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AGREEMENT AND PLAN OF MERGER
Dated as of November 23, 1998
Among
▇. ▇. ▇▇▇▇▇▇ COMPANY, INC.,
LEGACY ACQUISITION CORP.
And
▇▇▇▇▇▇▇▇ DRUG STORES, INC.
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TABLE OF CONTENTS
Page
Parties and Recitals ................................. 1
ARTICLE I
The Merger
SECTION 1.01. The Merger ........................... 2
SECTION 1.02. Closing .............................. 2
SECTION 1.03. Effective Time ....................... 2
SECTION 1.04. Effects .............................. 3
SECTION 1.05. Certificate of Incorporation and
Bylaws ............................ 3
SECTION 1.06. Directors ............................ 3
SECTION 1.07. Officers ............................. 3
ARTICLE II
Effect on the Capital Stock of the
Constituent Corporations; Exchange of Certificates
SECTION 2.01. Effect on Capital Stock .............. 3
SECTION 2.02. Exchange of Certificates ............. 5
ARTICLE III
Representations and Warranties of the Company
SECTION 3.01. Organization, Standing and Power ...... 10
SECTION 3.02. Company Subsidiaries; Equity Interests. 10
SECTION 3.03. Capital Structure ..................... 11
SECTION 3.04. Authority; Execution and Delivery;
Enforceability ...................... 12
SECTION 3.05. No Conflicts; Consents ................ 13
SECTION 3.06. SEC Documents; Undisclosed
Liabilities ......................... 15
SECTION 3.07. Information Supplied .................. 16
SECTION 3.08. Absence of Certain Changes or Events .. 16
SECTION 3.09. Taxes ................................. 18
SECTION 3.10. Absence of Changes in Benefit Plans ... 20
SECTION 3.11. ERISA Compliance; Excess Parachute
Payments ............................ 20
SECTION 3.12. Litigation ............................ 23
SECTION 3.13. Compliance with Company Permits ....... 24
SECTION 3.14. Brokers; Schedule of Fees and
Expenses ............................ 24
SECTION 3.15. Opinion of Financial Advisor .......... 25
SECTION 3.16. No Default ............................ 25
SECTION 3.17. Real Property ......................... 25
SECTION 3.18. Intellectual Property ................. 26
SECTION 3.19. Environmental Matters ................. 27
SECTION 3.20. Product Liability ..................... 28
SECTION 3.21. Insurance ............................. 28
SECTION 3.22. Contracts ............................. 28
ARTICLE IV
Representations and Warranties of Parent and Sub
SECTION 4.01. Organization, Standing and Power ...... 29
SECTION 4.02. Interim Operations of Sub.............. 29
SECTION 4.03. Capital Structure ..................... 29
SECTION 4.04. Authority; Execution and Delivery;
Enforceability ...................... 31
SECTION 4.05. No Conflicts; Consents ................ 32
SECTION 4.06. SEC Documents; Undisclosed
Liabilities ......................... 33
SECTION 4.07. Information Supplied .................. 33
SECTION 4.08. Absence of Certain Changes or Events .. 34
SECTION 4.09. Taxes ................................. 35
SECTION 4.10. Litigation............................. 35
SECTION 4.11. Compliance with Applicable Laws........ 35
SECTION 4.12. Parent Rights Agreement................ 35
ARTICLE V
Covenants Relating to Conduct of Business
SECTION 5.01. Conduct of Business ................... 36
SECTION 5.02. No Solicitation ....................... 40
ARTICLE VI
Additional Agreements
SECTION 6.01. Preparation of the Form S-4 and the
Proxy Statement; Stockholders
Meetings ........................... 42
SECTION 6.02. Access to Information;
Confidentiality .................... 44
SECTION 6.03. Reasonable Efforts; Notification ..... 45
SECTION 6.04. Company Stock Options................. 47
SECTION 6.05. Benefit Plans ........................ 50
SECTION 6.06. Indemnification ...................... 52
SECTION 6.07. Fees and Expenses .................... 54
SECTION 6.08. Public Announcements ................. 54
SECTION 6.09. Transfer Taxes ....................... 55
SECTION 6.10. Affiliates ........................... 55
SECTION 6.11. Stock Exchange Listing ............... 55
SECTION 6.12. Tax Treatment ........................ 55
SECTION 6.13. Eckerd Board ......................... 56
SECTION 6.14. Parent Rights ........................ 56
SECTION 6.15. Charitable Giving .................... 56
ARTICLE VII
Conditions Precedent
SECTION 7.01. Conditions to Each Party's
Obligation To Effect The Merger .... 56
SECTION 7.02. Conditions to Obligations of Parent
and Sub ........................... 57
SECTION 7.03. Conditions to Obligations of the
Company ........................... 59
ARTICLE VIII
Termination, Amendment and Waiver
SECTION 8.01. Termination ......................... 60
SECTION 8.02. Effect of Termination ................ 62
SECTION 8.03. Amendment ............................ 62
SECTION 8.04. Extension; Waiver .................... 62
SECTION 8.05. Procedure for Termination, Amendment,
Extension or Waiver ................ 62
ARTICLE IX
General Provisions
SECTION 9.01. Nonsurvival of Representations
and Warranties ..................... 63
SECTION 9.02. Notices .............................. 63
SECTION 9.03. Definitions .......................... 64
SECTION 9.04. Interpretation; Disclosure Letters ... 64
SECTION 9.05. Severability ......................... 65
SECTION 9.06. Counterparts ......................... 65
SECTION 9.07. Entire Agreement; Third-Party
Beneficiaries ...................... 65
SECTION 9.08. Governing Law ........................ 65
SECTION 9.09. Assignment ........................... 65
SECTION 9.10. Enforcement .......................... 66
EXHIBITS
Exhibit A Restated Certificate of Incorporation of
Surviving Corporation (Section 1.05)
Exhibit B Form of Company Affiliate Letter
(Section 6.10)
Exhibit C Form of Parent Representation Letter
(Section 6.12)
Exhibit D Form of Company Representation Letter
(Section 6.12)
Exhibit E Form of Company Legal Opinion
(Section 7.02(f))
Exhibit F Form of Opinion of Delaware Counsel of the
Company (Section 7.02(f))
Exhibit G Form of Parent Legal Opinion
(Section 7.03(e))
Exhibit H Form of Opinion of Delaware Counsel of the
Parent (Section 7.03(e))
AGREEMENT AND PLAN OF MERGER,
dated as of November 23, 1998 (this
"Agreement"), among ▇. ▇. ▇▇▇▇▇▇
COMPANY, INC., a Delaware corporation
("Parent"),LEGACY ACQUISITION CORP.,
a Delaware corporation and a wholly
owned subsidiary of Parent ("Sub"),
and ▇▇▇▇▇▇▇▇ DRUG STORES, INC., a
Delaware corporation (the "Company").
WHEREAS the respective Boards of Directors of
Parent, Sub and the Company have approved the merger (the
"Merger") of Sub with and into the Company on the terms and
subject to the conditions set forth in this Agreement, whereby
each issued and outstanding share of Class A common stock, par
value $1.00 per share, of the Company (the "Class A Common
Stock"), and each issued and outstanding share of Class B
common stock, par value $1.00 per share, of the Company (the
"Class B Common Stock" and, together with the Class A Common
Stock, the "Company Common Stock"), not owned directly by
Parent, Sub or the Company, shall be converted into the right
to receive common stock, par value $0.50 per share, of Parent
(the "Parent Common Stock");
WHEREAS simultaneously with the execution and
delivery of this Agreement, Parent and certain stockholders of
the Company (the "Principal Company Stockholders") are
entering into an agreement (the "Company Stockholder
Agreement" and, together with this Agreement, the "Transaction
Agreements") pursuant to which the Principal Company
Stockholders will agree to take specified actions in
furtherance of the Merger;
WHEREAS for Federal income tax purposes it is
intended that the Merger qualify as a "reorganization" within
the meaning of Section 368(a) of the Internal Revenue Code of
1986, as amended (the "Code"); and
WHEREAS Parent, Sub and the Company desire to make
certain representations, warranties, covenants and agreements
in connection with the Merger and also to prescribe various
conditions to the Merger.
NOW, THEREFORE, in consideration of the foregoing
and the representations, warranties, covenants and agreements
herein contained, the parties hereto agree as follows:
ARTICLE I
The Merger
SECTION 1.01. The Merger. On the terms and subject
to the conditions set forth in this Agreement, and in
accordance with the Delaware General Corporation Law (the
"DGCL"), Sub shall be merged with and into the Company at the
Effective Time (as defined in Section 1.03). At the Effective
Time, the separate corporate existence of Sub shall cease and
the Company shall continue as the surviving corporation (the
"Surviving Corporation"). At the election of Parent (subject
to the consent of the Company, which consent shall not be
unreasonably withheld), any direct wholly owned subsidiary of
Parent may be substituted for Sub as a constituent corporation
in the Merger. In such event, the parties shall execute an
appropriate amendment to this Agreement in order to reflect
the foregoing. The Merger and the other transactions
contemplated by the Transaction Agreements are sometimes
referred to in this Agreement collectively as the
"Transactions".
SECTION 1.02. Closing. The closing (the "Closing")
of the Merger shall take place at the offices of Cravath,
Swaine & ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ at
10:00 a.m. on a date to be specified by the parties (the
"Closing Date"), which shall be no later than the second
business day following the satisfaction (or, to the extent
permitted by law, waiver by all parties) of the conditions set
forth in Section 7.01, or, if on such day any condition set
forth in Section 7.02 or 7.03 has not been satisfied (or, to
the extent permitted by law, waived by the party or parties
entitled to the benefits thereof), as soon as practicable
after all the conditions set forth in Article VII have been
satisfied (or, to the extent permitted by law, waived by the
parties entitled to the benefits thereof), or at such other
place, time and date as shall be agreed in writing between
Parent and the Company.
SECTION 1.03. Effective Time. Prior to the Closing,
the Company shall prepare, and on the Closing Date the Company
shall file with the Secretary of State of the State of
Delaware, a certificate of merger or other appropriate
documents (in any such case, the "Certificate of Merger")
executed in accordance with the relevant provisions
of the DGCL and shall make all other filings or recordings
required under the DGCL. The Merger shall become effective at
such time as the Certificate of Merger is duly filed with such
Secretary of State, or at such other time as Parent and the
Company shall agree and specify in the Certificate of Merger
(the time the Merger becomes effective being the "Effective
Time").
SECTION 1.04. Effects. The Merger shall have the
effects set forth in Section 259 of the DGCL.
SECTION 1.05. Certificate of Incorporation and
Bylaws. (a) The Restated Certificate of Incorporation of the
Surviving Corporation shall be amended at the Effective Time
to read in the form of Exhibit A, and, as so amended, such
Restated Certificate of Incorporation shall be the Certificate
of Incorporation of the Surviving Corporation until thereafter
changed or amended as provided therein or by applicable law.
(b) The Bylaws of Sub, as in effect immediately
prior to the Effective Time, shall be the Bylaws of the
Surviving Corporation until thereafter changed or amended as
provided therein or by applicable law.
SECTION 1.06. Directors. The directors of Sub
immediately prior to the Effective Time shall be the directors
of the Surviving Corporation, until the earlier of their
resignation or removal or until their respective successors
are duly elected or appointed and qualified, as the case may
be.
SECTION 1.07. Officers. The officers of Sub
immediately prior to the Effective Time shall be the officers
of the Surviving Corporation, until the earlier of their
resignation or removal or until their respective successors
are duly elected or appointed and qualified, as the case may
be.
ARTICLE II
Effect on the Capital Stock of the
Constituent Corporations; Exchange of Certificates
SECTION 2.01. Effect on Capital Stock. At the
Effective Time, by virtue of the Merger and without any
action on the part of the holder of any shares of Company
Common Stock or any shares of capital stock of Sub:
(a) Capital Stock of Sub. Each issued and
outstanding share of capital stock of Sub shall be converted
into and become one fully paid and nonassessable share of
common stock, par value $1.00 per share, of the Surviving
Corporation.
(b) Cancelation of Treasury Stock and Parent- Owned
Stock. Each share of Company Common Stock that is owned by the
Company, Parent or Sub shall no longer be outstanding and
shall automatically be canceled and retired and shall cease to
exist, and no Parent Common Stock or other consideration shall
be delivered or deliverable in exchange therefor.
(c) Conversion of Company Common Stock. (1) Subject
to Sections 2.01(b), 2.01(e) and 2.02(e), each issued and
outstanding share of Company Common Stock shall be converted
into the right to receive that number (the "Exchange Ratio")
of fully paid and nonassessable shares of Parent Common Stock
equal to the quotient obtained by dividing (i) $30.00 (the
"Price") by (ii) the Fair Market Value (as defined below);
provided, however, that in no event shall the Exchange Ratio
be greater than 0.6709 or less than 0.5489. "Fair Market
Value" means an amount equal to the average of the closing
sale prices for the Parent Common Stock on the New York Stock
Exchange, Inc. (the "NYSE"), as reported in The Wall Street
Journal, Northeastern edition, for the Random Trading Days;
and "Random Trading Days" means the ten trading days selected
by lot out of the twenty trading days ending with the second
complete trading day prior to the Closing Date (not counting
the Closing Date) (such twenty trading day period is referred
to herein as the "Valuation Period"). The Random Trading Days
shall be selected by lot by the Company and Parent at 5:00
p.m., New York time, on the second complete trading day prior
to the date they select as the Closing Date pursuant to
Section 1.02.
(2) The shares of Parent Common Stock to be issued
upon the conversion of shares of Company Common Stock pursuant
to this Section 2.01(c) and cash in lieu of fractional shares
of Parent Common Stock as contemplated by Section 2.02(e) are
referred to collectively as "Merger Consideration". As of the
Effective Time, all such shares of Company Common Stock shall
no longer be outstanding and shall automatically be canceled
and retired and shall cease to exist, and each holder of a
certificate representing any such shares of Company Common
Stock shall cease to have any
rights with respect thereto, except the right to receive
Merger Consideration upon surrender of such certificate in
accordance with Section 2.02, without interest.
(3) The foregoing notwithstanding, if between the
date of this Agreement and the Effective Time the outstanding
shares of Parent Common Stock shall have been changed into a
different number of shares or a different class, by reason of
any stock dividend, subdivision, split, combination or
exchange of shares, the method of calculating the Exchange
Ratio, including the amount of the Price and the minimum and
maximum Exchange Ratio, shall be appropriately adjusted to
reflect such stock dividend, subdivision, split, combination
or exchange.
(d) Stock Options. Each outstanding Company Employee
Stock Option (as defined in Section 6.04) shall be treated in
the manner set forth in Section 6.04.
(e) Appraisal Rights. Notwithstanding anything in
this Agreement to the contrary, shares ("Appraisal Shares") of
Class B Common Stock that are issued and outstanding
immediately prior to the Effective Time and that are held by
any person who is entitled to demand and properly demands
appraisal of such Appraisal Shares pursuant to, and who
complies in all respects with, Section 262 of the DGCL
("Section 262") shall not be converted into Merger
Consideration as provided in Section 2.01(c), but shall be
entitled to payment of the fair value of such Appraisal Shares
in accordance with Section 262; provided, however, that if any
such holder shall fail to perfect or otherwise shall waive,
withdraw or lose the right to appraisal under Section 262,
then the right of such holder to be paid the fair value of
such holder's Appraisal Shares shall cease and such Appraisal
Shares shall be deemed to have been converted as of the
Effective Time into and to have become exchangeable for the
right to receive the Merger Consideration as provided in
Section 2.01(c). The Company shall give Parent (i) prompt
notice of any written objection to the Merger from any holder
of Appraisal Shares and (ii) the opportunity to direct all
negotiations and proceedings with respect to any such holder
of Appraisal Shares. The Company shall not, without the prior
written consent of Parent, voluntarily make any payment with
respect to, or settle, offer to settle or otherwise negotiate,
any such demands.
SECTION 2.02. Exchange of Certificates. (a) Exchange
Agent. Promptly following the Effective Time, Parent shall
deposit with ChaseMellon Shareholder Services, L.L.C. or such
other bank or trust company as may be
designated by Parent and reasonably acceptable to the Company
(the "Exchange Agent"), for the benefit of the holders of
shares of Company Common Stock, for exchange in accordance
with this Article II, through the Exchange Agent, certificates
representing the shares of Parent Common Stock issuable
pursuant to Section 2.01 in exchange for outstanding shares of
Company Common Stock (such shares of Parent Common Stock,
together with any dividends or distri butions with respect
thereto, being hereinafter referred to as the "Exchange
Fund"). For the purposes of such deposit, Parent shall assume
that there will not be any fractional shares of Parent Common
Stock. Parent agrees to make available to the Exchange Agent
from time to time as needed, cash sufficient to pay cash in
lieu of fractional shares in accordance with Section 2.02(e).
The Exchange Agent shall, pursuant to irrevocable
instructions, deliver the Parent Common Stock contemplated to
be issued pursuant to Section 2.01 out of the Exchange Fund.
The Exchange Fund shall not be used for any other purpose.
(b) Exchange Procedures. As soon as reasonably
practicable after the Effective Time, the Exchange Agent shall
mail to each holder of record of a certificate or certificates
(the "Certificates") that immediately prior to the Effective
Time represented outstanding shares of Company Common Stock
whose shares were converted into the right to receive Merger
Consideration pursuant to Section 2.01, (i) a letter of
transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall
pass, only upon delivery of the Certificates to the Exchange
Agent and shall be in such form and have such other provisions
as Parent may reasonably specify) and (ii) instructions for
use in effecting the surrender of the Certificates in exchange
for Merger Consideration. Upon surrender of a Certificate for
cancelation to the Exchange Agent or to such other agent or
agents as may be appointed by Parent and reasonably acceptable
to the Company, together with such letter of transmittal, duly
executed, and such other documents as may reasonably be
required by the Exchange Agent, the holder of such Certificate
shall be entitled to receive in exchange therefor a
certificate representing that number of whole shares of Parent
Common Stock (together with cash in lieu of fractional shares)
that such holder has the right to receive pursuant to the
provisions of this Article II, and the Certificate so
surrendered shall forthwith be canceled. In the event of a
transfer of ownership of Company Common Stock that is not
registered in the transfer records of the Company, a
certificate representing the appropriate number of shares of
Parent Common Stock may be issued to a person other than the
person in whose name the Certificate so
surrendered is registered, if such Certificate shall be
properly endorsed or otherwise be in proper form for transfer
and the person requesting such payment shall pay any transfer
or other taxes required by such transfer and by reason of the
issuance of shares of Parent Common Stock to a person other
than the registered holder of such Certificate or establish to
the satisfaction of Parent that such tax has been paid or is
not applicable. Until surrendered as contemplated by this
Section 2.02, each Certificate shall be deemed at any time
after the Effective Time to represent only the right to
receive upon such surrender Merger Consideration as
contemplated by this Section 2.02. No interest shall be paid
or accrue on any cash payable upon surrender of any
Certificate. The Exchange Agent shall not be entitled to vote
or exercise any rights of ownership with respect to the Parent
Common Stock held by it from time to time hereunder, except
that it shall receive and hold all dividends or other
distributions paid or distributed with respect thereto for the
account of persons entitled thereto.
(c) Distributions with Respect to Unexchanged
Shares. No dividends or other distributions with respect to
Parent Common Stock declared or made after the Effective Time
with a record date after the Effective Time shall be paid to
the holder of any Certificate formerly representing Company
Common Stock with respect to the right to receive shares of
Parent Common Stock issuable upon surrender thereof, and no
cash payment in lieu of fractional shares shall be paid to any
such holder pursuant to Section 2.02(e), until the surrender
of such Certificate in accordance with this Article II.
Subject to applicable law, following surrender of any such
Certificate, there shall be paid to the holder of the
Certificate representing whole shares of Parent Common Stock
issued in exchange therefor, without interest, (i) at the time
of such surrender, the amount of any cash payable in lieu of a
fractional share of Parent Common Stock to which such holder
is entitled pursuant to Section 2.02(e) and the amount of
dividends or other distributions with a record date after the
Effective Time theretofore paid with respect to such whole
shares of Parent Common Stock, and (ii) at the appropriate
payment date, the amount of dividends or other distributions
with a record date after the Effective Time but prior to such
surrender and a payment date subsequent to such surrender
payable with respect to such whole shares of Parent Common
Stock.
(d) No Further Ownership Rights in Company Common
Stock. The Merger Consideration issued (and paid) in
accordance with the terms of this Article II upon conversion
of any shares of Company Common Stock shall be deemed to
have been issued (and paid) in full satisfaction of all rights
pertaining to such shares of Company Common Stock, subject,
however, to the Surviving Corporation's obligation to pay any
dividends or make any other distributions with a record date
prior to the Effective Time that may have been declared or
made by the Company on such shares of Company Common Stock in
accordance with the terms of this Agreement or prior to the
date of this Agreement and which remain unpaid at the
Effective Time, and after the Effective Time there shall be no
further registration of transfers on the stock transfer books
of the Surviving Corporation of shares of Company Common Stock
that were outstanding immediately prior to the Effective Time.
If, after the Effective Time, any Certificates formerly
representing shares of Company Common Stock are presented to
the Surviving Corporation or the Exchange Agent for any
reason, they shall be canceled and exchanged as provided in
this Article II.
(e) No Fractional Shares. (1) No certificates or
scrip representing fractional shares of Parent Common Stock
shall be issued upon the conversion of Company Common Stock
pursuant to Section 2.01, and such fractional share interests
shall not entitle the owner thereof to vote or to any rights
of a holder of Parent Common Stock.
(2) In lieu of any such fractional shares, each
holder of Company Common Stock who would otherwise be entitled
to such fractional shares shall be entitled to an amount in
cash, without interest, rounded to the nearest cent, equal to
the product of (A) the amount of the fractional share interest
in a share of Parent Common Stock to which such holder is
entitled under Section 2.01(c) (or would be entitled but for
this Section 2.02(e)) and (B) the Fair Market Value. All
fractional shares to which a single record holder would be
entitled shall be aggregated. Calculations made pursuant to
this Section 2.02(e) shall be rounded to three decimal places.
(3) As soon as practicable after the determina tion
of the amount of cash, if any, to be paid to holders of
Company Common Stock in lieu of any fractional share interests
in Parent Common Stock, the Exchange Agent shall make
available such amounts, without interest, to the holders of
Company Common Stock entitled to receive such cash.
(f) Termination of Exchange Fund. Any portion of the
Exchange Fund and any cash in lieu of fractional shares of
Parent Common Stock made available to the Exchange Agent that
remains undistributed to the holders of Company Common Stock
for one year after the Effective Time shall be
delivered to Parent, upon demand, and any holder of Company
Common Stock who has not theretofore complied with this
Article II shall thereafter look only to Parent for payment of
its claim for Merger Consideration and any dividends or
distributions with respect to Parent Common Stock as
contemplated by Section 2.02(c)(i).
(g) No Liability. None of Parent, Sub, the Company
or the Exchange Agent shall be liable to any person in respect
of any shares of Company Common Stock or Parent Common Stock
(or dividends or distributions with respect thereto), as the
case may be, or cash from the Exchange Fund delivered to a
public official pursuant to any applicable abandoned property,
escheat or similar law. If any Certificate has not been
surrendered prior to five years after the Effective Time (or
immediately prior to such earlier date on which Merger
Consideration or any dividends or distributions with respect
to Parent Common Stock as contemplated by Section 2.02(c)(i)
in respect of such Certificate would otherwise escheat to or
become the property of any Governmental Entity (as defined in
Section 3.05)), any such shares, cash, dividends or
distributions in respect of such Certificate shall, to the
extent permitted by applicable law, become the property of the
Surviving Corporation, free and clear of all claims or
interest of any person previously entitled thereto.
(h) Investment of Exchange Fund. The Exchange Agent
shall invest any cash included in the Exchange Fund, as
directed by Parent, on a daily basis. Any interest and other
income resulting from such investments shall be paid to
Parent.
(i) Missing Certificates. In the event any
Certificate shall have been lost, stolen or destroyed, upon
the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed and, if
required by the Surviving Corporation, the posting by such
person of a bond in such reasonable amount as the Surviving
Corporation may direct as indemnity against any claim that may
be made against it with respect to such Certificate, the
Exchange Agent will issue in exchange for such lost, stolen or
destroyed Certificate the Merger Consideration, together with
any unpaid dividends and distributions with respect to shares
of Parent Common Stock as provided in Section 2.02(c),
deliverable in respect thereto pursuant to this Agreement.
(j) Backup Withholding of Tax. Parent shall be
entitled to deduct and withhold from the Merger Consideration
otherwise payable pursuant to this Agreement
to any former holder of Company Common Stock such amount as
Parent (or any affiliate thereof) or the Exchange Agent is
required to deduct and withhold pursuant to backup withholding
rules under the Code with respect to the making of such
payments. To the extent that amounts are so withheld by
Parent, such withheld amounts shall be treated for all
purposes of this Agreement as having been paid to the former
holder of Company Common Stock in respect of which such
deduction and withholding was made by Parent.
ARTICLE III
Representations and Warranties of the Company
The Company represents and warrants to Parent and
Sub as follows:
SECTION 3.01. Organization, Standing and Power. Each
of the Company and each of its subsidiaries (the "Company
Subsidiaries") is a corporation or partnership duly organized,
validly existing and in good standing under the laws of the
jurisdiction in which it is organized and has full power and
authority to own, lease and operate its properties and to
conduct its businesses as presently conducted. The Company and
each Company Subsidiary is duly qualified and in good standing
to do business in each jurisdiction where the nature of its
business or the ownership or leasing of its properties makes
such qualification necessary, other than in such jurisdictions
where the failure to be so qualified or in good standing could
not reasonably be expected to have (i) a material adverse
effect on the Company (as defined in Section 9.03) or (ii) a
material adverse effect on the ability of the Company to
perform its obligations under the Transaction Agreements or to
consummate the Transactions (collectively, a "Company Material
Adverse Effect"). The Company has made available to Parent
true and complete copies of the restated certificate of
incorporation of the Company, as amended to the date of this
Agreement (as so amended, the "Company Charter"), and the
by-laws of the Company, as amended to the date of this
Agreement (as so amended, the "Company Bylaws"), and the
comparable charter and organizational documents of each
Company Subsidiary, in each case as amended through the date
of this Agreement.
SECTION 3.02. Company Subsidiaries; Equity
Interests. (a) The letter, dated as of the date of this
Agreement, from the Company to Parent and Sub (the "Company
Disclosure Letter") lists each Company Subsidiary and its
jurisdiction of incorporation or organization. All the
outstanding shares of capital stock of each Company Subsidiary
have been validly issued and are fully paid and nonassessable
and are owned by the Company free and clear of all pledges,
liens, charges, mortgages, encumbrances and security interests
of any kind or nature whatsoever (collectively, "Liens").
(b) Except for its interests in the Company
Subsidiaries and except for the ownership interests set forth
in the Company Disclosure Letter and acquisitions after the
date of this Agreement permitted by Section 5.01(a)(iv), the
Company does not own, directly or indirectly, any capital
stock, membership interest, partnership interest, joint
venture interest or other equity interest or option or other
right to acquire any such interest, in any person, with a fair
market value as of the date of this Agreement in excess of
$100,000.
SECTION 3.03. Capital Structure. The authorized
capital stock of the Company consists of 20,000,000 shares of
Class A Common Stock and 12,000,000 shares of Class B Common
Stock. At the close of business on November 19, 1998, (i)
7,529,913 shares of Class A Common Stock and 6,230,566 shares
of Class B Common Stock were issued and outstanding, (ii)
60,559 shares of Class A Common Stock and 3,994 shares of
Class B Common Stock were held by the Company in its treasury
and (iii) 1,398,240 shares of Class A Common Stock were
reserved for issuance pursuant to outstanding Company Employee
Stock Options (as defined in Section 6.04), 629,828 additional
shares of Class A Common Stock were reserved for issuance
pursuant to the Company Stock Plans (as defined in Section
6.04) and 27,481 shares of Class A Common Stock were reserved
for issuance pursuant to the Company's 1987 Executive Bonus
and Stock Plan. Except as set forth above, at the close of
business on November 19, 1998, no shares of capital stock or
other voting securities of the Company were issued, reserved
for issuance or outstanding, and no securities of the Company
or any Company Subsidiary convertible into or exchangeable for
shares of capital stock, Voting Company Debt (as defined
below) or other voting securities of the Company or any
Company Subsidiary were issued, reserved for issuance or
outstanding. There are no outstanding Company SARs (as defined
in Section 6.04). All outstanding shares of Company Common
Stock are, and all such shares that may be issued prior to the
Effective Time in accordance with the terms of this Agreement
will be when issued, duly authorized, validly issued, fully
paid and nonassessable and not subject to or issued in
violation of any purchase option, call option, right of first
refusal, preemptive right, subscription right or any similar
right under any provision of the DGCL, the
Company Charter, the Company Bylaws or any Contract (as
defined in Section 3.05) to which the Company is a party or
otherwise bound. There are not any bonds, debentures, notes or
other indebtedness of the Company having the right to vote (or
convertible into, or exchangeable for, securities having the
right to vote) on any matters on which holders of Company
Common Stock may vote ("Voting Company Debt"). Except as set
forth above, as of the date of this Agreement, there are not
any options, warrants, calls, rights (including preemptive
rights), convertible or exchangeable securities, "phantom"
stock rights, stock appreciation rights, stock-based
performance units, commitments, Contracts, arrangements or
undertakings of any kind to which the Company or any Company
Subsidiary is a party or by which any of them is bound (i)
obligating the Company or any Company Subsidiary to issue,
deliver or sell, purchase, redeem or acquire or cause to be
issued, delivered or sold, or purchased, redeemed or acquired,
additional shares of capital stock or other equity interests
in, or any security convertible or exercisable for or
exchangeable into any capital stock of or other equity
interest in, the Company or of any Company Subsidiary or any
Voting Company Debt or other voting securities of the Company
or any Company Subsidiary or (ii) obligating the Company or
any Company Subsidiary to issue, grant, extend or enter into
any such option, warrant, call, right, security, commitment,
Contract, arrangement or undertaking. As of the date of this
Agreement, there are not any outstanding contractual
obligations of the Company or any Company Subsidiary to
repurchase, redeem or otherwise acquire any shares of capital
stock of the Company or any Company Subsidiary. Except for the
Company Stockholder Agreement and the Existing Stockholder
Agreement (as defined therein), there are not as of the date
hereof and there will not be at the Effective Time any
stockholder agreements, voting trusts or other agreements or
understandings to which the Company is a party or by which it
is bound relating to the voting of any shares of the capital
stock of the Company that will limit in any way the
solicitation of proxies by or on behalf of the Company from,
or the casting of votes by, the stockholders of the Company
with respect to the Merger. There are no restrictions on the
right of the Company to vote the stock of any of the Company
Subsidiaries.
SECTION 3.04. Authority; Execution and Delivery;
Enforceability. (a) The Company has all requisite corporate
power and authority to execute the Transaction Agreements to
which it is a party and to consummate the Transactions. The
execution and delivery by the Company of each Transaction
Agreement to which it is a party and the consummation by the
Company of the Transactions have been
duly authorized by all necessary corporate action on the part
of the Company, subject, in the case of the Merger, to receipt
of the Company Stockholder Approval (as defined in Section
3.04(c)). The Company has duly executed and delivered each
Transaction Agreement to which it is a party, and, assuming
each Transaction Agreement constitutes a valid and binding
obligation of each of the other parties thereto, each
Transaction Agreement to which it is a party constitutes its
legal, valid and binding obligation, enforceable against it in
accordance with its terms, subject, as to enforceability, to
bankruptcy, insolvency, reorganization, moratorium and other
laws of general applicability relating to or affecting
creditors' rights and remedies and to general principles of
equity.
(b) The Board of Directors of the Company (the
"Company Board"), at a meeting duly called and held, duly and
unanimously adopted resolutions (i) approving this Agreement
and the other Transaction Agreements, the Merger and the other
Transactions, (ii) determining that the terms of the Merger
and the other Transactions are fair to and in the best
interests of the Company and its stockholders, (iii)
recommending that the Company's stockholders adopt this
Agreement and (iv) declaring that this Agreement and the
Merger are advisable. Such resolutions are sufficient to
render inapplicable to Parent and Sub and this Agreement and
the other Transaction Agreements, the Merger and the other
Transactions the provisions of Section 203 of the DGCL. To the
Company's knowledge, no other state takeover statute or
similar statute or regulation applies or purports to apply to
the Company with respect to this Agreement and the other
Transaction Agreements, the Merger or any other Transaction.
(c) The only vote of holders of any class or series
of the Company's capital stock necessary to approve and adopt
this Agreement and the Merger is the adoption of this
Agreement by the holders of a majority of the outstanding
Company Common Stock, voting together as a single class (the
"Company Stockholder Approval").
SECTION 3.05. No Conflicts; Consents. (a) Except as
set forth in the Company Disclosure Letter, the execution and
delivery by the Company of each Transaction Agreement to which
it is a party do not, and the consummation of the Merger and
the other Transactions and compliance with the terms hereof
and thereof will not, conflict with, or result in any
violation of or default (with or without notice or lapse of
time, or both) under, or give rise to a right of termination,
cancelation or acceleration of any obligation or to loss of a
benefit
under, or result in the creation of any Lien upon any of the
properties or assets of the Company or any Company Subsidiary
under, any provision of (i) the Company Charter, the Company
Bylaws or the comparable charter or organizational documents
of any Company Subsidiary, (ii) any contract, lease, license,
indenture, note, bond, mortgage, agreement, permit,
concession, franchise or other instrument (a "Contract") to
which the Company or any Company Subsidiary is a party or by
which any of their respective properties or assets is bound or
(iii) subject to the filings and other matters referred to in
Section 3.05(b), any judgment, order or decree ("Judgment") or
statute, law, ordinance, rule or regulation ("Applicable Law")
applicable to the Company or any Company Subsidiary or any of
their respective properties or assets, other than, in the case
of clauses (ii) and (iii) above, any such items that,
individually or in the aggregate, could not reasonably be
expected to have a Company Material Adverse Effect.
(b) No consent, approval, license, permit, order or
authorization ("Consent") of, or registration, declaration or
filing with, any Federal, state, local or foreign government,
or permit from any court of competent jurisdiction,
administrative agency or commission or other governmental
authority or instrumentality, domestic or foreign (a
"Governmental Entity") is required to be obtained or made by
or with respect to the Company or any Company Subsidiary in
connection with the execution, delivery and performance of any
Transaction Agreement to which it is a party or the
consummation of the Transactions, other than (i) compliance
with and filings under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), (ii) the
filing with the Securities and Exchange Commission (the "SEC")
of (A) a proxy or information statement relating to the
adoption of this Agreement by the Company's stockholders (the
"Proxy Statement"), and (B) such reports under Section 13 of
the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), as may be required in connection with this Agreement
and the other Transaction Agreements, the Merger and the other
Transactions, (iii) the filing of the Certificate of Merger
with the Secretary of State of the State of Delaware and
appropriate documents with the relevant authorities of the
other jurisdictions in which the Company is qualified to do
business, (iv) compliance with and such filings as may be
required under applicable environmental laws, including the
New Jersey Environmental Cleanup Responsibility Act and the
Connecticut Environmental Transfer Law, (v) the approval of
the relevant pharmacy boards and alcoholic beverage
commissions or comparable entities in the states in which the
Company and the Company Subsidiaries do business,
(vi) such filings as may be required in connection with the
Taxes described in Section 6.09 and (vii) such other items (A)
required solely by reason of the participation of Parent (as
opposed to any other third party) in the Transactions, (B)
that, individually or in the aggregate, could not reasonably
be expected to have a Company Material Adverse Effect or (C)
as are set forth in the Company Disclosure Letter.
SECTION 3.06. SEC Documents; Undisclosed
Liabilities. The Company has filed and made available to
Parent true and correct copies of all reports, schedules,
forms, statements and other documents required to be filed by
the Company with the SEC since February 2, 1996 (the "Company
SEC Documents"). As of its respective date, each Company SEC
Document complied in all material respects with the
requirements of the Exchange Act or the Securities Act of
1933, as amended (the "Securities Act"), as the case may be,
and the rules and regulations of the SEC promulgated
thereunder applicable to such Company SEC Document, and did
not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.
The financial statements of the Company included in the
Company SEC Documents comply as to form in all material
respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect
thereto, have been prepared in accordance with generally
accepted accounting principles ("GAAP") (except, in the case
of unaudited statements, as permitted by Form 10-Q of the SEC)
applied on a consistent basis during the periods involved
(except as may be indicated in the notes thereto) and fairly
present in accordance with applicable requirements of GAAP
(except, in the case of unaudited statements, as permitted by
Form 10-Q of the SEC) the consolidated financial position of
the Company and its consolidated subsidiaries as of the dates
thereof and the consolidated results of their operations and
cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments,
none of which are material). Except as set forth in the Filed
Company SEC Documents (as defined in Section 3.08), as of the
date of this Agreement, neither the Company nor any Company
Subsidiary has any liabilities or obligations of any nature
(whether accrued, absolute, contingent or otherwise) required
by GAAP to be set forth on a consolidated balance sheet of the
Company and its consolidated subsidiaries or in the notes
thereto which, individually or in the aggregate, could
reasonably be expected to have a Company Material Adverse
Effect.
Except as disclosed in the Filed Company SEC
Documents or in the Company Disclosure Letter, as of the date
of this Agreement, there are no material agreements,
arrangements or understandings between the Company and any
party who is, or at any time after February 2, 1996 was, an
affiliate of the Company that are required to be disclosed in
the Filed Company SEC Documents.
SECTION 3.07. Information Supplied. None of the
information supplied or to be supplied by the Company for
inclusion or incorporation by reference in (i) the
registration statement on Form S-4 to be filed with the SEC by
Parent in connection with the issuance of Parent Common Stock
in the Merger (the "Form S-4") will, at the time the Form S-4
is filed with the SEC, at any time it is amended or
supplemented or at the time it becomes effective under the
Securities Act, contain any untrue statement of a material
fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not
misleading, or (ii) the Proxy Statement will, at the date it
is first mailed to the Company's stockholders or at the time
of the Company Stockholders Meeting (as defined in Section
6.01), contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading.
The Proxy Statement will comply as to form in all material
respects with the requirements of the Exchange Act and the
rules and regulations thereunder, except that no
representation is made by the Company with respect to
statements made or incorporated by reference therein based on
information supplied by Parent or Sub, in writing, for
inclusion or incorporation by reference in the Proxy
Statement.
SECTION 3.08. Absence of Certain Changes or Events.
Except as disclosed in the Company SEC Documents filed and
publicly available prior to the date of this Agreement (the
"Filed Company SEC Documents") or in the Company Disclosure
Letter, from the date of the most recent financial statements
included in the Filed Company SEC Documents to the date of
this Agreement, the Company has conducted its business only in
the ordinary course, and during such period there has not
been:
(i) any event, change, effect or development that,
individually or in the aggregate, has had or could
reasonably be expected to have a Company Material Adverse
Effect, other than events, changes, effects and
developments relating to the economy in general or to
the Company's industry in general and not specifically
relating to the Company or any Company Subsidiary;
(ii) except as permitted by Section 5.01(a)(i), any
declaration, setting aside or payment of any dividend or
other distribution (whether in cash, stock or property)
with respect to any capital stock of the Company or any
repurchase, redemption or other acquisition for value by
the Company or any Company Subsidiary of any outstanding
shares of capital stock or other equity securities of, or
other ownership interests in, the Company or any Company
Subsidiary;
(iii) any split, combination or reclassification of
any capital stock of the Company or any issuance or the
authorization of any issuance of any other securities in
respect of, in lieu of or in substitution for shares of
capital stock of the Company (other than conversions of
shares of Class B Common Stock into Class A Common Stock
in accordance with the terms thereof);
(iv) (A) any granting by the Company or any Company
Subsidiary to any director or executive officer of the
Company or any Company Subsidiary of any increase in
compensation, except in the ordinary course of business
consistent with prior practice or as was required under
employment agreements in effect as of the date of the
most recent financial statements included in the Filed
Company SEC Documents, (B) any granting by the Company or
any Company Subsidiary to any such director or executive
officer of any increase in severance or termination pay,
except as was required under any employment, severance or
termination agreements in effect as of the date of the
most recent financial statements included in the Filed
Company SEC Documents, or (C) any entry by the Company or
any Company Subsidiary into, or any amendment of, any
employment, severance or termination agreement or
arrangement with any such director or executive officer;
(v) any change in accounting methods, principles or
practices by the Company or any Company Subsidiary
materially affecting the consolidated assets, liabilities
or results of operations of the Company, except insofar
as may have been required by a change in GAAP;
(vi) any material elections with respect to Taxes
(as defined in Section 3.09) by the Company or any
Company Subsidiary or settlement or compromise by the
Company or any Company Subsidiary of any material Tax
liability or refund; or
(vii) any amendment of any material term of any
outstanding equity security of the Company or any Company
Subsidiary.
SECTION 3.09. Taxes. Except as set forth in the
Company Disclosure Letter:
(a) Each of the Company and each Company Subsidiary
has timely filed, or has caused to be timely filed on its
behalf (taking into account any extension of time within which
to file), all Tax Returns required to be filed by it, and all
such filed Tax Returns are true, complete and accurate, except
to the extent any failure to file or any inaccuracies in any
filed Tax Returns would not, individually or in the aggregate,
have a Company Material Adverse Effect. All Taxes shown to be
due on such Tax Returns, or otherwise required to be paid by
the Company or a Company Subsidiary, have been timely paid,
except to the extent that any failure to pay, individually or
in the aggregate, has not had and could not reasonably be
expected to have a Company Material Adverse Effect.
(b) The most recent financial statements contained
in the Filed Company SEC Documents reflect an adequate reserve
for all Taxes payable by the Company and the Company
Subsidiaries for all Taxable periods and portions thereof
through the date of such financial statements. As of the date
of this Agreement, no deficiency with respect to any Taxes has
been proposed, asserted or assessed against the Company or any
Company Subsidiary, and no requests for waivers of the time to
assess any such Taxes are pending.
(c) The Federal income Tax Returns of the Company
and each Company Subsidiary consolidated in such Returns have
been examined by and settled with the United States Internal
Revenue Service for all years through the fiscal year ended
February 3, 1994. All assessments for Taxes due with respect
to such completed and settled examinations or any concluded
litigation have been fully paid.
(d) There are no material Liens for Taxes (other
than for current Taxes not yet due and payable) on the assets
of the Company or any Company Subsidiary. Neither the Company
nor any Company Subsidiary is bound by any agreement with
respect to Taxes.
(e) The Company has no reason to believe that any
conditions exist that could reasonably be expected to prevent
the Merger from qualifying as a reorganization within the
meaning of Section 368(a) of the Code.
(f) Neither the Company nor any Company Subsidiary
has constituted either a "distributing corporation" or a
"controlled corporation" (within the meaning of Section
355(a)(1)(A) of the Code) in a distribution of stock
qualifying for tax-free treatment under Section 355 of the
Code (i) in the two years prior to the date of this Agreement
or (ii) in a distribution which could otherwise constitute
part of a "plan" or "series of related transactions" (within
the meaning of Section 355(e) of the Code) in conjunction with
the Merger.
(g) Neither the Company nor any Company Subsidiary
has ever been a member of an affiliated group of corporations
within the meaning of Section 1504 of the Code, other than the
affiliated group of which the Company is the common parent.
(h) Neither the Company nor any Company Subsidiary
has filed a consent pursuant to the provisions of Section
341(f) of the Code (or any corresponding provision of state or
local law) or agreed to have Section 341(f)(2) (or any
corresponding provision of state or local law) apply to any
disposition of any asset owned by the Company or any Company
Subsidiary, as the case may be.
(i) Neither the Company nor any Company Subsidiary
has agreed to make, nor is required to make, any adjustment
under Section 481(a) of the Code or any similar provision of
state, local or foreign law by reason of a change in
accounting methods or otherwise.
(j) The Company and the Company Subsidiaries have
complied in all material respects with all applicable laws,
rules and regulations relating to withholding of Taxes.
(k) No property owned by the Company or any Company
Subsidiary (i) is property required to be treated as being
owned by another person pursuant to the provisions of Section
168(f)(8) of the Internal Revenue Code of 1954, as amended and
in effect immediately prior to the enactment of the Tax Reform
Act of 1986, (ii) constitutes "tax-exempt use property" within
the meaning of Section 168(h)(1) of the Code, (iii) is
"tax-exempt bond financed property" within the meaning of
Section 168(g) of the Code, or (iv) is "limited use property"
(as that term is used in Rev. Proc. 76-30).
(l) To the knowledge of the Company, as of the date
of this Agreement, neither the Company nor any Company
Subsidiary is subject to an audit in process.
(m) For purposes of this Agreement:
"Taxes" includes all forms of taxation, whenever
created or imposed, and whether of the United States or
elsewhere, and whether imposed by a local, municipal,
governmental, state, foreign, Federal or other Governmental
Entity, or in connection with any agreement with respect to
Taxes, including all interest, penalties and additions imposed
with respect to such amounts.
"Tax Return" means all Federal, state, local,
provincial and foreign Tax returns, declarations, statements,
reports, schedules, forms and information returns and any
amended Tax return relating to Taxes.
SECTION 3.10. Absence of Changes in Benefit Plans.
Except as disclosed in the Filed Company SEC Documents or in
the Company Disclosure Letter, from the date of the most
recent audited financial statements included in the Filed
Company SEC Documents to the date of this Agreement, there has
not been any adoption or amendment in any material respect by
the Company or any Company Subsidiary of any collective
bargaining agreement or any bonus, pension, profit sharing,
deferred compensation, incentive compensation, stock
ownership, stock purchase, stock option, phantom stock,
retirement, vacation, severance, disability, death benefit,
hospitalization, medical or other plan, arrangement or
understanding (whether or not legally binding) providing
benefits to any current or former employee, officer or
director of the Company or any Company Subsidiary
(collectively, "Company Benefit Plans"). Except as disclosed
in the Filed Company SEC Documents or in the Company
Disclosure Letter, as of the date of this Agreement there are
not any employment, consulting, indemnification, severance or
termination agreements or arrangements between the Company or
any Company Subsidiary and any current or former employee,
officer or director of the Company or any Company Subsidiary.
SECTION 3.11. ERISA Compliance; Excess Parachute
Payments. (a) The Company Disclosure Letter contains a list
and brief description of all "employee pension benefit plans"
(as defined in Section 3(2) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")) (sometimes
referred to herein as "Company Pension Plans"), "employee
welfare benefit plans" (as defined in Section 3(1) of ERISA)
and all other Company Benefit Plans
maintained, or contributed to, by the Company or any Company
Subsidiary for the benefit of any current or former employees,
officers or directors of the Company or any Company
Subsidiary. The Company has made available to Parent true,
complete and correct copies of (i) each Company Benefit Plan
(or, in the case of any unwritten Company Benefit Plan, a
description thereof), (ii) the most recent annual report on
Form 5500 filed with the Internal Revenue Service with respect
to each Company Benefit Plan (if any such report was required)
and actuarial reports, if any, (iii) the most recent summary
plan description for each Company Benefit Plan for which such
summary plan description is required and (iv) each trust
agreement and group annuity contract relating to any Company
Benefit Plan.
(b) All Company Pension Plans intended to be tax-
qualified have been the subject of determination letters from
the Internal Revenue Service to the effect that such Company
Pension Plans are qualified and exempt from Federal income
taxes under Sections 401(a) and 501(a), respectively, of the
Code, and no such determination letter has been revoked nor,
to the knowledge of the Company, has revocation been
threatened, nor has any such Company Pension Plan been amended
since the date of its most recent determination letter or
application therefor in any respect that would adversely
affect its qualification or materially increase its costs and,
to the knowledge of the Company, nothing has occurred since
the date of such letter that could reasonably be expected to
affect the qualified status of such plan.
(c) Except as disclosed in the Company Disclosure
Letter, no Company Pension Plan had, as of the respective last
annual valuation date for each such Company Pension Plan, an
"unfunded benefit liability" (as such term is defined in
Section 4001(a)(18) of ERISA), based on actuarial assumptions
that have been furnished to Parent. None of the Company
Pension Plans has an "accumulated funding deficiency" (as such
term is defined in Section 302 of ERISA or Section 412 of the
Code), whether or not waived. None of the Company, any Company
Subsidiary, any officer of the Company or any of its Company
Subsidiary or any of the Company Benefit Plans which are
subject to ERISA, including the Company Pension Plans, any
trusts created thereunder or any trustee or administrator
thereof, has engaged in a "prohibited transaction" (as such
term is defined in Section 406 of ERISA or Section 4975 of the
Code) or any other breach of fiduciary responsibility that
could subject the Company, any Company Subsidiary or any
officer of the Company or any Company Subsidiary to the tax or
penalty on prohibited transactions imposed by such Section
4975 or to any liability under Section 502(i) or 502(1) of
ERISA. None
of such Company Benefit Plans and trusts has been terminated,
nor has there been any "reportable event" (as that term is
defined in Section 4043 of ERISA) with respect to any Company
Benefit Plan during the last five years. Neither the Company
nor any Company Subsidiary has incurred a "complete
withdrawal" or a "partial withdrawal" (as such terms are
defined in Sections 4203 and 4205, respectively, of ERISA)
since the effective date of such Sections 4203 and 4205 with
respect to any multiemployer pension plan (within the meaning
of Section 4001(a)(3) of ERISA).
(d) With respect to any Company Benefit Plan that is
an employee welfare benefit plan, (i) no such Company Benefit
Plan is unfunded or funded through a "welfare benefits fund"
(as such term is defined in Section 419(e) of the Code), (ii)
each such Company Benefit Plan that is a "group health plan"
(as such term is defined in Section 5000(b)(1) of the Code),
complies with the applicable requirements of Section 4980B(f)
of the Code and (iii) each such Company Benefit Plan
(including any such Plan covering retirees or other former
employees) may be amended or terminated without material
liability to the Company and the Company Subsidiary on or at
any time after the Effective Time.
(e) Other than payments that may be made to the
persons listed in the Company Disclosure Letter (the "Primary
Company Executives"), any amount that could be received
(whether in cash or property or the vesting of property) as a
result of the Merger or any other Transaction by any employee,
officer or director of the Company or any of its affiliates
who is a "disqualified individual" (as such term is defined in
proposed Treasury Regulation Section 1.280G-1) under any
employment, severance or termination agreement, other
compensation arrangement or Company Benefit Plan currently in
effect would not be characterized as an "excess parachute
payment" (as defined in Section 280G(b)(1) of the Code).
(f) None of the Company Benefit Plans (i) is a
"multiemployer plan" within the meaning of Section 4001(a)(3)
of ERISA or (ii) promises or provides retiree medical or life
insurance benefits to any person (other than as required by
law).
(g) None of the Company Benefit Plans provides for
payment of a benefit, the increase of a benefit amount, the
payment of a contingent benefit, or the acceleration of the
payment or vesting of a benefit by reason of the execution of
this Agreement or the consummation of the Transactions.
(h) Except as disclosed in the Company Disclosure
Letter, neither the Company nor any Company Subsidiary has an
obligation to adopt any new Company Benefit Plan or, except as
required by law, the amendment of an existing Company Benefit
Plan.
(i) Except as disclosed in the Company Disclosure
Letter, as of the date of this Agreement, each Company Benefit
Plan has been operated in all material respects in accordance
with its terms and the requirements of all applicable law.
(j) As of the date of this Agreement, the Company is
not aware of any material claims relating to the Company
Benefit Plans other than claims for benefits in the ordinary
course.
(k) Neither the Company nor any Company Subsidiary
is party to a collective bargaining agreement, and no
employees of the Company or any Company Subsidiary are
represented by any labor organization. To the knowledge of the
Company, no labor organization or group of employees of the
Company or any Company Subsidiary has made a pending demand
for recognition or certification, and there are no
representation or certification proceedings or petitions
seeking a representation proceeding presently pending or
threatened in writing to be brought or filed with the National
Labor Relations Board or any other labor relations tribunal or
authority. To the knowledge of the Company, as of the date of
this Agreement, there are no organizing activities involving
the Company or any Company Subsidiary pending with any labor
organization or group of employees of the Company or any
Company Subsidiary.
(l) There are no complaints, charges or claims
against the Company or any Company Subsidiary pending, or
threatened in writing to be brought or filed, with any
Governmental Entity or arbitrator based on, arising out of, in
connection with, or otherwise relating to the employment or
termination of employment of any individual by the Company or
any Company Subsidiary which, if resolved against the Company
or any Company Subsidiary, as the case may be, could
reasonably be expected to have a Company Material Adverse
Effect.
SECTION 3.12. Litigation. Except as disclosed in the
Filed Company SEC Documents or in the Company Disclosure
Letter, as of the date of this Agreement, there is no suit,
action or proceeding pending or, to the knowledge of the
Company, threatened against or affecting the Company or any
Company Subsidiary ("Company Litigation") that, individually
or in the aggregate, could reasonably be expected to have a
Company Material Adverse Effect, nor is there any material
Judgment ("Company Order") outstanding against the Company or
any Company Subsidiary. The Company Disclosure Letter lists
any pending Company Litigation or outstanding Company Order,
as of the date of this Agreement, with respect to which the
uninsured exposure or loss exceeds $150,000.
SECTION 3.13. Compliance with Company Permits.
Except as disclosed in the Filed Company SEC Documents or the
Company Disclosure Letter, the Company and the Company
Subsidiaries hold all permits, licenses, variances,
exemptions, orders, franchises and approvals of all
Governmental Entities necessary for the lawful conduct of
their respective businesses (the "Company Permits"), except
for those Company Permits the absence of which, individually
and in the aggregate, could not reasonably be expected to have
a Company Material Adverse Effect. Except as disclosed in the
Filed Company SEC Documents or in the Company Disclosure
Letter, the Company and the Company Subsidiaries are in
compliance with all Company Permits, except for instances of
noncompliance that, individually and in the aggregate, could
not reasonably be expected to have a Company Material Adverse
Effect. Except as set forth in the Filed Company SEC Documents
or in the Company Disclosure Letter, neither the Company nor
any Company Subsidiary has received any written communication
during the past two years from a Governmental Entity that
alleges that the Company or a Company Subsidiary is not in
compliance with any Company Permit, except for allegations of
noncompliance that, individually and in the aggregate, could
not reasonably be expected to have a Company Material Adverse
Effect. This Section 3.13 does not relate to matters with
respect to Taxes or environmental matters, which are the
subject of Sections 3.09 and 3.19, respectively.
SECTION 3.14. Brokers; Schedule of Fees and
Expenses. Except as disclosed in the Company Disclosure
Letter, no broker, investment banker, financial advisor,
consultant, attorney, accountant, actuary, proxy solicitor or
other person, other than ▇▇▇▇▇▇▇, ▇▇▇▇▇ & Co. and ▇.▇. ▇▇▇▇▇▇
& Co., Inc., the fees and expenses of which will be paid by
the Company, is entitled to any broker's, finder's,
attorney's, financial advisor's or other similar fee,
reimbursement of expenses or commission in connection with the
Merger and the other Transactions based upon arrangements made
by or on behalf of the Company. The Company has furnished to
Parent a true and complete copy of all agreements between the
Company and ▇▇▇▇▇▇▇, ▇▇▇▇▇ & Co. and ▇.▇. ▇▇▇▇▇▇ & Co., Inc.
relating to the Merger and the other Transactions.
SECTION 3.15. Opinion of Financial Advisor. The
Company has received the opinion of ▇▇▇▇▇▇▇, ▇▇▇▇▇ & Co.,
dated the date of this Agreement, to the effect that, as of
such date, the Exchange Ratio is fair to the holders of
Company Common Stock from a financial point of view, a signed
copy of which opinion has been delivered to Parent, it being
understood and agreed by Parent that such opinion is for the
benefit of the Board of Directors of the Company and may not
be relied upon by Parent, its affiliates or any of their
respective stockholders.
SECTION 3.16. No Default. Neither the Company nor
any Company Subsidiary is, or has received any notice that it
is, in default or violation (and no event has occurred which,
with notice or the lapse of time, or both, would constitute a
default or violation) of any provision of (i) their respective
charter and by-laws, (ii) any note, bond, mortgage, indenture,
license, lease, agreement or other instrument or obligation to
which the Company or any Company Subsidiary is, at the date of
this Agreement, a party or by which the Company or any Company
Subsidiary or any of their respective properties or assets may
be bound or (iii) any Judgment or Applicable Law applicable to
the Company or any Company Subsidiary, except in the case of
clauses (ii) and (iii) above, for defaults or violations
which, in the aggregate, could not reasonably be expected to
have a Company Material Adverse Effect.
SECTION 3.17. Real Property. (a) Except as set forth
in the Company Disclosure Letter, the Company and each Company
Subsidiary has good and marketable title to all of their
respective material real property owned in fee by them, and
valid leasehold interests in all material real property leased
by them, in each case free and clear of all Liens or title
defects, except for such Liens or title defects that could not
reasonably be expected to have a Company Material Adverse
Effect. Except as set forth in the Company Disclosure Letter,
the real property owned or leased by the Company or the
Company Subsidiaries comply and conform with all Applicable
Laws relating to their use and operation, including the
provisions of the Americans with Disabilities Act of 1990,
Public Law 101-336, 42 U.S.C. ss. 12191 et seq., except to the
extent that such non compliance or nonconformity could not
reasonably be expected to have a Company Material Adverse
Effect. This Section 3.17(a) does not relate to matters with
respect to Taxes or environmental matters, which are the
subject of Sections 3.09 and 3.19, respectively.
(b) Except as set forth in the Company Disclosure
Letter, there are no material leases, subleases, surface or
subsurface use agreements, tenancy arrangements or other
similar instruments or encumbrances to which the Company or
any Company Subsidiary is a party that will be in force or
effect as of the Closing Date that grant to any person any
right relating to the ownership or use of all or any part of
the real property owned or leased by the Company or any
Company Subsidiary, in each case, other than such rights
granted in the ordinary course of business consistent with
past practice and those rights granted in accordance with
Section 5.01(a). Neither the Company nor any Company
Subsidiary has granted to any person any material rights in,
or material right or option to acquire, fee title (or any
portion thereof) to the material real property owned by the
Company or any Company Subsidiary in fee, in each case, other
than such rights or options granted in the ordinary course of
business consistent with past practice and those granted in
accordance with Section 5.01(a). As of the date of this
Agreement, the Company and the Company Subsidiaries,
respectively, enjoy peaceful possession of all material real
property leased by the Company or such Company Subsidiaries,
and the Company has delivered to Parent copies of all such
leases, which copies contain all of the material terms and
conditions of such leases.
(c) The assets, properties, rights and contracts of
the Company and the Company Subsidiaries, taken as a whole,
are sufficient to permit the Company and the Company
Subsidiaries to conduct their business in all material
respects as currently being conducted. Except as set forth in
the Company Disclosure Letter, the Company has no continuing
material obligations relating to the assets of any operations
that have been disposed of.
SECTION 3.18. Intellectual Property. The Company and
the Company Subsidiaries possess or have adequate rights to
use all trademarks, trade names, patents, service marks, brand
marks, brand names, computer programs, database, industrial
designs and copyrights necessary for the operation of the
businesses of each of the Company and the Company Subsidiaries
(collectively, the "Company Intellectual Property"), except
for such failures to possess that, individually or in the
aggregate, could not reasonably be expected to have a Company
Material Adverse Effect. To the knowledge of the Company, the
use of the Company Intellectual Property by the Company or the
Company Subsidiaries does not infringe upon or violate any
material right, title, interest in any material intellectual
property right, trademark, trade name, patent, service ▇▇▇▇,
brand ▇▇▇▇, brand name, computer program, database, industrial
design, or copyright of any other person, except for such
infringements or violations that could not reasonably be
expected to have a Company Material Adverse Effect. Except as
set forth in the Company Disclosure Letter, the Company has
received no written notice that the use of any trade dress by
the Company or any Company Subsidiary infringes upon or
violates any trade dress rights of any other person, except
for such infringements or violations that could not reasonably
be expected to have a Company Material Adverse Effect.
SECTION 3.19. Environmental Matters. (a) Except as
disclosed in the Company Disclosure Letter or in the Filed
Company SEC Documents, (i) the Company, the Company
Subsidiaries and their respective operations and any owned,
leased or operated real property are in compliance with all
Environmental Laws, except for instances of noncompliance
that, individually and in the aggregate, could not reasonably
be expected to have a Company Material Adverse Effect; (ii) no
judicial or administrative proceedings are pending or, to the
knowledge of the Company, threatened against the Company or
any Company Subsidiary or any real property owned, operated or
leased by the Company or any Company Subsidiary alleging the
violation of or seeking to impose liability pursuant to any
Environmental Law, and there are no investigations pending or,
to the knowledge of the Company, threatened against the
Company or any Company Subsidiary or any real property owned,
operated or leased by the Company or any Company Subsidiary,
which in any case could reasonably be expected to result in
the Company incurring material Environmental Costs and
Liabilities; and (iii) there are no facts, circumstances or
conditions relating to, arising from or attributable to the
Company or any Company Subsidiary or any real property
currently owned, operated or leased by the Company or any
Company Subsidiary that are reasonably likely to result in the
Company incurring material Environmental Costs and
Liabilities.
(b) The Company has provided or made available to
Parent copies of all environmentally-related audits,
assessments, studies, reports, analyses and results of
investigations (prepared within the last five years) of the
real property currently owned, operated or leased by the
Company or any Company Subsidiary that are in the possession,
custody or control of the Company.
(c) "Environmental Costs and Liabilities" means any
and all losses, liabilities, obligations, damages, fines,
penalties, judgments, actions, claims, costs and expenses
(including fees, disbursements and expenses of legal counsel,
experts, engineers and consultants and the costs of
investigation and feasibility studies to clean up,
remove, treat or in any other way address any Hazardous
Materials) arising from or under any Environmental Law.
(d) "Environmental Law" means any applicable,
Federal, state, local or foreign law (including common law),
statute, code, ordinance, rule, regulation or other
requirement relating to the environment, natural resources or
public or employee health and safety.
(e) "Hazardous Material" means any substance,
material or waste which is regulated by any Governmental
Entity as hazardous, toxic, pollutant, contaminant or words of
similar meaning or regulatory effect, including, petroleum,
petroleum products, asbestos, urea formaldehyde and
polychlorinated biphenyls.
SECTION 3.20. Product Liability. There are no claims
pending or, to the knowledge of the Company, threatened
against the Company or any Company Subsidiary, and to the
knowledge of the Company there is no reasonable basis for any
claim, against the Company or any Company Subsidiary, for
injury to person or property of any person suffered as a
result of the sale of any product or performance of any
service by the Company or any Company Subsidiary, including
claims arising out of the defective or unsafe nature of such
products or services, which could reasonably be expected to
have a Company Material Adverse Effect.
SECTION 3.21. Insurance. The Company Disclosure
Letter contains a true and complete listing of the Company's
and each Company Subsidiaries' directors' and officers'
liability insurance, primary and excess casualty insurance
policies, providing coverage for bodily injury and property
damage to third parties (including products liability and
completed operations coverage) and worker's compensation, in
effect as of the date of this Agreement.
SECTION 3.22. Contracts. Except as disclosed in the
Company Disclosure Letter, neither the Company nor any Company
Subsidiary is a party to any agreement that expressly limits
the ability of the Company or any Company Subsidiary or
affiliate to compete in or conduct any line of business or
compete with any person or in any geographic area or during
any period of time. The Company Disclosure Letter sets forth
all claims received by the Company as of the date of this
Agreement for indemnification made by third parties pursuant
to the terms of agreements relating to the disposition by the
Company of lines of business since February 2, 1996.
ARTICLE IV
Representations and Warranties of Parent and Sub
Parent and Sub, jointly and severally, represent and
warrant to the Company as follows:
SECTION 4.01. Organization, Standing and Power. (a)
Each of Parent and each of its subsidiaries, including Sub
(the "Parent Subsidiaries"), is a corporation or partnership
duly organized, validly existing and in good standing under
the laws of the jurisdiction in which it is organized and has
full power and authority to conduct its businesses as
presently conducted, other than, in the case of the Parent
Subsidiaries, where the failure to be so organized, existing
or in good standing could not reasonably be expected to have
(i) a material adverse effect on Parent (as defined in Section
9.03) or (ii) a material adverse effect on the ability of
Parent to perform its obligations under the Transaction
Agreements or to consummate the Transactions (collectively, a
"Parent Material Adverse Effect"). Parent and each Parent
Subsidiary is duly qualified and in good standing to do
business in each jurisdiction where the nature of its business
or their ownership or leasing of its properties makes such
qualification necessary, other than in such jurisdictions
where the failure to be so qualified could not reasonably be
expected to have a Parent Material Adverse Effect. Parent has
made available to the Company true and complete copies of the
certificates of incorporation of Parent, as amended to the
date of this Agreement (as so amended, the "Parent Charter"),
and the Bylaws of Parent, as amended to the date of this
Agreement (as so amended, the "Parent Bylaws"), and the
comparable charter and organizational documents of Sub, in
each case as amended through the date of this Agreement.
SECTION 4.02. Interim Operations of Sub. Since the
date of its incorporation, Sub has not carried on any business
or conducted any operations other than the execution of the
Transaction Agreements to which it is a party, the performance
of its obligations hereunder and thereunder and matters
ancillary thereto.
SECTION 4.03. Capital Structure. (a) The authorized
capital stock of Parent consists of 1,250,000,000 shares of
Parent Common Stock and 25,000,000 shares of preferred stock,
without par value (together with the Parent Common Stock, the
"Parent Capital Stock"). At the close of business on November
18, 1998, (i) 254,359,353 shares of Parent Common Stock and
803,346.643 shares of Series B ESOP Convertible Preferred
Stock of Parent were
issued and outstanding, (ii) 15,900 shares of Parent Common
Stock were held by Parent in its treasury, (iii) as of October
30, 1998, 7,431,499 shares of Parent Common Stock were
reserved for issuance pursuant to outstanding options to
purchase Parent Common Stock granted under Parent Stock Plans
(as defined in Section 6.04), (iv) 1,600,000 shares of Series
A Junior Participating Preferred Stock of Parent were reserved
for issuance in connection with the rights (the "Parent
Rights") issued pursuant to the Rights Agreement dated as of
February 14, 1990 (as amended from time to time, the "Parent
Rights Agreement"), between Parent and ChaseMellon Shareholder
Services, L.L.C., as Rights Agent and (v) 72,904 shares of
Parent Common Stock remain reserved for issuance in connection
with Parent's previous acquisitions of ▇▇▇'▇ Incorporated and
of Eckerd Corporation. Except as set forth above, at the close
of business on November 18, 1998, no shares of capital stock
or other voting securities of Parent were issued, reserved for
issuance or outstanding, and no securities of Parent or any
Parent Subsidiary convertible into or exchangeable for, shares
of capital stock, Voting Parent Debt (as defined below) or
other voting securities of the Parent were issued, reserved
for issuance or outstanding, reserved for issuance or
outstanding. There are no outstanding Parent SARs (as defined
in Section 6.04) that were not granted in tandem with a
related Parent Employee Stock Option. All outstanding shares
of Parent Capital Stock are, and all such shares that may be
issued prior to the Effective Time or pursuant to this
Agreement will be when issued, duly authorized, validly
issued, fully paid and nonassessable and not subject to or
issued in violation of any purchase option, call option, right
of first refusal, preemptive right, subscription right or any
similar right under any provision of the DGCL, the Parent
Charter, the Parent Bylaws or any Contract to which Parent is
a party or otherwise bound. There are not any bonds,
debentures, notes or other indebtedness of Parent having the
right to vote (or convertible into, or exchangeable for,
securities having the right to vote) on any matters on which
holders of Parent Common Stock may vote ("Voting Parent
Debt"). Except as set forth above, as of the date of this
Agreement, there are not any options, warrants, calls, rights
(including preemptive rights), convertible or exchangeable
securities, "phantom" stock rights, stock appreciation rights,
stock-based performance units, commitments, Contracts,
arrangements or undertakings of any kind to which Parent or
any Parent Subsidiary is a party or by which any of them is
bound (i) obligating Parent or any Parent Subsidiary to issue,
deliver or sell, purchase, redeem or acquire or cause to be
issued, delivered or sold, or purchased, redeemed or acquired
additional shares of capital stock or other equity
interests in, or any security convertible or exercisable for
or exchangeable into any capital stock of or other equity
interest in, Parent or any Voting Parent Debt or other voting
securities of Parent or (ii) obligating Parent or any Parent
Subsidiary to issue, grant, extend or enter into any such
option, warrant, call, right, security, commitment, Contract,
arrangement or undertaking. As of the date of this Agreement,
there are not any outstanding contractual obligations of
Parent or any Parent Subsidiary to repur chase, redeem or
otherwise acquire any shares of capital stock of Parent.
Parent has made available to the Company a complete and
correct copy of the Parent Rights Agreement as amended to the
date of this Agreement.
(b) The authorized capital stock of Sub consists of
1,000 shares of common stock, par value $1.00 per share, all
of which have been validly issued, are fully paid and
nonassessable and are owned by Parent free and clear of any
Lien.
SECTION 4.04. Authority; Execution and Delivery;
Enforceability. (a) Each of Parent and Sub has all requisite
corporate power and authority to execute each Transaction
Agreement to which it is a party and to consummate the
Transactions. The execution and delivery by each of Parent and
Sub of each Transaction Agreement to which it is a party and
the consummation by it of the Transactions have been duly
authorized by all necessary corporate action on the part of
Parent and Sub. Parent, as sole stockholder of Sub, has
adopted this Agreement. Each of Parent and Sub has duly
executed and delivered each Transaction Agreement to which it
is a party, and, assuming each Transaction Agreement
constitutes a valid and binding obligation of each of the
other parties thereto, each Transaction Agreement to which it
is a party constitutes its legal, valid and binding
obligation, enforceable against it in accordance with its
terms, subject, as to enforceability, to bankruptcy,
insolvency, reorganization, moratorium and other laws of
general applicability relating to or affecting creditors'
rights and remedies and to general principles of equity.
(b) The Board of Directors of Parent (the "Parent
Board"), at a meeting duly called and held duly adopted
resolutions approving this Agreement and the other Transaction
Agreements, the Merger and the other Transactions. Such
resolutions are sufficient to render inapplicable to this
Agreement and the other Transaction Agreements, the Merger and
the other Transactions the provisions of Article Seventh of
the Parent Charter. To Parent's knowledge, no state takeover
statute or similar
statute or regulation applies or purports to apply to Parent
with respect to this Agreement and the other Transaction
Agreements, the Merger or any other Transaction.
(c) No vote of holders of any class or series of
capital stock of Parent is necessary to approve any
Transaction Agreement or Transaction.
SECTION 4.05. No Conflicts; Consents. (a) The
execution and delivery by each of Parent and Sub of each
Transaction Agreement to which it is a party, do not, and the
consummation of the Merger and the other Transactions and
compliance with the terms hereof and thereof will not,
conflict with, or result in any violation of or default (with
or without notice or lapse of time, or both) under, or give
rise to a right of termination, cancelation or acceleration of
any obligation or to loss of a benefit under, or result in the
creation of any Lien upon any of the properties or assets of
Parent or any Parent Subsidiary under, any provision of (i)
the Parent Charter or Parent Bylaws, (ii) any Contract to
which Parent or any Parent Subsidiary is a party or by which
any of their respective properties or assets is bound or (iii)
subject to the filings and other matters referred to in
Section 4.05(b), any Judgment or Applicable Law applicable to
Parent or any Parent Subsidiary or any of their respective
properties or assets, other than, in the case of clauses (ii)
and (iii) above, any such items that, individually or in the
aggregate, could not reasonably be expected to have a Parent
Material Adverse Effect.
(b) No Consent of, or registration, declaration or
filing with, any Governmental Entity is required to be
obtained or made by or with respect to Parent or any Parent
Subsidiary in connection with the execution, delivery and
performance of any Transaction Agreement to which Parent or
Sub is a party or the consummation of the Transactions, other
than (i) compliance with and filings under the HSR Act, (ii)
the filing with the SEC of (A) the Form S-4 and (B) such
reports under Section 13 of the Exchange Act, as may be
required in connection with this Agreement and the other
Transaction Agreements, the Merger and the other Transactions,
(iii) the filing of the Certificate of Merger with the
Secretary of State of the State of Delaware, (iv) compliance
with and such filings as may be required under applicable
environmental laws, including the New Jersey Environmental
Cleanup Responsibility Act and the Connecticut Environmental
Transfer Law, (v) the approval of the relevant pharmacy boards
and alcoholic beverage commissions or comparable entities in
the states in which Parent and the Parent Subsidiaries do
business, (vi) such
filings as may be required in connection with the Taxes
described in Section 6.09 and (vii) such other items (A)
required solely by reason of the participation of the Company
(as opposed to any other third party) in the Transactions or
(B) that, individually or in the aggregate, could not
reasonably be expected to have a Parent Material Adverse
Effect.
SECTION 4.06. SEC Documents; Undisclosed
Liabilities. Parent has filed and made available to the
Company true and correct copies of all reports, schedules,
forms, statements and other documents required to be filed by
Parent with the SEC since January 27, 1996 (the "Parent SEC
Documents"). As of its respective date, each Parent SEC
Document complied in all material respects with the
requirements of the Exchange Act or the Securities Act, as the
case may be, and the rules and regulations of the SEC
promulgated thereunder applicable to such Parent SEC Document,
and did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.
The financial statements of Parent included in the Parent SEC
Documents comply as to form in all material respects with
applicable accounting requirements and the published rules and
regula tions of the SEC with respect thereto, have been
prepared in accordance with GAAP (except, in the case of
unaudited statements, as permitted by Form 10-Q of the SEC)
applied on a consistent basis during the periods involved
(except as may be indicated in the notes thereto) and fairly
present in accordance with the applicable requirements of GAAP
(except, in the case of unaudited statements, as permitted by
Form 10-Q of the SEC) the consolidated financial position of
Parent and its consolidated subsidiaries as of the dates
thereof and the consolidated results of their operations and
cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments,
none of which are material). Except as set forth in the Filed
Parent SEC Documents (as defined in Section 4.08), as of the
date of this Agreement neither Parent nor any Parent
Subsidiary has any liabilities or obligations of any nature
(whether accrued, absolute, contingent or otherwise) required
by GAAP to be set forth on a consolidated balance sheet of
Parent and its consolidated subsidiaries or in the notes
thereto which, individually or in the aggregate, could
reasonably be expected to have a Parent Material Adverse
Effect.
SECTION 4.07. Information Supplied. None of the
information supplied or to be supplied by Parent or Sub for
inclusion or incorporation by reference in (i) the Form S-4
will, at the time the Form S-4 is filed with the SEC, at any
time it is amended or supplemented or at the time it becomes
effective under the Securities Act, contain any untrue
statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the
statements therein not misleading, or (ii) the Proxy Statement
will, at the date it is first mailed to the Company's
stockholders or at the time of the Company Stockholders
Meeting, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light
of the circumstances under which they are made, not
misleading. The Form S-4 will comply as to form in all
material respects with the requirements of the Securities Act
and the rules and regulations thereunder, except that no
representation is made by Parent or Sub with respect to
statements made or incorporated by reference therein based on
information supplied by the Company, in writing, for inclusion
or incor poration by reference therein.
SECTION 4.08. Absence of Certain Changes or Events.
Except as disclosed in the Parent SEC Documents filed and
publicly available prior to the date of this Agreement (the
"Filed Parent SEC Documents"), from the date of the most
recent financial statements included in the Filed Parent SEC
Documents to the date of this Agreement, Parent has conducted
its business only in the ordinary course, and during such
period there has not been:
(i) any event, change, effect or development that,
individually or in the aggregate, has had or could
reasonably be expected to have a Parent Material Adverse
Effect, other than events, changes, effects and
developments relating to the economy in general or to
Parent's industry in general and not specifically
relating to Parent or any Parent Subsidiary;
(ii) any declaration, setting aside or payment of
any extraordinary dividend or other extraordinary
distribution (whether in cash, stock or property) with
respect to any capital stock of Parent or any repurchase
for value by Parent of any capital stock of Parent in
violation of Section 5.01(b)(i); or
(iii) any reclassification of any capital stock of
Parent or any issuance or the authorization of any
issuance of any other securities in lieu of or in
substitution for shares of capital stock of Parent.
SECTION 4.09. Taxes. (a) Neither Parent nor Sub (nor
any other subsidiary of Parent) has constituted either a
"distributing corporation" or a "controlled corporation"
(within the meaning of Section 355(a)(1)(A) of the Code) in a
distribution of stock qualifying for tax-free treatment under
Section 355 of the Code (i) in the two years prior to the date
of this Agreement or (ii) in a distribution which could
otherwise constitute part of a "plan" or "series of related
transactions" (within the meaning of Section 355(e) of the
Code) in conjunction with the Merger.
(b) Parent has no reason to believe that any
conditions exist that could reasonably be expected to prevent
the Merger from qualifying as a reorganization within the
meaning of Section 368(a) of the Code.
SECTION 4.10. Litigation. Except as disclosed in the
Filed Parent SEC Documents, as of the date of this Agreement,
there is no suit, action or proceeding pending or, to the
knowledge of Parent, threatened against or affecting Parent or
any Parent Subsidiary ("Parent Litigation") that, individually
or in the aggregate, could reasonably be expected to have a
Parent Material Adverse Effect, nor is there any material
Judgment ("Parent Order") outstanding against Parent or any
Parent Subsidiary, in the case of any Parent Subsidiary, that,
individually or in the aggregate, could reasonably be expected
to have a Parent Material Adverse Effect.
SECTION 4.11. Compliance with Applicable Laws.
Except as disclosed in the Filed Parent SEC Documents, Parent
and Parent Subsidiaries are in compliance with all Applicable
Laws, including those relating to occupational health and
safety and the environment, except for instances of
noncompliance that, individually and in the aggregate, could
not reasonably be expected to have a Parent Material Adverse
Effect. Except as set forth in the Filed Parent SEC Documents,
neither Parent nor any Parent Subsidiary has received any
written communication during the past two years from a
Governmental Entity that alleges that Parent or a Parent
Subsidiary is not in compliance with any Applicable Law,
except for allegations of noncompliance that, individually and
in the aggregate, could not reasonably be expected to have a
Parent Material Adverse Effect. This Section 4.11 does not
relate to matters with respect to Taxes.
SECTION 4.12. Parent Rights Agreement. The execution
and delivery of this Agreement and the other Transaction
Agreements by Parent and Sub and consummation of the Merger
and the other Transactions will not result in the
grant or distribution of any Parent Rights to any person under
the Parent Rights Agreement (except for the Parent Rights
attached to the Parent Common Stock issuable in the Merger or
pursuant to this Agreement) or enable or require any Parent
Rights to be exercised or triggered.
ARTICLE V
Covenants Relating to Conduct of Business
SECTION 5.01. Conduct of Business. (a) Conduct of
Business by the Company. Except for matters set forth in the
Company Disclosure Letter or otherwise contemplated by the
Transaction Agreements, from the date of this Agreement to the
Effective Time the Company shall, and shall cause each Company
Subsidiary to, conduct its business in the usual, regular and
ordinary course in substantially the same manner as previously
conducted and use all reasonable efforts to preserve intact
its current business organization, keep available the services
of its current officers and employees and preserve its
relationships with customers, suppliers, licensors, licensees,
distributors and others having business dealings with them to
the end that its goodwill and ongoing business shall be
unimpaired at the Effective Time. Parent and Sub acknowledge
that officers and employees of the Company may voluntarily
terminate employment with the Company, and that the Company
has no control over such voluntary terminations. In addition,
and without limiting the generality of the foregoing, except
for matters set forth in the Company Disclosure Letter or
otherwise contemplated by the Transaction Agreements, from the
date of this Agreement to the Effective Time, the Company
shall not, and shall not permit any Company Subsidiary to, do
any of the following without the prior written consent of
Parent:
(i) (A) declare, set aside or pay any dividends on,
or make any other distributions in respect of, any of its
capital stock, other than (1) dividends and distributions
by a direct or indirect wholly owned subsidiary of the
Company to its parent, (2) regular quarterly cash
dividends with respect to the Company Common Stock for
the fiscal quarter ended November 6, 1998, not in excess
of $0.07 per share, with usual declaration, record and
payment dates and in accordance with the Company's past
dividend policy, and (3) if the Effective Time has not
occurred on or prior to April 10, 1999, regular quarterly
cash dividends with respect to the Company Common Stock
for the fiscal quarter ending January 29, 1999, not in
excess of
$0.07 per share, in accordance with the Company's past
dividend policy, (B) split, combine or reclassify any of
its capital stock or issue or authorize the issuance of
any other securities in respect of, in lieu of or in
substitution for shares of its capital stock, or (C)
purchase, redeem or otherwise acquire any shares of
capital stock of the Company or any Company Subsidiary or
any other securities thereof or any rights, warrants or
options to acquire any such shares or other securities;
(ii) issue, deliver, sell or grant, or authorize the
issuance, delivery, sale or grant of, (A) any shares of
its capital stock, (B) any Voting Company Debt or other
voting securities, (C) any securities convertible into or
exchangeable for, or any options, warrants or rights to
acquire, any such shares, Voting Company Debt, voting
securities or convertible or exchangeable securities or
(D) any "phantom" stock, "phantom" stock rights, stock
appreciation rights or stock-based performance units,
other than the issuance of shares of Class A Common Stock
upon conversion of shares of Class B Common Stock in
accordance with the terms thereof and the issuance of
Company Common Stock upon the exercise of Company
Employee Stock Options outstanding on the date of this
Agreement and in accordance with their present terms;
(iii) amend its certificate of incorporation, bylaws
or other comparable charter or organizational documents;
(iv) acquire or agree to acquire (A) by merging or
consolidating with, or by purchasing an equity interest
in or a substantial portion of the assets of, or by any
other manner, any business or any corporation,
partnership, joint venture, association or other business
organization or division thereof or (B) any assets that
are material, individually or in the aggregate, to the
Company and the Company Subsidiaries, taken as a whole,
except (1) entry into new real property leases up to the
amount set forth for leases in Schedule 5.01(a)(ix) to
the Company Disclosure Letter (including up to $500,000
in overruns if otherwise permitted under Section
5.01(a)(ix)) and (2) purchases of prescription files,
inventory and assets in the ordinary course of business
consistent with past practice;
(v) (A) grant to any executive officer or director
of the Company or any Company Subsidiary any increase
in compensation, except to the extent required under
employment agreements in effect as of the date of the
most recent audited financial statements included in the
Filed Company SEC Documents, (B) grant to any executive
officer or director of the Company or any Company
Subsidiary any increase in severance or termination pay,
except to the extent required under any agreement in
effect as of the date of the most recent audited
financial statements included in the Filed Company SEC
Documents, (C) establish any new benefit plans or
arrangements, (D) enter into any new, or amend any
existing, employment, consulting, indemnification,
severance or termination agreement with any executive
officer or director, (E) establish, adopt, enter into or
amend in any material respect any collective bargaining
agreement or Company Benefit Plan or (F) take any action
to accelerate any rights or benefits, or make any
material determinations not in the ordinary course of
business consistent with prior practice, under any
collective bargaining agreement or Company Benefit Plan;
(vi) make any change in accounting methods,
principles or practices materially affecting the reported
consolidated assets, liabilities or results of operations
of the Company, except insofar as may have been required
by a change in GAAP;
(vii) sell, lease (as lessor), license or otherwise
dispose of or subject to any Lien, or agree to sell,
lease (as lessor), license or otherwise dispose of or
subject to any Lien, any of its assets except (1) sales
of inventory and excess or obsolete assets in the
ordinary course of business consistent with past
practice, (2) dispositions or proposed dispositions
listed in the Company Disclosure Letter, or (3) Liens
suffered and dispositions made in the ordinary course of
business consistent with prior practice that are not
material, individually or in the aggregate, to the
Company and the Company Subsidiaries taken as a whole;
(viii) incur any indebtedness for borrowed money or
guarantee any such indebtedness of another person, issue
or sell any debt securities or warrants or other rights
to acquire any debt securities of the Company or any
Company Subsidiary, guarantee any debt securities of
another person, enter into any "keep well" or other
agreement to maintain any financial statement condition
of another person or enter into any arrangement having
the economic effect of any of the foregoing, except for
working capital borrowings under the Company's existing
credit facilities and refinancings of existing debt (in
the same or smaller principal amounts) that permit
prepayment of such debt without penalty;
(ix) make or agree to make any new capital
expenditure or expenditures that, in the aggregate,
exceed by more than $500,000, the amount set forth for
capital expenditures in the budget attached as Schedule
5.01(a)(ix) to the Company Disclosure Letter;
(x) make any material Tax election or settle or
compromise any material Tax liability or refund;
(xi) except as permitted by Section 5.01(a)(v),
enter into any material agreement, arrangement or
understanding with any party who is an affiliate of the
Company that would be required to be disclosed in the
Company SEC Documents; or
(xii) authorize any of, or commit or agree to take
any of, the foregoing actions.
The Company shall promptly provide Parent with true, correct
and complete copies of any and all leases which are entered
into, amended, renewed, replaced or extended after the date of
this Agreement. The Company shall promptly notify Parent of
the commencement after the date of this Agreement of any
Company Litigation involving an amount in controversy in
excess of $500,000.
(b) Conduct of Business by Parent. Except for
matters otherwise contemplated by the Transaction Agreements,
from the date of this Agreement to the Effective Time Parent
shall, and shall cause each Parent Subsidiary to, conduct its
business in the usual, regular and ordinary course in
substantially the same manner as previously conducted and use
all reasonable efforts to preserve intact its current business
organization, keep available the services of its current
officers and employees and keep its relationships with
customers, suppliers, licensors, licensees, distributors and
others having business dealings with them to the end that its
goodwill and ongoing business shall be unimpaired at the
Effective Time. In addition, and without limiting the
generality of the foregoing, except for matters otherwise
contemplated by the Transaction
Agreements, from the date of this Agreement to the Effective
Time, Parent shall not, and shall not permit any Parent
Subsidiary to, do any of the following without the prior
written consent of the Company:
(i) (A) in the case of Parent, declare, set aside or
pay any extraordinary dividends on, or make any other
extraordinary distributions in respect of, any of its
capital stock, (B) in the case of Parent, reclassify any
of its capital stock or issue or author ize the issuance
of any other securities in lieu of or in substitution for
shares of its capital stock, or (C) during the Valuation
Period, purchase, redeem or otherwise acquire any shares
of capital stock of Parent or any rights, warrants or
options to acquire any such shares;
(ii) in the case of Parent, amend its certificate of
incorporation or bylaws, except for such amendments to
its certificate of incorporation or bylaws that do not
have a material adverse affect on the Merger and the
other Transactions;
(iii) amend the Parent Rights Agreement, except for
such amendments that do not (x) have a material adverse
effect on the Merger and the other Transactions or (y)
discriminate against holders of Company Common Stock; or
(iv) authorize any of, or commit or agree to take
any of, the foregoing actions.
(c) Other Actions. Except as contemplated by this
Agreement, the Company and Parent shall not, and shall not
permit any of their respective subsidiaries to, take any
action that would, or that could reasonably be expected to,
result in (i) any of the representations and warranties of
such party set forth in any Transaction Agreement to which it
is a party being untrue in any material respect or (ii) except
as otherwise permitted by Section 5.02, any condition to the
Merger set forth in Article VII not being satisfied.
(d) Advice of Changes. The Company and Parent shall
promptly advise the other orally and in writing of any change
or event that has or could reasonably be expected to have a
Company Material Adverse Effect or Parent Material Adverse
Effect, respectively.
SECTION 5.02. No Solicitation. (a) From and after
the date of this Agreement, without the prior written
consent of Parent, the Company shall not, and shall not
authorize or permit any Company Subsidiary to, nor shall it
authorize or permit any of the respective directors, officers,
employees, agents, accountants, counsel, financial advisors
and other representatives of the Company or any of the Company
Subsidiaries (collectively, "Representatives") to, (i)
directly or indirectly, solicit, initiate or encourage
(including by way of furnishing information or assistance) or
take any other action knowingly to facilitate any inquiries or
the making of any proposal which constitutes or may reasonably
be expected to lead to an Acquisition Proposal (as defined in
Section 5.02(c)) or (ii) enter into or participate in any
discussions or negotiations regarding any Acquisition
Proposal. As of the date of this Agreement, the Company shall
immediately cease and terminate any existing solicitation,
initiation, encouragement, activity, discussion or negotiation
with any persons conducted heretofore by it or its
Representatives with respect to the foregoing. The Company
agrees not to release any third party from, or waive any
provision of, any standstill agreement to which it is a party
or any confidentiality agreement between it and another person
who has made, or who may reasonably be considered likely to
make, an Acquisition Proposal. The Company agrees that it will
notify Parent orally and in writing promptly (but in any event
within 24 hours) of any such inquiries, offers or proposals
(including the terms and conditions of any such proposal).
(b) Neither the Company Board nor any committee
thereof shall withdraw or modify in a manner adverse to Parent
or Sub, the approval or recommendation by the Company Board of
this Agreement unless, prior to receipt of the Company
Stockholder Approval, the Company Board determines in good
faith, based on the advice of outside counsel of nationally
recognized standing (which shall include Cravath, Swaine &
▇▇▇▇▇ and Morris, Nichols, Arsht & ▇▇▇▇▇▇▇), that it is
necessary to do so in order to comply with its fiduciary
obligations, in which case the Company Board or such committee
may so withdraw or modify its approval or recommendation of
the Merger and this Agreement.
(c) For purposes of this Agreement, an "Acquisition
Proposal" means any inquiry, proposal or offer from any person
relating to any direct or indirect acquisition or purchase of
a major amount of the assets of the Company and its
subsidiaries, taken as a whole, other than the transactions
contemplated by this Agreement, or of 50% or more of the total
voting power of all outstanding equity securities of the
Company or any tender offer or exchange offer (including by
the Company or any of its
subsidiaries) that if consummated would result in any person
beneficially owning 50% or more of the total voting power of
all outstanding equity securities of the Company, or any
merger, consolidation, business combination, sale of
substantially all assets, recapitalization, liquidation,
dissolution or similar transaction involving the Company or
any of its subsidiaries, other than the transactions
contemplated by this Agreement.
(d) Nothing contained in this Section 5.02 shall
prohibit the Company from (i) taking and disclosing to its
stockholders a position in accordance with Rules 14d-9 and
14e-2 under the Exchange Act or (ii) making any disclosure to
the Company's stockholders if, in the good faith judgment of
the Company Board, after consultation with outside counsel,
failure to so disclose would be inconsistent with applicable
laws. No action taken pursuant to this Section 5.02(d) shall
be deemed to be a withdrawal or modification for purposes of
Section 5.02(b); provided, that the Company Board has not
formally withdrawn its recommendation of this Agreement or its
declaration of the advisability of the Merger pursuant to
Section 251 of the DGCL.
ARTICLE VI
Additional Agreements
SECTION 6.01. Preparation of the Form S-4 and the
Proxy Statement; Stockholders Meetings. (a) As soon as
practicable following the date of this Agreement, the Company
shall prepare and file with the SEC the Proxy Statement in
preliminary form and Parent shall prepare and file with the
SEC the Form S-4, in which the Proxy Statement will be
included as a prospectus, and each of the Company and Parent
shall use its reasonable efforts to respond as promptly as
practicable to any comments of the SEC with respect thereto.
The Company and Parent shall each give the other party an
opportunity to review, comment on and make reasonable changes
to the Proxy Statement and the Form S-4, respectively. Each of
the Company and Parent shall use its reasonable efforts to
have the Form S-4 declared effective under the Securities Act
as promptly as practicable after such filing. The Company
shall use its reasonable efforts to cause the Proxy Statement
to be mailed to the Company's stockholders as promptly as
practicable after the Form S-4 is declared effective under the
Securities Act. Parent shall also take any reasonable action
(other than qualifying to do business in any jurisdiction in
which it is not now so qualified) required to be taken under
any applicable state
securities laws in connection with the issuance of Parent
Common Stock in the Merger and under the Company Stock Plans
and the Company shall furnish all information concerning the
Company and the holders of the Company Common Stock and rights
to acquire Company Common Stock pursuant to the Company Stock
Plans as may be reasonably requested in connection with any
such action. The parties shall notify each other promptly of
the receipt of any comments from the SEC or its staff and of
any request by the SEC or its staff for amendments or
supplements to the Proxy Statement or the Form S-4 or for
additional information and shall supply each other with copies
of all correspondence between such or any of its
representatives, on the one hand, and the SEC or its staff, on
the other hand, with respect to the Proxy Statement, the Form
S-4 or the Merger.
(b) If at any time prior to the Effective Time any
event with respect to the Company or any Company Subsidiary,
or with respect to other information supplied by the Company
for inclusion in the Proxy Statement or the Form S-4 shall
occur which is required to be described in an amendment of, or
a supplement to, the Proxy Statement or the Form S-4, the
Company will promptly notify Parent of such event, and the
Company shall cooperate with Parent in the prompt filing with
the SEC of any necessary amendment or supplement to the Proxy
Statement and the Form S-4 and, as required by law, in
disseminating the information contained in such amendment or
supplement to the stockholders of the Company.
(c) If at any time prior to the Effective Time any
event with respect to Parent or any Parent Subsidiary, or with
respect to other information supplied by the Parent for
inclusion in the Proxy Statement or the Form S-4 shall occur
which is required to be described in an amendment of, or a
supplement to, the Proxy Statement or the Form S-4, Parent
will promptly notify the Company of such event, and Parent
shall cooperate with Company in the prompt filing with the SEC
of any necessary amendment or supplement to the Proxy
Statement and the Form S-4 and, as required by law, in
disseminating the information contained in such amendment or
supplement to the stockholders of the Company.
(d) The Company shall, as soon as practicable
following effectiveness of the Form S-4, duly call, give
notice of, convene and hold a meeting of its stockholders (the
"Company Stockholders Meeting") for the purpose of seeking the
Company Stockholder Approval. The Company shall consult with
Parent in determining a date for such meeting that is
reasonably acceptable to Parent and the Company. The Company
shall, through the Company Board, recommend to
its stockholders that they give the Company Stockholder
Approval, except to the extent that the Company Board shall
have withdrawn or modified its approval or recommendation of
this Agreement or the Merger as permitted by Section 5.02(b).
(e) The Company shall instruct Deloitte & Touche
LLP, the Company's independent public accountants, to deliver
to Parent a letter dated a date within two business days
before the date on which the Form S-4 shall become effective
and addressed to Parent, the form and substance of which shall
be negotiated between Parent and Deloitte & Touche LLP (with
the intent that such letter should be customary in scope and
substance for letters delivered by such accounting firm in
connection with registration statements similar to the Form
S-4).
(f) Parent shall instruct KPMG Peat Marwick LLP,
Parent's independent public accountants, to deliver to the
Company a letter dated a date within two business days before
the date on which the Form S-4 shall become effective and
addressed to the Company, the form and substance of which
shall be negotiated among the Company, Parent and KPMG Peat
Marwick LLP (with the intent that such letter should be
customary in scope and substance for letters delivered by such
accounting firm in connection with registration statements
similar to the Form S-4).
SECTION 6.02. Access to Information; Confidenti
ality. Upon reasonable notice, the Company shall, and shall
cause its subsidiaries to, afford to the officers, employees,
accountants, counsel, financial advisors and other
representatives of Parent and Sub, reasonable access during
normal business hours during the period prior to the Effective
Time to all officers, legal and financial representatives,
properties, books, contracts, commitments, personnel and
records and all other information concerning its business,
properties and personnel as Parent may reasonably request and,
during such period, each of the Company and Parent shall, and
shall cause each of its respective subsidiaries to, furnish
promptly to the other party a copy of each report, schedule,
registration statement and other document filed by it during
such period pursuant to the requirements of Federal or state
securities laws. Upon reasonable notice, Parent shall make
available all information and personnel which is reasonably
requested by the Company. All information exchanged pursuant
to this Section 6.02 shall be subject to the confidentiality
agreement dated November 18, 1997, between Parent and ▇.▇.
▇▇▇▇▇▇ & Co., Inc., as agent for the Company (the
"Confidentiality Agreement").
SECTION 6.03. Reasonable Efforts; Notification. (a)
Upon the terms and subject to the conditions set forth in this
Agreement, each of the parties shall use its reasonable
efforts to take, or cause to be taken, all actions, and to do,
or cause to be done, and to assist and cooperate with the
other parties in doing, all things necessary, proper or
advisable to consummate and make effective, in the most
expeditious manner practicable, the Merger and the other
Transactions, including (i) the obtaining of all necessary
actions or nonactions, waivers, consents and approvals from
Governmental Entities and the making of all necessary
registrations and filings (including filings with Governmental
Entities, if any) and the taking of all reasonable steps as
may be necessary to obtain an approval or waiver from, or to
avoid an action or proceeding by, any Governmental Entity,
(ii) the obtaining of all necessary consents, approvals or
waivers from third parties, (iii) the defending of any
lawsuits or other legal proceedings, whether judicial or
administrative, challenging this Agreement or any other
Transaction Agreement or the consummation of the Transactions,
including seeking to have any stay or temporary restraining
order entered by any court or other Governmental Entity
vacated or reversed and (iv) the execution and delivery of any
additional instruments necessary to consummate the
Transactions and to fully carry out the purposes of the
Transaction Agreements. In connection with and without
limiting the foregoing, the Company and the Company Board
shall (i) take all action necessary to ensure that no state
takeover statute or similar statute or regulation is or
becomes applicable to any Transaction or this Agreement or any
other Transaction Agreement and (ii) if any state takeover
statute or similar statute or regulation becomes applicable to
any Transaction or this Agreement or any other Transaction
Agreement, take all action necessary to ensure that the Merger
and the other Transactions may be consummated as promptly as
practicable on the terms contemplated by the Transaction
Agreements. Notwithstanding the foregoing, neither the Company
Board nor the Company shall be prohibited from taking any
action permitted by Sections 5.02(b) or 5.02(d), respectively.
(b) In performing the parties obligations under
Section 6.03(a) relating to Antitrust Laws (as defined below),
each of Parent and the Company shall use its reasonable
efforts to (i) cooperate with each other in connection with
any filing or submission and in connection with any
investigation or other inquiry, (ii) keep the other party
informed in all material respects of any material
communication received by such party from, or given by such
party to, the Federal Trade Commission (the "FTC"), the
Antitrust Division of the Department of Justice (the "DOJ"),
or any other Governmental Entity and of any material
communication received or given in connection with any suit,
action or proceeding by any other person, in each case
regarding any of the Transactions, and (iii) permit the other
party to review any material communication (subject to
redaction as reasonably necessary to protect competitively
sensitive confidential business information) given by it to,
and to consult with each other in advance of any meeting or
conference with, the FTC, the DOJ or any such other
Governmental Entity or, in connection with any suit, action or
proceeding by any other person, with any other person, and to
the extent permitted by the FTC, the DOJ or such other
applicable Governmental Entity or person, give the other party
the opportunity to attend and participate in such meetings and
conferences. For purposes of this Agreement, "Antitrust Law"
means the ▇▇▇▇▇▇▇ Act, as amended, the ▇▇▇▇▇▇▇ Act, as
amended, the HSR Act, the Federal Trade Commission Act, as
amended, and all other Applicable Laws that are designed or
intended to prohibit, restrict or regulate actions having the
purpose or effect of monopolization or restraint of trade or
lessening of competition through merger or acquisition.
(c) In performing the parties obligations under
Section 6.03(a), each of Parent and the Company shall use its
reasonable efforts to resolve such objections, if any, as may
be asserted with respect to the Transactions under any
Antitrust Law. In connection with the foregoing, if any suit,
action or proceeding, including any suit, action or proceeding
by any person, is instituted (or threatened to be instituted)
challenging any Transaction as violative of any Antitrust Law,
each of Parent and the Company shall cooperate in all respects
with each other and use its reasonable efforts to contest and
resist any such suit, action or proceeding and to have
vacated, lifted, reversed or overturned any Judgment, whether
temporary, preliminary or permanent, that is in effect and
that prohibits, prevents or restricts consummation of the
Transactions. Notwithstanding the foregoing, nothing in this
Section 6.03 shall (i) require a party who has reasonably
concluded, at any time after April 15, 1999, that a favorable
resolution of any such suit, action or proceeding by the DOJ
or the FTC would not be reasonably likely to occur on or prior
to the Outside Date (as defined in Section 8.01(b)) to
continue to contest and resist any such suit, action or
proceeding, unless such suit, action or proceeding could be
disposed of by a Threshold Settlement (as defined in Section
6.03(e)) that the DOJ or the FTC has not theretofore rejected
or (ii) limit a party's right to terminate this Agreement
pursuant to Article VIII, so long as such party has up to
then complied in all material respects with its obligations
under this Section 6.03.
(d) If any objections are asserted with respect to
the Transactions under any Antitrust Law or if any suit,
action or proceeding is instituted by any Governmental Entity
or other person challenging any of the Transactions as
violative of any Antitrust Law, each of Parent and the Company
shall use its reasonable efforts to resolve any such
objections or challenges so as to permit consummation of the
Transactions. In furtherance and not in limitation of the
foregoing, each of Parent and the Company (and, to the extent
required by any Governmental Entity, its respective
subsidiaries and affiliates over which it exercises control)
shall be required to enter into a settlement, undertaking,
consent decree, stipulation or other agreement (a
"Settlement") with a Governmental Entity regarding antitrust
matters in connection with the Transactions, but,
notwithstanding anything else contained in this Agreement,
Parent shall not be required to enter into any Settlement that
requires the Company and/or Parent to hold separate (including
by establishing a trust or otherwise) or to sell or otherwise
dispose of a number of stores of the Company and/or Parent
(and its subsidiaries) exceeding the lesser of (i) such number
of stores the aggregate revenues of which do not exceed 10% of
the aggregate revenues of the Company for the fiscal year
ended January 30, 1998 and (ii) 15 stores (such a Settlement
so requiring the holding separate, sale or other disposition
of such stores being referred to herein as the "Threshold
Settlement"). The parties agree that compliance with any such
Threshold Settlement may require holding separate, sale or
disposition of stores of either or both of the parties.
(e) The Company shall give prompt notice to Parent,
and Parent or Sub shall give prompt notice to the Company, of
(i) any representation or warranty made by it contained in any
Transaction Agreement that is qualified as to materiality
becoming untrue or inaccurate in any respect or any such
representation or warranty that is not so qualified becoming
untrue or inaccurate in any material respect or (ii) the
failure by it to comply with or satisfy in any material
respect any covenant, condition or agreement to be complied
with or satisfied by it under any Transaction Agreement;
provided, however, that no such notification shall affect the
representations, warranties, covenants or agreements of the
parties or the conditions to the obliga tions of the parties
under the Transaction Agreements.
SECTION 6.04. Company Stock Options. (a) As soon as
practicable following the date of this Agreement,
the Company Board (or, if appropriate, any committee
administering the Company Stock Plans) shall adopt such
resolutions or take such other actions as may be required to
effect the following:
(i) adjust the terms of all outstanding Company
Employee Stock Options to provide that, at the Effective
Time, each Company Employee Stock Option out standing
immediately prior to the Effective Time shall be deemed
to constitute an option to acquire, on the same terms and
conditions as were applicable under such Company Employee
Stock Option (other than conditions in respect of
vesting, it being agreed that all Company Employee Stock
Options shall vest at or prior to the Effective Time),
the same number of shares of Parent Common Stock as the
holder of such Company Employee Stock Option would have
been entitled to receive pursuant to the Merger had such
holder exercised such Company Employee Stock Option in
full immediately prior to the Effective Time, at a price
per share equal to (A) the aggregate exercise price for
the shares of Company Common Stock otherwise purchasable
pursuant to such Company Employee Stock Option divided by
(B) the number of shares of Parent Common Stock deemed
purchasable pursuant to such Company Employee Stock
Option;
(ii) adjust the terms of all outstanding Company
Employee Stock Options to provide that, from and after
the Effective Time, each Company Employee Stock Option
outstanding immediately prior to the Effective Time shall
be exercisable for not less than 90 days after
termination of the holder's employment for any reason
(but not beyond the original term of such Company
Employee Stock Option) or such longer period as such
Company Employee Stock Option provides as of the date of
this Agreement;
(iii) make such other changes to the Company Stock
Plans as it deems appropriate to give effect to the
Merger (subject to the approval of Parent, which shall
not be unreasonably withheld); and
(iv) ensure that, after the Effective Time, no
Company Employee Stock Options may be granted under any
Company Stock Plan.
(b) At the Effective Time, and subject to compliance
by the Company with Section 6.04(a), Parent shall assume all
the obligations of the Company under the Company Stock Plans,
each outstanding Company Employee Stock Option
and the agreements evidencing the grants thereof. As soon as
practicable after the Effective Time, Parent shall deliver to
the holders of Company Employee Stock Options appropriate
notices setting forth such holders' rights pursuant to the
respective Company Stock Plans, and the agreements evidencing
the grants of such Company Employee Stock Options shall
continue in effect on the same terms and conditions (subject
to the adjustments required by this Section 6.04 after giving
effect to the Merger). Parent shall comply with the terms of
the Company Stock Plans and such agreements.
(c) Parent shall take all corporate action necessary
to reserve for issuance a sufficient number of shares of
Parent Common Stock for delivery upon exercise of the Company
Employee Stock Options assumed in accordance with this Section
6.04. As soon as practicable following the Effective Time,
Parent shall file a registration statement on Form S-8 (or any
successor or other appropriate form) with respect to the
shares of Parent Common Stock subject to such Company Employee
Stock Options and the Company Stock Plans and shall use its
reasonable efforts to maintain the effectiveness of such
registration statement or registration statements (and
maintain the current status of the prospectus or prospectuses
contained therein) for so long as such Company Employee Stock
Options remain outstanding. Parent shall use reasonable
efforts to negotiate with Merrill, Lynch, ▇▇▇▇▇▇ ▇▇▇▇▇▇ &
▇▇▇▇▇, Incorporated ("Merrill") to amend the Corporate Stock
Option Exercise Program Agreement dated May 1994 between the
Company and ▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇
Incorporated, as amended, relating to the cashless exercise
option plan so as to allow such plan to cover Parent Common
Stock issued in respect of the Company Employee Stock Options.
(d) In this Agreement:
"Company Employee Stock Option" means any option to
purchase Company Common Stock granted under any Company
Stock Plan and any option listed as a "Company Employee
Stock Option" in the Company Disclosure Letter.
"Company SAR" means any stock appreciation right
linked to the price of Company Common Stock and granted
under any Company Stock Plan.
"Company Stock Plans" means the 1984 Employee Stock
Option and Stock Appreciation Rights Plan and the 1987
Executive Bonus and Stock Plan.
"Parent Employee Stock Option" means any option to
purchase Parent Common Stock granted under any Parent
Stock Plan.
"Parent Stock Plans" means the ▇. ▇. Penney Company,
Inc. 1984 Equity Compensation Plan, the ▇. ▇. ▇▇▇▇▇▇
Company, Inc. 1989 Equity Compensation Plan, the ▇. ▇.
Penney Company, Inc. 1993 Equity Compensation Plan and
the ▇. ▇. ▇▇▇▇▇▇ Company, Inc. 1997 Equity Compensation
Plan.
SECTION 6.05. Benefit Plans. (a) For a period of not
less than twelve months after the Effective Time, Parent shall
(i) either (A) maintain or cause the Surviving Corporation (or
in the case of a transfer of all or substantially all the
assets and business of the Surviving Corporation, its
successors and assigns) to maintain the Company Benefit Plans
(other than plans providing for the issuance of Company Common
Stock or based on the value of Company Common Stock) at the
benefit levels in effect on the date of this Agreement or (B)
provide or cause the Surviving Corporation (or, in such case,
its successors or assigns) to provide benefits to employees of
the Company and the Company Subsidiaries that, taken as a
whole, are no less favorable in the aggregate to such
employees than those provided to similarly situated employees
of Eckerd Corporation, a wholly owned subsidiary of Parent
("Eckerd"), (ii) make available plans providing for the
issuance of Parent Common Stock to employees of the Company
and the Company Subsidiaries that are substantially equivalent
to those provided to similarly situated employees of Eckerd
(taking into account the Company Employee Stock Options that
are issued, outstanding and assumed by Parent on the Closing
Date) and (iii) maintain compensation levels of employees of
the Company and the Company Subsidiaries, taken as a whole, at
least the compensation levels in effect immediately prior to
the Effective Time. In addition, Parent shall, and shall cause
the Surviving Corporation to, satisfy in full all obligations
set forth on Schedule 6.05 to the Company Disclosure Letter.
(b) From and after the Effective Time, Parent shall,
and shall cause the Surviving Corporation to, honor in
accordance with their respective terms (as in effect on the
date of, or amended in accordance with, this Agreement), (i)
all the Company's employment, severance and termination
agreements, plans and policies disclosed in the Company
Disclosure Letter and all other obligations of the Company and
each Company Subsidiary under the Company Benefit Plans listed
in the Company Disclosure Letter, (ii) all unused vacation
days and all personal and sickness days accrued as
of the Effective Time in accordance with the vacation and
personnel policies of the Company and the Company Subsidiaries
in effect as of the date of this Agreement and (iii) all
obligations set forth in the Company Disclosure Letter;
provided, however, that nothing herein shall be deemed to
limit Parent's ability to amend, modify or terminate any of
the arrangements described in clauses (i)- (iii) above in
accordance with the respective terms of such arrangements.
(c) With respect to any "employee benefit plan", as
defined in Section 3(3) of ERISA, maintained by Parent or any
Parent Subsidiary (including any severance plan), for all
purposes, including determining eligibility to participate,
level of benefits and vesting, service with the Company or any
Company Subsidiary shall be treated as service with Parent or
the Parent Subsidiaries; provided, however, that such service
need not be recognized to the extent that such recognition
would result in any duplication of benefits or for benefit
accrual purposes under any defined benefit pension plan of
Parent or any Parent Subsidiary.
(d) Parent shall waive, or cause to be waived, any
pre-existing condition limitation under any welfare benefit
plan maintained by Parent or any of its affiliates (other than
the Company) in which employees of the Company and the Company
Subsidiaries (and their eligible dependents) will be eligible
to participate from and after the Effective Time, except to
the extent that such pre-existing condition limitation would
have been applicable under the comparable Company welfare
benefit plan immediately prior to the Effective Time. Parent
agrees to recognize, or cause to be recognized, the dollar
amount of all expenses incurred by each Company employee (and
his or her eligible dependents) during the calendar year in
which the Effective Time occurs for purposes of satisfying
such year's deductible and co-payment limitations under the
relevant welfare benefit plans in which they will be eligible
to participate from and after the Effective Time.
(e) Parent acknowledges that, for purposes of those
Company Benefit Plans listed in the Company Disclosure Letter
which are specifically identified in the Company Disclosure
Letter as being affected, by their respective terms, as a
result of the consummation of the Merger constituting a
"Change in Control" of the Company, the consummation of the
Merger will constitute a "Change in Control" of the Company
(as that term is respectively defined in each of such Company
Benefit Plans). Parent shall, and shall cause the Surviving
Corporation to (i) pay,
or cause to be paid, all amounts provided under such Company
Benefit Plans as a result of a Change in Control of the
Company in accordance with their terms as in effect on the
date of this Agreement and (ii) honor all rights and
privileges to or with respect to any such Company Benefit
Plans as in effect on the date of this Agreement which, by
their respective terms, became effective as a result of such
Change in Control.
(f) Parent shall cause the Surviving Corporation at
the Effective Time to continue to employ all employees of the
Company and the Company Subsidiaries who are employed
immediately prior to the Effective Time. Parent shall be under
no obligation to cause the Surviving Corporation to continue
to employ any such individuals after the Effective Time.
SECTION 6.06. Indemnification. (a) Parent shall, to
the fullest extent permitted by law, cause the Surviving
Corporation to honor all the Company's obligations to
indemnify (including any obligations to advance funds for
expenses) the current or former directors or officers of the
Company and its subsidiaries for acts or omissions by such
directors and officers occurring prior to the Effective Time
to the extent that such obligations of the Company exist on
the date of this Agreement, whether pursuant to the Company
Charter, the Company Bylaws, individual indemnity agreements
or otherwise, and such obligations shall survive the Merger
and shall continue in full force and effect in accordance with
the terms of the Company Charter, the Company Bylaws and such
individual indemnity agreements from the Effective Time until
the expiration of the applicable statute of limitations with
respect to any claims against such directors or officers
arising out of such acts or omissions.
(b) For a period of six years after the Effective
Time, Parent shall cause to be maintained in effect the
current policies of directors' and officers' liability
insurance maintained by the Company (provided that Parent may
substitute therefor policies with reputable and financially
sound carriers of at least the same coverage and amounts
containing terms and conditions which are no less advantageous
in any material respect) with respect to claims arising from
or related to facts or events which occurred at or before the
Effective Time; provided, however, that Parent shall not be
obligated to make annual premium payments for such insurance
to the extent such premiums exceed 250% of the annual premiums
paid as of the date hereof by the Company for such insurance
(such 250% amount, the "Maximum Premium"). If such insurance
coverage cannot be obtained at all, or can only be obtained at
an annual premium in excess
of the Maximum Premium, Parent shall maintain the most
advantageous policies of directors' and officers' insurance
obtainable for an annual premium equal to the Maximum Premium.
The Company represents to Parent that the Maximum Premium is
$164,250.
(c) From and after the Effective Time, to the
fullest extent permitted by law, Parent shall, and shall cause
the Surviving Corporation to, indemnify, defend and hold
harmless the present and former officers and directors of the
Company and its subsidiaries and any employee of the Company
or its subsidiaries who acts as a fiduciary under any Company
Benefit Plan (each an "Indemnified Party") against all losses,
claims, damages, liabilities, fees and expenses (including
attorneys' fees and disbursements), judgments, fines and
amounts paid in settlement (in the case of settlements, with
the approval of the indemnifying party (which approval shall
not be unreasonably withheld)) (collectively, "Losses"), as
incurred (payable monthly upon written request which request
shall include reasonable evidence of the Losses set forth
therein) to the extent arising from, relating to, or otherwise
in respect of, any actual or threatened action, suit,
proceeding or investigation, in respect of actions or
omissions occurring at or prior to the Effective Time in
connection with such Indemnified Party's duties as an officer
or director of the Company or any of its subsidiaries,
including in respect of this Agreement, any other Transaction
Agreement, the Merger and the other Transactions; provided,
however, that an Indemnified Party shall not be entitled to
indemnification under this Section 6.06(c) for Losses arising
out of actions or omissions by the Indemnified Party
constituting (i) a breach of this Agreement or any other
Transaction Agreement, (ii) criminal conduct or (iii) any
violation of federal, state or foreign securities laws. In
order to be entitled to indemnification under this Section
6.06(c), an Indemnified Party must give Parent and the
Surviving Corporation prompt written notice of any third party
claim which may give rise to any indemnity obligation under
this Section 6.06(c), and Parent and the Surviving Corporation
shall have the right to assume the defense of any such claim
through counsel of their own choosing, subject to such
counsel's reasonable judgment that separate defenses that
would create a conflict of interest on the part of such
counsel are not available. If Parent and the Surviving
Corporation do not assume any such defense, they shall be
liable for all reasonable costs and expenses of defending such
claim incurred by the Indemnified Party, including attorneys'
fees and disbursements, and shall advance such costs and
expenses to the Indemnified Party as set forth above, to the
fullest extent permitted by law. Neither
Parent nor the Surviving Corporation shall be liable under
this Section 6.06(c) for any Losses resulting from any
settlement, compromise or offer to settle or compromise any
such action, suit, proceeding or investigation, without the
prior written consent of Parent and the Surviving Corporation.
SECTION 6.07. Fees and Expenses. (a) Except for the
filing fees with respect to the Proxy Statement and the Form
S-4 and the HSR Act, which filing fees shall be shared equally
by Parent and the Company, all fees and expenses incurred in
connection with the Merger and the other Transactions shall be
paid by the party incurring such fees or expenses, whether or
not the Merger is consummated.
(b) The Company shall pay to Parent a fee of
$15,000,000 if the Company Board withdraws or modifies in a
manner adverse to Parent its approval or recommendation of the
Merger and this Agreement pursuant to Section 5.02(b) and all
of the following shall have occurred:
(i) the Company Stockholder Approval shall not have
been obtained on or prior to the Outside Date (as defined
in Section 8.01(b)(i)) as a result of (x) the Company's
breach or failure to perform its covenant contained in
Section 6.01(d) or (y) a Principal Company Stockholder's
breach or failure to perform in any material respect any
of its covenants contained in Sections 3(a)(1), 3(b) or
3(c) of the Company Stockholder Agreement;
(ii) Parent shall not have breached or failed to
perform in any material respect any of its covenants
contained in any Transaction Agreement; and
(iii) this Agreement shall have terminated pursuant
to Section 8.01(b)(i) or Section 8.01(b)(iv).
Any fee due under this Section 6.07(b) shall be paid by wire
transfer of same-day funds on the first business day after the
date of termination of this Agreement.
SECTION 6.08. Public Announcements. Parent and Sub,
on the one hand, and the Company, on the other hand, shall
consult with each other before issuing, and provide each other
the opportunity to review and make reasonable comment upon,
any press release or other public statements with respect to
the Merger and the other Transactions and shall not issue any
such press release or make any such public statement prior to
such consultation, except as may be required, based upon
opinion of counsel, by applicable
law, court process or by obligations pursuant to any listing
agreement with any national securities exchange, it being
agreed that no such press release or public statement will be
made prior to 8:30 a.m., New York time, on the day after this
Agreement is signed.
SECTION 6.09. Transfer Taxes. All stock transfer,
real estate transfer, documentary, stamp, recording and other
similar Taxes (including interest, penalties and additions to
any such Taxes) ("Transfer Taxes") incurred in connection with
the transactions contemplated by this Agreement shall be paid
by the Company, and the Company shall cooperate with Sub and
Parent in preparing, executing and filing any Tax Returns,
questionnaires, applications or other documents with respect
to such Transfer Taxes, including supplying in a timely manner
a complete list of all real property interests held by the
Company that are located in New York State and any information
with respect to such property that is reasonably necessary to
complete such Tax Returns.
SECTION 6.10. Affiliates. Prior to the Closing Date,
the Company shall deliver to Parent a letter identify ing all
persons who were, at the date of the Company Stockholders
Meeting, "affiliates" of the Company for purposes of Rule 145
under the Securities Act. The Company shall use its best
efforts to cause each such person to deliver to Parent on or
prior to the Closing Date a written agreement substantially in
the form attached as Exhibit B.
SECTION 6.11. Stock Exchange Listing. Parent shall
use its reasonable efforts to cause the shares of Parent
Common Stock to be issued in the Merger and under the Company
Stock Plans to be approved for listing on the NYSE, subject to
official notice of issuance, prior to the Closing Date.
SECTION 6.12. Tax Treatment. The parties intend the
Merger to qualify as a reorganization under Section 368(a) of
the Code. Each party and its affiliates shall use reasonable
efforts to cause the Merger to so qualify and to obtain the
opinions of Cravath, Swaine & ▇▇▇▇▇, solely for the benefit of
the Company, and Weil, Gotshal & ▇▇▇▇▇▇ LLP, solely for the
benefit of Parent and Sub, to the effect that the Merger will
be treated for U.S. Federal income tax purposes as a
"reorganization" within the meaning of Section 368(a) of the
Code and that Parent, Sub and the Company will each be a party
to that reorganization within the meaning of Section 368(b) of
the Code. For purposes of the tax opinions described in
Sections 7.02(e) and 7.03(d) of this Agreement, each of Parent
and the Company shall provide
representation letters substantially in the form of Exhibits C
and D, each dated on or about the date that is two business
days prior to the date the Proxy Statement is mailed to the
stockholders of the Company and reissued as of the Closing
Date. Each of Parent, Sub and the Company and each of their
respective affiliates shall not take any action and shall not
fail to take any action or suffer to exist any condition which
action or failure to act or condition would prevent, or would
be reasonably likely to prevent, the Merger from qualifying as
a reorganization within the meaning of Section 368(a) of the
Code.
SECTION 6.13. Eckerd Board. Promptly following the
Effective Time, ▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ will be invited to join
the Board of Directors of Eckerd.
SECTION 6.14. Parent Rights. For the avoidance of
doubt, the parties hereto acknowledge that pursuant to the
Parent Rights Agreement, one Parent Right will be attached to
each share of Parent Common Stock issued in connection with
the Merger upon conversion of Company Common Stock.
SECTION 6.15. Charitable Giving. For at least three
years after the Effective Time, Parent shall cause the
Surviving Corporation to continue to make charitable donations
to the charities, and in amounts not less than the amounts,
set forth in Schedule 6.15 to the Company Disclosure Letter.
ARTICLE VII
Conditions Precedent
SECTION 7.01. Conditions to Each Party's Obligation
To Effect The Merger. The respective obligation of each party
to effect the Merger is subject to the satisfaction or waiver
on or prior to the Closing Date of the following conditions:
(a) Stockholder Approval. The Company shall have
obtained the Company Stockholder Approval.
(b) Listing. The shares of Parent Company Stock
issuable to the Company's stockholders pursuant to this
Agreement and under the Company Stock Plans shall have been
approved for listing on the NYSE, subject to official notice
of issuance.
(c) Antitrust. The waiting period (and any extension
thereof) applicable to the Merger under the HSR Act shall have
been terminated or shall have expired. Any consents, approvals
and filings under any foreign antitrust law, the absence of
which would prohibit the consummation of Merger, shall have
been obtained or made.
(d) No Injunctions or Restraints. No temporary
restraining order, preliminary or permanent injunction or
other order issued by any court of competent jurisdiction or
other legal restraint or prohibition preventing the
consummation of the Merger shall be in effect; provided,
however, that prior to invoking this condition, each of the
parties shall have used its reasonable efforts to prevent the
entry of any such injunction or other order and to appeal as
promptly as possible any such injunction or other order that
may be entered, and shall have otherwise complied with its
obligations under Section 6.03.
(e) Form S-4. The Form S-4 shall have become
effective under the Securities Act and shall not be the
subject of any stop order or proceedings seeking a stop order,
and Parent shall have received all state securities or "blue
sky" authorizations necessary to issue Parent Common Stock
pursuant to the Merger.
SECTION 7.02. Conditions to Obligations of Parent
and Sub. The obligations of Parent and Sub to effect the
Merger are further subject to the following conditions, any or
all of which may be waived in whole or in part by Parent and
Sub:
(a) Representations and Warranties. Each of the
representations and warranties of the Company in this
Agreement shall be true and correct in all material respects,
as of the date of this Agreement and as of the Closing Date as
though made on and as of the Closing Date, except to the
extent such representations and warranties expressly relate to
an earlier date (in which case such representations and
warranties shall be true and correct in all material respects,
on and as of such earlier date). Parent shall have received a
certificate signed on behalf of the Company by the chief
executive officer and the chief financial officer of the
Company to such effect.
(b) Performance of Obligations of the Company. The
Company shall have performed in all material respects all
obligations required to be performed by it under this
Agreement at or prior to the Closing Date, and Parent shall
have received a certificate signed on behalf of the Company
by the chief executive officer and the chief financial officer
of the Company to such effect.
(c) Absence of Company Material Adverse Effect.
Except as disclosed in the Filed Company SEC Documents or in
the Company Disclosure Letter, since the date of this
Agreement, there shall not have been any event, change, effect
or development that, individually or in the aggregate, has had
a Company Material Adverse Effect, other than events, changes,
effects and developments relating to the economy in general or
to the Company's industry in general and not specifically
relating to the Company or any Company Subsidiary. Parent
shall have received a certificate signed on behalf of the
Company by its chief executive officer and chief financial
officer to such effect.
(d) Letters from Company Affiliates. Parent shall
have received from each person named in the letter referred to
in Section 6.10 an executed copy of an agreement substantially
in the form of Exhibit B.
(e) Tax Opinion. Parent and Sub shall have received
a written opinion, dated as of the Closing Date, from Weil,
Gotshal & ▇▇▇▇▇▇ LLP, special counsel to Parent and Sub, to
the effect that the Merger will be treated for federal income
tax purposes as a reorganization within the meaning of Section
368(a) of the Code and that Parent, Sub and the Company will
each be a party to that reorganization within the meaning of
Section 368(b) of the Code. In rendering such opinion, such
counsel shall be entitled to rely upon the representations
provided by the parties hereto in the representation letters
referred to in Section 6.12.
(f) Other Opinions. Parent shall have received from
the General Counsel of the Company, and from Morris, Nichols,
Arsht & ▇▇▇▇▇▇▇, special Delaware counsel to the Company,
legal opinions, dated as of the Closing Date, in substantially
the forms of Exhibits E and F.
(g) Existing Stockholder Agreement. The Existing
Stockholder Agreement (as defined in the Company Stockholder
Agreement) shall terminate at the Effective Time.
SECTION 7.03. Conditions to Obligations of the
Company. The obligation of the Company to effect the Merger is
further subject to the following conditions, any or all of
which may be waived in whole or in part by the Company:
(a) Representations and Warranties. Each of the
representations and warranties of Parent and Sub in this
Agreement shall be true and correct in all material respects,
as of the date of this Agreement and on the Closing Date as
though made on and as of the Closing Date, except to the
extent such representations and warranties expressly relate to
an earlier date (in which case such representations and
warranties shall be true and correct in all material respects,
on and as of such earlier date). The Company shall have
received a certificate signed on behalf of Parent by the chief
executive officer and the chief financial officer of Parent to
such effect.
(b) Performance of Obligations of Parent and Sub.
Parent and Sub shall have performed in all material respects
all obligations required to be performed by them under this
Agreement at or prior to the Closing Date, and the Company
shall have received a certificate signed on behalf of Parent
by the chief executive officer and the chief financial officer
of Parent to such effect.
(c) Absence of Parent Material Adverse Effect.
Except as disclosed in the Filed Parent SEC Documents, since
the date of this Agreement there shall not have been any
event, change, effect or development that, individually or in
the aggregate, has had a Parent Material Adverse Effect, other
than events, changes, effects and developments relating to the
economy in general or to the Parent's industry in general and
not specifically relating to the Parent or any Parent
Subsidiary. The Company shall have received a certificate
signed on behalf of Parent by its chief executive officer and
chief financial officer to such effect.
(d) Tax Opinion. The Company shall have received a
written opinion, dated as of the Closing Date, from Cravath,
Swaine & ▇▇▇▇▇, special counsel to the Company, to the effect
that the Merger will be treated for Federal income tax
purposes as a reorganization within the meaning of Section
368(a) of the Code and that Parent, Sub and the Company will
each be a party to that reorganization within the meaning of
Section 368(b) of the Code. In rendering
such opinion, such counsel shall be entitled to rely upon the
representations provided by the parties hereto in the
representation letters referred to in Section 6.12.
(e) Other Opinions. The Company shall have received
from the General Counsel of Parent, and from ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇
& Finger, special Delaware counsel to Parent, legal opinions,
dated as of the Closing Date, in substantially the forms of
Exhibits G and H.
ARTICLE VIII
Termination, Amendment and Waiver
SECTION 8.01. Termination. This Agreement may be
terminated at any time prior to the Effective Time, whether
before or after receipt of the Company Stockholder Approval:
(a) by mutual written consent of Parent, Sub and the
Company;
(b) by either Parent or the Company:
(i) if the Merger is not consummated on or
before May 31, 1999 (the "Outside Date"), unless the
failure to consummate the Merger is the result of a
material breach of any Transaction Agreement by the
party seeking to terminate this Agreement; or
(ii) if any Governmental Entity issues an
order, decree or ruling or takes any other action
permanently enjoining, restraining or otherwise
prohibiting the Merger and such order, decree,
ruling or other action shall have become final and
nonappealable; or
(iii) if any condition to the obligation of
such party to consummate the Merger set forth in
Section 7.02 (in the case of Parent) or 7.03 (in the
case of the Company) becomes incapable of
satisfaction prior to the Outside Date; provided,
however, that the failure of such condition is not
the result of a material breach of any Transaction
Agreement by the party seeking to terminate this
Agreement; or
(iv) if, upon a vote at a duly held meeting to
obtain the Company Stockholder Approval (including
any adjournment(s) or postponement(s)
thereof), the Company Stockholder Approval is not
obtained;
(c) by Parent, if:
(1) the Company Board withdraws or modifies in
a manner adverse to Parent its approval or
recommendation of the Merger and this Agreement
pursuant to Section 5.02(b) (provided that Parent
must give written notice to the Company of its
election to terminate this Agreement pursuant to
this clause (1) within 15 days after public
announcement of such action by the Company Board);
or
(2) the Company breaches or fails to perform in
any material respect any of its representations,
warranties or covenants contained in any Transaction
Agreement, which breach or failure to perform (i)
would give rise to the failure of a condition set
forth in Section 7.02(a) or 7.02(b), and (ii) cannot
be or has not been cured within 30 days after the
giving of written notice to the Company of such
breach (provided that Parent is not then in material
breach of any representation, warranty or covenant
contained in any Transaction Agreement); or
(3) after the date hereof there has been a
Company Material Adverse Effect, other than events,
changes, effects and developments relating to the
economy in general or to the Company's industry in
general and not specifically relating to the Company
or any Company Subsidiary; or
(d) by the Company, if:
(1) Parent breaches or fails to perform in any
material respect any of its representations,
warranties or covenants contained in any Transaction
Agreement, which breach or failure to perform (i)
would give rise to the failure of a condition set
forth in Section 7.03(a) or 7.03(b), and (ii) cannot
be or has not been cured within 30 days after the
giving of written notice to Parent of such breach
(provided that the Company is not then in material
breach of any representation, warranty or covenant
in any Transaction Agreement); or
(2) after the date hereof there has been a
Parent Material Adverse Effect, other than events,
changes, effects and developments relating to the
economy in general or to the Parent's industry in
general and not specifically relating to the Parent
or any Parent Subsidiary.
SECTION 8.02. Effect of Termination. In the event of
termination of this Agreement by either the Company or Parent
as provided in Section 8.01, this Agreement shall forthwith
become void and have no effect, without any liability or
obligation on the part of Parent, Sub or the Company, other
than Section 3.14, the last sentence of Section 6.02, Section
6.07, this Section 8.02 and Article IX, which provisions shall
survive such termination, and except to the extent that such
termination results from the wilful and material breach by a
party of any representa tion, warranty or covenant set forth
in any Transaction Agreement.
SECTION 8.03. Amendment. This Agreement may be
amended by the parties at any time before or after receipt of
the Company Stockholder Approval; provided, however, that
after receipt of the Company Stockholder Approval, there shall
be made no amendment that by law requires further approval by
the stockholders of the Company without the further approval
of such stockholders. This Agreement may not be amended except
by an instrument in writing signed on behalf of each of the
parties.
SECTION 8.04. Extension; Waiver. At any time prior
to the Effective Time, the parties may (a) extend the time for
the performance of any of the obligations or other acts of the
other parties, (b) waive any inaccuracies in the
representations and warranties contained in this Agreement or
in any document delivered pursuant to this Agreement or (c)
subject to the proviso of Section 8.03, waive compliance with
any of the agreements or conditions contained in this
Agreement. Any agreement on the part of a party to any such
extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party. The
failure of any party to this Agreement to assert any of its
rights under this Agreement or otherwise shall not constitute
a waiver of such rights.
SECTION 8.05. Procedure for Termination, Amend ment,
Extension or Waiver. A termination of this Agreement pursuant
to Section 8.01, an amendment of this Agreement pursuant to
Section 8.03 or an extension or waiver pursuant to Section
8.04 shall, in order to be effective, require in the case of
Parent, Sub or the Company, action by its Board
of Directors or the duly authorized designee of its Board of
Directors.
ARTICLE IX
General Provisions
SECTION 9.01. Nonsurvival of Representations and
Warranties. None of the representations and warranties in this
Agreement or in any instrument delivered pursuant to this
Agreement shall survive the Effective Time. This Section 9.01
shall not limit any covenant or agreement of the parties which
by its terms contemplates performance after the Effective Time
or the termination of this Agreement pursuant to Section 8.01.
SECTION 9.02. Notices. All notices, requests,
claims, demands and other communications under this Agree ment
shall be in writing and shall be deemed given (and shall be
deemed to have been duly received if given) by hand delivery
or telecopy (with a confirmation copy sent for next day
delivery via courier service, such as Federal Express), or by
any courier service, such as Federal Express, providing proof
of delivery, at the following addresses (or at such other
address for a party as shall be specified by like notice):
(a) if to Parent or Sub, to
▇. ▇. ▇▇▇▇▇▇ Company, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
with copies to:
▇. ▇. ▇▇▇▇▇▇ Company, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq. and
Weil, Gotshal & ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
(b) if to the Company, to
▇▇▇▇▇▇▇▇ Drug Stores, Inc.
▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
with a copy to:
Cravath, Swaine & ▇▇▇▇▇
Worldwide Plaza
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, Esq.
SECTION 9.03. Definitions. For purposes of this
Agreement:
An "affiliate" of any person means another person
that directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under common
control with, such first person.
A "material adverse effect" on a party means a
material adverse effect on the business, operations, assets,
condition (financial or otherwise) or results of operations of
such party and its subsidiaries, taken as a whole.
A "person" means any individual, firm, corporation,
partnership, company, limited liability company, trust, joint
venture, association, Governmental Entity or other entity.
A "subsidiary" of any person means another person,
an amount of the voting securities, other voting ownership or
voting partnership interests of which is sufficient to elect
at least a majority of its Board of Directors or other
governing body (or, if there are no such voting interests, 50%
or more of the equity interests of which) is owned directly or
indirectly by such first person.
SECTION 9.04. Interpretation; Disclosure Letters.
When a reference is made in this Agreement to a Section, such
reference shall be to a Section of this Agreement unless
otherwise indicated. The table of contents and headings
contained in this Agreement are for reference purposes only
and shall not affect in any way the meaning or interpretation
of this Agreement. Whenever the words "include", "includes" or
"including" are used in this
Agreement, they shall be deemed to be followed by the words
"without limitation". Any matter disclosed in any section of
or schedule to the Company Disclosure Letter shall be deemed
disclosed for all purposes and all sections of the Company
Disclosure Letter, to which such disclosure could reasonably
be deemed to apply.
SECTION 9.05. Severability. If any term or other
provision of this Agreement is invalid, illegal or incapable
of being enforced by any rule or law, or public policy, all
other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the
economic or legal substance of the transactions contemplated
hereby is not affected in any manner materially adverse to any
party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced,
the parties hereto shall negotiate in good faith to modify
this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner to the
end that transactions contemplated hereby are fulfilled to the
extent possible.
SECTION 9.06. Counterparts. This Agreement may be
executed in one or more counterparts, all of which shall be
considered one and the same agreement and shall become
effective when one or more counterparts have been signed by
each of the parties and delivered to the other parties.
SECTION 9.07. Entire Agreement; Third-Party
Beneficiaries. The Transaction Agreements, taken together with
the Company Disclosure Letter, the Confidentiality Agreement,
and any other agreement among the parties entered into
contemporaneously herewith, (a) constitute the entire
agreement, and supersede all prior agreements and
understandings, both written and oral, among the parties with
respect to the Transactions and (b) except for the provisions
of Article II, Section 6.04, Section 6.05 and Section 6.06,
are not intended to confer upon any person other than the
parties hereto any rights or remedies.
SECTION 9.08. Governing Law. This Agreement shall be
governed by, and construed in accordance with, the laws of the
State of Delaware, regardless of the laws that might otherwise
govern under applicable principles of conflicts of laws
thereof.
SECTION 9.09. Assignment. Neither this Agreement nor
any of the rights, interests or obligations under this
Agreement shall be assigned, in whole or in part, by opera
tion of law or otherwise by any of the parties without the
prior written consent of the other parties, except that Sub
may assign, in its sole discretion, any of or all its rights,
interests and obligations under this Agreement to any direct
wholly owned subsidiary of Parent, but no such assignment
shall relieve Sub of any of its obligations under this
Agreement. Any purported assignment without such consent shall
be void. Subject to the preceding sentences, this Agreement
will be binding upon, inure to the benefit of, and be
enforceable by, the parties and their respective successors
and assigns.
SECTION 9.10. Enforcement. The parties agree that
irreparable damage would occur in the event that any of the
provisions of any Transaction Agreement were not performed in
accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent breaches
of any Transaction Agreement and to enforce specifically the
terms and provisions of each Transaction Agreement in any
Federal court located in the State of Delaware or in any
Delaware state court, this being in addition to any other
remedy to which they are entitled at law or in equity. In
addition, each of the parties hereto (a) consents to submit
itself to the personal jurisdiction of any Federal court
located in the State of Delaware or any Delaware state court
in the event any dispute arises out of any Transaction
Agreement or any Transaction, (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, (c) agrees
that it will not bring any action relating to any Transaction
Agreement or any Transaction in any court other than any
Federal court sitting in the State of Delaware or any Delaware
state court and (d) waives any right to trial by jury with
respect to any action related to or arising out of any
Transaction Agreement or any Transaction.
IN WITNESS WHEREOF, Parent, Sub and the Company have
duly executed this Agreement, all as of the date first written
above.
▇. ▇. ▇▇▇▇▇▇ COMPANY, INC.,
by /s/ ▇. ▇. ▇▇▇▇▇▇▇▇▇▇▇▇▇
-------------------------------
Name: ▇. ▇. ▇▇▇▇▇▇▇▇▇▇▇▇▇
Title: Chairman of the Board
Chief Executive Officer
LEGACY ACQUISITION CORP.,
by /s/ ▇. ▇. ▇▇▇▇▇▇
--------------------------
Name: ▇. ▇. ▇▇▇▇▇▇
Title: Vice President
▇▇▇▇▇▇▇▇ DRUG STORES, INC.,
by /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
--------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Chairman of the Board
Chief Executive Officer
EXHIBIT A
RESTATED CERTIFICATE OF INCORPORATION
OF
SURVIVING CORPORATION
FIRST: The name of the corporation ("Corporation") shall
be [ ].
SECOND: The address of the Corporation's registered
office in the State of Delaware is ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ of new Castle, 19801. The name of the
Corporation's registered agent at such address is The
Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any
lawful at or activity for which corporations may be organized
under the General Corporation Law of the State of Delaware.
FOURTH: The total number of shares of all classes of
stock which the Corporation shall have authority to issue is
one thousand (1,000) shares of Common Stock of one dollar ($1)
par value.
FIFTH: In furtherance and not in limitation of the powers
conferred by the laws of the State of Delaware, the Board of
Directors is expressly authorized and empowered:
(a) to make, alter, and repeal the Bylaws of the
Corporation, subject to the power of the
stockholders of the Corporation to alter or repeal
any Bylaw made by the Board of Directors;
(b) subject to the laws of the State of Delaware from
time to time to sell, lease, or otherwise dispose of
any part or parts of the properties of the
Corporation and to cease to conduct the business
connected therewith or again to resume the same, as
it may deem best; and
(c) in addition to the powers and authorities
hereinbefore and by the laws of the State of
Delaware conferred upon the Board of Directors, to
exercise all such powers and to do all such acts and
things as may be exercised or done by the
Corporation; subject, nevertheless, to the
provisions of said laws, of the Certificate of
Incorporation as from time to time amended of the
Corporation, and of its Bylaws.
SIXTH: Any director or any officer of the Corporation
elected or appointed by the stockholders of the Corporation or
by its Board of Directors may be removed at any time in such
manner as shall be provided in the Bylaws of the Corporation.
SEVENTH: A director of the Corporation shall not be
personally liable to the Corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the director's duty
of loyalty to the Corporation or its stockholders, (ii) for
acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law,
(iii) under Section 174 of the Delaware General Corporation
Law, or (iv) for any transaction from which the director
derived an improper personal benefit. If the Delaware General
Corporation law is hereafter amended to permit further
limitation on or elimination of the personal liability of the
Corporation's directors for breach of fiduciary duty, then a
director of the Corporation shall be exempt from such
liability for any such breach to the full extent permitted by
the Delaware General Corporation Law as so amended from time
to time. Any repeal or modification of the foregoing
provisions of this Article, or the adoption of any provisions
inconsistent herewith, shall not adversely affect any right or
protection of a director of the Corporation hereunder in
respect of any act or omission of such director occurring
prior to such repeal, modification, or adoption of an
inconsistent provision.
EIGHTH: The Corporation reserves the right at any time
and from time to time to amend, alter, change, or repeal any
provision contained herein, and other provisions authorized by
the laws of the State of Delaware at the time in force may be
added or inserted, in the manner now or hereafter prescribed
by law; and all rights, preferences, and privileges of
whatsoever nature conferred upon stockholders, directors, or
any other persons whomsoever by and pursuant to this
Certificate of Incorporation in its present form or
as hereafter amended are granted subject to the right reserved
in this Article.
EXHIBIT B
Form of Company Affiliate Letter
Dear Sirs:
The undersigned refers to the Agreement and Plan of
Merger (the "Merger Agreement") dated as of November 23, 1998,
among ▇. ▇. ▇▇▇▇▇▇ COMPANY, INC., a Delaware corporation,
LEGACY ACQUISITION CORP., a Delaware corporation, and ▇▇▇▇▇▇▇▇
DRUG STORES, INC., a Delaware corporation. Capitalized terms
used but not defined in this letter have the meanings given
such terms in the Merger Agreement.
The undersigned, a holder of shares of Company
Common Stock, is entitled to receive in connection with the
Merger shares of Parent Common Stock. The undersigned
acknowledges that the undersigned may be deemed an "affiliate"
of the Company within the meaning of Rule 145 ("Rule 145")
promulgated under the Securities Act, although nothing
contained herein should be construed as an admission of such
fact.
If in fact the undersigned were an affiliate under
the Securities Act, the undersigned's ability to sell, assign
or transfer the Parent Common Stock received by the
undersigned in exchange for any shares of Company Common Stock
pursuant to the Merger may be restricted unless such
transaction is registered under the Securities Act or an
exemption from such registration is available. The undersigned
(i) understands that such exemptions are limited and (ii) has
obtained advice of counsel as to the nature and conditions of
such exemptions, including information with respect to the
applicability to the sale of such securities of Rules 144 and
145(d) promulgated under the Securities Act.
The undersigned hereby represents to and covenants
with Parent that the undersigned will not sell, assign or
transfer any of the Parent Common Stock received by the
undersigned in exchange for shares of Company Common Stock
pursuant to the Merger except (i) pursuant to an effective
registration statement under the Securities Act or (ii) in a
transaction that, in the opinion of counsel reasonably
satisfactory to Parent (the reasonable fees of which counsel
will be paid by Parent in connection with any sale, assignment
or transfer by gift or pursuant to Rule 144 or Rule 145(d)(1))
or as described in a "no-action" or interpretive letter from
the Staff of the SEC, is not required to be registered under
the Securities Act.
In the event of a sale or other disposition by the
undersigned pursuant to Rule 145 of Parent Common Stock
received by the undersigned in the Merger, the undersigned
will supply Parent with evidence of compliance with such Rule,
in the form of a letter in the form of Annex I hereto and the
opinion of counsel or no-action letter referred to above. The
undersigned understands that Parent may instruct its transfer
agent to withhold the transfer of any Parent Common Stock
disposed of by the undersigned, but that upon receipt of such
evidence of compliance the transfer agent shall effectuate the
transfer of the Parent Common Stock sold as indicated in the
letter.
The undersigned acknowledges and agrees that (i) the
Parent Common Stock issued to the undersigned will all be in
certificated form and (ii) appropriate legends will be placed
on certificates representing Parent Common Stock received by
the undersigned in the Merger or held by a transferee thereof,
which legends will be removed by delivery of substitute
certificates upon receipt by Parent of an opinion in form and
substance reasonably satisfactory to Parent from counsel (the
reasonable fees of which counsel will be paid by Parent in
connection with any removal of legends pursuant to Rule
144(k), Rule 145(d)(2) or Rule 145(d)(3)) to the effect that
such legends are no longer required for purposes of the
Securities Act.
The undersigned acknowledges that (i) the
undersigned has carefully read this letter and, to the extent
the undersigned has felt necessary, discussed such letter with
the undersigned's counsel or counsel of the Company and
understands the requirements hereof and the limitations
imposed upon the distribution, sale, transfer or other
disposition of Parent Common Stock and (ii) the receipt by
Parent of this letter is an inducement and a condition to
Parent's obligations to consummate the Merger.
Parent shall be under no obligation to register the
sale, transfer or other disposition of the shares of Parent
Common Stock received by the undersigned as a result of the
Merger or, except as set forth in this letter, to take any
other action necessary in order to make compliance with an
exemption from registration available.
For a period of two years from the Effective Time,
Parent shall file promptly all reports required to be filed by
it with the SEC pursuant to the Securities Exchange Act of
1934 (the "Exchange Act") in compliance with the Exchange Act
and the Rules promulgated thereunder.
Very truly yours,
Dated:
ANNEX I
TO EXHIBIT B
▇. ▇. ▇▇▇▇▇▇ COMPANY, INC.
On , the undersigned sold the
securities of ▇. ▇.PENNEY COMPANY, INC. ("Parent") described
below in the space provided for that purpose (the
"Securities"). The Securities were received by the undersigned
in connection with the merger of LEGACY ACQUISITION CORP.
("Sub"), a subsidiary of Parent, with and into ▇▇▇▇▇▇▇▇ DRUG
STORES, INC. (the "Company") pursuant to the Agreement and
Plan of Merger dated as of November 23, 1998 among Parent, Sub
and the Company.
Based upon the most recent report or statement filed
by Parent with the Securities and Exchange Commission, the
Securities sold by the undersigned were within the prescribed
limitations set forth in Rule 144(e) promulgated under the
Securities Act of 1933, as amended (the "Securities Act").
The undersigned hereby represents that the
Securities were sold in "brokers' transactions" within the
meaning of Section 4(4) of the Securities Act or in
transactions directly with a "market maker" as that term is
defined in Section 3(a)(38) of the Securities Exchange Act of
1934, as amended. The undersigned further represents that the
undersigned has not solicited or arranged for the solicitation
of orders to buy the Securities, and that the undersigned has
not made any payment in connection with the offer or sale of
the Securities to any person other than to the broker who
executed the order in respect of such sale.
Very truly yours,
Dated:
[Space to be provided for description of
securities.]
EXHIBIT C
[Letterhead of Parent]
[ ], 199_
Weil, Gotshal & ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Cravath, Swaine & ▇▇▇▇▇
Worldwide Plaza
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
In connection with the opinions to be delivered
pursuant to Sections 7.02(e) and 7.03(d) of the Agreement and
Plan of Merger (the "Merger Agreement") dated as of November
23, 1998, by and among ▇. ▇. Penney Company, Inc., a Delaware
corporation ("Parent"), Legacy Acquisition Corp., a Delaware
corporation and a wholly owned subsidiary of Parent ("Sub"),
and ▇▇▇▇▇▇▇▇ Drug Stores, Inc., a Delaware corporation (the
"Company"), and in connection with the filing with the
Securities Exchange Commission (the "SEC") of the registration
statement on Form S-4 (the "Registration Statement") relating
to the Merger Agreement, which includes the proxy
statement/prospectus of Parent and the Company, the
undersigned certifies and represents on behalf of Parent and
Sub, after due inquiry and investigation, as follows (any
capitalized term used but not defined herein having the
meaning given to such term in the Merger Agreement):
1. The facts relating to the contemplated merger
(the "Merger") of Sub with and into the Company as described
in the Registration Statement and the documents described in
the Registration Statement are, insofar as such facts pertain
to Parent and Sub, true, correct and complete in all
material respects. The Merger will be consummated in
accordance with the Merger Agreement.
2. The formula set forth in the Merger Agreement
pursuant to which each issued and outstanding share of Class A
common stock, par value $1.00 per share, of the Company (the
"Class A Common Stock"), and each issued and outstanding share
of Class B common stock, par value $1.00 per share, of the
Company (the "Class B Common Stock", and together with the
Class A Common Stock, the "Company Common Stock") will be
converted into common shares of Parent ("Parent Common Stock")
is the result of arm's length bargaining.
3. Cash payments to be made to stockholders of the
Company in lieu of fractional shares of Parent Common Stock
that would otherwise be issued to such stockholders in the
Merger will be made for the purpose of saving Parent the
expense and inconvenience of issuing and transferring
fractional shares of Parent Common Stock, and do not represent
separately bargained for consideration.
4. (i) Parent has no present plan or intention,
after, but in connection with, the Merger, to reacquire, or to
cause any corporation that is related to Parent to acquire,
any Parent Common Stock, except for repurchases of Parent
Common Stock by Parent in connection with a repurchase program
meeting the requirements of Section 4.05(1)(b) of Revenue
Procedure 96-30. To the best knowledge of the management of
Parent, no corporation that is related to Parent has a present
plan or intention to purchase any Parent Common Stock
following the Merger.
(ii) For purposes of this representation letter, two
corporations shall be treated as related to one another if
immediately prior to or immediately after the Merger, (a) the
corporations are members of the same affiliated group (within
the meaning of Section 1504 of the Internal Revenue Code of
1986, as amended (the "Code"), but determined without regard
to Section 1504(b) of the Code) or (b) one corporation owns
50% or more of the total combined voting power of all classes
of stock of the other corporation that are entitled to vote or
50% or more of the total value of shares of all classes of
stock of the other corporation (applying the attribution rules
of Section 318 of the Code, as modified pursuant to Section
304(c)(3)(B) of the Code).
5. Parent has no present plan or intention to make
any distributions after, but in connection with, the
Merger to holders of Parent Common Stock (other than dividends
made in the ordinary course of business).
6. Neither Parent nor Sub (nor any other subsidiary
of Parent) has acquired, or, except as a result of the Merger,
will acquire, or has owned in the past five years, any Company
Common Stock.
7. Prior to the Merger, Parent will own all the
capital stock of Sub. Parent has no present plan or intention
to cause the Company to issue additional shares of its stock
that would result in Parent owning less than all the capital
stock of the Company after the Merger.
8. Parent has no present plan or intention,
following the Merger, to liquidate the Company, to merge the
Company with and into another corporation, to sell or
otherwise dispose of any of the stock of the Company, to cause
the Company to distribute to Parent or any of its subsidiaries
any assets of the Company or the proceeds of any borrowings
incurred by the Company, or to cause the Company to sell or
otherwise dispose of any of the assets held by the Company at
the time of the Merger, except for dispositions of such assets
in the ordinary course of business and transfers described in
Section 368(a)(2)(C) of the Code or Treasury Regulations
Sections 1.368-1(d) or 1.368-2(k).
9. Immediately following the Merger, the Company
will hold (i) at least 90% of the fair market value of the net
assets and at least 70% of the fair market value of the gross
assets that were held by the Company immediately prior to the
Merger and (ii) at least 90% of the fair market value of the
net assets and at least 70% of the fair market value of the
gross assets that were held by Sub immediately prior to the
Merger. For purposes of this representation, amounts paid to
stockholders who receive cash or other property (including
cash in lieu of fractional shares of Parent Common Stock) in
connection with the Merger, assets of the Company used to pay
its reorganization expenses and all redemptions and
distributions made by the Company (other than dividends made
in the ordinary course of business) immediately preceding, or
in contemplation of, the Merger will be included as assets
held by the Company immediately prior to the Merger.
10. Except for Transfer Taxes and filing fees with
respect to the Proxy Statement and the Form S-4 and the HSR
Act, Parent, Sub, the Company and holders of Company Common
Stock will each pay their respective expenses, if
any, incurred in connection with the Merger. Except to the
extent specifically contemplated under the Merger Agreement
and the Company Stockholder Agreement, neither Parent nor Sub
has paid (directly or indirectly) or has agreed to assume any
expenses or other liabilities, whether fixed or contingent,
incurred or to be incurred by the Company or any holder of
Company Common Stock in connection with or as part of the
Merger or any related transactions.
11. Following the Merger, Parent intends to cause
the Company to continue its "historic business" or to use a
significant portion of its "historic business assets" in a
business (as such terms are defined in Treasury Regulations
Section 1.368-1(d)).
12. Neither Parent nor Sub is an investment company
as defined in Section 368(a)(2)(F)(iii) and (iv) of the Code.
13. Neither Parent nor Sub will take any position on
any Federal, state or local income or franchise tax return, or
take any other tax reporting position, that is inconsistent
with the treatment of the Merger as a reorganization within
the meaning of Section 368(a) of the Code, unless otherwise
required by a "determination" (as defined in Section
1313(a)(1) of the Code) or by applicable state or local tax
law (and then only to the extent required by such applicable
state or local tax law).
14. None of the compensation received by any
stockholder-employee of the Company in respect of periods
after the Effective Time represents separate consideration
for, or is allocable to, any of their Company Common Stock.
None of the Parent Common Stock that will be received by any
stockholder-employee of the Company in the Merger represents
separately bargained for consideration which is allocable to
any employment agreement or arrangement. The compensation paid
to any stockholder-employees will be for services actually
rendered and will be determined by bargaining at arm's-length.
15. There is no intercorporate indebtedness existing
between Parent (or any of its subsidiaries, including Sub) and
the Company (or any of its subsidiaries) that was issued or
acquired, or will be settled, at a discount.
16. Neither Parent nor Sub is under the jurisdiction
of a court in a Title 11 or similar case within the meaning of
Section 368(a)(3)(A) of the Code.
17. Neither Parent nor Sub (nor any other subsidiary
of Parent) has constituted either a "distributing corporation"
or a "controlled corporation" (within the meaning of Section
355(a)(1)(A) of the Code) in a distribution of stock
qualifying for tax-free treatment under Section 355 of the
Code (i) in the two years prior to the date of the Merger
Agreement or (ii) in a distribution which could otherwise
constitute part of a "plan" or "series of related
transactions" (within the meaning of Section 355(e) of the
Code) in conjunction with the Merger.
18. In connection with the Merger, Company Common
Stock will be converted solely into Parent Common Stock
(except for cash paid in lieu of fractional shares of Parent
Common Stock and payments made in respect of dissenting
shares). For purposes of this representation, Company Common
Stock redeemed for cash or other property furnished directly
or indirectly by Parent will be considered as acquired by
Parent for other than Parent Common Stock. Further, no
liabilities of the Company or any holders of Company Common
Stock will be assumed by Parent, nor, to the best knowledge of
(but not pursuant to due inquiry or investigation by) the
management of Parent, will any of the Company Common Stock
acquired by Parent in connection with the Merger be subject to
any liabilities.
19. The Merger Agreement, the Registration Statement
and the other documents described in the Registration
Statement represent the entire understanding of Parent and Sub
with respect to the Merger.
20. Sub is a corporation newly formed for the
purpose of participating in the Merger and at no time prior to
the Merger has had assets (other than nominal assets
contributed upon the formation of Sub, which assets will be
held by Sub following the Merger) or business operations.
21. The Merger is being undertaken for purposes of
enhancing the business of Parent and for other good and valid
business purposes of Parent.
22. The undersigned is authorized to make all the
representations set forth herein on behalf of Parent and Sub.
The undersigned acknowledges that (i) the opinions
to be delivered pursuant to Sections 7.02(e) and 7.03(d) of
the Merger Agreement will be based on the accuracy of the
representations set forth herein and on the accuracy of the
representations and warranties and the satisfaction of the
covenants and obligations contained in the Merger Agreement
and the various other documents related thereto, and (ii) such
opinions will be subject to certain limitations and
qualifications including that it may not be relied upon if any
such representations or warranties are not accurate or if any
such covenants or obligations are not satisfied in all
material respects.
The undersigned acknowledges that such opinions will
not address any tax consequences of the Merger or any action
taken in connection therewith except as expressly set forth in
such opinions.
Very truly yours,
▇. ▇. ▇▇▇▇▇▇ COMPANY, INC.,
by
-------------------------
Name:
Title:
EXHIBIT D
[Letterhead of the Company]
[ ], 199_
Cravath, Swaine & ▇▇▇▇▇
Worldwide Plaza
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Weil, Gotshal & ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
In connection with the opinions to be delivered
pursuant to Sections 7.02(e) and 7.03(d) of the Agreement and
Plan of Merger (the "Merger Agreement") dated as of November
23, 1998, by and among ▇. ▇. Penney Company, Inc., a Delaware
corporation ("Parent"), Legacy Acquisition Corp., a Delaware
corporation and a wholly owned subsidiary of Parent ("Sub"),
and ▇▇▇▇▇▇▇▇ Drug Stores, Inc., a Delaware corporation (the
"Company"), and in connection with the filing with the
Securities Exchange Commission (the "SEC") of the registration
statement on Form S-4 (the "Registration Statement") relating
to the Merger Agreement, which includes the proxy
statement/prospectus of Parent and the Company, the
undersigned certifies and represents on behalf of the Company,
after due inquiry and investigation, as follows (any
capitalized term used but not defined herein having the
meaning given to such term in the Merger Agreement):
1. The facts relating to the contemplated merger
(the "Merger") of Sub with and into the Company as described
in the Registration Statement and the documents described in
the Registration Statement are, insofar as such facts pertain
to the Company, true, correct and complete in all
material respects. The Merger will be consummated in
accordance with the Merger Agreement.
2. The formula set forth in the Merger Agreement
pursuant to which each issued and outstanding share of Class A
common stock, par value $1.00 per share, of the Company (the
"Class A Common Stock"), and each issued and outstanding share
of Class B common stock, par value $1.00 per share, of the
Company (the "Class B Common Stock", and together with the
Class A Common Stock, the "Company Common Stock") will be
converted into common shares of Parent ("Parent Common Stock")
is the result of arm's length bargaining.
3. Cash payments to be made to stockholders of the
Company in lieu of fractional shares of Parent Common Stock
that would otherwise be issued to such stockholders in the
Merger will be made for the purpose of saving Parent the
expense and inconvenience of issuing and transferring
fractional shares of Parent Common Stock, and do not represent
separately bargained for consideration.
4. (i) Neither the Company nor any corporation
related to the Company has acquired or has any present plan or
intention to acquire any Company Common Stock in contemplation
of the Merger, or otherwise as part of a plan of which the
Merger is a part. To the best knowledge of the management of
the Company, neither Parent nor any corporation that is
related to Parent has a present plan or intention to purchase
Company Common Stock (other than pursuant to the Merger) or
any Parent Company Stock following the Merger .
(ii) For purposes of this representation letter, two
corporations shall be treated as related to one another if
immediately prior to or immediately after the Merger, (a) the
corporations are members of the same affiliated group (within
the meaning of Section 1504 of the Internal Revenue Code of
1986, as amended (the "Code"), but determined without regard
to Section 1504(b) of the Code) or (b) one corporation owns
50% or more of the total combined voting power of all classes
of stock of the other corporation that are entitled to vote or
50% or more of the total value of shares of all classes of
stock of the other corporation (applying the attribution rules
of Section 318 of the Code, as modified pursuant to Section
304(c)(3)(B) of the Code).
5. The Company has not made, and does not have any
present plan or intention to make, any distributions (other
than dividends made in the ordinary course of
business or payments made in respect of dissenting shares)
prior to, in contemplation of or otherwise in connection with,
the Merger.
6. Except for Transfer Taxes and filing fees with
respect to the Proxy Statement and the Form S-4 and the HSR
Act, Parent, Sub, the Company and holders of Company Common
Stock will each pay their respective expenses, if any,
incurred in connection with the Merger. Except with respect to
Transfer Taxes, the Company has not agreed to assume, nor will
it directly or indirectly assume, any expense or other
liability, whether fixed or contingent, of any holder of
Company Common Stock.
7. Immediately following the Merger, the Company
will hold (i) at least 90% of the fair market value of the net
assets and at least 70% of the fair market value of the gross
assets that were held by the Company immediately prior to the
Merger and (ii) at least 90% of the fair market value of the
net assets and at least 70% of the fair market value of the
gross assets that were held by Sub immediately prior to the
Merger. For purposes of this representation, amounts paid to
stockholders who receive cash or other property (including
cash in lieu of fractional shares of Parent Common Stock) in
connection with the Merger, assets of the Company used to pay
its reorganization expenses and all redemptions and
distributions made by the Company (other than dividends made
in the ordinary course of business) immediately preceding, or
in contemplation of, the Merger will be included as assets
held by the Company immediately prior to the Merger.
8. Except as provided in the Merger Agreement,
immediately prior to the time of the Merger, the Company will
not have outstanding any warrants, options, convertible
securities or any other type of right pursuant to which any
person could acquire Company Common Stock.
9. In connection with the Merger, Company Common
Stock will be converted solely into Parent Common Stock
(except for cash paid in lieu of fractional shares of Parent
Common Stock and payments made in respect of dissenting
shares). For purposes of this representation, Company Common
Stock redeemed for cash or other property furnished, directly
or indirectly, by Parent will be considered as exchanged for
other than Parent Common Stock. Further, no liabilities of the
Company or any holders of Company Common Stock will be assumed
by Parent, nor, to the best knowledge of (but not pursuant to
due inquiry or investigation by) the management of the
Company, will any of the Company Common
Stock acquired by Parent in connection with the Merger be
subject to any liabilities.
10. The Company is not an investment company as
defined in Section 368(a)(2)(F)(iii) and (iv) of the Code.
11. The Company will not take, and, to the best
knowledge of the management of the Company, there is no
present plan or intention by stockholders of the Company to
take, any position on any Federal, state or local income or
franchise tax return, or take any other tax reporting
position, that is inconsistent with the treatment of the
Merger as a reorganization within the meaning of Section
368(a) of the Code, unless otherwise required by a
"determination" (as defined in Section 1313(a)(1) of the Code)
or by applicable state or local tax law (and then only to the
extent required by such applicable state or local tax law).
12. None of the compensation received by any
stockholder-employee of the Company in respect of periods at
or prior to the Effective Time represents separate
consideration for, or is allocable to, any of its Company
Common Stock. None of the Parent Common Stock that will be
received by stockholder-employees of the Company in the Merger
represents separately bargained for consideration which is
allocable to any employment agreement or arrangement. The
compensation paid to any stockholder- employees will be for
services actually rendered and will be determined by
bargaining at arm's-length.
13. There is no intercorporate indebtedness existing
between Parent (or any of its subsidiaries, including Sub) and
the Company (or any of its subsidiaries) that was issued or
acquired, or will be settled, at a discount.
14. The Company is not under the jurisdiction of a
court in a Title 11 or similar case within the meaning of
Section 368(a)(3)(A) of the Code.
15. It is the Company's present intention to pay all
Transfer Taxes attributable to the Merger out of the Company's
own funds (and not out of funds provided, directly or
indirectly, by Parent).
16. The Merger Agreement, the Registration Statement
and the other documents described in the Registration
Statement represent the entire understanding of the Company
with respect to the Merger.
17. No assets of the Company have been sold,
transferred or otherwise disposed of which would prevent
Parent from continuing the "historic business" of the Company
or from using a significant portion of the "historic business
assets" of the Company in a business following the Merger (as
such terms are defined in Treasury Regulations Section
1.368-1(d)).
18. Neither the Company nor any of its subsidiaries
has constituted either a "distributing corporation" or a
"controlled corporation" (within the meaning of Section
355(a)(1)(A) of the Code) in a distribution of stock
qualifying for tax-free treatment under Section 355 of the
Code (i) in the two years prior to the date of the Merger
Agreement or (ii) in a distribution which could otherwise
constitute part of a "plan" or "series of related
transactions" (within the meaning of Section 355(e) of the
Code) in conjunction with the Merger.
19. As of the time of the Merger, the fair market
value of the assets of the Company will equal or exceed the
sum of its liabilities, plus the amount of liabilities, if
any, to which such assets are subject.
20. No holders of Class A Common Stock have
dissenters' rights with respect to the Merger under applicable
laws, and it is the belief of the management of the Company
that dissenters' rights will not be perfected with respect to
Class B Common Stock representing more than 20% of the total
voting power of the Company Common Stock.
21. The undersigned is authorized to make all the
representations set forth herein.
The undersigned acknowledges that (i) the opinions
to be delivered pursuant to Sections 7.02(e) and 7.03(d) of
the Merger Agreement will be based on the accuracy of the
representations set forth herein and on the accuracy of the
representations and warranties and the satisfaction of the
covenants and obligations contained in the Merger Agreement
and the various other documents related thereto, and (ii) such
opinion will be subject to certain limitations and
qualifications including that it may not be relied upon if any
such representations or warranties are not accurate or if any
such covenants or obligations are not satisfied in all
material respects.
The undersigned acknowledges that such opinions will
not address any tax consequences of the Merger or any action
taken in connection therewith except as expressly set forth in
such opinions.
Very truly yours,
▇▇▇▇▇▇▇▇ DRUG STORES, INC.
by
-------------------------
Title:
Exhibit E
Opinion of General Counsel of Company. Parent and Sub shall
have received an opinion of counsel from the General Counsel
to the Company, dated the Closing Date, substantially to the
effect that:
(i) The incorporations and good standing of the
Company and the Company Subsidiaries are as stated
in the Merger Agreement; the capitalization of the
Company and the Company Subsidiaries are as stated
in the Merger Agreement as of the date of the Merger
Agreement; the authorized shares of Company Common
Stock are as stated in the Merger Agreement; all
outstanding shares of Company Common Stock are duly
authorized, validly issued, fully paid and
non-assessable and are not subject to and have not
been issued in violation of any purchase option,
call option, right of first refusal, preemptive
right, subscription right or any similar right under
any provision of the DGCL, the Company Charter, the
Company Bylaws or any Contract to which the Company
is a party or otherwise bound; and, to the knowledge
of such counsel, except as set forth in the Merger
Agreement, as of the date of the Merger Agreement,
there are not any options, warrants, calls, rights
(including preemptive rights), convertible or
exchangeable securities, "phantom" stock rights,
stock appreciation rights, stock-based performance
units, commitments, Contracts, arrangements or
undertakings of any kind to which the Company or any
Company Subsidiary is a party or by which any of
them is bound obligating the Company or any Company
Subsidiary to issue, deliver or sell, purchase,
redeem or acquire or cause to be issued, delivered
or sold, or purchased, redeemed or acquired,
additional shares of capital stock or other equity
interests in, or any security convertible or
exercisable for or exchangeable into any capital
stock of or other equity interest in, the Company or
of any Company Subsidiary or any Voting Company Debt
or other voting securities of the Company or any
Company Subsidiary.
(ii) The Company has all requisite corporate
power and authority to execute the Merger Agreement
and to consummate the Transactions. The execution
and delivery by the Company of the Merger Agreement
and the consummation by the
Company of the Transactions have been duly
authorized by all necessary corporate action on the
part of the Company. The Company has duly executed
and delivered the Merger Agreement, and, assuming
the Merger Agreement constitutes a valid and binding
obligation of each of the other parties thereto, the
Merger Agreement constitutes its legal, valid and
binding obligation.
(iii) Except as set forth in Section 3.05 in
the Company Disclosure Letter, the execution and
delivery by the Company of the Merger Agreement does
not, and the consummation of the Merger and the
other Transactions and compliance with the terms
thereof will not, conflict with, or result in any
violation of or default (with or without notice or
lapse of time, or both) under, or give rise to a
right of termination, cancelation or acceleration of
any obligation or to loss of a benefit under, or
result in the creation of any Lien upon any of the
properties or assets of the Company or any Company
Subsidiary under, any provision of (i) the Company
Charter, the Company Bylaws or the comparable
charter or organizational documents of any Company
Subsidiary, (ii) any Contract to which the Company
or any Company Subsidiary is a party or by which any
of their respective properties or assets is bound or
(iii) subject to the filings and other matters
referred to in Section 3.05(b) of the Merger
Agreement, any Judgment or Applicable Law applicable
to the Company or any Company Subsidiary or any of
their respective properties or assets, other than,
in the case of clauses (ii) and (iii) above, any
such items that, individually or in the aggregate,
could not reasonably be expected to have a Company
Material Adverse Effect.
(iv) To the knowledge of such counsel, no
Consent of, or registration, declaration or filing
with, any Governmental Entity which has not been
obtained is required to be obtained or made by or
with respect to the Company or any Company
Subsidiary in connection with the execution,
delivery and performance of the Merger Agreement and
the consummation of the Transactions, other than any
such items that, individually or in the aggregate,
could not reasonably be expected to have a Company
Material Adverse Effect.
(v) To the knowledge of such counsel, except as
disclosed in the Filed Company SEC Documents or in
the Company Disclosure Letter, there is no Company
Litigation that, individually or in the aggregate,
could reasonably be expected to have a Company
Material Adverse Effect, nor is there any Company
Order outstanding against the Company or any Company
Subsidiary.
(vi) There shall be a statement to the effect
that in the course of the preparation of the Form
S-4 and the Proxy Statement such counsel has
considered the information set forth therein in
light of the matters required to be set forth
therein, and has participated in conferences with
officers and representatives of the Company and
Parent, including their respective counsel and
independent public accountants, during the course of
which the contents of the Form S-4 and the Proxy
Statement and related matters were discussed. Such
counsel has not independently checked the accuracy
or completeness of, or otherwise verified, and
accordingly is not passing upon, and does not assume
responsibility for, the accuracy, completeness or
fairness of the statements contained in the Form S-4
or the Proxy Statement; and such counsel has relied
as to materiality, to a large extent, upon the
judgment of officers and representatives of the
Company and Parent. However, as a result of such
consideration and participation, nothing has come to
such counsel's attention which causes such counsel
to believe that the Form S-4 (other than the
financial statements, financial data, statistical
data and supporting schedules included therein, and
information relating to or supplied by Parent or
Sub, as to which such counsel expresses no belief),
at the time it became effective, contained any
untrue statement of a material fact or omitted to
state a material fact required to be stated therein
or necessary to make the statements therein not
misleading or that the Proxy Statement (other than
the financial statements, financial data,
statistical data and supporting schedules included
therein, and information relating to or supplied by
Parent or Sub, as to which such counsel expresses no
belief), at the time the Form S-4 became effective,
included any untrue statement of a material fact or
omitted to state a material fact necessary in order
to make the statements therein,
in the light of the circumstances under which they
were made, not misleading.
In rendering such opinion, counsel for the
Company may rely as to matters of fact upon the
representations of officers of the Company and the
Company Subsidiaries contained in any certificate
delivered to such counsel and certificates of public
officials which certificates should be attached to
and delivered with such opinion. Such opinion shall
be limited to the laws of the State of New York, the
General Corporation Law of the State of Delaware and
the laws of the United States of America.
Exhibit F
[LETTERHEAD OF MORRIS, NICHOLS, ARSHT & ▇▇▇▇▇▇▇]
[Date]
[Parent]
[Addressee]
Ladies and Gentlemen:
You have requested our opinion with respect to
certain matter of Delaware law involving the Agreement and
Plan of Merger (the "Agreement") dated as of November ___,
1998 among [Parent], a Delaware corporation ("Parent"), Legacy
Acquisition Corp., a Delaware corporation ("Sub"), and
[Refill], a Delaware corporation (the "Company"). In
connection with your request for our opinion, Cravath, Swaine
& ▇▇▇▇▇, counsel to the Company, has supplied to us and we
have reviewed the Agreement. We have not reviewed any other
documents in connection with your request, including the
certificate of incorporation or bylaws of the Company, or any
of the documents referred to in the Agreement, including
the exhibits and schedules thereto, or any documents relating
to employee benefits, and we have assumed that nothing in any
such document that we have not reviewed is contrary to or
inconsistent with the opinions expressed herein. We have also
assumed (1) that each of the parties to the Agreement was duly
organized under the laws
of the State of Delaware and is validly existing and in good
standing under such laws, with full power to execute, deliver
and perform the Agreement, and that such execution, delivery
and performance was duly authorized by all necessary corporate
action on the part of each such party, (2) that the Agreement
was duly executed and delivered by all parties thereto, (3)
that the Agreement has been duly and validly approved by the
requisite vote of the stockholders of the Company, and (4)
that the Agreement constitutes the legal, valid and binding
obligation of Parent and Sub, enforceable against each such
party in accordance with its terms. We have also assumed that
the directors of the Company acted in accordance with their
fiduciary duties in approving the Agreement and the
Transactions. Capitalized terms used but not defined herein
shall have the meaning set forth in the Agreement. No opinion
is expressed herein with respect to the Delaware Securities
Act, 6 Del.C. ss. 7301 et seq. Based upon and subject to the
foregoing, and limited in all respects to matters of Delaware
law, it is our opinion that the Agreement constitutes the
legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms,
except that such enforceability may be limited by (i)
bankruptcy, insolvency, reorganization, receivership,
fraudulent conveyance, moratorium or other laws of general
application relating to
or affecting the enforcement of creditors' rights and
remedies; (ii) the application of equitable principles
(regardless of whether such enforceability is considered in a
proceeding in equity or at law) or (iii) standards of good
faith, fair dealing, materiality and reasonableness that may
be applied by a court to the exercise of certain rights and
remedies.
The foregoing opinion is subject to the following
limitations and exceptions:
(a) We express no opinion with respect to any
document referred to or incorporated by reference in the
Agreement.
(b) We express no opinion with respect to Sections
8.03 or 8.04 of the Agreement to the extent that such
provisions purport to render ineffective any waiver or
amendment not in writing, or with respect to Section 9.10 of
the Agreement, regarding enforcement of the Agreement.
(c) We express no opinion with respect to Section
1.06 of the Agreement, regarding directors of the Surviving
Corporation, or Section 5.02 of the Agreement, regarding
Acquisition Proposals.
(d) We express no opinion with respect to Section
6.03 of the Agreement to the extent such provision requires
the Company to enter into any Settlement.
This opinion letter is addressed to you and is for
your sole benefit in connection with the transactions
contemplated hereby and may not be delivered to or relied upon
by anyone else without our express written consent.
Very truly yours,
Exhibit G
Opinion of General Counsel of Parent. The Company shall have
received opinions from the General Counsel of Parent, dated
the Closing Date, substantially to the effect that:
(i) The incorporation and good standing of
Parent and the Parent Subsidiaries are as stated in
the Merger Agreement; the capitalization of the
Parent and Sub are as stated in the Merger Agreement
as of the date of the Merger Agreement; the
authorized shares of Parent and Sub are as stated in
the Merger Agreement; all outstanding shares of
Parent Common Stock are, and all such shares that
may be issued prior to the Effective Time or
pursuant to the Merger Agreement will be when
issued, duly authorized, validly issued, fully paid
and non-assessable and not subject to or issued in
violation of any purchase option, call option, right
of first refusal, preemptive right, subscription
right or any similar right under any provision of
the DGCL, the Parent Charter, the Parent Bylaws or
any Contract to which Parent is a party or otherwise
bound; and to the knowledge of such counsel, except
as set forth in the Merger Agreement, as of the date
of the Merger Agreement, there are not any options,
warrants, calls, rights (including preemptive
rights), convertible or exchangeable securities,
"phantom" stock rights, stock appreciation rights,
stock-based performance units, commitments,
Contracts, arrangements or undertakings of any kind
to which Parent or any Parent Subsidiary is a party
or by which any of them is bound obligating Parent
or any Parent Subsidiary to issue, deliver or sell,
purchase, redeem or acquire or cause to be issued,
delivered or sold, or purchased, redeemed or
acquired additional shares of capital stock or other
equity interests in, or any security convertible or
exercisable for or exchangeable into any capital
stock of or other equity interest in, Parent or any
Voting Parent Debt or other voting securities of
Parent.
(ii) Each of Parent and Sub has all requisite
corporate power and authority to execute each
Transaction Agreement to which it is a party and to
consummate the Transactions. The execution and
delivery by each of Parent and Sub of each
Transaction Agreement to which it is a party and the
consummation by it of the Transactions have been
duly authorized by all necessary corporate action on
the part of Parent and Sub. Each of Parent and Sub
has duly executed and delivered each Transaction
Agreement to which it is a party, and, assuming each
Transaction Agreement constitutes a valid and
binding obligation of each of the other parties
thereto, each Transaction Agreement to which it is a
party constitutes its legal, valid and binding
obligation.
(iii) The execution and delivery by each of
Parent and Sub of each Transaction Agreement to
which it is a party, do not, and the consummation of
the Merger and the other Transactions and compliance
with the terms thereof will not, conflict with, or
result in any violation of or default (with or
without notice or lapse of time, or both) under, or
give rise to a right of termination, cancelation or
acceleration of any obligation or to loss of a
benefit under, or result in the creation of any Lien
upon any of the properties or assets of Parent or
any Parent Subsidiary under, any provision of (i)
Parent Charter or Parent Bylaws, (ii) any Contract
to which Parent or any Parent Subsidiary is a party
or by which any of their respective properties or
assets is bound or (iii) subject to the filings and
other matters referred to in Section 4.05(b) of the
Merger Agreement, any Judgment or Applicable Law
applicable to Parent or any Parent Subsidiary or any
of their respective properties or assets, other
than, in the case of clauses (ii) and (iii) above,
any such items that, individually or in the
aggregate, could not reasonably be expected to have
a Parent Material Adverse Effect.
(iv) To the knowledge of such counsel, no
Consent of, or registration, declaration or filing
with, any Governmental Entity which has not been
obtained is required to be obtained or made by or
with respect to the Parent or any Parent Subsidiary
in connection with the execution, delivery and
performance of any Transaction Agreement to which
Parent or Sub is a party and the consummation of the
Transactions, other than any such items that,
individually or in the
aggregate, could not reasonably be expected to have
a Parent Material Adverse Effect.
(v) To the knowledge of such counsel, except as
disclosed in the Filed Parent SEC Documents, there
is no Parent Litigation that, individually or in the
aggregate, could reasonably be expected to have a
Parent Material Adverse Effect, nor is there any
Parent Order outstanding against Parent or any
Parent Subsidiary, in the case of any Parent
Subsidiary, that, individually or in the aggregate,
could reasonably be expected to have a Parent
Material Adverse Effect.
(vi) There shall be a statement to the effect
that in the course of the preparation of the Form
S-4 and the Proxy Statement such counsel has
considered the information set forth therein in
light of the matters required to be set forth
therein, and has participated in conferences with
officers and representatives of the Company and
Parent, including their respective counsel and
independent public accountants, during the course of
which the contents of the Form S-4 and the Proxy
Statement and related matters were discussed. Such
counsel has not independently checked the accuracy
or completeness of, or otherwise verified, and
accordingly is not passing upon, and does not assume
responsibility for, the accuracy, completeness or
fairness of the statements contained in the Form S-4
or the Proxy Statement; and such counsel has relied
as to materiality, to a large extent, upon the
judgment of officers and representatives of the
Company and Parent. However, as a result of such
consideration and participation, nothing has come to
such counsel's attention which causes such counsel
to believe that the Form S-4 (other than the
financial statements, financial data, statistical
data and supporting schedules included therein, and
information relating to or supplied by the Company,
as to which such counsel
expresses no belief), at the time it became
effective, contained any untrue statement of a
material fact or omitted to state a material fact
required to be stated therein or necessary to make
the statements therein not misleading or that the
Proxy Statement (other than the financial
statements, financial data, statistical data and
supporting schedules included therein, and
information relating to or supplied by the Company,
as to which such counsel expresses no belief), at
the time the Form S-4 became effective, included any
untrue statement of a material fact or omitted to
state a material fact necessary in order to make the
statements therein, in the light of the
circumstances under which they were made, not
misleading.
In rendering such opinion, counsel for Parent
may rely as to matters of fact upon the
representations of officers of Parent and the Parent
Subsidiaries contained in any certificate delivered
to such counsel and certificates of public officials
which certificates shall be attached to or delivered
with such opinion. Such opinion shall be limited to
the laws of the State of Texas, the General
Corporation Law of the State of Delaware and the
laws of the United States of America.
Exhibit H
[TO BE SUBSTANTIALLY IN THE FORM OF THE MORRIS, NICHOLS,
ARSHT & ▇▇▇▇▇▇▇ OPINION SET FORTH IN EXHIBIT F]
