SECURITIES AND EXCHANGE COMMISSION
Washington, DC
20549
FORM 10 Q
(Mark One)
( X ) Quarterly Report Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
For the quarterly period ended February 27, 1999 Commission File number 0-80.
( ) Transition Report Pursuant to Section 13 or 15 (d)of the Securities
Exchange Act of 1934
For the transition period from
to
SEAWAY FOOD TOWN, INC.
(Exact name of registrant as specified in its charter)
Ohio 34-4471466
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) (Identification No.)
1020 Ford Street, Maumee, Ohio 43537
(Address of principal executive offices) (Zip Code)
419/893-9401
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at April 8, 1999
Common stock, without par 6,673,643 shares
value (stated value $2.00 per share)
<PAGE>
Index
Seaway Food Town, Inc.
Part I. Financial information
Item 1. Financial Statements (Unaudited)
Consolidated Statements of Income -- Thirteen and Twenty-six
weeks ended February 27, 1999 and February 28, 1998.
Consolidated Balance Sheets -- February 27, 1999 and August 29,
1999.
Condensed Consolidated Statements of Cash Flows -- Twenty-six
weeks ended February 27, 1999 and February 28, 1998.
Notes to Consolidated Financial Statements.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operation.
Item 3. Quantitative and Qualitative Disclosure of Market Risk.
Part II. Other Information
Item 2. Changes in Securities and Use of Proceeds.
Item 6. Exhibits and Reports on Form 8-K.
Signatures
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION
Consolidated Statements of Income
(Thousands of Dollars - Except
Average Share and Per-Share Data)
<CAPTION>
Thirteen Weeks Ended Twenty-Six Weeks Ended
February February February February
27, 1999 28, 1998 27, 1999 28, 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net Sales $170,382 $159,935 $327,012 $313,887
Cost of merchandise
sold 127,561 119,137 244,448 233,801
---------- ---------- ---------- ----------
Gross profit 42,821 40,798 82,564 80,086
Selling, general and
administrative
expenses 38,282 36,509 74,885 72,658
---------- ---------- ---------- ----------
Operating profit 4,539 4,289 7,679 7,428
Interest expense (989) (961) (1,999) (1,964)
Other income - net 82 (1) 155 39
---------- ---------- ---------- ----------
Income before income
taxes 3,632 3,327 5,835 5,503
Provision for income
taxes (1,308) (1,232) (2,090) (2,037)
---------- ---------- ---------- ----------
Net income $ 2,324 $ 2,095 $ 3,745 $ 3,466
========== ========== ========== ==========
Per common share:
Net income - basic
and diluted $ .35 $ .31 $ .56 $ .52
========== ========== ========== ==========
Dividends paid $ .045 $ .04 $ .09 $ .08
========== ========== ========== ==========
Average number of
shares outstanding
- basic and diluted 6,664,680 6,641,841 6,656,804 6,635,296
========== ========== ========== ==========
See notes to consolidated financial statements
</TABLE>
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION (Continued)
Consolidated Balance Sheets
(Thousands of Dollars)
<CAPTION>
February 27, August 29,
1999 1998
ASSETS ------------- -------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 9,892 $ 8,968
Income tax recoverable --- 100
Notes and accounts receivable, less
allowance for doubtful accounts
of $500 and $450 respectively 9,373 7,674
Merchandise inventories 55,054 50,293
Prepaid expenses, including deferred
income taxes 4,289 3,922
------------- -------------
78,608 70,957
Other assets 5,267 3,731
Property and equipment:
Cost 228,807 220,628
Less accumulated depreciation and
Amortization (133,896) (126,653)
------------- -------------
Net property and equipment 94,911 93,975
------------- -------------
$178,786 $168,663
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 51,332 $ 43,402
Income taxes 1,310 31
Accrued liabilities 12,682 12,569
Long-term debt due within one year 2,575 1,393
------------- -------------
Total current liabilities 67,899 57,395
Long-term debt 44,592 47,966
Deferred income taxes 2,474 2,474
Deferred other 2,915 3,475
Shareholders' equity:
Common stock 13,347 13,298
Capital in excess of stated value 358 ---
Retained earnings 47,201 44,055
------------- -------------
Total shareholders' equity 60,906 57,353
------------- -------------
$178,786 $168,663
============= =============
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION (Continued)
Condensed Consolidated Statements of Cash Flows
(Thousands of Dollars)
<CAPTION>
Twenty-six Weeks Ended
February 27, February 28,
1999 1998
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES-net cash provided $14,324 $ 8,992
INVESTING ACTIVITIES:
Expenditures for property and equipment (7,445) (6,699)
Proceeds from sale of property and other
assets 55 32
Acquisition of business (2,600) ---
Other (44) 442
----------- -----------
Net cash used in investing activities (10,034) (6,225)
FINANCING ACTIVITIES
Proceeds from issuance of long-term debt 3,700 2,400
Payments of long-term debt (5,892) (4,124)
Dividends paid (599) (530)
Decrease in deferred other (575) (689)
----------- -----------
Net cash used in financing activities (3,366) (2,943)
----------- -----------
Increase (decrease) in cash and cash equivalents 924 (176)
Cash and cash equivalents at beginning of
period 8,968 9,491
----------- -----------
Cash and cash equivalents at end of period $ 9,892 $ 9,315
=========== ===========
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest $ 1,915 $ 1,033
=========== ===========
Income Taxes $ 712 $ 2,314
=========== ===========
See notes to consolidated financial statements
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION (Continued)
Notes to Consolidated Financial Statements (Unaudited)
Note A. Basis of Presentation
The accompanying unaudited consolidated financial statements have
been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions
to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do
not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the thirteen and twenty-six week
periods ended February 27, 1999 are not necessarily indicative of the
results that may be expected for the year ended August 28, 1999.
The balance sheet at August 29, 1998 has been derived from the audited
financial statements at that date but does not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements.
For further information, refer to the consolidated financial statements
and footnotes thereto included in the Company's annual report on
Form 10-K for the year ended August 29, 1998.
Note B. Inventories
Meat, produce, bakery, deli and drug inventories are valued at the
lower of cost using the first-in, first-out (FIFO) method, or market.
All other merchandise inventories (including store inventories which
are determined by the retail inventory method) are valued at the lower
of cost using, the last-in, first-out (LIFO) method, or market.
Inventories have been reduced by $18,102,000 and $18,325,000 at
February 27, 1999 and August 29, 1998 respectively from amounts which
would have been reported under the FIFO method (which approximates
current cost).
Note C. Earnings Per Share
Net income per common share is based on the weighted average number
of shares outstanding during the periods. The Company has no
potentially dilutive securities.
All amounts in the consolidated financial statements referring to
shares, share prices and per share amounts have been adjusted
retroactively for the May, 1998 three-for-two stock split.
<PAGE>
PART I. FINANCIAL INFORMATION (Continued)
Notes to Consolidated Financial Statements (Unaudited)
Note D. New Accounting Standards
Financial Accounting Standards Board Statement No. 131 -- Segments,
will be applicable for fiscal 1999. This statement dictates the use
of a management approach to report financial and descriptive
information about the Company's operating segments. The impact on
the Company has not been determined.
Financial Accounting Standards Board Statement No. 133 -- Accounting
for Derivative Instruments and Hedging Activities, will be
applicable for fiscal 2001. This statement requires all derivatives
to be recorded at their fair value. The impact on the Company has not
been determined.
Note E. Acquisition
On January 16, 1999, the Company acquired a store in Piqua, Ohio for
$2,600,000. The acquisition was accounted for under the purchase
method of accounting. The results of operations for this store are
included in the accompanying 1999 statements of income for the period
from January 16, 1999 through February 27, 1999.
<PAGE>
PART I. FINANCIAL INFORMATION (Continued)
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations
The following table sets forth certain income statement components
expressed as a percentage of net sales and the year-to-year percentage
changes in such components.
<TABLE>
<CAPTION>
Percentage Percentage
Percentage of change in Percentage of change in
Net Sales dollars Net Sales dollars
- ------------- ----------- ------------- ------------
2nd Qtr.'99 26 26 26 Weeks '99
2nd Qtr. 2nd Qtr Compared to Weeks Weeks Compared to
1999 1998 2nd Qtr.'98 1999 1998 26 Weeks '98
- -------- -------- ----------- ------ ------ ------------
<C> <C> <C> <S> <C> <C> <C>
100.0% 100.0% 6.5% Net Sales 100.0% 100.0% 4.2%
======= ======= ====== ====== ====== =======
25.1 25.5 5.0 Gross Profit 25.2 25.5 3.1
Selling, general
and administrative
22.4 22.8 4.9 expense 22.9 23.1 3.1
2.7 2.7 5.8 Operating Profit 2.3 2.4 3.4
( .6) ( .6) 2.9 Interest Expense ( .6) ( .6) 1.8
.0 .0 8,300.0 Other income - net .1 .0 297.4
Income before income
2.1 2.1 9.2 Taxes 1.8 1.8 6.0
Provision for income
.8 .8 6.2 Taxes .6 .7 2.6
- ------- ------ ------- ------ ------ -------
1.3 1.3 10.9 1.2 1.1 8.0
====== ====== ======= ====== ====== =======
</TABLE>
Net sales for the second quarter of 1999 were $170,382,000 or 6.5% higher than
the same quarter in 1998. On a year-to-date basis, net sales were
$327,012,000 or 4.2% higher than 1998. These net increases were largely
attributable to increases in drugstore and supermarket sales from various
remodeled locations. Inclement weather helped boost sales somewhat this past
quarter; however, sales remained very strong since early 1999. Sales from
stores in operation both this past quarter as well as the same quarter a
year ago increased 5.86%.
Gross margins, as a percent of sales, decreased .4% in the second quarter of
1999 compared to the same quarter in 1998. On a year-to-date basis, margins
decreased .3% over 1998. Most of these decreases were attributable to
decreased selling margins in the retail stores.
<PAGE>
Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
As a percent of sales, selling, general and administrative expenses decreased
.4% during the current quarter compared to the same quarter of the prior year.
Increased sales during the quarter offset by selling costs relating to new and
remodeled locations was the principal reason for the decrease. On a
year-to-date basis, costs decreased .2%. This decrease related to increased
sales volume offset by higher costs in new and remodeled locations, as well
as increases in various administrative expenses. This decrease in selling,
general and administrative expenses for the most part, offsets the decrease in
gross margin percentage, both this past quarter as well as the year to date.
The Company continues to experience a very stable labor situation.
Interest expense for the second quarter and the year to date period is
comparable with the same periods of 1998.
Other income - net, increased in the second quarter and the year to date
period resulting primarily from an increase in royalty income and a decrease
in losses on asset disposals.
Income taxes as a percent of pre-tax income approximates the statutory tax
rates in effect. The percentage decrease in the second quarter 1999 compared
to 1998 is due mainly to the continued benefits from various tax planning
strategies. An effective tax rate of 36.0% was used in the second quarter of
fiscal 1999 versus a rate of 37.0% for the second quarter of fiscal 1998. On a
year-to-date basis, the rate is 35.8% in 1999 compared to 37.0% in 1998.
Net income for the quarter was $2,324,000 ($.35 per common share) which
compares to $2,095,000 ($.31 per common share) for the same quarter last year.
On a current trailing four quarters' basis, net income was $7,263,000 ($1.09
per common share) compared to $7,039,000 ($1.06 per common share) for the
prior four quarters, a 3.2% increase. The Company expects its last half of
fiscal 1999 net income to be comparable with the same period of fiscal 1998.
<PAGE>
Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
Impact of Inflation
Inflation increases the Company's major costs, inventory and labor.
The Company's provisions for LIFO inventories for the past quarter has
resulted in a decrease in cost of sales of $103,000 in the second quarter of
1999 compared to a decrease of $53,000 in the second quarter of 1998. On a
year-to-date basis, LIFO provisions reduced the cost of sales by $223,000
in the first half of 1999 compared to a reduction of $139,000 in the same
period of 1998. The Company has generally been able to maintain margins by
adjusting its retail prices, but competitive conditions may from time to time
render it unable to do so in seeking to maintain its market share.
LIQUIDITY AND CAPITAL RESOURCES
Overview
Measures of liquidity for the second quarter of the last two years were
as follows:
<TABLE>
<CAPTION>
(Dollars in millions) 2nd Qtr. 2nd Qtr.
- ---------------------- 1999 1998
-------- --------
<S> <C> <C>
Working capital (1) $28.8 $29.8
Unused lines of revolving credit 40.7 42.1
Current ratio (1) 1.42 1.49
(1) Includes add-back of gross LIFO reserve.
</TABLE>
During the first twenty-six weeks of fiscal 1999, the Company's working
capital, including the add-back of the gross LIFO reserve, decreased
$3,076,000 from the Company's fiscal year end on August 28, 1998. The
working capital ratio was 1.42 to 1 at the end of this quarter compared to
1.49 to 1 at August 29, 1998 and 1.49 to 1 at February 28, 1998. Borrowings
under the Company's Revolving Credit Agreements increased mainly due to
increased inventory levels and capital expenditures.
The funds required by the Company on a continuing basis for working capital,
capital expenditures and other needs are generated principally through
operations, long-term borrowings and capital leases, supplemented by
borrowings under revolving credit note agreements which have been arranged
primarily through institutional lenders. The Company is not aware of any
trends, demands, commitments or uncertainties which will result or which
<PAGE>
Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
are reasonably likely to result in a material change in the Company's
liquidity. During the second quarter of 1999 the Company borrowed against
revolving credit agreements with the maximum amount outstanding under such
agreements amounting to $14,700,000 with $4,300,000 outstanding as of the
end of the quarter.
Cash Flows from Operating Activities
Cash provided by operating activities increased approximately $5,332,000
from $8,992,000 to $14,324,000 for the comparative twenty-six week period.
This increase is primarily attributable to the increases in accounts payable
and accrued liabilities this quarter compared to the same period a year
earlier.
Cash Flows from Investing Activities
During the first twenty-six weeks of 1999, the Company used $10,034,000 of
cash in investing activities. This compares to $6,225,000 used in the
twenty-six weeks of 1998 resulting from increased expenditures for property
and equipment in 1999 versus 1998 as well as the acquisition of a store in
1999.
Cash Flows used in Financing Activities
Cash flows used in financing activities during the twenty-six weeks of 1999
were $3,366,000 which compares to $2,943,000 during the twenty-six weeks of
1998. The increase was due to higher debt repayments during the period
compared to a year earlier.
Year 2000 Modifications
The Year 2000 issue is the result of computer programs being written using
two digits rather than four to define the applicable year. As the date changes
from December 31, 1999 to January 1, 2000, many existing computer programs,
if not corrected, will read the date as January 1, 1900, or otherwise
incorrectly interpret the date. This may cause the computer to malfunction or
to cease to function altogether. The Company has determined that it must
modify or replace significant portions of its software. The Company's Year
2000 project is comprised of Information Technology (IT) areas such as
business applications within the mainframe computer or other environments;
non IT areas such as microprocessors and embedded chips in operating
equipment; and third party reliance such as banks, utility companies and
vendors. The Company is monitoring these areas in four phases, consisting of
assessment, remediation, testing and implementation. The state of readiness
in each of these areas, as well as the definition of each phase, is presented
below:
<PAGE>
Management's Discussion and Analysis of Financial Condition
And Results of Operations (continued)
<TABLE>
<CAPTION>
Project Assessment Remediation Testing Implementation
Segment
- ----------- ---------- ----------- ------- -------------------
<S> <C> <C> <C> <C>
IT areas:
Mainframe Complete Complete 75% Complete 50% Complete
Expected Expected
completion completion
date, 7/99 date, 7/99
Other Complete 80% Complete 65% Complete 45% Complete
Expected Expected Expected
completion completion completion
date, 5/99 date, 9/99 date, 10/99
Non IT areas Complete 95% Complete 20% Complete Not started
Expected Expected Expected
completion completion completion
date, 3/99 date, 6/99 date, 9/99
Third Complete 80% Complete Not applicable Not applicable
Parties Expected
completion
date, 9/99
</TABLE>
. Assessment is an inventory of IT, non-IT, and third party reliance affected
by the Year 2000 issue.
. Remediation is the changes to the code, obtaining compliant vendor software
or obtaining reliance from the third parties that the Year 2000 issue has
been addressed.
. Testing is the test of the changes to internally developed and vendor
upgraded software.
. Implementation is the rollout of the tested software into production.
The Company has completed all assessments and has completed additional
remediation, testing and implementation since year-end. However, the expected
completion dates have been extended relative to the first quarter evaluation.
We are working with certain third party software suppliers for specific
upgrades in the Mainframe and UNIX environment, so the project timetable has
been extended. These issues are currently being addressed and solutions are
being developed.
<PAGE>
Management's Discussion and Analysis of Financial Condition
And Results of Operations (continued)
The costs of the Year 2000 project through second quarter of fiscal 1999,
excluding costs of internal Company employees, total $747,000 which has been
charged to expense.
Management of the Company believes it has an effective program in place
to resolve the Year 2000 issue in a timely manner. However, the Company
cannot guarantee that it will not experience Year 2000 problems originating
from its own computers or those of third parties with whom the company does
business. As noted above, the Company has not yet completed all necessary
phases of the Year 2000 program. The significant risks of the Year 2000
project include unsuccessful testing of code changes or vendor upgrades,
failed attempts to obtain compliant vendor software, and failures on the part
of crucial vendors or utility companies.
Contingency planning is currently in progress. The Company has
assembled a Year 2000 Contingency team and scheduled Contingency planning
training. Formal contingency plans are being developed with an estimated
completion date of September, 1999.
Cautionary Statement for Purposes of "Safe Harbor Provisions" of the Private
Securities Litigation Reform Act of 1995
Except for historical facts, all matters discussed in this report which are
forward looking involve risks and uncertainties. A number of factors could
adversely affect future results, liquidity and capital resources. These
factors include, but are not limited to, competitive pressures from other
major supermarket operators, including entry of new competitive stores in the
Company's market, the level of discounting by competitors, the stability of
distribution incentives from suppliers, economic conditions in the Company's
primary markets and other uncertainties detailed from time to time in the
Company's Securities and Exchange Commission filings. Although management
believes it has the business strategy and resources needed for improved
operations, future revenue and margin trends cannot be reliably predicted.
Item 3. Quantitative and Qualitative Disclosure of Market Risk
The Company has interest rate cap agreements to manage interest rate
exposure. These transactions reduce the Company's exposure to significant
variations in interest rates. At February 27, 1999, a notional amount of
$20,000,000 was covered by these agreements at an average rate of 9.375%
through May, 1999. If the counterparties to these agreements fail to
perform, the Company would no longer be protected from interest rate
fluctuations by these agreements and could incur additional interest expense
as a result. The Company does not anticipate nonperformance by the
counterparties.
<PAGE>
Part II. Other Information
Item 2. Changes in Securities and Use of Proceeds
At the annual meeting of the shareholders held on January 7, 1999, the
shareholders voted to amend the Articles of Incorporation and Code of
Regulations of the Company. These amendments provide the Board of Directors
with a defensive framework within which to defend the Company, if necessary,
from any future hostile acquisition. These amendments materially modified
the rights of the holder of shares of the common stock of the Company. The
amendments are briefly described as follows:
1. The Articles of Incorporation were amended to add a modified
version of the Ohio Share Acquisition Statue. The amendment modifies the Ohio
Control Share Acquisition Statue to allow the Board of Directors to decline to
put certain acquisitions of Company common stock to a vote of the
shareholders, effectively rejecting such transactions. The effect of this
amendment is to give the Board of Directors greater control over acquisitions
of large stakes in the company and the discretion to prohibit such
transactions.
2. The Code of Regulations was amended to provide that members
of the Board of Directors may be removed only for good cause. Under Ohio law,
a board member can be removed at any time for any reason by a vote of the
shareholders. The effect of the amendment is to prevent the removal of
directors if they have not acted wrongfully. The intent of the amendment was
to make an unsolicited acquisition of the company via proxy fight more
difficult.
3. The Code of Regulations was amended to require that any
shareholder wishing to nominate a candidate for the board must do so at least
90 days before an annual shareholder meeting or 30 days before a special
shareholders meeting. The effect of this amendment is to eliminate the
possibility that a dissident group of shareholders could nominate and elect
its own slate of directors from the floor of any shareholders meeting.
4. The Code of Regulations was amended to provide that a
special meeting of the Board of Directors may be called with 48 hours notice.
The Code previously provided that a meeting could only be called with 7 days
notice. The effect of the amendment is that a board meeting can be called in
a much shorter period of time, and the Board will have greater flexibility in
responding to any given situation.
5. The Articles of Incorporation were amended to increase the
number of authorized shares of common stock from 12,000,000 to 24,000,000.
The effect of the amendment is to increase the number of shares which the
company may issue, whether privately or in a public offering.
6. The Articles of Incorporation were amended to provide that
mergers or similar transactions may be approved by the affirmative vote of a
<PAGE>
majority of the shareholders, as opposed to the normal, two-thirds, if the
Board of Directors approve the transaction by a majority vote. Previously,
the Articles had required the shareholders to approve such a transaction by a
two-thirds vote unless the Board of Directors had unanimously approved the
transaction. Also, this provision of the Articles was amended to include
"combinations" and "majority share acquisitions" as transactions included
within the scope of these voting requirements. The effect of the amendment is
to allow the shareholder to approve these types of transactions by a simple
majority vote, as opposed to a two-thirds vote, under more circumstances.
It is the intent of management in proposing these amendments to provide
the Board of Directors with a significant degree of control over any given
overture of acquisition to the company so that it might properly consider the
best interests of all parties involved, and if necessary to strike the most
favorable transaction for all. However, the end result will be to, in most
cases, increase the authority of the Board of Directors in dealing with any
hostile acquisition and to conversely limit the authority of the shareholders.
<PAGE>
Item 6. - Exhibits and Reports on Form 8 K.
6(a) Exhibits Attached
Exhibit 1 - Amended Articles of Incorporation and Code of
Regulations.
Exhibit 2 - Material Contract -- Non-Competition Agreement
6(b) Reports on Form 8 K.
On December 4, 1998, the company filed a Form 8-K in order to
update the formal description of the Company's securities. The
description was made pursuant to Item 5 of the form.
/s/ Richard B. Iott
Signature
Richard B. Iott, President and
Chief Executive Officer
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SEAWAY FOOD TOWN, INC.
Registrant
/s/ Richard B. Iott
Date April 12, 1999 By ___________________________
Richard B. Iott, President
and Chief Executive Officer
/s/ Waldo E. Yeager
Date April 12, 1999 By ____________________________
Waldo E. Yeager,
Chief Financial Officer,
Treasurer
<PAGE>
EXHIBIT 1
AMENDED ARTICLES OF INCORPORATION
OF
SEAWAY FOOD TOWN, INC.
FIRST: The name of said Corporation shall be SEAWAY FOOD TOWN, INC.
SECOND: The place in the State of Ohio where its principal office is located
is the City of Maumee, Lucas County.
THIRD: The purposes of the Corporation are:
1. To conduct, own, lease, manage and operate supermarkets, restaurants, and
general mercantile businesses at wholesale and retail, and to buy, sell,
produce and deal in all kinds of groceries, sundries, canned foods,
confectionery, vegetables, fruits, meats, fish, beverages, food products,
milk products, bakery products, and all other articles used and sold in the
grocery, baking, meat, supermarket, restaurant and general mercantile
business.
2. To take, lease, purchase or otherwise acquire, and to own, use, hold,
sell, convey, exchange, lease, mortgage, work, improve, develop, and otherwise
handle, deal in and dispose of real estate, real property, and any interest or
right therein.
3. To manufacture, purchase, or otherwise acquire, sell, assign and transfer,
exchange or otherwise dispose of, and to invest, trade, deal in or deal with
goods, wares, merchandise and personal property of every class and
description.
4. To purchase, acquire, hold, mortgage, pledge, hypothecate, loan money
upon, exchange, sell and otherwise deal in personal property and real
property of every kind, character and description whatsoever and wheresoever
situated, and any interest therein.
5. To acquire by purchase, subscription, underwriting, participation in
syndicates or otherwise, and to hold, own, sell, exchange, pledge,
hypothecate or otherwise dispose of shares of stock, bonds, mortgages,
debentures, trust receipts, participation certificates, certificates of
beneficial interest, notes and other securities, obligations contracts,
choses in action, and evidences of indebtedness generally, or interests
therein, of any corporations, associations, firms, trusts, persons,
governments, states, municipalities and other organizations: to receive,
collect and dispose of interest, dividends and income upon, of or from any of
the foregoing; to exercise any and all rights and privileges of individual
ownership or interest in obligations, including the right to vote thereon for
any and all purposes, and to do any and all acts and things for the
preservation, protection, improvement and enhancement in value thereof; and to
aid, by loan, subsidy, guarantee or otherwise those issuing, creating or
responsible for same.
<PAGE>
Each purpose specified in any clause or paragraph of this Article is an
independent purpose and shall not be limited or restricted by reference to or
inference from the terms of any other clause or paragraph of these Amended
Articles of Incorporation.
The Corporation reserves the right substantially to change its purposes. If a
change of purposes is authorized by the vote now or hereafter required by
statute, dissenting shareholders shall not have the appraisal or payment
rights provided by the Corporation Code of Ohio for dissenting shareholders.
FOURTH: The number of shares which the Corporation is authorized to have
outstanding is 24,300,000, consisting of 24,000,000 Common Shares, without par
value ("Common Shares") and 300,000 Serial Preferred Shares, without par value
("Serial Preferred Shares").
The shares of such classes shall have the following express terms:
DIVISION A
Express Terms of Common Shares
The Common Shares shall be subject to the express terms of the Serial
Preferred Shares and any series thereof. Each Common Share shall be equal to
every other Common Share. The holders of Common Shares shall be entitled to
one vote for each such share upon all matters presented to shareholders,
except those matters presented to the holders of Serial Preferred Shares for
voting thereon as a class.
DIVISION B
Express Terms of Serial Preferred Shares
Section 1. Serial Preferred Shares may be issued from time to time in one
or more series. All Serial Preferred Shares shall be of equal rank and shall
be identical, except in respect of the matters that may be fixed by the Board
of Directors as hereinafter provided, and each share of each series shall be
identical with all other shares of such series, except as to the date from
which dividends are cumulative.
Subject to the provisions of Sections 2 to 6, inclusive, of this Division B,
which provisions shall apply to all Serial Preferred Shares, the Board of
Directors hereby is authorized to cause Serial Preferred Shares to be issued
in one or more series and with respect to each such series prior to the
issuance thereof to fix:
(a) The designation of the series, which may be by distinguishing
number, letter or title.
(b) The number of shares of the series, which number the Board of
Directors may (except where otherwise provided in the creation of
the series) increase or decrease (but not below the number of shares
thereof then outstanding).
(c) The annual dividend rate of the series.
<PAGE>
(d) The dates at which dividends, if declared, shall be payable, and the
dates from which dividends shall be cumulative.
(e) The redemption rights and price or prices, if any, for shares of the
series.
(f) The terms and amount of any sinking fund provided for the purchase
or redemption of shares of the series.
(g) The amounts payable on shares of the series in the event of any
voluntary or involuntary liquidation, dissolution or winding up of
the affairs of the Corporation.
(h) Whether the shares of the series shall be convertible into Common
Shares, and, if so, the conversion price or prices, any adjustments
thereof, and all other terms and conditions upon which such
conversion may be made.
(i) Restrictions (in addition to those set forth in Section 6(b) of this
Division) on the issuance of shares of the same series or of any
other class or series.
The Board of Directors is authorized to adopt from time to time amendments to
the Amended Articles of Incorporation fixing, with respect to each such
series, the matters described in clauses (a) to (i), inclusive, of this
Section 1.
Section 2. The holders of Serial Preferred Shares of each series, in
preference to the holders of Common Shares and of any other class of shares
ranking junior to the Serial Preferred Shares, shall be entitled to receive
out of any funds legally available and when and as declared by the Board of
Directors dividends in cash at the rate for such series fixed in accordance
with the provisions of Section 1 of this Division B, payable quarterly on the
dates fixed for such series. No dividends may be paid upon or declared or
set apart for any of the Serial Preferred Shares for any quarterly dividend
period unless at the same time a like proportionate dividend for the same
quarterly dividend period, ratably in proportion to the respective annual
dividend rates fixed therefor, shall be paid upon or declared or set apart
for all Serial Preferred Shares of all series then issued and outstanding and
entitled to receive such dividend.
Section 3. (a) Subject to the express terms of each series and to the
provisions of Section 6(b)(iii) of this Division B, the Corporation may from
time to time redeem all or any part of the Serial Preferred Shares of any
series at the time outstanding (i) at the option of the Board of Directors at
the applicable redemption price for such series fixed in accordance with the
provisions of Section 1 of this Division B, or (ii) in fulfillment of the
requirement of any sinking fund provided for shares of such series at the
applicable sinking fund redemption price, fixed in accordance with the
provisions of Section 1 of this Division B, together in each case with an
amount equal to all dividends accrued and unpaid thereon (whether or not such
dividends shall have been earned or declared) to the redemption date.
<PAGE>
(b) Notice of every such redemption shall be mailed, postage prepaid, to the
holders of record of the Serial Preferred Shares to be redeemed at their
respective addresses then appearing on the books of the Corporation, not less
than 30 days nor more than 60 days prior to the date fixed for such
redemption. At any time before or after notice has been given as above
provided, the Corporation may deposit the aggregate redemption price of the
Serial Preferred Shares to be redeemed with any bank or trust company in
Cleveland, Ohio, or Toledo, Ohio, having capital and surplus of more than
$5,000,000, named in such notice, and direct that such deposited amount be
paid to the respective holders of the Serial Preferred Shares so to be
redeemed, in amounts equal to the redemption price of all Serial Preferred
Shares so to be redeemed, on surrender of the share certificate or
certificates held by such holders. Upon the making of such deposit such
holders shall cease to be shareholders with respect to such shares, and after
such notice shall have been given and such deposit shall have been made such
holders shall have no interest in or claim against the Corporation with
respect to such shares except only to receive such money from such bank or
trust company without interest or the right to exercise, before the redemption
date, any unexpired privileges of conversion. In case less than all of the
outstanding Serial Preferred Shares are to be redeemed, the Corporation shall
select pro rata or by lot the shares so to be redeemed in such manner as shall
be prescribed by its Board of Directors.
If the holders of Serial Preferred Shares which shall have been called
for redemption shall not, within six years after such deposit, claim the
amount deposited for the redemption thereof, any such bank or trust company
shall, upon demand, pay over to the Corporation such unclaimed amounts and
thereupon such bank or trust company and the Corporation shall be relieved of
all responsibility in respect thereof and to such holders.
(c) Any Serial Preferred Shares which are redeemed by the Corporation
pursuant to the provisions of this Section 3 and any Serial Preferred Shares
which are purchased and delivered in satisfaction of any sinking fund
requirements provided for shares of such series and any Serial Preferred
Shares which are converted in accordance with the express terms thereof shall
be canceled and not reissued. Any Serial Preferred Shares otherwise acquired
by the Corporation shall resume the status of authorized and unissued Serial
Preferred Shares without serial designation.
Section 4. (a) The holders of Serial Preferred Shares of any series shall, in
case of liquidation, dissolution or winding up of the affairs of the
Corporation, be entitled to receive in full out of the assets of the
Corporation, including its capital, before any amount shall be paid or
distributed among the holders of the Common Shares or any shares ranking
junior to the Serial Preferred Shares, the amounts fixed with respect to
shares of such series in accordance with Section 1 of this Division B, plus
an amount equal to all dividends accrued and unpaid thereon (whether or not
such dividends shall have been earned or declared) to the date of payment of
<PAGE>
the amount due pursuant to such liquidation, dissolution or winding up of the
affairs of the Corporation. In case the net assets of the Corporation legally
available therefor are insufficient to permit the payment upon all outstanding
Serial Preferred Shares and any shares ranking on a parity therewith of the
full preferential amount to which they are respectively entitled, then such
net assets shall be distributed ratably upon outstanding Serial Preferred
Shares and any shares ranking on a parity therewith in proportion to the full
preferential amount to which each such share is entitled.
After payment to holders of Serial Preferred Shares of the full preferential
amounts as aforesaid, holders of Serial Preferred Shares as such shall have
no right or claim to any of the remaining assets of the Corporation.
(b) The merger or consolidation of the Corporation into or with any other
corporation, or the merger of any other corporation into it, or the sale,
lease or conveyance of all or substantially all the property or business of
the Corporation, shall not be deemed to be a dissolution, liquidation or
winding up for the purposes of this Section 4.
Section 5. (a) The holders of Serial Preferred Shares shall be entitled to
one vote for each share; and, except as otherwise provided herein or required
by law, the holders of Serial Preferred Shares and the holders of Common
Shares shall vote together as one class on all matters. No adjustment of the
voting rights of holders of Serial Preferred Shares shall be made for an
increase or decrease in the number of Common Shares authorized or issued or
for share splits or combinations of the Common Shares or for share dividends
on any class of shares payable solely in Common Shares.
If, and so often as, the Corporation shall be in default in dividends in an
amount equivalent to six full quarterly dividends on any series of Serial
Preferred Shares at the time outstanding, whether or not earned or declared,
the holders of Serial Preferred Shares of all series, voting separately as a
class and in addition to all other rights to vote for Directors, shall be
entitled to elect, as herein provided, two members of the Board of Directors
of the Corporation; provided, however, that the holders of Serial Preferred
Shares shall not have or exercise such special class voting rights except at
meetings of the shareholders for the election of Directors at which the
holders of not less than 45% of the outstanding Serial Preferred Shares of
all series then outstanding are present in person or by proxy; and provided
further that the special class voting rights provided for herein when the
same shall have become vested shall remain so vested until all accrued and
unpaid dividends on the Serial Preferred Shares of all series then outstanding
shall have been paid, whereupon the holders of Serial Preferred Shares shall
be divested of their special class voting rights in respect of subsequent
elections of Directors, subject to the revesting of such special class voting
rights in the event hereinabove specified in this paragraph.
In the event of default entitling the holders of Serial Preferred Shares to
elect two Directors as above specified, a special meeting of the shareholders
<PAGE>
for the purpose of electing such Directors shall be called by the Secretary
of the Corporation upon written request of, or may be called by, the holders
of record of at least 15% of the Serial Preferred Shares of all series at the
time outstanding, and notice thereof shall be given in the same manner as that
required for the annual meeting of shareholders; provided, however, that the
Corporation shall not be required to call such special meeting if the annual
meeting of shareholders shall be held within 90 days after the date of receipt
of the foregoing written request from the holders of Serial Preferred Shares.
At any meeting at which the holders of Serial Preferred Shares shall be
entitled to elect Directors, the holders of 45% of the then outstanding Serial
Preferred Shares of all series, present in person or by proxy, shall be
sufficient to constitute a quorum, and the vote of the holders of a majority
of such shares so present at any such meeting at which there shall be such a
quorum shall be sufficient to elect the members of the Board of Directors
which the holders of Serial Preferred Shares are entitled to elect as
hereinabove provided.
The two Directors who may be elected by the holders of Serial Preferred Shares
pursuant to the foregoing provisions shall be in addition to any other
Directors then in office or proposed to be elected otherwise than pursuant to
such provisions, and nothing in such provisions shall prevent any change
otherwise permitted in the total number of Directors of the Corporation or
require the resignation of any Director elected otherwise than pursuant to
such provisions.
(b) The affirmative vote of the holders of at least a majority of the Serial
Preferred Shares at the time outstanding, given in person or by proxy at a
meeting called for the purpose at which the holders of Serial Preferred Shares
shall vote separately as a class, shall be necessary to effect any one or more
of the following (but so far as the holders of Serial Preferred Shares are
concerned, such action may be effected with such vote):
(i) Any amendment, alteration or repeal of any of the provisions of the
Amended Articles of Incorporation or of the Code of Regulations of the
Corporation which affects adversely the voting powers, rights or preferences
of the holders of Serial Preferred Shares; provided, however, that, for the
purpose of this clause (i) only, neither the amendment of the Amended Articles
of Incorporation so as to authorize or create, or to increase the authorized
or outstanding amount of, Serial Preferred Shares or of any shares of any
class ranking on a parity with or junior to the Serial Preferred Shares, nor
the amendment of the provisions of the Code of Regulations so as to increase
the number of Directors of the Corporation, shall be deemed to affect
adversely the voting powers, rights or preferences of the holders of Serial
Preferred Shares; and provided further, that if such amendment, alteration or
repeal affects adversely the rights or preferences of one or more but not all
series of Serial Preferred Shares at the time outstanding, only the vote of
the holders of at least a majority of the number of the shares at the time
outstanding of the series so affected shall be required;
(ii) The authorization or creation of, or the increase in the authorized
amount of, any shares of any class, or any security convertible into shares of
<PAGE>
any class, ranking prior to the Serial Preferred Shares;
(iii) The purchase or redemption (for sinking fund purposes or
otherwise) of less than all of the Serial Preferred Shares then outstanding
except in accordance with a share purchase offer made to all holders of
record of Serial Preferred Shares, unless all dividends upon all Serial
Preferred Shares then outstanding for all previous quarterly dividend periods
shall have been declared and paid or funds therefor set apart and all accrued
sinking fund obligations applicable thereto shall have been complied with;
(iv) The consolidation of the Corporation with or its merger into any
other corporation unless the corporation resulting from such consolidation or
merger will have after such consolidation or merger no class of shares either
authorized or outstanding ranking prior to or on a parity with the Serial
Preferred Shares except the same number of shares ranking prior to or on a
parity with the Serial Preferred Shares and having the same rights and
preferences as the shares of the Corporation authorized and outstanding
immediately preceding such consolidation or merger, and each holder of Serial
Preferred Shares immediately preceding such consolidation or merger shall
receive the same number of shares, with the same rights and preferences, of
the resulting corporation; or
(v) The authorization of any shares ranking on a parity with the Serial
Preferred Shares or an increase in the authorized number of Serial Preferred
Shares.
Section 6. For the purpose of this Division B:
Whenever reference is made to shares "ranking prior to the Serial Preferred
Shares" or "on a parity with the Serial Preferred Shares", such reference
shall mean and include all shares of the Corporation in respect of which the
rights of the holders thereof as to the payment of dividends or as to
distributions in the event of a voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the corporation are given
preference over, or rank on an equality with (as the case may be) the rights
of the holders of Serial Preferred Shares; and whenever reference is made to
shares "ranking junior to the Serial Preferred Shares", such reference shall
mean and include all shares of the Corporation in respect of which the rights
of the holders thereof as to the payment of dividends and as to distributions
in the event of a voluntary or involuntary liquidation, dissolution or winding
up of the affairs of the Corporation are junior and subordinate to the rights
of the holders of Serial Preferred Shares.
FIFTH: Section 1. Except as provided in Section 2 of this Article FIFTH,
notwithstanding any provision of the Ohio Revised Code now or hereafter in
force requiring for any purpose the vote, consent, waiver or release of the
holders of shares entitling them to exercise two-thirds, or any other
proportion of the voting power of the Corporation or classes of shares
thereof, such action, unless otherwise expressly required by Statute or by
these Amended Articles of Incorporation, may be taken by the vote, consent,
waiver or release of the holders of shares entitling them to exercise a
<PAGE>
majority of the voting power of the corporation of such class or classes.
Section 2. Any merger or consolidation of the Corporation with or into any
other corporation, any combination or majority share acquisition involving the
Corporation, or any dissolution, or any sale, lease, exchange or other
disposition of all or substantially all of the assets of the Corporation to or
with any other corporation, person or entity, shall require the affirmative
vote of the holders of at least two-thirds of each class or classes of the
outstanding shares of capital stock of the Corporation issued and outstanding
and entitled to vote. The provisions of this Section 2 of Article FIFTH shall
not apply to any transaction described in the preceding sentence which has
been approved by resolution adopted by the Directors at a meeting of the
Board of Directors of the Corporation at which a quorum is present.
The Board of Directors of the Corporation shall have the power and duty to
determine for the purposes of this Article FIFTH, on the basis of information
then known to it, whether any sale, lease, exchange or other disposition of
part of the assets of the Corporation involves substantially all the assets
of the Corporation. Any such determination by the Board shall be conclusive
and binding for all purposes of this Article FIFTH.
This Section 2 of Article FIFTH may not be amended or rescinded except by the
affirmative vote of the holders of at least two-thirds of each class or
classes of the outstanding shares of capital stock of the Corporation issued
and outstanding and entitled to vote, at any regular or special meeting of the
shareholders if notice of the proposed alteration or amendment be contained in
the notice of the meeting.
Section 3: No Person shall make a Control Share Acquisition without the prior
authorization of the Corporation's shareholders.
(A) In order to obtain the shareholder's authorization of a Control Share
Acquisition, a Person shall deliver a notice (the "Notice") to the Corporation
at its principal place of business that sets forth all of the following
information:
(1) The identity of the Person who is giving the Notice;
(2) A statement that the Notice is given pursuant to this Article
FIFTH;
(3) The number and class of shares of the Corporation owned, directly or
indirectly, by the Person who gives the Notice;
(4) The range of voting power under which the proposed Control Share
Acquisition would, if consummated, fall;
(5) A description in reasonable detail of the terms of the proposed
Control Share Acquisition; and
(6) Representations, supported by reasonable evidence, that the proposed
Control Share Acquisition, if consummated, would not be contrary to law
<PAGE>
and that the Person who is giving the Notice has the financial capacity
to make the proposed Control Share Acquisition.
(B) Within ten (10) days after receipt by the Corporation of a Notice that
complies with paragraph (A), the Board of Directors of the Corporation shall
call a special meeting of shareholders to consider the proposed Control Share
Acquisition. Such special meeting shall be held not later than fifty (50)
days after receipt of the Notice by the Corporation, unless the Person who
delivered the Notice agrees to a later date. However, the Board of Directors
shall have no obligation to call such meeting if it makes a determination
within ten (10) days after receipt of the Notice (i) that the Notice was not
given in good faith, (ii) that the proposed Control Share Acquisition would
not be in the best interest of the Corporation and its shareholders or others
whose interests the Board of Directors may take into consideration, or
(iii) that the Person who delivered the Notice has failed to adequately
demonstrate (a) that such Person has the financial capacity to make the
proposed Control Share Acquisition, or (b) that the proposed Control Share
Acquisition would not be contrary to law if consummated. The Board of
Directors may adjourn such meeting if, prior to such meeting, (i) the
Corporation has received a Notice from any other Person, or (ii) a merger,
consolidation or sale of assets of the Corporation has been approved by the
Board of Directors and the Board of Directors has determined that the Control
Share Acquisition proposed by such other Person or the merger, consolidation
or sale of assets of the Corporation should be presented to shareholders at
an adjourned meeting or at a special meeting held at a later date.
If the Board of Directors determines that a special meeting of shareholders
should not be called pursuant to this paragraph (B), the determination shall
not be deemed void or voidable merely because one or more of the directors or
officers who participated in making such determination may be deemed to be
other than disinterested if the material facts of the relationship giving
rise to a basis for self-interest are known to the directors and the
directors, in good faith reasonably justified by the facts, make such
determination by the affirmative vote of a majority of the disinterested
directors, even though the disinterested directors constitute less than a
quorum. For purposes of this paragraph, "disinterested directors" shall mean
directors whose material contacts with the Corporation are limited principally
to activities as a director or shareholder. Persons who have substantial,
recurring business or professional contacts with the Corporation shall not be
deemed to be "disinterested directors" for purposes of this provision. A
director shall not be deemed to be other than a "disinterested director"
merely because he or she would no longer be a director if the proposed
Control Share Acquisition were approved and consummated.
(C) The Corporation shall give notice of such special meeting to all
shareholders of record as of the record date set for such meeting as promptly
as practicable. Such notice shall include or be accompanied by a copy of the
Notice and by a statement of the Corporation, authorized by the Board of
Directors, of its position or recommendation, or that it is taking no
position or making no recommendation, with respect to the proposed Control
Share Acquisition.
<PAGE>
(D) The Person who delivered the Notice may make the proposed Control Share
Acquisition if both the following occur: (i) the shareholders of the
Corporation authorize such acquisition at the special meeting called by the
Board of Directors and held for that purpose, and at which a quorum is
present, by an affirmative vote of a majority of the voting shares represented
at such meeting in person or by proxy, and by a majority of the portion of
such voting shares represented at such meeting in person or by proxy excluding
the votes of Interested Shares; and (ii) such acquisition is consummated, in
accordance with the terms so authorized, not later than 360 days following
such shareholder authorization of the Control Share Acquisition.
(E) Shares issued or transferred to any Person in violation of this Article
FIFTH shall be valid only with respect to such amount of shares as does not
result in a violation of this Article FIFTH, and such issuance or transfer
shall be null and void with respect to the remainder of such shares (any such
remainder of shares being hereinafter called "Excess Shares"). If the second
clause of the foregoing sentence is determined to be invalid by virtue of any
legal decision, statute, rule or regulation, any Person who holds Excess
Shares in violation of this Article FIFTH shall be conclusively deemed to
have acted as an agent on behalf of the Corporation in acquiring such Excess
Shares and to hold such Excess Shares on behalf of the Corporation. While held
by any Person in violation of this Article FIFTH, Excess Shares shall not be
entitled to any voting rights, shall not be considered to be outstanding for
quorum or voting purposes, and shall not be entitled to receive dividends or
any other distribution with respect to such Excess Shares. Any such Person
who receives dividends or any other distribution with respect to Excess
Shares shall hold the same as agent for the Corporation and, following a
permitted transfer, for the transferee thereof. Notwithstanding the
foregoing, any holder of Excess Shares may transfer the same (together with
any distributions thereon) to any Person who, following such transfer, would
not own shares in violation of this Article FIFTH. Upon such permitted
transfer, the Corporation shall pay or distribute to the transferee any
dividends or other distributions on the Excess Shares not previously paid or
distributed.
(F) As used in this Article FIFTH:
(1) "Person" includes, without limitation, an individual, a corporation
(whether nonprofit or for profit), a partnership, an unincorporated
society or association, and two or more persons having a joint or common
interest.
(2) (a) "Control Share Acquisition" means the acquisition, directly or
indirectly, by any Person of shares of the Corporation that, when added
to all other shares of the Corporation in respect of which such Person
may exercise or direct the exercise of voting power as provided in this
paragraph (F)(2)(a), would entitle such Person, immediately after such
acquisition, directly or indirectly to exercise or direct the exercise of
voting power of the Corporation in the election of directors within any
of the following ranges of such voting power:
<PAGE>
(i) One-fifth or more but less than one-third of such voting
power;
(ii) One-third or more but less than a majority of such voting
power;
(iii) A majority or more of such voting power.
A bank, broker, nominee, trustee, or other Person who acquires shares in
the ordinary course of business for the benefit of others in good faith
and not for the purpose of circumventing this Article FIFTH shall,
however, be deemed to have voting power only of shares in respect of
which such Person would be able to exercise or direct the exercise of
votes without further instruction from others at a meeting of
shareholders called under this Article FIFTH. For purposes of this
Article FIFTH, the acquisition of securities immediately convertible into
shares of the Corporation with voting power in the election of directors
shall be treated as an acquisition of such shares.
(b) The acquisition of any shares of the Corporation does not
constitute a Control Share Acquisition for the purpose of this Article
FIFTH if the acquisition is consummated in any of the following
circumstances:
(i) By underwriters, in good faith and not for the purpose of
circumventing this Article FIFTH, in connection with an offering of the
securities of the Corporation to the public;
(ii) By bequest or inheritance, by operation of law upon the
death of any individual, or by any other transfer without valuable
consideration, including a gift, that is made in good faith and not for
the purpose of circumventing this Article FIFTH;
(iii) Pursuant to the satisfaction of a pledge or other
security interest created in good faith and not for the purpose of
circumventing this Article FIFTH;
(iv) Pursuant to a merger or consolidation adopted, or a
combination or majority share acquisition authorized, by shareholder vote
in compliance with the provisions of Article FIFTH, Section Two, of these
Articles of Incorporation and 1701.78 or 1701.83 of the Ohio Revised
Code, if the Corporation is the surviving or new corporation in the
merger or consolidation or is the acquiring corporation in the
combination or majority share acquisition and if the vote of shareholders
of the surviving, new, or acquiring corporation is required by the
provisions of 1701.78 or 1701.83 of the Ohio Revised Code;
(v) Prior to January 7, 1999;
(vi) Pursuant to a contract existing prior to January 7, 1999;
or
(vii) The Person's being entitled, immediately thereafter, to
exercise or direct the exercise of voting power of the Corporation in the
<PAGE>
election of directors within the same range theretofore attained by that
person either as a result of compliance with the provisions of this
section or as a result solely of the Corporation's purchase of shares
issued by it.
The acquisition by any Person of shares of the Corporation in a manner
described under this paragraph (F)(2)(b) shall be deemed to be a Control
Share Acquisition authorized pursuant to this Article FIFTH within the
range of voting power under paragraph (F)(2)(a)(i), (ii) or (iii) of this
Article FIFTH that such Person is entitled to exercise after such
acquisition, provided that, in the case of an acquisition in a manner
described under paragraph (F)(2)(b)(ii) or (iii), the transferor of such
shares to such Person had previously obtained any authorization of
shareholders required under this Article FIFTH in connection with such
transferor's acquisition of shares of the Corporation.
(c) The acquisition of shares of the Corporation in good faith and
not for the purpose of circumventing this Article FIFTH, which (i) had
previously been authorized by shareholders in compliance with this
Article FIFTH or (ii) would have constituted a Control Share Acquisition
but for paragraph (F)(2)(b), does not constitute a Control Share
Acquisition for the purpose of this Article FIFTH unless such acquisition
entitles any Person, directly or indirectly, to exercise or direct the
exercise of voting power of the Corporation in the election of directors
in excess of the range of such voting power authorized pursuant to this
Article FIFTH, or deemed to be so authorized under paragraph (F)(2)(b).
(3) "Interested Shares" means voting shares with respect to which any of
the following Persons may exercise or direct the exercise of the voting
power:
(a) any Person whose Notice prompted the calling of the meeting of
shareholders;
(b) any officer of the Corporation elected or appointed by the
directors of the Corporation; and
(c) any employee of the Corporation who is also a director of the
Corporation.
(G) No proxy appointed for or in connection with the shareholder
authorization of a Control Share Acquisition pursuant to this Article FIFTH is
valid if it provides that it is irrevocable. No such proxy is valid unless it
is sought, appointed, and received both:
(1) In accordance with all applicable requirements of law; and
(2) Separate and apart from the sale or purchase, contract or tender for
sale or purchase, or request or invitation for tender for sale or
purchase, of shares of the Corporation.
(H) Proxies appointed for or in connection with the shareholder authorization
of a Control Share Acquisition pursuant to this Article FIFTH shall be
<PAGE>
revocable at all times prior to the obtaining of such shareholder
authorization, whether or not coupled with an interest.
(I) Notwithstanding any other provisions of these Articles of
Incorporation or the Code of Regulations of the Corporation, as the same
may be in effect from time to time, or any provision of law that might
otherwise permit a lesser vote of the directors or shareholders, the
affirmative vote of at least two-thirds (2/3) of the voting shares shall
be required to alter, amend or repeal this Article FIFTH or adopt any
provisions in the Articles of Incorporation or Code of Regulations of
the Corporation, as the same may be in effect from time to time, that
are inconsistent with the provisions of this Article FIFTH. This
provision shall be in addition to any affirmative vote of the directors
or the holders of any particular class or series of shares required by
law, the Articles of Incorporation or the Code of Regulations of the
Corporation, as the same may be in effect from time to time.
(J) The provisions of 1701.831 of the Ohio Revised Code, as amended
from time to time, or any successor provision or provisions to said
section, shall apply to this Corporation with respect to any particular
Control Share Acquisition attempt, as such is defined in 1701.831 of the
Ohio Revised Code, only if (a)there is a determination by a court of
competent jurisdiction with respect to which no appeal is pending that
the provisions of Article FIFTH of these Articles of Incorporation shall
not be applicable to a particular Control Share Acquisition attempt, or
(b) in the event that Article FIFTH of these Articles of Incorporation,
as such Articles of Incorporation may be amended from time to time,
ceases to be an Article of these Articles of Incorporation, disregarding
any renumbering of such Article FIFTH resulting from any amendment of
these Articles of Incorporation.
SIXTH: Except as otherwise expressly provided herein, no shareholder
of the Corporation shall by reason of his holding shares of any class
have any pre-emptive or preferential right to purchase or subscribe to
any shares of any class of the Corporation, now or hereafter authorized,
or any notes, debentures, bonds or other securities convertible into or
carrying options or warrants to purchase shares of any class, now or
hereafter authorized, whether or not the issuance of any such shares, or
such notes, debentures, bonds or other securities, would affect
adversely the dividend or voting rights of such shareholder, and the
Board of Directors may issue shares of any class of the Corporation, or
any notes, debentures, bonds, or other securities convertible into or
carrying options or warrants to purchase shares of any class, without
offering any such shares of any class, either in whole or in part, to
the existing shareholders of any class; provided, however, that the
Board of Directors may, in its discretion, grant such preferential
subscription rights at such price and upon such other terms and
conditions as it may determine.
SEVENTH: The Board of Directors is hereby authorized to fix and
determine and to vary the amount of working capital of the Corporation,
to determine whether any, and, if any, what part, of its surplus,
however created or arising, shall be used or disposed of or declared in
dividends or paid to shareholders, and, without action by shareholders,
to use and apply such surplus, or any part thereof, at any time or from
time to time, in the purchase or acquisition of shares of any class,
<PAGE>
voting trust certificates and shares, bonds, debentures, notes, scrip,
warrants, obligations, evidences of indebtedness of the corporation or
other securities of the corporation to such extent or amount and in such
manner and upon such terms as the Board of Directors shall deem
expedient.
EIGHTH: (a) A Director or officer shall not be disqualified from
dealing or contracting with the Corporation as vendor, purchaser,
employee, agent or otherwise; nor shall any transaction or contract or
act of the Corporation be void or voidable or in any way affected or
invalidated by the fact that any director or officer, or any firm of which
any director or officer is a member, or any corporation of which any
director or officer is a shareholder, director or officer is in any
way interested in such transaction or contract or act, provided the fact
that such director or officer, or such firm, or such corporation is so
interested shall be disclosed or shall be known to the Board of
Directors or such members thereof as shall be present at any meeting of
the Board of Directors at which action upon any such contract or
transaction or act shall be taken; nor shall any such director or
officer be accountable or responsible to the Corporation for or in
respect to any such transaction or contract or act of the Corporation or
for any gains or profits realized by him by reason of the fact that he,
or any firm of which he is a member, or any corporation of which he is a
shareholder, director or officer is interested in such transaction or
contract or act; and any such director or officer may be counted in
determining the existence of a quorum at any meeting of the Board of
Directors of the Corporation which shall authorize or take action in
respect to any such contract, or transaction, or act, and may vote to
authorize, ratify, or approve any such contract or transaction or act,
with like force and effect as if he, or any firm of which he is a
member, or any corporation of which he is a shareholder, director or
officer were not interested in such transaction or contract or act.
(b) Every person who is or has been a director or officer of the
Corporation shall be indemnified by it against expenses and liabilities
reasonably incurred by him in connection with either (1) any action,
suit or proceeding to which he may be a party defendant, or (2) any
claim of liability asserted against him, by reason of his having been
director or officer of the Corporation. Without limitation, the term
"expenses" shall include any amount paid or agreed to be paid in
satisfaction of a judgment or in settlement of a judgment or claim of
liability other than any amount paid or agreed to be paid to the
Corporation itself. The Corporation shall not, however, indemnify any
director or officer in respect to matters as to which he shall be
finally adjudged liable for negligence or misconduct in the performance
of his duties as such director or officer, nor, in the case of a
settlement, unless such settlement shall be found to be in the interest
of the Corporation (1) by the court having jurisdiction of the action,
suit or proceeding against such director or officer or of a suit
involving his right to indemnification, or (2) by a majority of the
directors of the Corporation then in office other than those involved
(whether or not such majority constitutes a quorum), or, if there are
not at least two directors of the Corporation then in office other than
those involved, by a majority of a committee (selected by the Board of
Directors) of three or more shareholders of the Corporation who are not
directors or officers; provided that such indemnity in case of a
<PAGE>
settlement shall not be allowed by such directors or committee of
shareholders unless it is found by independent legal counsel that such
settlement is reasonable in amount and in the interest of the
Corporation. The foregoing right of indemnification shall not be
exclusive of any other rights to which any such director or officer may
be entitled under any regulations, agreement, or vote of shareholders,
or to which any such director or officer may be entitled as a matter of
law; and the foregoing right of indemnification shall inure to the
benefit of the heirs, executors and administrators of any such director
or officer.
NINTH: These Amended Articles of Incorporation supersede and take the
place of the existing Articles of Incorporation, and all amendments
thereto and thereof.
<PAGE>
CODE OF REGULATIONS
OF
SEAWAY FOOD TOWN, INC.
ARTICLE I
MEETINGS OF SHAREHOLDERS
Section 1. Annual Meeting. An annual meeting of the shareholders,
for the election of Directors to succeed those whose terms expire and
for the transaction of such other business as may properly come before
the meeting, shall be held at such place, on such date, and at such time
as the Board of Directors shall designate each year, which date shall be
within thirteen (13) months subsequent to the last annual meeting of
shareholders.
Section 2. Special Meetings. Special meetings of shareholders may
be called to be held on any business day in accordance with applicable
provisions (if any) in the Amended Articles of Incorporation, and also
in writing by the holders of twenty-five percent of the outstanding
shares entitled to vote thereat, or by the Chairman of the Board of
Directors, or by the President, or a Vice President, or a majority of
the directors in office, or by the Board of Directors, or by the
Executive Committee at a meeting thereof. Such meetings shall be held
at the principal office of the corporation in Toledo, Ohio, unless the
same is called by the Board of Directors or by the President, in which
case it may be held at any place designated by the Board or by the
President and specified in the notice of the meeting.
Section 3. Notice of Meetings. Not less than seven nor more than
sixty days before the date fixed for a meeting of shareholders, written
notice stating the time, place and purposes of such meeting shall be
given by or at the direction of the Chairman of the Board, the President
or the Secretary, or an Assistant Secretary, or any other person
required or permitted by these Regulations to give such notice. The
notice shall be given by personal delivery or by mail to each
shareholder entitled to notice of the meeting who is of record as of the
day next preceding the day on which notice is given or, if a record date
therefor is duly fixed, of record as of said date; if mailed, such
notice shall be addressed to the shareholder at his address as it
appears on the records of the corporation. Notice of the time, place
and purposes of any meeting of shareholders may be waived in writing,
either before or after the holding of such meeting, by any shareholder,
which writing shall be filed with or entered upon the records of the
meeting.
Section 4. Quorum and Adjournments. Except as may otherwise be
required by law, this Code of Regulations or the Amended Articles of
Incorporation, at any meeting of shareholders or of any class of
shareholders, the holders of a majority of the shares entitled to vote,
then issued and outstanding, present in person or represented by proxy,
shall constitute a quorum; provided, however, that any meeting,
including a meeting at which a quorum is not present, may, by vote of
the holders of a majority of the voting shares represented thereat,
adjourn from time to time and from place to place in the State of Ohio
<PAGE>
without notice other than by announcement at such meeting. At any such
adjourned meeting at which a quorum is present, any business may be
transacted which might have been transacted at the meeting as originally
notified or held.
Section 5. Proxies. A person who is entitled to attend a
shareholders meeting, to vote thereat, or to execute consents, waivers
or releases, may be represented at such meeting or vote thereat, and
execute consents, waivers, and releases, and exercise any of his rights,
by proxy or proxies appointed by a writing signed by such persons, as
provided by the laws of the State of Ohio.
Section 6. Approval and Ratification of Acts of Officers and Board.
Except as otherwise provided by the Amended Articles of Incorporation
or by law, any contract, act, or transaction, prospective or past, of
the corporation, or of the Board, or of the officers may be approved or
ratified by the affirmative vote at a meeting of the shareholders, or by
the written consent, with or without a meeting, of the holders of shares
entitling them to exercise a majority of the voting power of the
corporation, and such approval or ratification shall be as valid and
binding as though affirmatively voted for or consented to by every
shareholder of the corporation.
ARTICLE II.
BOARD OF DIRECTORS
Section 1. General Powers. Except where the law, the Amended
Articles of Incorporation, or these Regulations require action to be
authorized or taken by shareholders, all of the authority of the
corporation shall be exercised by its Board of Directors.
Section 2. Number of Directors. Until changed in accordance with
the provisions of Article XI, the number of directors of the
Corporation, none of whom need be shareholders, shall not be less than
seven (7) nor more than twelve (12). Without amendment of these
Regulations, the number of directors may be fixed or changed within the
limitations of the preceding sentence, at any annual meeting or at any
special meeting called for that purpose at which a quorum is present, by
the affirmative vote of the holders of a majority of the shares which
are represented at the meeting and entitled to vote on such proposal, or
as may be expressly provided in the Amended Articles of Incorporation,
but no reduction in the number of directors shall of itself have the
effect of shortening the term of any incumbent director.
Section 3. Election of Directors. Directors shall be elected at the
annual meeting of shareholders, but when the annual meeting is not held
or directors are not elected thereat, they may be elected at a special
meeting called and held for that purpose. Such election may be
conducted in any manner approved at such meeting subject to the right of
any shareholder entitled to vote at such election to require that such
election shall be by ballot.
At a meeting of shareholders at which directors are to be
elected, only persons nominated as candidates shall be eligible for
election as directors, and the candidates receiving the greatest number
of votes shall be elected.
<PAGE>
Any shareholder wishing to nominate a director must do so in a
signed writing to the Company at least Ninety (90) days in advance of
the annual meeting at which the director is to run for office or Thirty
(30) days in advance of a special meeting called for that purpose. The
signed writing must contain background information sufficient to include
in the Company's proxy statement, and must be accompanied by a
certification by the nominated director that such person will, if
elected, accept the position.
Section 4. Term of Office. The directors shall be divided into
three (3) classes, each of which shall consist of not less than two (2)
directors nor more than four (4) directors. The term of office of the
first class shall expire on the day of the annual election of the
Corporation following the close of the 1982 fiscal year; the term of
office of the second class shall expire on the day of the annual
election of the Corporation following the close of the 1983 fiscal year;
the term of office of the third class shall expire on the day of the
annual election of the Corporation following the close of the 1984
fiscal year. The number of directors in each class shall be the whole
number contained in the quotient arrived at by dividing the authorized
number of directors by three and if a fraction is also contained in such
quotient, then if such fraction is one-third (1/3) the extra director
shall be a member of Class III and if the fraction is two-thirds (2/3)
one of the extra directors shall be a member of Class III and the other
extra director shall be a member of Class II. At each annual election
after such classification, the number of directors equal to the number
of the class whose term expires on the day of such election shall be
elected for a term of three (3) years. If the number of the directors
of the Corporation is increased pursuant to Section 2 of this Article
II, directors nominated to a class whose term does not expire on the day
of such election shall be elected for an initial term whose length shall
be the number of years remaining in the term of such class. Directors
shall hold office until the annual meeting at which their terms are to
expire and until their successors are elected and qualified, or until
their earliest resignation, removal from office or death.
Notwithstanding any other provision of this Code of Regulations, any
director, or the entire Board of Directors, may be removed at any time,
at a meeting of the stockholders called for that purpose, but only for
good cause shown and only by the affirmative vote of the holders of two-
thirds (2/3) or more of the voting power of the Corporation entitled to
vote generally in the election of directors.
Any director may resign at any time by oral statement to that
effect made at a meeting of the Board, or in writing to that effect.
Such resignation shall be effective immediately or at such other time as
the director may specify.
Section 5. Vacancies. In the event of the occurrence of any vacancy
or vacancies in the Board, the remaining directors, though less than a
majority of the whole authorized number of directors, may, by the vote
of a majority of their number, fill such vacancy for the remainder of
the unexpired term of the position to which such director is appointed.
Section 6. Quorum. A majority of the qualified directors at any
time in office shall constitute a quorum for all purposes; provided,
however, that at any meeting duly called, whether a quorum is present or
<PAGE>
otherwise, a majority of the directors present may adjourn from time to
time and from place to place within or without the State of Ohio without
notice other than by announcement at the meeting. At any such adjourned
meeting at which a quorum is present any business may be transacted
which might have been transacted at the meeting as originally called.
At each meeting of the Board of Directors at which a quorum is present
all questions and business shall be determined by a vote of the majority
of the directors present unless a different vote is required by law, by
the Articles of Incorporation, or by this Code of Regulations.
Section 7. Meetings. Immediately after each annual meeting of the
shareholders, the newly elected and continuing directors shall hold an
organization meeting for the purpose of electing officers and
transacting any other business. Notice of such meeting need not be
given. Regular meetings of the Board of Directors shall be held at such
times and places within or without the State of Ohio as may be provided
for in bylaws or resolutions adopted by the Board. Special meetings may
be held at any time and place within or without the State of Ohio upon
call by the Chairman of the Board, the President, or a majority of the
directors in office. Notice of the time and place of each special
meeting shall be given by letter or telegram or in person not less than
Forty-eight (48) hours prior to such time. Notice of any special
meeting may be waived in writing and will be waived by any director by
his attendance thereat. Unless otherwise indicated in the notice
thereof, any business may be transacted at any meeting held by the Board
of Directors.
Section 8. Compensation. The directors, by the affirmative vote of
a majority of those in office, and irrespective of any personal interest
of any of them, may establish reasonable compensation, which may include
pensions, profit sharing plans, disability and death benefits, or other
benefits, for services to the corporation by directors and officers, or
may delegate such authority to one or more officers or directors.
ARTICLE III
EXECUTIVE AND OTHER COMMITTEES
Section 1. Executive Committee. The Board of Directors at any time
by the affirmative vote of not less than two-thirds of all directors in
office at the time may appoint from its members an Executive Committee
which shall consist of not less than three (3) members. Each member of
such Committee shall hold office during the pleasure of the Board of
Directors and may be removed by the Board at any time with or without
cause. Vacancies occurring in the Committee may be filled by the Board
of Directors. The Committee shall prescribe its own rules for calling
and holding meetings and its method of procedure, subject, however, to
any rules prescribed by the Board of Directors, and the Committee shall
keep minutes of its meetings. A quorum for any meeting of the Committee
shall consist of not less than a majority of the members; and at each
meeting of the Committee at which a quorum is present, all questions and
business shall be determined by the affirmative vote of not less than a
majority of the members. Except as the Committee's powers and duties
may be limited or otherwise prescribed by the Board of Directors, the
Committee, during the intervals between the meetings of the Board, shall
have general control over the corporation's current and usual business;
provided, however, that the Committee shall not declare dividends on
<PAGE>
shares, nor authorize the issuing of any shares or other securities, nor
employ a general manager, nor elect or remove any officers, nor fill
vacancies in the Board of Directors or in the Committee, nor, unless
specifically so authorized by the Board of Directors, adopt or modify
any profit sharing or pension plans, or fix the salaries of officers or
authorize the payment of bonuses or management funds to officers.
Subject to said exceptions, persons dealing with the corporation shall
be entitled to rely upon any action of the Committee with the same force
and effect as though said action had been taken by the Board of
Directors. Subject to the rights of third persons, any action of the
Committee shall be subject to revision or alteration by the Board of
Directors.
Section 2. Other Committees. The Board of Directors is authorized
to create such other committees as the Board shall deem essential to the
prosecution of the business of the corporation and to confer upon any
such committee such powers and authority as the Board Deems desirable,
except such as under Section 1 may not be exercised by or delegated to
the Executive Committee.
ARTICLE IV
OFFICERS
Section 1. Officers Designated. The Board of Directors, at its
organization meeting, may elect a Chairman of the Board, and shall elect
a President, one or more Vice Presidents, one of whom, if so designated,
may be an Executive Vice President, a Secretary, and a Treasurer, and,
in its discretion, one or more Assistant Secretaries and one or more
Assistant Treasurers and such other officers as it may determine. The
Chairman of the Board and the President shall be, and the other officers
may be but need not be, chosen from the members of the Board of
Directors. Any two, but not more than two, of such offices may be held
by the same person but in any case where the action of more than one
officer is required, no person shall act in more than one capacity.
Section 2. Term of Office. The officers of the corporation shall
hold office until the next organization meeting of the Board of
Directors and until their respective successors are chosen and
qualified, except in case of resignation, death or removal. The Board
of Directors may remove any officer at any time with or without cause by
a majority vote of the members of the Board at the time. A vacancy in
any office may be filled by election by the Board of Directors.
Section 3. Chairman of the Board. The Chairman of the Board, if
any, shall preside at all meetings of the shareholders and of the Board
of Directors and shall have such other powers and duties as from time to
time may be prescribed by the Board of Directors.
Section 4. President. In the absence or non-election of a Chairman
of the Board, the President shall preside at meetings of the
shareholders and of the Board of Directors. Subject to the directions
of the Board of Directors, the President shall be the chief executive
officer of the corporation and shall have general supervision over its
property, business and affairs. He may execute all authorized deeds,
mortgages, bonds, contracts and other obligations in the name of the
<PAGE>
corporation and shall have such other powers and duties as
may be prescribed by the Board of Directors.
Section 5. Vice Presidents. The Vice Presidents, in the absence or
disability of the Presidents, in the order designated by the Board of
Directors, shall perform the President's duties, together with such other
duties as the Board of Directors from time to time may prescribe. The power
of the Vice Presidents to execute all authorized deeds, mortgages, bonds,
contracts and other obligations in the name and on behalf of the corporation
shall be coordinate with like powers of the President.
Section 6. Secretary. The Secretary shall keep the minutes of all
meetings of the shareholders and of the Board of Directors. He shall keep
such books as may be required by the Board of Directors, shall have charge of
the seal of the corporation, and shall give all notices of meetings of
shareholders and of the Board of Directors; provided, however, that any
persons calling such meeting may, at their option, themselves give such
notice. The secretary shall have such other powers and duties as the Board of
Directors may prescribe.
Section 7. Treasurer. The Treasurer shall receive and have in
charge all money, bills, notes, bonds, stocks and securities in other
corporations and similar property belonging to the corporation, and shall do
with the same as may be ordered by the Board of Directors. He shall keep
accurate financial accounts and hold the same open for the inspection or
examination of the Directors, and shall have such other powers and duties as
may be prescribed by the Board of Directors. On the expiration of his term
of office, he shall turn over to his successor or to the Board of Directors,
all property, books, papers and money of the corporation in his hands.
Section 8. Other Officers. The Assistant Secretaries and the
Assistant Treasurers and the other officers, if any, shall have such powers
and duties as may be prescribed by the Board of Directors.
Section 9. Delegation of Duties - General Manager. The Board of
Directors is authorized to delegate the duties of any officer to any other
officer, employee or committee, and generally to control the action of the
officers and to require the performance of duties in addition to those
mentioned herein. The Board of Directors, in its discretion, is authorized
to employ a General Manager, who may but need not be one of the above-
mentioned officers of the corporation, and the Board may delegate to him such
duties otherwise devolving upon officers of the corporation, as the Board may
see fit.
Section 10. Compensation. The Board of Directors is authorized to
determine, or to provide the method of determining, or to empower a committee
of its members to determine, the compensation of all officers. Such
compensation may be by way of fixed salary, or on the basis of earnings of
the corporation, or any combination thereof, or otherwise, as may be
determined from time to time by the Board of Directors or by any committee
empowered by the Board.
<PAGE>
Section 11. Bond. Any officer, if so required by the Board of
Directors, shall furnish a fidelity bond in such sum and with such security
as the Board of Directors may require.
Section 12. Signing Checks and Other Instruments. The Board of
Directors is authorized to determine, or provide the method of determining,
the manner in which checks, notes, bills of exchange, contracts and other
obligations and instruments of the corporation shall be signed, countersigned
or endorsed, as the case may be.
ARTICLE V
CERTIFICATES FOR SHARES
Section 1. Form of Certificates and Signatures. Each holder of
shares is entitled to one or more certificates, signed by the Chairman of the
Board or the President or a Vice President and by the Secretary, or an
Assistant Secretary, the Treasurer, or an Assistant Treasurer of the
corporation, which shall certify the number and class of shares held by him in
the corporation, but no certificate for shares shall be executed or delivered
until such shares are fully paid. When such a certificate is countersigned by
an incorporated transfer agent or registrar, the signature of any of said
officers of the corporation may be facsimile, engraved, stamped, or printed.
Although any officer of the corporation whose manual or facsimile signature is
affixed to such a certificate so countersigned ceases to be such officer
before the certificate is delivered, such certificate, nevertheless, shall be
effective in all respects when delivered.
Section 2. Transfer of Shares. Shares of the corporation shall be
transferable upon the books of the corporation by the holders thereof, in
person, or by a duly authorized attorney, upon surrender and cancellation of
certificates for a like number of shares of the same class or series, with
duly executed assignment and power of transfer endorsed thereon or attached
thereto, and with such proof of the authenticity of the signatures to such
assignment and power of transfer as the corporation or its agents may
reasonably require.
Section 3. Lost, Stolen or Destroyed Certificates. If any certificate
for shares is lost, stolen or destroyed, the Chairman of the Board, the
President or any Vice President of the corporation may, upon being satisfied
of that fact, authorize the issuance of a new certificate in place thereof
upon the corporation being furnished with an affidavit in such form as such
officer may require to the effect that the shares represented by said
certificate belonged to the shareholder requesting a new certificate, and
upon the corporation being furnished with a good and sufficient open penalty
bond upon such terms and secured by such surety as such officer in his
discretion may require. Such officers in their discretion may refuse to issue
a new certificate until the corporation has been indemnified to its
satisfaction and has been protected to its satisfaction by a final order or
decree of a court of competent jurisdiction.
Section 4. Transfer Agents and Registrars. The Board of Directors
may appoint, or revoke the appointment of, transfer agents and registrars and
may require all certificates for shares to bear the signatures of such
transfer agents and registrars, or any of the them. The Board of Directors
<PAGE>
shall have authority to make all such rules and regulations as it may deem
expedient concerning the issue, transfer, and registration of certificates for
shares of the corporation.
ARTICLE VI
RECORD DATES
For any lawful purpose, including, without limitation, the determination
of the shareholders who are entitled to:
(1) receive notice of or to vote at a meeting of shareholders,
(2) receive payment of any dividend or distribution,
(3) receive or exercise rights of purchase of or subscription
for, or exchange or conversion of, shares or other
securities, subject to contract rights with respect thereto, or
(4) participate in the execution of written consents, waivers,
or releases,
the Board of Directors may fix a record date which shall not be a date earlier
than the date on which the record date is fixed and, in the cases provided for
in clauses (1), (2), and (3) above, shall not be more than sixty days
preceding the date of the meeting of shareholders, or the date fixed for the
payment of any dividend or distribution, or the date fixed for the receipt or
the exercise of rights, as the case may be. The record date for the purpose
of the determination of the shareholders who are entitled to receive notice of
or to vote at a meeting of shareholders shall continue to be the record date
for all adjournments of such meeting, unless the Board of Directors or the
persons who shall have fixed the original record date shall, subject to the
limitations set forth in this Article, fix another date, and in case a new
record date is so fixed, notice thereof and of the date to which the meeting
shall have been adjourned shall be given to shareholders of record as of such
date in accordance with the same requirements as those applying to a meeting
newly called. The Board of Directors may close the share transfer books
against transfers of shares during the whole or any part of the period
provided for in this Article, including the date of the meeting of
shareholders and the period ending with the date, if any, to which adjourned.
ARTICLE VII
SEAL
The Board of Directors shall provide a suitable seal containing the name
of the corporation. If deemed advisable by the Board of Directors, duplicate
seals may be provided and kept for the purposes of the corporation.
ARTICLE VIII
FISCAL YEAR
The Board of Directors shall have the authority to establish the fiscal
year of the corporation and to change the same from time to time as may be
necessary.
<PAGE>
ARTICLE IX
CANCELLATION OF FORMER CODES OF REGULATIONS
This amended Code of Regulations supersedes all Codes of Regulation and
bylaws heretofore adopted.
ARTICLE X
AUTHORITY TO TRANSFER AND VOTE SECURITIES
The Chairman of the Board, the President, and a Vice President of the
corporation are each authorized to sign the name of the corporation and to
perform all acts necessary to effect a transfer of any shares, bonds, other
evidences of indebtedness or obligations, subscription rights, warrants, and
other securities of another corporation owned by this corporation and to
issue the necessary powers of attorney for the same; and each such officer is
authorized, on behalf of this corporation, to vote such securities, to
appoint proxies with respect thereto, and to execute consents, waivers, and
releases with respect thereto, or to cause any such action to be taken.
ARTICLE XI
AMENDMENTS
Except for Amendments to Sections 2, 4, 5, 6, and 7 of Article II and
except for amendments to this Article XI of this Code of Regulations which
shall require the affirmative vote of the holders of record of shares
entitling them to exercise two-thirds of the voting power of the Corporation
on such proposal, this Code of Regulations may be altered, changed or amended
in any respect or superceded by a new Code of Regulations in whole or in part
by the affirmative vote of the holders of record of shares entitling them to
exercise a majority of the voting power of the Corporation on such proposal,
at any annual or special meeting called for such purpose, or without a meeting
by the written consent of the holders of record of shares entitling them to
exercise two-thirds of the voting power of the Corporation. In case of
adoption of any regulation or amendment by such written consent, the Secretary
shall enter the same in his records and mail a copy thereof to each
shareholder who did not participate in the adoption thereof.
<PAGE>
EXHIBIT 2
COVENANT NOT TO COMPETE AND RELEASE
This Covenant Not To Compete and Release (the "Agreement") is made
and entered into by and between David J. Walrod ("Employee") and Seaway Food
Town, Inc. ("Company").
WITNESSETH:
WHEREAS, Employee currently serves as an officer and director of
Company; and
WHEREAS, Employee has decided to leave the Company in order to
pursue other interests; and
WHEREAS, As a result of his employment with the Company and his
position as a director, Employee possesses a great deal of confidential
information regarding the Company; and
WHEREAS, Such knowledge would greatly harm the Company if put to use
by a competitor or any other party with interests adverse to that of
the Company's; and
WHEREAS, in light of the foregoing, Company and Employee have
decided to enter into the following Covenant Not To Compete and Release.
NOW, THEREFORE, in consideration of these premises, the promises and
mutual covenants contained herein and other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, the parties
hereto hereby agree as follows:
1. Employment. Employee's employment with the Company is
hereby terminated.
2. Directorship. Employee hereby resigns as a director of
the Company.
3. Compensation. Employee shall receive as total consideration
for the mutual promises and obligations contained in this Agreement the sum
of Four Hundred Fourteen Thousand Dollars ($414,000.00), to be paid as
follows:
(a) $150,000.00 to be paid on the eighth day after a copy of
this Agreement, fully executed by Employee, shall have been
delivered to the Company (the "Effective Date").
(b) $65,000.00 to be paid six (6) months from the Effective Date.
(c) $65,000.00 to be paid one (1) year from the Effective Date.
(d) $65,000.00 to be paid eighteen (18) months from the Effective
Date.
<PAGE>
(e) $69,000.00 to be paid twenty-four (24) months from the
Effective Date.
The parties hereto agree that in the event of any breach of this Agreement by
the Employee, all payments hereunder shall cease and all right to further
payments hereunder shall be forfeited. The parties agree that such cessation
of payments shall not relieve the Employee of any duties or responsibilities
under this Agreement.
4. Life Insurance. The Company will transfer ownership of a
certain life insurance policy maintained on the life of Employee to Employee.
Employee shall be responsible for all subsequent payments under said policy
and for any and all other obligations under said policy. Employee
further agrees to indemnify and hold harmless the Company from any and all
claims, demands, causes of action or liabilities arising in any way out of
said policy.
5. Car. The Company will transfer the title to the Employee's
Company owned car, a 1996 Lincoln, to the Employee. The Employee shall be
responsible for insuring and maintaining the car, and for all other matters
related to the car, after the Effective Date. Employee further agrees to
indemnify and hold harmless the Company from any and all claims, demands,
causes of action or liabilities arising in any way out of or related in any
way to the car, its operation and/or expenses.
6. Health Insurance. The Company will pay for the health insurance
plan now provided to the Employee for the six month period beginning on the
Effective Date, prorated for any partial calendar month at the beginning and/
or end of such six month period.
7. Restrictive Covenant. Employee acknowledges and recognizes
Employee's possession of Proprietary Information and the highly competitive
nature of the business of the Company and, accordingly, agrees that in
consideratiion of the premises contained herein, Employee will not, for the
period beginning on the Effective Date and ending on the date two (2) years
from the Effective Date: (i) within a 100 mile radius from such place or
places as the Company may from time to time conduct business, directly or
indirectly engage in any activities which are in competition with, or adverse
to the interests of, the business of the Company whether such engagement shall
be as an employer, officer, director, owner, employee, consultant, stock-
holder, partner or other participant; or (ii) assist, aid, or otherwise be
involved with, any person, firm or entity, whether as an employer, officer,
director, owner, employee, consultant, stockholder, partner or other
participant, which engages in any such competition in the manner described in
the foregoing clause (i). As an example, and not by way of limitation, the
above precludes the Employee from being involved with Kroger, Meijer, CVS,
or Rite Aid. While in some cases the corporate offices of those companies
may be more than 100 miles from any place in which the Company conducts
business, those companies do business within such 100 mile radius. If the
Employee violates any of the provisions of the foregoing paragraph due to
his acceptance of employment with a competitor, the Company's sole remedy
shall be to cease making payments pursuant to section three (3) hereunder;
provided, however, that nothing contained herein shall be construed to
prevent the Company from pursuing any and all remedies available to it,
<PAGE>
whether at law, in equity, or otherwise, for the breach of any other
provision of this section or of this Agreement
In addition, during the term hereof, with or without reason,
Employee shall not: (i) induce employees of the Company to terminate their
employment with the Company or to engage in any such competition;
(ii) induce clients, customers or suppliers of the Company to terminate
their business relationship with the Company; or (iii) solicit business from
any clients or customers of the Company who were clients or customers of
the Company at any time during Employee's employment therewith; provided,
however, that the ownership of less than five percent (5%) of the
outstanding capital stock of any corporation whose shares are traded on a
national securities exchange or on the over-the-counter market shall not
be deemed engaging in any such competition.
If the Employee accepts employment with any person, firm, or entity,
there shall be no violation of this section seven (7) if such employment would
not have constituted a breach of the provisions of this section seven (7) at
the time of such acceptance.
The Employee shall not be precluded from working on commercial
real estate development so long as such development does not involve (as
a tenant, purchaser, investor, or in any other manner) any person, firm or
other entity which directly or indirectly engages, within a 100 mile radius
from such place or places as the Company may from time to time conduct
business, in any activities which are in competition with, or adverse to
the interests of, the business of the Company, whether such engagement
shall be as an employer, officer, director, owner, employee, consultant,
stockholder, partner or other participant.
Because Employee has represented the Company in negotiations with
its various unions and because Employee has invaluable knowledge regarding
the Company's negotiating position and strategies, the parties hereto
expressly recognize that Employee's employment with any labor organization
which the Company recognizes, whether presently or in the future, as
a bargaining representative of Company employees shall constitute an
inherent breach of the provisions of sections 7 and 8 hereunder, and
Employee hereby agrees to refrain from associating with any such labor
organization in any manner, including, but not limited to, accepting
employment with or consulting or working for, any such labor organization.
In the event of the breach of the terms and provisions of the foregoing
paragraph, the Company may pursue any remedy available to it, whether
at law, in equity, or otherwise.
Employee shall not take any action which is opposed to the best
interests of the Company, its employees, officers, or directors. Employee
shall not make disparaging remarks regarding the Company, its employees,
officers, or directors, or take any action which would harm or disparage
the Company, its employees, officers, or directors, in any manner, or damage
the reputation of the Company, its employees, officers, or directors.
8. Proprietary Information. Employee understands and acknowledges
that:
<PAGE>
(a) Employee's employment created a relationship of confidence
and trust between Employee and the Company with respect to certain information
applicable to the business of the Company or applicable to the business of
any client or customer or licensee of the Company, which has been made
known to Employee by the Company or by any client or customer of the Company
or learned by Employee during his employment with the Company.
(b) The Company possesses and will continue to possess
information that has been created, discovered, or developed by, or otherwise
become known to, the Company (including, without limitation, information
created, discovered or developed by, or made known to, Employee prior to the
term hereof or during the term hereof) or in which property rights have been
or may be assigned or otherwise conveyed to the Company, which information
has commercial value in the business in which the Company is engaged and is
treated by the Company as confidential. Except as otherwise herein provided,
all such information is hereinafter called "Proprietary Information", which
term, as used herein, shall also include, but shall not be limited to,
business practices, formulations, costing, data, functional specifications,
computer programs, know-how, research, technology, improvements, developments,
designs, marketing plans, strategies, forecasts, new products, trade
secrets, unpublished financial statements, budgets, projections, licenses,
franchises, prices, costs, and customer and supplier information and
lists. Notwithstanding anything contained in this Agreement to the
contrary, the term "Proprietary Information" shall not include
(i) information which is in the public domain, (ii) information
which is published or otherwise becomes part of the public domain
through no act or fault of Employee, (iii) information which
subsequently becomes available to Employee on a non-confidential basis from
a source other than the Company and which source, to the best of Employee's
knowledge, did not acquire the information on a confidential basis, or
(iv) information required to be disclosed by any federal or state law,
rule or regulation or by any applicable judgment, order or decree of any
court or governmental body or agency having jurisdiction in the premises.
(c) All Proprietary Information shall be the sole property of
the Company, its successors and its assigns. Employee assigns to the
Company any rights Employee may have or acquire in such Proprietary
Information, and further assigns to the Company any and all inventions,
programs, copyrights, trademarks and/or service marks, and all amendments
and enhancements of same developed or obtained by Employee during the
period of his employment with the Company. At all times, Employee shall
keep in strictest confidence and trust all Proprietary Information, and
Employee shall never use or disclose any Proprietary Information
without the written consent of the Company.
(d) Employee shall promptly surrender to the Company or its
nominee any Proprietary Information or document, memorandum, record, letter or
other paper in his possession or under his control relating to the operation,
business or affairs of the Company.
Because Employee has represented the Company in negotiations with
various unions and because Employee has invaluable knowledge regarding the
<PAGE>
Company's negotiating position and strategies, the parties hereto expressly
recognize that Employee's employment with any labor organization which the
Company recognizes, whether presently or in the future, as a bargaining
representative of Company employees shall constitute an inherent breach of the
provisions of sections 7 and 8 hereunder, and Employee hereby agrees to
refrain from associating with any such labor organization in any manner,
including, but not limited to, accepting employment with or consulting or
working for, any such labor organization.
Employee recognizes that in the event of a breach of the Proprietary
Information provisions of this Agreement, the Company does not have an
adequate remedy at law.
9. Reasonableness of Restrictions. Employee agrees that the
foregoing limitations are reasonable and properly required for the adequate
protection of the business of the Company, and that in the event that any such
limitation is found to be unreasonable by a court of competent jurisdiction,
the Employee agrees and submits to the alteration of such limitation as shall
appear reasonable to the court. Employee further agrees that in the event of
any breach of this Agreement, the Company does not have an adequate remedy
at law.
10. Release. In return for the consideration set forth in Section
3 above, Employee, Employee's heirs, estates, executors, administrators,
employees, successors and assigns do fully release and discharge the Company
and its officers, directors, agents, servants, employees, consultants,
successors and assigns from any and all claims of any and every kind, nature
and character, known or unknown, including, but not limited to, any and
all claims to the existence of an employer-employee relationship which
Employee may now have against Company, or has ever had against Company
and/or officers, directors, agents, servants, employees, consultants,
successors and assigns, which arise in whole or in part from any dealing
of any kind between Employee and Company and/or any officer, director,
agent, servant, employee, or consultant of Employee and/or Company,
which have transpired prior to the Effective Date, including, but not
limited to any and all claims, rights, demands, and causes of action of any
and every kind, known or unknown, whether arising out of any claims for
breach of contract, breach of enforceable promise, breach of the
implied covenant of good faith and fair dealing, fraud, negligent or
intentional misrepresentation, wrongful discharge, race discrimination,
religious discrimination, national origin and ancestry discrimination, age
discrimination, physical handicap discrimination, sexual preference
discrimination, sex discrimination, sexual harassment, intentional and/or
negligent infliction of emotional distress, negligence, defamation,
false imprisonment, loss of consortium, injury to personal reputation,
damages to personal and family rights, violation of the right to
privacy, violation of the United States Constitution, any breach of any
express or implied contract, any breach of any express or implied covenant
of good faith and fair dealing, any tort, personal injury, employment
discrimination arising under the common law, or any statute including the
Civil Rights Act of 1964, as amended; the Age Discrimination in Employment
Act, 42 U.S.C. Section 1981; The Americans With Disabilities Act of
1990, 42 U.S.C. Section 12101; 42 U.S.C. Sections 1981-88; Ohio Fair
Employment Practices Act, Ohio Rev. Code ch. 4112, or any other federal,
<PAGE>
state or municipal statute, regulation or order relating to wrongful
discharge, employment discrimination and/or terms of employment. Employee
represents and warrants that he has not assigned any such claims or
authorized any other person or entity to assert such claims on Employee's
behalf. Further, Employee agrees that under this Agreement, Employee
waives any and all claims for damages incurred at any time after the date
of this Agreement.
11. Denial of Liability. Liability for any and all claims
which Employee may have against the Company is expressly denied by the
Company. Liability for any and all claims which the Company may have against
Employee is expressly denied by Employee. Neither this Agreement itself nor
the furnishing of consideration for this Agreement shall be deemed or
construed at any time for any purpose as an admission of liability or
responsibility for any wrongdoing of any kind.
12. Litigation. At no time subsequent to the execution of
the Agreement will Employee file or maintain, or cause or knowingly
permit the filing or maintenance, in any state, federal or foreign court,
or before any local, state, federal or foreign administrative agency, and/or
other tribunal, any charge, claim or action of any kind, nature and character
whatsoever, known or unknown, which the Employee may now have, has ever had,
or may in the future have against the Company and/or any officer, director,
consultant or agent of the Company which is based in whole or in part on any
matter referred to herein. However, this section shall not prevent the
Employee from suing to enforce this Agreement.
13. Offer and Acceptance. The delivery of an executed copy of this
Agreement to the Employee shall constitute an offer to contract on the terms
and conditions contained herein. Employee shall have 21 days after the
Date of Delivery to accept such offer by deliverying, in conformity with
the requirements set forth in section 22 hereunder, a fully executed copy of
this Agreement to the Company. If Employee fails to deliver a fully executed
copy of this Agreement within such 21 day period, such offer shall be
deemed to have lapsed and this Agreement shall be null and void and of no
effect.
14. Age Discrimination in Employment Act. In order to comply
with the provisions of Title II of the Older Workers Benefits Protection
Act, the parties further agree as follows:
(a) Employee agrees to waive any right or claim Employee may
have against the Company under the Age Discrimination in
Employment Act.
(b) Employee represents that Employee understands that by entering
into this Agreement Employee is agreeing, among other things,
not to bring any charge or action for age discrimination
against the Company.
(c) Employee further represents that Employee understands that
Employee is voluntarily waiving the right to bring an action
against the Company for age discrimination.
<PAGE>
(d) Employee represents that Employee understands that by entering
into this Agreement Employee does not waive any rights or
claims that may arise after the Effective Date.
(e) Employee represents that Employee understands that this waiver
is in exchange for the benefits in this Agreement.
(f) Employee is advised to consult with an attorney prior to
signing this Agreement.
(g) Employee understands that Employee has a period of twenty-one
(21) days from the date in which Employee has been presented
with a copy of the Agreement to consider and execute said
Agreement.
(h) Employee understands that he has a period of seven (7) days
after signing this Agreement in which to revoke this Agreement.
(i) Employee represents that he understands that this Agreement
shall not become effective or enforceable until the eighth
(8th) day after Employee signs this Agreement.
15. Legal Consultation. EMPLOYEE REPRESENTS THAT HE HAS BEEN
ADVISED BY THE COMPANY TO CONSULT WITH LEGAL COUNSEL REGARDING THIS AGREEMENT.
16. Confidentiality. Employee agrees not to disclose any
information concerning this Agreement to anyone, including past,
present, and future employees of the Company except as may be necessary to
enforce rights contained herein in an appropriate legal or administrative
proceeding.
17. Evidentiary Matters. Notwithstanding the terms and provisions
of section 16, the Company and Employee agree that this Agreement may be
used as evidence in any subsequent proceeding in which either of the
parties allege a breach of this Agreement.
18. Severability. If any provision in this Agreement is held by
a court of competent jurisdiction to be invalid, void or unenforceable,
the remaining provisions shall nevertheless continue in full force without
being impaired or invalidated in anyway.
19. State Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Ohio.
20. Binding Effect. EMPLOYEE AND THE COMPANY REPRESENT THAT
EMPLOYEE AND THE COMPANY HAVE CAREFULLY READ THIS AGREEMENT, THAT
EMPLOYEE AND THE COMPANY FULLY UNDERSTAND ITS FINAL AND BINDING EFFECT,
AND THAT IT CONSTITUTES THE ENTIRE AGREEMENT AMONG THE PARTIES HERETO.
21. Voluntary Action. IT IS UNDERSTOOD BY EMPLOYEE THAT EMPLOYEE
HAS THE OPTION OF SIGNING THIS AGREEMENT, AND IF EMPLOYEE CHOOSES TO
SIGN THIS AGREEMENT, SUCH ACTION WILL BE A VOLUNTARY ACT ON THE EMPLOYEE'S
PART.
<PAGE>
22. Notices. All notices, requests, demands, revocations, and
other communications hereunder shall be in writing and shall be deemed to
have been duly given, and all deliveries required hereunder shall be deemed
to have been duly made, if personally delivered or, if mailed, when mailed
by United States first class, certified or registered mail, postage prepaid,
to the other party at the following addresses (or at such other address
as shall be given in writing by any party to the other):
If to Employee, to:
David J. Walrod
29263 Belmont Lake Rd.
Perrysburg, OH 43551
If to Company, to:
Seaway Food Town, Inc.
1020 Ford St.
Maumee, OH 43537
Attention: Richard B. Iott
With a required copy to:
Spengler Nathanson, P.L.L.
608 Madison Ave.
Suite 1000
Toledo, OH 43604-1169
Attention: Gary D. Sikkema, Esq.
23. Entire Agreement. This Agreement contains the entire agreement
between Employee and the Company and supersedes all prior discussions and
agreements, written or oral, and may be modified only by written agreement
executed by Employee and the Company.
24. Receipt. Employee was presented with a copy of this Agreement,
fully executed by the Company, on the 27th day of January, 1999.
25. Company. Company, as the term is used in this Agreement, shall
mean Seaway Food Town, Inc., and all of its subsidiaries and any other entity
or person which controls, is controlled by, or is under common control with,
Seaway Food Town, Inc.
26. Successors and Assigns. This Agreement shall be binding
upon, and inure to the benefit of, the successors and assigns of the Company.
IN WITNESS WHEREOF, Seaway Food Town, Inc. has caused this Agreement
to be duly executed as of this 27th day of January, 1999.
SEAWAY FOOD TOWN,INC.
<PAGE>
By: /s/ Richard B. Iott
Richard B. Iott, President
ACCEPTANCE
David J. Walrod hereby agrees to be bound by the foregoing Agreement
on this 27th day of January, 1999 (the "Date of Acceptance"), and acknowledges
his understanding that this Agreement shall become fully binding on all of
the parties hereto on the eighth day after the execution of this Acceptance
unless earlier revoked by Employee.
/s/ David J. Walod
David J. Walrod
<PAGE>
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<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> AUG-28-1999
<PERIOD-END> FEB-27-1999
<CASH> $ 9,892
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<RECEIVABLES> 9,873
<ALLOWANCES> (500)
<INVENTORY> 55,054
<CURRENT-ASSETS> 78,608
<PP&E> 228,807
<DEPRECIATION> (133,896)
<TOTAL-ASSETS> 178,786
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0
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<OTHER-SE> 47,559
<TOTAL-LIABILITY-AND-EQUITY> 178,786
<SALES> 170,382
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<CGS> 127,561
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