1
Exhibit 3
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AGREEMENT AND PLAN OF MERGER
BY AND AMONG
RITE AID CORPORATION
OCEAN ACQUISITION CORPORATION
AND
REVCO D.S., INC.
DATED AS OF
NOVEMBER 29, 1995
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TABLE OF CONTENTS
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ARTICLE I THE OFFER AND MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.1 The Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.2 Company Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 1.3 The Merger. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 1.4 Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 1.5 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 1.6 Directors and Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 1.7 Stockholders' Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE II CONVERSION OF SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 2.1 Conversion of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 2.2 Alternative Consideration and Additional
Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 2.3 Issuance of Parent Common Stock or Payment of Cash Consideration . . . . . . . . . . . . . . . . . 15
Section 2.4 Treatment of Stock Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 2.5 Stock Transfer Books . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 2.6 Dissenting Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 3.1 Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 3.2 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 3.3 Corporate Authorization; Validity of Agreement; Company Action . . . . . . . . . . . . . . . . . . 24
Section 3.4 Consents and Approvals; No Violations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 3.5 SEC Reports and Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 3.6 Absence of Certain Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 3.7 No Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 3.8 Information in Proxy Statement/Prospectus. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 3.9 Employee Benefit Plans; ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 3.10 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 3.11 No Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 3.12 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 3.13 Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 3.14 Assets; Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 3.15 Environmental Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 3.16 Reimbursement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 3.17 Labor Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 3.18 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 3.19 Transactions with Affiliates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 3.20 Compliance with Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 3.21 Vote Required . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND
SUB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 4.1 Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 4.2 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 4.3 Corporate Authorization; Validity of Agreement; Necessary Action . . . . . . . . . . . . . . . . . 40
Section 4.4 Consents and Approvals; No Violations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
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Section 4.5 SEC Reports and Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 4.6 Absence of Certain Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 4.7 No Undisclosed Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 4.8 Information in Proxy Statement/Prospectus. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 4.9 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 4.10 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 4.11 Compliance with Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 4.12 No Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Section 4.13 Financing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 4.14 Opinion of Financial Advisor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
ARTICLE V COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 5.1 Interim Operations of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 5.2 Treatment of Certain Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Section 5.3 Access to Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Section 5.4 Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Section 5.5 Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 5.6 No Solicitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Section 5.7 Additional Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 5.8 Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 5.9 Notification of Certain Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 5.10 Directors' and Officers' Insurance and Indemnification . . . . . . . . . . . . . . . . . . . . . . 61
Section 5.11 Rule 145 Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Section 5.12 Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Section 5.13 Proxy Statement/Prospectus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Section 5.14 New York State Real Property Transfer and Gains Taxes. . . . . . . . . . . . . . . . . . . . . . . 64
Section 5.15 Confidentiality/Standstill Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Section 5.16 Stock Exchange Listing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
ARTICLE VI CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Section 6.1 Conditions to the Obligations of Each Party . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
ARTICLE VII TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Section 7.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Section 7.2 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Section 7.3 Termination Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
ARTICLE VIII MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Section 8.1 Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Section 8.2 Finders' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Section 8.3 Amendment and Modification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Section 8.4 Nonsurvival of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Section 8.5 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Section 8.6 Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Section 8.7 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Section 8.8 Entire Agreement; No Third Party Beneficiaries; Rights of Ownership . . . . . . . . . . . . . . . . 72
Section 8.9 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Section 8.10 Specific Performance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
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Section 8.11 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Section 8.12 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Section 8.13 Joint and Several Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Exhibits
Annexes
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AGREEMENT AND PLAN OF MERGER
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AGREEMENT AND PLAN OF MERGER, dated as of November 29, 1995,
by and among Rite Aid Corporation, a Delaware corporation ("Parent"), Ocean
Acquisition Corporation, a Delaware corporation and a wholly owned subsidiary
of Parent ("Sub"), and Revco D.S., Inc., a Delaware corporation (the
"Company").
WHEREAS, the Boards of Directors of Parent, Sub and the
Company have approved, and deem it advisable and in the best interests of their
respective stockholders to consummate, the acquisition of the Company by Parent
upon the terms and subject to the conditions set forth herein;
WHEREAS, it is intended that the acquisition be accomplished
by Sub commencing a cash tender offer for Shares (as defined in Section 1.1) to
be followed by a merger of Sub with and into the Company (the "Merger"), with
the Company being the surviving corporation;
WHEREAS, as a condition and inducement to Parent and Sub
entering into this Agreement and incurring the obligations set forth herein,
concurrently with the execution and delivery of this Agreement, Parent is
entering into a Stockholder Agreement with ▇▇▇▇/Chilmark Fund, L.P. in the form
of Exhibit A hereto (the "▇▇▇▇/Chilmark Stockholder Agreement"), pursuant to
which, among other things, such stockholder has agreed to vote the Shares then
owned by such stockholder in favor of the Merger provided for herein;
WHEREAS, as a condition and inducement to Parent and Sub
entering into this Agreement and incurring the obligations set forth herein,
concurrently with the execution and delivery of this Agreement, Parent and the
Company are entering into a Stock Option Agreement in the form of Exhibit B
hereto (the "Stock Option Agreement"), pursuant to which, among other things,
the Company has granted Parent the right to purchase Shares representing 19.9%
of the outstanding Shares at the date of exercise under certain circumstances;
WHEREAS, the Board of Directors of the Company has approved
the transactions contemplated by this Agreement, the ▇▇▇▇/Chilmark Stockholder
Agreement and the Stock Option Agreement in accordance with the provisions of
Section 203 of the Delaware General Corporation Law (the "DGCL") and has
resolved to recommend the acceptance
0139329.08-01S2a
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of the Offer (as defined in Section 1.1) and the approval of the Merger by the
holders of Shares; and
NOW, THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants and agreements set forth
herein and in the ▇▇▇▇/Chilmark Stockholder Agreement and the Stock Option
Agreement, the parties hereto agree as follows:
ARTICLE I
THE OFFER AND MERGER
Section 1.1 THE OFFER. (a) As promptly as practicable (but
in no event later than five business days after the public announcement of the
execution hereof), Sub shall commence (within the meaning of Rule 14d-2 under
the Securities Exchange Act of 1934, as amended (the "Exchange Act")) an offer
(the "Offer") to purchase for cash not less than 35,144,833 shares and up to
all of the issued and outstanding common stock, par value $.01 per share
(referred to herein as either the "Shares" or "Company Common Stock"), of the
Company at a price of $27.50 per Share, net to the seller in cash (such price,
or such higher price per Share as may be paid in the Offer, being referred to
herein as the "Offer Price"), the exact number of Shares within such range to
be determined by Parent in its sole discretion, it being hereby agreed that
Parent may change the amount of Shares sought to be purchased in the Offer
within such range at any time prior to consummation of the Offer, provided that
Parent complies with the requirements of Rule 14e-1 of the Exchange Act. The
Offer shall be subject to there being validly tendered and not withdrawn prior
to the expiration of the Offer, at least 35,144,833 Shares or such other number
of Shares as shall equal 50.1% of the Shares outstanding on a fully-diluted
basis as of the expiration of the Offer (the "Minimum Condition") and to the
other conditions set forth in Annex A hereto. Sub shall, on the terms and
subject to the prior satisfaction or waiver of the conditions of the Offer,
accept for payment and pay for Shares tendered as soon as practicable after the
later of the satisfaction of the conditions to the Offer and the expiration of
the Offer; PROVIDED, HOWEVER, that no such payment shall be made until after
any calculation of proration as required by applicable
0139329.08-01S2a 2
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law. The obligations of Sub to commence the Offer and to accept for payment
and to pay for any Shares validly tendered on or prior to the expiration of the
Offer and not withdrawn shall be subject only to the conditions set forth in
Annex A hereto. The Offer shall be made by means of an offer to purchase (the
"Offer to Purchase") containing the terms set forth in this Agreement and the
conditions set forth in Annex A hereto. Without the written consent of the
Company, Sub shall not amend or waive the Minimum Condition, decrease the Offer
Price, change the number of Shares sought to an amount less than 50.1% of the
outstanding Shares on a fully-diluted basis, change the form of consideration
to be paid pursuant to the Offer or impose conditions to the Offer in addition
to those set forth in Annex A hereto, or amend any other term or condition of
the Offer in any manner which is adverse to the holders of Shares; provided,
however, that if on the initial scheduled expiration date of the Offer (as it
may be extended in accordance with the terms hereof), all conditions to the
Offer shall not have been satisfied or waived, the Offer may be extended from
time to time without the consent of the Company for such period of time as is
reasonably expected to be necessary to satisfy the unsatisfied conditions. In
addition, the Offer Price may be increased and the Offer may be extended to the
extent required by law in connection with such increase in each case without
the consent of the Company.
(b) Parent and Sub shall file with the United
States Securities and Exchange Commission (the "SEC") as soon as practicable on
the date the Offer is commenced, a Tender Offer Statement on Schedule 14D-1
with respect to the Offer (together with all amendments and supplements thereto
and including the exhibits thereto, the "Schedule 14D-1") which will include,
as exhibits, the Offer to Purchase and a form of letter of transmittal and
summary advertisement (collectively, together with the Schedule 14D-1 and any
amendments and supplements thereto, the "Offer Documents"). Parent and Sub
represent that the Offer Documents will comply in all material respects with
the provisions of applicable federal securities laws and, on the date filed
with the SEC and on the date first published, sent or given to the Company's
stockholders, will not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the
0139329.08-01S2a 3
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circumstances under which they were made, not misleading, except that no
representation is made by Parent or Sub with respect to information supplied by
the Company in writing for inclusion in the Offer Documents. The information
supplied by the Company for inclusion in the Offer Documents will not, on the
date filed with the SEC and on the date first published, sent or given to the
Company's stockholders, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading. Each of Parent and Sub further agrees to take all
steps necessary to cause the Offer Documents to be filed with the SEC and to be
disseminated to holders of Shares, in each case as and to the extent required
by applicable federal securities laws. Each of Parent and Sub, on the one
hand, and the Company, on the other hand, agrees promptly to correct any
information provided by it for use in the Offer Documents if and to the extent
that it shall have become false and misleading in any material respect, and
Parent and Sub further agree to take all steps necessary to cause the Offer
Documents as so corrected to be filed with the SEC and to be disseminated to
holders of Shares, in each case as and to the extent required by applicable
federal securities laws. The Company and its counsel shall be given the
opportunity to review the Schedule 14D-1 and the Offer Documents before they
are filed with the SEC. In addition, Parent and Sub agree to provide the
Company and its counsel in writing with any comments Parent, Sub or their
counsel may receive from time to time from the SEC or its staff with respect to
the Offer Documents promptly after the receipt of such comments. Parent and
Sub will cooperate with the Company in responding to any comments received from
the SEC with respect to the Offer and amending the Offer in response to any
such comments.
Section 1.2 COMPANY ACTIONS.
(a) The Company hereby approves of and consents to
the Offer and represents that the Board of Directors, at a meeting duly called
and held, has unanimously (with one director absent and two directors
abstaining) (i) determined that this Agreement and the transactions
contemplated hereby, including, without limitation, the Offer, the Merger, the
▇▇▇▇/Chilmark
0139329.08-01S2a 4
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Stockholder Agreement, the Stock Option Agreement and the transactions
contemplated thereby, are fair to and in the best interests of the holders of
Shares, (ii) approved this Agreement and the transactions contemplated hereby,
including, without limitation, the Offer and the Merger, and approved the
▇▇▇▇/Chilmark Stockholder Agreement, the Stock Option Agreement and the
transactions contemplated thereby, such determination and approval constituting
approval thereof for purposes of Section 203 of the DGCL, and (iii) resolved to
recommend that the stockholders of the Company who desire to receive cash for
their Shares accept the Offer and tender their Shares thereunder to Sub and
that all stockholders of the Company approve and adopt this Agreement;
provided, however, that prior to the purchase by Sub of Shares pursuant to the
Offer, the Company may modify, withdraw or change such recommendation only to
the extent that the Board of Directors of the Company determines, after having
received the oral or written opinion of outside legal counsel to the Company,
that the failure to so withdraw, modify or change would result in a breach of
the Board of Directors' fiduciary duties under applicable laws.
(b) Concurrently with the commencement of the
Offer, the Company shall file with the SEC a Solicita- tion/Recommendation
Statement on Schedule 14D-9 (together with all amendments and supplements
thereto and including the exhibits thereto, the "Schedule 14D-9") which shall
contain the recommendation referred to in clauses (i), (ii) and (iii) of
Section 1.2(a) hereof; provided, however, that the Company may modify, withdraw
or change such recommendation only to the extent that the Board of Directors of
the Company determines, after having received the oral or written opinion of
outside legal counsel to the Company, that the failure to so withdraw, modify
or change would result in a breach of the Board of Directors' fiduciary duties
under applicable laws and any such withdrawal, change or modification shall not
constitute a breach of this Agreement. The Company represents that the
Schedule 14D-9 will comply in all material respects with the provisions of
applicable federal securities laws and, on the date filed with the SEC and on
the date first published, sent or given to the Company's stockholders, shall
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the
0139329.08-01S2a 5
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circumstances under which they were made, not misleading, except that no
representation is made by the Company with respect to information supplied by
Parent or Sub for inclusion in the Schedule 14D-9. The information supplied by
Parent and Sub for inclusion in the Schedule 14D-9 will not, on the date filed
with the SEC and on the date first published, sent or given to the Company's
stockholders, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading. The Company further agrees to take all steps necessary
to cause the Schedule 14D-9 to be filed with the SEC and to be disseminated to
holders of Shares, in each case as and to the extent required by applicable
federal securities laws. Each of the Company, on the one hand, and Parent and
Sub, on the other hand, agrees promptly to correct any information provided by
it for use in the Schedule 14D-9 if and to the extent that it shall have become
false and misleading in any material respect and the Company further agrees to
take all steps necessary to cause the Schedule 14D-9 as so corrected to be
filed with the SEC and to be disseminated to holders of Shares, in each case as
and to the extent required by applicable federal securities laws. Parent and
its counsel shall be given the opportunity to review the Schedule 14D-9 before
it is filed with the SEC. In addition, the Company agrees to provide Parent,
Sub and their counsel in writing with any comments the Company or its counsel
may receive from time to time from the SEC or its staff with respect to the
Schedule 14D-9 promptly after the receipt of such comments. The Company will
cooperate with Parent and Sub in responding to any comments received from the
SEC with respect to the Schedule 14D-9 and amending the Schedule 14D-9 in
response to any such comments.
(c) In connection with the Offer, if requested by
Sub, the Company will promptly furnish or cause to be furnished to Sub mailing
labels, security position listings and any available listing or computer file
containing the names and addresses of the record holders of the Shares as of a
recent date, and shall furnish Sub with such information and assistance as Sub
or its agents may reasonably request in communicating the Offer to the
stockholders of the Company. Except for such steps as are necessary to
disseminate the Offer
0139329.08-01S2a 6
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Documents, Parent and Sub shall hold in confidence the information contained in
any of such labels and lists and the additional information referred to in the
preceding sentence, will use such information only in connection with the
Offer, and, if this Agreement is terminated, will upon request of the Company
deliver or cause to be delivered to the Company all copies of such information
then in its possession or the possession of its agents or representatives.
(d) The Board of Directors of the Company has
received the written opinion of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. Incorporated ("Company
Financial Advisor"), dated as of a date which is on or prior to the date of
this Agreement, to the effect that, as of such date, the consideration to be
received by holders of Shares (other than Sub and its affiliates) pursuant to
the Offer and Merger, taken together, is fair from a financial point of view to
such holders (the "Company Fairness Opinion"). The Company has delivered to
Sub a copy of the Company Fairness Opinion, together with Company Financial
Advisor's authorization to the inclusion of the Company Fairness Opinion in the
Offer Documents and the Proxy Statement/Prospectus (as defined in Section 1.7).
Section 1.3 THE MERGER. Subject to the terms and
conditions of this Agreement and in accordance with the DGCL at the Effective
Time, the Company and Sub shall consummate a merger (the "Merger") pursuant to
which (i) Sub shall be merged with and into the Company and the separate
corporate existence of Sub shall thereupon cease, and (ii) the Company shall be
the successor or surviving corporation in the Merger (the "Surviving
Corporation") and shall continue to be governed by the laws of the State of
Delaware. Pursuant to the Merger, (x) the Certificate of Incorporation of the
Company, as in effect immediately prior to the Effective Time, shall be the
Certificate of Incorpo- ration of the Surviving Corporation until thereafter
amended as provided by law and such Certificate of Incorporation, and (y) the
By-laws of the Company, as in effect immediately prior to the Effective Time,
shall be the By-laws of the Surviving Corporation until thereafter amended as
provided by law, the Certificate of Incorporation of the Surviving Corporation
and such By-laws. The Merger shall have the effects set forth in the DGCL.
0139329.08-01S2a 7
12
Section 1.4 EFFECTIVE TIME. (a) Parent, Sub and the
Company will cause a Certificate of Merger (the "Certificate of Merger") with
respect to the Merger to be executed and filed on the date of the Closing (as
defined in Section 1.5) (or on such other date as Parent and the Company may
agree) with the Secretary of State of the State of Delaware as provided in the
DGCL. The Merger shall become effective on the date on which the Certificate
of Merger has been duly filed with the Secretary of State or such time as is
agreed upon by the parties and specified in the Certificate of Merger, and such
time is hereinafter referred to as the "Effective Time".
(b) If Shares are purchased in the Offer, Parent
and Sub covenant and agree to consummate the Merger pursuant to the terms of
this Agreement not later than June 30, 1996.
Section 1.5 CLOSING. The closing of the Merger (the
"Closing") will take place at 10:00 a.m., New York City time, on a date to be
specified by the parties, which shall be no later than the third business day
after satisfaction or waiver of all of the conditions set forth in Article VII
hereof (the "Closing Date"), at the offices of Skadden, Arps, Slate, ▇▇▇▇▇▇▇ &
▇▇▇▇, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, unless another time, date or place
is agreed to in writing by the parties hereto.
Section 1.6 DIRECTORS AND OFFICERS. (a) Promptly upon the
acceptance for payment of any Shares by Parent or any of its Subsidiaries (as
defined in Section 3.1 hereof) pursuant to the Offer, Parent shall be entitled
to designate such number of directors, rounded up to the next whole number, on
the Board of Directors of the Company as is equal to the product of the total
number of directors on such Board (giving effect to the directors designated by
Parent pursuant to this sentence) multiplied by the percentage that the
aggregate number of Shares beneficially owned by Sub, Parent and any of their
affiliates bears to the total number of shares of Company Common Stock then
outstanding. The Company shall, upon request of Parent, use its best efforts
promptly either to increase the size of its Board of Directors or, at the
Company's election, secure the resignations of such number of its incumbent
directors as is necessary to enable Parent's designees to be so elected to the
Company's Board, and shall cause Parent's designees to be
0139329.08-01S2a 8
13
so elected. At such time, the Company shall also cause persons designated by
Parent to constitute the same percentage (rounded up to the next whole number)
as is on the Company's Board of Directors of (i) each committee of the
Company's Board of Directors, (ii) each board of directors (or similar body) of
each Subsidiary of the Company and (iii) each committee (or similar body) of
each such board, in each case only to the extent permitted by applicable law or
the rules of any stock exchange on which the Company Common Stock is listed.
Notwithstanding the foregoing, until the Effective Time, each of Parent, Sub
and the Company shall use its best efforts to retain as a member of the
Company's Board of Directors at least two directors who are directors of the
Company on the date hereof (the "Continuing Directors"); PROVIDED, THAT
subsequent to the purchase of and payment for Shares pursuant to the Offer,
Parent shall always have its designees represent at least a majority of the
entire Board of Directors. In the event of a vacancy on the Board of Directors
resulting from the resignation or death of any Continuing Director, such
vacancy shall be filled by the remaining Continuing Directors, or if there are
no remaining Continuing Directors by the designees of ▇▇▇▇/Chilmark Fund, L.P.
The Company's obligations under this Section 1.6(a) shall be subject to Section
14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder. The Company
shall promptly take all actions required pursuant to such Section 14(f) and
Rule 14f-1 in order to fulfill its obligations under this Section 1.6(a),
including mailing to stockholders the information required by such Section
14(f) and Rule 14f-1 as is necessary to enable Parent's designees to be elected
to the Company's Board of Directors. Parent or Sub will supply the Company any
information with respect to either of them and their nominees, officers,
directors and affiliates required by such Section 14(f) and Rule 14f-1. The
provisions of this Section 1.6(a) are in addition to and shall not limit any
rights which Sub, Parent or any of their affiliates may have as a holder or
beneficial owner of Shares as a matter of law with respect to the election of
directors or otherwise.
(b) From and after the time, if any, that Parent's
designees constitute a majority of the Company's Board of Directors and prior
to the Effective Time, (i) any material amendment of this Agreement, (ii) any
termination of this Agreement by the Company, (iii) any exten-
0139329.08-01S2a 9
14
sion of time for performance of any of the obligations of Parent or Sub
hereunder, (iv) any waiver of any condition or any of the Company's rights
hereunder, (v) any amendment or change to the Certificate of Incorporation or
By-laws of the Company or any of its Subsidiaries, (vi) any amendment or change
to any Benefit Plan (as defined in Section 3.9(a)) or compensation policies or
severance obligations (including those agreements or obligations referenced in
Section 3.9 hereof or set forth in Schedule 3.9 of the Company Disclosure
Schedule) or (vii) any amendment or change to the policies of directors' and
officers' liability insurance maintained by the Company and its Subsidiaries on
the date hereof, may be effected only by the action of a majority of the Board
of Directors of the Company, which majority includes a majority of the
Continuing Directors; PROVIDED, THAT if there shall be no Continuing Directors,
actions may be effected by majority vote of the entire Board of Directors of
the Company. Any actions with respect to the enforcement of this Agreement by
the Company shall be effected only by the action of a majority of the
Continuing Directors.
(c) The directors and officers of Sub at the
Effective Time shall, from and after the Effective Time, be the initial
directors and officers of the Surviving Corporation until their successors
shall have been duly elected or appointed or qualified or until their earlier
death, resignation or removal in accordance with the Surviving Corporation's
Certificate of Incorporation and By-laws.
Section 1.7 STOCKHOLDERS' MEETINGS. (a) In order to
consummate the Merger, the Company, acting through its Board of Directors,
shall, in accordance with applicable law, duly call, give notice of, convene
and hold a special meeting of its stockholders (the "Company Special Meeting"),
as soon as practicable after the registration statement on Form S-4 (together
with all amendments, schedules, and exhibits thereto) to be filed by Parent in
connection with the registration of the Parent Common Stock to be issued by
Parent in the Merger (the "Registration Statement") is declared effective, for
the purpose of considering and taking action upon this Agreement. The Company
shall include in the joint proxy statement/prospectus forming a part of the
Registration Statement (the "Proxy Statement/Prospectus") the recommendation of
the Board of Directors of the Company that
0139329.08-01S2a 10
15
stockholders of the Company vote in favor of the approval of the Merger and the
adoption of this Agreement. Parent agrees that it will vote, or cause to be
voted, all of the Shares then owned by it, Sub or any of its other
Subsidiaries, in favor of the approval of the Merger and adoption of the Merger
Agreement at the Company Special Meeting.
(b) In order to consummate the Merger, Parent,
acting through its Board of Directors, shall, in accordance with applicable
law, duly call, give notice of, convene and hold a special meeting of its
stockholders (the "Parent Special Meeting" and together with the Company
Special Meeting, the "Special Meetings"), as soon as practicable after the
Registration Statement is declared effective, for the purpose of authorizing
the issuance of shares of Parent Common Stock (as defined below) pursuant to
the Merger. Parent shall include in the Proxy Statement/Prospectus the
recommendation of the Board of Directors of Parent that stockholders of Parent
vote in favor of the issuance of shares of Parent common stock, par value $1.00
per share ("Parent Common Stock"), in the Merger.
(c) Nothing in this Section 1.7 is intended to
impair the fiduciary duties of the Boards of Directors of the Company or Parent
or, in the case of the Board of Directors of the Company, to restrict its
ability to exercise its right of termination pursuant to Section 7.1(c)(1) of
this Agreement.
ARTICLE II
CONVERSION OF SHARES
Section 2.1 CONVERSION OF SHARES. (a) Each share of Common
Stock, par value $.01 per share, of Sub issued and outstanding immediately
prior to the Effective Time, without any other action by Parent, Sub or the
Company, shall, at the Effective Time, be converted into and become one fully
paid and nonassessable share of common stock of the Surviving Corporation.
(b) Each share of Company Common Stock issued and
outstanding immediately prior to the Effective Time (other than Shares to be
cancelled pursuant to Section 2.1(d) hereof and other than Dissenting Shares
0139329.08-01S2a 11
16
(as defined in Section 2.6), if any) shall, at the Effective Time, by virtue of
the Merger and without any action on the part of the holder thereof, be
converted into either (i) the right to receive a number of duly authorized,
validly issued, fully paid and nonassessable shares of Parent Common Stock
determined as set forth in clause (c) below; PROVIDED that Parent shall not
issue more than 1.12500 nor less than .91666 shares of Parent Common Stock per
Share (the "Exchange Ratio") or (ii) if the alternative consideration
contemplated by Section 2.2 hereof is applicable, then the right to receive the
Alternative Consideration (as defined in Section 2.2), plus, in each of clause
(i) and (ii) above, any Additional Consideration contemplated by Section 2.2
hereof.
(c) For purposes hereof, "Average Parent Share Price"
shall mean the average closing price per share of Parent Common Stock on the
New York Stock Exchange (the "NYSE") as reported on the NYSE Composite Tape for
fifteen NYSE trading days selected by Parent and the Company by lot from among
the forty NYSE trading days ending on the fifth trading day immediately
preceding the Company Special Meeting. "Transaction Price" shall mean $27.50
per Share. The number of shares of Parent Common Stock into which each Share
shall be converted in the Merger shall be determined as follows:
1. In the event the Average Parent Share Price equals
the Transaction Price, each Share shall be converted into one share of Parent
Common Stock.
2. In the event that the Average Parent Share Price is
greater than the Transaction Price, each Share shall be converted into a number
of shares of Parent Common Stock (rounded to the nearest one one-hundred
thousandth) determined by the following formula:
Number of shares of Transaction Price plus .5 x (Average
Parent Common Stock = Parent Share Price Minus Transaction Price)
------------------------------------------------
Average Parent Share Price
3. In the event that the Average Parent Share Price is
less than the Transaction Price, each Share shall be converted, at the option
of Parent, into either:
0139329.08-01S2a 12
17
(I) a number of shares of Parent Common Stock (rounded to the nearest one
one-hundred thousandth) determined by the following formula:
Number of shares of Transaction Price minus .5 x (Transaction
Parent Common Stock = Price minus Average Parent Share Price)
-------------------------------------------
Average Parent Share Price
or (II) one share of Parent Common Stock plus the Cash Adjustment Amount,
without any interest thereon, where the Cash Adjustment Amount is determined by
the following formula:
Cash Adjust- = .5 x (Transaction Price minus
ment Amount Average Parent Share Price);
PROVIDED, HOWEVER, in no event shall the Cash Adjustment Amount be greater than
$2.75 per Share.
(d) All shares of Company Common Stock that are
owned by the Company as treasury stock and any shares of Company Common Stock
owned by Parent, Sub or any other direct or indirect wholly owned Subsidiary of
Parent shall, at the Effective Time, be cancelled and retired and shall cease
to exist and no Parent Common Stock or cash, if the alternative consideration
contemplated by Section 2.2 hereof is applicable, shall be delivered in
exchange therefor.
(e) On and after the Effective Time, holders of
certificates which immediately prior to the Effective Time represented
outstanding Shares (the "Certificates") shall cease to have any rights as
stockholders of the Company, except the right to receive the consideration set
forth in this Article II (other than the Additional Consideration provided by
Section 2.2(c) hereof) (the "Merger Consideration") for each Share held by them
or, if applicable, payments due to holders of Dissenting Shares (as defined in
Section 2.6 hereof).
Section 2.2 ALTERNATIVE CONSIDERATION AND ADDITIONAL
CONSIDERATION. (a) In the event that the stockholders of Parent shall not
approve the issuance of Parent Common Stock pursuant to the Merger at the
Parent Special Meeting, but all conditions to the Merger are otherwise
satisfied or waived (if permissible), the
0139329.08-01S2a 13
18
Company, Parent and Sub shall nonetheless consummate the Merger and each share
of Company Common Stock issued and outstanding immediately prior to the
Effective Time (other than treasury Shares and Shares owned by Parent and its
Subsidiaries) shall, at the Effective Time, by virtue of the Merger and
without any action on the part of the holder hereof, be converted into the
right to receive the following consideration (the "Alternative Consideration")
in a combination of shares of Parent Common Stock and cash determined as
follows:
1. The number of shares of Parent Common Stock into
which each Share shall be converted in the Merger (the "Adjusted Exchange
Ratio") shall equal the Exchange Ratio determined pursuant to Section 2.1(c)
hereof (assuming no Cash Adjustment Amount is paid) multiplied by a fraction
(the "Adjustment Fraction"), the numerator of which is the number of shares of
Parent Common Stock equal to 19.9% of the then outstanding shares of Parent
Common Stock and the denominator of which is (a) the Exchange Ratio multiplied
by (b) the aggregate number of outstanding Shares (other than treasury Shares
and Shares owned by Parent and its Subsidiaries); and
2. The amount of cash (the "Adjusted Alternative
Cash Consideration") into which each Share shall be converted in the Merger
shall equal the Transaction Price multiplied by 1 minus the Adjustment
Fraction.
(b) In the event the Merger is not consummated
prior to April 29, 1996 and the Company shall not have materially breached this
Agreement (other than by acts caused or permitted by Parent), then the
stockholders of the Company shall be entitled to receive interest on the amount
of the Merger Consideration that they receive, from April 29, 1996 until the
earlier of the Effective Time or June 30, 1996, calculated at an annual rate
equal to the prime rate of interest (as announced from time to time by ▇▇▇▇▇▇
Guaranty Trust Company of New York). For purposes of calculating the Merger
Consideration, the Average Parent Share Price, if not otherwise ascertainable
in accordance with the terms of this Agreement, shall be the average price of
Parent Common Stock based on the 15 highest closing prices of Parent Common
Stock since the consummation of the Offer until the earlier of June 30, 1996 or
the Effective Time.
0139329.08-01S2a 14
19
(c) In the event Parent and/or Sub, in violation
of their obligations under this Agreement, fails or refuses to consummate the
Merger on or prior to June 30, 1996 and the Company shall not have materially
breached this Agreement (other than by acts caused or permitted by Parent),
then, in addition to any rights or remedies that the Company and its
stockholders otherwise have in law or at equity as a result thereof, the
stockholders of the Company shall be entitled to receive interest from June 30,
1996 on the amount of the Merger Consideration not paid until such Merger
Consideration is paid, calculated at the annual rate of the higher of (i) the
prime rate of interest (as announced from time to time by ▇▇▇▇▇▇ Guaranty Trust
Company of New York) plus 300 basis points or (ii) the amount otherwise
permitted by law. For purposes of calculating the Merger Consideration, the
Average Parent Share Price, if not otherwise ascertainable in accordance with
the terms of this Agreement, shall be the average price of Parent Common Stock
based on the 15 highest closing prices of Parent Common Stock since the
consummation of the Offer until such Merger Consideration is paid. Any
additional consideration paid or payable pursuant to Section 2.2(b) or Section
2.2(c) is referred to herein as "Additional Consideration".
Section 2.3 ISSUANCE OF PARENT COMMON STOCK OR PAYMENT OF
CASH CONSIDERATION. (a) The manner in which each Share (other than Shares to
be cancelled as set forth in Section 2.1(d)) shall be converted into Parent
Common Stock or, if the Alternative Consideration contemplated by Section 2.2
hereof is applicable, the right to receive the Alternative Consideration in the
Merger shall be as set forth in this Section 2.3.
(b) No certificates or scrip representing
fractional shares of Parent Common Stock shall be issued upon the surrender for
exchange of Certificates representing Shares, no dividend or distribution with
respect to shares shall be payable on or with respect to any fractional share
and such fractional share interests shall not entitle the owner thereof to vote
or to any other rights of a stockholder of Parent. In lieu of any such
fractional share of Parent Common Stock, Parent shall pay to each former
stockholder of the Company who otherwise would be entitled to receive a
fractional share of Parent Common Stock an amount in cash determined by
0139329.08-01S2a 15
20
multiplying (i) the Average Parent Share Price on the date on which the
Effective Time occurs by (ii) the fractional interest in a share of Parent
Common Stock to which such holder would otherwise be entitled.
(c) Parent shall designate a bank or trust company
to act as agent for the holders of shares of Company Common Stock in connection
with the Merger (the "Exchange Agent") to receive the shares of Parent Common
Stock and the Cash Adjustment Amount, if any, or the Alternative Consideration,
as the case may be, and any Additional Consideration to which holders of shares
of Company Common Stock shall become entitled pursuant to this Article II.
(d) As soon as reasonably practicable after the
Effective Time, the Exchange Agent shall mail to each holder of record of a
Certificate whose shares were converted pursuant to this Article II into the
right to receive the Merger Consideration (i) a letter of transmittal (which
shall specify that delivery shall be effected, and risk of loss and title to
the Certificates shall pass, only upon delivery of the Certificates to the
Exchange Agent and shall be in such form and have such other provisions as
Parent may reasonably specify) and (ii) instructions for use in effecting the
surrender of the Certificates in exchange for the Merger Consideration and any
Additional Consideration contemplated by Section 2.2(c). Upon surrender of a
Certificate for cancellation to the Exchange Agent or to such other agent or
agents as may be appointed by Parent, together with such letter of transmittal,
duly executed, the holder of such Certificate shall be entitled to receive in
exchange therefor the Merger Consideration and any Additional Consideration
contemplated by Section 2.2(c) for each share of Company Common Stock formerly
represented by such Certificate and the Certificate so surrendered shall
forthwith be cancelled. If payment of the Merger Consideration and any
Additional Consideration contemplated by Section 2.2(c) is to be made to a
person other than the person in whose name the surrendered Certificate is
registered, it shall be a condition of payment that the Certificate so
surrendered shall be properly endorsed or shall be otherwise in proper form for
transfer and that the person requesting such payment shall have paid any
transfer and other taxes required by reason of the payment of the Merger
Consideration and any Additional Consideration contemplated by
0139329.08-01S2a 16
21
Section 2.2(c) to a person other than the registered holder of the Certificate
surrendered or shall have established to the satisfaction of the Surviving
Corporation that such tax either has been paid or is not applicable.
(e) Immediately following the Effective Time,
Parent shall deliver, in trust, to the Exchange Agent, for the benefit of the
holders of Shares, (i) certificates representing an aggregate number of shares
of Parent Common Stock as nearly as practicable equal to the product of the
Exchange Ratio and the number of Shares to be converted into Parent Common
Stock as determined by this Article II plus, if applicable, the Cash Adjustment
Amount multiplied by the number of Shares to be converted into Parent Common
Stock as determined by this Article II or (ii) if the Alternative Consideration
contemplated by Section 2.2 hereof is applicable, certificates representing an
aggregate number of shares of Parent Common Stock as nearly as practicable
equal to the product of the Adjusted Exchange Ratio and the number of Shares to
be converted into Parent Common Stock as determined by this Article II, plus an
amount of cash equal to the product of the Adjusted Alternative Cash
Consideration and the number of Shares to be converted into the Adjusted
Alternative Cash Consideration pursuant to this Article II. In addition,
Parent shall deliver to the Exchange Agent the aggregate amount of any
Additional Consideration to be paid to holders of Shares. As soon as
practicable after the Effective Time, each holder of Shares converted into
Parent Common Stock (plus the Cash Adjustment Amount, if applicable or any
Additional Consideration, if applicable) or cash pursuant to this Article II,
upon surrender to the Exchange Agent of one or more Certificates for such
Shares for cancellation, shall be entitled to receive either certificates
representing the number of shares of Parent Common Stock into which such Shares
shall have been converted in the Merger (plus the Cash Adjustment Amount, if
applicable, or any Additional Consideration, if applicable) or, in case the
Alternative Consideration contemplated by Section 2.2 is applicable the cash
(including any Additional Consideration, if applicable) and certificates
representing the number of shares of Parent Common Stock into which such Shares
shall have been converted in the Merger. No dividends or distributions that
have been declared will be paid to persons entitled to receive certificates for
0139329.08-01S2a 17
22
shares of Parent Common Stock until such persons surrender their Certificates
for Shares, at which time all such dividends shall be paid. In no event shall
the persons entitled to receive such dividends be entitled to receive interest
on such dividends. Notwithstanding the foregoing, neither the Exchange Agent
nor any party hereto shall be liable to a holder of Shares for any Parent
Common Stock, Alternative Consideration or dividends thereon delivered to a
public official pursuant to any applicable abandoned property, escheat or
similar law.
(f) At any time following nine months after the
Effective Time, the Surviving Corporation shall be entitled to require the
Exchange Agent to deliver to it any shares of Parent Common Stock or funds
(including any interest received with respect thereto) which had been made
available to the Exchange Agent and which have not been disbursed to holders of
Certificates, and thereafter such holders shall be entitled to look to the
Surviving Corporation and Parent (subject to abandoned property, escheat or
other similar laws) only with respect to the Merger Consideration payable or
issuable upon due surrender of their Certificates, without any interest
thereon.
Section 2.4 TREATMENT OF STOCK OPTIONS. (a) Effective as
of the Effective Time, each option granted by the Company to purchase shares of
Company Common Stock that is outstanding and unexercised immediately prior
thereto (the "Company Stock Options"), shall cease to represent a right to
acquire shares of Company Common Stock and shall be converted automatically
into an option to purchase shares of Parent Common Stock in an amount and at an
exercise price determined as provided below (and otherwise subject to the terms
of the Company 1992 Long-Term Incentive Compensation Plan, as amended and the
Company 1992 Non-Employee Directors' Stock Option Plan, as amended (together
the "Option Plans"), and the agreements evidencing grants thereunder). The
number of shares of Parent Common Stock subject to, and the option price and
terms and conditions of, the new option shall be determined in a manner that
preserves both (i) the aggregate gain (or loss) on the Company Stock Option
immediately prior to the Effective Time and (ii) the ratio of the exercise
price per share subject to the Company Stock Option to the fair market value
(determined immediately prior to the Effective Time) per share sub-
0139329.08-01S2a 18
23
ject to such option, provided that any fractional shares of Parent Common Stock
resulting from such determination shall be rounded down to the nearest share.
Effective as of the Effective Time, the Surviving Corporation shall assume each
Company Stock Option agreement, each as amended, as provided herein. The
adjustment provided herein with respect to any Company Stock Options that are
"incentive stock options" (as defined in section 422 of the Code) shall be and
is intended to be effected in a manner that is consistent with section 424(a)
of the Code. The duration, vesting and other terms of the new options shall be
the same as the Company Stock Options that they replace, except that all
references to the Company shall be deemed to be references to Parent. In the
event that a holder of a Company Stock Option is terminated without Cause (as
defined in Section 5.5(a) of this Agreement) within 12 months of the Effective
Time, then such holder's new option shall become 100% exercisable as of such
date of termination.
(b) Notwithstanding Section 2.4(a) above, outstanding
vested options under the Long Term Incentive Plan (LTIP) held by Covered
Executives (as defined in Section 5.5(a) hereof), including options that become
vested in connection with a "Change in Control" under the terms of existing
award agreements under the LTIP, shall, effective as of the Effective Time
become exercisable under a cashless exercise procedure made available by the
Company (subject to applicable law and any administrative procedures and
policies deemed appropriate by the Company). Individuals subject to Section 16
of the Exchange Act shall be provided with a cash compensation arrangement
providing such individuals with the opportunity to receive a cash payment
approximating the benefits that would be deprived by reason of Section 16 of
the Exchange Act.
(c) Effective as of the Effective Time, the Options
Plans shall terminate and the provisions in any other plan, program, agreement
or arrangement, providing for the issuance or grant of any other interest in
respect of the capital stock of the Company or any of its Subsidiaries shall be
deleted. Furthermore, the Company shall take all actions necessary to ensure
that following the Effective Time, no holder of Company Stock Options or any
participant in the Option Plans or any other plans, programs, agreements or
arrangements shall have any right
0139329.08-01S2a 19
24
thereunder to acquire any equity securities of the Company, the Surviving
Corporation or any subsidiary of either of the foregoing.
Section 2.5 STOCK TRANSFER BOOKS. At the Effective Time,
the stock transfer books of the Company shall be closed and there shall be no
further registration of transfers of Shares on the records of the Company. If,
after the Effective Time, Certificates representing Shares are presented to the
Surviving Corporation, they shall be cancelled and exchanged for cash or
certificates representing Parent Common Stock pursuant to this Article II.
Section 2.6 DISSENTING SHARES. Notwithstanding anything in
this Agreement to the contrary, in the event the Alternative Consideration or
any Additional Consideration contemplated by Section 2.2 hereof is applicable
or in the event that Parent elects to pay any Cash Adjustment Amount, Shares
which immediately prior to the Effective Time are held by stockholders who have
properly exercised and perfected appraisal rights under Section 262 of the DGCL
(the "Dissenting Shares"), shall not be converted into the right to receive the
Merger Consideration, but the holders of Dissenting Shares shall be entitled to
receive such consideration as shall be determined pursuant to Section 262 of
the DGCL; provided, however, that if any such holder shall have failed to
perfect or shall withdraw or lose his right to appraisal and payment under the
DGCL, such holder's Shares shall thereupon be deemed to have been converted as
of the Effective Time into the right to receive the Merger Consideration,
without any interest thereon, and such Shares shall no longer be Dissenting
Shares.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Sub as
follows:
Section 3.1 ORGANIZATION. Each of the Company and its
Subsidiaries is a corporation, partnership or other entity duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation or organization, and has all requisite corporate
0139329.08-01S2a 20
25
or other power and authority and all necessary governmental approvals to own,
lease and operate its properties and to carry on its business as now being
conducted, except where the failure to be so organized, existing and in good
standing or to have such power, authority and governmental approvals would not
have a material adverse effect on the Company and its Subsidiaries taken as a
whole. Each of the Company and its Subsidiaries is duly qualified or licensed
to do business and in good standing in each jurisdiction in which the property
owned, leased or operated by it or the nature of the business conducted by it
makes such qualification or licensing necessary, except where the failure to be
so duly qualified or licensed and in good standing would not, in the aggregate,
have a material adverse effect on the Company and its Subsidiaries taken as a
whole. As used in this Agreement, the word "Subsidiary" means, with respect to
any party, any corporation or other organization, whether incorporated or
unincorporated, of which (i) such party or any other Subsidiary of such party
is a general partner (excluding such partnerships where such party or any
Subsidiary of such party do not have a majority of the voting interest in such
partnership) or (ii) at least a majority of the securities or other interests
having by their terms ordinary voting power to elect a majority of the Board of
Directors or others performing similar functions with respect to such
corporation or other organization is directly or indirectly owned or controlled
by such party or by any one or more of its Subsidiaries, or by such party and
one or more of its Subsidiaries. As used in this Agreement, any reference to
any event, change or effect having a material adverse effect on or with respect
to any entity (or group of entities taken as a whole) means such event, change
or effect, individually or in the aggregate with such other events, changes, or
effects, which is materially adverse to the financial condition, business,
results of operations, assets, liabilities, properties or prospects of such
entity. If "material adverse effect" is used with respect to more than one
entity, it shall mean such events, changes or effects with respect to all such
entities taken as a whole. Section 3.1 of the Disclosure Schedule delivered by
the Company to Parent on or prior to the date hereof (the "Company Disclosure
Schedule") sets forth a complete list of the Company's Subsidiaries.
0139329.08-01S2a 21
26
Section 3.2 CAPITALIZATION. (a) The authorized capital
stock of the Company consists of 100,000,000 Shares and 25,000,000 shares of
preferred stock, par value $.01 per share (the "Preferred Stock"). As of the
date hereof, (i) 66,587,990 shares of Company Common Stock are issued and
outstanding, 700,000 shares of Company Common Stock are held in the Company's
treasury, 1,096,101 shares of Company Common Stock are reserved for issuance
under the Company's 401(k) Savings Plan, 2,002,220 shares of Company Common
Stock are reserved for issuance under the Company's 1993 Employee Stock
Purchase Plan and 3,561,377 shares of Company Common Stock are reserved for
issuance pursuant to options previously granted pursuant to the Company Stock
Option Plans, (ii) no shares of Preferred Stock are issued and outstanding, and
(iii) no Shares or shares of Preferred Stock are issued and held in the
treasury of the Company. All the outstanding shares of the Company's capital
stock are, and all shares which may be issued pursuant to the Company Stock
Option Plans will be, when issued in accordance with the respective terms
thereof, duly authorized, validly issued, fully paid and non-assessable.
Except as disclosed in Section 3.2(a) of the Company Disclosure Schedule, there
are no bonds, debentures, notes or other indebtedness having voting rights (or
convertible into securities having such rights) ("Voting Debt") of the Company
or any of its Subsidiaries issued and outstanding. Except as set forth above
and except for the transactions contemplated by this Agreement and the Stock
Option Agreement, as of the date hereof, (i) there are no shares of capital
stock of the Company authorized, issued or outstanding and (ii) there are no
existing options, warrants, calls, pre-emptive rights, subscriptions or other
rights, convertible securities, agreements, arrangements or commitments of any
character, relating to the issued or unissued capital stock of the Company or
any of its Subsidiaries, obligating the Company or any of its Subsidiaries to
issue, transfer or sell or cause to be issued, transferred or sold any shares
of capital stock or Voting Debt of, or other equity interest in, the Company or
any of its Subsidiaries or securities convertible into or exchangeable for such
shares or equity interests or obligations of the Company or any of its
Subsidiaries to grant, extend or enter into any such option, warrant, call,
subscription or other right, convertible security, agreement, arrangement or
commitment. Except as disclosed in
0139329.08-01S2a 22
27
Section 3.2(a) of the Company Disclosure Schedule, there are no outstanding
contractual obligations of the Company or any of its Subsidiaries to
repurchase, redeem or otherwise acquire any Shares or the capital stock of the
Company or any subsidiary or affiliate of the Company or to provide funds to
make any investment (in the form of a loan, capital contribution or otherwise)
in any Subsidiary or any other entity. Except as permitted by this Agreement,
following the Merger, neither the Company nor any of its Subsidiaries will have
any obligation to issue, transfer or sell any shares of its capital stock
pursuant to any employee benefit plan or otherwise.
(b) Except as disclosed in Section 3.2(b) of the
Company Disclosure Schedule, all of the outstanding shares of capital stock of
each of the Subsidiaries are beneficially owned by the Company, directly or
indirectly, and all such shares have been validly issued and are fully paid and
nonassessable and are owned by either the Company or one of its Subsidiaries
free and clear of all liens, charges, security interests, options, claims or
encumbrances of any nature whatsoever.
(c) Except for the ▇▇▇▇/Chilmark Stockholder
Agreement, there are no voting trusts or other agreements or understandings to
which the Company or any of its Subsidiaries is a party with respect to the
voting of the capital stock of the Company or any of the Subsidiaries. None of
the Company or its Subsidiaries is required to redeem, repurchase or otherwise
acquire shares of capital stock of the Company, or any of its Subsidiaries,
respectively, as a result of the transactions contemplated by this Agreement.
The Company has delivered to Parent a letter agreement which causes the
termination, as of the consummation of the Offer, of the Stockholder Agreement
by and between ▇▇▇▇/Chilmark and the Company dated as of June 1, 1992 the
Registration Rights Agreement by and between ▇▇▇▇/Chilmark Fund, L.P. and the
Company dated as of June 1, 1992 and the Registration Rights Agreement by and
between Magten Asset Management Corporation ("Magten") and the Company, dated
as of January 20, 1993 (such agreements being referred to herein as the
"Existing Company/Stockholder Agreements").
(d) At the Effective Time, the number of shares of Company Common Stock
outstanding shall not exceed 73,247,688.
0139329.08-01S2a 23
28
Section 3.3 CORPORATE AUTHORIZATION; VALIDITY OF AGREEMENT;
COMPANY ACTION. (a) The Company has full corporate power and authority to
execute and deliver this Agreement and the Stock Option Agreement, and, subject
to obtaining any necessary approval of its stockholders as contemplated by
Section 1.7(a) hereof with respect to the Merger, to consummate the
transactions contemplated hereby and thereby. The execution, delivery and
performance by the Company of this Agreement and the Stock Option Agreement,
and the consummation by it of the transactions contemplated hereby and thereby,
have been duly and validly authorized by its Board of Directors and, except in
the case of this Agreement for obtaining the approval of its stockholders as
contemplated by Section 1.7(a) hereof with respect to the Merger, no other
corporate action or proceedings on the part of the Company is necessary to
authorize the execution and delivery by the Company of this Agreement and the
Stock Option Agreement, and the consummation by it of the transactions
contemplated hereby and thereby. This Agreement and the Stock Option Agreement
has been duly executed and delivered by the Company and, assuming this
Agreement and the Stock Option Agreement constitutes a valid and binding
obligation of Parent and Sub, constitutes a valid and binding obligation of the
Company enforceable against the Company in accordance with its terms, except
that (i) such enforcement may be subject to applicable bankruptcy, insolvency
or other similar laws, now or hereafter in effect, affecting creditors' rights
generally, and (ii) the remedy of specific performance and injunctive and other
forms of equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor may be brought.
(b) The Board of Directors of the Company has duly
and validly approved and taken all corporate action required to be taken by the
Board of Directors for the consummation of the transactions contemplated by
this Agreement (including, without limitation, the Offer, the acquisition of
Shares pursuant to the Offer and the Merger, the Stock Option Agreement, the
▇▇▇▇/Chilmark Stockholder Agreement and the termination of the Existing
Company/Stockholder Agreements), including, but not limited to, all actions
necessary to render the provisions of Section 203 of the DGCL inapplicable to
such transactions.
0139329.08-01S2a 24
29
Section 3.4 CONSENTS AND APPROVALS; NO VIOLATIONS. Except
as disclosed in Section 3.4 of the Company Disclosure Schedule, and except for
all filings, permits, authorizations, consents and approvals as may be required
under, and other applicable requirements of, the Exchange Act, the DGCL, the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), and for the approval of this Agreement by the Company's stockholders and
the filing and recordation of the Certificate of Merger as required by the
DGCL, neither the execution, delivery or performance of this Agreement and the
Stock Option Agreement, nor the consummation by the Company of the transactions
contemplated hereby or thereby nor compliance by the Company with any of the
provisions hereof or thereof will (i) conflict with or result in any breach of
any provision of the certificate of incorporation or by-laws or similar
organizational documents of the Company or of any of its Subsidiaries, (ii)
require any filing with, or permit, authorization, consent or approval of, any
court, arbitral tribunal, administrative agency or commission or other
governmental or other regulatory authority or agency (a "Governmental Entity"),
except where the failure to obtain such permits, authorizations, consents or
approvals or to make such filings would not have a material adverse effect on
the Company and its Subsidiaries and would not, or would not be reasonably
likely to, materially impair the consummation of the Offer or the ▇▇▇▇/Chilmark
Stockholder Agreement or the Stock Option Agreement or the ability of the
Company to consummate the Merger or the other transactions contemplated hereby
or thereby, (iii) result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right of termination, amendment, cancellation or acceleration) under, any of
the terms, conditions or provisions of any note, bond, mortgage, indenture,
guarantee, other evidence of indebtedness (collectively, the "Debt
Instruments"), lease, license, contract, agreement or other instrument or
obligation to which the Company or any of its Subsidiaries is a party or by
which any of them or any of their properties or assets may be bound and which
either has a term of more than one year or involves the payment or receipt of
money in excess of $300,000 (a "Company Agreement") or (iv) violate any order,
writ, injunction, decree, statute, rule or regulation applicable to the
Company, any of its Subsidiaries or any of their properties or assets, except
in the case
0139329.08-01S2a 25
30
of clause (iii) or (iv) for such violations, breaches or defaults which would
not, individually or in the aggregate, have a material adverse effect on the
Company and its Subsidiaries, and which would not, or would not be reasonably
likely to, materially impair the consummation of the Offer, the Stock Option
Agreement or the ▇▇▇▇/Chilmark Stockholder Agreement or the ability of the
Company to consummate the Merger or the other transactions contemplated hereby
or thereby.
Section 3.5 SEC REPORTS AND FINANCIAL STATEMENTS. The
Company has filed with the SEC, and has heretofore made available to Parent
true and complete copies of, all forms, reports, schedules, statements and
other documents required to be filed by it and its Subsidiaries since May 30,
1992 under the Exchange Act or the Securities Act (as such documents have been
amended since the time of their filing, collectively, the "Company SEC
Documents"). As of their respective dates or, if amended, as of the date of
the last such amendment, the Company SEC Documents, including, without
limitation, any financial statements or schedules included therein (a) did not
contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading and (b) complied in all material respects with the applicable
requirements of the Exchange Act and the Securities Act, as the case may be,
and the applicable rules and regulations of the SEC thereunder. Each of the
consolidated financial statements included in the Company SEC Documents have
been prepared from, and are in accordance with, the books and records of the
Company and/or its consolidated Subsidiaries, comply in all material respects
with applicable accounting requirements and with the published rules and
regulations of the SEC with respect thereto, have been prepared in accordance
with United States generally accepted accounting principles ("GAAP") applied on
a consistent basis during the periods involved (except as may be indicated in
the notes thereto) and fairly present in all material respects the consolidated
financial position and the consolidated results of operations and cash flows
(and changes in financial position, if any) of the Company and its consolidated
Subsidiaries as at the dates thereof or for the periods presented therein.
0139329.08-01S2a 26
31
Section 3.6 ABSENCE OF CERTAIN CHANGES. Except to the
extent disclosed in the Company SEC Documents filed prior to the date of this
Agreement or as otherwise disclosed to Parent in Section 3.6 of the Company
Disclosure Schedule, from June 3, 1995 through the date of this Agreement, the
Company and its Subsidiaries have conducted their respective businesses and
operations in the ordinary course of business consistent with past practice.
From June 3, 1995 through the date of this Agreement, there has not occurred
(i) any events, changes, or effects (including the incurrence of any
liabilities of any nature, whether or not accrued, contingent or otherwise)
having or, which would be reasonably likely to have, individually or in the
aggregate, a material adverse effect on the Company and its Subsidiaries; (ii)
any declaration, setting aside or payment of any dividend or other distribution
(whether in cash, stock or property) with respect to the equity interests of
the Company or of any of its Subsidiaries, other than dividends paid by wholly
owned Subsidiaries; or (iii) any material change by the Company or any of its
Subsidiaries in accounting principles or methods, except insofar as may be
required by a change in GAAP. Except as set forth on Schedule 3.6 of the
Company Disclosure Schedule, from June 3, 1995 through the date of this
Agreement, neither the Company nor any of its Subsidiaries has taken any of the
actions prohibited by Section 5.1 hereof.
Section 3.7 NO UNDISCLOSED LIABILITIES. Except (a) to the
extent disclosed in the Company SEC Documents filed prior to the date of this
Agreement and (b) for liabilities and obligations incurred in the ordinary
course of business consistent with past practice, during the period from June
3, 1995 through the date of this Agreement, neither the Company nor any of its
Subsidiaries have incurred any liabilities or obligations of any nature,
whether or not accrued, contingent or otherwise, that have, or would be
reasonably likely to have, a material adverse effect on the Company and its
Subsidiaries or would be required to be reflected or reserved against on a
consolidated balance sheet of the Company and its Subsidiaries (including the
notes thereto) prepared in accordance with GAAP as applied in preparing the
June 3, 1995 consolidated balance sheet of the Company and its Subsidiaries.
Section 3.7 of the Company Disclosure Schedule sets forth each instrument
evidencing indebtedness of the Company and its Subsidiaries which
0139329.08-01S2a 27
32
will accelerate or become due or payable, or result in a right of redemption or
repurchase on the part of the holder of such indebtedness, or with respect to
which any other payment or amount will become due or payable, in any such case
with or without due notice or lapse of time, as a result of this Agreement, the
Merger or the other transactions contemplated hereby.
Section 3.8 INFORMATION IN PROXY STATEMENT/PROSPECTUS. The
Proxy Statement/Prospectus (or any amendment thereof or supplement thereto), at
the date mailed to the Company's stockholders, on the date filed with the SEC
and at the time of the Special Meetings, will not contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading, PROVIDED, HOWEVER,
that no representation is made by the Company with respect to statements made
therein based on information supplied by Parent or Sub for inclusion in the
Proxy Statement/Prospectus. None of the information supplied by the Company
for inclusion or incorporation by reference in the Registration Statement will,
at the date it becomes effective and at the time of the Special Meetings
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. Subject to the proviso set forth in the second preceding sentence,
the Proxy Statement/Prospectus will comply in all material respects with the
provisions of the Exchange Act and the rules and regulations thereunder.
Section 3.9 EMPLOYEE BENEFIT PLANS; ERISA. (a) As of the
date of this Agreement, except as set forth in Section 3.9(a) of the Company
Disclosure Schedule: there are no material employee benefit plans,
arrangements, practices, contracts or agreements (including, without
limitation, employment agreements, change of control employment agreements and
severance agreements, incentive compensation, bonus, stock option, stock
appreciation rights and stock purchase plans) of any type (including but not
limited to plans described in section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")), maintained by the Company,
0139329.08-01S2a 28
33
any of its Subsidiaries or any trade or business, whether or not incorporated
(an "ERISA Affiliate"), that together with the Company would be deemed a
"controlled group" within the meaning of section 4001(a)(14) of ERISA, or with
respect to which the Company or any of its Subsidiaries has or may have a
liability, other than those listed on Section 3.9(a) of the Company Disclosure
Schedule (the "Benefit Plans"). Except as disclosed in Section 3.9(a) of the
Company Disclosure Schedule (or as otherwise permitted by this Agreement): (1)
neither the Company nor any ERISA Affiliate has any formal plan or commitment,
whether legally binding or not, to create any additional Benefit Plan or modify
or change any existing Benefit Plan that would affect any employee or
terminated employee of the Company or any ERISA Affiliate; and (2) since
September 31, 1995, there has been no change, amendment, modification to, or
adoption of, any Benefit Plan. Section 3.9(a) of the Company Disclosure
Schedule contains a list of each material employment, termination, severance,
incentive and deferred compensation agreement or arrangement that is a Benefit
Plan, and the date of execution of each such agreement or arrangement.
(b) Except as disclosed in Section 3.9(b) of the
Company Disclosure Schedule, under the applicable laws of all jurisdictions
within the United States of America and all foreign jurisdictions, with respect
to any Benefit Plan, there are no material amounts accrued but unpaid as of the
most recent balance sheet date that are not reflected on that balance sheet
prepared in accordance with GAAP.
(c) With respect to each Benefit Plan, except as
disclosed on Schedule 3.9(c) of the Company Disclosure Schedule and as would
not have a material adverse effect on the Company and its Subsidiaries: (i) if
intended to qualify under section 401(a), 401(k) or 403(a) of the Code, such
plan so qualifies, and its trust is exempt from taxation under section 501(a)
of the Code; (ii) such plan has been administered in accordance with its terms
and applicable law; (iii) no breaches of fiduciary duty have occurred; (iv) no
disputes are pending, or, to the knowledge of the Company, threatened; (v) no
prohibited transaction (within the meaning of Section 406 of ERISA) has
occurred; (vi) no lien imposed under the Code or ERISA exists or is likely to
exist; and (vii) all contributions and premiums due (including any extensions
0139329.08-01S2a 29
34
for such contributions and premiums) have been made in full.
(d) Except as disclosed in Section 3.9(d) of the
Company Disclosure Schedule, none of the Benefit Plans has incurred any
"accumulated funding deficiency," as such term is defined in section 412 of the
Code, whether or not waived.
(e) Except as disclosed on Section 3.9(e) of the
Company Disclosure Schedule: (i) neither the Company nor any ERISA Affiliate
has incurred any liability under Title IV of ERISA since the effective date of
ERISA that has not been satisfied in full except as would not have or would not
reasonably be likely to have a material adverse effect on the Company and its
Subsidiaries (including sections 4063-4064 and 4069 of ERISA) and, to the
knowledge of the Company, no basis for any such liability exists; (ii) neither
the Company nor any ERISA Affiliate maintains (or contributes to), or has
maintained (or has contributed to) within the last six years, any employee
benefit plan that is subject to Title IV of ERISA; and (iii) there is no
pending dispute between the Company or any ERISA Affiliate concerning payment
of contributions or payment of withdrawal liability payments.
(f) With respect to each Benefit Plan that is a
"welfare plan" (as defined in section 3(1) of ERISA), except as specifically
disclosed in Section 3.9(f) of the Company Disclosure Schedule, no such plan
provides medical or death benefits with respect to current or former employees
of the Company or any of its Subsidiaries beyond their termination of
employment, other than on an employee-pay-all basis, and each such welfare plan
may be amended or terminated by the Company or any of its Subsidiaries at any
time with respect to such former or current employees.
(g) With respect to each Benefit Plan that is
intended to provide special tax treatment to participants (including sections
79, 105, 106, 125, 127 and 129 of the Code), to the Company's knowledge, such
Benefit Plan has satisfied all of the material requirements for the receipt of
such special tax treatment since January 1, 1992.
0139329.08-01S2a 30
35
(h) Except as specifically set forth in Section
3.9(h) of the Company Disclosure Schedule, the consummation of the transactions
contemplated by this Agreement will not (i) entitle any individual to severance
pay or any tax "gross-up" payments with respect to the imposition of any tax
pursuant to Section 4999 of the Code or accelerate the time of payment or
vesting, or increase the amount, of compensation or benefits due to any
individual with respect to any Benefit Plan, or (ii) constitute or result in a
prohibited transaction under section 4975 of the Code or section 406 or 407 of
ERISA with respect to any Benefit Plan.
(i) Except as disclosed on Section 3.9(i) of the
Company Disclosure Schedule, neither the Company, any Benefits Affiliate nor
any "administrator" as that term is defined in section 3(16) of ERISA, has any
liability with respect to or connected with any Benefit Plan for excise taxes
payable under the Code or civil penalties payable under ERISA and, to the
Company's knowledge, no basis for any such liability exists.
(j) Except as disclosed on Schedule 3.9(j) of the
Company Disclosure Schedule, there is no Benefit Plan that is a "multiemployer
plan," as such term is defined in section 3(37) of ERISA, or which is covered
by section 4063 or 4064 of ERISA.
(k) With respect to each Benefit Plan except Plans
in which employees of Parent or its Affiliates do not participate and except
Multiemployer Plans from which the Company has withdrawn, the Company has
delivered or made available to Parent accurate and complete (with de minimis
omissions) copies of all plan texts, summary plan descriptions, summaries of
material modifications, trust agreements and other related agreements including
all amendments to the foregoing; the two most recent annual reports; the most
recent annual and periodic accounting of plan assets; the most recent
determination letter received from the United States Internal Revenue Service
(the "Service"); and the two most recent actuarial reports, to the extent any
of the foregoing may be applicable to a particular Benefit Plan.
0139329.08-01S2a 31
36
(l) With respect to each Benefit Plan that is a
"group health plan" as such term is defined in section 5000(b) of the Code,
except as specifically set forth in Section 3.9(l) of the Company Disclosure
Schedule, to the Company's knowledge, each such Benefit Plan complies and has
complied with the requirements of Part 6 of Title I of ERISA and Sections 4980B
and 5000 of the Code except where the failure to so comply would not have a
material adverse effect on the Company and its Subsidiaries.
(m) There are no material plans, arrangements,
practices, contracts or agreements (including change of control agreements,
severance agreements, retirement agreements, stock option or purchase
agreements, medical or death benefit agreements) maintained by the Company or
an ERISA Affiliate or with respect to which the Company or any of its
Subsidiaries has a material liability to a director or former director (as a
director) of the Company or an ERISA Affiliate other than those listed on
Section 3.9(m) of the Company Disclosure Schedule or disclosed in the Company's
most recent proxy statement (the "Director Plans"). Neither the Company nor
any ERISA Affiliate has any formal plan or commitment, whether legally binding
or not, to create any Director Plan or modify or change any existing Director
Plan that would affect any director or former director of the Company or any
ERISA Affiliate.
Section 3.10 LITIGATION. Except to the extent disclosed in
the Company SEC Documents filed prior to the date of this Agreement or on
Section 3.10 of the Company Disclosure Schedule, there is no suit, claim,
action, proceeding or investigation pending or, to the best knowledge of the
Company, threatened against or affecting, the Company or any of its
Subsidiaries which, individually or in the aggregate, is reasonably likely to
have a material adverse effect on the Company and its Subsidiaries, or would,
or would be reasonably likely to, materially impair the consummation of the
Offer or the ability of the Company to consummate the Merger or the other
transactions contemplated hereby or thereby.
Section 3.11 NO DEFAULT. The business of the Company and
each of its Subsidiaries is not being conducted in default or violation of any
term, condition or provision of (a) its respective certificate of incorpora-
0139329.08-01S2a 32
37
tion or by-laws or similar organizational documents, (b) any Company Agreement
or (c) except as disclosed in Section 3.11 of the Company Disclosure Schedule,
any federal, state, local or foreign law, statute, regulation, rule, ordinance,
judgment, decree, order, writ, injunction, concession, grant, franchise, permit
or license or other governmental authorization or approval applicable to the
Company or any of its Subsidiaries, excluding from the foregoing clauses (b)
and (c), defaults or violations that would not have a material adverse effect
on the Company and its Subsidiaries or would not, or would not be reasonably
likely to, materially impair the consummation of the Offer or the ability of
the Company to consummate the Merger or the other transactions contemplated
hereby. No investigation or review by any Governmental Entity with respect to
the Company or any of its Subsidiaries is pending or, to the best knowledge of
the Company, threatened, nor to the best knowledge of the Company, has any
Governmental Entity indicated an intention to conduct the same.
Section 3.12 TAXES. (a) As of the date of this Agreement,
except as set forth in Section 3.12 of the Company Disclosure Schedule:
(i) the Company and its Subsidiaries have (I) duly
filed (or there have been filed on their behalf) with the appropriate
governmental authorities all Tax Returns (as hereinafter defined) required to
be filed by them and such Tax Returns are true, correct and complete in all
material respects, and (II) duly paid in full or made provision in accordance
with GAAP (or there has been paid or provision has been made on their behalf)
for the payment of all Taxes (as hereinafter defined) for all periods ending
through the date hereof;
(ii) the Company and its Subsidiaries have
complied in all material respects with all applicable laws, rules and
regulations relating to the payment and withholding of Taxes and have, within
the time and the manner prescribed by law, withheld and paid over to the proper
governmental authorities all amounts required to be so withheld and paid over
under applicable laws;
(iii) no federal, state, local or foreign audits
or other administrative proceedings or
0139329.08-01S2a 33
38
court proceedings are presently pending with regard to any Taxes or Tax Returns
of the Company or its Subsidiaries and neither the Company nor its Subsidiaries
has received a written notice of any pending audits or proceedings;
(iv) neither the Service nor any other taxing
authority (whether domestic or foreign) has asserted, or to the best knowledge
of the Company, is threatening to assert, against the Company or any of its
Subsidiaries any deficiency or claim for Taxes; and
(b) As of the date of this Agreement, except as set forth in
Section 3.12 of the Company Disclosure Schedule:
(i) there are no material liens for Taxes upon any
property or assets of the Company or any Subsidiary thereof, except for liens
for Taxes not yet due and payable and liens for Taxes that are being contested
in good faith by appropriate proceedings;
(ii) neither the Company nor any of its
Subsidiaries has agreed to or is required to make any adjustment under Section
481(a) of the Code;
(iii) the federal income Tax Returns of the
Company and its Subsidiaries have been examined by the Service (or the
applicable statutes of limitation for the assessment of federal income Taxes
for such periods have expired) for all periods as set forth on Section 3.12 of
the Company Disclosure Schedule;
(iv) neither the Company nor any of its
Subsidiaries is a party to any material agreement providing for the allocation
or sharing of Taxes; and
(v) neither the Company nor any of its
Subsidiaries has, with regard to any assets or property held or acquired by any
of them, filed a consent to the application of Section 341(f) of the Code, or
agreed to have Section 341(f)(2) of the Code apply to any disposition of a
subsection (f) asset (as such term is defined in Section 341(f)(4) of the Code)
owned by the Company or any of its Subsidiaries.
0139329.08-01S2a 34
39
(c) "Taxes" shall mean any and all taxes, charges,
fees, levies or other assessments, including, without limitation, income,
gross receipts, excise, real or personal property, sales, withholding, social
security, retirement, unemployment, occupation, use, service, service use,
license, net worth, payroll, franchise, transfer and recording taxes, fees and
charges, imposed by the Service or any taxing authority (whether domestic or
foreign including, without limitation, any state, county, local or foreign
government or any subdivision or taxing agency thereof (including a United
States possession)), whether computed on a separate, consolidated, unitary,
combined or any other basis; and such term shall include any interest whether
paid or received, fines, penalties or additional amounts attributable to, or
imposed upon, or with respect to, any such taxes, charges, fees, levies or
other assessments. "Tax Return" shall mean any report, return, document,
declaration or other information or filing required to be supplied to any
taxing authority or jurisdiction (foreign or domestic) with respect to Taxes,
including, without limitation, information returns, any documents with respect
to or accompanying payments of estimated Taxes, or with respect to or
accompanying requests for the extension of time in which to file any such
report, return, document, declaration or other information.
Section 3.13 CONTRACTS. Each Company Agreement is valid,
binding and enforceable and in full force and effect, except where failure to
be valid, binding and enforceable and in full force and effect would not have a
material adverse effect on the Company and its Subsidiaries, and there are no
material defaults thereunder by the Company or its Subsidiaries or, to the best
knowledge of the Company, by any other party thereto. Except as disclosed in
Section 3.13 of the Company Disclosure Schedule, neither the Company nor any
Subsidiary is a party to any agreement that expressly limits the ability of the
Company or any Subsidiary or affiliate to compete in or conduct any line of
business or compete with any person or in any geographic area or during any
period of time.
Section 3.14 ASSETS; REAL PROPERTY. The assets,
properties, rights and contracts, including, without limitation (as
applicable), title or leaseholds thereto, of the Company and its Subsidiaries,
taken as a
0139329.08-01S2a 35
40
whole, are sufficient to permit the Company and its Subsidiaries to conduct
their business as currently being conducted with only such exceptions as are
immaterial to the Company and its Subsidiaries. All material real property
owned by the Company and its Subsidiaries (the "Real Property") is owned free
and clear of all liens, charges, security interests, options, claims,
mortgages, pledges, easements, rights-of-way or other encumbrances and
restrictions of any nature whatsoever, except as described in Section 3.14 of
the Company Disclosure Schedule or those that do not materially adversely
interfere with the use of such Real Property as currently used.
Section 3.15 ENVIRONMENTAL MATTERS. Except as disclosed in
Section 3.15 of the Company Disclosure Schedule, as of the date of this
Agreement, the Company is in material compliance with all applicable
Environmental Laws and there are no Environmental Liabilities and Costs of the
Company and its Subsidiaries that would have or are reasonably likely to have a
material adverse effect on the Company and its Subsidiaries.
For purposes of this Section 3.15, the following definitions
shall apply:
"Environmental Laws" means all applicable foreign, federal,
state and local laws, common law, regulations, rules and ordinances relating to
pollution or protection of health, safety or the environment.
"Environmental Liabilities and Costs" means all liabilities,
obligations, responsibilities, obligations to conduct cleanup, losses, damages,
deficiencies, punitive damages, consequential damages, treble damages, costs
and expenses (including, without limitation, all reasonable fees, disbursements
and expenses of counsel, expert and consulting fees and costs of investigations
and feasibility studies and responding to government requests for information
or documents), fines, penalties, restitution and monetary sanctions, interest,
direct or indirect, known or unknown, absolute or contingent, past, present or
future, resulting from any claim or demand, by any person or entity, whether
based in contract, tort, implied or express warranty, strict liability, joint
and several liability, criminal or civil statute, under any Environmental Law,
or arising from environmental, health or safety conditions, as a result of past
or present
0139329.08-01S2a 36
41
ownership, leasing or operation of any properties, owned, leased or operated by
the Company or any of its Subsidiaries.
Section 3.16 REIMBURSEMENT. The Company or its
Subsidiaries, as the case may be, are parties to such agreements with third
party payors, including Medicaid, health maintenance organizations, preferred
provider organizations, insurance companies and other payment sources, which
are necessary to conduct their respective businesses as of the date of this
Agreement and a true and accurate list of all such agreements is set forth on
Section 3.16 of the Company Disclosure Schedule.
Section 3.17 LABOR RELATIONS. Except as set forth on
Section 3.17 of the Company Disclosure Schedule, there is no labor strike,
slowdown or work stoppage or lockout against the Company or any of its
Subsidiaries, there is no unfair labor practice charge or complaint against or
pending before the National Labor Relations Board (the "NLRB") which if decided
adversely could have a material adverse effect on the Company and its
Subsidiaries, taken as a whole, and there is no representation claim or
petition pending before the NLRB and no question concerning representation
exists with respect to the employees of the Company or its Subsidiaries.
Section 3.18 INSURANCE. As of the date hereof, the Company
and each of its Subsidiaries are insured by insurers, reasonably believed by
the Company to be of recognized financial responsibility and solvency, against
such losses and risks and in such amounts as are customary in the businesses in
which they are engaged. All material policies of insurance and fidelity or
surety bonds are in full force and effect. Descriptions of these plans and
related liability coverage have been previously provided to Parent. Section
3.18 of the Company Disclosure Schedule contains a listing of all open workers
compensation and general liability claims as of a recent date. These claims,
individually or in the aggregate, would not have a material adverse effect on
the Company and its Subsidiaries, taken as a whole. All necessary
notifications of claims have been made to insurance carriers other than those
which will not have a material adverse effect on the Company and its
Subsidiaries, taken as a whole.
0139329.08-01S2a 37
42
Section 3.19 TRANSACTIONS WITH AFFILIATES. Except to the
extent disclosed in the Company SEC Documents filed prior to the date of this
Agreement, from May 29, 1993 through the date of this Agreement there have
been no transactions, agreements, arrangements or understandings between the
Company or its Subsidiaries, on the one hand, and the Company's affiliates
(other than wholly-owned Subsidiaries of the Company) or other Persons, on the
other hand, that would be required to be disclosed under Item 404 of Regulation
S-K under the Securities Act.
Section 3.20 COMPLIANCE WITH LAW. The Company and its
Subsidiaries have complied in all material respects with all laws, statutes,
regulations, rules, ordinances, and judgments, decrees, orders, writs and
injunctions, of any court or governmental entity relating to any of the
property owned, leased or used by them, or applicable to their business,
including, but not limited to, equal employment opportunity, discrimination,
occupational safety and health, environmental, interstate commerce, antitrust
laws, ERISA and laws relating to Taxes (as defined in Section 3.12). The
Company, with respect to each store location, has all permits and licenses
(including, without limitation, pharmaceutical and liquor licenses and permits)
necessary to carry on the business being conducted at each store location.
Section 3.21 VOTE REQUIRED. The affirmative vote of the
holders of a majority of the outstanding shares of Company Common Stock are the
only votes of the holders of any class or series of the Company's capital stock
necessary to approve the Merger.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Sub represent and warrant to the Company as
follows:
Section 4.1 ORGANIZATION. Each of Parent and Sub is a
corporation duly organized, validly existing and in good standing under the
laws of Delaware and has all requisite corporate or other power and authority
and all necessary governmental approvals to own, lease and operate its
properties and to carry on its business as now
0139329.08-01S2a 38
43
being conducted, except where the failure to be so organized, existing and in
good standing or to have such power, authority and governmental approvals would
not have a material adverse effect on Parent and its Subsidiaries. Parent and
each of its Subsidiaries is duly qualified or licensed to do business and in
good standing in each jurisdiction in which the property owned, leased or
operated by it or the nature of the business conducted by it makes such
qualification or licensing necessary, except where the failure to be so duly
qualified or licensed and in good standing would not have a material adverse
effect on Parent and its Subsidiaries.
Section 4.2 CAPITALIZATION. (a) The authorized capital
stock of Parent consists of 240,000,000 shares of Parent Common Stock and (b)
20,000,000 preferred shares, par value $1.00 per share (the "Parent Preferred
Stock"). As of the date hereof, (i) 83,758,467 shares of Parent Common Stock
are issued and outstanding, (ii) no shares of Parent Preferred Stock are issued
and outstanding, (iii) 6,532,169 shares of Parent Common Stock are issued and
held in the treasury of Parent, and (iv) 6,417,062 shares of Parent Common
Stock are reserved for issuance under Parent's 1990 Omnibus Stock Incentive
Plan (the "Parent Plan"). All of the outstanding shares of Parent's capital
stock are, and all shares which may be issued pursuant to the exercise of
outstanding options or pursuant to the Parent Plan will be, when issued in
accordance with the respective terms thereof, duly authorized, validly issued,
fully paid and non-assessable. Except for Parent's 6.75% Zero Coupon
Convertible Subordinated Notes due July 24, 2006, there are no bonds,
debentures, notes or other indebtedness having voting rights (or convertible
into securities having such rights) ("Parent Voting Debt") of Parent or any of
its Subsidiaries issued and outstanding. Except as set forth above, and except
as set forth in Section 4.2 of the Disclosure Schedule delivered to the Company
on or prior to the date hereof (the "Parent Disclosure Schedule") and except
for transactions contemplated by this Agreement, as of the date hereof, (i)
there are no shares of capital stock of Parent authorized, issued or
outstanding and (ii) there are no existing options, warrants, calls,
pre-emptive rights, subscriptions or other rights, convertible securities,
agreements, arrangements or commitments of any character, relating to the
issued or unissued capital stock of Parent or any of its Subsidiaries,
0139329.08-01S2a 39
44
obligating Parent or any of its Subsidiaries to issue, transfer or sell or
cause to be issued, transferred or sold any shares of capital stock or Parent
Voting Debt of, or other equity interest in, Parent or any of its Subsidiaries
or securities convertible into or exchangeable for such shares or equity
interests or obligations of Parent or any of its Subsidiaries to grant, extend
or enter into any such option, warrant, call, subscription or other right,
convertible security, agreement, arrangement or commitment. There are no
outstanding contractual obligations of Parent or any of its Subsidiaries to
repurchase, redeem or otherwise acquire any shares of Parent Common Stock or
the capital stock of Parent or any subsidiary or affiliate of Parent or to
provide funds to make any investment (in the form of a loan, capital
contribution or otherwise) in any Subsidiary or any other entity.
(b) There are no voting trusts or other agreements
or understandings to which Parent or any of its Subsidiaries is a party with
respect to the voting of the capital stock of Parent or its Subsidiaries. None
of Parent or its Subsidiaries is required to redeem, repurchase or otherwise
acquire shares of capital stock of Parent, or any of its Subsidiaries,
respectively, as a result of the transactions contemplated by this Agreement.
Section 4.3 CORPORATE AUTHORIZATION; VALIDITY OF AGREEMENT;
NECESSARY ACTION. Each of Parent and Sub has full corporate power and
authority to execute and deliver this Agreement, the Stock Option Agreement and
the ▇▇▇▇/Chilmark Stockholder Agreement and, subject in the case of this
Agreement to obtaining any necessary approval of Parent's stockholders as
contemplated by Section 1.7(b) hereof with respect to the Merger, to consummate
the transactions contemplated hereby and thereby. The execution, delivery and
performance by Parent and Sub of this Agreement and the consummation by Parent
and Sub of the transactions contemplated hereby have been duly and validly
authorized by their respective Boards of Directors and by Sub's sole
stockholder and, except in the case of obtaining any necessary approval of
Parent's stockholders as contemplated by Section 1.7(b) hereof, no other
corporate action or proceedings on the part of Parent and Sub are necessary to
authorize the execution and delivery by Parent and Sub of this Agreement and
the
0139329.08-01S2a 40
45
consummation by Parent and Sub of the transactions contemplated hereby. This
Agreement has been duly executed and delivered by Parent and Sub, and, assuming
this Agreement constitutes valid and binding obligations of the Company,
constitutes valid and binding obligations of each of Parent and Sub,
enforceable against them in accordance with its terms, except that (i) such
enforcement may be subject to applicable bankruptcy, insolvency or other
similar laws, now or hereafter in effect, affecting creditors' rights
generally, and (ii) the remedy of specific performance and injunctive and other
forms of equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor may be brought.
The shares of Parent Common Stock issued pursuant to the Merger, if any, will
be duly authorized, validly issued, fully paid and nonassessable and not
subject to preemptive rights.
Section 4.4 CONSENTS AND APPROVALS; NO VIOLATIONS. Except
for filings, permits, authorizations, consents and approvals as may be required
under, and other applicable requirements of, the Exchange Act, the Securities
Act of 1933 (the "Securities Act"), the DGCL, the HSR Act, state blue sky laws
and any applicable state takeover laws and the approval by Parent's
stockholders of the issuance of Parent Common Stock in the Merger, neither the
execution, delivery or performance of this Agreement by Parent and Sub nor the
consummation by Parent and Sub of the transactions contemplated hereby nor
compliance by Parent and Sub with any of the provisions hereof will (i)
conflict with or result in any breach of any provision of the certificate of
incorporation or by-laws of Parent and Sub, (ii) require any filing with, or
permit, authorization, consent or approval of, any Governmental Entity (except
where the failure to obtain such permits, authorizations, consents or approvals
or to make such filings would not have a material adverse effect on Parent and
its Subsidiaries or would not, or would not be reasonably likely to, materially
impair the ability of Parent and Sub to consummate the Offer, the Merger or the
other transactions contemplated hereby or thereby), (iii) result in a violation
or breach of, or constitute (with or without due notice or lapse of time or
both) a default (or give rise to any right of termination, amendment,
cancellation or acceleration) under, any of the terms, conditions or provisions
of any note, bond, mortgage, indenture, guarantee, other
0139329.08-01S2a 41
46
evidence of indebtedness, lease, license, contract, agreement or other
instrument or obligation to which Parent or any of its Subsidiaries is a party
or by which any of them or any of their properties or assets may be bound or
(iv) violate any order, writ, injunction, decree, statute, rule or regulation
applicable to Parent, any of its Subsidiaries or any of their properties or
assets, except in the case of clauses (iii) and (iv) for violations, breaches
or defaults which would not have a material adverse effect on Parent and its
Subsidiaries or would not, or would not be reasonably likely to, materially
impair or the ability of Parent or Sub to consummate the Offer, the Merger or
the other transactions contemplated hereby.
Section 4.5 SEC REPORTS AND FINANCIAL STATEMENTS. Parent
has filed with the SEC, and has heretofore made available to the Company, true
and complete copies of, all forms, reports, schedules, statements and other
documents required to be filed by it and its Subsidiaries since February 27,
1993 under the Exchange Act or the Securities Act (as such documents have been
amended since the time of their filing, collectively, the "Parent SEC
Documents"). As of their respective dates or, if amended, as of the date of
the last such amendment, the Parent SEC Documents, including, without
limitation, any financial statements or schedules included therein (a) did not
contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading and (b) complied in all material respects with the applicable
requirements of the Exchange Act and the Securities Act, as the case may be,
and the applicable rules and regulations of the SEC thereunder. Each of the
consolidated financial statements included in the Parent SEC Documents have
been prepared from, and are in accordance with, the books and records of Parent
and/or its consolidated Subsidiaries, comply in all material respects with
applicable accounting requirements and with the published rules and regulations
of the SEC with respect thereto, have been prepared in accordance with GAAP
applied on a consistent basis during the periods involved (except as may be
indicated in the notes thereto) and fairly present in all material respects the
consolidated financial position and the consolidated results of operations and
cash flows (and
0139329.08-01S2a 42
47
changes in financial position, if any) of Parent and its consolidated
Subsidiaries as at the dates thereof or for the periods presented therein.
Section 4.6 ABSENCE OF CERTAIN CHANGES. Except to the
extent disclosed in the Parent SEC Documents filed prior to the date of this
Agreement, from March 4, 1995 through the date of this Agreement, Parent and
its Subsidiaries have conducted their respective businesses in the ordinary
course of business consistent with past practice. From March 4, 1995 through
the date of this Agreement, there has not occurred (i) any events, changes, or
effects (including the incurrence of any liabilities of any nature, whether or
not accrued, contingent or otherwise) having or, which would be reasonably
likely to have, individually or in the aggregate, a material adverse effect on
Parent and its Subsidiaries; (ii) any declaration, setting aside or payment of
any dividend or other distribution (whether in cash, stock or property) with
respect to the equity interests of Parent or of any of its Subsidiaries other
than regular quarterly cash dividends or dividends paid by wholly owned
Subsidiaries; or (iii) any change by Parent or any of its Subsidiaries in
accounting principles or methods, except insofar as may be required by a change
in GAAP.
Section 4.7 NO UNDISCLOSED LIABILITIES. Except (a) to the
extent disclosed in the Parent SEC Documents filed prior to the date of this
Agreement and (b) for liabilities and obligations incurred in the ordinary
course of business consistent with past practice, during the period from March
4, 1995 through the date of this Agreement, neither Parent nor any of its
Subsidiaries have incurred any liabilities or obligations of any nature,
whether or not accrued, contingent or otherwise, that have, or would be
reasonably likely to have, a material adverse effect on Parent and its
Subsidiaries or would be required to be reflected or reserved against on a
consolidated balance sheet of Parent and its Subsidiaries (including the notes
thereto) prepared in accordance with GAAP as applied in preparing the March 4,
1995 consolidated balance sheet of Parent and its Subsidiaries.
Section 4.8 INFORMATION IN PROXY STATEMENT/PROSPECTUS. The
Registration Statement (or any amendment thereof or supplement thereto) will,
at the
0139329.08-01S2a 43
48
date it is filed with the SEC and as of the date it becomes effective and the
Proxy Statement/Prospectus (or any amendment thereof or supplement thereto) at
the date mailed to Parent's stockholders and at the time of the Special
Meetings, will not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they are
made, not misleading, provided, however, that no representation is made by
Parent or Sub with respect to statements made therein based on information
supplied by the Company for inclusion in the Registration Statement. None of
the information supplied by Parent or Sub for inclusion or incorporation by
reference in the Proxy Statement/Prospectus will, at the date mailed to
stockholders and at the time of the Special Meetings, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they are made, not misleading. Subject to the
proviso set forth in the second preceding sentence, the Registration Statement
will comply in all material respects with the provisions of the Securities Act
and Exchange Act, respectively, and the rules and regulations thereunder.
Section 4.9 LITIGATION. Except to the extent disclosed in
the Parent SEC Documents filed prior to the date of this Agreement, as of the
date of this Agreement, there is no suit, claim, action, proceeding or
investigation pending or, to the best knowledge of Parent, threatened against
or affecting, Parent or any of its Subsidiaries, which, individually or in the
aggregate, is reasonably likely to have a material adverse effect on Parent and
its Subsidiaries or would, or would be reasonably likely to, materially impair
the ability of Parent or Sub to consummate the Offer, the Merger or the other
transactions contemplated hereby.
Section 4.10 TAXES. (a) As of the date of this Agreement,
except as set forth in Section 4.10 of the Parent Disclosure Schedule:
(i) Parent and its Subsidiaries have (I) duly
filed (or there have been filed on their behalf) with the appropriate
governmental authorities all Tax Returns required to be filed by them and such
Tax Returns
0139329.08-01S2a 44
49
are true, correct and complete in all material respects, and (II) duly paid in
full or made provision in accordance with GAAP (or there has been paid or
provision has been made on their behalf) for the payment of all Taxes (as
hereinafter defined) for all periods ending through the date hereof;
(ii) Parent and its Subsidiaries have complied in
all material respects with all applicable laws, rules and regulations relating
to the payment and withholding of Taxes and have, within the time and the
manner prescribed by law, withheld and paid over to the proper governmental
authorities all amounts required to be so withheld and paid over under
applicable laws;
(iii) no federal, state, local or foreign audits
or other administrative proceedings or court proceedings are presently pending
with regard to any Taxes or Tax Returns of Parent or its Subsidiaries and
neither Parent nor its Subsidiaries has received a written notice of any
pending audits or proceedings; and
(iv) neither the Service nor any other taxing
authority (whether domestic or foreign) has asserted, or to the best knowledge
of Parent, is threatening to assert, against Parent or any of its Subsidiaries
any deficiency or claim for Taxes.
(b) As of the date of this Agreement, except as set forth in
Section 4.10 of the Parent Disclosure Schedule:
(i) there are no material liens for Taxes upon any
property or assets of Parent or any Subsidiary thereof, except for liens for
Taxes not yet due and payable and liens for Taxes that are being contested in
good faith by appropriate proceedings;
(ii) neither Parent nor any of its Subsidiaries
has agreed to or is required to make any adjustment under Section 481(a) of the
Code;
(iii) the federal income Tax Returns of Parent and
its Subsidiaries have been examined by the Service (or the applicable statutes
of limitation for the assessment of federal income Taxes for such periods have
expired) for all periods through and including March 2,
0139329.08-01S2a 45
50
1991 for Parent and October 31, 1987 for Perry Drug Stores, Inc.;
(iv) neither Parent nor any of its Subsidiaries is
a party to any material agreement providing for the allocation or sharing of
Taxes; and
(v) neither Parent nor any of its Subsidiaries
has, with regard to any assets or property held or acquired by any of them,
filed a consent to the application of Section 341(f) of the Code, or agreed to
have Section 341(f)(2) of the Code apply to any disposition of a subsection (f)
asset (as such term is defined in Section 341(f)(4) of the Code) owned by
Parent or any of its Subsidiaries.
Section 4.11 COMPLIANCE WITH LAW. Parent and its
Subsidiaries have complied in all material respects with all laws, statutes,
regulations, rules, ordinances, and judgments, decrees, orders, writs and
injunctions, of any court or governmental entity relating to any of the
property owned, leased or used by them, or applicable to their business,
including, but not limited to, equal employment opportunity, discrimination,
occupational safety and health, environmental, interstate commerce, antitrust
laws, ERISA and laws relating to Taxes.
Section 4.12 NO DEFAULT. The business of Parent and each
of its Subsidiaries is not being conducted in default or violation of any term,
condition or provision of (a) its respective certificate of incorporation or
by-laws or similar organizational documents, (b) any lease, license, contract,
agreement or other instrument or obligation to which Parent or any of its
Subsidiaries is a party or by which any of them or any of their properties or
assets may be bound and which either has a term of more than one year or
involves the payment or receipt of money in excess of $300,000 (a "Parent
Agreement") or (c) any federal, state, local or foreign law, statute,
regulation, rule, ordinance, judgment, decree, order, writ, injunction,
concession, grant, franchise, permit or license or other governmental
authorization or approval applicable to Parent or any of its Subsidiaries,
excluding from the foregoing clauses (b) and (c), defaults or violations that
would not have a material adverse effect on Parent and its Subsidiaries or
would not, or would not be reasonably likely to, materially
0139329.08-01S2a 46
51
impair the consummation of the Offer or the ability of Parent or Sub to
consummate the Merger or the other transactions contemplated hereby. Except as
set forth on Schedule 4.12 of the Parent Disclosure Schedule, no investigation
or review by any Governmental Entity with respect to Parent or any of its
Subsidiaries is pending or, to the best knowledge of Parent or Sub, threatened,
nor to the best knowledge of Parent or Sub, has any Governmental Entity
indicated an intention to conduct the same.
Section 4.13 FINANCING. Either Parent or Sub has, or will
have prior to the consummation of the Offer, sufficient funds available to
purchase the Shares pursuant to the Offer.
Section 4.14 OPINION OF FINANCIAL ADVISOR. Parent has
received an opinion from ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ Securities Corporation
("DLJ"), dated as of a date which is on or prior to the date of this Agreement
to the effect that, as of such date, the consideration to be paid by Parent in
the Offer and the Merger, taken together, is fair to Parent from a financial
point of view (the "Parent Fairness Opinion"). Parent has delivered to the
Company a copy of the Parent Fairness Opinion, together with DLJ's
authorization to include the Parent Fairness Opinion in the Offer Documents and
the Proxy Statement/Prospectus.
ARTICLE V
COVENANTS
Section 5.1 INTERIM OPERATIONS OF THE COMPANY. The Company
covenants and agrees that, (i) except as expressly provided in this Agreement,
and (ii) during the period prior to the consummation of Offer, except with the
prior written consent of Parent, and (iii) during the period following the
consummation of the Offer and prior to the Effective Time, except with the
authorization of the Board of Directors of the Company, including the
affirmative vote of a majority of the Continuing Directors, and (iv) following
consummation of the Offer and prior to the Effective Time, except for
prepayments by Parent of indebtedness of the Company and the advancement of
funds by Parent to the Company on the terms and condi-
0139329.08-01S2a 47
52
tions, and at the interest rate, and for the purposes for which borrowing may
be made, under the Company's existing credit facility:
(a) the business of the Company and its
Subsidiaries shall be conducted only in the ordinary course of business
consistent with past practice and, to the extent consistent therewith, each of
the Company and its Subsidiaries shall use its best efforts to preserve its
business organization intact and maintain its existing relations with
customers, suppliers, employees, creditors and business partners;
(b) the Company will not, directly or indirectly,
split, combine or reclassify the outstanding Company Common Stock, or any
outstanding capital stock of any of the Subsidiaries of the Company;
(c) neither the Company nor any of its
Subsidiaries shall: (i) amend its certificate of incorporation or by-laws or
similar organizational documents; (ii) declare, set aside or pay any dividend
or other distribution payable in cash, stock or property with respect to its
capital stock other than dividends paid by the Company's Subsidiaries to the
Company or its Subsidiaries; (iii) issue, sell, transfer, pledge, dispose of or
encumber any additional shares of, or securities convertible into or
exchangeable for, or options, warrants, calls, commitments or rights of any
kind to acquire, any shares of capital stock of any class of the Company or its
Subsidiaries, other than issuances pursuant to exercise of stock-based awards
or options outstanding on the date hereof as disclosed in Section 3.2 or in
Section 5.1(c) of the Company Disclosure Schedule; (iv) transfer, lease,
license, sell, mortgage, pledge, dispose of, or encumber any material assets
other than (a) in the ordinary course of business consistent with past practice
or (b) pursuant to existing agreements disclosed in Section 5.1(c) of the
Company Disclosure Schedule; or (v) redeem, purchase or otherwise acquire
directly or indirectly any of its capital stock;
(d) except as disclosed in Section 5.1(d) of the
Company Disclosure Schedule, neither the Company nor any of its Subsidiaries
shall: (i) except as otherwise provided in this Agreement and except for
normal, regularly scheduled increases for non-officer employees
0139329.08-01S2a 48
53
consistent with past practice or pursuant to the terms of existing collective
bargaining agreements, grant any increase in the compensation payable or to
become payable by the Company or any of its Subsidiaries to any officer or
employee (including through any new award made under, or the exercise of any
discretion under, any Benefit Plan (ii) adopt any new, or amend or otherwise
increase, or accelerate the payment or vesting of the amounts payable or to
become payable under any existing, bonus, incentive compensation, deferred
compensation, severance, profit sharing, stock option, stock purchase,
insurance, pension, retirement or other employee benefit plan agreement or
arrangement; (iii) enter into any, or amend any existing, employment or
severance agreement with or, grant any severance or termination pay to any
officer, director, employee or consultant of the Company or any of its
Subsidiaries; or (iv) make any additional contributions to any grantor trust
created by the Company to provide funding for non-tax-qualified employee
benefits or compensation; or (v) provide any severance program to any
Subsidiary which does not have a severance program as of the date of this
Agreement;
(e) neither the Company nor any of its
Subsidiaries shall modify, amend or terminate any of the Company Agreements or
waive, release or assign any material rights or claims, except in the ordinary
course of business consistent with past practice;
(f) neither the Company nor any of its
Subsidiaries shall permit any material insurance policy naming it as a
beneficiary or a loss payable payee to be cancelled or terminated without
notice to Parent, except in the ordinary course of business consistent with
past practice;
(g) except as set forth in Section 5.1(g) of the
Company Disclosure Schedule, neither the Company nor any of its Subsidiaries
shall: (i) incur or assume any debt except for borrowings under existing
credit facilities in the ordinary course consistent with past practice; (ii)
assume, guarantee, endorse or otherwise become liable or responsible (whether
directly, contingently or otherwise) for the obligations of any other person,
except in the ordinary course of business consistent with past practice; (iii)
make any loans, advances or capital contributions to, or investments in, any
other
0139329.08-01S2a 49
54
person (other than to wholly owned Subsidiaries of the Company or customary
loans or advances to employees in accordance with past practice); or (iv) enter
into any material commitment (including, but not limited to, any leases,
capital expenditure or purchase of assets) other than purchases of inventory in
the ordinary course of business consistent with past practice;
(h) neither the Company nor any of its
Subsidiaries shall change any of the accounting principles used by it unless
required by GAAP;
(i) neither the Company nor any of its
Subsidiaries shall pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction of any such
claims, liabilities or obligations, (x) reflected or reserved against in the
consolidated financial statements (or the notes thereto) of the Company and its
consolidated Subsidiaries, (y) incurred in the ordinary course of business
consistent with past practice or (z) which are legally required to be paid,
discharged or satisfied;
(j) neither the Company nor any of its
Subsidiaries will adopt a plan of complete or partial liquidation, disso-
lution, merger, consolidation, restructuring, recapitalization or other
material reorganization of the Company or any of its Subsidiaries or any
agreement relating to a Takeover Proposal (as defined in Section 5.6) (other
than the Merger);
(k) neither the Company nor any of its
Subsidiaries will take, or agree to commit to take, any action that would make
any representation or warranty of the Company contained herein inaccurate in
any respect at, or as of any time prior to, the Effective Time;
(l) neither the Company nor any of its
Subsidiaries will engage in any transaction with, or enter into any agreement,
arrangement, or understanding with, directly or indirectly, any of the
Company's affiliates, including, without limitation, any transactions,
agreements, arrangements or understandings with any affiliate or other Person
covered under Item 404 of Regulation S-K under the Securities Act that would be
required to be disclosed under such Item 404, other than
0139329.08-01S2a 50
55
pursuant to such agreements, arrangements, or understandings existing on the
date of this Agreement (which are set forth on Section 5.1(l) of the Company
Disclosure Schedule);
(m) close, shut down, or otherwise eliminate any
of the Company's stores other than in the ordinary course of business
consistent with past practice;
(n) change the name of or signage at any of the
Company's stores;
(o) close, shut down, or otherwise eliminate any
of the Company's distribution centers;
(p) move the location, close, shut down or
otherwise eliminate the Company's headquarters, or effect a general staff
reduction at such headquarters;
(q) change or modify in any material respect the
Company's existing advertising program and policies;
(r) except as set forth in Section 5.1(r) of the
Company Disclosure Schedule, enter into any new lease (other than renewals of
existing leases after consultation with Parent) or purchase or acquire or enter
into any agreement to purchase or acquire any real estate;
(s) neither the Company nor any of its Subsidiaries
will incur any liabilities or obligations of any nature, whether or not
accrued, contingent or otherwise, that have, or would be reasonably likely to
have, a material adverse effect on the Company and its Subsidiaries; and
(t) neither the Company nor any of its
Subsidiaries will enter into an agreement, contract, commitment or ar-
rangement to do any of the foregoing, or to authorize, recommend, propose or
announce an intention to do any of the foregoing.
Section 5.2 TREATMENT OF CERTAIN INDEBTEDNESS. The Company
will cooperate with Parent, if Parent shall so request, to effect a defeasance
of, and/or a repurchase by means of a debt tender offer (together with a
0139329.08-01S2a 51
56
solicitation of consents to eliminate the restrictive covenants) of, the 9 1/8%
Senior Notes due 2000 issued by the Company and the 10 1/8% Senior Notes due
June 1, 2002 issued by Hook SupeRx, Inc., provided that any funds and all
related out-of-pocket transaction expenses necessary to effect any such
defeasance or repurchase shall be provided and borne by Parent, without any
right of reimbursement. The Company and Parent will cooperate to effect such
defeasance and/or repurchase in a manner which takes into account all relevant
tax, accounting, corporate, structural, contractual and similar issues.
Section 5.3 ACCESS TO INFORMATION. (a) To the extent
permitted by applicable law, the Company shall (and shall cause each of its
Subsidiaries to) afford to the officers, employees, accountants, counsel,
financing sources and other representatives of Parent, access, during normal
business hours, during the period prior to the Effective Time, to all of its
and its Subsidiaries' properties, books, contracts, commitments and records
(including any Tax Returns or other Tax related information pertaining to the
Company and its Subsidiaries) and, during such period, the Company shall (and
shall cause each of its Subsidiaries to) furnish promptly to Parent (i) a copy
of each report, schedule, registration statement and other document filed or
received by it during such period pursuant to the requirements of federal
securities laws and (ii) all other information concerning its business,
properties and personnel as Parent may reasonably request (including any Tax
Returns or other Tax related information pertaining to the Company and its
Subsidiaries). Parent will hold any such information which is nonpublic in
confidence in accordance with the provisions of the existing confidentiality
agreement between the Company and Parent, dated August 17, 1995 (the
"Confidentiality Agreement").
(b) To the extent permitted by applicable law,
Parent shall (and shall cause each of its Subsidiaries to) afford to the
officers, employees, accountants, counsel, financing sources and other
representatives of the Company, access, during normal business hours, during
the period prior to the Effective Time, to all of its and its Subsidiaries'
properties, books, contracts, commitments and records (including any Tax
Returns or other Tax related information pertaining to Parent and its
Subsidiaries) and, during such period, Parent shall (and shall
0139329.08-01S2a 52
57
cause each of its Subsidiaries to) furnish promptly to the Company (a) a copy
of each report, schedule, registration statement and other document filed or
received by it during such period pursuant to the requirements of the federal
securities laws and (b) all other information as the Company may reasonably
request (including any Tax Returns or other Tax related information pertaining
to Parent and its Subsidiaries). The Company will hold any such information
which is nonpublic in confidence in accordance with the provisions of the
Confidentiality Agreement.
Section 5.4 CONSENTS AND APPROVALS. (a) The Company and
Parent shall take all reasonable actions necessary to file as soon as
practicable notifications under the HSR Act and to respond as promptly as
practicable to any inquiries received from the Federal Trade Commission and the
Anti-trust Division of the Department of Justice for additional information or
documentation and to respond as promptly as practicable to all inquiries and
requests received from any State Attorney General or other Governmental Entity
in connection with antitrust matters.
(b) Parent and the Company shall, and each shall
cause each of its Subsidiaries to, subject to the preceding subsection, (i)
cooperate with one another to prepare, as soon as practicable, all filings and
other presentations in connection with seeking any regulatory approval from a
Governmental Entity, exemption or other authorization necessary to consummate
the transactions contemplated by this Agreement, (ii) prosecute such filings
and other presentations with diligence, (iii) diligently oppose any objections
to, appeals from or petitions to reconsider or reopen any such approval by
persons not party to this Agreement, and (iv) take all such further action as
in Parent's and the Company's judgment reasonably may facilitate obtaining any
final order or orders approving such transactions consistent with this
Agreement.
(c) Each of the Company, Parent and Sub will take
all reasonable actions necessary to comply promptly with all legal requirements
(which actions shall include, without limitation, furnishing all information in
connection with approvals of or filings with any Governmental Entity,
including, without limitation, any
0139329.08-01S2a 53
58
schedule, or reports required to be filed with the SEC), and will promptly
cooperate with and furnish information to each other in connection with any
such requirements imposed upon any of them or any of their Subsidiaries in
connection with this Agreement and the transactions contemplated hereby. Each
of the Company, Parent and Sub will, and will cause its Subsidiaries to, take
all reasonable actions necessary to obtain any consent, authorization, order or
approval of, or any exemption by, any Governmental Entity or other public or
private third party, required to be obtained or made by Parent, Sub, the
Company or any of their Subsidiaries in connection with the Offer, the Merger
or the taking of any action contemplated thereby or by this Agreement or the
Stockholders Agreements.
Section 5.5 EMPLOYEE BENEFITS. (a) Parent agrees to cause
Surviving Corporation and its Subsidiaries to provide to certain employees of
the Company payments and benefits, which are set forth in this Section 5.5(a)
and which shall be effected, by means of individual agreements, negotiated in
good faith by the parties hereto, reflecting the economic terms set forth in
this Section 5.5.
(i) EVA PLAN BONUS
--------------
As soon as practicable following the earlier of (A) the
Effective Time and (B) the end of the Company's 1996 fiscal year, the Company
shall pay, pursuant to the terms of the Company's Economic Value Added
Incentive Plan (the "EVA Plan") as herein modified, bonuses for fiscal year
1996, calculated based on the Company's financial results as of February 10,
1996, and annualized to equal a bonus for a 12 month period.
(ii) SEVERANCE PAY
-------------
With respect to the executives of the Company listed on
Schedule 5.5(a)(ii) attached hereto ("Covered Executives"), effective as soon
as practicable following the Effective Time (or if later, the date of
termination of employment of the Covered Executive), the Company shall pay to
each Covered Executive severance payments (the "Severance Payments"), on a
bi-weekly basis or at such other intervals as are consistent with Parent's
executive payroll practices, based on one of the two
0139329.08-01S2a 54
59
formulae set forth below, pursuant to elections made by each Covered Executive
prior to the Effective Time:
(A) Severance Payments equal to, on an annualized
basis, "Base Pay" (as defined below), continuing for a period of three
years with respect to Covered Executives who are listed as Group A
Executives ("Group A Executives") on Schedule 5.5(a)(ii)(A) of the Company
Disclosure Schedule and for a period of 18 months with respect to Covered
Executives listed as Group B Executives ("Group B Executives") on Schedule
5.5(a)(ii)(A) of the Company Disclosure Schedule. For purposes of this
Section 5.5(a), Base Pay shall mean the highest base pay paid to the
Covered Executive during any one of the 1994, 1995 or 1996 fiscal years,
provided that the base pay for the 1996 fiscal year shall be calculated on
an annualized basis; or
(B) Severance Payments equal to, on an annualized
basis, "Base Plus Bonus Pay" (as defined below), continuing for a period of
two years with respect to Group A Executives, and for a period of one year
with respect to Group B Executives. For purposes of this Section 5.5(a),
Base Plus Bonus Pay shall mean Base Pay plus the amount that would have
been paid to the executive under the EVA Plan for fiscal year 1995 as the
targeted bonus (the "1995 Target Bonus").
In lieu of the Severance Payments described in clauses (A)
and (B) above, Messrs. ▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ shall receive Severance Payments,
continuing for three years, equal to, on an annualized basis, Base Plus Bonus
Pay.
The period during which a Covered Executive continues to
receive Severance Payments shall be referred to in this Section 5.5(a) as the
"Severance Period" for such Covered Executive.
During the Severance Period, each Covered Executive shall
continue to receive, at the Company's expense, continuation of benefits
described in Section 6(a)(ii) of the Covered Executive's employment agreement
with the Company on terms at least as favorable to the Covered Executive as is
currently in effect, which bene-
0139329.08-01S2a 55
60
fits may be provided by covering such Covered Executive under benefit plans and
programs maintained by Parent PROVIDED, FURTHER HOWEVER, that to the extent any
such Covered Executive receives comparable benefits from, and at the expense
of, a subsequent employer, such benefits from the Company shall cease.
Notwithstanding anything in this Agreement to the contrary,
the Severance Payments described in clauses (A) or (B) above shall be paid to a
Covered Executive only if such Covered Executive is actively employed by the
Company immediately prior to the Effective Time.
In the event that a Covered Executive that continues
employment with the Company following the Effective Time is terminated prior to
the expiration of the Severance Period that would have applied had such Covered
Executive been terminated effective as of the Effective Time, then such Covered
Executive shall be entitled to receive the Severance Payments determined
pursuant to this Section 5.5(a).
Each employee, other than any Covered Executives, of the
Company, who is covered by the Company's severance pay plan as in effect on
November 1, 1995 (each, a "Severance-Eligible Employee") and who is employed by
the Company immediately prior to the Effective Time and terminated for other
than "Cause," as defined below, within 12 months following the Effective Time,
shall be entitled to receive bi-weekly severance payments, consistent with
Parent's payroll practices, for a six-month period commencing on such
Severance-Eligible Employee's date of termination of employment, equal to, on
an annualized basis, such Severance-Eligible Employee's Base Pay; PROVIDED,
HOWEVER, that such payments shall be reduced (but not below zero), by the
amount of compensation such Severance-Eligible Employee receives from a
subsequent employer to the extent that such Severance-Eligible Employee is
employed during such six-month period.
For purposes of this Agreement, "Cause" shall mean the
conviction of an employee or executive (as the case may be) for the commission
of a felony, including the entry of a guilty or NOLO CONTENDERE plea, any
willful, grossly negligent or fraudulent action or inaction by an employee or
executive, as the case may be, or the
0139329.08-01S2a 56
61
employee's or executive's willful and continued failure to substantially
perform an employee's or executive's assigned duties.
(iii) SERP BENEFITS
-------------
Each Company employee who is (A) covered by the Company's
Supplemental Executive Retirement Plan ("SERP") and (B) actively employed by
the Company, in either case, immediately prior to the Effective Time (each, a
"SERP Executive") shall be eligible to receive benefits under the SERP based on
the terms of the SERP, as modified herein. For each SERP Executive (i) the
amount of service taken into account for purposes of calculating benefits and
vesting under the SERP shall be equal to the SERP Executive's service with the
Company prior to the Effective Time plus the Covered Executive's Severance
Period, if any, and (ii) compensation for each SERP Executive for purposes of
the SERP shall include one-half of the 1995 Target Bonus for such SERP
Executive.
(iv) GROSS-UP; CAP
-------------
With respect to the eight Executives listed on Section
5.5(a)(iv) of the Company Disclosure Schedule, the Company shall provide such
executives with a cash gross-up payment to make such executives whole for the
excise taxes imposed on all benefits and other amounts paid or payable to such
executive on account of the transactions contemplated by this Agreement as a
result of the application of sections 280G and 4999 of the Code. With respect
to all other employees of the Company who are entitled to benefits and other
amounts paid or payable to such executive on account of the transactions
contemplated by this Agreement as a result of the application of sections 280G
and 4999 of the Code, the Company shall not be obligated to pay or provide to
any such employee any payments or benefits to the extent that such payments or
benefits would constitute a "parachute payment" within the meaning of section
280G(b)(2)(A) of the Code.
(v) ESPP
----
The Company shall amend the Company's Employee Stock
Purchase Plan to provide that the option period
0139329.08-01S2a 57
62
that is in effect as of the date hereof shall cease as soon as practicable
following the date hereof.
(vi) OUTPLACEMENT
------------
The Company shall provide outplacement services from a
recognized outplacement provider selected by Parent to all employees of the
Company as of the Effective Time who were based in Twinsburg, Ohio as of the
Effective Time, and are terminated without Cause within one year of the
Effective Time.
(b) Parent agrees to cause Surviving Corporation and its
Subsidiaries to provide to all active employees of the Company who continue to
be employed by the Company as of the Effective Time ("Continuing Employees")
employee benefits comparable to those benefits provided to similarly situated
employees of Parent (which benefits may be provided by covering Company
employees under benefit plans maintained by Parent for employees of Parent who
perform similar duties). In addition, with respect to medical benefits
provided to Continuing Employees as of the Effective Time, Parent agrees to
cause Surviving Corporation and its Subsidiaries to waive waiting periods and
pre-existing condition requirements under such plans, and to give Continuing
Employees credit for any copayments and deductibles actually paid by such
employees under the Company's medical plans during the calendar year in which
the Closing occurs. In addition, service with the Company shall be recognized
for purposes of eligibility under Parent welfare plans as well as for purposes
of Parent's programs or policies for vacation pay and sick pay.
Section 5.6 NO SOLICITATION. (a) The Company (and its
Subsidiaries, and affiliates over which it exercises control) will not, and the
Company (and its Subsidiaries, and affiliates over which it exercises control)
will use their best efforts to ensure that their respective officers,
directors, employees, investment bankers, attorneys, accountants and other
agents do not, directly or indirectly: (i) initiate, solicit or encourage, or
take any action to facilitate the making of, any offer or proposal which
constitutes or is reasonably likely to lead to any Takeover Proposal (as
defined below) of the Company or any Subsidiary or an inquiry with respect
thereto, or, (ii) in the event of an unsolicited Takeover
0139329.08-01S2a 58
63
Proposal for the Company or any Subsidiary or affiliate of the Company, engage
in negotiations or discussions with, or provide any information or data to, any
corporation, partnership, person or other entity or group (other than Parent,
any of its affiliates or representatives) (each, a "Person") relating to any
Takeover Proposal, except in the case of clause (ii) above to the extent that
(x) the Takeover Proposal is a bona fide written proposal submitted to the
Company's Board of Directors and (y) the Company's Board of Directors
determines, after having received the oral or written opinion of outside legal
counsel to the Company, that the failure to engage in such negotiations or
discussions or provide such information would result in a breach of the Board
of Directors' fiduciary duties under applicable law. The Company shall notify
Parent and Sub orally and in writing of any such offers, proposals, inquiries
or Takeover Proposals (including, without limitation, the material terms and
conditions thereof and the identity of the Person making it), within 24 hours
of the receipt thereof, and shall thereafter inform Parent on a reasonable
basis of the status and content of any discussions or negotiations with such a
third party, including any material changes to the terms and conditions
thereof. The Company shall, and shall cause its Subsidiaries and affiliates
over which it exercises control, and will use best efforts to ensure their
respective officers, directors, employees, investment bankers, attorneys,
accountants and other agents to, immediately cease and cause to be terminated
all discussions and negotiations that have taken place prior to the date
hereof, if any, with any parties conducted heretofore with respect to any
Takeover Proposal relating to the Company. Nothing contained in this Section
5.6 shall prohibit the Company or its Board of Directors from taking and
disclosing to its stockholders a position with respect to a tender offer by a
third party pursuant to Rules 14d-9 and 14e-2(a) promulgated under the Exchange
Act or making such disclosure as may be required by applicable law.
(b) As used in this Agreement, "Takeover Proposal"
when used in connection with any Person shall mean any tender or exchange offer
involving the capital stock of such Person, any proposal for a merger,
consolidation or other business combination involving such Person or any
Subsidiary of such Person, any proposal or offer to acquire in any manner a
substantial equity
0139329.08-01S2a 59
64
interest in, or a substantial portion of the business or assets of, such Person
or any Subsidiary of such Person, any proposal or offer with respect to any
recapitalization or restructuring with respect to such Person or any Subsidiary
of such Person or any proposal or offer with respect to any other transaction
similar to any of the foregoing with respect to such Person or any Subsidiary
of such Person other than pursuant to the transactions to be effected pursuant
to this Agreement.
Section 5.7 ADDITIONAL AGREEMENTS. Subject to the terms
and conditions herein provided (including, but not limited to, Section 5.4)
each of the parties hereto agrees to use its reasonable efforts to take, or
cause to be taken, all action and to do, or cause to be done, all things
necessary, proper or advisable, whether under applicable laws and regulations
or otherwise, or to remove any injunctions or other impediments or delays,
legal or otherwise, to consummate and make effective the Merger and the other
transactions contemplated by this Agreement. In case at any time after the
Effective Time any further action is necessary or desirable to carry out the
purposes of this Agreement, the proper officers and directors of the Company
and Parent shall use their reasonable efforts to take, or cause to be taken,
all such necessary actions.
Section 5.8 PUBLICITY. So long as this Agreement is in
effect, neither the Company nor Parent nor affiliates which either of them
control shall issue or cause the publication of any press release or other
public statement or announcement with respect to this Agreement, the Stock
Option Agreement or the ▇▇▇▇/Chilmark Stockholder Agreement or the transactions
contemplated hereby or thereby without the prior consultation of the other
party, except as may be required by law or by obligations pursuant to any
listing agreement with a national securities exchange, provided that each party
will use its best efforts to consult with the other party prior to any such
issuance.
Section 5.9 NOTIFICATION OF CERTAIN MATTERS. The Company
shall give prompt notice to Parent, and Parent shall give prompt notice to the
Company, of (a) the occurrence, or non-occurrence of any event the occurrence
or non-occurrence of which would cause any representation or warranty contained
in this Agreement to be
0139329.08-01S2a 60
65
untrue or inaccurate in any material respect at or prior to the Effective Time
and (b) any material failure of the Company or Parent, as the case may be, to
comply with or satisfy any covenant, condition or agreement to be complied with
or satisfied by it hereunder; PROVIDED, HOWEVER, that the delivery of any
notice pursuant to this Section 5.9 shall not limit or otherwise affect the
remedies available hereunder to the party receiving such notice.
Section 5.10 DIRECTORS' AND OFFICERS' INSURANCE AND
INDEMNIFICATION. Parent agrees that at all times after the Effective Time, it
shall cause the Surviving Corporation and its Subsidiaries to indemnify, each
person who is now, or has been at any time prior to the date hereof, an
employee, agent, director or officer of the Company or of any of the Company's
Subsidiaries, successors and assigns (individually an "Indemnified Party" and
collectively the "Indemnified Parties"), to the fullest extent permitted by
law, with respect to any claim, liability, loss, damage, judgment, fine,
penalty, amount paid in settlement or compromise, cost or expense, including
reasonable fees and expenses of legal counsel, (whenever asserted or claimed)
("Indemnified Liability") based in whole or in part on, or arising in whole or
in part out of, any matter existing or occurring at or prior to the Effective
Time whether commenced, asserted or claimed before or after the Effective Time,
including liability arising under the Securities Act, the Exchange Act or state
law. Parent shall, and shall cause the Surviving Corporation to, maintain in
effect for not less than four years after the Effective Time the current
policies of directors' and officers' liability insurance maintained by the
Company and its Subsidiaries on the date hereof (provided that Parent may
substitute therefor policies having at least the same coverage and containing
terms and conditions which are no less advantageous to the persons currently
covered by such policies as insured) with respect to matters existing or
occurring at or prior to the Effective Time; PROVIDED, HOWEVER, that if the
aggregate annual premiums for such insurance during such period shall exceed
200% of the per annum rate of the aggregate premium currently paid by the
Company and its Subsidiaries for such insurance on the date of this Agreement,
then Parent shall cause the Surviving Corporation to, and the Surviving
Corporation shall, provide the maximum coverage that shall then be
0139329.08-01S2a 61
66
available at an annual premium equal to 200% of such rate. Parent agrees to
pay all expenses (including fees and expenses of counsel) that may be incurred
by any Indemnified Party in successfully enforcing the indemnity or other
obligations under this Section 5.10. The rights under this Section 5.10 are in
addition to rights that an Indemnified Party may have under the Certificate of
Incorporation, By-laws, other similar organizational documents of the Company
or any of its Subsidiaries or the DGCL. The rights under this Section 5.10
shall survive consummation of the Merger and are expressly intended to benefit
each Indemnified Party. Parent agrees to cause Surviving Corporation and any
of its Subsidiaries (or their successors) to keep in effect the provisions of
its Certificate of Incorporation or By-laws or similar organizational documents
providing for indemnification to the fullest extent provided by law.
Section 5.11 RULE 145 AFFILIATES. At least 40 days prior
to the Closing Date, the Company shall deliver to Parent a letter identifying,
to the best of the Company's knowledge, all persons who are, at the time of the
Company Special Meeting, deemed to be "affiliates" of the Company for purposes
of Rule 145 under the Securities Act ("Company Affiliates"). The Company shall
use its best efforts to cause each Person who is identified as a Company
Affiliate to deliver to Parent at least 30 days prior to the Closing Date an
agreement substantially in the form of Exhibit C to this Agreement.
Section 5.12 COOPERATION. Parent and the Company shall
together, or pursuant to an allocation of responsibility to be agreed upon
between them, coordinate and cooperate (a) with respect to the timing of the
Special Meetings, (b) in determining whether any action by or in respect of, or
filing with, any Governmental Entity is required, or any actions, consents
approvals or waivers are required to be obtained from parties to any material
contracts, in connection with the consummation of the transactions contemplated
by this Agreement, (c) in seeking any such actions, consents, approvals or
waivers or making any such filings, furnishing information required in
connection therewith and timely seeking to obtain any such actions, consents
approvals or waivers. As soon as possible following the commencement of the
Offer, the Company shall cooperate with Parent in the preparation and filing of
the Proxy Statement/Prospectus
0139329.08-01S2a 62
67
with the Commission, including, but not limited to providing legal, financial,
and accounting information concerning the Company and assisting in the
preparation of all financial and pro forma financial information required to be
included in such Proxy Statement/Prospectus. Subject to the terms and
conditions of this Agreement, Parent and the Company will each use its best
efforts to have the Registration Statement declared effective under the
Securities Act as promptly as practicable after the Registration Statement is
filed, and Parent and the Company shall, subject to applicable law, confer on a
regular and frequent basis with one or more representatives of one another to
report operational matters of significance to the Merger and the general status
of ongoing operations insofar as relevant to the Merger, provided that the
parties will not confer on any matter to the extent inconsistent with law.
Section 5.13. PROXY STATEMENT/PROSPECTUS. As soon as
practicable following the consummation of the Offer, Parent and the Company
shall prepare and file with the SEC the Proxy Statement/Prospectus and each
shall use its best efforts to have the Proxy Statement/Prospectus cleared by
the SEC as promptly as practicable. As soon as practicable following such
clearance Parent shall prepare and file with the SEC the Registration
Statement, of which the Proxy Statement/Prospectus will form a part, and shall
use its best efforts to have the Registration Statement declared effective by
the SEC as promptly as practicable thereafter. Parent and the Company shall
cooperate with each other in the preparation of the Proxy Statement/Prospectus,
and each will provide to the other promptly copies of all correspondence
between it or any of its representatives and the SEC. Each of the Company and
Parent shall furnish all information concerning it required to be included in
the Registration Statement and the Proxy Statement/Prospectus, and as promptly
as practicable after the effectiveness of the Registration Statement, the Proxy
Statement/Prospectus will be mailed to the stockholders of the Company and
Parent. No amendment or supplement to the Registration Statement or the Proxy
Statement/Prospectus will be made without the approval of each of the Company
and Parent, which approval will not be unreasonably withheld or delayed. Each
of the Company and Parent will advise the other promptly after it receives
notice thereof, of the time when the Registration Statement has become
effective or any amend-
0139329.08-01S2a 63
68
ment thereto or any supplement or amendment to the Proxy Statement/Prospectus
has been filed, or the issuance of any stop order, or the suspension of the
qualification of the Parent Common Stock to be issued in the Merger for
offering or sale in any jurisdiction, or of any request by the SEC or the NYSE
for amendment of the Registration Statement or the Proxy Statement/Prospectus.
Section 5.14 NEW YORK STATE REAL PROPERTY TRANSFER AND
GAINS TAXES. Sub or the Surviving Corporation shall pay or cause to be paid
any New York State and New York City Real Property Transfer or Gains Taxes
incurred in connection with the Offer and the Merger.
Section 5.15 CONFIDENTIALITY/STANDSTILL AGREEMENT. The
parties hereto agree that the Confidentiality Agreement shall be hereby amended
to provide that any provision therein which in any manner limits, restricts or
prohibits the voting or acquisition of Shares by Parent or any of its
affiliates or the representation of Parent's designees on the Company's Board
of Directors or which in any manner would be inconsistent with this Agreement
or the ▇▇▇▇/Chilmark Stockholder Agreement or the Stock Option Agreement or the
transactions contemplated hereby and thereby shall terminate as of the date
hereof. The Company agrees not to take any action that would impede, bar,
restrict or otherwise interfere in any manner with Parent's rights under the
▇▇▇▇/Chilmark Stockholder Agreement or the Stock Option Agreement, including,
without limitation, Parent's right to exercise the option granted to Parent
pursuant to the Stock Option Agreement. The provisions of this Section 5.15
shall survive any termination of this Agreement.
Section 5.16 STOCK EXCHANGE LISTING. The Parent shall use
its best efforts to list prior to the Effective Time on the New York Stock
Exchange, Inc. ("NYSE") and the Pacific Stock Exchange, subject to official
notice of issuance, the shares of Parent Common Stock to be issued in the
Merger.
0139329.08-01S2a 64
69
ARTICLE VI
CONDITIONS
Section 6.1 CONDITIONS TO THE OBLIGATIONS OF EACH PARTY.
The obligations of the Company, on the one hand, and Parent and Sub, on the
other hand, to consummate the Merger are subject to the satisfaction (or, if
permissible, waiver by the party for whose benefit such conditions exist) of
the following conditions:
(a) this Agreement shall have been adopted by the
stockholders of the Company in accordance with the DGCL;
(b) no court, arbitrator or governmental body, agency or
official shall have issued any order, decree or ruling which remains in
force and there shall not be any statute, rule or regulation, restraining,
enjoining or prohibiting the consummation of the Merger;
(c) the Registration Statement shall have become effective
under the Securities Act and no stop order suspending effectiveness of the
Registration Statement shall have been issued and no proceeding for that
purpose shall have been initiated or threatened by the SEC; and
(d) Parent, Sub or their affiliates shall have purchased
Shares pursuant to the Offer.
ARTICLE VII
TERMINATION
Section 7.1 TERMINATION. Anything herein or elsewhere to
the contrary notwithstanding, this Agreement may be terminated and the Merger
contemplated herein may be abandoned at any time prior to the Effective Time,
whether before or after stockholder approval hereof:
(a) By the mutual consent of the Board of Directors of
Parent and the Board of Directors of the Company.
0139329.08-01S2a 65
70
(b) By either of the Board of Directors of the
Company or the Board of Directors of Parent:
(i) if Parent or Sub has not purchased Shares
in accordance with the terms of the Offer on or prior to April 29, 1996;
PROVIDED, HOWEVER, that the right to terminate this Agreement under this
Section 7.1(b)(i) shall not be available to any party whose failure to
fulfill any obligations under this Agreement has been the cause of, or
resulted in, the failure to satisfy the conditions to the Offer; PROVIDED
FURTHER, HOWEVER, that Parent shall not have the right to terminate this
Agreement under this Section 7.1(b)(i) if Parent or Sub purchases any
Shares in connection with the Offer after April 29, 1996; or
(ii) if any Governmental Entity shall have
issued an order, decree or ruling or taken any other action (which order,
decree, ruling or other action the parties hereto shall use their best
efforts to lift), in each case permanently restraining, enjoining or
otherwise prohibiting the transactions contemplated by this Agreement and
such order, decree, ruling or other action shall have become final and
non-appealable.
(c) By the Board of Directors of the Company:
(i) if, prior to the purchase of Shares
pursuant to the Offer, the Board of Directors of the Company shall have (A)
withdrawn, or modified or changed in a manner adverse to Parent or Sub its
approval or recommendation of the Offer, this Agreement or the Merger in
order to approve and permit the Company to execute a definitive agreement
relating to a Takeover Proposal, and (B) determined, after having received
the oral or written opinion of outside independent legal counsel to the
Company, that the failure to take such action as set forth in the preceding
clause (A) would result in a breach of the Board of Directors' fiduciary
duties under applicable law; PROVIDED, HOWEVER, that the Company shall have
given Parent and Sub at least thirty-six hours advance actual notice of any
termination pursuant to this Section 7.1(c)(i) and shall have
0139329.08-01S2a 66
71
made the payment referred to in Section 7.3 hereof; or
(ii) if prior to the purchase of Shares pursuant
to the Offer, Parent or Sub (x) breaches or fails in any material respect
to perform or comply with any of its material covenants and agreements
contained herein or (y) breaches its representations and warranties in any
material respect and such breach would have or would be reasonably likely
to have a material adverse effect on Parent and its Subsidiaries; PROVIDED,
HOWEVER, that if any such breach is cured, the Company may not terminate
this Agreement pursuant to this Section 7.1(c)(ii); or
(iii) if Parent or Sub shall have terminated the
Offer, or the Offer shall have expired, without Parent or Sub, as the case
may be, purchasing any shares of Company Common Stock pursuant thereto;
PROVIDED that the Company may not terminate this Agreement pursuant to this
Section 7.1(c)(iii) if the Company is in material breach of this Agreement;
or
(iv) if, due to an occurrence that if occurring
after the commencement of the Offer would result in a failure to satisfy
any of the conditions set forth in Annex A hereto, Parent, Sub or any of
their affiliates shall have failed to commence the Offer on or prior to
five business days following the date of the initial public announcement of
the Offer; PROVIDED, that the Company may not terminate this Agreement
pursuant to this Section 7.1(c)(iv) if the Company is in material breach of
this Agreement.
(d) By the Board of Directors of Parent:
(i) if, due to an occurrence that if occurring
after the commencement of the Offer would result in a failure to satisfy
any of the conditions set forth in Annex A hereto, Parent, Sub or any of
their affiliates shall have failed to commence the Offer on or prior to
five business days following the date of the initial public announcement of
the Offer; PROVIDED that Parent may not terminate this
0139329.08-01S2a 67
72
Agreement pursuant to this Section 7.1(d)(i) if Parent or Sub is in material
breach of this Agreement; or
(ii) if (A) prior to the purchase of Shares
pursuant to the Offer, the Board of Directors of the Company shall have
withdrawn, or modified or changed in a manner adverse to Parent or Sub its
approval or recommendation of the Offer, this Agreement or Merger or shall
have recommended a Takeover Proposal or other business combination, or the
Company shall have entered into an agreement in principle (or similar
agreement) or definitive agreement providing for a Takeover Proposal or
other business combination with a person or entity other than Parent, Sub
or their Subsidiaries (or the Board of Directors of the Company resolves to
do any of the foregoing), or (B) prior to the consummation of the Offer, it
shall have been publicly disclosed or Parent or Sub shall have learned that
any person, entity or "group" (as that term is defined in Section 13(d)(3)
of the Exchange Act) (an "Acquiring Person"), other than Parent, Sub or
▇▇▇▇/Chilmark Fund, L.P. or Magten or FMR Corp. (including any of FMR
Corp.'s affiliates) shall have acquired beneficial ownership (determined
pursuant to Rule 13d-3 promulgated under the Exchange Act) of more than
14.9% of any class or series of capital stock of the Company (including the
Shares), through the acquisition of stock, the formation of a group or
otherwise, or shall have been granted any option, right or warrant,
conditional or otherwise, to acquire beneficial ownership of more than
14.9% of any class or series of capital stock of the Company (including the
Shares); or
(iii) if Parent or Sub, as the case may be, shall
have terminated the Offer, or the Offer shall have expired without Parent
or Sub, as the case may be, purchasing any Shares thereunder, PROVIDED that
Parent may not terminate this Agreement pursuant to this Section
7.1(d)(iii) if Parent or Sub is in material breach of this Agreement.
Section 7.2 EFFECT OF TERMINATION. In the event of the
termination of this Agreement as provided in Section 7.1, written notice
thereof shall forthwith be
0139329.08-01S2a 68
73
given to the other party or parties specifying the provision hereof pursuant to
which such termination is made, and this Agreement shall forthwith become null
and void, and there shall be no liability on the part of Parent, Sub or the
Company except (A) for fraud or for material breach of this Agreement and (B)
as set forth in Sections 5.15, 7.3, 8.1 and 8.2 hereof.
Section 7.3 TERMINATION FEE. If (w) the Board of Directors
of the Company shall terminate this Agreement pursuant to Section 7.1(c)(i)
hereof, (x) the Board of Directors of Parent shall terminate this Agreement
pursuant to Section 7.1(d)(ii)(A) hereof, (y) the Board of Directors of Parent
shall terminate this Agreement pursuant to Section 7.1(d)(ii)(B) and within
nine months of such termination, an Acquiring Person shall acquire or
beneficially own a majority of the then outstanding Shares or shall have
obtained representation on the Company's Board of Directors or shall enter into
a definitive agreement with the Company with respect to a Takeover Proposal or
similar business combination, or (z) the Board of Directors of Parent shall
terminate this Agreement pursuant to Section 7.1(d)(i) or Section 7.1(d)(iii)
hereof, in each case due to (I) a material breach of the representations and
warranties of the Company set forth in this Agreement or (II) a material breach
of, or failure to perform or comply with, by the Company any material
obligation, covenant or agreement contained in this Agreement, then in any such
case as described in clause (w), (x), (y) or (z) (each such case of termination
being referred to as a "Trigger Event"), the Company shall pay to Parent (not
later than the date of termination of this Agreement in the case of clauses
(w), (x) and (z) above) an amount equal to $45 million.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 FEES AND EXPENSES. Except as otherwise
provided in Section 7.3 hereof and except for expenses incurred in connection
with printing the Offer Documents, Schedule 14D-9, Proxy Statement/Prospectus
and the Registration Statement, as well as the filing fees relating thereto and
relating to the filing under the HSR Act, which costs shall be shared equally
by Parent and
0139329.08-01S2a 69
74
the Company, all costs (other than the filing fee for registration of the
Parent Common Stock which will be paid by Parent) and expenses incurred in
connection with this Agreement and the consummation of the transactions
contemplated hereby and thereby shall be paid by the party incurring such
expenses.
Section 8.2 FINDERS' FEES. (a) Except for ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
& Co. Incorporated, a copy of whose engagement agreement has been provided to
Parent and whose fees will be paid by the Company, there is no investment
banker, broker, finder or other intermediary which has been retained by or is
authorized to act on behalf of the Company or any of its Subsidiaries who might
be entitled to any fee or commission from the Company or any of its
Subsidiaries upon consummation of the transactions contemplated by this
Agreement.
(b) Except for ▇▇▇▇▇▇▇▇▇, Lufkin & ▇▇▇▇▇▇▇▇
Securities Corporation, a copy of whose engagement agreement has been provided
to the Company and whose fees will be paid by Parent, there is no investment
banker, broker, finder or other intermediary which has been retained by or is
authorized to act on behalf of Parent or any of its Subsidiaries who might be
entitled to any fee or commission from Parent or any of its Subsidiaries upon
consummation of the transactions contemplated by this Agreement.
Section 8.3 AMENDMENT AND MODIFICATION. Subject to
applicable law, this Agreement may be amended, modified and supplemented in any
and all respects, whether before or after any vote of the stockholders of the
Company contemplated hereby, by written agreement of the parties hereto,
pursuant to action taken by their respective Boards of Directors (which, in the
case of the Company, shall include the affirmative vote of a majority of the
Continuing Directors), at any time prior to the Closing Date with respect to
any of the terms contained herein; PROVIDED, HOWEVER, that after the approval
of this Agreement by the stockholders of the Company, no such amendment,
modification or supplement shall reduce or change the consideration to be
received by the Company's stockholders in the Merger.
Section 8.4 NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES.
None of the representations and warranties
0139329.08-01S2a 70
75
in this Agreement or in any schedule, instrument or other document delivered
pursuant to this Agreement shall survive the Effective Time.
Section 8.5 NOTICES. All notices and other communications
hereunder shall be in writing and shall be deemed given if delivered
personally, telecopied (which is confirmed) or sent by an overnight courier
service, such as FedEx, to the parties at the following addresses (or at such
other address for a party as shall be specified by like notice):
(a) if to Parent or Sub, to:
Rite Aid Corporation
▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
and
(b) if to the Company, to:
Revco D.S., Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
0139329.08-01S2a 71
76
with a copy to:
▇▇▇▇▇▇▇ ▇.▇. ▇▇▇▇▇, Esq.
Benesch, Friedlander,
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Telephone No.: ▇▇▇-▇▇▇-▇▇▇▇
Telecopy No.: ▇▇▇-▇▇▇-▇▇▇▇
Section 8.6 INTERPRETATION. When a reference is made in
this Agreement to Sections, such reference shall be to a Section of this
Agreement unless otherwise indicated. Whenever the words "include", "includes"
or "including" are used in this Agreement they shall be deemed to be followed
by the words "without limitation". The phrases "the date of this Agreement",
"the date hereof", and terms of similar import, unless the context otherwise
requires, shall be deemed to refer to November __, 1995. As used in this
Agreement, the term "affiliate(s)" shall have the meaning set forth in Rule
l2b-2 of the Exchange Act.
Section 8.7 COUNTERPARTS. This Agreement may be executed
in two or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when two or more counterparts have been
signed by each of the parties and delivered to the other parties, it being
understood that all parties need not sign the same counterpart.
Section 8.8 ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES;
RIGHTS OF OWNERSHIP. This Agreement, the ▇▇▇▇/Chilmark Stockholder Agreement,
the Stock Option Agreement and the Confidentiality Agreement, as modified
hereby (including the exhibits hereto and the documents and the instruments
referred to herein and therein): (a) constitute the entire agreement and
supersede all prior agreements and understandings, both written and oral, among
the parties with respect to the subject matter hereof, and (b) except as
provided in Sections 5.5 and 5.10 with respect to the obligations of the
Company or the Surviving Corporation thereunder, are not intended to confer
upon any person other than the parties hereto any rights or remedies hereunder.
0139329.08-01S2a 72
77
Section 8.9 SEVERABILITY. If any term, provision, covenant
or restriction of this Agreement is held by a court of competent jurisdiction
or other authority to be invalid, void, unenforceable or against its regulatory
policy, the remainder of the terms, provisions, covenants and restrictions of
this Agreement shall remain in full force and effect and shall in no way be
affected, impaired or invalidated.
Section 8.10 SPECIFIC PERFORMANCE. The parties hereto
agree that irreparable damage would occur in the event any provision of this
Agreement was not performed in accordance with the terms hereof and that the
parties shall be entitled to the remedy of specific performance of the terms
hereof, in addition to any other remedy at law or equity.
Section 8.11 GOVERNING LAW. This Agreement shall be
governed and construed in accordance with the laws of the State of Delaware
without giving effect to the principles of conflicts of law thereof.
Section 8.12 ASSIGNMENT. Neither this Agreement nor any of
the rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties, except that Sub may assign, in its sole
discretion, any or all of its rights, interests and obligations hereunder to
Parent or to any direct or indirect wholly owned Subsidiary of Parent;
PROVIDED, HOWEVER, that no such assignment shall relieve Parent from any of its
obligations hereunder. Subject to the preceding sentence, this Agreement will
be binding upon, inure to the benefit of and be enforceable by the parties and
their respective successors and assigns.
Section 8.13 JOINT AND SEVERAL LIABILITY. Parent and Sub
hereby agree that they will be jointly and severally liable for all covenants,
agreements, obligations and representations and warranties made by either of
them in this Agreement.
0139329.08-01S2a 73
78
IN WITNESS WHEREOF, Parent, Sub and the Company have caused
this Agreement to be signed by their respective officers thereunto duly
authorized as of the date first written above.
RITE AID CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇. Grass
---------------------------------------
Name: ▇▇▇▇▇▇ ▇. Grass
Title: Chairman of the Board and
Chief Executive
Officer
OCEAN ACQUISITION CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇. Grass
---------------------------------------
Name: ▇▇▇▇▇▇ ▇. Grass
Title: President
REVCO D.S., INC.
By: /s/ D. ▇▇▇▇▇▇ ▇▇▇▇▇
---------------------------------------
Name: D. ▇▇▇▇▇▇ ▇▇▇▇▇
Title: President and Chief
Executive Officer
0139329.08-01S2a
79
ANNEX A
-------
CONDITIONS TO THE TENDER OFFER
------------------------------
Notwithstanding any other provisions of the Offer, and in
addition to (and not in limitation of) Sub's rights to extend and amend the
Offer at any time in its sole discretion (subject to the provisions of the
Merger Agreement), Sub shall not be required to accept for payment or, subject
to any applicable rules and regulations of the SEC, including Rule 14e-1(c)
under the Exchange Act (relating to Sub's obligation to pay for or return
tendered Shares promptly after termination or withdrawal of the Offer), pay
for, and may delay the acceptance for payment of or, subject to the restriction
referred to above, the payment for, any tendered Shares, and may terminate the
Offer as to any Shares not then paid for, if (i) any applicable waiting period
under the HSR Act has not expired or terminated prior to the expiration of the
Offer, (ii) the Minimum Condition has not been satisfied, or (iii) at any time
on or after November 17, 1995 and prior to the acceptance for payment of any
Shares, any of the following events shall occur or shall be determined by Sub
to have occurred:
(a) there shall be instituted, pending or threatened any
action or proceeding by any government or governmental authority or agency,
domestic or foreign, (i) challenging or seeking to make illegal, to delay
materially or otherwise directly or indirectly to restrain or prohibit the
making of the Offer, the acceptance for payment of or payment for some of or
all the Shares by Parent or Sub or the consummation by Parent or Sub of the
Merger, seeking to obtain material damages relating to the Merger Agreement,
the ▇▇▇▇/Chilmark Stockholder Agreement, the Stock Option Agreement or any of
the transactions contemplated thereby or otherwise seeking to prohibit directly
or indirectly the transactions contemplated by the Offer or the Merger, or
challenging or seeking to make illegal the transactions contemplated by the
▇▇▇▇/Chilmark Stockholder Agreement, the Stock Option Agreement or otherwise
directly or indirectly to restrain, prohibit or delay the transactions
contemplated by the ▇▇▇▇/Chilmark Stockholder Agreement or the Stock Option
Agreement, (ii) seeking to restrain,
0139329.08-01S2a A-1
80
prohibit or delay Parent's, Sub's or any of their subsidiaries' ownership or
operation of all or any portion (other than an immaterial portion) of the
business or assets of the Company or its subsidiaries, or to compel Parent or
any of its subsidiaries to dispose of or hold separate all or any portion
(other than an immaterial portion) of the business or assets of the Company or
Parent or their respective subsidiaries, (iii) seeking to impose or confirm
material limitations on the ability of Parent, Sub or any of their subsidiaries
or affiliates effectively to exercise full rights of ownership of the Shares,
including, without limitation, the right to vote any Shares acquired or owned
by Parent, Sub or any of their subsidiaries or affiliates on all matters
properly presented to the Company's stockholders, or (iv) seeking to require
divestiture by Parent, or Sub or any of their subsidiaries of any Shares; or
(b) there shall be any action taken, or any statute, rule,
regulation, injunction, judgment, order or decree enacted, enforced, entered,
promulgated, issued or deemed applicable to the Offer or the Merger, by any
court, government or governmental authority or agency, domestic or foreign,
that, directly or indirectly, results in any of the consequences referred to in
clauses (i) through (iv) of paragraph (a) above; or
(c) there shall have occurred (i) any general suspension of
trading in, or limitation on prices for, securities on the New York Stock
Exchange for a period in excess of three hours, (ii) the declaration of a
banking moratorium or any suspension of payments in respect of banks in the
United States (whether or not mandatory), (iii) the commencement of a war,
armed hostilities or other international or national calamity directly or
indirectly involving the United States, (iv) any limitation (whether or not
mandatory) by any foreign or United States governmental authority or agency on
the extension of credit by banks or other financial institutions, (v) any
decline in either the Dow ▇▇▇▇▇ Industrial Average or the Standard & Poor's
Index of 500 Industrial Companies by an amount in excess of 20% measured from
the close of business on November 29, 1995, or (vi) in the case of any of the
foregoing existing at the time of the commencement of the Offer, a material
acceleration or worsening thereof; or
0139329.08-01S2a ▇-▇
▇▇
(▇) the representations and warranties of the Company set
forth in the Merger Agreement shall not be true and correct in any material
respect as of the date of consummation of the Offer as though made on or as of
such date, except (i) for changes specifically permitted by the Merger
Agreement and (ii) those representations and warranties that address matters
only as of a particular date which are true and correct as of such date, or the
Company shall have breached or failed in any material respect to perform or
comply with any material obligation, agreement or covenant required by the
Merger Agreement to be performed or complied with by it; or
(e) the Merger Agreement shall have been terminated in
accordance with its terms; or
(f) any party to the ▇▇▇▇/Chilmark Stockholder Agreement or
the Stock Option Agreement other than Sub and Parent shall have breached or
failed to perform any of its agreements under such agreements or breached any
of its representations and warranties in such agreements or any such agreement
shall not be valid, binding and enforceable, except for such breaches or
failures or failures to be valid, binding and enforceable that do not
materially and adversely affect the benefits expected to be received by Parent
and Sub under the Merger Agreement, the ▇▇▇▇/Chilmark Stockholder Agreement or
the Stock Option Agreement; or
(g) (i) it shall have been publicly disclosed or Parent or
Sub shall have otherwise learned that any person, entity or "group" (as defined
in Section 13(d)(3) of the Exchange Act), other than ▇▇▇▇/Chilmark Fund, L.P.
or Magten Asset Management Corporation, or FMR Corp. (including any of FMR
Corp.'s affiliates) Parent or its affiliates or any group of which any of them
is a member, shall have acquired beneficial ownership (determined pursuant to
Rule 13d-3 promulgated under the Exchange Act) of more than 14.9% of any class
or series of capital stock of the Company (including the Shares), through the
acquisition of stock, the formation of a group or otherwise, or shall have been
granted an option, right or warrant, conditional or otherwise, to acquire
beneficial ownership of more than 14.9% of any class or series of capital stock
of the Company (including the Shares); or (ii) any person, entity or group
shall have entered into a definitive agreement or agreement in principle with
the
0139329.08-01S2a A-3
82
Company with respect to a merger, consolidation or other business combination
with the Company; or
(h) a tender or exchange offer for some or all of the Shares
or proposal for a Takeover Proposal shall have been publicly proposed to be
made or shall have been made by another person or entity;
(i) the Board of Directors of the Company shall have
withdrawn, or modified or changed in a manner adverse to Parent or Sub
(including by amendment of the Schedule 14D-9), its approval or recommendation
of the Offer, the Merger Agreement, or the Merger, or recommended another
proposal or offer, or shall have resolved to do any of the foregoing; or
(j) there shall have occurred any event, change or effect
(including the incurrence of any liabilities of any nature, whether or not
accrued, contingent or otherwise) which has, individually or in the aggregate,
a material adverse effect (as defined in the Merger Agreement) on the Company
and its Subsidiaries;
which in the sole judgment of Parent or Sub, in any such case, and regardless
of the circumstances (including any action or inaction by Parent or Sub giving
rise to such condition) makes it inadvisable to proceed with the Offer or with
such acceptance for payment or payments.
The foregoing conditions are for the sole benefit of Parent
and Sub and may be asserted by Parent or Sub regardless of the circumstances
giving rise to any such condition or may be waived by Parent or Sub in whole or
in part at any time and from time to time in their sole discretion. The
failure by Parent or Sub at any time to exercise any of the foregoing rights
shall not be deemed a waiver of any such right; the waiver of any such right
with respect to particular facts and other circumstances shall not be deemed a
waiver with respect to other facts and circumstances; and each such right shall
be deemed an ongoing right which may be asserted at any time and from time to
time.
0139329.08-01S2a A-4
83
Exhibit A
See Exhibit 4 to this Schedule 14D-9.
84
Exhibit B
See Exhibit 5 to this Schedule 14D-9.
85
EXHIBIT C
---------
Form of Affiliate Agreement
---------------------------
Rite Aid Corporation
▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
The undersigned is a holder of shares of Common Stock, par value $.O1
per share (the "Company Common Stock"), of Revco D.S., Inc., a Delaware
corporation (the "Company"). The undersigned may receive shares of Common
Stock, par value $1.00 per share (the "Parent Common Stock"), of Rite Aid
Corporation, a Delaware corporation ("Parent"), in connection with the merger
of Ocean Acquisition Corporation, a Delaware corporation and a wholly owned
subsidiary of Parent ("Sub"), with and into the Company, with the Company
continuing as the surviving corporation (the "Merger").
The undersigned acknowledges that the undersigned may be deemed an
"affiliate" of the Company as the term "affiliate" is defined for purposes of
paragraphs (c) and (d) of Rule 145 ("Rule 145") of the rules and regulations
under the Securities Act of 1933, as amended (the "Act"). Execution of this
Agreement by the undersigned should not be construed as an admission of
"affiliate" status or as a waiver of any rights the undersigned may have to
object to any claim that the undersigned is such an affiliate on or after the
date of this Agreement.
If in fact the undersigned were an affiliate of the Company under the
Act, the undersigned's ability to sell, transfer or otherwise dispose of any
Parent Common Stock received by the undersigned in exchange for any shares of
Company Common Stock pursuant to the Merger may be restricted unless such
transaction is registered under the Act or an exemption from such registration
is available. The undersigned understands that such exemptions are limited and
the undersigned has obtained advice of counsel as to the nature and
conditions of such exemptions, including information with respect to the
applicability to the sale of such securities of Rules 144 and 145(d)
promulgated under the Act.
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A. The undersigned hereby represents to and covenants with Parent
that the undersigned will not sell, transfer or otherwise dispose of any Parent
Common Stock received by the undersigned in exchange for shares of Company
Common Stock pursuant to the Merger except (i) pursuant to an effective
registration statement under the Act, (ii) by a sale made in conformity with
the provisions of Rule 145 (and otherwise in accordance with Rule 144 under
the Act if the undersigned is an affiliate of Parent and if so required at the
time) or (iii) in a transaction which, in the opinion of independent counsel
reasonably satisfactory to Parent or as described in a "no-action" or
interpretive letter from the Staff of the Securities and Exchange Commission
(the "Commission"), is not required to be registered under the Act.
B. The undersigned understands that Parent is under no obligation to
register the sale, transfer or other disposition of Parent Common Stock by the
undersigned or on behalf of the undersigned under the Act or, except as
provided in paragraph F.1 below, to take any other action necessary in order to
make compliance with an exemption from such registration available.
C. The undersigned also understands that stop transfer instructions
will be given to Parent's transfer agents with respect to the Parent Common
Stock issued to the undersigned and that there will be placed on the
certificates for the Parent Common Stock issued to the undersigned, or any
substitutions therefor, a legend stating in substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT
OF 1933 APPLIES. THE SHARES REPRESENTED BY THIS CERTIFICATE MAY ONLY
BE TRANSFERRED IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT DATED
NOVEMBER 29, 1995 BETWEEN THE REGISTERED HOLDER HEREOF AND RITE AID
CORPORATION, A COPY OF WHICH AGREEMENT IS ON FILE AT THE PRINCIPAL
OFFICES OF RITE AID CORPORATION."
D. The undersigned also understands that unless a sale or transfer is
made in conformity with the provisions of Rule 145, or pursuant to a
registration statement, Parent reserves the right to put the following legend
on the certificates issued to the undersigned's transferee:
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87
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND WERE ACQUIRED FROM A
PERSON WHO RECEIVED SUCH SHARES IN A TRANSACTION TO WHICH RULE 145
PROMULGATED UNDER THE SECURITIES ACT OF 1933 APPLIES. THE SHARES HAVE
BEEN ACQUIRED BY THE HOLDER NOT WITH A VIEW TO, OR FOR RESALE IN
CONNECTION WITH, ANY DISTRIBUTION THEREOF WITHIN THE MEANING OF THE
SECURITIES ACT OF 1933 AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE
TRANSFERRED EXCEPT IN ACCORDANCE WITH AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933."
E. In the event of a sale of Parent Common Stock pursuant to Rule 145,
the undersigned will supply Parent with evidence of compliance with such Rule,
in the form of customary seller's and broker's Rule 145 representation
letters or as Parent may otherwise reasonably request. The undersigned
understands that Parent may instruct its transfer agent to withhold the
transfer of any Parent Common Stock disposed of by the undersigned in a manner
inconsistent with this letter.
F. By Parent's acceptance of this Agreement, Parent hereby agrees with
the undersigned as follows:
1. For so long as to the extent necessary to permit the undersigned to
sell the Parent Common Stock pursuant to Rule 145 and, to the extent
applicable, Rule 144 under the Act, Parent shall (a) use its reasonable best
efforts to (i) file, on a timely basis, all reports and data required to be
filed with the Commission by it pursuant to Section 13 of the Securities
Exchange Act of 1934, as amended (the "1934 Act") and (ii) furnish to the
undersigned upon request a written statement as to whether Parent has
complied with such reporting requirements during the 12 months preceding any
proposed sale of Parent Common Stock by the undersigned under Rule 145 and Rule
144. Parent has filed all reports required to be filed with the Commission
under Section 13 of the 1934 Act during the preceding 12 months.
2. It is understood and agreed that the legends set forth in
paragraph C and D above shall be removed by delivery of substitute
certificates without such legend if such legend is not required for purposes of
the Act or this Agreement. It is understood and agreed that such legends and
the stop orders referred to above will be removed if (i) two years shall have
elapsed from the date the undersigned acquired Parent Common Stock re-
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88
ceived in the Merger and the provisions of Rule 145(d)(2) are then available
to the undersigned, (ii) three years shall have elapsed from the date
the undersigned acquired the Parent Common Stock received in the Merger and the
provisions of Rule 145(d)(3) are then applicable to the undersigned, (iii) the
Parent has received either an opinion of counsel, which opinion and counsel
shall be reasonably satisfactory to Parent, or a "no action" letter obtained
from the staff of the Commission, to the effect that the Parent Common Stock
subject thereto may be transferred free of the restrictions imposed by Rule 144
or 145 under the Act, or (iv) in the event of a sale of Parent Common Stock
received by the undersigned in the Merger which has been registered under the
Act or made in conformity with the provisions of Rule 145; and, in the case of
(i) and (ii) above, Parent has received either an opinion of counsel, which
opinion and counsel shall be reasonably satisfactory to Parent, or a "no
action" letter obtained from the staff of the Commission, to the effect that
the restrictions imposed by Rule 145 under the Act no longer apply to the
undersigned.
The undersigned acknowledges that it has carefully reviewed this letter
and understands the requirements hereof and the limitations imposed upon the
distribution, sale, transfer or other disposition of Parent Common Stock
received by the undersigned in the Merger.
Very truly yours,
-----------------------------
Name
Accepted this ____ day of
_____________ 199___, by
RITE AID CORPORATION
By:_____________________________
Name:
Title:
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