-----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, OM3V0Yp2wgAK3YCPEYijfEc+GoeQEBnHrMGXqdY74LidtANg92K9StgS/i902pxf ee5lVf1hGyjS2Wr291LLdw== 0000912057-97-024120.txt : 19970715 0000912057-97-024120.hdr.sgml : 19970715 ACCESSION NUMBER: 0000912057-97-024120 CONFORMED SUBMISSION TYPE: SC 14D1 PUBLIC DOCUMENT COUNT: 14 FILED AS OF DATE: 19970714 SROS: NONE SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: DELCHAMPS INC CENTRAL INDEX KEY: 0000729970 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-GROCERY STORES [5411] IRS NUMBER: 630245434 STATE OF INCORPORATION: AL FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: SC 14D1 SEC ACT: 1934 Act SEC FILE NUMBER: 005-34753 FILM NUMBER: 97640028 BUSINESS ADDRESS: STREET 1: 305 DELCHAMPS DR STREET 2: P O BOX 1668 CITY: MOBILE STATE: AL ZIP: 36602 BUSINESS PHONE: 2054330431 MAIL ADDRESS: STREET 1: 305 DELCHAMPS DR STREET 2: PO BOX 1668 CITY: MOBILE STATE: AL ZIP: 36602 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: JITNEY JUNGLE STORES INC CENTRAL INDEX KEY: 0001005408 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-GROCERY STORES [5411] IRS NUMBER: 133863017 STATE OF INCORPORATION: DE FISCAL YEAR END: 0429 FILING VALUES: FORM TYPE: SC 14D1 BUSINESS ADDRESS: STREET 1: 126 EAST 56TH STREET STREET 2: 29TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10022 BUSINESS PHONE: 2125594333 FORMER COMPANY: FORMER CONFORMED NAME: JJ ACQUISITIONS CORP DATE OF NAME CHANGE: 19951227 SC 14D1 1 SCHEDULE 14D1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------------- SCHEDULE 14D-1 TENDER OFFER STATEMENT PURSUANT TO SECTION 14(D)(1) OF THE SECURITIES EXCHANGE ACT OF 1934 ------------------------ DELCHAMPS, INC. (Name of Subject Company) DELTA ACQUISITION CORPORATION A WHOLLY OWNED SUBSIDIARY OF JITNEY-JUNGLE STORES OF AMERICA, INC. (Bidders) COMMON STOCK, $.01 PAR VALUE PER SHARE (Title of Class of Securities) 246615 10 8 (CUSIP Number of Class of Securities) ------------------------ MICHAEL E. JULIAN PRESIDENT AND CHIEF EXECUTIVE OFFICER JITNEY-JUNGLE STORES OF AMERICA, INC. 1770 ELLIS AVENUE SUITE 200 JACKSON, MISSISSIPPI 39204 (601) 965-8600 (Name, Address and Telephone Number of Persons Authorized to Receive Notices and Communications on Behalf of Bidders) ------------------------ WITH A COPY TO: DECHERT PRICE & RHOADS 4000 BELL ATLANTIC TOWER 1717 ARCH STREET PHILADELPHIA, PA 19103 (215) 994-4000 ATTENTION: WILLIAM G. LAWLOR DAVID E. SCHULMAN ------------------------ CALCULATION OF FILING FEE TRANSACTION VALUATION* AMOUNT OF FILING FEE** $227,483,790 $45,497
* For the purpose of calculating the fee only, this amount assumes the purchase of 7,582,793 shares of Common Stock of Delchamps, Inc. at $30.00 per share. Such number of shares includes all outstanding shares as of July 8, 1997, and assumes the exercise of all stock options to purchase shares of Common Stock issued by Delchamps, Inc. which were outstanding as of July 8, 1997. ** The amount of the filing fee, calculated in accordance with Rule 0-11(d) of the Securities Exchange Act of 1934, as amended, equals 1/50th of one percent of the aggregate value of cash offered by Delta Acquisition Corporation for such number of Shares. / / Check box if any part of the fee is offset as provided by Rule 0-11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing. Amount Previously Paid: Not Applicable Filing Not Applicable Party: Form or Registration Not Applicable Date Filed: Not Applicable No.:
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- This statement relates to a tender offer by Delta Acquisition Corporation, an Alabama corporation (the "Offeror") and a wholly owned subsidiary of Jitney-Jungle Stores of America, Inc., a Mississippi corporation ("Parent"), to purchase all outstanding shares of common stock, par value $.01 per share, of Delchamps, Inc., an Alabama corporation (the "Company"), including the associated preferred share purchase rights (the "Rights") issued pursuant to the Rights Agreement dated as of October 14, 1988, as amended, between the Company and the First Alabama Bank, as Rights Agent (collectively, the "Shares"), at a purchase price of $30.00 per Share, net to the seller in cash, without interest thereon, upon the terms and subject to the conditions set forth in the Offer to Purchase, dated July 14, 1997 (the "Offer to Purchase"), and in the related Letter of Transmittal (which, together with any amendments or supplements thereto, collectively constitute the "Offer") copies of which are filed as Exhibit (a)(1) and (a)(2) hereof, respectively and which are incorporated herein by reference. ITEM 1. SECURITY AND SUBJECT COMPANY. (a) The name of the subject company is Delchamps, Inc., an Alabama corporation. The address of the principal executive offices of the Company is set forth in Section 8 ("Certain Information Concerning the Company") of the Offer to Purchase and is incorporated herein by reference. (b) The exact title of the class of equity securities being sought in the Offer is the Common Stock, par value $.01 per share, including the associated Rights, of the Company. The information set forth in the "Introduction" of the Offer to Purchase is incorporated herein by reference. (c) The information set forth in Section 6 ("Price Range of Shares; Dividends") of the Offer to Purchase is incorporated herein by reference. ITEM 2. IDENTITY AND BACKGROUND. This Statement is being filed by the Offeror and Parent. The information set forth in the "Introduction," Section 9 ("Certain Information Concerning Parent and the Offeror") and in Annex I ("Certain Information Concerning the Directors and Executive Officers of Parent and the Offeror") of the Offer to Purchase, is incorporated herein by reference. (a) through (d), (g): This Statement is being filed by the Offeror and Parent. The name, residence or business address, citizenship, present principal occupation or employment and material occupations during the last 5 years of each executive officer and director of the Offeror and Parent is set forth in Annex I hereto. (e) through (f): During the past five years, neither the Offeror nor Parent nor, to the best knowledge of the Offeror and Parent, any of the persons listed in Annex I of the Offer to Purchase (i) has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or (ii) was a party to a civil proceeding of a judicial or administrative body of competent jurisdiction as a result of which any such person was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting activities subject to, federal or state securities laws or finding any violation of such laws. ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY. (a) None. (b) The information set forth in the "Introduction" and Section 11 ("Background of the Offer; Past Contacts, Transactions or Negotiations With the Company") of the Offer to Purchase is incorporated herein by reference. 1 ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. (a) and (b): The information set forth in the "Introduction" and Section 10 ("Source and Amount of Funds") of the Offer to Purchase is incorporated herein by reference. (c) Not applicable. ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER. (a) through (e): The information set forth in the "Introduction," Section 11 ("Background of the Offer; Past Contacts, Transactions or Negotiations With the Company"), Section 12 ("Purpose of the Offer and the Merger; Plans for the Company") and Section 13 ("The Merger Agreement") of the Offer to Purchase is incorporated herein by reference. (f) and (g): The information set forth in Section 7 ("Certain Effects of the Transaction") of the Offer to Purchase is incorporated herein by reference. ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY. (a) and (b): The information set forth in the "Introduction," Section 9 ("Certain Information Concerning Parent and the Offeror") and Section 13 ("The Merger Agreement") of the Offer to Purchase is incorporated herein by reference. ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO THE SUBJECT COMPANY'S SECURITIES. The information set forth in the "Introduction," Section 9 ("Certain Information Concerning Parent and the Offeror"), Section 11 ("Background of the Offer; Past Contracts, Transactions or Negotiations With the Company"), Section 12 ("Purpose of the Offer and the Merger; Plans for the Company"), and Section 13 ("The Merger Agreement") of the Offer to Purchase is incorporated herein by reference. ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED. The information set forth in the "Introduction" and in Section 17 ("Fees and Expenses") of the Offer to Purchase is incorporated herein by reference. ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS. The information set forth in Section 9 ("Certain Information Concerning Parent and the Offeror") of the Offer to Purchase is incorporated herein by reference. The incorporation by reference herein of the above-mentioned financial information does not constitute an admission that such information is material to a decision by a security holder of the Company whether to sell, tender or hold Shares being sought in the Offer. ITEM 10. ADDITIONAL INFORMATION. (a) Not applicable. (b) and (c). The information set forth in the "Introduction," and Section 16 ("Certain Legal Matters") of the Offer to Purchase is incorporated herein by reference. (d) The information set forth in Section 7 ("Certain Effects of the Transaction") of the Offer to Purchase is incorporated herein by reference. (e) None. 2 (f) The information set forth in the Offer to Purchase, the Letter of Transmittal and the Agreement and Plan of Merger, dated as of July 8, 1997, among Parent, the Offeror and the Company, copies of which are attached hereto as Exhibits (a)(1), (a)(2) and (c)(1), respectively, is incorporated herein by reference in its entirety. ITEM 11. MATERIAL TO BE FILED AS EXHIBITS. (a) (1) Offer to Purchase, dated July 14, 1997. (a) (2) Letter of Transmittal. (a) (3) Letter from Donaldson, Lufkin & Jenrette Securities Corporation to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees. (a) (4) Letter from Brokers, Dealers, Commercial Banks, Trust Companies, and Other Nominees to Clients. (a) (5) Notice of Guaranteed Delivery. (a) (6) Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. (a) (7) Summary Advertisement, dated July 14, 1997. (a) (8) Press Release issued by Parent and the Company on July 8, 1997. (a) (9) Press Release issued by Parent on July 14, 1997. (b) (1) Commitment Letter, dated as of July 3, 1997, between Parent and DLJ Bridge Finance, Inc., as amended by the letter dated July 14, 1997 from DLJ Bridge Finance, Inc. to Parent. (b) (2) Commitment Letter, dated as of July 7, 1997, between Parent and Fleet Capital Corporation. (b) (3) Indenture dated March 5, 1996 between Jitney-Jungle Stores of America, Inc. and Marine Midland Bank, as Trustee, relating to the issuance and sale of $200,000,000 aggregate principal amount of 12% Senior Notes due 2006 (incorporated by reference to Exhibit No. 4.2 to Amendment No. 2 to Form S-1 (No. 33-80833) of JJ Acquisitions Corp. filed with the Securities and Exchange Commission on February 27, 1996). (c) (1) Agreement and Plan of Merger, dated as of July 8, 1997, among Parent, the Offeror and the Company. (c) (2) Confidentiality and Standstill Agreement, dated as of April 8, 1997, among Parent, Bruckmann, Rosser, Sherrill & Co., Inc. and the Company. (d) None. (e) Not applicable. (f) None.
3 SIGNATURE After due inquiry and to the best of my knowledge and belief, I certify the information set forth in this statement is true, complete and correct. JITNEY-JUNGLE STORES OF AMERICA, INC. By: /s/ MICHAEL E. JULIAN --------------------------------------- Name: Michael E. Julian Title: President and Chief Executive Officer DELTA ACQUISITION CORPORATION By: /s/ MICHAEL E. JULIAN --------------------------------------- Name: Michael E. Julian Title: President Dated: July 14, 1997 4 EX-99.(A)(1) 2 EXHIBIT 99.(A)(1) OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK (INCLUDING THE ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS) OF DELCHAMPS, INC. AT $30.00 NET PER SHARE BY DELTA ACQUISITION CORPORATION A WHOLLY OWNED SUBSIDIARY OF JITNEY-JUNGLE STORES OF AMERICA, INC. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, AUGUST 8, 1997, UNLESS THE OFFER IS EXTENDED. UNDER CERTAIN CIRCUMSTANCES, THE OFFER WILL BE EXTENDED UNTIL SEPTEMBER 12, 1997 IF NECESSARY TO MEET CERTAIN CONDITIONS, INCLUDING THE HSR CONDITION AND THE NOTEHOLDER CONSENT CONDITION REFERRED TO IN THIS OFFER TO PURCHASE. IN ADDITION, NOTWITHSTANDING THE SATISFACTION OR WAIVER OF ANY CONDITIONS OF THE OFFER, THE OFFER MAY BE EXTENDED UNTIL SEPTEMBER 12, 1997 TO ENABLE PARENT AND THE OFFEROR TO OBTAIN PERMANENT FINANCING FOR THE TRANSACTION. THE OFFER MAY BE EXTENDED IN OTHER CIRCUMSTANCES AS DESCRIBED IN THIS OFFER TO PURCHASE. SEE SECTION 1. THIS OFFER (THE "OFFER") IS BEING MADE PURSUANT TO THE AGREEMENT AND PLAN OF MERGER, DATED AS OF JULY 8, 1997 (THE "MERGER AGREEMENT"), AMONG JITNEY-JUNGLE STORES OF AMERICA, INC. ("PARENT"), DELTA ACQUISITION CORPORATION (THE "OFFEROR"), AND DELCHAMPS, INC. (THE "COMPANY"). THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE OFFER, THE MERGER (AS DEFINED HEREIN) AND THE MERGER AGREEMENT (AS DEFINED HEREIN), HAS DETERMINED THAT THE CONSIDERATION TO BE PAID FOR THE SHARES IN THE OFFER AND THE MERGER IS FAIR TO THE SHAREHOLDERS OF THE COMPANY AND THAT THE OFFER AND THE MERGER ARE OTHERWISE IN THE BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS AND RECOMMENDS THAT ALL SHAREHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER AND, IF REQUIRED BY THE ALABAMA BUSINESS CORPORATION LAW, VOTE IN FAVOR OF THE MERGER. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER A NUMBER OF SHARES OF COMMON STOCK, $.01 PAR VALUE PER SHARE, OF THE COMPANY, INCLUDING THE ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS (COLLECTIVELY, THE "SHARES"), SUCH THAT THE OFFEROR AND ITS AFFILIATES WILL BENEFICIALLY OWN IN THE AGGREGATE NOT LESS THAN TWO-THIRDS OF THE SHARES OUTSTANDING ON A FULLY DILUTED BASIS, (II) ANY APPLICABLE WAITING PERIOD UNDER THE HSR ACT (AS DEFINED HEREIN) OR PERIOD DURING WHICH PARENT SHALL HAVE CONSENTED OR OTHERWISE BE BARRED FROM PURCHASING SHARES PURSUANT TO THE OFFER AS PART OF ANY AGREEMENT OR OTHER ARRANGEMENT WITH ANY GOVERNMENTAL OR REGULATORY AUTHORITY INVOLVING THE HSR ACT OR ANY OTHER APPLICABLE ANTITRUST LAWS HAVING EXPIRED OR HAVING BEEN TERMINATED PRIOR TO THE EXPIRATION OF THE OFFER, (III) PARENT HAVING OBTAINED PRIOR TO THE EXPIRATION OF THE OFFER AN AMENDMENT OR SUPPLEMENT TO THE INDENTURE GOVERNING ITS 12% SENIOR NOTES DUE 2006 AS DESCRIBED HEREIN AND (IV) THE SATISFACTION OF CERTAIN OTHER TERMS AND CONDITIONS. SEE SECTIONS 1 AND 15. -------------------------- IMPORTANT Any shareholder desiring to tender Shares should either (i) complete and sign the Letter of Transmittal or a facsimile thereof in accordance with the instructions in the Letter of Transmittal and deliver the Letter of Transmittal with the Shares and all other required documents to the Depositary (as defined herein) or follow the procedure for book-entry transfer set forth in Section 3 or (ii) request such shareholder's broker, dealer, commercial bank, trust company or other nominee to effect the transaction for the shareholder. Shareholders having Shares registered in the name of a broker, dealer, commercial bank, trust company or other nominee must contact such person if they desire to tender their Shares. Any shareholder who desires to tender Shares and whose certificates representing such Shares are not immediately available or who cannot comply with the procedures for book-entry transfer on a timely basis or who cannot deliver all required documents to the Depositary, in each case prior to the expiration of the Offer, may tender such Shares pursuant to the guaranteed delivery procedure set forth in Section 3. Questions and requests for assistance may be directed to Donaldson, Lufkin & Jenrette Securities Corporation, the Dealer Manager, or to MacKenzie Partners, Inc., the Information Agent, at their respective addresses and telephone numbers set forth on the back cover of this Offer to Purchase. Additional copies of this Offer to Purchase, the Letter of Transmittal, the Notice of Guaranteed Delivery and other related materials may be obtained from the Information Agent or from brokers, dealers, commercial banks and trust companies. -------------------------- THE DEALER MANAGER FOR THE OFFER IS: DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION July 14, 1997 TABLE OF CONTENTS PAGE Introduction................................................................................ 1 1. Terms--The Offer................................................................. 3 2. Acceptance for Payment and Payment for Shares.................................... 6 3. Procedure for Tendering Shares................................................... 7 4. Withdrawal Rights................................................................ 10 5. Certain Federal Income Tax Consequences.......................................... 10 6. Price Range of Shares; Dividends................................................. 11 7. Certain Effects of the Transaction............................................... 12 8. Certain Information Concerning the Company....................................... 13 9. Certain Information Concerning Parent and the Offeror............................ 16 10. Source and Amount of Funds....................................................... 18 11. Background of the Offer; Past Contacts, Transactions or Negotiations With the Company.......................................................................... 21 12. Purpose of the Offer and the Merger; Plans for the Company....................... 23 13. The Merger Agreement............................................................. 25 14. Dividends and Distributions...................................................... 35 15. Certain Conditions to the Offeror's Obligations.................................. 36 16. Certain Legal Matters............................................................ 38 17. Fees and Expenses................................................................ 41 18. Miscellaneous.................................................................... 42 Annex I --Certain Information Concerning the Directors and Executive Officers of Parent and the Offeror.............................................. I-1
i To the holders of Common Stock of Delchamps, Inc.: INTRODUCTION Delta Acquisition Corporation, an Alabama corporation (the "Offeror") and a wholly owned subsidiary of Jitney-Jungle Stores of America, Inc., a Mississippi corporation ("Parent"), hereby offers to purchase all outstanding shares of Common Stock, $.01 par value per share, of Delchamps, Inc., an Alabama corporation (the "Company"), including the associated preferred share purchase rights (the "Rights") issued pursuant to the Rights Agreement dated as of October 14, 1988, as amended (the "Rights Agreement"), between the Company and First Alabama Bank, as Rights Agent (collectively, the "Shares"), at a purchase price of $30.00 per Share (the "Offer Price"), net to the seller in cash, without interest, upon the terms and subject to the conditions set forth in this Offer to Purchase and in the related Letter of Transmittal (which, together with any amendments or supplements hereto or thereto, collectively constitute the "Offer"). Tendering holders of Shares will not be obligated to pay brokerage fees or commissions or, except as set forth in the Letter of Transmittal, stock transfer taxes on the purchase of Shares by the Offeror pursuant to the Offer. The Offeror will pay all charges and expenses of Donaldson, Lufkin & Jenrette Securities Corporation (the "Dealer Manager"), IBJ Schroder Bank and Trust Company (the "Depositary") and MacKenzie Partners, Inc. (the "Information Agent") in connection with the Offer. See Section 17. THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE OFFER, THE MERGER (AS DEFINED HEREIN), AND THE MERGER AGREEMENT (AS DEFINED HEREIN), HAS DETERMINED THAT THE CONSIDERATION TO BE PAID FOR THE SHARES IN THE OFFER AND THE MERGER IS FAIR TO THE SHAREHOLDERS OF THE COMPANY AND THAT THE OFFER AND THE MERGER ARE OTHERWISE IN THE BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS AND RECOMMENDS THAT ALL SHAREHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER AND, IF REQUIRED BY THE ALABAMA BUSINESS CORPORATION LAW, VOTE IN FAVOR OF THE MERGER. The Company has advised the Offeror that Credit Suisse First Boston Corporation ("CSFB"), the Company's financial advisor, has delivered to the Company's Board of Directors its written opinion dated July 7, 1997 that, as of such date and based upon and subject to the matters set forth therein, the consideration to be received by the holders of Shares pursuant to the Offer and the Merger was fair from a financial point of view to such holders. A copy of such opinion is set forth in full as an exhibit to the Company's Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9") which is being mailed to the Company's shareholders with this Offer to Purchase, and such shareholders are urged to read the opinion carefully and in its entirety. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER A NUMBER OF SHARES SUCH THAT THE OFFEROR AND ITS AFFILIATES WILL BENEFICIALLY OWN IN THE AGGREGATE NOT LESS THAN TWO-THIRDS OF THE SHARES OUTSTANDING ON A FULLY DILUTED BASIS (THE "MINIMUM CONDITION"), (II) ANY WAITING PERIOD UNDER THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED (THE "HSR ACT"), APPLICABLE TO THE PURCHASE OF SHARES PURSUANT TO THE OFFER OR PERIOD DURING WHICH PARENT SHALL HAVE CONSENTED OR OTHERWISE BE BARRED FROM PURCHASING SHARES PURSUANT TO THE OFFER AS PART OF ANY AGREEMENT OR OTHER ARRANGEMENT WITH ANY GOVERNMENTAL OR REGULATORY AUTHORITY INVOLVING THE HSR ACT OR ANY OTHER APPLICABLE ANTITRUST LAWS HAVING EXPIRED OR HAVING BEEN TERMINATED PRIOR TO THE EXPIRATION OF THE OFFER (THE "HSR CONDITION"), (III) PARENT OBTAINING PRIOR TO THE EXPIRATION OF THE OFFER AN AMENDMENT OR SUPPLEMENT TO THE SENIOR NOTES INDENTURE (THE "SENIOR NOTES INDENTURE") GOVERNING ITS 12% SENIOR NOTES DUE 2006 (THE "SENIOR NOTES") (AND, TO THE EXTENT NECESSARY, THE SENIOR NOTES AND GUARANTEES REFERRED TO THEREIN), ALL WITH THE CONSENT OF THE HOLDERS OF SUCH SENIOR NOTES AND IN ACCORDANCE WITH THE TERMS OF SUCH SENIOR NOTES INDENTURE, TO INCREASE THE AMOUNT OF PERMITTED INDEBTEDNESS, RESTRICTED PAYMENTS AND INVESTMENTS PERMITTED TO BE INCURRED OR MADE, AS APPLICABLE, BY PARENT AND ITS SUBSIDIARIES UNDER THE SENIOR NOTES INDENTURE AND TO MAKE SUCH OTHER CHANGES THERETO AS ARE NECESSARY 1 TO PERMIT IT TO CONSUMMATE THE OFFER, THE MERGER AND THE OTHER TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT (THE "NOTEHOLDER CONSENT CONDITION") AND (IV) THE SATISFACTION OF CERTAIN OTHER TERMS AND CONDITIONS. SEE SECTIONS 1 AND 15. The Offer is being made pursuant to the Agreement and Plan of Merger, dated as of July 8, 1997 (the "Merger Agreement"), among Parent, the Offeror and the Company. The Merger Agreement provides that, among other things, after the purchase of Shares pursuant to the Offer and the satisfaction of the other conditions set forth in the Merger Agreement and in accordance with the relevant provisions of the Alabama Business Corporation Act, as amended (the "ABCA"), the Offeror will be merged with and into the Company (the "Merger"). Following consummation of the Merger, it is anticipated that the Company will continue as the surviving corporation (the "Surviving Corporation") and will be a wholly owned subsidiary of Parent. The Merger is subject to a number of conditions, including approval by shareholders of the Company. At the effective time of the Merger (the "Effective Time"), each Share that is issued and outstanding (other than Shares owned by the Company, Parent, the Offeror, any other wholly owned subsidiary of Parent or by shareholders, if any, who are entitled to and who properly exercise dissenters' rights under the ABCA), will be converted into and become the right to receive from the Surviving Corporation $30.00 (or any higher price that may be paid for each Share pursuant to the Offer) in cash, without interest thereon. See Section 5 for a description of certain tax consequences of the Offer and the Merger. Instead of merging the Offeror into the Company, Parent may elect to merge the Company with and into Parent, the Offeror or another direct or indirect wholly owned subsidiary of Parent. The Merger Agreement provides that, promptly after the Offeror purchases Shares pursuant to the Offer, the Offeror will be entitled to designate such number of directors, rounded up to the next whole number, of the Board of Directors of the Company as will give the Offeror representation on the Board of Directors equal to at least that number of directors equal to the product of (i) the total number of directors on the Board of Directors and (ii) the percentage that the number of Shares so purchased bears to the number of Shares outstanding. However, the Merger Agreement provides that the Board of Directors of the Company shall have, to the extent they are willing to continue to serve, at least three directors who were directors on the date of the Merger Agreement and who are not designees nor officers, directors, employees or affiliates of Parent or the Offeror nor employees of the Company and its subsidiaries. The Company has agreed to use its best efforts to cause the appropriate number of directors to resign and the Offeror's designees to be elected or appointed to the Board of Directors of the Company. The Merger Agreement is more fully described in Section 13. The Company has represented to the Offeror that as of the date of the Merger Agreement, there were 7,127,743 Shares issued and outstanding and there were outstanding stock options and rights to purchase an aggregate of 455,050 Shares. As a result, the Offeror believes the Minimum Condition will be satisfied if 5,055,196 Shares are validly tendered and not withdrawn pursuant to the Offer. As of the date hereof, neither the Offeror nor Parent nor any of their affiliates beneficially owns any Shares. If the Offeror acquires at least 5,055,196 Shares in the Offer, the Offeror will beneficially own two-thirds of the outstanding Shares on a fully diluted basis. Accordingly, the Offeror would have sufficient voting power to approve the Merger without the affirmative vote of any other shareholder. Under the terms of the Merger Agreement, Parent and the Offeror may reduce the Minimum Condition to a majority of the outstanding Shares on a fully diluted basis. Parent and the Offeror currently do not intend to reduce the Minimum Condition but reserve the right to do so, subject to the terms of the Merger Agreement and the applicable rules and regulations of the Securities and Exchange Commission (the "Commission"). Under the ABCA, if the Offeror acquires at least 80% of the outstanding Shares pursuant to the Offer, the Offeror could elect to effect the merger of the Company with and into Parent, the Offeror or another direct or indirect wholly owned subsidiary of Parent without a vote of the shareholders of the Company. If, however, the Offeror does not acquire at least 80% of the then outstanding Shares pursuant to the Offer or otherwise and a vote of the Company's shareholders is required under the ABCA, a longer period of time generally will be required to effect the Merger. See Section 12. 2 Under the terms of the Merger Agreement, the Offer is conditioned upon, among other things, satisfaction of the Noteholder Consent Condition, which provides that Parent obtain an amendment or supplement to the Senior Notes Indenture governing its Senior Notes to increase the amount of permitted indebtedness, restricted payments and investments permitted to be incurred or made, as applicable, by Parent and its subsidiaries under the Senior Notes Indenture and to make such other changes thereto as are necessary to permit it to consummate the Offer, the Merger and the other transactions contemplated by the Merger Agreement. The Senior Notes Indenture currently contains restrictions upon the ability of Parent and its subsidiaries to (i) incur additional indebtedness, unless specified financial coverage ratios are met or such indebtedness is otherwise permitted, and (ii) make investments in third persons in excess of permitted amounts. Parent intends to solicit consents from holders of its Senior Notes to make the following principal amendments to the Senior Notes Indenture: (i) to permit Parent to issue up to $200.0 million of subordinated indebtedness and to permit certain of Parent's subsidiaries to guarantee such indebtedness; (ii) to permit Parent or certain of its subsidiaries to incur up to $75.0 million of additional indebtedness, including borrowings under Parent's senior credit facility; (iii) to provide that Parent's purchase of Shares will constitute a permitted investment and that the Merger and the related payment of merger consideration will not constitute a restricted payment under the Senior Notes Indenture; and (iv) to amend the amount of annual fees payable by Parent to Bruckmann, Rosser, Sherrill & Co., Inc., a financial advisor to Parent and an affiliate of the majority shareholder of Parent, in view of the proposed acquisition of the Company. Under the terms of the Senior Notes Indenture, the foregoing amendments require the consent of at least a majority in aggregate principal amount of the holders of Senior Notes. The Senior Notes Indenture has been filed as an exhibit to the Schedule 14D-1. THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION WHICH SHOULD BE READ BEFORE ANY DECISION IS MADE WITH RESPECT TO THE OFFER. 1. TERMS--THE OFFER. Upon the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of any extension or amendment), the Offeror will accept for payment and pay for all Shares validly tendered prior to the Expiration Date and not theretofore withdrawn in accordance with Section 4. The term "Expiration Date" shall mean 12:00 Midnight, New York City time, on Friday, August 8, 1997, unless and until the Offeror shall have extended the period of time for which the Offer is open, in which event the term "Expiration Date" shall mean the latest time and date at which the Offer, as so extended by the Offeror, shall expire. Under the terms of the Merger Agreement, subject to the applicable rules and regulations of the United States Securities and Exchange Commission (the "Commission"), the Offeror expressly reserves the right (but has no obligation) to increase the consideration per Share payable in the Offer or amend, modify or make any changes in the terms and conditions of the Offer except that the Offeror shall not, without the prior written consent of the Company, impose conditions to the Offer other than the conditions set forth in Section 15, reduce the number of Shares sought to be purchased in the Offer, reduce the Offer Price, change the form of consideration payable in the Offer, extend the Expiration Date (except as set forth in the next paragraph), or otherwise change any term of the Offer in any manner adverse to the holders of Shares. The Offeror may, without the consent of the Company, extend the Offer (i) if at the then scheduled Expiration Date of the Offer, any of the conditions set forth in Section 15 shall not have been satisfied or waived, until such time as such conditions are satisfied or waived, (ii) for any period required by any rule, regulation, interpretation or position of the Commission or the Commission staff applicable to the Offer, 3 (iii) on one or more occasions for an aggregate period of not more than five business days, if the Minimum Condition has been satisfied but less than 80% of the outstanding Shares (on a fully diluted basis) have been validly tendered and not withdrawn, (iv) for any reason on one or more occasions for an aggregate period of not more than 10 business days beyond the initial Expiration Date or the latest Expiration Date that would otherwise be permitted under clause (i), (ii) or (iii) of this sentence, and (v) on one or more occasions for an aggregate period of not more than 60 calendar days after the date hereof (I.E., September 12, 1997) in order for Parent to obtain financing on terms acceptable to it; provided, however, that without the written consent of the Company, Parent and the Offeror may not extend the Offer (A) for any period that would end more than 60 calendar days after the date hereof (I.E., September 12, 1997), unless on such sixtieth day any of the conditions in Section 15 are not satisfied, or (B) for any period that would end more than 90 calendar days after the date hereof (I.E., October 14, 1997); provided further that if, on the initial Expiration Date of the Offer, or any extension thereof, the conditions set forth in paragraphs (c)(iii) through (c)(ix) and (e) in Section 15 have been satisfied or waived but any of the HSR Condition, the Noteholder Consent Condition or the conditions set forth in paragraphs (c)(i) or (c)(ii) in Section 15 shall not have been satisfied or waived, Parent and the Offeror have agreed to extend the Offer one or more times (for such periods as Parent and the Offeror shall determine in their sole discretion) until 60 calendar days after the date hereof (I.E., September 12, 1997); provided, further, that Parent and the Offeror may extend the Offer beyond October 14, 1997 if the conditions set forth in Section 15 shall not have been satisfied as a result of a breach by the Company of its obligations under the Merger Agreement. If the Offeror shall decide, in its sole discretion, to increase the consideration offered in the Offer to holders of Shares and if, at the time that notice of such increase is first published, sent or given to holders of Shares in the manner specified below, the Offer is scheduled to expire at any time earlier than the expiration of a period ending on the tenth business day from, and including, the date that such notice is first so published, sent or given, then, subject to the terms of the Merger Agreement, the Offer will be extended until the expiration of such period of 10 business days. For purposes of the Offer, a "business day" means any day other than a Saturday, Sunday or a federal holiday and consists of the time period from 12:01 a.m. through 12:00 Midnight, New York City time. THE OFFER IS CONDITIONED UPON SATISFACTION OF THE MINIMUM CONDITION, THE HSR CONDITION, THE NOTEHOLDER CONSENT CONDITION AND CERTAIN OTHER TERMS AND CONDITIONS. THE MERGER AGREEMENT AND THE OFFER MAY BE TERMINATED BY THE OFFEROR AND PARENT IF CERTAIN EVENTS OCCUR. SEE SECTION 15. Subject to the applicable rules and regulations of the Commission, the foregoing conditions are for the sole benefit of the Offeror and Parent and may be asserted by the Offeror or Parent and may be waived by the Offeror or Parent, in whole or in part, at any time and from time to time, in the sole discretion of the Offeror or Parent; provided that, without the written consent of the Company, the Offeror and Parent may not reduce the Minimum Condition to less than a majority of the outstanding Shares on a fully diluted basis or waive the condition relating to the expiration of the waiting period under the HSR Act. For a discussion of certain agreements among the Offeror, Parent and the Company relating to the satisfaction of the HSR Condition and certain other of the conditions set forth in Section 15, see Section 13, "The Merger Agreement--HSR MATTERS." If the Minimum Condition or any other condition set forth in Section 15 has not been satisfied by 12:00 Midnight, New York City time, on Friday, August 8, 1997 (or any other time then set as the Expiration Date), the Offeror reserves the right (but shall not be obligated), subject to the terms and conditions contained in the Merger Agreement (including the limitations described above) and to the applicable rules and regulations of the Commission, (i) to terminate the Offer and not accept for payment or pay for any Shares and return all tendered Shares to tendering shareholders, (ii) to waive all the unsatisfied conditions and accept for payment and pay for all Shares validly tendered prior to the Expiration Date and not theretofore withdrawn, (iii) to extend the Offer and, subject to the right of shareholders to withdraw Shares until the Expiration Date, retain the Shares that have been tendered during the period or periods for which the Offer is extended or (iv) to amend the Offer. 4 Subject to the limitations set forth in this Offer and the Merger Agreement, the Offeror reserves the right (but will not be obligated), at any time or from time to time in its sole discretion, to extend the period during which the Offer is open by giving oral or written notice of such extension to the Depositary and by making a public announcement of such extension. Except to the extent required by the Merger Agreement, there can be no assurance that the Offeror will exercise its right to extend the Offer. See Section 13. Subject to the applicable rules and regulations of the Commission and subject to the limitations set forth in the Merger Agreement, the Offeror expressly reserves the right, at any time and from time to time, in its sole discretion, (i) to delay payment for any Shares regardless of whether such Shares were theretofore accepted for payment, or to terminate the Offer and not to accept for payment or pay for any Shares not theretofore accepted for payment or paid for, upon the occurrence of any of the conditions set forth in Section 15, by giving oral or written notice of such delay or termination to the Depositary, and (ii) at any time or from time to time, to amend the Offer in any respect by giving oral or written notice of such amendment to the Depositary. Under no circumstances will interest be paid on the purchase price of the Shares to be paid by the Offeror, regardless of any extension of the Offer or any delay in making any payment. The Offeror's right to delay payment for any Shares or not to pay for any Shares theretofore accepted for payment is subject to the applicable rules and regulations of the Commission, including Rule 14e-1(c) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), relating to the Offeror's obligation to pay for or return tendered Shares promptly after the termination or withdrawal of the Offer. Any extension of the period during which the Offer is open, delay in acceptance for payment or payment, termination or amendment of the Offer will be followed, as promptly as practicable, by public announcement thereof, such announcement in the case of an extension to be issued not later than 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date in accordance with the public announcement requirements of Rules 14d-4(c), 14d-6(d) and 14e-1(d) under the Exchange Act. Without limiting the obligation of the Offeror under such rule or the manner in which the Offeror may choose to make any public announcement, the Offeror currently intends to make announcements by issuing a press release to the Dow Jones News Service and making any appropriate filing with the Commission. If, subject to the terms of the Merger Agreement, the Offeror makes a material change in the terms of the Offer or the information concerning the Offer, or if it waives a material condition of the Offer (including, with the consent of the Company, a waiver of the Minimum Condition), the Offeror will disseminate additional tender offer materials and extend the Offer if and to the extent required by Rules 14d-4(c), 14d-6(d) and 14e-1 under the Exchange Act or otherwise. The minimum period during which the Offer must remain open following material changes in the terms of the Offer or the information concerning the Offer, other than a change in price or a change in percentage of securities sought, will depend upon the facts and circumstances, including the relative materiality of the terms or information changes. With respect to a change in price or a change in percentage of securities sought, a minimum 10 business day period is generally required to allow for adequate dissemination to shareholders and investor response. The Company has provided the Offeror with the Company's list of shareholders and security position listings for the purpose of disseminating the Offer to holders of Shares. This Offer to Purchase and the related Letter of Transmittal will be mailed to record holders of Shares whose names appear on the Company's shareholder list and will be furnished to brokers, dealers, commercial banks, trust companies and similar persons whose names, or the names of whose nominees, appear on the shareholder list or, if applicable, who are listed as participants in a clearing agency's security position listing for subsequent transmittal to beneficial owners of Shares. 5 2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES. Upon the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of any such extension or amendment), the Offeror will accept for payment and will pay for all Shares validly tendered prior to the Expiration Date and not theretofore withdrawn in accordance with Section 4 promptly after the later to occur of (i) the Expiration Date and (ii) the satisfaction or waiver of the conditions set forth in Section 15. Subject to compliance with Rule 14e-1(c) under the Exchange Act and any other applicable rules of the Commission and the terms of the Merger Agreement, the Offeror expressly reserves the right to delay acceptance for payment of, or payment for, Shares in order to comply in whole or in part with any applicable law, including the HSR Act. See Sections 1, 15 and 16. The Company and Parent each filed a Premerger Notification and Report Form with respect to the Offer under the HSR Act on July 11, and July 14, 1997, respectively. The waiting period under the HSR Act with respect to the Offer will expire at 11:59 p.m., New York City time, on July 29, 1997 unless early termination of the waiting period is granted. However, the Antitrust Division of the Department of Justice or the Federal Trade Commission may extend the waiting period by requesting additional information or documentary material from Parent or the Company. If such a request is made, such waiting period will expire at 11:59 p.m., New York City time, on the tenth day after substantial compliance by Parent or the Company with such request. See Section 16 for additional information concerning the HSR Act and the applicability of the antitrust laws to the Offer and Section 13 for certain provisions of the Merger Agreement applicable to such matters. Payment for Shares accepted for payment pursuant to the Offer will in all cases be made only after timely receipt by the Depositary of (i) certificates for such Shares or timely confirmation (a "Book-Entry Confirmation") of a book-entry transfer of such Shares into the Depositary's account at The Depository Trust Company or the Philadelphia Depository Trust Company (collectively, the "Book-Entry Transfer Facilities") pursuant to the procedures set forth in Section 3, (ii) a properly completed and duly executed Letter of Transmittal (or a manually signed facsimile thereof) with all required signature guarantees or, in the case of a book-entry transfer, an Agent's Message (as defined below) and (iii) any other documents required by the Letter of Transmittal. The term "Agent's Message" means a message transmitted by a Book-Entry Transfer Facility to, and received by, the Depositary and forming a part of a Book-Entry Confirmation, which states that such Book-Entry Transfer Facility has received an express acknowledgment from the participant in such Book-Entry Transfer Facility tendering the Shares that such participant has received and agrees to be bound by the terms of the Letter of Transmittal and that the Offeror may enforce such agreement against the participant. For purposes of the Offer, the Offeror will be deemed to have accepted for payment, and thereby purchased, Shares validly tendered and not withdrawn as, if and when the Offeror gives oral or written notice to the Depositary of the Offeror's acceptance of such Shares for payment pursuant to the Offer. In all cases, payment for Shares purchased pursuant to the Offer will be made by deposit of the purchase price with the Depositary, which will act as agent for tendering shareholders for the purpose of receiving payment from the Offeror and transmitting such payment to tendering shareholders whose Shares have been accepted for payment. If, for any reason whatsoever, acceptance for payment of any Shares tendered pursuant to the Offer is delayed, or the Offeror is unable to accept for payment Shares tendered pursuant to the Offer, then, without prejudice to the Offeror's rights under Section 1, the Depositary may, nevertheless, on behalf of the Offeror, retain tendered Shares, and such Shares may not be withdrawn, except to the extent that the tendering shareholders are entitled to withdrawal rights as described in Section 4 below and as otherwise required by Rule 14e-1(c) under the Exchange Act. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE PURCHASE PRICE OF THE SHARES TO BE PAID BY THE OFFEROR, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING ANY PAYMENT. 6 If any tendered Shares are not accepted for payment pursuant to the terms and conditions of the Offer for any reason, or if certificates are submitted for more Shares than are tendered, certificates for such unpurchased or untendered Shares will be returned, without expense to the tendering shareholder (or, in the case of Shares delivered by book-entry transfer to a Book-Entry Transfer Facility, such Shares will be credited to an account maintained within such Book-Entry Transfer Facility), as promptly as practicable after the expiration or termination of the Offer. If, prior to the Expiration Date, the Offeror increases the price being paid for Shares accepted for payment pursuant to the Offer, such increased consideration will be paid to all shareholders whose Shares are purchased pursuant to the Offer, whether or not such Shares were tendered prior to such increase in consideration. The Offeror reserves the right to transfer or assign, in whole or from time to time in part, to one or more of its affiliates, the right to purchase Shares tendered pursuant to the Offer, but any such transfer or assignment will not relieve the Offeror of its obligations under the Offer or prejudice the rights of tendering shareholders to receive payment for Shares validly tendered and accepted for payment. 3. PROCEDURE FOR TENDERING SHARES. VALID TENDERS. For Shares to be validly tendered pursuant to the Offer, a properly completed and duly executed Letter of Transmittal (or a manually signed facsimile thereof), with any required signature guarantees, or, in the case of a book-entry transfer, an Agent's Message, and any other required documents, must be received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase prior to the Expiration Date and either (i) certificates representing such Shares must be received by the Depositary along with the Letter of Transmittal or such Shares must be tendered pursuant to the procedure for book-entry transfer set forth below, and a Book-Entry Confirmation must be received by the Depositary, in each case prior to the Expiration Date or (ii) the guaranteed delivery procedures set forth below must be complied with. No alternative, conditional or contingent tenders will be accepted. BOOK-ENTRY TRANSFER. The Depositary will make a request to establish an account with respect to the Shares at each Book-Entry Transfer Facility for purposes of the Offer within two business days after the date of this Offer to Purchase. Any financial institution that is a participant in a Book-Entry Transfer Facility's system may make book-entry delivery of Shares by causing a Book-Entry Transfer Facility to transfer such Shares into the Depositary's account at a Book-Entry Transfer Facility in accordance with such Book-Entry Transfer Facility's procedures for transfer. Although delivery of Shares may be effected through book-entry at a Book-Entry Transfer Facility prior to the Expiration Date, (i) the Letter of Transmittal (or a manually signed facsimile thereof), properly completed and duly executed, with any required signature guarantees, or an Agent's Message in connection with a book-entry transfer, and any other required documents, must, in any case, be transmitted to and received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase or (ii) the guaranteed delivery procedures described below must be complied with. DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH SUCH BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY. SIGNATURE GUARANTEE. Signatures on the Letter of Transmittal must be guaranteed by a member in good standing of the Securities Transfer Agents Medallion Program, the New York Stock Exchange Medallion Signature Guarantee Program, the Stock Exchange Medallion Program, or by any other bank, broker, dealer, credit union, savings association or other entity which is an "eligible guarantor institution," as such term is defined in Rule 17Ad-15 under the Exchange Act (each of the foregoing being referred to as an "Eligible Institution" and, collectively, as "Eligible Institutions"), unless the Shares tendered thereby are tendered (i) by a registered holder of Shares who has not completed either the box labeled "Special Delivery Instructions" or the box labeled "Special Payment Instructions" on the Letter of Transmittal or (ii) for the account of any Eligible Institution. If the certificates evidencing Shares are registered in the 7 name of a person or persons other than the signer of the Letter of Transmittal, or if payment is to be made, or delivered to, or certificates for unpurchased Shares are to be issued or returned to, a person other than the registered owner or owners, then the tendered certificates must be endorsed or accompanied by duly executed stock powers, in either case signed exactly as the name or names of the registered owner or owners appear on the certificates, with the signatures on the certificates or stock powers guaranteed by an Eligible Institution as provided in the Letter of Transmittal. See Instructions 1 and 5 to the Letter of Transmittal. GUARANTEED DELIVERY. Any shareholder who desires to tender Shares and whose certificates for Shares are not immediately available or who cannot comply with the procedures for book-entry transfer on a timely basis or who cannot deliver all required documents to the Depositary, in each case prior to the Expiration Date, may tender such Shares if all of the following guaranteed delivery procedures are duly complied with: (i) the tender is made by or through an Eligible Institution; (ii) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form made available by the Offeror, is received by the Depositary, as provided below, prior to the Expiration Date; and (iii) the certificates for all tendered Shares, in proper form for transfer (or a Book-Entry Confirmation), together with a properly completed and duly executed Letter of Transmittal (or a manually signed facsimile thereof), and any required signature guarantees, or, in the case of a book- entry transfer, an Agent's Message, and any other documents required by the Letter of Transmittal are received by the Depositary within three trading days of the date of such Notice of Guaranteed Delivery. The term "trading day" is any day on which the Nasdaq National Market (the "Nasdaq National Market") operated by the National Association of Securities Dealers, Inc. (the "NASD") is open for business. The Notice of Guaranteed Delivery may be delivered by hand or transmitted by facsimile transmission or mail to the Depositary and must include a guarantee by an Eligible Institution in the form set forth in the Notice of Guaranteed Delivery. THE METHOD OF DELIVERY OF SHARES, THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING SHAREHOLDER. SHARES WILL BE DEEMED DELIVERED ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY (INCLUDING, IN THE CASE OF A BOOK-ENTRY TRANSFER, BY BOOK-ENTRY CONFIRMATION). IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY. Notwithstanding any other provision hereof, payment for Shares accepted for payment pursuant to the Offer will in all cases be made only after timely receipt by the Depositary of (i) certificates for such Shares or a Book-Entry Confirmation, (ii) a properly completed and duly executed Letter of Transmittal (or a manually signed facsimile thereof), with all required signature guarantees or, in the case of a book-entry transfer, an Agent's Message, and (iii) any other documents required by the Letter of Transmittal. Accordingly, tendering shareholders may be paid at different times depending upon when certificates for Shares or Book-Entry Confirmations with respect to Shares are actually received by the Depositary. BACKUP FEDERAL INCOME TAX WITHHOLDING. IN ORDER TO AVOID "BACKUP WITHHOLDING" OF FEDERAL INCOME TAX ON PAYMENTS OF CASH PURSUANT TO THE OFFER, A SHAREHOLDER SURRENDERING SHARES IN THE OFFER MUST, UNLESS AN EXEMPTION APPLIES, PROVIDE THE DEPOSITARY WITH SUCH SHAREHOLDER'S CORRECT TAXPAYER IDENTIFICATION NUMBER ("TIN") ON A SUBSTITUTE FORM W-9 (WHICH HAS BEEN INCLUDED IN THE LETTER OF TRANSMITTAL) AND CERTIFY UNDER PENALTIES OF PERJURY THAT SUCH TIN IS CORRECT. 8 If a shareholder does not provide such shareholder's correct TIN, the Internal Revenue Service (the "IRS") may impose a penalty on such shareholder and payment of cash to such shareholder pursuant to the Offer may be subject to backup withholding of 31%. All shareholders surrendering Shares pursuant to the Offer should complete and sign the main signature form and the Substitute Form W-9 included as part of the Letter of Transmittal to provide the information and certification necessary to avoid backup withholding (unless an applicable exemption exists and is proved in a manner satisfactory to the Offeror and the Depositary). Certain shareholders (including, among others, all corporations and certain foreign individuals and entities) are not subject to backup withholding. Noncorporate foreign stockholders should complete and sign the main signature form and a Form W-8, Certificate of Foreign Status, a copy of which may be obtained from the Depositary, in order to avoid backup withholding. See Instructions 8 and 9 set forth in the Letter of Transmittal. DETERMINATION OF VALIDITY. All questions as to the form of documents and the validity, eligibility (including time of receipt) and acceptance for payment of any tender of Shares will be determined by the Offeror, in its sole discretion, and its determination will be final and binding on all parties. The Offeror reserves the absolute right to reject any or all tenders of any Shares that are determined by it not to be in proper form or the acceptance of or payment for which may, in the opinion of the Offeror, be unlawful. The Offeror also reserves the absolute right to waive any of the conditions of the Offer, subject to the limitations set forth in the Merger Agreement, or any defect or irregularity in the tender of any Shares. The Offeror's interpretation of the terms and conditions of the Offer (including the Letter of Transmittal and the Instructions to the Letter of Transmittal) will be final and binding on all parties. No tender of Shares will be deemed to have been validly made until all defects and irregularities have been cured or waived. None of the Offeror, Parent, the Dealer Manager, the Depositary, the Information Agent or any other person will be under any duty to give notification of any defects or irregularities in tenders or incur any liability for failure to give any such notification. APPOINTMENT. By executing the Letter of Transmittal as set forth above (including through delivery of an Agent's Message), a tendering shareholder irrevocably appoints designees of the Offeror as such shareholder's attorneys-in-fact and proxies, each with full power of substitution, in the manner set forth in the Letter of Transmittal, to the full extent of such shareholder's right with respect to the Shares tendered by such shareholder and accepted for payment by the Offeror (and any and all other Shares or other securities or property (but excluding any regular quarterly dividend on the Shares of not more than $0.11 per Share based on the declaration, record and payment dates normally applicable to the Shares) issued or issuable in respect of such Shares (any such Shares, other securities or property collectively, "Distributions")). All such powers of attorney and proxies shall be considered coupled with an interest in the tendered Shares. This appointment is effective when, and only to the extent that, the Offeror accepts for payment the Shares deposited with the Depositary. Upon acceptance for payment, all prior powers of attorney and proxies given by the shareholder with respect to such Shares or other securities or rights will, without further action, be revoked and no subsequent proxies may be given or written consent executed (and, if given or executed, will not be deemed effective). The designees of the Offeror will, with respect to the Shares and other securities or rights, be empowered to exercise all voting and other rights of such shareholder as they in their sole judgment deem proper in respect of any annual or special meeting of the Company's shareholders, or any adjournment or postponement thereof, any actions by written consent in lieu of any such meeting or otherwise. The Offeror reserves the right to require that, in order for Shares to be deemed validly tendered, immediately upon the Offeror's payment for such Shares, the Offeror must be able to exercise full voting and other rights with respect to such Shares and the other securities or rights issued or issuable in respect of such Shares, including voting at any meeting of shareholders (whether annual or special or whether or not adjourned) in respect of such Shares. OTHER REQUIREMENTS. A tender of Shares pursuant to any one of the procedures described above will constitute the tendering shareholder's acceptance of the terms and conditions of the Offer, as well as the tendering shareholder's representation and warranty that (i) such shareholder has the full power and 9 authority to tender, sell, assign and transfer the tendered Shares (and all Distributions), and (ii) when the same are accepted for payment by the Offeror, the Offeror will acquire good and unencumbered title thereto, free and clear of all liens, restrictions, charges and encumbrances and not subject to any adverse claims. The Offeror's acceptance for payment of Shares tendered pursuant to the Offer will constitute a binding agreement between the tendering shareholder and the Offeror upon the terms and subject to the conditions of the Offer. 4. WITHDRAWAL RIGHTS. Except as otherwise provided in this Section 4, tenders of Shares made pursuant to the Offer are irrevocable. Shares tendered pursuant to the Offer may be withdrawn at any time prior to the Expiration Date and, unless theretofore accepted for payment pursuant to the Offer, may also be withdrawn at any time after September 11, 1997. If purchase of or payment for Shares is delayed for any reason or if the Offeror is unable to purchase or pay for Shares for any reason, then, without prejudice to the Offeror's rights under the Offer, tendered Shares may be retained by the Depositary on behalf of the Offeror and may not be withdrawn except to the extent that tendering shareholders are entitled to withdrawal rights as set forth in this Section 4, subject to Rule 14e-1(c) under the Exchange Act, which provides that no person who makes a tender offer shall fail to pay the consideration offered or return the securities deposited by or on behalf of security holders promptly after the termination or withdrawal of the Offer. For a withdrawal of Shares tendered pursuant to the Offer to be effective, a written, telegraphic, telex or facsimile transmission notice of withdrawal must be timely received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase. Any notice of withdrawal must specify the name of the person who tendered the Shares to be withdrawn, the number of Shares to be withdrawn and the name of the registered holders of the Shares, if different from that of the person who tendered the Shares. If certificates for Shares to be withdrawn have been delivered or otherwise identified to the Depositary, then, prior to the physical release of such certificates, the serial numbers shown on such certificates must be submitted to the Depositary and, unless such Shares have been tendered by an Eligible Institution, the signatures on the notice of withdrawal must be guaranteed by an Eligible Institution. If Shares have been tendered pursuant to the procedures for book-entry transfer set forth in Section 3, any notice of withdrawal must also specify the name and number of the account at the Book-Entry Transfer Facility to be credited with the withdrawn Shares and must otherwise comply with such Book-Entry Transfer Facility's procedures. All questions as to the form and validity (including time of receipt) of notices of withdrawal will be determined by the Offeror, in its sole discretion, and its determination will be final and binding on all parties. None of the Offeror, Parent, the Dealer Manager, the Depositary, the Information Agent or any other person will be under any duty to give notification of any defects or irregularities in any notice of withdrawal or incur any liability for failure to give any such notification. Any Shares properly withdrawn will be deemed not validly tendered for purposes of the Offer, but may be retendered at any subsequent time prior to the Expiration Date by following any of the procedures described in Section 3. 5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES. The following is a summary of certain United States federal income tax consequences of the Offer and the Merger to beneficial owners of Shares whose Shares are purchased pursuant to the Offer or whose Shares are converted to cash in the Merger. The discussion is for general information only and does not purport to consider all aspects of federal income taxation that might be relevant to beneficial owners of Shares. The discussion is based on current provisions of the Internal Revenue Code of 1986, as amended (the "Code"), existing regulations promulgated thereunder and administrative and judicial interpretations thereof, all of which are subject to change. The discussion applies only to beneficial owners of Shares in whose hands Shares are capital assets within the meaning of Section 1221 of the Code, and may not apply to Shares received pursuant to the exercise of employee stock options or otherwise as compensation, or to 10 certain types of beneficial owners of Shares (such as insurance companies, tax-exempt organizations and broker-dealers) who may be subject to special rules. This discussion does not discuss the federal income tax consequences to a beneficial owner of Shares who, for United States federal income tax purposes, is a non-resident alien individual, a foreign corporation, a foreign partnership or a foreign estate or trust, nor does it consider the effect of any foreign, state or local tax laws. BECAUSE INDIVIDUAL CIRCUMSTANCES MAY DIFFER, EACH BENEFICIAL OWNER OF SHARES SHOULD CONSULT SUCH BENEFICIAL OWNER'S OWN TAX ADVISOR TO DETERMINE THE APPLICABILITY OF THE RULES DISCUSSED BELOW TO SUCH BENEFICIAL OWNER AND THE PARTICULAR TAX EFFECTS TO SUCH BENEFICIAL OWNER OF THE OFFER AND THE MERGER, INCLUDING THE APPLICATION AND EFFECT OF STATE, LOCAL AND OTHER TAX LAWS. The receipt of cash for Shares pursuant to the Offer or the Merger will be a taxable transaction for federal income tax purposes. In general, for federal income tax purposes, a beneficial owner of Shares will recognize gain or loss equal to the difference between the beneficial owner's adjusted tax basis in the Shares sold pursuant to the Offer or converted to cash in the Merger and the amount of cash received therefor. Gain or loss must be determined separately for each block of Shares (I.E., Shares acquired at the same cost in a single transaction) sold pursuant to the Offer or converted to cash in the Merger. Such gain or loss will be capital gain or loss, and will be long-term capital gain or loss if the beneficial owner held the Shares for more than one year as of the date of sale (in the case of the Offer) or the Effective Time (in the case of the Merger). A long-term capital gain of individuals currently is taxed at a maximum rate of 28%. Various legislative proposals, including separate versions of the Revenue Reconciliation Bill of 1997 recently passed by the House of Representatives and the Senate (the "Bills") would reduce the long-term capital gains rates applicable to individuals. It is uncertain whether, in what form, and with what effective date any such legislation will be enacted. However, the preferential long-term capital gain treatment under the Bills would be effective for sales occurring on or after May 7, 1997, and the chairmen of the House Ways and Means Committee and the Senate Finance Committee have stated their present intention that any capital gains legislation will be effective with respect to transactions occurring on or after that date. Payments in connection with the Offer or the Merger may be subject to "backup withholding" at a rate of 31%, unless a beneficial owner of Shares (i) is a corporation or comes within certain exempt categories and, when required, demonstrates this fact or (ii) provides a correct TIN to the payor, and otherwise complies with applicable requirements of the backup withholding rules. A beneficial owner who does not provide a correct TIN may be subject to penalties imposed by the IRS. Any amount paid as backup withholding does not constitute an additional tax and will be creditable against the beneficial owner's federal income tax liability. Each beneficial owner of Shares should consult with his or her own tax advisor as to his or her qualification for exemption from backup withholding and the procedure for obtaining such exemption. Those tendering their Shares in the Offer may prevent backup withholding by completing the Substitute Form W-9 included in the Letter of Transmittal. See Section 3. Similarly, those who convert their Shares into cash in the Merger may prevent backup withholding by completing a Substitute Form W-9 and submitting it to the paying agent for the Merger. Parent and the Offeror will be entitled to deduct and withhold from the consideration otherwise payable pursuant to the Merger Agreement to any holder of Shares such amounts as Parent or the Offeror is required to deduct and withhold with respect to the making of such payment. To the extent that amounts are so withheld by Parent or the Offeror, such withheld amounts shall be treated for all purposes of the Merger Agreement as having been paid to the holder of the Shares in respect of which such deduction and withholding was made by Parent or the Offeror. 6. PRICE RANGE OF SHARES; DIVIDENDS. According to the Company's Annual Report on Form 10-K for the fiscal year ended June 29, 1996 (the "Company 1996 10-K"), the Shares (including the associated Rights) are included for quotation in the 11 Nasdaq National Market, under the symbol "DLCH". The following table sets forth for the periods indicated the high and low sales prices per Share on the Nasdaq National Market and the cash dividends declared on the Company's common stock as reported in the Company 1996 10-K with respect to the years ended July 1, 1995 and June 29, 1996, and as reported by published financial sources with respect to periods after June 29, 1996.
HIGH LOW CASH DIVIDENDS --------- --------- ----------------- Year Ended July 1, 1995: First Quarter............................................. $24 $20 1/2 $ 0.11 Second Quarter............................................ 21 14 1/2 0.11 Third Quarter............................................. 18 1/2 14 3/4 0.11 Fourth Quarter............................................ 22 1/2 17 5/8 0.11 Year Ended June 29, 1996: First Quarter............................................. $21 3/4 17 1/4 $ 0.11 Second Quarter............................................ 20 3/4 16 3/4 0.11 Third Quarter............................................. 25 1/8 20 1/4 0.11 Fourth Quarter............................................ 24 1/2 20 1/2 0.11 Year Ended June 28, 1997: First Quarter............................................. $25 1/4 $18 1/4 $ 0.11 Second Quarter............................................ 21 3/4 19 1/4 0.11 Third Quarter............................................. 25 1/8 18 3/4 0.11 Fourth Quarter............................................ 31 3/4 23 0.11
On July 7, 1997, the last full day of trading prior to the public announcement of the execution of the Merger Agreement, the last reported sales price per Share on the Nasdaq National Market was $32 1/4. On July 11, 1997, the last full day of trading prior to the commencement of the Offer, the last reported sales price per Share was $29 3/4. Shareholders are urged to obtain current market quotations for the Shares. 7. CERTAIN EFFECTS OF THE TRANSACTION. The purchase of the Shares by the Offeror pursuant to the Offer will reduce the number of Shares that might otherwise trade publicly and may reduce the number of holders of Shares, which could adversely affect the liquidity and market value of the remaining Shares held by shareholders other than the Offeror. The Offeror cannot predict whether the reduction in the number of Shares that might otherwise trade publicly or possible reduction in numbers of holders thereof would have an adverse or beneficial effect on the market price for or marketability of the Shares or whether it would cause future market prices to be greater or less than the Offer Price. MARKET FOR SHARES. Depending upon the number of Shares purchased pursuant to the Offer, the Shares may no longer meet the requirements of the NASD for continued inclusion in the Nasdaq National Market, which require that an issuer have at least 200,000 publicly held shares, held by at least 400 shareholders or 300 shareholders of round lots, with a market value of at least $1,000,000, and have net tangible assets of at least $1,000,000, $2,000,000 or $4,000,000, depending on profitability levels during the issuer's four most recent fiscal years. If these standards are not met, the Shares might nevertheless continue to be included in the NASD's Nasdaq Stock Market with quotations published in the Nasdaq "additional list" or in one of the "local lists," but if the number of holders of the Shares were to fall below 300, or if the number of publicly held Shares were to fall below 100,000 or there were not at least two registered and active market makers for the Shares, the NASD's rules provide that the Shares would no longer be "qualified" for Nasdaq Stock Market reporting and the Nasdaq Stock Market would cease to provide any quotations. Shares held directly or indirectly by directors, officers or beneficial owners of more than 10% of the Shares are not considered as being publicly held for this purpose. The Company has advised Parent and the Offeror that, as of July 8, 1997, there were approximately 1,524 holders of record of 12 Shares and there were 7,127,743 Shares outstanding. If, as a result of the purchase of Shares pursuant to the Offer or otherwise, the Shares no longer meet the requirements of the NASD for continued inclusion in the Nasdaq National Market or in any other tier of the Nasdaq Stock Market and the Shares are no longer included in the Nasdaq National Market or in any other tier of the Nasdaq Stock Market, as the case may be, the market for Shares could be adversely affected. In the event that the Shares will no longer be listed or traded on the Nasdaq National Market or meet the requirements of the NASD for continued inclusion in any tier of the Nasdaq Stock Market, it is possible that the Shares would continue to trade in the over-the-counter market and that price quotations would be reported by other sources. The extent of the public market for the Shares and the availability of such quotations would, however, depend upon the number of holders of Shares remaining, at such time, the interest in maintaining a market in Shares on the part of securities firms, the possible termination of registration of the Shares under the Exchange Act, as described below, and other factors. EXCHANGE ACT REGISTRATION. The Shares are currently registered under the Exchange Act. Such registration may be terminated upon application by the Company to the Commission if there are fewer than 300 record holders of such Shares. It is the intention of the Offeror to seek to cause an application for such termination to be made as soon after consummation of the Offer as the requirements for termination of registration of such Shares are met. If such registration were terminated, the Company would no longer legally be required to disclose publicly in proxy materials distributed to shareholders the information which it now must provide under the Exchange Act or to make public disclosure of financial and other information in annual, quarterly and other reports required to be filed with the Commission under the Exchange Act; the Company would no longer be subject to Rule 13e-3 under the Exchange Act relating to "going private" transactions; and the officers, directors and 10% shareholders of the Company would no longer be subject to the "short-swing" insider trading reporting and profit recovery provisions of the Exchange Act. Furthermore, if such registration were terminated, persons holding "restricted securities" of the Company may be deprived of their ability to dispose of such securities under Rule 144 or Rule 144A promulgated under the Securities Act of 1933, as amended (the "Securities Act"). If registration of the Shares is not terminated prior to the Merger, then the Shares will be delisted from all stock exchanges and the registration of the Shares under the Exchange Act will be terminated following the consummation of the Merger. MARGIN REGULATIONS. The Shares are currently "margin securities" under the regulations of the Board of Governors of the Federal Reserve System (the "Federal Reserve Board"), which has the effect, among other things, of allowing brokers to extend credit on the collateral of such Shares. Depending upon factors similar to those described above regarding listing and market quotations, it is possible that, following the Offer, the Shares would no longer constitute "margin securities" for the purposes of the margin regulations of the Federal Reserve Board and therefore could no longer be used as collateral for loans made by brokers. If registration of Shares under the Exchange Act were terminated, such Shares would no longer be "margin securities." 8. CERTAIN INFORMATION CONCERNING THE COMPANY. Except as otherwise set forth herein, the information concerning the Company contained in this Offer to Purchase, including financial information, has been furnished by the Company or has been taken from or based upon publicly available documents and records on file with the Commission and other public sources. None of the Offeror, Parent and the Dealer Manager assumes any responsibility for the validity, reasonableness, accuracy or completeness of the information concerning the Company or for any failure by the Company to disclose events which may have occurred or may affect the significance or accuracy of any such information but which are unknown to the Offeror, Parent or the Dealer Manager. 13 The Company is an Alabama corporation with its principal executive offices located at 305 Delchamps Drive, Mobile, Alabama 36602. The Company operates 118 supermarkets in Louisiana, Mississippi, Alabama and Florida and 10 liquor stores in Florida. Set forth below is certain summary consolidated financial data with respect to the Company excerpted or derived from financial information contained in the Company's Annual Report on Form 10-K for the fiscal year (52 weeks) ended June 29, 1996 and the Company's Quarterly Reports on Form 10-Q for the quarters (13 weeks) ended March 29, 1997 and March 30, 1996. More comprehensive financial information is included in such reports and other documents filed by the Company with the Commission, and the following summary is qualified in its entirety by reference to such reports and such other documents and all the financial information (including any related notes) contained therein. Such reports and other documents should be available for inspection and copies thereof should be obtainable in the manner set forth below. DELCHAMPS, INC. SELECTED CONSOLIDATED FINANCIAL INFORMATION (IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)
(39 WEEKS) (52 WEEKS) NINE MONTHS ENDED YEAR ENDED ---------------------- ---------------------------------------- MARCH 29 MARCH 30 JUNE 29 JULY 1 JULY 2 1997 1996 1996 1995 1994 ---------- ---------- ------------ ------------ ------------ (UNAUDITED) STATEMENT OF EARNINGS DATA: Sales........................................ $ 836,054 $ 841,967 $ 1,126,629 $ 1,054,088 $ 1,067,191 Operating income (loss)...................... 9,068 7,387 13,119 (34,991) 22,019 Net earnings (loss).......................... 3,093 1,199 3,852 (25,666) 10,951 COMMON STOCK DATA: Net earnings (loss) per common share......... $ 0.43 $ 0.17 $ 0.54 $ (3.61) $ 1.54 BALANCE SHEET DATA: Working capital.............................. $ 23,628 $ 18,536 $ 22,067 $ 22,920 $ 54,926 Total assets................................. 245,769 264,458 255,183 269,412 263,269 Long-term debt and obligations under capital leases, excluding current installments..... 17,882 22,436 21,237 25,745 32,169 Restructure obligation, excluding current portion.................................... 12,388 14,046 15,668 19,219 -- Stockholders' equity......................... 113,884 109,019 112,925 110,042 136,300
The Company is subject to the informational requirements of the Exchange Act and in accordance therewith files periodic reports, proxy statements and other information with the Commission relating to its business, financial condition and other matters. The Company is required to disclose in such proxy statements certain information, as of particular dates, concerning the Company's directors and officers, their remuneration, stock options granted to them, the principal holders of the Company's securities and any material interests of such persons in transactions with the Company. Such reports, proxy statements and other information may be inspected at the public reference facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the regional offices of the Commission located at Seven World Trade Center, 13th Floor, New York, New York 10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material may also be obtained at prescribed rates from the Public Reference Section of the Commission, 450 Fifth Street, N.W., Washington, 14 D.C. 20549. The Commission also maintains a World Wide Web site on the internet at http://www.sec.gov that contains reports and other information regarding registrants that file electronically with the Commission. Such material may also be inspected at the offices of the Nasdaq National Market. CERTAIN COMPANY FORECASTS. To the knowledge of Parent and the Offeror, the Company does not as a matter of course make public forecasts as to its future financial performance. However, during the course of the discussions between Parent and the Company that led to the execution of the Merger Agreement, the Company provided Parent with certain information about the Company and its financial performance which is not publicly available. The information provided included forecasts of the Company's fiscal 1998, 1999 and 2000 results of operations as an independent company (I.E. without regard to the impact to the Company of a transaction with Parent). The forecasts presented in the tables below (the "Forecasts") are derived or excerpted from the information provided by the Company and are based on numerous estimates and assumptions concerning future events, none of which is susceptible of accurate prediction. According to the Company, the Forecasts assumed, among other things, that (i) comparable store sales growth would be 4.9%, 3.0% and 3.4% for each respective fiscal year of the Forecasts, (ii) gross margins would be 24.60%, 25.45% and 25.90% for each respective fiscal year of the Forecasts, (iii) capital expenditures would be $40 million in fiscal year 1998 and $25 million each in fiscal years 1999 and 2000, (iv) operating improvements would be generated from management's new corporate and store-level initiatives and (v) the Company would continue to open new stores and remodel existing stores. The Forecasts have not been adjusted to reflect the effects of the Offer or the Merger or the incurrence of indebtedness in connection therewith. Parent has been advised by the Company that management of the Company prepared the Forecasts in January 1997 based on factual circumstances known or believed to exist at the time and on assumptions as to future events deemed reasonable at the time. Subsequent to the delivery of the Forecasts to Parent, a number of important factual circumstances changed, including a continuing decline in the Company's same store sales and a reduction in management's estimates of the financial benefit of the planned frequent shopper program. Parent did not ask the Company to update the Forecasts prior to the execution of the Merger Agreement. The Company has advised Parent that any update of the Forecasts based on currently known facts and current assumptions regarding future events would be less favorable as to the Company's future financial performance than the Forecasts. The Forecasts should be read together with the other information contained in this Section 8. DELCHAMPS, INC. SELECTED FORECASTS (IN MILLIONS OF DOLLARS)
(FISCAL YEAR ENDED IN JUNE) ------------------------------- 1998 1999 2000 --------- --------- --------- Sales.......................................................................... $ 1,163.2 $ 1,237.2 $ 1,284.3 Gross profit................................................................... 286.1 314.9 332.6 Selling, general and administrative expenses (excluding depreciation and amortization)................................................................ 242.0 249.8 254.2 Earnings before interest, taxes, depreciation and amortization................. 44.2 65.1 78.4 Depreciation and amortization.................................................. 25.4 26.6 27.1 Earnings before interest and taxes............................................. 18.8 38.5 51.3
15 THE FORECASTS WERE NOT PREPARED WITH A VIEW TO PUBLIC DISCLOSURE OR COMPLIANCE WITH THE PUBLISHED GUIDELINES OF THE COMMISSION OR THE GUIDELINES ESTABLISHED BY THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS REGARDING PROJECTIONS OR FORECASTS, WERE NOT REVIEWED BY THE COMPANY'S INDEPENDENT AUDITORS AND ARE INCLUDED HEREIN ONLY BECAUSE SUCH INFORMATION WAS PROVIDED TO PARENT. THESE FORWARD-LOOKING STATEMENTS ARE SUBJECT TO CERTAIN RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THE FORECASTS. THE FORECASTS REFLECT NUMEROUS ASSUMPTIONS, ALL MADE BY MANAGEMENT OF THE COMPANY, WITH RESPECT TO INDUSTRY PERFORMANCE, GENERAL BUSINESS, ECONOMIC, MARKET AND FINANCIAL CONDITIONS AND OTHER MATTERS, INCLUDING ASSUMED INTEREST EXPENSE AND EFFECTIVE TAX RATES CONSISTENT WITH HISTORICAL LEVELS FOR THE COMPANY, ALL OF WHICH ARE IMPOSSIBLE TO PREDICT WITH ANY DEGREE OF ACCURACY, MANY OF WHICH ARE BEYOND THE COMPANY'S CONTROL AND NONE OF WHICH WERE SUBJECT TO APPROVAL BY PARENT OR THE OFFEROR. ACCORDINGLY, THERE CAN BE NO ASSURANCE THAT THE ASSUMPTIONS MADE IN PREPARING THE FORECASTS WILL PROVE ACCURATE, AND ACTUAL RESULTS MAY BE MATERIALLY GREATER OR LESS THAN THOSE CONTAINED IN THE FORECASTS. THE INCLUSION OF THE FORECASTS HEREIN SHOULD NOT BE REGARDED AS AN INDICATION THAT ANY OF PARENT, THE OFFEROR, THE COMPANY OR THEIR RESPECTIVE FINANCIAL ADVISORS CONSIDERED OR CONSIDER THE FORECASTS TO BE A RELIABLE PREDICTION OF FUTURE EVENTS, AND THE FORECASTS SHOULD NOT BE RELIED UPON AS SUCH. NONE OF PARENT, THE OFFEROR, THE COMPANY AND THEIR RESPECTIVE FINANCIAL ADVISORS ASSUMES ANY RESPONSIBILITY FOR THE VALIDITY, REASONABLENESS, ACCURACY OR COMPLETENESS OF THE FORECASTS. NONE OF PARENT, THE OFFEROR, THE COMPANY AND ANY OF THEIR FINANCIAL ADVISORS HAS MADE, OR MAKES, ANY REPRESENTATION TO ANY PERSON REGARDING THE INFORMATION CONTAINED IN THE FORECASTS AND NONE OF THEM INTENDS TO UPDATE OR OTHERWISE PUBLICLY REVISE THE FORECASTS TO REFLECT CIRCUMSTANCES EXISTING AFTER THE DATE WHEN MADE OR TO REFLECT THE OCCURRENCE OF FUTURE EVENTS EVEN IN THE EVENT THAT ANY OR ALL OF THE ASSUMPTIONS UNDERLYING THE FORECASTS ARE SHOWN TO BE IN ERROR, OR EXPERIENCE OR FUTURE CHANGES MADE IT CLEAR THAT SUCH FORECASTS WILL NOT BE REALIZED. 9. CERTAIN INFORMATION CONCERNING PARENT AND THE OFFEROR. The Offeror is a newly incorporated Alabama corporation. To date, the Offeror has not conducted any business other than that incident to its formation, the execution and delivery of the Merger Agreement and the commencement of the Offer. Accordingly, no meaningful financial information with respect to the Offeror is available. The Offeror is a wholly owned subsidiary of Parent. The principal executive office of the Offeror is located at 1770 Ellis Avenue, Suite 200, Jackson, Mississippi 39204. Parent, a Mississippi corporation, has its principal executive office at 1770 Ellis Avenue, Suite 200, Jackson, Mississippi 39204. Jitney-Jungle operates a chain of 23 discount stores, 77 conventional stores and 4 combination stores for a total of 104 supermarkets and 52 gasoline stations located throughout Mississippi and in Tennessee, Arkansas, Alabama, Louisiana and Florida. 16 Set forth below are certain summary consolidated financial data with respect to Parent excerpted or derived from financial information contained in Parent's Annual Report on Form 10-K for the fiscal year (52 weeks) ended April 27, 1996, Parent's Quarterly Report on Form 10-Q for the quarter (12 weeks) ended January 4, 1997 and the Registration Statement on Form S-1 of JJ Acquisitions Corp. (No. 33-80833). More comprehensive financial information is included in such reports and other documents filed by Parent with the Commission, and the following summary is qualified in its entirety by reference to such reports and such other documents and all the financial information (including any related notes) contained therein. JITNEY-JUNGLE STORES OF AMERICA, INC. SELECTED CONSOLIDATED FINANCIAL INFORMATION (IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)
(36 WEEKS) (52 WEEKS) NINE MONTHS ENDED YEAR ENDED ----------------------- ---------------------------------------- JAN. 4 JAN. 6 APRIL 27 APRIL 29 APRIL 30 1997 1996 1996 1995 1994 ----------- ---------- ------------ ------------ ------------ (UNAUDITED) OPERATING RESULTS DATA: Net sales................................... $ 832,905 $ 822,513 $ 1,179,318 $ 1,173,927 $ 1,152,333 Earnings before income taxes and extraordinary item........................ 563 16,915 24,977 30,220 27,135 Net earnings................................ 353 10,574 14,459 18,803 17,179 COMMON STOCK DATA: Net earnings (loss) per common and common equivalent share before extraordinary item...................................... $ (11.08) $ 519.15 $ 162.88 $ 923.15 $ 843.42 Extraordinary item.......................... -- -- (15.96) -- -- Net earnings (loss) per common and common equivalent share.......................... (11.08) 519.15 146.92 923.15 843.42 FINANCIAL POSITION DATA: Total assets................................ $ 281,556 $ 313,953 $ 279,003 $ 312,415 $ 296,803 Working capital............................. 23,362 78,702 28,077 71,929 60,385 Long-term debt.............................. 233,590 33,226 239,059 38,727 40,628 Shareholders' equity (deficit).............. (147,178) 148,912 (144,815) 140,216 124,857
Parent files periodic reports and other information with the Commission relating to its business, financial condition and other matters. Such reports and other information are available for inspection and copying at the offices of the Commission in the same manner as set forth with respect to the Company in Section 8. RECENT DEVELOPMENTS. On June 17, 1997, Parent issued a press release with respect to its financial results for the fiscal year (53 weeks) ended May 3, 1997. As set forth in the press release, net sales for the 53 weeks ended May 3, 1997 were $1,228.5 million compared with $1,179.3 million for the prior year (52 weeks ended April 27, 1996), an increase of 4.2%. Same store sales increased by 0.2% over the prior year. Fourth quarter sales were $395.6 million compared to $356.8 million a year ago and same store sales increased 2.0% over the comparable prior year period. Earnings before income taxes and extraordinary item and net earnings for the 53 weeks ended May 3, 1997 were $3.2 million and $0.3 million, respectively, compared with $25.0 million and $14.4 million for the prior year. In the press release, Parent stated that gross profits decreased as a percentage of net sales in the fiscal year to 23.6% as compared to 23.9% for the prior year. The decrease in gross profit was principally due to increased promotional activities and the effect of the new Jitney-Jungle Gold Card which is Parent's new 17 frequent shopper card launched in January 1997. Selling, general and administrative expenses as a percentage of net sales decreased to 20.4% for the fiscal year as compared to 20.6% for the prior year. Earnings before interest, income taxes, LIFO provision, depreciation and amortization increased $5.5 million in the fiscal year to $70.4 million or 5.7% of net sales as compared to $64.9 million or 5.5% of net sales for the prior year. The increase was principally due to the improvement in selling, general and administrative expenses. OTHER. The name, citizenship, business address, present principal occupation and material positions held during the past five years of each of the directors and executive officers of Parent and the Offeror are set forth in Annex I to this Offer to Purchase. Except as described in this Offer to Purchase, none of the Offeror, Parent, or to the best knowledge of the Offeror and Parent, any of the persons listed in Annex I hereto or any associate or majority-owned subsidiary of the Offeror, Parent or any of the persons so listed benefically owns or has any right to acquire, directly or indirectly, any Shares and none of the Offeror or Parent, or to the best knowledge of the Offeror and Parent, any of the persons or entities referred to above nor any director, executive officer or subsidiary of any of the foregoing has effected any transaction in the Shares during the past 60 days. Except as set forth in this Offer to Purchase, none of the Offeror, Parent or, to the best knowledge of the Offeror or Parent, any of the persons listed in Annex I hereto, has any contract, arrangement, understanding or relationship with any other person with respect to any securities of the Company, including, but not limited to, any contract, arrangement, understanding or relationship concerning the transfer or the voting of any such securities, joint ventures, loan or option arrangements, puts or calls, guaranties of loans, guaranties against loss or the giving or withholding of proxies. Except as set forth in this Offer to Purchase, since July 3, 1994, there have been no contacts, negotiations or transactions between the Offeror or Parent, or, to the best of their knowledge, any of the persons listed in Annex I hereto, on the one hand, and the Company or its affiliates, on the other hand, concerning a merger, consolidation or acquisition, a tender offer or other acquisition of securities, an election of directors or a sale or other transfer of a material amount of assets. Except as described in this Offer to Purchase, since July 3, 1994, none of the Offeror, Parent or, to the best knowledge of Parent or the Offeror, any of the persons listed in Annex I hereto, has had any transaction with the Company or any of its executive officers, directors or affiliates that would require disclosure under the rules and regulations of the Commission applicable to the Offer. 10. SOURCE AND AMOUNT OF FUNDS. The total amount of funds required by the Offeror to consummate the Offer and the Merger is expected to be approximately $270 million, which amount includes the acquisition of all of the Shares (net of proceeds received upon the exercise of outstanding options), and certain refinancing obligations and estimated financing and transaction fees and expenses. The Offeror plans to obtain the necessary funds under the Senior Credit Facility and proceeds from the sale of Bridge Notes or Senior Subordinated Notes (all as described below). Parent has received a written financing commitment (the "Credit Facility Commitment Letter") from Fleet Capital Corporation ("Fleet") consisting of a $150 million senior credit facility ("Senior Credit Facility") and a written financing commitment (the "Bridge Commitment Letter") from DLJ Bridge Finance, Inc. ("DLJ Bridge") to purchase up to $200 million of senior subordinated increasing rate notes of Parent (the "Bridge Notes"). Although Fleet has committed to provide the entire Senior Credit Facility, Fleet expects to assemble a syndicate of financial institutions (the "Lenders") to fund the Senior Credit Facility prior to the initial funding under the Senior Credit Facility. The terms of the definitive agreement providing for the Senior Credit Facility (the "Loan Agreement") and the documentation governing the Bridge Notes (the "Bridge Documentation") have not yet been finalized. The following is a summary of the anticipated principal terms of the Senior Credit Facility and the Bridge Documentation based upon the Credit Facility Commitment Letter and the Bridge Commitment Letter, respectively. This summary is 18 subject to completion of the Loan Agreement and the Bridge Documentation and is qualified in its entirety by reference to the Credit Facility Commitment Letter and the Bridge Commitment Letter, respectively, which are filed as exhibits to the Schedule 14D-1 of which this Offer to Purchase is an exhibit. SENIOR CREDIT FACILITY Loans under the Senior Credit Facility may be borrowed, repaid and reborrowed by Parent (and certain of its subsidiaries) from time to time for the purpose of providing funds to consummate the Offer and the Merger, to refinance certain indebtedness, to pay certain fees and expenses incurred in connection with the Offer and the Merger and to provide working capital from time to time. The Senior Credit Facility will mature in six and one-half years and will have scheduled reductions of the commitment under the Senior Credit Facility, in years two through six and in the first and second quarters of year seven of $5, $7, $8, $9, $11, $6.5 and $6.5 million, respectively. Availability under the Senior Credit Facility will be subject to a borrowing base comprised of 65% of the eligible inventory of the borrower plus $53 million, amortizing as set forth above. The commitment will be subject to mandatory prepayments and reductions in the event of certain extraordinary transactions and issuances of debt and equity and by the amount of 50% of annual cash flow. Borrowings under the Senior Credit Facility will bear interest at a floating rate based upon, at the borrower's option, (i) Fleet's prime rate, or (ii) the London Interbank Offered Rate ("LIBOR"), plus, through January 31, 1998 in each case, a margin equal to .75% over the prime rate and a margin equal to 2.00% over LIBOR, and thereafter prime rate plus margins ranging from .25% to 1.00% and LIBOR plus margins ranging from 1.25% to 2.25% per annum, depending upon Parent's debt to earnings ratio. An unused commitment fee will accrue on the unused portion of the Senior Credit Facility at a rate ranging from .25% to .50% per annum, depending upon Parent's debt to earnings ratio. Parent will also pay Fleet syndication and administration fees, reimburse certain expenses and provide certain indemnities, all of which Parent believes to be customary for commitments of this type. The Loan Agreement will contain conditions precedent, representations and warranties, covenants (including financial covenants), events of default and other provisions customary for such financings. Fleet's commitment to provide the Senior Credit Facility is conditioned on, among other things: the Merger Agreement being entered into by Parent, the Offeror and the Company in form, scope and substance satisfactory to Fleet, and being approved by the Boards of Directors of Parent, the Offeror and the Company; absence of any material restriction under any applicable law on the consummation of the Merger or the ability of the Offeror to vote the Shares held by it in favor of the Merger; amendment of the Rights Agreement to make it inapplicable to the Offer and the Merger; the Offer and the Merger not being subject to the provisions of any applicable state antitakeover law; satisfaction of the Minimum Condition; review by and satisfaction of Fleet with the documents relating to the Offer; the Offeror purchasing the Shares pursuant to the Offer on or before September 30, 1997 at an Offer Price not in excess of $30.00 per Share; satisfaction of the Lenders with the corporate, legal and capital structure of Parent and its subsidiaries; receipt by the Lenders of a valid and perfected first priority lien and security interest in the Shares held by Parent or any of its affiliates and all other assets of Parent and its subsidiaries (subject to certain exceptions); absence of any material adverse change in the business, condition (financial or otherwise), operations, performance, properties or prospects of Parent and its subsidiaries, taken as a whole, since May 3, 1997, or the Company and its subsidiaries, taken as a whole, since March 29, 1997, or from that previously described to Fleet; absence of any material pending or threatened litigation; receipt of all governmental and third party consents and approvals necessary in connection with each aspect of the transaction (including the financing and under any existing indebtedness of Parent); review of and satisfaction of the Lenders with the terms of the Bridge Notes or any securities issued by Parent in lieu of the Bridge Notes; receipt of customary closing documents, including solvency certificates and opinions, in form and substance satisfactory to Fleet; receipt of satisfactory results of an environmental analysis of the property and business of the Company and its subsidiaries; satisfaction of the Lenders with the ability of Parent and its subsidiaries to fulfill their obligations under and with their regulatory compliance in respect 19 of all employee benefit plans; satisfaction of the Lenders with the amount, types and terms and conditions of all insurance maintained by Parent, the Company and their respective subsidiaries; receipt by the Lenders of all fees and expenses required to be paid; and availability to Parent and its subsidiaries under the Senior Credit Facility plus available cash on hand in an aggregate amount not less than $35,000,000 (giving effect to consummation of the Offer and the Merger on a pro forma basis). It is anticipated that the indebtedness incurred through borrowings under the Senior Credit Facility will be repaid from funds generated internally by Parent and its subsidiaries, including the Company and its subsidiaries, and from other sources that may include the proceeds of the private or public sale of debt or equity securities. No final decisions have been made concerning the method Parent will employ to repay such indebtedness. Such decisions when made will be based on Parent's review from time to time of the advisability of particular actions, as well as on prevailing interest rates and financial and other economic conditions. BRIDGE NOTES Under the terms of the Bridge Commitment Letter, DLJ Bridge would purchase the Bridge Notes pursuant to a Securities Purchase Agreement (the "Securities Purchase Agreement"). DLJ Bridge intends to offer to Credit Suisse First Boston, an affiliate of CSFB, the opportunity to participate as a co-purchaser in up to thirty percent of DLJ Bridge's commitment to purchase the Bridge Notes. The Bridge Notes will initially bear interest at the prime rate plus 3%. If the Bridge Notes are not retired in whole by the end of the first six-month period following the date of issuance, the interest rate will increase by another 1% and will continue to increase by an additional .5% at the end of each subsequent three-month period until the first anniversary of the issuance of the Bridge Notes. Commencing on the first anniversary of the date of issuance of the Bridge Notes, interest shall be payable at the greater of the following as of the beginning of each quarterly period: (i) the prime rate plus 5%, increasing by an additional .5% at the end of each subsequent three-month period; (ii) the treasury rate plus 7%, increasing by an additional .5% at the end of each subsequent three-month period; (iii) the DLJ High Yield Index Rate plus 2.5%, increasing by an additional .5% at the end of each subsequent three-month period; and (iv) the rate in effect on the day immediately preceding the first anniversary of the date of issuance of the Bridge Notes plus .5%, increasing by an additional .5% at the end of each subsequent three-month period; provided, however, that the per annum interest rate will not exceed 18% and that portion, if any, of any interest representing a per annum interest rate in excess of 16% will be paid by issuing Bridge Notes with a principal amount equal to such excess portion of interest. Interest will be payable in cash, quarterly in arrears (except to the extent paid in additional Bridge Notes as set forth in the foregoing sentence). The Bridge Notes will mature on the first anniversary of the date of issuance, subject to extension if certain conditions are satisfied. Parent will be required to redeem the Bridge Notes with, subject to certain exceptions, the net proceeds from certain issuances of debt or equity securities or sales of assets. Parent may redeem the Bridge Notes at any time at 103% of par plus accrued interest. Under certain circumstances, the Bridge Notes may be sold to third party purchasers. The Bridge Notes will be subordinated to the Senior Credit Facility and certain refinancings thereof. In addition, warrants to purchase common stock of Parent representing 20% of the fully-diluted common stock of Parent (the "Escrowed Warrants") will be placed in an escrow account. The Escrowed Warrants will be exercisable at a price equal to $.01 per share for a period of seven years from the date such Escrowed Warrants are released from escrow and will have customary anti-dilution provisions and demand and piggy-back registration rights. If the refinancing of the Bridge Notes is not completed within certain periods over a two-year period following the first anniversary of the issuance of the Bridge Notes, Escrowed Warrants shall be released from escrow in certain specified amounts to DLJ Bridge and DLJ Bridge shall be entitled to retain such released Escrowed Warrants. Commencing on the first anniversary of the issuance of the Bridge Notes, Parent will make available to DLJ Bridge such of the Escrowed Warrants as are needed to facilitate the resale of the Bridge Notes to third parties on a fixed rate basis; 20 provided, however, that DLJ Bridge shall not retain any such equity provided specifically to facilitate the resale of the Bridge Notes. The Bridge Notes will contain certain representations, warranties, covenants and events of default customary for securities of this type. Parent will pay DLJ Bridge certain fees, reimburse certain expenses and provide certain indemnities, all of which Parent believes to be customary for commitments of this type. DLJ Bridge's commitment to purchase the Bridge Notes is conditioned on, among other things: consummation of the Offer and the Merger in accordance with the terms of the Offer to Purchase and the Merger Agreement at an aggregate cost for the Common Stock of the Company not in excess of $228.0 million; execution of the Loan Agreement (the covenants, terms and conditions of which shall be satisfactory in all respects to DLJ Bridge) with borrowings outstanding under the Senior Credit Facility not in excess of $75.0 million; indebtedness of Parent not in excess of $549.2 million; satisfactory completion by DLJ Bridge of its due diligence and receipt of financial information; satisfactory completion of loan documentation; receipt of all governmental, regulatory, shareholder and third party consents and approvals (including under the HSR Act) necessary or desirable in connection with the Offer and the Merger; absence of any material adverse change in the business, condition (financial or otherwise), operations, performance, properties or prospects of Parent, Offeror and the Company and their subsidiaries since the end of the most recently ended fiscal year for which audited financial statements are available or in the facts and information as represented to DLJ Bridge; absence of material pending or threatened litigation; receipt of customary closing documents in form and substance satisfactory to DLJ Bridge; absence of any event of default under the Bridge Documentation; execution of an engagement letter between Parent and the Dealer Manager engaging the Dealer Manager as exclusive investment banker for Parent for all purposes until the date the Bridge Notes have been paid in full; receipt of all fees and expenses required to be paid; absence of material disruption or adverse change in the financial or capital markets; receipt of consent from the Senior Credit Facility lenders concerning the terms of the Bridge Notes and financing anticipated to replace the Bridge Notes; receipt of consent from the holders of Parent's Senior Notes allowing Parent to incur the indebtedness under the Senior Credit Facility and the Bridge Notes; and in the event Credit Suisse First Boston, an affiliate of CSFB, elects to participate in the purchase of the Bridge Notes, a certificate from Credit Suisse First Boston stating that the conditions to funding the Bridge Notes have been satisfied. Subsequent to the execution of the Credit Facility Commitment Letter, DLJ Bridge confirmed to Parent that the senior bank facility described in the Bridge Commitment Letter refers to a $150 million senior secured financing consisting of a six and one-half year amortizing revolving credit facility. It is anticipated that the indebtedness incurred under the Bridge Notes will be refinanced with an offering of senior subordinated notes ("Senior Subordinated Notes") by Parent which would be underwritten by the Dealer Manager. Parent may elect not to draw on the commitment for the Bridge Notes and instead obtain the remainder of the financing through the issuance of Senior Subordinated Notes on such terms as may be available in the market. Under the Merger Agreement, the Offer may be extended until September 12, 1997 to enable Parent and the Offeror to obtain permanent financing for the transaction. See Section 1. 11. BACKGROUND OF THE OFFER; PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE COMPANY. Parent's business strategy is focused on enhancing revenues and profitability by taking advantage of its leading market positions and continuing its growth in certain attractive Southeast markets. Parent's management identified the Company as an attractive merger candidate which would further these strategic objectives. From time to time over the past two years, Mr. Bruce C. Bruckmann, a director of Parent and a principal in Bruckmann, Rosser, Sherrill & Co., Inc. ("BRS"), an affiliate of Parent's majority shareholder, and Mr. Timothy E. Kullman, the Company's chief financial officer, had general discussions regarding recent developments and trends in the supermarket industry and the strategic direction of Parent and the Company. In mid-January, 1997, Mr. Bruckmann contacted Mr. Kullman to arrange a meeting between representatives of Parent and the Company to discuss the possibility of a friendly business combination between Parent and the Company. 21 On January 31, 1997, Mr. Bruckmann and Mr. Harold O. Rosser, II and Mr. Stephen C. Sherrill, also directors of Parent and principals in BRS, met with Mr. David W. Morrow, the Company's Chairman and Chief Executive Officer, Mr. Kullman and Mr. Richard W. La Trace, the Company's President, to discuss generally the companies' businesses and philosophies and the framework for a potential transaction. During the meeting, Parent's representatives discussed generally the possibility of a strategic merger of the two companies in which the Company would acquire Parent for common stock under terms to be negotiated. Mr. Morrow indicated the Company would review the matter and inform Parent if the Company wished to further pursue a possible transaction. In mid-February, Mr. Kullman called Mr. Bruckmann and informed him that the Company had retained CSFB as its financial advisor to assist the Company in reviewing and evaluating its strategic alternatives and that the Company or CSFB would contact Parent if appropriate. In early April, at the Company's direction CSFB contacted Mr. Bruckmann to ascertain whether Parent would be interested in pursuing the acquisition of the Company as part of a managed sale process. Mr. Bruckmann indicated that Parent would be interested in participating in the process. On April 8, Parent, BRS and the Company executed the Confidentiality and Standstill Agreement (the "Confidentiality and Standstill Agreement"), which contained customary confidentiality and standstill provisions. See Section 13. Thereafter, the Company's management and CSFB provided detailed information about the Company to Parent and met with its representatives to answer questions and provide additional due diligence information. Later that month, representatives of another supermarket chain approached Parent through Donaldson, Lufkin & Jenrette Securities Corporation (an affiliate of a shareholder of Parent) regarding the possibility of a joint acquisition of the Company and, at Parent's request, the Company waived the standstill provisions of the Confidentiality and Standstill Agreement to permit Parent to pursue such discussions. In early May, at CSFB's request as part of the sale process, Parent submitted a non-binding indication of interest expressing Parent's willingness to pursue jointly with such other supermarket chain an acquisition of the Company for approximately $27 to $31 per Share in cash. Thereafter, Parent conducted additional due diligence, including reviewing the Company's data room records and inspecting selected stores. On June 2, CSFB requested as part of the sale process that Parent submit a formal proposal to acquire the Company, and provided Parent with the Company's draft of the proposed Merger Agreement. In early June, Parent and the other supermarket chain terminated their discussions and Parent advised CSFB that it wished to pursue on its own an acquisition of the Company. On June 18, Parent submitted a proposal to acquire the Company in a cash merger for a price of $27 per Share. Shortly thereafter, CSFB advised Parent that its proposed price and the financing condition which was contained in Parent's proposal were unacceptable and that the transaction would have to be structured as a tender offer in order to accelerate the closing of the transaction. Following additional negotiations, Parent eliminated the financing condition and offered the Company a choice between a tender offer at $28.50 per Share or a merger transaction at $30 per Share, reflecting Parent's higher estimated costs to finance a tender offer. After further negotiations, Parent proposed a tender offer for all Shares at $30 per Share in cash, followed by a merger in which non-tendering shareholders would also receive $30 per Share in cash. Parent's proposal did not contain a financing condition but required a tender offer period of up to 60 calendar days to provide Parent with sufficient time to obtain permanent financing. Parent also advised the Company that the transaction would be subject to Parent's ability to obtain the consent of the holders of at least a majority in aggregate principal amount of the Senior Notes. In addition, Parent informed the 22 Company that it was unwilling to proceed with further discussions unless the Company provided it with a five-day period to negotiate with the Company on an exclusive basis. On June 30, the Company provided Parent with a revised draft Merger Agreement and related documents reflecting the status of negotiations to date. Thereafter, representatives of Parent and the Company negotiated these documents and held discussions regarding various legal and business issues, and representatives of Parent continued due diligence activities. On July 2 and 3, representatives of Parent and the Company met to continue negotiations on the Merger Agreement. The principal issues discussed included the conditions to the Offer generally; the time periods and terms upon which Parent could or would be required to extend the Offer; the conditions upon which Parent would be required to pursue antitrust approval; the conditions upon which the Company could entertain third party offers for the Company after the execution of the Merger Agreement; the bases upon which the Company could modify its position with respect to the Offer or terminate the Merger Agreement as a result of certain third party offers; and the amount of the termination and expense fees and the circumstances under which they would be payable by the Company. Over the next four days, representatives of the Company and Parent continued these discussions and finalized the Merger Agreement and related documentation. The Merger Agreement was executed and publicly announced on the morning of July 8, 1997. On July 11, the Company filed a Premerger Notification and Report Form under the HSR Act with respect to the Offer and the Merger. On July 14, the Parent filed its Premerger Notification and Report Form and the Offeror commenced the Offer. 12. PURPOSE OF THE OFFER AND THE MERGER; PLANS FOR THE COMPANY. The purpose of the Offer, the Merger, the Merger Agreement and the other transactions contemplated thereby, is to enable Parent to acquire control of, and the entire equity interest in, the Company. The Offer is intended to increase the likelihood that the Merger will be completed promptly. Pursuant to the ABCA and the Articles of Incorporation (the "Charter") of the Company, adoption by the Board of Directors of the Company and the affirmative vote of the holders of two-thirds of the outstanding shares of the Company entitled to vote thereon and, if a class or series is entitled to vote as a class, the affirmative vote of the holders of two-thirds of the outstanding shares of the class or series, is required to approve the Merger Agreement. The Board of Directors of the Company has unanimously approved the Offer, the Merger and the Merger Agreement, and, unless the Merger is consummated pursuant to the short form merger provisions under the ABCA as described below, the only remaining required corporate action of the Company is the approval of the Merger Agreement by the affirmative vote of the holders of two-thirds of the outstanding Shares. If the Minimum Condition is satisfied, the Offeror will have sufficient voting power to cause the approval of the Merger Agreement without the affirmative vote of any other shareholder. Under the terms of the Merger Agreement, Parent and the Offeror may reduce the Minimum Condition to a majority of the outstanding Shares on a fully diluted basis. Parent and the Offeror currently do not intend to reduce the Minimum Condition but reserve the right to do so, subject to the terms of the Merger Agreement and the applicable rules and regulations of the Commission. In the Merger Agreement, the Company has agreed that, promptly after consummation of the Offer, the Company will take all action necessary, in accordance with the ABCA and the Company's Charter and Bylaws, to convene a special meeting of the Company's shareholders at which such shareholders will be asked to approve the Merger (the "Special Meeting"). Parent has agreed that all Shares owned by Parent, and its direct and indirect subsidiaries will be voted in favor of the Merger. If the Offeror owns two-thirds of the outstanding Shares, approval of the Merger can be obtained without the affirmative vote of any other shareholder of the Company. 23 Under the Merger Agreement, Parent has retained the right to elect at any time after consummation of the Offer (or prior to consummation of the Offer and with the written consent of the Company, which shall not be withheld unreasonably) to merge the Company with and into Parent, the Offeror or another direct or indirect wholly owned subsidiary of Parent. Under the ABCA, if the Offeror acquires at least 80% of the outstanding Shares pursuant to the Offer, the Offeror could elect to effect the merger of the Company with and into Parent, the Offeror or another direct or indirect wholly owned subsidiary of Parent without a vote of the shareholders of the Company. If, however, the Offeror does not acquire at least 80% of the then outstanding Shares pursuant to the Offer or otherwise and a vote of the Company's shareholders is required under the ABCA, a longer period of time generally will be required to effect the Merger. DISSENTERS' RIGHTS. Holders of Shares do not have dissenters' rights in connection with the Offer. If the Merger is consummated, holders of Shares at the effective time of the Merger will have certain rights pursuant to the provisions of Article XIII of the ABCA ("Article XIII") to dissent and demand appraisal of their Shares. Under Article XIII, dissenting shareholders who comply with the applicable statutory procedures will be entitled to obtain payment for the fair value of their Shares immediately prior to the effectiveness of the Merger (exclusive of any appreciation or depreciation arising in anticipation of the Merger unless exclusion would be inequitable) in cash, together with accrued interest from the effective date of the Merger. Assuming compliance with the statutory procedures, a dissenting shareholder will also be entitled, in the absence of agreement between the Company and the shareholder regarding the fair value of his Shares, to receive a judicial determination of such value. Any such judicial determination of the fair value of Shares could be based upon factors other than, or in addition to, the price per Share to be paid in the Merger or the market value of the Shares. The value so determined could be more or less than the price per Share to be paid in the Merger. The foregoing summary of Article XIII does not purport to be complete and is qualified in its entirety by reference to Article XIII. FAILURE TO FOLLOW THE STEPS REQUIRED BY ARTICLE XIII FOR PERFECTING DISSENTERS' RIGHTS MAY RESULT IN THE LOSS OF SUCH RIGHTS. RULE 13E-3. The Commission has adopted Rule 13e-3 under the Exchange Act which is applicable to certain "going private" transactions and which may, under certain circumstances, be applicable to the Merger or another business combination in which the Offeror seeks to acquire the remaining Shares not held by it following the purchase of Shares pursuant to the Offer. The Offeror believes, however, that Rule 13e-3 will not be applicable to the Merger if the Merger is consummated within one year after the termination of the Offer at the Offer Price. If applicable, Rule 13e-3 requires, among other things, that certain financial information concerning the Company and certain information relating to the fairness of the proposed transaction and the consideration offered to minority shareholders in such transaction be filed with the Commission and disclosed to shareholders prior to consummation of the transaction. PLANS FOR THE COMPANY. Parent will continue to evaluate the business and operations of the Company during the pendency of the Offer and after the consummation of the Offer and the Merger. Parent intends to seek additional information about the Company during this period. Thereafter, Parent intends to review such information as part of a comprehensive review of the Company's business, assets, operations, corporate structure, dividend policy, capitalization, policies, management and personnel with a view to optimizing the Company's potential contribution to Parent's business. Although Parent and the Offeror are still developing their business plan with respect to the Company after the consummation of the Offer, Parent and the Offeror generally intend to integrate the Company's operations with the operations of Parent as soon as practicable to achieve operating synergies. At this time, Parent and the Offeror have not specifically determined how this integration will be structured. The combining of the Company's business with Parent's business could, among other things, involve consolidating and streamlining certain operations and reorganizing other businesses and operations. 24 Except as indicated in this Offer to Purchase, Parent does not have any current plans or proposals which relate to or would result in any of the following: an extraordinary corporate transaction, such as a merger, reorganization or liquidation involving the Company or any of its subsidiaries; a sale or transfer of a material amount of assets of the Company or any of its subsidiaries; any change in the present Board of Directors or management of the Company; any material change in the Company's present capitalization or dividend policy; or any other material change in the Company's corporate structure or business. Notwithstanding the foregoing, following the acquisition of Shares pursuant to the Offer, the Offeror may designate up to that number of directors of the Board of Directors of the Company as will make the percentage of the Company's directors designated by the Offeror equal to the aggregate voting power of the Shares held by Parent and any of its subsidiaries. In addition, assuming the designation of directors as aforesaid and so long as there are holders of Shares other than Parent or any of its subsidiaries, Parent expects that the Board of Directors would not declare dividends on the Shares. Subject to the terms of the Merger Agreement and the Confidentiality and Standstill Agreement referred to in Section 13, the Offeror or an affiliate of the Offeror may, following the consummation or termination of the Offer, seek to acquire additional Shares through open market purchases, privately negotiated transactions, a tender offer or exchange offer or otherwise, upon such terms and at such prices as it shall determine, which may be more or less than the price to be paid pursuant to the Offer. The Offeror and its affiliates also reserve the right to dispose of any or all Shares acquired by them, subject to the terms of the Merger Agreement. 13. THE MERGER AGREEMENT. The following summary of certain provisions of the Merger Agreement, a copy of which is filed as an exhibit to the Schedule 14D-1, is qualified in its entirety by reference to the text of the Merger Agreement. THE MERGER AGREEMENT THE OFFER. The Offeror commenced the Offer in accordance with the terms of the Merger Agreement. Pursuant to the terms and conditions of the Merger Agreement, each of the Company, Parent and the Offeror have agreed, subject to certain exceptions, to cooperate with each other and use their respective commercially reasonable best efforts to cause the conditions to the Offer to be met as soon as reasonably practicable. The Offeror and Parent intend to consummate the Offer and the Merger as soon as reasonably practicable. To that end (provided that the conditions set forth in paragraphs (c)(iii) through (c)(ix) and (e) of Section 15 have been met), Parent and Offeror have agreed to use commercially reasonable best efforts, subject to the terms of the Merger Agreement, to consummate the Offer within 30 business days following the date hereof, including the obtaining of requisite financing as discussed in Section 10, the receipt of the consent of the holders of the Senior Notes as discussed in Section 1 and the receipt of requisite governmental approvals (including in respect of the HSR Act) as discussed in Section 16. If the conditions set forth in paragraphs (c)(iii) through (c)(ix) and (e) of Section 15 have been met but the HSR Condition or Noteholder Consent Condition are not met within 30 business days following the date hereof, Parent and the Offeror have agreed to use commercially reasonable best efforts, subject to the terms of the Merger Agreement, to consummate the Offer on or prior to the sixtieth calendar day following the date hereof. See "HSR MATTERS" below. The Offeror reserves the right (but shall not be obligated), in accordance with applicable rules and regulations of the Commission, subject to the limitations set forth in the Merger Agreement and described below, to reduce the Minimum Condition or to waive any other condition to the Offer (other than the condition relating to the expiration of the waiting period under the HSR Act). If the Minimum Condition or any condition set forth in Section 15 has not been satisfied by 12:00 Midnight, New York City time, on Friday, August 8, 1997 (or any other time then set as the Expiration Date), the Offeror may, subject to the terms of the Merger Agreement as described below, elect to (i) extend the Offer and, subject to applicable withdrawal rights, retain all tendered Shares until the expiration of the Offer, as extended, (ii) subject to 25 complying with applicable rules and regulations of the Commission, accept for payment all Shares so tendered and not extend the Offer or (iii) terminate the Offer and not accept for payment any Shares and return all tendered Shares to tendering shareholders. Under the terms of the Merger Agreement, the Offeror may not (except as described in the next sentence), without the consent of the Company's Board of Directors, impose conditions to the Offer in addition to the conditions set forth in Section 15, decrease the Offer Price, change the form of consideration, reduce the number of Shares to be purchased in the Offer (provided that Parent and Offeror may reduce the Minimum Condition to a majority of the outstanding shares on a fully diluted basis), extend the expiration date of the Offer (except as provided below in this paragraph) or otherwise change any term of the Offer in any manner adverse to the holders of Shares. Parent, the Offeror and the Company have acknowledged their intention to consummate the transactions contemplated by the Merger Agreement as soon as reasonably practicable. To that end (provided that the conditions set forth in paragraphs (c)(iii) through (c)(ix) and (e) as set forth in Section 15 have been met), Parent and the Offeror have agreed to use commercially reasonable best efforts, subject to the terms of the Merger Agreement, to consummate the Offer within 30 business days following commencement of the Offer, including the obtaining of requisite financing, the receipt of the consent of the holders of the Senior Notes as contemplated by the Noteholder Consent Condition and receipt of requisite governmental approvals (including in respect of the HSR Act) as contemplated by Section 15. If the conditions set forth in paragraphs (c)(iii) through (c)(ix) and (e) as set forth in Section 15 have been met but either the HSR Condition or the Noteholder Consent Condition are not met within 30 business days following commencement of the Offer, Parent and the Offeror have agreed to use commercially reasonable best efforts, subject to the terms of the Merger Agreement, to consummate the Offer on or prior to the sixtieth calendar day following commencement of the Offer. Notwithstanding the foregoing, Parent and the Offeror may, without the consent of the Company, extend the Offer on one or more occasions (i) if at the then scheduled Expiration Date of the Offer, any of the conditions to the Offeror's obligations to accept for payment and pay for Shares shall not have been satisfied or waived, until such time as such conditions are satisfied or waived, (ii) for any period required by any rule, regulation, interpretation or position of the Commission or the Commission staff applicable to the Offer, (iii) on one or more occasions for an aggregate period of not more than five business days, if the Minimum Condition has been satisfied but less than 80% of the outstanding Shares (on a fully diluted basis) have been validly tendered and not withdrawn, (iv) for any reason on one or more occasions for an aggregate period of not more than 10 business days beyond the initial expiration date or the latest expiration date that would otherwise be permitted under clause (i), (ii) or (iii) of this sentence, and (v) on one or more occasions for an aggregate period of not more than 60 calendar days after the date of the commencement of the Offer in order for Parent to obtain financing on terms acceptable to it; provided, however, that without the written consent of the Company, Parent and the Offeror may not extend the Offer (A) for any period that would end more than 60 calendar days after the date of the commencement of the Offer unless on such sixtieth day any of the conditions set forth in Section 15 are not satisfied, or (B) for any period that would end more than 90 calendar days after the date of the commencement of the Offer; provided further that if on the initial expiration date of the Offer, or any extension thereof, the conditions set forth in paragraphs (c)(iii) through (c)(ix) and (e) as set forth in Section 15 have been satisfied or waived but any of the conditions set forth in paragraphs (b), (c)(i), (c)(ii) or (d) as set forth in Section 15 shall not have been satisfied or waived, Parent and the Offeror have agreed to extend the Offer one or more times (for such periods as Parent and the Offeror shall determine in their sole discretion) until 60 calendar days after the date of the commencement of the Offer; provided, further, that Parent and the Offeror may extend the Offer beyond such 90 calendar day period if the conditions set forth in Section 15 shall not have been satisfied as a result of a breach by the Company of its obligations under the Merger Agreement. Under the terms of the Merger Agreement, in the event the number of outstanding Shares or Shares issuable upon the exercise of, or subject to, options or other agreements exceeds the amounts specifically set forth in the Merger Agreement by more than 10,000 Shares (including without limitation as a result of 26 any stock split, reverse stock split, stock dividend, including any dividend or distribution of securities convertible into Shares, recapitalization, or other like change occurring after July 8, 1997), the Offer Price shall be appropriately adjusted downward. THE MERGER. The Merger Agreement provides that, at the Effective Time, in accordance with the Merger Agreement and the ABCA, the Offeror shall be merged with and into the Company, the separate corporate existence of the Offeror shall cease and the Company shall continue as the Surviving Corporation. Notwithstanding the foregoing, Parent may elect at any time after consummation of the Offer (or prior to the consummation of the Offer and with the written consent of the Company, which shall not be withheld unreasonably) and prior to the fifth business day immediately preceding the date of the notice of the meeting of shareholders of the Company to consider approval of the Merger and the Merger Agreement, to merge the Company with and into Parent, the Offeror or another direct or indirect wholly owned subsidiary of Parent. At the Effective Time, the Charter and Bylaws of the Company, as in effect immediately prior to the Effective Time, shall be the Charter and Bylaws of the Surviving Corporation, until thereafter amended as provided therein and under the ABCA. The directors of the Offeror immediately prior to the Effective Time will be the initial directors of the Surviving Corporation and the officers of the Company immediately prior to the Effective Time (unless any directors or officers of Parent or the Offeror are so designated in writing by Parent prior to the Effective Time) will be the initial officers of the Surviving Corporation, in each case until their successors are elected or appointed. CONVERSION OF SECURITIES. At the Effective Time, by virtue of the Merger and without any action on the part of Parent, the Offeror, the Company or the holder of any securities of the Offeror or the Company, each Share issued and outstanding immediately prior to the Effective Time (other than Shares owned by the Company as treasury stock, Parent, the Offeror, or any other wholly owned subsidiary of Parent or by shareholders, if any, who are entitled to and who properly exercise dissenters' rights under the ABCA) shall be converted into and become the right to receive the Offer Price. Each share of stock of the Offeror issued and outstanding immediately prior to the Effective Time shall be converted into and become one validly issued, fully paid and nonassessable share of common stock, $.01 par value, of the Surviving Corporation. REPRESENTATIONS AND WARRANTIES. In the Merger Agreement, the Company has made customary representations and warranties to Parent and the Offeror. The representations and warranties of the Company relate, among other things, to its organization and qualification; subsidiaries; capital structure; authority to enter into the Merger Agreement and to consummate the transactions contemplated thereby; non-contravention of any laws or regulations with respect to the transactions contemplated; required consents and approvals; absence of any liability for brokerage or finders' fees; filings made by the Company with the Commission under the Securities Act or the Exchange Act (including financial statements included in the documents filed by the Company under these Acts); absence of any material adverse change; absence of material adverse legal proceedings; compliance with laws; tax matters; liabilities; benefit plans and employees and employment practices; environmental matters; information supplied; real property; labor matters; contracts and certain agreements; absence of certain liabilities; opinion of a financial advisor; state takeover statutes; insurance; intellectual property; certain agreements; indemnification claims; and prior negotiations. The Offeror and Parent have also made customary representations and warranties to the Company. Representations and warranties of the Offeror and Parent relate, among other things, to: their organization and authority to enter into the Merger Agreement and to consummate the transactions contemplated thereby; non-contravention of any laws or regulations with respect to the transactions contemplated; required consents and approvals; absence of any adverse legal proceedings; financing; and information supplied. 27 CONDUCT OF BUSINESS BY THE COMPANY PENDING THE MERGER. Except as otherwise contemplated by the Merger Agreement, prior to the Effective Time, unless the Offeror shall otherwise agree in writing (provided, however, that following the appointment of the Offeror's designees to the Company's Board of Directors pursuant to the Merger Agreement, the Offeror shall be deemed to have consented to all actions taken by the Company thereafter, except actions, if any, directed or caused by those directors who were not so designated by the Offeror or by the Board of Directors of the Company prior to the appointment of such designees): (a) The business of the Company and its subsidiaries will be conducted only in the ordinary course consistent with past practices. (b) The Company will use all commercially reasonable efforts to preserve intact in all material respects the business organization of the Company and its subsidiaries, to keep available the services of its and their present officers and employees and to preserve the goodwill of those having business relationships with it and its subsidiaries. (c) Except as otherwise permitted in the Merger Agreement, the Company will not, and will not permit any of its subsidiaries to (i) amend its articles of incorporation or bylaws (or comparable charter documents); (ii) split, combine, reclassify or take similar action with respect to any of its capital stock; (iii) issue or agree to issue any additional shares of, or rights of any kind to acquire any shares of, its capital stock of any class, other than, in the case of the Company, shares of capital stock and Rights issuable pursuant to the Rights Agreement and Shares issuable upon the exercise of outstanding options to purchase an aggregate of 455,050 Shares pursuant to certain employees and director plans; (iv) purchase, redeem or otherwise acquire any Shares or any other shares of its capital stock of any class; or (v) declare, set aside or pay any dividend payable in cash, stock or property or make any other distributions with respect to Shares or any other shares of its capital stock of any class; or (vi) make any commitment to do any of the foregoing, except for (A) the declaration and payment of dividends by a wholly owned subsidiary of the Company solely to the Company and (B) the declaration and payment of regular quarterly cash dividends by the Company consistent with past practices (including as to declaration, record and payment date) in no event to exceed $0.11 per Share per fiscal quarter. (d) The Company will not, and will not permit any of its subsidiaries to (i) acquire (by merger, consolidation or acquisition of stock or assets) any corporation, partnership or other business organization or division thereof or make any investment in any other person, either by purchase of stock or securities, contribution to capital (other than to wholly owned subsidiaries), property transfer or purchase of any material amount of property or assets; (ii) other than sales of inventory in the ordinary course of its business consistent with past practices and other than the sale of surplus real estate, sell, lease, grant any security interest in or otherwise dispose of or encumber any material amount of its assets or properties; (iii) incur any indebtedness for borrowed money other than borrowings in the ordinary course of business under existing lines of credit (or under any refinancing of such existing lines of credit), or issue any debt securities, or assume, guarantee, endorse or otherwise as an accommodation become responsible for the obligations of any other person (other than a wholly owned subsidiary); (iv) make any capital expenditure or commitment for additions to plant, property or equipment constituting capital assets except expenditures pursuant to commitments existing as of the date of the Merger Agreement and as disclosed to Parent in the Merger Agreement or included in the Company's budgets for fiscal years 1997 and 1998 as described in the Merger Agreement; (v) change any assumption underlying, or method of calculating, any bad debt, contingency or other reserve (except changes that may be necessary or appropriate in order to comply with a change in generally accepted accounting principles that takes effect after the date of the Merger Agreement); (vi) pay, discharge or satisfy any material claims, liabilities or obligations (absolute, accrued, contingent or otherwise) other than (A) the payment, discharge or satisfaction of liabilities in the ordinary course consistent with past practices and (B) costs relating to the Merger Agreement and 28 the transactions contemplated thereby; (vii) waive, release, grant or transfer any rights of material value or modify or change in any material respect any existing material license, lease, contract or other document; or (viii) enter into any contract, agreement, commitment or arrangement with respect to any of the foregoing; provided, however, that, notwithstanding the foregoing, the Company will not be prohibited from financing, constructing, equipping, supplying, staffing and opening new stores and remodeling existing stores for which commitments have been entered into by the Company prior to the date of the Merger Agreement and which commitments are disclosed to Parent in the Merger Agreement. (e) Neither the Company nor any of its subsidiaries will (i) enter into any new severance or change of control agreement, or any employment agreement; (ii) amend any existing employment contract or change of control or severance agreement; (iii) grant any increases in compensation or benefits other than increases in the ordinary course consistent with past practices; (iv) adopt any new employee plan or benefit arrangement; (v) make any change in or to any existing employee plan or benefit arrangement, other than such changes as are required by law or that, in the opinion of its counsel, are necessary or advisable to maintain the tax-qualified status of such employee plan or benefit arrangement; (vi) make any grants, awards or distributions under any employee plan or benefit arrangement, other than those grants, awards or distributions required to be made under such employee plans or benefit arrangements as in effect on the date of the Merger Agreement; or (vii) make any amendment to any provision of any outstanding grant or award. (f) The Company will not cause any of the Company's representations or warranties that are subject to a materiality qualification to become untrue and will not cause any of the Company's representations and warranties that are not so qualified to become untrue in any material respect. NO SOLICITATION. The Merger Agreement provides that the Company will not, nor will it permit any of its subsidiaries to, nor will it authorize or permit any officer, director or employee of, or any investment banker, attorney or other advisor or representative of, the Company or any of its subsidiaries to, directly or indirectly, (i) solicit, initiate or encourage the submission of any takeover proposal, or (ii) participate in any discussions or negotiations regarding, or furnish to any "person" or "group" (as such terms are defined in the Merger Agreement) any information with respect to, or take any other action to facilitate any inquiries or the making of any proposal that constitutes or may reasonably be expected to lead to any takeover proposal, provided, however, that prior to the expiration of the Offer, upon receipt by the Company of a bona fide written unsolicited takeover proposal to purchase all the Shares outstanding for (A) a cash amount per Share in excess of the Offer Price or (B) consideration which is not all cash that the Company has determined reasonably and in good faith to be in excess of the Offer Price and that CSFB has advised the Company in writing is in excess of the Offer Price (a copy of which advice has been furnished by the Company to Parent), in either case by a group or person (or any of their respective affiliates or associates) who (x) within the past 12 months has not executed and delivered to the Company a confidentiality agreement and whose failure to execute a confidentiality agreement does not constitute a breach of the Merger Agreement (any such person or group a "New Bidder") and (y) in the good faith reasonable judgment of the Board of Directors after consultation with CSFB possesses the financial wherewithal reasonably to be capable of consummating the takeover proposal (a "superior proposal"), following notice to Parent, the Company may participate in negotiations with a New Bidder regarding the superior proposal and furnish information with respect to the Company pursuant to a customary confidentiality agreement (containing "standstill" provisions no less onerous than in the Confidentiality and Standstill Agreement between Parent and Company). Without limiting the foregoing, any violation of the restrictions set forth in the preceding sentence by any officer, director or employee of the Company or any of its subsidiaries or any investment banker, attorney or other advisor or representative of the Company or any of its subsidiaries, will be deemed to be a breach of the foregoing provision by the Company. Under the Merger Agreement, "takeover proposal" means any proposal for a tender offer, merger or other transaction involving any Change in Control (as defined below under "Fees and Expenses"). 29 The Merger Agreement provides further that neither the Board of Directors nor any committee thereof shall (i) withdraw or modify, in a manner adverse to Parent or the Offeror, the approval or recommendation by the Board of Directors nor any such committee of the Merger Agreement, the Offer or the Merger, (ii) approve or recommend any takeover proposal, (iii) enter into any agreement with respect to any takeover proposal, (iv) amend the Rights Agreement, redeem the Rights or waive any other anti-takeover provisions (including Article Eleven of the Company's Articles of Incorporation) or otherwise facilitate any other takeover proposal in any respect, or (v) terminate the Merger Agreement in connection with any takeover proposal. Notwithstanding the foregoing, in the event the Board of Directors receives a superior proposal from a New Bidder or any other group or person which the Board of Directors determines in its good faith reasonable judgment (and based on the written advice of CSFB) to be more favorable to the Company's shareholders than the Offer and Merger, the Board of Directors may (subject to the following sentence): (A) withdraw or modify its approval or recommendation of the Merger Agreement, the Offer and the Merger taken together, (B) recommend any such superior proposal, or (C) solely with respect to such a superior proposal submitted by a New Bidder, terminate the Merger Agreement in order to enter into an agreement with respect to such a superior proposal or amend the Rights Agreement, redeem the Rights or waive any other anti-takeover provisions in respect of such superior proposal and otherwise facilitate such proposal, in each case (subject to the Company's obligations to pay the Termination Fee and Expense Fee as described below under "Fees and Expenses") at any time following Parent's receipt of written notice of the Company's intent to take the actions described in clauses (A), (B) and/or (C) above (a "Superior Proposal Notice") advising Parent that the Board of Directors has received a superior proposal, specifying the material terms and conditions of such superior proposal and identifying the person or group making such superior proposal. The Company may deliver the Superior Proposal Notice and take any of the foregoing actions described in clauses (A), (B) and/or (C) only if (i) the Company is not otherwise in material breach of the Merger Agreement and (ii) the Company pays to Parent concurrent with the delivery of the Superior Proposal Notice the Termination Fee and the Expense Fee (as described below under "Fees and Expenses"). In addition to the foregoing obligations of the Company, the Company has agreed to promptly advise Parent orally and in writing of any takeover proposal, or any inquiry with respect to or which could reasonably be expected to lead to any takeover proposal, the material terms and conditions of such takeover proposal or inquiry, and the identity of the person making any such takeover proposal or inquiry. The Company will keep Parent fully informed of the status and details of any such takeover proposal or inquiry and the Company's responses and other actions with respect thereto. The Merger Agreement provides that the Company shall be entitled to disclose to its shareholders any such information which is required by applicable law (including without limitation the Exchange Act) regarding any takeover proposal. HSR MATTERS. Neither Parent nor any of its subsidiaries is obligated in connection with obtaining any required HSR Act consent (i) to initiate or defend any litigation to which any governmental or regulatory authority (including the Department of Justice ("DOJ") and the Federal Trade Commission ("FTC")) is a party, (ii) to agree or otherwise become subject to any material limitations on (A) the right of Parent or the Offeror, or their affiliates effectively to control or operate the business, assets, or operations of the Company, (B) the right of Parent, the Offeror, or its affiliates to acquire or hold the business, assets, or operations of the Company, or (C) the right of Parent or the Offeror to exercise full rights of ownership of the Shares acquired by Parent or the Offeror including, without limitation, the right to vote any shares held by Parent or the Offeror on all matters properly presented to the Company's shareholders, or (iii) to agree or otherwise be required to sell or otherwise dispose of, hold separate (through the establishment of a trust or otherwise), or divest itself of all or any portion of the business, assets, or operations of the Company, the Offeror or Parent, except, in connection with the proposed resolution of any objections that may be asserted by the FTC or the DOJ with respect to the transactions contemplated by the Merger Agreement, for the sale or disposal of such of the Company's supermarkets (or, in lieu thereof, supermarkets of Parent) that did not in the aggregate generate in excess of $2.7 million of net earnings before interest, tax, 30 depreciation and amortization for the fiscal year ended June 29, 1997 (based upon the Company's books and records for such supermarkets by location) ("EBITDA"). If Parent is required to divest a Parent store, the EBITDA of the closest Company store will be used in calculating the $2.7 million. THIRD PARTY STANDSTILL AGREEMENTS. The Company has agreed not to amend, modify, waive, or terminate any of the provisions of any confidentiality agreement or "standstill" agreement with any group or person to which the Company or any of its subsidiaries is a party and shall request the return of any confidential information pursuant to the terms thereof. The Company agreed that Parent will be permitted to enforce such agreements on the Company's behalf including seeking equitable relief to the extent available. INDEMNIFICATION. Pursuant to the Merger Agreement, the Company, and from and after the Effective Time, the Surviving Corporation (each, an "Indemnifying Party"), will indemnify, defend and hold harmless each person who is now, or has been at any time prior to the date hereof or who becomes prior to the Effective Time, a director or officer of the Company or any of its subsidiaries (the "Indemnified Parties") against all losses, claims, damages, costs and expenses (including attorneys' fees), liabilities, judgments and settlement amounts that are paid or incurred in connection with any claim, action, suit, proceeding or investigation (whether civil, criminal, administrative or investigative and whether asserted or claimed prior to, at or after the Effective Time) that is based in whole or in part on, or arises in whole or in part out of, the fact that such Indemnified Party is or was a director or officer of the Company or any of its subsidiaries and (i) relates to or arises out of any action or omission occurring or allegedly occurring at or prior to the Effective Time, or (ii) is based in whole or in part on, arises in whole or in part out of, or pertains in whole or in part to, the Merger Agreement or the transactions contemplated thereby, in each case to the full extent a corporation is permitted under applicable law to indemnify its own directors or officers, as the case may be; provided that no Indemnifying Party shall be liable for any settlement of any claim effected without its written consent, which consent will not be unreasonably withheld. Without limiting the foregoing, in the event that any such claim, action, suit, proceeding or investigation is brought against any Indemnified Party (whether arising prior to or after the Effective Time), the Indemnifying Parties will pay expenses in advance of the final disposition of any such claim, action, suit, proceeding or investigation to each Indemnified Party to the full extent permitted by applicable law. Except as required by applicable law or legal process, Parent, the Offeror and the Company have agreed in the Merger Agreement not to take any action so as to amend, modify or repeal the provisions for exculpation of directors or indemnification of directors or officers contained in the articles of incorporation or bylaws (or other comparable charter documents) of the Surviving Corporation and its subsidiaries in such a manner as would adversely affect in any material respect the rights of any individual who shall have served as a director or officer of the Company or any of its subsidiaries prior to the Effective Time to be exculpated or to be indemnified by such corporations in respect of their serving in such capacities prior to the Effective Time. The Company will honor in accordance with their respective terms each of the indemnity agreements between the Company and each of its directors as in effect on the date of the Merger Agreement and will not terminate such agreements prior to the Effective Time. The Company will, and after the consummation of the Offer, Parent will cause the Company to, until the sixth anniversary of the Effective Time and for so long thereafter as any claim asserted prior to such date has not been fully adjudicated by a court of competent jurisdiction, cause to be maintained in effect the policies of directors' and officers' liability insurance maintained by the Company and its subsidiaries as of the date of the Merger Agreement (or policies providing at least the same coverage amounts and containing terms that are no less advantageous to the insured parties) with respect to claims arising from facts or events that occurred or are alleged to have occurred at or prior to the Effective Time; provided that the Company shall endeavor to obtain such coverage at the lowest premium cost reasonably available and that the Company shall not, and Parent shall not be obligated to cause the Surviving Corporation to pay an aggregate (whether over time or on a one-time basis) premium in excess of $600,000. 31 BOARD REPRESENTATION. The Merger Agreement provides that promptly upon payment by the Offeror for the Shares pursuant to the Offer, the Offeror will be entitled to designate such number of directors, rounded up to the next whole number, as will give the Offeror representation on the Board of Directors of the Company equal to at least that number of directors equal to the product of (i) the total number of directors on the Board of Directors and (ii) the percentage that the number of Shares so purchased bears to the number of Shares outstanding, and the Company will, at such time, use its best efforts to cause the appropriate number of directors who are members of the Board of Directors as of the date of the Merger Agreement to resign and the Offeror's designees to be appointed or elected; provided, however, that notwithstanding the foregoing, until the Effective Time, there shall be, to the extent they are willing to continue to serve, at least three directors on the Board of Directors who were directors on the date of the Merger Agreement and who are not designees nor officers, directors, employees or affiliates of Parent or the Offeror nor are employees of the Company or any of its subsidiaries (the "Independent Directors"); provided, further, that if the number of Independent Directors shall be reduced below three for any reason, the Board of Directors will, subject to the approval of the remaining Independent Directors, if any, designate a person or persons to fill the vacancy or vacancies who are directors on the date of the Merger Agreement and not an officer, director, employee or affiliate of Parent or the Offeror nor an employee of the Company. Any vacancies that cannot be filled in the foregoing manner shall be filled by the Board of Directors at its discretion. The Company's obligations to appoint the Offeror's designees to the Board of Directors is subject to Section 14(f) of the Exchange Act and Rule 14f-1 thereunder. Following the election of the Offeror's designees pursuant to the Merger Agreement and until the Effective Time, any amendment of the Merger Agreement or the Charter or Bylaws of the Company, any termination of the Merger Agreement by the Company, any extension by the Company of the time for the performance of any of the obligations or other acts of Parent or the Offeror, any waiver of any of the Company's rights under the Merger Agreement, or any transaction between Parent (or any affiliate or associate thereof) and the Company will require the concurrence of a majority of the Independent Directors. The Independent Directors will have the authority to retain such counsel and other advisors at the expense of the Company as are reasonably appropriate to assist them in the exercise of their duties in connection with the Merger Agreement. In addition, the Independent Directors will have the authority to institute any action on behalf of the Company to enforce performance of the Merger Agreement. OPTIONS; EMPLOYEE BENEFITS; SEVERANCE AND OTHER AGREEMENTS. The Merger Agreement provides that prior to the Effective Time, the Company may elect to accelerate the exercisability of options granted and outstanding prior to the date of the Merger Agreement under the Company's Directors' Stock Option Plan and the Company's 1993 Stock Incentive Plan and the vesting of restricted shares granted and outstanding prior to the date of the Merger Agreement under the Company's 1987 Restricted Stock Plan and may waive the two-year holding period for stock issued pursuant to the Company's Director Compensation Plan. In addition, the Company will have the right prior to the Effective Time to pay to any holder of an outstanding option to purchase Common Stock an amount equal to the difference between the Offer Price and the per Share exercise price of a stock option held by such holder multiplied by the number of Shares then subject to such option (whether or not then exercisable), less any amounts required to be withheld under the Code, as amended, or any provision of state, local or foreign tax law, in exchange for the surrender and cancellation of such stock option. The Company will use its commercially reasonable best efforts to cause all options to be exercised prior to the Effective Time. The Company has been advised by its directors that they will exercise all options held by them prior to the consummation of the Offer. Prior to the Effective Time, the Company may adopt any amendments to its Directors' Stock Option Plan, 1993 Stock Incentive Plan or 1987 Restricted Stock Plan or any agreements thereunder as may be necessary or appropriate to effectuate the foregoing, provided that no such amendment may reduce the per Share exercise price of such options. In addition, the Company may terminate or amend its Director Compensation Plan to eliminate future issuances of stock. 32 Parent has agreed to honor or cause the Offeror to honor, in accordance with their respective terms, certain specified severance agreements and employment agreements relating to officers, directors and employees that have previously been disclosed by the Company to Parent, as in effect on the date of the Merger Agreement. CONDITIONS PRECEDENT. The respective obligation of each party to effect the Merger is subject to the fulfillment, at or prior to the Effective Time, of each of the following conditions: (i) the Offeror shall have purchased all Shares validly tendered pursuant to the Offer; (ii) the Merger Agreement shall have been adopted by the requisite vote of the shareholders of the Company under the ABCA; (iii) no governmental or regulatory authority shall have issued an order or ruling or taken any other action declaring illegal or otherwise prohibiting the Merger; and (iv) all governmental consents, orders and approvals legally required for the consummation of the Merger and the transactions contemplated by the Merger Agreement shall have been obtained and be in effect at the Effective Time. TERMINATION. The Merger Agreement provides that it may be terminated at any time (upon written notice to the other parties thereto) prior to the Effective Time, whether before or after approval by the shareholders of the Company, (i) by mutual written consent of the Boards of Directors of the Company, Parent and the Offeror; (ii) by the Company, (A) if the Offer has not been commenced timely in accordance with the provisions of the Merger Agreement, provided that such failure shall not have been corrected on the next business day; (B) if any representation or warranty made by Parent and/or the Offeror in the Merger Agreement shall not be true and correct, which materially and adversely affects the consummation of the Offer, and such breach is not capable of being cured or is not cured by Parent and/or the Offeror prior to the expiration of the Offer; (C) if Parent or the Offeror shall not have performed and complied with, in all material respects (without reference to any materiality qualifications contained therein), each agreement and covenant required by the Merger Agreement to be performed or complied with by it, and such breach is not capable of being cured by Parent and/or the Offeror or is not cured prior to the expiration of the Offer; and (D) in respect of a superior proposal (as described above under "No Solicitation"), provided that (x) the Company shall have paid Parent the Termination Fee and the Expense Fee (as described below under "Fees and Expenses") and (y) Parent or the Offeror does not make, within three business days of receipt of a Superior Proposal Notice, an offer that the Company's Board of Directors believes, in good faith after consultation with its legal counsel and financial advisors, is at least as favorable, from a financial point of view, to the Company's shareholders as such other bidder's offer; provided, however, that if subsequent to the payment of the Termination Fee and the Expense Fee and prior to the termination of the Merger Agreement, Parent or the Offeror makes an offer that the Company's Board of Directors believes in good faith after consultation with its legal counsel and financial advisors, is at least as favorable, from a financial point of view, to the Company's shareholders as such other bidder's offer, Parent and the Offeror shall, upon written request of the Company, return the Termination Fee and the Expense Fee once the Company shall have approved and recommended Parent's and the Offeror's amended offer and shall have rescinded certain actions taken with respect to such superior proposal; (iii) prior to the purchase of Shares by the Offeror pursuant to the Offer, by Parent or the Offeror, if (A) any representation or warranty made by the Company in the Merger Agreement that contains a materiality qualification shall not be true and correct, or any representation or warranty made by the Company in the Merger Agreement that is not so qualified shall not be true and correct in any material respect, and, in each case, such breach of the representation or warranty is not capable of being cured by the Company or is not cured prior to the expiration of the Offer; (B) the Company shall not have performed and complied with, in all material respects (without reference to any materiality qualifications contained therein), each agreement and covenant required by the Merger Agreement to be performed or complied with by it and such breach of the agreement or covenant is not capable of being cured by the Company or is not cured prior to the expiration of the Offer; and (iv) by Parent, the Offeror or the Company, if (A) (x) the Offer shall be terminated or expire in accordance with its terms without the purchase of any Shares pursuant thereto or (y) the Offeror shall not have accepted for payment any Shares pursuant to the Offer within 90 calendar days following the commencement of the Offer; provided, that 33 Parent and the Offeror shall not be entitled to terminate for such reason if the cause thereof is a breach by Parent or the Offeror of any of their obligations under the Merger Agreement and the Company shall not be entitled to terminate for such reason if the cause thereof is a breach by the Company of any of its obligations under the Merger Agreement; (B) any governmental or regulatory authority shall have issued an order or ruling or taken any other action declaring illegal or otherwise prohibiting the consummation of the Offer or the Merger and such order shall have become final and nonappealable; (C) if, at the Special Meeting (including any adjournment or postponement thereof), the requisite shareholder approval is not obtained, except that the right to terminate the Merger Agreement under this clause (C) will not be available to any party whose willful failure to perform any material obligation or to perform any material condition under the Merger Agreement has been the proximate cause of, or resulted in, the failure to obtain the requisite shareholder approval. If the Merger Agreement is validly terminated by either the Company or Parent or the Offeror, the Merger Agreement will forthwith become null and void and there will be no liability or obligation on the part of either the Company or Parent or the Offeror (or any of their respective representatives or affiliates), except that (i) the provisions relating to confidentiality, no solicitation, fees and expenses and certain other provisions will continue to apply following any such termination and (ii) nothing shall relieve any party from liability for wilful breach of its representations, warranties, covenants or agreements contained in the Merger Agreement. FEES AND EXPENSES. Except as provided in the Merger Agreement, whether or not the Offer or the Merger is consummated, all costs and expenses incurred in connection with the Merger Agreement shall be paid by the party incurring such costs and expenses. The Merger Agreement provides that: (i) if (A) Parent or the Offeror shall have provided the Company with an irrevocable written notice of termination of the Merger Agreement based upon a material willful breach by the Company of the Merger Agreement (provided that such notice may state that it is subject to payment of the Termination Fee and the Expense Fee by the Company) or (B) any Change in Control shall have occurred during the term of the Merger Agreement or within 180 days following termination of the Merger Agreement (other than pursuant to (1) clause (i) as described above under "Termination", (2) clause (ii) as described above under "Termination", (3) clause (iv)(A) as described above under "Termination" if the Offer has expired due to the failure to satisfy any of the conditions in paragraphs (b), (c)(i), (c)(ii), (c)(iii) or (d) as set forth under Section 15, unless in the case of the conditions set forth in paragraphs (b), (c)(i), (c)(ii) or (c)(iii) as set forth under Section 15, Parent and the Offeror are diligently pursuing the satisfaction of such conditions and the Company shall not have agreed to Parent's or the Offeror's written request to extend the Offer beyond the periods prescribed by the Merger Agreement, or (4) clause (iv)(B) as described above under "Termination", so long as the Company shall not be in breach of this Agreement) then the Company shall promptly, but in no event later than five business days after the first to occur of any such event described in clauses (A) and (B) above (the "Payment Date"), pay Parent a fee of $7,000,000 (the "Termination Fee") and shall also reimburse Parent and the Offeror for all out-of-pocket expenses and fees payable by them or their affiliates up to an aggregate of $3,000,000 (including without limitation fees and expenses of all counsel, printers, banks, investment banking firms, and other financial institutions, and their respective agents directly related to the transactions contemplated by the Merger Agreement (including the financing of the transactions contemplated by the Merger Agreement by Parent and the Offeror (see Section 10) or obtaining the required consents of Parent's noteholders (see Sections 1 and 15)) (the "Expense Fee"). The Termination Fee and the Expense Fee shall, in the alternative, be due under the circumstances described above under "No Solicitation." In no event will the Company be obligated to pay the Termination Fee and the Expense Fee more than once, unless Parent and the Offeror have previously refunded such Termination Fee and Expense Fee as provided above in which case the Termination Fee and Expense Fee shall continue to be payable in the circumstances provided in the Merger Agreement. 34 "Change in Control" means any of the following: (i) any person or group (other than Parent or the Offeror) acquires or beneficially owns, or enters into an agreement with the Company or any of its subsidiaries to acquire, directly or indirectly, 25% or more of the outstanding Shares or 25% or more of the assets (including shares of subsidiaries), revenues or earning power of the Company and its subsidiaries, taken as a whole; (ii) the Company distributes or transfers, or publicly announces its intention to distribute or transfer, to its shareholders, by dividend or otherwise, assets constituting 25% or more of the market value or earning power of the Company on a consolidated basis; or (iii) any person or group (other than Parent or the Offeror) enters into an agreement with the Company or any of its subsidiaries to consummate, or consummates, directly or indirectly, a tender offer or exchange offer for any Shares or involving a merger, consolidation or other business combination or similar transaction with or involving the Company. THE CONFIDENTIALITY AND STANDSTILL AGREEMENT The Company and Parent are also parties to a Confidentiality and Standstill Agreement dated April 8, 1997 containing customary terms, including a standstill provision which, as modified by the Merger Agreement, terminates if the Termination Fee and Expense Fee are, or are required to be, paid. The Confidentiality and Standstill Agreement is filed as an exhibit to the Schedule 14D-1 and is incorporated herein by reference. 14. DIVIDENDS AND DISTRIBUTIONS. If, on or after the date of the Merger Agreement, the Company should (i) split, combine or otherwise change the Shares or the Company's capitalization, (ii) issue or sell any additional securities of the Company or otherwise cause an increase in the number of outstanding securities of the Company (except for Shares issuable upon the exercise of director or employee stock options outstanding on the date of the Merger Agreement) or (iii) acquire currently outstanding Shares or otherwise cause a reduction in the number of outstanding Shares, then, without prejudice to the Offeror's rights under Sections 1 and 15, the Offeror, in its sole discretion, subject to the terms of the Merger Agreement, may make such adjustments as it deems appropriate in the purchase price and other terms of the Offer. If, on or after the date of the Merger Agreement, the Company should declare or pay any dividend on the Shares or make any distribution (including, without limitation, cash dividends, the issuance of additional Shares pursuant to a stock dividend or stock split, the issuance of other securities or the issuance of rights for the purchase of any securities, but excluding any regular quarterly dividend on the Shares of not more than $0.11 per Share based on the declaration, record and payment dates normally applicable to the Shares) with respect to the Shares, that is payable or distributable to shareholders of record on a date prior to the transfer to the name of the Offeror or its nominee or transferee on the Company's stock transfer records of the Shares purchased pursuant to the Offer, then, without prejudice to the Offeror's rights under Sections 1 and 15, any such dividend, distribution or right to be received by the tendering shareholders will be received and held by the tendering shareholders for the account of the Offeror and will be required to be promptly remitted and transferred by each tendering shareholder to the Depositary for the account of the Offeror, accompanied by appropriate documentation of transfer. Pending such remittance and subject to applicable law, the Offeror will be entitled to all rights and privileges as owner of any such dividend, distribution or right and may withhold the entire purchase price or deduct from the purchase price the amount or value thereof, as determined by the Offeror in its sole discretion. The Merger Agreement provides that neither the Company nor any of its subsidiaries will, among other things, from the date of the Merger Agreement until the Effective Time, (i) split, combine, reclassify or take similar action with respect to any of its capital stock; (ii) issue or agree to issue any additional shares of, or rights of any kind to acquire any shares of, its capital stock of any class, other than, in the case of the Company, shares of capital stock and Rights issuable pursuant to the Rights Agreement and Shares issuable upon the exercise of outstanding options pursuant to existing employee benefit plans and director option plans; (iii) purchase, redeem or otherwise acquire any Shares or any other shares of its capital stock 35 of any class; or (iv) declare, set aside or pay any dividend payable in cash, stock or property or make any other distributions with respect to Shares or any other shares of its capital stock of any class; or (v) make any commitment to do any of the foregoing, except for (A) the declaration and payment of dividends by a wholly owned subsidiary of the Company solely to the Company and (B) the declaration and payment of regular quarterly cash dividends by the Company consistent with past practices (including as to declaration, record and payment dates) in no event to exceed $0.11 per Share per fiscal quarter. 15. CERTAIN CONDITIONS TO THE OFFEROR'S OBLIGATIONS. Notwithstanding any other provision of the Offer, the Offeror shall not be required to accept for payment or pay for any tendered Shares (subject to Rule 14e-1(c) under the Exchange Act (relating to the Offeror's obligation to pay for or return tendered Shares after the termination or withdrawal of the Offer)) and may delay (subject to the provisions of the Merger Agreement, see Section 13) the acceptance for payment of, or the payment for, any Shares, amend the Offer as provided in the Merger Agreement or terminate the Offer as provided in the Merger Agreement, if (a) immediately prior to the expiration of the Offer (as it may be extended in accordance with the terms of the Merger Agreement), there shall not have been validly tendered and not withdrawn pursuant to the Offer a number of Shares such that, upon consummation of the Offer, the Offeror and its affiliates will beneficially own in the aggregate not less than two-thirds of the Shares outstanding on a fully diluted basis; (b) any applicable (i) waiting period under the HSR Act or (ii) period during which Parent shall have consented or otherwise be barred from purchasing Shares pursuant to the Offer as part of any agreement or other arrangement with any governmental or regulatory authority involving the HSR Act or any other applicable antitrust laws shall not have expired or terminated prior to the expiration of the Offer (as it may be extended in accordance with the terms of the Merger Agreement); (c) at any time on or after the date of the Merger Agreement and before the time of payment for any Shares, any of the following events shall have occurred and be continuing: (i) there shall be threatened or pending by any governmental or regulatory authority (or the staff of the FTC or the staff of the Antitrust Division of the DOJ (the "Antitrust Division") shall have recommended the commencement of) any suit, action or proceeding, or there shall be pending by any other person any suit, action or proceeding which has a reasonable possibility of success, (A) challenging the acquisition by Parent or the Offeror of any Shares, seeking to restrain or prohibit the making or consummation of the Offer or the Merger or the performance of any of the other transactions contemplated by the Merger Agreement or seeking to obtain from the Company, Parent or the Offeror any damages or otherwise imposing financial burdens, penalties or fines that are material in relation to the Company and its subsidiaries, or Parent and its subsidiaries, in each case taken as a whole, (B) seeking to prohibit or limit the ownership or operation by the Company, Parent or any of their respective subsidiaries of a material portion of the business or assets of the Company or its subsidiaries, or Parent or its subsidiaries, as a result of the Offer, the Merger or any of the other transactions contemplated by the Merger Agreement, (C) seeking to impose limitations on the ability of Parent or the Offeror to acquire or hold, or exercise full rights of ownership of, any Shares accepted for payment pursuant to the Offer including, without limitation, the right to vote the Shares accepted for payment by it on all matters properly presented to the shareholders of the Company, (D) seeking to prohibit Parent or any of its subsidiaries from effectively controlling or operating in any material respect the business or operations of the Company or its subsidiaries, or (E) which otherwise is reasonably likely to have a Material Adverse Effect. As used herein, "Material Adverse Effect" means any change or effect that is materially adverse to the condition (financial or otherwise), total assets, total liabilities, business, results of operations or prospects of the Company and its subsidiaries taken as a whole, including without limitation any such change or effect that prevents Parent and the Offeror from obtaining their contemplated financing for the Offer and the Merger; 36 (ii) there shall be any statute, rule, regulation, judgment, order or injunction enacted, entered, enforced, promulgated or deemed applicable to the Offer or the Merger, or any other action shall be taken by any governmental or regulatory authority or court, other than the application to the Offer or the Merger of applicable waiting periods under the HSR Act, that is reasonably likely to result, directly or indirectly, in any of the consequences referred to in clauses (A) through (E) of paragraph (i) above, or any governmental consents, orders and approvals legally required for the consummation of the Offer or the Merger shall not have been obtained, and such failure is reasonably likely to result, directly or indirectly, in any of the consequences referred to in clauses (A) through (E) of paragraph (i) above; (iii) (A) a general suspension of trading in, or limitation on prices for, securities on any national securities exchange or in the over the counter market, (B) any change in general, financial, bank or capital market conditions which materially affects the ability of financial institutions to extend credit or syndicate loans, (C) a decline in the Standard & Poor's 500 Index by an amount in excess of 25%, measured from July 3, 1997, (D) a declaration of a banking moratorium or any suspension of payments in respect of banks in the United States or any material limitation (whether or not mandatory) imposed by any governmental or regulatory authority that is reasonably likely to affect the extension of credit by lending institutions in general, or (E) a commencement of a war or armed hostilities or other national or international crisis directly or indirectly involving the United States which war, hostilities or crisis is reasonably likely to have a Material Adverse Effect or adversely affect the ability of the Company to perform its obligations under the Merger Agreement or to consummate the Merger or to materially affect Parent's ability to obtain the consents referred to in paragraph (d) below; or in the case of any of the events described in (A) through (E) above existing as of the date of the Merger Agreement, a material acceleration or worsening thereof; (iv) any of the representations and warranties made by the Company in the Merger Agreement that are subject to a materiality qualification shall not be true and correct, or any of the representations and warranties made by the Company in the Merger Agreement that are not so qualified shall not be true and correct in any material respect, in each case at any time prior to the consummation of the Offer as though made on and as of such date or, in the case of representations and warranties made as of a specific date earlier than the date of the consummation of the Offer, on and as of such earlier date; provided, however, that if the Company discovers such a breach of a representation or warranty, the Company shall promptly notify Parent and the Offeror of the nature of such breach and if Parent or the Offeror discovers such a breach of a representation or warranty, Parent or the Offeror shall promptly notify the Company of the nature of such breach and provided further that, in the case of breaches that are reasonably capable of being cured prior to the expiration of the Offer, the Company shall have failed to diligently proceed to effect a cure of such breach and, in any event, to cure such breach prior to the expiration of the Offer (including any extensions thereof); (v) the Company shall not have performed and complied with, in all material respects (without reference to any materiality qualifications contained therein), each agreement and covenant required by the Merger Agreement to be performed or complied with by it; provided, however, that if the Company discovers such a breach of an agreement or covenant, the Company shall promptly notify Parent and the Offeror of the nature of such breach and if Parent or the Offeror discovers such a breach of an agreement or covenant, Parent or the Offeror shall promptly notify the Company of the nature of such breach and provided further that, in the case of breaches that are reasonably likely to be cured prior to the expiration of the Offer, the Company shall have failed to diligently proceed to effect a cure of such breach and, in any event, to cure such breach prior to the expiration of the Offer (including any extensions thereof); (vi) there shall have occurred any change (or any development that, insofar as reasonably can be foreseen, is reasonably likely to result in any change) that is materially adverse to the condition (financial or otherwise), total assets, total liabilities, business, results of operations or prospects of the Company and its subsidiaries taken as a whole, including without limitation any such change that 37 prevents Parent and the Offeror from obtaining the contemplated financing for the Offer and the Merger; (vii) the Company shall have delivered (or been obliged to deliver) to Parent a Superior Proposal Notice or there shall have been a Change in Control (see Section 13); (viii) prior to the purchase of Shares pursuant to the Offer, the Board of Directors (or any committee thereof) of the Company shall have withdrawn or modified (including by amendment of its Schedule 14D-9) in a manner adverse to Parent or the Offeror, its approval or recommendation of the Offer, the Merger Agreement or the Merger or shall have recommended another takeover proposal, or shall have adopted any resolution to effect any of the foregoing; or (ix) the Merger Agreement shall have been terminated in accordance with its terms, or Parent or the Offeror have reached an agreement in writing with the Company providing for termination of the Offer or delay in acceptance of, or payment for, the Shares; (d) Parent shall not have obtained prior to the expiration of the Offer an amendment or supplement to the Senior Notes Indenture (and, to the extent necessary, the Notes and Guarantees referred to therein), all with the consent of the holders of such Notes and in accordance with the terms of such Indenture, to increase the amount of permitted indebtedness, restricted payments and investments permitted to be incurred or made, as applicable, by Parent and its subsidiaries under the Senior Notes Indenture and to make such other changes thereto as are necessary to permit Parent to consummate the Offer, the Merger and the other transactions contemplated by the Merger Agreement; or (e) Prior to the expiration of the Offer, all of the Company's directors and substantially all of the holders of the Company's outstanding Options who are employees of the Company shall have exercised such Options or shall have entered into agreements with the Company to exercise such Options prior to the Effective Time of the Merger (or such later time as may be specified by Parent) or otherwise permit the Company to "cash-out" the Options as provided in the Merger Agreement; which (in the case of each of paragraphs (a), (b), (c)(i) through (c)(viii), (d) and (e) above) makes it inadvisable, as determined by the Offeror in its sole judgment to proceed with the Offer or with such acceptance for payment of, or payment for, Shares. The foregoing conditions are for the sole benefit of the Offeror and Parent and may be asserted by the Offeror or Parent and may be waived by the Offeror or Parent, in whole or in part, at any time and from time to time, in the sole discretion of the Offeror or Parent; provided that, without the written consent of the Company, Parent and the Offeror may not reduce the Minimum Condition to less than a majority of the outstanding Shares on a fully diluted basis or waive the condition set forth in (b) above. The failure by the Offeror or Parent at any time to exercise any of the foregoing rights will not be deemed a waiver of any right and each right will be deemed an ongoing right which may be asserted at any time and from time to time. Should the Offer be terminated pursuant to the foregoing provisions, all tendered Shares not theretofore accepted for payment shall forthwith be returned by the Depositary to the tendering shareholders. Under certain circumstances, the Offer will be extended until September 12, 1997 if necessary to meet certain conditions, including the conditions set forth in paragraphs (b) and (d) above. In addition, notwithstanding the satisfaction or waiver of any conditions of the Offer, the Offer may be extended until September 12, 1997 to enable Parent and the Offeror to obtain permanent financing for the transaction. The Offer may also be extended in other circumstances. See Section 1. 16. CERTAIN LEGAL MATTERS. Except as otherwise disclosed herein, the Offeror is not presently aware of any consent, order, approval or other action by any governmental or regulatory authority which would be required for the 38 consummation of the Offer or the Merger or the acquisition or ownership of Shares by the Offeror as contemplated herein and, if not obtained, is reasonably likely to result, directly or indirectly, in any of the consequences referred to in clauses (A) through (E) of paragraph (c)(i) of Section 15. Should any consent, order, approval or other action be required (other than as set forth in this Section), the Offeror currently contemplates that it would seek such consent, order, approval or action. The Company's pharmacists are required to be licensed by the appropriate state board of pharmacy and the Federal Drug Enforcement Administration (the "FDEA"). The Company's pharmacies are also registered with the FDEA and licensed under state law. Many of the Company's stores sell alcoholic beverages and are subject to various state and local licensing requirements as a result. By virtue of these license and registration requirements, the Offeror, Parent or the Company may be obligated to obtain certain governmental consents and approvals in order to comply with applicable law. The Offeror believes that such approvals can be obtained in due course, and that the Company will continue to conduct its operations substantially in the same manner as before the transfer. While except as described in this Offer to Purchase, the Offeror does not presently intend to delay the acceptance for payment of, or payment for, Shares tendered pursuant to the Offer pending the outcome of any such matter, there can be no assurance that any such approval or action, if needed, would be obtained or would be obtained without substantial conditions, or that adverse consequences might not result to the business of the Company, the Offeror or Parent or that certain parts of the business of the Company or Parent might not have to be disposed of or held separate in order to obtain such approval or in the event that such approvals were not obtained or any other actions were not taken. U.S. ANTITRUST. Under the provisions of the HSR Act applicable to the Offer, the acquisition of Shares under the Offer may be consummated following the expiration of a 15-day waiting period following the filing of a Premerger Notification and Report Form with respect to the Offer, unless Parent receives a request for additional information or documentary material from the Antitrust Division or the FTC or unless early termination of the waiting period is granted. The Company and Parent each made such a filing on July 11 and July 14, 1997, respectively, and, accordingly, the initial waiting period will expire at 11:59 p.m., New York City time, on July 29, 1997 unless early termination of the waiting period is granted. If, within the initial 15-day waiting period, either the Antitrust Division or the FTC requests additional information or documentary material concerning the Offer, the waiting period will be extended through the tenth day after the date of substantial compliance by the Offeror. Complying with a request for additional information or documentary material can take a significant amount of time. In addition, if the Antitrust Division or the FTC raises substantive issues in connection with the proposed transaction, the parties frequently engage in negotiations with the relevant government agency concerning possible means of addressing those issues and may agree to delay consummation of the transaction while such negotiations continue. The Antitrust Division and the FTC frequently scrutinize the legality under the antitrust laws of transactions such as the Offeror's proposed acquisition of the Company, and there are certain locations in Florida and Mississippi in which both the Company and Parent have stores in close proximity. At any time before or after the Offeror's acquisition of Shares pursuant to the Offer, the Antitrust Division or the FTC could take such action under the antitrust laws as either deems necessary or desirable in the public interest, including seeking to enjoin the purchase of Shares pursuant to the Offer or the consummation of the Merger, or seeking the divestiture of Shares acquired by the Offeror or the divestiture of substantial assets of the Company or its subsidiaries or Parent or its subsidiaries. Private parties or state attorneys general may also bring legal action under the antitrust laws under certain circumstances. There can be no assurance that a challenge to the Offer or the consummation of the Merger on antitrust grounds will not be made, or, if such a challenge is made, of the result thereof. If any applicable waiting period under the HSR Act applicable to the Offer has not expired or been terminated prior to the Expiration Date, or any period during which Parent shall have consented or otherwise been barred from purchasing Shares pursuant to the Offer as part of any agreement or arrangement with any governmental or regulatory authority involving the HSR Act or any other applicable 39 antitrust laws shall not have expired or terminated prior to the Expiration Date, the Offeror will not be obligated to proceed with the Offer or the purchase of any Shares not theretofore purchased pursuant to the Offer. See Section 15. The Offeror, Parent and the Company have entered into certain agreements regarding the HSR Act and other antitrust matters. See Section 13 under "The Merger Agreement--HSR MATTERS." STATE TAKEOVER LAWS. Various states have adopted takeover laws and regulations applicable to attempts to acquire securities of corporations which are incorporated, or have substantial assets, shareholders, principal executive offices or principal places of business or whose business operations otherwise have substantial economic effects in such states. In EDGAR V. MITE CORP., in 1982, the Supreme Court of the United States (the "U.S. Supreme Court") invalidated on constitutional grounds the Illinois Business Takeover Act, which, as a matter of state securities law, made takeovers of corporations meeting certain requirements more difficult. However in 1987, in CTS CORP. V. DYNAMICS CORP. OF AMERICA, the U.S. Supreme Court held that the State of Indiana may, as a matter of corporate law and, in particular, with respect to those aspects of corporate law concerning corporate governance, constitutionally disqualify a potential acquirer from voting on the affairs of a target corporation without the prior approval of the remaining shareholders. The state law before the U.S. Supreme Court was by its terms applicable only to corporations that had a substantial number of shareholders in the state and were incorporated there. The Company, directly or through subsidiaries, conducts business in a number of states throughout the United States, some of which have enacted takeover laws. The Offeror does not know whether any of these laws will, by their terms, apply to the Offer or the Merger and has not complied with any such laws. Should any person seek to apply any state takeover law, the Offeror will take such action as then appears desirable, which may include challenging the validity or applicability of any such statute in appropriate court proceedings. In the event it is asserted that one or more state takeover laws is applicable to the Offer or the Merger, and an appropriate court does not determine that it is inapplicable or invalid as applied to the Offer, the Offeror might be required to file certain information with, or receive approvals from, the relevant state authorities. In addition, if enjoined, the Offeror might be unable to accept for payment any Shares tendered pursuant to the Offer, or be delayed in continuing or consummating the Offer and the Merger. In such event, the Offeror may not be obligated to accept for payment any Shares tendered. See Section 15. CERTAIN CHARTER PROVISIONS. Article Eleven of the Company's Charter provides that in addition to any action required by law or the Company's Charter, and except as otherwise expressly provided therein (as discussed below), the approval or authorization of (i) any merger or consolidation of the Company or any subsidiary of the Company with (A) any Interested Shareholder (as defined below) or (B) any other corporation (whether or not itself an Interested Shareholder) which is, or after such merger or consolidation would be, an affiliate of an Interested Shareholder; or (ii) any sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of transactions) to or with any Interested Shareholder or any affiliate of any Interested Shareholder of any assets of the Company or any subsidiary of the Company having an aggregate fair market value of $10,000,000 or more; or (iii) the issuance or transfer by the Company or any subsidiary of the Company (in one transaction or a series of transactions) of any securities of the Company or any subsidiary of the Company to any Interested Shareholder or any affiliate of any Interested Shareholder in exchange for cash, securities or other property (or a combination thereof) having an aggregate fair market value of $10,000,000 or more; or (iv) the adoption of any plan or proposal for the liquidation or dissolution of the Company proposed by or on behalf of an Interested Shareholder or any affiliate of any Interested Shareholder; or (v) any reclassification of securities (including any reverse stock split), or any merger or consolidation of the Company with any of its subsidiaries or any other transaction (whether or not with or into or otherwise involving an Interested Shareholder) which has the effect, directly or indirectly, of increasing the proportionate share of the outstanding shares of any class of equity or convertible securities of the Company or any subsidiary of the Company which is directly or indirectly owned by any Interested Shareholder or any affiliate of any Interested Shareholder shall require the affirmative vote of the holders of at least 80% of the voting power 40 of the then outstanding shares of capital stock of the Company entitled to vote generally in the election of directors (the "Voting Stock"), voting together as a single class, (it being understood that for purposes of the foregoing provision, each share of the Voting Stock shall have the number of votes granted to it generally in the election of directors). Such affirmative vote shall be required notwithstanding the fact that no vote may be required, or that a lesser percentage may be specified, by law or in any agreement with any national securities exchange or otherwise. For purposes of such Article Eleven, "Interested Shareholder" is defined as any person (other than the Company or any subsidiary of the Company) who or which: (i) is the beneficial owner, directly or indirectly, of more than 20% of the outstanding voting stock of the Company; or (ii) is an affiliate of the Company and at any time within the two-year period immediately prior to the date in question was the beneficial owner, directly or indirectly, of 20% or more of the outstanding Voting Stock of the Company; or (iii) is an assignee of or has otherwise succeeded to any Voting Stock of the Company which at any time within the two-year period immediately prior to the date in question was beneficially owned by any Interested Shareholder, if such assignment or succession shall have occurred in the course of a transaction or a series of transaction not involving a public offering within the meaning of the Securities Act. The foregoing provisions of the Company's Charter are applicable to any particular business combination. However, such business combination requires only such affirmative vote as is required by law and any other provision of the Company's Charter, if the business combination has been approved by a majority of the Disinterested Directors (as defined below). For purposes of such Article Eleven, "Disinterested Director" is defined as any member of the Board of Directors of the Company who is unaffiliated with the Interested Shareholder and was a member of the Board of Directors prior to the time that the Interested Shareholder became an Interested Shareholder, and any successor of a Disinterested Director who is unaffiliated with the Interested Shareholder, and is recommended to succeed a Disinterested Director by a majority of Disinterested Directors then on the Board of Directors. The Merger of the Offeror with and into the Company would trigger the requirements of Article Eleven of the Company's Charter. In accordance with the Company's Charter, the required approval by the Board of Directors of the Company of the Merger Agreement has been obtained. RIGHTS AGREEMENT. The Rights Agreement contains certain provisions that may delay, defer or prevent a takeover of the Company. In connection with the Merger Agreement, the Company's Board of Directors has amended the Rights Agreement to provide that, so long as the Merger Agreement has not been terminated, such provisions will not apply to the Offer, the Merger and the Merger Agreement and the transactions contemplated thereby. The provisions of the Rights Agreement are described in the Company's Schedule 14D-9. 17. FEES AND EXPENSES. Neither the Offeror nor Parent, nor any officer, director, shareholder, agent or other representative of the Offeror or Parent will pay any fees or commissions to any broker, dealer or other person (other than the Information Agent and the Depositary) for soliciting tenders of Shares pursuant to the Offer. Brokers, dealers, commercial banks and trust companies and other nominees will, upon request, be reimbursed by the Offeror for customary mailing and handling expenses incurred by them in forwarding materials to their customers. Donaldson, Lufkin & Jenrette Securities Corporation is acting as Dealer Manager in connection with the Offer and is providing certain financial advisory services to Parent and the Offeror in connection with the Offer. DLJ Bridge, an affiliate of the Dealer Manager, has provided Parent with the Bridge Commitment Letter and will receive fees pursuant to the financing contemplated thereby. See Section 10. In addition, Parent has agreed to indemnify the Dealer Manager and certain affiliated persons against 41 certain liabilities and expenses in connection with its services, including, without limitation, certain liabilities under the federal securities laws. The Offeror has retained MacKenzie Partners, Inc. as Information Agent and IBJ Schroder Bank & Trust Company as Depositary in connection with the Offer. The Information Agent and the Depositary will receive reasonable and customary compensation for their services hereunder and reimbursement for their reasonable out-of-pocket expenses. The Depositary will also be indemnified by the Offeror against certain liabilities in connection with the Offer. The Information Agent may contact holders of Shares by mail, telex, telegraph and personal interviews and may request brokers, dealers and other nominee shareholders to forward materials relating to the Offer to beneficial owners of Shares. 18. MISCELLANEOUS. The Offer is being made to all holders of Shares. The Offeror is not aware of any state where the making of the Offer is prohibited by administrative or judicial action pursuant to a valid state statute. If the Offeror becomes aware of any valid state statute prohibiting the making of the Offer, the Offeror will make a reasonable good faith effort to comply with such statute or seek to have such statute declared inapplicable to the Offer. If, after such reasonable good faith effort, the Offeror cannot comply with such statute, the Offer will not be made to (nor will tenders be accepted from or on behalf of) the holders of Shares in such state. In those jurisdictions where the securities, blue sky or other laws require the Offer to be made by a licensed broker or dealer, the Offer shall be deemed to be made on behalf of the Offeror by the Dealer Manager or one or more registered brokers or dealers licensed under the laws of such jurisdiction. NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION ON BEHALF OF THE OFFEROR OTHER THAN AS CONTAINED IN THIS OFFER TO PURCHASE OR IN THE LETTER OF TRANSMITTAL AND, IF ANY SUCH INFORMATION OR REPRESENTATION IS GIVEN OR MADE, IT SHOULD NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE OFFEROR OR PARENT. The Offeror and Parent have filed with the Commission the Schedule 14D-1, pursuant to Section 14(d)(1) of the Exchange Act and Rule 14d-3 promulgated thereunder, furnishing certain information with respect to the Offer, and may file amendments thereto. The Schedule 14D-1 and any amendments thereto, including exhibits, may be examined and copies may be obtained at the same places and in the same manner as set forth with respect to the Company in Section 8 (except that they will not be available at the regional offices of the Commission). DELTA ACQUISITION CORPORATION July 14, 1997 42 ANNEX I CERTAIN INFORMATION CONCERNING THE DIRECTORS AND EXECUTIVE OFFICERS OF PARENT AND THE OFFEROR 1. DIRECTORS AND EXECUTIVE OFFICERS OF PARENT. Set forth below are the name, current business address, citizenship, present principal occupation or employment and employment history (covering a period of not less than five years) of each executive officer and director of Parent. Unless otherwise indicated, each such person's business address is 1770 Ellis Avenue, Suite 200, Jackson, Mississippi 39204. All persons listed below are citizens of the United States of America.
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT NAME AND MATERIAL POSITIONS HELD DURING PAST FIVE YEARS - ------------------------------ --------------------------------------------------------------------------------- W.H. Holman, Jr. Chairman of the Board since 1967. Chief Executive Officer of Parent from 1967 until January 1997. Member of the Board of Directors of two private companies. Roger P. Friou Director of Parent since June 1984. President of Parent from March 1996 to May 1997. Prior to 1996 served as Vice Chairman, Chief Financial Officer, and Secretary of Parent since 1991. Prior to that time he served as Executive Vice President from 1984. Member of the Board of Directors of Parkway Properties, Inc. Bruce C. Bruckmann Director of Parent since March 1996 and a principal in Bruckmann, Rosser, Sherrill & Co., Inc. ("BRS"). He was an officer and subsequently a Managing Director of Citicorp Venture Capital, Ltd. ("CVC") from 1983 through 1994. Member of the Board of Directors of AmeriSource Distribution Corporation, CORT Business Services Corporation, Chromcraft Revington, Inc., Mohawk Industries, Inc. and Anvil Knitwear, Inc. as well as several private companies. Harold O. Rosser, II Director of Parent since March 1996 and a principal in BRS. He was an officer and subsequently a Managing Director of CVC from 1987 through 1994. Member of the Board of Directors of DavCo Restaurants, Inc., as well as several private companies. Stephen C. Sherrill Director of Parent since March 1996 and a principal in BRS. He was an officer and subsequently a Managing Director of CVC from 1983 through 1994. Member of the Board of Directors of Galey & Lord, Inc., and of several private companies. Michael E. Julian President of Parent since May 1997 and Chief Executive Officer since January 1997. Director of Parent since April 1996. Prior to January 1997 served as Director, Chairman, President and Chief Executive Officer of Farm Fresh, Inc. since 1988. Member of the Board of Directors of Jackson Hewitt Inc. and one private company. John M. Moriarty, Jr. Director of Parent since April 1996. A Managing Director of Donaldson, Lufkin & Jenrette Securities Corporation since 1989 and a Managing Director of DLJ Merchant Banking, Inc. since January 1996. Member of the Board of Directors of a private company. Ronald E. Johnson Director of Parent since May 1996. Member of the Board of Directors, President and Chief Executive Officer of Farm Fresh, Inc. since January 1997. Prior to that served as Chairman, President and Chief Executive Officer of Kash n' Karry from 1995 to 1997 and Executive Vice President and Chief Operating Officer of Farm Fresh, Inc. from 1988 to 1995.
I-1
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT NAME AND MATERIAL POSITIONS HELD DURING PAST FIVE YEARS - ------------------------------ --------------------------------------------------------------------------------- Bernard J. Ebbers Director of Parent since August 1996. President and Chief Executive Officer of WorldCom, Inc. since 1983. Member of the Board of Directors of WorldCom, Inc. David K. Essary Executive Vice President since March 1996. Previously served as Executive Vice President--Retail Operations since 1991. From 1985 to 1991 served as Senior Vice President--Marketing. Jerry L. Jones Senior Vice President--Administrative Operations since April 1997. Senior Vice President--Retail Operations from March 1996 to April 1997. Previously served as Senior Vice President--Human Resources since 1991. Prior to that, served as Vice President--Human Resources from 1989. Harold D. Evans Senior Vice President--Store Operations since 1993. Previously served as Vice President--Store Operations from 1986. David R. Black Senior Vice President--Finance/Chief Financial Officer since 1996. Previously served as Treasurer and Controller from 1986. J.R. Hansbrough Senior Vice President--Information Services since 1996. Previously served as Vice President--Information Services from 1994. Prior to that, Consultant and Marketing Representative with IBM Corporation from 1982. James P. Riley Senior Vice President--Engineering since 1996. Previously served as Vice President--Engineering from 1991 and Director of Engineering Services from 1985. Clyde D. Staley Senior Vice President--Real Estate since 1996. Previously served as Vice President--Real Estate from 1985. W.H. Holman, III Secretary of Parent since 1996 and also serves as President of Pump and Save, Inc. Previously served as Senior Vice President--Sales and Marketing from 1992 and Vice President--Sales and Marketing from 1991 and is the son of W.H. Holman, Jr. Member of the Board of Directors of one private company.
2. DIRECTORS AND EXECUTIVE OFFICERS OF OFFEROR. Since July 1997, Michael E. Julian has served as the Director, President, and Secretary of the Offeror. Set forth above is his current business address, citizenship, present principal occupation or employment and employment history (covering a period of not less than five years). 3. BRUCKMANN, ROSSER, SHERRILL & CO., L.P. Bruckmann, Rosser, Sherrill & Co., L.P., the majority shareholder of Parent, is a limited partnership, the sole general partner of which is BRS Partners, L.P. and the general manager of which is BRS. The sole general partner of BRS Partners, L.P. is BRSE Associates, Inc. Bruce C. Bruckmann, Harold O. Rosser, II, Stephen C. Sherrill and Stephen F. Edwards are the only stockholders of BRS and BRSE Associates, Inc. Set forth above is the current business address, citizenship, present principal occupation or employment and employment history (covering a period of not less than five years) for Bruce C. Bruckmann, Harold O. Rosser, II and Stephen C. Sherrill. Stephen F. Edwards is a principal in BRS, was an officer of CVC from 1993 to 1995 and is a citizen of the United States of America. Each of the foregoing person's business address is 126 East 56th Street, 29th Floor, New York, NY 10022. I-2 Facsimile copies of the Letter of Transmittal, properly completed and duly executed, will be accepted. The Letter of Transmittal and certificates for Shares and any other required documents should be sent or delivered by each shareholder of the Company or such shareholder's broker, dealer, commercial bank, trust company or other nominee to the Depositary at one of the addresses set forth below: THE DEPOSITARY FOR THE OFFER IS: IBJ SCHRODER BANK & TRUST COMPANY BY MAIL: FACSIMILE TRANSMISSION: BY HAND OR OVERNIGHT COURIER: P.O. Box 84 (for Eligible Institutions 1 State Street Bowling Green Station Only) New York, New York 10004 New York, New York 10274-0084 (212) 858-2611 Attention: Reorganization Attention: Reorganization Confirmation Telephone: Department Department (212) 858-2103 Securities Processing Window SC-1
Questions or requests for assistance may be directed to the Information Agent or the Dealer Manager at their respective addresses or telephone numbers and locations set forth below. Additional copies of this Offer to Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery may be obtained from the Information Agent. Shareholders may also contact their broker, dealer, commercial bank, trust company or other nominee for assistance concerning the Offer. THE INFORMATION AGENT FOR THE OFFER IS: [LOGO] 156 FIFTH AVENUE NEW YORK, NY 10010 (212) 929-5500 (CALL COLLECT) OR CALL TOLL-FREE: (800) 322-2885 THE DEALER MANAGER FOR THE OFFER IS: DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION 277 PARK AVENUE NEW YORK, NY 10172 (212) 892-7099 (CALL COLLECT) EX-99.(A)(2) 3 EXHIBIT 99.(A)(2) LETTER OF TRANSMITTAL TO TENDER OF SHARES OF COMMON STOCK OF DELCHAMPS, INC. PURSUANT TO THE OFFER TO PURCHASE DATED JULY 14, 1997 BY DELTA ACQUISITION CORPORATION A WHOLLY OWNED SUBSIDIARY OF JITNEY-JUNGLE STORES OF AMERICA, INC. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, AUGUST 8, 1997, UNLESS THE OFFER IS EXTENDED. UNDER CERTAIN CIRCUMSTANCES, THE OFFER WILL BE EXTENDED UNTIL SEPTEMBER 12, 1997 IF NECESSARY TO MEET CERTAIN CONDITIONS, INCLUDING THE HSR CONDITION AND THE NOTEHOLDER CONSENT CONDITION REFERRED TO IN THE OFFER TO PURCHASE (AS DEFINED BELOW). IN ADDITION, NOTWITHSTANDING THE SATISFACTION OR WAIVER OF ANY CONDITIONS OF THE OFFER, THE OFFER MAY BE EXTENDED UNTIL SEPTEMBER 12, 1997 TO ENABLE PARENT AND THE OFFEROR TO OBTAIN PERMANENT FINANCING FOR THE TRANSACTION. THE OFFER MAY BE EXTENDED IN OTHER CIRCUMSTANCES AS DESCRIBED IN THE OFFER TO PURCHASE. THE DEPOSITARY FOR THE OFFER IS: IBJ SCHRODER BANK & TRUST COMPANY BY MAIL: FACSIMILE TRANSMISSION: BY HAND OR OVERNIGHT COURIER: P.O. Box 84 (for Eligible Institutions 1 State Street Bowling Green Station Only) New York, New York 10004 New York, New York (212) 858-2611 Attention: Reorganization 10274-0084 Department Attention: Reorganization FOR CONFIRMATION TELEPHONE: Securities Processing Window Department (212) 858-2103 SC-1
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS, OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE OTHER THAN AS SET FORTH ABOVE, DOES NOT CONSTITUTE A VALID DELIVERY TO THE DEPOSITARY. YOU MUST SIGN THIS LETTER OF TRANSMITTAL IN THE APPROPRIATE SPACE THEREFOR PROVIDED BELOW AND COMPLETE THE SUBSTITUTE FORM W-9 SET FORTH BELOW. THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED. This Letter of Transmittal is to be completed by shareholders of Delchamps, Inc. (the "Company") if certificates evidencing Shares are to be forwarded herewith or, unless an Agent's Message (as defined in the Offer to Purchase) is utilized, if delivery of Shares (as defined below) is to be made by book-entry transfer to the Depository's account at The Depository Trust Company or the Philadelphia Depository Trust Company (hereinafter collectively referred to as the "Book-Entry Transfer Facilities") pursuant to the procedures set forth in Section 3 of the Offer to Purchase (as defined below). DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY. Shareholders whose certificates for Shares are not immediately available or who cannot deliver their Shares and all other documents required hereby to the Depositary by the Expiration Date (as defined in the Offer to Purchase), or who cannot comply with the book-entry transfer procedures on a timely basis, may nevertheless tender their Shares pursuant to the guaranteed delivery procedures set forth in Section 3 of the Offer to Purchase. See Instruction 2. DESCRIPTION OF SHARES TENDERED
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) SHARES TENDERED (PLEASE FILL IN, IF BLANK) (ATTACH ADDITIONAL LIST, IF NECESSARY) SHARE NUMBER OF SHARES NUMBER OF CERTIFICATE REPRESENTED BY SHARES NUMBER(S)* CERTIFICATE(S)* TENDERED** Total Shares......................... * Need not be completed by shareholders tendering by book-entry transfer. ** Unless otherwise indicated, it will be assumed that all Shares represented by any certificate delivered to the Depositary are being tendered. See Instruction 4.
NOTE: SIGNATURES MUST BE PROVIDED BELOW PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY / / CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO THE DEPOSITARY'S ACCOUNT AT ONE OF THE BOOK-ENTRY TRANSFER FACILITIES AND COMPLETE THE FOLLOWING: Name of Tendering Institution Account No. at / / The Depository Trust Company / / Philadelphia Depository Company Transaction Code Number / / CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING: Name(s) of Registered Holder(s) Date of Execution of Notice of Guaranteed Delivery Window Ticket Number (if any) Name of Institution which Guaranteed Delivery If delivery is by book-entry transfer: Name of Tendering Institution Account No. at / / The Depository Trust Company / / Philadelphia Depository Company Transaction Code Number
Ladies and Gentlemen: The undersigned hereby tenders to Delta Acquisition Corporation (the "Offeror"), an Alabama corporation and a wholly owned subsidiary of Jitney-Jungle Stores of America, Inc., a Mississippi corporation ("Parent"), the above-described shares of common stock, $.01 par value per share of Delchamps, Inc., an Alabama corporation (the "Company"), including the associated preferred share purchase rights issued pursuant to the Rights Agreement dated as of October 14, 1988, as amended, between the Company and First Alabama Bank, as Rights Agent (collectively, the "Shares"), pursuant to the Offeror's offer to purchase all of the outstanding Shares at a purchase price of $30.00 per Share, net to the seller in cash, without interest thereon, upon the terms and subject to the conditions set forth in the Offer to Purchase, dated July 14, 1997 (the "Offer to Purchase"), receipt of which is hereby acknowledged, and in this Letter of Transmittal (which, together with the Offer to Purchase, and any amendments or supplements hereto or thereto, collectively constitute the "Offer"). The Offer is being made in connection with the Agreement and Plan of Merger, dated as of July 8, 1997 (the "Merger Agreement"), among Parent, the Offeror and the Company. Subject to and effective upon acceptance for payment of, and payment for, the Shares tendered herewith, the undersigned hereby sells, assigns and transfers to or upon the order of the Offeror all right, title and interest in and to all the Shares that are being tendered hereby (and any and all other Shares or other securities or property (but excluding any regular quarterly dividend on the Shares of not more than $0.11 per Share based on the declaration, record and payment dates normally applicable to the Shares) issued or issuable in respect thereof (any such Shares, other securities or property collectively, "Distributions")) and appoints the Depositary the true and lawful agent and attorney-in-fact of the undersigned with respect to such Shares (and all Distributions), with full power of substitution (such power of attorney being deemed to be an irrevocable power coupled with an interest), to (a) deliver certificates for such Shares (and all Distributions), or transfer ownership of such Shares (and all Distributions) on the account books maintained by any of the Book-Entry Transfer Facilities, together, in any such case, with all accompanying evidences of transfer and authenticity, to or upon the order of the Offeror, (b) present such Shares (and all Distributions) for transfer on the books of the Company and (c) receive all benefits and otherwise exercise all rights of beneficial ownership of such Shares (and all Distributions), all in accordance with the terms of the Offer. The undersigned hereby irrevocably appoints each designee of the Offeror as the attorney-in-fact and proxy of the undersigned, each with full power of substitution, to exercise all voting and other rights of the undersigned in such manner as each such attorney and proxy or his substitute shall in his sole judgment deem proper, with respect to all of the Shares tendered hereby which have been accepted for payment by the Offeror prior to the time of any vote or other action (and any Distributions) at any meeting of Shareholders of the Company (whether annual or special and whether or not an adjourned meeting), any actions by written consent in lieu of any such meeting or otherwise. This proxy is irrevocable and is granted in consideration of, and is effective upon, the acceptance for payment of such Shares by the Offeror in accordance with the terms of the Offer. Such acceptance for payment shall revoke any other proxy or written consent granted by the undersigned at any time with respect to such Shares (and all Distributions), and no subsequent proxies will be given or written consents will be executed by the undersigned (and if given or executed, will not be deemed effective). The undersigned hereby represents and warrants that the undersigned has full power and authority to tender, sell, assign and transfer the Shares tendered hereby (and all Distributions) and that when the same are accepted for payment by the Offeror, the Offeror will acquire good and unencumbered title thereto, free and clear of all liens, restrictions, charges and encumbrances and not subject to any adverse claims. The undersigned, upon request, will execute and deliver any additional documents deemed by the Depositary or the Offeror to be necessary or desirable to complete the sale, assignment and transfer of the Shares tendered hereby (and all Distributions). All authority herein conferred or agreed to be conferred shall survive the death or incapacity of the undersigned, and any obligation of the undersigned hereunder shall be binding upon the heirs, personal representatives, successors and assigns of the undersigned. Except as stated in the Offer, this tender is irrevocable. The undersigned understands that tenders of Shares pursuant to any one of the procedures described in Section 3 of the Offer to Purchase and in the instructions hereto will constitute an agreement between the undersigned and the Offeror upon the terms and subject to the conditions of the Offer. The Offeror's acceptance of such Shares for payment will constitute a binding agreement between the undersigned and the Offeror upon the terms and subject to the conditions of the Offer, including, without limitation, the undersigned's representation and warranty that the undersigned owns the Shares being tendered. Unless otherwise indicated under "Special Payment Instructions," please issue the check for the purchase price of any Shares purchased, and return any certificates evidencing Shares not tendered or not purchased, in the name(s) of the undersigned. Similarly, unless otherwise indicated under "Special Delivery Instructions," please mail the check for the purchase price of any Shares purchased and return any certificates for Shares not tendered or not purchased (and accompanying documents, as appropriate) to the undersigned at the address shown below the undersigned's signature(s). In the event that both "Special Payment Instructions" and "Special Delivery Instructions" are completed, please issue the check for the purchase price of any Shares purchased and return any Shares not tendered or not purchased in the name(s) of, and mail said check and any certificates to, the person(s) so indicated. The undersigned recognizes that the Offeror has no obligation, pursuant to the "Special Payment Instructions," to transfer any Shares from the name of the registered holder(s) thereof if the Offeror does not accept for payment any of the Shares so tendered. SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 1, 5, 6 AND 7) (SEE INSTRUCTIONS 5 AND 7) To be completed ONLY if the check for the purchase price To be completed ONLY if the check for the purchase price of Shares purchased or certificates for Shares not of Shares purchased or certificates for Shares not tendered or not purchased are to be issued in the name of tendered or not purchased are to be mailed to someone someone other than the undersigned, or if Shares tendered other than the undersigned, or the undersigned at an hereby and delivered by book-entry transfer which are not address other than that shown below the undersigned's accepted for payment are to be returned by credit to an signature(s). account at one of the Book-Entry Transfer Facilities other than that designated above. Issue / / check / / Certificate to: Mail check and/or Certificates to: Name Name PLEASE PRINT PLEASE PRINT Address Address (ZIP CODE) (ZIP CODE) TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER (SEE (TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER) (SEE SUBSTITUTE FORM W-9) SUBSTITUTE FORM W-9) / / CREDIT SHARES DELIVERED BY BOOK-ENTRY TRANSFER AND NOT PURCHASED TO THE ACCOUNT SET FORTH BELOW: CHECK APPROPRIATE BOX: / / THE DEPOSITORY TRUST COMPANY / / PHILADELPHIA DEPOSITORY TRUST COMPANY ACCOUNT NUMBER
INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER 1. GUARANTEE OF SIGNATURES. Except as otherwise provided below, signatures on all Letters of Transmittal must be guaranteed by a firm that is a bank, broker, dealer, credit union, savings association or other entity which is a member in good standing of the Securities Transfer Agents Medallion Program, the New York Stock Exchange Medallion Signature Guarantee Program, the Stock Exchange Medallion Program, or by any other bank, broker, dealer, credit union, savings association or other entity which is an "eligible guarantor institution," as such term is defined in Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended (each of the foregoing constituting an "Eligible Institution"), unless the Shares tendered thereby are tendered (i) by a registered holder of Shares who has not completed either the box labeled "Special Payment Instructions" or the box labeled "Special Delivery Instructions" on the Letter of Transmittal or (ii) for the account of an Eligible Institution. See Instruction 5. If the certificates are registered in the name of a person or persons other than the signer of this Letter of Transmittal, or if payment is to be made or delivered to, or certificates evidencing unpurchased Shares are to be issued or returned to, a person other than the registered owner or owners, then the tendered certificates must be endorsed or accompanied by duly executed stock powers, in either case signed exactly as the name or names of the registered owner or owners appear on the certificates or stock powers, with the signatures on the certificates or stock powers guaranteed by an Eligible Institution as provided herein. See Instruction 5. 2. DELIVERY OF LETTER OF TRANSMITTAL AND SHARES. This Letter of Transmittal is to be used either if certificates are to be forwarded herein or, unless an Agent's Message (as defined in the Offer to Purchase) is utilized, if the delivery of Shares is to be made by book-entry transfer pursuant to the procedures set forth in Section 3 of the Offer to Purchase. Certificates for all physically delivered Shares, or a confirmation of a book-entry transfer into the Depositary's account at one of the Book-Entry Transfer Facilities of all Shares delivered electronically, as well as a properly completed and duly executed Letter of Transmittal (or a manually signed facsimile thereof) and any other documents required by this Letter of Transmittal, or an Agent's Message in the case of a book-entry delivery, must be received by the Depositary at one of its addresses set forth on the front page of this Letter of Transmittal by the Expiration Date. If certificates are forwarded to the Depositary in multiple deliveries, a properly completed and duly executed Letter of Transmittal must accompany each such delivery. Shareholders who cannot deliver their Shares and all other required documents to the Depositary by the Expiration Date must tender their Shares pursuant to the guaranteed delivery procedures set forth in Section 3 of the Offer to Purchase. Pursuant to such procedures: (a) such tender must be made by or through an Eligible Institution; (b) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form provided by the Offeror, must be received by the Depositary prior to the Expiration Date; and (c) the certificates for all tendered Shares, in proper form for tender, or a confirmation of a book-entry transfer into the Depositary's account at one of the Book-Entry Transfer Facilities of all Shares delivered electronically, as well as a properly completed and duly executed Letter of Transmittal (or a manually signed facsimile thereof), and any other documents required by this Letter of Transmittal must be received by the Depositary within three trading days after the date of such Notice of Guaranteed Delivery, all as provided in Section 3 of the Offer to Purchase. The term "trading day" is any day on which the NASDAQ National Market operated by the National Association of Securities Dealers, Inc. is open for business. THE METHOD OF DELIVERY OF CERTIFICATES EVIDENCING SHARES, THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH A BOOK-ENTRY TRANSFER FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING SHAREHOLDER. SHARES WILL BE DEEMED DELIVERED ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY (INCLUDING, IN THE CASE OF A BOOK-ENTRY TRANSFER, BY A CONFIRMATION OF A BOOK-ENTRY TRANSFER). IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY. No alternative, conditional or contingent tenders will be accepted, and no fractional Shares will be purchased. By executing this Letter of Transmittal (or a manually signed facsimile thereof), the tendering Shareholder waives any right to receive any notice of the acceptance for payment of the Shares. 3. INADEQUATE SPACE. If the space provided herein is inadequate, the certificate numbers and/or the number of Shares should be listed on a separate schedule attached hereto. 4. PARTIAL TENDERS (NOT APPLICABLE TO SHAREHOLDERS WHO TENDER BY BOOK-ENTRY TRANSFER). If fewer than all the Shares represented by any certificate delivered to the Depositary are to be tendered, fill in the number of Shares which are to be tendered in the box entitled "Number of Shares Tendered." In such case, a new certificate of the remainder of the Shares represented by the old certificate will be sent to the person(s) signing this Letter of Transmittal unless otherwise provided in the appropriate box on this Letter of Transmittal, as promptly as practicable following the expiration or termination of the Offer. All Shares evidenced by certificates delivered to the Depositary will be deemed to have been tendered unless otherwise indicated. 5. SIGNATURES ON LETTER OF TRANSMITTAL; STOCK POWERS AND ENDORSEMENTS. If this Letter of Transmittal is signed by the registered holder(s) of the Shares tendered hereby, the signature(s) must correspond with the name(s) as written on the face of the certificate without alteration, enlargement or any change whatsoever. If any of the Shares tendered hereby are held by record by two or more persons, all such persons must sign this Letter of Transmittal. If any of the Shares tendered hereby are registered in different names on different certificates, it will be necessary to complete, sign and submit as many separate Letters of Transmittal as there are different registrations of certificates. If this Letter of Transmittal is signed by the registered holder(s) of the Shares tendered hereby, no endorsements of certificates or separate stock powers are required unless payment of the purchase price is to be made, or certificates evidencing Shares not tendered or not purchased are to be returned, in the name of any person other than the registered holder(s), in which case the certificate(s) for such Shares tendered hereby must be endorsed, or accompanied by, appropriate stock powers, in either case signed exactly as the name(s) of the registered holder(s) appear(s) on the certificate for such Shares. Signatures on any such certificates or stock powers must be guaranteed by an Eligible Institution. If this Letter of Transmittal or any certificate evidencing Shares or stock power is signed by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, such person should so indicate when signing, and proper evidence satisfactory to the Offeror of the authority of such person so to act must be submitted. 6. STOCK TRANSFER TAXES. Except as otherwise provided in this Instruction 6, the Offeror will pay any stock transfer taxes with respect to the sale and transfer of any Shares to it or its order pursuant to the Offer. If, however, payment of the purchase price is to be made to, or Shares not tendered or not purchased are to be returned in the name of, any person other than the registered holder(s), then the amount of any stock transfer taxes (whether imposed on the registered holder(s), such other person or otherwise) payable on account of the transfer to such person will be deducted from the purchase price unless satisfactory evidence of the payment of such taxes, or exemption therefrom, is submitted. Except as provided in this Instruction 6, it will not be necessary for transfer tax stamps to be affixed to the certificates listed in this Letter of Transmittal. 7. SPECIAL PAYMENT AND DELIVERY INSTRUCTION. If the check for the purchase price of any Shares purchased is to be issued, or any Shares not tendered or not purchased are to be returned, in the name of a person other than the person(s) signing this Letter of Transmittal or if the check or any certificates for Shares not tendered or not purchased are to be mailed to someone other than the person(s) signing this Letter of Transmittal or to the person(s) signing this Letter of Transmittal at an address other than that shown above, the appropriate boxes on this Letter of Transmittal should be completed. Shareholders tendering Shares by book-entry transfer may request that Shares not purchased be credited to such account at any of the Book-Entry Transfer Facilities as such Shareholder may designate under "Special Payment Instructions." If no such instructions are given, any such Shares not purchased will be returned by crediting the account at the Book-Entry Transfer Facilities designated above. 8. SUBSTITUTE FORM W-9. The tendering Shareholder is required to provide the Depositary with such Shareholder's correct TIN on Substitute Form W-9, which is provided below, unless an exemption applies. Failure to provide the information on the Substitute Form W-9 will subject the tendering Shareholder to a $50 penalty and to 31% federal income tax backup withholding on the payment of the purchase price for the Shares. 9. FOREIGN HOLDERS. Foreign holders must submit a completed IRS Form W-8 to avoid 31% backup withholding. IRS Form W-8 may be obtained by contacting the Depositary at one of the addresses on the face of this Letter of Transmittal. 10. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests for assistance may be directed to the Dealer Manager or the Information Agent at their respective addresses or telephone numbers set forth below. Additional copies of the Offer to Purchase, this Letter of Transmittal and the Notice of Guaranteed Delivery may be obtained from the Information Agent or from brokers, dealers, commercial banks or trust companies. 11. WAIVER OF CONDITIONS. The conditions of the Offer may be waived by the Offeror (subject to certain limitations in the Merger Agreement), in whole or in part, at any time or from time to time, in the Offeror's sole discretion. 12. LOST, DESTROYED OR STOLEN CERTIFICATES. If any certificate representing Shares has been lost, destroyed or stolen, the Shareholder should promptly notify the Depositary. The Shareholder will then be instructed as to the steps that must be taken in order to replace the certificate. This Letter of Transmittal and related documents cannot be processed until the procedures for replacing lost, destroyed or stolen certificates have been followed. IMPORTANT: THIS LETTER OF TRANSMITTAL OR A MANUALLY SIGNED FACSIMILE COPY HEREOF (TOGETHER WITH CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL OTHER REQUIRED DOCUMENTS) OR A NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE DEPOSITARY ON OR PRIOR TO THE EXPIRATION DATE (AS DEFINED IN THE OFFER TO PURCHASE). IMPORTANT TAX INFORMATION Under federal income tax law, a shareholder whose tendered Shares are accepted for payment is required to provide the Depositary with such shareholder's correct TIN on the Substitute Form W-9. If such Shareholder is an individual, the TIN is such shareholders' Social Security Number. If the Depositary is not provided with the correct TIN, the shareholder may be subject to a $50 penalty imposed by the Internal Revenue Service. In addition, payments that are made to such shareholder with respect to Shares purchased pursuant to the Offer may be subject to backup withholding. Certain shareholders (including, among others, all corporations and certain foreign individuals) are not subject to these backup withholding and reporting requirements. In order for a foreign individual to qualify as an exempt recipient, that shareholder must submit a statement, signed under penalties of perjury, attesting to that individual's exempt status. Such statements may be obtained from the Depositary. All exempt recipients (including foregoing persons wishing to qualify as exempt recipients) should see the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 for additional instructions. If backup withholding applies, the Depositary is required to withhold 31% of any payments made to the shareholder. Backup withholding is not an additional tax. Rather, the tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If backup withholding results in an overpayment of taxes, a refund may be obtained. PURPOSE OF SUBSTITUTE FORM W-9 To prevent backup federal income tax withholding on payments that are made to a shareholder with respect to Shares purchased pursuant to the Offer, the shareholder is required to notify the Depositary of such shareholder's correct TIN by completing the form certifying that the TIN provided on the Substitute Form W-9 is correct. WHAT NUMBER TO GIVE THE DEPOSITARY The shareholder is required to give the Depositary the Social Security Number or Employer Identification Number of the record owner of the Shares. If the Shares are in more than one name or are not in the name of the actual owner, consult the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 for additional guidelines on which number to report. SIGN HERE (Complete Substitute Form W-9 below) ________________________________________________________________________________ ________________________________________________________________________________ (Signature(s) of Owner(s)) ________________________________________________________________________________ Name(s) ________________________________________________________________________ ________________________________________________________________________________ Capacity (full title) __________________________________________________________ Address ________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ (Include Zip Code) ________________________________________________________________________________ Area Code and Telephone Number _________________________________________________ Taxpayer Identification or Social Security Number ______________________________ (See Substitute Form W-9) Dated: ___________________________________________________________________, 1997 (Must be signed by registered holder(s) exactly as name(s) appear(s) on stock certificate(s) or on a security position listing or by the person(s) authorized to become registered holder(s) by certificates and documents transmitted herewith. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, agent, officer of a corporation or other person acting in a fiduciary or representative capacity, please set forth full title and see Instruction 5). GUARANTEE OF SIGNATURE(S) (See Instructions 1 and 5) FOR USE BY FINANCIAL INSTITUTIONS ONLY. PLACE MEDALLION GUARANTEE IN SPACE BELOW. Authorized signature(s) ________________________________________________________ Name ___________________________________________________________________________ Name of Firm ___________________________________________________________________ Address ________________________________________________________________________ ________________________________________________________________________________ (Include Zip Code) Area Code and Telephone Number _________________________________________________ Dated: ___________________________________________________________________, 1997 PAYOR'S NAME: IBJ SCHRODER BANK & TRUST COMPANY SUBSTITUTE Part I -- PLEASE PROVIDE YOUR TIN TIN: FORM W-9 IN THE BOX AT THE RIGHT AND CERTIFY Social Security BY SIGNING AND DATING BELOW. Number or Employer Identification Number DEPARTMENT OF THE TREASURY, Part II -- For Payees exempt from backup withholding, see INTERNAL REVENUE SERVICE the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 and complete as instructed therein. PAYOR'S REQUEST FOR TAXPAYER Certification -- Under penalties of perjury, I certify that IDENTIFICATION NUMBER ("TIN") the number shown on this form is my correct TIN (or I am AND CERTIFICATION waiting for a number to be issued to me). SIGNATURE: Date:
CERTIFICATION INSTRUCTIONS -- See the enclosed "Guidelines for Certification of Taxpayer Identification Number on Substitution Form W-9" for the appropriate TIN and signature for the certification. Persons awaiting a taxpayer identification number should complete the additional certification described below. Foreign persons claiming exemption from these requirements should consult the Depositary regarding proper establishment of the exemption. NOTE: FAILURE TO COMPLETE AND RETURN THIS SUBSTITUTE FORM W-9 MAY RESULT IN BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU ARE AWAITING YOUR TIN. CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER I certify under penalties of perjury that a TIN has not been issued to me, and either (1) I have mailed or delivered an application to receive a TIN to the appropriate IRS Center or Social Security Administration Officer or (2) I intend to mail or deliver an application in the near future. I understand that if I do not provide a TIN by the time of payment, 31% of all payments pursuant to the Offer made to me thereafter will be withheld until I provide a number. SIGNATURE:_____________________________________________ Date:_____________ THE INFORMATION AGENT FOR THE OFFER IS: [LOGO] 156 FIFTH AVENUE NEW YORK, NY 10010 (212) 929-5500 (CALL COLLECT) OR CALL TOLL-FREE: (800) 322-2885 THE DEALER MANAGER FOR THE OFFER IS: DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION 277 PARK AVENUE NEW YORK, NY 10172 (212) 892-7099 (CALL COLLECT) EX-99.(A)(3) 4 EXHIBIT 99.(A)(3) OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK (INCLUDING THE ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS) OF DELCHAMPS, INC. AT $30.00 NET PER SHARE BY DELTA ACQUISITION CORPORATION A WHOLLY OWNED SUBSIDIARY OF JITNEY-JUNGLE STORES OF AMERICA, INC. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, AUGUST 8, 1997, UNLESS THE OFFER IS EXTENDED. UNDER CERTAIN CIRCUMSTANCES, THE OFFER WILL BE EXTENDED UNTIL SEPTEMBER 12, 1997 IF NECESSARY TO MEET CERTAIN CONDITIONS, INCLUDING THE HSR CONDITION AND THE NOTEHOLDER CONSENT CONDITION REFERRED TO IN THE OFFER TO PURCHASE. IN ADDITION, NOTWITHSTANDING THE SATISFACTION OR WAIVER OF ANY CONDITIONS OF THE OFFER, THE OFFER MAY BE EXTENDED UNTIL SEPTEMBER 12, 1997 TO ENABLE PARENT AND THE OFFEROR TO OBTAIN PERMANENT FINANCING FOR THE TRANSACTION. THE OFFER MAY BE EXTENDED IN THE OTHER CIRCUMSTANCES AS DESCRIBED IN THE OFFER TO PURCHASE. July 14, 1997 To Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees: We have been appointed by Delta Acquisition Corporation, an Alabama corporation (the "Offeror") and a wholly-owned subsidiary of Jitney-Jungle Stores of America, Inc., a Mississippi corporation ("Parent"), to act as Dealer Manager in connection with the Offeror's offer to purchase all outstanding shares of Common Stock, $.01 par value per share, of Delchamps, Inc., an Alabama corporation (the "Company"), including the associated preferred share purchase rights issued pursuant to the Rights Agreement dated as of October 14, 1988, as amended, between the Company and First Alabama Bank, as Rights Agent (collectively, the "Shares"), at a purchase price of $30.00 per Share, net to the seller in cash, without interest, upon the terms and subject to the conditions set forth in the Offer to Purchase, dated July 14, 1997 (the "Offer to Purchase"), and in the related Letter of Transmittal (which, together with any amendments or supplements thereto, collectively constitute the "Offer") enclosed herewith. The Offer is being made in connection with the Agreement and Plan of Merger, dated as of July 8, 1997, among Parent, the Offeror and the Company (the "Merger Agreement"). Any shareholder who desires to tender Shares and whose certificates representing such Shares (the "Certificates") are not immediately available or who cannot comply with the procedures for book-entry transfer on a timely basis or who cannot deliver all required documents to IBJ Schroder Bank & Trust Company (the "Depositary"), in each case prior to the Expiration Date (as defined in Section 1 of the Offer to Purchase), may tender their Shares pursuant to the guaranteed delivery procedures set forth in Section 3 of the Offer to Purchase. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER A NUMBER OF SHARES SUCH THAT THE OFFEROR AND ITS AFFILIATES WILL BENEFICIALLY OWN IN THE AGGREGATE NOT LESS THAN TWO-THIRDS OF THE SHARES OUTSTANDING ON A FULLY DILUTED BASIS, (II) ANY APPLICABLE WAITING PERIOD UNDER THE HSR ACT (AS DEFINED IN THE OFFER TO PURCHASE) OR PERIOD DURING WHICH PARENT SHALL HAVE CONSENTED OR OTHERWISE BE BARRED FROM PURCHASING SHARES PURSUANT TO THE OFFER AS PART OF ANY AGREEMENT OR OTHER ARRANGEMENT WITH ANY GOVERNMENTAL OR REGULATORY AUTHORITY INVOLVING THE HSR ACT OR ANY OTHER APPLICABLE ANTITRUST LAWS HAVING EXPIRED OR HAVING BEEN TERMINATED PRIOR TO THE EXPIRATION OF THE OFFER, (III) PARENT HAVING OBTAINED PRIOR TO THE EXPIRATION OF THE OFFER AN AMENDMENT OR SUPPLEMENT TO THE INDENTURE GOVERNING ITS 12% SENIOR NOTES DUE 2006 AS DESCRIBED IN THE OFFER TO PURCHASE AND (IV) THE SATISFACTION OF CERTAIN OTHER TERMS AND CONDITIONS AS DESCRIBED IN THE OFFER TO PURCHASE. Please furnish copies of the enclosed materials to those of your clients for whose accounts you hold Shares in your name or in the name of your nominee. For your information and for forwarding to your clients for whom you hold Shares registered in your name or in the name of your nominee, or who hold Shares registered in their own names, we are enclosing the following documents: 1. The Offer to Purchase, dated July 14, 1997. 2. The Letter of Transmittal to be used by holders of Shares in accepting the Offer and tendering Shares. Facsimile copies of the Letter of Transmittal (with manual signatures) may be used to tender Shares. 3. A letter to shareholders of the Company from David W. Morrow, the Chairman of the Board and Chief Executive Officer of the Company, together with a Solicitation/Recommendation Statement on Schedule 14D-9 filed with the Securities and Exchange Commission (the "Commission") by the Company and mailed to the shareholders of the Company. 4. The Notice of Guaranteed Delivery for Shares to be used to accept the Offer if neither of the two procedures for tendering Shares set forth in the Offer to Purchase can be completed on a timely basis. 5. A printed form of letter which may be sent to your clients for whose accounts you hold Shares registered in your name, with space provided for obtaining such clients' instructions with regard to the Offer. 6. Guidelines of the Internal Revenue Service for Certification of Taxpayer Identification Number on Substitute Form W-9. 7. A return envelope addressed to the Depositary. Upon the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of any such extension or amendment), the Offeror will accept for payment and will pay for all Shares validly tendered prior to the Expiration Date and not theretofore withdrawn in accordance with Section 4 of the Offer to Purchase. Payment for Shares accepted for payment pursuant to the Offer will in all cases be made only after timely receipt by the Depositary of (i) certificates for such Shares or a Book-Entry Confirmation (as defined in Section 2 of the Offer to Purchase), (ii) a properly completed and duly executed Letter of Transmittal (or a manually signed facsimile thereof) with all required signature guarantees or, in the case of a book-entry transfer, an Agent's Message (as defined in Section 2 of the Offer to Purchase) and (iii) any other documents required by the Letter of Transmittal. Neither the Offeror nor Parent, nor any officer, director, shareholder, agent or other representative of the Offeror or Parent will pay any fees or commissions to any broker, dealer or other person (other than the Information Agent and the Depositary as described in Section 17 of the Offer to Purchase) for 2 soliciting tenders of Shares pursuant to the Offer. The Offeror will, however, upon request, reimburse you for customary mailing and handling expenses incurred by you in forwarding the enclosed materials to your clients. Tendering holders of Shares will not be obligated to pay brokerage fees or commissions or, except as set forth in Instruction 6 of the Letter of Transmittal, stock transfer taxes on the purchase of Shares by the Offeror pursuant to the Offer. YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. PLEASE NOTE THAT THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, AUGUST 8, 1997, UNLESS THE OFFER IS EXTENDED. In order to take advantage of the Offer, (i) a properly completed and duly executed Letter of Transmittal (or a manually signed facsimile thereof), with any required signature guarantees, or, in the case of a book-entry transfer, an Agent's Message (as defined in the Offer to Purchase), and any other required documents must be received by the Depositary and (ii) Certificates representing the tendered Shares must be received by the Depositary or a Book-Entry Confirmation (as defined in the Offer to Purchase) must be received by the Depositary in accordance with the instructions set forth in the Offer. If holders of Shares wish to tender, but it is impracticable for them to forward their Certificates or other required documents or complete the procedures for book-entry transfer prior to the Expiration Date, a tender may be effected by following the guaranteed delivery procedures specified in Section 3 of the Offer to Purchase. Any inquiries you may have with respect to the Offer should be addressed to Donaldson, Lufkin & Jenrette Securities Corporation, the Dealer Manager, or MacKenzie Partners, Inc., the Information Agent, at their respective addresses and telephone numbers set forth on the back cover of the Offer to Purchase. Additional copies of the enclosed materials may be obtained from MacKenzie Partners, Inc., the Information Agent. Very truly yours, DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY OTHER PERSON AS AN AGENT OF PARENT, THE OFFEROR, THE COMPANY, THE DEPOSITARY, THE INFORMATION AGENT, THE DEALER MANAGER OR ANY AFFILIATE OF ANY OF THE FOREGOING, OR AUTHORIZE YOU OR ANY OTHER PERSON TO MAKE ANY STATEMENT OR USE ANY DOCUMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE ENCLOSED DOCUMENTS AND THE STATEMENTS CONTAINED THEREIN. 3 EX-99.(A)(4) 5 EXHIBIT 99.(A)(4) OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK (INCLUDING THE ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS) OF DELCHAMPS, INC. AT $30.00 NET PER SHARE BY DELTA ACQUISITION CORPORATION A WHOLLY OWNED SUBSIDIARY OF JITNEY-JUNGLE STORES OF AMERICA, INC. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, AUGUST 8, 1997, UNLESS THE OFFER IS EXTENDED. UNDER CERTAIN CIRCUMSTANCES, THE OFFER WILL BE EXTENDED UNTIL SEPTEMBER 12, 1997 IF NECESSARY TO MEET CERTAIN CONDITIONS, INCLUDING THE HSR CONDITION AND THE NOTEHOLDER CONSENT CONDITION REFERRED TO IN THE OFFER TO PURCHASE. IN ADDITION, NOTWITHSTANDING THE SATISFACTION OR WAIVER OF ANY CONDITIONS OF THE OFFER, THE OFFER MAY BE EXTENDED UNTIL SEPTEMBER 12, 1997 TO ENABLE PARENT AND THE OFFEROR TO OBTAIN PERMANENT FINANCING FOR THE TRANSACTION. THE OFFER MAY BE EXTENDED IN OTHER CIRCUMSTANCES AS DESCRIBED IN THE OFFER TO PURCHASE. July 14, 1997 To Our Clients: Enclosed for your consideration are the Offer to Purchase, dated July 14, 1997 (the "Offer to Purchase"), and the related Letter of Transmittal (which, together with any amendments or supplements thereto, collectively constitute the "Offer") relating to the offer by Delta Acquisition Corporation, an Alabama corporation (the "Offeror") and a wholly owned subsidiary of Jitney-Jungle Stores of America, Inc., a Mississippi corporation ("Parent"), to purchase all outstanding shares of Common Stock, $.01 par value per share, of Delchamps, Inc., an Alabama corporation (the "Company"), including the associated preferred share purchase rights issued pursuant to the Rights Agreement dated as of October 14, 1988, as amended (the "Rights Agreement"), between the Company and First Alabama Bank, as Rights Agent (collectively, the "Shares"), at a purchase price of $30.00 per Share, net to the seller in cash, without interest, upon the terms and subject to the conditions set forth in the Offer. The Offer is being made in connection with the Agreement and Plan of Merger, dated as of July 8, 1997, among Parent, the Offeror and the Company (the "Merger Agreement"). Any shareholder who desires to tender Shares and whose certificates representing such Shares (the "Certificates") are not immediately available or who cannot comply with the procedures for book-entry transfer on a timely basis or who cannot deliver all required documents to IBJ Schroder Bank & Trust Company (the "Depositary"), in each case prior to the Expiration Date (as defined in Section 1 of the Offer to Purchase), may tender their Shares pursuant to the guaranteed delivery procedures set forth in Section 3 of the Offer to Purchase. THIS MATERIAL IS BEING FORWARDED TO YOU AS THE BENEFICIAL OWNER OF SHARES CARRIED BY US IN YOUR ACCOUNT BUT NOT REGISTERED IN YOUR NAME. A TENDER OF SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF RECORD AND PURSUANT TO YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER SHARES HELD BY US FOR YOUR ACCOUNT. Accordingly, we request instructions as to whether you wish to tender any or all of the Shares held by us for your account, upon the terms and conditions set forth in the Offer. Please note the following: 1. The Offer Price is $30.00 per Share, net to the seller in cash without interest, upon the terms and subject to the conditions of the Offer. 2. The Offer is being made for all of the outstanding Shares. 3. The Board of Directors of the Company has unanimously approved the Offer, and the Merger Agreement, has determined that the consideration to be paid for the Shares in the Offer is fair to the shareholders of the Company and that the Offer is otherwise in the best interests of the Company and its shareholders and recommends that all shareholders accept the Offer and tender their Shares pursuant to the Offer. 4. The Offer and withdrawal rights will expire at 12:00 Midnight, New York City time, on Friday, August 8, 1997, unless the Offer is extended. 5. The Offer is conditioned upon, among other things, (i) there being validly tendered and not withdrawn prior to the expiration of the Offer a number of Shares such that the Offeror and its affiliates will beneficially own in the aggregate not less than two-thirds of the Shares outstanding on a fully diluted basis, (ii) any applicable waiting period under the HSR Act (as defined in the Offer to Purchase) or period during which Parent shall have consented or otherwise be barred from purchasing Shares pursuant to the Offer as part of any agreement or other arrangement with any governmental or regulatory authority involving the HSR Act or any other applicable antitrust laws having expired or having been terminated prior to the expiration of Offer, (iii) Parent having obtained prior to the expiration of the Offer an amendment or supplement to the Indenture governing its 12% Senior Notes due 2006 as described in the Offer to Purchase and (iv) the satisfaction of certain other terms and conditions as described in the Offer to Purchase. Tendering holders of Shares will not be obligated to pay brokerage fees or commissions or, except as set forth in Instruction 6 of the Letter of Transmittal, stock transfer taxes on the purchase of Shares by the Offeror pursuant to the Offer. The Offer is made only by the Offer to Purchase and the related Letter of Transmittal and is being made to all holders of Shares. The Offeror is not aware of any state where the making of the Offer is prohibited by administrative or judicial action pursuant to a state statute. If the Offeror becomes aware of any valid state statute prohibiting the making of the Offer, the Offeror will make a reasonable good faith effort to comply with such statute or seek to have such statute declared inapplicable to the Offer. If, after such reasonable good faith effort, the Offeror cannot comply with such statute, the Offer will not be made to (nor will tenders be accepted from or on behalf of) the holders of Shares in such State. In those jurisdictions where the securities, blue sky or other laws require the Offer to be made by a licensed broker or dealer, the Offer shall be deemed to be made on behalf of the Offeror by Donaldson, Lufkin & Jenrette Securities Corporation or one or more registered brokers or dealers licensed under the laws of such jurisdiction. If you wish to have us tender any or all of the shares, please so instruct us by completing, executing, detaching and returning to us the instruction form contained in this letter. An envelope in which to return your instruction to us is enclosed. If you authorize the tender of your Shares, all such Shares will be tendered unless otherwise indicated in such instruction form. PLEASE FORWARD YOUR INSTRUCTIONS TO US AS SOON AS POSSIBLE TO ALLOW US AMPLE TIME TO TENDER YOUR SHARES ON YOUR BEHALF PRIOR TO THE EXPIRATION OF THE OFFER. INSTRUCTIONS WITH RESPECT TO THE OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK (INCLUDING THE ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS) OF DELCHAMPS, INC. BY DELTA ACQUISITION CORPORATION A WHOLLY OWNED SUBSIDIARY OF JITNEY-JUNGLE STORES OF AMERICA, INC. The undersigned acknowledge(s) receipt of your letter, and the enclosed Offer to Purchase dated July 14, 1997 (the "Offer to Purchase"), and the related Letter of Transmittal (which, together with any amendments or supplements thereto, collectively constitute the "Offer"), in connection with the offer by Delta Acquisition Corporation, an Alabama corporation (the "Offeror") and a wholly owned subsidiary of Jitney-Jungle Stores of America, Inc., a Mississippi corporation, to purchase all outstanding shares of Common Stock, $.01 par value per share, of Delchamps, Inc., an Alabama corporation (the "Company"), including the associated preferred share purchase rights issued pursuant to the Rights Agreement dated as of October 14, 1988, as amended, between the Company and First Alabama Bank, as Rights Agent (collectively, the "Shares"), at a purchase price of $30.00 per Share, net to the seller in cash, without interest, upon the terms and subject to the conditions set forth in the Offer. This will instruct you to tender to the Offeror the number of Shares indicated below (or if no number is indicated below, all Shares) which are held by you for the account of the undersigned, upon the terms and subject to the conditions set forth in the Offer. Number of Shares to be Tendered:* ___________________ SIGN HERE Account Number: Signature(s) Date: , 1997 (Print Name(s)) (Print Address(es)) (Area Code and Telephone Number(s)) (Taxpayer Identification or Social Security Number(s))
- ------------------------ * Unless otherwise indicated, it will be assumed that all Shares held by us for your account are to be tendered. 3 EX-99.(A)(5) 6 EXHIBIT 99.(A)(5) NOTICE OF GUARANTEED DELIVERY FOR TENDER OF SHARES OF COMMON STOCK OF DELCHAMPS, INC. TO DELTA ACQUISITION CORPORATION A WHOLLY OWNED SUBSIDIARY OF JITNEY-JUNGLE STORES OF AMERICA, INC. (NOT TO BE USED FOR SIGNATURE GUARANTEES) THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, AUGUST 8, 1997, UNLESS THE OFFER IS EXTENDED. UNDER CERTAIN CIRCUMSTANCES, THE OFFER WILL BE EXTENDED UNTIL SEPTEMBER 12, 1997 IF NECESSARY TO MEET CERTAIN CONDITIONS, INCLUDING THE HSR CONDITION AND THE NOTEHOLDER CONSENT CONDITION REFERRED TO IN THE OFFER TO PURCHASE (AS DEFINED BELOW). IN ADDITION, NOTWITHSTANDING THE SATISFACTION OR WAIVER OF ANY CONDITIONS OF THE OFFER, THE OFFER MAY BE EXTENDED UNTIL SEPTEMBER 12, 1997 TO ENABLE PARENT AND THE OFFEROR TO OBTAIN PERMANENT FINANCING FOR THE TRANSACTION. THE OFFER MAY BE EXTENDED IN OTHER CIRCUMSTANCES AS DESCRIBED IN THE OFFER TO PURCHASE. This form, or one substantially equivalent hereto, must be used to accept the Offer (as defined below) if certificates for shares of common stock, par value $.01, per share, of Delchamps, Inc., an Alabama corporation (the "Company"), including the associated preferred share repurchase rights issued pursuant to the Rights Agreement dated as of October 14, 1988, as amended, between the Company and First Alabama Bank, as Rights Agent (collectively, the "Shares"), are not immediately available or if the procedure for book-entry transfer cannot be completed on a timely basis or time will not permit all required documents to reach the Depositary on or prior to the Expiration Date (as defined in the Offer to Purchase). Such form may be delivered by hand, facsimile transmission, or mail to the Depositary. See Section 3 of the Offer to Purchase. THE DEPOSITARY FOR THE OFFER IS: IBJ SCHRODER BANK & TRUST COMPANY
BY MAIL: FACSIMILE TRANSMISSION: BY HAND OR OVERNIGHT COURIER: P.O. Box 84 (for Eligible Institutions Only) 1 State Street Bowling Green Station (212) 858-2611 New York, New York 10004 New York, New York 10274-0084 Attention: Reorganization Department Attention: Reorganization Department FOR CONFIRMATION TELEPHONE: Securities Processing Window SC-1 (212) 858-2103
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS, OR TRANSMISSION OF INSTRUMENTS VIA A FACSIMILE, OTHER THAN AS SET FORTH ABOVE, DOES NOT CONSTITUTE A VALID DELIVERY TO THE DEPOSITARY. THIS NOTICE OF GUARANTEED DELIVERY IS NOT TO BE USED TO GUARANTEE SIGNATURES IF A SIGNATURE ON A LETTER OF TRANSMITTAL IS REQUIRED TO BE GUARANTEED BY AN "ELIGIBLE INSTITUTION" (AS DEFINED IN THE OFFER TO PURCHASE) UNDER THE INSTRUCTIONS THERETO, SUCH SIGNATURE GUARANTEES MUST APPEAR IN THE APPLICABLE SPACE PROVIDED IN THE SIGNATURE BOX ON THE LETTER OF TRANSMITTAL. The Eligible Institution that completes this form must communicate the guarantee to the Depositary and must deliver the Letter of Transmittal or an Agent's Message and certificates for Shares to the Depositary within the time period shown herein. Failure to do so could result in a financial loss to such Eligible Institution. THE GUARANTEE ON THE REVERSE SIDE MUST BE COMPLETED. Ladies and Gentlemen: The undersigned hereby tender to Delta Acquisition Corporation, an Alabama corporation and a wholly owned subsidiary of Jitney-Jungle Stores of America, Inc., a Mississippi corporation, upon the terms and subject to the conditions set forth in the Offer to Purchase, dated July 14, 1997 (the "Offer to Purchase"), and the related Letter of Transmittal, receipt of which are hereby acknowledged, Shares of the Company, pursuant to the guaranteed delivery procedure set forth in Section 3 of the Offer to Purchase.
Number of Shares Tendered: SIGN HERE Certificate No(s) (if available): Name(s) of Record Holder(s) (Please Print) If securities will be tendered by Address(es): book-entry transfer: (Zip Code) Name of Tendering Institution: Area Code and Telephone No(s): Account No.: at / / The Depository Trust Company / / Philadelphia Depository Trust Company Signature(s): Dated:, 1997
GUARANTEE (NOT TO BE USED FOR SIGNATURE GUARANTEE) The undersigned, a bank, broker, dealer, credit union, savings association or other entity which is a member in good standing of the Securities Transfer Agents Medallion Program, the New York Stock Exchange Medallion Signature Guarantee Program, the Stock Exchange Medallion Program, or a bank, broker, dealer, credit union, savings association or other entity which is an "eligible guarantor institution," as such term is defined in Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended, guarantees the delivery to the Depositary of the Shares tendered hereby, together with a properly completed and duly executed Letter of Transmittal (or manually signed facsimile(s) thereof) and any other required documents, or an Agent's Message (as defined in the Offer to Purchase) in the case of a book-entry delivery of Shares, all within three trading days (as defined in Section 3 of the Offer to Purchase) of the date hereof.
Name of Firm: Title: Name: (Authorized Signature) (Please Print or Type) Address: Area Code and Telephone No.: Dated: (Zip Code)
DO NOT SEND CERTIFICATES FOR SHARES WITH THIS FORM -- CERTIFICATES SHOULD BE SENT WITH LETTER OF TRANSMITTAL. EX-99.(A)(6) 7 EXHIBIT 99.(A)(6) GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE PAYER -- Social Security numbers have nine digits separated by two hyphens: I.E., 000-00-0000. Employer identification numbers have nine digits separated by only one hyphen: I.E., 00-0000000. The table below will help determine the number to give the Payer.
- ----------------------------------------------------- GIVE THE NAME AND SOCIAL SECURITY FOR THIS TYPE OF ACCOUNT: NUMBER OF -- - ----------------------------------------------------- 1. Individual The individual 2. Two or more The actual owner of individuals (joint the account or, if account) combined funds, the first individual on the account(1) 3. Custodian account of The minor(2) a minor (Uniform Gift to Minors Act) 4. a. The usual The grantor- revocable savings trustee(1) trust (grantor is also trustee) b. So-called trust account that is The actual owner(1) not a legal or valid trust under state law 5. Sole proprietorship The owner(3) - ----------------------------------------------------- GIVE THE NAME AND SOCIAL SECURITY FOR THIS TYPE OF ACCOUNT: NUMBER OF -- - ----------------------------------------------------- 6. Sole proprietorship The owner(3) 7. A valid trust, The legal entity (Do estate or pension not furnish the trust identifying number of the personal representative or trustee unless the legal entity itself is not designated in the account title.)(4) 8. Corporate The corporation 9. Association, club, The organization religious, charitable, educational, or other tax-exempt organization 10. Partnership The partnership 11. A broker or The broker or registered nominee nominee 12. Account with the The public entity Department of Agriculture in the name of a public entity (such as a State or local government, school district, or prison) that receives agricultural program payments
- --------------------------------------------- - --------------------------------------------- (1) List first and circle the name of the person whose number you furnish. If only one person on a joint account has a SSN, that person's number must be furnished. (2) Circle the minor's name and furnish the minor's social security number. (3) You must show your individual name, but you may also enter your business or "doing business as" name. You may use either your social security number or employment identification number (if you have one). (4) List first and circle the name of the legal trust, estate or pension trust. NOTE: If no name is circled when there is more than one name, the number will be considered to be that of the first name listed. GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 PAGE 2 OBTAINING A NUMBER If you don't have a taxpayer identification number or you don't know your number, obtain Form SS-5, Application for a Social Security Card, or Form SS-4, Application for Employer Identification Number (for businesses and all other entities), or Form W-7 for Individual Taxpayer Identification Number (for alien individuals required to file U.S. tax returns), at an office of the Social Security Administration or the Internal Revenue Service. PAYEES EXEMPT FROM BACKUP WITHHOLDING Payees specifically exempted from backup withholding on all payments include the following: - A financial institution. - An organization exempt from tax under section 501(a), or an individual retirement plan, or a custodial account under Section 403(b)(7). - The United States or any agency or instrumentality thereof. - A State, the District of Columbia, a possession of the United States, or any political subdivision or instrumentality thereof. - A foreign government, a political subdivision of a foreign government, or any agency or instrumentality thereof. - An international organization or any agency, or instrumentality thereof. Payees that may be exempted from backup withholding: - A corporation. - A registered dealer in securities or commodities registered in the U.S. or a possession of the U.S. - A real estate investment trust. - A common trust fund operated by a bank under section 584(a). - An entity registered at all times during the tax year under the Investment Company Act of 1940. - A foreign central bank of issue. Payments of dividends and patronage dividends not generally subject to backup withholding include the following: - Payments to nonresident aliens subject to withholding under section 1441. - Payments to partnerships not engaged in a trade or business in the U.S. and which have at least one nonresident alien partner. - Payments of patronage dividends where the amount received is not paid in money. - Payments made by certain foregoing organizations. Payments of interest not generally subject to backup withholding include the following: - Payments of interest on obligations issued by individuals. NOTE: You may be subject to backup withholding if this interest is $600 or more and is paid in the course of the payer's trade or business and you have not provided your correct taxpayer identification number to the payer. - Payments of tax-exempt interest (including exempt-interest dividends under section 852). - Payments described in section 6049(b)(5) to non-resident aliens. - Payments on tax-free covenant bonds under section 1451. - Payments made by certain foreign organizations. - Mortgage interest paid to you. Exempt payees described above should file a Substitute Form W-9 to avoid possible erroneous backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS OR PATRONAGE DIVIDENDS, ALSO SIGN AND DATE THE FORM. Certain payments other than interest, dividends and patronage dividends that are not subject to information reporting are also not subject to backup withholding. For details, see sections 6041, 6041A(a), 6042, 6044, 6045, 6049, 6050A, and 6050N, and their regulations. PRIVACY ACT NOTICE.--Section 6109 requires most recipients of dividend, interest or other payments to give taxpayer identification numbers to payers who must report the payments to the IRS. The IRS uses the numbers for identification purposes and to help verify the accuracy of your tax return. Payers must be given the numbers whether or not recipients are required to file tax returns. Payers must generally withhold 31% of taxable interest, dividend and certain other payments to a payee who does not furnish a taxpayer identification number to a payer. Certain penalties must also apply. PENALTIES. (1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER. -- If you fail to furnish your correct taxpayer identification number to a payer, you are subject to a penalty of $50 for each such failure unless your failure is due to reasonable cause and not to willful neglect. (2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. -- If you make a false statement with no reasonable basis which results in no imposition of backup withholding, you are subject to a penalty of $500. (3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. -- Falsifying certifications or affirmations may subject you to criminal penalties including fines and/or imprisonment. FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE SERVICE. EX-99.(A)(7) 8 EXHIBIT 99.(A)(7) EXHIBIT 99.(A)(7) THIS ANNOUNCEMENT IS NEITHER AN OFFER TO PURCHASE NOR A SOLICITATION OF AN OFFER TO SELL SHARES. THE OFFER IS MADE ONLY BY THE OFFER TO PURCHASE DATED JULY 14, 1997, AND THE RELATED LETTER OF TRANSMITTAL AND IS BEING MADE TO ALL HOLDERS OF SHARES. THE OFFEROR IS NOT AWARE OF ANY STATE WHERE THE MAKING OF THE OFFER IS PROHIBITED BY ADMINISTRATIVE OR JUDICIAL ACTION PURSUANT TO A STATE STATUTE. IF THE OFFEROR BECOMES AWARE OF ANY VALID STATE STATUTE PROHIBITING THE MAKING OF THE OFFER, THE OFFEROR WILL MAKE A REASONABLE GOOD FAITH EFFORT TO COMPLY WITH SUCH STATUTE OR SEEK TO HAVE SUCH STATUTE DECLARED INAPPLICABLE TO THE OFFER. IF, AFTER SUCH REASONABLE GOOD FAITH EFFORT, THE OFFEROR CANNOT COMPLY WITH SUCH STATUTE, THE OFFER WILL NOT BE MADE TO (NOR WILL TENDERS BE ACCEPTED FROM OR ON BEHALF OF) THE HOLDERS OF SHARES IN SUCH STATE. IN THOSE JURISDICTIONS WHERE THE SECURITIES, BLUE SKY OR OTHER LAWS REQUIRE THE OFFER TO BE MADE BY A LICENSED BROKER OR DEALER, THE OFFER SHALL BE DEEMED TO BE MADE ON BEHALF OF THE OFFEROR BY DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION (THE "DEALER MANAGER") OR ONE OR MORE REGISTERED BROKERS OR DEALERS LICENSED UNDER THE LAWS OF SUCH JURISDICTION. NOTICE OF OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK (INCLUDING THE ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS) OF DELCHAMPS, INC. AT $30.00 NET PER SHARE BY DELTA ACQUISITION CORPORATION A WHOLLY OWNED SUBSIDIARY OF JITNEY-JUNGLE STORES OF AMERICA, INC. Delta Acquisition Corporation, an Alabama corporation (the "Offeror") and a wholly owned subsidiary of Jitney-Jungle Stores of America, Inc., a Mississippi corporation ("Parent"), is offering to purchase all outstanding shares of Common Stock, $.01 par value per share, of Delchamps, Inc., an Alabama corporation (the "Company"), including the associated preferred share purchase rights issued pursuant to the Rights Agreement dated as of October 14, 1988, as amended, between the Company and First Alabama Bank, as Rights Agent (collectively, the "Shares"), at a purchase price of $30.00 per Share, net to the seller in cash, without interest, upon the terms and subject to the conditions set forth in the Offer to Purchase, dated July 14, 1997 (the "Offer to Purchase"), and in the related Letter of Transmittal (which, together with any amendments or supplements thereto, collectively constitute the "Offer"). THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, AUGUST 8, 1997, UNLESS THE OFFER IS EXTENDED. UNDER CERTAIN CIRCUMSTANCES, THE OFFER WILL BE EXTENDED UNTIL SEPTEMBER 12, 1997 IF NECESSARY TO MEET CERTAIN CONDITIONS, INCLUDING THE HSR CONDITION AND THE NOTEHOLDER CONSENT CONDITION REFERRED TO IN THE OFFER TO PURCHASE. IN ADDITION, NOTWITHSTANDING THE SATISFACTION OR WAIVER OF ANY CONDITIONS OF THE OFFER, THE OFFER MAY BE EXTENDED UNTIL SEPTEMBER 12, 1997 TO ENABLE PARENT AND THE OFFEROR TO OBTAIN PERMANENT FINANCING FOR THE TRANSACTION. THE OFFER MAY BE EXTENDED IN OTHER CIRCUMSTANCES AS DESCRIBED IN THE OFFER TO PURCHASE. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER A NUMBER OF SHARES SUCH THAT THE OFFEROR AND ITS AFFILIATES WILL BENEFICIALLY OWN IN THE AGGREGATE NOT LESS THAN TWO-THIRDS OF THE SHARES OUTSTANDING ON A FULLY DILUTED BASIS, (II) ANY APPLICABLE WAITING PERIOD UNDER THE HSR ACT (AS DEFINED IN THE OFFER TO PURCHASE) OR PERIOD DURING WHICH PARENT SHALL HAVE CONSENTED OR OTHERWISE BE BARRED FROM PURCHASING SHARES PURSUANT TO THE OFFER AS PART OF ANY AGREEMENT OR OTHER ARRANGEMENT WITH ANY GOVERNMENTAL OR REGULATORY AUTHORITY INVOLVING THE HSR ACT OR ANY OTHER APPLICABLE ANTITRUST LAWS HAVING EXPIRED OR HAVING BEEN TERMINATED PRIOR TO THE EXPIRATION OF THE OFFER, (III) PARENT HAVING OBTAINED PRIOR TO THE EXPIRATION OF THE OFFER AN AMENDMENT OR SUPPLEMENT TO THE INDENTURE GOVERNING ITS 12% SENIOR NOTES DUE 2006 AS DESCRIBED IN THE OFFER TO PURCHASE AND (IV) THE SATISFACTION OF CERTAIN OTHER TERMS AND CONDITIONS AS DESCRIBED IN THE OFFER TO PURCHASE. The Offer is being made pursuant to the Agreement and Plan of Merger, dated as of July 8, 1997 (the "Merger Agreement"), among Parent, the Offeror and the Company. The Merger Agreement provides that, among other things, after the purchase of Shares pursuant to the Offer and the satisfaction of the other conditions set forth in the Merger Agreement and in accordance with the relevant provisions of the Alabama Business Corporation Act, as amended (the "ABCA"), the Offeror will be merged with and into the Company (the "Merger"). Following consummation of the Merger, it is anticipated that the Company will continue as the surviving corporation (the "Surviving Corporation") and will be a wholly owned subsidiary of Parent. The Merger is subject to a number of conditions, including approval by the shareholders of the Company. At the effective time of the Merger (the "Effective Time"), each Share that is issued and outstanding (other than Shares owned by the Company, Parent, the Offeror, any other wholly owned subsidiary of Parent or by shareholders, if any, who are entitled to and who properly exercise dissenters' rights under the ABCA) will be converted into and become the right to receive from the Surviving Corporation $30.00 (or any higher price that may be paid for each Share pursuant to the Offer) in cash, without interest thereon. THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE OFFER, THE MERGER AND THE MERGER AGREEMENT, HAS DETERMINED THAT THE CONSIDERATION TO BE PAID FOR THE SHARES IN THE OFFER AND THE MERGER IS FAIR TO THE SHAREHOLDERS OF THE COMPANY AND THAT THE OFFER AND THE MERGER ARE OTHERWISE IN THE BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS AND RECOMMENDS THAT ALL SHAREHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER AND, IF REQUIRED BY THE ABCA, VOTE IN FAVOR OF THE MERGER. For purposes of the Offer, the Offeror will be deemed to have accepted for payment, and thereby purchased, Shares validly tendered and not withdrawn as, if and when the Offeror gives oral or written notice to IBJ Schroder Bank & Trust Company (the "Depositary") of the Offeror's acceptance of such Shares for payment pursuant to the Offer. In all cases, payment for Shares purchased pursuant to the Offer will be made by deposit of the purchase price with the Depositary, which will act as agent for tendering shareholders for the purpose of receiving payment from the Offeror and transmitting such payment to tendering shareholders whose Shares have been accepted for payment. Under no circumstances will interest be paid on the purchase price of the Shares to be paid by the Offeror, regardless of any extension of the Offer or any delay in making any payment. Payment for Shares accepted for payment pursuant to the Offer will in all cases be made only after timely receipt by the Depositary of (i) certificates for such Shares or a Book-Entry Confirmation (as defined in the Offer to Purchase), (ii) a properly completed and duly executed Letter of Transmittal (or a manually signed facsimile thereof), with all required signature guarantees or, in the case of a book-entry transfer, an Agent's Message (as defined in the Offer to Purchase), and (iii) any other documents required by the Letter of Transmittal. If any condition set forth in the Offer to Purchase has not been satisfied by 12:00 Midnight, New York City time, on Friday, August 8, 1997 (or any other time then set as the Expiration Date), the Offeror reserves the right (but shall not be obligated), subject to the terms and conditions contained in the Merger Agreement and to the applicable rules and regulations of the Securities and Exchange Commission, (i) to terminate the Offer and not accept for payment or pay for any Shares and return all tendered Shares to tendering shareholders, (ii) to waive all the unsatisfied conditions and accept for payment and pay for all Shares validly tendered prior to the Expiration Date and not theretofore withdrawn, (iii) to extend the Offer and, subject to the right of shareholders to withdraw Shares until the Expiration Date, retain the Shares that have been tendered during the period or periods for which the Offer is extended or (iv) to amend the Offer. The term "Expiration Date" shall mean 12:00 Midnight, New York City time, on Friday, August 8, 1997, unless the Offeror shall have extended the period of time for which the Offer is open, in which event the term "Expiration Date" shall mean the latest time and date at which the Offer, as so extended by the Offeror, shall expire. Subject to the limitations set forth in the Offer and the Merger Agreement, the Offeror reserves the right (but will not be obligated), at any time or from time to time in its sole discretion, to extend the period during which the Offer is open by giving oral or written notice of such extension to the Depositary and by making a public announcement of such extension. Except to the extent required by the Merger Agreement, there can be no assurance that the Offeror will exercise its right to extend the Offer. Any extension of the period during which the Offer is open, delay in acceptance for payment or payment, termination or amendment of the Offer will be followed, as promptly as practicable, by public announcement thereof, such announcement in the case of an extension to be issued not later than 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date. During any such extension, all Shares previously tendered and not withdrawn will remain subject to the Offer, subject to the rights of a tendering shareholder to withdraw such shareholder's Shares. Except as otherwise provided in the Offer to Purchase, tenders of Shares made pursuant to the Offer are irrevocable. Shares tendered pursuant to the Offer may be withdrawn at any time prior to the Expiration Date and, unless theretofore accepted for payment pursuant to the Offer, may also be withdrawn at any time after September 11, 1997. For a withdrawal of Shares tendered pursuant to the Offer to be effective, a written, telegraphic, telex or facsimile transmission notice of withdrawal must be timely received by the Depositary at one of its addresses set forth on the back cover of the Offer to Purchase. Any notice of withdrawal must specify the name of the person who tendered the Shares to be withdrawn, the number of Shares to be withdrawn and the name of the registered holder of the Shares, if different from that of the person who tendered the Shares. If certificates for Shares to be withdrawn have been delivered or otherwise identified to the Depositary, then, prior to the physical release of such certificates, the serial numbers shown on such certificates must be submitted to the Depositary and, unless such Shares have been tendered by an Eligible Institution (as defined in the Offer to Purchase), the signatures on the notice of withdrawal must be guaranteed by an Eligible Institution. If Shares have been tendered pursuant to the procedures for book-entry transfer, any notice of withdrawal must also specify the name and number of the account at the Book-Entry Transfer Facility to be credited with the withdrawn Shares and must otherwise comply with such Book-Entry Transfer Facility's procedures. All questions as to the form and validity (including time of receipt) of notices of withdrawal will be determined by the Offeror, in its sole discretion, and its determination will be final and binding on all parties. Any Shares properly withdrawn will be deemed not validly tendered for purposes of the Offer, but may be retendered at any subsequent time prior to the Expiration Date by following any of the procedures described in the Offer to Purchase. The information required to be disclosed by Rule 14d-6 (e)(1)(vii) of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended, is contained in the Offer to Purchase and is incorporated herein by reference. The Company has provided the Offeror with the Company's list of shareholders and security position listings for the purpose of disseminating the Offer to holders of Shares. The Offer to Purchase and the related Letter of Transmittal will be mailed to record holders of Shares whose names appear on the Company's shareholder list and will be furnished to brokers, dealers, commercial banks, trust companies and similar persons whose names, or the names of whose nominees, appear on the shareholder list or, if applicable, who are listed as participants in a clearing agency's security position listing for subsequent transmittal to beneficial owners of Shares. THE OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION THAT SHOULD BE READ BEFORE ANY DECISION IS MADE WITH RESPECT TO THE OFFER. Questions or requests for assistance may be directed to the Information Agent or the Dealer Manager at their respective addresses or telephone numbers and locations set forth below. Neither the Offeror nor Parent, nor any officer, director, shareholder, agent or other representative of the Offeror or Parent will pay any fees or commissions to any broker, dealer or other person (other than the Information Agent and the Depositary) for soliciting tenders of Shares pursuant to the Offer. Additional copies of the Offer to Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery may be obtained from the Information Agent. Shareholders may also contact their broker, dealer, commercial bank, trust company or other nominee for assistance concerning the Offer. THE INFORMATION AGENT FOR THE OFFER IS: [LOGO] 156 Fifth Avenue New York, NY 10010 (212) 929-5500 (call collect) or Call Toll-Free: (800) 322-2885 THE DEALER MANAGER FOR THE OFFER IS: DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION 277 Park Avenue New York, New York 10172 (212) 892-7099 (call collect) July 14, 1997 EX-99.(A)(8) 9 EXHIBIT 99.(A)(8) FOR IMMEDIATE RELEASE DELCHAMPS, INC. AND JITNEY-JUNGLE STORES OF AMERICA, INC. ANNOUNCE MERGER AGREEMENT MOBILE, ALABAMA, and JACKSON, MISSISSIPPI, July 8, 1997: Delchamps, Inc. (Nasdaq NMS: DLCH) and Jitney-Jungle Stores of America, Inc. announced today that they have entered into a definitive merger agreement under which Jitney-Jungle will acquire Delchamps. Under the merger agreement, Jitney-Jungle will commence, within five business days, an all-cash tender offer for all of Delchamps' outstanding common stock at a price of $30 per share. Following successful completion of the tender offer, Jitney-Jungle will acquire for the same cash price any shares that are not tendered by means of a merger of Delchamps with a wholly owned subsidiary of Jitney-Jungle. Delchamps' Board of Directors has approved the transaction unanimously and has recommended approval by the Delchamps stockholders. Credit Suisse First Boston Corporation is acting as financial advisor to Delchamps in the transaction. David W. Morrow, Chairman and Chief Executive Officer of Delchamps, said: "The combination of these two excellent regional supermarket chains will create a very strong competitor capable of meeting the increasing challenges of the intensely competitive market in the Gulf South region. We expect the combination to benefit our employees and customers, as well as our stockholders." "This transaction unites two leading supermarket chains in the southeast," said Michael E. Julian, President and Chief Executive Officer of Jitney-Jungle. "We are excited about the opportunity to better serve the Jitney-Jungle and Delchamps customers by combining the employees, managers and resources of two leading retail companies and building one of the premier supermarket chains." The tender offer is conditioned upon, among other things, there being tendered and not withdrawn prior to the expiration date of the offer at least two-thirds of the outstanding Delchamps shares. The offer initially will expire 20 business days after it is commenced, but under certain circumstances will be extended by Jitney-Jungle for up to 60 calendar days from the commencement date if necessary to meet certain conditions, including receipt of regulatory approval under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the consent of holders of Jitney-Jungle's outstanding senior notes. The offer may be extended by Jitney-Jungle for up to the same period to enable it to obtain permanent financing for the acquisition. In addition, Jitney-Jungle may extend the offer for up to 90 calendar days from the commencement date under certain other circumstances. Jitney-Jungle has obtained commitment letters from Fleet Capital Corporation and from an affiliate of Donaldson, Lufkin & Jenrette Securities Corporation to provide senior bank and subordinated debt financing to fund the tender offer and the merger. Delchamps operates 118 supermarkets in Louisiana, Mississippi, Alabama and Florida, and 10 liquor stores in Florida. Jitney-Jungle operates a chain of 21 discount stores, 77 conventional stores and 7 combination stores for a total of 105 supermarkets and 53 gasoline stations located throughout Mississippi and in Tennessee, Arkansas, Alabama, Louisiana and Florida. ##### FOR FURTHER INFORMATION CONTACT: Delchamps, Inc.: Timothy E. Kullman, Chief Financial Officer (334) 433-0437, ext. 217 Jitney-Jungle Stores of America, Inc.: Michael E. Julian, President and Chief Executive Officer (601) 346-2116 EX-99.(A)(9) 10 EXHIBIT 99.(A)(9) JITNEY-JUNGLE COMMENCES TENDER OFFER FOR DELCHAMPS JACKSON, MISSISSIPPI, July 14, 1997: Jitney-Jungle Stores of America, Inc. announced today that its subsidiary, Delta Acquisition Corporation, commenced its previously announced tender offer for all of the outstanding shares of common stock of Delchamps, Inc. (NASDAQ: DLCH) for $30.00 per share in cash. The Boards of Directors of both companies have approved the transaction. The tender offer is conditioned upon, among other things, there being tendered and not withdrawn prior to the expiration date of the offer at least two-thirds of the outstanding Delchamps shares. The offer initially will expire at 12:00 midnight, NYC time, on Friday, August 8, 1997, but under certain circumstances will be extended by Jitney-Jungle until September 12, 1997 if necessary to meet certain conditions, including receipt of regulatory approval under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the consent of holders of Jitney-Jungle's outstanding senior notes. The offer may be extended by Jitney-Jungle until September 12, 1997 to enable it to obtain permanent financing for the acquisition. The offer may be extended in other circumstances as described in the offer to purchase. Following successful completion of the tender offer, Jitney-Jungle will acquire for the same cash price any Delchamps shares that are not tendered by means of a merger of Delchamps with a wholly owned subsidiary of Jitney-Jungle. Jitney-Jungle has obtained commitment letters from Fleet Capital Corporation and from an affiliate of Donaldson, Lufkin & Jenrette Securities Corporation to provide senior bank and subordinated debt financing to fund the tender offer and the merger. Donaldson, Lufkin & Jenrette Securities Corporation will serve as dealer manager for the tender offer. MacKenzie Partners is the information agent. Jitney-Jungle operates a chain of 23 discount stores, 77 conventional stores, and 4 combination stores for a total of 104 supermarkets and 52 gasoline stations located throughout Mississippi and in Tennessee, Arkansas, Alabama, Louisiana, and Florida. # # # FOR FURTHER INFORMATION CONTACT: Jitney-Jungle Stores of America, Inc.: Michael E. Julian, President and Chief Executive Officer (601) 346-2116 MacKenzie Partners, Inc.: Steven C. Balet (212) 929-5500 EX-99.(B)(1) 11 EXHIBIT 99.(B)(1) [Letterhead] July 3, 1997 Jitney-Jungle Stores of America, Inc. 1770 Ellis Avenue Suite 200 Jackson, Mississippi 39204 Attention: Mr. Michael E. Julian President & Chief Executive Officer Gentlemen: You have advised DLJ Bridge Finance, Inc., a Delaware corporation ("DLJ Bridge"), that Jitney-Jungle Stores of America, Inc. (together with its subsidiaries, "Jitney-Jungle" or the "Company") proposes to acquire (the "Acquisition") 100% of the issued and outstanding common stock of Delchamps, Inc. (together with its subsidiaries, "Delchamps" and together with Jitney-Jungle, the "Credit Group") from the public shareholders thereof pursuant to a tender offer (the "Tender Offer") for $30.00 per share, equating to a total purchase price for 100% of the issued and outstanding common stock of Delchamps of approximately $228.0 million ($220.9 million net of option exercises). The Tender Offer will be initiated pursuant to a merger agreement (the "Merger Agreement") to be negotiated and entered into between Jitney-Jungle and the board of directors of Delchamps (collectively, the "Seller") which will be conditioned upon the successful consummation of the Tender Offer and pursuant to which Delchamps will merge, (the "Merger") with a newly-formed special purpose subsidiary of Jitney-Jungle, with Delchamps being the surviving entity. We further understand that concurrent with the consummation of the Acquisition certain other transactions will occur including: (i) the Merger; (ii) the refinancing (the "Refinancing") of approximately $34.4 million of existing debt of Delchamps (including $9.8 million of capitalized leases); and (iii) the payment of approximately $36.0 million of financing fees and other expenses to be incurred in connection with the Acquisition and the Merger (collectively, the "Expense Payments"). As used herein, the term "Transaction" shall refer, collectively, to the Tender Offer, the Acquisition, the Merger, the Refinancing and the Expense Payments. We understand that the total cash proceeds required to consummate the Transaction are approximately $281.4 million and that such funds will be provided as follows: (i) borrowings by the Company of approximately $75.0 million under a $175.0 million senior secured financing (the "Bank Credit Facility") consisting of an -eight-year $75.0 million amortizing term loan facility and a six-year $100.0 million non-amortizing revolving credit facility (none of which shall be drawn at closing); (ii) the issuance by the Company, for cash, of up to $200.0 million of senior subordinated increasing rate notes (the "Bridge Notes"); and (iii) approximately $6.4 million of available cash. I am pleased to advise you that DLJ Bridge hereby commits (the "Commitment") that it or one of its affiliates will purchase up to $200.0 million of Bridge Notes, the proceeds of which will be used to finance in part the consummation of the Transaction. You have advised us that a copy of this letter (the "Bridge Commitment Letter") and the attached Summary of Terms and Conditions (the "Summary of Terms and Conditions"), which is incorporated into and made a part of this Bridge Commitment Letter, will be provided to the Seller but that you understand that our obligation to make any monies available to the Company is subject expressly to (i) the execution and delivery of definitive documentation, including without limitation a definitive securities purchase agreement (the "Securities Purchase Agreement"), satisfactory to us and covering the matters expressly referred to herein and covering such other 1 matters as we may request (collectively, the "Definitive Documents") and (ii) the satisfaction of the other conditions precedent set out in the Summary of Terms and Conditions. Jitney-Jungle agrees to pay to DLJ Bridge a non-refundable cash commitment fee (the "Commitment Fee") in an amount equal to one percent (1.00%) of the principal amount of the Bridge Notes subject to this Commitment. Jitney-Jungle also agrees to pay to DLJ Bridge a cash takedown fee (the "Takedown Fee") in an amount equal to two percent (2.00%) of the principal amount of Bridge Notes purchased by DLJ Bridge. The Commitment Fee set forth above will be earned upon acceptance of the Commitment and will be payable only upon (i) the closing of the Transaction; (ii) the closing of any other transaction or series of transactions in which Jitney-Jungle or any of its affiliates acquires Delchamps within the next two years; or (iii) the payment to Jitney-Jungle of any break-up fee or similar reimbursement pursuant to the Merger Agreement. The Takedown Fee set forth above will be earned and payable upon the issuance of the Bridge Notes. The Commitment is not assignable by you. Nothing in this Bridge Commitment Letter, expressed or implied, shall give any person, other than the parties hereto, any benefit or any legal or equitable right, remedy or claim under this Bridge Commitment Letter. DLJ Bridge is prepared to offer (the "Co-Purchase Offer") to CS First Boston ("CSFB" or the "Co-Purchaser"), or an affiliate of CSFB reasonably acceptable to DLJ Bridge, the opportunity to participate, as a co-purchaser, in up to thirty percent (30.0%) of the Commitment. In the event that the Co-Purchaser accepts the Co-Purchase Offer: (i) Donaldson, Lufkin & Jenrette Securities Corporation's ("DLJSC") right to act as exclusive agent or sole underwriter in the offering of the Permanent Financing (as defined in the attached Summary of Terms and Conditions) shall become the right, but not the obligation, to act as lead agent or lead manager, as the case may be, in such offering (but only to allow the participation of the Co-Purchaser in such offering, as set forth herein); (ii) the Co-Purchaser shall have the right, but not the obligation, to act as co-agent or co-manager, as the case may be, along with DLJ in the offering of the Permanent Financing; (iii) if DLJSC and the Co-Purchaser act as lead manger or lead agent and co-manager or co-agent, respectively, the Co-Purchaser shall be entitled to a share of the gross underwriting spread or placement fee, as the case may be (in either case, the "Underwriter's Compensation"), payable by the issuer of such Permanent Financing from such offering, net of unreimbursed expenses, equal to the Co-Purchaser's ratable participation in the Commitment; (iv) any reference in the Bridge Commitment Letter or the attached Summary of Terms and Conditions to a transaction in which DLJSC has acted as exclusive agent or sole underwriter shall be deemed to have been amended to permit such participation by the Co-Purchaser; (v) DLJ Bridge's obligation to purchase Bridge Notes under the Commitment shall be reduced an obligation to purchase seventy percent (70.0%) of Bridge Notes issued pursuant to the Commitment; and (vi) CSFB shall become a co-party to the Engagement Letter (as defined in the attached Summary of Terms and Conditions) and shall have the right, but not the obligation, to act as co-agent or co-manager (with 30% of the economics), as the case may be, along with DLJ in any transaction thereunder. The foregoing is subject, in its entirety, to the execution of definitive documentation between DLJ Bridge, CSFB and the Company setting forth the foregoing and in form and substance satisfactory to DLJ Bridge. Jitney-Jungle agrees to indemnify and hold the DLJ Bridge Group, as defined in Exhibit A hereto, harmless to the extent set forth in Exhibit A to this Bridge Commitment Letter and, upon demand from time to time, to reimburse DLJ Bridge for all reasonable out-of-pocket costs, expenses and other payments, including but not limited to reasonable legal fees and disbursements incurred or made in connection with the Commitment, and the preparation, execution and delivery of the Definitive Documents, regardless of whether or not the Definitive Documents are executed. Jitney-Jungle hereby represents that, based on its review and analysis, to its knowledge (a) all information, other than Projections (as defined below), which have been made available to DLJ Bridge by any member of the Credit Group or any of its representatives in connection with the transactions contemplated hereby (together with information hereafter made available, the "Information") have been reviewed and analyzed by Jitney-Jungle in connection with the performance of its own due diligence and, as supplemented as contemplated by the next sentence, is (or will be, in the case of Information made available after the date hereof) complete and correct in all material respects and does not (or will not, as the case may be) contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements contained therein not materially misleading in light of the circumstances under which such statements were or are made; and (b) all financial projections concerning the Credit Group that have been or are hereafter made available to DLJ Bridge by an member of the Credit Group or its representatives in connection with the transactions contemplated hereby (the "Projections") have been (or will be, in the case of Projections made available after the date hereof) prepared in good faith based upon reasonable assumptions. Jitney-Jungle agrees to supplement the Information and Projections, to the extent Jitney-Jungle becomes aware of or is furnished with such Information and Projections, from time to time until the closing of the Transaction so that the representation and warranty in the preceding sentence is correct on the closing date. This Bridge Commitment Letter and the attached Summary of Terms and Conditions set forth the entire understanding of the parties as to the scope of the Commitment and DLJ Bridge's obligations thereunder. This Commitment will expire at 5:00 PM New York City time on July 7, 1997 unless accepted prior to such time. This Commitment will also expire at the earlier of: (i) the termination of the Merger Agreement; (ii) the closing of the Transaction without the issuance of any Bridge Notes; (iii) the commencement by the Credit Group of the marketing of any securities pursuant to the Transaction in which Donaldson, Lufkin & Jenrette Securities Corporation ("DLJSC") is not sole manger or sole agent, as the case may be; or (iv) 5:00 PM New York City time on September 30, 1997 if the closing of the Transaction has not occurred by such time. This Bridge Commitment Letter shall be governed by, and construed in accordance with, the laws of the State of New York as applied to contracts made and performed within such state, without giving effect to the principles of conflicts of laws thereof. To the fullest extent permitted by applicable law, each of the parties hereto hereby irrevocably submits to the jurisdiction of any New York State court or Federal court sitting in the Borough of Manhattan in New York City in respect of any suit, action or proceeding arising out of or relating to the provisions of the Commitment and irrevocably agrees that all claims in respect of any such suit, action or proceeding may be heard and determined in any such court. Each of the parties hereto waives to the fullest extent permitted by applicable law, any objection which it may now or hereafter have to the laying of the venue of any such suit, action or proceedings brought in any such court, and any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum. Please indicate your acceptance of the Commitment and your agreement to the matters contained in this Bridge Commitment Letter by executing this document and returning it to us prior to the time of expiration set forth above. Sincerely, DLJ Bridge Finance, Inc. /s/ Robert C. Grien ---------------------------- By: Robert C. Grien Title: Senior Vice President Accepted and Agreed to this July 3, 1997 Jitney-Jungle Stores of America, Inc. /s/ Michael Julian - ------------------------------------- By: Michael Julian Title: President and Chief Executive Officer SUMMARY OF TERMS AND CONDITIONS Set forth below is a summary of the terms of the Bridge Notes and the conditions to the obligation of DLJ Bridge to purchase any Bridge Notes. Capitalized terms used herein and not otherwise defined have the meaning set forth in the Bridge Commitment Letter to which this Summary of Terms and Conditions is attached and of which it forms a part. Senior Subordinated Increasing Rate Notes Issuer: Jitney-Jungle Stores of America, Inc. or, at the option of DLJ Bridge, such other entity(ies) as shall be the borrower(s) under the Bank Credit Facility. Issue: Senior Subordinated Increasing Rate Notes (the "Bridge Notes"). Use of Proceeds: Proceeds will be used to finance in part the consummation of the Transaction. Principal Amount: Up to $200,000,000. Price: 100% of principal amount. Interest Rate: Interest shall be payable at the prime rate plus a spread (the "Spread"). The Spread will initially be 300 basis points. If the Bridge Notes are not retired in whole by the end of the first six month period following the date of their issuance (the "Issuance Date"), the Spread will increase by 100 basis points and shall continue to increase by an additional 50 basis points at the end of each subsequent three month period until the first anniversary of the issuance of the Bridge Notes. Commencing on the first anniversary of the Issuance Date, interest shall be payable at the greater of the following as of the beginning of each quarterly period: (i) the prime rate plus 500 basis points, increasing by an additional 50 basis points at the end of each subsequent three month period for so long as the Bridge Notes are outstanding; (ii) the Treasury Rate (as defined below) plus 700 basis points, increasing by an additional 50 basis points at the end of each subsequent three month period for so long as the Bridge Notes are outstanding; (iii) the DLJ High Yield Index Rate plus 250 basis points, increasing by an additional 50 basis points at the end of each subsequent three month period for so long as the Bridge Notes are outstanding; and (iv) the rate in effect on the day immediately preceding the first anniversary of the Issuance Date plus 50 basis points, increasing by an additional 50 basis points at the end of each subsequent three month period for so long as the Bridge Notes are outstanding. For purposes of this Summary of Terms and Conditions, the "prime rate" means the prime or reference rate as announced from time to time by The Bank of New York and the "Treasury Rate" means the rate applicable to the most recent auction of direct obligations of the United States having a maturity closest to the Bridge Notes, as published by the Board of Governors of the Federal Reserve System.
1 Notwithstanding anything to the contrary set forth above, at no time shall the per annum interest rate on the Bridge Notes exceed eighteen percent (18.00%). In addition, that portion, if any, of any interest payment representing a per annum interest rate in excess of sixteen percent (16.00%) shall be paid by issuing Bridge Notes with a principal amount equal to such excess portion of interest. Maturity: The Bridge Notes will mature on the first anniversary of the Issuance Date, provided however, that the maturity of the Bridge Notes will be automatically extended until the date which is six (6) months after the date of the original final stated maturity of the Bank Credit Facility if, on the first anniversary of the Issuance Date, the following conditions are met: (i) there shall exist no default under the Bridge Notes; (ii) there shall have been no acceleration under the Bank Credit Facility or any other debt instrument of the Company; and (iii) all fees due to DLJ Bridge and DLJSC as of such date shall have been paid in full. Mandatory Redemption: The Company will redeem the Bridge Notes with, subject to certain agreed exceptions, (i) the net proceeds from the issuance of any subordinated debt or equity securities by any member of the Credit Group (the "Permanent Financing"), (ii) the net proceeds from the issuance of any other debt by any member of the Credit Group to the extent permitted by the Bank Credit Facility, or (iii) the net proceeds from asset sales by any member of the Credit Group in excess of the amount thereof required to be paid to the banks under the Bank Credit Facility, in each case at par plus accrued interest, provided, that the redemption price shall be one hundred three percent (103.0%) of par plus accrued interest if the Bridge Notes are redeemed with or in anticipation of funds raised by any means other than a transaction in which DLJSC has acted as exclusive agent or sole underwriter to the Credit Group; and provided further, that after twelve (12) months from the date of their issuance, the Bridge Notes may be redeemed at 100% of principal plus accrued interest unless (a) (i) within such twelve-month period DLJSC delivered to the Credit Group a proposal to market securities of the Credit Group to one or more financially responsible institutional investors (or a commitment from DLJSC or another nationally recognized investment banking firm to underwrite the public sale of securities of the Credit Group, on a firm commitment basis), on financial and other terms and conditions no less favorable to the issuer of such securities than those generally available in the United States capital markets to issuers of securities having a creditworthiness comparable to that of the issuer of such securities, in an amount sufficient to redeem all the Bridge Notes (a "Bona Fide Proposal"), and (ii) the Credit Group did not authorize DLJSC to execute such Bona Fide Proposal; it being understood that no such proposal shall be deemed to be a Bona Fide Proposal if DLJSC fails to execute such proposal on substantially the terms proposed, or (b) the Company and DLJSC have agreed in their reasonable judgment that no such Bona Fide Proposal could be made.
2 Interest Payments: Interest on the Bridge Notes will be payable in cash, quarterly in arrears (except as provided elsewhere herein). Optional Redemption: The Bridge Notes will be callable, in whole or in part, upon not less than 10 days written notice, at the option of the Company, at any time at par plus accrued interest to the redemption date; provided, that the redemption price shall be one hundred three percent (103.0%) of par plus accrued interest if the Bridge Notes are refunded (whether at the time of redemption or maturity) with or in anticipation of funds raised by any means other than a transaction in which DLJSC has acted as exclusive agent or sole underwriter to the Company; provided further, that after twelve (12) months from the date of their issuance, the Bridge Notes may be redeemed at 100% of principal plus accrued interest unless DLJSC has delivered a Bona Fide Proposal or the Company and DLJSC have agreed in their reasonable judgment that no such Bona Fide Proposal could be made. Commencing on the earliest to occur of (i) the first anniversary of the Issuance Date and (ii) refusal by the Company to execute a Bona Fide Proposal (such event, a "Refusal Event" and such earlier date, the "First Anniversary"), the Bridge Notes may be sold to third party purchasers on a fixed rate basis at a rate no greater than the then applicable rate of interest. In such event, the Bridge Notes will be non-callable until the fifth anniversary of the Issuance Date and will be callable thereafter at par plus accrued interest plus a premium equal to the coupon in effect on the date on which such Bridge Notes were sold to third party purchasers with such premium declining ratably to par one year prior to the maturity of the Bridge Notes. DLJ Bridge shall agree that no such third party sales shall take place unless the Company has been given ten (10) days prior notice. Subordination: The Bridge Notes will be subordinated to the Bank Credit Facility and certain refinancings thereof (collectively, the "Designated Senior Debt"). See Exhibit B to the Bridge Commitment Letter. Guarantees: Delchamps will issue a senior subordinated guarantee in favor of the Bridge Notes. The Company's other direct and indirect affiliates which are guarantors of the Bank Credit Facility will also issue senior subordinated guarantees in favor of the Bridge Notes. In addition, in the event the Company is not the issuer of the Bridge Notes, the Company will issue senior subordinated guarantees in favor of the Bridge Notes. Registration Rights: The Company will file, and will use its best efforts to cause to become effective, a "shelf" registration statement with respect to the Bridge Notes as soon as practicable after the First Anniversary. The Company will keep the registration statement for the Bridge Notes effective until all of the Bridge Notes have been redeemed. If a "shelf" registration statement for the Bridge Notes has either (i) not been filed within 60 days after the First Anniversary, or (ii) not been declared effective 120 days after the First Anniversary, the Company will pay liquidated damages thereafter of $.192 per
3 week per $1,000 principal amount of Bridge Notes outstanding until such time as such registration statement has become effective. The Company will also pay such liquidated damages for any period of time following the effectiveness of such registration statement that the registration statement is not available for resales thereunder. In addition, the holders of the Bridge Notes will have the right to "piggy-back" in the registration of any debt securities which are registered by the Company unless all of the Bridge Notes will be redeemed from the proceeds of such securities. Rollover Fee: On the date of the First Anniversary, the Company shall pay to DLJ Bridge a cash fee (the "Rollover Fee") in an amount equal to three percent (3.00%) of the principal amount of the Bridge Notes outstanding on such date; provided however, that the portion of such Rollover Fee set forth below will be creditable against the fees earned due to DLJSC (and CSFB, to the extent they accept the Co-Purchase Offer) in connection with the placement of the Permanent Financing in the event that such placement occurs during the corresponding period from the First Anniversary set forth below:
Period from Amount First of Anniversary credit ----------- ---------- 0-89 days 2.50% 90-179 days 2.00% 180-269 days 1.50% 270-359 days 1.00% 360-449 days 0.50% 450 days and thereafter 0.00%
Equity Amount Escrowed: On the Issuance Date, warrants (the "Escrowed Warrants") representing twenty percent (20%) of the fully-diluted common stock of the Company will be placed in an escrow account. The Escrowed Warrants will be exercisable at a price equal to $0.01 per share for a period of seven (7) years from the date such Escrowed Warrants are released from escrow and will have customary anti-dilution provisions and demand and "piggy- back" registration rights. If the refinancing of 100% of the Bridge Notes is not completed within the periods following the First Anniversary set forth in Column A below, Escrowed Warrants exercisable into the percentage of the Company's fully-diluted common stock set forth in Column B shall be released from escrow to DLJ Bridge and DLJ Bridge shall be entitled to retain such released Escrowed Warrants.
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A B ------ ------ 0-90 days 1.0% 91-180 days 1.0% 181-270 days 1.5% 271-360 days 1.5% 361-450 days 2.5% 451-540 days 2.5% 541-630 days 3.0% 631-720 days 3.0% 721 days and thereafter 4.0% ---- 20.0% ----- -----
Any Escrowed Warrants to which DLJ Bridge is not entitled as set forth above shall be returned to the Company for cancellation following a determination thereof. Escrow: The Escrowed Warrants will be held, undated, in escrow by Snoga, Inc., an affiliate of DLJ Bridge or a bank mutually acceptable to DLJ Bridge and the Company, from the Issuance Date. Right to Resell Bridge Notes: DLJ Bridge shall have the absolute and unconditional right to resell Bridge Notes in compliance with applicable law to any third party. Commencing on the First Anniversary, the Company shall make available to DLJ Bridge such of the Escrowed Warrants as are needed to facilitate the resale of the Bridge Notes to third parties on a fixed rate basis; provided, however that DLJ Bridge shall agree that it shall not retain any such equity provided specifically to facilitate the resale of the Bridge Notes as set forth in this provision. Representations and Warranties: The Securities Purchase Agreement will contain representations and warranties to DLJ Bridge and holders of the Bridge Notes which are usual and customary for transactions of this nature or required by DLJ Bridge for this Transaction in particular as to the Credit Group, including but not limited to: (i) Corporate Existence and Power; (ii) Authorization, Execution and Enforceability of Material Agreements; (iii) Governmental Authorization; (iv) Non-Contravention of Laws or Material Agreements; (v) Financial Information; (vi) Litigation; (vii) Taxes; (viii) Subsidiaries; (ix) Not an Investment Company; (x) ERISA; (xi) Environmental; (xii) Permits; (xiii) Leases; (xiv) Full Disclosure; (xv) Capitalization; (xvi) Solicitation; Access to Information; (xvii) Absence of Any Undisclosed Liabilities; (xviii) Historical and Pro Forma Financial Statements; (xix) No Material Adverse Change; and (xx) Governmental Regulations. Covenants: The Securities Purchase Agreement will contain usual and customary covenants for securities of this nature including covenants with respect to: (i) Furnishing of Information; (ii) Use of Proceeds; (iii) Wholly Owned Subsidiaries; (iv) Restrictions on Indebtedness; (v) Restrictions on Dividends and Redemptions and Repayment of Subordinated Debt or Pari Passu Debt; (vi) Restrictions on the Sale of Assets; (vii) Restrictions on Business
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Activities; (viii) Restrictions on Transactions with Affiliates; (ix) Restrictions on Merger or Consolidation; (x) Restrictions on Liens; (xi) Refinancing of Bridge Notes (including providing such of the Escrowed Warrants as are needed in order to facilitate such refinancing); (xii) Restrictions on Investments and Acquisitions and (xiii) Additional Covenants which will not include any financial maintenance covenants or covenants regarding accelerated buy-back or sinking fund requirements. Event of Default: An Event of Default as defined for the Bridge Notes will include but not be limited to: (i) the failure of the Company to pay principal on the Bridge Notes when due; (ii) the failure of the Company to pay interest or fees on the Bridge Notes and the continuance of such failure for 5 days; (iii) the failure of the Credit Group to comply with any other provision, condition, covenant, promise, warranty or representation in the Securities Purchase Agreement or the Bridge Notes, provided that in certain cases such failure continues for 30 days after notice; (iv) a default under any instrument or instruments governing indebtedness of any member of the Credit Group when such default causes such indebtedness to become due prior to its stated maturity or failure to pay any such indebtedness at its stated maturity in an aggregate principal amount exceeding a threshold amount to be agreed; (v) final judgments aggregating in excess of a threshold amount to be agreed rendered against any member of the Credit Group and not discharged or stayed within 60 days; (vi) certain events of bankruptcy, insolvency or reorganization with respect to any member of the Credit Group ; (vii) material misrepresentations in the Securities Purchase Agreement; (viii) unenforceability of any Guarantee; (ix) certain ERISA defaults; or (x) Change of Control of the Company. In case an Event of Default shall occur and be continuing, the holders of at least 33 1/3% (a majority where DLJ Bridge, or its affiliates, hold a majority of the aggregate principal amount of the Bridge Notes) in aggregate principal amount of the Bridge Notes then outstanding, by notice in writing to the Company and the agent bank under the Bank Credit Facility (the "Agent Bank") may declare the principal of and all accrued interest on all Bridge Notes to be due and payable immediately, provided that for so long as the Bank Credit Facility is in effect, such acceleration shall not become effective until the earlier of (i) five days after the notice of acceleration is received or (ii) the date on which the Designated Senior Debt is accelerated. If an Event of Default specified in clause (vi) occurs, the principal of and accrued interest on the Bridge Notes will be immediately due and payable without any declaration or other act on the part of the holders of the Bridge Notes. An acceleration notice may be annulled and past defaults (except for monetary defaults not yet cured) may be waived by the holders of a majority in aggregate principal amount of the Bridge Notes. In the event that the Bridge Notes have accelerated as a result of an acceleration under the Designated Senior Debt and such acceleration of Designated Senior Debt is rescinded within
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five days, the acceleration under the Bridge Notes will be automatically rescinded. If an Event of Default shall occur and for as long as such Event of Default shall be continuing, DLJ Bridge shall have the right to appoint one (1) representative to sit on the Company's Board of Directors provided, however, that such right shall terminate if DLJ Bridge no longer retains at least 50% of the outstanding Bridge Notes. Defeasance Provision: None. Expiration Date: The obligation of DLJ Bridge to purchase the Bridge Notes will expire upon the earliest of: (i) the completion of the Transaction without the use of the Bridge Notes; (ii) termination of the Merger Agreement; (iii) the commencement by the Company of the marketing of any securities pursuant to the Transaction in which Donaldson, Lufkin & Jenrette Securities Corporation ("DLJSC") is not sole manger or sole agent, as the case may be; and (iv) September 30, 1997. Governing Law: New York.
7 Securities Purchase Agreement The Commitment of DLJ Bridge to purchase the Bridge Notes will be subject to the execution of definitive documentation including a definitive securities purchase agreement (the "Securities Purchase Agreement") which will contain the terms and conditions set forth herein and such other conditions precedent, covenants, representations, warranties, events of default and other provisions are as customary for financings of this kind. Conditions to Funding: The funding of the Bridge Notes will be subject to satisfaction of the conditions precedent deemed appropriate by DLJ Bridge for leveraged financing generally and for this transaction in particular, including the following: (i) The Transaction shall have been consummated in accordance with the terms of each of the Tender Offer and the Merger Agreement and the aggregate payment for the common stock of the Company shall not have exceeded $228.0 million. The Merger Agreement and other documentation (including the Tender Offer) shall be satisfactory in form and substance to DLJ Bridge, without any amendment, modification or waiver of any of the terms or conditions thereof without the prior written consent of DLJ Bridge; (ii) The Company shall have in place the Bank Credit Facility of which not more than $75.0 million shall be drawn and the covenants and other terms and conditions of which shall be satisfactory in all respect to DLJ Bridge. The Credit Group shall have not more than $549.2 million of aggregate indebtedness, which shall include only the following: (i) not more than $75.0 million borrowed under the Bank Credit Facility, (ii) not more than $200.0 million of Bridge Notes, (iii) not more than $200.0 million of Senior Notes of Jitney-Jungle existing as of the date hereof (the "Jitney Senior Notes"), and (iv) capital lease obligations in an aggregate amount not exceeding $74.2 million.; (iii) DLJ Bridge shall have completed its tax, legal and environmental due diligence investigations of the Credit Group and the results of such investigations shall be satisfactory to DLJ Bridge; (iv) Receipt of (a) consolidated financial statements of the Credit Group including balance sheets and income and cash flow statements as of the end of and for each of the last three fiscal years of the Credit Group (which shall not differ materially from the information supplied to date to DLJ Bridge) and its affiliates, audited by independent public accountants of recognized national standing and prepared in conformity with GAAP, together with the report thereon; (b) unaudited selected financial information of the Credit Group meeting the requirements of Item 301 (a) of Regulation S-K for the two fiscal years immediately preceding the last three fiscal years of the Credit Group; and (c) unaudited interim financial statements of the Credit Group, prepared in the same manner 8 as the historical audited statements for the most recently ended quarterly period and for the same quarterly period during the most recently ended fiscal year; (v) The corporate, tax, capital and ownership structure (including articles of incorporation and by-laws), shareholders agreements and management of the Company and its subsidiaries before and after the Transaction shall be consistant with that previously disclosed to DLJ Bridge or its affiliates, and shall not have been modified other than without the prior written consent of DLJ Bridge; (vi) Receipt of a consolidating pro forma balance sheet of the Credit Group as of the Closing Date, giving effect to the Transaction and the transactions contemplated by the Merger Agreement and the Securities Purchase Agreement and reflecting estimated purchase price accounting adjustments, prepared by independent public accountants of recognized national standing; (vii) Satisfactory completion of all loan documentation and other documentation relating to the Bridge Notes in form and substance satisfactory to DLJ Bridge and in compliance with all applicable laws and regulations; (viii) Receipt of all governmental, regulatory, shareholder and third party consents (including Hart-Scott-Rodino clearance) and approvals necessary or desirable in connection with the Transaction and the related financings and other transactions contemplated hereby and expiration of all applicable waiting periods without any action being taken by any competent authority that could restrain, prevent or impose any materially adverse conditions on the Transaction or such other transactions or that could seek or threaten any of the foregoing, and no law or regulation shall be applicable which in the judgment of DLJ Bridge could have any such effect; (ix) Absence of any material adverse change in the business, condition (financial or otherwise), operations, performance, properties or prospects of the Credit Group since the end of the most recently ended fiscal year for which audited financial statements have been provided to DLJ Bridge or in the facts and information as represented to date; (x) Absence of any action, suit, investigation, litigation or proceeding pending or threatened in any court or before any arbitrator or governmental instrumentality that purports to affect the Transaction or the Bridge Notes or any of the other transactions contemplated hereby, or that could have a material adverse effect on the Transaction or the Bridge Notes or any of the other transactions contemplated hereby; (xi) DLJ Bridge shall have received satisfactory opinions of counsel to the Company as to the transactions contemplated hereby 9 (including without limitation the tax aspects thereof and compliance with all applicable securities laws), and such corporate resolutions, certificates and other documents as DLJ Bridge shall reasonably request; (xii) Absence of any Event of Default or event that, with notice and/or the passage of time, could become an Event of Default and accuracy of all representations and warranties; (xiii) A letter (the "Engagement Letter") shall have been executed between the Company and DLJSC engaging DLJSC as exclusive investment banker to theCredit Group, for all purposes until the date on which the Bridge Notes have been repaid in full; (xiv) All fees and expenses due to DLJ Bridge in connection with the purchase of the Bridge Notes or to DLJSC as set forth in the Engagement Letter or otherwise shall have been paid in full; (xv) Absence of any disruption or adverse change in the financial or capital markets generally which could reasonably be expected to materially adversely affect the purchase of the Bridge Notes or the refinancings thereof; (xiv) DLJ Bridge shall have received consent from the Bank Credit Facility lenders, if any, concerning the anticipated terms and conditions of the Bridge Notes, and the Permanent Financing including the application of the proceeds from any such financing. Such terms will include usual and customary terms for securities of this type; (xv) The Company shall have received consent from the holders of the Jitney Senior Notes allowing the Company to incur the indebtedness contemplated by the Transaction and such consent shall be acceptable to DLJ Bridge in all respects; and (xvi) In the event CSFB accepts the Co-Purchase Offer, CSFB shall have delivered to DLJ Bridge an irrevocable certificate stating that the conditions to funding their Bridge Notes have been satisfied and that they are prepared to fund their ratable share of the takedown. 10 EXHIBIT A In consideration of the commitment given by DLJ Bridge Finance, Inc., a Delaware limited partnership ("DLJ Bridge"), with respect to the Transaction involving Jitney-Jungle, (the "Indemnifying Party") and Delchamps pursuant to the Bridge Commitment Letter between Jitney-Jungle and DLJ Bridge of which this Exhibit is a part (such Bridge Commitment Letter, together with all Exhibits attached thereto, is referred to herein as the "Commitment"), the Indemnifying Party agrees to indemnify and hold harmless DLJ Bridge, its affiliates, and each person, if any, who controls DLJ Bridge, or any of its affiliates, within the meaning of the Securities Act of 1933, as amended (the "Act") or the Securities Exchange Act of 1934, as amended (a "Controlling Person"), and the respective partners, agents, employees, officers and directors of DLJ Bridge, its affiliates, and any such Controlling Person (each an "Indemnified Party" and collectively, the "Indemnified Parties" or the "DLJ Bridge Group"), from and against any and all losses, claims, damages, liabilities and expenses (including, without limitation and as incurred, reasonable costs of investigating, preparing or defending any such claim or action, whether or not DLJ Bridge Group is a party thereto) arising out of, or in connection with any activities contemplated by, the Commitment or any other services rendered in connection therewith, including, but not limited to, losses, claims, damages, liabilities or expenses arising out of or based upon any untrue statement or any alleged untrue statement of a material fact or any omission or any alleged omission to state a material fact in any of the disclosure or offering or confidential information documents (the "Disclosure Documents") pertaining to any of the transactions or proposed transactions contemplated by the Commitment, including any eventual resale or refinancing of any Bridge Notes (as defined in the Commitment), provided that the Indemnifying Party will not be responsible for any claims, liabilities, losses, damages or expenses that are determined by final judgment of a court of competent jurisdiction to result solely from DLJ Bridge Group's gross negligence, willful misconduct or bad faith. The Indemnifying Party also agrees that DLJ Bridge Group shall have no liability (except for breach of provisions of the Bridge Commitment Letter for which this Exhibit A is a part) for claims, liabilities, damages, losses or expenses, including legal fees, incurred by the Indemnifying Party unless they are determined by final judgment of a court of competent jurisdiction to result solely from DLJ Bridge Group's gross negligence, willful misconduct or bad faith. In case any action shall be brought against DLJ Bridge Group with respect to which indemnity may be sought against the Indemnifying Party under this agreement, DLJ Bridge Group shall promptly notify the Indemnifying Party in writing and the Indemnifying Party shall, if requested by DLJ Bridge or if the Indemnifying Party desires to do so, assume the defense thereof, including the employment of counsel reasonably satisfactory to DLJ Bridge and payment of all reasonable fees and expenses. The failure to so notify the Indemnifying Party shall not affect any obligations the Indemnifying Party may have to DLJ Bridge Group under the Commitment or otherwise unless the Indemnifying Party is materially adversely affected by such failure. DLJ Bridge Group shall have the right to employ separate counsel in such action and participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of DLJ Bridge Group, unless: (i) the Indemnifying Party has failed to assume the defense and employ counsel reasonably satisfactory to DLJ Bridge or (ii) the named parties to any such action (including any impleaded parties) include DLJ Bridge Group and the Indemnifying Party, and DLJ Bridge Group shall have been advised by counsel that there may be one or more legal defenses available to it which are different from or additional to those available to the Indemnifying Party, in which case, if such Indemnified Party notifies the Indemnifying Party in writing that it elects to employ separate counsel at the expense of the Indemnifying Party, the Indemnifying Party shall not have the right to assume the defense of such action or proceeding on behalf of such Indemnified Party, provided, however, that the Indemnifying Party shall not, in connection with any one such action or proceeding or separate but substantially similar or related actions or proceedings in the same jurisdiction arising out of the same general allegations or circumstances, be responsible hereunder for the reasonable fees and expenses of more than one such firm of separate counsel, in addition to any local counsel, which counsel shall be designated by DLJ Bridge and reasonably acceptable to the Indemnifying Party. The Indemnifying Party shall not be liable for any settlement of any such action effected without the written consent of the Indemnifying Party (which shall not be unreasonably withheld) and the Indemnifying Party agrees to indemnify and hold harmless DLJ Bridge Group from and against any loss or liability by reasons of settlement of any action effected with the 11 consent of the Indemnifying Party. In addition, the Indemnifying Party will not, without the prior written consent of DLJ Bridge, settle or compromise or consent to the entry of any judgment in or otherwise seek to terminate any pending or threatened action, claim, suit or proceeding in respect to which indemnification or contribution may be sought hereunder (whether or not DLJ Bridge is a party thereto) unless such settlement, compromise, consent or termination includes an express unconditional release of DLJ Bridge and the other Indemnified Parties, satisfactory in form and substance to DLJ Bridge, from all liability arising out of such action, claim, suit or proceeding. If for any reason the foregoing indemnity is unavailable to an Indemnified Party or insufficient to hold an Indemnified Party harmless, then in lieu of indemnifying such Indemnified Party, the Indemnifying Party shall contribute to the amount paid or payable by such Indemnified Party as a result of such claims, liabilities, losses, damages, or expenses (i) in such proportion as is appropriate to reflect the relative benefits received by the Indemnifying Party on the one hand and by DLJ Bridge on the other from the Transaction contemplated by the Commitment or (ii) if the allocation provided by clause (i) is not permitted under applicable law, in such proportion as is appropriate to reflect not only the relative benefits received by the Indemnifying Party on the one hand and DLJ Bridge on the other, but also the relative fault of the Indemnifying Party and DLJ Bridge as well as any other relevant equitable considerations. Notwithstanding the provisions of this Exhibit A, the aggregate contribution of all Indemnified Parties shall not exceed the amount of fees actually received by DLJ Bridge pursuant to the Commitment. It is hereby further agreed that the relative benefits to the Indemnifying Party on the one hand and DLJ Bridge on the other with respect to any Transaction shall be deemed to be in the same proportion as (i) the total value of the Transaction bears to (ii) the fees paid to DLJ Bridge with respect to such Transaction. The relative fault of the Indemnifying Party on the one hand and DLJ Bridge on the other with respect to the Transaction shall be determined by reference to, among other things, whether any untrue or alleged untrue statement of material fact or the omission or alleged omission to state a material fact related to information supplied by the Indemnifying Party or by DLJ Bridge and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. No Indemnified Party shall have any liability to the Indemnifying Party or any other person in connection with the services rendered pursuant to the Commitment except for the liability for claims, liabilities, losses or damages finally determined by a court of competent jurisdiction to have resulted from action taken or omitted to be taken by such Indemnified Party in bad faith or to be due to such Indemnified Party's willful misconduct, or gross negligence. No person guilty of fraudulent misrepresentation (within the meaning of Section 11 (f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The indemnity, contribution and expense reimbursement obligations set forth herein (i) shall be in addition to any liability the Indemnifying Party may have to any Indemnified Party at common law or otherwise, (ii) shall survive the termination of the Commitment and (iii) shall remain operative and in full force and effect regardless or any investigation made by or on behalf of the DLJ Bridge or any other Indemnified Party. 12 EXHIBIT B SUBORDINATION PROVISIONS Set forth below is substantially the form of subordination provisions for each of the Subordinated Bridge Notes (the "Notes") which will be set forth in the Definitive Documents, subject to conforming changes. (a) Notes Subordinated to Designated Senior Debt. The Issuer for itself and its successors, and each Holder, by its acceptance of the Notes, agrees that the payment of the Subordinated Obligations [to be defined to mean principal and interest (including post-petition interest as provided below) on the Subordinated Bridge Notes and any claim for rescission or damages in respect thereof under any applicable law] by the Issuer is subordinated, to the extent and in the manner provided in this Section, to the prior payment of Designated Senior Debt; provided that the provisions of this Section do not apply to, and the Notes are not subordinated in respect of, the proceeds of the Permanent Financing. This Section will constitute a continuing offer to all persons who, in reliance upon its provisions, become holders of, or continue to hold, Designated Senior Debt, and such provisions are made for the benefit of the holders of Designated Senior Debt, and such holders are made obligees under this Section and they and/or each of them may enforce its provisions. (b) No Payment on Notes in Certain Circumstances. (i) No payment will be made on account of the Subordinated Obligations, or to acquire any of the Notes for cash or property other than capital stock of the Issuer, or on account of the redemption provisions of the Notes (x) upon the maturity of any Designated Senior Debt by lapse of time, acceleration or otherwise, unless and until all such Designated Senior Debt shall first be paid in full or provided for in cash or cash equivalents or such payment duly provided for or (y) in the event that the Issuer defaults in the payment of any principal of or interest on or any other amounts payable on or due in connection with any Designated Senior Debt when it becomes due and payable, whether at maturity or at a date fixed for prepayment or by declaration or otherwise, unless and until such default has been cured or waived in writing. (ii) Upon the happening of any event of default (or if an event of default would result upon any payment with respect to the Subordinated Obligations) with respect to any Designated Senior Debt, as such event of default is defined in the instruments evidencing such Designated Senior Debt or under which it is outstanding, permitting the holders to accelerate its maturity (if the default is other than default in payment of the principal of or interest on or any other amount due in connection with such Designated Senior Debt) upon written notice of the event of default given to the Issuer by the holders of such Designated Senior Debt, then, unless and until such event of default has been cured or waived in writing, no payment will be made by the Issuer with respect to the Subordinated Obligations or to acquire any of the Notes for cash, property or securities other than capital stock of the Issuer or with regard to redemption of Notes; provided that this paragraph (ii) will not prevent the making of any payment for a period of more than 179 days after the date the written notice of the default is given unless such Designated Senior Debt in respect of which such event of default exists has been declared due and payable in its entirety within that period, and that declaration has not been rescinded. If such Designated Senior Debt is not declared due and payable within 179 days after the written notice 1 of the default is given, promptly after the end of the 179 day period the Issuer will pay all sums not paid during the 179-day period because of this paragraph (ii) unless paragraph (i) above is then applicable. During any 360-day consecutive period only one such period during which payment of principal of, or interest on, the Notes may not be made may commence and the duration of such period may not exceed 179 days. (iii)If any payment or distribution of assets of the Issuer is received by any Holder in respect of the Subordinated Obligations at a time when that payment or distribution should not have been made because of paragraph (i) or (ii), such payment or distribution will be received and held in trust for and will be paid over to the holders of Designated Senior Debt which is due and payable and remains unpaid or unprovided for (pro rata as to each of such holders on the basis of the respective amounts of Designated Senior Debt which is due and payable held by them) until all such Designated Senior Debt has been paid in full or provided for in cash or cash equivalents, after giving effect to any concurrent payment or distribution or provision therefor to the holders of such Designated Senior Debt. (c) Notes Subordinated to Prior Payment of all Designated Senior Debt on Dissolution, Liquidation or Reorganization. Upon any distribution of assets of the Issuer upon any dissolution, winding up, liquidation or reorganization of the Issuer (whether in bankruptcy, insolvency, receivership or similar proceeding related to the Issuer or its property or upon an assignment for the benefit of creditors or otherwise): (i) the holders of all Designated Senior Debt will first be entitled to receive payment in full or provision for payment in full in cash or cash equivalents of the principal of and interest due on Designated Senior Debt and other amounts due in connection with Designated Senior Debt (including interest accruing subsequent to an event specified in Sections _____ [certain bankruptcy events] and ___________ [winding up] at the rate provided for in the documents governing such Designated Senior Debt, whether or not such interest is an allowed claim enforceable against the debtor in a Bankruptcy case under Title 11 of the United States Code), before the Holders are entitled to receive any payment on account of the principal of or interest on the Notes; (ii) any payment or distribution of assets of the Issuer of any kind or character, whether in cash, property or securities, to which the Holders would be entitled except for the provisions of this Section will be paid by the liquidating trustee or agent or other person making such a payment or distribution directly to the holders of Designated Senior Debt or their representatives to the extent necessary to make payment in full or provision for payment in full in cash or cash equivalents of all Designated Senior Debt remaining unpaid, after giving effect to any concurrent payment or distribution or provision therefor to the holders of such Designated Senior Debt ; and (iii)if, notwithstanding the foregoing, any payment or distribution of assets of the Issuer of any kind or character, whether in cash, property or securities is received by the Holders on account of the Subordinated Obligations before all Designated Senior Debt is paid in full or provided for in cash or cash equivalents, such payment or distribution will be received and held in trust for and will be paid over to the holders of the Designated Senior Debt remaining unpaid or unprovided for or their representatives for application to the payment of such Designated Senior Debt until all such Designated Senior Debt has been paid in full or provided for in cash or cash 2 equivalents, after giving effect to any concurrent payment or distribution or provision therefor to the holders of such Designated Senior Debt. The Issuer will give prompt written notice to the Holders of any dissolution, winding up, liquidation or reorganization of it or any assignment for the benefit of its creditors and of any event of default in respect of Designated Senior Debt. (d) For purposes of this Section, the words "cash, property or securities" shall not be deemed to include (x) shares of capital stock of the Issuer as reorganized or readjusted, (y) securities of the Issuer or any other corporation provided for by a plan of reorganization or readjustment which are subordinated, to at least the same extent as the Notes, to the payment of all Designated Senior Debt then outstanding or (z) any payment or distribution of securities of the Issuer or any other corporation authorized by an order or decree giving effect, and stating in such order or decree that effect has been given, to subordination of the Notes to Designated Senior Debt and made by a court of competent jurisdiction in a reorganization proceeding under any applicable bankruptcy, insolvency or similar law. For purposes of this Section, "payment on the account of the Subordinated Obligations" shall not include the Warrants, any shares issued upon exercise of the Warrants or any sale or transfer of any of the foregoing. (e) Holders to be Subrogated to Rights of Holders of Designated Senior Debt. Following the payment in full or provision for payment in full of all Designated Senior Debt, the Holders will be subrogated to the rights of the holders of Designated Senior Debt to receive payments or distributions of assets of the Issuer applicable to the Designated Senior Debt until all amounts owing on the Notes have been paid in full, and for the purpose of such subrogation no such payments or distributions to the holders of Designated Senior Debt by or on behalf of the Issuer or by or on behalf of the Holders by virtue of this Section which otherwise would have been made to the Holders will, as between the Issuer and the Holders, be deemed to be payment by the Issuer to or on account of the Designated Senior Debt, it being understood that the provisions of this Section are and are intended solely for the purpose of defining the relative rights of the Holders, on the one hand, and the holders of Designated Senior Debt, on the other hand. (f) Obligations of the Issuer Unconditional. Nothing contained in this Section or elsewhere in the Notes is intended to or will impair, as between the Issuer and the Holders, the obligations of the Issuer, which are absolute and unconditional, to pay to the Holders the Subordinated Obligations as and when they become due and payable in accordance with their terms, or is intended to or will affect the relative rights of the Holders and creditors of the Issuer other than the holders of the Designated Senior Debt, nor will anything herein or therein prevent any Holder from exercising all remedies otherwise permitted by applicable law upon default under this Note, subject to the rights if any, under this Section of the holders of Designated Senior Debt in respect of cash, property or securities of the Issuer received upon the exercise of any such remedy. (g) Subordination Rights not Impaired by Acts or Omissions of the Issuer or Holders of Designated Senior Debt. No right of any present or future holders of any Designated Senior Debt to enforce subordination as provided herein will be any time in any way be prejudiced or impaired by any act or failure to act on the part of the Issuer or by any act or failure to act by any such holder, or by any noncompliance by the Issuer with the terms of this Note, regardless of any knowledge thereof which any such holder may have or otherwise be charged with. The holders of Designated Senior Debt may extend, renew, modify or amend the terms of the Designated Senior Debt or any security therefor and release, sell or exchange such security and otherwise deal freely with the Issuer, all without affecting the liabilities and obligations of the parties to the document or the Holders. No amendment to 3 these provisions will be effective against the holders of the Designated Senior Debt who have not consented thereto in writing. (h) Not to Prevent Events of Default. The failure to make a payment on account of the Subordinated Obligations by reason of any provision of this Section will not be construed as preventing the occurrence of an Event of Default. 4 [Letterhead] July 14, 1997 Jitney-Jungle Stores of America, Inc. 1770 Ellis Avenue Suite 200 Jackson, Mississippi, 39204 Attention: Mr. Michael E. Julian President & Chief Executive Officer Gentlemen: This will confirm our agreement to modify the second paragraph of the letter agreement between us dated July 3, 1997 to read as set forth below. "We understand that the total cash proceeds required to consummate the Transaction are approximately $281.4 million and that such funds will be provided as follows: (i) borrowings by the Company of approximately $75.0 million under a $150.0 million senior secured financing (the "Bank Credit Facility") consisting of a six and one half-year amortizing revolving credit facility; (ii) the issuance by the Company, for cash, of up to $200.0 million of senior subordinated increasing rate notes (the "Bridge Notes"); and (iii) approximately $6.4 million of available cash." Please indicate your agreement to the foregoing by executing this document. Sincerely, DLJ Bridge Finance, Inc. /s/ Paul Thompson III ------------------------- By: Paul Thompson III Title: Chief Operating Officer Accepted and Agreed to this July 3, 1997 Jitney-Jungle Stores of America, Inc. /s/ Michael Julian - ------------------------------------- By: Michael Julian Title: President and Chief Executive Officer EX-99.(B)(2) 12 EXHIBIT 99.(B)(2) July 7, 1997 Jitney-Jungle Stores of America, Inc. 1770 Ellis Avenue Suite 200 Jackson, MS 39204 Attention: Mr. Michael E. Julian President and Chief Executive Officer Dear Michael: Based on our discussions concerning the proposed acquisition (the "Acquisition") by Jitney-Jungle Stores of America, Inc. ("Jitney") of Delchamps, Inc. (the "Target" or the "Company"), Fleet Capital Corporation ("Fleet") is pleased to provide you with financing commitments for, and its agreement to act as administrative and collateral agent (the "Administrative Agent") in connection with,$150,000,000 of Senior Facilities (as hereinafter defined) described in this letter and in the attached summary of terms and conditions (the "Annex" and, together with this letter, the "Commitment Letter"), and its undertaking to syndicate (in such capacity, the "Arranger") the Senior Facilities to the Lenders (as defined under the section "Lenders" in the Annex). As Fleet presently understands the transaction, Jitney will enter into a merger agreement (the "Merger Agreement") with Target. Jitney will form a single purpose wholly owned subsidiary ("Newco") and, pursuant to the Merger Agreement, Newco will commence a cash tender offer (the "Tender Offer") for all outstanding shares of stock of Target. As soon as practicable following the purchase of stock pursuant to the Tender Offer, pursuant to the Merger Agreement, Newco will be merged with and into Target (the "Merger"). The aggregate consideration per share paid pursuant to the Tender Offer and the Merger shall not exceed $30 and the purchase price for all outstanding shares of stock on a fully diluted basis shall not exceed $228,000,000. In connection with the Acquisition, approximately $34,400,000 of Target's debt will be refinanced and Jitney and Target will incur costs and expenses as described in the projections provided to Fleet not to exceed $45,300,000. The Acquisition, the Merger, the costs and expenses and the financings contemplated in connection therewith are collectively referred to as the "Transaction." You have asked Fleet to provide you with commitments for senior secured debt facilities aggregating $150,000,000 (the "Senior Facilities") required in connection with the Transaction and to provide working capital for Jitney and its subsidiaries (including Target following consummation of the Acquisition), consisting of a six and one-half year amortizing revolving credit facility in the amount of $150,000,000 (the "Revolving Credit Facility"), with a $30,000,000 sublimit for the issuance of standby and trade letters of credit. To finance the Acquisition, to pay fees and expenses incurred in connection with the Transaction and to refinance existing debt of Target and existing senior secured debt of Jitney, we understand that (a) immediately prior to or concurrently with the closing of the Senior Facilities Jitney will receive $200,000,000 in gross proceeds from its issuance of $200,000,000 fixed rate senior subordinated debt securities (the "Subordinated Debt") requiring amortization no earlier than six months following the scheduled final maturity of the Senior Facilities in the event the Subordinated Debt is issued as a bridge loan, and otherwise (including under any facility that refinances any such bridge loan) no earlier than the maturity of Jitney's existing senior unsecured notes and bearing interest (cash) in any year during which any portion of the Senior Facilities is scheduled to remain outstanding at an aggregate rate per annum not to exceed in the event the Subordinated Debt is issued as a bridge loan, the rates set forth in the draft term sheet previously submitted to Fleet, and otherwise (including under any facility that refinances any such bridge loan) 15% and (b) the Lenders will provide up to $115,000,000 under the Senior Facilities. Subject to the satisfaction of the conditions contained in this Commitment Letter and your acceptance hereof, Fleet commits to lend the entire amount of the Senior Facilities, on the terms and conditions referred to in this Commitment Letter, and undertakes in its capacity as the Arranger to arrange a syndicate of lenders to act as Lenders under the Senior Facilities. Please note, however, that the terms and conditions of this commitment and undertaking are not limited to those set forth in this Commitment Letter. Those matters that are not covered or made clear herein or in the attached Annex are subject to mutual agreement of the parties. The terms and conditions of this commitment and undertaking may be modified only in writing. In addition, this commitment and undertaking is subject to: (a) the preparation, execution and delivery of mutually acceptable loan documentation, including a credit agreement incorporating substantially the terms and conditions outlined herein and in the Annex, (b) the absence of (i) a material adverse change in the business, condition (financial or otherwise), operations, performance, properties or prospects of Jitney and its subsidiaries taken as a whole since May 3, 1997, or Target and its subsidiaries taken as a whole since March 29, 1997, and 2 (ii) the absence of any material disruption of or material adverse change in current financial, banking or capital market conditions that, in the good faith judgment of Fleet, could materially impair the satisfactory syndication of the Senior Facilities, (c) the material accuracy and completeness of all representations that you make to us and all information that you furnish to us in connection with this commitment and undertaking and your compliance with the terms of this Commitment Letter, (d) no development or change occurring after the date hereof, and no information becoming known after the date hereof, that (i) results in or could reasonably be expected to result in a material change in, or material deviation from, the Pre-Commitment Information (as hereinafter defined), including, without limitation, a material change in the terms of the Transaction or any part thereof that is or could reasonably be expected to be adverse: to Jitney and its subsidiaries taken as a whole or to Target and its subsidiaries taken as a whole or to the Administrative Agent or the Lenders; or in the legal, tax, accounting or financial aspects of the Transaction or any part thereof; or to the post-Transaction corporate or capital structure of Jitney and its subsidiaries contemplated in this Commitment Letter and in the Pre-Commitment Information, or (ii) has had or could reasonably be expected to have a Material Adverse Effect (as defined under the section "Conditions Precedent to Initial Extension of Credit" in the Annex) and (e) a closing of the Tender Offer on or before September 30, 1997 and the Merger on or before the six month anniversary of the closing of the Tender Offer. Fleet's commitment and undertaking set forth in this Commitment Letter may also be terminated upon written notice by Fleet if any event occurs or any information becomes available that, in its judgment, results or is reasonably likely to result in the failure to satisfy on a timely basis any condition set forth in the immediately preceding paragraph. Fleet's agreement herein is to provide the entire amount of the Senior Facilities on a fully underwritten basis. Fleet, however, reserves the right, in its capacity as the Arranger, to syndicate the Senior Facilities to additional Lenders with a corresponding reduction in Fleet's commitment hereunder. The Arranger will manage all aspects of the syndication in consultation with you, including the timing of all offers to potential Lenders and the acceptance of commitments, the amounts offered and the compensation provided. By acceptance of this Commitment Letter, you agree to take all actions that the Arranger may reasonably request to assist it in forming a syndicate acceptable to it and you. Your assistance in forming such a syndicate shall include but not be limited to: (a) making your senior management and representatives and senior management and representatives of the Company and its subsidiaries available to participate in information meetings with potential Lenders at such times and places as the Arranger may reasonably request; (b) using your best efforts to ensure that the syndication efforts of the Arranger benefit from your lending relationships and those of the Target; and 3 (c) providing the Arranger with all information reasonably deemed necessary by it to complete a successful syndication. To ensure an orderly and effective syndication of the Senior Facilities, you agree that until the termination of the syndication (as evidenced by written notification received by you from the Arranger), you will not, and will not permit any of your affiliates to, syndicate or issue, attempt to syndicate or issue, announce or authorize the announcement of the syndication or issuance of, or engage in discussions concerning the syndication or issuance of, any debt facility or debt security of Jitney or any of its subsidiaries (including any renewals thereof), without the prior written consent of the Arranger, other than the issuance and sale of the Subordinated Debt and the consent solicitation with respect to Jitney's existing $200,000,000 principal amount of senior unsecured notes. You agree that Fleet will act as the sole administrative and collateral agent for the Senior Facilities and as the sole arranger for the Senior Facilities and that no additional agents, co-agents or arrangers will be appointed, or other titles conferred, without the prior consent of Fleet. You agree that no Lender will receive any compensation of any kind for its participation in the Senior Facilities, except as expressly provided for in the Fee Letter or in the Annex; provided that Fleet acknowledges it is Fleet's intention to invite participation in the Senior Facilities from both CS First Boston and DLJ Capital Funding, Inc., with tier 1 titles as documentation agents and with commitment amounts to be mutually agreeable to you and Fleet. In addition to the fees described in the Annex, you hereby confirm your agreement to pay Fleet when due the nonrefundable fees for the Senior Facilities (the "Agreed Fees") set forth in the Fee Letter. You agree to indemnify and hold harmless Fleet, individually and in its capacity as the Administrative Agent and the Arranger, each Lender and each of their affiliates and their officers, directors, employees, agents, advisors and other representatives (each an "Indemnified Party") from and against any and all claims, damages, losses, liabilities and expenses (including, without limitation, reasonable fees and expenses of counsel) that may be incurred by or asserted or awarded against any Indemnified Party, in each case arising out of or in connection with or by reason of, or in connection with the preparation for a defense of, any investigation, litigation or proceeding arising out of, related to or in connection with (a) the Transaction or any similar transaction and any of the other transactions contemplated hereby and thereby, (b) any acquisition or proposed acquisition or similar business combination or proposed business combination by you or any of your subsidiaries or affiliates of all or any portion of the shares of 4 capital stock or substantially all of the assets of the Target or any of its subsidiaries or (c) the Senior Facilities and any other financings, or any use made or proposed to be made with the proceeds thereof, in each case whether or not such investigation, litigation, or proceeding is brought by you, your shareholders or creditors or an Indemnified Party or an Indemnified Party is otherwise a party thereto and whether or not the Transaction is consummated, except to the extent such claim, damage, loss, liability or expense is found in a final, nonappealable judgment by a court of competent jurisdiction to have resulted from such Indemnified Party's gross negligence or willful misconduct. You also agree that no Indemnified Party shall have any liability (whether direct or indirect, in contract or tort or otherwise) to you or your subsidiaries or affiliates or to your or their respective security holders or creditors arising out of, related to or in connection with the Transaction, except for actual and direct damages, as opposed to consequential, special, exemplary, indirect, punitive or other damages, determined in a final nonappealable judgment by a court of competent jurisdiction to have resulted from such Indemnified Party's gross negligence or willful misconduct. In further consideration of the commitment and undertaking of Fleet hereunder, and recognizing that in connection herewith Fleet is incurring substantial costs and expenses, including, without limitation, fees and expenses of counsel and due diligence, syndication (including printing, distribution and bank meetings), transportation, computer, duplication, appraisal, audit, insurance, consultant, search, filing and recording fees, you agree to pay, from time to time upon request, such costs and expenses (whether incurred before or after the date hereof), regardless of whether the Transaction (or any part thereof) is consummated or any loan documentation is entered into. You also agree to pay all costs and expenses of Fleet (including, without limitation, fees and expenses of counsel) incurred in connection with the enforcement of this Commitment Letter and the Fee Letter. Fleet will endeavor to notify you when in its good faith judgment expenses (other than legal fees) exceed $50,000. You may from time to time request from Fleet a good faith estimate of expenses incurred to any date. You should be aware that Fleet or one or more of its affiliates may be providing financing or other services to parties whose interests may conflict with yours. However, be assured that, consistent with Fleet's longstanding policy to hold in confidence the affairs of its customers, neither Fleet nor any of its affiliates will furnish confidential information obtained from you to any of its other customers. By the same token, Fleet and its affiliates will not make available to you confidential information that they have obtained or may obtain from any other customer. 5 You agree that this Commitment Letter and the Fee Letter are for your confidential use only and neither their existence nor the terms hereof or thereof will be disclosed by you to any person or entity other than your officers, directors, accountants, attorneys and other advisors, and then only on a "need to know" basis in connection with the Transaction and on a confidential basis, except that, following your return of an executed counterpart hereof to Fleet, you may (a) make public disclosure of the existence and amount of Fleet's commitment and undertaking under this Commitment Letter, (b) file a copy of this Commitment Letter in any public record in which it is required by law to be filed, (c) provide a copy of this Commitment Letter on a confidential basis to the Target and its officers, directors, accountants, attorneys and other advisors and (d) make such other public disclosures of the terms and conditions of this Commitment Letter as you are required by law, in the opinion of your counsel, to make. You agree that you will permit Fleet to review and approve any reference to Fleet or any of its affiliates or to any other agent or arranger under the Senior Facilities contained in any press release or similar public disclosure prior to public release. Your obligations under this Commitment Letter and the Fee Letter with respect to fees, indemnification, costs and expenses and confidentiality shall survive the expiration or termination of this Commitment Letter. You represent and warrant that (a) all written information that has been or will hereafter be made available by you or on your behalf or by any of your representatives in connection with the Transaction and the other transactions contemplated hereby to Fleet or any of its affiliates or representatives or to any Lender or any potential Lender is and will be, taken as a whole, complete and correct in all material respects and does not and will not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained therein not misleading in light of the circumstances under which such statements were or are made and (b) all financial projections, if any, that have been or will be prepared by you or on your behalf or by any of your representatives and made available to Fleet or any of its affiliates or representatives or to any Lender or any potential Lender in connection with the Transaction and the other transactions contemplated hereby have been or will be prepared in good faith based upon reasonable assumptions (it being understood that such projections are subject to significant uncertainties and contingencies, many of which are beyond your control, and that no assurance can be given that any particular projections will be realized). You agree to supplement the information and projections from time to time so that the representations and warranties contained in this paragraph remain complete and correct. 6 In issuing this commitment and undertaking, Fleet is relying on the accuracy of the information furnished to it by or on behalf of you or any of your subsidiaries or by or on behalf of the Target or any of its subsidiaries (collectively, the "Pre-Commitment Information"). The business and financial terms set forth in this Commitment Letter have been established based on the Pre-Commitment Information. The obligations of Fleet under this Commitment Letter and of any Lender that issues a commitment for the Senior Facilities are made solely for your benefit and may not be relied upon or enforced by any other person or entity. This Commitment Letter shall be governed by, and construed in accordance with, the laws of the State of New York. This Commitment Letter may be executed in any number of 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 Commitment Letter. Delivery of an executed counterpart of this Commitment Letter by telecopier shall be effective as delivery of a manually executed counterpart of this Commitment Letter. Each of you and Fleet hereby irrevocably waives all right to trial by jury in any action, proceeding or counterclaim (whether based on contract, tort or otherwise) arising out of or relating to this Commitment Letter, the transactions contemplated hereby or the actions of Fleet in the negotiation, performance or enforcement hereof. Please evidence your acceptance of the provisions of this Commitment Letter (including, without limitation, the attached Annex) and the other transactions referred to above 7 by signing the enclosed copy of this Commitment Letter and returning it to the undersigned together with the accepted Fee Letter at or before 9:00 P.M. (New York City time) on July 8, 1997, the time at which Fleet's commitments and undertaking set forth above (if not so accepted prior thereto) will expire. Very truly yours, FLEET CAPITAL CORPORATION By /s/ Patrick R. Brocker ---------------------------------- Name: Patrick R. Brocker Title: Senior Vice President ACCEPTED this ___ day of July, 1997 JITNEY-JUNGLE STORES OF AMERICA, INC. By: /s/ Michael E. Julian ---------------------------- Name: Michael E. Julian Title: President 8 JITNEY-JUNGLE STORES OF AMERICA, INC. Summary of Terms and Conditions (Capitalized terms used herein and not otherwise defined shall have the meanings assigned to them in the attached Commitment Letter.) Borrowers: Jitney-Jungle Stores of America, Inc. and certain of its subsidiaries (including Target), as determined by Agent and Jitney. Guarantors: All of the existing and future direct and indirect subsidiaries of Jitney. Administrative Agent and Arranger: Fleet Capital Corp. (individually, "Fleet"). Lenders: Fleet, and other banks, financial institutions and institutional lenders acceptable to Fleet and Jitney (the acceptance by Jitney not to be unreasonably withheld or delayed). Prior to receipt of written notice from Fleet that the syndication of the Senior Facilities has been completed, no Lender may assign any part of its share thereof to any other potential Lender. Following receipt of the notice referred to in the immediately preceding sentence, each Lender may assign all or any part of its share thereof to one or more other banks, financial institutions and institutional lenders that are Eligible Assignees (to be defined in the loan documentation) and, upon such assignment, such banks, financial institutions or institutional lenders, as the case may be, shall become Lenders for all purposes under the loan documentation. Senior Facilities: Up to $150,000,000 at any time outstanding as a six and one-half year amortizing Senior Secured Revolving Credit facility (the "Revolving Credit Facility"), with a $30,000,000 sublimit for standby and trade letters of credit. The maximum amount available to the Borrowers under the Revolving Credit Facility and the Supplemental Availability will be reduced in equal quarterly installments during each year following the Closing Date ("Year 1", "Year 2," etc.) as follows: Year 1 $0 Year 2 $5 million Year 3 $7 million Year 4 $8 million Year 5 $9 million Year 6 $11 million First quarter Year 7 $6.5 million Second quarter Year 7 $6.5 million Letters of Credit: The expiration date of any trade Letter of Credit shall be not more than 180 days after the date of issuance thereof, the expiration date of any standby Letter of Credit shall be not more than one year after the date of issuance thereof (although any such Letter of Credit may be renewable for an additional one-year period on terms to be set forth in the loan documentation) and the expiration date of any Letter of Credit shall not occur on or after the final maturity date of the Revolving Credit Facility. Purpose: To (i) refinance indebtedness under the existing credit agreement by and among Jitney and certain of its subsidiaries, Fleet Bank, N.A. (as successor to NatWest Bank N.A.) as Agent and the lenders party thereto (the "Existing Credit Agreement"), (ii) finance in part the Transaction and to pay fees and expenses incurred in connection therewith, (iii) refinance indebtedness of Target in an amount approximating $34,400,000 and (iv) to provide working capital from time to time for Jitney and its subsidiaries. Closing Date: On or before September 30, 1997. Termination Date: Six and one-half years following the Closing Date. Security: The Borrowers and each of the Guarantors shall grant the Administrative Agent and the Lenders a valid and perfected first priority (subject to certain exceptions to be set forth in the loan documentation) lien and security interest in all of the following: (a) All shares of capital stock of each of Jitney's present and future subsidiaries. 2 (b) All other present and future property and assets, wherever located, real and personal, of such Borrower or such Guarantor, including, but not limited to, machinery and equipment, inventory and other goods, accounts receivable, owned real estate, leaseholds, fixtures, bank accounts, general intangibles, license rights, patents, trademarks, tradenames, copyrights, chattel paper, instruments, insurance proceeds, contract rights, hedge agreements, documents, instruments, indemnification rights, tax refunds and cash; provided that with respect to leased retail facilities of such Borrower or such Guarantor, leasehold mortgages will only be required on such stores which in the Administrative Agent's reasonable judgment generate significant revenue, and Borrowers and Guarantors will have 90 days from the Closing Date to provide such leasehold mortgages. (c) All proceeds and products of the property and assets described in clauses (a) and (b) above. The priority of the lien and security interest of the Administrative Agent and the Lenders shall be supported by such landlord and mortgagee waivers, warehousemen and bailee letters, bank consent agreements, third party consents, intercreditor agreements and other agreements as shall be requested by the Administrative Agent, in each case in form and substance satisfactory to the Administrative Agent. Availability: In multiple drawings from time to time at the time of and following the consummation of the Transaction. Each borrowing under the Revolving Credit Facility, subject to a swing line to be incorporated into the final loan documentation, shall be an amount of $1,000,000 or an integral multiple of $100,000 in excess thereof, and in each case shall be made on not less than one business day's notice in the case of Prime Rate advances and on not less than three business day's notice in the case of Eurodollar Rate advances. Availability under the Revolving Credit Facility to each Borrower shall be subject to a borrowing base comprised of the following: Advances to any Borrower up to 65% of eligible inventory of such Borrower plus, for all Borrowers in the aggregate an amount equal to the Supplemental Availability. The maximum Supplemental 3 Availability shall be an amount equal to $53,000,000 and the Supplemental Availability shall amortize as set forth above under the description of Senior Facilities. Eligibility will be defined in the loan documentation. Eligible inventory of Jitney and its subsidiaries (including Target and its subsidiaries) shall be defined as set forth in the Existing Credit Agreement. Eligible Inventory of Target and its subsidiaries shall be determined initially based upon a collateral audit conducted by Fleet. Amortization/ Repayment of Senior Facilities: As set forth under the description of Senior Facilities. Mandatory Prepayment and Commitment Reduction: All net cash proceeds (a) from sales of property and assets of Jitney and its subsidiaries (excluding sales of inventory in the ordinary course of business and excluding sales of obsolete and other equipment (and certain retail store and wholesale operations properties previously identified to the Administrative Agent) not to exceed an amount to be agreed upon in the aggregate until the Termination Date; provided that an amount equal to the net cash proceeds received from each such sale of equipment and other properties is reinvested as a capital expenditure within 12 months from receipt), (b) of Extraordinary Receipts (to be defined in the loan documentation and to exclude cash receipts in the ordinary course of business) of Jitney and its subsidiaries and (c) from the issuance of debt or equity of Jitney and its subsidiaries otherwise permitted under the loan documentation. The lesser of (a) 50% of annual Excess Cash Flow (to be defined in the loan documentation) of Jitney and its subsidiaries on a consolidated basis and (b) $7,000,000, except to the extent that the ratio of Indebtedness to EBITDA (such terms to be defined in the loan documentation) for the subject year is at or below 3.5 to 1.0, in which event no Excess Cash Flow prepayment shall be required. All of the foregoing mandatory prepayments shall be applied to the Senior Facilities, shall permanently reduce the commitment under the Revolving Credit Facility and shall reduce the Supplemental 4 Availability pro rata with respect to the remaining amortization schedule. Interest Rates and Interest Periods: At the Borrower's option, any advance made to it will be available at the rates and for the Interest Periods stated below: (a) Prime Rate - a fluctuating rate equal to (i) Fleet's "Prime Rate" (360 day basis) plus (ii) the Applicable Margin (as hereinafter defined). Fleet's "Prime Rate" is a fluctuating interest rate equal to the higher from time to time of (A) the rate of interest announced publicly by Fleet in Boston, Massachusetts, as its prime rate and (B) a rate equal to 1/2 of 1% per annum above the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as determined for any day by Fleet. Interest based on the Prime Rate shall be payable monthly in arrears. (b) Eurodollar Rate - a periodic fixed rate equal to --------------- (i) LIBOR (360 day basis) plus (ii) the Applicable Margin. LIBOR is the average rate per annum (rounded upward to the nearest of 1/16 of 1%) at which deposits in U.S. dollars as offered by Fleet to prime banks in the London interbank market at 11:00 A.M. (London time) two business days before the first day of the applicable Interest Period and in amounts substantially equal to the Eurodollar Rate advance to be made by Fleet as part of the applicable borrowing and with a maturity equal to such Interest Period, adjusted for reserve requirements. Interest Periods for Eurodollar Rate borrowings shall be one, two, three or six months, as selected by the Borrower. Interest based on the Eurodollar Rate shall be payable in arrears on the earlier of (A) the last day of the applicable Interest Period and (B) quarterly. The "Applicable Margin" means, at any time and from time to time prior to Jitney's fiscal quarter ending on or about January 31, 1998 (the "Initial Test Date"), with respect to the Revolving Credit Facility, 0.75% per annum for Prime Rate borrowings and 2.00% per annum for Eurodollar Rate borrowings. After the Initial Test Date, the Applicable Margin for the Revolving Credit Facility will 5 be adjusted on a fiscal quarterly basis as set forth in the loan documentation in accordance with Schedule A hereto. During the continuance of any default under the loan documentation, the Applicable Margin on all obligations owing under the loan documentation and the letter of credit fees shall increase by 2% per annum. Unused Commitment Fee: 0.425% per annum on the unused portion of each Lender's share of the Senior Facilities from the Closing Date until the Initial Test Date and adjusted thereafter on a fiscal quarterly basis as set forth in the loan documentation in accordance with Schedule A, payable quarterly in arrears and on the date of the termination or expiration of the commitments. Letter of Credit Fees: Fees for letters of credit issued as part of the Revolving Credit Facility (each a "Letter of Credit") shall be determined based on margins comparable to the Applicable Margin for Eurodollar Rate borrowings under the Revolving Credit Facility and shall be payable on the average daily outstanding undrawn amount of all Letters of Credit. A separate fee of 0.25% shall be payable to the fronting bank for the Letters of Credit, payable on the date of issuance thereof. Agent's Fees: As set forth in the Fee Letter. Conditions Precedent to Initial Extension of Credit: Those customarily found in credit agreements for similar secured financings and others appropriate in the judgment of Fleet for the Transaction, including, without limitation, the following: (a) (i) The Boards of Directors of the Target and Jitney shall have approved the Acquisition, (ii) the Target, Jitney and Newco shall have entered into the Merger Agreement which agreement shall be in form, scope and substance reasonably satisfactory to the Administrative Agent, and the Merger Agreement shall have been approved by the Boards of Directors of Target, Newco and Jitney, (iii) in the judgment of the Agent and its counsel, there shall be no material restriction under any applicable law on (x) the ability of the Target, Newco or Jitney to authorize, approve or consummate the Merger or (y) the ability of Newco to 6 vote shares of capital stock of the Target held by Newco (including those acquired under the Tender Offer) in favor of the Merger and to have such votes included among those necessary for approval of the Merger, (iv) (x) the Board of Directors of the Target shall have waived or redeemed all of the Target's common stock purchase rights, if any, or other "poison pill" at a price not to exceed an amount to be agreed upon between Jitney and Fleet or (y) such common stock purchase rights or other poison pills shall be made inapplicable to the Tender Offer and the Merger in a manner satisfactory in all respects to Fleet, and (v) neither the Tender Offer nor the Merger shall be subject to the provisions of any applicable state antitakeover law. (b) Newco shall have acquired and shall hold the unrestricted right to vote that number of the fully diluted shares of capital stock of Target necessary under applicable law for approval of the Merger by the Target's shareholders, free and clear of any lien, charge or encumbrance, other than the security interests securing the Senior Facilities created under the loan documentation (to the extent permitted under applicable law). (c) The Agent shall have received and been reasonably satisfied with the offer to purchase and all related materials pursuant to which the Tender Offer is made (collectively, the "Offering Materials"), and the Offering Materials shall provide in any event, among other things, for the purchase for cash of any and all shares of common stock of Target up to $30 per share, and the Tender Offer made thereunder shall have closed, without waiver, amendment or modification, except with the prior written consent of Fleet. (d) The final terms and conditions of the Transaction (including, without limitation, the terms and conditions of the Merger Agreement), including, without limitation, all legal and tax aspects thereof, (i) shall be as described herein and otherwise consistent in all material respects with the description thereof received in writing as part of the Pre-Commitment Information and (ii) shall be otherwise satisfactory to the Lenders; and all documentation relating to the Transaction shall be in form and substance reasonably satisfactory to the Lenders. The Transaction shall have been consummated on the Closing Date (except 7 for the Merger which shall be required to be effected on or prior to the six month anniversary of the Closing Date) in accordance with the documentation previously reviewed by and satisfactory to the Lenders, without any waiver or amendment of any term or condition therein not consented to by the Lenders and in compliance with all applicable laws and all necessary approvals. (e) All documentation relating to the Senior Facilities, including a credit agreement incorporating substantially the terms and conditions outlined herein, shall be in form and substance satisfactory to the Lenders. (f) The Lenders shall be reasonably satisfied with the corporate, legal and capital structure of each Borrower and each of the Guarantors, including, without limitation, the charter and bylaws of each Borrower and each such Guarantor and each agreement or instrument relating thereto. (g) After giving effect to the consummation of the Acquisition, the Lenders shall have a valid and perfected first priority (subject to certain exceptions to be set forth in the loan documentation) lien and security interest in all capital stock of Target held by Jitney or any of its affiliates and in the other collateral referred to under the section "Security" above; all filings, recordations and searches necessary or desirable in connection with such liens and security interests shall have been duly made; and all filing and recording fees and taxes shall have been duly paid. (h) There shall have occurred no material adverse change in the business, condition (financial or otherwise), operations, performance, properties or prospects (i) of Jitney and its subsidiaries, taken as a whole, since May 3, 1997 or Target and its subsidiaries, taken as a whole, since March 29, 1997 or (ii) of Jitney and its subsidiaries, taken as a whole, or Target and its subsidiaries, taken as a whole, from that described in the Pre-Commitment Information. (i) There shall exist no action, suit, investigation, litigation or proceeding pending or threatened in any court or before any arbitrator or governmental or regulatory agency or authority that (i) could reasonably be expected to (A) have a material 8 adverse effect on the business, condition (financial or otherwise), operations, performance, properties or prospects of Jitney and its subsidiaries, taken as a whole or Target and its subsidiaries, taken as a whole, (B) materially adversely affect the ability of any Borrower or any Guarantor to perform its obligations under the loan documentation or (C) materially adversely affect the rights and remedies of the Administrative Agent and the Lenders under the loan documentation or (ii) purports to adversely affect any aspect of the Transaction (including, without limitation, the Tender Offer and the Merger) or the Senior Facilities (each of the foregoing, a "Material Adverse Effect"). (j) All governmental and third party consents and approvals necessary in connection with each aspect of the Transaction and the Senior Facilities shall have been obtained (without the imposition of any conditions that are not acceptable to the Lenders) and shall remain in effect; all applicable waiting periods shall have expired without any adverse action being taken or threatened by any competent authority; and no law or regulation shall be applicable in the judgment of the Lenders that restrains, prevents or imposes materially adverse conditions upon any aspect of the Transaction or the Senior Facilities. (k) All of the Pre-Commitment Information shall be true and correct in all material aspects; and no development or change shall have occurred that (i) has resulted in or could reasonably be expected to result in a material adverse change in, or material adverse deviation from, the Pre-Commitment Information or (ii) has had or could reasonably be expected to have a Material Adverse Effect. (l) The Lenders shall be satisfied with the terms and conditions of (A) the long-term fixed rate subordinated debt securities (the "Subordinated Debt") to be issued by the Borrower on the Closing Date, the amortization of which shall not commence earlier than 6 months after the scheduled Termination Date in the event the Subordinated Debt is issued as a bridge loan, and otherwise (including under any facility that refinances any such bridge loan) no earlier than the maturity of Jitney's existing senior unsecured notes, and the interest (cash or otherwise) on which in any year during 9 which any portion of the Senior Facilities is scheduled to remain outstanding shall not exceed an aggregate rate of, in the event the Subordinated Debt is issued as a bridge loan, the rates set forth in the draft term sheet previously submitted to Fleet, and otherwise (including under any facility that refinances any such bridge loan) 15% per annum, (B) all existing indebtedness of Jitney and its subsidiaries (including without limitation the existing $200,000,000 senior unsecured notes of Jitney) and any consents or other solicitations required in connection therewith in order to consummate the Transaction. The Borrower shall have received at least $200,000,000 in gross cash proceeds from the sale of the Subordinated Debt, and all such proceeds, shall have been used or shall be used simultaneously with the initial extension of credit under the loan documentation for the purchase of shares of stock of Target pursuant to the Tender Offer. (m) All loans made by the Lenders to Jitney or any of its affiliates shall be in full compliance with all applicable margin and other regulations promulgated by the Board of Governors of the Federal Reserve System (including without limitation Regulations G, U, T and X). (n) The Borrower and each of the Guarantors shall have delivered letters from their respective chief financial officers, in form and substance satisfactory to the Lenders, attesting to the Solvency (as hereinafter defined) of the Borrower and such Guarantor, as the case may be, in each case individually and together with its subsidiaries, taken as a whole, immediately before and immediately after giving effect to the Transaction. As used herein, the term "Solvency" of any person means (i) the fair value of the property of such person exceeds its total liabilities (including, without limitation, contingent liabilities), (ii) the present fair saleable value of the assets of such person is not less than the amount that will be required to pay its probable liability on its debts as they become absolute and matured, (iii) such person does not intend to, and does not believe that it will, incur debts or liabilities beyond its ability to pay as such debts and liabilities mature and (iv) such person is not engaged, and is not about to engage, in business or a transaction for which its property would constitute an unreasonably small capital. At the 10 request of the Administrative Agent, the Borrower will cause an independent third party firm acceptable to the Administrative Agent to issue a solvency opinion, attesting to the Borrower's and each Guarantor's Solvency, in form and substance satisfactory to the Administrative Agent. (o) An environmental consultant engaged by Jitney and acceptable to the Administrative Agent shall have conducted an environmental analysis of the property and business of Target and its subsidiaries and such analysis shall be satisfactory to the Lenders in all respects. (p) The Lenders shall be satisfied that (i) Jitney and its subsidiaries (including Target) will be able to meet their respective obligations under all employee and retiree welfare plans, (ii) the employee benefit plans of Target and its subsidiaries are, in all material respects, funded in accordance with the minimum statutory requirements, (iii) no material "reportable event" (as defined in ERISA, but excluding events for which reporting has been waived) has occurred as to any such employee benefit plan and (iv) no termination of, or withdrawal from, any such employee benefit plan has occurred or is contemplated that could reasonably be expected to result in a material liability. (q) The Lenders shall be satisfied with the amount, types and terms and conditions of all insurance maintained by Jitney, the Target and their respective subsidiaries, and the Lenders shall have received one or more endorsements naming the Administrative Agent, on behalf of the Lenders, as an additional insured and loss payee under all insurance policies to be maintained with respect to the properties of Jitney, the Target and their respective subsidiaries forming part of the Lenders' collateral described under the section "Security" above. (r) The Lenders shall have received all additional financial, business and other information regarding Jitney, the Target and their respective subsidiaries and properties as they shall have reasonably requested. The Administrative Agent shall have had the opportunity to audit the books and records of Target and its subsidiaries and the results of such audit shall be satisfactory to the Administrative Agent. The Administrative Agent shall have received evidence 11 satisfactory to it that the existing indebtedness of Target immediately prior to consummation of the Acquisition is approximately $34,400,000. (s) The Lenders shall have received (i) satisfactory opinions of counsel for the Borrowers and the Guarantors, and of local counsel for the Lenders as to the Transaction (including, without limitations, the tax aspects thereof and compliance with all applicable securities laws) and (ii) such corporate resolutions, certificates and other documents as the Lenders shall reasonably request. (t) There shall exist no default under any of the loan documentation, and the representations and warranties of the Borrowers, each of the Guarantors and each of their respective subsidiaries therein shall be true and correct immediately prior to, and after giving effect to, the initial extension of credit under the loan documentation. (u) All accrued fees and expenses of the Administrative Agent and the Lenders (including the fees and expenses of counsel and local counsel) shall have been paid. (v) The Borrowers will have availability under the Revolving Credit Facility plus available cash on hand in an aggregate amount not less than $35,000,000 (giving effect to consummation of the Transaction on a pro forma basis (including, without limitation, payment of the aggregate consideration payable to acquire all outstanding shares of capital stock of Target pursuant to the Tender Offer and the Merger) and to all payables being current and all transaction fees, costs and expenses in connection with the Transaction being paid). The Administrative Agent shall be satisfied that Jitney will at all times prior to consummation of the Merger have availability under the Revolving Credit Facility plus cash on hand in an aggregate amount sufficient to acquire all outstanding shares of capital stock of Target pursuant to the Tender Offer and the Merger (other than shares previously acquired by Jitney or Newco). 12 Conditions Precedent to Subsequent Extensions of Credit: There shall exist no default under any of the loan documentation, and the representations and warranties of the Borrowers, each of the Guarantors and each of their respective subsidiaries therein shall be true and correct in all material respects immediately prior to, and after giving effect to, such extension of credit. Representations and Warranties: Those customarily found in credit agreements for similar secured financings and others appropriate in the judgment of Fleet for the Transaction, including, without limitation, absence of any material adverse change in the business, condition (financial or otherwise), operations, performance, properties or prospects of Jitney and its subsidiaries, taken as a whole, since May 3, 1997. Covenants: Those affirmative, negative and financial covenants customarily found in credit agreements for similar secured financings (including, without limitation, covenants of the type set forth in the Existing Credit Agreement), applicable to Jitney and each of its subsidiaries, and others appropriate in the judgment of Fleet for the Transaction, including, without limitation, financial covenants of the type set forth in the Existing Credit Agreement. Events of Default: Those customarily found in credit agreements for similar secured financings and others appropriate in the judgment of Fleet for the Transaction. Expenses: The Borrowers shall pay all of the Administrative Agent's due diligence, syndication (including printing, distribution and bank meetings), transportation, computer, duplication, appraisal, audit, insurance, consultant, search, filing and recording fees and all other out-of-pocket expenses (including the fees and expenses of counsel for the Administrative Agent), whether or not any of the transactions contemplated hereby are consummated, as well as all expenses of the Administrative Agent in connection with the administration of the loan documentation. The Borrowers shall also pay the expenses of the Administrative Agent and the Lenders in connection with the enforcement of any of the loan documentation (including the fees and expenses of counsel). Indemnity: The Borrowers and the Guarantors, jointly and severally, will indemnify and hold harmless the Administrative Agent, each Lender and each of their affiliates and their officers, directors, 13 Schedule A - ------------------------------------------------------------------------------- Indebtedness/EBITDA Eurodollar Rate Prime Rate Unused Applicable Margin Applicable Margin Commitment Fee - ------------------------------------------------------------------------------- > 5.0 2.25% 1.00% .50% - - ------------------------------------------------------------------------------- > 4.25 but < 5.0 2.00 .75 .425 - - ------------------------------------------------------------------------------- > 3.75 but < 4.25 1.75 .50 .375 - - ------------------------------------------------------------------------------- > 3.25 but < 3.75 1.50 .25 .25 - - ------------------------------------------------------------------------------- < 3.25 1.25 0 .25 - ------------------------------------------------------------------------------- Indebtedness and EBITDA will be defined in the loan documents. Indebtedness will be defined in a manner consistent with the Existing Credit Agreement. EBITDA will be calculated on a trailing four fiscal quarter basis in a manner set forth in the loan documents. employees, agents and advisors (each an "Indemnified Party") from and against any and all claims, damages, losses, liabilities and expenses (including, without limitation, reasonable fees and expenses of counsel) that may be incurred by or asserted or awarded against any Indemnified Party, in each case arising out of or in connection with or by reason of, or in connection with the preparation for a defense of, any investigation, litigation or proceeding arising out of, related to or in connection with (a) the Transaction or any similar transaction of Jitney or any of its subsidiaries or its other affiliates and any of the other transactions contemplated in the loan documentation, (b) any acquisition or proposed acquisition or similar business combination or proposed business combination by Jitney or any of its subsidiaries or affiliates of all or any portion of the shares of capital stock or substantially all of the property and assets of any other person, (c) the Senior Facilities and any use made or proposed to be made with the proceeds thereof or (d) the actual or alleged presence of hazardous materials on any property of Jitney or any of its subsidiaries or any environmental action or proceeding relating in any way to Jitney or any of its subsidiaries or any of their respective properties, in each case, whether or not such investigation, litigation or proceeding is brought by Jitney, any of its subsidiaries, its shareholders or creditors or an Indemnified Party or an Indemnified Party is otherwise a party thereto and whether or not the Transaction is consummated, except to the extent such claim, damage, loss, liability or expense is found in a final, nonappealable judgment by a court of competent jurisdiction to have resulted from such Indemnified Party's gross negligence or willful misconduct. Each Borrower and Guarantor will further agree that no Indemnified Party shall have any liability (whether direct or indirect, in contract or tort or otherwise) to Jitney or any of its subsidiaries or to their respective security holders or creditors arising out of, related to or in connection with the Transaction, except for actual and direct damages, as opposed to special, exemplary, indirect, consequential, punitive or other damages, determined in a final nonappealable judgment by a court of competent jurisdiction to have resulted from such Indemnified Party's gross negligence or willful misconduct. Required Lenders: Majority of commitments. Assignments and Participation: Assignments, with Jitney's consent (not to be unreasonably withheld or delayed) and the consent of the Administrative Agent 14 (not to be unreasonably withheld or delayed), must be to Eligible Assignees and, in each case other than an assignment to a Lender or an assignment of the entirety of a Lender's interest in the Senior Facilities, in a minimum amount of $10,000,000. Each Lender will also have the right, without consent of the Borrower or the Administrative Agent, to assign (i) as security all or part of its rights under the loan documentation to any Federal Reserve Bank and (ii) all or part of its rights or obligations under the loan documentation to any of its affiliates. No participation shall include voting rights, other than for reductions or postponements of amounts payable or release of all or substantially all of the collateral. A processing and recordation fee of $3,000 shall be payable to the Administrative Agent for each assignment by the assignor or assignee bank. Taxes: All payments to be free and clear of any present or future taxes, withholdings or other deductions whatsoever (other than income taxes in the jurisdiction of the Lender's applicable lending office). The Lenders will use reasonable efforts (consistent with their respective internal policies and legal and regulatory restrictions and so long as such efforts would not otherwise be disadvantageous to such Lenders) to minimize to the extent possible any applicable taxes, and the Borrower will indemnify the Lenders and the Administrative Agent for such taxes paid by the Lenders or the Administrative Agent. Miscellaneous: Standard yield protection (including compliance with risk-based capital guidelines, increased cost, payments free and clear of withholding taxes and interest period breakage indemnities), Eurodollar illegality and similar provisions, defaulting lender provisions, waiver of jury trial and submission to jurisdiction. Governing Law: New York. Counsel for the Administrative Agent: Kaye, Scholer, Fierman, Hays & Handler, LLP. 15 EX-99.(C)(1) 13 EXHIBIT 99.(C)(1) - -------------------------------------------------------------------------------- AGREEMENT AND PLAN OF MERGER BY AND AMONG JITNEY-JUNGLE STORES OF AMERICA, INC., DELTA ACQUISITION CORPORATION and DELCHAMPS, INC. July 8, 1997 - -------------------------------------------------------------------------------- TABLE OF CONTENTS Page ARTICLE I THE OFFER.................................................................1 1.1 The Offer............................................................1 1.2 Company Action.......................................................3 1.3 Directors............................................................5 ARTICLE II THE MERGER................................................................6 2.1 The Merger...........................................................6 2.2 Effect of the Merger.................................................6 2.3 Closing; Consummation of the Merger..................................6 2.4 Articles of Incorporation; Bylaws; Directors and Officers............6 2.5 Conversion of Securities.............................................7 2.6 Exchange of Certificates.............................................8 ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY.............................9 3.1 Organization and Qualification; Subsidiaries.........................9 3.2 Capitalization......................................................10 3.3 Authority Relative to this Agreement................................11 3.4 Non-Contravention; Approvals and Consents...........................11 3.5 Brokers and Finders.................................................12 3.6 SEC Filings.........................................................12 3.7 Absence of Certain Changes or Events................................13 3.8 Legal Proceedings...................................................13 3.9 Compliance with Law.................................................13 3.10 Taxes...............................................................13 3.11 ERISA and Related Matters...........................................15 3.12 Environmental Matters...............................................16 3.13 Information Supplied................................................18 3.14 Real Property.......................................................18 3.15 Labor Matters.......................................................19 3.16 Contracts; Certain Agreements.......................................20 3.17 Absence of Certain Liabilities......................................21 3.18 Opinion of Financial Advisor........................................21 3.19 Takeover Statute....................................................21 3.20 Insurance...........................................................21 3.21 Intellectual Property...............................................21 3.22 Certain Agreements..................................................22 i 3.23 Indemnification Claims..............................................22 3.24 Prior Negotiations..................................................22 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB.........................23 4.1 Organization of Parent and Sub......................................23 4.2 Authority Relative to this Agreement................................23 4.3 Non-Contravention; Approvals and Consents...........................23 4.4 Legal Proceedings...................................................24 4.5 Financing...........................................................24 4.6 Information Supplied................................................25 ARTICLE V COVENANTS OF THE COMPANY.................................................25 5.1 Conduct of Business by the Company Pending the Merger...............25 5.2 No Solicitation.....................................................27 5.3 Company Stock Plans.................................................29 ARTICLE VI ADDITIONAL COVENANTS.....................................................29 6.1 Proxy Statement and Special Meeting.................................29 6.2 HSR Matters.........................................................30 6.3 Publicity...........................................................31 6.4 Investigation; Confidentiality......................................32 6.5 Directors' and Officers' Indemnification and Insurance..............32 6.6 Change of Control Agreements........................................34 6.7 Fees and Expenses...................................................34 6.8 Conduct of Business of Sub..........................................34 6.9 Cooperation.........................................................34 6.10 Post-Offer Action...................................................34 6.11 Transaction Litigation..............................................35 ARTICLE VII CONDITIONS TO THE MERGER.................................................35 ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER .......................................35 8.1 Termination.........................................................35 8.2 Effect of Termination...............................................37 8.3 Termination Payment.................................................37 8.4 Amendment...........................................................39 8.5 Waiver..............................................................39 ii ARTICLE IX GENERAL PROVISIONS.......................................................39 9.1 Non-Survival of Representations, Warranties and Agreements..........39 9.2 Certain Definitions.................................................39 9.3 Notices.............................................................40 9.4 Headings............................................................41 9.5 Applicable Law......................................................41 9.6 No Assignment; Binding Effect.......................................41 9.7 Counterparts........................................................41 9.8 Third Party Beneficiaries...........................................41 9.9 Invalid Provisions..................................................41 9.10 Specific Performance................................................41 9.11 Entire Agreement....................................................42 9.12 Days................................................................42 9.13 Jurisdiction........................................................42 iii AGREEMENT AND PLAN OF MERGER This Agreement and Plan of Merger (the "Agreement"), dated as of July 8, 1997, is by and among Jitney-Jungle Stores of America, Inc., a Mississippi corporation ("Parent"), Delta Acquisition Corporation, an Alabama corporation and a wholly-owned subsidiary of Parent ("Sub"), and Delchamps, Inc., an Alabama corporation (the "Company"). WHEREAS, the respective Boards of Directors of Parent, Sub and the Company have each determined that it is advisable and in the best interests of their respective shareholders, on the terms and subject to the conditions in this Agreement (i) for Sub to make a cash tender offer to purchase all issued and outstanding shares of the Company's common stock, $.01 par value per share (the "Common Stock") and associated preferred share purchase rights (the "Rights") issued pursuant to the Rights Agreement (defined in Section 1.2) (such shares of Common Stock and associated Rights, the "Shares"), and (ii) following the consummation of the cash tender offer, for Sub to merge with and into the Company, with the result that the Company will become a wholly-owned subsidiary of Parent (the "Merger"). NOW THEREFORE, the parties hereto agree as follows: ARTICLE I THE OFFER 1.1 The Offer. (a) Provided that this Agreement shall not have been terminated in accordance with Section 8.1 and none of the events set forth in paragraph (c) of Annex A hereto shall have occurred and be existing, and subject to the provisions of this Agreement, no later than five business days after the date hereof, Parent shall cause Sub to, and Sub shall, commence (within the meaning of Rule 14d-2 under the Securities Exchange Act of 1934 (the "Exchange Act")) a tender offer (the "Offer") to purchase all of the issued and outstanding Shares, at a price per Share of $30.00 (such amount, or any greater amount per Share paid pursuant to the Offer, the "Per Share Price") net to each seller in cash. Subject to the provisions of this Agreement, Sub shall, and Parent shall cause Sub to, accept for payment and pay the Per Share Price for any Shares validly tendered and not withdrawn pursuant to the Offer as soon as practicable after the expiration of the Offer. (b) The obligation of Parent and Sub to consummate the Offer, and to accept for payment and pay for Shares tendered pursuant to the Offer, shall be subject to only those conditions set forth in Annex A. Parent and Sub may waive any such condition other than (i) the Minimum Condition (defined in Annex A), provided that Parent and Sub may reduce the Minimum Condition to a majority of the outstanding Shares on a fully diluted basis, or (ii) the condition relating to the expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"). Parent and Sub expressly reserve the right (but have no obligation) to increase the consideration per share payable in the Offer or amend, modify or make any changes in the terms and conditions of the Offer except that neither Parent nor Sub shall, without the prior written consent of the Company's Board of Directors, (i) impose conditions to the Offer in addition to those set forth in Annex A, (ii) decrease the Per Share Price, (iii) change the form of consideration, (iv) reduce the number of Shares sought to be purchased in the Offer, (v) extend the expiration date of the Offer (except as provided below in this paragraph), or (vi) otherwise change any term of the Offer in any manner adverse to the holders of Shares. The Offer shall expire on the twentieth business day after its commencement, except as provided below. The parties acknowledge their intention to consummate the transactions contemplated hereby as soon as reasonably practicable. To that end (provided that the conditions set forth in paragraphs (c)(iii) through (c)(ix) and (e) of Annex A have been met), Parent and Sub shall use commercially reasonable best efforts, subject to the terms of this Agreement (including Section 6.2 and Annex A), to consummate the Offer within 30 business days following commencement of the Offer, including the obtaining of requisite financing, the receipt of the consent of the holders of its 12% Senior Notes due 2006 as contemplated by Annex A and receipt of requisite governmental approvals (including in respect of the HSR Act) as contemplated by Annex A. If the conditions set forth in paragraphs (c)(iii) through (c)(ix) and (e) of Annex A have been met but the conditions set forth in either or both of paragraphs (b) or (d) of Annex A are not met within 30 business days following commencement of the Offer, Parent and Sub shall use commercially reasonable best efforts, subject to the terms of this Agreement (including Section 6.2 and Annex A), to consummate the Offer on or prior to the sixtieth calendar day following commencement of the Offer. Notwithstanding the foregoing, the parties acknowledge Parent's and Sub's right, without the consent of the Company, to extend the Offer on one or more occasions as follows: (i) extend the Offer, if at the then-scheduled expiration date of the Offer, any of the conditions to Sub's obligations to accept for payment and pay for Shares shall not be satisfied or waived, until such time as such conditions are satisfied or waived, (ii) extend the Offer for any period required by any rule, regulation, interpretation or position of the Securities and Exchange Commission ("SEC") or the staff thereof applicable to the Offer, (iii) extend the Offer on one or more occasions for an aggregate period of not more than 5 business days if the Minimum Condition has been satisfied but less than 80% of the outstanding Shares (on a fully diluted basis) have been validly tendered and not withdrawn, (iv) extend the Offer for any reason on one or more occasions for an aggregate period of not more than 10 business days beyond the initial expiration date or the latest expiration date that would otherwise be permitted under clause (i), (ii) or (iii) of this sentence, and (v) extend the Offer on one or more occasions for an aggregate period of not more than 60 calendar days after the date of the commencement of the Offer in order for Parent to obtain financing on terms acceptable to it; provided, however, that without the written consent of the Company, Parent and Sub may not extend the Offer (A) for any period that would end more than 60 calendar days after the date of the commencement of the Offer, unless on such sixtieth day any of the conditions on Annex A are not satisfied, or (B) for any period that would end more than 90 calendar days after the date of the commencement of the Offer; provided further that if on the initial expiration date of the Offer, or any extension thereof, the conditions set forth in paragraphs (c)(iii) through (c)(ix) and (e) of Annex A have been satisfied or waived but any of the conditions set forth in paragraphs (b), (c)(i), (c)(ii) or (d) in Annex A shall not have been satisfied or waived, Parent and Sub agree to extend the Offer one or more times (for such periods as Parent and Sub shall determine in their sole discretion) until 60 calendar days after the date of the commencement of the Offer; provided, further, that Parent and Sub may extend the Offer beyond such 90 calendar day period if 2 the conditions set forth in Annex A shall not have been satisfied as a result of a breach by the Company of its obligations under this Agreement. (c) On the date of commencement of the Offer, Parent and Sub shall file with the Securities and Exchange Commission (the "SEC") with respect to the Offer a Tender Offer Statement on Schedule 14D-1 (together with all amendments and supplements thereto, the "Schedule 14D-1"), and shall take such steps as are reasonably necessary to cause the Offer to Purchase (defined below) to be disseminated to the holders of Shares as and to the extent required by applicable federal securities laws. The Schedule 14D-1 shall contain an offer to purchase (the "Offer to Purchase") and forms of the related letter of transmittal and summary advertisement (the Offer to Purchase and such other documents, together with any amendments or supplements thereto, collectively, the "Offer Documents"). The Company and its counsel shall be given a reasonable opportunity to review and comment on the Schedule 14D-1 and the Offer Documents prior to their being filed with the SEC or disseminated to the Company's shareholders. Parent and Sub shall provide the Company and its counsel with a copy of any written comments that Parent or Sub receives from the SEC or its staff with respect to the Schedule 14D-1 and the Offer Documents promptly after receipt of any such comments. (d) Parent shall provide or cause to be provided to Sub on a timely basis the funds necessary to accept for payment, and pay for, any Shares that Sub becomes obligated to accept for payment, and pay for, pursuant to the Offer. (e) The parties understand and agree that the Per Share Price has been calculated based upon the accuracy of the representation and warranty set forth in Section 3.2(a) and that, in the event the number of outstanding Shares or Shares issuable upon the exercise of, or subject to, options or other agreements exceeds the amounts specifically set forth in Section 3.2(a) by more than 10,000 Shares (including without limitation as a result of any stock split, reverse stock split, stock dividend, including any dividend or distribution of securities convertible into Shares, recapitalization, or other like change occurring after the date of this Agreement), the Per Share Price shall be appropriately adjusted downward. The provisions of this paragraph (e) shall not, however, affect the representation set forth in Section 3.2(a). 1.2 Company Action. (a) The Company represents that (i) the Board of Directors of the Company (the "Board of Directors") has by unanimous vote of those present at the meeting at which the Offer and the Merger were considered duly approved the Offer and the Merger and this Agreement and has resolved to recommend acceptance of the Offer and approval of the Merger by the Company's shareholders; (ii) the affirmative vote of the holders of record of at least two-thirds of the Shares outstanding on the record date for the Special Meeting (defined below) and entitled to vote (the "Requisite Shareholder Approval") is the only vote of the holders of any class or series of the capital stock of the Company required to approve the Merger; and (iii) the Company has taken all necessary actions so that the provisions of Article Eleven of the Company's Articles of Incorporation will not 3 apply to this Agreement, the Offer, the Merger, or the acquisition of Shares by Parent or Sub pursuant to this Agreement. In addition, the Company represents that it has adopted Amendment No. 2 to the Rights Agreement dated as of October 14, 1988 by and between the Company and First Alabama Bank as Rights Agent, as amended by the Amendment to Rights Agreement dated as of October 16, 1992 by and between the Company and the Rights Agent (as so amended, the "Rights Agreement") and that a copy of such Amendment No. 2 has been delivered by the Company to Parent; that as of the date hereof and after giving effect to the execution and delivery of this Agreement, each Right is represented by the certificate representing the associated Share and is not exercisable or transferable apart from the associated Share; that there has not been a "Distribution Date" or "Shares Acquisition Date," and that the Company has taken all necessary actions so that the execution and delivery of this Agreement and the consummation of the Offer and the Merger will not result in the triggering of the provisions of Section 11 or Section 13 of the Rights Agreement or the occurrence of a "Distribution Date" or "Shares Acquisition Date" and will not result in Parent, Sub or any of their affiliates or associates becoming an "Acquiring Person" (as such terms are defined in the Rights Agreement) and that upon consummation of the Offer the Rights will no longer be outstanding and the former holders of the Rights will not have any claims or rights thereunder (without any necessity to redeem the Rights to effectuate the foregoing). The Company has been advised that all of its directors intend either to tender their Shares pursuant to the Offer or (solely in the case of directors who would as a result of the tender incur liability under Section 16(b) of the Exchange Act) to vote in favor of the Merger. (b) On the date the Schedule 14D-1 is filed with the SEC, the Company shall file with the SEC a Solicitation/Recommendation Statement on Schedule 14D-9 (together with all amendments and supplements thereto, the "Schedule 14D-9") and shall take such steps as are reasonably necessary to cause the Schedule 14D-9 to be disseminated to the holders of the Shares as and to the extent required by applicable federal securities laws. Subject to the provisions of Sections 5.2 and 8.3, the Offer Documents and the Schedule 14D-9 shall contain the recommendation of the Board of Directors that the Company's shareholders accept the Offer and vote to approve the Merger. Parent and its counsel shall be given a reasonable opportunity to review and comment on the Schedule 14D-9 prior to its being filed with the SEC or disseminated to the Company's shareholders. The Company shall provide Parent and its counsel with a copy of any written comments that the Company receives from the SEC or its staff with respect to the Schedule 14D-9 promptly after receipt of any such comments. (c) The Company shall promptly furnish Sub with mailing labels containing the names and addresses of the record holders of Shares and with lists of securities positions of Shares held in stock depositories, each as of a recent date, and shall furnish Sub with such additional information, including updated lists of shareholders, mailing labels and lists of securities positions, as Sub may reasonably request for the purpose of communicating the Offer to the holders of Shares. Except as and to the extent required by law and except for such steps as are necessary to disseminate the Offer Documents and any other documents necessary to consummate the Offer or the Merger, Parent and Sub shall hold in confidence the information contained in such labels and listings, and any other information relating to the holders of Shares received from the Company or its transfer agent, shall 4 use such information only in connection with the Offer and the Merger, and, if this Agreement is terminated in accordance with Section 8.1, shall deliver to the Company all such information, including all copies of and extracts or summaries from such information, then in their possession or control. 1.3 Directors. (a) Promptly upon payment by Sub for the Shares pursuant to the Offer, Sub shall be entitled to designate such number of directors, rounded up to the next whole number, as will give Sub representation on the Board of Directors equal to at least that number of directors equal to the product of (i) the total number of directors on the Board of Directors and (ii) the percentage that the number of Shares so purchased bears to the number of Shares outstanding, and the Company shall, at such time, use its best efforts to cause the appropriate number of directors who are members of the Board of Directors as of the date hereof to resign and Sub's designees to be appointed or elected; provided, however, that notwithstanding the foregoing, until the Effective Time (defined in Section 2.3), there shall be, to the extent they are willing to continue to serve, at least three directors on the Board of Directors who are directors on the date hereof and who are not designees nor officers, directors, employees or affiliates of Parent or Sub nor are employees of the Company or any of its Subsidiaries (the "Independent Directors"); provided, further, that if the number of Independent Directors shall be reduced below three for any reason, the Board of Directors shall, subject to the approval of the remaining Independent Directors, if any, designate a person or persons to fill the vacancy or vacancies who are directors on the date hereof and not an officer, director, employee or affiliate of Parent or Sub nor an employee of the Company. Any vacancies that cannot be filled in the foregoing manner shall be filled by the Board of Directors at its discretion. (b) The Company's obligations to appoint Sub's designees to the Board of Directors shall be subject to Section 14(f) of the Exchange Act and Rule 14f-1 thereunder. Parent and Sub shall supply and shall be solely responsible for all information with respect to themselves, their officers, directors and affiliates, and Sub's designees required by Section 14(f) and Rule 14f-1. (c) Following the election of Sub's designees pursuant to this Section and until the Effective Time, any amendment of this Agreement or the Articles of Incorporation or Bylaws of the Company, any termination of this Agreement by the Company, any extension by the Company of the time for the performance of any of the obligations or other acts of Parent or Sub, any waiver of any of the Company's rights hereunder, or any transaction between Parent (or any affiliate or associate thereof) and the Company shall require the concurrence of a majority of the Independent Directors. The Independent Directors shall have the authority to retain such counsel and other advisors at the expense of the Company as are reasonably appropriate to assist them in the exercise of their duties in connection with this Agreement. In addition, the Independent Directors shall have the authority to institute any action on behalf of the Company to enforce performance of this Agreement. 5 ARTICLE II THE MERGER 2.1 The Merger. At the Effective Time (defined in Section 2.3), in accordance with this Agreement and the provisions of the ABCA, Sub shall be merged with and into the Company, the separate existence of Sub shall cease, and the Company shall continue as the surviving corporation under the corporate name it possesses immediately prior to the Effective Time. The Company hereinafter sometimes is referred to as the "Surviving Corporation." Notwithstanding the foregoing, Parent may elect at any time after consummation of the Offer (or prior to the consummation of the Offer and with the written consent of the Company, which shall not be withheld unreasonably) and prior to the fifth business day immediately preceding the date of the notice of the meeting of shareholders of the Company to consider approval of the Merger and this Agreement that instead of merging Sub into the Company as hereinabove provided, to merge the Company with and into Parent, Sub or another direct or indirect wholly-owned subsidiary of Parent; provided however that each representation, warranty, covenant and agreement of Parent and Sub contained herein and relating to Sub shall thereupon be deemed to be made by Parent and such subsidiary and to relate to such subsidiary, and provided further that the Company shall not be deemed to have breached any of its representations, warranties or covenants herein solely by reason of such election. In such event the parties shall execute an appropriate amendment to this Agreement in order to reflect the foregoing and to provide that Parent, Sub or such other subsidiary of Parent shall be in all respects substituted for Sub and shall be the Surviving Corporation. 2.2 Effect of the Merger. At the Effective Time, the effect of the Merger shall be as provided in the applicable provisions of the ABCA. 2.3 Closing; Consummation of the Merger. (a) The closing of the Merger (the "Closing") shall take place at 10:00 a.m. local time at the New York or Philadelphia offices of Dechert Price & Rhoads, or at such other location as specified by Sub and on a date to be specified by Sub, which date shall be as promptly as practicable after the satisfaction or waiver of the conditions to the Merger set forth herein (the "Closing Date"). (b) As soon as practicable after the satisfaction or waiver of the conditions to the Merger set forth herein, the parties shall cause the Merger to be consummated by delivering to the Secretary of State of the State of Alabama for filing articles of merger and any other documents in such form as required by the relevant provisions of the ABCA and shall cause the Merger to take effect on the date of such filing (the time at which the Merger takes effect, the "Effective Time"). 2.4 Articles of Incorporation; Bylaws; Directors and Officers. The Articles of Incorporation of the Surviving Corporation shall be the Articles of Incorporation of the Company, as in effect immediately prior to the Effective Time, until thereafter amended as provided therein and 6 under the ABCA. The Bylaws of the Surviving Corporation shall be the Bylaws of the Company, as in effect immediately prior to the Effective Time, until thereafter amended as provided therein and under the ABCA. The directors of Sub immediately prior to the Effective Time will be the initial directors of the Surviving Corporation, and the officers of the Company immediately prior to the Effective Time (unless any directors or officers of Parent or Sub are so designated in writing by Parent prior to the Effective Time) will be the initial officers of the Surviving Corporation, in each case until their successors are elected or appointed. 2.5 Conversion of Securities. At the Effective Time, by virtue of the Merger and without any action on the part of Parent, Sub, the Company or the holder of any of the securities of the Company or Sub: (a) Each Share issued and outstanding immediately prior to the Effective Time (other than Shares to be canceled pursuant to Section 2.5(b) and Dissenting Shares as defined in Section 2.5(d)), together with associated Rights, shall be converted into and become the right to receive the Per Share Price. All such Shares and associated Rights shall no longer be outstanding and shall automatically be canceled and retired and shall cease to exist, and each holder of a certificate representing any such Shares and associated Rights shall cease to have any rights with respect thereto, except the right to receive the Per Share Price, less any required withholding taxes, upon the surrender of such certificate in accordance with Section 2.6, without interest. (b) All Shares, together with associated Rights, that are owned by the Company as treasury stock and all Shares, together with associated Rights, owned by Parent, Sub or any other wholly-owned Subsidiary of Parent shall be canceled and retired and shall cease to exist and no consideration shall be delivered in exchange therefor. (c) Each share of common stock, par value $.01 per share, of Sub issued and outstanding immediately prior to the Effective Time shall be converted into and become one validly issued, fully paid and nonassessable share of common stock, par value $.01 per share, of the Surviving Corporation. Each certificate representing outstanding shares of the common stock of Sub at the Effective Time shall thereafter represent an equal number of shares of the common stock of the Surviving Corporation. (d) (i) Notwithstanding any provision of this Agreement to the contrary, each outstanding Share the holder of which has perfected such holder's right to demand payment for such holder's Shares in accordance with Article 13 of the ABCA and has not effectively withdrawn or lost such right (a "Dissenting Share"), shall not be converted into or represent the right to receive the Per Share Price, but the holder thereof shall be entitled only to such rights as are granted by Article 13 of the ABCA; provided, however, that any Dissenting Share held by a person at the Effective Time who shall, after the Effective Time and in accordance with the ABCA, withdraw such person's demand for payment or lose such person's dissenters' rights, shall be deemed to be converted as of the Effective Time into the right to receive the Per Share Price pursuant to Section 2.5(a). (ii) The Company shall give Parent (A) prompt notice and a copy of any written notice of a shareholder's intent to demand payment, of any request to withdraw a demand for 7 payment and of any other instruments delivered to it pursuant to Article 13 of the ABCA and (B) the opportunity to direct all negotiations and proceedings with respect to demands for payment under Article 13 of the ABCA. The Company shall not voluntarily make any payment with respect to any demand for payment and shall not, except with the prior written consent of Parent, settle or offer to settle any such demands. 2.6 Exchange of Certificates. (a) At such times as shall be necessary to make the payments pursuant to Section 2.5 to holders of Shares, Parent shall make available to the Surviving Corporation, and the Surviving Corporation shall deposit with a bank or trust company designated by Parent before the Closing Date and reasonably acceptable to the Company (the "Payment Agent") an amount in cash equal to the aggregate Per Share Price to which holders of Shares shall be entitled upon consummation of the Merger, to be held for the benefit of and distributed to such holders in accordance with this Section. The Payment Agent shall agree to hold such funds (such funds, together with earnings thereon, being referred to herein as the "Payment Fund") for delivery as contemplated by this Section and upon such additional terms as may be agreed upon by the Payment Agent, the Company and Parent. If for any reason (including losses) the Payment Fund is inadequate to pay the cash amounts to which holders of Shares shall be entitled, Parent and the Surviving Corporation shall in any event remain liable, and Parent shall make available to the Surviving Corporation additional funds for the payment thereof. The payment Agent shall invest portions of the Payment Fund as Parent directs. All interest and other income earned in respect of the Payment Fund shall inure to the benefit of, and shall be paid to, the Surviving Corporation. The Payment Fund shall not be used for any purpose except as expressly provided in this Agreement. (b) As soon as practicable after the Effective Time, Parent and the Surviving Corporation shall cause the Payment Agent to mail to each record holder of one or more certificates (the "Certificates") that immediately prior to the Effective Time represented outstanding Shares and associated Rights that have been converted pursuant to Section 2.5(a) into the right to receive the Per Share Price (i) a letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon receipt of the Certificates by the Payment Agent and shall be in such form and have such other provisions as the Surviving Corporation may reasonably specify) and (ii) instructions for use in effecting the surrender of the Certificates in exchange for the Per Share Price. Upon surrender of a Certificate to the Payment Agent for cancellation, together with such letter of transmittal duly executed and completed in accordance with its terms, the holder of such Certificate shall be entitled to receive in exchange therefor a check representing the Per Share Price for each Share represented thereby, and the Certificate so surrendered shall forthwith be canceled. In no event shall the holder of any Certificate be entitled to receive interest on any funds to be received by reason of the Merger, including any interest earned by the Payment Fund. In the event of a transfer of ownership of Shares that is not registered in the transfer records of the Company, the Per Share Price may be paid to a transferee if the Certificate representing such Shares is presented to the Payment Agent accompanied by all documents required to evidence and effect such transfer and by evidence that any applicable stock transfer taxes have 8 been paid. Until surrendered as contemplated by this Section, each Certificate shall be deemed after the Effective Time to represent only the right to receive upon such surrender the Per Share Price for each Share represented thereby as contemplated by this Article II. (c) All cash paid upon the surrender for exchange of Certificates in accordance with the terms hereof shall be deemed to have been paid in full satisfaction of all rights pertaining to the Shares and the Rights represented thereby. From and after the Effective Time, the stock transfer books of the Company shall be closed and there shall be no further registration of transfers on the stock transfer books of the Surviving Corporation of the Shares that were outstanding immediately prior to the Effective Time. If, after the Effective Time, Certificates are presented to the Surviving Corporation for any reason, they shall be canceled and exchanged as provided in this Section, subject in the case of Dissenting Shares, to applicable law and the provisions of this Agreement. (d) Any portion of the Payment Fund that remains unclaimed by the Company's shareholders six months after the Effective Time shall be delivered to the Surviving Corporation upon demand, and any of the Company's shareholders who have not theretofore complied with this Section shall thereafter look only to the Surviving Corporation (subject to abandoned property, escheat and other similar laws) as general creditors for payment of their claim for the Per Share Price. Neither Parent nor the Surviving Corporation shall be liable to any holder of Shares for cash representing the Per Share Price delivered to a public official in accordance with any applicable abandoned property, escheat or similar law. (e) The Surviving Corporation shall be entitled to deduct and withhold from the Per Share Price or any payment made in respect of Dissenting Shares such amounts as the Surviving Corporation is required to deduct and withhold with respect to the making of such payment under the Internal Revenue Code of 1986, as amended (the "Code"), or any provision of state, local or foreign tax law. Such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holder of the Shares in respect of which such deduction and withholding was made. ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY Except as set forth on the Disclosure Schedule attached as Annex B (the "Disclosure Schedule") in a manner that makes reasonably apparent that such matter relates to the particular representation or warranty below, the Company represents and warrants to each of Parent and Sub as follows: 3.1 Organization and Qualification; Subsidiaries. (a) The Company has one Significant Subsidiary (defined in Section 9.2), Supermarket Cigarette Sales, Inc., a Louisiana corporation. The Company and its Significant Subsidiary are corporations duly incorporated, validly existing and in good standing under the laws of their respective jurisdictions of incorporation and have all requisite corporate power and authority to own 9 their respective properties and carry on their respective businesses as now being conducted. The Company and its Significant Subsidiary are duly qualified as foreign corporations to do business, and are in good standing, in each jurisdiction where the character of their properties owned or held under lease or the nature of their activities makes such qualification necessary, except to the extent that any failure to so qualify or be in good standing would not have a Material Adverse Effect or adversely affect the ability of the Company to perform its obligations hereunder or to consummate the Merger. As used herein, "Material Adverse Effect" means any change or effect that is materially adverse to the condition (financial or otherwise), total assets, total liabilities, business, results of operations or prospects of the Company and its Subsidiaries taken as a whole, including without limitation any such change or effect that prevents Parent and Sub from obtaining their contemplated financing for the Offer and the Merger. The Company has made available to Parent correct and complete copies of the articles of incorporation and bylaws of the Company and the Significant Subsidiary. (b) The only Subsidiaries of the Company are those set forth in Section 3.1 of the Disclosure Schedule. Except as set forth in Section 3.19 of the Disclosure Schedule, neither the Company nor any of its Subsidiaries owns, directly or indirectly, any interest or investment (whether equity or debt) in any corporation, partnership, limited liability company, joint venture, business, trust or other person (other than the Company's Subsidiaries). 3.2 Capitalization. (a) The authorized capital stock of the Company consists of (i) 25,000,000 shares of Common Stock, of which as of the date hereof, 7,127,743 shares were issued and outstanding (including 10,800 shares that were issued and outstanding under the 1987 Restricted Stock Plan and remained subject to a repurchase option thereunder) and no shares were held as treasury shares and (ii) 5,000,000 shares of Preferred Stock, no par value, of which, as of the date hereof, no shares were issued and outstanding and 80,000 shares were reserved for issuance pursuant to the Rights Agreement. Except as provided in the Rights Agreement and except for Shares issuable upon the exercise of outstanding options to purchase an aggregate of 455,050 Shares (the "Options") pursuant to the 1993 Stock Incentive Plan and the Directors' Stock Option Plan, there are no options, warrants or other rights, agreements or commitments obligating the Company to issue any shares of its capital stock or any securities convertible into its capital stock or to repurchase or redeem any shares of its capital stock. All Shares outstanding are, and all Shares subject to issuance as aforesaid, when issued on the terms and conditions specified in the instruments pursuant to which they are issuable, will be, duly authorized, validly issued, fully paid, non-assessable and free of preemptive rights. There are no shareholder, voting trust, or other agreements or understandings to which the Company or any of its Subsidiaries is a party or to which any of them are bound relating to the voting of any shares of the capital stock of the Company or any of its Subsidiaries. (b) All of the outstanding capital stock of the Significant Subsidiary is duly authorized, validly issued, fully paid and non-assessable and free of preemptive rights and is owned by the Company free and clear of any claim, lien or encumbrance. There are no outstanding options, calls 10 or commitments of any kind relating to the issued or unissued capital stock or other securities of the Significant Subsidiary. 3.3 Authority Relative to this Agreement. The Company has all requisite corporate power and authority to enter into this Agreement and, subject to the receipt of the Requisite Shareholder Approval of the Merger, to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution, delivery and performance of this Agreement by the Company and the consummation by the Company of the transactions contemplated hereby have been duly authorized by all necessary corporate (including shareholder) action on the part of the Company, except for the Requisite Shareholder Approval of the Merger. This Agreement has been duly and validly executed and delivered by the Company. Subject to receipt of the Requisite Shareholder Approval of the Merger, and assuming the due authorization, execution and delivery of this Agreement by Parent and Sub, this Agreement constitutes the legal, valid and binding agreement of the Company enforceable in accordance with its terms. 3.4 Non-Contravention; Approvals and Consents. (a) The execution and delivery of this Agreement by the Company do not, and the performance by the Company of its obligations hereunder and the consummation of the transactions contemplated hereby will not, conflict with, result in a violation or breach of, constitute (with or without notice or lapse of time or both) a default under, permit the termination of any provision of, or result in the termination of, the acceleration of the maturity of, or the acceleration of the performance of, or result in the creation or imposition of any lien upon any of the assets or properties of the Company or any of its Subsidiaries under, any of the terms, conditions or provisions of (i) the articles of incorporation or bylaws of the Company or any of its Subsidiaries, or (ii) subject to receipt of the Requisite Shareholder Approval and the taking of the actions described in paragraph (b) of this Section, (x) any statute, law, rule, regulation or ordinance (together, "Laws"), or any judgment, decree, order, writ, permit or license (together, "Orders"), of any court, tribunal, arbitrator, authority, agency, commission, official or other instrumentality of the United States or any state, county, city or other political subdivision in the United States, or of any foreign country (a "Governmental or Regulatory Authority") applicable to the Company or any of its Subsidiaries or any of their respective assets or properties, or (y) any note, bond, mortgage, security agreement, indenture, license, franchise, contract, lease or other instrument, obligation or agreement of any kind (together, "Contracts") to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries or any of their respective assets or properties is bound, or (z) any Employee Plan or Benefit Arrangement (defined in Section 3.11); except, with respect to the foregoing clauses (ii) (x), (y) and (z) those which, individually or in the aggregate, (I) could not reasonably be expected to have a Material Adverse Effect or adversely affect the ability of the Company to perform its obligations hereunder or to consummate the Merger or (II) occur as a result of the regulatory status of Parent, Sub or their Subsidiaries. (b) Except for (i) the premerger notification requirements of the HSR Act, (ii) the requirements of the Exchange Act and the Nasdaq Stock Market, (iii) the filing of appropriate 11 documents relating to the Merger required by the ABCA, and (iv) requirements of Law necessary to transfer liquor licenses and pharmacy licenses, WIC permits and Food Stamp permits, no consent, approval or action of, filing with or notice to any Governmental or Regulatory Authority or other person is required, under any Law or Order or any Contract to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries or any of their respective assets or properties is bound, for the execution and delivery of this Agreement by the Company, the performance by the Company of its obligations hereunder or the consummation of the transactions contemplated hereby, except those that the failure to make or obtain, individually or in the aggregate, (I) could not reasonably be expected to have a Material Adverse Effect or adversely affect the ability of the Company to perform its obligations hereunder or to consummate the Merger or (II) occur as a result of the regulatory status of Parent, Sub or their Subsidiaries. 3.5 Brokers and Finders. The Company has not employed any broker or finder to act on its behalf and has not incurred and will not incur any liability for any brokerage fees or finders' fees in connection with the transactions contemplated hereby, other than pursuant to the letter agreement between the Company and Credit Suisse First Boston Corporation ("CSFBC") dated as of February 12, 1997, a copy of which has previously been delivered to Parent. 3.6 SEC Filings. The Company has heretofore made available to Parent and Sub its (i) Annual Report on Form 10-K for the year ended June 29, 1996, (ii) Quarterly Reports on Form 10-Q for the quarters ended September 28, 1996, December 28, 1996 and March 29, 1997, (iii) proxy statements relating to all of the Company's meetings of shareholders (whether annual or special) held or scheduled to be held since June 29, 1996 and (iv) each other registration statement, proxy or information statement, form, report and other document filed by the Company with the SEC since June 29, 1996 (collectively, the "SEC Filings"). At the time it was filed, each SEC Filing (including all exhibits and schedules thereto and documents incorporated by reference therein) and, at the time it is filed, any SEC Filing filed by the Company with the SEC after the date of this Agreement (i) complied, or with respect to those not yet filed will comply, in all material respects with the requirements of the Exchange Act and (ii) did not, or with respect to those not yet filed will not, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading. The audited consolidated financial statements and unaudited consolidated interim financial statements of the Company and its consolidated Subsidiaries included in the SEC Filings (including, in each case, the notes and schedules, if any, thereto) (the "Company Financial Statements"), were and will be prepared in accordance with generally accepted accounting principles applied on a consistent basis during the periods involved (except as may be indicated therein or in the notes thereto or, in the case of the unaudited statements, as permitted by Form 10-Q of the SEC), complied as of their respective dates in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto, and fairly presented and will present fairly in all material respects the consolidated financial position of the Company and its consolidated Subsidiaries as of the dates thereof and the consolidated results of their operations and cash flows for the periods then ended (subject, in the case of any unaudited interim financial statements, to normal recurring year-end adjustments (which are not expected to 12 be, individually or in the aggregate, materially adverse to the Company and its Subsidiaries taken as a whole)). 3.7 Absence of Certain Changes or Events. Since June 29, 1996, except as reflected in subsequent SEC Filings filed prior to the date of this Agreement, (i) there has not been any change, event or development having, or that could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect or adversely affect the ability of the Company to perform its obligations hereunder or to consummate the Merger, (ii) the Company and its Subsidiaries have conducted their respective businesses only in the ordinary course consistent with past practices; and, since March 29, 1997, neither the Company nor any of its Subsidiaries has taken any action that, if taken after the date hereof, would constitute a breach of any provision of Section 5.1. 3.8 Legal Proceedings. (i) There are no actions, suits, arbitrations, proceedings or investigations pending or, to the knowledge of the Company, threatened, against the Company or any of its Subsidiaries or any of their respective assets and properties that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect or adversely affect the ability of the Company to perform its obligations hereunder or to consummate the Merger, and (ii) neither the Company nor any of its Subsidiaries is subject to any Order that, individually or in the aggregate, is having or could reasonably be expected to have a Material Adverse Effect or adversely affect the ability of the Company to perform its obligations hereunder or to consummate the Merger. 3.9 Compliance with Law. Neither the Company nor any of its Subsidiaries has violated or failed to comply with, or has received any notice from any Governmental or Regulatory Authority asserting a failure to comply with, any Law or Order, except where a violation or failure to comply would not have a Material Adverse Effect or adversely affect the ability of the Company to perform its obligations hereunder or to consummate the Merger. The Company and its Subsidiaries have and are in compliance with all permits, licenses and franchises from Governmental or Regulatory Authorities required to conduct their businesses as now being conducted, except to the extent that the failure to have or comply with such permits, licenses and franchises would not have a Material Adverse Effect or adversely affect the ability of the Company to perform its obligations hereunder or to consummate the Merger. 3.10 Taxes. (a) As used herein, "Taxes" means all taxes of any kind, including those on, measured by or referred to as income, gross receipts, sales, use, ad valorem, franchise, profits, license, withholding, payroll, employment, excise, severance, stamp, occupation, premium, value added, property or windfall profits taxes, and all customs, duties and similar fees, assessments and charges of any kind whatsoever, together with any interest thereon and any penalties, additions to tax and additional amounts imposed with respect thereto by any Governmental or Regulatory Authority. As used herein, "Tax Return" means any return, report, declaration, information statement and other document with respect to Taxes required to be filed by the Company or any of its Subsidiaries with 13 the Internal Revenue Service or any other Governmental or Regulatory Authority, including all accompanying schedules. (b) The Company and its Subsidiaries have timely filed all federal and state income Tax Returns and all other material Tax Returns required to be filed by them and have paid all Taxes shown thereon to be due and all other Taxes for which a notice of assessment or demand for payment has been received by the Company or its Subsidiaries, except for such Taxes as to which the failure to pay, individually or in the aggregate, would not be material. There are no other material Taxes that would be due if asserted by a Governmental or Regulatory Authority. Neither the Company nor any of its Subsidiaries has granted any waiver of any statute of limitations with respect to, or any extension of a period for the assessment of, any Tax. True, correct and complete copies of the federal and state income Tax Returns of the Company and its consolidated Subsidiaries for the fiscal years ended June 29, 1996, July 1, 1995, July 2, 1994 and July 3, 1993 have been made available to Parent. (c) (i) No material claim for unpaid Taxes has become a lien against the property of the Company or any of its Subsidiaries or is being asserted against the Company or any of its Subsidiaries nor, to the Company's knowledge, are there pending any material proposed adjustments to the manner in which any Tax of a Company or a Subsidiary is determined; (ii) to the knowledge of the Company, no audit of any Tax Return of the Company or any of its Subsidiaries is being conducted by a Governmental or Regulatory Authority; (iii) except with respect to the Change of Control Agreements listed in the Disclosure Schedule (the "Change of Control Agreements"), the 1993 Stock Incentive Plan, the Directors' Stock Option Plan and the 1987 Restricted Stock Plan, neither the Company nor any of its Subsidiaries is a party to any agreement or arrangement that would result, individually or in the aggregate, in the actual or deemed payment by the Company or a Subsidiary of any "excess parachute payments" within the meaning of Section 280G of the Code; and (iv) except with respect to the 1993 Stock Incentive Plan, the Directors' Stock Option Plan and the 1987 Restricted Stock Plan, no acceleration of the vesting schedule for any property that is substantially unvested within the meaning of the regulations under Section 83 of the Code will occur in connection with the transactions contemplated by this Agreement. No claim has been made by a Governmental or Regulatory Authority in a jurisdiction where the Company or a Subsidiary does not file Tax Returns that the Company or such Subsidiary is or may be subject to taxation by that jurisdiction. (d) Neither the Company nor any Subsidiary has ever (i) joined in or been required to join in the filing of a consolidated or combined federal, state or local income Tax Return with respect to which the Company or a Subsidiary could be liable for the Taxes of a person other than the Company or the Subsidiaries or (ii) been the subject of a Tax ruling or a closing agreement with respect to Taxes with any Governmental or Regulatory Authority that has continuing effect. Neither the Company nor any Subsidiary is a party to any tax sharing or tax allocation agreement or arrangement pursuant to which it could be liable for Taxes of a person other than the Company or the Subsidiaries. Neither the Company nor any Subsidiary has agreed to make nor is it required to 14 make any adjustment under Section 481 of the Code by reason of a change in accounting method or otherwise. 3.11 ERISA and Related Matters. (a) Each Employee Plan (defined below) has been maintained and administered in compliance with its terms and with the requirements of applicable Laws, including the Employee Retirement Income Security Act of 1974, as amended ("ERISA") and the Code, except where the failure to comply would not have a Material Adverse Effect. There is no litigation, administrative or arbitration proceeding, or other dispute pending or, to the Company's knowledge, threatened that involves any Employee Plan or Benefit Arrangement (defined below) that could reasonably be expected to have a Material Adverse Effect or a material adverse effect on any employee or director of the Company or its Subsidiaries or on any fiduciary (as defined in ERISA Section 3(21)) of such Employee Plan or Benefit Arrangement. (b) The Company and its Subsidiaries do not maintain and have never maintained nor been required to contribute to an "employee benefit plan" as defined in Section 3 of ERISA that is or was (i) a plan subject to Title IV of ERISA or (ii) a "multiemployer plan" as defined in Section 3(37) of ERISA. (c) Neither the Company, its Subsidiaries nor any of their shareholders, directors, officers or employees has engaged in any transaction with respect to an Employee Plan that could subject the Company or any of its Subsidiaries to a tax, penalty or liability for a prohibited transaction, as defined in Section 406 of ERISA or Section 4975 of the Code, except for such taxes, penalties or liabilities that would not have a Material Adverse Effect. (d) As used herein: (i) "Benefit Arrangement" means any employment, severance or similar contract, or any other contract, plan, policy or arrangement (whether or not written) providing for compensation, bonus, profit-sharing, stock option or other stock related rights or other forms of incentive or deferred compensation, vacation benefits, insurance coverage (including any self-insured arrangement), health or medical benefits, cafeteria plan benefits, disability benefits, severance benefits and post-employment or retirement benefits (including compensation, pension, health, medical and life insurance benefits), other than an Employee Plan, that is maintained, administered or contributed to by the Company or any of its Subsidiaries and covers any employee or former employee of the Company or any of its Subsidiaries. (ii) "Employee Plan" means a plan or arrangement as defined in Section 3(3) of ERISA that (A) is subject to any provision of ERISA, (B) is maintained, administered or contributed to by the Company or any of its Subsidiaries and (C) covers any employee or former employee of the Company or any of its Subsidiaries. 15 3.12 Environmental Matters. (a) Each of the Company and its Subsidiaries has obtained all material licenses, permits, authorizations, approvals and consents from all Governmental or Regulatory Authorities ("Environmental Permits") that are required in respect of its business or operations under any applicable Environmental Law (defined below), and each of such Environmental Permits is in full force and effect. (b) Each of the Company and its Subsidiaries is in compliance with the terms and conditions of all such Environmental Permits and with all applicable Environmental Laws, except for such failures that, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect or adversely affect the ability of the Company to perform its obligations hereunder or to consummate the Merger. (c) (i) No site or facility now or previously owned, operated or leased by the Company or any of its Subsidiaries is listed or proposed for listing on the National Priorities List or CERCLIS, promulgated pursuant to the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended ("CERCLA"), and the rules and regulations thereunder or on any similar state or local list of sites requiring investigation or remediation. (ii) Neither the Company nor any of its Subsidiaries has received any written notice of any actual or alleged violation of any Environmental Law with respect to any of its facilities, except a violation or violations that, individually, or in the aggregate, could not reasonably be expected to have a Material Adverse Effect or adversely affect the ability of the Company to perform its obligations hereunder or to consummate the Merger. (iii) The Company and its Subsidiaries are not subject to any material outstanding agreements or orders with any Governmental or Regulatory Authority or other person respecting (A) Environmental Laws, (B) Remedial Action or (C) any Release of a Hazardous Material. (iv) Neither the Company nor any of its Subsidiaries has received any written notice or request for information pertaining to a response action (as defined by CERCLA), with respect to any of its sites or facilities now or previously owned, operated or leased by them, except for notices or requests that individually or in the aggregate could not reasonably be expected to have a Material Adverse Effect or adversely affect the ability of the Company to perform its obligations hereunder or to consummate the Merger. (v) No Hazardous Material is present (except in quantities for retail sale to consumers or for store maintenance) or has been Released (defined below) at, on, about, under, or from any of the Company or any of its Subsidiaries' sites or facilities, now or previously owned, operated or leased by them, except in compliance with Environmental Law (defined below), and except for the presence of Hazardous Material or such Release(s) which individually or in the 16 aggregate could not reasonably be expected to have a Material Adverse Effect or adversely affect the ability of the Company to perform its obligations hereunder or to consummate the Merger. (d) No liens have arisen under or pursuant to any Environmental Law on any site or facility owned, operated or leased by the Company or any of its Subsidiaries, other than liens that individually or in the aggregate could not reasonably be expected to have a Material Adverse Effect or adversely affect the ability of the Company to perform its obligations hereunder or to consummate the Merger. (e) There have been no material environmental investigations, studies, audits, tests, reviews or other analyses conducted by, or which are in the possession of, the Company or any of its Subsidiaries in relation to any site or facility owned, operated or leased by the Company or any of its Subsidiaries, except for those the reports of which have been made available to Parent prior to the execution of this Agreement. (f) No sites or facilities, now or previously owned, operated or leased by the Company or any of its Subsidiaries, have or had at the time of ownership, operation, or leasing, any (i) underground storage tanks, (ii) friable asbestos, (iii) polychlorinated biphenyls ("PCBs"), or (iv) chlorofluorocarbons ("CFCs"), except in circumstances which could not reasonably be expected to have individually or in the aggregate a Material Adverse Effect or adversely affect the ability of the Company to perform its obligations hereunder or to consummate the Merger. (g) As used herein: (i) "Environmental Law" means any Law or Order relating to the environment or to emissions, discharges or Releases of pollutants, contaminants, or chemicals, or industrial, toxic or hazardous substances or wastes, into the environment (including structures, ambient air, soil, surface water, ground water, wetlands, land or subsurface strata), or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of pollutants, contaminants, chemicals or industrial, toxic or hazardous substances or wastes. (ii) "Hazardous Material" means (A) any chemicals or other materials or substances that are defined as or included in the definition of "hazardous substances," "hazardous wastes," "hazardous materials," "extremely hazardous wastes," "restricted hazardous wastes," "toxic substances," "pollutants," "contaminants," or words of similar import under any Environmental Law, including petroleum, friable asbestos, PCBs, and CFCs; and (B) any other chemical, material or substance, the presence of or exposure to which is prohibited, limited or regulated by any Governmental or Regulatory Authority under any Environmental Law. (iii) "Release" means any actual or threatened (as defined under CERCLA) release, spill, effluent, emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching or migration into the environment or any structure. 17 (iv) "Remedial Action" means all actions, including any capital expenditures, required by a Governmental or Regulatory Authority, required under any Environmental Law or voluntarily undertaken to (A) clean up, remediate, remove, treat, or in any other way ameliorate or address any Hazardous Materials Released into the environment; (B) prevent the Release, or minimize the further Release of any Hazardous Material so it does not endanger or threaten to endanger public health or the environment; (C) perform pre-remedial studies and investigations or post-remedial monitoring and care relating to a Release; or (D) bring the applicable party into compliance with any Environmental Law. 3.13 Information Supplied. (a) The Schedule 14D-9 will not, on the date of its filing with the SEC and the date it is first published, sent or given to shareholders, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading, except that no representation is made by the Company with respect to information supplied in writing by or on behalf of Parent or Sub expressly for inclusion therein and information incorporated by reference therein from documents filed by Parent or any of its Subsidiaries with the SEC. The Schedule 14D-9 will comply as to form in all material respects with the requirements of the Exchange Act and the rules and regulations thereunder. (b) Neither the information supplied or to be supplied in writing by or on behalf of the Company for inclusion in, nor the information incorporated by reference from documents filed by the Company or any of its Subsidiaries with the SEC into, the Schedule 14D-1 and the Offer Documents will, on the date the Schedule 14D-1 and the Offer Documents are filed with the SEC or on the date they are first published, sent or given to shareholders, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. (c) The Company (and Parent and Sub, with respect to written information supplied by either of them specifically for use in the Schedule 14D-9) shall promptly correct the Schedule 14D-9 if and to the extent that it shall have become false or misleading in any material respect and the Company shall take all steps necessary to cause such document as so corrected to be filed with the SEC and disseminated to the Company's shareholders to the extent required by applicable federal securities laws. 3.14 Real Property. (a) Section 3.14(a) of the Disclosure Schedule contains a list of all real property or interests in real property owned or leased by the Company and its Subsidiaries. Copies of all leases so listed, including all modifications, amendments and supplements thereto, have heretofore been 18 made available to Parent and all such leases are in full force and effect in accordance with their respective terms. (b) There are no existing defaults or events that, with notice or lapse of time or both, would constitute defaults, under any such leases, except for defaults that individually or in the aggregate could not reasonably be expected to have a material adverse effect on the Company's ability to continue to operate the relevant properties as currently operated. Neither the consummation of the Offer nor the Merger shall cause the termination of any such leases, or have a material adverse effect on the rights thereunder of the Company or its Subsidiaries. (c) The Company and its Subsidiaries enjoy peaceful and undisturbed possession of the leased properties. The Company or its relevant Subsidiary has good and valid title to the leasehold estate in each property leased by it, except for (i) mortgages and encumbrances that secure indebtedness that are properly reflected on the Company Financial Statements; (ii) liens for taxes accrued but not yet payable; (iii) liens arising as a matter of Law in the ordinary course of business with respect to obligations incurred after the date of the Company Financial Statements, provided that the obligations secured by such liens are not delinquent or are being contested in good faith; and (iv) such imperfections of title and encumbrances, if any, as do not, individually or in the aggregate, materially detract from the value or materially interfere with the present use of such property. (d) The Company has good and marketable fee title to the real property interests owned by it, except for (i) mortgages and encumbrances that secure indebtedness that are properly reflected on the Company Financial Statements; (ii) liens for taxes accrued but not yet payable; (iii) liens arising as a matter of Law in the ordinary course of business with respect to obligations incurred after the date of the Company Financial Statements, provided that the obligations secured by such liens are not delinquent or are being contested in good faith; and (iv) such imperfections of title and encumbrances, if any, as do not, individually or in the aggregate, materially detract from the value or materially interfere with the present use of such property. (e) The Company or its Subsidiaries are not in material violation of any zoning, building or safety ordinance, regulation or requirement or other Law applicable to the operation of the owned real properties or leased properties likely to impede the normal operation of the business of the Company or its Subsidiaries, and the Company or its Subsidiaries have not received any written notice of any such violation with which such recipient has not complied. (f) There are no pending, or, to the knowledge of the Company, threatened condemnation or similar proceedings relating to any of the owned real properties or leased properties of the Company or its Subsidiaries. 3.15 Labor Matters. Except as set forth in Section 3.15 of the Disclosure Schedule, (a) there is no unfair labor practice complaint against the Company or any Subsidiary pending or to the knowledge of the Company threatened before the National Labor Relations Board; (b) there is no labor strike, dispute, slow down or stoppage actually pending or, to the knowledge of the Company, 19 threatened against or involving the Company or any Subsidiary; and (c) no private agreement restricts the Company or any Subsidiary from relocating, closing or terminating any of their operations or facilities. There are no controversies pending or, to the knowledge of the Company, threatened between the Company or any of its Subsidiaries and any representatives of its employees, and, to the knowledge of the Company, there are no organizational efforts underway involving employees of the Company or any of its Subsidiaries, except in each case activities that would not, individually or in the aggregate, have a Material Adverse Effect or adversely affect the ability of the Company to perform its obligations hereunder or to consummate the Merger. 3.16 Contracts; Certain Agreements. (a) Except (i) as disclosed in the SEC Filings, (ii) documents identified in Section 3.16(a) of the Disclosure Schedule, (iii) the leases identified in Exhibit 3.14 to the Disclosure Schedule and (iv) purchase orders issued for inventory and supplies in the ordinary course of business, there is no contract or agreement that is material to the business, financial condition or results of operations of the Company and its Subsidiaries taken as a whole. Neither the Company nor any of its Subsidiaries nor, to the knowledge of the Company, any other party thereto is in breach or violation of, or in default in the performance or observance of any term or provision of, and no event has occurred that, with notice or lapse of time or both, could reasonably be expected to result in a default under, any Contract to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries or any of their respective assets or properties is bound, except for breaches, violations and defaults that individually or in the aggregate, are not having and could not reasonably be expected to have a Material Adverse Effect or adversely affect the ability of the Company to perform its obligations hereunder or to consummate the Merger. (b) Neither the Company nor any of its Subsidiaries is a party to any oral or written (i) union or collective bargaining agreement, (ii) agreement with any executive officer or other key employee of the Company or any of its Subsidiaries the benefits of which are contingent or vest, or the terms of which are materially altered, upon the occurrence of a transaction involving the Company or any of its Subsidiaries of the nature contemplated by this Agreement, except for the Change of Control Agreements and agreements pursuant to the Directors' Stock Option Plan, the 1993 Stock Incentive Plan and the 1987 Restricted Stock Plan, (iii) employment agreement with respect to any executive officer or other key employee of the Company or any of its Subsidiaries, except for the Company's employment agreement with David W. Morrow dated as of January 1, 1997, or (iv) agreement or plan, including any stock option, stock appreciation right, restricted stock, stock purchase plan or Benefit Arrangement, any of the benefits of which will be increased, or the vesting of the benefits of which will be accelerated, by the occurrence of any of the transactions contemplated by this Agreement, or the value of any of the benefits of which will be calculated on the basis of any of the transactions contemplated by this Agreement, except for those listed in clause (ii) above. Each of the Agreement among Shareholders dated October 8, 1987 and the Agreement among Shareholders dated October 14, 1988, each by and among the Company and the shareholders named therein, as amended, are terminated in their entirety and have no further force or effect. 20 (c) Except as set forth in Section 3.16(c) of the Disclosure Schedule, the consummation of the Offer, the Merger and the other transactions contemplated by this Agreement will not result in payments (including any gross-up payments in respect of any "excess parachute payments" within the meaning of Section 280G of the Code) under the agreements referred to in Section 3.16(b)(ii). 3.17 Absence of Certain Liabilities. Except for matters reflected or reserved against in the balance sheet for the period March 29, 1997 included in the Company Financial Statements, neither the Company nor any of its Subsidiaries had at that date, or has incurred since that date, any liabilities or obligations (whether absolute, accrued, contingent, fixed or otherwise, or whether due or to become due) of any nature, whether or not required by generally accepted accounting principles to be reflected in a consolidated balance sheet of the Company and its consolidated Subsidiaries (including the notes thereto), except liabilities or obligations that (i) were incurred in the ordinary course of business consistent with past practices and (ii) have not had, and could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect or adversely affect the ability of the Company to perform its obligations hereunder or to consummate the Merger. 3.18 Opinion of Financial Advisor. The Company has received a written opinion dated July 7, 1997 from its financial advisor, CSFBC that, as of such date, and on the basis of and subject to the matters set forth therein, the Per Share Price was fair from a financial point of view to the Company's shareholders and such opinion shall not have been (i) withdrawn or (ii) modified or amended in a manner that is adverse to Parent, Sub or the Offer, it being understood by the Company, Parent and Sub that CSFBC has not been, and is not expected to be, asked to update its opinion and shall have no express or implied obligation to do so, and provided that any advice of CSFBC contemplated by Section 5.2(a) shall not be deemed to be such a withdrawal, modification or amendment. A copy of such opinion has been provided to Parent. 3.19 Takeover Statute. The execution, delivery and performance of this Agreement and consummation of the transactions contemplated hereby will not cause to be applicable to the Company any "fair price," "moratorium," "control share acquisition" or other similar anti-takeover statute or regulation enacted under Alabama law. 3.20 Insurance. There are no material retroactive premium adjustments under any of the Company's insurance policies or other insurance arrangements with third parties. 3.21 Intellectual Property. (a) The Company, directly or indirectly, owns, licenses or otherwise possesses (or has applied for), legally enforceable rights to use as they are currently used in the conduct of the Company's business all trademarks, trade names, service marks, trade dress, logos and designs and any and all registrations and applications therefor (and all goodwill associated therewith), all copyrights, whether or not registered, all patents and any applications therefor, computer software and tangible or intangible proprietary information or material (the "Company Intellectual Property 21 Rights"), except where the failure to so own, be licensed or otherwise possess legally enforceable rights to use could not reasonably be expected to have a Material Adverse Effect. (b) Section 3.21 (b) of the Disclosure Schedule sets forth a complete and accurate list of the Company's (i) registered trademarks, trade names, service marks and copyrights, and (ii) patent applications or issued patents. Except as set forth in Section 3.21(b) of the Disclosure Schedule, no claims with respect to the Company Intellectual Property Rights have been asserted or, to the knowledge of the Company, are threatened by any person, (i) that the manufacture, use, sale or licensing by the Company or any of its Subsidiaries infringes on any copyright, patent, trademark, trade secret, service mark, or other proprietary right of any person, (ii) against the use by the Company or any of its Subsidiaries of any material trademarks, service marks, trade names, trade secrets, copyrights, patents, technology, know-how or computer software programs and applications used in the business of the Company and its Subsidiaries as currently conducted, or (iii) challenging the ownership, validity or effectiveness of any of the Company Intellectual Property Rights. All registered trademarks, service marks, patents, and copyrights owned or held by the Company are valid and subsisting and not subject to cancellation or abandonment proceedings. No claims or actions have been asserted or are threatened by the Company against any person with regard to the Company Intellectual Property Rights and, to the knowledge of the Company, there is no unauthorized use, infringement or misappropriation of any of the Company Intellectual Property Rights by any third party, including any employee or former employee of the Company or any of its subsidiaries, that could reasonably be expected to have a Material Adverse Effect or adversely affect the ability of the Company to perform its obligations hereunder or to consummate the Merger. No Company Intellectual Property Right or product of the Company or any of its Subsidiaries is subject to any outstanding decree, order, judgment, or stipulation restricting in any manner the licensing thereof by the Company or any of its Subsidiaries. 3.22 Certain Agreements. Neither the Company nor any of its Subsidiaries is a party to, or bound by, any contract or agreement that materially limits the ability of the Company directly or through any of its Subsidiaries to compete in any line of business or with any person in any geographic area during any period of time. 3.23 Indemnification Claims. The Company is not aware of any indemnification, breach of contract or similar claim by or against the Company or any of its Subsidiaries that is pending or threatened (or that could be reasonably expected to be made in the future), in each case in excess of $250,000 in amount, with respect to any acquisition by the Company after January 1, 1992. 3.24 Prior Negotiations. The Company, CSFBC and the Company's other advisors and representatives have not been involved in substantive discussions with any group or person (or any of their respective affiliates or associates) or their representatives, or furnished material confidential information (including the offering memorandum prepared by the Company) to any such group or person (or any of their respective affiliates or associates) or their representatives, in connection with a possible takeover proposal except for such groups or persons which have executed and delivered to the Company a customary confidentiality agreement (containing "standstill" provisions that are 22 substantially similar to the analogous provisions in the Confidentiality Agreement (as defined in Section 9.11)). ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB Each of Parent and Sub represents and warrants to the Company as follows: 4.1 Organization of Parent and Sub. Parent and Sub are corporations duly incorporated, validly existing and in good standing under the laws of their respective jurisdictions of incorporation and have all requisite corporate power and authority to own their respective properties and carry on their respective businesses as now being conducted. Parent and Sub are duly qualified as foreign corporations to do business, and are in good standing, in each jurisdiction where the character of their properties owned or held under lease or the nature of their activities makes such qualification necessary, except to the extent that any failure to so qualify or be in good standing would not have a material adverse effect on Parent or Sub. Parent has delivered to the Company correct and complete copies of the certificates of incorporation and bylaws of Parent and Sub. Sub was formed solely for the purpose of engaging in the transactions contemplated by this Agreement, has engaged in no other business activities and has conducted only such operations as are required for the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby. 4.2 Authority Relative to this Agreement. Each of Parent and Sub has all requisite corporate power and authority to enter into this Agreement, to perform its obligations under this Agreement and to consummate the transactions contemplated hereby. The execution, delivery and performance of this Agreement by each of Parent and Sub and the consummation by each of Parent and Sub of the transactions contemplated hereby have been duly authorized by all necessary corporate (including shareholder) action on the part of Parent and Sub. This Agreement has been duly and validly executed and delivered by each of Parent and Sub, and, assuming the due authorization, execution and delivery of this Agreement by the Company, constitutes the legal, valid and binding agreement of Parent and Sub enforceable in accordance with its terms. 4.3 Non-Contravention; Approvals and Consents. (a) The execution and delivery of this Agreement by each of Parent and Sub do not, and the performance by Parent and Sub of its obligations hereunder and the consummation of the transactions contemplated hereby will not, conflict with, result in a violation or breach of, constitute (with or without notice or lapse of time or both) a default under, permit the termination of any provision of, or result in the termination of, the acceleration of the maturity of, or the acceleration of the performance of, or result in the creation or imposition of any lien upon any of the assets or properties of the Parent or any of its Subsidiaries under, any of the terms, conditions or provisions of (i) the certificates of incorporation or bylaws (or other comparable charter documents) of the Parent or any of its Subsidiaries, or (ii) subject to the taking of the actions described in paragraph 23 (b) of this Section, (x) any Law or Order applicable to Parent or any of its Subsidiaries or any of their respective assets or properties, (y) any Contract to which Parent or any of its Subsidiaries is a party or by which Parent or any of its Subsidiaries or any of their respective assets or properties is bound, or (z) any employee benefit plan of Parent or any Subsidiaries; except, with respect to the foregoing clauses (x), (y) and (z) those that, individually or in the aggregate, (I) could not reasonably be expected to adversely affect the ability of Parent and Sub to consummate the transactions contemplated hereby or (II) occur as a result of the regulatory status of the Company or its Subsidiaries, and except for the consent of the holders of a majority in principal amount outstanding of its 12% Senior Notes due 2006 issued pursuant to the Indenture dated as of March 5, 1996 described on Annex A. (b) Except for (i) the premerger notification requirements of the HSR Act, (ii) the requirements of the Exchange Act, any relevant national securities exchange and the Nasdaq Stock Market, (iii) the filing of appropriate documents relating to the Merger required by the ABCA, and (iv) the consent of the holders of a majority in principal amount outstanding of its 12% Senior Notes due 2006 issued pursuant to the Indenture dated as of March 5, 1996 described on Annex A, no consent, approval or action of, filing with or notice to any Governmental or Regulatory Authority or other person is necessary or required, under any of the terms, conditions or provisions of any Law or Order or any Contract to which Parent or any of its Subsidiaries is a party or by which Parent or any of its Subsidiaries or any of their respective assets or properties is bound, for the execution and delivery of this Agreement by each of Parent and Sub, the performance by each of Parent and Sub of its obligations hereunder or the consummation of the transactions contemplated hereby, except those that the failure to make or obtain, individually or in the aggregate, (I) could not reasonably be expected to adversely affect the ability of Parent and Sub to consummate the transactions contemplated hereby or (II) occur as a result of the regulatory status of the Company or its Subsidiaries. 4.4 Legal Proceedings. (i) There are no actions, suits, arbitrations, proceedings or investigations pending or, to the knowledge of Parent, threatened, against Parent or any of its Subsidiaries or any of their respective assets and properties that, individually or in the aggregate, could reasonably be expected to adversely affect the ability of Parent and Sub to consummate the transactions contemplated hereby, and (ii) neither Parent nor any of its Subsidiaries is subject to any Orders that, individually or in the aggregate, could reasonably be expected to adversely affect the ability of Parent and Sub to consummate the transactions contemplated hereby. 4.5 Financing. Parent has received bridge financing commitments aggregating at least $350 million, which is sufficient to pay the aggregate amount payable in respect of the Shares upon the consummation of the Offer and the Merger. 24 4.6 Information Supplied. (a) The Schedule 14D-1 and the Offer Documents will not, on the date filed with the SEC and first published, sent or given to shareholders of the Company, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading, except that no representation is made by Parent or Sub with respect to information supplied in writing by or on behalf of the Company expressly for inclusion therein and information incorporated by reference therein from documents filed by the Company or any of its Subsidiaries with the SEC. The Schedule 14D-1 and the Offer Documents will comply as to form in all material respects with the requirements of the Exchange Act. (b) Neither the information supplied or to be supplied in writing by or on behalf of Parent or Sub for inclusion in, nor the information incorporated by reference from documents filed by Parent or any of its Subsidiaries with the SEC into, the Schedule 14D-9 will, on the date the Schedule 14D-9 is filed with the SEC and first published, sent or given to shareholders of the Company, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. (c) Parent and Sub (and the Company, with respect to written information supplied specifically for use in the Schedule 14D-1 and the Offer Documents) shall promptly correct the Schedule 14D-1 and the Offer Documents if and to the extent that they shall have become false or misleading in any material respect and Parent and Sub shall take all steps necessary to cause such documents as so corrected to be filed with the SEC and disseminated to the Company's shareholders to the extent required by applicable federal securities laws. ARTICLE V COVENANTS OF THE COMPANY 5.1 Conduct of Business by the Company Pending the Merger. Except as described on the Disclosure Schedule or as otherwise contemplated by this Agreement, prior to the Effective Time, unless Sub shall otherwise agree in writing (provided, however, that following the appointment of Sub's designees to the Company's Board of Directors pursuant to Section 1.3, Sub shall be deemed to have consented to all actions taken by the Company thereafter, except actions, if any, directed or caused by those directors who were not so designated by the Sub or by the Board of Directors of the Company prior to the appointment of such designees): (a) The business of the Company and its Subsidiaries shall be conducted only in the ordinary course consistent with past practices. (b) The Company shall use all commercially reasonable efforts to preserve intact in all material respects the business organization of the Company and its Subsidiaries, to keep available 25 the services of its and their present officers and employees and to preserve the goodwill of those having business relationships with it and its Subsidiaries. (c) Except as permitted in Section 5.3, the Company shall not, and shall not permit any of its Subsidiaries to (i) amend its articles of incorporation or bylaws (or comparable charter documents); (ii) split, combine, reclassify or take similar action with respect to any of its capital stock; (iii) issue or agree to issue any additional shares of, or rights of any kind to acquire any shares of, its capital stock of any class, other than, in the case of the Company, shares of capital stock and Rights issuable pursuant to the Rights Agreement and Shares issuable upon the exercise of outstanding options to purchase an aggregate of 455,050 Shares pursuant to the 1993 Stock Incentive Plan and the Directors' Stock Option Plan; (iv) purchase, redeem or otherwise acquire any Shares or any other shares of its capital stock of any class; or (v) declare, set aside or pay any dividend payable in cash, stock or property or make any other distributions with respect to Shares or any other shares of its capital stock of any class; or (vi) make any commitment to do any of the foregoing, except for (A) the declaration and payment of dividends by a wholly-owned Subsidiary of the Company solely to the Company and (B) the declaration and payment of regular quarterly cash dividends by the Company consistent with past practices (including as to declaration, record and payment dates) in no event to exceed $0.11 per Share per fiscal quarter. (d) The Company shall not, and shall not permit any of its Subsidiaries to (i) acquire (by merger, consolidation or acquisition of stock or assets) any corporation, partnership or other business organization or division thereof or make any investment in any other person, either by purchase of stock or securities, contribution to capital (other than to wholly-owned Subsidiaries), property transfer or purchase of any material amount of property or assets; (ii) other than sales of inventory in the ordinary course of its business consistent with past practices and other than the sale of surplus real estate, sell, lease, grant any security interest in or otherwise dispose of or encumber any material amount of its assets or properties; (iii) incur any indebtedness for borrowed money other than borrowings in the ordinary course of business under existing lines of credit (or under any refinancing of such existing lines of credit), or issue any debt securities, or assume, guarantee, endorse or otherwise as an accommodation become responsible for the obligations of any other person (other than a wholly-owned Subsidiary); (iv) make any capital expenditure or commitment for additions to plant, property or equipment constituting capital assets except expenditures pursuant to commitments existing as of the date of this Agreement and reflected in Section 5.1(d) of the Disclosure Schedule or included in the Company's budgets for fiscal years 1997 and 1998 as described in Section 5.1(d) of the Disclosure Schedule; (v) change any assumption underlying, or method of calculating, any bad debt, contingency or other reserve (except changes that may be necessary or appropriate in order to comply with a change in generally accepted accounting principles that takes effect after the date of this Agreement); (vi) pay, discharge or satisfy any material claims, liabilities or obligations (absolute, accrued, contingent or otherwise) other than (A) the payment, discharge or satisfaction of liabilities in the ordinary course consistent with past practices and (B) costs relating to this Agreement and the transactions contemplated hereby; (vii) waive, release, grant or transfer any rights of material value or modify or change in any material respect any existing material license, lease, contract or other document; or (viii) enter into any 26 contract, agreement, commitment or arrangement with respect to any of the foregoing; provided, however, that, notwithstanding the foregoing, nothing herein shall prohibit the Company from financing, constructing, equipping, supplying, staffing and opening new stores and remodeling existing stores for which commitments have been entered into by the Company prior to the date hereof and which commitments are reflected in Section 5.1(d) of the Disclosure Schedule. (e) Neither the Company nor any of its Subsidiaries shall (i) enter into any new severance or change of control agreement, or any employment agreement; (ii) amend any existing employment contract or change of control or severance agreement; (iii) grant any increases in compensation or benefits other than increases in the ordinary course consistent with past practices; (iv) adopt any new Employee Plan or Benefit Arrangement; (v) make any change in or to any existing Employee Plan or Benefit Arrangement, other than such changes as are required by Law or that, in the opinion of its counsel, are necessary or advisable to maintain the tax-qualified status of such Employee Plan or Benefit Arrangement; (vi) make any grants, awards or distributions under any Employee Plan or Benefit Arrangement, other than those grants, awards or distributions required to be made under such Employee Plans or Benefit Arrangements as in effect on the date of this Agreement; or (vii) make any amendment to any provision of any outstanding grant or award. (f) The Company shall not cause any of the Company's representations or warranties that are subject to a materiality qualification to become untrue and shall not cause any of the Company's representations and warranties that are not so qualified to become untrue in any material respect. 5.2 No Solicitation (a) The Company shall not, nor shall it permit any of its Subsidiaries to, nor shall it authorize or permit any officer, director or employee of, or any investment banker, attorney or other advisor or representative of, the Company or any of its Subsidiaries to, directly or indirectly, (i) solicit, initiate or encourage the submission of any takeover proposal, or (ii) participate in any discussions or negotiations regarding, or furnish to any person or group (as those terms are defined in Section 9.2) any information with respect to, or take any other action to facilitate any inquiries or the making of any proposal that constitutes or may reasonably be expected to lead to any takeover proposal, provided, however, that prior to the expiration of the Offer, upon receipt by the Company of a bona fide written unsolicited takeover proposal to purchase all the Shares outstanding for (A) a cash amount per Share in excess of the Per Share Price or (B) consideration which is not all cash that the Company has determined reasonably and in good faith to be in excess of the Per Share Price and that CSFBC has advised the Company in writing is in excess of the Per Share Price (a copy of which advice has been furnished by the Company to Parent), in either case by a group or person (or any of their respective affiliates or associates) who (x) within the past 12 months has not executed and delivered to the Company a confidentiality agreement and whose failure to execute a confidentiality agreement does not constitute a breach of Section 3.24 hereof (any such person or group a "New Bidder") and (y) in the good faith reasonable judgment of the Board of Directors after consultation with CSFBC possesses the financial wherewithal reasonably to be capable of consummating the takeover proposal (a "superior proposal"), following notice to Parent as required 27 by Section 5.2(c), the Company may participate in negotiations with a New Bidder regarding the superior proposal and furnish information with respect to the Company pursuant to a customary confidentiality agreement (containing "standstill" provisions no less onerous than in the Confidentiality Agreement (as defined in Section 9.11)). Without limiting the foregoing, it is understood that any violation of the restrictions set forth in the preceding sentence by any officer, director or employee of the Company or any of its subsidiaries or any investment banker, attorney or other advisor or representative of the Company or any of its Subsidiaries, shall be deemed to be a breach of this Section 5.2(a) by the Company. For purposes of this Agreement, "takeover proposal" means any proposal for a tender offer, merger or other transaction involving any Change in Control described in Section 8.3(b)(i) or (iii). (b) Neither the Board of Directors nor any committee thereof shall (i) withdraw or modify, in a manner adverse to Parent or Sub, the approval or recommendation by the Board of Directors nor any such committee of this Agreement, the Offer or the Merger, (ii) approve or recommend any takeover proposal, (iii) enter into any agreement with respect to any takeover proposal, (iv) amend the Rights Agreement, redeem the Rights or waive any other anti-takeover provisions (including Article Eleven of the Company's Articles of Incorporation) or otherwise facilitate any other takeover proposal in any respect, or (v) terminate this Agreement in connection with any takeover proposal. Notwithstanding the foregoing, in the event the Board of Directors receives a superior proposal from a New Bidder or any other group or person which the Board of Directors determines in its good faith reasonable judgment (and based on the written advice of CSFBC) to be more favorable to the Company's shareholders than the Offer and Merger, the Board of Directors may (subject to the following sentence): (A) withdraw or modify its approval or recommendation of this Agreement, the Offer and the Merger taken together, (B) recommend any such superior proposal, or (C) solely with respect to such a superior proposal submitted by a New Bidder, terminate this Agreement in order to enter into an agreement with respect to such a superior proposal or amend the Rights Agreement, redeem the Rights or waive any other anti-takeover provisions in respect of such superior proposal and otherwise facilitate such proposal, in each case (subject to Section 8.1(b)(iv)) at any time following Parent's receipt of written notice of the Company's intent to take the actions described in clauses (A), (B) and/or (C) above (a "Section 5.2(b) Notice") advising Parent that the Board of Directors has received a superior proposal, specifying the material terms and conditions of such superior proposal and identifying the person or group making such superior proposal. The Company may deliver the Section 5.2(b) Notice and take any of the foregoing actions described in clauses (A), (B) and/or (C) only if (i) the Company is not otherwise in material breach of this Agreement and (ii) the Company pays to Parent concurrent with the delivery of the Section 5.2(b) Notice the Termination Fee and the Expense Fee (as defined in Section 8.3). (c) In addition to the obligations of the Company set forth in paragraph (b) above, the Company shall promptly advise Parent orally and in writing of any takeover proposal, or any inquiry with respect to or which could reasonably be expected to lead to any takeover proposal, the material terms and conditions of such takeover proposal or inquiry, and the identity of the person making any such takeover proposal or inquiry. The Company will keep Parent fully informed of the status and 28 details of any such takeover proposal or inquiry and the Company's responses and other actions with respect thereto. The parties understand and agree that the Company shall be entitled to disclose to its shareholders any such information which is required by applicable law (including without limitation the Exchange Act) regarding any takeover proposal. The Company will not amend, modify, waive, or terminate any of the provisions of any confidentiality agreement or "standstill" agreement with any group or person to which the Company or any of its Subsidiaries is a party and shall request the return of any confidential information pursuant to the terms thereof. The Company agrees that Parent shall be permitted to enforce such agreements on the Company's behalf including seeking equitable relief to the extent available. (d) Notwithstanding anything to the contrary contained herein, during the period commencing on the date hereof and ending 180 calendar days following the date of this Agreement, the Company shall not permit any of the actions described in Section 5.2(a) or Section 5.2(b) (except the actions described in clauses (A) and (B) of Section 5.2(b)) involving any person or group, together with their affiliates or associates, who is or should be listed in or referred to in Section 3.24 of the Disclosure Schedule. 5.3 Company Stock Plans. Prior to the Effective Time, the Company may elect to accelerate the exercisability of options granted and outstanding prior to the date of this Agreement under the Directors' Stock Option Plan and the 1993 Stock Incentive Plan and the vesting of restricted shares granted and outstanding prior to the date of this Agreement under the 1987 Restricted Stock Plan and may waive the two-year holding period for stock issued pursuant to the Director Compensation Plan. In addition, the Company shall have the right prior to the Effective Time to pay to any holder of an outstanding option to purchase Common Stock an amount equal to the difference between the Per Share Price and the per Share exercise price of a stock option held by such holder multiplied by the number of Shares then subject to such option (whether or not then exercisable), less any amounts required to be withheld under the Code or any provision of state, local or foreign tax law, in exchange for the surrender and cancellation of such stock option. The Company shall use its commercially reasonable best efforts to cause all options to be exercised prior to the Effective Time. The Company has been advised by its directors that they will exercise all options held by them prior to the consummation of the Offer. Prior to the Effective Time, the Company may adopt any amendments to its Directors' Stock Option Plan, 1993 Incentive Compensation Plan or 1987 Restricted Stock Plan or any agreements thereunder as may be necessary or appropriate to effectuate the foregoing, provided that no such amendment may reduce the per Share exercise price of such options. In addition, the Company may terminate or amend the Director Compensation Plan to eliminate future issuances of stock. 29 ARTICLE VI ADDITIONAL COVENANTS 6.1 Proxy Statement and Special Meeting. (a) Promptly after consummation of the Offer, the Company shall prepare and file with the SEC, if required by the rules of the SEC, a preliminary proxy statement, together with a form of proxy, or information statement, with respect to the special meeting of the Company's shareholders at which the shareholders of the Company will be asked to approve the Merger (the "Special Meeting"). The Company shall use its best efforts to have the proxy statement or information statement cleared by the SEC and, as promptly as practicable thereafter, subject to compliance with the rules and regulations of the SEC, the Company shall mail a definitive proxy statement or information statement to shareholders of the Company (such proxy or information statement and all amendments or supplements thereto, if any, the "Proxy Statement"). Parent, Sub and the Company shall cooperate with each other in the preparation of the Proxy Statement. The Company shall notify Parent of the receipt of any comments of the SEC with respect to the Proxy Statement and of any requests by the SEC for additional information, and promptly shall provide to Parent copies of all correspondence between the Company or any representative of the Company and the SEC with respect to the Proxy Statement. The Company shall give Parent and its counsel the opportunity to review the Proxy Statement and all responses to SEC comments and requests for additional information before they are sent to the SEC. Each of the Company, Parent and Sub agrees to use its best efforts, after consultation with the other parties hereto, to respond promptly to all such comments of and requests for information from the SEC and to cause the Proxy Statement to be mailed at the earliest practicable time to the Company's shareholders entitled to vote at the Special Meeting. (b) Promptly after consummation of the Offer, the Company shall take all action necessary, in accordance with the ABCA and its Articles of Incorporation and Bylaws, to convene the Special Meeting. (c) Subject to the fiduciary obligations of the Board of Directors under applicable law, (i) the Proxy Statement shall contain the recommendation of the Board of Directors that the shareholders of the Company vote to approve the Merger, and (ii) the Company shall, if proxies are solicited, use its best efforts to solicit from its shareholders proxies in favor of such approval and to take all other action reasonably necessary or helpful to secure the vote or consent of shareholders required to effect the Merger. (d) At the Special Meeting, Parent and its direct and indirect Subsidiaries shall vote, or cause to be voted, all of the Shares then owned by any of them in favor of the Merger. 6.2 HSR Matters. 30 (a) No later than seven business days after the date of this Agreement, Parent, Sub and the Company shall file (or cause their Ultimate Parent Entities as defined in the HSR Act to file) with the Federal Trade Commission ("FTC") and the Antitrust Division of the United States Department of Justice ("DOJ") the appropriate notification and report forms under the HSR Act with respect to the transactions contemplated by this Agreement. Parent, Sub and the Company shall comply, and Parent and Sub shall cause their Ultimate Parent Entities to comply, at the earliest practicable date with any request from the FTC or the DOJ for additional information or documentation with respect to such filing. To the extent permitted by law, Parent, Sub and the Company shall request, and Parent and Sub shall cause their Ultimate Parent Entities to request, that the FTC and DOJ treat as confidential the information so submitted. (b) Subject to the terms and conditions of this Section 6.2, Parent and Sub shall, and shall cause their Ultimate Parent Entities to, use their commercially reasonable best efforts to (i) resolve diligently and expeditiously any objections that may be asserted by the FTC or the DOJ with respect to the transactions contemplated by this Agreement ("Objections"), and (ii) obtain the termination of the waiting period under the HSR Act, in each case prior to the initial expiration date of the Offer or, if not possible by such date, as soon as practicable thereafter. (c) Parent, Sub and the Company shall cooperate fully and in good faith in connection with overcoming Objections, and (i) each of Parent, Sub and the Company shall promptly inform the other of any material communication made by such party to, or received by such party from, the FTC or the DOJ, and (ii) Parent shall keep the Company informed of any material discussions between Parent and/or Sub and the FTC and/or the DOJ regarding this Agreement. Parent and Sub shall cause their Ultimate Parent Entities to cooperate fully in connection with the foregoing matters in this Section. (d) Notwithstanding the foregoing, nothing contained in this Agreement will require or obligate Parent or Sub (i) to initiate or defend any litigation to which any Governmental or Regulatory Authority (including the DOJ and the FTC) is a party, (ii) to agree or otherwise become subject to any material limitations on (A) the right of the Parent or Sub, or their affiliates effectively to control or operate the business, assets, or operations of the Company, (B) the right of Parent, Sub, or its affiliates to acquire or hold the business, assets, or operations of the Company, (C) the right of Parent or Sub to exercise full rights of ownership of the shares of Common Stock of the Company acquired by Parent or Sub including, without limitation, the right to vote any shares held by Parent or Sub on all matters properly presented to the Company's shareholders, or (iii) to agree or otherwise be required to sell or otherwise dispose of, hold separate (through the establishment of a trust or otherwise), or divest itself of all or any portion of the business, assets, or operations of the Company, Sub or the Parent, except, in connection with the proposed resolution of any Objections, for the sale or disposal of such of the Company's supermarkets (or, in lieu thereof, supermarkets of Parent) that did not in the aggregate generate in excess of $2.7 million of net earnings before interest, tax, depreciation and amortization for the fiscal year ended June 29, 1997 (based upon the Company's books and records for such supermarkets by location) ("EBITDA"). (If Parent is required to divest 31 a Parent store, the EBITDA of the closest Company store shall be used in calculating the $2.7 million.) 6.3 Publicity. Neither Parent, Sub or their respective representatives nor the Company or its representatives shall disclose to any person (including by means of a press release) any information relating to this Agreement and the transactions contemplated hereby, except as expressly permitted hereby or to the extent reasonably appropriate to accomplish the purposes of this Agreement, without obtaining the prior consent of Parent or the Company, as the case may be, which shall not be unreasonably withheld; provided, however, that nothing in this Section shall prohibit any party from making any disclosure that its counsel deems necessary or advisable in order to fulfill such party's disclosure obligations imposed by law or the applicable rules of the SEC, any state securities authority, any securities exchange or the Nasdaq Stock Market, as long as such party makes a good faith effort to consult with the other party prior to such disclosure. This Section shall supersede the provisions of paragraph 2 of the Confidentiality Agreement (defined in Section 9.11). 6.4 Investigation; Confidentiality. (a) The Company shall give to Parent and Sub and their respective representatives full access upon reasonable prior notice and during normal business hours, to all officers, employees, agents, attorneys, accountants, assets, properties, books and records of the Company and its Subsidiaries, and shall cause its and its Subsidiaries' officers and independent auditors to furnish to such persons such financial and operating data and other information, including access to the working papers of its independent auditors, with respect to its business and properties and the business and properties of its Subsidiaries as such persons shall from time to time reasonably request; provided, however, that in conducting their investigation, Parent and Sub and such representatives may not interfere unreasonably with the business and operations of the Company and its Subsidiaries. Information obtained pursuant to the immediately preceding sentence shall constitute "Confidential Information" under the Confidentiality Agreement, subject to paragraph 4 of such Agreement. This Section shall supersede the first sentence of paragraph 6 of the Confidentiality Agreement and the Company shall not be entitled to request the return of Confidential Information pursuant to paragraph 3 of such Agreement unless and until this Agreement terminates. (b) Parent and Sub shall, upon request by the Company, provide the Company, its counsel, accountants and other authorized representatives with such information concerning Parent or Sub as may be reasonably necessary for the Company to ascertain the accuracy and completeness of the information supplied by or on behalf of Parent or Sub for inclusion in the Schedule 14D-1, Schedule 14D-9 and the Proxy Statement and to verify Parent's and Sub's performance of and compliance with their respective representations, warranties and covenants herein contained. Except as and to the extent required by law, the Company shall keep confidential any information furnished to it pursuant to the preceding sentence that is reasonably designated as confidential at the time of delivery. 32 6.5 Directors' and Officers' Indemnification and Insurance. (a) The Company, and from and after the Effective Time, the Surviving Corporation (each, an "Indemnifying Party"), shall indemnify, defend and hold harmless each person who is now, or has been at any time prior to the date hereof or who becomes prior to the Effective Time, a director or officer of the Company or any of its Subsidiaries (the "Indemnified Parties") against all losses, claims, damages, costs and expenses (including attorneys' fees), liabilities, judgments and settlement amounts that are paid or incurred in connection with any claim, action, suit, proceeding or investigation (whether civil, criminal, administrative or investigative and whether asserted or claimed prior to, at or after the Effective Time) that is based in whole or in part on, or arises in whole or in part out of, the fact that such Indemnified Party is or was a director or officer of the Company or any of its Subsidiaries and (i) relates to or arises out of any action or omission occurring or allegedly occurring at or prior to the Effective Time, or (ii) is based in whole or in part on, arises in whole or in part out of, or pertains in whole or in part to, this Agreement or the transactions contemplated hereby, in each case to the full extent a corporation is permitted under applicable law to indemnify its own directors or officers, as the case may be; provided that no Indemnifying Party shall be liable for any settlement of any claim effected without its written consent, which consent shall not be unreasonably withheld. Without limiting the foregoing, in the event that any such claim, action, suit, proceeding or investigation is brought against any Indemnified Party (whether arising prior to or after the Effective Time), the Indemnifying Parties will pay expenses in advance of the final disposition of any such claim, action, suit, proceeding or investigation to each Indemnified Party to the full extent permitted by applicable law. To the extent that any indemnification is sought pursuant to this Section 6.5(a), the Indemnified Party will promptly notify the Parent of any claim, action, suit, proceeding, or investigation for which it may seek indemnification under this Section 6.5; and in the event of any such claim, action, suit, proceeding, or investigation (whether arising before or after the Effective Time), (i) Parent or the Surviving Corporation will have the right to assume the defense thereof, and neither Parent nor the Surviving Corporation will be liable to such Indemnified Parties for any legal expenses of other counsel subsequently incurred thereafter by such Indemnified Parties in connection with the defense thereof, except that an Indemnified Party will have the right to retain separate counsel, reasonably acceptable to the Parent, at the expense of the Indemnifying Party if the named parties to any such proceeding include both the Indemnified Party and the Company or Parent, or their respective successors, and the representation of such parties by the same counsel would be proscribed under applicable standards of professional conduct; provided that, (i) neither the Parent nor the Surviving Corporation will be responsible for the legal expenses of more than one law firm in connection with any one matter, (ii) the Indemnified Parties will cooperate in the defense of any such matter, and (iii) neither the Parent nor the Surviving Corporation will be liable for any settlement effected without its prior written consent; provided, however, that notwithstanding the foregoing, neither the Parent nor the Surviving Corporation will have any obligation under this Section 6.5 to indemnify an Indemnified Party when and if a court of competent jurisdiction ultimately determines, and such determination becomes final, that the indemnification of such Indemnified Party in the manner contemplated hereby is prohibited by applicable law. 33 (b) Except as required by applicable Law or legal process, Parent, Sub and the Company will not take any action so as to amend, modify or repeal the provisions for exculpation of directors or indemnification of directors or officers contained in the articles of incorporation or bylaws (or other comparable charter documents) of the Surviving Corporation and its Subsidiaries in such a manner as would adversely affect in any material respect the rights of any individual who shall have served as a director or officer of the Company or any of its Subsidiaries prior to the Effective Time to be exculpated or to be indemnified by such corporations in respect of their serving in such capacities prior to the Effective Time. The Company will honor in accordance with their respective terms each of the indemnity agreements between the Company and each of its directors as in effect on the date of this Agreement and shall not terminate such agreements prior to the Effective Time. (c) The Company shall, and after the consummation of the Offer, Parent shall cause the Company to, until the sixth anniversary of the Effective Time and for so long thereafter as any claim asserted prior to such date has not been fully adjudicated by a court of competent jurisdiction, cause to be maintained in effect the policies of directors' and officers' liability insurance maintained by the Company and its Subsidiaries as of the date hereof (or policies providing at least the same coverage amounts and containing terms that are no less advantageous to the insured parties) with respect to claims arising from facts or events that occurred or are alleged to have occurred at or prior to the Effective Time; provided that the Company shall endeavor to obtain such coverage at the lowest premium cost reasonably available and that the Company shall not, and Parent shall not be obligated to cause the Surviving Corporation to, pay an aggregate (whether over time or on a one-time basis) premium in excess of $600,000. (d) The provisions of this Section are intended to be for the benefit of, and shall be enforceable by, each Indemnified Party and each party entitled to insurance coverage under paragraph (c) above, respectively, and his or her heirs and legal representatives, and shall be in addition to any other rights an Indemnified Party may have under the ABCA, any indemnity agreement, the articles of incorporation or bylaws of the Surviving Corporation or any of its Subsidiaries, or otherwise. 6.6 Change of Control Agreements. The Company will, and after the consummation of the Offer Parent shall cause the Company to, honor in accordance with their respective terms each of the Change of Control Agreements (defined in Section 3.10) as in effect on the date of this Agreement. 6.7 Fees and Expenses. Whether or not the Offer or the Merger is consummated, all costs and expenses incurred in connection with this Agreement shall be paid by the party incurring such cost or expense, subject to Sections 5.2, 8.1, 8.2 and 8.3. 6.8 Conduct of Business of Sub. Parent shall cause Sub to perform its obligations under this Agreement in accordance with its terms. 34 6.9 Cooperation. Subject to the terms and conditions of this Agreement (including, without limitation, Sections 1.1 and 6.2 and Annex A) Parent, Sub and the Company shall cooperate with each other and use their respective commercially reasonable best efforts to cause the conditions to the Offer in Annex A to be met as soon as reasonably practicable. The Company shall cooperate with Parent's reasonable requests for assistance in connection with Parent's transition planning and related activities prior to the Effective Time. 6.10 Post-Offer Action. As soon as practicable following consummation of the Offer, Parent and Sub shall use their commercially reasonable best efforts to cause the conditions to the Merger set forth in Article VII to be met and to consummate the Merger, subject to the terms of this Agreement. 6.11 Transaction Litigation. The Company shall give Parent the opportunity to participate in the defense or settlement of any litigation against the Company and its directors directly relating to any of the transactions contemplated by this Agreement until the purchase of Shares pursuant to the Offer, and thereafter shall give Parent the opportunity to direct the defense of such litigation and, if Parent so chooses to direct such litigation, Parent shall give the Company and its directors an opportunity to participate in such litigation; provided, however, that no such settlement shall be agreed to without Parent's consent, which consent shall not be unreasonably withheld; and provided further that no settlement requiring a payment by a director shall be agreed to without such director's consent. ARTICLE VII CONDITIONS TO THE MERGER The respective obligation of each party to effect the Merger is subject to the fulfillment, at or prior to the Closing, of each of the following conditions: (i) Sub shall have purchased all Shares validly tendered pursuant to the Offer; (ii) This Agreement shall have been adopted by the requisite vote of the shareholders of the Company under the ABCA; (iii) No Governmental or Regulatory Authority shall have issued an Order or ruling or taken any other action declaring illegal or otherwise prohibiting the Merger; and (iv) All governmental consents, orders and approvals legally required for the consummation of the Merger and the transactions contemplated hereby shall have been obtained and be in effect at the Effective Time. 35 ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER 8.1 Termination. Subject, in the case of the Company, to any approval of Independent Directors required by Section 1.3(c), this Agreement may be terminated at any time (upon written notice to the other parties hereto) prior to the Effective Time, whether before or after approval by the shareholders of the Company: (a) by mutual written consent of the Boards of Directors of the Company, Parent and Sub; (b) by the Company, (i) if the Offer has not been commenced timely in accordance with Section 1.1, provided that such failure shall not have been corrected on the next business day; (ii) if any representation or warranty made by Parent and/or Sub in this Agreement shall not be true and correct, which materially and adversely affects the consummation of the Offer, and such breach is not capable of being cured or is not cured by Parent and/or Sub prior to the expiration of the Offer; (iii) if Parent or Sub shall not have performed and complied with, in all material respects (without reference to any materiality qualifications contained therein), each agreement and covenant required by this Agreement to be performed or complied with by it, and such breach is not capable of being cured by Parent and/or Sub or is not cured prior to the expiration of the Offer; (iv) as provided in Section 5.2 in respect of a superior proposal, provided that (x) the Company shall have paid Parent the Termination Fee and the Expense Fee and (y) Parent or Sub does not make within three business days of receipt of the Section 5.2(b) Notice an offer that the Company's Board of Directors believes in good faith after consultation wih its legal counsel and financial advisors, is at least as favorable, from a financial point of view, to the Company's shareholders as such other other bidder's offer; provided, however, that if subsequent to the payment of the Termination Fee and the Expense Fee and prior to the termination of this Agreement, Parent or Sub makes an offer that the Company's Board of Directors believes in good faith after consultation with its legal counsel and financial advisors, is at least as favorable, from a financial point of view, to the Company's shareholders as such other bidder's offer, Parent and Sub shall, upon written request of the Company, return the Termination Fee and the Expense Fee once the Company shall have approved and recommended Parent's and Sub's amended offer and shall have rescinded any actions taken with respect to such superior proposal pursuant to clauses (A), (B) and (C) of Section 5.2(b); (c) prior to the purchase of Shares by Sub pursuant to the Offer, by Parent or Sub, if 36 (i) any representation or warranty made by the Company in this Agreement that contains a materiality qualification shall not be true and correct, or any representation or warranty made by the Company in this Agreement that is not so qualified shall not be true and correct in any material respect, and, in each case, such breach of the representation or warranty is not capable of being cured by the Company or is not cured prior to the expiration of the Offer; (ii) the Company shall not have performed and complied with, in all material respects (without reference to any materiality qualifications contained therein), each agreement and covenant required by the Agreement to be performed or complied with by it and such breach of the agreement or covenant is not capable of being cured by the Company or is not cured prior to the expiration of the Offer. (d) by Parent, Sub or the Company, if (i) (x) the Offer shall be terminated or expire in accordance with its terms without the purchase of any Shares pursuant thereto or (y) Sub shall not have accepted for payment any Shares pursuant to the Offer within 90 calendar days following the commencement of the Offer; provided, that Parent and Sub shall not be entitled to terminate for such reason if the cause thereof is a breach by Parent or Sub of any of their obligations under this Agreement and the Company shall not be entitled to terminate for such reason if the cause thereof is a breach by the Company of any of its obligations under this Agreement; (ii) any Governmental or Regulatory Authority shall have issued an Order or ruling or taken any other action declaring illegal or otherwise prohibiting the consummation of the Offer or the Merger and such Order shall have become final and nonappealable; (iii) if, at the Special Meeting (including any adjournment or postponement thereof), the Requisite Shareholder Approval is not obtained, except that the right to terminate this Agreement under this Section 8.2(d)(iii) will not be available to any party whose willful failure to perform any material obligation or to perform any material condition under this Agreement has been the proximate cause of, or resulted in, the failure to obtain the Requisite Shareholder Approval. 8.2 Effect of Termination. If this Agreement is validly terminated by either the Company or Parent or Sub pursuant to Article VIII, this Agreement will forthwith become null and void and there will be no liability or obligation on the part of either the Company or Parent or Sub (or any of their respective representatives or affiliates), except that (i) the provisions of Sections 6.3 and 6.4 relating to confidentiality, and 6.7 relating to fees and expenses, and Section 5.2, Section 8.3, Section 9.11, and, insofar as they relate to the other provisions of this Agreement that survive termination, Sections 9.3 through 9.7, Sections 9.9 and 9.10 and Sections 9.12 and 9.13, and this Section 8.2 will continue to apply following any such termination and (ii) nothing contained herein shall relieve any party hereto from liability for wilful breach of its representations, warranties, covenants or agreements contained in this Agreement. 37 8.3 Termination Payment. (a) If (i) Parent or Sub shall have provided the Company with an irrevocable written notice of termination of this Agreement pursuant to Section 8.1 based upon a material wilful breach by the Company of this Agreement (provided that such notice may state that it is subject to payment of the Termination Fee and the Expense Fee by the Company and that, in the event the Termination Fee and Expense Fee are not paid to Parent and Sub within five business days, such termination notice shall be deemed not to have been given and this Agreement shall not terminate as a result of such notice and the Company shall continue to be subject to its obligations to pay the Termination Fee and the Expense Fee as set forth in this Section 8.3) or (ii) any Change in Control shall have occurred during the term of this Agreement, or within 180 days following termination of this Agreement (other than pursuant to (w) Section 8.1(a), (x) Section 8.1(b), (y) Section 8.1(d)(i) if the Offer has expired due to the failure to satisfy any of the conditions in paragraphs (b), (c)(i), (c)(ii), (c)(iii) or (d) of Annex A, unless in the case of the conditions set forth in paragraphs (b), (c)(i), (c)(ii) or (c)(iii) of Annex A Parent and Sub are diligently pursuing the satisfaction of such conditions and the Company shall not have agreed to Parent's or Sub's written request to extend the Offer beyond the periods prescribed by Section 1.1(b), or (z) Section 8.1(d)(ii), so long as the Company shall not be in breach of this Agreement), then the Company shall promptly, but in no event later than five business days after the first to occur of any such event described in clauses (i) and (ii) above (the "Payment Date"), pay Parent a fee of $7,000,000 (the "Termination Fee") and shall also reimburse Parent and Sub for all out-of-pocket expenses and fees payable by them or their affiliates up to an aggregate of $3,000,000 (including without limitation fees and expenses of all counsel, printers, banks, investment banking firms, and other financial institutions, and their respective agents directly related to the transactions contemplated by this Agreement (including the financing of the transactions contemplated by this Agreement by Parent and Sub or obtaining the required consents of Parent's noteholders) (the "Expense Fee"), such amounts to be paid on the Payment Date in cash in immediately available funds (United States Dollars) by wire transfer to an account designated by Parent in writing not less than one business day prior to the Payment Date. The Termination Fee and the Expense Fee shall, in the alternative, be due under the circumstances provided in Section 5.2. In no event shall the Company be obligated to pay the Termination Fee and the Expense Fee more than once, unless Parent and Sub have previously refunded such Termination Fee and Expense Fee pursuant to Section 8.1(b)(iv) in which case the Termination Fee and Expense Fee shall continue to be payable in the circumstances provided in Section 5.2 and this Section 8.3. (b) As used herein, "Change in Control" means any of the following: (i) any person or group (other than Parent or Sub) acquires or beneficially owns, or enters into an agreement with the Company or any of its Subsidiaries to acquire, directly or indirectly, 25% or more of the outstanding Shares or 25% or more of the assets, revenues or earning power of the Company and its Subsidiaries, taken as a whole (it being understood that shares of Subsidiaries constitute assets of the Company for purposes of this Section 8.3); 38 (ii) the Company distributes or transfers, or publicly announces its intention to distribute or transfer, to its shareholders, by dividend or otherwise, assets constituting 25% or more of the market value or earning power of the Company on a consolidated basis; or (iii) any person or group (other than Parent or Sub) enters into an agreement with the Company or any of its Subsidiaries to consummate, or consummates, directly or indirectly, a tender offer or exchange offer for any Shares or involving a merger, consolidation or other business combination or similar transaction with or involving the Company. The Company agrees to notify Parent and Sub within five business days of the occurrence of any Change in Control and Parent and Sub shall be entitled to provide wire transfer instructions after receipt of such notice and the Payment Date shall be the next business day after Parent or Sub delivers such wire instructions to the Company. (c) The Company acknowledges that the agreements contained in this Section 8.3 are an integral part of the transactions contemplated by this Agreement, and that without these agreements Parent and Sub would not enter into this Agreement. The parties understand and agree that payment of the Termination Fee and Expense Fee are in addition to all other rights and remedies available to Parent and Sub hereunder, at law or in equity, and that Parent and Sub shall retain and apply the Termination Fee and Expense Fee against all direct and indirect damages suffered by Parent and Sub, whether or not as a result of the occurrence of the events described under Section 8.3(a) above. 8.4 Amendment. Subject in the case of the Company to Section 1.3(c), this Agreement may be amended, supplemented or modified by action taken by the respective Boards of Directors of the parties hereto at any time prior to the Effective Time, whether prior to or after the Requisite Shareholder Approval shall have been obtained, but after such approval only to the extent permitted by applicable law. No such amendment, supplement or modification shall be effective unless set forth in a written instrument duly executed by each party hereto. 8.5 Waiver. Subject in the case of the Company to Section 1.3(c), at any time prior to the Effective Time, any party hereto, by action taken by its Board of Directors, may to the extent permitted by applicable law (i) extend the time for the performance of any of the obligations or other acts of the other parties hereto, (ii) waive any inaccuracies in the representations and warranties of the other parties hereto contained herein or (iii) waive compliance with any of the covenants, agreements or conditions of the other parties hereto contained herein. No such extension or waiver shall be effective unless set forth in a written instrument duly executed by the party extending the time of performance or waiving any such inaccuracy or non-compliance. No waiver by any party of any term or condition of this Agreement shall be deemed to be or construed as a waiver of the same or any other term or condition of this Agreement on any future occasion. 39 ARTICLE IX GENERAL PROVISIONS 9.1 Non-Survival of Representations, Warranties and Agreements. The representations and warranties of the Company in this Agreement shall not survive the consummation of the Offer, and the other representations and warranties, and the covenants and agreements in this Agreement shall not survive the Effective Time, except for the agreements contained in Article II and Section 6.5 (relating to directors' and officers' indemnification and insurance) and any other agreement contained herein that expressly contemplates performance after the Effective Time. 9.2 Certain Definitions. For purposes of this Agreement, the following terms have the following meanings: (a) "affiliate" means a person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with the first mentioned person; (b) "associate" when used to indicate a relationship with any person, has the meaning specified in Rule 405 promulgated under the Securities Act of 1933, as amended; (c) "group" includes the meaning specified in Section 13(d)(3) of the Exchange Act; (d) "person" includes an individual, corporation, partnership, association, trust, other entity or any unincorporated organization; (e) "Significant Subsidiary" means any Subsidiary of the Company that is a "Significant Subsidiary" as such term is used in Regulation S-X or that contributed in excess of $500,000 to the Company's consolidated earnings before income taxes in any of the Company's fiscal years 1995, 1996 or 1997 or would be reasonably likely to contribute such amount in the Company's fiscal year 1998; and (f) a "Subsidiary" of a person is any corporation or other incorporated or unincorporated organization more than 50% of the equity interests of which are beneficially owned directly or indirectly by such person or with respect to which such person has the right to exercise control. 9.3 Notices. Any notices or other communications hereunder shall be in writing and shall be deemed to have been duly given when delivered in person or by a nationally recognized overnight delivery service, or transmitted by facsimile transmission (with confirmation of receipt), or five days after dispatch by registered or certified mail, postage prepaid, addressed to the parties at the following addresses or facsimile numbers: 40 (a) If to the Company, to: Delchamps, Inc. 305 Delchamps Drive Mobile, AL 36602 Attention: Chief Executive Officer Facsimile: (334) 438-4586 with a copy to: Jones, Walker, Waechter, Poitevent, Carrere & Denegre, L.L.P. 201 St. Charles Avenue New Orleans, LA 70170 Attention: L. R. McMillan, II Facsimile: (504) 582-8012 (b) If to Parent or Sub, to: Jitney-Jungle Stores of America, Inc. 1770 Ellis Avenue, Suite 200 Jackson, MS 39204 Attention: Mr. Michael E. Julian Facsimile: (601) 346-2158 with a copy to: Dechert Price & Rhoads 4000 Bell Atlantic Tower 1717 Arch Street Philadelphia, PA 19103 Attention: William G. Lawlor and David E. Schulman Facsimile: (215) 994-2222 or such other address as shall be furnished in writing by any party. 9.4 Headings. The descriptive headings of the several Articles and Sections of this Agreement are inserted for convenience only and do not constitute a part of this Agreement. 9.5 Applicable Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Alabama without giving effect to the conflict of laws provisions thereof. 9.6 No Assignment; Binding Effect. Subject to Section 2.1, neither this Agreement nor any right, interest or obligation hereunder may be assigned, by operation of law or otherwise, by any party hereto without the prior written consent of the other parties hereto, and any attempt to do so will be void. Subject to the preceding sentence, this Agreement is binding upon, inures to the benefit of and is enforceable by the parties hereto and their respective successors and assigns. 9.7 Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 41 9.8 Third Party Beneficiaries. The terms and provisions of this Agreement are intended solely for the benefit of each party hereto and their respective successors or permitted assigns, and except as otherwise expressly provided for herein, it is not the intention of the parties to confer third-party beneficiary rights upon any other person. 9.9 Invalid Provisions. If any provision of this Agreement is held to be illegal, invalid or unenforceable under any present or future Law or Order, and if the rights or obligations of any party hereto under this Agreement will not be materially and adversely affected thereby, (i) such provision will be fully severable, (ii) this Agreement will be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part hereof, and (iii) the remaining provisions of this Agreement will remain in full force and effect and will not be affected by the illegal, invalid or unenforceable provision or by its severance herefrom. 9.10 Specific Performance. Nothing in this Agreement shall preclude a party from seeking specific performance, injunctive relief or any other remedies not involving the payment of monetary damages in the event of any breach or violation (or threatened breach or violation) of any provision of this Agreement by the other party and each party acknowledges that, in light of the unique benefit to it of its rights under this Agreement, such remedies shall be available in respect of any such breach or violation by it in any suit properly instituted in a court of competent jurisdiction and shall be in addition to any other remedies available at law or in equity to such party. 9.11 Entire Agreement. The Confidentiality and Standstill Agreement dated as of April 8, 1997 between Parent and the Company (the "Confidentiality Agreement") shall remain in full force and effect except as expressly superseded hereby; provided that if the Company has paid (or is obligated to pay) the Termination Fee and the Expense Fee, the standstill provisions of the Confidentiality Agreement shall terminate. This Agreement (including the Annexes, exhibits, schedules, documents and instruments referred to herein) and the Confidentiality Agreement constitute the entire agreement and supersede (with prospective effect only) any other prior agreements and understandings, both written and oral, between the parties with respect to the subject matter hereof. 9.12 Days. As used herein "day" means calendar day unless business day is expressly specified, and if the last day for timely performance falls on a day that is not a business day, performance may be timely made on the first business day following. 9.13 Jurisdiction. The parties to this Agreement, acting for themselves and for their respective successors and assigns, hereby irrevocably and unconditionally consent to submit to the non-exclusive jurisdiction of both the courts of the States of Delaware and Alabama and of the United States of America located in such States for any actions, suits or proceedings arising out of or relating to this Agreement (and none of such persons shall commence any action, suit or proceeding relating thereto except in such courts). Each such person hereby irrevocably and unconditionally waives any objection to the laying of venue of any action, suit or proceeding arising out of this Agreement, in either the courts of the States of Delaware and Alabama or of the United States of America located in such States. 42 IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed on its behalf by its officers thereunto duly authorized, all as of the date first written above. JITNEY-JUNGLE STORES OF AMERICA, INC. By: /s/ Michael E. Julian ------------------------------------- Name: Michael E. Julian Title: President/CEO DELTA ACQUISITION CORPORATION By: /s/ Michael E. Julian ------------------------------------- Name: Michael E. Julian Title: President/CEO DELCHAMPS, INC. By: /s/ David W. Morrow ------------------------------------- Name: David W. Morrow Title: Chairman of the Board and Chief Executive Officer 43 Annex A CONDITIONS TO THE OFFER Notwithstanding any other provision of the Offer, Sub shall not be required to accept for payment or pay for any tendered Shares (subject to Rule 14e-1(c) under the Exchange Act) and may delay in accordance with Section 1.1(b) the acceptance for payment of, or the payment for, any Shares, amend the Offer in accordance with Section 1.1(b) or terminate the Offer (subject to Section 1.1(b)), if (a) immediately prior to the expiration of the Offer (as it may be extended in accordance with Article I of the Agreement), there shall not have been validly tendered and not withdrawn pursuant to the Offer a number of Shares such that, upon consummation of the Offer, Sub and its affiliates will beneficially own in the aggregate not less than two-thirds of the Shares outstanding on a fully diluted basis (the "Minimum Condition"); (b) any applicable (i) waiting period under the HSR Act or (ii) period during which Parent shall have consented or otherwise be barred from purchasing Shares pursuant to the Offer as part of any agreement or other arrangement with any Governmental or Regulatory Authority involving the HSR Act or any other applicable antitrust laws shall not have expired or terminated prior to the expiration of the Offer (as it may be extended in accordance with Article I of the Agreement); (c) at any time on or after the date of this Agreement and before the time of payment for any Shares, any of the following events shall have occurred and be continuing: (i) there shall be threatened or pending by any Governmental or Regulatory Authority (or the staff of the Federal Trade Commission or the staff of the Antitrust Division of the Department of Justice shall have recommended the commencement of) any suit, action or proceeding, or there shall be pending by any other person any suit, action or proceeding which has a reasonable possibility of success, (A) challenging the acquisition by Parent or Sub of any Shares, seeking to restrain or prohibit the making or consummation of the Offer or the Merger or the performance of any of the other transactions contemplated by this Agreement or seeking to obtain from the Company, Parent or Sub any damages or otherwise imposing financial burdens, penalties or fines that are material in relation to the Company and its Subsidiaries, or Parent and its Subsidiaries, in each case taken as a whole, (B) seeking to prohibit or limit the ownership or operation by the Company, Parent or any of their respective Subsidiaries of a material portion of the business or assets of the Company or its Subsidiaries, or Parent or its Subsidiaries, as a result of the Offer, the Merger or any of the other transactions contemplated by this Agreement, (C) seeking to impose limitations on the ability of Parent or Sub to acquire or hold, or exercise full rights of ownership of, any Shares accepted for payment pursuant to the Offer including, without limitation, the right to vote the Shares accepted for payment by it on all matters properly presented to the shareholders of the Company, (D) seeking to prohibit Parent or any of its Subsidiaries from effectively controlling or operating in any material respect the business or operations of the Company or its Subsidiaries, or (E) which otherwise is reasonably likely to have a Material Adverse Effect; (ii) there shall be any statute, rule, regulation, judgment, order or injunction enacted, entered, enforced, promulgated or deemed applicable to the Offer or the Merger, or any other action shall be taken by any Governmental or Regulatory Authority or court, other than the application to the Offer or the Merger of applicable waiting periods under the HSR Act, that is reasonably likely to result, directly or indirectly, in any of the consequences referred to in clauses (A) through (E) of paragraph (i) above, or any governmental consents, orders and approvals legally required for the consummation of the Offer or the Merger shall not have been obtained, and such failure is reasonably likely to result, directly or indirectly, in any of the consequences referred to in clauses (A) through (E) of paragraph (i) above; (iii) (A) a general suspension of trading in, or limitation on prices for, securities on any national securities exchange or in the over the counter market, (B) any change in general, financial, bank or capital market conditions which materially affects the ability of financial institutions to extend credit or syndicate loans, (C) a decline in the Standard & Poor's 500 Index by an amount in excess of 25%, measured from July 3, 1997, (D) a declaration of a banking moratorium or any suspension of payments in respect of banks in the United States or any material limitation (whether or not mandatory) imposed by any Governmental or Regulatory Authority that is reasonably likely to affect the extension of credit by lending institutions in general, or (E) a commencement of a war or armed hostilities or other national or international crisis directly or indirectly involving the United States which war, hostilities or crisis is reasonably likely to have a Material Adverse Effect or adversely affect the ability of the Company to perform its obligations hereunder or to consummate the Merger or to materially affect Parent's ability to obtain the consents referred to in paragraph (d) below; or in the case of any of the events described in (A) through (E) above existing as of the date hereof, a material acceleration or worsening thereof; (iv) any of the representations and warranties made by the Company in the Agreement that are subject to a materiality qualification shall not be true and correct, or any of the representations and warranties made by the Company in the Agreement that are not so qualified shall not be true and correct in any material respect, in each case at any time prior to the consummation of the Offer as though made on and as of such date or, in the case of representations and warranties made as of a specific date earlier than the date of the consummation of the Offer, on and as of such earlier date; provided, however, that if the Company discovers such a breach of a representation or warranty, the Company shall promptly notify Parent and Sub of the nature of such breach and if Parent or Sub discovers such a breach of a representation or warranty, Parent or Sub shall promptly notify the Company of the nature of such breach and provided further that, in the case of breaches that are reasonably capable of being cured prior to the expiration of the Offer, the Company shall have failed to diligently proceed to effect a cure of such breach and, in any event, to cure such breach prior to the expiration of the Offer (including any extensions thereof); 2 (v) the Company shall not have performed and complied with, in all material respects (without reference to any materiality qualifications contained therein), each agreement and covenant required by the Agreement to be performed or complied with by it; provided, however, that if the Company discovers such a breach of an agreement or covenant, the Company shall promptly notify Parent and Sub of the nature of such breach and if Parent or Sub discovers such a breach of an agreement or covenant, Parent or Sub shall promptly notify the Company of the nature of such breach and provided further that, in the case of breaches that are reasonably likely to be cured prior to the expiration of the Offer, the Company shall have failed to diligently proceed to effect a cure of such breach and, in any event, to cure such breach prior to the expiration of the Offer (including any extensions thereof); (vi) there shall have occurred any change (or any development that, insofar as reasonably can be foreseen, is reasonably likely to result in any change) that is materially adverse to the condition (financial or otherwise), total assets, total liabilities, business, results of operations or prospects of the Company and its Subsidiaries taken as a whole, including without limitation any such change that prevents Parent and Sub from obtaining the contemplated financing for the Offer and the Merger; (vii) the Company shall have delivered (or been obliged to deliver) to Parent a Section 5.2 Notice or there shall have been a Change in Control; (viii) prior to the purchase of Shares pursuant to the Offer, the Board of Directors (or any committee thereof) shall have withdrawn or modified (including by amendment of its Schedule 14D-9) in a manner adverse to Parent or Sub its approval or recommendation of the Offer, this Agreement or the Merger or shall have recommended another takeover proposal, or shall have adopted any resolution to effect any of the foregoing; or (ix) the Agreement shall have been terminated in accordance with its terms, or Parent or Sub have reached an agreement in writing with the Company providing for termination of the Offer or delay in acceptance of, or payment for, the Shares. (d) Parent shall not have obtained prior to the expiration of the Offer an amendment or supplement to the Indenture dated as of March 5, 1996 among Parent, Interstate Jitney Jungle Stores, Inc., an Alabama corporation and successor by merger to JJ (Interstate), Inc., Southern Jitney Jungle Company, a Mississippi corporation and successor by merger to JJ (Southern), Inc., McCarty-Holman Co., Inc., a Mississippi corporation and successor by merger to JJ (McCarty-Holman), Inc., Pump and Save, Inc., a Mississippi corporation and successor by merger to JJ (Pump and Save), Inc., Jitney-Jungle Bakery, Inc., a Mississippi corporation and successor by merger to JJ (Bakery), Inc., and Marine Midland Bank, as Trustee, (and, to the extent necessary, the Notes and Guarantees referred to therein), all with the consent of the holders of such Notes and in accordance with the terms of such Indenture, to increase the amount of permitted indebtedness, restricted payments and investments permitted to be incurred or made, as applicable, by Parent and its Subsidiaries under the Indenture and to make such other changes thereto as are necessary to permit 3 Parent to consummate the Offer, the Merger and the other transactions contemplated by this Agreement. (e) Prior to the expiration of the Offer, all of the Company's directors and substantially all of the holders of the Options who are employees of the Company shall have exercised such Options or shall have entered into agreements with the Company to exercise such Options prior to the Effective Time (or such later time as may be specified by Parent) or otherwise permit the Company to "cash-out" the Options as provided in the second sentence of Section 5.3 of the Agreement. which (in the case of each of paragraphs (a), (b), (c)(i) through (c)(viii), (d) and (e) above) makes it inadvisable, as determined by Sub in its sole judgment, to proceed with the Offer or with such acceptance for payment of, or payment for, Shares. The foregoing conditions are for the sole benefit of Sub and Parent and may be asserted by Sub or Parent and may be waived by Sub or Parent, in whole or in part, at any time and from time to time, in the sole discretion of Sub or Parent; provided that, without the written consent of the Company, Parent and Sub may not reduce the Minimum Condition to less than a majority of the outstanding Shares on a fully diluted basis or waive the condition set forth in (b) above. The failure by Sub or Parent at any time to exercise any of the foregoing rights will not be deemed a waiver of any right and each right will be deemed an ongoing right which may be asserted at any time and from time to time. 4 Annex B DISCLOSURE SCHEDULE 3.1 The Company's only Subsidiary is Supermarket Cigarette Sales, Inc., a Louisiana corporation. The Company has a 50% interest in a real estate partnership in Mobile, Alabama. Pursuant to an Aircraft Joint Ownership Agreement dated May 13, 1996, a Purchase Agreement dated April 12, 1996 and an Agreement to Repurchase dated April 12, 1996, the Company purchased a 20% interest in a 1976 Cessna Citation 500 Airplane and agreed to certain terms governing its operation. The Company has an interest in Topco Associates, Inc., a cooperative purchasing organization of which the Company is a shareholding member. 3.2 The Company's Employee Stock Ownership Plan contains provisions relating to the voting of shares of the Company's capital stock. 3.4 The Company makes no representation regarding the effect of the financing transactions contemplated by Parent or Sub in connection with this Agreement. The transactions contemplated by this Agreement will breach a covenant in the Loan Agreement dated June 29, 1995 between the Company and Hibernia National Bank, as agent for itself and other banks. Compliance with such covenant has been waived under the conditions described in a letter dated July 2, 1997, a copy of which has been provided to Parent. The Company must give the holders of its 5.51% Senior Notes notice of any person becoming a 50% shareholder within 30 days. The transactions contemplated by this Agreement will conflict with the leases for Stores No. 24 and 94. The transactions contemplated by this Agreement will constitute a "Change of Control" pursuant to the Company's Change of Control Agreements, which will give persons who are parties to such agreements certain rights as provided therein. The transactions contemplated by this Agreement will cause the restrictions to lapse on 10,800 restricted Shares subject to the 1987 Restricted Stock Plan and will accelerate the exercisability of options to purchase 101,250 Shares outstanding under the Directors' Stock Option Plan and the 1993 Stock Incentive Plan (not included in the 101,250 Shares are options for 31,333 Shares that will vest on July 29, 1997). The Company makes no representation with respect to the effect of the consummation of the Offer or the Merger on its insurance policies except that, to the Company's knowledge, there are no material insurance policies that will terminate or expire as a result of the consummation of the Offer or the Merger that could not be replaced with similar policies on customary commercial terms. The Company owns a one-half interest in a partnership which owns and has developed a site near Mobile consisting of 22 acres, more or less. The transactions contemplated by this Agreement will give the other partner the right to initiate a buy-sell process, pursuant to which the Company must choose either to buy or sell the other partner's interest at the price specified by the partner, and will terminate the Company's right to initiate such a process. Alternatively, the partner may elect to offer to buy the Company's interest at an appraised value. The Company shall not initiate any such process without Parent's consent, which shall not be unreasonably withheld. Upon consummation of the Offer, Topco Associates, Inc. may require that the Company withdraw. 3.7 From March 29, 1997 to the date of this Agreement, the Company has taken the following actions that, if taken after the date of the Agreement, would or may constitute a breach of Section 5.1: o Issued Shares under the Directors Compensation Plan and upon option exercises under the 1993 Stock Incentive Plan and Directors Stock Option Plan. o Paid a regular quarterly dividend. o Entered into lease agreements with respect to Stores No. 36 and 91 and an expansion agreement with respect to Store No. 3. o Made capital expenditures reflected in the 1997 fiscal year capital budget. o Finalized the settlement agreement in the Williams case. o Reduced Michael Doan's Change of Control Agreement to writing. 3.10 The federal income Tax Returns for the Company's fiscal years ended July 3, 1993, July 2, 1994 and July 1, 1995 are currently being audited. List of Change of Control Agreements (1): Change of control agreement between the Company and David W. Morrow dated December 13, 1995. Change of control agreement between the Company and Richard W. La Trace dated June 7, 1995. Change of control agreement between the Company and Timothy E. Kullman dated August 2, 1994. Change of control agreement between the Company and Thomas P. Robbins dated October 8, 1995. Change of control agreement between the Company and Frank I. Bennen dated June 29, 1995. Change of control agreement between the Company and Larry S. Griffin dated September 11, 1989. 2 Change of control agreement between the Company and Thomas R. Trebesh dated June 8, 1993. Change of control agreement between the Company and Vernell L. Abreo, Jr. dated January 24, 1992. Change of control agreement between the Company and Dennis Smith dated April 29, 1996. Change of control agreement between the Company and Fred Rayle dated December 4, 1995. Change of control agreement between the Company and Joel D. Cambron dated September 11, 1989. Change of control agreement between the Company and W. David Whatley dated September 11, 1989. Change of control agreement between the Company and Lester Holland dated November 8, 1994. Change of control agreement between the Company and Michael Doan dated April 15, 1996. Change of control agreement between the Company and Stanley Ewell dated January 22, 1997. Change of control agreement between the Company and Lewis R. Loeb dated October 10, 1994. Change of control agreement between the Company and Robert W. Hyde, Jr. dated August 10, 1995. Change of control agreement between the Company and Jerry D. Fussell dated September 11, 1989. Change of control agreement between the Company and Terral E. Layton dated September 11, 1989. Change of control agreement between the Company and Harry S. Pollard dated September 11, 1989. Change of control agreement between the Company and James D. Mashburn dated November 23, 1994. Change of control agreement between the Company and Dallas Hastings dated September 11, 1989. Change of control agreement between the Company and Richard G. Bonner dated September 11, 1989. Change of control agreement between the Company and Carolyn H. Jones dated September 11, 1989. Change of control agreement between the Company and Joseph K. Burnett dated September 11, 1989. Change of control agreement between the Company and Gerald N. Davis dated September 11, 1989. Change of control agreement between the Company and Ruth D. Peden dated September 11, 1989. Change of control agreement between the Company and Michael W. Yohn dated September 11, 1989. Change of control agreement between the Company and Russell A. Boltz dated September 11, 1989. Change of control agreement between the Company and Thomas W. Delchamps dated January 3, 1995. Change of control agreement between the Company and David M. Middleton dated November 23, 1994. Change of control agreement between the Company and Brian W. Patterson dated November 23, 1994. 3 Change of control agreement between the Company and Charles R. Powell dated September 11, 1989. Change of control agreement between the Company and Ray F. Lewis dated September 11, 1989. Change of control agreement between the Company and William Bailey dated September 11, 1989. Change of control agreement between the Company and Leon (Wayne) Wiggins dated November 23, 1994. Change of control agreement between the Company and James Applin dated September 11, 1989. Change of control agreement between the Company and James Giddeon, II dated September 11, 1989. Change of control agreement between the Company and David McPherson dated September 11, 1989. ______________________ (1) One person who was terminated and rehired by the Company has claimed that he has in effect a Change of Control Agreement. He did have a Change of Control Agreement prior to his termination of employment. He claims that the Company promised when it rehired him that he would be provided with the same benefits he had prior to his termination of employment and that, therefore, he is entitled to a Change of Control Agreement. The Company has informed him that he does not have a Change of Control Agreement; however, if he were entitled to such an agreement, the Company's payment obligations thereunder would not exceed $200,000. ______________________ 3.11 The Company shall not take action or fail to take any action that would cause it to become a participant in a multiemployer plan. See footnote (1) to the list of Change of Control Agreements in Section 3.10 relating to an employee who has asserted a right to a Change of Control Agreement. 3.12(c) Crichton property, designated as Parcels C and D, Delchamps Commercial Subdivision, Mobile County, Alabama, and also referred to as 551 Western Drive, is listed on the Alabama Department of Environmental Management's inventory for reported leaking underground storage tanks. All tanks are out of service. This property was sold to the Finch Companies, Inc. in June 1996, and it is subject to environmental indemnities by the Company. The costs for monitoring the underground storage tank system are eligible for reimbursement under the Alabama Tank Trust Fund Act of 1988. The Hammond Distribution Center, located at 407 Pride Ave., and also referred to as 1721 S. Airport Road, Hammond, Louisiana, is listed on a Resource Conservation Recovery Act Corrective Action Record. The Center is separately undergoing a Phase II investigation by Delchamps, for solvents and petroleum. No corrective action order is pending. 4 The Adams Street property, designated as Lot 2, Distributors Subdivision, Mobile, Alabama is listed on the Alabama Department of Environmental Management's inventory for reported leaking underground storage tanks. The ADEM in 1996 required no further action Delchamps' stores 123 (200 West Willow, St., Lafayette, LA) and 302 (corner of Airport and McGregor, Mobile, ALA) are reported in the emergency response notification system each for a diesel truck fuel leak in 1993 and 1995, respectively. 3.12(e) The Company has ordered Phase I Environmental Site Assessments on several store locations, several owned parcels of raw land and the headquarters site in Mobile, Alabama that have not yet been completed. The Company will provide Parent with access to such assessments as soon as they are received by the Company. The Company has materials relating to the 551 Western Drive location sold by the Company, which shall be provided to Parent. 3.12(f) The Company represents that the stores listed on Exhibit 3.12(f) are the only Company stores that have not been retrofitted with current refrigerant. To the Company's knowledge, the matters described in Sections 3.12(c), (e) and (f) above are not material. 3.14(a) List of real property owned or leased by the Company and its Subsidiaries: See the list of leased stores attached as Exhibit 3.14 hereto. List of real property locations and approximate descriptions: Louisiana 1. Hammond Property. A tract of land, together with improvements thereon, situated in Hammond, Tangipahoa Parish, Louisiana, lying north of U.S. Highway 190, in T-6-S, R-8-E, Sections 17 and 20, consisting of 272 acres, more or less. 2. Mandeville Property. A tract of land, together with improvements thereon, situated in Mandeville, St. Tammany Parish, Louisiana, lying south of U.S. Highway 190, in T-7-S, R-11-E, Section 38, consisting of 22 acres, more or less. 3. Jones Creek Road Property. A tract of land, together with improvements thereon, situated in Baton Rouge, East Baton Rouge Parish, Louisiana, in T-7-S, R-2-E, Section 60, 5 designated as Lot A-3-A-2, Woodlawn Estates, 2nd Filing, consisting of 1.2 acres, more or less. 4. Bluebonnet Boulevard Property. Two tracts of land, together with improvements thereon, situated in Baton Rouge, East Baton Rouge Parish, Louisiana, in T-7-S, R-1-E, Sections 8 and 9, designated as Tracts B-1 and C-1-B, Greensburg Land District, consisting of 2.4 acres, more or less. Mississippi 1. D'Iberville Property. Two tracts of land, together with improvements thereon, situated in D'Iberville, Harrison County, Mississippi, lying west of Highway 69 and south of Popps Ferry Road, in T-7-S, R-9-W, Sections 8 and 9. 2. Courthouse Road Property. A tract of land, together with improvements thereon, situated in Gulfport, Harrison County, Mississippi, lying east Courthouse Road and south of Pass Christian Road, in T-7-S, R-11-W, consisting of 5.67 acres, more or less. NOTE: This tract is currently under option. Alabama 1. Headquarters. A building of approximately 65,000 square feet in which the corporate headquarters is located, situated at 305 Delchamps Drive, Mobile, Alabama and the land on which it is situated. 2. Adams Street Property. A tract of land, together with improvements thereon, situated in Mobile, Mobile County, Alabama, designated as Lot 2, Distributors Subdivision, forming the corner of Delchamps Drive and Adams Street, consisting of 2.69 acres, more or less. 3. Crichton Property. A tract of land, together with improvements thereon, situated in Mobile, Mobile County, Alabama, designated as Parcels C and D, Delchamps Commercial Subdivision, lying northeast of Moffett Road and west of Western Drive, consisting of 24 acres, more or less. NOTE: This tract is currently under option. 4. Broad and Elmira Streets Property. A tract of land, together with improvements thereon, situated in Mobile, Mobile County, Alabama, forming the corner of Broad and Elmira Streets, with an adjoining lot providing frontage on Marine Street, consisting of 1.21 acres, more or less. NOTE: A sale of this tract is pending. 6 5. 109 Broad Street Property. A tract of land, together with improvements thereon, situated in Mobile, Mobile County, Alabama, forming the northeast corner of Broad and Church Streets. Improvements thereon bear municipal number 109 Broad Street. 6. Store No. 39 Property. The Company owns the land on which Store No. 39 is situated; consisting of 3 acres, more or less. 7. Mobile Partnership. The Company owns a one-half interest in a partnership which owns and has developed a site near Mobile consisting of 22 acres, more or less and upon which Store No. 8 is situated. The Company leases Store No. 8 from the partnership. Florida Panama City Property. A fifty percent (50%) interest as tenant-in-common in a tract of land, together with improvements thereon, situated in Panama City, Bay County, Florida, lying east of Thomas Drive and north of Magnolia Beach Road, in T-4-S, R-15-W, Section 9, consisting of 18.7 acres, more or less. 3.14(b) The transactions contemplated by this Agreement will conflict with the leases for Stores No. 24 and 94. 3.14(c) The Company has subleased the locations indicated on Exhibit 3.14 hereto. 3.15 The Company is involved in a unionization effort at the Hammond distribution center and has challenged the election that occurred in December 1996. Delchamps, Inc. and General Truck Drivers, Chauffeurs, Warehousemen & Helpers Local No. 270 and Wilburn Ray Young, Jr. and Ivy H. Tate and David Aranyosi (Before the National Labor Relations Board Region 15) 3.16(a) The Company makes no representation regarding the effect of the financing transactions contemplated by Parent or Sub in connection with this Agreement. The transactions contemplated by this Agreement will breach a covenant in the Loan Agreement dated June 29, 1995 between the Company and Hibernia National Bank, as agent for itself and other banks. Compliance with such covenant has been waived under the conditions described in a letter dated July 2, 1997, a copy of which has been provided to Parent. 7 The Company must and will give the holders of its 5.51% Senior Notes notice of any person becoming a 50% shareholder within 30 days. The transactions contemplated by this Agreement will conflict with the leases for Stores No. 24 and 94. The Company owns a one-half interest in a partnership which owns and has developed a site near Mobile consisting of 22 acres, more or less. The transactions contemplated by this Agreement will give the other partner the right to initiate a buy-sell process, pursuant to which the Company must choose either to buy or sell the other partner's interest at the price specified by the partner, and will terminate the Company's right to initiate such a process. Alternatively, the partner may elect to offer to buy the Company's interest at an appraised value. Upon consummation of the Offer, Topco Associates, Inc. may require that the Company withdraw. The contracts and agreements listed on the Data Room Index dated July 5, 1997 are incorporated by reference herein. 3.16(c) $12.2 million (not including amounts up to $200,000 described in footnote (1) in Disclosure Schedule Section 3.10). 3.21(b) None. 3.24 The standstill provisions of one of the agreements will not by its terms apply to the transactions contemplated by this Agreement. 5.1(d) The Company's fiscal year 1997 capital budget, as amended during the fiscal year, covered nine store expansions, six minor store remodels, three combo conversions, and various store equipment, warehouse equipment and administrative equipment items, aggregating approximately $25.2 million, of which approximately $13.7 million had been spent at May 31, 1997. A portion of the remainder was spent in June 1997 and the rest has been carried over to fiscal year 1998. The Company's fiscal year 1998 capital budget includes three store expansions, thirteen major store remodels, four combo conversions, and various store equipment, warehouse equipment and administrative equipment items aggregating approximately $48.5 million, including amounts carried over from the fiscal year 1997 capital budget. The store 8 expansion, remodel and conversion schedule for fiscal year 1998 was previously submitted to Parent. The Company will consult with Parent prior to making any such capital expenditures in excess of $500,000. The Company shall retain the right to make bonus payments pursuant to its Cash Incentive Compensation Plan not to exceed $2.6 million. The Company shall be entitled to make expenditures in connection with its Frequent Shopper Program; provided, that the Company shall delay the introduction of the program for four weeks from July 10, 1997 and shall thereafter consult with Parent prior to such introduction. 5.1(e) The Company shall retain the right to make bonus payments pursuant to its Cash Incentive Compensation Plan not to exceed $2.6 million. The Company shall be entitled to enter into new agreements or amend existing agreements, including employment, severance and change of control agreements, and to grant new awards or benefits, excluding stock options and other long term incentive compensation arrangements, to the extent reasonably necessary to provide equivalent compensation to the replacement (including by way of internal promotion) of any employee at the Vice President level or above who terminates employment with the Company prior to the Effective Time; provided, that the Company shall consult with Parent prior to taking any of the foregoing actions. 9 EX-99.(C)(2) 14 EXHIBIT 99.(C)(2) CONFIDENTIALITY AND STANDSTILL AGREEMENT April 8, 1997 Mr. Bruce C. Bruckmann Bruckmann, Rosser, Sherrill & Co., Inc. 126 East 56th Street New York, NY 10022 Dear Mr. Bruckmann: Delchamps, Inc. ("DLCH"), Bruckmann, Rosser, Sherrill & Co., Inc. and Jitney-Jungle Stores of America, Inc. (Bruckmann, Rosser, Sherrill & Co., Inc. and Jitney-Jungle Stores of America, Inc., together, "BRS") are prepared to engage in discussions with respect to a possible negotiated business combination involving BRS and DLCH (the "Transaction"), and during the course of such discussions DLCH may disclose and make available to BRS certain information concerning DLCH's business, prospects, financial condition, operations, assets and liabilities. All such information furnished to BRS or its Representatives (as defined below) by or on behalf of DLCH (irrespective of the form of communication and whether such information is so furnished on or after the date hereof), and all analyses, compilations, data, studies, notes, interpretations, memoranda or other documents prepared by BRS or its Representatives containing or based in whole or in part on any such furnished information are collectively referred to herein as the "Confidential Information." As a condition to being furnished with the Confidential Information, BRS agrees as follows: 1. Non-Disclosure of Confidential Information. (a) BRS shall (i) use the Confidential Information solely for the purpose of evaluating a possible Transaction and for no other competitive or other purpose; (ii) not disclose the Confidential Information to any third party, except for disclosures to its directors, officers, employees and representatives of its advisors (such as independent accountants, investment bankers, attorneys and financing sources) acting on its behalf (such directors, officers, employees and representatives being referred to hereinafter collectively as its "Representatives") who in each case, in its reasonable judgment, need to know such information for the purpose of evaluating a possible Transaction; (iii) inform its Representatives of the confidential nature of the Confidential Information and direct its Representatives to treat the Confidential Information confidentially; (iv) take all additional reasonable precautions necessary to prevent the disclosure of the Confidential Information by its Representatives to any third party; and (v) be responsible for any breach of this Agreement by its respective Representatives who have not entered into a written agreement with DLCH to be bound by the terms hereof. Mr. Bruce C. Bruckmann April 8, 1997 Page 2 (b) If BRS or its Representatives is requested (by interrogatories, requests for information or documents, subpoena, civil investigative demand or similar process) to disclose any Confidential Information, it is agreed that BRS will provide DLCH with prompt notice of such request so that DLCH may seek an appropriate protective order and/or waive BRS's compliance with the provisions of this Agreement. BRS and its Representatives may disclose without liability hereunder only that portion of the Confidential Information that BRS is advised by written opinion of counsel is legally required to be disclosed; provided that BRS gives to DLCH written notice of the information to be disclosed as far in advance of its disclosure as is practicable and, upon DLCH's request and at DLCH's expense, uses reasonable efforts to obtain assurances that confidential treatment will be accorded to such information. 2. Non-Disclosure of Negotiations or Agreements. Except as required by law, or in circumstances where the law is unclear as advisable in the written opinion of counsel in order to protect the disclosing party, neither BRS or its Representatives, on the one hand, nor DLCH or its Representatives, on the other hand, shall disclose to any person the existence, status or terms of any discussions, negotiations or agreements concerning a possible Transaction, including without limitation any offer, letter of intent, proposal, price, value or valuation, or any similar terms, agreements or understandings between BRS and DLCH with respect thereto, or that BRS has received from DLCH Confidential Information, without obtaining the prior written consent of DLCH or BRS, as the case may be, which consent will not be unreasonably withheld. 3. Return of Confidential Information. All written Confidential Information delivered by or on behalf of DLCH to BRS pursuant to this Agreement shall be and remain the property of DLCH, and upon the written request of DLCH, BRS shall (i) promptly return such Confidential Information and shall not retain any copies or other reproductions or extracts thereof, (ii) destroy or have destroyed all memoranda, notes, reports, analyses, compilations, studies, interpretations, or other documents derived from or containing Confidential Information, and all copies and other reproductions and extracts thereof, and (iii) provide a certificate to DLCH certifying that the foregoing materials have, in fact, been destroyed or returned, signed by an authorized officer supervising such destruction or return. Notwithstanding the return or destruction of the Confidential Information, BRS and its Representatives will continue to be bound by the confidentiality and other obligations hereunder. 4. Information Not Deemed Confidential Information. The term "Confidential Information" does not include information that (i) is or becomes generally available to the public other than as a result of a disclosure by BRS or its Representatives in violation of this Agreement; or (ii) was or becomes available to BRS on a non-confidential basis from a source Mr. Bruce C. Bruckmann April 8, 1997 Page 3 other than DLCH or its Representatives, provided that such source is not known by BRS to be bound by an obligation of confidentiality to DLCH or its Representatives. 5. No Representations or Warranties. Neither DLCH nor any of its respective officers, directors, employees, representatives or agents makes any representation or warranty, express or implied, as to the accuracy and completeness of any Confidential Information provided by it, and no liability shall result to DLCH from its use, except as set forth in a definitive agreement for a Transaction. Only the representations and warranties that are made in a definitive agreement for a Transaction, when, as, and if it is executed, and subject to such limitations and restrictions as may be specified therein, shall have any legal effect. 6. No Agreement. DLCH has the absolute right to determine what information, properties and personnel it wishes to make available to BRS. Unless a definitive agreement regarding a Transaction between BRS and DLCH has been executed and delivered, neither DLCH, BRS nor any of their stockholders or affiliates will be under any legal obligation of any kind whatsoever with respect to such a Transaction by virtue of this letter Agreement or any other written or oral expression with respect to such Transaction except, in the case of this Agreement, matters specifically agreed to herein. Each party further acknowledges and agrees that each party reserves the right, in its sole discretion, to reject any and all proposals made by the other party or any of its Representatives with regard to a Transaction, and to terminate discussion and negotiations with the other party at any time. 7. Contact Persons: No Solicitation. All requests by BRS for Confidential Information, meetings with personnel or inspection of properties and all other communications regarding a possible Transaction shall be made only to the contacts designated by DLCH (the "Contact Persons"). BRS agrees that, for a period of two years from the date of this Agreement, it will not initiate contact (except in the ordinary course of business and except to the extent permitted by paragraph 9) with any director, officer, employee, distributor or customer of DLCH regarding its business operations, prospects or finances, except as may be permitted by the Contact Persons for due diligence purposes. It is expressly understood that this Agreement is not intended to preclude the ability of the companies to compete with one another in the ordinary course. BRS further agrees that, for a period of two years from the date hereof, it will not hire any of DLCH's officers, zone managers and/or district managers without DLCH's written consent and will not solicit for hire (other than by means of a general advertisement) any of DLCH's non-store level employees other than clerical and administrative employees. 8. Non-public information. DLCH has outstanding publicly-held securities and the Confidential Information contains material non-public information. BRS acknowledges that it is (i) aware, and has advised or will advise its Representatives, that the United States Mr. Bruce C. Bruckmann April 8, 1997 Page 4 securities laws prohibit any person in possession of material non-public information about a company from purchasing or selling securities of such company, and from communicating such information to any other person under circumstances in which it is reasonably foreseeable that such person may purchase or sell such securities and (ii) familiar with the Securities and Exchange Act of 1934, as amended, and the rules and regulations thereunder, and BRS agrees that it will neither use nor permit any of its Representatives to use any Confidential Information in violation of such Act or rules or regulations, including without limitation, Rule 10b-5. 9. Standstill. BRS agrees that, until the expiration of two years from the date of this Agreement, without prior written invitation (on an unsolicited basis) of DLCH's Board of Directors, it and its affiliates will not (i) in any manner acquire, agree to acquire or make any proposal or offer or otherwise seek to acquire, directly or indirectly, any securities (or rights in respect thereof), assets or property of DLCH or any of its subsidiaries or of any successor thereto or person in control thereof, whether such agreements or proposals or offers are made with or to DLCH or any of its subsidiaries (or a successor thereto or person in control thereof) or a third party; (ii) enter into or agree, offer, seek or propose to enter into or otherwise be involved in or part of, directly or indirectly, any merger, acquisition transaction or other business combination relating to DLCH or any of its subsidiaries or any of their respective assets; (iii) make, or in any way participate in, directly or indirectly, and "solicitation" of "proxies" (as such terms are used in the proxy rules of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) to vote, or seek to advise or influence any person with respect to the voting of, any voting securities of DLCH or any of its subsidiaries or of any successor thereto or person in control thereof, (iv) form, join or in any way participate in a "group" (within the meaning of Section 13(d)(3) of the Exchange Act) with respect to any voting securities of DLCH or any of its subsidiaries or of any successor thereto or person in control thereof; (v) seek or propose, alone or in concert with others, to control or influence the management, Board of Directors or policies of DLCH; (vi) directly or indirectly enter into any discussions, negotiations, arrangements or understandings with any other person (except internal discussions and planning activities involving its Representatives) with respect to any of the foregoing activities or propose any of such activities to any other person (other than its Representatives); (vii) directly or indirectly advise, encourage, assist, act as a financing source for or otherwise invest in any other person in connection with any of the foregoing; (viii) publicly disclose any intention, plan or arrangement inconsistent with the foregoing. BRS also agrees that, during such two-year period, neither it nor any of its affiliates will: (i) request DLCH or its advisors, directly or indirectly, to (1) amend or waive any provision of this paragraph (including this sentence) or (2) otherwise consent to any action inconsistent with any provision of this paragraph (including this sentence); or (ii) take any initiative with respect to DLCH or any of its subsidiaries that could be reasonably be expected to require DLCH to make Mr. Bruce C. Bruckmann April 8, 1997 Page 5 a public announcement regarding (1) such initiative, (2) any of the activities referred to in this paragraph, (3) the possibility of a Transaction or any similar transaction or (4) the possibility of BRS or any other person acquiring control of DLCH, whether by means of a business combination or otherwise. Additionally, BRS's Chief Executive Officer may contact DLCH's Chief Executive Officer for the purpose of expressing continuing or renewed interest in a Transaction or in any other business relationship, provided that, unless invited to do so by DLCH's Chief Executive Officer, no offer or proposal shall be made that would require disclosure or formal consideration by DLCH or its Board of Directors. 10. Person. The term "person" as used in this Agreement will be interpreted broadly to include the media and any corporation, company, group, partnership, governmental body or other entity or individual, 11. No Waiver. No failure or delay by DLCH or BRS in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any other or further exercise thereof, or the exercise of any right, power or privilege hereunder. 12. Remedies. It is understood and agreed that money damages would not be a sufficient remedy for any breach of this Agreement and that the non-breaking party shall be entitled to equitable relief, including specific performance and injunction, as a remedy for any such breach or threatened breach. Each party agrees to waive, and use its best efforts to cause its directors, officers, employees or agents to waive, any requirement for the securing or posting of any bond or other security in connection with such remedy. Such remedies shall not be deemed to be the exclusive remedies for a breach of this Agreement, but shall be in addition to all other remedies available at law or in equity, including remedies pursuant to applicable laws relating to trade secrets. 13. Benefits: Governing Law. This Agreement is for the benefit of DLCH and its respective directors, officers, employees, representatives and agents and its respective successors and assigns and shall be governed by and construed in accordance with the internal substantive laws and not the choice of law rules of the State of Alabama. 14. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, and all such counterparts together shall constitute but one of the same Agreement. 15. Severability. If any provision of this Agreement is invalid or unenforceable, such invalidity or unenforceability shall not be deemed to affect any other provision hereof or Mr. Bruce C. Bruckmann April 8, 1997 Page 6 the validity of the remainder of this Agreement, and such invalid or unenforceable provision shall be deemed deleted herefrom to the minimum extent necessary to cure such invalidity or unenforceability. 16. Modifications. No provision of this Agreement may be waived, amended or modified except by the written agreement of BRS and DLCH. Please confirm your agreement with the foregoing by signing and returning one copy of this letter to the undersigned, whereupon this letter Agreement shall become a binding agreement between us. DELCHAMPS, INC. By: /s/ Timothy E. Kullman ------------------------ Timothy E. Kullman Senior Vice President and Chief Financial Officer Accepted and agreed to as of the ____ day of April 1997. BRUCKMANN ROSSER, SHERRILL & CO., INC. By: /s/ Bruce C. Bruckmann -------------------------- Bruce C. Bruckmann Authorized Signatory and JITNEY-JUNGLE STORES OF AMERICA, INC. By: /s/ Roger P. Friou --------------------- Name: Roger P. Friou Title: President -----END PRIVACY-ENHANCED MESSAGE-----