EXHIBIT 99.3
AGREEMENT AND PLAN OF MERGER
DATED AS OFOCTOBER 18, 1998
BY AND BETWEEN THE KROGER CO.,
JOBSITE HOLDINGS, INC. AND
▇▇▇▇ ▇▇▇▇▇, INC.
TABLE OF CONTENTS
Page
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ARTICLE I
Section 1.1 The Merger......................................
Section 1.2 The Closing; Effective Time.....................
Section 1.3 Subsequent Actions..............................
Section 1.4 Certificate of Incorporation; Bylaws; Directors.
and Officers of the Surviving Corporation ......
ARTICLE II
Section 2.1 Treatment of Capital Stock .....................
Section 2.2 Conversion of Common Stock .....................
Section 2.3 Cancellation of Excluded Shares ................
Section 2.4 Conversion of Common Stock of Jobsite Holdings..
Section 2.5 Exchange Agent; Exchange Procedures.............
Section 2.6 Transfer Books..................................
Section 2.7 Termination of Exchange Fund....................
Section 2.8 Options to Purchase ▇▇▇▇ ▇▇▇▇▇ Shares...........
Section 2.9 Warrants to Purchase ▇▇▇▇ ▇▇▇▇▇ Shares..........
Section 2.10 Appraisal Rights...............................
Section 2.11 Certain Adjustments............................
Section 2.12 Restricted Stock...............................
Section 2.13 Assignment.....................................
ARTICLE III
Section 3.1 Organization and Qualification; Subsidiaries....
Section 3.2 Certificate of Incorporation and Bylaws.........
Section 3.3 Capitalization..................................
Section 3.4 Power and Authority; Authorization; Valid &
Binding.........................................
Section 3.5 No Conflict; Required Filings and Consents......
Section 3.6 SEC Reports; Financial Statements...............
Section 3.7 Absence of Certain Changes......................
Section 3.8 Litigation and Liabilities......................
Section 3.9 No Violation of Law; Permits....................
Section 3.10 Employee Matters; ERISA........................
Section 3.11 Labor Matters..................................
Section 3.12 Environmental Matters..........................
Section 3.13 Board Action; Vote Required....................
Section 3.14 Opinion of Financial Advisor...................
Section 3.15 Brokers........................................
Section 3.16 Tax Matters....................................
Section 3.17 Intellectual Property..........................
Section 3.18 Insurance......................................
Section 3.19 Contracts and Commitments......................
Section 3.20 Accounting and Tax Matters.....................
Section 3.21 Ownership of Shares of Kroger..................
Section 3.22 Year 2000 Compliance...........................
ARTICLE IV
Section 4.1 Organization and Qualification; Subsidiaries....
Section 4.2 Articles of Incorporation and Regulations.......
Section 4.3 Capitalization..................................
Section 4.4 Power and Authority; Authorization; Valid &
Binding.........................................
Section 4.5 No Conflict; Required Filings and Consents......
Section 4.6 SEC Reports; Financial Statements...............
Section 4.7 Absence of Certain Changes......................
Section 4.8 Litigation and Liabilities......................
Section 4.9 No Violation of Law; Permits....................
Section 4.10 Employee Matters; ERISA........................
Section 4.11 Labor Matters..................................
Section 4.12 Environmental Matters..........................
Section 4.13 Board Action; Vote Required....................
Section 4.14 Opinion of Financial Advisor...................
Section 4.15 Brokers........................................
Section 4.16 Tax Matters....................................
Section 4.17 Intellectual Property..........................
Section 4.18 Insurance......................................
Section 4.19 Contracts and Commitments......................
Section 4.20 Accounting and Tax Matters.....................
Section 4.21 Ownership of Shares of ▇▇▇▇ ▇▇▇▇▇..............
Section 4.22 Rights Agreement...............................
Section 4.23 Year 2000 Compliance...........................
ARTICLE V
Section 5.1 Interim Operations of ▇▇▇▇ ▇▇▇▇▇................
Section 5.2 Interim Operations of Kroger....................
Section 5.3 No Solicitation by ▇▇▇▇ ▇▇▇▇▇...................
Section 5.4 No Solicitation by Kroger.......................
Section 5.5 Charitable Contribution.........................
ARTICLE VI
Section 6.1 Meetings of Stockholders........................
Section 6.2 Filings Best Efforts............................
Section 6.3 Publicity.......................................
Section 6.4 Registration Statement..........................
Section 6.5 Authorized Shares; Listing Application..........
Section 6.6 Further Action..................................
Section 6.7 Expenses........................................
Section 6.8 Notification of Certain Matters.................
Section 6.9 Access to Information...........................
Section 6.10 Review of Information..........................
Section 6.11 Indemnification; Directors' and Officers'
Insurance......................................
Section 6.12 Employee Benefit Plans.........................
Section 6.13 Kroger Board of Directors and Officers.........
Section 6.14 Affiliates.....................................
Section 6.15 Pooling-of-Interests...........................
Section 6.16 Tax-Free Reorganization........................
Section 6.17 Accountant's Comfort Letters...................
Section 6.18 Accountant's Pooling Letters...................
ARTICLE VII
Section 7.1 Conditions to Obligations of the Parties to
Consummate the Merger...........................
Section 7.2 Additional Conditions to Obligations of Kroger
and Jobsite Holdings............................
Section 7.3 Additional Conditions to Obligations of ▇▇▇▇
▇▇▇▇▇...........................................
ARTICLE VIII
Section 8.1 Termination.....................................
Section 8.2 Effect of Termination and Abandonment...........
Section 8.3 Amendment.......................................
ARTICLE IX
Section 9.1 Non-Survival of Representations, Warranties and
Agreements......................................
Section 9.2 Notices.........................................
Section 9.3 Certain Definitions; Interpretation.............
Section 9.4 Headings........................................
Section 9.5 Severability....................................
Section 9.6 Entire Agreement; No Third-Party Beneficiaries..
Section 9.7 Assignment......................................
Section 9.8 Governing Law...................................
Section 9.9 Counterparts....................................
Exhibits
Exhibit A Certificate of Incorporation of Surviving
Corporation.......................................
Exhibit B Affiliate Letters.................................
Exhibit C Pooling Letters...................................
INDEX OF DEFINED TERMS
DEFINED TERM SECTION
Additional ▇▇▇▇ ▇▇▇▇▇ Termination Fee ................. 8.2(b)(i)
Additional Kroger Termination Fee...................... 8.2(b)(ii)
Affiliate.............................................. 9.3(a)(v)
Agreemen............................................... 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
▇▇▇▇ ▇▇▇▇▇............................................. preamble
▇▇▇▇ ▇▇▇▇▇ Acquisition Proposal........................ 5.3(c)
▇▇▇▇ ▇▇▇▇▇ Acquisition Transaction..................... 5.3(c)
▇▇▇▇ ▇▇▇▇▇ Benefit Plan................................ 3.10(a)
▇▇▇▇ ▇▇▇▇▇ Business Combination Proposal............... 8.2(b)(i)
▇▇▇▇ ▇▇▇▇▇ Capital Stock Disclosure Date............... 3.3(a)
▇▇▇▇ ▇▇▇▇▇ Certificate of Incorporation................ 3.2. 1.4(a)
▇▇▇▇ ▇▇▇▇▇ Common Stock................................ recitals
▇▇▇▇ ▇▇▇▇▇ Contracts................................... 3.19
▇▇▇▇ ▇▇▇▇▇ Disclosure Letter........................... Article III
▇▇▇▇ ▇▇▇▇▇ Employee.................................... 3.10(b)
▇▇▇▇ ▇▇▇▇▇ Employees................................... 3.10(b)
▇▇▇▇ ▇▇▇▇▇ Equity Rights............................... 3.3(a)
▇▇▇▇ ▇▇▇▇▇ ERISA Affiliate............................. 3.10(d)
▇▇▇▇ ▇▇▇▇▇ Material Adverse Effect..................... 9.3(a)(i)
▇▇▇▇ ▇▇▇▇▇ Multiemployer Plan.......................... 3.10(a)
▇▇▇▇ ▇▇▇▇▇ Options..................................... 2.8(a)
▇▇▇▇ ▇▇▇▇▇ Pension Plan................................ 3.10(c)
▇▇▇▇ ▇▇▇▇▇ Preferred Stock............................. 3.3(a)
▇▇▇▇ ▇▇▇▇▇ SEC Reports................................. 3.6(a)
▇▇▇▇ ▇▇▇▇▇ Shares...................................... recitals
▇▇▇▇ ▇▇▇▇▇ 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 ▇▇▇▇ ▇▇▇▇▇ 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)
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 ▇▇▇▇ ▇▇▇▇▇ 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)
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
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corporation, Jobsite Holdings, Inc. ("Jobsite Holdings" or "Merger
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Sub"), a Delaware corporation and a wholly owned subsidiary of
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Kroger, and ▇▇▇▇ ▇▇▇▇▇, Inc. ("▇▇▇▇ ▇▇▇▇▇"), a Delaware
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corporation. Kroger and ▇▇▇▇ ▇▇▇▇▇ are sometimes referred to herein,
individually, as a "Party," and together, as the "Parties."
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W I T N E S S E T H:
WHEREAS, the respective Boards of Directors of Kroger, Jobsite
Holdings and ▇▇▇▇ ▇▇▇▇▇ have each determined that the merger of
Jobsite Holdings with and into ▇▇▇▇ ▇▇▇▇▇ (the "Merger")
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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 taxfree reorganization under Section 368
of the Internal Revenue Code of 1986, as amended (the "Code"),
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and the rules and regulations promulgated thereunder;
WHEREAS, it is intended that, for accounting purposes, the
Merger will be accounted for as a poolingofinterests under United
States generally accepted accounting principles ("GAAP") and
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applicable rules and regulations of the Securities and Exchange
Commission (the "SEC").
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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 ▇▇▇▇ ▇▇▇▇▇ have executed and
delivered a Stock Option Agreement, dated as of the date hereof (the
"▇▇▇▇ ▇▇▇▇▇ Stock Option Agreement"), pursuant to which ▇▇▇▇
---------------------------------
▇▇▇▇▇ 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 ▇▇▇▇ ▇▇▇▇▇ (the "▇▇▇▇ ▇▇▇▇▇ Common Stock" or
-----------------------
"▇▇▇▇ ▇▇▇▇▇ Shares") equal to 19.9% of the outstanding shares of
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▇▇▇▇ ▇▇▇▇▇ 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 ▇▇▇▇ ▇▇▇▇▇'▇
willingness to enter into this Agreement, ▇▇▇▇ ▇▇▇▇▇ 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 ▇▇▇▇ ▇▇▇▇▇ Stock Option Agreement, the "Stock Option
------------
Agreements"), pursuant to which Kroger is granting to ▇▇▇▇ ▇▇▇▇▇ an
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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
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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 ▇▇▇▇
▇▇▇▇▇ 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
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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
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shall be merged with and into ▇▇▇▇ ▇▇▇▇▇ and the separate corporate
existence of Jobsite Holdings shall cease. ▇▇▇▇ ▇▇▇▇▇ 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
-----------
whollyowned 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
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place (i) at the offices of Fried, Frank, Harris, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇,
▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇▇, 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 ▇▇▇▇ ▇▇▇▇▇ shall agree (the date of the
Closing, the "Closing Date").
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(b) On the Closing Date, ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ 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 ▇▇▇▇ ▇▇▇▇▇ (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 ▇▇▇▇ ▇▇▇▇▇ 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 ▇▇▇▇ ▇▇▇▇▇ 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
▇▇▇▇ ▇▇▇▇▇ and Jobsite Holdings, by virtue of the Merger 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 ▇▇▇▇ ▇▇▇▇▇ Common Stock issued and
outstanding immediately prior to the Effective Time (excluding those
held in the treasury of ▇▇▇▇ ▇▇▇▇▇, 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,
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fully paid and nonassessable share of Kroger Common Stock. Holders
of Shares of ▇▇▇▇ ▇▇▇▇▇ 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 ▇▇▇▇
▇▇▇▇▇ 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 ▇▇▇▇ ▇▇▇▇▇ (the "Exchange Agent"), to
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effect the exchange of ▇▇▇▇ ▇▇▇▇▇ 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
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").
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(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 ▇▇▇▇ ▇▇▇▇▇ 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 ▇▇▇▇ ▇▇▇▇▇ 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 ▇▇▇▇ ▇▇▇▇▇ 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 ▇▇▇▇ ▇▇▇▇▇ 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 ▇▇▇▇ ▇▇▇▇▇ 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 ▇▇▇▇ ▇▇▇▇▇ 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 ▇▇▇▇ ▇▇▇▇▇ 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.
Section 2.6 Transfer Books
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The stock transfer books of ▇▇▇▇ ▇▇▇▇▇ shall be closed at the
Effective Time and no transfer of any ▇▇▇▇ ▇▇▇▇▇ Shares will
thereafter be recorded on any of the stock transfer books. In the
event of a transfer of ownership of any ▇▇▇▇ ▇▇▇▇▇ Shares that is not
registered in the stock transfer records of ▇▇▇▇ ▇▇▇▇▇ at the
Effective Time, a certificate or certificates representing the number
of full shares of Kroger Common Stock into which such ▇▇▇▇ ▇▇▇▇▇
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 ▇▇▇▇ ▇▇▇▇▇ 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 ▇▇▇▇ ▇▇▇▇▇ Shares who had not theretofore
surrendered certificates or certificates which immediately prior to
the Effective Time represented ▇▇▇▇ ▇▇▇▇▇ 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 ▇▇▇▇ ▇▇▇▇▇ 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 ▇▇▇▇ ▇▇▇▇▇ Shares
-------------------------------------
(a) Prior to the Effective Time, ▇▇▇▇ ▇▇▇▇▇ shall take all
action reasonably necessary with respect to each of the ▇▇▇▇ ▇▇▇▇▇
Benefit Plans (as defined) pursuant to which options to purchase ▇▇▇▇
▇▇▇▇▇ Shares (the "▇▇▇▇ ▇▇▇▇▇ Options") will be outstanding
------------------
immediately prior to the Effective Time such that as of and after the
Effective Time each ▇▇▇▇ ▇▇▇▇▇ 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 ▇▇▇▇ ▇▇▇▇▇ 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 ▇▇▇▇ ▇▇▇▇▇ Common Stock immediately prior to the
Effective Time divided by (y) the Exchange Ratio. Except as required
by the terms of such ▇▇▇▇ ▇▇▇▇▇ Option, (i) ▇▇▇▇ ▇▇▇▇▇ shall take no
action to cause any ▇▇▇▇ ▇▇▇▇▇ 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
▇▇▇▇ ▇▇▇▇▇ Option to become vested or exercisable.
(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 ▇▇▇▇ ▇▇▇▇▇ 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 ▇▇▇▇ ▇▇▇▇▇
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 ▇▇▇▇ ▇▇▇▇▇ Options a notice stating
the number of shares of Kroger Common Stock then covered by such ▇▇▇▇
▇▇▇▇▇ Options, the exercise price per share for each such share of
Kroger Common Stock and an acknowledgment that, except for the
conversion of the ▇▇▇▇ ▇▇▇▇▇ Options into options to purchase shares
of Kroger Common Stock as described in such notice, the provisions of
the ▇▇▇▇ ▇▇▇▇▇ Benefit Plans pursuant to which such ▇▇▇▇ ▇▇▇▇▇
Options were originally granted and the agreements evidencing the
grants of such ▇▇▇▇ ▇▇▇▇▇ 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 ▇▇▇▇ ▇▇▇▇▇ 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 ▇▇▇▇ ▇▇▇▇▇ 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 ▇▇▇▇ ▇▇▇▇▇ 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 ▇▇▇▇
▇▇▇▇▇ Options remain outstanding.
Section 2.9 Warrants to Purchase ▇▇▇▇ ▇▇▇▇▇ 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 ▇▇▇▇▇'▇ 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 ▇▇▇▇ ▇▇▇▇▇ 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").
----
Section 2.11 Certain Adjustments
-------------------
If between the date of this Agreement and the Effective Time,
the outstanding shares of ▇▇▇▇ ▇▇▇▇▇ 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 ▇▇▇▇ ▇▇▇▇▇ 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 ▇▇▇▇ ▇▇▇▇▇ 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 ▇▇▇▇ ▇▇▇▇▇ 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 ▇▇▇▇ ▇▇▇▇▇ to
Kroger (the "▇▇▇▇ ▇▇▇▇▇ Disclosure Letter"), ▇▇▇▇ ▇▇▇▇▇ hereby
----------------------------
represents and warrants to Kroger and Jobsite Holdings as follows:
Section 3.1 Organization and Qualification; Subsidiaries
--------------------------------------------
(a) ▇▇▇▇ ▇▇▇▇▇ is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Delaware. Each of the Subsidiaries of ▇▇▇▇ ▇▇▇▇▇ 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 ▇▇▇▇ ▇▇▇▇▇ 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 ▇▇▇▇ ▇▇▇▇▇ Material
Adverse Effect (as defined).
(b) All of the outstanding shares of capital stock and other
equity securities of the Subsidiaries of ▇▇▇▇ ▇▇▇▇▇ have been validly
issued and are fully paid and nonassessable, and are owned, directly
or indirectly, by ▇▇▇▇ ▇▇▇▇▇, 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 ▇▇▇▇ ▇▇▇▇▇ 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 ▇▇▇▇ ▇▇▇▇▇. The ▇▇▇▇ ▇▇▇▇▇ Disclosure Letter lists
the name and jurisdiction of incorporation or organization of each
Subsidiary of ▇▇▇▇ ▇▇▇▇▇.
(c) Except for interests in its Subsidiaries, neither ▇▇▇▇
▇▇▇▇▇ 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
---------------------------------------
▇▇▇▇ ▇▇▇▇▇ has furnished, or otherwise made available, to Kroger
a complete and correct copy of its Certificate of Incorporation (the
"▇▇▇▇ ▇▇▇▇▇ Certificate of Incorporation") and its bylaws, as amended
--------------------------------------
to the date of this Agreement. The ▇▇▇▇ ▇▇▇▇▇ Certificate of
Incorporation and the bylaws of ▇▇▇▇ ▇▇▇▇▇ are in full force and
effect. ▇▇▇▇ ▇▇▇▇▇ is not in violation of any of the provisions of
the ▇▇▇▇ ▇▇▇▇▇ Certificate of Incorporation or its bylaws.
Section 3.3 Capitalization
--------------
(a) The authorized capital stock of ▇▇▇▇ ▇▇▇▇▇ consists of
400,000,000 shares of ▇▇▇▇ ▇▇▇▇▇ Common Stock and 100,000,000 shares
of Preferred Stock, par value $.01 per share (the "▇▇▇▇ ▇▇▇▇▇
----------
Preferred Stock"). At the close of business on October 15, 1998 (the
---------------
"▇▇▇▇ ▇▇▇▇▇ Capital Stock Disclosure Date"), (i) 154,772,188 shares
----------------------------------------
of ▇▇▇▇ ▇▇▇▇▇ Common Stock, and no shares of ▇▇▇▇ ▇▇▇▇▇ Preferred
Stock, were issued and outstanding and (ii) no shares of ▇▇▇▇ ▇▇▇▇▇
Common Stock or ▇▇▇▇ ▇▇▇▇▇ Preferred Stock, were held by ▇▇▇▇ ▇▇▇▇▇
in its treasury. The ▇▇▇▇ ▇▇▇▇▇ Disclosure Letter lists the number
of shares of ▇▇▇▇ ▇▇▇▇▇ Common Stock and ▇▇▇▇ ▇▇▇▇▇ Preferred Stock
reserved for issuance as of the ▇▇▇▇ ▇▇▇▇▇ Capital Stock Disclosure
Date under each of the ▇▇▇▇ ▇▇▇▇▇ Benefit Plans (as defined) or
otherwise. Since the ▇▇▇▇ ▇▇▇▇▇ Capital Stock Disclosure Date until
the date of this Agreement, no shares of ▇▇▇▇ ▇▇▇▇▇ Common Stock or
▇▇▇▇ ▇▇▇▇▇ Preferred Stock have been issued or reserved for issuance,
except in respect of the exercise, conversion or exchange of ▇▇▇▇
▇▇▇▇▇ Equity Rights (as defined) outstanding as of the ▇▇▇▇ ▇▇▇▇▇
Capital Stock Disclosure Date and in connection with the ▇▇▇▇ ▇▇▇▇▇
Stock Option Agreement. For purposes of this Agreement, "▇▇▇▇ ▇▇▇▇▇
----------
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 ▇▇▇▇ ▇▇▇▇▇ or any of its Subsidiaries at any time, or upon the
happening of any stated event, any shares of the capital stock of
▇▇▇▇ ▇▇▇▇▇. The ▇▇▇▇ ▇▇▇▇▇ Disclosure Letter sets forth the number
and type of ▇▇▇▇ ▇▇▇▇▇ Equity Rights (including the number and class
of ▇▇▇▇ ▇▇▇▇▇'▇ capital stock for or into which the ▇▇▇▇ ▇▇▇▇▇ Equity
Rights are exercisable, convertible or exchangeable and any ▇▇▇▇
▇▇▇▇▇ Benefit Plan pursuant to which such ▇▇▇▇ ▇▇▇▇▇ Equity Rights
were granted or issued) outstanding as of the ▇▇▇▇ ▇▇▇▇▇ Capital
Stock Disclosure Date. Other than (i) the ▇▇▇▇ ▇▇▇▇▇ Equity Rights
disclosed in the ▇▇▇▇ ▇▇▇▇▇ Disclosure Letter; (ii) ▇▇▇▇ ▇▇▇▇▇ Equity
Rights granted pursuant to the ▇▇▇▇ ▇▇▇▇▇ Stock Option Agreement and
(iii) a warrant for 3,869,366 shares of ▇▇▇▇ ▇▇▇▇▇ Common Stock, ▇▇▇▇
▇▇▇▇▇ does not have outstanding any ▇▇▇▇ ▇▇▇▇▇ Equity Rights as of
the date of this Agreement. Except as disclosed in the ▇▇▇▇ ▇▇▇▇▇
SEC Reports (as defined), no stockholders of ▇▇▇▇ ▇▇▇▇▇ are party to
any voting agreement, voting trust or similar arrangement with
respect to ▇▇▇▇ ▇▇▇▇▇ Shares to which ▇▇▇▇ ▇▇▇▇▇ or any Subsidiary of
▇▇▇▇ ▇▇▇▇▇ is a Party.
(b) There are no outstanding obligations of ▇▇▇▇ ▇▇▇▇▇ or any
of its Subsidiaries to repurchase, redeem or otherwise acquire any
shares of ▇▇▇▇ ▇▇▇▇▇ Common Stock or any ▇▇▇▇ ▇▇▇▇▇ Equity Rights
(except in connection with the exercise, conversion or exchange of
outstanding ▇▇▇▇ ▇▇▇▇▇ Equity Rights). All of the issued and
outstanding shares of ▇▇▇▇ ▇▇▇▇▇ Common Stock are validly issued,
fully paid, nonassessable and free of preemptive rights. No shares
of ▇▇▇▇ ▇▇▇▇▇ Common Stock have been repurchased by ▇▇▇▇ ▇▇▇▇▇ or any
of its Subsidiaries since October 1, 1996.
Section 3.4 Power and Authority; Authorization; Valid &
--------------------------------------------
Binding
-------
▇▇▇▇ ▇▇▇▇▇ 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 ▇▇▇▇ ▇▇▇▇▇ s stockholders as required by
the DGCL. The execution and delivery of this Agreement and the Stock
Option Agreements by ▇▇▇▇ ▇▇▇▇▇, the performance by it of its
obligations hereunder and thereunder and the consummation by ▇▇▇▇
▇▇▇▇▇ of the transactions contemplated hereby and thereby, have been
duly authorized by all necessary corporate action on the part of ▇▇▇▇
▇▇▇▇▇ (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
Agreements have been duly executed and delivered by ▇▇▇▇ ▇▇▇▇▇ 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 ▇▇▇▇ ▇▇▇▇▇ 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 ▇▇▇▇ ▇▇▇▇▇ does not, and the performance by ▇▇▇▇
▇▇▇▇▇ of its obligations hereunder and thereunder and the
consummation by ▇▇▇▇ ▇▇▇▇▇ of the transactions contemplated hereby,
and thereby will not, (i) violate or conflict with the ▇▇▇▇ ▇▇▇▇▇
Certificate of Incorporation or the bylaws of ▇▇▇▇ ▇▇▇▇▇, (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 ▇▇▇▇ ▇▇▇▇▇ 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 ▇▇▇▇ ▇▇▇▇▇ 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, ▇▇▇▇ ▇▇▇▇▇ or any of its Subsidiaries), require the consent of
any other party to, or result in any obligation on the part of ▇▇▇▇
▇▇▇▇▇ 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 ▇▇▇▇ ▇▇▇▇▇ or any of
its Subsidiaries is a party or by which ▇▇▇▇ ▇▇▇▇▇, 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 ▇▇▇▇ ▇▇▇▇▇ Material Adverse Effect.
(b) Except for applicable requirements, if any, under the
premerger notification requirements of the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇
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 with respect to the environmental permits of ▇▇▇▇ ▇▇▇▇▇
or its Subsidiaries, filings or other actions required pursuant to
the rules and regulations of any stock exchange on which the ▇▇▇▇
▇▇▇▇▇ Shares are listed, and approval of stockholders under the DGCL
or under the rules and regulations of the NYSE, neither ▇▇▇▇ ▇▇▇▇▇
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
▇▇▇▇ ▇▇▇▇▇ 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 ▇▇▇▇ ▇▇▇▇▇ 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 ▇▇▇▇ ▇▇▇▇▇ Material Adverse Effect.
Section 3.6 SEC Reports; Financial Statements
---------------------------------
(a) ▇▇▇▇ ▇▇▇▇▇ 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 "▇▇▇▇ ▇▇▇▇▇ SEC Reports"), and, with respect to the ▇▇▇▇
----------------------
▇▇▇▇▇ SEC Reports filed by ▇▇▇▇ ▇▇▇▇▇ after the date hereof and prior
to the Closing Date, will deliver or make available to Kroger all of
its ▇▇▇▇ ▇▇▇▇▇ SEC Reports in the form filed with the SEC. The ▇▇▇▇
▇▇▇▇▇ SEC Reports (i) were (and any ▇▇▇▇ ▇▇▇▇▇ 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 ▇▇▇▇
▇▇▇▇▇ 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 ▇▇▇▇ ▇▇▇▇▇ SEC Reports (or incorporated
therein by reference) fairly present in all material respects (or,
with respect to financial statements contained in the ▇▇▇▇ ▇▇▇▇▇ SEC
Reports filed after this date, will fairly present in all material
respects) the consolidated financial position of ▇▇▇▇ ▇▇▇▇▇ and its
consolidated subsidiaries as of the respective dates and the
consolidated results of operations, retained earnings and cash flows
of ▇▇▇▇ ▇▇▇▇▇ 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 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 ▇▇▇▇ ▇▇▇▇▇ SEC Reports filed prior to
this date, (a) since the end of ▇▇▇▇ ▇▇▇▇▇ s fiscal year last ended,
▇▇▇▇ ▇▇▇▇▇ 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 ▇▇▇▇ ▇▇▇▇▇ 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 ▇▇▇▇ ▇▇▇▇▇ Material
Adverse Effect and (b) since the end of ▇▇▇▇ ▇▇▇▇▇ 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 ▇▇▇▇ ▇▇▇▇▇; (ii) any change by ▇▇▇▇ ▇▇▇▇▇ 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 ▇▇▇▇ ▇▇▇▇▇ 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 ▇▇▇▇ ▇▇▇▇▇ 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 ▇▇▇▇ ▇▇▇▇▇ or its Subsidiaries material to ▇▇▇▇ ▇▇▇▇▇ 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
▇▇▇▇ ▇▇▇▇▇ 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 ▇▇▇▇ ▇▇▇▇▇ 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.
Section 3.8 Litigation and Liabilities
--------------------------
(a) Except as disclosed in the ▇▇▇▇ ▇▇▇▇▇ 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 ▇▇▇▇ ▇▇▇▇▇, hearings or
investigations, pending or, to the knowledge of ▇▇▇▇ ▇▇▇▇▇,
threatened against ▇▇▇▇ ▇▇▇▇▇ 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 ▇▇▇▇ ▇▇▇▇▇ Material Adverse Effect.
(b) Neither ▇▇▇▇ ▇▇▇▇▇ 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 ▇▇▇▇ ▇▇▇▇▇ Material Adverse Effect
except (i) liabilities described in the ▇▇▇▇ ▇▇▇▇▇ SEC Reports filed
with the SEC prior to the date hereof or reflected on ▇▇▇▇ ▇▇▇▇▇ s
consolidated balance sheet (and related notes thereto) as of the end
of its most recently completed fiscal year filed in the ▇▇▇▇ ▇▇▇▇▇
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 ▇▇▇▇ ▇▇▇▇▇ 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 ▇▇▇▇ ▇▇▇▇▇ 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
▇▇▇▇ ▇▇▇▇▇ Material Adverse Effect. Neither ▇▇▇▇ ▇▇▇▇▇ 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 ▇▇▇▇ ▇▇▇▇▇
Material Adverse Effect, nor to the knowledge of ▇▇▇▇ ▇▇▇▇▇, has ▇▇▇▇
▇▇▇▇▇ 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 ▇▇▇▇ ▇▇▇▇▇ Disclosure Letter is a complete
list of each ▇▇▇▇ ▇▇▇▇▇ Benefit Plan and each ▇▇▇▇ ▇▇▇▇▇
Multiemployer Plan. The term "▇▇▇▇ ▇▇▇▇▇ 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 ▇▇▇▇ ▇▇▇▇▇ or any Subsidiary of ▇▇▇▇
▇▇▇▇▇ has or may have any liability (accrued, contingent or
otherwise). The term "▇▇▇▇ ▇▇▇▇▇ Multiemployer Plan" shall mean any
----------------------------
"multiemployer plan" within the meaning of Section 4001(a)(3) of
ERISA in respect to which ▇▇▇▇ ▇▇▇▇▇ or any Subsidiary of ▇▇▇▇ ▇▇▇▇▇
has or may have any liability (accrued, contingent or otherwise).
(b) ▇▇▇▇ ▇▇▇▇▇ has used all commercially reasonable efforts to
provide or make available to Kroger (i) current, accurate and
complete copies of all documents embodying each ▇▇▇▇ ▇▇▇▇▇ Benefit
Plan, including all amendments, written interpretations (which could
be regarded as increasing the liabilities of ▇▇▇▇ ▇▇▇▇▇) and all
trust or funding arrangements with respect thereto; (ii) the most
recent annual actuarial valuation, if any, prepared for each ▇▇▇▇
▇▇▇▇▇ Benefit Plan; (iii) the most recent annual report (Series 5500
and all schedules), if any, required under ERISA in connection with
each ▇▇▇▇ ▇▇▇▇▇ Benefit Plan or related trust; (iv) the most recent
determination letter received from the Internal Revenue Service, if
any, for each ▇▇▇▇ ▇▇▇▇▇ Benefit Plan and related trust which is
intended to satisfy the requirements of Section 401(a) of the Code;
(v) if any ▇▇▇▇ ▇▇▇▇▇ Benefit Plan is funded, the most recent annual
and periodic accounting of such ▇▇▇▇ ▇▇▇▇▇ 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 ▇▇▇▇ ▇▇▇▇▇ 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 ▇▇▇▇ ▇▇▇▇▇ or any Subsidiary of ▇▇▇▇ ▇▇▇▇▇ (each, a "▇▇▇▇
----
▇▇▇▇▇ Employee" and collectively, the "▇▇▇▇ ▇▇▇▇▇ Employees")
-------------- --------------------
relating to each ▇▇▇▇ ▇▇▇▇▇ Benefit Plan (which communication could
be regarded as increasing the liabilities of ▇▇▇▇ ▇▇▇▇▇ and its
Subsidiaries taken as a whole under the relevant ▇▇▇▇ ▇▇▇▇▇ Benefit
Plan). The liabilities arising under those documents that ▇▇▇▇ ▇▇▇▇▇
has been unable to produce, to the extent not reflected in ▇▇▇▇
▇▇▇▇▇ s financial statements, would not reasonably be expected to
have a ▇▇▇▇ ▇▇▇▇▇ Material Adverse Effect.
(c) All ▇▇▇▇ ▇▇▇▇▇ 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 ▇▇▇▇ ▇▇▇▇▇ Material Adverse
Effect. Each ▇▇▇▇ ▇▇▇▇▇ 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 "▇▇▇▇ ▇▇▇▇▇ Pension Plan"), has received a
-----------------------
favorable determination letter from the Internal Revenue Service, and
▇▇▇▇ ▇▇▇▇▇ 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 ▇▇▇▇ ▇▇▇▇▇ Disclosure
Letter or in the ▇▇▇▇ ▇▇▇▇▇ SEC Reports filed prior to this date,
there is no pending or, to ▇▇▇▇ ▇▇▇▇▇ s knowledge, threatened, claim,
litigation, proceeding, audit, examination or investigation relating
to any ▇▇▇▇ ▇▇▇▇▇ Benefit Plans or any ▇▇▇▇ ▇▇▇▇▇ Employees that,
individually or in the aggregate, would reasonably be expected to
have a ▇▇▇▇ ▇▇▇▇▇ Material Adverse Effect. With respect to the
Voluntary Compliance Resolution filing with the Internal Revenue
Service for the ▇▇▇▇▇ s Food 4 Less Employee Stock Ownership Plan,
the ▇▇▇▇▇ s UFCW Employee Stock Ownership Plan and the ▇▇▇▇▇ s
Teamsters Employee Stock Ownership Plan, ▇▇▇▇ ▇▇▇▇▇ expects that the
matter will be resolved without having a ▇▇▇▇ ▇▇▇▇▇ Material Adverse
Effect.
(d) No material liability under Title IV of ERISA has been or
is reasonably expected to be incurred by ▇▇▇▇ ▇▇▇▇▇ or any
Subsidiaries of ▇▇▇▇ ▇▇▇▇▇ or any entity which is considered a single
employer with ▇▇▇▇ ▇▇▇▇▇ or any Subsidiary of ▇▇▇▇ ▇▇▇▇▇ under
Section 4001(a)(15) of ERISA or Section 414 of the Code (an "▇▇▇▇
----
▇▇▇▇▇ 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 ▇▇▇▇ ▇▇▇▇▇ 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 ▇▇▇▇ ▇▇▇▇▇
Benefit Plan have been made. No ▇▇▇▇ ▇▇▇▇▇ 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
▇▇▇▇ ▇▇▇▇▇ nor any Subsidiaries of ▇▇▇▇ ▇▇▇▇▇ nor any ▇▇▇▇ ▇▇▇▇▇
ERISA Affiliate has provided, or is required to provide, security to
any ▇▇▇▇ ▇▇▇▇▇ Pension Plan pursuant to Section 401(a)(29) of the
Code.
(f) As of the Closing Date, neither ▇▇▇▇ ▇▇▇▇▇, any Subsidiary
of ▇▇▇▇ ▇▇▇▇▇ nor any ▇▇▇▇ ▇▇▇▇▇ 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 ▇▇▇▇ ▇▇▇▇▇, any
Subsidiary of ▇▇▇▇ ▇▇▇▇▇ nor any ▇▇▇▇ ▇▇▇▇▇ ERISA Affiliate has
knowledge that any ▇▇▇▇ ▇▇▇▇▇ 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 ▇▇▇▇ ▇▇▇▇▇ Multiemployer Plan becoming insolvent or going
into reorganization.
(g) Except as set forth in the ▇▇▇▇ ▇▇▇▇▇ 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 ▇▇▇▇ ▇▇▇▇▇ Benefit Plan, trust or loan that will or may 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 ▇▇▇▇
▇▇▇▇▇ Employee, or (ii) result in the triggering or imposition of any
restrictions or limitations on the right of ▇▇▇▇ ▇▇▇▇▇, any
Subsidiary of ▇▇▇▇ ▇▇▇▇▇ or Kroger to amend or terminate any ▇▇▇▇
▇▇▇▇▇ Benefit Plan. Except as set forth in the ▇▇▇▇ ▇▇▇▇▇ Disclosure
Letter, no payment or benefit which will or may be made by ▇▇▇▇
▇▇▇▇▇, any Subsidiary of ▇▇▇▇ ▇▇▇▇▇, Kroger or any of their
respective affiliates with respect to any ▇▇▇▇ ▇▇▇▇▇ 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 ▇▇▇▇ ▇▇▇▇▇ 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
▇▇▇▇ ▇▇▇▇▇ Material Adverse Effect, no work stoppage, slowdown,
lockout or labor strike against ▇▇▇▇ ▇▇▇▇▇ or any Subsidiary of ▇▇▇▇
▇▇▇▇▇ by ▇▇▇▇ ▇▇▇▇▇ Employees (or any union that represents them) is
pending or, to the knowledge of ▇▇▇▇ ▇▇▇▇▇, threatened.
(b) Except as set forth in the ▇▇▇▇ ▇▇▇▇▇ SEC Reports filed
prior to this date and as, individually or in the aggregate, would
not reasonably be expected to have a ▇▇▇▇ ▇▇▇▇▇ Material Adverse
Effect, as of the date of this Agreement, neither ▇▇▇▇ ▇▇▇▇▇ nor any
Subsidiary of ▇▇▇▇ ▇▇▇▇▇ is involved in or, to the knowledge of ▇▇▇▇
▇▇▇▇▇, threatened with, any labor dispute, grievance, arbitration or
union organizing activity (by it or any of its employees) involving
any ▇▇▇▇ ▇▇▇▇▇ Employees.
Section 3.12 Environmental Matters
---------------------
Except as set forth in the ▇▇▇▇ ▇▇▇▇▇ 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 ▇▇▇▇ ▇▇▇▇▇
Material Adverse Effect:
(i) ▇▇▇▇ ▇▇▇▇▇ and each of its Subsidiaries is in compliance
with all applicable Environmental Laws, and neither ▇▇▇▇ ▇▇▇▇▇ nor
any of its Subsidiaries has received any written communication from
any Person or Governmental Entity that alleges that ▇▇▇▇ ▇▇▇▇▇ or any
of its Subsidiaries is not in compliance with applicable
Environmental Laws.
(ii) ▇▇▇▇ ▇▇▇▇▇ 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 ▇▇▇▇ ▇▇▇▇▇ and its Subsidiaries are in
compliance with all terms and conditions of such Environmental
Permits.
(iii) There is no Environmental Claim (as defined) pending
or, to the knowledge of ▇▇▇▇ ▇▇▇▇▇, threatened (i) against ▇▇▇▇ ▇▇▇▇▇
or any of its Subsidiaries, (ii) against any Person whose liability
for any Environmental Claim has been retained or assumed
contractually by ▇▇▇▇ ▇▇▇▇▇ or any of its Subsidiaries, or (iii)
against any real or personal property or operations which ▇▇▇▇ ▇▇▇▇▇
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 ▇▇▇▇ ▇▇▇▇▇ or any of its
Subsidiaries, or against any Person whose liability for any
Environmental Claim has been retained or assumed contractually by
▇▇▇▇ ▇▇▇▇▇ or any of its Subsidiaries.
(v) None of the properties owned, leased or operated by ▇▇▇▇
▇▇▇▇▇, 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, 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) ▇▇▇▇ ▇▇▇▇▇'▇ 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 ▇▇▇▇ ▇▇▇▇▇ 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 ▇▇▇▇ ▇▇▇▇▇ Stock Option Agreement (including the
purchase of shares of ▇▇▇▇ ▇▇▇▇▇ Common Stock thereunder) or any of
the transactions contemplated hereby or thereby. In connection with
each ▇▇▇▇ ▇▇▇▇▇ 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 ▇▇▇▇
▇▇▇▇▇ 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 ▇▇▇▇ ▇▇▇▇▇ 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 ▇▇▇▇ ▇▇▇▇▇ s
capital stock required to approve this Agreement and the transactions
contemplated hereby.
Section 3.14 Opinion of Financial Advisor
----------------------------
▇▇▇▇ ▇▇▇▇▇ or its Board of Directors has received the opinion of
▇▇▇▇▇▇▇ ▇▇▇▇▇ Barney Inc. and ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ 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 ▇▇▇▇
▇▇▇▇▇ Common Stock from a financial point of view.
Section 3.15 Brokers
-------
Set forth in the ▇▇▇▇ ▇▇▇▇▇ 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 ▇▇▇▇ ▇▇▇▇▇
or any of its Subsidiaries and the expected amounts of such fees and
commissions. ▇▇▇▇ ▇▇▇▇▇ 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 ▇▇▇▇ ▇▇▇▇▇ 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 ▇▇▇▇
▇▇▇▇▇ 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 ▇▇▇▇ ▇▇▇▇▇
Disclosure Letter) or (ii) are adequately reflected as a liability on
▇▇▇▇ ▇▇▇▇▇ 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, ▇▇▇▇
▇▇▇▇▇ 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) ▇▇▇▇ ▇▇▇▇▇ 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 ▇▇▇▇ ▇▇▇▇▇, 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 ▇▇▇▇ ▇▇▇▇▇ s or any of its Subsidiaries' Tax liability
that (x) were raised by any Taxing authority in a communication to
▇▇▇▇ ▇▇▇▇▇ or any Subsidiary and (y) would be, individually or in the
aggregate, material to ▇▇▇▇ ▇▇▇▇▇ 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 ▇▇▇▇ ▇▇▇▇▇ SEC Reports
filed prior to this date.
(f) ▇▇▇▇ ▇▇▇▇▇ 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 ▇▇▇▇ ▇▇▇▇▇ and its
Subsidiaries for each of its fiscal years ended on or about January
31, 1996, 1997 and 1998.
(g) ▇▇▇▇ ▇▇▇▇▇ 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 ▇▇▇▇ ▇▇▇▇▇ nor any of its Subsidiaries currently utilizes, or
to the knowledge of the general counsel and members of the legal
department of ▇▇▇▇ ▇▇▇▇▇ involved in intellectual property, has in
the past utilized, any existing or pending patent, trademark, trade
name, service ▇▇▇▇, copyright, software, trade secret or know-how,
except for those which are owned, possessed or lawfully used by ▇▇▇▇
▇▇▇▇▇ or its Subsidiaries in their business operations, and neither
▇▇▇▇ ▇▇▇▇▇ nor any of its Subsidiaries infringes upon or unlawfully
uses any patent, trademark, trade name, service ▇▇▇▇, 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 ▇▇▇▇ ▇▇▇▇▇ Material Adverse Effect. ▇▇▇▇ ▇▇▇▇▇
and 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 ▇▇▇▇ ▇▇▇▇▇ Material Adverse Effect.
Section 3.18 Insurance
---------
Except to the extent adequately accrued on the most recent
balance sheet contained in the ▇▇▇▇ ▇▇▇▇▇ SEC Reports filed as of
this date, neither ▇▇▇▇ ▇▇▇▇▇ 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 ▇▇▇▇ ▇▇▇▇▇ Material Adverse Effect.
Section 3.19 Contracts and Commitments
-------------------------
Set forth in the ▇▇▇▇ ▇▇▇▇▇ Disclosure Letter is a complete and
accurate list of all of the following contracts (written or oral),
plans, undertakings, commitments or agreements ("▇▇▇▇ ▇▇▇▇▇
----------
Contracts") to which ▇▇▇▇ ▇▇▇▇▇ 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 ▇▇▇▇ ▇▇▇▇▇ or any of its Subsidiaries material
to ▇▇▇▇ ▇▇▇▇▇ 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 ▇▇▇▇ ▇▇▇▇▇ Contracts,
as amended to date, that would be required to be filed as exhibits to
▇▇▇▇ ▇▇▇▇▇ s Form 10-K if such Form 10-K were being filed on this
date, that have not been filed prior to the date hereof as Exhibits
to the ▇▇▇▇ ▇▇▇▇▇ SEC Reports have been delivered or made available
to Kroger.
Each ▇▇▇▇ ▇▇▇▇▇ Contract is valid and binding on ▇▇▇▇ ▇▇▇▇▇, and
any Subsidiary of ▇▇▇▇ ▇▇▇▇▇ which is a party thereto and, to the
knowledge of ▇▇▇▇ ▇▇▇▇▇, each other party thereto and is in full
force and effect, and ▇▇▇▇ ▇▇▇▇▇ and its Subsidiaries have performed
and complied with all obligations required to be performed or
compiled with by them under each ▇▇▇▇ ▇▇▇▇▇ Contract, except in each
case as would not, individually or in the aggregate, reasonably be
expected to have a ▇▇▇▇ ▇▇▇▇▇ Material Adverse Effect.
Section 3.20 Accounting and Tax Matters
--------------------------
Neither ▇▇▇▇ ▇▇▇▇▇ nor any of its affiliates has taken or agreed
to take any action, nor does ▇▇▇▇ ▇▇▇▇▇ have any knowledge of any
fact or circumstance with respect to ▇▇▇▇ ▇▇▇▇▇, 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
-----------------------------
▇▇▇▇ 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 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 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, 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 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
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 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, 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, 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),
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 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.
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.
(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;
(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 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 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, 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 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
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);
(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 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
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.
(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:
(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:
(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
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 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.
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.
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.
(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 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 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.
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 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
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 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 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%."
(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.
(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
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 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," "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 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.
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:
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Name:
Title:
JOBSITE HOLDINGS, INC.
By:
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Name:
Title:
FRED MEYER, INC.
By:
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Name:
Title: