RECAPITALIZATION AGREEMENT AND PLAN OF MERGER
by and among
SMITH'S FOOD & DRUG CENTERS, INC.
CACTUS ACQUISITION, INC.
SMITTY'S SUPERMARKETS, INC.
and
THE YUCAIPA COMPANIES
Dated as of January 29, 1996
TABLE OF CONTENTS
Page
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ARTICLE 1. THE MERGER AND EFFECT OF THE MERGER ON THE CAPITAL
STOCK OF THE CONSTITUENT CORPORATIONS 2
1.1 The Merger 2
1.2 Effective Time of the Merger 2
1.3 Effects of the Merger 2
1.4 Certificate of Incorporation and Bylaws 2
1.5 Directors and Officers 3
1.6 Tax Consequences 3
1.7 Stockholders' Agreements 3
1.8 Tax Matters Certificates and Opinions 3
1.9 Specified Smitty's Indebtedness 3
1.10 Effect on Capital Stock 4
1.11 Dissenting Shares 4
1.12 Exchange of Certificates 5
ARTICLE 2. RECAPITALIZATION OF THE COMPANY 6
2.1 Offer by the Company 6
2.2 Financing Arrangements by Yucaipa 7
2.3 Definitive Financing Agreements 8
2.4 Execution of Related Agreements 8
2.5 Redemption of the Company's Preferred Stock 8
2.6 Board of Directors; Officers 8
2.7 Company's Options and Deferred Compensation Plans 9
2.8 Recapitalization 9
ARTICLE 3. THE CLOSINGS 10
3.1 Merger Closing 10
3.2 Offer Closing 11
ARTICLE 4. REPRESENTATIONS OF THE COMPANY AND ACQUISITION 11
4.1 Organization 11
4.2 Capitalization 11
4.3 Authorization 12
4.4 Absence of Certain Changes or Events 12
4.5 No Conflict or Violation 13
4.6 Consents and Approvals 13
4.7 Litigation 13
4.8 Compliance with Law 14
4.9 Company SEC Reports 14
4.10 ERISA 14
4.11 Taxes 15
4.12 Absence of Breaches or Defaults 16
4.13 Environmental Matters 16
4.14 No Brokers 17
4.15 Opinion of Financial Advisor 17
4.16 No Other Agreements to Sell the Company or its Assets 17
4.17 Transactions with Affiliates 17
4.18 Vote Required 17
4.19 Registration Rights 17
4.20 Information in Proxy Statement 17
4.21 Information in the Financing Registration Statements 18
ARTICLE 5. REPRESENTATIONS OF SMITTY'S 18
5.1 Organization of Smitty's 18
5.2 Subsidiaries 18
5.3 Capitalization 19
5.4 Authorization 19
5.5 Absence of Certain Changes or Events 19
5.6 Assets 20
5.7 Contracts and Commitments 21
5.8 Absence of Breaches or Defaults 22
5.9 No Conflict or Violation 22
5.10 Consents and Approvals 23
5.11 Litigation 23
5.12 Compliance with Law 23
5.13 Labor Matters 23
5.14 Smitty's SEC Reports 24
5.15 No Brokers 25
5.16 No Other Agreements to Sell Smitty's or its Assets 25
5.17 Proprietary Rights 25
5.18 Employee Benefit Plans 25
5.19 Insurance 26
5.20 Affiliate Transactions 26
5.21 Environmental Matters 27
5.22 Taxes 27
5.23 Bank Accounts 28
5.24 Information in Proxy Statement and Financing
Registration Statements 28
ARTICLE 6. REPRESENTATIONS OF YUCAIPA 29
6.1 Organization; Authorization; etc. 29
6.2 Ownership of Shares 29
6.3 Consents and Approvals; No Violations 29
6.4 Agreement to Sell Smitty's and Other Matters 30
ARTICLE 7. CONDUCT OF BUSINESS PENDING THE MERGER CLOSING 30
7.1 The Company 30
7.2 Smitty's 31
ARTICLE 8. ADDITIONAL COVENANTS 34
8.1 Further Assurances and Cooperation 34
8.2 Certain Filings and Consents 34
8.3 Access to Information; Confidentiality 35
8.4 Notification of Certain Matters 35
8.5 Alternative Proposals 36
8.6 Public Statements and Press Releases 37
8.7 Directors' and Officers' Insurance and Indemnification 37
8.8 Financial Information 39
8.9 Smitty's Stockholders' Approval 39
8.10 Proxy Statement; Company Stockholders' Meeting 39
8.11 Stockholders' Representative 40
8.12 Termination of Consulting Agreement 40
ARTICLE 9. CONDITIONS PRECEDENT TO THE MERGER 40
9.1 Conditions Precedent to the Company's and Acquisition's
Obligations 40
9.2 Conditions Precedent to Smitty's' Obligations 42
ARTICLE 10. TERMINATION, AMENDMENT AND WAIVER 43
10.1 Termination of the Agreement 43
10.2 Termination of Recapitalization 44
10.3 Procedure and Effect of Termination 44
10.4 Fees and Expenses 45
10.5 Amendments 45
10.6 Waivers 45
ARTICLE 11. DEFINITIONS 45
11.1 Defined Terms 45
11.2 Other Defined Terms 50
ARTICLE 12. MISCELLANEOUS 52
12.1 Non-survival of Representations and Warranties 52
12.2 Assignment 52
12.3 Notices 52
12.4 Payment to Yucaipa 53
12.5 Choice of Law 53
12.6 Counterparts 53
12.7 No Third Party Beneficiaries 53
12.8 Invalidity 53
12.9 Headings 53
12.10 Gender 54
12.11 Delivery of Company Disclosure Schedule 54
SCHEDULE I- Specified Company Indebtedness
ANNEXES
Annex A - Certificate of Incorporation of
the Surviving Corporation
Annex B - Legal Opinion to be Delivered by
Counsel to the Company
Annex C - Legal Opinion to be Delivered by
Counsel to Smitty's
Annex D - Form of Amended and Restated Certificate
of Incorporation of the Company
Annex E - Form of Registration Rights Agreement
Annex F - Form of Smitty's Stockholders'
Agreement
Annex G - Form of Continuity-of-Interest
Letter
Annex H - Form of Investment Letter
Annex I - Form of Company Tax Matters
Certificate
Annex J - Form of Smitty's Tax Matters
Certificate
Annex K - Form of Standstill Agreement
Annex L - Form of Management Agreement
Annex M - Form of Warrant Agreement
Annex N - Conditions to Offer
Annex O - Smith's Shareholder
Agreement
RECAPITALIZATION AGREEMENT AND PLAN OF MERGER
RECAPITALIZATION AGREEMENT AND PLAN OF MERGER (this
"Agreement"), dated as of January 29, 1996, by and among Smith's
Food & Drug Centers, Inc., a Delaware corporation (the "Company"),
Cactus Acquisition, Inc., a Delaware corporation and a wholly owned
subsidiary of the Company ("Acquisition"), Smitty's Supermarkets,
Inc., a Delaware corporation ("Smitty's"), and The Yucaipa
Companies, a California general partnership ("Yucaipa").
Acquisition and Smitty's are hereinafter collectively referred to
as the "Constituent Corporations". Definitions of capitalized
terms used herein are contained or referenced in Article 11 hereof.
WHEREAS, the parties hereto desire to effect a series of
transactions as described herein which, collectively, will
constitute the Recapitalization of the Company;
WHEREAS, the respective Boards of Directors of the
Company, Acquisition and Smitty's have determined that the merger
of Acquisition with and into Smitty's (the "Merger") in accordance
with the Delaware General Corporation Law (the "Delaware Law") and
upon the terms and subject to the conditions set forth in this
Agreement, would be fair and in the best interests of their
respective stockholders, and such Boards of Directors have approved
such Merger upon the terms and conditions contained in this
Agreement;
WHEREAS, it is intended that the Merger qualify as a
reorganization within the meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended;
WHEREAS, as part of the Recapitalization, the Company
will make an offer to repurchase for $36.00 per share (the "Offer
Price") 50% of its outstanding Class A Common Stock, par value $.01
per share (the "Class A Common Stock") and its outstanding Class
B Common Stock, par value $.01 per share (the "Class B Common
Stock; together with the Class A Common Stock, the "Common Stock"),
pursuant to a tender offer as further described herein (the
"Offer");
WHEREAS, as part of the Recapitalization, the Company
will enter into a Management Services Agreement, in the form of
Annex L hereto (the "Management Agreement"), with Yucaipa pursuant
to which Yucaipa will undertake and perform various managerial
obligations in respect of the Company's operations, subject to the
terms and conditions contained in such agreement; and
WHEREAS, as part of the Recapitalization, the Company
will redeem a portion of its outstanding Series I Preferred Stock,
par value $.01 per share (the "Series I Preferred Stock"), from
certain holders thereof in accordance with the redemption
provisions contained in the Company's certificate of incorporation;
NOW, THEREFORE, in consideration of the mutual covenants
and premises contained herein and for other good and valuable
consideration the receipt and adequacy of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE 1.
THE MERGER AND EFFECT OF THE MERGER ON THE
CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS
1.1 The Merger. Subject to the terms and conditions
hereof, at the Effective Time, Acquisition shall be merged with and
into Smitty's in accordance with the applicable provisions of the
Delaware Law. Upon the consummation of the Merger, the separate
existence of Acquisition shall cease and Smitty's, as the surviving
corporation in the Merger (the "Surviving Corporation"), shall
continue its corporate existence under the laws of the State of
Delaware as a wholly owned subsidiary of the Company.
1.2 Effective Time of the Merger. On the Merger Closing
Date, the parties hereto shall cause the Merger to be consummated
by duly filing an appropriate certificate of merger (the
"Certificate of Merger") in such form as is required by, and
executed in accordance with, the relevant provisions of the
Delaware Law. The Merger shall be effective at such time as the
Certificate of Merger is filed with the Secretary of State of
Delaware in accordance with the Delaware Law or at such later time
as is specified in the Certificate of Merger (the "Effective
Time").
1.3 Effects of the Merger. The Merger shall have all
of the effects provided for under the Delaware Law, including,
without limitation, that upon the effectiveness of the Merger, the
Surviving Corporation shall thereupon and thereafter possess all
the rights, privileges, powers and franchises, of a public as well
as of a private nature, of the Constituent Corporations, and shall
become subject to all the restrictions, disabilities and duties of
each of the Constituent Corporations; and, all and singular, the
rights, privileges, powers and franchises of each of the
Constituent Corporations, and all property, real, personal and
mixed, and all debts due to any of such Constituent Corporations,
on whatever account, as well for stock subscriptions as all other
choses in action belonging to each of such corporations, shall
become vested in the Surviving Corporation; and all property,
rights, privileges, powers and franchises, and all and every other
interest shall become thereafter as effectually the property of the
Surviving Corporation as they were of the Constituent Corporations;
and the title to any real estate vested by deed or otherwise or any
other interest in real estate vested by any instrument or otherwise
in either of such Constituent Corporations shall not revert or
become in any way impaired by reason of the Merger; but all liens
upon any property of either of the Constituent Corporations shall
thenceforth attach to the Surviving Corporation, and shall be
enforceable against it to the same extent as if such debts,
liabilities and duties had been incurred or contracted by it; all
of the foregoing in accordance with the applicable provisions of
the Delaware Law.
1.4 Certificate of Incorporation and Bylaws.
(a) The certificate of incorporation of Smitty's, as in
effect immediately prior to the Effective Time, shall be amended
so as to read in its entirety in the form set forth as Annex A
hereto, and, as so amended, until thereafter further amended as
provided therein and under the Delaware Law, it shall be the
certificate of incorporation of the Surviving Corporation following
the Merger.
(b) The bylaws of Smitty's as in effect at the Effective
Time shall be the bylaws of the Surviving Corporation following the
Merger until thereafter changed or amended as provided therein or
under the Delaware Law.
1.5 Directors and Officers. The directors and officers
of the Surviving Corporation following the Merger shall be the
directors and officers, respectively, of Acquisition at the Merger
Closing Date, until the earlier of their resignation or removal or
until their respective successors are duly elected and qualified,
as the case may be. Smitty's shall cause to be delivered to the
Company on the Merger Closing Date the resignations of such
officers and directors as the Company shall designate, in such
capacities, of itself and its subsidiaries.
1.6 Tax Consequences. For federal income tax purposes,
the Merger is intended to constitute a reorganization within the
meaning of Section 368(a) of the Code. Neither the Company,
Acquisition, Smitty's nor the Surviving Corporation shall take a
position inconsistent with this Section 1.6 on any tax return or
otherwise.
1.7 Stockholders' Agreements. As of the date hereof,
each of the Smitty's Principal Stockholders shall have entered
into, and Smitty's and Yucaipa shall use their respective best
efforts to cause each other Smitty's Stockholder, to enter into a
stockholders' agreement (each a "Smitty's Stockholders' Agreement")
with the Company in substantially the form attached hereto as Annex
F and to execute a Continuity-of-Interest Letter and an Investment
Letter in the forms attached hereto as Annexes G and H,
respectively.
1.8 Tax Matters Certificates and Opinions. At the
Merger Closing, the Company and Smitty's shall deliver Tax Matters
Certificates to their respective counsel, which certificates shall
be in substantially the form of Annexes I and J attached hereto,
respectively. At the Merger Closing, each of the Company and
Smitty's shall have requested and received written opinions from
their respective counsel, dated the Merger Closing Date, to the
effect that the Merger will constitute a reorganization within the
meaning of Section 368(a) of the Code, which opinions will be
substantially identical in form and substance. Such counsel shall,
in rendering such opinions, be entitled to rely on (and to the
extent reasonably required, the parties and the Smitty's Principal
Stockholders shall make) reasonable representations related
thereto.
1.9 Specified Smitty's Indebtedness. On the Merger
Closing Date, the Company shall repay, or cause to be repaid, all
outstanding principal and interest, and other amounts payable,
under the Specified Smitty's Indebtedness. In furtherance of the
foregoing, substantially concurrently with the commencement of the
Offer (or in the event that the Recapitalization is terminated
prior to the commencement of the Offer in accordance with the
provisions of Section 10.2 hereof, as soon as practicable following
such termination), Smitty's shall commence offers (the "Debt
Offers") to purchase for cash all of the issued and outstanding
12 3/4% Senior Subordinated Notes due 2004 of Smitty's Super Valu,
Inc. (the "Smitty's Notes") and the 13 3/4% Senior Discount Debentures
due 2006 of Smitty's (the "Smitty's Debentures" and, together with
the Smitty's Notes, the "Smitty's Securities"), at such prices as
may be recommended by the Company's financial advisors, net to the
sellers in cash (such prices, or such higher prices as may be paid
in the Debt Offers, being referred to herein as the "Debt Offer
Prices"). The Debt Offers shall be subject to there being validly
tendered and not withdrawn prior to the expiration of the Debt
Offers, at least 50.1% of the outstanding Smitty's Notes and
Smitty's Debentures as of the expiration of the Debt Offers (the
"Minimum Debt Condition") and to such other conditions as are
reasonably determined by Smitty's. Smitty's shall, on the terms
and subject to the prior satisfaction or waiver of the conditions
of the Debt Offers, accept for payment and pay for Smitty's
Securities tendered as soon as practicable after the later of the
satisfaction of the conditions to the Debt Offers and the
expiration of the Debt Offers. The Debt Offers shall be made by
means of an offer to purchase (the "Debt Offer to Purchase")
containing the terms contemplated by this Agreement. Without the
written consent of the Company, Smitty's shall not amend or waive
the Minimum Debt Condition, change the Debt Offer Prices, change
the number of Smitty's Securities sought to an amount less than all
of the outstanding Smitty's Securities, change the form of
consideration to be paid pursuant to the Debt Offers or amend any
other term or condition of the Debt Offers in any manner which is
adverse to the holders of the Smitty's Securities; provided,
however, that if on the initial scheduled expiration date of the
Debt Offers (as they may be extended in accordance with the terms
thereof), all conditions to the Debt Offers shall not have been
satisfied or waived, the Debt Offers may be extended from time to
time without the consent of the Company for such period of time as
is reasonably expected to be necessary to satisfy such unsatisfied
conditions. In addition, the Debt Offer Prices may be increased
with the consent of the Company as specified above, in which case
the Debt Offers may be extended to the extent required by law in
connection with such increase without any further consent of the
Company.
1.10 Effect on Capital Stock. As of the Effective Time,
by virtue of the Merger and without any action on the part of the
holder of any shares of common stock, par value $.01 per share,
without distinction as to class, of Smitty's (the "Smitty's Common
Stock") or any shares of capital stock of Acquisition or the
Company:
(a) Common Stock of Acquisition. Each share of common
stock of Acquisition issued and outstanding immediately prior
to the Effective Time shall be converted into one share of
common stock, par value $.01 per share, of the Surviving
Corporation.
(b) Cancellation of Treasury Stock of Acquisition. Each
share of capital stock of Acquisition that is owned by
Acquisition or by any subsidiary of the Company or Acquisition
shall automatically be cancelled and retired and shall cease
to exist, and no consideration shall be delivered or
deliverable in exchange therefor.
(c) Smitty's Common Stock. Each share of Smitty's
Common Stock, without distinction as to class, outstanding
immediately prior to the Effective Time (other than shares of
Smitty's Common Stock to be cancelled pursuant to Section
1.10(d) below), shall be converted into 3.011803 shares of the
Company's Class B Common Stock (the "Merger Consideration").
(d) Cancellation of Treasury Stock of Smitty's. Each
share of capital stock of Smitty's that is owned by Smitty's
or by any subsidiary of Smitty's shall automatically be
cancelled and retired and shall cease to exist, and no
consideration shall be delivered or deliverable in exchange
therefor.
1.11 Dissenting Shares. Each Smitty's Stockholder
delivering a Smitty's Stockholders' Agreement will agree, pursuant
to its respective Smitty's Stockholders' Agreement, to waive any
appraisal rights granted pursuant to Section 262 of the Delaware
Law (or any successor provision) to which it may otherwise be
entitled as a result of the transactions resulting from the Merger.
Notwithstanding anything in this Agreement to the contrary, shares
of Smitty's Common Stock outstanding immediately prior to the
Effective Time held by a holder (other than any Smitty's
Stockholder who has delivered a Smitty's Stockholders' Agreement)
who has the right to demand payment for and an appraisal of such
shares in accordance with Section 262 of the Delaware Law (or any
successor provision) ("Dissenting Shares") shall not be converted
into the Merger Consideration or any cash in lieu of fractional
shares of Smitty's Common Stock unless such holder fails to perfect
or otherwise loses such holder's right to such payment or
appraisal, if any. If, after the Effective Time, such holder fails
to perfect or loses any such right to appraisal, each such share
of Smitty's Common Stock of such holder shall be treated as a share
that had been converted as of the Effective Time into the Merger
Consideration in accordance with Section 1.10. Smitty's shall give
prompt notice to the Company of any demands received by Smitty's
for appraisal of shares of Smitty's Common Stock, and the Company
(or its designee) shall have the right to participate in and direct
all negotiations and proceedings with respect to such demands.
Smitty's shall not, except with the prior written consent of the
Company (or its designee), make any payment with respect to, or
settle or offer to settle, any such demands.
1.12 Exchange of Certificates.
(a) Exchange Procedures. As soon as practicable after
the Effective Time, each holder of an outstanding certificate or
certificates which prior thereto represented shares of Smitty's
Common Stock shall, upon surrender to the Surviving Corporation,
duly endorsed, as the Surviving Corporation may require, be
entitled to a certificate or certificates representing the number
of full shares of Class B Common Stock into which the number of
shares of Smitty's Common Stock previously represented by such
certificate or certificates surrendered shall have been converted
pursuant to this Agreement. Certificates for the newly issued
Class B Common Stock shall bear the legend contemplated by the
Investment Letters. After the Effective Time, there shall be no
further transfer on the records of Smitty's or its transfer agent
of certificates representing shares of Smitty's Common Stock which
have been converted pursuant to this Agreement into the Merger
Consideration, and if such certificates are presented to Smitty's
for transfer, they shall be cancelled against delivery of the
certificates representing the Merger Consideration, as well as any
cash in lieu of fractional shares thereof. If any certificate for
Class B Common Stock is to be issued in, or if cash in lieu of
fractional shares is to be remitted to, a name other than that in
which the certificate for Smitty's Common Stock surrendered for
exchange is registered, it shall be a condition of such exchange
that the certificate so surrendered shall be properly endorsed,
with signature guaranteed, or otherwise in proper form for transfer
and that the person requesting such exchange shall pay to the
Company or its transfer agent any transfer or other taxes required
by reason of the issuance of certificates for such Class B Common
Stock in a name other than that of the registered holder of the
Smitty's Common Stock certificate surrendered, or establish to the
satisfaction of Smitty's or its transfer agent that such tax has
been paid or is not applicable. Until surrendered as contemplated
by this Section, each certificate for shares of Smitty's Common
Stock shall be deemed at any time after the Effective Time to
represent the Merger Consideration as contemplated by Section 1.10.
No interest will be paid or will accrue on any cash payable as
Merger Consideration or in lieu of any fractional shares of Class
B Common Stock issued hereby.
(b) Distributions. No dividends or other distributions
with respect to Class B Common Stock issued hereby with a record
date after the Effective Time shall be paid to the holder of any
unsurrendered certificate for shares of Smitty's Common Stock with
respect to the shares of Class B Common Stock represented thereby
and no cash payment in lieu of fractional shares shall be paid to
any such holder until the surrender of such certificate in
accordance with this Article 1. Subject to the effect of
applicable laws, following surrender of any such certificate, there
shall be paid to the holder of the certificates representing whole
shares of Class B Common Stock issued in connection therewith,
without interest, (i) at the time of such surrender the amount of
any cash payable in lieu of a fractional share of Class B Common
Stock to which such holder is entitled pursuant to Section 1.11(c),
and (ii) at the appropriate payment date, the proportionate amount
of dividends or other distributions with a record date after the
Effective Time but prior to such surrender with respect to such
whole shares of Class B Common Stock.
(c) No Fractional Shares.
(i) No certificates or scrip representing
fractional shares of Class B Common Stock shall be issued in
connection with the Merger.
(ii) Notwithstanding any other provision of this
Agreement, each holder of shares of Smitty's Common Stock
exchanged pursuant to the Merger who would otherwise have been
entitled to receive a fraction of a share of Class B Common
Stock (after taking into account all shares of Smitty's Common
Stock delivered by such holder) shall receive, in lieu
thereof, a cash payment (without interest) representing such
holder's proportionate interest in a share of Class B Common
Stock which shall be deemed to have a value equal to the
average closing price of the Class B Common Stock on the New
York Stock Exchange for the five trading days following the
Merger Closing Date.
ARTICLE 2.
RECAPITALIZATION OF THE COMPANY
2.1 Offer by the Company.
(a) The Company shall commence the Offer as soon as
practicable following the mailing of the Proxy Statement by the
Company to its stockholders. The Company agrees that the terms of
the Offer will provide that the Company will purchase, subject to
the satisfaction or waiver of the conditions to the Offer set forth
in Annex N hereto, 50% of its outstanding shares of Common Stock,
which shares have been validly tendered and not withdrawn in the
Offer, at a price per share equal to the Offer Price.
Notwithstanding the foregoing, however, the parties agree that in
the event the financing described in paragraph (b) of Annex N has
been obtained, the Company agrees that it will, if so requested in
writing by Yucaipa, waive the condition set forth in paragraph (f)
of Annex N. Upon the Company's acceptance of, and payment for,
shares of Common Stock, such shares shall cease to be outstanding
for all purposes. The Offer shall provide that if there are
validly tendered and not withdrawn more than 50% of the shares of
outstanding Common Stock, then the number of shares that the
Company is obligated to purchase shall be reduced pro rata on the
basis of the total number of shares tendered.
(b) On the date the Offer is commenced, the Company
shall file with the SEC an Offer Statement on Schedule 13E-4 with
respect to the Offer. The Offer Statement shall contain the offer
to purchase and forms of the related letter of transmittal and
summary advertisement, as well as all other information and
exhibits required by law. The Company agrees promptly to correct
any information in the Offer Statement that shall be or shall have
become false or misleading in any material respect and the Company
further agrees to take all steps necessary to cause the Offer
Statement as so corrected to be filed with the SEC and disseminated
to the stockholders of the Company as and to the extent required
by applicable federal securities laws. Smitty's and its counsel
shall be given an opportunity to participate in the preparation of
the Offer Statement prior to its being filed with the SEC. The
Company agrees to provide Smitty's and its counsel with any written
comments the Company or its counsel may receive from the SEC with
respect to the Offer Statement promptly after the receipt of such
comments. The form and substance of the Offer Statement and any
amendments, modifications or supplements to the Offer Statement
shall be determined by the Company in its reasonable discretion;
provided, however, that the Company will provide Smitty's a
reasonable opportunity to review and comment on any such amendment,
modification or supplement prior to filing or distribution.
2.2 Financing Arrangements by Yucaipa.
(a) On or prior to the date hereof, Yucaipa has caused
to be delivered to the Company, and the Company has accepted, one
or more bank commitment letters and one or more highly confident
letters (collectively, the "Commitment Letters") containing
indicative terms and conditions which are reasonably satisfactory
to the Company providing for (i) borrowings by the Company in an
aggregate principal amount of approximately $850 million under one
or more senior bank facilities, (ii) the issuance and sale by the
Company of senior notes and senior subordinated notes in an
aggregate principal amount of approximately $650 million (the "New
Debt Securities"), (iii) the issuance and sale of shares of a newly
designated series of the Company's pay-in-kind preferred stock with
aggregate gross proceeds of approximately $75 million (the "PIK
Preferred Stock") and shares of the Company's Class B Common Stock
(the financings referred to in clauses (i), (ii) and (iii) are
collectively referred to as the "Financings").
(b) At all times prior to the Offer Closing Date,
Yucaipa agrees to use all reasonable efforts to consult with the
Company concerning and, as appropriate, assist the Company in
arranging for the Company to enter into one or more agreements
providing for financing (collectively, the "Financing Agreements"),
with terms and conditions which are consistent with the related
Commitment Letters for such Financing Agreements and are otherwise
reasonably satisfactory to the Company.
(c) On or prior to the Offer Closing Date, the Company
agrees to effect borrowings and issuances and sales, as applicable,
under the Financing Agreements, the funds of which shall be used
upon expiration of the Offer, together with other funds available
to the Company, to (x) purchase 50% of its outstanding Common
Stock, (y) repay all outstanding principal and interest, and other
amounts payable, under the Specified Company Indebtedness and the
Specified Smitty's Indebtedness and (z) pay certain fees and
expenses incurred in connection with the Recapitalization and the
other transactions contemplated hereby.
2.3 Definitive Financing Agreements. The Company shall
use all reasonable efforts to negotiate, prepare and enter into
definitive Financing Agreements to provide for the Financings on
terms and conditions which are consistent with those contained in
the related Commitment Letters and are otherwise reasonably
satisfactory to the Company. Each of the parties hereto shall use
all reasonable efforts to satisfy, on or before the Offer Closing
Date, all requirements of the Financing Agreements which are
conditions to closing the transactions constituting the Financings.
Without limitation of the foregoing, the Company will prepare
registration statements (the "Financing Registration Statements")
for filing pursuant to the Securities Act on such forms as may be
appropriate in order to permit the public offering of the New Debt
Securities and the PIK Preferred Stock and to take such other
actions in connection therewith as may be appropriate to complete
such public offerings. Smitty's and its counsel shall be given an
opportunity to participate in the preparation of each Financing
Registration Statement prior to its being filed with the SEC. The
Company agrees to provide Smitty's and its counsel with any written
comments the Company or its counsel may receive from the SEC with
respect to any Financing Registration Statement promptly after the
receipt of such comments. The form and substance of the Financing
Registration Statements and any amendments, modifications or
supplements to the Financing Registration Statements shall be
determined by the Company in its reasonable discretion; provided,
however, that the Company will provide Smitty's and its counsel a
reasonable opportunity to review and comment on any such amendment,
modification or supplement prior to filing or distribution.
2.4 Execution of Related Agreements.
(a) Simultaneously with the execution of this Agreement,
the Company, Yucaipa, the Smitty's Principal Stockholders and the
Company stockholders named therein shall enter into a Standstill
Agreement (the "Standstill Agreement"), in the form of Annex K
hereto.
(b) On the Offer Closing Date, the Company and Yucaipa
shall enter into the Management Agreement, in the form of Annex L
hereto.
(c) On the Offer Closing Date, the Company and Yucaipa
shall enter into a Warrant Agreement (the "Warrant Agreement"), in
the form of Annex M hereto.
(d) Simultaneously with the execution of this Agreement,
Smitty's, Jeffrey P. Smith, Richard D. Smith, Fred L. Smith, Ida
Smith, the Dee Glenn Smith Marital Trust, Trust for the Children
of Jeffrey Paul Smith, Trust for the Children of Richard Dee Smith,
and Trust for the Children of Fred Lorenzo Smith shall each enter
into a stockholders' agreement (the "Smith's Shareholder
Agreement"), in the form of Annex O hereto.
2.5 Redemption of the Company's Preferred Stock. On or
prior to the Offer Closing Date, the Company agrees, subject to the
provisions of the Company's certificate of incorporation, to redeem
outstanding shares of Series I Preferred Stock from certain holders
in an amount and on terms reasonably acceptable to the Company and
Smitty's.
2.6 Board of Directors; Officers. Effective on the
Offer Closing Date, the Company agrees to use all reasonable
efforts, subject to the provisions of the certificate of
incorporation and bylaws of the Company and the approval of the
Company's stockholders at the Company Stockholders' Meeting, to:
(a) cause the Company's Board of Directors to be reduced
to seven directors and have nominated and elected as directors
two designees of Yucaipa, two independent directors, the
individual selected by the Company to become the Chief
Operating Officer of the Company and two nominees designated
by the Chairman of the Company; and
(b) cause the Company's Board of Directors to elect
Ronald W. Burkle as the Chief Executive Officer of the
Company.
2.7 Company's Options and Deferred Compensation Plans.
(a) The Company shall, consistent with applicable law,
offer those employees who hold, immediately prior to the Offer
Closing Date, options to purchase Common Stock under the Company's
1989 Stock Option Plan (the "Options"), the opportunity to elect
either: (A) to receive (on the Offer Closing Date) cash payments
with respect to one-half of the shares subject to the Options in
an amount equal to (1) the number of shares of Company Common Stock
that would be received by such holder upon exercise of such Options
multiplied by the Offer Price minus (2) the aggregate exercise
price of such Options, and, in consideration of such payments, to
execute amendments to each existing option agreement such that the
remaining one-half of the shares subject to the Options shall not
be exercisable prior to the exercise date stated therein (without
regard to the transactions contemplated hereby) and shall have a
reduced exercise price of $15.00 per share of Company Common Stock;
or (B) have the vesting of all of such holder's Options accelerate
in accordance with the stated terms of the options as in effect as
of the date of this Agreement.
(b) The Company shall use all reasonable efforts to
amend its deferred compensation agreements in effect as of the date
of this Agreement with each of Frederick F. Urbanek, James A.
Acton, Richard C. Bylski, Larry R. McNeill, Kenneth A. White,
Matthew G. Tezak, Paul D. Tezak, James W. Hallsey, Michael C. Frei,
Harry M. Moskal, Robert C. Bolinder and Thomas K. Welch, to provide
that if within two years after the Closing Date the Company
terminates such officer's employment without cause (as such term
will be defined in such amendments to the reasonable satisfaction
of such officers, the Company and Yucaipa), all of such officer's
unvested benefits under such deferred compensation agreement shall
become immediately and fully vested.
2.8 Recapitalization. As used herein, the
"Recapitalization" refers collectively to the execution, delivery
and performance of this Agreement with respect to the following:
(i) the execution and delivery of, and receipt of the proceeds
under, the Financing Agreements, (ii) the making and consummation
of the Offer, (iii) the execution and delivery of the Management
Agreement; (iv) the execution and delivery of, and the issuance of
the warrants provided for under, the Warrant Agreement, (v) the
completion of the transactions contemplated by Sections 2.6 and 2.7
hereof, and (vi) the filing of the restated certificate of
incorporation of the Company in the form attached hereto as Annex
D.
ARTICLE 3.
THE CLOSINGS
3.1 Merger Closing.
(a) The closing of the Merger (the "Merger Closing")
shall take place at 10:00 a.m. local time on the fifth Business Day
following the day on which the last to be fulfilled or waived of
the conditions set forth in Article 9 hereof shall be fulfilled or
waived in accordance with this Agreement, at the offices of Latham
& Watkins, 633 West Fifth Street, Sixth Floor, Los Angeles,
California 90071, or at such other time and place and on such other
date as the parties hereto shall agree (the "Merger Closing Date").
(b) In connection with the Merger Closing, the filing
required under Section 1.2 shall be made and all actions, payments
and deliveries then required hereunder shall be completed. The
Merger Closing shall be deemed to have occurred only when (i) the
matters provided for in Section 1.2 shall have occurred and (ii)
all of the opinions, certificates and other documents required to
be delivered at the Merger Closing, as specified in the following
sentence, have been delivered (or the requirement therefor waived).
(c) At the Merger Closing, (i) the Company shall deliver
to the Smitty's Stockholders, in the case of clause (A), and to
Yucaipa (with copies to Smitty's) as representative of the Smitty's
Stockholders, in the case of clauses (B) through (G), (A) the
Merger Consideration as specified in Section 1.10, (B) a
certificate of the Company (signed on behalf of the Company by its
President or a Vice President) that the conditions set forth in
Section 9.1 have been satisfied (except as waived by Smitty's), (C)
the certificate of incorporation of each of the Company and
Acquisition, certified by the Secretary of State of Delaware and
certificates of good standing of the Company and Acquisition in
Delaware and Arizona, (D) an incumbency certificate with respect
to the officers of the Company and Acquisition, (E) the
Registration Rights Agreement, in the form of Annex E hereto, duly
executed by the Company, (F) a favorable opinion of counsel to the
Company (which counsel may include in-house counsel to the Company
and shall be reasonably satisfactory to Smitty's) as to the matters
set forth in the Annex B hereto and such other matters as are
customary in acquisition transactions and as may be reasonably
requested by Smitty's and Yucaipa, and (G) such other certificates,
instruments or other documents as Smitty's may reasonably request,
in each case in form and substance reasonably satisfactory to
Smitty's; and (ii) Smitty's and Yucaipa, as applicable, shall
deliver, or cause to be delivered, to the Company (A) the corporate
minute books, stock transfer books and bylaws of Smitty's, (B) a
certificate of Smitty's and Yucaipa (signed, in the case of
Smitty's, by its President or a Vice President) that the conditions
set forth in Section 9.2 have been satisfied (except as waived by
the Company), (C) the certificate of incorporation of Smitty's
certified by the Secretary of State of Delaware and certificates
of good standing of Smitty's in Delaware and Arizona, (D)
incumbency certificates with respect to the officers of Smitty's
and, as appropriate, its subsidiaries, and Yucaipa, (E) a favorable
opinion of counsel to Smitty's (which counsel may include in-house
counsel to Smitty's and shall be reasonably satisfactory to the
Company) as to the matters set forth in Annex C hereto and such
other matters as are customary in acquisition transactions and as
may be reasonably requested by the Company, and (F) such other
certificates, instruments or other documents as the Company may
reasonably request, in each case in form and substance reasonably
satisfactory to the Company.
3.2 Offer Closing. Unless the Recapitalization has been
terminated in accordance with Section 10.2 hereof, the closing of
the Offer (the "Offer Closing"; and together with the Merger
Closing, the "Closing") shall take place on the Merger Closing Date
(the "Offer Closing Date"; and together with the Merger Closing
Date, the "Closing Date"). At the Offer Closing, each of the
parties hereto shall have executed and delivered, to the extent
they are parties thereto, each of the Management Agreement and the
Warrant Agreement.
ARTICLE 4.
REPRESENTATIONS OF THE COMPANY AND ACQUISITION
The Company and Acquisition hereby represent and warrant
to Smitty's as follows:
4.1 Organization. Each of the Company, Acquisition and
the Company's other subsidiaries is a corporation duly organized,
validly existing and in good standing under the laws of the
jurisdiction of its incorporation, with the corporate power and
authority to own and operate its businesses as presently conducted.
Each of the Company, Acquisition and the Company's other
subsidiaries is duly qualified as a foreign corporation to do
business, and is in good standing, in each jurisdiction where the
character of its properties owned or held under lease or the nature
of its activities makes such qualification necessary, except where
the failure of the Company or any of its subsidiaries to be so
qualified would not have a Material Adverse Effect on the Company
and its subsidiaries taken as a whole. The Company has previously
provided Smitty's with true and correct copies of the certificate
of incorporation and bylaws, as currently in effect, of the Company
and each of the Company's subsidiaries. Except as disclosed in
Section 4.1 of the Disclosure Schedule, all of the outstanding
shares of capital stock of each of the Company's subsidiaries are
beneficially owned by the Company, directly or indirectly, free and
clear of all liens, charges, security interests, options, claims
or encumbrances of any nature whatsoever, and all such shares have
been validly issued and are fully paid and non-assessable.
4.2 Capitalization.
(a) The authorized capital stock of the Company consists
of 20,000,000 shares of Class A Common Stock, 100,000,000 shares
of Class B Common Stock and 85,000,000 shares of preferred stock,
34,524,579 shares of which have been designated as Series I
Preferred Stock. As of January 25, 1996, 11,598,086 shares of
Class A Common Stock, 18,363,925 shares of Class B Common Stock
(4,890,288 of which are held in the Company's treasury) and
12,956,747 shares of Series I Preferred Stock are issued and
outstanding. All of the issued and outstanding shares of Common
Stock are validly issued, fully paid and non-assessable. As of the
date hereof, except as otherwise disclosed in Section 4.2 of the
Disclosure Schedule, there are no existing options, warrants,
calls, subscriptions, convertible securities or other securities,
agreements, commitments, or obligations which would require the
Company to issue or sell shares of Common Stock or any other equity
securities, or securities convertible into or exchangeable or
exercisable for shares of Common Stock or any other equity
securities of the Company or any of its subsidiaries. The Company
has no commitments or obligations to purchase or redeem any shares
of its Common Stock or, except as specified in the Company's
certificate of incorporation, its Series I Preferred Stock.
(b) The authorized capital stock of Acquisition consists
of (i) 1,000 shares of common stock, 100 shares of which are issued
and outstanding as of the date hereof. All of the issued and
outstanding shares of Acquisition's common stock are validly
issued, fully paid and non-assessable and owned by the Company.
There are no existing options, warrants, calls, subscriptions,
convertible securities or other securities, agreements,
commitments, or obligations which would require Acquisition to
issue or sell shares of its common stock or any other equity
securities, or securities convertible into or exchangeable or
exercisable for shares of its common stock or any other equity
securities. Acquisition has no commitments or obligations to
purchase or redeem any shares of its common stock.
(c) Upon issuance in connection with the Merger, the
shares of Class B Common Stock to be delivered to the Smitty's
Stockholders as Merger Consideration will be validly issued, fully
paid and non-assessable.
4.3 Authorization. Each of the Company and Acquisition
has the requisite corporate power and authority to execute, deliver
and perform this Agreement and the other Transaction Documents to
which it is a party and the transactions contemplated hereby and
thereby. The execution and delivery of this Agreement by each of
the Company and Acquisition, the performance by each of the Company
and Acquisition of their respective obligations hereunder and the
consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of the
Company and Acquisition, as applicable, except for the
authorization and performance of the Financing Agreements and the
requisite approval of the Company's stockholders, all of which
action will be taken prior to the Closing Date. The execution,
delivery and performance of the other Transaction Documents and the
consummation of the transactions contemplated thereby will have
been duly authorized by all necessary corporate action on the part
of the Company or Acquisition, as applicable, prior to the Closing
Date. Each of this Agreement and the Standstill Agreement has been
duly and validly executed and delivered by each of the Company and
Acquisition, as applicable, and constitutes a legally valid and
binding obligation of each of the Company and Acquisition, as the
case may be, enforceable against them in accordance with its terms
except to the extent that such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or
other laws affecting the enforcement of creditors' rights generally
or by general principles of equity. The other Transaction
Documents will have been, as of the Closing Date, duly and validly
executed and delivered by the Company and will constitute, as of
such time, legally valid and binding obligations of the Company,
enforceable against them in accordance with their respective terms,
except to the extent that such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or
other laws affecting the enforcement of creditors' rights generally
or by general principles of equity. The Certificate of Merger will
have been, as of the Effective Time, duly and validly executed and
delivered by Acquisition and will constitute as of such time
legally valid and binding obligation of Acquisition, enforceable
against it in accordance with its terms except to the extent that
such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws affecting the
enforcement of creditors' rights generally or by general principles
of equity.
4.4 Absence of Certain Changes or Events. Except as set
forth in Section 4.4 of the Disclosure Schedule or in the Company
SEC Reports and except for the transactions contemplated hereby,
since December 31, 1994, (i) the Company and its subsidiaries have
conducted their respective businesses only in the ordinary and
usual course consistent with past practices, and (ii) there has not
been any materially adverse change in the business, operations,
condition (financial or otherwise), results of operations,
prospects, assets, liabilities, working capital or reserves of the
Company and its subsidiaries taken as a whole. Except as set forth
in Section 4.4 of the Disclosure Schedule or the Company SEC
Reports, from December 31, 1994 through the date of this Agreement,
neither the Company nor any of its subsidiaries has taken any of
the actions prohibited by Section 7.1 hereof.
4.5 No Conflict or Violation. Except as set forth in
Section 4.5 of the Disclosure Schedule, neither the execution and
delivery of this Agreement or the other Transaction Documents, nor
the performance by each of the Company and Acquisition of their
respective obligations hereunder and thereunder, nor the
consummation of the transactions contemplated hereby or thereby,
will (i) conflict with the Company's or Acquisition's certificate
of incorporation or bylaws; (ii) assuming satisfaction of the
requirements set forth in Section 4.6 below, violate any statute,
law, ordinance, rule or regulation applicable to the Company or
Acquisition or any of their respective properties or assets; or
(iii) violate, breach, be in conflict with or constitute a default
(or an event which, with notice or lapse of time or both, would
constitute a default) under, or permit the termination of any
provision of, or result in the termination of, the acceleration of
the maturity of, or the acceleration of the performance of any
obligation of the Company or any of its subsidiaries, or result in
the creation or imposition of any lien upon any properties, assets
or business of the Company or any of its subsidiaries under, any
note, bond, indenture, mortgage, deed of trust, lease, franchise,
permit, authorization, license, contract, instrument or other
agreement or commitment, or any order, judgment or decree to which
the Company or any of its subsidiaries is a party or by which the
Company or any of its subsidiaries or any of their respective
assets or properties is bound or encumbered, except, in each case,
for such violations, conflicts, defaults or other occurrences
which, in the aggregate, would not have a Material Adverse Effect
on the Company and its subsidiaries taken as a whole and would not
prevent or delay the Merger or the Recapitalization or otherwise
prevent the Company from performing its obligations under this
Agreement and the other Transaction Documents.
4.6 Consents and Approvals. Except (i) pursuant to
applicable requirements of the HSR Act, (ii) for filing of the
Certificate of Merger in accordance with the Delaware Law, (iii)
with respect to matters set forth in Section 4.6 of the Disclosure
Schedule, no consent, approval or authorization of, permit from,
or declaration, filing or registration with, any governmental or
regulatory authority, or any other person or entity, is required
to be made or obtained by the Company or Acquisition in connection
with the execution, delivery and performance of this Agreement or
the other Transaction Documents and the consummation of the
transactions contemplated hereby and thereby.
4.7 Litigation. Except as set forth in Section 4.7 of
the Disclosure Schedule or in the Company SEC Reports, there are
no Actions instituted, pending or, to the best knowledge of the
Company or Acquisition, threatened, which can reasonably be
expected, individually or in the aggregate, directly or indirectly,
to have a Material Adverse Effect on the Company and its
subsidiaries taken as a whole, or to prevent or delay the Merger
or the Recapitalization or otherwise prevent the Company or
Acquisition from performing their respective obligations under this
Agreement and the other Transaction Documents, nor is there any
outstanding judgment, decree, or injunction or any statute, rule
or order of any domestic or foreign court, governmental department,
commission or agency which has or will have, individually or in the
aggregate, any such Material Adverse Effect.
4.8 Compliance with Law. Except as set forth in Section
4.8 of the Disclosure Schedule, the Company and each of its
subsidiaries is in compliance with all foreign, federal, state and
local laws and regulations applicable to its operations or with
respect to which compliance is a condition of engaging in the
business thereof (including, without limitation, all Environmental
Laws), except to the extent that failure to comply would not have
a Material Adverse Effect on the Company and its subsidiaries taken
as a whole. Except as set forth in Section 4.8 of the Disclosure
Schedule, to the best knowledge of the Company, neither the Company
nor any of its subsidiaries has received any notice asserting a
failure, or possible failure, to comply with any such law or
regulation, the subject of which notice has not been resolved as
required thereby or otherwise to the satisfaction of the party
sending the notice, except for such failure as would not have a
Material Adverse Effect on the Company and its subsidiaries taken
as a whole or the transactions contemplated hereby.
4.9 Company SEC Reports. The Company has delivered to
Smitty's true and complete copies of each registration statement,
report and proxy or information statement, including without
limitation, its annual reports to stockholders incorporated in
material part by reference in certain of such reports, in the form
(including exhibits (including all material contracts) and any
amendments thereto) required to be filed with the SEC since
December 31, 1993 (collectively, the "Company SEC Reports"). As
of the respective dates such Company SEC Reports were filed, or if
any Company SEC Reports were amended, as of the date such amendment
was filed, each of the Company SEC Reports (i) complied in all
material respects with all applicable requirements of the
Securities Act and the Exchange Act and the rules and regulations
promulgated thereunder, and (ii) did not contain any untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they
were made, not misleading. Each of the audited consolidated
financial statements and unaudited consolidated interim financial
statements of the Company (including any related notes and
schedules) included or incorporated by reference in its Annual
Reports on Form 10-K for each of the three fiscal years ended on
the Saturday nearest to December 31 in 1992, 1993 and 1994 and
Quarterly Reports on Form 10-Q for all interim periods subsequent
thereto fairly present, in conformity with GAAP applied on a
consistent basis (except as may be indicated in the notes thereto),
the consolidated financial position of the Company and its
subsidiaries as of its date and the consolidated results of
operations and changes in financial position for the period then
ended (subject to normal year-end adjustments in the case of any
unaudited interim financial statements).
4.10 ERISA.
(a) Section 4.10 of the Disclosure Schedule contains a
complete list of the Company's Employee Plans. Copies or
descriptions of the Company's Employee Plans have been or will be
furnished or made available to Smitty's and Yucaipa and their
counsel within 10 Business Days of the date of this Agreement.
(b) Except as described in Section 4.10 of the
Disclosure Schedule, each of the Company's Employee Plans (other
than any Multiemployer Plan) has been administered and is in
compliance with the terms of such Plan and all applicable laws,
rules and regulations where the failure thereof would have a
Material Adverse Effect on the Company and its subsidiaries taken
as a whole.
(c) No "reportable event" (as such term is used in
section 4043 of ERISA), "prohibited transaction" (as such term is
used in section 406 of ERISA or section 4975 of the Code) or
"accumulated funding deficiency" (as such term is used in section
412 or 4971 of the Code) has heretofore occurred with respect to
any of the Company's Employee Plans (other than any Multiemployer
Plan) which would have a Material Adverse Effect on the Company and
its subsidiaries taken as a whole.
(d) No litigation or administrative or other proceeding
involving any of the Company's Employee Plans (other than any
Multiemployer Plan) has occurred or are threatened where an adverse
determination would have a Material Adverse Effect on the Company
and its subsidiaries taken as a whole.
(e) Except as set forth in Section 4.10 of the
Disclosure Schedule, neither the Company nor any ERISA Affiliate
of the Company has incurred any withdrawal liability with respect
to any Multiemployer Plan under Title IV of ERISA which remains
unsatisfied in an amount which would have a Material Adverse Effect
on the Company and its subsidiaries taken as a whole.
(f) Any termination of, or withdrawal from, any of the
Company's Employee Plans or Multiemployer Plans, on or prior to the
Closing Date, would not subject the Company to any material
liability under Title IV of ERISA.
4.11 Taxes. As of the date of this Agreement, except as
set forth in Section 4.12 of the Disclosure Schedule:
(i) the Company and its subsidiaries have (A) duly
filed (or there have been filed on their behalf) with the
appropriate governmental authorities all Tax Returns required
to be filed by them and such Tax Returns are true, correct and
complete in all material respects, and (B) duly paid in full
or made provision in accordance with GAAP (or there has been
paid or provision has been made on their behalf) for the
payment of all Taxes for all periods (or portions thereof)
ending on or prior to the Merger Closing Date;
(ii) the Company and its subsidiaries have complied
in all material respects with all applicable laws, rules and
regulations relating to the payment and withholding of Taxes
and have, within the time and the manner prescribed by law,
withheld and paid over to the proper governmental authorities
all amounts required to be so withheld and paid over under
applicable laws;
(iii) no federal, state, local or foreign audits
or other administrative proceedings or court proceedings are
presently pending with regard to any Taxes or Tax Returns of
the Company or its subsidiaries and neither the Company nor
its subsidiaries has received a written notice of any pending
audits or proceedings;
(iv) neither the Service nor any other taxing
authority (whether domestic or foreign) has asserted, or to
the best knowledge of the Company, is threatening to assert,
against the Company or any of its subsidiaries any deficiency
or claim for Taxes; and
(v) there are no material liens for Taxes upon any
property or assets of the Company or any subsidiary thereof,
except for liens for Taxes not yet due and payable and liens
for Taxes that are being contested in good faith by
appropriate proceedings.
4.12 Absence of Breaches or Defaults. Except as set
forth in Section 4.12 of the Disclosure Schedule, to the best of
the Company's knowledge, neither the Company nor any of its
subsidiaries is in default under, or in breach or violation of, any
material Contract. No event has occurred which either entitles,
or would, on notice or lapse of time or both, entitle the holder
of any indebtedness affecting the Company or any of its
subsidiaries (except for the execution of this Agreement) to
accelerate, or which does accelerate, the maturity of any
indebtedness affecting the Company or any of its subsidiaries,
except as set forth in Section 4.12 of the Disclosure Schedule.
4.13 Environmental Matters. Except as set forth in
Section 4.13 of the Disclosure Schedule, each of the Properties of
the Company or any of its subsidiaries is maintained in compliance
with all Environmental Laws, except where the failure to so comply,
or any aggregation of such failures, would not have a Material
Adverse Effect on the Company and its subsidiaries taken as a
whole. Except as set forth in Section 4.13 of the Disclosure
Schedule, no conditions exist with respect to the soil, surface
waters, groundwaters, land, stream sediments, surface or subsurface
strata, ambient air, and any other environmental medium on or off
the Company's Properties, which, individually or in the aggregate,
could result in any damage, claim, or liability to or against the
Company or any of its subsidiaries by any third party (including,
without limitation, any government entity), including, without
limitation, any condition resulting from the operation of the
Company's business and/or operator in the vicinity of any of the
Company's Properties and/or any activity or operation formerly
conducted by any Person on the Company's Properties, except in any
such case which would not be reasonably expected to have a Material
Adverse Effect on the Company and its subsidiaries taken as a
whole. With the exception of retail consumer products sold in the
ordinary course of business and supplies used in the ordinary
course of business, and except as set forth in Section 4.13 of the
Disclosure Schedule, the Company and any other Person for whose
conduct the Company is or may be held responsible, has not
generated, manufactured, refined, transported, treated, stored,
handled, disposed, transferred, produced, or processed any
Hazardous Materials. Except as set forth in Section 4.13 of the
Disclosure Schedule, (i) there are no existing uncured notices of
violation, administrative actions, or lawsuits against the Company
or any of its subsidiaries arising under Environmental Laws or
relating to the use, handling, storage, treatment, recycling,
generation, or release of Hazardous Materials at any of the
Company's Properties, nor has the Company received any uncured
notification of any allegation of any responsibility for any
disposal, release, or threatened release at any location of any
Hazardous Materials; (ii) there have been no spills or releases of
Hazardous Materials at any of the Company's Properties in excess
of quantities reportable under Environmental Laws, except in any
such case which would not be reasonably expected to have a Material
Adverse Effect on the Company and its subsidiaries taken as a
whole; and (iii) there are no consent decrees, consent orders,
judgments, judicial or administrative orders, or liens by any
governmental authority relating to any Environmental Law which
regulate, obligate, or bind the Company or any of its subsidiaries.
4.14 No Brokers. Except for fees to be paid to Goldman,
Sachs & Co. by the Company, no broker, finder or investment banker
is entitled to any brokerage, finder's or other fee or commission
in connection with the Merger or the Recapitalization or in
connection with any proposed sale of the Company or any of its
assets, or a restructuring of or merger or similar transaction
involving the Company based upon arrangements made by or on behalf
of Company and its subsidiaries.
4.15 Opinion of Financial Advisor. The Company has
received an opinion from Goldman, Sachs & Co. dated as of a date
which is on or prior to the date of this Agreement to the effect
that, as of such date, the Merger Consideration to be paid by the
Company in the Merger is fair to the Company (the "Fairness
Opinion"). The Company has delivered to each of Smitty's and
Yucaipa a true, complete and correct copy of the Fairness Opinion.
4.16 No Other Agreements to Sell the Company or its
Assets. Except as set forth in Section 4.16 of the Disclosure
Schedule, the Company has no legal obligation, absolute or
contingent, to any other person or firm to sell any material
portion of the Assets of the Company, to sell the capital stock of
the Company or any of its subsidiaries, or to effect any merger,
consolidation or other reorganization of the Company or any of its
subsidiaries or to enter into any agreement with respect thereto.
4.17 Transactions with Affiliates. Except to the extent
disclosed in the Company SEC Reports filed prior the date of this
Agreement, from December 31, 1994 through the date of this
Agreement, there have been no transactions, agreements,
arrangements or understandings between the Company or its
subsidiaries, on the one hand, and the Company's affiliates (other
than wholly owned subsidiaries of the Company) or other Persons,
on the other hand, that would be required to be disclosed under
Item 404 of Regulation S-K under the Securities Act.
4.18 Vote Required. The approval by a majority of the
votes cast by the holders of the outstanding shares of Company
Common Stock and Series I Preferred Stock (taking into account the
special voting rights attributable to the Class A Common Stock and
the Series I Preferred Stock) is the only vote of the holders of
any class or series of the Company's capital stock necessary to
approve the Merger and the Recapitalization; provided that the
total vote cast represents over 50% in interest of all securities
of the Company entitled to vote on such matters.
4.19 Registration Rights. Except as set forth in Section
4.19 of the Disclosure Schedule, neither the Company nor any of its
subsidiaries has previously entered into any agreement granting any
registration rights to any Person, whether consistent or
inconsistent with the rights to be granted to the Smitty's
Stockholders in the Registration Rights Agreement.
4.20 Information in Proxy Statement. The Proxy Statement
(or any amendment thereof or supplement thereto), at the date
mailed to the Company's stockholders and at the time of the Company
Stockholders' Meeting, will not contain any untrue statement of a
material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made,
not misleading; provided, however, that no representation is made
by the Company with respect to statements made therein based on
information supplied by Smitty's, Yucaipa or any of their
respective affiliates for inclusion in the Proxy Statement.
Subject to the proviso set forth in the preceding sentence, the
Proxy Statement will comply in all material respects with the
provisions of the Exchange Act and the rules and regulations
thereunder.
4.21 Information in the Financing Registration
Statements. The Financing Registration Statements (or any
amendments thereof or supplements thereto), on the date declared
effective by the SEC, will not contain any untrue statement of a
material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made,
not misleading; provided, however, that no representation is made
by the Company with respect to statements made therein based on
information supplied by Smitty's, Yucaipa or any of their
respective affiliates for inclusion in the Financing Registration
Statements. Subject to the proviso set forth in the preceding
sentence, the Financing Registration Statements will comply in all
material respects with the provisions of the Securities Act and the
rules and regulations thereunder.
ARTICLE 5.
REPRESENTATIONS OF SMITTY'S
Smitty's hereby represents and warrants to the Company
and Acquisition as follows:
5.1 Organization of Smitty's. Smitty's and each of its
subsidiaries is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction of its
incorporation, with the corporate power and authority to own and
operate its businesses as presently conducted. Smitty's and each
of its subsidiaries is duly qualified as a foreign corporation to
do business and is in good standing in each jurisdiction where the
character of its properties owned or held under lease or the nature
of its activities makes such qualification necessary, except where
the failure of Smitty's or any of its subsidiaries to be so
qualified would not have a Material Adverse Effect on Smitty's and
its subsidiaries taken as a whole. The jurisdictions in which
Smitty's and each of its subsidiaries are qualified to do business
are set forth in Section 5.1 of the Disclosure Schedule. Smitty's
has previously provided the Company with true and correct copies
of its certificate of incorporation and bylaws and the charter
documents and bylaws of each of its subsidiaries, as currently in
effect.
5.2 Subsidiaries. The only subsidiaries of Smitty's are
those set forth in Section 5.2 of the Disclosure Schedule. All of
the outstanding shares of capital stock of each of Smitty's'
subsidiaries are validly issued, fully paid, non-assessable and
free of preemptive rights or rights of first refusal. Except as
set forth in Section 5.2 of the Disclosure Schedule, Smitty's owns,
directly or indirectly, all of the issued and outstanding capital
stock of each of its subsidiaries, free and clear of all
Encumbrances, and there are no existing options, warrants, calls,
subscriptions, convertible securities or other securities,
agreements, commitments or obligations of any character relating
to the outstanding capital stock or other securities of any
subsidiary of Smitty's or which would require any subsidiary of
Smitty's to issue or sell any shares of its capital stock or
securities convertible into or exchangeable for shares of its
capital stock. Except as set forth in Section 5.2 of the
Disclosure Schedule, neither Smitty's nor any of its subsidiaries
owns less than 100% of the outstanding voting securities or other
capital stock of any corporation or other entity (other than
investments in marketable securities).
5.3 Capitalization. The authorized capital stock of
Smitty's consists of (i) 1,500,000 shares of Smitty's Common Stock,
1,000,000 shares of which have been designated as "Class A Common
Stock" and 500,000 shares of which have been designated "Class B
Common Stock," and (ii) 10,000 shares of preferred stock, par value
$.01 per share. As of the date hereof, 705,692.803 shares of
Smitty's' Class A Common Stock, 303,300 shares of Smitty's' Class
B Stock and no shares of Smitty's' preferred stock are issued and
outstanding; none of such shares are held in Smitty's' treasury as
of the date hereof. All of the issued and outstanding shares of
Smitty's Common Stock are validly issued, fully paid and
non-assessable. There are no existing options, warrants, calls,
subscriptions, convertible securities or other securities,
agreements other than this Agreement, commitments, or obligations
which would require Smitty's to issue or sell shares of Smitty's
Common Stock or any other equity securities, or securities
convertible into or exchangeable or exercisable for shares of
Smitty's Common Stock or any other equity securities of Smitty's.
Neither Smitty's nor any of its subsidiaries has any commitments
or obligations to purchase or redeem any shares of capital stock
of any class of, or other equity interests in, Smitty's or any of
its subsidiaries.
5.4 Authorization. Smitty's has the requisite corporate
power and authority to execute, deliver and perform this Agreement
and the transactions contemplated hereby. The execution and
delivery of this Agreement by Smitty's and the performance by
Smitty's of its obligations hereunder and the consummation of the
transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of Smitty's, other than the
adoption and approval of this Agreement by the stockholders of
Smitty's, and no other corporate proceedings on the part of
Smitty's are necessary to authorize this Agreement and the
transactions contemplated hereby. This Agreement has been duly and
validly executed and delivered by Smitty's and constitutes a
legally valid and binding obligation of Smitty's, enforceable
against it in accordance with its terms, except to the extent that
such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws affecting the
enforcement of creditors' rights generally or by general principles
of equity. The Certificate of Merger will have been, as of the
Effective Time, duly and validly authorized, executed and delivered
by Smitty's, and will constitute as of such time a legally valid
and binding obligation of Smitty's, enforceable against it in
accordance with its terms, except to the extent that such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws affecting the enforcement
of creditors' rights generally or by general principles of equity.
5.5 Absence of Certain Changes or Events. Except as set
forth in Section 5.5 of the Disclosure Schedule and the
transactions contemplated hereby, since July 30, 1995, Smitty's and
its subsidiaries have conducted their respective businesses only
in the ordinary and usual course consistent with past practices and
there has not been any change in Smitty's' business, operations,
condition (financial or otherwise), results of operations,
prospects, assets, liabilities, working capital or reserves, except
for changes contemplated hereby or changes which have not,
individually or in the aggregate, been materially adverse to
Smitty's and its subsidiaries taken as a whole. Except as set
forth in Section 5.5 of the Disclosure Schedule or the Smitty's SEC
Reports, from July 30, 1995 through the date of this Agreement,
neither Smitty's nor any of its subsidiaries has taken any of the
actions prohibited by Section 7.2 hereof.
5.6 Assets.
(a) Except as set forth in Section 5.6(a) of the
Disclosure Schedule, Smitty's and its subsidiaries have good and
marketable fee simple title to, or a valid leasehold interest in,
all material Assets reflected on Smitty's' balance sheet at October
22, 1995, free and clear of all Encumbrances (other than Permitted
Encumbrances).
(b) Section 5.6(b) of the Disclosure Schedule sets forth
a complete and accurate list of (i) each Property and/or Facility
owned in fee by Smitty's or any of its subsidiaries, (ii) each
Property and/or Facility held for development by Smitty's or any
of its subsidiaries and (iii) each Property and/or Facility being
leased, subleased or otherwise occupied by Smitty's or any of its
subsidiaries pursuant to any Lease, in each case describing the
location (property address), the identity of the tenant (if other
than Smitty's) and the current use of such Property or Facility.
(c) Smitty's and its subsidiaries, in person or by
subtenant, as the case may be, enjoy peaceful and undisturbed
possession of all of their respective Properties and Facilities,
except for those Properties designated as unimproved land on
Section 5.6(b) of the Disclosure Schedule and, with respect to
which, such Properties are subject to no Encumbrances (other than
Permitted Encumbrances) that would materially interfere with the
development of or the market value of the same as Facilities.
(d) There are no pending or, to the best knowledge of
Smitty's, threatened condemnation or similar proceedings relating
to any of the Properties or Facilities of Smitty's and its
subsidiaries.
(e) To the best knowledge of Smitty's, (i) the real
property improvements (including leasehold improvements), which
constitute a portion of the Facilities are structurally sound with
no known material defects, and (ii) the building systems which
constitute a portion of the Facilities and the equipment and other
tangible Assets owned, leased or used by Smitty's and its
subsidiaries in the conduct of their respective businesses are in
good operating condition and repair, subject to ordinary wear and
tear, and are adequate for the present uses thereof; none of such
Facilities (except for Facilities scheduled for renovation in the
ordinary course of business as set forth in Section 5.6(e) of the
Disclosure Schedule), are in need of maintenance or repairs except
for ordinary, routine maintenance and repairs.
(f) Section 5.6(f) of the Disclosure Schedule sets forth
a complete and accurate list of all leases (including subleases and
licenses) of personal property entered into by Smitty's or any of
its subsidiaries and involving any annual expense to Smitty's or
any such subsidiary in excess of $50,000 and not cancelable
(without material liability) within 30 days.
(g) Section 5.6(g) of the Disclosure Schedule sets forth
a complete and accurate list of all agreements pursuant to which
Smitty's or any of its subsidiaries lease, sublease, or otherwise
permit any third party to occupy all or any portion of its
Properties or the Facilities (collectively, the "Third Party
Leases").
(h) Section 5.6(h) of the Disclosure Schedule indicates
with respect to each Lease entered into by Smitty's or any of its
subsidiaries, as a tenant or subtenant: (i) the term, (ii) current
rent and (iii) a brief summary of any terms which would be outside
of the ordinary course of business which would have, or could
reasonably be expected to have, a Material Adverse Effect on
Smitty's and its subsidiaries taken as a whole.
(i) Smitty's or its subsidiaries, as the case may be,
has in all material respects performed all obligations on its part
to be performed with respect to (i) all Assets leased by it or to
it (whether as lessor or lessee) except where the failure to
perform would not, individually or in the aggregate, have a
Material Adverse Effect on Smitty's and its subsidiaries taken as
a whole, and (ii) all Leases of its Facilities, and there exists
no material default or event which, with the giving of notice or
lapse of time or both, would become a default on the part of
Smitty's or any of its subsidiaries under any Lease.
(j) To the best knowledge of Smitty's, (i) no default
(nor any event which, with the giving of notice or passage of time
or both would constitute a default) has occurred on the part of any
other party to any Lease of which it is a party and (ii) each of
the Leases is valid, binding and enforceable in accordance with its
terms and is in full force and effect, and assuming all consents
required by the terms thereof or applicable law have been obtained,
the Leases will continue to be valid, binding and enforceable in
accordance with their respective terms and in full force and effect
immediately following the consummation of the transactions
contemplated hereby.
(k) Smitty's has delivered to the Company, or otherwise
made available, originals or true copies of all Leases and Third
Party Leases (as the same may have been amended or modified from
time to time).
5.7 Contracts and Commitments. Section 5.7 of the
Disclosure Schedule contains a complete and accurate list of all
Contracts of the following categories to which Smitty's or any of
its subsidiaries is a party or by which any of them is bound as of
the date of this Agreement:
(i) Contracts not made in the ordinary course of
business involving annual expenditures or liabilities in
excess of $100,000 or total expenditures in excess of
$300,000;
(ii) employment contracts, including, without
limitation, contracts to employ executive officers and other
contracts with officers, directors or stockholders of
Smitty's, and any other Contracts with or for the benefit of
any Smitty's Stockholder or its affiliates, and all severance
or similar arrangements with any Personnel that will result
in any obligation (absolute or contingent) of Smitty's or any
of its subsidiaries to make any payment to any Personnel
following termination of employment;
(iii) labor contracts;
(iv) material distribution, franchise, license,
sales, agency or advertising contracts;
(v) options, rights of first refusal, purchase
rights or other contractual rights to lease, purchase,
acquire, sell or dispose of all, or any portion of, any real
property or material personal property, whether as grantor or
grantee, other than as set forth in the Leases;
(vi) Contracts for the purchase of inventory which
are not cancelable (without material penalty, cost or other
liability) within 90 days (other than Contracts for the
purchase of holiday goods in accordance with customary
industry practices) and other Contracts made in the ordinary
course of business involving expenditures or liabilities in
excess of $100,000 which are not cancelable (without material
penalty, cost or other liability) within 30 days;
(vii) promissory notes, loans, agreements,
indentures, evidences of indebtedness or other instruments
relating to the lending of money, whether as borrower, lender
or guarantor, in excess of $50,000;
(viii) Contracts containing covenants limiting
the freedom of Smitty's or any of its subsidiaries to engage
in any line of business or compete with any person or operate
at any location;
(ix) powers of attorney;
(x) joint venture or partnership agreements or
joint development or similar agreements pursuant to which any
third party is entitled to develop any Property and/or
Facility on behalf of Smitty's or its subsidiaries; and
(xi) any other Contract, whether similar or
dissimilar to the foregoing, which would be material to
Smitty's and its subsidiaries taken as a whole.
True copies of the written Contracts identified in Section 5.7 of
the Disclosure Schedule have been delivered or made available to
the Company.
5.8 Absence of Breaches or Defaults. Except as set
forth in Section 5.8 of the Disclosure Schedule, to best knowledge
of Smitty's, neither Smitty's nor any of its subsidiaries is in
default under, or in breach or violation of, any material Contract.
No event has occurred which either entitles, or would, on notice
or lapse of time or both, entitle the holder of any indebtedness
affecting Smitty's or any of its subsidiaries (except for the
execution of this Agreement) to accelerate, or which does
accelerate, the maturity of any indebtedness affecting Smitty's or
any of its subsidiaries, except as set forth in Section 5.8 of the
Disclosure Schedule.
5.9 No Conflict or Violation. Except as set forth in
Section 5.9 of the Disclosure Schedule, neither the execution and
delivery of this Agreement, nor the performance by Smitty's of its
obligations hereunder nor the consummation of the transactions
contemplated hereby, will (i) conflict with Smitty's' certificate
of incorporation or bylaws; (ii) assuming satisfaction of the
requirements set forth in Section 5.10 below, violate any statute,
law, ordinance, rule or regulation, applicable to Smitty's or any
of its subsidiaries or any of their properties or assets; or (iii)
violate, breach, be in conflict with or constitute a default (or
an event which, with notice or lapse of time or both, would
constitute a default) under, or permit the termination of any
provision of, or result in the termination of, the acceleration of
the maturity of, or the acceleration of the performance of any
obligation of Smitty's or any of its subsidiaries, or result in the
creation or imposition of any lien upon any properties, assets or
business of Smitty's or any of its subsidiaries under, any note,
bond, indenture, mortgage, deed of trust, lease, franchise, permit,
authorization, license, contract, instrument or other agreement or
commitment or any order, judgment or decree to which Smitty's or
any of its subsidiaries is a party or by which Smitty's or any of
its subsidiaries or any of their respective assets or properties
is bound or encumbered, except for such violations, conflicts,
defaults or other occurrences which, in the aggregate, would not
have, and would not reasonably be expected to have, a Material
Adverse Effect on Smitty's and its subsidiaries taken as a whole,
and would not prevent or delay the Merger or the Recapitalization
or otherwise prevent the Smitty's from performing its obligations
under this Agreement.
5.10 Consents and Approvals. Except (i) pursuant to
applicable requirements of the HSR Act, (ii) for the filing of the
Certificate of Merger in accordance with the Delaware Law, or (iii)
with respect to matters set forth in Section 5.10 of the Disclosure
Schedule, no consent, approval or authorization of, permit from,
or declaration, filing or registration with, any governmental or
regulatory authority, or any other person or entity (including,
without limitation, any landlord under any lease), is required to
be made or obtained by Smitty's or its subsidiaries in connection
with the execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated hereby.
5.11 Litigation. Except as set forth in Section 5.11 of
the Disclosure Schedule, there are no Actions instituted, pending
or, to the best knowledge of Smitty's, threatened, which, if
adversely decided, would, individually or in the aggregate,
directly or indirectly, have a Material Adverse Effect on Smitty's
and its subsidiaries taken as a whole, or would prevent or delay
the Merger or the Recapitalization or otherwise prevent Smitty's
from performing its obligations under this Agreement, nor is there
any outstanding judgment, decree, or injunction or any statute,
rule or order of any domestic or foreign court, governmental
department, commission or agency which has or will have,
individually or in the aggregate, any such Material Adverse Effect.
5.12 Compliance with Law. Except as set forth in Section
5.12 of the Disclosure Schedule, Smitty's and each of its
subsidiaries is in compliance with all foreign, federal, state and
local laws and regulations applicable to its operations or with
respect to which compliance is a condition of engaging in the
business thereof (including, without limitation, all Environmental
Laws), except to the extent that failure to comply would not have
a Material Adverse Effect on Smitty's and its subsidiaries taken
as a whole. Except as set forth in Section 5.12 of the Disclosure
Schedule, to the best knowledge of Smitty's, neither Smitty's nor
any of its subsidiaries has received any notice asserting a
failure, or possible failure, to comply with any such law or
regulation, the subject of which notice has not been resolved as
required thereby or otherwise to the satisfaction of the party
sending the notice, except for such failure as would have a
Material Adverse Effect on Smitty's and its subsidiaries taken as
a whole or the transactions contemplated hereby. Smitty's and its
subsidiaries have all material permits, licenses and franchises
from governmental agencies required to conduct their respective
businesses as they are now being conducted and all such permits,
licenses and franchises will remain in effect after the Effective
Time.
5.13 Labor Matters.
(a) Section 5.13(a) of the Disclosure Schedule contains
a complete list of all organizations representing the employees of
Smitty's or any of its subsidiaries. There is no strike, work
stoppage or labor disturbance pending or, to the best knowledge of
Smitty's, threatened, which involves any employees of Smitty's or
any of its subsidiaries.
(b) Section 5.13(b) of the Disclosure Schedule contains
a list of all unfair employment or labor practice charges which are
presently pending, as well as a description and the status of each,
which to the best knowledge of Smitty's have been filed with any
governmental authority by or on behalf of any employee of Smitty's
or any of its subsidiaries and a list of all employment-related
litigation or administrative proceedings which are presently
pending (together with a description and the status of each such
litigation or proceeding), filed by or on behalf of any employee
of Smitty's or any of is subsidiaries.
(c) Except as described in Sections 5.11, 5.13(a) and
(b) of the Disclosure Schedule, there are not presently pending or,
to the best knowledge of Smitty's, threatened, against Smitty's or
any of its subsidiaries any material claims by any governmental
authority, labor organization, or employee alleging that Smitty's
or any such employer has violated any applicable laws respecting
employment practices. Smitty's and each of its subsidiaries is in
compliance in all material respects with its obligations under all
statutes, executive orders and other governmental regulations or
judicial decrees governing its employment practices, including
without limitation, provisions relating to wages, hours, equal
opportunity and payment of social security and other taxes.
(d) Except as described in Section 5.13(d) of the
Disclosure Schedule, (i) Smitty's has paid, or caused to be paid,
in full to all employees of Smitty's and its subsidiaries all
wages, salaries, commissions, bonuses, benefits and other
compensation due to such employees or otherwise arising under any
policy, practice, agreement, plan, program, statute or other law,
(ii) neither Smitty's nor any of its subsidiaries is liable for any
severance pay or other payments to any employee or former employee
arising from the termination of employment, nor will Smitty's or
its subsidiaries have any liability under any benefit or severance
policy, practice, agreement, plan, or program which exists or
arises, or may be deemed to exist or arise, as a result of or in
connection with the transactions contemplated hereunder or as a
result of the termination by Smitty's or such subsidiaries of any
persons employed on or prior to the Merger Closing Date, (iii)
Smitty's and its subsidiaries have not closed any plant or
facility, effectuated any layoffs of employees or implemented any
early retirement, separation or window program within the past
year, nor has Smitty's or its subsidiaries planned or announced any
such future action or program for the future, and (iv) Smitty's is
in compliance with its obligations, if any, pursuant to the Worker
Adjustment and Retraining Notification Act of 1988, and all other
notification and bargaining obligations arising under any
collective bargaining agreement, statute or otherwise.
5.14 Smitty's SEC Reports. Smitty's has delivered or
made available to the Company true and complete copies of each
registration statement, report and proxy or information statement
filed with the SEC, including, without limitation, all exchange
offer registration statements on Form S-4 (the "Smitty's Exchange
Registration Statements"), in the form (including exhibits and any
amendments thereto) required to be filed with the SEC since July
31, 1994 (collectively, the "Smitty's SEC Reports"). As of the
respective dates such Smitty's SEC Reports were filed or, if any
such Smitty's SEC Reports were amended, as of the date such
amendment was filed, each of the Smitty's SEC Reports (i) complied
in all material respects with all applicable requirements of the
Securities Act and the Exchange Act and the rules and regulations
promulgated thereunder, and (ii) did not contain any untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they
were made, not misleading. Each of the audited consolidated
financial statements and unaudited consolidated interim financial
statements of Smitty's (including any related notes and schedules)
included or incorporated by reference in its Annual Reports on Form
10-K for the three fiscal years ended July 30, 1995 and Quarterly
Reports on Form 10-Q for all interim periods subsequent thereto
fairly present, in conformity with GAAP applied on a consistent
basis (except as may be indicated in the notes thereto), the
consolidated financial position of Smitty's and its subsidiaries
as of its date and the consolidated results of operations and
changes in financial position for the period then ended (subject
to normal year-end adjustments in the case of any unaudited interim
financial statements).
5.15 No Brokers. Except as specified in Schedule 5.15
hereto, no broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with
the Merger or the Recapitalization or in connection with any
proposed sale of Smitty's or any of its assets, or a restructuring
of or merger or similar transaction involving Smitty's based upon
arrangements made by or on behalf of Smitty's and its subsidiaries.
5.16 No Other Agreements to Sell Smitty's or its Assets.
Except as set forth in Section 5.16 of the Disclosure Schedule,
Smitty's has no legal obligation, absolute or contingent, to any
other Person to sell any material portion of the Assets of
Smitty's, to sell the capital stock of Smitty's or any of its
subsidiaries, or to effect any merger, consolidation or other
reorganization of Smitty's or any of its subsidiaries or to enter
into any agreement with respect thereto.
5.17 Proprietary Rights. Section 5.17 of the Disclosure
Schedule contains a list of all Proprietary Rights which are owned
by Smitty's or any of its subsidiaries, or in which Smitty's or any
of its subsidiaries has any interest, or which, to the best
knowledge of Smitty's, have been used in connection with, or which
relate to the business of Smitty's or any of its subsidiaries
(whether or not presently used in connection therewith). Except
as set forth in Section 5.17 of the Disclosure Schedule, Smitty's
or a subsidiary of Smitty's owns and has the sole and exclusive
right to use all such Proprietary Rights and such items are not
subject to any licenses, Encumbrances or charges of any kind.
Neither Smitty's nor any of its subsidiaries has been charged, or
to the best knowledge of Smitty's is any of them threatened to be
charged, with infringement of, nor to the best knowledge of
Smitty's has any of them infringed, any unexpired patent,
trademark, trademark registration, trade name, service mark,
copyright, copyright registration or other proprietary right of any
party. Smitty's and each of its subsidiaries owns, or is licensed
or otherwise has the right to use, all patents, trademarks, trade
names, service marks, copyrights, technology, know-how, processes,
methods and designs used in or necessary for the conduct of its
business as presently being conducted. The consummation of the
Merger and the other transactions contemplated hereby will not
alter or impair any of such rights.
5.18 Employee Benefit Plans.
(a) Section 5.18 of the Disclosure Schedule contains a
complete list of the Employee Plans of Smitty's. Copies or
descriptions of the Employee Plans of Smitty's have been or will
be furnished or made available to the Company and their counsel
within 10 Business Days of the date of this Agreement.
(b) Except as described in Section 5.18 of the
Disclosure Schedule, each of Smitty's Employee Plans (other than
any Multiemployer Plan) has been administered and is in compliance
with the terms of such Plan and all applicable laws, rules and
regulations where the failure thereof would have a Material Adverse
Effect on Smitty's and its subsidiaries taken as a whole.
(c) No "reportable event" (as such term is used in
section 4043 of ERISA), "prohibited transaction" (as such term is
used in section 406 of ERISA or section 4975 of the Code) or
"accumulated funding deficiency" (as such term is used in section
412 or 4971 of the Code) has heretofore occurred with respect to
any Smitty's Employee Plan (other than any Multiemployer Plan)
which would have a Material Adverse Effect on Smitty's and its
subsidiaries taken as a whole.
(d) No litigation or administrative or other proceeding
involving any Smitty's Employee Plans (other than any Multiemployer
Plan) has occurred or are threatened where an adverse determination
would have a Material Adverse Effect on Smitty's and its
subsidiaries taken as a whole.
(e) Except as set forth in Section 5.18 of the
Disclosure Schedule, neither Smitty's nor any ERISA Affiliate of
Smitty's has incurred any withdrawal liability with respect to any
Multiemployer Plan under Title IV of ERISA which remains
unsatisfied in an amount which would have a Material Adverse Effect
on Smitty's and its subsidiaries taken as a whole.
(f) Any termination of, or withdrawal from, any Smitty's
Employee Plans or Multiemployer Plans, on or prior to the Closing
Date, would not subject Smitty's to any material liability under
Title IV of ERISA.
5.19 Insurance. Section 5.19 of the Disclosure Schedule
contains a complete and accurate list of all policies or binders
of fire, liability, property, title, workers' compensation,
business interruption, errors or omissions and other forms of
insurance (showing as to each policy or binder the carrier, policy
number, coverage limits, including without limitation, retentions
and deductibles, expiration dates, annual premiums and a general
description of the type of coverage provided) maintained by
Smitty's or any of its subsidiaries on its business, property or
Personnel within the last five years. All of such policies are
sufficient for compliance with all requirements of law and of all
contracts to which Smitty's or any of its subsidiaries is a party.
5.20 Affiliate Transactions. Except as set forth in
Section 5.20 of the Disclosure Schedule or in the Smitty's SEC
Reports, from July 30, 1995 through the date of this Agreement
there have been no transactions, agreements, arrangements or
understandings between Smitty's or any of its subsidiaries, on the
one hand, and Smitty's' affiliates (other than wholly owned
subsidiaries of Smitty's) or other Persons, on the other hand, that
would be required to be disclosed under Item 404 of Regulation S-
K under the Securities Act.
5.21 Environmental Matters. Except as set forth in
Section 5.21 of the Disclosure Schedule, each of the Properties of
Smitty's or any of its subsidiaries is maintained in compliance
with all Environmental Laws, except where the failure to so comply,
or any aggregation of such failures, would not have a Material
Adverse Effect on Smitty's and its subsidiaries taken as a whole.
Except as set forth in Section 5.21 of the Disclosure Schedule, no
conditions exist with respect to the soil, surface waters,
groundwaters, land, stream sediments, surface or subsurface strata,
ambient air, and any other environmental medium on or off the
Properties, which, individually or in the aggregate, could result
in any damage, claim, or liability to or against Smitty's or any
of its subsidiaries by any third party (including without
limitation, any government entity), including, without limitation,
any condition resulting from the operation of Smitty's' business
and/or operator in the vicinity of any of the Properties and/or any
activity or operation formerly conducted by any Person on the
Properties, except in any such case which would not be reasonably
expected to have a Material Adverse Effect on Smitty's and its
subsidiaries taken as a whole. With the exception of retail
consumer products sold in the ordinary course and supplies used in
the ordinary course of business and except as set forth in Section
5.21 of the Disclosure Schedule, Smitty's and any other Person for
whose conduct Smitty's is or may be held responsible, has not
generated, manufactured, refined, transported, treated, stored,
handled, disposed, transferred, produced, or processed any
Hazardous Materials. Except as set forth in Section 5.21 of the
Disclosure Schedule, (i) there are no existing uncured notices of
violation, administrative actions, or lawsuits against Smitty's or
any of its subsidiaries arising under Environmental Laws or
relating to the use, handling, storage, treatment, recycling,
generation, or release of Hazardous Materials at any of the
Properties, nor has Smitty's received any uncured notification of
any allegation of any responsibility for any disposal, release, or
threatened release at any location of any Hazardous Materials; (ii)
there have been no spills or releases of Hazardous Materials at any
of the Properties in excess of quantities reportable under
Environmental Laws, except in any such case which would not be
reasonably expected to have a Material Adverse Effect on Smitty's
and its subsidiaries taken as a whole; and (iii) there are no
consent decrees, consent orders, judgments, judicial or
administrative orders, or liens by any governmental authority
relating to any Environmental Law which regulate, obligate, or bind
Smitty's or any of its subsidiaries.
5.22 Taxes. As of the date of this Agreement, except as
set forth in Section 5.22 of the Disclosure Schedule:
(i) Smitty's and its subsidiaries have (A) duly
filed (or there have been filed on their behalf) with the
appropriate governmental authorities all Tax Returns required
to be filed by them and such Tax Returns are true, correct and
complete in all material respects, and (B) duly paid in full
or made provision in accordance with GAAP (or there has been
paid or provision has been made on their behalf) for the
payment of all Taxes for all periods (or portions thereof)
ending on or prior to the Merger Closing Date;
(ii) Smitty's and its subsidiaries have complied in
all material respects with all applicable laws, rules and
regulations relating to the payment and withholding of Taxes
and have, within the time and the manner prescribed by law,
withheld and paid over to the proper governmental authorities
all amounts required to be so withheld and paid over under
applicable laws;
(iii) no federal, state, local or foreign audits
or other administrative proceedings or court proceedings are
presently pending with regard to any Taxes or Tax Returns of
Smitty's or its subsidiaries and neither Smitty's nor its
subsidiaries has received a written notice of any pending
audits or proceedings;
(iv) neither the Service nor any other taxing
authority (whether domestic or foreign) has asserted, or to
the best knowledge of Smitty's, is threatening to assert,
against Smitty's or any of its subsidiaries any deficiency or
claim for Taxes;
(v) there are no material liens for Taxes upon any
property or assets of Smitty's or any subsidiary thereof,
except for liens for Taxes not yet due and payable and liens
for Taxes that are being contested in good faith by
appropriate proceedings;
(vi) neither Smitty's nor any of its subsidiaries
has agreed to or is required to make any adjustment under
Section 481(a) of the Code;
(vii) the applicable statutes of limitation for
the assessment of federal income Taxes upon Smitty's and its
subsidiaries for all periods have expired, except as set forth
on Section 5.22 of the Disclosure Schedule;
(viii) neither Smitty's nor any of its
subsidiaries is a party to any material agreement providing
for the allocation or sharing of Taxes; and
(ix) neither Smitty's nor any of its subsidiaries
has, with regard to any assets or property held or acquired
by any of them, filed a consent to the application of Section
341(f) of the Code, or agreed to have Section 341(f)(2) of the
Code apply to any disposition of a subsection (f) asset (as
such term is defined in Section 341(f)(4) of the Code) owned
by Smitty's or any of its subsidiaries.
5.23 Bank Accounts. Section 5.23 of the Disclosure
Schedule contains a true and complete listing of all bank accounts
or other depositary accounts maintained by Smitty's or any of its
subsidiaries and the authorized signatories thereto.
5.24 Information in Proxy Statement and Financing
Registration Statements. Information supplied by Smitty's, Yucaipa
or any of their respective affiliates for inclusion in (i) the
Proxy Statement (or any amendment thereof or supplement thereto),
at the date mailed to the Company's stockholders and at the time
of the Company Stockholders' Meeting, and (ii) the Financing
Registration Statements (or any amendments thereof or supplements
thereto), on the date declared effective by the SEC, will not
contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances
under which they are made, not misleading.
ARTICLE 6.
REPRESENTATIONS OF YUCAIPA
Yucaipa, on behalf of itself and on behalf of the
Smitty's Principal Stockholders that are affiliates of the Yucaipa,
hereby represents and warrants to the Company and Acquisition as
follows:
6.1 Organization; Authorization; etc. Yucaipa and each
Smitty's Principal Stockholder is duly organized, validly existing
and in good standing under the laws of its jurisdiction of
organization. The execution and delivery of this Agreement and the
consummation of the Merger and the other transactions contemplated
hereby have been duly authorized by all necessary partnership
action on the part of Yucaipa. This Agreement has been duly
executed and delivered by Yucaipa, and, assuming the due execution
hereof by each other party hereto, this Agreement constitutes the
legally valid and binding obligation of Yucaipa, enforceable
against Yucaipa in accordance with its terms, except to the extent
that such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws affecting the
enforcement of creditors' rights generally and to general equitable
principles.
6.2 Ownership of Shares. At the time of the Merger
Closing, each of the Smitty's Principal Stockholders will own,
beneficially and of record, all of the shares of Smitty's Common
Stock issued in its name and set forth opposite its name on Section
6.2 of the Disclosure Schedule, free of any Encumbrance and subject
to no restriction with respect to the voting thereof (except as
contemplated by this Agreement or the Smitty's Stockholders'
Agreements), other than restrictions generally applicable under
federal or state securities laws.
6.3 Consents and Approvals; No Violations. Except for
the filing of the Certificate of Merger with the Secretary of State
of Delaware as set forth in Section 1.2, filings pursuant to the
HSR Act and the matters set forth in Section 6.3 of the Disclosure
Schedule, and assuming compliance with any applicable antitrust
laws, there is no requirement applicable to Yucaipa or any Smitty's
Principal Stockholder to make any filing or registration with, or
to obtain any permit, authorization, consent or approval of, any
government or regulatory authority or any non-governmental person
or entity in connection with the execution and delivery by Yucaipa
of this Agreement, the consummation of the Merger, and the
performance of the other transactions contemplated hereby, except
where the failure to make such filings or registrations or to
obtain such permits, authorizations, consents or approvals would
not, individually or in the aggregate, have a Material Adverse
Effect on Smitty's and its subsidiaries taken as a whole or the
consummation of the transactions contemplated hereby. Except as
set forth in Section 6.3 of the Disclosure Schedule, neither the
execution or delivery of this Agreement by Yucaipa nor the
performance by Yucaipa of its obligations under this Agreement will
(i) violate any provision of the partnership agreement or bylaws
(or other comparable governing instrument) of Yucaipa or any
Smitty's Principal Stockholder, (ii) violate any provision of, or
constitute (with or without notice, the passage of time or both)
a default under, or result in the acceleration of or entitle any
party to accelerate (whether after the giving of notice or lapse
of time or both) or terminate any obligation under, any mortgage,
lien, lease, agreement or other instrument or obligation to which
Yucaipa or any Smitty's Principal Stockholder is a party or by
which it or the shares of Smitty's Common Stock owned by it are
bound, except where such event would not, individually or in the
aggregate, have a Material Adverse Effect on Smitty's and its
subsidiaries taken as a whole or the consummation of the
transactions contemplated hereby, or (iii) assuming compliance with
any applicable antitrust laws, violate any order, writ, injunction,
decree, statute, rule or regulation to which Yucaipa or any
Smitty's Principal Stockholder is subject.
6.4 Agreement to Sell Smitty's and Other Matters.
Neither Yucaipa nor any Smitty's Principal Stockholder has any
legal obligation, absolute or contingent, to any other Person to
sell or dispose of its interest in the capital stock of Smitty's,
by way of a sale of capital stock, merger, consolidation or other
reorganization, or otherwise, or to enter into any agreement with
respect thereto. Except as set forth on Section 6.4 of the
Disclosure Schedule, neither Yucaipa nor any Smitty's Principal
Stockholder has directly or through any Affiliate or agent created,
or caused to be created, (i) any legal obligation, absolute or
contingent, of any other Person to sell any material portion of the
Assets of Smitty's or its subsidiaries, to sell the capital stock
of Smitty's or its subsidiaries, to effect any merger,
consolidation or other reorganization of Smitty's or its
subsidiaries, or to enter into any agreement with respect thereto,
or (ii) any liability (contingent or otherwise) for payment of a
brokerage, finder's, investment banking or other fee or commission
in connection with any sale or restructuring of Smitty's and its
subsidiaries, or (iii) any obligation with respect to the issuance
or sale of capital stock by Smitty's or any of its subsidiaries.
ARTICLE 7.
CONDUCT OF BUSINESS PENDING THE MERGER CLOSING
7.1 The Company. From the date hereof through the
Merger Closing Date, except as otherwise provided for in this
Agreement, the Company shall conduct the business of the Company
and its subsidiaries only in the ordinary and usual course as such
business has been conducted, and shall use all reasonable efforts
to keep intact the business organization in all material respects.
The Company shall use all reasonable efforts to avoid, and to cause
its subsidiaries to avoid, the occurrence of a breach of any
representation or warranty hereunder as of the Merger Closing, or
a violation of any covenant to be performed by it pursuant hereto,
or the failure to satisfy any condition to the obligations of any
party hereto. In addition, from the date hereof through the Merger
Closing Date, neither the Company nor any of its subsidiaries
shall, except as otherwise provided in this Agreement:
(a) (i) amend its certificate of incorporation or bylaws
(other than amendments to defer the redemption of the Series
I Preferred Stock for up to five years); (ii) split, combine
or reclassify any of its outstanding equity securities or
declare, set aside or pay any dividend payable in cash, stock
or property or make any other distribution with respect to
any of its equity securities, except regularly scheduled
dividends on its Common Stock, consistent with past practice;
or (iii) redeem, purchase or otherwise acquire, directly or
indirectly, any shares of its equity securities (other than
redemptions of Series I Preferred Stock in accordance with the
Company's certificate of incorporation);
(b) except as set forth in Section 4.4 of the Disclosure
Schedule, issue or sell or agree to issue or sell any
additional shares of, or options, warrants or rights of any
kind to acquire any shares of, its capital stock of any class
or series; (ii) enter into any agreement, contract or
commitment out of the ordinary course of its business to
dispose of or acquire, or relating to the disposition or
acquisition of, a segment of its business; (iii) except in the
ordinary course of business, sell, pledge, dispose of or
encumber any material Assets (including, without limitation,
any indebtedness owed to it or any material claims held by
it); (iv) acquire (by merger, consolidation or acquisition of
stock or assets) any corporation, partnership or other
business organization or division thereof or make any material
investment, either by purchase of stock or securities,
contribution to capital, property transfer or purchase, in any
case, of any material amount of property or assets, in any
other individual or entity; or (v) enter into any contract,
agreement, commitment or arrangement with respect to any of
the foregoing;
(c) adopt or amend any bonus, profit sharing,
compensation, stock option, pension, retirement, deferred
compensation, employment or other employee benefit plan,
agreement, trust, fund or other arrangement for the benefit
or welfare of any employee or increase in any manner the
compensation or fringe benefits of any employee or pay any
benefit not required by any existing plan, arrangement or
agreement;
(d) incur any material amount of indebtedness for
borrowed money, or make any loans or advances or capital
contributions to any other person other than a wholly owned
subsidiary of the Company, or issue or sell any debt
securities, other than borrowings under existing lines of
credit in the ordinary course of business or acquire any debt
instruments of others;
(e) make or commit to make any capital expenditures in
excess of $1,000,000 in the aggregate, other than expenditures
for (i) routine maintenance and repair or (ii) pursuant to
existing contracts or commitments;
(f) enter into or amend any Contract for the purchase
of inventory which is not cancelable within 90 days (other
than Contracts for the purchase of holiday goods in accordance
with customary industry practices) without penalty, cost or
liability or any other Contract in excess of $100,000 which
is not cancelable within 30 days without penalty, cost or
liability;
(g) grant any severance or termination pay (other than
pursuant to policies or agreements in effect on the date
hereof) or increase the benefits payable under its severance
or termination pay policies or agreements in effect on the
date hereof; and
(h) take or permit any action which would prevent the
Merger from qualifying as a reorganization under Section 368
of the Code.
Notwithstanding the foregoing provisions, in no event shall the
Company be required to comply with the provisions contained in
Sections 7.1(b) through (h) following the date, if any, that the
Company shall have terminated the Recapitalization.
7.2 Smitty's. From the date hereof through the Merger
Closing Date, except as otherwise provided for in this Agreement,
Smitty's shall conduct its business and the business of its
subsidiaries only in the ordinary and usual course as such business
has been conducted, and shall use reasonable efforts to keep intact
the business organization in all material respects. Without
limiting the foregoing, Smitty's shall, and shall cause its
subsidiaries to; (i) maintain reasonably comparable advertising and
promotional expenditures; (ii) maintain reasonably comparable
overall levels of inventory subject to seasonal variation and
changes in sales volume; (iii) maintain comparable insurance
coverage at commercially reasonable rates; (iv) pay amounts due to
vendors consistent with past practices; and (v) perform customary
maintenance on its Properties, Facilities and Fixtures and
Equipment and provide for the security of such Properties,
Facilities and Fixtures and Equipment in accordance with past
practices. Smitty's shall use all reasonable efforts to avoid, and
to cause each of its subsidiaries to avoid, the occurrence of a
breach of any representation or warranty hereunder as of the Merger
Closing, or a violation of any covenant to be performed by it
pursuant hereto, or the failure to satisfy any condition to the
obligations of any party hereto. In addition, from the date hereof
through the Merger Closing, except as set forth in Section 7.2 of
the Disclosure Schedule or as otherwise specifically provided for
in this Agreement or as the Company may specifically consent in
writing, which consent shall not be unreasonably withheld, neither
Smitty's or any of its subsidiaries shall:
(a) close any Facility, except as required by applicable
law or in the event of casualty or as a result of the
expiration of any Lease which, after reasonable efforts, is
not renewed;
(b) enter into, with respect to any Facility or Property
or any other real property or any material assets, any new
lease, lease termination agreement or material amendment
(excluding any extension or renewal of any lease in accordance
with past practices) of any agreement to lease such real
property;
(c) sell, assign or sublease any Facility or Property;
(d) (i) sell, assign or sublease any Fixtures and
Equipment or other material Assets (other than as specified
in clause (ii)), the aggregate sales prices and the annual
rental payments of which are $100,000 or more in the
aggregate, other than in the ordinary course of business, or
(ii) enter into any sale-leaseback transaction resulting in
annual rental payments in excess of $100,000, except for sale-
leaseback transactions for Fixtures and Equipment in the
ordinary course of business consistent with past practice;
(e) make or commit to make any capital expenditures in
excess of $250,000 in the aggregate, other than expenditures
for (i) routine maintenance and repair or (ii) pursuant to
existing contracts or commitments;
(f) incur any material amount of indebtedness for
borrowed money, or make any loans or advances or capital
contributions to any other person other than a wholly owned
subsidiary of the Company, or issue or sell any debt
securities, other than borrowings under existing lines of
credit in the ordinary course of business or acquire any debt
instruments of others;
(g) make any transfer of Assets from Smitty's or any of
its subsidiaries to any Affiliate (other than a wholly owned
subsidiary);
(h) materially reduce any store operating hours except
as consistent with past practices, as a result of security
concerns, material changes in sales volume, or as required by
law;
(i) (i) amend its certificate of incorporation or bylaws
or the charter or bylaws of any of its subsidiaries; (ii)
split, combine or reclassify the outstanding shares of its
capital stock or declare, set aside or pay any dividend
payable in cash, stock or property or make any other
distribution with respect to such shares of capital stock;
(iii) redeem, purchase or otherwise acquire, directly or
indirectly, any shares of its capital stock; or (iv) sell or
pledge any stock of any of its subsidiaries;
(j) (i) issue or sell or agree to issue or sell any
additional shares of, or options, warrants or rights of any
kind to acquire any shares of, its capital stock of any class;
(ii) enter into any agreement, contract or commitment out of
the ordinary course of its business, to dispose of or acquire,
or relating to the disposition or acquisition of, a segment
of its business; (iii) except in the ordinary course of
business, sell, pledge, dispose of or encumber any material
Assets (including without limitation, any indebtedness owed
to them or any material claims held by them); (iv) acquire (by
merger, consolidation or acquisition of stock or assets) any
corporation, partnership or other business organization or
division thereof or make any material investment, either by
purchase of stock or securities, contribution to capital,
property transfer or purchase, in any case, of any material
amount of property or assets, in any other Person; or (v)
enter into any contract, agreement, commitment or arrangement
with respect to any of the foregoing;
(k) fail to preserve intact its business organization,
or fail to keep available the services of its present officers
and key employees, and fail to preserve the good will of
customers of, and other persons having business relationships
with it;
(l) grant any severance or termination pay (other than
pursuant to policies or agreements in effect on the date
hereof) or increase the benefits payable under its severance
or termination pay policies or agreements in effect on the
date hereof;
(m) adopt or amend any bonus, profit sharing,
compensation, stock option, pension, retirement, deferred
compensation, employment or other employee benefit plan,
agreement, trust, fund or other arrangement for the benefit
or welfare of any employee or increase in any manner the
compensation or fringe benefits of any employee or pay any
benefit not required by any existing plan, arrangement or
agreement;
(n) enter into or amend any Contract for the purchase
of inventory which is not cancelable within 90 days (other
than Contracts for the purchase of holiday goods in accordance
with customary industry practices) without penalty, cost or
liability or any other Contract in excess of $100,000 which
is not cancelable within 30 days without penalty, cost or
liability;
(o) negotiate, enter into, or modify any agreement or
agree to be bound by any agreement with any collective
bargaining agent relating to its business, except for
agreements with respect to routine employee grievance matters
in the ordinary course of business;
(p) take or permit any action which would prevent the
Merger from qualifying as a reorganization under Section 368
of the Code; and
(q) make any material change in its tax or accounting
policies or any material reclassification of assets or
liabilities.
ARTICLE 8.
ADDITIONAL COVENANTS
8.1 Further Assurances and Cooperation. Subject to the
terms and conditions herein provided, each of the parties hereto
agrees to use all reasonable efforts to take, or cause to be taken,
all actions and to do, or cause to be done, all things necessary,
proper or advisable to consummate and make effective as promptly
as practicable the transactions contemplated by this Agreement and
to cooperate with each other in connection therewith, (a) to obtain
all necessary waivers, consents and approvals from other parties
to material loan agreements, leases and other contracts (provided
that Smitty's shall not agree to any substantial modification to
any such agreement, lease or contract or to any payment of funds
in order to obtain such waiver, consent or approval without the
prior written consent of the Company), (b) to defend any lawsuits
or other legal proceedings challenging this Agreement or the
consummation of the transactions contemplated hereby, (c) to lift
or rescind any injunction or restraining order or other order
adversely affecting the ability of the parties to consummate the
transactions contemplated hereby, (d) to effect all necessary
registrations and filings (including any registrations and filings
which may be required to be made by the Company pursuant to any
federal or state securities laws), (e) to negotiate and enter into,
on terms reasonably satisfactory to the Company, the Financing
Agreements and to satisfy all conditions thereto, and (f) to
fulfill all conditions to this Agreement. Without limitation of
the foregoing, Smitty's shall use all reasonable efforts to (i)
cause each of the Smitty's Stockholders to execute a Smitty's
Stockholders' Agreement, Continuity-of-Interest Letter and
Investment Letter as referred to in Section 1.7 hereof, and (ii)
take such actions as the Company may reasonably request to
facilitate the repayment by the Company of the Specified Smitty's
Indebtedness on the Merger Closing Date.
8.2 Certain Filings and Consents. Each party hereto
shall (a) as promptly as practicable make any required filings and
submissions under the HSR Act with respect to the Merger, (b)
cooperate with each other in determining whether any other filings
are required to be made or consents, approvals, permits or
authorizations are required to be obtained under any other federal,
state, local or foreign law or regulation or whether any consents,
approvals or waivers are required to be obtained from other parties
to loan agreements, leases or other contracts in connection with
the consummation of the Financings, the Merger, the Offer and the
other transactions contemplated by this Agreement, and (c) actively
assist each other in obtaining any consents, permits,
authorizations, approvals or waivers which are required. Each
party hereto shall promptly inform the other of any material
communication between such party and the Federal Trade Commission,
the Department of Justice or any other government or governmental
authority regarding the Merger or the other transactions
contemplated by this Agreement. If any party receives a request
for additional information or documentary material from any such
government or governmental authority, then such party shall
endeavor in good faith to make, or cause to be made, as soon as
reasonably practicable and after consultation with the other party,
an appropriate response to such request. Notwithstanding the
foregoing, in connection with proceedings under or relating to the
HSR Act or any other federal or state antitrust law, all analyses,
appearances, presentations, memoranda, briefs, arguments, and
opinions made or submitted by or on behalf of any party hereto
shall be subject to the joint approval or disapproval and the joint
control of the Company and Smitty's, acting with the advice of
their respective counsel, provided that nothing herein shall
prevent any party hereto or their authorized representatives from
making or submitting any such analysis, appearance, presentation,
memorandum, brief, argument, or opinion in response to a subpoena
or as otherwise required by law. The parties hereto shall
cooperate in connection with reaching any understandings,
undertakings or agreements (oral or written) involving the Federal
Trade Commission, the Department of Justice or any other
governmental authority in connection with the transactions
contemplated hereby. The Company shall use all reasonable efforts
to resolve such objections, if any, as may be asserted with respect
to the transactions contemplated hereby under any applicable
federal or state antitrust laws; provided, however, that in no
event shall the Company or any of its subsidiaries or the Surviving
Corporation or any of its subsidiaries be required in that
connection to (i) effect any divestitures of any material assets
of the Company, Smitty's or their respective subsidiaries, (ii)
hold separate any such material assets or (iii) agree to any
material restrictions on the operations of the Company, Smitty's
or their respective subsidiaries of any material portion of the
business or assets of the Company, Smitty's or their respective
subsidiaries.
8.3 Access to Information; Confidentiality.
(a) Upon reasonable notice, each party shall, and shall
cause each of its subsidiaries to, afford the other parties and
their representatives, full access during normal business hours to
all of its officers, agents, properties, books, contracts,
commitments and records (including but not limited to tax returns)
and, during such period, shall furnish promptly to such other party
and such other persons all information concerning its business,
properties and personnel as such other party or such other persons
may reasonably request. No investigation pursuant to this Section
8.3 or otherwise shall affect the representations and warranties
or indemnities of the parties hereto or the conditions to the
parties' respective obligations to consummate the Financings, the
Merger, the Offer or the other transactions contemplated by the
Recapitalization.
(b) Each party hereto shall (and shall use all
reasonable efforts to cause its representatives to) hold all such
non-public documents, work papers and other materials in confidence
in accordance with the provisions of the Confidentiality
Agreements. In the event of termination of this Agreement, each
party hereto shall return promptly every confidential document
furnished to it by the other parties hereto in connection with the
transactions contemplated hereby, and shall use all reasonable
efforts to cause its representatives to return the same, in each
case subject to the continued application of the Confidentiality
Agreements.
8.4 Notification of Certain Matters. The Company shall
give prompt notice to Smitty's, and Smitty's shall give prompt
notice to the Company, of (a) the occurrence, or failure to occur,
of any event which occurrence or failure would be likely to cause
any representation or warranty contained in this Agreement to be
untrue or inaccurate in any material respect at any time from the
date hereof to the Merger Closing Date, (b) any material failure
of the Company or Smitty's or any of their respective affiliates,
as the case may be, or of any of their respective officers,
directors, employees or agents, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied
by it under this Agreement, and (c) the status or fulfillment of
any of the conditions set forth in Article 9 hereof, upon
reasonable request of the other party; provided, however, that no
such notification shall affect the representations or warranties
of the parties or the conditions to the obligations of the parties
hereunder.
8.5 Alternative Proposals.
(a) Smitty's (and its subsidiaries, and affiliates over
which it exercises control) will not, and Smitty's (and each of its
subsidiaries and affiliates over which it exercises control) will
use its best efforts to ensure that its respective officers,
directors, employees, investment bankers, attorneys, accountants
and other agents do not, directly or indirectly: (i) initiate,
solicit or encourage, or take any action to facilitate the making
of, any offer or proposal which constitutes or is reasonably likely
to lead to any Alternative Transaction (as defined below) or an
inquiry with respect thereto, or, (ii) in the event of an
unsolicited Alternative Transaction for Smitty's or any subsidiary
or affiliate of Smitty's, engage in negotiations or discussions
with, or provide any information or data to, any corporation,
partnership, person or other entity or group (other than the
Company or any of its affiliates or representatives) relating to
any Alternative Transaction, except in the case of clause (ii)
above to the extent that (x) the Alternative Transaction is a bona
fide written proposal submitted to Smitty's Board of Directors and
(y) Smitty's Board of Directors determines, after having received
the oral or written opinion of outside legal counsel to Smitty's,
that the failure to engage in such negotiations or discussions or
provide such information would result in a breach of the Board of
Directors' fiduciary duties under applicable law. Smitty's shall,
and shall cause its subsidiaries and affiliates over which it
exercises control, and will use its best efforts to ensure their
respective officers, directors, employees, investment bankers,
attorneys, accountants and other agents to, immediately cease and
cause to be terminated all discussions and negotiations that have
taken place prior to the date hereof, if any, with any parties
conducted heretofore with respect to any Alternative Transaction
relating to Smitty's. Smitty's represents that it is not now
engaged in discussions or negotiations with any party with respect
to an Alternative Transaction.
(b) The Company (and its subsidiaries, and affiliates
over which it exercises control) will not, and the Company (and its
subsidiaries, and affiliates over which it exercises control) will
use their best efforts to ensure that their respective officers,
directors, employees, investment bankers, attorneys, accountants
and other agents do not, directly or indirectly: (i) initiate,
solicit or encourage, or take any action to facilitate the making
of, any offer or proposal which constitutes or is reasonably likely
to lead to any Alternative Transaction (as defined below) or an
inquiry with respect thereto, or, (ii) in the event of an
unsolicited Alternative Transaction for the Company or any
subsidiary or affiliate of the Company, engage in negotiations or
discussions with, or provide any information or data to, any
corporation, partnership, person or other entity or group (other
than Yucaipa or any of its affiliates or representatives) relating
to any Alternative Transaction, except in the case of clause (ii)
above to the extent that (x) the Alternative Transaction is a bona
fide written proposal submitted to the Company's Board of Directors
and (y) the Company's Board of Directors determines, after having
received the oral or written opinion of outside legal counsel to
the Company, that the failure to engage in such negotiations or
discussions or provide such information would result in a breach
of the Board of Directors' fiduciary duties under applicable law.
The Company shall, and shall cause its subsidiaries and affiliates
over which it exercises control, and will use its best efforts to
ensure their respective officers, directors, employees, investment
bankers, attorneys, accountants and other agents to, immediately
cease and cause to be terminated all discussions and negotiations
that have taken place prior to the date hereof, if any, with any
parties conducted heretofore with respect to any Alternative
Transaction relating to the Company. The Company represents that
it is not now engaged in discussions or negotiations with any party
with respect to an Alternative Transaction. Nothing contained in
this Section 8.5 shall prohibit the Company or its Board of
Directors from taking and disclosing to its stockholders a position
with respect to a tender offer by a third party pursuant to Rules
14d-9 and 14e-2(a) promulgated under the Exchange Act or making
such disclosure as may be required by applicable law.
(c) As used in this Agreement, "Alternative Transaction"
when used in connection with any Person shall mean any tender or
exchange offer involving the capital stock of such Person, any
proposal for a merger, consolidation or other business combination
involving such Person or any subsidiary of such Person, any
proposal or offer to acquire in any manner a substantial equity
interest in, or a substantial portion of the business or assets of,
such Person or any subsidiary of such Person, any proposal or offer
with respect to any recapitalization or restructuring with respect
to such Person or any subsidiary of such Person or any proposal or
offer with respect to any other transaction similar to any of the
foregoing with respect to such Person or any subsidiary of such
Person other than pursuant to the transactions to be effected
pursuant to this Agreement.
(d) In case of any capital reorganization, sale, merger
or consolidation of the Company in connection with an Alternative
Transaction (other than a merger or consolidation in which the
Company is the continuing corporation and which does not result in
any reclassification of the outstanding shares of Common Stock into
shares of other stock or other securities or assets) (collectively
such actions being hereinafter referred to as "Reorganizations")
is consummated, the Smitty's Stockholders shall, to the extent they
do not receive the Merger Consideration prior to the consummation
of such Alternative Transaction, be entitled upon consummation of
the Merger to receive the same number of shares of stock or other
securities or assets to which a holder of the number of shares of
the Company's Common Stock included in the Merger Consideration
would have been entitled to receive upon the consummation of such
Reorganization.
8.6 Public Statements and Press Releases. The Company,
Smitty's and each of their respective affiliates shall not from and
after the date hereof make, issue or release any public
announcement, press release, statement or acknowledgment of the
existence of, or reveal publicly the terms, conditions and status
of, the transactions provided for herein, without the prior consent
of the other parties as to the content and time of release of and
the media in which such statement or announcement is to be made,
except as may be required by applicable law, court process or by
obligations pursuant to any requirements of the New York Stock
Exchange, Inc.; provided, in the case of any such exception, the
Company shall use all reasonable efforts to provide Smitty's and
Yucaipa with prior notice of such disclosure or release. Each
party hereto agrees that it will not unreasonably withhold any such
consent.
8.7 Directors' and Officers' Insurance and
Indemnification.
(a) The Company agrees that after the Merger Closing
Date it shall, and shall cause its subsidiaries to, indemnify each
person who is now, or has been at any time prior to the date
hereof, a director or officer of Smitty's or any of Smitty's
subsidiaries, successors and assigns (individually a "Smitty's
Indemnified Party" and collectively the "Smitty's Indemnified
Parties"), to the fullest extent permitted by law, with respect to
any claim, liability, loss, damage, judgment, fine, penalty, amount
paid in settlement or compromise, cost or expense, including
reasonable fees and expenses of legal counsel (whenever asserted
or claimed) ("Smitty's Indemnified Liability"), based in whole or
in part on, or arising in whole or in part out of, any matter
existing or occurring at or prior to the Merger Closing Date
whether commenced, asserted or claimed before or after the Merger
Closing Date, including liability arising under the Securities Act,
the Exchange Act or state law. The Company shall, and shall cause
the Surviving Corporation to, maintain in effect for not less than
four years after the Merger Closing Date the current policies of
directors' and officers' liability insurance maintained by Smitty's
and its subsidiaries on the date hereof (provided that the Company
may substitute therefor policies having at least the same coverage
and containing terms and conditions which are no less advantageous
to the persons currently covered by such policies as insured) with
respect to matters existing or occurring at or prior to the Merger
Closing Date, and the Company shall use its best efforts to prepay
premiums with respect to the foregoing insurance for the four-year
period following the Merger Closing Date; provided, however, that
if the aggregate annual premiums for such insurance during such
period shall exceed 200% of the per annum rate of the aggregate
premium currently paid by Smitty's and its subsidiaries for such
insurance on the date of this Agreement, then the Company shall
cause the Surviving Corporation to, and the Surviving Corporation
shall, provide the maximum coverage that shall then be available
at an annual premium equal to 200% of such rate. The Company
agrees to pay all reasonable expenses (including reasonable fees
and expenses of counsel) that may be incurred by any Smitty's
Indemnified Party in successfully enforcing the indemnity or other
obligations under this Section 8.7(a).
(b) The Company agrees that after the Offer Closing Date
it shall, and shall cause its subsidiaries to, indemnify each
person who is now, or has been at any time prior to the date
hereof, a director or officer of the Company or any of the
Company's subsidiaries, successors and assigns (individually a
"Company Indemnified Party" and collectively the "Company
Indemnified Parties"), to the fullest extent permitted by law, with
respect to any claim, liability, loss, damage, judgment, fine,
penalty, amount paid in settlement or compromise, cost or expense,
including reasonable fees and expenses of legal counsel (whenever
asserted or claimed) ("Company Indemnified Liability"), based in
whole or in part on, or arising in whole or in part out of, any
matter existing or occurring at or prior to the Offer Closing Date
whether commenced, asserted or claimed before or after the Offer
Closing Date, including liability arising under the Securities Act,
the Exchange Act or state law. The Company shall maintain in
effect for not less than four years after the Offer Closing Date
the current policies of directors' and officers' liability
insurance maintained by the Company and its subsidiaries on the
date hereof (provided that the Company may substitute therefor
policies having at least the same coverage and containing terms and
conditions which are no less advantageous to the persons currently
covered by such policies as insured) with respect to matters
existing or occurring at or prior to the Offer Closing Date and the
Company shall use its best efforts to prepay premiums with respect
to the foregoing insurance for the four-year period following the
Merger Closing Date; provided, however, that if the aggregate
annual premiums for such insurance during such period shall exceed
200% of the per annum rate of the aggregate premium currently paid
by the Company and its subsidiaries for such insurance on the date
of this Agreement, then the Company shall provide the maximum
coverage that shall then be available at an annual premium equal
to 200% of such rate. The Company agrees to pay all reasonable
expenses (including reasonable fees and expenses of counsel) that
may be incurred by any Company Indemnified Parties in successfully
enforcing the indemnity or other obligations under this Section
8.7(b).
(c) Indemnity Procedures. The rights under this Section
8.7 are in addition to rights that a Smitty's Indemnified Party or
a Company Indemnified Party may have under the certificate of
incorporation, bylaws, other similar organizational documents of
the Company, Smitty's or any of their subsidiaries or applicable
law. The rights under this Section 8.7 shall survive consummation
of the Merger and the Recapitalization and are expressly intended
to benefit each Indemnified Party. The Company shall keep, and
shall cause the Surviving Corporation and any of its other
subsidiaries (or their successors) to keep, in effect the
provisions of its certificate of incorporation or bylaws or similar
organizational documents providing for indemnification to the
fullest extent provided by law.
8.8 Financial Information. Smitty's shall deliver to
the Company as soon as available all interim and other financial
statements and other management reports generated in the ordinary
course of business prepared by or for Smitty's, prior to the Merger
Closing. In addition, subject to compliance with any applicable
antitrust laws, Smitty's shall deliver to the Company, on a weekly
and monthly basis, such internal sales reports on a store by store
basis promptly as they are prepared by Smitty's for each such week
or month.
8.9 Smitty's Stockholders' Approval. Smitty's agrees
to promptly hold a meeting of its stockholders, or receive the
written consent of its stockholders in lieu of a meeting (either
of such actions, the "Smitty's Stockholders' Meeting"), in order
for such stockholders to approve the Merger as required by
applicable law.
8.10 Proxy Statement; Company Stockholders' Meeting.
(a) The Company agrees to promptly hold a meeting of its
stockholders (the "Company Stockholders' Meeting") in order for
such stockholders to approve all of the transactions contemplated
by the Recapitalization, including, without limitation, (i) the
issuance of Common Stock by the Company in the Merger and in
connection with the Financings, (ii) the election of directors of
the Company, and (iii) the adoption of an amended and restated
certificate of incorporation for the Company. The Company shall
use all reasonable efforts to obtain stockholder approval thereof.
The Company Stockholders' Meeting shall be held as soon as
practicable following the date upon which the Proxy Statement shall
have been approved for release to the Company's stockholders by
the SEC.
(b) The Company shall, as promptly as practicable,
prepare and file with the SEC the Proxy Statement, with forms of
proxy in connection with the vote of its stockholders at the
Company Stockholders' Meeting. The Company will use all reasonable
efforts to have or cause the Proxy Statement declared effective as
promptly as practicable, and will take any other action required
or necessary to be taken under federal or state securities laws or
otherwise in connection with the SEC approval process. The Company
shall use all reasonable efforts to cause the Proxy Statement to
be mailed to its stockholders at the earliest practicable date and
shall use all reasonable efforts to hold the Company Stockholders'
Meeting as soon as practicable after the date thereof.
(c) Smitty's and its counsel shall be given the
opportunity to participate in the preparation of the Proxy
Statement prior to its being filed with the SEC. The Company
agrees to provide Smitty's and its counsel with any written
comments the Company or its counsel may receive from the SEC with
respect to the Proxy Statement promptly after the receipt of such
comments. The form and substance of the Proxy Statement and any
amendments, modifications or supplements to the Proxy Statement
shall be determined by the Company in its reasonable discretion;
provided, however, that the Company will provide Smitty's a
reasonable opportunity to review and comment on any such amendment,
modification or supplement prior to filing or distribution.
8.11 Stockholders' Representative. Yucaipa is hereby
appointed as the "Stockholders' Representative" on behalf of the
Smitty's Stockholders and irrevocably constituted and appointed as
each Smitty's Stockholder's attorney-in-fact, to act in each
Smitty's Stockholder's name, place and stead in any way in which
he/she/it could do any or all of the following: (i) to supervise
the Closings and determine whether the conditions to the Closings
have been satisfied and waive any conditions which, in its sole
discretion, it deems appropriate to facilitate the Closings; (ii)
to take any and all actions that may be necessary or desirable in
connection with this Agreement; (iii) to execute and deliver in its
capacity as Stockholders' Representative any and all notices,
documents or certificates to be executed by the Stockholders'
Representative in accordance with this Agreement and the other
Transaction Documents; (iv) deliver at the Merger Closing stock
powers and any other required instruments of transfer to be
executed by the Smitty's Stockholders, including a letter of
transmittal, and to accept certificate or certificates in the name
of each Smitty's Stockholder Merger Consideration as set forth in
Section 3.1(c); (v) take all other actions and do other things
provided in or contemplated by this Agreement as to be taken or
performed by the Stockholders' Representative. This power of
attorney shall be coupled with an interest and irrevocable and
shall survive, and shall not be affected by, the subsequent death,
disability or incompetence, or liquidation or dissolution, as
applicable of any Smitty's Stockholder.
8.12 Termination of Consulting Agreement. As of the
Merger Closing Date, Smitty's and Yucaipa shall mutually terminate
the Consulting Agreement dated as of April 30, 1994 among Smitty's,
Smitty's Super Valu, Inc. and Yucaipa and Smitty's shall pay, or
cause to be paid, to Yucaipa all fees and expense reimbursements
accrued through the Merger Closing Date and owing to Yucaipa
thereunder, without regard to any change of control or other
payments caused by the transactions contemplated by this Agreement.
ARTICLE 9.
CONDITIONS PRECEDENT TO THE MERGER
9.1 Conditions Precedent to the Company's and
Acquisition's Obligations. The obligation of the Company and
Acquisition to effect the Merger shall be subject to the
fulfillment, at or prior to the Effective Time, of the following
conditions:
(a) Representations and Warranties. The representations
and warranties of Smitty's and Yucaipa contained in this
Agreement which by their terms require an event or condition
having a Material Adverse Effect in order to be inaccurate
shall be true and correct on and as of the Merger Closing Date
with the same effect as though such representations and
warranties had been made on and as of such date, except for
representations and warranties that speak as of a specific
date or time other than the Merger Closing Date (which need
only be true and correct as of such date or time). The
representations and warranties of Smitty's and Yucaipa
contained in this Agreement which by their terms do not
require an event or condition having a Material Adverse Effect
in order to be inaccurate shall be true and correct on and as
of the Merger Closing Date with the same effect as though such
representations and warranties had been made on and as of such
date (except for representations and warranties that speak as
of a specific date or time other than the Merger Closing Date,
which need only be true and correct as of such date or time),
except for such breaches or inaccuracies that, individually
or in the aggregate, would not have a Material Adverse Effect
on Smitty's and its subsidiaries taken as a whole.
(b) Compliance with Covenants. The covenants and
agreements of Smitty's and Yucaipa to be performed on or
complied with prior to the Effective Time shall have been duly
performed and complied with, except for such breaches that,
individually or in the aggregate, would not have a Material
Adverse Effect on the Company and its subsidiaries taken as
a whole, on Smitty's and its subsidiaries taken as a whole or
the consummation of the transactions contemplated hereby.
(c) Absence of Certain Injunctions and Government
Actions. The waiting period, and any extension thereof, under
the HSR Act and any other applicable federal or state
antitrust or fair trade law shall have expired. There (i)
shall not be in effect a temporary restraining order or a
preliminary or permanent injunction or other order, decree or
ruling by a court of competent jurisdiction or by a
governmental, regulatory or administrative agency or
commission which (A) restrains or prohibits the Merger or the
consummation of all or any of the other transactions
contemplated hereby, (B) (i) prohibits or restricts the
ownership or operation by the Company or any of its
subsidiaries of any portion of their or Smitty's' business or
assets or (ii) compels the Company or any of its subsidiaries
to dispose of or hold separate any portion of their or
Smitty's' business or assets which, in either case, would be
reasonably likely to have a Material Adverse Effect on the
Company and its subsidiaries taken as a whole or on Smitty's
and its subsidiaries taken as a whole, (C) imposes any
limitations on the ability of the Company or any of its
subsidiaries effectively to control in any material respect
the business and operations of Smitty's, or (D) is otherwise
reasonably likely to have a Material Adverse Effect on the
Company and its subsidiaries taken as a whole, the value of
Smitty's and its subsidiaries taken as a whole, the
consummation of the transactions contemplated hereby or on the
Combined Companies taken as a whole; or (ii) shall not be
pending before any court of competent jurisdiction or before
any administrative law judge or court or before any
governmental, regulatory or administrative agency or
commission, any action or proceeding, whether in law or in
equity or otherwise, brought by any governmental, regulatory
or administrative agency, commission or authority, which seeks
as relief a result described in clause (i) above; or (iii)
shall not have been promulgated or enacted by a governmental
authority a statute, rule, regulation or executive order which
has an effect described in clause (i)(A), (B), (C) or (D)
above.
(d) Approvals and Consents of Third Parties. All
approvals, consents, authorizations and waivers from
governmental and other regulatory agencies and other third
parties disclosed in Section 5.10 of the Disclosure Schedule
(including the expiration of any applicable waiting period
under any regulation or statute other than the HSR Act and any
other federal or state antitrust or fair trade law) which,
either individually or in the aggregate, if not obtained on
or prior to the Effective Time would have a Material Adverse
Effect on the Company and its subsidiaries taken as a whole
or on Smitty's and its subsidiaries taken as a whole, or would
adversely affect the validity or enforceability of this
Agreement or the transactions contemplated hereby, shall have
been obtained.
(e) Company Stockholders' Approval. The stockholders
of the Company shall have approved this Agreement and the
other transactions contemplated by the Recapitalization at the
Company Stockholders' Meeting, provided that, if the Company
terminates the Recapitalization in accordance with Section
10.2, then the condition set forth in this Section 9.1(e)
shall automatically be deemed to have been satisfied without
any further action required by the Company.
(f) Standstill Agreement. The Standstill Agreement, in
the form attached hereto as Annex K, shall remain in full
force and effect.
(g) Consummation of Offer. The Offer shall have been
consummated concurrently in accordance with the terms thereof
(including the satisfaction or waiver of the conditions set
forth in Annex N hereto) and shall have resulted in the
purchase by the Company pursuant to the Offer of 50% of the
Company's outstanding Common Stock, provided that, if the
Company terminates the Recapitalization in accordance with
Section 10.2, then the condition set forth in this Section
9.1(g) shall automatically be deemed to have been satisfied
without any further action required by the Company.
9.2 Conditions Precedent to Smitty's' Obligations. The
obligation of Smitty's to effect the Merger shall be subject to the
fulfillment, at or prior to the Effective Time, of the following
conditions:
(a) Representations and Warranties. The representations
and warranties of the Company and Acquisition contained in
this Agreement which by their terms require an event or
condition having a Material Adverse Effect in order to be
inaccurate shall be true and correct on and as of the Merger
Closing Date with the same effect as though such
representations and warranties had been made on and as of such
date, except for representations and warranties that speak as
of a specific date or time other than the Merger Closing Date
(which need only be true and correct as of such date or time).
The representations and warranties of the Company and
Acquisition contained in this Agreement which by their terms
do not require an event or condition having a Material Adverse
Effect in order to be inaccurate shall be true and correct on
and as of the Merger Closing Date with the same effect as
though such representations and warranties had been made on
and as of such date (except for representations and warranties
that speak as of a specific date or time other than the Merger
Closing Date which need only be true and correct as of such
date or time), except for such breaches or inaccuracies that,
individually or in the aggregate, would not have a Material
Adverse Effect on the Smitty's Stockholders, the value of the
Merger Consideration, the consummation of the transactions
contemplated hereby or on the Combined Companies taken as a
whole.
(b) Compliance with Covenants. The covenants and
agreements of the Company and Acquisition to be performed on
or complied with prior to the Effective Time shall have been
duly performed and complied with, except for such breaches
that, individually or in the aggregate, would not have a
Material Adverse Effect on the Smitty's Stockholders, the
value of the Merger Consideration, the consummation of the
transactions contemplated hereby or on the Combined Companies
taken as a whole.
(c) Absence of Certain Injunctions and Government
Actions. The waiting period, and any extension thereof, under
the HSR Act and any other applicable federal or state
antitrust or fair trade law shall have expired. There (i)
shall not be in effect a temporary restraining order or a
preliminary or permanent injunction or other order, decree or
ruling by a court of competent jurisdiction or by a
governmental, regulatory or administrative agency or
commission which (A) restrains or prohibits the Merger or the
consummation of all or any of the other transactions
contemplated thereby, (B) (i) prohibits or restricts the
ownership or operation by the Company or any of its
subsidiaries of any portion of their or Smitty's' business or
assets or (ii) compels the Company or any of its subsidiaries
to dispose of or hold separate any portion of their or
Smitty's' business or assets which, in either case, would be
reasonably likely to have a Material Adverse Effect on the
Company and its subsidiaries taken as a whole or on Smitty's
and its subsidiaries taken as a whole, (C) imposes any
limitations on the ability of the Company or any of its
subsidiaries effectively to control in any material respect
the business and operations of Smitty's, or (D) is otherwise
reasonably likely to have a Material Adverse Effect on the
Smitty's Stockholders, the value of the Merger Consideration,
the consummation of the transactions contemplated hereby or
on the Combined Companies taken as a whole; or (ii) shall not
be pending before any court of competent jurisdiction or
before any administrative law judge or court or before any
governmental, regulatory or administrative agency or
commission, any action or proceeding, whether in law or in
equity or otherwise, brought by any governmental, regulatory
or administrative agency, commission or authority, which seeks
as relief a result described in clause (i) above; or (iii)
shall not have been promulgated or enacted by a governmental
authority a statute, rule, regulation or executive order which
has an effect described in clause (i)(A) or (B) above.
(d) Approvals and Consents of Third Parties. All
approvals, consents, authorizations and waivers from
governmental and other regulatory agencies and other third
parties disclosed in Section 5.10 of the Disclosure Schedule
(including the expiration of any applicable waiting period
under any regulation or statute other than the HSR Act and any
other federal or state antitrust or fair trade law) which,
either individually or in the aggregate, if not obtained on
or prior to the Effective Time would have a Material Adverse
Effect on the Combined Companies taken as a whole.
(e) Other Agreements. The Registration Rights
Agreement, in the form attached as Annex F hereto, and, unless
the Recapitalization has been terminated in accordance with
Section 10.2, the Management Agreement and the Warrant
Agreement, in the forms attached hereto as Annexes L and M,
respectively, shall have been duly executed by the Company and
shall be in full force and effect.
ARTICLE 10.
TERMINATION, AMENDMENT AND WAIVER
10.1 Termination of the Agreement. This Agreement may
be terminated at any time prior to the Closing Date by:
(a) the mutual consent of the Company and Smitty's, set
forth in a written instrument executed by both parties;
(b) either the Company or Smitty's, if neither the
Merger nor the Offer shall have been consummated on or before
the Termination Date;
(c) the Company, if Smitty's or Yucaipa is in material
breach of its obligations under this Agreement, or by
Smitty's, if the Company or Acquisition is in material breach
of its obligations under this Agreement; provided that no
party shall be entitled to terminate this Agreement by reason
of this clause if it or any of its affiliates is in material
breach of its obligations under this Agreement; or
(d) by Smitty's or Yucaipa, if within 13 Business Days
after the date of this Agreement, Yucaipa and Smitty's
reasonably determine that the contents of the portions, if
any, of the Disclosure Schedule which are delivered by the
Company after the date of execution of this Agreement, or
updates to any portions of the Disclosure Schedule, are
materially adverse relative to the information disclosed in
writing on or prior to the date hereof to Yucaipa and Smitty's
or would otherwise have a Material Adverse Effect on the
consummation of the transactions contemplated hereby.
10.2 Termination of Recapitalization. At any time prior
to the Closing Date, if, in the exercise of its fiduciary duties
to the Company's stockholders under applicable law, the Company's
Board of Directors (i) determines that the termination of the
Recapitalization is required by reason of its acceptance of any
Alternative Transaction (which acceptance and termination shall be
deemed to have occurred upon (A) the execution and delivery by the
Company and the other parties thereto of the definitive merger or
other agreement with respect to any such Alternative Transaction
or (B) the Board of Directors' determination to (1) recommend that
the holders of Company Common Stock tender their shares into any
tender offer or exchange offer seeking to acquire more than 10% of
the Company Common Stock or (2) remain neutral with respect to any
such offer) or (ii) withdraws or materially modifies or changes its
recommendation of the Recapitalization, the Company may terminate
the terms and conditions contained herein which relate to the
Company's consummation of the Recapitalization, including the
provisions contained in Article 2 and Sections 3.2, 7.1 and
8.10(b); provided, however, that any such termination of the
Recapitalization shall not otherwise affect the Company's
obligation to consummate the Merger in accordance with the terms
and conditions set forth herein.
10.3 Procedure and Effect of Termination. In the event
of termination of this Agreement as provided in Section 10.1, this
Agreement shall forthwith become void and no party hereto shall
have any liability or further obligation to any other party hereto
under or by reason of this Agreement or the transactions
contemplated hereby, except that: (i) each party shall redeliver
all documents, work papers and other material of any other party
relating to the transactions contemplated hereby, whether so
obtained before or after the execution hereof, to the party
furnishing the same; and (ii) the provisions of this Section 10.3
and Sections 8.3(b) and 10.4 shall continue in full force and
effect. The foregoing provisions shall not limit or restrict the
availability of specific performance or other injunctive relief to
the extent that specific performance or such other relief would
otherwise be available to a party hereunder. Nothing contained in
this Section shall relieve any party of liability for any breach
of the representations, warranties, covenants or agreements set
forth in this Agreement.
10.4 Fees and Expenses. In the event that (i) the Merger
and the Recapitalization are consummated, or (ii) the Merger is
consummated, but the Recapitalization is terminated in accordance
with Section 10.2 hereof, the fees and expenses of the Company,
Yucaipa and Smitty's in connection with the transactions
contemplated hereby (including all Financing Expenses) shall be
paid by the Company. In the event that neither the Merger nor the
Recapitalization are consummated, each of the parties hereto shall
pay its own fees and expenses; provided, however, that in such an
eventuality, the Company shall bear 65% of the Financing Expenses
and Smitty's shall bear 35% of the Financing Expenses. Each of the
Company and Smitty's shall indemnify and hold harmless the other
party to the extent it pays any portion of the Financing Expenses
in excess of the percentages specified in the preceding sentence.
10.5 Amendments. This Agreement may not be amended
except by action of each of the parties hereto set forth in an
instrument in writing signed by or on behalf of each of the parties
hereto.
10.6 Waivers. At any time prior to the Closing Date, any
party hereto may (i) extend the time for the performance of any of
the obligations or other acts of any other party hereto, (ii) waive
any inaccuracies in the representations and warranties of any other
party contained herein or in any document delivered pursuant
hereto, or (iii) waive compliance with any of the agreements of any
other party or with any conditions to its own obligations. Any
agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in an instrument in writing
signed on behalf of such party by a duly authorized officer or
partner. No waiver of any of the provisions of this Agreement
shall be deemed or shall constitute a waiver of any other provision
hereof (whether or not similar), nor shall such waiver constitute
a continuing waiver unless otherwise expressly provided.
ARTICLE 11.
DEFINITIONS
11.1 Defined Terms. As used herein, the terms below
shall have the following meanings:
"Action" shall mean any action, order, writ, injunction,
judgment or decree outstanding or claim, suit, litigation,
proceeding, arbitration or investigation by or before any court,
governmental or other regulatory or administrative agency or
commission or any other person.
"Affiliate" shall mean, with respect to any Person, any
other Person that directly, or through one or more intermediaries,
controls or is controlled by or is under common control with such
Person.
"Assets" shall mean, with respect to any Person, all
land, buildings, improvements, leasehold improvements, Fixtures and
Equipment and other assets (tangible or intangible) owned or leased
by such Person or any of its subsidiaries.
"Benefit Arrangement" shall mean, with respect to any
Person, any employment, consulting, severance or other similar
contract, arrangement or policy and each plan, arrangement (written
or oral), program, agreement or commitment providing for insurance
coverage (including without limitation any self-insured
arrangements), workers' compensation, disability benefits,
supplemental unemployment benefits, vacation benefits, retirement
benefits, life, health, disability or accident benefits (including
without limitation any "voluntary employees' beneficiary
association" as defined in Section 501(c)(9) of the Code providing
for the same or other benefits) or for deferred compensation,
profit-sharing bonuses, stock options, stock appreciation rights,
stock purchases or other forms of incentive compensation or
post-retirement insurance, compensation or benefits which (A) is
not a Welfare Plan, Pension Plan or Multiemployer Plan, (B) is
entered into, maintained, contributed to or required to be
contributed to, as the case may be, by such Person or an ERISA
Affiliate or under which such Person or any ERISA Affiliate may
incur any liability, and (C) covers any employee or former employee
of such Person or any ERISA Affiliate (with respect to their
relationship with such entities).
"Business Day" shall mean any day that is not a Saturday,
Sunday or a day on which banking institutions in New York, New York
or Los Angeles, California are not required to be open.
"Code" shall mean the Internal Revenue Code of 1986, as
it may be amended from time to time.
"Combined Companies" shall mean the Company and its
subsidiaries after the Effective Time.
"Confidentiality Agreements" shall mean those certain
confidentiality agreements between the Company and Yucaipa dated
December 13, 1995 and between the Company and Smitty's dated
October 9, 1995.
"Contract" shall mean any contract (written or oral),
plan, undertaking or other commitment or agreement.
"Disclosure Schedule" means the schedules attached to
this Agreement which set forth exceptions to the representations
and warranties contained in Articles 4, 5 and 6 hereof and certain
other information called for by other provisions of this Agreement.
"Employee Plans" shall mean all Benefit Arrangements,
Multiemployer Plans, Pension Plans and Welfare Plans.
"Encumbrances" shall mean any claim, lien, pledge,
option, charge, easement, security interest, deed of trust,
mortgage, right-of-way, covenant, condition, restriction,
encumbrance or other rights of third parties.
"ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended from time to time.
"ERISA Affiliate" shall mean, with respect to any Person,
any entity which is (or at any relevant time was) a member of a
"controlled group of corporations" with, under "common control"
with, or a member of an "affiliated service group" with, such
Person as defined in Section 414(b), (c), (m) or (o) of the Code.
"Environmental Laws" shall mean any federal, state or
local law, statute, ordinance, order, decree, rule or regulation
relating to releases, discharges, emissions or disposals to air,
water, land or groundwater, to the withdrawal or use of
groundwater, to the use, handling or disposal of polychlorinated
biphenyls, asbestos or urea formaldehyde, to the treatment,
storage, disposal or management of Hazardous Materials, to exposure
to toxic, hazardous or other controlled, prohibited or regulated
substances, and to the transportation, release or any other use of
Hazardous Materials, including the Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C. 9601, et seq.
("CERCLA"), the Resource Conservation and Recovery Act, 42 U.S.C.
6901, et seq. ("RCRA"), the Toxic Substances Control Act, 15
U.S.C. 2601, et seq. ("TSCA"), the Occupational, Safety and
Health Act, 29 U.S.C. 651, et seq., the Clean Air Act, 42 U.S.C.
7401, et seq., the Federal Water Pollution Control Act, 33 U.S.C.
1251, et seq., the Safe Drinking Water Act, 42 U.S.C. 300f, et
seq., the Hazardous Materials Transportation Act, 49 U.S.C. 1802
et seq. ("HMTA") and the Emergency Planning and Community Right to
Know Act, 42 U.S.C. 11001 et seq. ("EPCRA"), and other comparable
state laws and all rules, regulations and guidance documents
promulgated pursuant thereto or published thereunder.
"Exchange Act" shall mean the Securities Exchange Act of
1934, as amended, and the regulations promulgated thereunder.
"Facility" shall mean each store, office, plant or
warehouse.
"Financing Expenses" shall mean all fees, costs and
expenses incurred by the Company in connection with the Financings,
including, without limitation, all fees, costs and expenses: (i)
identified in the Commitment Letters (including, without
limitation, the fees and expenses of counsel to the bank lenders),
(ii) of counsel to Smitty's and the Company for the allocable
portion of such counsel's time spent working on matters related to
the Financings and the Recapitalization, (iii) of the Company's
independent certified public accountants, and (iv) in connection
with printing, engraving, messenger and delivery services
customarily incurred in financing transactions similar to the
Financings.
"Fixtures and Equipment" shall mean, with respect to any
Person, all of the furniture, fixtures, furnishings, machinery and
equipment owned by such Person and located in, at or upon the
Facilities of such Person.
"GAAP" shall mean time generally accepted accounting
principles in the United States of America, as in effect from time
to time, consistently applied.
"Hazardous Materials" shall mean each and every element,
compound, chemical mixture, contaminant, pollutant, material, waste
or other substance which is defined, determined or identified as
hazardous or toxic under Environmental Laws or the release of which
is regulated under Environmental Laws. Without limiting the
generality of the foregoing, the term includes: "hazardous
substances" as defined in CERCLA; "extremely hazardous substances"
as defined in EPCRA; "hazardous waste" as defined in RCRA;
"hazardous materials" as defined in HMTA; "chemical substance or
mixture" as defined in TSCA; crude oil, petroleum products or any
fraction thereof; radioactive materials including source, byproduct
or special nuclear materials; asbestos or asbestos-containing
materials; and radon.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
"Leases" shall mean, with respect to any Person, all
leases (including subleases and any other occupancy agreement) of
real property, in each case to which such Person or any of its
subsidiaries is a party, whether as lessor, lessee, guarantor or
otherwise, or by which any of them or their respective properties
or assets are bound, or which otherwise relate to the operation of
their respective businesses.
"Material Adverse Effect" shall mean, with respect to any
person or entity, a material adverse effect on the business,
operations, prospects, assets, liabilities, results of operations
or financial condition of such person or entity.
"Multiemployer Plan" shall mean, with respect to any
Person, any "multiemployer plan," as defined in Section 4001(a)(3)
of ERISA, (A) which such Person or any ERISA Affiliate maintains,
administers, contributes to or is required to contribute to, or,
after September 25, 1980, maintained, administered, contributed to
or was required to contribute to, or under which such Person or any
ERISA Affiliate may incur any liability and (B) which covers any
employee or former employee of such Person or any ERISA Affiliate
(with respect to their relationship with such entities).
"Multiemployer Welfare Plan" shall mean a Welfare Plan
that is a "multiemployer plan," as defined in Section 3(37) of
ERISA.
"Offer Statement" shall mean an issuer tender offer
statement on Schedule 13E-4 (which statement shall contain the
Offer to Purchase and forms of the related letter of transmittal
and summary advertisement and the other information and exhibits
required by law to be included therein) to be prepared with respect
to the Offer, together with any amendments thereof or supplements
thereto.
"Pension Plan" shall mean, with respect to any Person,
any "employee pension benefit plan" as defined in Section 3(2) of
ERISA (other than a Multiemployer Plan) (A) which such Person or
any ERISA Affiliate maintains, administers, contributes to or is
required to contribute to, or, within the six years prior to the
Closing Date, maintained, administered, contributed to or was
required to contribute to, or under which such Person or any ERISA
Affiliate may incur any liability and (B) which covers any employee
or former employee of such Person or any ERISA Affiliate (with
respect to their relationship with such entities).
"Permitted Encumbrances" shall mean any Encumbrances
resulting from (i) all statutory or other liens for Taxes or
assessments which are not yet due or delinquent or the validity of
which are being contested in good faith by appropriate proceedings
for which adequate reserves are being maintained in accordance with
GAAP; (ii) all cashiers', workers' and repairers' liens, and other
similar liens imposed by law, incurred in the ordinary course of
business; (iii) all laws and governmental rules, regulations,
ordinances and restrictions; (iv) all leases, subleases, licenses,
concessions or service contracts to which Smitty's or any of its
subsidiaries is a party; (v) Encumbrances identified on title
policies delivered to the Company prior to the date hereof; and
(vi) all other liens and mortgages (but solely to the extent such
liens or mortgages secure indebtedness described in Section 5.7 of
the Disclosure Schedule), covenants, imperfections in title,
charges, easements, restrictions and other Encumbrances which, in
the case of any such Encumbrances pursuant to clauses (i) through
(vi), do not materially detract from or materially interfere with
the value or present use of the asset subject thereto or affected
thereby.
"Person" shall mean any individual, corporation,
partnership, limited liability company, joint venture, governmental
agency or instrumentality, or any other entity.
"Personnel" shall mean, with respect to any Person, all
officers, employees and agents of such Person.
"Property" shall mean, with respect to any Person, all
improved or unimproved real property owned or leased by such Person
or any of its subsidiaries.
"Proprietary Rights" shall mean all patents, trademarks,
trade names, service marks and copyrights, and applications
therefor.
"Proxy Statement" shall mean a proxy statement and forms
of proxy in connection with the votes of the stockholders of the
Company with respect to the Merger, the Offer and the other
transactions contemplated by the Recapitalization, together with
any amendments thereof or supplements thereto, in the form or forms
mailed to the Company's stockholders.
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933,
as amended, and the regulations promulgated thereunder.
"Service" shall mean the Internal Revenue Service or any
successor thereto.
"Smitty's Principal Stockholders" shall mean,
collectively, the investment partnerships which own shares in
Smitty's for which Yucaipa acts as the general partner.
"Smitty's Stockholders" shall mean the holders of the
Common Stock (Class A and Class B) of Smitty's.
"Specified Smitty's Indebtedness" shall mean the Smitty's
Notes, the Smitty's Debentures and all indebtedness under the
Credit Agreement dated as of June 29, 1994 among Smitty's Super
Valu, Inc., a wholly owned subsidiary of Smitty's, and The Chase
Manhattan Bank, N.A.
"Specified Company Indebtedness" shall mean the
indebtedness of the Company identified on Schedule I hereto.
"subsidiary" shall mean, with respect to any Person, (i)
any corporation in an unbroken chain of corporations beginning with
such Person if each of the corporations other than the last
corporation in the unbroken chain then owns stock possessing 50%
or more of the total combined voting power of all classes of stock
in one of the other corporations in such chain; (ii) any
partnership in which such Person is a general partner; or (iii) any
partnership in which such Person possesses a 50% or greater
interest in the total capital or total income of such partnership.
"Tax" or "Taxes" shall mean all federal, state, local,
foreign and other taxes, levies, imposts, assessments, impositions
or other similar government charges, including, without limitation,
income, estimated income, business, occupation, franchise, real
property, payroll, personal property, sales, transfer, stamp, use,
employment, commercial rent or withholding, occupancy, premium,
gross receipts, profits, windfall profits, deemed profits, license,
lease, severance, capital, production, corporation, ad valorem,
excise, duty or other taxes, including interest, penalties and
additions (to the extent applicable) thereto.
"Tax Return" shall mean any report, return, document,
declaration or other information or filing required to be supplied
to any taxing authority or jurisdiction (foreign or domestic) with
respect to Taxes, including, without limitation, information
returns, any documents with respect to or accompanying payments of
estimated Taxes, or with respect to or accompanying requests for
the extension of time in which to file any such report, return,
document, declaration or other information.
"Termination Date" shall mean July 30, 1996.
"Transaction Documents" shall mean the collective
reference to this Agreement, the Certificate of Merger, the
Registration Rights Agreement, the Standstill Agreement, the
Management Agreement and the Warrant Agreement; provided, however,
that if the Recapitalization is terminated pursuant to Section 10.2
hereof, "Transaction Documents" shall be deemed to refer only to
this Agreement, the Certificate of Merger, the Standstill Agreement
and the Registration Rights Agreement.
"Welfare Plan" shall mean, with respect to any Person,
any "employee welfare benefit plan" as defined in Section 3(1) of
ERISA, (A) which such Person or any ERISA Affiliate maintains,
administers, contributes to or is required to contribute to, or
under which such Person or any ERISA Affiliate may incur any
liability and (B) which covers any employee or former employee of
such Person or any ERISA Affiliate (with respect to their
relationship with such entities).
11.2 Other Defined Terms. The following terms shall have
the meanings defined for such terms in the Sections set forth
below:
Term Section
- ---- -------
Acquisition Preamble
Agreement Preamble
Alternative Transaction 8.5(c)
Certificate of Merger 1.2
Class A Common Stock Recitals
Class B Common Stock Recitals
Closing 3.2
Closing Date 3.2
Commitment Letters 2.2
Common Stock Preamble
Company Preamble
Company Indemnified Liability 8.7(b)
Company Indemnified Party 8.7(b)
Company SEC Reports 4.9
Company Stockholders' Agreement 1.7
Company Stockholders' Meeting 8.10(c)
Constituent Corporations Preamble
Debt Offer 1.9
Debt Offer Prices 1.9
Debt Offer to Purchase 1.9
Delaware Law Recitals
Dissenting Shares 1.11
Effective Time 1.2
Fairness Opinion 4.14
Financing Agreements 2.2
Financing Registration Statements 2.3
Financings 2.2
Management Agreement Recitals
Merger Recitals
Merger Closing 3.1(a)
Merger Closing Date 3.1(a)
Merger Consideration 1.10(c)
Minimum Debt Condition 1.9
New Debt Securities 2.2
Notification Date 1.10(e)
Offer Recitals
Offer Closing 3.2(a)
Offer Closing Date 3.2(a)
Offer Price Recitals
PIK Preferred Stock 2.2
Recapitalization 2.7
Series I Preferred Stock Recitals
Smitty's Preamble
Smitty's Common Stock 1.10
Smitty's Debentures 1.9
Smitty's Indemnified Liability 8.7(a)
Smitty's Indemnified Party 8.7(a)
Smitty's Notes 1.9
Smitty's SEC Reports 5.14
Smitty's Securities 1.9
Smitty's Stockholders' Agreement 1.7
Smitty's Stockholders' Meeting 8.9
Standstill Agreement 2.4(a)
Stockholders' Representative 8.11
Surviving Corporation 1.1
Third Party Leases 5.6(g)
Warrant Agreement 2.4(c)
Yucaipa Preamble
ARTICLE 12.
MISCELLANEOUS
12.1 Non-survival of Representations and Warranties. None
of the representations and warranties in this Agreement or in any
schedule, instrument or other document delivered pursuant to this
Agreement shall survive the Merger Closing Date or the Offer
Closing Date.
12.2 Assignment. Neither this Agreement, nor any of the
rights, duties or obligations hereunder or contemplated hereby, may
be assigned by the parties hereto without the prior written consent
of the other parties hereto. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their
respective successors and assigns.
12.3 Notices. Unless otherwise provided herein, any
notice, request, instruction or other document to be given
hereunder by any party to the others shall be in writing and
delivered in person or by courier, telegraphed, telexed or by
facsimile transmission or mailed by certified mail, postage
prepaid, return receipt requested (such mailed notice to be
effective on the date of such receipt is acknowledged), as follows:
(a) if to the Company, to
Smith's Food & Drug Centers, Inc.
1550 South Redwood Road
Salt Lake City, Utah 84104
Attn: General Counsel
Fax Number: (801) 974-1676
With a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attn: Robert L. Friedman, Esq.
Fax Number: (212) 455-2502
(b) if to Smitty's or Yucaipa, to
The Yucaipa Companies
10000 Santa Monica Boulevard, Fifth Floor
Los Angeles, California 90067
Attn: Mark A. Resnik
Fax Number: (310) 789-7201
With a copy to:
Latham & Watkins
633 West Fifth Street, Suite 4000
Los Angeles, California 90071
Attn: Thomas C. Sadler, Esq.
Fax Number: (213) 891-8763
or to such other place and with such other copies as any party
hereto may designate as to itself by written notice to the others.
12.4 Payment to Yucaipa. If the Offer is consummated,
the Company shall pay to Yucaipa, on the Offer Closing Date, a
success fee of $15 million by wire transfer of immediately
available funds to an account designated at least one Business Day
prior to the Offer Closing Date by Yucaipa.
12.5 Choice of Law. This Agreement shall be construed,
interpreted and the rights of the parties determined in accordance
with the laws of the State of Delaware, without reference to the
choice of laws provisions thereof.
12.6 Counterparts. This Agreement may be executed in one
or more counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same
instrument.
12.7 No Third Party Beneficiaries. None of the
provisions of this Agreement shall be for the benefit of or
enforceable by any third party, except for the provisions set forth
in Section 8.7 hereof.
12.8 Invalidity. In the event that any one or more of
the provisions contained in this Agreement or in any other
instrument referred to herein, shall, for any reason, be held to
be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any
other provision of this Agreement or any other such instrument.
12.9 Headings. The headings of the Articles and Sections
herein are inserted for convenience of reference only and are not
intended to be a part of or to affect the meaning or interpretation
of this Agreement. All references to Sections or Articles
contained herein mean Sections or Articles of this Agreement unless
otherwise stated.
12.10 Gender. Words used in this Agreement, regardless
of the number and gender specially used, shall be deemed and
construed to include any other number, singular or plural, and any
other gender, masculine, feminine or neuter, as the context
requires.
12.11 Delivery of Company Disclosure Schedule. The
portions of the Disclosure Schedule which are to be prepared by the
Company may be so prepared and delivered to, or updated and
delivered to, Smitty's and Yucaipa not later than 10 Business Days
after the date of this Agreement and, if not reasonably acceptable
to Smitty's and Yucaipa, Smitty's and Yucaipa shall be entitled to
terminate this Agreement as set forth in Section 10.1(d) hereof.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement, or have caused this Agreement to be duly executed on
their respective behalf by their respective officers thereunto duly
authorized, as of the day and year first above written.
SMITH'S FOOD & DRUG CENTERS, INC.
By: /s/ Jeffrey P. Smith
--------------------
Name: Jeffrey P. Smith
Title: Chairman, President and
Chief Executive Officer
CACTUS ACQUISITION, INC.
By: /s/ Jeffrey P. Smith
--------------------
Name: Jeffrey P. Smith
Title: President and Chief
Executive Officer
SMITTY'S SUPERMARKETS, INC.
By: /s/ Mark A. Resnik
------------------
Name: Mark A. Resnik
Title: Vice President
THE YUCAIPA COMPANIES
By: /s/ Mark A. Resnik
------------------
Name: Mark A. Resnik
Title: General Partner