AGREEMENT AND PLAN OF MERGER
BY AND AMONG
RITE AID CORPORATION
OCEAN ACQUISITION CORPORATION
AND
REVCO D.S., INC.
DATED AS OF
NOVEMBER 29, 1995
TABLE OF CONTENTS
Page
ARTICLE I THE OFFER AND MERGER . . . . . . . . . . . . 2
Section 1.1 The Offer . . . . . . . . . . . . . . . . . 2
Section 1.2 Company Actions . . . . . . . . . . . . . . 4
Section 1.3 The Merger. . . . . . . . . . . . . . . . . 7
Section 1.4 Effective Time . . . . . . . . . . . . . . . 8
Section 1.5 Closing . . . . . . . . . . . . . . . . . . 8
Section 1.6 Directors and Officers . . . . . . . . . . . 8
Section 1.7 Stockholders' Meetings . . . . . . . . . . . 10
ARTICLE II CONVERSION OF SHARES . . . . . . . . . . . . 11
Section 2.1 Conversion of Shares . . . . . . . . . . . . 11
Section 2.2 Alternative Consideration and Additional
Consideration . . . . . . . . . . . . . . . 13
Section 2.3 Issuance of Parent Common Stock or Payment of
Cash Consideration . . . . . . . . . . . . . 15
Section 2.4 Treatment of Stock Options . . . . . . . . . 18
Section 2.5 Stock Transfer Books . . . . . . . . . . . . 20
Section 2.6 Dissenting Shares . . . . . . . . . . . . . 20
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY 20
Section 3.1 Organization . . . . . . . . . . . . . . . . 20
Section 3.2 Capitalization . . . . . . . . . . . . . . . 22
Section 3.3 Corporate Authorization; Validity of
Agreement; Company Action . . . . . . . . . 24
Section 3.4 Consents and Approvals; No Violations . . . 25
Section 3.5 SEC Reports and Financial Statements . . . . 26
Section 3.6 Absence of Certain Changes . . . . . . . . . 27
Section 3.7 No Undisclosed Liabilities . . . . . . . . . 27
Section 3.8 Information in Proxy Statement/Prospectus. . 28
Section 3.9 Employee Benefit Plans; ERISA . . . . . . . 28
Section 3.10 Litigation . . . . . . . . . . . . . . . . . 32
Section 3.11 No Default. . . . . . . . . . . . . . . . . 32
Section 3.12 Taxes . . . . . . . . . . . . . . . . . . . 33
Section 3.13 Contracts . . . . . . . . . . . . . . . . . 35
Section 3.14 Assets; Real Property . . . . . . . . . . . 35
Section 3.15 Environmental Matters. . . . . . . . . . . . 36
Section 3.16 Reimbursement . . . . . . . . . . . . . . . 37
Section 3.17 Labor Relations . . . . . . . . . . . . . . 37
Section 3.18 Insurance . . . . . . . . . . . . . . . . . 37
Section 3.19 Transactions with Affiliates. . . . . . . . 38
Section 3.20 Compliance with Law . . . . . . . . . . . . 38
Section 3.21 Vote Required . . . . . . . . . . . . . . . 38
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND
SUB . . . . . . . . . . . . . . . . . . . . 38
Section 4.1 Organization . . . . . . . . . . . . . . . . 38
Section 4.2 Capitalization . . . . . . . . . . . . . . . 39
Section 4.3 Corporate Authorization; Validity of
Agreement; Necessary Action . . . . . . . . 40
Section 4.4 Consents and Approvals; No Violations . . . 41
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Page
Section 4.5 SEC Reports and Financial Statements . . . . 42
Section 4.6 Absence of Certain Changes . . . . . . . . . 43
Section 4.7 No Undisclosed Liabilities. . . . . . . . . 43
Section 4.8 Information in Proxy Statement/Prospectus. . 43
Section 4.9 Litigation . . . . . . . . . . . . . . . . . 44
Section 4.10 Taxes. . . . . . . . . . . . . . . . . . . . 44
Section 4.11 Compliance with Law . . . . . . . . . . . . 46
Section 4.12 No Default . . . . . . . . . . . . . . . . . 46
Section 4.13 Financing. . . . . . . . . . . . . . . . . . 47
Section 4.14 Opinion of Financial Advisor. . . . . . . . 47
ARTICLE V COVENANTS . . . . . . . . . . . . . . . . . 47
Section 5.1 Interim Operations of the Company . . . . . 47
Section 5.2 Treatment of Certain Indebtedness . . . . . 51
Section 5.3 Access to Information . . . . . . . . . . . 52
Section 5.4 Consents and Approvals . . . . . . . . . . . 53
Section 5.5 Employee Benefits . . . . . . . . . . . . . 54
Section 5.6 No Solicitation . . . . . . . . . . . . . . 58
Section 5.7 Additional Agreements . . . . . . . . . . . 60
Section 5.8 Publicity . . . . . . . . . . . . . . . . . 60
Section 5.9 Notification of Certain Matters . . . . . . 60
Section 5.10 Directors' and Officers' Insurance and Indem-
nification . . . . . . . . . . . . . . . . . 61
Section 5.11 Rule 145 Affiliates . . . . . . . . . . . . 62
Section 5.12 Cooperation . . . . . . . . . . . . . . . . 62
Section 5.13 Proxy Statement/Prospectus . . . . . . . . . 63
Section 5.14 New York State Real Property Transfer and
Gains Taxes. . . . . . . . . . . . . . . . 64
Section 5.15 Confidentiality/Standstill Agreement. . . . 64
Section 5.16 Stock Exchange Listing. . . . . . . . . . . 64
ARTICLE VI CONDITIONS . . . . . . . . . . . . . . . . . 65
Section 6.1 Conditions to the Obligations of Each Party 65
ARTICLE VII TERMINATION . . . . . . . . . . . . . . . . 65
Section 7.1 Termination . . . . . . . . . . . . . . . . 65
Section 7.2 Effect of Termination . . . . . . . . . . . 68
Section 7.3 Termination Fee . . . . . . . . . . . . . . 69
ARTICLE VIII MISCELLANEOUS . . . . . . . . . . . . . . . 69
Section 8.1 Fees and Expenses . . . . . . . . . . . . . 69
Section 8.2 Finders' Fees . . . . . . . . . . . . . . . 70
Section 8.3 Amendment and Modification. . . . . . . . . 70
Section 8.4 Nonsurvival of Representations and Warranties 70
Section 8.5 Notices . . . . . . . . . . . . . . . . . . 71
Section 8.6 Interpretation . . . . . . . . . . . . . . . 72
Section 8.7 Counterparts . . . . . . . . . . . . . . . . 72
Section 8.8 Entire Agreement; No Third Party Beneficia-
xxxx; Rights of Ownership . . . . . . . . . 72
Section 8.9 Severability . . . . . . . . . . . . . . . . 73
Section 8.10 Specific Performance. . . . . . . . . . . . 73
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Page
Section 8.11 Governing Law. . . . . . . . . . . . . . . . 73
Section 8.12 Assignment . . . . . . . . . . . . . . . . . 73
Section 8.13 Joint and Several Liability . . . . . . . . 73
Exhibits
Annexes
iii
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of November 29, 1995, by and
among Rite Aid Corporation, a Delaware corporation ("Parent"), Ocean Acquisition
Corporation, a Delaware corporation and a wholly owned subsidiary of Parent
("Sub"), and Revco D.S., Inc., a Delaware corporation (the "Company").
WHEREAS, the Boards of Directors of Parent, Sub and the Company have
approved, and deem it advisable and in the best interests of their respective
stockholders to consummate, the acquisition of the Company by Parent upon the
terms and subject to the conditions set forth herein;
WHEREAS, it is intended that the acquisition be accomplished by Sub
commencing a cash tender offer for Shares (as defined in Section 1.1) to be
followed by a merger of Sub with and into the Company (the "Merger"), with the
Company being the surviving corporation;
WHEREAS, as a condition and inducement to Parent and Sub entering into
this Agreement and incurring the obligations set forth herein, concurrently with
the execution and delivery of this Agreement, Parent is entering into a
Stockholder Agreement with Xxxx/Chilmark Fund, L.P. in the form of Exhibit A
hereto (the "Xxxx/Chilmark Stockholder Agreement"), pursuant to which, among
other things, such stockholder has agreed to vote the Shares then owned by such
stockholder in favor of the Merger provided for herein;
WHEREAS, as a condition and inducement to Parent and Sub entering into
this Agreement and incurring the obligations set forth herein, concurrently with
the execution and delivery of this Agreement, Parent and the Company are
entering into a Stock Option Agreement in the form of Exhibit B hereto (the
"Stock Option Agreement"), pursuant to which, among other things, the Company
has granted Parent the right to purchase Shares representing 19.9% of the
outstanding Shares at the date of exercise under certain circumstances;
WHEREAS, the Board of Directors of the Company has approved the
transactions contemplated by this Agreement, the Xxxx/Chilmark Stockholder
Agreement and the Stock Option Agreement in accordance with the provisions of
Section 203 of the Delaware General Corporation Law (the "DGCL") and has
resolved to recommend the acceptance
of the Offer (as defined in Section 1.1) and the approval of the Merger by the
holders of Shares; and
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein and in
the Xxxx/Chilmark Stockholder Agreement and the Stock Option Agreement, the
parties hereto agree as follows:
ARTICLE I
THE OFFER AND MERGER
Section 1.1 The Offer. (a) As promptly as practicable (but in no
event later than five business days after the public announcement of the
execution hereof), Sub shall commence (within the meaning of Rule 14d-2 under
the Securities Exchange Act of 1934, as amended (the "Exchange Act")) an offer
(the "Offer") to purchase for cash not less than 35,144,833 shares and up to all
of the issued and outstanding common stock, par value $.01 per share (referred
to herein as either the "Shares" or "Company Common Stock"), of the Company at a
price of $27.50 per Share, net to the seller in cash (such price, or such higher
price per Share as may be paid in the Offer, being referred to herein as the
"Offer Price"), the exact number of Shares within such range to be determined by
Parent in its sole discretion, it being hereby agreed that Parent may change the
amount of Shares sought to be purchased in the Offer within such range at any
time prior to consummation of the Offer, provided that Parent complies with the
requirements of Rule 14e-1 of the Exchange Act. The Offer shall be subject to
there being validly tendered and not withdrawn prior to the expiration of the
Offer, at least 35,144,833 Shares or such other number of Shares as shall equal
50.1% of the Shares outstanding on a fully-diluted basis as of the expiration of
the Offer (the "Minimum Condition") and to the other conditions set forth in
Annex A hereto. Sub shall, on the terms and subject to the prior satisfaction
or waiver of the conditions of the Offer, accept for payment and pay for Shares
tendered as soon as practicable after the later of the satisfaction of the
conditions to the Offer and the expiration of the Offer; provided, however, that
no such payment shall be made until after any calculation of proration as
required by applicable
2
law. The obligations of Sub to commence the Offer and to accept for payment and
to pay for any Shares validly tendered on or prior to the expiration of the
Offer and not withdrawn shall be subject only to the conditions set forth in
Annex A hereto. The Offer shall be made by means of an offer to purchase (the
"Offer to Purchase") containing the terms set forth in this Agreement and the
conditions set forth in Annex A hereto. Without the written consent of the
Company, Sub shall not amend or waive the Minimum Condition, decrease the Offer
Price, change the number of Shares sought to an amount less than 50.1% of the
outstanding Shares on a fully-diluted basis, change the form of consideration to
be paid pursuant to the Offer or impose conditions to the Offer in addition to
those set forth in Annex A hereto, or amend any other term or condition of the
Offer in any manner which is adverse to the holders of Shares; provided,
however, that if on the initial scheduled expiration date of the Offer (as it
may be extended in accordance with the terms hereof), all conditions to the
Offer shall not have been satisfied or waived, the Offer may be extended from
time to time without the consent of the Company for such period of time as is
reasonably expected to be necessary to satisfy the unsatisfied conditions. In
addition, the Offer Price may be increased and the Offer may be extended to
the extent required by law in connection with such increase in each case without
the consent of the Company.
(b) Parent and Sub shall file with the United States Securities and
Exchange Commission (the "SEC") as soon as practicable on the date the Offer is
commenced, a Tender Offer Statement on Schedule 14D-1 with respect to the Offer
(together with all amendments and supplements thereto and including the exhibits
thereto, the "Schedule 14D-1") which will include, as exhibits, the Offer to
Purchase and a form of letter of transmittal and summary advertisement
(collectively, together with the Schedule 14D-1 and any amendments and supple-
ments thereto, the "Offer Documents"). Parent and Sub represent that the Offer
Documents will comply in all material respects with the provisions of applicable
federal securities laws and, on the date filed with the SEC and on the date
first published, sent or given to the Company's stockholders, will not contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the
3
circumstances under which they were made, not misleading, except that no
representation is made by Parent or Sub with respect to information supplied by
the Company in writing for inclusion in the Offer Documents. The information
supplied by the Company for inclusion in the Offer Documents will not, on the
date filed with the SEC and on the date first published, sent or given to the
Company's stockholders, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading. Each of Parent and Sub further agrees to take all
steps necessary to cause the Offer Documents to be filed with the SEC and to be
disseminated to holders of Shares, in each case as and to the extent required
by applicable federal securities laws. Each of Parent and Sub, on the one hand,
and the Company, on the other hand, agrees promptly to correct any information
provided by it for use in the Offer Documents if and to the extent that it shall
have become false and misleading in any material respect, and Parent and Sub
further agree to take all steps necessary to cause the Offer Documents as so
corrected to be filed with the SEC and to be disseminated to holders of Shares,
in each case as and to the extent required by applicable federal securities
laws. The Company and its counsel shall be given the opportunity to review the
Schedule 14D-1 and the Offer Documents before they are filed with the SEC. In
addition, Parent and Sub agree to provide the Company and its counsel in writing
with any comments Parent, Sub or their counsel may receive from time to time
from the SEC or its staff with respect to the Offer Documents promptly after the
receipt of such comments. Parent and Sub will cooperate with the Company in re-
sponding to any comments received from the SEC with respect to the Offer and
amending the Offer in response to any such comments.
Section 1.2 Company Actions.
(a) The Company hereby approves of and consents to the Offer and
represents that the Board of Directors, at a meeting duly called and held, has
unanimously (with one director absent and two directors abstaining) (i)
determined that this Agreement and the transactions contemplated hereby,
including, without limitation, the Offer, the Merger, the Xxxx/Chilmark
4
Stockholder Agreement, the Stock Option Agreement and the transactions
contemplated thereby, are fair to and in the best interests of the holders of
Shares, (ii) approved this Agreement and the transactions contemplated hereby,
including, without limitation, the Offer and the Merger, and approved the
Xxxx/Chilmark Stockholder Agreement, the Stock Option Agreement and the
transactions contemplated thereby, such determination and approval constituting
approval thereof for purposes of Section 203 of the DGCL, and (iii) resolved
to recommend that the stockholders of the Company who desire to receive cash for
their Shares accept the Offer and tender their Shares thereunder to Sub and that
all stockholders of the Company approve and adopt this Agreement; provided,
however, that prior to the purchase by Sub of Shares pursuant to the Offer, the
Company may modify, withdraw or change such recommendation only to the extent
that the Board of Directors of the Company determines, after having received the
oral or written opinion of outside legal counsel to the Company, that the
failure to so withdraw, modify or change would result in a breach of the Board
of Directors' fiduciary duties under applicable laws.
(b) Concurrently with the commencement of the Offer, the Company
shall file with the SEC a Solicitation/Recommendation Statement on Schedule
14D-9 (together with all amendments and supplements thereto and including the
exhibits thereto, the "Schedule 14D-9") which shall contain the recommendation
referred to in clauses (i), (ii) and (iii) of Section 1.2(a) hereof; provided,
however, that the Company may modify, withdraw or change such recommendation
only to the extent that the Board of Directors of the Company determines, after
having received the oral or written opinion of outside legal counsel to the
Company, that the failure to so withdraw, modify or change would result in a
breach of the Board of Directors' fiduciary duties under applicable laws and any
such withdrawal, change or modification shall not constitute a breach of this
Agreement. The Company represents that the Schedule 14D-9 will comply in all
material respects with the provisions of applicable federal securities laws and,
on the date filed with the SEC and on the date first published, sent or given to
the Company's stockholders, shall not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
5
circumstances under which they were made, not misleading, except that no
representation is made by the Company with respect to information supplied by
Parent or Sub for inclusion in the Schedule 14D-9. The information supplied
by Parent and Sub for inclusion in the Schedule 14D-9 will not, on the date
filed with the SEC and on the date first published, sent or given to the
Company's stockholders, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading. The Company further agrees to take all steps
necessary to cause the Schedule 14D-9 to be filed with the SEC and to be
disseminated to holders of Shares, in each case as and to the extent required by
applicable federal securities laws. Each of the Company, on the one hand, and
Parent and Sub, on the other hand, agrees promptly to correct any information
provided by it for use in the Schedule 14D-9 if and to the extent that it shall
have become false and misleading in any material respect and the Company further
agrees to take all steps necessary to cause the Schedule 14D-9 as so corrected
to be filed with the SEC and to be disseminated to holders of Shares, in each
case as and to the extent required by applicable federal securities laws.
Parent and its counsel shall be given the opportunity to review the Schedule
14D-9 before it is filed with the SEC. In addition, the Company agrees to
provide Parent, Sub and their counsel in writing with any comments the Company
or its counsel may receive from time to time from the SEC or its staff with
respect to the Schedule 14D-9 promptly after the receipt of such comments. The
Company will cooperate with Parent and Sub in responding to any comments
received from the SEC with respect to the Schedule 14D-9 and amending the
Schedule 14D-9 in response to any such comments.
(c) In connection with the Offer, if requested by Sub, the Company
will promptly furnish or cause to be furnished to Sub mailing labels, security
position listings and any available listing or computer file containing the
names and addresses of the record holders of the Shares as of a recent date, and
shall furnish Sub with such information and assistance as Sub or its agents may
reasonably request in communicating the Offer to the stockholders of the
Company. Except for such steps as are necessary to disseminate the Offer
6
Documents, Parent and Sub shall hold in confidence the information contained in
any of such labels and lists and the additional information referred to in the
preceding sentence, will use such information only in connection with the Offer,
and, if this Agreement is terminated, will upon request of the Company deliver
or cause to be delivered to the Company all copies of such information then in
its possession or the possession of its agents or representatives.
(d) The Board of Directors of the Company has received the written
opinion of Xxxxxx Xxxxxxx & Co. Incorporated ("Company Financial Advisor"),
dated as of a date which is on or prior to the date of this Agreement, to the
effect that, as of such date, the consideration to be received by holders of
Shares (other than Sub and its affiliates) pursuant to the Offer and Merger,
taken together, is fair from a financial point of view to such holders (the
"Company Fairness Opinion"). The Company has delivered to Sub a copy of the
Company Fairness Opinion, together with Company Financial Advisor's autho-
rization to the inclusion of the Company Fairness Opinion in the Offer Documents
and the Proxy Statement/Prospectus (as defined in Section 1.7).
Section 1.3 The Merger. Subject to the terms and conditions of this
Agreement and in accordance with the DGCL at the Effective Time, the Company and
Sub shall consummate a merger (the "Merger") pursuant to which (i) Sub shall be
merged with and into the Company and the separate corporate existence of Sub
shall thereupon cease, and (ii) the Company shall be the successor or surviving
corporation in the Merger (the "Surviving Corporation") and shall continue to be
governed by the laws of the State of Delaware. Pursuant to the Merger, (x) the
Certificate of Incorporation of the Company, as in effect immediately prior to
the Effective Time, shall be the Certificate of Incorporation of the Surviving
Corporation until thereafter amended as provided by law and such Certificate of
Incorporation, and (y) the Bylaws of the Company, as in effect immediately
prior to the Effective Time, shall be the By-laws of the Surviving Corporation
until thereafter amended as provided by law, the Certificate of Incorporation of
the Surviving Corporation and such By-laws. The Merger shall have the effects
set forth in the DGCL.
7
Section 1.4 Effective Time. (a) Parent, Sub and the Company will
cause a Certificate of Merger (the "Certificate of Merger") with respect to the
Merger to be executed and filed on the date of the Closing (as defined in
Section 1.5) (or on such other date as Parent and the Company may agree) with
the Secretary of State of the State of Delaware as provided in the DGCL. The
Merger shall become effective on the date on which the Certificate of Merger
has been duly filed with the Secretary of State or such time as is agreed upon
by the parties and specified in the Certificate of Merger, and such time is
hereinafter referred to as the "Effective Time".
(b) If Shares are purchased in the Offer, Parent and Sub covenant and
agree to consummate the Merger pursuant to the terms of this Agreement not later
than June 30, 1996.
Section 1.5 Closing. The closing of the Merger (the "Closing") will
take place at 10:00 a.m., New York City time, on a date to be specified by the
parties, which shall be no later than the third business day after satisfaction
or waiver of all of the conditions set forth in Article VII hereof (the "Closing
Date"), at the offices of Skadden, Arps, Slate, Xxxxxxx & Xxxx, 000 Xxxxx
Xxxxxx, Xxx Xxxx, Xxx Xxxx, unless another time, date or place is agreed to in
writing by the parties hereto.
Section 1.6 Directors and Officers. (a) Promptly upon the
acceptance for payment of any Shares by Parent or any of its Subsidiaries (as
defined in Section 3.1 hereof) pursuant to the Offer, Parent shall be entitled
to designate such number of directors, rounded up to the next whole number, on
the Board of Directors of the Company as is equal to the product of the total
number of directors on such Board (giving effect to the directors designated by
Parent pursuant to this sentence) multiplied by the percentage that the
aggregate number of Shares beneficially owned by Sub, Parent and any of their
affiliates bears to the total number of shares of Company Common Stock then
outstanding. The Company shall, upon request of Parent, use its best efforts
promptly either to increase the size of its Board of Directors or, at the
Company's election, secure the resignations of such number of its incumbent
directors as is necessary to enable Parent's designees to be so elected to the
Company's Board, and shall cause Parent's designees to be
8
so elected. At such time, the Company shall also cause persons designated by
Parent to constitute the same percentage (rounded up to the next whole number)
as is on the Company's Board of Directors of (i) each committee of the Company's
Board of Directors, (ii) each board of directors (or similar body) of each
Subsidiary of the Company and (iii) each committee (or similar body) of each
such board, in each case only to the extent permitted by applicable law or the
rules of any stock exchange on which the Company Common Stock is listed.
Notwithstanding the foregoing, until the Effective Time, each of Parent, Sub
and the Company shall use its best efforts to retain as a member of the
Company's Board of Directors at least two directors who are directors of the
Company on the date hereof (the "Continuing Directors"); provided, that
subsequent to the purchase of and payment for Shares pursuant to the Offer,
Parent shall always have its designees represent at least a majority of the
entire Board of Directors. In the event of a vacancy on the Board of Directors
resulting from the resignation or death of any Continuing Director, such vacancy
shall be filled by the remaining Continuing Directors, or if there are no
remaining Continuing Directors by the designees of Xxxx/Chilmark Fund, L.P. The
Company's obligations under this Section 1.6(a) shall be subject to Section
14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder. The Company
shall promptly take all actions required pursuant to such Section 14(f) and Rule
14f-1 in order to fulfill its obligations under this Section 1.6(a), including
mailing to stockholders the information required by such Section 14(f) and Rule
14f-1 as is necessary to enable Parent's designees to be elected to the
Company's Board of Directors. Parent or Sub will supply the Company any
information with respect to either of them and their nominees, officers,
directors and affiliates required by such Section 14(f) and Rule 14f-1. The
provisions of this Section 1.6(a) are in addition to and shall not limit any
rights which Sub, Parent or any of their affiliates may have as a holder or
beneficial owner of Shares as a matter of law with respect to the election of
directors or otherwise.
(b) From and after the time, if any, that Parent's designees
constitute a majority of the Company's Board of Directors and prior to the
Effective Time, (i) any material amendment of this Agreement, (ii) any termi-
nation of this Agreement by the Company, (iii) any exten-
9
sion of time for performance of any of the obligations of Parent or Sub
hereunder, (iv) any waiver of any condition or any of the Company's rights
hereunder, (v) any amendment or change to the Certificate of Incorporation or
Bylaws of the Company or any of its Subsidiaries, (vi) any amendment or change
to any Benefit Plan (as defined in Section 3.9(a)) or compensation policies or
severance obligations (including those agreements or obligations referenced in
Section 3.9 hereof or set forth in Schedule 3.9 of the Company Disclosure
Schedule) or (vii) any amendment or change to the policies of directors' and
officers' liability insurance maintained by the Company and its Subsidiaries on
the date hereof, may be effected only by the action of a majority of the Board
of Directors of the Company, which majority includes a majority of the
Continuing Directors; provided, that if there shall be no Continuing Directors,
actions may be effected by majority vote of the entire Board of Directors of the
Company. Any actions with respect to the enforcement of this Agreement by the
Company shall be effected only by the action of a majority of the Continuing
Directors.
(c) The directors and officers of Sub at the Effective Time shall,
from and after the Effective Time, be the initial directors and officers of the
Surviving Corporation until their successors shall have been duly elected or
appointed or qualified or until their earlier death, resignation or removal in
accordance with the Surviving Corporation's Certificate of Incorporation and
By-laws.
Section 1.7 Stockholders' Meetings. (a) In order to consummate the
Merger, the Company, acting through its Board of Directors, shall, in accordance
with applicable law, duly call, give notice of, convene and hold a special
meeting of its stockholders (the "Company Special Meeting"), as soon as
practicable after the registration statement on Form S-4 (together with all
amendments, schedules, and exhibits thereto) to be filed by Parent in connection
with the registration of the Parent Common Stock to be issued by Parent in the
Merger (the "Registration Statement") is declared effective, for the purpose of
considering and taking action upon this Agreement. The Company shall include in
the joint proxy statement/prospectus forming a part of the Registration
Statement (the "Proxy Statement/Prospectus") the recommendation of the Board
of Directors of the Company that
10
stockholders of the Company vote in favor of the approval of the Merger and the
adoption of this Agreement. Parent agrees that it will vote, or cause to be
voted, all of the Shares then owned by it, Sub or any of its other Subsidiaries,
in favor of the approval of the Merger and adoption of the Merger Agreement at
the Company Special Meeting.
(b) In order to consummate the Merger, Parent, acting through its
Board of Directors, shall, in accordance with applicable law, duly call, give
notice of, convene and hold a special meeting of its stockholders (the "Parent
Special Meeting" and together with the Company Special Meeting, the "Special
Meetings"), as soon as practicable after the Registration Statement is de-
clared effective, for the purpose of authorizing the issuance of shares of
Parent Common Stock (as defined below) pursuant to the Merger. Parent shall
include in the Proxy Statement/Prospectus the recommendation of the Board of
Directors of Parent that stockholders of Parent vote in favor of the issuance of
shares of Parent common stock, par value $1.00 per share ("Parent Common
Stock"), in the Merger.
(c) Nothing in this Section 1.7 is intended to impair the fiduciary
duties of the Boards of Directors of the Company or Parent or, in the case of
the Board of Directors of the Company, to restrict its ability to exercise its
right of termination pursuant to Section 7.1(c)(1) of this Agreement.
ARTICLE II
CONVERSION OF SHARES
Section 2.1 Conversion of Shares. (a) Each share of Common Stock,
par value $.01 per share, of Sub issued and outstanding immediately prior to the
Effective Time, without any other action by Parent, Sub or the Company, shall,
at the Effective Time, be converted into and become one fully paid and
nonassessable share of common stock of the Surviving Corporation.
(b) Each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time (other than Shares to be cancelled
pursuant to Section 2.1(d) hereof and other than Dissenting Shares
11
(as defined in Section 2.6), if any) shall, at the Effective Time, by virtue
of the Merger and without any action on the part of the holder thereof, be
converted into either (i) the right to receive a number of duly authorized,
validly issued, fully paid and nonassessable shares of Parent Common Stock
determined as set forth in clause (c) below; provided that Parent shall not
issue more than 1.12500 nor less than .91666 shares of Parent Common Stock per
Share (the "Exchange Ratio") or (ii) if the alternative consideration
contemplated by Section 2.2 hereof is applicable, then the right to receive the
Alternative Consideration (as defined in Section 2.2), plus, in each of clause
(i) and (ii) above, any Additional Consideration contemplated by Section 2.2
hereof.
(c) For purposes hereof, "Average Parent Share Price" shall mean the
average closing price per share of Parent Common Stock on the New York Stock
Exchange (the "NYSE") as reported on the NYSE Composite Tape for fifteen NYSE
trading days selected by Parent and the Company by lot from among the forty NYSE
trading days ending on the fifth trading day immediately preceding the Company
Special Meeting. "Transaction Price" shall mean $27.50 per Share. The number
of shares of Parent Common Stock into which each Share shall be converted in the
Merger shall be determined as follows:
1. In the event the Average Parent Share Price equals the
Transaction Price, each Share shall be converted into one share of Parent Common
Stock.
2. In the event that the Average Parent Share Price is greater than
the Transaction Price, each Share shall be converted into a number of shares of
Parent Common Stock (rounded to the nearest one one-hundred thousandth)
determined by the following formula:
Number of shares of Transaction Price plus .5 x (Average
Parent Common Stock = Parent Share Price minus Transaction Price)
---------------------------------------------
Average Parent Share Price
3. In the event that the Average Parent Share Price is less than the
Transaction Price, each Share shall be converted, at the option of Parent, into
either:
12
(I) a number of shares of Parent Common Stock (rounded to the nearest one
one-hundred thousandth) determined by the following formula:
Number of shares of Transaction Price minus .5 x (Transaction
Parent Common Stock = Price minus Average Parent Share Price)
-------------------------------------------
Average Parent Share Price
or (II) one share of Parent Common Stock plus the Cash
Adjustment Amount, without any interest thereon, where
the Cash Adjustment Amount is determined by the following
formula:
Cash Adjust- = .5 x (Transaction Price minus
ment Amount Average Parent Share Price);
provided, however, in no event shall the Cash Adjustment
Amount be greater than $2.75 per Share.
(d) All shares of Company Common Stock that are owned by the Company
as treasury stock and any shares of Company Common Stock owned by Parent, Sub or
any other direct or indirect wholly owned Subsidiary of Parent shall, at the
Effective Time, be cancelled and retired and shall cease to exist and no Parent
Common Stock or cash, if the alternative consideration contemplated by Section
2.2 hereof is applicable, shall be delivered in exchange therefor.
(e) On and after the Effective Time, holders of certificates which
immediately prior to the Effective Time represented outstanding Shares (the
"Certificates") shall cease to have any rights as stockholders of the Company,
except the right to receive the consideration set forth in this Article II
(other than the Additional Consideration provided by Section 2.2(c) hereof) (the
"Merger Consideration") for each Share held by them or, if applicable, payments
due to holders of Dissenting Shares (as defined in Section 2.6 hereof).
Section 2.2 Alternative Consideration and Additional Consideration.
(a) In the event that the stockholders of Parent shall not approve the issuance
of Parent Common Stock pursuant to the Merger at the Parent Special Meeting, but
all conditions to the Merger are otherwise satisfied or waived (if permissible),
the
13
Company, Parent and Sub shall nonetheless consummate the Merger and each share
of Company Common Stock issued and outstanding immediately prior to the
Effective Time (other than treasury Shares and Shares owned by Parent and its
Subsidiaries) shall, at the Effective Time, by virtue of the Merger and without
any action on the part of the holder hereof, be converted into the right to
receive the following consideration (the "Alternative Consideration") in a
combination of shares of Parent Common Stock and cash determined as follows:
1. The number of shares of Parent Common Stock into which each Share
shall be converted in the Merger (the "Adjusted Exchange Ratio") shall equal the
Exchange Ratio determined pursuant to Section 2.1(c) hereof (assuming no Cash
Adjustment Amount is paid) multiplied by a fraction (the "Adjustment Fraction"),
the numerator of which is the number of shares of Parent Common Stock equal to
19.9% of the then outstanding shares of Parent Common Stock and the denominator
of which is (a) the Exchange Ratio multiplied by (b) the aggregate number of
outstanding Shares (other than treasury Shares and Shares owned by Parent and
its Subsidiaries); and
2. The amount of cash (the "Adjusted Alternative Cash
Consideration") into which each Share shall be converted in the Merger shall
equal the Transaction Price multiplied by 1 minus the Adjustment Fraction.
(b) In the event the Merger is not consummated prior to April 29,
1996 and the Company shall not have materially breached this Agreement (other
than by acts caused or permitted by Parent), then the stockholders of the
Company shall be entitled to receive interest on the amount of the Merger
Consideration that they receive, from April 29, 1996 until the earlier of the
Effective Time or June 30, 1996, calculated at an annual rate equal to the prime
rate of interest (as announced from time to time by Xxxxxx Guaranty Trust
Company of New York). For purposes of calculating the Merger Consideration,
the Average Parent Share Price, if not otherwise ascertainable in accordance
with the terms of this Agreement, shall be the average price of Parent Common
Stock based on the 15 highest closing prices of Parent Common Stock since the
consummation of the Offer until the earlier of June 30, 1996 or the Effective
Time.
14
(c) In the event Parent and/or Sub, in violation of their obligations
under this Agreement, fails or refuses to consummate the Merger on or prior to
June 30, 1996 and the Company shall not have materially breached this Agreement
(other than by acts caused or permitted by Parent), then, in addition to any
rights or remedies that the Company and its stockholders otherwise have in law
or at equity as a result thereof, the stockholders of the Company shall be
entitled to receive interest from June 30, 1996 on the amount of the Merger
Consideration not paid until such Merger Consideration is paid, calculated at
the annual rate of the higher of (i) the prime rate of interest (as announced
from time to time by Xxxxxx Guaranty Trust Company of New York) plus 300 basis
points or (ii) the amount otherwise permitted by law. For purposes of
calculating the Merger Consideration, the Average Parent Share Price, if not
otherwise ascertainable in accordance with the terms of this Agreement, shall
be the average price of Parent Common Stock based on the 15 highest closing
prices of Parent Common Stock since the consummation of the Offer until such
Merger Consideration is paid. Any additional consideration paid or payable
pursuant to Section 2.2(b) or Section 2.2(c) is referred to herein as
"Additional Consideration".
Section 2.3 Issuance of Parent Common Stock or Payment of Cash
Consideration. (a) The manner in which each Share (other than Shares to be
cancelled as set forth in Section 2.1(d)) shall be converted into Parent Common
Stock or, if the Alternative Consideration contemplated by Section 2.2 hereof
is applicable, the right to receive the Alternative Consideration in the Merger
shall be as set forth in this Section 2.3.
(b) No certificates or scrip representing fractional shares of Parent
Common Stock shall be issued upon the surrender for exchange of Certificates
representing Shares, no dividend or distribution with respect to shares shall
be payable on or with respect to any fractional share and such fractional share
interests shall not entitle the owner thereof to vote or to any other rights of
a stockholder of Parent. In lieu of any such fractional share of Parent Common
Stock, Parent shall pay to each former stockholder of the Company who otherwise
would be entitled to receive a fractional share of Parent Common Stock an amount
in cash determined by
15
multiplying (i) the Average Parent Share Price on the date on which the
Effective Time occurs by (ii) the fractional interest in a share of Parent
Common Stock to which such holder would otherwise be entitled.
(c) Parent shall designate a bank or trust company to act as agent
for the holders of shares of Company Common Stock in connection with the Merger
(the "Exchange Agent") to receive the shares of Parent Common Stock and the Cash
Adjustment Amount, if any, or the Alternative Consideration, as the case may be,
and any Additional Consideration to which holders of shares of Company Common
Stock shall become entitled pursuant to this Article II.
(d) As soon as reasonably practicable after the Effective Time, the
Exchange Agent shall mail to each holder of record of a Certificate whose shares
were converted pursuant to this Article II into the right to receive the Merger
Consideration (i) a letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon delivery of the Certificates to the Exchange Agent and shall be in
such form and have such other provisions as Parent may reasonably specify) and
(ii) instructions for use in effecting the surrender of the Certificates in
exchange for the Merger Consideration and any Additional Consideration
contemplated by Section 2.2(c). Upon surrender of a Certificate for
cancellation to the Exchange Agent or to such other agent or agents as may be
appointed by Parent, together with such letter of transmittal, duly executed,
the holder of such Certificate shall be entitled to receive in exchange
therefor the Merger Consideration and any Additional Consideration contemplated
by Section 2.2(c) for each share of Company Common Stock formerly represented by
such Certificate and the Certificate so surrendered shall forthwith be cancel-
led. If payment of the Merger Consideration and any Additional Consideration
contemplated by Section 2.2(c) is to be made to a person other than the person
in whose name the surrendered Certificate is registered, it shall be a condition
of payment that the Certificate so surrendered shall be properly endorsed or
shall be otherwise in proper form for transfer and that the person requesting
such payment shall have paid any transfer and other taxes required by reason of
the payment of the Merger Consideration and any Additional Consideration
contemplated by
16
Section 2.2(c) to a person other than the registered holder of the Certificate
surrendered or shall have established to the satisfaction of the Surviving
Corporation that such tax either has been paid or is not applicable.
(e) Immediately following the Effective Time, Parent shall deliver,
in trust, to the Exchange Agent, for the benefit of the holders of Shares, (i)
certificates representing an aggregate number of shares of Parent Common Stock
as nearly as practicable equal to the product of the Exchange Ratio and the
number of Shares to be converted into Parent Common Stock as determined by
this Article II plus, if applicable, the Cash Adjustment Amount multiplied by
the number of Shares to be converted into Parent Common Stock as determined by
this Article II or (ii) if the Alternative Consideration contemplated by Section
2.2 hereof is applicable, certificates representing an aggregate number of
shares of Parent Common Stock as nearly as practicable equal to the product of
the Adjusted Exchange Ratio and the number of Shares to be converted into Parent
Common Stock as determined by this Article II, plus an amount of cash equal to
the product of the Adjusted Alternative Cash Consideration and the number of
Shares to be converted into the Adjusted Alternative Cash Consideration pursuant
to this Article II. In addition, Parent shall deliver to the Exchange Agent
the aggregate amount of any Additional Consideration to be paid to holders of
Shares. As soon as practicable after the Effective Time, each holder of Shares
converted into Parent Common Stock (plus the Cash Adjustment Amount, if
applicable or any Additional Consideration, if applicable) or cash pursuant to
this Article II, upon surrender to the Exchange Agent of one or more
Certificates for such Shares for cancellation, shall be entitled to receive
either certificates representing the number of shares of Parent Common Stock
into which such Shares shall have been converted in the Merger (plus the Cash
Adjustment Amount, if applicable, or any Additional Consideration, if
applicable) or, in case the Alternative Consideration contemplated by Section
2.2 is applicable the cash (including any Additional Consideration, if
applicable) and certificates representing the number of shares of Parent Common
Stock into which such Shares shall have been converted in the Merger. No divi-
dends or distributions that have been declared will be paid to persons entitled
to receive certificates for
17
shares of Parent Common Stock until such persons surrender their Certificates
for Shares, at which time all such dividends shall be paid. In no event shall
the persons entitled to receive such dividends be entitled to receive interest
on such dividends. Notwithstanding the foregoing, neither the Exchange Agent
nor any party hereto shall be liable to a holder of Shares for any Parent Common
Stock, Alternative Consideration or dividends thereon delivered to a public
official pursuant to any applicable abandoned property, escheat or similar law.
(f) At any time following nine months after the Effective Time, the
Surviving Corporation shall be entitled to require the Exchange Agent to deliver
to it any shares of Parent Common Stock or funds (including any interest
received with respect thereto) which had been made available to the Exchange
Agent and which have not been disbursed to holders of Certificates, and there-
after such holders shall be entitled to look to the Surviving Corporation and
Parent (subject to abandoned property, escheat or other similar laws) only with
respect to the Merger Consideration payable or issuable upon due surrender of
their Certificates, without any interest thereon.
Section 2.4 Treatment of Stock Options. (a) Effective as of the
Effective Time, each option granted by the Company to purchase shares of Company
Common Stock that is outstanding and unexercised immediately prior thereto
(the "Company Stock Options"), shall cease to represent a right to acquire
shares of Company Common Stock and shall be converted automatically into an
option to purchase shares of Parent Common Stock in an amount and at an exercise
price determined as provided below (and otherwise subject to the terms of the
Company 1992 Long-Term Incentive Compensation Plan, as amended and the Company
1992 Non-Employee Directors' Stock Option Plan, as amended (together the "Option
Plans"), and the agreements evidencing grants thereunder). The number of shares
of Parent Common Stock subject to, and the option price and terms and conditions
of, the new option shall be determined in a manner that preserves both (i) the
aggregate gain (or loss) on the Company Stock Option immediately prior to the
Effective Time and (ii) the ratio of the exercise price per share subject to the
Company Stock Option to the fair market value (determined immediately prior to
the Effective Time) per share sub-
18
ject to such option, provided that any fractional shares of Parent Common Stock
resulting from such determination shall be rounded down to the nearest share.
Effective as of the Effective Time, the Surviving Corporation shall assume each
Company Stock Option agreement, each as amended, as provided herein. The
adjustment provided herein with respect to any Company Stock Options that are
"incentive stock options" (as defined in section 422 of the Code) shall be and
is intended to be effected in a manner that is consistent with section 424(a) of
the Code. The duration, vesting and other terms of the new options shall be the
same as the Company Stock Options that they replace, except that all references
to the Company shall be deemed to be references to Parent. In the event that a
holder of a Company Stock Option is terminated without Cause (as defined in
Section 5.5(a) of this Agreement) within 12 months of the Effective Time, then
such holder's new option shall become 100% exercisable as of such date of
termination.
(b) Notwithstanding Section 2.4(a) above, outstanding vested options
under the Long Term Incentive Plan (LTIP) held by Covered Executives (as defined
in Section 5.5(a) hereof), including options that become vested in connection
with a "Change in Control" under the terms of existing award agreements under
the LTIP, shall, effective as of the Effective Time become exercisable under a
cashless exercise procedure made available by the Company (subject to applicable
law and any administrative procedures and policies deemed appropriate by the
Company). Individuals subject to Section 16 of the Exchange Act shall be
provided with a cash compensation arrangement providing such individuals with
the opportunity to receive a cash payment approximating the benefits that would
be deprived by reason of Section 16 of the Exchange Act.
(c) Effective as of the Effective Time, the Options Plans shall
terminate and the provisions in any other plan, program, agreement or
arrangement, providing for the issuance or grant of any other interest in re-
spect of the capital stock of the Company or any of its Subsidiaries shall be
deleted. Furthermore, the Company shall take all actions necessary to ensure
that following the Effective Time, no holder of Company Stock Options or any
participant in the Option Plans or any other plans, programs, agreements or
arrangements shall have any right
19
thereunder to acquire any equity securities of the Company, the Surviving
Corporation or any subsidiary of either of the foregoing.
Section 2.5 Stock Transfer Books. At the Effective Time, the stock
transfer books of the Company shall be closed and there shall be no further
registration of transfers of Shares on the records of the Company. If,
after the Effective Time, Certificates representing Shares are presented to
the Surviving Corporation, they shall be cancelled and exchanged for cash or
certificates representing Parent Common Stock pursuant to this Article II.
Section 2.6 Dissenting Shares. Notwithstanding anything in this
Agreement to the contrary, in the event the Alternative Consideration or any
Additional Consideration contemplated by Section 2.2 hereof is applicable or in
the event that Parent elects to pay any Cash Adjustment Amount, Shares which
immediately prior to the Effective Time are held by stockholders who have
properly exercised and perfected appraisal rights under Section 262 of the DGCL
(the "Dissenting Shares"), shall not be converted into the right to receive the
Merger Consideration, but the holders of Dissenting Shares shall be entitled to
receive such consideration as shall be determined pursuant to Section 262 of the
DGCL; provided, however, that if any such holder shall have failed to perfect or
shall withdraw or lose his right to appraisal and payment under the DGCL, such
holder's Shares shall thereupon be deemed to have been converted as of the
Effective Time into the right to receive the Merger Consideration, without any
interest thereon, and such Shares shall no longer be Dissenting Shares.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Sub as follows:
Section 3.1 Organization. Each of the Company and its Subsidiaries
is a corporation, partnership or other entity duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation
or organization, and has all requisite corporate
20
or other power and authority and all necessary governmental approvals to own,
lease and operate its properties and to carry on its business as now being
conducted, except where the failure to be so organized, existing and in good
standing or to have such power, authority and governmental approvals would not
have a material adverse effect on the Company and its Subsidiaries taken as a
whole. Each of the Company and its Subsidiaries is duly qualified or licensed
to do business and in good standing in each jurisdiction in which the property
owned, leased or operated by it or the nature of the business conducted by it
makes such qualification or licensing necessary, except where the failure to be
so duly qualified or licensed and in good standing would not, in the aggre-
gate, have a material adverse effect on the Company and its Subsidiaries taken
as a whole. As used in this Agreement, the word "Subsidiary" means, with
respect to any party, any corporation or other organization, whether
incorporated or unincorporated, of which (i) such party or any other Subsidiary
of such party is a general partner (excluding such partnerships where such
party or any Subsidiary of such party do not have a majority of the voting
interest in such partnership) or (ii) at least a majority of the securities or
other interests having by their terms ordinary voting power to elect a majority
of the Board of Directors or others performing similar functions with respect to
such corporation or other organization is directly or indirectly owned or con-
trolled by such party or by any one or more of its Subsidiaries, or by such
party and one or more of its Subsidiaries. As used in this Agreement, any
reference to any event, change or effect having a material adverse effect on or
with respect to any entity (or group of entities taken as a whole) means such
event, change or effect, individually or in the aggregate with such other
events, changes, or effects, which is materially adverse to the financial
condition, business, results of operations, assets, liabilities, properties or
prospects of such entity. If "material adverse effect" is used with respect to
more than one entity, it shall mean such events, changes or effects with respect
to all such entities taken as a whole. Section 3.1 of the Disclosure Schedule
delivered by the Company to Parent on or prior to the date hereof (the "Company
Disclosure Schedule") sets forth a complete list of the Company's Subsidiaries.
21
Section 3.2 Capitalization. (a) The authorized capital stock of
the Company consists of 100,000,000 Shares and 25,000,000 shares of preferred
stock, par value $.01 per share (the "Preferred Stock"). As of the date hereof,
(i) 66,587,990 shares of Company Common Stock are issued and outstanding,
700,000 shares of Company Common Stock are held in the Company's treasury,
1,096,101 shares of Company Common Stock are reserved for issuance under the
Company's 401(k) Savings Plan, 2,002,220 shares of Company Common Stock are
reserved for issuance under the Company's 1993 Employee Stock Purchase Plan
and 3,561,377 shares of Company Common Stock are reserved for issuance pursuant
to options previously granted pursuant to the Company Stock Option Plans, (ii)
no shares of Preferred Stock are issued and outstanding, and (iii) no Shares or
shares of Preferred Stock are issued and held in the treasury of the Company.
All the outstanding shares of the Company's capital stock are, and all shares
which may be issued pursuant to the Company Stock Option Plans will be, when
issued in accordance with the respective terms thereof, duly authorized, validly
issued, fully paid and non-assessable. Except as disclosed in Section 3.2(a) of
the Company Disclosure Schedule, there are no bonds, debentures, notes or other
indebtedness having voting rights (or convertible into securities having such
rights) ("Voting Debt") of the Company or any of its Subsidiaries issued and
outstanding. Except as set forth above and except for the transactions
contemplated by this Agreement and the Stock Option Agreement, as of the date
hereof, (i) there are no shares of capital stock of the Company authorized,
issued or outstanding and (ii) there are no existing options, warrants, calls,
pre-emptive rights, subscriptions or other rights, convertible securities,
agreements, arrangements or commitments of any character, relating to the
issued or unissued capital stock of the Company or any of its Subsidiaries,
obligating the Company or any of its Subsidiaries to issue, transfer or sell or
cause to be issued, transferred or sold any shares of capital stock or Voting
Debt of, or other equity interest in, the Company or any of its Subsidiaries or
securities convertible into or exchangeable for such shares or equity
interests or obligations of the Company or any of its Subsidiaries to grant,
extend or enter into any such option, warrant, call, subscription or other
right, convertible security, agreement, arrangement or commitment. Except as
disclosed in
22
Section 3.2(a) of the Company Disclosure Schedule, there are no outstanding
contractual obligations of the Company or any of its Subsidiaries to repurchase,
redeem or otherwise acquire any Shares or the capital stock of the Company or
any subsidiary or affiliate of the Company or to provide funds to make any
investment (in the form of a loan, capital contribution or otherwise) in any
Subsidiary or any other entity. Except as permitted by this Agreement,
following the Merger, neither the Company nor any of its Subsidiaries will have
any obligation to issue, transfer or sell any shares of its capital stock
pursuant to any employee benefit plan or otherwise.
(b) Except as disclosed in Section 3.2(b) of the Company Disclosure
Schedule, all of the outstanding shares of capital stock of each of the
Subsidiaries are beneficially owned by the Company, directly or indirectly,
and all such shares have been validly issued and are fully paid and
nonassessable and are owned by either the Company or one of its Subsidiaries
free and clear of all liens, charges, security interests, options, claims or
encumbrances of any nature whatsoever.
(c) Except for the Xxxx/Chilmark Stockholder Agreement, there are
no voting trusts or other agreements or understandings to which the Company or
any of its Subsidiaries is a party with respect to the voting of the capital
stock of the Company or any of the Subsidiaries. None of the Company or its
Subsidiaries is required to redeem, repurchase or otherwise acquire shares of
capital stock of the Company, or any of its Subsidiaries, respectively, as a
result of the transactions contemplated by this Agreement. The Company has
delivered to Parent a letter agreement which causes the termination, as of the
consummation of the Offer, of the Stockholder Agreement by and between
Xxxx/Chilmark and the Company dated as of June 1, 1992 the Registration Rights
Agreement by and between Xxxx/Chilmark Fund, L.P. and the Company dated as of
June 1, 1992 and the Registration Rights Agreement by and between Magten Asset
Management Corporation ("Magten") and the Company, dated as of January 20, 1993
(such agreements being referred to herein as the "Existing Company/Stockholder
Agreements").
(d) At the Effective Time, the number of shares of Company Common
Stock outstanding shall not exceed 73,247,688.
23
Section 3.3 Corporate Authorization; Validity of Agreement; Company
Action. (a) The Company has full corporate power and authority to execute and
deliver this Agreement and the Stock Option Agreement, and, subject to obtaining
any necessary approval of its stockholders as contemplated by Section 1.7(a)
hereof with respect to the Merger, to consummate the transactions contemplated
hereby and thereby. The execution, delivery and performance by the Company of
this Agreement and the Stock Option Agreement, and the consummation by it of the
transactions contemplated hereby and thereby, have been duly and validly
authorized by its Board of Directors and, except in the case of this Agreement
for obtaining the approval of its stockholders as contemplated by Section 1.7(a)
hereof with respect to the Merger, no other corporate action or proceedings on
the part of the Company is necessary to authorize the execution and delivery by
the Company of this Agreement and the Stock Option Agreement, and the
consummation by it of the transactions contemplated hereby and thereby. This
Agreement and the Stock Option Agreement has been duly executed and delivered by
the Company and, assuming this Agreement and the Stock Option Agreement
constitutes a valid and binding obligation of Parent and Sub, constitutes a
valid and binding obligation of the Company enforceable against the Company in
accordance with its terms, except that (i) such enforcement may be subject to
applicable bankruptcy, insolvency or other similar laws, now or hereafter in
effect, affecting creditors' rights generally, and (ii) the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.
(b) The Board of Directors of the Company has duly and validly
approved and taken all corporate action required to be taken by the Board of
Directors for the consummation of the transactions contemplated by this
Agreement (including, without limitation, the Offer, the acquisition of Shares
pursuant to the Offer and the Merger, the Stock Option Agreement, the
Xxxx/Chilmark Stockholder Agreement and the termination of the Existing
Company/Stockholder Agreements), including, but not limited to, all actions
necessary to render the provisions of Section 203 of the DGCL inapplicable to
such transactions.
24
Section 3.4 Consents and Approvals; No Violations. Except as
disclosed in Section 3.4 of the Company Disclosure Schedule, and except for all
filings, permits, authorizations, consents and approvals as may be required
under, and other applicable requirements of, the Exchange Act, the DGCL, the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), and for the approval of this Agreement by the Company's stockholders and
the filing and recordation of the Certificate of Merger as required by the
DGCL, neither the execution, delivery or performance of this Agreement and the
Stock Option Agreement, nor the consummation by the Company of the transactions
contemplated hereby or thereby nor compliance by the Company with any of the
provisions hereof or thereof will (i) conflict with or result in any breach of
any provision of the certificate of incorporation or by-laws or similar
organizational documents of the Company or of any of its Subsidiaries, (ii)
require any filing with, or permit, authorization, consent or approval of, any
court, arbitral tribunal, administrative agency or commission or other
governmental or other regulatory authority or agency (a "Governmental Entity"),
except where the failure to obtain such permits, authorizations, consents or
approvals or to make such filings would not have a material adverse effect on
the Company and its Subsidiaries and would not, or would not be reasonably
likely to, materially impair the consummation of the Offer or the
Xxxx/Chilmark Stockholder Agreement or the Stock Option Agreement or the ability
of the Company to consummate the Merger or the other transactions contemplated
hereby or thereby, (iii) result in a violation or breach of, or constitute (with
or without due notice or lapse of time or both) a default (or give rise to any
right of termination, amendment, cancellation or acceleration) under, any of the
terms, conditions or provisions of any note, bond, mortgage, indenture, guar-
xxxxx, other evidence of indebtedness (collectively, the "Debt Instruments"),
lease, license, contract, agreement or other instrument or obligation to which
the Company or any of its Subsidiaries is a party or by which any of them or any
of their properties or assets may be bound and which either has a term of more
than one year or involves the payment or receipt of money in excess of $300,000
(a "Company Agreement") or (iv) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to the Company, any of its Subsidiaries
or any of their properties or assets, except in the case
25
of clause (iii) or (iv) for such violations, breaches or defaults which would
not, individually or in the aggregate, have a material adverse effect on the
Company and its Subsidiaries, and which would not, or would not be reasonably
likely to, materially impair the consummation of the Offer, the Stock Option
Agreement or the Xxxx/Chilmark Stockholder Agreement or the ability of the
Company to consummate the Merger or the other transactions contemplated hereby
or thereby.
Section 3.5 SEC Reports and Financial Statements. The Company has
filed with the SEC, and has heretofore made available to Parent true and
complete copies of, all forms, reports, schedules, statements and other
documents required to be filed by it and its Subsidiaries since May 30, 1992
under the Exchange Act or the Securities Act (as such documents have been
amended since the time of their filing, collectively, the "Company SEC
Documents"). As of their respective dates or, if amended, as of the date of the
last such amendment, the Company SEC Documents, including, without limitation,
any financial statements or schedules included therein (a) did not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading and (b) complied
in all material respects with the applicable requirements of the Exchange Act
and the Securities Act, as the case may be, and the applicable rules and
regulations of the SEC thereunder. Each of the consolidated financial state-
ments included in the Company SEC Documents have been prepared from, and are in
accordance with, the books and records of the Company and/or its consolidated
Subsidiaries, comply in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with United States generally
accepted accounting principles ("GAAP") applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto) and fairly
present in all material respects the consolidated financial position and the
consolidated results of operations and cash flows (and changes in financial
position, if any) of the Company and its consolidated Subsidiaries as at the
dates thereof or for the periods presented therein.
26
Section 3.6 Absence of Certain Changes. Except to the extent
disclosed in the Company SEC Documents filed prior to the date of this
Agreement or as otherwise disclosed to Parent in Section 3.6 of the Company
Disclosure Schedule, from June 3, 1995 through the date of this Agreement, the
Company and its Subsidiaries have conducted their respective businesses and
operations in the ordinary course of business consistent with past practice.
From June 3, 1995 through the date of this Agreement, there has not occurred (i)
any events, changes, or effects (including the incurrence of any liabilities of
any nature, whether or not accrued, contingent or otherwise) having or, which
would be reasonably likely to have, individually or in the aggregate, a
material adverse effect on the Company and its Subsidiaries; (ii) any
declaration, setting aside or payment of any dividend or other distribution
(whether in cash, stock or property) with respect to the equity interests of the
Company or of any of its Subsidiaries, other than dividends paid by wholly owned
Subsidiaries; or (iii) any material change by the Company or any of its
Subsidiaries in accounting principles or methods, except insofar as may be
required by a change in GAAP. Except as set forth on Schedule 3.6 of the
Company Disclosure Schedule, from June 3, 1995 through the date of this
Agreement, neither the Company nor any of its Subsidiaries has taken any of the
actions prohibited by Section 5.1 hereof.
Section 3.7 No Undisclosed Liabilities. Except (a) to the extent
disclosed in the Company SEC Documents filed prior to the date of this Agreement
and (b) for liabilities and obligations incurred in the ordinary course of
business consistent with past practice, during the period from June 3, 1995
through the date of this Agreement, neither the Company nor any of its
Subsidiaries have incurred any liabilities or obligations of any nature,
whether or not accrued, contingent or otherwise, that have, or would be
reasonably likely to have, a material adverse effect on the Company and its
Subsidiaries or would be required to be reflected or reserved against on a
consolidated balance sheet of the Company and its Subsidiaries (including the
notes thereto) prepared in accordance with GAAP as applied in preparing the
June 3, 1995 consolidated balance sheet of the Company and its Subsidiaries.
Section 3.7 of the Company Disclosure Schedule sets forth each instrument
evidencing indebtedness of the Company and its Subsidiaries which
27
will accelerate or become due or payable, or result in a right of redemption or
repurchase on the part of the holder of such indebtedness, or with respect to
which any other payment or amount will become due or payable, in any such case
with or without due notice or lapse of time, as a result of this Agreement, the
Merger or the other transactions contemplated hereby.
Section 3.8 Information in Proxy Statement/Prospectus. The Proxy
Statement/Prospectus (or any amendment thereof or supplement thereto), at the
date mailed to the Company's stockholders, on the date filed with the SEC and at
the time of the Special Meetings, will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading, provided, however, that
no representation is made by the Company with respect to statements made therein
based on information supplied by Parent or Sub for inclusion in the Proxy
Statement/Prospectus. None of the information supplied by the Company for
inclusion or incorporation by reference in the Registration Statement will, at
the date it becomes effective and at the time of the Special Meetings contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. Subject to the proviso set forth in the second preceding sentence,
the Proxy Statement/Prospectus will comply in all material respects with the
provisions of the Exchange Act and the rules and regulations thereunder.
Section 3.9 Employee Benefit Plans; ERISA. (a) As of the date of
this Agreement, except as set forth in Section 3.9(a) of the Company Disclosure
Schedule: there are no material employee benefit plans, arrangements,
practices, contracts or agreements (including, without limitation, employment
agreements, change of control employment agreements and severance agreements,
incentive compensation, bonus, stock option, stock appreciation rights and
stock purchase plans) of any type (including but not limited to plans
described in section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")), maintained by the Company,
28
any of its Subsidiaries or any trade or business, whether or not incorporated
(an "ERISA Affiliate"), that together with the Company would be deemed a
"controlled group" within the meaning of section 4001(a)(14) of ERISA, or with
respect to which the Company or any of its Subsidiaries has or may have a
liability, other than those listed on Section 3.9(a) of the Company Disclosure
Schedule (the "Benefit Plans"). Except as disclosed in Section 3.9(a) of
the Company Disclosure Schedule (or as otherwise permitted by this Agreement):
(1) neither the Company nor any ERISA Affiliate has any formal plan or
commitment, whether legally binding or not, to create any additional Benefit
Plan or modify or change any existing Benefit Plan that would affect any
employee or terminated employee of the Company or any ERISA Affiliate; and (2)
since September 31, 1995, there has been no change, amendment, modification to,
or adoption of, any Benefit Plan. Section 3.9(a) of the Company Disclosure
Schedule contains a list of each material employment, termination, severance,
incentive and deferred compensation agreement or arrangement that is a Benefit
Plan, and the date of execution of each such agreement or arrangement.
(b) Except as disclosed in Section 3.9(b) of the Company Disclosure
Schedule, under the applicable laws of all jurisdictions within the United
States of America and all foreign jurisdictions, with respect to any Benefit
Plan, there are no material amounts accrued but unpaid as of the most recent
balance sheet date that are not reflected on that balance sheet prepared in
accordance with GAAP.
(c) With respect to each Benefit Plan, except as disclosed on
Schedule 3.9(c) of the Company Disclosure Schedule and as would not have a
material adverse effect on the Company and its Subsidiaries: (i) if intended
to qualify under section 401(a), 401(k) or 403(a) of the Code, such plan so
qualifies, and its trust is exempt from taxation under section 501(a) of the
Code; (ii) such plan has been administered in accordance with its terms and
applicable law; (iii) no breaches of fiduciary duty have occurred; (iv) no
disputes are pending, or, to the knowledge of the Company, threatened; (v) no
prohibited transaction (within the meaning of Section 406 of ERISA) has
occurred; (vi) no lien imposed under the Code or ERISA exists or is likely to
exist; and (vii) all contributions and premiums due (including any extensions
29
for such contributions and premiums) have been made in full.
(d) Except as disclosed in Section 3.9(d) of the Company Disclosure
Schedule, none of the Benefit Plans has incurred any "accumulated funding
deficiency," as such term is defined in section 412 of the Code, whether or not
waived.
(e) Except as disclosed on Section 3.9(e) of the Company Disclosure
Schedule: (i) neither the Company nor any ERISA Affiliate has incurred any
liability under Title IV of ERISA since the effective date of ERISA that has
not been satisfied in full except as would not have or would not reasonably be
likely to have a material adverse effect on the Company and its Subsidiaries
(including sections 4063-4064 and 4069 of ERISA) and, to the knowledge of the
Company, no basis for any such liability exists; (ii) neither the Company nor
any ERISA Affiliate maintains (or contributes to), or has maintained (or has
contributed to) within the last six years, any employee benefit plan that is
subject to Title IV of ERISA; and (iii) there is no pending dispute between the
Company or any ERISA Affiliate concerning payment of contributions or payment of
withdrawal liability payments.
(f) With respect to each Benefit Plan that is a "welfare plan" (as
defined in section 3(1) of ERISA), except as specifically disclosed in Section
3.9(f) of the Company Disclosure Schedule, no such plan provides medical or
death benefits with respect to current or former employees of the Company or
any of its Subsidiaries beyond their termination of employment, other than on an
employee-pay-all basis, and each such welfare plan may be amended or terminated
by the Company or any of its Subsidiaries at any time with respect to such
former or current employees.
(g) With respect to each Benefit Plan that is intended to provide
special tax treatment to participants (including sections 79, 105, 106, 125, 127
and 129 of the Code), to the Company's knowledge, such Benefit Plan has
satisfied all of the material requirements for the receipt of such special tax
treatment since January 1, 1992.
30
(h) Except as specifically set forth in Section 3.9(h) of the Company
Disclosure Schedule, the consummation of the transactions contemplated by this
Agreement will not (i) entitle any individual to severance pay or any tax
"gross-up" payments with respect to the imposition of any tax pursuant to
Section 4999 of the Code or accelerate the time of payment or vesting, or in-
crease the amount, of compensation or benefits due to any individual with
respect to any Benefit Plan, or (ii) constitute or result in a prohibited
transaction under section 4975 of the Code or section 406 or 407 of ERISA with
respect to any Benefit Plan.
(i) Except as disclosed on Section 3.9(i) of the Company Disclosure
Schedule, neither the Company, any Benefits Affiliate nor any "administrator" as
that term is defined in section 3(16) of ERISA, has any liability with respect
to or connected with any Benefit Plan for excise taxes payable under the Code or
civil penalties payable under ERISA and, to the Company's knowledge, no basis
for any such liability exists.
(j) Except as disclosed on Schedule 3.9(j) of the Company Disclosure
Schedule, there is no Benefit Plan that is a "multiemployer plan," as such term
is defined in section 3(37) of ERISA, or which is covered by section 4063 or
4064 of ERISA.
(k) With respect to each Benefit Plan except Plans in which employees
of Parent or its Affiliates do not participate and except Multiemployer Plans
from which the Company has withdrawn, the Company has delivered or made
available to Parent accurate and complete (with de minimis omissions) copies
of all plan texts, summary plan descriptions, summaries of material
modifications, trust agreements and other related agreements including all
amendments to the foregoing; the two most recent annual reports; the most recent
annual and periodic accounting of plan assets; the most recent determination
letter received from the United States Internal Revenue Service (the "Service");
and the two most recent actuarial reports, to the extent any of the foregoing
may be applicable to a particular Benefit Plan.
31
(l) With respect to each Benefit Plan that is a "group health plan"
as such term is defined in section 5000(b) of the Code, except as specifically
set forth in Section 3.9(l) of the Company Disclosure Schedule, to the
Company's knowledge, each such Benefit Plan complies and has complied with the
requirements of Part 6 of Title I of ERISA and Sections 4980B and 5000 of the
Code except where the failure to so comply would not have a material adverse
effect on the Company and its Subsidiaries.
(m) There are no material plans, arrangements, practices, contracts
or agreements (including change of control agreements, severance agreements,
retirement agreements, stock option or purchase agreements, medical or death
benefit agreements) maintained by the Company or an ERISA Affiliate or with
respect to which the Company or any of its Subsidiaries has a material
liability to a director or former director (as a director) of the Company or an
ERISA Affiliate other than those listed on Section 3.9(m) of the Company
Disclosure Schedule or disclosed in the Company's most recent proxy statement
(the "Director Plans"). Neither the Company nor any ERISA Affiliate has any
formal plan or commitment, whether legally binding or not, to create any
Director Plan or modify or change any existing Director Plan that would affect
any director or former director of the Company or any ERISA Affiliate.
Section 3.10 Litigation. Except to the extent disclosed in the
Company SEC Documents filed prior to the date of this Agreement or on Section
3.10 of the Company Disclosure Schedule, there is no suit, claim, action,
proceeding or investigation pending or, to the best knowledge of the Company,
threatened against or affecting, the Company or any of its Subsidiaries which,
individually or in the aggregate, is reasonably likely to have a material
adverse effect on the Company and its Subsidiaries, or would, or would be
reasonably likely to, materially impair the consummation of the Offer or the
ability of the Company to consummate the Merger or the other transactions
contemplated hereby or thereby.
Section 3.11 No Default. The business of the Company and each of
its Subsidiaries is not being conducted in default or violation of any term,
condition or provision of (a) its respective certificate of incorpora-
32
tion or by-laws or similar organizational documents, (b) any Company Agreement
or (c) except as disclosed in Section 3.11 of the Company Disclosure Schedule,
any federal, state, local or foreign law, statute, regulation, rule,
ordinance, judgment, decree, order, writ, injunction, concession, grant,
franchise, permit or license or other governmental authorization or approval
applicable to the Company or any of its Subsidiaries, excluding from the
foregoing clauses (b) and (c), defaults or violations that would not have a
material adverse effect on the Company and its Subsidiaries or would not, or
would not be reasonably likely to, materially impair the consummation of the
Offer or the ability of the Company to consummate the Merger or the other
transactions contemplated hereby. No investigation or review by any
Governmental Entity with respect to the Company or any of its Subsidiaries is
pending or, to the best knowledge of the Company, threatened, nor to the best
knowledge of the Company, has any Governmental Entity indicated an intention to
conduct the same.
Section 3.12 Taxes. (a) As of the date of this Agreement, except as
set forth in Section 3.12 of the Company Disclosure Schedule:
(i) the Company and its Subsidiaries have (I) duly filed (or there
have been filed on their behalf) with the appropriate governmental authorities
all Tax Returns (as hereinafter defined) required to be filed by them and such
Tax Returns are true, correct and complete in all material respects, and (II)
duly paid in full or made provision in accordance with GAAP (or there has been
paid or provision has been made on their behalf) for the payment of all Taxes
(as hereinafter defined) for all periods ending through the date hereof;
(ii) the Company and its Subsidiaries have complied in all material
respects with all applicable laws, rules and regulations relating to the payment
and withholding of Taxes and have, within the time and the manner prescribed by
law, withheld and paid over to the proper governmental authorities all amounts
required to be so withheld and paid over under applicable laws;
(iii) no federal, state, local or foreign audits or other
administrative proceedings or
33
court proceedings are presently pending with regard to any Taxes or Tax Returns
of the Company or its Subsidiaries and neither the Company nor its
Subsidiaries has received a written notice of any pending audits or pro-
ceedings;
(iv) neither the Service nor any other taxing authority (whether
domestic or foreign) has asserted, or to the best knowledge of the Company, is
threatening to assert, against the Company or any of its Subsidiaries any
deficiency or claim for Taxes; and
(b) As of the date of this Agreement, except as set forth in Section
3.12 of the Company Disclosure Schedule:
(i) there are no material liens for Taxes upon any property or assets
of the Company or any Subsidiary thereof, except for liens for Taxes not yet due
and payable and liens for Taxes that are being contested in good faith by
appropriate proceedings;
(ii) neither the Company nor any of its Subsidiaries has agreed to or
is required to make any adjustment under Section 481(a) of the Code;
(iii) the federal income Tax Returns of the Company and its
Subsidiaries have been examined by the Service (or the applicable statutes of
limitation for the assessment of federal income Taxes for such periods have
expired) for all periods as set forth on Section 3.12 of the Company Disclosure
Schedule;
(iv) neither the Company nor any of its Subsidiaries is a party to
any material agreement providing for the allocation or sharing of Taxes; and
(v) neither the Company nor any of its Subsidiaries has, with regard
to any assets or property held or acquired by any of them, filed a consent to
the application of Section 341(f) of the Code, or agreed to have Section
341(f)(2) of the Code apply to any disposition of a subsection (f) asset (as
such term is defined in Section 341(f)(4) of the Code) owned by the Company or
any of its Subsidiaries.
34
(c) "Taxes" shall mean any and all taxes, charges, fees, levies or
other assessments, including, without limitation, income, gross receipts,
excise, real or personal property, sales, withholding, social security,
retirement, unemployment, occupation, use, service, service use, license, net
worth, payroll, franchise, transfer and recording taxes, fees and charges,
imposed by the Service or any taxing authority (whether domestic or foreign
including, without limitation, any state, county, local or foreign government or
any subdivision or taxing agency thereof (including a United States posses-
sion)), whether computed on a separate, consolidated, unitary, combined or any
other basis; and such term shall include any interest whether paid or received,
fines, penalties or additional amounts attributable to, or imposed upon, or with
respect to, any such taxes, charges, fees, levies or other assessments. "Tax
Return" shall mean any report, return, document, declaration or other
information or filing required to be supplied to any taxing authority or
jurisdiction (foreign or domestic) with respect to Taxes, including, without
limitation, information returns, any documents with respect to or accompanying
payments of estimated Taxes, or with respect to or accompanying requests for the
extension of time in which to file any such report, return, document,
declaration or other information.
Section 3.13 Contracts. Each Company Agreement is valid, binding
and enforceable and in full force and effect, except where failure to be valid,
binding and enforceable and in full force and effect would not have a material
adverse effect on the Company and its Subsidiaries, and there are no material
defaults thereunder by the Company or its Subsidiaries or, to the best knowledge
of the Company, by any other party thereto. Except as disclosed in Section 3.13
of the Company Disclosure Schedule, neither the Company nor any Subsidiary is a
party to any agreement that expressly limits the ability of the Company or any
Subsidiary or affiliate to compete in or conduct any line of business or compete
with any person or in any geographic area or during any period of time.
Section 3.14 Assets; Real Property. The assets, properties, rights
and contracts, including, without limitation (as applicable), title or
leaseholds thereto, of the Company and its Subsidiaries, taken as a
35
whole, are sufficient to permit the Company and its Subsidiaries to conduct
their business as currently being conducted with only such exceptions as are
immaterial to the Company and its Subsidiaries. All material real property
owned by the Company and its Subsidiaries (the "Real Property") is owned free
and clear of all liens, charges, security interests, options, claims, mortgages,
pledges, easements, rights-of-way or other encumbrances and restrictions of any
nature whatsoever, except as described in Section 3.14 of the Company
Disclosure Schedule or those that do not materially adversely interfere with
the use of such Real Property as currently used.
Section 3.15 Environmental Matters. Except as disclosed in Section
3.15 of the Company Disclosure Schedule, as of the date of this Agreement, the
Company is in material compliance with all applicable Environmental Laws and
there are no Environmental Liabilities and Costs of the Company and its
Subsidiaries that would have or are reasonably likely to have a material adverse
effect on the Company and its Subsidiaries.
For purposes of this Section 3.15, the following definitions shall
apply:
"Environmental Laws" means all applicable foreign, federal, state and
local laws, common law, regulations, rules and ordinances relating to pollution
or protection of health, safety or the environment.
"Environmental Liabilities and Costs" means all liabilities,
obligations, responsibilities, obligations to conduct cleanup, losses, damages,
deficiencies, punitive damages, consequential damages, treble damages, costs
and expenses (including, without limitation, all reasonable fees, disbursements
and expenses of counsel, expert and consulting fees and costs of investigations
and feasibility studies and responding to government requests for information or
documents), fines, penalties, restitution and monetary sanctions, interest,
direct or indirect, known or unknown, absolute or contingent, past, present or
future, resulting from any claim or demand, by any person or entity, whether
based in contract, tort, implied or express warranty, strict liability, joint
and several liability, criminal or civil statute, under any Environmental Law,
or arising from environmental, health or safety conditions, as a result of past
or present
36
ownership, leasing or operation of any properties, owned, leased or operated by
the Company or any of its Subsidiaries.
Section 3.16 Reimbursement. The Company or its Subsidiaries, as the
case may be, are parties to such agreements with third party payors, including
Medicaid, health maintenance organizations, preferred provider organizations,
insurance companies and other payment sources, which are necessary to conduct
their respective businesses as of the date of this Agreement and a true and
accurate list of all such agreements is set forth on Section 3.16 of the Company
Disclosure Schedule.
Section 3.17 Labor Relations. Except as set forth on Section 3.17 of
the Company Disclosure Schedule, there is no labor strike, slowdown or work
stoppage or lockout against the Company or any of its Subsidiaries, there is no
unfair labor practice charge or complaint against or pending before the National
Labor Relations Board (the "NLRB") which if decided adversely could have a
material adverse effect on the Company and its Subsidiaries, taken as a whole,
and there is no representation claim or petition pending before the NLRB and no
question concerning representation exists with respect to the employees of the
Company or its Subsidiaries.
Section 3.18 Insurance. As of the date hereof, the Company and
each of its Subsidiaries are insured by insurers, reasonably believed by the
Company to be of recognized financial responsibility and solvency, against such
losses and risks and in such amounts as are customary in the businesses in
which they are engaged. All material policies of insurance and fidelity or
surety bonds are in full force and effect. Descriptions of these plans and
related liability coverage have been previously provided to Parent. Section
3.18 of the Company Disclosure Schedule contains a listing of all open workers
compensation and general liability claims as of a recent date. These claims,
individually or in the aggregate, would not have a material adverse effect on
the Company and its Subsidiaries, taken as a whole. All necessary
notifications of claims have been made to insurance carriers other than those
which will not have a material adverse effect on the Company and its Subsidiar-
ies, taken as a whole.
37
Section 3.19 Transactions with Affiliates. Except to the extent
disclosed in the Company SEC Documents filed prior to the date of this
Agreement, from May 29, 1993 through the date of this Agreement there have been
no transactions, agreements, arrangements or understandings between the
Company or its Subsidiaries, on the one hand, and the Company's affiliates
(other than wholly-owned Subsidiaries of the Company) or other Persons, on the
other hand, that would be required to be disclosed under Item 404 of Regulation
S-K under the Securities Act.
Section 3.20 Compliance with Law. The Company and its
Subsidiaries have complied in all material respects with all laws, statutes,
regulations, rules, ordinances, and judgments, decrees, orders, writs and
injunctions, of any court or governmental entity relating to any of the
property owned, leased or used by them, or applicable to their business,
including, but not limited to, equal employment opportunity, discrimination,
occupational safety and health, environmental, interstate commerce, antitrust
laws, ERISA and laws relating to Taxes (as defined in Section 3.12). The
Company, with respect to each store location, has all permits and licenses
(including, without limitation, pharmaceutical and liquor licenses and permits)
necessary to carry on the business being conducted at each store location.
Section 3.21 Vote Required. The affirmative vote of the holders of
a majority of the outstanding shares of Company Common Stock are the only votes
of the holders of any class or series of the Company's capital stock necessary
to approve the Merger.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Sub represent and warrant to the Company as follows:
Section 4.1 Organization. Each of Parent and Sub is a corporation
duly organized, validly existing and in good standing under the laws of Delaware
and has all requisite corporate or other power and authority and all necessary
governmental approvals to own, lease and operate its properties and to carry
on its business as now
38
being conducted, except where the failure to be so organized, existing and in
good standing or to have such power, authority and governmental approvals would
not have a material adverse effect on Parent and its Subsidiaries. Parent and
each of its Subsidiaries is duly qualified or licensed to do business and in
good standing in each jurisdiction in which the property owned, leased or
operated by it or the nature of the business conducted by it makes such
qualification or licensing necessary, except where the failure to be so duly
qualified or licensed and in good standing would not have a material adverse
effect on Parent and its Subsidiaries.
Section 4.2 Capitalization. (a) The authorized capital stock of
Parent consists of 240,000,000 shares of Parent Common Stock and (b) 20,000,000
preferred shares, par value $1.00 per share (the "Parent Preferred Stock").
As of the date hereof, (i) 83,758,467 shares of Parent Common Stock are issued
and outstanding, (ii) no shares of Parent Preferred Stock are issued and
outstanding, (iii) 6,532,169 shares of Parent Common Stock are issued and held
in the treasury of Parent, and (iv) 6,417,062 shares of Parent Common Stock are
reserved for issuance under Parent's 1990 Omnibus Stock Incentive Plan (the
"Parent Plan"). All of the outstanding shares of Parent's capital stock are,
and all shares which may be issued pursuant to the exercise of outstanding
options or pursuant to the Parent Plan will be, when issued in accordance with
the respective terms thereof, duly authorized, validly issued, fully paid and
non-assessable. Except for Parent's 6.75% Zero Coupon Convertible Subor-
dinated Notes due July 24, 2006, there are no bonds, debentures, notes or other
indebtedness having voting rights (or convertible into securities having such
rights) ("Parent Voting Debt") of Parent or any of its Subsidiaries issued and
outstanding. Except as set forth above, and except as set forth in Section 4.2
of the Disclosure Schedule delivered to the Company on or prior to the date
hereof (the "Parent Disclosure Schedule") and except for transactions
contemplated by this Agreement, as of the date hereof, (i) there are no shares
of capital stock of Parent authorized, issued or outstanding and (ii) there are
no existing options, warrants, calls, preemptive rights, subscriptions or
other rights, convertible securities, agreements, arrangements or commitments
of any character, relating to the issued or unissued capital stock of Parent or
any of its Subsidiaries,
39
obligating Parent or any of its Subsidiaries to issue, transfer or sell or cause
to be issued, transferred or sold any shares of capital stock or Parent Voting
Debt of, or other equity interest in, Parent or any of its Subsidiaries or
securities convertible into or exchangeable for such shares or equity
interests or obligations of Parent or any of its Subsidiaries to grant, extend
or enter into any such option, warrant, call, subscription or other right,
convertible security, agreement, arrangement or commitment. There are no
outstanding contractual obligations of Parent or any of its Subsidiaries to
repurchase, redeem or otherwise acquire any shares of Parent Common Stock or the
capital stock of Parent or any subsidiary or affiliate of Parent or to provide
funds to make any investment (in the form of a loan, capital contribution or
otherwise) in any Subsidiary or any other entity.
(b) There are no voting trusts or other agreements or understandings
to which Parent or any of its Subsidiaries is a party with respect to the voting
of the capital stock of Parent or its Subsidiaries. None of Parent or its
Subsidiaries is required to redeem, repurchase or otherwise acquire shares of
capital stock of Parent, or any of its Subsidiaries, respectively, as a result
of the transactions contemplated by this Agreement.
Section 4.3 Corporate Authorization; Validity of Agreement; Necessary
Action. Each of Parent and Sub has full corporate power and authority to
execute and deliver this Agreement, the Stock Option Agreement and the
Xxxx/Chilmark Stockholder Agreement and, subject in the case of this Agreement
to obtaining any necessary approval of Parent's stockholders as contemplated by
Section 1.7(b) hereof with respect to the Merger, to consummate the
transactions contemplated hereby and thereby. The execution, delivery and
performance by Parent and Sub of this Agreement and the consummation by Parent
and Sub of the transactions contemplated hereby have been duly and validly
authorized by their respective Boards of Directors and by Sub's sole stockholder
and, except in the case of obtaining any necessary approval of Parent's
stockholders as contemplated by Section 1.7(b) hereof, no other corporate action
or proceedings on the part of Parent and Sub are necessary to authorize the
execution and delivery by Parent and Sub of this Agreement and the
40
consummation by Parent and Sub of the transactions contemplated hereby. This
Agreement has been duly executed and delivered by Parent and Sub, and, assuming
this Agreement constitutes valid and binding obligations of the Company,
constitutes valid and binding obligations of each of Parent and Sub, enforceable
against them in accordance with its terms, except that (i) such enforcement
may be subject to applicable bankruptcy, insolvency or other similar laws, now
or hereafter in effect, affecting creditors' rights generally, and (ii) the
remedy of specific performance and injunctive and other forms of equitable
relief may be subject to equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought. The shares of Parent
Common Stock issued pursuant to the Merger, if any, will be duly authorized,
validly issued, fully paid and nonassessable and not subject to preemptive
rights.
Section 4.4 Consents and Approvals; No Violations. Except for
filings, permits, authorizations, consents and approvals as may be required
under, and other applicable requirements of, the Exchange Act, the Securities
Act of 1933 (the "Securities Act"), the DGCL, the HSR Act, state blue sky laws
and any applicable state takeover laws and the approval by Parent's stockholders
of the issuance of Parent Common Stock in the Merger, neither the execution,
delivery or performance of this Agreement by Parent and Sub nor the consummation
by Parent and Sub of the transactions contemplated hereby nor compliance by
Parent and Sub with any of the provisions hereof will (i) conflict with or
result in any breach of any provision of the certificate of incorporation or
by-laws of Parent and Sub, (ii) require any filing with, or permit,
authorization, consent or approval of, any Governmental Entity (except where
the failure to obtain such permits, authorizations, consents or approvals or to
make such filings would not have a material adverse effect on Parent and its
Subsidiaries or would not, or would not be reasonably likely to, materially
impair the ability of Parent and Sub to consummate the Offer, the Merger or the
other transactions contemplated hereby or thereby), (iii) result in a
violation or breach of, or constitute (with or without due notice or lapse of
time or both) a default (or give rise to any right of termination, amendment,
cancellation or acceleration) under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, guarantee, other
41
evidence of indebtedness, lease, license, contract, agreement or other
instrument or obligation to which Parent or any of its Subsidiaries is a party
or by which any of them or any of their properties or assets may be bound or
(iv) violate any order, writ, injunction, decree, statute, rule or regulation
applicable to Parent, any of its Subsidiaries or any of their properties or
assets, except in the case of clauses (iii) and (iv) for violations, breaches or
defaults which would not have a material adverse effect on Parent and its
Subsidiaries or would not, or would not be reasonably likely to, materially
impair or the ability of Parent or Sub to consummate the Offer, the Merger or
the other transactions contemplated hereby.
Section 4.5 SEC Reports and Financial Statements. Parent has filed
with the SEC, and has heretofore made available to the Company, true and
complete copies of, all forms, reports, schedules, statements and other
documents required to be filed by it and its Subsidiaries since February 27,
1993 under the Exchange Act or the Securities Act (as such documents have been
amended since the time of their filing, collectively, the "Parent SEC
Documents"). As of their respective dates or, if amended, as of the date of the
last such amendment, the Parent SEC Documents, including, without limi-
tation, any financial statements or schedules included therein (a) did not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading and (b) complied in all material respects with the applicable
requirements of the Exchange Act and the Securities Act, as the case may be, and
the applicable rules and regulations of the SEC thereunder. Each of the
consolidated financial statements included in the Parent SEC Documents have
been prepared from, and are in accordance with, the books and records of
Parent and/or its consolidated Subsidiaries, comply in all material respects
with applicable accounting requirements and with the published rules and
regulations of the SEC with respect thereto, have been prepared in accordance
with GAAP applied on a consistent basis during the periods involved (except as
may be indicated in the notes thereto) and fairly present in all material
respects the consolidated financial position and the consolidated results of
operations and cash flows (and
42
changes in financial position, if any) of Parent and its consolidated
Subsidiaries as at the dates thereof or for the periods presented therein.
Section 4.6 Absence of Certain Changes. Except to the extent
disclosed in the Parent SEC Documents filed prior to the date of this
Agreement, from March 4, 1995 through the date of this Agreement, Parent and its
Subsidiaries have conducted their respective businesses in the ordinary course
of business consistent with past practice. From March 4, 1995 through the date
of this Agreement, there has not occurred (i) any events, changes, or effects
(including the incurrence of any liabilities of any nature, whether or not
accrued, contingent or otherwise) having or, which would be reasonably
likely to have, individually or in the aggregate, a material adverse effect on
Parent and its Subsidiaries; (ii) any declaration, setting aside or payment of
any dividend or other distribution (whether in cash, stock or property) with
respect to the equity interests of Parent or of any of its Subsidiaries other
than regular quarterly cash dividends or dividends paid by wholly owned
Subsidiaries; or (iii) any change by Parent or any of its Subsidiaries in
accounting principles or methods, except insofar as may be required by a change
in GAAP.
Section 4.7 No Undisclosed Liabilities. Except (a) to the extent
disclosed in the Parent SEC Documents filed prior to the date of this Agreement
and (b) for liabilities and obligations incurred in the ordinary course of
business consistent with past practice, during the period from March 4, 1995
through the date of this Agreement, neither Parent nor any of its Subsidiaries
have incurred any liabilities or obligations of any nature, whether or not
accrued, contingent or otherwise, that have, or would be reasonably likely to
have, a material adverse effect on Parent and its Subsidiaries or would be
required to be reflected or reserved against on a consolidated balance sheet of
Parent and its Subsidiaries (including the notes thereto) prepared in accordance
with GAAP as applied in preparing the March 4, 1995 consolidated balance sheet
of Parent and its Subsidiaries.
Section 4.8 Information in Proxy Statement/Prospectus. The
Registration Statement (or any amendment thereof or supplement thereto) will, at
the
43
date it is filed with the SEC and as of the date it becomes effective and the
Proxy Statement/Prospectus (or any amendment thereof or supplement thereto) at
the date mailed to Parent's stockholders and at the time of the Special
Meetings, will not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they are
made, not misleading, provided, however, that no representation is made by
Parent or Sub with respect to statements made therein based on information
supplied by the Company for inclusion in the Registration Statement. None of
the information supplied by Parent or Sub for inclusion or incorporation by
reference in the Proxy Statement/Prospectus will, at the date mailed to
stockholders and at the time of the Special Meetings, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading. Subject to the
proviso set forth in the second preceding sentence, the Registration Statement
will comply in all material respects with the provisions of the Securities Act
and Exchange Act, respectively, and the rules and regulations thereunder.
Section 4.9 Litigation. Except to the extent disclosed in the Parent
SEC Documents filed prior to the date of this Agreement, as of the date of this
Agreement, there is no suit, claim, action, proceeding or investigation
pending or, to the best knowledge of Parent, threatened against or affecting,
Parent or any of its Subsidiaries, which, individually or in the aggregate, is
reasonably likely to have a material adverse effect on Parent and its
Subsidiaries or would, or would be reasonably likely to, materially impair the
ability of Parent or Sub to consummate the Offer, the Merger or the other
transactions contemplated hereby.
Section 4.10 Taxes. (a) As of the date of this Agreement, except as
set forth in Section 4.10 of the Parent Disclosure Schedule:
(i) Parent and its Subsidiaries have (I) duly filed (or there have
been filed on their behalf) with the appropriate governmental authorities all
Tax Returns required to be filed by them and such Tax Returns
44
are true, correct and complete in all material respects, and (II) duly paid in
full or made provision in accordance with GAAP (or there has been paid or
provision has been made on their behalf) for the payment of all Taxes (as
hereinafter defined) for all periods ending through the date hereof;
(ii) Parent and its Subsidiaries have complied in all material
respects with all applicable laws, rules and regulations relating to the
payment and withholding of Taxes and have, within the time and the manner
prescribed by law, withheld and paid over to the proper governmental authorities
all amounts required to be so withheld and paid over under applicable laws;
(iii) no federal, state, local or foreign audits or other
administrative proceedings or court proceedings are presently pending with
regard to any Taxes or Tax Returns of Parent or its Subsidiaries and neither
Parent nor its Subsidiaries has received a written notice of any pending audits
or proceedings; and
(iv) neither the Service nor any other taxing authority (whether
domestic or foreign) has asserted, or to the best knowledge of Parent, is
threatening to assert, against Parent or any of its Subsidiaries any
deficiency or claim for Taxes.
(b) As of the date of this Agreement, except as set forth in Section
4.10 of the Parent Disclosure Schedule:
(i) there are no material liens for Taxes upon any property or assets
of Parent or any Subsidiary thereof, except for liens for Taxes not yet due
and payable and liens for Taxes that are being contested in good faith by
appropriate proceedings;
(ii) neither Parent nor any of its Subsidiaries has agreed to or is
required to make any adjustment under Section 481(a) of the Code;
(iii) the federal income Tax Returns of Parent and its Subsidiaries
have been examined by the Service (or the applicable statutes of limitation for
the assessment of federal income Taxes for such periods have expired) for all
periods through and including March 2,
45
1991 for Parent and October 31, 1987 for Perry Drug Stores, Inc.;
(iv) neither Parent nor any of its Subsidiaries is a party to any
material agreement providing for the allocation or sharing of Taxes; and
(v) neither Parent nor any of its Subsidiaries has, with regard to
any assets or property held or acquired by any of them, filed a consent to the
application of Section 341(f) of the Code, or agreed to have Section 341(f)(2)
of the Code apply to any disposition of a subsection (f) asset (as such term
is defined in Section 341(f)(4) of the Code) owned by Parent or any of its
Subsidiaries.
Section 4.11 Compliance with Law. Parent and its Subsidiaries have
complied in all material respects with all laws, statutes, regulations, rules,
ordinances, and judgments, decrees, orders, writs and injunctions, of any court
or governmental entity relating to any of the property owned, leased or used by
them, or applicable to their business, including, but not limited to, equal
employment opportunity, discrimination, occupational safety and health,
environmental, interstate commerce, antitrust laws, ERISA and laws relating to
Taxes.
Section 4.12 No Default. The business of Parent and each of its
Subsidiaries is not being conducted in default or violation of any term,
condition or provision of (a) its respective certificate of incorporation or
by-laws or similar organizational documents, (b) any lease, license, contract,
agreement or other instrument or obligation to which Parent or any of its
Subsidiaries is a party or by which any of them or any of their properties or
assets may be bound and which either has a term of more than one year or
involves the payment or receipt of money in excess of $300,000 (a "Parent Agree-
ment") or (c) any federal, state, local or foreign law, statute, regulation,
rule, ordinance, judgment, decree, order, writ, injunction, concession, grant,
franchise, permit or license or other governmental authorization or approval
applicable to Parent or any of its Subsidiaries, excluding from the foregoing
clauses (b) and (c), defaults or violations that would not have a material
adverse effect on Parent and its Subsidiaries or would not, or would not be
reasonably likely to, materially
46
impair the consummation of the Offer or the ability of Parent or Sub to
consummate the Merger or the other transactions contemplated hereby. Except as
set forth on Schedule 4.12 of the Parent Disclosure Schedule, no investigation
or review by any Governmental Entity with respect to Parent or any of its
Subsidiaries is pending or, to the best knowledge of Parent or Sub, threatened,
nor to the best knowledge of Parent or Sub, has any Governmental Entity
indicated an intention to conduct the same.
Section 4.13 Financing. Either Parent or Sub has, or will have prior
to the consummation of the Offer, sufficient funds available to purchase the
Shares pursuant to the Offer.
Section 4.14 Opinion of Financial Advisor. Parent has received an
opinion from Xxxxxxxxx, Xxxxxx & Xxxxxxxx Securities Corporation ("DLJ"), dated
as of a date which is on or prior to the date of this Agreement to the effect
that, as of such date, the consideration to be paid by Parent in the Offer and
the Merger, taken together, is fair to Parent from a financial point of view
(the "Parent Fairness Opinion"). Parent has delivered to the Company a copy
of the Parent Fairness Opinion, together with DLJ's authorization to include
the Parent Fairness Opinion in the Offer Documents and the Proxy
Statement/Prospectus.
ARTICLE V
COVENANTS
Section 5.1 Interim Operations of the Company. The Company covenants
and agrees that, (i) except as expressly provided in this Agreement, and (ii)
during the period prior to the consummation of Offer, except with the prior
written consent of Parent, and (iii) during the period following the
consummation of the Offer and prior to the Effective Time, except with the
authorization of the Board of Directors of the Company, including the
affirmative vote of a majority of the Continuing Directors, and (iv) following
consummation of the Offer and prior to the Effective Time, except for
prepayments by Parent of indebtedness of the Company and the advancement of
funds by Parent to the Company on the terms and condi-
47
tions, and at the interest rate, and for the purposes for which borrowing may be
made, under the Company's existing credit facility:
(a) the business of the Company and its Subsidiaries shall be
conducted only in the ordinary course of business consistent with past practice
and, to the extent consistent therewith, each of the Company and its
Subsidiaries shall use its best efforts to preserve its business organization
intact and maintain its existing relations with customers, suppliers,
employees, creditors and business partners;
(b) the Company will not, directly or indirectly, split, combine or
reclassify the outstanding Company Common Stock, or any outstanding capital
stock of any of the Subsidiaries of the Company;
(c) neither the Company nor any of its Subsidiaries shall: (i) amend
its certificate of incorporation or by-laws or similar organizational
documents; (ii) declare, set aside or pay any dividend or other distribution
payable in cash, stock or property with respect to its capital stock other
than dividends paid by the Company's Subsidiaries to the Company or its Subsid-
iaries; (iii) issue, sell, transfer, pledge, dispose of or encumber any
additional shares of, or securities convertible into or exchangeable for, or
options, warrants, calls, commitments or rights of any kind to acquire, any
shares of capital stock of any class of the Company or its Subsidiaries, other
than issuances pursuant to exercise of stock-based awards or options out-
standing on the date hereof as disclosed in Section 3.2 or in Section 5.1(c) of
the Company Disclosure Schedule; (iv) transfer, lease, license, sell, mortgage,
pledge, dispose of, or encumber any material assets other than (a) in the
ordinary course of business consistent with past practice or (b) pursuant to
existing agreements disclosed in Section 5.1(c) of the Company Disclosure
Schedule; or (v) redeem, purchase or otherwise acquire directly or
indirectly any of its capital stock;
(d) except as disclosed in Section 5.1(d) of the Company Disclosure
Schedule, neither the Company nor any of its Subsidiaries shall: (i) except as
otherwise provided in this Agreement and except for normal, regularly
scheduled increases for non-officer employees
48
consistent with past practice or pursuant to the terms of existing collective
bargaining agreements, grant any increase in the compensation payable or to
become payable by the Company or any of its Subsidiaries to any officer or
employee (including through any new award made under, or the exercise of any
discretion under, any Benefit Plan (ii) adopt any new, or amend or otherwise
increase, or accelerate the payment or vesting of the amounts payable or to
become payable under any existing, bonus, incentive compensation, deferred
compensation, severance, profit sharing, stock option, stock purchase,
insurance, pension, retirement or other employee benefit plan agreement or
arrangement; (iii) enter into any, or amend any existing, employment or
severance agreement with or, grant any severance or termination pay to any
officer, director, employee or consultant of the Company or any of its
Subsidiaries; or (iv) make any additional contributions to any grantor trust
created by the Company to provide funding for non-tax-qualified employee
benefits or compensation; or (v) provide any severance program to any
Subsidiary which does not have a severance program as of the date of this
Agreement;
(e) neither the Company nor any of its Subsidiaries shall modify,
amend or terminate any of the Company Agreements or waive, release or assign any
material rights or claims, except in the ordinary course of business
consistent with past practice;
(f) neither the Company nor any of its Subsidiaries shall permit any
material insurance policy naming it as a beneficiary or a loss payable payee to
be cancelled or terminated without notice to Parent, except in the ordinary
course of business consistent with past practice;
(g) except as set forth in Section 5.1(g) of the Company Disclosure
Schedule, neither the Company nor any of its Subsidiaries shall: (i) incur or
assume any debt except for borrowings under existing credit facilities in the
ordinary course consistent with past practice; (ii) assume, guarantee, endorse
or otherwise become liable or responsible (whether directly, contingently or
otherwise) for the obligations of any other person, except in the ordinary
course of business consistent with past practice; (iii) make any loans,
advances or capital contributions to, or investments in, any other
49
person (other than to wholly owned Subsidiaries of the Company or customary
loans or advances to employees in accordance with past practice); or (iv) enter
into any material commitment (including, but not limited to, any leases, capital
expenditure or purchase of assets) other than purchases of inventory in the
ordinary course of business consistent with past practice;
(h) neither the Company nor any of its Subsidiaries shall change any
of the accounting principles used by it unless required by GAAP;
(i) neither the Company nor any of its Subsidiaries shall pay,
discharge or satisfy any claims, liabilities or obligations (absolute, accrued,
asserted or unasserted, contingent or otherwise), other than the payment,
discharge or satisfaction of any such claims, liabilities or obligations, (x)
reflected or reserved against in the consolidated financial statements (or the
notes thereto) of the Company and its consolidated Subsidiaries, (y) incurred
in the ordinary course of business consistent with past practice or (z) which
are legally required to be paid, discharged or satisfied;
(j) neither the Company nor any of its Subsidiaries will adopt a plan
of complete or partial liquidation, dissolution, merger, consolidation, restruc-
turing, recapitalization or other material reorganization of the Company or any
of its Subsidiaries or any agreement relating to a Takeover Proposal (as
defined in Section 5.6) (other than the Merger);
(k) neither the Company nor any of its Subsidiaries will take, or
agree to commit to take, any action that would make any representation or
warranty of the Company contained herein inaccurate in any respect at, or as of
any time prior to, the Effective Time;
(l) neither the Company nor any of its Subsidiaries will engage in
any transaction with, or enter into any agreement, arrangement, or understanding
with, directly or indirectly, any of the Company's affiliates, including,
without limitation, any transactions, agreements, arrangements or understandings
with any affiliate or other Person covered under Item 404 of Regulation S-K
under the Securities Act that would be required to be disclosed under such Item
404, other than
50
pursuant to such agreements, arrangements, or understandings existing on the
date of this Agreement (which are set forth on Section 5.1(l) of the Company
Disclosure Schedule);
(m) close, shut down, or otherwise eliminate any of the Company's
stores other than in the ordinary course of business consistent with past
practice;
(n) change the name of or signage at any of the Company's stores;
(o) close, shut down, or otherwise eliminate any of the Company's
distribution centers;
(p) move the location, close, shut down or otherwise eliminate the
Company's headquarters, or effect a general staff reduction at such
headquarters;
(q) change or modify in any material respect the Company's existing
advertising program and policies;
(r) except as set forth in Section 5.1(r) of the Company Disclosure
Schedule, enter into any new lease (other than renewals of existing leases after
consultation with Parent) or purchase or acquire or enter into any agreement to
purchase or acquire any real estate;
(s) neither the Company nor any of its Subsidiaries will incur any
liabilities or obligations of any nature, whether or not accrued, contingent or
otherwise, that have, or would be reasonably likely to have, a material
adverse effect on the Company and its Subsidiaries; and
(t) neither the Company nor any of its Subsidiaries will enter into
an agreement, contract, commitment or arrangement to do any of the foregoing, or
to authorize, recommend, propose or announce an intention to do any of the
foregoing.
Section 5.2 Treatment of Certain Indebtedness. The Company will
cooperate with Parent, if Parent shall so request, to effect a defeasance of,
and/or a repurchase by means of a debt tender offer (together with a
51
solicitation of consents to eliminate the restrictive covenants) of, the 9 1/8%
Senior Notes due 2000 issued by the Company and the 10 1/8% Senior Notes due
June 1, 2002 issued by Hook SupeRx, Inc., provided that any funds and all
related out-of-pocket transaction expenses necessary to effect any such
defeasance or repurchase shall be provided and borne by Parent, without any
right of reimbursement. The Company and Parent will cooperate to effect such
defeasance and/or repurchase in a manner which takes into account all relevant
tax, accounting, corporate, structural, contractual and similar issues.
Section 5.3 Access to Information. (a) To the extent permitted by
applicable law, the Company shall (and shall cause each of its Subsidiaries to)
afford to the officers, employees, accountants, counsel, financing sources and
other representatives of Parent, access, during normal business hours, during
the period prior to the Effective Time, to all of its and its Subsidiaries'
properties, books, contracts, commitments and records (including any Tax Returns
or other Tax related information pertaining to the Company and its
Subsidiaries) and, during such period, the Company shall (and shall cause each
of its Subsidiaries to) furnish promptly to Parent (i) a copy of each report,
schedule, registration statement and other document filed or received by it
during such period pursuant to the requirements of federal securities laws and
(ii) all other information concerning its business, properties and personnel as
Parent may reasonably request (including any Tax Returns or other Tax related
information pertaining to the Company and its Subsidiaries). Parent will hold
any such information which is nonpublic in confidence in accordance with the
provisions of the existing confidentiality agreement between the Company and
Parent, dated August 17, 1995 (the "Confidentiality Agreement").
(b) To the extent permitted by applicable law, Parent shall (and
shall cause each of its Subsidiaries to) afford to the officers, employees,
accountants, counsel, financing sources and other representatives of the
Company, access, during normal business hours, during the period prior to the
Effective Time, to all of its and its Subsidiaries' properties, books,
contracts, commitments and records (including any Tax Returns or other Tax
related information pertaining to Parent and its Subsidiaries) and, during
such period, Parent shall (and shall
52
cause each of its Subsidiaries to) furnish promptly to the Company (a) a copy of
each report, schedule, registration statement and other document filed or
received by it during such period pursuant to the requirements of the federal
securities laws and (b) all other information as the Company may reasonably
request (including any Tax Returns or other Tax related information pertaining
to Parent and its Subsidiaries). The Company will hold any such information
which is nonpublic in confidence in accordance with the provisions of the
Confidentiality Agreement.
Section 5.4 Consents and Approvals. (a) The Company and Parent shall
take all reasonable actions necessary to file as soon as practicable
notifications under the HSR Act and to respond as promptly as practicable to
any inquiries received from the Federal Trade Commission and the Anti-trust
Division of the Department of Justice for additional information or
documentation and to respond as promptly as practicable to all inquiries and
requests received from any State Attorney General or other Governmental Entity
in connection with antitrust matters.
(b) Parent and the Company shall, and each shall cause each of its
Subsidiaries to, subject to the preceding subsection, (i) cooperate with one
another to prepare, as soon as practicable, all filings and other presentations
in connection with seeking any regulatory approval from a Governmental Entity,
exemption or other authorization necessary to consummate the transactions
contemplated by this Agreement, (ii) prosecute such filings and other
presentations with diligence, (iii) diligently oppose any objections to,
appeals from or petitions to reconsider or reopen any such approval by per-
sons not party to this Agreement, and (iv) take all such further action as in
Parent's and the Company's judgment reasonably may facilitate obtaining any
final order or orders approving such transactions consistent with this
Agreement.
(c) Each of the Company, Parent and Sub will take all reasonable
actions necessary to comply promptly with all legal requirements (which actions
shall include, without limitation, furnishing all information in connection with
approvals of or filings with any Governmental Entity, including, without
limitation, any
53
schedule, or reports required to be filed with the SEC), and will promptly
cooperate with and furnish information to each other in connection with any such
requirements imposed upon any of them or any of their Subsidiaries in connection
with this Agreement and the transactions contemplated hereby. Each of the
Company, Parent and Sub will, and will cause its Subsidiaries to, take all rea-
sonable actions necessary to obtain any consent, authorization, order or
approval of, or any exemption by, any Governmental Entity or other public or
private third party, required to be obtained or made by Parent, Sub, the Company
or any of their Subsidiaries in connection with the Offer, the Merger or the
taking of any action contemplated thereby or by this Agreement or the Stock-
holders Agreements.
Section 5.5 Employee Benefits. (a) Parent agrees to cause Surviving
Corporation and its Subsidiaries to provide to certain employees of the
Company payments and benefits, which are set forth in this Section 5.5(a) and
which shall be effected, by means of individual agreements, negotiated in good
faith by the parties hereto, reflecting the economic terms set forth in this
Section 5.5.
(i) EVA Plan Bonus
As soon as practicable following the earlier of (A) the Effective Time
and (B) the end of the Company's 1996 fiscal year, the Company shall pay,
pursuant to the terms of the Company's Economic Value Added Incentive Plan (the
"EVA Plan") as herein modified, bonuses for fiscal year 1996, calculated based
on the Company's financial results as of February 10, 1996, and annualized to
equal a bonus for a 12 month period.
(ii) Severance Pay
With respect to the executives of the Company listed on Schedule
5.5(a)(ii) attached hereto ("Covered Executives"), effective as soon as
practicable following the Effective Time (or if later, the date of termination
of employment of the Covered Executive), the Company shall pay to each Covered
Executive severance payments (the "Severance Payments"), on a bi-weekly basis or
at such other intervals as are consistent with Parent's executive payroll
practices, based on one of the two
54
formulae set forth below, pursuant to elections made by each Covered Executive
prior to the Effective Time:
(A) Severance Payments equal to, on an annualized basis, "Base Pay"
(as defined below), continuing for a period of three years with respect to
Covered Executives who are listed as Group A Executives ("Group A Executives")
on Schedule 5.5(a)(ii)(A) of the Company Disclosure Schedule and for a period
of 18 months with respect to Covered Executives listed as Group B Executives
("Group B Executives") on Schedule 5.5(a)(ii)(A) of the Company Disclosure
Schedule. For purposes of this Section 5.5(a), Base Pay shall mean the highest
base pay paid to the Covered Executive during any one of the 1994, 1995 or 1996
fiscal years, provided that the base pay for the 1996 fiscal year shall be
calculated on an annualized basis; or
(B) Severance Payments equal to, on an annualized basis, "Base Plus
Bonus Pay" (as defined below), continuing for a period of two years with respect
to Group A Executives, and for a period of one year with respect to Group B
Executives. For purposes of this Section 5.5(a), Base Plus Bonus Pay shall mean
Base Pay plus the amount that would have been paid to the executive under the
EVA Plan for fiscal year 1995 as the targeted bonus (the "1995 Target Bonus").
In lieu of the Severance Payments described in clauses (A) and (B)
above, Messrs. Xxxxx and Xxxxxxxx shall receive Severance Payments, continuing
for three years, equal to, on an annualized basis, Base Plus Bonus Pay.
The period during which a Covered Executive continues to receive
Severance Payments shall be referred to in this Section 5.5(a) as the "Severance
Period" for such Covered Executive.
During the Severance Period, each Covered Executive shall continue to
receive, at the Company's expense, continuation of benefits described in Section
6(a)(ii) of the Covered Executive's employment agreement with the Company on
terms at least as favorable to the Covered Executive as is currently in effect,
which bene-
55
fits may be provided by covering such Covered Executive under benefit plans and
programs maintained by Parent provided, further however, that to the extent any
such Covered Executive receives comparable benefits from, and at the expense of,
a subsequent employer, such benefits from the Company shall cease.
Notwithstanding anything in this Agreement to the contrary, the
Severance Payments described in clauses (A) or (B) above shall be paid to a
Covered Executive only if such Covered Executive is actively employed by the
Company immediately prior to the Effective Time.
In the event that a Covered Executive that continues employment with
the Company following the Effective Time is terminated prior to the expiration
of the Severance Period that would have applied had such Covered Executive been
terminated effective as of the Effective Time, then such Covered Executive shall
be entitled to receive the Severance Payments determined pursuant to this
Section 5.5(a).
Each employee, other than any Covered Executives, of the Company,
who is covered by the Company's severance pay plan as in effect on November 1,
1995 (each, a "Severance-Eligible Employee") and who is employed by the
Company immediately prior to the Effective Time and terminated for other than
"Cause," as defined below, within 12 months following the Effective Time, shall
be entitled to receive bi-weekly severance payments, consistent with Parent's
payroll practices, for a six-month period commencing on such Severance-Eligible
Employee's date of termination of employment, equal to, on an annualized basis,
such Severance-Eligible Employee's Base Pay; provided, however, that such
payments shall be reduced (but not below zero), by the amount of compensation
such Severance-Eligible Employee receives from a subsequent employer to the
extent that such SeveranceEligible Employee is employed during such six-month
period.
For purposes of this Agreement, "Cause" shall mean the conviction of
an employee or executive (as the case may be) for the commission of a felony,
including the entry of a guilty or nolo contendere plea, any willful, grossly
negligent or fraudulent action or inaction by an employee or executive, as the
case may be, or the
56
employee's or executive's willful and continued failure to substantially perform
an employee's or executive's assigned duties.
(iii) SERP Benefits
Each Company employee who is (A) covered by the Company's Supplemental
Executive Retirement Plan ("SERP") and (B) actively employed by the Company, in
either case, immediately prior to the Effective Time (each, a "SERP Executive")
shall be eligible to receive benefits under the SERP based on the terms of the
SERP, as modified herein. For each SERP Executive (i) the amount of service
taken into account for purposes of calculating benefits and vesting under the
SERP shall be equal to the SERP Executive's service with the Company prior to
the Effective Time plus the Covered Executive's Severance Period, if any, and
(ii) compensation for each SERP Executive for purposes of the SERP shall include
one-half of the 1995 Target Bonus for such SERP Executive.
(iv) Gross-Up; Cap
With respect to the eight Executives listed on Section 5.5(a)(iv) of
the Company Disclosure Schedule, the Company shall provide such executives with
a cash gross-up payment to make such executives whole for the excise taxes
imposed on all benefits and other amounts paid or payable to such executive on
account of the transactions contemplated by this Agreement as a result of the
application of sections 280G and 4999 of the Code. With respect to all other
employees of the Company who are entitled to benefits and other amounts paid or
payable to such executive on account of the transactions contemplated by this
Agreement as a result of the application of sections 280G and 4999 of the
Code, the Company shall not be obligated to pay or provide to any such employee
any payments or benefits to the extent that such payments or benefits would
constitute a "parachute payment" within the meaning of section 280G(b)(2)(A)
of the Code.
(v) ESPP
The Company shall amend the Company's Employee Stock Purchase Plan to
provide that the option period
57
that is in effect as of the date hereof shall cease as soon as practicable
following the date hereof.
(vi) Outplacement
The Company shall provide outplacement services from a recognized
outplacement provider selected by Parent to all employees of the Company as of
the Effective Time who were based in Twinsburg, Ohio as of the Effective Time,
and are terminated without Cause within one year of the Effective Time.
(b) Parent agrees to cause Surviving Corporation and its
Subsidiaries to provide to all active employees of the Company who continue to
be employed by the Company as of the Effective Time ("Continuing Employees")
employee benefits comparable to those benefits provided to similarly situated
employees of Parent (which benefits may be provided by covering Company
employees under benefit plans maintained by Parent for employees of Parent who
perform similar duties). In addition, with respect to medical benefits provided
to Continuing Employees as of the Effective Time, Parent agrees to cause
Surviving Corporation and its Subsidiaries to waive waiting periods and
pre-existing condition requirements under such plans, and to give Continuing
Employees credit for any copayments and deductibles actually paid by such
employees under the Company's medical plans during the calendar year in which
the Closing occurs. In addition, service with the Company shall be recognized
for purposes of eligibility under Parent welfare plans as well as for purposes
of Parent's programs or policies for vacation pay and sick pay.
Section 5.6 No Solicitation. (a) The Company (and its Subsidiaries,
and affiliates over which it exercises control) will not, and the Company (and
its Subsidiaries, and affiliates over which it exercises control) will use
their best efforts to ensure that their respective officers, directors,
employees, investment bankers, attorneys, accountants and other agents do not,
directly or indirectly: (i) initiate, solicit or encourage, or take any action
to facilitate the making of, any offer or proposal which constitutes or is
reasonably likely to lead to any Takeover Proposal (as defined below) of the
Company or any Subsidiary or an inquiry with respect thereto, or, (ii) in the
event of an unsolicited Takeover
58
Proposal for the Company or any Subsidiary or affiliate of the Company, engage
in negotiations or discussions with, or provide any information or data to, any
corporation, partnership, person or other entity or group (other than Parent,
any of its affiliates or representatives) (each, a "Person") relating to any
Takeover Proposal, except in the case of clause (ii) above to the extent that
(x) the Takeover Proposal is a bona fide written proposal submitted to the
Company's Board of Directors and (y) the Company's Board of Directors deter-
mines, after having received the oral or written opinion of outside legal
counsel to the Company, that the failure to engage in such negotiations or
discussions or provide such information would result in a breach of the Board of
Directors' fiduciary duties under applicable law. The Company shall notify
Parent and Sub orally and in writing of any such offers, proposals, inquiries or
Takeover Proposals (including, without limitation, the material terms and
conditions thereof and the identity of the Person making it), within 24 hours of
the receipt thereof, and shall thereafter inform Parent on a reasonable basis
of the status and content of any discussions or negotiations with such a third
party, including any material changes to the terms and conditions thereof. The
Company shall, and shall cause its Subsidiaries and affiliates over which it
exercises control, and will use best efforts to ensure their respective
officers, directors, employees, investment bankers, attorneys, accountants
and other agents to, immediately cease and cause to be terminated all
discussions and negotiations that have taken place prior to the date hereof, if
any, with any parties conducted heretofore with respect to any Takeover Proposal
relating to the Company. Nothing contained in this Section 5.6 shall prohibit
the Company or its Board of Directors from taking and disclosing to its
stockholders a position with respect to a tender offer by a third party
pursuant to Rules 14d-9 and 14e-2(a) promulgated under the Exchange Act or
making such disclosure as may be required by applicable law.
(b) As used in this Agreement, "Takeover Proposal" when used in
connection with any Person shall mean any tender or exchange offer involving the
capital stock of such Person, any proposal for a merger, consolidation or
other business combination involving such Person or any Subsidiary of such
Person, any proposal or offer to acquire in any manner a substantial equity
59
interest in, or a substantial portion of the business or assets of, such Person
or any Subsidiary of such Person, any proposal or offer with respect to any
recapitalization or restructuring with respect to such Person or any
Subsidiary of such Person or any proposal or offer with respect to any other
transaction similar to any of the foregoing with respect to such Person or any
Subsidiary of such Person other than pursuant to the transactions to be effected
pursuant to this Agreement.
Section 5.7 Additional Agreements. Subject to the terms and
conditions herein provided (including, but not limited to, Section 5.4) each of
the parties hereto agrees to use its reasonable efforts to take, or cause to be
taken, all action and to do, or cause to be done, all things necessary, proper
or advisable, whether under applicable laws and regulations or otherwise, or to
remove any injunctions or other impediments or delays, legal or otherwise, to
consummate and make effective the Merger and the other transactions contemplated
by this Agreement. In case at any time after the Effective Time any further
action is necessary or desirable to carry out the purposes of this Agreement,
the proper officers and directors of the Company and Parent shall use their
reasonable efforts to take, or cause to be taken, all such necessary actions.
Section 5.8 Publicity. So long as this Agreement is in effect,
neither the Company nor Parent nor affiliates which either of them control shall
issue or cause the publication of any press release or other public statement or
announcement with respect to this Agreement, the Stock Option Agreement or the
Xxxx/Chilmark Stockholder Agreement or the transactions contemplated hereby
or thereby without the prior consultation of the other party, except as may be
required by law or by obligations pursuant to any listing agreement with a
national securities exchange, provided that each party will use its best efforts
to consult with the other party prior to any such issuance.
Section 5.9 Notification of Certain Matters. The Company shall give
prompt notice to Parent, and Parent shall give prompt notice to the Company, of
(a) the occurrence, or non-occurrence of any event the occurrence or
non-occurrence of which would cause any representation or warranty contained
in this Agreement to be
60
untrue or inaccurate in any material respect at or prior to the Effective Time
and (b) any material failure of the Company or Parent, as the case may be, to
comply with or satisfy any covenant, condition or agreement to be complied
with or satisfied by it hereunder; provided, however, that the delivery of any
notice pursuant to this Section 5.9 shall not limit or otherwise affect the
remedies available hereunder to the party receiving such notice.
Section 5.10 Directors' and Officers' Insurance and Indemnification.
Parent agrees that at all times after the Effective Time, it shall cause the
Surviving Corporation and its Subsidiaries to indemnify, each person who is
now, or has been at any time prior to the date hereof, an employee, agent,
director or officer of the Company or of any of the Company's Subsidiaries,
successors and assigns (individually an "Indemnified Party" and collectively the
"Indemnified Parties"), to the fullest extent permitted by law, with respect to
any claim, liability, loss, damage, judgment, fine, penalty, amount paid in
settlement or compromise, cost or expense, including reasonable fees and
expenses of legal counsel, (whenever asserted or claimed) ("Indemnified
Liability") based in whole or in part on, or arising in whole or in part out of,
any matter existing or occurring at or prior to the Effective Time whether
commenced, asserted or claimed before or after the Effective Time, including
liability arising under the Securities Act, the Exchange Act or state law.
Parent shall, and shall cause the Surviving Corporation to, maintain in effect
for not less than four years after the Effective Time the current policies of
directors' and officers' liability insurance maintained by the Company and its
Subsidiaries on the date hereof (provided that Parent may substitute therefor
policies having at least the same coverage and containing terms and conditions
which are no less advantageous to the persons currently covered by such policies
as insured) with respect to matters existing or occurring at or prior to the
Effective Time; provided, however, that if the aggregate annual premiums for
such insurance during such period shall exceed 200% of the per annum rate of the
aggregate premium currently paid by the Company and its Subsidiaries for such
insurance on the date of this Agreement, then Parent shall cause the Surviving
Corporation to, and the Surviving Corporation shall, provide the maximum
coverage that shall then be
61
available at an annual premium equal to 200% of such rate. Parent agrees to pay
all expenses (including fees and expenses of counsel) that may be incurred by
any Indemnified Party in successfully enforcing the indemnity or other
obligations under this Section 5.10. The rights under this Section 5.10 are in
addition to rights that an Indemnified Party may have under the Certificate of
Incorporation, By-laws, other similar organizational documents of the Company or
any of its Subsidiaries or the DGCL. The rights under this Section 5.10 shall
survive consummation of the Merger and are expressly intended to benefit each
Indemnified Party. Parent agrees to cause Surviving Corporation and any of its
Subsidiaries (or their successors) to keep in effect the provisions of its
Certificate of Incorporation or By-laws or similar organizational documents
providing for indemnification to the fullest extent provided by law.
Section 5.11 Rule 145 Affiliates. At least 40 days prior to the
Closing Date, the Company shall deliver to Parent a letter identifying, to the
best of the Company's knowledge, all persons who are, at the time of the
Company Special Meeting, deemed to be "affiliates" of the Company for purposes
of Rule 145 under the Securities Act ("Company Affiliates"). The Company shall
use its best efforts to cause each Person who is identified as a Company
Affiliate to deliver to Parent at least 30 days prior to the Closing Date an
agreement substantially in the form of Exhibit C to this Agreement.
Section 5.12 Cooperation. Parent and the Company shall together, or
pursuant to an allocation of responsibility to be agreed upon between them,
coordinate and cooperate (a) with respect to the timing of the Special Meetings,
(b) in determining whether any action by or in respect of, or filing with, any
Governmental Entity is required, or any actions, consents approvals or waivers
are required to be obtained from parties to any material contracts, in
connection with the consummation of the transactions contemplated by this
Agreement, (c) in seeking any such actions, consents, approvals or waivers or
making any such filings, furnishing information required in connection
therewith and timely seeking to obtain any such actions, consents approvals or
waivers. As soon as possible following the commencement of the Offer, the
Company shall cooperate with Parent in the preparation and filing of the Proxy
Statement/Prospectus
62
with the Commission, including, but not limited to providing legal, financial,
and accounting information concerning the Company and assisting in the
preparation of all financial and pro forma financial information required to
be included in such Proxy Statement/Prospectus. Subject to the terms and
conditions of this Agreement, Parent and the Company will each use its best
efforts to have the Registration Statement declared effective under the
Securities Act as promptly as practicable after the Registration Statement is
filed, and Parent and the Company shall, subject to applicable law, confer on a
regular and frequent basis with one or more representatives of one another to
report operational matters of significance to the Merger and the general status
of ongoing operations insofar as relevant to the Merger, provided that the
parties will not confer on any matter to the extent inconsistent with law.
Section 5.13. Proxy Statement/Prospectus. As soon as practicable
following the consummation of the Offer, Parent and the Company shall prepare
and file with the SEC the Proxy Statement/Prospectus and each shall use its best
efforts to have the Proxy Statement/Prospectus cleared by the SEC as promptly as
practicable. As soon as practicable following such clearance Parent shall
prepare and file with the SEC the Registration Statement, of which the Proxy
Statement/Prospectus will form a part, and shall use its best efforts to have
the Registration Statement declared effective by the SEC as promptly as
practicable thereafter. Parent and the Company shall cooperate with each other
in the preparation of the Proxy Statement/Prospectus, and each will provide to
the other promptly copies of all correspondence between it or any of its
representatives and the SEC. Each of the Company and Parent shall furnish all
information concerning it required to be included in the Registration Statement
and the Proxy Statement/Prospectus, and as promptly as practicable after the
effectiveness of the Registration Statement, the Proxy Statement/Prospectus will
be mailed to the stockholders of the Company and Parent. No amendment or
supplement to the Registration Statement or the Proxy Statement/Prospectus will
be made without the approval of each of the Company and Parent, which approval
will not be unreasonably withheld or delayed. Each of the Company and Parent
will advise the other promptly after it receives notice thereof, of the time
when the Registration Statement has become effective or any amend-
63
ment thereto or any supplement or amendment to the Proxy Statement/Prospectus
has been filed, or the issuance of any stop order, or the suspension of the
qualification of the Parent Common Stock to be issued in the Merger for offering
or sale in any jurisdiction, or of any request by the SEC or the NYSE for
amendment of the Registration Statement or the Proxy Statement/Prospectus.
Section 5.14 New York State Real Property Transfer and Gains Taxes.
Sub or the Surviving Corporation shall pay or cause to be paid any New York
State and New York City Real Property Transfer or Gains Taxes incurred in
connection with the Offer and the Merger.
Section 5.15 Confidentiality/Standstill Agreement. The parties
hereto agree that the Confidentiality Agreement shall be hereby amended to
provide that any provision therein which in any manner limits, restricts or
prohibits the voting or acquisition of Shares by Parent or any of its affiliates
or the representation of Parent's designees on the Company's Board of Directors
or which in any manner would be inconsistent with this Agreement or the
Xxxx/Chilmark Stockholder Agreement or the Stock Option Agreement or the
transactions contemplated hereby and thereby shall terminate as of the date
hereof. The Company agrees not to take any action that would impede, bar,
restrict or otherwise interfere in any manner with Parent's rights under the
Xxxx/Chilmark Stockholder Agreement or the Stock Option Agreement, including,
without limitation, Parent's right to exercise the option granted to Parent
pursuant to the Stock Option Agreement. The provisions of this Section 5.15
shall survive any termination of this Agreement.
Section 5.16 Stock Exchange Listing. The Parent shall use its best
efforts to list prior to the Effective Time on the New York Stock Exchange, Inc.
("NYSE") and the Pacific Stock Exchange, subject to official notice of issuance,
the shares of Parent Common Stock to be issued in the Merger.
64
ARTICLE VI
CONDITIONS
Section 6.1 Conditions to the Obligations of Each Party. The
obligations of the Company, on the one hand, and Parent and Sub, on the other
hand, to consummate the Merger are subject to the satisfaction (or, if
permissible, waiver by the party for whose benefit such conditions exist) of the
following conditions:
(a) this Agreement shall have been adopted by the stockholders of the
Company in accordance with the DGCL;
(b) no court, arbitrator or governmental body, agency or official
shall have issued any order, decree or ruling which remains in force and there
shall not be any statute, rule or regulation, restraining, enjoining or
prohibiting the consummation of the Merger;
(c) the Registration Statement shall have become effective under the
Securities Act and no stop order suspending effectiveness of the Registration
Statement shall have been issued and no proceeding for that purpose shall have
been initiated or threatened by the SEC; and
(d) Parent, Sub or their affiliates shall have purchased Shares
pursuant to the Offer.
ARTICLE VII
TERMINATION
Section 7.1 Termination. Anything herein or elsewhere to the
contrary notwithstanding, this Agreement may be terminated and the Merger
contemplated herein may be abandoned at any time prior to the Effective Time,
whether before or after stockholder approval hereof:
(a) By the mutual consent of the Board of Directors of Parent and the
Board of Directors of the Company.
65
(b) By either of the Board of Directors of the Company or the Board
of Directors of Parent:
(i) if Parent or Sub has not purchased Shares in accordance with
the terms of the Offer on or prior to April 29, 1996; provided, however, that
the right to terminate this Agreement under this Section 7.1(b)(i) shall not be
available to any party whose failure to fulfill any obligations under this
Agreement has been the cause of, or resulted in, the failure to satisfy the
conditions to the Offer; provided further, however, that Parent shall not have
the right to terminate this Agreement under this Section 7.1(b)(i) if Parent or
Sub purchases any Shares in connection with the Offer after April 29, 1996; or
(ii) if any Governmental Entity shall have issued an order, decree or
ruling or taken any other action (which order, decree, ruling or other action
the parties hereto shall use their best efforts to lift), in each case
permanently restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement and such order, decree, ruling or other action
shall have become final and non-appealable.
(c) By the Board of Directors of the Company:
(i) if, prior to the purchase of Shares pursuant to the Offer, the
Board of Directors of the Company shall have (A) withdrawn, or modified or
changed in a manner adverse to Parent or Sub its approval or recommendation of
the Offer, this Agreement or the Merger in order to approve and permit the
Company to execute a definitive agreement relating to a Takeover Proposal, and
(B) determined, after having received the oral or written opinion of outside
independent legal counsel to the Company, that the failure to take such action
as set forth in the preceding clause (A) would result in a breach of the Board
of Directors' fiduciary duties under applicable law; provided, however, that
the Company shall have given Parent and Sub at least thirty-six hours advance
actual notice of any termination pursuant to this Section 7.1(c)(i) and shall
have
66
made the payment referred to in Section 7.3 hereof; or
(ii) if prior to the purchase of Shares pursuant to the Offer, Parent
or Sub (x) breaches or fails in any material respect to perform or comply with
any of its material covenants and agreements contained herein or (y) breaches
its representations and warranties in any material respect and such breach
would have or would be reasonably likely to have a material adverse effect on
Parent and its Subsidiaries; provided, however, that if any such breach is
cured, the Company may not terminate this Agreement pursuant to this Section
7.1(c)(ii); or
(iii) if Parent or Sub shall have terminated the Offer, or the Offer
shall have expired, without Parent or Sub, as the case may be, purchasing any
shares of Company Common Stock pursuant thereto; provided that the Company may
not terminate this Agreement pursuant to this Section 7.1(c)(iii) if the Company
is in material breach of this Agreement; or
(iv) if, due to an occurrence that if occurring after the
commencement of the Offer would result in a failure to satisfy any of the
conditions set forth in Annex A hereto, Parent, Sub or any of their affiliates
shall have failed to commence the Offer on or prior to five business days
following the date of the initial public announcement of the Offer; provided,
that the Company may not terminate this Agreement pursuant to this Section
7.1(c)(iv) if the Company is in material breach of this Agreement.
(d) By the Board of Directors of Parent:
(i) if, due to an occurrence that if occurring after the commencement
of the Offer would result in a failure to satisfy any of the conditions set
forth in Annex A hereto, Parent, Sub or any of their affiliates shall have
failed to commence the Offer on or prior to five business days following the
date of the initial public announcement of the Offer; provided that Parent may
not terminate this
67
Agreement pursuant to this Section 7.1(d)(i) if Parent or Sub is in material
breach of this Agreement; or
(ii) if (A) prior to the purchase of Shares pursuant to the Offer,
the Board of Directors of the Company shall have withdrawn, or modified or
changed in a manner adverse to Parent or Sub its approval or recommendation of
the Offer, this Agreement or Merger or shall have recommended a Takeover
Proposal or other business combination, or the Company shall have entered into
an agreement in principle (or similar agreement) or definitive agreement
providing for a Takeover Proposal or other business combination with a person or
entity other than Parent, Sub or their Subsidiaries (or the Board of Directors
of the Company resolves to do any of the foregoing), or (B) prior to the
consummation of the Offer, it shall have been publicly disclosed or Parent or
Sub shall have learned that any person, entity or "group" (as that term is
defined in Section 13(d)(3) of the Exchange Act) (an "Acquiring Person"),
other than Parent, Sub or Xxxx/Chilmark Fund, L.P. or Magten or FMR Corp.
(including any of FMR Corp.'s affiliates) shall have acquired beneficial
ownership (determined pursuant to Rule 13d-3 promulgated under the Exchange Act)
of more than 14.9% of any class or series of capital stock of the Company
(including the Shares), through the acquisition of stock, the formation of a
group or otherwise, or shall have been granted any option, right or warrant,
conditional or otherwise, to acquire beneficial ownership of more than 14.9% of
any class or series of capital stock of the Company (including the Shares); or
(iii) if Parent or Sub, as the case may be, shall have terminated the
Offer, or the Offer shall have expired without Parent or Sub, as the case may
be, purchasing any Shares thereunder, provided that Parent may not terminate
this Agreement pursuant to this Section 7.1(d)(iii) if Parent or Sub is in
material breach of this Agreement.
Section 7.2 Effect of Termination. In the event of the termination
of this Agreement as provided in Section 7.1, written notice thereof shall
forthwith be
68
given to the other party or parties specifying the provision hereof pursuant
to which such termination is made, and this Agreement shall forthwith become
null and void, and there shall be no liability on the part of Parent, Sub or the
Company except (A) for fraud or for material breach of this Agreement and (B) as
set forth in Sections 5.15, 7.3, 8.1 and 8.2 hereof.
Section 7.3 Termination Fee. If (w) the Board of Directors of the
Company shall terminate this Agreement pursuant to Section 7.1(c)(i) hereof,
(x) the Board of Directors of Parent shall terminate this Agreement pursuant to
Section 7.1(d)(ii)(A) hereof, (y) the Board of Directors of Parent shall
terminate this Agreement pursuant to Section 7.1(d)(ii)(B) and within nine
months of such termination, an Acquiring Person shall acquire or beneficially
own a majority of the then outstanding Shares or shall have obtained
representation on the Company's Board of Directors or shall enter into a defin-
itive agreement with the Company with respect to a Takeover Proposal or
similar business combination, or (z) the Board of Directors of Parent shall
terminate this Agreement pursuant to Section 7.1(d)(i) or Section 7.1(d)(iii)
hereof, in each case due to (I) a material breach of the representations and
warranties of the Company set forth in this Agreement or (II) a material breach
of, or failure to perform or comply with, by the Company any material
obligation, covenant or agreement contained in this Agreement, then in any such
case as described in clause (w), (x), (y) or (z) (each such case of termination
being referred to as a "Trigger Event"), the Company shall pay to Parent (not
later than the date of termination of this Agreement in the case of clauses (w),
(x) and (z) above) an amount equal to $45 million.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Fees and Expenses. Except as otherwise provided in
Section 7.3 hereof and except for expenses incurred in connection with printing
the Offer Documents, Schedule 14D-9, Proxy Statement/Prospectus and the
Registration Statement, as well as the filing fees relating thereto and relating
to the filing under the HSR Act, which costs shall be shared equally by Parent
and
69
the Company, all costs (other than the filing fee for registration of the Parent
Common Stock which will be paid by Parent) and expenses incurred in connection
with this Agreement and the consummation of the transactions contemplated hereby
and thereby shall be paid by the party incurring such expenses.
Section 8.2 Finders' Fees. (a) Except for Xxxxxx Xxxxxxx & Co.
Incorporated, a copy of whose engagement agreement has been provided to Parent
and whose fees will be paid by the Company, there is no investment banker,
broker, finder or other intermediary which has been retained by or is authorized
to act on behalf of the Company or any of its Subsidiaries who might be entitled
to any fee or commission from the Company or any of its Subsidiaries upon
consummation of the transactions contemplated by this Agreement.
(b) Except for Xxxxxxxxx, Lufkin & Xxxxxxxx Securities Corporation,
a copy of whose engagement agreement has been provided to the Company and whose
fees will be paid by Parent, there is no investment banker, broker, finder or
other intermediary which has been retained by or is authorized to act on behalf
of Parent or any of its Subsidiaries who might be entitled to any fee or
commission from Parent or any of its Subsidiaries upon consummation of the
transactions contemplated by this Agreement.
Section 8.3 Amendment and Modification. Subject to applicable law,
this Agreement may be amended, modified and supplemented in any and all
respects, whether before or after any vote of the stockholders of the Company
contemplated hereby, by written agreement of the parties hereto, pursuant to
action taken by their respective Boards of Directors (which, in the case of
the Company, shall include the affirmative vote of a majority of the Continuing
Directors), at any time prior to the Closing Date with respect to any of the
terms contained herein; provided, however, that after the approval of this
Agreement by the stockholders of the Company, no such amendment, modification or
supplement shall reduce or change the consideration to be received by the
Company's stockholders in the Merger.
Section 8.4 Nonsurvival of Representations and Warranties. None of
the representations and warranties
70
in this Agreement or in any schedule, instrument or other document delivered
pursuant to this Agreement shall survive the Effective Time.
Section 8.5 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally,
telecopied (which is confirmed) or sent by an overnight courier service, such as
FedEx, to the parties at the following addresses (or at such other address for a
party as shall be specified by like notice):
(a) if to Parent or Sub, to:
Rite Aid Corporation
00 Xxxxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxxxx 00000
Attention: Chief Executive Officer
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
with a copy to:
Xxxxx X. Xxxxxxxxx, Esq.
Skadden, Arps, Slate, Xxxxxxx & Xxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
and
(b) if to the Company, to:
Revco D.S., Inc.
0000 Xxxxxxxxxx Xxxxxxx
Xxxxxxxxx, Xxxx 00000
Attention: Chief Executive Officer
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
71
with a copy to:
Xxxxxxx X.X. Xxxxx, Esq.
Benesch, Friedlander,
Xxxxxx & Aronoff
0000 XX Xxxxxxx Xxxxxxxx
000 Xxxxxx Xxxxxx
Xxxxxxxxx, Xxxx 00000
Telephone No.: 000-000-0000
Telecopy No.: 000-000-0000
Section 8.6 Interpretation. When a reference is made in this
Agreement to Sections, such reference shall be to a Section of this Agreement
unless otherwise indicated. Whenever the words "include", "includes" or
"including" are used in this Agreement they shall be deemed to be followed by
the words "without limitation". The phrases "the date of this Agreement", "the
date hereof", and terms of similar import, unless the context otherwise
requires, shall be deemed to refer to November , 1995. As used in this
Agreement, the term "affiliate(s)" shall have the meaning set forth in Rule
l2b-2 of the Exchange Act.
Section 8.7 Counterparts. This Agreement may be executed in two or
more counterparts, all of which shall be considered one and the same agreement
and shall become effective when two or more counterparts have been signed by
each of the parties and delivered to the other parties, it being understood that
all parties need not sign the same counterpart.
Section 8.8 Entire Agreement; No Third Party Beneficiaries; Rights of
Ownership. This Agreement, the Xxxx/Chilmark Stockholder Agreement, the Stock
Option Agreement and the Confidentiality Agreement, as modified hereby
(including the exhibits hereto and the documents and the instruments referred to
herein and therein): (a) constitute the entire agreement and supersede all
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof, and (b) except as provided in
Sections 5.5 and 5.10 with respect to the obligations of the Company or the
Surviving Corporation thereunder, are not intended to confer upon any person
other than the parties hereto any rights or remedies hereunder.
72
Section 8.9 Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void, unenforceable or against its regulatory
policy, the remainder of the terms, provisions, covenants and restrictions of
this Agreement shall remain in full force and effect and shall in no way be
affected, impaired or invalidated.
Section 8.10 Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall
be entitled to the remedy of specific performance of the terms hereof, in
addition to any other remedy at law or equity.
Section 8.11 Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of Delaware without giving
effect to the principles of conflicts of law thereof.
Section 8.12 Assignment. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties, except that Sub may assign, in its sole
discretion, any or all of its rights, interests and obligations hereunder to
Parent or to any direct or indirect wholly owned Subsidiary of Parent; provided,
however, that no such assignment shall relieve Parent from any of its
obligations hereunder. Subject to the preceding sentence, this Agreement will
be binding upon, inure to the benefit of and be enforceable by the parties and
their respective successors and assigns.
Section 8.13 Joint and Several Liability. Parent and Sub hereby
agree that they will be jointly and severally liable for all covenants,
agreements, obligations and representations and warranties made by either of
them in this Agreement.
73
IN WITNESS WHEREOF, Parent, Sub and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized
as of the date first written above.
RITE AID CORPORATION
By: /s/ Xxxxxx X. Grass
----------------------------
Name: Xxxxxx X. Grass
Title: Chairman of the Board
and Chief Executive Officer
OCEAN ACQUISITION CORPORATION
By: /s/ Xxxxxx X. Grass
----------------------------
Name: Xxxxxx X. Grass
Title: President
REVCO D.S., INC.
By: /s/ D. Xxxxxx Xxxxx
-----------------------------
Name: D. Xxxxxx Xxxxx
Title: President and Chief
Executive Officer
ANNEX A
CONDITIONS TO THE TENDER OFFER
Notwithstanding any other provisions of the Offer, and in addition to
(and not in limitation of) Sub's rights to extend and amend the Offer at any
time in its sole discretion (subject to the provisions of the Merger Agreement),
Sub shall not be required to accept for payment or, subject to any applicable
rules and regulations of the SEC, including Rule 14e-1(c) under the Exchange Act
(relating to Sub's obligation to pay for or return tendered Shares promptly
after termination or withdrawal of the Offer), pay for, and may delay the
acceptance for payment of or, subject to the restriction referred to above, the
payment for, any tendered Shares, and may terminate the Offer as to any Shares
not then paid for, if (i) any applicable waiting period under the HSR Act has
not expired or terminated prior to the expiration of the Offer, (ii) the
Minimum Condition has not been satisfied, or (iii) at any time on or after
November 17, 1995 and prior to the acceptance for payment of any Shares, any of
the following events shall occur or shall be determined by Sub to have occurred:
(a) there shall be instituted, pending or threatened any action or
proceeding by any government or governmental authority or agency, domestic or
foreign, (i) challenging or seeking to make illegal, to delay materially or
otherwise directly or indirectly to restrain or prohibit the making of the
Offer, the acceptance for payment of or payment for some of or all the Shares
by Parent or Sub or the consummation by Parent or Sub of the Merger, seeking to
obtain material damages relating to the Merger Agreement, the Xxxx/Chilmark
Stockholder Agreement, the Stock Option Agreement or any of the transactions
contemplated thereby or otherwise seeking to prohibit directly or indirectly the
transactions contemplated by the Offer or the Merger, or challenging or
seeking to make illegal the transactions contemplated by the Xxxx/Chilmark
Stockholder Agreement, the Stock Option Agreement or otherwise directly or indi-
rectly to restrain, prohibit or delay the transactions contemplated by the
Xxxx/Chilmark Stockholder Agreement or the Stock Option Agreement, (ii) seeking
to restrain,
A-1
prohibit or delay Parent's, Sub's or any of their subsidiaries' ownership or
operation of all or any portion (other than an immaterial portion) of the
business or assets of the Company or its subsidiaries, or to compel Parent or
any of its subsidiaries to dispose of or hold separate all or any portion (other
than an immaterial portion) of the business or assets of the Company or Parent
or their respective subsidiaries, (iii) seeking to impose or confirm material
limitations on the ability of Parent, Sub or any of their subsidiaries or
affiliates effectively to exercise full rights of ownership of the Shares,
including, without limitation, the right to vote any Shares acquired or owned by
Parent, Sub or any of their subsidiaries or affiliates on all matters properly
presented to the Company's stockholders, or (iv) seeking to require divestiture
by Parent, or Sub or any of their subsidiaries of any Shares; or
(b) there shall be any action taken, or any statute, rule,
regulation, injunction, judgment, order or decree enacted, enforced, entered,
promulgated, issued or deemed applicable to the Offer or the Merger, by any
court, government or governmental authority or agency, domestic or foreign,
that, directly or indirectly, results in any of the consequences referred to
in clauses (i) through (iv) of paragraph (a) above; or
(c) there shall have occurred (i) any general suspension of trading
in, or limitation on prices for, securities on the New York Stock Exchange for a
period in excess of three hours, (ii) the declaration of a banking moratorium or
any suspension of payments in respect of banks in the United States (whether or
not mandatory), (iii) the commencement of a war, armed hostilities or other
international or national calamity directly or indirectly involving the United
States, (iv) any limitation (whether or not mandatory) by any foreign or
United States governmental authority or agency on the extension of credit by
banks or other financial institutions, (v) any decline in either the Dow Xxxxx
Industrial Average or the Standard & Poor's Index of 500 Industrial Companies by
an amount in excess of 20% measured from the close of business on November 29,
1995, or (vi) in the case of any of the foregoing existing at the time of the
commencement of the Offer, a material acceleration or worsening thereof; or
A-2
(d) the representations and warranties of the Company set forth in
the Merger Agreement shall not be true and correct in any material respect as of
the date of consummation of the Offer as though made on or as of such date,
except (i) for changes specifically permitted by the Merger Agreement and (ii)
those representations and warranties that address matters only as of a particu-
lar date which are true and correct as of such date, or the Company shall have
breached or failed in any material respect to perform or comply with any
material obligation, agreement or covenant required by the Merger Agreement
to be performed or complied with by it; or
(e) the Merger Agreement shall have been terminated in accordance
with its terms; or
(f) any party to the Xxxx/Chilmark Stockholder Agreement or the Stock
Option Agreement other than Sub and Parent shall have breached or failed to
perform any of its agreements under such agreements or breached any of its
representations and warranties in such agreements or any such agreement shall
not be valid, binding and enforceable, except for such breaches or failures or
failures to be valid, binding and enforceable that do not materially and
adversely affect the benefits expected to be received by Parent and Sub under
the Merger Agreement, the Xxxx/Chilmark Stockholder Agreement or the Stock
Option Agreement; or
(g) (i) it shall have been publicly disclosed or Parent or Sub shall
have otherwise learned that any person, entity or "group" (as defined in Section
13(d)(3) of the Exchange Act), other than Xxxx/Chilmark Fund, L.P. or Magten
Asset Management Corporation, or FMR Corp. (including any of FMR Corp.'s
affiliates) Parent or its affiliates or any group of which any of them is a
member, shall have acquired beneficial ownership (determined pursuant to Rule
13d-3 promulgated under the Exchange Act) of more than 14.9% of any class or
series of capital stock of the Company (including the Shares), through the
acquisition of stock, the formation of a group or otherwise, or shall have
been granted an option, right or warrant, conditional or otherwise, to acquire
beneficial ownership of more than 14.9% of any class or series of capital stock
of the Company (including the Shares); or (ii) any person, entity or group shall
have entered into a definitive agreement or agreement in principle with the
A-3
Company with respect to a merger, consolidation or other business combination
with the Company; or
(h) a tender or exchange offer for some or all of the Shares or
proposal for a Takeover Proposal shall have been publicly proposed to be made or
shall have been made by another person or entity;
(i) the Board of Directors of the Company shall have withdrawn, or
modified or changed in a manner adverse to Parent or Sub (including by amendment
of the Schedule 14D-9), its approval or recommendation of the Offer, the Merger
Agreement, or the Merger, or recommended another proposal or offer, or shall
have resolved to do any of the foregoing; or
(j) there shall have occurred any event, change or effect (including
the incurrence of any liabilities of any nature, whether or not accrued,
contingent or otherwise) which has, individually or in the aggregate, a
material adverse effect (as defined in the Merger Agreement) on the Company and
its Subsidiaries;
which in the sole judgment of Parent or Sub, in any such case, and regardless of
the circumstances (including any action or inaction by Parent or Sub giving rise
to such condition) makes it inadvisable to proceed with the Offer or with such
acceptance for payment or payments.
The foregoing conditions are for the sole benefit of Parent and Sub
and may be asserted by Parent or Sub regardless of the circumstances giving rise
to any such condition or may be waived by Parent or Sub in whole or in part at
any time and from time to time in their sole discretion. The failure by Parent
or Sub at any time to exercise any of the foregoing rights shall not be deemed a
waiver of any such right; the waiver of any such right with respect to
particular facts and other circumstances shall not be deemed a waiver with
respect to other facts and circumstances; and each such right shall be deemed an
ongoing right which may be asserted at any time and from time to time.
A-4
EXHIBIT C
Form of Affiliate Agreement
Rite Aid Corporation
00 Xxxxxx Xxxx
Xxxx Xxxx, XX 00000
Ladies and Gentlemen:
The undersigned is a holder of shares of Common Stock, par value $.01 per
share (the "Company Common Stock"), of Revco D.S., Inc., a Delaware corporation
(the "Company"). The undersigned may receive shares of Common Stock, par value
$1.00 per share (the "Parent Common Stock"), of Rite Aid Corporation, a
Delaware corporation ("Parent"), in connection with the merger of Ocean
Acquisition Corporation, a Delaware corporation and a wholly owned subsidiary
of Parent ("Sub"), with and into the Company, with the Company continuing as
the surviving corporation (the "Merger").
The undersigned acknowledges that the undersigned may be deemed an
"affiliate" of the Company as the term "affiliate" is defined for purposes of
paragraphs (c) and (d) of Rule 145 ("Rule 145") of the rules and regulations
under the Securities Act of 1933, as amended (the "Act"). Execution of this
Agreement by the undersigned should not be construed as an admission of
"affiliate" status or as a waiver of any rights the undersigned may have to
object to any claim that the undersigned is such an affiliate on or after the
date of this Agreement.
If in fact the undersigned were an affiliate of the Company under the Act,
the undersigned's ability to sell, transfer or otherwise dispose of any Parent
Common Stock received by the undersigned in exchange for any shares of Company
Common Stock pursuant to the Merger may be restricted unless such transaction
is registered under the Act or an exemption from such registration is
available. The undersigned understands that such exemptions are limited and
the undersigned has obtained advice of counsel as to the nature and conditions
of such exemptions, including information with respect to the applicability to
the sale of such securities of Rules 144 and 145(d) promulgated under the Act.
A. The undersigned hereby represents to and covenants with Parent that
the undersigned will not sell, transfer or otherwise dispose of any Parent
Common Stock received by the undersigned in exchange for shares of Company
Common Stock pursuant to the Merger except (i) pursuant to an effective
registration statement under the Act, (ii) by a sale made in conformity with
the provisions of Rule 145 (and otherwise in accordance with Rule 144
under the Act if the undersigned is an affiliate of Parent and if so required at
the time) or (iii) in a transaction which, in the opinion of independent counsel
reasonably satisfactory to Parent or as described in a "no-action" or
interpretive letter from the Staff of the Securities and Exchange Commission
(the "Commission"), is not required to be registered under the Act.
B. The undersigned understands that Parent is under no obligation to
register the sale, transfer or other disposition of Parent Common Stock by the
undersigned or on behalf of the undersigned under the Act or, except as
provided in paragraph F.1 below, to take any other action necessary in order to
make compliance with an exemption from such registration available.
C. The undersigned also understands that stop transfer instructions will
be given to Parent's transfer agents with respect to the Parent Common Stock
issued to the undersigned and that there will be placed on the certificates
for the Parent Common Stock issued to the undersigned, or any substitutions
therefor, a legend stating in substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE
ISSUED IN A TRANSACTION TO WHICH RULE 145 PROMULGATED
UNDER THE SECURITIES ACT OF 1933 APPLIES. THE
SHARES REPRESENTED BY THIS CERTIFICATE MAY ONLY BE
TRANSFERRED IN ACCORDANCE WITH THE TERMS OF AN
AGREEMENT DATED NOVEMBER 29, 1995 BETWEEN THE REGISTERED
HOLDER HEREOF AND RITE AID CORPORATION, A COPY
OF WHICH AGREEMENT IS ON FILE AT THE PRINCIPAL
OFFICES OF RITE AID CORPORATION."
D. The undersigned also understands that unless a sale or transfer is made
in conformity with the provisions of Rule 145, or pursuant to a registration
statement, Parent reserves the right to put the following legend on the
certificates issued to the undersigned's transferee:
2
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND
WERE ACQUIRED FROM A PERSON WHO RECEIVED SUCH SHARES
IN A TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER
THE SECURITIES ACT OF 1933 APPLIES. THE SHARES HAVE
BEEN ACQUIRED BY THE HOLDER NOT WITH A VIEW TO, OR
FOR RESALE IN CONNECTION WITH, ANY DISTRIBUTION
THEREOF WITHIN THE MEANING OF THE SECURITIES ACT OF
1933 AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE
TRANSFERRED EXCEPT IN ACCORDANCE WITH AN EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT OF 1933."
E. In the event of a sale of Parent Common Stock pursuant to Rule 145, the
undersigned will supply Parent with evidence of compliance with such Rule, in
the form of customary seller's and broker's Rule 145 representation letters
or as Parent may otherwise reasonably request. The undersigned understands
that Parent may instruct its transfer agent to withhold the transfer of any
Parent Common Stock disposed of by the undersigned in a manner inconsistent
with this letter.
F. By Parent's acceptance of this Agreement, Parent hereby agrees with the
undersigned as follows:
1. For so long as to the extent necessary to permit the undersigned to
sell the Parent Common Stock pursuant to Rule 145 and, to the extent
applicable, Rule 144 under the Act, Parent shall (a) use its reasonable best
efforts to (i) file, on a timely basis, all reports and data required to be
filed with the Commission by it pursuant to Section 13 of the Securities
Exchange Act of 1934, as amended (the "1934 Act") and (ii) furnish to the
undersigned upon request a written statement as to whether Parent has complied
with such reporting requirements during the 12 months preceding any proposed
sale of Parent Common Stock by the undersigned under Rule 145 and Rule 144.
Parent has filed all reports required to be filed with the Commission under
Section 13 of the 1934 Act during the preceding 12 months.
2. It is understood and agreed that the legends set forth in paragraph C
and D above shall be removed by delivery of substitute certificates without
such legend if such legend is not required for purposes of the Act or this
Agreement. It is understood and agreed that such legends and the stop orders
referred to above will be removed if (i) two years shall have elapsed from the
date the undersigned acquired Parent Common Stock re-
3
ceived in the Merger and the provisions of Rule 145(d)(2) are then available to
the undersigned, (ii) three years shall have elapsed from the date the
undersigned acquired the Parent Common Stock received in the Merger and the
provisions of Rule 145(d)(3) are then applicable to the undersigned, (iii) the
Parent has received either an opinion of counsel, which opinion and counsel
shall be reasonably satisfactory to Parent, or a "no action" letter obtained
from the staff of the Commission, to the effect that the Parent Common Stock
subject thereto may be transferred free of the restrictions imposed by Rule
144 or 145 under the Act, or (iv) in the event of a sale of Parent Common Stock
received by the undersigned in the Merger which has been registered under the
Act or made in conformity with the provisions of Rule 145; and, in the case of
(i) and (ii) above, Parent has received either an opinion of counsel, which
opinion and counsel shall be reasonably satisfactory to Parent, or a "no
action" letter obtained from the staff of the Commission, to the effect that
the restrictions imposed by Rule 145 under the Act no longer apply to the
undersigned.
The undersigned acknowledges that it has carefully reviewed this letter
and understands the requirements hereof and the limitations imposed upon the
distribution, sale, transfer or other disposition of Parent Common Stock
received by the undersigned in the Merger.
Very truly yours,
-------------------------
Name
Accepted this __ day of
_______________ 199_, by
RITE AID CORPORATION
By:
---------------------------
Name:
Title:
4
