Exhibit 2.2
PURCHASE AND SEPARATION AGREEMENT
by and among
▇▇▇▇▇▇▇▇▇'▇, INC.,
NEW ALOHA CORPORATION,
SUPERVALU INC.
and
AB ACQUISITION LLC
Dated as of January 22, 2006
TABLE OF CONTENTS
PAGE
----
ARTICLE I DEFINITIONS........................................... 2
Section 1.1 General............................................... 2
ARTICLE II TRANSFER OF NEW DIAMOND ASSETS AND NEW DIAMOND
LIABILITIES; PURCHASE AND SALE OF THE COMPANY AND THE
RETAINED ENTITIES' STOCK.............................. 17
Section 2.1 Transfer of New Diamond Assets and New Diamond
Entities.............................................. 17
Section 2.2 Transfer and Assumption of New Diamond Liabilities.... 18
Section 2.3 Purchase and Sale of the Company's and the Retained
Entities' Stock; Retained Assets and Retained
Liabilities........................................... 18
Section 2.4 Reorganization; Consummation of the Mergers and New
Diamond Liability Transfer; Retained Business Price... 19
Section 2.5 The Closing........................................... 19
Section 2.6 Certain Indebtedness of the Company; Succession and
Release; Indemnification.............................. 20
Section 2.7 Current Accounts...................................... 22
Section 2.8 Retained Business Price Allocation; Retained Property
Proceeds.............................................. 22
Section 2.9. Insurance Proceeds.................................... 23
ARTICLE III REPRESENTATIONS AND WARRANTIES........................ 24
Section 3.1 Representations and Warranties of Onyx................ 24
Section 3.2 Representations and Warranties of the Company......... 28
Section 3.3 Representations and Warranties of SV.................. 28
ARTICLE IV TAX MATTERS........................................... 30
Section 4.1. Liability for Taxes................................... 30
Section 4.2. Filing Responsibility................................. 33
Section 4.3. Cooperation and Exchange of Information............... 34
Section 4.4. Tax Proceedings....................................... 35
Section 4.5. Tax Sharing Agreements................................ 37
Section 4.6. Tax Benefits.......................................... 37
Section 4.7. Transfer Taxes........................................ 38
Section 4.8. Taxes Governed by Article IV.......................... 38
Section 4.9 Survival.............................................. 38
i
Section 4.10. Post-Closing Dispositions............................. 38
Section 4.11. Reorganization Treatment.............................. 38
Section 4.12. [Intentionally Omitted]............................... 39
Section 4.13. Tax Treatment of Payments............................. 39
ARTICLE V INDEMNIFICATION....................................... 39
Section 5.1 SV's and New Diamond's Agreement to Indemnify......... 39
Section 5.2 Onyx's and the Company's Agreement to Indemnify....... 39
Section 5.3 Reduction of Indemnifiable Losses for Insurance
Benefits Received..................................... 39
Section 5.4 Procedure for Indemnification......................... 40
Section 5.5 Pending Litigation; New Litigation.................... 41
Section 5.6 Remedies Exclusive.................................... 42
Section 5.7 Retained Business Price Adjustment.................... 42
Section 5.8 Exclusion of Tax Indemnities.......................... 42
ARTICLE VI CERTAIN ADDITIONAL MATTERS............................ 42
Section 6.1 Further Assurances; Subsequent Transfers.............. 42
Section 6.2 Use of Names; Cross-License........................... 45
Section 6.3 Settlement of Intercompany Accounts................... 46
Section 6.4 Merger Agreement Provisions........................... 46
Section 6.5 Further Action; Reasonable Best Efforts............... 49
Section 6.6 Ancillary Agreements.................................. 50
Section 6.7 Sharing of Certain Payments........................... 51
Section 6.8 Certain Restrictions Pending the Closing.............. 51
Section 6.9 Payments by Onyx to the Exchange Fund................. 52
Section 6.10 Settlement of Appraisal Proceedings................... 52
Section 6.11 Certain Standalone Drug Sale Matters.................. 52
Section 6.12 Proxy Statement....................................... 53
Section 6.13 Merger Agreement Termination Fee...................... 53
ARTICLE VII ACCESS TO INFORMATION AND SERVICES.................... 54
Section 7.1 Access to Information................................. 54
Section 7.2 Litigation Cooperation................................ 54
Section 7.3 Retention of Records.................................. 55
Section 7.4 Confidentiality....................................... 55
Section 7.5 Publicity............................................. 55
ii
ARTICLE VIII EMPLOYEE BENEFITS; LABOR MATTERS...................... 55
Section 8.1 Locus of Employees and Company Plans.................. 55
Section 8.2 Employee Benefits..................................... 56
Section 8.3 Other Liabilities and Obligations..................... 56
Section 8.4 Welfare Plans......................................... 57
Section 8.5 Retirement Plans; Savings Plans....................... 57
Section 8.6 Preservation of Rights to Amend or Terminate Plans.... 58
Section 8.7 Reimbursement; Indemnification........................ 58
Section 8.8 Change In Control..................................... 58
ARTICLE IX MISCELLANEOUS......................................... 58
Section 9.1 Conditions to Closing................................. 58
Section 9.2 Termination Prior to the Closing...................... 61
Section 9.3 Effect of Termination................................. 61
Section 9.4 No Survival........................................... 62
Section 9.5 Entire Agreement; Third Party Beneficiaries........... 62
Section 9.6 Fees and Expenses..................................... 62
Section 9.7 No Waiver............................................. 62
Section 9.8 Amendments............................................ 62
Section 9.9. Governing Law......................................... 63
Section 9.10 Notices............................................... 63
Section 9.11 Interpretation........................................ 64
Section 9.12 Counterparts.......................................... 65
Section 9.13 Specific Performance.................................. 65
Section 9.14 Successors and Assigns................................ 65
Section 9.15 Severability.......................................... 66
Section 9.16 Jurisdiction; Venue; Consent to Service of Process.... 66
Section 9.17 Waiver of Jury Trial.................................. 67
Section 9.18 Company Disclosure Letter............................. 67
iii
SCHEDULES
Schedule 1.1 - Structure Steps
Schedule 1.2 - New Diamond Assets
Schedule 1.3 - [Intentionally Omitted]
Schedule 1.4 - [Intentionally Omitted]
Schedule 1.5 - New Diamond Entities
Schedule 1.6 - New Diamond Scheduled Liabilities
Schedule 1.7 - Retained Assets
Schedule 1.8 - Retained Employees
Schedule 1.9 - [Intentionally Omitted]
Schedule 1.10 - Retained Scheduled Liabilities
Schedule 1.11 - Specified Standalone Drug Liabilities
Schedule 1.12 - Retained Actions
Schedule 1.13 - New Diamond Actions
Schedule 1.14 - Retained Names
EXHIBITS
Exhibit A - Financing Commitment
Exhibit B - Form of Transition Services Agreement
Exhibit C - Onyx Disclosure Letter
Exhibit D - Company Disclosure Letter
Exhibit E - SV Disclosure Letter
iv
THIS PURCHASE AND SEPARATION AGREEMENT (this "Separation Agreement"),
dated as of January 22, 2006, is entered into by and between ▇▇▇▇▇▇▇▇▇'▇, Inc.,
a Delaware corporation (the "Company"), New Aloha Corporation, a Delaware
corporation and wholly owned subsidiary of the Company ("New Diamond"),
SUPERVALU INC., a Delaware corporation ("SV"), and AB Acquisition LLC, a
Delaware limited liability company ("Onyx").
WHEREAS, concurrently with the execution of this Separation Agreement,
the Company has entered into an Agreement and Plan of Merger (the "Merger
Agreement"), dated as of the date hereof, by and among the Company, New Diamond,
New Diamond Sub, Inc., a Delaware corporation and wholly-owned subsidiary of New
Diamond, SV, and Emerald Acquisition Sub, Inc., a Delaware corporation and
wholly-owned subsidiary of SV, pursuant to which, among other things (1) the
Company shall merge with New Diamond Sub Inc., with the Company surviving (the
"Diamond Merger"), and (2) New Diamond shall merge with Emerald Acquisition Sub
Inc., with New Diamond surviving (the "Emerald Merger," and together with the
Diamond Merger, the "Mergers"), in each case, in accordance with the General
Corporation Law of the State of Delaware (the "DGCL");
WHEREAS, upon the terms and subject to the conditions set forth herein
(including as contemplated by the Reorganization (as defined herein)), (1)
pursuant to the Diamond Merger, New Diamond shall acquire all of the issued and
outstanding Equity Interests (as defined herein) of the Company for stock of New
Diamond, (2) the Company shall immediately thereafter convert into a Delaware
limited liability company, (3) the Company shall thereafter consummate the
distribution and transfer of all the New Diamond Assets (as defined herein) to
New Diamond, subject to the assumption by New Diamond of the New Diamond
Liabilities (as defined herein), (4) thereafter the Company and its Subsidiaries
shall consummate the Standalone Drug Sale (as defined herein), upon the terms
and subject to the conditions set forth in the Standalone Drug Sale Agreement,
(5) Onyx shall immediately thereafter acquire all of the issued and outstanding
Equity Interests of the Company from New Diamond for the Retained Business Price
(as defined below) and (6) thereafter the Emerald Merger shall be consummated;
and
WHEREAS, concurrently with the execution of this Separation Agreement,
and as a condition to the willingness of each of the Company and SV to enter
into this Separation Agreement, Cerberus Capital Management, L.P., on behalf of
one or more affiliated funds or managed accounts to be designated by it (the
"Sponsor"), has provided a financing commitment pursuant to which the Sponsor
has committed, subject to the terms and conditions set forth therein, to invest
the amount set forth therein to purchase Equity Interests of Onyx and to provide
debt financing to the Retained Business (as defined herein), in the form
attached hereto as Exhibit A (the "Financing Commitment").
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 General. As used in this Separation Agreement, the
following terms shall have the following meanings:
"338(h)(10) Election Subsidiaries" has the meaning set forth in
Section 4.1(c).
"338(h)(10) Elections" has the meaning set forth in Section 4.1(c).
"ABS Indenture" has the meaning set forth in the definition of Company
Indentures.
"Accountant" has the meaning set forth in Section 2.8(a).
"Action" means any claim, action, suit, proceeding or investigation by
or before any Authority.
"Affected Party" has the meaning set forth in Section 4.2(d).
"Affiliate" means, with respect to any specified person, any other
person that directly, or indirectly through one or more intermediaries,
Controls, is Controlled by, or is under common Control with, such specified
person.
"Affiliated Group" means the consolidated group for Income Tax
purposes of which New Diamond or the Company is or was the common parent, which
group terminates as a result of the Mergers.
"Albertson's Inc. Guarantee" has the meaning set forth in Section
2.6(b).
"American Stores" has the meaning set forth in the definition of
Company Indentures.
"Ancillary Agreements" means (i) the Transition Services Agreement
substantially in the form attached as Exhibit B and (ii) the Cross-License
Agreement.
"ASC Indenture" has the meaning set forth in the definition of Company
Indentures.
"Asset" means, with respect to any person, except as otherwise
provided herein, any and all of its right, title and interest in and to all of
the rights, properties, assets, inventories, claims, contracts and businesses of
every kind, character and description, whether real, personal or mixed, tangible
and intangible, whether accrued, contingent or otherwise, of every kind and
description and wherever located, owned or used by such person (including in the
possession of owners or third parties or elsewhere), including (i) all cash,
cash equivalents, notes and accounts receivable (whether current or
non-current), deposit accounts, securities accounts and other banks accounts;
(ii) all certificates of deposit, banker's acceptances and other investment
2
securities; (iii) all patents, patent rights, trade dress, trademarks, service
marks, trademark and service ▇▇▇▇ rights, trade names, trade name rights, domain
names, copyrights, banners, logos, data rights, privacy rights, publicity
rights, registrations or applications for any of the foregoing, trade secrets,
works of authorship, technology and know-how (including all data bases, customer
lists, confidential information, discoveries, inventions and improvements), and
other proprietary rights and information; (iv) all rights existing under leases,
contracts, licenses, service agreements, sales and purchase agreements, other
agreements and business arrangements and all policies of insurance and proceeds,
benefits and rights to coverage under insurance policies; (v) all real estate
and all buildings and other improvements thereon; (vi) all leasehold
improvements and all equipment (including all office equipment), fixtures, trade
fixtures and furniture; (vii) all office supplies, other miscellaneous supplies
and other tangible property of any kind; (viii) all computer hardware, software,
computer programs and systems and documentation relating thereto, including all
databases and reference and resource materials; (ix) all prepayments or prepaid
expenses; (x) all claims, causes of action, rights of recovery, rights to ▇▇▇
for past, present and future infringement of any intellectual property rights
and rights of set-off of any kind; (xi) the right to receive mail, accounts
receivable payments and other communications; (xii) all customer lists and
records pertaining to customers and accounts, personnel records, all lists and
records pertaining to suppliers and agents, and all books, ledgers, files and
business records of every kind and all minute books, stock ledgers and other
corporate books and records; (xiii) all advertising materials and all other
printed or written materials; (xiv) all permits, waivers, licenses, approvals
and authorizations of governmental authorities or third parties relating to the
ownership, possession or operation of the Assets; (xv) all goodwill as a going
concern and all other intangible properties; and (xvi) all employee contracts,
including the right thereunder to restrict the employee from competing in
certain respects.
"Assumed Benefit Plans" means any (i) Company Plan maintained by the
Retained Entities solely for the benefit of current and former employees of the
Retained Business (including, for the avoidance of doubt, any such plan in which
New Diamond Employees participate by virtue of past service to the Retained
Business), and (ii) any Company Plan that is an employment, change-of-control,
severance or similar individual agreement between the Company, a New Diamond
Entity or one of their respective Affiliates and any Retained Employee, other
than any such agreement providing for equity or equity-based compensation. For
purposes of the preceding sentence, any award (whether a cash, restricted stock
unit, or retention award) made pursuant to Section 6.1(a)(ii) of the Company
Disclosure Letter to the Merger Agreement and made to a Retained Employee (and
any agreement in respect of such award) shall not be considered an award and/or
agreement providing for equity or equity-based compensation and shall be
considered an Assumed Benefit Plan for all purposes of this Agreement.
"Authority" means any court, arbitrator, administrative or other
governmental authority, agency, commission, tribunal, authority or
instrumentality, domestic (including federal, state or local) or foreign or any
other authority, which has authority or jurisdiction over any party hereto or
any of their respective properties or assets.
"Business Day" means any day that is not a Saturday, a Sunday or other
day that is a statutory holiday under the federal Laws of the United States.
3
"Business Description Presentation" has the meaning set forth in the
definition of New Diamond Business.
"Buyer Tax Indemnitee" has the meaning set forth in Section 4.1(a).
"Casualty" has the meaning set forth in Section 2.9(a).
"Closing" has the meaning set forth in Section 2.5(a).
"Closing Date" means the date on which the Closing occurs.
"Code" means the Internal Revenue Code of 1986, as amended, and the
rules and regulations promulgated thereunder.
"Company" has the meaning set forth in the Preamble.
"Company Disclosure Letter" has the meaning set forth in Section 3.2.
"Company Form 10-K" has the meaning set forth in Section 3.2.
"Company Headquarters" has the meaning set forth in the definition of
New Diamond Business.
"Company Indemnitees" has the meaning set forth in Section 5.1.
"Company Indentures" mean (i) that certain Indenture, dated as of May
1, 1992, by and between ▇▇▇▇▇▇▇▇▇'▇, Inc. and ▇▇▇▇▇▇ Guaranty Trust Company of
New York, as trustee (the "ABS Indenture") and (ii) that certain Indenture,
dated as of May 1, 1995 (as supplemented), by and between American Stores
Company, LLC ("American Stores") and ▇.▇. ▇▇▇▇▇▇ Trust Company, National
Association, as successor trustee (the "ASC Indenture").
"Company Material Adverse Effect" means any effect that is materially
adverse to the business, financial condition or results of operations of the
Company and the Company Subsidiaries taken as a whole in relation to the current
and expected performance and value of the Retained Business, Retained Assets and
Retained Liabilities, other than any effect to the extent resulting proximately
from (i) general economic conditions or developments or changes therein, (ii)
conditions in the industries in which the Company and the Company Subsidiaries
operate or developments or changes therein, except to the extent that such
conditions, developments or changes impact the Company in a materially
disproportionate adverse manner relative to similarly situated competitors of
the Company, (iii) conditions in the stock markets or other capital markets or
developments or changes therein, (iv) the announcement of the Transaction
Agreements or the Transactions (each as defined in the Merger Agreement), (v)
the performance by the Company of its obligations pursuant to the Transaction
Agreements (except the obligations of the Company to obtain the consents
contemplated by Section 4.3 and Section 4.4 of the Merger Agreement as
incorporated by reference mutatis mutandis into this Separation Agreement
pursuant to Section 3.2 hereof), (vi) the announcement, consummation,
termination or abandonment of the Standalone Drug Sale, (vii) any actions taken
or omitted to be taken by or at the request or with the written consent of the
other parties hereto, (viii) any changes in any
4
Laws or any accounting regulations or principles, (ix) any union organizing
activities, labor disputes, strikes, work stoppages or similar labor unrests or
disruption, or (x) any acts of God, war or terrorism, except to the extent that
such acts impact the Company in a materially disproportionate manner relative to
similarly situated competitors of the Company. A failure by the Company to meet
any projections, estimates or budgets for any period prior to, on or after the
date of this Separation Agreement shall not in itself constitute a Company
Material Adverse Effect. The parties hereto acknowledge their awareness of the
matters set forth in Section 4.9 of the Company Disclosure Letter with respect
to decline in business and financial performance.
"Company Percentage" means 15%.
"Company Plans" has the meaning set forth in the Merger Agreement, but
determined without application of any materiality standard under Section 4.13(a)
of the Merger Agreement.
"Company Subsidiaries" means the Subsidiaries of the Company.
"Condemnation" has the meaning set forth in Section 2.9(a).
"Confidentiality Agreement" means that certain Confidentiality
Agreement, dated August 15, 2005, by and between Sponsor and the Company.
"Control" (including the terms "Controlled by" and "under common
Control with"), with respect to the relationship between or among two or more
persons, means the possession, directly or indirectly, of the power to direct or
cause the direction of the affairs or management of a person, whether through
the ownership of voting securities, by contract or otherwise, including the
ownership, directly or indirectly, of securities having the power to elect a
majority of the board of directors or similar body governing the affairs of such
person.
"Controlling Party" has the meaning set forth in Section 4.4(b).
"Coordination Agreement" means that certain Coordination Agreement by
and among the Company, SV, Onyx, and CVS, dated as of the date hereof.
"Cross-Licensing Agreement" has the meaning set forth in Section
6.2(b).
"Cub Sale Agreement" means that certain Asset Purchase Agreement,
dated as of the date hereof, by and between Hawk Acquisition LLC and SV.
"CVS" has the meaning set forth in the definition of Standalone Drug
Sale Agreement.
"Designated Affiliate" means, with respect to any specified person, an
Affiliate of such person that (i) has been designated by such person for
purposes of the appropriate section of this Separation Agreement (with such
designation subject to the prior written consent of Onyx, in the case of a New
Diamond Designated Affiliate, or SV, in the case of an Onyx Designated
Affiliate, which consent shall not be unreasonably withheld) and (ii) has agreed
in writing for the benefit of the other parties hereto to be bound by the terms
of this Separation Agreement as if a
5
party hereto; provided, however, any such designation by any person hereto
shall not relieve such person of any of its obligations or agreements hereunder.
"Determination" has the meaning set forth in Section 2.8(a).
"DGCL" has the meaning set forth in the Recitals.
"Diamond LLC Conversion" has the meaning set forth in Section 2.1(a).
"Diamond Merger" has the meaning set forth in the Recitals.
"Disregarded Entity" has the meaning set forth in Section 4.1(c).
"Disregarded Entity Treatment" has the meaning set forth in Section
4.1(c).
"DOJ" means the Antitrust Division of the U.S. Department of Justice.
"Effective Time" has the meaning provided for such term in the Merger
Agreement.
"Emerald Merger" has the meaning set forth in the Recitals.
"Equity Interest" means (i) with respect to a corporation, any and all
classes or series of shares of capital stock, (ii) with respect to a
partnership, limited liability company, trust or similar person, any and all
classes or series of partnership, limited liability company, trust or similar
interests or units, and (iii) with respect to any other person, any other
security representing any direct equity ownership or participation in such
person.
"ERISA" means Employee Retirement Income Security Act of 1974.
"Excess Dissenting Shares Liability" has the meaning set forth in the
definition of Shared Transaction Litigation Liabilities.
"Exchange Act" means the Securities Exchange Act of 1934 and the rules
and regulations promulgated thereunder.
"Exchange Fund" has the meaning set forth in Section 6.9.
"Exclusive Diamond Proceedings" has the meaning set forth in Section
4.4(b)(i).
"Exclusive Onyx Proceedings" has the meaning set forth in Section
4.4(b)(ii).
"Exclusive Tax Proceedings" has the meaning set forth in Section
4.4(b)(ii).
"Financing" has the meaning set forth in Section 3.1(g).
"Financing Commitment" has the meaning set forth in Section 3.1(g).
"Form S-4" has the meaning set forth in the Merger Agreement.
6
"Former Retained Employees" means individuals who are Retained
Employees by application of clause (iii) of the definition of Retained
Employees.
"FTC" means the U.S. Federal Trade Commission.
"Future Debt Financing" has the meaning set forth in Section 6.4(d).
"Grantee" has the meaning set forth in Section 6.1(d).
"Grantor" has the meaning set forth in Section 6.1(d).
"Guarantee Release Date" has the meaning set forth in Section 2.6(b).
"HSR Act" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of
1976, as amended, and the rules and regulations promulgated thereunder.
"Income Taxes" means U.S. federal, state or local Taxes based upon or
measured by net income or capital gain (but not any gross income Taxes and not
any withholding Taxes or payroll, employment or employee Taxes).
"Indemnifiable Losses" means any and all losses, Liabilities, claims,
damages, obligations, payments, costs and expenses (including the Liabilities,
costs and expenses of any and all Actions, demands, assessments, Judgments,
settlements and compromises relating thereto and reasonable attorneys' fees and
expenses in connection therewith) suffered or incurred by an Indemnitee;
provided, that the foregoing does not include any losses, Liabilities, claims,
damages, obligations, payments, costs, fees or expenses arising out of or
relating to any claim for loss of profits or earnings, diminution in value or
incidental, indirect, special or consequential damages unless awarded against
any Indemnitee in a Third Party Claim.
"Indemnified Amounts" has the meaning set forth in Section 6.1(d)(2).
"Indemnified Directors or Officers" has the meaning set forth in the
Merger Agreement.
"Indemnifying Party" means any party or other person who is required
to indemnify any other person pursuant to any indemnification provisions
contained in this Separation Agreement.
"Indemnitee" means any party or other person who is entitled to
receive indemnification from an Indemnifying Party pursuant to any
indemnification provisions contained in this Separation Agreement.
"Information" has the meaning set forth in Section 7.1(a)(1).
"Intercompany Accounts" has meaning set forth in Section 6.3.
"IRS" has the meaning set forth in Section 2.8(a).
7
"Judgments" means any and all judgments, orders, writs, directives,
rulings, decisions, injunctions, decrees, assessments, settlement agreements
(other than settlement agreements under which there are no continuing
obligations) or awards of any Authority.
"Laws" means any and all applicable (i) federal, territorial, state,
local and foreign laws, ordinances and regulations, (ii) codes, standards,
rules, requirements, orders and criteria issued under any federal, territorial,
state, local or foreign laws, ordinances or regulations, (iii) rules, guidelines
or published interpretations of any Authority and (iv) Judgments.
"Liabilities" means, with respect to any person, any and all
liabilities and obligations of such person, whether absolute, accrued,
contingent, reflected on a balance sheet (or in the notes thereto) or otherwise,
including those arising under any Law or Action, and those arising under any
contract, commitment or undertaking.
"Lien" means any lien, encumbrance, pledge, mortgage, security
interest, claim under bailment, or storage contract.
"Lucky Delaware" has the meaning set forth in Section 4.1(c).
"Lucky Proprietary Name Rights" has the meaning set forth in Section
6.2(b).
"Merger Agreement" has the meaning set forth in the Recitals.
"Mergers" has the meaning set forth in the Recitals.
"New Diamond" has the meaning set forth in the Preamble.
"New Diamond Action" has the meaning set forth in Section 5.5(b).
"New Diamond Asset Transfer" has the meaning set forth in Section
2.1(b).
"New Diamond Assets" means (i) all the Assets of the Company and its
Subsidiaries primarily related to the New Diamond Business, (ii) Assets set
forth on Schedule 1.2 of this Separation Agreement whether or not any such Asset
would fall within any category of Retained Assets as set forth in the definition
thereof and (iii) all cash and cash equivalents of the Company and its
Subsidiaries, other than cash and cash equivalents included in clause (iii) of
the definition of Retained Assets.
"New Diamond Assumption Price" means an amount of cash equal to the
difference between (i) $625,000,000 in respect of certain Liabilities to be
assumed by New Diamond including Liabilities that, but for such assumption,
would be Retained Liabilities and (ii) the Option Adjustment Amount.
"New Diamond Business" means (i) the business of the Company reflected
as the "Core Food" business of the Company and its Subsidiaries as reflected in
that certain Presentation, dated September 2005 (the "Business Description
Presentation"), by The Blackstone Group L.P. and ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Co. (which
presentation describes the Company's "Core Food", "Standalone Drug" and
"Underperforming Metro Areas" (or "Non-Core")
8
businesses), and (ii) the Company's headquarters in Boise, Idaho, Phoenix,
Arizona (the Scottsdale and Glendale facilities) and Salt Lake City, Utah
(collectively, the "Company Headquarters"); provided, that the New Diamond
Business shall not include the Springfield Stores.
"New Diamond Employees" means:
(i) all employees of the New Diamond Business as of immediately
prior to the Separation;
(ii) all employees of the Company Headquarters other than those
set forth on Schedule 1.8 of this Separation Agreement; and
(iii) all former employees of the New Diamond Business (other
than Standalone Drug Employees) who were, immediately prior to termination
of employment (with such termination occurring prior to the Closing),
employed primarily in connection with the New Diamond Business;
"New Diamond Entities" means each of the entities set forth on
Schedule 1.5 of this Separation Agreement.
"New Diamond Indemnitees" has the meaning set forth in Section 5.2.
"New Diamond Liabilities" means, without duplication:
(i) the obligations of New Diamond to perform and comply with its
covenants and agreements contained in this Separation Agreement and
Liabilities arising from or relating to any breach by New Diamond of such
covenants and agreements;
(ii) all of the Liabilities of the Company and the New Diamond
Entities primarily related to the New Diamond Business; provided, however,
that Liabilities primarily related to the Company Headquarters shall be
deemed to be only Liabilities that relate directly to the assets physically
located there;
(iii) all Liabilities directly relating to all New Diamond
Actions;
(iv) all obligations for dividends declared by the Company after
the date hereof but not paid prior to the Effective Time;
(v) all Liabilities of ▇▇▇▇'▇ Supermarkets, Inc., Star Markets
Company, Inc., ▇▇▇▇ Equipment Corporation, ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Inc., ▇▇▇▇'▇
Realty Co., ▇▇▇▇▇▇ Markets LLC, ▇▇▇▇'▇ Realty Trust., Acme Markets, Inc,
Jewel Food Stores, Inc., Jetco Properties, Inc., Bristol Farms Inc., Lazy
Acres Market, Inc., U.S. Satellite Corporation, Lucky Stores, Inc. (NV),
Scolari's Stores Inc., Food Basket Inc., Albertson's Liquors, Inc.,
American Procurement and Logistics Co., APLC Procurement, Inc., Brockton
Corporation, Jewel Companies, Inc., JOAH, Inc., Meadowlane, Inc.,
MFC-Livonia Properties, Inc., SSM Holdings Company, Star Markets Holdings,
Inc.,
9
▇▇▇▇'▇ North Attleboro, Corp., ▇▇▇▇'▇ Securities Corporation I, and ▇▇▇▇'▇
Securities Corporation II;
(vi) 85% of Unallocated Liabilities;
(vii) New Diamond Scheduled Liabilities;
(viii) 50% of the Shared Transaction Liabilities;
(ix) 85% of the Shared Transaction Litigation Liabilities;
(x) all of the Specified Standalone Drug Liabilities;
(xi) Liabilities that arise from or relate to the Company
Indentures and Liabilities in respect of commercial paper, revolving credit
debt and long-term debt for borrowed money (other than mortgages for
borrowed money secured by real estate and all capital leases and industrial
revenue bonds to the extent, in each case, such matters relate to the
Retained Assets) of the Company or its Subsidiaries, including any costs
associated with the defeasance or prepayment of debt and release of
collateral directly related thereto;
(xii) all Liabilities for Actions to the extent arising from or
relating to information supplied by SV or its Affiliates specified for
inclusion (or incorporation by reference) in the Proxy Statement/Prospectus
(as defined in the Merger Agreement);
(xiii) all Liabilities that are express post-Closing obligations
of SV, New Diamond or their Affiliates under the Standalone Drug Sale
Agreement; and
(xiv) Liabilities that arise from or relate to the conduct of the
New Diamond Business following the Closing.
"New Diamond Liability Transfer" has the meaning set forth in Section
2.2.
"New Diamond Merger" has the meaning set forth in the Recitals.
"New Diamond Names" has the meaning set forth in Section 6.2(a).
"New Diamond Percentage" means 85%.
"New Diamond Proprietary Name Rights" has the meaning set forth in
Section 6.2(a).
"New Diamond Scheduled Liabilities" means the Liabilities set forth on
Schedule 1.6 of this Separation Agreement (it being understood that such
Liabilities shall be deemed to be New Diamond Liabilities and not Retained
Liabilities irrespective of whether or not any such Liabilities would fall
within any category of Retained Liabilities as set forth in the definition
thereof).
10
"New Diamond Seller Group" means New Diamond or any New Diamond
Entity.
"New Welfare Plans" has the meaning set forth in Section 8.4.
"Non-Controlling Party" has the meaning set forth in Section 4.4(b).
"Non-Income Tax" means any Tax that is not an Income Tax.
"NYSE" means the New York Stock Exchange.
"Objection" has the meaning set forth in Section 6.5(d).
"Old Welfare Plans" has the meaning set forth in Section 8.4.
"Onyx" has the meaning set forth in the Preamble.
"Onyx Disclosure Letter" has the meaning set forth in Section 3.1.
"Onyx Real Estate Dropdowns" shall mean the transfer by a Retained
Entity to a wholly-owned subsidiary (treated as a disregarded entity within the
meaning of Treasury Regulatory Section 301.7701-3) of such Retained Entity of
any real estate ground lease in which the Retained Entity is the lessee and any
real property owned by the Retained Entity, in each case, associated with the
Retained Business.
"Onyx Termination Fee" has the meaning set forth in Section 9.3(b).
"Option Adjustment Amount" means, in the event that the fair market
value of the Per Share Merger Consideration (as defined in the Merger
Agreement), valuing the Stock Consideration (as defined in the Merger Agreement)
at the Average Closing Price (as defined in the Merger Agreement), is less than
$24.71, an amount equal to 40% of the aggregate reduction of the Per Share
Merger Consideration payable to holders of Options and Stock Units (each as
defined in the Merger Agreement) as a result of the Per Share Merger
Consideration being less than $24.71 per share (as compared to being $24.71 per
share).
"Parent Board Recommendation" has the meaning set forth in the Merger
Agreement.
"Parent Material Adverse Effect" has the meaning set forth in the
Merger Agreement.
"PCX" means the Pacific Stock Exchange.
"Post-Closing Period" has the meaning set forth in Section 4.1(a)(7).
"Post-Standalone Drug Sale Cash Sweep" has the meaning set forth in
Section 2.1.
"Pre-Closing Period" has the meaning set forth in Section 4.1(a)(3).
11
"Pre-Existing Title Policy" has the meaning set forth in Section
6.1(d)(2).
"Prior Transferors" has the meaning set forth in Section 6.1(d)(2).
"Proxy Statement/Prospectus" has the meaning set forth in the Merger
Agreement.
"Reorganization" means the Separation and the Retained Business
Purchase pursuant to a series of transaction steps, substantially as reflected
on Schedule 1.1 of this Separation Agreement, that are intended to further the
parties' efforts to accomplish the Separation and the Retained Business
Purchase, in the manner contemplated by Section 2.4(a).
"Representatives" has the meaning set forth in Section 5.1.
"Retained Action" has the meaning set forth in Section 5.5(a).
"Retained Assets" means, following the consummation of the Standalone
Drug Sale, (i) all of the Assets of the Company and its Subsidiaries, other than
the New Diamond Assets, (ii) Assets set forth on Schedule 1.7 of this Separation
Agreement whether or not any such Asset would fall within any category of New
Diamond Assets as set forth in the definition thereof and (iii) cash and cash
equivalents held directly at the store level by stores included in the Retained
Business.
"Retained Assets Transfer" has the meaning set forth in Section
2.3(b).
"Retained Business" means all present and past businesses of the
Company and its Subsidiaries (and their respective predecessors) other than (i)
the Standalone Drug Business and (ii) the New Diamond Business, and specifically
includes the Springfield Stores.
"Retained Business Allocation" has the meaning set forth in Section
2.8(a).
"Retained Business Entities" means Onyx, the Retained Entities and any
Designated Affiliates of Onyx.
"Retained Business Price" means (i) $350,000,000 plus (ii) the New
Diamond Assumption Price minus (iii) the Retained Property Proceeds.
"Retained Business Purchase" has the meaning set forth in Section
2.3(b).
"Retained Employees" means:
(i) employees of the Retained Business as of immediately prior to
the Separation, other than the New Diamond Employees;
(ii) the individuals listed on Schedule 1.8 of this Separation
Agreement; and
(iii) all former employees of the Company and its Subsidiaries
(other than Standalone Drug Employees) who were, immediately prior to
termination of
12
employment (with such termination occurring prior to the Closing), employed
primarily in connection with the Retained Business.
"Retained Entities" means the Company and all of the direct and
indirect Subsidiaries of the Company, excluding New Diamond and the New Diamond
Entities.
"Retained Entities Transfer" has the meaning set forth in Section
2.3(a).
"Retained Liabilities" means, without duplication:
(i) the obligations of the Company to perform and comply with its
respective covenants and agreements contained in this Separation Agreement
and the Transition Services Agreement and Liabilities arising from or
relating to any breach by the Company of such covenants and agreements;
(ii) all Liabilities of the Company and its Subsidiaries
(including Liabilities that arise from or relate to mortgages for borrowed
money secured by real estate and all capital leases and industrial revenue
bonds to the extent that, in each case, such matters relate to the Retained
Assets, including the Springfield Stores) other than the New Diamond
Liabilities;
(iii) all Liabilities directly relating to all Retained Actions;
(iv) 15% of Unallocated Liabilities;
(v) Retained Scheduled Liabilities;
(vi) 50% of the Shared Transaction Liabilities;
(vii) 15% of the Shared Transaction Litigation Liabilities;
(viii) all Liabilities for Actions to the extent arising from or
relating to information supplied by Onyx or its Affiliates specified for
inclusion (or incorporation by reference) in the Proxy Statement/Prospectus
(as defined in the Merger Agreement);
(ix) all Liabilities that are express post-Closing obligations of
the Company or its Affiliates under the Standalone Drug Sale Agreement; and
(x) Liabilities that arise from or relate to the conduct of the
Retained Business following the Closing.
"Retained Names" has the meaning set forth in Section 6.2(a)(2).
"Retained Property Proceeds" has the meaning set forth in Section
2.8(b).
"Retained Proprietary Name Rights" has the meaning set forth in
Section 6.2(a)(2).
13
"Retained Scheduled Liabilities" means the Liabilities set forth on
Schedule 1.10 of this Separation Agreement (it being understood that such
Liabilities shall be deemed to be Retained Liabilities and not New Diamond
Liabilities irrespective of whether or not any such Liabilities would fall
within any category of New Diamond Liabilities set forth in the definition
thereof).
"Return Preparer" has the meaning set forth in Section 4.2(d).
"Section 4.6 Liability" means:
(i) any New Diamond Scheduled Liability;
(ii) any Liability under Company Plans that are not Assumed
Benefit Plans and any Liability that New Diamond is responsible for under
Section 8.4 (other than any Liability under the Transition Services
Agreement);
(iii) any obligation to make payments with respect to Options and
Stock Units issued by the Company or New Diamond, in each case, to the
extent set forth in the Merger Agreement; and
(iv) any Tax Liability set forth in Section 4.1(a)(4).
"Seller Tax Indemnitee" has the meaning set forth in Section 4.1(b).
"Separation" has the meaning set forth in Section 2.2.
"Separation Agreement" has the meaning set forth in the Preamble.
"Shared Non-Income Taxes" means Non-Income Taxes for any Pre-Closing
Period attributable to neither the New Diamond Business, the New Diamond Assets,
the Retained Business, the Retained Assets, the Standalone Drug Business nor the
Standalone Drug Assets.
"Shared Transaction Liabilities" means, without duplication,
Liabilities incurred by the Company and its Subsidiaries for fees and expenses
of investment bankers, attorneys, accountants and other consultants and advisors
and their out-of-pocket costs and expenses, in each case, to the extent incurred
in connection with the transactions contemplated by this Separation Agreement,
the Merger Agreement and the Standalone Drug Sale that are incurred on or prior
to Closing or arise from or relate to arrangements, agreements or commitments
entered into or made by the Company or its Subsidiaries prior to the Effective
Time, including Liabilities for filing fees and printing and mailing costs and
other expenses incurred in connection with the Proxy Statement/Prospectus and
other out-of-pocket costs and expenses incurred in connection with the Company's
and its Subsidiaries' efforts to comply with the pre-closing covenants and
agreements contained in the Merger Agreement.
"Shared Transaction Litigation Liabilities" means Liabilities incurred
by the Company and its Subsidiaries and arising from or relating to any Actions
that arise from or relate to the execution of this Separation Agreement, the
Merger Agreement or the Standalone Drug
14
Sale Agreement, or the consummation of the transactions contemplated hereby and
thereby, whether brought before or after the Closing and whether brought by
current or former stockholders or option holders of the Company or New Diamond,
any Authority or third parties, including any obligation of the Company or New
Diamond to make payments to any of its dissenting stockholders (but only to the
extent such Liabilities to dissenting stockholders are in excess (such excess
amount, the "Excess Dissenting Shares Liability") of the amount of Per Share
Merger Consideration that would have been payable in respect of the Dissenting
Shares (as defined in the Merger Agreement) held by such dissenting stockholders
at the Effective Time if such appraisal proceeding had not been brought).
Notwithstanding anything to the contrary in this Separation Agreement, "Shared
Transaction Litigation Liabilities" shall not include Liabilities for Actions to
the extent arising from or relating to information supplied by Onyx or New
Diamond specifically for inclusion (or incorporation by reference) in the Proxy
Statement/Prospectus.
"Solvent" has the meaning set forth in Section 3.1(h).
"Specified Standalone Drug Liabilities" means the Liabilities set
forth on Schedule 1.11 of this Separation Agreement (it being understood that
such Liabilities shall be deemed New Diamond Liabilities irrespective of whether
or not any such Liabilities would fall under any category of Retained
Liabilities set forth in the definition thereof), to the extent not paid or
assumed by CVS pursuant to the Standalone Drug Sale Agreement.
"Sponsor" has the meaning set forth in the Recitals.
"Springfield Stores" means the Jewel-Osco stores of the Company
located at (i) ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ (Company store number
3031), and (ii) ▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ (Company store
number 3180).
"Springfield Stores Date" has the meaning set forth in Section 6.14.
"Standalone Drug Assets" means the Purchased Assets (as defined in the
Standalone Drug Sale Agreement).
"Standalone Drug Business" has the meaning set forth in the Standalone
Drug Sale Agreement.
"Standalone Drug Employees" means all employees of Standalone Drug at
the time of the Standalone Drug Sale and all former employees of Standalone
Drug.
"Standalone Drug Sale" means the purchase and sale of the Standalone
Drug Business, on the terms and subject to the conditions set forth in the
Standalone Drug Sale Agreement.
"Standalone Drug Sale Agreement" means that certain Asset Purchase
Agreement, dated as of the date hereof, by and among the Company, New Diamond,
SV, and CVS Corporation ("CVS") and certain other Sellers (as defined in the
Standalone Drug Sale Agreement).
15
"Straddle Period" has the meaning set forth in Section 4.1(a).
"Subsidiary" of a person means any and all corporations, partnerships,
limited liability companies, trusts and other entities, whether incorporated or
unincorporated, with respect to which such person, directly or indirectly,
legally or beneficially, owns (i) a right to a majority of the profits of such
entity or (ii) securities having the power to elect a majority of the board of
directors or similar body governing the affairs of such entity.
"SV" has the meaning set forth in the Preamble.
"SV Disclosure Letter" has the meaning set forth in Section 3.3.
"Tax" means all (i) taxes imposed by any U.S. federal, state or local,
foreign or other governmental entity or political subdivision thereof, including
all income, gross receipts, gains, profits, windfall profits, gift, severance,
ad valorem, capital, social security, unemployment disability, premium,
recapture, credit, excise, property, sales, use, occupation, service, service
use, leasing, leasing use, value added, transfer, payroll, employment,
withholding, estimated, license, stamp, franchise or other taxes of any kind
whatsoever, including interest, penalties or additions thereto and (ii)
liabilities of a person for the payment of any amounts pursuant to any
tax-sharing, tax allocation or similar agreement.
"Tax Authority" means, with respect to any Tax, the governmental
entity or political subdivision thereof that imposes such Tax, and the agency
(if any) charged with the collection of such Tax for such entity or subdivision.
"Tax Benefit" means the Tax effect of any item of loss, deduction or
credit or any other item which decreases Taxes paid or payable or increases Tax
basis.
"Tax Detriment" means the Tax effect of any item of income or gain or
other item that increases Taxes paid or payable or decreases Tax basis.
"Tax Item" means any item of income, gain, loss, deduction, credit,
recapture of credit or any other item which increases or decreases Taxes paid or
payable, including an adjustment under Section 481 of the Code resulting from a
change in accounting method.
"Tax Proceeding" means any Tax audit, contest, litigation, defense or
other proceeding with or against any Tax Authority.
"Tax Return" or "Return" means any report, return, documents,
declaration or other information (and any supporting schedules or attachments
thereto) required to be supplied to any Tax Authority or jurisdiction with
respect to Taxes (including any returns or reports filed on a consolidated,
unitary, or combined basis, amended returns and claims for refund).
"Termination Date" has the meaning set forth in the Merger Agreement.
"Third Party Claim" has the meaning set forth in Section 5.4(a).
16
"Transactions" means the Mergers, the Standalone Drug Sale and the
transactions contemplated by this Separation Agreement.
"Transfer Document" has the meaning set forth in Section 6.1(d)(1).
"Transfer Taxes" has the meaning set forth in Section 4.7.
"Transferred Real Property" means all real property Assets (including
any fee or leasehold) to be transferred or assigned pursuant to the Separation
Agreement, to New Diamond, the New Diamond Entities, Onyx or the Retained
Entities, and/or one or more of the respective Designated Affiliates.
"Unallocated Action" has the meaning set forth in Section 5.5(b).
"Unallocated Liabilities" means, without duplication:
(i) Unallocated Actions;
(ii) any Liabilities incurred by the Company and/or SV under
Section 6.8(a) of the Merger Agreement in respect of the Company; and
(iii) Liabilities of the Company arising out of the operation of
the Standalone Drug Business prior to the Closing (other than Specified
Standalone Drug Liabilities and any such Liabilities to the extent paid or
assumed by CVS pursuant to the Standalone Drug Sale Agreement);
(iv) other Liabilities of the Company to the extent such
Liabilities are not (a) Liabilities of the type described in any clause of
the definition of New Diamond Liabilities (other than clause (vi) thereof)
or (b) Liabilities of the type described in any clause of the definition of
Retained Liabilities (other than clause (iv) thereof).
"Welfare Plans" has the meaning set forth in Section 8.4.
ARTICLE II
TRANSFER OF NEW DIAMOND ASSETS AND NEW DIAMOND LIABILITIES;
PURCHASE AND SALE OF THE COMPANY AND THE RETAINED ENTITIES' STOCK
Section 2.1 Transfer of New Diamond Assets and New Diamond Entities.
(a) Subject to the terms and conditions of this Separation Agreement, each of
the Company, Onyx, SV and New Diamond and their respective Affiliates shall
consummate, or cause to be consummated immediately following the satisfaction or
waiver of the conditions to the consummation of this Separation Agreement as set
forth in Section 9.1 (excluding conditions that, by their terms, cannot be
satisfied until the Closing), (i) the acquisition by New Diamond of all of the
capital stock of the Company in exchange for stock of New Diamond in accordance
with the Merger Agreement, followed immediately by (ii) the conversion of the
Company into a limited liability company (the "Diamond LLC Conversion").
17
(b) Immediately thereafter, (1) the Company shall (i) convey, assign,
transfer and deliver, directly or indirectly, to New Diamond and/or one or more
of its Designated Affiliates, subject to all Liens, all of the Company's right,
title and interest in and to all the New Diamond Assets of the Company and (ii)
deliver, directly or indirectly, to New Diamond and/or one or more of its
Designated Affiliates legal and beneficial ownership of all of the Equity
Interests of the New Diamond Entities, and (2) New Diamond and/or one or more of
its Designated Affiliates shall (i) acquire and accept from the Company, subject
to all Liens in place with respect to such Assets immediately prior to the
Closing Date, all of the Company's right, title and interest in and to all the
New Diamond Assets of the Company and (ii) acquire and accept from the Company
legal and beneficial ownership of all of the Equity Interests of the New Diamond
Entities directly transferred to New Diamond (such transactions, the "New
Diamond Asset Transfer"). In addition to the foregoing, immediately following
the consummation of the Standalone Drug Sale, the Company shall, and shall cause
each of its Subsidiaries to, convey, assign, transfer or otherwise distribute
all of the cash proceeds from the Standalone Drug Sale to New Diamond (the
"Post-Standalone Drug Sale Cash Sweep"). By virtue of the New Diamond Asset
Transfer and the Post-Standalone Drug Sale Cash Sweep, pursuant to this
Separation Agreement, after the Closing, New Diamond will directly or indirectly
own all of the capital stock of the New Diamond Entities and the Assets of such
entities (other than the Retained Assets) as well as other Assets, including the
New Diamond Proprietary Name Rights, and such Assets of the New Diamond Entities
will be considered New Diamond Assets for purposes of this Separation Agreement.
Section 2.2 Transfer and Assumption of New Diamond Liabilities.
Subject to the terms and conditions of this Separation Agreement, concurrently
with the New Diamond Asset Transfer, (a) the Company shall convey, assign and
transfer, directly or indirectly, to New Diamond and/or one or more of its
Designated Affiliates, all of the New Diamond Liabilities of the Company and (b)
New Diamond and/or one or more of its Designated Affiliates shall assume and
agree to pay, perform and discharge when due, or cause to be assumed, paid,
performed and discharged, in due course, all of the New Diamond Liabilities of
the Company and the New Diamond Entities (the "New Diamond Liability Transfer,"
and together with the New Diamond Asset Transfer, the "Separation").
Section 2.3 Purchase and Sale of the Company's and the Retained
Entities' Stock; Retained Assets and Retained Liabilities. (a) Subject to the
terms and conditions of this Separation Agreement, at the Closing and following
the Separation and the Standalone Drug Sale, New Diamond shall (or shall cause
one or more of its Subsidiaries to) sell and deliver, directly or indirectly, to
Onyx and/or one or more of its Designated Affiliates, and Onyx and/or one or
more of its Designated Affiliates shall (1) purchase, acquire and accept from
New Diamond, or the applicable Subsidiary or Subsidiaries of New Diamond, legal
and beneficial ownership of all of the Equity Interests of the Company (such
purchase, the "Retained Entities Transfer") and (2) assume and agree to pay,
perform and discharge when due, or cause to be assumed, paid, performed and
discharged, in due course, all of the Retained Liabilities. By virtue of the
Company's retained ownership of all of the capital stock of the other Retained
Entities after the Closing, the Company will indirectly own all of the Assets
owned by such Retained Entities (other than the New Diamond Assets), including
the capital stock and the Assets of such entities and such Assets will be
considered Retained Assets for purposes of this Separation Agreement
18
(b) Immediately following the Retained Entities Transfer, New
Diamond shall (or shall cause one or more of the New Diamond Entities to) sell,
convey, assign, transfer and deliver, directly or indirectly, to Onyx and/or one
or more of its Designated Affiliates, subject to all Liens, all of New Diamond's
(or the New Diamond Entities', as applicable) right, title and interest in and
to all the Retained Assets of New Diamond or the New Diamond Entities, as
applicable and Onyx and/or one or more of its Designated Affiliates shall
purchase, acquire and accept from New Diamond (or the New Diamond Entities, as
applicable) subject to all Liens in place with respect to such Asset immediately
prior to the Closing Date, all of New Diamond's (or the New Diamond Entities',
as applicable) right, title and interest in and to all the Retained Assets of
New Diamond or the New Diamond Entities, as applicable (such transactions, the
"Retained Assets Transfer" and together with the Retained Entities Transfer, the
"Retained Business Purchase").
Section 2.4 Reorganization; Consummation of the Mergers and New
Diamond Liability Transfer; Retained Business Price. (a) Subject to the terms
and conditions of this Separation Agreement and in furtherance of Sections 2.1,
2.2 and 2.3 hereof, and in furtherance of the parties' mutual desire and intent
to transfer, directly or indirectly, the Retained Entities to Onyx and/or one or
more of its Designated Affiliates in a transaction treated for federal income
Tax purposes as a sale of assets (except with respect to the purchase of Lucky
Delaware, which the parties mutually desire and intend to be treated as a sale
of stock for federal income Tax purposes), each of the Company, Onyx, SV and New
Diamond and their respective Affiliates shall consummate, or cause to be
consummated, the transactions contemplated by the Reorganization, substantially
as provided in Schedule 1.1 and in a manner consistent with Section 4.1(c) of
this Separation Agreement.
(b) Subject to the terms and conditions of this Separation
Agreement, in consideration of the New Diamond Asset Transfer, each of the
Company and New Diamond shall consummate, or cause to be consummated, the New
Diamond Liability Transfer.
(c) Subject to the terms and conditions of this Separation
Agreement, in consideration of the Retained Business Purchase, Onyx and/or one
or more of its Designated Affiliates shall (1) pay to New Diamond (or such New
Diamond Entity as New Diamond may designate) an amount of cash equal to the
Retained Business Price and (2) assume and agree to pay, perform and discharge
when due, or cause to be assumed, paid, performed and discharged, in due course,
all of the Retained Liabilities assumed by Onyx and/or one or more of its
Designated Affiliates pursuant to Section 2.3.
Section 2.5 The Closing. (a) Subject to the satisfaction or waiver of
the conditions set forth in Section 9.1 of this Separation Agreement, each of
the Diamond LLC Conversion, the Separation, the Standalone Drug Sale and the
Retained Business Purchase shall take place in succession as contemplated by the
Coordination Agreement, in each case, at the offices of ▇▇▇▇▇ Day, ▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ (the "Closing"). The parties hereto agree that
(i) the sale, conveyance, assignment and transfer of the New Diamond Assets and
New Diamond Entities or the Retained Assets and Retained Entities, as
applicable, shall be effected at the Closing by delivery by each of the parties
(A) with respect to those Assets and Equity Interests which are evidenced by
capital stock certificates or similar instruments, certificates duly endorsed in
blank or accompanied by stock powers or other instruments of
19
assignment executed in blank and (B) with respect to all other Assets, such good
and sufficient instruments of transfer and delivery as shall be necessary to
vest in New Diamond or Onyx or their respective Designated Affiliates, as the
case may be, all of the right, title and interest of the Company in and to such
Assets, and (ii) the assumption of Liabilities shall be effected by delivery by
New Diamond or Onyx or their respective Designated Affiliates, as applicable, to
the appropriate counterparty of such good and sufficient instruments of
assumption, as shall be necessary for the assumption by New Diamond or Onyx or
their respective Designated Affiliates, as applicable, of the Liabilities to be
assumed pursuant to this Separation Agreement. All of the foregoing transfer or
assumption instruments or other documents shall be in such form as are
reasonably satisfactory to the parties hereto.
(b) The parties hereto will cooperate with one another and with
CVS in causing the Closing, the "Closing" contemplated by the Standalone Drug
Sale Agreement and the "Closing" contemplated by the Merger Agreement to occur
and be effected as promptly as practicable but in no event later than two (2)
Business Days after the Initial Closing Date (as defined in the Merger
Agreement).
Section 2.6 Certain Indebtedness of the Company; Succession and
Release; Indemnification. In connection with the transactions contemplated
hereby, the parties agree that:
(a) In connection with the Separation and substantially
concurrent with the New Diamond Asset Transfer, with respect to the ABS
Indenture, each of the Company and New Diamond shall take, or cause to be taken,
all those actions specified under the ABS Indenture to (1) cause New Diamond to
assume all obligations thereunder, including executing and delivering one or
more supplemental indentures in accordance with the terms thereof and (2) to
cause the Company to be released and discharged from any and all obligations
thereunder. Following the Closing, New Diamond shall, or shall cause one of its
Affiliates to, pay, perform and discharge all obligation, covenants and
agreements under the ABS Indenture pursuant to the terms thereof. Any
Liabilities of the Retained Entities on account of the foregoing shall be deemed
Indemnifiable Losses of the Company Indemnitees under Article V of this
Separation Agreement.
(b) Following the Closing, New Diamond shall, or shall cause one
of its Affiliates to, pay, perform and discharge all obligations, covenants and
agreements under the ASC Indenture pursuant to the terms thereof, subject only
to the provisions in this Section 2.6(b) relating to the ▇▇▇▇▇▇▇▇▇'▇ Inc.
Guarantee. All Liabilities incurred by the Retained Entities on account of the
foregoing shall be deemed Indemnifiable Losses of the Company Indemnitees under
Article V of this Separation Agreement. Following the Closing and until the
fifth (5th) anniversary of the Closing Date (such date, the "Guarantee Release
Date"), (i) Onyx shall cause the Company to be duly organized, validly existing
and in good standing under the laws of the State of Delaware and (ii) each of
Onyx and the Company shall cause to remain outstanding and in full force and
effect the guarantee entered pursuant to that certain Supplemental Indenture No.
2, dated as of July 6, 2005 (the "▇▇▇▇▇▇▇▇▇'▇ Inc. Guarantee"), whereby the
Company guaranteed all of the obligations under the ASC Indenture. On or prior
to the Guarantee Release Date, New Diamond shall, or shall cause one of its
Affiliates to, cause the Company to be released and discharged from the
▇▇▇▇▇▇▇▇▇'▇ Inc. Guarantee (and the Company shall, and shall cause the other
Retained Entities to, cooperate at New Diamond's expense in seeking such release
and
20
discharge). Any Liabilities of the Company or any other Retained Entities on
account of any payments that are required to be made under the ▇▇▇▇▇▇▇▇▇'▇ Inc.
Guarantee (other than Liabilities arising out of a breach by Onyx or the Company
of this Section 2.6(b) or the ▇▇▇▇▇▇▇▇▇'▇ Inc. Guarantee) shall be deemed
Indemnifiable Losses of the Company under Article V of this Separation
Agreement.
(c) Without limiting the generality of the foregoing, following
the Closing, (1) with respect to any other New Diamond Liabilities that
constitute obligations for money borrowed, New Diamond shall use its reasonable
best efforts to cause the Company and the other Retained Entities and their
respective Equity Interests, properties and assets to be released and discharged
from any and all Liabilities, Liens, guarantees, and the like under such
indebtedness (and Onyx and/or one of its Designated Affiliates shall, and shall
cause the Company and the other Retained Entities to, cooperate in seeking such
release and discharge), and New Diamond shall, or shall cause a New Diamond
Entity to, (to the extent permitted by the terms of New Diamond's financing)
pay, perform and discharge such indebtedness pursuant to the terms thereof, and
perform and abide by all other obligations, covenants and agreements therein, in
each case, pending such release and discharge and (2) with respect to any
Retained Liabilities that constitute obligations for money borrowed, Onyx and/or
one of its Designated Affiliates shall, and shall cause the Company and the
other Retained Entities to, use its reasonable best efforts to cause New Diamond
and the New Diamond Entities and their respective Equity Interests, properties
and assets to be released and discharged from any and all Liabilities, Liens,
guarantees and the like under such indebtedness (and New Diamond shall, and
shall cause the New Diamond Entities to, cooperate in seeking such release and
discharge), and Onyx and/or one of its Designated Affiliates shall, and shall
cause the Company and the other Retained Entities to (to the extent permitted by
the terms of Onyx's financing), pay, perform and discharge such indebtedness
pursuant to the terms thereof, and perform and abide by all other obligations,
covenants and agreements therein, in each case, pending such release and
discharge; provided, that each of Onyx and New Diamond shall use commercially
reasonable efforts to obtain necessary approvals from their respective financing
sources to permit such performance; and
(d) Following the Closing, (1) if the Company or any other
Retained Entity is a party to or bound by any agreement or instrument governing
any New Diamond Liabilities contemplated by clause (c) above that constitute
obligations for money borrowed or any related guaranty, security agreement or
pledge, each of Onyx and/or one of its Designated Affiliates shall, or shall
cause the Company or such Retained Entity to (to the extent permitted by the
terms of Onyx's financing), at the expense of New Diamond and/or one of its
Designated Affiliates, perform and abide by all obligations, covenants and
agreements contained therein pending the release and discharge contemplated by
clause (c)(1) above and (2) if any New Diamond Entity is a party to or bound by
any agreement or instrument governing any Retained Liabilities contemplated by
clause (c) above that constitute obligations for money borrowed or any related
guaranty, security agreement or pledge, New Diamond and/or one of its Designated
Affiliates shall, or shall cause such New Diamond Entity to (to the extent
permitted by the terms of New Diamond's financing), at the expense of the
Company and/or one of its Designated Affiliates, perform and abide by all
obligations, covenants and agreements contained therein pending the release and
discharge contemplated by clause (c)(2) above; provided, that each of Onyx and
New Diamond shall use commercially reasonable efforts to obtain necessary
approvals
21
from their respective financing sources to permit such performance. Any expenses
(including reasonable attorneys fees, administrative costs and amounts paid to
third parties) incurred in connection with this Section 2.6(d) for the account
of New Diamond and/or its Designated Affiliates, on the one hand, and the
Company and/or its Designated Affiliates on the other hand, shall be deemed
Indemnifiable Losses of the Company and New Diamond, respectively, under Article
V of this Separation Agreement.
Section 2.7 Current Accounts. After the date hereof and prior to the
Closing, (a) the Company shall continue its general practices and policies
relating to (1) the payment and collection, as the case may be, of accounts
payable and accounts receivable, (2) subject to the provisions of Section 6.1 of
the Merger Agreement, the defense and settlement of Actions and (3) maintenance
of inventory of a quantity (accounting for seasonal variations), quality and
mix, in each case, in the ordinary course and consistent with past practice for
the New Diamond Business and the Retained Business and (b) no party hereto
shall, nor shall any party permit any of its Subsidiaries or Affiliates to,
materially influence or otherwise alter such practices and policies.
Section 2.8 Retained Business Price Allocation; Retained Property
Proceeds. (a) Within sixty (60) days following the Closing Date, Onyx shall
deliver to New Diamond for its review and approval a proposed allocation of the
Retained Business Price (including any adjustments made thereto) and any
liabilities assumed, for Tax purposes, which shall be prepared in a manner
consistent with fair market value and, as applicable, Sections 338 and 1060 of
the Code and the Treasury Regulations promulgated thereunder (such allocation,
as agreed by Onyx and New Diamond or as resolved by the Accountant, the
"Retained Business Allocation"). In the event that Onyx and New Diamond are
unable to reach an agreement on the Retained Business Allocation within fifty
(50) days of such delivery, Onyx and New Diamond shall each set forth in writing
their positions regarding any remaining disagreed items and such positions shall
be submitted to a nationally recognized public accounting firm mutually
acceptable to both Onyx and New Diamond (the "Accountant") for resolution in the
next forty-five (45) days. The Accountant shall be instructed to resolve such
disputed items so that the Retained Business Allocation is consistent with fair
market value and, as applicable, Sections 338 and 1060 of the Code and the
Treasury Regulations promulgated thereunder. Each of Onyx and New Diamond shall
bear all fees and costs incurred by it in connection with such dispute, except
that each of Onyx and New Diamond shall pay one-half (50%) of the fees and
expenses of the Accountant. The parties agree to use the Retained Business
Allocation for all Tax purposes and in all filings, declarations and reports
with the Internal Revenue Service (the "IRS") in respect thereof, including any
reports required to be filed under Sections 1060 and 338 of the Code. The
parties shall timely file, or cause to be timely filed, IRS Form 8594 (or any
comparable form under state, local, or foreign Tax law) and any required
attachments thereto in accordance with the Retained Business Allocation. On any
Tax Return and in any Tax Proceeding, none of (x) Onyx, the Company, their
Designated Affiliates and the other Retained Entities nor (y) SV, New Diamond,
their Designated Affiliates and the New Diamond Entities shall take any position
inconsistent with or represent that the Retained Business Allocation is not
correct, unless otherwise required to do so as a result of a determination (as
defined in Section 1313(a) of the Code or any similar state or local tax
provision) (a "Determination").
22
(b) (i) No less than five Business Days after each monthly
anniversary of the first month end after date hereof through no later than two
Business Days prior to the Closing Date and (ii) on the date that is two
Business Days prior to the Closing Date, the Company shall deliver to Onyx in
writing a statement providing in reasonable detail the aggregate net cash
proceeds (after Tax, any reasonable transaction costs and assumption of
Liabilities) actually received by the Company or any of its Subsidiaries during
the time period from and after the date hereof through the most recent month end
prior to the date such statement is delivered (or, in the case of the statement
delivered pursuant to clause (ii), from the date hereof through the date of such
statement) directly related to dispositions by the Company or any of its
Subsidiaries after the date hereof (the "Retained Property Proceeds") of
"Non-Core" stores (as described in the Business Description Presentation) (or
all or substantially all of the Assets located in any store in a liquidation of
such store) or any underlying real property or any non-operating real property
(including, without limitation, proceeds resulting from the exercise of any
right of recapture by a landlord with respect to any real property lease) that,
if not disposed, would qualify as Retained Assets; provided, however, that the
Company shall not be required to deliver a report pursuant to clause (i) of this
sentence if the amount of Retained Property Proceeds that would be set forth in
such report would be less than $100,000 more than the amount of Retained
Property Proceeds set forth in the most recently delivered previous report;
provided, further, that nothing in this Separation Agreement shall prohibit the
Company from selling or otherwise transferring to a third party (other than SV)
the Springfield Stores and in no event shall any proceeds from such sale or
transfer of the Springfield Stores be considered Retained Property Proceeds;
provided, further, that if the Company shall sell or otherwise transfer to a
third party (other than SV) the Springfield Stores at the Closing, it shall use
commercially reasonable best efforts to give 30 days' prior notice of such sale
to Onyx (or such shorter period of notice as may be practicable).
Section 2.9 Insurance Proceeds. (a) In the event that, after the
execution of this Agreement, but prior to the Closing Date, any New Diamond
Asset or Retained Asset is subject to loss, destruction or damage to the
building or other improvements thereon (a "Casualty") or the exercise of eminent
domain by a governmental authority (a "Condemnation"):
(i) Subject to Section 2.9(a)(ii), at the Closing the Company
shall (A) retain, or shall transfer and convey to New Diamond or one
or more of Onyx's Designated Affiliates, as applicable, all net
proceeds the Company or any of its Subsidiaries have received from any
third party insurance claims, condemnation awards, compensation or
other reimbursements relating to such Casualty or Condemnation (except
as to proceeds of business interruption, rental and lost profits
insurance for periods up to and including the Effective Time, whenever
received, to the extent that such proceeds have not already been used
by the Company or any of its Subsidiaries to repair any such loss,
destruction or damage) and except to the extent such proceeds are used
or intended to be used to reimburse the Company or such Subsidiaries
for any out-of-pocket costs, expenses, damages or losses suffered or
incurred by the Company or its Subsidiaries during the period up to
and including the Effective Time) and (B) to the extent such proceeds
have not already been used by the Company or its Subsidiaries to
repair any such loss, destruction or damage, assign to New Diamond (in
the case of a Casualty relating to a New Diamond Asset) or to one or
23
more of Onyx's Designated Affiliates (in the case of a Casualty
relating to a Retained Asset) the right to receive any future proceeds
of such Casualty or Condemnation receivable after the Effective Time,
including as to business interruption insurance, rental and lost
profits insurance for any period after the Effective Time).
(ii) If any such Casualty is not covered under the Company's or
any of its Subsidiaries' third party insurance policies and in the
event of a store that has suffered a Casualty where the landlord is
responsible for such repairs, loss or destruction pursuant to the
terms of the relevant Lease, the applicable the Company or its
Subsidiary, as applicable, shall assign the applicable lease to New
Diamond or one or more of Onyx's Designated Affiliates, as applicable,
and, without any additional payment from New Diamond or such Onyx
Designated Affiliate(s), the Company or such Subsidiary shall assign
to New Diamond or such Onyx Designated Affiliate(s) any claim they
have under such lease with respect thereto.
(b) Any party receiving a notice of Casualty or Condemnation shall
notify all other parties in accordance with Section 9.10. Notwithstanding
anything to the contrary contained in this Separation Agreement, in no
event will any Casualty or Condemnation constitute the breach of any
representation, warranty or covenant of the Company contained in this
Separation Agreement.
(c) Notwithstanding anything to the contrary in this Separation
Agreement, under no circumstances shall (1) the Company, New Diamond or any
of their respective Affiliates be responsible for any retention or
deductible payable with respect to any Casualty or Condemnation and (2) any
payments on account of a Casualty or Condemnation or any other loss be
required after the Closing Date from ▇▇▇▇▇ American Corporation, or any
other Subsidiary or Affiliate of SV or the Company that has underwritten an
insurance policy with respect to any New Diamond Asset or Retained Asset.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.1 Representations and Warranties of Onyx. Except as set
forth on the corresponding sections of the disclosure letter delivered by Onyx
to the Company and SV on or prior to the execution of this Separation Agreement
(the "Onyx Disclosure Letter"), Onyx hereby, jointly and severally with each of
its Designated Affiliates, represents and warrants to the Company and SV that:
(a) Organization and Standing. Each of Onyx and its Designated
Affiliates is duly organized, validly existing and in good standing under the
laws of its respective jurisdiction of organization, and has the requisite
corporate or similar power and authority to own its properties and to carry on
its business as presently conducted and is duly qualified to do business and is
in good standing (where such concept exists) as a foreign corporation in each
24
jurisdiction in which the nature of its business or the ownership or leasing of
its properties makes such qualification necessary. Complete and correct copies
of the certificate of incorporation and by-laws (or equivalent organizational
documents) of Onyx and its Designated Affiliates (if and to the extend actually
designated), as currently in effect, have been made available to the Company,
and as so made available, are in full force and effect and no other
organizational documents are applicable to or binding upon Onyx and its
Designated Affiliates.
(b) Authority; Enforceability. Each of Onyx and its Designated
Affiliates has the corporate or other power and authority to execute and deliver
this Separation Agreement and to perform its obligations hereunder and to
consummate the transactions contemplated hereby. The execution and delivery by
each of Onyx and its Designated Affiliates of this Separation Agreement and the
consummation by each of Onyx and its Designated Affiliates of the transactions
contemplated hereunder have been duly authorized by all necessary action on the
part of each of Onyx and its Designated Affiliates and the holders of any Equity
Interests thereof and no other corporate or similar proceeding on the part of
Onyx or its Designated Affiliates are necessary pursuant to its governing
documents or applicable Law to authorize this Separation Agreement or to
consummate the transactions contemplated hereby. This Separation Agreement has
been duly executed and delivered by each of Onyx and, if and when applicable,
its Designated Affiliates and, assuming due authorization, execution and
delivery by the other parties hereto, constitutes a legal, valid and binding
agreement of each of Onyx and its Designated Affiliates, enforceable against
each of 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 and general equitable
principles (whether considered in a proceeding in equity or at law).
(c) Non-Contravention. The execution, delivery and performance of
this Separation Agreement by each of Onyx and its Designated Affiliates does not
and will not (1) conflict with or violate its certificate of incorporation or
by-laws or comparable governing documents, (2) assuming that all consents,
approvals and authorizations contemplated by Section 3.1(d) have been obtained
and all filings described therein have been made, conflict with or violate any
Law applicable to Onyx, its Designated Affiliates or any of their Subsidiaries
or by which it or any of its properties are bound or (3) result in any breach or
violation of or constitute a default (or an event which with notice or lapse of
time or both would become a default) or result in the loss of a benefit under,
or give rise to any right of termination, cancellation, recapture, amendment or
acceleration of, or performance under, any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit or other instrument or obligation to
which Onyx, its Designated Affiliates or any of their Subsidiaries is a party or
by which Onyx, its Designated Affiliates or any of their Subsidiaries or its or
any of their properties are bound, except, in the case of clauses (2) and (3) of
this Section 3.1(c), for any such conflict, violation, breach, default, loss,
right or other occurrence which would not, individually or in the aggregate,
prevent or materially delay the consummation of the transactions contemplated
hereby.
(d) Governmental Consents. The execution, delivery and
performance of this Separation Agreement by each of Onyx and its Designated
Affiliates and the consummation by each of Onyx and its Designated Affiliates of
the transactions contemplated hereby do not and will not require any consent,
approval, authorization or permit of, action by, filing with or notification to,
any Governmental Authority, except as required under or pursuant
25
to (1) the HSR Act, (2) the Exchange Act, (3) state securities, takeover and
"blue sky" Laws, (4) the rules and regulations of the NYSE and the PCX, (5) the
DGCL, (6) the applicable requirements of antitrust or other competition Laws of
other jurisdictions or investment Laws relating to foreign ownership, and (7)
any other consent, approval, authorization, permit, action, filing or
notification the failure of which to be made or obtained would not, individually
or in the aggregate, prevent or materially delay the consummation of the
transactions contemplated hereby and by the Merger Agreement.
(e) Capitalization. Section 3.1(e) of the Onyx Disclosure Letter
sets forth the authorized, outstanding equity of Onyx as of the date hereof.
There is no agreement, contract, commitment or arrangement pursuant to which
Onyx or any Subsidiary of Onyx is or may become obligated to repurchase or
redeem any shares of capital stock or voting securities of Onyx or any
securities or obligations convertible or exchangeable into or exercisable for,
any shares of capital stock or voting securities of Onyx. Onyx does not have
outstanding any bonds, debentures, notes or other obligations the holders of
which have the right to vote (or which are convertible, exchangeable or
exercisable for or into securities having the right to vote) with the members of
Onyx on any matter.
(f) Litigation. There are no Actions pending or, to the knowledge
of Onyx, threatened against Onyx or its Designated Affiliates or, to the
knowledge of Onyx, any officer, director or employee of Onyx or its Designated
Affiliates in such capacity, which would, individually or in the aggregate,
prevent or materially delay Onyx or its Designated Affiliates from performing
its obligations under this Separation Agreement in any material respect. Neither
Onyx nor its Designated Affiliates is a party or subject to or in default under
the order of any Authority which would prevent or materially delay Onyx or its
Designated Affiliates from performing its obligations under this Separation
Agreement in any material respect.
(g) Financing. Attached hereto as Exhibit A is a true and
complete copy of the Financing Commitment (the "Financing Commitment"), pursuant
to which the Sponsor thereto has committed, subject to the terms and conditions
set forth therein, to invest the amounts set forth therein to purchase Equity
Interests of Onyx and to provide debt financing to Onyx and its Designated
Affiliates (the "Financing"). The Financing Commitment has not been amended or
modified prior to the date of this Separation Agreement, no such amendment or
modification is contemplated, and the commitment contained in the Financing
Commitment has not been withdrawn or rescinded in any respect. The Financing
Commitment is in full force and effect and is the valid, binding and enforceable
obligation of the parties thereto. There are no conditions precedent or other
contingencies related to the funding of the full amount of the Financing, other
than as set forth in or contemplated by the Financing Commitment. No event has
occurred which, with or without notice, lapse of time or both, would constitute
a default on the part of Onyx or its Designated Affiliates under the Financing
Commitment, and Onyx has no reason to believe that any of the conditions to the
Financing contemplated by the Financing Commitment will not be satisfied or that
the Financing will not be made available to Onyx on the Closing Date. Onyx and
its Designated Affiliates will have at and after the Closing funds sufficient to
pay the aggregate Retained Business Price and any other amounts required to be
paid in connection with the consummation of the transactions contemplated
hereby, and to pay all related fees and expenses.
26
(h) Solvency. Assuming satisfaction of the conditions to this
Separation Agreement and the Merger Agreement (other than the consummation of
the transactions contemplated hereby), and after giving effect to the
transactions contemplated hereby and thereby, including the Financing and Future
Debt Financing, any alternative financing and the payment of the aggregate Per
Share Merger Consideration, the Reorganization, the assumption or retention (as
applicable) of the Retained Liabilities by the Company, Onyx and its Designated
Affiliates, the assumption or retention (as applicable) of the New Diamond
Liabilities by New Diamond and its Designated Affiliates, payment of all amounts
required to be paid in connection with the consummation of the transactions
contemplated hereby and thereby, and payment of all related fees and expenses,
each of the Company, Onyx and its Designated Affiliates will be Solvent as of
the Effective Time and immediately after the consummation of the transactions
contemplated hereby and thereby. For the purposes of this Separation Agreement
the term "Solvent" when used with respect to any person, means that, as of any
date of determination, (1) the amount of the "fair saleable value" of the assets
of such person will, as of such date, exceed (i) the value of all "liabilities
of such person, including contingent and other liabilities," as of such date, as
such quoted terms are generally determined in accordance with applicable federal
laws governing determinations of the insolvency of debtors, and (ii) the amount
that will be required to pay the probable liabilities of such person on its
existing debts (including contingent liabilities) as such debts become absolute
and matured, (2) such person will not have, as of such date, an unreasonably
small amount of capital for the operation of the businesses in which it is
engaged or proposed to be engaged following such date, and (3) such person will
be able to pay its liabilities, including contingent and other liabilities, as
they mature. For purposes of this definition, "not have an unreasonably small
amount of capital for the operation of the businesses in which it is engaged or
proposed to be engaged" and "able to pay its liabilities, including contingent
and other liabilities, as they mature" means that such person will be able to
generate enough cash from operations, asset dispositions or refinancing, or a
combination thereof, to meet its obligations as they become due.
(i) Brokers. No agent, broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Separation Agreement based upon
arrangements made by or on behalf of Onyx or its Designated Affiliates for which
any party other than Onyx or its Designated Affiliates could have any liability.
(j) Company Stock. Neither Onyx nor any of its Designated
Affiliates is, and at no time during the last three years has either Onyx or any
of its Designated Affiliates been, an "interested stockholder" of the Company as
defined in Section 203 of the DGCL. Neither Onyx nor any of its Designated
Affiliates owns (directly or indirectly, beneficially or of record), or is a
party to any agreement, arrangement or understanding for the purpose of
acquiring, holding, voting or disposing of, any shares of capital stock of the
Company (other than as contemplated by this Separation Agreement).
(k) Onyx Designated Affiliates. Each of the Designated Affiliates
of Onyx was formed or will be formed, as the case may be, solely for the purpose
of engaging in the transactions contemplated hereby, has engaged in no other
business activities and has conducted its operations only as contemplated by
this Separation Agreement.
27
Section 3.2 Representations and Warranties of the Company. Except as
set forth in the corresponding sections of the disclosure letter (subject to the
provisions of Section 9.18) delivered by the Company to Onyx on or prior to the
execution of this Separation Agreement (the "Company Disclosure Letter") and
except as disclosed in the Form 10-K of the Company for the fiscal period ended
February 3, 2005, as amended through the date hereof (as amended, the "Company
Form 10-K"), the Proxy Statement for the Company's 2005 Annual Meeting of
Shareholders, and the Form 10-Qs and Form 8-Ks filed or furnished from the date
of the filing of the Company Form 10-K to the date of this Separation Agreement
(and any amendments to any such filings which amendments are filed with the SEC
prior to the date hereof) to the extent such qualifications are reasonably
apparent (and which in no event shall include risk factors or other factors
identified in general cautionary statements regarding reliance on forward
looking statements in either case included in the Company SEC Reports), the
Company hereby represents and warrants to Onyx and its Designated Affiliates
that the representations and warranties of the Company set forth in Article IV
of the Merger Agreement are true and correct; provided, however, that (1) the
representations and warranties contained in Article IV of the Merger Agreement
are made herein by the Company (mutatis mutandis) for the benefit of Onyx and
its Designated Affiliates, (2) except for purposes of the representations and
warranties contained in Section 4.1 (Organization), Section 4.2(a) and (c)
(Authority; Enforceability), Section 4.5 (Capitalization of the Company),
Section 4.7 (SEC Reports; Financial Information), Section 4.10(a)(iv), (x) and
(xi) (Contracts), Section 4.13 (Employee Compensation and Benefit Plans; ERISA),
Section 4.14 (Labor Matters), Section 4.19 (Tax) and Section 4.20 (Insurance),
of the Merger Agreement, all references to the "Company" or to the "Company
Subsidiaries" contained in Article IV of the Merger Agreement shall be deemed to
refer to the Company and its Subsidiaries in respect of the Retained Business,
Retained Assets and Retained Liabilities, (3) for the avoidance of doubt, all
reference to "Company Material Adverse Effect" therein shall be deemed to refer
to "Company Material Adverse Effect" as defined in this Separation Agreement and
(4) all references to "Parent" contained in Article IV of the Merger Agreement
shall be deemed to refer to Onyx.
Section 3.3 Representations and Warranties of SV. Except as set forth
on the corresponding sections of the disclosure letter delivered by SV to the
Company and Onyx on or prior to the execution of this Separation Agreement (the
"SV Disclosure Letter"), SV hereby, jointly and severally with each of their
respective Designated Affiliates, represents and warrants to the Company and
Onyx that:
(a) Organization. Each of SV and its Designated Affiliates is
duly organized, validly existing and in good standing under the laws of its
respective jurisdiction of organization, and has the requisite corporate or
similar power and authority to own its properties and to carry on its business
as presently conducted and is duly qualified to do business and is in good
standing (where such concept exists) as a foreign corporation in each
jurisdiction in which the nature of its business or the ownership or leasing of
its properties makes such qualification necessary. Complete and correct copies
of the certificate of incorporation and by-laws (or equivalent organizational
documents) of SV and its Designated Affiliates (if and to the extend actually
designated) as currently in effect, have been made available to each of the
Company and Onyx, and as so made available, are in full force and effect and no
other organizational documents are applicable to or binding upon SV.
28
(b) Authority; Enforceability. Each of SV and its Designated
Affiliates has the corporate or other power and authority to execute and deliver
this Separation Agreement and to perform its obligations hereunder and to
consummate the transactions contemplated hereby. The execution and delivery by
each of SV and its Designated Affiliates of this Separation Agreement and the
consummation by each of SV and its Designated Affiliates of the transactions
contemplated hereunder have been duly authorized by all necessary action on the
part of each of SV and its Designated Affiliates and no other corporate
proceedings on the part of each of SV and its Designated Affiliates are
necessary pursuant to its governing documents or the DGCL to authorize this
Separation Agreement or to consummate the transactions contemplated hereby. The
boards of directors of each of SV and its Designated Affiliates have determined
that it is in the best interests of SV to enter into this Separation Agreement,
and have approved this Separation Agreement. This Separation Agreement has been
duly executed and delivered by each of SV and its Designated Affiliates and,
assuming due authorization, execution and delivery by the other parties hereto,
constitutes a legal, valid and binding agreement of each of SV and its
Designated Affiliates, enforceable against each of 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 and general equitable principles (whether considered
in a proceeding in equity or at law).
(c) Non-Contravention. The execution, delivery and performance of
this Separation Agreement by each of SV and its Designated Affiliates does not
and will not (1) conflict with or violate its certificate of incorporation or
by-laws or comparable governing documents, (2) conflict with or violate the
governing documents of any other Subsidiary of SV, (3) assuming that all
consents, approvals and authorizations contemplated by Section 3.3(d) have been
obtained and all filings described therein have been made, conflict with or
violate any Law applicable to each of SV and its Designated Affiliates or any of
their Subsidiaries or by which it or any of its properties are bound or (4)
result in any breach or violation of or constitute a default (or an event which
with notice or lapse of time or both would become a default) or result in the
loss of a benefit under, or give rise to any right of termination, cancellation,
recapture, amendment or acceleration of, or performance under, any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit or other
instrument or obligation to which SV and its Designated Affiliates or any of
their Subsidiaries is a party or by which SV and its Designated Affiliates or
any of their Subsidiaries or its or any of their properties are bound, except,
in the case of clauses (2), (3), and (4) of this Section 3.3(c) for any such
conflict, violation, breach, default, loss, right or other occurrence which
would not (i) prevent or materially delay SV or its Designated Affiliates from
performing its obligations under this Separation Agreement in any material
respect or (ii) reasonably be expected to have, individually or in the
aggregate, a Parent Material Adverse Effect.
(d) Governmental Consents. The execution, delivery and
performance of this Separation Agreement by each of SV and its Designated
Affiliates and the consummation by each of SV and its Designated Affiliates of
the Transactions do not and will not require any consent, approval,
authorization or permit of, action by, filing with or notification to, any
Governmental Authority, except as required under or pursuant to (1) the HSR Act,
(2) the Exchange Act, (3) state securities, takeover and "blue sky" Laws, (4)
the rules and regulations of the NYSE and the PCX, (4) the DGCL, (5) the
applicable requirements of antitrust or other competition Laws of other
jurisdictions or investment Laws relating to foreign ownership, and
29
(6) any other consent, approval, authorization, permit, action, filing or
notification the failure of which to be made or obtained would not reasonably be
expected to have, individually or in the aggregate, a Parent Material Adverse
Effect.
(e) Solvency. Assuming satisfaction of the conditions to this
Separation Agreement and the Merger Agreement (other than the consummation of
the transactions contemplated hereby), and after giving effect to the
transactions contemplated hereby and thereby, the Reorganization, the assumption
or retention (as applicable) of the Retained Liabilities by the Company, Onyx
and its Designated Affiliates, the assumption or retention (as applicable) of
the New Diamond Liabilities by New Diamond and its Designated Affiliates,
payment of all amounts required to be paid in connection with the consummation
of the transactions contemplated hereby and thereby, and payment of all related
fees and expenses, each of SV, New Diamond and its Designated Affiliates will be
Solvent as of the Effective Time and immediately after the consummation of the
transactions contemplated hereby and thereby.
(f) Brokers. No agent, broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Separation Agreement based upon
arrangements made by or on behalf of SV for which the Company or Onyx could have
any liability.
ARTICLE IV
TAX MATTERS
Section 4.1 Liability for Taxes. (a) New Diamond and SV shall (and New
Diamond shall cause the New Diamond Entities to) be responsible for, pay or
cause to be paid, and shall (and New Diamond shall cause the New Diamond
Entities to) indemnify Onyx, its Designated Affiliates and each of its
Subsidiaries and Affiliates (including the Retained Entities after the Closing
Date) (each a "Buyer Tax Indemnitee") and hold each Buyer Tax Indemnitee
harmless from and against any and all of the following (including reasonable
fees and expenses in connection therewith):
(1) any and all Taxes of New Diamond and each New Diamond Entity
((i) other than any Non-Income Taxes attributable to the Retained
Business or the Retained Assets and (ii) limited, in the case of
Shared Non-Income Taxes, to the New Diamond Percentage of such
Non-Income Taxes);
(2) the New Diamond Percentage of any Shared Non-Income Taxes
imposed on any Retained Entity;
(3) any and all United States federal Income Taxes for any
taxable period (or portion thereof) that ends on or prior to the
Closing Date (such a period, a "Pre-Closing Period") of the Affiliated
Group;
(4) any and all state, local and foreign Income Taxes for all
Pre-Closing Periods of each Retained Entity;
30
(5) any and all liability for Taxes of the Affiliated Group
imposed on the Retained Entities as a result of the application of
Treasury Regulation Section 1.1502-6 (or any similar provision of
state, local or foreign law);
(6) any and all Non-Income Taxes for Pre-Closing Periods of,
imposed upon, or relating or attributable to the New Diamond Business,
the New Diamond Assets or the Standalone Drug Business (regardless of
whether such Taxes are imposed on any New Diamond Entity or any
Retained Entity); and
(7) any and all Taxes for any taxable period (or portion thereof)
that begins after the Closing Date (such a period, a "Post-Closing
Period") of, imposed upon or relating or attributable to the New
Diamond Entities, the New Diamond Business or the New Diamond Assets.
If, for any state, local or foreign Income Tax purposes, any Taxable
period of any Retained Entity includes but does not end on the Closing Date (any
such period, a "Straddle Period"), Income Taxes, if any, attributable to such
Straddle Period shall be allocated to (A) New Diamond and SV for the portion of
such Straddle Period up to and including the Closing Date, and (B) Onyx for the
portion of such Straddle Period subsequent to the Closing Date. For purposes of
the preceding sentence, Income Taxes for the portion of each Straddle Period up
to and including the Closing Date and for the portion of such Straddle Period
subsequent to the Closing Date shall be determined on the basis of an interim
closing of the books as of the close of business on the Closing Date as if such
Straddle Period consisted of one Taxable period ending on the Closing Date
followed by a Taxable period beginning on the day following the Closing Date,
and exemptions, allowances or deductions that are calculated on an annual basis,
such as the deduction for depreciation, shall be apportioned on a daily basis.
New Diamond and SV shall be entitled to any refund of (or credit of or
against) Taxes to the extent that such refund (or credit) relates to a Tax that
is the responsibility of New Diamond or SV under this Section 4.1(a) and shall
be entitled to any refund or credit to which New Diamond or SV is entitled under
Section 4.6. For the avoidance of doubt, New Diamond and SV shall be entitled to
any deposits of Income Taxes with the Internal Revenue Service made by New
Diamond, SV, any New Diamond Entity or, prior to the Closing, the Company or any
Retained Entity.
(b) Each of Onyx and the Company shall (and shall cause each of
the Retained Entities to), be responsible for, pay or cause to be paid, and
shall (and shall cause each of the Retained Entities to) indemnify New Diamond
and its Subsidiaries and Affiliates (other than the Retained Entities) (each a
"Seller Tax Indemnitee") and hold each Seller Tax Indemnitee harmless from and
against any and all of the following (including reasonable fees and expenses in
connection therewith):
(1) any and all Non-Income Taxes of each Retained Entity
((i) other than any Non-Income Taxes attributable to the New Diamond
Business, the New Diamond Assets or the Standalone Drug Business and (ii)
limited, in the case of Shared Non-Income Taxes, to the Company Percentage
of such Non-Income Taxes);
31
(2) the Company Percentage of any Shared Non-Income Taxes
imposed on New Diamond or a New Diamond Entity;
(3) any and all Non-Income Taxes for Pre-Closing Periods of,
imposed upon, or relating or attributable to the Retained Business or the
Retained Assets (regardless of whether such Non-Income Taxes are imposed on
any Retained Entity or New Diamond or any New Diamond Entity);
(4) any and all Taxes for any Post-Closing Period of,
imposed upon, or relating or attributable to the Retained Entities, the
Retained Business or the Retained Assets and any and all Taxes of Onyx (or
any Affiliate of Onyx that purchases a Retained Entity or Retained Asset
pursuant hereto); and
(5) notwithstanding Section 4.1(a), any Taxes resulting from
any extraordinary transaction taken by or with respect to the Retained
Entities, the Retained Business or the Retained Assets on the Closing Date
but after the Retained Business Purchase and any and all Taxes resulting
from any Onyx Real Estate Dropdowns (or of any wholly-owned subsidiary
referred to in the definition thereof), the Financing or any Future Debt
Financing (and New Diamond and SV shall not be responsible for such Taxes
described in this clause (5)).
Each of Onyx, its Designated Affiliates and the Company shall be
entitled to any refund of (or credit of or against) Taxes to the extent that
such refund (or credit) relates to a Tax that is the responsibility of Onyx, its
Designated Affiliates, any Retained Entity or the Company under this Section
4.1(b), except for refunds (or credits) to which New Diamond may be entitled
under Section 4.1(a).
(c) The parties acknowledge and agree that they desire and intend
to treat (x) the Retained Business Purchase (other than the purchase of Lucky
Stores, Inc., a Delaware corporation ("Lucky Delaware"), and its Subsidiaries)
as a purchase of assets for federal income Tax purposes, (y) the purchase of
Lucky Delaware as a purchase of stock for federal income Tax purposes and (z)
the Separation as a transaction that does not result in any gain, including any
deferred intercompany gain, for federal income Tax purposes (other than with
respect to the distribution of certain New Diamond Assets from Lucky Delaware
and its Subsidiaries pursuant to this Separation Agreement). In furtherance of
the parties' desire and intention, at the option of SV: New Diamond and Onyx
shall (i) jointly make timely and irrevocable elections under Section 338(h)(10)
of the Code (and any corresponding elections under state or local tax law) (the
"338(h)(10) Elections") with respect to any Retained Entities designated by New
Diamond (such entities, the "338(h)(10) Election Subsidiaries") (provided that
this clause (i) shall not be available with respect to any Retained Entity
designated by Onyx in writing no later than 60 days after the execution of this
Separation Agreement as a Retained Entity to be purchased by an entity that is
not a corporation for federal income Tax purposes), (ii) jointly cause any
Retained Entities designated by New Diamond (such entities, the "Disregarded
Entities") to be treated as "disregarded" entities within the meaning of
Treasury Regulation Section 301.7701-3, including by way of conversion of such
Retained Entities into Delaware limited liability companies on or prior to the
Closing Date (such treatment, the "Disregarded Entity Treatment"), and (iii)
take such other actions as may be necessary or appropriate to further
32
such desire and intention while transferring directly or indirectly the Retained
Entities to Onyx and/or its Designated Affiliates. New Diamond and Onyx shall,
and shall cause their respective Subsidiaries and Affiliates to, (i) treat the
338(h)(10) Elections and Disregarded Entity Treatment as valid, (ii) file all
Tax Returns in a manner consistent with such 338(h)(10) Elections and
Disregarded Entity Treatment and (iii) take no position or action contrary
thereto, except to the extent required to do otherwise pursuant to a
Determination. New Diamond and Onyx shall jointly prepare or cause to be
prepared, in a manner consistent with the Retained Business Allocation, any form
or document required to effect a valid and timely 338(h)(10) Election or
Disregarded Entity Treatment. New Diamond and Onyx and any of their respective
Subsidiaries and Affiliates shall take any and all actions reasonably necessary
to effectuate the 338(h)(10) Elections and Disregarded Entity Treatment. Except
as may be required by a Determination, consistent with the provisions above in
this Section 4.1(c), New Diamond, Onyx and their respective Subsidiaries and
Affiliates shall file, or cause to be filed, all Tax Returns in a manner
consistent with the 338(h)(10) Elections and Disregarded Entity Treatment and
shall treat the Retained Business Purchase (other than the purchase of Lucky
Delaware and its Subsidiaries) as a purchase of assets for federal income Tax
purposes, the purchase of Lucky Delaware as a purchase of stock for federal
income Tax purposes and the Separation as a transaction that does not result in
any gain, including any deferred intercompany gain, for federal income Tax
purposes (other than with respect to the distribution of certain New Diamond
Assets from Lucky Delaware and its Subsidiaries pursuant to this Separation
Agreement) (and take no position or action contrary thereto). The parties agree
that no election other than the 338(h)(10) Elections with respect to the
338(h)(10) Subsidiaries shall be made under Section 338 of the Code with respect
to the purchase of any of the Retained Entities pursuant to this Agreement.
Section 4.2 Filing Responsibility. (a) New Diamond shall prepare and
file, or cause to be prepared and filed, when due: (1) all United States
consolidated federal Income Tax Returns for the Affiliated Group or the
affiliated group of which SV is the common parent, (2) any Tax Return (whether
filed on a consolidated, combined, unitary, separate or other basis) of, or
which includes, New Diamond or any other New Diamond Entity, and (3) any Income
Tax Return of any Retained Entity for any Pre-Closing Period or a Straddle
Period.
(b) Onyx, its Designated Affiliates or the Company shall, except
to the extent that filing such Tax Returns are the responsibility of New Diamond
under Section 4.2(a), prepare and file, or cause to be prepared and filed, all
Tax Returns with respect to each Retained Entity.
(c) The parties agree to prepare and file, or cause to be
prepared and filed, all Pre-Closing Period Tax Returns of the Company and its
Subsidiaries in a manner consistent with past practices of the Company and its
Subsidiaries, except as otherwise required by Law or a Determination.
(d) In the case of any Straddle Period Income Tax Return of a
Retained Entity or Non-Income Tax Return of a New Diamond Entity or a Retained
Entity, in each case, on which are reportable Taxes for which both SV and New
Diamond, on the one hand, and Onyx and the Company, on the other hand, are
responsible under Section 4.1 (or any Non-Income Tax Return of a Retained Entity
on which are reportable only Taxes that are the responsibility of New Diamond
and SV under Section 4.1(a) or any Non-Income Tax Return of a
33
New Diamond Entity on which are reportable only Taxes that are the
responsibility of Onyx and the Company under Section 4.1(b)), the party that is
responsible for preparing such Tax Return under this Section 4.2 (the "Return
Preparer") shall furnish such Tax Return required to be filed by the Return
Preparer (together with making available any associated workpapers prepared in
connection with such Tax Return) to the other party (the "Affected Party") for
its review and approval (which approval shall not be unreasonably delayed or
withheld) at least 30 days prior to the due date for filing such Tax Return
(taking into account valid extensions) and (y) the Affected Party shall provide
any good faith comments it may have on such Return to the Return Preparer within
15 days of the Affected Party's receipt of such draft Tax Return from the Return
Preparer (such comments to be limited to confirming that the Tax Return is
consistent with past practice as set forth in Section 4.2(c) and with the Tax
treatments specified in this Separation Agreement); provided, however, that in
the event that such Tax Return is required to be filed (taking into account
valid extensions) within four (4) months after the Closing Date, then such time
periods shall be reasonably reduced and the parties shall act expeditiously so
that such Tax Return may be filed on a timely basis; provided, further, however,
that to the extent that the Return Preparer does not agree with the Affected
Party's comments, the Return Preparer and the Affected Party shall endeavor in
good faith to resolve such disagreement. In the event that the Return Preparer
and the Affected Party are unable to resolve such disagreement, and to the
extent that the Affected Party objects that the Return Preparer has not prepared
the Tax Return in question in accordance with past practices as set forth in
Section 4.2(c) or consistent with the Tax treatments specified in this
Separation Agreement, the Accountant shall resolve such dispute in accordance
with past practices as set forth in Section 4.2(c) and consistent with the Tax
treatments specified in this Separation Agreement. In such case, the Return
Preparer and the Affected Party shall each bear one-half (50%) of the fees and
expenses attributable to the Accountant's resolution of such dispute. Any Tax
Return that is furnished to an Affected Party pursuant to this Section 4.2(d)
shall be accompanied by a statement setting forth the portion of the Tax due in
connection with filing such Tax Return that is allocable to the Affected Party
pursuant to Section 4.1, which statement will specify in reasonable detail the
calculation of the portion of such Tax so allocable. The Affected Party shall
pay to the Return Preparer the portion of such Tax so allocable no later than
one Business Day prior to the date such Tax Return is to be filed.
Section 4.3 Cooperation and Exchange of Information. (a) As soon as
practicable, from and after the Closing Date, SV, New Diamond and its
Subsidiaries, on the one hand, and Onyx, its Designated Affiliates, the Retained
Entities and their respective Subsidiaries, on the other hand, shall provide
each other with such cooperation and shall deliver to each other such
information and data and make available such knowledgeable employees as Onyx,
its Designated Affiliates, the Retained Entities and their respective
Subsidiaries, on the one hand, and New Diamond and its Subsidiaries, on the
other hand, may reasonably request in order to complete and file all Tax Returns
which they may be required to file or to respond to audits by any Tax
Authorities, and to otherwise enable them or their Affiliates to satisfy their
respective accounting, Tax and other legitimate requirements. Each of SV, New
Diamond, the New Diamond Entities, Onyx, its Designated Affiliates and the
Retained Entities shall make their employees and facilities available on a
mutually convenient basis to provide explanation of any documents or information
provided hereunder. Onyx shall, and shall cause its Designated Affiliates, the
Retained Entities and their respective Subsidiaries to, take all actions
reasonably necessary to facilitate New Diamond's and SV's exercise of their
rights under this Article IV in
34
respect of the Retained Entities, including preparing and filing Tax Returns,
and conducting Tax Proceedings. New Diamond shall, and shall cause the New
Diamond Entities to, take all actions reasonably necessary to facilitate Onyx's
and the Company's exercise of their rights under this Article IV in respect of
the New Diamond Entities, including conducting Tax Proceedings.
(b) For a period of ten (10) years after the Closing Date, New
Diamond, Onyx, its Designated Affiliates and the Retained Entities shall retain
all Tax Returns, books and records of, or with respect to, the Retained
Entities, the Retained Assets or the Retained Business for all taxable periods
ending on or prior to the Closing Date to the extent such items are in such
person's possession after the Closing. Thereafter, neither New Diamond, Onyx,
any of its Designated Affiliates nor any of the Retained Entities shall dispose
of any such Tax Returns, books or records unless it first offers such Tax
Returns, books and records to New Diamond or Onyx, as applicable and New Diamond
or Onyx, as applicable fails to accept such offer within 60 days of its being
made.
(c) SV, New Diamond, Onyx, its Designated Affiliates and the
Retained Entities shall, and shall cause their respective Subsidiaries to,
cooperate in the preparation of all Tax Returns relating in whole or in part to
taxable periods ending on or before the Closing Date that are required to be
filed after such date and all Tax Returns for Straddle Periods.
Section 4.4 Tax Proceedings. (a) Each of SV, New Diamond and its
Subsidiaries, on the one hand, and Onyx, its Designated Affiliates, the Retained
Entities and their respective Subsidiaries, on the other hand, shall provide
prompt notice to the other party of any claim, assessment or dispute of which it
becomes aware related to Taxes for which it is indemnified by the other party
under Section 4.1. Such notice shall attach copies of the pertinent portion of
any written communication from a Tax Authority and contain factual information
(to the extent known) describing any asserted Tax liability in reasonable detail
and shall be accompanied by copies of any notice and other documents received
from any Tax Authority in respect of any such matters.
(b) In the case of any Tax Proceeding, the Controlling Party
shall have the sole right to control, contest, resolve and defend the Tax
Proceeding (including having the right to determine whether and when to settle
the Tax Proceeding); provided, however, that, except in the case of Exclusive
Tax Proceedings, in the case of any Tax Proceeding relating to any Pre-Closing
Period or Straddle Period in which the outcome would reasonably be expected to
result in an increase in liability for Taxes with respect to which the
Non-Controlling Party or any Affiliate thereof is liable under this Separation
Agreement or with respect to which such Non-Controlling Party or Affiliate is
liable at law and with respect to which such Non-Controlling Party or Affiliate
is not entitled to indemnification under this Separation Agreement, (i) the
Controlling Party shall provide the Non-Controlling Party with a timely and
reasonably detailed account of each phase of such Tax Proceeding, (ii) the
Non-Controlling Party shall be entitled to receive copies of all correspondence
and documents related to such Tax Proceeding, (iii) the Controlling Party shall
consult with the Non-Controlling Party before taking any significant action in
connection with such Tax Proceeding, (iv) the Controlling Party shall consult
with the Non-Controlling Party and offer the Non-Controlling Party an
opportunity to comment before submitting any written materials prepared or
furnished in connection with such
35
Tax Proceeding, (v) the Controlling Party shall defend such Tax Proceeding
diligently and in good faith as if it were the only party in interest in
connection with such Tax Proceeding, (vi) except in the case of a Tax Proceeding
in respect of a Tax Return of a Retained Entity on which are reportable Taxes
for which only SV and New Diamond are responsible under Section 4.1, the
Non-Controlling Party shall be entitled to participate in (but not control) such
Tax Proceeding, at its own expense, and (vii) the Controlling Party shall not
settle such Tax Proceeding without the consent of the Non-Controlling Party
which shall not be unreasonably withheld.
For purposes of this Section 4.4(b):
(i) New Diamond shall be the "Controlling Party" with respect to any
Tax Proceeding in respect of (A) a Tax Return referred to in Section 4.4(c)
(and any adjustment to a state or local Income Tax Return required as a
result of the outcome of any Tax Proceeding with respect to such a Tax
Return), (B) (except in the case of a Non-Income Tax Return on which Taxes
for which Onyx is responsible under Section 4.1 are reportable) any Tax
Return of New Diamond or a New Diamond Entity (such Tax Proceedings
described in clauses (A) or (B), collectively, the "Exclusive Diamond
Proceedings") and there shall be no "Non-Controlling Party" in respect of
such a Tax Proceeding,
(ii) Onyx shall be the "Controlling Party" with respect to any Tax
Proceeding in respect of a Tax Return referred to in Section 4.4(d) (the
"Exclusive Onyx Proceedings," and, together with the Exclusive Diamond
Proceedings, the "Exclusive Tax Proceedings") and there shall be no
"Non-Controlling Party" in respect of such a Tax Proceeding,
(iii) except in the case of Exclusive Tax Proceedings, in the case of
any Tax Proceeding in respect of (A) any Income Tax Return of a Retained
Entity for a Straddle Period, (B) any Tax Return of a Retained Entity on
which are reportable only Taxes for which SV and New Diamond are
responsible under Section 4.1 or (C) a Non-Income Tax Return on which are
reportable Non-Income Taxes for which both SV and New Diamond, on the one
hand, and Onyx and the Company, on the other hand, are responsible under
this Separation Agreement, if Onyx and the Company are responsible under
this Separation Agreement for more than half the Taxes reported on the Tax
Return, then Onyx shall be the "Controlling Party" and New Diamond shall be
the "Non-Controlling Party"; otherwise New Diamond shall be the
"Controlling Party" and Onyx the "Non-Controlling Party" with respect to
such Tax Proceeding,
(c) Notwithstanding any other provision of this Separation Agreement,
neither Onyx, its Designated Affiliates, the Retained Entities nor any of their
respective Subsidiaries or Affiliates shall be entitled to participate in any
Tax Proceeding with respect to any Tax Return of the Affiliated Group or any
United States consolidated federal Income Tax Return which includes New Diamond
or SV or any other consolidated, combined or unitary Tax Return which includes
New Diamond, any New Diamond Entity or any member of the New Diamond Seller
Group, nor shall Onyx, its Designated Affiliates, the Retained Entities nor any
of their respective Subsidiaries or Affiliates be entitled to any information
(except to the extent relating solely to
36
any Retained Entity, the Retained Business, or any Retained Asset, which may
include pro forma information relating solely to the Retained Entities, the
Retained Business or a Retained Asset) regarding any such Tax Return (or any Tax
Returns of New Diamond).
(d) Notwithstanding any other provision of this Separation Agreement,
neither SV, New Diamond, any New Diamond Entity nor any of their respective
Subsidiaries or Affiliates shall be entitled to participate in any Tax
Proceeding with respect to any Tax Return of any Retained Entity for a
Post-Closing Period other than a Straddle Period (or any consolidated, combined
or unitary Tax Return for a Post-Closing Period, other than a Straddle Period,
which includes any Retained Entity), unless such Tax Return includes New Diamond
or a New Diamond Entity, nor shall SV, New Diamond, any New Diamond Entity nor
any of their respective Subsidiaries or Affiliates be entitled to any
information (except to the extent relating solely to any Retained Entity, the
Retained Business or any Retained Asset which may include pro forma information
relating solely to the Retained Entities, the Retained Business, or a Retained
Asset) regarding any such Tax Return.
Section 4.5 Tax Sharing Agreements. Anything in any other agreement to
the contrary notwithstanding, all liabilities and obligations between New
Diamond, any New Diamond Entity or any member of the New Diamond Seller Group,
on the one hand, and the Retained Entities, on the other hand, under any Tax
allocation or Tax sharing agreement in effect prior to the Closing Date (other
than this Separation Agreement) shall cease and terminate as of the Closing
Date.
Section 4.6 Tax Benefits. New Diamond and SV shall be entitled to any
Tax Benefit arising from any deduction that results from any payment, loss,
obligation, Tax or Liability arising from a Section 4.6 Liability. Neither Onyx,
its Designated Affiliates, the Company nor any of their respective Subsidiaries
shall claim any such deduction in respect of a Section 4.6 Liability on any Tax
Return that Onyx, its Designated Affiliates or the Company are responsible for
preparing under Section 4.2(b); provided, however, that if any deduction arising
in respect of a payment, loss, obligation, Tax or Liability arising from a
Section 4.6 Liability is not permitted by law or administrative practice to be
reported on a Tax Return for which New Diamond has filing responsibility under
Section 4.2(a) (or another Pre-Closing Period Tax Return) and is permitted by
law or administrative practice to be reported on a Tax Return for which Onyx,
its Designated Affiliates or the Company has filing responsibility under Section
4.2(b), then, at New Diamond's request, Onyx, its Designated Affiliates, the
Retained Entities or their respective Subsidiaries shall claim such deduction
and pay to New Diamond the amount of any Tax Benefit actually realized in cash
from such deduction (less any Tax Detriment that results from such deduction) no
later than thirty (30) days after the Tax Return in which such Tax Benefit is
realized or utilized is filed; provided, however, that New Diamond shall repay
such amount to the extent that subsequent events occur that result in the loss
or reduction of such Tax Benefit no later than thirty (30) days after Onyx
notifies New Diamond, in writing as provided below, of the loss or reduction of
such Tax Benefit. For purposes of this Section 4.6, such subsequent events
include, but are not limited to, audit adjustments, realization of any Tax
Detriment, and the recognition of a net operating loss that could have been
carried over to offset income in the absence of the deduction that results from
the payment, loss, obligation, Tax or Liability arising from a Section 4.6
Liability. For purposes of this Section 4.6, an increase (or reduction) in Taxes
as a result of any Tax Benefit or Tax Detriment shall be deemed to be
37
realized by a party to the extent the Tax liability of such party exceeds (or is
less than) the Tax liability such party would have incurred without taking into
account any Tax Item relating to such Tax Benefit or Tax Detriment. Any payment
in respect of a net Tax Benefit or notice of a loss or reduction of such Tax
Benefit shall be accompanied by a schedule prepared by Onyx in good faith
setting forth in reasonable detail the amount of such Tax Benefit or such loss
or reduction of Tax Benefit and the calculation of that amount. Nothing in this
Section 4.6 shall require Onyx or any Retained Entity to disclose to any person
any Tax Return filed by it or any material information Onyx or such Retained
Entity otherwise deems confidential.
Section 4.7 Transfer Taxes. Notwithstanding anything to the contrary
in this Separation Agreement, other than with respect to the Standalone Drug
Sale, New Diamond and Onyx agree that New Diamond shall bear 50% of all
documentary, sales, use, registration, value added, transfer, recordation stamp
and similar Taxes (collectively, "Transfer Taxes") imposed on the Reorganization
or the transactions set forth in Section 2.1(a), and Onyx shall bear 50% of any
such Transfer Taxes. New Diamond and Onyx, and their respective Subsidiaries and
Affiliates, agree to timely sign and deliver any affidavits, certificates or
forms as may be necessary or appropriate to establish an exemption from (or
otherwise reduce), or file Tax Returns or any other documents with respect to,
such Transfer Taxes. Any party shall have the right to seek a refund of any and
all Transfer Taxes paid by it for which it is responsible pursuant to this
Section 4.7 at its own expense. If so requested, the other party shall use
reasonable efforts to cooperate with the party seeking such refund.
Section 4.8 Taxes Governed by Article IV. Claims for indemnification
with respect to Taxes shall be governed by this Article IV and Section 5.8 but
not by any other provision of Article V or Article VI. For the absence of doubt,
any obligations to make indemnification payments with respect to Taxes imposed
under Section 4999 of the Code shall be governed by the provisions of Article
VIII addressing allocation of Liabilities under Company Plans.
Section 4.9 Survival. All rights and obligations under this Article IV
shall survive the Closing Date and continue until 60 days after the expiration
of all applicable statutes of limitation (including all periods of extension,
whether automatic or permissive).
Section 4.10 Post-Closing Dispositions. For the avoidance of doubt,
the covenants of Onyx, its Designated Affiliates and the Retained Entities set
forth in this Article IV shall apply to Onyx, its Designated Affiliates and the
Retained Entities regardless of any post-Closing disposition of the Retained
Entities by Onyx, its Designated Affiliates or any of their respective
Subsidiaries or Affiliates.
Section 4.11 Reorganization Treatment. The parties agree (a) to treat
the acquisition by New Diamond of all of the issued and outstanding Equity
Interests of the Company for stock of New Diamond and the subsequent conversion
of the Company into a Delaware limited liability company, taken together, as a
mere change in identity or form of the Company qualifying as a reorganization
under Section 368(a)(1)(F) of the Code and (b) to treat the Company as a
"disregarded" entity within the meaning of Treasury Regulation Section
301.7701-3 for the period from and after the time of the conversion of the
Company into a Delaware limited liability company and for so long as the Company
is wholly owned by New
38
Diamond, in each case, for all Tax purposes, unless required to do otherwise as
a result of a Determination. The parties agree not to take any position on any
Tax Return or in any Tax Proceeding inconsistent with such treatment described
in the immediately preceding sentence.
Section 4.12 [Intentionally Omitted]
Section 4.13 Tax Treatment of Payments. The parties agree to treat any
indemnity payments pursuant to this Article IV, for Tax purposes, as an
adjustment to the Retained Business Price or as payments that are deductible by
the payor, as appropriate, unless otherwise required by applicable Tax Law.
ARTICLE V
INDEMNIFICATION
Section 5.1 SV's and New Diamond's Agreement to Indemnify. In addition
to any other indemnification provided hereunder, subject to the terms and
conditions set forth in this Separation Agreement, from and after the Closing
Date, each of SV and New Diamond shall, and New Diamond shall cause each of the
New Diamond Entities to, indemnify, defend and hold harmless Onyx, the Company,
the other Retained Entities and each of their respective directors, officers,
partners, members, employees and other representatives, advisors and agents
(collectively, "Representatives"), Subsidiaries and Affiliates (collectively,
the "Company Indemnitees") from and against any and all Indemnifiable Losses of
the Company Indemnitees arising out of or resulting from, directly or
indirectly, the New Diamond Liabilities and the matters contemplated as being
Indemnifiable Losses by Section 2.6 of this Separation Agreement.
Section 5.2 Onyx's and the Company's Agreement to Indemnify. In
addition to any other indemnification provided hereunder, subject to the terms
and conditions set forth in this Separation Agreement, from and after the
Closing Date, each of Onyx and the Company shall, and shall cause each of the
Retained Entities to, indemnify, defend and hold harmless SV, New Diamond and
the New Diamond Entities, and each of their respective Representatives,
Subsidiaries and Affiliates (collectively, the "New Diamond Indemnitees") from
and against any and all Indemnifiable Losses of the New Diamond Indemnitees
arising out of or resulting from, directly or indirectly, the Retained
Liabilities and the matters contemplated as being Indemnifiable Losses by
Section 2.6 of this Separation Agreement.
Section 5.3 Reduction of Indemnifiable Losses for Insurance Benefits
Received. For purposes of this Article V, Section 8.2 and Section 8.7, the
calculation of any Indemnifiable Loss will reflect the amount of any insurance
proceeds or indemnification payments received by the Indemnitee in respect of
such Indemnifiable Loss (net of all reasonable costs and expenses incurred by
the Indemnitee in recovering such insurance proceeds). Each Indemnitee shall use
its commercially reasonable efforts to recover from its insurers or other
sources of reimbursement or recovery the maximum portion of any Indemnifiable
Loss that is recoverable from such sources.
39
Section 5.4 Procedure for Indemnification. (a) If an Indemnitee shall
receive notice of the assertion by a person who is not a party to this
Separation Agreement of any claim or of the commencement by any such person of
any Action (a "Third Party Claim") with respect to which an Indemnifying Party
may be obligated to provide indemnification under Section 5.1 or Section 5.2,
such Indemnitee shall give such Indemnifying Party prompt notice thereof after
becoming aware of such Third Party Claim; provided, that the failure of any
Indemnitee to give notice as provided in this Section 5.4 shall not relieve the
related Indemnifying Party of its obligations under this Article V, except to
the extent that such Indemnifying Party is actually and materially prejudiced by
such failure to give notice. Such notice shall describe the Third Party Claim in
reasonable detail, and, if practicable, shall indicate the estimated amount of
the Indemnifiable Loss that has been or may be sustained or asserted by such
Indemnitee.
(b) If an Indemnitee gives notice of a Third Party Claim to an
Indemnifying Party, the Indemnifying Party shall have 30 days after receipt of
notice to elect, at its option, to take responsibility for resolving, and assume
and control the defense of, at its own expense and by its own counsel, any such
Third Party Claim and shall be entitled to assert any and all defenses available
to the Indemnitee to the fullest extent permitted by Law. If the Indemnifying
Party shall undertake to defend and resolve any such Third Party Claim, it shall
promptly notify the Indemnitee of its intention to do so, and the Indemnitee
agrees to cooperate as reasonably requested by the Indemnifying Party and its
counsel in the resolution of, or defense against, any such Third Party Claim;
provided, however, that the Indemnifying Party shall not admit any liability
with respect to such Third Party Claim without the prior written consent of the
Indemnitee, and shall not resolve, settle, compromise or discharge any such
Third Party Claim without the prior written consent of the Indemnitee (which
consent will not be unreasonably withheld or delayed) unless the relief consists
solely of the payment of money and includes a provision whereby the plaintiff or
claimant in the matter releases the Indemnitees from all liability with respect
thereto. Notwithstanding the foregoing, the Indemnitee shall have the right to
defend (but not admit liability, compromise, settle or otherwise resolve such
Third Party Claim without the prior written consent of the Indemnifying Party)
any Third Party Claim as to itself by its own separate counsel, and the
Indemnifying Party shall pay the reasonable fees, costs and expenses of such
separate counsel, as incurred, if the Indemnitee shall have determined in good
faith that an actual or potential conflict of interest makes representation by
the same counsel or the counsel selected by the Indemnifying Party
inappropriate. Further, the Indemnitee shall have the right to employ separate
counsel and to participate in the defense of any Third Party Claim (though such
separate counsel shall not appear of record), at the expense of the Indemnitee
(unless the Indemnifying Party agrees to pay the fees and expenses of such
separate counsel). In any event, the Indemnitee and Indemnifying Party and their
counsel shall cooperate in the defense of any Third Party Claim and keep such
persons informed of all developments relating to any such Third Party Claim, and
provide copies of all relevant correspondence and documentation relating thereto
consistent with applicable rules of privilege and legal ethics. All costs and
expenses incurred in connection with the Indemnitee's cooperation shall be paid
by the Indemnifying Party, as incurred. If the Indemnifying Party receiving a
notice of Third Party Claim does not elect timely to take responsibility for
resolving, and defend, such Third Party Claim or does not defend such Third
Party Claim in good faith, the Indemnitee shall have the right, in addition to
any other right or remedy it may have hereunder, at the Indemnifying Party's
expense, to defend such Third Party Claim; provided, however, that (1) the
Indemnitee shall not have any obligation to participate in the defense of, or
defend, any such Third Party Claim; (2)
40
the Indemnitee's defense of or participation in the defense of any such claim
shall not in any way diminish or lessen the obligations of the Indemnifying
Party under this Article V; and (3) the Indemnitee shall not resolve, settle,
compromise or discharge any such Third Party Claim without the prior written
consent of the Indemnifying Party.
Section 5.5 Pending Litigation; New Litigation. Following the Closing
Date, (a) Onyx and/or one or more if its Designated Affiliates shall have
exclusive authority and control over the investigation, prosecution, defense and
appeal of (1) all Actions brought against the Company or its Subsidiaries listed
on Schedule 1.12 of this Separation Agreement and all pending Actions brought
against the Company or its Subsidiaries exclusively relating to the Retained
Business and (2) all Actions brought against the Company or its Subsidiaries
brought after the date hereof that primarily relate to the Retained Business
(the Actions described in the foregoing clauses (1) and (2) each, a "Retained
Action"), and may settle or compromise, or consent to the entry of any Judgment
with respect to, any such Action without the consent of any other party,
provided, that in the event that such Retained Action involves the potential
indemnification of an Indemnified Director or Officer, Onyx or one or more of
its Designated Affiliates, as applicable, shall not settle, compromise or
consent to the entry of any judgment in any actual or threatened claim, demand,
action, suit, proceeding, inquiry or investigation in connection with a Retained
Action in respect of which indemnification has been or could be sought by such
Indemnified Director or Officer under the Transaction Agreements unless such
settlement, compromise or judgment includes an unconditional release of such
Indemnified Director or Officer from all liability arising out of such claim,
demand, action, suit, proceeding, inquiry or investigation or such Indemnified
Director or Officer otherwise consents thereto, and (b) New Diamond and/or one
or more of its Designated Affiliates shall have exclusive authority and control
over the investigation, prosecution, defense and appeal of (1) all pending
Actions brought against the Company or its Subsidiaries listed on Schedule 1.13
of this Separation Agreement, (2) all of the Actions brought against the Company
or its Subsidiaries as of the date hereof that are not Retained Actions (the
Actions described in the foregoing clauses (1) and (2) each, a "New Diamond
Action") (3) all Shared Transaction Litigation Liabilities, (4) all Unallocated
Actions (as defined below) and (5) all Actions that constitute Specified
Standalone Drug Liabilities, and may settle or compromise, or consent to the
entry of any Judgment with respect to, any such Action without the consent of
any other party; provided, that, notwithstanding anything to the contrary,
neither Onyx nor New Diamond (nor any of their respective Subsidiaries or
Affiliates) may settle or compromise, or consent to the entry of any Judgment
with respect to, any Retained Action, New Diamond Action, Unallocated Action,
Shared Transaction Litigation Liability or any Action that constitutes a
Specified Standalone Drug Liability, without the prior written consent of the
other party if such settlement, compromise or consent to such Judgment (i)
includes any form of relief binding upon such other party or its Affiliates or
their respective businesses or assets, (ii) does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such other party (and
any Affiliate of such other party subject to such Action) of a full and final
release from all Liability in respect of such claim or litigation or (iii) in
the case of a Shared Transaction Litigation Liability, requires any cash payment
for damages or otherwise by any party to this Separation Agreement other than
the settling party. If, after the date hereof, any Action other than those
Retained Actions, New Diamond Actions and Shared Transaction Litigation
Liabilities as described above shall be brought against the Company or any of
its Subsidiaries, such Action
41
shall be deemed to be "Unallocated Actions" for purposes of this Separation
Agreement unless such Action shall constitute a Specified Standalone Drug
Liability.
Section 5.6 Remedies Exclusive. From and after the Closing and except
as otherwise specifically provided herein (including Articles IV and VIII), the
rights to indemnification provided in this Article V shall be the exclusive
monetary remedy for any New Diamond Liabilities or Retained Liabilities;
provided that nothing herein shall preclude assertion by any Indemnitee of any
other rights or the seeking of any and all other remedies against any
Indemnifying Party in the event of fraud or in the event of an Indemnifying
Party's failure to comply with its indemnification obligations hereunder.
Section 5.7 Retained Business Price Adjustment. The parties agree to
treat any indemnity payments pursuant to this Separation Agreement for Tax
purposes, as an adjustment to the Retained Business Price, as applicable, or as
payments that are deductible by the payor, as appropriate, unless otherwise
required by applicable Tax Law.
Section 5.8 Exclusion of Tax Indemnities. Notwithstanding anything to
the contrary in this Article V or in Article VI, the provisions of Article V and
Article VI shall not apply to Tax indemnification matters and indemnification
shall not be provided under Article V or Article VI for Taxes, all such matters
and any such indemnification being governed by Article IV.
ARTICLE VI
CERTAIN ADDITIONAL MATTERS
Section 6.1 Further Assurances; Subsequent Transfers. (a) Each of the
parties hereto will execute and deliver such further instruments of transfer,
distribution and assumption and will take such other actions as the other
parties hereto may reasonably request in order to effectuate the purposes of
this Separation Agreement and to carry out the terms hereof. Without limiting
the generality of the foregoing, at any time and from time to time after
Closing, at the request of any party the other party will execute and deliver
such other instruments of transfer and distribution, and take such action as the
requesting party may reasonably deem necessary or desirable in order to more
effectively transfer, convey and assign to such requesting party (or any of its
Subsidiaries and/or Designated Affiliates) and to confirm such requesting
party's (or any of its Subsidiaries and/or Designated Affiliates, as the case
may be) right, title to or interest in, all of the New Diamond Assets or Equity
Interests in the New Diamond Entities, the Retained Assets or Equity Interests
in the Retained Entities, as applicable, to put the requesting party (or any of
its Subsidiaries and/or Designated Affiliates, as the case may be) in actual
possession and operating control thereof and to permit the requesting party (or
any of its Subsidiaries and/or Designated Affiliates, as the case may be) to
exercise all rights with respect thereto (including rights under contracts and
other arrangements as to which the consent of any third party to the transfer
thereof shall not have previously been obtained) and to properly assume and
discharge the related New Diamond Liabilities, or the Retained Liabilities, as
applicable.
(b) In furtherance of the foregoing, in the event and to the
extent that a transferring party is unable to obtain any consents required to
transfer and assign to the other
42
party (or such other party's Designated Affiliate), and a release of a
transferor from, any agreements, licenses and other rights included in the New
Diamond Assets or Retained Assets, as applicable, such transferor (1) shall
continue to be bound thereby pending assignment to the other party or its
Designated Affiliate and (2) shall, at the direction and expense of the other
party, pay, perform and discharge fully all of its obligations thereunder from
and after the Closing and prior to assignment to the other party or its
Designated Affiliate, and the other party will indemnify the transferor for any
Liabilities of the transferor arising out of such Assets or its compliance with
the documentation and agreement relating to, any reasonable out-of-pocket
expenses associated with any attempt to transfer or failure to transfer such
Asset or any Liabilities arising out of or resulting from the transferor's
actions taken in accordance with any such directions of the other party or its
Designated Affiliate. The transferor shall, without further consideration
therefor, pay, assign and remit to the other party or its Designated Affiliate
promptly all monies, rights and other consideration received in respect of such
agreements. Following the Closing, the transferor shall exercise or exploit its
rights and options under all such agreements, leases, licenses and other rights
and commitments referred to in this Section 6.1(b) when and only as reasonably
directed by, and at the expense of, the other party or its Designated Affiliate.
If and when any such consent shall be obtained or such agreement, lease, license
or other right shall otherwise become assignable, the transferor shall promptly
assign all its rights and obligations thereunder to the other party or its
Designated Affiliate without payment of further consideration and the other
party or its Designated Affiliate shall, without the payment of any further
consideration therefor, assume such rights and obligations. Notwithstanding the
foregoing, if the arrangement described in this Section 6.1(b) is impracticable
or will cause (or is likely to cause) a default under any real estate lease
(whether due to the intended change of the store brand under which such property
will be operated or for other reasons), then the parties will work in good faith
to establish a mutually satisfactory arrangement for the operation of such
leased real property during the period subsequent to the Closing and pending
receipt of the required consent, including a fair and equitable arrangement
(under the applicable circumstances) for allocating income and expenses with
respect to such property during such period.
(c) In the event that, subsequent to the Closing Date, the
Company or Onyx shall either (1) receive written notice from New Diamond that
certain specified Assets of the Company or any Subsidiary of the Company which
properly constitute New Diamond Assets were not transferred to New Diamond on or
prior to the Closing Date or (2) determine that certain Assets of the Company or
any Subsidiary of the Company which properly constitute New Diamond Assets were
not transferred to New Diamond on or prior to the Closing Date, then (assuming
the accuracy of such notice or demand) as promptly as practicable thereafter,
the Company or Onyx, as appropriate, shall take all steps reasonably necessary
to transfer and deliver any and all of such Assets to New Diamond without the
payment by New Diamond of any further consideration therefor. In the event that,
subsequent to the Closing Date, New Diamond shall either (i) receive written
notice from the Company or Onyx that certain specified Assets which properly
constitute Retained Assets were transferred to New Diamond or included with the
New Diamond Entities or (ii) determine that certain Assets of New Diamond which
properly constitute Retained Assets were transferred to New Diamond or included
with the New Diamond Entities, then (assuming the accuracy of such notice or
demand) as promptly as practicable thereafter, New Diamond shall, and shall
cause its Subsidiaries to, take all steps reasonably necessary to transfer and
deliver any and all of such Assets to the Company or its
43
Subsidiaries in each case without the payment by Onyx, the Company of any
further consideration therefor.
(d) Without limiting the provisions of this Section 6.1 or any
other provision of this Separation Agreement, each of the parties for itself and
its respective Subsidiaries and Affiliates, as appropriate, agrees to execute,
acknowledge and deliver all documents and to take all actions reasonably
necessary to effectuate the following:
(1) Each Transferred Real Property shall be conveyed by
means of a warranty deed and/or assignment of lease with warranties, in
recordable form (as modified as appropriate in the particular jurisdiction
in which the real property is located (each a "Transfer Document"), and
(2) Each Transfer Document executed by a party transferring
or otherwise assigning Transferred Real Property that conveys Transferred
Real Property to any other party shall state on the face thereof the
following:
(i) In the case of any breach of any transferor (each,
a "Grantor") warranties herein contained, whether expressed or
implied, the liability of Grantor shall be limited to its interest in
the real property hereby conveyed and all amounts (collectively,
"Indemnified Amounts") which are recovered from the prior
non-affiliated transferors in the chain of title ("Prior Transferors")
or pursuant to any real property title policies existing prior to the
date of this instrument ("Pre-Existing Title Policy").
(ii) Grantor irrevocably assigns to each transferee
(each, a "Grantee") all of Grantor's right, title and interest in and
to all Indemnity Amounts including without limitation all claims,
actions, rights of recovery and indemnity, losses, damages, expenses
and fees (including reasonable attorneys' fees and court costs), at
law, in equity or by contract, which Grantor may now or hereafter have
against any and all Prior Transferors or under any Pre-Existing Title
Policy, and Grantor hereby irrevocably designates and appoints the
transferee its attorney in fact, coupled with an interest, with
respect to all Indemnity Amounts.
(iii) The warranties and covenants contained herein
shall be solely for the benefit of and enforceable by Grantee
hereunder and for no other party including heirs, successors and
assigns of Grantee and under no circumstances shall such warranties
and covenants be deemed to run with the real property conveyed by this
instrument.
(iv) Without limiting the foregoing provisions of this
Section 6.1(d), if any claim is made by Grantee against Grantor as the
result of any alleged breach of any covenants or warranties in any
Transfer Document, upon Grantee's written notice Grantor shall either
(A) make and diligently pursue all claims against the Prior
Transferors, and against any title insurance company under any
applicable Pre-Existing Title Policy, or (B) permit Grantee, in the
name of Grantor, to make any or all such claims, in all cases at the
sole cost and expense of Grantee, including counsel selected and
retained by Grantee as is
44
reasonably acceptable to Grantor. If Grantor shall be named by any
third-party in any proceeding in connection with any such claim,
Grantee (at Grantee's sole cost) shall with counsel reasonably
acceptable to Grantor defend and procure the dismissal of Grantor
(subject to the requirements of law in connection with pursuing the
claims against the Prior Transferors and the title insurance company,
as applicable).
Section 6.2 Use of Names; Cross-License. (a) Following the Closing
Date, the Company and the other Retained Entities shall have the sole and
exclusive ownership of and right to use, as between the Company and the other
Retained Entities, on the one hand, and New Diamond and its Subsidiaries, on the
other hand, each of the names that are (1) set forth in Schedule 1.14 of this
Separation Agreement or (2) used solely in connection with the Retained Business
(the "Retained Names"), and each of the trade marks, trade names, trade dress,
service marks, banners, logos and other proprietary rights related to such
Retained Names (the "Retained Proprietary Name Rights"). Following the Closing
Date, New Diamond and its Subsidiaries shall have the sole and exclusive
ownership of and right to use, as between New Diamond and its Subsidiaries, on
the one hand, and the Company and the other Retained Entities, on the other
hand, all names used by the Company and its Subsidiaries other than the Retained
Names (the "New Diamond Names"), and all other trade marks, trade names, trade
dress, service marks, banners, logos and other proprietary rights related to
such New Diamond Names (the "New Diamond Proprietary Name Rights"). In
connection with the Separation, the Company shall use its reasonable best
efforts to take, or cause to be taken, all actions and to do, or cause to be
done, all things necessary, proper or advisable to vest New Diamond and it
Subsidiaries with full and undivided ownership in the New Diamond Proprietary
Name Rights. Notwithstanding the foregoing, following the Closing, neither the
Company and the other Retained Entities, nor New Diamond and its Subsidiaries,
shall use any names that are confusingly similar to the Retained Names or the
New Diamond Names, as applicable, without the prior written consent of the other
party, provided that the parties agree that none of the names set forth on
Schedule 1.14, on the one hand, and the New Diamond Names, on the other hand,
shall be deemed to be "confusingly similar." As promptly as practicable
following the Closing Date but in no event later than one hundred eighty (180)
days following the Closing Date, the parties hereto shall, and shall cause their
respective Subsidiaries and other Affiliates to, take all action necessary to
cease using, and change (including by amending any charter documents), any
corporate or other names which are the same as or confusingly similar to any of
the New Diamond Names and the New Diamond Proprietary Name Rights or the
Retained Names and the Retained Proprietary Name Rights, as the case may be.
(b) Notwithstanding the foregoing, on the Closing Date, the
Company and New Diamond shall enter into a Cross-Licensing Agreement (the
"Cross-Licensing Agreement"), reasonably acceptable to both parties, which shall
provide for, among other things, the grant of a limited, royalty-free
cross-license to each of the Company and its Subsidiaries, on the one hand and
to each of New Diamond and its Subsidiaries, on the other hand, to use certain
Retained Proprietary Name Rights and New Diamond Proprietary Name Rights, in
each case, for so long as and to the extent that each of the Company and its
Subsidiaries, on the one hand, and New Diamond and its Subsidiaries, on the
other hand, own the Retained Assets or the New Diamond Assets, respectively. The
Cross-Licensing Agreement shall also provide for the grant of a limited,
royalty-free, license to the Company and its Subsidiaries of the Lucky New
45
Diamond Proprietary Name Rights set forth on Schedule 1.16 of this Separation
Agreement (collectively, the "Lucky Proprietary Name Rights") for use in
Northern California and Nevada for a period of three years from the Closing
Date. The exclusive right of the Company and its Subsidiaries to use the Lucky
Proprietary Name Rights in Northern California and Nevada shall continue and
shall become perpetual if the Company or its Subsidiaries (or their transferees)
use any of the Lucky Proprietary Name Rights in Northern California and Nevada
during such three-year period. If the Company or its Subsidiaries (or their
transferees) do not use any of the Lucky Proprietary Name Rights in Northern
California and Nevada during any portion of such three-year period, the license
to use the Lucky Proprietary Name Rights shall cease and all right, title and
interest in and to the Lucky Proprietary Name Rights shall revert to New Diamond
and its Subsidiaries. The Cross-Licensing Agreement shall further provide that,
except as provided above with respect to the Lucky Proprietary Name Rights if
such rights are used during the three-year period from the Closing Date, in the
event that Retained Assets or the New Diamond Assets, as the case may be, are
transferred or assigned to a third party, such third party shall obtain the
benefit of the license contained therein for up to one hundred eighty (180) days
following the transfer of such Assets to such third party; provided, however,
that if such third party is a national competitor of the New Diamond Business
the expiration of such license for such third party's benefit shall expire no
later than ninety (90) days following the transfer of such Assets to such third
party.
Section 6.3 Settlement of Intercompany Accounts. All intercompany
leases, receivables, payables, loans and other accounts (collectively,
"Intercompany Accounts") in existence immediately prior to the Separation
between the Company or the other Retained Entities, on the one hand, and New
Diamond or the New Diamond Entities, on the other hand, shall be contributed,
distributed or otherwise transferred or assumed at or prior to the Closing such
that, as of the Closing, there are no Intercompany Accounts outstanding between
New Diamond or any New Diamond Entity, on the one hand, and any Retained Entity,
on the other hand.
Section 6.4 Merger Agreement Provisions. (a) Each of the parties
hereto that is also a party to the Merger Agreement shall provide Onyx with as
much prior written notice as is reasonably practicable (which, if the
circumstances permit, shall be not less than two Business Days' notice) of any
proposed agreement or consent by any or all of them to any modifications of the
terms and conditions of, or proposed delivery by both or either of them of any
consent or waiver or any exercise of any right of termination under, the Merger
Agreement. Each of the parties hereto that is also a party to the Merger
Agreement shall (1) allow Onyx to participate directly in any negotiations or
discussions relating to any such proposed modification, consent, waiver or
termination unless such action would not reasonably be expected to have a
material adverse effect on the Retained Business, Retained Assets or Retained
Liabilities and (2) keep Onyx reasonably informed of the status and any
developments with respect to any such proposed modification, consent, waiver or
termination. None of the parties hereto that is also a party to the Merger
Agreement shall, without the prior written consent of Onyx, terminate the Merger
Agreement pursuant to Section 8.1(a) thereof or agree to any modification of any
of the terms or conditions of, or give any consent or waiver under, any
provision of the Merger Agreement if such modification, consent or waiver would
reasonably be expected to have an adverse effect on the Retained Business,
Retained Assets or Retained Liabilities. SV shall not, without the prior written
consent of Onyx, terminate the Merger Agreement pursuant to Section
8.1(e)(2)(B).
46
(b) Prior to the Closing, each party hereto will promptly notify
each other party hereto in the event that such party becomes aware of (1) the
occurrence or nonoccurrence of any event the occurrence or nonoccurrence of
which could reasonably be expected to cause (i) any representation or warranty
of any party to the Merger Agreement to be untrue or inaccurate or (ii) any
covenant, condition or agreement of any party to the Merger Agreement contained
in the Merger Agreement to not be complied with or satisfied and (2) any failure
of any party to the Merger Agreement to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it under the Merger
Agreement.
(c) During the period from the date of this Separation Agreement
through the earlier of the termination of this Separation Agreement pursuant to
its terms and the Closing Date, the Company shall, and shall cause each Company
Subsidiary to, subject to reasonable restrictions imposed from time to time upon
advice of counsel respecting applicable Law or the Confidentiality Agreement,
afford representatives of Onyx and its Designated Affiliates, following notice
from Onyx to the Company in accordance with this Section 6.4(c), reasonable
access during normal business hours to all properties, offices, books,
contracts, commitments and records and such financial (including all working
papers) and operating data of the Company and the Company Subsidiaries and all
other information concerning its business, properties, personnel, vendors,
landlords/sublandlords, tenants, licensees and franchisees as Onyx or its
Designated Affiliates may reasonably request, including access to distribution
centers and stores to conduct field audits at Onyx's expense, and shall instruct
the employees, counsel, financial advisors and auditors of the Company to
cooperate with Onyx in connection with the foregoing. Onyx shall schedule and
coordinate all inspections with the Company and shall give the Company at least
two Business Days prior notice thereof, setting forth the inspection or
materials that Onyx or its representatives intend to conduct. The Company shall
be entitled to have representatives present at all times during any such
inspection. Notwithstanding the foregoing, neither Onyx nor any of its
representatives shall (i) contact or have any discussions with any of the
Company's employees below the level of division vice president (or, if no such
position exists with respect to any particular area of the Company, division
leader or its equivalent), agents, or representatives, unless in each case Onyx
obtains the prior written consent of the Company, which shall not be
unreasonably withheld, conditioned or delayed, (ii) contact or have any
discussions with any of the vendors, licensees or franchisees of the Company or
the Company Subsidiaries, unless in each case Onyx obtains the prior written
consent of the Company, which shall not be unreasonably withheld, conditioned or
delayed, (iii) contact or have any discussions with any of the
landlord/sublandlords, tenants/subtenants of the Company or the Company
Subsidiaries if, within two Business Days after receipt of notice from Onyx of
its intention to have such a discussion, the Company shall raise a reasonable
objection to such contact or discussion, (iv) damage any property or any portion
thereof, or (v) perform any onsite procedure or investigation (including any
onsite environmental investigation or study) that involves physical disturbance
or damage to any property or any portion thereof. Within ten (10) Business Days
after the date hereof, the Company shall appoint a representative for the
purpose of coordination of inspections and providing approvals of contact with
employees, vendors, landlords/sublandlords, tenants/subtenants, licensees or
franchisees of the Company or its Subsidiaries. Notwithstanding the foregoing,
neither the Company nor any Company Subsidiary shall be required to provide
access to or to disclose information where such access or disclosure would
jeopardize the attorney-client privilege of the Company or any Company
Subsidiary or contravene any Law or binding
47
agreement entered into prior to the date of this Separation Agreement. All
information obtained pursuant to this Section 6.4(c) shall continue to be
governed by the Confidentiality Agreement.
(d) Onyx shall use its commercially reasonable efforts to obtain
the Financing pursuant to the terms and conditions set forth in the Financing
Commitment. Onyx shall notify the Company if at any time prior to the Closing
Date the Financing Commitment shall expire or be terminated, modified or amended
for any reason. The Company shall (i) provide and shall cause the Company
Subsidiaries to, and use commercially reasonable efforts to cause the respective
officers, employees and Representatives, including legal and accounting, of the
Company and its Subsidiaries to provide, all cooperation reasonably requested by
Onyx in connection with any debt financing that Onyx may determine to arrange
(any such debt financing, a "Future Debt Financing"), including providing such
access and documentation and taking such action as is customary for transactions
such as the Financing or Future Debt Financing and facilitating the production
of any due diligence items that the prospective lenders may reasonably request,
including current Phase I Environmental Site Assessments, field audits,
appraisals and title insurance with respect to the real property, and (ii)
satisfy the conditions in the Financing Commitment or Future Debt Financing that
require action by the Company. Onyx shall promptly, upon request by the Company,
reimburse the Company for all reasonable out-of-pocket third party costs
incurred by the Company or any of the Company Subsidiaries in connection with
such cooperation.
(e) During the period from the date of this Separation Agreement
through the earlier of the termination of this Separation Agreement pursuant to
its terms and the Closing Date, Onyx shall, and shall cause each Subsidiary of
Onyx to, subject to reasonable restrictions imposed from time to time upon
advice of counsel respecting applicable Law or the Confidentiality Agreement,
afford representatives of the Company and its Subsidiaries such information as
they may reasonably require concerning the capitalization, liquidity and
financial resources of Onyx and its Subsidiaries after giving effect to the
transactions contemplated by this Separation Agreement. Notwithstanding the
foregoing, neither Onyx nor any Onyx Subsidiary shall be required to provide
access to or to disclose information where such access or disclosure would
jeopardize the attorney-client privilege of Onyx or any Subsidiary of Onyx or
contravene any Law or binding agreement entered into prior to the date of this
Separation Agreement. The Company shall hold, and shall cause its officers,
employees, agents, consultants, advisors and other Representatives to hold, in
strict confidence, unless compelled to disclose by judicial or administrative
process or at the direction of any Authority or, in the opinion of its counsel,
by other requirements of Law, all non-public information concerning Onyx
furnished it pursuant to this Section 6.4(e) or its Representatives or otherwise
in its possession (except to the extent that such information can be shown to
have been (x) in the public domain through no fault of the party to which it was
furnished or (y) later lawfully acquired on a nonconfidential basis from other
sources by the party to which it was furnished), and the Company shall not,
without the prior written consent of the party that furnished such information,
release or disclose such information to any other person, except its auditors,
attorneys, financial advisors, financing sources, bankers and other consultants,
advisors and other representatives who have a need to know such information and
who agree to be bound by the provisions of this sentence. The Company shall be
deemed to have satisfied its obligation to hold confidential information
concerning or supplied by any other party if it exercises the same care as it
takes to preserve confidentiality for its own similar confidential information.
48
Section 6.5 Further Action; Reasonable Best Efforts. (a) Subject to
the terms and conditions of this Separation Agreement, each of the parties
hereto will use its reasonable best efforts to take, or cause to be taken, all
actions and to do, or cause to be done, and assist and cooperate with the other
parties in doing, all things necessary, or desirable under applicable Law and
regulations to consummate, in the most expeditious manner practicable, the
transactions contemplated by this Separation Agreement. In furtherance of the
foregoing, from the date hereof until Closing (and except as contemplated by the
Cub Sale Agreement), Onyx agrees, and shall cause each of its Affiliates and
each holder of its Equity Interests, not to enter into any transaction which
would impair or delay the parties' ability to receive approval of the
transactions contemplated hereby under the HSR Act, including, without
limitation, any acquisition of or merger with any entity that derived revenues
in the following NAICS Codes: 44561, 44611 and any NAIC codes that begin with
44511 or 44611. Onyx hereby represents that no person that is the ultimate
parent entity of Onyx derives any revenues in such NAICS Codes, otherwise than
as a result of the Cub Sale Agreement.
(b) The Company and Onyx will use reasonable best efforts to: (i)
prepare, as soon as practicable, all filings and other presentations in
connection with seeking any regulatory approval, exemption or other
authorization from any Authority necessary to consummate the transactions
contemplated hereby; (ii) prosecute such filings and other presentations with
diligence; and (iii) oppose any objections to, appeals from or petitions to
reconsider or reopen any such approval by persons not party to this Agreement.
The Company and Onyx will use reasonable best efforts to facilitate obtaining
any final order or orders approving such transactions, consistent with this
Separation Agreement and/or to remove any impediment to the consummation of the
transactions contemplated hereby. The Company and Onyx will use reasonable best
efforts to furnish all information in connection with the approvals of or
filings with any Authority and will promptly cooperate with and furnish
information in connection with any such requirements imposed upon Onyx or any of
its Affiliates in connection with this Agreement and the transactions
contemplated hereby. Subject to Sections 6.5(c) and 6.5(d), Onyx will use
reasonable best efforts to obtain any consent, authorization, order or approval
of, or any exemption by, and to remove any impediment imposed by any Authority
to allow the consummation of the transactions contemplated hereby. Onyx and the
Company will each advise the other party promptly of any material communication
received by such party or any of its Affiliates from the FTC, DOJ, any state
attorney general or any other Authority regarding any of the transactions
contemplated hereby, and of any understandings, undertakings or agreements (oral
or written) such party proposes to make or enter into with the FTC, DOJ, any
state attorney general or any other Authority in connection with the
transactions contemplated hereby. Onyx and the Company will each consult with
the other in advance of any material meetings with the FTC.
(c) In furtherance and not in limitation of Sections 6.5(a) and
(b), each of Onyx and the Company shall make an appropriate filing of a
Notification and Report Form pursuant to the HSR Act with respect to the
transactions contemplated hereby as promptly as practicable and thereafter make
any other required submissions with respect to the transactions contemplated
hereby under the HSR Act and shall take all other actions reasonably necessary,
proper or advisable to cause the expiration or termination of the applicable
waiting periods under the HSR Act as soon as practicable.
49
(d) In furtherance and not in limitation of Sections 6.5(a) and
(b), Onyx shall, in order to consummate the Retained Business Purchase
contemplated by this Separation Agreement, use its reasonable best efforts (i)
to secure the expiration or termination of any applicable waiting period under
the HSR Act, (ii) to resolve any objections asserted with respect to the
Retained Business Purchase contemplated hereby under any antitrust law or the
Federal Trade Commission Act raised by any governmental authority
("Objections"), and (iii) to prevent the entry of, and to have vacated, lifted,
reversed or overturned, any decree, judgment, injunction or other order that
would prevent, prohibit, restrict or delay Closing. For purposes of this Section
6.5(d), "reasonable best efforts" include (A) executing settlements,
undertakings, consent decrees, stipulations or other agreements, (B) selling,
divesting or otherwise conveying particular assets or categories of assets or
businesses of Onyx, (C) agreeing to sell, divest or otherwise convey any
particular assets or categories of assets or businesses of the Company
contemporaneously with or subsequent to the Closing, and (D) permitting the
Company to sell, divest or otherwise convey any particular assets or categories
of assets or businesses of the Company prior to the Closing; provided, that in
no event shall Onyx be required (or shall the Company be permitted pursuant to
this Section 6.5(d)) to take any actions pursuant to this Section 6.5(d) that,
individually or when aggregated with all other actions taken pursuant to this
Section 6.5(d), could reasonably be expected to have a material adverse effect
on Onyx and the Company, taken as a whole, after giving effect to the
consummation of the Retained Business Purchase. No actions taken pursuant to
this Section 6.5(d) shall be considered for purposes of determining whether a
Company Material Adverse Effect has occurred. Onyx shall respond to and seek to
resolve any Objection as promptly as practicable after such Objection is raised.
(e) Subject to the terms and conditions of the Merger Agreement,
each of the Company and SV shall comply with their obligations under Section
6.6(a)-(d) of the Merger Agreement.
(f) Notwithstanding the foregoing or any other provision of this
Separation Agreement, nothing in this Section 6.5 shall limit a party's right to
terminate this Separation Agreement pursuant to Section 9.2 so long as such
party has up to then complied in all material respects with its obligations
under this Section 6.5.
Section 6.6 Ancillary Agreements. On the Closing Date, the parties
shall execute (and/or cause their respective Subsidiaries party thereto to
execute) the Ancillary Agreements; it being agreed that (i) Onyx may request
that the schedules to the Transition Services Agreement include any service that
the Company Headquarters currently provides to the Retained Business and (ii)
prior to the Closing Date, SV and Onyx shall review and negotiate in good faith
to agree upon the appropriate service levels to be set forth in the Transition
Services Agreement with respect to services to be provided under the Transition
Services Agreement to Onyx after the Closing Date. Notwithstanding anything to
the contrary contained in this Separation Agreement, (i) the nonperformance by
any party with the agreements and covenants set forth in Section 6.2(b) or this
Section 6.6 (including any related failure of any party to certify as to the
performance thereof) shall not constitute a failure of any condition to the
obligation of any party to consummate the transactions contemplated by this
Separation Agreement to be satisfied or grounds for any party to terminate this
Separation Agreement and (ii) if and to the extent of a conflict between the
terms and provisions of this Separation Agreement and any Ancillary Agreement,
the terms of the Ancillary Agreement shall govern.
50
Section 6.7 Sharing of Certain Payments. In the event that SV receives
a Company Termination Fee (as defined in the Merger Agreement), SV and Onyx
shall share in such fee (a) first, in an amount equal to each party's actual
out-of-pocket third party expenses incurred in connection with this Separation
Agreement and the Merger Agreement and (b) second, on a 85%/15% basis. Such
amount shall be paid within five (5) Business Days of the receipt by SV of such
Company Termination Fee.
Section 6.8 Certain Restrictions Pending the Closing. (a) Each of Onyx
and SV agrees that, from and after the date hereof and prior to the Closing,
except (1) as otherwise expressly permitted by this Separation Agreement or the
Merger Agreement, (2) for any action that constitutes an exercise of their
respective rights under Section 6.4, Section 9.1 or Section 9.2 or (3) as agreed
in writing by the other parties hereto, each of Onyx and SV shall not, and shall
not permit any of its Subsidiaries to, take or agree, in writing or otherwise,
to take any action which could reasonably be expected to materially impair its
ability to perform its obligations under this Separation Agreement or to
prevent, impede or materially delay the consummation of the transactions
contemplated under this Separation Agreement or result in the failure to satisfy
any condition to the consummation of the transactions hereunder.
(b) The Company agrees that, from and after the date hereof and
prior to the Closing, except (1) as otherwise expressly permitted by this
Separation Agreement or the Merger Agreement, (2) for any action that
constitutes an exercise of the Company's rights under Section 9.1 or Section 9.2
of this Separation Agreement or (3) as agreed in writing by the other parties
hereto, the Company shall not, and shall not permit any of its Subsidiaries to,
take or agree, in writing or otherwise, to take any action which could
reasonably be expected to materially impair the Company's ability to perform its
obligations under this Separation Agreement or to prevent, impede or materially
delay the consummation of the transactions contemplated under this Separation
Agreement or result in the failure to satisfy any condition to the consummation
of the transactions hereunder.
(c) In furtherance, and not limitation of the foregoing, Section
6.1(a) (Conduct of Business Prior to the Closing) of the Merger Agreement is
incorporated herein by reference (mutatis mutandis); provided, however, for
purposes of this Section 6.8(c) of the Separation Agreement (1) "Onyx" shall be
substituted for any reference to "Parent" contained in such section, (2) "this
Separation Agreement" shall be substituted for any reference to "this Agreement"
in such section, (3) the references to "(in each case, with respect to the New
Diamond Business or to the extent affecting New Diamond and/or the New Diamond
Entities in a non-de minimis respect)" shall be deemed to read "(in each case,
in relation to the Retained Business, the Retained Assets and the Retained
Liabilities)," (4) Section 6.1(a)(v)(D)(2) shall be deemed to read "any Real
Property Lease (other than any amendment or termination in connection with the
disposition of the Springfield Stores) which provides for monthly base rental
payments over the primary term of the lease in excess of $10,000, on average or
which provides for a term in excess of two years,", (5) Section 6.1(a)(v)(E)
shall be deemed to read "vary capital expenditures upward or downward in any
material respect from the capital expenditure budget insofar as it relates to
the Retained Business as set forth on Section 6.8(c) of the Company Disclosure
Letter authorize, or enter into, any new capital expenditures which are in the
aggregate, in excess of the Company's capital expenditure budget insofar as it
relates to the Retained Business or authorize, or enter into any commitment to
make any capital expenditures
51
that related to the Retained Business which are, individually, in excess of
$2,500,000.", and (6) the following shall be inserted at the end of Section
6.1(a)(vi) as a new number (9): "(9) hire (except in the case of replacing a
departing executive or employee) any executive officer (as defined by Rule 3b-7
of the Exchange Act) or other employee earning annual compensation in excess of
$250,000, or terminate more than two such executive officers or employees
earning in excess of $250,000 in any 6 month period, other than termination for
cause."
Section 6.9 Payments by Onyx to the Exchange Fund. Under the Merger
Agreement, SV has agreed to deposit in trust (the "Exchange Fund") with the
Paying Agent (as defined in the Merger Agreement) any amounts payable under
Article III of the Merger Agreement. In furtherance of the foregoing and Onyx's
obligations under Section 2.4(c) of this Separation Agreement, Onyx and/or one
or more of its Designated Affiliates shall pay, or cause to be paid, by wire
transfer of immediately available funds to the account designated by the Paying
Agent as the Exchange Fund, an amount without duplication equal to the Retained
Business Price (which amount New Diamond intends to treat as having been loaned
from New Diamond to SV).
Section 6.10 Settlement of Appraisal Proceedings. In the event any
appraisal proceeding brought under Section 262 of the DGCL results in the
payment of an amount per share in respect of shares of the Common Stock (as
defined in the Merger Agreement) of the Company outstanding prior to the
Effective Time that is less than the Per Share Merger Consideration (after
taking into account the costs and expenses of defending such Action), the
difference between the amount of such payment and the Per Share Merger
Consideration shall be split between the Company and New Diamond on a 15%/85%
basis. Each of Onyx and SV shall, or shall cause the Company or New Diamond,
respectively, to make such payments when and if due.
Section 6.11 Certain Standalone Drug Sale Matters. (a) The Company
shall not, without the prior written consent of the other parties hereto,
voluntarily terminate the Standalone Drug Sale Agreement or agree to any
modification of any of the terms or conditions of, or give any consent or waiver
under, or enter into any settlement of any Action or dispute under any provision
of the Standalone Drug Sale Agreement, if such modification, consent, waiver,
settlement or termination would reasonably by expected to adversely affect, or
impose any cost or liability on, Onyx or its Subsidiaries (including their
interests following the consummation of the transactions contemplated by the
Standalone Drug Sale Agreement) or adversely affect the ability to consummate
the transactions contemplated hereby in a timely manner. The Company shall
comply with the terms of the Standalone Drug Sale Agreement in all material
respects. The Company will use reasonable best efforts to cause the conditions
to the consummation of the Standalone Drug Sale Agreement to be satisfied (or
waived by the other party thereto).
(b) Prior to the Closing, the Company will promptly notify each
other party hereto in the event that the Company becomes aware of (1) the
occurrence or nonoccurrence of any event the occurrence or nonoccurrence of
which could reasonably be expected to cause (i) any representation or warranty
of any party to the Standalone Drug Sale Agreement to be untrue or inaccurate or
(ii) any covenant, condition or agreement of any party to the Standalone Drug
Sale Agreement contained in the Standalone Drug Sale Agreement to not be
52
complied with or satisfied or (2) any failure of any party to the Standalone
Drug Sale Agreement to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it under the Standalone Drug Sale
Agreement, in each case, to the extent that any of the foregoing matters would
reasonably be expected to result in the failure of a closing condition to the
Standalone Drug Sale Agreement.
Section 6.12 Proxy Statement. Onyx will cooperate with SV and the
Company in the preparation of the Proxy Statement/Prospectus and Form S-4. Each
of Parent and the Company will provide Onyx with a reasonable opportunity to
review drafts of, and revisions to, the Proxy Statement/Prospectus and Form S-4
prepared by such party, and Onyx shall use its reasonable best efforts to
furnish to SV and the Company information relating to it and its affiliates as
necessary to prepare the Proxy Statement/Prospectus and Form S-4. Onyx agrees
that none of the information supplied or to be supplied by it for inclusion or
incorporation by reference in the Proxy Statement/Prospectus or the Form S-4
will, at the date such document is first mailed to the stockholders of the
relevant party and at the time of such party's meeting of stockholders relating
to the Merger, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in the light of the circumstances under which they are
made, not misleading. For purposes of the foregoing, it is understood and agreed
that information concerning or related to Onyx or any of its Designated
Subsidiaries will be deemed to have been supplied by Onyx.
Section 6.13 Merger Agreement Termination Fee. In the event that (i)
SV is required to make a payment to the Company pursuant to Section 8.2(d)(i) of
the Merger Agreement or (ii)(A) SV is required to make a payment to the Company
pursuant to Section 8.2(d)(ii) of the Merger Agreement and (B) the board of
directors of SV shall have failed to include or make or shall have publicly
withdrawn, modified or changed, in a manner adverse to the Company, the Parent
Board Recommendation for reasons primarily related to antitrust concerns, Onyx
shall be responsible for the payment to the Company of (or shall reimburse SV
for) an amount equal to $70,000,000 of such $250,000,000 payment.
Section 6.14 Springfield Stores Sale.
(a) Onyx shall act in good faith and use its reasonable best
efforts to sell the Springfield Stores to a third party (other than SV) prior to
the date that is the one year anniversary of the Closing Date (the "Springfield
Stores Date") and shall consider in good faith any prospective purchaser of the
Springfield Stores proposed to Onyx by SV; provided, that such one year
limitation shall be extended if Onyx is in discussions with any third party to
sell the Springfield Stores on the Springfield Stores Date until such
discussions have terminated in good faith.
(b) To the extent Onyx shall have entered into an agreement to
sell one or both of the Springfield Stores within the timeline contemplated by
paragraph (a) above, it shall, upon the closing of such sale, pay to Jewel Food
Stores, Inc. eighty per cent (80%), and shall be entitled to keep twenty percent
(20%), of the consideration (net of tax and costs of sale) for such store or
stores. Any such payment to Jewel Food Stores, Inc. shall be allocable to the
Springfield Stores.
53
(c) SV shall be entitled to see, at its request, all
documentation with respect to the sales or prospective sales contemplated by
this Section 6.14.
ARTICLE VII
ACCESS TO INFORMATION AND SERVICES
Section 7.1 Access to Information. From and after the Closing (a) each
of the parties hereto shall (1) afford to the other parties and their respective
authorized accountants, counsel and other designated Representatives reasonable
access (including using reasonable efforts to give access to persons or firms
possessing Information) and duplicating rights during normal business hours and
upon reasonable advance notice to all records, books, contracts, instruments,
computer data and other data and information (collectively, "Information")
within the each other party's possession insofar as such access is reasonably
required by Onyx or SV, as the case may be, or their respective Designated
Affiliates and (2) at the request and expense of Onyx, SV or their respective
Designated Affiliates, as applicable, use its reasonable efforts to cooperate
with the other parties and their respective accountants and other
Representatives in connection with the preparation of any audits (and related
financial statement preparation) and with the transition of the Retained
Business and the New Diamond Business to "stand-alone" businesses following the
Closing, including by assisting in connection with any efforts to obtain
insurance coverage for the Retained Business and the New Diamond Business, as
applicable. Information may be requested under this Section 7.1 for, without
limitation, audit, accounting, claims, litigation and tax purposes, as well as
for purposes of fulfilling disclosure and reporting obligations.
Section 7.2 Litigation Cooperation. Following the Closing, with
respect to any Action that involves any of the parties to this Separation
Agreement or any of the Retained Entities or New Diamond Entities and relates to
(a) the transactions contemplated by this Separation Agreement or the Merger
Agreement or (b) the Company or any current or former Subsidiary of the Company
or any Liabilities or current or former Assets, employees or businesses thereof,
whether or not such Action is subject to indemnification hereunder, each of the
parties hereto shall, upon written request by any other party hereto, and at the
expense of the requesting party (subject to the indemnification and
expense-sharing provisions of this Separation Agreement, to the extent
applicable), provide all cooperation and assistance, and shall furnish such
records and information, as may be reasonably requested by the other in
connection therewith, including, by using reasonable efforts to make available
to the other, its officers, directors, employees and agents as witnesses and to
attend such conferences, discovery proceedings, hearings, trials and appeals as
may be reasonably requested by the other in connection therewith. With respect
to (1) any such Action involving Shared Transaction Liabilities or (2) any
Action initiated by any Authority or private party pursuant to the HSR Act or
any similar Law and relating to the transactions contemplated by this Separation
Agreement or the Merger Agreement, the parties agree, consistent with applicable
rules of privilege and legal ethics, to provide each other with timely and
reasonably detailed updates with respect to all material developments, consult
with each other before taking any significant actions in connection therewith
and offer each other the opportunity to comment before submitting to any
Authority or adverse party any written materials prepared or furnished in
connection with such Action.
54
Section 7.3 Retention of Records. Except as otherwise required by Law
or agreed to in writing, the parties hereto and/or one or more of their
Designated Affiliates shall each retain, for a period of at least seven years
following the Closing Date, all Information in their possession relating to (a)
in the case of New Diamond and its Affiliates, the Retained Assets, the Retained
Entities and the Retained Business, the Retained Liabilities, and (b) in the
case of the Company and its Affiliates, the New Diamond Assets, the New Diamond
Entities, the New Diamond Business and the New Diamond Liabilities.
Notwithstanding the foregoing, except as otherwise required by Law, any party
may destroy or otherwise dispose of any of such Information at any time,
provided, that prior to such destruction or disposal, (1) such party provides no
less than 90 or more than 120 days' prior written notice to the other parties,
specifying the Information proposed to be destroyed or disposed of and (2) if
the other party shall request in writing prior to the scheduled date for such
destruction or disposal that any of the Information proposed to be destroyed or
disposed of be delivered to such party, the responsive party shall promptly
arrange for the delivery of such of the Information as was requested, at the
expense of the requesting party.
Section 7.4 Confidentiality. From and after the Closing, each party
shall hold, and shall cause its officers, employees, agents, consultants,
advisors and other Representatives to hold, in strict confidence, unless
compelled to disclose by judicial or administrative process or at the direction
of any Authority or, in the opinion of its counsel, by other requirements of
Law, all non-public Information concerning the other parties furnished it by any
such other party or its representatives or otherwise in its possession (except
to the extent that such Information can be shown to have been (a) in the public
domain through no fault of the party to which it was furnished or (b) later
lawfully acquired on a nonconfidential basis from other sources by the party to
which it was furnished), and each party shall not, without the prior written
consent of the party that furnished such Information, release or disclose such
Information to any other person, except its auditors, attorneys, financial
advisors, financing sources, bankers and other consultants, advisors and other
representatives who have a need to know such Information and who agree to be
bound by the provisions of this Section 7.4. Each party shall be deemed to have
satisfied its obligation to hold confidential Information concerning or supplied
by any other party if it exercises the same care as it takes to preserve
confidentiality for its own similar confidential Information.
Section 7.5 Publicity. The parties shall consult with each other
before issuing any press release or otherwise making any public statements with
respect to this Separation Agreement or the transactions contemplated hereby,
except to the extent public disclosure is required by applicable Law or the
requirements of the NYSE or the PCX, in which case the issuing party shall use
its reasonable best efforts to consult with the other party before issuing any
such release or making any such public statement.
ARTICLE VIII
EMPLOYEE BENEFITS; LABOR MATTERS
Section 8.1 Locus of Employees and Company Plans. No later than
immediately prior to the Separation, the employment of any New Diamond Employees
who are employed by a Retained Entity shall be transferred to a New Diamond
Entity, and the
55
employment of any Retained Employees who are employed by a New Diamond Entity
shall be transferred to a Retained Entity. The New Diamond Employees who are
employed by a New Diamond Entity immediately prior to the Separation shall be
retained as employees of such entity, and the Retained Employees who are
employed by a Retained Entity immediately prior to the Separation shall be
retained as employees of such entity. Prior to the Separation the Company shall
cause the real estate leases and real property assets associated with the
Retained Business held in trust in a Company Plan to be removed from such trust.
Concurrently with the Separation, New Diamond shall assume or retain sponsorship
of all Company Plans (other than Assumed Benefit Plans), all assets held in
trust (other than such real estate leases and real property assets) to fund such
plans and all insurance policies funding such plans shall be New Diamond Assets,
and the Retained Entities and Retained Employees shall cease to actively
participate in such plans as of the Closing Date (it being understood that
Retained Employees shall still be eligible for benefits in accordance with the
terms of such plans, provided that no additional rights or benefits shall accrue
under any such plans in respect of service of the Retained Employees subsequent
to the Closing Date), and, except to the extent provided elsewhere herein, New
Diamond shall assume and be solely responsible for all Liabilities and
obligations whatsoever in respect of such plans. Without limiting the generality
of Section 9.5, nothing in this Article VIII, express or implied, is intended to
or shall confer upon any current or former employee or service provider of New
Diamond, the Company, and their respective Affiliates any right, benefit or
remedy of any nature whatsoever.
Section 8.2 Employee Benefits. After the Closing, each of the Company,
Onyx and/or one or more of its Designated Affiliates shall, and shall cause each
Retained Entity to, as the case may be, take such action as may be necessary to
honor the applicable obligations under the last sentence of Section 6.8(c) and
Section 6.13(a), (c), (d) and (e) of the Merger Agreement with respect to the
Retained Employees (other than Former Retained Employees) as if the "Surviving
Corporation" as referenced therein was the Company and "Parent" as referenced
therein was Onyx, and including without limitation an obligation to establish
and maintain as of the Effective Time such plans, policies and arrangements in
such form as Onyx may determine to provide such benefits. For purposes of this
Section 8.2, the last sentence of Section 6.13(a) of the Merger Agreement shall
be deemed to read: "For purposes of this Section 6.13 only, the term "Company
Employee" shall be deemed to refer to any current employee, officer, consultant,
independent contractor or director of the Company or any Subsidiary of the
Company after giving effect to the Standalone Drug Sale and the Separation."
Section 8.3 Other Liabilities and Obligations. As of the Closing Date,
with respect to claims relating to any employee Liability or obligations not
otherwise allocated in this Separation Agreement, (a) New Diamond shall assume,
and be solely responsible for, all Liabilities and obligations whatsoever of the
Company and its Affiliates for such claims made by all New Diamond Employees and
(b) the Company shall retain or assume, and be solely responsible for, all
Liabilities and obligations whatsoever for claims made by all Retained Employees
whether arising out of events, occurrences or services performed before or
following the Closing Date. As of the Closing Date, the Company shall assume
(subject to the definition of Shared Transaction Litigation Liabilities) and be
solely responsible for all Liabilities and obligations whatsoever in respect of
Assumed Benefit Plans, and all assets held in trust to fund such plans and all
insurance policies funding such plans shall be Retained Assets. Without limiting
the generality of the foregoing, as of the Closing Date, New Diamond shall
assume and
56
be solely responsible for any collective bargaining agreement or obligation
covering New Diamond Employees as of the Closing Date and the Company shall
retain or assume and be solely responsible for any collective bargaining
agreement or obligation covering Retained Employees as of the Closing Date.
Section 8.4 Welfare Plans. Effective as of the Closing Date, Retained
Employees shall cease to participate in plans providing for the type of benefits
described in Section 3(1) of ERISA (other than retiree medical plans under which
Former Retained Employees shall continue to participate (but not to actively
accrue credit for service) following the Closing Date) ("Welfare Plans") that
are sponsored by the New Diamond Entities ("Old Welfare Plans") and shall
commence participation in Welfare Plans sponsored by Retained Entities ("New
Welfare Plans"). New Diamond will provide administrative services and support to
the New Welfare Plans following the Closing Date, as set forth in the Transition
Services Agreement. Effective as of the Closing Date, the Company shall assume
all responsibility for, and all Liabilities in respect of, accrued but unused
vacation days of Retained Employees, and New Diamond shall assume all
responsibility for, and all Liabilities in respect of, accrued but unused
vacation days of New Diamond Employees. As of the Closing Date, (a) New Diamond
shall assume or retain liability for all ▇▇▇▇▇▇▇'▇ compensation claims with
respect to New Diamond Employees and Retained Employees that arose directly out
of injuries or illness that occurred prior to the Closing Date and disability
claims with respect to New Diamond Employees and Retained Employees that arose
prior to the Closing Date, (b) New Diamond shall assume or retain liability for
all ▇▇▇▇▇▇▇'▇ compensation claims with respect to New Diamond Employees that
arise out of injuries or illness that arise on or after the Closing Date and
disability claims with respect to New Diamond Employees that arise on or after
the Closing Date and (c) the Company shall assume or retain liability for all
▇▇▇▇▇▇▇'▇ compensation claims with respect to Retained Employees that arise
directly out of injuries or illness that arise on or after the Closing Date and
disability claims with respect to Retained Employees that arise on or after the
Closing Date. For purposes of the preceding sentence, under no circumstances
will a ▇▇▇▇▇▇▇'▇ compensation claim be deemed to have arisen out of an injury
occurring prior to the Closing Date or will a claim for disability benefits be
deemed to have arisen prior to the Closing Date, in each case, if the applicable
claim is not filed prior to, or within 180 days following, the Closing Date.
Section 8.5 Retirement Plans; Savings Plans. (a) At Closing New
Diamond and its Affiliates shall assume or retain sponsorship of, and
responsibility for all Liabilities in respect of, Company Plans (other than
Assumed Benefit Plans) that are qualified or nonqualified retirement, retiree
medical, or deferred compensation plans, whether with respect to New Diamond
Employees, Retained Employees or Standalone Drug Employees. All assets held in
trust to fund such plans (other than the real estate leases and real property
assets associated with the Retained Business which shall be removed from any
such trust prior to the Separation and shall be Retained Assets) and all
insurance policies funding such plans shall be New Diamond Assets.
(b) As soon as practicable after the Closing Date, New Diamond
shall cause the account balances of all employees of the Company (other than New
Diamond Employees and Former Retained Employees) in the Company Plans that are
account balance plans qualified under Section 401(a) of the Code to be available
for distribution in accordance
57
with the terms of such plans, and the Company shall permit Retained Employees
(other than Former Retained Employees) who are participants in such plans to
rollover such distributions (including a rollover of outstanding participant
loans) into a defined contribution plan established by the Company that
satisfies the qualification requirements of Section 401(a) of the Code.
Section 8.6 Preservation of Rights to Amend or Terminate Plans. No
provision of this Separation Agreement shall be construed as a limitation on the
right of the Company or New Diamond to amend any plan or terminate its
participation therein which the Company or New Diamond would otherwise have
under the terms of such plan or otherwise, and no provision of this Separation
Agreement shall be construed to create a right in any employee or beneficiary of
such employee under a plan that such employee or beneficiary would not otherwise
have under the terms of such plan itself.
Section 8.7 Reimbursement; Indemnification. New Diamond and the
Company acknowledge that the Company, on the one hand, and New Diamond, on the
other hand, and their respective Subsidiaries, may incur costs and expenses
(including contributions to plans and the payment of insurance premiums)
pursuant to any of the employee benefit or compensation plans, programs or
arrangements which are, as set forth in this Separation Agreement, the
responsibility of the other. Accordingly, the Company and New Diamond agree to
reimburse each other, as soon as practicable but in any event within five
Business Days of receipt from the other party of appropriate verification, for
all such costs and expenses reduced by the amount of any Tax reduction or
recovery of Tax benefit realized by the Company or New Diamond or any such
Subsidiary, as the case may be, in respect of the corresponding payment made by
it. Liabilities retained, assumed or indemnified by New Diamond pursuant to this
Article VIII shall in each case be deemed to be New Diamond Liabilities, and
Liabilities retained, assumed or indemnified by the Company pursuant to this
Article VIII shall in each case be deemed to be Retained Liabilities, and, in
each case, shall be subject to the indemnification provisions set forth in
Article V.
Section 8.8 Change In Control. The parties hereto will treat the
consummation of the Transactions, both individually and collectively, and
regardless of the order in which they actually occur, as a "change in control,"
"change of control" or similar event under each of the Company Plans (to the
extent such Company Plans contain provisions relating to "change in control,"
"change of control" or similar event).
ARTICLE IX
MISCELLANEOUS
Section 9.1 Conditions to Closing.
(a) Mutual Conditions to Consummate the Separation Agreement. The
respective obligations of each party to consummate the transactions contemplated
by this Separation Agreement shall be subject to the satisfaction or waiver at
or prior to the Closing of the following conditions:
58
(1) each of the conditions to the Merger, as set forth in
Article VII of the Merger Agreement (other than the condition that the
Standalone Drug Sale, the Separation and the Retained Business Purchase
shall have occurred), and each of the conditions of the Standalone Drug
Sale, as set forth in Article IX of the Standalone Drug Sale Agreement,
shall have been satisfied or waived (excluding conditions of the Merger
Agreement and the Standalone Drug Sale Agreement that, by their terms,
cannot be satisfied until the closing of the Merger Agreement or the
Standalone Drug Sale Agreement, as applicable);
(2) the waiting period (and any extension thereof)
applicable to the transactions contemplated by this Separation Agreement
under the HSR Act shall have been terminated or shall have expired; and
(3) no Law, temporary restraining order, preliminary or
permanent injunction or other legal restraint shall have been enacted,
entered, promulgated or enforced and no action or decision shall have been
taken and remain in effect by any Authority which prohibits, restrains or
enjoins the consummation of the transactions contemplated by this
Separation Agreement.
(b) Conditions to Obligations of Onyx. The obligations of Onyx to
consummate the transactions contemplated hereby shall be further subject to the
satisfaction or waiver at or prior to the Closing of the following conditions:
(1) The representations and warranties of the Company
contained in Section 3.2(a) of this Separation Agreement (disregarding any
Company Material Adverse Effect, materiality or similar qualifiers therein)
shall be true and correct as of the date hereof and the Closing Date as
though made on and as of such date (unless any such representation or
warranty is made only as of a specific date, in which event such
representation and warranty shall be true and correct as of such specified
date), except where any failure of any such representation or warranty to
be so true and correct has not had and would not reasonably be expected to
have a Company Material Adverse Effect, provided, however, that the
representations and warranties of the Company in Section 4.2 of the Merger
Agreement (Authority, Enforceability), as modified pursuant to Section
3.2(a) of this Separation Agreement, shall be true in all but de minimis
respects;
(2) The Company shall have performed in all material
respects the obligations, and complied in all material respects with the
agreements and covenants, required to be performed by or complied with by
it under this Separation Agreement at or prior to the Closing;
(3) The representations and warranties of SV and its
Designated Affiliates set forth in this Separation Agreement (disregarding
any Parent Material Adverse Effect, materiality or similar qualifiers
therein) shall be true and correct as of the date hereof and the Closing
Date as though made on and as of such date (unless any such representation
or warranty is made only as of a specific date, in which event such
representation and warranty shall be true and correct as of such specified
date),
59
except where any failure of such representation or warranty to be so true
and correct has not had and would not reasonably be expected to have a
Parent Material Adverse Effect;
(4) Each of SV and its Designated Affiliates shall have
performed in all material respects the material obligations, and complied
in all material respects with the material agreements and covenants,
required to be performed by or complied with by it under this Separation
Agreement at or prior to the Closing; and
(5) Onyx shall have received a certificate of an executive
officer of (i) the Company, certifying that the conditions set forth in
Sections 9.1(b)(1) and (2) have been satisfied and (ii) SV, certifying that
the conditions set forth in Section 9.1(b)(3) and (4) have been satisfied.
(6) Notwithstanding the foregoing, Onyx shall not, without
the prior written consent of SV, amend, modify or waive any provision of
this Separation Agreement if such amendment, modification or waiver would
reasonably be expected to have an adverse effect on the New Diamond
Business, New Diamond Assets or New Diamond Liabilities.
(c) Conditions to the Obligations of the Company and SV. The
obligations of each of the Company and SV to consummate the transactions
contemplated hereby shall be further subject to the satisfaction or waiver at or
prior to the Closing of the following conditions:
(1) The representations and warranties of Onyx and its
Designated Affiliates set forth in this Separation Agreement shall be true
and correct in all material respects, in each case as of the date hereof
and the Closing Date as though made on and as of such date (unless any such
representation or warranty is made only as of a specific date, in which
event such representation and warranty shall be true and correct in all
material respects as of such specified date);
(2) Each of Onyx and its Designated Affiliates shall have
performed in all material respects the material obligations, and complied
in all material respects with the material agreements and covenants,
required to be performed by or complied with by it under this Separation
Agreement at or prior to the Closing;
(3) Each of the Company and SV shall have received a
certificate of an executive officer of Onyx, certifying that the conditions
set forth in Sections 9.1(c)(1) and (2) have been satisfied.
(d) Additional Conditions to the Obligation of the Company. The
obligations of the Company to consummate the transactions contemplated hereby
shall be further subject to the Company having received, at Onyx's expense, an
opinion in form and substance reasonably acceptable to the Company, of a
nationally recognized independent valuation firm reasonably acceptable to the
Company, addressed to the Company's Board of Directors and dated as of the
Closing Date, to the effect that immediately after giving effect to the
transactions contemplated by this Separation Agreement, the Standalone Drug Sale
Agreement and the Merger Agreement, including the Financing, any alternative
financing, any other repayment or
60
refinancing of debt contemplated in this Separation Agreement, payment of all
amounts required to be paid in connection with the consummation of the
transactions contemplated by the Separation Agreement, the Standalone Drug Sale
Agreement and the Merger Agreement, and payment of all related fees and
expenses, each of Onyx and the Company are Solvent.
Section 9.2 Termination Prior to the Closing. (a) Termination by
Mutual Consent. This Separation Agreement may be terminated at any time prior to
the Closing upon the mutual written consent of the Company, SV and Onyx.
(b) Automatic Termination. This Separation Agreement shall
terminate automatically upon any termination of the Merger Agreement or the
Standalone Drug Sale Agreement in accordance with the terms thereof.
(c) Termination by Onyx. This Separation Agreement may be
terminated at any time prior to the Closing by written notice from Onyx to each
other party if the Closing shall not have been consummated by the Termination
Date (as defined in the Merger Agreement).
(d) Termination by Any Party. This Separation Agreement may be
terminated at any time prior to the Closing by written notice from any party to
each other party if (1) any Authority of competent jurisdiction shall have
issued a final order, decree or ruling or taken any other action permanently
enjoining, restraining or otherwise prohibiting the consummation of the
transactions contemplated by this Separation Agreement and such order, decree or
ruling or other action shall have become final and nonappealable or (2) there
shall have been a material failure of any representation or warranty of any
other party to be true or a material breach of any covenant or agreement of
another party contained in this Separation Agreement such that the conditions
set forth in Section 9.1(b) or (c) would not be satisfied, and such breach or
failure to be true is not cured (if curable) prior to the earlier of (i) 20
Business Days following notice of such breach (it being understood that such 20
Business Day period shall not be applicable to covenants or agreements that by
their terms are intended to be satisfied at Closing) and (ii) the Termination
Date; provided that the right to terminate this Separation Agreement pursuant to
this Section 9.2(d)(2) shall not be available to the party seeking to terminate
if any action of such party or the failure of such party to perform any of its
obligations under this Separation Agreement required to be performed at or prior
to the Closing has been the cause of, or resulted in, the failure of the Closing
to occur on or before the Termination Date and such action or failure to perform
constitutes a breach of this Separation Agreement.
Section 9.3 Effect of Termination. (a) Except as provided below, in
the event of the termination of this Separation Agreement pursuant to Section
9.2, this Separation Agreement shall forthwith become void and there shall be no
liability or obligation on the part of any party hereto, except with respect to
this Article IX and Section 6.7, which shall survive such termination; provided,
however, that nothing herein shall relieve any party from liability for any
willful or intentional material breach of this Separation Agreement.
(b) Onyx agrees that, if the Company, New Diamond or SV shall
terminate this Separation Agreement pursuant to Section 9.2(d)(2) on account of
a breach of this Separation Agreement by Onyx then Onyx shall be liable for
damages equal in the aggregate to
61
$100,000,000 (one hundred million dollars) (the "Onyx Termination Fee"),
two-thirds of which shall be paid to the Company and one-third of which shall be
paid to SV. The Onyx Termination Fee shall be paid promptly in immediately
available funds no later than two Business Days after such termination by the
Company, New Diamond or SV. Subject to the rights of the Company and SV as
third-party beneficiaries under the Financing Commitment in respect of the Onyx
Termination Fee, the obligation of Onyx to make such payment to SV and the
Company shall be the sole remedy and recourse of the Company, New Diamond or SV
arising out of such breach by Onyx of this Separation Agreement. The Company and
SV agree that any claim that SV has or may have against Onyx or the Sponsor
relating to the Onyx Termination Fee or otherwise under the Financing Commitment
shall be subordinated in right of payment to the payment in full of any claim
that the Company has or may have against Onyx or the Sponsor under the Financing
Commitment relating to the payment of the Onyx Termination Fee.
Section 9.4 No Survival. None of the representations and warranties in
this Separation Agreement or in any instrument delivered pursuant to this
Separation Agreement, and the other agreements and documents contemplated to be
delivered in connection herewith, including any rights arising out of any breach
of such representations and warranties shall, in the event Closing occurs,
survive the Effective Time.
Section 9.5 Entire Agreement; Third Party Beneficiaries. This
Separation Agreement (together with the documents and instruments referred to
herein, including the Merger Agreement, the Ancillary Agreements, including the
Transition Services Agreement) (a) constitutes the entire agreement and
supersedes all other prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter hereof, and (b) is not
intended to confer upon any person other than the parties hereto and thereto any
rights or remedies; provided, however, that the Indemnified Directors or
Officers and the Indemnitees are intended to be third party beneficiaries of the
provisions of Articles IV and V and each of such persons shall have the right to
enforce such provisions as if they were parties hereto.
Section 9.6 Fees and Expenses. Except as otherwise specifically
provided in this Separation Agreement, all costs, expenses incurred by the
parties hereto in connection with this Separation Agreement, the Merger
Agreement and the transactions contemplated hereunder and thereunder shall be
paid by the party hereto or thereto incurring such costs or expenses.
Section 9.7 No Waiver. No waiver by any party hereto of any breach of
any covenant, agreement, representation or warranty hereunder shall be deemed a
waiver of any preceding or succeeding breach of the same. The exercise of any
right granted to any party in this Separation Agreement shall not operate as a
waiver of any default or breach on the part of the other parties hereto. Each
and all of the several rights and remedies of any party hereto under this
Separation Agreement shall be construed as cumulative and no one right as
exclusive of the others.
Section 9.8 Amendments. No change, modification, alteration, amendment
or agreement to discharge in whole or in part, or waiver of, any of the terms
and conditions of this Separation Agreement, shall be binding upon any party,
unless the same shall be made by a written instrument signed and executed by the
authorized representatives of each party, with the same formality as the
execution of this Separation Agreement.
62
Section 9.9 Governing Law. This Separation Agreement shall be governed
by, and construed in accordance with, the laws of the State of Delaware (without
giving effect to choice of law principles thereof).
Section 9.10 Notices. (a) All notices, requests and demands to or upon
the respective parties hereto, and all statements and accountings given or
required to be given hereunder, shall be made by personal service, or sent by
certified mail, return receipt requested, postage prepaid, or by facsimile
addressed as follows, or to such other address as may hereafter be designated in
writing by the respective parties hereto, and shall be deemed received when
delivered to the designated address (and only if confirmed if delivered by
facsimile):
(1) if to the Company, to
▇▇▇▇▇▇▇▇▇'▇, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: Corporate Secretary
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to
▇▇▇▇▇ Day
North Point
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
and
▇▇▇▇▇ Day
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
and
(2) if to Onyx, to
AB Acquisition LLC
▇/▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇.▇.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
63
with a copy to
▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
and
(3) if to SV, to
SUPERVALU, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: Corporate Secretary
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to
Wachtell, Lipton, ▇▇▇▇▇ & ▇▇▇▇
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, Esq.
▇▇▇▇ ▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(b) To the extent not otherwise to be provided under the Merger
Agreement, each of SV and the Company agrees to deliver to each of Onyx and New
Diamond copies of all notices, requests and demands to or from the parties to
the Merger Agreement, and all certificates, statements and accountings delivered
or given or required to be delivered or given under the Merger Agreement, each
such delivery to be made in accordance with the procedures set forth in Section
9.10(a); provided, however, that if SV or the Company elects to deliver any such
notice, request, demand or certificate, statement or accounting by certified
mail as permitted by Section 9.10(a), a copy thereof will also be delivered to
each of Onyx and New Diamond by personal service or by confirmed facsimile in
accordance with Section 9.10(a).
Section 9.11 Interpretation. The headings contained in this Separation
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Separation Agreement. In this Separation
Agreement, unless a contrary intention appears, (a) the words "herein," "hereof"
and "hereunder" and other words of similar import refer to this Separation
Agreement as a whole and not to any particular Article, Section, Schedule,
Exhibit or other subdivision, (b) whenever the words "include," "includes" or
"including" are used in this Separation Agreement, they shall be deemed to be
followed by the words "without limitation," (c) reference to any Article,
Section, Schedule or Exhibit is reference to such Article or Section of, or
Schedule or Exhibit to, this Separation Agreement, (d) "days" means calendar
days, (e) all defined terms in this Separation Agreement have the defined
meaning when used in any certificate or other document made or delivered
pursuant to this
64
Separation Agreement, unless otherwise indicated therein, (f) all defined terms
in this Separation Agreement are applicable to the singular as well as the
plural forms of such terms and to the masculine as well as to the feminine and
neuter genders of such term, and in each case, vice versa, (g) references in
this Separation Agreement to specific Laws (such as the Code, HSR Act and ERISA)
or to specific provisions of Laws include all rules and regulations promulgated
thereunder, (h) "person" means any natural person or any corporation,
association, partnership, joint venture, limited liability, joint stock or other
company or trust, (i) references to the "Company and each of its Subsidiaries,"
the "Subsidiaries of the Company," and other similar phrases, with respect to
any time prior to the Closing, shall be deemed to include reference to each of
the Subsidiaries of the Company without giving effect to the transfer of
ownership of the New Diamond Entities at Closing, (j) items listed or included
within a definition are so listed or included without duplication, (k) any
statute defined or referred to herein or in any agreement or instrument referred
to herein means such statute as from time to time amended, modified or
supplemented, including by succession of comparable successor statutes, and (l)
if and to the extent any party designates a Designated Affiliate pursuant to the
terms hereof, such Designated Affiliate shall be deemed to be a party to this
Separation Agreement and to have made any representations and warranties
contained in this Separation Agreement as of the time of such designation, and
any action or undertaking required of such Designated Affiliate pursuant to the
terms of this Separation Agreement shall become an obligation of such Designated
Affiliate as of the time of such designation. No provisions of this Separation
Agreement shall be interpreted or construed against any party hereto solely
because such party or its legal representative drafted such provision.
Section 9.12 Counterparts. This Separation Agreement may be executed
simultaneously in any number of counterparts, each of which shall be deemed an
original but all of which together shall constitute one and the same instrument.
Section 9.13 Specific Performance. The parties agree that if for any
reason any of the provisions of this Separation Agreement are not performed in
accordance with their specific terms or are otherwise breached, immediate and
irreparable harm or injury would be caused for which money damages would not be
an adequate remedy. Accordingly, each party agrees that, in addition to any
other available remedy at law or equity, each party shall be entitled to an
injunction restraining any violation or threatened violation of the provisions
of this Separation Agreement without the necessity of posting a bond or other
form of security. In the event that any Action should be brought in equity to
enforce the provisions of this Separation Agreement, no party will allege, and
each party hereby waives the defense, that there is an adequate remedy at law.
Section 9.14 Successors and Assigns. (a) This Separation Agreement
shall inure to the benefit of and be binding upon the respective successors and
permitted assigns of the parties hereto, but any such assignment by any party
hereto shall not relieve such assigning party of any of its obligations or
agreements hereunder unless expressly agreed to in writing by each other party
hereto in its sole discretion; provided, however, that no party may assign,
delegate or otherwise transfer any of its rights or obligations under this
Separation Agreement without the consent of each other party hereto, except that
from and after the Closing Date this Separation Agreement may be assigned to a
lender of a party as collateral for indebtedness, provided that the party making
such assignment shall not be released from its obligations hereunder and the
65
non-assigning party shall have no obligation to pursue remedies against any
assignee before proceeding against assignor for any breach of any of its
obligations hereunder; provided, further, that nothing contained in this Section
9.14(a) shall prevent Onyx, New Diamond, SV or the Company (but, in the case of
the Company, only after the Effective Time) from assigning from transferring or
assigning this Separation Agreement or its rights and obligations hereunder to a
Designated Affiliate, in either case, so long as such assignment or transfer
does not purport to relieve the assignee of its obligations hereunder. Any
attempted assignment in violation of the foregoing shall be null and void.
(b) To the extent that the Company, Onyx and/or one of more its
Designated Affiliates or any of their respective Subsidiaries, directly or
indirectly, whether by merger, transfer of assets, transfer of stock, operation
of law, license or otherwise, transfers, licenses or otherwise disposes of, in
one or more transactions, to any other person all or substantially all of the
Retained Assets each owns immediately after the Closing or the Retained
Business, Onyx or such Designated Affiliate or such Subsidiary will cause the
transferee of such Retained Assets to assume specifically such transferor's and
the Company's obligations under this Separation Agreement with respect thereto.
Such assumption will not relieve the transferor of its obligations in respect
thereof. To the extent that New Diamond and/or one or more of their Designated
Affiliates or any of their respective Subsidiaries, directly or indirectly,
whether by merger, transfer of assets, transfer of stock, operation of law,
license or otherwise, transfers, licenses or otherwise disposes of, in one or
more transactions, to any other person all or substantially all of the New
Diamond Assets or the New Diamond Business, the transferor will cause the
transferee of such New Diamond Assets or New Diamond Business to assume
specifically its obligations under this Separation Agreement with respect
thereto. Such assumption will not relieve the transferor of its obligations in
respect thereof. The parties agree that such transferee may exercise all of the
transferring party's rights hereunder, as the case may be, with respect to such
Assets or businesses.
Section 9.15 Severability. If any term or other provision of this
Separation Agreement is determined by a court of competent jurisdiction to be
invalid, illegal or incapable of being enforced, all other terms and provisions
of this Separation Agreement shall nevertheless remain in full force and effect.
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 Separation Agreement so as to effect the original intent of the
parties as closely as possible in a mutually acceptable manner.
Section 9.16 Jurisdiction; Venue; Consent to Service of Process. (a)
Except as otherwise provided in Section 2.7, 2.8 or 4.9, each of the parties
hereto (a) consents to submit itself to the exclusive personal jurisdiction of
the Delaware Court of Chancery and any Federal court located in the State of
Delaware in the event of any Action arising out of or relating to this
Separation Agreement or any of the transactions contemplated by this Separation
Agreement, (b) agrees that it will not attempt to deny or defeat such personal
jurisdiction by motion or other request for leave from any such court, and (c)
agrees that it will not bring any Action arising out of or relating to this
Separation Agreement or any of the transactions contemplated by this Separation
Agreement in any court other than the Delaware Court of Chancery or a Federal
court sitting in the State of Delaware. In any Action arising out of or relating
to this Separation Agreement or any of the transactions contemplated by this
Separation Agreement, each party
66
irrevocably and unconditionally waives and agrees not to assert by way of
motion, as a defense or otherwise any claims that it is not subject to the
jurisdiction of the above courts, that such Action is brought in an inconvenient
forum or that the venue of such Action is improper. Each of the parties also
hereby agrees that any final and unappealable Judgment against a party in
connection with any such Action shall be conclusive and binding on such party
and that such award or Judgment may be enforced in any court of competent
jurisdiction, either within or outside of the United States. A certified or
exemplified copy of such Judgment shall be conclusive evidence of the fact and
amount of such Judgment.
(b) Each party hereto irrevocably consents to service of process
in the manner provided for the giving of notices pursuant to Section 9.10 of
this Separation Agreement. Nothing in this Section 9.16 shall affect the right
of any party to serve process in any other manner permitted by applicable Law.
Section 9.17 Waiver of Jury Trial. To the fullest extent permitted by
Law, each of the parties irrevocably waives all right to trial by jury in any
Action or counterclaim arising out of or relating to this Separation Agreement
or any of the transactions contemplated by this Separation Agreement.
Section 9.18 Company Disclosure Letter. There may have been included
in the Company Disclosure Letter and may be included elsewhere in this
Separation Agreement items which are not "material," and such inclusion shall
not be deemed to be an acknowledgment or agreement by the Company that such
items are "material" or to affect the interpretation of such term for purposes
of this Separation Agreement. Disclosures included in any Section of the Company
Disclosure Letter shall be considered to be made for purposes of all other
Sections of the Company Disclosure Letter to the extent that the relevance of
any such disclosure to any other Section of the Company Disclosure Letter is
reasonably apparent from the text of such disclosure. The inclusion of any items
or information in the Company Disclosure Letter shall not be construed as an
admission that such item or information (or any non-disclosed item or
information of comparable or greater significance) is material or otherwise
required to be scheduled as an exception from any representation, warranty or
covenant. Matters reflected in the Company Disclosure Letter are not necessarily
limited to matters required by the Agreement to be disclosed in the Company
Disclosure Letter.
67
IN WITNESS WHEREOF, the parties have caused this Separation Agreement
to be signed by their respective officers thereunto duly authorized as of the
date first written above.
▇▇▇▇▇▇▇▇▇'▇, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇
------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇
Title: Executive Vice President and
General Counsel
NEW ALOHA CORPORATION
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇
Title: President
SUPERVALU, INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇
Title: Chairman & CEO
AB ACQUISITION LLC
By: /s/ ▇▇▇ ▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇ ▇▇▇▇▇▇▇
Title: Authorized Signatory