<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 23, 1996
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO. 5 TO
SCHEDULE 13E-4
ISSUER TENDER OFFER STATEMENT
(PURSUANT TO SECTION 13(E)(1) OF THE SECURITIES EXCHANGE ACT OF 1934)
----------------
SMITH'S FOOD & DRUG CENTERS, INC.
(NAME OF ISSUER AND PERSON FILING STATEMENT)
CLASS A COMMON STOCK, PAR VALUE $.01 PER SHARE
CLASS B COMMON STOCK, PAR VALUE $.01 PER SHARE
(TITLES OF CLASSES OF SECURITIES)
----------------
N/A
(CUSIP NUMBER FOR CLASS A COMMON STOCK)
832388-10-2
(CUSIP NUMBER FOR CLASS B COMMON STOCK)
MICHAEL C. FREI
SENIOR VICE PRESIDENT AND GENERAL COUNSEL
SMITH'S FOOD & DRUG CENTERS, INC.
1550 SOUTH REDWOOD ROAD
SALT LAKE CITY, UTAH 84104
(801) 974-1400
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE NOTICES
AND COMMUNICATIONS ON BEHALF OF THE PERSON FILING STATEMENT)
----------------
COPIES TO:
ROBERT L. FRIEDMAN
JOHN W. CARR
SIMPSON THACHER & BARTLETT
425 LEXINGTON AVENUE
NEW YORK, NY 10017
(212) 455-2000
----------------
APRIL 25, 1996
(DATE TENDER OFFER FIRST PUBLISHED,
SENT OR GIVEN TO SECURITY HOLDERS)
----------------
CALCULATION OF FILING FEE
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TRANSACTION VALUATION* AMOUNT OF FILING FEE
- ------------------------------------------------------------------------------
<S> <C>
$451,291,032 $90,259**
</TABLE>
- -------------------------------------------------------------------------------
* Assumes purchase of 50% of its outstanding shares of Common Stock
(12,535,862 shares based on Common Stock outstanding as of April 15, 1996)
at $36 per share.
** Fee paid with initial filing on April 25, 1996.
----------------
[_]CHECK BOX IF ANY PART OF THE FEE IS OFFSET AS PROVIDED BY RULE 0-11(A)(2)
AND IDENTIFY THE FILING WITH WHICH THE OFFSETTING FEE WAS PREVIOUSLY PAID.
IDENTIFY THE PREVIOUS FILING BY REGISTRATION STATEMENT NUMBER, OR THE FORM OR
SCHEDULE AND THE DATE OF ITS FILING.
AMOUNT PREVIOUSLY PAID: N/A FILING PARTY: N/A
FORM OR REGISTRATION NO.: N/A DATE FILED: N/A
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
This Amendment No. 5 amends and supplements the Issuer Tender Offer Statement
on Schedule 13E-4, dated April 25, 1996, of Smith's Food & Drug Centers, Inc.
(the "Company") filed in connection with the offer by the Company to purchase,
in the aggregate, 50% of its outstanding shares of Class A Common Stock, par
value $.01 per share, and Class B Common Stock, par value $.01 per share, of the
Company (collectively, the "Shares") (or 12,535,862 Shares based on Shares
outstanding as of April 15, 1996) at a price of $36 per Share, net to the seller
in cash, upon the terms and subject to the conditions set forth in the Offer to
Purchase dated April 25, 1996 (the "Offer to Purchase"), and related Letter of
Transmittal. Capitalized terms used without definition in this Amendment No. 5
shall have the meanings given to them in the Offer to Purchase.
On May 22, 1996, a purported class action complaint (the "Shareholder's
Complaint") entitled Larry F. Klang v. Smith's Food & Drug Centers, Inc., et
-------------------------------------------------------
al., Case no. 15012, was filed against the Company, its current directors,
- ---
Yucaipa, Ronald Burkle and Goldman Sachs in the Chancery Court in and for New
Castle County, Delaware. The Shareholder's Complaint alleges, among other
things, that (i) the Company's purchase of Common Stock in the Offer will impair
the Company's capital in violation of Delaware law, (ii) the Company and the
director defendants have violated their fiduciary duties by entering into the
Recapitalization Agreement and by making allegedly inaccurate and incomplete
disclosure in the Company's Offer to Purchase and Proxy Statement, and (iii)
Yucaipa, Mr. Burkle and Goldman Sachs have aided and abetted the Company and its
directors in carrying out such allegedly illegal actions. The Shareholder's
Complaint seeks, among other things, injunctive relief to prevent the holding of
the Stockholders' Meeting and the consummation of the transactions contemplated
by the Recapitalization Agreement, rescission of such transactions (if
completed), certification of the action as a class action and the award of costs
and damages.
Based on a preliminary review of the Shareholder's Complaint by the Company
and its counsel, the Company believes that the allegations made therein are
without merit and the Company intends to vigorously defend itself and the other
defendants against such allegations.
A copy of the Shareholder's Complaint is filed as Exhibit 1 to this Schedule
13E-4 and is incorporated herein by reference. The foregoing descriptions of the
Shareholder's Complaint are qualified in their entirety by reference to the
Shareholder's Complaint.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
Exhibit 1 -- Complaint in Larry F. Klang v. Smith's Food & Drug Centers,
----------------------------------------------
Inc., et al. (Delaware Chancery Court, New Castle County, May 22, 1996).
- ------------
1
<PAGE>
SIGNATURE
AFTER DUE 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.
Smith's Food & Drug Centers, Inc.
/s/ Michael C. Frei
By: _________________________________
Michael C. Frei
Senior Vice President, General
Counsel and Secretary
Dated: May 23, 1996
2
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NO. DESCRIPTION PAGE
------- ----------- ------------
<C> <S> <C>
Exhibit 1 Larry F. Klang v. Smith's Food & Drug Centers,
----------------------------------------------
Inc., et al., (Delaware Chancery Court, New Castle
------------
County, May 22, 1996).
</TABLE>
<PAGE>
EXHIBIT 1
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
LARRY F. KLANG, on behalf of himself )
and all others similarly situated, )
)
Plaintiff, )
v. ) No. 15012
) -----
SMITH'S FOOD & DRUG CENTERS, INC., JEFFREY )
P. SMITH, RICHARD D. SMITH, FRED L. )
SMITH, SEAN D. SMITH, ROBERT D. BOLINDER, )
KENNETH A. WHITE, DOUGLAS JOHN TIGERT, )
STUART ROSENTHAL, RAY V. ROSE, DUANE )
PETERS, NICOLE MILLER, ALLEN P. )
MARTINDALE, DELONNE ANDERSON, THE )
YUCAIPA COMPANIES, RONALD BURKLE, )
and GOLDMAN SACHS & CO., INC., )
)
Defendants. )
CLASS ACTION COMPLAINT FOR INJUNCTIVE AND OTHER RELIEF
------------------------------------------------------
Larry F. Klang, Plaintiff, complaining of Smith's Food & Drug Centers, Inc.
("SFD"), Jeffrey P. Smith, Richard D. Smith, Fred L. Smith, Sean D. Smith,
Robert D. Bolinder ("Bolinder"), Kenneth A. White ("White"), Douglas John Tigert
("Tigert"), Stuart Rosenthal ("Rosenthal"), Ray V. Rose ("Rose"), Duane Peters
("Peters"), Nicole Miller ("Miller"), Allen P. Martindale ("Martindale"),
Delonne Anderson ("Anderson"), The Yucaipa Companies ("Yucaipa"), Ronald Burkle
("Burkle"), and Goldman Sachs & Co., Inc., Defendants, shows:
PARTIES
-------
1. Larry F. Klang ("Klang" or "the plaintiff") is a holder of Class B
common shares of SFD and is a resident of Irving, Texas.
2. SFD is a Delaware corporation having its principal place of business
at 1550 South Redwood Road, Salt Lake City, Utah 84104.
<PAGE>
3. Jeffrey P. Smith is the Chairman of the Board and Chief Executive
Officer of SFD and is the brother of Fred L. Smith and Richard D. Smith and the
son of the founder of SFD.
4. Richard D. Smith is the Vice Chairman of the Board and Chief Operating
Officer of SFD.
5. Fred L. Smith is a Director of SFD and resides at 74285 Quail Lake
Dr., Indian Wells, California 92210.
6. Bolinder is Executive Vice President of SFD, a Director of SFD.
7. White is Senior Vice President of SFD, a Director of SFD.
8. Sean D. Smith, Tigert, Rosenthal, Rose, Peters, Miller, Martindale,
and Anderson are Directors of SFD.
9. Yucaipa is a California limited partnership having its principal place
of business at 10000 Santa Monica Boulevard, Fifth Floor, Los Angeles,
California 90067.
10. Burkle is the Managing General Partner of Yucaipa and may be served at
the Yucaipa office shown above.
11. Goldman Sachs & Co., Inc. is a Delaware corporation.
BACKGROUND FACTS
----------------
12. SFD is a supermarket company operating 120 stores in Utah, Arizona,
Nevada, New Mexico, Idaho, Texas, and Wyoming. It has outstanding 11,366,562
shares of Class A Common Stock and 13,705,191 shares of Class B Common Stock.
The Class A is neither registered nor traded and is believed to be owned
primarily by members of the Smith family and insiders. The Class B is publicly
2
<PAGE>
held and traded on the NYSE. There is also outstanding Series I Preferred
Stock, the amount and ownership of which is presently unknown to Plaintiff,
except that the Smith Group, defined below, owns 64.5% of it.
13. Members of the Smith family, including the Defendants named Smith, and
related trusts ("the Smith Group") own approximately 30.4% of the SFD common
stock (primarily Class A) and other officers and directors own 7.6% of that
stock. Because of disparities in voting power between the two classes of common
stock, the Smith Group has approximately 62.1% of the aggregate number of votes
eligible to be cast at the meeting described below.
14. Yucaipa is a private investment group specializing in the supermarket
industry. It owns or controls supermarket companies in southern California, the
Chicago area, and Arizona, including Smitty's Supermarkets, Inc. ("Smitty's"), a
Delaware corporation based in Phoenix, Arizona.
15. SFD issued to its shareholders a Proxy Statement and a separate Offer
to Purchase dated April 25, 1996. The Proxy Statement and Offer were actually
mailed to the plaintiff and other Class B shareholders in "waves" with Tampa,
Florida postmarks bearing dates days and even weeks after April 25, 1996. The
Proxy Statement is for a shareholders meeting to be held on May 23, 1996, to
vote on a certain Recapitalization Agreement and Plan of Merger ("the
Agreement") among SFD, Cactus Acquisition, Inc. (a wholly-owned subsidiary of
SFD), Smitty's, and Yucaipa. The Offer to Purchase ("the Offer") is a
self-tender by SFD for 50% of its
3
<PAGE>
common stock (both classes) at $36 per share, pursuant to the Agreement. The
Offer states that it will expire on May 22, 1996. Both the Agreement and the
Offer are very long and complex documents which the shareholders have been given
less than 30 days to digest and to respond. The Proxy Statement and Offer are
incorporated as part of this complaint.
16. The Agreement and the actions it contemplates are grossly unfair and
are the result of breaches of fiduciary duties owed to the Class B stockholders
by the directors of SFD and the controlling shareholders, aided and abetted by
Yucaipa, Berkle and Goldman Sachs & Co., Inc.
CLASS ALLEGATIONS
-----------------
17. Plaintiff brings this action individually and as a class action
pursuant to Rule 23, on behalf of himself and all persons or entities who owned
Class B Common Stock in SFD on the record date for the May 23 shareholders
meeting, excluding present and former directors, officers and employees of SFD
and members of their families.
18. Plaintiff's claims are typical of the claims of members of the Class.
This action is based on Defendants' conduct toward and damage to all Class
Members and not on conduct or damage unique to Plaintiff.
19. The Class is so numerous that joinder of all members is impracticable.
While the exact number in the Class is unknown, it is ascertainable through
records maintained by SFD, its affiliates or agents. The Class is believed to
include approximately 1300 people, firms, or institutions.
4
<PAGE>
20. Common questions of law and fact exist as to all members of the Class
and predominate over questions affecting individual members thereof, including:
(a) Whether Defendants breached their fiduciary duties to the Class
members or aided and abetted others in doing so;
(b) Whether standardized written materials disseminated to the Class
members omitted or misrepresented material facts; and
(c) Whether class members will sustain or have sustained damages as a
result of Defendants' wrongdoing and, if so, the measure of
damages.
21. No difficulties are likely to be encountered in the management of this
litigation as a class action. Plaintiff has no interests antagonistic to those
of other Class members and will fairly and adequately represent the interests of
the Class; he has sustained damages because of the conduct alleged and has
retained counsel competent and experienced in class and securities litigation
and will prosecute this action vigorously.
22. A class action is superior to other methods for the fair and efficient
adjudication of this controversy. The damages suffered by individual Class
members are small in comparison to the expense of this litigation, making it
difficult or impossible to redress the wrongs on an individual basis.
THE PROPOSED TRANSACTION
------------------------
23. The transaction reflected in the Proxy Statement and Offer involves
(a) the merger of Smitty's into a wholly-owned subsidiary of SFD, (b) the
issuance of Class B Common Stock to the owners of Smitty's (entities controlled
by Yucaipa), (c) the self
5
<PAGE>
tender by SFD for 50% of its common stock of both classes for $36 per share, (d)
the repayment of certain SFD and Smitty's debt, (e) the purchase of up to 50% of
outstanding management stock options, (f) the purchase of part of the Series I
Preferred Stock, and (g) the payment by SFD of certain fees and other amounts.
The transaction also entails SFD entering a Management Services Agreement with
Yucaipa.
24. In order to finance all of the transaction, SFD will incur $1,318.2
million dollars in new debt, assume $43.6 million of Smitty's debt, and issue
new cumulative redeemable exchangeable preferred stock for gross proceeds of $75
million.
A. WHAT SFD GETS OUT OF THE TRANSACTION.
-----------------------------------------
25. SFD gets Smitty's, a company which had lost nearly $2 million dollars
during the last six month period for which financials were available, the
addition of which gives SFD a negative net worth of $121.6 million, under
generally accepted accounting principles ("GAAP"), compared to a positive
shareholders equity of $416.7 million without the transaction.
26. SFD's management estimates that it can achieve approximately $25
million annualized cost savings over a 3-year period by integrating its Arizona
operations with Smitty's, but only after spending an additional $32 million in
capital and other costs over the next two years.
B. WHAT THE CLASS B SHAREHOLDERS GET OUT OF THE TRANSACTION.
-------------------------------------------------------------
27. The Class B shareholders get a premium over market price (currently
approximately $28 per share) for half of their stock while
6
<PAGE>
the value of the other half will plummet. This, admitted by SFD, will occur due
to the undercapitalized and extraordinarily leveraged position of the company as
a result of these transactions, coupled with the thinness of the trading market
post-tender.
C. WHAT THE SMITH GROUP AND
OTHER INSIDERS GET OUT OF THE TRANSACTION.
------------------------------------------
28. The Smith Group and other insiders will receive over $170,000,000, the
vast bulk of which is attributable to their ownership of the otherwise
unmarketable, untradeable Class A Stock.
29. On information and belief, for the reasons set out below, the Smith
Group either have already agreed, or will agree, to a sale of the balance of
their Class A Stock at a substantial price.
D. WHAT YUCAIPA GETS OUT OF THE TRANSACTION.
---------------------------------------------
30. Yucaipa receives:
(a) 3,038,888 shares of SFD Class B Stock (30.72% of the Class B
after merger);
(b) a fee of $15,000,000 for using "reasonable efforts to consult
with" SFD and "as appropriate, assist [SFD] in arranging for
[SFD] to enter into" financing agreements;
(c) a Management Services Agreement having a five-year term for
$1,000,000 per year, not terminable by SFD without the payment of
the greater of $5,000,000 or twice the total fees which would
have been due for the remaining term of the contract;
(d) warrants to purchase a new class of SFD stock;
(e) installation of its managing general partner as Chief Executive
Officer of SFD (though he is not required "to spend any
specified amount of time on [SFD's] affairs"), one of its
employees as Senior Vice President, Administration of the
Company, and two of its nominees on a downsized and reconstituted
SFD board of directors.
7
<PAGE>
31. Moreover, Yucaipa, which had earlier expressed a desire to purchase
SFD, has gotten SFD to purchase half of its own stock, as well as a losing
venture of Yucaipa's, using SFD's credit and assets. With its management
contract, its executive and board positions and its warrants, Yucaipa has
"locked up" SFD for a five-year period, without cost, investment, or liability
to itself, while it can explore acquisition of the balance of the company less
expensively if SFD survives.
COUNT ONE
VIOLATION OF (S)160, DEL. GEN. CORP. L.
---------------------------------------
32. SFD is purchasing its stock which will cause impairment of its
capital, in violation of (S)160, Del. Gen. Corp. L.
33. SFD states in its offer that it "believes" that the fair value of its
assets will exceed its liabilities and that SDF will have sufficient capital
after the proposed transaction. However, it admits having no valuation of its
assets as of the date of the Offer. The directors made their decision
concerning the proposed transaction without any valuation of the assets.
34. The stockholders are being solicited to sell in the Offer and to vote
in the Proxy Statement without any valuation of the assets of SFD.
35. Moreover, even if the fair value of the assets exceeded liabilities,
as a public company SFD is required to prepare its financial statements in
accordance with GAAP, SEC Reg. S-X, Rule 4-01, which will reflect a large
negative net worth. Thus, the company will continue to display impaired capital
to the investing public, thereby devaluing the Class B Stock.
8
<PAGE>
COUNT TWO
BREACH OF FIDUCIARY DUTY -- ILLEGAL LOCK-UP
-------------------------------------------
36. Over the past two years, SFD has been sharing non-public information
with various potential suitors, in connection with possible offers to acquire
it. Among these potential offerors was Yucaipa which, in late 1995, stated it
would make an offer of cash and securities subject to satisfactory completion of
due diligence and making satisfactory arrangements for financing. However, after
completion of its due diligence, Yucaipa offered less cash and more equity than
was acceptable to the management of SFD. Yucaipa then made a proposal
essentially the same as that ultimately reflected in the Agreement. However, in
January, 1996, SFD's board decided to contact other potential bidders and
provide non-public information to any who appeared seriously interested,
whereupon Yucaipa purported to withdraw from further negotiations.
37. Five companies were thereafter provided non-public information, and
at least two submitted proposals, at least one of which was markedly superior to
the one ultimately incorporated in the Agreement insofar as SFD generally and
the Class B shareholders were concerned. These offers were rejected and the
Agreement with Yucaipa was entered into.
38. Notwithstanding the fact that the directors of SFD had put the company
up for auction and were charged with the duty of maximizing the company's value,
particularly for its public shareholders, the directors favored the interests of
the controlling shareholders to the detriment of the Class B
9
<PAGE>
shareholders, thereby minimizing the company's value insofar as they were
concerned.
39. In order to prevent any competing offers which might interfere with
the deal being made with Yucaipa for the benefit of the Class A and Preferred
shareholders, the directors entered into the Agreement and the Management
Services Agreement, which essentially establishes a five-year lockup and
transfer of managerial control to Yucaipa, which, on information and belief,
will obtain full control within a period of years, all in violation of their
fiduciary duties.
COUNT THREE
BREACH OF FIDUCIARY DUTY -- INADEQUATE DISCLOSURES
--------------------------------------------------
40. The directors breached their fiduciary duties of loyalty and candor by
inadequately making the disclosures described in the following paragraphs.
41. While stating that the Class A Stock is not registered or traded, SFD
does not disclose that this self-tender is the only way (other than a negotiated
sale to a third party) that the holders of that stock, primarily the Smith
Group, can realize cash value for it, much less a premium over the market
established by the Class B Stock.
42. While stating that the management of SFD "believes" that its asset
values exceed the liabilities it is taking on, SFD does not disclose on what
that belief is based or what the asset value is believed to be.
43. While stating that the offering price is $36 per share, SFD does not
disclose what the basis for the price was or whether
10
<PAGE>
other offering prices were considered and whether such offer would have been
more advantageous to SFD and the Class B Stockholders.
44. While stating that the Class B stock may trade "substantially below"
the offering price, SFD does not disclose in what range that trading may be
expected or the expected effect on the trading public of reporting a negative
net worth and taking 50% of the previously traded stock off the market.
45. While stating that its financial advisor, Goldman, Sachs & Co., would
render a complex fairness opinion, SFD did not disclose that Goldman, Sachs
would not provide the directors or stockholders with an opinion that the
transactions are fair to the company and the Class B shareholders. The Goldman,
Sachs opinion is confined solely to the fairness of the number of securities
issued to the sellers of Smitty's Supermarkets, Inc.
46. While acknowledging that "[c]ertain directors and officers of [SFD],
Yucaipa and certain of their affiliates and certain nominees have interests
described herein that may present them with potential conflicts of interest,"
neither the identities of the persons, nor the nature of the conflicts, are
identified, delineated or described. Neither does SFD acknowledge or describe
the actual conflicts of interest which exist.
47. While revealing that Yucaipa is in the supermarket business and what
chains it owns or controls and while stating that the directors have relied on
the experience and expertise of Yucaipa and its managing general partner,
Burkle, in recommending approval of the Agreement, SFD does not provide
information to the
11
<PAGE>
stockholders on the nature and depth of the experience and/or expertise in
question.
48. While revealing raw numbers regarding voting power and ownership
percentages, SFD does not disclose that the Class B shareholders can defeat the
Agreement, if they so desire, by withholding their proxies altogether and
thereby prevent the required quorum for the vote.
COUNT FOUR
----------
BREACH OF FIDUCIARY DUTY - NONDISCLOSURES
-----------------------------------------
49. On information and belief, the following facts were not disclosed.
(a) The loss suffered by SFD in California was and will be the result
of permitting certain of the officers and directors, to profit illegally at the
company's expense by "flipping" land to the company (i.e., buying the land
secretly at one price and selling it to the company at another, much higher,
price) or by causing SFD to pay above market rent on properties owned in whole
or in part by those officers or directors. This usurpation of corporate
opportunities caused SFD to pay higher than market prices for the land acquired
or rented. If SFD pursued the officers engaged in this practice and the
directors who condoned or ignored it, recoveries made could have a material
beneficial effect on the values of the Class B stock and the net worth of the
company.
(b) The Offer and Proxy Statement understate the losses in California
and overstate the values of the remaining California properties.
12
<PAGE>
(c) There is a second stage to the transaction with Yucaipa which, on
information and belief, if Yucaipa has succeeded in resurrecting Smitty's
with SFD's money, Yucaipa will buy the remainder of the Class B stock at
the much lower price to which it will have fallen, as well as the remainder
of the Class A stock at a price to be negotiated or already agreed upon
with the controlling shareholders (the Smith Group and other officers and
directors).
COUNT FIVE
BREACH OF FIDUCIARY DUTY -- AIDING AND ABETTING
-----------------------------------------------
50. With knowledge that the directors of SFD were breaching their
fiduciary duties of care, candor, and loyalty to the Class B shareholders,
Yucaipa and its managing general partner, Burkle, encouraged, aided, abetted and
participated in those breaches and in the illegal lockup transaction.
COUNT SIX
---------
51. Goldman Sachs & Co., Inc., a Delaware corporation ("Goldman Sachs"),
was retained by SFD to provide financial guidance and investment banking service
to SFD and to its stockholders. Goldman Sachs has fiduciary obligations to the
shareholders of SFD and has breached these duties by:
(a) Aiding and abetting the other defendants in putting together
transactions that are beneficial to the other defendants and detrimental to
the stockholders of SFD,
(b) Failing to disclose significant financial information in
connection with the transactions to the stockholders,
13
<PAGE>
(c) Failing to issue an opinion or advise the stockholders as to the
unfairness of the transactions to the stockholders. Goldman Sachs has
limited its opinion to the fairness of the ratio in the transaction with
Smitty's Supermarkets, Inc.
(d) Goldman Sachs has charged and received excessive fees in
connection with the transactions and has wrongfully obtained
indemnification for breaches of fiduciary obligation of its own and its
participation in breaches of fiduciary obligations of the other defendants.
COUNT SEVEN
-----------
52. All the defendants have violated their fiduciary obligation to the
Class B Stockholders, in terms of the timing aspect of the transaction by
unfairly and deliberately providing them with a complicated, incomplete and
lengthy Offer (104 pages) and the equally complicated, incomplete and lengthy
Proxy Statement (252 pages) with inadequate time to review, understand,
investigate, consult with legal and financial advisors and take appropriate
action including, inter alia, bringing on an injunctive motion or other legal
----------
remedies. The plaintiff's copy of the Proxy Statement was postmarked May 2,
1996, and the Offer was postmarked April 30, 1996. On information and belief,
other Class B shareholders received Proxy Statements and Offers with later
postmarks.
14
<PAGE>
53. The plaintiff will suffer irreparable harm if the transactions
referred to herein are not enjoined or rescinded by order of this Court.
54. The plaintiff and the class will suffer irreparable harm if injunctive
relief and/or recision or recessionary damages are not granted.
55. The plaintiff and the class are without a remedy at law.
DAMAGES
-------
56. Because of the negative net worth of SFD, continued net losses (both
SFD and Smitty's having reported substantial losses for the last reporting
periods shown in the Proxy Statement), and the thinness of the market
post-merger and tender, the Class B Stock remaining (at least 50% of the
pre-merger number of shares) will be essentially worthless. The Class B
shareholders will have lost, giving due credit for the tender offer price
obtained, approximately $8 to $10 per share, or an aggregate loss of
approximately $109,641,528 to $137,051,910.
WHEREFORE, the plaintiff moves for the following relief:
A. Preliminary, temporary and permanent injunctive relief against the
holding of the stockholders' meeting and the consummation of any or all of the
transactions referred to in these pleadings or in the proxy statement or in the
offer.
B. Rescission or rescissory damages or restitution.
C. Certification of this action as a class action and certification of the
plaintiff as a class action representative.
15
<PAGE>
D. The imposition of a constructive trust over the proceeds of the
transactions referred to in the complaint, the proxy statement or the offer.
E. Appointment of a receiver of the corporate defendant, Smith's Food &
Drug Centers, Inc., in view of the violation of a Del.C. (S)160.
------
F. The award of costs, interest and attorney's fees to the plaintiff.
G. Such other equitable and legal relief as is appropriate under the
circumstances.
PRICKETT, JONES, ELLIOTT, KRISTOL
& SCHNEE
By /s/ WILLIAM PRICKETT
-------------------------------------
William Prickett
Ronald A. Brown, Jr.
1310 King Street
Wilmington, Delaware 19899
302 888-6500
Attorneys for Plaintiff
Of Counsel:
A. B. Conant, Jr.
CONANT, WHITTENBURG, FRENCH & SCHACHTER
2300 Plaza of the Americas
600 North Pearl, LB 133
Dallas, Texas 75201
214 999-5700
May 22, 1996
16
