-----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, TMAwitQfr3nFChSNmHHl9wUyQyl0E4q8hODVLKrC5aNIzMTT7L7VUby4TwDtLvB7 qLKxSKwBzehfv56zcRn34A== 0000014920-96-000005.txt : 19970110 0000014920-96-000005.hdr.sgml : 19970110 ACCESSION NUMBER: 0000014920-96-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19961026 FILED AS OF DATE: 19961210 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: BRUNOS INC CENTRAL INDEX KEY: 0000014920 STANDARD INDUSTRIAL CLASSIFICATION: 5411 IRS NUMBER: 630411801 STATE OF INCORPORATION: AL FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-06544 FILM NUMBER: 96678142 BUSINESS ADDRESS: STREET 1: 800 LAKESHORE PKWY CITY: BIRMINGHAM STATE: AL ZIP: 35211 BUSINESS PHONE: 2059409400 MAIL ADDRESS: STREET 1: PO BOX 2486 CITY: BIRMINGHAM STATE: AL ZIP: 35201 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Quarterly Report Under Section 13 or 15 (d) of The Securities and Exchange Act of 1934 QUARTER ENDED: OCTOBER 26, 1996 COMMISSION FILE NO. 0-6544 BRUNO'S, INC. STATE OF INCORPORATION: ALABAMA I.R.S. EMPLOYER I.D. NO. 63-0411801 ADDRESS OF PRINCIPAL EXECUTIVE OFFICE (INCLUDING ZIP CODE) 800 Lakeshore Parkway, Birmingham, Alabama 35211 REGISTRANT'S TELEPHONE NUMBER INCLUDING AREA CODE (205) 940-9400 OUTSTANDING COMMON STOCK AS OF OCTOBER 26, 1996 is 25,323,680 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes (X) No ( ) Commission File No. 0-6544 BRUNO'S, INC. Index Page No. PART I. FINANCIAL INFORMATION Item 1. Financial Statements: Condensed Consolidated Balance Sheets at October 26, 1996 and January 27, 1996 2 Condensed Consolidated Statements of Operations for the Thirty-nine (39) and Thirteen (13) Week Periods Ended October 26, 1996 and the Thirty-eight (38) and Twelve (12) Week Periods Ended September 23, 1995 3 Condensed Consolidated Statements of Cash Flows for the Thirty-nine (39) Week Period Ended October 26, 1996 and the Thirty-eight (38) Week Period Ended September 23, 1995 4 Notes to Condensed Consolidated Financial Statements 5-7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8-15 PART II. OTHER INFORMATION Item 1. Legal Proceedings 16 Item 2. Change in Securities 16 Item 3. Defaults Upon Senior Securities 16 Item 4. Submission of Matters to a Vote of Security Holders 16 Item 5. Other Information 16 Item 6. Exhibits and Reports on Form 8-K 17 1 PART I. FINANCIAL INFORMATION Commission File No. 0-6544 Item 1. Financial Statements BRUNO'S, INC. CONDENSED CONSOLIDATED BALANCE SHEETS AS OF OCTOBER 26, 1996 AND JANUARY 27, 1996 (In Thousands Except Share and Per Share Amounts) - - --------------------------------------------------------------------------------------------
October 26, January 27, 1996 1996 (unaudited) --------------- --------------- ASSETS: Current assets: Cash and cash equivalents $ 37,937 $ 57,387 Receivables 25,755 25,294 Inventories, net of LIFO reserve of $9,305 and and $8,505, respectively 200,257 215,589 Prepaid expenses 11,060 11,225 Deferred income taxes 7,352 6,733 ------------ ------------ Total current assets 282,361 316,228 ------------ ------------ Property and equipment, net 431,616 491,664 Noncurrent assets: Deferred income taxes 8,035 -- Intangibles and other assets, net 51,994 65,254 ------------ ------------ Total noncurrent assets 60,029 65,254 ------------ ------------ Total $ 774,006 $ 873,146 ============ ============ LIABILITIES AND DEFICIENCY IN NET ASSETS: Current liabilities: Current maturities of long-term debt and capitalized lease obligations $ 1,844 $ 1,938 Accounts payable 171,694 167,283 Accrued income taxes -- 583 Accrued payroll and related expenses 16,864 17,975 Closed store accrual 25,077 10,600 Other accrued expenses 49,319 52,136 ------------ ------------ Total current liabilities 264,798 250,515 ------------ ------------ Noncurrent liabilities: Long-term debt 789,077 834,223 Capitalized lease obligations 16,752 17,963 Deferred income taxes -- 21,082 Other noncurrent liabilities 39,280 30,706 ------------ ------------ Total noncurrent liabilities 845,109 903,974 ------------ ------------ Deficiency in net assets: Common Stock, $.01 par value, 60,000,000 shares authorized; 25,323,680 and 25,007,015 issued and outstanding, respectively 253 250 Paid-in capital (587,984) (592,096) Shareholders' notes receivable (1,941) -- Retained earnings 253,771 310,503 ------------ ------------ Total deficiency in net assets (335,901) (281,343) ------------ ------------ Total $ 774,006 $ 873,146 ============ ============ See notes to condensed consolidated financial statements.
2 Commission File No. 0-6544 BRUNO'S, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THIRTY-NINE AND THIRTEEN WEEK PERIODS ENDED OCTOBER 26, 1996 AND THE THIRTY-EIGHT AND TWELVE WEEK PERIODS ENDED SEPTEMBER 23, 1995 (In Thousands Except Share and Per Share Amounts) - - ------------------------------------------------------------------------------------------------------------- (UNAUDITED)
October 26, September 23, October 26, September 23, 1996 1995 1996 1995 (39 Weeks) (38 Weeks) (13 Weeks) (12 Weeks) ------------ ------------ ------------ -------------- NET SALES $ 2,146,720 $ 2,087,008 $ 694,223 $ 655,180 COST AND EXPENSES: Cost of products sold 1,631,668 1,608,583 530,826 508,597 Store operating, selling and administrative expenses 406,614 402,583 134,586 119,719 Merger expenses -- 29,610 -- 29,610 Loss on divestiture of stores 88,588 -- 88,588 -- Depreciation and amortization 42,762 38,934 14,654 12,897 Interest expense, net 63,071 22,069 20,558 11,097 ------------ ------------ ------------ ------------ Total cost and expenses 2,232,704 2,101,779 789,212 681,920 ------------ ------------ ------------ ------------ Loss before provision for income tax benefit and extraordinary item (85,984) (14,771) (94,989) (26,740) INCOME TAX BENEFIT (30,427) (277) (33,849) (4,506) ------------ ------------ ------------ ------------ Loss before extraordinary item (55,557) (14,494) (61,140) (22,234) EXTRAORDINARY ITEM, NET 1,175 3,742 513 3,742 ------------ ------------ ------------ ------------ Net loss $ (56,732) $ (18,236) $ (61,653) $ (25,976) ============ ============ ============ ============ LOSS PER COMMON SHARE: Loss before extraordinary item $ (2.21) $ (0.21) $ (2.43) $ (0.40) Extraordinary Item, net (0.05) (0.05) (0.02) (0.07) ------------ ------------ ------------ ------------ Net loss $ (2.26) $ (0.26) $ (2.45) $ (0.47) ============ ============ ============ ============ CASH DIVIDENDS PER COMMON SHARE $ -- $ 0.30 $ -- $ -- ============ ============ ============ ============ WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 25,151,810 70,398,39 25,196,838 55,005,000 ============ ============ ============ ============ See notes to condensed consolidated financial statements.
3 Commission File No. 0-6544 BRUNO'S, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THIRTY-NINE WEEK PERIOD ENDED OCTOBER 26, 1996 AND THE THIRTY-EIGHT WEEK PERIOD ENDED SEPTEMBER 23, 1995 (Amounts In Thousands) - - -------------------------------------------------------------------------------------------- (UNAUDITED)
October 26, September 23, 1996 1995 (39 Weeks) (38 Weeks) -------------- -------------- OPERATING ACTIVITIES: Net loss $ (56,732) $ (18,236) Adjustments to reconcile net loss to net cash provided by operating activities: Extraordinary item, net 1,175 3,742 Loss on divestiture of stores 88,588 -- Depreciation and amortization 42,762 38,934 LIFO provision 400 1,037 Change in assets and liabilities (13,929) 74,731 ------------ ------------ Total adjustments 118,996 118,444 ------------ ------------ Net cash provided by operating activities 62,264 100,208 ------------ ------------ INVESTING ACTIVITIES: Proceeds from sale of property 1,823 6,447 Capital expenditures (39,260) (36,672) ------------ ------------ Net cash used in investing activities (37,437) (30,225) ------------ ------------ FINANCING ACTIVITIES: Proceeds from issuance of term loan facilities -- 470,000 Proceeds from issuance of senior subordinated notes -- 400,000 Debt issuance costs -- (40,880) Redemption of common stock -- (879,956) Reductions of long-term debt (46,451) (245,515) Sale of common stock 2,174 250,004 Dividends paid -- (10,060) ------------ ------------ Net cash used in financing activities (44,277) (56,407) ------------ ------------ NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (19,450) 13,576 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 57,387 5,486 ------------ ------------ CASH AND CASH EQUIVALENTS, END OF PERIOD $ 37,937 $ 19,062 ============ ============ See notes to condensed consolidated financial statements.
4 Commission File No. 0-6544 BRUNO'S, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THIRTY-NINE AND THIRTEEN WEEK PERIODS ENDED OCTOBER 26, 1996 AND THE THIRTY-EIGHT AND TWELVE WEEK PERIODS ENDED SEPTEMBER 23, 1995 (In Thousands Except Share and Per Share Amounts) 1. BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements include the accounts of Bruno's, Inc. and its wholly owned subsidiaries. Significant inter-company balances and transactions have been eliminated in consolidation. In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments necessary for a fair statement of the consolidated financial position and results of operations of the Company for the interim periods. In December 1995, the Company changed its fiscal year to a 52 or 53 week year ending on the Saturday closest to January 31 from a 52 or 53 week year ending on the Saturday closest to June 30. Due to the change in year end described above, the consolidated statements of operations compare the thirty-nine (39) and thirteen (13) week periods ended October 26, 1996 to the thirty-eight (38) and twelve (12) week periods ended September 23, 1995. The results of operations of the Company for the thirty-nine weeks ended October 26, 1996, are not necessarily indicative of the results that may be expected for the entire year. 2. LOSS PER SHARE Loss per share was computed based on the weighted average number of common shares outstanding during the respective periods. At October 26, 1996, 25,323,680 shares were outstanding. Stock options and warrants outstanding are common stock equivalents but were excluded from loss per common share computations because their effect either was not material or would be antidilutive to the calculation of loss per share. 3. CONTINGENCIES In 1991, the Company received a favorable termination letter with respect to the termination of the employee pension plan of a supermarket chain acquired by the Company in 1989. Pursuant to that termination, distributions were made to all participants of that employee pension plan. After all of the benefit liabilities were paid, remaining plan assets of approximately $2.7 million were transferred to the Company as a reversion of excess pension assets. On June 15, 1992, the Company received a letter from the Pension Benefit Guaranty Corporation ("PBGC") contending that inappropriate actuarial assumptions were used to determine the value of the benefits distributed and that additional distributions must be made to numerous former participants in the plan. In August 1994, the Company filed suit in the U.S. District Court for the Northern District of Alabama challenging the PBGC's determination. In April 1995, the District Court entered summary judgment against the Company and in favor of the PBGC. 5 Commission File No. 0-6544 The Company appealed the District Court's ruling to the U.S. Court of Appeals for the Eleventh Circuit, which ruled against the Company. The Company is currently making additional distributions to the former participants in the plan. At October 26, 1996, the Company had established a reserve of $1.6 million in its consolidated financial statements to cover the additional distributions. In addition, the Company is a party to various legal and taxing authority proceedings incidental to its business. In the opinion of management, the ultimate liability with respect to these actions will not materially affect the financial position or results of operations of the Company. On May 23, 1996, the Company entered into an agreement to purchase Seessel Holdings, Inc. ("SHI"), which owns and operates a retail supermarket business in Memphis, Tennessee, for $62 million in cash. SHI had formerly entered into an agreement with Fleming Companies, Inc. ("Fleming") under which SHI gave Fleming the right of first refusal to elect to acquire SHI on the same terms as the agreement with the Company. A dispute regarding whether Fleming properly exercised its right of first refusal was resolved on November 20, 1996 in the Company's favor. The Company plans to complete the acquisition of SHI by mid-December 1996. The Company may pursue other acquisition opportunities as and when they become available. 4. DIVESTITURE PROGRAM During the period ended October 26, 1996, management evaluated the Company's market strategy, geographic positioning and store level return on assets. As a result of this evaluation, the Company developed a formal program in the quarter ended October 26, 1996 to sell or close the Company's distribution center in Vidalia, Georgia and approximately 47 stores (the "Divestiture Program"). The 47 stores included in the Divestiture Program consist of 33 Piggly Wiggly stores in Georgia, nine FoodMax stores in Georgia and South Carolina, two Food World stores in Florida, one Food World store in Mississippi, one Food World store in Alabama, and one Food Fair store in Alabama. The Divestiture Program will effect approximately 3,000 employees. The Company retained an investment banking firm to contact potential buyers and to structure and manage a competitive bidding process. As of December 10, 1996, the Company has completed transactions involving the sale of 27 of the 47 stores included in the Divestiture Program. Sale proceeds from the transactions totaled $11.7 million plus a payment for counted inventory of $7.4 million. The Company has executed a contract for the sale of two additional stores for anticipated sale proceeds of $2.3 million plus a payment for counted inventory. It is expected that this transaction will be closed in late December 1996. Additionally, the Company recently completed going out of business sales on the remaining 18 stores for which buyers were not found. These 18 stores had total inventory at cost of $7.7 million on October 26, 1996. The Vidalia Distribution Center, which had total inventory at cost of $16.3 million on October 26, 1996, has also been closed. The accompanying statements of operations for the thirty- nine and thirteen weeks ended October 26, 1996 include a charge of $88.6 million for costs associated with the Divestiture Program. The $88.6 million consists of a $55.0 million loss on the divestiture of fixed assets and intangibles, net of proceeds of $14 million (of which 6 Commission File No. 0-6544 $5.6 million was applied to goodwill), $18.5 million in future rental payments, $8.4 million in inventory markdowns and $6.7 million in severance costs, professional fees and other miscellaneous expenses. See Management's Discussion and Analysis for the operating results of the stores included in the Divestiture Program for the thirty- nine and thirteen week periods ended October 26, 1996. 7 Commission File No. 0-6544 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following is management's discussion and analysis of significant factors affecting the Company's earnings during the periods included in the accompanying condensed consolidated statements of operations. The thirty-nine (39) and thirteen (13) week periods ended October 26, 1996 are compared to the thirty-eight (38) and twelve (12) week periods ended September 23, 1995, and accordingly, certain of the period-to-period changes are a consequence of such difference. A table showing the percentage of net sales represented by certain items in the Company's condensed consolidated statements of operations follows:
COMPARISON OF: ---------------------------------------------------------- October 26, September 23, October 26, September 23, 1996 1995 1996 1995 (39 Weeks) (38 Weeks) (13 Weeks) (12 Weeks) ------------- ------------- ------------- ------------- Net sales 100.00% 100.00% 100.00% 100.00% Cost of products sold 76.01% 77.08% 76.46% 77.63% Store operating, selling, and administrative expenses 18.94% 19.29% 19.39% 18.27% ---------- ---------- ---------- ---------- EBITDA 5.05% 3.63% 4.15% 4.10% Merger expenses -- 1.42% -- 4.52% Loss on divestiture of stores 4.13% -- 12.76% -- Depreciation and amortization 1.99% 1.87% 2.11% 1.97% Interest expense, net 2.94% 1.06% 2.96% 1.69% ---------- ---------- ---------- ---------- Loss before provision for income tax benefit and extraordinary item -4.01% -0.71% -13.68% -4.08% Income tax benefit -1.42% -0.01% -4.88% -0.69% Extraordinary item, net 0.05% 0.18% 0.07% 0.57% ---------- ---------- ---------- ---------- Net loss -2.64% -0.87% -8.88% -3.96% ========== ========== ========== ==========
A summary of the period to period changes in certain items included in the condensed statements of operations follows:
Increase (Decrease) Thirty-nine weeks ended Thirteen weeks ended October 26, 1996 and thirty-eight October 26, 1996 and twelve weeks ended September 23, 1995 weeks ended September 23, 1995 -------------------------------------------------------------------------- Dollars in Thousands Except Per Share Amounts $ % Change $ % Change ----------- ----------- ----------- ----------- Net sales 59,712 2.86% 39,043 5.96% Cost of products sold 23,085 1.44% 22,229 4.37% Store operating, selling, and administrative expenses 4,031 1.00% 14,867 12.42% ----------- ----------- EBITDA 32,596 42.98% 1,947 7.25% Merger expenses (29,610) -100.00% (29,610) -100.00% Loss on divestiture of stores 88,588 -- 88,588 -- Depreciation and amortization 3,828 9.83% 1,757 13.62% Interest expense, net 41,002 185.79% 9,461 85.26% ----------- ----------- Loss before provision for income tax benefit and extraordinary item (71,213) 482.11% (68,249) 255.23% Income tax benefit (30,150) 10884.48% (29,343) 651.20% Extraordinary item, net (2,567) -68.60% (3,229) -86.29% ----------- ----------- Net loss (38,496) 211.10% (35,677) 137.35% =========== Loss per common share before extraordinary items (2.00) 952.38% (2.03) 507.50% Loss per common share (2.00) 769.23% (1.98) 421.28% =========== ===========
8 Commission File No. 0-6544 A table showing separately the Company's continuing operations and the stores to be sold or closed follows: CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE CONTINUING OPERATIONS VERSUS THE STORES TO BE DIVESTED FOR THE THIRTY-NINE AND THIRTEEN WEEK PERIODS ENDED OCTOBER 26, 1996 (Amounts In Thousands) - - ------------------------------------------------------------------------------------------------------------------------------------
Thirty-nine (39) Week Period Thirteen (13) Week Period Ended October 26, 1996 Ended October 26, 1996 ----------------------------------------- ---------------------------------------- Continuing Stores to be Total Continuing Stores to be Total Operations Divested Company Operations Divested Company ------------- ------------- ------------- ------------- ------------- ----------- Net sales $ 1,941,020 $ 205,700 $ 2,146,720 $ 628,244 $ 65,979 $ 694,223 Cost of products sold 1,477,420 154,248 1,631,668 482,473 48,353 530,826 Store operating, selling, and administrative expenses 355,280 51,334 406,614 117,766 16,820 134,586 ------------ ------------ ------------ ------------ ----------- ---------- EBITDA 108,320 118 108,438 28,005 806 28,811 Loss on divestiture of stores -- 88,588 88,588 -- 88,588 88,588 Depreciation and amortization 37,056 5,706 42,762 12,706 1,948 14,654 ------------ ------------ ----------- ------------ ----------- ----------- Operating Income (loss) $ 71,264 $ (94,176) $ (22,912) $ 15,299 $ (89,730) $ (74,431) ============ ============ =========== ============ =========== =========== Thirty-nine (39) Week Period Thirteen (13) Week Period Ended October 26, 1996 Ended October 26, 1996 ----------------------------------------- ---------------------------------------- Continuing Stores to be Total Continuing Stores to be Total Operations Divested Company Operations Divested Company ------------- ------------- ------------- ------------- ------------- ----------- Net sales 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% Cost of products sold 76.12% 74.99% 76.01% 76.80% 73.29% 76.46% Store operating, selling, and administrative expenses 18.30% 24.96% 18.94% 18.75% 25.49% 19.39% ------------ ------------ ----------- ------------ ----------- ----------- EBITDA 5.58% 0.06% 5.05% 4.46% 1.22% 4.15% Loss on divestiture of stores -- 43.07% 4.13% -- 134.27% 12.76% Depreciation and amortization 1.91% 2.77% 1.99% 2.02% 2.95% 2.11% ------------ ------------ ----------- ------------ ----------- ----------- Operating Income (loss) 3.67% -45.78% -1.07% 2.44% -136.00% -10.72% ============ ============ =========== ============ =========== ===========
9 BRUNO'S, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS COMPARISON OF OPERATIONS FOR THE THIRTY-NINE WEEK PERIOD ENDED OCTOBER 26, 1996 TO THE THIRTY-EIGHT WEEK PERIOD ENDED SEPTEMBER 23, 1995 (UNAUDITED) Net Sales Net sales increased $59.7 million or 2.9% for the period ended October 26, 1996, as compared to the period ended September 23, 1995. Excluding the impact of the thirty- ninth week in the period ended October 26, 1996, sales increased $6.5 million or 0.3%. The Company did not report results of operations for the thirty-nine week period ended October 28, 1995; however, same store sales decreased 0.4% for the period ended October 26, 1996 compared to the period ended October 28, 1995. Same store sales for the operations of the Company excluding the stores to be sold or closed in the fourth quarter increased 0.3% for the period ended October 26, 1996 compared to the period ended October 28, 1995. Same store sales for the stores to be sold or closed decreased 7.2% for the same period. Gross Profit Gross profit (net sales less cost of products sold) as a percentage of net sales was 24.0% in the period ended October 26, 1996, as compared to 22.9% in the period ended September 23, 1995. The increase in gross profit was primarily due to improved buying and pricing practices resulting from the implementation of a new distribution center ordering system. Gross profit for the operations of the Company excluding the stores to be sold or closed in the fourth quarter was 23.9% for the period ending October 26, 1996. Gross profit for the stores to be sold or closed was 25.0%. Store Operating, Selling and Administrative Expenses Store operating, selling and administrative expenses as a percentage of net sales was 18.9% for the period ended October 26, 1996, as compared to 19.3% for the period ended September 23, 1995. The decline was primarily the result of an unusual adjustment recorded in the period ended September 23, 1995 to increase the self-insurance reserve by $22.2 million. Excluding the self-insurance adjustment, store operating, selling and administrative expenses as a percentage of net sales increased to 18.9% for the period ended October 26, 1996 from 18.2% for the period ended September 23, 1995 due to costs associated with increased promotional activities. 10 Commission File No. 0-6544 Because the stores being sold or closed during the fourth quarter are typically smaller volume stores, they tend to have higher store operating, selling and administrative expenses as a percentage of net sales. For the period ended October 26, 1996, store operating, selling and administrative expenses as a percentage of sales were 25.0% for the stores being sold or closed compared to 18.3% for the Company's continuing operations. Merger Expenses On August 18, 1995, Crimson Acquisition Corp. was merged into and with the Company (the "Merger"). Merger expenses recorded in the period ended September 23, 1995 are related to the Merger. These expenses consist primarily of professional and advisory fees as well as payments to certain Company officers, other employees and directors pursuant to employment and option agreements. Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) EBITDA, excluding the impact of the loss on the divestiture, increased $32.6 million or 43.0% in the period ended October 26, 1996 compared to the period ended September 23, 1995. The period ended September 23, 1995 included the adjustment to increase the Company's self-insurance reserve. EBITDA for the operations of the Company excluding the stores to be sold or closed in the fourth quarter was $108,320 for the period ended October 26, 1996 compared to $118 for the stores being sold or closed for the same period. Interest Expense, Net The $41.0 million increase in net interest expense for the period ended October 26, 1996, compared to the period ended September 23, 1995 is attributable to financing incurred in connection with Merger. Loss on Divestiture of Stores During the period ended October 26, 1996, management evaluated the Company's market strategy, geographic positioning and store level return on assets. As a result of this evaluation, the Company developed a formal program in the quarter ended October 26, 1996 to sell or close the Company's distribution center in Vidalia, Georgia and approximately 47 stores (the "Divestiture Program"). The 47 stores included in the Divestiture Program consist of 33 Piggly Wiggly stores in Georgia, nine FoodMax stores in Georgia and South Carolina, two Food World stores in Florida, one Food World store in Mississippi, one Food World store in Alabama, and one Food Fair store in Alabama. The Divestiture Program will effect approximely 3,000 employees. The Company retained an investment banking firm to contact potential buyers and to structure and manage a competitive bidding process. As of December 10, 1996, the Company has completed transactions involving the sale of 27 of the 47 stores included in the Divestiture Program. Sale proceeds from the transactions totaled $11.7 million plus 11 Commission File No. 0-6544 a payment for counted inventory of $7.4 million. The Company has executed a contract for the sale of two additional stores for anticipated sale proceeds of $2.3 million plus a payment for counted inventory. It is expected that this transaction will be closed in late December 1996. Additionally, the Company recently completed going out of business sales on the remaining 18 stores for which buyers were not found. These 18 stores had total inventory at cost of $7.7 million on October 26, 1996. The Vidalia Distribution Center, which had total inventory at cost of $16.3 million on October 26, 1996, has also been closed. The accompanying statement of operations for the thirty-nine week period ended October 26, 1996 includes a charge of $88.6 million for costs associated with the Divestiture Program. The $88.6 million consists of a $55.0 million loss on the divestiture of fixed assets and intangibles, net of proceeds of $14 million (of which $5.6 million was applied to goodwill), $18.5 million in future rental payments, $8.4 million in inventory markdowns and $6.7 million in severance costs, professional fees and other miscellaneous expenses. Income Taxes The Company's effective income tax benefits during the periods ended October 26, 1996 and September 23, 1995 reflect the loss before provision for income taxes and extraordinary items. Extraordinary Item, Net In the period ended October 26, 1996, the Company prepaid $45 million in principal amount of its $475 million term loan facility entered into in connection with the Merger. As a result of this repayment, the related debt issuance costs of $1,175 (net of tax of $720) were written off in the period ended October 26, 1996. In the period ended September 23, 1995, the Company terminated an interest rate swap agreement and wrote off debt acquisition costs. As a result of these activities, $3,742 (net of tax of $2,294) was written off in the period ended September 23, 1995. COMPARISON OF OPERATIONS FOR THE THIRTEEN WEEK PERIOD ENDED OCTOBER 26, 1996 TO THE TWELVE WEEK PERIOD ENDED SEPTEMBER 23, 1995 (UNAUDITED) Net Sales Net sales increased $39.0 million or 6.0% in the thirteen- week period ended October 26, 1996 as compared to the twelve- week period ended September 23, 1995. Excluding the impact of the thirteenth week in the period ended October 26, 1996, sales decreased $14.2 million or 2.2%. The Company did not report results of operations for the thirteen-week period ended October 28, 1995; however, same store sales decreased 2.3% for the thirteen-week period ended October 26, 1996 as compared to the thirteen-week period ended October 28, 1995 due to a number of recent new store openings by competitors in the Company's trading areas. Same store sales for the operations of the Company excluding the stores to be sold or closed in the fourth quarter decreased 1.8% for the period ended October 26, 1996 compared to the period ended October 28, 1995. Same store sales for the stores to be sold or closed decreased 6.3% for the same period. 12 Commission File No. 0-6544 Gross Profit Gross profit (net sales less cost of products sold) as a percentage of net sales was 23.5% in the period ended October 26, 1996, as compared to a gross profit percentage of 22.4% for the period ended September 23, 1995. The increase in gross profit was primarily due to improved buying and pricing practices resulting from the implementation of a new distribution center ordering system. Gross profit for the Company's continuing operations was 23.2% for the period ended October 26, 1996. Gross profit for the stores to be sold or closed was 26.7%. Store Operating, Selling and Administrative Expenses Store operating, selling and administrative expenses as a percentage of net sales was 19.4% for the period ended October 26, 1996, as compared to 18.3% for the period ended September 23, 1995. The increase was primarily due to costs associated with increased promotional activities. Because the stores being sold or closed during the fourth quarter are typically smaller volume stores, they tend to have higher store operating, selling and administrative expenses as a percentage of net sales. For the period ended October 26, 1996, store operating, selling and administrative expenses as a percentage of net sales was 25.5% for the stores being sold or closed compared to 18.8% for the Company's continuing operations. Merger Expenses Merger expenses recorded in the period ended September 23, 1995 are related to the Merger. These expenses consist primarily of professional and advisory fees as well as payments to certain Company officers, other employees and directors pursuant to employment and option agreements. Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) EBITDA, excluding the impact of the loss on the divestiture, increased $1.9 million or 7.2% in the period ended October 26, 1996 compared to the period ended September 23, 1995 due to the additional week in the current year's period. EBITDA for the operations of the Company excluding the stores to be sold or closed in the fourth quarter was $28,005 for the period ended October 26, 1996 compared to a $806 for the stores being sold or closed for the same period. Loss on Divestiture of Stores The accompanying statement of operations for the thirteen week period ended October 26, 1996 includes a charge of $88.6 million for costs associated with the Divestiture Program. The $88.6 million consists of a $55.0 million loss on the divestiture of fixed assets and intangibles, net of proceeds of $14 million (of which $5.6 million was applied to goodwill), $18.5 million in future rental payments, $8.4 million in inventory markdowns and $6.7 million in severance costs, professional fees and other miscellaneous expenses. 13 Commission File No. 0-6544 Interest Expense, Net The $9.5 million increase in net interest expense for the period ended October 26, 1996, compared to the period ended September 23, 1995 is attributable to financing incurred in connection with the Merger. Income Taxes The Company's effective income tax benefits for the periods ended October 26, 1996 and September 23, 1995 reflect the loss before provision for income taxes and extraordinary items. Extraordinary Item, Net In the period ended October 26, 1996, the Company prepaid $20 million in principal amount of its $475 million term loan facility entered into in connection with the Merger. As a result of this repayment, the related debt issuance costs of $513 (net of tax of $315) were written off in the period ended October 26, 1996. In the period ended September 23, 1995, the Company terminated an interest rate swap agreement and wrote off debt acquisition costs. As a result of these activities, $3,742 (net of tax of $2,294) were written off in the period ended September 23, 1995. LIQUIDITY AND CAPITAL RESOURCES Historically, the Company has funded working capital requirements, capital expenditures and other cash requirements primarily through cash flow from operations. Operating activities generated $62.3 million and $100.2 million, respectively, in cash in each of the periods ended October 26, 1996 and September 23, 1995. The Company believes that operating cash flows will be sufficient to fund store expansion and working capital needs; however, if the Company needs additional cash, it has a $125 million undrawn revolving credit facility available. There were no borrowings outstanding under this facility during the thirty-nine week period ended October 26, 1996. Cash flows used in investing activities were $37.4 million and $30.2 million for the thirty-nine week period ended October 26, 1996 and the thirty-eight week period ended September 23, 1995, respectively. Proceeds from the sale of certain property totaled $1.8 million during the thirty-nine week period ended October 26, 1996 compared to $6.4 million during the thirty-eight week period ended September 23, 1995. Capital expenditures were $39.3 in the thirty-nine week period ended October 26, 1996 compared to $36.6 million in the thirty-eight week period ended September 23, 1995. The Company's capital expenditures are primarily related to the opening of new and replacement stores and investments in purchasing and warehousing systems technology. The Company believes that capital expenditures for the remainder of fiscal 1996 will be financed through cash flows from operations, existing cash balances and, if necessary, borrowings under its revolving credit facility. 14 Commission File No. 0-6544 The primary use of cash in financing activities during the thirty-nine week period ended October 26, 1996, was $46.5 million in long-term debt repayments, of which $45 million was a prepayment under the term loan facility. The Company also generated $2.2 million through sales of shares of the Company's common stock to executives of the Company. The Company's financing arrangements contain certain restrictions that limit its ability to make future borrowings beyond the amounts currently available and to pay dividends. On May 23, 1996, the Company entered into an agreement to purchase Seessel Holdings, Inc. ("SHI"), which owns and operates a retail supermarket business in Memphis, Tennessee, for $62 million in cash. SHI had formerly entered into an agreement with Fleming Companies, Inc. ("Fleming") under which SHI gave Fleming the right of first refusal to elect to acquire SHI on the same terms as the agreement with the Company. A dispute regarding whether Fleming properly exercised its right of first refusal was resolved on November 20, 1996 in the Company's favor. The Company plans to complete the acquisition of SHI by mid-December. The acquisition will be financed through cash flows from operations, existing cash balances and borrowings under the Company's revolving credit facility. The Company may pursue other acquisition opportunities as and when they become available. On October 26, 1996, the Company announced the Divestiture Program. As of the date hereof, the Divestiture Program is substantially complete. See note 4 to the Company's consolidated financial statements for the thirty-nine and thirteen week periods ended October 26, 1996 for a discussion of the Divestiture Program. 15 Commission File No. 0-6544 PART II. OTHER INFORMATION Item 1. Legal Proceedings In 1991, the Company received a favorable termination letter with respect to the termination of the employee pension plan of a supermarket chain acquired by the Company in 1989. Pursuant to that termination, distributions were made to all participants of that employee pension plan. After all of the benefit liabilities were paid, remaining plan assets of approximately $2.7 million were transferred to the Company as a reversion of excess pension assets. On June 15, 1992, the Company received a letter from the Pension Benefit Guaranty Corporation ("PBGC") contending that inappropriate actuarial assumptions were used to determine the value of the benefits distributed and that additional distributions must be made to numerous former participants in the plan. In August 1994, the Company filed suit in the U.S. District Court for the Northern District of Alabama challenging the PBGC's determination. In April 1995, the District Court entered summary judgment against the Company and in favor of the PBGC. The Company appealed the District Court's ruling to the U.S. Court of Appeals for the Eleventh Circuit, which ruled against the Company. The Company is currently making additional distributions to the former participants in the plan. At October 26, 1996, the Company had established a reserve of $1.6 million in its consolidated financial statements to cover the additional distributions. In addition, the Company is a party to various legal and taxing authority proceedings incidental to its business. In the opinion of management, the ultimate liability with respect to these actions will not materially affect the financial position or results of operations of the Company. Item 2. Change In Securities None Item 3. Defaults Upon Senior Securities None Item 4. Submission of Matters to a Vote of Security Holders None Item 5. Other Information None 16 Commission File No. 0-6544 Item 6. Exhibits and Reports on Form 8-K (a) Exhibits Exhibit Number Description ------- --------------- 10.36 Employment Agreement, dated September 12, 1996, between the Company and Walter M. Grant. 10.37 Employment Agreement, dated September 12, 1996, between the Company and James J. Hagan. 10.38 Employment Agreement, dated September 12, 1996, between the Company and Laura Hayden. 10.39 Form of Management Stockholder's Agreement, dated September 30, 1996, between the Company and each of Walter M. Grant, James J. Hagan and Laura Hayden. 10.40 Form of Non-Qualified Stock Option Agreement, dated as of September 30, 1996, between the Company and each of Walter M. Grant, James J. Hagan and Laura Hayden. 10.41 Schedule of Terms of Management Stockholder's Agreements and Non-Qualified Stock Option Agreements executed by each of Walter M. Grant, James J. Hagan and Laura Hayden. 27 Financial Data Schedule (for SEC use only). (b) Reports on Form 8-K None 17 Commission File No. 0-6544 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. BRUNO'S, INC. _________________ James J. Hagan, Senior Vice President-Finance and Chief Financial Officer Dated: December 10, 1996 18 Commission File No. 0-6544 BRUNO'S, INC. FORM 10-Q (For Quarter Ended October 26, 1996) INDEX OF EXHIBITS -------------------
Exhibit Number Description Numbered Pages - - ---------------------------------------------------------------------------------- 10.36 Employment Agreement, dated September 12, 1996, between the Company and Walter M. Grant. 1-12 10.37 Employment Agreement, dated September 12, 1996, between the Company and James J. Hagan. 1-11 10.38 Employment Agreement, dated September 12, 1996, between the Company and Laura Hayden. 1-13 10.39 Form of Management Stockholder's Agreement, dated as of September 30, 1996, between the Company and each of Walter M. Grant, James J. Hagan, and 1-19 Laura Hayden. 10.40 Form of Non-Qualified Stock Option Agreement, dated as of September 30, 1996, between the Company and each of Walter M. Grant, James J. Hagan, and 1-12 Laura Hayden. 10.41 Schedule of Terms of Management Stockholder's Agreements 1 and Non-Qualified Stock Option Agreements executed by each of Walter M. Grant, James J. Hagan, and Laura Hayden. 27 Financial Data Schedule 19
EX-27 2 ARTICLE 5 FINANCIAL DATA SCHEDULE FOR THIRD QTR. 10-Q
5 1,000 9-Mos Jan-27-1996 Jan-28-1996 Oct-27-1996 37,937 0 25,755 0 200,257 282,361 431,616 42,762 774,006 264,798 400,000 253 0 0 (335,901) 774,006 2,146,720 2,146,720 1,631,668 1,631,668 495,202 0 63,071 (85,984) (30,427) (55,557) 0 1,175 0 (56,732) (2.26) (2.26)
EX-10.36 3 EMPLOYMENT AGREEMENT Commission File No. 0-6544 EMPLOYMENT AGREEMENT AGREEMENT, made September 12, 1996, by and between BRUNO'S, INC., an Alabama corporation (the "Company"), and WALTER M. GRANT ("Executive"). RECITALS In order to induce Executive to serve as an executive officer of the Company, the Company desires to provide Executive with compensation and other benefits on the terms and conditions set forth in this Agreement. Executive is willing to accept such employment and perform services for the Company, on the terms and conditions hereinafter set forth. It is therefore hereby agreed by and between the parties as follows: 1. Employment. 1.1 Subject to the terms and conditions of this Agreement, the Company agrees to employ Executive during the term hereof as its Senior Vice President, General Counsel, and Secretary. 1.2 Subject to the terms and conditions of this Agreement, Executive hereby accepts employment as Senior Vice President, General Counsel and Secretary of the Company and agrees to devote his full working time and efforts, to the best of his ability, experience and talent, to the performance of services, duties and responsibilities in connection therewith. 2. Term of Employment. Executive's term of employment under this Agreement commenced on June 17, 1996 and, subject to the 1 Commission File No. 0-6544 terms hereof, shall terminate on the earlier of (i) June 16, 1999 (the "Termination Date") or (ii) termination of Executive's employment pursuant to this Agreement (alternatively, the "Term"); provided, however, that any termination of employment by Executive (other than for death or Permanent Disability) may only be made upon 30 days prior written notice to the Company. 3. Compensation. 3.1 Salary. During the Term, the Company shall pay Executive a base salary ("Base Salary") at the rate of $240,000 per annum. Base Salary shall be payable in accordance with the ordinary payroll practices of the Company, but no less frequently than monthly. Any increase in Base Salary shall be in the reasonable discretion of the Company and, as so increased, shall constitute "Base Salary" hereunder. 3.2 Annual Bonus. In addition to his Base Salary, Executive shall be paid an annual bonus (the "Bonus") during the term of his employment hereunder with a target amount equal to 50% of Base Salary (the "Target Bonus") and a maximum amount equal to 100% of Base Salary based on performance criteria determined by the Company in its reasonable discretion. 3.3 Compensation Plans and Programs. Executive shall be eligible to participate in any compensation plan or program maintained by the Company in which other senior executives of the Company participate on terms comparable to those applicable to such other senior executives. 2 Commission File No. 06544 3.4 Relocation Allowance. To assist the Executive with his relocation to the Birmingham, Alabama area, the Company agrees to pay to the Executive a relocation allowance in the amount of $50,000. Such payment shall be made upon the execution of this Agreement. 4. Employee Benefits. 4.1 Employee Benefit Programs, Plans and Practices. The Company shall provide Executive during the term of his employment hereunder with coverage under all employee pension and welfare benefit programs, plans and practices (commensurate with his positions in the Company and to the extent permitted under any employee benefit plan) in accordance with the terms thereof, which the Company makes available to its senior executives. 4.2 Vacation and Fringe Benefits. Executive shall be entitled to twenty (20) business days paid vacation in each calendar year, which shall be taken at such times as are consistent with Executive's responsibilities hereunder. Unless otherwise approved by the Company, any vacation days not taken in any calendar year shall be forfeited without payment therefor. In addition, Executive shall be entitled to the perquisites and other fringe benefits, including, without limitation, a Company automobile, made available to senior executives of the Company, commensurate with his position with the Company. 5. Expenses. Executive is authorized to incur reasonable expenses in carrying out his duties and responsibilities under this Agreement, including, without 3 Commission File No. 0-6544 limitation, expenses for travel and similar items related to such duties and responsibilities. The Company will reimburse Executive for all such expenses upon presentation by Executive from time to time of appropriately itemized and approved (consistent with the Company's policy) accounts of such expenditures. 6. Termination of Employment. The Company may terminate Executive's employment at any time for any reason. 6.1 Termination Not for Cause or for Good Reason. (a) If Executive's employment is terminated (i) by the Company other than for Cause (as defined in this Section 6.1) or (ii) by Executive for Good Reason (as defined in this Section 6.1) prior to the Termination Date, Executive shall receive a severance payment equal to twelve month's Base Salary, as in effect immediately prior to the event giving rise to such termination, payable in accordance with the ordinary payroll practices of the Company, but no less frequently than monthly following such termination of employment. In addition, the Company shall pay to Executive any earned but unpaid bonus of Executive with respect to the year preceding his termination. (b) For purposes of this Agreement, "Good Reason" shall mean any of the following (without Executive's express prior written consent): (i) Any material breach by the Company of any provision of this Agreement, including a demotion by the Company in Executive's position or the assignment to Executive of duties or responsibilities which are materially inconsistent with the duties or responsibilities contemplated by Section 1 of this Agreement (except, in either case, in connection with the termination of Executive's employment for Cause, as a result of Permanent Disability, as a result of Executive's death or by Executive other than for Good Reason); or 4 Commission File No. 0-6544 (ii) A reduction by the Company in Executive's Base Salary, other than a reduction which is part of a general salary reduction program affecting senior executives of the Company and which reduction is not, on average, greater than the salary reduction (as a percentage of Base Salary) of other senior executives of the Company. (c) For purposes of this Agreement, "Cause" mean any of the following: (i) willful malfeasance or willful misconduct by Executive in connection with his employment; (ii) continuing refusal by Executive to perform his duties hereunder or any lawful direction of the Chief Executive Officer of the Company ("CEO"), within 10 days after notice of any such refusal to perform such duties or direction was given to Executive; (iii) any breach of the provisions of Section 13 of this Agreement by Executive or any other material breach of this Agreement by Executive; or (iv) the commission by Executive of (A) any felony or (B) a misdemeanor involving moral turpitude. (d) For purposes of this Agreement, "Permanent Disability" shall mean a disability that would entitle Executive to receive benefits under the Company's long-term disability plan applicable to senior executive officers as in effect from time to time, which prevents the Executive from performing his duties hereunder for 180 consecutive days or more. 6.2 Voluntary Termination by Executive; Discharge for Cause; Death or Disability. (a) In the event that Executive's employment is terminated (i) by the Company for Cause; (ii) by Executive other than for Good Reason or (iii) as a result of the Executive's Permanent Disability or death, prior to the Termination Date, Executive shall only be entitled to receive the amounts 5 Commission File No. 0-6544 already earned and accrued, including Base Salary through the date of termination and any earned but unpaid bonus of Executive with respect to the year preceding his termination, based on Executive's employment with the Company prior to such termination. Executive shall not be entitled, among other things, to the payment of any Bonus in respect of all or any portion of the fiscal year in which such termination occurs. After the termination of Executive's employment under this Section 6.2 and payment of all amounts due to Executive under the terms of this Agreement in the event of the termination of Executive's employment under this Section 6.2, the obligations of the Company under this Agreement to make any further payments, or provide any benefits specified herein (other than benefits required to be provided by applicable law or under the terms of any employee benefit of the Company in which the Executive was a participant) to Executive shall thereupon cease and terminate. Termination of Executive pursuant to this Section 6.2 shall be made by delivery to Executive of a notice from the CEO setting forth in reasonable detail the reasons for such termination. 7. Stock Arrangements. The Company shall provide Executive with the opportunity to purchase 25,000 shares of common stock, par value $.01 per share, of the Company at a price of $12.00 per share. Executive and the Company shall enter into the Management Stockholder's Agreement (the "Stock Agreement"), substantially in the form attached hereto as Exhibit A, with such changes as the Company shall deem necessary or desirable. In addition, the Company shall grant options (the "Options") to 6 Commission File No. 0-6544 Executive to purchase 56,250 shares of the Company's Common Stock at an exercise price of $12.00 per share. With respect to Options granted to Executive, Executive and the Company shall enter into a standard form stock option agreement, with such changes as the Company shall deem necessary or desirable. 8. Mitigation of Damages. Executive shall not be required to mitigate damages or the amount of any payment provided for under this Agreement by seeking other employment or otherwise after the termination of his employment hereunder, and no amounts earned by Executive, whether from self-employment, as a common-law employee or otherwise, shall reduce the amount of any termination amount otherwise payable to him. 9. Notices. All notices or communications hereunder shall be in writing, addressed as follows: To the Company: William J. Bolton Bruno's, Inc. 800 Lakeshore Parkway Birmingham, Alabama 35211 with a copy to: Alvin H. Brown, Esq. Simpson Thacher & Bartlett 425 Lexington Avenue New York, New York 10017 To Executive: Walter M. Grant c/o Bruno's, Inc. 800 Lakeshore Parkway Birmingham, Alabama 35211 7 Commission File No. 0-6544 Any such notice or communication shall be delivered by hand or by courier or sent certified or registered mail, return receipt requested, postage prepaid, addressed as above (or to such other address as such party may designate in a notice duly delivered as described above), and the third business day after the actual date of mailing shall constitute the time at which notice was given. 10. Separability; Legal Fees. If any provision of this Agreement shall be declared to be invalid or unenforceable, in whole or in part, such invalidity or unenforceability shall not affect the remaining provisions hereof which shall remain in full force and effect. The Company shall pay the reasonable fees and disbursements (not in excess of $7,500) of Executive's legal counsel in connection with the negotiation and execution of this Agreement and the other documents contemplated hereby. Other than as provided in the foregoing sentence, each party shall bear the costs of any legal fees and other fees and expenses which may be incurred in respect of negotiating or enforcing its respective rights under this Agreement. 11. Assignment. This Agreement shall be binding upon and inure to the benefit of the heirs and representatives of Executive and the assigns and successors of the Company, but neither this Agreement nor any rights or obligations hereunder shall be assignable or otherwise subject to hypothecation by Executive (except by will or by operation of the laws of intestate succession) or by the Company, except that the Company may assign this Agreement to any successor (whether by merger, purchase or otherwise) to all or sustantally all of the stock, 8 Commission File No. 0-6544 assets or businesses of the Company, if such successor expressly agrees to assume the obligations of the Company hereunder. 12. Amendment. This Agreement may only be amended by written agreement of the parties hereto. 13. Nondisclosure of Confidential Information; Non- Competition. (a) Executive shall not, without the prior written consent of the Company, use, divulge, disclose or make accessible to any other person, firm, partnership, corporation or other entity any Confidential Information pertaining to the business of the Company or any of its affiliates, except (i) while employed by the Company, in the business of and for the benefit of the Company, or (ii) when required to do so by a court of competent jurisdiction, by any governmental agency having supervisory authority over the business of the Company, or by any administrative body or legislative body (including a committee thereof) with jurisdiction to order Executive to divulge, disclose or make accessible such information. For purposes of this Section 13(a), "Confidential Information" shall mean non- public information concerning the financial data, strategic business plans, product development (or other proprietary product data), customer lists, marketing plans and other non-public, proprietary and confidential information of the Company, Kohlberg Kravis Roberts & Co. or their respective affiliates (the "Restricted Group") or customers, that, in any case, is not otherwise available to the public (other than by Executive's breach of the terms hereof). 9 Commission File No. 0-6544 (b) During the period of his employment hereunder and for one year thereafter, Executive agrees that, without the prior written consent of the Company, (A) he will not, directly or indirectly, either as principal, manager, agent, consultant, officer, stockholder, partner, investor, lender or employee or in any other capacity, carry on, be engaged in or have any financial interest in, any business which is in competition with the business of the Company and (B) he shall not, on his own behalf or on behalf of any person, firm or company, directly or indirectly, solicit or offer employment to any person who has been employed by the Restricted Group at any time during the 12 months immediately preceding such solicitation. (c) For purposes of this Section 13, a business shall be deemed to be in competition with the Company if it is principally involved in the purchase, sale or other dealing in any property or the rendering of any service purchased, sold, dealt in or rendered by the Company as a material part of the business of the Company within the same geographic area in which the Company makes such purchases, sales or dealings or renders such services. Nothing in this Section 13 shall be construed so as to preclude Executive from investing in any publicly or privately held company, provided Executive's beneficial ownership of any class of such company's securities does not exceed 1% of the outstanding securities of such class. (d) Executive and the Company agree that this covenant not to compete is a reasonable covenant under the circumstances, and further agree that if in the opinion of any court of competent jurisdiction such restraint is not reasonable in any respect, such court shall have the right, power and authority to excise or modify such provision or provisions of this covenant as to the court shall appear not reasonable and to enforce the 10 Commission File No. 0-6544 remainder of the covenant as so amended. Executive agrees that any breach of the covenants contained in this Section 13 would irreparably injure the Company. Accordingly, Executive agrees that the Company may, in addition to pursuing any other remedies it may have in law or in equity, cease making any payments otherwise required by this Agreement and obtain an injunction against Executive from any court having jurisdiction over the matter restraining any further violation of this Agreement by Executive. 14. Beneficiaries; References. Executive shall be entitled to select (and change, to the extent permitted under any applicable law) a beneficiary or beneficiaries to receive any compensation or benefit payable hereunder following Executive's death, and may change such election, in either case by giving the Company written notice thereof. In the event of Executive's death or a judicial determination of his incompetence, reference in this Agreement to Executive shall be deemed, where appropriate, to refer to his beneficiary, estate or other legal representative. Any reference to the masculine gender in this Agreement shall include, where appropriate, the feminine. 15. Survivorship. The respective rights and obligations of the parties hereunder shall survive any termination of this Agreement to the extent necessary to the intended preservation of such rights and obligations. The provisions of this Section 15 are in addition to the survivorship provisions of any other section of this Agreement. 16. Governing Law. This Agreement shall be construed, interpreted and governed in accordance with the laws of the State of Alabama, without reference to rules relating to conflicts of law. 11 Commission File No. 0-6544 17. Effect on Prior Agreements. This Agreement contains the entire understanding between the parties hereto and supersedes in all respects any prior agreement or understanding between the Company or any affiliate of the Company and Executive as to employment matters other than the agreements to in Section 7 hereof. 18. Withholding. The Company shall be entitled to withhold from payment any amount of withholding required by law. 19. Counterparts. This Agreement may be executed in two or more counterparts, each of which will be deemed an original. BRUNO'S, INC. By /s/ William J. Bolton Name: William J. Bolton Title: President and Chief Executive Officer EXECUTIVE /s/ Walter M. Grant Walter M. Grant 12 EX-10.37 4 EMPLOYMENT AGREEMENT Commission File No. 0-6544 EMPLOYMENT AGREEMENT AGREEMENT, made September 12, 1996, by and between BRUNO'S, INC., an Alabama corporation (the "Company"), and JAMES J. HAGAN ("Executive"). RECITALS In order to induce Executive to serve as an executive officer of the Company, the Company desires to provide Executive with compensation and other benefits on the terms and conditions set forth in this Agreement. Executive is willing to accept such employment and perform services for the Company, on the terms and conditions hereinafter set forth. It is therefore hereby agreed by and between the parties as follows: 1. Employment. 1.1 Subject to the terms and conditions of this Agreement, the Company agrees to employ Executive during the term hereof as its Senior Vice President and Chief Financial Officer. 1.2 Subject to the terms and conditions of this Agreement, Executive hereby accepts employment as Senior Vice President and Chief Financial Officer of the Company and agrees to devote his full working time and efforts, to the best of his ability, experience and talent, to the performance of services, duties and responsibilities in connection therewith. 2. Term of Employment. Executive's term of employment under this Agreement (the "Term") commenced on May 6, 1996 and, subject to the terms hereof, shall terminate on the termination 1 Commission File No. 0-6544 of Executive's employment pursuant to this Agreement (the "Termination Date"); provided, however, that any termination of employment by Executive (other than for death or Permanent Disability) may only be made upon 30 days prior written notice to the Company. 3. Compensation. 3.1 Salary. During the Term, the Company shall pay Executive a base salary ("Base Salary") at the rate of $275,000 per annum. Base Salary shall be payable in accordance with the ordinary payroll practices of the Company, but no less frequently than monthly. Any increase in Base Salary shall be in the reasonable discretion of the Company and, as so increased, shall constitute "Base Salary" hereunder. 3.2 Annual Bonus. In addition to his Base Salary, Executive shall be paid an annual bonus (the "Bonus") during the term of his employment hereunder with a target amount equal to 50% of Base Salary (the "Target Bonus") and a maximum amount equal to 100% of Base Salary based on performance criteria determined by the Company in its reasonable discretion. 3.3 Compensation Plans and Programs. Executive shall be eligible to participate in any compensation plan or program maintained by the Company in which other senior executives of the Company participate on terms comparable to those applicable to such other senior executives. 3.4 Payment of Relocation Allowance. To assist the Executive with his relocation to the Birmingham, Alabama area, the Company agrees to either reimburse the Executive for or pay directly the expenses set forth on Exhibit A hereto to the extent actually 2 Commission File No. 0-6544 incurred by Executive in relocating from the location of his current residence (if other than the Birmingham area) to the Birmingham area. 4. Employee Benefits. 4.1 Employee Benefit Programs, Plans and Practices. The Company shall provide Executive during the term of his employment hereunder with coverage under all employee pension and welfare benefit programs, plans and practices (commensurate with his positions in the Company and to the extent permitted under any employee benefit plan) in accordance with the terms thereof, which the Company makes available to its senior executives. 4.2 Vacation and Fringe Benefits. Executive shall be entitled to twenty (20) business days paid vacation in each calendar year, which shall be taken at such times as are consistent with Executive's responsibilities hereunder. Unless otherwise approved by the Company, any vacation days not taken in any calendar year shall be forfeited without payment therefor. In addition, Executive shall be entitled to the perquisites and other fringe benefits, including, without limitation, a Company automobile, made available to senior executives of the Company, commensurate with his position with the Company. 5. Expenses. Executive is authorized to incur reasonable expenses in carrying out his duties and responsibilities under this Agreement, including, without limitation, expenses for travel and similar items related to such duties and responsibilities. The Company will reimburse Executive for all such expenses upon presentation by Executive from time to time of appropriately itemized and approved (consistent with the Company's policy) accounts of such expenditures. 3 Commission File No. 0-6544 6. Termination of Employment. The Company may terminate Executive's employment at any time for any reason. 6.1 Termination Not for Cause or for Good Reason. (a) If Executive's employment is terminated (i) by the Company other than for Cause (as defined in this Section 6.1) or (ii) by Executive for Good Reason (as defined in this Section 6.1), Executive shall receive a severance payment equal to twelve month's Base Salary, as in effect immediately prior to the event giving rise to such termination, payable in accordance with the ordinary payroll practices of the Company, but no less frequently than semi-monthly following such termination of employment. In addition, the Company shall pay to Executive any earned but unpaid bonus of Executive with respect to the year preceding his termination. (b) For purposes of this Agreement, "Good Reason" shall mean any of the following (without Executive's express prior written consent): (i) Any material breach by the Company of any provision of this Agreement, including a demotion by the Company in Executive's position or the assignment to Executive of duties or responsibilities which are materially inconsistent with the duties or responsibilities contemplated by Section 1 of this Agreement (except, in either case, in connection with the termination of Executive's employment for Cause, as a result of Permanent Disability, as a result of Executive's death or by Executive other than for Good Reason); or (ii) A reduction by the Company in Executive's Base Salary, other than a reduction which is part of a general salary reduction program affecting senior executives of the Company and which reduction is not, on average, greater than the salary reduction (as a percentage of Base Salary) of other senior executives of the Company. (c) For purposes of this Agreement, "Cause" mean any of the following: (i) willful malfeasance or willful misconduct by Executive in connection with his employment; (ii) continuing refusal by Executive to perform his duties hereunder or any lawful direction of the Chief Executive Officer of the Company ("CEO"), within 10 days after notice of any such 4 Commission File No. 0-6544 refusal to perform such duties or direction was given to Executive; (iii) any breach of the provisions of Section 13 of this Agreement by Executive or any other material breach of this Agreement by Executive; or (iv) the commission by Executive of (A) any felony or (B) a misdemeanor involving moral turpitude. (d) For purposes of this Agreement, "Permanent Disability" shall mean a disability that would entitle Executive to receive benefits under the Company's long-term disability plan applicable to senior executive officers as in effect from time to time, which prevents the Executive from performing his duties hereunder for 180 consecutive days or more. 6.2 Voluntary Termination by Executive; Discharge for Cause; Death or Disability. (a) In the event that Executive's employment is terminated (i) by the Company for Cause; (ii) by Executive other than for Good Reason or (iii) as a result of the Executive's Permanent Disability or death, Executive shall only be entitled to receive the amounts already earned and accrued, including Base Salary through the date of termination and any earned but unpaid bonus of Executive with respect to the year preceding his termination, based on Executive's employment with the Company prior to such termination. Executive shall not be entitled, among other things, to the payment of any Bonus in respect of all or any portion of the fiscal year in which such termination occurs. After the termination of Executive's employment under this Section 6.2 and payment of all amounts due to Executive under the terms of this Agreement in the event of the termination of Executive's employment under this Section 6.2, the obligations of the Company under this Agreement to make any further payments, or provide any benefits specified herein (other than benefits required to be provided by applicable law or under the terms of any employee benefit of the Company in 5 Commission File No. 0-6544 which the Executive was a participant) to Executive shall thereupon cease and terminate. Termination of Executive pursuant to this Section 6.2 shall be made by delivery to Executive of a notice from the CEO setting forth in reasonable detail the reasons for such termination. 7. Stock Arrangements. The Company shall provide Executive with the opportunity to purchase 25,000 shares of common stock, par value $.01 per share, of the Company at a price of $12.00 per share. Executive and the Company shall enter into the Management Stockholder's Agreement (the "Stock Agreement"), substantially in the form attached hereto as Exhibit B, with such changes as the Company shall deem necessary or desirable. In addition, the Company shall grant options (the "Options") to Executive to purchase 66,667 shares of the Company's Common Stock at an exercise price of $12.00 per share. With respect to Options granted to Executive, Executive and the Company shall enter into a standard form stock option agreement, with such changes as the Company shall deem necessary or desirable. 8. Mitigation of Damages. Executive shall not be required to mitigate damages or the amount of any payment provided for under this Agreement by seeking other employment or otherwise after the termination of his employment hereunder, and no amounts earned by Executive, whether from self-employment, as a common-law employee or otherwise, shall reduce the amount of any termination amount otherwise payable to him. 9. Notices. All notices or communications hereunder shall be in writing, addressed as follows: To the Company: William J. Bolton Bruno's, Inc. 800 Lakeshore Parkway Birmingham, Alabama 35211 6 Commission File No. 0-6544 with a copy to: Alvin H. Brown, Esq. Simpson Thacher & Bartlett 425 Lexington Avenue New York, New York 10017 To Executive: James J. Hagan c/o Bruno's, Inc. 800 Lakeshore Parkway Birmingham, Alabama 35211 Any such notice or communication shall be delivered by hand or by courier or sent certified or registered mail, return receipt requested, postage prepaid, addressed as above (or to such other address as such party may designate in a notice duly delivered as described above), and the third business day after the actual date of mailing shall constitute the time at which notice was given. 10. Separability; Legal Fees. If any provision of this Agreement shall be declared to be invalid or unenforceable, in whole or in part, such invalidity or unenforceability shall not affect the remaining provisions hereof which shall remain in full force and effect. The Company shall pay the reasonable fees and disbursements (not in excess of $7,500) of Executive's legal counsel in connection with the negotiation and execution of this Agreement and the other documents contemplated hereby. Other than as provided in the foregoing sentence, each party shall bear the costs of any legal fees and other fees and expenses which may be incurred in respect of negotiating or enforcing its respective rights under this Agreement. 11. Assignment. This Agreement shall be binding upon and inure to the benefit of the heirs and representatives of Executive and the assigns and successors of the Company, but neither this Agreement nor any rights or obligations hereunder shall be assignable or otherwise subject to hypothecation by Executive (except by will or by operation of the laws of intestate succession) or by the Company, except that the Company may assign this Agreement to any successor (whether by merger, purchase or otherwise) to all or substantially all of the stock, assets or businesses of the Company, if such successor expressly agrees to assume the obligations of the Company hereunder. 12. Amendment. This Agreement may only be amended by written agreement of the parties hereto. 13. Nondisclosure of Confidential Information; Non- Competition. (a) Executive shall not, without the prior written consent of the Company, use, divulge, disclose or make accessible to any other person, firm, partnership, corporation or other entity any Confidential Information pertaining to the business of the Company or any of its affiliates, except (i) while employed by the Company, in the business of and for the benefit of the Company, or (ii) when required to do so by a court of competent jurisdiction, by any governmental agency having supervisory authority over the business of the Company, or by any administrative body or legislative body (including a committee thereof) with jurisdiction to order Executive to divulge, disclose or make accessible such information. For purposes of this Section 13(a), "Confidential Information" shall mean non- public information concerning the financial data, strategic business plans, product development (or other proprietary product data), customer lists, marketing plans and other non-public, proprietary and confidential information of the Company, Kohlberg Kravis Roberts & Co. or their respective affiliates (the "Restricted Group") or customers, that, in any case, is not otherwise available to the public (other than by Executive's breach of the terms hereof). 7 Commission File No. 0-6544 (b) During the period of his employment hereunder and for one year thereafter, Executive agrees that, without the prior written consent of the Company, (A) he will not, directly or indirectly, either as principal, manager, agent, consultant, officer, stockholder, partner, investor, lender or employee or in any other capacity, carry on, be engaged in or have any financial interest in, any business which is in competition with the business of the Company and (B) he shall not, on his own behalf or on behalf of any person, firm or company, directly or indirectly, solicit or offer employment to any person who has been employed by the Restricted Group at any time during the 12 months immediately preceding such solicitation. (c) For purposes of this Section 13, a business shall be deemed to be in competition with the Company if it is principally involved in the purchase, sale or other dealing in any property or the rendering of any service purchased, sold, dealt in or rendered by the Company as a material part of the business of the Company within the same geographic area in which the Company makes such purchases, sales or dealings or renders such services. Nothing in this Section 13 shall be construed so as to preclude Executive from investing in any publicly or privately held company, provided Executive's beneficial ownership of any class of such company's securities does not exceed 1% of the outstanding securities of such class. (d) Executive and the Company agree that this covenant not to compete is a reasonable covenant under the circumstances, and further agree that if in the opinion of any court of competent jurisdiction such restraint is not reasonable in any respect, such court shall have the right, power and authority to excise or modify such provision or provisions of this covenant as to the court shall appear not reasonable and to enforce the remainder of the 8 Commission File No. 0-6544 covenant as so amended. Executive agrees that any breach of the covenants contained in this Section 13 would irreparably injure the Company. Accordingly, Executive agrees that the Company may, in addition to pursuing any other remedies it may have in law or in equity, cease making any payments otherwise required by this Agreement and obtain an injunction against Executive from any court having jurisdiction over the matter restraining any further violation of this Agreement by Executive. 14. Beneficiaries; References. Executive shall be entitled to select (and change, to the extent permitted under any applicable law) a beneficiary or beneficiaries to receive any compensation or benefit payable hereunder following Executive's death, and may change such election, in either case by giving the Company written notice thereof. In the event of Executive's death or a judicial determination of his incompetence, reference in this Agreement to Executive shall be deemed, where appropriate, to refer to his beneficiary, estate or other legal representative. Any reference to the masculine gender in this Agreement shall include, where appropriate, the feminine. 15. Survivorship. The respective rights and obligations of the parties hereunder shall survive any termination of this Agreement to the extent necessary to the intended preservation of such rights and obligations. The provisions of this Section 15 are in addition to the survivorship provisions of any other section of this Agreement. 16. Governing Law. This Agreement shall be construed, interpreted and governed in accordance with the laws of the State of Alabama, without reference to rules relating to conflicts of law. 9 Commission File No. 0-6544 17. Effect on Prior Agreements. This Agreement contains the entire understanding between the parties hereto and supersedes in all respects any prior agreement or understanding between the Company or any affiliate of the Company and Executive as to employment matters other than the agreements to in Section 7 hereof. 18. Withholding. The Company shall be entitled to withhold from payment any amount of withholding required by law. 19. Counterparts. This Agreement may be executed in two or more counterparts, each of which will be deemed an original. BRUNO'S, INC. By /s/ William J. Bolton Name: William J. Bolton Title: President and Chief Executive Officer EXECUTIVE /s/ James J. Hagan James J. Hagan 10 EX-10.38 5 EMPLOYMENT AGREEMENT Commission File No. 0-6544 EMPLOYMENT AGREEMENT AGREEMENT, made September 12, 1996, by and between BRUNO'S, INC., an Alabama corporation (the "Company"), and LAURA HAYDEN ("Executive"). RECITALS In order to induce Executive to serve as an executive officer of the Company, the Company desires to provide Executive with compensation and other benefits on the terms and conditions set forth in this Agreement. Executive is willing to accept such employment and perform services for the Company, on the terms and conditions hereinafter set forth. It is therefore hereby agreed by and between the parties as follows: 1. Employment. 1.1 Subject to the terms and conditions of this Agreement, the Company agrees to employ Executive during the term hereof as its Senior Vice President - Human Resources. 1.2 Subject to the terms and conditions of this Agreement, Executive hereby accepts employment as Senior Vice President - Human Resources of the Company and agrees to devote her full working time and efforts, to the best of her ability, experience and talent, to the performance of services, duties and responsibilities in connection therewith. 2. Term of Employment. Executive's term of employment under this Agreement shall commence on July 8, 1996 and, subject to the terms hereof, shall terminate on the earlier of (i) July 7, 1999 (the "Termination Date") or (ii) termination of Executive's 1 Commission File No. 0-6544 employment pursuant to this Agreement (alternatively, the "Term"); provided, however, that any termination of employment by Executive (other than for death or Permanent Disability) may only be made upon 30 days prior written notice to the Company. 3. Compensation. 3.1 Salary. During the Term, the Company shall pay Executive a base salary ("Base Salary") at the rate of $190,000 per annum. Base Salary shall be payable in accordance with the ordinary payroll practices of the Company, but no less frequently than semi-monthly. Any increase in Base Salary shall be in the reasonable discretion of the Company and, as so increased, shall constitute "Base Salary" hereunder. 3.2 Annual Bonus. In addition to her Base Salary, Executive shall be paid an annual bonus (the "Bonus") during the term of her employment hereunder with a target amount equal to 50% of Base Salary (the "Target Bonus") and a maximum amount equal to 100% of Base Salary based on performance criteria determined by the Company in its reasonable discretion. 3.3 Compensation Plans and Programs. Executive shall be eligible to participate in any compensation plan or program maintained by the Company in which other senior executives of the Company participate on terms comparable to those applicable to such other senior executives. 3.4 Payment of Relocation Allowance. To assist the Executive with her relocation to the Birmingham, Alabama area, 2 Commission File No. 0-6544 the Company agrees to either reimburse the Executive for or pay directly the expenses set forth on Exhibit A hereto to the extent actually incurred by Executive in relocating from the location of her current residence (if other than the Birmingham area) to the Birmingham area. 4. Employee Benefits. 4.1 Employee Benefit Programs, Plans and Practices. The Company shall provide Executive during the term of her employment hereunder with coverage under all employee pension and welfare benefit programs, plans and practices (commensurate with her positions in the Company and to the extent permitted under any employee benefit plan) in accordance with the terms thereof, which the Company makes available to its senior executives. 4.2 Vacation and Fringe Benefits. Executive shall be entitled to twenty (20) business days paid vacation in each calendar year, which shall be taken at such times as are consistent with Executive's responsibilities hereunder. Unless otherwise approved by the Company, any vacation days not taken in any calendar year shall be forfeited without payment therefor. In addition, Executive shall be entitled to the perquisites and other fringe benefits, including, without limitation, a Company automobile, made available to senior executives of the Company, commensurate with her position with the Company. 5. Expenses. Executive is authorized to incur reasonable expenses in carrying out her duties and responsibilities 3 Commission File No. 0-6544 under this Agreement, including, without limitation, expenses for travel and similar items related to such duties and responsibilities. The Company will reimburse Executive for all such expenses upon presentation by Executive from time to time of appropriately itemized and approved (consistent with the Company's policy) accounts of such expenditures. 6. Termination of Employment. The Company may terminate Executive's employment at any time for any reason. 6.1 Termination Not for Cause or for Good Reason. (a) If Executive's employment is terminated (i) by the Company other than for Cause (as defined in this Section 6.1) or (ii) by Executive for Good Reason (as defined in this Section 6.1) prior to the Termination Date, Executive shall receive a severance payment equal to twelve month's Base Salary, as in effect immediately prior to the event giving rise to such termination, payable in accordance with the ordinary payroll practices of the Company, but no less frequently than semi-monthly following such termination of employment. In addition, the Company shall pay to Executive any earned but unpaid bonus of Executive with respect to the year preceding her termination. (b) For purposes of this Agreement, "Good Reason" shall mean any of the following (without Executive's express prior written consent): (i) Any material breach by the Company of any provision of this Agreement, including a demotion by the Company in Executive's position or the assignment to Executive of duties or responsibilities which are materially inconsistent with the duties or responsibilities contemplated by Section 1 of this Agreement (except, in either case, in connection with the termination of Executive's employment for Cause, as a result of Permanent Disability, as a result of Executive's death or by Executive other than for Good Reason); or 4 Commission File No. 0-6544 (ii) A reduction by the Company in Executive's Base Salary, other than a reduction which is part of a general salary reduction program affecting senior executives of the Company and which reduction is not, on average, greater than the salary reduction (as a percentage of Base Salary) of other senior executives of the Company. (c) For purposes of this Agreement, "Cause" mean any of the following: (i) willful malfeasance or willful misconduct by Executive in connection with her employment; (ii) continuing refusal by Executive to perform her duties hereunder or any lawful direction of the Chief Executive Officer of the Company ("CEO"), within 10 days after notice of any such refusal to perform such duties or direction was given to Executive; (iii) any breach of the provisions of Section 13 of this Agreement by Executive or any other material breach of this Agreement by Executive; or (iv) the commission by Executive of (A) any felony or (B) a misdemeanor involving moral turpitude. (d) For purposes of this Agreement, "Permanent Disability" shall mean a disability that would entitle Executive to receive benefits under the Company's long-term disability plan applicable to senior executive officers as in effect from time to time, which prevents the Executive from performing her duties hereunder for 180 consecutive days or more. 6.2 Voluntary Termination by Executive; Discharge for Cause; Death or Disability. In the event that Executive's employment is terminated (i) by the Company for Cause; (ii) by Executive other than for Good Reason or (iii) as a result of the Executive's Permanent Disability or death, prior to the Termination Date, Executive shall only be entitled 5 Commission File No. 0-6544 to receive the amounts already earned and accrued, including Base Salary through the date of termination and any earned but unpaid bonus of Executive with respect to the year preceding her termination, based on Executive's employment with the Company prior to such termination. Executive shall not be entitled, among other things, to the payment of any Bonus in respect of all or any portion of the fiscal year in which such termination occurs. After the termination of Executive's employment under this Section 6.2 and payment of all amounts due to Executive under the terms of this Agreement in the event of the termination of Executive's employment under this Section 6.2, the obligations of the Company under this Agreement to make any further payments, or provide any benefits specified herein (other than benefits required to be provided by applicable law or under the terms of any employee benefit of the Company in which the Executive was a participant) to Executive shall thereupon cease and terminate. Termination of Executive pursuant to this Section 6.2 shall be made by delivery to Executive of a notice from the CEO setting forth in reasonable detail the reasons for such termination. 7. Stock Arrangements. (a) The Company shall provide Executive with the opportunity to purchase 15,625 shares of common stock, par value $.01 per share, of the Company ("Common Stock") at a price of $12.00 per share. Executive and the Company shall enter into the Management Stockholder's Agreement (the "Stock Agreement"), substantially in the form attached hereto as Exhibit B, with such changes as the Company shall deem necessary or desirable. In respect of the Common Stock to be purchased pursuant to the Stock Agreement (the "Purchase Stock"), the company shall lend to Executive half of 6 Commission File No. 0-6544 such purchase price at an interest rate equal to the applicable Federal rate as determined under Section 1274(d) of the Internal Revenue Code of 1986, as amended, at the time such loan is made (the "Loan"). The Loan shall be due upon the earliest of (i) one year following termination of Executive's employment by the Company without Cause or by Executive for Good Reason or immediately upon the termination of Executive's employment for any other reason, (ii) the disposition of the Purchase Stock by Executive or (iii) seven years from the date of the purchase of the Purchase Stock. The Loan shall be secured by the entire amount of the Purchase Stock and the Company shall have full recourse thereto in the event of Executive's default on the Loan. Executive and the Company shall enter into written arrangements necessary to effect the foregoing, including, without limitation, a loan agreement, note and pledge agreement, upon such terms and conditions as the parties shall agree. (b) For each share of Purchase Stock purchased by Executive pursuant to Section 7(a) hereof, Executive shall be granted an option (the "Option") to purchase three shares of Company stock at an exercise price of $12.00 per share. With respect to Options granted to Executive, Executive and the Company shall enter into a standard form stock option agreement, with such changes as the Company shall deem necessary or desirable. 8. Mitigation of Damages. Executive shall not be required to mitigate damages or the amount of any payment provided for under this Agreement by seeking other employment or otherwise after the termination of her employment hereunder, and 7 Commission File No. 0-6544 no amounts earned by Executive, whether from self-employment, as a common-law employee or otherwise, shall reduce the amount of any termination amount otherwise payable to her. 9. Notices. All notices or communications hereunder shall be in writing, addressed as follows: To the Company: William J. Bolton Bruno's, Inc. 800 Lakeshore Parkway Birmingham, Alabama 35211 with a copy to: Alvin H. Brown, Esq. Simpson Thacher & Bartlett 425 Lexington Avenue New York, New York 10017 To Executive: Laura Hayden c/o Bruno's, Inc. 800 Lakeshore Parkway Birmingham, Alabama 35211 Any such notice or communication shall be delivered by hand or by courier or sent certified or registered mail, return receipt requested, postage prepaid, addressed as above (or to such other address as such party may designate in a notice duly delivered as described above), and the third business day after the actual date of mailing shall constitute the time at which notice was given. 8 Commission File No. 0-6544 10. Separability; Legal Fees. If any provision of this Agreement shall be declared to be invalid or unenforceable, in whole or in part, such invalidity or unenforceability shall not affect the remaining provisions hereof which shall remain in full force and effect. The Company shall pay the reasonable fees and disbursements (not in excess of $7,500) of Executive's legal counsel in connection with the negotiation and execution of this Agreement and the other documents contemplated hereby. Other than as provided in the foregoing sentence, each party shall bear the costs of any legal fees and other fees and expenses which may be incurred in respect of negotiating or enforcing its respective rights under this Agreement. 11. Assignment. This Agreement shall be binding upon and inure to the benefit of the heirs and representatives of Executive and the assigns and successors of the Company, but neither this Agreement nor any rights or obligations hereunder shall be assignable or otherwise subject to hypothecation by Executive (except by will or by operation of the laws of intestate succession) or by the Company, except that the Company may assign this Agreement to any successor (whether by merger, purchase or otherwise) to all or substantially all of the stock, assets or businesses of the Company, if such successor expressly agrees to assume the obligations of the Company hereunder. 12. Amendment. This Agreement may only be amended by written agreement of the parties hereto. 13. Nondisclosure of Confidential Information; Non- Competition. (a) Executive shall not, without the prior written consent of the Company, use, divulge, disclose 9 Commission File No. 0-6544 or make accessible to any other person, firm, partnership, corporation or other entity any Confidential Information pertaining to the business of the Company or any of its affiliates, except (i) while employed by the Company, in the business of and for the benefit of the Company, or (ii) when required to do so by a court of competent jurisdiction, by any governmental agency having supervisory authority over the business of the Company, or by any administrative body or legislative body (including a committee thereof) with jurisdiction to order Executive to divulge, disclose or make accessible such information. For purposes of this Section 13(a), "Confidential Information" shall mean non-public information concerning the financial data, strategic business plans, product development (or other proprietary product data), customer lists, marketing plans and other non-public, proprietary and confidential information of the Company, Kohlberg Kravis Roberts & Co. or their respective affiliates (the "Restricted Group") or customers, that, in any case, is not otherwise available to the public (other than by Executive's breach of the terms hereof). (b) During the period of her employment hereunder and for one year thereafter, Executive agrees that, without the prior written consent of the Company, (A) she will not, directly or indirectly, either as principal, manager, agent, consultant, officer, stockholder, partner, investor, lender or employee or in any other capacity, carry on, be engaged in or have any financial interest in, any business which is in competition with the business of the Company and (B) she shall not, on her own behalf or on behalf of any person, firm or company, directly or indirectly, solicit or offer employment to any person who has been employed by the Restricted Group at any time during the 12 months immediately preceding such solicitation. 10 Commission File No. 0-6544 (c) For purposes of this Section 13, a business shall be deemed to be in competition with the Company if it is principally involved in the purchase, sale or other dealing in any property or the rendering of any service purchased, sold, dealt in or rendered by the Company as a material part of the business of the Company within the same geographic area in which the Company makes such purchases, sales or dealings or renders such services. Nothing in this Section 13 shall be construed so as to preclude Executive from investing in any publicly or privately held company, provided Executive's beneficial ownership of any class of such company's securities does not exceed 1% of the outstanding securities of such class. (d) Executive and the Company agree that this covenant not to compete is a reasonable covenant under the circumstances, and further agree that if in the opinion of any court of competent jurisdiction such restraint is not reasonable in any respect, such court shall have the right, power and authority to excise or modify such provision or provisions of this covenant as to the court shall appear not reasonable and to enforce the remainder of the covenant as so amended. Executive agrees that any breach of the covenants contained in this Section 13 would irreparably injure the Company. Accordingly, Executive agrees that the Company may, in addition to pursuing any other remedies it may have in law or in equity, cease making any payments otherwise required by this Agreement and obtain an injunction against Executive from any court having jurisdiction over the matter restraining any further violation of this Agreement by Executive. 11 Commission File No. 0-6544 14. Beneficiaries; References. Executive shall be entitled to select (and change, to the extent permitted under any applicable law) a beneficiary or beneficiaries to receive any compensation or benefit payable hereunder following Executive's death, and may change such election, in either case by giving the Company written notice thereof. In the event of Executive's death or a judicial determination of her incompetence, reference in this Agreement to Executive shall be deemed, where appropriate, to refer to her beneficiary, estate or other legal representative. Any reference to the masculine gender in this Agreement shall include, where appropriate, the feminine. 15. Survivorship. The respective rights and obligations of the parties hereunder shall survive any termination of this Agreement to the extent necessary to the intended preservation of such rights and obligations. The provisions of this Section 15 are in addition to the survivorship provisions of any other section of this Agreement. 16. Governing Law. This Agreement shall be construed, interpreted and governed in accordance with the laws of the State of Alabama, without reference to rules relating to conflicts of law. 17. Effect on Prior Agreements. This Agreement contains the entire understanding between the parties hereto and supersedes in all respects any prior agreement or understanding between the Company or any affiliate of the Company and Executive as to employment matters other than the agreements to in Section 7 hereof. 18. Withholding. The Company shall be entitled to withhold from payment any amount of withholding required by law. 12 Commission File No. 0-6544 19. Counterparts. This Agreement may be executed in two or more counterparts, each of which will be deemed an original. BRUNO'S, INC. By /s/ William J. Bolton Name: William J. Bolton Title: President and Chief Executive Officer EXECUTIVE /s/ Laura Hayden Laura Hayden Exhibit A In connection with Executive's relocation to the Birmingham, Alabama area, the Company shall reimburse Executive for the following expenses, subject to reasonable substantiation thereof: 1. Reasonable travel costs, including airfare and lodging, associated with locating a residence in the Birmingham area. 2. The reasonable costs of moving company fees incurred in moving Executive's household to the Birmingham area and of local moving (from temporary housing and storage to permanent housing). 3. The reasonable costs of temporary housing and storage in the Birmingham area for a period not to exceed six months. 13 EX-10.39 6 FORM OF MANAGEMENT STOCKHOLDER'S AGREEMENT Commission File No. 0-6544 FORM OF MANAGEMENT STOCKHOLDER'S AGREEMENT This Management Stockholder's Agreement (this "Agreement") is entered into as of ________________ between BRUNO'S, INC., an Alabama corporation (the "Company"), and __________________ (the "Purchaser") (the Company and the Purchaser being hereinafter collectively referred to as the "Parties"). RECITALS On August 18, 1995, Crimson Acquisition Corp., an Alabama corporation ("Crimson"), merged with and into the Company (the "Merger"). In connection with the Merger, the Company has sold and proposes to sell shares of its Common Stock, par value $.01 per share (the "Common Stock"), to key employees of the Company and certain other investors at a price of $12 per share of Common Stock. This Agreement is one of several other agreements ("Other Purchasers' Agreements") which have been, or which in the future will be, entered into between the Company and other individuals who are or will be key employees of the Company or one of its subsidiaries (collectively, the "Other Purchasers"). In addition, the Company has also entered into, and may in the future enter into, agreements (the "Investors' Agreements") with other purchasers (collectively, the "Investors") pursuant to which the Investors purchased or will purchase shares of Common Stock. The Company has agreed to sell _______ shares of Common Stock to Purchaser so that Purchaser shall receive, in the aggregate, _______ shares of Common Stock (the "Purchase Stock"). In addition, the Company will grant to Purchaser an option or options to purchase Common Stock ("Options") at an exercise price of $12 per share of Common Stock pursuant to the terms of the 1996 Stock Purchase and Option Plan for Key Employees of Bruno's, Inc. and Subsidiaries (the "Option Plan") and the "Non-Qualified Stock Option Agreement" attached hereto as Exhibit A. The Options may be granted as Time Options or Performance Options (each as defined in the Non-Qualified Stock Option Agreement). AGREEMENT To implement the foregoing and in consideration of the mutual agreements contained herein, the Parties agree as follows: 1. Purchase of Stock; Issuance of Options. (a) Subject to the terms and conditions hereinafter set forth, the Purchaser hereby subscribes for and shall purchase, and the Company shall sell to the Purchaser, the Purchase Stock at a purchase price of $12 per share on _____________ (the "Purchase Date"). The Company shall have 1 Commission File No. 0-6544 no obligation to sell any Purchase Stock to any person who (i) is a resident or citizen of a state or other jurisdiction in which the sale of the Purchase Stock to him or her would constitute a violation of the securities or "blue sky" laws of such jurisdiction or (ii) is not an employee of the Company or any of its subsidiaries on the date hereof. (b) The aggregate price for the Purchase Stock shall be $_______ (such amount hereinafter sometimes referred to as the "Purchase Price"). The Purchase Price shall be paid in the following manner: the Purchaser shall deliver to the Company on the Purchase Date cash or a check or checks payable to the order of the Company in the aggregate amount of the Purchase Price. In consideration of receipt of the Purchase Price, the Company will deliver to the Purchaser a certificate, registered in the Purchaser's name, for the Purchase Stock, which shall be subject to the terms and conditions hereinafter set forth. (c) Subject to the terms and conditions hereinafter set forth and upon and as of the Purchase Date, the Company shall issue to the Purchaser the Options and the Parties shall execute and deliver to each other copies of the Non-Qualified Stock Option Agreement concurrently with the issuance of the Options. 2. Purchaser's Representations, Warranties and Agreements. (a) The Purchaser agrees and acknowledges that he will not, directly or indirectly, offer, transfer, sell, assign, pledge, hypothecate or otherwise dispose of (any such act being herein referred to herein as a "transfer") any shares of the Purchase Stock and, at the time of exercise, the Common Stock issuable upon exercise of the Options (collectively, the "Stock") unless such transfer complies with Section 3 of this Agreement. Furthermore, if the Purchaser is an "affiliate" (as defined under Rule 405 of the rules and regulations promulgated under the Act and as interpreted by the Board of Directors of the Company) of the Company (an "Affiliate"), the Purchaser agrees and acknowledges that he will not transfer any shares of the Stock unless (i) the transfer is pursuant to an effective registration statement under the Securities Act of 1933, as amended, and the rules and regulations in effect thereunder (the "Act"), and in compliance with applicable provisions of state securities laws or (ii) (A) counsel for the Purchaser (which counsel shall be reasonably acceptable to the Company) shall have furnished the Company with an opinion, satisfactory in form and substance to the Company, that no such registration is required because of the availability of an exemption from registration under the Act and (B) if the Purchaser is a citizen or resident of any country other than the United States, or the Purchaser desires to effect any transfer in any such country, counsel for the Purchaser (which counsel shall be reasonably satisfactory to the Company) shall have furnished the Company with an opinion or other advice reasonably satisfactory in form and substance to the Company to the effect that such transfer will comply with the securities laws of such jurisdiction. Notwithstanding the foregoing, the Company acknowledges and agrees that any of the following transfers are deemed to be in compliance with the Act and this Agreement and no opinion of counsel is required in connection therewith: (x) a transfer made pursuant to Section 4, 5 or 6 hereof, (y) a transfer upon the death of the Purchaser to his executors, administrators, testamentary trustees, legatees or beneficiaries (the "Purchaser's Estate") or a transfer to the executors, administrators, testamentary trustees, legatees or beneficiaries of a person who has become a holder of Stock in accordance with the terms of this Agreement, provided that it is expressly understood that any such transferee shall be 2 Commission File No. 0-6544 bound by the provisions of this Agreement and (z) a transfer made after the Purchase Date in compliance with the federal securities laws to a trust or custodianship the beneficiaries of which may include only the Purchaser, his spouse or his lineal descendants (a "Purchaser's Trust") or a transfer made after the third anniversary of the Purchase Date to such a trust by a person who has become a holder of Stock in accordance with the terms of this Agreement, provided that such transfer is made expressly subject to this Agreement and that the transferee agrees in writing to be bound by the terms and conditions hereof. (b) The certificate (or certificates) representing the Stock shall bear the following legend: "THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE TRANSFERRED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF UNLESS SUCH TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION COMPLIES WITH THE PROVISIONS OF THE MANAGEMENT STOCKHOLDER'S AGREEMENT DATED AS OF ___________, 1996 BETWEEN BRUNO'S, INC. ("THE COMPANY") AND THE PURCHASER NAMED ON THE FACE HEREOF (A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY). EXCEPT AS OTHERWISE PROVIDED IN SUCH AGREEMENT, NO TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION OF THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE MADE EXCEPT (A) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND IN COMPLIANCE WITH APPLICABLE PROVISIONS OF STATE SECURITIES LAWS OR (B) IF (I) THE COMPANY HAS BEEN FURNISHED WITH A SATISFACTORY OPINION OF COUNSEL FOR THE HOLDER THAT SUCH TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION IS EXEMPT FROM THE PROVISIONS OF SECTION 5 OF THE ACT OR THE RULES AND REGULATIONS IN EFFECT THEREUNDER, AND IN COMPLIANCE WITH APPLICABLE PROVISIONS OF STATE SECURITIES LAWS, AND (II) IF THE HOLDER IS A CITIZEN OR RESIDENT OF ANY COUNTRY OTHER THAN THE UNITED STATES, OR THE HOLDER DESIRES TO EFFECT ANY SUCH TRANSACTION IN ANY SUCH COUNTRY, THE COMPANY HAS BEEN FURNISHED WITH A SATISFACTORY OPINION OR OTHER ADVICE OF COUNSEL FOR THE HOLDER THAT SUCH TRANSACTION WILL NOT VIOLATE THE LAWS OF SUCH COUNTRY." (c) The Purchaser acknowledges that he has been advised that (i) the Stock has been registered on Form S-8 under the Act, (ii) a restrictive legend in the form heretofore set forth shall be placed on the certificates representing the Stock and (iii) a notation shall be made in the appropriate records of the Company indicating that the Stock is subject to restrictions on transfer and appropriate stop transfer restrictions will be issued to the Company's transfer agent with respect to the Stock. If the Purchaser is an Affiliate, the Purchase also acknowledges 3 Commission File No. 0-6544 that (1) the Stock must be held indefinitely and the Purchaser must continue to bear the economic risk of the investment in the Stock unless it is subsequently registered under the Act or an exemption from such registration is available, (2) it is not anticipated that there will be any market on an exchange or a quotation service for the Stock, (3) when and if shares of the Stock may be disposed of without registration in reliance on Rule 144 of the rules and regulations promulgated under the Act, such disposition can be made only in limited amounts in accordance with the terms and conditions of such Rule, (4) if the Rule 144 exemption is not available, public sale without registration will require compliance with Regulation A or some other exemption under the Act, (d) If any shares of the Stock are to be disposed of in accordance with Rule 144 under the Act or otherwise, the Purchaser shall promptly notify the Company of such intended disposition and shall deliver to the Company at or prior to the time of such disposition such documentation as the Company may reasonably request in connection with such sale and, in the case of a disposition pursuant to Rule 144, shall deliver to the Company an executed copy of any notice on Form 144 required to be filed with the Securities and Exchange Commission (the "SEC"). (e) The Purchaser agrees that, if any shares of the capital stock of the Company are offered to the public pursuant to an effective registration statement under the Act (other than registration of securities issued under an employee plan), the Purchaser will not effect any public sale or distribution of any shares of the Stock not covered by such registration statement within 7 days prior to, or within 180 days after, the effective date of such registration statement, unless otherwise agreed to in writing by the Company. (f) The Purchaser represents and warrants that (i) he has received and reviewed the document(s) comprising the Prospectus (the "Prospectus") relating to the Purchase Stock and the documents referred to therein, certain of which documents set forth the rights, preferences and restrictions relating to the Stock and (ii) he has been given the opportunity to obtain any additional information or documents and to ask questions and receive answers about such documents, the Company and the business and prospects of the Company which he deems necessary to evaluate the merits and risks related to his investment in the Purchase Stock and to verify the information contained in the Prospectus and the information received as indicated in this Section 2(f)(ii), and he has relied solely on such information. (g) The Purchaser further represents and warrants that (i) his financial condition is such that he can afford to bear the economic risk of holding the Purchase Stock for an indefinite period of time and has adequate means for providing for his current needs and personal contingencies, (ii) he can afford to suffer a complete loss of his investment in the Purchase Stock, (iii) he understands and has taken cognizance of all risk factors related to the purchase of the Purchase Stock, including those set forth in the Prospectus referred to above, and (iv) his knowledge and experience in financial and business matters are such that he is capable of evaluating the merits and risks of his purchase of the Purchase Stock as contemplated by this Agreement. 4 Commission File No. 0-6544 3. Restriction on Transfer. Except for transfers permitted by clauses (x), (y) and (z) of Section 2(a) or a sale of shares of Stock pursuant to an effective registration statement under the Act filed by the Company or pursuant to the Sale Participation Agreement (as defined below), the Purchaser agrees that he will not transfer any shares of the Stock at any time prior to the fifth anniversary of the Purchase Date. No transfer of any such shares in violation hereof shall be made or recorded on the books of the Company and any such transfer shall be void and of no effect. 4. Right of First Refusal. If at any time after the fifth anniversary of the Purchase Date and prior to a Public Offering (as defined below), the Purchaser receives a bona fide offer to purchase any or all of his shares of Stock (the "Offer") from a third party (the "Offeror") which the Purchaser wishes to accept, the Purchaser shall cause the Offer to be reduced to writing and shall notify the Company in writing of his wish to accept the Offer. The Purchaser's notice shall contain an irrevocable offer to sell such shares of Stock to the Company (in the manner set forth below) at a purchase price equal to the price contained in, and on the same terms and conditions of, the Offer, and shall be accompanied by a true copy of the Offer (which shall identify the Offeror). At any time within 30 days after the date of the receipt by the Company of the Purchaser's notice, the Company shall have the right and option to purchase, or to arrange for a third party to purchase, all of the shares of Stock covered by the Offer either (i) at the same price and on the same terms and conditions as the Offer or (ii) if the Offer includes any consideration other than cash, then at the sole option of the Company, at the equivalent all cash price, determined in good faith by the Company's Board of Directors, by delivering a certified bank check or checks in the appropriate amount (and any such non-cash consideration to be paid) to the Purchaser at the principal office of the Company against delivery of certificates or other instruments representing the shares of the Purchase Stock so purchased, appropriately endorsed by the Purchaser. If at the end of such 30 day period, the Company has not tendered the purchase price for such shares in the manner set forth above, the Purchaser may during the succeeding 30 day period sell not less than all of the shares of Stock covered by the Offer to the Offeror at a price and on terms no less favorable to the Purchaser than those contained in the Offer. Promptly after such sale, the Purchaser shall notify the Company of the consummation thereof and shall furnish such evidence of the completion and time of completion of such sale and of the terms thereof as may reasonably be requested by the Company. If, at the end of 30 days following the expiration of the 30 day period for the Company to purchase the Stock, the Purchaser has not completed the sale of such shares of the Stock as aforesaid, all the restrictions on sale, transfer or assignment contained in this Agreement shall again be in effect with respect to such shares of the Stock. 5. Purchaser's Resale of Stock and Options to the Company Upon The Purchaser's Death or Disability. (a) Except as otherwise provided herein, if at any time prior to a Public Offering (i) the Purchaser is still in the employ of the Company or any subsidiary of the Company, or had retired from the Company and its subsidiaries at age 62 or over (or such other age as may be approved by the Board of Directors of the Company) after having been employed 5 Commission File No. 0-6544 by the Company or any subsidiary for at least three years after the Purchase Date, and (ii) the Purchaser either dies or becomes permanently disabled, then the Purchaser, the Purchaser's Estate or a Purchaser's Trust, as the case may be, shall have the right, for six months following the date of death or permanent disability, to (A) sell to the Company, and the Company shall be required to purchase, on one occasion, all or any portion of the shares of Stock then held by the Purchaser, the Purchaser's Trust and/or the Purchaser's Estate, as the case may be, at the Section 5 Repurchase Price, as determined in accordance with Section 7, and (B) require the Company to pay to the Purchaser or the Purchaser's Estate, as the case may be, an additional amount equal to the Option Excess Price determined on the basis of a Section 5 Repurchase Price as provided in Section 8 with respect to the termination of outstanding Options held by the Purchaser. The Purchaser, the Purchaser's Estate and/or the Purchaser's Trust, as the case may be, shall send written notice to the Company of its intention to sell shares of Stock and to terminate such Options in exchange for the payment referred to in the preceding sentence (the "Redemption Notice"). The completion of the purchase shall take place at the principal office of the Company on the tenth business day after the giving of the Redemption Notice. The Section 5 Repurchase Price and any payment with respect to the Options as described above shall be paid by delivery to the Purchaser, the Purchaser's Estate or the Purchaser's Trust, as the case may be, of a certified bank check or checks in the appropriate amount payable to the order of the Purchaser, the Purchaser's Estate or the Purchaser's Trust, as the case may be, against delivery of certificates or other instruments representing the Purchase Stock so purchased and appropriate documents cancelling the Options so terminated appropriately endorsed or executed by the Purchaser, the Purchaser's Estate or the Purchaser's Trust, or his or its duly authorized representative. For purposes of this Agreement, Purchaser shall be deemed to have a "permanent disability" when the majority of the Board of Directors of the Company shall, in good faith, so determine. (b) Notwithstanding anything in Section 5(a) to the contrary and subject to Section 11, if there exists and is continuing a default or an event of default on the part of the Company or any subsidiary of the Company under any loan, guarantee or other agreement under which the Company or any subsidiary of the Company has borrowed money or if the repurchase referred to in Section 5(a) would result in a default or an event of default on the part of the Company or any subsidiary of the Company under any such agreement or if a repurchase would not be permitted under Section 10-2B-6.31 of the Alabama Business Corporation Act (the "ABCA") or would otherwise violate the ABCA (or if the Company reincorporates in another state, the business corporation law of such state) (each such occurrence being an "Event"), the Company shall not be obligated to repurchase any of the Purchase Stock or the Options from the Purchaser, the Purchaser's Estate or the Purchaser's Trust, as the case may be, until the first business day which is 10 calendar days after all of the foregoing Events have ceased to exist (the "Repurchase Eligibility Date"); provided, however, that (i) the number of shares of Purchase Stock subject to repurchase under this Section 5(b) shall be that number of shares of Purchase Stock, and (ii) the number of Exercisable Option Shares (as defined in Section 8) for purposes of calculating the Option Excess Price payable under this Section 5(b) shall be the number of Exercisable Option Shares, held by the Purchaser, the Purchaser's Estate or a Purchaser's Trust, as the case may be, at the time of delivery of a Redemption Notice in accordance with Section 5(a) hereof; provided, further, that the Repurchase Calculation Date shall be determined in accordance with Section 7 as of the Repurchase Eligibility Date (unless the Section 5 Repurchase Price would be greater if the Repurchase Calculation Date had been determined as if no Event 6 Commission File No. 0-6544 had occurred in which case, solely for purposes of this proviso, the Repurchase Calculation Date shall be determined as if no Event had occurred). All Options exercisable as of the date of a Redemption Notice shall continue to be exercisable until the repurchase pursuant to such Redemption Notice. (c) Notwithstanding any other provision of this Section 5 to the contrary and subject to Section 11, the Purchaser, the Purchaser's Estate or the Purchaser's Trust, as the case may be, shall have the right to withdraw any Redemption Notice which has been pending for 60 or more days and which has remained unsatisfied because of the provisions of Section 5(b). 6. The Company's Option to Repurchase Stock and Options of Purchaser. (a) If, on or prior to the fifth anniversary of the Purchase Date, (i) the Purchaser's active employment with the Company (and/or, if applicable, its subsidiaries) is voluntarily or involuntarily terminated for any reason whatsoever, with or without Cause, (ii) the beneficiaries of a Purchaser's Trust shall include any person or entity other than the Purchaser, his spouse or his lineal descendants, or (iii) the Purchaser shall effect a transfer of any of the Stock other than as permitted in this Agreement (alternatively, a "Call Event"), the Company shall have the right to purchase all, but not less than all, of the shares of the Stock then held by the Purchaser or a Purchaser's Trust at the Section 6 Repurchase Price determined in accordance with Section 7 hereof; provided, however, that if the termination of employment results from (A) the death or permanent disability of the Purchaser or (B) the retirement of the Purchaser from the Company or any of its subsidiaries at age 62 or over (or such other age as may be approved by the Board of Directors of the Company) after having been employed by the Company or its subsidiaries for at least three years after the Purchase Date, the Company shall have the right to purchase all, but not less than all, of the shares of the Purchase Stock then held by the Purchaser or a Purchaser's Trust but the Repurchase Price shall be the Section 5 Repurchase Price. The Company shall have a period of 75 days from the date of a Call Event in which to give notice in writing to the Purchaser of the exercise of such election ("Call Notice"). In the event that the Company exercises its right to repurchase shares of the Purchase Stock pursuant to this Section 6, the Company shall also pay the Purchaser an amount equal to the Option Excess Price determined on the basis of the Section 6 Repurchase Price or the Section 5 Repurchase Price, as the case may be, as provided in Section 8, with respect to the termination of outstanding Options held by the Purchaser. (b) The completion of the purchases pursuant to the foregoing shall take place at the principal office of the Company on the tenth business day after the giving of notice of the exercise of the option to purchase. The Section 5 Repurchase Price or the Section 6 Repurchase Price, as the case may be, and any payment with respect to the Options as described above shall be paid by delivery to the Purchaser of a certified bank check or checks in the appropriate amount payable to the order of the Purchaser against delivery of certificates or other instruments representing the Purchase Stock so purchased and appropriate documents canceling the Options so terminated, appropriately endorsed or executed by the Purchaser, the Purchaser's Trust or his or its authorized representative. 7 Commission File No. 0-6544 (c) Notwithstanding any other provision of this Section 6 to the contrary and subject to Section 11, if there exists and is continuing any Event, the Company shall delay the repurchase of any of the Purchase Stock or the Options (pursuant to a Call Notice timely given in accordance with Section 6(a) hereof) from the Purchaser, the Purchaser's Estate, or the Purchaser's Trust, as the case may be, until the Repurchase Eligibility Date; provided, however, that (i) the number of shares of Purchase Stock subject to repurchase under this Section 6(c) shall be that number of shares of Purchase Stock and (ii) the number of Exercisable Option Shares for purposes of calculating the Option Excess Price payable under this Section 6(c) shall be the number of Exercisable Option Shares held by the Purchaser, the Purchaser's Estate or a Purchaser's Trust, as the case may be, at the time of delivery of a Call Notice in accordance with Section 6(a) hereof; provided, further, that the Repurchase Calculation Date shall be determined in accordance with Section 7 based on the Repurchase Eligibility Date (unless the applicable Repurchase Price would be greater if the Repurchase Calculation Date had been determined as if no Event had occurred, in which case, solely for purposes of this proviso, the Repurchase Calculation Date shall be determined as if no Event had occurred). All Options exercisable as of the date of a Call Notice shall continue to be exercisable until the repurchase pursuant to such Call Notice. 7. Determination of Repurchase Price. (a) The Section 5 Repurchase Price and the Section 6 Repurchase Price are hereinafter collectively referred to as the "Repurchase Price." The Repurchase Price shall be calculated on the basis of the unaudited financial statements of the Company or the Market Price Per Share (as defined in Section 7(f)) as of the last day of the month preceding the later of (i) the month in which the event giving rise to the repurchase occurs and (ii) the month in which the Repurchase Eligibility Date occurs (hereinafter called the "Repurchase Calculation Date"). The event giving rise to the repurchase shall be the death, permanent disability, retirement or termination of employment, as the case may be, of the Purchaser, not the giving of any notice required pursuant to Section 5 or 6. (b) Prior to a Public Offering (as hereinafter defined) the Section 5 Repurchase Price shall be a per share Repurchase Price equal to $12 plus the amount, if any, by which the Book Value Per Share (as defined in Section 7(d)) as of the Repurchase Calculation Date exceeds $12. After a Public Offering, the Section 5 Repurchase Price shall be a per share Repurchase Price equal to $12 plus the amount, if any, by which the Market Price Per Share as of the Repurchase Calculation Date exceeds $12. (c) Prior to a Public Offering, the Section 6 Repurchase Price shall be a per share Repurchase Price equal to the lesser of (i) the Book Value Per Share or (ii) $12 plus (x) the Percentage (as defined below) multiplied by (y) the amount, if any, by which the Book Value Per Share as of the Repurchase Calculation Date exceeds $12. After a Public Offering, the Section 6 Repurchase Price shall be a per share Repurchase Price equal to the lesser of (i) Market Price Per Share or (ii) $12 plus (a) the Percentage multiplied by (b) the amount, if any, by which the Market Price Per Share as of the Repurchase Calculation Date exceeds $12; provided, however, that in the event of Purchaser's termination without Cause by the Company (and/or, if applicable, its subsidiaries) or with Good Reason by the Purchaser, the Section 6 Repurchase Price shall be 8 Commission File No. 0-6544 the Book Value Per Share or Market Price Per Share, as the case may be. For purposes of this Agreement the following definitions shall apply: "Cause" shall mean (i) the Purchaser's willful and continued failure to perform Purchaser's duties with respect to the Company or its subsidiaries which continues beyond ten days after a written demand for substantial performance is delivered to Purchaser by the Company or (ii) misconduct by Purchaser involving (x) dishonesty or breach of trust in connection with Purchaser's employment or (y) conduct which would be a reasonable basis for an indictment of Purchaser for a felony or for a misdemeanor involving moral turpitude; and "Good Reason" shall mean (i) a reduction in Purchaser's base salary or (ii) a substantial reduction in Purchaser's duties and responsibilities other than as approved by the Chief Executive Officer of the Company. Notwithstanding the immediately preceding sentence, the definitions in any employment agreement in effect on the date hereof between the Company and Purchaser of "Cause" and "Good Reason" shall supersede and replace the definitions of "Cause" and "Good Reason" in the immediately preceding sentence and shall be deemed incorporated by reference in this Agreement in their entirety. The "Percentage" shall be determined as follows:
Repurchase Calculation Date Percentage - - --------------------------- ---------- Purchase Date through and including the first 0% anniversary of the Purchase Date After the first anniversary of the Purchase 20% Date through and including the second anniversary of the Purchase Date After the second anniversary of the Purchase 40% Date through and including the third anniversary of the Purchase Date After the third anniversary of the Purchase 60% Date through and including the fourth anniversary of the Purchase Date After the fourth anniversary of the Purchase 80% Date through and including the fifth anniversary of the Purchase Date After the fifth anniversary of the Purchase 100% Date
(d) For purposes of this Agreement, "Book Value Per Share" shall be the quotient of (a) (i) $300 million plus (ii) the aggregate net income of the Company from and after the date of the Merger (as decreased by any net losses from and after the date of the Merger) plus (iii) the aggregate dollar amount contributed to the Company after the date of the Merger as equity by the shareholders of the Company (including consideration to be received upon exercise of the Options and other stock equivalents) plus (iv) unusual charges taken during the Company's transition period ended January 27, 1996 which, net of taxes, total $88.251 million, (v) plus, to the extent reflected as deductions to Book Value Per Share in clause (ii) above, or minus, to the extent reflected as additions to Book Value Per Share in clause (ii) above, unusual items recognized by the Company, if and to the extent determined in the sole discretion of the Compensation Committee of the Board of Directors of the Company, minus, (vi) the aggregate 9 Commission File No. 0-6544 dollar amount of any dividends paid by the Company after the date of the Merger divided by (b) the sum of the number of shares of Common Stock then outstanding and the number of shares of Common Stock issuable upon the exercise of all outstanding stock options and other rights to acquire Common Stock and the conversion of all securities convertible into shares of Common Stock. The calculations set forth in clauses (a)(ii), (a)(iii), (a)(v) and (a)(vi) of the immediately preceding sentence shall be determined in accordance with generally accepted accounting principles applied on a basis consistent with any prior periods as reflected in the consolidated financial statements of the Company. (e) As used herein the term "Public Offering" shall mean the sale of shares of Common Stock to the public subsequent to the date hereof pursuant to a registration statement under the Act which has been declared effective by the SEC (other than a registration statement on Form S-8 or any other similar form) which results in an active trading market in the Common Stock if such a market does not already exist. A "Qualified Public Offering" shall mean a Public Offering pursuant to an effective registration statement relating to the sale of shares of the Company Stock held by any and all of KKR Partners II, L.P. and Crimson Associates, L.P., a Delaware limited partnership; provided, however, that a "Qualified Public Offering" shall be deemed to have occurred if there has been a Public Offering and there exists an active trading market in 40% or more of the Common Stock. (f) As used herein the term "Market Price Per Share" shall mean the price per share equal to the average of the last sale price of the Common Stock on the Repurchase Calculation Date on each exchange on which the Common Stock may at the time be listed or, if there shall have been no sales on any of such exchanges on the Repurchase Calculation Date, the average of the closing bid and asked prices on each such exchange at the end of the Repurchase Calculation Date or if there is no such bid and asked price on the Repurchase Calculation Date on the next preceding date when such bid and asked price occurred or, if the Common Stock shall not be so listed, the average of the closing sales prices as reported by NASDAQ at the end of the Repurchase Calculation Date in the over-the-counter market. If the Common Stock is not so listed or reported by NASDAQ, then the Market Price Per Share shall be the Book Value Per Share. (g) In determining the Repurchase Price, appropriate adjustments shall be made for any future issuances of rights to acquire and securities convertible into Common Stock and any stock dividends, splits, combinations, recapitalizations or any other adjustment in the number of outstanding shares of Common Stock. 8. Stock Issued to Purchaser Upon Exercise of Stock Options; Termination of Options. (a) The Company may from time to time grant to the Purchaser, in addition to the Options, options under the Option Plan to purchase shares of Common Stock at $12 per share or at a different option exercise price. The term "Purchase Stock" as used in this Agreement shall include all shares of Common Stock of the Company purchased by the Purchaser pursuant to this Agreement and issued to the Purchaser by the Company upon exercise of the Options and of any other stock options held by the Purchaser. 10 Commission File No. 0-6544 (b) All outstanding Options granted to the Purchaser under the Option Plan or otherwise, whether or not then exercisable, will be automatically terminated upon the payment by the Company to the Purchaser, pursuant to the provisions of Sections 5 or 6 of this Agreement, of an amount equal to the Option Excess Price. If the Option Excess Price is zero or a negative number, all outstanding stock options granted to the Purchaser under the Option Plan or otherwise, whether or not then exercisable, shall be automatically terminated upon the repurchase of Stock as provided in Sections 5 or 6. The Option Excess Price is the excess, if any, of the Section 5 Repurchase Price or the Section 6 Repurchase Price, depending on which Repurchase Price is being used to repurchase the remainder of the Stock, over the Option Price (as defined in the Option Plan) multiplied by the number of Exercisable Option Shares. For purposes hereof, "Exercisable Option Shares" shall mean the shares of Common Stock which, at the time of determination of the Option Excess Price, could be purchased by the Purchaser upon exercise of his outstanding options. 9. The Company's Representations and Warranties. (a) The Company represents and warrants to the Purchaser that (i) this Agreement has been duly authorized, executed and delivered by the Company and (ii) the Purchase Stock, when issued and delivered in accordance with the terms hereof, will be duly and validly issued, fully paid and nonassessable. (b) If the Company shall have engaged in a Public Offering, the Company will file the reports required to be filed by it under the Act and the Exchange Act and the rules and regulations adopted by the SEC thereunder, to the extent required from time to time to enable the Purchaser to sell shares of Stock without registration under the Act within the limitations of the exemptions provided by (A) Rule 144 under the Act, as such Rule may be amended from time to time, or (B) any similar rule or regulation hereafter adopted by the SEC. Notwithstanding anything contained in this Section 10(b), the Company may deregister under Section 12 of the Exchange Act if it is then permitted to do so pursuant to the Exchange Act and the rules and regulations thereunder. Nothing in this Section 9(b) shall be deemed to limit in any manner the restrictions on sales of Stock contained in this Agreement. 10. "Piggyback" Registration Rights. (a) If the Purchaser is an Affiliate of the Company, effective upon the purchase of Common Stock pursuant to this Agreement, until the later of (i) the first occurrence of a Qualified Public Offering (as defined in Section 7(e) above) or (ii) the fifth anniversary of the Purchase Date, the Purchaser hereby agrees to be bound by all of the terms, conditions and obligations of the Registration Rights Agreement dated as of August 18, 1995, among the Company (as successor by Merger to Crimson Acquisition Corp.) and certain of the Investors (the "Registration Rights Agreement") and, in the case of a Qualified Public Offering and subject to the limitations set forth in this Section 10, shall have all of the rights and privileges of the Registration Rights Agreement, in each case as if the Purchaser were an original party (other than the Company) thereto; provided, however, that the Purchaser shall not have any rights to request registration under Section 3 of the Registration Rights Agreement; and provided further, that the 11 Commission File No. 0-6544 Purchaser shall not be bound by any amendments to the Registration Rights Agreement unless Purchaser consents thereto. Notwithstanding anything to the contrary contained in the Registration Rights Agreement, the Purchaser's rights and obligations under the Registration Rights Agreement shall be subject to the limitations and additional obligations set forth in this Section 10. All shares of Stock purchased by the Purchaser pursuant to this Agreement and held by the Purchaser, the Purchaser's Trust or the Purchaser's Estate, including shares purchased upon the exercise of Options, shall be deemed to be Registrable Securities as defined in the Registration Rights Agreement. (b) The Company will promptly notify the Purchaser in writing (a "Notice") of any proposed registration (a "Proposed Registration") in connection with a Qualified Public Offering. If within 15 days of the receipt by the Purchaser of such Notice, the Company receives from the Purchaser, the Purchaser's Trust or the Purchaser's Estate a written request (a "Request") to register shares of Stock held by the Purchaser, the Purchaser's Estate or the Purchaser's Trust (which Request will be irrevocable unless otherwise mutually agreed to in writing by the Purchaser and the Company), shares of Stock will be so registered as provided in this Section 10; provided, however, that for each such registration statement only one Request, which shall be executed by the Purchaser, the Purchaser's Trust or the Purchaser's Estate, as the case may be, may be submitted for all Registrable Securities held by the Purchaser, the Purchaser's Estate and the Purchaser's Trust. (c) The maximum number of shares of Stock which will be registered pursuant to a Request will be the lowest of (i) the number of shares of Stock then held by the Purchaser (which for purposes of this subparagraph (c) shall include shares held by the Purchaser's Estate or a Purchaser's Trust), including all shares of Stock which the Purchaser is then entitled to acquire under an unexercised Option to the extent then exercisable or (ii) the maximum number of shares of Stock which the Company can register in the Proposed Registration without adverse effect on the offering in the view of the managing underwriters (reduced pro rata with all Other Purchasers) as more fully described in subsection (d) of this aggregate number of shares of Common Stock the Purchaser and all Other Purchasers have requested be registered) and all Other Purchasers are permitted to register under the Registration Rights Agreement. (d) If a Proposed Registration involves an underwritten offering and the managing underwriter advises the Company in writing that, in its opinion, the number of shares of Stock requested to be included in the Proposed Registration exceeds the number which can be sold in such offering, so as to be likely to have an adverse effect on the price, timing or distribution of the shares of Stock offered in such Qualified Public Offering as contemplated by the Company, then the Company will include in the Proposed Registration (i) first, 100% of the shares of Stock the Company proposes to sell and (ii) second, to the extent of the number of shares of Stock requested to be included in such registration which, in the opinion of such managing underwriter, can be sold without having the adverse effect referred to above, the number of shares of Stock which the "Holders" (as defined in the Registration Rights Agreement), including, without limitation, the Purchaser and Other Purchasers have requested to be included in the Proposed Registration, such amount to be allocated pro rata among all 12 Commission File No. 0-6544 requesting Holders on the basis of the relative number of shares of Stock then held by each such Holder (provided that any shares thereby allocated to any such Holder that exceed such Holder's request will be reallocated among the remaining requesting Holders in like manner). (e) Upon delivering a Request the Purchaser will, if requested by the Company, execute and deliver a custody agreement and power of attorney in form and substance satisfactory to the Company with respect to the shares of Stock to be registered pursuant to this Section 10 (a "Custody Agreement and Power of Attorney"). The Custody Agreement and Power of Attorney will provide, among other things, that the Purchaser will deliver to and deposit in custody with the custodian and attorney-in-fact named therein a certificate or certificates representing such shares of Stock (duly endorsed in blank by the registered owner or owners thereof or accompanied by duly executed stock powers in blank) and irrevocably appoint said custodian and attorney-in-fact as the Purchaser's agent and attorney-in-fact with full power and authority to act under the Custody Agreement and Power of Attorney on the Purchaser's behalf with respect to the matters specified therein. (f) The Purchaser agrees that he will execute such other agreements as the Company may reasonably request to further evidence the provisions of this Section 10. (g) Notwithstanding anything to the contrary in the foregoing, the Purchaser shall have no registration rights under this Section 10 unless he is an Affiliate of the Company. 11. Pro Rata Repurchases. Notwithstanding anything to the contrary contained in Sections 5, 6 or 7, if at any time consummation of all purchases and payments to be made by the Company pursuant to this Agreement and the Other Purchasers' Agreements would result in an Event, then the Company shall make purchases from, and payments to, the Purchaser and Other Purchasers pro rata (on the basis of the proportion of the number of shares of Stock and the number of Options each such Purchaser and all Other Purchasers have elected or are required to sell to the Company) for the maximum number of shares of Stock and shall pay the Option Excess Price for the maximum number of Options permitted without resulting in an Event (the "Maximum Repurchase Amount"). The provisions of Section 5(b) and 6(c) shall apply in their entirety to payments and repurchases with respect to Options and shares of Stock which may not be made due to the limits imposed by the Maximum Repurchase Amount under this Section 11. Until all of such Stock and Options are purchased and paid for by the Company, the Purchaser and the Other Purchasers whose Stock and Options are not purchased in accordance with this Section 11 shall have priority, on a pro rata basis, over other purchases of Common Stock and Options by the Company pursuant to this Agreement and Other Purchasers' Agreements. 12. Rights to Negotiate Repurchase Price. Nothing in this Agreement shall be deemed to restrict or prohibit the Company from purchasing shares of Stock or Options from the Purchaser, at any time, upon such terms and conditions, and for such price, as may be mutually agreed upon between the Parties, whether or not at the time of such purchase circumstances exist which specifically grant the Company the 13 Commission File No. 0-6544 right to purchase, or the Purchaser the right to sell, shares of Stock or the Company has the right to pay, or the Purchaser has the right to receive, the Option Excess Price under the terms of this Agreement. 13. Covenant Regarding 83(b) Election. Except as the Company may otherwise agree in writing, the Purchaser hereby covenants and agrees that he will make an election provided pursuant to Treasury Regulation 1.83-2 with respect to the Stock, including without limitation, the Stock to be acquired pursuant to Section 1 and the Stock to be acquired upon each exercise of the Purchaser's Options; and Purchaser further covenants and agrees that he will furnish the Company with copies of the forms of election the Purchaser files within 30 days after the date hereof, and within 30 days after each exercise of Purchaser's Non-Qualified Options and with evidence that each such election has been filed in a timely manner. 14. Notice of Change of Beneficiary. Immediately prior to any transfer of Stock to a Purchaser's Trust, the Purchaser shall provide the Company with a copy of the instruments creating the Purchaser's Trust and with the identity of the beneficiaries of the Purchaser's Trust. The Purchaser shall notify the Company immediately prior to any change in the identity of any beneficiary of the Purchaser's Trust. 15. Expiration of Certain Provisions. The provisions contained in Sections 4, 5 and 6 of this Agreement and the portion of any other provision of this Agreement which incorporates the provisions of Sections 4, 5 and 6, shall terminate and be of no further force or effect with respect to any shares of Stock sold by the Purchaser (i) pursuant to an effective registration statement filed by the Company pursuant to Section 10 hereof or (ii) pursuant to the terms of the Sale Participation Agreement of even date herewith, among the Purchaser, KKR Partners II, L.P. and Crimson Associates, L.P. The provisions contained in Sections 2(e), 3, 4, 5, 6 and 13 of this Agreement, and the portion of any other provisions of this Agreement which incorporate the provisions of such Sections, shall terminate and be of no further force or effect upon the consummation of a merger, reorganization, business combination or liquidation of the Company, or a sale of Common Stock owned by the Investors, but only if such merger, reorganization, business combination, liquidation or sale of Common Stock results in KKR Associates, a New York limited partnership, or any affiliate thereof, no longer having the power (i) to elect a majority of the Board of Directors of the Company or such other corporation which succeeds to the Company's rights and obligations pursuant to such merger, reorganization, business combination, liquidation or stock sale, or (ii) if the resulting entity of such merger, reorganization, business combination, liquidation or stock sale is not a corporation, to select the general partner(s) or other persons or entities controlling the operations and business of the resulting entity. 14 Commission File No. 0-6544 16. Recapitalizations, etc. The provisions of this Agreement shall apply, to the full extent set forth herein with respect to the Stock or the Options, to any and all shares of capital stock of the Company or any capital stock, partnership units or any other security evidencing ownership interests in any successor or assign of the Company (whether by merger, consolidation, sale of assets or otherwise) which may be issued in respect of, in exchange for, or substitution of the Stock or the Options, by reason of any stock dividend, split, reverse split, combination, recapitalization, liquidation, reclassification, merger, consolidation or otherwise. 17. Purchaser's Employment by the Company. Nothing contained in this Agreement or in any other agreement entered into by the Company and the Purchaser contemporaneously with the execution of this Agreement (i) obligates the Company or any subsidiary of the Company to employ the Purchaser in any capacity whatsoever or (ii) prohibits or restricts the Company (or any such subsidiary) from terminating the employment, if any, of the Purchaser at any time or for any reason whatsoever, with or without Cause, and the Purchaser hereby acknowledges and agrees that neither the Company nor any other person has made any representations or promises whatsoever to the Purchaser concerning the Purchaser's employment or continued employment by the Company or any subsidiary of the Company. 18. State Securities Laws. The Company hereby agrees to use its best efforts to comply with all state securities or "blue sky" laws which might be applicable to the sale of the Stock and the issuance of the Options to the purchaser. 19. Binding Effect: The provisions of this Agreement shall be binding upon and accrue to the benefit of the parties hereto and their respective heirs, legal representatives, successors and assigns. In the case of a transferee permitted under Section 2(a) hereof, such transferee shall be deemed the Purchaser hereunder; provided, however, that no transferee (including without limitation, transferees referred to in Section 2(a) hereof) shall derive any rights under this Agreement unless and until such transferee has delivered to the Company a valid undertaking and becomes bound by the terms of this Agreement. 20. Amendment. This Agreement may be amended only by a written instrument signed by the Parties hereto. 21. Closing. Except as otherwise provided herein, the closing of each purchase and sale of shares of Stock and the payment 15 Commission File No. 0-6544 of the Option Excess Price, if any, pursuant to this Agreement shall take place at the principal office of the Company on the tenth business day following delivery of the notice by either Party to the other of its exercise of the right to purchase or sell such Stock hereunder or to cause the payment of the Option Excess Price, if any. 22. Applicable Law. The laws of the state of Alabama (or if the Company reincorporates in another state, of that state) shall govern the interpretation, validity and performance of the terms of this Agreement, regardless of the law that might be applied under principles of conflicts of law. Any suit, action or proceeding against the Purchaser, with respect to this Agreement, or any judgment entered by any court in respect of any thereof, may be brought in any court of competent jurisdiction in the State of Alabama (or if the Company reincorporates in another state, in that state) or New York, as the Company may elect in its sole discretion, and the Purchaser hereby submits to the non-exclusive jurisdiction of such courts for the purpose of any such suit, action, proceeding or judgment. By the execution and delivery of this Agreement, the Purchaser appoints The Corporation Trust Company, at its office in New York, New York or Montgomery, Alabama (or if the Company reincorporates in another state, an office in that state), as the case may be, as his agent upon which process may be served in any such suit, action or proceeding. Service of process upon such agent, together with notice of such service given to the Purchaser in the manner provided in Section 25 hereof, shall be deemed in every respect effective service of process upon him in any suit, action or proceeding. Nothing herein shall in any way be deemed to limit the ability of the Company to serve any such writs, process or summonses in any other manner permitted by applicable law or to obtain jurisdiction over the Purchaser, in such other jurisdictions and in such manner, as may be permitted by applicable law. The Purchaser hereby irrevocably waives any objections which he may now or hereafter have to the laying of the venue of any suit, action or proceeding arising out of or relating to this Agreement brought in any court of competent jurisdiction in the State of Alabama (or if the Company reincorporates in another state, in that state) or New York, and hereby further irrevocably waives any claim that any such suit, action or proceeding brought in any such court has been brought in any inconvenient forum. No suit, action or proceeding against the Company with respect to this Agreement may be brought in any court, domestic or foreign, or before any similar domestic or foreign authority other than in a court of competent jurisdiction in the State of Alabama (or if the Company reincorporates in another state, in that state) or New York, and the Purchaser hereby irrevocably waives any right which he may otherwise have had to bring such an action in any other court, domestic or foreign, or before any similar domestic or foreign authority. The Company hereby submits to the jurisdiction of such courts for the purpose of any such suit, action or proceeding. 23. Assignability of Certain Rights by the Company. The Company shall have the right to assign any or all of its rights or obligations to purchase shares of Stock pursuant to Sections 4, 5 and 6 hereof; provided, however, that the Company shall remain obligated to perform its obligations notwithstanding such assignment in the event that such assignee fails to perform the obligations so assigned to it. 16 Commission File No. 0-6544 24. Miscellaneous. In this Agreement (i) all references to "dollars" or "$" are to United States dollars and (ii) the word "or" is not exclusive. If any provision of this Agreement shall be declared illegal, void or unenforceable by any court of competent jurisdiction, the other provisions shall not be affected, but shall remain in full force and effect. 25. Notices. All notices and other communications provided for herein shall be in writing and shall be deemed to have been duly given if delivered by hand (whether by overnight courier or otherwise) or sent by registered or certified mail, return receipt requested, postage prepaid, to the Party to whom it is directed: (a) If to the Company, to it at the following address: c/o Kohlberg Kravis Roberts & Co. 2800 Sand Hill Road Suite 200 Menlo Park, California 94025 Attn: James H. Greene, Jr. with a copy to: Simpson Thacher & Bartlett 425 Lexington Avenue New York, New York 10017-3909 Attn: David J. Sorkin, Esq. (b) If to the Purchaser, to him at the address set forth below under his signature; or at such other address as either party shall have specified by notice in writing to the other. 26. Covenant Not to Compete; Confidential Information. (a) In consideration of the Company entering into this Agreement with the Purchaser, the Purchaser hereby agrees effective as of the Purchase Date, for so long as the Purchaser is employed by the Company or one of its subsidiaries and for a period of one year thereafter (the "Noncompete Period"), the Purchaser shall not, directly or indirectly, engage in the production, sale or distribution of any product produced, sold or distributed by the Company or its subsidiaries on the date hereof or during the Noncompete Period anywhere in the world in which the Company or its subsidiaries is doing business other than through the Purchaser's 17 Commission File No. 0-6544 employment with the Company or any of its subsidiaries. At the Company's option, the Noncompete Period may be extended for an additional one year period if (i) within nine months of the termination of the Purchaser's employment, the Company gives the Purchaser notice of such extension and (ii) beginning with the first anniversary of such termination, the Company pays the Purchaser an amount equal to the Purchaser's base salary on the date of the termination of his employment. Such amount shall be paid in installments in a manner consistent with the then current salary payment policies of the Company. For purposes of this Agreement, the phrase "directly or indirectly engage in" shall include any direct or indirect ownership or profit participation interest in such enterprise, whether as an owner, stockholder, partner, joint venturer of otherwise, and shall include any direct or indirect participation in such enterprise as a consultant, licensor of technology or otherwise. (b) The Purchaser will not disclose or use at any time any Confidential Information (as defined below) of which the Purchaser is or becomes aware, whether or not such information is developed by him, except to the extent that such disclosure or use is directly related to and required by the Purchaser's performance of duties, if any, assigned to the Purchaser by the Company. As used in this Agreement, the term "Confidential Information" means information that is not generally known to the public and that is used, developed or obtained by the Company or its subsidiaries in connection with its business, including but not limited to (i) products or services, (ii) fees, costs and pricing structures, (iii) designs, (iv) computer software, including operating systems, applications and program listings, (v) flow charts, manuals and documentation, (vi) data bases, (vii) accounting and business methods, (viii) inventions, devices, new developments, methods and processes, whether patentable or unpatentable and whether or not reduced to practice, (ix) customers and clients and customer or client lists, (x) other copyrightable works, (xi) all technology and trade secrets, and (xii) all similar and related information in whatever form. Confidential Information will not include any information that has been published in a form generally available to the public prior to the date the Purchaser proposes to disclose or use such information. The Purchaser acknowledges and agrees that all copyrights, works, inventions, innovations, improvements, developments, patents, trademarks and all similar or related information which relate to the actual or anticipated business of the Company and its subsidiaries (including its predecessors) and conceived, developed or made by the Purchaser while employed by the Company or its subsidiaries belong to the Company. The Purchaser will perform all actions reasonably requested by the Company (whether during or after the Noncompete Period) to establish and confirm such ownership at the Company's expense (including without limitation assignments, consents, powers of attorney and other instruments). (c) Notwithstanding clauses (a) and (b) above, if at any time a court holds that the restrictions stated in such clauses (a) and (b) are unreasonable or otherwise unenforceable under circumstances then existing, the parties hereto agree that the maximum period, scope or geographic area determined to be reasonable under such circumstances by such court will be substituted for the stated period, scope or area. Because the Purchaser's services are unique and because the Purchaser has had access to Confidential Information, the parties hereto agree that money damages will be an inadequate remedy for any breach of this Agreement. In the event a breach or threatened breach of this Agreement, the Company or its successors or assigns may, in addition to other rights and remedies existing in their favor, apply to any court of competent jurisdiction for specific performance and/or injunctive relief in order to enforce, or 18 Commission File No. 0-6544 prevent andy violations of, the provisions hereof (without the posting of a bond or other security). (d) Notwithstanding the foregoing paragraphs (a), (b) and (c), the provisions of any employment agreement in effect on the date hereof between the Company and Purchaser which contains covenants relating to confidentiality and competition shall supersede and replace the provisions of paragraphs (a), (b) and (c) and shall be deemed incorporated by reference in this Agreement in their entirety. IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date first above written. BRUNO'S, INC. By_________________________________ William J. Bolton Chairman and Chief Executive Officer ___________________________________ ___________________________________ ___________________________________ Address 19 EX-10.40 7 FORM OF NON-QUALIFIED STOCK OPTION AGREEMENT Commission File No. 0-6544 FORM OF NON-QUALIFIED STOCK OPTION AGREEMENT THIS AGREEMENT, dated as of _______________, is made by and between Bruno's, Inc., an Alabama corporation hereinafter referred to as the "Company", and ________, an employee of the Company or a Subsidiary (as defined below) or Affiliate (as defined below) of the Company, hereinafter referred to as "Optionee". WHEREAS, the Company wishes to afford the Optionee the opportunity to purchase shares of its Common Stock, par value $.01 per share (the "Common Stock"); WHEREAS, the Company wishes to carry out the Plan (as hereinafter defined), the terms of which are hereby incorporated by reference and made a part of this Agreement; and WHEREAS, the Committee (as hereinafter defined), appointed to administer the Plan, has determined that it would be to the advantage and best interest of the Company and its stockholders to grant the Non-Qualified Options provided for herein to the Optionee as an incentive for increased efforts during his term of office with the Company or its Subsidiaries or Affiliates, and has advised the Company thereof and instructed the undersigned officers to issue said Options; NOW, THEREFORE, in consideration of the mutual covenants herein contained and other good and valuable consideration, receipt of which is hereby acknowledged, the parties hereto do hereby agree as follows: ARTICLE I DEFINITIONS Whenever the following terms are used in this Agreement, they shall have the meaning specified in the Plan or below unless the context clearly indicates to the contrary. Section 1.1 - Affiliate "Affiliate" shall mean, with respect to the Company, any corporation directly or indirectly controlling, controlled by, or under common control with, the Company or any other entity designated by the Board of Directors of the Company in which the Company or an Affiliate has an interest. 1 Commission File No. 0-6544 Section 1.2 - Cause "Cause" shall mean, except as otherwise provided in an employment agreement between the Company and the Optionee, (i) misconduct by the Optionee involving dishonesty or breach of trust in connection with Optionee's employment or (ii) conduct which (A) would be a reasonable basis for an indictment of a felony or a misdemeanor involving moral turpitude and (B) is reasonably likely to be injurious to the Company. Section 1.3 - Code "Code" shall mean the Internal Revenue Code of 1986, as amended. Section 1.4 - Committee "Committee" shall mean the Compensation Committee of the Company. Section 1.5 - Grant Date "Grant Date" shall mean the date on which the Options provided for in this Agreement were granted. Section 1.6 Management Stockholder's Agreement "Management Stockholder's Agreement" shall mean that certain Management Stockholder's Agreement dated as of ________________ between the Optionee and the Company. Section 1.7 - Options "Options" shall mean the non-qualified options, which may include a Time Option and/or a Performance Option, to purchase Common Stock granted under this Agreement. Section 1.8 - Performance Option "Performance Option" shall mean an Option with respect to which the commencement of exercisability is governed by Section 3.1(c) hereof. Section 1.9 - Permanent Disability The Optionee shall be deemed to have a "Permanent Disability" if the Optionee is unable to engage in the activities required by the Optionee's job by reason of any medically determined physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months. 2 Commission File No. 0-6544 Section 1.10 - Plan "Plan" shall mean the 1996 Stock Purchase and Option Plan for Key Employees of Bruno's, Inc. and Subsidiaries. Section 1.11 - Pronouns The masculine pronoun shall include the feminine and neuter, and the singular the plural, where the context so indicates. Section 1.12 - Retirement "Retirement" shall mean retirement at age 62 or over (or such other age as may be approved by the Board of Directors of the Company) after having been employed by the Company or a Subsidiary for at least three years after the Grant Date. Section 1.13 - Secretary "Secretary" shall mean the Secretary of the Company. Section 1.14 - Subsidiary "Subsidiary" shall mean any corporation in an unbroken chain of corporations beginning with the Company if each of the corporations, or group of commonly controlled corporations (other than the last corporation in the unbroken chain), then owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. Section 1.15- Time Option "Time Option" shall mean an Option with respect to which the commencement of exercisability is governed by Section 3.1(a) hereof. Section 1.16 - Trigger Date "Trigger Date" shall mean _____________ (the date on which the Optionee commenced employment with the Company). 3 Commission File No. 0-6544 ARTICLE II GRANT OF OPTIONS Section 2.1 - Grant of Options For good and valuable consideration, on and as of the date hereof the Company irrevocably grants to the Optionee a Time Option and/or a Performance Option to purchase any part or all of an aggregate of the number of shares set forth with respect to each such Option on the signature page hereof of its $.01 par value Common Stock upon the terms and conditions set forth in this Agreement. Section 2.2 - Exercise Price Subject to Section 2.4, the exercise price of the shares of stock covered by the Options shall be $12 per share without commission or other charge. Section 2.3 - Consideration to the Company In consideration of the granting of these Options by the Company, the Optionee agrees to render faithful and efficient services to the Company or a Subsidiary or Affiliate, with such duties and responsibilities as the Company shall from time to time prescribe. Nothing in this Agreement or in the Plan shall confer upon the Optionee any right to continue in the employ of the Company or any Subsidiary or Affiliate or shall interfere with or restrict in any way the rights of the Company and its Subsidiaries or Affiliates, which are hereby expressly reserved, to terminate the employment of the Optionee at any time for any reason whatsoever, with or without cause. Section 2.4 - Adjustments in Options Pursuant to Merger, Consolidation, etc. Subject to Section 9 of the Plan, in the event that the outstanding shares of the stock subject to an Option are, from time to time, changed into or exchanged for a different number or kind of shares of the Company or other securities of the Company by reason of a merger, consolidation, recapitalization, reclassification, stock split, stock dividend, combination of shares, or otherwise, the Committee shall make an appropriate and equitable adjustment in the number and kind of shares and/or the amount of consideration as to which or for which, as the case may be, such Option, or portions thereof then unexercised, shall be exercisable. Any such adjustment made by the Committee shall be final and binding upon the Optionee, the Company and all other interested persons. 4 Commission File No. 0-6544 ARTICLE III PERIOD OF EXERCISABILITY Section 3.1 - Commencement of Exercisability (a) Time Options shall become exercisable as follows:
Percentage of Time Option Date Time Option Shares Granted As to Which Becomes Exercisable Time Option Is Exercisable - - -------------------------- -------------------------- After the first anniversary of the Trigger Date 20% After the second anniversary of the Trigger Date 40% After the third anniversary of the Trigger Date 60% After the fourth anniversary of the Trigger Date 80% After the fifth anniversary of the Trigger Date 100%
Notwithstanding the foregoing, the Time Option shall become immediately exercisable as to 100% of the shares of Common Stock subject to such Option immediately prior to a Change of Control (but only to the extent such Option has not otherwise terminated or become exercisable). A "Change of Control" means (i) a sale of all or substantially all of the assets of the Company to a Person or Group who is not an Affiliate of Kohlberg Kravis Roberts & Co., L.P. ("KKR"), (ii) a sale by KKR or any of its Affiliates resulting in (A) more than 50% of the voting stock of the Company being held by a Person or Group that does not include KKR or any of its Affiliates and (B) more than 50% of the seats on the Board of Directors of the Company being controlled by or being designees of a party or parties other than KKR or any of its Affiliates, or (iii) a merger or consolidation of the Company into another Person which is not an Affiliate of KKR. "Person" means an individual, partnership, corporation, business trust, joint stock company, trust, unincorporated association, joint venture, governmental authority or other entity of whatever nature. "Group" means two or more Persons acting together as a partnership, limited partnership, syndicate or other group for the purpose of acquiring, holding or disposing of securities of the Company. 5 Commission File No. 0-6544 (c) The Performance Option shall become exercisable with respect to 20% of the shares of Common Stock subject to such Option on each Vesting Date following a Determination Date that the Company's Cumulative EBITDA equals or exceeds the Cumulative EBITDA Target as of such Determination Date and the actual EBITDA for that year equals or exceeds the EBITDA Target for that year. If the Company's EBITDA for a Plan Year is less than 100% of the EBITDA Target for such Plan Year (a "Missed Year"), no such Performance Option shall become exercisable with respect to any additional shares of Common Stock on the Vesting Date for such Plan Year. If, for any Plan Year subsequent to a Missed Year, EBITDA exceeds the EBITDA Target and Cumulative EBITDA exceeds the Cumulative EBITDA Target, then any prior percentage of Performance Options in respect of prior Missed Years shall become exercisable (but only to the extent such Option has not otherwise terminated or become exercisable). Notwithstanding the foregoing, the Performance Option shall become exercisable as to 100% of the shares of Common Stock subject to such Option after seven years after the Trigger Date (but only to the extent such Option has not otherwise terminated or become exercisable). (d) For purposes of Section 3.1(c): (i) "Cumulative EBITDA" means with respect to any Performance Option, the sum of the EBITDA for the Company and its consolidated subsidiaries during the period commencing on January 28, 1996 and ending on the last day of the Plan Year preceding the Determination Date. (ii) "Cumulative EBITDA Targets" means with respect to any Performance Option, the sum of the EBITDA Targets for the period commencing on January 28, 1996 and ending on the last day of the Plan Year preceding the Determination Date. (iii) "Determination Date" means February 15 of each calendar year. (iv) "EBITDA" shall mean, with respect to the Company and its consolidated subsidiaries, net income before net interest expense, income taxes, depreciation and amortization, writedown of property and securities, extraordinary loss on extinguishment of debt, loss on disposal of discontinued operations and loss from operation of discontinued operations. (v) "EBITDA Target" shall have the meaning ascribed to such term in Schedule I hereto for Plan Years 1997 through 2001 and such other targets as are established by the Committee with respect to subsequent Plan Years; provided, that to the extent that the Company or any of its subsidiaries disposes or acquires assets out of the ordinary course of business the Committee will decrease or increase, as the case may be, the EBITDA Target for such dispositions or acquisitions. (vi) "Plan Year" means (i) the period from January 28, 1996 to February 1, 1997 with respect to Plan Year 1997 and (ii) thereafter, the period commencing on the day immediately succeeding the close of the prior Plan Year until the Saturday closest to each January 31st. 6 Commission File No. 0-6544 (vii) "Vesting Date" means August 18th of each calendar year. (e) Notwithstanding the foregoing, no Option shall become exercisable as to any additional shares of Common Stock following the termination of employment of the Optionee for any reason other than a termination of employment because of death, Permanent Disability or Retirement of the Optionee and any Option (other than as provided in the next succeeding sentence) which is non-exercisable as of the Optionee's termination of employment shall be immediately cancelled. In the event of a termination of employment because of such death, Permanent Disability or Retirement, the Time Options (but not the Performance Options) shall immediately become exercisable as to all shares of Common Stock subject thereto. Section 3.2 - Expiration of Options Except as otherwise provided in Section 5 or 6 of the Management Stockholder's Agreement, the Options may not be exercised to any extent by the Optionee after the first to occur of the following events: (a) The tenth anniversary of the Grant Date; or (b) The first anniversary of the date of the Optionee's termination of employment by reason of death, Permanent Disability or Retirement; or (c) The first business day which is fifteen calendar days after the earlier of (i) 75 days after termination of employment of the Optionee for any reason other than for death, Permanent Disability or Retirement or (ii) the delivery of notice by the Company that it does not intend to exercise its call right under Section 6 of the Management Stockholder's Agreement; provided, however, that in any event the Options shall remain exercisable under this subsection 3.2(c) until at least 45 days after termination of employment of the Optionee for any reason other than for death, Permanent Disability or Retirement; or (d) The date the Option is terminated pursuant to Section 5, 6 or 8(b) of the Management Stockholder's Agreement; (e) The date of an Optionee's termination of employment by the Company for Cause; or (f) If the Committee so determines pursuant to Section 9 of the Plan, the effective date of either the merger or consolidation of the Company into another Person, or the exchange or acquisition by another Person of all or substantially all of the Company's assets or 80% or more of its then outstanding voting stock, or the recapitalization, reclassification, liquidation or dissolution of the Company. At least ten (10) days prior to the effective date of such merger, consolidation, exchange, acquisition, recapitalization, reclassification, liquidation or dissolution, the Committee shall give the Optionee notice of such event if the Option has then neither been fully exercised nor become unexercisable under this Section 3.2. 7 Commission File No. 0-6544 ARTICLE IV EXERCISE OF OPTIONS Section 4.1 - Person Eligible to Exercise During the lifetime of the Optionee, only he may exercise an Option or any portion thereof. After the death of the Optionee, any exercisable portion of an Option may, prior to the time when an Option becomes unexercisable under Section 3.2, be exercised by his personal representative or by any person empowered to do so under the Optionee's will or under the then applicable laws of descent and distribution. Section 4.2 - Partial Exercise Any exercisable portion of an Option or the entire Option, if then wholly exercisable, may be exercised in whole or in part at any time prior to the time when the Option or portion thereof becomes unexercisable under Section 3.2; provided, however, that any partial exercise shall be for whole shares of Common Stock only. Section 4.3- Manner of Exercise An Option, or any exercisable portion thereof, may be exercised solely by delivering to the Secretary or his office all of the following prior to the time when the Option or such portion becomes unexercisable under Section 3.2: (a) Notice in writing signed by the Optionee or the other person then entitled to exercise the Option or portion thereof, stating that the Option or portion thereof is thereby exercised, such notice complying with all applicable rules established by the Committee; (b) Full payment (in cash, by check or by a combination thereof) for the shares with respect to which such Option or portion thereof is exercised; (c) A bona fide written representation and agreement, in a form satisfactory to the Committee, signed by the Optionee or other person then entitled to exercise such Option or portion thereof, stating that the shares of stock are being acquired for his own account, for investment and without any present intention of distributing or reselling said shares or any of them except as may be permitted under the Securities Act of 1933, as amended (the "Act"), and then applicable rules and regulations thereunder, and that the Optionee or other person then entitled to exercise such Option or portion thereof will indemnify the Company against and hold it free and harmless from any loss, damage, expense or liability resulting to the Company if any sale or distribution of the shares by such person is contrary to the representation and agreement referred to above; provided, however, that the Committee may, in its absolute discretion, take whatever additional actions it deems appropriate to ensure the observance and performance of such representation and agreement and to effect compliance with the Act and any other federal or state securities laws or regulations; 8 Commission File No. 0-6544 (d) Full payment to the Company of all amounts which, under federal, state or local law, it is required to withhold upon exercise of the Option; and (e) In the event the Option or portion thereof shall be exercised pursuant to Section 4.1 by any person or persons other than the Optionee, appropriate proof of the right of such person or persons to exercise the option. Without limiting the generality of the foregoing, the Committee may require an opinion of counsel acceptable to it to the effect that any subsequent transfer of shares acquired on exercise of an Option does not violate the Act, and may issue stop-transfer orders covering such shares. Share certificates evidencing stock issued on exercise of this Option shall bear an appropriate legend referring to the provisions of subsection (c) above and the agreements herein. The written representation and agreement referred to in subsection (c) above shall, however, not be required if the shares to be issued pursuant to such exercise have been registered under the Act, and such registration is then effective in respect of such shares. Section 4.4 - Conditions to Issuance of Stock Certificates The shares of stock deliverable upon the exercise of an Option, or any portion thereof, may be either previously authorized but unissued shares or issued shares which have then been reacquired by the Company. Such shares shall be fully paid and nonassessable. The Company shall not be required to issue or deliver any certificate or certificates for shares of stock purchased upon the exercise of an Option or portion thereof prior to fulfillment of all of the following conditions: (a) The obtaining of approval or other clearance from any state or federal governmental agency which the Committee shall, in its absolute discretion, determine to be necessary or advisable; and (b) The lapse of such reasonable period of time following the exercise of the Option as the Committee may from time to time establish for reasons of administrative convenience. Section 4.5 - Rights as Stockholder The holder of an Option shall not be, nor have any of the rights or privileges of, a stockholder of the Company in respect of any shares purchasable upon the exercise of the Option or any portion thereof unless and until certificates representing such shares shall have been issued by the Company to such holder. 9 Commission File No. 0-6544 ARTICLE V MISCELLANEOUS Section 5.1 - Administration The Committee shall have the power to interpret the Plan and this Agreement and to adopt such rules for the administration, interpretation and application of the Plan as are consistent therewith and to interpret or revoke any such rules. All actions taken and all interpretations and determinations made by the Committee shall be final and binding upon the Optionee, the Company and all other interested persons. No member of the Committee shall be personally liable for any action, determination or interpretation made in good faith with respect to the Plan or the Options. In its absolute discretion, the Board of Directors may at any time and from time to time exercise any and all rights and duties of the Committee under the Plan and this Agreement. Section 5.2 - Options Not Transferable Except as provided in the Management Stockholder's Agreement, neither the Options nor any interest or right therein or part thereof shall be liable for the debts, contracts or engagements of the Optionee or his successors in interest or shall be subject to disposition by transfer, alienation, anticipation, pledge, encumbrance, assignment or any other means whether such disposition be voluntary or involuntary or by operation of law by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy), and any attempted disposition thereof shall be null and void and of no effect; provided, however, that this Section 5.2 shall not prevent transfers by will or by the applicable laws of descent and distribution. Section 5.3 - Shares to Be Reserved The Company shall at all times during the term of the Options reserve and keep available such number of shares of stock as will be sufficient to satisfy the requirements of this Agreement. Section 5.4 - Notices Any notice to be given under the terms of this Agreement to the Company shall be addressed to the Company in care of its Secretary, and any notice to be given to the Optionee shall be addressed to him at the address given beneath his signature hereto. By a notice given pursuant to this Section 5.4, either party may hereafter designate a different address for notices to be given to him. Any notice which is required to be given to the Optionee shall, if the Optionee is then deceased, be given to the Optionee's personal representative if such representative has previously informed the Company of his status and address by written notice under this Section 5.4. Any notice shall have been deemed duly given when enclosed in a properly sealed envelope or wrapper addressed as aforesaid, deposited (with postage prepaid) in a post office or branch post office regularly maintained by the United States Postal Service. 10 Commission File No. 0-6544 Section 5.5 - Titles Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of this Agreement. Section 5.6 - Applicability of Plan and Management Stockholder's Agreement The Options and the shares of Common Stock issued to the Optionee upon exercise of the Options shall be subject to all of the terms and provisions of the Plan and the Management Stockholder's Agreement, to the extent applicable to the Options and such shares. In the event of any conflict between this Agreement and the Plan, the terms of the Plan shall control. In the event of any conflict between this Agreement or the Plan and the Management Stockholder's Agreement, the terms of the Management Stockholder's Agreement shall control. Section 5.7 - Amendment This Agreement may be amended only by a writing executed by the parties hereto which specifically states that it is amending this Agreement. Section 5.8 - Governing Law The laws of the State of Alabama (or if the Company reincorporates in another state, the laws of that state) shall govern the interpretation, validity and performance of the terms of this Agreement regardless of the law that might be applied under principles of conflicts of laws. Section 5.9 - Jurisdiction Any suit, action or proceeding against the Optionee with respect to this Agreement, or any judgment entered by any court in respect of any thereof, may be brought in any court of competent jurisdiction in the State of Alabama (or if the Company reincorporates in another state, in that state) or New York, as the Company may elect in its sole discretion, and the Optionee hereby submits to the non-exclusive jurisdiction of such courts for the purpose of any such suit, action, proceeding or judgment. The Optionee hereby irrevocably waives any objections which he may now or hereafter have to the laying of the venue of any suit, action or proceeding arising out of or relating to this Agreement brought in any court of competent jurisdiction in the State of Alabama (or if the Company reincorporates in another state, in that state) or New York, and hereby further irrevocably waives any claim that any such suit, action or proceeding brought in any such court has been brought in any inconvenient forum. No suit, action or proceeding against the Company with respect to this Agreement may be brought in any court, domestic or foreign, or before any similar domestic or foreign authority other than in a court of competent jurisdiction in the State of Alabama (or if the Company reincorporates in another state, in that state) or New York, and the Optionee hereby irrevocably waives any right which he may otherwise have had to bring such an action in any other court, domestic or foreign, or before any similar domestic or foreign authority. The Company hereby submits to the jurisdiction of such courts for the purpose of any such suit, action or proceeding. 11 Commission File No. 0-6544 IN WITNESS WHEREOF, this Agreement has been executed and delivered by the parties hereto. BRUNO'S, INC. By:____________________________ _ William J. Bolton Chairman and Chief Executive Officer: Aggregate number of shares of Common Stock for which the Time Option granted hereunder is _________________________ exercisable (50% of total Optionee number of shares): __________ _________________________ _________________________ Address Aggregate number of shares of Common Stock for which the Performance Option granted hereunder is exercisable (50% of total number of shares): Optionee's Taxpayer __________ Identification Number: _________________________ 12 EX-10.41 8 SCHEDULE OF TERMS Schedule of Terms of Management Stockholder's Agreements and Non-Qualified Stock Option Agreements Executed by Walter M. Grant, James J. Hagan and Laura Hayden
Purchase Shares Time Performance Name Date Purchased Options Options ---------- ----------- ----------- ----------- ------------ Walter M. Grant 9/30/96 25,000 (1) 28,125 28,125 James J. Hagan 9/30/96 25,000 (1) 33,333.5 33,333.5 Laura Hayden 9/30/96 15,625 (2) 23,437.5 23,437.5 (1) The purchase price for the shares acquired by Mr. Grant and Mr. Hagan was paid in cash. (2) Ms. Hayden paid one-half of the purchase price for the shares acquired by her in cash and obtained a loan from the Company in an amount equal to the balance of the purchase price. The loan is secured by all of the shares purchased by Ms. Hayden.
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