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EXHIBIT 1
AGREEMENT AND PLAN OF MERGER
AMONG
SAFEWAY INC.,
WINDY CITY ACQUISITION CORP.
AND
DOMINICK'S SUPERMARKETS, INC.
DATED AS OF OCTOBER 13, 1998
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of October 13, 1998 (the
"Agreement"), among Safeway Inc., a Delaware corporation ("Parent"), Windy City
Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of
Parent ("Merger Sub"), and Dominick's Supermarkets, Inc., a Delaware corporation
(the "Company").
RECITALS
WHEREAS, the Boards of Directors of Parent, Merger Sub and the Company have
each approved the merger of Merger Sub with and into the Company and the Company
becoming a wholly-owned direct subsidiary of Parent (the "Merger") in accordance
with the Delaware General Corporation Law (the "DGCL") upon the terms and
subject to the conditions set forth herein;
WHEREAS, in order to facilitate the Merger, the Boards of Directors of
Parent, Merger Sub and the Company have each approved the offer by Merger Sub to
purchase for cash all of the issued and outstanding shares of Common Stock, par
value $.01 per share (the "Voting Common Stock"), and Non-Voting Common Stock,
par value $.01 per share (the "Non-Voting Common Stock" and, together with the
Voting Common Stock, the "Common Stock"), of the Company at a price per share
equal to the Price per Share (as defined below) subject to the terms and
conditions set forth herein and in Annex A hereto; and
WHEREAS, concurrently with the execution and delivery of this Agreement and
as a condition and inducement to Parent's willingness to enter into this
Agreement, Parent and certain holders of Common Stock (the "Stockholders") have
entered into a stockholders agreement, dated as of the date hereof and in the
form attached as Exhibit A hereto (the "Stockholders Agreement");
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby,
Parent, Merger Sub and the Company hereby agree as follows:
ARTICLE I.
DEFINITIONS
For purposes of this Agreement, the term:
"Action" shall mean any action, order, writ, injunction, judgment or decree
outstanding or claim, suit, litigation, proceeding, arbitration or investigation
by or before any court, governmental or other regulatory or administrative
agency or commission or any other Person.
"Affiliate" shall mean, with respect to any Person, any other Person that
directly, or through one or more intermediaries, controls or is controlled by or
is under common control with such Person.
"Agreement" shall have the meaning set forth in the Preamble.
"Alternative Transaction" shall mean any of the following events: (i) any
merger, consolidation or business combination between the Company or any of its
Significant Subsidiaries and any person other than Parent, Merger Sub or any
affiliate thereof (a "Third Party"); (ii) the acquisition or purchase by a Third
Party of 25% or more of the capital stock (including securities exercisable or
exchangeable for or convertible into capital stock) of the Company or any
material equity interest in any of its Significant Subsidiaries or consolidated
assets of the Company and its Subsidiaries, taken as a whole; (iii) any tender
offer or exchange offer that, if consummated, would result in any Third Party
owning 25% or more of the Common Stock; or (iv) any proposal or offer with
respect to the foregoing.
"Assets" shall mean, with respect to any Person, all land, buildings,
improvements, leasehold improvements, Fixtures and Equipment and other assets,
real or personal, tangible or intangible, owned, leased or licensed by such
Person or any of its Subsidiaries.
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"Average Parent Price" shall mean the average of the closing prices of the
Parent Common Stock on the NYSE as reported on the NYSE Composite Transaction
Tape for the 15 trading days randomly selected by lot out of the 35 trading days
ending on the second trading day preceding the Effective Time.
"Benefit Arrangement" shall mean, with respect to any Person, any
employment, consulting, severance, change in control or other similar contract,
arrangement or policy and each plan, arrangement (written or oral), program,
agreement or commitment providing for insurance coverage (including without
limitation any self-insured arrangements), workers' compensation, disability
benefits, life, health, disability or accident benefits (including without
limitation any "voluntary employees' beneficiary association" as defined in
Section 501(c)(9) of the Code providing for the same or other benefits) or for
deferred compensation, profit-sharing bonuses, stock options, stock appreciation
rights, stock purchases or other forms of incentive compensation other than
Welfare Plan, Pension Plan or Multiemployer Plan, in each case with respect to
which such Person or any ERISA Affiliate has or may have any liability (accrued,
contingent or otherwise).
"Business Day" shall have the meaning specified in Rule 14d-1(e)(6) of the
Exchange Act for purposes of Article II of this Agreement and for all other
purposes shall mean each day other than Saturdays, Sundays and days when
commercial banks are authorized to be closed for business in New York, New York.
"Bylaws" shall have the meaning set forth in Section 2.4(c).
"Cause" shall mean, with respect to any employee of the Company or the
Surviving Corporation, any acts or omissions on the part of such employee
involving: (i) material dishonesty or misappropriation adversely affecting the
Company or the Surviving Corporation, as the case may be, or its property or
funds; (ii) serious misconduct, including but not limited to reckless or willful
destruction of Company property, non-performance of employee's responsibilities
as an employee, violation of a material condition of employment, aiding a
competitor of the Company or the Surviving Corporation, as the case may be,
unauthorized disclosure or use of confidential information on trade secrets or
sexual, racial or other actionable harassment; (iii) conviction of, or a plea of
nolo contendere to, any felony; or (iv) illegal, unethical, dishonest,
fraudulent or other similar conduct tending to place such employee or the
Company or the Surviving Corporation, as the case may be, by reason of
association with such employee, in disrepute or to subject the Company or the
Surviving Corporation, as the case may be, to material financial loss or loss of
business, in each case as determined by the Company Board or the Board of
Directors of the Surviving Corporation, as the case may be.
"Certificate of Incorporation" shall have the meaning set forth in Section
2.4(c).
"Certificate of Merger" shall have the meaning set forth in Section 3.3.
"Certificate of Ownership" shall have the meaning set forth in Section 3.3.
"Certificates" shall have the meaning set forth in Section 3.9(b).
"Closing" shall have the meaning set forth in Section 3.2.
"Closing Date" shall have the meaning set forth in Section 3.2.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Common Stock" shall have the meaning set forth in the Recitals.
"Company" shall have the meaning set forth in the Preamble.
"Company Board" shall have the meaning set forth in Section 2.4(a).
"Company Disclosure Schedule" shall have the meaning set forth in Section
4.3.
"Company Financial Adviser" shall have the meaning set forth in Section
4.20.
"Company Stock Rights" shall mean all stock options, restricted stock
awards, performance awards, dividend equivalents, deferred stock, stock
payments, stock appreciation rights and shares of capital stock granted,
awarded, earned or purchased pursuant to any Stock Plan.
"Company Stockholder Meeting" shall have the meaning set forth in Section
7.1.
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"Confidentiality Agreement" shall have the meaning set forth in Section
7.2(b).
"Continuing Directors" shall have the meaning set forth in Section 2.4(c).
"Contract" shall mean any note, bond, mortgage, indenture, guarantee, other
evidence of indebtedness, lease, license, contract, agreement on other
instrument or obligation (written or oral) 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 which (i) does not terminate or is otherwise not cancelable
within one (1) year without penalty, cost or liability or (ii) involves the
payment or receipt of money in excess of $500,000.
"Conversion Ratio" shall mean the quotient obtained by dividing the Price
Per Share by the Average Parent Price.
"Current Premium" shall have the meaning set forth in Section 7.6(d).
"DGCL" shall have the meaning set forth in the Recitals.
"DOJ" shall have the meaning set forth in Section 7.8.
"Effective Time" shall have the meaning set forth in Section 3.3.
"Employee Benefits" shall have the meaning set forth in Section 7.5.
"Employee Plans" shall mean all Benefit Arrangements, Multiemployer Plans,
Pension Plans and Welfare Plans.
"Encumbrances" shall mean any claim, lien, pledge, option, charge,
easement, security interest, deed of trust, mortgage, right-of-way, covenant,
condition, restriction, encumbrance or other rights of third parties.
"Environmental Laws" shall mean any federal, state or local law, statute,
ordinance, order, decree, rule or regulation relating to releases, discharges,
emissions or disposals to air, water, land or groundwater of Hazardous
Materials; to the use handling or disposal of polychlorinated biphenyls,
asbestos or urea formaldehyde or any other Hazardous Material; to the treatment,
storage, disposal or management of Hazardous Materials; to exposure to toxic,
hazardous or other controlled, prohibited or regulated substances; and to the
transportation, release or any other use of Hazardous Materials, including the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
9601, et seq. ("CERCLA"), the Resource Conservation and Recovery Act, 42 U.S.C.
6901, et seq. ("RCRA"), the Toxic Substances Control Act, 15 U.S.C. 2601, et
seq. ("TSCA"), the Occupational, Safety and Health Act, 29 U.S.C. 651, et seq.,
the Clean Air Act, 42 U.S.C. 7401, et seq., the Federal Water Pollution Control
Act, 33 U.S.C. 1251, et seq., the Safe Drinking ▇▇▇▇▇ ▇▇▇, ▇▇ ▇.▇.▇. ▇▇▇▇, et
seq., the Hazardous Materials Transportation act, 49 U.S.C. 1802 et seq.
("HMTA") and the Emergency Planning and Community Right to Know Act, 42 U.S.C.
11001 et seq. ("EPCRA"), and other comparable state and local laws and all
rules, regulations and guidance documents promulgated pursuant thereto or
published thereunder.
"Environmental Report" shall mean any written report, study, assessment,
audit or other similar document that addresses any issues of actual or potential
noncompliance with, or actual or potential liability under or cost arising out
of, any Environmental Law that may in any way affect the Company or any of its
Subsidiaries.
"ERISA" shall have the meaning set forth in Section 4.12(c).
"ERISA Affiliate" shall mean, with respect to any Person, any entity which
is (or at any relevant time was) a member of a "controlled group of
corporations" with, under "common control" with, or a member of as "affiliated
service group" with, such Person as defined in Section 414(b), (c) or (m) of the
Code.
"Exchange Act" shall mean the Securities and Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"Expenses" shall have the meaning set forth in Section 9.3(a).
"Facility" shall have the meaning set forth in Section 4.13(a).
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"Fixtures And Equipment" shall mean, with respect to any Person, all of the
furniture, fixtures, furnishings, machinery and equipment owned, leased or
licensed by such Person and located in, at or upon the facilities of such
Person.
"GAAP" shall mean generally accepted accounting principles in the United
States of America, as in effect from time to time, consistently applied.
"Hazardous Materials" shall mean each and every element, compound, chemical
mixture, contaminant, pollutant, material, waste or other substance which is
defined, determined or identified as hazardous or toxic under Environmental Laws
or the release of which is regulated under Environmental Laws. Without limiting
the generality of the foregoing, the term includes: "hazardous substances" as
defined in CERCLA; "extremely hazardous substances" as defined in EPCRA;
"hazardous waste" as defined in RCRA; "hazardous materials" as defined in HMTA;
"chemical substance or mixture" as defined in TSCA; crude oil, petroleum
products or any fraction thereof; radioactive materials including source,
byproduct or special nuclear materials; asbestos or asbestos-containing
materials; chlorinated fluorocarbons ("CFCs"); and radon.
"HSR Act" shall have the meaning set forth in Section 4.6(b).
"Indemnified Parties" shall have the meaning set forth in Section 7.6(a).
"Leases" shall mean, with respect to any Person, all leases (including
subleases, licenses, any occupancy agreement and any other agreement) of real or
personal property, in each case to which such Person or any of its Subsidiaries
is a party, whether as lessor, lessee, guarantor or otherwise, or by which any
of them or their respective properties or assets are bound, or which otherwise
relate to the operation of their respective businesses.
"Management Agreement" shall mean that certain Management Agreement, dated
as of November 1, 1996, by and among the Company, Dominick's Finer Foods, Inc.
and Yucaipa.
"Material Adverse Effect" shall mean, with respect to either of the Company
or Parent, as the context requires, a material adverse change in, or effect on,
the business, operations, assets, results of operations or condition (financial
or otherwise) of such Person and its Subsidiaries taken as a whole or any change
which materially impairs or materially delays the ability of such Person to
consummate the transactions contemplated by this Agreement.
"Merger" shall have the meaning set forth in the Recitals.
"Merger Consideration" shall have the meaning set forth in Section 3.7(a).
"Merger Sub" shall have the meaning set forth in the Preamble.
"Minimum Condition" shall have the meaning set forth in Section 2.1(a).
"Minimum Shares" shall have the meaning set forth in Section 2.1(a).
"Multiemployer Plan" shall mean, with respect to any Person, any
"multiemployer plan," as defined in Section 4001(a)(3) of ERISA which such
Person or any ERISA Affiliate has or may have any liability (accrued, contingent
or otherwise).
"New Stock Rights" shall have the meaning set forth in Section 3.8(b).
"NLRB" shall have the meaning set forth in Section 4.15.
"Non-Voting Common Stock" shall have the meaning set forth in the Recitals.
"NYSE" shall mean the New York Stock Exchange.
"Permits" shall have the meaning set forth in Section 4.7.
"Offer" shall have the meaning set forth in Section 2.1.
"Offer Consummation Date" shall mean the date Merger Sub accepts for
payment and pays for all shares of Common Stock that have been validly tendered
and not withdrawn pursuant to the Offer.
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"Offer Documents" shall have the meaning set forth in Section 2.2(a).
"Outside Date" shall mean April 15, 1999.
"Parent" shall have the meaning set forth in the Preamble.
"Parent Board" shall have the meaning set forth in Section 3.8(b).
"Parent Common Stock" shall have the meaning set forth in Section 3.8(b).
"Parent Financial Adviser" shall mean ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. Incorporated.
"Paying Agent" shall have the meaning set forth in Section 3.9(a).
"Payment Fund" shall have the meaning set forth in Section 3.9(a).
"Pension Plan" shall mean, with respect to any Person, any "employee
pension benefit plan" as defined in Section 3(2) of ERISA (other than a
Multiemployer Plan) which such Person contributed to or was required to
contribute to, or under which such Person or any ERISA Affiliate has or may have
any liability (accrued, contingent or otherwise).
"Permitted Action" shall have the meaning set forth in Section 7.1(a).
"Permitted Encumbrances" shall mean any Encumbrances resulting from (i) all
statutory or other liens for Taxes or assessments which are not yet due or
delinquent or the validity of which are being contested in good faith by
appropriate proceedings for which adequate reserves are being maintained in
other accordance with GAAP; (ii) all cashiers', landlords', workers' and
repairers' liens, and other similar liens imposed by law, incurred in the
ordinary course of business; (iii) all laws and governmental rules, regulations,
ordinances and restrictions; (iv) all leases, subleases, licenses, concessions
or service contracts to which any Person or any of its Subsidiaries is a party;
(v) Encumbrances identified on title policies or preliminary title reports or
other documents or writings delivered or made available for inspection to Parent
prior to the date hereof or included in the Public Records; and (vi) all other
liens and mortgages, covenants, imperfections in title, charges, easements,
restrictions and other Encumbrances which, in the case of any such Encumbrances
pursuant to clause (i) through (vi), do not materially detract from or
materially interfere with the present use of the asset subject thereto or
affected thereby.
"Person" shall mean any individual, corporation, partnership, limited
liability company, joint venture, governmental agency or instrumentality, or any
other entity.
"Preferred Stock" shall have the meaning set forth in Section 4.3.
"Price Per Share" shall have the meaning set forth in Section 2.1(a).
"Property" shall have the meaning set forth in Section 4.13(a).
"Proxy Statement" shall have the meaning set forth in Section 4.19.
"Schedule 14D-1" shall have the meaning set forth in Section 2.2(a).
"Schedule 14D-9" shall have the meaning set forth in Section 2.2(b).
"SEC" shall have the meaning set forth in Section 2.2(a).
"SEC Reports" shall have the meaning set forth in Section 4.8(a).
"Securities Act" shall mean the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Significant Subsidiary" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Securities Act, as such regulation is in effect on the date
hereof.
"Spread Per Share" shall have the meaning set forth in Section 3.8(a).
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"Stock Plans" shall mean the 1995 Plan, 1996 Plan, Directors Deferred
Compensation and Restricted Stock Plan and Stock Purchase Plan and any other
stock option, performance unit or similar plan of the Company and its
Subsidiaries.
"Stock Purchase Plan" shall have the meaning set forth in Section 3.8(d).
"Stockholders" shall have the meaning set forth in the Recitals.
"Stockholders Agreement" shall have the meaning set forth in the Recitals.
"Subsidiary" shall mean, with respect to any Person, any corporation or
other organization, whether incorporated or unincorporated, of which such Person
directly or indirectly owns or controls 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.
"Superior Transaction" shall mean any bona fide Alternative Transaction
involving at least 60% of the outstanding shares of Common Stock on terms that
the Company Board determines in its good faith judgment (after consultation with
the Company Financial Adviser or another financial adviser of nationally
recognized reputation, taking into account all the terms and conditions of the
Alternative Transaction, including any break-up fees, expense reimbursement
provisions, conditions to consummation and all other legal, financial,
regulatory and other aspects of the proposal and, to the extent relevant to any
of the foregoing, the identity of the Person proposing the Superior Transaction)
are more favorable to the Company's stockholders from a financial point of view
than this Agreement and the Merger taken as a whole.
"Surviving Corporation" shall have the meaning set forth in Section 3.1.
"Tax" or "Taxes" shall mean all federal, state, local, foreign and other
taxes, levies, imposts, assessments, impositions or other similar government
charges, including, without limitation, income, estimated income, business,
occupation, franchise, real property, payroll, personal property, sales,
transfer, stamp, use, employment, commercial rent or withholding, occupancy,
premium, gross receipts, profits, windfall profits, deemed profits, license,
lease, severance, capital, production, corporation, ad valorem, excise, duty or
other taxes, including interest, penalties and additions (to the extent
applicable) thereto whether disputed or not.
"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.
"Termination Fee" shall have the meaning set forth in Section 9.3(a).
"Transfer Taxes" shall have the meaning set forth in Section 7.12.
"Voting Common Stock" shall have the meaning set forth in the Recitals.
"Welfare Plan" shall mean, with respect to any Person, any "employee
welfare benefit plan" as defined in Section 3(1) of ERISA which such Person has
or may have any liability (accrued, contingent or otherwise).
"Yucaipa" shall mean The Yucaipa Companies, a California general
partnership.
"Yucaipa Warrant" shall mean that certain Class A Common Stock Purchase
Warrant No. W-1 issued by the Company to Yucaipa on March 22, 1995.
"1995 Plan" shall mean the Company's Restated 1995 Stock Option Plan.
"1996 Plan" shall mean the Company's 1996 Equity Participation Plan.
"1996 Stockholders Agreement" shall have the meaning set forth in Section
4.2.
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ARTICLE II.
THE TENDER OFFER
SECTION 2.1. The Offer.
(a) Provided that this Agreement shall not have been terminated in
accordance with Article IX, then (i) not later than the first Business Day after
execution of this Agreement, Parent and the Company shall issue a public
announcement of the execution of this Agreement and (ii) Merger Sub shall, as
soon as practicable, but in no event later than five Business Days after the
date of such announcement, commence (within the meaning of Rule 14d-2(a) of the
Exchange Act) a tender offer (the "Offer") to purchase all of the outstanding
shares of Common Stock at a price of $49.00 per share, net to the seller in cash
(the "Price Per Share") subject to reduction only for any applicable federal
withholding taxes. The Offer shall be made pursuant to an Offer to Purchase and
related Letter of Transmittal in form reasonably satisfactory to the Company and
containing terms and conditions set forth in this Agreement. The obligation of
Merger Sub to accept for payment, purchase and pay for shares of Common Stock
tendered pursuant to the Offer shall be subject only to (i) at least that number
of shares of Common Stock equivalent to a majority of the total issued and
outstanding shares of Common Stock on a fully diluted basis (without giving
effect to the shares issuable upon the exercise of the Yucaipa Warrant) on the
date such shares are purchased pursuant to the Offer (the "Minimum Shares")
being validly tendered and not withdrawn prior to the expiration of the Offer
(the "Minimum Condition") and (ii) the satisfaction of the other conditions set
forth in Annex A hereto, any of which conditions may be waived by Merger Sub in
its sole discretion; provided, however, that Merger Sub shall not waive the
Minimum Condition without the prior written consent of the Company. The Company
agrees that no shares of Common Stock held by the Company or any of its
Subsidiaries will be tendered to Merger Sub pursuant to the Offer.
(b) Without the prior written consent of the Company, neither Parent nor
Merger Sub will (i) decrease the Price Per Share payable in the Offer, (ii)
decrease the number of shares of Common Stock sought pursuant to the Offer or
change the form of consideration payable in the Offer, (iii) change or amend the
conditions to the Offer (including the conditions set forth in Annex A hereto)
or impose additional conditions to the Offer, (iv) change the expiration date of
the Offer or (v) otherwise amend, add or waive any term or condition of the
Offer in any manner adverse to the holders of shares of Common Stock; provided,
however, that if on any scheduled expiration date of the Offer, which shall
initially be 20 Business Days after the commencement date of the Offer, all
conditions to the Offer have not been satisfied or waived, Merger Sub may, and
at the request of the Company shall, from time to time, extend the expiration
date of the Offer for up to 10 additional Business Days (but in no event shall
Merger Sub be required to extend the expiration date of the Offer beyond the
Outside Date); and provided further that Merger Sub may, without the consent of
the Company, (x) extend the Offer for any period required by any rule,
regulation, interpretation or position of the SEC or the Staff thereof
applicable to the Offer and (y) extend the Offer if (1) the Offer Conditions
shall have been satisfied or waived and (2) the number of shares of Common Stock
that have been validly tendered and not withdrawn represent more than 65% but
less than 90% of the issued and outstanding shares of each of the Voting Common
Stock and the Non-Voting Common Stock; provided, however, that in no event shall
the extensions permitted under the foregoing clause (y) exceed, in the
aggregate, 10 Business Days. Parent and Merger Sub will, subject to the terms
and conditions of this Agreement, use their best efforts to consummate the
Offer. Assuming the prior satisfaction or waiver of all the conditions to the
Offer set forth in Annex A, and subject to the terms and conditions of this
Agreement, Merger Sub shall, and Parent shall cause Merger Sub to, accept for
payment, purchase and pay for, in accordance with the terms of the Offer, all
shares of Common Stock validly tendered and not withdrawn pursuant to the Offer
as soon as permitted under applicable law, recognizing that the parties wish to
close as expeditiously as possible following expiration or termination of the
waiting period under the HSR Act. Parent shall provide, or cause to be provided,
to Merger Sub, on a timely basis, the funds necessary to purchase any shares of
Common Stock that Merger Sub becomes obligated to purchase pursuant to the
Offer.
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SECTION 2.2. SEC Filings.
(a) As soon as reasonably practicable on the commencement date of the
Offer, Parent and Merger Sub shall file with the Securities and Exchange
Commission (the "SEC"), with respect to the Offer, a Tender Offer Statement on
Schedule 14D-1 (the "Schedule 14D-1"). The Schedule 14D-1 will comply as to form
and content in all material respects with the applicable provisions of the
federal securities laws and will contain or incorporate by reference the Offer
to Purchase, the related Letter of Transmittal and other ancillary documents and
agreements pursuant to which the Offer will be made (the Schedule 14D-1, the
Offer to Purchase, the Letter of Transmittal and such other documents being
collectively referred to herein as the "Offer Documents"). The Company and its
counsel shall be given an opportunity to review and comment upon the Offer
Documents and any amendment or supplement thereto prior to the filing thereof
with the SEC, and Parent and Merger Sub shall consider such comments in good
faith. Parent and Merger Sub agree to provide to the Company and its counsel any
comments which Parent, Merger Sub or their counsel may receive from the Staff of
the SEC with respect to the Offer Documents promptly after receipt thereof.
Parent, Merger Sub and the Company agree to correct promptly any information
provided by any of them for use in the Offer Documents which shall have become
false or misleading in any material respect, and Parent and Merger Sub further
agree to take all steps necessary to cause the Schedule 14D-1 as so corrected to
be filed with the SEC and disseminated to the Company's stockholders, in each
case as and to the extent required by the applicable provisions of the federal
securities laws.
(b) As soon as reasonably practicable on the commencement date of the
Offer, the Company shall file with the SEC a Solicitation/Recommendation
Statement on Schedule 14D-9 (as amended from time to time, the "Schedule 14D-9")
containing the recommendation of the Company Board described in Section 4.22
(subject to the right of the Company Board to withdraw, amend or modify such
recommendation in accordance with Section 7.1(a)) which will comply as to form
and content in all material respects with the applicable provisions of the
federal securities laws. The Company will use its reasonable best efforts to
cause the Schedule 14D-9 to be filed on the same date that the Schedule 14D-1 is
filed; provided, however, that in any event the Schedule 14D-9 will be filed no
later than ten Business Days following the commencement date of the Offer. The
Company will cooperate with Parent and Merger Sub in mailing or otherwise
disseminating the Schedule 14D-9 with the appropriate Offer Documents to the
stockholders of the Company. Parent and its counsel shall be given an
opportunity to review and comment upon the Schedule 14D-9 and any amendment or
supplement thereto prior to the filing thereof with the SEC, and the Company
shall consider any such comments in good faith. The Company agrees to provide to
Parent and Merger Sub and their counsel any comments which the Company or its
counsel may receive from the Staff of the SEC with respect to the Schedule 14D-9
promptly after receipt thereof. The Company, Parent and Merger Sub agree to
correct promptly any information provided by any of them for use in the Schedule
14D-9 which shall have become false or misleading in any material respect, and
the Company further agrees to take all steps necessary to cause such Schedule
14D-9 as so corrected to be filed with the SEC and disseminated to the Company's
stockholders, in each case as and to the extent required by the applicable
provisions of the federal securities laws. Parent, Merger Sub and the Company
each hereby agree to provide promptly such information necessary to the
preparation of the exhibits and schedules to the Schedule 14D-9 and the Offer
Documents which the respective party responsible therefor shall reasonably
request.
SECTION 2.3. Company Action. Promptly upon execution of this Agreement and
in connection with the Offer, the Company shall furnish Merger Sub with such
information (including a list of the stockholders of the Company, mailing labels
and a list of securities positions, each as of a recent date), and shall
thereafter render such assistance, as Parent or Merger Sub may reasonably
request in communicating the Offer to the Company's stockholders. Subject to the
requirements of applicable law and except for such steps as are necessary to
disseminate the Offer Documents and any other documents necessary to consummate
the Merger, Parent and Merger Sub and each of their respective affiliates and
associates shall (a) hold in confidence the information contained in any of such
labels and lists, (b) use such information only in connection with the Offer and
the Merger and (c) if this Agreement is terminated, promptly deliver to the
Company all copies of such information then in their possession.
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SECTION 2.4. Composition of the Company Board.
(a) Promptly upon the acceptance for payment of, and payment by Merger Sub
in accordance with the Offer for, not less than a majority of the outstanding
shares of Common Stock on a fully diluted basis (without giving effect to the
shares issuable upon the exercise of the Yucaipa Warrant) pursuant to the Offer,
Merger Sub shall be entitled to designate such number of members of the Board of
Directors of the Company (the "Company Board"), rounded up to the next whole
number, equal to that number of directors which equals the product of the total
number of directors on the Company Board (giving effect to the directors elected
pursuant to this sentence) multiplied by the percentage that such number of
shares of Common Stock owned in the aggregate by Merger Sub or Parent, upon such
acceptance for payment, bears to the number of shares of Common Stock
outstanding; provided, however, that until the Effective Time there shall be at
least one Continuing Director. Upon the written request of Merger Sub, the
Company shall, on the date of such request, (i) either increase the size of the
Company Board or 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 Board and (ii) cause Parent's designees to be so elected, in each case
as may be necessary to comply with the foregoing provisions of this Section
2.4(a).
(b) The Company's obligation to cause designees of Merger Sub to be elected
or appointed to the Company Board 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 Section 14(f) and Rule 14f-1 in order to
fulfill its obligations under this Section 2.4, and shall include in the
Schedule 14D-9 such information with respect to the Company and its officers and
directors as is required under Section 14(f) and Rule 14f-1. Parent and Merger
Sub will supply to the Company any information with respect to any of them and
their nominees, officers, directors and affiliates required by Section 14(f) and
Rule 14f-1 and applicable rules and regulations.
(c) After the time that Merger Sub's designees constitute at least a
majority of the Company Board and until the Effective Time, any (i) amendment or
termination of this Agreement, (ii) amendment to the Amended and Restated
Certificate of Incorporation (the "Certificate of Incorporation") or bylaws (the
"Bylaws") of the Company or (iii) extension of time for the performance or
waiver of the obligations or other acts of Parent or Merger Sub or waiver of the
Company's rights hereunder shall require the approval of a majority of the then
serving directors, if any, who are directors as of the date hereof (the
"Continuing Directors"), except to the extent that applicable law requires that
such action be acted upon by the full Company Board, in which case such action
will require the concurrence of a majority of the Company Board, which majority
shall include each of the Continuing Directors. If there is more than one
Continuing Director and prior to the Effective Time, the number of Continuing
Directors is reduced for any reason, the remaining Continuing Director or
Directors shall be entitled to designate persons to fill such vacancies who
shall be deemed Continuing Directors for purposes of this Agreement. In the
event there is only one Continuing Director and he or she resigns or is removed
or if all Continuing Directors resign or are removed, he, she or they, as
applicable, shall be entitled to designate his, her or their successors, as the
case may be, each of whom shall be deemed a Continuing Director for purposes of
this Agreement. The Company Board shall not delegate any matter set forth in
this Section 2.4 to any committee of the Company Board.
ARTICLE III.
THE MERGER
SECTION 3.1. The Merger. Upon the terms and subject to the conditions of
this Agreement and in accordance with the DGCL, at the Effective Time, Merger
Sub shall be merged with and into the Company. As a result of the Merger, the
separate corporate existence of Merger Sub shall cease and the Company shall
continue as the surviving corporation of the Merger (the "Surviving
Corporation").
SECTION 3.2. Closing and Closing Date. Unless this Agreement shall have
been terminated and the transactions herein contemplated shall have been
abandoned pursuant to the provisions of Section 9.1, the closing (the "Closing")
of the Merger shall take place (a) at 9:00 a.m., New York City time, on the
second
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Business Day after all of the conditions to the respective obligations of the
parties set forth in Article VIII hereof shall have been satisfied or waived or
(b) at such other time and date as Parent and the Company shall agree (such date
and time on and at which the Closing occurs being referred to herein as the
"Closing Date"). The Closing shall take place at the offices of ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
located at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
SECTION 3.3. Effective Time. The parties hereto shall cause the Merger to
be consummated by either (i) filing a certificate of merger (the "Certificate Of
Merger") on the Closing Date with the Secretary of State of the State of
Delaware, or (ii) in the event Merger Sub shall have acquired 90% or more of the
outstanding shares of each class of capital stock of the Company, filing a
certificate of ownership and merger (the "Certificate of Ownership") with the
Secretary of State of the State of Delaware, in each case in such form as
required by and executed in accordance with the relevant provisions of the DGCL
(the date and time of the filing of the Certificate of Merger or the Certificate
of Ownership, as the case may be, with the Secretary of State of the State of
Delaware or at such later time or date after such filing as may be specified in
the Certificate of Merger or the Certificate of Ownership, as the case may be,
being the "Effective Time").
SECTION 3.4. Effects of the Merger. The Merger shall have the effects set
forth in the applicable provisions of the DGCL. Without limiting the generality
of the foregoing, and subject thereto, at the Effective Time all the property,
rights, privileges, immunities, powers and franchises of the Company and Merger
Sub shall vest in the Surviving Corporation, and all debts, liabilities and
duties of the Company and Merger Sub shall become the debts, liabilities and
duties of the Surviving Corporation. At Parent's election, any direct or
indirect subsidiary of Parent other than Merger Sub may be merged with and into
the Company instead of Merger Sub; provided, however, that such election (i)
does not cause or result in a delay or postponement of the consummation of the
Offer or the Effective Time and (ii) shall not relieve Merger Sub of any of its
obligations under this Agreement. In the event of such an election, the parties
agree to execute an appropriate amendment to this Agreement in order to reflect
such election.
SECTION 3.5. Certificate of Incorporation; Bylaws.
(a) At the Effective Time and without any further action on the part of the
Company and Merger Sub, the Certificate of Incorporation of the Company as in
effect immediately prior to the Effective Time shall be the Certificate of
Incorporation of the Surviving Corporation until duly amended as provided
therein and under the DGCL, except that the Certificate of Incorporation of the
Surviving Corporation shall provide for the authorized capitalization and for
the number of directors set forth in the Certificate of Merger filed with the
Secretary of State of the State of Delaware.
(b) At the Effective Time and without any further action on the part of the
Company and Merger Sub, the Bylaws of the Company as in effect immediately prior
to the Effective Time shall be the Bylaws of the Surviving Corporation until
duly amended as provided for therein and under the DGCL.
SECTION 3.6. Directors and Officers. The directors of Merger Sub
immediately prior to the Effective Time shall be the initial directors of the
Surviving Corporation, each to hold office in accordance with the Certificate of
Incorporation and Bylaws of the Surviving Corporation, and the officers of the
Company immediately prior to the Effective Time shall be the initial officers of
the Surviving Corporation, in each case until their respective successors are
duly elected or appointed (as the case may be) and qualified.
SECTION 3.7. Conversion of Securities. At the Effective Time, by virtue of
the Merger and without any action on the part of Parent, Merger Sub, the Company
or the holders of any of the following securities:
(a) Subject to Section 3.7(d), each share of Common Stock issued and
outstanding immediately prior to the Effective Time (other than shares of
Common Stock to be canceled in accordance with Section 3.7(b) hereof) shall
be converted into and represent the right to receive the Price Per Share in
cash (the "Merger Consideration"). The Merger Consideration shall be
payable upon the surrender of the certificate formerly representing such
share of Common Stock. As of the Effective Time, all such shares of Common
Stock shall no longer be outstanding and shall automatically be canceled
and retired and shall cease to exist, and each holder of a certificate
representing any such shares of Common Stock shall cease to have any rights
with respect thereto, except the right to receive the Merger Consideration.
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(b) Each share of Common Stock that is (i) held in the treasury of the
Company or (ii) owned by Parent, Merger Sub or any other direct or indirect
wholly-owned subsidiary of Parent or the Company, in each case immediately
prior to the Effective Time, shall be canceled and retired without any
conversion thereof and shall cease to exist and no payment or distribution
shall be made with respect thereto.
(c) Each share of common, preferred or other capital stock of Merger
Sub issued and outstanding immediately prior to the Effective Time shall be
converted into and become one fully paid and nonassessable share of common,
preferred or other capital stock of the Surviving Corporation and shall
thereafter constitute all of the issued and outstanding capital stock of
the Surviving Corporation.
(d) Notwithstanding any other provision of this Agreement to the
contrary, shares of Common Stock outstanding immediately prior to the
Effective Time and held by a holder who has (i) not voted in favor of the
Merger or consented thereto in writing and (ii) demanded appraisal for such
Common Stock in accordance with the DGCL shall not be converted into a
right to receive the Merger Consideration, but shall be entitled to receive
such amount as shall be determined pursuant to Section 262 of the DGCL,
unless such holder fails to perfect or withdraws or otherwise loses its
right to appraisal or it is determined that such holder does not have
appraisal rights in accordance with the DGCL. If after the Effective Time
such holder fails to perfect or withdraws or loses its right to appraisal,
or if it is determined that such holder does not have an appraisal right,
such shares of Common Stock shall be treated as if they had been converted
as of the Effective Time for a right to receive the Merger Consideration
without any interest thereon. The Company shall give Parent and Merger Sub
prompt notice of any demands received by the Company for appraisal of
shares of Common Stock pursuant to Section 262 of the DGCL, any withdrawal
of such demands and any other instruments served pursuant to the DGCL and
received by the Company, and Parent and Merger Sub shall have the right to
direct all negotiations and proceedings with respect to such demands,
except as required by applicable law. The Company shall not, except with
the prior written consent of Parent and Merger Sub, make any payment with
respect to, or settle or offer to settle, any such demands.
(e) As of the Effective Time, the Yucaipa Warrant shall no longer be
outstanding and shall automatically be canceled and shall cease to exist,
and the holder thereof shall cease to have any rights with respect thereto,
except that in the event that the Yucaipa Warrant shall not have been
purchased by Parent or Merger Sub in accordance with the Stockholders
Agreement, the holder thereof shall have the right to receive the
consideration described in the Stockholders Agreement.
SECTION 3.8. Treatment of Employee Options and Other Company Stock Rights.
(a) Prior to the Effective Time, the Company may accelerate to the day
after the Effective Time the vesting of the unvested Company Stock Rights (or
any portion thereof) identified on Section 3.8(a) of the Company Disclosure
Schedule but, other than those Company Stock Rights permitted to be accelerated
hereunder, neither the Company, the Company Board nor any committee thereof
shall accelerate the vesting or exercisability of any Company Stock Rights prior
to the Effective Time. Prior to the Effective Time, the Company will enter into
agreements in respect of those outstanding Company Stock Rights heretofore
granted pursuant to the 1995 Plan and the 1996 Plan which are identified on
Section 3.8(a) of the Company Disclosure Schedule. Such agreements will provide
for the payment, upon surrender of each Company Stock Right on the day after the
Effective Time, of an amount of cash per share subject to the vested portion
(including any Company Stock Right or portion thereof for which the vesting is
accelerated pursuant to this Section 3.8(a)) of each such Company Stock Right
equal to the excess, if any, of the Price Per Share over the exercise price of
such Company Stock Right (the "Spread Per Share") less an amount equal to all
taxes required to be withheld from such payment. Subject to Section 3.8(b), any
Company Stock Rights not so surrendered or otherwise exercised prior to the
Effective Time shall terminate at the Effective Time in accordance with the
terms of the applicable Stock Plan or such agreements with optionees, and the
Company and the Company Board, or any committee thereof, shall take, or cause to
be taken, any action required or desirable to effectuate such termination.
Parent shall cause the Company to pay, on the day after the Effective Time, the
aggregate Spread Per Share to the holders of Company Stock Rights surrendered in
accordance with this Section 3.8(a).
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(b) Prior to the Effective Time, the Company Board (or, if appropriate, any
Committee thereof) and the Board of Directors of Parent (the "Parent Board")
shall adopt appropriate resolutions and take all other actions necessary (or
instruct the officers of the Company to take all such actions, including,
without limitation, causing the Company to enter into appropriate agreements
with the holders of all affected Company Stock Rights) to provide that effective
at the Effective Time, the vested and unvested portion of all outstanding
Company Stock Rights heretofore granted under the 1995 Plan and the 1996 Plan
other than those Company Stock Rights identified on Section 3.8(a) of the
Company Disclosure Schedule (which will be canceled in exchange for the payment
provided for in Section 3.8(a) above) shall be assumed by Parent and converted
automatically into options to purchase shares of common stock, par value $.01
per share, of Parent (the "Parent Common Stock") (collectively, "New Stock
Rights") in an amount and, if applicable, at an exercise price determined as
provided below:
(i) The number of shares of Parent Common Stock to be subject to the
New Stock Right shall be equal to the product of (x) the number of shares
of Common Stock remaining subject (as of immediately prior to the Effective
Time) to the Company Stock Right identified on Section 3.8(b) of the
Company Disclosure Schedule multiplied by (y) the Conversion Ratio,
provided that any fractional shares of Parent Common Stock resulting from
such multiplication shall be rounded down to the nearest share; and
(ii) The exercise price per share of Parent Common Stock under the New
Stock Right shall be equal to the exercise price per share of the Common
Stock under the original Company Stock Right divided by the Conversion
Ratio, provided that such exercise price shall be rounded down to the
nearest cent.
(iii) As soon as practicable (but in any event within fifteen (15)
Business Days) after the Effective Time, Parent shall deliver to each
holder of an outstanding Company Stock Right an appropriate notice setting
forth such holder's rights pursuant thereto, and the unvested portion of
such Company Stock Right shall otherwise continue in effect on the same
terms and conditions (including antidilution provisions) as were in effect
prior to the Effective Time.
(iv) Subject to any applicable limitations under the Securities Act,
Parent shall file a registration statement on Form S-8 (or any successor
form) or another appropriate form (or shall cause such New Stock Rights to
be deemed to be an option or other stock right issued pursuant to a stock
option or other equity compensation plan of Parent for which shares of
Parent Common Stock have previously been registered pursuant to an
appropriate registration form with the SEC), and shall cause such
registration statement to be effective on or prior to the date of the
Effective Time, with respect to the shares of Parent Common Stock issuable
upon exercise of the New Stock Rights, and shall use all reasonable efforts
to maintain the effectiveness of such registration statement (and maintain
the current status of the prospectus or prospectuses contained therein) for
so long as such New Stock Rights shall remain outstanding.
The adjustment provided herein with respect to any options which are "incentive
stock options" (as defined in Section 422 of the Code) shall be, and is intended
to be, effected in a manner which is consistent with Section 424(a) of the Code.
Except as otherwise provided for in this Section 3.8, after the Effective Time,
each New Stock Right shall be exercisable and shall vest upon the same terms and
conditions as were applicable to the related Company Stock Right immediately
prior to the Effective Time (except that with regard to such New Stock Right,
any references to the Company shall be deemed, as appropriate, to include
Parent); provided, however, that any New Stock Rights held by an employee or
consultant of the Company or any of its Subsidiaries whose employment or
consulting arrangement, as the case may be, is terminated without Cause or is
subject to a Constructive Termination (which term shall be defined in the
agreements entered into with the holders of the applicable Company Stock Rights
in a manner consistent with the definition of such term contained in the
Employment Agreements (each dated as of October 9, 1998) identified on Section
4.12 of the Company Disclosure Schedule), in either case after the Effective
Time, shall become fully vested on the date of such termination. Parent agrees
that it shall take all action necessary, on or prior to the Effective Time, to
authorize and reserve a number of shares of Parent Common Stock sufficient for
issuance upon exercise of New Stock Rights as contemplated by this Section 3.8.
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(c) Prior to the Effective Time, the Company will take all actions
necessary (i) to shorten the offering period under the Company's 1997 Employee
Stock Purchase Plan (the "Stock Purchase Plan") in which the Effective Time
occurs so that such offering period terminates on the day prior to the Effective
Time and (ii) to terminate the Stock Purchase Plan effective as of the Effective
Time.
(d) Prior to the Effective Time, the Company, the Company Board or any
committee thereof shall take such actions, including, without limitation, by
adopting appropriate resolutions and timely providing any notification required
pursuant to the terms of any Stock Plan or Company Stock Right necessary to
ensure that as of the Effective Time, no holder of a Company Stock Right or any
participant in any Stock Plan shall have any right thereunder to acquire capital
stock of the Company, Merger Sub or the Surviving Corporation. The Company, the
Company Board or any committee thereof will take such actions, including,
without limitation, by adopting appropriate resolutions and timely providing any
notification required pursuant to the terms of any Stock Plan or Company Stock
Right necessary to ensure that as of the Effective Time, none of Merger Sub, the
Company, the Surviving Corporation or any of their respective Subsidiaries is or
will be bound by any Company Stock Rights, other options, warrants, rights or
agreements which would entitle any person, other than Merger Sub or its
affiliates, to own any capital stock of the Company, Merger Sub, the Surviving
Corporation or any of their respective subsidiaries or to receive any payment in
respect thereof, except as otherwise provided herein.
SECTION 3.9. Surrender of Shares of Common Stock; Stock Transfer Books.
(a) Prior to the Closing Date, Merger Sub shall designate a bank or trust
company reasonably acceptable to the Company to act as agent for the holders of
shares of Common Stock in connection with the Merger (the "Paying Agent") to
receive the Merger Consideration to which holders of shares of Common Stock
shall become entitled pursuant to Section 3.7(a). Prior to the filing of the
Certificate of Merger or Certificate of Ownership, as the case may be, with the
Secretary of State of the State of Delaware, Parent or Merger Sub will deposit
with the Paying Agent, in trust for the benefit of the stockholders of the
Company, cash in an aggregate amount equal to the product of (i) the number of
shares of Common Stock outstanding (and not owned of record by Parent or Merger
Sub) immediately prior to the Effective Time multiplied by (ii) the Price Per
Share. The deposit made by Parent or Merger Sub pursuant to the preceding
sentence is hereinafter referred to as the "Payment Fund." The Paying Agent
shall cause the Payment Fund to be (i) held for the benefit of the holders of
Common Stock and (ii) promptly applied to making the payments provided for in
Section 3.9(b). The Payment Fund shall not be used for any purpose that is not
provided for herein.
(b) Promptly after the Effective Time, Parent shall, or shall cause the
Surviving Corporation to, cause to be mailed to each record holder, as of the
Effective Time, of an outstanding certificate or certificates which immediately
prior to the Effective Time represented shares of Common Stock (the
"Certificates"), a form of letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon proper delivery of the Certificates to the Paying Agent) and
instructions for use in effecting the surrender of the Certificates in exchange
for the Merger Consideration. Upon surrender to the Paying Agent of a
Certificate, together with such letter of transmittal, duly completed and
validly executed in accordance with the instructions thereto, and such other
documents as may be reasonably required pursuant to such instructions, the
holder of such Certificate shall be paid promptly, without interest thereon and
subject to any required withholding or taxes, the amount of cash to which such
holder is entitled pursuant to Section 3.7(a), and the Certificate so
surrendered shall forthwith be canceled. Until so surrendered and exchanged,
each Certificate, subject to Sections 3.7(b) and (d), shall represent solely the
right to receive the Merger Consideration into which the Common Stock it
theretofore represented shall have been converted pursuant to Section 3.7(a),
subject to any required withholding of taxes. If the payment of the Merger
Consideration 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 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.
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(c) At any time after the six month anniversary of the Effective Time,
Parent shall be entitled to require the Paying Agent to deliver to Parent all
cash and any other instruments in its possession relating to the transactions
contemplated by this Agreement which had been made available to the Paying Agent
and which have not been distributed to holders of Certificates. Thereafter, each
holder of a Certificate, subject to Sections 3.7(b) and (d), may surrender such
Certificate to the Surviving Corporation and (subject to applicable abandoned
property, escheat or other similar laws) receive in exchange therefor the
consideration payable in respect thereto pursuant to Section 3.7(a), without
interest, but shall have no greater rights against the Surviving Corporation
than may be accorded to general creditors of the Surviving Corporation.
Notwithstanding the foregoing, none of Parent, the Surviving Corporation or the
Paying Agent shall be liable for the Price Per Share to any holder of a
Certificate if such amount is delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law.
(d) At the Effective Time, the stock transfer books of the Company shall be
closed and thereafter there shall be no further registration of transfers of
shares of Common Stock on the records of the Company. From and after the
Effective Time, the holders of Certificates evidencing ownership of shares of
Common Stock outstanding immediately prior to the Effective Time shall cease to
have any rights with respect to such shares of Common Stock except as otherwise
provided for herein or by applicable law.
(e) If, at any time after the Effective Time, the Surviving Corporation
shall consider or be advised that any deeds, bills of sale, assignments,
assurances or any other actions or things are necessary or desirable to vest,
perfect or confirm of record or otherwise in the Surviving Corporation its
right, title or interest in, to or under any of the rights, properties or assets
of either Merger Sub or the Company acquired or to be acquired by the Surviving
Corporation as a result of, or in connection with, the Merger or otherwise to
carry out this Agreement, the officers of the Surviving Corporation shall be
authorized to execute and deliver, in the name and on behalf of each of Merger
Sub and the Company or otherwise, all such deeds, bills of sale, assignments and
assurances and to take and do, in such names and on such behalves or otherwise,
all such other actions and things as may be necessary or desirable to vest,
perfect or confirm any and all right, title and interest in, to and under such
rights, properties or assets in the Surviving Corporation or otherwise to carry
out the purposes of this Agreement.
SECTION 3.10. Lost, Stolen or Destroyed Certificates. In the event any
Certificates shall have been lost, stolen or destroyed, the Paying Agent shall
pay with respect to such lost, stolen or destroyed Certificates, upon the making
of an affidavit of that fact by the holder thereof, such amount as may be
required pursuant to Section 3.9; provided, however, that Parent may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed Certificates to deliver a bond in such
sum as it may reasonably direct as indemnity against any claim that may be made
against Parent or the Paying Agent with respect to the Certificates alleged to
have been lost, stolen or destroyed.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Merger Sub that:
SECTION 4.1. Organization and Qualification. The Company and each of its
Subsidiaries is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization, with the corporate power and
authority to own and operate its business as presently conducted. The Company
and each of its Subsidiaries is duly qualified as a foreign corporation or other
entity to do business and is in good standing in each jurisdiction where the
character of its properties owned or held under lease or the nature of its
activities makes such qualification necessary, except for such failures of the
Company and any of its Subsidiaries to be so qualified as would not,
individually or in the aggregate, have a Material Adverse Effect. The Company
has previously made available to Parent true and correct copies of its
Certificate of Incorporation and Bylaws and the charter documents and bylaws or
other organizational documents of each of its Subsidiaries, as currently in
effect.
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SECTION 4.2. Authorization; Validity and Effect of Agreement. The Company
has the requisite corporate power and authority to execute, deliver and perform
its obligations under this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by the Company
and the performance by the Company of its obligations hereunder and the
consummation of the transactions contemplated hereby have been duly authorized
by the Company Board and all other necessary corporate action on the part of the
Company, other than the adoption and approval of this Agreement by the
stockholders of the Company, and no other corporate proceedings on the part of
the Company are necessary to authorize this Agreement and the transactions
contemplated hereby. The Company Board has approved for the purposes of Section
251(b) of the DGCL the agreement of merger contained in this Agreement. This
Agreement has been duly and validly executed and delivered by the Company and
constitutes a legal, valid and binding obligation of the Company, enforceable
against it in accordance with its terms, subject to the effects of bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other similar
laws relating to or affecting creditors' rights generally, general equitable
principles (whether considered in a proceeding in equity or at law) and an
implied covenant of good faith and fair dealing. The Amended and Restated
Stockholders' Agreement, dated as of November 1, 1996 and as amended as of the
date of this Agreement (the "1996 Stockholders Agreement"), a true and complete
copy of which has been provided to Parent, among the Company, Dominick's Finer
Foods, Inc. and the stockholders of the Company named therein (a) does not
restrict, prevent, prohibit or otherwise impede any holder of Common Stock from
(i) tendering its shares in the Offer or (ii) entering into a Stockholders
Agreement or performing its obligations thereunder and (b) will terminate upon
the consummation of the Offer. The amendment to the 1996 Stockholders Agreement
does not require the consent of any party to such agreement other than the
Stockholders. The Yucaipa Warrant, as amended as of the date of this Agreement,
a true and complete copy of which has been provided to Parent, permits the
transfer of the Yucaipa Warrant to Parent as described in the Stockholders
Agreement.
SECTION 4.3. Capitalization. The authorized capital stock of the Company
consists of 50,000,000 shares of Voting Common Stock, 10,000,000 shares of
Non-Voting Stock and 4,000,000 shares of preferred stock having a par value of
$.01 per share (the "Preferred Stock"). As of October 8, 1998, 18,679,737 shares
of Voting Common Stock (none of which are held in the Company treasury),
2,861,354 shares of Non-Voting Common Stock (none of which are held in the
Company treasury) and no shares of Preferred Stock were issued and outstanding.
As of October 8, 1998, (i) 1,205,438 shares of Voting Common Stock and no shares
of Non-Voting Stock were reserved for issuance and issuable upon or otherwise
deliverable in connection with the exercise of outstanding Company Stock Rights
and (ii) 3,874,492 shares of Voting Common Stock were reserved for issuance and
issuable upon or otherwise deliverable in connection with the exercise of the
Yucaipa Warrant. All of the issued and outstanding shares of Common Stock are
validly issued, fully paid and non-assessable. Except pursuant to the exercise
of Company Stock Rights prior to the date hereof, since October 8, 1998 no
shares of Common Stock or Preferred Stock have been issued. As of the date
hereof, except as otherwise disclosed in Section 4.3 of the disclosure schedule
delivered by the Company to Parent and Merger Sub prior to the execution of this
Agreement (the "Company Disclosure Schedule"), there are no existing options,
warrants, calls, subscriptions, convertible securities or other securities,
agreements, commitments, or obligations which would require the Company or any
of its Subsidiaries to issue or sell shares of Common Stock, Preferred Stock or
any other equity securities, or securities convertible into or exchangeable or
exercisable for shares of Common Stock, Preferred Stock or any other equity
securities of the Company or any of its Subsidiaries. Except as set forth in
Section 4.3 of the Company Disclosure Schedule, the Company has no commitments
or obligations to purchase or redeem any shares of Common Stock or the capital
stock of any of its Subsidiaries or to provide funds to or make any investment
(in the form of a loan, capital contribution or otherwise) in any such
Subsidiary or any other entity. Except as set forth in Section 4.3 of the
Company Disclosure Schedule, there are no stockholders' agreements, voting
trusts or other agreements or understandings to which the Company is a party or
by which it is bound relating to the voting or registration of any shares of
capital stock of the Company or any preemptive rights with respect thereto.
Provided that Merger Sub is not a bank holding company (as defined in 12 U.S.C.
Section 1841), or an Affiliate of a bank holding company, the shares of
Non-Voting Common Stock to be acquired by Merger Sub upon the Offer
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Consummation Date may be converted into Voting Common Stock in accordance with
the terms of the Company's Certificate of Incorporation.
SECTION 4.4. Subsidiaries. The only Subsidiaries of the Company are those
set forth in Section 4.4 of the Company Disclosure Schedule. All of the
outstanding shares of capital stock and other ownership interests of each of the
Company's Subsidiaries are validly issued, fully paid, non-assessable and free
of preemptive rights, rights of first refusal or similar rights. Except as set
forth in Section 4.4 of the Company Disclosure Schedule, the Company owns,
directly or indirectly, all of the issued and outstanding capital stock and
other ownership interests of each of its Subsidiaries, free and clear of all
Encumbrances, and there are no existing options, warrants, calls, subscriptions,
convertible securities or other securities, agreements, commitments or
obligations of any character relating to the outstanding capital stock or other
securities of any Subsidiary of the Company or which would require any
Subsidiary of the Company to issue or sell any shares of its capital stock,
ownership interests or securities convertible into or exchangeable for shares of
its capital stock or ownership interests.
SECTION 4.5. Other Interests. Except as set forth in Section 4.5 of the
Company Disclosure Schedule, neither the Company nor any of the Company's
Subsidiaries owns, directly or indirectly, any interest or investment in
(whether equity or debt) any corporation, partnership, limited liability
company, joint venture, business, trust or other Person (other than the
Company's Subsidiaries).
SECTION 4.6. No Conflict; Required Filings and Consents.
(a) Except as set forth in Section 4.6 of the Company Disclosure Schedule
with respect to clause (iii) below, neither the execution and delivery of this
Agreement nor the performance by the Company of its obligations hereunder, nor
the consummation of the transactions contemplated hereby, will: (i) conflict
with the Company's Certificate of Incorporation or Bylaws; (ii) assuming
satisfaction of the requirements set forth in Section 4.6(b) below, violate any
statute, law, ordinance, rule or regulation, applicable to the Company or any of
its Subsidiaries or any of their properties or assets; or (iii) violate, breach,
be in conflict with or constitute a default (or an event which, with notice or
lapse of time or both, would constitute a default) under, or permit the
termination of any provision of, or result in the termination of, the
acceleration of the maturity of, or the acceleration of the performance of any
obligation of the Company or any of its Subsidiaries under, or cause an
indemnity payment to be made by the Company or any of its Subsidiaries under, or
result in the creation or imposition of any lien upon any properties, assets or
business of the Company or any of its Subsidiaries under, any note, bond,
indenture, mortgage, deed of trust, lease, franchise, permit, authorization,
license, contract, instrument or other agreement or commitment or any order,
judgment or decree to which the Company or any of its Subsidiaries is a party or
by which the Company or any of its Subsidiaries or any of their respective
assets or properties is bound or encumbered, or give any Person the right to
require the Company or any of its Subsidiaries to purchase or repurchase any
notes, bonds or instruments of any kind except, in the case of clauses (ii) and
(iii), for such violations, breaches, conflicts, defaults or other occurrences
which, individually or in the aggregate, would not have a Material Adverse
Effect.
(b) Except (i) for the pre-merger notification requirements of the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended, and the rules
and regulations thereunder (the "HSR Act"), (ii) for the filing of the
Certificate of Merger or Certificate of Ownership, as the case may be, pursuant
to the DGCL, (iii) with respect to matters set forth in Sections 4.6(a) or
4.6(b) of the Company Disclosure Schedule and (iv) for applicable requirements,
if any, of the Exchange Act, no consent, approval or authorization of, permit
from, notice to, or declaration, filing or registration with, any governmental
or regulatory authority, or any other Person or entity is required to be made or
obtained by the Company or its Subsidiaries in connection with the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby, except where the failure to obtain such
consent, approval, authorization, permit or declaration, to deliver such notice
or to make such filing or registration would not, individually or in the
aggregate, have a Material Adverse Effect.
SECTION 4.7. Compliance. The Company and each of its Subsidiaries is in
compliance with all foreign, federal, state and local laws and regulations
applicable to its operations or with respect to which compliance is a condition
of engaging in the business thereof, except to the extent that failure to comply
would not,
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individually or in the aggregate, have a Material Adverse Effect. To the
knowledge of the Company, neither the Company nor any of its Subsidiaries has
received any notice asserting a failure, or possible failure, to comply with any
such law or regulation, the subject of which notice has not been resolved as
required thereby or otherwise to the satisfaction of the party sending the
notice, except for such failure as would not, individually or in the aggregate,
have a Material Adverse Effect. The Company and its Subsidiaries have all
permits, licenses grants, authorizations, easements, consents, certificates,
approvals, orders and franchises (collectively, "Permits") from governmental
agencies required to conduct their respective businesses as they are now being
conducted and assuming that all necessary consents to transfer are obtained, all
such Permits will remain in effect after the consummation of the Offer and after
the Effective Time, except for such failures to have such Permits that would
not, individually or in the aggregate, have a Material Adverse Effect.
SECTION 4.8. SEC Documents.
(a) The Company has delivered or made available to Parent true and complete
copies of each registration statement, proxy or information statement, form,
report and other documents required to be filed by it with the SEC since January
1, 1997 (collectively, the "SEC Reports"). As of their respective dates, the SEC
Reports (i) complied, or, with respect to those not yet filed, will comply, in
all material respects with the applicable requirements of the Securities Act and
the Exchange Act and (ii) did not, or, with respect to those not yet filed, will
not, contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements made
therein, in the light of the circumstances under which they were made, not
misleading. The Company has filed all required SEC Reports required to be filed
by it under the Exchange Act since November 1, 1996. The Company has heretofore
made available or promptly will make available to Parent a complete and correct
copy of all amendments or modifications to any SEC Report which has been filed
prior to the date hereof or which is required to be filed but has not yet been
filed with the SEC.
(b) Each of the consolidated balance sheets of the Company included in or
incorporated by reference into the SEC Reports (including the related notes and
schedules) presents fairly, in all material respects, the consolidated financial
position of the Company and its consolidated Subsidiaries as of its date, and
each of the consolidated statements of income, retained earnings and cash flows
of the Company included in or incorporated by reference into the SEC Reports
(including any related notes and schedules) presents fairly, in all material
respects, the results of operations, retained earnings or cash flows, as the
case may be, of the Company and its Subsidiaries for the periods set forth
therein (subject, in the case of unaudited statements, to normal year-end audit
adjustments), in each case in accordance with GAAP consistently applied during
the periods involved, except as may be noted therein.
(c) Except as set forth in Section 4.8(c) of the Company Disclosure
Schedule and except as set forth in the SEC Reports, neither the Company nor any
of its Subsidiaries has any liabilities or obligations of any nature (whether
accrued, absolute, contingent or otherwise) that would be required to be
reflected on, or reserved against in, a consolidated balance sheet of the
Company and its Subsidiaries or in the notes thereto, prepared in accordance
with GAAP consistently applied, except for (i) liabilities or obligations that
were so reserved on, or reflected in (including the notes to), the consolidated
balance sheet of the Company as of August 8, 1998, (ii) liabilities or
obligations arising in the ordinary course of business (including trade
indebtedness) since August 8, 1998 and (iii) liabilities or obligations which
would not, individually or in the aggregate, have a Material Adverse Effect.
SECTION 4.9. Absence of Certain Changes. Except as set forth in Section 4.9
of the Company Disclosure Schedule and except as set forth in the SEC Reports
and except for the transactions expressly contemplated hereby, since November 1,
1997, the Company and its Subsidiaries have conducted their respective
businesses only in the ordinary and usual course consistent with past practices
and there has not been any (i) change in the Company's business, operations,
condition (financial or otherwise), results of operations, assets or
liabilities, except for changes contemplated hereby or changes which have not,
individually or in the aggregate, had a Material Adverse Effect, or (ii)
condition, event or occurrence which, individually or in the aggregate, could
reasonably be expected to result in a Material Adverse Effect. Except as set
forth in Section 4.9 of the Company Disclosure Schedule and except as set forth
in the SEC Reports, from
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August 8, 1998 through the date of this Agreement, neither the Company nor any
of its Subsidiaries has taken any of the actions prohibited by Section 6.1
hereof.
SECTION 4.10. Litigation. Except as set forth in Section 4.10 of the
Company Disclosure Schedule and except as set forth in the SEC Reports, there is
no Action instituted, pending or, to the knowledge of the Company, threatened,
in each case against the Company or any of its Subsidiaries, which would,
individually or in the aggregate, directly or indirectly, have a Material
Adverse Effect, nor is there any outstanding judgment, decree or injunction, in
each case against the Company or any of its Subsidiaries, or any order of any
domestic or foreign court, governmental department, commission or agency
applicable to the Company or any of its Subsidiaries which has or will have,
individually or in the aggregate, a Material Adverse Effect.
SECTION 4.11. Taxes. Except as set forth in Section 4.11 of the Company
Disclosure Schedule:
(a) The Company and its Subsidiaries have (A) 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 are true, correct and complete in all material respects, except
where (other than in the case of federal income Tax Returns) any such
failure to file, or failure to be true, correct and complete, would not,
individually or in the aggregate, have a Material Adverse Effect, and (B)
duly paid in full, or adequately disclosed and fully provided for as a
liability on the financial statements of the Company and its Subsidiaries
included in the SEC Reports or delivered to Parent prior to the date
hereof, all material Taxes;
(b) The Company and its Subsidiaries have complied in all material
respects with all applicable laws, rules and regulations relating to the
withholding of Taxes and the payment of such withheld Taxes to the proper
governmental authorities, except where any such failure to comply, withhold
or pay over would not, individually or in the aggregate, have a Material
Adverse Effect;
(c) All federal income Tax Returns of the Company and its Subsidiaries
for periods through the taxable year ended on October 31, 1994 have been
audited, and no federal or material state, local or foreign audits or other
administrative proceedings or court proceedings are presently being
conducted 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 with respect to material Taxes or
material Tax Returns of the Company, and neither the Company nor any of its
Subsidiaries has waived in writing any statute of limitations with respect
to material Taxes;
(d) Neither the Internal Revenue Service nor any other taxing
authority (whether domestic or foreign) has asserted in writing against the
Company or any of its Subsidiaries any deficiency or claim for Taxes,
except where any such deficiency or claim for Taxes, if decided adversely
to the Company or any of its Subsidiaries, would not, individually or in
the aggregate, have a Material Adverse Effect;
(e) There are no material liens for Taxes upon any 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, and no material written power of attorney that has
been granted by the Company or its Subsidiaries (other than to the Company
or a Subsidiary) currently is in force with respect to any matter relating
to Taxes;
(f) Neither the Company nor any of its Subsidiaries has, with regard
to any assets or property held by any of them, 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;
(g) Since March 22, 1995, none of the Company or its Subsidiaries has
been a member of an affiliated group filing a consolidated federal income
tax return other than a group the common parent of which is the Company;
(h) As of the Closing Date, except as set forth in Section 4.11(h) of
the Company Disclosure Schedule, neither the Company nor any of its
Subsidiaries shall be party to, be bound by or have an obligation under,
any Tax sharing agreement or similar contract or arrangement or any
agreement that
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obligates it to make any payment computed by reference to Taxes, taxable
income or taxable losses of any other Person; and
(i) Neither the Company nor any of its Subsidiaries has agreed to
make, or is required to make, any material adjustment under Section 481(a)
of the Code.
(j) Neither the Company nor any of its Subsidiaries has issued or
assumed (i) any obligations described in Section 279(a) of the Code, (ii)
any applicable high yield discount obligation, as defined in Section 163(i)
of the Code or (iii) any registration-required obligation, within the
meaning of Section 163(f)(2) of the Code, that is not in registered form.
SECTION 4.12. Employee Benefit Plans.
(a) Section 4.12 of the Company Disclosure Schedule contains a complete
list of all Employee Plans of the Company and its ERISA Affiliates. True and
complete copies or descriptions of the Employee Plans of the Company and its
ERISA Affiliates, including, without limitation, trust instruments, if any, that
form a part thereof, and all amendments thereto have been furnished or made
available to Parent and its counsel.
(b) Except as described in Section 4.12 of the Company Disclosure Schedule,
each of the Employee Plans of the Company and its ERISA Affiliates (other than
any Multiemployer Plan) has been administered and is in compliance with the
terms of such Employee Plan and all applicable laws, rules and regulations
except for noncompliance which could not reasonably be expected, individually or
in the aggregate, to have a Material Adverse Effect.
(c) No "reportable event" (as such term is used in section 4043 of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")) for which
the notice requirements to the Pension Benefit Guaranty Corporation have not
been waived, "prohibited transaction" (as such term is used in section 406 of
ERISA or section 4975 of the Code) for which no exemption exists, "nondeductible
contributions" (as such term is used in Section 4972 of the Code) or
"accumulated funding deficiency" (as such term is used in section 412 or 4971 of
the Code) has heretofore occurred with respect to any Pension Plan (other than
any Multiemployer Plan) of the Company or its ERISA Affiliates, except for such
events which would not, individually or in the aggregate, have a Material
Adverse Effect.
(d) No litigation or administrative or other proceeding involving any
Employee Plans of the Company or any of its ERISA Affiliates has occurred or are
threatened where an adverse determination could, individually or in the
aggregate, have a Material Adverse Effect.
(e) Except as set forth in Section 4.12 of the Company Disclosure Schedule,
neither the Company nor any ERISA Affiliate has incurred any withdrawal
liability with respect to any Multiemployer Plan under Title IV of ERISA which
remains unsatisfied, except for such liabilities as would not, individually or
in the aggregate, have a Material Adverse Effect.
(f) Except as set forth in Section 4.12 of the Company Disclosure Schedule,
any termination of, or partial or complete withdrawal from, any Employee Plans
of the Company or its ERISA Affiliates, on or prior to the Closing Date, will
not subject the Company or any ERISA Affiliate to any liability that would
individually or in the aggregate have a Material Adverse Effect.
(g) Except as set forth in Section 4.12 of the Company Disclosure Schedule,
neither the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (i) result in any payment becoming due to
any employee (former or retired) of the Company or its Subsidiaries, (ii)
increase any benefits under any Employee Plan or (iii) result in the
acceleration of the time of payment or vesting of any such benefits.
(h) Except as disclosed in Section 4.12 of the Company Disclosure Schedule,
(i) the Company is not aware of any situation described in (b), (c) or (d) above
with respect to a Multiemployer Plan and (ii) the transactions contemplated by
this Agreement will not cause the occurrence of a situation described in Section
4.12 (b), (c), (d) or (e) as of the Effective Time.
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SECTION 4.13. Title to Assets.
(a) Section 4.13(a) of the Company Disclosure Schedule sets forth a
complete and accurate list of each improved or unimproved real property (whether
owned or leased, "Property") and/or store, office, plant or warehouse
("Facility") owned or leased by the Company or any of its Subsidiaries, and the
current use of such Property or Facility and indicating whether the Property or
Facility is owned or leased.
(b) Except as set forth in Section 4.13(b) of the Company Disclosure
Schedule, the Company and its Subsidiaries have good and marketable title to or
a valid leasehold estate in all of the material Property and Facilities. Except
as set forth in Section 4.13(b) of the Company Disclosure Schedule, the Company
and its Subsidiaries have good and marketable title or a valid right to use all
of the Property and Facilities that are necessary, and all of the personal
assets and properties that are necessary, for the conduct of the business of the
Company or any of its Subsidiaries free and clear of all Encumbrances (other
than Permitted Encumbrances).
(c) There are no pending or, to the best knowledge of the Company,
threatened condemnation or similar proceedings against the Company or any of its
Subsidiaries or to the knowledge of the Company, otherwise relating to any of
the Properties or Facilities of the Company and its Subsidiaries except for such
proceedings which would not, individually or in the aggregate, have a Material
Adverse Effect.
(d) Section 4.13(d) of the Company Disclosure Schedule sets forth a
complete and accurate list of all Leases (including subleases and licenses) of
personal property entered into by the Company or any of its Subsidiaries and
involving any annual expense to the Company or any such Subsidiary in excess of
$250,000 and/or not cancelable (without material liability) within one year.
(e) Section 4.13(e) of the Company Disclosure Schedule indicates each Lease
entered into by the Company or any of its Subsidiaries, as a tenant or
subtenant.
(f) The Company or its Subsidiaries, as the case may be, has in all
material respects performed all obligations on its part required to have been
performed with respect to (i) all Assets leased by it or to it (whether as
lessor or lessee), and (ii) all Leases and there exists no material default or
event which, with the giving of notice or lapse of time or both, would become a
default on the part of the Company or any of its Subsidiaries under any Lease,
in each case except where the failure to perform or such default or event would
not, individually or in the aggregate, have a Material Adverse Effect.
(g) To the knowledge of the Company, each of the Leases is valid, binding
and enforceable in accordance with its terms and is in full force and effect,
and assuming all consents required by the terms thereof or applicable law have
been obtained, the Leases will continue to be valid, binding and enforceable in
accordance with their respective terms and in full force and effect immediately
following the consummation of the transactions contemplated hereby, in each case
except where the failure to be valid, binding and enforceable and in full force
and effect would not, individually or in the aggregate, have a Material Adverse
Effect.
(h) Except as shown on Section 4.13(h) of the Company Disclosure Schedule,
the Company has delivered to Parent, or otherwise made available, originals or
true copies of all Leases (as the same may have been amended or modified, in any
material respect, from time to time) set forth in the Company Disclosure
Schedule.
(i) The Assets of the Company and its Subsidiaries, taken as a whole, are
sufficient to permit the Company and its Subsidiaries to conduct their business
as currently being conducted with only such exceptions as would not have a
Material Adverse Effect.
SECTION 4.14. Contracts. Each Contract is valid, binding and enforceable
and in full force and effect, and assuming all consents required by the terms
thereof or applicable law have been obtained, such Contracts will continue to be
valid, binding and enforceable and in full force and effect immediately
following the consummation of the transactions contemplated hereby, except where
failure to be valid, binding and enforceable and in full force and effect would
not have a Material Adverse Effect, and there are no material defaults
thereunder by the Company or its Subsidiaries or, to the best knowledge of the
Company, by any
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other party thereto. Section 4.14 of the Company Disclosure Schedule sets forth
each Contract of the Company or any of its Subsidiaries as of August 8, 1998 not
otherwise set forth in the Company Disclosure Schedule. No event has occurred
which either entitles, or would, on notice or lapse of time or both, entitle the
holder of any indebtedness for borrowed money of the Company or any of its
Subsidiaries to accelerate, or which does accelerate, the maturity of any
Contract relating to indebtedness of the Company or any of its Subsidiaries,
except as set forth in Section 4.14 of the Company Disclosure Schedule.
SECTION 4.15. Labor Relations. Neither the Company nor any of its
Subsidiaries is a party to any collective bargaining agreement or other labor
union contract applicable to persons employed by the Company or its Subsidiaries
except as disclosed in Section 4.15 of the Company Disclosure Schedule. Except
as set forth on Section 4.15 of the Company Disclosure Schedule, there is no
labor strike, slowdown or work stoppage or lockout pending or, to the best
knowledge of the Company, threatened against the Company or any of its
Subsidiaries, there is no unfair labor practice charge or other employment
related complaint pending or, to the best knowledge of the Company, threatened
against the Company or any of its Subsidiaries which if decided adversely could
have a Material Adverse Effect, and there is no representation claim or petition
pending before the National Labor Relations Board and no question concerning
representation exists with respect to the employees of the Company or its
Subsidiaries.
SECTION 4.16. Intellectual Property. Except as set forth in Section 4.16 of
the Company Disclosure Schedule, the Company and its Subsidiaries own or possess
adequate licenses or other valid rights to use "Dominick's", "Dominick's The
Fresh Store" and all other material trademarks, trademark rights, trade names,
trade name rights, copyrights, patents, patent rights, service marks, trade
secrets, applications for trademarks and for service marks, and other
proprietary rights and information used or held for use in connection with the
business of the Company and its Subsidiaries as currently conducted, except
where the failure to own or possess such licenses or rights would not have a
Material Adverse Effect, and the Company has no knowledge of any assertion or
claim challenging the validity of any of the foregoing.
SECTION 4.17. Affiliate Transactions. Except as set forth in the SEC
Reports and as set forth in Section 4.17 of the Company Disclosure Schedule,
from November 1, 1997 through the date of this Agreement there have been no
transactions, agreements, arrangements or understandings between the Company or
any of its Subsidiaries, on the one hand, and any 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 4.18. Environmental Matters.
(a) Except as set forth in the SEC Reports, and except to the extent that,
individually or in the aggregate, failure to satisfy the following
representations has not had, and would not reasonably be expected to have, a
Material Adverse Effect, the Company and each of its Subsidiaries to the best of
the Company's knowledge (i) have obtained all applicable permits, licenses and
other authorizations which are required to be obtained under all applicable
Environmental Laws by the Company or its Subsidiaries; (ii) are in compliance
with all terms and conditions of such required permits, licenses and
authorization, and also are in compliance with all other limitations,
restrictions, conditions, standards, prohibitions, requirements, obligations,
schedules and timetables contained in applicable Environmental Laws; (iii) have
not received notice of any past or present violations of Environmental Laws, or
of any event, incident or action which is reasonably likely to prevent continued
compliance with such Environmental Laws, or which would give rise to any common
law environmental liability, or which would otherwise form the basis of any
claim, action, suit or proceeding against the Company or any of its Subsidiaries
based on or resulting from the manufacture, processing, use, treatment, storage,
disposal, transport, or handling, or the emission, discharge or release into the
environment, of any Hazardous Material; and (iv) have taken all actions required
under applicable Environmental Laws to register any products or materials
required to be registered by the Company or its Subsidiaries thereunder.
(b) The copies of the Environmental Reports provided by the Company to
Parent are true, correct and complete in all material respects.
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SECTION 4.19. Proxy Statement; Offer Documents; Other Information. None of
(a) the proxy statement, if any, for use relating to the approval by the
stockholders of the Company of the Merger and any amendment or supplement
thereto (collectively, the "Proxy Statement"), (b) the Schedule 14D-9 or (c) the
information supplied by the Company for inclusion or incorporation by reference
in the Offer Documents, the Schedule 14D-1 and any other documents to be filed
with the SEC or any regulatory agency in connection with the transactions
contemplated hereby, including any amendment or supplement to such documents,
will, at the respective times such documents are filed, and, with respect to the
Offer Documents and the Proxy Statement, if any, when first published, sent or
given to the stockholders of the Company, contain an untrue statement of
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 are made, not false or misleading or, in the case of the Offer
Documents and the Proxy Statement, if any, or any amendment thereof or
supplement thereto, at the time of the Company Stockholder Meeting, if any, and
at the Effective Time, contain an 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 made therein, in light of the circumstances under which they
are made, not false or misleading or necessary to correct any statement in any
earlier communication with respect to the Offer or the solicitation of proxies
for the Company Stockholder Meeting, if any, which shall have become false or
misleading. All documents which the Company files or is responsible for filing
with the SEC and any regulatory agency in connection with the Offer or the
Merger (including, without limitation, the Schedule 14D-9 and the Proxy
Statement, if any) will comply as to form and content in all material respects
with the provisions of applicable law. Notwithstanding the foregoing, the
Company makes no representations or warranties with respect to information that
has been supplied by Parent or Merger Sub, or their auditors, attorneys,
financial advisers, other consultants or advisers, specifically for use in the
Schedule 14D-9 and the Proxy Statement, if any, or in any other documents to be
filed with the SEC or any regulatory agency in connection with the transactions
contemplated hereby.
SECTION 4.20. Opinion of Financial Adviser. The Company has received the
written opinion of ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ Securities Corporation (the
"Company Financial Adviser"), dated as of October 12, 1998, to the effect that
the consideration to be received in the Merger by the Company's stockholders
(other than the holders of shares of Common Stock that are Affiliates of the
Company) is fair to such stockholders from a financial point of view. An
executed copy of such opinion has been provided to Parent. The Company has been
authorized by the Company Financial Adviser to permit, subject to prior review
and consent by such Company Financial Adviser, the inclusion of such fairness
opinion (or a reference thereto) in the Proxy Statement and the Schedule 14D-9.
SECTION 4.21. Brokers. Except as set forth in Section 4.21 of the Company
Disclosure Schedule, no consultant, broker, finder or investment banker (other
than the Company Financial Adviser) is entitled to any brokerage, finder's or
other fee or commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of the Company. The
Company has heretofore furnished to Parent a complete and correct copy of all
agreements between the Company and the Company Financial Adviser pursuant to
which such firm would be entitled to any payment relating to the transactions
contemplated hereby.
SECTION 4.22. Vote Required. The affirmative vote of the holders of a
majority of the outstanding shares of Voting Common Stock entitled to vote
thereon is the only vote of the holders of any class or series of the Company's
capital stock necessary to approve the Merger. The Company approves of, and
consents to, the Offer. The Company Board, at a meeting duly called and held, by
unanimous vote (i) determined that this Agreement and the transactions
contemplated hereby, including the Offer and the Merger, are advisable and fair
to, and in the best interests of, the stockholders of the Company, (ii) approved
this Agreement and the transactions contemplated hereby, including the Offer and
the Merger, and the Stockholders Agreement which approvals constitute approval
of this Agreement, the Offer and the Merger and the Stockholders Agreement for
purposes of Section 203 of the DGCL, and (iii) resolved, subject to Section
7.1(a), to recommend that the holders of the shares of Common Stock accept the
Offer and tender all of their shares of Common Stock to Purchaser and approve
this Agreement and the transactions contemplated hereby, including the Offer and
the Merger. The Company hereby agrees to the inclusion in the Schedule 14D-9
and, if required, the Proxy Statement of the recommendations of the Company
Board described in this Section 4.22
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(subject to the right of the Company Board to withdraw, amend or modify such
recommendation in accordance with Section 7.1(a)).
SECTION 4.23. No Other Agreements to Sell the Company or its Assets. The
Company has no legal obligation, absolute or contingent, to any other Person to
sell more than 5% of the Assets of the Company, to sell more than 5% of the
capital stock or other ownership interests of the Company or any of its
Significant Subsidiaries, or to effect any merger, consolidation or other
reorganization of the Company or any of its Significant Subsidiaries or to enter
into any agreement with respect thereto.
SECTION 4.24. DGCL Section 203; State Takeover Statutes. The action of the
Company Board in approving the Offer, the Merger, this Agreement and the
transactions contemplated by this Agreement and the Stockholders Agreement is
sufficient to render inapplicable to the Offer, the Merger, this Agreement and
the Stockholders Agreement the provisions of Section 203 of the DGCL. No
provision of the certificate of incorporation, by-laws or other governing
instruments of the Company or any of its Subsidiaries or any applicable law
would, directly or indirectly, restrict or impair the ability of Parent (i) to
vote, or otherwise to exercise the rights of a stockholder with respect to,
shares of the Company and its Subsidiaries that may be acquired or controlled by
Parent or (ii) to consummate the Merger.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Merger Sub hereby, jointly and severally, represent and warrant
to the Company that:
SECTION 5.1. Organization and Qualification. Each of Parent and Merger Sub
is duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization, with the corporate power and authority to own
and operate its businesses as presently conducted. Each of Parent and Merger Sub
is duly qualified as a foreign corporation or other entity to do business and is
in good standing in each jurisdiction where the character of its properties
owned or held under lease or the nature of its activities makes such
qualification necessary, except for such failures of Parent and Merger Sub to be
so qualified as would not, individually or in the aggregate, have a Material
Adverse Effect. Parent has previously made available to the Company true and
correct copies of the certificate of incorporation and bylaws of each of Parent
and Merger Sub.
SECTION 5.2. Authorization; Validity and Effect of Agreement. Each of
Parent and Merger Sub has the requisite corporate power and authority to
execute, deliver and perform its obligations under this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by Parent and Merger Sub and the performance by them of their
respective obligations hereunder and the consummation by them of the
transactions contemplated hereby have been duly authorized by the Parent Board
and the Board of Directors of Merger Sub, and no other corporate proceedings
(including, without limitation, stockholder action) on the part of Parent or
Merger Sub are necessary to authorize this Agreement and the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by Parent and Merger Sub and constitutes a legal, valid and binding
obligation of Parent and Merger Sub, enforceable against them in accordance with
its terms, subject to the effects of bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally, general equitable principles (whether
considered in a proceeding in equity or at law) and an implied covenant of good
faith and fair dealing.
SECTION 5.3. No Conflict; Required Filings and Consents.
(a) Neither the execution and delivery of this Agreement nor the
performance by Parent and Merger Sub of their obligations hereunder, nor the
consummation of the transactions contemplated hereby, will: (i) conflict with
Parent's or Sub's certificate of incorporation or bylaws; (ii) assuming
satisfaction of the requirements set forth in Section 5.3(b) below, violate any
statute, law, ordinance, rule or regulation, applicable to Parent or any of its
Subsidiaries or any of their properties or assets; or (iii) violate, breach, be
in conflict with or constitute a default (or an event which, with notice or
lapse of time or both, would constitute a
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default) under, or permit the termination of any provision of, or result in the
termination of, the acceleration of the maturity of, or the acceleration of the
performance of any obligation of Parent or any of its Subsidiaries under, or
cause an indemnity payment to be made by the Parent or any of its Subsidiaries
under, or result in the creation of imposition of any lien upon any properties,
assets or business of Parent or any of its Subsidiaries under, any note, bond,
indenture, mortgage, deed of trust, lease, franchise, permit, authorization,
license, contract, instrument or other agreement or commitment or any order,
judgment or decree to which Parent or any of its Subsidiaries is a party or by
which Parent or any of its Subsidiaries or any of their respective assets or
properties is bound or encumbered, or give any Person the right to require
Parent or any of its Subsidiaries to purchase or repurchase any notes, bonds or
instruments of any kind except, in the case of clauses (ii) and (iii), for such
violations, breaches, conflicts, defaults or other occurrences which,
individually or in the aggregate, would not have a Material Adverse Effect.
(b) Except (i) for the pre-merger notification requirements of the HSR Act
and (ii) for the filing of the Certificate of Merger or Certificate of
Ownership, as the case may be, pursuant to the DGCL and (iii) for applicable
requirements, if any, of the Exchange Act, no consent, approval or authorization
of, permit from, notice to or declaration, filing or registration with, any
governmental or regulatory authority, or any other Person or entity is required
to be made or obtained by Parent or Merger Sub in connection with the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby, except where the failure to obtain such
consent, approval, authorization, permit or declaration, to deliver such notice
or to make such filing or registration would not, individually or in the
aggregate, have a Material Adverse Effect.
SECTION 5.4. Proxy Statement; Offer Documents; Other Information. None of
(a) the Offer Documents, (b) the Schedule 14D-1 or (c) the information supplied
by Parent or Merger Sub for inclusion or incorporation by reference in the Proxy
Statement, if any, the Schedule 14D-9 and any other documents to be filed with
the SEC or any regulatory agency in connection with the transactions
contemplated hereby, including any amendment or supplement to such documents,
will, at the respective times such documents are filed, and, with respect to the
Proxy Statement, if any, and the Offer Documents, when first published, sent or
given to stockholders of the Company, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to made the statements made therein, in light of the
circumstances under which they are made, not misleading or, in the case of the
Proxy Statement, if any, or any amendment thereof or supplement thereto, at the
time of the Company Stockholder Meeting, if any, and at the Effective Time,
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 made the statements
made therein, in light of the circumstances under which they are made, not false
or misleading or necessary to correct any statement in any earlier communication
with respect to the Offer or the solicitation of proxies for the Company
Stockholder Meeting, if any, which shall have become false or misleading. All
documents which Parent or Merger Sub files or is responsible for filing with the
SEC or any regulatory agency in connection with the Offer or the Merger
(including, without limitation, the Offer Documents and the Schedule 14D-1) will
comply as to form and content in all material respects with the provisions of
applicable law. Notwithstanding the foregoing, neither Parent nor Merger Sub
makes any representation or warranty with respect to any information that has
been supplied by the Company or its auditors, attorneys, financial advisers,
other consultants or advisers, specifically for use in the Offer Documents and
the Schedule 14D-1, or in any other documents to be filed with the SEC or any
regulatory agency in connection with the transactions contemplated hereby.
SECTION 5.5. Financial Resources. Parent and Merger Sub have, as of the
date of this Agreement, available cash or undrawn lines of credit sufficient to
consummate the Offer and the Merger on the terms contemplated by this Agreement,
and, at the expiration of the Offer and at the Effective Time of the Merger,
Parent and Merger Sub will have available all of the funds necessary for the
acquisition of all shares of Common Stock pursuant to the Offer and the Merger,
as the case may be, and to perform their respective obligations under this
Agreement.
SECTION 5.6. No Prior Activities. Merger Sub has not incurred nor will it
incur any liabilities or obligations, except those incurred in connection with
its organization and with the negotiation of this Agreement and the performance
hereof, and the consummation of the transactions contemplated hereby,
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including the Merger. Except as contemplated by this Agreement, Merger Sub has
not engaged in any business activities of any type or kind whatsoever, or
entered into any agreements or arrangements with any person or entity, or become
subject to or bound by any obligation or undertaking. As of the date hereof, all
of the issued and outstanding capital stock of Merger Sub is owned beneficially
and of record by Parent, free and clear of all Encumbrances (other than those
created by this Agreement and the transactions contemplated hereby).
SECTION 5.7. Ownership of Common Stock. To the best knowledge of Parent and
Merger Sub, none of Parent, Merger Sub or any of their respective affiliates,
beneficially or of record, owns any shares of Common Stock, other than shares of
Common Stock, if any, held by or for the account of employees or former
employees of Parent, Merger Sub or any of their respective affiliates pursuant
to any Employee Plan.
SECTION 5.8. Brokers. No consultant, broker, finder or investment banker
(other than the Parent Financial Adviser, the fees and expenses of which shall
be paid by Parent) is entitled to any brokerage, finder's or other fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of Parent or Merger Sub.
ARTICLE VI.
CONDUCT OF BUSINESS OF THE COMPANY PENDING THE MERGER
Except as set forth in Section 6.1 of the Company Disclosure Schedule, the
Company covenants and agrees that, during the period from the date hereof to the
Effective Time (except as otherwise contemplated by the terms of this
Agreement), unless Parent shall otherwise agree (i) the businesses of the
Company and its Subsidiaries shall be conducted, in all material respects, in
the ordinary course and in a manner consistent with past practice and, in all
material respects, in compliance with applicable laws; and (ii) the Company
shall use its best efforts consistent with the foregoing to preserve
substantially intact the business organization of the Company and its
Subsidiaries, to keep available the services of the present officers, employees
and consultants of the Company and its Subsidiaries and to preserve, in all
material respects, the present relationships of the Company and its Subsidiaries
with customers, suppliers, advertisers, distributors and other persons with
which the Company or any of its Subsidiaries has significant business relations;
provided, however, that the Company shall not make any significant payment or
incur any significant obligations other than in the ordinary course of business
without Parent's prior written consent. In furtherance of the foregoing, neither
the Company nor any of its Subsidiaries shall (except as set forth in Section
6.1 of the Company Disclosure Schedule and except as otherwise contemplated by
the terms of this Agreement), between the date of this Agreement and the
Effective Time, directly or indirectly do, or propose or commit to do, any of
the following without the prior consent of Parent:
(a) make or commit to make any capital expenditures in excess of
$500,000 (such amount to increase by an additional $500,000 for each 20
Business Day period, or portion thereof, after the initial expiration date
of the Offer) in the aggregate, other than expenditures for routine or
emergency maintenance and repair or expenditures in amounts not exceeding
those reflected in capital expenditure budgets disclosed in the SEC Reports
or supplied to Parent prior to the date of this Agreement;
(b) incur any indebtedness for borrowed money or guarantee such
indebtedness of another Person (other than the Company or a wholly-owned
Subsidiary of the Company) or enter into any "keep well" or other agreement
to maintain the financial condition of another Person (other than the
Company or a wholly-owned Subsidiary of the Company) or make any loans, or
advances of borrowed money or capital contributions to, or equity
investments in, any other Person (other than the Company or a wholly-owned
Subsidiary of the Company) or issue or sell any debt securities, other than
borrowings under existing agreements in the ordinary course of business
consistent with past practice;
(c)(i) amend its Certificate of Incorporation or Bylaws or the charter
or bylaws of any of its Subsidiaries; (ii) split, combine or reclassify the
outstanding shares of its capital stock or other ownership interests or
declare, set aside or pay any dividend payable in cash, stock or property
or make any other distribution with respect to such shares of capital stock
or other ownership interests; (iii) redeem,
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purchase or otherwise acquire, directly or indirectly, any shares of its
capital stock or other ownership interests other than in connection with
the Stock Purchase Plan; or (iv) sell or pledge any stock of any of its
Subsidiaries;
(d)(i) other than upon exercise of outstanding Company Stock Rights or
warrants or pursuant to the Stock Purchase Plan (in each case disclosed in
Section 4.3 of the Company Disclosure Schedule) and in connection with the
conversion of Non-Voting Common Stock, issue or sell or agree to issue or
sell any additional shares of, or grant, confer or award any options,
warrants or rights of any kind to acquire any shares of, its capital stock
of any class; (ii) enter into any agreement, contract or commitment to
dispose of or acquire, or relating to the disposition or acquisition of, a
segment of its business or to sell, lease, license, close, shut down or
otherwise dispose of any stores or to relocate any stores; (iii) except in
the ordinary course of business consistent with past practice, sell,
pledge, dispose of or encumber any material Assets (including, without
limitation, any indebtedness owed to them or any claims held by them),
including real property; (iv) acquire (by merger, consolidation,
acquisition of stock or assets or otherwise) any corporation, partnership
or other business organization or division thereof or any material Assets
(other than inventory in the ordinary course of business consistent with
past practice), including real property, or make any material investment,
either by purchase of stock or other securities, or contribution to
capital, in any case, in any material amount of property or assets, in or
of any other Person or (v) remodel any stores, except for store remodels
which the Company has commenced or for which the Company has entered into
an agreement, or otherwise committed, as of the date of this Agreement;
(e) grant any severance or termination pay (other than pursuant to
policies or agreements in effect on the date hereof as disclosed in the SEC
Reports or set forth in Section 6.1(e) of the Company Disclosure Schedule)
or increase the benefits payable under its severance or termination pay
policies or agreements in effect on the date hereof or enter into any
employment or severance agreement with any officer, director or employee;
(f) adopt or amend any bonus, profit sharing, compensation, stock
option, pension, retirement, deferred compensation, employment or other
employee benefit plan, agreement, trust, fund or other arrangement for the
benefit or welfare of any director, officer or employee or increase in any
manner the compensation or fringe benefits of any director, officer or
employee or grant, confer, award or pay any forms of cash incentive,
bonuses or other benefit not required by any existing plan, arrangement or
agreement, in each case except in the ordinary course of business or as
required by law or other than in accordance with Section 3.8, amend or
modify the terms of any Company Stock Rights;
(g) enter into or amend any (i) Lease or (ii) contract, agreement,
commitment, understanding or other arrangement, in each case involving
annual expenditures or liabilities in excess of $250,000 and, in the case
of clause (ii), which is not cancelable within one (1) year without
penalty, cost or liability;
(h) enter into or modify, in any material respect, any material
collective bargaining agreements;
(i) make any material change in its tax or accounting policies or any
material reclassification of assets or liabilities except as required by
law or GAAP;
(j) change or make any material Tax elections, change materially any
method of accounting with respect to Taxes, file any amended Tax Return, or
settle or compromise any material federal, state, local or foreign Tax
liability;
(k) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise),
except the payment, discharge or satisfaction of (i) liabilities or
obligations in the ordinary course of business consistent with past
practice or in accordance with the terms thereof as in effect on the date
hereof or (ii) claims settled or compromised to the extent permitted by
Section 6.1(k), or waive, release, grant or transfer any rights of material
value or modify or change in any material respect any existing contract, in
each case other than in the ordinary course of business consistent with
past practice;
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(l) settle or compromise any litigation, other than litigation not in
excess of amounts reserved for in the most recent consolidated financial
statements of the Company included in the SEC Reports or, if not so
reserved for, in an aggregate amount not in excess of $500,000 (provided in
either case such settlement documents do not involve any material
non-monetary obligations on the part of the Company and its Subsidiaries);
(m) adopt a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other
reorganization of the Company or any of its Subsidiaries (other than the
Merger) or otherwise alter through merger, liquidation, reorganization,
restructuring or any other fashion the corporate structure and ownership of
any Subsidiary of the Company;
(n) make any payment to an Affiliate, except in accordance with the
terms of any contract or compensation to employees in the ordinary course
of business; or
(o) take, or offer or propose to take, or agree to take in writing or
otherwise, any of the actions described in Sections 6.1(a) through 6.1(n)
or any action which would result in any of the conditions set forth in
Annex A or Article VIII not being satisfied.
ARTICLE VII.
ADDITIONAL AGREEMENTS
SECTION 7.1. Stockholders Meeting.
(a) As soon as practicable following the acquisition by Merger Sub of the
Minimum Shares pursuant to the Offer, the Company, acting through the Company
Board, shall, in accordance with applicable law, its Certificate of
Incorporation and Bylaws and subject to the other provisions of this Section
7.1(a), to the extent necessary to consummate the Merger, promptly and duly
call, give notice of, convene and hold as soon as practicable a meeting of the
holders of Common Stock (the "Company Stockholder Meeting") for the purpose of
voting to approve and adopt this Agreement and the transactions contemplated
hereby and (i) recommend that the holders of the Common Stock accept the Offer
and tender all of their shares of Common Stock to Purchaser and approve this
Agreement and the transactions contemplated hereby, including the Merger, which
recommendation shall be included in the Proxy Statement, if any, and (ii) take
all reasonable and lawful action to solicit and obtain such approval. The
Company Board shall not withdraw, amend or modify in a manner adverse to Parent
its recommendation referred to in clause (i) of the preceding sentence (or
announce publicly its intention to do so) provided that the disclosure of (x)
the receipt of an Alternative Transaction or (y) the fact that the Company Board
is considering such Alternative Transaction or reviewing it with its advisers
(to the extent the Company Board shall have determined in good faith that any
such disclosure is required by law or any applicable securities exchange
requirement) shall not by itself constitute such a withdrawal, modification or
amendment. Notwithstanding the foregoing, prior to the acceptance for payment of
the Minimum Shares pursuant to the Offer, the Company Board shall be permitted
to (A) withdraw, amend or modify its recommendation (or publicly announce its
intention to do so) of this Agreement and the transactions contemplated hereby,
including the Offer and the Merger, in a manner adverse to Parent or (B) approve
or recommend or enter into an agreement with respect to a Superior Transaction
if: (i) the Company has complied with Section 7.3; (ii) a Superior Transaction
shall have been proposed by any Person other than Parent and such proposal is
pending at the time of such action; (iii) the Company Board shall have
determined in good faith, based on the advice of its outside legal counsel, that
the failure to withdraw, amend or modify its recommendation or to approve or
recommend or enter into such Superior Transaction would constitute a breach of
the Company Board's fiduciary duties under applicable law; and (iv) the Company
shall have notified Parent of such Superior Transaction proposal at least three
Business Days in advance of such action. No action by the Company Board
permitted by the preceding sentence (each, a "Permitted Action") shall
constitute a breach of this Agreement by the Company.
(b) Notwithstanding the preceding paragraph or any other provision of this
Agreement, in the event Merger Sub owns 90% or more of the outstanding shares of
each class of the capital stock of the Company following expiration of the
Offer, the Company shall not be required to call the Company Stockholder
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Meeting or to file or mail the Proxy Statement, and the parties hereto shall, at
the request of Parent and subject to Article VIII, take all necessary and
appropriate action to cause the Merger to become effective as soon as
practicable following such expiration without a meeting of stockholders of the
Company in accordance with Section 253 of the DGCL.
(c) If required by applicable law, as soon as practicable following
Parent's request, the Company shall file with the SEC under the Exchange Act and
the rules and regulations promulgated thereunder, and shall use its reasonable
best efforts to have cleared by the SEC, the Proxy Statement with respect to the
Company Stockholder Meeting. Parent, Purchaser and the Company will cooperate
with each other in the preparation of the Proxy Statement. Without limiting the
generality of the foregoing, each of Parent and Purchaser will furnish to the
Company the information relating to it required by the Exchange Act and the
rules and regulations promulgated thereunder to be set forth in the Proxy
Statement. The Company agrees to use its reasonable best efforts, after
consultation with the other parties hereto, to respond promptly to any comments
made by the SEC with respect to the Proxy Statement and any preliminary version
thereof filed by it and cause such Proxy Statement to be mailed to the Company's
stockholders at the earliest practicable time.
SECTION 7.2. Access to Information; Confidentiality.
(a) From the date hereof to the Effective Time, the Company shall, and
shall cause its Subsidiaries, officers, directors, employees, auditors and other
agents, upon reasonable notice, to afford the officers, employees, auditors and
other agents of Parent reasonable access during normal business hours to its
officers, employees, agents, properties, offices, plants and other facilities
and to all books and records, and shall furnish Parent with all financial,
operating and other data and information as Parent through its officers,
employees or agents may from time to time reasonably request; provided, however,
that, prior to the acceptance for payment of the Minimum Shares pursuant to the
Offer, the foregoing shall not require the Company to permit any inspection, or
to disclose any information, that in the reasonable judgment of the Company (i)
would result in the disclosure of any trade secrets of third parties or violate
any of its obligations with respect to confidentiality if the Company shall have
used all reasonable efforts to obtain the consent of such third party to such
inspection or disclosure, (ii) relates to Alternative Transactions to the extent
that any confidentiality agreement in existence on the date hereof with the
Company prohibits the Company from making such books, records and other
information available to Parent or (iii) which is subject to an attorney-client
privilege or which constitutes attorney work product; and provided further that,
prior to the acceptance for payment of the Minimum Shares pursuant to the Offer,
the Company may provide information which is of a sensitive competitive nature
in a form which minimizes the potential detriment to the Company from such
disclosure while addressing the legitimate business objectives of Parent in
seeking such information.
(b) Each of the Company and Parent will hold, and will cause its directors,
officers, employees, agents, advisers (including, without limitation, counsel
and auditors) and controlling persons to hold, any such information which is
nonpublic in confidence on the same terms and conditions as set forth in the
letter dated August 25, 1998, as amended from time to time, between the Company
and Parent (the "Confidentiality Agreement"). Each of the Company and the Parent
agree that the Confidentiality Agreement shall terminate immediately upon the
Effective Time. Each of the Company and Parent further agree that upon the
execution of this Agreement, (i) the fourth full paragraph of the
Confidentiality Agreement shall be superseded by Section 7.9 hereof, (ii) the
fourth sentence of the tenth full paragraph of the Confidentiality Agreement
shall be deemed to have been deleted and (iii) except for clause (ii)(b)
thereof, the eighth full paragraph of the Confidentiality Agreement shall be
deemed to have been deleted. Furthermore, in the event this Agreement is
terminated pursuant to Section 9.1(c)(ii), 9.1(d)(i) or 9.1(d)(iii) in a
circumstance where a Termination Fee may be payable pursuant to Section 9.3(b)
or Section 9.1(e) or 9.1(f) in a circumstance where a Termination Fee is
payable, the seventh full paragraph of the Confidentiality Agreement shall be
deemed deleted.
(c) No investigation pursuant to this Section 7.2 shall affect any
representations or warranties of the parties herein or the conditions to the
obligations of the parties hereto.
(d) In order to facilitate an orderly transition of the business of the
Company to a wholly-owned subsidiary of Parent and to permit the coordination of
their related operations on a timely basis, the Company
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shall, to the extent reasonably practical and permitted by applicable law,
consult with Parent on significant strategic and financial and operational
matters, including, without limitation, retail operations, store openings,
closings and remodelings, marketing, advertising and personnel.
SECTION 7.3. No Solicitation of Transactions. The Company shall, and shall
cause its Subsidiaries and their respective officers, directors, employees, and
representatives and agents engaged by the Company in connection with the
transactions contemplated hereby to, immediately cease any existing discussions
or negotiations, if any, with any parties conducted heretofore with respect to
any Alternative Transaction. Neither the Company or any of its Subsidiaries, nor
any of its or their respective officers, directors, employees or representatives
and agents engaged by the Company in connection with the transactions
contemplated hereby, shall, directly or indirectly, solicit, initiate,
facilitate or encourage the making of any proposal for an Alternative
Transaction, participate in discussions or negotiations with, or provide any
information to, any Person or group (other than Parent and Merger Sub or any
designees of Parent or Merger Sub) concerning an Alternative Transaction or
grant any waiver or release under any standstill or similar agreement with
respect to any class of equity securities of the Company and its Subsidiaries;
provided that the Company (and its Subsidiaries and its and their respective
officers, directors, employees, representatives or agents) may, prior to the
acceptance for payment of the Minimum Shares pursuant to the Offer, participate
in negotiations or discussions with, and provide information to, any Person
concerning an Alternative Transaction not solicited after the date hereof which
is submitted in writing by such Person to the Company Board after the date of
this Agreement if the Company Board, in its good faith judgment, believes that
such Alternative Transaction could reasonably be expected to result in a
Superior Transaction and the Company Board determines in good faith, based on
the advice of outside legal counsel, that the failure to participate in such
discussions or negotiations or to furnish such information would constitute a
breach of the Company Board's fiduciary duties under applicable law; provided,
however, that prior to participating in any such discussions or negotiations or
furnishing any information, the Company receives from such third party an
executed confidentiality agreement on terms at least as favorable to the
Company, in all material respects, as those contained in the Confidentiality
Agreement, and provided further that the Company provides prompt notice to
Parent to the effect that it is furnishing information to, or entering into
discussions or negotiations with, a third party. Nothing contained in this
Section 7.3 shall prohibit the Company Board from complying with Rule 14e-2
promulgated under the Exchange Act with regard to a tender or exchange offer.
The Company shall notify Parent promptly if it receives any unsolicited proposal
concerning an Alternative Transaction, the identity of the person making any
such proposal and all the terms and conditions thereof and shall advise Parent
periodically of all material developments relating thereto.
SECTION 7.4. Parent Vote. Parent shall vote all shares of Common Stock and
all proxies it holds in favor of the Merger. After the date hereof and prior to
the expiration of the Offer, Parent shall not purchase, offer to purchase, or
enter into any contract, agreement or understanding regarding the purchase of
shares of Common Stock, except pursuant to the terms of the Offer and the
Merger.
SECTION 7.5. Employee Benefits Matters. Commencing on the consummation of
the Offer and continuing until December 31, 1999, Parent shall cause the Company
and the Surviving Corporation to continue to provide to employees of the Company
and its Subsidiaries (excluding employees covered by collective bargaining
agreements), as a whole, Employee Benefits which, in the aggregate, are no less
favorable to such employees than the Employee Benefits provided to such
employees as of the date hereof. Parent and the Company agree that the Company
and the Surviving Corporation shall pay promptly or provide when due all
compensation and benefits required to be paid pursuant to the terms of any
Employee Plan or any individual agreement with any employee, former employee,
director or former director in effect and disclosed to Parent as of the date
hereof. For all Employee Benefits (including, without limitation, Employee Plans
and other programs of Parent and its affiliates after the Effective Time), all
service with the Company or any of its Subsidiaries prior to the Effective Time
of employees (excluding employees covered by collective bargaining agreements)
shall be treated as service with Parent and its affiliates for eligibility and
vesting purposes and for benefit accruals for purposes of severance and vacation
pay to the same extent that such service is taken into account by the Company
and its Subsidiaries as of the date hereof, except to the extent such treatment
will result in duplication of benefits. From and after the Effective Time,
Parent shall, and shall cause the Surviving
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Corporation to, (i) cause any pre-existing condition or limitation and any
eligibility waiting periods (to the extent such conditions, limitations or
waiting periods did not apply to the employees of the Company under the Employee
Plans in existence as of the date hereof) under any group health plans of Parent
or any of its Subsidiaries to be waived with respect to employees of the Company
and their eligible dependents and (ii) give each employee of the Company credit
for the plan year in which the Effective Time occurs toward applicable
deductions and annual out-of-pocket limits for expenses incurred prior to the
Effective Time (or such later date on which participation commences) during the
applicable plan year. "Employee Benefits" shall mean the following benefits: any
medical, health, dental, life insurance, long-term disability, severance,
pension, Section 401(k), retirement or savings plan, policy or arrangement,
including those such plans for which coverage is generally limited to officers
or a select group of highly compensated employees of the Company or any of its
Subsidiaries. Nothing herein shall require the continued employment of any
person or prevent the Company or any of its Subsidiaries and/or the Surviving
Corporation from taking any action or refraining from taking any action which
the Company or any of its Subsidiaries could take or refrain from taking prior
to or after the Effective Time, including, without limitation, any action the
Company or any of its Subsidiaries or the Surviving Corporation could take to
terminate any plan under its terms as in effect as of the date hereof.
SECTION 7.6. Directors' and Officers' Indemnification; Insurance.
(a) From and after the Effective Time, Parent shall cause the Surviving
Corporation to indemnify and hold harmless each person who is now, or has been
at any time prior to the date hereof, an officer or director of the Company or
any of its Subsidiaries (the "Indemnified Parties") against any losses, claims,
damages, judgments, settlements, liabilities, costs or expenses (including
without limitation reasonable attorneys' fees and out-of-pocket expenses)
incurred in connection with any claim, action, suit, proceeding or investigation
arising out of or pertaining to acts or omissions, or alleged acts or omissions,
by them in their capacities as such occurring at or prior to the Effective Time
(including, without limitation, in connection with the Offer, the Merger and the
other transactions contemplated by this Agreement), to the fullest extent that
the Company or such Subsidiaries would have been permitted, under applicable law
and the Certificate of Incorporation or Bylaws of the Company or the
organizational documents of such Subsidiaries each as in effect on the date of
this Agreement. In connection with the foregoing, Parent shall cause the
Surviving Corporation to advance expenses as incurred to the fullest extent
permitted under applicable law upon receipt from the Indemnified Party to whom
expenses are advanced of a written undertaking to repay such advances as
contemplated by Section 145(e) of the DGCL). Parent shall cause the Surviving
Corporation to pay all reasonable expenses, including reasonable attorneys'
fees, that may be incurred by any Indemnified Party in enforcing this Section
7.6. If the indemnity provided by this Section 7.6(a) is not available with
respect to any Indemnified Party, then Parent shall cause the Surviving
Corporation, on the one hand, and the Indemnified Party, on the other hand, to
contribute to the amount payable in such proportion as is appropriate to reflect
relative faults and benefits. If the Surviving Corporation or any of its
successors or assigns (i) consolidates with or merges into any other Person and
shall not be the continuing or surviving person or entity of such consolidation
or merger or (ii) transfers or conveys all or substantially all of its
properties and assets to any Person, then, and in each such case, to the extent
necessary, proper provision shall be made so that the successors and assigns of
the Surviving Corporation assume the obligations set forth in this Section 7.6.
The parties acknowledge and agree that to the extent that the Surviving
Corporation fails to comply with its indemnification obligations pursuant to
this Section 7.6, Parent shall indemnify and hold harmless each of the
Indemnified Parties to the same extent as the Surviving Corporation was required
to indemnify such Indemnified Parties hereunder.
(b) In any event of any such claim, action, suit, proceeding or
investigation, (i) any Indemnified Party wishing to claim indemnification under
this Section 7.6 shall, upon becoming aware of any such claim, action, suit,
proceeding or investigation, promptly notify the Surviving Corporation thereof
(provided that the failure to provide such notice shall not relieve the Parent
or the Surviving Corporation of any liability or obligation it may have to such
Indemnified Party under this Section 7.6 unless such failure materially
prejudices Parent or the Surviving Corporation), and shall deliver to Parent and
the Surviving Corporation the undertaking contemplated by Section 145(e) of the
DGCL, (ii) Parent shall cause the Surviving Corporation to pay the
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reasonable fees and expenses of counsel selected by the Indemnified Parties,
which counsel shall be reasonably acceptable to Parent and the Surviving
Corporation, (iii) Parent and the Surviving Corporation shall cooperate in the
defense of any such matter; provided, however, that neither Parent nor the
Surviving Corporation shall be liable for any settlement effected without its
prior written consent (which consent shall not be unreasonably withheld); and
provided further, that neither Parent nor the Surviving Corporation shall be
liable under this Section 7.6 for the fees and expenses of more than one counsel
for all Indemnified Parties in any single claim, action, suit, proceeding or
investigation, except to the extent that, in the opinion of counsel for the
Indemnified Parties, two or more of such Indemnified Parties have conflicting
interests in the outcome of such claim, action, suit, proceeding or
investigation such that additional counsel is required to be retained by such
Indemnified Parties under applicable standards of professional conduct.
(c) Unless otherwise required by law, (i) at the Effective Time, the
Certificate of Incorporation and Bylaws of the Surviving Corporation shall
contain provisions providing for exculpation of director and officer liability
and indemnification by the Surviving Corporation of the Indemnified Parties not
less favorable to the Indemnified Parties than those provisions providing for
exculpation of director and officer liability and indemnification by the Company
of the Indemnified Parties contained in the Certificate of Incorporation and
Bylaws of the Company as in effect on the date of this Agreement, and (ii) for a
period of six years from the Effective Time, the Surviving Corporation and the
Company's Subsidiaries shall not amend, repeal or modify any such provisions
contained in their respective certificates of incorporation and bylaws, or other
organizational documents of such Subsidiaries, to reduce or adversely affect the
rights of the Indemnified Parties thereunder in respect of actions or omissions
by them occurring at or prior to the Effective Time.
(d) Parent shall cause the Surviving Corporation to purchase a four-year
extended reporting period endorsement ("reporting tail coverage") under the
Company's existing directors' and officers' liability insurance coverage (or as
much coverage as can be obtained for a total not in excess of 175% of the
Current Premium), provided that such reporting tail coverage shall extend the
director and officer liability coverage in force as of the date hereof from the
Effective Time on terms, that in all material respects, are no less advantageous
to the intended beneficiaries thereof than the existing officers' and directors'
liability insurance. "Current Premium" shall mean the last annual premium paid
prior to the date hereof for the existing officers' and directors' liability
insurance, which the Company represents and warrants to be $445,500.
(e) This covenant is intended to be for the benefit of, and shall be
enforceable by, each of the Indemnified Parties and their respective heirs and
legal representatives.
SECTION 7.7. Notification of Certain Matters. The Company shall give prompt
notice to Parent, and Parent shall give prompt notice to the Company, of (i) the
occurrence or non-occurrence of any event the occurrence or non-occurrence of
which would be likely to cause any representation or warranty contained in this
Agreement to be untrue or inaccurate and (ii) any failure of the Company, Parent
or Merger Sub, 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 7.7
shall not limit or otherwise affect the remedies available hereunder to the
party receiving such notice.
SECTION 7.8. Further Action. Upon the terms and subject to the conditions
hereof, each of the parties hereto shall use its reasonable best efforts to
take, or cause to be taken, all appropriate action, and to do or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Agreement, including, without limitation, (i) cooperating in the Offer and
the preparation and filing of the Proxy Statement, required filings under the
HSR Act (no later than the fifth Business Day after the date of this Agreement)
and any amendments to the foregoing, (ii) using its reasonable best efforts to
make promptly all required regulatory filings and applications and to obtain all
licenses, permits, consents, approvals, authorizations, qualifications and
orders of governmental authorities and parties to contracts with the Company and
its Subsidiaries as are necessary for the consummation of the transactions
contemplated by this Agreement and to fulfill the conditions to the Offer and
the Merger, (iii) cooperating in all respects with each other in connection with
obtaining antitrust clearance and with any investigation or other inquiry,
including any proceeding initiated by a private party, in connection with the
transactions pursuant hereto, and (iv) keeping the other party informed
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in all material respects of any material communication received by such party
from, or given by such party to, the FTC, the Antitrust Division of the
Department of Justice ("DOJ") or any other governmental authority and of any
material communication received or given in connection with any proceeding by a
private party, in each case regarding any of the transactions contemplated
hereby. The Company and Parent each shall keep the other apprised of the status
of matters relating to completion of the transactions contemplated hereby,
including promptly furnishing the other with copies of notices or other
communications received by Parent or the Company, as the case may be, or any of
their Subsidiaries, from any governmental authority with respect to the Offer or
the Merger or any of the other transactions contemplated by this Agreement. The
parties hereto will consult and cooperate with one another, and consider in good
faith the views of one another in connection with any analyses, appearances,
presentations, memoranda, briefs, arguments, opinions and proposals made or
submitted by or on behalf of any party hereto in connection with proceedings
under or relating to the HSR Act or any other antitrust law. 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 each
party to this Agreement shall use their reasonable best efforts to take all such
necessary action. Notwithstanding the foregoing, nothing in this Section 7.8
shall require, or be construed to require, Parent or the Company, in connection
with the receipt of any regulatory approval, to proffer or agree (i) to sell or
hold separate or agree to sell, divert or discontinue or to limit, before or
after the Effective Time any assets, businesses or interest in any assets or
businesses of Parent, the Company or any of their respective affiliates (or to
consent to any sale or agreement to sell or discontinuance or limitation by
Parent or the Company, as the case may be, of any of its assets or business) or
(ii) to agree to any conditions relating to, or changes or restriction in, the
operations of any such asset or business which, in either case, is reasonably
likely to materially and adversely impact the economic or business benefits to
such party of the transactions contemplated by this Agreement. In furtherance
and not in limitation of the covenants of the parties contained in this Section
7.8, if any administrative or judicial action or proceeding, including any
proceeding by a private party, is instituted (or threatened to be instituted)
challenging any transaction contemplated by this Agreement as violative of any
antitrust law, each of the parties shall cooperate in all respects with each
other and use its reasonable best efforts to contest and resist any such action
or proceeding, and to have vacated, lifted, reversed or overturned any decree,
judgment, injunction or other order, whether temporary, preliminary or
permanent, that is in effect and that prohibits, prevents or restricts, and to
resolve any challenge or objection raised by any governmental authority or
private party.
SECTION 7.9. Public Announcements. The initial press release shall be a
joint press release and thereafter Parent and the Company shall consult with
each other before issuing any press release or otherwise making any public
statements with respect to the Offer or the Merger and shall not issue any such
press release or make any such public statement prior to such consultation,
except as may, upon the advice of outside legal counsel, be required by law or
any listing agreement with its securities exchange.
SECTION 7.10. Stock Exchange De-Listing. The Surviving Corporation shall
use its best efforts to cause the Voting Common Stock to be de-listed from the
NYSE and the Chicago Stock Exchange and de-registered under the Exchange Act as
soon as practicable following the Effective Time.
SECTION 7.11. Acceleration of Outstanding Indebtedness. If, after the Offer
Consummation Date, any obligation of the Company or any of its Subsidiaries for
borrowed money outstanding is accelerated or the Company or any such Subsidiary
is otherwise required to repurchase, repay or prepay any such obligation, Parent
agrees, within the time period specified in the contract governing such
obligation, to loan to the Company an amount equal to the amount which the
Company or any such Subsidiary is required to so repurchase, repay or prepay
(including any related prepayment premiums or penalties). The Company shall use
its best efforts prior to the acceptance for payment of the Minimum Shares in
the Offer to seek a waiver of any default under any obligation that would
otherwise be accelerated upon the purchase of such Minimum Shares, such waiver
to be effective until no earlier than the Effective Time; provided, however,
that the Company shall not make any significant payments in connection therewith
without Parent's prior written consent. Upon the reasonable request of Parent
(which shall not, prior to the Offer Consummation Date, require the Company to
expend any money), the Company will cooperate with Parent with respect to any
negotiations with lenders under the Company's credit facilities.
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SECTION 7.12. Transfer Taxes. The Company or the Surviving Corporation
shall pay all state or local real property transfer, real estate excise, gains
or similar Taxes, if any, of the Company (collectively, the "Transfer Taxes"),
attributable to the transfer of a controlling interest in the Company or the
beneficial ownership of real property or interests therein and any penalties or
interest with respect thereto, payable in connection with the consummation of
the Offer or the Merger. The Company shall cooperate with Parent in the filing
of any returns with respect to the Transfer Taxes, including supplying in a
timely manner a complete list of all real property or interests therein held by
the Company and its Subsidiaries and any information with respect to such
properties that is reasonably necessary to complete such returns.
SECTION 7.13. Shareholder Litigation. The Company and Parent agree that in
connection with any litigation which may be brought against the Company or its
directors or officers relating to the transactions contemplated hereby, the
Company will keep Parent, and any counsel which Parent may retain at its own
expense, informed of the course of such litigation, to the extent Parent is not
otherwise a party thereto, and the Company agrees that it will consult with
Parent prior to entering into any settlement or compromise of any such
shareholder litigation; provided, that, no such settlement or compromise will be
entered into without Parent's prior written consent, which consent shall not be
unreasonably withheld.
SECTION 7.14. Treatment of Management Agreement. At the earlier of the
Offer Consummation Date and the Effective Time, Parent will cause (a) the
Management Agreement to be terminated and (b) the Company to make a termination
payment to Yucaipa pursuant to Section 8.3 of the Management Agreement.
SECTION 7.15. Treatment of Yucaipa Warrant. At the earlier of the Offer
Consummation Date and the Effective Time, Parent or Merger Sub shall purchase
from Yucaipa the Yucaipa Warrant for an amount equal to the product of (i) the
difference between the Price Per Share and the per share exercise price thereof
($20.73 as of the date hereof) multiplied by (ii) the number of shares of Common
Stock underlying the Yucaipa Warrant (3,874,492 as of the date hereof). Upon the
purchase of the Yucaipa Warrant and payment of the purchase price therefor in
accordance with the provisions of this Section 7.15, Yucaipa shall cease to have
any rights with respect to the Yucaipa Warrant.
ARTICLE VIII.
CONDITIONS OF MERGER
The respective obligations of each party to effect the Merger shall be
subject to the satisfaction at or prior to the Closing Date of the following
conditions:
(a) this Agreement shall have been approved by the affirmative vote of
the holders of a majority of the outstanding shares of Voting Common Stock,
unless Merger Sub shall have acquired 90% or more of the outstanding shares
of each class of the capital stock of the Company;
(b) no statute, rule, regulation, executive order, decree, ruling,
injunction or other order (whether temporary, preliminary or permanent)
shall have been enacted, entered, promulgated or enforced by any court or
governmental authority of competent jurisdiction which prohibits,
restrains, enjoins or restricts the consummation of the Merger; provided,
however, that the parties shall use their reasonable best efforts to cause
any such decree, ruling, injunction or other order to be vacated or lifted;
(c) any waiting period applicable to the Offer and the Merger under
the HSR Act shall have terminated or expired; and
(d) Merger Sub shall have (i) commenced the Offer pursuant to Article
II hereof and (ii) purchased, pursuant to the terms and conditions of such
Offer, all shares of Common Stock duly tendered and not withdrawn;
provided, however, that neither Parent nor Merger Sub shall be entitled to
rely on the condition in clause (ii) above if either of them shall have
failed to purchase shares of Common Stock pursuant to the Offer in breach
of their obligations under this Agreement.
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ARTICLE IX.
TERMINATION, AMENDMENT AND WAIVER
SECTION 9.1. Termination. This Agreement may be terminated and the Merger
contemplated hereby may be abandoned at any time prior to the Effective Date,
whether before or after approval of matters presented in connection with the
Merger by the stockholders of the Company:
(a) by mutual written consent of Parent and the Company as duly
authorized by their respective Boards of Directors;
(b) by the Company, if Merger Sub shall have failed to commence the
Offer within the five-Business Day period specified in Section 2.1(a);
(c) (i) by the Company, if Parent or Merger Sub breaches any of their
respective representations, warranties, covenants or agreements contained
in this Agreement (without regard to any materiality or Material Adverse
Effect qualifier) which is reasonably likely to materially adversely affect
Parent's or Merger Sub's ability to consummate the Offer or the Merger and,
with respect to any such breach that is reasonably capable of being
remedied, the breach is not remedied within ten Business Days after the
Company has furnished Parent or Merger Sub with written notice of such
breach or (ii) by Parent, prior to the acceptance for payment of the
Minimum Shares pursuant to the Offer, if the Company breaches any of its
representations, warranties, covenants or agreements contained in this
Agreement (without regard to any materiality or Material Adverse Effect
qualifier) which is reasonably likely to have a Material Adverse Effect
and, with respect to any such breach that is reasonably capable of being
remedied, the breach is not remedied within ten Business Days after Parent
has furnished the Company with written notice of such breach;
(d) by Parent or the Company:
(i) if the Effective Time shall not have occurred on or before the
Outside Date (provided that the right to terminate this Agreement
pursuant to this clause (i) shall not be available to any party whose
failure to fulfill any obligation under this Agreement has been the
cause of, or resulted in, the failure of the Effective Time to occur on
or before such date);
(ii) if there shall be any statute, law, rule or regulation that
makes consummation of the Offer or the Merger illegal or prohibited or
if any court of competent jurisdiction or other governmental authority
shall have issued an order, judgment, decree or ruling, or taken any
other action restraining, enjoining, or otherwise prohibiting the Offer
or the Merger or prohibiting Parent from acquiring or holding or
exercising rights of ownership of the Company Stock and such order,
judgment, decree, ruling or other action shall have become final and
non-appealable; or
(iii) if the Offer terminates or expires on account of the failure
of any condition specified in Annex A without Merger Sub having
purchased any shares of Common Stock thereunder (provided that the right
to terminate this Agreement pursuant to this clause (iii) shall not be
available to any party whose failure to fulfill any obligation under
this Agreement has been the cause of, or resulted in, the failure of any
such condition);
(e) by Parent, prior to the acceptance for payment of the Minimum
Shares pursuant to the Offer, if (i) the Company Board withdraws, amends or
modifies its approval or recommendation of this Agreement and the
transactions contemplated hereby (or publicly announces its intention to do
so) in a manner adverse to Parent or (ii) the Company approves, recommends
or enters into an agreement with respect to, or consummates, an Alternative
Transaction; or
(f) by the Company, prior to the acceptance for payment of the Minimum
Shares pursuant to the Offer, if the Company Board shall have taken any
Permitted Action in accordance with the provisions of Section 7.1(a);
provided that such termination under this Section 9.1(f) shall not be
effective until the Company has made payment of the full Termination Fee
and Expenses required by Section 9.3.
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SECTION 9.2. Effect of Termination. In the event of the termination of this
Agreement pursuant to Section 9.1, this Agreement shall forthwith become void
and there shall be no liability on the part of any party hereto except as set
forth in Section 9.3 and Section 10.1; provided, however, that nothing herein
shall relieve any party from liability for any willful breach hereof.
SECTION 9.3. Termination Fee and Expenses.
(a) In the event that this Agreement is terminated by Parent pursuant to
Section 9.1(e) or by the Company pursuant to Section 9.1(f), the Company shall
pay to Parent by wire transfer of immediately available funds to an account
designated by Parent on the next Business Day following such termination (or, in
the case of a termination pursuant to Section 9.1(f), prior to the effectiveness
of such termination, except that if documentation is not available, the Company
shall be permitted to make payment upon the provision by Parent of such
documentation) an amount equal to $36.0 million (the "Termination Fee") plus, no
later than two Business Days following the receipt of appropriate documentation,
reasonable out-of-pocket expenses of Parent relating to the transactions
contemplated by this Agreement (including reasonable fees and expenses of
Parent's counsel, accountants and financial advisers ("Expenses"); provided,
however, that the Company's reimbursement obligation for all such Expenses shall
not exceed $5.0 million.
(b) If all of the following events have occurred:
(i) an Alternative Transaction is commenced, publicly disclosed,
publicly proposed or otherwise communicated to the Company at any time on
or after the date of this Agreement and prior to the acceptance for payment
of the Minimum Shares pursuant to the Offer and either (1) Parent or the
Company terminates this Agreement pursuant to Section 9.1(d)(i) or (2) the
Company terminates this Agreement pursuant to Section 9.1(d)(iii) or (3)
Parent terminates this Agreement pursuant to Section 9.1(c)(ii); and
(ii) thereafter, within 12 months of the date of termination, the
Company (A) enters into a definitive agreement with respect to, or
consummates, the Alternative Transaction described in clause (i) above or
(B) consummates a Superior Proposal (whether or not such Superior Proposal
was commenced, publicly disclosed, publicly proposed or otherwise
communicated to the Company prior to such termination);
then, the Company shall pay to Parent an amount equal to the Termination Fee
plus Expenses (i) if payable pursuant to Section 9.3(b)(ii)(A), concurrently
with the execution of such definitive agreement or (ii) if payable pursuant to
Section 9.3(b)(ii)(B), concurrently with the consummation of such Superior
Proposal.
(c) The Surviving Corporation shall pay all charges and expenses, including
those of the Paying Agent, in connection with the transactions contemplated in
Article III. Except as otherwise specifically provided herein, each party shall
bear its own expenses in connection with this Agreement and the transactions
contemplated hereby.
(d) Notwithstanding the foregoing, in no event shall the Company be
obligated to pay more than one Termination Fee or more than $5.0 million in
Expenses with respect to all such occurrences.
SECTION 9.4. Amendment. This Agreement may be amended by the parties hereto
by action taken by or on behalf of their respective Boards of Directors at any
time before or after any required approval of matters presented in connection
with the Merger by the stockholders of the Company; provided, however, that
after any such approval, there shall be made no amendment that by law requires
further approval by such stockholders without the further approval of such
stockholders. This Agreement may not be amended except by an instrument in
writing signed by the parties hereto.
SECTION 9.5. Waiver. At any time prior to the Closing Date, any party
hereto may (a) extend the time for the performance of any of the obligations or
other acts of the other parties hereto, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto and (c) waive compliance with any of the agreements or
conditions contained herein. Any such extension or waiver shall be valid if set
forth in an instrument in writing signed by the party or parties to be bound
thereby. The failure of any party to this Agreement to assert any of its rights
under this Agreement or otherwise shall not constitute a waiver of such rights.
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ARTICLE X.
GENERAL PROVISIONS
SECTION 10.1. Non-Survival of Representations, Warranties and
Agreements. The representations, warranties and agreements in this Agreement
shall terminate at the Effective Time or upon the termination of this Agreement
pursuant to Section 9.1, as the case may be, except that the agreements set
forth in Article III and Section 7.5 and Section 7.6 shall survive the Effective
Time and those set forth in Section 7.2(b), Section 9.2 and Section 9.3 and the
Confidentiality Agreement in accordance with its terms shall survive termination
of this Agreement.
SECTION 10.2. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by telecopy,
overnight courier or by registered or certified mail (postage prepaid, return
receipt requested) to the respective parties at the following addresses (or at
such other address for a party as shall be specified by like notice):
if to Parent or Merger Sub:
Safeway Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with an additional copy to:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Fax: : (▇▇▇) ▇▇▇-▇▇▇▇
if to the Company:
Dominick's Supermarkets, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Fax: : (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
and
The Yucaipa Companies LLC
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
SECTION 10.3. Severability. If any term or other provision of this
agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as
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possible in an acceptable manner to the end that the transactions contemplated
hereby are fulfilled to the fullest extent possible.
SECTION 10.4. Entire Agreement; Assignment. This Agreement and the
Stockholders Agreement, together with the Confidentiality Agreement, constitutes
the entire agreement among the parties with respect to the subject matter hereof
and supersedes all prior agreements and undertakings, both written and oral,
among the parties, or any of them, with respect to the subject matter hereof.
This Agreement shall not be assigned by any party hereto without the prior
written consent of the other parties, by operation of law or otherwise, except
that Parent and Purchaser may assign all or any of their respective rights and
obligations hereunder to any direct or indirect wholly-owned Subsidiary or
Subsidiaries of Parent, provided that no such assignment shall relieve the
assigning party of its obligations hereunder if such assignee does not perform
such obligations. Any attempted assignment which does not comply with the
provisions of this Section 10.4 shall be null and void ab initio.
SECTION 10.5. Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and, except as provided in the
following sentence, nothing in this Agreement, express or implied, is intended
to or shall confer upon any other person any rights, benefits or remedies of any
nature whatsoever under or by reason of this Agreement. The parties hereto
expressly intend the provisions of Sections 3.8 and 7.6 to confer a benefit upon
and be enforceable by, as third party beneficiaries of this Agreement, the third
persons referred to in, or intended to be benefited by, such provisions.
SECTION 10.6. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware, without
reference to the conflict of laws principles thereof.
SECTION 10.7. Headings. The descriptive headings contained in this
Agreement are included for convenience of reference only and shall not affect in
any way the meaning or interpretation of this Agreement.
SECTION 10.8. Specific Performance. Each of the parties hereto acknowledges
and agrees that the other parties hereto would be irreparably damaged in the
event any of the provisions of this Agreement were not performed in accordance
with their specific terms or were otherwise breached. Accordingly, each of the
parties hereto agrees that they each shall be entitled to an injunction or
injunctions to prevent breaches of the provisions of this Agreement and to
enforce specifically this Agreement and the terms and conditions hereof in any
action instituted in any court of the United States or any state having
competent jurisdiction, in addition to any other remedy to which such party may
be entitled, at law or in equity.
SECTION 10.9. Parent Guarantee. Parent hereby guarantees the due
performance of any and all obligations and liabilities of Merger Sub under or
arising out of this Agreement and the transactions contemplated hereby.
SECTION 10.10. Counterparts. This Agreement may be executed in two or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
37
39
IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
SAFEWAY INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: Senior Vice President and
General Counsel
WINDY CITY ACQUISITION CORP.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: Senior Vice President and
General Counsel
DOMINICK'S SUPERMARKETS, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President and Chief Executive
Officer
38
40
ANNEX A
CONDITIONS TO THE OFFER
The Offer shall be conditioned upon at least that number of shares of
Common Stock equivalent to a majority of the total issued and outstanding shares
(on a fully diluted basis, without giving effect to the shares issuable upon the
exercise of the Yucaipa Warrant) of Common Stock on the date such shares are
purchased pursuant to the Offer (the "Minimum Shares") being validly tendered
and not withdrawn prior to the date which is 20 Business Days following the
commencement of the Offer in accordance with the terms hereof or such later date
as the Offer may be extended by an amendment to this Agreement in accordance
with the provisions of Section 9.4 or as provided in Section 2.1(b). Moreover,
notwithstanding any other provision of the Offer, and subject to the terms and
conditions of the Agreement, Merger Sub shall not be obligated to accept for
payment any shares of Common Stock until expiration of all applicable waiting
periods under the HSR Act, and Merger Sub shall not be required to accept for
payment, purchase or pay for, and may delay the acceptance for payment of or
payment for, any shares of Common Stock tendered in the Offer, or if the Minimum
Shares shall not have been validly tendered pursuant to the Offer and not
withdrawn, may terminate or amend the Offer, subject to the terms and conditions
of the Agreement and Merger Sub's obligation to extend the Offer pursuant to
Section 2.1(b) if, prior to the time of acceptance for payment of any such
shares of Common Stock (whether or not any other shares of Common Stock have
theretofore been accepted for payment or paid for pursuant to the Offer), any of
the following shall occur and remain in effect:
(a) a United States or state governmental authority or other agency or
commission or United States or state court of competent jurisdiction shall
have enacted, issued, promulgated, enforced or entered any statute, rule,
regulation, injunction or other order which is in effect and has the effect
of making the acquisition of Common Stock by Merger Sub illegal or
prohibits or imposes material limitations on the ability of Merger Sub to
acquire shares of Common Stock or otherwise prohibiting (directly or
indirectly) consummation of the transactions contemplated by this Agreement
or prohibits or imposes material limitations on the ability of Parent to
own or operate all or a material portion of the Company's and its
Subsidiaries' businesses or assets, taken as a whole, subject to Parent's
and Merger Sub's obligations pursuant to Sections 2.1(b) and 7.8 of the
Agreement and Parent's agreement not to terminate the Offer as long as any
such injunction or order has not become final and non-appealable;
(b) either (i) any of the representations or warranties of the Company
in the Agreement (without giving effect to any materiality or Material
Adverse Effect qualifier therein) shall not be true and correct which
inaccuracy, singly or in the aggregate, would have or be reasonably likely
to have a Material Adverse Effect and which are not reasonably capable of
being cured by the Company or have not been cured within 10 Business Days
after the giving of written notice to the Company, in each case as if such
representations or warranties were made as of such time (unless a
representation speaks as of an earlier date, in which case it shall be
deemed to have been made as of such earlier date); or (ii) the Company
shall have failed to perform any obligation or to comply with any agreement
or covenant of the Company to be performed or complied with by it under the
Agreement, which failure, singly or in the aggregate, would have or be
reasonably likely to have a Material Adverse Effect and is not reasonably
capable of being cured by the Company or has not been cured within 10
Business Days after the giving of written notice to the Company; and an
officer of the Company shall not have provided a certificate to the effect
that the conditions set forth in clauses (i) and (ii) have not occurred on
the date shares of Common Stock are to be accepted for payment pursuant to
the Offer;
(c) (i) the Company Board (A) shall have amended, modified or
withdrawn in a manner adverse to Parent its approval or recommendation of
this Agreement, the Offer, the Merger or any of the transactions
contemplated thereby or (B) shall have endorsed, approved or recommended
any Alternative Transaction or (ii) the Company shall have entered into any
agreement with respect to any Alternative Transaction;
(d) any person or group (as defined in Section 13(d)(3) of the
Exchange Act), other than Parent or Merger Sub or any of their respective
subsidiaries or affiliates, shall have become the beneficial owner
ANNEX A-1
41
(as defined in Rule 13d-3 promulgated under the Exchange Act) of more than
25% of the outstanding shares of Common Stock (either on a primary or a
fully diluted basis, without giving effect to the shares issuable upon the
exercise of the Yucaipa Warrant); provided, however, that this provision
shall not apply to any person or group that beneficially owns shares of
Common Stock on the date hereof so long as such person or group does not
further increase its beneficial ownership beyond the number of shares of
Common Stock such person or group beneficially owns on the date of the
Agreement;
(e) the Agreement shall have been terminated by the Company or Parent
pursuant to its terms;
(f) there shall have occurred and be continuing (i) any general
suspension of, or limitation on prices for, trading in securities on the
NYSE (excluding suspensions or limitations (x) resulting solely from
physical damage or interference with such exchanges not related to market
conditions or (y) triggered on the NYSE by price fluctuations on a trading
day), (ii) a declaration of a banking moratorium or any suspension of
payments in respect of banks in the United States, (iii) any limitation by
any United States governmental authority on the extension of credit
generally by banks or other financial institutions; (iv) a commencement of
war or material armed hostilities or other national calamity directly
involving the United States which could reasonably be expected to
materially adversely affect the consummation of the Offer or (v) 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
(g) there shall have occurred and be continuing any change in the
Company's business, operations, condition (financial or otherwise), results
of operations, assets or liabilities, except for changes contemplated
hereby or changes which are not reasonably likely to have a Material
Adverse Effect;
which, in reasonable judgment of Parent and Merger Sub, in any such case, and
regardless of the circumstances (including any action or inaction by or giving
rise to any such conditions), makes it inadvisable to proceed with the Offer
and/or with such acceptance for payment of or payment for shares of Common
Stock.
The foregoing conditions are for the sole benefit of Parent and Merger Sub
and may be asserted by Parent and Merger Sub regardless of the circumstances
giving rise to such condition or, except for the Minimum Condition, may be
waived by Parent and Merger Sub in whole or in part at any time and from time to
time. The failure by Parent or Merger 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 any other facts and circumstances, and
each such right shall be deemed an ongoing right that may be asserted at any
time and from time to time.
ANNEX A-2