-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GN3bIFq1khLcjRozKZQlsmvfaw3ENo4TzPr6Bzd80eDVlGshrXVO2weTN5XfUMON FKfilD6JXd+RDNH8dMjOlw== 0000850309-97-000021.txt : 19970922 0000850309-97-000021.hdr.sgml : 19970922 ACCESSION NUMBER: 0000850309-97-000021 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 19970919 SROS: NYSE GROUP MEMBERS: YUCAIPA ARIZONA PARTNERS, L.P. GROUP MEMBERS: YUCAIPA COMPANIES GROUP MEMBERS: YUCAIPA SMITTY'S PARTNERS II, L.P. GROUP MEMBERS: YUCAIPA SMITTY'S PARTNERS, L.P. GROUP MEMBERS: YUCAIPA SSV PARTNERS, L.P. SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: FRED MEYER INC CENTRAL INDEX KEY: 0001043273 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-DEPARTMENT STORES [5311] IRS NUMBER: 911826443 STATE OF INCORPORATION: DE FISCAL YEAR END: 0201 FILING VALUES: FORM TYPE: SC 13D SEC ACT: SEC FILE NUMBER: 005-51581 FILM NUMBER: 97683344 BUSINESS ADDRESS: STREET 1: 3800 SE 22ND AVENUE CITY: PORTLAND STATE: OR ZIP: 97202 BUSINESS PHONE: 5032328844 MAIL ADDRESS: STREET 1: 3800 SE 22ND AVENUE CITY: PORTLAND STATE: OR ZIP: 97202 FORMER COMPANY: FORMER CONFORMED NAME: MEYER SMITH HOLDCO INC DATE OF NAME CHANGE: 19970730 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: YUCAIPA COMPANIES CENTRAL INDEX KEY: 0001015905 STANDARD INDUSTRIAL CLASSIFICATION: [] FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 10000 STREET 2: 10000 SANTA MONICA BOULEVARD 5TH FLOOR CITY: LOS ANGELES STATE: CA ZIP: 90067 BUSINESS PHONE: 3107897800 SC 13D 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 _________________________________________ SCHEDULE 13D (RULE 13D-101) UNDER THE SECURITIES EXCHANGE ACT OF 1934 FRED MEYER, INC. (Name of Issuer) Common Stock, $.01 Par Value (Title of Class of Securities) 592907-10-9 (CUSIP Number) Robert P. Bermingham The Yucaipa Companies 10000 Santa Monica Boulevard, Fifth Floor Los Angeles, California 90067 (310) 789-7200 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) September 9, 1997 (Date of Event which Requires Filing of This Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(b)(3) or (4), check the following box: [_] The information required in the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 (the "Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). (Continued on following pages) (Page 1 of 14 Pages) - - ----------------------- ------------------ CUSIP NO. 592907-10-9 SCHEDULE 13D PAGE 2 OF 14 - - ----------------------- ------------------ - - --------------------------------------------------------------------------- NAME OF REPORTING PERSON 1 The Yucaipa Companies - - --------------------------------------------------------------------------- CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP 2 (a) [X] (b) [_] - - --------------------------------------------------------------------------- SEC USE ONLY 3 - - --------------------------------------------------------------------------- SOURCE OF FUNDS 4 NA - - --------------------------------------------------------------------------- CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED 5 PURSUANT TO ITEMS 2(d) or 2(e) [_] - - --------------------------------------------------------------------------- CITIZENSHIP OR PLACE OF ORGANIZATION 6 California - - --------------------------------------------------------------------------- SOLE VOTING POWER 7 NUMBER OF 2,144,683 SHARES ---------------------------------------------------------- SHARED VOTING POWER BENEFICIALLY 8 2,154,403 OWNED BY ---------------------------------------------------------- EACH SOLE DISPOSITIVE POWER 9 REPORTING 2,144,683 PERSON ---------------------------------------------------------- SHARED DISPOSITIVE POWER WITH 10 2,154,403 - - --------------------------------------------------------------------------- AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 11 4,299,086 - - --------------------------------------------------------------------------- CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES 12 [_] - - --------------------------------------------------------------------------- PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 13 9.4% - - --------------------------------------------------------------------------- TYPE OF REPORTING PERSON 14 PN - - --------------------------------------------------------------------------- - - ----------------------- ------------------ CUSIP NO. 592907-10-9 SCHEDULE 13D PAGE 3 OF 14 - - ----------------------- ------------------ - - --------------------------------------------------------------------------- NAME OF REPORTING PERSON 1 Yucaipa Arizona Partners, L.P. - - --------------------------------------------------------------------------- CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP 2 (a) [X] (b) [_] - - --------------------------------------------------------------------------- SEC USE ONLY 3 - - --------------------------------------------------------------------------- SOURCE OF FUNDS 4 NA - - --------------------------------------------------------------------------- CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED 5 PURSUANT TO ITEMS 2(d) or 2(e) [_] - - --------------------------------------------------------------------------- CITIZENSHIP OR PLACE OF ORGANIZATION 6 California - - --------------------------------------------------------------------------- SOLE VOTING POWER 7 NUMBER OF 287,261 SHARES ---------------------------------------------------------- SHARED VOTING POWER BENEFICIALLY 8 0 OWNED BY ---------------------------------------------------------- EACH SOLE DISPOSITIVE POWER 9 REPORTING 287,261 PERSON ---------------------------------------------------------- SHARED DISPOSITIVE POWER WITH 10 0 - - --------------------------------------------------------------------------- AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 11 287,261 - - --------------------------------------------------------------------------- CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES 12 [_] - - --------------------------------------------------------------------------- PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 13 0.7% - - --------------------------------------------------------------------------- TYPE OF REPORTING PERSON 14 PN - - --------------------------------------------------------------------------- - - ----------------------- ------------------ CUSIP NO. 592907-10-9 SCHEDULE 13D PAGE 4 OF 14 - - ----------------------- ------------------ - - --------------------------------------------------------------------------- NAME OF REPORTING PERSON 1 Yucaipa Smitty's Partner's, L.P. - - --------------------------------------------------------------------------- CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP 2 (a) [X] (b) [_] - - --------------------------------------------------------------------------- SEC USE ONLY 3 - - --------------------------------------------------------------------------- SOURCE OF FUNDS 4 NA - - --------------------------------------------------------------------------- CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED 5 PURSUANT TO ITEMS 2(d) or 2(e) [_] - - --------------------------------------------------------------------------- CITIZENSHIP OR PLACE OF ORGANIZATION 6 California - - --------------------------------------------------------------------------- SOLE VOTING POWER 7 NUMBER OF 315,700 SHARES ---------------------------------------------------------- SHARED VOTING POWER BENEFICIALLY 8 0 OWNED BY ---------------------------------------------------------- EACH SOLE DISPOSITIVE POWER 9 REPORTING 315,700 PERSON ---------------------------------------------------------- SHARED DISPOSITIVE POWER WITH 10 0 - - --------------------------------------------------------------------------- AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 11 315,700 - - --------------------------------------------------------------------------- CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES 12 [_] - - --------------------------------------------------------------------------- PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 13 0.7% - - --------------------------------------------------------------------------- TYPE OF REPORTING PERSON 14 PN - - --------------------------------------------------------------------------- - - ----------------------- ------------------ CUSIP NO. 592907-10-9 SCHEDULE 13D PAGE 5 OF 14 - - ----------------------- ------------------ - - --------------------------------------------------------------------------- NAME OF REPORTING PERSON 1 Yucaipa Smitty's Partners II, L.P. - - --------------------------------------------------------------------------- CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP 2 (a) [X] (b) [_] - - --------------------------------------------------------------------------- SEC USE ONLY 3 - - --------------------------------------------------------------------------- SOURCE OF FUNDS 4 NA - - --------------------------------------------------------------------------- CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED 5 PURSUANT TO ITEMS 2(d) or 2(e) [_] - - --------------------------------------------------------------------------- CITIZENSHIP OR PLACE OF ORGANIZATION 6 California - - --------------------------------------------------------------------------- SOLE VOTING POWER 7 NUMBER OF 143,632 SHARES ---------------------------------------------------------- SHARED VOTING POWER BENEFICIALLY 8 0 OWNED BY ---------------------------------------------------------- EACH SOLE DISPOSITIVE POWER 9 REPORTING 143,632 PERSON ---------------------------------------------------------- SHARED DISPOSITIVE POWER WITH 10 0 - - --------------------------------------------------------------------------- AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 11 143,632 - - --------------------------------------------------------------------------- CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES 12 [_] - - --------------------------------------------------------------------------- PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 13 0.3% - - --------------------------------------------------------------------------- TYPE OF REPORTING PERSON 14 PN - - --------------------------------------------------------------------------- - - ----------------------- ------------------ CUSIP NO. 592907-10-9 SCHEDULE 13D PAGE 6 OF 14 - - ----------------------- ------------------ - - --------------------------------------------------------------------------- NAME OF REPORTING PERSON 1 Yucaipa SSV Partners, L.P. - - --------------------------------------------------------------------------- CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP 2 (a) [X] (b) [_] - - --------------------------------------------------------------------------- SEC USE ONLY 3 - - --------------------------------------------------------------------------- SOURCE OF FUNDS 4 NA - - --------------------------------------------------------------------------- CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED 5 PURSUANT TO ITEMS 2(d) or 2(e) [_] - - --------------------------------------------------------------------------- CITIZENSHIP OR PLACE OF ORGANIZATION 6 California - - --------------------------------------------------------------------------- SOLE VOTING POWER 7 NUMBER OF 1,407,810 SHARES ---------------------------------------------------------- SHARED VOTING POWER BENEFICIALLY 8 0 OWNED BY ---------------------------------------------------------- EACH SOLE DISPOSITIVE POWER 9 REPORTING 1,407,810 PERSON ---------------------------------------------------------- SHARED DISPOSITIVE POWER WITH 10 0 - - --------------------------------------------------------------------------- AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 11 1,407,810 - - --------------------------------------------------------------------------- CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES 12 [_] - - --------------------------------------------------------------------------- PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 13 3.2% - - --------------------------------------------------------------------------- TYPE OF REPORTING PERSON 14 PN - - --------------------------------------------------------------------------- ITEM 1. SECURITY AND ISSUER. This statement relates to the Common Stock, par value $.01 per share (the "Common Stock"), of Fred Meyer, Inc., a Delaware Corporation formerly known as Meyer-Smith Holdco, Inc. (the "Company"). The principal executive offices of the Company are located at 3800 SE 22nd Avenue, Portland, Oregon 97202. ITEM 2. IDENTITY AND BACKGROUND. (a) This statement is being filed jointly by (i) The Yucaipa Companies, a California general partnership ("Yucaipa"), (ii) Yucaipa Arizona Partners, L.P., California limited partnership ("Arizona Partners"), (iii) Yucaipa Smitty's Partners, L.P., a California limited partnership ("Smitty's Partners"), (iv) Yucaipa Smitty's Partners II, L.P., a California limited partnership ("Smitty's Partners II") and (v) Yucaipa SSV Partners, L.P., a California limited partnership ("SSV Partners" and, together with Yucaipa, Arizona Partners, Smitty's Partners and Smitty's Partners II, the "Reporting Persons"). Yucaipa is the sole general partner of each of Arizona Partners, Smitty's Partners, Smitty's Partners II and SSV Partners. Ronald W. Burkle, Patrick L. Graham, Ira L. Tochner, Robert I. Bernstein, Lawrence K. Kalantari, Darren W. Karst and Linda McLoughlin Figel are the general partners of Yucaipa. (b) The address of the principal business and principal office of each of the Reporting Persons is 10000 Santa Monica Boulevard, Fifth Floor, Los Angeles, California 90067. The business address of Ronald W. Burkle, Patrick L. Graham, Ira L. Tochner, Robert I. Bernstein, Lawrence K. Kalantari and Linda McLoughlin Figel is 10000 Santa Monica Boulevard, Fifth Floor, Los Angeles, California 90067. The business address of Darren W. Karst is 505 Railroad Avenue, Northlake, Illinois 60164. (c) The principal business of Yucaipa is acquiring, investing in and/or managing supermarket and other companies. The principal business of Arizona Partners, Smitty's Partners, Smitty's Partners II and SSV Partners is investing in the Common Stock of the Company. The present principal occupation or employment of each of Ronald W. Burkle, Patrick L. Graham, Ira L. Tochner, Robert I. Bernstein, Lawrence K. Kalantari and Linda McLoughlin Figel is as a general partner of Yucaipa, a private investment group specializing in supermarket companies, the address of which is 10000 Santa Monica Boulevard, Fifth Floor, Los Angeles, California 90067. The present principal occupation or employment of Darren W. Karst is as Executive Vice President and Chief Financial Officer of Dominick's Finer Foods, Inc., a supermarket operator, the address of which is 505 Railroad Avenue, Northlake, Illinois 60164. (d) None of the Reporting Persons, nor, to the best of their knowledge, any of the individuals referred to in paragraph (a) above, has during the last five years been convicted in a criminal proceeding (excluding traffic violations and similar misdemeanors). (e) None of the Reporting Persons, nor, to the best of their knowledge, any of the individuals referred to in paragraph (a) above, has during the last five years been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws. (f) Each of the individuals referred to in paragraph (a) above is a United States citizen. ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. The consideration for the shares of Common Stock acquired by the Reporting Persons was Class B Common Stock, par value $.01 per share, of Smiths's Food & Drug Centers, Inc., a Delaware corporation ("Smith's"), held by the Reporting Persons prior to September 9, 1997. On September 9, 1997 (the "Closing Date"), pursuant to the Agreement and Plan of Reorganization and Merger dated as of May 11, 1997 (the "Merger Agreement") among the Company, FM Stores, Inc., a Delaware corporation formerly known as Fred Meyer, Inc. ("FM Stores"), Smith's, Fred Meyer Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of the Company ("Fred Meyer Merger Sub"), and Smith Merger Sub, a Delaware corporation and wholly owned subsidiary of the Company ("Smith's Merger Sub"), (i) Smith's Merger Sub merged with and into Smith's and Fred Meyer Merger Sub merged with and into FM Stores (together, the "Merger") with each of Smith's and FM Stores surviving the respective merger and becoming a wholly owned subsidiary of the Company, (ii) each outstanding share of Class A Common Stock, par value $.01 per share (the "Smith's Class A Common Stock"), and Class B Common Stock, par value $.01 per share (the "Smith's Class B Common Stock"), of Smith's (including shares held by each of the Reporting Persons) was converted into 1.05 shares of Common Stock of the Company and each outstanding share of Series I Preferred Stock, par value $.01 per share, of Smith's was converted into the right to receive in cash the amount of thirty-three and one-third cents ($.33_) and (iii) each outstanding share of common stock, par value $.01 per share, of FM Stores was converted into one share of Common Stock of the Company. ITEM 4. PURPOSE OF TRANSACTION. The Reporting Persons acquired the Common Stock for investment pursuant to the Merger. A copy of the Merger Agreement is included as Exhibit 99.1 to the Current Report on Form 8-K dated May 11, 1997 of Smith's, filed with the Securities and Exchange Commission (the "Commission") on May 14, 1997. The Reporting Persons intend to review their investment in the Company from time to time and, depending upon the price and availability of the Common Stock, subsequent developments affecting the Company, the Company's business and prospects, other investment and business opportunities available to the Reporting Persons, general stock market and economic conditions, tax considerations and other factors deemed relevant, may decide to increase or decrease the size of their investment in the Company. Except as described herein and in Item 6 below, neither the Reporting Persons, nor, to the best of their knowledge, any of the individuals referred to in paragraph (a) of Item 2, has any present plan or proposal which relates to, or could result in, any of the events referred to in paragraphs (a) through (j), inclusive, of Item 4 of Schedule 13D. However, the Reporting Persons will continue to review the business of the Company and, depending upon one or more of the factors referred to above, may in the future propose that the Company take one or more of such actions. ITEM 5. INTEREST IN SECURITIES OF THE ISSUER. (a) Arizona Partners owns 287,261 shares of Common Stock (approximately 0.7% of the total number of outstanding shares of Common Stock immediately following the consummation of the Merger); Smitty's Partners owns 315,700 shares of Common Stock (approximately 0.7% of the total number of outstanding shares of Common Stock immediately following the consummation of the Merger); Smitty's Partners II owns 143,632 shares of Common Stock (approximately 0.3% of the total number of outstanding shares of Common Stock immediately following the consummation of the Merger); SSV Partners owns 1,407,810 shares of Common Stock (approximately 3.2% of the total number of outstanding shares of Common Stock immediately following the consummation of the Merger); and Yucaipa owns 210,000 shares of Common Stock (approximately 0.5% of the total number of outstanding shares of Common Stock immediately following the consummation of the Merger) and is the record holder of a currently exercisable warrant entitling it to purchase up to 1,934,683 shares of Common Stock, which shares it may be deemed to beneficially own pursuant to Section 13d-3(d)(1) of the Act. (b) Arizona Partners, Smitty's Partners, Smitty's Partners II and SSV Partners, acting through their sole general partner, Yucaipa, have the sole power to vote or direct the vote, and to dispose or to direct the disposition of the shares of Common Stock beneficially owned by them. As a result, Yucaipa may be deemed to beneficially own the shares of Common Stock directly owned by Arizona Partners, Smitty's Partners, Smitty's Partners II and SSV Partners. Each of Ronald W. Burkle, Patrick L. Graham, Robert I. Bernstein, Lawrence K. Kalantari, Ira L. Tochner, Linda McLoughlin Figel and Darren W. Karst, as a general partner of Yucaipa, may be deemed to beneficially own the shares of Common Stock of the Company beneficially owned by the Reporting Persons, but disclaims any such ownership (except to the extent of such individual's pecuniary interest therein), and the filing of this statement shall not be construed as an admission that any of Messrs. Burkle, Graham, Bernstein, Kalantari, Tochner or Karst or Ms. Figel is, for the purposes of Section 13(d) or 13(g) of the Act, the beneficial owner of such securities. (c) Except as described in Item 4 above, there have not been any transactions in the Common Stock effected by or for the account of the Reporting Persons during the past 60 days. (d) Except as stated in this Item 5, to the best knowledge of the Reporting Persons, no other person has the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, the shares of Common Stock owned by the Reporting Persons. (e) Not applicable. ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDING OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER. In connection with the Merger, (i) Ronald W. Burkle was elected Chairman of the Board of Directors of the Company, (ii) the Company and Yucaipa entered into a Registration Rights Agreement and a Supplemental Warrant Agreement as described below and (iii) the Company and The Yucaipa Companies LLC, a Delaware limited liability company and an affiliate of Yucaipa ("Yucaipa LLC"), entered into a Management Services Agreement described below. THE MANAGEMENT SERVICES AGREEMENT On the Closing Date, the Company entered into the Management Services Agreement with Yucaipa LLC. Under the terms of the Management Services Agreement, Yucaipa LLC, through its members, employees or other designated representatives or agents, will provide the Company and its subsidiaries, subject to the supervision of the Company's Board of Directors, management consultation and advice and Mr. Burkle will serve as the Chairman of the Company's Board of Directors. During the term of the Management Services Agreement and for a period of 90 days from the later of (i) the date on which the Management Services Agreement is terminated or (ii) the date on which Ronald W. Burkle ceases to be the Chairman of the Company's Board of Directors, neither Yucaipa LLC nor any of its affiliates, alone or with others, will, in any manner, without the prior approval of the Company's Board of Directors, (a) enter into or agree to enter into, singly or with any other person, any form of business combination, acquisition, restructuring, recapitalization, liquidation or other similar transaction relating to the Company or any subsidiary of the Company, (b) hold, acquire, or offer or agree to acquire, become the beneficial owner of or obtain any rights in respect of, in each case by purchase or otherwise, any securities entitled to vote generally in the election of directors of the Company, or any direct or indirect rights or options to acquire any such securities or any securities convertible into or exercisable for such securities, in excess of 15% of the Company's outstanding voting securities, (c) participate in any proxy solicitation with respect to such voting securities, (d) participate in or encourage the formation of any partnership, syndicate, voting trust or other group which owns or seeks or offers to acquire beneficial ownership of any such voting securities or which seeks control of the Company or (d) otherwise act, alone or in concert with others, to seek or offer to control or influence, in any manner (except pursuant to the Management Services Agreement or through its representatives on the Company's Board of Directors), the management, Board of Directors or policies of the Company. The foregoing summary of the Management Services Agreement is qualified in its entirety by reference to the agreement which is attached hereto as Exhibit 1. THE SUPPLEMENTAL WARRANT AGREEMENT On May 23, 1996, Smith's issued to Yucaipa warrants to purchase 1,842,555 shares of Class C Common Stock, par value $.01 per share (the "Smith's Class C Common Stock"), of Smith's (the "Warrants") at an initial exercise price of $50.00 per share. On the Closing Date, the Company executed the Supplemental Warrant Agreement providing that any holder of a Warrant will have the right until the expiration date thereof to exercise such Warrant at the existing exercise price for the number of shares of Common Stock of the Company to which a holder of the number of shares of Smith's Class C Common Stock that would have otherwise been deliverable upon the exercise of such Warrant would have been entitled pursuant to the Merger Agreement if such Warrant had been exercised in full immediately prior to the effective time of the Merger. One-half of the Warrants are exercisable at the election of Yucaipa on or prior to May 23, 2005, and one-half of the Warrants are exercisable at the election of Yucaipa on or prior to May 23, 2006. The Warrants are exercisable for an aggregate of 1,934,683 shares of Common Stock of the Company at an exercise price of $50 for each 1.05 shares of Common Stock of the Company, for an aggregate purchase price of $92,127,750. The foregoing summary of the Supplemental Warrant Agreement is qualified in its entirety by reference to the agreement which is attached hereto as Exhibit 2. THE REGISTRATION RIGHTS AGREEMENT On the Closing Date, the Company entered into the Registration Rights Agreement with (i) Jeffrey P. Smith, Richard D. Smith, Fred L. Smith and certain Smith family trusts, and (ii) the Reporting Persons, each of which received shares of Common Stock of the Company in the Merger. Under the terms of the Registration Rights Agreement, each of (i) the holders of a majority of the Registrable Securities (as defined in the Registration Rights Agreement) held by Yucaipa, its affiliates and transferees of the foregoing, as a group (the "Yucaipa Holder Group"), and (ii) the holders of a majority of the Registrable Securities held by Jeffrey Smith, Richard Smith, Fred Smith, members of their respective families or any trust of which any of the foregoing are beneficiaries, as a group (the "Smith Holder Group") will each be entitled to two written requests (each, a "Demand Registration") upon the Company for the registration under the Securities Act of 1933, as amended (the "Securities Act") of all or part (but not less than one million (1,000,000) shares) of their shares of Registrable Securities; provided, however, that the Company will only be required to effect one Demand Registration during any six-month period. Such Demand Registration may, at the election of the demanding holders, be in the form of an underwritten offering and such demanding holders will be entitled to select the underwriters. If at any time the Company proposes to file a registration statement under the Securities Act with respect to an offering by the Company for its own account or for the account of any holders of any class of common equity securities (other than (i) a registration statement on Form S-4 or S-8 or (ii) a registration statement filed in connection with a Demand Registration or a Shelf Registration (as defined herein) or (iii) a registration statement filed in connection with an offering of securities solely to existing security holders of the Company), the Company will give notice of such proposed filing to the holders of Registrable Securities who are parties to the Registration Rights Agreement and their transferees and will offer such holders the opportunity to register their Registrable Securities as part of such registration (a "Piggyback Registration"). Upon the request of holders of a majority of the Registrable Securities held by the Yucaipa Holder Group at any time, the Company will cause to be filed with the Commission as promptly as practicable after such request, but in no event later than 60 days thereafter, a shelf registration statement (a "Shelf Registration") which will provide for resales of Registrable Securities held by members of the Yucaipa Holder Group who have provided information required by the Registration Rights Agreement. The Company agreed to use its best efforts to have such Shelf Registration declared effective and to keep such Shelf Registration continuously effective, for a period of at least one year following the date on which it becomes effective under the Securities Act; provided, however, that in no event will the Company be required to keep the Shelf Registration in effect after the fifth anniversary of the Closing Date. In the event the Company is not able to fulfill all requests for the Registrable Securities to be included in any Demand Registration or Piggyback Registration, the Company will grant certain priority rights to the Smith Holder Group and the Yucaipa Holder Group which enable the Smith Holder Group and the Yucaipa Holder Group to have their Registrable Securities up to certain designated amounts included in such registrations before certain other stockholders of the Company having piggyback or other similar registration rights are entitled to include their Registrable Securities in such registrations, subject to the priority of that certain registration rights agreement, dated December 11, 1981, by and among FMI Acquisition Corporation (now FM Stores), FMI Associates Limited Partnership and certain executive officers of FMI Acquisition Corporation, and the Assignment thereof dated January 27, 1997. The Company will be obligated to pay its expenses associated with registration of the Registrable Securities, regardless of whether any registration statement required by the Registration Rights Agreement becomes effective. In addition, the Company will provide customary securities law indemnification to any party who participates in any registration effected under the Registration Rights Agreement. The Registration Rights Agreement will terminate upon the earlier to occur of (i) the mutual agreement by the parties thereto, (ii) with respect to any holder, such holder ceasing to own any Registrable Securities, (iii) the fifteenth anniversary of the Closing Date, or (iv) with respect to the Yucaipa Holder Group or the Smith Holder Group, the date on which the aggregate number of shares of outstanding Registrable Securities held by the Yucaipa Holder Group or the Smith Holder Group, as applicable, is less than 20% of the Registrable Securities Shares originally held by the Yucaipa Holder Group or the Smith Holder Group, as applicable, immediately following the consummation of the transactions contemplated by the Merger Agreement (except with respect to any holder that is an "affiliate" of the Company within the meaning of the Securities Act). The foregoing summary of the Registration Rights Agreement is qualified in its entirety by reference to the agreement which is attached hereto as Exhibit 3. ITEM 7. MATERIAL TO BE FILED AS EXHIBITS. Exhibit 1. Management Services Agreement, dated as of September 9, 1997, by and between Fred Meyer, Inc. and The Yucaipa Companies LLC. Exhibit 2. Supplemental Warrant Agreement, dated as of September 9, 1997, by and between Fred Meyer, Inc. and The Yucaipa Companies. Exhibit 3. Registration Rights Agreement, dated as of September 9, 1997, by and between the Company and the parties listed on the signature pages thereto. Exhibit 4. Joint Filing Agreement. SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Dated: September 19, 1997 Yucaipa Arizona Partners, L.P. Yucaipa Smitty's Partners, L.P. Yucaipa Smitty's Partners II, L.P. Yucaipa SSV Partners, L.P. By: The Yucaipa Companies Its General Partner By: /S/ LAWRENCE K. KALANTARI Name: Lawrence K. Kalantari Title: General Partner Dated: September 19, 1997 The Yucaipa Companies By: /S/ LAWRENCE K. KALANTARI Name: Lawrence K. Kalantari Title: General Partner EXHIBIT INDEX Exhibit 1. Management Services Agreement, dated as of September 9, 1997, by and between Fred Meyer, Inc. and The Yucaipa Companies LLC. Exhibit 2. Supplemental Warrant Agreement, dated as of September 9, 1997, by and between Fred Meyer, Inc. and The Yucaipa Companies. Exhibit 3. Registration Rights Agreement, dated as of September 9, 1997, by and between the Company and the parties listed on the signature pages thereto. Exhibit 4. Joint Filing Agreement. EX-1 2 EXHIBIT 1 MANAGEMENT SERVICES AGREEMENT THIS MANAGEMENT SERVICES AGREEMENT (this "Agreement") is made and entered into as of September 9, 1997 by and between THE YUCAIPA COMPANIES LLC, a Delaware limited liability company ("Yucaipa"), and Fred Meyer, Inc., a Delaware corporation formerly known as Meyer-Smith Holdco, Inc. (the "Company"). RECITALS A. FM Stores, Inc., a Delaware corporation and predecessor to Company formerly known as Fred Meyer, Inc. ("Fred Meyer Stores") is in the business of operating multidepartment stores and specialty stores and is a leading regional retailer of a wide range of food, apparel, fine jewelry and products for the home; B. Smith's Food & Drug Centers, Inc. ("Smith's") is in the business of operating combination food and drug centers and is a leading regional supermarket and drug store chain; C. Fred Meyer Stores and Smith's, pursuant to the Agreement and Plan of Reorganization and Merger, dated as of May 11, 1997 (the "Merger Agreement"), have combined their operations through the mergers contemplated therein (the "Mergers"), and each of them have become wholly-owned subsidiaries of the Company; D. Yucaipa is experienced in the management of supermarket companies and has been providing certain general business and financial advice and management services to Smith's; E. The Company wishes to obtain the continuing benefits of Yucaipa's advice and services following the consummation of the Mergers; and F. In connection with the Mergers, Ronald W. Burkle has been elected to serve as the Chairman of the Board of Directors of the Company. AGREEMENT NOW, THEREFORE, in consideration of the premises and the mutual covenants of the parties hereto and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the undersigned parties agree as follows: SECTION 1. MANAGEMENT SERVICES. (a) Subject to the provisions of this Agreement, and subject to the supervision of the Board of Directors of the Company (the "Board of Directors"), Yucaipa, through its members, employees or other designated representatives or agents, shall provide the Company with management consultation and advice regarding strategic planning and development, budgeting, future financing plans, selection and retention of management employees, general business management and governmental affairs, and such other similar management services as may be requested by the Board of Directors and/or the Chief Executive Officer from time to time. As used herein, the Company refers to the Company and its subsidiaries, as the context requires. (b) Chairman of the Board of Directors. Ronald W. Burkle shall, if he so elects, have the right to serve as Chairman of the Board of Directors of the Company during his initial three year term as a director of the Company, and shall have all rights and responsibilities customarily vested in a Chairman of the Board of Directors, provided that he shall not receive any compensation for serving in such capacity beyond the compensation paid to Yucaipa under this Agreement. (c) Best Practices. During the term of this Agreement the Company will be afforded the opportunity to participate in the "Best Practices" program as conducted by Yucaipa and certain of its affiliated businesses. SECTION 2. MANAGEMENT FEES. Commencing on the date hereof (the "Effective Date"), the Company shall pay to Yucaipa an annual management fee, in consideration of the services rendered by Yucaipa pursuant to Section 1 above, equal to Five Hundred Thousand Dollars ($500,000.00), one-twelfth (1/12th) of which shall be payable in advance on the first day of each calendar month; provided that a prorated portion of such fee will be payable in advance on the Effective Date for the partial month beginning on the Effective Date and ending on the last day of the then current month. SECTION 3. REIMBURSEMENT OF EXPENSES. The Company shall reimburse Yucaipa for all of its reasonable out-of- pocket costs and expenses incurred in connection with the performance of its obligations under this Agreement. Yucaipa shall bill the Company for the amount of all such costs and expenses monthly, and shall provide the Company with a reasonable itemization of such costs and expenses. SECTION 4. ADDITIONAL SERVICES. In the event that, during the term of this Agreement, the Board of Directors requests Yucaipa to provide (i) consulting services in connection with any proposed acquisition or divestiture transaction or any debt or equity financing or (ii) any other services not contemplated by Section 1 above, Yucaipa shall be entitled to such additional compensation for such services as may be agreed upon by Yucaipa and the Company (and approved by a majority of the Company's disinterested directors). SECTION 5. TERM OF AGREEMENT. The term of this Agreement shall commence on the Effective Date and continue for a period of five (5) years ending on the fifth anniversary of the Effective Date. SECTION 6. TERMINATION. 6.1 Termination by the Company. The Company may elect to terminate this Agreement: (a) at any time following a determination of the Board of Directors to effect such a termination by giving Yucaipa at least ninety (90) days' written notice of such termination; (b) if Yucaipa shall fail to reasonably perform any material covenant, agreement, term or provision of this Agreement to be kept, observed or performed by it (other than any failure or alleged failure occasioned by or resulting from force majeure, directly or indirectly) and such failure shall continue for a period of sixty (60) days after written notice from the Company, which notice shall describe the alleged failure with particularity; and (c) at any time if, in connection with the performance of its duties hereunder, Yucaipa or any of its members commits (or is grossly negligent in its supervision or hiring of any employee or agent of Yucaipa who commits) any act of fraud, dishonesty or gross negligence which is materially detrimental to the business or reputation of the Company as reasonably determined by the Board of Directors. 6.2 Termination by Yucaipa. Yucaipa may elect to terminate this Agreement: (a) if the Company shall fail to reasonably perform any material covenant, agreement, term or provision of this Agreement to be kept, observed or performed by it (other than any failure or alleged failure occasioned by or resulting from force majeure, directly or indirectly) and such failure shall continue for a period of sixty (60) days after written notice from Yucaipa, which notice shall describe the alleged failure with particularity; (b) if the Company shall fail to make any payment due to Yucaipa hereunder, if such payment is not made in full within thirty (30) days after written notice of such failure; or (c) if Ronald W. Burkle ceases to be Chairman of the Board of Directors, other than by reason of his death, disability, termination for Cause or voluntary resignation. For purposes of the foregoing, "Cause" shall mean the commission by Ronald W. Burkle of any act described in Section 6.1(c) or any felony conviction. 6.3 Termination for Change of Control. This Agreement may be terminated, at the election of either Yucaipa or the Company, if during the term hereof there shall have been a change in control of the Company, which for purposes of this Agreement shall be deemed to have occurred upon any of the following events: (a) the acquisition after the Effective Date, in one or more transactions, of "beneficial ownership" (within the meaning of Rule 13d-3(a)(1) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) by any person (other than Yucaipa or any of its members or affiliates) or any group of persons (excluding any group which includes Yucaipa or any of its members or affiliates) who constitute a group (within the meaning of Section 13(d)(3) of the Exchange Act) of any securities of the Company such that, as a result of such acquisition, such person or group beneficially owns (within the meaning of Rule 13d-3(a)(1) under the Exchange Act) 40% or more of the Company's then outstanding voting securities entitled to vote on a regular basis for a majority of the Board of Directors; or (b) the sale of all or substantially all of the assets or capital stock of the Company (including, without limitation, by way of merger, consolidation, lease or transfer) in a transaction or series of related transactions (excluding any sale to Yucaipa or any of its members or affiliates). As used herein the term "affiliate" refers to any person controlled by, or under common control with, the specified person. 6.4 Payments upon Termination. (a) In the event of any termination pursuant to Section 6.1(a), Section 6.2 or Section 6.3, the Company shall pay, or cause to be paid, to Yucaipa a cash termination payment in an amount equal to the greater of (i) Two Million Five Hundred Thousand Dollars ($2,500,000) and (ii) twice the total consulting fees that would have been earned by Yucaipa under Section 2 hereof during the remaining term of this Agreement as if the Agreement had not been terminated, without regard to any sums previously paid by the Company to Yucaipa pursuant to Section 2 above. (b) Such amount, if any, which shall be due Yucaipa pursuant to this Section 6.4 in the event of any such termination shall be due and payable to Yucaipa, in full, as of the date of such termination. The parties intend that should the foregoing payments be determined to constitute liquidated damages, such payments shall in all events be deemed reasonable. 6.5 Effect of Termination. Upon any such termination of this Agreement the obligations of the parties hereunder shall also terminate, except (i) the Company shall continue to be obligated to Yucaipa for any payments to be received pursuant to Section 6.4(a), and for any unpaid fees or expenses incurred prior to any such termination, (ii) the Company's obligations under Section 7 hereof shall survive any such termination for the period of time specified therein; and (iii) the provisions of Sections 8, 9 and 10 shall survive any such termination. SECTION 7. STANDSTILL. Yucaipa agrees that during the term of this Agreement and for a period of 90 days from the later of (i) the date on which this Agreement is terminated or (ii) the date on which Ronald W. Burkle ceases to be the Chairman of the Board of Directors, neither it nor any of its affiliates, alone or with others, will in any manner, without the prior approval of the Company's Board of Directors, (a) enter into or agreed to enter into, singly or with any other person, any form of business combination, acquisition, restructuring, recapitalization, liquidation or other similar transaction relating to the Company or any subsidiary of the Company, (b) hold, acquire, or offer or agree to acquire, become the beneficial owner of or obtain any rights in respect of, in each case by purchase or otherwise, any securities entitled to vote generally in the election of directors of the Company, or any direct or indirect rights or options to acquire any such securities or any securities convertible or exercisable into or exchangeable for such securities ("Voting Securities") of the Company, in excess of 15% of the Company's outstanding Voting Securities (including for these purposes any shares of Company Common Stock acquired pursuant to the Mergers or upon the exercise of any currently exercisable option or warrant), (c) make, or in any way participate in, any solicitation of proxies with respect to any such Voting Securities (including by the execution of action by written consent), become a participant in any election contest with respect to the Company, seek to influence any person with respect to any such Voting Securities, (d) participate in or encourage the formation of any partnership, syndicate, voting trust or other group which owns or seeks or offers to acquire beneficial ownership of any such Voting Securities or which seeks control of the Company or has the purpose of circumventing any provision of this Agreement, (e) otherwise act, alone or in concert with other (including, without limitation, by providing financing for another Person), to seek or to offer to control or influence, in any manner (except pursuant to its services under this Agreement or through its representatives on the Board of Directors, or policies of the Company, (f) make any formal demand, request or proposal to amend, waive or terminate any provision of this Section 7, (g) make any proposal or other communication or take any other action that would compel the Company to make a public announcement or disclosure thereof in respect of any matter referred to in this Section 7 or (h) publicly propose or announce or otherwise publicly disclose an intent to propose or that it is considering proposing any of the matters referred to in this Section 7. Yucaipa shall be released from its obligations hereunder in the event that the Company enters into an agreement which would result in a Change of Control with any person other than Yucaipa or its affiliates. As used herein the terms "beneficial ownership," "person" and "group" shall have the meanings ascribed to such terms pursuant to Regulation 13D-G adopted by the SEC under the Securities Exchange Act of 1934, as amended, and as in effect on the date hereof; provided, however, that for purposes of determining beneficial ownership under this Section 7 any Voting Securities issuable upon the exercise of any option or warrant shall only be included in such determination to the extent of the number of such Voting Securities which would be issuable under such option or warrant on a "net" or "cashless" basis at such time. In addition, Yucaipa agrees that it will exercise any such option or warrant on a "net" or "cashless" basis if and to the extent the exercise on any other basis would result in its aggregate beneficial ownership of Voting Securities exceeding 15% of the Company's outstanding Voting Securities. SECTION 8. CONFIDENTIALITY. 8.1 Definitions. For purposes of this Section: (a) The term "Confidential Material" means all information, whether oral, written or otherwise (including any information furnished prior to the execution of this Agreement), furnished or otherwise disclosed by the Company to Yucaipa and its affiliates or any of the Representatives (as defined below), and all notes, reports, analyses, compilations, studies and other materials prepared by Yucaipa or any of the Representatives (in whatever form maintained, whether documentary, computer storage or otherwise) containing or based upon, in whole or in part, any such information. The term "Confidential Material" does not include information which is or becomes generally available to the public other than as a result of a disclosure by Yucaipa or any of the Representatives or becomes available to Yucaipa or any of the Representatives on a non-confidential basis from any source that is not known by Yucaipa or such Representative to be bound by an obligation of confidentiality to the Company. (b) The term "Representatives" shall mean any and all members, partners, directors, officers, employees, agents, prospective financing sources, affiliates or representatives (including representatives of advisors) of Yucaipa. 8.2 Yucaipa and its affiliates and each of the Representatives shall preserve the confidentiality of the Confidential Material and shall not disclose any of the Confidential Material in any manner whatsoever; provided, however, that (i) Yucaipa or its affiliates may make any disclosure of such information to which the Company gives its prior written consent, (ii) Yucaipa and its affiliates and the Representatives may make disclosures of such information within the scope of their authority under this Agreement, and (iii) any of such information may be disclosed to the Representatives who need to know, and who are informed of the confidential nature of the Confidential Material and of the terms of this Section and who agree to keep such information confidential. In any event, Yucaipa and its affiliates shall inform each of their Representatives which have, or will have, access to any or all of the Confidential Material, of the existence and content of this Agreement and will take all reasonable action necessary to cause such Representatives to observe the confidentiality requirements of this Agreement. In any event, Yucaipa shall be responsible for any breach of this Agreement by any of its Representatives. 8.3 If Yucaipa or its affiliates or any of the Representatives are requested or required (by oral questions, interrogatories, requests for information or documents, subpoena, civil investigative demand, any informal or formal investigation by any government or governmental agency or authority or otherwise) to disclose any Confidential Material or such person's opinion, judgment, view or recommendation concerning the Company as developed from the Confidential Material, Yucaipa agrees (i) to immediately notify the Company in writing of the existence, terms and circumstances surrounding such a request, (ii) to consult with the Company on the advisability of taking legally available steps to resist or narrow such request and shall exercise its best efforts to obtain reliable assurance that confidential treatment required hereby will be accorded such Confidential Material, and (iii) if disclosure of such information is required, to furnish only that portion of the Confidential Material which, in the opinion of counsel to Yucaipa, Yucaipa is legally compelled to disclose, and to cooperate with any action by the Company to obtain an appropriate protective order or other reliable assurance that confidential treatment will be accorded the Confidential Material. 8.4 Yucaipa hereby acknowledges on behalf of itself and its affiliates (and agrees to advise its affiliates and the Representatives who are informed in accordance with the terms of this Section as to the matters which are the subject of this Section), that the United States securities laws prohibit any person who has received from an issuer material, non-public information, including certain information that may be part of the Confidential Material, while such information is non-public, from purchasing or selling securities of such issuer or from communicating such information to any other person under circumstances in which it is reasonably foreseeable that such person is likely to purchase or sell such securities. SECTION 9. INDEMNIFICATION. (a) The Company (the "Indemnifying Party") agrees to indemnify and hold harmless Yucaipa and each of its affiliates, members, partners, officers, agents and the employees of each of them (each an "Indemnified Party" and collectively, the "Indemnified Parties"), from and against all losses, claims, damages or liabilities resulting from any claim, lawsuit or other proceeding by any person to which any Indemnified Party may become subject which is related to or arises out of the performance of the services to be provided hereunder (or under the Merger Agreement), and will reimburse any Indemnified Party for all reasonable out-of-pocket expenses (including reasonable counsel fees and disbursements) incurred by such Indemnified Party in connection with investigating or defending any such claim. Each Indemnifying Party further agrees that the indemnification and reimbursement commitments herein shall apply whether or not such Indemnified Party is a formal party to any such lawsuit, claim or other proceedings. The foregoing provision is expressly intended to cover reimbursement of reasonable legal and other expenses incurred in a deposition or other discovery proceeding. Notwithstanding the foregoing, the Indemnifying Party shall not be liable to any Indemnified Party (a) in respect of any loss, claim, damage, liability or expense to an Indemnified Party to the extent the same is determined, in a final judgment by a court having jurisdiction, to have resulted from the gross negligence or willful misconduct of such Indemnified Party or any intentional, material breach by such Indemnified Party of its obligations under this Agreement or (b) for any settlement effected by such Indemnified Party without the written consent of such Indemnifying Party, which consent shall not be unreasonably withheld. In the event of the assertion against any Indemnified Party of any such claim or the commencement of any such action or proceeding, each Indemnifying Party shall be entitled to participate in such action or proceeding and in the investigation of such claim and, after written notice from such Indemnifying Party to such Indemnified Party, to assume the investigation or defense of such claim, action or proceeding with counsel of the Indemnifying Party's choice at the Indemnifying Party's expense; provided, however, that such counsel shall be reasonably satisfactory to the Indemnified Party. Notwithstanding anything to the contrary contained herein, the Indemnifying Party may retain one firm of counsel to represent all Indemnified Parties in such claim, action or proceeding; provided that the Indemnified Party shall have the right to employ a single firm of separate counsel (and any necessary local counsel) and to participate in the defense or investigation of such claim, action or proceeding, and the Indemnifying Party shall bear the expense of such separate counsel (and local counsel, if applicable), if (i) in the written opinion of counsel to the Indemnified Party use of counsel of the Indemnifying Party's choice could reasonably be expected to give rise to a conflict of interest, (ii) the Indemnifying Party shall not have employed counsel reasonably satisfactory to the Indemnified Party to represent the Indemnified Party within a reasonable time after notice of the assertion of any such claim or institution of any such action or proceeding or (iii) the Indemnifying Party shall authorize the Indemnified Party to employ separate counsel at the Indemnifying Party's expense. (b) If for any reason (other than the gross negligence or willful misconduct of an Indemnified Party referred to above) the foregoing indemnification is unavailable to any Indemnified Party or insufficient to hold it harmless as and to the extent contemplated by the preceding paragraph (a), then the Indemnifying Party shall contribute to the amount paid or payable by the Indemnified Party as a result of such loss, claim, damage or liability in such proportion as is appropriate to reflect the relative benefits received by the Indemnifying Party and its affiliates, on the one hand, and the Indemnified Party, as the case may be, on the other hand, as well as any other relevant equitable considerations. (c) Notwithstanding anything contained in this Section 9, each Indemnified Party who is also a director, officer or employee of the Company shall not be entitled to any greater indemnification under clause (a) of this Section 9 and contribution under clause (b) of this Section 9 than such Indemnified Party would otherwise be entitled to under the charter and by-laws of the Company or any other indemnification agreement to which such Indemnified Party is a signatory. SECTION 10. NOTICES. All notices, demands, requests, consents or approvals required or permitted to be given hereunder or which are given with respect to this Agreement shall be in writing and shall be personally served and mailed, registered or certified, return receipt requested, postage prepaid (or by a substantially similar method), or delivered by a reputable overnight courier service with charges prepaid, or transmitted by hand delivery, telegram, telex or facsimile, addressed as set forth below, or such other address as such party shall have specified most recently by written notice. Notice shall be deemed given or delivered on the date of service or transmission if personally served or transmitted by telegram, telex or facsimile. Notice otherwise sent as provided herein shall be deemed given or delivered on the third business day following the date mailed or on the next business day following the delivery of such notice to a reputable overnight courier service. If to Yucaipa: The Yucaipa Companies LLC 10000 Santa Monica Boulevard Fifth Floor Los Angeles, California 90067 Attention: Ronald W. Burkle If to the Company: Fred Meyer, Inc. 3800 S.E. 22nd Avenue Portland, Oregon 97202 Attention: Robert G. Miller with a copy to the General Counsel of the Company at the same address. SECTION 11. MISCELLANEOUS. 11.1 Entire Agreement; Amendments. This Agreement contains all of the terms and conditions agreed upon by the parties hereto in connection with the subject matter hereof. This Agreement may not be amended, modified or changed except by written instrument signed by all of the parties hereto. 11.2 Assignment; Successors. This Agreement shall not be assigned and is not assignable by any party without the prior written consent of each of the other parties hereto; provided, however, that Yucaipa may assign, without the prior consent of the Company, its rights and obligations under this Agreement to any partnership or limited liability company controlled by Ronald W. Burkle, and provided further, that Yucaipa may assign the right to receive any payment hereunder (but not its duties and obligations hereunder) to any other person or entity. Subject to the preceding sentence, this Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective permitted successors and assigns. 11.3 Governing Law. This Agreement shall be governed by and construed in accordance with the internal domestic laws of the State of New York, without regard to the choice of law provisions thereof. 11.4 Attorneys' Fees. If any legal action is brought concerning any matter relating to this Agreement, or by reason of any breach of any covenant, condition or agreement referred to herein, the prevailing party shall be entitled to have and recover from the other party to the action all costs and expenses of suit, including attorneys' fees. 11.5 Relationship. Nothing in this Agreement shall constitute or be construed to be a partnership or joint venture between the Company and Yucaipa. To the extent appropriate to the duties and obligations hereunder, Yucaipa shall be an independent contractor and none of its employees shall be deemed employees of the Company by reason of this Agreement or the performance of its duties hereunder. This Agreement is for the benefit of the Company and Yucaipa and shall not create third party beneficiary rights. 11.6 Construction and Interpretation. This Agreement shall not be construed for or against either party by reason of the authorship or alleged authorship of any provision hereof or by reason of the status of the respective parties. This Agreement shall be construed reasonably to carry out its intent without presumption against or in favor of either party. The natural persons executing this Agreement on behalf of each party have the full right, power and authority to do and affirm the foregoing warranty on behalf of each party and on their own behalf. The captions on sections are provided for purposes of convenience and are not intended to limit, define the scope of or aid in interpretation of any of the provisions hereof. References to a party or parties shall refer to the Company or Yucaipa, or both, as the context may require. All pronouns and singular or plural references as used herein shall be deemed to have interchangeably (where the sense of the sentence requires) a masculine, feminine or neuter, and/or singular or plural meaning, as the case may be. 11.7 Severability. If any term, provision or condition of this Agreement is determined by a court or other judicial or administrative tribunal to be illegal, void or otherwise ineffective or not in accordance with public policy, the remainder of this Agreement shall not be affected thereby and shall remain in full force and effect and shall be construed in such manner so as to preserve the validity hereof and the substance of the transactions herein contemplated to the extent possible. 11.8 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which taken together shall constitute one and the same instrument. IN WITNESS WHEREOF, the parties hereto have caused this Management Services Agreement to be duly executed as of the date first above written. THE YUCAIPA COMPANIES LLC By: /S/ RONALD W. BURKLE Name: Ronald W. Burkle Title: Managing Member FRED MEYER, INC. By: /S/ KENNETH THRASHER Name: Kenneth Thrasher Title: Executive Vice President EX-2 3 EXHIBIT 2 SUPPLEMENTAL WARRANT AGREEMENT SUPPLEMENTAL WARRANT AGREEMENT (the "Agreement") dated as of September 9, 1997 among FRED MEYER, INC., a Delaware corporation formerly known as Meyer- Smith Holdco, Inc. (the "Company"), and THE YUCAIPA COMPANIES, a California general partnership, or its registered permitted assigns (the "Consultant"). WHEREAS, Smith's Food & Drug Centers, Inc., a Delaware corporation ("Smith's"), has become a wholly-owned subsidiary of the Company as a result of the transactions (collectively, the "Merger") contemplated in the Agreement and Plan of Reorganization and Merger dated as of May 11, 1997 between Smith's and FM Stores, Inc., a Delaware corporation and predecessor to the Company formerly known as Fred Meyer, Inc. ("Fred Meyer Stores"). WHEREAS, prior to the effective date of the Merger, Smith's was a party to a Warrant Agreement dated May 23, 1996 (the "Warrant Agreement") between Smith's and the Consultant pursuant to which Smith's issued 1,842,555 warrants to purchase an aggregate of 1,842,555 shares of Class C Common Stock, $.01 par value per share, of Smith's. Defined terms used herein and not otherwise defined herein have the meanings set forth in the Warrant Agreement. WHEREAS, pursuant to the terms of the Merger Agreement and the Warrant Agreement, the Company is required to enter into a supplemental warrant agreement to provide for the issuance of Common Stock, $.01 par value ("Common Stock"), of the Company upon exercise of the warrants subject to the Warrant Agreement. NOW, THEREFORE, in consideration of the premises and the mutual agreements set forth in this Agreement, in the Warrant Agreement and in the Merger Agreement, the parties hereto agree as follows: SECTION 1. The Warrant Agreement is hereby amended such that, unless the context requires otherwise, the following defined terms contained therein shall have the meanings set forth below: (a) "Class C Common Stock," "Class B Common Stock," or "Common Stock" shall mean and refer to the Common Stock of the Company. (b) "Company" shall mean and refer to Fred Meyer, Inc., a Delaware corporation formerly known as Meyer-Smith Holdco, Inc. (c) "Holder(s)" shall mean and refer to the registered holder(s) of the Warrant Certificates or the New Warrant Certificates, as defined below. (d) "Merger Agreement" shall mean and refer to the Merger Agreement dated as of May 11, 1997 by and between Smith's and Fred Meyer Stores. (e) "Registration Rights Agreement" shall mean and refer to the Registration Rights Agreement dated as of September 9, 1997 by and among the Company, Consultant and certain stockholders of the Company named therein. (f) "Warrant Shares" shall mean and refer to the Common Stock of the Company issuable upon exercise of the Warrants. (g) "Warrants" shall mean and refer to the 1,934,683 warrants, as described herein and in the Warrant Agreement, to purchase an aggregate of 1,934,683 shares (subject to adjustment) of Common Stock of the Company, pursuant hereto and pursuant to the Merger Agreement. SECTION 2. All references to the "Standstill Agreement" shall be deleted. SECTION 3. Subject to the terms and conditions of the Warrant Agreement, the Company shall issue shares of its Common Stock as set forth in Section 3 hereof to Holders of Warrants upon exercise of such Warrants. SECTION 4. The Warrants shall be exercisable initially for an aggregate of 1,934,683 Warrant Shares at an Exercise Price of $47.61904 per share, subject in each case to the adjustment provisions contained in the Warrant Agreement. The following proviso shall be added to the end of the third paragraph under Section 5 of the Warrant Agreement: "PROVIDED FURTHER, that any period of consecutive trading days during which the Market Price of the Smith's Class B Common Stock equaled or exceeded the Exercise Price of the Warrants prior to consummation of the Mergers (as defined in the Merger Agreement) shall count toward such 60- day period." SECTION 5. The parties hereto acknowledge that on September 8, 1997, the Market Price of Smith's Class B Common Stock had exceeded the Exercise Price then in effect for at least 60 consecutive trading days and as a result thereof and in accordance with the terms of the Warrant Agreement the Exercise Period in the case of the Series A Warrants expires at 5:00 p.m., Los Angeles time, on May 23, 2005 and, in the case of the Series B Warrants expires at 5:00 p.m., Los Angeles time on May 23, 2006. SECTION 6. On September 5, 1997, the Company announced a two-for-one stock split of its Common Stock (the "Split"). Upon consummation of the Split, the Exercise Price and Warrant Number shall be adjusted pursuant to the provisions of Section 9 of the Warrant Agreement. SECTION 7. Upon tender and delivery to the Company by any Holder of Series A Warrant Certificates or Series B Warrant Certificates (as defined in the Warrant Agreement) or both and upon cancellation thereof, the Company shall issue and deliver new Series A Warrant Certificates ("New Series A Warrant Certificates") and new Series B Warrant Certificates ("New Series B Warrant Certificates" and together with the New Series A Warrant Certificates, the "New Warrant Certificates"), respectively, evidencing the Warrants of such tendering Holders. The New Warrant Certificates shall reflect the amendments to the Warrant Certificates shall continue to be valid evidence of the Warrants, and shall continue to be exercisable for the Common Stock of the Company pursuant to the terms hereof and in the Warrant Agreement. The New Warrant Certificates shall comply with and be subject to all of the terms and conditions of the Warrant Agreement applicable to the Warrant Certificates. SECTION 8. Section 5 of the Warrant Agreement is hereby amended by deleting the second paragraph thereof. SECTION 9. Section 8 of the Warrant Agreement is hereby amended by deleting the second sentence of the first paragraph. SECTION 10. Section 12 of the Warrant Agreement is hereby amended so that notices shall be made as set forth therein to the Company at 3800 SE 22nd Avenue, Portland, Oregon 97202, Attention: President, with a copy to the General Counsel. SECTION 11. Section 13 of the Warrant Agreement is hereby deleted. SECTION 12. The Company hereby assumes all obligations of Smith's under the Warrant Agreement and agrees to be bound by all of the provisions thereof, as amended by this Agreement. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed, as of the day and year first above written. FRED MEYER, INC. By: /S/ ROGER A. COOKE Roger A. Cooke Senior Vice President THE YUCAIPA COMPANIES By: /S/ RONALD W. BURKLE Name: Ronald W. Burkle Title: General Partner EX-3 4 EXHIBIT 3 THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and entered into as of September 9, 1997 by and among Fred Meyer, Inc., formerly known as Meyer-Smith Holdco., Inc., a Delaware corporation (the "Company"), The Yucaipa Companies, a California general partnership ("Yucaipa") and each of the holders of the Company Common Stock (as hereinafter defined) executing this Agreement (each a "Holder" and collectively, the "Holders"). WHEREAS, this Agreement is made pursuant to that certain Agreement and Plan of Reorganization and Merger dated as of May 11, 1997 (the "Reorganization Agreement") by and between Smith's Food & Drug Centers, Inc., a Delaware corporation ("Smith") and Fred Meyer, Inc., a Delaware corporation ("Fred Meyer"), under which the execution and delivery of this Agreement is a condition to the closing of the transactions contemplated thereby. NOW THEREFORE, in consideration of the mutual covenants herein contained and for other good and valuable consideration, the parties hereto agree as follows: ARTICLE I DEFINITIONS SECTION 1.1 DEFINITIONS. Capitalized terms used herein and not otherwise defined herein have the meanings ascribed to them in the Reorganization Agreement. In addition, the following capitalized terms shall have the meanings ascribed to them below: "Affiliate," as applied to any specified Person, shall mean any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person and, in the case of a Person who is an individual, shall include (i) members of such specified Person's immediate family (as defined in Instruction 2 of Item 404(a) of Regulation S-K under the Securities Act) and (ii) trusts, the trustee and all beneficiaries of which are such specified Person or members of such Person's immediate family as determined in accordance with the foregoing clause (i). For the purposes of this definition, "control," when used with respect to any Person, means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Business Day" means any day that is not a Saturday, Sunday or a day on which banking institutions in New York, New York or Los Angeles, California are not required to be open. "Company Common Stock" means the common stock, par value $.01 per share, of the Company. "Deferral Period" is defined in Section 2.1. "Demand Notice" is defined in Section 2.1. "Demand Registration" is defined in Section 2.1. "Demanding Holder" means any Holder initiating a registration request in compliance with Section 2.1(a); provided that any action required or permitted to be taken under this Agreement by any Demanding Holders shall be taken by action of the holders of a majority of the Registrable Securities held by such Demanding Holders. "Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder. "Holders" means the holders of Company Common Stock and of the Warrants who have executed this Agreement, and the transferees of each of them. "Person" means an individual, partnership, corporation, limited liability company, trust or unincorporated organization, or a government or agency or political subdivision thereof. "Piggyback Registration" is defined in Section 2.2. "Piggyback Holder" is defined in Section 2.2. "Prospectus" means the prospectus included in a Registration Statement, as amended or supplemented by any prospectus supplement and by all other amendments thereto, including post-effective amendments, and all material incorporated by reference into such Prospectus. "Public Distribution" shall mean any bona fide underwritten public distribution of Stock pursuant to an effective registration statement under the Securities Act or any other applicable law, or any bona fide public sale in an open market transaction under Rule 144 of the Securities Act (or any successor rule) if such sale is in compliance with the requirements of paragraphs (c), (d), (e), (f) and (g) of such Rule (notwithstanding the provisions of paragraph (k) of such Rule). "Public Offering" shall mean any bona fide underwritten public distribution of Stock pursuant to an effective registration statement under the Securities Act or any other applicable law. "Registrable Securities" means each share of Stock held by the Holders, or acquired by the Holders after the date hereof, until (i) it has been effectively registered under the Securities Act and disposed of by such Holders pursuant to an effective registration statement, or (ii) it is sold by such Holders pursuant to Rule 144 (or any similar provisions then in force) under the Securities Act or (iii) it is freely transferable pursuant to Rule 144(k) (or any similar provision then in force) promulgated, and under the Securities Act. "Registrable Securities" shall include all shares of Company Common Stock issued or issuable upon exercise of the Warrants. "Registration Statement" means any registration statement of the Company relating to a Demand Registration pursuant to Section 2.1, a Piggyback Registration pursuant to Section 2.2, or a Shelf Registration pursuant to Section 2.3, in each case, including the Prospectus included therein, all amendments and supplements thereto (including post-effective amendments) and all exhibits and material incorporated by reference therein. "Restricted Registration" means any public offering of Registrable Securities pursuant to a Registration Statement in which the aggregate number of shares proposed to be offered by the Smith Group and the Yucaipa Group is restricted by the managing underwriter(s) as contemplated by Sections 2.1(e) and 2.2(b) hereof. "SEC" means the Securities and Exchange Commission. "Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder. "Selling Holder" means a Holder who sells or proposes to sell Registrable Securities pursuant to a Registration Statement under the Securities Act. "Shelf Registration" or "Shelf Registration Statement" is defined in Section 2.3. "Smith Group" is defined in Section 2.1(a). "Stock" means the following securities: (i) the Company Common Stock or (ii) any security or other instrument (a) received as a dividend on, or other payment made to the holders of, the Company Common Stock (or any other security or instrument referred to in this definition) or (b) issued in connection with a split of the Company Common Stock (or any other security or instrument referred to in this definition) or as a result of any exchange or reclassification of the Company Common Stock (or any other security or instrument referred to in this definition), reorganization, consolidation, merger or recapitalization. "Underwritten Registration" or "Underwritten Offering" means a registration in which Stock of the Company is sold to an underwriter for re- offering to the public. "Warrants" means the Smith's Warrants as modified pursuant to Section 2.1(e) of the Reorganization Agreement. "Yucaipa Group" is defined in Section 2.1(a). ARTICLE II REGISTRATION RIGHTS SECTION 2.1 DEMAND REGISTRATIONS. (a) REQUEST FOR REGISTRATION. At any time and from time to time on or after the Effective Time (as defined in the Reorganization Agreement), each of (i) the holders of a majority of the Registrable Securities held by Yucaipa and its Affiliates and transferees of any of the foregoing, as a group (the "Yucaipa Group"), and (ii) the holders of a majority of the Registrable Securities held by Jeffrey P. Smith, Richard D. Smith and Fred L. Smith or members of their respective families, or any trust of which requests of the Company for registration with the SEC, under and in accordance with the provisions of the Securities Act, of all or part (but not less than one million (1,000,000) shares of Registrable Securities) of their Registrable Securities (a "Demand Registration") by giving written notice to the Company of such demand (a "Demand Notice"), provided that the Company shall be required to effect only one Demand Registration during any six-month period. Each such Demand Notice will specify the number of Registrable Securities proposed to be sold pursuant to such Demand Registration and will also specify the intended method of disposition thereof. Promptly after receipt of any Demand Notice, but in no event later than 60 days after receipt of such Demand Notice, the Company shall file a Registration Statement with the SEC with respect to the Registrable Securities included in the Demand Notice and shall use its best efforts to have such Registration Statement declared effective as promptly as practicable; PROVIDED, HOWEVER, that the Company may postpone the filing of such Registration Statement for a period of up to 90 days (the "Deferral Period") if the Board of Directors reasonably determines that (i) such a filing would adversely affect any proposed financing, acquisition, divestiture or other material transaction by the Company or (ii) such a filing would otherwise represent an undue hardship for the Company. The Company shall not be entitled to request more than one such deferral with respect to any group of Holders requesting a Demand Registration within any 365-day period. If the Company does elect to defer any such Demand Registration, the Holders requesting such Demand Registration may, at their election by written notice to the Company, (i) confirm their request to proceed with such Demand Registration upon the expiration of the Deferral Period or (ii) withdraw their request for such Demand Registration in which case no such request for a Demand Registration shall be deemed to have occurred for purposes of this Agreement. The Company shall give written notice of any Demand Notice by any Holder, which request complies with this Section 2.1(a), within 5 days after the receipt thereof, to each Holder who did not initially join in such request. Within 10 days after receipt of such notice, any such Holder may request in writing that its Registrable Securities be included in such registration, and the Company shall include in the Demand Registration the Registrable Securities of each such Holder requested to be so included, subject to the provisions of Section 2.1(e). Each such request shall specify the number of shares of Registrable Securities proposed to be sold and the intended method of disposition thereof. (b) EFFECTIVE REGISTRATION. Except as provided in subsection (c) below, a registration will not be deemed to have been effected as a Demand Registration unless it has been declared effective by the SEC; provided that if, after it has become effective, the offering of Registrable Securities pursuant to such registration is or becomes the subject of any stop order, injunction or other order or requirement of the SEC or any other governmental or administrative agency, or if any court prevents or otherwise limits the sale of Registrable Securities pursuant to the registration (for any reason other than the acts or omissions of the Holders), such registration will be deemed not to have been effected. If (i) a registration requested pursuant to this Section 2.1 is deemed not to have been effected in accordance with the provisions of the preceding sentence or (ii) the registration requested pursuant to this Section 2.1 does not remain continuously effective for a period of at least 90 days beyond the effective date thereof or until the consummation of the distribution by the Holders of the Registrable Securities included in such registration statement (the "Demand Registration Statement"), then such Demand Registration Statement shall not count as a Demand Registration that may be requested by the Demanding Holder(s) in question and the Company shall continue to be obligated to effect a registration pursuant to this Section 2.1. (c) WITHDRAWAL. The Demanding Holders may withdraw all or any part of the Registrable Securities from a Demand Registration at any time (whether before or after the filing or effective date of the Demand Registration Statement), and if all such Registrable Securities are withdrawn, to withdraw the demand related thereto. If at any time a registration statement is filed pursuant to a Demand Registration, and subsequently a sufficient number of Registrable Securities are withdrawn from the Demand Registration so that such Demand Registration Statement does not cover at least the required amounts specified by Section 2.1(a), and an additional number of Registrable Securities is not so included, the Company may (or shall, if requested by the Demanding Holders) withdraw such Demand Registration Statement; provided that such withdrawn registration statement will count as a Demand Registration unless the Demanding Holders elect to bear the expenses associated with such withdrawn registration statement. If the Demanding Holders elect to bear such expenses, such expenses shall be borne by the Demanding Holder(s) whose withdrawal of Registrable Securities resulted in such Demand Registration Statement not covering the specified required amounts. (d) SELECTION OF UNDERWRITER. If the Demanding Holders so elect, the offering of Registrable Securities pursuant to a Demand Registration shall be in the form of an Underwritten Offering. The Demanding Holders shall select one or more nationally recognized firms of investment bankers to act as the managing Underwriter or Underwriters in connection with such offering and shall select any additional investment bankers and managers to be used in connection with such offering; provided that such investment bankers and managers must be reasonably satisfactory to the Company. The Company shall (together with all Holders of Registrable Securities proposing to distribute such Registrable Securities through such underwriting) enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting in the manner set forth above. (e) PRIORITY ON DEMAND REGISTRATIONS. If, in any Demand Registration involving an Underwritten Offering the managing underwriter or underwriters thereof advise the Demanding Holders or the Company in writing that in its or their reasonable opinion the number of Registrable Securities proposed to be sold in such Demand Registration exceeds the number that can be sold in such offering or will adversely affect the success of such offering (including, without limitation, an impact on the selling price or the number of Registrable Securities that any participant may sell), the Company shall include in such registration only the number of Registrable Securities, if any, which in the opinion of such underwriter or underwriters can be sold without having an adverse effect on the success of the offering and in accordance with the following priority: (i) first, Registrable Securities held by Demanding Holders in the group initially requesting such registration, allocated pro rata among such group (based upon the number of Registrable Securities requested to be included in such Demand Registration) and (ii) second, pro rata (based upon the number of Registrable Securities requested to be included in such registration by such Holders) among the other Holders of Registrable Securities who have requested to include Registrable Securities in such registration. If all Registrable Securities requested to be sold in the Underwritten Offering are included therein, the Company may include other shares of Stock in such offering in accordance with the following priority, but not to exceed the number recommended by the managing underwriter or underwriters: (x) first, pro rata among any other stockholders of the Company having piggyback or other similar registration rights and (y) second, shares of Stock proposed to be sold by or for the account of the Company. Notwithstanding the foregoing, if prior to the filing of any Demand Registration Statement, the Company has received Demand Notices from both the Smith Group and the Yucaipa Group, then the Smith Group and the Yucaipa Group shall be permitted to include their Registrable Securities in any such Demand Registration on an equal basis (i.e. each group will be entitled to 50% of the remaining share allocation, or such greater percentage as may be available if the other group elects not to fill its entire 50% allocation). SECTION 2.2 PIGGYBACK REGISTRATIONS. (a) RIGHT TO PARTICIPATE IN REGISTRATION. If at any time the Company proposes to file a registration statement under the Securities Act with respect to an offering by the Company for its own account or for the account of any holders of any class of common equity securities (other than (i) a registration statement on Form S-4 or S-8 (or any substitute form that may be adopted by the SEC) or (ii) a registration statement filed in connection with a Demand Registration or a Shelf Registration or (iii) a registration statement filed in connection with an offering of securities solely to the Company's existing securityholders), then the Company shall give written notice of such proposed filing to the Holders as soon as practicable (but in no event less than 20 days before the anticipated filing date), and such notice shall offer such Holder the opportunity to register such number of shares of Registrable Securities as each such Holder may request, which request shall specify the Registrable Securities intended to be disposed of by such Holder and the intended method of distribution thereof (or, if the offering is a proposed Underwritten Offering, that such Holder elects to have the number of Registrable Securities so specified included in such Underwritten Offering) (a "Piggyback Registration"). The Company shall use its best efforts to cause the managing Underwriter or Underwriters of a proposed Underwritten Offering to permit the Registrable Securities requested by the Holders thereof to be included in a Piggyback Registration (the "Piggyback Holders") to be included on the same terms and conditions as any similar securities of the Company or any other securityholder included therein and to permit the sale or other disposition of such Registrable Securities in accordance with the intended method of distribution thereof. No registration effected under this Section 2.2 and no failure to effect a registration under this Section 2.2(a), shall relieve the Company of its obligations pursuant to Section 2.1, and no failure to effect a registration under this Section 2.2(a) and complete the sale of shares in connection therewith shall relieve the Company of any other obligation under this Agreement (including, without limitation, the Company's obligations under Sections 3.2 and 4.1). (b) PRIORITY ON PIGGYBACK REGISTRATIONS. Unless the registration statement is being filed pursuant to a Demand Registration (in which case the priority of piggyback rights shall be as provided in Section 2.1(e) above), if the managing underwriter or underwriters advise the Company in writing that in its or their reasonable opinion the number of equity securities of the Company proposed to be sold in such registration (including Registrable Securities to be included pursuant to subsection (a) above) will adversely affect the success of such offering (including, without limitation, an impact on the selling price or the number of equity securities of the Company that any participant may sell), the Company shall include in such registration the number of equity securities of the Company, if any, which in the opinion of such underwriter or underwriters can be sold without having an adverse effect on the offering and in accordance with the following priority: (i) first, the securities the Company proposes to sell for its own account, (ii) second, any Registrable Securities of the Smith Group and any Registrable Securities of the Yucaipa Group, on an equal basis (as specified in Section 2.1(e) above), and (iii) third, pro rata based on the number of Registrable Securities that each Holder or other Person having similar rights shall have requested to be included therein. (c) WITHDRAWAL. The Piggyback Holders may withdraw all or any part of the Registrable Securities from a Piggyback Registration at any time (before but not after the effective date of such registration statement), by delivering written notice of such withdrawal request to the Company, unless such Piggyback Registration is underwritten, in which case Registrable Securities may not be withdrawn after the effective date of the Registration Statement. (d) TERMINATION OF REGISTRATION BY THE COMPANY. If the Company shall determine for any reason (x) not to register or (y) to delay a registration which includes Registrable Securities pursuant to this Section 2.2, the Company may, at its election, give written notice of such determination to the Holders of the Registrable Securities and, thereupon (i) in the case of a determination not to register, shall be relieved of its obligation to register any Registrable Securities in connection with such registration (but not from its obligation to pay the Registration Expenses (as defined below) in connection therewith), without prejudice, however, to the rights, if any, of any Holder or Holders of Registrable Securities to request that such registration be effected as a Demand Registration under Section 2.1, and (ii) in the case of a delay in registering, shall be permitted to delay registering any Registrable Securities for the same period as the delay in registering such other shares. SECTION 2.3 SHELF REGISTRATION. (a) FILING AND EFFECTIVENESS. Upon the request of the Demanding Holders in the Yucaipa Group at any time prior to the first anniversary of the Effective Time, the Company shall cause to be filed with the SEC as promptly as practicable after such request, but in no event later than 60 days thereafter, a shelf registration statement pursuant to Rule 415 under the Securities Act (a "Shelf Registration" or a "Shelf Registration Statement"), which Shelf Registration Statement shall provide for resales of all Registrable Securities held by members of the Yucaipa Group who shall have provided the information required pursuant to Section 3.1(b). The Smith Group shall be afforded the opportunity to include any Registrable Securities held by the Smith Group in such Shelf Registration. The Company shall use its best efforts to have such Shelf Registration declared effective and to keep such Shelf Registration Statement continuously effective, supplemented and amended to the extent necessary to ensure that it is available for resales of Registrable Securities by such Holders, and to ensure that it conforms with the requirements of this Agreement, the Securities Act and the policies, rules and regulations of the SEC as announced from time to time, for a period of at least one (1) year following the date on which such Shelf Registration Statement becomes effective under the Securities Act; provided, however, that, notwithstanding any other provisions of this Agreement, with respect to any registrable Securities, the Company shall not be obligated to effect any Shelf Registration Statement, or keep any Shelf Registration Statement effective, at any time or for any period after the fifth anniversary of the Effective Time. A request of the Demanding Holders in the Yucaipa Group under this Section 2.3(a) shall be deemed to be a request for a Demand Registration under Section 2.1 above. (b) EFFECTIVE REGISTRATION. A registration will not be deemed to have been effected as a Shelf Registration unless it has been declared effective by the SEC and the Company has complied in all material respects with its obligations under this Agreement with respect thereto; provided that if, after it has become effective, the offering of Registrable Securities pursuant to such registration is or becomes the subject of any stop order, injunction or other order or requirement of the SEC or any other governmental or administrative agency, or if any court prevents or otherwise limits the sale of Registrable Securities pursuant to the registration (for any reason other than the acts or omissions of the Holders), such registration will be deemed not to have been effected. If (i) the Shelf Registration is deemed not to have been effected in accordance with the provisions of the preceding sentence or (ii) the Shelf Registration does not remain continuously effective for the period described in subsection (a) above, then such Shelf Registration Statement shall not count as a Shelf Registration and the Company shall continue to be obligated to effect a registration pursuant to this Section 2.3. (c) SUSPENSION. With respect to any Shelf Registration that has been declared effective (i) the Company may suspend use of such Shelf Registration at any time if the continued effectiveness thereof would require the Company to disclose a material financing, acquisition or other corporate transaction, which disclosure the Board of Directors of the Company shall have determined in good faith is not in the best interests of the Company and its stockholders, and (ii) the Company may suspend use of such Shelf Registration during any period if each of the Company and the holders of a majority of the Registrable Securities included in such Shelf Registration consents in writing to such suspension for such period. ARTICLE III REGISTRATION PROCEDURES SECTION 3.1 REGISTRATION PROCEDURES. (a) GENERAL PROVISIONS. In connection with any Registration Statement and any related Prospectus required by this Agreement to permit the sale or resale of Registrable Securities, the Company shall: (1) prepare and file with the SEC a registration statement with respect to such Registrable Securities within the time periods specified herein, make all required filings with the NASD and use its best efforts to cause such registration statement to become effective as promptly as practicable (subject to the Company's right to withdraw the registration statement under the circumstances described in Sections 2.1(c) or 2.2(d)); (2) promptly prepare and file with the SEC such amendments and post- effective amendments to the Registration Statement as may be necessary to keep the Registration Statement effective for the applicable period set forth in Sections 2.1, 2.2 or 2.3, as applicable, or such shorter period as will terminate when all Registrable Securities covered by such Registration Statement have been sold (subject to Section 2.3(c)); cause the Prospectus to be supplemented by a required Prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 under the Securities Act, and to comply fully with the applicable provision of Rules 424 and 430A under the Securities Act in a timely manner; and comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such Registration Statement during the applicable period in accordance with the intended method or methods of distribution by the sellers thereof set forth in such Registration Statement or supplement to the Prospectus; (3) use its best efforts to keep such Registration Statement continuously effective and provide all requisite financial statements for the period specified in Sections 2.1, 2.2 or 2.3, as applicable (subject to Section 2.3(c)); upon the occurrence of any event that would cause any such Registration Statement or the Prospectus contained therein (A) to contain a material misstatement or omission or (B) not to be effective and usable for resale of Registrable Securities during the period required by this Agreement, the Company shall file promptly an appropriate amendment to such Registration Statement, in the case of clause (A), correcting any such misstatement or omission, and, in the case of either clause (A) or (B), use its best efforts to cause such amendment to declared effective and such Registration Statement and related Prospectus to become usable for their intended purposes(s) as soon as practicable thereafter; (4) provide (A) the Holders of Registrable Securities participating in the registration, (B) the underwriters (which term, for purposes of this Agreement, shall include a Person deemed to be an underwriter within the meaning of Section 2(11) of the Securities Act), if any, of the Registrable Securities to be registered, (C) the sale or placement agent therefor, if any, (D) counsel for such underwriters or agent, and (E) counsel for the Holders thereof, as selected by Holders of a majority of the Registrable Securities covered by such registration statement, the opportunity to participate in the preparation of such registration statement, each prospectus included therein or filed with the SEC, and each amendment or supplement thereto, and for a reasonable period prior to the filing of such registration statement, and throughout the period specified in Section 3.4(b) hereof, make available for inspection by the parties referred to in (A) through (E) above such financial and other information and books and records of the Company, provide access to properties of the Company and cause the officers, directors, employees, counsel and independent certified public accountants of the Company to respond to such inquiries as shall be reasonably necessary to conduct a reasonable investigation within the meaning of Section 11 of the Securities Act; (5) advise the underwriters, if any, and Selling Holders promptly and, if requested by such Persons, to confirm such advice in writing, (A) when the Prospectus or any Prospectus supplement or post-effective amendment has been filed, and, with respect to any Registration Statement or any post-effective amendment thereto, when the same has become effective, (B) of any request by the SEC for amendments to the Registration Statement or amendments or supplements to the Prospectus or for additional information relating thereto, (C) of the issuance by the SEC of any stop order suspending the effectiveness of the Registration Statement under the Securities Act or of the suspension by any state securities commission of the qualification of the Registrable Securities for offering or sale in any jurisdiction, or the initiation of any proceeding for any of the preceding purposes, (D) of the existence of any fact or the happening of any event that makes any statement of a material fact made in the registration Statement, the Prospectus, any amendment or supplement thereto, or any document incorporated by reference therein untrue, or that requires the making of any additions to or changes in the Registration Statement or the Prospectus in order to make the statements therein not misleading. If at any time the SEC shall issue any stop order suspending the effectiveness of the Registration Statement, or any state securities commission or other regulatory authority shall issue an order suspending the qualification or exemption from qualification of the Registrable Securities under state securities or Blue Sky laws, the Company shall use its best efforts to obtain the withdrawal or lifting of such order at the earliest possible time; (6) furnish to each Selling Holder named in any Registration Statement or Prospectus and each of the underwriter(s) in connection with such sale, if any, such number of copies of any Registration Statement or Prospectus included therein or any amendments or supplements to any such Registration Statement or Prospectus (including all documents incorporated by reference after the initial filing of such Registration Statement and all exhibits filed therewith), reasonably requested by such Person; (7) if requested by any selling Holders or the underwriter(s) in connection with such sale, if any, promptly include in any Registration Statement or Prospectus, pursuant to a supplement or post-effective amendment if necessary, such information as such selling Holders and such underwriter(s), if any, may reasonably request to have included therein, including, without limitation, information relating to the "Plan of Distribution" of the Registrable Securities, information with respect to the principal amount of Registrable Securities being sold to such underwriter(s), the purchase price being paid therefor and any other terms of the offering of the Registrable Securities to be sold in such offering, and make all required filing of such Prospectus supplement or post- effective amendment as soon as practicable after the Company is notified of the matters to be included in such Prospectus supplement or post- effective amendment; (8) deliver to each Selling Holder and each of the underwriter(s), if any, without charge, as many copies of the Prospectus (including each preliminary prospectus) and any amendment or supplement thereto as such Persons reasonably may request; the Company hereby consents to the use of the Prospectus and any amendment or supplement thereto by each of the Selling Holders and each of the underwriter(s), if any, in connection with the offering and the sale of the Registrable Securities covered by the Prospectus or any amendment or supplement thereto; (9) in connection with any Underwritten Offering pursuant to a Demand Registration, enter into an underwriting agreement with one or more underwriter designated in accordance with this Agreement, such agreement to be of the form, scope and substance as is customary in underwritten offerings, and take all such other actions as are reasonably requested by the managing underwriter(s) in order to expedite or facilitate the disposition of such Registrable Securities and in such connections (i) make such representations and warranties to the underwriters in form, scope and substance as are customarily made by issuers to underwriters in underwritten offerings with respect to the business of the Company; (ii) obtain opinions of counsel to the Company and updates thereof (which counsel and opinions (in form, scope and substance) shall be reasonably satisfactory to the managing underwriter(s)) addressed to the managing underwriter(s) covering the matters customarily covered in opinions requested in underwritten offerings and such other matters as may be reasonably requested by the underwriters; (iii) obtain "comfort" letters and updates thereof from the Company's independent certified public accountants addressed to the underwriters, such "comfort" letters to be in customary form and covering matters of the type customarily covered in "comfort" letters in connection with underwritten offerings; (iv) deliver such documents and certificates as may be reasonably requested by the managing underwriter(s) to evidence compliance with any customary conditions contained in the underwriting agreement or other agreement entered into by the Company. The above shall be done at each closing under such underwriting or similar agreement; (10) prior to any public offering of Registrable Securities, cooperate with the Selling Holders, the underwriter(s), if any, and their respective counsel in connection with the registration and qualification of the Registrable Securities under the securities or Blue Sky laws of such jurisdictions as the Selling Holders or underwriter(s), if any, may request and do any and all other acts or things necessary or advisable to enable the disposition in such jurisdictions or the Registrable Securities covered by the applicable Registration Statement; provided, however, that the Company shall not be required to register or qualify as a foreign corporation where it is not now so qualified or to take any action that would subject it to the service of process in suits or to taxation, except as is required as a result of the Registration Statement, in any jurisdiction where it is not now so subject; (11) in connection with any sale of Registrable Securities that will result in such securities no longer being Registrable Securities, cooperate with the Selling Holders and the underwriter(s), if any, to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be sold and not bearing any restrictive legends; and to register such Registrable Securities in such denominations and such names as the Selling Holders or the underwriter(s), if any, may request at least two Business Days prior to such sale of Registrable Securities; (12) if requested by the Selling Holders, provide a CUSIP number for all Registrable Securities not later than the effective date of the Registration Statement covering such Registrable Securities and provide the Company's transfer agent(s) and registrar(s) for the Registrable Securities with printed certificates for the Registrable Securities; (13) cooperate and assist in any filings required to be made with the NASD and in the performance of any due diligence investigation by any underwriter (including any "qualified independent underwriter") that is required to be retained in accordance with the rules and regulations of the NASD), and use their best efforts to cause such Registration Statement to become effective and approved by such governmental agencies or authorities as may be necessary to enable the Selling Holders or underwriters, if any, to consummate the disposition of such Registrable Securities; (14) otherwise use its best efforts to comply with all applicable rules and regulations of the SEC, and make generally available to its security holders, as soon as practicable, a consolidated earnings statement meeting the requirements of Rule 158 under the Securities Act (which need not be audited) covering a period of at least twelve month periods, but not more than eighteen months, beginning with the first month of the Company's first quarter commencing after the effective date of the Registration Statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act; and (15) cause all Registrable Securities covered by the Registration Statement to be listed on each securities exchange on which securities of the same class issued by the Company are then listed if requested by the Selling Holders holding a majority of the Registered Securities or the managing underwriter(s), if any. Each Selling Holder, upon receipt of any notice from the Company of the happening of any event described in subsection (5)(B), (C), or (D) of Section 3.1(a) or in Section 2.3(c) (a "Suspension Notice"), shall forthwith discontinue disposition of the Registrable Securities pursuant to the Registration Statement relating thereto until such Selling Holder receives copies of the supplemented or amended Prospectus contemplated hereby or until it is advised in writing (the "Advice") by the Company that the use of the Prospectus may be resumed, and has received copies of any additional or supplemented filings that are incorporated by reference in the Prospectus, and, if so directed by the Company, such Selling Holder will, or will request the managing underwriter or underwriters, if any, to deliver to the Company (at the Company's expense) all copies, other than permanent file copies then in such Selling Holder's possession, of the Prospectus covering such Registrable Securities current at the time of receipt of such notice. The period from the date on which any Holder receives a Suspension Notice to the date on which any Holder receives either the Advice or copies of the supplemented or amended Prospectus contemplated hereby relating to such notice shall hereinafter be referred to as the "Suspension Period." If the Company shall give any Suspension Notice, (i) the Company shall use its best efforts and take such actions as are reasonably necessary to render Advice and end the Suspension Period as promptly as practicable and (ii) the time periods for which a Registration Statement is required to be kept effective pursuant to Sections 2.1, 2.2 or 2.3, as the case may be, shall be extended by the number of days during the period from and including the date of the giving of such Suspension Notice to and including the date when each Selling Holder shall have received (A) the copies of the supplemented or amended Prospectus contemplated by Section 3.1(a) or (B) the Advice. (b) PROVISION BY HOLDERS OF CERTAIN INFORMATION. No Holder of Registrable Securities may include any of its Registrable Securities in any Registration Statement pursuant to this Agreement unless and until such Holder furnishes to the Company in writing, within 20 days after receipt of a request therefor, such information as the Company may reasonably request specified in item 507 of Regulation S-K under the Securities Act for use in connection with any Registration Statement or Prospectus or preliminary Prospectus included therein. Each Holder as to which any Registration Statement is being effected agrees to furnish promptly to the Company all information required to be disclosed in order to make the information previously furnished to the Company by such Holder not materially misleading. SECTION 3.2 REGISTRATION EXPENSES. (a) All expenses incident to the Company's performance of or compliance with this Section 3.2 will be paid by the Company, regardless of whether any registration statement required hereunder becomes effective, including, without limitation: (1) all registration and filing fees; (2) fees and expenses of compliance with securities or blue sky laws (including, without limitation, reasonable fees and disbursements of counsel in connection with blue sky qualifications of the Registrable Securities and determination of their eligibility for investment under the laws of such jurisdictions as the managing underwriters or Holders of Registrable Securities being sold may designate); (3) printing (including, without limitation, expenses of printing or engraving certificates for the Registrable Securities in a form eligible for trading on the New York Stock Exchange or for deposit with the Depository Trust Company and of printing prospectuses), messenger, telephone and delivery expenses; (4) reasonable fees and disbursements of counsel for the Company; (5) reasonable fees and disbursements of all independent certified public accountants of the Company (including, without limitation, the expenses of any special audit and "cold comfort" letters required by or incident to such performance); (6) fees and expenses of other Persons retained by the Company; and (7) fees and expenses associated with any NASD filing required to be made in connection with the registration of the Registrable Securities, including, if applicable, the reasonable fees and expenses of any "qualified independent underwriter" (and its counsel) that is required to be retained in accordance with the rules and regulations of the NASD (all such expenses being herein called "Registration Expenses"). (b) The Company will, in any event, pay its internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expense of any annual audit, the fees and expenses incurred in connection with the listing of the Registrable Securities to be registered on Nasdaq or on each national securities exchange on which similar securities issued by the Company are then listed, rating agency fees and the fees and expenses of any Person, including special experts, retained by the Company. SECTION 3.3 PARTICIPATION IN UNDERWRITTEN REGISTRATIONS. No Holder may participate in any Underwritten Registration hereunder unless such Holder (i) agrees to sell its Registrable Securities on the basis provided in any underwriting arrangements approved by the Persons entitled hereunder to approve such arrangements and (b) completes and executes all reasonable questionnaires, powers of attorney, underwriting agreements, hold-back agreements letters and other documents customarily required under the terms of such underwriting arrangements. Notwithstanding the foregoing, (x) no Selling Holder shall be required to make any representations or warranties except those which relate solely to such Holder and its intended method of distribution, and (y) the liability of each such Holder to any underwriter under such underwriting agreement will be limited to liability arising from misstatements or omissions regarding such Holder and its intended method of distribution and any such liability shall not exceed an amount equal to the amount of net proceeds such Holder derives from such registration; provided, however, that in an offering by the Company in which any Holder requests to be included in a Piggyback Registration, the Company shall use its best efforts to arrange the terms of the offering such that the provisions set forth in clauses (x) and (y) of this Section 3.3 are true. Nothing in this Section 3.3 shall be construed to create any additional rights regarding the registration of Registrable Securities in any Person otherwise than as set forth herein. SECTION 3.4 HOLD-BACK AGREEMENTS. (a) RESTRICTIONS ON PUBLIC DISTRIBUTION BY HOLDER OF REGISTRABLE SECURITIES. Upon the written request of the managing underwriter or underwriters of a Public Offering, each Holder of Registrable Securities shall not effect any Public Distribution of such securities, or any securities convertible into or exchangeable or exercisable for such securities, including a sale pursuant to Rule 144 under the Securities Act (except as part of such Public Offering), during the 14-day period prior to, and during the 90-day period following, the offering date for each Public Offering made pursuant to such registration statement (as identified by such underwriter or underwriters or the Company in good faith). The foregoing provisions shall not apply to any Holder that is prevented by applicable statute or regulation from entering into any such agreement; provided, however, that any such Holder shall undertake not to effect any Public Distribution of the class of securities covered by such registration statement (except as part of such Underwritten Offering) during such period unless it has provided 60 days' prior written notice of such Public Distribution to the managing underwriter. (b) RESTRICTIONS ON PUBLIC DISTRIBUTION BY THE COMPANY AND OTHERS. The Company agrees and it shall use its best efforts to cause its Affiliates (other than Persons who are Holders hereunder) to agree: (1) not to effect any Public Distribution of any securities being registered in accordance with Article II hereof, or any securities convertible into or exchangeable or exercisable for such securities, during the 14-day period prior to, and during the 90-day period following, the offering date for each Public Offering made pursuant to a registration statement filed under Article II hereof, if requested in writing by the managing underwriters (except as part of such Public Offering or pursuant to registrations in connection with mergers, acquisitions, exchange offers, subscription offers, dividend reinvestment plans or stock options or other employee benefit plans); and (2) to use its best efforts to cause each Holder of its privately placed Registrable Securities that are issued by the Company at any time on or after the date of this Agreement to agree not to effect any Public Distribution, including a sale pursuant to Rule 144 under the Securities Act, of any Registrable Securities during the period set forth in clause (1) above (except as part of such Public Offering, if and to the extent permitted). ARTICLE IV INDEMNIFICATION AND CONTRIBUTION SECTION 4.1 INDEMNIFICATION BY THE COMPANY. The Company agrees to indemnify and hold harmless each Selling Holder, each person, if any, who controls such Holder (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) (hereinafter referred to as a "controlling person"), the respective officers, directors, partners, employees, representatives and agents of any Holder or any controlling person (each an "Indemnified Holder"), to the fullest extent lawful, from and against any and all losses, claims, damages, liabilities, judgments, actions and expenses (including without limitation and as incurred, reimbursement of all reasonable costs of investigating, preparing, pursuing or defending any claim or action, or any investigation or proceeding by any governmental agency or body, commenced or threatened, including the reasonable fees and expenses of counsel to any Indemnified Holder) directly or indirectly caused by, related to, based upon, arising out of or in connection with any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement or Prospectus (or any amendment or supplement thereto), or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as such losses, claims, damages, liabilities or expenses are caused by an untrue statement or omission or alleged untrue statement or omission that is made in reliance upon and in conformity with information relating to any of the Holders furnished in writing to the Company by any of the Holders expressly for use therein. SECTION 4.2 INDEMNIFICATION BY HOLDERS OF REGISTRABLE SECURITIES. Each Selling Holder agrees, severally and not jointly, to indemnify and hold harmless the Company and its directors, officers and any person controlling (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) the Company and its respective officers, directors, partners, employees, representatives and agents of each such person, to the same extent as the foregoing indemnity from the Company to each of the Indemnified Holders, but only with respect to losses, claims, damages, liabilities, judgments, actions and expenses (including without limitation and as incurred, reimbursement of all reasonable costs of investigating, preparing, pursuing or defending any claim or action, or any investigation or proceeding by any governmental agency or body, commenced or threatened, including the reasonable fees and expenses of counsel to the Company) directly or indirectly caused by, related to, based upon, arising out of or in connection with any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement or Prospectus (or any amendment or supplement thereto), or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, to the extent, but only to the extent, that such untrue statement or omission is contained in any information relating to such Holder furnished in writing by such Holder expressly for use in any Registration Statement or Prospectus. In case any action or proceeding shall be brought against the Company or its directors or officers or any such controlling person in respect of which indemnity may be sought against a Holder of Registrable Securities, such Holder shall have the rights and duties given the Company, and the Company or its directors or officers or such controlling person shall have the rights and duties given to each Holder by the preceding paragraph. Each Selling Holder also agrees to indemnify and hold harmless each other Selling Holder or underwriters participating in the distribution on substantially the same basis as that of the indemnification of the Company provided in this section 4.2. In no event shall the liability of any selling Holder hereunder be greater in amount than the dollar amount of the proceeds received by such Holder upon the sale of the Registrable Securities giving rise to such indemnification obligation. The Company shall be entitled to receive indemnities from underwriters, selling brokers, dealer managers and similar securities industry professionals participating in the distribution, to the same extent as provided above with respect to information so furnished in writing by such Persons specifically for inclusion in any Registration Statement or Prospectus. SECTION 4.3 CONDUCT OF INDEMNIFICATION PROCEEDINGS. Any Person entitled to indemnification hereunder (an "Indemnified Party") will (i) promptly give notice of any claim, action or proceeding (including any governmental or regulatory investigation or proceeding) or the commencement of any such action or proceeding to the Person against whom such indemnity may be sought (an "Indemnifying Party"); provided that the failure to give such notice shall not relieve the Indemnifying Party of its obligations pursuant to this Agreement except to the extent that such Indemnifying Party has been prejudiced in any material respect by such failure, and (ii) permit the Indemnifying Party to assume the defense of such claim with counsel reasonably satisfactory to such Indemnified Party; provided that the Indemnified Party shall have the right to employ separate counsel and participate in the defense of such claim, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party unless (a) the Indemnifying Party has agreed to pay for such fees and expenses, or (b) the Indemnifying Party shall have failed to assume the defense of such claim and employ counsel reasonably satisfactory to such Indemnified Party or (c) in the reasonable judgment of such Indemnified Party, based upon advice of its counsel, a conflict of interest may exist between such Indemnified Party and the Indemnifying Party with respect to such claims. If such defense is not assumed by the Indemnifying Party, the Indemnifying Party will not be subject to any liability for any settlement of any such claim effected without the Indemnifying Party's prior written consent, which consent shall not be unreasonably withheld. The Indemnifying Party shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there be a final judgment for the plaintiff, the Indemnifying Party agrees to indemnify and hold harmless any Indemnified Party from and against any loss, claim damage, liability or expense by reason of any settlement of any such claim or action. No Indemnifying Party shall, without the prior written consent of each Indemnified Party, settle or compromise or consent to the entry of judgment in or otherwise seek to terminate any pending or threatened action, claim, litigation or proceeding in respect of which indemnification or contribution may be sought hereunder (whether or not any Indemnified Party is a party thereto), unless such settlement, compromise, consent or termination includes an unconditional release of each Indemnified Party from all liability arising out of such action, claim, litigation or proceeding. An Indemnifying Party who is not entitled to, or elects not to, assume the defense of the claim will not be obligated to pay the fees and expenses of more than one counsel for all parties indemnified by such Indemnifying Party with respect to such claim, unless in the reasonable judgment of any Indemnified Party a conflict of interest may exist between such Indemnified Party and any other such Indemnified Parties with respect to such Claim, in which event the Indemnifying Party shall be obligated to pay the fees and expenses of such additional counsel or counsels. SECTION 4.4 CONTRIBUTION. If the indemnification provided for in this Article IV is unavailable to an Indemnified Party (other than by reason of exceptions provided in those Sections) in respect of any losses, claims, damages, liabilities or expenses referred to therein, then each applicable Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall have a joint and severable obligation to contribute to the amount paid or payable by such Indemnified Party as a result of such losses, claims, damages, liabilities or expenses in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party, on the one hand, and of the Indemnified Party, on the other, in connection with the statements or omissions which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative fault of the Indemnifying Party, on the one hand, and of the Indemnified Party, on the other, shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the Indemnifying Party or by the Indemnified Party and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The amount paid or payable by a party as a result of the losses, claims, damages, liabilities and expenses referred to above shall be deemed to include, subject to the limitations set forth in the second paragraph of Section 4.1, any legal or other fees or expenses reasonably incurred by such party in connection with investigating or defending any action or claim. The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 4.4 were determined by pro rata allocation (even if the Holders were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph. The amount paid or payable by an indemnified party as a result of the losses, claims, damages, liabilities or expenses referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 4.4, none of the Indemnified Holders shall be required to contribute, in the aggregate, any amount in excess of the amount by which the net proceeds received by such Holder with respect to the Registrable Securities exceeds the greater of (A) the amount paid by such Holder for its Registrable Securities and (B) the amount of any damages which such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Holders' obligation to contribute pursuant to this Section 4.4 are several in proportion to the respective number of Registrable Securities held by each of the Holders hereunder and not joint. For purposes of this Article IV, each controlling person of a Holder shall have the same rights to contribution as such Holder, and each officer, director, and person, if any, who controls the Company within the meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange Act shall have the same rights to contribution as the Company, subject in each case to the limitations set forth in the immediately preceding paragraph. Any party entitled to contribution will, promptly after receipt of notice of commencement of any action, suit or proceeding against such party in respect of which a claim for contribution may be made against another party or parties under this Article IV, notify such party or parties from whom contribution may be sought, but the omission to so notify such party or parties shall not relieve the party or parties from who contribution may be sought from any obligation it or they may have under this Article IV or otherwise except to the extent that it has been prejudiced in any material respect by such failure. No party shall be liable for contribution with respect to any action or claim settled without its written consent; provided, however, that such written consent was not unreasonably withheld. SECTION 4.5 ADDITIONAL INDEMNITY. The indemnity, contribution and expense reimbursement obligations under this Article IV shall be in addition to any liability each Indemnifying Party may otherwise have; provided, however, that any payment made by the Company which results in an Indemnified Party receiving from any source(s) indemnification, contribution or reimbursement for an amount in excess of the actual loss, liability or expense incurred by such Indemnified Party, shall be refunded to the Company by the Indemnified Party receiving such excess payment. ARTICLE V MISCELLANEOUS SECTION 5.1 RULE 144. The Company agrees it will file in a timely manner all reports required to be filed by it pursuant to the Securities Act and the Exchange Act and the rules and regulations adopted by the SEC thereunder and will take such further action as any Holder of Registrable Securities may reasonably request in order that such Holder may effect sales of Registrable Securities without registration within the limitations of the exemptions provided by Rule 144, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the SEC. At any reasonable time and upon the request of a Holder of Registrable Securities, the Company will furnish such Holder with such information as may be necessary to enable the Holder to effect sales of Registrable Securities pursuant to Rule 144 under the Securities Act and will deliver to such Holder a written statement as to whether it has complied with such information and requirements. SECTION 5.2 SPECIFIC PERFORMANCE. Each Holder, in addition to being entitled to exercise all rights provided herein or granted by law, including recovery of liquidated or other damages, will be entitled to specific performance of its rights under this Agreement. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Agreement and hereby agrees to waive the defense in any action for specific performance that a remedy at law would be adequate. SECTION 5.3 OTHER AGREEMENTS. Notwithstanding any other provisions of this Agreement, the Company shall have no obligation to effect a registration of any of the Registrable Securities hereunder if and to the extent any such registration would limit the number of shares registered and sold pursuant to, or otherwise conflict with the provisions of, the Registration Rights Agreement, dated December 11, 1981, by and among FMI Acquisition Corporation (now Fred Meyer, Inc.,), FMI Associates Limited Partnership and certain executive officers of FMI Acquisition Corporation (now Fred Meyer, Inc.,), and the Assignment thereof dated January 27, 1997 (the "FMI Agreement"). By way of example only and without limiting the foregoing, if, in connection with an Underwritten Offering, the underwriters of such offering conclude that it would be inadvisable to register and sell the total number of shares with respect to which registration has been requested under this Agreement and the FMI Agreement, any reduction in the total number of shares to be registered and sold shall first reduce the number of shares to be registered and sold pursuant to this Agreement before the number of shares to be registered and sold pursuant to the FMI Agreement shall be reduced. The Company will not on or after the date of this Agreement enter into any agreement with respect to its securities that is inconsistent with the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof. SECTION 5.4 CHARTER AMENDMENTS AFFECTING THE COMPANY'S COMMON STOCK. The Company will not amend its Certificate of Incorporation in any respect that would materially and adversely affect the rights of the Holders hereunder. SECTION 5.5 AMENDMENTS AND WAIVERS. The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to or departures from the provisions hereof may not be given unless the Company has obtained the written consent of Holders of a majority of the outstanding shares of Registrable Securities held by each of the Smith Group and the Yucaipa Group, respectively. SECTION 5.6 NOTICES. Unless otherwise provided herein, any notice, request, instruction or other document to be given hereunder by any party to the others shall be made in writing, by hand-delivery, telegraph, telex, telecopier, registered first-class mail or air courier guaranteeing overnight delivery as follows: if to the Company, to: Fred Meyer, Inc. 3800 SE 22nd Avenue Portland, Oregon 97202 Attention: General Counsel Fax: (503) 797-7138 if to any Holder: to the address specified below such Holder's name on the signature pages hereto; or to such other place and with such other copies as any party hereto may designate as to itself by written notice to the others. All such notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five Business Days after being deposited in the mail, postage prepaid, if mailed; when answered back, if telexed; when receipt acknowledged, if telecopied: and on the next Business Day if timely delivered to an air courier guaranteeing overnight delivery. SECTION 5.7 SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties, including without limitation and without the need for an express assignment, subsequent holders of Registrable Securities or of the Warrants, provided that the Company may not assign its rights or obligations under this Agreement to any other person or entity without the written consent of a majority of the outstanding shares of Registrable Securities held by each of the Smith Group and the Yucaipa Group, respectively. SECTION 5.8 COUNTERPARTS. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. SECTION 5.9 HEADINGS. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. SECTION 5.10 GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to the choice of law provisions thereof. SECTION 5.11 SEVERABILITY. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby. SECTION 5.12 ENTIRE AGREEMENT. This Agreement is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein with respect to the registration rights granted by the Company with respect to the Registrable Securities. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter. SECTION 5.13 PRONOUNS. Whenever the context may require, any pronouns used herein shall be deemed also to include the corresponding neuter, masculine or feminine forms. SECTION 5.14 ATTORNEY'S FEES. In any action or proceeding brought to enforce any provision of this Agreement, the successful party shall be entitled to recover reasonable attorney's fees in addition to its costs and expenses and any other available remedy. SECTION 5.15 SECURITIES HELD BY THE COMPANY OR ITS SUBSIDIARIES. Whenever the consent or approval of Holders of a specified percentage or Registrable Securities is required hereunder, Registrable Securities held by the Company or its Subsidiaries shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage. SECTION 5.16 FURTHER ASSURANCES. Each party shall cooperate and take such action as may be reasonably requested by another party in order to carry out the provisions and purposes of this Agreement and the transactions contemplated hereby. SECTION 5.17 TERMINATION. Unless sooner terminated in accordance with its terms or as otherwise herein provided, including specifically in Section 2.3(a), this Agreement shall terminate upon the earlier to occur of (i) the mutual agreement by the parties hereto, (ii) with respect to any Holder, such Holder ceasing to own any Registrable Securities, (iii) the fifteenth anniversary of the Effective Time, or (iv) with respect to the Yucaipa Group or the Smith Group, the date on which the aggregate number of shares of outstanding Registrable Securities held by the Yucaipa Group or the Smith Group, as applicable, is less than 20% of the Registrable Shares originally held by the Yucaipa Group or the Smith Group, as applicable, following the consummation of the transactions contemplated by the Reorganization Agreement; PROVIDED, that the foregoing clause (iv) shall not apply as to any member of the Yucaipa Group or the Smith Group, as applicable, if, as of such date, such member of the Yucaipa Group or the Smith Group, as applicable, is an "affiliate" of the Company within the meaning of the Securities Act. (signature page follows) IN WITNESS HEREOF, the parties hereto have executed and delivered this Agreement as of the date first written above. FRED MEYER, INC. By: /S/ KENNETH THRASHER Name: Kenneth Thrasher Title: Executive Vice President /S/ JEFFREY P. SMITH JEFFREY P. SMITH Address: 32 Burningtree Court Las Vegas, Nevada 89117 /S/ FRED L. SMITH FRED L. SMITH Address: /S/ RICHARD D. SMITH RICHARD D. SMITH Address: TRUST FOR THE CHILDREN OF JEFFREY P. SMITH By: /S/ JEFFREY P. SMITH Name: Jeffrey P. Smith Title: Trustee Address: TRUST FOR THE CHILDREN OF FRED L. SMITH By: /S/ FRED L. SMITH Name: Fred L. Smith Title: Trustee Address: TRUST FOR THE CHILDREN OF RICHARD D. SMITH By: /S/ RICHARD D. SMITH Name: Richard D. Smith Title: Trustee Address: THE YUCAIPA COMPANIES By: /S/ RONALD W. BURKLE Name: Ronald W. Burkle Title: General Partner Address: 10000 Santa Monica Boulevard Fifth Floor Los Angeles, California 90067 FAX: (310) 798-7201 YUCAIPA SSV PARTNERS, L.P. By: The Yucaipa Companies Its: General Partner By: /S/ RONALD W. BURKLE Name: Ronald W. Burkle Title: General Partner Address: 10000 Santa Monica Boulevard Fifth Floor Los Angeles, California 90067 FAX: (310) 798-7201 YUCAIPA SMITTY'S PARTNERS, L.P. By: The Yucaipa Companies Its: General Partner By: /S/ RONALD W. BURKLE Name: Ronald W. Burkle Title: General Partner Address: 10000 Santa Monica Boulevard Fifth Floor Los Angeles, California 90067 FAX: (310) 798-7201 YUCAIPA SMITTY'S PARTNERS II, L.P. By: The Yucaipa Companies Title: General Partner By: /S/ RONALD W. BURKLE Name: Ronald W. Burkle Title: General Partner Address: 10000 Santa Monica Boulevard Fifth Floor Los Angeles, California 90067 FAX: (310) 798-7201 YUCAIPA ARIZONA PARTNERS, L.P. By: The Yucaipa Companies Its: General Partner By: /S/ RONALD W. BURKLE Name: Ronald W. Burkle Title: General Partner Address: 10000 Santa Monica Boulevard Fifth Floor Los Angeles, California 90067 FAX: (310) 798-7201 EX-4 5 EXHIBIT 4 JOINT FILING AGREEMENT In accordance with Rule 13d-1(f)(1) promulgated under the Securities Exchange Act of 1934, as amended, the undersigned hereby agree to the joint filing with all other Reporting Persons (as such term is defined in the Schedule 13D referred to below) on behalf of each of them of a statement on Schedule 13D (including amendments thereto) with respect to the Common Stock, par value $.01 per share, of Fred Meyer, Inc., a Delaware corporation, and that this Agreement may be included as an Exhibit to such joint filing. IN WITNESS WHEREOF, the undersigned hereby execute this Agreement as of September 19, 1997. Yucaipa Arizona Partners, L.P. Yucaipa Smitty's Partners, L.P. Yucaipa Smitty's Partners II, L.P. Yucaipa SSV Partners, L.P. By: The Yucaipa Companies Its General Partner By: /S/ LAWRENCE K. KALANTARI Name:Lawrence K. Kalantari Title:General Partner The Yucaipa Companies By: /S/ LAWRENCE K. KALANTARI Name:Lawrence K. Kalantari Title:General Partner -----END PRIVACY-ENHANCED MESSAGE-----