TRANSACTIONS WITH OFFICERS, DIRECTORS, OR "INSIDERS" § 16.302
January 198616-167
§ 16.300 OTHER TRANSACTIONS BETWEEN THE CORPORATION
AND ITS OFFICERS, DIRECTORS, OR "INSIDERS"
§16.301 To approve (a) the purchase by a corporation of a majority of its outstanding Common Stock from its board chairman and (b) the related sale of all such
shares to three officers of the corporation (with copies of the Stock Redemption
Agreement and the Executive Stock Purchase Agreement)
ZIMMERMAN REDEMPTION AGREEMENT;
EXECUTIVE STOCK PURCHASE AGREEMENT
Introduction At the Annual Meeting, there will be submitted to the Company's shareholders for
their approval and ratification an integrated plan providing for the acquisition by t he
Company of 255,000 shares of Common Stock from William Zimmerman, Chairman of
the Board of Directors and holder of sole investment and voting power with respect to
56.9% of the outstanding common stock of the Company (see "Security Ownership of
Principal Stockholders and Management"), as Trustee of the William Zimmerman Trust
(a revocable inter vivos trust for the benefit of certain members of the Zimmerma n
Family of which William Zimmerman is Trustee), and the sale of an aggregate of
255,000 shares (85,000 shares each) to three of the Company's principal executive
officers, Arthur Frankel, President and a director of the Company and owner of 8.5% of
the outstanding Common Stock of the Company, Arthur Boric, Vice President -- Store
Operations and Bill Thomas, Vice President -- Finance, Secretary and Treasurer (the
"purchasing executives") under a purchase and sale agreement pursuant to which the
purchase price must be paid by the executives and the shares transferred by the
Company on or before May 25, 1984. For information regarding the current
stockholdings of Messrs. Zimmerman, Frankel, Boric and Thomas at May 31, 1979 and
giving effect to the proposed transactions see "Security Ownership of Participating
Executives".
The primary purpose of the plan is to effect the transmission of a portion of the
Common Stock owned by William Zimmerman, founder of the Company, to three of the
younger senior executives who have been instrumental in the growth of the Company.
By doing so it will also aid Mr. Zimmerman in diversifying his assets and will give such
executives a greater equity participation in the Company than they might otherwise be
able to obtain.
The plan is embodied in two interdependent agreements; the first, an agreement
between the Company and William Zimmerman, as Trustee of the William Z immerman
Trust (the "Zimmerman Redemption Agreement"), and the second, an agreement
between the Company and Arthur Frankel, Arthur Boric, and Bill Thomas (the
"Executive Purchase Agreement"). Both agreements were executed on May 26, 1979, as
of May 25, 1979, subject to shareholder approval and certain other conditions described
below. The full text of the Zimmerman Redemption Agreement is attached to t his Proxy
Statement as Appendix "B"; the full text of the Executive Purchase Agreement is
attached to this Proxy Statement as Appendix "C." The descriptions of such agreements
below are qualified in their entirety by reference to the terms of the agreements.
Zimmerman Redemption AgreementUnder the Zimmerman Redemption Agreement, Mr. Zimmerman, as Trustee of
the William Zimmerman Trust, will sell and the Company will purchase an aggregate of
255,000 shares of issued and
outstanding Common Stock of the Company owned by the William Zimmerman Trust.
The purchase price is $10.12 per share (an aggregate purchase price of $2,580,600)
which is 87.5% of the average mean between the bid and asked prices of Common Stock
in the over-the-counter market as reported by NASDAQ for the period May 22, 1979
through June 8, 1979. On May 25, 1979, the last trading day before the date the
agreement was executed, the bid and asked prices were $11.00 and $11.75, respectively.
On June 8, 1979 the bid and asked prices were $11.50 and $12.25 respectively.
Principal conditions to the consummation of such purchase and sale are (1) the
approval of the Zimmerman Redemption Agreement and the Executive Purchase
Agreement by a majority of shares owned by shareholders entitled to vote (excluding
interested parties as described below under "Required Shareholder Vote"); (2) receipt of
a ruling by the Internal Revenue Service that the distribution to the William Zimmerman
Trust of the purchase price will constitute a payment in exchange for the shares under
Section 302 of the Internal Revenue Code (the "IRS Ruling"); and (3) the satisfaction of
all conditions under the Executive Purchase Agreement (described below under
"Executive Stock Purchase Agreement"). The purchase price will be paid by the
Company and the shares transferred by the Trust within thirty (30) business days of the
receipt of the IRS Ruling.
Executive Stock Purchase Agreement
Under the Executive Stock Purchase Agreement the Company agreed to sell and
each of the purchasing executives severally agreed to purchase 85,000 shares (an
aggregate of 255,000 shares for the three executives) of Common Stock at an initial
purchase price (subject to a 7% compound annual increase) per share equal to 100% of
the average mean between the bid and asked prices of the Company's Common Stock in
the over-the-counter market as reported by NASDAQ for the period May 22, 1979
through June 8, 1979. Such calculated initial purchase price is $11.57 per share; an
aggregate initial purchase price of $2,950,350. On May 25, 1979, the last trading day
before the date of execution of the agreement, the bid and asked prices were $11.00 and
$11.75, respectively. On June 8, 1979 the bid and asked prices were $11.50 and $12.25
respectively.
The Closing Date (at which time each of the executives is obligated to pay t he
purchase price and the Company is obligated to transfer the shares) for the purchase a nd
sale is May 25, 1984; however, each purchasing executive may prepay prior to May 25,
1984, all or any portion of the purchase price and receive the number of shares for
which he has paid in full. The initial purchase price of $11.57 per share will increase by
7% compounded annually after the date of execution of the Executive Purchase
Agreement with respect to those shares which have not been fully paid for.
Prior to full payment for and transfer of the shares, the purchasing executives shall
have no right to vote or receive dividends with respect to such shares.
In the event a purchasing executive voluntarily without good cause terminates his
employment with the Company and its subsidiaries, his obligation to pay the purchase
price may at the sole option of the Company be accelerated and become due a nd payable
TRANSACTIONS WITH OFFICERS, DIRECTORS, OR "INSIDERS" § 16.302
January 198616-167
in accordance with the following provisions: (i) if the market price per share of the
Company's Common Stock at the date of termination is equal to or greater than the
purchase price per share at the date of termination, the Company may declare the
purchase price to be due and payable on a specified date no earlier than 180 days from
the date of written notice of demand: and (ii) if the market price per share of the
Company's Common Stock at the date of termination is less than the purchase price per
share at the date of termination the Company may declare the purchase price due and
payable on a specified date from the date of written notice of demand no earlier than one
half of the number of days between the date of execution of the Agreement and the date
of termination, but in no event earlier than 180 days from the date of written notice of
demand.
In the event that a purchasing executive's employment with the Company
terminates for any reason and the executive engages in activity which is dete rmined by
the Company to be detrimental to the interests of the Company, the Company may
declare the purchase price due and payable 30 days from the date of written demand. If
the purchase price is not paid when due (on May 25, 1984, or earlier in the event of
acceleration) the legal remedies available to the Company shall include, but not be
limited to the following: (i) if the market price of the Common Stock (at the date of
default) is higher than the per share purchase price (at the date of default), the Company
may elect to cancel the agreement with respect to any shares not fully paid for and
transferred, in which case the defaulting executive shall not be obligated to pay the
remainder of the purchase price nor shall he be entitled to the balance of the unpa id for
shares or the appreciation in the market price of such shares and (ii) if the market price
of the Common Stock (at the date of default) is lower than the purchase price (at the
date of default), the Company may credit the market price of the Common Stock aga inst
the remainder of the purchase price and take any appropriate legal action to col lect the
remaining balance.
The number of shares to be purchased and sold and the purchase price will be
adjusted in the event of stock dividends, stock splits, reclassifications or
recapitalizations or other corporate reorganization in which the Company is a surviving
corporation. In the event of a merger or consolidation of the Company with or into
another corporation or the sale or conveyance of all or substantially all of the assets of
the Company, the Agreement shall relate thereafter to the kind and amount of share s of
stock and of the securities and property receivable upon such consolidation, merger, sale
or conveyance by a holder of the number of shares of Common Stock of the Company
which remain unpaid by the Purchasers immediately prior to such consolidation. merger,
sale or conveyance. The agreement provides that any such continuing or successor
corporation shall expressly assume the obligation to deliver, upon payment by the
purchaser of the purchase price, such shares, securities or property as the purchaser shall
be entitled to receive.
The agreement also grants to the purchasing executives three demand and three
incidental registration rights subject to certain conditions.
Principal conditions to the obligations of the Company are (1) the approval of the
Zimmerman Redemption Agreement and the Executive Purchase Agreement by a
majority of outstanding shares owned by shareholders entitled to vote (excluding
interested parties as described below under "Required Shareholder Vote"), (2) the
purchase by the Company of 255,000 shares from the William Zimmerman Trust
pursuant to the Zimmerman Redemption Agreement, and (3) the receipt by the
Company of a letter from Touche Ross & Co. satisfactory to the Company regarding the
accounting treatment for the transactions which letter has been received.The Executive Purchase Agreement provides that it shall be administered by a
Committee of the Board of Directors the members of which are not purchasing
executives. The Committee is authorized to interpret the agreement, to ame nd the
agreement (with the concurrence of the Purchaser) so long as the amendment does not
decrease the purchase price, extend the Closing Date, release or liberalize the
purchaser's obligations and the power to commence, maintain and settle any appropriate
judicial or nonjudicial remedial action necessary to enforce the duties and obligat ions of
the purchasers.
Required Shareholder Vote
Both the Zimmerman Redemption Agreement and the Executive Purchase
Agreement provide that the agreements must be ratified by a majority of outstanding
shares owned by shareholders entitled to vote at the Annual Meeting, excluding the
shares owned, directly or indirectly, by William Zimmerman, the William Zim merman
Trust, the William Zimmerman Family Trust, Arthur Frankel, Arthur Borie, Bill
Thomas and their spouses, children, grandchildren and parents. On the basis of the
information available to the Company, including information supplied to the Company
by Messrs. Zimmerman, Frankel, Borie and Thomas and their respective spouses,
children, grandchildren and parents, an aggregate of 3,683,400 shares are owned by
such persons and 1,422,166 shares are owned by persons whose shares shall be included
in the vote on the proposed transactions.
For information concerning remuneration of Messrs. Zimmerman, Frankel, Borie
and Thomas, see "Remuneration and Other Information about Management
Remuneration of Management" and "Other Employee Benefit and Remuneration Plans."
For information regarding options granted and exercised by Messrs. Borie and Thomas
see "Qualified Stock Option Plan."
Security Ownership of Participating Executives
The following table sets forth information as of May 31, 1979, regarding the
Company's Common Stock owned of record or beneficially, including Common Stock
subject to option (whether or not exercisable within 60 days) pursuant to the Company's
Qualified Stock Option Plan, by Messrs. Zimmerman, Frankel, Borie and Thomas
("Shares Owned Before") and the same information giving effect to the proposed
Zimmerman Redemption Agreement and Executive Purchase Agreement ("Shares
Owned After").
Shares Owned Before Shares Owned After
Name No (1) Percent (2) No (1) Percent (2)(3)
William Zimmerman, Trustee of the William 1,700,304 32.6% 1,445,304 27.7%
Zimmerman Trust (4)(6)
William Zimmerman, Trustee of the William 1,205,152 23.1% 1,205,152 23.1%
Zimmerman Family Trust (5)(6)
Arthur Frankel (6) 433,200 8.3% 518,200 9.9%
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January 198616-167
Arthur Borie (1) 77,200 1.5% 162,200 3.1%
Bill Thomas (1) 101,600 1.9% 186,600 3.6%
(1) Includes shares subject to unexercised options (whether or not exercisable within 60
days) granted under the Company's Qualified Stock Option Plan: Arthur Borie --
33,700 shares; Bill Thomas 30,000 shares. For other information regarding such
options see "Qualified Stock Option Plan."
(2) Shares subject to unexercised options (whether or not exercisable within 60 days) (105,300) have been deemed outstanding for the purpose of computing the
percentage of outstanding shares owned by the specified person and for the purpose
of computing the percentage of outstanding shares owned by every other person.
(3) Shares to be purchased by Messrs. Frankel, Borie and Thomas pursuant to the Executive Stock Purchase Agreement have been deemed outstanding for the purpose
of computing the percentage of outstanding shares owned by the specified person
and for the purpose of computing the percentage of outstanding shares by every
other person.
(4) The William Zimmerman Trust is a revocable inter vivos trust for the benefit of
certain members of the Zimmerman Family of which William Zimmerman i s
Trustee.
(5) The William Zimmerman Family Trust is a trust for the benefit of certai n members
of the Zimmerman Family of which William Zimmerman is Trustee and under
which he has a limited power of appointment to himself of up to $5,000 or 5% of the
value of the Trust's assets per year.
(6) Messrs. Zimmerman and Frankel have informed the Company that they desire to sell Common Stock in an underwritten public offering pursuant to a registration
statement to be filed by the Company. Although the actual number of shares to be
sold and the time of sale will depend upon a number of factors, including the
prevailing market conditions and the market price of the Common Stock, Mr.
Zimmerman has indicated that the William Zimmerman Trust desires to se ll 415,000
shares; Mr. Frankel has indicated that he desires to sell 200,000 shares. On May 24,
1979, the Board of Directors authorized the filing of a registration statement
covering an aggregate of 905,000 shares of Common Stock to be offered in an
underwritten public offering and the inclusion in such registration statement of
415,000 shares to be sold by the William Zimmerman Trust, 30,000 shares to be
sold by Marc Zimmerman, William Zimmerman's adult son, 30,000 shares to be sold
by Stuart Zimmerman, William Zimmerman's adult son, 30,000 shares to be sold by
Susan Zimmerman, William Zimmerman's adult daughter, 200,000 shares to be sold
by Arthur Frankel, and 200,000 shares to be sold by David Tepper.
(7) Certain Considerations Each shareholder should carefully consider the ultimate desirability of the
foregoing transactions after analyzing those factors which he considers material. The
factors which are mentioned below are not exhaustive and are illustrative only.
One of the effects of the transaction is to reduce the Company's current assets and
shareholders' equity by $2,580,600, the amount of the purchase price for the shares
proposed to be purchased from the Zimmerman Trust since the purchase price of the
Zimmerman Stock will be funded by cash on hand and cash which becomes available
upon the maturity of short term money market instruments while the purchasing
executives are not obligated to pay the purchase price of the shares until May 25, 1984.
As at December 31, 1978, the Company had $14,061,000 in cash and money market
instruments ($3,361,000 cash; $10,700,000 money market instruments). As at March 31,
1979, the Company had $8,796,000 in cash and money market instruments ($1,096,000
cash, $7,700,000 marketable securities).For the fiscal year ended December 31, 1978, the composite weighted return on
the Company's investments in money market instruments was 8.4%; for the three-month
period ended March 31, 1979, it was 10.8%. Due to the variability of interest rates,
which have significantly increased over the last year, such returns may not be indicat ive
of what the Company may earn from such investments in the future. Funds utilized for
the purchase of the Zimmerman Stock will not be available for such investments, nor
will they be available for working capital or other purposes. For the fiscal year ended
December 31, 1978, the Company had a return of 19.5% on average total assets and a
return of 26.5% on average shareholders' equity.
Additionally, as at December 31, 1978, the Company's ratio of current assets to
current liabilities was 3.7 to 1, its ratio of total assets to total debt was 3.7 to I and its
ratio of shareholders' equity to total debt was 2.7 to 1. As at March 31, 1979 such ratios
were 5.2 to 1, 4.8 to 1 and 3.8 to I respectively. Giving effect to the proposed
transactions such ratios would have been 3.4 to 1, 3.5 to I and 2.5 to I as at December
31, 1978 and 4.8 to 1, 4.5 to 1 and 3.5 to 1 as at March 31, 1979, reflecting the reduction
in current assets and shareholders' equity resulting from the proposed transactions.
Although the purchase will be funded from cash and cash equivalents, at some
time in the future, an effect could be to increase the borrowings by the Company to a
level greater than what such borrowings would have been had the funds not been
utilized for the repurchase of the Zimmerman Stock or had the executives paid cash
immediately for the stock to be purchased by them. As at December 31, 1978, and
March 31, 1979 the Company had no bank borrowings. For the year ended December
31, 1978, average monthly borrowings outstanding were $333,000, maximum month-
end borrowings outstanding were $4,000,000, the weighted average interest rate was
9.5%; for the three months ended March 31, 1979 such amounts were $333,000,
$1,000,000, and 11.75% respectively. Historically, the Company's bank borrowings
peak during August and September at which time inventory peaks preparatory for the
Christmas Season.
Since under the terms of the Executive Purchase Agreement the executives may
pay the purchase price (and receive the shares) at any time until May 25, 1984, the
Company will not have such funds immediately available and, therefore, will not be abl e
to use such funds for investment in interest bearing money market instruments or for
working capital purposes. Although the purchase price increases by 7% a year for the
period of time the purchase price is not paid, during the course of that five-year period
the interest rate obtainable by the Company through the purchase of interest bearing
obligations, including from financial institutions with considerably greater assets than
the purchasing executives, could be higher (as it is now) than 7%. And, the interest rate
at which the executives could borrow money could be higher (as it is now) than 7% over
TRANSACTIONS WITH OFFICERS, DIRECTORS, OR "INSIDERS" § 16.302
January 198616-167
the five years during which the purchase price may be paid.
The executives will benefit from any increase in the market price of the Stoc k;
they will also bear the risk of loss from any decrease in the market price of the Stock
since they are unconditionally personally liable for the purchase price.
The following table sets forth as at the indicated dates the aggregate purchase pri ce
(reflecting the initial purchase price of $2,950,350 plus an increase of 7% compounded
annually) which will be due pursuant to the Executive Stock Purchase Agreement
("Aggregate Purchase Price Due Company") and the amount of principal plus total
interest which would be accumulated if the amount of $2,580,600 proposed to be paid to
the Zimmerman Trust for the shares to be purchased had been invested at an a ssumed
interest rate of 10% compounded annually beginning May 25, 1979 ("Redemption Price
Compounded at 10% Annually"). In fact, the Company will have the use of such funds
and will pay no interest to Mr. Zimmerman until the Closing of the Zimmerman
Redemption Agreement, which will occur sometime after July 13, 1979, upon receipt of
the IRS Ruling; the 7% compounded annually increase in the purchase price pursuant to
the Executive Stock Purchase Agreement begins May 25, 1979.
May 25, 1979 May 25,1980 May 25,1981 May 25,1982 May 25,1983 May 25,1984
Aggregate Purchase
Price ........................... $2,950,350 $3,156,875 $3,377,856 $3,614,306 $3,867,307 $4,138,018
Redemption Price
Compounded at 10%
Annually .................... $2,580,600 $2,838,600 $3,122,526 $3,434,779 $3,778,256 $4,156,082
The executives who are purchasers under the Executive Stock Purchase
Agreement are three of the five senior management executives of the Company. All of
them have held their positions with the Company at least since 1972. Since that time
revenues have increased at an average annual rate of 26.2%, net earnings have increased
at an average annual rate of 37.4% and earnings per share have increased at an average
annual rate of 36.1% and the Company has enjoyed an average return on shareholders'
equity of 23.9%. For the four-year period from June 1, 1974 through December 31,
1978, the respective figures were 28.0%, 52.7%, 51.3% and 28.7%. However, included
in this period is the fiscal year. ended December 31, 1975, in which earnings increased
by an unusual and non recurring 116.2%.
It is hoped that the increased shareholdings in the Company brought about by the
Executive Purchase Agreement will create additional incentives for the participa ting
executives to remain in the employ of the Company and to participate in t he furtherance
of the Company's objectives, including its continued profitable growth.
Since two directors and principal shareholders have an economic interest in the
proposed plan, the Board of Directors has required the proposed plan to be submitted to
the shareholders and has required that for ratification (i) a majority of the outstanding
shares must vote affirmatively, and (ii) a majority of outstanding shares excluding
shares directly or indirectly owned by William Zimmerman, the William Zi mmerman
Trust, the William Zimmerman Family Trust, Messrs. Frankel, Borie, Thomas and thei r
respective spouses, children, grandchildren and parents must vote affirmatively.
ZIMMERMAN STOCK REDEMPTION AGREEMENT
This Agreement is made as of May 25, 1979 between WILLIAM ZIMMERMAN
TRUST (the "Stockholder") and PIC 'N' SAVE CORPORATION, a California
corporation (the "Company").
RECITALS
(a) The Company presently has 5,105,566 shares issued and outstanding.
(b) The William Zimmerman Trust is a revocable intervivos trust for the benefit of
Marc, Stuart and Susan Zimmerman, children of William Zimmerman. William
Zimmerman is the Trustee of the William Zimmerman Trust. The William Zimmerman
Trust owns 1,700,304 shares of the Company's Common Stock.
(c) The William Zimmerman Family Trust is a trust for the benefit of Marc, Stua rt
and Susan Zimmerman. Willian Zimmerman is the Trustee of the Zimmerman Fa mily
Trust and has a limited power of appointment to himself of up to $5,000 or 5% of the
value of Trust's assets per year. The Zimmerman Family Trust owns 1,205,152 shares of
the Company's Common Stock.
(d) Marc Zimmerman owns 76,048 shares of the Company's Common Stock;
Stuart Zimmerman owns 76,048 shares of the Company's Common Stock: Susan
Zimmerman owns 76,048 shares of the Company's Common Stock.
(e) The William Zimmerman Trust, the William Zimmerman Family Trust, Marc
Zimmerman, Stuart Zimmerman and Susan Zimmerman desire to dispose of an
aggregate of 760,000 shares of the Company's Common Stock in order to diversify their
assets.
(f) The Company (subject to the ratification of the shareholders) desires to
increase the ownership of its Common Stock by certain key senior management
personnel in order to provide such personnel with added incentives to benefit the
interests of the Company and its shareholders through additional equity ownership.
(g) In order to facilitate the objectives specified in "f," the William Zimme rman
Trust is willing to sell to the Company, and the Company is (subject to shareholder
approval) willing to redeem 255,000 shares of Common Stock, which shares will be
sold to certain key senior management personnel.
(h) The William Zimmerman Trust desires to sell 415,000 shares in an
underwritten public offering; Marc, Stuart and Susan Zimmerman desire to sell an
aggregate of 90,000 shares (30,000 shares each) in such offering.
NOW THEREFORE, it is agreed as follows: 1.Redemption of Stock. Stockholder hereby agrees to sell to the Company, and
the Company hereby agrees to redeem from the Stockholder, 255,000 shares of the
Company's Common Stock $.25 par value per share (the "Stock").
2.Redemption Price. The "redemption price per share" shall be equal to 87.5%
of the average mean between the bid and asked prices of the Company's Common Stock
in the over-the-counter market as reported by NASDAQ for the period beginning May
22, 1979 through June 8, 1979. The aggregate redemption price shall be the amount
obtained by multiplying the redemption price per share times 255,000.
3.Delivery of Stock; Payment of Purchase Price. The Stockholder shall deliver
to the Company at the Closing a certificate or a number of certificates represe nting the
TRANSACTIONS WITH OFFICERS, DIRECTORS, OR "INSIDERS" § 16.302
January 198616-167
Stock to be redeemed hereunder, which certificate or certificates shall be duly endorsed
for transfer to the Company. The Company shall deliver a cashier's check for the
purchase price. Upon execution of the Agreement certificates in negotiable form for the
Stock to be sold hereunder shall be placed in escrow with Union Bank as "Escrow
Holder." The Escrow Holder shall be instructed to deliver certificates for the Stock
pursuant to this Agreement when the Escrow Holder receives for the Stockholder the
purchase price therefore under this Agreement. The Stockholder agrees that the shares
represented by the certificates held in escrow for the Stockholder under the Escrow
Agreement are subject to the interest of the Company hereunder; that the arrangeme nt
made by the Stockholder for such escrow are to that extent irrevocable; that the
Stockholder's obligations hereunder
shall not be terminated by operation of law or the occurrence of any event, and that if
any such event should occur before the delivery of the Stock hereunder, certificates for
the shares to be sold by the Stockholder shall be delivered by the Escrow Holder in
accordance with the terms and conditions of this Agreement as if such event has not
occurred, regardless of whether the Escrow Holder shall have received notice of such
event or not. In the event outstanding shares of the Company's Common Stock are
increased, decreased, or changed into or exchanged for a different number or kind of
securities of the Company through stock split, stock dividend, stock consolidation,
recapitalization or other corporate reorganization in which the Company is a surviving
corporation, an appropriate and proportionate adjustment shall be made in the number
and kind of Common Stock or other securities which shall be deliverable hereunder and
in the redemption price per share. Such adjustment, however, shall not change the
aggregate redemption price.
4.Representations of the Stockholder. The Stockholder represents and warrants
to, and agrees with, the Company that:
(a) It has all necessary power and authority to enter this Agreement to sell
the Stock to the Company and that this Agreement is a valid and enforceable
agreement in accordance with its terms.
(b) The Stockholder has, and on the Closing date will have, marketable and
valid title to the shares of Stock to be sold hereunder free and clear of all liens,
encumbrances, equities and claims; and upon delivery of and payment for such
shares of Stock to be sold by it hereunder, the Company will acquire marketable
and valid title of such shares of Stock, free and clear of all liens, encumbrances,
equities and claims. 5. Representations of the Company. The Company hereby represents and
warrants that this Agreement has been approved for submission to the shareholders by
the Board of Directors of the Company and that upon shareholder approval of this
Agreement and the transactions provided for herein no further corporate action will be
necessary on the part of the Company to make this Agreement valid and binding upon
the Company in accordance with its terms.
6.Closing Date. The "Closing" shall occur as soon as practicable (but in no
event more than 30 days after satisfaction of the conditions specified in Secti on 7) and
on such date and at such place as shall be agreed upon in writing between the
Stockholder and the Company, but in no event shall such date be later than May 1, 1980.
7.Conditions to the Closing
7.1 Conditions to the Stockholder's Obligations. The obligation of the
Stockholder to sell the Stock to the Company upon the Closing is subject to satisfacti on
of the following conditions:
(a) The shareholders of the Company shall have duly approved and ratified
this Agreement and the Agreement between the Company, Arthur Frankel, Arthur
Boric and Bill Thomas, attached hereto as Exhibit "A" by a majority of the
outstanding shares entitled to vote at a duly held meeting of shareholders in
accordance with applicable Delaware corporate law; provided, however, that in
such shareholders vote, there shall not be counted as outstanding shares of
Common Stock directly or indirectly owned by William Zimmerman, the William
Zimmerman Trust, the William Zimmerman Family Trust, Marc Zimmerman,
Stuart Zimmerman, Susan Zimmerman, Arthur Frankel, Arthur Boric, Bill Thomas
and their respective spouses, children, grandchildren and parents.
(b) The Stockholder shall have received a favorable ruling from the Internal
Revenue Service to the effect that the redemption contemplated herein, when
integrated with other sales by the Stockholder and William Zimmerman's childre n,
will be treated as a distribution in part or full payment in exchange for the Stoc k
within Section 302 of the Internal Revenue Code of 1954, as amended.
(c) All conditions to the Agreement between the Company and Arthur Frankel, Arthur Boric and Bill Thomas shall have been satisfied.
(d) The representations and warranties of the Company contained herein shall be true and correct in all respects as of the date of
the Closing, and shall be deemed repeated and shall have the same effect
as though such representations and warranties had been repeated on the
date of the Closing.
7.2 Conditions to the Company's Obligations. The obligation of the Company
to redeem the Stock from the Stockholder upon the Closing is subject to satisfaction of
the following conditions:
(a) The shareholders of the Company shall have duly approved and ratified
this Agreement and the Agreement between the Company, Arthur Frankel, Arthur
Borie and Bill Thomas, attached hereto as Exhibit "A" by a majority of the
outstanding shares entitled to vote at a duly held meeting of shareholders in
accordance with applicable Delaware corporate law; provided, however, that in
such shareholders vote, there shall not be counted as outstanding shares of
Common Stock directly or indirectly owned by William Zimmerman, the William
Zimmerman Trust, the William Zimmerman Family Trust, Mark Zimmerman,
Stuart Zimmerman, Susan Zimmerman, Arthur Frankel, Arthur Boric, Bill Thomas
and their respective spouses, children, grandchildren and parents.
(b) All conditions to the Agreement by and between the Company and Arthur
Frankel, Arthur Boric and Bill Thomas, shall have been satisfied.
(c) The representations and warranties of the Stockholder contained herein
shall be true and correct in all respects as of the date of the Closing, and shal l be
deemed repeated and shall have the same effect as though such representations and
warranties had been repeated on the date of the Closing.
TRANSACTIONS WITH OFFICERS, DIRECTORS, OR "INSIDERS" § 16.302
January 198616-167
8.Further Acts. Each party hereby agrees to cooperate fully and to perform any
further or additional acts and execute and deliver any further or additional instruments
or documents which may be reasonably necessary or appropriate to carry out the
transactions contemplated by this Agreement, including without limitation, the
Stockholders' agreement to undertake all reasonable actions necessary to obtain a
favorable ruling from the Internal Revenue Service as contemplated by Section 7.1(b) of
this agreement.
9.Attorneys' Fees. In the event of any dispute between the parties hereto arising
out of this Agreement, the successful party shall be entitled to recover from the other
reasonable attorneys' fees as fixed by the court.
10.Entire Agreement; Modification. This Agreement, together with the Exhibits
attached, constitutes the entire Agreement between the parties with respect to the subject
matter herein contained, merging into it any and all prior agreements. This Agree ment
may not be modified, amended, rescinded or terminated or in any other way changed
except by an agreement in writing signed by all parties.
11.Construction. This Agreement shall be construed and applied in accordance
with California law. If any of the provisions of this Agreement shall be unlawful, void
or for any reason unenforceable, such provisions shall be deemed separable from and in
no way affecting the validity or enforceability of the remaining provisions of this
Agreement or the Exhibits hereto.
EXECUTIVE STOCK PURCHASE AGREEMENT
This Agreement is made as of May 25, 1979 among PIC 'N' SAVE
CORPORATION, a California corporation (the "Company"), ARTHUR FRANKEL,
ARTHUR BORIE and BILL THOMAS (collectively referred to as the "Purchasers").
RECITALS
(a) The Company has entered into the Zimmerman Stock Redemption Agreement
(the "Zimmerman Agreement") pursuant to which the Company has agreed to redeem
255,000 shares of the Company's Common Stock from the William Zimmerman Trust
(the "Trust"). Among the conditions to the obligations of the Company and the Trust
under the Zimmerman Agreement, is the condition that the Company and the Purchasers
enter into a legally valid and binding agreement to purchase all the shares to be
redeemed prior to the close of the Zimmerman Agreement.
(b) Arthur Frankel, Arthur Boric and Bill Thomas are respectively, President, Vice
President -- Store Operations and Vice President -- Finance, Secretary and Treasurer of
the Company, and each of them desires to acquire additional equity interest in t he
Company.
(c) The Company has agreed to the above described redemption from the Trust and
the proposed sale of such shares to the Purchasers in order to provide them with added
incentives to further the best interests of the Company and its shareholders.
NOW THEREFORE, it is agreed as follows: 1.Sale of Stock. Each Purchaser hereby severally agrees to purchase and the
Company hereby agrees to sell to each Purchaser the number of shares of the Company's
Common Stock, $.25 par value, set forth opposite his name:
Name Shares
Arthur Frankel ........................................................... 85,000
Arthur Borie............................................................... 85,000
Bill M. Thomas .......................................................... 85,000
(hereinafter collectively referred to as the "Stock").
2.Purchase and Delivery of Stock. The "initial purchase price per share" of
each share of Stock shall be equal to the average mean between the bid and asked prices
of the Common Stock in the over-the-counter market as reported by NASDAQ for the
period beginning May 22, 1979 through June 8, 1979. In consideration for the privilege
of deferring payment of the purchase price, the initial purchase price shall increase each
year (or portion thereof) compounded at the annual rate of 7% with respect to unpaid for
shares and such price per share at any time shall be the "purchase price per share." Eac h
Purchaser hereby unconditionally agrees to pay the aggregate purchase price for the
shares of Stock he has agreed to purchase on or before May 25, 1984, the "Closing date"
of this Agreement. A Purchaser may at any time acquire and receive all or a port ion of
the shares he has agreed to purchase prior to the Closing date upon payment of the
purchase price thereof, provided, however, that in no event may a Purchaser acquire and
receive less than 1,000 shares in any one such transaction. Prior to the payment of the
required purchase price, no Purchaser shall be entitled to receive delivery of the shares
he has agreed to purchase, and prior to delivery of such shares upon payment therefor,
no Purchaser shall have any dividend, voting or other rights as a shareholder of the
Company with respect to such shares.
3.Conditions to the Company's Obligations. The obligations of the Company
under this Agreement are subject to satisfaction of the following conditions:
TRANSACTIONS WITH OFFICERS, DIRECTORS, OR "INSIDERS" § 16.302
January 198616-167
(a) The shareholders of the Company shall have duly approved and ratified
this Agreement and the transactions provided for herein and the Zimmerman
Agreement attached as Exhibit "A" by a majority of the outstanding shares entitled
to vote at a duly held meeting of the shareholders in accordance with applicable
Delaware corporate law; provided, however, that in such shareholders vote, there
shall not be counted as outstanding shares of Common Stock directly or indirectly
owned by William Zimmerman, the William Zimmerman Trust, the William
Zimmerman Family Trust, Marc Zimmerman, Stuart Zimmerman, Susan
Zimmerman, Arthur Frankel, Arthur Boric, Bill Thomas, and their respective
spouses, children, grandchildren and parents;
(b) The Company shall have purchased 255,000 shares of Common Stock
pursuant to the Zimmerman Agreement;
(c) There shall have been received from Touche Ross & Co. a letter
satisfactory to the Company: (i) regarding the accounting treatment (with
particular reference to earnings per share computation) for the shares subject to
this Agreement; (ii) that the purchase price for the Stock purchased to the
Zimmerman Agreement shall reduce shareholders equity and the purchase price
receivable pursuant to this Agreement shall be set forth in shareholders equity; (iii)
that the difference, if any, between the fair market value of the date of exec ution of
this Agreement of the shares to be purchased and the initial purchase price shall be
treated as compensation expense chargeable to earnings and deductible by the
Company for income tax purposes and that thereafter there will be no
compensation expense chargeable to earnings for financial reporting purposes or
deductible by the Company for income tax purposes with respect to this
Agreement; (iv) regarding the accounting treatment of the 7% compound annual
increase in the purchase price per share.
(d) The shares to be issued shall have been qualified with the California
Commissioner of Corporations if such qualification is required and shall have been
approved for listing on any national securities exchange upon which the
Company's Common Stock may be admitted to trading. 4. Acceleration of Purchase Price. In the event that a Purchaser voluntarily
without good cause terminates his employment with the Company and its subsidiaries
his obligation to pay the purchase price for the shares he has agreed to purchase, may at
the sole option of the Company and upon written demand by the Company be
accelerated and become due and payable in accordance with the following provisions:
(a) if the market price per share of the Company's Common Stock at the date
of termination is equal to or greater than the purchase price per share at the da te of
termination, the Company may declare the purchase price due and payable on a
specified date no earlier than 180 days after the date of written notice of such
demand;
(b) if the market price per share of the Company's Common Stock at the date
of termination is less than the purchase price per share at the date of terminat ion,
the Company may declare the purchase price due and payable on a specified dat e
no earlier than a number of days after written notice of such demand obtained by
dividing the number of days between the date of execution of this Agreement and
the date of termination by 2, but in no event earlier than six months from the date
of written notice of such demand.
In the event that a Purchaser's employment with the Company terminates for any reason
and thereafter such Purchaser engages in activity determined by the Company to be
detrimental to the interests of the Company, the Company may at its sole option declare
his obligation to pay the purchase price for the shares he has agreed to purchase due and
payable within 30 days of written demand by the Company.
For purposes of this Section 4, the "market price per share" of the Company's
Common Stock shall be deemed to be (i) in the event that the Company's Common
Stock is traded in the over-the-counter market, the mean between the bid and asked
price as reported by NASDAQ and (ii) in the event that the Company's Common Stock
is registered on a national securities exchange, the closing price on such exchange.
5.Default. Should a Purchaser for any reason fail to pay the purchase price for the
shares he has agreed to purchase hereunder when due, whether on the Closing date or on
an earlier date resulting from acceleration of the amount due hereunder pursuant to
Section 4 hereof, the legal remedies available to the Company shall include, but not be
limited to, the following:
(a) if the market price per share (at the date of default) of shares which remain
unpaid for is higher than the purchase price per share (at the date of default) for
such shares, the Company may elect to cancel its obligations with respect to t he
sale of such shares to the Purchaser, in which event the Purchaser shall no longer
be entitled to pay for and receive such shares or receive any appreciation in the
value of such shares over the purchase price;
(b) if the market price per share (at the date of default) of shares which remain
unpaid for is lower than the aggregate purchase price per share (at the date of
default) for such shares, the Company may credit the market price per share of
such shares against the purchase price remaining due and take any appropriate
legal action to collect any remaining balance.
For purposes of this Section 5, the "market price per share" of the Company's
Common Stock shall be deemed to be (i) in the event that the Company's Common
Stock is traded in the over-the-counter market, the mean between the bid and asked
prices as reported by NASDAQ and (ii) in the event that the Company's Common Stock
is registered on a national securities exchange, the closing price on such exchange.
6.Adjustment of Stock. In the event outstanding shares of the Company's
Common Stock are increased, decreased or changed into or exchanged for a different
number or kind of securities of the Company through stock split, stock dividend, stock
consolidation, recapitalization or other corporate reorganization in which the Company
is a surviving corporation, an appropriate and proportionate adjustment shall be made in
the number and kind of Common Stock or other securities which shall be deliverable
hereunder and in the purchase price per share. Such adjustment, however, shall not
change the aggregate purchase price each Purchaser is required to pay pursuant to
Section 2 of this Agreement. In the event of any merger or consolidation of the
Company with or into another corporation, or in case of any sale or conveyance to
another corporation of all or substantially all of the assets of the Company, this
Agreement shall relate thereafter to the kind and amount of shares of stock and of the
securities and property receivable upon such consolidation, merger, sale or conveyance
by a holder of the number of shares of Common Stock (whole or fractional) of the
Corporation which remain unpaid for by the Purchasers immediately prior to such
TRANSACTIONS WITH OFFICERS, DIRECTORS, OR "INSIDERS" § 16.302
January 198616-167
consolidation, merger, sale or conveyance. Any such continuing or successor
corporation shall expressly assume the obligation to deliver, upon the payment by the
Purchaser of the purchase price, such shares, securities or property as the Purchaser shall
be entitled to receive pursuant to the provisions hereof.
7. Nondistribution Representations by the Purchasers
(a) The Stock to be issued and sold by the Company to the Purchasers is not
registered with the Securities and Exchange Commission under the Securities Act of
1933, as amended (the "Act"), in reliance upon the exemption afforded by Section 4(2)
of the Act with respect to private transactions. Each of the Purchasers represents to t he
Company that the shares being acquired pursuant to this Agreement are being acquired
by him not with a view to, or for the sale in connection with, any distribution thereof
contrary to the provisions of the Act.
(b) Each Purchaser confirms that he has been advised by the Company, and that he
clearly understands, the following:
(1) The Stock to be issued and sold by the Company to the Purchaser is not
registered with the Securities and Exchange Commission under the Act in reliance
upon the exemption afforded by Section 4(2) of the Act with respect to private
transactions.
(2) The Stock must be held indefinitely by the Purchaser unless the shares are
subsequently registered under the Act or an exemption from such registration is
available.
(3) Any routine sales of the Stock made in reliance upon Rule 144 promulgated by the Securities and Exchange Commission under the
Act, can be made only in limited amounts in accordance with the terms and
conditions of that rule which terms and conditions at present include,
among other things, that the required holding period for restricted stock to
be sold under the rule does not commence until the full purchase price for
such stock has been paid or the purchase obligation is secured by collateral
other than the Stock purchased which has a fair market value at least equal
to the amount of the obligation.
(4) Upon issuance restrictive legends will be placed upon the certificate or certificates representing the Stock and stop-transfer
instructions may be issued to the transfer agent of the Company's Common
Stock as a means to prevent the illegal sale of privately placed securitie s by
the Purchaser or by any person or entity acquiring the Stock from or
through the Purchaser, whether directly or indirectly.
(c) Except for transfers effected in accordance with the provisions of Rule 144
under the Act, each Purchaser shall not transfer any of the Stock without first having
complied with each of the following conditions:
(1) The Company shall have received written notice of the proposed transfer,
setting forth the circumstances and details hereof, which notice shall be received
by the Company no later than ten business days prior to the date a binding
obligation to transfer such shares shall be entered into; and
(2) The Company shall have received a written opinion of counsel, which
opinion and which counsel are satisfactory to legal counsel to the Company,
specifying the nature and circumstances of the proposed transfer and setting forth
such counsel's opinion that the proposed transfer will not cause the transactions
contemplated hereby between the Company and Purchaser or such proposed
transfer to be in violation of any of the provisions of the Act, and rules and
regulations promulgated thereunder, nor in violation of the California Corporate
Securities Act of 1968, as amended, and rules and regulations promulgated
thereunder.8. Registration Provisions
(a) During the seven-year period beginning with the execution of this Agreement,
each of the Purchasers shall have the right on no more than three occasions to give
notice to the Company of his intention to effect the sale, transfer or other dispositi on of
the shares of the stock acquired hereunder and to request that the Company register such
shares. Whenever any registration is requested pursuant to this Section 8(a), the
Company shall give all of the other Purchasers reasonable notice of the request and such
Purchasers shall have the right within fifteen (15) days of the receipt of such notice to
join in the Request by Notice to the Company. Upon the receipt of such Request, the
Company shall (i) prepare and file as promptly as possible a registration statement unde r
the Securities Act of 1933 relating to the shares of stock requested to be registered in the
Request and shall use its best efforts to cause such registration statement to bec ome
effective at the earliest possible date; (ii) prepare and file any required suppl emented or
revised prospectuses and/or post-effective amendments which may be necessary to
permit the continued public offering of securities pursuant to each such registration
statement for a maximum period of ninety (90) days from the effective date of the
applicable registration; (iii) use its best efforts to cause to be registered or qual ified
under the securities or Blue Sky laws (unless such offering is exempt thereunder) of
such jurisdictions of the United States as such Purchasers shall reasonably request it.
(b) The Company shall be required to file a registration statement pursuant to
Section 8(a) only if the aggregate number of shares of stock purchased hereunder by all
Purchasers to be included in such registration statement is at least 10,000 shares and at
least one Purchaser requesting such registration desires to register shares in excess of the
number such Purchaser could then sell pursuant to Rule 144.
(c) The Company may delay the filing and effectiveness of the Registration
Statement requested pursuant to Section 8(a) for good cause reasonably determined by
the Board of Directors, provided, however, that in the event registration is requested by
an executive who has voluntarily without good cause terminated and with respect to
whom the Company has elected to accelerate the payment date of the purchase price
pursuant to Section 4 hereof, the period during which the Company delays the filing of
the registration statement pursuant to this Section 8(c) shall be added to the acc elerated
payment date.
(d) All expenses of any registration under Section 8(a) shall be borne by the
Purchasers whose shares of stock are included in such registration statement, in
proportion to the number of shares included.
(e) If during the seven-year period following the date of execution of this
Agreement, the Company shall propose to file on its behalf or on behalf of any of ifs
security holders a registration statement under the 1933 Act relating to the sale of the
Company's securities to be sold for cash on Form S-1, Form S-7 or Form S-16, the
Company will in each instance give to each Purchaser reasonable notice of its i ntention
TRANSACTIONS WITH OFFICERS, DIRECTORS, OR "INSIDERS" § 16.302
January 198616-167
in that regard and if, within fifteen (15) days of the receipt of such notice, a Purchaser
requests the Company in writing to register a minimum of 5,000 shares of stock subject
to this Agreement, the Company will take action to include in such registrati on
statement, or in a substantially concurrent registration statement, the shares made the
subject of such request and will use its best efforts to cause such registration statement
to be declared effective; provided that the Company shall be obligated to include any
such shares of each Purchaser in a maximum of three registration statements pursuant to
this Section 8(e). Any such request from a Purchaser to the Company shall specify the
manner in which the shares are to be sold. Provided, however, that if any of the
securities to be included in such registration statement for sale by the Company or a ny
selling shareholder of the Company are to be sold through underwriters in a firm
commitment underwritten offering, the shares of the same class requested to be included
in such registration statement by a Purchaser shall be included in such underwritten
offering at the same underwriting discount or commission and on the same terms and
conditions as are applicable to the other shares of the same class included therein.
Anything in this Section 8(e) to the contrary notwithstanding, if a registration
statement in which a Purchaser has requested inclusion of shares owned by him pursuant
to this Section 8(e) includes shares of the same class to be sold by the Company or by
security holders of the Company in a firm commitment underwritten offering and the
managing or principal underwriter advises the Company that in its good faith judgment
the shares which the Purchaser has requested to be included in such registration
statement will make it impractical to offer and sell at that tim e in a firm commitment
underwritten offering all the shares proposed to be included in such underwritten
offering (including the shares of Purchaser proposed to be included therein), then the
number of shares to be included in such registration statement by all selling stockholders
(including each Purchaser) shall be reduced to such number as such managing or
principal underwriter states may be sold and such reduced number shall be ratably
allocated among all selling stockholders in proportion to the number of shares owned by
them; provided, however, that in lieu of so reducing the number of shares to be included
in such registration statement, any of the Purchasers who wishes to participate in such
registration statement may delay any offering of his shares for such period, up to ninety
(90) days from the effective date of such registration statement, as may be requested by
such underwriter, and the number of shares of a Purchaser to the included in such
registration statement shall be determined as if such Purchaser had not requested suc h
inclusion.
The Company may at any time prior to the time the registration statement filed
pursuant to this Section 8(e) has become effective, determine not to effect such
registration, in which event the Company will have no further obligation under this
Section 8(e) to register any shares of any Purchaser in connection with such proposed
registration.
With respect to a registration statement filed pursuant to this Section 8(e), the
Company shall be required to keep such registration effective for no more than 90 days
from the effective date, except that in case of a registration statement fil ed in connection
with a firm commitment underwritten public offering the Company shall keep such
registration statement effective until the completion of the offering and thereaft er as
required by The General Rules and Regulations under the 1933 Act; provided, however,
that if pursuant to the provisions of Section 8(e) Purchasers delay any offering of their
shares, then in that event the Company shall keep the registration statement under which
such shares are registered effective for a period of ninety (90) days after the date when
such Purchasers are first entitled to offer shares pursuant to such registration statement.
With respect to a registration statement pursuant to this Section 8(e), the Purchaser
shall bear that portion of the total expenses as the number of his shares included there in
bears to all shares included therein. Each Purchaser shall pay any underwriter's discount
or commission or broker/dealer charges with respect to his shares and the fees and
expenses of counsel for the Purchaser.
(f) It shall be a condition precedent to the inclusion of any shares of a Purchaser in
any registration statement pursuant to this Section 8, that the Company shall have
received from such Purchaser in form and substance satisfactory to the Company and its
counsel (i) an undertaking to pay all expenses required to be paid by such Purchaser; (ii)
in the case of a registration statement relating to the sale in other than a firm
commitment underwritten offering, a letter relating to compliance with the 1933 Act and
1934 Act, particularly the prospectus delivery provisions and Rule 10b-6.
(g) Prior to the effective date of any registration statement pursuant to this Section
8, the Company will enter into an agreement with each Purchaser whose shares are
included in such registration statement containing reciprocal indemnification provisions
with respect to liabilities (including liabilities on the part of controlling persons) under
the Securities Act of 1933 and other statutes and common law, in a form which is the n
in current use by reputable investment bankers.
9.Company Management of the Agreement. Because the Purchasers are
executive officers of the Company and one of them is a Company director, the rights,
duties and obligations of the Company under this Agreement shall be administered,
supervised and controlled by a committee of the Board of Directors of the Company
composed of two or more directors who are not parties to this Agreement. It is agreed
that this committee shall be granted all powers and authority of the Board of Dire ctors
with respect to this Agreement and any actions to be taken thereunder, including,
without limitation, the power on the part of the Company (which shall not be binding on
a Purchaser) to interpret the Agreement, the power to amend (with the concurrence of
the Purchaser) the Agreement so long as the amendment does not decrease the purchase
price, extend the Closing date, release or in any way liberalize the Purchaser's
obligations, and the power to commence, maintain and set
