-up, recapitalization, combination, exchange
of shares or the like, the term "Shares" shall be deemed to refer to and
include the Shares as well as all such dividends and distributions and
any Shares into which or for which any or all of the Shares may be
changed or exchanged and the Purchase Price shall be appropriately
adjusted.
7. CONDUCT AS A DIRECTOR. Notwithstanding anything in this
Agreement to the contrary, the covenants and agreements set forth herein
shall not prevent any of the Stockholders' designees serving on the
Company's Board of Directors from taking any action, subject to the
applicable provisions of the Merger Agreement, while acting in such
designee's capacity as a director of the Company; PROVIDED, THAT, such
action shall not in any manner affect Stockholder's obligations under
this Agreement or the Proxy.
8. MISCELLANEOUS.
8.1 ENTIRE AGREEMENT. This Agreement, the Proxy and the
Merger Agreement constitute the entire agreement among the parties with
respect to the subject matter hereof and supersede all other prior
agreements and understandings, both written and oral, among any of the
parties with respect to the subject matter hereof.
8.2 CERTAIN EVENTS. Each Stockholder agrees that this
Agreement and the Proxy and the obligations hereunder and thereunder
shall attach to such Stockholder's Shares and shall be binding upon any
person or entity to which legal or beneficial ownership of such Shares
shall pass, whether by operation of law or
<PAGE>
Page 16 of 33 Pages
otherwise, including, without
limitation, such Stockholder's heirs, guardians, administrators or
successors. Notwithstanding any transfer of Shares, the transferor shall
remain liable for the performance of all obligations of the transferor
under this Agreement.
8.3 ASSIGNMENT. This Agreement shall not be assigned
without the prior written consent of the other parties hereto and no
rights, or any direct or indirect interest herein, shall be transferable
hereunder without the prior written consent of the other parties hereto;
PROVIDED, THAT, Parent and Sub may assign or transfer their rights
hereunder to any wholly-owned subsidiary of Parent, which assignment
shall not relieve Parent or Sub of any of their respective obligations
hereunder.
8.4 AMENDMENTS, WAIVERS, ETC. This Agreement may not be
amended, changed, supplemented, waived or otherwise modified or
terminated, except upon the execution and delivery of a written agreement
executed by the parties to be bound thereby.
8.5 NOTICES. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be given
(and shall be deemed to have been duly received if so given) by hand
delivery, telegram, telex or telecopy, or by mail (registered or
certified mail, postage prepaid, return receipt requested) or by any
courier services, such as Federal Express, providing proof of delivery.
All communications hereunder shall be delivered to the respective parties
at the following addresses:
If to Stockholders:At the addresses set forth on Schedule 1 hereto
with a copy to: Milbank, Tweed, Hadley & McCloy
1 Chase Manhattan Plaza
New York, New York 10005
Attention: Lawrence Lederman
Telephone: (212) 530-5000
Telecopy: (212) 530-5219
If to Parent or Sub: Food Lion, Inc.
2110 Executive Drive
Salisbury, North Carolina 28145
Attention: R. William McCanless
Telephone: (704) 633-8250
Telecopy: (704) 639-1353
<PAGE>
Page 17 of 33 Pages
with a copy to: Akin, Gump, Strauss, Hauer & Feld, L.L.P.
1333 New Hampshire Avenue, N.W.
Suite 400
Washington, D.C. 20036
Attention: Russell W. Parks, Jr., P.C.
Telephone: (202) 887-4092
Telecopy: (202) 887-4288
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth
above.
8.6 SEVERABILITY. Whenever possible, each provision or
portion of any provision of this Agreement and the Proxy will be
interpreted in such manner as to be effective and valid under applicable
law but if any provision or portion of any provision of this Agreement or
the Proxy is held to be invalid, illegal or unenforceable in any respect
under any applicable law or rule in any jurisdiction, such invalidity,
illegality or unenforceability will not affect any other provision or
portion of any provision in such jurisdiction, and this Agreement and the
Proxy will be reformed, construed and enforced in such jurisdiction as if
such invalid, illegal or unenforceable provision or portion of any
provision had never been contained herein.
8.7 SPECIFIC PERFORMANCE. Each of the parties hereto
recognizes and acknowledges that a breach by it of any covenants or
agreements contained in this Agreement or the Proxy will cause the other
parties to sustain damages for which it would not have an adequate remedy
at law for money damages, and therefore each of the parties hereto agrees
that in the event of any such breach the aggrieved parties shall be
entitled to the remedy of specific performance of such covenants and
agreements and injunctive and other equitable relief in addition to any
other remedy to which they may be entitled, at law or in equity.
8.8 REMEDIES CUMULATIVE. All rights, powers and remedies
provided under this Agreement or the Proxy or otherwise available in
respect hereof at law or in equity shall be cumulative and not
alternative, and the exercise of any thereof by any party shall not
preclude the simultaneous or later exercise of any other such right,
power or remedy by such party.
8.9 NO WAIVER. The failure of any party hereto to
exercise any right, power or remedy provided under this Agreement or the
Proxy or otherwise available in respect hereof at law or in equity, or to
insist upon compliance by any other party hereto with its obligations
hereunder or thereunder, and any custom or practice of the parties at
variance with the terms hereof or thereof, shall not constitute a waiver
by such party of its right to exercise any such or other right, power or
remedy or to demand such compliance.
<PAGE>
Page 18 of 33 Pages
8.10 NO THIRD PARTY BENEFICIARIES. This Agreement is not
intended to be for the benefit of, and shall not be enforceable by, any
person or entity who or which is not a party hereto.
8.11 GOVERNING LAW. This Agreement and the Proxy shall be
governed and construed in accordance with the laws of the State of
Delaware, without giving effect to the principles of conflicts of law
thereof.
8.12 JURISDICTION. Each party hereby irrevocably submits
to the exclusive jurisdiction of the United States District Court for the
District of Delaware or any court of the State of Delaware located in the
City of Wilmington in any action, suit or proceeding arising in
connection with this Agreement or the Proxy, and agrees that any such
action, suit or proceeding shall be brought only in such court (and
waives any objection based on forum non conveniens or any other objection
to venue therein); PROVIDED, HOWEVER, that such consent to jurisdiction
is solely for the purpose referred to in this Section 8.12 and shall not
be deemed to be a general submission to the jurisdiction of said Courts
or in the State of Delaware other than for such purposes.
8.13 DESCRIPTIVE HEADINGS. The descriptive headings used
herein are inserted for convenience of reference only and are not
intended to be part of or to affect the meaning or interpretation of this
Agreement.
8.14 COUNTERPARTS; EFFECTIVENESS. This Agreement may be
executed in counterparts, each of which shall be deemed to be an
original, but all of which, taken together, shall constitute one and the
same Agreement. Notwithstanding the foregoing, this Agreement shall not
be effective as to any Stockholder until executed by all Stockholders.
8.15 TERMINATION. This Agreement may be terminated, and
the transactions contemplated hereby may be abandoned, by any Stockholder
at any time prior to the exercise of the Stock Option as to such
Stockholder's Option Shares (such date being referred to herein as the
"Termination Date"):
8.15.1 At any time after the Merger Agreement is
terminated in accordance with its terms by the Company due to the
material breach of any representation, warranty, covenant or agreement on
the part of Parent or Sub set forth in the Merger Agreement; or
8.15.2 At any time after the earlier of (x) 5:00 p.m.
Eastern Time on the date which is five (5) business days after the date
of termination of the Merger Agreement for any reason not specified in
Section 8.15.1 above and (y) 5:00 p.m. Eastern Time on March 7, 1997.
8.16 OBLIGATION TO EFFECT MERGER. If the Closing occurs
and the Merger Agreement is terminated other than due to a breach of any
representation, warranty, covenant or agreement on the part of the
Company set forth in the Merger
<PAGE>
Page 19 of 33 Pages
Agreement or the failure to satisfy any
of the conditions set forth in Article VIII or Section 10.2 of the
Merger Agreement, then Parent and Sub shall use commercially reasonable
efforts to effect the Merger at a price per Share equal to the Merger
Price as soon as reasonably practicable.
8.17 CERTIFICATION. Each Stockholder hereby agrees that
its Option Shares, whether now owned or hereafter acquired, shall be
certificated by the Company, and that the Company shall place the
following legend on any certificate representing its Option Shares:
Transfer and Voting of the Securities represented by this
Certificate are subject to restrictions set forth in a Stockholders
Agreement dated October 31, 1996, a copy of which may be obtained
from the Company at its principal executive offices.
8.18 IRREVOCABLE PROXY. Each Stockholder acknowledges
that, concurrently with the execution of this Agreement, it has executed
and delivered to Parent an Irrevocable Proxy, the form of which is
attached hereto as Exhibit A hereto (the "Proxy").
<PAGE>
Page 20 of 33 Pages
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the day and year first above written.
FOOD LION, INC. KK ACQUISITION CORP. KASH N' KARRY FOOD
STORES,
INC.
By: By: By:
Name: Name: Name:
Title: Title: Title:
STOCKHOLDERS
BANKAMERICA CAPITAL CITICORP NORTH AMERICA, LANDMARK EQUITY
PARTNERS,
CORPORATION INC. III, L.P.
By: By: By:
Name: Name: Name:
Title: Title: Title:
LANDMARK EQUITY PRUDENTIAL INSURANCE PAINEWEBBER CAPITAL
INC. PARTNERS, IV, L.P. COMPANY OF AMERICA
By: By: By:
Name: Name: Name:
Title: Title: Title:
UBS CAPITAL LLC HIGH YIELD PORTFOLIO IDS BOND FUND, INC.
By: By: By:
Name: Name: Name:
Title: Title: Title:
IDS LIFE ADVANTAGE FUND THE PRUDENTIAL INSURANCE PRUCO LIFE INSURANCE
COMPANY COMPANY OF AMERICA
By:
By: By: Name:
Name: Name: Title:
Title: Title:
WELLS, FARGO & COMPANY
By:
Name:
Title:
<PAGE>
Page 21 of 33 Pages
SCHEDULE 1 TO
STOCKHOLDERS AGREEMENT
Name and Address Number of Shares Owned
of Stockholder
BankAmerica Capital Corporation 129,988
231 South LaSalle Street
Chicago, IL 60697
Citicorp North America, Inc. 145,076
399 Park Avenue
New York, NY 10043
Landmark Equity Partners III, L.P. 174,091
760 Hopmeadow Street
P.O. Box 188
Simsbury, CT 06070
Landmark Equity Partners IV, L.P. 9,285
760 Hopmeadow Street
P.O. Box 188
Simsbury, CT 06070
The Prudential Insurance Company 585,904
of America
Two Gateway Center
Floor 7
100 Mullberry Street
Newark, NJ 07102
Prudential Property & Casualty 27,855
Company
c/o The Prudential Insurance Company
of America
Two Gateway Center
Floor 7
100 Mullberry Street
Newark, NJ 07102
Pruco Life Insurance Company of 14,869
Arizona
c/o The Prudential Insurance Company
of America
Two Gateway Center
Floor 7
100 Mullberry Street
Newark, NJ 07102
<PAGE>
Page 22 of 33 Pages
PaineWebber Capital Inc. 533,601
1285 Avenue of the Americas
14th Floor
New York, NY 10019
UBS Capital LLC 145,076
299 Park Avenue
New York, NY 10171
High Yield Portfolio 822,430
c/o American Express Financial
Corporation
3000 IDS Tower 10
Minneapolis, MN 55440-0010
IDS Bond Fund, Inc. 149,570
c/o American Express Financial
Corporation
3000 IDS Tower 10
Minneapolis, MN 55440-0010
IDS Life Advantage Fund 20,000
c/o American Express Financial
Corporation
3000 IDS Tower 10
Minneapolis, MN 55440-0010
The Prudential Insurance Company 220,515
of America
c/o Prudential Capital Group -
Corporates
Four Embarcadero Center
Suite 2700
San Francisco, CA 94111
Pruco Life Insurance Company 11,606
c/o Prudential Capital Group -
Corporates
Four Embarcadero Center
Suite 2700
San Francisco, CA 94111
<PAGE>
Page 23 of 33 Pages
Wells, Fargo & Company 145,076
MAC 0195-171
444 Market Street
17th Floor
San Francisco, CA 94111
<PAGE>
Page 24 of 33 Pages
EXHIBIT A
to Stockholders Agreement
IRREVOCABLE PROXY
The undersigned stockholder of Kash n' Karry Food Stores, Inc., a
Delaware corporation (the "Company"), hereby irrevocably (to the fullest
extent provided by law, but subject to automatic termination and
revocation as provided below) appoints KK Acquisition Corp., a Delaware
corporation (the "Sub"), the attorney and proxy of the undersigned, with
full power of substitution and resubstitution, to the full extent of the
undersigned's rights with respect to the shares of capital stock of the
Company owned beneficially or of record by the undersigned, which shares
are listed on the final page of this Proxy, and any and all other shares
or securities of the Company issued or issuable with respect thereof or
otherwise acquired by stockholder on or after the date hereof, until the
termination date specified in the Stockholders Agreement referred to
below (the "Shares"). Upon the execution hereof, all prior proxies given
by the undersigned with respect to the Shares are hereby revoked and no
subsequent proxies will be given as to the matters covered hereby prior
to the date of termination of the Stockholders Agreement (the
"Termination Date"). This proxy is irrevocable (to the fullest extent
provided by law, but subject to automatic termination and revocation as
provided below), coupled with an interest, and is granted in connection
with the Stockholders Agreement, dated as of October 31, 1996, among the
Company, Food Lion, Inc., a North Carolina corporation ("Parent"), Sub
and the Stockholders party thereto, including the undersigned stockholder
(the "Stockholders Agreement," capitalized terms not otherwise defined
herein being used herein as therein defined), and is granted in
consideration of the Company entering into the Merger Agreement referred
to therein.
The attorney and proxy named above will be empowered at any time
prior to the Termination Date to exercise all voting and other rights
with respect to the Shares (including, without limitation, the power to
execute and deliver written consents with respect to the Shares) of the
undersigned at every annual, special or adjourned meeting of shareholders
of the Company and in every written consent in lieu of such a meeting, or
otherwise: (i) in favor of the Merger, the execution and delivery by the
Company of the Merger Agreement and the approval of the terms thereof and
the Stockholders Agreement and each of the other actions contemplated by
the Merger Agreement and the Stockholders Agreement and any actions
required in furtherance thereof; (ii) against any action, any failure to
act, or agreement, that would result in a breach in any respect of any
covenant, representation or warranty or any other obligation or agreement
of the Company under the Merger Agreement or the Stockholders Agreement
(before giving effect to any materiality or similar qualifications
contained therein); and (iii) against the following actions (other than
the Merger and the transactions contemplated by the Merger Agreement):
(A) any extraordinary corporate transaction, such as a merger,
consolidation or other business combination involving the Company or its
Subsidiaries; (B) a sale, lease or transfer of a material amount of
assets of the Company or its Subsidiaries, or
<PAGE>
Page 25 of 33 Pages
a reorganization,
recapitalization, dissolution or liquidation of the Company or its
Subsidiaries; (C) (1) any change in a majority of the persons who
constitute the board of directors of the Company; (2) any change in the
present capitalization of the Company or any amendment of the Company's
Certificate of Incorporation or Bylaws; (3) any other material change in
the Company's corporate structure or business; or (4) any other action
involving the Company or its Subsidiaries which is intended, or could
reasonably be expected, to impede, interfere with, delay, postpone, or
materially adversely affect the Merger and the transactions contemplated
by this Agreement and the Merger Agreement.
The attorney and proxy named above may only exercise this proxy to
vote the Shares subject hereto in accordance with the preceding
paragraph, and may not exercise this proxy in respect of any other
matter. The undersigned shareholder may vote the Shares (or grant one or
more proxies to vote the Shares) on all other matters.
Any obligation of the undersigned hereunder shall be binding upon
the successors and assigns of the undersigned.
This proxy is irrevocable, but shall automatically terminate and be
revoked and be of no further force and effect on and after the
Termination Date.
Dated: October 31, 1996 STOCKHOLDER
By:
Name:
Title:
Shares Owned:
Page 26 of 33 Pages
September 8, 1995
PaineWebber Incorporated
1285 Avenue of the Americas
New York, NY 10019
Gentlemen:
In connection with the engagement of PaineWebber Incorporated
("PaineWebber") to advise and assist the undersigned (referred to herein
as "we," "our" or "us") with the matters set forth in the Agreement dated
September 8, 1995 between us and PaineWebber, we hereby agree to
indemnify and hold harmless PaineWebber, its affiliated companies, and
each of PaineWebber's and such affiliated companies' respective officers,
directors, agents, employees and controlling persons (within the meaning
of each of Section 20 of the Securities Exchange Act of 1934 and Section
15 of the Securities Act of 1933) (each of the foregoing, including
PaineWebber, being hereinafter referred to as an "Indemnified Person") to
the fullest extent permitted by law from and against any and all losses,
claims, damages, expenses (including reasonable fees, disbursements, and
other charges of counsel), actions (including actions brought by us or
our equity holders or derivative actions brought by any person claiming
through us or in our name), proceedings, arbitrations or investigations
(whether formal or informal), or threats thereof (all of the foregoing
being hereinafter referred to as "Liabilities"), based upon, relating to
or arising out of such engagement or any Indemnified Person's role
therein: PROVIDED, HOWEVER, that we shall not be liable under this
paragraph: (a) for any amount paid in settlement of claims without our
consent, unless our consent is unreasonably withheld, or (b) to the
extent that it is finally judicially determined, or expressly stated in
an arbitration award, that such Liabilities resulted primarily from the
willful misconduct or gross negligence of the Indemnified Person seeking
indemnification. If multiple claims are brought against any Indemnified
Person in an arbitration and at least one such claim is based on, relates
to or arises out of the engagement of PaineWebber by us or any
Indemnified Person's role therein, we agree that any award resulting
therefrom shall be deemed conclusively to be based on, relate to or arise
out of the engagement of PaineWebber by us or any Indemnified Person's
role therein, except to the extent that such award expressly states that
the award, or any portion thereof, is based solely upon, relates to or
arises out of other matters for which indemnification is not available
hereunder. In connection with our obligation to indemnify for expenses
as set forth above, we further agree to reimburse each Indemnified Person
for all such expenses (including reasonable fees, disbursements or other
charges of counsel) as they are incurred by such Indemnified Person;
PROVIDED, HOWEVER, that if an Indemnified Person is reimbursed hereunder
for any expenses, the amount so paid shall be refunded if and to the
extent it is finally judicially determined, or expressly stated in an
arbitration award, that the Liabilities in question resulted primarily
from the willful misconduct or gross negligence of such Indemnified
Person. We hereby also agree that neither PaineWebber nor any other
Indemnified Person shall
<PAGE>
Page 27 of 33 Pages
have any liability to us (or anyone claiming through us or in our name)
in connection with PaineWebber's engagement by us except to the extent
that such Indemnified Person has engaged in willful misconduct or
been grossly negligent.
Promptly after PaineWebber receives notice of the commencement of any
action or other proceeding in respect of which indemnification or
reimbursement may be sought hereunder, PaineWebber will notify us
thereof; but the omission so to notify us shall not relieve us from any
obligation hereunder unless, and only to the extent that, such omission
results in our forfeiture of substantive rights or defenses. If any such
action or other proceeding shall be brought against any Indemnified
Person, we shall, upon written notice given reasonably promptly following
your notice to us of such action or proceeding, be entitled to assume the
defense thereof at our expense with counsel chosen by us and reasonably
satisfactory to such Indemnified Person; PROVIDED, HOWEVER, that any
Indemnified Person may at its own expense retain separate counsel to
participate in such defense. Notwithstanding the foregoing, such
Indemnified Person shall have the right to employ separate counsel at our
expense and to control its own defense of such action or proceeding if,
in the reasonable opinion of counsel to such Indemnified Person, a
difference of position or potential difference of position exists between
us and such Indemnified Person that would, in the opinion of counsel to
the Indemnified Person, make representation of both the Indemnified
Person and us inappropriate or inadvisable under generally accepted
standards of professional conduct; PROVIDED, HOWEVER, that in no event
shall we be required to pay fees and expenses under this indemnity for
more than one firm of attorneys (in addition to local counsel) in any
jurisdiction in any one legal action or group of related legal actions.
We agree that we will not, without the prior written consent of
PaineWebber, which consent will not be unreasonably withheld, settle or
compromise or consent to the entry of any judgment in any pending or
threatened claim, action or proceeding relating to the matters
contemplated by PaineWebber's engagement (whether or not any Indemnified
Person is a party thereto) unless such settlement, compromise or consent
includes an unconditional release of PaineWebber and each other
Indemnified Person from all liability arising or that may arise out of
such claim, action or proceeding.
If the indemnification of an Indemnified Person provided for hereunder
is finally judicially determined by a court of competent jurisdiction to
be unenforceable, then we agree, in lieu of indemnifying such Indemnified
Person, to contribute to the amount paid or payable by such Indemnified
Person as a result of such Liabilities in such proportion as is
appropriate to reflect the relative benefits received, or sought to be
received, by us on the one hand and by PaineWebber on the other from the
transactions in connection with which PaineWebber has been engaged. If
the allocation provided in the preceding sentence is not permitted by
applicable law, then we agree to contribute to the amount paid or payable
by such Indemnified Person as a result of such Liabilities in such
proportion as is appropriate to reflect not only the relative benefits
referred to in such preceding sentence but also the relative fault of us
and of such Indemnified Person. Notwithstanding the foregoing, in no
event shall the aggregate amount required to be contributed by all
Indemnified Persons taking into account our contributions as described
<PAGE>
Page 28 of 33 Pages
above exceed the amount of fees actually received by PaineWebber pursuant
to such engagement. The relative benefits received or sought to be
received by us on the one hand and by PaineWebber on the other shall be
deemed to be in the same proportion as (a) the total value of the
transactions with respect to which PaineWebber has been engaged bears to
(b) the fees paid or payable to PaineWebber with respect to such
engagement.
The rights accorded to Indemnified Persons hereunder shall be in
addition to any rights that any Indemnified Person may have at common
law, by separate agreement or otherwise.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE
PERFORMED ENTIRELY WITHIN SUCH STATE. WE HEREBY CONSENT, SOLELY FOR THE
PURPOSE OF ALLOWING AN INDEMNIFIED PERSON TO ENFORCE ITS RIGHTS
HEREUNDER, TO PERSONAL JURISDICTION AND SERVICE AND VENUE IN ANY COURT IN
WHICH ANY CLAIM FOR WHICH INDEMNIFICATION MAY BE SOUGHT HEREUNDER IS
BROUGHT AGAINST PAINEWEBBER OR ANY OTHER INDEMNIFIED PERSON. We and
PaineWebber also hereby irrevocably waive any right we and PaineWebber
may have to a trial by jury in respect of any claim based upon or arising
out of this agreement. This agreement may not be amended or otherwise
modified except by an instrument signed by both PaineWebber and us. If
any provision hereof shall be determined to be invalid or unenforceable
in any respect, such determination shall not affect such provision in any
other respect or any other provision of this agreement, which shall
remain in full force and effect. If there is more than one indemnitor
hereunder, each indemnifying person
<PAGE>
Page 29 of 33 Pages
agrees that its liabilities hereunder shall be joint and several. Each
Indemnified Person is an intended beneficiary hereunder.
The foregoing indemnification agreement shall remain in effect
indefinitely, notwithstanding any termination of PaineWebber's
engagement.
Very truly yours,
KASH N' KARRY FOOD STORES, INC.
By:________________________________
Name:
Title:
Acknowledged and Agreed to:
PAINEWEBBER INCORPORATED
By:________________________________
Name:
Title:
<PAGE>
Page 30 of 33 Pages
June 5, 1996 PAINEWEBBER
Board of Directors
Kash n' Karry Food Stores, Inc.
6422 Harney Road
Tampa, Florida 33610
Attention:Mr. Ronald E. Johnson
Chairman, President and Chief Executive Officer
Madame and Gentlemen:
Kash n' Karry Food Stores, Inc. (the "Company") proposes to enter
into an Agreement and Plan of Merger (the "Agreement") pursuant to which
(i) a subsidiary ("Sub") of the acquiring company ("Parent") will make a
tender offer (the "Offer") for all of the outstanding shares of common
stock, par value $0.01, per share ("Common Stock") of the Company at a
specified price net to the seller in cash (the "Consideration") and
(ii) following completion of the Offer, each issued and outstanding share
of Common Stock (other than (a) shares owned by the Company as treasury
stock, (b) shares owned by Parent, Sub or any other wholly-owned
subsidiary of Parent and (c) shares held by parties perfecting appraisal
rights) will be converted in a merger (the "Merger") solely into the
right to receive the Consideration. The Board of Directors of the
Company has requested that PaineWebber Incorporated ("PaineWebber")
render an opinion (the "Opinion") as to whether or not the Consideration
to be received by the holders of the Common Stock in the Offer and the
Merger, taken as a whole, is fair, from a financial point of view, to
such shareholders.
As compensation for PaineWebber's services in rendering the
Opinion, the Company agrees to pay PaineWebber a fee of $250,000 payable
in cash on the date PaineWebber delivers the Opinion. In the event that
an update or revised Opinion is requested, the Company agrees to pay
PaineWebber an additional fee to be mutually agreed upon payable in cash
on such date PaineWebber delivers an updated or revised Opinion. In
addition, the Company agrees to reimburse PaineWebber, upon request made
from time to time, for all of its reasonable out-of-pocket expenses
incurred in connection with this engagement, including the reasonable
fees, disbursements and other charges of its legal counsel. The
Company's obligations to pay PaineWebber's compensation (and reimburse
PaineWebber for fees and expenses) as set forth herein shall be without
regard to the conclusion set forth in the Opinion or whether PaineWebber
determines that a favorable Opinion cannot be delivered.
<PAGE>
Page 31 of 33 Pages
It is understood that the Opinion, if rendered, will be dated as of
a date reasonably proximate to the date of the Schedule 14D-9 to be filed
with the Securities and Exchange Commission (the "SEC") in connection
with the Offer and any proxy statement or information statement required
to be filed with the SEC in connection with the Merger. If the Opinion
is included in such Schedule 14D-9, proxy statement or information
statement, it will be reproduced therein in full, and any description of
or reference to PaineWebber or summary of the Opinion will be in a form
reasonably acceptable to PaineWebber and its counsel. Except as provided
in this letter, the Opinion will not be reproduced, summarized, described
or referred to or otherwise made public without PaineWebber's prior
written consent.
The Company will furnish PaineWebber (and will request that the
Parent furnish PaineWebber) with such information as PaineWebber believes
appropriate to its assignment (all such information so furnished being
the "Information"). The Company recognizes and confirms that PaineWebber
(a) will use and rely primarily on the Information and on information
available from generally recognized public sources in rendering the
Opinion and does not assume any responsibility to independently verify
the same, (b) does not assume responsibility for the accuracy or
completeness of the Information and such other information and (c) will
not make an appraisal of any assets of the Parent or the Company. To the
best of the Company's knowledge, the Information to be furnished by the
Company, when delivered, will be true and correct in all material
respects and will not contain any material misstatement of fact or omit
to state any material fact necessary to make the statements contained
therein not misleading. The Company will promptly notify PaineWebber if
it learns of any material inaccuracy or misstatement in, or material
omission from, any Information theretofore delivered to PaineWebber. All
such Information, whether oral or written, will be kept confidential in
accordance with the terms of that certain letter agreement (the "Letter
Agreement") dated September 8, 1995, by and between PaineWebber and the
Company.
It is understood that PaineWebber is being engaged hereunder solely
to provide the services described above to the Board of Directors of the
Company, and that PaineWebber is not acting as an agent of, and its
engagement hereunder is not intended to confer rights on the equity
holders of the Company or any other third party.
In addition to the fees provided for above, the Company shall pay
to PaineWebber PaineWebber's customary hourly fees for each hour that a
PaineWebber employee shall be required to testify (or be available on
site to testify) in any court proceedings, or in oral depositions in
connection with any such proceedings, relating to or arising out of the
Opinion or PaineWebber's engagement hereunder.
Reference is made to the Letter Agreement and the related
indemnification agreement (the "Indemnification Agreement") attached
thereto and incorporated by reference therein. The Company agrees that
the indemnification and other agreements set forth in the Indemnification
Agreement shall apply in connection with PaineWebber's
<PAGE>
Page 32 of 33 Pages
engagement hereunder, shall survive the termination, expiration or
suppression of this letter agreement, and are incorporated by reference
herein.
THIS AGREEMENT WILL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF DELAWARE APPLICABLE TO AGREEMENTS MADE AND
TO BE PERFORMED ENTIRELY IN SUCH STATE. EACH OF THE COMPANY AND
PAINEWEBBER AGREE THAT ANY ACTION OR PROCEEDING BASED HEREON, OR ARISING
OUT OF PAINEWEBBER'S ENGAGEMENT HEREUNDER, SHALL BE BROUGHT AND
MAINTAINED EXCLUSIVELY IN THE COURTS OF THE STATE OF DELAWARE OR IN THE
UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE. THE COMPANY
AND PAINEWEBBER EACH HEREBY IRREVOCABLY SUBMIT TO THE JURISDICTION OF THE
COURTS OF THE STATE OF DELAWARE AND OF THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE FOR THE PURPOSE OF ANY SUCH ACTION OR
PROCEEDING AS SET FORTH ABOVE AND IRREVOCABLY AGREE TO BE BOUND BY ANY
JUDGMENT RENDERED THEREBY IN CONNECTION WITH SUCH ACTION OR PROCEEDING.
EACH OF THE COMPANY AND PAINEWEBBER HEREBY IRREVOCABLY WAIVE, TO THE
FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY HAVE OR
HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH ACTION OR
PROCEEDING BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT
ANY SUCH ACTION OR PROCEEDING HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
The Company (for itself, anyone claiming through it or its name,
and on behalf of its equity holders) and PaineWebber each hereby
irrevocably waive any right they may have to a trial by jury in respect
of any claim based upon or arising out of this letter agreement or the
transactions contemplated hereby. This letter agreement may not be
assigned by either party without the prior written consent of the other
party.
This letter agreement (including the Indemnification Agreement)
embodies the entire agreement and understanding between the parties
hereto relating to the subject matter hereof and supersedes all prior
agreements and understandings relating to such subject matter, other than
the Letter Agreement. This letter agreement may not be amended or
otherwise modified or waived except by an instrument in writing signed by
both PaineWebber and the Company. If any provision of this letter
agreement is determined to be invalid or unenforceable in any respect,
such determination will not affect such provision in any other respect or
any other provision of this letter agreement, which will remain in full
force and effect.
<PAGE>
Page 33 of 33 Pages
If the foregoing correctly sets forth our agreement, please so
indicate by signing and returning to us the enclosed duplicate original
copy of this letter agreement.
Very truly yours,
PAINEWEBBER INCORPORATED
By _________________________________
David M. Reed, Jr.
Managing Director
Accepted and Agreed to as of
the date first written above:
Kash n' Karry Food Stores, Inc.
By ____________________________________
Ronald E. Johnson
Chairman, President and Chief Executive Officer
