<PAGE>
DART GROUP CORPORATION
3300 75TH AVENUE
LANDOVER, MARYLAND 20785
April 15, 1998
Dear Stockholder:
We are pleased to report that Dart Group Corporation (the "Company") has
entered into a merger agreement with Richfood Holdings, Inc. ("Richfood") and
one of its subsidiaries that provides for the acquisition of the Company by
Richfood at a price of $160.00 per share in cash. Under the terms of the
proposed transaction, a Richfood subsidiary is today commencing a cash tender
offer for all outstanding shares of the Company's common stock at $160.00 per
share. Following the successful completion of the tender offer, the Richfood
subsidiary will be merged into the Company and all shares not purchased by the
Richfood subsidiary in the tender offer will be converted into the right to
receive $160.00 per share in cash in the merger.
YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE RICHFOOD TENDER OFFER
AND DETERMINED THAT THE TERMS OF THE TENDER OFFER AND THE MERGER, TAKEN
TOGETHER, ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE COMPANY AND ITS
STOCKHOLDERS. ACCORDINGLY, THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
ACCEPTANCE OF THE RICHFOOD TENDER OFFER AND APPROVAL AND ADOPTION OF THE
MERGER AGREEMENT BY THE STOCKHOLDERS OF THE COMPANY.
In arriving at its recommendations, the Board of Directors gave careful
consideration to a number of factors. These factors included the opinion dated
April 8, 1998, of Wasserstein Perella & Co., Inc. ("Wasserstein Perella"),
financial advisor to the Company, to the effect that, as of such date and
based upon and subject to certain matters stated in such opinion, the cash
consideration of $160.00 per share to be received by Company stockholders
(other than Richfood and its affiliates) in the offer and the merger was fair
from a financial point of view to such stockholders.
Accompanying this letter is a copy of the Company's
Solicitation/Recommendation Statement on Schedule 14D-9. Also enclosed is
Richfood's Offer to Purchase and related materials, including a Letter of
Transmittal for use in tendering shares. We urge you to read carefully the
enclosed materials, including Wasserstein Perella's opinion, which is attached
to the Schedule 14D-9.
The management and directors of Dart Group Corporation thank you for the
support you have given the Company.
Sincerely,
/s/ Richard B. Stone
Richard B. Stone
Chairman of the Board
and Chief Executive Officer
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(D)(4) OF
THE SECURITIES EXCHANGE ACT OF 1934
----------------
DART GROUP CORPORATION
(NAME OF SUBJECT COMPANY)
DART GROUP CORPORATION
(NAME OF PERSON FILING STATEMENT)
COMMON STOCK, PAR VALUE $1.00 PER SHARE
(TITLE OF CLASS OF SECURITIES)
237415104
(CUSIP NUMBER OF CLASS OF SECURITIES)
----------------
RICHARD B. STONE
CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER
DART GROUP CORPORATION
3300 75TH AVENUE
LANDOVER, MARYLAND 20785
(301) 226-1200
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO
RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF
THE PERSON FILING STATEMENT)
WITH A COPY TO:
DAVID G. POMMERENING, ESQ.
O'MELVENY & MYERS LLP
555 13TH STREET, N.W.
WASHINGTON, D.C. 20004-1109
(202) 383-5300
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
ITEM 1. SECURITY AND SUBJECT COMPANY
The name of the subject company is Dart Group Corporation, a Delaware
corporation (the "Company"). The address of the principal executive offices of
the Company is 3300 75th Avenue, Landover, Maryland 20785. The title of the
class of equity securities to which this Statement relates is common stock,
par value $1.00 per share, of the Company (the "Company Common Stock" or the
"Shares").
ITEM 2. TENDER OFFER OF THE PURCHASER
This Statement relates to the tender offer by DGC Acquisition, Inc. ("Merger
Sub"), a Delaware corporation and a wholly owned subsidiary of Richfood
Holdings, Inc., a Virginia corporation ("Richfood"), disclosed in a Tender
Offer Statement on Schedule 14D-1 (the "Schedule 14D-1") dated April 15, 1998
offering to purchase all of the outstanding Shares at a price of $160 per
Share, net to the seller in cash (the "Offer Consideration"), upon the terms
and subject to the conditions set forth in the Offer to Purchase dated April
15, 1998 (the "Offer to Purchase") and the related Letter of Transmittal
(which, together with the Offer to Purchase, constitute the "Offer").
The Offer is being made pursuant to an Agreement and Plan of Merger dated as
of April 9, 1998 (the "Merger Agreement") by and among Richfood, Merger Sub
and the Company. The Merger Agreement provides, among other things, that three
business days following satisfaction or waiver of the conditions set forth in
the Merger Agreement, Merger Sub will be merged with and into the Company (the
"Merger"), the separate corporate existence of Merger Sub will cease and the
Company will continue as the surviving corporation (the "Surviving
Corporation") and a direct wholly owned subsidiary of Richfood. A copy of the
Merger Agreement is filed as Exhibit A to this Statement and is incorporated
herein by reference.
As set forth in the Schedule 14D-1, the principal executive offices of
Richfood are located at 4860 Cox Road, Suite 300, Glen Allen, Virginia 23060
and the principal executive offices of Merger Sub are located at 4860 Cox
Road, Suite 300, Glen Allen, Virginia 23060.
ITEM 3. IDENTITY AND BACKGROUND
(a) The name and address of the Company, which is the person filing this
Statement, are set forth in Item 1 above.
(b) Except as set forth in this Item 3(b), to the knowledge of the Company,
there are no material contracts, agreements, arrangements or understandings
and no actual or potential conflicts of interest between the Company or its
affiliates and (i) the Company's executive officers, directors or affiliates
or (ii) Richfood or Merger Sub or their respective executive officers,
directors or affiliates.
EMPLOYMENT AGREEMENTS
Richard B. Stone, Chairman of the Board, Chief Executive Officer and a
director of the Company, entered into an employment agreement with the Company
for a three-year term running from February 12, 1998 to and including February
12, 2001 (the "Stone Employment Agreement"). Pursuant to the Stone Employment
Agreement, Mr. Stone was granted options to purchase 30,000 shares of Company
Common Stock at a price of $108 per share (the fair market value on the date
of grant) which options vest and become exercisable upon a Change of Control
(as defined therein, which would include the consummation of the Offer). In
addition, upon execution of the Stone Employment Agreement, Mr. Stone was
granted 6,000 shares of Company Common Stock, which restricted stock vests
upon a Change of Control. The Company has also agreed to loan to Mr. Stone
such amounts as are necessary to make any required tax payment as a result of
the grant or vesting of such Company Common Stock and, pursuant to such
provision, loaned Mr. Stone $341,450 on March 10, 1998. It is expected that
such loan will be repaid upon consummation of the Offer or the Merger. Based
upon the Offer Consideration of $160 per share, Mr. Stone's options will have
an aggregate value of approximately $1,560,000 and Mr. Stone's restricted
stock will have an aggregate value of approximately $960,000. Finally,
pursuant to the Stone Employment Agreement, Mr. Stone will receive a cash
bonus of $700,000 if the Offer and the Merger are consummated as set forth in
the Merger Agreement. After Mr. Stone has received the foregoing
2
<PAGE>
compensation, the Stone Employment Agreement is terminable at the Company's
option without any further payments. A copy of the Stone Employment Agreement
is filed as Exhibit B to this Statement and is incorporated herein by
reference.
The Company has also entered into employment agreements with certain
executive officers pursuant to which the Company has agreed to pay specified
amounts to each executive if such executive is terminated without cause. If
one of the following executive officers is terminated without cause, he will
be entitled to the amounts indicated (which amounts are subject to yearly
increases and are payable in accordance with the Company's normal payroll
schedule, except for that of Mr. Flint, which is payable in a lump sum): Mark
A. Flint, Senior Vice President, Chief Financial Officer and Treasurer
($292,800); Elliot R. Arditti, Senior Vice President, Secretary and Corporate
Counsel ($190,900); Dennis N. Weiss, Executive Vice President, Real Estate
($275,400); Terrance J. Sharp, Senior Vice President of Human Resources
($240,800); Dale A. Morris, Senior Vice President, Chief Information Officer
($135,000); Ronald T. Rice, Vice President, Controller ($139,400); and Robert
J. Fishbein, Tax Manager ($100,000). In addition, the employment agreements
provide that the executive will be entitled to lump-sum payments for accrued
vacation and sick time and accrued but unpaid salary. The Company has also
entered into a retention agreement with Kenneth M. Sobien, Assistant
Treasurer, under which the Company has agreed to make a lump-sum payment to
Mr. Sobien of ten-months' base salary and all unused vacation and sick time in
the event Mr. Sobien is terminated involuntarily and without cause.
EMPLOYEE OPTIONS
Pursuant to the terms of the Company's 1992 Stock Option Plan (as amended,
the "Stock Option Plan"), certain executive officers and other employees of
the Company have been granted Employee Options (as herein defined) to purchase
shares of Company Common Stock. The Stock Option Plan and the 1998 amendment
thereto are filed as Exhibits C and D to this Statement, respectively, and are
incorporated herein by reference. The Stock Option Plan was amended in
connection with the Merger Agreement to provide, among other things, that
participants in that plan may tender their Employee Options in connection with
the Offer in exchange for cash from Merger Sub for each Share that is subject
to such holder's Employee Options, equal to the difference between the Offer
Price and the per Share exercise price of such holder's Employee Options,
which amount may be reduced by any required withholding tax. Employee Option
holders who do not participate in the Offer will receive cash from Merger Sub
for each Share that is subject to an Employee Option that has not been
exercised or tendered as of the Effective Date (as defined in the Merger
Agreement), equal to the difference between the Merger Consideration (as
defined in the Merger Agreement) per Share payable to the Company stockholders
who do not tender their stock in the Offer and the per Share exercise price of
such Employee Options, which amount may be reduced by any required withholding
tax. The following executive officers hold Employee Options under the Stock
Option Plan: Mark A. Flint (2,500 shares at $105.00 per share and 750 shares
at $92.00 per share); Terrance J. Sharp (1,750 shares at $105.00 per share,
800 shares at $92.00 per share and 250 shares at $85.75 per share); Elliot R.
Arditti (900 shares at $105.00 per share, 750 shares at $92.00 per share, 350
shares at $85.75 per share, 350 shares at $73.00 per share and 350 shares at
$81.50 per share); Dennis N. Weiss (1,500 shares at $105.00 per share, 800
shares at $92.00 per share and 268 shares at $85.75 per share); Ronald T. Rice
(900 shares at $105.00 per share, 750 shares at $92.00 per share and 300
shares at $85.75 per share); Robert J. Fishbein (250 shares at $105.00 per
share, 84 shares at $92.00 per share and 34 shares at $85.75 per share); and
Kenneth M. Sobien (300 shares at $105.00 per share, 200 shares at $92.00 per
share and 50 shares at $85.75 per share).
DIRECTORS' AND OFFICERS' INDEMNIFICATION
Section 145 of Delaware General Corporation Law (the "DGCL") authorizes a
court to award, or a corporation's board of directors to grant, indemnity to
directors and officers in terms sufficiently broad to permit such
indemnification under certain circumstances for liabilities (including
reimbursement for expenses incurred) arising under the Securities Act of 1933,
as amended (the "Act").
In accordance with the DGCL, Article Eighth of the Amended and Restated
Certificate of Incorporation of the Company eliminates the personal liability
of a director of the Company for monetary damages for certain breaches of
fiduciary duty as a director. A copy of such Article Eighth is filed as
Exhibit E to this Statement and is incorporated herein by reference. Subject
to certain limitations, Article VII of the Amended and Restated
3
<PAGE>
Bylaws of the Company also provides for indemnification of officers and
directors of the Company. A copy of such Article VII is filed as Exhibit F to
this Statement and is incorporated herein by reference. In addition, the
Company has entered into indemnification agreements with certain of its
officers and all of its directors by which the Company provides such persons
with the maximum indemnification allowed under applicable law. These
agreements also address certain procedural and substantive matters that are
not covered, or are covered in less detail, in the Company's Amended and
Restated Certificate of Incorporation and Amended and Restated Bylaws. A copy
of the form of such indemnification agreement is filed as Exhibit G to this
Statement and is incorporated herein by reference. Finally, under the Merger
Agreement, Richfood has agreed to continue to provide, or cause the Company to
continue to provide, indemnification of officers and directors as and to the
extent set forth in the Merger Agreement.
ARRANGEMENTS WITH RICHFOOD, MERGER SUB OR THEIR AFFILIATES
The Merger Agreement
The following is a summary of certain provisions of the Merger Agreement.
Such summary is qualified in its entirety by reference to the Merger
Agreement. Capitalized terms not otherwise defined in the following summary
have the respective meanings ascribed to them in the Merger Agreement.
The Offer. The Merger Agreement provides that Merger Sub will make the
Offer. Subject to the Conditions (as defined below) to the Offer and to the
Merger Agreement not having been terminated in accordance with its terms,
Richfood has agreed to cause Merger Sub to commence an offer to purchase, not
later than the fifth business day from the public announcement of the
execution of the Merger Agreement, all outstanding shares of Company Common
Stock at a price of $160 per share. Merger Sub will accept for payment, and
pay for, in accordance with the terms of the Offer, all shares of Company
Common Stock, validly tendered and not withdrawn, as soon as practicable after
the Offer's expiration date; provided, however, that, Merger Sub may extend
the Offer in connection with an increase in the consideration to be paid
pursuant to the Offer so as to comply with applicable rules and regulations of
the Securities Exchange Commission ("SEC"). Even if all Conditions are
satisfied, Merger Sub may extend the Offer for up to ten business days after
the initial expiration date if fewer than 90% of the Shares outstanding as of
such date have been tendered at such date, so long as, in connection with such
extension, Merger Sub irrevocably waives certain enumerated conditions to the
Offer. Notwithstanding the foregoing, Merger Sub has agreed to extend the
Offer from time to time until June 30, 1998 if, and to the extent that, at the
initial expiration date of the Offer, or any extension thereof, all Conditions
to the Offer have not been satisfied or waived; provided that Richfood and
Merger Sub shall have no obligation to extend the Offer if the Company's
failure to fulfill any obligation under the Merger Agreement has been the
cause of or has resulted in the failure of any such condition to be satisfied.
Subject to the terms of the Merger Agreement, Merger Sub expressly reserves
the right to increase the price per share payable in the Offer or to make any
other changes in the terms and conditions of the Offer except that Merger Sub
cannot waive the Minimum Condition (as defined below). Moreover, without the
prior written consent of the Company, Merger Sub will not (i) decrease or
change the form of the Offer Consideration or decrease the number of Shares
sought pursuant to the Offer, (ii) impose additional conditions to the Offer,
(iii) extend the expiration date of the Offer (except as required by Law or
the applicable rules and regulations of the SEC) or (iv) amend any term of the
Offer in any manner adverse to the holders of shares of Company Common Stock;
provided, however, that, except as set forth above, Merger Sub may waive any
condition to the Offer in its sole discretion.
Conditions to the Offer. The obligation of Merger Sub to accept for payment
and pay for Shares tendered pursuant to the Offer is subject to (i) the tender
and nonwithdrawal of Shares which constitute a majority of all outstanding
shares on a fully diluted basis ("on a fully diluted basis" means, as of any
date, the number of Shares outstanding, together with Shares that the Company
is or may be required to issue pursuant to obligations outstanding at that
date under employee stock option or other benefit plans, options, warrants or
convertible or exchangeable securities, or otherwise) (the "Minimum
Condition") and (ii) the satisfaction or waiver of the other conditions to the
Offer described below.
Notwithstanding any other provision of the Offer, Merger Sub is not required
to accept for payment or, subject to any applicable rules and regulations of
the SEC, including Rule 14e-1(c) under the Securities Exchange Act of 1934, as
amended (the "Exchange Act") (relating to Merger Sub's obligation to pay for
or return Shares promptly after termination or withdrawal of the Offer), to
pay for any tendered Shares, and may postpone the
4
<PAGE>
acceptance for payment or, subject to the restriction referred to above,
payment for any tendered Shares, unless the following conditions (the Minimum
Condition, together with the following conditions, the "Conditions") have been
satisfied: (i) any applicable waiting periods under the HSR Act shall have
expired or been terminated before the expiration of the Offer and (ii) on or
after the date of the Merger Agreement and before acceptance for payment of,
or payment for, the Shares, none of the following events have occurred:
(a) any Governmental Authority has enacted, issued, promulgated, enforced
or entered any statute, rule, regulation, executive order, decree,
injunction or other order which is in effect and which (i) materially
restricts, prevents or prohibits consummation of the Offer or the Merger or
results in the obligation to pay damages as a result of or in connection
with the Offer and the Merger in amounts that would have a Material Adverse
Effect (as defined herein) on the Company, (ii) prohibits or limits
materially the ownership or operation by the Company, Richfood or any of
their subsidiaries of all or any material portion of the business or assets
of the Company and its subsidiaries taken as a whole or compels the
Company, Richfood or any of their subsidiaries to dispose of, or hold
separate, all or any material portion of the business or assets of Richfood
or any of its subsidiaries, or of the Company and its subsidiaries taken as
a whole, (iii) imposes material limitations on the ability of Richfood,
Merger Sub or any other subsidiary of Richfood to acquire or hold, or to
exercise effectively full rights of ownership of, any Shares, including,
without limitation, the right to vote any Shares acquired by Merger Sub
pursuant to the Offer or otherwise on all matters properly presented to the
Company's stockholders, including, without limitation, the approval and
adoption of the Merger Agreement and the transactions contemplated thereby
or (iv) requires divestitures by Richfood, Merger Sub or any other
affiliate of Richfood of any Shares;
(b) the representations and warranties of the Company set forth in the
Merger Agreement, when read without any exception or qualification as to
materiality or Material Adverse Effect on the Company, shall not be true
and accurate as of the date of the Merger Agreement and the date of the
consummation of the Offer (except for those representations and warranties
that address matters only as of a particular date or only with respect to
such period) except where the failure to be so true and correct would not,
individually or in the aggregate, reasonably be expected to (i) have a
Material Adverse Effect on the Company, (ii) prevent the consummation of
the Offer or (iii) have a material adverse effect on the benefits to
Richfood of the transactions contemplated by the Merger Agreement;
(c) (i) the Company shall not have performed, in all material respects,
all obligations and complied with all covenants necessary to be performed
or complied with by it or (ii) an event shall have occurred relating to a
non-wholly owned subsidiary or partnership of the Company that would be
prohibited by the covenants set forth in Section 7.1(a) of the Merger
Agreement if such subsidiary or partnership had been wholly owned by the
Company and which event has a material adverse effect on the benefits to
Richfood of the transactions contemplated by the Merger Agreement;
(d) the Merger Agreement shall have been terminated in accordance with
its terms;
(e) the Board of Directors of the Company shall have (i) withdrawn or
materially modified or changed (including by amendment of this Statement on
Schedule 14D-9) in a manner adverse to Merger Sub its recommendation of the
Offer, the Merger Agreement or the Merger or (ii) the Board of Directors of
the Company shall have approved or recommended an Acquisition Proposal (as
defined herein);
(f) other than the filing of the Certificate of Merger with respect to
the Merger as provided for by Section 3.3 of the Merger Agreement, all
licenses, permits, authorizations, consents, orders, qualifications or
approvals of, or declarations or filings with, or expirations of waiting
periods imposed by, any Governmental Authority requisite to consummation of
the Merger and the transactions contemplated thereby, shall have been
filed, occurred or been obtained, as the case may be, except such of the
foregoing as would not have a Material Adverse Effect on the Company;
(g) it shall have been publicly disclosed or Merger Sub shall have
otherwise learned that any Person or "group" (as defined in Section
13(d)(3) of the Exchange Act), other than Richfood or its affiliates or any
group of which any of them is a member, shall have, after the date of the
Merger Agreement, (i) acquired beneficial ownership (determined pursuant to
Rule 13d-3 promulgated under the Exchange Act)
5
<PAGE>
of more than 20% of any class or series of capital stock of the Company or
shall have been granted an option, right or warrant, conditional or
otherwise, to obtain more than 20% of any class or series of capital stock
of the Company (including the Shares) or (ii) without the prior consent of
Richfood, entered into any binding agreement with the Company with respect
to (A) a merger, consolidation or other business combination with, or
acquisition of a material portion of the assets of, the Company or (B) a
tender or exchange offer for Shares; and
(h) there shall have occurred (i) any general suspension of trading in
securities on any national securities exchange or in the over-the-counter
market, (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) any indirect limitation (whether or not mandatory) by a
United States Governmental Authority or agency on the extension of credit
by banks or other financial institutions or (iv) any decline in the Dow
Jones Industrial Average in excess of 25%, measured from the date of the
Merger Agreement.
The foregoing Conditions are for the sole benefit of Merger Sub and its
affiliates and, subject to the terms of the Merger Agreement, may be asserted
by Merger Sub regardless of the circumstances giving rise to any such
Condition or may be waived by Merger Sub in whole or in part, from time to
time in its sole discretion. The failure by Merger Sub at any time to exercise
any of the foregoing rights will not be deemed a waiver of any such right and
each such right will be deemed an ongoing right that may be asserted at any
time and from time to time.
For the purposes of the Merger Agreement and as used herein, "Material
Adverse Effect" means, with respect to any entity or group of entities, a
material adverse effect on the business, operations, assets, liabilities,
financial condition or results of operations of such entity or group of
entities taken as a whole, other than any change, circumstance or effect (i)
relating to the economy or securities markets in general, (ii) relating to the
industries in which the Company or Richfood operate and not specifically
relating to the Company or Richfood, (iii) set forth or described in the
reports filed by the Company with the SEC, (iv) resulting from the execution
of the Merger Agreement, the announcement of the Merger Agreement and the
transactions contemplated thereby or any change in the value of the Company
Common Stock relating to such execution or announcement or (v) in the case of
the Company, resulting in diminution in the value after the date of the Merger
Agreement of the shares of common stock of Crown Books Corporation held by the
Company.
Recommendation of the Board of Directors. In the Merger Agreement, the
Company states that the Board has (i) unanimously determined that each of the
Merger Agreement and the transactions contemplated thereby, including the
Offer and the Merger, are fair to and in the best interests of the Company and
its stockholders, (ii) approved the Merger Agreement and the transactions
contemplated thereby, including the Offer and the Merger, (iii) resolved to
elect not to be subject to any state antitakeover law that is or purports to
be applicable to the Offer, the Merger or the transactions contemplated by the
Merger Agreement, (iv) taken all steps necessary to render Section 203 of the
DGCL inapplicable to the Merger Agreement, and the transactions contemplated
thereby, including the Offer and the Merger and (v) subject to its fiduciary
duties, resolved to recommend that its stockholders accept the Offer and
tender all of their Shares pursuant thereto and approve the Merger.
The Merger. The Merger Agreement provides that, subject to the terms and
conditions thereof, and in accordance with DGCL, Merger Sub will be merged
with and into the Company, with the Company continuing as the Surviving
Corporation and a wholly owned subsidiary of Richfood. The Merger will become
effective (the "Effective Time") by filing with the Secretary of State of the
State of Delaware, as soon as practicable on or after the third business day
following satisfaction or waiver of the conditions to the Merger (described
below under "Conditions to the Merger") (the "Closing Date"), a certificate of
merger in accordance with the relevant provisions of the DGCL.
At the Effective Time, (i) each Share issued and outstanding immediately
before the Effective Time (other than Shares described in clause (ii) below)
will be converted into the right to receive the Offer Consideration without
interest thereon (the "Merger Consideration"), (ii) (a) all shares of Company
Common Stock owned by the Company, Richfood, Merger Sub or any other wholly
owned subsidiary of Richfood or the Company
6
<PAGE>
immediately before the Effective Time will be cancelled and retired and will
cease to exist, and no consideration will be delivered or deliverable in
exchange therefor and (b) each Share held by any holder who has perfected any
dissenters' rights under the DGCL, as applicable (the "Dissenting Shares"),
will not be converted into or be exchangeable for the right to receive the
Merger Consideration, but instead will represent only the right to receive
payment of the appraisal value of such shares of Company Common Stock and
(iii) each share of common stock of Merger Sub issued and outstanding
immediately before the Effective Time will be converted into and become one
fully paid and nonassessable share of common stock, par value $1.00 per share,
of the Surviving Corporation.
The Merger Agreement provides that the Amended and Restated Certificate of
Incorporation and Amended and Restated Bylaws set forth in Annex II and III to
the Merger Agreement, respectively, will be the Amended and Restated
Certificate of Incorporation and Amended and Restated Bylaws of the Surviving
Corporation until amended in accordance with the terms thereof and the DGCL.
The Merger Agreement also provides that (i) the directors and officers of
Merger Sub immediately before the Effective Time will be the initial directors
and officers of the Surviving Corporation and (ii) the initial officers and
directors of the Surviving Corporation will hold office from the Effective
Time until their respective successors are duly elected or appointed and
qualify, or until their earlier death, resignation or removal in the manner
provided in the Amended and Restated Certificate of Incorporation and Amended
and Restated Bylaws of the Surviving Corporation.
Treatment of Options. In the Merger Agreement, the Company has agreed that
after the Effective Time, each holder of (i) a then-outstanding option
(collectively, the "Employee Options") to purchase Shares under the Stock
Option Plan and the option agreements between the Company and certain of its
officers, directors, employees and consultants thereunder or (ii) any other
option, warrant or other right to acquire (upon purchase, exchange, conversion
or otherwise) shares of Company Common Stock (collectively, the "Other
Options" and, together with the Employee Options, the "Options"), will be
entitled to receive for each Share subject to such Option, in settlement and
cancellation thereof, an amount (subject to any applicable withholding tax) in
cash equal to the difference between the Merger Consideration and the per
Share exercise price of such Option, to the extent such difference is a
positive number (such amount being hereafter referred to as the "Option
Consideration"). In the alternative, each holder of an Option outstanding at
the commencement of the Offer may tender such Option and thereby be entitled
to receive for each Share subject to such Option, upon consummation of the
Offer, an amount in cash equal to the Option Consideration. Notwithstanding
the above, with respect to any person subject to Section 16(a) of the Exchange
Act, any such amount will be paid as soon as practicable after the first date
payment can be made without liability to such person under Section 16(b) of
the Exchange Act. In the Merger Agreement, the Company has represented and
warranted to Richfood and Merger Sub that the Stock Option Plan has been
amended to the extent necessary to give effect to the foregoing. Upon receipt
of the related Option Consideration, each Option will be cancelled. The
surrender of an Option to the Company in exchange for the Option Consideration
will be deemed a release of any and all rights the holder had or may have had
in respect of such Option.
Directors. The Merger Agreement provides that, promptly upon the purchase by
Richfood or any of its subsidiaries (including Merger Sub) of such number of
shares of Company Common Stock which represents at least a majority of the
outstanding Shares (on a fully diluted basis), Richfood will be entitled to
designate such number of directors ("Richfood's Designees"), rounded up to the
next whole number, as will give Richfood representation on the Company's Board
of Directors equal to the product of the number of directors on the Company's
Board of Directors (giving effect to any increase in the number of directors
pursuant to this paragraph) multiplied by the percentage that such number of
Shares so purchased bears to the aggregate number of Shares outstanding (such
number being the "Board Percentage"). The Company will, subject to Richfood's
having provided the Company with the information regarding Richfood's
Designees required pursuant to Section 14(f) of the Exchange Act, promptly
satisfy the Board Percentage by (i) increasing the size of the Company's Board
of Directors or (ii) securing the resignations of such number of directors as
is necessary to enable Richfood's Designees to be elected to the Company's
Board of Directors. The Company has agreed to use its best efforts to cause
the then-remaining members of the Company's Board of Directors to promptly so
elect Richfood's Designees.
The Merger Agreement also provides that following the election or
appointment of Richfood's Designees and before the Effective Time, any
amendment or termination of the Merger Agreement, extension for the
7
<PAGE>
performance or waiver of the obligations or other acts of Richfood or Merger
Sub thereunder will require the concurrence of a majority of directors of the
Company then in office who were directors on the date of the Merger Agreement
and who voted to approve the Merger Agreement; provided, that if there are no
such directors, such actions may be effected by majority vote of the Company's
entire Board of Directors; provided, further, that after the approval of the
Merger Agreement by the Company's stockholders, no such amendment,
termination, modification or supplement shall reduce or change the Merger
Consideration or adversely affect the rights of the Company's stockholders
thereunder without the approval of such stockholders.
Stockholders' Meeting. Pursuant to the Merger Agreement, if required by
applicable law in order to consummate the Merger, the Company will (i) duly
call, give notice of, convene and hold a special meeting of its stockholders
as soon as practicable following the acceptance for payment of Shares by
Merger Sub pursuant to the Offer for the purpose of considering and taking
action upon the Merger and the Merger Agreement and (ii) prepare and file with
the SEC a preliminary proxy statement relating to the Merger and the Merger
Agreement, and use its reasonable best efforts (x) to obtain and furnish the
information required to be included by the SEC in the Proxy Statement (as
hereinafter defined) and, after consultation with Richfood, to respond
promptly to any comments made by the SEC with respect to the preliminary proxy
statement and cause a definitive proxy statement (the "Proxy Statement") to be
mailed to its stockholders and (y) to obtain the necessary approvals of the
Merger and the Merger Agreement by its stockholders. The Merger Agreement
provides further that, subject to the fiduciary duties of the Board of
Directors, the Company will include in the Proxy Statement the recommendation
of the Company's Board of Directors that stockholders of the Company vote in
favor of the approval of the Merger and the Merger Agreement. Finally,
Richfood is obligated under the Merger Agreement to vote, or cause to be
voted, all of the Shares owned by it, Merger Sub or any of its other
Subsidiaries in favor of the approval of the Merger and the Merger Agreement.
The Merger Agreement also provides that, in accordance with Section 253 of
the DGCL, in the event that Richfood, Merger Sub and any other subsidiary of
Richfood shall acquire at least 90% of the outstanding Shares pursuant to the
Offer, the parties shall take all necessary and appropriate action to cause
the Merger to become effective as soon as practicable after the acceptance for
payment of Shares by Merger Sub pursuant to the Offer without a meeting of
stockholders of the Company.
Representations and Warranties. The Merger Agreement contains certain
representations and warranties of the parties including representations by the
Company as to (i) organization and authority of the Company, (ii)
capitalization, (iii) authority relative to the Merger Agreement, (iv)
consents and approvals, (v) no violations or defaults, (vi) financial
statements and SEC reports, (vii) absence of certain events, (viii) materially
adverse litigation, (ix) title to and sufficiency of assets, (x) material
contracts, (xi) labor matters, (xii) employee benefit plans, (xiii) tax
matters, (xiv) compliance with law, (xv) transactions with affiliates, (xvi)
fees and expenses of brokers and others and (xvii) guarantees and absence of
undisclosed liabilities.
Interim Operations of the Company. Except as contemplated by the Merger
Agreement, the Company has covenanted and agreed that, between the date of the
Merger Agreement and before the Effective Time, the Company and its wholly
owned subsidiaries and partnerships will conduct their respective operations
according to their ordinary and usual course of business, consistent with past
practice, and will use their reasonable best efforts to preserve intact their
respective business organizations, to keep available the services of their
officers and employees and to maintain satisfactory relationships with
licensors, licensees, suppliers, contractors, distributors, customers and
others having material business relationships with them. Without limiting the
generality of the foregoing, the Company has agreed that, except as otherwise
provided in the Merger Agreement, before the Effective Time, neither the
Company nor any of its wholly owned subsidiaries or partnerships will, without
the prior consent of Richfood:
(i) amend its Articles or Certificate of Incorporation, bylaws,
partnership or joint venture agreements or other organizational documents;
(ii) authorize for issuance or issue, sell or deliver (whether through
the issuance or granting of options, warrants, commitments, subscriptions,
rights to purchase or otherwise) any stock of any class or any other
8
<PAGE>
securities or interests, except as required by the terms of any Company
Benefit Plan existing on the date of the Merger Agreement, or any options,
warrants, rights or other securities outstanding as of the date of the
Merger Agreement and disclosed pursuant to the Merger Agreement;
(iii) split, combine or reclassify any shares of its capital stock or
declare, set aside or pay any dividend or other distribution or redemption
(whether in cash, stock or property or any combination thereof) in respect
of its capital stock, or redeem or otherwise acquire any of its securities
or any securities of its subsidiaries and partnerships;
(iv) (A) incur or assume any Funded Debt (as defined below) not currently
outstanding, except for borrowings in the ordinary course of business under
revolving credit agreements in effect on the date of the Merger Agreement,
or permit any modifications or amendments of any agreements related to
Funded Debt, (B) assume, guarantee, endorse or otherwise become liable or
responsible for the obligations of any person (including, without
limitation, the obligations of any other subsidiary or partnership of the
Company), or permit the renewal or extension of any contract or other
obligation that is the subject of a guarantee or similar obligation, other
than the endorsement of checks for deposit in the ordinary course of
business, (C) make any loans, advances or capital contributions to, or
investments in, any other person (including, without limitation, any
subsidiary or partnership of the Company), (D) enter into any Contract, or
alter, amend, modify or exercise any option under any existing Contract,
other than in the ordinary course of business or in connection with the
transactions, contemplated by the Merger Agreement, (E) enter into, or
alter, amend, modify or exercise any option under, any supply or
requirements agreement or (F) authorize any capital expenditures other than
capital expenditures pursuant to Contracts entered into before the date of
the Merger Agreement, capital expenditures related to necessary maintenance
in the ordinary course of business or capital expenditures reflected in
Shoppers Food Warehouse Corporation's ("Shoppers") fiscal 1999 capital
budget;
(v) adopt or amend (except as may be required by law or as provided in
the Merger Agreement) any bonus, profit sharing, compensation, severance,
termination, stock option, stock appreciation right, restricted stock,
pension, retirement, deferred compensation, employment, severance or other
employee benefit agreements, trusts, plans, funds or other arrangements for
the benefit or welfare of any director, officer or employee, or (except for
normal increase to nonexecutive employees in the ordinary course of
business that are consistent with past practices and that, in the
aggregate, do not result in a material increase in benefits or compensation
expense) increase in any manner the compensation or fringe benefits of any
director, officer or employee or pay any benefit not required by any
existing plan or arrangement (including, without limitation, the granting
of stock options, stock appreciation rights, shares of restricted stock or
performance units) or enter into any contract, agreement, commitment or
arrangement to do any of the foregoing;
(vi) acquire, sell, lease or dispose of any material assets outside the
ordinary course of business;
(vii) take any action other than in the ordinary course of business and
in a manner consistent with past practice with respect to accounting
policies or practices;
(viii) make any material Tax election or settle or compromise any
material federal, state, local or foreign income Tax liability;
(ix) except for the payment of professional fees, pay, discharge or
satisfy any material claims, liabilities or obligations (absolute, accrued
or unasserted, contingent or otherwise), other than the payment, discharge
or satisfaction in the ordinary course of business of liabilities reflected
or reserved against in the Company's audited consolidated balance sheet as
of January 31, 1997, included in the Company's SEC Reports, or incurred in
the ordinary course of business since the date thereof;
(x) hold any meeting of its stockholders except to the extent required by
the request of the stockholders entitled to call a meeting under the
Company's Bylaws or the DGCL;
(xi) take any action that would or is reasonably likely to result in any
of the Conditions to the Merger not being satisfied as of the Closing Date;
or
(xii) agree in writing or otherwise to take any of the foregoing actions.
9
<PAGE>
"Funded Debt" means, without duplication, (i) all indebtedness for borrowed
money or which has been incurred in connection with the acquisition of assets,
in each case having a final maturity of one or more than one year from the
date of origin thereof (or which is renewable or extendible at the option of
the obligor for a period or periods more than one year from the date of
origin), but excluding all payments in respect thereof that are required to be
made within one year from the date of any determination of funded Debt to the
extent the obligation to make such payments shall constitute a current
liability of the obligor under generally accepted accounting principles
("GAAP"), (ii) all rentals payable under capitalized or synthetic leases and
(iii) all guaranties of Funded Debt of others.
Actions Regarding the Rights. The Company's Board of Directors has, in
accordance with the terms and provisions of the Rights Agreement, (i)
determined that the Distribution Date (as defined in the Rights Agreement)
that would otherwise occur by virtue of the commencement of the Offer shall be
indefinitely postponed and (ii) approved the redemption of the Rights in
connection with the Offer and the Merger. The Board has agreed to cause such
redemption to occur immediately before Merger Sub's purchase of Shares
pursuant to the Offer.
No Solicitation. In the Merger Agreement, the Company agreed that it will
not, directly or indirectly, through any officer, director, employee, agent or
otherwise, after the date of the Merger Agreement and before the Effective
Time, (i) solicit, initiate, or encourage submission of proposals, offers or
expressions of interest from any person relating to any acquisition or
purchase of all or (other than in the ordinary course of business) a
substantial portion of the assets of, or any equity interest in (including by
way of a tender offer), any Dart Company or partnership of the Company or any
business combination involving any Dart Company (any of the foregoing
proposals, offers or expressions of interest being referred to herein as an
"Acquisition Proposal") or (ii) participate in any negotiations or discussions
regarding, or furnish to any person any nonpublic information with respect to,
or otherwise cooperate in any way with, or assist or participate in,
facilitate or encourage, any Acquisition Proposal; provided, however, that the
Company may (at any time before the consummation of the Offer) participate in
discussions or negotiations with and furnish nonpublic information to any
person concerning an Acquisition Proposal submitted in writing to the
Company's Board of Directors after the date of the Merger Agreement if (A)
such Acquisition Proposal was not solicited, initiated or encouraged in
violation of the Merger Agreement and (B) the Company's Board of Directors
believes, in its good faith judgment, that such Acquisition Proposal is
reasonably likely to result in a proposal which is more favorable, from a
financial point of view, to the stockholders of the Company than the proposal
set forth in the Merger Agreement (a "Superior Proposal"). Until such time, if
any, that Richfood makes its first offer after receipt from the Company of
notice that the Company's Board of Directors has determined that an
Acquisition Proposal constitutes a Superior Proposal, the Company must notify
Richfood of such proposal as promptly as practicable (and in any event within
48 hours) and in such notice must indicate in reasonable detail the identity
of the person making the Acquisition Proposal and the terms and conditions of
such Acquisition Proposal, and must keep Richfood apprised of all material
developments relating to such Acquisition Proposal which could reasonably be
expected to culminate in the Company's Board of Directors withdrawing,
modifying or amending its recommendation of the Offer, the Merger and the
other transactions contemplated in the Merger Agreement in a manner adverse to
Merger Sub.
If the Company provides nonpublic information to any person who makes an
Acquisition Proposal in accordance with the terms of the Merger Agreement, the
Company is obligated to require such person to enter into a confidentiality
agreement on terms substantially similar to the Confidentiality Agreement as a
condition to and before providing any such information (except as to the
standstill provisions thereof, provided that if under the aforementioned
circumstances the Company enters into any confidentiality agreement without
standstill provisions substantially similar to those contained in the
Confidentiality Agreement, Richfood will to the extent of the difference be
relieved of compliance with the Confidentiality Agreement's standstill
provisions).
The Company has further agreed that as of the date of the Merger Agreement
it will immediately terminate any existing discussions or negotiations with
any third parties with respect to any Acquisition Proposal. The Company may
waive provisions of any "standstill" agreements between the Company and any
party to the
10
<PAGE>
extent necessary to permit such party to submit an Acquisition Proposal that
the Company's Board of Directors, in its good faith judgment, believes is
reasonably likely to result in a Superior Proposal; provided, however, that
such waiver (i) does not constitute solicitation, initiation or encouragement
of the submission of an Acquisition Proposal that would otherwise contravene
the provisions of the Merger Agreement and (ii) would not permit any person to
acquire beneficial ownership of Shares or participate in any tender offer or
proxy solicitation relating to the Company that would otherwise be prohibited
by such "standstill" agreement.
Shoppers Senior Notes. In the event any of the 9 3/4% Senior Notes due 2004
(the "Senior Notes") issued by Shoppers under the Indenture, dated as of June
26, 1997, between Shoppers, as issuer, and Norwest Bank Minnesota, N.A., as
trustee, are tendered to Shoppers by the holders thereof as a result of the
transactions contemplated in the Merger Agreement, Richfood will (i) cause
Shoppers to comply with its obligations under such indenture and (ii) if
necessary, lend to Shoppers all amounts required to repurchase any Senior
Notes so tendered.
Directors' and Officers' Indemnification. For a six-year period after the
consummation of the Offer, Richfood will cause the Company and its
Subsidiaries to maintain all rights of indemnification (including the rights
to advancement of expenses and exculpation from liability) existing in favor
of the present and former directors, officers, employees and agents of the
Company and its Subsidiaries (the "Indemnified Parties") on terms no less
favorable than those provided in the certificates of incorporation and bylaws
of such entities on the date of the Merger Agreement with respect to matters
occurring before the Effective Time. In addition, Richfood will and will cause
the Company and its Subsidiaries (and their successors) to perform all of
their respective obligations under certain indemnification agreements.
Richfood has acknowledged that all directors, officers or employees of the
Company are serving in their capacities at such Subsidiaries at the direction
and request of the Company.
Richfood will also maintain for a six-year period after the consummation of
the Offer the policies for directors' and officers' liability insurance
existing at the time the Merger Agreement was executed, including coverage
with respect to claims arising from facts or events that occurred at or before
the consummation of the Offer (provided that Richfood may substitute policies
of at least the same coverage containing terms and conditions that are not
materially less advantageous), to the extent such insurance is available to
Richfood on the market. If such insurance is not so available to Richfood,
Richfood will provide such level of insurance as is then provided to directors
and officers of Richfood.
In the event that Richfood or the Company or any of their respective
successors or assigns (i) consolidates with or merges into any other person
and is not the continuing or surviving corporation or entity in such
consolidation or merger or (ii) transfers all or substantially all of its
properties and assets to any person, then, and in each case, proper provisions
must be made so that the successors and assigns of Richfood or the Company, as
the case may be, honor the indemnification obligations set forth in the Merger
Agreement.
The obligations of the Company and Richfood with respect to the provision of
indemnification and directors' and officers' liability insurance to the
Indemnified Parties may not be terminated, modified or assigned in such a
manner so as to adversely affect any Indemnified Party without the consent of
such Indemnified Party.
Further Assurances. Subject to the terms and conditions of the Merger
Agreement, and subject to fiduciary obligations under applicable law as
advised by counsel, each of the parties has agreed to use its best efforts to
take, or cause to be taken, all actions, and to do, or cause to be done, all
things necessary, proper and advisable under applicable law to consummate and
make effective the transactions contemplated by the Merger Agreement. In case
at any time after the Effective Time any further action is necessary or
desirable to carry out the purposes of the Merger Agreement, the proper
officers and directors of each party to the Merger Agreement will take all
such necessary action. Richfood and the Company will execute any additional
instruments necessary to consummate the transactions contemplated by the
Merger Agreement.
Conditions to the Merger. Pursuant to Article VIII of the Merger Agreement,
the respective obligations of Merger Sub and the Company to consummate the
Merger are subject to the satisfaction, at or before the Effective
11
<PAGE>
Time, of the following conditions: (a) if required by DGCL, the Merger
Agreement and the Merger shall have been approved and adopted by the
affirmative vote of the holders of a majority of Shares entitled to vote
thereon; (b) no order, decree or injunction shall have been enacted, entered,
promulgated or enforced by any United States court of competent jurisdiction
or any United States Governmental Authority that prohibits the consummation of
the Merger; provided, however, that the parties to the Merger Agreement will
use their best efforts to have any such order, decree or injunction vacated or
reversed; and (c) any waiting period applicable to the Merger under the HSR
Act will have expired or been terminated, all applicable requirements of the
Exchange Act will have been satisfied and any applicable filings under state
securities, "Blue Sky" or takeover laws will have been made.
The obligations of the Company to consummate the Merger are subject to the
satisfaction or waiver at or before the Effective Time, of the following
conditions: (a) each of the representations and warranties of Richfood and
Merger Sub contained in the Merger Agreement, when read without exception or
qualification as to materiality or Material Adverse Effect on the Company,
must be true and correct in all material respects when made and at and as of
the consummation of the Offer with the same force and effect as if those
representations and warranties had been made at and as of such time (except to
the extent such representations and warranties speak as of a specified earlier
date, in which event such representations and warranties must be true and
correct as of such specified date), except where the failure to be so true and
correct would not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect on Richfood; and (b) Richfood and Merger Sub
must, in all material respects, have performed all obligations and complied
with all covenants necessary to be performed or complied with by them on or
before the consummation of the Offer.
The obligations of Richfood and Merger Sub to consummate the Merger are
subject to the satisfaction or waiver at or before the Effective Time of the
following conditions: (a) each of the representations and warranties of the
Company contained in the Merger Agreement, when read without exception or
qualification as to materiality or Material Adverse Effect on the Company must
be true and correct in all material respects when made and at and as of the
consummation of the Offer with the same force and effect as if those
representations and warranties had been made at and as of such time (except to
the extent such representations and warranties speak as of a specified earlier
date, in which event such representations and warranties must be true and
correct as of such specified date), except where the failure to be so true and
correct would not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect on the Company; and (b) the Company must, in
all material respects, have performed all obligations and complied with all
covenants necessary to be performed or complied with by it on or before the
consummation of the Offer.
Termination. Pursuant to Section 9.1 of the Merger Agreement, the Merger
Agreement may be terminated and the Merger may be abandoned at any time
(notwithstanding the approval of the Merger by the respective stockholders of
the Company and Merger Sub) before the Effective Time: (a) by mutual written
consent of the Company and Richfood; (b) by the Company or Richfood, if either
(x) the Offer has not been consummated as of June 30, 1998 or (y) the
Effective Time has not occurred on or before December 31, 1998 (provided, that
the right to terminate the Merger Agreement under this provision shall not be
available to any party whose failure to fulfill any obligation under the
Merger Agreement has been the cause of or has resulted in the failure of the
consummating of the Offer or the Effective Time to occur on or before the
applicable date set forth above); (c) by the Company if there has been a
material breach by Richfood of any representation, warranty, covenant or
agreement set forth in the Merger Agreement, which breach has not been cured
within twenty business days following notice to Richfood of such breach; (d)
by Richfood if (i) subject to the Company's right to cure within 20 business
days of notice, the representations and warranties of the Company set forth in
the Merger Agreement, when read without any exception or qualification as to
materiality or Material Adverse Effect on the Company, are not true and
accurate as of the date of the Merger Agreement and the date of the
consummation of the Offer (except for those representations and warranties
that address matters only as of a particular date or only with respect to such
period) except where the failure to be so true and correct would not,
individually or in the aggregate, reasonably be expected to (A) have a
Material Adverse Effect on the Company, (B) prevent the consummation of the
Offer or (C) have a material adverse effect on the benefits to Richfood of the
transactions contemplated by the Merger Agreement, (ii) subject to the
Company's right to cure within 20 business days of
12
<PAGE>
notice, (A) the Company has not performed, in all material respects, all
obligations and complied with all covenants necessary to be performed or
complied with by it or (B) an event shall have occurred relating to a non-
wholly owned subsidiary or partnership of the Company that would be prohibited
by the covenants set forth in Section 7.1(a) of the Merger Agreement if such
subsidiary or partnership had been wholly owned by the Company and which event
has a material adverse effect on the benefits to Richfood of the transactions
contemplated by the Merger Agreement, or (iii) the Company's Board of
Directors should fail to recommend to its stockholders approval of the
transactions contemplated by the Merger Agreement, including, without
limitation, the Offer and the Merger, or such recommendation has been made and
subsequently withdrawn, modified or amended in any manner adverse to Richfood;
(e) by the Company if, before the Effective Time, a Superior Proposal has been
made; provided, that (i) if a component of such Superior Proposal is cash
consideration, then the party making such Superior Proposal has cash on hand
or financing in place to provide such cash consideration, which financing is
committed and/or underwritten substantially to the same extent as Richfood's
financing was on the date the Merger Agreement was executed, (ii) the
Company's Board of Directors intends to enter into a definitive agreement
relating to such Superior Proposal immediately following the termination of
the Merger Agreement, and (iii) Richfood does not make, within two business
days of receiving the first notice from the Company specifying that the
Company's Board of Directors has determined that an Acquisition Proposal
constitutes a Superior Proposal giving rise to a potential right of
termination, an offer that the Company's Board of Directors believes, in good
faith after consultation with its financial advisors, is more favorable, from
a financial point of view, to the Company's stockholders than such Superior
Proposal; or (f) by the Company or Richfood, if any court of competent
jurisdiction in the United States or other United States Governmental
Authority shall have issued an order, decree or ruling or taken any other
action restraining, enjoining or otherwise prohibiting the Merger and such
order, decree, ruling or other action has become final and nonappealable.
Effect of Termination; Termination Fee. In the event of the termination of
the Merger Agreement, in accordance with its terms, the Merger Agreement will
forthwith become void and have no effect, without any liability on the part of
any party thereto or its directors, officers or stockholders, other than the
provisions of the Merger Agreement relating to the Confidentiality Agreement,
the effect of termination and the Termination Fee (as defined herein) and the
provisions of Article X thereof.
In the Merger Agreement, the Company has agreed to pay Richfood $6.0 million
plus actual out-of-pocket expenses incurred by Richfood or on its behalf in
connection with the transactions contemplated in the Merger Agreement (such
amount of expenses not to exceed $500,000) (the "Termination Fee") if: (a) the
Merger Agreement is terminated by Richfood because the purchase of Shares
pursuant to the Offer has not been consummated on or before June 30, 1998 and
the failure of the consummation of the Offer is caused by or is attributable
to the failure of the conditions to the Offer set forth in clauses (b), (c),
(e) or (g)(2) of Annex I to the Merger Agreement to be satisfied, (b) the
Merger Agreement is terminated by Richfood if (i) any of the events described
in clauses (b) or (c) of Annex I to the Merger Agreement has occurred, which
event has not been cured by the Company within 20 business days following
notice to the Company of such event or (ii) the Company's Board of Directors
has failed to recommend to its stockholders approval of the transactions
contemplated by the Merger Agreement or such recommendation has been made and
subsequently withdrawn, modified or amended in any manner adverse to Richfood,
or (c) the Merger Agreement is terminated by the Company pursuant to the
provisions described in clause (e) under "Termination" above. The foregoing
provisions are the sole remedy of the parties to the Merger Agreement in the
event of any termination of the Merger Agreement; provided, however, that the
foregoing does not relieve any party from liability for any material breach of
the Merger Agreement.
Amendment. The Merger Agreement may be amended by action taken by the
parties thereto at any time before or after approval of the Merger by the
Company's stockholders (if stockholder approval of the Merger is required by
applicable law) but, after any such approval, no amendment will be made that
would have any of the effects specified in DGCL Section 251(d) without the
approval of the Company's stockholders. The Merger Agreement may not be
amended except by an instrument in writing signed on behalf of the Company,
Richfood and Merger Sub.
13
<PAGE>
Confidentiality Agreement
The following is a summary of certain material provisions of the
Confidentiality Agreement, dated as of February 3, 1998, between Richfood and
the Company (the "Confidentiality Agreement"). This summary does not purport
to be complete and is qualified in its entirety by reference to the
Confidentiality Agreement which is filed herewith as Exhibit H and is
incorporated herein by reference. Capitalized terms not otherwise defined
below shall have the meanings set forth in the Confidentiality Agreement.
The Confidentiality Agreement contains customary provisions pursuant to
which, among other matters, Richfood agreed to keep confidential all
nonpublic, confidential or proprietary information furnished to it by the
13--1
<PAGE>
Fees and Expenses. The Merger Agreement provides that each party will bear
its own expenses incurred in connection with the Merger Agreement and the
transactions contemplated thereby, whether or not the Merger is consummated.
Confidentiality Agreement
The following is a summary of certain material provisions of the
Confidentiality Agreement, dated as of February 3, 1998, between Richfood and
the Company (the "Confidentiality Agreement"). This summary does not purport
to be complete and is qualified in its entirety by reference to the
Confidentiality Agreement which is filed herewith as Exhibit H and is
incorporated herein by reference.
The Confidentiality Agreement contains customary provisions pursuant to
which, among other matters, Richfood agreed to keep confidential all
nonpublic, confidential or proprietary information furnished to it by the
Company relating to the Company, subject to certain exceptions (the
"Evaluation Material"), and to use the Evaluation Material solely for the
purpose of evaluating a possible transaction involving the Company and
Richfood. Richfood has agreed in the Confidentiality Agreement that for a
period of two years from the date thereof, unless specifically permitted in
writing in advance by the Company, neither it nor its affiliates will, among
other things, directly or indirectly, (i) acquire or offer to acquire
ownership (including, but not limited to, beneficial ownership as defined in
Rule 13d-3 under the Exchange Act) of any assets or business of the Company
(other than in the ordinary course of Richfood's business as wholesale
supplier to Shoppers) or of any voting or other securities or rights or
options to acquire such ownership, (ii) make or participate in any
"solicitation" of "proxies" (as such terms are used in the proxy rules of the
SEC) or (iii) seek to influence or control the management or policies of the
Company or any of its affiliates (other than in the ordinary course of
Richfood's business as wholesale supplier to Shoppers). Richfood further
agreed that, for a period of one year from the date of the Confidentiality
Agreement, it will not solicit for hire any of the employees of the Company
with whom Richfood has had contact during the period of its investigation of
the Company or who became known to Richfood in the course of its consideration
of a possible transaction with the Company.
Supply Arrangements with Richfood
Since June 3, 1991, Shoppers and Richfood (and a corporate predecessor,
Super Rite Foods, Inc.) have had a contract by which Richfood supplied a
substantial portion of the grocery products purchased for resale by Shoppers.
The initial contract ran from June 1991 to June 1995. The supply contract was
twice extended for one-year renewal terms. Since the last renewal term ended
in 1997, the parties have continued to operate under the terms of the original
June 3, 1991 contract although the contract is no longer in effect.
ITEM 4. THE SOLICITATION OR RECOMMENDATION
(a) Recommendation of the Board of Directors
The Board of Directors of the Company has unanimously approved the Merger
Agreement and the transactions contemplated thereby and determined that the
Offer and the Merger, taken together, are fair to, and in the best interests
of, the Company and its stockholders. THE BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS ACCEPTANCE OF THE OFFER AND APPROVAL AND ADOPTION OF THE MERGER
AGREEMENT BY THE STOCKHOLDERS OF THE COMPANY. This recommendation is based in
part upon an opinion of Wasserstein Perella & Co., Inc. ("Wasserstein
Perella"), dated as of April 8, 1998, to the effect that, as of such date, the
consideration to be received by the Company's stockholders in the Offer and
the Merger is fair to the stockholders from a financial point of view (the
"Fairness Opinion"). The Fairness Opinion contains a description of the
factors considered, the assumptions made and the scope of the review
undertaken by Wasserstein Perella in rendering its opinion. The full text of
the Fairness Opinion is attached as Exhibit I to this Schedule 14D-9 and is
incorporated herein by reference. Stockholders are urged to read the Fairness
Opinion in its entirety.
(b) Background; Reasons for the Recommendation of the Company's Board of
Directors
14
<PAGE>
Background
In March 1997, following the purchase by the Company of the 50% of Shoppers
that it did not previously own from the Herman family, the Company explored
the possibility of selling Shoppers and contacted several prospective buyers
including Richfood. Ultimately, the Company concluded that it was not in its
best interests to sell Shoppers at that time because of the price levels
proposed and tax inefficiencies in the proposed structures.
In early December 1997, Mr. Stone, who was then Acting Chief Executive
Officer of the Company, was contacted by Mr. John E. Stokely, President and
Chief Executive Officer of Richfood, who requested a meeting. On December 17,
1997, Mr. Stone and Mr. William White, President of Shoppers, met with Mr.
Stokely to discuss the possibility of a business combination involving
Richfood and the Company. This meeting was followed by several telephone
conversations in December 1997 and January 1998. No firm proposals resulted
from these discussions.
On February 5, 1998, the Company consummated a settlement of disputes which
had been the subject of nearly five years of litigation involving the Hafts,
its founding family. These disputes had impacted the basic corporate
governance structure of the Company. In connection with the closing of the
settlement agreements, substantially all litigation involving the Company, its
subsidiaries and any Haft family members was dismissed with prejudice.
Following the consummation of the settlements with the Hafts, the Company
established a corporate governance structure more typical of public companies
that do not have controlling stockholders.
As a result of the discussions between Mr. Stokely and Mr. Stone in January
1998, the Company and Richfood entered into the Confidentiality Agreement on
February 3, 1998. Because the Company was still completing the final
transactions connected to the Haft settlements and was in the process of
completing changes to its corporate governance structure, the Company did not
pursue discussions about terms of a potential agreement and no formal
diligence review process was begun at that time.
In early February, the Company received a written indication of interest
from a group of investors (the "first potential bidder") for the purchase of
Shoppers for $360 million in cash. This indication of interest was reported in
The Washington Post on February 12, 1998. The letter did not indicate any
source of financing and was contingent upon a diligence review. The letter
also did not address how various intercompany liabilities would be handled.
On February 12, 1998, Mr. Stone received a letter from Mr. Stokely stating
that Richfood continued to be interested in acquiring Shoppers at a value
superior to that attributed in The Washington Post to the first potential
bidder. Again, the Company postponed a formal response until it had finalized
its corporate governance structure and the Board of Directors made a
determination whether to explore possible extraordinary business transactions
involving the Company or its businesses.
On February 10 and 12, the Company's Board met to resolve a number of issues
that remained after the conclusion of the Haft family litigation and the
closing of the settlement agreements. At the meeting on February 12, the
Company's Board unanimously resolved to repurchase all of the Company's voting
stock, which was held in a voting trust for the benefit of Ronald S. Haft. At
the same time it repurchased all of the Company's voting stock, the Board
resolved to amend and restate the Company's Certificate of Incorporation to
eliminate the two-tiered common stock capitalization (in which substantially
all of the Company's voting common stock had been held by the Haft family) and
to provide voting rights for the Company's public stockholders. At that time,
the Board determined to retain a financial advisor and explore the possibility
of engaging in a sale of the Company or other transaction to maximize
stockholder value.
On March 2, 1998, Mr. Stokely and Mr. John C. Belknap, Executive Vice
President and Chief Financial Officer of Richfood, visited Mr. Stone and Mr.
Harry M. Linowes, a Director of the Company, at the Company's headquarters to
discuss a possible business combination between Richfood and the Company. No
agreements were reached at this meeting.
15
<PAGE>
On March 4, 1998, the Company retained Wasserstein Perella to be its
financial advisor in connection with possible transactions to maximize
stockholder value and issued a press release to that effect. Thereafter,
Wasserstein Perella contacted approximately 15 potential strategic buyers to
inquire whether they had any interest in acquiring all or any part of the
Company. On March 9, 1998, a team of representatives of Richfood began an
intensive due diligence review of the Company's books and records. In
addition, representatives of Richfood conducted extensive interviews of
management of the Company and each of its significant subsidiaries.
In March 1998, the Company entered into confidentiality agreements with
other parties, including the first potential bidder and another interested
party (the "second potential bidder"). Representatives of the first potential
bidder began diligence on March 23, which diligence process continued until
early April. Representatives of the second potential bidder began diligence on
March 27, conducted interviews on March 30, and continued diligence into early
April.
Mr. Stokely and Mr. Belknap presented a formal offer to Mr. Stone, Mr.
Howard M. Metzenbaum and others on March 23, 1998 that contemplated a stock-
for-stock merger pursuant to which Richfood would acquire the Company at an
indicated value of $147 per share. The Company informed Richfood that it would
consider the proposal but that it was not, at that time, in a position to
recommend or accept the proposal.
On March 30, 1998, the Board held a meeting at which Wasserstein Perella
made a formal presentation analyzing the offer from Richfood and indications
of interest from the other potential bidders and providing a preliminary
indication of a range of values of the Company and its constituent parts.
After considering the advantages and disadvantages of a stock-for-stock and a
cash-for-stock transaction, the Board directed Wasserstein Perella to explore
the possibility of a cash transaction with potential bidders in order to
determine whether a more favorable proposal could be obtained on that basis.
On April 3, 1998, the Board met to discuss the status of the proposal made
by Richfood and the indications of interest received from the other potential
bidders. After discussing these matters with its financial and legal advisors,
the Board directed Wasserstein Perella to advise Richfood that the
consideration offered in the stock-for-stock proposal was inadequate and that
Richfood submit its last and best offer which need not be in the form of
stock. After discussions between Wasserstein Perella and Donaldson, Lufkin &
Jenrette Securities Corporation, financial advisor to Richfood ("DLJ"), on
April 3, 1998, Richfood indicated its willingness to pay $157 per share in a
cash transaction. Wasserstein Perella informed the Board that Richfood had
increased its offer to $157 per share and the Board directed Wasserstein
Perella to seek a further increase in the price. After further discussions
between Wasserstein Perella and DLJ, Richfood expressed a willingness to
increase its offer to $160 per share in cash if definitive documentation could
be executed promptly.
Thereafter, Wasserstein Perella continued its discussions with
representatives of the other potential bidders and advised them to conclude
their diligence efforts on an accelerated basis. On April 3, 1998, the
Company's counsel sent a proposed agreement to Richfood and each of the other
potential bidders. Wasserstein Perella indicated to the other potential
bidders that it would be to their advantage to deliver a formal written offer
by 9:00 a.m. on Monday, April 6, 1998 and that a Board meeting was scheduled
to be held later that day.
However, neither of the other potential bidders made a noncontingent
proposal to the Board that day, and the Board meeting was postponed. Although
both other potential bidders submitted indications of interest to the Board
and the second potential bidder indicated interest in acquiring the Company in
a cash transaction at $160 per share, neither bidder submitted a definitive
offer at any time to the Board. In addition, the Board took into account that
neither of the other potential bidders indicated a willingness to acquire the
Company at a cash price higher than that of Richfood and that both indications
of interest were highly contingent on some combination of more due diligence,
financing sources and/or expectations about the price such potential bidder
could receive on the sale of certain of the Company's assets.
16
<PAGE>
From April 5, 1998 through April 8, 1998, the Company engaged in extensive
negotiations with Richfood concerning the terms of a definitive merger
agreement under which Richfood would acquire the Company for cash. The
contractual terms negotiated with Richfood during this period included, among
others, the terms of the Offer, the representations and warranties to be made
by the Company, the conditions to Merger Sub's obligations to consummate the
Offer and the Merger, a standard termination fee, the instances in which the
termination fee would be payable and procedures for responding to a superior
proposal.
The terms of the Merger Agreement were reviewed by the Board at a meeting
held on April 8, 1998, and certain terms of the Merger Agreement were further
negotiated at the direction of the Board. At the meeting, Wasserstein Perella
made its formal presentation to the Board as to the fairness of the proposed
merger, indicating its view that as of such date, the $160 per share cash
consideration to be received by the stockholders in the Offer and the Merger
was fair from a financial point of view. Wasserstein Perella indicated that it
was prepared to present a formal written fairness opinion and subsequently
delivered such opinion dated April 8, 1998.
At the meeting, the Board also reviewed the indications of interest received
from the other potential bidders and concluded that both of the indications of
interest were highly conditional and not sufficiently likely to result in an
unconditional superior proposal as to merit delay in reaching an agreement
with Richfood and the possibility of not reaching an agreement at all.
On the night of April 8, 1998, following further negotiation of the Merger
Agreement, the Board reconvened by telephone and approved the Merger Agreement
and the transactions contemplated thereby.
On April 9, 1998, the Company and Richfood executed and delivered the Merger
Agreement, and the Company and Richfood each issued a press release announcing
the execution of the Merger Agreement before the opening of the New York Stock
Exchange. A copy of the press release issued by the Company is filed as
Exhibit J.
Reasons for the Recommendation of the Company's Board of Directors
In light of the Board of Directors' review of the Company's competitive and
financial position, recent operating results and prospects, the Board
determined that the Offer and the Merger, taken together, are fair to, and in
the best interests of, the Company and its stockholders. In making such
recommendation and in approving the Merger Agreement and the transactions
contemplated thereby, the Board considered a number of factors, including, but
not limited to, the following:
(1) the terms and conditions of the Merger Agreement, including the
parties' representations, warranties and covenants, the conditions to their
respective obligations, the limited ability of Richfood and Merger Sub to
terminate the Offer or the Merger Agreement and the provision for payment
of all cash with no financing condition;
(2) the financial condition, results of operations, cash flows and
prospects of the Company;
(3) the prospects of the Company if the Company were to remain
independent and the risks inherent in remaining independent, including
competitive risks;
(4) the extensive arms-length negotiations between the Company and
Richfood that resulted in the $160 per Share price;
(5) the history of the Company's discussions with other parties,
including, without limitation, (i) the opportunity provided to other
parties to submit proposals to the Company and (ii) that proposals made by
other parties were more conditional or had greater uncertainty than the
Offer and the Merger;
(6) that the Offer and the Merger provide for a prompt cash tender offer
for all Shares to be followed by a merger for the same consideration,
thereby enabling the Company's stockholders to obtain the benefits of the
transaction in exchange for their Shares at the earliest possible time;
(7) the current status of the industries in which the Company competes
and the financial resources available to the Company's competitors;
17
<PAGE>
(8) the recent trading price of the Shares and that the $160 per Share to
be paid in the Offer and as the consideration in the Merger represents (x)
a premium of approximately 14.3% over the $140.00 closing sale price for
the Shares on the NASDAQ on April 8, 1998, the last trading day before the
public announcement of the execution of the Merger Agreement, and (y) a
premium of approximately 48.1% over the $108.00 closing sale price for the
Shares on the NASDAQ on February 11, 1998, the day before public disclosure
was made that a group had made a proposal to acquire Shoppers, the
Company's principal asset;
(9) that in view of the efforts of the Company and Wasserstein Perella to
find strategic partners and potential acquirors, and the public
announcement with respect thereto, as well as the notice to each potential
bidder of the need to make their best proposal by April 6, 1998, no
definitive unconditional offer had been made and the likelihood that an
unconditional superior offer would ultimately be made was insufficient to
justify the risk of delay in proceeding with the favorable transaction with
Richfood;
(10) the financial presentations of Wasserstein Perella made on March 30,
1998 and April 8, 1998 and the oral opinion of Wasserstein Perella
delivered to the Company Board at the April 8, 1998 Company Board meeting
(subsequently confirmed in writing as of such date) to the effect that, as
of such date and based upon and subject to certain matters stated in such
opinion, the cash consideration of $160 per Share to be received by holders
of Shares in the Offer and the Merger was fair, from a financial point of
view, to such holders. Wasserstein Perella's opinion is directed only to
the fairness, from a financial point of view, of the cash consideration to
be received in the Offer and the Merger to holders of Shares and is not
intended to constitute, and does not constitute, a recommendation as to
whether any stockholder should tender Shares pursuant to the Offer.
STOCKHOLDERS ARE URGED TO READ THE FAIRNESS OPINION IN ITS ENTIRETY;
(11) the Merger Agreement permits the Board, in the exercise of its
fiduciary duties, to furnish information and data, and enter into
discussions and negotiations, in connection with an unsolicited acquisition
proposal and recommend an unsolicited acquisition proposal to the Company's
stockholders;
(12) the Merger Agreement permits the Company Board, in the exercise of
its fiduciary duties, to terminate the Merger Agreement in favor of a
Superior Proposal; upon such termination, the Company must pay Richfood a
fee of $6 million, plus up to $500,000 of expenses (representing
approximately 3.0% of the total value of the consideration to be paid to
stockholders and Option holders in the Offer and the Merger with respect to
outstanding Shares on a fully diluted basis);
(13) the business reputation of Richfood and its management, and
Richfood's financial strength, including its ability to finance the Offer;
and
(14) the likelihood of continued consolidation in the industries in which
the Company competes and the possibility that changes in those industries,
depending on their nature, could be disadvantageous to the Company.
The Company's Board of Directors did not assign relative weights to the
above factors or determine that any factor was of particular importance.
Rather, the Board viewed its position and recommendations as being based on
the totality of the information presented to and considered by it. In
addition, it is possible that different members of the Board assigned
different weights to the factors.
The Company's Board of Directors recognized that, while the consummation of
the Offer gives the Company's stockholders the opportunity to realize a
significant premium over the price at which the Shares were traded before the
public announcement of the Offer, tendering in the Offer would eliminate the
opportunity for such stockholders to participate in the future growth and
profits of the Company. The Board believes that the loss of the opportunity to
participate in the growth and profits of the Company was reflected in the
Offer Consideration of $160 per Share. The Board also recognized that there
can be no assurance as to the level of growth or profits to be attained by the
Company in the future.
18
<PAGE>
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED
Pursuant to the terms of the engagement letter dated March 4, 1998 (the
"Wasserstein Engagement Letter"), the Company has retained Wasserstein Perella
as its financial advisor in considering the Company's financial and strategic
alternatives, including the possible sale of (or other extraordinary
transactions involving) the Company and/or its subsidiaries.
The Company agreed in the Wasserstein Engagement Letter that it will pay
Wasserstein Perella a transaction fee, based on a formula set forth therein,
which will result in a cash payment to Wasserstein Perella of approximately
three million dollars payable in pro rata installments upon consummation of
the Offer and the Merger. Whether or not any transaction is proposed or
consummated, the Company has agreed to reimburse Wasserstein Perella for
reasonable travel and other out-of-pocket expenses, including reasonable legal
fees and expenses. In a separate indemnification agreement, which the
Wasserstein Engagement Letter incorporates by reference, the Company agreed to
indemnify Wasserstein Perella against certain liabilities arising out of
Wasserstein Perella's engagement. In the ordinary course of business,
Wasserstein Perella and its affiliates may from time to time make a market in,
have a long or short position in, buy and sell and otherwise effect
transactions for their own account or for the account of customers in
securities of the Company and other entities that are or may be subject to the
engagement contemplated by the Wasserstein Engagement Letter.
Except as disclosed herein, neither the Company nor any person acting on its
behalf has employed, retained or agreed to compensate any person to make
solicitations or recommendations to the stockholders concerning the Offer or
the Merger.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES
(a) During the past 60 days, no transactions in Shares have been effected by
the Company or, to the best of the Company's knowledge, by any of its
executive officers, directors, affiliates or subsidiaries, except that the
Company issued 18,400 shares of Company Common Stock to several former
employees of the Company pursuant to options held by such former employees
under a 1983 stock option plan, and that Mr. Stone was granted the restricted
stock and options described in Item 3(b) (the provisions of which are
incorporated herein by reference) and elsewhere herein. On February 17, 1998,
the Company repurchased all of its Class A Common Stock and Class B Common
Stock held in a voting trust for the benefit of Ronald Haft, and filed its
Amended and Restated Certificate of Incorporation in the Secretary of State's
office in Delaware resulting in the reclassification of the Class A Common
Stock and Class B Common Stock into a single class of common stock with one
vote per share.
(b) To the best knowledge of the Company, all of its executive officers,
directors, affiliates and subsidiaries currently intend to tender pursuant to
the Offer all Shares held of record or beneficially owned by such persons
(other than shares issuable upon the exercise of Options and Shares, if any,
which if tendered could cause such persons to incur liability under the
provisions of Section 16(b) of the Exchange Act), subject to and consistent
with any fiduciary obligations of such persons.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY
(a) Except as set forth in this Statement, the Company is not engaged in any
negotiation in response to the Offer that relates to or would result in (i) an
extraordinary transaction, such as a merger or reorganization, involving the
Company or any subsidiary of the Company, (ii) a purchase, sale or transfer of
a material amount of assets by the Company or any subsidiary of the Company,
(iii) a tender offer for or other acquisition of securities by or of the
Company or (iv) any material change in the present capitalization or dividend
policy of the Company.
(b) Except as described in Item 3(b) or 4 above (the provisions of which are
hereby incorporated by reference), there are no transactions, Board of
Directors resolutions, agreements in principle, or signed contracts in
response to the Offer that relate to or would result in one or more of the
events referred to in Item 7(a) above.
19
<PAGE>
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED
Not applicable.
ITEM 9. MATERIALS TO BE FILED AS EXHIBITS
<TABLE>
<C> <S>
Exhibit A Agreement and Plan of Merger dated as of April 9, 1998 by and
among Richfood, Merger Sub and the Company
Exhibit B Employment Agreement by and between the Company and Richard B.
Stone dated as of February 12, 1998
Exhibit C Dart Group Corporation 1992 Stock Option Plan
Exhibit D 1998 Amendment to Dart Group Corporation 1992 Stock Option Plan
Exhibit E Article Eighth of the Amended and Restated Certificate of
Incorporation of the Company
Exhibit F Article VII of the Amended and Restated Bylaws of the Company
Exhibit G Form of Indemnification Agreement
Exhibit H Confidentiality Agreement dated as of February 3, 1998 between
Richfood and the Company
Exhibit I Opinion of Wasserstein Perella & Co., Inc. dated April 8, 1998
Exhibit J Press Release of the Company dated April 9, 1998
</TABLE>
20
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this Statement is true, complete and
correct.
Dart Group Corporation
/s/ Richard B. Stone
By: _________________________________
Name: Richard B. Stone
Title: Chairman of the Board
andChief Executive Officer
21
<PAGE>
Exhibit A
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
RICHFOOD HOLDINGS, INC.,
DGC ACQUISITION, INC.
AND
DART GROUP CORPORATION
-----------------------------------
Dated as of April 9, 1998
-----------------------------------
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
----
ARTICLE I
DEFINITIONS
<S> <C> <C>
Section 1.1. Agreement................................................ 2
Section 1.2. Certificates............................................. 2
Section 1.3. Closing; Closing Date.................................... 2
Section 1.4. Code..................................................... 3
Section 1.5. Confidentiality Agreement................................ 3
Section 1.6. Contracts................................................ 3
Section 1.7. Crown.................................................... 3
Section 1.8. Crown Common Stock....................................... 3
Section 1.9. Dart..................................................... 3
Section 1.10. Dart Common Stock........................................ 3
Section 1.11. Dart Companies........................................... 3
Section 1.12. Dart Group Fiscal 1998 Financial Statements.............. 4
Section 1.13. Dart Group SEC Reports................................... 4
Section 1.14. DGCL..................................................... 5
Section 1.15. DLJ...................................................... 5
Section 1.16. Effective Time........................................... 5
Section 1.17. ERISA.................................................... 5
Section 1.18. Exchange Act............................................. 5
Section 1.19. GAAP..................................................... 5
Section 1.20. Governmental Authority................................... 5
Section 1.21. HSR Act.................................................. 6
Section 1.22. IRS...................................................... 6
Section 1.23. Knowledge of Dart........................................ 6
Section 1.24. Law...................................................... 6
Section 1.25. Material Adverse Effect.................................. 6
Section 1.26. Merger................................................... 7
Section 1.27. Merger Consideration..................................... 7
Section 1.28. Merger Subsidiary........................................ 7
Section 1.29. Nasdaq................................................... 7
Section 1.30. Offer; Offer Consideration............................... 7
Section 1.31. Offer Documents.......................................... 7
Section 1.32. Partnership; Partnerships................................ 8
Section 1.33. Paying Agent............................................. 8
Section 1.34. Permits.................................................. 8
Section 1.35. Richfood................................................. 8
Section 1.36. Rights; Rights Agreement................................. 8
Section 1.37. Schedule 14D-1........................................... 8
Section 1.38. Schedule 14D-9........................................... 9
Section 1.39. SEC...................................................... 9
Section 1.40. Securities Act........................................... 9
Section 1.41. Shares................................................... 9
Section 1.42. Shoppers................................................. 9
Section 1.43. Subsidiary; Subsidiaries................................. 9
Section 1.44. Tax Returns.............................................. 10
</TABLE>
- i -
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
Section 1.45. Taxes.................................................... 10
Section 1.46. Trak..................................................... 10
Section 1.47. Trak Common Stock........................................ 11
Section 1.48. Wasserstein.............................................. 11
<CAPTION>
ARTICLE II
THE OFFER
<S> <C> <C>
Section 2.1. The Offer................................................ 11
Section 2.2. Offer Documents.......................................... 13
Section 2.3. Dart Actions............................................. 15
Section 2.4. Directors................................................ 18
<CAPTION>
ARTICLE III
THE MERGER
<CAPTION>
<S> <C> <C>
Section 3.1. The Merger............................................... 20
Section 3.2. Closing.................................................. 21
Section 3.3. Effective Time of the Merger............................. 21
Section 3.4. Effects of the Merger.................................... 21
Section 3.5. Stockholders' Meeting.................................... 22
Section 3.6. Merger Without Meeting of Shareholders................... 24
<CAPTION>
ARTICLE IV
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF
THE CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
<S> <C> <C>
Section 4.1. Effect on Capital Stock.................................. 24
Section 4.2. Conversion of Securities................................. 25
Section 4.3. Payment for Shares....................................... 26
Section 4.4. Stock Transfer Books..................................... 31
Section 4.5. Stock Options............................................ 31
Section 4.6. Dissenting Shares........................................ 32
<CAPTION>
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF RICHFOOD
AND MERGER SUBSIDIARY
<S> <C> <C>
Section 5.1. Organization and Authority............................... 33
Section 5.2. Authority Relative to this Agreement..................... 34
Section 5.3. Consents and Approvals; No Violations.................... 35
Section 5.4. Information Supplied..................................... 36
Section 5.5. Financial Capability..................................... 37
Section 5.6. Fees and Expenses of Brokers and Others.................. 37
</TABLE>
- ii -
<PAGE>
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
OF DART
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
Section 6.1. Organization and Authority of the Dart Companies......... 38
Section 6.2. Capitalization........................................... 39
Section 6.3. Authority Relative to this Agreement..................... 42
Section 6.4. Consents and Approvals; No Violations.................... 43
Section 6.5. Reports.................................................. 45
Section 6.6. Absence of Certain Events................................ 47
Section 6.7. Litigation............................................... 48
Section 6.8. Title to and Sufficiency of Assets....................... 49
Section 6.9. Contracts................................................ 49
Section 6.10. Labor Matters............................................ 51
Section 6.11. Employee Benefit Plans................................... 52
Section 6.12. Tax Matters.............................................. 54
Section 6.13. Compliance with Law...................................... 58
Section 6.14. Transactions With Affiliates............................. 58
Section 6.15. Fees and Expenses of Brokers and Others.................. 59
Section 6.16. Absence of Undisclosed Liabilities; Guarantees........... 60
Section 6.17. Information Supplied..................................... 61
<CAPTION>
ARTICLE VII
COVENANTS
<S> <C> <C>
Section 7.1. Conduct of the Business of Dart.......................... 62
Section 7.2. No Solicitation.......................................... 69
Section 7.3. Access to Information; Confidentiality Agreements........ 71
Section 7.4. Best Efforts............................................. 72
Section 7.5. Consents................................................. 73
Section 7.6. Public Announcements..................................... 73
Section 7.7. Dart Group Fiscal 1998 Financial Statements.............. 73
Section 7.8. Indemnification; Insurance............................... 74
Section 7.9. Shoppers Senior Notes.................................... 76
<CAPTION>
ARTICLE VIII
CONDITIONS PRECEDENT TO CONSUMMATION OF THE MERGER
<S> <C> <C>
Section 8.1. Conditions Precedent to Each Party's Obligation to
Effect the Merger........................................ 76
Section 8.2. Conditions Precedent to Obligations of Dart.............. 77
Section 8.3. Conditions Precedent to Obligations of Richfood and
Merger Subsidiary........................................ 78
</TABLE>
- iii -
<PAGE>
ARTICLE IX
TERMINATION; AMENDMENT; WAIVER
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
Section 9.1. Termination.............................................. 79
Section 9.2. Effect of Termination.................................... 82
Section 9.3. Termination Fee.......................................... 82
Section 9.4. Amendment................................................ 83
Section 9.5. Extension; Waiver........................................ 83
<CAPTION>
ARTICLE X
MISCELLANEOUS
<S> <C> <C>
Section 10.1. Survival of Representations and Warranties............... 84
Section 10.2. Brokerage Fees and Commissions........................... 84
Section 10.3. Entire Agreement; Assignment............................. 85
Section 10.4. Notices.................................................. 85
Section 10.5. Governing Law; Consent to Jurisdiction................... 86
Section 10.6. Descriptive Headings..................................... 87
Section 10.7. Parties in Interest...................................... 87
Section 10.8. Counterparts............................................. 87
Section 10.9. Specific Performance..................................... 88
Section 10.10. Fees and Expenses........................................ 88
Section 10.11. Severability............................................. 88
</TABLE>
- iv -
<PAGE>
ANNEXES AND EXHIBITS
<TABLE>
<CAPTION>
<S> <C>
Annex I Conditions to the Offer
Annex II Certificate of Incorporation of Surviving Corporation
Annex III Bylaws of Surviving Corporation
Exhibit 1.23 Knowledge of Dart
Exhibit 6.1A Dart Subsidiaries
Exhibit 6.1B Dart Partnerships
Exhibit 6.2 Dart Companies' Outstanding Options, Warrants, Subscriptions or Other Rights
Exhibit 6.4 Dart Required Consents
Exhibit 6.5 Certain SEC Reports
Exhibit 6.6 Adverse Changes Affecting Dart Companies
Exhibit 6.7 Dart Litigation
Exhibit 6.8 Certain Permitted Liens
Exhibit 6.10 Dart Labor Matters
Exhibit 6.11 Dart Benefit Plans
Exhibit 6.12 Tax Matters Concerning Dart
Exhibit 6.14 Transactions With Affiliates by Dart
Exhibit 6.16 Dart Company Guarantees
Exhibit 7.1A Conduct of the Business of Dart
Exhibit 7.1B Shoppers Fiscal 1999 Capital Expenditure Budget
Exhibit 7.1C Representatives
Exhibit 7.8 Indemnification Agreements
</TABLE>
- v -
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of April 9, 1998, by and among
RICHFOOD HOLDINGS, INC., a Virginia corporation ("Richfood"), DGC ACQUISITION,
INC., a Delaware corporation ("Merger Subsidiary"), and DART GROUP CORPORATION,
a Delaware corporation ("Dart").
RECITALS
--------
WHEREAS, the respective Boards of Directors of Richfood, Merger Subsidiary
and Dart have unanimously approved the acquisition of Dart by Richfood, by means
of the merger of Merger Subsidiary with and into Dart (the "Merger"), upon the
terms and subject to the conditions set forth in this Agreement; and
WHEREAS, to effectuate the acquisition, Richfood and Dart each desire that
Richfood cause Merger Subsidiary to commence a cash tender offer to purchase all
of the outstanding shares of common stock, par value $1.00 per share, of Dart
("Shares" or "Dart Common Stock"), upon the terms and subject to the conditions
set forth in this Agreement and the Offer Documents (as defined in Section 2.2
-----------
hereof), and the Board of Directors of Dart has unanimously approved such tender
offer and has resolved to recommend to its stockholders that they accept the
tender offer and tender their shares of Dart Common Stock pursuant thereto; and
A-1
<PAGE>
WHEREAS, Richfood, Merger Subsidiary and Dart desire to make certain
representations, warranties, covenants and agreements in connection with the
Offer and the Merger and also to prescribe various conditions to consummation
thereof;
NOW, THEREFORE, in consideration of the foregoing and the mutual premises,
representations, warranties, covenants and agreements herein contained, the
parties hereto, intending to be legally bound, hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1. Agreement. "Agreement" shall mean this Agreement, together
---------
with the Annexes and Exhibits attached hereto, as amended from time to time in
accordance with the terms hereof.
Section 1.2. Certificates. "Certificates" shall have the meaning given
------------
in Section 4.3.(b) hereof.
---------------
Section 1.3. Closing; Closing Date. "Closing" shall mean the closing
---------------------
held pursuant to Section 3.2 hereof, and "Closing Date" shall mean the date on
-----------
which the Closing occurs.
A-2
<PAGE>
Section 1.4. Code. "Code" shall mean, as appropriate, the Internal
----
Revenue Code of 1954 or of 1986, each as amended.
Section 1.5. Confidentiality Agreement. "Confidentiality Agreement"
-------------------------
shall mean the letter agreement, dated as of February 3, 1998, between Dart and
Richfood.
Section 1.6. Contracts. "Contracts" shall mean contracts, agreements,
---------
leases, licenses, arrangements, understandings, relationships and commitments,
written or oral.
Section 1.7. Crown. "Crown" shall mean Crown Books Corporation, a
-----
Delaware corporation and Subsidiary of Dart.
Section 1.8. Crown Common Stock. "Crown Common Stock" shall mean the
------------------
common stock, $0.01 par value, of Crown.
Section 1.9. Dart. "Dart" shall mean Dart Group Corporation, a Delaware
----
corporation.
Section 1.10. Dart Common Stock. "Dart Common Stock" shall mean the
-----------------
common stock, par value $1.00 per share, of Dart.
Section 1.11. Dart Companies. "Dart Companies" shall mean Dart, its
--------------
Subsidiaries and the Partnerships in which it has an interest.
A-3
<PAGE>
Section 1.12. Dart Group Fiscal 1998 Financial Statements. "Dart Group
-------------------------------------------
Fiscal 1998 Financial Statements" shall mean the audited consolidated balance
sheets of Dart, Crown, Shoppers and Trak, each as of January 31, 1998, or
February 1, 1998, as the case may be, and the related audited consolidated
statements of earnings, stockholders' equity and cash flows for the fiscal years
then ended, together with the notes thereto, to be delivered to Richfood by Dart
in accordance with Section 7.7 hereof.
-----------
Section 1.13. Dart Group SEC Reports. "Dart Group SEC Reports" shall mean
----------------------
(a) the Annual Reports on Form 10-K of Dart, Crown and Trak for their respective
fiscal years ended January 31, 1997, or February 1, 1997, as the case may be,
(b) the Registration Statement on Form S-4 of Shoppers (Reg. No. 333-32825), as
amended through the date hereof, and (c) all documents filed by Dart, Crown,
Shoppers or Trak with the SEC pursuant to Sections 13(a) and 13(c) of the
Exchange Act, any definitive proxy statements filed pursuant to Section 14 of
the Exchange Act and any report filed pursuant to Section 15(d) of the Exchange
Act, in each case following the filing of such Annual Reports on Form 10-K (or,
in the case of Shoppers, the effective date of such registration statement) and
prior to the date hereof.
A-4
<PAGE>
Section 1.14. DGCL. "DGCL" shall mean the Delaware General Corporation
----
Law, as amended.
Section 1.15. DLJ. "DLJ" shall mean Donaldson, Lufkin & Jenrette
---
Securities Corporation, financial advisors to Richfood.
Section 1.16. Effective Time. "Effective Time" shall have the meaning
--------------
given in Section 3.3 hereof.
-----------
Section 1.17. ERISA. "ERISA" shall mean the Employee Retirement Income
-----
Security Act of 1974, as amended.
Section 1.18. Exchange Act. "Exchange Act" shall mean the Securities
------------
Exchange Act of 1934, as amended.
Section 1.19. GAAP. "GAAP" shall mean generally accepted accounting
----
principles as in effect in the United States of America at the time of the
preparation of the subject financial statement.
Section 1.20. Governmental Authority. "Governmental Authority" shall mean
----------------------
any federal, state, provincial, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, or any court, in each case
whether of the United States, any of its possessions or territories, or of any
foreign nation.
A-5
<PAGE>
Section 1.21. HSR Act. "HSR Act" shall mean the Hart-Scott-Rodino
-------
Antitrust Improvements Act of 1976, as amended.
Section 1.22. IRS. "IRS" shall mean the Internal Revenue Service.
---
Section 1.23. Knowledge of Dart. "Knowledge of Dart" shall mean the
-----------------
actual knowledge, after due inquiry, of those officers of the Dart Companies
identified on Exhibit 1.23 attached hereto.
------------
Section 1.24. Law. "Law" shall mean any federal, state, provincial, local
---
or other law or governmental requirement of any kind, and the rules, regulations
and orders promulgated thereunder.
Section 1.25. Material Adverse Effect. "Material Adverse Effect" shall
-----------------------
mean, with respect to any entity or group of entities, a material adverse effect
on the business, operations, assets, liabilities, financial condition or results
of operations of such entity or group of entities taken as a whole, other than
any change, circumstance or effect (i) relating to the economy or securities
markets in general, (ii) relating to the industries in which Dart or Richfood
operate and not specifically relating to Dart or Richfood, (iii) set forth or
described in the Dart Group SEC Reports, (iv) resulting from the execution of
this Agreement, the announcement of this Agreement and the transactions
A-6
<PAGE>
contemplated hereby or any change in the value of Dart Common Stock relating to
such execution or announcement or (v) in the case of Dart, resulting in a
diminution in the value after the date hereof of the shares of Crown common
stock held by Dart.
Section 1.26. Merger. "Merger" shall mean the merger of Merger Subsidiary
------
with and into Dart at the Effective Time.
Section 1.27. Merger Consideration. "Merger Consideration" shall have the
--------------------
meaning given in Section 4.2.(a) hereof.
---------------
Section 1.28. Merger Subsidiary. "Merger Subsidiary" shall mean DGC
-----------------
Acquisition, Inc., a Delaware corporation and wholly-owned subsidiary of
Richfood.
Section 1.29. Nasdaq. "Nasdaq" shall mean The Nasdaq National Market.
------
Section 1.30. Offer; Offer Consideration. "Offer" and "Offer
--------------------------
Consideration" shall have the respective meanings given in Section 2.1.(a)
---------------
hereof.
Section 1.31. Offer Documents. "Offer Documents" shall have the meaning
---------------
given in Section 2.2 hereof.
-----------
A-7
<PAGE>
Section 1.32. Partnership; Partnerships. "Partnership" shall mean any
-------------------------
limited or general partnership, joint venture or other business association,
other than a Subsidiary, in which any party has a direct or indirect interest
(collectively, "Partnerships").
Section 1.33. Paying Agent. "Paying Agent" shall mean First Union
------------
National Bank of North Carolina.
Section 1.34. Permits. "Permits" shall mean permits, licenses and
-------
governmental authorizations, registrations and approvals.
Section 1.35. Richfood. "Richfood" shall mean Richfood Holdings, Inc., a
--------
Virginia corporation.
Section 1.36. Rights; Rights Agreement. "Rights" shall mean the preferred
------------------------
share purchase rights issued by Dart pursuant to the Rights Agreement, dated as
of February 17, 1998 (the "Rights Agreement"), between Dart and The Bank of New
York, as rights agent.
Section 1.37. Schedule 14D-1. "Schedule 14D-1" shall have the meaning
--------------
given in Section 2.2 hereof.
-----------
A-8
<PAGE>
Section 1.38. Schedule 14D-9. "Schedule 14D-9" shall have the meaning
--------------
given in Section 2.3 hereof.
-----------
Section 1.39. SEC. "SEC" shall mean the Securities and Exchange
---
Commission.
Section 1.40. Securities Act. "Securities Act" shall mean the Securities
--------------
Act of 1933, as amended.
Section 1.41. Shares. "Shares" shall mean shares of Dart Common Stock.
------
Section 1.42. Shoppers. "Shoppers" shall mean Shoppers Food Warehouse
--------
Corporation, a Delaware corporation and indirect wholly-owned Subsidiary of
Dart.
Section 1.43. Subsidiary; Subsidiaries. "Subsidiary" shall mean (i) each
------------------------
corporate entity with respect to which a party has the right to vote (directly
or indirectly through one or more other entities or otherwise) shares
representing 50% or more of the votes eligible to be cast in the election of
directors of such entity, and (ii) each other corporate entity which constitutes
a "significant subsidiary," as defined in Rule 1-02 of Regulation S-X adopted
under the Exchange Act (collectively, "Subsidiaries").
A-9
<PAGE>
Section 1.44. Tax Returns. "Tax Returns" shall mean any report, return,
-----------
information statement, payee statement or other information required to be
provided to any federal, state, local or foreign Governmental Authority, or
otherwise retained, with respect to Taxes or the Dart Benefit Plans (as defined
in Section 6.11 hereof).
------------
Section 1.45. Taxes. "Taxes" shall mean any and all taxes, levies,
-----
imposts, duties, assessments, charges and withholdings imposed or required to be
collected by or paid over to any federal, state, local or foreign Governmental
Authority or any political subdivision thereof, including without limitation
income, gross receipts, ad valorem, value added, minimum tax, franchise, sales,
-- -------
use, excise, license, real or personal property, unemployment, disability, stock
transfer, mortgage recording, estimated, withholding or other tax, governmental
fee or other like assessment or charge of any kind whatsoever, and including any
interest, penalties, fines, assessments or additions to tax imposed in respect
of the foregoing, or in respect of any failure to comply with any requirement
regarding Tax Returns.
Section 1.46. Trak. "Trak" shall mean Trak Auto Corporation, a Delaware
----
corporation and Subsidiary of Dart.
A-10
<PAGE>
Section 1.47. Trak Common Stock. "Trak Common Stock" shall mean the
-----------------
common stock, $0.01 par value per share, of Trak.
Section 1.48. Wasserstein. "Wasserstein" shall mean Wasserstein Perella &
-----------
Co., Inc., financial advisors to Dart.
ARTICLE II
THE OFFER
Section 2.1. The Offer. (a) Provided that this Agreement shall not have
---------
been terminated pursuant to Article IX, as promptly as practicable (but in any
----------
event not later than five business days after the public announcement of the
execution and delivery of this Agreement), Richfood shall cause Merger
Subsidiary to commence (within the meaning of Rule 14d-2 under the Exchange Act)
an offer to purchase (the "Offer") all outstanding shares of Dart Common Stock
at a price of $160.00 per share, net to the seller in cash (such amount, or any
greater amount per Share paid pursuant to the Offer, being hereinafter referred
to as the "Offer Consideration"). The obligation of Richfood and Merger
Subsidiary to commence the Offer, consummate the Offer, accept for payment and
to pay for shares of Dart Common Stock validly tendered in the Offer and not
withdrawn shall be subject only to those conditions set forth in Annex I
-------
hereto, including the condition that a number of Shares representing a majority
of all outstanding Shares on a fully-
A-11
<PAGE>
diluted basis shall have been validly tendered and not withdrawn prior to the
expiration of the Offer. The initial expiration date of the Offer will be
midnight on the twentieth business day after the Offer is commenced.
(b) Merger Subsidiary expressly reserves the right to increase the price
per share payable in the Offer or to make any other changes in the terms and
conditions of the Offer, except that without the prior written consent of Dart,
Merger Subsidiary shall not (i) decrease or change the form of the Offer
Consideration or decrease the number of Shares sought pursuant to the Offer,
(ii) impose additional conditions to the Offer, (iii) extend the expiration date
of the Offer (except as required by Law or the applicable rules and regulations
of the SEC) or (iv) amend any term of the Offer in any manner adverse to holders
of shares of Dart Common Stock; provided, however, that, except as set forth
-------- -------
above, Merger Subsidiary may waive any condition to the Offer in its sole
discretion (other than the Minimum Condition, as defined in Annex I, which
-------
Merger Subsidiary may not waive); and provided further, that the Offer may be
-------- -------
extended in connection with an increase in the consideration to be paid pursuant
to the Offer so as to comply with applicable rules and regulations of the SEC;
and provided, further, that the Offer may be extended by Merger Subsidiary for
-------- -------
up to ten (10) business days after the initial expiration date if fewer than 90%
of the Shares outstanding as of such date have been tendered at such date, so
A-12
<PAGE>
long as, in connection with such extension, Merger Subsidiary irrevocably waives
the conditions to the Offer set forth in clauses (b), (c), (f), (g)(1) and (h)
of Annex I. Assuming the prior satisfaction or waiver of the conditions to the
-------
Offer, Merger Subsidiary shall accept for payment, and pay for, in accordance
with the terms of the Offer, all shares of Dart Common Stock validly tendered
and not withdrawn pursuant to the Offer as soon as practicable after the
expiration date thereof. Notwithstanding the foregoing, Merger Subsidiary
shall, and Richfood agrees to cause Merger Subsidiary to, extend the Offer from
time to time until June 30, 1998, if, and to the extent that, at the initial
expiration date of the Offer, or any subsequent extension thereof, all
conditions to the Offer have not been satisfied or waived; provided, however,
-------- -------
that Richfood and Merger Subsidiary shall have no obligation to extend the Offer
if Dart's failure to fulfill any obligation under this Agreement has been the
cause of or has resulted in the failure of any such condition being satisfied.
(c) Richfood shall provide or cause to be provided to Merger Subsidiary all
of the funds necessary to purchase any Shares of Dart Common Stock that Merger
Subsidiary becomes obligated to purchase pursuant to the Offer.
Section 2.2. Offer Documents. On the date of commencement of the Offer,
---------------
Richfood and Merger Subsidiary shall file or cause
A-13
<PAGE>
to be filed with the SEC a Tender Offer Statement on Schedule 14D-1 (the
"Schedule 14D-1") with respect to the Offer which shall contain the offer to
purchase and related letter of transmittal (such Schedule 14D-1, letter of
transmittal and other ancillary Offer documents and instruments pursuant to
which the Offer will be made, together with any supplements or amendments
thereto, the "Offer Documents") and shall contain (or shall be amended in a
timely manner to contain) all information which is required to be included
therein in accordance with the Exchange Act and the rules and regulations
thereunder and any other applicable Law, and shall conform in all material
respects with the requirements of the Exchange Act and any other applicable Law;
provided, however, that no agreement or representation is hereby made or shall
- -------- -------
be made by Richfood or Merger Subsidiary with respect to information supplied by
Dart in writing expressly for inclusion in, or with respect to Dart information
derived from the Dart Group SEC Reports which is included or incorporated by
reference in, the Offer Documents. Richfood, Merger Subsidiary and Dart each
agrees promptly to correct any information provided by them for use in the Offer
Documents if and to the extent that it shall have become false or misleading in
any material respect and Merger Subsidiary further agrees to take all lawful
action necessary to cause the Offer Documents as so corrected to be filed
promptly with the SEC and to be disseminated to holders of Dart Common Stock, in
each case as and to the extent required by applicable Law. Dart and its counsel
A-14
<PAGE>
shall be given the opportunity to review and comment upon the Offer Documents to
be filed with the SEC prior to any such filing. In addition, Richfood and
Merger Subsidiary agree to provide Dart and its counsel in writing with any
comments or other communications that Richfood, Merger Subsidiary 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 or other
communications.
Section 2.3. Dart Actions. (a) Dart hereby approves of and consents to
------------
the Offer and represents and warrants that (i) Dart's Board of Directors (at a
meeting duly called and held) has (A) unanimously determined that each of this
Agreement and the transactions contemplated hereby, including the Offer and the
Merger, are fair to and in the best interests of Dart and its stockholders, (B)
approved this Agreement and the transactions contemplated hereby, including the
Offer and the Merger, (C) resolved to elect not to be subject to any state
takeover law that is or purports to be applicable to the Offer, the Merger or
the transactions contemplated by this Agreement, (D) taken all steps necessary
to render Section 203 of the DGCL inapplicable to this Agreement, and the
transactions contemplated hereby and thereby, including the Offer and the Merger
and (E) subject to the fiduciary duties of the Board of Directors applicable
from time to time, resolved to recommend that the holders of Dart Common Stock
accept the Offer and tender all of their Shares
A-15
<PAGE>
pursuant thereto and approve the Merger, and (ii) Wasserstein has delivered to
the Board of Directors of Dart its written opinion that the Offer Consideration
to be received by the holders of Dart Common Stock in the Offer and the Merger
Consideration to be received by the holders of Dart Common Stock in the Merger
as contemplated in this Agreement is fair, from a financial point of view, to
such holders, and Wasserstein has consented to the inclusion of such opinion in
the Offer Documents. Dart hereby consents to the inclusion in the Offer
Documents of the recommendation of its Board of Directors referred to in this
Section 2.3. Dart hereby agrees to file with the SEC simultaneously with the
- -----------
filing by Richfood and Merger Subsidiary of the Schedule 14D-1, a
Solicitation/Recommendation Statement on Schedule 14D-9 (together with all
amendments and supplements thereto, the "Schedule 14D-9") which will contain
(subject to the fiduciary duties of the Board of Directors as advised by
counsel) such recommendation of the Board of Directors of Dart in favor of the
Offer and Merger and otherwise complying with Rule 14d-9 under the Exchange Act.
Dart covenants that the Schedule 14D-9 shall comply in all material respects
with the Exchange Act and any other applicable Law and shall contain (or shall
be amended in a timely manner to contain) all information which is required to
be included therein in accordance with the Exchange Act and the rules and
regulations thereunder and any other applicable Law. Dart, Richfood and Merger
Subsidiary each agree promptly to correct any information provided by them for
use in the Schedule
A-16
<PAGE>
14D-9 if and to the extent that it shall have become false or misleading in any
material respect and Dart further agrees to take all lawful action necessary to
cause the Schedule 14D-9 as so corrected to be filed promptly with the SEC and
disseminated to the holders of Dart Common Stock, in each case as and to the
extent required by applicable Law. Richfood, Merger Subsidiary and their
counsel shall be given an opportunity to review and comment upon the Schedule
14D-9 and any amendments thereto prior to the filing thereof with the SEC. In
addition, Dart agrees to provide Richfood, Merger Subsidiary and their counsel
in writing with any comments or other communications that Dart 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 or other
communications. In connection with the Offer, Dart shall (or shall cause its
transfer agent to) promptly furnish Richfood with mailing labels, security
position listings and all available listings or computer files containing the
names and addresses of the record holders of Dart Common Stock as of the latest
practicable date and shall furnish Richfood with such information and assistance
(including updated lists of stockholders, mailing labels and lists of security
positions) as Richfood or its agents may reasonably request in communicating the
Offer to the record and beneficial holders of Dart Common Stock. Subject to the
requirements of applicable Law, and except for such actions as are necessary to
disseminate the Offer Documents and any other documents necessary to consummate
the
A-17
<PAGE>
Offer and the Merger, Richfood and Merger Subsidiary shall hold in confidence
the information contained in such labels and lists, shall use such information
only in connection with the Offer and the Merger, and, if the Offer or this
Agreement is terminated in accordance with its terms, shall deliver promptly to
Dart (or destroy and certify to Dart the destruction of) all copies of such
information then in their possession.
(b) The Board of Directors of Dart has (i) determined, pursuant to Section
-------
3(a)(ii) of the Rights Agreement, that the Distribution Date (as defined in the
- --------
Rights Agreement) that would otherwise occur by virtue of the commencement of
the Offer shall be indefinitely postponed, and (ii) approved the redemption of
the Rights pursuant to Section 23(a) of the Rights Agreement in connection with
-------------
the Offer and the Merger and shall cause such redemption to occur immediately
prior to Merger Subsidiary's purchase of Shares pursuant to the Offer.
Section 2.4. Directors. (a) Promptly upon the purchase by Richfood or
---------
any of its Subsidiaries (including Merger Subsidiary) of such number of shares
of Dart Common Stock which represents at least a majority of the outstanding
shares of Dart Common Stock, and from time to time thereafter, Richfood shall be
entitled to designate such number of directors ("Richfood's Designees"), rounded
up to the next whole number, as will give Richfood representation on the Board
of Directors of Dart equal
A-18
<PAGE>
to the product of (x) the number of directors on the Board of Directors of Dart
(giving effect to any increase in the number of directors pursuant to this
Section 2.4), and (y) the percentage that such number of Shares so purchased
- -----------
bears to the aggregate number of Shares outstanding (such number being, the
"Board Percentage"), and Dart shall, subject to Richfood's having theretofore
provided Dart with the information with respect to Richfood's Designees required
pursuant to Section 14(f) of the Exchange Act, promptly satisfy the Board
Percentage by (i) increasing the size of the Board of Directors of Dart, or (ii)
securing the resignations of such number of directors as is necessary to enable
Richfood's Designees to be elected to the Board of Directors of Dart (and Dart
shall use its best efforts to cause the then-remaining members of the Dart's
Board of Directors to promptly so elect Richfood's Designees). At the request
of Richfood, Dart shall take, at Dart's expense, all lawful action necessary to
effect any such election, including, without limitation, mailing to Dart's
stockholders the information required by Section 14(f) of the Exchange Act and
Rule 14f-1 promulgated thereunder, unless such information has previously been
provided to Dart's stockholders in the Schedule 14D-9.
(b) Following the election or appointment of Richfood's Designees pursuant
to this Section 2.4 and prior to the Effective Time of the Merger, any amendment
-----------
or termination of this
A-19
<PAGE>
Agreement by Dart, extension for the performance or waiver of the obligations or
other acts of Richfood or Merger Subsidiary hereunder by Dart or waiver of
Dart's rights hereunder shall require the concurrence of a majority of directors
of Dart then in office who are directors on the date hereof and who voted to
approve this Agreement; provided, that if there shall be no such directors, such
--------
actions may be effected by majority vote of the entire Board of Directors of
Dart; and provided, further, that after the approval of this Agreement by the
-------- -------
stockholders of Dart, no such amendment, termination, modification or supplement
shall reduce or change the Merger Consideration or adversely affect the rights
of Dart's stockholders hereunder without the approval of such stockholders.
ARTICLE III
THE MERGER
Section 3.1. The Merger. Upon the terms and subject to the conditions
----------
set forth in this Agreement, and in accordance with the DGCL, Merger Subsidiary
shall be merged with and into Dart at the Effective Time. At the Effective
Time, the separate corporate existence of Merger Subsidiary shall cease, and
Dart shall continue as the surviving corporation and a direct wholly-owned
subsidiary of Richfood (Merger Subsidiary and Dart are sometimes hereinafter
referred to as "Constituent Corporations" and, as the context requires, Dart is
sometimes hereinafter
A-20
<PAGE>
referred to as the "Surviving Corporation"), and shall continue under the name
"DART GROUP CORPORATION."
Section 3.2. Closing. Unless this Agreement shall have been terminated
-------
and the transactions herein contemplated shall have been abandoned pursuant to
Section 9.1, the closing of the Merger (the "Closing") shall take place at 10:00
- -----------
a.m., local time, on the third business day following satisfaction or waiver of
the conditions set forth in Article VIII (the "Closing Date"), at the offices of
------------
Hunton & Williams, 951 East Byrd Street, Richmond, Virginia 23219, unless
another date, time or place is agreed to in writing by the parties hereto.
Section 3.3. Effective Time of the Merger. Subject to the provisions of
----------------------------
this Agreement, the parties hereto shall cause the Merger to be consummated by
filing a certificate of merger (the "Certificate of Merger") with the Secretary
of State of the State of Delaware, as provided in the DGCL, as soon as
practicable on or after the Closing Date. The Merger shall become effective
upon such filing or at such time thereafter as is provided in the Certificate of
Merger (the "Effective Time").
Section 3.4. Effects of the Merger. (a) The Merger shall have the
---------------------
effects as set forth in the applicable provisions of the DGCL.
A-21
<PAGE>
(b) The directors and the officers of Merger Subsidiary immediately prior
to the Effective Time shall, from and after the Effective Time, be the initial
directors and officers of the Surviving Corporation until their successors have
been duly elected or appointed and qualified, or until their earlier death,
resignation or removal in accordance with the Surviving Corporation's
Certificate of Incorporation and Bylaws.
(c) The Certificate of Incorporation of Dart immediately prior to the
Effective Time shall be amended by virtue of the Merger to read in its entirety
as set forth in Annex II attached hereto, until thereafter duly amended in
--------
accordance with the terms thereof and the DGCL.
(d) The Bylaws of Dart as in effect immediately prior to the Effective Time
shall be amended by virtue of the Merger to read in its entirety as set forth in
Annex III attached hereto, until thereafter duly amended in accordance with the
- ---------
terms thereof, the Certificate of Incorporation and the DGCL.
Section 3.5. Stockholders' Meeting. (a) If required by applicable Law
---------------------
in order to consummate the Merger, Dart, acting through its Board of Directors,
shall, in accordance with applicable Law and Dart's Certificate of Incorporation
and Bylaws:
A-22
<PAGE>
(i) duly call, give notice of, convene and hold a special meeting of
its stockholders (the "Special Meeting") as soon as practicable following the
acceptance for payment of Shares by Merger Subsidiary pursuant to the Offer for
the purpose of considering and taking action upon the Merger and this Agreement;
(ii) prepare and file with the SEC a preliminary proxy statement
relating to the Merger and this Agreement, and use its reasonable best efforts
(x) to obtain and furnish the information required to be included by the SEC in
the Proxy Statement (as hereinafter defined) and, after consultation with
Richfood, to respond promptly to any comments made by the SEC with respect to
the preliminary proxy statement and cause a definitive proxy statement (the
"Proxy Statement") to be mailed to its stockholders, and (y) to obtain the
necessary approvals of the Merger and this Agreement by its stockholders; and
(iii) subject to the fiduciary duties of the Board of Directors as
advised by counsel, include in the Proxy Statement the recommendation of Dart's
Board of Directors that stockholders of Dart vote in favor of the approval of
the Merger and this Agreement.
(b) Richfood agrees that it will vote, or cause to be voted, all of the
Shares then owned by it, Merger Subsidiary or
A-23
<PAGE>
any of its other Subsidiaries in favor of the approval of the Merger and this
Agreement.
Section 3.6. Merger Without Meeting of Shareholders. Notwithstanding
--------------------------------------
Section 3.5 hereof, in the event that Richfood, Merger Subsidiary and any other
- -----------
Subsidiary of Richfood shall acquire at least 90% of the outstanding Shares
pursuant to the Offer, the parties hereto agree to take all necessary and
appropriate action to cause the Merger to become effective as soon as
practicable after the acceptance for payment of Shares by Merger Subsidiary
pursuant to the Offer without a meeting of stockholders of Dart, in accordance
with Section 253 of the DGCL.
ARTICLE IV
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF
THE CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
Section 4.1. Effect on Capital Stock. At the Effective Time, by virtue
-----------------------
of the Merger and without any action on the part of the holder of any shares of
Dart Common Stock or the holder of any capital stock of Merger Subsidiary:
(a) Capital Stock of Merger Subsidiary. Each share of the capital stock of
----------------------------------
Merger Subsidiary issued and outstanding immediately prior to the Effective Time
shall be converted into and become one fully paid and nonassessable shares of
common stock, par value $0.10 per share, of the Surviving Corporation.
A-24
<PAGE>
(b) Cancellation of Treasury Stock and Richfood-Owned Stock. Each share of
-------------------------------------------------------
Dart Common Stock and all other shares of capital stock of Dart that are owned
by Dart and all shares of Dart Common Stock and other shares of capital stock of
Dart owned by Richfood, Merger Subsidiary or any other wholly-owned Subsidiary
of Richfood or Dart shall be canceled and retired and shall cease to exist and
no consideration shall be delivered or deliverable in exchange therefor.
Section 4.2. Conversion of Securities. At the Effective Time, by virtue
------------------------
of the Merger and without any action on the part of Merger Subsidiary, Dart or
the holders of any of the shares thereof:
(a) Subject to the other provisions of this Section 4.2, each share of Dart
-----------
Common Stock issued and outstanding immediately prior to the Effective Time
(excluding shares owned, directly or indirectly, by Dart or any wholly-owned
Subsidiary of Dart or by Richfood, Merger Subsidiary or any other wholly-owned
Subsidiary of Richfood and excluding Dissenting Shares (as defined in Section
-------
4.6)) shall be converted into the right to receive the Offer Consideration,
- ---
payable to the holder thereof, without any interest thereon (the "Merger
Consideration"), upon surrender and exchange of the Certificates (as defined in
Section 4.3.(b)).
- ---------------
A-25
<PAGE>
(b) All shares of Dart Common Stock, when converted as provided in Section
-------
4.2.(a), no longer shall be outstanding and shall automatically be canceled and
- -------
retired and shall cease to exist, and each Certificate previously evidencing
such Shares shall thereafter represent only the right to receive the Merger
Consideration. The holders of Certificates previously evidencing Shares
outstanding immediately prior to the Effective Time shall cease to have any
rights with respect to Dart Common Stock except as otherwise provided herein or
by Law and, upon the surrender of Certificates in accordance with the provisions
of Section 4.3 (but subject to Section 4.6), such Certificates shall represent
----------- -----------
only the right to receive for their Shares the Merger Consideration, without any
interest thereon.
Section 4.3. Payment for Shares. (a) Paying Agent. Prior to the
------------------ ------------
Effective Time, Richfood shall deposit or shall cause to be deposited with the
Paying Agent in a separate fund established for the benefit of the holders of
shares of Dart Common Stock, for payment in accordance with this Article IV,
----------
through the Paying Agent (the "Payment Fund"), immediately available funds in
amounts necessary to make the payments pursuant to Section 4.2.(a) and this
---------------
Section 4.3 to holders of shares of Dart Common Stock (other than Dart or any
- -----------
wholly-owned Subsidiary of Dart or Richfood, Merger Subsidiary or any other
wholly-owned Subsidiary of Richfood, or holders of Dissenting Shares). The
Paying Agent shall, pursuant to irrevocable
A-26
<PAGE>
instructions, pay the Merger Consideration out of the Payment Fund. From time
to time at or after the Effective Time, Richfood shall take all lawful action
necessary to make or cause to be made the appropriate cash payments, if any, to
holders of Dissenting Shares. Prior to the Effective Time, Richfood shall enter
into such appropriate commercial arrangements, if any, as may be necessary to
ensure effectuation of the immediately preceding sentence. The Paying Agent
shall invest portions of the Payment Fund as Richfood directs in obligations of
or guaranteed by the United States of America, in commercial paper obligations
receiving the highest investment grade rating from both Moody's Investors
Services, Inc. and Standard & Poor's Corporation, or in certificates of deposit,
bank repurchase agreements or banker's acceptances of commercial banks with
capital exceeding $100,000,000 (collectively, "Permitted Investments");
provided, however, that the maturities of Permitted Investments shall be such as
- -------- -------
to permit the Paying Agent to make prompt payment to former holders of Dart
Common Stock entitled thereto as contemplated by this Section. All earnings on
Permitted Investments shall be paid to Richfood. If for any reason (including
losses) the Payment Fund is inadequate to pay the amounts to which holders of
shares of Dart Common Stock shall be entitled under this Section 4.3, Richfood
-----------
shall promptly restore such amount of the inadequacy to the Payment Fund, and in
any event shall be liable for payment thereof. The Payment Fund
A-27
<PAGE>
shall not be used for any purpose except as expressly provided in this
Agreement.
(b) Payment Procedures. As soon as reasonably practicable after the
------------------
Effective Time, Richfood shall instruct the Paying Agent to mail to each holder
of record (other than Dart or any wholly-owned Subsidiary of Dart or Richfood,
Merger Subsidiary or any other wholly-owned Subsidiary of Richfood) of a
Certificate or Certificates which, immediately prior to the Effective Time,
evidenced outstanding shares of Dart Common Stock (the "Certificates"), (i) a
form of letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
proper delivery of the Certificates to the Paying Agent, and shall be in such
form and have such other provisions as Richfood reasonably may specify), and
(ii) instructions for use in effecting the surrender of the Certificates in
exchange for payment therefor. Upon surrender of a Certificate for cancellation
to the Paying Agent together with such letter of transmittal, duly executed, and
such other customary documents as may be required pursuant to such instructions,
the holder of such Certificate shall be entitled to receive in respect thereof
cash in an amount equal to the product of (x) the number of shares of Dart
Common Stock represented by such Certificate, and (y) the Merger Consideration,
and the Certificate so surrendered shall forthwith be canceled. No interest
shall be paid or accrued on the Merger
A-28
<PAGE>
Consideration payable upon the surrender of any Certificate. If payment is to
be made to a Person (as defined below) 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 otherwise in proper
form for transfer and that the Person requesting such payment shall pay any
transfer or other taxes required by reason of the payment to a Person other than
the registered holder of the surrendered Certificate or establish to the
satisfaction of the Surviving Corporation that such tax has been paid or is not
applicable. Until surrendered in accordance with the provisions of this Section
-------
4.3, after the Effective Time each Certificate (other than Certificates
- ---
representing Shares owned by Dart or any wholly-owned Subsidiary of Dart or
Richfood, Merger Subsidiary or any other wholly-owned Subsidiary of Richfood)
shall represent for all purposes only the right to receive the Merger
Consideration. For purposes of this Agreement, "Person" means an individual,
corporation, partnership, joint venture, association, trust, unincorporated
organization or other entity.
(c) Termination of Payment Fund; Interest. Any portion of the Payment Fund
-------------------------------------
which remains undistributed to the holders of Dart Common Stock for one year
after the Effective Time shall be delivered to Dart, upon demand, and any
holders of Dart Common Stock who have not theretofore complied with this Article
--------
IV and
- --
A-29
<PAGE>
the instructions set forth in the letter of transmittal mailed to such holder
after the Effective Time shall thereafter look only to Dart for payment of the
Merger Consideration to which they are entitled; provided that if, but only if,
--------
Dart shall have defaulted in its obligation to make such payment within a
reasonable period of time after receipt of written request therefor from any
such holder, such holder may thereafter look to Richfood for payment of the
Merger Consideration to which they are entitled. All interest accrued in
respect of the Payment Fund shall inure to the benefit of and be paid to
Richfood.
(d) No Liability. Neither Richfood nor the Surviving Corporation shall be
------------
liable to any holder of shares of Dart Common Stock for any cash from the
Payment Fund delivered to a public official pursuant to any applicable abandoned
property, escheat or similar law.
(e) Withholding Rights. Richfood or Dart shall be entitled to deduct and
------------------
withhold, or cause the Paying Agent to deduct and withhold, from the
consideration otherwise payable pursuant to this Agreement to any holder of
Certificates such amounts as are required to be deducted and withheld with
respect to the making of such payment under the Code, or any provision of state,
local or foreign tax law. To the extent that amounts are so withheld, (i) such
withheld amounts shall be treated for all purposes of this Agreement as having
been paid to the holder of the
A-30
<PAGE>
Certificates in respect of which such deduction and withholding was made, and
(ii) Richfood or Dart shall provide, or cause the Paying Agent to provide, to
the holders of such Certificates written notice of the amounts so deducted or
withheld.
Section 4.4. Stock Transfer Books. At the Effective Time, the stock
--------------------
transfer books of Dart shall be closed and there shall be no further
registration of transfers of shares of Dart Common Stock thereafter on the
records of Dart.
Section 4.5. Stock Options. After the Effective Time, each holder of (i)
-------------
a then outstanding option (collectively, the "Employee Options") to purchase
Shares under Dart's 1992 Stock Option Plan and the Option Agreements between
Dart and certain of its officers, directors, employees and consultants
thereunder (the "Stock Option Plan"), or (ii) any other option, warrant or other
right to acquire (upon purchase, exchange, conversion or otherwise) shares of
Dart Common Stock (collectively, the "Other Options" and, together with the
Employee Options, the "Options"), shall be entitled to receive for each Share
subject to such Option, in settlement and cancellation thereof, an amount
(subject to any applicable withholding tax) in cash equal to the difference
between the Merger Consideration and the per Share exercise price of such
Option, to the extent such difference is a positive number (such amount being
hereinafter referred to as, the "Option Consideration"). In addition, in the
alternative,
A-31
<PAGE>
each holder of an Option outstanding at the commencement of the Offer may tender
such Option and thereby be entitled to receive for each Share subject to such
Option, upon consummation of the Offer and in settlement and cancellation of
such Option, an amount (subject to any applicable withholding tax) in cash equal
to the Option Consideration. Notwithstanding the foregoing provisions of this
Section 4.5, with respect to any Person subject to Section 16(a) of the Exchange
- -----------
Act, any such Option Consideration shall be paid as soon as practicable after
the first date payment can be made without liability to such Person under
Section 16(b) of the Exchange Act. Dart represents and warrants to Richfood and
Merger Subsidiary that the Stock Option Plan has been or will be amended to the
extent necessary to give effect to the foregoing as of the commencement of the
Offer. Upon receipt of the related Option Consideration, the Option shall be
canceled. The surrender of an Option to Dart in exchange for the Option
Consideration shall be deemed a release of any and all rights the holder had or
may have had in respect of such Option.
Section 4.6. Dissenting Shares. Notwithstanding any other provisions of
-----------------
this Agreement to the contrary, shares of Dart Common Stock that are outstanding
immediately prior to the Effective Time and which are held by stockholders who
shall have not voted in favor of the Merger or consented thereto in writing and
who shall have demanded properly in writing appraisal for
A-32
<PAGE>
such shares in accordance with Section 262 of the DGCL (collectively, the
"Dissenting Shares") shall not be converted into or represent the right to
receive the Merger Consideration. Such shares instead shall, from and after the
Effective Time, represent only the right to receive payment of the appraised
value of such shares of Dart Common Stock held by them in accordance with the
provisions of such Section 262, except that all Dissenting Shares held by
stockholders who shall have failed to perfect or who effectively shall have
withdrawn or lost their rights to appraisal of such shares of Dart Common Stock
under such Section 262 shall thereupon be deemed to have been converted into and
to have become exchangeable, as of the Effective Time, for the right to receive,
without any interest thereon, the Merger Consideration upon surrender, in the
manner provided in Section 4.3, of the Certificate or Certificates that,
-----------
immediately prior to the Effective Time, evidenced such shares of Dart Common
Stock.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF RICHFOOD
AND MERGER SUBSIDIARY
Richfood and Merger Subsidiary represent and warrant to Dart as follows:
Section 5.1. Organization and Authority. Each of Richfood and Merger
--------------------------
Subsidiary is duly organized, validly existing and in
A-33
<PAGE>
good standing under the laws of its jurisdiction of organization. Merger
Subsidiary was formed solely for the purpose of engaging in the transactions
contemplated hereby and has not engaged in any business activities or conducted
any operations other than in connection with the transactions contemplated
hereby.
Section 5.2. Authority Relative to this Agreement. The execution,
------------------------------------
delivery and performance of this Agreement and of all of the other documents and
instruments required hereby by Richfood and Merger Subsidiary are within the
corporate power of Richfood and Merger Subsidiary. The execution and delivery
of this Agreement and the consummation of the transactions contemplated hereby
have been duly authorized by the respective Boards of Directors of Richfood and
Merger Subsidiary, and by Richfood as the sole shareholder of Merger Subsidiary,
and no other corporate or shareholder proceedings on the part of Richfood or
Merger Subsidiary are necessary to authorize this Agreement or to consummate the
transactions contemplated herein. This Agreement and all of the other documents
and instruments required hereby have been or will be duly and validly executed
and delivered by Richfood or Merger Subsidiary and (assuming the due
authorization, execution and delivery hereof and thereof by Dart) constitute or
will constitute valid and binding agreements of Richfood and Merger Subsidiary,
enforceable against them in accordance with their respective terms, except as
such enforceability may be limited by bankruptcy, insolvency,
A-34
<PAGE>
reorganization, moratorium and similar laws relating to or affecting creditors
generally, by general equitable principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law) or by an
implied covenant of good faith and fair dealing.
Section 5.3. Consents and Approvals; No Violations. Except for (i) any
-------------------------------------
applicable requirements of the Securities Act, the Exchange Act, the HSR Act and
any applicable filings under state securities, "Blue Sky" or takeover laws, and
(ii) the filing of the Certificate of Merger as required by the DGCL, no filing
or registration with, and no permit, authorization, consent or approval of, any
public body or authority is necessary or required in connection with the
execution and delivery of this Agreement by Richfood or Merger Subsidiary, or
for the consummation by Richfood or Merger Subsidiary of the transactions
contemplated by this Agreement. Assuming that all filings, registrations,
Permits, authorizations, consents and approvals contemplated by the immediately
preceding sentence have been duly made or obtained, neither the execution,
delivery and performance of this Agreement nor the consummation of the
transactions contemplated hereby by Richfood and Merger Subsidiary will (i)
conflict with or result in any breach of any provision of the Articles or
Certificate of Incorporation or Bylaws of Richfood or Merger Subsidiary, (ii)
result in a violation or breach of, or constitute (with or without due notice or
lapse of time or both)
A-35
<PAGE>
a default under, any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, license, Contract or other instrument or obligation to
which Richfood or any of its Subsidiaries is a party or by which it or any of
them or any of their properties or assets may be bound or (iii) violate any
order, writ, injunction, decree, statute, rule or regulation applicable to
Richfood or any of its Subsidiaries or any of their properties or assets except,
in the case of subsections (ii) and (iii) above, for violations, breaches or
defaults that would not have a Material Adverse Effect on Richfood and that will
not prevent or delay the consummation of the transactions contemplated hereby.
Section 5.4. Information Supplied. None of the information relating to
--------------------
Richfood and its affiliates supplied in writing by Richfood specifically for
inclusion in the Schedule 14D-9 will, at the time the Schedule 14D-9 is filed
with the SEC, 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. If at any time prior to the Effective Time, Richfood
should become aware of any event relating to Richfood or any of its Subsidiaries
that is required under applicable Law to be disclosed in an amendment or
supplement to the Schedule 14D-9, Richfood shall promptly so inform Dart and
will furnish to Dart
A-36
<PAGE>
all information relating to such event that is required under applicable Law to
be disclosed in an amendment or supplement to the Schedule 14D-9. The Schedule
14D-1 will comply as to form in all material respects with the requirements of
the Exchange Act, and shall not, when filed with the SEC, 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; provided, however,
-------- -------
that no agreement or representation hereby is made or shall be made by Richfood
or Merger Subsidiary with respect to information supplied by Dart in writing
expressly for inclusion in the Schedule 14D-1, or with respect to information
derived from the Dart Group SEC Reports which is included or incorporated by
reference in the Schedule 14D-1.
Section 5.5. Financial Capability. Richfood has sufficient available
--------------------
cash, marketable securities and borrowing capacity under its committed credit
facilities which are permitted to be used for the Offer and the Merger to
consummate the transactions contemplated hereby.
Section 5.6. Fees and Expenses of Brokers and Others. Neither Richfood
---------------------------------------
nor any of its affiliates (a) has had any dealings, negotiations or
communications with any broker or other intermediary in connection with the
transactions contemplated by
A-37
<PAGE>
this Agreement, (b) is committed to any liability for any brokers' or finders'
fees or any similar fees in connection with the transactions contemplated by
this Agreement or (c) has retained any broker or other intermediary to act on
its behalf in connection with the transactions contemplated by this Agreement,
except that Richfood has engaged DLJ to represent it in connection with such
transactions and shall pay all of DLJ's fees and expenses in connection with
such engagement.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
OF DART
Dart represents and warrants to Richfood and Merger Subsidiary as follows:
Section 6.1. Organization and Authority of the Dart Companies. Each of
------------------------------------------------
the Dart Companies is duly organized, validly existing and in good standing
under the laws of its jurisdiction of organization. Each of the Dart Companies
has full corporate or partnership power to carry on its respective business as
it is now being conducted and to own, operate and hold under lease its assets
and properties as, and in the places where, such properties and assets now are
owned, operated or held. Each of the Dart Companies is duly qualified as a
foreign entity to do business, and is in good standing, in each jurisdiction
where the failure to be so qualified would have a Material Adverse Effect
A-38
<PAGE>
on the Dart Companies. Exhibit 6.1A constitutes a true and complete list of all
------------
of the Subsidiaries of Dart, and Exhibit 6.1B constitutes a true and complete
------------
list of all of the Partnerships in which Dart has an interest. The copies of
the Amended and Restated Certificate of Incorporation and By-laws of Dart which
have been delivered to Richfood are complete and correct and in full force and
effect on the date hereof.
Section 6.2. Capitalization. (a) Dart's authorized equity
--------------
capitalization consists of 3,500,000 shares of Dart Common Stock, par value
$1.00 per share, and 3,500 shares of Series A Junior Participating Preferred
Stock, par value $.00005 per Share. As of the close of business on April 6,
1998, 1,202,502 shares of Dart Common Stock and no shares of Dart preferred
stock were issued and outstanding. Such shares of Dart Common Stock constituted
all of the issued and outstanding shares of capital stock of Dart as of such
date. All issued and outstanding shares of Dart Common Stock have been duly
authorized and validly issued and are fully paid and nonassessable, are not
subject to and have not been issued in violation of any preemptive rights and
have not been issued in violation of any federal or state securities laws.
Except as set forth on Exhibit 6.2 attached hereto, Dart has not, subsequent to
-----------
January 31, 1997, declared or paid any dividend on, or declared or made any
distribution with respect to, or authorized or effected any split-up or any
other recapitalization of, any of the Dart Common Stock, or directly or
A-39
<PAGE>
indirectly redeemed, purchased or otherwise acquired any of its outstanding
capital stock or agreed to take any such action and will not take any such
action during the period between the date of this Agreement and the Effective
Time. As of the date hereof, all outstanding shares of Dart Common Stock are
duly included for trading on Nasdaq.
(b) All of the outstanding shares of capital stock of Dart's Subsidiaries
are validly issued, fully paid and nonassessable. Except as disclosed on
Exhibit 6.1A or Exhibit 6.1B hereto, all of the outstanding shares of capital
- ------------ ------------
stock of Dart's Subsidiaries and all of Dart's interests in Dart's Partnerships
are owned by Dart, directly or indirectly, free and clear of all liens, claims,
charges or encumbrances. Except as set forth on Exhibit 6.2 attached hereto,
-----------
there are no outstanding securities, options, warrants, calls, subscriptions,
rights or Contracts to which any Dart is a party or by which any Dart Company is
bound, granting to any third party the right to purchase or acquire any capital
stock of or any partnership or membership interests in any of the Dart
Companies, and there are no put rights or Contracts pursuant to which any of the
Dart Companies is bound to repurchase any shares of its capital stock or
partnership or membership interests.
(c) Crown's authorized equity capitalization consists of 20,000,000 shares
of Crown Common Stock, par value $0.01 per
A-40
<PAGE>
share. As of the close of business on April 6, 1998, 5,288,473 shares of Crown
Common Stock were issued and outstanding. Such shares of Crown Common Stock
constituted all of the issued and outstanding shares of capital stock of Crown
as of such date. All issued and outstanding shares of Crown Common Stock have
been duly authorized and validly issued and are fully paid and nonassessable,
are not subject to and have not been issued in violation of any preemptive
rights and have not been issued in violation of any federal or state securities
laws. Except as set forth on Exhibit 6.2 attached hereto and except for the
-----------
declaration and payment of dividends in the ordinary course of business, Crown
has not, subsequent to February 1, 1997, declared or paid any dividend on, or
declared or made any distribution with respect to, or authorized or effected any
split-up or any other recapitalization of, any of the Crown Common Stock, or
directly or indirectly redeemed, purchased or otherwise acquired any of its
outstanding capital stock or agreed to take any such action and will not take
any such action during the period between the date of this Agreement and the
Effective Time. As of the date hereof, all outstanding shares of Crown Common
Stock are duly included for trading on Nasdaq.
(d) Trak's authorized equity capitalization consists of 15,000,000 shares
of Trak Common Stock, par value $0.01 per share. As of the close of business on
April 6, 1998, 5,909,179 shares of Trak Common Stock were issued and
outstanding. Such
A-41
<PAGE>
shares of Trak Common Stock constituted all of the issued and outstanding shares
of capital stock of Trak as of such date. All issued and outstanding shares of
Trak Common Stock have been duly authorized and validly issued and are fully
paid and nonassessable, are not subject to and have not been issued in violation
of any preemptive rights and have not been issued in violation of any federal or
state securities laws. Except as set forth on Exhibit 6.2 attached hereto and
-----------
except for the declaration and payment of dividends in the ordinary course of
business, Trak has not, subsequent to February 1, 1997, declared or paid any
dividend on, or declared or made any distribution with respect to, or authorized
or effected any split-up or any other recapitalization of, any of the Trak
Common Stock, or directly or indirectly redeemed, purchased or otherwise
acquired any of its outstanding capital stock or agreed to take any such action
and will not take any such action during the period between the date of this
Agreement and the Effective Time. As of the date hereof, all outstanding shares
of Trak Common Stock are duly included for trading on Nasdaq.
Section 6.3. Authority Relative to this Agreement. The execution,
------------------------------------
delivery and performance of this Agreement and of all of the other documents and
instruments required hereby by Dart are within the corporate power of Dart. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by the
A-42
<PAGE>
Board of Directors of Dart and no other corporate or shareholder proceedings on
the part of Dart are necessary to authorize this Agreement or to consummate the
transactions contemplated herein (other than, with respect to the Merger, the
approval of the Merger and of this Agreement by a majority of the outstanding
shares of Dart Common Stock at the Special Meeting, unless the Merger is
effected without a meeting of stockholders pursuant to Section 253 of the DGCL).
This Agreement and all of the other documents and instruments required hereby
have been or will be duly and validly executed and delivered by Dart and
(assuming the due authorization, execution and delivery hereof and thereof by
Richfood) constitute or will constitute valid and binding agreements of Dart,
enforceable against Dart in accordance with their respective terms, except as
such enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium and similar laws relating to or affecting creditors generally, by
general equitable principles (regardless of whether such enforceability is
considered in a proceeding in equity or at law) or by an implied covenant of
good faith and fair dealing.
Section 6.4. Consents and Approvals; No Violations. (a) Except for (i)
-------------------------------------
any applicable requirements of the Securities Act, the Exchange Act, the HSR
Act, and any applicable filings under state securities, "Blue Sky" or takeover
laws, (ii) the filing of the Certificate of Merger as required by the DGCL and
(iii) those required filings, registrations, consents and
A-43
<PAGE>
approvals listed on Exhibit 6.4 attached hereto, no material filing or
-----------
registration with, and no material Permit, authorization, consent or approval
of, any public body or authority is necessary or required in connection with the
execution and delivery of this Agreement by Dart or for the consummation by Dart
of the transactions contemplated by this Agreement. Assuming that all filings,
registrations, Permits, authorizations, consents and approvals contemplated by
the immediately preceding sentence have been duly made or obtained, neither the
execution, delivery and performance of this Agreement nor the consummation of
the transactions contemplated hereby by Dart will (i) conflict with or result in
any breach of any provision of the Certificates of Incorporation, by-laws,
partnership or joint venture agreements or other organizational documents of any
of the Dart Companies, (ii) 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, cancellation or acceleration) under, or otherwise
result in any diminution of any of the rights of the Dart Companies with respect
to, any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, license, Contract or other instrument or obligation to which any of
the Dart Companies is a party or by which it or any of them or any of their
properties or assets may be bound or (iii) violate any order, writ, injunction,
decree, statute, rule or regulation applicable to any of the Dart Companies or
any of their
A-44
<PAGE>
properties or assets except, in the case of subsections (ii) or (iii) above, for
violations, breaches or defaults that would not have a Material Adverse Effect
on the Dart Companies and that will not prevent or materially delay the
consummation of the transactions contemplated hereby.
(b) The Board of Directors of Dart, prior to the execution hereof, has
approved the execution and delivery of this Agreement, the purchase of Shares by
Merger Subsidiary pursuant to the Offer and the consummation of the Merger and
the other transactions contemplated herein, and such approval is sufficient to
render inapplicable to this Agreement, the purchase of Shares by Merger
Subsidiary pursuant to the Offer, the Merger and the other transactions
contemplated herein the restrictions of Section 203(a) of the DGCL.
Section 6.5. Reports. The Dart Group SEC Reports complied, as of their
-------
respective dates of filing, in all material respects with all applicable
requirements of the Securities Act, the Exchange Act and the rules and
regulations of the SEC. As of their respective dates, none of such forms,
reports or documents, including without limitation any financial statements or
schedules included therein, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein not misleading in light of the
circumstances under which
A-45
<PAGE>
they were made. Each of the balance sheets (including the related notes and
schedules) included in the Dart Group SEC Reports fairly presented in all
material respects the consolidated financial position of the Dart Companies as
of the respective dates thereof, and the other related financial statements
(including the related notes and schedules) included therein fairly presented in
all material respects the consolidated results of operations and cash flows of
the Dart Companies for the respective fiscal periods or as of the respective
dates set forth therein. Each of the financial statements (including the
related notes and schedules) included in the Dart Group SEC Reports (i) complied
as to form with the applicable accounting requirements and rules and regulations
of the SEC, and (ii) was prepared in accordance with GAAP consistently applied
during the periods presented, except as otherwise noted therein and subject to
normal year-end and audit adjustments in the case of any unaudited interim
financial statements. Except for Dart, Crown, SFW Holding Corp., Shoppers and
Trak, none of the Dart Companies is required to file any forms, reports or other
documents with the SEC, Nasdaq, the New York Stock Exchange or any other foreign
or domestic securities exchange or Governmental Authority with jurisdiction over
securities laws. Except as set forth in Exhibit 6.5 attached hereto, since
-----------
January 31, 1997, each of Dart, Crown, SFW Holding Corp., Shoppers and Trak has
timely filed all reports,
A-46
<PAGE>
registration statements and other filings to be filed by it with the SEC.
Section 6.6. Absence of Certain Events. Except as set forth in the Dart
-------------------------
Group SEC Reports filed prior to the date of this Agreement or as otherwise
specifically disclosed in Exhibit 6.6 attached hereto, since January 31, 1997,
-----------
none of the Dart Companies has suffered any change in its business, financial
condition or results of operations that has had or will have a Material Adverse
Effect upon the Dart Companies. Except as disclosed in the Dart Group SEC
Reports or in Exhibit 6.6 hereto, or as otherwise specifically contemplated by
-----------
this Agreement, there has not been since January 31, 1997: (i) any entry into
any binding agreement or understanding or any amendment of any binding agreement
or understanding between any of the Dart Companies on the one hand, and any of
their respective directors, officers or employees on the other hand, providing
for employment of any such director, officer or employee or any general or
material increase in the compensation, severance or termination benefits payable
or to become payable by any of the Dart Companies to any of their respective
directors, officers or employees (except for normal increases in the ordinary
course of business that are consistent with past practices and that, in the
aggregate, do not result in a material increase in benefits or compensation
expense), or any adoption of or increase in any bonus, insurance, pension or
other employee benefit plan, payment
A-47
<PAGE>
or arrangement (including, without limitation, the granting of stock options or
stock appreciation rights or the award of restricted stock) made to, for or with
any such director, officer or employee; (ii) any labor dispute that has had or
is expected to have a Material Adverse Effect upon the Dart Companies; (iii) any
entry by any of the Dart Companies into any material commitment, agreement,
license or transaction (including, without limitation, any borrowing, capital
expenditure, sale of assets or any mortgage, pledge, lien or encumbrances made
on any of the properties or assets of any of the Dart Companies) other than in
the ordinary and usual course of business; (iv) any material change in the
accounting policies or practices of any of the Dart Companies; (v) any damage,
destruction or loss, whether covered by insurance or not, which has had or will
have a Material Adverse Effect upon the Dart Companies; or (vi) any agreement to
do any of the foregoing.
Section 6.7. Litigation. Except as set forth in Exhibit 6.7 attached
---------- -----------
hereto, there is no action, suit, proceeding or, to the Knowledge of Dart,
investigation pending or, to the Knowledge of Dart, threatened against or
relating to any of the Dart Companies at law or in equity, or before any
federal, state, provincial, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, whether in the United
States or otherwise, that is expected, in the reasonable judgment of Dart, to
have a Material Adverse Effect on
A-48
<PAGE>
the Dart Companies or that seeks restraint, prohibition, material damages or
other extraordinary relief in connection with this Agreement or the consummation
of the transactions contemplated hereby.
Section 6.8. Title to and Sufficiency of Assets. As of the date hereof
----------------------------------
the Dart Companies own, and as of the Effective Time the Dart Companies will
own, good and marketable title to all of their assets (excluding, for purposes
of this sentence, assets held under leases), free and clear of any and all
mortgages, liens, encumbrances, charges, claims, restrictions, pledges, security
interests or impositions, except as disclosed on Exhibit 6.8 attached hereto.
-----------
Such assets, together with all assets held or used by the Dart Companies under
leases, include all tangible and intangible assets, Contracts and rights
necessary or required for the operation of the businesses of the Dart Companies
in accordance with past practice.
Section 6.9. Contracts. Prior to the date hereof, Dart has provided
---------
Richfood with access to true and correct copies of all of the Contracts to which
any Dart Company (with the exception of Trak) is a party that constitute: (i) a
lease of any interest in any real property; (ii) a lease of any personal
property with aggregate annual rental payments in excess of $100,000; (iii) an
option to acquire or lease any interest in real property or a right of first
refusal with respect thereto;
A-49
<PAGE>
(iv) an agreement to purchase or sell a capital asset or an interest in any
business entity for a price in excess of $100,000 or a right of first refusal
with respect thereto; (v) an agreement relating to the borrowing or lending of
money or the purchase or sale of securities; (vi) a guaranty, contribution
agreement or other agreement that includes any indemnification, contribution or
support obligation; (vii) an agreement limiting in any respect the ability of
any Dart Company to compete in any line of business or with any person; (viii) a
supply or requirements agreement or an agreement with a vendor to which any of
the Dart Companies is a party or by which any of the Dart Companies is bound;
(ix) an employment or material consulting agreement to which any of the Dart
Companies is a party or by which any of the Dart Companies is bound; and (x) any
other agreement with a remaining term in excess of one year or involving an
amount over its term in excess of $100,000. The Dart Companies have performed
in all material respects and, to the Knowledge of Dart, every other party has
performed in all material respects, each material term, covenant and condition
of each of the Contracts to which any Dart Company is a party that is to be
performed by any of them at or before the date hereof. No event has occurred
that would, with the passage of time or compliance with any applicable notice
requirements or both, constitute a material default by any Dart Company or, to
the Knowledge of Dart, any other party under any of the Contracts to which any
Dart Company is a party, and, to the Knowledge of Dart,
A-50
<PAGE>
no party to any of the Contracts to which any Dart Company is a party intends to
cancel, terminate or exercise any option under any of such Contracts.
Section 6.10. Labor Matters. (a) Except as set forth in Exhibit 6.10
------------- ------------
attached hereto, with respect to employees of the Dart Companies: (i) to the
Knowledge of Dart, no current officer, senior executive or key employee has
announced any plans to terminate employment with any of the Dart Companies; (ii)
there is no unfair labor practice charge or complaint against any Dart Company
pending or, to the Knowledge of Dart, threatened before the National Labor
Relations Board or any other comparable authority; (iii) no material grievance
or any material arbitration proceeding arising out of or under collective
bargaining agreements is pending and, to the Knowledge of Dart, no claims
therefor exist or have been threatened; and (iv) there is no material
litigation, arbitration proceeding, governmental investigation, administrative
charge, citation or action of any kind pending or, to the Knowledge of Dart,
proposed or threatened against any Dart Company relating to employment,
employment practices, terms and conditions of employment or wages and hours.
(b) Except as described in Exhibit 6.10 attached hereto, no Dart Company
------------
has any collective bargaining relationship or duty to bargain with any Labor
Organization (as such term is defined in Section 2(5) of the National Labor
Relations Act, as amended),
A-51
<PAGE>
and no Dart Company has recognized any Labor Organization as the collective
bargaining representative of any of its employees.
Section 6.11. Employee Benefit Plans. (a) For purposes of this Section,
----------------------
the term "Dart Benefit Plans" shall mean all pension, retirement, profit-
sharing, deferred compensation, stock option, employee stock ownership,
severance pay, vacation, bonus or other incentive plans, and all other employee
programs, arrangements or agreements, whether arrived at through collective
bargaining or otherwise, all medical, vision, dental and other health plans, all
life insurance plans, and all other employee benefit plans or fringe benefit
plans, including, without limitation, any "employee benefit plan," as that term
is defined in Section 3(3) of ERISA, currently adopted, maintained by, sponsored
in whole or in part by, or contributed to by any of the Dart Companies or
affiliates thereof for the benefit of employees, retirees, dependents, spouses,
directors or other beneficiaries and under which employees, retirees,
dependents, spouses, directors or other beneficiaries are eligible to
participate. Any of the Dart Benefit Plans which is an "employee pension
benefit plan," as that term is defined in Section 3(2) of ERISA, is referred to
herein as a "Dart ERISA Plan."
(b) Except as set forth on Exhibit 6.11 hereto, no Dart Benefit Plan is or
------------
has been a multiemployer plan within the meaning of Section 3(37) of ERISA. As
to any multiemployer plan
A-52
<PAGE>
set forth on Exhibit 6.11 hereto, and except as otherwise specified in such
------------
Exhibit, Dart has provided to Richfood an estimate of the "withdrawal liability"
that would arise if Dart were to withdraw or cause a withdrawal from each such
plan. All Dart Benefit Plans are in compliance with the applicable provisions
(including, without limitation, any funding requirements or limitations) of
ERISA, the Code and any other applicable Laws, the breach or violation of which
would have a Material Adverse Effect on the Dart Companies. No Dart Benefit
Plan provides for post-retirement medical benefit obligations (without regard to
COBRA obligations). Except as set forth on Exhibit 6.11 hereto, no Dart ERISA
------------
Plan which is a defined benefit pension plan has any "unfunded current
liability," as that term is defined in Section 302(d)(8)(A) of ERISA, and the
present fair market value of the assets of any such plan exceeds the plan's
"benefit liabilities," as that term is defined in Section 4001(a)(16) of ERISA,
when determined under actuarial factors that would apply if the plan terminated
in accordance with all applicable legal requirements.
(c) Exhibit 6.11 hereto is a true and correct list of all Dart Benefit
------------
Plans. Dart has made available to Richfood and will provide to Richfood before
the consummation of the Offer true and correct copies of each governing document
for each Dart Benefit Plan, together with the most recent summary plan
description, annual report and audited financial statement for each such plan
A-53
<PAGE>
and the actuarial report for any Dart Benefit Plan that is a defined benefit
pension plan or funded welfare benefit plan.
Section 6.12. Tax Matters. (a) Except as set forth on Exhibit 6.12:
----------- ------------
(i) Dart, Crown and Trak and each of their respective Subsidiaries
that is incorporated under the laws of the United States or of any of the United
States are members of affiliated groups, within the meaning of Section 1504(a)
of the Code, of which Dart, Crown or Trak, respectively, is the common parent,
such affiliated groups file consolidated federal income tax returns and none of
Dart, Crown or Trak nor any of their respective Subsidiaries has ever filed a
consolidated federal income tax return with (or been included in a consolidated
return of) a different affiliated group;
(ii) each of the Dart Companies has timely filed or caused to be filed
all Tax Returns required to have been filed by or for it, and all information
set forth in such Tax returns is accurate and complete in all material respects;
(iii) each of the Dart Companies has paid or made adequate provision
on its books and records in accordance with GAAP for all Taxes covered by such
Tax Returns;
A-54
<PAGE>
(iv) each of the Dart Companies is in material compliance with, and
its records contain all information and documents (including, without
limitation, properly completed IRS Forms W-8 and Forms W-9) necessary to comply
in all material respects with, all applicable information reporting and tax
withholding requirements under federal, state, local and foreign Laws, and such
records identify with specificity all accounts subject to withholding under
Section 1441, 1442 or 3406 of the Code or similar provisions of state, local or
foreign laws;
(v) there is not a material amount of unpaid Taxes due and payable by
any of the Dart Companies or by any other person that is or could become a lien
on any asset of, or otherwise have a Material Adverse Effect on, the Dart
Companies;
(vi) each of the Dart Companies has collected or withheld all Taxes
required to be collected or withheld by it, and all such Taxes have been paid to
the appropriate Governmental Authority or set aside in appropriate accounts for
future payment when due;
(vii) none of the Dart Companies has granted (or is subject to) any
waiver, which is currently in effect, of the period of limitations for the
assessment of any Tax; no material unpaid Tax deficiency has been assessed or
asserted against or with respect to any of the Dart Companies by any
Governmental
A-55
<PAGE>
Authority; no power of attorney relating to Taxes that is currently in effect
has been granted by or with respect to any of the Dart Companies; there are no
currently pending administrative or judicial proceedings, or any deficiency or
refund litigation, with respect to Taxes of any of the Dart Companies, the
adverse outcome of which would have a Material Adverse Effect on the Dart
Companies; and any such assertion, assessment, proceeding or litigation
disclosed on Exhibit 6.12 hereto is being contested in good faith through
------------
appropriate measures, and its status is described in Exhibit 6.12 hereto;
------------
(viii) none of the Dart Companies has made or entered into, or holds
any asset subject to, a consent filed pursuant to Section 341(f) of the Code and
the regulations thereunder or a "safe harbor lease" subject to former Section
168(f)(8) of the Code and the regulations thereunder;
(ix) none of the Dart Companies is required to include in income any
amount from an adjustment pursuant to Section 481 of the Code or the regulations
thereunder or any similar provision of state or local Law, and Dart has no
Knowledge that any Governmental Authority has proposed any such adjustment;
(x) none of the Dart Companies has made or is obligated to make any
payments, or has been or is a party to any Contract is reasonably likely to
obligate it to make any
A-56
<PAGE>
payments, that would not be deductible by reason of sections 162(m) or 280G of
the Code;
(xi) there are no excess loss accounts or deferred intercompany gains
with respect to any member of the affiliated group of which Dart is the common
parent which would have a Material Adverse Effect on the Dart Companies if taken
into account; and
(xii) the most recent audited consolidated balance sheet included in
the Dart Group SEC Reports fully and properly reflects, as of the date thereof,
the liabilities of Dart and its Subsidiaries for all accrued Taxes and deferred
liability for Taxes and, for periods ending after such date, the books and
records of each such corporation fully and properly reflect its liability for
all accrued Taxes.
(b) Dart has made available to Richfood its tax records that (i) contain
all material and continuing Tax elections, consents and agreements made by or
affecting any of the Dart Companies, (ii) reflect all types of material Taxes
paid and Tax Returns filed by or on behalf of any of the Dart Companies and
(iii) reflect each Tax with respect to which any of the Dart Companies is or has
been included in a consolidated, unitary or combined return.
A-57
<PAGE>
Section 6.13. Compliance with Law. The conduct of the businesses of the
-------------------
Dart Companies and their use of their assets does not violate or conflict, and
has not violated or conflicted, with any Law, which violation or conflict would
reasonably be expected to have a Material Adverse Effect on the Dart Companies.
Section 6.14. Transactions With Affiliates. For purposes of this Section,
----------------------------
the term "Affiliate" shall mean (a) any person who, to the Knowledge of Dart, is
the beneficial owner of 5% or more of the voting securities of Dart, Crown or
Trak, (b) any director, officer or employee of any of the Dart Companies, (c)
any person, firm or corporation that directly or indirectly controls, is
controlled by or is under common control with any of the Dart Companies, (d)
Herbert H. Haft, Robert M. Haft, Ronald S. Haft, Gloria G. Haft and Linda G.
Haft (collectively, the "Hafts"), and any person, firm or corporation that
directly or indirectly controls, is controlled by or is under common control
with any of the Hafts; and (e) any member of the immediate family of any of the
foregoing persons. Except as set forth in Exhibit 6.14 attached hereto or
------------
previously provided in writing to Richfood, since January 31, 1997, the Dart
Companies have not, in the ordinary course of business or otherwise, (a)
purchased, leased or otherwise acquired any material property or assets or
obtained any material services from, (b) sold, leased or otherwise disposed of
any material property or assets or provided any material services to (except
with respect to remuneration for
A-58
<PAGE>
services rendered in the ordinary course of business as a director, officer or
employee of one or more of the Dart Companies), (c) entered into or modified in
any manner any Contract with, or (d) borrowed any money from, or made or
forgiven any loan or other advance to, any Affiliate. Except as set forth in
Exhibit 6.14 or previously provided in writing to Richfood, (a) the Contracts of
- ------------
the Dart Companies do not include any obligation or commitment between any of
the Dart Companies and any Affiliate, (b) the assets of the Dart Companies do
not include any receivable or other obligation or commitment from an Affiliate
to any of the Dart Companies and (c) the liabilities of the Dart Companies do
not include any payable or other obligation or commitment from any of the Dart
Companies to any Affiliate. To the Knowledge of Dart and except as set forth in
Exhibit 6.14 hereto or previously provided in writing to Richfood, no Affiliate
- ------------
of any of the Dart Companies is a party to any Contract with any customer or
supplier of any Dart Company that materially and adversely affects in any manner
the business, financial condition or results of operation of any of the Dart
Companies.
Section 6.15. Fees and Expenses of Brokers and Others. None of the Dart
---------------------------------------
Companies (a) has had any dealings, negotiations or communications with any
broker or other intermediary in connection with the transactions contemplated by
this Agreement, (b) is committed to any liability for any brokers' or finders'
fees or any similar fees in connection with the transactions
A-59
<PAGE>
contemplated by this Agreement or (c) has retained any broker or other
intermediary to act on its behalf in connection with the transactions
contemplated by this Agreement, except that Dart has engaged Wasserstein to
represent it in connection with such transactions, and shall pay all of
Wasserstein's fees and expenses in connection with such engagement.
Section 6.16. Absence of Undisclosed Liabilities; Guarantees. (a) None
----------------------------------------------
of the Dart Companies has, as of the date hereof, or will have, as of the
Effective Time, any liabilities or obligations of any kind, whether absolute,
accrued, asserted or unasserted, contingent or otherwise, that would be required
to be disclosed on a consolidated balance sheet of Dart prepared as of such
date, in accordance with GAAP, except liabilities, obligations or contingencies
that were (a) reflected on or accrued or reserved against in the consolidated
balance sheet of Dart as of January 31, 1997, included in the Dart Group SEC
Reports or reflected in the notes thereto, or (b) incurred after the date of
such balance sheet in the ordinary course of business and consistent with past
practices and which, individually or in the aggregate, would not have a Material
Adverse Effect on the Dart Companies. None of the Dart Companies is a party to
any Contract, or subject to any charter or other corporate or partnership
restriction, or subject to any judgment, order, writ, injunction, decree, rule
or regulation, which could reasonably be expected to have a Material Adverse
Effect on the Dart Companies.
A-60
<PAGE>
(b) Attached hereto as Exhibit 6.16 is a true and correct list of all
------------
obligations, contingent or otherwise, of any Dart Company pursuant to which such
entity has guaranteed the payment or performance of any debt or contractual
obligation of any other person (including, without limitation, any other Dart
Company, and including any obligation to keep well, to purchase assets or
securities, to take-or-pay, or to maintain financial condition).
Section 6.17. Information Supplied. None of the information relating to
--------------------
Dart and its affiliates supplied in writing by Dart specifically for inclusion
in the Offer Documents will, at the respective times the Offer Documents are
filed with the SEC, 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. If at any time prior to the Effective Time Dart should
become aware of any event relating to any Dart Company that is required by
applicable Law to be set forth in an amendment of, or supplement to, the Offer
Documents, Dart shall promptly so inform Richfood and Merger Subsidiary and will
furnish to Richfood and Merger Subsidiary all information relating to such event
that is required under applicable Law to be disclosed in an amendment or
supplement to the Offer Documents. The Schedule 14D-9 will comply as to form in
all material respects with the Exchange Act, and shall not, when filed with the
SEC, contain any untrue
A-61
<PAGE>
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; provided, however,
-------- -------
that no agreement or representation hereby is made or shall be made by Dart with
respect to information supplied by Richfood or Merger Subsidiary in writing
expressly for inclusion in the Schedule 14D-9.
ARTICLE VII
COVENANTS
Section 7.1. Conduct of the Business of Dart. (a) Except as set forth
-------------------------------
in Exhibit 7.1A attached hereto, or as otherwise expressly provided in this
------------
Agreement, during the period from the date of this Agreement to the Effective
Time, Dart shall, and shall cause each of its wholly-owned Subsidiaries and
Partnerships to, conduct their respective operations according to their ordinary
and usual course of business and consistent with past practice, and to use their
respective reasonable best efforts to preserve intact their respective business
organizations, to keep available the services of their officers and employees
and to maintain satisfactory relationships with licensors, licensees, suppliers,
contractors, distributors, customers and others having material business
relationships with them. Without limiting the generality of the foregoing, and
A-62
<PAGE>
except as otherwise expressly provided in this Agreement, prior to the Effective
Time, neither Dart nor any of Dart's wholly-owned Subsidiaries or Partnerships
will, without the prior written consent of Richfood:
(i) amend its Articles or Certificate of Incorporation, bylaws,
partnership or joint venture agreements or other organizational documents;
(ii) authorize for issuance or issue, sell or deliver (whether through
the issuance or granting of options, warrants, commitments, subscriptions,
rights to purchase or otherwise) any stock of any class or any other securities
or interests, except as required by the terms of any Dart Benefit Plan existing
on the date hereof, or any options, warrants, rights or other securities
outstanding as of the date hereof and disclosed pursuant to this Agreement;
(iii) split, combine or reclassify any shares of its capital stock or
declare, set aside or pay any dividend or other distribution or redemption
(whether in cash, stock or property or any combination thereof) in respect of
its capital stock, or redeem or otherwise acquire any of its securities or any
securities of their respective Subsidiaries and Partnerships;
A-63
<PAGE>
(iv) (A) incur or assume any Funded Debt (as defined below) not
currently outstanding, except for borrowings in the ordinary course of business
under revolving credit agreements in effect on the date hereof, or permit any
modifications or amendments of any agreements related to Funded Debt, (B)
assume, guarantee, endorse or otherwise become liable or responsible for the
obligations of any person (including, without limitation, the obligations of any
other Dart Company), or permit the renewal or extension of any contract or other
obligation that is the subject of a guarantee or similar obligation, other than
the endorsement of checks for deposit in the ordinary course of business, (C)
make any loans, advances or capital contributions to, or investments in, any
other person (including, without limitation, any other Dart Company), (D) enter
into any Contract, or alter, amend, modify or exercise any option under any
existing Contract, other than in the ordinary course of business or in
connection with the transactions contemplated by this Agreement, (E) enter into,
or alter, amend, modify or exercise any option under, any supply or requirements
agreement or (F) authorize any capital expenditures other than capital
expenditures pursuant to Contracts entered into prior to the date hereof,
capital expenditures related to necessary maintenance in the ordinary course of
business or capital expenditures reflected in Shoppers' fiscal 1999 capital
budget attached hereto as Exhibit 7.1B;
------------
A-64
<PAGE>
(v) adopt or amend (except as may be required by Law or as provided in
this Agreement) any bonus, profit sharing, compensation, severance, termination,
stock option, stock appreciation right, restricted stock, pension, retirement,
deferred compensation, employment, severance or other employee benefit
agreements, trusts, plans, funds or other arrangements for the benefit or
welfare of any director, officer or employee, or (except for normal increases to
non-executive employees in the ordinary course of business that are consistent
with past practices and that, in the aggregate, do not result in a material
increase in benefits or compensation expense) increase in any manner the
compensation or fringe benefits of any director, officer or employee or pay any
benefit not required by any existing plan or arrangement (including, without
limitation, the granting of stock options, stock appreciation rights, shares of
restricted stock or performance units) or enter into any Contract, agreement,
commitment or arrangement to do any of the foregoing;
(vi) acquire, sell, lease or dispose of any material assets outside
the ordinary course of business;
(vii) take any action other than in the ordinary course of business
and in a manner consistent with past practice with respect to accounting
policies or practices;
A-65
<PAGE>
(viii) make any material Tax election or settle or compromise any
material federal, state, local or foreign income Tax liability;
(ix) except for the payment of professional fees, pay, discharge or
satisfy any material claims, liabilities or obligations (absolute, accrued or
unasserted, contingent or otherwise), other than the payment, discharge or
satisfaction in the ordinary course of business of liabilities reflected or
reserved against in Dart's audited consolidated balance sheet as of January 31,
1997, included in the Dart Group SEC Reports, or incurred in the ordinary course
of business since the date thereof; or
(x) hold any meeting of its stockholders except to the extent required
by the request of the stockholders entitled to call a meeting under Dart's
bylaws or the DGCL;
(xi) take any action that would or is reasonably likely to result in
any of the conditions set forth in Article VIII not being satisfied as of the
------------
Closing Date; or
(xii) agree in writing or otherwise to take any of the foregoing
actions.
A-66
<PAGE>
For purposes of this Section, "Funded Debt" shall mean, without
duplication, (i) all indebtedness for borrowed money or which has been incurred
in connection with the acquisition of assets, in each case having a final
maturity of one or more than one year from the date of origin thereof (or which
is renewable or extendible at the option of the obligor for a period or periods
more than one year from the date of origin), but excluding all payments in
respect thereof that are required to be made within one year from the date of
any determination of Funded Debt to the extent the obligation to make such
payments shall constitute a current liability of the obligor under GAAP, (ii)
all rentals payable under capitalized or synthetic leases, and (iii) all
guaranties of Funded Debt of others.
(b) Richfood and Dart agree that, during the period from the date of this
Agreement to the Effective Time: (i) they will cause representatives of their
respective companies to meet, no less frequently than monthly, to discuss the
operations and business prospects of the Dart Companies; (ii) Dart will promptly
advise Richfood of the occurrence of any event having a Material Adverse Effect
on the Dart Companies, or any event that would constitute a breach by Dart of
any of its representations, warranties, covenants or agreements set forth in
this Agreement; and (iii) Richfood will promptly advise Dart of the occurrence
of any event that would constitute a breach by Richfood of any of
A-67
<PAGE>
its representations, warranties, covenants or agreements set forth in this
Agreement.
(c) Richfood hereby designates the two officers of Richfood identified on
Exhibit 7.1C attached hereto, or such other officers as Richfood may designate
- ------------
from time to time upon written notice to Dart ("Richfood's Representatives"), to
be responsible for determining whether consent to any action prohibited by
Section 7.1.(a) shall be given by Richfood. Dart hereby designates the two
- ---------------
officers of Dart identified on Exhibit 7.1C attached hereto, or such other
------------
officers as Dart may designate upon written notice to Richfood ("Dart's
Representatives"), to contact Richfood's Representatives with any requests for
consent to any action prohibited by Section 7.1.(a). Richfood's Representatives
---------------
shall respond promptly (either orally or in writing) to any request for consent
(which may be oral or written) to the taking of any action under
Section 7.1.(a). If Richfood's Representatives do not respond to any request
- ---------------
within three business days of its receipt, such consent will be deemed to have
been given. Dart may rely on any consent given orally or in writing by either of
Richfood's Representatives. The time periods within which Richfood's
Representatives must respond shall commence on the date either of Richfood's
Representatives receive an oral or written request for consent.
A-68
<PAGE>
Section 7.2. No Solicitation. (a) Dart agrees that it shall not, after
---------------
the date hereof and before the Effective Time, directly or indirectly, through
any officer, director, employee, agent or otherwise, (i) solicit, initiate or
encourage submission of proposals, offers or expressions of interest from any
person relating to any acquisition or purchase of all or (other than in the
ordinary course of business) a substantial portion of the assets of, or any
equity interest in (including by way of a tender offer), any Dart Company or any
business combination involving any Dart Company (any of the foregoing proposals,
offers or expressions of interest being referred to herein as an "Acquisition
Proposal") or, (ii) participate in any negotiations or discussions regarding, or
furnish to any person any nonpublic information with respect to, or otherwise
cooperate in any way with, or assist or participate in, facilitate or encourage,
any Acquisition Proposal; provided, however, that prior to the consummation of
-------- -------
the Offer, Dart may participate in negotiations or discussions with, and provide
nonpublic information to, any person concerning an Acquisition Proposal
submitted in writing by such person to the Board of Directors of Dart after the
date of this Agreement if (A) such Acquisition Proposal was not solicited,
initiated or encouraged in violation of this Agreement and (B) the Board of
Directors of Dart, in its good faith judgment, believes that such Acquisition
Proposal is reasonably likely to result in a Superior Proposal.
A-69
<PAGE>
(b) Until such time, if any, that Richfood makes its first offer after
receipt from Dart of notice pursuant to Section 9.1.(e)(iii) that Dart's Board
--------------------
of Directors has determined that an Acquisition Proposal constitutes a Superior
Proposal, Dart shall notify Richfood as promptly as practicable (and in any
event within 48 hours) if any Acquisition Proposal is made and shall in such
notice indicate in reasonable detail the identity of the person making such
Acquisition Proposal and the terms and conditions of such Acquisition Proposal,
and shall keep Richfood promptly advised of all material developments relating
to such Acquisition Proposal which could reasonably be expected to culminate in
the Board of Directors of Dart withdrawing, modifying or amending its
recommendation of the Offer, the Merger and the other transactions contemplated
in this Agreement in a manner adverse to Merger Subsidiary.
(c) If, pursuant to Section 7.2.(a), Dart provides nonpublic information to
---------------
any person who makes an Acquisition Proposal, Dart shall require such person to
enter into a confidentiality agreement on terms substantially similar to the
Confidentiality Agreement as a condition to and before providing any such
information (except as to the standstill provisions thereof, provided that if
under the aforementioned circumstances Dart enters into any confidentiality
agreement without standstill provisions substantially similar to those contained
in the Confidentiality Agreement, then Richfood shall to the extent of
A-70
<PAGE>
the difference be relieved of compliance with the Confidentiality Agreement's
standstill provisions).
(d) Dart shall immediately cease and cause to be terminated any existing
discussions or negotiations with any persons (other than Richfood and Merger
Subsidiary) conducted heretofore with respect to any Acquisition Proposal. Dart
may waive the provisions of any "standstill" agreements between Dart and any
party to the extent necessary to permit such party to submit an Acquisition
Proposal that the Board of Directors of Dart believes, in its good faith
judgment, is reasonably likely to result in a Superior Proposal; provided, that
--------
such waiver (i) does not violate or conflict with subsection (a) of this Section
-------
7.2, and (ii) would not, in any event, permit such person to acquire any direct
- ---
or indirect beneficial ownership of Shares or participate in any tender offer or
proxy solicitation relating to Dart that would otherwise be prohibited by such
"standstill" agreement.
Section 7.3. Access to Information; Confidentiality Agreements.
-------------------------------------------------
(a) Between the date of this Agreement and the Effective Time, Dart will
give Richfood and its authorized representatives reasonable access during normal
business hours to all plants, offices, warehouses and other facilities and to
all books and records of the Dart Companies, will permit Richfood to make such
inspections as it may reasonably request and will cause
A-71
<PAGE>
its officers and those of its Subsidiaries and Partnerships to furnish such
financial and operating data and other information with respect to their
businesses and properties as may from time to time reasonably be requested by
Richfood. Subject to Section 7.6 hereof, all such information shall be kept
-----------
confidential by Richfood in accordance with the Confidentiality Agreement.
(b) Notwithstanding the execution of this Agreement, the Confidentiality
Agreement shall remain in full force and effect through the Effective Time, at
which time the Confidentiality Agreement shall terminate and be of no further
force and effect.
Section 7.4. Best Efforts. Subject to the terms and conditions herein
------------
provided and subject to fiduciary obligations under applicable Law as advised by
counsel, each of the parties hereto agrees to use its best efforts to take, or
cause to be taken, all action, and to do, or cause to be done, all things
necessary, proper and advisable under applicable Law, to consummate and make
effective the 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 each
party to this Agreement shall take all such necessary action. Richfood and Dart
will execute any additional instruments necessary to consummate the transactions
contemplated hereby.
A-72
<PAGE>
Section 7.5. Consents. Dart and Richfood each will use its best efforts
--------
to obtain consents of all third parties and governmental authorities necessary
to the consummation of the transactions contemplated by this Agreement.
Section 7.6. Public Announcements. The parties hereto have agreed upon
--------------------
the text of their respective press releases announcing, among other things, the
execution of this Agreement, which press releases shall be disseminated promptly
following the execution hereof. Dart and Richfood will consult with each other
before issuing any additional press releases or otherwise making any additional
public statement with respect to this Agreement, the Offer, the Merger or the
transactions contemplated herein and shall not issue any such press release or
make any such public statement prior to such consultation or as to which the
other party promptly and reasonably objects, except as may be required by Law
based on the advice of such party's counsel or by obligations pursuant to any
listing agreement with any national securities exchange or inter-dealer
quotation system, in which case the party proposing to issue such press release
or make such public announcement shall use its best efforts to consult in good
faith with the other party before issuing any such press release or making any
such public announcements.
Section 7.7. Dart Group Fiscal 1998 Financial Statements. Dart
-------------------------------------------
covenants and agrees to deliver the Dart Group Fiscal 1998
A-73
<PAGE>
Financial Statements to Richfood as soon as practicable after the date hereof,
but in any event no later than May 1, 1998. The audited consolidated financial
statements of each of Dart, Crown, Shoppers and Trak included in the Dart Group
Fiscal 1998 Financial Statements shall be accompanied by the respective opinions
of Arthur Andersen LLP thereon.
Section 7.8. Indemnification; Insurance. (a) From and after the
--------------------------
consummation of the Offer and for a period of six (6) years thereafter, Richfood
shall cause Dart and its wholly-owned Subsidiaries to maintain all rights of
indemnification (including rights to advancement of expenses and exculpation
from liability) existing in favor of the present and former directors, officers,
employees and agents of Dart and such Subsidiaries (collectively, the
"Indemnified Parties") on terms no less favorable than those provided in the
certificates of incorporation and bylaws of such entities on the date of this
Agreement with respect to matters occurring prior to the Effective Time. In
addition, Richfood shall and shall cause each of Dart and its Subsidiaries (or
any of their successors) to perform all of their respective obligations under
those Indemnification Agreements listed on Exhibit 7.8 attached hereto. Richfood
-----------
acknowledges that all directors, officers and employees of Subsidiaries of Dart
that are not wholly-owned Subsidiaries who are also directors, officers or
employees of Dart are serving in their capacities at such Subsidiaries at the
direction and request of Dart.
A-74
<PAGE>
(b) Richfood shall cause to be maintained in effect from the consummation
of the Offer until six (6) years thereafter the current policies for directors'
and officers' liability insurance maintained by Dart for the benefit of the
Indemnified Parties, including coverage with respect to claims arising from
facts or events that occurred at or prior to the consummation of the Offer
(provided that Richfood may substitute therefor policies of at least the same
coverage containing terms and conditions that are not materially less
advantageous), with respect to matters occurring prior to the Effective Time, to
the extent such insurance is available to Richfood in the market. If such
insurance is not available to Richfood in the market, Richfood will provide such
level of insurance as is then provided to directors and officers of Richfood.
(c) In the event Richfood or Dart or any of their respective successors or
assigns (i) consolidates with or merges into any other person and shall not be
the continuing or surviving corporation or entity in such consolidation or
merger, or (ii) transfers all or substantially all of its properties and assets
to any person, then, and in each case, proper provision shall be made so that
the successors and assigns of Richfood or Dart, as the case may be, honor the
indemnification obligations set forth in this Section 7.8.
-----------
A-75
<PAGE>
(d) The obligations of Dart and Richfood under this Section 7.8 shall not
-----------
be terminated, modified or assigned in such a manner so as to adversely affect
any Indemnified Party without the consent of such Indemnified Party (it being
expressly agreed that the Indemnified Parties shall be third-party beneficiaries
of this Section 7.8).
-----------
Section 7.9. Shoppers Senior Notes. In the event that any of the 9-3/4%
---------------------
Senior Notes due 2004 (the "Senior Notes") issued by Shoppers pursuant to that
certain Indenture, dated as of February 6, 1997, between Shoppers, as issuer,
SFW Holding Corp., as guarantor, and Norwest Bank Minnesota, N.A., as trustee
(the "Indenture") are tendered to Shoppers (the "Tendered Notes") by the holders
thereof as a result of the transactions contemplated herein, Richfood will (i)
cause Shoppers to comply with its obligations under the Indenture, and (ii) if
necessary, lend to Shoppers all amounts required to repurchase any Tendered
Shares on commercially reasonable terms and in accordance with lending
conditions then available in arms-length transactions.
ARTICLE VIII
CONDITIONS PRECEDENT TO CONSUMMATION OF THE MERGER
Section 8.1. Conditions Precedent to Each Party's Obligation to Effect
---------------------------------------------------------
the Merger. The respective obligation of each party to consummate the Merger is
- ----------
subject to the
A-76
<PAGE>
satisfaction at or prior to the Effective Time of the following conditions
precedent:
(a) this Agreement and the Merger shall have been approved and adopted by
the affirmative vote of the holders of a majority of Shares entitled to vote
thereon if such vote is required under the DGCL;
(b) no order, decree or injunction shall have been enacted, entered,
promulgated or enforced by any United States court of competent jurisdiction or
any United States Governmental Authority which prohibits the consummation of the
Merger; provided, however, that the parties hereto shall use their best efforts
-------- -------
to have any such order, decree or injunction vacated or reversed; and
(c) any waiting period applicable to the Merger under the HSR Act shall
have terminated or expired, all applicable requirements of the Exchange Act
shall have been satisfied and any applicable filings under state securities,
"Blue Sky" or takeover laws shall have been made.
Section 8.2. Conditions Precedent to Obligations of Dart. The
-------------------------------------------
obligations of Dart to consummate the Merger are subject to the satisfaction or
waiver at or prior to the Effective Time of the following conditions precedent:
A-77
<PAGE>
(a) the representations and warranties of Richfood and Merger Subsidiary
contained in Article V, when read without exception or qualification as to
---------
materiality or Material Adverse Effect, shall be true and correct when made and
at and as of the consummation of the Offer with the same force and effect as if
those representations and warranties had been made at and as of such time
(except to the extent such representations and warranties speak as of a
specified earlier date, in which event such representations and warranties must
be true and correct as of such specified date), except where the failure to be
so true and correct would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on Richfood; and
(b) Richfood and Merger Subsidiary shall, in all material respects, have
performed all obligations and complied with all covenants necessary to be
performed or complied with by them on or before the consummation of the Offer.
Section 8.3. Conditions Precedent to Obligations of Richfood and Merger
----------------------------------------------------------
Subsidiary. The obligations of Richfood and Merger Subsidiary to consummate the
- ----------
Merger are subject to the satisfaction or waiver at or prior to the Effective
Time of the following conditions precedent:
A-78
<PAGE>
(a) the representations and warranties of Dart contained in Article VI,
----------
when read without exception or qualification as to materiality or Material
Adverse Effect on Dart, shall be true and correct when made and at and as of the
consummation of the Offer with the same force and effect as if those
representations and warranties had been made at and as of such time (except to
the extent such representations and warranties speak as of a specified earlier
date, in which event such representations and warranties must be true and
correct as of such specified date), except where the failure to be so true and
correct would not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect on Dart; and
(b) Dart shall, in all material respects, have performed all obligations
and complied with all covenants necessary to be performed or complied with by it
on or before the consummation of the Offer.
ARTICLE IX
TERMINATION; AMENDMENT; WAIVER
Section 9.1. Termination. This Agreement may be terminated and the
-----------
Merger contemplated hereby may be abandoned at any time notwithstanding approval
thereof by the respective shareholders of Dart and Merger Subsidiary, but prior
to the Effective Time:
A-79
<PAGE>
(a) by mutual written consent of Dart and Richfood;
(b) by Dart or Richfood, if either (i) the purchase of Shares pursuant to
the Offer has not been consummated on or before June 30, 1998, or (ii) the
Effective Time shall not have occurred on or before December 31, 1998 (provided
that the right to terminate this Agreement under this Section 9.1.(b) shall not
---------------
be available to any party whose failure to fulfill any obligation under this
Agreement has been the cause of or has resulted in the failure of the
consummation of the Offer or Effective Time to occur on or before the applicable
date set forth above);
(c) by Dart if there has been a material breach by Richfood of any
representation, warranty, covenant or agreement set forth in this Agreement,
which breach has not been cured within twenty (20) business days following
notice to Richfood of such breach;
(d) by Richfood if (i) any of the events described in clauses (b) or (c) of
Annex I has occurred, which event has not been cured by Dart within twenty (20)
- -------
business days following notice to Dart of such event; or (ii) the Board of
Directors of Dart should fail to recommend to its stockholders approval of the
transactions contemplated by this Agreement, including, without limitation, the
Offer and the Merger, or such recommendation shall have been made and
subsequently withdrawn, modified or amended in any manner adverse to Richfood;
A-80
<PAGE>
(e) by Dart if, prior to the Effective Time, a corporation, partnership,
person or other entity or group shall have made a bona fide Acquisition Proposal
---- ----
that the Board of Directors of Dart believes, in good faith after consultation
with its financial advisors, is more favorable, from a financial point of view,
to the stockholders of Dart than the proposal set forth in this Agreement (a
"Superior Proposal"); provided, that (i) if a component of such Superior
--------
Proposal is cash consideration, then the party making such Superior Proposal has
cash on hand or financing in place to provide such cash consideration, which
financing is committed and/or underwritten substantially to the same extent as
Richfood's financing is on the date hereof, (ii) the Board of Directors of Dart
intends to enter into a definitive agreement relating to such Superior Proposal
immediately following the termination of this Agreement pursuant to this Section
-------
9.1.(e), and (iii) Richfood does not make, within two business days of receiving
- -------
the first notice from Dart specifying that the Board of Directors of Dart has
determined that an Acquisition Proposal constitutes a Superior Proposal giving
rise to a potential right of termination under this Section 9.1.(e), an offer
---------------
that the Board of Directors of Dart believes, in good faith after consultation
with its financial advisors, is more favorable, from a financial point of view,
to Dart's stockholders than such Superior Proposal; or
A-81
<PAGE>
(f) by Dart or Richfood, if any court of competent jurisdiction in the
United States or other United States Governmental Authority shall have issued an
order, decree or ruling or taken any other action restraining, enjoining or
otherwise prohibiting the Merger and such order, decree, ruling or other action
shall have become final and nonappealable.
Section 9.2. Effect of Termination. If this Agreement is so terminated
---------------------
and the Merger is not consummated, this Agreement shall forthwith become void
and have no effect, without any liability on the part of either party or its
directors, officers or shareholders, other than the provisions of Section
-------
7.3.(b), this Section 9.2, Section 9.3 and Article X.
- -------- ----------- ----------- ---------
Section 9.3. Termination Fee. (a) If this Agreement is terminated (i)
---------------
by Richfood pursuant to Section 9.1.(b)(i) hereof, and the failure of the
------------------
consummation of the Offer has been caused by or is attributable to the failure
of the conditions to the Offer set forth in clauses (b), (c), (e) or (g)(2) of
Annex I to be satisfied, (ii) by Richfood pursuant to Section 9.1.(d) hereof, or
- ------- ---------------
(iii) by Dart pursuant to Section 9.1.(e) hereof, and, in the case of any of the
---------------
foregoing, if Dart is not entitled to terminate this Agreement by reason of
Section 9.1.(c) hereof, then Dart shall promptly (and in any event within two
- ---------------
days of receipt by Dart of written notice from Richfood) pay to Richfood (by
wire transfer of immediately available funds to an account
A-82
<PAGE>
designated by Richfood): (A) a termination fee of $6.0 million, plus (B)
Richfood's actual out-of-pocket expenses (including all fees and expenses of its
counsel, advisors, accountants and consultants) incurred by Richfood or on its
behalf in connection with the transactions contemplated in this Agreement, not
to exceed $500,000 in the aggregate.
(b) This Section 9.3 shall be the sole remedy of the parties hereto in the
-----------
event of any termination of this Agreement; provided, however, that nothing in
-------- -------
this Section 9.3 shall relieve any party from liability for any material breach
-----------
of this Agreement.
Section 9.4. Amendment. This Agreement may be amended by action taken by
---------
the parties hereto at any time before or after approval of the Merger by the
stockholders of Dart but, after any such approval, no amendment shall be made
that would have any of the effects specified in DGCL Section 251(d) without the
approval of the stockholders of Dart. This Agreement may not be amended except
by an instrument in writing signed on behalf of each of the parties hereto.
Section 9.5. Extension; Waiver. At any time prior to the Effective Time,
-----------------
Richfood and Merger Subsidiary on the one hand, and Dart on the other hand, may
(i) extend the time for the performance of any of the obligations or other acts
of the other
A-83
<PAGE>
party hereto, (ii) waive any inaccuracies in the representations and warranties
contained herein or in any document, certificate or writing delivered pursuant
hereto by the other party hereto or (iii) waive compliance with any of the
agreements or conditions contained herein by the other party hereto. Any
agreement on the part of any party to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party.
ARTICLE X
MISCELLANEOUS
Section 10.1. Survival of Representations and Warranties. The
------------------------------------------
representations and warranties made herein shall not survive beyond the
Effective Time.
Section 10.2. Brokerage Fees and Commissions. No broker, finder or
------------------------------
investment banker (other than Wasserstein, whose fees shall be paid by Dart) is
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of Dart; and no broker, finder or investment banker (other
than DLJ, whose fees shall be paid by Richfood) is entitled to any brokerage,
finder's or other fee or commission in connection with the transactions
contemplated by this Agreement
A-84
<PAGE>
based upon arrangements made by or on behalf of Richfood or Merger Subsidiary.
Section 10.3. Entire Agreement; Assignment. This Agreement (a)
----------------------------
constitutes the entire agreement among the parties with respect to the subject
matter hereof and supersedes, except as set forth in Section 7.1.(b) hereof, all
---------------
other prior agreements and understandings, both written and oral, between the
parties or any of them with respect to the subject matter hereof, and (b) shall
not be assigned by operation of law or otherwise.
Section 10.4. Notices. All notices, requests, claims, demands and other
-------
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by cable,
telecopy, telegram or telex, by nationally recognized overnight delivery
service, or by registered or certified mail (postage prepaid, return receipt
requested) to the respective parties as follows:
if to Richfood:
Richfood Holdings, Inc.
4860 Cox Road, Suite 300
Glen Allen, Virginia 23060
Attention: John E. Stokely
President & Chief
Executive Officer
A-85
<PAGE>
with a copy to:
Hunton & Williams
Riverfront Plaza, East Tower
951 East Byrd Street
Richmond, Virginia 23219-4074
Attention: Gary E. Thompson, Esq.
if to Dart:
Dart Group Corporation
3300 75th Avenue
Landover, Maryland 20785
Attention: Richard B. Stone
Chairman & Chief
Executive Officer
with a copy to:
O'Melveny & Myers LLP
555 13th Street, N.W.
Washington, D.C. 20004-1109
Attention: David G. Pommerening, Esq.
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
Section 10.5. Governing Law; Consent to Jurisdiction. This Agreement
--------------------------------------
shall be governed by and construed in accordance with the laws of the State of
Delaware regardless of the laws that might otherwise govern under applicable
principles of conflicts of laws thereof. Each of the parties hereto (a)
consents to submit itself to the personal jurisdiction of any federal court
located in the State of Delaware or any Delaware state court in the event any
dispute arises out of this Agreement or any of the
A-86
<PAGE>
transactions contemplated by this Agreement, and, in connection with any such
matter, to service of process by notice as otherwise provided herein, (b) agrees
that it will not attempt to deny or defeat such personal jurisdiction by motion
or other request for leave from any such court, and (c) agrees that it will not
bring any action relating to this Agreement or any of the transactions
contemplated by this Agreement in any court other than a federal court sitting
in the State of Delaware or a Delaware state court.
Section 10.6. Descriptive Headings. The descriptive headings herein are
--------------------
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
Section 10.7. Parties in Interest. This Agreement shall be binding upon
-------------------
and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person any rights, benefits or remedies of any nature whatsoever under or by
reason of this Agreement, except as provided in Section 7.8.
-----------
Section 10.8. Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
A-87
<PAGE>
Section 10.9. Specific Performance. The parties hereto agree that
--------------------
irreparable damage would occur in the event any of the provisions of this
Agreement were not performed in accordance with the terms hereof and that the
parties shall be entitled to specific performance of the terms hereof, in
addition to any other remedy at law or equity.
Section 10.10. Fees and Expenses. All costs and expenses incurred in
-----------------
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such expenses, whether or not the Merger is
consummated.
Section 10.11. Severability. If any term or other provision of this
------------
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to either party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner,
to the end that the transactions contemplated hereby are fulfilled to the extent
possible.
A-88
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be duly executed on its behalf by its officer thereunto duly authorized, all as
of the day and year first above written.
RICHFOOD HOLDINGS, INC.
By: /s/ JOHN E. STOKELY
--------------------------------
John E. Stokely
President & Chief
Executive Officer
DGC ACQUISITION, INC.
By: /s/ JOHN E. STOKELY
--------------------------------
John E. Stokely
President & Chief
Executive Officer
DART GROUP CORPORATION
By: /s/ RICHARD B. STONE
--------------------------------
Richard B. Stone
Chairman & Chief
Executive Officer
A-89
<PAGE>
ANNEX I
-------
CONDITIONS TO THE OFFER
Notwithstanding any other provision of the Offer, Merger Subsidiary 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 Merger Subsidiary's obligation to pay for or return tendered Shares promptly
after expiration or termination of the Offer), to pay for any Shares tendered
unless the following conditions have been satisfied: (i) there have been validly
tendered and not withdrawn prior to the time the Offer shall otherwise expire a
number of Shares which constitutes a majority of the Shares outstanding on a
fully-diluted basis on the date of purchase ("on a fully-diluted basis" for
purposes hereof meaning, as of any date, the number of Shares outstanding,
together with Shares that Dart is or may be required to issue pursuant to
obligations outstanding at that date under employee stock option or other
benefit plans, options, warrants or convertible or exchangeable securities, or
otherwise) (the "Minimum Condition"); (ii) any applicable waiting periods under
the HSR Act shall have expired or been terminated prior to the expiration of the
Offer; and (iii) if, at any time on or after the date of the Agreement and
before acceptance for payment of, or payment for, such Shares any of the
following events shall occur:
A-90
<PAGE>
(a) any Governmental Authority shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, executive
order, decree, injunction or other order which is in effect and which (1)
materially restricts, prevents or prohibits consummation of the Offer or
the Merger or results in the obligation to pay damages as a result of or in
connection with the transactions contemplated by this Agreement in amounts
that would have a Material Adverse Effect on Dart, (2) prohibits or limits
materially the ownership or operation by Dart, Richfood or any of their
Subsidiaries of all or any material portion of the business or assets of
Dart and its Subsidiaries taken as a whole or compels Dart, Richfood, or
any of their Subsidiaries to dispose of or hold separate all or any
material portion of the business or assets of Richfood or any of its
Subsidiaries, or of Dart and its Subsidiaries taken as a whole, (3) imposes
material limitations on the ability of Richfood, Merger Subsidiary or any
other Subsidiary of Richfood to acquire or hold, or to exercise effectively
full rights of ownership of, any Shares, including, without limitation, the
right to vote any Shares acquired by Merger Subsidiary pursuant to the
Offer or otherwise on all matters properly presented to Dart's
stockholders, including, without limitation, the approval and adoption of
the Agreement and the transactions contemplated thereby or (4) requires
divestitures by Richfood, Merger Subsidiary or any other affiliate of
Richfood of any Shares;
A-91
<PAGE>
(b) any of the representations and warranties of Dart set forth in the
Agreement, when read without any exception or qualification as to
materiality or Material Adverse Effect on Dart, shall not be true and
correct as if such representations and warranties were made at the time of
such determination (except as to any such representation or warranty which
speaks as of a specific date, which must be untrue or incorrect as of such
specific date) except where the failure to be so true and correct would
not, individually or in the aggregate, reasonably be expected to (i) have a
Material Adverse Effect on Dart, (ii) prevent the consummation of the Offer
or (iii) have a material adverse effect on the benefits to Richfood of the
transactions contemplated by this Agreement;
(c) (i) Dart shall not have performed, in all material respects, all
obligations and complied with all covenants necessary to be performed or
complied with by it, or (ii) an event shall have occurred relating to a
non-wholly owned Subsidiary or Partnership of Dart that would be prohibited
by the covenants set forth in Section 7.1.(a) hereof if such Subsidiary or
---------------
Partnership had been wholly owned by Dart and which event has a material
adverse effect on the benefits to Richfood of the transactions contemplated
by this Agreement;
(d) the Agreement shall have been terminated in accordance with its
terms;
A-92
<PAGE>
(e) the Board of Directors of Dart shall have (i) withdrawn or
materially modified or changed (including by amendment of the Schedule 14D-
9) in a manner adverse to Merger Subsidiary its recommendation of the
Offer, the Agreement or the Merger, or (ii) the Board of Directors of Dart
shall have approved or recommended an Acquisition Proposal;
(f) other than the filing of the Certificate of Merger with respect to
the Merger as provided for by Section 3.3 of the Agreement, all licenses,
-----------
permits, authorizations, consents, orders, qualifications or approvals of,
or declarations or filings with, or expirations of waiting periods imposed
by, any Governmental Authority requisite to consummation of the Merger and
the transactions contemplated thereby, shall have been filed, occurred or
been obtained, as the case may be, except any of the foregoing the absence
of which would not result in a Material Adverse Effect on Dart;
(g) it shall have been publicly disclosed or Merger Subsidiary shall
have otherwise learned that any Person or "group" (as defined in Section
13(d)(3) of the Exchange Act), other than Richfood or its affiliates or any
group of which any of them is a member, shall have (1) acquired beneficial
ownership (determined pursuant to Rule 13d-3 promulgated under the Exchange
Act) of more than 20% of any class or series of capital stock of Dart or
shall have been granted an option,
A-93
<PAGE>
right or warrant, conditional or otherwise, to obtain more than 20% of any
class or series of capital stock of Dart (including the Shares); or (2)
without the prior consent of Richfood, entered into any binding agreement
or understanding with Dart with respect to (A) a merger, consolidation or
other business combination with, or acquisition of a material portion of
the assets of, Dart, or (B) a tender or exchange offer for Shares; or
(h) there shall have occurred and be continuing (i) any general
suspension of trading in securities on any national securities exchange or
in the over-the-counter market, (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) any indirect limitation (whether
or not mandatory) by a United States Governmental Authority or agency on
the extension of credit by banks or other financial institutions or (iv) a
decline in the Dow Jones Industrial Average in excess of 25%, measured from
the date hereof.
The foregoing conditions are for the sole benefit of Merger Subsidiary and
its affiliates and, subject to the terms of the Agreement, may be asserted by
Merger Subsidiary regardless of the circumstances (including, without
limitation, any action or inaction by Merger Subsidiary or any of its
affiliates) giving rise to any such condition or may be waived by Merger
Subsidiary, in
A-94
<PAGE>
whole or in part, from time to time in its sole discretion, except as otherwise
provided in the Agreement. The failure by Merger Subsidiary at any time to
exercise any of the foregoing rights shall not be deemed a waiver of any such
right and each such right shall be deemed an ongoing right and may be asserted
at any time and from time to time. Unless otherwise defined herein, capitalized
terms used herein shall have the meanings ascribed to them in the Agreement
among Richfood, Merger Subsidiary and Dart to which this Annex I is attached.
-------
A-95
<PAGE>
ANNEX II
--------
CERTIFICATE OF INCORPORATION OF SURVIVING CORPORATION
A-96
<PAGE>
ANNEX III
---------
BYLAWS OF SURVIVING CORPORATION
A-97
<PAGE>
EXHIBIT B
Employment Agreement
--------------------
This Employment Agreement (the "Agreement") is entered into by and between
Dart Group Corporation (the "Company") and Richard B. Stone ("Executive") as of
the 12th day of February, 1998.
I. EMPLOYMENT.
----------
The Company hereby employs Executive and Executive hereby accepts such
employment, upon the terms and conditions hereinafter set forth, for a three
year term running from February 12, 1998, to and including February 12, 2001.
This Agreement is subject to renewal only as set forth in Section VI below. The
term of this Agreement, including extensions thereof, is referred to as the
"Term."
II. DUTIES.
------
A. Executive shall serve during the course of his employment as Chairman
and Chief Executive Officer of the Company and each of its subsidiaries, and
shall have such other duties and responsibilities as the Board of the Company
shall determine from time to time.
B. Executive agrees to devote substantially all of his professional time,
energy and ability as is reasonably necessary to accomplish the business of the
Company. Nothing herein shall prevent Executive, upon approval of the Board of
Directors of the Company, from serving as a director or trustee of other
corporations or businesses which are not in competition with the business of the
Company. Nothing herein shall prevent Executive from investing in real estate
for his own account or from becoming a passive partner or a passive stockholder
in any corporation, partnership or other venture not in direct competition with
the business of the Company.
C. For the term of this Agreement, Executive shall report directly to the
Board of Directors of the Company. Executive shall be given such authority as
is appropriate to carry out the duties described above and all executives of the
Company and its subsidiaries shall report directly to Executive or his designee.
Executive shall also serve as Chairman of the Board of Directors.
III. COMPENSATION AND BENEFITS.
-------------------------
A. Salary. The Company will pay to Executive a base salary at the rate
------
of $550,000 per year. Such salary shall be earned weekly and shall be payable
in periodic installments in accordance with the Company's customary practices
for
B-1
<PAGE>
executive officers. Amounts payable shall be reduced by standard withholding
and other authorized deductions. The Company will review Executive's salary at
least annually. The Company may in its discretion increase Executive's salary
but it may not reduce it during the Term.
B. Additional Compensation. To incentivize Executive to maximize
-----------------------
stockholder value in a timely manner, Executive shall be entitled to additional
compensation comprised of three components: (1) stock options, (2) restricted
stock and (3) cash payments, in each case as provided below. For the purposes
of this Agreement, a "Total Sale" of the Company is deemed to have occurred
either when (x) substantially all of the common stock of the Company is
converted into cash, securities or other property (including pursuant to a
transaction using recapitalization accounting) or (y) substantially all of the
Company's businesses (i.e. the businesses generating 90% or more of the revenues
---
of the Company) have been sold or otherwise divested. The closing date of the
transaction that gives rise to a Total Sale shall be deemed the date of the
Total Sale. For purposes of this Agreement, a "Change of Control" occurs when
any "person" (as such term is used in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934 (the "Exchange Act")) is or becomes the beneficial owner,
directly or indirectly, of more than 35% of the total voting power of the voting
stock of the Company.
C. Grant of Option; Exercise Price. Subject to the terms and conditions
-------------------------------
set forth herein, the Company hereby grants to Executive options to purchase
30,000 shares at a price per share of $108.00 (as from time to time adjusted
hereunder, the "Exercise Price"), which shall vest as provided below and expire
five years from the date of this Agreement. These options shall be nonqualified
stock options. The Exercise Price and the number of shares purchasable upon
exercise of an option shall be subject to adjustment, and Executive will be
entitled to certain notifications, in each case as provided in Exhibit A.
1. Exercisability of Option. With respect to vested options, upon
------------------------
payment of the Exercise Price at the time in effect hereunder, the Company shall
cause to be issued and shall deliver to Executive a certificate for the shares
issuable upon such exercise. Such certificate shall be deemed to have been
issued as of the date of the surrender of the option as to such number of shares
and payment of the Exercise Price. Fractional share interests shall be
disregarded, but may be accumulated. No fewer than 50 shares may be purchased
at any one time, unless the number purchased is the total number at the time
remaining for purchase under the options. The options shall be exercisable by
the delivery to the Company of a written notice substantially in the form of
Exhibit B hereto stating the number of shares to be purchased pursuant to the
options and accompanied by payment in full in accordance with this Agreement, in
an amount equal to the Exercise Price per Share multiplied by the number of
shares to be purchased.
B-2
<PAGE>
2. Permitted Consideration. The purchase price of any shares
-----------------------
purchased on exercise of a vested option shall be paid in full at the time of
each purchase in one or a combination of the following methods: (i) in cash or
by electronic funds transfer; (ii) by check payable to the order of the Company;
or (iii) by the delivery of shares owned by Executive or vested stock options
held by Executive. Any shares or stock options used to satisfy the Exercise
Price of an option shall be valued at their fair market value on the date of
exercise (as mutually determined by the Board of Directors and Executive) and
shall have been owned by Executive or have been vested for at least six months
prior to the exercise.
3. Vesting. When each business unit is sold or otherwise divested,
-------
a percentage of Executive's stock options shall vest and become exercisable.
Stock options shall become exercisable upon vesting. The percentages of
Executive's stock options that shall vest at the sale or divestiture of each
business unit are as follows:
% of Stock Options Vesting
Business Divested (Number of Dart Shares)
----------------- --------------------------
Trak Auto 30% vest (9,000 shares)
Crown Books 15% vest (4,500 shares)
Total Beverage 10% vest (3,000 shares)
Shoppers 45% vest (13,500 shares)
Regardless of the sale or divestiture of the Company's business units, all of
the unvested options shall vest 4 1/2 years from the date of this Agreement if
executive is employed by the Company (or its successor) at such time. In case
of a Change of Control or a Total Sale of the Company, all options shall vest
immediately. The exercise price of the options shall be the Exercise Price.
4. Payment of Taxes. The Company shall pay all documentary stamp
----------------
taxes, if any, attributable to this Agreement or the issuance of any of the
shares or other securities upon the exercise of the options.
5. Reservation of shares. The Company will at all times reserve and
---------------------
keep available, free from preemptive rights, out of the aggregate of its
authorized but unissued shares or its authorized and issued shares held in its
treasury, for the purpose of enabling it to satisfy any obligation to issue
shares upon exercise of the options, the full number of shares deliverable upon
exercise of the options. Before taking any action which would cause an
adjustment pursuant to Exhibit A reducing the Exercise Price below the then par
value (if any) of the shares issuable upon exercise of the options, the Company
will take any corporate action which may, in the opinion of its counsel (which
may be counsel employed by the Company), be necessary in order that the Company
may validly and legally issue fully paid and nonassessable shares at the
Exercise Price as so adjusted.
B-3
<PAGE>
6. Representations of the Company; Obtaining Approvals and Stock
-------------------------------------------------------------
Exchange Listings; Registration Rights. The Company covenants and represents
- --------------------------------------
that all shares which may be issued upon the exercise of the options will, upon
issuance, be fully paid and nonassessable and free from all taxes (other than
withholding taxes on income and wages), liens, charges and security interests
with respect to the issue thereof. The Company will in good faith, and as
expeditiously as possible, take all action which may be necessary to obtain and
keep effective any and all permits, consents and approvals of governmental
agencies and authorities, and will make any and all filings under Federal and
State securities laws, necessary in connection with the issuance of the options,
the exercise of the options, and the issuance, sale, transfer and delivery of
shares upon exercise of the options by Executive, provided that the foregoing
-------- ----
provisions of this sentence shall not be deemed to require registration of the
options or the shares issuable on exercise of the options under the Securities
Act of 1933, as amended, or similar state securities laws.
D. Restricted Stock. Executive shall also receive promptly upon
----------------
execution hereof 6,000 shares of common stock of the Company. Such shares
received by Executive shall vest as described below. When each business unit is
sold or divested, a percentage of Executive's restricted stock shall vest as
follows:
% of Shares Vesting
Business Divested (Number of Dart Shares)
----------------- --------------------------
Trak Auto 30% vest (1,800 shares)
Crown Books 15% vest (900 shares)
Total Beverage 10% vest (600 shares)
Shoppers 45% vest (2,700 shares)
Regardless of the sale or divestiture of the Company's business units, all of
the unvested shares shall vest 4 1/2 years from the date of this Agreement if
Executive is employed by the Company (or its successor) at such time. In case
of a Change of Control or a Total Sale of the Company, all unvested restricted
stock shall vest immediately. When Executive's taxes become due and payable as
a result of the receipt or vesting of the restricted stock, the Company agrees
to loan Executive such amounts as are necessary to make any required tax
payments, including all taxes, interest, penalties, additions to tax and costs
imposed or incurred with respect to the restricted stock. Each such loan shall
bear simple interest at the applicable federal rate, payable annually, and shall
mature on the later of a Total Sale of the Company and the fifth anniversary of
the making of such loan; provided that each such loan will be mandatorily
--------
prepaid from the proceeds of the sale or other divestiture of the shares to
which such loan related (e.g. if the loan related to 100 shares and 50 of such
shares were sold by Executive, one half of the loan would be mandatorily
prepayable from the proceeds of such sale). Each such loan may be prepaid at
any time without premium or penalty.
B-4
<PAGE>
1. Dividends; Voting Rights. As of the date of this Agreement,
------------------------
Executive shall be entitled to cash dividends declared with respect to the
shares of restricted stock issued hereunder. Any securities or other property
receivable in respect of the restricted stock by Executive as a result of any
dividend or other distribution, conversion or exchange of or with respect to the
restricted stock will be subject to the restrictions and risks of forfeiture set
forth herein to the same extent as the shares of restricted stock to which such
securities or other property relate. As of the date of this Agreement, the
Executive shall be entitled to voting rights with respect to the shares of
restricted stock issued hereunder.
2. Certificates. Within 10 days after the date of this Agreement,
------------
the Company shall issue a certificate or certificates for the shares of
restricted stock issued hereunder, registered in the name of Executive, which
certificate(s) shall upon redelivery thereof to the Company pursuant to Section
III.D.3 below be held by the Company until the restrictions on such shares shall
have lapsed and the shares shall thereby have become vested or the shares
represented thereby are forfeited hereunder. The certificate(s) representing
shares forfeited hereunder and any shares accumulated thereon shall be
cancelled; any other rights or property accumulated in respect thereof also
shall be forfeited and shall revert to the Company. The certificate(s)
representing restricted shares shall bear a legend referring to this Agreement
and restrictions and limitations on such shares.
3. Certificates to be Held by the Company; Power of Attorney. Upon
---------------------------------------------------------
delivery to Executive of the certificate(s) representing shares awarded to
Executive hereunder, Executive shall redeliver such certificate(s) to the
Company, together with a stock power or stock powers, in blank, with respect to
such certificate(s), to be held by the Company pursuant to the terms hereof.
Executive, by acceptance of this Agreement, shall be deemed to appoint the
Company and each of its authorized representatives as Executive's attorney(s)-
in-fact to effect any transfer of unvested forfeited shares (or shares otherwise
reacquired by the Company hereunder) or related property or rights to the
Company as may be required hereunder, and to execute such documents as the
Company or such representatives deem necessary or advisable in connection with
any such transfer.
4. Delivery of Certificates. Promptly after the lapse or other
------------------------
release of restrictions in accordance with the terms hereof, a certificate or
certificates evidencing the number of shares of Common Stock as to which the
restrictions have lapsed or been released shall be delivered to Executive. The
shares so delivered shall no longer be restricted stock or restricted shares
hereunder.
E. Cash Bonus. If (a) a Total Sale of the Company occurs on or before
----------
December 31, 1999 and (b) the fair market value per share of the consideration
received by stockholders in connection with all transactions resulting in the
Total Sale (as determined by the Board of Directors) exceeds the Exercise Price,
Executive shall be paid a cash bonus determined as provided below. The amount
of the cash
B-5
<PAGE>
bonus shall be: (i) $700,000 if the Total Sale occurs on or prior to December
31, 1998, (ii) $612,500 if the Total Sale occurs after December 31, 1998 and on
or prior to March 31, 1999, (iii) $525,000 if the Total Sale occurs after March
31, 1999 and on or prior to June 30, 1999, (iv) $435,000 if the Total Sale
occurs after June 30, 1999 and on or prior to September 30, 1999, and (v)
$350,000 if the Total Sale occurs after September 30, 1999 and on or prior to
December 31, 1999. If a Total Sale does not occur by December 31, 1999, or if
the fair market value per share of the consideration received by stockholders in
connection with all transactions resulting in the Total Sale (as determined by
the Board of Directors) is less than the Exercise Price, Executive shall not be
entitled to a cash bonus under this Section.
F. Excise Tax on Payments Due Because of a Change of Control. If a
---------------------------------------------------------
transaction described in Section 280G(b)(2)(A)(i) of the Internal Revenue Code
of 1986, as amended, occurs with respect to the Company, that results in
Executive receiving payments pursuant to this Agreement because of a Change in
Control (the "Payments"), that are subject to an excise tax pursuant to Section
4999 of the Internal Revenue Code of 1986, as amended, and any successor
provision or any comparable provision of state or local income tax law, then the
Company shall pay to Executive an additional cash payment (the "Gross-Up
Payment") in an amount such that after Executive pays all taxes, interest,
penalties, additions to tax and costs imposed or incurred with respect to the
Payments and the Gross-Up Payment, Executive retains an amount of the Gross-Up
Payment equal to any excise tax imposed on him. This provision is intended to
put Executive in the same position as Executive would have been had no excise
tax been imposed upon or incurred as a result of any payment due to a Change in
Control.
G. Non-transferability. Except as provided in this Section, the options
-------------------
under this Agreement are exercisable only by Executive. Prior to vesting, the
options and the restricted stock issued hereunder are nontransferable and shall
not be subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance or charge (other than to the Company), except by
operation of law or by will or the laws of descent and distribution. The
Company shall disregard any attempt at transfer, assignment or other alienation
prohibited hereby.
H. Performance-Based Awards. Prior to the date of this Agreement, the
------------------------
performance criteria conditioning the grant of the options hereunder and the
cash bonus provided for under Section III.E. (the "Performance Awards") hereof
were approved by the Compensation Committee of the Company. The eligible class
of persons for Performance Awards consists of Executive. In no event shall
grants of Performance Awards to Executive hereunder during the initial three
year term hereof relate to more than 30,000 shares or to a cash amount of more
than $700,000 (it being understood that the 6,000 restricted shares do not
constitute Performance Awards). Before any Performance Award is vested or paid
hereunder, the Compensation Committee must certify that the conditions of
vesting or payment were satisfied.
B-6
<PAGE>
I. Savings and Retirement Plans. Executive shall be entitled to
----------------------------
participate in all savings and retirement plans, practices, policies and
programs applicable generally to other executives of the Company.
J. Welfare Benefit Plans. Executive and his family shall be eligible for
---------------------
participation in and shall receive all benefits under welfare benefit plans,
practices, policies and programs provided by the Company (including, without
limitation, medical, prescription, dental, disability, salary continuance,
employee life, group life, accidental death and travel accident insurance plans
and programs) to the extent applicable generally to other executives of the
Company.
K. Expenses. Executive shall be entitled to receive prompt reimbursement
--------
for all reasonable employment expenses incurred by him in accordance with the
policies, practices and procedures as in effect generally with respect to other
executives of the Company.
L. Fringe Benefits. Executive shall be entitled to fringe benefits in
---------------
accordance with the plans, practices, programs and policies as in effect
generally with respect to other executives of the Company.
M. Vacation. Executive shall be entitled to paid vacation in accordance
--------
with the plans, policies, programs and practices as in effect generally with
respect to other executives of the Company, but in no case shall Executive
accrue fewer than 20 days of paid vacation per year.
N. Legal Fees. The Company agrees to reimburse Executive for any fees
----------
and expenses, including legal fees and expenses, incurred by Executive in
connection with (i) the negotiation, execution and delivery of this Agreement
and (ii) the enforcement of any rights of Executive under this Agreement.
IV. TERMINATION.
-----------
A. Cause. The Company may terminate Executive's employment for Cause.
-----
For purposes of this Agreement, "Cause" shall mean that the Board members, other
than Executive, unanimously determine that Executive has engaged in or
committed: theft, fraud or other illegal conduct; or material breach of this
Agreement, provided, however, that no event or circumstance shall constitute
-------- -------
Cause within the meaning of this clause unless Executive has been given written
notice in accordance with Section XIV of the events or circumstances
constituting Cause and has failed to effect a cure thereof within 30 calendar
days following the giving of such notice.
B. Death or Disability. Executive's employment shall terminate
-------------------
automatically upon Executive's death. If Executive suffers a Permanent
Disability (as defined below) which results in an absence from full-time
performance of his
B-7
<PAGE>
duties for a period of five consecutive months, then the Company shall be
entitled to terminate his employment. In that event, the Company must give to
Executive written notice in accordance with Section XIV of its intention to
terminate Executive's employment, and Executive's employment with the Company
shall terminate effective on the 30th day after receipt of such notice by
Executive, so long as, within the 30 days after such receipt, Executive shall
not have returned to full-time performance of his duties. For purposes of this
Agreement, "Permanent Disability" shall mean a physical or mental impairment
which substantially limits a major life activity of Executive and which renders
Executive unable to perform the essential functions of his position, even with
reasonable accommodation which does not impose any undue hardship on the
Company.
C. Resignation for Good Reason. Executive may resign for "Good Reason."
---------------------------
For purposes of this Agreement, "Good Reason" shall mean the resignation of
Executive after the Company, without express consent of Executive, materially
breaches the Agreement; Executive notifies the Company in writing in accordance
with Section XIV of the nature of such material breach; and the Company does not
correct such material breach within 30 calendar days after its receipt of such
notice. The Company acknowledges and agrees that a material breach for purposes
of this provision shall include, but not be limited to, any material reduction
in Executive's duties or authority (whether or not accompanied by a change in
title), or any diminution in Executive's title.
D. Obligations of the Company Upon Termination.
-------------------------------------------
1. Termination for Cause or Resignation Without Good Reason. If
--------------------------------------------------------
Executive is terminated for Cause or if Executive resigns from the Company
without Good Reason, this Agreement shall terminate without further obligations
to Executive other than for the timely payment of: (i) Executive's annual base
salary through the date of termination to the extent not theretofore paid, any
vested restricted stock, and any cash bonus to which Executive is entitled, on
or prior to the date of termination, (ii) any compensation previously deferred
by Executive (together with any accrued interest or earnings thereon) and any
accrued vacation pay, in each case to the extent not theretofore paid (the sum
of the amounts described in clauses (i) and (ii) shall be hereinafter referred
to as the "Accrued Obligations"), which shall be paid to Executive within 30
days of the termination date. Any of Executive's options that are vested on or
prior to the date of termination will not be forfeited. If Executive is
terminated for Cause, such vested options may be exercised by Executive at any
time within thirty days from the date of termination, and if Executive resigns
without Good Reason, such vested options may be exercised by Executive at any
time within one year from the date of termination. Any unvested restricted
stock or stock options shall be forfeited. If it is subsequently determined
that the Company did not have Cause for termination under this Section IV.D.1,
then the Company's decision to terminate shall be deemed to have been made under
Section IV.D.3 and Executive is entitled to the amounts payable thereunder.
B-8
<PAGE>
2. Termination for Death or Disability. If Executive's employment is
-----------------------------------
terminated by the Company because of Executive's death or Permanent Disability
any time after May 12, 1998, this Agreement shall terminate without further
obligations to Executive other than for the timely payment to Executive or his
estate or beneficiary, as applicable, of (a) the Accrued Obligations, (b)
payment to Executive of any amounts due pursuant to the terms of any applicable
welfare benefit plans, and (c) payment to Executive of the cash payment in the
amounts set forth in Section III.E if a Total Sale occurs within the time
periods set forth therein. Any of Executive's options that are vested on or
prior to the date of termination shall not be forfeited and may be exercised by
Executive or Executive's estate at any time within one year from the date of
termination. Any unvested restricted stock or stock options shall be forfeited.
3. Termination By the Company for Other than Cause, Death or
---------------------------------------------------------
Disability, and Resignation for Good Reason. If the Company terminates
- -------------------------------------------
Executive's employment for other than Cause, death or Permanent Disability, or
if Executive resigns for Good Reason, this Agreement shall terminate with the
following obligations to Executive: (a) the timely payment of Accrued
Obligations; and (b) payment to Executive of the cash payment to which Executive
is entitled in the amounts set forth in Section III.E. if a Total Sale occurs
within the time periods set forth therein. In addition all unvested stock
options shall vest immediately upon the date of termination and all of
Executive's unexercised stock options may be exercised by Executive at any time
within five years from the date of this Agreement. All unvested restricted
stock shall be forfeited on the date of such termination for other than Cause,
death or Permanent Disability or resignation for Good Reason.
4. Termination By the Company After a Total Sale of the Company.
------------------------------------------------------------
After a Total Sale of the Company, if Executive has received all of the
compensation provided for under this Agreement (including vesting of all
restricted stock, vesting of all stock options and the payment contemplated by
Section III.E), the Company may at its option, within 15 days of the
consummation of the Total Sale of the Company, terminate this Agreement upon 30
days' written notice to Executive. In such event, the Company shall have no
further obligations to compensate Executive hereunder except with respect to
obligations of the Company that survive termination of this Agreement and as
required by law.
V. ARBITRATION.
-----------
Any controversy or claim arising out of or relating to this Agreement, its
enforcement or interpretation, or because of an alleged breach, default, or
misrepresentation in connection with any of its provisions, shall be submitted
to arbitration, to be held in Washington, D.C. in accordance with the American
Arbitration Association's National Rules for the Resolution of Employment
B-9
<PAGE>
Disputes, including that the arbitrator's fees and expenses shall be paid
entirely by the Company.
VI. RENEWAL.
-------
This Agreement shall be automatically renewed for one additional year each
year after the expiration of the stated term, unless either party gives written
notice in accordance with Section XIV of his or its desire to modify or
terminate the Agreement and such notice is given at least thirty (30) days prior
to the expiration of this Agreement (or any renewal). Upon renewal pursuant to
this Section VI, unless the parties agree to modify this Agreement, no stock
options, restricted stock, or cash bonus shall be awarded to Executive in
addition to those amounts to which he is entitled in the original term of this
Agreement. If a notice is sent by the Company pursuant to this Section VI,
indicating that the Company wishes to terminate Executive's relationship with
the Company at the end of the term of this Agreement (or any renewal), such
notice shall be deemed a termination of Executive without Cause and Section
IV.D.3 shall apply. If a notice is sent by Executive pursuant to this Section
VI, indicating that Executive wishes to terminate his relationship with the
Company at the end of the term of this Agreement (or any renewal), such notice
shall be deemed a resignation by Executive without Good Reason and Section
IV.D.1 shall apply.
VII. SUCCESSORS.
----------
A. This Agreement is personal to Executive and shall not, without the
prior written consent of the Company, be assignable by Executive.
B. This Agreement shall inure to the benefit of and be binding upon the
Company and its successors and assigns and any such successor or assignee shall
be deemed substituted for the Company under the terms of this Agreement for all
purposes. As used herein, "successor" and "assignee" shall include any person,
firm, corporation or other entity which at any time, whether by purchase, merger
or otherwise, directly or indirectly acquires the stock of the Company or to
which the Company assigns this Agreement by operation of law or otherwise.
VIII. WAIVER.
------
No waiver of any breach of any term or provision of this Agreement shall be
construed to be, nor shall be, a waiver of any other breach of this Agreement.
No waiver shall be binding unless in writing and signed by the party waiving the
breach.
B-10
<PAGE>
IX. MODIFICATION.
------------
This Agreement may not be amended or modified other than by a written
agreement executed by Executive and the Company, with the approval of a majority
of the Board of Directors.
X. SAVINGS CLAUSE.
--------------
If any provision of this Agreement or the application thereof is held
invalid, the invalidity shall not affect other provisions or applications of the
Agreement which can be given effect without the invalid provisions or
applications and to this end the provisions of this Agreement are declared to be
severable.
XI. COMPLETE AGREEMENT.
------------------
This Agreement constitutes and contains the entire agreement and final
understanding concerning Executive's employment with the Company and the other
subject matters addressed herein between the parties. It is intended by the
parties as a complete and exclusive statement of the terms of their agreement.
It supersedes and replaces all prior negotiations and all agreements proposed or
otherwise, whether written or oral, concerning the subject matter hereof. Any
representation, promise or agreement not specifically included in this Agreement
shall not be binding upon or enforceable against either party. This is a fully
integrated agreement.
XII. GOVERNING LAW.
-------------
This Agreement shall be deemed to have been executed and delivered within
the District of Columbia, and the rights and obligations of the parties
hereunder shall be construed and enforced in accordance with, and governed by,
by the laws of the District of Columbia without regard to principles of conflict
of laws.
XIII. CONSTRUCTION.
------------
Each party has cooperated in the drafting and preparation of this
Agreement. Hence, in any construction to be made of this Agreement, the same
shall not be construed against any party on the basis that the party was the
drafter. The captions of this Agreement are not part of the provisions hereof
and shall have no force or effect.
XIV. COMMUNICATIONS.
--------------
All notices, requests, demands and other communications hereunder shall be
in writing and shall be deemed to have been duly given if delivered or if mailed
by registered or certified mail, postage prepaid, addressed to Executive at 4508
Foxhall
B-11
<PAGE>
Crescents, N.W., Washington, D.C. 20007, or addressed to the Company at 3300
75th Avenue, Landover, Maryland 20785. Either party may change the address at
which notice shall be given by written notice given in the above manner.
XV. EXECUTION.
---------
This Agreement is being executed in one or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument. Photographic copies of such signed counterparts may be
used in lieu of the originals for any purpose.
IN WITNESS THEREOF, the parties hereto have executed this Agreement as of
the date first above written.
RICHARD B. STONE
/s/ Richard B. Stone
--------------------
DART GROUP CORPORATION
By: /s/ Terry Sharp
---------------
Title: Senior Vice President
Human Resources
B-12
<PAGE>
SPOUSAL CONSENT
By her signature below, the spouse of Executive, if Executive be
legally married as of the date of his execution of this Agreement, acknowledges
that she has read this Agreement and is familiar with the terms and provisions
thereof, and agrees to be bound by all the terms and conditions of said
Agreement.
________________________
Spouse's Signature
________________________
Printed Name
Dated:__________________
By his or her signature below, Executive represents that he or she is
not legally married as of the date of execution of this Agreement.
________________________
Executive's Signature
Dated:__________________
B-13
<PAGE>
Exhibit A
---------
OPTION ADJUSTMENTS
------------------
I. Generally. The Exercise Price and the number of shares of purchasable
---------
upon the exercise of an option are subject to adjustment from time to time as
provided in this Exhibit A as follows:
(a) If there shall occur any extraordinary dividend or other
extraordinary distribution in respect of the shares (whether in the form of
cash, shares, other securities, or other property), or any recapitalization,
stock split (including a stock split in the form of a stock dividend), reverse
stock split, reorganization, merger, combination, consolidation, split-up, spin-
off, combination, repurchase, or exchange of shares or other securities of the
Company, or there shall occur any other fundamental change or event in respect
of the shares or a sale of substantially all the assets of the Company as an
entirety, then the Company shall:
(1) equitably and proportionately adjust (a) the number and type
of shares subject to the then outstanding options, and (b) the Exercise
Price of the options; or
(2) in the case of an extraordinary dividend or other
distribution, split-up, or spin-off, make an appropriate, equitable
provision for a distribution upon exercise of the options of equivalent
value (in property, securities or cash) to the distribution to
shareholders; or
(3) in the case of a merger, combination or other reorganization
that the Company does not survive, or in a sale of assets, provide for the
substitution or exchange of the options (or the shares deliverable on
exercise of the options) for a right to acquire the consideration payable
to holders of other shares of the Company upon or in respect of such event;
provided, however, in each case, that no such adjustment shall fail to provide,
- -------- -------
upon a merger or other reorganization or similar event of the type described
above that the Company does not legally survive, for a conversion of the options
into a right to acquire at least as favorable to Executive as that distributed
or payable upon or in respect of such event in respect of the number of shares
as to which the options is or thereafter may be exercised, with appropriate,
proportionate and equitable adjustments to the Exercise Price and any other
affected features.
If, in the case of any such event, the stock or other securities or
property receivable thereupon by shareholders of the Company includes shares of
stock or other securities or property of or from an entity other than a
successor legally bound hereby, such other entity shall execute and deliver for
the benefit of Executive an agreement to be bound hereby, together with such
additional provisions
B-14
<PAGE>
to protect the interests of Executive as the Company shall reasonably consider
necessary by reason of the foregoing or as the Company may otherwise provide.
The provisions of Section I(a) and (b) of this Exhibit A shall bind
Executive to the adjustments or substitutions made by the Company in good faith
in accordance with the terms hereof. These provisions also shall apply to any
successive recapitalization, reorganization or other change.
(b) If any options or other right under this options is not exercised
prior to a dissolution of the Company, express provision shall be made in the
plan of dissolution or otherwise for the substitution or other settlement of the
options for the payment of the fair value thereof, or upon exercise, for the
payment of value equivalent to that paid in the dissolution to the holders of a
like number of shares as then are subject to the options.
(c) Except as provided herein, adjustments under Section I(a) or (b)
of this Exhibit A shall become effective immediately after the record date for
the determination of shareholders entitled to receive the applicable rights
contemplated thereby.
(d) No adjustment in the Exercise Price shall be required unless such
adjustment would require an increase or decrease of at least 1% of the Exercise
Price per Share; provided, that any adjustments which by reason of this
--------
subsection (d) are not required to be made shall be carried forward and taken
into account in any subsequent adjustment. All calculations under this Section
I of Exhibit A shall be made to the nearer cent or to the nearer one-hundredth
of a Share, as the case may be. The Company shall not be required to issue any
fractional share, but any fractional share interest shall be paid in cash equal
to the fair market value of the applicable percentage of a share in lieu thereof
or, at the Company's election, paid in a fractional or whole Share.
(e) Anything in this Section I of this Exhibit A to the contrary
notwithstanding, the Company shall be entitled to make such reductions in the
Exercise Price or increase in the number of shares purchasable upon exercise of
the options, in addition to those required by this Section, as it in its
discretion shall reasonably determine to be advisable in order that any stock
dividend, subdivision of shares, distribution of rights or warrants to purchase
stock or securities, or distribution of other assets (other than cash dividends)
hereafter made by the Company to its stockholders shall not be taxable.
B-15
<PAGE>
II. Notices to Optionee.
-------------------
(a) Adjustments. Upon any adjustment of the Exercise Price or the
-----------
number of shares Executive shall be entitled to purchase upon exercise thereof
pursuant to Section I of this Exhibit A, the Company within 20 days thereafter
shall (i) mail to Executive (at the address last appearing on the Company's
records for such purposes) a certificate of a firm of independent public
accountants of recognized standing selected by the Board of Directors of the
Company (who may be the regular auditors of the Company) setting forth the
Exercise Price after such adjustment and the adjusted number of shares (or
fraction thereof) purchasable upon exercise of the options and setting forth in
reasonable detail the method of calculation and the facts upon which the
calculation is based.
(b) Distributions; Certain Major Events. If:
-----------------------------------
(i) the Company shall declare a dividend (or any other
distribution) payable to the holders of shares otherwise than in cash; or
(ii) the Company shall authorize the granting to the holders of
shares of rights to subscribe for or purchase any shares of any class or of
any other rights; or
(iii) the Company shall authorize any reclassification or
change of the shares (other than a subdivision or combination of its
outstanding shares), or any reclassification, consolidation, merger or
other reorganization to which the Company is a party and for which approval
of any shareholders of the Company is required, or the sale or conveyance
of all or substantially all the property or business of the Company; or
(iv) there shall be proposed any voluntary or involuntary
dissolution, liquidation or winding up of the Company;
then the Company shall cause to be mailed to Executive, (at the address last
appearing on the Company's records for such purposes), at least 20 days prior to
the applicable record date or effective date hereinafter specified, by first
class mail, postage prepaid, a written notice stating (i) the date as of which
the holders of record of shares to be entitled to receive any such rights,
warrants or distribution are to be determined, or (ii) the date on which any
such consolidation, merger, conveyance, transfer, dissolution, liquidation or
winding up is expected to become effective, and the date as of which it is
expected that holders of record of shares shall be entitled to exchange their
shares for securities or other property, if any, deliverable upon such
reclassification, consolidation, merger, reorganization, con veyance, transfer,
dissolution, liquidation or winding up. If any action referred to in this
subsection II(b) requires the approval of holders of shares, the Company shall
cause notice of the proposed action and the record date for the determination of
B-16
<PAGE>
holders of shares entitled to vote on such matter to be mailed to Executive (at
such address), at least 20 days prior to such record date, by first class mail,
postage prepaid. The failure to give any notice required by this subsection
II(b) or any defect therein shall not affect the legality of any such
reclassification, consolidation, merger, reorganization, conveyance, transfer,
dissolution, liquidation or winding up, or the vote upon any action; provided,
--------
however, that the failure to give any notice will extend the period during which
- -------
the options may be exercised by a like number of days and during which the
holder is entitled to receive securities or other property, as the case may be,
upon exercise of the options.
B-17
<PAGE>
Notational Record of Exercise:
<TABLE>
<CAPTION>
==============================================================================
Date Number of shares Amount Received
- ------------------------ ------------------------- ---------------------------
<S> <C> <C>
- ------------------------ ------------------------- ---------------------------
- ------------------------ ------------------------- ---------------------------
- ------------------------ ------------------------- ---------------------------
- ------------------------ ------------------------- ---------------------------
======================== ========================= ===========================
</TABLE>
B-18
<PAGE>
Exhibit B
---------
FORM OF EXERCISE OF OPTION
( To be executed upon each exercise of Option )
The undersigned hereby irrevocably elects to exercise the right,
evidenced by the Employment Agreement dated as of ___________________, 1998 (the
"Agreement"), to purchase _________ shares (the "shares") and herewith tenders
payment in full for such shares as follows: [check applicable box(es)
[_] by certified or official bank check payable to the order of Dart
Group, Inc.] in the amount of $______________
[_] by electronic funds transfer in the amount of $______________
[_] by delivery of ___________ shares with a value of $__________ per
share, or $______________ in the aggregate.
in accordance with the terms of the Agreement.
Executive requests that a certificate for such shares be registered to Executive
and delivered to:
_______________________________________________________________.
If said number of shares is less than all of the shares purchasable under the
Agreement, Executive represents that it has made (and authorizes the Company to
likewise make) notation of the partial exercise and the date hereof on its
executed copy of the Agreement.
Executive (a) acknowledges that the shares have not been registered under the
Securities Act of 1933 or any applicable state laws and may be sold or otherwise
transferred only in compliance with such laws, and (b) represents that he will
B-19
<PAGE>
comply with all such laws as to any transactions with respect to the shares.
Dated:
_________________________
_________________________
Insert Taxpayer I.D. No.
of Executive)
To be completed by Corporation after the price, value (if applicable) and
receipt of funds verified:
ACCEPTED BY:
DART GROUP CORPORATION
By: ___________________________
Its: __________________________
B-20
<PAGE>
EXHIBIT C
DART GROUP CORPORATION
----------------------
1992 STOCK OPTION PLAN
----------------------
DART GROUP CORPORATION, a Delaware corporation (hereinafter referred
to as the ("Company"), has adopted effective as of December 8, 1991, a stock
option plan (hereinafter referred to as the "Plan") for its full-time key
employees and directors in accordance with the following terms and conditions.
This Plan is subject to approval by the holders of a majority of the shares of
the common stock of the Company present in person or by proxy and entitled to
vote at the 1992 annual meeting of shareholders of the Company. In the event
such approval is not obtained, this Plan and all options granted hereunder the
Option Agreements entered into pursuant hereto shall be null and void and of no
force or effect.
SECTION ONE
-----------
DESIGNATION AND PURPOSE OF THE PLAN
-----------------------------------
A. DESIGNATION. The Plan is designated the "DART GROUP CORPORATION
-----------
1992 STOCK OPTION PLAN."
B. PURPOSE. The purpose of this Plan is to advance the growth and
-------
development of the Company by affording an opportunity to executives and key
employees and directors of the Company and its Subsidiary Companies (as defined
below) to purchase shares of the company's stock and to provide incentives for
them to put forth maximum efforts for the success of the Company's business.
Competition and technical developments in
C-1
<PAGE>
the Company's lines of business make it necessary for the Company and its
Subsidiary Companies to attract and retain persons of competence and to
encourage the highest level of performance if the Company is to maintain and
improve its position in the Company's lines of business and to continue to serve
the best interests of its stockholders and customers. The acquisition of such
stock by such employees and directors, who are primarily responsible for the
Company's success, provides a continuing incentive for them to promote the best
interests of the Company, and, by giving such employees and directors a
proprietary interest in the Company, induces them to continue in the employ of
the Company and its Subsidiary Companies. The Plan also enables the Company to
attract competent persons to enter the employ or serve as directors of the
Company and its Subsidiary Companies.
Prior to the adoption of this Plan, the Company had in effect the Dart
Drug Corporation 1981 Incentive Stock Option Plan (the "Prior Plan"), which
expired on December 7, 1991. All options granted and in effect under the Prior
Plan will remain outstanding and subject to the terms of the Prior Plan.
SECTION TWO
-----------
DEFINITIONS
-----------
The following definitions shall be applicable to the terms used in the
Plan:
A. "Code" means the Internal Revenue Code of 1986, as presently in
------
effect or as hereafter amended.
C-2
<PAGE>
B. "Committee" means the Stock Option Plan Committee appointed to
-----------
administer the Plan pursuant to Section Four.
C. "Company" means DART GROUP CORPORATION, a Delaware corporation.
---------
D. "Director" means a member of the Board of Directors of the Company
----------
or any Subsidiary Company.
E. "Eligible Employee" means any executive or key employee of the
-------------------
Company or any Subsidiary Company who is employed on a full-time basis.
Employees on leave of absence or in military service are not Eligible Employees
while on a leave of absence or in military service.
F. "Incentive Stock Option" means an option as defined in Section 422
------------------------
of the Code and any other applicable provisions of the Code.
G. "Non-qualified Stock Option" means an option granted hereunder
----------------------------
which does not qualify as an Incentive Stock Option.
H. "Option" means an Incentive Stock Option and a Non-qualified Stock
--------
Option.
I. "Participant" means any Eligible Employee or Director who is
-------------
granted an Option as provided in the Plan.
J. "Stock" means authorized and unissued or reacquired shares of
-------
Class A common stock of the Company.
K. "Subsidiary Company" means any present or future "subsidiary
--------------------
corporation" of the Company as such term is defined in Section 424(f) of the
Code and which the Company has elected to be covered by the Plan.
C-3
<PAGE>
L. Where applicable, the terms used in this Plan have the same
meaning as the terms used in the Code, and the regulations and rulings issued
thereunder and pursuant thereto.
M. Wherever appropriate, words used in this Plan in the singular may
mean the plural, the plural may mean the singular, and the masculine may mean
the feminine or neuter.
SECTION THREE
-------------
STOCK SUBJECT TO OPTIONS
------------------------
A. TOTAL NUMBER OF SHARES. The total number of shares of Stock which
-----------------------
may be issued by the Company to all Participants under this Plan is 400,000
shares of which (i) the maximum total number of shares that may be issued to
Participants pursuant to Incentive Stock Options is 200,000; and (ii) the
maximum total number of shares that may be issued to Participants pursuant to
non-qualified stock options is 200,000. The total number of shares of Stock
which may be so issued may be increased only by a resolution adopted by the
Board of Directors of the Company and approved by the stockholders of the
Company. Such Stock may either be authorized and unissued or reacquired Stock.
B. EXPIRED INCENTIVE STOCK OPTIONS. If any Option granted under this
--------------------------------
Plan is terminated or expires for any reason whatsoever, in whole or in part,
the shares (or remaining shares) of Stock subject to that particular Option
shall again be available for grant under this Plan.
C-4
<PAGE>
SECTION FOUR
------------
ADMINISTRATION OF THE PLAN
--------------------------
A. APPOINTMENT OF COMMITTEE. The Board of Directors of the Company
-------------------------
shall appoint a Stock Option Plan Committee which shall consist of not less than
two (2) members of such Board of Directors, none of whom is, or has been during
the one (1) year period prior to his appointment, an Eligible Employee. In
addition, the Board of Directors shall designate a member of the Committee to
act as Chairman of the Committee. The Board of Directors, in its sole
discretion, may, at any time, remove any member of the Committee and appoint any
director to fill any vacancy on the Committee who is not, and who has not been
during the one (1) year period prior to his appointment, an Eligible Employee.
The Board of Directors shall remove, as soon as practicable, any member of the
Committee, who, after having been designated a member of the Committee, becomes
an Eligible Employee; provided that, prior to his removal, no such member who
has become an Eligible Employee shall, as of and after such time as he has
become an Eligible Employee, have any of the powers or authority granted under
this Section Four.
B. COMMITTEE MEETINGS. The Committee shall hold its meetings at such
-------------------
times and places as are specified by the Committee Chairman. A majority of the
Committee shall constitute a quorum. All actions of the Committee shall be
taken by a majority of a quorum present at a meeting duly called by the
Committee Chairman; provided, however, any action taken by a written document
signed by a majority of the Committee members
C-5
<PAGE>
shall be as effective as action taken by the Committee at a meeting duly called
and held.
C. COMMITTEE POWERS. Subject to the terms and provisions of this
-----------------
Plan and the requirements of the Code, the Committee, in its sole discretion,
shall have full power and authority to (a) designate the Participants to whom
Options shall be granted, (b) determine the number of shares to be made
available under each such Option award, (c) determine the period or periods in
which the Participant may exercise such Option, subject to the requirement that
no Option shall be exercisable until six months from the date of its grant, and
(d) determine the date on which such Option expires; provided, however, that the
-------- -------
Committee shall not have the right to exercise any discretion with respect to
granting Options under the Plan to Participants who are Directors and not
Eligible Employees, and provided further that the Committee's discretion with
-------- -------
respect to options granted under the Plan to officers, directors or any person
who possesses more than ten percent of the combined voting power of all classes
of stock of the Company or any Subsidiary Company (hereinafter, "Ten Percent
Holders") shall be limited as set forth in subsection 2 below.
1. The Committee shall be required to grant 1500 Non-qualified Stock
Options to each Director who is not an Eligible Employee each calendar year.
The Committee shall be required (i) to grant such Non-qualified Stock Options to
be effective as of July 31 of each year; (ii) provide that such Options granted
to such persons shall expire five years from the date of grant plus
C-6
<PAGE>
the period of time necessary to enable such person to exercise the option during
the next following exercise period described in subsection 2 below; provided,
--------
however, that such term shall in no event exceed five years for any Ten Percent
- -------
Holder as provided in Section 8; and (iii) provide that any Options granted such
persons may not be exercised during the six month period immediately following
the date of grant and thereafter may only be exercised as to one fourth of the
number of shares each year thereafter on a cumulative basis except as provided
in subsection 2 below.
2. The Committee shall be required, with resect to Participants who
are officers, directors and/or Ten Percent Holders of the Company or any
Subsidiary Company, to require that Options may only be exercised by such person
during the period beginning on the second business day following the date of the
release by the Company for publication of quarterly and annual summary
statements of sales and earnings and ending on the forty-fifth business day
following such release date.
3. Subject to the foregoing, the Committee shall have all rights,
powers and authority necessary or appropriate to administer this Plan in
accordance with its terms, including, without limitation, the power to make
binding interpretations of this Plan and to resolve all questions (whether
express or implied) arising thereunder. The Committee may prescribe such rules
and regulations for administering this Plan as the Committee, in its sole
discretion, deems necessary or appropriate.
C-7
<PAGE>
D. COMPLIANCE WITH INTERNAL REVENUE CODE. The Committee shall at all
--------------------------------------
times administer this Plan and make interpretations hereunder in such manner
that Incentive Stock Options granted hereunder shall at all times constitute
incentive stock options under the Code.
SECTION FIVE
------------
SELECTION OF PARTICIPANTS
-------------------------
A. DISCRETION OF COMMITTEE. In determining which Eligible Employees
------------------------
shall be offered Options, as well as the terms thereof, the Committee shall
evaluate, among other things, (i) the duties and responsibilities of Eligible
Employees, (ii) their past and prospective contributions to the success of the
Company, (iii) the extent to which they are performing and will continue to
perform outstanding services for the benefit of the Company, and (iv) such other
factors as the Committee deems relevant. Except as expressly set forth in
Section 4.C hereof, the Committee's determinations under the Plan (including
without limitation determinations of the persons to receive awards, the form,
amount and timing of such awards, the terms and provisions of such awards and
the agreements evidencing same) need not be uniform and may be made by it
selectively among persons who receive, or are eligible to receive, awards under
the Plan, whether or not such persons are similarly situated.
B. LIMITATION ON GRANT OF INCENTIVE STOCK OPTIONS. An Incentive
-----------------------------------------------
Stock Option may not granted to any Participant if the grant of such Incentive
Stock Option to such Participant would otherwise cause the aggregate fair market
value (determined
C-8
<PAGE>
on the date the option is granted) of the Stock subject to an Incentive Stock
Option that can be exercised for the first time by such Participant during the
calendar year under all incentive stock option plans of the Company (without
taking into account any incentive stock options issued prior to January 1, 1987
pursuant to the Prior Plan that may become exercisable during such calendar
year) to exceed $100,000, provided that such limitation shall be increased to
any greater amount permitted by the Code as amended from time to time.
C. DETERMINATION OF STOCK OWNERSHIP. For purposes of this Plan, a
---------------------------------
Participant's Stock ownership shall be determined pursuant to the rules of
constructive ownership set forth in Section 424(d) of the code.
SECTION SIX
-----------
OPTION AGREEMENT
----------------
A. FORM OF OPTION. Each Option granted to a Participant shall be
---------------
evidenced by a written agreement, executed by the Participant and the Company,
stating the number of shares of Stock subject to the Option evidenced thereby
and such terms and conditions as the Committee determines, subject to the
provisions of this Plan (an "Option Agreement"). Each such Option Agreement
shall incorporate the provisions of this Plan by reference.
B. DATE OF GRANT OF OPTIONS. The date of the grant of an Option is
-------------------------
the date specified in the Option Agreement.
C-9
<PAGE>
SECTION SEVEN
-------------
OPTION PRICES
-------------
A. DETERMINATION OF OPTION PRICE. The option price per share of
------------------------------
Stock deliverable upon the exercise of an Option shall be one hundred percent
(100%) of the fair market value of a share of Stock on the date of the Option is
granted. Notwithstanding the foregoing, in the case of an Incentive Stock
Option granted to a Ten Percent Holder, the option price per share of Stock
shall not be less than one hundred and ten percent (110%) of the fair market
value of a share of Stock on the date the Incentive Stock Option is granted.
B. DETERMINATION OF FAIR MARKET VALUE. The fair market value of the
-----------------------------------
Stock on the date of granting an Option shall be determined by the Committee in
accordance with the applicable regulations of the Internal Revenue Service.
SECTION EIGHT
-------------
TERM OF OPTION
--------------
The term of an Option may vary within the sole discretion of the
Committee; provided, however, that the term of an Option granted to an Eligible
-------- -------
Employee who is not a Ten Percent Holder shall not exceed ten years from the
date of granting the Option to the Participant; and that the term of an Option
granted to a Ten Percent Holder shall not exceed five years from the date of
granting the Option to the Ten Percent Holder; and that the term of an Option
granted to an Eligible Employee who is a Director (but not a Ten Percent Holder)
shall be fixed at five years plus the period of time necessary to
C-10
<PAGE>
enable such person to exercise the option during the next following exercise
period referred to in Section 4.C.2 above.
SECTION NINE
------------
EXERCISE OF OPTION
------------------
A. LIMITATION ON EXERCISE OF OPTION. Except as otherwise provided
---------------------------------
herein, the Committee, in its sole discretion, may limit an Option by
restricting its exercise in whole or in part for specified periods.
B. METHOD OF EXERCISING AN OPTION. Subject to the terms of any
-------------------------------
particular Option and Section 4.C., a Participant may exercise it in whole or in
part by written notice to the Company stating in such written notice the number
of shares of Stock such Participant elects to purchase under his Option.
C. NO OBLIGATION TO EXERCISE OPTION. A Participant is under no
---------------------------------
obligation to exercise an Option or any part thereof.
D. PAYMENT FOR OPTION STOCK. Upon exercise of an Option, a
-------------------------
Participant shall be required to pay the exercise price for the number of shares
of Stock which the Participant elects to purchase in cash or by good check or
money order made payable to the Company.
E. DELIVERY OF STOCK TO PARTICIPANT. The Company shall undertake and
---------------------------------
follow all necessary procedures to make prompt delivery of the number of shares
of Stock which the Participant elects to purchase upon exercise of an Option
granted under this Plan. Such delivery, however, may be postponed, at the sole
discretion of the Company, to enable the Company to comply with any applicable
procedures, regulations or listing
C-11
<PAGE>
requirements of any governmental agency, stock exchange or regulatory authority.
SECTION TEN
-----------
NONTRANSFERABILITY OF OPTIONS
-----------------------------
During a Participant's lifetime, an Option granted to him may be
exercised only by him or by such person's guardian or legal representative. It
may not be sold, exchanged, assigned, pledged, discounted, hypothecated or
otherwise transferred except by will or by the laws of descent and distribution
or pursuant to a qualified domestic relations order as defined by the coded. No
Option or any right thereunder shall be subject to execution, attachment or
similar process. Upon any attempt to so sell, exchange, assign, pledge,
discount, hypothecate or otherwise transfer any Option, or any right thereunder,
contrary to the provisions hereof, such Option and all rights thereunder shall
immediately become null and void.
SECTION ELEVEN
--------------
COMPLIANCE WITH SECURITIES LAWS
-------------------------------
A. WRITTEN AGREEMENT BY PARTICIPANTS. Unless a registration
----------------------------------
statement under the Securities Act of 1933 is then in effect with respect to the
Stock a Participant receives upon exercise of his Option, the Committee, in its
discretion, may require at the time that a Participant exercises his Option,
that the Participant agree in writing to acquire such Stock he receives upon
exercise of his Option for investment and not for resale or distribution, or to
consent to such other agreement as the Committee, in its discretion, may deem to
be necessary to
C-12
<PAGE>
comply with the requirements of the Securities Act of 1933 or any applicable
state securities laws. A reference to any such agreement shall be inscribed on
the Stock certificate(s).
B. REGISTRATION REQUIREMENT. Each Option shall be subject to the
-------------------------
requirement that, if at any time the Board of Directors of the Company
determines that the listing, registration or qualification of the shares subject
to the Option upon any stock exchange or under any state or federal law is
necessary or desirable as a condition of, or in connection with, the issuance of
shares thereunder, the Option may not be exercised in whole or in part unless
such listing, registration or qualification shall have been effected or obtained
(and the same shall have been free of any conditions not acceptable to the Board
of Directors of the Company).
SECTION TWELVE
--------------
CHANGES IN CAPITAL STRUCTURE OF COMPANY
---------------------------------------
In the event of a change in the capital structure of the Company, the
number of shares specified in Section Three of this Plan, the number of shares
covered by each outstanding Option and the price per share shall be
proportionately adjusted for any increase or decrease in the number of issued
shares of Stock resulting from the splitting or consolidation of shares, or the
payment of a stock dividend, or change effected in any other manner, without
receipt of additional or further consideration by the Company; provided,
--------
however, that any such adjustment shall be made so as not to result in a
- -------
"modification" of any Incentive Stock Option within the meaning of Section
424(h) of the Code.
C-13
<PAGE>
SECTION THIRTEEN
----------------
REORGANIZATION, DISSOLUTION OR LIQUIDATION
------------------------------------------
In the event the Company consolidates with, merges into, or transfers
substantially all its assets or property to another corporation, or in the event
any other corporation acquires control of the Company in a reorganization within
the meaning of Section 368(a) of the Code, or in the event of the Company's
dissolution or liquidation other than pursuant to any plan of such
reorganization, all outstanding Options shall thereupon terminate; provided,
however, that the Company shall give at least fifteen days' written notice to
holders of unexercised Options prior to the effective date of such
consolidation, merger, reorganization, dissolution or liquidation; and, unless
such Options are assumed or substitutes therefor are issued (within the meaning
of Section 424(a) of the Code) by the surviving or acquiring corporation in any
such consolidation, merger or other reorganization, all Options previously
issued shall accelerate upon such notice, and the holders thereof may exercise
such Options prior to such effective date, notwithstanding any time limitation
previously placed on the exercise of such Options, including, without
limitation, those imposed by Section 4.C.2.
SECTION FOURTEEN
----------------
TERMINATION OF EMPLOYMENT
-------------------------
A. SEVERANCE. Subject to the subsequent provisions of this Section
----------
Fourteen, in the event that a Participant's employment with the Company and its
Subsidiary Companies
C-14
<PAGE>
terminates for any reason, any Option granted to him terminates three months
after the earlier of (i) the giving of notice by the Company, any Subsidiary
Company or the Participant of such termination or, in the absence of such
notice, (ii) the date of such termination of employment; provided, however, that
-------- -------
in the event the Participant's employment is terminated by reason of the
Participant's unlawful or illegal conduct or malfeasance in the performance of
his employment duties, any option granted to him shall terminate on the date his
employment terminates.
B. DEATH. Subject to the provisions of paragraph C of this Section
------
Fourteen, if a Participant dies while in the employ of the Company or any
Subsidiary Company, on leave of absence of on military leave, his Option may be
exercised within one year after his death by the executor or administrator of
the estate of the Participant or by the person to whom the Option shall pass by
will or by the laws of descent and distribution, but only to the extent the
Participant was entitled to exercise the Option on the date of his death.
C. LIMITATION. Notwithstanding the provisions of paragraph B of this
-----------
Section Fourteen or any other provisions of this Plan, in no event may an Option
be exercised by anyone after the expiration date provided for in Section Eight
of this Plan or the date specified in the Option Agreement.
D. PARENT - SUBSIDIARIES. For the purposes of paragraph A of this
----------------------
Section Fourteen, transfer of employment between corporations in this group
comprised of the Company and
C-15
<PAGE>
its Subsidiary Companies shall not be deemed a termination of employment.
SECTION FIFTEEN
---------------
APPLICATION OF FUNDS
--------------------
All proceeds received by the Company from the exercise of Options
shall be paid into its treasury. Such proceeds shall be used for general
corporate purposes.
SECTION SIXTEEN
---------------
PARTICIPANT'S RIGHTS AS A HOLDER OF SHARES
------------------------------------------
A Participant, or other person authorized to exercise the
Participant's Option pursuant to Paragraph B of Section Fourteen, has no rights
as a stockholder with respect to any shares of Stock covered by his Option until
the date a certificate is issued to him for such Shares. Except as otherwise
provided in Section Twelve of this Plan, no adjustment shall be made for
dividends or other rights for which the record date occurs prior to the date
such stock certificate is issued.
SECTION SEVENTEEN
-----------------
AMENDMENT AND TERMINATION OF THE PLAN
-------------------------------------
A. DISCRETION OF THE BOARD OF DIRECTORS. The Board of Directors of
-------------------------------------
the Company may amend or terminate this Plan at any time; provided, however,
-------- -------
that (i) any such amendment or termination shall not without the consent of a
Participant adversely affect his rights under an Option previously granted to
him; (ii) any such amendment shall not result in a "modification" of any
Incentive Stock Option within the meaning of Section 424(h) of the Code; (iii)
any such amendment shall not change,
C-16
<PAGE>
modify or otherwise alter the provisions of the Plan applicable to Participants
who are Directors, except in response to changes in securities or other laws or
rules, regulations or regulatory interpretations applicable to this Plan or to
comply with stock exchange rules or requirements; (iv) any amendment which
increases the total number of shares of Stock that may be issued under this Plan
or changes the definition of Eligible Employee shall be subject to obtaining the
approval thereof by the Company's stockholders; and (v) the provisions of this
Plan relating to formula grants of options to directors within the meaning of
Rule 16b-3 promulgated under the Securities Exchange Act of 1934 shall not in
any event be amended more than once every six months except to comport with
changes in the code, the Employee Retirement Income Security Act, or the rules
thereunder.
B. AUTOMATIC TERMINATION. In any event, this Plan shall terminate
----------------------
ten (10) years after its approval by the stockholders of the Company or its
adoption by the Board of Directors of the Company, whichever is the earlier.
Options may be granted under this Plan at any time and from time to time prior
to termination of the Plan under this Paragraph B. Any Option outstanding at
the time the Plan is terminated under this Paragraph B shall remain in effect
until aid Option is exercised or expires in accordance with this Plan and the
terms of such Option.
C-17
<PAGE>
SECTION EIGHTEEN
----------------
NOTICES
-------
All notices and elections by a Participant or any person succeeding to
his right to an Option as a result of the Participant's death shall be in
writing and delivered in person or by mail to the President or Treasurer of the
Company at the principal office of the Company.
C-18
<PAGE>
EXHIBIT D
DART GROUP CORPORATION
DART GROUP CORPORATION 1992 STOCK OPTION PLAN
1998 AMENDMENT
Pursuant to Section 17 of the Dart Group Corporation 1992 Stock Option
Plan (the "Plan"), the Board of Directors hereby amends the Plan as follows:
1. SECTION TEN is amended by adding at the end thereof the
following:
However, nothing in this Section Ten shall prevent a Participant from
tendering his Options in exchange for cash pursuant to a tender offer
by DGC Acquisition, Inc., a Delaware corporation ("DGC"), pursuant to
an agreement and plan of merger entered into by and among the Company,
Richfood Holdings, Inc., a Virginia corporation, and DGC Acquisition,
Inc. (the "Merger Agreement").
2. SECTION THIRTEEN is amended by adding at the end thereof the
following:
In the event of a tender offer by DGC pursuant to the Merger
Agreement, Participants may tender their Options in connection with
the tender offer in exchange for cash from DGC, for each share of
stock that is subject to such holder's Options, equal to the
difference between the price per share offered by DGC in the tender
offer, and the per share exercise price of such holder's Options,
which amount may be reduced by any required withholding tax. Option
holders who do not participate in the tender offer will receive cash
from DGC, for each share that is subject to such Options that have not
been exercised or tendered as of the effective date of the merger,
equal to the difference between the Merger Consideration (as defined
in the Merger Agreement) per share payable to the Company shareholders
who do not tender their stock in the tender offer and the per share
exercise price of such Options, which amount may be reduced by any
required withholding tax.
D-1
<PAGE>
EXHIBIT E
ARTICLE EIGHTH
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
DART GROUP CORPORATION
EIGHTH. Each person who was or is a party or is threatened to be made a
party to, or is involved in any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (a
"Proceeding"), by reason of the fact that he or she or a person of whom he or
she is the legal representative, is or was a director or officer of the
Corporation, shall be indemnified and held harmless by the Corporation to the
fullest extent permitted from time to time by the General Corporation Law of the
State of Delaware as the same exists or may hereafter be amended (but, if
permitted by applicable law, in the case of any such amendment, only to the
extent that such amendment permits the Corporation to provide broader
indemnification rights than said law permitted the Corporation to provide prior
to such amendment) or any other applicable laws as presently or hereafter in
effect. The Corporation may, by action of the Board of Directors, provide
indemnification to employees and agents (other than a director or officer), of
the Corporation, to directors, officers, employees or agents of any subsidiary
of the Corporation, and to each person serving at the request of the Corporation
or any of its subsidiaries as a director, officer, partner, member, employee, or
agent of another corporation, partnership, limited liability company, joint
venture, trust or other enterprise, with the same scope and effect as the
foregoing indemnification of directors and officers of the Corporation. The
Corporation shall be required to indemnify any person seeking indemnification in
connection with a Proceeding (or part thereof) initiated by such person only if
such Proceeding (or part thereof) was authorized by the Board of Directors or is
a Proceeding to enforce such person's claim to indemnification pursuant to the
rights granted by this Certificate of Incorporation or otherwise by the
Corporation. Without limiting the generality or the effect of the foregoing, the
Corporation may enter into one or more agreements with any person which provide
for indemnification greater or different than that provided in this ARTICLE
EIGHTH. Any amendment or repeal of this ARTICLE EIGHTH shall not adversely
affect any right or protection existing hereunder in respect of any act or
omission occurring prior to such amendment or repeal.
<PAGE>
EXHIBIT F
ARTICLE VII
AMENDED AND RESTATED BYLAWS
OF
DART GROUP CORPORATION
ARTICLE VII.
INDEMNIFICATION AND INSURANCE
SECTION 1. INDEMNIFICATION.
a. The Corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation) by
reason of the fact that he or she or a person of whom he or she is the legal
representative is or was a director or officer of the Corporation, or by reason
of any action alleged to have been taken or omitted in such capacity, against
costs, charges, expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him or her or on
his or her behalf in connection with such action, suit or proceeding and any
appeal therefrom, if he or she acted in good faith and in a manner he or she
reasonably believed to be in, or not opposed to, the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The Corporation may, by
action of the Board of Directors, provide indemnification to employees and
agents (other than a director or officer) of the Corporation, to directors,
officers, employees or agents of any
F-1
<PAGE>
subsidiary of the Corporation, and to each person serving at the request of the
Corporation or any of its subsidiaries as a director, officer, partner, member,
employee, or agent of another corporation, partnership, limited liability
company, joint venture, trust or other enterprise, with the same scope and
effect as the foregoing indemnification of directors and officers of the
Corporation. The termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or upon a please of nolo contendere or its
---- ----------
equivalent, shall not, of itself, create a presumption that the person did not
act in good faith and in a manner which he or she reasonably believed to be in,
or not opposed to, the best interests of the Corporation, and, with respect to
any criminal action or proceeding, had reasonable cause to believe that his
conduct was unlawful.
b. The Corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the Corporation to procure a judgment in
its favor by reason of the fact that he or she or a person of whom he or she is
the legal representative is or was a director or officer of the Corporation, or
by reason of any action alleged to have been taken or omitted in such capacity,
against costs, charges, expenses (including attorneys' fees) actually and
reasonably incurred by him or her or on his or her behalf in connection with the
defense or settlement of such action or suit and any appeal therefrom, if he or
she acted in good faith and in a manner he or she reasonably believed to be in,
or not opposed to, the best interests of the Corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable for gross negligence or
misconduct in the performance of his or her duty to the Corporation unless and
only to the extent that the Court of Chancery of the State of Delaware or the
court
F-2
<PAGE>
in which such action or suit was brought shall determine upon application that,
despite the adjudication of such liability but in view of all the circumstances
of the case, such person is fairly and reasonably entitled to indemnification
for such costs, charges and expenses which the Court of Chancery or such other
court shall deem proper. The Corporation may, by action of the Board of
Directors, provide indemnification to employees and agents (other than a
director or officer) of the Corporation, to directors, officers, employees or
agents of any subsidiary of the Corporation, and to each person serving at the
request of the Corporation or any of its subsidiaries as a director, officer,
partner, member, employee, or agent of another corporation, partnership, limited
liability company, joint venture, trust or other enterprise, with the same scope
and effect as the foregoing indemnification of directors and officers of the
Corporation.
c. Notwithstanding the other provisions of Section 1 of Article VII
of these Bylaws, to the extent that any person entitled to indemnification
pursuant to the terms of Section 1(a) or (b) of Article VII of these Bylaws has
been successful on the merits or otherwise, including, without limitation, the
dismissal of an action without prejudice, in defense of any action, suit or
proceeding referred to in Section 1(a) and (b) of Article VII of these Bylaws,
or in defense of any claim, issue or matter therein, he or she shall be
indemnified against all costs, charges and expenses (including attorneys' fees)
actually and reasonably incurred by him or her or on his or her behalf in
connection therewith.
d. Any indemnification of a director or officer of the Corporation or
a legal representative thereof under Section 1(a) and (b) of Article VII of
these Bylaws (unless ordered by a court) shall be paid by the Corporation unless
a determination is made (1) by the Board of Directors by a majority vote of a
quorum consisting of directors who
F-3
<PAGE>
were not parties to such action, suit or proceeding; or (2) if such a quorum is
not obtainable, or even if obtainable a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion; or (3) by the
stockholders, that indemnification of the director, officer, employee or agent
is not proper in the circumstances because he or she has not met the applicable
standards of conduct set forth in Section 1(a) and (b) of Article VII of these
Bylaws.
e. Costs, charges, and expenses (including attorneys' fees) incurred
by a director or officer of the Corporation or a legal representative thereof in
defending a civil or criminal action, suit or proceeding (including
investigations by any government agency and all costs, charges and expenses
incurred in preparing for any threatened action, suit or proceeding) shall be
paid by the Corporation in advance of the final disposition of such action, suit
or proceeding upon receipt of an undertaking by or on behalf of such person to
repay all amounts so advanced if it shall ultimately be determined that such
person is not entitled to be indemnified by the Corporation pursuant to this
Article VII. No security shall be required for such undertaking and such
undertaking shall be accepted without reference to the recipient's financial
ability to make repayment. Such expenses incurred by other employees, agents
and other persons entitled to indemnification pursuant to Section 1(a) of (b) of
Article VII of these Bylaws may be so paid upon such terms and conditions, if
any, as the Board deems appropriate. The Board of Directors may, in the manner
set forth above, and subject to the approval of such director, officer, legal
representative, employee, agent or other person, authorize the Corporation's
counsel to represent such person, in any action, suit or proceeding, whether or
not the Corporation is a party to such action, suit or proceeding.
F-4
<PAGE>
f. Any indemnification under Section 1(a), (b) or (c) of Article VII
or advance of costs, charges and expenses under Section 1(e) of Article VII of
these Bylaws shall be made promptly, and in any event within sixty (60) days,
upon the written request of the person entitled to such indemnification or
advance directed to the Secretary of the Corporation. The right to
indemnification or advances as granted by this Article VII shall be enforceable
by the director, officer, employee or agent in any court of competent
jurisdiction if the Corporation denies such request in whole or in part, or if
no disposition thereof is made within sixty (60) days. Such person's costs and
expenses incurred in connection with successfully establishing his right to
indemnification or advances, in whole or in part, in any such action shall also
be indemnified by the Corporation. It shall be a defense to any such action
(other than an action brought to enforce a claim for the advance of costs,
charges and expenses under Section 1(e) of Article VII of these Bylaws where the
required undertaking, if any, has been received by the Corporation) that the
claimant has not met the standard of conduct set forth in Section 1(a) or (b) of
Article VII of these Bylaws, but the burden of proving that such standard of
conduct has not been met shall be on the Corporation. Neither the failure of
the Corporation (including its Board of Directors, its independent legal
counsel, or its stockholders) to have made a determination prior to the
commencement of such action that indemnification of the claimant is proper in
the circumstances because he or she has met the applicable standard of conduct
set forth in Section 1(a) and (b) of Article VII of these Bylaws, nor the fact
that there has been an actual determination by the Corporation (including its
Board of Directors, its independent legal counsel, or its stockholders) that the
claimant has not met such applicable standards of conduct, shall be a defense to
the action or create a presumption that the claimant has not met the applicable
standard of conduct.
F-5
<PAGE>
g. The indemnification and advancement of expenses provided by, or
granted pursuant to, other Sections of this Article VII shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of costs, charges and expenses may be entitled under any law (common
or statutory), bylaw, agreement, vote of stockholders or disinterested directors
or otherwise, both as to action in an official capacity and as to action in
another capacity while holding such office or while employed by or acting as
agent for the Corporation, and shall continue as to a person who has ceased to
be a director, officer, legal representative, employee or agent and shall inure
to the benefit of the estate, heirs, executors and administrators of such
person. All rights to indemnification under Article VII of these Bylaws shall
be deemed to be a contract between the Corporation and each director, officer of
the Corporation, or legal representative thereof, who serves or served in such
capacity at any time while Article VII of these Bylaws is in effect. No
amendment or repeal of this Article VII of these Bylaws or any relevant
provisions of the Delaware General Corporation Law or any other applicable laws
shall adversely affect or deny to any director, officer, legal representative,
employee or agent any rights to indemnification which such person may have, or
change or release any obligations of the Corporation, under Article VII of these
Bylaws with respect to any costs, charges, expenses (including attorneys' fees),
judgments, fines, and amounts paid in settlement which arise out of an action,
suit or proceeding based in whole or substantial part on any act or failure to
act, actual or alleged, which takes place before or while Section 1 of Article
VII of these Bylaws is in effect. The provisions of this sub-section (g) shall
apply to any such action, suit or proceeding whenever commenced, including any
such action, suit or proceeding commenced after any amendment or repeal of
Article VII of these Bylaws.
F-6
<PAGE>
h. For purposes of this Article VII, references to "the Corporation"
shall include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, its officers, legal
representatives thereof, its employees or its agents so that any person who is
or was a director, officer, employee or agent of such constituent corporation or
a legal representative of such a director or officer, or is or was serving at
the request of such constituent corporation as a director, officer, partner,
member, employee or agent of another corporation, partnership, limited liability
company, joint venture, trust or other enterprise, shall stand in the same
position under the provisions of this Article VII with respect to the resulting
or surviving corporation as such person would have with respect to such
constituent corporation if its separate existence had continued.
i. For purposes of this Article VII, references to "other
enterprises" shall include employee benefit plans including but not limited to
any employee benefit plan of the Corporation; references to "fines" shall
include any penalties and any excise or similar taxes assessed on a person with
respect to an employee benefit plan; and references to "serving at the request
of the Corporation" shall include any service as a director, officer, employee
or agent of the Corporation which imposes duties on, or involves service by,
such director, officer, employee or agent with respect to any employee benefit
plan, its participants, or beneficiaries including acting as a fiduciary
thereof; a person who acted in good faith and in a manner he or she reasonably
believed to be in the interest of the participants and beneficiaries of an
employee benefit plan shall be deemed to have acted in a manner "not opposed to
the best interests of the Corporation" as referred to in this Article
F-7
<PAGE>
VII; and service as a partner, trustee or member of management or similar
committee of a partnership or joint venture, or as a director, officer, employee
or agent of a corporation which is a partner, trustee or joint venturer, shall
be considered service as a director, officer, employee or agent of the
partnership, joint venture, trust or other enterprise.
SECTION 2. INSURANCE. The Corporation may purchase and maintain
insurance on behalf of any person who is or was or has agreed to become a
director, officer, employee or agent of the Corporation, or is or was serving at
the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against any liability asserted against him or her and incurred by him or her or
on his or her behalf in any such capacity, or arising out of his status as such,
whether or not the Corporation would have the power to indemnify him or her
against such liability under the provisions of Section 145 of the Delaware
General Corporation Law and these Bylaws, provided that such insurance is
--------
available on acceptable terms as determined by a vote of a majority of the
entire Board of Directors.
F-8
<PAGE>
EXHIBIT G
FORM OF INDEMNIFICATION AGREEMENT
---------------------------------
This Indemnification Agreement ("Agreement") is made as of the 20th
day of November, 1997, by and between Dart Group Corporation, a Delaware
corporation (the "Company"), and _____________________________, a director of
the Company (the "Indemnitee").
RECITALS
--------
A. The Indemnitee has agreed to serve or is presently serving as a
director of the Company and the Company desires the Indemnitee to serve in that
capacity. The Indemnitee is willing, subject to certain conditions including,
without limitation, the execution and performance of this Agreement by the
Company, to serve in that capacity.
B. In addition to the indemnification to which the Indemnitee is
entitled under The Delaware General Corporation Law (the "DGCL"), the
certificate of incorporation of the Company, as amended (the "Certificate"), and
the by-laws of the Company, as amended, the Company has obtained at its sole
expense insurance protecting its officers and directors, including the
Indemnitee, against certain losses arising out of actual or threatened actions,
suits or proceedings to which such persons may be made or threatened to be made
parties. However, as a result of circumstances having no relation to, and
beyond the control of, the Company and the Indemnitee, there can be no assurance
of the continuation or renewal of that insurance.
G-1
<PAGE>
Accordingly, and in order to induce the Indemnitee to serve or
continue to serve as a director, the Company and Indemnitee agree as follows:
1. Service. The Indemnitee will serve as a director of the Company
-------
so long as he is duly elected and qualified in accordance with the by-laws of
the Company (the "By-Laws") or until he resigns in writing or is removed in
accordance with applicable law.
2. Initial Indemnity. (a) The Company shall indemnify the Indemnitee
-----------------
when he was or is a party or is threatened to be made a party to any pending,
threatened or completed action, suit or proceeding, whether civil,
administrative, investigative or criminal (other than an action by or in the
name of the Company) by reason of the fact that he is or was or had agreed to
become a director, officer, employee, agent or consultant of the Company, or is
or was serving or had agreed to serve as a director, officer, employee, agent or
consultant of any subsidiary of the Company or, at the request of the Company,
of another corporation, partnership, joint venture, trust or other enterprise,
or by reason of any action alleged to have been taken or omitted in such
capacity, against any and all costs, charges and expenses (including, without
limitation, attorneys' and others' fees and expenses), judgments, fines and
amounts paid in settlement actually and reasonably incurred by the Indemnitee in
connection therewith and any appeal therefrom if the Indemnitee acting in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the Company, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction or upon a plea of nolo contendere or its equivalent shall
---- ----------
G-2
<PAGE>
not, of itself, create a presumption that the Indemnitee did not satisfy the
foregoing standard of conduct to the extent applicable thereto.
(b) The Company shall indemnify the Indemnitee when he was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding by or in the right of the Company to
procure a judgment in its favor by reason of the fact that he is or was or had
agreed to become a director, officer, employee, agent or consultant of the
Company, or is or was serving or had agreed to serve as a director, officer,
employee, agent or consultant of any subsidiary of the Company, or, at the
request of the Company, of another corporation, partnership, joint venture,
trust or other enterprise against costs, charges and expenses (including,
without limitation, attorneys' and others' fees and expenses) actually and
reasonably incurred by him in connection with the defense or settlement thereof
or any appeal therefrom if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the Company, and
except that no indemnification shall be made in respect of any claim, issue or
matter as to which the Indemnitee shall have been finally adjudged to be liable
to the Company unless: (i) the Court of Chancery or the court in which such
action, suit or proceeding was brought shall determine upon application that,
despite the adjudication of liability but in view of all the circumstances of
the case, the Indemnitee is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery or such other court shall deem proper or
(ii) such indemnification is consistent with the maximum permissible indemnity
which may exist under applicable law at the time of any request for indemnity
hereunder.
G-3
<PAGE>
(c) To the extent that the Indemnitee has been successful on the
merits or otherwise, including, without limitation, the dismissal of an action
without prejudice, in defense of any action, suit or proceeding referred to in
Sections 2(a) or 2(b) hereof or in defense of any claim, issue or matter
therein, he shall be indemnified against costs, charges and expenses (including,
without limitation, attorneys' and others' fees and expenses) actually and
reasonably incurred by him in connection therewith.
(d) Any indemnification under Sections 2(a) or 2(b) (unless ordered by
a court) shall be made by the Company only as authorized in the specific case
upon a determination in accordance with Section 4 hereof or any applicable
provision of the Certificate, By-Laws, other agreement, resolution or otherwise.
Such determination shall be made: (i) by the Board of Directors of the Company
(the "Board"), by a majority vote of directors who were not parties to such
action, suit or proceeding (the "disinterested directors"), even if such
disinterested directors constitute less than a quorum of the Board, or (ii) if
there is no disinterested directors or the disinterested directors by a majority
vote so direct, by independent legal counsel (designated in the manner provided
below in this subsection (d)) in a written opinion or (iii) by a majority vote
at a meeting of the holders of voting stock of the Company (the "Stockholders")
in accordance with the By-Laws. Independent legal counsel shall be designated
by vote of a majority of the disinterested directors, subject to the approval of
the Indemnitee (which approval shall be by a majority of the disinterested
directors, if any, and shall not be unreasonably withheld); provided, however,
-------- -------
that if the Board is unable or fails to so designate, such designation shall be
made by the Indemnitee subject to the approval of the Company (which approval
shall be by a majority of the
G-4
<PAGE>
disinterested directors, if any, and shall not be unreasonably withheld) and
provided further that, if there is a change in control of the company after this
Agreement is executed, then independent legal counsel shall be selected by the
Indemnitee and approved by the Company (which approval shall not be unreasonably
withheld). Independent legal counsel shall not be any person or firm who, under
the applicable standards of professional conduct then prevailing, would have a
conflict of interest in representing either the Company or the Indemnitee in an
action to determine the Indemnitee's rights under this Agreement. The Company
agrees to pay the reasonable fees and expenses of such independent legal counsel
and to indemnify fully such counsel against costs, charges and expenses
(including attorneys' and others' fees and expenses) actually and reasonably
incurred by such counsel in connection with this Agreement or the opinion, made
in good faith and without gross negligence, of such counsel pursuant hereto.
(e) All expenses (including attorneys' and others' fees and expenses)
incurred by the Indemnitee in defending a civil, criminal, administrative or
investigative action, suit, proceeding or claim with respect to which the
Indemnitee expects to be entitled to indemnification under this Section 2 shall
be paid by the Company in advance of the final disposition of such action, suit
or proceeding in the manner prescribed by Section 4(b) hereof.
(f) If the Company shall adopt any amendment to the Certificate or By-
Laws the effect of which would be to deny, diminish or encumber the Indemnitee's
rights to indemnity pursuant to the Certificate, By-Laws, the DGCL, this
Agreement or applicable law, such amendment shall not apply to any actual or
alleged act or failure to
G-5
<PAGE>
act on the part of the Indemnitee occurring in whole or in part prior to the
date (the "Effective Date") upon which the amendment was approved by the Board
or the Stockholders, as the case may be, unless such amendment by its terms
would have such application and the Indemnitee shall have voted (other than by a
holder of an irrevocable proxy from the Indemnitee) in favor of such adoption as
a director or holder of record of the Company's voting stock, as the case may
be.
(g) Nothing in this Section 2 is intended to limit the maximum
permissible indemnification and advancements to be afforded the Indemnitee by
Section 3 of this Agreement, the Certificate of Incorporation, By-Laws,
insurance policies or applicable law.
3. Additional Indemnification. (a) Pursuant to Section 145(f) of
--------------------------
the DGCL, without limiting any right which the Indemnitee may have pursuant to
Section 2 hereof, the Certificate, the By-Laws, the DGCL, any policy of
insurance or otherwise, the Company shall indemnify the Indemnitee to the
maximum extent not prohibited by applicable law at the time any request for
indemnification is made hereunder against any amount which he is or becomes
legally obligated to pay relating to or arising out of any threatened, pending
or completed action, suit, proceeding, investigation or claim, whether civil,
criminal or administrative, made against or involving him by reason of the fact
that he is or was or had agreed to become a director, officer, employee, agent
or consultant of the Company, or is or was serving or had agreed to serve as a
director, officer, employee, agent or consultant of any subsidiary of the
Company or, at the request of the Company, of another corporation, partnership,
joint venture, trust or other enterprise, or by reason of any act or omission
which he actually or allegedly commits,
G-6
<PAGE>
suffers, permits or acquiesces in while serving in his capacity as a director,
officer, employee, agent or consultant of the Company, any subsidiary of the
Company, or, if he is serving in such capacity at the request of the Company, as
a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise. The payments which the Company is
obligated to make pursuant to this Section 3 shall include, without limitation,
damages, judgments, settlements and charges, costs and expenses (including,
without limitation, reasonable attorneys' and others' fees and expenses) in
connection with all forms of legal action, suits, proceedings, investigation or
claims and appeal therefrom, and expenses of appeal attachment or similar bonds;
provided, however, that the Company shall not be obligated under this Section
- -------- -------
3(a) to indemnify the Indemnitee for:
(i) any fine or similar governmental levy that is imposed in
a final, nonappealable order and that Company is prohibited by
applicable law from paying; or
(ii) any damages or judgments to the extent based upon or
attributable to the Indemnitee gaining in fact a personal profit
to which he was not legally entitled, including, without
limitation, profits made from the purchase and sale by the
Indemnitee of equity securities of the Company which are
recoverable by the Company pursuant to Section 16(b) of the
Securities Exchange Act of 1934, as amended, and profits arising
from transactions in publicly traded securities of the Company
which were effected by the Indemnitee in violation of Section
10(b) of the Securities
G-7
<PAGE>
Exchange Act of 1934, as amended, including Rule 10b-5
promulgated thereunder.
If the Indemnitee so requests in writing, the determination of whether the
Indemnitee shall be entitled to indemnification under this Section 3(a) shall be
made in accordance with Section 4(a) hereof.
(b) Expenses (including, without limitation, attorneys' and others'
fees and expenses) incurred by Indemnitee in connection with any actual or
threatened civil, criminal or administrative action, suit, proceeding,
investigation or claim with respect to which the Indemnitee expects to be
entitled to indemnification under this Section 3 shall be paid by the Company in
advance of the final disposition thereof as authorized in accordance with
Section 4(b) hereof.
4. Certain Procedures Relating to Indemnification and Advancement of
-----------------------------------------------------------------
Expenses. (a) Except as otherwise permitted or required by the DGCL, for
- --------
purposes of pursuing his rights to indemnification under Sections 2(a), 2(b) or
3(a) hereof, as the case may be, the Indemnitee may, but shall not be required
to, (i) submit to the Board a sworn statement of request for indemnification
substantially in the form of Exhibit 1 attached hereto and made a part hereof
(the "Indemnification Statement") averring that he is entitled to
indemnification hereunder; and (ii) present to the Company reasonable evidence
of all expenses for which payment is requested, provided, that no evidence that
--------
would cause a waiver or breach of either the attorney-client privilege or the
attorney work product doctrine shall be required. Submission of an
Indemnification Statement to the Board shall create a presumption that the
Indemnitee is entitled to indemnification under Section 2(a), 2(b) or 3(a)
hereof, as the case may be, and the Board shall be
G-8
<PAGE>
deemed to have determined that the Indemnitee is entitled to such
indemnification unless: (i) the directors who are not parties to the same
action, suit, proceeding, investigation or claim for which indemnification is
sought do not constitute a quorum of the Board; or (ii) within 30 calendar days
after submission of the Indemnification Statement, the Board shall determine by
vote of a majority of disinterested directors at a meeting at which a quorum of
the Board comprised of disinterested directors is present, based upon clear and
convincing evidence (sufficient to rebut the foregoing presumption), that the
Indemnitee is not entitled to such indemnification and the Indemnitee shall have
received notice within such period in writing of such determination that the
Indemnitee is not so entitled to indemnification, which notice shall disclose
with particularity the evidence in support of the Board's determination and
which notice shall be sworn to by all persons who participated in the
determination and voted to deny indemnification. The provisions of this Section
4(a) are intended to be procedural only and shall not affect the right of the
Indemnitee to indemnification under this Agreement, and any determination by the
Board that the Indemnitee is not entitled to indemnification and any failure to
make the payments requested in the Indemnification Statement shall be subject to
judicial review as provided in Section 6 hereof.
(b) For purposes of requesting advancement of expenses pursuant to
Section 2(e) hereof, the Indemnitee shall submit to the Board a sworn statement
of request for advancement of expenses substantially in the form of Exhibit 2
attached hereto and made a part hereof (the "Undertaking"), averring that (i) he
has reasonably incurred or will reasonably incur actual expenses in defending in
actual civil,
G-9
<PAGE>
criminal or administrative action, suit, proceeding, investigation or claim and
(ii) he undertakes to repay such amount if it shall ultimately be determined
that he is not entitled to be indemnified by the Company under this Agreement or
otherwise. For purposes of requesting advancement of expenses pursuant to
Section 3(b) hereof, the Indemnitee shall submit an Undertaking or such other
form of request as he determines to be appropriate (an "Expense Request").
Within 20 calendar days after receipt of an Undertaking or Expense Request, as
the case may be, the Board shall authorize immediate payment of the expenses
stated in the Undertaking or Expense Request, as the case may be, and such
payments shall be made by the Company. No security shall be required in
connection with any Undertaking or Expense Request and any Undertaking or
Expense Request shall be accepted without reference to the Indemnitee's ability
to make repayment.
5. Subrogation; Duplication of Payments. (a) In the event of
------------------------------------
payment under this Agreement, the Company shall be subrogated to the extent of
such payment to all of the rights of recovery of the Indemnitee, who shall
execute all papers required and shall do everything that may be necessary to
secure such rights, including the execution of such documents necessary to
enable the Company effectively to bring suit to enforce such rights.
(b) The Company shall not be liable under this Agreement to make any
payment in connection with any claim made against the Indemnitee to the extent
the Indemnitee has actually received payment (under any insurance policy, the
Certificate, the By-Laws or otherwise) of the amounts otherwise payable
hereunder.
G-10
<PAGE>
6. Enforcement. (a) If a claim for indemnification made to the
-----------
Company pursuant to Section 4 hereof is not paid in full by the Company within
30 calendar days after a written claim has been received by the Company, or if a
claim for advancement of expenses made to the Company pursuant to Section 4
hereof is not paid in full by the Company within 20 calendar days after a
written claim has been received by the Company, the Indemnitee may at any time
thereafter bring suit against the Company to recover the unpaid amount of the
claim.
(b) In any action brought under Section 6(a) hereof, it shall be a
defense to a claim for indemnification pursuant to sections 2(a) or 2(b) hereof
(other than an action brought to enforce a claim for expenses incurred in
defending any proceeding in advance of its final disposition where the
Undertaking, if any is required, has been tendered to the Company) that the
Indemnitee has not met the standards of conduct which make it permissible under
the DGCL for the Company to indemnify the Indemnitee for the amount claimed, but
the burden of proving such defense shall be on the Company. Neither the failure
of the Company (including the Board, independent legal counsel or the
Stockholders) to have made a determination prior to commencement of such action
that indemnification of the Indemnitee is proper in the circumstances because he
has met the applicable standard of conduct set forth in the dgcl, nor an actual
determination by the Company (including the Board, independent legal counsel or
Stockholders) that the Indemnitee has not met such applicable standard of
conduct, shall create a presumption that the Indemnitee has not met the
applicable standard of conduct.
G-11
<PAGE>
(c) It is the intent of the Company that the Indemnitee not be
required to incur the expenses associated with the enforcement of his rights
under this Agreement by litigation or other legal action because the cost and
expense thereof would substantially detract from the benefits intended to be
extended to the Indemnitee hereunder. Accordingly, if it should appear to the
Indemnitee that the Company has failed to comply with any of its obligations
under this Agreement or in the event that the Company or any other person takes
any action to declare this Agreement void or unenforceable, or institutes any
action, suit or proceeding designed (or having the effect of being designed) to
deny, or to recover from, the Indemnitee the benefits intended to be provided to
the Indemnitee hereunder, the Company irrevocably authorizes the Indemnitee from
time to time to retain counsel of his choice, at the expenses of the Company as
hereafter provided, to represent the Indemnitee in connection with the
initiation or defense of any litigation or other legal action, whether by or
against the Company or any director, officer, stockholder or other person
affiliated with the Company, in any jurisdiction. Regardless of the outcome
thereof, the Company shall pay be solely responsible for any and all costs,
charges and expenses, including, without limitation, attorneys' and others' fees
and expenses, reasonably incurred by the Indemnitee to advance a good faith and
non-frivolous position of the Indemnitee (i) as a result of the Company's
failure to perform this Agreement or any provision thereof or (ii) as a result
of the Company or any person contesting the validity or enforceability of this
Agreement or any provision thereof as aforesaid.
7. Merger or Consolidation. In the event that the Company shall be
-----------------------
a constituent corporation in a consolidation, merger or other reorganization,
the Company,
G-12
<PAGE>
if it shall not be the surviving, resulting or acquiring corporation therein,
shall require as a condition thereto the surviving, resulting or acquiring
corporation to agree to indemnify the Indemnitee to the full extent provided in
this Agreement. Whether or not the Company is the resulting, surviving or
acquiring corporation in any such transaction, the Indemnitee shall also stand
in the same position under this Agreement with respect to the resulting,
surviving or acquiring corporation as he would have the respect to the Company
had its separate existence continued.
8. Nonexclusivity and Severability. (a) The right to
-------------------------------
indemnification provided by this Agreement shall not be exclusive of any other
rights to which the Indemnitee may be entitled under the Certificate, By-Laws,
the DGCL, any other statute, insurance policy, agreement, vote of Stockholders
or of Directors or otherwise, both as to actions in his official capacity and as
to actions in another capacity while holding such office, and shall continue
after the Indemnitee has ceased to be a director, officer, employee or agent and
shall inure to the benefit of his heirs, executors and administrators.
(b) If any provision of this Agreement or the application of any
provision hereof to any person or circumstances is held invalid, unenforceable
or otherwise illegal, the remainder of this Agreement and the application of
such provision to other persons or circumstances shall not be affected, and the
provision so held to be invalid, unenforceable or otherwise illegal shall be
reformed to the extent (and only to the extent) necessary to make it
enforceable, valid and legal.
G-13
<PAGE>
9. Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the laws of the State of Delaware, without giving effect to
the principles of conflict of laws thereof.
10. Modification; Survival. This Agreement contains the entire
----------------------
agreement of the parties relating to the subject matter hereof. This Agreement
may be modified only by an instrument in writing signed by both parties hereto.
The provisions or this Agreement shall survive the death, disability, or
incapacity of the Indemnitee or the cessation of the Indemnitee's service as a
director, officer, employee or agent of the Company and shall inure to the
benefit of the Indemnitee's heirs, executors and administrators.
11. Certain Terms. For purposes of this Agreement, references to
-------------
"other enterprises" shall include employee benefit plans; references to "fines"
shall include any excise taxes assessed on Indemnitee with respect to any
employee benefit plan; and references to "serving at the request of the Company"
shall include any service as a director, officer, employee or agent of the
company which imposes duties on, or involves services by, the Indemnitee with
respect to an employee benefit plan, its participants or beneficiaries;
references to the masculine shall include the feminine; references to the
singular shall include the plural and vice versa; and if the Indemnitee acted in
---- -----
good faith and in a manner he reasonably believed to be in the interest of the
participants and beneficiaries of an employee benefit plan he shall be deemed to
have acted in a manner "not opposed to the best interests of the Company" as
referred to herein.
G-14
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
DART GROUP CORPORATION
By:
-------------------------------
Name: Richard B. Stone
Title: Acting Chief Executive Officer
-------------------------------------
-------------------------------------
G-15
<PAGE>
Exhibit 1
---------
INDEMNIFICATION STATEMENT
-------------------------
STATE OF_________________:
: ss:
COUNTY OF________________:
I, ____________________, being first duly sworn, do depose and say as
follows:
1. This Indemnification Statement is submitted pursuant to the
Indemnification Agreement, dated as of November 20, 1997, between Dart Group
Corporation (the "Company"), a Delaware corporation, and the undersigned.
2. I am requesting indemnification against charges, costs, expenses
(including, without limitation, attorneys' and others' fees and expenses),
judgments, fines and amounts paid in settlement, all of which (collectively,
"Liabilities") have been or will be incurred by me in connection with an actual
or threatened action, suit, proceeding or claim to which I am a party or am
threatened to be made a party.
3. With respect to all matters related to any such action, suit,
proceeding or claim, I am entitled to be indemnified as herein contemplated
pursuant to the aforesaid Indemnification Agreement.
4. Without limiting any other rights which I have or may have, I am
requesting indemnification against Liabilities which have or may arise out of
_________________
G-16
<PAGE>
________________________________________________________________________________
________________________________________________________________________________
_________________________________________________________________________.
_______________________________
Subscribed and sworn to before
me, a Notary Public in and for
said County and State, this
______ day of _______________, 199__.
__________________________________
Notary Public
[Seal]
My commission expires the ______
day of _______________, ______.
G-17
<PAGE>
Exhibit 2
---------
UNDERTAKING
-----------
STATE OF_________________:
: ss:
COUNTY OF________________:
I, ____________________, being first duly sworn, do depose and say as
follows:
1. This Undertaking is submitted pursuant to the Indemnification
Agreement, dated as of November 20, 1997, between Dart Group Corporation (the
"Company"), a Delaware corporation, and the undersigned.
2. I am requesting advancement of certain costs, charges and
expenses which I have incurred or will incur in defending an actual or pending
civil or criminal action, suit, proceeding or claim.
3. I hereby undertake to repay this advancement of expenses if it
shall ultimately be determined that I am not entitled to be indemnified by the
Company under the aforesaid Indemnification Agreement or otherwise.
4. The costs, charges and expenses for which advancement is
requested are, in general, all expenses related to______________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
__________________.
___________________________
G-18
<PAGE>
Subscribed and sworn to before
me, a Notary Public in and for
said County and State, this
______ day of _______________, 199__.
_________________________________
Notary Public
[Seal]
My commission expires the ______
day of _______________, ______.
G-19
<PAGE>
EXHIBIT H
DART GROUP CORPORATION
3300 75TH AVENUE
LANDOVER, MARYLAND 20785
CONFIDENTIALITY AGREEMENT
You, the undersigned, have expressed an interest in a possible purchase of,
merger with or similar transaction involving, Dart Group Corporation and/or one
or more of its subsidiaries (collectively, the "Company"). In connection with
your analysis of a possible negotiated transaction with the Company, you have
requested certain oral and written information concerning the Company from
officers, directors, employees, representatives, advisors and/or agents of the
Company. In consideration of furnishing you with such information, you agree
to, and agree to cause your affiliates to comply with, the following terms of
this Confidentiality Agreement:
(1) The Evaluation Material (as defined below) will be used solely for the
purpose of evaluating a possible transaction between the Company and you
relating to the purchase by you of the Company, and will not be used in any
way directly or indirectly detrimental to the Company or for any other
purpose. All the Evaluation Material will be kept confidential by you and
your legal and financial advisors, except that you may disclose the
Evaluation Material or portions thereof to those of your directors,
officers, employees, representatives and agents and to those
representatives of your legal and financial advisors (the persons to whom
such disclosure is permissible being collectively called "Representatives")
who need to know such information for the purpose of evaluating your
possible acquisition of the Company (it being understood that each such
Representative will be informed of the confidential nature of the
Evaluation Material and will agree to be bound by this agreement). You
agree to be responsible for any breach of this agreement by any of the
Representatives. You will keep a list of all persons (indicating their
position and affiliation) who have received any of it. In the event that
you or any of the Representatives is requested or required (by deposition,
interrogatory, request for documents, subpoena, civil investigative demand
or similar process or by law or rule of a stock exchange or similar entity)
to disclose any of the Evaluation Material, you or such Representative, as
the case may be, shall provide the Company with prompt prior notice of such
request or requirement so that the Company may seek a protective order or
other appropriate remedy or, if appropriate, waive compliance with the
terms of this agreement. In the event that such protective order or other
remedy is not obtained, or that the Company waives compliance with the
provisions hereof, (i) you or such Representative, as the case may be, may
disclose to any tribunal only that portion of the Evaluation Material which
you are advised by written opinion of
H-1
<PAGE>
Richfood Holdings, Inc.
Page 2 -- February __, 1998
your counsel is legally required to be disclosed or else stand liable for
contempt or suffer other censure or penalty, and shall exercise reasonable
efforts to obtain assurance that confidential treatment will be accorded
such Evaluation Material and (ii) you shall not be liable for such
disclosure unless such disclosure to such tribunal was caused by or
resulted from a previous disclosure by you or any Representative not
permitted by this agreement. The term "person" as used in this agreement
with be interpreted broadly to include, without limitation, any
corporation, company, partnership or individual.
(2) The term "Evaluation Material" as used in this agreement shall mean all
information and documents, whether in written or oral form, which have been
furnished by the Company, or any employee, officer, or financial or legal
advisor to the Company (the "Disclosing Party"), to you or any of the
Representatives, whether furnished or otherwise disclosed before or after
the date of this agreement, together with all analyses, compilations,
studies or other documents, records or data prepared by you or any of the
Representatives which contain or otherwise reflect or are generated from
such information and documents. The term "Evaluation Material" does not
include any information which (i) at the time of disclosure is generally
available to and known by the public (other than as a result of a
disclosure directly or indirectly by you or any of the Representatives not
permitted by this agreement), (ii) was available to you on a
nonconfidential basis from a source that is not known by you to be bound by
a confidentiality agreement with any Disclosing Party or otherwise
prohibited from transmitting or disclosing the information by a
contractual, legal or fiduciary obligation, (iii) has been independently
developed by you without violation of any obligation under this agreement
or use of any Evaluation Material or (iv) became available to you on a non-
confidential basis or has been independently developed by you in your
capacity as wholesale supplier to Shoppers Food Warehouse Corp.
("Shoppers").
(3) If you determine not to seek to proceed with a transaction with the
Company, you will promptly inform the Company, and you and your
Representatives shall promptly either (i) destroy all copies of the written
------
Evaluation Material in your or their possession or under your or their
custody or control (including that stored in any computer, word processor
or similar device) and confirm such destruction to the Company in writing
or (ii) return to the Company all copies of the Evaluation Material
furnished to you by or on behalf of the Company in your possession or in
the possession of your Representatives. Any oral Evaluation Material will
continue to be held subject to the terms of this agreement.
H-2
<PAGE>
Richfood Holdings, Inc.
Page 3 -- February __, 1998
(4) Except as required by law or by the rules and regulations of any stock
exchange on which your stock is listed and only to the extent required by
such law or rules and regulations as so advised in writing by counsel, you
will not, and will direct and cause the Representatives not to, without the
prior written consent of the Company, disclose to any person (i) that the
Company is contemplating a sale, (ii) that any investigations, discussions
or negotiations are taking place concerning a possible transaction between
the Company and you, (iii) that you have requested or received Evaluation
Material from any Disclosing Party, or (iv) any of the terms, conditions or
other facts with respect to any such possible transaction, including the
status thereof.
(5) Until the earliest of (i) the execution by you of a definitive purchase and
sale agreement (the "Sale Agreement"); (ii) an acquisition of the Company
by a third party; or (iii) two years from the date of this agreement, you
agree not to initiate or maintain contact (except for those contacts made
in the ordinary course of business) with any officer, director, employee,
representative, or agent of the Company or any of its subsidiaries
regarding its business, assets, operations, prospects or finances, except
with the express written permission of the Company. It is understood that
the Company will arrange for appropriate contacts for due diligence
purposes. It is further understood that all (a) communications regarding
this possible transaction, (b) requests for additional information, (c)
requests for facility tours or management meetings and (d) discussions or
questions regarding procedures will be submitted or directed to Senator
Richard Stone. You further agree that for a period of one year from the
date hereof, you will not solicit for hire any of the employees of the
Company with whom you have had contact during the period of your
investigation or who became known to you in the course of your
consideration of a possible transaction with the Company, provided,
however, that the foregoing will not be deemed to prevent you from (1)
conducting general solicitations of employment published in a journal,
newspaper or other publication of general circulation or in trade
publications or other similar media and which, in any case, are not
directed specifically toward such employees, or (2) negotiating with or
employing any such employee who initiates contacts with you on an
unsolicited basis.
(6) You understand and acknowledge that the Company is not making any
representation or warranty, express or implied, as to the accuracy or
completeness of the Evaluation Material, and the Company, its officers,
directors, employees, stockholders, owners, affiliates, advisors or agents
expressly disclaims any and all liability to you or any other person that
may be
H-3
<PAGE>
Richfood Holdings, Inc.
Page 4 -- February __, 1998
based upon or relate to (i) the use of the Evaluation Material by you or
any of the Representatives or (ii) any errors therein or omissions
therefrom. Only those particular representations or warranties, if any,
that are made to a purchaser in a definitive Sale Agreement when, as, and
if it is executed, and subject to such limitations and restrictions as may
be specified in such Sale Agreement, will have any legal effect.
(7) For a period of two years from the date hereof, unless specifically
requested or permitted in writing in advance by the Company, you and your
affiliates (as defined in Rule 12b-2 under the Securities Exchange Act of
1934, as amended (the "Exchange Act")) that are under your control will not
(and you and they will not advise, assist, participate with or encourage
others to), directly or indirectly, in any manner, effect or seek, offer,
propose (whether publicly or otherwise) to:
(i) make any public announcement with respect to, or submit any proposal
for, a transaction between the Company or any of its security
holders and you (and/or any of your affiliates), whether or not any
other parties are also involved, directly or indirectly, in such
proposal or transaction, unless such proposal is directed and
disclosed solely to the Board of Directors of the Company or its
designated representatives, and the Company shall have requested in
writing in advance the submission of such proposal (and shall have
consented in writing, in advance, in the case of any such proposal
from or involving parties in addition to or other than you, to the
involvement of such additional or other parties);
(ii) by purchase or otherwise, through your affiliates or otherwise,
alone or with others, acquire, offer to acquire, or agree to
acquire, ownership (including, but not limited to, beneficial
ownership as defined in Rule 13d-3 under the Exchange Act) of any
assets or business of the Company (other than in the ordinary course
of your business as wholesale supplier to Shoppers) or of any voting
or other securities or direct or indirect rights (including
convertible securities) or options to acquire such ownership (or
otherwise act in concert with any person which so acquires, offers
to acquire, or agrees to acquire);
(iii) make, or in any way participate directly or indirectly in, any
"solicitation" of "proxies" (as such terms are used in the proxy
rules of the Securities and Exchange Commission) to vote, or seek to
advise or influence any
H-4
<PAGE>
Richfood Holdings, Inc.
Page 5 -- February __, 1998
person with respect to the voting of, any voting securities of the
Company or any of its affiliates;
(iv) form, join or in any way participate in a "group" (within the
meaning of Section 13(d)(3) of the Exchange Act) with respect to any
voting securities of the Company or any of its affiliates;
(v) otherwise, alone or in concert with others, seek to influence or
control the management or policies of the Company or any of its
affiliates (other than in the ordinary course of your business as
wholesale supplier to Shoppers);
(vi) deposit securities of the Company or any of its subsidiaries into a
voting trust;
(vii) except as required by law or by the rules and regulations of any
stock exchange on which your stock is listed and only to the extent
required by such law or rules and regulations as so advised in
writing by counsel, take any action which might require the Company
to make a public announcement regarding (A) the possibility of a
business combination or merger involving, or a sale or other
disposition of, the Company or its subsidiaries or any of its voting
securities or a material portion of its assets or any
recapitalization, restructuring, liquidation, dissolution, purchase
or sale of a substantial portion of the assets of, or other
extraordinary transaction with respect to the Company or any of its
subsidiaries or (B) any of the types of matters set forth in (i)-
(vi) above;
(viii) except as required by law or by the rules and regulations of any
stock exchange on which your stock is listed and only to the extent
required by such law or rules and regulations as so advised in
writing by counsel, disclose to any third party any intention, plan
or arrangement inconsistent with the foregoing; or
(ix) enter into any discussions, negotiations, arrangements or
understandings with any third party with respect to any of the
foregoing. You and your affiliates agree not to approach or request
the Company or its subsidiaries (or any of their respective
directors, officers, employees or agents), directly or indirectly,
to amend or waive any provision of this paragraph (7) (including
this sentence).
H-5
<PAGE>
Richfood Holdings, Inc.
Page 6 -- February __, 1998
You and your affiliates under your control agree to notify the Company if
you or one or more of such affiliates is approached by a third party
concerning the participation of you and/or the third party in a transaction
or activity described in this paragraph (7) and you and such affiliates
under your control agree to inform the Company of the nature of each
contact with such third parties and the identities of the third parties
involved.
(8) You and your affiliates under your control hereby acknowledge that you are
aware and that your officers, directors, employees, advisers and/or agents
involved in the possible transaction contemplated herein have been advised
that the United States securities laws prohibit any person who has material
non-public information about a company from purchasing or selling
securities of such company.
(9) You also understand and agree that no contract or agreement providing for
the sale of the Company shall be deemed to exist between you and the
Company unless and until a definitive Sale Agreement has been executed and
delivered by you and the Company, and you hereby waive, in advance, any
claims (including, without limitation, breach of contract) in connection
with the sale of the Company unless and until a definitive Sale Agreement
has been executed and delivered by you and the Company. You also agree
that unless and until a definitive Sale Agreement has been executed and
delivered, neither the Company, nor its stockholders or owners has any
legal obligation of any kind whatsoever with respect to any such
transaction by virtue of this agreement or any other written oral
expression with respect to such transaction except, in the case of this
agreement, for the matters specifically agreed to herein. For purposes of
this paragraph, the term "definitive Sale Agreement" does not include an
executed letter of intent or any other preliminary written agreement, nor
does it include any written or verbal acceptance of an offer or bid on your
part. You further understand that (i) the Company shall be free to conduct
the process for the sale of the Company as it, in its sole discretion shall
determine (including, without limitation, negotiating with any of the
prospective buyers and entering into a definitive Sale Agreement without
prior notice to you or any other person), (ii) any procedures relating to
such sale may be changed at any time without notice to you or any other
person and (iii) you shall not have any claims whatsoever against the
Company, or any of its respective directors, officers, stockholders,
owners, affiliates, representatives, advisors or agents arising out of or
relating to the sale of the Company (other than those as against the
parties to a definitive Sale Agreement with you in accordance with the
terms thereof). Neither this paragraph nor any other provision in this
H-6
<PAGE>
Richfood Holdings, Inc.
Page 7 -- February __, 1998
agreement can be waived or amended except by written consent of the
Company, which consent shall specifically refer to this paragraph (or such
other provision) and explicitly make such waiver or amendment. Each party
agrees that nothing in this agreement shall in any way affect, or
constitute the waiver of any rights under, any supply agreements that may
be in effect from time to time between you and Shoppers.
(10) You agree that money damages would not be a sufficient remedy for any
breach of this agreement and that the Company shall be entitled to
equitable relief, including injunction and specific performance, in the
event of any breach of the provisions of this agreement, in addition to all
other remedies available to the Company at law or in equity. You also
hereby irrevocably and unconditionally consent to submit to the exclusive
jurisdiction of the courts of the State of Maryland and of the United
States of America located in the State of Maryland for any actions, suits
or proceedings arising out of or relating to this agreement and the
transactions contemplated hereby (and you agree not to commence any action,
suit or proceeding relating thereto except in such courts), and further
agree that service of any process, summons, notice or document by U.S.
registered mail to your address set forth below shall be effective service
of process for any action, suit or proceeding brought against you in any
such court. You hereby irrevocably and unconditionally waive any objection
to the laying of venue of any action, suit or proceeding arising out of
this agreement or the transactions contemplated hereby in the courts of the
State of Maryland, and hereby further irrevocably and unconditionally waive
and agree not to plead or claim in any such court that any such action,
suit or proceeding brought in any such court has been brought in an
inconvenient forum.
(11) It is further understood that no failure or delay in exercising any right,
power or privilege hereunder will operate as a waiver thereof, nor will any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege hereunder.
(12) This agreement is for the benefit of the Company and its successors and
assigns. The rights of the Company under this Agreement may be assigned in
whole or in part to any purchaser of the Company, which purchaser shall be
entitled to enforce this Agreement to the same extent and in the same
manner as the Company is entitled to enforce the Agreement. This agreement
and all controversies arising from or relating to performance under this
agreement shall be governed by and construed in accordance with the laws of
the State of
H-7
<PAGE>
Richfood Holdings, Inc.
Page 8 -- February __, 1998
Maryland, without giving effect to its conflicts of laws and principles.
This agreement supersedes the Confidentiality Agreement, dated as of March
14, 1997, by and among you, the Company and Shoppers, which agreement shall
be of no further force and effect.
(13) If any legal action is brought for the enforcement of the Agreement, or
because of an alleged dispute, breach, default or misrepresentation in
connection with any of the provisions of this Agreement, the prevailing
party or parties shall be entitled to recover his, its or their reasonable
attorneys' fees and other costs incurred in such legal action, in addition
to any other relief to which he, it or they may be entitled.
If you agree with the foregoing, please sign a copy of this facsimile
letter and return to me. Your return to me of a signed facsimile copy will
thereupon constitute our agreement with respect to the subject matter of this
letter.
Very truly yours,
DART GROUP CORPORATION
/s/ Richard B. Stone
--------------------
Richard B. Stone
Chairman and Chief Executive Officer
H-8
<PAGE>
Richfood Holdings, Inc.
Page 9 -- February __, 1998
AGREED TO and ACCEPTED THIS
_____ DAY OF FEBRUARY, 1998
RICHFOODS HOLDINGS, INC.
By:
----------------------------
Name:
---------------------
Title:
--------------------
Address:
-----------------------
-----------------------
-----------------------
-----------------------
H-9
<PAGE>
EXHIBIT I
Wasserstein Perella
& Co., Inc. 31 West
52nd Street New
York, New York
10019-6118 Telephone
212-969-2700 Fax
212-969-7836
WASSERSTEIN PERELLA & CO
April 8, 1998
Board of Directors
Dart Group Corporation
3300 75th Avenue
Landover, Maryland 20785
Members of the Board:
You have asked us to advise you with respect to the fairness, from a
financial point of view, to the holders of the common stock, par value $1.00
per share (the "Shares"), of Dart Group Corporation (the "Company") of the
consideration to be received by such holders pursuant to the terms of the
Agreement and Plan of Merger (the "Merger Agreement"), among the Company,
Richfood Holdings, Inc. a Virginia corporation ("Parent"), and DGC
Acquisition, Inc., a Delaware corporation and a wholly-owned subsidiary of
Parent ("Sub"). The Merger Agreement provides for, among other things, a cash
tender offer by Sub to acquire all of the outstanding Shares at a price of
$160 per share (the "Tender Offer") and for a subsequent merger (the "Merger")
of Sub with and into the Company pursuant to which each then outstanding Share
will be converted into the right to receive $160 in cash (the "Merger" and
together with the Tender Offer, the "Transaction"). The terms and conditions
of the Transaction are set forth in more detail in the Merger Agreement.
The Company operates through its wholly-owned subsidiary Shoppers Food
Warehouse Corp. ("Shoppers"), and its majority-owned subsidiaries Trak Auto
Corporation ("Trak"), a retail discount auto parts store chain, and Crown
Books Corporation ("Crown"), a retail discount book store chain. The common
stock of each of Trak and Crown is publicly traded. The Company's other assets
include its wholly--owned subsidiary, Total Beverage Corporation, which
operates retail discount beverage stores and certain real estate holdings (the
"Real Estate Holdings").
In connection with rendering our opinion, we have reviewed a draft, dated
the date hereof, of the Merger Agreement, and for purposes hereof, we have
assumed that the final form thereof will not differ in any material respect
from the draft provided to us. We have also reviewed and analyzed certain
publicly available business and financial information relating to the Company
and its subsidiaries for recent years and interim periods to date, as well as
certain internal financial and operating information, including financial
forecasts, analyses and projections prepared by or on behalf of the Company
and its subsidiaries and provided to us for purposes of our analysis, and we
have met with the managements of the Company and its subsidiaries to review
and discuss such information and, among other matters, the respective
businesses, operations, assets, financial condition and future prospects of
the Company and its subsidiaries.
We have reviewed and considered certain financial and stock market data
relating to the subsidiaries of the Company and we have compared that data
with similar data for certain other companies, the securities of which are
publicly traded, that we believe may be relevant or comparable in certain
respects to such subsidiaries. We have reviewed and considered the financial
terms of certain recent acquisitions and business combination transactions in
the industries in which the Company's subsidiaries engage and in other
industries generally, that we believe to be reasonably comparable to the
Merger or otherwise relevant to our inquiry. We have also performed such other
financial studies, analyses, and investigations and reviewed such other
information as we considered appropriate for purposes of this opinion.
<PAGE>
In our review and analysis and in formulating our opinion, we have assumed
and relied upon the accuracy and completeness of all the financial and other
information provided to or discussed with us or publicly available, and we
have not assumed any responsibility for independent verification of any of
such information. We note that detailed financial projections for the Company
and its subsidiaries of the type customarily used for performing a discounted
cash flow analysis were not available to us and we did not perform such
analysis in connection with the rendering of this opinion. In addition, we
have not reviewed any of the books and records of the Company or its
subsidiaries, or assumed any responsibility for conducting a physical
inspection of the properties or facilities of the Company or its subsidiaries,
or for making or obtaining an independent valuation or appraisal of the
assets, lease portfolio or liabilities of the Company or its subsidiaries. The
Company has obtained and provided to us copies of independent appraisals,
prepared as of January 1998, of the Real Estate Holdings. With your consent,
we have relied exclusively upon such appraisals for purposes of valuing the
Real Estate Holdings and have made no independent inquiry with respect to such
valuation. No independent valuation or appraisal was provided to us with
respect to any other assets or liabilities of the Company or its subsidiaries.
We have assumed that the transactions described in the Merger Agreement will
be consummated on the terms set forth therein, without waiver or modification.
Our opinion is necessarily based on economic and market conditions and other
circumstances as they exist and can be evaluated by us as of the date hereof.
We have acted as financial advisor to the Company in connection with the
Transaction and will receive a fee for our services, which is contingent upon
the consummation of the Transaction or an alternative transaction. In
addition, the Company has agreed to indemnify us for certain liabilities which
may arise out of our engagement as financial advisor, including the rendering
of this opinion. We have also performed various other investment banking
services for the Company and its subsidiaries including, among others, (i)
acting as dealer manager for a self-tender conducted by Trak, (ii) providing
financial advisory services relating to the possible disposition by the
Company of certain assets, (iii) providing financial advisory services in
connection with the acquisition, and acting as initial purchaser of debt
securities of Shoppers in connection with the related financing, of the 50%
interest in Shoppers not then owned by the Company, (iv) acting as initial
purchaser of debt securities of Shoppers in connection with the refinancing by
Shoppers of the Shoppers' acquisition indebtedness, (v) providing financial
advisory services in connection with the analysis of potential strategic
alternatives relating to Shoppers, (vi) acting as a financial advisor to the
Company in connection with settlements between the Company and certain members
of the Haft family involving, among other things, the repurchase of the equity
interests of such family members in the Company and the settlement of all
outstanding disputes between the Company and such individuals, and (vii)
providing financial advisory services in connection with the disposition by
Trak of its California operations. We have received customary fees for
providing such services.
In the ordinary course of our business, we may actively trade the equity
securities of the Company and Parent for our own account and for the accounts
of customers and, accordingly, may at any time hold a long or short position
in such securities.
Our opinion addresses only the fairness, from a financial point of view, to
the holders of the Shares of the consideration to be received by such holders
pursuant to the Merger, and we do not express any opinion on any other terms
of the Transaction. Specifically, our opinion does not address the Company's
underlying business decision to effect the transactions contemplated by the
Merger Agreement, nor does our opinion address the relative merits of the
Transaction as compared to any alternative transaction or business strategy
that may have been considered by the Board of Directors of the Company as
alternatives to the Transaction.
It is understood that this letter is for the benefit and use of the Board of
Directors of the Company in its consideration of the Transaction, and except
for inclusion in its entirety in any tender offer statement, information
statement or proxy statement circulated to holders of Shares relating to the
Transaction, may not be disseminated, quoted, referred to or reproduced at any
time or in any manner without our prior written consent. This opinion does not
constitute a recommendation to any holder of Shares with respect to whether
such holder should tender Shares pursuant to the Tender Offer or as to how
such holder should vote with respect to the Merger, and should not be relied
upon by any holder as such.
2
<PAGE>
Based upon and subject to the foregoing, including the various assumptions
and limitations set forth herein, it is our opinion that as of the date
hereof, the $160 per Share cash consideration to be received by the holders of
Shares pursuant to the Transaction is fair to such holders from a financial
point of view.
Very truly yours,
/s/ Wasserstein Perella & Co., Inc.
Wasserstein Perella & Co., Inc.
3
<PAGE>
Exhibit J
Dart Group to Be Acquired by Richfood Holdings
LANDOVER, Md., April 9 /PRNewswire/ -- Richard B. Stone, Chairman of Dart Group
Corporation (Nasdaq: DART - news), announced today that Dart has entered into a
definitive merger agreement with Richfood Holdings, Inc. (NYSE: RFH - news) that
provides for the acquisition of Dart by Richfood at a price of $160 per share in
cash. The company's Board of Directors unanimously approved the Richfood tender
offer and the execution of the merger agreement.
Under the terms of the merger agreement, Richfood will commence a cash tender
offer for all outstanding shares of Dart's common stock at $160 per share within
five business days. The completion of the tender offer is not subject to
financing, but is subject to a number of other customary conditions, including a
majority of Dart's outstanding shares on a fully diluted basis being tendered
and the expiration of the waiting period under the Hart-Scott-Rodino Act.
Following the successful completion of the Richfood tender offer, all shares not
purchased in the tender offer will be converted in a subsequent merger into the
right to receive $160 per share in cash and Dart will become a wholly owned
subsidiary of Richfood. The merger is also subject to various conditions.
Mr. Stone said, "We are very pleased to have achieved this transaction which we
believe to be in the best interests of our shareholders."
Wasserstein Perella & Co., Inc. acted as financial advisor to Dart.
Safe Harbor Statement under the Private Securities Litigation Reform Act of
1995: The statements contained in this release that are not historical facts are
forward looking statements. Actual results may differ materially from those
projected in the forward looking statements, which statements involve risks and
uncertainties, including the satisfaction of the conditions to the tender offer
and merger contained in the Merger Agreement. Investors are directed to the
other risks discussed in documents filed by the Company with the Securities and
Exchange Commission.
J-1
