AGREEMENT AND PLAN OF MERGER
DATED AS OF
OCTOBER 18, 1998
BY AND BETWEEN
THE KROGER CO.,
JOBSITE HOLDINGS, INC.
AND
FRED MEYER, INC.
TABLE OF CONTENTS
Page
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ARTICLE I....................................................................2
Section 1.1 The Merger..............................................2
Section 1.2 The Closing; Effective Time.............................2
Section 1.3 Subsequent Actions......................................3
Section 1.4 Certificate of Incorporation; Bylaws; Directors
and Officers of the Surviving Corporation.............3
ARTICLE II...................................................................3
Section 2.1 Treatment of Capital Stock..............................3
Section 2.2 Conversion of Common Stock..............................4
Section 2.3 Cancellation of Excluded Shares.........................4
Section 2.4 Conversion of Common Stock of Jobsite Holdings..........4
Section 2.5 Exchange Agent; Exchange Procedures.....................4
Section 2.6 Transfer Books..........................................4
Section 2.7 Termination of Exchange Fund............................6
Section 2.8 Options to Purchase Fred Meyer Shares...................6
Section 2.9 Warrants to Purchase Fred Meyer Shares..................7
Section 2.10 Appraisal Rights........................................7
Section 2.11 Certain Adjustments.....................................8
Section 2.12 Restricted Stock........................................8
Section 2.13 Assignment..............................................8
ARTICLE III..................................................................8
Section 3.1 Organization and Qualification; Subsidiaries............8
Section 3.2 Certificate of Incorporation and Bylaws.................9
Section 3.3 Capitalization..........................................9
Section 3.4 Power and Authority; Authorization; Valid & Binding....10
Section 3.5 No Conflict; Required Filings and Consents.............11
Section 3.6 SEC Reports; Financial Statements......................12
Section 3.7 Absence of Certain Changes.............................13
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Section 3.8 Litigation and Liabilities.............................14
Section 3.9 No Violation of Law; Permits...........................14
Section 3.10 Employee Matters; ERISA................................14
Section 3.11 Labor Matters..........................................17
Section 3.12 Environmental Matters..................................17
Section 3.13 Board Action; Vote Required............................19
Section 3.14 Opinion of Financial Advisor...........................20
Section 3.15 Brokers................................................20
Section 3.16 Tax Matters............................................20
Section 3.17 Intellectual Property..................................21
Section 3.18 Insurance..............................................22
Section 3.19 Contracts and Commitments..............................22
Section 3.20 Accounting and Tax Matters.............................23
Section 3.21 Ownership of Shares of Kroger..........................23
Section 3.22 Year 2000 Compliance...................................23
ARTICLE IV..................................................................23
Section 4.1 Organization and Qualification; Subsidiaries...........24
Section 4.2 Articles of Incorporation and Regulations..............24
Section 4.3 Capitalization.........................................24
Section 4.4 Power and Authority; Authorization; Valid & Binding....25
Section 4.5 No Conflict; Required Filings and Consents.............26
Section 4.6 SEC Reports; Financial Statements......................27
Section 4.7 Absence of Certain Changes.............................28
Section 4.8 Litigation and Liabilities.............................29
Section 4.9 No Violation of Law; Permits...........................29
Section 4.10 Employee Matters; ERISA................................30
Section 4.11 Labor Matters..........................................32
Section 4.12 Environmental Matters..................................32
Section 4.13 Board Action; Vote Required............................33
Section 4.14 Opinion of Financial Advisor...........................33
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Section 4.15 Brokers................................................34
Section 4.16 Tax Matters............................................34
Section 4.17 Intellectual Property..................................35
Section 4.18 Insurance..............................................35
Section 4.19 Contracts and Commitments..............................35
Section 4.20 Accounting and Tax Matters.............................36
Section 4.21 Ownership of Shares of Fred Meyer......................37
Section 4.22 Rights Agreement.......................................37
Section 4.23 Year 2000 Compliance...................................37
ARTICLE V...................................................................37
Section 5.1 Interim Operations of Fred Meyer.......................37
Section 5.2 Interim Operations of Kroger...........................40
Section 5.3 No Solicitation by Fred Meyer..........................42
Section 5.4 No Solicitation by Kroger..............................43
Section 5.5 Charitable Contribution................................45
ARTICLE VI..................................................................45
Section 6.1 Meetings of Stockholders...............................45
Section 6.2 Filings Best Efforts...................................45
Section 6.3 Publicity..............................................48
Section 6.4 Registration Statement.................................48
Section 6.5 Authorized Shares; Listing Application.................48
Section 6.6 Further Action.........................................49
Section 6.7 Expenses...............................................49
Section 6.8 Notification of Certain Matters........................50
Section 6.9 Access to Information..................................50
Section 6.10 Review of Information..................................51
Section 6.11 Indemnification; Directors' and Officers' Insurance....51
Section 6.12 Employee Benefit Plans.................................52
Section 6.13 Kroger Board of Directors and Officers.................53
Section 6.14 Affiliates.............................................53
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Section 6.15 Pooling-of-Interests...................................54
Section 6.16 Tax-Free Reorganization................................54
Section 6.17 Accountant's Comfort Letters...........................54
Section 6.18 Accountant's Pooling Letters...........................55
ARTICLE VII.................................................................55
Section 7.1 Conditions to Obligations of the Parties
to Consummate the Merger.............................55
Section 7.2 Additional Conditions to Obligations of Kroger
and Jobsite Holdings.................................56
Section 7.3 Additional Conditions to Obligations of Fred Meyer.....57
ARTICLE VIII................................................................58
Section 8.1 Termination............................................58
Section 8.2 Effect of Termination and Abandonment..................59
Section 8.3 Amendment..............................................61
ARTICLE IX..................................................................61
Section 9.1 Non-Survival of Representations, Warranties
and Agreements.......................................61
Section 9.2 Notices................................................61
Section 9.3 Certain Definitions; Interpretation....................62
Section 9.4 Headings...............................................64
Section 9.5 Severability...........................................64
Section 9.6 Entire Agreement; No Third-Party Beneficiaries.........64
Section 9.7 Assignment.............................................64
Section 9.8 Governing Law..........................................64
Section 9.9 Counterparts...........................................65
Exhibits
Exhibit A Certificate of Incorporation of Surviving Corporation
Exhibit B Affiliate Letters
Exhibit C Pooling Letters
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INDEX OF DEFINED TERMS
DEFINED TERM SECTION
Additional Fred Meyer Termination Fee 8.2(b)(i)
Additional Kroger Termination Fee 8.2(b)(ii)
affiliate 9.3(a)(v)
Agreement preamble
Closing 1.2(a)
Closing Date 1.2(a)
Code recitals
Confidentiality Agreement 6.9(b)
Consents 7.2(d)
control 9.3(a)(vi)
Current Premium 6.11(b)
D&O Insurance 6.11(b)
Deloitte 6.18
DGCL 1.1
Effective Time 1.2(b)
Environmental Claim 3.12
Environmental Laws 3.12
Environmental Permits 3.12
ERISA 9.3(a)(vii)
Exchange Act 3.5(b)
Exchange Agent 2.5(a)
Exchange Fund 2.5(a)
Exchange Ratio 2.2(a)
Excluded Shares 2.2(a)
Fees and Expenses 8.2(c)
Filings 7.2(d)
Form S-4 6.4
Fred Meyer preamble
Fred Meyer Acquisition Proposal 5.3(c)
Fred Meyer Acquisition Transaction 5.3(c)
Fred Meyer Benefit Plan 3.10(a)
Fred Meyer Business Combination Proposal 8.2(b)(i)
Fred Meyer Capital Stock Disclosure Date 3.3(a)
Fred Meyer Certificate of Incorporation 3.2. 1.4(a)
Fred Meyer Common Stock recitals
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Fred Meyer Contracts 3.19
Fred Meyer Disclosure Letter Article III
Fred Meyer Employee 3.10(b)
Fred Meyer Employees 3.10(b)
Fred Meyer Equity Rights 3.3(a)
Fred Meyer ERISA Affiliate 3.10(d)
Fred Meyer Material Adverse Effect 9.3(a)(i)
Fred Meyer Multiemployer Plan 3.10(a)
Fred Meyer Options 2.8(a)
Fred Meyer Pension Plan 3.10(c)
Fred Meyer Preferred Stock 3.3(a)
Fred Meyer SEC Reports 3.6(a)
Fred Meyer Shares recitals
Fred Meyer Stock Option Agreement recitals
GAAP recitals
Governmental Entity 3.5(b)
Hazardous Materials 3.12
HSR Act 3.5(b)
Indemnified Parties 6.11(a)
Initial Fred Meyer Termination Fee 8.2(b)(i)
Initial Kroger Termination Fee 8.2(b)(ii)
Jobsite Holdings preamble
knowledge 9.3(a)(viii)
Kroger preamble
Kroger Acquisition Proposal 5.4(c)
Kroger Acquisition Transaction 5.4(c)
Kroger Articles of Incorporation Article IV
Kroger Benefit Plan 4.10(a)
Kroger Business Combination Proposal 8.2(b)(ii)
Kroger Capital Stock Disclosure Date 4.3(a)
Kroger Common Stock recitals
Kroger Contracts 4.19
Kroger Disclosure Letter Article IV
Kroger Employee 4.10(b)
Kroger Employees 4.10(b)
Kroger Equity Rights 4.3(a)
Kroger ERISA Affiliate 4.10(d)
Kroger Material Adverse Effect 9.3(a)(ii)
Kroger Multiemployer Plan 4.10(a)
Kroger Pension Plan 4.10(c)
Kroger Preferred Stock 4.3(a)
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Kroger Right 2.2(a)
Kroger Rights 4.22
Kroger Rights Agreement 4.22. 2.2(a)
Kroger SEC Reports 4.6(a)
Kroger Shares recitals
Kroger Stock Option Agreement recitals
Merger recitals
Merger Sub preamble
New Fred Meyer Options 2.8(a)
NYSE 4.4
OGCL 2.10
Parties preamble
Party preamble
Pension Plan 3.10(c)
Person 9.3(a)(ix)
Proxy Statement/Prospectus 6.4
PwC 6.18
Release 3.12
Representative 5.3(b)
SEC recitals
Securities Act 3.5(b)
Significant Subsidiary 9.3(a)(x)
Stock Option Agreements recitals
Subsidiary 9.3(a)(xi)
Surviving Corporation 1.1
Tax 3.16
Tax Return 3.16
Taxable 3.16
Taxes 3.16
Termination Date 8.1(b)
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of October 18, 1998 (this
"Agreement"), by and among The Kroger Co. ("Kroger"), an Ohio corporation,
Jobsite Holdings, Inc. ("Jobsite Holdings" or "Merger Sub"), a Delaware
corporation and a wholly-owned subsidiary of Kroger, and Fred Meyer, Inc. ("Fred
Meyer"), a Delaware corporation. Kroger and Fred Meyer are sometimes referred to
herein, individually, as a "Party," and together, as the "Parties."
W I T N E S S E T H:
WHEREAS, the respective Boards of Directors of Kroger, Jobsite Holdings and
Fred Meyer have each determined that the merger of Jobsite Holdings with and
into Fred Meyer (the "Merger") upon the terms and subject to the conditions set
forth in this Agreement is advisable, fair to and in the best interests of their
respective corporations and stockholders and have approved the Merger;
WHEREAS, it is intended that, for federal income tax purposes, the Merger
will qualify as a tax-free reorganization under Section 368 of the Internal
Revenue Code of 1986, as amended (the "Code"), and the rules and regulations
promulgated thereunder;
WHEREAS, it is intended that, for accounting purposes, the Merger will be
accounted for as a pooling-of-interests under United States generally accepted
accounting principles ("GAAP") and applicable rules and regulations of the
Securities and Exchange Commission (the "SEC").
WHEREAS, concurrently with the execution and delivery of this Agreement and
as a condition and inducement to Kroger's willingness to enter into this
Agreement, Kroger and Fred Meyer have executed and delivered a Stock Option
Agreement, dated as of the date hereof (the "Fred Meyer Stock Option
Agreement"), pursuant to which Fred Meyer is granting to Kroger an option to
purchase, under certain circumstances, up to a number of shares of common stock,
par value $.01 per share, of Fred Meyer (the "Fred Meyer Common Stock" or "Fred
Meyer Shares") equal to 19.9% of the outstanding shares of Fred Meyer Common
Stock with an exercise price of $44.125 per share.
WHEREAS, concurrently with the execution and delivery of this Agreement and
as a condition and inducement to Fred Meyer's willingness to enter into this
Agreement, Fred Meyer and Kroger have executed and delivered a Stock Option
Agreement, dated as of the date hereof (the "Kroger Stock Option Agreement" and
together with the Fred Meyer Stock Option Agreement, the "Stock Option
Agreements"), pursuant to which Kroger is granting to Fred Meyer an option to
purchase, under certain circumstances, up to a number of shares of common stock,
par value $1.00 per share, of
Kroger, together with the associated preferred stock purchase rights (the
"Kroger Common Stock" or "Kroger Shares") equal to 19.9% of the outstanding
shares of Kroger Common Stock with an exercise price of $50.00 per share.
WHEREAS, concurrently with the execution and delivery of this Agreement and
as a condition and inducement to Kroger's willingness to enter into this
Agreement, Kroger and certain stockholders of Fred Meyer have executed and
delivered Voting Agreements, dated as of this date.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements contained in this Agreement, and intending to be legally bound
hereby, the parties agree as follows (certain capitalized terms used herein are
defined in Section 9.3):
ARTICLE I
Section 1.1 The Merger. At the Effective Time (as defined) and subject to
and upon the terms and conditions of this Agreement and in accordance with the
Delaware General Corporation Law (the "DGCL"), Jobsite Holdings shall be merged
with and into Fred Meyer and the separate corporate existence of Jobsite
Holdings shall cease. Fred Meyer shall continue as the surviving corporation
(sometimes referred to as the "Surviving Corporation") in the Merger, and as of
the Effective Time shall be a wholly-owned subsidiary of Kroger. The Merger
shall have the effects specified in Section 259(a) of the DGCL.
Section 1.2 The Closing; Effective Time. (a) The closing of the Merger (the
"Closing") shall take place (i) at the offices of Fried, Frank, Harris, Shriver
& Jacobson, One New York Plaza, New York, New York, 10004, at 10:00 A.M. local
time, on the second business day following the date on which the last to be
satisfied or waived of the conditions set forth in Article VII (other than those
conditions that by their nature are to be satisfied at the Closing, but subject
to the satisfaction or, where permitted, waiver of those conditions) shall be
satisfied or waived in accordance with this Agreement or (ii) at such other
place, time and/or date as Kroger and Fred Meyer shall agree (the date of the
Closing, the "Closing Date").
(b) On the Closing Date, Kroger, Fred Meyer and Jobsite Holdings
shall cause a certificate of merger in respect of the Merger to be properly
executed and filed with the Secretary of State of the State of Delaware as
provided in Section 251 of the DGCL. The Merger shall become effective at such
time at which the certificate of merger shall be duly filed with Secretary of
State of Delaware or at such later time reflected in the certificate of merger
as shall be agreed by Kroger and Fred Meyer (the time that the Merger becomes
effective, the "Effective Time").
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Section 1.3 Subsequent Actions. If, at any time after the Effective Time,
the Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments, assurances or any other actions or things are necessary or
desirable to continue in, vest, perfect or confirm of record or otherwise in the
Surviving Corporation's right, title or interest in, to or under any of the
rights, properties, privileges, franchises or assets of either of its
constituent corporations acquired or to be acquired by the Surviving Corporation
as a result of, or in connection with, the Merger, or otherwise to carry out the
intent of this Agreement, the officers and directors of the Surviving
Corporation shall be authorized to execute and deliver, in the name and on
behalf of either of the constituent corporations of the Merger, all such deeds,
bills of sale, assignments and assurances and to take and do, in the name and on
behalf of each of such corporations or otherwise, all such other actions and
things as may be necessary or desirable to vest, perfect or confirm any and all
right, title and interest in, to and under such rights, properties, privileges,
franchises or assets in the Surviving Corporation (as defined) or otherwise to
carry out the intent of this Agreement.
Section 1.4 Certificate of Incorporation; Bylaws; Directors and Officers of
the Surviving Corporation. Unless otherwise agreed by Kroger and Fred Meyer
prior to the Closing, at the Effective Time:
(a) The certificate of incorporation attached hereto as Exhibit A
shall be at and after the Effective Time (until amended as provided by law and
by that certificate of incorporation) the certificate of incorporation of the
Surviving Corporation.
(b) The bylaws of Jobsite Holdings as in effect immediately prior
to the Effective Time shall be at and after the Effective Time (until amended as
provided by law, the certificate of incorporation of the Surviving Corporation
and the bylaws of the Surviving Corporation, as applicable) the bylaws of the
Surviving Corporation;
(c) The officers of Fred Meyer immediately prior to the Effective
Time shall continue to serve in their respective offices of the Surviving
Corporation from and after the Effective Time, until their successors are
elected or appointed and qualified or until their resignation or removal; and
(d) The directors of Jobsite Holdings immediately prior to the
Effective Time shall be the directors of the Surviving Corporation from and
after the Effective Time, until their successors are elected or appointed and
qualified or until their resignation or removal.
ARTICLE II
Section 2.1 Treatment of Capital Stock. The manner and basis of converting
the shares of common stock of Fred Meyer and Jobsite Holdings, by virtue of the
Merger
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and without any action on the part of any holder thereof, shall be as set forth
in this Article II.
Section 2.2 Conversion of Common Stock. (a) Each share of Fred Meyer Common
Stock issued and outstanding immediately prior to the Effective Time (excluding
those held in the treasury of Fred Meyer, by any of its Subsidiaries (as
defined) or by Kroger or any of its Subsidiaries (collectively, the "Excluded
Shares")), and all rights in respect thereof, shall at the Effective Time,
without any action on the part of any holder, forthwith cease to exist and be
converted into the right to receive one (1) (the "Exchange Ratio") validly
issued, fully paid and nonassessable share of Kroger Common Stock. Holders of
Shares of Fred Meyer Common Stock shall also have the right to receive together
with each share of Kroger Common Stock issued at the Effective Time, one
associated right (an "Kroger Right") in accordance with the Rights Agreement,
dated as of April 4, 1997, between Kroger and the Bank of New York, as Rights
Agent (the "Kroger Rights Agreement"). Reference to the shares of Kroger Common
Stock issuable at the Effective Time shall be deemed to include the associated
Kroger Rights.
(b) Except as otherwise provided, commencing immediately after the
Effective Time, each certificate which, immediately prior to the Effective
Time, represented issued and outstanding shares of Fred Meyer Common Stock shall
evidence the right to receive shares of Kroger Common Stock on the basis set
forth in paragraph (a) above.
Section 2.3 Cancellation of Excluded Shares. At the Effective Time, each
Excluded Share, by virtue of the Merger and without any action on the part of
the holder thereof, shall cease to be outstanding, shall be canceled and
retired, and no shares of stock or other securities of Kroger or the Surviving
Corporation shall be issuable, and no payment or other consideration shall be
made or paid in respect of the Excluded Share.
Section 2.4 Conversion of Common Stock of Jobsite Holdings. At the
Effective Time, each share of common stock of Jobsite Holdings issued and
outstanding immediately prior to the Effective Time, and all rights in respect
thereof, shall, without any action on the part of Kroger, forthwith cease to
exist and be converted into one validly issued, fully paid and nonassessable
share of common stock of the Surviving Corporation.
Section 2.5 Exchange Agent; Exchange Procedures. (a) Subject to the terms
and conditions of this Agreement, at or prior to the Effective Time, Kroger
shall appoint Bank of New York, or such other exchange agent selected by Kroger
that is reasonably acceptable to Fred Meyer (the "Exchange Agent"), to effect
the exchange of Fred Meyer Shares for shares of Kroger Common Stock in
accordance with the provisions of this Article II. As soon as reasonably
practicable following the Effective Time, Kroger shall
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deposit, or cause to be deposited, with the Exchange Agent certificates
representing the shares of Kroger Common Stock to be issued in the Merger, and
the amount of any dividends or distributions in accordance with Section 2.5(b)
(the "Exchange Fund").
(b) As soon as reasonably practicable after the Effective Time,
Kroger shall instruct the Exchange Agent to mail to each record holder of a
certificate or certificates which immediately prior to the Effective Time
represented Fred Meyer Shares (i) a letter of transmittal (which shall specify
that delivery shall be effected, and risk of loss and title to such certificates
shall pass, only upon delivery to the Exchange Agent and shall be in such form
and have such other provisions as Kroger shall reasonably specify) and (ii)
instructions for use in effecting the surrender of certificates which
immediately prior to the Effective Time represented Fred Meyer Shares for
certificates representing shares of Kroger Common Stock. Commencing immediately
after the Effective Time, upon the surrender to the Exchange Agent of such
certificate or certificates representing Fred Meyer Shares, together with a duly
executed and completed letter of transmittal and all other documents and other
materials required by the Exchange Agent to be delivered in connection
therewith, the holder shall be entitled to receive a certificate or certificates
representing the number of whole shares of Kroger Common Stock into which the
shares of Fred Meyer Common Stock which immediately prior to the Effective Time
were represented by the certificate or certificates so surrendered shall have
been converted in accordance with the provisions of Section 2.2. Unless and
until any certificate or certificates which immediately prior to the Effective
Time represented shares of Fred Meyer Common Stock are so surrendered, no
dividend or other distribution, if any, payable to the holders of record of
shares of Kroger Common Stock as of any date subsequent to the Effective Time
shall be paid to the holder of such certificate or certificates. Except as
otherwise provided, upon the surrender of any certificate or certificates which
immediately prior to the Effective Time represented Fred Meyer Shares, the
record holder of the certificate or certificates representing shares of Kroger
Common Stock issued in exchange therefor shall be entitled to receive (i) at the
time of surrender, the amount of any dividends or other distributions (net of
any applicable tax withholdings) having a record date after the Effective Time
and a payment date prior to the surrender date, payable in respect of such
shares of Kroger Common Stock and (ii) at the appropriate payment date, the
amount of dividends or other distributions (net of any applicable tax
withholdings) having a record date after the Effective Time and a payment date
subsequent to the date of such surrender, payable in respect of such shares of
Kroger Common Stock. No interest shall be payable in respect of the payment of
dividends or distributions pursuant to the immediately preceding sentence.
(c) Notwithstanding anything in this Agreement to the contrary,
certificates surrendered for exchange by any "affiliate" (as defined) of Fred
Meyer shall not be exchanged for shares of Kroger Common Stock until Kroger
shall have received a signed agreement from the "affiliate" as provided in
Section 6.14.
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Section 2.6 Transfer Books. The stock transfer books of Fred Meyer shall be
closed at the Effective Time and no transfer of any Fred Meyer Shares will
thereafter be recorded on any of the stock transfer books. In the event of a
transfer of ownership of any Fred Meyer Shares that is not registered in the
stock transfer records of Fred Meyer at the Effective Time, a certificate or
certificates representing the number of full shares of Kroger Common Stock into
which such Fred Meyer Shares shall have been converted in the Merger shall be
issued to the transferee together with a cash payment in accordance with Section
2.5(b) of dividends or distributions, if any, only if the certificate or
certificates which immediately prior to the Effective Time represented such Fred
Meyer Shares are surrendered as provided in Section 2.5, accompanied by all
documents required to evidence and effect such transfer and by evidence of
payment of any applicable stock transfer taxes.
Section 2.7 Termination of Exchange Fund. Any portion of the Exchange Fund
which remains undistributed one year after the Effective Time shall be delivered
to Kroger upon demand, and each holder of Fred Meyer Shares who had not
theretofore surrendered certificates or certificates which immediately prior to
the Effective Time represented Fred Meyer Shares in accordance with the
provisions of this Article II shall thereafter look only to Kroger for
satisfaction of such holder's claims for shares of Kroger Common Stock and any
dividends or distributions payable in accordance with Section 2.5(b).
Notwithstanding the foregoing, none of Kroger, the Surviving Corporation, the
Exchange Agent or any other Person shall be liable to any former holder of Fred
Meyer Shares for any amount properly delivered to a public official pursuant to
applicable abandoned property, escheat or similar laws.
Section 2.8 Options to Purchase Fred Meyer Shares. (a) Prior to the
Effective Time, Fred Meyer shall take all action reasonably necessary with
respect to each of the Fred Meyer Benefit Plans (as defined) pursuant to which
options to purchase Fred Meyer Shares (the "Fred Meyer Options") will be
outstanding immediately prior to the Effective Time such that as of and after
the Effective Time each Fred Meyer Option shall entitle the holder to purchase
that number of shares of Kroger Common Stock as is equal to the product of (x)
the number of shares of Fred Meyer Common Stock subject to the option
immediately prior to the Effective Time and (y) the Exchange Ratio; and the
exercise price per share of Kroger Common Stock subject to such option shall be
equal to (x) the exercise price per share of Fred Meyer Common Stock immediately
prior to the Effective Time divided by (y) the Exchange Ratio. Except as
required by the terms of such Fred Meyer Option, (i) Fred Meyer shall take no
action to cause any Fred Meyer Option which pursuant to its terms as in effect
as of this date would not become vested or exercisable by reason of the
transactions contemplated by this Agreement to become vested or exercisable in
connection herewith, and (ii) nothing contained in this Agreement shall be
interpreted as causing any such Fred Meyer Option to become vested or
exercisable.
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(b) Notwithstanding the foregoing, the exercise price shall be
rounded, if necessary, to the nearest one one-hundredth of a cent. Other than as
provided in paragraph (a) above and in the prior sentence of this paragraph (b),
as of and after the Effective Time, each Fred Meyer Option shall be subject to
the same terms and conditions as in effect immediately prior to the Effective
Time, but giving effect to the Merger (it being understood that all Fred Meyer
Options exercisable at the same price and granted on the same date shall be
aggregated for this purpose).
(c) As soon as practicable after the Effective Time, Kroger shall
deliver to each holder of Fred Meyer Options a notice stating the number of
shares of Kroger Common Stock then covered by such Fred Meyer Options, the
exercise price per share for each such share of Kroger Common Stock and an
acknowledgment that, except for the conversion of the Fred Meyer Options into
options to purchase shares of Kroger Common Stock as described in such notice,
the provisions of the Fred Meyer Benefit Plans pursuant to which such Fred Meyer
Options were originally granted and the agreements evidencing the grants of such
Fred Meyer Options shall continue in effect on the same terms and conditions
(subject to the adjustments required by this Section 2.8 after giving effect to
the Merger and the terms of the relevant Fred Meyer Benefit Plan).
(d) Kroger shall take all corporate action necessary to reserve for
issuance a sufficient number of shares of Kroger Common Stock for delivery upon
exercise of all of the Fred Meyer Options in accordance with this Section 2.8.
As soon as practicable after the Effective Time, Kroger shall file a
registration statement on Form S-8 (or any successor or other appropriate forms)
with respect to the shares of Kroger Common Stock subject to the Fred Meyer
Options and shall use all reasonable efforts to maintain the effectiveness of
this registration statement (and maintain the current status of the prospectus
or prospectuses contained therein) for so long as the Fred Meyer Options remain
outstanding.
Section 2.9 Warrants to Purchase Fred Meyer Shares. At the Effective Time,
Kroger will execute a supplemental warrant agreement as required by Section 9(l)
of that certain Warrant Agreement, dated May 23, 1996, among Smith's Food & Drug
Centers, Inc. and The Yucaipa Companies, as supplemented by the Supplemental
Warrant Agreement, dated as of September 9, 1997.
Section 2.10 Appraisal Rights. In accordance with Section 262 of the DGCL,
no appraisal rights shall be available to holders of Fred Meyer Shares in
connection with the Merger. Appraisal rights shall be available to holders of
Kroger in connection with the Merger in accordance with Sections 1701.84(D) and
1701.85 of the Ohio General Corporation Law (the "OGCL").
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Section 2.11 Certain Adjustments. If between the date of this Agreement and
the Effective Time, the outstanding shares of Fred Meyer Common Stock or Kroger
Common Stock shall be changed into a different number of shares by reason of any
stock split, combination of shares, or any dividend payable in stock shall be
declared thereon with a record date within such period, the Exchange Ratio shall
be appropriately adjusted and provisions shall be made for appropriate payments
in lieu of the issuance of fractional shares of Kroger Common Stock in order to
provide the holders of Fred Meyer Shares the same economic effect as
contemplated by this Agreement prior to such event.
Section 2.12 Restricted Stock. At the Effective Time, any shares of Fred
Meyer Common Stock awarded pursuant to any plan, arrangement or transaction and
outstanding immediately prior to the Effective Time shall be converted into
shares of Kroger Common Stock in accordance with Section 2.2, subject to the
same terms, conditions and restrictions as in effect immediately prior to the
Effective Time, except to the extent that these terms, conditions and
restrictions may be altered in accordance with their terms as a result of the
transactions contemplated hereby.
Section 2.13 Assignment. Notwithstanding anything in this Agreement to the
contrary, Kroger may, in its sole discretion, restructure the Merger so as to
substitute Kroger for Jobsite Holdings as one of the constituent corporations in
the Merger and so that Fred Meyer shall merge with and into Kroger with Kroger
continuing as the surviving corporation in the Merger, provided that such
restructuring could not reasonably be expected to interfere with or delay (in
any material respect) the consummation of the Merger by reason of any Consent
relating to Kroger that would not have been required to have been obtained by
Kroger had the Merger not been so restructured. In the event of such
restructuring, the Parties shall promptly enter into any amendment to this
Agreement necessary or desirable to provide for such restructuring.
ARTICLE III
Except as set forth in the corresponding sections or subsections of the
disclosure letter, dated this date, delivered by Fred Meyer to Kroger (the "Fred
Meyer Disclosure Letter"), Fred Meyer hereby represents and warrants to Kroger
and Jobsite Holdings as follows:
Section 3.1 Organization and Qualification; Subsidiaries. (a) Fred Meyer is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware. Each of the Subsidiaries of Fred Meyer is a
corporation or other business entity duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation or
organization, and each of Fred Meyer and its Subsidiaries has the requisite
corporate or other organizational power and authority to own, operate or
- 8 -
lease its properties and to carry on its business as it is now being conducted,
and 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,
operated or leased or the nature of its activities makes such qualification
necessary, in each case except as would not, individually or in the aggregate,
reasonably be expected to have a Fred Meyer Material Adverse Effect (as
defined).
(b) All of the outstanding shares of capital stock and other
equity securities of the Subsidiaries of Fred Meyer have been validly issued and
are fully paid and nonassessable, and are owned, directly or indirectly, by Fred
Meyer, free and clear of all pledges and security interests. There are no
subscriptions, options, warrants, calls, commitments, agreements, conversion
rights or other rights of any character (contingent or otherwise) entitling any
Person to purchase or otherwise acquire from Fred Meyer or any of its
Subsidiaries at any time, or upon the happening of any stated event, any shares
of capital stock or other equity securities of any of the Subsidiaries of Fred
Meyer. The Fred Meyer Disclosure Letter lists the name and jurisdiction of
incorporation or organization of each Subsidiary of Fred Meyer.
(c) Except for interests in its Subsidiaries, neither Fred Meyer
nor any of its Subsidiaries owns directly or indirectly any equity interest in
any Person or has any obligation or made any commitment to acquire any such
interest or make any such investment.
Section 3.2 Certificate of Incorporation and Bylaws. Fred Meyer has
furnished, or otherwise made available, to Kroger a complete and correct copy of
its Certificate of Incorporation (the "Fred Meyer Certificate of Incorporation")
and its bylaws, as amended to the date of this Agreement. The Fred Meyer
Certificate of Incorporation and the bylaws of Fred Meyer are in full force and
effect. Fred Meyer is not in violation of any of the provisions of the Fred
Meyer Certificate of Incorporation or its bylaws.
Section 3.3 Capitalization. (a) The authorized capital stock of Fred Meyer
consists of 400,000,000 shares of Fred Meyer Common Stock and 100,000,000 shares
of Preferred Stock, par value $.01 per share (the "Fred Meyer Preferred Stock").
At the close of business on October 15, 1998 (the "Fred Meyer Capital Stock
Disclosure Date"), (i) 154,772,188 shares of Fred Meyer Common Stock, and no
shares of Fred Meyer Preferred Stock, were issued and outstanding and (ii) no
shares of Fred Meyer Common Stock or Fred Meyer Preferred Stock, were held by
Fred Meyer in its treasury. The Fred Meyer Disclosure Letter lists the number of
shares of Fred Meyer Common Stock and Fred Meyer Preferred Stock reserved for
issuance as of the Fred Meyer Capital Stock Disclosure Date under each of the
Fred Meyer Benefit Plans (as defined) or otherwise. Since the Fred Meyer Capital
Stock Disclosure Date until the date of this Agreement, no
- 9 -
shares of Fred Meyer Common Stock or Fred Meyer Preferred Stock have been issued
or reserved for issuance, except in respect of the exercise, conversion or
exchange of Fred Meyer Equity Rights (as defined) outstanding as of the Fred
Meyer Capital Stock Disclosure Date and in connection with the Fred Meyer Stock
Option Agreement. For purposes of this Agreement, "Fred Meyer Equity Rights"
shall mean subscriptions, options, warrants, calls, commitments, agreements,
conversion rights or other rights of any character (contingent or otherwise) to
purchase or otherwise acquire from Fred Meyer or any of its Subsidiaries at any
time, or upon the happening of any stated event, any shares of the capital stock
of Fred Meyer. The Fred Meyer Disclosure Letter sets forth the number and type
of Fred Meyer Equity Rights (including the number and class of Fred Meyer's
capital stock for or into which the Fred Meyer Equity Rights are exercisable,
convertible or exchangeable and any Fred Meyer Benefit Plan pursuant to which
such Fred Meyer Equity Rights were granted or issued) outstanding as of the Fred
Meyer Capital Stock Disclosure Date. Other than (i) the Fred Meyer Equity Rights
disclosed in the Fred Meyer Disclosure Letter; (ii) Fred Meyer Equity Rights
granted pursuant to the Fred Meyer Stock Option Agreement and (iii) a warrant
for 3,869,366 shares of Fred Meyer Common Stock, Fred Meyer does not have
outstanding any Fred Meyer Equity Rights as of the date of this Agreement.
Except as disclosed in the Fred Meyer SEC Reports (as defined), no stockholders
of Fred Meyer are party to any voting agreement, voting trust or similar
arrangement with respect to Fred Meyer Shares to which Fred Meyer or any
Subsidiary of Fred Meyer is a Party.
(b) There are no outstanding obligations of Fred Meyer or any of
its Subsidiaries to repurchase, redeem or otherwise acquire any shares of Fred
Meyer Common Stock or any Fred Meyer Equity Rights (except in connection with
the exercise, conversion or exchange of outstanding Fred Meyer Equity Rights).
All of the issued and outstanding shares of Fred Meyer Common Stock are validly
issued, fully paid, nonassessable and free of preemptive rights. No shares of
Fred Meyer Common Stock have been repurchased by Fred Meyer or any of its
Subsidiaries since October 1, 1996.
Section 3.4 Power and Authority; Authorization; Valid & Binding. Fred Meyer
has the necessary corporate power and authority to enter into and deliver this
Agreement and the Stock Option Agreements and to perform its obligations
hereunder and thereunder and to consummate the transactions contemplated hereby
and thereby, except that the Merger is subject to the adoption and approval of
this Agreement and the Merger by Fred Meyer's stockholders as required by the
DGCL. The execution and delivery of this Agreement and the Stock Option
Agreements by Fred Meyer, the performance by it of its obligations hereunder and
thereunder and the consummation by Fred Meyer of the transactions contemplated
hereby and thereby, have been duly authorized by all necessary corporate action
on the part of Fred Meyer (other than with respect to the Merger and the
adoption and approval of this Agreement and the Merger by its stockholders as
required by the DGCL). This Agreement and the Stock Option
- 10 -
Agreements have been duly executed and delivered by Fred Meyer and, assuming the
due authorization, execution and delivery of this Agreement by Kroger and Merger
Sub and the execution and delivery of the Stock Option Agreements by Kroger,
each agreement constitutes a legal, valid and binding obligation of Fred Meyer
enforceable against it in accordance with the terms hereof or thereof, subject
to bankruptcy, insolvency, fraudulent transfer, moratorium, reorganization and
similar laws of general applicability relating to or affecting creditors' rights
and to general equity principles (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
Section 3.5 No Conflict; Required Filings and Consents. (a) The execution
and delivery of this Agreement and the Stock Option Agreements by Fred Meyer
does not, and the performance by Fred Meyer of its obligations hereunder and
thereunder and the consummation by Fred Meyer of the transactions contemplated
hereby, and thereby will not, (i) violate or conflict with the Fred Meyer
Certificate of Incorporation or the bylaws of Fred Meyer, (ii) subject to
obtaining or making the notices, reports, filings, waivers, consents, approvals
or authorizations referred to in paragraph (b) below, conflict with or violate
any law, regulation, court order, judgment or decree applicable to Fred Meyer or
any of its Subsidiaries or by which any of their respective property is bound or
affected or (iii) result in any breach of or constitute a default (or an event
which with notice or lapse of time or both would become a default) under, or
give to others any rights of termination, cancellation, vesting, modification,
alteration or acceleration of any obligation under, result in the creation of a
lien, claim or encumbrance on any of the properties or assets of Fred Meyer or
any of its Subsidiaries pursuant to, result in the loss of any material benefit
under (including an increase in the price paid by, or cost to, Fred Meyer or any
of its Subsidiaries), require the consent of any other party to, or result in
any obligation on the part of Fred Meyer or any of its Subsidiaries to
repurchase (with respect to a bond or a note), any agreement, contract,
instrument, bond, note, indenture, permit, license or franchise to which Fred
Meyer or any of its Subsidiaries is a party or by which Fred Meyer, any of its
Subsidiaries or any of their respective property is bound or affected, except,
in the case of clauses (ii) and (iii) above, as would not, individually or in
the aggregate, reasonably be expected to have a Fred Meyer Material Adverse
Effect.
(b) Except for applicable requirements, if any, under the
premerger notification requirements of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), the filing of a
certificate of merger with respect to the Merger as required by the DGCL,
filings with the SEC under the Securities Act of 1933, as amended (the
"Securities Act"), and the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), any filings required pursuant to any state securities or "blue
sky" laws, any filings required pursuant to any state liquor, gaming or pharmacy
laws, any applicable requirements of any Environmental Laws (as defined)
governing the transfer of any interest in real property or of business
operations (including, without limitation, transfer acts, notifications and deed
restrictions), the transfer of application requirements
- 11 -
with respect to the environmental permits of Fred Meyer or its Subsidiaries,
filings or other actions required pursuant to the rules and regulations of any
stock exchange on which the Fred Meyer Shares are listed, and approval of
stockholders under the DGCL or under the rules and regulations of the NYSE,
neither Fred Meyer nor any of its Subsidiaries is required to submit any notice,
report or other filing with any Governmental Entity (as herein defined) in
connection with the execution, delivery, performance or consummation of this
Agreement, the Stock Option Agreements or the Merger, except for such notices,
reports or filings that, if not made, would not, individually or in the
aggregate, reasonably be expected to have a Fred Meyer Material Adverse Effect.
Except as set forth in the immediately preceding sentence, no waiver, consent,
approval or authorization of any governmental or regulatory authority, court,
agency, commission or other governmental entity or any securities exchange or
other self-regulatory body, domestic or foreign ("Governmental Entity"), is
required to be obtained by Fred Meyer or any of its Subsidiaries in connection
with its execution, delivery, performance or consummation of this Agreement, the
Stock Option Agreements or the transactions contemplated hereby and thereunder
except for such waivers, consents, approvals or authorizations that, if not
obtained or made, would not, individually or in the aggregate, reasonably be
expected to have, a Fred Meyer Material Adverse Effect.
Section 3.6 SEC Reports; Financial Statements. (a) Fred Meyer and its
predecessors have filed all forms, reports and documents (including all
Exhibits, Schedules and Annexes thereto) required to be filed by them with the
SEC since January 29, 1995, including any amendments or supplements
(collectively, including any such forms, reports and documents filed after this
date, the "Fred Meyer SEC Reports"), and, with respect to the Fred Meyer SEC
Reports filed by Fred Meyer after the date hereof and prior to the Closing Date,
will deliver or make available to Kroger all of its Fred Meyer SEC Reports in
the form filed with the SEC. The Fred Meyer SEC Reports (i) were (and any Fred
Meyer SEC Reports filed after this date will be) in all material respects in
accordance with the requirements of the Securities Act or the Exchange Act, as
the case may be, and the rules and regulations promulgated thereunder, and (ii)
as of their respective filing dates, did not (and any Fred Meyer SEC Reports
filed after this date will 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 the light of the circumstances under
which they were made, not misleading.
(b) The financial statements, including all related notes and
schedules, contained in the Fred Meyer SEC Reports (or incorporated therein by
reference) fairly present in all material respects (or, with respect to
financial statements contained in the Fred Meyer SEC Reports filed after this
date, will fairly present in all material respects) the consolidated financial
position of Fred Meyer and its consolidated subsidiaries as of the respective
dates and the consolidated results of operations, retained earnings and cash
flows of Fred Meyer and its consolidated subsidiaries for the respective periods
indicated,
- 12 -
in each case in accordance with GAAP applied on a consistent basis throughout
the periods involved (except for changes in accounting principles disclosed in
the notes) and the rules and regulations of the SEC, except with respect to
interim financial statements for normal year-end adjustments which were not or
are not expected to be, as the case may be, individually or in the aggregate,
material in amount and did not or will not, as the case may be, include certain
notes which may be required by GAAP but which are not required by Form 10-Q of
the SEC.
Section 3.7 Absence of Certain Changes. Except as disclosed in the Fred
Meyer SEC Reports filed prior to this date, (a) since the end of Fred Meyer's
fiscal year last ended, Fred Meyer and each of its Subsidiaries has conducted
its business in all material respects in the ordinary and usual course of its
business consistent with past practice and there has not been any change in the
financial condition, business, prospects or results of operations of Fred Meyer
and its Subsidiaries, or any development or combination of developments that,
individually or in the aggregate, has had or would reasonably be expected to
have a Fred Meyer Material Adverse Effect and (b) since the end of Fred Meyer's
fiscal year last ended until this date there has not been (i) any declaration,
setting aside or payment of any dividend or other distribution in respect of the
capital stock of Fred Meyer; (ii) any change by Fred Meyer to its accounting
policies, practices or methods; (iii) other than in the ordinary course of
business consistent with past practice, any material tax election made or
changed, any audit settled or any amended Tax Returns (as defined) filed; (iv)
any amendment or change to the terms of any of its indebtedness material to Fred
Meyer and its Subsidiaries taken as a whole; (v) any incurrence of any material
indebtedness outside of the ordinary course of business; (vi) outside the
ordinary course of business, any transfer, lease, license, sale, mortgage,
pledge, encumbrance or other disposition of assets or properties material to
Fred Meyer and its Subsidiaries taken as a whole; (vii) any material damage,
destruction or other casualty loss with respect to any asset or property owned,
leased or otherwise used by Fred Meyer or its Subsidiaries material to Fred
Meyer and its Subsidiaries taken as a whole, whether or not covered by
insurance; (viii) except in the ordinary course of business consistent with past
practice for employees other than executive officers or directors, or except as
required by applicable law or pursuant to a contractual obligation in effect as
of the date of this Agreement, (A) any execution, adoption or amendment of any
agreement or arrangement relating to severance or any employment or consulting
agreement with any officer, director or other key employee, or any amendment to
any Fred Meyer Benefit Plan or adoption or execution of any new employee benefit
plan for the benefit of any officer, director or other key employee (including,
without limitation, the Fred Meyer Benefit Plans referred to in Section 3.10) or
(B) any grant of any stock options or other equity related award; or (ix) any
agreement or commitment entered into with respect to any of the foregoing.
- 13 -
Section 3.8 Litigation and Liabilities. (a) Except as disclosed in the Fred
Meyer SEC Reports filed prior to this date, there are no civil, criminal or
administrative actions, suits or claims, proceedings (including condemnation
proceedings) or, to the knowledge of Fred Meyer, hearings or investigations,
pending or, to the knowledge of Fred Meyer, threatened against Fred Meyer or any
of its Subsidiaries or any of their respective properties and assets, except for
any of the foregoing which would not, individually or in the aggregate,
reasonably be expected to have a Fred Meyer Material Adverse Effect.
(b) Neither Fred Meyer nor any of its Subsidiaries has any liabilities
(absolute, accrued, contingent or otherwise) the existence of which would,
individually or in the aggregate, reasonably be expected to have a Fred Meyer
Material Adverse Effect except (i) liabilities described in the Fred Meyer SEC
Reports filed with the SEC prior to the date hereof or reflected on Fred Meyer's
consolidated balance sheet (and related notes thereto) as of the end of its most
recently completed fiscal year filed in the Fred Meyer SEC Reports or (ii)
liabilities permitted to be incurred pursuant to Section 5.1.
Section 3.9 No Violation of Law; Permits. The business of Fred Meyer and
each of its Subsidiaries is being conducted in accordance with all applicable
statutes of law, ordinances, regulations, judgments, orders or decrees of any
Governmental Entity, and not in violation of any permits, franchises, licenses,
authorizations or consents granted by any Governmental Entity, and Fred Meyer
and each of its Subsidiaries has obtained all permits, franchises, licenses,
authorizations or consents necessary for the conduct of its business, except, in
each case, as would not, individually or in the aggregate, reasonably be
expected to have a Fred Meyer Material Adverse Effect. Neither Fred Meyer nor
any of its Subsidiaries is subject to any cease and desist or other order,
judgment, injunction or decree issued by, or is a party to any written
agreement, consent agreement or memorandum of understanding with, is a party to
any commitment letter or similar undertaking to, is subject to any order or
directive by, or has adopted any board resolutions at the request of, any
Governmental Entity that materially restricts the conduct of its business
(whether the type of business, the location or otherwise) and which,
individually or in the aggregate, would reasonably be expected to have a Fred
Meyer Material Adverse Effect, nor to the knowledge of Fred Meyer, has Fred
Meyer been advised in writing that any Governmental Entity has proposed issuing
or requesting any of the foregoing.
Section 3.10 Employee Matters; ERISA. (a) Set forth in the Fred Meyer
Disclosure Letter is a complete list of each Fred Meyer Benefit Plan and each
Fred Meyer Multiemployer Plan. The term "Fred Meyer Benefit Plan" shall mean (i)
each plan, program, policy, contract or agreement providing for compensation,
severance, termination pay, performance awards, stock or stock-related awards,
fringe benefits or other employee benefits of any kind, including, without
limitation, any "employee benefit
- 14 -
plan," within the meaning of Section 3(3) of ERISA but excluding any
"multiemployer plan" within the meaning of Sections 3(37) or 4001(a)(3) of
ERISA, and (ii) each employment, severance, consulting, non-compete,
confidentiality, or similar agreement or contract, in each case, with respect to
which Fred Meyer or any Subsidiary of Fred Meyer has or may have any liability
(accrued, contingent or otherwise). The term "Fred Meyer Multiemployer Plan"
shall mean any "multiemployer plan" within the meaning of Section 4001(a)(3) of
ERISA in respect to which Fred Meyer or any Subsidiary of Fred Meyer has or may
have any liability (accrued, contingent or otherwise).
(b) Fred Meyer has used all commercially reasonable efforts to provide
or make available to Kroger (i) current, accurate and complete copies of all
documents embodying each Fred Meyer Benefit Plan, including all amendments,
written interpretations (which could be regarded as increasing the liabilities
of Fred Meyer) and all trust or funding arrangements with respect thereto; (ii)
the most recent annual actuarial valuation, if any, prepared for each Fred Meyer
Benefit Plan; (iii) the most recent annual report (Series 5500 and all
schedules), if any, required under ERISA in connection with each Fred Meyer
Benefit Plan or related trust; (iv) the most recent determination letter
received from the Internal Revenue Service, if any, for each Fred Meyer Benefit
Plan and related trust which is intended to satisfy the requirements of Section
401(a) of the Code; (v) if any Fred Meyer Benefit Plan is funded, the most
recent annual and periodic accounting of such Fred Meyer Benefit Plan's assets;
(vi) the most recent summary plan description together with the most recent
summary of material modifications, if any, required under ERISA with respect to
each Fred Meyer Benefit Plan; and (vii) all material communications to any one
or more current, former or retired employee, officer, consultant, independent
contractor, agent or director of Fred Meyer or any Subsidiary of Fred Meyer
(each, a "Fred Meyer Employee" and collectively, the "Fred Meyer Employees")
relating to each Fred Meyer Benefit Plan (which communication could be regarded
as increasing the liabilities of Fred Meyer and its Subsidiaries taken as a
whole under the relevant Fred Meyer Benefit Plan). The liabilities arising under
those documents that Fred Meyer has been unable to produce, to the extent not
reflected in Fred Meyer's financial statements, would not reasonably be expected
to have a Fred Meyer Material Adverse Effect.
(c) All Fred Meyer Benefit Plans have been administered in all
respects in accordance with the terms thereof and all applicable laws except for
violations which, individually or in the aggregate, would not reasonably be
expected to have a Fred Meyer Material Adverse Effect. Each Fred Meyer Benefit
Plan which is an "employee pension benefit plan" within the meaning of Section
3(2) of ERISA ("Pension Plan") and which is intended to be qualified under
Section 401(a) of the Code (each, an "Fred Meyer Pension Plan"), has received a
favorable determination letter from the Internal Revenue Service, and Fred Meyer
is not aware of any circumstances that would reasonably be expected to result in
the revocation or denial of this qualified status. Except as otherwise set forth
in
- 15 -
the Fred Meyer Disclosure Letter or in the Fred Meyer SEC Reports filed prior to
this date, there is no pending or, to Fred Meyer's knowledge, threatened, claim,
litigation, proceeding, audit, examination or investigation relating to any Fred
Meyer Benefit Plans or any Fred Meyer Employees that, individually or in the
aggregate, would reasonably be expected to have a Fred Meyer Material Adverse
Effect. With respect to the Voluntary Compliance Resolution filing with the
Internal Revenue Service for the Ralph's Food 4 Less Employee Stock Ownership
Plan, the Ralph's UFCW Employee Stock Ownership Plan and the Ralph's Teamsters
Employee Stock Ownership Plan, Fred Meyer expects that the matter will be
resolved without having a Fred Meyer Material Adverse Effect.
(d) No material liability under Title IV of ERISA has been or is
reasonably expected to be incurred by Fred Meyer or any Subsidiaries of Fred
Meyer or any entity which is considered a single employer with Fred Meyer or any
Subsidiary of Fred Meyer under Section 4001(a)(15) of ERISA or Section 414 of
the Code (an "Fred Meyer ERISA Affiliate"). No notice of a "reportable event,"
within the meaning of Section 4043 of ERISA for which the 30-day reporting
requirement has not been waived, has been required to be filed for any Fred
Meyer Pension Plan within the past twelve (12) months.
(e) All contributions, premiums and payments (other than
contributions, premiums or payments that are not material, in the aggregate)
required to be made under the terms of any Fred Meyer Benefit Plan have been
made. No Fred Meyer Pension Plan has an "accumulated funding deficiency"
(whether or not waived) within the meaning of Section 412 of the Code or Section
302 of ERISA. Neither Fred Meyer nor any Subsidiaries of Fred Meyer nor any Fred
Meyer ERISA Affiliate has provided, or is required to provide, security to any
Fred Meyer Pension Plan pursuant to Section 401(a)(29) of the Code.
(f) As of the Closing Date, neither Fred Meyer, any Subsidiary of Fred
Meyer nor any Fred Meyer ERISA Affiliate will have incurred any withdrawal
liability as described in Section 4201 of ERISA for withdrawals that have
occurred on or prior to the Closing Date that has not previously been satisfied.
Neither Fred Meyer, any Subsidiary of Fred Meyer nor any Fred Meyer ERISA
Affiliate has knowledge that any Fred Meyer Multiemployer Plan fails to qualify
under Section 401(a) of the Code, is insolvent or is in reorganization within
the meaning of Part 3 of Subtitle E of Title IV of ERISA nor of any condition
that would reasonably be expected to result in a Fred Meyer Multiemployer Plan
becoming insolvent or going into reorganization.
(g) Except as set forth in the Fred Meyer Disclosure Letter, the
execution of, and performance of the transactions contemplated in, this
Agreement will not (either alone or upon the occurrence of any additional or
subsequent events) (i) constitute an event under any Fred Meyer Benefit Plan,
trust or loan that will or may
- 16 -
result in any payment (whether of severance pay or otherwise), acceleration,
forgiveness of indebtedness, vesting, distribution, increase in benefits or
obligation to fund benefits with respect to any Fred Meyer Employee, or (ii)
result in the triggering or imposition of any restrictions or limitations on the
right of Fred Meyer, any Subsidiary of Fred Meyer or Kroger to amend or
terminate any Fred Meyer Benefit Plan. Except as set forth in the Fred Meyer
Disclosure Letter, no payment or benefit which will or may be made by Fred
Meyer, any Subsidiary of Fred Meyer, Kroger or any of their respective
affiliates with respect to any Fred Meyer Employee will be characterized as an
"excess parachute payment," within the meaning of Section 280G(b)(1) of the
Code.
Section 3.11 Labor Matters. (a) Except as set forth in the Fred Meyer SEC
Reports filed prior to this date, and except for those matters that would not,
individually or in the aggregate, reasonably be expected to have a Fred Meyer
Material Adverse Effect, no work stoppage, slowdown, lockout or labor strike
against Fred Meyer or any Subsidiary of Fred Meyer by Fred Meyer Employees (or
any union that represents them) is pending or, to the knowledge of Fred Meyer,
threatened.
(b) Except as set forth in the Fred Meyer SEC Reports filed prior to
this date and as, individually or in the aggregate, would not reasonably be
expected to have a Fred Meyer Material Adverse Effect, as of the date of this
Agreement, neither Fred Meyer nor any Subsidiary of Fred Meyer is involved in
or, to the knowledge of Fred Meyer, threatened with, any labor dispute,
grievance, arbitration or union organizing activity (by it or any of its
employees) involving any Fred Meyer Employees.
Section 3.12 Environmental Matters. Except as set forth in the Fred Meyer
SEC Reports filed prior to this date and except for those matters that would
not, individually or in the aggregate, reasonably be expected to have a Fred
Meyer Material Adverse Effect:
(i) Fred Meyer and each of its Subsidiaries is in compliance with
all applicable Environmental Laws, and neither Fred Meyer nor any of its
Subsidiaries has received any written communication from any Person or
Governmental Entity that alleges that Fred Meyer or any of its Subsidiaries is
not in compliance with applicable Environmental Laws.
(ii) Fred Meyer and each of its Subsidiaries has obtained or has
applied for all applicable environmental, health and safety permits, licenses,
variances, approvals and authorizations required under Environmental Laws
(collectively, the "Environmental Permits") necessary for the construction of
its facilities or the conduct of its operations, and all those Environmental
Permits are in effect or, where applicable, a renewal application has been
timely filed and is pending agency approval, and Fred Meyer and its Subsidiaries
are in compliance with all terms and conditions of such Environmental Permits.
- 17 -
(iii) There is no Environmental Claim (as defined) pending or, to
the knowledge of Fred Meyer, threatened (i) against Fred Meyer or any of its
Subsidiaries, (ii) against any Person whose liability for any Environmental
Claim has been retained or assumed contractually by Fred Meyer or any of its
Subsidiaries, or (iii) against any real or personal property or operations which
Fred Meyer or any of its Subsidiaries owns, leases or operates, in whole or in
part.
(iv) There have been no Releases (as defined) of any Hazardous
Material (as defined) that would be reasonably likely to form the basis of any
Environmental Claim against Fred Meyer or any of its Subsidiaries, or against
any Person whose liability for any Environmental Claim has been retained or
assumed contractually by Fred Meyer or any of its Subsidiaries.
(v) None of the properties owned, leased or operated by Fred
Meyer, its Subsidiaries or any predecessor thereof are now, or were in the past,
listed on the National Priorities List of Superfund Sites or any analogous state
list (excluding easements that transgress those Superfund sites).
For purposes of this Agreement:
(i) "Environmental Claim" means any and all administrative,
regulatory or judicial actions, suits, demands, demand letters, directives,
claims, liens, investigations, proceedings or notices of noncompliance or
violation (written or oral) by any person (including any federal, state, local
or foreign governmental authority) alleging potential liability (including,
without limitation, potential responsibility for or liability for enforcement,
investigatory costs, cleanup costs, governmental response costs, removal costs,
remedial costs, natural resources damages, property damages, personal injuries
or penalties) arising out of, based on or resulting from (A) the presence, or
Release or threatened Release into the environment, of any Hazardous Materials
at any location, whether or not owned, operated, leased or managed by the
representing Party or any of its Subsidiaries; or (B) circumstances forming the
basis of any violation or alleged violation of any Environmental Law; or (C) any
and all claims by any third party seeking damages, contribution,
indemnification, cost recovery, compensation or injunctive relief resulting from
the presence or Release of any Hazardous Materials.
(ii) "Environmental Laws" means all applicable foreign, federal,
state and local laws, rules, requirements and regulations relating to pollution,
the environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata) or protection of human health as
it relates to the environment including, without limitation, laws and
regulations relating to Releases of Hazardous Materials, or otherwise relating
to the manufacture, processing, distribution, use,
- 18 -
treatment, storage, disposal, transport or handling of Hazardous Materials or
relating to management of asbestos in buildings.
(iii) "Hazardous Materials" means (A) any petroleum or any
by-products or fractions thereof, asbestos or asbestos-containing materials,
urea formaldehyde foam insulation, any form of natural gas, explosives,
polychlorinated biphenyls ("PCBs"), radioactive materials, ionizing radiation,
electromagnetic field radiation or microwave transmissions; (B) any chemicals,
materials or substances, whether waste materials, raw materials or finished
products, which are now defined as or included in the definition of "hazardous
substances," "hazardous wastes," "hazardous materials," "extremely hazardous
substances," "restricted hazardous wastes," "toxic substances," "toxic
pollutants," "pollutants," "contaminants," or words of similar import under any
Environmental Law; and (C) any other chemical, material or substance, whether
waste materials, raw materials or finished products, regulated or forming the
basis of liability under any Environmental Law.
(iv) "Release" means any release, spill, emission, leaking,
injection, deposit, disposal, discharge, dispersal, leaching or migration into
the environment (including without limitation ambient air, atmosphere, soil,
surface water, groundwater or property).
Section 3.13 Board Action; Vote Required. (a) Fred Meyer's Board of
Directors has approved this Agreement, the Stock Option Agreements and the
transactions contemplated hereby and thereby, including the Merger, has
determined that the Merger is in the best interests of Fred Meyer and its
stockholders and has resolved to recommend to stockholders that they vote in
favor of approving and adopting this Agreement and approving the Merger. Neither
Section 203 of the DGCL nor any other state takeover or similar statute or
regulation applies to the Merger, this Agreement, the Fred Meyer Stock Option
Agreement (including the purchase of shares of Fred Meyer Common Stock
thereunder) or any of the transactions contemplated hereby or thereby. In
connection with each Fred Meyer Benefit Plan under which a holder of an option
granted pursuant thereto would be entitled, in respect of such option, to
receive cash upon a change of control, the Board of Directors (or the
appropriate Committee thereof) has taken all necessary action so that in
connection with the Merger such holder would be entitled to exercise this option
solely for shares of Fred Meyer Common Stock or, following the Merger, Kroger
Common Stock.
(b) The affirmative vote of the holders of a majority of all of the
outstanding shares of Fred Meyer Common Stock is necessary to approve and adopt
this Agreement and the Merger. Such vote is the only vote of the holders of any
class or series of Fred Meyer's capital stock required to approve this Agreement
and the transactions contemplated hereby.
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Section 3.14 Opinion of Financial Advisor. Fred Meyer or its Board of
Directors has received the opinion of Salomon Smith Barney Inc. and Donaldson,
Lufkin & Jenrette Securities Corporation, dated as of this date, to the effect
that, as of this date, the Exchange Ratio is fair to the holders of shares of
Fred Meyer Common Stock from a financial point of view.
Section 3.15 Brokers. Set forth in the Fred Meyer Disclosure Letter is a
list of each broker, finder or investment banker and other Person entitled to
any brokerage, finder's, investment banking or other similar fee or commission
in connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Fred Meyer or any of its Subsidiaries and
the expected amounts of such fees and commissions. Fred Meyer has previously
provided to Kroger copies of any agreements giving rise to any such fee or
commission.
Section 3.16 Tax Matters. (a) All Tax Returns required to be filed by Fred
Meyer or its Subsidiaries on or prior to the Effective Time have been or will be
prepared in good faith and timely filed with the appropriate Governmental Entity
on or prior to the Effective Time or by the due date thereof including
extensions and all such Tax Returns are (or, as to Tax Returns not filed on the
date hereof, will be) complete and accurate in all material respects, except
where the failure to so file or to be complete and accurate would not,
individually or in the aggregate, reasonably be expected to be material and
except with respect to matters contested in good faith as set forth in the Fred
Meyer Disclosure Letter.
(b) All material Taxes (as herein defined) that are required to be
paid, either (i) have been fully paid (except with respect to matters contested
in good faith as set forth in the Fred Meyer Disclosure Letter) or (ii) are
adequately reflected as a liability on Fred Meyer's or its Subsidiaries' books
and records. All Taxes required to be collected or withheld from third parties
have been collected or withheld in all material respects.
(c) With respect to any period for which Tax Returns have not yet been
filed, or for which Taxes are not yet due or owing, Fred Meyer and its
Subsidiaries have made due and sufficient accruals for such Taxes in their
respective books and records and financial statements, except where the failure
to so accrue would not, individually or in the aggregate, reasonably be expected
to be material.
(d) Fred Meyer and each of its Subsidiaries have not waived any
statute of limitations, or agreed to any extension of time, with respect to
federal income or material state Taxes or a material Tax assessment or
deficiency.
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(e) As of this date, (i) there are not pending or, to the knowledge of
Fred Meyer, threatened, any audits, examinations, investigations or other
proceedings in respect of Taxes or Tax matters and (ii) there are not any
unresolved questions or claims concerning Fred Meyer's or any of its
Subsidiaries' Tax liability that (x) were raised by any Taxing authority in a
communication to Fred Meyer or any Subsidiary and (y) would be, individually or
in the aggregate, material to Fred Meyer and its Subsidiaries taken as a whole,
after taking into account any reserves for Taxes set forth on the most recent
balance sheet contained in the Fred Meyer SEC Reports filed prior to this date.
(f) Fred Meyer has made available to Kroger correct and complete
copies of the United States federal income and all material state income or
franchise Tax Returns filed by Fred Meyer and its Subsidiaries for each of its
fiscal years ended on or about January 31, 1996, 1997 and 1998.
(g) Fred Meyer has not distributed the stock of a "controlled
corporation" (within the meaning of that term as used in section 355(a) of the
Code) in a transaction subject to section 355 of the Code within the past two
years.
As used in this Agreement, (i) the term "Tax" (including, with correlative
meaning, the terms "Taxes" and "Taxable") includes all federal, state, local and
foreign income, profits, franchise, gross receipts, license, premium,
environmental (including taxes under Section 59A of the Code), capital stock,
severance, stamp, payroll, sales, employment, unemployment, disability, use,
transfer, property, withholding, excise, production, occupation, windfall
profits, customs duties, social security (or similar), registration, value
added, alternative or add-on minimum, estimated, occupancy and other taxes,
duties or governmental assessments of any nature whatsoever, together with all
interest, penalties and additions imposed with respect to such amounts and any
interest in respect of such penalties and additions, and (ii) the term "Tax
Return" includes all returns and reports (including elections, declarations,
disclosures, schedules, estimates and information returns and any amendment
thereto) required to be supplied to a Tax authority relating to Taxes.
Section 3.17 Intellectual Property. Neither Fred Meyer nor any of its
Subsidiaries currently utilizes, or to the knowledge of the general counsel and
members of the legal department of Fred Meyer involved in intellectual property,
has in the past utilized, any existing or pending patent, trademark, trade name,
service mark, copyright, software, trade secret or know-how, except for those
which are owned, possessed or lawfully used by Fred Meyer or its Subsidiaries in
their business operations, and neither Fred Meyer nor any of its Subsidiaries
infringes upon or unlawfully uses any patent, trademark, trade name, service
mark, copyright or trade secret owned or validly claimed by another Person
except, in each case, as would not, individually or in the aggregate, reasonably
be expected to have a Fred Meyer Material Adverse Effect. Fred Meyer and
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its Subsidiaries own, have a valid license to use or have the right validly to
use all existing and pending patents, trademarks, tradenames, service marks,
copyrights and software necessary to carry on their respective businesses
substantially as currently conducted except the failure of which to own, validly
license or have the right validly to use, individually or in the aggregate,
would not reasonably be expected to have a Fred Meyer Material Adverse Effect.
Section 3.18 Insurance. Except to the extent adequately accrued on the most
recent balance sheet contained in the Fred Meyer SEC Reports filed as of this
date, neither Fred Meyer nor its Subsidiaries has any obligation (contingent or
otherwise) to pay in connection with any insurance policies any retroactive
premiums or "retro-premiums" that, individually or in the aggregate, would
reasonably be expected to have a Fred Meyer Material Adverse Effect.
Section 3.19 Contracts and Commitments. Set forth in the Fred Meyer
Disclosure Letter is a complete and accurate list of all of the following
contracts (written or oral), plans, undertakings, commitments or agreements
("Fred Meyer Contracts") to which Fred Meyer or any of its Subsidiaries is a
party or by which any of them is bound as of the date of this Agreement:
(a) each distribution, supply, inventory purchase, franchise, license,
sales, agency or advertising contract involving annual expenditures or
liabilities in excess of $30,000,000 which is not cancelable (without material
penalty, cost or other liability) within one year;
(b) each promissory note, loan, agreement, indenture, evidence of
indebtedness or other instrument providing for the lending of money, whether as
borrower, lender or guarantor, in excess of $20,000,000;
(c) each contract, lease, agreement, instrument or other arrangement
(excluding jewelry store leases) containing any "radius clause" applicable to
markets in which Kroger has operations;
(d) each joint venture or partnership agreement pursuant to which any
third party is entitled to develop any property and/or facility on behalf of
Fred Meyer or any of its Subsidiaries material to Fred Meyer and its
Subsidiaries taken as a whole; and
(e) any contract that would constitute a "material contract" (as such
term is defined in Item 601(b)(10) of Regulation S-K of the SEC).
Correct and complete copies of the written Fred Meyer Contracts, as amended
to date, that would be required to be filed as exhibits to Fred Meyer's Form
10-K if such Form 10-K were being filed on this date, that have not been filed
prior to the
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date hereof as Exhibits to the Fred Meyer SEC Reports have been delivered or
made available to Kroger.
Each Fred Meyer Contract is valid and binding on Fred Meyer, and any
Subsidiary of Fred Meyer which is a party thereto and, to the knowledge of Fred
Meyer, each other party thereto and is in full force and effect, and Fred Meyer
and its Subsidiaries have performed and complied with all obligations required
to be performed or compiled with by them under each Fred Meyer Contract, except
in each case as would not, individually or in the aggregate, reasonably be
expected to have a Fred Meyer Material Adverse Effect.
Section 3.20 Accounting and Tax Matters. Neither Fred Meyer nor any of its
affiliates has taken or agreed to take any action, nor does Fred Meyer have any
knowledge of any fact or circumstance with respect to Fred Meyer, that would
prevent the business combination to be effected pursuant to the Merger from
being accounted for as a "pooling-of-interests" under GAAP or the rules and
regulations of the SEC or prevent the Merger from qualifying as a
"reorganization" within the meaning of Section 368 of the Code.
Section 3.21 Ownership of Shares of Kroger. Fred Meyer and its Subsidiaries
do not beneficially own (as defined in Rule 13d-3 under the Exchange Act) any
capital stock or other equity securities of Kroger or any Kroger Equity Rights
(as herein defined) other than pursuant to the Kroger Stock Option Agreement.
Section 3.22 Year 2000 Compliance. The software and hardware operated by
Fred Meyer and its Subsidiaries are capable of providing or are being adapted to
provide uninterrupted millennium functionality to record, store, process and
present calendar dates falling on or after January 1, 2000 and date-dependent
data in substantially the same manner and with the same functionality as such
software records, stores, processes and presents such calendar dates and
date-dependent data as of the date hereof, except as would not have a Fred Meyer
Material Adverse Effect. To the knowledge of the executive officers of Fred
Meyer, the ability of Fred Meyer's significant suppliers, customers and others
with which it conducts business to identify and resolve their own Year 2000
issues will not have a Fred Meyer Material Adverse Effect. Prior to the date
hereof, Fred Meyer has discussed with Kroger and its advisors the material steps
that it and its Subsidiaries have taken to become Year 2000 compliant and the
costs Fred Meyer expects to incur in connection therewith.
ARTICLE IV
Except as set forth in the corresponding sections or subsections of the
disclosure letter, dated this date, delivered by Kroger to Fred Meyer (the
"Kroger
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Disclosure Letter"), Kroger and Jobsite Holdings hereby represent and warrant
to Fred Meyer as follows:
Section 4.1 Organization and Qualification; Subsidiaries. (a) Kroger is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Ohio. Each of the Subsidiaries of Kroger (including Jobsite
Holdings) is a corporation or other business entity duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation or organization, and each of Kroger and its Subsidiaries has the
requisite corporate or other organizational power and authority to own, operate
or lease its properties and to carry on its business as it is now being
conducted, and 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, operated or leased or the nature of its activities makes such
qualification necessary, in each case except as would not, individually or in
the aggregate, reasonably be expected to have a Kroger Material Adverse Effect
(as defined).
(b) All of the outstanding shares of capital stock and other equity
securities of the Subsidiaries of Kroger (including Jobsite Holdings) have been
validly issued and are fully paid and nonassessable, and are owned, directly or
indirectly, by Kroger, free and clear of all pledges and security interests.
There are no subscriptions, options, warrants, calls, commitments, agreements,
conversion rights or other rights of any character (contingent or otherwise)
entitling any Person to purchase or otherwise acquire from Kroger or any of its
Subsidiaries at any time, or upon the happening of any stated event, any shares
of capital stock or other equity securities of any of the Subsidiaries of Kroger
(including Jobsite Holdings). The Kroger Disclosure Letter lists the name and
jurisdiction of incorporation or organization of each Subsidiary of Kroger.
(c) Except for interests in Subsidiaries, neither Kroger nor any of
its Subsidiaries owns directly or indirectly any equity interest in any Person
or, other than pursuant to this Agreement, has any obligation or made any
commitment to acquire any such interest or make any such investment.
Section 4.2 Articles of Incorporation and Regulations. Kroger has
furnished, or otherwise made available, to Fred Meyer a complete and correct
copy of its articles of incorporation (the "Kroger Articles of Incorporation")
and its regulation, in each case as amended to the date of this Agreement. The
Kroger Certificate of Incorporation and the regulations of Kroger are in full
force and effect. Kroger is not in violation of any of the provisions of the
Kroger Articles of Incorporation or the regulations of Kroger.
Section 4.3 Capitalization. (a) The authorized capital stock of Kroger
consists of 350,000,000 shares of Kroger Common Stock and 5,000,000 shares of
Preferred Stock, par value $100.00 per share (the "Kroger Preferred Stock"). At
the close of business on
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October 13, 1998 (the "Kroger Capital Stock Disclosure Date"), (i) 280,937,046
shares of Kroger Common Stock, and no shares of Kroger Preferred Stock, were
issued and outstanding and (ii) 24,836,361 shares of Kroger Common Stock, and no
shares of Kroger Preferred Stock, were held by Kroger in its treasury. The
Kroger Disclosure Letter lists the number of shares of Kroger Common Stock and
Kroger Preferred Stock reserved for issuance as of the Kroger Capital Stock
Disclosure Date under each of the Kroger Benefit Plans (as defined) or
otherwise. Since the Kroger Capital Stock Disclosure Date until the date of this
Agreement, no shares of Kroger Common Stock or Kroger Preferred Stock have been
issued or reserved for issuance, except in respect of the exercise, conversion
or exchange of Kroger Equity Rights (as defined) outstanding as of the Kroger
Capital Stock Disclosure Date and in connection with the Kroger Stock Option
Agreement. For purposes of this Agreement, "Kroger Equity Rights" shall mean
subscriptions, options, warrants, calls, commitments, agreements, conversion
rights or other rights of any character (contingent or otherwise) to purchase or
otherwise acquire from Kroger or any of its Subsidiaries at any time, or upon
the happening of any stated event, any shares of the capital stock of Kroger,
except for Kroger Rights. The Kroger Disclosure Letter sets forth the number and
type of Kroger Equity Rights (including the number and class of Kroger's capital
stock for or into which the Kroger Equity Rights are exercisable, convertible or
exchangeable and any Kroger Benefit Plan pursuant to which such Kroger Equity
Rights were granted or issued) outstanding as of the Kroger Capital Stock
Disclosure Date. Other than the Kroger Equity Rights disclosed in the Kroger
Disclosure Letter and the Kroger Equity Rights granted pursuant to the Kroger
Stock Option Agreement, Kroger does not have any outstanding Kroger Equity
Rights as of the date of this Agreement. Except as disclosed in the Kroger SEC
Reports (as defined), no stockholders of Kroger are party to any voting
agreement, voting trust or similar arrangement with respect to Kroger Shares to
which Kroger or any Subsidiary of Kroger is a Party.
(b) There are no outstanding obligations of Kroger or any of its
Subsidiaries to repurchase, redeem or otherwise acquire any shares of Kroger
Common Stock or any Kroger Equity Rights (except in connection with the
exercise, conversion or exchange of outstanding Kroger Equity Rights). All of
the issued and outstanding shares of Kroger Common Stock are validly issued,
fully paid, nonassessable and free of preemptive rights. Except as disclosed in
the Kroger Disclosure Letter, no shares of Kroger Common Stock have been
repurchased by Kroger or any of its Subsidiaries since October 1, 1996.
Section 4.4 Power and Authority; Authorization; Valid & Binding. Each of
Kroger and Jobsite Holdings has the necessary corporate power and authority to
deliver this Agreement and, in the case of Kroger, the Stock Option Agreements,
to perform its obligations hereunder, and, in the case of Kroger, thereunder,
and to consummate the transactions contemplated hereby and, in the case of
Kroger, thereby as applicable,
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subject to the approval and authorization of this Agreement and the Merger by
Kroger's stockholders as required by the OGCL ( including the issuance of shares
of Kroger Common Stock in accordance with the terms of this Agreement as
required by the rules and regulations of the New York Stock Exchange (the
"NYSE")). The execution and delivery by each of Kroger and Jobsite Holdings of
this Agreement and, in the case of Kroger, the Stock Option Agreements, the
performance by it of its obligations hereunder and, in the case of Kroger,
thereunder, and the consummation by it of the transactions contemplated hereby,
and in the case of Kroger, thereby, have been duly authorized by all necessary
corporate action on the part of such corporation, subject, with respect to
Kroger, to the approval of this Agreement and the Merger by Kroger's
stockholders as required by the OGCL (including the issuance of shares of Kroger
Common Stock in accordance with the terms of this Agreement as required by the
rules and regulations of the NYSE). This Agreement, and, in the case of Kroger,
the Stock Option Agreements, have been duly executed and delivered by Kroger and
Jobsite Holdings and, assuming the due authorization, execution and delivery by
Fred Meyer, each agreement constitutes a legal, valid and binding obligation of
Kroger and Jobsite Holdings, as applicable, enforceable against such parties in
accordance with the terms hereof or thereof, subject to bankruptcy, insolvency,
fraudulent transfer, moratorium, reorganization and similar laws of general
applicability relating to or affecting creditors' rights and to general equity
principles (regardless of whether such enforceability is considered in a
proceeding in equity or at law).
Section 4.5 No Conflict; Required Filings and Consents. (a) The execution
and delivery of this Agreement by each of Kroger and Jobsite Holdings and the
Stock Option Agreements by Kroger does not, and the performance by each of
Kroger and Jobsite Holdings of its obligations hereunder and, in the case of
Kroger, thereunder and the consummation by each of Kroger and Jobsite Holdings
of the transactions contemplated hereby and, in the case of Kroger, thereby,
will not, (i) violate or conflict with the Kroger Articles of Incorporation or
the regulations of Kroger or the certificate of incorporation or bylaws of Fred
Meyer Holdings, (ii) subject to obtaining or making the notices, reports,
filings, waivers, consents, approvals or authorizations referred to in paragraph
(b) below, conflict with or violate any law, regulation, court order, judgment
or decree applicable to Kroger or any of its Subsidiaries or by which any of
their respective property is bound or affected or (iii) subject to obtaining the
approval and authorization of the stockholders of Kroger for the Merger and the
issuance of shares of Kroger Common Stock in accordance with the terms hereof,
result in any breach of or constitute a default (or an event which with notice
or lapse of time or both would become a default) under, or give to others any
rights of termination, cancellation, vesting, modification, alteration or
acceleration of any obligation under, result in the creation of a lien, claim or
encumbrance on any of the properties or assets of Kroger or any of its
Subsidiaries pursuant to, result in the loss of any material benefit under
(including an increase in the price paid by, or cost to, Kroger
- 26 -
or any of its Subsidiaries), require the consent of any other party to, or
result in any obligation on the part of Kroger or any of its Subsidiaries to
repurchase (with respect to a bond or a note), any agreement, contract,
instrument, bond, note, indenture, permit, license or franchise to which Kroger
or any of its Subsidiaries is a party or by which Kroger, any of its
Subsidiaries or any of their respective property is bound or affected, except,
in the case of clauses (ii) and (iii) above, as would not, individually or in
the aggregate, reasonably be expected to have a Kroger Material Adverse Effect.
(b) Except for applicable requirements, if any, under the premerger
notification requirements of the HSR Act, the filing of a certificate of merger
with respect to the Merger as required by the DGCL, filings with the SEC under
the Securities Act and the Exchange Act, any filings required pursuant to any
state securities or "blue sky" laws, any filings required pursuant to any state
liquor, gaming or pharmacy laws, any applicable requirements of any
Environmental Laws governing the transfer of any interest in real property or of
business operations (including, without limitation, transfer acts, notifications
and deed restrictions), the transfer of application requirements with respect to
the environmental permits of Kroger or its Subsidiaries, filings or other
actions required pursuant to the rules and regulations of any stock exchange on
which the Kroger Shares are listed, and approval of stockholders required under
the OGCL or under the rules and regulations of the NYSE, neither Kroger nor any
of its Subsidiaries (including Jobsite Holdings) is required to submit any
notice, report or other filing with any Governmental Entity in connection with
the execution, delivery, performance or consummation of this Agreement, the
Stock Option Agreements or the Merger, except for such notices, reports or
filings that, if not made, would not, individually or in the aggregate,
reasonably be expected to have a Kroger Material Adverse Effect. Except as set
forth in the immediately preceding sentence, no waiver, consent, approval or
authorization of any Governmental Entity is required to be obtained by Kroger or
any of its Subsidiaries (including Jobsite Holdings) in connection with its
execution, delivery, performance or consummation of this Agreement, the Stock
Option Agreements or the transactions contemplated hereby and thereby except for
such waivers, consents, approvals or authorizations that, if not obtained or
made, would not, individually or in the aggregate, reasonably be expected to
have a Kroger Material Adverse Effect.
Section 4.6 SEC Reports; Financial Statements. (a) Kroger has filed all
forms, reports and documents (including all Exhibits, Schedules and Annexes
thereto) required to be filed by it with the SEC since January 1, 1995,
including any amendments or supplements (collectively, including any such forms,
reports and documents filed after this date, the "Kroger SEC Reports"), and,
with respect to the Kroger SEC Reports filed by Kroger after the date hereof and
prior to the Closing Date, will deliver or make available to Fred Meyer all of
its Kroger SEC Reports in the form filed with the SEC. The Kroger SEC Reports
(i) were (and any Kroger SEC Reports filed after this date will be) in all
material respects in accordance with the requirements of the Securities Act or
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the Exchange Act, as the case may be, and the rules and regulations promulgated
thereunder, and (ii) as of their respective filing dates, did not (and any
Kroger SEC Reports filed after this date will 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 the light of
the circumstances under which they were made, not misleading.
(b) The financial statements, including all related notes and
schedules, contained in the Kroger SEC Reports (or incorporated therein by
reference) fairly present in all material respects (or, with respect to
financial statements contained in the Kroger SEC Reports filed after this date,
will fairly present in all material respects) the consolidated financial
position of Kroger and its consolidated subsidiaries as at the respective dates
and the consolidated results of operations, retained earnings and cash flows of
Kroger and its consolidated subsidiaries for the respective periods indicated,
in each case in accordance with GAAP applied on a consistent basis throughout
the periods involved (except for changes in accounting principles disclosed in
the notes) and the rules and regulations of the SEC, except with respect to
interim financial statements for normal year-end adjustments were not or are not
expected to be, as the case may be, individually or in the aggregate, material
in amount and did not or will not, as the case may be, include certain notes
which may be required by GAAP but which are not required by Form 10-Q of the
SEC.
Section 4.7 Absence of Certain Changes. Except as disclosed in the Kroger
SEC Reports filed prior to this date, (a) since the end of Kroger's fiscal year
last ended, Kroger and each of its Subsidiaries has conducted its business in
all material respects in the ordinary and usual course of its business
consistent with past practice and there has not been any change in the financial
condition, business, prospects or results of operations of Kroger and its
Subsidiaries or any development or combination of developments that,
individually or in the aggregate, has had or would reasonably be expected to
have a Kroger Material Adverse Effect and (b) since the end of Kroger's fiscal
year last ended until this date, there has not been (i) any declaration, setting
aside or payment of any dividend or other distribution in respect of the capital
stock of Kroger; (ii) any change by Kroger to its accounting policies, practices
or methods; (iii) other than in the ordinary course of business consistent with
past practice, any material tax election made or changed, any audit settled or
any amended Tax Returns filed; (iv) any amendment or change to the terms of any
of its indebtedness material to Kroger and its Subsidiaries taken as a whole;
(v) any incurrence of any material indebtedness outside of the ordinary course
of business; (vi) outside the ordinary course of business, any transfer, lease,
license, sale, mortgage, pledge, encumbrance or other disposition of assets or
properties material to Kroger and its Subsidiaries taken
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as a whole; (vii) any material damage, destruction or other casualty loss with
respect to any asset or property owned, leased or otherwise used by Kroger or
its Subsidiaries material to Kroger and its Subsidiaries taken as a whole,
whether or not covered by insurance; (viii) except in the ordinary course of
business consistent with past practice for employees other than executive
officers or directors, or except as required by applicable law or pursuant to a
contractual obligation in effect as of the date of this Agreement, (A) any
execution, adoption or amendment of any agreement or arrangement relating to
severance or any employment or consulting agreement with any officer, director
or other key employee, or any amendment to any Kroger Benefit Plan or adoption
or execution of any new employee benefit plan for the benefit of any officer,
director or other key employee (including, without limitation, the Kroger
Benefit Plans referred to in Section 4.10) or (B) any grant of any stock options
or other equity related award; or (ix) any agreement or commitment entered into
with respect to any of the foregoing.
Section 4.8 Litigation and Liabilities. (a) Except as disclosed in the
Kroger SEC Reports filed prior to this date, there are no civil, criminal or
administrative actions, suits or claims, proceedings (including condemnation
proceedings) or, to the knowledge of Kroger, hearings or investigations, pending
or, to the knowledge of Kroger, threatened against Kroger or any of its
Subsidiaries or any of their respective properties and assets, except for any of
the foregoing which would not, individually or in the aggregate, reasonably be
expected to have a Kroger Material Adverse Effect.
(b) Neither Kroger nor any of its Subsidiaries has any liabilities
(absolute, accrued, contingent or otherwise) the existence of which would,
individually or in the aggregate, reasonably be expected to have a Kroger
Material Adverse Effect, except (i) liabilities described in the Kroger SEC
Reports filed with the SEC prior to the date hereof or reflected on the Kroger's
consolidated balance sheet (and related notes thereto) as of the end of its most
recently completed fiscal year filed in the Kroger SEC Reports or (ii)
liabilities permitted to be incurred pursuant to Section 5.2.
Section 4.9 No Violation of Law; Permits. The business of Kroger and each
of its Subsidiaries is being conducted in accordance with all applicable
statutes of law, ordinances, regulations, judgments, orders or decrees of any
Governmental Entity, and not in violation of any permits, franchises, licenses,
authorizations or consents granted by any Governmental Entity, and Kroger and
each of its Subsidiaries has obtained all permits, franchises, licenses,
authorizations or consents necessary for the conduct of its business, except, in
each case, as would not, individually or in the aggregate, reasonably be
expected to have a Kroger Material Adverse Effect. Neither Kroger nor any of its
Subsidiaries is subject to any cease and desist or other order, judgment,
injunction or decree issued by or is a party to any written agreement, consent
agreement or memorandum of understanding with, is a party to any commitment
letter or similar undertaking to, is subject to any order or directive by, or
has adopted any board resolutions at the request of, any Governmental Entity
that materially restricts the conduct of its business (whether the type of
business, the location or otherwise) and which,
- 29 -
individually or in the aggregate, would reasonably be expected to have a Kroger
Material Adverse Effect, nor to the knowledge of Kroger, has Kroger been advised
in writing that any Governmental Entity has proposed issuing or requesting any
of the foregoing.
Section 4.10 Employee Matters; ERISA. (a) Set forth in the Kroger
Disclosure Letter is a complete list of each Kroger Benefit Plan and each Kroger
Multiemployer Plan. The term "Kroger Benefit Plan" shall mean (i) each plan,
program, policy, contract or agreement providing for compensation, severance,
termination pay, performance awards, stock or stock-related awards, fringe
benefits or other employee benefits of any kind including, without limitation,
any "employee benefit plan," within the meaning of Section 3(3) of ERISA but
excluding any "multiemployer plan" within the meaning of Sections 3(37) or
4001(a)(3) of ERISA, and (ii) each employment, severance, consulting,
non-compete, confidentiality, or similar agreement or contract, in each case,
with respect to which Kroger or any Subsidiary of Kroger has or may have any
liability (accrued, contingent or otherwise). The term "Kroger Multiemployer
Plan" shall mean any "multiemployer plan" within the meaning of Section
4001(a)(3) of ERISA in respect to which Kroger or any Subsidiary of Kroger has
or may have any liability (accrued, contingent or otherwise).
(b) Kroger has provided or made available, or has caused to be
provided or made available, to Fred Meyer (i) current, accurate and complete
copies of all documents embodying each Kroger Benefit Plan, including all
amendments, written interpretations (which could be regarded as increasing the
liabilities of Kroger and its Subsidiaries taken as a whole under the relevant
Kroger Benefit Plan) and all trust or funding agreements with respect thereto;
(ii) the most recent annual actuarial valuation, if any, prepared for each
Kroger Benefit Plan; (iii) the most recent annual report (Series 5500 and all
schedules thereto), if any, required under ERISA in connection with each Kroger
Benefit Plan or related trust; (iv) the most recent determination letter
received from the Internal Revenue Service, if any, for each Kroger Benefit Plan
and related trust which is intended to satisfy the requirements of Section
401(a) of the Code; (v) if any Kroger Benefit Plan is funded, the most recent
annual and periodic accounting of such Kroger Benefit Plan's assets; (vi) the
most recent summary plan description together with the most recent summary of
material modifications, if any, required under ERISA with respect to each Kroger
Benefit Plan; and (vii) all material communications to any one or more current,
former or retired employee, officer, consultant, independent contractor, agent
or director of Kroger or any Subsidiary of Kroger (each, an "Kroger Employee"
and collectively, the "Kroger Employees") relating to each Kroger Benefit Plan
(which communication could be interpreted as increasing the liabilities of
Kroger and its Subsidiaries taken as a whole under the relevant Kroger Benefit
Plan).
(c) All Kroger Benefit Plans have been administered in all respects in
accordance with the terms thereof and all applicable laws except for violations
which,
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individually or in the aggregate, would not reasonably be expected to have a
Kroger Material Adverse Effect. Each Kroger Benefit Plan which is a Pension Plan
and which is intended to be qualified under Section 401(a) of the Code (each, an
"Kroger Pension Plan"), has received a favorable determination letter from the
Internal Revenue Service, and Kroger is not aware of any circumstances that
would reasonably be expected to result in the revocation or denial of this
qualified status. Except as otherwise set forth in the Kroger Disclosure Letter
or in the Kroger SEC Reports filed prior to this date, there is no pending or,
to Kroger's knowledge, threatened, claim, litigation, proceeding, audit,
examination or investigation relating to any Kroger Benefit Plans or Kroger
Employees that, individually or in the aggregate, would reasonably be expected
to have a Kroger Material Adverse Effect.
(d) No material liability under Title IV of ERISA has been or is
reasonably expected to be incurred by Kroger or any Subsidiaries of Kroger or
any entity which is considered a single employer with Kroger or any Subsidiary
of Kroger under Section 4001(a)(15) of ERISA or Section 414 of the Code (an
"Kroger ERISA Affiliate"). No notice of a "reportable event," within the meaning
of Section 4043 of ERISA for which the 30-day reporting requirement has not been
waived, has been required to be filed for any Kroger Pension Plan within the
past twelve (12) months.
(e) All contributions, premiums and payments (other than
contributions, premiums or payments that are not material, in the aggregate)
required to be made under the terms of any Kroger Benefit Plan have been made.
No Kroger Pension Plan has an "accumulated funding deficiency" (whether or not
waived) within the meaning of Section 412 of the Code or Section 302 of ERISA.
Neither Kroger nor any Subsidiaries of Kroger nor any Kroger ERISA Affiliate has
provided, or is required to provide, security to any Kroger Pension Plan
pursuant to Section 401(a)(29) of the Code.
(f) As of the Closing Date, neither Kroger, any Subsidiary of Kroger
nor any Kroger ERISA Affiliate will have incurred any withdrawal liability as
described in Section 4201 of ERISA for withdrawals that have occurred on or
prior to the Closing Date that has not previously been satisfied. Neither
Kroger, any Subsidiary of Kroger nor any Kroger ERISA Affiliate has knowledge
that any Kroger Multiemployer Plan fails to qualify under Section 401(a) of the
Code, is insolvent or is in reorganization within the meaning of Part 3 of
Subtitle E of Title IV of ERISA nor of any condition that would reasonably be
expected to result in a Kroger Multiemployer Plan becoming insolvent or going
into reorganization.
(g) The execution of, and performance of the transactions contemplated
in, this Agreement will not (either alone or upon the occurrence of any
additional or subsequent events) (i) constitute an event under any Kroger
Benefit Plan, trust or loan that will or may result in any payment (whether of
severance pay or otherwise),
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acceleration, forgiveness of indebtedness, vesting, distribution, increase in
benefits or obligation to fund benefits with respect to any Kroger Employee, or
(ii) result in the triggering or imposition of any restrictions or limitations
on the right of Kroger or any Subsidiary of Kroger to amend or terminate any
Kroger Benefit Plan. No payment or benefit which will or may be made by Kroger,
any Subsidiary of Kroger or any of their respective affiliates with respect to
any Kroger Employee will be characterized as an "excess parachute payment,"
within the meaning of Section 280G(b)(1) of the Code.
Section 4.11 Labor Matters. (a) Except as set forth in the Kroger SEC
Reports filed prior to this date and except for those matters that would not,
individually or in the aggregate, reasonably be expected to have a Kroger
Material Adverse Effect, no work stoppage, slowdown, lockout or labor strike
against Kroger or any Subsidiary of Kroger by Kroger Employees (or any union
that represents them) is pending or, to the knowledge of Kroger, threatened.
(b) Except as set forth in the Kroger SEC Reports filed prior to this
date and as, individually or in the aggregate, would not reasonably be expected
to have a Kroger Material Adverse Effect, as of the date of this Agreement,
neither Kroger nor any Subsidiary of Kroger is involved in or, to the knowledge
of Kroger, threatened with, any labor dispute, grievance, arbitration or union
organizing activity (by it or any of its employees) involving any Kroger
Employees.
Section 4.12 Environmental Matters. Except as set forth in Kroger's SEC
Reports filed prior to this date and except for those matters that would not,
individually or in the aggregate, reasonably be expected to have a Kroger
Material Adverse Effect:
(i) Kroger and each of its Subsidiaries is in compliance with all
applicable Environmental Laws, and neither Kroger nor any of its Subsidiaries
has received any written communication from any Person or Governmental Entity
that alleges that Kroger or any of its Subsidiaries is not in compliance with
applicable Environmental Laws.
(ii) Kroger and each of its Subsidiaries has obtained or has
applied for all Environmental Permits necessary for the construction of its
facilities or the conduct of its operations, and all those Environmental Permits
are in effect or, where applicable, a renewal application has been timely filed
and is pending agency approval, and Kroger and its Subsidiaries are in
compliance with all terms and conditions of such Environmental Permits.
(iii) There is no Environmental Claim pending or, to the
knowledge of Kroger, threatened (i) against Kroger or any of its Subsidiaries,
(ii) against any Person whose liability for any Environmental Claim has been
retained or assumed
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contractually by Kroger or any of its Subsidiaries, or (iii) against any real or
personal property or operations which Kroger or any of its Subsidiaries owns,
leases or operates, in whole or in part.
(iv) There have been no Releases of any Hazardous Material that
would be reasonably likely to form the basis of any Environmental Claim against
Kroger or any of its Subsidiaries, or against any Person whose liability for any
Environmental Claim has been retained or assumed contractually by Kroger or any
of its Subsidiaries.
(v) None of the properties owned, leased or operated by Kroger,
its Subsidiaries or any predecessor thereof are now, or were in the past, listed
on the National Priorities List of Superfund Sites or any analogous state list
(excluding easements that transgress those Superfund sites).
Section 4.13 Board Action; Vote Required. (a) Kroger's Board of Directors
has approved this Agreement, the Stock Option Agreements and the transactions
contemplated hereby and thereby, including the Merger, has determined that the
Merger is in the best interests of Kroger and its stockholders and has resolved
to recommend to its stockholders that they vote in favor of approving and
authorizing this Agreement and the Merger (including the issuance of shares of
Kroger Common Stock pursuant to the terms hereof). Neither Section 1704.02 of
the OGCL nor any other state takeover or similar statute or regulation applies
to the Merger, this Agreement, the Kroger Stock Option Agreement (including the
purchase of shares of Kroger Common Stock thereunder) or any of the transactions
contemplated hereby or thereby. The Board of Directors of Kroger has duly
adopted (and not withdrawn) a resolution rescinding any authorization previously
granted permitting Kroger to repurchase shares of Kroger Common Stock.
(b) The affirmative vote of the holders of a majority of the shares of
Kroger Common Stock present in person or by proxy at a duly convened and held
meeting of the stockholders of Kroger is necessary to approve the issuance by
Kroger of the shares of Kroger Common Stock pursuant to the terms hereof. The
affirmative vote of holders of Kroger Common Stock representing a majority of
the shares of Kroger Common Stock outstanding and entitled to vote thereon is
necessary to approve and authorize the Merger. Such votes are the only votes of
the holders of any class or series of Kroger's capital stock required in
connection with this Agreement and the transactions contemplated hereby.
Section 4.14 Opinion of Financial Advisor. Kroger or its Board of Directors
has received the opinion of Goldman, Sachs & Co. dated as of this date, to the
effect that, as of this date, the Exchange Ratio is fair from a financial point
of view to Kroger.
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Section 4.15 Brokers. Set forth in the Kroger Disclosure Letter is a list
of each broker, finder or investment banker and other Person entitled to any
brokerage, finder's, investment banking or other similar fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Kroger or any of its Subsidiaries and the
expected amounts of such fees and commissions. Kroger has previously provided to
Fred Meyer copies of any agreements giving rise to any such fee or commission.
Section 4.16 Tax Matters. (a) All Tax Returns required to be filed by
Kroger or its Subsidiaries on or prior to the Effective Time have been or will
be prepared in good faith and timely filed with the appropriate Governmental
Entity on or prior to the Effective Time or by the due date thereof including
extensions and all such Tax Returns are (or as to Tax Returns not filed on the
date hereof, will be) complete and accurate in all material respects, except
where the failure to so file or to be complete and accurate would not,
individually or in the aggregate, reasonably be expected to be material and
except with respect to matters contested in good faith as set forth in the
Kroger Disclosure Letter.
(b) All material Taxes that are required to be paid either (i) have
been fully paid (except with respect to matters contested in good faith as set
forth in the Kroger Disclosure Letter) or (ii) are adequately reflected as a
liability on Kroger's or its Subsidiaries' books and records. All Taxes required
to be collected or withheld from third parties have been collected or withheld
in all material respects.
(c) With respect to any period for which Tax Returns have not yet been
filed, or for which Taxes are not yet due or owing, Kroger and its Subsidiaries
have made due and sufficient accruals for such Taxes in their respective books
and records and financial statements, except where the failure to so accrue
would not, individually or in the aggregate, reasonably be expected to be
material.
(d) Kroger and each of its Subsidiaries have not waived any statute of
limitations, or agreed to any extension of time, with respect to federal income
or material state Taxes or a material Tax assessment or deficiency.
(e) As of this date, (i) there are not pending or, to the knowledge of
Kroger, threatened, any audits, examinations, investigations or other
proceedings in respect of Taxes or Tax matters and (ii) there are not any
unresolved questions or claims concerning Kroger's or any of its Subsidiaries'
Tax liability that (x) were raised by any Taxing authority in a communication to
Kroger or any Subsidiary and (y) would be, individually or in the aggregate,
material to Kroger and its Subsidiaries taken as a whole, after taking into
account any reserves for Taxes set forth on the most recent balance sheet
contained in the Kroger SEC Report filed prior to this date.
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(f) Kroger has made available to Fred Meyer correct and complete
copies of the United States federal income and all material state income or
franchise Tax Returns filed by Kroger and its Subsidiaries for each of its
fiscal years ended on or about December 31, 1996 and 1997.
(g) Kroger has not distributed the stock of a "controlled corporation"
(within the meaning of that term as used in section 355(a) of the Code) in a
transaction subject to section 355 of the Code within the past two years.
Section 4.17 Intellectual Property. Neither Kroger nor any of its
Subsidiaries currently utilizes, or to the knowledge of the general counsel and
the members of the legal department of Kroger involved in intellectual property,
has in the past, utilized any existing or pending patent, trademark, trade name,
service mark, copyright, software, trade secret or know-how, except for those
which are owned, possessed or lawfully used by Kroger or its Subsidiaries in
their business operations, and neither Kroger nor any of its Subsidiaries
infringes upon or unlawfully uses any patent, trademark, trade name, service
mark, copyright or trade secret owned or validly claimed by another Person
except, in each case, as would not, individually or in the aggregate, reasonably
be expected to have a Kroger Material Adverse Effect. Kroger and its
Subsidiaries own or have a valid license to use or have the right validly to use
all existing and pending patents, trademarks, tradenames, service marks,
copyrights and software necessary to carry on their respective businesses
substantially as currently conducted except the failure of which to own, or
validly license, or have the right to validly use individually or in the
aggregate, would not reasonably be expected to have a Kroger Material Adverse
Effect.
Section 4.18 Insurance. Except to the extent adequately accrued on the most
recent balance sheet contained in the Kroger SEC Reports filed as of this date,
neither Kroger nor its Subsidiaries has any obligation (contingent or otherwise)
to pay in connection with any insurance policies any retroactive premiums or
"retro premiums" that, individually in the aggregate, would reasonably be
expected to have, a Kroger Material Adverse Effect.
Section 4.19 Contracts and Commitments. Set forth in the Kroger Disclosure
Letter is a complete and accurate list of all of the following contracts
(written or oral), plans, undertakings, commitments or agreements ("Kroger
Contracts") to which Kroger or any of its Subsidiaries is a party or by which
any of them is bound as of the date of this Agreement.
(a) each distribution, supply, inventory purchase, franchise, license,
sales, agency or advertising contract involving annual expenditures or
liabilities in excess of $30,000,000 which is not cancelable (without material
penalty, cost or other liability) within one year;
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(b) each promissory note, loan, agreement, indenture, evidence of
indebtedness or other instrument providing for the lending of money, whether as
borrower, lender or guarantor, in excess of $20,000,000;
(c) each contract, lease, agreement, instrument or other arrangement
containing any "radius clause" applicable to markets in which Fred Meyer has
operations;
(d) each joint venture or partnership agreement pursuant to which any
third party is entitled to develop any property and/or facility on behalf of
Kroger or any of its Subsidiaries material to Kroger and its Subsidiaries taken
as a whole;
(e) any contract that would constitute a "material contract" (as such
term is defined in Item 601(b)(10) of Regulation S-K of the SEC); and
(f) except as would not reasonably be expected to have, individually
or in the aggregate, a Kroger Material Adverse Effect, each contract, lease,
agreement, plan (including Kroger Benefit Plans), instrument, note, indenture or
other arrangement to which Kroger or any of its Subsidiaries is a party or
otherwise bound under the terms of which any of the rights or obligations of a
party thereto (or any other Person who has rights or obligations thereunder) may
be terminated, accelerated, vested, modified or altered as a result of the
execution and delivery of this Agreement and the Stock Option Agreement, the
performance by the parties of their obligations hereunder or thereunder or
consummation of the transactions contemplated hereby and thereby;
Correct and complete copies of the written Kroger Contracts, as
amended to date, that would be required to be filed as exhibits to Kroger's Form
10-K if such Form 10-K were being filed on the date hereof, that have not been
filed prior to this date as Exhibits to the Kroger SEC Reports have been
delivered or made available to Fred Meyer.
Each Kroger Contract is valid and binding on Kroger and any Subsidiary
of Kroger which is a party thereto and, to the knowledge of Kroger, each other
party thereto and is in full force and effect, and Kroger and its Subsidiaries
have performed and complied with all obligations required to be performed or
compiled with by them under each Kroger Contract, except in each case as would
not, individually or in the aggregate, reasonably be expected to have a Kroger
Material Adverse Effect.
Section 4.20 Accounting and Tax Matters. Neither Kroger nor any of its
affiliates has taken or agreed to take any action, nor does Kroger have any
knowledge of any fact or circumstance with respect to Kroger or Merger Sub, that
would prevent the business combination to be effected pursuant to the Merger
from being accounted for as a "pooling-of-interests" under GAAP or the rules and
regulations of the SEC or prevent the
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Merger from qualifying as a "reorganization" within the meaning of Section 368
of the Code.
Section 4.21 Ownership of Shares of Fred Meyer. Kroger and its Subsidiaries
do not beneficially own (as defined in Rule 13d-3 under the Exchange Act) any
capital stock or other equity securities of Fred Meyer or any Fred Meyer Equity
Rights other than the Fred Meyer Stock Option Agreement.
Section 4.22 Rights Agreement. No "Distribution Date" or "Stock Acquisition
Date" (as such terms are defined in the Rights Agreement, dated as of April 4,
1997, between Kroger and The Bank of New York, as Rights Agent (the "Kroger
Rights Agreement")) has occurred as of this date. The execution and delivery of
this Agreement and the Kroger Stock Option Agreement and the consummation of the
transactions contemplated hereby and thereby will not result in the ability of
any Person to exercise any rights ("Kroger Rights") issued under the Kroger
Rights Agreement or cause the Kroger Rights to separate from the shares of
Kroger Common Stock to which they are attached or to be triggered or become
exercisable.
Section 4.23 Year 2000 Compliance. The software and hardware operated by
Kroger and its Subsidiaries are capable of providing or are being adapted to
provide uninterrupted millennium functionality to record, store, process and
present calendar dates falling on or after January 1, 2000 and date-dependent
data in substantially the same manner and with the same functionality as such
software records, stores, processes and presents such calendar dates and
date-dependent data as of the date hereof, except as would not have a Kroger
Material Adverse Effect. To the knowledge of the executive officers of Kroger,
the ability of Kroger's significant suppliers, customers and others with which
it conducts business to identify and resolve their own Year 2000 issues will not
have a Kroger Material Adverse Effect. Prior to the date hereof, Kroger has
discussed with Fred Meyer and its advisors the material steps that it and its
Subsidiaries have taken to become Year 2000 compliant and the costs Kroger
expects to incur in connection therewith.
ARTICLE V
Section 5.1 Interim Operations of Fred Meyer. Fred Meyer covenants and
agrees as to itself and its Subsidiaries that, after this date and prior to the
Effective Time (unless Kroger shall otherwise approve in writing, or unless as
otherwise expressly contemplated by this Agreement or disclosed in the Fred
Meyer Disclosure Letter):
(i) the business of Fred Meyer and its Subsidiaries shall be
conducted in all material respects in the ordinary and usual course and, to the
extent consistent therewith, each of Fred Meyer and its Subsidiaries shall use
its reasonable best
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efforts to preserve its business organization intact in all material respects,
keep available the services of its officers and employees as a group (subject to
changes in the ordinary course) and maintain its existing relations and goodwill
in all material respects with customers, suppliers, regulators, distributors,
creditors, lessors, and others having business dealings with it;
(ii) Fred Meyer shall not issue, deliver, grant or sell any
additional shares of Fred Meyer Common Stock or any Fred Meyer Equity Rights
(other than (x) the issuance, delivery, grant or sale of shares of Fred Meyer
Common Stock or Fred Meyer Equity Rights pursuant to the exercise or conversion
of Fred Meyer Equity Rights outstanding as of this date or pursuant to the
exercise of New Fred Meyer Options (as defined), and (y) if the Merger is not
consummated by April 30, 1999, the issuance or delivery of Fred Meyer options
(the "New Fred Meyer Options") to Fred Meyer Employees at the vice president
level or below, exercisable, in the aggregate, for no more than 1,500,000 shares
of Fred Meyer Common Stock (it being understood that (A) these options shall
have a vesting schedule substantially similar to the vesting schedule that was
applicable to the options granted by Fred Meyer to this same group of employees
in 1998 and (B) the vesting of these options shall not accelerate by reason of
the consummation of the Merger including upon termination of employment
following the consummation of the Merger);
(iii) Fred Meyer shall not (A) amend the Fred Meyer Certificate
of Incorporation or Bylaws, or adopt any stockholders rights plan or enter into
any agreement with any of its stockholders in their capacity as such; (B) split,
combine, subdivide or reclassify its outstanding shares of capital stock; (C)
declare, set aside or pay any dividend or distribution payable in cash, stock or
property in respect of any of its capital stock; or (D) repurchase, redeem or
otherwise acquire or permit any of its Subsidiaries to purchase, redeem or
otherwise acquire, any shares of its capital stock or any Fred Meyer Equity
Rights (it being understood that this provision shall not prohibit the exercise
(cashless or otherwise) of options);
(iv) neither Fred Meyer nor any of its Subsidiaries shall take
any action that to the knowledge of Fred Meyer would prevent the business
combination to be effected pursuant to the Merger from qualifying for "pooling
of interests" accounting treatment under GAAP and the rules and regulations of
the SEC, or would prevent the Merger from qualifying as a "reorganization"
within the meaning of Section 368 of the Code or take any action that it knows
would cause any of its representations and warranties in this Agreement to
become inaccurate in any material respect;
(v) except as otherwise expressly permitted by this Agreement,
and except as required by applicable law or pursuant to contractual obligations
in effect on this date; Fred Meyer shall not, and shall not permit its
Subsidiaries to, (A) enter into,
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adopt or amend (except for renewals on substantially identical terms) any
agreement or arrangement relating to severance, (B) enter into, adopt or amend
(except for renewals on substantially identical terms) any employee benefit plan
or employment or consulting agreement (including, without limitation, the Fred
Meyer Benefit Plans referred to in Section 3.10); or (C) grant any stock options
or other equity related awards;
(vi) except for (A) borrowings under lines of credit as existing
as of the date hereof, (B) any amendments, renewals, replacements or extensions
of such lines of credit that will not increase the aggregate amount of borrowing
permitted thereunder, so long as the amendment, renewal, replacement or
extension could not reasonably be expected to interfere with or delay (in any
material respect) the consummation of the Merger (including, without limitation,
by delaying in any material respect the receipt of any necessary Consent,
requiring receipt of any additional Consent not theretofore required in
connection with the Merger or creating any potential material impediment under
any antitrust, competition or trade regulation law), (C) the issuance and
roll-over of commercial paper and (D) the issuance of medium term notes with a
maturity date not later than 364 days from the date of issuance to renew,
replace or refinance existing indebtedness, in each case in the ordinary course
of business, neither Fred Meyer nor any of its Subsidiaries shall issue, incur
or amend the terms of any indebtedness for borrowed money or guarantee any such
indebtedness (other than indebtedness of Fred Meyer or any wholly-owned
Subsidiary thereof); provided, however, that from and after January 2, 1999, the
aggregate outstanding indebtedness for borrowed money of Fred Meyer and its
Subsidiaries shall not exceed the sum of (i) $100,000,000 and (ii) the aggregate
outstanding indebtedness for borrowed money of Fred Meyer and its Subsidiaries
as of the date hereof;
(vii) in each of fiscal 1998 and fiscal 1999, neither Fred Meyer
nor any of its Subsidiaries shall make any capital expenditures in excess of the
aggregate amount reflected in the capital expenditure budget for that fiscal
year, a copy of which budget is attached to the Fred Meyer Disclosure Letter;
(viii) other than in the ordinary course of business consistent
with past practice, neither Fred Meyer nor any of its Subsidiaries shall
transfer, lease, license, sell, mortgage, pledge, encumber or otherwise dispose
of any of its or its Subsidiaries' property or assets (including capital stock
of any of its Subsidiaries) material to Fred Meyer and its Subsidiaries taken as
a whole, except pursuant to contracts existing as of this date (the terms of
which have been previously disclosed to Kroger);
(ix) none of Fred Meyer's Subsidiaries shall issue, deliver, sell
or encumber shares of any class of its capital stock or any securities
convertible into, or any rights, warrants or options to acquire, any such
shares, except any such shares issued
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pursuant to options and other awards outstanding on this date under Fred Meyer
Benefit Plans;
(x) neither Fred Meyer nor any of its Subsidiaries shall acquire
any business, including any stores or other facilities, whether by merger,
consolidation, purchase of property or assets or otherwise, except to the extent
provided for in the capital expenditure budget attached to the Fred Meyer
Disclosure Letter in respect of any twelve month period after this date;
(xi) Fred Meyer shall not change its accounting policies,
practices or methods except as required by GAAP or by the rules and regulations
of the SEC;
(xii) other than pursuant to this Agreement, Fred Meyer shall
not, and shall not permit any of its Subsidiaries to, take any action to cause
Fred Meyer Shares to cease to be listed on the NYSE;
(xiii) Fred Meyer shall not, and shall not permit any of its
Subsidiaries to, enter into any Fred Meyer Contract described in clauses (a),
(c) and (d) of Section 3.19, or amend any distribution, supply, inventory,
purchase, franchise, license, sales agency or advertising contract such that
annual expenditures or annual commitments thereunder increase by more than
$30,000,000 and Fred Meyer's inability to cancel or terminate such contract is
extended by more than six months, but in no event to a date later than June 30,
1999;
(xiv) Fred Meyer shall not change or, other than in the ordinary
course of business, make any material Tax election, settle any audit or Tax
controversy in an amount in excess of $2,000,000 or file any amended Tax Returns
that provide for additional tax liabilities in an amount in excess of
$2,000,000, without the consent of Kroger, which consent shall not be
unreasonably withheld (and, with respect to the matters referenced on Schedule
3.16(b)(i), (x) Kroger shall have the right to participate in any proceedings,
relating thereto, (y) Fred Meyer shall promptly inform Kroger of all material
developments and proceedings and provide Kroger with copies of all relevant
documents related to such developments or proceedings, and (z) Fred Meyer shall
provide Kroger the opportunity to review and comment on any submission to a
Taxing authority by providing a draft copy of such submission to Kroger as soon
as practicable so as to allow Kroger a reasonable opportunity to review and
comment under the circumstances); or
(xv) Fred Meyer shall not enter into, or permit any of its
Subsidiaries to enter into, any commitments or agreements to do any of the
foregoing.
Section 5.2 Interim Operations of Kroger. Kroger covenants and agrees as to
itself and its Subsidiaries that, after this date and prior to the Effective
Time (unless Fred
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Meyer shall otherwise approve in writing and except as otherwise expressly
contemplated by this Agreement or disclosed in the Kroger Disclosure Letter):
(i) the business of Kroger and its Subsidiaries shall be
conducted in all material respects in the ordinary and usual course and to the
extent consistent therewith, each of Kroger and its Subsidiaries shall use its
reasonable best efforts to preserve its business organization intact in all
material respects, keep available the services of its executive officers and
employees as a group (subject to changes in the ordinary course) and maintain
its existing relationships and goodwill in all material respects with customers,
suppliers, regulators, distributors, creditors, lessors and others having
business dealings with it; provided, however, that nothing contained in this
clause (i) shall prohibit Kroger from acquiring, or exploring the acquisition
of, any retail business, including any stores or facilities, whether by merger,
consolidation, purchase of property or assets or otherwise, if the acquisition
could not reasonably be expected to interfere with or delay (in any material
respect) the consummation of the Merger (including, without limitation, by
delaying in any material respect the receipt of any necessary Consent, requiring
receipt of any additional material Consent not theretofore required in
connection with the Merger or creating any potential material impediment under
any antitrust, competition or trade regulation law);
(ii) Kroger shall not issue, deliver, grant or sell any
additional shares of Kroger Common Stock or any Kroger Equity Rights, (other
than the issuance, delivery, grant or sale of shares of Kroger Common Stock or
Kroger Equity Rights (w) pursuant to a stock split or stock dividend, (x) in the
ordinary course of business consistent with past practice pursuant to Kroger
Benefit Plans, (y) pursuant to the exercise or conversion of Kroger Equity
Rights outstanding as of the date hereof or issued by Kroger after the date
hereof in accordance with subclauses (x) and (z) of this clause (ii) and (z)
representing, in the aggregate (but not including shares of Kroger Common Stock
or Kroger Equity Rights issued, delivered, granted or sold pursuant to
subclauses (w), (x) and (y) hereof), not more than such number of shares of
Kroger Common Stock as would represent 15% of the Kroger Common Stock
outstanding on the date hereof;
(iii) Kroger shall not (A) amend the Kroger Articles of
Incorporation or its regulations or amend the Kroger Rights Agreement or redeem
the Kroger Rights; (B) reclassify its outstanding shares of capital stock; (C)
declare, set aside or pay any dividend or distribution payable in cash, stock or
property in respect of any of its capital stock; or (D) repurchase, redeem or
otherwise acquire or permit any of its Subsidiaries to purchase, redeem or
otherwise acquire, any shares of its capital stock or any Kroger Equity Rights
(it being understood that this provision shall not prohibit the exercise
(cashless or otherwise) of options);
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(iv) neither Kroger nor any of its Subsidiaries shall take any
action that to the knowledge of Kroger would prevent the business combination to
be effected pursuant to Merger from qualifying for "pooling of interests"
accounting treatment under GAAP and the rules and regulations of the SEC, or
would prevent the Merger from qualifying as a "reorganization" within the
meaning of Section 368 of the Code or take any action that it knows would cause
any of its representations and warranties herein to become inaccurate in any
material respect;
(v) Kroger shall not change its accounting policies, practices or
methods except as required by GAAP or by the rules and regulations of the SEC;
(vi) other than in the ordinary course of business consistent
with past practice, neither Kroger nor any of its Subsidiaries shall transfer,
lease, license, sell or otherwise dispose of any of its or its Subsidiaries'
property or assets (including capital stock of any of its Subsidiaries) material
to Kroger and its Subsidiaries taken as a whole, except pursuant to contracts
existing as of the date hereof (the terms of which have been previously
disclosed to Fred Meyer) and except for any sale or disposition of assets in a
single transaction or series of integrally related sales or dispositions the
proceeds of which have a fair market value of not more than $1,000,000,000;
(vii) Kroger shall not, and shall not permit any of its
Subsidiaries to, take any action to cause the shares of its common stock to
cease to be listed on the NYSE; or
(viii) Kroger shall not enter into, or permit any of its
Subsidiaries to enter into, any commitments or agreements to do any of the
foregoing.
Section 5.3 No Solicitation by Fred Meyer. (a) Fred Meyer shall immediately
cease and terminate any existing solicitation, initiation, encouragement,
activity, discussion or negotiation with any Persons conducted heretofore by
Fred Meyer, its Subsidiaries or any of their respective Representatives (as
defined) with respect to any proposed, potential or contemplated Fred Meyer
Acquisition Transaction (as defined).
(b) From and after this date, without the prior written consent of
Kroger, Fred Meyer will not, will not authorize or permit any of its
Subsidiaries to, and shall use its reasonable best efforts to cause any of its
or their respective officers, directors, employees, financial advisors, agents
or representatives (each a "Representative") not to, directly or indirectly,
solicit, initiate or encourage (including by way of furnishing information) or
take any other action to facilitate any inquiries or the making of any proposal
which constitutes or may reasonably be expected to lead to a Fred Meyer
Acquisition Proposal (as defined) from any Person, or engage in any discussion
or negotiations relating thereto or accept any Fred Meyer Acquisition Proposal.
Nothing
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contained in this Agreement shall prohibit Fred Meyer from complying
with Rule 14e-2 promulgated under the Exchange Act with regard to a tender or
exchange offer or from making any other disclosures to its stockholders to the
extent required by law.
(c) Fred Meyer shall notify Kroger orally and in writing of any such
inquiries, offers or proposals (including, without limitation, the terms and
conditions of any such offers or proposals, any amendments or revisions, and the
identity of the Person making it), as promptly as practicable following the
receipt, and shall keep Kroger reasonably informed of the status and material
terms of any such inquiry, offer or proposal. For purposes of this Agreement,
"Fred Meyer Acquisition Proposal" shall mean, with respect to Fred Meyer, any
inquiry, proposal or offer from any Person (other than Kroger or any of its
Subsidiaries) relating to any (i) direct or indirect acquisition or purchase of
a business of Fred Meyer or any of its Subsidiaries, that constitutes 15% or
more of the consolidated net revenues, net income or assets of Fred Meyer and
its Subsidiaries, (ii) direct or indirect acquisition or purchase of 15% or more
of any class of equity securities of Fred Meyer or any of its Subsidiaries whose
business constitutes 15% or more of the consolidated net revenues, net income or
assets of Fred Meyer and its Subsidiaries, (iii) tender offer or exchange offer
that if consummated would result in any person beneficially owning 15% or more
of the capital stock of Fred Meyer, or (iv) merger, consolidation, business
combination, recapitalization, liquidation, dissolution or similar transaction
involving Fred Meyer or any of its Subsidiaries whose business constitutes 15%
or more of the consolidated net revenues, net income or assets of Fred Meyer and
its Subsidiaries. Each of the transactions referred to in clauses (i) - (iv) of
the definition of Fred Meyer Acquisition Proposal, other than any such
transaction to which Kroger or any of its Subsidiaries is a party, is referred
to as an "Fred Meyer Acquisition Transaction".
(d) Neither the Board of Directors of Fred Meyer nor any committee
thereof shall (i) withdraw or modify, or propose publicly to withdraw or modify,
in a manner adverse to Kroger, the approval or recommendation by such Board of
Directors of this Agreement or the Merger (subject to the Board of Directors of
Fred Meyer concluding in good faith, after considering applicable provisions of
state law, and after consultation with outside counsel, that withdrawal or
modification of its approval or recommendation of the Agreement and the Merger
is required for it to act in a manner consistent with its fiduciary duties under
applicable law), (ii) approve or recommend, or propose publicly to approve or
recommend, any Fred Meyer Acquisition Proposal or Fred Meyer Acquisition
Transaction or (iii) cause Fred Meyer to enter into any letter of intent,
agreement in principle, acquisition agreement or other similar agreement related
to any Fred Meyer Acquisition Proposal or Fred Meyer Acquisition Transaction.
Section 5.4 No Solicitation by Kroger. (a) Kroger shall immediately cease
and terminate any existing solicitation, initiation, encouragement, activity,
discussion or
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negotiation with any Persons conducted heretofore by Kroger, its
Subsidiaries or any of their respective Representatives with respect to any
proposed, potential or contemplated Kroger Acquisition Transaction (as defined).
(b) From and after this date, without the prior written consent of
Fred Meyer, Kroger will not, will not authorize or permit any of its
Subsidiaries to, and will not authorize any of its or their respective
Representatives to, and shall use reasonable best efforts to cause its
Representatives not to, directly or indirectly, solicit, initiate or encourage
(including by way of furnishing information) or take any other action to
facilitate any inquiries or the making of any proposal which constitutes or may
reasonably be expected to lead to a Kroger Acquisition Proposal (as defined)
from any Person, or engage in any discussion or negotiations relating thereto or
accept any Kroger Acquisition Proposal. Nothing contained in this Agreement
shall prohibit Kroger from complying with Section 1701.831 of the OGCL or Rule
14e-2 promulgated under the Exchange Act with regard to a tender or exchange
offer or from making any other disclosure to its stockholders to the extent
required by law.
(c) Kroger shall notify Fred Meyer orally and in writing of any such
inquiries, offers or proposals (including, without limitation, the terms and
conditions of any such offers or proposals, any amendments or revisions, and the
identity of the Person making it), as promptly as practicable following the
receipt, and shall keep Fred Meyer reasonably informed of the status and
material terms of any such inquiry, offer or proposal. For purposes of this
Agreement, "Kroger Acquisition Proposal" shall mean, with respect to Kroger, any
inquiry, proposal or offer from any Person (other than Fred Meyer or any of its
Subsidiaries) relating to any (i) direct or indirect acquisition or purchase of
a business of Kroger or any of its Subsidiaries, that constitutes 15% or more of
the consolidated net revenues, net income or assets of Kroger and its
Subsidiaries, (ii) direct or indirect acquisition or purchase of 15% or more of
any class of equity securities of Kroger or any of its Subsidiaries whose
business constitutes 15% or more of the consolidated net revenues, net income or
assets of Kroger and its Subsidiaries, (iii) tender offer or exchange offer that
if consummated would result in any person beneficially owning 15% or more of the
capital stock of Kroger, or (iv) merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction involving
Kroger or any of its Subsidiaries whose business constitutes 15% or more of the
consolidated net revenues, net income or assets of Kroger and its Subsidiaries.
Each of the transactions referred to in clauses (i)-(iv) of the definition of
Kroger Acquisition Proposal, other than any such transaction to which Fred Meyer
or any of its Subsidiaries is a party, is referred to as an "Kroger Acquisition
Transaction;" provided, however, that a Kroger Acquisition Transaction does not
include a transaction permitted pursuant to the proviso to Section 5.2 (i) as
long as such transaction is not reasonably expected to interfere with or delay
(in any material respect) the consummation of the Merger.
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(d) Neither the Board of Directors of Kroger nor any committee shall
(i) withdraw or modify, or propose publicly to withdraw or modify, in a manner
adverse to Fred Meyer, the approval or recommendation by such Board of Directors
of this Agreement or the Merger (subject to the Board of Directors of Kroger
concluding in good faith, after considering applicable provisions of state law,
and after consultation with outside counsel, that withdrawal or modification of
its approval or recommendation of the Agreement and the Merger is required for
it to act in a manner consistent with its fiduciary duties under applicable
law), (ii) approve or recommend, or propose publicly to approve or recommend,
any Kroger Acquisition Proposal or Kroger Acquisition Transaction or (iii) cause
Kroger to enter into any letter of intent, agreement in principle, acquisition
agreement or other similar agreement related to any Kroger Acquisition Proposal
or Kroger Acquisition Transaction.
Section 5.5 Charitable Contribution. Prior to the Effective Time, with the
consent of Kroger, Fred Meyer may make a charitable donation of up to a total of
$20,000,000 to The Fred Meyer Foundation and the Ralphs/Food 4 Less Foundation
(the "Charitable Contribution"). To the extent the Charitable Contribution is
not made in full prior to the Effective Time, the balance of the Charitable
Contribution will be made by Kroger within seven years of the Effective Time.
Other than the Charitable Contribution, prior to the Effective Time, neither
Fred Meyer nor its Subsidiaries shall make any charitable contribution other
than in the ordinary course of business consistent with past practice.
ARTICLE VI
Section 6.1 Meetings of Stockholders. Each of the Parties will take all
action necessary in accordance with applicable law and its certificate of
incorporation and bylaws, or articles of incorporation and regulations, as the
case may be, to convene a meeting of its stockholders as promptly as practicable
to consider and vote upon the approval and authorization of this Agreement and
the Merger, and, in the case of Kroger, the issuance of shares of Kroger Common
Stock in accordance with the terms of this Agreement. The Board of Directors of
each Party shall recommend this approval and authorization, subject to Section
5.3(d)(i) or Section 5.4(d)(i), as the case may be. Each of the Parties shall
take all lawful action to solicit such approval and authorization including,
without limitation, timely mailing the Proxy Statement/Prospectus (as defined).
The Parties shall coordinate and cooperate with respect to the timing of such
meetings and shall use their reasonable best efforts to hold such meetings on
the same day.
Section 6.2 Filings Best Efforts
(a) Subject to the terms and conditions in this Agreement Fred Meyer
and Kroger shall:
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(i) within 20 business days from this date, make their respective
filings under the HSR Act with respect to the Merger and thereafter shall
promptly make any other required submissions under the HSR Act;
(ii) use their reasonable best efforts to cooperate with one
another in (i) determining which filings are required to be made prior to the
Effective Time with, and which consents, approvals, permits or authorizations
are required to be obtained prior to the Effective Time from Governmental
Entities of the United States and the several states in connection with the
execution and delivery of this Agreement and the consummation of the Merger and
the transactions contemplated hereby; (ii) timely making all such filings and
timely seeking all such consents, approvals, permits or authorizations; and
(iii) as promptly as practicable responding to any request for information from
such Governmental Entities;
(iii) subject to any restrictions under the antitrust laws, to
the extent practicable, promptly notify each other of any communication to that
party from any Governmental Entity with respect to this Agreement and the
transactions contemplated hereby, and permit the other party to review in
advance any proposed written communication to any Governmental Entity;
(iv) not agree to participate in any meeting with any
Governmental Entity in respect of any filings, investigation or other inquiry
with respect to this Agreement and the transactions contemplated hereby, unless
it consults with the other party in advance and, to the extent permitted by such
Governmental Entity, gives the other party the opportunity to attend and
participate thereat, in each case to the extent practicable;
(v) subject to any restrictions under the antitrust laws, furnish
the other party with copies of all correspondence, filings, and communications
(and memoranda setting forth the substance thereof) between them and their
affiliates and their respective representatives on the one hand, and any
Governmental Entity or members or its staffs on the other hand, with respect to
this Agreement and the transactions contemplated hereby (excluding documents and
communications which are subject to preexisting confidentiality agreements and
to attorney client privilege); and
(vi) furnish the other party with such necessary information and
reasonable assistance as such other Party and its affiliates may reasonably
request in connection with their preparation of necessary filings,
registrations, or submissions of information to any Governmental Entities in
connection with this Agreement and the transactions contemplated hereby,
including without limitation, any filings necessary or appropriate under the
provisions of the HSR Act.
(b) Without limiting Section 6.2(a), Kroger and Fred Meyer shall:
- 46 -
(i) each use its reasonable best efforts to avoid the entry of,
or to have vacated or terminated, any decree, order, or judgment that would
restrain, prevent or delay the Closing, on or before September 30, 1999,
including without limitation defending through litigation on the merits any
claim asserted in any court by any party; and
(ii) each take any and all steps necessary to avoid or eliminate
each and every impediment under any antitrust, competition or trade regulation
law that may be asserted by any Governmental Entity with respect to the Merger
so as to enable the Closing to occur as soon as reasonably possible (and in any
event no later than September 30, 1999), including, without limitation,
proposing, negotiating, committing to and effecting, by consent decree, hold
separate order, or otherwise, the sale, divestiture or disposition of such
assets or businesses of Kroger or Fred Meyer (or any of their respective
subsidiaries) or otherwise take or commit to take any actions that limits its
freedom of action with respect to, or its ability to retain, any of the
businesses, product lines or assets of Kroger, Fred Meyer or their respective
Subsidiaries, as may be required in order to avoid the entry of, or to effect
the dissolution of, any injunction, temporary restraining order, or other order
in any suit or proceeding, which would otherwise have the effect of preventing
or delaying the Closing. At the request of Kroger, Fred Meyer shall agree to
divest, hold separate, or otherwise take or commit to take any action that
limits its freedom of action with respect to, or its ability to retain, any of
the businesses, product lines or assets of Fred Meyer or any of its
Subsidiaries, provided that any such action is conditioned upon the consummation
of the Merger. Fred Meyer agrees and acknowledges that, in connection with any
filing or submission required, action to be taken or commitment to be made by
Kroger, Fred Meyer or any of its respective Subsidiaries to consummate the
Merger or other transactions contemplated in this Agreement, neither Fred Meyer
nor any of its Subsidiaries shall, without Kroger's prior written consent,
divest any assets, commit to any divestiture or assets or businesses of Fred
Meyer and its subsidiaries or take any other action or commit to take any action
that would limit Fred Meyer's, Kroger's or any of their subsidiaries freedom of
action with respect to, or their ability to retain any of their businesses,
product lines or assets.
Notwithstanding the foregoing, (x) nothing in this Agreement shall
require Kroger to agree to the sale, transfer, divestiture or other disposition
of stores of Kroger, Fred Meyer or any of their subsidiaries having aggregate
gross annual sales for the 1997 fiscal year in excess of 7% of the combined
gross annual sales of Fred Meyer and its subsidiaries taken as a whole for such
period, and (y) other than the sale, transfer, divestiture or other disposition
of stores having revenues up to the gross annual sales referenced in clause (x)
of this paragraph (b), neither party shall be required to take any actions or
make any commitments or agreements pursuant to paragraph (b)(ii) above, if the
taking of such action or the making of any commitments or the consequences
thereof, individually or in the aggregate, would be reasonably likely to have a
Kroger Material
- 47 -
Adverse Effect. Any actions taken by Kroger or Fred Meyer to comply with their
respective obligations under Section 6.2(b)(ii), including a decision by Kroger
to waive any of the provisions of this paragraph, shall not be considered to
constitute or result in a Kroger Material Adverse Effect or a Fred Meyer
Material Adverse Effect, as applicable.
(c) If any "fair price," "moratorium," "control share acquisition" or
similar anti-takeover statute or regulation is or may become applicable to the
Merger, each Party and its Boards of Directors shall grant such approvals and
take such actions as are necessary so that the Merger may be consummated as
promptly as practicable on the terms contemplated by this Agreement and
otherwise act to eliminate or minimize the effects of such statute or regulation
on such transactions.
Section 6.3 Publicity. The Parties agree that the initial press release
with respect to the Merger shall be a joint press release. Thereafter, subject
to their respective legal obligations (including requirements of stock exchanges
and other similar regulatory bodies), the Parties shall consult with each other
before issuing any such press release or otherwise making public statements with
respect to the Merger.
Section 6.4 Registration Statement. The Parties shall cooperate and
promptly prepare, and Kroger shall file with the SEC as soon as practicable, a
Registration Statement on Form S-4 (the "Form S-4") under the Securities Act
with respect to the Kroger Common Stock issuable in the Merger, a portion of
which Registration Statement shall also serve as the joint proxy
statement/prospectus with respect to the meetings of the stockholders of each of
the Parties in connection with the Merger (the "Proxy Statement/Prospectus").
The Parties will cause the Proxy Statement/Prospectus and the Form S-4 to comply
as to form in all material respects with the applicable provisions of the
Securities Act, the Exchange Act and the rules and regulations thereunder.
Kroger shall use its reasonable best efforts to, and Fred Meyer will cooperate
with Kroger to, have the Form S-4 declared effective by the SEC as promptly as
practicable. Kroger shall use its reasonable best efforts to obtain, prior to
the effective date of the Form S-4, all necessary state securities law or "blue
sky" permits or approvals required to carry out the Merger (provided that Kroger
shall not be required to qualify to do business in any jurisdiction in which it
is not now so qualified). Each of the Parties agree that the information
provided by it for inclusion in the Proxy Statement/Prospectus and each
amendment or supplement thereto, at the time of mailing thereof, at the time of
the respective meetings of stockholders of the Parties, and at the time it is
filed or becomes effective, will not include an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading.
Section 6.5 Authorized Shares; Listing Application. As soon as practicable
after the execution of the Agreement, Kroger shall file an amendment to the
Kroger
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Articles of Incorporation to reflect stockholder approval of an amendment to the
Kroger Articles of Incorporation increasing the number of authorized shares of
Kroger Common Stock from 350,000,000 to 1,000,000,000. Kroger shall as soon as
reasonably practicable prepare and submit to the NYSE and all other securities
exchanges on which the shares of Kroger Common Stock are listed a listing
application with respect to the shares of Kroger Common Stock issuable in the
Merger, and shall use its reasonable best efforts to obtain, prior to the
Effective Time, approval for the listing of such Kroger Common Stock on such
exchanges, subject to official notice of issuance.
Section 6.6 Further Action. Each of the Parties shall, subject to the
fulfillment at or before the Effective Time of each of the conditions of
performance set forth in this Agreement or the waiver thereof, use its
reasonable best efforts to perform those further acts and execute those
documents as may be reasonably required to effect the transactions contemplated
hereby. Each of the Parties will comply in all material respects with all
applicable laws and with all applicable rules and regulations of any
Governmental Entity in connection with its execution, delivery and performance
of this Agreement and the Stock Option Agreements and the transactions
contemplated hereby and thereby. Each of the Parties agrees to use its
reasonable best efforts to obtain in a timely manner all necessary waivers,
consents, approvals and opinions and to effect all necessary registrations and
filings, and to use its reasonable best efforts to take, or cause to be taken,
all other actions and to do, or cause to be done, all other things necessary,
proper or advisable to consummate and make effective as promptly as practicable
the Merger. Fred Meyer agrees to use its reasonable best efforts to obtain, or
in cooperation with Kroger to obtain, in a timely manner all Consents that may
be necessary or desirable in connection with the consummation of the Merger
under the terms of the agreements listed on Schedule 3.5 of the Fred Meyer
Disclosure Letter.
Section 6.7 Expenses. Whether or not the Merger is consummated, all costs
and expenses incurred in connection with this Agreement and the transactions
contemplated thereby (including the Merger) shall be paid by the party incurring
those expenses except as expressly provided in this Agreement and except that
(a) the filing fees in connection with the filing of the Form S-4 and the Proxy
Statement/Prospectus with the SEC, (b) all filing fees in connection with any
filings, permits or approvals required under applicable state securities or
"blue sky" laws, and (c) the expenses incurred in connection with printing and
mailing of the Form S-4 and the Proxy Statement/Prospectus, and (d) any
commitment fee payable in connection with any planned refinancing or replacement
by Kroger of, or any commitment to obtain the consent of the requisite lenders
to consummate the Merger under, the financing facilities listed as items 1 and 2
on Schedule 3.5(a)(iii) of the Fred Meyer Disclosure Letter and the financing
facilities listed on Schedule 4.5(a) of the Kroger Disclosure Letter shall be
shared by Kroger and Fred Meyer equally.
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Section 6.8 Notification of Certain Matters. Each Party shall give prompt
notice to the other Party of the following:
(a) the occurrence or nonoccurrence of any event whose occurrence or
nonoccurrence is reasonably expected to cause any of the conditions precedent
set forth in Article VII not to be satisfied;
(b) the status of matters relating to completion of the Merger,
including promptly furnishing the other with copies of notice or other
communications received by any Party or any of its respective Subsidiaries from
any Governmental Entity or other third party with respect to this Agreement or
the transactions contemplated thereby, including the Merger; and
(c) any facts relating to that Party which would make it necessary or
advisable to amend the Proxy Statement/Prospectus or the Form S-4 in order to
make the statements therein not untrue or misleading or to comply with
applicable law; provided, however, that the delivery of any notice pursuant to
this Section 6.8 shall not limit or otherwise affect the remedies available
hereunder to the Party receiving such notice.
Section 6.9 Access to Information. (a) From this date to the Effective
Time, each of the Parties shall, and shall cause its respective Subsidiaries,
and its and their officers, directors, employees, auditors, counsel and agents
to afford the officers, employees, auditors, counsel and agents of the other
Party reasonable access at reasonable times upon reasonable notice to each of
the Party's and its Subsidiaries' officers, employees, auditors, counsel,
agents, properties, offices and other facilities and to all of their respective
books and records, and shall furnish the other Party with all financial,
operating and other data and information as such other Party may reasonably
request, in each case only to the extent, in the judgment of counsel to such
Party, permitted by law, including antitrust law, and provided no Party shall be
obligated to make any disclosure which would cause forfeiture of attorney-client
privilege or would violate confidentiality agreements (so long as such Party
shall have used commercially reasonable efforts to obtain a release or waiver
from the applicable confidentiality agreement in respect of such disclosure).
(b) Each of the Parties agrees that all information so received from
the other Parties shall be deemed received pursuant to the confidentiality
agreements, dated as of September 16, 1998, between Kroger and Fred Meyer (the
"Confidentiality Agreement"), and that each Party shall, and shall cause its
affiliates and each of its and their Representatives to, comply with the
provisions of the Confidentiality Agreement with respect to such information and
the provisions of the Confidentiality Agreement are hereby incorporated herein
by reference with the same effect as if fully set forth in this Agreement.
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Section 6.10 Review of Information. Subject to applicable laws relating to
the exchange of information, including the anti-trust laws, each Party shall
have the right to review in advance, and to the extent practicable each will
consult the other on, all the information relating to it, or any of its
respective Subsidiaries, that appear in any filing made with, or written
materials submitted to, any third party and/or any Governmental Entity in
connection with the Merger. In exercising the foregoing right, each of the
Parties shall act reasonably and as promptly as practicable.
Section 6.11 Indemnification; Directors' and Officers' Insurance. (a) From
and after the Effective Time, Kroger shall, or shall cause the Surviving
Corporation to, indemnify and hold harmless each present and former director and
officer of Fred Meyer or any of its Subsidiaries (when acting in such capacity)
(the "Indemnified Parties"), against any costs or expenses (including reasonable
attorneys' fees), judgments, fines, losses, claims, damages or liabilities
incurred in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative, for
acts or omissions existing or occurring at or prior to the Effective Time,
whether asserted or claimed prior to, at or after the Effective Time, to the
fullest extent permitted under the DGCL or other applicable law, as applicable
(and Kroger shall, or shall cause the Surviving Corporation to, also advance
expenses as incurred to the fullest extent permitted under the DGCL or other
applicable law, provided the Person to whom expenses are advanced provides an
undertaking to repay such advances if it is ultimately determined that such
Person is not entitled to indemnification).
(b) Kroger shall maintain, or cause the Surviving Corporation to
maintain, a policy of officers' and directors' liability insurance for acts and
omissions occurring prior to the Effective Time ("D&O Insurance") with coverage
in amount and scope at least as favorable as its existing directors' and
officers' liability insurance coverage for a period of six years after the
Effective Time; provided, however, if the existing D&O Insurance expires, is
terminated or canceled, or if the annual premium therefor is increased to an
amount in excess of 200% of the last annualized premium paid prior to this date
(the "Current Premium"), in each case during such six year period, Kroger shall,
or shall cause the Surviving Corporation to, obtain D&O Insurance in an amount
and scope as great as can be obtained for the remainder of such period for a
premium not in excess (on an annualized basis) of 200% of the Current Premium.
(c) If Kroger or the Surviving Corporation or any of their respective
successors or assigns (i) shall consolidate with or merge into any other
corporation or other entity and shall not be the continuing or surviving
corporation or entity of the consolidation or merger or (ii) shall transfer all
or substantially all of its properties and assets to any individual, corporation
or other entity, then and in each such case, proper provisions shall be made so
that the successors and assigns of Kroger or the Surviving Corporation shall
assume all of the obligations set forth in this Section 6.11.
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(d) The provisions of this Section 6.11 are intended to be for the
benefit of, and shall be enforceable by, each of the Indemnified Parties, their
heirs and their representatives.
Section 6.12 Employee Benefit Plans. (a) From and after the Effective Time,
Kroger will cause the Surviving Corporation and its Subsidiaries to honor, pay
and perform all of their respective covenants and obligations under, and in
accordance with their terms, (i) all employment, protection and severance
agreements between Fred Meyer and its Subsidiaries and any officer, director or
employee of Fred Meyer or any of its Subsidiaries to the extent disclosed in
Section 3.10 of the Fred Meyer Disclosure Letter, in accordance with the terms
thereof as in effect immediately prior to the date hereof, and (ii) the Fred
Meyer Benefit Plans. Nothing in this Section 6.12 shall be interpreted to
prohibit Kroger or any of its Subsidiaries from amending or terminating any Fred
Meyer Benefit Plan in accordance with the terms thereof.
(b) (i) Until December 31, 1999, Kroger shall cause to be provided to
each Fred Meyer Employee (other than those represented by collective bargaining
agreements) (w) a base salary or hourly wage, as applicable, at an annual or
hourly rate, respectively, that is not less than the rate in effect for such
individual immediately prior to the Effective Time, (x) pension, welfare, fringe
and other employee benefits, including severance benefits, that, in each case,
are at least as favorable to that Fred Meyer Employee as the benefits provided
to that Fred Meyer Employee immediately prior to the Effective Time, (y) annual
cash bonus opportunities that are at least as favorable to that Fred Meyer
Employee as the bonus opportunities available to that Fred Meyer Employee
immediately prior to the Effective Time and (z) if the Merger is consummated on
or prior to April 30, 1999, equity awards that are at least as favorable to the
Fred Meyer Employees who are at the vice president level or below as the awards
granted to similarly situated employees of Kroger or its Subsidiaries during or
for such period are to the employees of Kroger and its Subsidiaries.
Notwithstanding the foregoing, subject to the terms of permitted employment
agreements, Kroger shall not be obligated to continue to employ any Fred Meyer
Employee for any particular length of time.
(ii) For purposes of determining eligibility and vesting (but not
for benefit accrual) under any Kroger Benefit Plans Fred Meyer employees shall
be credited with their years of service with Fred Meyer or its Subsidiaries, but
only to the extent that those years of service would have been credited under
the relevant Kroger Benefit Plan if such Fred Meyer Employee had been a
similarly situated Kroger Employee during the relevant period of time. To the
extent that any Kroger Benefit Plan in which a Fred Meyer Employee participates
after the Effective Time provides medical, dental, vision or other welfare
benefits, Kroger shall cause all pre-existing condition exclusions and actively
at work requirements of such plan to be waived for such employee and his or her
covered dependents except to the extent such employee and his or her covered
dependents were
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subject to such requirements under the applicable Fred Meyer Benefit Plans, and
Kroger shall cause any eligible expenses incurred by such employee on or before
the Effective Time to be taken into account under such plan for purposes of
satisfying all deductible, coinsurance and maximum out-of-pocket requirements
applicable to such employee and his or her covered dependents for the applicable
plan year.
(c) On or prior to the Effective Time, Fred Meyer shall take all such
actions as are necessary to terminate its and its Subsidiaries' Employee Stock
Purchase Plans at or prior to the Effective Time. Fred Meyer shall, in
connection with such termination, cause all participants in such plans not to be
permitted to have Fred Meyer increase the percentage or amount of any monies
withheld by Fred Meyer for investment in such plans after the date hereof, and
cause each such participant either to receive previously invested cash or
purchase Fred Meyer Common Stock pursuant to such plans prior to the Effective
Time.
Section 6.13 Kroger Board of Directors and Officers. As of the Effective
Time, the six individuals listed in the Fred Meyer Disclosure Letter shall be
elected to the Board of Directors of Kroger, and each such individual shall
become a member of that class of the Board of Directors of Kroger that is
specified for such individual in the Fred Meyer Disclosure Letter. In the event
that the Board of Directors of Kroger decreases to below thirteen members, 5 of
the individuals (as selected by Fred Meyer) listed in the Fred Meyer Disclosure
Letter shall be elected to the Board of Directors of Kroger, and each such
individual shall become a member of that class of the Board of Directors of
Kroger that is specified for such individual in the Fred Meyer Disclosure
Letter. The Executive Committee of the Board of Directors of Kroger will be
expanded to include Mr. Ronald W. Burkle and one other person as listed in the
Fred Meyer Disclosure Letter, and Mr. Ronald W. Burkle will be chairman of the
Executive Committee so long as he remains a director of Kroger. In the event
that any of such individuals shall be unable or unwilling to serve as a member
of the Board of Directors of Kroger as of the Effective Time, his or her
replacement shall be selected by Fred Meyer from its Board of Directors,
provided that any such replacement shall be reasonably acceptable to Kroger. As
of the Effective Time, Mr. Robert G. Miller shall be duly elected and appointed
Vice Chairman of the Board of Directors and Chief Operating Officer of Kroger.
Section 6.14 Affiliates. (a) Not less than 45 days prior to the Effective
Time, each Party (i) shall have delivered to the other Party a letter
identifying all Persons who, in the opinion of the Party delivering such letter,
may be, as of the date this Agreement is submitted for adoption by such Party's
stockholders, its "affiliates" for purposes of Rule 145 under the Securities Act
or SEC Accounting Series Releases 130 and 135, and (ii) shall use its reasonable
best efforts to cause each Person who is identified as an "affiliate" of it in
such letter to deliver, as promptly as practicable but in no event later than 30
days prior to the Closing (or after such later date as the Parties may agree), a
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signed agreement, in the case of affiliates of Fred Meyer, to Fred Meyer and
Kroger substantially in the form customary for transactions of this type, and in
the case of affiliates of Kroger, to Kroger substantially in the form customary
for transactions of this type. Each Party shall notify each other Party from
time to time after the delivery of the letter described in Section 6.14(a)(i) of
any Person not identified on such letter who then is, or may be, such an
"affiliate" and use its reasonable best efforts to cause each additional Person
who is identified as an "affiliate" to execute a signed agreement as set forth
in this Section 6.14(a). Attached as Exhibit B to this Agreement are copies of
the letters described in Section 6.14(a)(i).
(b) Shares of Kroger Common Stock and shares of Fred Meyer Common
Stock beneficially owned by each such "affiliate" of Kroger or Fred Meyer who
has not provided a signed agreement in accordance with Section 6.14(a) shall not
be transferable during any period prior to and after the Effective Time if, as a
result of this transfer during any such period, taking into account the nature,
extent and timing of this transfer and similar transfers by all other
"affiliates" of Kroger and Fred Meyer, this transfer will, in the reasonable
judgment of accountants of Kroger, interfere with, or prevent the Merger from
being accounted for, as a pooling-of-interests. Neither Kroger or Fred Meyer
shall register, or allow its transfer agent to register, on its books the
transfer of any shares of Kroger Common Stock or Fred Meyer Common Stock of any
affiliate of Fred Meyer or Kroger who has not provided a signed agreement in
accordance with Section 6.14(a) unless the transfer is made in compliance with
the foregoing. The restrictions on the transferability of shares held by Persons
who execute an agreement pursuant to Section 6.14(a) shall be as provided in
those agreements.
Section 6.15 Pooling-of-Interests. Each of the Parties will use its
reasonable best efforts to cause the Merger to be accounted for as a
pooling-of-interests in accordance with GAAP and the rules and regulations of
the SEC.
Section 6.16 Tax-Free Reorganization. Each of the Parties will use its
reasonable best efforts to cause the Merger to qualify as a tax-free
"reorganization" under Section 368 of the Code.
Section 6.17 Accountant's Comfort Letters. Each Party shall use its
reasonable best efforts to cause to be delivered to the other Party two letters
from its independent public accountants, one dated a date within two business
days before the date on which the Form S-4 shall become effective and one dated
the Closing Date, in form and substance reasonably satisfactory to recipient and
customary in scope and substance for comfort letters delivered by independent
accountants in connection with registration statements similar to the Form S-4.
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Section 6.18 Accountant's Pooling Letters. Fred Meyer shall use its
reasonable best efforts to cause to be delivered to Kroger from Deloitte &
Touche LLP ("Deloitte") (or any other independent public accounting firm
reasonably satisfactory to Kroger) two letters each addressed to Kroger and
PricewaterhouseCoopers LLP ("PwC") (or any other independent public accounting
firm selected by Kroger), one dated the date upon which the Form S-4 becomes
effective and one dated the Closing Date, stating that as of the respective
dates of its letters, Deloitte is not aware of any conditions that exist that
would preclude Fred Meyer's ability to be a party in a business combination to
be accounted for as a pooling of interests. Kroger shall use its reasonable best
efforts to cause to be delivered to Fred Meyer from PwC (or any other
independent public accounting firm reasonably satisfactory to Fred Meyer) two
letters, each addressed to Fred Meyer and Deloitte (or any other independent
public accounting firm selected by Fred Meyer), one dated the date upon which
the Form S-4 becomes effective and one dated the Closing Date, stating that
accounting for the Merger as a pooling of interests under Opinion 16 of the
Accounting Principles Board and applicable SEC rules and regulations is
appropriate if the Merger is closed and consummated as contemplated by this
Agreement. Attached as Exhibit C to this Agreement are copies of the letters
described in this Section 6.18.
ARTICLE VII
Section 7.1 Conditions to Obligations of the Parties to Consummate the
Merger. The respective obligation of each party to consummate the Merger shall
be subject to the satisfaction of each of the following conditions:
(a) Stockholder Approval. This Agreement and the Merger shall have
been approved and adopted by the requisite vote of the stockholders of Fred
Meyer and Kroger, in each case in accordance with the DGCL, the OGCL or the
rules and regulations of the NYSE, as applicable.
(b) Legality. No order, decree or injunction shall have been entered
or issued by any Governmental Entity which is in effect and has the effect of
making the Merger illegal or otherwise prohibiting consummation of the Merger.
Each Party agrees that, in the event that any such order, decree or injunction
shall be entered or issued, it shall use its reasonable best efforts to cause
any such order, decree or injunction to be lifted or vacated.
(c) HSR Act. The waiting period (or extension thereof) under the HSR
Act applicable to the Merger shall have expired or been terminated.
(d) Registration Statement Effective. The Form S-4 shall have become
effective prior to the mailing by each of the Parties of the Proxy
Statement/Prospectus to
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its respective stockholders and no stop order suspending the effectiveness of
the Form S-4 shall then be in effect;
(e) Blue Sky Approvals. All such consents, approvals, authorizations,
orders, registrations, filings, qualifications, licenses or permits as may be
required under state securities or "blue sky" laws in connection with the shares
of Kroger Common Stock to be issued pursuant to the Merger have been obtained.
(f) Stock Exchange Listing. The shares of Kroger Common Stock to be
issued pursuant to the Merger shall have been duly approved for listing on the
NYSE, subject to official notice of issuance.
Section 7.2 Additional Conditions to Obligations of Kroger and Jobsite
Holdings. The obligations of Kroger and Jobsite Holdings to consummate the
Merger shall also be subject to the satisfaction or waiver of each of the
following conditions:
(a) Representations and Warranties. The representations and
warranties of Fred Meyer contained in this Agreement shall be true and correct
on and as of the Closing Date (except to the extent such representations and
warranties shall have been expressly made as of an earlier date, in which case
such representations and warranties shall have been true and correct as of such
earlier date) with the same force and effect as if made on and as of the Closing
Date, except to the extent that any failures of such representations and
warranties to be so true and correct (determined without regard to materiality
qualifiers or limitations contained therein), individually or in the aggregate,
would not reasonably be expected to have resulted in a Fred Meyer Material
Adverse Effect.
(b) Agreements and Covenants. Fred Meyer shall have performed or
complied in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by it on or before the Effective
Time.
(c) Certificates. Kroger shall have received a certificate of an
executive officer of Fred Meyer that the conditions set forth in paragraphs (a)
and (b) above have been satisfied.
(d) Consents. Except as set forth in the Fred Meyer Disclosure Letter,
Fred Meyer shall have obtained all consents, approvals, releases or
authorizations ("Consents") from, and Fred Meyer shall have made all filings and
registrations ("Filings") to or with, any Person, including without limitation
any Governmental Entity, necessary to be obtained or made in order for Kroger
and Jobsite Holdings to consummate the Merger or issue shares of Kroger Common
Stock pursuant thereto, as applicable, unless the failure to obtain such
Consents or make such Filings would not, individually or in the aggregate,
reasonably be expected to have a Fred Meyer Material
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Adverse Effect (it being understood that the obtaining of Consents in connection
with the agreements listed on Schedule 3.5 of the Fred Meyer Disclosure Letter
shall not be a condition to the consummation of the Merger).
(e) Tax Opinion. Kroger shall have received an opinion of Fried,
Frank, Harris, Shriver & Jacobson (or other counsel reasonably satisfactory to
it), dated as of the Closing Date, in form and substance reasonably satisfactory
to it, substantially to the effect that, on the basis of the facts and
assumptions described in the opinion, the Merger constitutes a tax-free
reorganization under Section 368 of the Code. In rendering this opinion, counsel
may require and rely upon representations and covenants including those
contained in this Agreement or in certificates of officers of the Parties and
others; and
(f) Accountants Letters. Kroger shall have received each of the
accountants' letters contemplated by Sections 6.17 and 6.18 to be received by
it.
Section 7.3 Additional Conditions to Obligations of Fred Meyer. The
obligations of Fred Meyer to consummate the Merger shall also be subject to the
satisfaction or waiver of each of the following conditions:
(a) Representations and Warranties. The representations and warranties
of Kroger and Jobsite Holdings contained in this Agreement shall be true and
correct on and as of the Closing Date (except to the extent such representations
and warranties shall have been expressly made as of an earlier date, in which
case such representations and warranties shall have been true and correct as of
such earlier date) with the same force and effect as if made on and as of the
Closing Date, except to the extent that any failures of such representations and
warranties to be so true and correct (determined without regard to materiality
qualifiers or limitations contained therein), individually or in the aggregate,
would not reasonably be expected to have resulted in a Kroger Material Adverse
Effect;
(b) Agreements and Covenants. Each of Kroger and Jobsite Holdings
shall have performed or complied in all material respects with all agreements
and covenants required by this Agreement to be performed or complied with by it
on or before the Effective Time.
(c) Certificates. Fred Meyer shall have received a certificate of an
executive officer of Kroger that the conditions set forth in paragraphs (a) and
(b) above have been satisfied;
(d) Consents. Except as set forth in the Kroger Disclosure Letter,
Kroger shall have obtained all Consents from, and Kroger shall have made all
Filings to or with, any Person, including without limitation any Governmental
Entity, necessary to be obtained or made in order for Fred Meyer to consummate
the Merger, unless the
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failure to obtain such Consents or make such Filings would not, individually or
in the aggregate, be reasonably expected to have a Kroger Material Adverse
Effect.
(e) Tax Opinion. Fred Meyer shall have received an opinion of Cleary,
Gottlieb, Steen & Hamilton (or other counsel reasonably satisfactory to it),
dated as of the Closing Date, in form and substance reasonably satisfactory to
it, substantially to the effect that, on the basis of the facts and assumptions
described in the opinion, the Merger constitutes a tax-free reorganization under
Section 368 of the Code. In rendering such opinion, counsel may require and rely
upon representations and covenants including those contained in this Agreement
or in certificates of officers of the Parties and others; and
(f) Accountants Letters. Fred Meyer shall have received each of the
accountants' letters contemplated by Sections 6.17 and 6.18 to be received by
it.
ARTICLE VIII
Section 8.1 Termination. This Agreement may be terminated at any time
before the Effective Time (except as otherwise provided) as follows:
(a) by mutual written consent of each of Kroger and Fred Meyer;
(b) by either Fred Meyer or Kroger, if the Effective Time shall not
have occurred on or before September 30, 1999 (the "Termination Date");
provided, however, that the right to terminate this Agreement under this Section
8.1(b) shall not be available to any Party whose failure to fulfill any
obligation under this Agreement has been the cause of, or resulted in, the
failure of the Effective Time to occur on or before the Termination Date;
(c) by either Fred Meyer or Kroger, if a Governmental Entity shall
have issued an order, decree or injunction having the effect of making the
Merger illegal or permanently prohibiting the consummation of the Merger, and
such order, decree or injunction shall have become final and nonappealable (but
only if the terminating Party shall have used its reasonable best efforts to
cause such order, decree or injunction to be lifted or vacated);
(d) by either Fred Meyer or Kroger, if there shall have been a
material breach by the other of any of its (x) representations or warranties
contained in this Agreement, which breach would result in the failure to satisfy
one or more of the conditions set forth in Section 7.2(a) (in the case of a
breach by Fred Meyer) or Section 7.3(a) (in the case of a breach by Kroger), or
(y) covenants or agreements contained in this Agreement, which breach would
result in the failure to satisfy one or more of the conditions set forth in
Section 7.2(b) (in the case of a breach by Fred Meyer) or Section 7.3(b) (in the
case of a breach by Kroger), and in any such case such breach
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shall be incapable of being cured or, if capable of being cured, shall not have
been cured within 30 days after written notice thereof shall have been received
by the Party alleged to be in breach.
(e) by either Fred Meyer or Kroger, if the required approvals of the
stockholders of Fred Meyer or Kroger shall not have been obtained at a duly held
stockholders' meeting, including any adjournments or postponements.
Section 8.2 Effect of Termination and Abandonment. (a) In the event of
termination of this Agreement pursuant to this Article VIII, this Agreement
(other than as set forth in Section 9.1) shall become void and of no effect with
no liability on the part of any party hereto (or of any of its Representatives);
provided, however, no such termination shall relieve any party hereto from (x)
any liability for damages resulting from any willful or intentional breach of
this Agreement (whether or not any fees contemplated by this Section 8.2 are
payable) or (y) any obligation to pay the termination fees provided for below or
Fees and Expenses (as defined) pursuant to this Section 8.2.
(b) (i) In the event that prior to the meeting of Fred Meyer
stockholders duly convened and held to vote in respect of this Agreement and the
Merger, a Fred Meyer Business Combination Proposal (as defined) shall have been
made to Fred Meyer and made known to its stockholders generally or shall have
been made directly to its stockholders generally or any Person shall have
publicly announced an intention (whether or not conditional) to make a Fred
Meyer Business Combination Proposal (whether or not such Proposal shall have
been rejected or shall have been withdrawn), and thereafter (x) this Agreement
is terminated pursuant to Section 8.1(e) by reason of the failure of the
stockholders of Fred Meyer to approve this Agreement or the Merger at such
meeting or (y) this Agreement is terminated by Kroger pursuant to 8.1(d)(y) by
reason of a breach by Fred Meyer of its covenants or agreements hereunder, Fred
Meyer shall, simultaneously with such termination, pay to Kroger a fee equal to
$55,000,000 (the "Initial Fred Meyer Termination Fee"). In addition, in the
event that this Agreement is terminated under circumstances in which the Initial
Fred Meyer Termination Fee becomes payable, and within eighteen months of such
termination Fred Meyer enters into an agreement with any Person with respect to
a Fred Meyer Business Combination Proposal or a Fred Meyer Business Combination
Proposal is consummated, then, upon the signing of such agreement or, if no
agreement is signed, then at the closing (and as a condition to the closing,
which condition may not be waived without the express written consent of Kroger)
of such Fred Meyer Business Combination Proposal, Fred Meyer shall pay to Kroger
an additional termination fee equal to $110,000,000 (the "Additional Fred Meyer
Termination Fee"). "Fred Meyer Business Combination Proposal" shall mean any
Fred Meyer Acquisition Proposal, provided that all references in the definition
of Fred Meyer Acquisition Proposal to "15%" shall be deemed to be references to
"50%."
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(ii) In the event that prior to the meeting of Kroger
stockholders duly convened and held to vote in respect to this Agreement and the
Merger, a Kroger Business Combination Proposal (as defined) shall have been made
to Kroger and made known to its stockholders generally or shall have been made
directly to its stockholders generally or any Person shall have publicly
announced an intention (whether or not conditional) to make a Kroger Business
Combination Proposal (whether or not such Proposal shall have been rejected or
shall have been withdrawn) and thereafter (x) this Agreement is terminated
pursuant to Section 8.1(e) by reason of the failure of the stockholders of
Kroger to approve this Agreement or the Merger at such meeting or (y) this
Agreement is terminated by Fred Meyer pursuant to Section 8.1(d)(y) by reason of
a breach by Kroger of its covenants or agreements hereunder, Kroger shall,
simultaneously with such termination, pay to Fred Meyer a fee equal to
$90,000,000 (the "Initial Kroger Termination Fee"). In addition, in the event
that this Agreement is terminated under circumstances in which the Initial
Kroger Termination Fee becomes payable, and within eighteen months of such
termination Kroger enters into an agreement with any Person with respect to a
Kroger Business Combination Proposal or a Kroger Business Combination Proposal
is consummated, then, upon the signing of such agreement or, if no agreement is
signed, then at the closing (and as a condition to the closing, which condition
may not be waived without the express written consent of Fred Meyer) of such
Kroger Business Combination Proposal, Kroger shall pay to Fred Meyer an
additional termination fee equal to $185,000,000 (the "Additional Kroger
Termination Fee"). "Kroger Business Combination Proposal" shall mean any Kroger
Acquisition Proposal provided that all references in the definition of Kroger
Acquisition Proposal to "15%" shall be deemed to be references to "50%."
(c) In the event that this Agreement is terminated pursuant to Section
8.1(e) by reason of the failure of any Party's stockholders to approve this
Agreement or the Merger at a meeting of stockholders duly convened and held to
vote in respect of this Agreement and the Merger or the issuance of shares
pursuant thereto, such Party shall promptly upon such termination (following
receipt of a statement therefor) reimburse the other Party for all fees and
expenses (including, without limitation, fees and expenses of counsel, financial
advisors, accountants, consultants and other advisors and Representatives)
("Fees and Expenses") incurred and paid by the other Party in connection with
this Agreement and the Merger.
(d) Reimbursements of Fees and Expenses hereunder and any Termination
Fee payable hereunder shall be payable by wire transfer of immediately available
funds. The reimbursement of Fees and Expenses shall be credited against any
Termination Fee payable by such Party. No Party which is in material breach of
its covenants, agreements or representations shall be entitled to receive Fees
and Expenses or a Termination Fee.
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(e) The Parties acknowledge that the agreements contained in this
Section 8.2 are an integral part of the transactions contemplated by this
Agreement, and that, without these agreements, Kroger and Fred Meyer would not
enter into this Agreement. If either Party fails to pay promptly any amount due
pursuant to this Section 8.2, and, in order to obtain such payment, the other
Party commences a suit which results in a judgment against such first Party for
such amount (or any portion thereof), such first Party shall pay the costs and
expenses (including attorneys' fees) of the other Party in connection with such
suit, together with interest on such amount in respect of the period from the
date such amount became due until the date such amount is paid at the prime rate
of The Chase Manhattan Bank in effect from time to time during such period.
Section 8.3 Amendment. This Agreement may be amended at any time before the
Effective Time but only pursuant to a writing executed and delivered by Kroger
and Fred Meyer in accordance with the provisions of applicable law.
ARTICLE IX
Section 9.1 Non-Survival of Representations, Warranties and Agreements. The
representations, warranties and agreements in this Agreement shall terminate at
the Effective Time or upon the termination of this Agreement pursuant to Section
8.1, as the case may be, except that (a) the agreements set forth in Sections
1.3, 6.11, 6.12, 6.13, 6.14 and 9.8 shall survive the Effective Time, and (b)
the agreements set forth in Sections 6.7, 6.9(b), 8.2 and 9.8 shall survive
termination indefinitely.
Section 9.2 Notices. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given
or made as of the date of receipt and shall be delivered personally or mailed by
registered or certified mail (postage prepaid, return receipt requested), sent
by overnight courier or sent by telecopy, to the applicable party at the
following addresses or telecopy numbers (or at such other address or telecopy
number for a party as shall be specified by like notice):
(a) if to Fred Meyer:
Fred Meyer, Inc.
3800 SE 22nd Avenue
Portland, Oregon 97202
Attention: Roger A. Cooke, Esq.
Telecopy No.: (503) 797-7138
with a copy to:
Cleary, Gottlieb, Steen & Hamilton
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One Liberty Plaza
New York, New York 10006
Attention: Daniel S. Sternberg, Esq.
Telecopy No.: (212) 225-3999
(b) if to Kroger or Jobsite Holdings:
The Kroger Co.
1014 Vine Street
Cincinnati, Ohio 45202
Attention: Paul W. Heldman, Esq.
Telecopy No.: (513) 762-1400
with a copy to:
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, New York 10004
Attention: Arthur Fleischer, Jr., Esq.
Telecopy No.: (212) 859-4000
Section 9.3 Certain Definitions; Interpretation. (a) For purposes of this
Agreement, the following terms shall have the following meanings:
(i) "Fred Meyer Material Adverse Effect" means any change,
circumstance, event or effect (x) that is or will be materially adverse to the
business, results of operations, financial condition or prospects of Fred Meyer
and its Subsidiaries taken as a whole, or (y) that will prevent or materially
impair Fred Meyer's ability to consummate the Merger, provided that a Fred Meyer
Material Adverse Effect shall not include changes or effects (1) relating to
economic conditions or financial markets in general or the retail food and drug
industry in general, (2) resulting from the voluntary termination of employment
by employees of Fred Meyer and its Subsidiaries between this date and the
Closing Date or (3) resulting from actions required to be taken by the terms of
this Agreement. A decline in the stock market price of the shares of Fred Meyer
Common Stock in and of itself shall not be deemed an "Fred Meyer Material
Adverse Effect."
(ii) "Kroger Material Adverse Effect" means any change,
circumstance, event or effect (x) that is or will be materially adverse to the
business, results of operations, financial condition or prospects of Kroger and
its Subsidiaries taken as a whole, or (y) that is or will prevent or materially
impair Kroger's ability to consummate the Merger or to issue shares of Kroger
Common Stock in accordance with
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the terms hereof, provided that a Kroger Material Adverse Effect shall not
include changes or effects (1) relating to economic conditions or financial
markets in general or the retail food and drug industry in general or (2)
resulting from actions required to be taken by the terms of this Agreement. A
decline in the stock market price of the shares of Kroger Common Stock in and of
itself shall not be deemed an "Kroger Material Adverse Effect."
(iii) "affiliate" of a Person means a Person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, the first mentioned Person.
(iv) "control" (including the terms "controlled by" and "under
common control with") means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of stock, as trustee or executor, by contract or
credit arrangement or otherwise.
(v) "ERISA" means the Employee Retirement Income Security Act of
1974, as amended and the rules and regulations promulgated thereunder.
(vi) "knowledge" of any Party shall mean the actual knowledge of
any of the executive officers of that Party.
(vii) "Person" means an individual, corporation, partnership,
limited liability company, association, trust, unincorporated organization,
entity or group (as defined in the Exchange Act).
(viii) "Significant Subsidiary" shall have the meaning set forth
in Rule 1-02 of Regulation S-X of the SEC.
(ix) "Subsidiary" of a Person means any corporation or other
legal entity of which that Person (either alone or through or together with any
other Subsidiary or Subsidiaries) is the general partner or managing entity or
of which at least a majority of the stock (or other equity interests the holders
of which are generally entitled to vote for the election of the board of
directors or others performing similar functions of such corporation or other
legal entity) is directly or indirectly owned or controlled by that Person
(either alone or through or together with any other Subsidiary or Subsidiaries).
(b) When a reference is made in this Agreement to Articles, Sections,
Disclosure Letters or Exhibits, this reference is to an Article or a Section of,
or an Exhibit to, this Agreement, unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include,"
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"includes" or "including" are used in this Agreement, they shall be understood
to be followed by the words "without limitation."
Section 9.4 Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
Section 9.5 Severability. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner materially
adverse to any Party. Upon a determination that any term or other provision is
invalid, illegal or incapable of being enforced, the Parties shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
Parties as closely as possible in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the maximum extent possible.
Section 9.6 Entire Agreement; No Third-Party Beneficiaries. This Agreement,
the Stock Option Agreements, the Fred Meyer Disclosure Letter, the Kroger
Disclosure Letter and the Confidentiality Agreement constitute the entire
agreement and supersede any and all other prior agreements and undertakings,
both written and oral, among the parties hereto, or any of them, with respect to
the subject matter hereof and, except for Section 6.11 (Indemnification;
Directors' and Officers' Insurance), does not, and is not intended to, confer
upon any Person other than the parties hereto any rights or remedies hereunder.
Section 9.7 Assignment. This Agreement shall not be assigned by any party
by operation of law or otherwise without the express written consent of each of
the other parties.
Section 9.8 Governing Law. This Agreement shall be governed by and
construed in accordance with, the laws of the State of New York without regard
to the conflicts of laws provisions thereof, provided that the provisions of
Article II shall be governed by the DGCL or the OGCL, as applicable. Each of the
parties irrevocably and unconditionally consents to submit to the exclusive
jurisdiction of the federal courts of the State of New York and the courts of
the United States of America located in the Southern District of the State of
New York for any litigation arising out of or relating to this Agreement or the
Merger or any of the other transactions contemplated hereby (and agrees not to
commence any litigation relating hereto except in these courts), and further
agrees that service of any process, summons, notice or document by U.S.
registered mail to its respective address set forth in Section 9.2 shall be
effective service of process for any litigation brought against it in any such
court. Each of the Parties hereby irrevocably and unconditionally waives any
objection to the laying of venue of any litigation arising out of this Agreement
or the Merger or any of the other transactions contemplated hereby in the courts
of the State of New York or the courts of the United States of America located
in the State of New York and hereby further irrevocably and unconditionally
waives and agrees not to plead or claim in any such court that any such
litigation brought in any such court has been brought in an inconvenient forum.
Each of the parties hereto hereby irrevocably
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and unconditionally waives any right it may have to trial by jury in connection
with any litigation arising out of or relating to this Agreement, the Stock
Option Agreements, the Merger or any of the other transactions contemplated
hereby or thereby.
Section 9.9 Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties in separate counterparts, each of
which when executed shall be deemed to be an original, but all of which shall
constitute one and the same agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first written above by their respective officers
thereunto duly authorized.
THE KROGER CO.
By: PAUL HELDMAN
-------------------------------
Name: Paul Heldman
Title: Senior Vice President
JOBSITE HOLDINGS, INC.
By: PAUL HELDMAN
-------------------------------
Name: Paul Heldman
Title: Senior Vice President
FRED MEYER, INC.
By: ROBERT G. MILLER
-------------------------------
Name: Robert G. Miller
Title: Vice Chairman and
Chief Executive Officer
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