As filed with the Securities and Exchange Commission on May 23, 1997
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
WHOLE FOODS MARKET, INC.
(Exact name of registrant as specified in its charter)
Texas
(State of incorporation)
74-1989366
(I.R.S. employer identification no.)
601 N. Lamar Boulevard, Suite 300
Austin, Texas 78703
512-477-4455
(Address, including zip code, and telephone number,
including area code, of registrant's principal
executive offices)
Glenda J. Flanagan
Chief Financial Officer
Whole Foods Market, Inc.
Austin, Texas 78703
512-477-4455
(Name, address including zip code, and telephone number, including area
code, of agents for service)
Copy to:
Bruce H. Hallett
Crouch & Hallett, L.L.P.
717 N. Harwood St., Suite 1400
Dallas, Texas 75201
(214) 953-0053
Approximate date of commencement of proposed sale to the public: As soon
as practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box.
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [x]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering.
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box.
CALCULATION OF REGISTRATION FEE
Proposed Proposed
Maximum Maximum
Title of Each Amount Offering Aggregate Amount of
Class of Securities Being Price Offering Registration
Being Registered Registered Per Share(1) Price Fee
Common Stock, 399,903 shares $ 28.50 $11,397,236 $3,454
no par value
(1) Estimated solely for purposes of calculating the amount of the
registration fee pursuant to the provisions of Rule 457(c).
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
Subject to Completion, dated May 23, 1997
399,903 Shares
WHOLE FOODS MARKET, INC.
COMMON STOCK
The 399,903 shares (the "Shares") of common stock, no par value ("Common
Stock"), of Whole Foods Market, Inc., a Texas corporation (the "Company" or
"Whole Foods Market"), offered hereby are being sold by the Selling
Shareholders. See "Selling Shareholders." The Company will not receive any of
the proceeds from the sale of the Shares offered hereby.
The Shares may be offered by the Selling Shareholders from time to time in
open market transactions (which may include block transactions) or otherwise in
the over-the-counter market through the Nasdaq National Market, or in private
transactions at prices relating to prevailing market prices or at negotiated
prices. The Selling Shareholders may effect such transactions by selling the
Shares to or through broker-dealers, and such broker-dealers may receive
compensation in the form of discounts, concessions or commissions from the
Selling Shareholders and/or purchasers of the Shares for whom such
broker-dealers may act as agent or to whom they sell as principal or both (which
compensation as to a particular broker-dealer might be in excess of customary
commissions). The Selling Shareholders and any broker-dealer acting in
connection with the sale of the Shares offered hereby may be deemed to be
"underwriters" within the meaning of the Securities Act of 1933, as amended (the
"Act"), in which event any discounts, concessions or commissions received by
them, which are not expected to exceed those customary in the types of
transactions involved, or any profit on resales of the Shares by them, may be
deemed to be underwriting commissions or discounts under the Act. The offering
contemplated hereby will terminate as to the Shares upon the earlier to occur of
the sale of all the Shares or June ___, 1998, pursuant to certain agreements to
which the Company and each of the Selling Shareholders are parties. See "Selling
Shareholders."
The costs, expenses and fees incurred in connection with the registration
of the Shares, which are estimated to be $15,000 (excluding selling commissions
and brokerage fees incurred by the Selling Shareholders) will be paid by the
Company, which has also agreed to indemnify certain of the Selling Shareholders
against certain liabilities, including liabilities under the Act.
Purchasers of the Shares should carefully consider the risk factors set
forth herein. See "Risk Factors."
The last reported sale price of the Common Stock on the Nasdaq National
Market on June ____, 1997 was $______ per share.
------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-----------------
The date of this Prospectus is June ___, 1997.
<PAGE>
AVAILABLE INFORMATION
Whole Foods Market is subject to the informational requirements of the
Securities Exchange Act of 1934 (the "1934 Act") and in accordance therewith
files reports and other information with the Securities and Exchange Commission
(the "Commission"). Reports, proxy statements and other information concerning
the Company can be inspected and copied at the public reference facilities
maintained by the Commission at the public reference facilities maintained by
the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549; 7
World Trade Center, Suite 1300, New York, New York 10048; and 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Copies of such material can be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549 at prescribed rates. Certain reports, proxy
statements and other information filed by the Company may also be obtained at
the Commission's World Wide Web site, located at http://www.sec.gov. In
addition, such material can be inspected at the offices of the Nasdaq Stock
Market, Inc., 1735 K Street, N.W., Washington, D.C. 20006.
DOCUMENTS INCORPORATED BY REFERENCE
The Company's Annual Report on Form 10-K for the fiscal year ended
September 29, 1996, and Quarterly Reports on Form 10-Q for the first two fiscal
quarters of its 1997 fiscal year, each filed with the Commission, are
incorporated in this Prospectus by reference. All documents subsequently filed
by the Company pursuant to Sections 13(a), 13(c), 14 or 15(d) of the 1934 Act
prior to the termination of the offering of the Shares hereunder shall be deemed
to be incorporated herein by reference and shall be a part hereof from the date
of the filing of such documents. Any statements contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or replaced for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or replaces
such statement. Any such statement so modified or replaced shall not be deemed,
except as so modified or replaced, to constitute a part of this Prospectus.
Whole Foods Market will provide without charge to each person, including
any beneficial owner, to whom a Prospectus is delivered, upon written or oral
request of such person, a copy of the documents incorporated by reference
herein, other than exhibits to such documents not specifically incorporated by
reference. Such requests should be directed to Whole Foods Market, Inc., 601 N.
Lamar Boulevard, Suite 300, Austin, Texas 78703, Attention: Chief Financial
Officer (telephone (512) 447-4455).
2
<PAGE>
THE COMPANY
Whole Foods Market owns and operates the country's largest chain of natural
foods supermarkets, featuring food made from natural ingredients free of
unnecessary additives. The Company opened its first store in Austin, Texas in
1980 and operated 68 stores as of September 29, 1996. The Company's stores
average approximately 22,000 square feet and offer a broad selection of foods at
competitive prices with an emphasis on customer service. In comparison to
traditional supermarkets, the Company utilizes a decentralized team approach to
store operations in which pricing, buying and merchandising decisions are made
at the individual store level. The Company believes that this approach promotes
a greater level of employee involvement, resulting in improved operating
efficiency, customer service, merchandising and store presentation.
The Company has designed its stores to attract quality-oriented consumers
who are interested in health, nutrition, food safety and preserving the
environment. Product offerings include organically grown and high-grade
commercial produce; grocery products and environmentally safe household items;
meat, poultry and seafood free of growth hormones and antibiotics; bulk foods,
such as nuts, candies, dried fruit and whole unprocessed grains and cereals;
specialty gourmet foods; prepared foods, such as fresh bakery goods, soups, hot
entrees and sandwiches; vitamins, body care products and cosmetics; and
miscellaneous items including books and magazines emphasizing health and
nutrition. In addition, the Company offers a line of private label products to
further enhance its quality image and customer loyalty.
Whole Foods Market's expansion strategy is to open or acquire stores in
existing regions and in metropolitan areas where the Company believes it can
become a leading natural foods supermarket retailer.
The Company's competitors currently include other natural foods
supermarkets, traditional and specialty supermarkets, other natural foods stores
and small specialty stores. The Company has historically encountered limited
competition in its geographic markets with other stores operating in the natural
foods supermarket format; however, it has faced increased competition in recent
years from such stores, particularly in new markets, and expects to encounter
additional competition from such stores in its existing markets and in new
markets. In addition, traditional and specialty supermarkets compete with the
Company in one or more product categories and may expand more aggressively in
marketing a broad range of natural foods and thereby compete more directly with
the Company for products, customers and locations.
Whole Foods Market's principal offices are located at 601 N. Lamar
Boulevard, Suite 300, Austin, Texas 78703, (telephone (512) 447-4455).
2
<PAGE>
RISK FACTORS
The Company wishes to caution readers that the following important factors,
among others, could cause the actual results of Whole Foods Market to differ
materially from those indicated by forward-looking statements made from time to
time in news releases, reports, proxy statements, registration statements and
other written communications, as well as oral forward-looking statements made
from time to time by representatives of the Company. Except for historical
information, the matters discussed in such oral and written communications are
forward looking statements that involve risks and uncertainties, including but
not limited to general business conditions, the timely and successful
development and opening of new stores, the impact of competition and other risks
detailed below.
Expansion Strategy. Whole Foods Market's strategy is to expand through a
combination of new store openings and acquisitions of existing stores.
Successful implementation of this strategy is contingent on numerous conditions,
some of which are described below, and there can be no assurance that the
Company's expansion strategy can be successfully executed.
Continued growth of Whole Foods Market will depend to a significant degree
upon its ability to open or acquire new stores in existing and new markets and
to operate these stores on a successful basis. Further, the Company's expansion
strategy is dependent on finding suitable locations, and the Company faces
intense competition with other retailers for such sites. There can be no
assurance that the Company will be able to open or acquire new stores in a
timely manner and to operate them on a successful basis. In addition, there can
be no assurance that the Company can successfully hire and train new employees
and integrate such employees into the programs and policies of the Company or
adapt its distribution, management information and other operating systems to
the extent necessary to operate new or acquired stores in a successful and
profitable manner and adequately supply natural foods products to these stores
at competitive prices.
There can be no assurance that Whole Foods Market will continue to grow
through acquisitions. To the extent the Company further expands by acquiring
existing stores, there can be no assurance that Whole Foods Market can
successfully integrate such stores into its operations and support systems, and
that the operations of acquired stores will not be adversely affected as the
Company's decentralized approach to store operations is introduced to such
stores.
The acquisition of existing stores and the opening of new stores requires
significant amounts of capital. In the past, the Company's growth has been
funded primarily through proceeds from public offerings, bank debt, private
placements of debt and internally generated cash flow. These and other sources
of capital may not be available to the Company in the future.
Quarterly Fluctuations. The Company's quarterly results of operations may
fluctuate significantly as the result of the timing of new store openings and
the range of operating results which may be generated from newly opened stores.
It is Whole Foods Market's policy to expense the pre-opening costs associated
with a new store opening during the quarter in which the store is opened.
Accordingly, quarter to quarter comparisons of results of operations have been
and will be materially impacted by the timing of new store openings. In
addition, the Company's quarterly operating results could be adversely affected
by losses from new stores, variations in the mix of product sales, price changes
in response to competitive factors, increases in merchandise costs and possible
supply shortages, as well as by the factors listed below in "Operating Results".
Competition. Whole Foods Market's competitors currently include other
natural foods stores, large and small traditional and specialty supermarkets and
grocery stores. These stores compete with
3
<PAGE>
the Company in one or more product categories. In addition, traditional and
specialty supermarkets are expanding more aggressively in marketing a broad
range of natural foods and thereby competing directly with the Company for
products, customers and locations. Some of these potential competitors have been
in business longer or have greater financial or marketing resources than Whole
Foods Market and may be able to devote greater resources to the sourcing,
promotion and sale of their products. Increased competition may have an adverse
effect on profitability as the result of lower sales, lower gross profits,
and/or greater operating costs such as marketing.
Personnel Matters. Whole Foods Market is dependent upon a number of key
management and other personnel. The loss of the services of a significant number
of key personnel within a short period of time could have a material adverse
effect upon the Company. Whole Foods Market's continued success is also
dependent upon its ability to attract and retain qualified employees to meet the
Company's future needs. The Company faces intense competition for qualified
personnel, many of whom are subject to offers from competing employers, and
there can be no assurance that Whole Foods Market will be able to attract and
retain such personnel. Whole Foods Market does not currently maintain key person
insurance on any employee.
Integration of Fresh Fields' Operations. Whole Foods Market anticipates
reducing the historical overhead expenses of Fresh Fields Market, Inc. ("Fresh
Fields") by adopting Whole Foods Market's decentralized approach to store
management. Whole Foods Market will also seek to improve the operating
profitability of the Fresh Fields stores through enhanced purchasing power,
improved utilization of distribution facilities and other economies of scale
resulting from the merger with Fresh Fields. There can be no assurance that
Whole Foods Market will be able to achieve the economies of scale and other
operating enhancements it seeks in the Fresh Fields operations, or that these
economies of scale can be achieved in a period of time currently anticipated by
management.
The acquisition of Fresh Fields materially increased the scope of the
Company's operations from 48 to 68 stores as of September 29, 1996, after giving
effect to the closing or relocation of duplicate stores. The integration of the
Fresh Fields operations into the Whole Foods Market organization is a
significant undertaking. While Whole Foods Market has experience in acquiring
and integrating other businesses into Whole Foods Market's operations, Fresh
Fields has a larger number of stores and employees and substantially greater
revenues than any of the companies previously acquired by Whole Foods Market.
There can be no assurance that the operations of Fresh Fields' stores will not
be adversely affected by the introduction of the Company's team approach to
store operations or the response of customers to the changes in operations and
merchandising mix made by the Company. The integration of Fresh Fields into the
Company will require the dedication of management resources which may
temporarily detract from attention to the day-to-day business of the Company.
Legal Matters. From time to time Whole Foods Market is the subject of
various lawsuits arising in the ordinary course of business. Although not
currently anticipated by management, there is potential for the Company's
results to be materially impacted by legal and settlement expenses related to
such lawsuits.
Whole Foods Market is a non-subscriber to Worker's Compensation Insurance
in the State of Texas. There is some potential for the Company's results to be
materially impacted by medical, lost time and other costs associated with
on-the-job injuries.
The Company provides partially self-insured, voluntary employee benefits
plans which provide health care and other benefits to participating employees.
The plans are designed to provide specified levels of coverage, with excess
insurance provided by a commercial insurer. There is some potential
4
<PAGE>
for Whole Foods Market's results to be materially impacted by claims made in
excess of reserves therefore.
Informational Picketing. Certain of the Company's stores have been
subjected to informational picketing and negative publicity campaigns by members
of various local trade unions. These informational pickets and campaigns may
have the effect of lowering the sales volumes of new or existing stores.
Operating Results. The Company's ability to meet expected results for any
period may be negatively impacted by many factors, as described above and
including, but not limited, to the following: (i) reductions in sales caused by
competitive issues, product availability, weather and other factors; (ii) losses
generated by new stores or higher than expected pre-opening costs; (iii) higher
than expected costs and expenses at store, regional and national levels; (iv)
lower than expected gross margins resulting from the impact of competition or
other factors; (v) higher than expected interest expense due to higher than
expected interest rates or borrowings outstanding; and (vi) delays in new store
openings.
Whole Foods Market's ability to increase same store sales during any period
will be directly impacted by competition, availability of product and other
factors which are often beyond the control of the Company.
5
<PAGE>
SELLING STOCKHOLDERS
The table below sets forth the beneficial ownership of the Company's Common
Stock by the Selling Stockholders at April 30, 1997, and after giving effect to
the sale of the shares of Common Stock offered hereby. Each of the persons named
below has sole voting and investment power with respect to the shares of Common
Stock beneficially owned by him. Unless otherwise indicated, the share numbers
in the table below represent 1% or less of the outstanding Common Stock of the
Company.
Shares Owned Shares Being Shares Owned After
Name Before the Offering Offered the Offering (1)
- ---- ------------------- -------------- ------------------
James K. Oppenheimer(2) 145,967 145,967 --
Richard Gerber(2) 26,968 26,968 --
Julie Gerber(2) 26,968 26,968 --
The Carlyle Group(3) 1,453,935 200,000 1,253,935
- --------------
(1) Assumes that all of the Shares offered hereby are sold.
(2) These holders acquired the Shares owned by them pursuant to the April 1997
acquisition of Bread of Life, Inc. and affiliated companies. Subsequent to
the acquisition, Messrs. Oppenheimer and Gerber have served as the Regional
President and Regional Vice President, respectively, of the Southern
Florida region of the Company.
(3) The Carlyle Group's beneficial ownership represented 7.6% of the
outstanding Common Stock at April 30, 1997 (6.5% after the sale of the
Shares offered hereby). The Carlyle Group acquired its Shares pursuant to
the acquisition of Fresh Fields. David W. Dupree, a Managing Director of
The Caryle Group, has served as a member of the Company's board of
directors since August 1996. The address of The Carlyle Group is 1001
Pennsylvania Avenue, N.W., Washington, D.C. 20004. The 200,000 Shares
offered by The Carlyle Group are held of record by Carlyle FFM Partners VI,
L.P.
The Company is registering the Shares of the Selling Stockholders pursuant
to certain registration rights granted to them pursuant to an Agreement and Plan
of Merger entered in connection with such acquisition. The offering of the
Shares contemplated hereby will terminate on June ___, 1998, or such earlier
date as all Shares offered hereby have been sold.
DESCRIPTION OF CAPITAL STOCK
The Company is authorized to issue 50,000,000 shares of Common Stock, no
par value, of which approximately 19,179,000 shares were outstanding as of the
close of business on April 30, 1997, and 5,000,000 shares of Preferred Stock,
$.01 par value ("Preferred Stock"), none of which are outstanding.
Holders of Common Stock are entitled to one vote per share on any matter
submitted to the vote of shareholders, and cumulative voting is prohibited in
the election of directors. Subject to preferences that may be applicable to any
outstanding Preferred Stock, the holders of Common Stock are entitled to receive
ratably such dividends, if any, as may be declared from time to time by the
Board of Directors out of funds legally available therefor. The Common Stock is
non-assessable, not redeemable, does not have any conversion rights and is not
subject to call. Holders of shares of Common Stock have no preemptive rights to
maintain their respective percentage of ownership in future offerings or sales
of stock by the Company.
6
<PAGE>
The Company may issue Preferred Stock in one or more series and the Board
of Directors may designate the dividend rate, voting rights and other rights,
preferences and restrictions of each series. It is not possible to state the
actual effect of the issuance of any shares of Preferred Stock upon the rights
of holders of the Common Stock until the Board of Directors of the Company
determines the specific rights of holders of such Preferred Stock. However, such
effects might include, among other things, restricting dividends on the Common
Stock, diluting the voting power of the Common Stock, impairing the liquidation
rights of the Common Stock and delaying or preventing a change in control of the
Company without further action by the shareholders.
The Transfer Agent and Registrar for the Common Stock is Securities
Transfer Corp., Dallas, Texas.
LEGAL OPINIONS
The validity of the shares of Common Stock offered hereby has been passed
upon by Crouch & Hallett, L.L.P., Dallas, Texas.
EXPERTS
The consolidated financial statements of the Company as of September 29,
1996, and September 24, 1995, and for each of the fiscal years in the three-year
period ended September 29, 1996, have been incorporated by reference herein and
in the registration statement in reliance upon the report of KPMG Peat Marwick
LLP, independent certified public accountants, incorporated by reference herein,
and upon the authority of said firm as experts in accounting and auditing. To
the extent that KPMG Peat Marwick LLP audits and reports upon consolidated
financial statements of the Company issued at future dates, and consents to the
use of their report thereon, such financial statements also will be incorporated
by reference herein in reliance upon their reports and said authority.
7
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following expenses will be paid by the Company:
Item Amount (1)
SEC registration fee $ 3,454
Legal fees and expenses 5,000
Accounting fees 5,000
Miscellaneous 1,546
---------
Total $15,000
- --------
(1) All items other than SEC registration fee are estimated
Item 15. Indemnification of Directors and Officers.
Article 2.02-1 of the Texas Business Corporation Act provides for
indemnification of directors and officers in certain circumstances. Reference is
made to Article VII of the Bylaws of the registrant filed as an exhibit hereto.
The Company's Restated Articles of Incorporation provide that no director
shall be liable to the registrant or its shareholders for an act or omission in
such capacity as a director, except for liability as a result of (i) a breach of
the director's duty of loyalty to the registrant or its shareholders, (ii) an
act or omission not in good faith or which involve intentional misconduct or
knowing violation of law, (iii) an transaction from which such director derived
an improper personal benefit, (iv) an act or omission for which the liability of
a director is expressly provided by law or (v) an act related to an unlawful
stock repurchase of payment of a dividend.
An insurance policy obtained by the registrant provides for indemnification
of officers and directors of the registrant and certain other persons against
liabilities and expenses incurred by any of them in certain stated proceedings
and under certain stated conditions.
Item 16. Exhibits.
2(a) --- Agreement and Plan of Merger, among the registrant, Whole Foods Market
Group, Inc., Bread of Life, Inc., and the shareholders of Bread of
Life, Inc. (1)
2(b) --- Agreement and Plan of Merger among the Registrant, Whole Foods Market
Mid- Atlantic, Inc. and Fresh Fields Markets, Inc. (2)
3(a) --- Restated Articles of Incorporation of the registrant. (3)
3(b) --- Amended and Restated Bylaws of the registrant. (4)
5 --- Opinion of Crouch & Hallett, L.L.P. (1)
23(a)--- Consent of KPMG Peat Marwick LLP. (1)
23(b)--- Consent of Crouch & Hallett, L.L.P. (included in opinion filed as
Exhibit 5).
24 --- Power of Attorney (included on p. II-3).
- ----------------
(1) Filed herewith.
II-1
<PAGE>
(2) Filed as an exhibit to Registration Statement No. 333-7719 on Form S-4 and
incorporated herein by reference.
(3) Filed as an exhibit to Registration Statement No. 33-69362 on Form S-3 and
incorporated herein by reference.
(4) Filed as an exhibit to the registrant's annual report on Form 10-K for the
fiscal year ended September 24, 1995, and incorporated herein by reference.
Item 17. Undertakings.
(a) Rule 415 Offering
The registrant hereby undertakes (1) to file, during any
period in which offers or sales are being made of the Shares registered
hereby, a post-effective amendment to this Registration Statement to
include any material information with respect to the plan of
distribution not previously disclosed in this Registration Statement or
any material change to such information in this Registration Statement;
(2) that, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new Registration Statement relating to the securities
offered herein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof; and (3) to
remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination
of the offering.
(b) Filings Incorporating Subsequent Exchange Act Documents by
Reference
The registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing
of the Company's annual report pursuant to section 13(a) or section
15(d) of the Securities Exchange Act of 1934 (and, where applicable,
each filing of an employee benefit plan's annual report pursuant to
section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the Registration Statement shall be deemed
to be a new Registration Statement relating to the securities offered
herein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(c) Indemnification for Liability under the Securities Act of 1934
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing
provisions or otherwise, the registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer, or controlling person of the
registrant in the successful defense of any action, suit, or
proceeding) is asserted by such director, officer, or controlling
person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of Austin and State of Texas on the 22nd day of May,
1997.
WHOLE FOODS MARKET, INC.
By /s/ Glenda J. Flanagan
-------------------------------------------
Glenda J. Flanagan, Chief Financial Officer
POWER OF ATTORNEY
Each of the undersigned hereby appoints John P. Mackey and Glenda J.
Flanagan, and each of them (with full power to act alone), as attorneys and
agents for the undersigned, with full power of substitution, for and in the
name, place and stead of the undersigned, to sign and file with the Securities
and Exchange Commission under the Securities Act of 1933 any and all amendments
and exhibits to this Registration Statement and any and all applications,
instruments and other documents to be filed with the Securities and Exchange
Commission pertaining to the registration of the securities covered hereby, with
full power and authority to do and perform any and all acts and things
whatsoever requisite or desirable.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this registration statement has been signed below by the following persons in
the capacities and on May 22, 1997.
Signature Title
/s/ John P. Mackey Chairman of the Board
- ----------------------- and Director
John P. Mackey (Principal Executive Officer)
/s/ Glenda J. Flanagan Chief Financial Officer
- ----------------------- (Principal Financial Officer and Accounting Officer)
Glenda J. Flanagan
/s/ Cristina G. Banks Director
- -----------------------
Cristina G. Banks
/s/ David W. Dupree Director
- -----------------------
David W. Dupree
/s/ John B. Elstrott Director
- -----------------------
John B. Elstrott
II-3
<PAGE>
/s/ Elizabeth Cogan Fascitelli Director
- -------------------------------
Elizabeth Cogan Fascitelli
/s/ Avram J. Goldberg Director
- -------------------------------
Avram J. Goldberg
/s/ Fred "Chico" Lager Director
- -------------------------------
Fred "Chico" Lager
Director
- -------------------------------
Linda A. Mason
Director
- -------------------------------
Ralph Z. Sorenson
II-4
<PAGE>
Exhibit 2(a)
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (the "Agreement") is made as of the 11th
day of March, 1997, by and among Whole Foods Market, Inc., a Texas corporation
(the "Parent"); Whole Foods Market Group, Inc., a Delaware corporation (the
"Subsidiary"); Bread of Life, Inc., a Florida corporation ("BOL"); Bread of Life
Plantation, Inc., a Florida corporation ("BOLP"); Bread of Life - Coral Springs,
Inc., a Florida corporation ("BOLC" and, together with BOL and BOLP, the
"Company"); James Oppenheimer ("Oppenheimer"); Richard Gerber ("R. Gerber");
Julie Gerber ("J. Gerber" and, together with Oppenheimer and R. Gerber, the
"Shareholders").
In consideration of the mutual covenants and agreements contained herein,
the parties hereto covenant and agree as follows:
1. THE MERGER.
1.1. Merger. In accordance with the provisions of the business corporation
laws of the States of Florida and Delaware at the Effective Date (as hereinafter
defined), each of BOL, BOLP and BOLC shall be merged (the "Merger") into the
Subsidiary, and the Subsidiary shall be the surviving corporation (the
"Surviving Corporation") and as such shall continue to be governed by the laws
of the State of Delaware.
1.2. Continuing of Corporate Existence. Except as may otherwise be set
forth herein, the corporate existence and identity of the Subsidiary, with all
its purposes, powers, franchises, privileges, rights and immunities, shall
continue unaffected and unimpaired by the Merger, and the corporate existence
and identity of the Company, with all its purposes, powers, franchises,
privileges, rights and immunities, at the Effective Date shall be merged with
and into that of the Subsidiary, and the Surviving Corporation shall be vested
fully therewith and the separate corporate existence and identity of the Company
shall thereafter cease except to the extent continued by statute.
1.3. Effective Date. The Merger shall become effective upon the issuance of
a certificate of merger (the "Effective Date") by each of the Secretary of State
of the State of Delaware and the Secretary of State of the State of Florida
subsequent to the filing on the Closing Date (as defined herein) of Certificates
of Merger with the Secretary of State of the State of Delaware pursuant to the
Delaware General Corporation Law and with the Secretary of State of the State of
Florida pursuant to the business corporation laws of the state of Florida.
1
<PAGE>
1.4. Corporate Government.
(a) The Certificate of Incorporation of the Subsidiary, as in
effect on the Effective Date, shall continue in full force and effect and shall
be the Certificate of Incorporation of the Surviving Corporation.
(b) The Bylaws of the Subsidiary, as in effect as of the
Effective Date, shall continue in full force and effect and shall be the Bylaws
of the Surviving Corporation.
(c) The members of the Board of Directors and the officers of
the Surviving Corporation shall be the persons holding such offices in the
Subsidiary as of the Effective Date. None of the members of the Board of
Directors or the officers of the Company as of the date hereof shall become
members of the Board of Directors or executive officers of the Surviving
Corporation upon the Effective Date.
1.5. Rights and Liabilities of the Surviving Corporation. The Surviving
Corporation shall have the following rights and obligations:
(a) The Surviving Corporation shall have all the rights,
privileges immunities and powers and shall be subject to all the duties and
liabilities of a corporation organized under the laws of the State of Delaware.
(b) The Surviving Corporation shall possess all of the rights,
privileges immunities and franchises, of either a public or private nature, of
the Company and the Subsidiary and all property, real, personal and mixed, and
all debts due on whatever account, including subscription to shares, and all
other choses in action, and every other interest of or belonging or due to the
Company and the Subsidiary shall be taken and deemed to be transferred or
invested in the Surviving Corporation without further act or deed.
(c) At the Effective Date, the Surviving Corporation shall
thenceforth be responsible and liable for all liabilities and obligations of the
Company and the Subsidiary, and any claim existing or action or proceeding
pending by or against the Subsidiary or the Company may be prosecuted as if the
Merger had not occurred, or the Surviving Corporation may be substituted in its
place. Neither the rights of creditors nor any liens upon the property of the
Subsidiary or the Company shall be impaired by the Merger.
1.6. Closing. Consummation of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Parent in Austin,
Texas commencing as soon as possible after the execution of this Agreement when
each of the other conditions set forth in Articles 6 and 7 have been satisfied
or waived, and
2
<PAGE>
shall proceed promptly to conclusion, or at such other place, time and date as
shall be fixed by mutual agreement between Parent and the Company. The day on
which the Closing shall occur is referred to herein as the "Closing Date." Each
party will cause to be prepared, executed and delivered Certificates of Merger
to be filed with the Secretary of State of Delaware and the Secretary of State
of Florida and all other appropriate and customary documents as any party or its
counsel may reasonably request for the purpose of consummating the transactions
contemplated by this Agreement. All actions taken at the Closing shall be deemed
to have been taken simultaneously at the time the last of any such actions is
taken or completed.
1.7. Tax Consequences. It is intended that the Merger shall constitute a
reorganization within the meaning of Section 368 of the Internal Revenue Code of
1986, as amended (the "Code"), and that this Agreement shall constitute a "plan
of reorganization" for the purposes of Section 368 of the Code.
1.8. Pooling of Interests. It is the intention of the parties hereto that
the Merger will be treated for financial reporting purposes as a pooling of
interests.
2. CONVERSION OF SHARES.
2.1. Conversion of Company Shares. The manner and basis of converting
common stock, no par value, of BOL ("BOL Common Stock"), common stock, $.50 par
value, of BOLP ("BOLP Common Stock"), and common stock, $.50 par value, of BOLC
("BOLC Common Stock" and, together with the BOL and BOLC Common Stock, the
"Company Common Stock") into common stock, no par value, of Parent ("Parent
Common Stock") at the time of the Closing, shall be as follows:
(a) The outstanding shares of Company Common Stock in the aggregate
and on a fully diluted basis shall at the Effective Date, by virtue of the
Merger and without any action on the part of the holder thereof, be
converted into such number of shares of Parent Common Stock (the "Base
Purchase Price") as is equal to (i) the Company Enterprise Value (as
defined herein) divided by (ii) the Determination Price (as defined
herein).
(b) The "Company Enterprise Value" shall be equal to (i) $5.75 million
minus (ii) the amount of long-term indebtedness (including current
maturities thereof) of the Company (whether to financial institutions, the
Shareholders or other third parties) as of the Closing Date. The
"Determination Price" shall be equal to $20.26 per share (the average
closing price of Parent Common Stock (as reported by the Southwest Edition
of The Wall Street Journal) on the Nasdaq National Market System for the 30
trading days ended March 12, 1997).
3
<PAGE>
(c) The Base Purchase Price shall be allocated among the Shareholders
in accordance with the ownership percentages set forth opposite their
signatures to this Agreement. No scrip or fractional shares of Parent
Common Stock shall be issued in the Merger. All fractional shares of Parent
Common Stock to which a Shareholder of the Company would otherwise be
entitled with respect to each certificate representing Company Common Stock
issued pursuant to this Agreement shall be aggregated. If a fractional
share results from such aggregation, such Shareholder shall be entitled,
after the issuance of such Company Common Stock or Positive Adjustment
Shares, to receive from Parent an amount in cash in lieu of such fractional
share, based on the Determination Price.
2.2. Issuance of Positive Adjustment Shares. Subject to the requirements of
this Section 2.2, Parent shall issue and deliver to the Shareholders additional
shares of Parent Common Stock ("Positive Adjustment Shares"), as required in
accordance with the following:
(a) Not later than 120 days after the Closing, the Parent, at its own
cost, shall prepare and deliver to the Shareholders an unaudited balance
sheet of the Company as of the Closing Date (the "Closing Balance Sheet"),
prepared in accordance with generally accepted accounting principles,
applied consistently with the Company's past practices. The Shareholders
shall permit Parent and its accountants to participate in the physical
inventory of the Supermarkets (as defined herein) as of the Closing Date
for the purpose of preparing the Closing Balance Sheet.
(b) In connection with preparing the Closing Balance Sheet, Parent
shall determine the Net Book Value (as defined herein) of the Company as of
the Closing Date (the "Closing Date Value"), which shall be set forth on
the Closing Balance Sheet. For purposes of this Agreement, "Net Book Value"
shall mean the difference of (i) total assets of the Company less (ii)
total liabilities of the Company, as computed in accordance with generally
accepted accounting principles consistently applied. For purposes of
determining the inventory component of Net Book Value, inventories shall be
valued at the lower of cost or market. Cost shall be calculated using the
retail inventory method as follows: (i) all inventory items shall be
physically counted; (ii) the actual item count shall be multiplied by the
retail price to determine the extended retail price; (iii) this extended
retail price for a given store section shall be multiplied by the "margin
percentage" for that location to determine the margin dollars included in
the extended retail price; (iv) the margin dollars shall be subtracted from
the extended retail price to determine the cost of items in that location;
and (v) the "margin percentage" to be used in (iii) above shall be based
upon the current mark-up applicable to products in that store section.
(c) Within 30 days after the Closing Balance Sheet is delivered to the
Shareholders pursuant to clause (a) above, the Shareholders, at their own
cost, shall
4
<PAGE>
complete their examination thereof, and provide for the examination
thereof by their accountants, if necessary, and shall deliver to the Parent
either (i) a written acknowledgment accepting the Closing Balance Sheet,
including the determination of the Closing Date Value, or (ii) a written
report of a Big Six accounting firm engaged by Shareholders setting forth
in reasonable detail any proposed adjustments to the Closing Balance Sheet
or the Closing Date Value ("Adjustment Report"). A failure by the
Shareholders to deliver the Adjustment Report within the required 30 day
period shall constitute their acceptance of the Closing Balance Sheet and
the Closing Date Value. The Parent shall, and shall cause its independent
auditors to, cooperate with the Shareholders and their accountants in the
course of the preparation of the Adjustment Report.
(d) During a period of 30 days following the receipt by the
Shareholders of the Adjustment Report, the Shareholders and Parent shall
attempt to resolve any difference they may have with respect to the matters
raised in the Adjustment Report. In the event Shareholders and Parent fail
to agree on all of the proposed adjustments contained in the Adjustment
Report within such 30 day period, then Shareholders and Parent mutually
agree that the Miami office of [independent Big Six firm] (the "Independent
Auditors") shall make the final determination with respect to the
correctness of the proposed adjustments in the Adjustment Report in light
of the terms and provisions of this Agreement. The decision of the
Independent Auditors shall be final and binding on the Shareholders and
Parent, and may be used in a court of law by either the Shareholders or
Parent for the purpose of enforcing such decision. The costs and expenses
of the Independent Auditors and their services rendered pursuant to this
clause (d) shall be borne by the non-prevailing party or, if neither party
prevails, equally by Shareholders and Parent.
(e) In the event that, after finalization of the Closing Balance
Sheet, the Closing Date Value as set forth thereon is greater than a
negative $680,000 (such negative amount being referred to as the "Minimum
Net Book Value"), the Shareholders shall be entitled to receive from
Parent, and Parent shall be obligated to issue and deliver to the
Shareholders, the nearest whole number of Positive Adjustment Shares as is
equal to (i) the dollar amount of the excess of (A) the Closing Date Value
over (B) the Minimum Net Book Value, divided by (ii) the Determination
Price.
2.3 Closing Procedure. At the Closing, the Parent shall issue the shares of
Parent Common Stock representing the Base Purchase Price to the Shareholders in
exchange for certificates representing 100% of the Company Common Stock;
provided, however, that the Parent and the Shareholders shall jointly deposit
such nearest whole number of shares of Parent Common Stock as is equal to
$500,000 divided by the Determination Price with an escrow agent (the "Post
Closing Escrow Agent") to be held pursuant to the terms of the Post-Closing
Escrow Agreement of even date herewith in the form attached hereto as Exhibit C
(the "Post-Closing Escrow Agreement"). The Post-Closing Escrow Agent shall hold
such escrowed shares of Parent Common Stock for a period of one year, after
which the escrowed amount shall be delivered to the Shareholders, subject to
earlier claims in favor of Parent as set forth in the Post-Closing Escrow
Agreement.
5
<PAGE>
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SHAREHOLDERS.
Except as set forth on the Company Disclosure Schedule, the Company and the
Shareholders, jointly and severally, hereby represent and warrant to Parent as
follows.
3.1. Organization and Good Standing of the Company. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Florida.
3.2. Subsidiaries, Investments. The Company has no equity, profit sharing,
participation or other ownership interest in any corporation or partnership.
3.3. Corporate Power and Authority; Binding Effect. The Company has the
corporate power and authority and all material licenses and permits required by
governmental authorities to own, lease and operate its properties and assets, to
carry on its business as currently being conducted, and to execute, deliver and
perform this Agreement. This Agreement has been or will have been duly
authorized, executed and delivered by the Company and the Shareholders and is
the legal, valid and binding obligation of the Company and the Shareholders
enforceable in accordance with its terms, except that (i) enforceability may be
limited by bankruptcy, insolvency or other similar laws affecting creditors'
rights and (ii) the availability of equitable remedies may be limited by
equitable principles of general applicability.
3.4. Compliance with Other Instruments. Neither the execution and delivery
by the Company or the Shareholders of this Agreement nor the consummation by
them of the transactions contemplated hereby will violate, breach, be in
conflict with, or constitute a default under, or permit the termination or the
acceleration of maturity of, or result in the imposition of any lien, claim or
encumbrance upon any property or asset of the Company pursuant to (i) the
Company's articles of incorporation or bylaws or (ii) any note, bond, indenture,
mortgage, deed of trust, evidence of indebtedness, loan or lease agreement,
other agreement or instrument, judgment, order, injunction or decree by which
the Company or a Shareholder is bound, to which any of them is a party or to
which any of their assets are subject.
3.5. Consents. No approval, authorization, consent, order or other action
of, or filing with, any governmental authority or administrative agency is
required in connection with the execution and delivery by the Company or the
Shareholders of this Agreement or the consummation of the transactions
contemplated hereby. No approval, authorization or consent of any other third
party is required in connection with the execution and delivery by the Company
or the Shareholders of this Agreement and the consummation of the transactions
contemplated hereby.
3.6. Capitalization. The authorized capital stock of BOL consists of 1,000
shares of BOL Common Stock, of which 200 shares are issued and outstanding and
6
<PAGE>
owned of record by Oppenheimer (100 shares) and R. Gerber and J. Gerber,
jointly (100 shares). The authorized capital stock of BOLP consists of 10,000
shares of BOLP Common Stock, of which 1,000 shares are issued and outstanding
and owned of record by Oppenheimer (500 shares), R. Gerber (250 shares) and J.
Gerber (250 shares). The authorized capital stock of BOLC consists of 10,000
shares of BOLC Common Stock, of which 1,000 shares are issued and outstanding
and owned of record by Oppenheimer (500 shares), R. Gerber (250 shares) and J.
Gerber (250 shares). All of the issued and outstanding shares of the Company
Common Stock have been duly authorized and validly issued and are fully paid and
nonassessable and are owned of record and beneficially by the Shareholders, free
and clear of all liens, claims and encumbrances. As of the Closing, there will
be no voting trusts, shareholder agreements or other voting arrangements by the
shareholders of the Company. There is no outstanding subscription, contract,
convertible or exchangeable security, option, warrant, call or other right
obligating the Company to issue, sell, exchange, or otherwise dispose of, or to
purchase, redeem or otherwise acquire, shares of, or securities convertible into
or exchangeable for, capital stock of the Company.
3.7. Financial Statements and Records of the Company.
(a) The Company has delivered to Parent true, correct and complete
copies of the unaudited balance sheet of the Company as of December 28,
1996, and the related statement of income for the 52 weeks then ended (the
"Company Financial Statements").
(b) The Company Financial Statements present fairly the assets,
liabilities and financial position of the Company as of the dates thereof
and the results of operations thereof for the periods then ended and have
been prepared in conformity with generally accepted accounting principles
applied on a consistent basis with prior periods. The books and records of
the Company have been and are being maintained in accordance with good
business practice, reflect only valid transactions, are complete and
correct in all material respects, and present fairly in all material
respects the basis for the financial position and results of operations of
the Company set forth in the Company Financial Statements.
7
<PAGE>
(c) As of the Closing Date, the Net Book Value of the Company, as
determined in accordance with Section 2.2 of this Agreement, will be no
less than a negative $1.08 million.
3.8. Absence of Certain Changes. Since December 28, 1996, the Company has
not (except as may result from the transactions contemplated by this Agreement
or as set forth on the Company Financial Statements):
(i) suffered any change in its business, results of operations,
working capital, assets, liabilities or condition (financial or otherwise)
or the manner of conducting its business other than changes in the ordinary
course of business that, individually or in the aggregate, have not had a
material adverse effect on the Company;
(ii) suffered any damage or destruction to or loss of its assets not
covered by insurance, or any loss of suppliers, that has a material adverse
effect on the business, results of operations, assets or condition
(financial or otherwise) of the Company;
(iii) acquired or disposed of any asset, or incurred, assumed,
guaranteed, endorsed, paid or discharged any indebtedness, liability or
obligation, or subjected or permitted to be subjected any material amount
of assets to any lien, claim or encumbrance of any kind, except in the
ordinary course of business or pursuant to agreements in force at the date
of this Agreement;
(iv) forgiven, compromised, canceled, released, waived or permitted to
lapse any material rights or claims;
(v) entered into or terminated any material agreement, commitment or
transaction, or agreed or made any changes in material leases or
agreements, other than renewals or extensions thereof and leases,
agreements, transactions and commitments entered into in the ordinary
course of business;
(vi) written up, written down or written off the book value of any
material amount of assets;
(vii) declared, paid or set aside for payment any dividend or
distribution with respect to its capital stock;
(viii) redeemed, purchased or otherwise acquired, or sold, granted or
otherwise disposed of, directly or indirectly, any of its capital stock or
securities or any rights to acquire such capital stock or securities, or
agreed to changes
8
<PAGE>
in the terms and conditions of any such rights outstanding as of the
date of this Agreement;
(ix) increased the compensation of or paid any bonuses to any
employees or contributed to any employee benefit plan, other than in
accordance with established policies, practices or requirements;
(x) entered into any employment, consulting, compensation or
collective bargaining agreement with any person or group; or
(xi) entered into, adopted or amended any employee benefit plan.
3.9. No Material Undisclosed Liabilities. There are no material liabilities
or obligations of the Company of any nature, whether absolute, accrued,
contingent or otherwise, other than (i) the liabilities and obligations that are
fully reflected, accrued, or reserved against on the Company Financial
Statements, for which the reserves are appropriate and reasonable, or incurred
in the ordinary course of business and consistent with past practices since
December 28, 1996, or (ii) liabilities or obligations not required to be
disclosed in financial statements prepared in accordance with generally accepted
accounting principles.
3.10. Tax Liabilities. The Company has filed all federal, state, county and
local tax returns and reports required to be filed by it, including those with
respect to income, payroll, property, withholding, social security,
unemployment, franchise, excise and sales taxes; has either paid in full all
taxes that have become due as reflected on any return or report and any interest
and penalties with respect thereto or has fully accrued on its books or has
established adequate reserves for all taxes payable but not yet due; and has
made required cash deposits with appropriate governmental authorities
representing estimated payments of taxes, including income taxes and employee
withholding tax obligations. No extension or waiver of any statute of
limitations or time within which to file any return has been granted to or
requested by the Company with respect to any tax. No unsatisfied deficiency,
delinquency or default for any tax, assessment or governmental charge has been
assessed (or, to the knowledge of the Company, claimed or proposed) against the
Company, nor has the Company received notice of any such deficiency, delinquency
or default.
3.11. Title to Properties.
(a) The Company has good and marketable fee or leasehold title to the
assets reflected in its books and records as being owned or leased,
including (except as they have since been affected by transactions in the
ordinary course of business) the real and personal properties reflected in
the Company Financial Statements (except for assets subject to financing
leases required to be capitalized under generally
9
<PAGE>
accepted accounting principles, all of which are so reflected in the Company
Financial Statements or notes thereto), and all assets purchased by the Company
since the date of the Company Financial Statements (except for such assets as
have been disposed of by the Company in the ordinary course of business), free
and clear of any lien, claim or encumbrance, except as reflected in the Company
Financial Statements or notes thereto and except for:
(i) liens for taxes, assessments or other governmental charges not yet
due and payable;
(ii) statutory liens incurred in the ordinary course of business with
respect to liabilities that are not yet due and payable;
(iii) landlord liens contained in leases in the ordinary course of
business; and
(iv) such imperfections of title and/or encumbrances as are not
material in character, amount or extent and do not materially detract from
the value or interfere with the use of the properties and assets subject
thereto or affected thereby.
(b) (i) Applicable zoning ordinances permit the operation of the Bread
of Life supermarkets (the "Supermarkets") at the sites located at 7720
Peters Road, Plantation, Florida, 2388 North Federal Highway, Ft.
Lauderdale, Florida and 810 University Drive, Coral Springs, Florida
(collectively the "Real Estate"); (ii) the Company has all easements and
rights, including easements for all utilities, services, roadways and other
means of ingress and egress, necessary to operate the Supermarkets; and
(iii) neither the whole nor any portion of the Real Estate has been
condemned, requisitioned or otherwise taken by any public authority, and no
notice of any such condemnation, requisition or taking has been received;
except in each case where the failure of such provisions to be true and
correct would not have a material adverse effect on the business and
operations of the Company. No such condemnation, requisition or taking is
threatened or contemplated to the Company's knowledge, and there are no
pending public improvements which may result in special assessments against
or which may otherwise materially and adversely affect the Real Estate. To
the knowledge of the Company, the Real Estate has not been used for deposit
or disposal of hazardous wastes or substances in violation of any past or
current law in any material respect and there is no material liability
under past or current law with respect to any hazardous wastes or
substances which have been deposited or disposed of on or in the Real
Estate.
10
<PAGE>
(c) The Company has received no notice of, and has no actual knowledge
of, any material violation of any zoning, building, health, fire, water use
or similar statute, ordinance, law, regulation or code in connection with
the Real Estate.
(d) To the knowledge of the Company, no hazardous or toxic material
(as hereinafter defined) exists in any structure located on, or exists on
or under the surface of, the Real Estate which is, in any case, in material
violation of applicable environmental law. For purposes of this Section,
"hazardous or toxic material" shall mean waste, substance, materials,
smoke, gas or particulate matter designated as hazardous, toxic or
dangerous under any environmental law. For purposes of this Section,
"environmental law" shall include the Comprehensive Environmental Response
Compensation and Liability Act, the Clean Air Act, the Clean Water Act and
any other applicable federal, state or local environmental, health or
safety law, rule or regulation relating to or imposing liability or
standards concerning or in connection with hazardous, toxic or dangerous
waste, substance, materials, smoke, gas or particulate matter.
3.12. Condition of Assets. All of the assets of the Company viewed as a
whole and not on an asset by asset basis are in good condition and working
order, ordinary wear and tear excepted, and are suitable for the uses for which
intended, free from any known defects, except such minor defects, as do not
substantially interfere with the continued use thereof.
3.13. Contracts. Set forth on the Company Disclosure Schedule are complete
and accurate lists of all of the following categories of contracts and
commitments (including summaries of oral contracts) to which the Company is a
party or bound:
(i) contracts with any labor union; employee benefit plans or
contracts; and employment, consulting or similar contracts, including
confidentiality agreements;
(ii) leases, whether as lessor or lessee; loan agreements, mortgages,
indentures, instruments of indebtedness or commitments in each case
involving indebtedness for borrowed money or money loaned to others; and
guaranty or suretyship, performance bond, indemnification or contribution
agreements involving obligations;
(iii) contracts with third parties that involve aggregate payments by
the Company of more than $25,000;
(iv) insurance policies material to the business of the Company; and
11
<PAGE>
(v) other contracts that are material to the operations, business or
financial condition of the Company.
To the extent requested, the Company has furnished or made available accurate
and complete copies of the foregoing contracts and agreements to Parent. All
such contracts are valid, binding, subsisting and enforceable obligations of the
Company. No contracts or commitments have been made by the Company granting any
person any right to develop, franchise, license, own, manage or operate the
Supermarkets or any future store. The Company has not entered into any
commitment or understanding for the lease of real property other than the Real
Estate.
3.14. Litigation and Government Claims. There is no pending suit, action or
litigation, or administrative, arbitration or other proceeding or governmental
investigation or inquiry, to which the Company is a party or to which its assets
are subject which would, if decided against the Company, individually or in the
aggregate, have a material adverse effect on the business, results of
operations, assets or the condition, financial or otherwise, of the Company. To
the knowledge of the Company, there are no such proceedings threatened,
contemplated or any basis for any unasserted claims (whether or not the
potential claimant may be aware of the claim) which would, if decided against
the Company, individually or in the aggregate, have a material adverse effect on
the business, results of operations, assets or the condition, financial or
otherwise, of the Company.
3.15. No Violations or Defaults. To the knowledge of the Company and the
Shareholders, the Company is not in violation of or default under nor has any
event occurred that, with the lapse of time or the giving of notice or both,
would constitute a violation of or default under, or permit the termination or
the acceleration of maturity of, or result in the imposition of a lien, claim or
encumbrance upon any property or asset of the Company pursuant to, the articles
of organization or bylaws of the Company or any loan or lease agreement, other
agreement or instrument, judgment, order, injunction or decree to which the
Company is a party, by which it is bound, or to which any of its assets is
subject, except where such violation or default would not have a material
adverse effect on the business, results of operations, assets or the condition,
financial or otherwise, of the Company. To the knowledge of the Company, there
are no existing violations of any law applicable to the Company's business that
have a material adverse effect on the Company's business, operations,
properties, assets or condition.
3.16. Labor Matters.
(a) The Company is not party to any collective bargaining agreements
with any union, and no collective bargaining agreement is currently being
negotiated by the Company.
12
<PAGE>
(b) There are no discrimination charges against the Company (relating
to sex, age, race, national origin, handicap or veteran status) pending
before any federal or state agency or authority.
(c) There is no labor strike or similar material dispute pending or,
to the best knowledge of the Company, threatened against or involving the
Company.
(d) There is no arbitration proceeding under any collective bargaining
agreement pending or, to the knowledge of the Company, threatened involving
any employees of the Company.
(e) For the past two years, the Company has followed the practices
outlined in its employee policy manuals in all material respects with
regard to conditions and terms of employment and termination benefits with
respect to its employees.
3.17. Investment Representations. Each of the Shareholders acknowledges
receipt of the SEC Reports described in Section 4.7 from Parent and the
opportunity to ask questions of and receive answers from representatives of the
management of Parent concerning an investment in Parent Common Stock, and
acknowledges and agrees that (i) the shares of Parent Common Stock to be
received by virtue of the Merger are being acquired for investment purposes and
not with a view to the distribution or resale thereof in violation of the
Securities Act of 1933, as amended (the "1933 Act"), and cannot be resold unless
they are registered under the 1933 Act and applicable state securities laws or
an exemption from registration is available therefor and (ii) such Shareholder
is an "accredited investor" as such term is used in Regulation D under the 1933
Act.
3.18. Transaction with Affiliates. Upon the occurrence of the Closing,
neither the Shareholders nor any Affiliate of the Shareholders will have any
interest in or will own any property or right used principally in the conduct of
the Company's business. The term "Affiliate" shall mean the Shareholders, or any
member of the immediate family (including brother, sister, descendant, ancestor
or in-law) of the Shareholders, or any corporation, partnership, trust or other
entity in which the Shareholders or any such family member has a substantial
interest or is a director, officer, partner or trustee.
3.19. Brokers and Finders. The Company has not engaged any person to act or
render services as a broker, finder or similar capacity in connection with the
transactions contemplated herein and no person has, as a result of any agreement
or action by the Company, any right or valid claim against the Company, Parent
or any of Parent's affiliates for any commission, fee or other compensation as a
broker or
13
<PAGE>
finder, or in any similar capacity in connection with the transactions
contemplated herein.
4. REPRESENTATIONS AND WARRANTIES OF PARENT AND SUBSIDIARY. Parent and
Subsidiary, jointly and severally, represent and warrant to the Company and the
Shareholders as follows:
4.1. Organization and Good Standing. Parent is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Texas. Subsidiary is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and is a wholly-owned
subsidiary of Parent.
4.2. Foreign Qualification. Each of Parent and Subsidiary is duly qualified
or licensed to do business and in good standing as a foreign corporation in
every jurisdiction where the failure so to qualify could have a material adverse
effect on its business, operations, assets or financial condition.
4.3. Corporate Power and Authority. Each of Parent and Subsidiary has the
corporate power and authority and all licenses and permits required by
governmental authorities to own, lease and operate its properties and assets, to
carry on its business as currently being conducted, and each has the corporate
power and authority and all licenses and permits required by governmental
authorities to execute, deliver and perform this Agreement.
4.4. Binding Effect. This Agreement has been or will have been duly
authorized, executed and delivered by Parent and Subsidiary and is the legal,
valid and binding obligations of each of them, enforceable in accordance with
its terms except that (i) enforceability may be limited by bankruptcy,
insolvency, or other similar laws affecting creditors' rights and (ii) the
availability of equitable remedies may be limited by equitable principles of
general applicability.
4.5. Compliance with Other Instruments. Neither the execution and delivery
by Parent or Subsidiary of this Agreement nor the consummation by them of the
transactions contemplated hereby will violate, breach, be in conflict with, or
constitute a default under, or permit the termination or the acceleration of
maturity of, or result in the imposition of any lien, claim or encumbrance upon
any property or asset of Parent or Subsidiary pursuant to, their respective
certificates of incorporation or bylaws, or any note, bond, indenture, mortgage,
deed of trust, evidence of indebtedness, loan or lease agreement, other
agreement or instrument, judgment, order, injunction or decree by which Parent
or Subsidiary is bound, to which either is a party, or to which their assets are
subject.
14
<PAGE>
4.6. Parent Shares. The Parent Common Stock to be issued by virtue of the
Merger (the "Parent Shares"), when issued and delivered, will be duly
authorized, validly issued, fully paid, and nonassessable, free and clear of all
liens, claims and encumbrances. Parent does not make any representation as to
the market price which the Shareholders will realize upon the ultimate
disposition of the Parent Shares, it being acknowledged by the Shareholders that
the market price of publicly traded securities will be affected by many factors
which are outside the control of Parent and as to which it can offer no
assurance.
4.7. Parent Reports to SEC. Parent has furnished to the Shareholders true
and complete copies of (i) the Parent's Annual Report to Stakeholders for the
year ended September 29, 1996 and (ii) the Parent's Quarterly Report on Form
10-Q for the first fiscal quarter of fiscal 1997 (collectively the "SEC
Reports"). The SEC Reports did not, on their respective dates of filing, contain
an untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading. Parent has filed
on a timely basis all documents required to be filed by it with the Securities
and Exchange Commission (the "SEC") and all such documents complied as to form
with the applicable requirements of law. All financial statements included in
such documents, including without limitation, the SEC Reports, (i) complied as
to form in all material respects with the applicable accounting requirements and
the published rules and regulations of the SEC with respect thereto, (ii) were
prepared in accordance with generally accepted accounting principles applied on
a consistent basis throughout the periods covered thereby (except as may be
indicated therein), (iii) fairly present the financial position, results of
operations and cash flows of Parent as of the respective dates thereof and for
the periods referred to therein, and (iv) are consistent with the books and
records of Parent. Since January 19, 1997, there has not been any material
adverse change in the assets, business, financial condition or results of
operations of Parent.
4.8. No Material Undisclosed Liabilities. There are no material liabilities
or obligations of Parent of any nature, whether absolute, accrued, contingent or
otherwise, other than (i) the liabilities and obligations that are fully
reflected in the SEC Reports, or incurred in the ordinary course of business and
consistent with past practices since January 19, 1997, (ii) liabilities or
obligations not required to be disclosed in financial statements prepared in
accordance with generally accepted accounting principles and (iii) liabilities
incurred in connection with this Agreement and the transactions contemplated
hereby.
4.9. Brokers and Finders. Neither Parent nor Subsidiary has engaged any
person to act or render services as a broker, finder or similar capacity in
connection with the transactions contemplated herein and no person has as a
result of any agreement or action by Parent or Subsidiary any right or valid
claim against the
15
<PAGE>
Company or any of the Company's affiliates for any commission, fee or other
compensation as a broker or finder, or in any similar capacity in connection
with the transactions contemplated herein.
5. CERTAIN COVENANTS.
5.1. Cooperation. Each of the parties hereto shall, and shall cause each of
its affiliates to, use its best efforts to (i) obtain at the earliest
practicable date and, in any event, before the Closing Date, any approvals,
authorizations and consents necessary to consummate the transactions
contemplated by this Agreement; (ii) as reasonably requested by the other,
cooperate with and keep the other informed in connection with this Agreement;
and (iii) take such actions as the other parties may reasonably request to
consummate the transactions contemplated by this Agreement and diligently
attempt to satisfy, to the extent within its control, all conditions precedent
to its obligations to close the transactions contemplated by this Agreement;
provided, however, that nothing in this Section 5.1 shall require a party to
expend any monies to obtain the consent of a third party except as otherwise
specifically required under this Agreement.
5.2 Maintenance of Company Business and Assets. The Shareholders covenant
that between the date hereof and the Closing, except as contemplated hereby or
with the prior consent of Parent, they will cause the Company to refrain from
doing any of the following: (i) entering into any transaction other than in the
ordinary course of business, (ii) permitting any encumbrance, mortgage or pledge
on any asset of the Company, (iii) disposing of any material asset of the
Company, (iv) effecting any change in the capitalization of the Company or (v)
incurring any indebtedness not reflected on the Company Financial Statements.
5.3. Registration of Parent Common Stock.
(a) As soon as practicable, Parent shall prepare and file with the SEC
a Registration Statement on Form S-3 (the "Registration Statement")
registering the Parent Shares for resale to the public. Parent shall use
its best efforts to cause the Registration Statement (i) to become
effective as soon as practicable after the filing thereof (but in any event
prior to the "Pooling Publication Date" (defined herein) and (ii) to remain
effective so that such Parent Shares may be offered and sold on a
continuous or delayed basis in accordance with Rule 415 under the 1933 Act,
until the earlier of one year after the Closing Date or such time as all of
the Parent Shares have been sold by the Shareholders.
(b) Based upon the written opinion of Parent's securities law counsel,
Parent may, by written notice to the Shareholders, for a period not to
exceed 30 days, suspend or withdraw the Registration Statement and require
that the Shareholders
16
<PAGE>
cease sales of the Parent Shares thereunder, if (i) Parent is engaged
in negotiations or preparations for any transaction that Parent desires to
keep confidential for valid business reasons, and (ii) Parent determines in
good faith that the public disclosure requirements imposed on Parent as a
result of the Registration Statement would require public disclosure of
such negotiations or preparations; provided, however, that Parent may not
exercise this right on more than one occasion.
(c) Parent agrees to indemnify and hold harmless the Shareholders, and
any broker or agent selling the Parent Shares on behalf of the
Shareholders, against any losses, claims, damages or liabilities to which
any such person may become subject under the 1933 Act, or otherwise,
insofar as such losses, claims, damages or liabilities arise from any
untrue statement or alleged untrue statement of a material fact contained
in the Registration Statement or prospectus included therein, or any
supplemental filings, or other documents, incident to the Registration
Statement, or arise out of or are based upon the omission to state therein
a fact required to be stated therein or necessary to make the statements
therein not misleading (except insofar as such losses, claims, damages or
liabilities arise out of or are based upon information furnished in writing
to Parent by or on behalf of the Shareholders specifically for use in such
registration statement or prospectus).
(d) Parent shall bear all expenses of the Registration Statement filed
hereunder, which shall include, without limitation, all registration and
filing fees and the reasonable fees and disbursements of counsel and
accountants for Parent; but which shall not include any selling commissions
or underwriting discounts or stock transfer taxes for the Shareholders or
their brokers or underwriters or of any counsel or accountants retained by
the Shareholders.
5.4 Pooling. From and after the date hereof and until the Effective Date,
the Parent, the Company, the Shareholders and their respective subsidiaries or
other affiliates shall not, to the best of their knowledge, (i) take any action,
or fail to take any action, that would jeopardize the treatment of the Merger as
a "pooling of interest" for accounting purposes or (ii) take any action, or fail
to take any action, that would jeopardize qualification of the Merger as a
reorganization within the meaning of Section 368 of the Code. The Shareholders
have agreed that, until such time (the "Pooling Publication Date") as financial
results of Parent covering at least thirty days of combined operations of Parent
and the Company subsequent to the Closing Date have been published (it being
understood that Parent will use its best efforts to cause such publication as
promptly as practicable after the Closing consistent with the federal securities
laws and accounting requirements), they will not sell or otherwise dispose of
any Parent Shares. Parent will give instructions to its transfer agent with
respect to the Parent Shares to the effect that no transfer of such shares shall
be effected until the Pooling Publication Date.
17
<PAGE>
5.5. Shareholder Action. Each of the Shareholders hereby represents that
they will vote all shares of Company Common Stock held directly or indirectly by
them in favor of the adoption and approval of this Agreement and the
transactions contemplated hereby, and the Company shall provide to Parent
evidence of such agreements, in form and substance reasonably satisfactory to
the Parent.
5.6. Employee Benefits. As soon as practicable following the Effective
Date, all employees of the Company shall be included in all of the Subsidiary's
employee benefit plans and shall be given credit for their periods of service
with the Company as if such service were with the Subsidiary in determining
their eligibility for inclusion in, and the level of benefits granted after the
Effective Date under, such plans. The Subsidiary plans to offer employment to
all of the employees of the Company as of the Closing Date; however, the
employment of any employees of the Company employed by the Subsidiary after the
Effective Date shall be at will, except with respect to the employment of the
Shareholders pursuant to their employment contracts.
5.7. Radio Show. Parent acknowledges that one or more of the Shareholders
has, and after the Closing will continue to have, a financial interest in a
radio show regarding natural foods. The Shareholders having such interest
covenant that they shall not engage in conflict of interest transactions on
behalf of such radio show which would adversely affect the Parent and its
subsidiaries.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY AND THE SHAREHOLDERS.
The obligations of the Company and the Shareholders to consummate the
transactions contemplated by this Agreement shall be subject to the satisfaction
on or before the Closing Date of each of the following conditions:
6.1. Compliance. Parent and Subsidiary shall have, or shall have caused to
be, satisfied or complied with and performed in all material respects, all
terms, covenants and conditions of this Agreement to be complied with or
performed by them on or before the Closing Date.
6.2. Representations and Warranties. All of the representations and
warranties made by Parent and Subsidiary in this Agreement and in all
certificates and other documents delivered by them to the Company pursuant
hereto, shall have been true and correct in all material respects as of the date
hereof, and shall be true and correct in all material respects at the Closing
Date with the same force and effect as if such representations and warranties
had been made at and as of the Closing Date, except for changes permitted or
contemplated by this Agreement.
6.3. Legal Opinion. The Company shall have received the opinion of Crouch &
Hallett, L.L.P., counsel to Parent and Subsidiary, dated the Closing Date, in
the form reasonably acceptable to the Shareholders.
18
<PAGE>
6.4. Employment Agreement. Parent shall have entered into the Employment
Agreements in the forms of Exhibits A-1, A-2 and A-3 hereto (the "Employment
Agreements") with each of the Shareholders.
6.5. Non-Competition Agreement. Parent and each of the Shareholders shall
have entered into the Non-Competition Agreement in the form of Exhibit B hereto
(the "Non-Competition Agreement").
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT AND SUBSIDIARY. Except as
may be waived by Parent and Subsidiary, the obligations of Parent and Subsidiary
to consummate the transactions contemplated by this Agreement shall be subject
to the satisfaction, on or before the Closing Date, of each of the following
conditions:
7.1. Compliance. The Company and the Shareholders shall have, or shall have
caused to be, satisfied or complied with and performed in all material respects
all terms, covenants, and conditions of this Agreement to be complied with or
performed by the Company or the Shareholders (as the case may be) on or before
the Closing Date.
7.2. Representations and Warranties. All of the representations and
warranties made by the Company and Shareholders in this Agreement, the exhibits
attached hereto and in all certificates and other documents delivered by the
Company pursuant hereto, shall have been true and correct in all material
respects as of the date hereof, and shall be true and correct in all material
respects at the Closing Date with the same force and effect as if such
representations and warranties had been made at and as of the Closing Date,
except for changes permitted or contemplated by this Agreement.
7.3. Legal Opinion. Parent and Subsidiary shall have received the opinion
of David Friedman, P.A., counsel for the Company and the Shareholders, dated as
of the Closing Date, in form reasonably acceptable to the Parent and Subsidiary.
7.4. Employment Agreement. Parent shall have entered into the Employment
Agreements with each of the Shareholders.
7.5. Non-Competition Agreement. Parent and each of the Shareholders shall
have entered into the Non-Competition Agreement.
7.6. Receipt of Pooling Letter. Parent shall have received a letter from
KPMG Peat Marwick LLP, dated the Effective Date and addressed to Parent, stating
substantially to the effect that, based on such firm's review of this Agreement
and the other procedures set forth in such letter, such firm concurs that the
Merger will qualify
19
<PAGE>
as a pooling of interests transaction under Opinion 16 of the Accounting
Principles Board.
7.7. Estoppel Certificates. Parent shall have received certificates from
the lessors of the Real Estate, indicating the absence of any default by the
Company under such leases, confirming the terms of such leases and (to the
extent required under the terms of the respective leases) consenting to the
Merger.
7.8. Third Party Consents. Parent shall have received the approval from
alcoholic beverage commissions and any other required governmental bodies or
third parties to the consummation of the transactions contemplated by the Merger
and to the operation of the Supermarkets, effective as of the Closing Date, by
the Parent and/or its subsidiaries.
7.9. Security Interest of Shareholders. The Company shall have obtained a
release from Oppenheimer of his security interest in the assets of the Company.
8. INDEMNIFICATION.
8.1. Indemnification of Parent and Subsidiary. Subject to the limitations
set forth in Sections 8.3 and 8.4, the Shareholders, jointly and severally,
shall indemnify and hold Parent and Subsidiary harmless from, against, for and
in respect of (i) any and all damages, losses, settlement payments, obligations,
liabilities, claims, actions or causes of action and encumbrances suffered,
sustained, incurred or required to be paid by Parent or Subsidiary, net of any
resulting income tax benefits to Parent or Subsidiary, because of (A) the breach
of any written representation, warranty, agreement or covenant of the Company or
the Shareholders contained in this Agreement, or (B) any outstanding lawsuits,
proceedings or actions pending or threatened against the Company that relate to
periods prior to the Closing (the "Litigation Claims"); and (ii) all reasonable
costs and expenses (including, without limitation, attorneys' fees, interest and
penalties) incurred by Parent or Subsidiary in connection with any action, suit,
proceeding, demand, assessment or judgment incident to any of the matters
indemnified against in this Section 8.1. In order to secure the indemnification
obligations of the Shareholders hereunder, the Shareholders have entered into
the Post-Closing Escrow Agreement.
8.2. Indemnification of Shareholders. Subject to the limitations set forth
in Sections 8.3 and 8.4, Parent and Subsidiary, jointly and severally, shall
indemnify and hold the Shareholders harmless from, against, for and in respect
of: (i) any and all damages, losses, settlement payments, obligations,
liabilities, claims, actions or causes of action and encumbrances suffered,
sustained, incurred or required to be paid by the Shareholders, net of any
resulting income tax benefits to the Shareholders, because of the breach of any
written representation, warranty, agreement or covenant of
20
<PAGE>
Parent or Subsidiary contained in this Agreement; (ii) any and all liabilities,
obligations, claims and demands arising out of the ownership or operation of the
Company on and after the Closing Date, except to the extent the same arises from
a breach of any written representation, warranty, agreement or covenant of the
Company or the Shareholders contained in this Agreement (other than agreements
or covenants of the Company to be performed after the Closing); and (iii) all
reasonable costs and expenses (including, without limitation, attorneys' fees,
interest and penalties) incurred by the Shareholders in connection with any
action, suit, proceeding, demand, assessment or judgment incident to any of the
matters indemnified against in this Section 8.2.
8.3. Survival of Representations, Warranties and Covenants. All
representations, warranties, covenants and agreements made by any party to this
Agreement or pursuant hereto shall be deemed to be material and to have been
relied upon by the parties hereto, and shall survive for one year following the
Closing Date. Notice of any claim, whether made under the indemnification
provisions hereof or otherwise, based on a breach of a representation, warranty,
covenant or agreement must be given prior to the expiration of such
representation, warranty, covenant or agreement; and any claim not made within
such period shall be of no force or effect. The representations and warranties
hereunder shall not be affected or diminished by any investigation at any time
by or on behalf of the party for whose benefit such representations and
warranties were made. All statements contained herein or in any certificate,
exhibit, list or other document delivered pursuant hereto shall be deemed to be
representations and warranties.
8.4. General Rules Regarding Indemnification. The obligations and
liabilities of each indemnifying party hereunder with respect to claims
resulting from the assertion of liability by the other party shall be subject to
the following terms and conditions:
(a) The indemnified party shall give prompt written notice (which in
no event shall exceed 30 days from the date on which the indemnified party
first became aware of such claim or assertion) to the indemnifying party of
any claim which might give rise to a claim by the indemnified party against
the indemnifying party based on the indemnity agreements contained in
Sections 8.1 or 8.2 hereof, stating the nature and basis of said claims and
the amounts thereof, to the extent known.
(b) If any action, suit or proceeding is brought against the
indemnified party with respect to which the indemnifying party may have
liability under the indemnity agreements contained in Sections 8.1 or 8.2
hereof, the action, suit or proceeding shall, at the election of the
indemnifying party, be defended (including all proceedings on appeal or for
review which counsel for the indemnified party shall deem appropriate) by
the indemnifying party. The indemnified party shall have the right to
employ its own counsel in any such case, but the fees and expenses of such
counsel
21
<PAGE>
shall be at the indemnified party's own expense unless the employment
of such counsel and the payment of such fees and expenses both shall have
been specifically authorized in writing by the indemnifying party in
connection with the defense of such action, suit or proceeding.
Notwithstanding the foregoing, (A) if there are defenses available to the
indemnified party which are inconsistent with those available to the
indemnifying party to such extent as to create a conflict of interest
between the indemnifying party and the indemnified party, the indemnified
party shall have the right to direct the defense of such action, suit or
proceeding insofar as it relates to such inconsistent defenses, and the
indemnifying party shall be responsible for the reasonable fees and
expenses of the indemnified party's counsel insofar as they relate to such
inconsistent defenses, and (B) if such action, suit or proceeding involves
or could have an effect on matters beyond the scope of the indemnity
agreements contained in Sections 8.1 and 8.2 hereof, the indemnified party
shall have the right to direct (at its own expense) the defense of such
action, suit or proceeding insofar as it relates to such other matters. The
indemnified party shall be kept fully informed of such action, suit or
proceeding at all stages thereof whether or not it is represented by
separate counsel.
(c) The indemnified party shall make available to the indemnifying
party and its attorneys and accountants all books and records of the
indemnified party relating to such proceedings or litigation and the
parties hereto agree to render to each other such assistance as they may
reasonably require of each other in order to ensure the proper and adequate
defense of any such action, suit or proceeding.
(d) The indemnified party shall not make any settlement of any claims
without the written consent of the indemnifying party.
(e) Parent shall be entitled to assert a claim against the Parent
Shares escrowed pursuant to the Post-Closing Escrow Agreement in respect of
any amounts to which it is entitled to receive by virtue of this Article 8.
9. MISCELLANEOUS.
9.1. Termination. This Agreement and the transactions contemplated hereby
may be terminated at any time on or before the Closing Date:
(i) by mutual consent of the Company and Parent.
(ii) by Parent or Subsidiary if there has been a material
misrepresenta tion or breach of warranty in the representations and
warranties of the Company or the Shareholders set forth herein or if there
has been any material failure on the part of the Company or the
Shareholders to comply with its obligations hereunder;
22
<PAGE>
(iii) by the Company or the Shareholders if there has been a material
misrepresentation or breach of warranty in the representations and
warranties of Parent or Subsidiary set forth herein or if there has been
any material failure on the part of Parent or Subsidiary to comply with its
obligations hereunder;
(iv) by the Company or Parent if the transactions contemplated by this
Agreement have not been consummated by April 30, 1997, unless the parties
otherwise agree or unless such failure of consummation is due to the
failure of the terminating party to perform or observe the covenants and
agreements hereof to be performed or observed by it at or before the
Closing Date; and
(v) by the Company or Parent if the transactions contemplated hereby
violate any order, decree or judgment of any court or governmental body or
agency having competent jurisdiction.
In the event of the termination of this Agreement pursuant to this Section 9.1,
this Agreement shall forthwith become null and void and of no further force or
effect; provided, however, that the parties hereto shall remain liable for any
breach of this Agreement prior to its termination.
9.2. Expenses. Each of Parent, Subsidiary, the Company and the Shareholders
shall pay its own reasonable expenses incurred in connection with this Agreement
and the transactions contemplated hereby.
9.3. Entire Agreement. This Agreement and the exhibits hereto contain the
complete agreement among the parties with respect to the transactions
contemplated hereby and supersede all prior agreements and understandings, oral
or written, among the parties with respect to such transactions. Section and
other headings are for reference purposes only and shall not affect the
interpretation or construction of this Agreement. The parties hereto have not
made any representation or warranty except as expressly set forth in this
Agreement or in any certificate or schedule delivered pursuant hereto.
9.4. Remedies of the Surviving Corporation. After the Closing, the
Surviving Corporation shall have the same rights and benefits under this
Agreement as does Parent and Subsidiary with respect to the representations,
warranties and covenants of the Shareholders contained herein, as fully as if
such representations, warranties and covenants had been made to or with the
Surviving Corporation in lieu of Parent and Subsidiary. In any proceedings by
Parent or Subsidiary to assert or prosecute any claims under, or to otherwise
enforce, this Agreement or any other agreement contemplated hereby or any
transaction contemplated hereby or thereby, each of the Shareholders agrees that
he shall not assert as a defense or bar to recovery by the Surviving Corporation
and hereby waives any right so to assert such defense or bar
23
<PAGE>
such recovery, that (a) before the date of this Agreement the Company (as
opposed to Parent and Subsidiary) had knowledge of the circumstances giving rise
to the claim being pursued by it; (b) before the date of this Agreement the
Company engaged in conduct or took action that caused or brought about the
circumstances giving rise to its claim or otherwise contributed thereto; (c) the
Surviving Corporation is estopped from asserting or recovering upon its claim by
reason of having joined in the representations, warranties, and covenants made
by Shareholders in this Agreement; or (d) Shareholders have a right of
contribution from or indemnification by the Surviving Corporation to the extent
that there is any recovery against him. Each of the Shareholders further agrees
that he shall not under any circumstances whatsoever affirmatively seek any
contribution from or indemnification by the Surviving Corporation for any
losses, damages, expenses or other claims, regardless of form, suffered by him
arising out of, related to or in connection with this Agreement or any other
agreement contemplated hereby (except pursuant to Section 8.2) or any
transaction contemplated hereby or thereby.
9.5. Public Announcements. No party to this Agreement shall issue any press
release relating to, or otherwise publicly disclose, the transactions
contemplated by this Agreement without the prior approval of the other parties.
Notwithstanding the foregoing, any party may make such disclosure as may be
required by law, provided the disclosing party obtains from the other party
prior approval of the substance of the proposed disclosure (such as the content
of a proposed press release), which approval may not be unreasonably withheld or
delayed.
9.6. Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an
original, and such counterparts together shall constitute only one original.
9.7. Notices. All notices, demands, requests or other communications that
may be or are required to be given, served or sent by any party to any other
party pursuant to this Agreement shall be in writing and shall be mailed by
first-class, registered or certified mail, return receipt requested, postage
prepaid, or transmitted by a reputable overnight courier service, facsimile
transmission or by hand delivery, addressed as follows:
(i) If to the Shareholders:
c/o Bread of Life
7720 Peters Road
Plantation, Florida 33324
Fax: 954-236-0073
24
<PAGE>
with a copy to:
David Friedman, P.A.
2699 Sterling Road, Suite A2001
Fort Lauderdale, Florida 33312
Fax: 954-962-3803
(ii) If to the Company (after the Closing), Parent or
Subsidiary:
Whole Foods Market, Inc.
601 N. Lamar Blvd.
Suite 300
Austin, Texas 78703-5413
Attention: John Mackey, Chairman
Fax: 512-477-1069
with a copy to:
Crouch & Hallett, L.L.P.
717 N. Harwood, Suite 1400
Dallas, Texas 75201
Attention: Bruce H. Hallett
Fax: 214-953-0576
Each party may designate by notice in writing a new address to which any notice,
demand, request or communication may thereafter be so given, served or sent.
Each notice, demand, request or communication that is mailed, delivered or
transmitted in the manner described above shall be deemed sufficiently given,
served, sent and received for all purposes at such time as it is delivered to
the addressee (with the return receipt, fax confirmation, the delivery receipt
or the affidavit of courier or messenger being deemed conclusive evidence of
such delivery) or at such time as delivery is refused by the addressee upon
presentation.
9.8. Assignment; Successors and Assigns. This Agreement may not be assigned
by any of the parties hereto without the written consent of all the other
parties. Subject to the preceding sentence, this Agreement and the rights,
interests and obligations hereunder shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and assigns.
9.9. Governing Law. This Agreement shall be construed and enforced in
accordance with the laws of the State of Texas.
25
<PAGE>
9.10. Waiver and Other Action. This Agreement may be amended, modified or
supplemented only by a written instrument executed by the parties against which
enforcement of the amendment, modification or supplement is sought.
9.11. Severability. If any provision of this Agreement is held to be
illegal, invalid, or unenforceable, such provision shall be fully severable, and
this Agreement shall be construed and enforced as if such illegal, invalid or
unenforceable provision were never a part hereof; the remaining provisions
hereof shall remain in full force and effect and shall not be affected by the
illegal, invalid or unenforceable provision or by its severance; and in lieu of
such illegal, invalid or unenforceable provision, there shall be added
automatically as part of this Agreement, a provision as similar in its terms to
such illegal, invalid or unenforceable provision as may be possible and be
legal, valid and enforceable.
9.12. Third-Party Beneficiaries. This Agreement and the rights,
obligations, duties and benefits hereunder are intended for the parties hereto,
and no other person or entity shall have any rights, obligations, duties and
benefits pursuant hereto.
9.13. Arbitration. Any controversy or dispute among the parties arising in
connection with this Agreement shall be submitted to a panel of three
arbitrators and finally settled by arbitration in accordance with the commercial
arbitration rules of the American Arbitration Association. Each of the disputing
parties shall appoint one arbitrator, and these two arbitrators shall
independently select a third arbitrator. Arbitration shall take place in Austin,
Texas or such other location as the arbitrators may select. The prevailing party
in such arbitration shall be entitled to the award of all costs and attorneys'
fees in connection with such action. Any award for monetary damages resulting
from nonpayment of sums due hereunder shall bear interest from the date on which
such sums were originally due and payable. Judgment upon the award rendered may
be entered in any court having jurisdiction or application may be made to such
court for judicial acceptance of the award and an order of enforcement, as the
case may be.
[signatures on following pages]
26
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
WHOLE FOODS MARKET GROUP, INC.
By:
------------------------------
Name:
Title:
WHOLE FOODS MARKET, INC.
By:
------------------------------
Name:
Title:
BREAD OF LIFE, INC.
By:
------------------------------
Name:
Title:
BREAD OF LIFE - PLANTATION, INC.
By:
------------------------------
Name:
Title:
BREAD OF LIFE - CORAL SPRINGS, INC.
By:
------------------------------
Name:
Title:
27
<PAGE>
SHAREHOLDERS:
------------------------------------
James Oppenheimer
Ownership percentage: 50%
------------------------------------
Richard Gerber
Ownership percentage: 25%
------------------------------------
Julie Gerber
Ownership percentage: 25%
28
<PAGE>
Exhibit 5
[CROUCH & HALLETT LETTERHEAD]
May 23, 1997
Whole Foods Market, Inc.
601 N. Lamar Blvd., Suite 300
Austin, Texas 78703
Gentlemen:
We have served as counsel for Whole Foods Market, Inc., a Texas
corporation (the "Company"), in connection with the Registration Statement on
Form S-3 covering the sale of a maximum of 399,903 shares (the "Shares") of
Common Stock, no par value, of the Company. The Shares are to be sold from time
to time by shareholders of the Company as described in the Registration
Statement.
We have examined such documents and questions of law as we have deemed
necessary to render the opinion expressed below. Based upon the foregoing, we
are of the opinion that the Shares are duly and validly issued, fully paid and
non-assessable.
We consent to the use of this opinion as Exhibit 5 to the Registration
Statement.
Very truly yours,
/s/ Crouch & Hallett, LLP
<PAGE>
Exhibit 23(a)
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Whole Foods Market, Inc.:
We consent to the use of our report incorporated herein by reference and to the
reference to our firm under the heading "Experts" in the prospectus.
/s/ KPMG Peat Marwick, LLP
Austin, Texas
May 23, 1997
<PAGE>
[CROUCH & HALLETT LETTERHEAD]
May 23, 1997
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, D.C. 20549
Attn: 1933 Act Filing Desk
Re: Whole Foods Market, Inc.
Gentlemen:
On behalf of Whole Foods Market, Inc., we have filed by EDGAR a copy of
a registration statement on Form S-3, together with the exhibits indicated as
being filed therewith. The filing fee referenced on the cover page of the S-3
has been wired directly by Whole Foods Market, Inc. to the Commission, per the
EDGAR rules. If you should have any questions, please do not hesitate to call me
at 214-922-4120 or fax at 214-953-0576.
Very truly yours,
/s/ Bruce H. Hallett
<PAGE>
