SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________________________________________
SCHEDULE 13D
(RULE 13d-101)
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. 1)
SMITH'S FOOD & DRUG CENTERS, INC.
(Name of Issuer)
Class B Common Stock, $.01 Par Value
(Title of Class of Securities)
832388-10-2
(CUSIP Number)
Lawrence K. Kalantari
The Yucaipa Companies
10000 Santa Monica Boulevard, Fifth Floor
Los Angeles, California 90067
(310) 789-7200
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
May 11, 1997
(Date of Event which Requires Filing of This Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and is filing
this schedule because of Rule 13d-1(b)(3) or (4), check the following box: [_]
The information required in the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 (the "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).
(Continued on following pages)
<PAGE>
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CUSIP NO. 832388-10-2 SCHEDULE 13D PAGE 2 OF 10
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NAME OF REPORTING PERSON
1
The Yucaipa Companies
- - ------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
2 (a) [X]
(b) [_]
- - ------------------------------------------------------------------------------
SEC USE ONLY
3
- - ------------------------------------------------------------------------------
SOURCE OF FUNDS
4
NA
- - ------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
5 PURSUANT TO ITEMS 2(d) or 2(e)
[_]
- - ------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6
California
- - ------------------------------------------------------------------------------
SOLE VOTING POWER
7
NUMBER OF 200,000
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8
2,051,814
OWNED BY
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9
REPORTING 200,000
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER
WITH 10
2,051,814
- - ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
2,251,814
- - ------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
12
[X]
- - ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13 18.8%
- - ------------------------------------------------------------------------------
TYPE OF REPORTING PERSON
14
PN
- - ------------------------------------------------------------------------------
<PAGE>
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CUSIP NO. 832388-10-2 SCHEDULE 13D PAGE 3 OF 10
- - ----------------------- ---------------------
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NAME OF REPORTING PERSON
1
Yucaipa Arizona Partners, L.P.
- - ------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
2 (a) [X]
(b) [_]
- - ------------------------------------------------------------------------------
SEC USE ONLY
3
- - ------------------------------------------------------------------------------
SOURCE OF FUNDS
4
NA
- - ------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
5 PURSUANT TO ITEMS 2(d) or 2(e)
[_]
- - ------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6
California
- - ------------------------------------------------------------------------------
SOLE VOTING POWER
7
NUMBER OF 273,582
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8
0
OWNED BY
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9
REPORTING 273,582
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER
WITH 10
0
- - ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11 273,582
- - ------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
12
[X]
- - ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
2.3%
- - ------------------------------------------------------------------------------
TYPE OF REPORTING PERSON
14
PN
- - ------------------------------------------------------------------------------
<PAGE>
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CUSIP NO. 832388-10-2 SCHEDULE 13D PAGE 4 OF 10
- - ----------------------- ---------------------
- - ------------------------------------------------------------------------------
NAME OF REPORTING PERSON
1
Yucaipa Smitty's Partners, L.P.
- - ------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
2 (a) [X]
(b) [_]
- - ------------------------------------------------------------------------------
SEC USE ONLY
3
- - ------------------------------------------------------------------------------
SOURCE OF FUNDS
4
NA
- - ------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
5 PURSUANT TO ITEMS 2(d) or 2(e)
[_]
- - ------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6
California
- - ------------------------------------------------------------------------------
SOLE VOTING POWER
7
NUMBER OF 300,667
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8
0
OWNED BY
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9
REPORTING 300,667
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER
WITH 10
0
- - ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
300,667
- - ------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
12
[X]
- - ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
2.5%
- - ------------------------------------------------------------------------------
TYPE OF REPORTING PERSON
14
PN
- - ------------------------------------------------------------------------------
<PAGE>
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CUSIP NO. 832388-10-2 SCHEDULE 13D PAGE 5 OF 10
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NAME OF REPORTING PERSON
1
Yucaipa Smitty's Partners II, L.P.
- - ------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
2 (a) [X]
(b) [_]
- - ------------------------------------------------------------------------------
SEC USE ONLY
3
- - ------------------------------------------------------------------------------
SOURCE OF FUNDS
4
NA
- - ------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
5 PURSUANT TO ITEMS 2(d) or 2(e)
[_]
- - ------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6
California
- - ------------------------------------------------------------------------------
SOLE VOTING POWER
NUMBER OF 7
136,793
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8
0
OWNED BY
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9
REPORTING 136,793
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER
WITH 10
0
- - ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
136,793
- - ------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
12
[X]
- - ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
1.1%
- - ------------------------------------------------------------------------------
TYPE OF REPORTING PERSON
14
PN
- - ------------------------------------------------------------------------------
<PAGE>
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CUSIP NO. 832388-10-2 SCHEDULE 13D PAGE 6 OF 10
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- - ------------------------------------------------------------------------------
NAME OF REPORTING PERSON
1
Yucaipa SSV Partners, L.P.
- - ------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
2 (a) [X]
(b) [_]
- - ------------------------------------------------------------------------------
SEC USE ONLY
3
- - ------------------------------------------------------------------------------
SOURCE OF FUNDS
4
NA
- - ------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
5 PURSUANT TO ITEMS 2(d) or 2(e)
[_]
- - ------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6
California
- - ------------------------------------------------------------------------------
SOLE VOTING POWER
7
NUMBER OF 1,340,772
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8
0
OWNED BY
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER
9
REPORTING 1,340,772
PERSON -----------------------------------------------------------
SHARED DISPOSITIVE POWER
WITH 10
0
- - ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
1,340,772
- - ------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
12
[X]
- - ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
11.2%
- - ------------------------------------------------------------------------------
TYPE OF REPORTING PERSON
14
PN
- - ------------------------------------------------------------------------------
<PAGE>
The Yucaipa Companies ("Yucaipa"), Yucaipa Arizona Partners, L.P.
("Arizona Partners"), Yucaipa Smitty's Partners, L.P. ("Smitty's Partners"),
Yucaipa Smitty's Partners II, L.P. ("Smitty's Partners II") and Yucaipa SSV
Partners, L.P. ("SSV Partners" and, together with Yucaipa, Arizona Partners,
Smitty's Partners and Smitty's Partners II, the "Reporting Persons") hereby
amend, as set forth below, their Statement on Schedule 13D dated May 23, 1996
filed with the Securities and Exchange Commission on June 3, 1996 (the
"Statement") relating to the Class B Common Stock, par value $.01 per share,
of Smith's Food & Drug Centers, Inc. Capitalized terms used herein that are not
otherwise defined shall have the meanings given to them in the Statement.
ITEM 2. IDENTITY AND BACKGROUND.
The response to Item 2 is amended to reflect that Mark A. Resnik is no
longer a general partner of Yucaipa.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
The response to Item 5 is amended as follows:
Item 5(a) is restated in its entirety as follows:
(a) Arizona Partners owns 273,582 of the Class B Common Stock
(approximately 2.3% of the total number of outstanding shares of Class B Common
Stock as of May 11, 1997); Smitty's Partners owns 300,667 shares of the Class B
Common Stock (approximately 2.5% of the total number of outstanding shares of
Class B Common Stock as of May 11, 1997); Smitty's Partners II owns 136,793
shares of the Class B Common Stock (approximately 1.1% of the total number of
outstanding shares of Class B Common Stock as of May 11, 1997); SSV Partners
owns 1,340,772 shares of the Class B Common Stock (approximately 11.2% of the
total number of outstanding shares of Class B Common Stock as of May 11, 1997);
and Yucaipa owns 200,000 shares of the Class B Common Stock (approximately 1.7%
of the total number of outstanding shares of Class B Common Stock as of May 11,
1997).
Item 5(b) is amended to reflect that Mark A. Resnik is no longer a general
partner of Yucaipa. Item 5(b) is further amended to incorporate the following:
Pursuant to the Amended and Restated Standstill Agreement, dated as of
January 29, 1997 (the "Standstill Agreement"), by and among Smith's, the
Reporting Persons and certain other persons listed on the signature pages
thereto, the parties thereto holding an aggregate of 2,730,319 shares of Class A
Common Stock, 2,256,955 shares of Class B Common Stock and 3,253,623 shares of
Series I Preferred Stock are required to vote their respective shares to elect
to Smith's seven-member Board of Directors two persons nominated by Yucaipa and
two persons nominated by the Smith family. As a result of the Standstill
Agreement, some or all of the parties thereto may be deemed to constitute a
"group." A group consisting of such persons may be deemed to beneficially own
all shares beneficially owned by each of the persons constituting such a group.
The Reporting Persons do not affirm the existence of such a group and, except
to the extent set forth above, disclaim beneficial ownership of shares of Class
A Common Stock, Class B Common Stock and Series I Preferred Stock owned by any
other person.
Item 5 (c) is amended to reflect that there have not been any transactions
in the Class B Common Stock effected by or for the account of the Reporting
Persons during the past 60 days.
(Page 7 of 10)
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDING OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER.
Item 6 is amended to incorporate the following:
THE VOTING AGREEMENT
On May 11, 1997, Smith's Food & Drug Centers, Inc., a Delaware corporation
("Smith's"), and Fred Meyer, Inc., a Delaware corporation ("Fred Meyer")
entered into an Agreement and Plan of Reorganization and Merger (the "Merger
Agreement"), a copy of which is attached as Exhibit 99.1 to Smith's Current
Report on Form 8-K filed with the Securities and Exchange Commission on May 14,
1997. Prior to the execution of the Merger Agreement, the Reporting Persons and
certain other stockholders (collectively, together with the Reporting Persons,
the "Stockholders") of Smith's entered into a Voting Agreement (the "Voting
Agreement") with Fred Meyer pursuant to which the Stockholders agreed, among
other things, to vote the shares of Smith's capital stock owned or acquired by
them (i) in favor of approval and adoption of the Merger Agreement and (ii)
against any other merger agreement or Acquisition Proposal (as defined in the
Voting Agreement) and against any amendment of Smith's certificate of
incorporation or bylaws or any other proposals or transactions which would in
any manner impede the transactions contemplated by the Merger Agreement. In
addition, the Stockholders agreed not to convert or dispose of, or enter into
any other voting agreement with respect to, their shares of Smith's capital
stock, subject to certain limited exceptions. In the event that the Merger
Agreement is terminated pursuant to Sections 7.2(c) or 7.4 thereof, and at the
time of such termination less than 50.1% of the aggregate voting power of
Smith's is subject to the Voting Agreements (as defined below), each Stockholder
has agreed to pay to Fred Meyer an amount equal to the Profit (as defined in the
Voting Agreement) of such Stockholder from the consummation of any Acquisition
Proposal within 18 months of such termination. Certain other stockholders of
Smith's have entered into similar voting agreements (collectively, together with
the Voting Agreement, the "Voting Agreements") with Fred Meyer. As of May 11,
1997, the shares subject to the Voting Agreements represented approximately 70%
of the aggregate voting power of Smith's.
THE TRANSACTION CONSULTING AGREEMENT
On April 29, 1997, The Yucaipa Companies LLC, an affiliate of the Reporting
Persons ("Yucaipa LLC"), entered into a Transaction Consulting Agreement (the
"Transaction Consulting Agreement") with Smith's pursuant to which Smith's
retained Yucaipa LLC to provide management consultation and advice in
connection with a possible merger transaction involving Fred Meyer or an
alternative transaction. In consideration for such services and in
consideration for the cancellation of the Management Services Agreement (which
Yucaipa LLC has agreed to terminate upon the consummation of any Transaction
(as defined in the Transaction Consulting Agreement)), Smith's has agreed to
pay Yucaipa LLC a fee of $15 million. In addition, Smith's will reimburse
Yucaipa LLC for its reasonable out-of-pocket costs and expenses incurred in
connection with, and will indemnify Yucaipa LLC for all losses resulting from
claims arising out of, the performance of its obligations under the Transaction
Consulting Agreement.
The foregoing summaries of the Voting Agreement and the Transaction
Consulting Agreement are qualified in their entirety by reference to the
agreements which are attached hereto as exhibits and incorporated herein by
reference.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
Exhibit 1. Voting Agreement, dated as of May 11, 1997, by and among
Fred Meyer, Inc. and the persons listed on the signature
pages thereto.
Exhibit 2. Transaction Consulting Agreement, dated as of April 29,
1997, by and between The Yucaipa Companies, LLC and
Smith's Food & Drug Centers, Inc.
(Page 8 of 10)
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: May 15, 1997 Yucaipa Arizona Partners, L.P.
Yucaipa Smitty's Partners, L.P.
Yucaipa Smitty's Partners II, L.P.
Yucaipa SSV Partners, L.P.
By: The Yucaipa Companies
Its General Partner
By: /s/ RONALD W. BURKLE
Name: Ronald W. Burkle
Title: General Partner
Dated: May 15, 1997 The Yucaipa Companies
By: /S/ RONALD W. BURKLE
Name: Ronald W. Burkle
Title: General Partner
(Page 9 of 10)
EXHIBIT INDEX
Exhibit 1. Voting Agreement, dated as of May 11, 1997, by and among
Fred Meyer, Inc. and the persons listed on the signature
pages thereto.
Exhibit 2. Transaction Consulting Agreement, dated as of April 29,
1997, by and between The Yucaipa Companies, LLC and
Smith's Food & Drug Centers, Inc.
(Page 10 of 10)
EXHIBIT 1
VOTING AGREEMENT
among
FRED MEYER, INC.
and
EACH OF THE INDIVIDUALS AND ENTITIES
LISTED ON THE SIGNATURE PAGE HERETO
Dated as of May 11, 1997
<PAGE>
VOTING AGREEMENT (this "Agreement") dated as of May 11, 1997, among Fred
Meyer, Inc., a Delaware corporation ("Fred Meyer") and the individuals and
entities (other than the University of Utah and the Corporation of the
President of the Church of Jesus Christ of Latter-Day Saints (the "Other
Stockholders")) listed on Schedule A attached hereto and each of such
individuals and entities being a "Stockholder" and, collectively, the
"Stockholders").
WHEREAS, Fred Meyer and Smith's Food & Drug Centers, Inc., a Delaware
corporation (the "Company"), propose to enter into an Agreement and Plan of
Reorganization and Merger dated as of the date hereof (as the same may be
amended or supplemented in a manner not adverse to the Stockholders, the
"Reorganization Agreement"; capitalized terms used but not defined herein shall
have the meanings set forth in the Reorganization Agreement) providing for the
formation of a new Delaware holding company, Meyer-Smith Holdco, Inc.
("Holdings"), the formation of two subsidiaries wholly-owned by Holdings ("Fred
Meyer Merger Sub, Inc." and "Smith's Merger Sub, Inc.") and the simultaneous
merger of Fred Meyer Merger Sub, Inc. with and into Fred Meyer and Smith's
Merger Sub, Inc. with and into the Company (the "Merger") so that each of Fred
Meyer and the Company become wholly-owned subsidiaries of Holdings, upon the
terms and subject to the conditions set forth in the Reorganization Agreement;
WHEREAS, pursuant to the Merger the Common Stock (as defined below) will
be converted into shares of common stock, par value $.01 per share, of Holdings
and each share of the Series I Preferred Stock (as defined below) shall be
converted into the right to receive thirty-three and one-third cents ($.33
1/3) (the "Preferred Consideration)";
WHEREAS, simultaneously with the execution hereof, Fred Meyer is entering
into voting agreements (the "Other Voting Agreements", and together with this
Agreement, the "Voting Agreements") with the Other Stockholders, dated as of
the date hereof;
WHEREAS, immediately prior to the Effective Time, Fred Meyer will assign
each of the Voting Agreements and all of its rights, interests and obligations
hereunder and thereunder to Holdings;
WHEREAS, each Stockholder and each Other Stockholder owns beneficially and
(except as set forth on Schedule A attached hereto) of record (i) the number of
shares of Class A Common Stock, par value $.01 per share, of the Company (the
"Class A Common Stock"), of Class B Common Stock, par value $.01 per share, of
the Company (the "Class B Common Stock"), of Class C Common Stock, par value
$.01 per share, of the Company (the "Class C Common Stock" and, together with
the Class A Common Stock and the Class B Common Stock, the "Common Stock") and
of Series I Preferred Stock, par value $.01 per share, of the Company (the
"Series I Preferred Stock") set forth opposite his or its name on Schedule A
attached hereto (such shares of Common Stock and of Series I Preferred Stock,
together with any other shares of capital stock of the Company acquired
(including, without limitation, through the exercise of Options or Warrants or
by reason of any split, reclassification, stock dividend or other distribution
with respect to the capital stock of the Company) by such Stockholder or such
Other Stockholder after the date hereof and during the term of the Voting
Agreements, being collectively referred to herein as the "Subject Shares") and
(ii) options issued under any Stock Option Plan (the "Options") and warrants
(the "Warrants") issued under the Warrant Agreement, dated as of May 23, 1996,
between the Company and The Yucaipa Companies, a California general partnership
(the "Partnership") (the "Warrant Agreement") to acquire the number of shares
of Common Stock or of Series I Preferred Stock, if any, set forth opposite his
or its name on Schedule A attached hereto;
WHEREAS, the Common Stock and the Series I Preferred Stock set forth on
Schedule A attached hereto represent at least 50.1% of the voting power of the
issued and outstanding shares of capital stock of the Company entitled to vote
on each of the matters set forth in Section 3 hereof; and
WHEREAS, as a condition to its willingness to enter into the
Reorganization Agreement, Fred Meyer has required that the Other Stockholders
enter into the Other Voting Agreements and that each Stockholder enter into
this Agreement.
NOW, THEREFORE, to induce Fred Meyer to enter into, and in consideration
of its entering into, the Reorganization Agreement, and in consideration of the
premises and the representations, warranties and agreements contained herein,
the parties agree as follows:
1. Representations and Warranties of each Stockholder. Each Stockholder
hereby, severally and not jointly, represents and warrants to Fred Meyer as of
the date hereof in respect of himself or itself as follows:
(a) Authority. The Stockholder has all requisite power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. This Agreement has been duly authorized, executed
and delivered by the Stockholder (or in the case of any Stockholder which
is a trust, by the trustee on behalf of such trust, or in the case of any
Stockholder which is a partnership by a general partner on behalf of such
partnership) and constitutes a valid and binding obligation of the
Stockholder enforceable in accordance with its terms. The execution and
delivery of this Agreement do not, and the consummation of the
transactions contemplated hereby and compliance with the terms hereof will
not, conflict with, or result in any violation of, or default (with or
without notice or lapse of time or both) under any provision of, any trust
agreement, loan or credit agreement, note, bond, mortgage, indenture,
lease or other agreement, instrument, permit, concession, franchise,
license, judgment, order, notice, decree, statute, law, ordinance, rule or
regulation applicable to the Stockholder or to the Stockholder's property
or assets. If the Stockholder is married and the Stockholder's Subject
Shares, Option or Warrants constitute community property or otherwise need
spousal or other approval for this Agreement to be legal, valid and
binding, this Agreement has been duly authorized, executed and delivered
by, and constitutes a valid and binding agreement of, the Stockholder's
spouse, and is enforceable against such spouse in accordance with its
terms. No trust which is a Stockholder requires the consent of any
beneficiary to the execution and delivery of this Agreement or to the
consummation of the transactions contemplated hereby.
(b) The Subject Shares, Options and Warrants. The Stockholder is
the beneficial and (except as set forth on Schedule A attached hereto)
record owner of, and has good and marketable title to, the Subject Shares,
Options and Warrants set forth opposite such Stockholder's name on
Schedule A attached hereto, free and clear of any claims, liens,
encumbrances and security interests whatsoever (other than as set forth on
Schedule A attached hereto). The Stockholder does not own, of record or
beneficially, any shares of capital stock of the Company other than the
Subject Shares and the shares of Common Stock subject to any Options or
Warrants set forth opposite such Stockholder's name on Schedule A attached
hereto. The Stockholder has the sole right to vote such Subject Shares,
and none of such Subject Shares is subject to any voting trust or other
agreement, arrangement or restriction with respect to the voting of such
Subject Shares, except as contemplated by this Agreement or as otherwise
set forth on Schedule A attached hereto. The Partnership has not
transferred, sold, pledged, assigned or otherwise disposed of (including
by gift) (collectively, "Transfer") any Warrants issued to it pursuant to
the Warrant Agreement and the Warrants set forth opposite the
Partnership's name on Schedule A attached hereto constitute all of the
Warrants issued and outstanding under the Warrant Agreement.
2. Representations and Warranties of Fred Meyer. Fred Meyer hereby
represents and warrants to each Stockholder that Fred Meyer has all requisite
corporate power and authority to enter into this Agreement and to consummate
the transactions contemplated hereby. The execution and delivery of this
Agreement by Fred Meyer, and the consummation of the transactions contemplated
hereby, have been duly authorized by all necessary corporate action on the part
of Fred Meyer. This Agreement has been duly executed and delivered by Fred
Meyer and constitutes a valid and binding obligation of Fred Meyer enforceable
in accordance with its terms.
3. Covenants of each Stockholder. Until the termination of this
Agreement in accordance with Section 7 hereof, each Stockholder, severally and
not jointly, agrees as follows:
(a) Vote for the Merger. At any duly noticed meeting of
stockholders of the Company called to vote upon the Merger and the
Reorganization Agreement or at any adjournment thereof or in any other
circumstances upon which a vote, consent or other approval (including by
written consent) with respect to the Merger and the Reorganization
Agreement is sought, the Stockholder shall, including by initiating a
written consent solicitation if requested by Fred Meyer, vote (or cause to
be voted) the Subject Shares in favor of the Merger, the adoption by the
Company of the Reorganization Agreement and the approval of the terms
thereof and, to the extent presented to the stockholders of the Company
for a vote, each of the other transactions contemplated by the
Reorganization Agreement. The Stockholder hereby waives any appraisal
rights granted pursuant to Section 262 of the General Corporation Law of
the State of Delaware (the "DGCL") (or any successor provision) to which
it may otherwise be entitled as a result of the Merger or the other
transactions contemplated by the Reorganization Agreement.
(b) Vote Against Acquisition Proposals. At any duly noticed meeting
of stockholders of the Company or at any adjournment thereof or in any
other circumstances upon which the Stockholder's vote, consent or other
approval is sought, the Stockholder shall be present (in person or by
proxy) and shall vote (or cause to be voted) the Subject Shares against
(i) any merger agreement or merger (other than the Reorganization
Agreement and the Merger), consolidation, combination, sale of substantial
assets, reorganization, recapitalization, dissolution, liquidation or
winding up of or by the Company or any other Acquisition Proposal as such
term is defined in the Reorganization Agreement relating to the Company
(an "Acquisition Proposal") or (ii) any amendment of the Company's
certificate of incorporation or by-laws or other proposal or transaction
involving the Company or any of its subsidiaries, which amendment or other
proposal or transaction would in any manner impede, frustrate, prevent or
nullify the Merger, the Reorganization Agreement or any of the other
transactions contemplated by the Reorganization Agreement or change in any
manner the voting rights of any class of capital stock of the Company.
Subject to Section 9, the Stockholder further agrees not to commit or
agree to take any action inconsistent with the foregoing.
(c) Transfer of Subject Shares, Options and Warrants. Except
pursuant to this Agreement and except as provided in the immediately
succeeding sentence of this Section 3(c), the Stockholder agrees not to
(i) Transfer, or enter into any contract, option or other arrangement
(including any profit sharing arrangement) with respect to the Transfer
of, the Subject Shares, any Option or Warrant or any shares of Common
Stock subject to any Option or Warrant to any person, other than pursuant
to the terms of the Merger, (ii) enter into any voting arrangement,
whether by proxy, power-of-attorney, voting agreement, voting trust or
otherwise, in connection with, directly or indirectly, any Acquisition
Proposal or (iii) convert (or cause to be converted) any of the Subject
Shares consisting of Class A Common Stock into Class B Common Stock, in
whole or in part, and agrees not to commit or agree to take any of the
foregoing actions. Notwithstanding the foregoing, the Stockholder shall
have the right (i) for estate planning purposes, to Transfer Subject
Shares to a transferee if and only if such Transfer will not result in the
automatic conversion of Class A Common Stock or Class C Common Stock to
Class B Common Stock or the reduction in the number of votes allocated to
the Series I Preferred Stock and only following the due execution and
delivery to Fred Meyer by each transferee of a legal, valid and binding
counterpart to this Agreement and (ii) to pledge such Subject Shares for
purposes of securing customary margin or similar loans (and other
customary steps related thereto, including transferring the certificate
evidencing the shares into the name of the lender or its nominee) if and
only if, in the case of the Class A Common Stock or the Series I Preferred
Stock, such pledge will not result in the automatic conversion of Class A
Common Stock to Class B Common Stock or the reduction in the number of
votes allocated to the Series I Preferred Stock and only following the
delivery to Fred Meyer of an acknowledgment by the pledgee of the
existence of this Agreement.
(d) No Solicitation. During the term of this Agreement, the
Stockholder shall not, nor shall it permit any of its Affiliates or any
director, officer, employee, investment banker, attorney or other adviser
or representative of any of the foregoing to, (i) directly or indirectly,
solicit, initiate or encourage the submission of, any Acquisition Proposal
or (ii) subject to the terms of Section 9, directly or indirectly
participate in any discussions or negotiations regarding, or furnish to
any person any information with respect to, or take any other action to
facilitate any inquiries or the making of any proposal that constitutes,
or may reasonably be expected to lead to, any Acquisition Proposal.
(e) Stockholder Assistance. Until the Merger is consummated or the
Reorganization Agreement is terminated, the Stockholder shall use all
reasonable efforts to assist and cooperate with the other parties to
consummate and make effective, in the most expeditious manner practicable,
the Merger and the other transactions contemplated by the Reorganization
Agreement, subject, in each case to the requirements of applicable laws,
regulations, decrees or other judicial process and subject to the
fiduciary obligations of any such Stockholder who is also an officer or
director of the Company in his capacity as such.
(f) Treatment of Certain Stockholder Profits. (i) In the event
that the Reorganization Agreement shall have been terminated at any time
pursuant to Section 7.4(a) thereof or Section 7.4(d) thereof, or is
terminated, at any time after an Acquisition Proposal is made, pursuant to
Section 7.2(c) thereof (regardless of whether such termination is by Fred
Meyer or the Company), Section 7.4(b) thereof or Section 7.4(c) thereof,
and at the time of such termination less than 50.1% of the voting power of
the issued and outstanding shares of capital stock of the Company entitled
to vote on each of the matters set forth in Section 3 hereof is subject to
valid and binding Voting Agreements in full force and effect in all
respects. Each Stockholder shall pay to Fred Meyer on demand an amount
equal to all profit (determined in accordance with Section 3(f) (ii) of
such Stockholder from the consummation of any Acquisition Proposal (an
"Acquisition Transaction") within 18 months of such termination.
(ii) For purposes of this Section 3(f), the profit of any
Stockholder from any Acquisition Transaction shall equal (A) the
aggregate consideration received by such Stockholder (or which such
Stockholder is legally entitled to receive) pursuant to such Acquisition
Transaction, valuing any non-cash consideration (including any residual
interest in the Company) at its fair market value on the date of such
consummation plus (B) the fair market value, on the date of disposition,
of all Subject Shares, Options and Warrants of such Stockholder and
shares of Common Stock acquired by such Stockholder upon exercise of any
Option or Warrant (less the exercise price thereof) disposed of after the
termination of the Reorganization Agreement and prior to the date of such
consummation less (C) the fair market value of the aggregate
consideration that would have been issuable or payable to such
Stockholder pursuant to the Reorganization Agreement in effect on the
date hereof, valued as of immediately prior to the first public
announcement of the termination of, or the intention of Fred Meyer or the
Company to terminate, the Reorganization Agreement, as if the Merger had
been consummated on the date of such public announcement. For purposes
of clause (C) above, the fair market value of the common stock of
Holdings that would have been received by the Stockholders pursuant to
the Reorganization Agreement as originally executed shall be deemed to be
the fair market value of the common stock, par value $.01 per share, of
Fred Meyer.
(iii) For purposes of this Section 3(f), the fair market
value of any non-cash consideration consisting of:
(A) securities listed on a national securities exchange or
traded on the NASDAQ/NMS shall be equal to the average
closing price per share of such security as reported on the
composite trading system of such exchange or by NASDAQ/NMS
for the five trading days ending on the trading day
immediately prior to the date of value determination; and
(B) consideration which is other than cash or securities of the
form specified in clause (A) of this Section 3(f) (iii)
shall be determined by a nationally recognized independent
investment banking firm mutually agreed upon by the parties
within 10 business days of the event requiring selection of
such banking firm; provided, however, that if the parties
are unable to agree within two business days after the date
of such event as to the investment banking firm, then the
parties shall each select one firm, and those firms shall
select a third investment banking firm, which third firm
shall make such determination; provided further, that the
fees and expenses of such investment banking firm shall be
borne equally by Fred Meyer, on the one hand, and the
Stockholders, on the other hand. The determination of the
investment banking firm shall be binding upon the parties.
(iv) Any payment of profit under this Section 3(f) shall (x) if
paid in cash, be paid by wire transfer of same day funds to an account
designated by Fred Meyer and (y) if paid through a mutually agreed
transfer of securities, to the extent such transfer is permitted by
applicable law and the transfer of such securities to Fred Meyer would not
adversely impact Fred Meyer, or the value of such securities, be paid
through delivery of such securities, suitably endorsed for transfer.
4. Affiliate Letter; Tax Certificates. Each Stockholder (other than any
Stockholder holding only shares of Series I Preferred Stock) shall execute and
deliver an Affiliate Letter contemplated by the Reorganization Agreement and
such tax certificates as may reasonably be requested by tax counsel for Fred
Meyer or for the Company in connection with the rendering of the tax opinions
contemplated by the Reorganization Agreement
5. Further Assurances. Each Stockholder will, from time to time,
execute and deliver, or cause to be executed and delivered, such additional or
further consents, documents and other instruments as Fred Meyer or Holdings may
reasonably request for the purpose of effectively carrying out the transactions
contemplated by this Agreement.
6. Assignment. Neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned by any of the parties without the
prior written consent of the other parties, except that Fred Meyer may assign,
in its sole discretion, any or all of its rights, interests and obligations
hereunder to Holdings or to any direct or indirect wholly owned subsidiary of
Fred Meyer. Subject to the preceding sentence, this Agreement will be binding
upon, inure to the benefit of and be enforceable by the parties and their
respective heirs, successors and assigns.
7. Termination. This Agreement shall terminate upon the earlier of (a)
the 18 month anniversary of the termination of the Reorganization Agreement or
(b) the Effective Time of the Merger; provided, however, that unless (x) the
Company is in material breach of its material obligations under the
Reorganization Agreement, (y) any Stockholder or any Other Stockholder is in
material breach of its material obligations under this Agreement or the Other
Voting Agreements, as the case may be or (z) a meeting of the Company's
stockholders (or any adjournment thereof) has been held to consider the Merger
and the other transactions contemplated by the Reorganization Agreement and the
Smith's Stockholder Approval was not obtained, this Agreement shall terminate
at the time the Reorganization Agreement is terminated (i) pursuant to Section
7.1 or 7.2(b) thereof, or (ii) by the Company (A) pursuant to Section 7.2(d)
thereof or (B) pursuant to Section 7.2(a) thereof (unless an Acquisition
Proposal is pending at the time of such termination) made) or (C) pursuant to
Section 7.3 thereof. Notwithstanding the foregoing, Section 3(f) shall (if
operative in accordance with its terms) survive the termination of the
Reorganization Agreement for the period of time specified therein.
8. General Provisions.
(a) Amendments. This Agreement may not be amended except by an
instrument in writing signed by each of the parties hereto.
(b) Notice. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally, telecopied
(which is confirmed) or sent by overnight courier (providing proof of
delivery) to Fred Meyer in accordance with the notification provision
contained in the Reorganization Agreement and to the Stockholders at their
respective addresses set forth on Schedule A attached hereto (or at such
other address for a party as shall be specified by like notice).
(c) Interpretation. When a reference is made in this Agreement to
Sections, such reference shall be to a Section to this Agreement unless
otherwise indicated. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Wherever the words "include",
"includes" or "including" are used in this Agreement, they shall be deemed
to be followed by the words "without limitation".
(d) Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement,
and shall become effective when one or more of the counterparts have been
signed by each of the parties and delivered to the other party, it being
understood that each party need not sign the same counterpart.
(e) Entire Agreement; No Third-Party Beneficiaries. This Agreement
(including the documents and instruments referred to herein) (i)
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to
the subject matter hereof and (ii) is not intended to confer upon any
person other than the parties hereto and other than Holdings, which is an
express beneficiary of this Agreement, any rights or remedies hereunder.
(f) Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware regardless
of the laws that might otherwise govern under applicable principles of
conflicts of law thereof.
(g) Public Announcements. Each Stockholder will consult with Fred
Meyer and use reasonable efforts to agree upon the text of any press
release, before issuing any press release or otherwise making public
statements with respect to the transactions contemplated by this Agreement
and the Reorganization Agreement and shall not issue any such press
release or make any such public statement without Fred Meyer's prior
consent, which consent shall not be unreasonably withheld, except as may
be required by applicable law (including requirements of stock exchanges
and other similar regulatory bodies).
(h) Severability. If any term, provision, covenant or restriction
herein, or the application thereof to any circumstance, shall, to any
extent, be held by a court of competent jurisdiction to be invalid, void
or unenforceable, the remainder of the terms, provisions, covenants and
restrictions herein and the application thereof to any other
circumstances, shall remain in full force and effect, shall not in any way
be affected, impaired or invalidated, and shall be enforced to the fullest
extent permitted by law, and the parties hereto shall reasonably negotiate
in good faith a substitute term or provision that comes as close as
possible to the invalidated and unenforceable term or provision, and that
puts each party in a position as nearly comparable as possible to the
position each such party would have been in but for the finding of
invalidity or unenforceability, while remaining valid and enforceable.
9. Stockholder Capacity. No person executing this Agreement who is or
becomes during the term hereof a director or officer of the Company makes any
agreement or understanding herein in his capacity as such director or officer.
Each Stockholder signs solely in his capacity as the record holder and
beneficial owner of, or the trustee of a trust whose beneficiaries are the
beneficial owners of, or the general partner of a partnership which is the
beneficial owner of such Stockholder's Subject Shares or Options or Warrants
and nothing herein shall limit or affect any actions taken by a Stockholder in
his or its capacity as an officer or director of the Company to the extent
specifically permitted by the Reorganization Agreement. Nothing in this
Agreement shall be deemed to constitute a transfer of the beneficial ownership
of the Subject Shares by any Stockholder.
10. Enforcement. The parties agree, and the beneficiaries of each trust
which is a party hereto have agreed, that irreparable damage would occur in the
event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any court of the United States
located in the State of Delaware or in a Delaware state court, this being in
addition to any other remedy to which they are entitled at law or in equity.
In addition, each of the parties hereto (i) consents to submit to the personal
jurisdiction of any Federal court located in the State of Delaware or any
Delaware state court in the event any dispute arises out of this Agreement or
any of the transactions contemplated hereby, (ii) agrees that such party will
not attempt to deny or defeat such personal jurisdiction by motion or other
request for leave from any such court, (iii) agrees that such party will not
bring any action relating to this Agreement or the transactions contemplated
hereby in any court other than a Federal court sitting in the state of Delaware
or a Delaware state court, (iv) waives any right to trial by jury with respect
to any claim or proceeding related to or arising out of this Agreement or any
of the transactions contemplated hereby and (v) appoints The Corporation Trust
Corporation as such party's agent for service of process in the State of
Delaware.
11. Each Stockholder owning Series I Preferred Stock hereby acknowledges
that it will receive the Preferred Consideration in the Merger and hereby
agrees to accept the Preferred Consideration in exchange for the cancellation
of its Series I Preferred Stock and to take such further actions as Fred Meyer
and the Company may request to evidence such agreement.
(Signature page follows)
<PAGE>
IN WITNESS WHEREOF, Fred Meyer has caused this Agreement to be signed by
its officer thereunto duly authorized and each Stockholder has signed this
Agreement or has caused this Agreement to be signed by its officer thereunto
duly authorized, all as of the date first written above.
FRED MEYER, INC.
By: /S/ ROBERT G. MILLER
--------------------
Name:
Title:
STOCKHOLDERS:
THE YUCAIPA COMPANIES
By: /S/ RONALD W. BURKLE
--------------------
Name:
Title: General Partner
YUCAIPA ARIZONA PARTNERS, L.P.
YUCAIPA SMITTY'S PARTNERS, L.P.
YUCAIPA SMITTY'S PARTNERS II, L.P.
YUCAIPA SSV PARTNERS, L.P.
By: THE YUCAIPA COMPANIES
as the General Partner of each of the
entities listed above
By: /S/ RONALD W. BURKLE
--------------------
Name:
Title: General Partner
/S/ JEFFREY P. SMITH
--------------------
JEFFREY P. SMITH
/S/ FRED L. SMITH
--------------------
FRED L. SMITH
/S/ RICHARD D. SMITH
--------------------
RICHARD D. SMITH
THE DEE GLENN MARITAL TRUST
By: /S/ JEFFREY P. SMITH
--------------------
Name: Jeffrey P. Smith
Title: Trustee
TRUST FOR THE CHILDREN OF JEFFREY P. SMITH
By: /S/ JEFFREY P. SMITH
--------------------
Name: Jeffrey P. Smith
Title: Trustee
TRUST FOR THE CHILDREN OF FRED L. SMITH
By: /S/ FRED L. SMITH
-----------------
Name: Fred L. Smith
Title: Trustee
TRUST FOR THE CHILDREN OF RICHARD D. SMITH
By: /S/ RICHARD D. SMITH
--------------------
Name: Richard D. Smith
Title: Trustee
<PAGE>
<TABLE>
SCHEDULE A<FN1>
<CAPTION>
Shares of
Shares of Shares of Shares of capital Shares of
Class A Class B Common Series I stock capital stock
Common Stock Stock Preferred subject to subject to
Name Stock Options Warrants
---------------------------- ------------ -------------- --------- ---------- -------------
<S> <C> <C> <C> <C> <C>
The Yucaipa Companies
10000 Santa Monica Boulevard 200,000 1,842,555<FN1>
5th Floor
Los Angeles, CA 90067
Yucaipa Arizona Partners, L.P. 273,582
c/o The Yucaipa Companies
10000 Santa Monica Boulevard
5th Floor
Los Angeles, CA 90067
Yucaipa Smitty's Partners, L.P. 300,667
c/o The Yucaipa Companies
10000 Santa Monica Boulevard
5th Floor
Los Angeles, CA 90067
Yucaipa Smitty's Partners II, 136,793
L.P.
c/o The Yucaipa Companies
10000 Santa Monica Boulevard
5th Floor
Los Angeles, CA 90067
Yucaipa SSV Partners, L.P. 1,340,772<FN2>
c/o The Yucaipa Companies
10000 Santa Monica Boulevard
5th Floor
Los Angeles, CA 90067
University of Utah 2,267,731
c/o Treasurer
University of Utah
407 Park Building
Salt Lake City, UT 84112
A-1
Corporation of the President 2,000,010
of the Church of Jesus
Christ of Latter-Day Saints
50 East North Temple
Salt Lake City, UT 84150
Jeffrey P. Smith 648,666 5,141
c/o Smith's Food & Drug
Centers, Inc.
1550 South Redwood Road
Salt Lake City, UT 84101
Fred L. Smith 252,708
c/o Smith's Food & Drug
Centers, Inc.
1550 South Redwood Road
Salt Lake City, UT 84101
Richard D. Smith
c/o Smith's Food & Drug
Centers, Inc.
1550 South Redwood Road
Salt Lake City, UT 84104
Dee Glen Smith Marital Trust I 224,287 3,253,623
c/o Ida W. Smith
1066 North East Capital Blvd.
Salt Lake City, UT 84103
Trust for the Children of 560,353
Jeffrey P. Smith
c/o Smith's Food & Drug
Centers, Inc.
1550 South Redwood Road
Salt Lake City, UT 84104
A-2
Trust for the Children of 560,353<FN3>
Fred L. Smith
c/o Smith's Food & Drug
Centers, Inc.
1550 South Redwood Road
Salt Lake City, UT 84104
Trust for the Children of 483,952
Richard D. Smith
c/o Smith's Food & Drug
Centers, Inc.
1550 South Redwood Road
Salt Lake City, UT 84104
---------- --------- ---------- --------- ---------
Total Shares 2,730,319 2,256,955 7,521,364 1,842,555
========== ========= ========== ========= =========
Total Voting Power 27,303,190 2,256,955 75,213,640
========== ========= ========== ========= =========
<FN>
<FN1> No shares of Class C Common Stock have been issued. 1,842,555 shares of nonvoting class C
Common Stock are issuable upon exercise of the Yucaipa Warrant.
<FN2> Of this total, 660,000 shares are pledged to Goldman, Sachs & Co. for collateral purposes in
connection with a margin account.
<FN3> The children of Fred L. Smith have individual trusts of shares of Class A Common Stock.
Fred L. Smith is the trustee and the trusts are as follows: Fred Lloyd Smith Trust,
41,353 shares; Staci Elaine Smith Trust, 28,670 shares; and Zachary Dee Smith Trust, 28,670
shares.
A-3
</FN>
</TABLE>
EXHIBIT 2
TRANSACTION CONSULTING AGREEMENT
THIS TRANSACTION CONSULTING AGREEMENT (this "Agreement") is made and
entered into as of April 29, 1997 by and between THE YUCAIPA COMPANIES LLC, a
Delaware limited liability company, ("Yucaipa"), and SMITH'S FOOD & DRUG
CENTERS, INC., a Delaware corporation (the "Company").
RECITALS
A. The Company is in the business of operating supermarkets in
Arizona, Idaho, Nevada, New Mexico, Texas, Utah and Wyoming;
B. Yucaipa is a private investing group specializing in the
acquisition and management of supermarket chains;
C. The Company and an affiliate of Yucaipa were parties to a
Management Services Agreement (the "MSA") pursuant to which such affiliate
provided certain general business and financial advice and management services
to the Company in connection with the operation of its business;
D. The affiliate of Yucaipa which was originally party to the MSA
has assigned all of its rights and obligations thereunder to Yucaipa, as
provided in Section 11.2 of the MSA;
E. Pursuant to Section 4 of the MSA, the Company's board of
Directors may request Yucaipa to provide consulting services in connection
with any proposed acquisition transaction and Yucaipa shall be entitled to
such additional compensation for such services as it and the Company may
agree;
F. The Company wishes to obtain the consulting services of Yucaipa
in connection with a proposed transaction on the terms set forth herein.
1
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual
covenants of the parties hereto and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the undersigned
parties agree as follows:
SECTION 1. CONSULTING SERVICES.
The Company hereby retains Yucaipa to provide the Company with
management consultation and advice in connection with a possible merger
transaction involving Fred Meyer Inc. ("FMI") (the "Proposed Transaction") or
any alternative transaction between the Company and another person which would
result in a "change in control" of the Company as defined in the MSA (an
"Alternative Transaction" and, together with the Proposed Transaction, each a
"Transaction"). Yucaipa's services pursuant to this Agreement shall include
(i) assisting the Company in conducting its review of the business and
prospects of FMI or any person proposing an Alternative Transaction, including
an analysis of the possible operating synergies which could be achieved and a
review of financial projections; (ii) coordinating FMI's or such other
person's due diligence activities with respect to the Company; (iii)
consulting with the Company concerning the terms of any proposed Transaction
and the preparation of required documentation; (iv) assisting the Company in
communications with its banks and bondholders, including coordination of any
refinancings which are undertaken; (v) advising the Company with respect to
any new financings to be undertaken in connection with the consummation of any
Transaction; (vi) consulting with the Company regarding governmental relations
relating to any proposed Transaction; and (vii) such other related services as
Yucaipa customarily provides for similar transactions.
SECTION 2. TERMINATION OF MANAGEMENT SERVICES AGREEMENT.
Upon the consummation of any Transaction Yucaipa hereby agrees and
elects to terminate the MSA, as provided in Section 6.3 thereof.
SECTION 3. CONSULTING AND TERMINATION FEE.
On such date (the "Effective Date") as any Transaction is
consummated, the Company shall pay to Yucaipa a fee of $15,000,000 in
consideration of the services to be rendered by Yucaipa pursuant to Section 1
above and in consideration for the cancellation of the MSA and the Company's
obligations thereunder as provided in Section 2 above. In addition, the
Company agrees that Yucaipa shall be entitled to retain the entire "Prepayment
Amount" as defined in Section 2(b) of the MSA.
SECTION 4. REIMBURSEMENT OF EXPENSES.
The Company shall reimburse Yucaipa for all of its reasonable out-
of-pocket costs and expenses incurred in connection with the performance of
its obligations under this Agreement. Yucaipa shall bill the Company for the
amount of all such costs and expenses monthly or, if it so elects, upon
consummation of the Transaction, and shall provide the Company with a
reasonable itemization of such costs and expenses.
2
SECTION 5. TERM OF AGREEMENT.
The term of this Agreement shall commence on the date hereof and
continue for a period of one (1) year ending on the first anniversary of such
date (the "Term").
SECTION 6. TERMINATION.
The Company may elect to terminate this Agreement at any time
following a determination of the Board of Directors of the Company to effect
such a termination by giving Yucaipa at least ten (10) days' written notice of
such termination. Yucaipa may elect to terminate this Agreement in the event
that the Board of Directors of the Company requests it to provide the
consulting services set forth in Section 1 above with respect to any
Alternative Transaction by giving the Company at least ten (10) days' written
notice of such termination.
SECTION 7. EFFECT OF TERMINATION.
Upon any termination of this Agreement by the Company or Yucaipa
pursuant to Section 6 above, the obligations of the parties hereunder shall
terminate, except (i) the Company shall continue to be obligated to Yucaipa
for all amounts so which it is entitled pursuant to Section 3 above with
respect to any Transaction which is either (a) consummated during the Term
(irrespective of any such termination) or (b) consummated subsequent to the
Term pursuant to any definitive agreement executed during the Term, and for
any unreimbursed expenses incurred prior to any such termination, (ii) the
Company's obligations under Section 9 hereof shall survive any such
termination; and (iii) the provisions of Sections 8 and 10 shall also survive
any such termination.
SECTION 8. CONFIDENTIALITY.
The parties hereto agree to be bound by the confidentiality
provisions of Section 3.9 of that certain Standstill Agreement, dated as of
January 29, 1996 by and among the Company, an affiliate of Yucaipa and the
other parties thereto during the entire term of this Agreement, regardless of
whether the Standstill Agreement is earlier terminated.
SECTION 9. INDEMNIFICATION.
(a) The Company (the "Indemnifying Party") agrees to indemnify and
hold harmless Yucaipa and each of its affiliates, members, partners, officers,
agents and the employees of each of them (each an "Indemnified Party" and
collectively, the "Indemnified Parties"), from and against all losses, claims,
damages or liabilities resulting from any claim, lawsuit or other proceeding
by any person to which any Indemnified Party may become subject which is
related to or arises out of the performance of the services to be provided
hereunder (or under the Recapitalization Agreement), and will reimburse any
Indemnified Party for all reasonable out-of-pocket expenses (including
reasonable counsel fees and disbursements) incurred by such Indemnified Party
in connection with investigating or defending any such claim. Each
Indemnifying Party further agrees that the indemnification and reimbursement
commitments herein shall apply whether or not such Indemnified Party is a
formal party to any such lawsuit, claim or other proceedings. The foregoing
provision is expressly intended to cover reimbursement of reasonable legal and
other expenses incurred in a deposition or other discovery proceeding.
3
Notwithstanding the foregoing, the Indemnifying Party shall not be
liable to any Indemnified Party (a) in respect of any loss, claim, damage,
liability or expense to an Indemnified Party to the extent the same is
determined, in a final judgment by a court having jurisdiction, to have
resulted from the gross negligence or willful misconduct of such Indemnified
Party or any intentional, material breach by such Indemnified Party of its
obligations under this Agreement or (b) for any settlement effected by such
Indemnified Party without the written consent of such Indemnifying Party,
which consent shall not be unreasonably withheld.
In the event of the assertion against any Indemnified Party of any
such claim or the commencement of any such action or proceeding, each
Indemnifying Party shall be entitled to participate in such action or
proceeding and in the investigation of such claim and, after written notice
from such Indemnifying Party to such Indemnified Party, to assume the
investigation or defense of such claim, action or proceeding with counsel of
the Indemnifying Party's choice at the Indemnifying Party's expense; provided,
however, that such counsel shall be reasonably satisfactory to the Indemnified
Party. Notwithstanding anything to the contrary contained herein, the
Indemnifying Party may retain one firm of counsel to represent all Indemnified
Parties in such claim, action or proceeding; provided that the Indemnified
Party shall have the right to employ a single firm of separate counsel (and
any necessary local counsel) and to participate in the defense or
investigation of such claim, action or proceeding, and the Indemnifying Party
shall bear the expense of such separate counsel (and local counsel, if
applicable), if (i) in the written opinion of counsel to the Indemnified Party
use of counsel of the Indemnifying Party's choice could reasonably be expected
to give rise to a conflict of interest, (ii) the Indemnifying Party shall not
have employed counsel reasonably satisfactory to the Indemnified Party to
represent the Indemnified Party within a reasonable time after notice of the
assertion of any such claim or institution of any such action or proceeding or
(iii) the Indemnifying Party shall authorize the Indemnified Party to employ
separate counsel at the Indemnifying Party's expense.
(b) If for any reason (other than the gross negligence or
willful misconduct of an Indemnified Party referred to above) the foregoing
indemnification is unavailable to any Indemnified Party or insufficient to
hold it harmless as and to the extent contemplated by the preceding paragraph
(a), then the Indemnifying Party shall contribute to the amount paid or
payable by the Indemnified Party as a result of such loss, claim, damage or
liability in such proportion as is appropriate to reflect the relative
benefits received by the Indemnifying Party and its affiliates, on the one
hand, and the Indemnified Party, as the case may be, on the other hand, as
well as any other relevant equitable considerations.
4
SECTION 10. NOTICES.
All notices, demands, requests, consents or approvals required or
permitted to be given hereunder or which are given with respect to this
Agreement shall be in writing and shall be personally served and mailed,
registered or certified, return receipt requested, postage prepaid (or by a
substantially similar method), or delivered by a reputable overnight courier
service with charges prepaid, or transmitted by hand delivery, telegram, telex
or facsimile, addressed as set forth below, or such other address as such
party shall have specified most recently by written notice. Notice shall be
deemed given or delivered on the date of service or transmission if personally
served or transmitted by telegram, telex or facsimile. Notice otherwise sent
as provided herein shall be deemed given or delivered on the third business
day following the date mailed or on the next business day following the
delivery of such notice to a reputable overnight courier service.
If to Yucaipa: The Yucaipa Companies LLC
10000 Santa Monica Boulevard
Fifth Floor
Los Angeles, California 90067
Attention: Mr. Ronald W. Burkle
If to the Company: Smith's Food & Drug Centers, Inc.
1550 South Redwood Road
Salt Lake City, Utah 84104
Attention: Chairman of the Board
with a copy to the General Counsel of the Company at the same
address.
SECTION 11. MISCELLANEOUS.
11.1 Entire Agreement; Amendments. This Agreement contains all of
the terms and conditions agreed upon by the parties hereto in connection with
the subject matter hereof. This Agreement may not be amended, modified or
changed except by written instrument signed by all of the parties hereto.
11.2 Assignment; Successors. This Agreement shall not be assigned
and is not assignable by any party without the prior written consent of each
of the other parties hereto; provided, however, that Yucaipa may assign,
without the prior consent of the Company, its rights and obligations under
this Agreement to any partnership or limited liability company controlled by
Ronald W. Burkle, and provided further, that Yucaipa may assign the right to
receive any payment hereunder (but not its duties and obligations hereunder)
to any other person or entity. Subject to the preceding sentence, this
Agreement shall inure to the benefit of and be binding upon the parties hereto
and their respective permitted successors and assigns.
11.3 Governing Law. This Agreement shall be governed by and
construed in accordance with the internal domestic laws of the State of New
York, without regard to the choice of law provisions thereof.
11.4 Attorneys' Fees. If any legal action is brought concerning any
matter relating to this Agreement, or by reason of any breach of any covenant,
condition or agreement referred to herein, the prevailing party shall be
entitled to have and recover from the other party to the action all costs and
expenses of suit, including attorneys' fees.
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11.5 Relationship. Nothing in this Agreement shall constitute or be
construed to be a partnership or joint venture between the Company and
Yucaipa. To the extent appropriate to the duties and obligations hereunder,
Yucaipa shall be an independent contractor and none of its employees shall be
deemed employees of the Company by reason of this Agreement or the performance
of its duties hereunder. This Agreement is for the benefit of the Company and
Yucaipa and shall not create third party beneficiary rights.
11.6 Construction and Interpretation. This Agreement shall not be
construed for or against either party by reason of the authorship or alleged
authorship of any provision hereof or by reason of the status of the
respective parties. This Agreement shall be construed reasonably to carry out
its intent without presumption against or in favor of either party. The
natural persons executing this Agreement on behalf of each party have the full
right, power and authority to do and affirm the foregoing warranty on behalf
of each party and on their own behalf. The captions on sections are provided
for purposes of convenience and are not intended to limit, define the scope of
or aid in interpretation of any of the provisions hereof. References to a
party or parties shall refer to the Company or Yucaipa, or both, as the
context may require. All pronouns and singular or plural references as used
herein shall be deemed to have interchangeably (where the sense of the
sentence requires) a masculine, feminine or neuter, and/or singular or plural
meaning, as the case may be.
11.7 Severability. If any term, provision or condition of this
Agreement is determined by a court or other judicial or administrative
tribunal to be illegal, void or otherwise ineffective or not in accordance
with public policy, the remainder of this Agreement shall not be affected
thereby and shall remain in full force and effect and shall be construed in
such manner so as to preserve the validity hereof and the substance of the
transactions herein contemplated to the extent possible.
11.8 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
taken together shall constitute one and the same instrument.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Transaction
Consulting Agreement to be duly executed as of the date first above written.
THE YUCAIPA COMPANIES LLC
By: /s/ Ronald W. Burkle
Name:
Title: Managing Member
SMITH'S FOOD & DRUG CENTERS, INC.
By: /s/ Jeffrey P. Smith
Name:
Title:
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