UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of the earliest event reported) July 30, 1996
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THE GRAND UNION COMPANY
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(Exact name of registrant as specified in its charter)
Delaware 0-26602 22-1518276
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(State or other jurisdiction (Commission (IRS Employer of
of incorporation) File Number) Identification No.)
201 Willowbrook Boulevard, Wayne, New Jersey 07470-0966
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (201) 890-6000
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ITEMS 1 AND 5. CHANGE IN CONTROL OF THE REGISTRANT AND OTHER EVENTS.
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Description of the Transaction
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On July 30, 1996, The Grand Union Company (the "Company") entered into
a definitive agreement (the "Stock Purchase Agreement") to sell $100 million
of 8.5% class A convertible preferred stock, $1.00 par value per share (the
"Preferred Stock") to an investment group comprised of Trefoil Capital
Investors II, L.P., a Delaware limited partnership, and GE Investment Private
Placement Partners II, A Limited Partnership, a Delaware limited partnership
(collectively, the "Purchasers"). Pursuant to the Stock Purchase Agreement, the
Company will sell to the Purchasers an aggregate of 2,000,000 shares of
Preferred Stock (the "Shares") at a purchase price of $50 per share in stages
through February 25, 1998.
The Company will sell to the Purchasers, at the Purchasers' option, at
any time after July 30, 1996, an aggregate of 229,998 shares of Preferred
Stock (the "First Closing") for a purchase price of $50 per share. The
Purchasers have agreed to purchase, and the Company has agreed to sell,
at any time after July 30, 1996, an aggregate of 800,000 shares of Preferred
Stock (less any amount of Preferred Stock purchased at the First Closing) for
a purchase price of $50 per share (the "Principal Closing"). The Purchasers
have further agreed to purchase, and the Company has further agreed to sell,
an additional 400,000 shares of Preferred Stock on each of February 25, 1997,
August 25, 1997 and February 25, 1998, in each case at a purchase price of $50
per share. Any or all of the purchases referred to in the preceding sentence
may be accelerated by the Purchasers, with or without the approval of the
Company. Each of the purchases are subject to the satisfaction or waiver of
certain closing conditions as specified in the Stock Purchase Agreement. The
Principal Closing is subject to satisfaction or waiver of all of the
conditions set forth in the Stock Purchase Agreement, including without
limitation the termination or expiration of any required waiting period
pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, stockholder approval (or waiver of such approval by the NASD)
and consent of the Company's lenders.
The Preferred Stock is subject to mandatory redemption on June 1, 2005. The
Company may elect to redeem the Preferred Stock at any time on or after the
second anniversary of the Principal Closing. The redemption cost varies with the
date of the redemption as follows:
- If the redemption is between the second and third anniversary of the
Principal Closing, the redemption price is equal to 180% of the
Conversion Price (as discussed below), plus all accrued and unpaid
dividends.
- If the redemption occurs between the third and fifth anniversary of
the Principal Closing, the redemption price is equal to 200% of the
Conversion Price, plus all accrued and unpaid dividends.
- If the redemption occurs between the fifth and sixth anniversary of
the Principal Closing, the redemption price shall be $51.5938 per
share, plus all accrued and unpaid dividends.
- If the redemption occurs between the sixth and seventh anniversary of
the Principal Closing, the redemption price shall be $51.0625 per share,
plus all accrued and unpaid dividends.
- If the redemption occurs between the seventh and eighth anniversary of
the Principal Closing, the redemption price shall be $50.5313 per share,
plus all accrued and unpaid dividends.
- If the redemption occurs after the eighth anniversary of the Principal
Closing, the redemption price shall at the Stated Value, plus all
accrued and unpaid dividends.
Voting Control
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Pursuant to the Certificate of Designation of Preferred Stock setting forth
the powers, preferences, rights, qualifications, limitations and restrictions
of such class of preferred stock (the "Certificate of Designation"),
the holders of the Preferred Stock have the right to vote together with the
holders of the Company's common stock (the "Common Stock"), as a single
class, on all matters submitted to the Company's stockholders for a vote,
including the election of directors. The number of votes entitled to be
cast by the holder of Preferred Stock is equal to the number of whole votes
which could be cast in such vote by a holder of the shares of Common Stock
into which such shares of Preferred Stock are convertible on the record
date for such vote.
Pursuant to the Certificate of Designation, the initial Conversion
Price (as defined therein) of the Shares is $6.375, and is subject to
adjustment at the Principal Closing to the lower of (i) $7.25 and (ii) the
greater of (x) $6.50 and (y) 120% of the then applicable Fair Market Value
(as defined in the Certificate of Designation).
For purposes of Rule 13d-3 under the Exchange Act, by virtue of the
Stock Purchase Agreement, each of the Purchasers may be deemed to be the
beneficial owner of an aggregate of 15,686,200 shares of Common Stock into
which the aggregate 2,000,000 Shares to be purchased by them pursuant to
the Stock Purchase Agreement are convertible (assuming a conversion price
of $6.50 per share). Each of the Purchasers has agreed pursuant to the
Stock Purchase Agreement to purchase 1,000,000 Shares, convertible into
7,843,100 shares of Common Stock. Such 15,686,200 shares of Common Stock, if
outstanding, could constitute up to approximately 61% of the total number
of shares of Common Stock outstanding.
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The following table shows, for each closing, the dates, number of
shares of Preferred Stock and estimated minimum and maximum cumulative
voting percentages (using conversion prices of $7.25 and $6.50,
respectively) assuming no additional stock issuances.
Cumulative Voting
Percentage
Preferred ----------
Closing Date Shares Minimum Maximum
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First unscheduled 299,998 17.14% 18.75%
Principal unscheduled 500,002 35.56% 38.10%
Third February 25, 1997 400,000 45.28% 48.00%
Fourth August 25, 1997 400,000 52.46% 55.17%
Fifth February 25, 1998 400,000 57.97% 60.61%
Pursuant to the Certificate of Designation, the Holders of the
Preferred Stock will be entitled to receive quarterly dividends in the
amount of 8.5% of the Stated Value (as defined in the Certificate of
Designation) per annum. Until the third anniversary of the Principal
Closing, such dividends are payable in additional shares of Preferred Stock or
in shares of Common Stock. From the third anniversary of the Principal Closing
to the fifth anniversary of the Principal Closing, such dividends are payable
in cash, unless the Company's bank credit agreement or the indenture governing
its 12% Senior Notes due 2004 shall prohibit such cash payments, in which case
such dividends may be paid in additional shares of Preferred Stock or shares of
Common Stock. To the extent that any dividends on the Preferred Stock are paid
in shares of Common Stock, the Company is required to pay a premium in
additional shares of Common Stock equal to 33-1/3% of the total number of
shares of Common Stock that would otherwise be paid as the dividend. After the
fifth anniversary, all dividends are payable in cash.
The Stock Purchase Agreement provides that, for so long as the
Purchasers own at least 50% of the total number of Shares purchased by them
pursuant to the Stock Purchase Agreement, the Purchasers shall have pre-
emptive rights with respect to any sale by the Company of any shares of its
Common Stock or securities convertible into or exchangeable for shares of
its Common Stock (with certain limited exceptions), in proportion to the
shares of Preferred Stock then held by the Purchasers.
The Stock Purchase Agreement also provides that until the third
anniversary of the Principal Closing, if one shall have occurred, the
Purchasers will not sell more than one-third of the Shares (or shares of
Common Stock issued upon conversion of such Shares the ("Conversion
Shares")) purchased by them pursuant to the Stock Purchase Agreement.
Control of the Board of Directors
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From and after the First Closing, if one occurs, the Company will have
the obligation to cause the size of its Board of Directors to be increased
to nine members, of whom two shall be selected by the Purchasers. From and
after the Principal Closing, the Company will have the obligation to cause
(if necessary) the size of its Board of Directors to be increased to nine
members, of whom five shall be selected by the Purchasers. Pursuant to the
Stock Purchase Agreement, the Company is obligated to include nominees for
such number of directors to be included in the Company's slate of nominees
for election as directors at the Company's 1996 annual meeting of
stockholders and any other meeting of stockholders at which a slate of
directors is presented by the Company with a record date on or prior to
September 1, 1997.
Pursuant to the Stock Purchase Agreement, the Purchasers have agreed
that (i) for so long as the Board of Directors of the Company is composed
of a majority of directors nominated by the Purchasers and their
affiliates, the Purchasers will cause the Board of Directors to consist of
at least nine members and to cause any slate of nominees presented by the
Company for election as directors to include not less than a number of
Disinterested Directors (as defined in the Stock Purchase Agreement) equal
to one-third (rounded to the nearest whole number) of all directors, (ii)
for so long as the Purchasers and their affiliates hold less than 50% but
more than 35% of the outstanding voting securities of the Company, the
Purchasers will use their best efforts to cause the Board of Directors to
consist of at least nine members and to cause any slate of nominees
presented by the Company for election as directors to include not less than
a number of Disinterested Directors equal to four-ninths (rounded to the
nearest whole
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number) of all directors, and (iii) for so long as the Purchasers and their
affiliates hold less than 35% of the outstanding voting securities of the
Company, the Purchasers will use their best efforts to cause the Board of
Directors to consist of at least nine members and to cause any slate of
nominees presented by the Company for election as directors to include not
less than a number of Disinterested Directors equal to five-ninths (rounded
to the nearest whole number) of all directors. In each such case, the
number of Disinterested Directors to be elected shall be calculated without
regard to any directors which the holders of the Preferred Stock shall be
entitled to elect as a result of the default by the Company in the payment
of six consecutive required quarterly dividends.
The Stock Purchase Agreement provides that as long as any of the members
of the Board of Directors of the Company are selected by the Purchasers, the
affirmative vote of at least a majority of the Disinterested Directors shall
be required to take any of the following actions: (i) make any decision to
take, or omit to take, any action on the Company's behalf with respect to the
Company's rights and obligations pursuant to the Stock Purchase Agreements or
any of the Transaction Documents (as defined in the Stock Purchase Agreement);
(ii) make any decision or take, or omit to take, any action on the Company's
behalf with respect to the Preferred Stock, the shares of Preferred Stock
purchased by the Purchasers pursuant to the Stock Purchase Agreement or the
Company's rights and obligations under the Certificate of Designation; (iii)
approve any transactions between the Company, on the one hand, and affiliates
of the Purchasers, or either of them, on the other hand; and (iv) approve the
Disinterested Directors previously nominated by the nominating committee of the
Board of Directors for election as directors at any meeting of stockholders
or the Board of Directors of the Company, which approval shall not be
unreasonably withheld.
The Purchasers have also agreed in the Stock Purchase Agreement to
vote any shares of Preferred Stock or Conversion Shares held by them from
time to time in favor of the election of such Disinterested Directors, and
to waive any right to which it would be entitled to elect additional
directors in the event of the default by the Company in the payment of six
consecutive quarterly dividend payments at any time the Board of Directors
of the Company is composed of a majority of directors selected by the
Purchasers.
In addition, if the Company shall have failed to pay in full dividends
on the Preferred Stock for six consecutive quarters, the Certificate of
Designation provides that the size of the Board of Directors of the Company
shall be increased by two, and the holders of shares of Preferred Stock,
voting together as a single class, shall have the right to elect such two
directors. The right to elect such two directors terminates upon payment
in full of all dividends payable on the Preferred Stock, at which time the
Board of Directors shall return to its previous size and the directors
elected by the holders of the Preferred Stock shall be removed. In
addition, such right to elect two directors shall not apply where the
holders of Preferred Stock have the right to elect two directors through a
class vote, as described in the next paragraph.
From or after the First Closing Date, the size of the Board of Directors
of the Company shall be increased by two, and the holders of shares of Preferred
Stock, voting together as a single class, shall have the right to elect two
directors to fill such positions. On and after the Principal Closing Date, the
voting rights described in this paragraph shall terminate, and thereafter the
holders of the Preferred Stock shall be entitled to vote with the Common
Stock.
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Item 7. Exhibits
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10.1 Stock Purchase Agreement by and among The Grand Union Company,
and the Purchasers listed on Schedule I Hereto dated as of July 30, 1996.
99.1 The Grand Union Company's July 30, 1996 Press Release.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE GRAND UNION COMPANY
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(Registrant)
Date: August 14, 1996 /s/ Kenneth R. Baum
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Kenneth R. Baum
Senior Vice President,
Chief Financial Officer
and Secretary (Principal
Financial Officer and
Principal Accounting Officer)
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Exhibit 10.1
Execution Copy
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STOCK PURCHASE AGREEMENT
by and among
THE GRAND UNION COMPANY
and
THE PURCHASERS LISTED ON SCHEDULE I HERETO
Dated as of July 30, 1996
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TABLE OF CONTENTS
ARTICLE I
THE PURCHASE ..........................................................1
Section 1.1. Definitions........................................1
Section 1.2. Sale and Purchase of Preferred Stock...............1
Section 1.3. The Closings.......................................1
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY..........................3
Section 2.1. Organization and Qualification; Subsidiaries.......3
Section 2.2. Certificate of Incorporation and By-Laws...........4
Section 2.3. Capitalization.....................................4
Section 2.4. Authority Relative to this Agreement...............5
Section 2.5. No Conflict; Required Filings and Consents.........6
Section 2.6. Compliance; Permits................................7
Section 2.7. SEC Filings; Financial Statements..................8
Section 2.8. Absence of Certain Changes or Events...............8
Section 2.9. No Undisclosed Liabilities.........................9
Section 2.10. Absence of Litigation.............................9
Section 2.11. Employee Benefit Plans; Employment Agreements.....9
Section 2.12. Labor Matters....................................12
Section 2.13. Proxy Statement; Section 14(f) Statement.........12
Section 2.14. Title to Property................................13
Section 2.15. Restrictions on Business Activities..............15
Section 2.16. Taxes............................................15
Section 2.17. Environmental Matters............................17
Section 2.18. Intellectual Property............................18
Section 2.19. Interested Party Transactions....................19
Section 2.20. Insurance........................................19
Section 2.21. Opinion of Financial Advisor.....................19
Section 2.22. Brokers..........................................19
Section 2.23. Takeover Statute.................................19
Section 2.24. Change in Control Payments.......................20
Section 2.25. Section 203 of the DGCL Not Applicable...........20
Section 2.26. Foreign Corrupt Practices Act....................20
Section 2.27. Disclosure.......................................20
Section 2.28. Securities Laws..................................20
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS......................20
Section 3.1. Organization......................................21
Section 3.2. Due Authorization.................................21
Section 3.3. Acquisition for Investment; Source of Funds.......21
Section 3.4. Brokers or Finders................................21
Section 3.5. Accredited Investor...............................21
ARTICLE IV
CONDUCT OF BUSINESS PENDING THE PRINCIPAL CLOSING.....................21
Section 4.1. Conduct of Business by the Company Pending
the Principal Closing...........................................22
Section 4.2. No Solicitation...................................24
ARTICLE V
ADDITIONAL AGREEMENTS.................................................25
Section 5.1. HSR Act...........................................25
Section 5.2. Proxy Statement; 14(f) Statement..................26
Section 5.3. Stockholders Meeting..............................26
Section 5.4. Access to Information.
(a) ...............................................26
Section 5.5. Confidentiality...................................27
Section 5.6. Consents; Approvals...............................28
Section 5.7. Notification of Certain Matters...................28
Section 5.8. Public Announcements. ............................28
Section 5.9. Conveyance Taxes..................................29
Section 5.10. Listing..........................................29
Section 5.11. Consent of Banks.................................29
Section 5.12. Restrictions on Transfer.........................29
Section 5.13. Board Representation.............................30
Section 5.14. Certificate of Designation; Charter Amendment....33
Section 5.15. Subsequent Closings..............................33
Section 5.17. Common Stock Purchase............................35
ARTICLE VI
CONDITIONS TO THE STOCK PURCHASE......................................37
Section 6.1. Conditions to Obligation of Each Party to
Effect Any Closing..............................................37
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Section 6.2. Conditions to Obligation of Each Party to Effect
the Principal Closing...........................................37
Section 6.3. Additional Conditions to Obligations of the
Purchasers at the First Closing.................................38
Section 6.4. Additional Conditions to Obligations of the
Purchasers at the Principal Closing.............................39
Section 6.5. Conditions to Obligation of the Purchasers at
any Subsequent Closing..........................................41
Section 6.6. Additional Conditions to Obligation of the
Company at the First Closing and the Principal Closing..........41
Section 6.7. Conditions to Obligations of the Company at any
Subsequent Closing..............................................42
ARTICLE VII
TERMINATION...........................................................43
Section 7.1. Termination.......................................43
Section 7.2. Effect of Termination; Termination Fee............45
Section 7.4. Fees and Expenses.................................46
ARTICLE VIII
GENERAL PROVISIONS....................................................46
Section 8.1. Effectiveness of Representations, Warranties
and Agreements; Knowledge, Etc..................................46
Section 8.2. Restrictive Legends...............................46
Section 8.3. Notices...........................................47
Section 8.4. Certain Definitions...............................49
Section 8.5. Amendment.........................................54
Section 8.6. Waiver............................................54
Section 8.7. Cooperation.......................................54
Section 8.8. Headings..........................................54
Section 8.9. Severability......................................55
Section 8.10. Entire Agreement.................................55
Section 8.11. Assignment. ....................................55
Section 8.12. Parties in Interest..............................55
Section 8.13. Failure or Indulgence Not Waiver; Remedies
Cumulative......................................................55
Section 8.14. Governing Law....................................55
Section 8.15. Counterparts.....................................55
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Schedules
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Schedule I List of Investors
Schedule II Wire Transfer Instructions
Company Disclosure Schedule
Exhibit A Certificate of Designation
Exhibit B Charter Amendment
Exhibit C By-Law Amendment
Exhibit D Ratification and Voting Agreement
Exhibit E Registration Rights Agreement
Exhibit F-1 Form of Opinion of Ropes & Gray (First and Principal
Closing)
Exhibit F-2 Opinion of Wilkie, Farr & Gallagher
Exhibit G-1 Form of Opinion of Fried Frank (First and Principal
Closing)
Exhibit G-2 Opinion of Dewey Ballantine
Exhibit H Management Agreement
Exhibit I Form of Opinion of Ropes & Gray (Subsequent Closing)
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STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement, dated as of July 30, 1996 (this
"Agreement"), is among each of (i) The Grand Union Company, a Delaware
corporation (the "Company"), and (ii) Trefoil Capital Investors II, L.P., a
Delaware limited partnership ("Trefoil"), and GE Investment Private Placement
Partners II, A Limited Partnership, a Delaware limited partnership ("GEI") (each
a "Purchaser" and, collectively, the "Purchasers").
WITNESSETH:
WHEREAS, the Purchasers wish to purchase from the Company, and the Company
wishes to sell and issue to the Purchasers (the "Stock Purchase"), an aggregate
of Two Million (2,000,000) shares of the Company's Class A Convertible Preferred
Stock, $1.00 par value per share (the "Preferred Stock"), in up to five separate
installments; and
WHEREAS, the Purchasers and the Company are entering into this Agreement
to provide for such purchase and sale and to establish various rights and
obligations in connection therewith.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein set forth, the parties agree as follows:
ARTICLE I
THE PURCHASE
Section 1.1. Definitions. Certain terms are used in this Agreement as
specifically defined herein. These definitions are set forth or referred to in
Section 8.4 hereof.
Section 1.2. Sale and Purchase of Preferred Stock. Subject to the terms
and conditions of this Agreement, and in reliance on the representations and
warranties set forth in this Agreement, the Company hereby agrees to sell to the
Purchasers, and each of the Purchasers hereby agrees severally to purchase from
the Company, at a purchase price of $50.00 per share (the "Purchase Price"), the
number of shares of Preferred Stock as are set forth on Schedule I as being
purchased by such Purchaser (such shares of Preferred Stock purchased hereunder,
the "Shares") at each of the First Closing, the Principal Closing, the Third
Closing, the Fourth Closing and the Fifth Closing (all as defined below),
subject to Section 5.15 (b) hereof. The terms of the Preferred Stock are set
forth in the Certificate of Designation (as hereinafter defined).
Section 1.3. The Closings. Unless this Agreement shall have been
terminated and the transactions herein contemplated shall have been abandoned
pursuant to Section 7.1, and subject to the satisfaction or waiver of the
conditions applicable to such Closing set forth in Article VI, the purchase and
sale of the Shares will be made in up to five installments (each, an
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"Installment") and the purchase of each Installment will take place at one or
more closings (each, a "Closing"), at the New York conference center of Ropes &
Gray, 885 Third Avenue, New York, New York, on the dates specified below, unless
another date, time or place is agreed to in writing by the parties hereto. At
each Closing, the Company will deliver to each Purchaser a certificate (or, if
requested in writing at least two business days prior to the Closing,
certificates), registered in such Purchaser's name, representing the number of
Shares to be purchased by such Purchaser hereunder against payment of the
aggregate purchase price therefor by wire transfer of immediately available
funds to the Company's account as set forth on Schedule II hereto.
(a) The First Closing. The closing of the initial investment (the
"First Closing") shall take place at 10:00 a.m. (Eastern Time) on such
date (if any) as the Purchasers shall specify by not less than five (5)
business days' prior notice to the Company; provided, however, that the
Purchasers, acting together, may decide, in the exercise of their sole and
absolute discretion, whether or not to give such notice; and provided,
further, that if the Principal Closing shall have occurred prior to the
time that the First Closing shall have occurred, then no First Closing
shall occur. If the Purchasers shall give notice of the First Closing
pursuant to the preceding sentence, and the Company shall notify the
Purchasers on or before the First Closing Date specified in such notice
that the Company is unable to obtain the consent referred to in Section
5.11 hereof on or prior to such specified First Closing Date, then the
Purchasers shall be entitled to purchase shares of Common Stock as
provided in Section 5.17 hereof. At the First Closing, subject to
satisfaction or waiver of the applicable conditions set forth in Article
VI, the Company shall sell and each Purchaser shall purchase the number of
Shares set forth opposite such Purchaser's name on Schedule I hereto under
the heading "First Closing". The date (if any) on which the First Closing
shall occur is referred to herein as the "First Closing Date".
(b) The Principal Closing. The principal Closing (the "Principal
Closing") shall take place at 10:00 a.m. (Eastern Time) as promptly as
practicable (and in any event within five business days) after
satisfaction or waiver of the applicable conditions set forth in Article
VI. At the Principal Closing the Company shall sell and each Purchaser
shall purchase the number of Shares set forth opposite such Purchaser's
name on Schedule I hereto under the heading "Principal Closing", less
either (i) (if the First Closing shall have occurred) the number of Shares
purchased by such Purchaser at the First Closing or (ii) (if the purchase
of Common Stock contemplated by Section 5.17 hereof shall have occurred)
the number of Shares calculated by dividing the amount of the proceeds
received pursuant to Section 5.17 hereof by the Conversion Price as of the
date of the Principal Closing.
(c) Subsequent Closings. On each of February 25, 1997 (the "Third
Closing"), August 25, 1997 (the "Fourth Closing"), and February 25, 1998
(the "Fifth Closing", and together with the Third Closing and the Fourth
Closing, the "Subsequent Closings"), or at such other earlier time or
times as provided in Section 5.15(b) hereof upon the occurrence of a
Trigger Event, upon the fulfillment of the applicable conditions set forth
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in Article VI hereof, each Purchaser shall purchase at such Subsequent
Closing that number of Shares set forth opposite such Purchaser's name on
Schedule I hereto under the headings "Third Closing", "Fourth Closing" and
"Fifth Closing", respectively (except as otherwise provided in Section
5.15(b)(2) hereof). The dates on which each Subsequent Closing shall occur
are referred to herein as the "Subsequent Closing Dates", and each of the
First Closing Date, the Principal Closing Date and each Subsequent Closing
Date are referred to herein as a "Closing Date".
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Subject to Section 8.1 hereof, the Company hereby represents and warrants
to the Purchasers that, except as set forth in the written disclosure schedule
delivered simultaneously with the execution and delivery of this Agreement that
is arranged in paragraphs corresponding to the numbered and lettered paragraphs
contained in this Article II (the "Company Disclosure Schedule"):
Section 2.1. Organization and Qualification; Subsidiaries. The Company is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware. Each of the Company's subsidiaries is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation. Each of the Company and its
subsidiaries has the requisite corporate power and authority and is in
possession of all franchises, grants, authorizations, licenses, permits,
easements, consents, certificates, approvals and orders ("Approvals") necessary
to own, lease and operate the properties it purports to own, lease and operate
and to carry on its business as it is now being conducted, except such failures
as are immaterial to the Company's business as currently conducted. Each of the
Company and its subsidiaries is duly qualified or licensed as a foreign
corporation to do business, and is in good standing, in each jurisdiction where
the character of the properties owned, leased or operated by it or the nature of
its activities makes such qualification or licensing necessary, except for such
failures to be so duly qualified or licensed and in good standing that could not
reasonably be expected to have a Material Adverse Effect. A true and complete
list of all of the Company's subsidiaries as of the date hereof, together with
the jurisdiction of incorporation of each subsidiary, the authorized
capitalization of each subsidiary, and the percentage of each subsidiary's
outstanding capital stock beneficially owned by the Company or another
subsidiary, is set forth in Section 2.1 of the Company Disclosure Schedule. As
of the date hereof, the Company does not directly or indirectly own any equity
or similar interest in, or any interest convertible into or exchangeable or
exercisable for, any equity or similar interest in, any corporation,
partnership, joint venture or other business association or entity, with respect
to which interest the Company has invested or is required to invest $100,000 or
more, excluding securities in any publicly traded company held for investment by
the Company and comprising less than five percent of the outstanding stock of
such company.
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Section 2.2. Certificate of Incorporation and By-Laws. The Company has
heretofore furnished to the Purchasers a complete and correct copy of its
Certificate of Incorporation and By-Laws as most recently restated and
subsequently amended to date, and has furnished or made available to the
Purchasers the Certificate of Incorporation and By-Laws (or equivalent
organizational documents) of each of its subsidiaries (the "Company Subsidiary
Documents"). Such Certificate of Incorporation, By-Laws and Company Subsidiary
Documents are in full force and effect. Neither the Company nor any of its
subsidiaries is in violation of any of the provisions of its Certificate of
Incorporation or By-Laws or Company Subsidiary Documents.
Section 2.3. Capitalization.
(a) The authorized capital stock of the Company consists of (i)
30,000,000 shares of Common Stock, par value $1.00 per share ("Common
Stock"), and (ii) 10,000,000 shares of preferred stock, par value $1.00
per share, none of which is issued and outstanding and none of which is
held in treasury. As of the date hereof, (i) 10,000,000 shares of Common
Stock were issued and outstanding, all of which are validly issued, fully
paid and nonassessable, and no shares were held in treasury, (ii) no
shares of Common Stock were held by subsidiaries of the Company, (iii)
1,000,000 shares of Common Stock were reserved for future issuance
pursuant to stock options ("Stock Options") granted or to be granted under
the Company's 1995 Equity Incentive Option Plan or the Company's 1995
Non-Employee Directors' Stock Option Plan (collectively, the "Company
Stock Option Plans") (options for 235,680 shares of Common Stock having
been granted prior to the date hereof); and (iv) 900,000 shares of Common
Stock were reserved for future issuance upon the exercise of certain
warrants (the "Warrants") pursuant to that certain Warrant Agreement
between the Company and American Stock Transfer & Trust Company, dated as
of June 15, 1995, (the "Warrant Agreement").
(b) On or prior to the First Closing Date or, if the First Closing
shall not have occurred prior thereto, the Principal Closing Date, the
Certificate of Designation will have been duly adopted and filed with the
Secretary of State of Delaware and on the First Closing Date, or if the
First Closing shall not have occurred prior thereto, the Principal Closing
Date, shall be in full force and effect. On or prior to the First Closing
Date (if a First Closing shall occur): (i) a number of shares of Common
Stock equal to the number of Conversion Shares issuable upon the
conversion of the Shares issued on the First Closing Date will have been
reserved for issuance upon such conversion and (ii) the Shares issued on
the First Closing Date will, upon payment of the Purchase Price therefor,
be validly issued, fully paid and nonassessable. On or prior to the
Principal Closing Date and each subsequent Closing Date, (i) the Shares
issued on such Closing Date will, upon payment of the Purchase Price
therefore, be validly issued, fully paid and nonassessable, and (ii) a
number of Conversion Shares equal to the number of such shares issuable
upon the conversion of all Shares then outstanding and to be issued at
such Closing shall have been reserved for issuance upon such conversion.
All shares of Common Stock, including the Conversion Shares, subject to
issuance as aforesaid, upon issuance on the terms and
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conditions specified in the instruments pursuant to which they are
issuable, will be duly authorized, validly issued, fully paid and
nonassessable.
(c) As of the date hereof, except as specified in Section 2.3(a),
there are no options, warrants or other rights, agreements, arrangements
or commitments of any character relating to the issued or unissued capital
stock of the Company or any of its subsidiaries or obligating the Company
or any of its subsidiaries to issue or sell any shares of capital stock
of, or other equity interests in, the Company or any of its subsidiaries.
There are no obligations, contingent or otherwise, of the Company or any
of its subsidiaries to repurchase, redeem or otherwise acquire any shares
of Common Stock or the capital stock of any subsidiary or to provide funds
to or make any investment (in the form of a loan, capital contribution or
otherwise) in any such subsidiary or any other entity other than
guarantees of bank obligations of subsidiaries entered into in the
ordinary course of business and except for the terms of the Company Stock
Option Plans. All of the outstanding shares of capital stock of each of
the Company's subsidiaries are duly authorized, validly issued, fully paid
and nonassessable, and all such shares are beneficially owned by the
Company or another subsidiary of the Company free and clear of all
security interests, liens, claims, pledges, agreements, limitations in the
Company's voting rights, charges or other encumbrances of any nature
whatsoever (collectively, "Liens").
Section 2.4. Authority Relative to this Agreement. The Company has all
necessary corporate power and authority to execute and deliver this Agreement
the Registration Rights Agreement, and the Management Agreement (collectively,
the "Transaction Documents") and to perform its obligations hereunder and
thereunder and to consummate the transactions contemplated hereby and thereby.
The execution and delivery of each of the Transaction Documents by the Company
and the consummation by the Company of the transactions contemplated thereby
have been duly and validly authorized by all necessary corporate action, and no
other corporate proceedings on the part of the Company are necessary to
authorize the Transaction Documents or to consummate the transactions so
contemplated, other than (i) as contemplated by Sections 5.11 and 6.2(a), (ii)
the adoption of the Charter Amendment (as hereinafter defined) by the holders of
at least a majority of the outstanding shares of Common Stock entitled to vote
in accordance with the Delaware General Corporation Law, as from time to time in
effect (the "DGCL") and the Company's Certificate of Incorporation and By-Laws,
and (iii) the adoption of the By-Law Amendment (as hereinafter defined) by the
Board of Directors of the Company. The Board of Directors of the Company has
determined that it is advisable and in the best interest of the Company's
stockholders for the Company to consummate the Stock Purchase upon the terms and
subject to the conditions of this Agreement, and has unanimously recommended
that the Company's stockholders approve and adopt this Agreement. Each of this
Agreement and each of the other Transaction Documents has been duly and validly
executed and delivered by the Company and, assuming the due authorization,
execution and delivery by the Purchasers, constitutes a legal, valid and binding
obligation of the Company enforceable against the Company in accordance with its
terms, except that (i) such enforcement may be subject to
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bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights, (ii) the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought, and (iii) the enforcement of the
indemnification provisions contained in the Registration Rights Agreement are
subject to applicable securities laws and principles of public policy.
Section 2.5. No Conflict; Required Filings and Consents.
(a) The Company has previously provided to the Purchasers copies of
(i) all loan agreements, indentures, mortgages, pledges, conditional sale
or title retention agreements, security agreements, equipment obligations,
guaranties and standby letters of credit, to which the Company or any of
its subsidiaries is a party or by which any of them is bound, each in a
principal amount equal to or exceeding $3,000,000, but excluding any such
agreement between the Company and its wholly-owned subsidiaries or between
two or more wholly-owned subsidiaries of the Company; (ii) all real
property leases currently in effect and to which the Company or any
subsidiary of the Company is a party or by which any of them or any of
their respective properties or assets is bound or affected; (iii) all
contracts, agreements, commitments, equipment leases or lease purchase
agreements or other understandings or arrangements not specified in
clauses (i), (ii) or (iv) hereof to which the Company or any of its
subsidiaries is a party or by which any of them or any of their respective
properties or assets are bound or affected, but excluding contracts,
agreements, commitments or other understandings or arrangements entered
into in the ordinary course of business and involving, in each case,
either (A) aggregate obligations to pay or rights to receive payments or
receipts by the Company or any of its subsidiaries of less than $3,000,000
over the remaining life of any single contract or (B) aggregate annual
payments of less than $500,000 for any single contract; and (iv) all
agreements which, as of the date hereof, are required to be filed by the
Company as "material contracts" with the Securities Exchange Commission
("SEC") pursuant to the requirements of the Securities Exchange Act of
1934, as amended, and the SEC's rules and regulations thereunder (the
"Exchange Act").
(b) (i) Neither the Company nor any of its subsidiaries has
breached, is in default under, or has received written notice of any
breach of or default under, any agreement, contract or other instrument to
which it is party, (ii) to the knowledge of the Company, no other party to
any of the agreements, contracts or other instrument referred to in clause
(i) of this Section 2.5(b) has breached or is in default of any of its
obligations thereunder, and (iii) each of such agreements, contracts and
other instruments is in full force and effect, except in any such case for
breaches, defaults or failures to be in full force and effect that have
not had and could not reasonably be expected to have a Material Adverse
Effect.
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(c) The execution and delivery of this Agreement by the Company does
not, and the performance of this Agreement by the Company and the
consummation of the transactions contemplated hereby will not: (i)
conflict with or violate the Certificate of Incorporation or By-Laws of
the Company; (ii) conflict with or violate any federal, foreign, state or
provincial law, rule, regulation, order, judgment or decree (collectively,
"Laws") applicable to the Company or any of its subsidiaries or by which
its or any of their respective properties are bound or affected; or (iii)
result in any breach of or constitute a default (or an event that with
notice or lapse of time or both would become a default under), or impair
the Company's or any of its subsidiaries' rights or alter the rights or
obligations of any third party under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a Lien on any of the properties or assets of the Company or
any of its subsidiaries pursuant to, (x) any note, bond, mortgage,
indenture, real property lease or other material lease, or (y) any
material contract, agreement, license, permit, franchise or other
instrument or obligation, to which the Company or any of its subsidiaries
is a party or by which the Company or any of its subsidiaries or its or
any of their respective properties are bound or affected.
(d) The execution and delivery of this Agreement by the Company does
not, and the performance of this Agreement by the Company will not,
require any consent, approval, authorization or permit of, or filing with
or notification to, any federal, foreign, state or provincial governmental
or regulatory authority except (i) for applicable requirements, if any, of
the Securities Act of 1933, as amended, and the SEC's rules and
regulations thereunder (the "Securities Act"), the Exchange Act, state
securities laws ("Blue Sky Laws") and the pre-merger notification
requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended (the "HSR Act"), (ii) as contemplated by Section 6.2(a), and
(iii) for any consent, approval, authorization or permit of, or filing
with or notification to, any other federal, foreign, state or provincial
governmental or regulatory authority which will be obtained, filed or
provided, as the case may be, prior to the Principal Closing.
Section 2.6. Compliance; Permits.
(a) Neither the Company nor any of its subsidiaries is in conflict
with, or in default or violation of, (i) any Law applicable to the Company
or any of its subsidiaries or by which its or any of their respective
properties are bound or affected (except for violations which are
immaterial to the Company and its subsidiaries, taken as a whole) or (ii)
(x) any note, bond, mortgage, indenture, real property lease or other
material lease, or (y) any material contract, agreement, license, permit,
franchise or other instrument or obligation to which the Company or any of
its subsidiaries is a party or by which the Company or any of its
subsidiaries or its or any of their respective properties are bound or
affected (except for violations which are immaterial to the Company and
its subsidiaries, taken as a whole).
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<PAGE>
(b) The Company and its subsidiaries hold all permits, licenses,
easements, variances, exemptions, consents, certificates, orders and
approvals from governmental authorities which are material to the
operation of the business of the Company and its subsidiaries taken as a
whole as it is now being conducted (collectively, the "Company Permits").
The Company and its subsidiaries are, and after giving effect to the
transactions contemplated hereby will be, in compliance in all material
respects with the terms of the Company Permits.
Section 2.7. SEC Filings; Financial Statements.
(a) The Company has filed all forms, reports and documents required
to be filed with the SEC and has made available to Purchasers (i) its
Annual Report on Form 10-K for the period ended March 30, 1996, (ii) all
other forms, reports and documents filed by the Company with the SEC since
June 15, 1995, and (iii) all amendments and supplements to all such forms,
reports and documents filed by the Company with the SEC since June 15,
1995 (collectively, the "Company SEC Reports"). The Company SEC Reports
(i) were prepared in all material respects in accordance with the
requirements of the Securities Act or the Exchange Act, as the case may
be, and (ii) did not at the time they were filed (or if amended or
superseded by a filing prior to the date of this Agreement, then on the
date of such filing) contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary
in order to make the statements therein, in the light of the circumstances
under which they were made, not misleading. None of the Company's
subsidiaries is required to file any forms, reports or other documents
with the SEC.
(b) Each of the consolidated financial statements (including, in
each case, any related notes thereto) contained in the Company SEC Reports
was prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods involved (except as
may be indicated in the notes thereto), and each fairly presents in all
material respects the consolidated financial position of the Company and
its subsidiaries as at the respective dates thereof and the consolidated
results of their operations and cash flows and stockholders' equity for
the periods indicated, except that the unaudited interim financial
statements (i) were or are subject to normal and recurring year-end
adjustments which were not or are not expected to be material in amount
and (ii) do not contain the footnotes required by generally accepted
accounting principles.
Section 2.8. Absence of Certain Changes or Events. Since March 30, 1996,
the Company has conducted its business in the ordinary course and there has not
occurred: (a) any Material Adverse Effect; (b) any amendments or changes in the
Certificate of Incorporation or By-laws of the Company; (c) any damage to,
destruction or loss of any asset of the Company (whether or not covered by
insurance) that could reasonably be expected to have a Material Adverse Effect;
(d) any material change by the Company in its accounting methods, principles or
practices; (e) any material revaluation by the Company of any of its assets,
including, without limitation, writing
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<PAGE>
down the value of inventory or writing off notes or accounts receivable other
than in the ordinary course of business; (f) any other material action or event
that would have required the consent of the Purchasers pursuant to Section 4.1
had such action or event occurred after the date of this Agreement (substituting
the dollar thresholds in Section 2.5(a) for the dollar threshold appearing in
Section 4.1(e)); or (g) any sale of a material amount of property of the Company
or any of its subsidiaries, except in the ordinary course of business or as
permitted under the Company Credit Agreement.
Section 2.9. No Undisclosed Liabilities. Neither the Company nor any of
its subsidiaries has any liabilities (absolute, accrued, contingent or
otherwise), except liabilities (a) adequately provided for or disclosed in the
Company's audited balance sheet (including any related notes thereto) for the
fiscal year ended March 30, 1996 included in the Company SEC Reports (the "1996
Company Balance Sheet"), (b) which were incurred in the ordinary course of
business and should not be reflected under generally accepted accounting
principles on the 1996 Company Balance Sheet, (c) incurred since March 30, 1996
in the ordinary course of business consistent with past practice, (d) incurred
in connection with this Agreement or (e) not covered by clauses (a) - (d) of
this Section 2.9, in an aggregate amount not exceeding $900,000.
Section 2.10. Absence of Litigation. There are no claims, actions, suits,
proceedings or investigations pending or, to the knowledge of the Company,
threatened against the Company or any of its subsidiaries, or any properties or
rights of the Company or any of its subsidiaries, before any federal, foreign,
state or provincial court, arbitrator or administrative, governmental or
regulatory authority or body that could reasonably be expected to have a
Material Adverse Effect.
Section 2.11. Employee Benefit Plans; Employment Agreements.
(a) Section 2.11(a) of the Company Disclosure Schedule lists as of
the date hereof all employee pension plans (as defined in Section 3(2) of
the Employee Retirement Income Security Act of 1974, as amended
("ERISA")), all material employee welfare plans (as defined in Section
3(1) of ERISA) and all other material bonus, stock option, stock purchase,
incentive, deferred compensation, supplemental retirement, severance and
other similar fringe or employee benefit plans, programs or arrangements,
and any material employment, executive compensation, consulting or
severance agreements, written or otherwise, maintained by or contributed
to the Company or any subsidiary of the Company or any Company ERISA
Affiliate for the benefit of, or relating to, any current or former
employee of or consultant to the Company, any trade or business (whether
or not incorporated) which is a member of a controlled group including the
Company or which is under common control with the Company or any
subsidiary of the Company (a "Company ERISA Affiliate", provided that for
purposes of Section 412 of the Code, the term "Company ERISA Affiliate"
shall include entities required to be aggregated with the Company or a
subsidiary under Sections 414(m) or (o) of the Code) within the meaning of
Section 414 of the Internal Revenue Code of 1986, as amended (the "Code"),
or any
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<PAGE>
subsidiary of the Company, as well as each plan with respect to which the
Company or a Company ERISA Affiliate could incur liability under Section
4069 (if such plan has been or were terminated) or Section 4212(c) of
ERISA (all such plans, practices and programs are referred to as the
"Company Employee Plans"). There have been made available to the
Purchasers copies of (i) each such written Company Employee Plan (or in
the case of an unwritten plan, a written description thereof), and summary
plan descriptions relating thereto, (ii) the most recent annual report on
Form 5500 series, with accompanying schedules and attachments, filed with
respect to each Company Employee Plan required to make such a filing, and
(iii) the most recent actuarial valuation report for each Company Employee
Plan.
(b) (i) Section 2.11(b) of the Company Disclosure Schedule lists as
of the date hereof all "multiemployer" plans to which the Company or any
subsidiary thereof or any other Company ERISA Affiliate contributes; (ii)
all Company Employee Plans are in compliance in form and operation in all
material respects with the requirements prescribed by any and all Laws
(including ERISA and the Code) currently in effect with respect thereto
(including all applicable requirements for notification to participants or
the Department of Labor, Pension Benefit Guaranty Corporation (the
"PBGC"), Internal Revenue Service (the "IRS") or Secretary of the
Treasury), and the Company and each of its subsidiaries have performed all
material obligations required to be performed by them under, are not in
any material respect in default under or violation of, and have no
knowledge of any material default or violation by any other party to, any
of the Company Employee Plans; (iii) each Company Employee Plan intended
to qualify under Section 401(a) of the Code and each trust intended to
qualify under Section 501(a) of the Code is the subject of a favorable
determination letter from the IRS, and nothing has occurred which may
reasonably be expected to impair any such determination; (iv) all
contributions required to be made to any Company Employee Plan pursuant to
Section 412 of the Code, or the terms of the Company Employee Plan or any
collective bargaining agreement, have been made on or before their due
dates, and the Company is not in arrears in any material respect on
payment of benefits under any Company Employee Plan; (v) with respect to
each Company Employee Plan, no "reportable event" within the meaning of
Section 4043 of ERISA (excluding any such event for which the 30 day
notice requirement has been waived under the regulations to Section 4043
of ERISA) nor any event described in Sections 4062, 4063 or 4041 of ERISA
has occurred; (vi) no non-exempt prohibited transaction, within the
meaning of Section 4975 of the Code or Section 406 of ERISA, has occurred
with respect to any Company Employee Plan; and (vii) there are no actions,
proceedings, arbitrations, suits or claims pending, or to the knowledge of
the Company, threatened or anticipated (other than routine claims for
benefits) against the Company or any Company ERISA Affiliate or to the
Company's knowledge any administrator, trustee or other fiduciary of any
Company Employee Plan with respect to any Company Employee Plan, or
against any Company Employee Plan or against the assets of any Company
Employee Plan; provided, however, that, with respect to such of the
Company Employee Plans as are "multiemployer plans," the representations
and warranties contained in
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clauses (i), (ii), (iii), (v) and (vi) above are made only to the
Company's knowledge. To the Company's knowledge, the withdrawal liability
that the Company has incurred, if any, plus any liability that the Company
would incur if it or any of the Company ERISA Affiliates were to
completely withdraw as of the date hereof from each multiemployer plan to
which it is required to contribute would not be material. The execution
of, and performance of the transactions contemplated in, this Agreement
will not (either alone or upon the occurrence of any additional or
subsequent events) (x) constitute an event under any Company Employee Plan
or other agreement with any employer that will or may result in any
payment (whether of severance pay or otherwise), acceleration, forgiveness
of indebtedness, vesting, distribution, increase in benefits or obligation
to fund benefits with respect to any employee, or (y) result in the
triggering or imposition of any restrictions or limitations on the right
of the Company or the Purchasers to amend or terminate any Company
Employee Plan and receive the full amount of any excess assets remaining
or resulting from such amendment or termination, subject to applicable
taxes. No payment or benefit which will or may be made by the Company, the
Purchaser or any of their respective affiliates with respect to any
employee will be characterized as an "excess parachute payment," within
the meaning of Section 280G(b)(1) of the Code. The most recent financial
statements of the Company fairly present the liabilities for retiree
medical and life insurance benefits and the funded status of the Company's
pension plan(s) and nothing has occurred which would adversely affect such
funded status and the facts provided to the actuary by the Company with
respect to such benefits and plan(s) was complete and correct in all
material respects. The assumptions made by the Company pursuant to Section
482 of ERISA were reasonable when made. Neither the Company nor any of its
subsidiaries (or any Company ERISA Affiliate) has incurred or is
reasonably likely to incur liability (i) under Title IV of ERISA (other
than the payment of premiums, none of which are overdue) with respect to
any Company Employee Plan or (ii) with respect to an accumulated funding
deficiency, whether or not waived.
(c) Section 2.11(c) of the Company Disclosure Schedule sets forth a
true and complete list of each current or former employee, officer or
director of the Company or any of its subsidiaries who holds (i) any
option to purchase Common Stock as of the date hereof, together with the
number of shares of Common Stock subject to such option, the option price
of such option (to the extent determined as of the date hereof), whether
such option is intended to qualify as an incentive stock option within the
meaning of Section 422(b) of the Code (an "ISO"), and the expiration date
of such option and (ii) any other right, directly or indirectly, to
acquire Common Stock, together with the number of shares of Common Stock
subject to such right. Section 2.11(c) of the Company Disclosure Schedule
also sets forth the total number of such ISOs, such nonqualified options
and such other rights.
(d) Section 2.11(d) of the Company Disclosure Schedule sets forth a
true and complete list of: (i) all employment agreements with officers of
the Company or any of its subsidiaries; (ii) all agreements with
consultants who are individuals obligating the
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Company or any of its subsidiaries to make annual cash payments in an
amount exceeding $200,000; (iii) all employees of, or consultants to, the
Company or any of its subsidiaries who have executed a non-competition
agreement with the Company or any of its subsidiaries and to whom the
Company is obligated to make annual cash payments in excess of $200,000;
(iv) all severance agreements, programs and policies of the Company or any
of its subsidiaries with or relating to its employees, in each case with
outstanding commitments exceeding $50,000 to any employee, and excluding
programs and policies required to be maintained by law; and (v) all plans,
programs, agreements and other arrangements of the Company or any of its
subsidiaries with or relating to its employees which contain change in
control provisions.
Section 2.12. Labor Matters. There are no claims or proceedings pending
or, to the knowledge of the Company, threatened, between the Company or any of
its subsidiaries and any of their respective employees, asserting that the
Company has committed an unfair labor practice. Neither the Company nor any of
its subsidiaries is a party to any collective bargaining agreement or other
labor union contract applicable to persons employed by the Company or its
subsidiaries, nor does the Company or any of its subsidiaries know of any
activities or proceedings of any labor union to organize any such employees. The
Company has no knowledge of any strikes, slowdowns, work stoppages, lockouts, or
threats thereof, by or with respect to any employees of the Company or any of
its subsidiaries which could reasonably be expected to have a Material Adverse
Effect.
Section 2.13. Proxy Statement; Section 14(f) Statement.
(a) Any proxy statement to be sent to the stockholders of the
Company in connection with a meeting of the stockholders of the Company to
consider the sale of the Shares (the "Stockholders Meeting"; such proxy
statement as amended or supplemented is referred to herein as the "Proxy
Statement") will comply as to form in all material respects with Section
14(a) of the Exchange Act and the rules promulgated thereunder, and will
not, on the date the Proxy Statement (or any amendment thereof or
supplement thereto) is first mailed to stockholders or at the time of the
Stockholders Meeting, contain any statement which, at such time and in
light of the circumstances under which it shall be made, is false or
misleading with respect to any material fact, or shall omit to state any
material fact necessary in order to make the statements made therein not
false or misleading, or omit to state any material fact necessary to
correct any statement in any earlier communication with respect to the
solicitation of proxies for the Stockholders Meeting which has become
false or misleading. If at any time prior to the Closing Date any event
relating to the Company or any of its affiliates, officers or directors
should be discovered by the Company which is required to be set forth in a
supplement to the Proxy Statement, the Company shall promptly inform the
Purchasers. Notwithstanding the foregoing, the Company makes no
representation or warranty with respect to any statement or omission made
based on information supplied by the Purchasers which is contained in any
of the foregoing documents.
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(b) In the event that the Principal Closing is to be consummated
without a shareholder vote, the information statement required by Rule
14f-1 of the Exchange Act (the "14(f) Statement") and the information
statement required by Rule 14c-2 under the Exchange Act, if required to be
delivered to shareholders of the Company in connection with the
Ratification and Voting Agreement or otherwise in connection with the
Stock Purchase (the "Schedule 14C"), will each comply as to form in all
material respects with the requirements of Section 14 of the Exchange Act,
and will not, on the date the 14(f) Statement or the Schedule 14C, as
applicable, (or any amendment thereof or supplement thereto) is first
mailed to stockholders, contain any statement which, at such time and in
light of the circumstances under which it shall be made, is false or
misleading with respect to any material fact, or shall omit to state any
material fact necessary in order to make the statements made therein not
false or misleading, or omit to state any material fact necessary to
correct any statement in any earlier communication which has become false
or misleading. If at any time prior to the Principal Closing Date any
event relating to the Company or any of its affiliates, officers or
directors should be discovered by the Company which is required to be set
forth in a supplement to the 14(f) Statement or the Schedule 14C, as
applicable, the Company shall promptly inform the Purchasers.
Notwithstanding the foregoing, the Company makes no representation or
warranty with respect to any statement or omission made based on
information supplied by the Purchasers which is contained in any of the
foregoing documents.
Section 2.14. Title to Property.
(a) The Company and each of its subsidiaries have good and
marketable title to all of their properties and assets, free and clear of
all liens, charges and encumbrances, except liens for taxes not yet due
and payable and such liens or other imperfections of title which are not
material to the current use of such property in the Company's business;
and all leases pursuant to which the Company or any of its subsidiaries
lease from others any personal property are in good standing, valid and
effective in accordance with their respective terms, and there is not
under any of such leases, any existing material default or event of
default (or event which with notice or lapse of time, or both, would
constitute a material default), except where the lack of such good
standing, validity and effectiveness or the existence of such default or
event of default would not be material.
(b) Section 2.14 of the Company Disclosure Schedule sets forth a
complete list of all real property and interests in real property owned in
fee by the Company or its subsidiaries as of the date hereof (each, an
"Owned Property" and collectively the "Owned Properties") and a true,
complete and correct list of all properties subject to leases, licenses
and other occupancy agreements, as amended, modified or supplemented as of
the date hereof (collectively, the "Leases"), pursuant to which the
Company or its subsidiaries, as applicable, leases or subleases real
property and interests in real property leased or subleased by the Company
or its subsidiaries as of the date hereof (each, a
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"Leased Property" and collectively the "Leased Properties"). The Company
or its respective subsidiary, as applicable, has (x) good and marketable
fee title to all Owned Properties and (y) good and valid title to the
leasehold estates in all Leased Properties, in each case free and clear of
all mortgages, liens, security interests, encumbrances, leases,
assignments, subleases, easements, covenants, rights-of-way and other
restrictions of any nature whatsoever (each, an "Encumbrance" and
collectively, "Encumbrances"), except for mortgages granted to Bankers
Trust Company, as Agent under the Company Credit Agreement and such liens,
security interests, encumbrances, leases, assignments, subleases,
easements, covenants, rights-of-way and other restrictions or
imperfections of title that either individually or in the aggregate do not
materially impair the continued use and operation of the property to which
they relate for the business of the Company or such respective subsidiary,
as applicable, as presently conducted and uses ancillary thereto. The
Company has heretofore made available to Purchasers true, correct and
complete copies of each of the Leases. Each of the Leases is in full force
and effect. Neither the Company nor its subsidiaries, as applicable, is in
default under any material provisions under any of the Leases nor has any
event occurred which with the giving of notice or the passage of time or
both would constitute such a default, under any such material provision.
To the best knowledge of the Company, the landlord under each of the
Leases is not in default under any material provisions thereunder nor has
any event occurred which with the giving of notice or the passage of time
or both would constitute such a default.
(c) The Company is not in material violation of any zoning, building
or safety ordinance, regulation or requirement or other law or regulation
applicable to the operation of owned or leased properties likely to impede
the normal operation of the business of the Company, and the Company has
not received any written notice of any such violation with which such
recipient has not complied.
(d) Except as set forth in Section 2.14(d) of the Company Disclosure
Schedule, there are no pending claims of landlords with respect to damages
arising from the Company's rejection of nonresidential real property
leases in Chapter 11 Bankruptcy Case No. 95-84 (PJW) in the United States
Bankruptcy Court for the District of Delaware ("Case No. 95-84"), other
than those claims which are in their entirety subject to 11 U.S.C.
502(b)(6).
(e) Except as set forth on Section 2.14(e) of the Company Disclosure
Schedule, there are no leases that were assigned by the Company prior to
the filing by the Company of its Chapter 11 bankruptcy petition in Case
No. 95-84 with respect to which the Company has received written notice
from any party that such party possesses a claim against the Company,
other than those claims with respect to which a proof of claim was filed
in Case No. 95-84, nor is the Company aware of any such claims which are
pending or threatened.
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Section 2.15. Restrictions on Business Activities. There is no agreement,
judgment, injunction, order or decree binding upon the Company or any of its
subsidiaries which has or could reasonably be expected to have the effect of
prohibiting or impairing in any material respect any business practice of the
Company or any of its subsidiaries, acquisition of property by the Company or
any of its subsidiaries or the conduct of business by the Company or any of its
subsidiaries as currently conducted or as proposed to be conducted by the
Company.
Section 2.16. Taxes.
(a) For purposes of this Agreement, "Tax" or "Taxes" shall mean (i)
taxes, fees, levies, duties, tariffs, imposts, and governmental
impositions or charges of any kind in the nature of (or similar to) taxes,
payable to any federal, state, local or foreign taxing authority,
including (without limitation), income, franchise, profits, gross
receipts, ad valorem, net worth, value added, sales, use, service, real or
personal property, special assessments, capital stock, license, payroll,
withholding, employment, social security, workers' compensation,
unemployment compensation, utility, severance, production, excise, stamp,
occupation, premiums, windfall profits, transfer and gains taxes, (ii) any
liability of the Company or its subsidiaries for taxes of any other person
under Treasury Regulation Section 1.1502-6 (or any analogous provision of
foreign, state or local law), as a transferee or successor under Section
6901 of the Code (or any analogous provision of foreign, state or local
law), by contract, or otherwise and (iii) in each case, interest,
penalties, additional taxes and additions to tax imposed with respect
thereto; "Tax Returns" shall mean returns, reports, forms, declarations
and information statements with respect to Taxes required to be filed with
the IRS or any other federal, foreign, state or provincial taxing
authority, domestic or foreign, including, without limitation,
consolidated, combined and unitary tax returns ; "Code" shall mean the
Internal Revenue Code of 1986, as amended; "Affiliated Group" shall mean,
in connection with any federal income Tax, any affiliated group within the
meaning of Section 1504 of the Code, and in connection with any state or
local Tax, any combined, unitary or similar group under an applicable
provision of state or local law; and "IRS" shall mean the Internal Revenue
Service.
(b) (i)The Company and its subsidiaries, and each Affiliated Group
of which the Company or its subsidiaries was a member, have filed all Tax
Returns (or extension requests) that relate to the Company or its
subsidiaries required to be filed by them, (ii) all such Tax Returns were
complete and correct, except as would not have a material effect on the
liability of the Company or its subsidiaries for Taxes, (iii) the Company
and its subsidiaries, and each Affiliated Group of which the Company or
its subsidiaries was a member, have paid all Taxes due in connection with
or with respect to the periods or transactions covered by such Tax Returns
and have paid all other Taxes as are due, except such as are being
contested in good faith by appropriate proceedings and included in Section
2.16 of the Company Disclosure Schedule, (iv) there are no other Taxes
(other than an immaterial amount of Taxes) that would be due if asserted
by a taxing authority,
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except with respect to which the Company is maintaining reserves to the
extent currently required, (v) all material amounts required to be
collected or withheld by each of the Company and its subsidiaries have
been collected or withheld and any such amounts that are required to be
remitted to any taxing authority have been duly remitted, (vi) no taxing
authority in a jurisdiction where any of the Company or its subsidiaries
do not file Tax Returns has made a written claim or assertion (or, to the
knowledge of the Company, a threat) that such non-filing entity is or may
be subject to taxation by such jurisdiction that would or may involve a
material amount of Tax, (vii) none of the Company or its subsidiaries has
agreed or is required to include in income any material adjustment
pursuant to Section 481(a) of the Code (or analogous provisions of
foreign, state or local law) by reason of a change in accounting method or
otherwise, and, the IRS (or other taxing authority) has not proposed, and
to the knowledge of the Company, is not considering, any such change in
accounting method in connection with an ongoing audit of the Company or
its subsidiaries (viii) none of the Company or its subsidiaries has agreed
or is required to include in income any adjustment pursuant to Section 482
of the Code (or analogous provisions of foreign, state or local law) which
could materially affect the liability for Taxes of the Company or its
subsidiaries for any period (or portion of a period) after the Closing,
and, the IRS (or other taxing authority) has not proposed, and to the
knowledge of the Company, is not considering, any such adjustment which
could have any such material effect, (ix) no material excess loss account
(as described in Treasury Regulation Section 1.1502-19) exists with
respect to any of the Company's subsidiaries, (x) the Company and its
subsidiaries have made all material payments of estimated Taxes required
to be made under Section 6655 of the Code and any analogous provisions of
state, local or foreign law, (xi) there was no reduction to the tax basis
of any of the assets of the Company or the subsidiaries as a result of the
consummation of the Second Amended Chapter 11 Plan of Reorganization of
the Grand Union Company, dated April 19, 1995, (xii) there is no action,
suit, proceeding, investigation, audit, claim or assessment pending as to
which the Company has received notice in writing with respect to any
material liability for Tax that relates to the Company or any of its
subsidiaries, (xiii) there are no tax rulings, requests for rulings, or
closing agreements to which any of the Company, its subsidiaries or any
Affiliated Group of which the Company or any of its subsidiaries was a
member, is a party or is subject which could materially affect the
liability for Taxes of the Company or its subsidiaries for any period (or
portion of a period) after the Closing, (xiv) all income Tax Returns of
the Company, each of its subsidiaries and each Affiliated Group of which
the Company or its subsidiaries was a member, with respect to taxable
periods through the year ended March 30, 1991, have been examined and
closed or are Tax Returns with respect to which the applicable statute of
limitations has expired without extension or waiver, (xv) neither the
Company nor any of its subsidiaries is a party to any tax sharing
agreement to which any person not presently included in the consolidated
federal income Tax Return filed by the Company is a party, (xvi) none of
the Company nor any of its subsidiaries has disposed of any property in a
transaction being accounted for under the installment method pursuant to
Section 453 of the Code which involves the deferral of a material amount
of tax, (xvii) none of the
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Company nor any of its subsidiaries has any deferred gain (A) arising from
intercompany transactions (as described in Treasury Regulation Section
1.1502-13) or (B) with respect to stock or obligations of any other member
of the Company's Affiliated Group, which could materially affect the
liability for Taxes of the Company or its subsidiaries for any period (or
portion of a period) after the Closing, (xviii) there are no material tax
liens on any assets of the Company or any subsidiary thereof, except for
Taxes not yet due and payable, and (xix) neither the Company nor any of
its subsidiaries has granted any waiver of any statute of limitations with
respect to, or any extension of a period for the assessment of, any Tax.
The accruals and reserves for Taxes (including deferred taxes) reflected
in the 1996 Company Balance Sheet are in all material respects adequate to
cover all Taxes required to be accrued through the date thereof (including
interest and penalties, if any, thereon and Taxes being contested).
(c) To the knowledge of the Company, neither the Company nor any of
its subsidiaries owns any property of a character, the indirect transfer
of which, pursuant to this Agreement, would give rise to any material
documentary, stamp or other transfer tax.
(d) The amount of net operating loss carryovers and other carryovers
available to the Company and its subsidiaries as of March 30, 1996 is at
least $36.4 million. There are no material limitations, as of the
Principal Closing Date, (without regard to this transaction), on the
ability of the Company and its subsidiaries to use the carryovers
described in the preceding clause or claim any otherwise deductible
amounts under Sections 382 and 383 of the Code.
Section 2.17. Environmental Matters. Except in all cases as, in the
aggregate, have not had and could not reasonably be expected to have a Material
Adverse Effect, and except for any matters as to which remediation efforts have
been completed, the Company and each of its subsidiaries: (i) have obtained all
Approvals which are required to be obtained under all applicable federal, state,
foreign or local laws or any regulation, code, plan, order, decree, judgment,
notice or demand letter issued, entered, promulgated or approved thereunder
relating to pollution, contamination or protection of the environment, human
health or safety or safety of employees, including laws relating to emissions,
discharges, releases or threatened releases of pollutants, contaminants, or
solid, hazardous or toxic materials or wastes into air (indoor or outdoor),
surface water, ground water, soil, land surface or subsurface, buildings,
facilities, real or personal property or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport, or
handling of pollutants, contaminants or solid, hazardous or toxic materials or
wastes by the Company or its subsidiaries or their respective agents
("Environmental Laws"); (ii) are in compliance with all terms and conditions of
such required Approvals and also are in compliance with all other limitations,
restrictions, conditions, standards, prohibitions, requirements, obligations,
schedules and timetables contained in applicable Environmental Laws; (iii) as of
the date hereof, are not aware of, nor have received notice of, any past or
present, actual, alleged or potential violations of Environmental Laws or any
event, condition, circumstance, activity, practice, incident, action or plan
which is reasonably likely to interfere
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with or prevent continued compliance with or which may give rise to any
contractual, common law or statutory liability, or otherwise form the basis of
any claim, action, suit, investigation or proceeding, against the Company or any
of its subsidiaries based on or resulting from the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling, or the
emission, discharge or release into the environment or elsewhere, of any
pollutant, contaminant or solid, hazardous or toxic material or waste; (iv) have
taken all actions necessary under applicable Environmental Laws to register any
products or materials required to be registered by the Company or its
subsidiaries (or any of their respective agents) thereunder; (v) to the
Company's knowledge, there have been no past or present releases from any
underground or aboveground storage tanks at, on, under or about any property or
assets owned, operated or controlled by the Company or any of its subsidiaries;
(vi) as of the date hereof, are not aware of, nor have received any written
notice or other communication that any of them is nor may be a potentially
responsible person or otherwise liable in connection with any waste disposal
site; and (vii) has not been at any time requested or required by any
governmental authority to perform any investigatory, removal or remedial
activity or other action pursuant to any Environmental Laws.
Section 2.18. Intellectual Property.
(a) The Company, directly or indirectly, owns, licenses or otherwise
possesses (or has applied for), legally enforceable rights to use all
trademarks, trade names, service marks, trade dress, logos and designs and
any and all registrations and applications therefor (and all goodwill
associated therewith), all copyrights, whether or not registered, all
patents and any applications therefore, computer software and tangible or
intangible proprietary information or material, except where the failure
to so own, be licensed or otherwise possess legally enforceable rights to
use could not reasonably be expected to have a Material Adverse Effect
(the "Company Intellectual Property Rights").
(b) Section 2.18 of the Company Disclosure Schedule sets forth a
complete and accurate list of the Company's (i) registered trademarks,
trade names, service marks and copyrights, and (ii) patent applications or
issued patents. No claims with respect to the Company Intellectual
Property Rights have been asserted or, to the knowledge of the Company,
are threatened by any person that reasonably would be expected to have a
Material Adverse Effect, (i) that the manufacture, sale, licensing or use
of any of the products of the Company or any of its subsidiaries as now
manufactured, sold or licensed or used or currently proposed for
manufacture, use, sale or licensing by the Company or any of its
subsidiaries infringes on any copyright, patent, trademark, trade secret,
service mark, or other proprietary right of any person, (ii) against the
use by the Company or any of its subsidiaries of any material trademarks,
service marks, trade names, trade secrets, copyrights, patents,
technology, know-how or computer software programs and applications used
in the business of the Company and its subsidiaries as currently
conducted, or (iii) challenging the ownership, validity or effectiveness
of any of the Company Intellectual Property Rights. All registered
trademarks, service marks, patents, and copyrights owned or held by the
Company are valid and subsisting and not subject to
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cancellation or abandonment proceedings. No claims or actions have been
asserted or are threatened by the Company against any person with regard
to the Company Intellectual Property Rights and, to the knowledge of the
Company, there is no unauthorized use, infringement or misappropriation of
any of the Company Intellectual Property Rights by any third party,
including any employee or former employee of the Company or any of its
subsidiaries, which could reasonably be expected to have a Material
Adverse Effect. No Company Intellectual Property Right or product of the
Company or any of its subsidiaries is subject to any outstanding decree,
order, judgment, or stipulation restricting in any manner the licensing
thereof by the Company or any of its subsidiaries.
Section 2.19. Interested Party Transactions. Since March 30, 1996, no
event has occurred that would be required to be reported as a Certain
Relationship or Related Transaction, pursuant to Item 404 of Regulation S-K
promulgated by the SEC.
Section 2.20. Insurance. Section 2.20 of the Company Disclosure Schedule
sets forth a complete list of all material fire and casualty, general liability,
business interruption, product liability, professional liability and sprinkler
and water damage insurance policies maintained by the Company or any of its
subsidiaries. All such policies are with reputable insurance carriers, provide
full and adequate coverage for all normal risks incident to the business of the
Company and its subsidiaries and their respective properties and assets and are
in character and amount similar to that carried by entities engaged in similar
businesses and subject to the same or similar perils or hazards, except as could
not reasonably be expected to have a Material Adverse Effect.
Section 2.21. Opinion of Financial Advisor. The Company has been advised
in writing by its financial advisor, Donaldson, Lufkin & Jenrette ("DLJ"), that
in its opinion, as of the date hereof, the consideration to be received for the
Shares is fair to the Company from a financial point of view.
Section 2.22. Brokers. No broker, finder or investment banker (other than
DLJ, the fees and expenses of which will be paid by the Company) is entitled to
any brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Company or its subsidiaries or affiliates. Other than the
letter dated January 17, 1996 between DLJ and the Company, in the form filed as
Exhibit 10.28 to the Company's annual report on Form 10-K for the fiscal year
ended March 30, 1996 (the "DLJ Engagement Letter"), there are no agreements
between the Company and DLJ pursuant to which such firm would be entitled to any
payment relating to the transactions contemplated hereunder.
Section 2.23. Takeover Statute. Execution, delivery and performance of
this Agreement and consummation of the transactions contemplated hereby will not
cause to be applicable to the Company any "fair price," "moratorium," "control
share acquisition" or other similar antitakeover statute or regulation enacted
under state or federal laws (each a "Takeover Statute").
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Section 2.24. Change in Control Payments. Neither the Company nor any of
its subsidiaries have any plans, programs or agreements to which they are
parties, or to which they are subject, pursuant to which payments may be
required or acceleration of benefits may be required upon a change of control of
the Company.
Section 2.25. Section 203 of the DGCL Not Applicable. The Board of
Directors of the Company has taken all actions so that the restrictions
contained in Section 203 of the DGCL applicable to a "business combination" (as
defined in Section 203) will not apply to the execution, delivery or performance
of this Agreement or the consummation of the transactions contemplated hereby.
Section 2.26. Foreign Corrupt Practices Act. To the Company's knowledge,
the Company has not made, offered or agreed to offer anything of value to any
government official, political party or candidate for governmental office (or
any person that the Company knows or has reason to know, will offer anything of
value to any governmental official, political party or candidate for political
office), such that the Company or its subsidiaries have violated the Foreign
Corrupt Practices Act of 1977, as amended. There is not now nor has there ever
been any employment by the Company of any governmental or political official in
any country while such official was in office.
Section 2.27. Disclosure. Neither this Agreement nor any other agreement
or certificates delivered to the Purchasers as of the date hereof contains any
untrue statement of a material fact or omits to state a material fact necessary
to make the statements herein or therein, in light of the circumstances under
which they were made, not misleading. With respect to any projections contained
in information provided to Purchasers, the Company represents only that such
projections were prepared in good faith.
Section 2.28. Securities Laws. Assuming that the Purchasers'
representations and warranties contained in Section 3 hereof are, and continue
to be at each Closing, true and correct, the offer, issuance and sale of the
Shares is, and will be as of each Closing, exempt from the registration and
prospectus delivery requirements of the Securities Act, and have been registered
or qualified (or are exempt from registration and qualification) under the
registration, permit or qualification requirements of all applicable Blue Sky
Laws.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Subject to Section 8.1 hereof, each of the Purchasers severally represents
and warrants to the Company that:
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Section 3.1. Organization. Such Purchaser is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization.
Section 3.2. Due Authorization. Such Purchaser has all right, power and
authority to enter into the Transaction Documents to which it is party and to
consummate the transactions contemplated thereby. The execution and delivery of
the Transaction Documents to which it is party by such Purchaser and the
consummation by such Purchaser of the transactions contemplated hereby have been
duly authorized by all necessary action on behalf of such Purchaser. The
Transaction Documents to which it is party have been duly executed and delivered
by such Purchaser and, assuming the due authorization, execution and delivery by
the other parties thereto, constitutes the valid and binding agreement of such
Purchaser enforceable in accordance with their respective terms, except that (i)
such enforcement may be subject to bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights, (ii) the remedy of specific performance and injunctive and
other forms of equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor may be brought, and
(iii) the enforcement of the indemnification provisions contained in the
Registration Rights Agreement are subject to applicable securities laws and
principles of public policy.
Section 3.3. Acquisition for Investment; Source of Funds. Such Purchaser
is acquiring the Shares being purchased by it for its own account for the
purpose of investment and not with a view to or for sale in connection with any
distribution thereof, and such Purchaser has no present intention or plan to
effect any distribution of Shares other than in an offering registered under the
Securities Act or a disposition exempt from registration under the Securities
Act.
Section 3.4. Brokers or Finders. No agent, broker, investment banker or
other firm or person acting on behalf of such Purchaser, including any of the
foregoing that is an affiliate of such Purchaser, is or will be entitled to
receive any broker's or finder's fee or any other commission or similar fee in
connection with any of the transactions contemplated by this Agreement, except
for the fees to be paid to Shamrock Capital Advisors, Inc. ("SCA") and GE
Investment Management Incorporated (the "GEI Manager") by the Company in
accordance with Sections 6.3(i) and 6.4(h) of this Agreement and Sections 2 and
5 of the Management Agreement.
Section 3.5. Accredited Investor. Such Purchaser is an "accredited
investor" within the meaning of Rule 501(a) under the Securities Act.
ARTICLE IV
CONDUCT OF BUSINESS PENDING THE PRINCIPAL CLOSING
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Section 4.1. Conduct of Business by the Company Pending the Principal
Closing. The Company covenants and agrees that, during the period from the date
of this Agreement and continuing until the earlier of the termination of this
Agreement or the Principal Closing, unless the Purchasers shall otherwise agree
in writing, the Company shall conduct its business and shall cause the
businesses of its subsidiaries to be conducted only in, and the Company and its
subsidiaries shall not take any action except in, the ordinary course of
business and the Company shall use all reasonable commercial efforts to: (i) pay
all obligations of the Company as they come due (except for such obligations as
the Company disputes in good faith), (ii) preserve substantially intact the
business organization of the Company and its subsidiaries, (iii) keep available
the services of the present officers, employees and consultants of the Company
and its subsidiaries and (iv) preserve the present relationships of the Company
and its subsidiaries with customers, suppliers and other persons with which the
Company or any of its subsidiaries has significant business relations. By way of
amplification and not limitation, except as contemplated by this Agreement or as
set forth on the Company Disclosure Schedule, neither the Company nor any of its
subsidiaries shall, during the period from the date of this Agreement and
continuing until the earlier of the termination of this Agreement or the
Principal Closing, directly or indirectly do, or propose to do, any of the
following without the prior written consent of the Purchasers:
(a) amend or otherwise change the Certificate of Incorporation or
By-Laws of the Company or any of its subsidiaries;
(b) issue, grant, sell, pledge, dispose of or encumber, or authorize
the issuance, sale, pledge, disposition or encumbrance of, any shares of
capital stock of any class, or any options, warrants, convertible
securities or other rights of any kind to acquire any shares of capital
stock, or any other ownership interest (including, without limitation, any
phantom interest) in the Company, any of its subsidiaries or affiliates
(except for the issuance of shares of Common Stock issuable pursuant to
(i) Stock Options which were granted under the Company Stock Option Plans
or may be granted under the 1995 Non-Employee Director Stock Option Plan
or (ii) the Warrants, and in each case which are outstanding on the date
hereof);
(c) sell, pledge, dispose of or encumber any assets of the Company
or any of its subsidiaries except for (i) sales of assets in the ordinary
course of business and in a manner consistent with past practice, (ii)
dispositions of obsolete or worthless assets, and (iii) as permitted by
the Company Credit Agreement;
(d) (i) declare, set aside, make or pay any dividend or other
distribution (whether in cash, stock or property or any combination
thereof) in respect of any of its capital stock, except that a wholly
owned subsidiary of the Company may declare and pay a dividend to its
parent, (ii) split, combine or reclassify any of its capital stock or
issue or authorize or propose the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital stock,
or (iii) amend the terms or change the period of exercisability
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of, purchase, repurchase, redeem or otherwise acquire, or permit any
subsidiary to purchase, repurchase, redeem or otherwise acquire, any of
its securities or any securities of its subsidiaries, including, without
limitation, the Senior Notes, shares of Common Stock or any option,
warrant or right, directly or indirectly, to acquire shares of Common
Stock, or propose to do any of the foregoing (other than pursuant to the
Company Stock Option Plans);
(e) (i) acquire (by merger, consolidation, or acquisition of stock
or assets) any corporation, partnership or other business organization or
division thereof; (ii) incur any indebtedness for borrowed money or issue
any debt securities or assume, guarantee or endorse or otherwise as an
accommodation become responsible for, the obligations of any person or
make any loans or advances, except borrowings in the ordinary course of
business for working capital purposes or to fund capital expenditures or
purchases of fixed assets permitted by clause (iv) hereof under the
Company Credit Agreement; (iii) enter into, materially amend or terminate
any material contract or agreement; (iv) authorize any capital
expenditures or purchase of fixed assets except as permitted under the
Company Credit Agreement; or (v) enter into or amend any contract,
agreement, commitment or arrangement to effect any of the matters
prohibited by this Section 4.1(e); provided, that consent to actions under
clauses (ii) - (v) above shall only be required with respect to
obligations to pay or rights to receive payments of $1,500,000 on any
single contract or any contract or any contract with annual payments in
excess of $500,000;
(f) increase the compensation payable or to become payable to its
officers or employees, or grant any severance or termination pay to any
director or officer of the Company or any of its subsidiaries, or
establish, adopt, enter into or amend any collective bargaining, bonus,
profit sharing, thrift, compensation, stock option, restricted stock,
pension, retirement, deferred compensation, employment, termination,
severance or other plan, agreement, trust, fund, policy or arrangement for
the benefit of any current or former directors, officers or employees,
except, in each case, as may be required by law or as may occur in the
ordinary course of business;
(g) take any action to change accounting policies or procedures
(including, without limitation, procedures with respect to revenue
recognition, payments of accounts payable and collection of accounts
receivable), except for changes in GAAP after the date hereof;
(h) make any material tax election inconsistent with past practice
or settle or compromise any federal, state, local or foreign tax liability
in an amount greater than the amount listed in Section 2.16 of the Company
Disclosure Schedule or agree to an extension of a statute of limitations;
(i) pay, discharge or satisfy any material claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in the
ordinary course of business and consistent with past practice
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of liabilities reflected or reserved against in the financial statements
contained in the Company SEC Reports filed prior to the date of this
Agreement or incurred in the ordinary course of business and consistent
with past practice;
(j) enter into any contract which would have been required to be
disclosed under Section 2.5(a), except to the extent otherwise permitted
by Section 4.1(e) above;
(k) enter into any transaction with any affiliate (other than
transactions in the ordinary course of business and consistent with past
practice) on terms less favorable to the Company than would be obtained in
an arms'-length transaction with an unaffiliated Third Party; or
(l) take, or agree in writing or otherwise to take, any of the
actions described in Sections 4.1 (a) through (k) above, or any action
which would make any of the representations or warranties of the Company
contained in this Agreement untrue or incorrect as of the date hereof or
which would prevent the Company from being able to deliver the certificate
referred to in Section 6.4(a) hereof if the Principal Closing were to be
held on the date of such action or prevent the Company from performing or
cause the Company not to perform its covenants hereunder such that the
Company would be prevented from delivering the certificate referred to in
Section 6.4(b) hereof if the Principal Closing were to be held on the date
of such action.
Section 4.2. No Solicitation.
(a) The Company shall not, directly or indirectly, through any
officer, director, employee, representative or agent of the Company or any
of its subsidiaries, (i) solicit, initiate or encourage the initiation of
any inquiries or proposals regarding any merger, sale of substantial
assets, sale of shares of capital stock (including without limitation by
way of a tender offer) or similar transactions involving the Company or
any subsidiaries of the Company other than the Stock Purchase (any of the
foregoing inquiries or proposals being referred to herein as an
"Acquisition Proposal"), (ii) engage in negotiations or discussions
concerning, or provide any nonpublic information to any person relating
to, any Acquisition Proposal or (iii) agree to, approve or recommend any
Acquisition Proposal. Nothing contained in this Agreement shall prevent
the Board of Directors of the Company from considering, discussing,
negotiating, agreeing, approving and recommending to the stockholders of
the Company a bona fide Acquisition Proposal not solicited in violation of
this Agreement, provided the Board of Directors of the Company determines
in good faith (upon advice of outside counsel) that it is required to do
so in order to discharge properly its fiduciary duties.
(b) The Company shall immediately notify the Purchasers after
receipt of any Acquisition Proposal, or any modification of or amendment
to any Acquisition Proposal, or any request for nonpublic information
relating to the Company or any of its subsidiaries
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in connection with an Acquisition Proposal or for access to the
properties, books or records of the Company or any subsidiary by any
person or entity that informs the Board of Directors of the Company or
such subsidiary that it is considering making, or has made, an Acquisition
Proposal. Such notice to the Purchasers shall be made orally and in
writing, and shall indicate whether the Company is providing or intends to
provide the person making the Acquisition Proposal with access to
information concerning the Company as provided in Section 4.2(c).
(c) If the Board of Directors of the Company receives a request for
material nonpublic information by a person who makes, or indicates that it
is considering making, a bona fide Acquisition Proposal, and the Board of
Directors determines in good faith and upon the advice of outside counsel
that it is required to cause the Company to act as provided in this
Section 4.2(c) in order to discharge properly the directors' fiduciary
duties, then, provided the person making the Acquisition Proposal has
executed a confidentiality agreement substantially similar to the one then
in effect among the Company and Purchasers, the Company may provide such
person with access to information regarding the Company.
(d) The Company shall immediately cease and cause to be terminated
any existing discussions or negotiations with any persons (other than the
Purchasers) conducted heretofore with respect to any of the foregoing. The
Company agrees not to release any third party from the confidentiality
provisions of any confidentiality agreement to which the Company is a
party.
The Company shall (i) ensure that the officers, directors and key employees of
the Company and its subsidiaries are aware of and abide by and (ii) use its best
efforts to ensure that any investment banker or other advisor or representative
retained by the Company is aware of and abides by the restrictions described in
this Section 4.2.
Section 4.3. Press Releases; Interim Public Filings. The Company shall
deliver to the Purchasers complete and correct copies of all press releases and
public filings made between the date hereof and the Principal Closing Date, in
each case prior to release in the form in which it will be issued.
ARTICLE V
ADDITIONAL AGREEMENTS
Section 5.1. HSR Act. As promptly as practicable after the date of the
execution of this Agreement, the Company, the Purchasers and all other necessary
parties shall file notifications under and in accordance with the HSR Act in
connection with the Stock Purchase and the transactions contemplated hereby and
shall respond as promptly as practicable to any inquiries and
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requests received (i) from the Federal Trade Commission (the "FTC") and the
Antitrust Division of the Department of Justice (the "Antitrust Division") for
additional information or documentation or (ii) from any State Attorney General
or other governmental authority in connection with antitrust matters.
Section 5.2. Proxy Statement; 14(f) Statement. Unless the Principal
Closing is to occur without a vote of the shareholders, as promptly as
practicable after the execution of this Agreement, the Company shall prepare and
file with the SEC preliminary proxy materials which shall constitute the Proxy
Statement of the Company. As promptly as practicable after comments are received
from the SEC thereon and after the furnishing by the Company and the Purchasers
of all information required to be contained therein, the Company shall use all
reasonable efforts to mail the Proxy Statement to its shareholders, as soon
thereafter as practicable. The Proxy Statement shall include the recommendation
of the Board of Directors of the Company in favor of the Stock Purchase, subject
to the last sentence of Section 5.3. Notwithstanding anything contained in this
Section 5.2 to the contrary, in the event that the Principal Closing is to occur
without a vote of the shareholders of the Company, the Company and the
Purchasers shall prepare, file and mail to the Company's shareholders the 14(f)
Statement and, if required, the Schedule 14C. The Company shall amend and
supplement the Proxy Statement or the 14(f) Statement or the Schedule 14C, as
the case may be, in the event that such amendment or supplement is required
under the Exchange Act. The Purchasers shall promptly furnish to the Company all
information reasonably requested by it for use in the preparation of the Proxy
Statement, the 14(f) Statement and the Schedule 14C, as the case may be, and any
amendments or supplements thereto, and each Purchaser shall promptly notify the
Company if any amendment or supplement is required under the Exchange Act with
respect to any information previously furnished by the Purchaser.
Section 5.3. Stockholders Meeting. Unless the Principal Closing is to
occur without a vote of the Company's shareholders, the Company shall call and
hold its Stockholders Meeting as promptly as practicable and in accordance with
applicable laws for the purpose of voting upon the approval of the Stock
Purchase. Unless otherwise required under the applicable fiduciary duties of the
directors of the Company, as determined by such directors in good faith after
consultation with and based upon the advice of outside legal counsel, the
Company shall use all reasonable efforts to solicit from its stockholders
proxies in favor of adoption of this Agreement and approval of the transactions
contemplated hereby and shall take all other action necessary or advisable to
secure the vote or consent of stockholders to obtain such approvals.
Section 5.4. Access to Information.
(a) Upon reasonable notice and subject to restrictions contained in
confidentiality agreements to which such party is subject (from which such
party shall use reasonable efforts to be released), the Company shall (and
shall cause each of its subsidiaries to) afford to the officers,
employees, accountants, counsel and other representatives of the
Purchasers reasonable access, during the period from the date hereof until
the Closing
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Date, to all of its properties, books, contracts, commitments and records
and, during such period, the Company shall (and shall cause each of its
subsidiaries to) furnish promptly to the Purchasers all information
concerning its business, properties and personnel as the Purchasers may
reasonably request, and shall make available to the Purchasers the
appropriate individuals (including attorneys, accountants and other
professionals) for discussion of the Company's business, properties and
personnel as the Purchasers may reasonably request.
(b) As long as either Purchaser shall own any Shares, Conversion
Shares or securities issued by the Company as dividends on the Shares, the
Company shall permit a representative of such Purchaser, to visit and
inspect any of the properties of the Company and its subsidiaries and to
discuss the affairs, finances and accounts of the Company and its
subsidiaries with, and to make proposals and furnish advice with respect
thereto to, the principal officers of the Company, all at such reasonable
times, upon reasonable notice and as often as such Purchaser may
reasonably request; provided, however, that at any time a Purchaser shall
own securities representing less than 10% of the total voting power of all
of the Company's securities then outstanding, the Company's principal
officers shall not be required pursuant to this Section 5.4(b) to meet
with such Purchaser's representative more often than quarterly, and
provided further, neither the Board of Directors nor the officers of the
Company shall be under any obligation to take any action with respect to
any proposals made or advice furnished by such Purchaser pursuant to this
Section 5.4, other than to take such proposals or advice seriously and
give due consideration thereto.
(c) Each party shall keep all information furnished or obtained
pursuant to this Section confidential in accordance with the terms of
Section 5.5 hereof.
Section 5.5. Confidentiality. It is understood by the parties hereto that
the information, documents and instruments delivered to Purchasers by the
Company or its agents and the information, documents and instruments delivered
to the Company by the Purchasers or their respective agents are of a
confidential and proprietary nature. Each of the parties hereto agrees that both
prior and subsequent to the Closing it will maintain the confidentiality of all
such confidential information, documents or instruments delivered to it by each
of the other parties hereto or their agents in connection with the negotiation
of this Agreement or in compliance with the terms, conditions and covenants
hereof and will only disclose such information, documents and instruments to its
duly authorized officers, partners, directors, representatives and agents. Each
of the parties hereto further agrees that if the transactions contemplated
hereby are not consummated, it will return all such documents and instruments
and all copies thereof in its possession to the other party to this Agreement.
Each of the parties hereto recognizes that any breach of this Section 5.5 would
result in irreparable harm to the other parties to this Agreement and their
affiliates and that therefore either the Company or the Purchasers, as the case
may be, shall be entitled to seek an injunction to prohibit any such breach or
anticipated breach, without the necessity of posting a bond, cash or otherwise,
in addition to all of their other legal and
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equitable remedies. Nothing in this Section 5.5, however, shall prohibit such
use of such confidential information, documents or information as upon the
advice of the Company's counsel or the Purchaser's counsel is required by law,
governmental regulations or judicial process; provided, however, that no such
disclosure shall be made without reasonable notice to the party that is the
source of such confidential information.
Section 5.6. Consents; Approvals. The Company shall use all reasonable
efforts to obtain all consents, waivers, approvals, authorizations or orders
(including, without limitation (i) consents under the agreements set forth on
Section 5.6 of the Company Disclosure Schedule and (ii) all United States and
foreign governmental and regulatory rulings and approvals), and the Company
shall make all filings (including, without limitation, all filings with United
States and foreign governmental or regulatory agencies) required in connection
with the authorization, execution and delivery of this Agreement by the Company
and the consummation by it of the transactions contemplated hereby, in each case
as promptly as practicable; provided, however, no payment or accommodation shall
be made by the Company in connection with obtaining the foregoing without
Purchasers' consent, which consent shall not be unreasonably withheld. The
Company and the Purchasers shall furnish promptly all information required to be
included in the Proxy Statement, the 14(f) Statement, or the Schedule 14C, as
the case may be, or for any application or other filing to be made pursuant to
the rules and regulations of any United States or foreign governmental body in
connection with the transactions contemplated by this Agreement. The Company
also shall use its reasonable efforts to obtain all necessary state securities
laws or blue sky permits and approvals required to carry out the transactions
contemplated hereby and shall furnish all information as may be reasonably
requested in connection with any such action.
Section 5.7. Notification of Certain Matters. The Company shall give
prompt notice to the Purchasers and the Purchasers shall give prompt notice to
the Company, of (i) the occurrence or nonoccurrence of any event the occurrence
or nonoccurrence of which would be likely to cause any representation or
warranty contained in this Agreement to become untrue or inaccurate, or (ii) any
failure of the Company or the Purchasers, as the case may be, materially to
comply with or satisfy any covenant, condition or agreement to be complied with
or satisfied by it hereunder; provided, however, that the delivery of any notice
pursuant to this Section shall not limit or otherwise affect the remedies
available hereunder to the party receiving such notice; and provided, further,
that such notice shall be required only if the certificates referred to in
Sections 6.3(a), 6.3(b), 6.4(a) or 6.4(b), would not be able to be given if the
applicable Closing were to occur on such date.
Section 5.8. Public Announcements. The Purchasers and the Company shall
consult with each other before issuing any press release with respect to the
Stock Purchase or this Agreement and shall not issue any such press release or
make any such public statement without the prior consent of the other party,
which consent shall not be unreasonably withheld; provided, however, that a
party may, without the prior consent of the other party, issue such press
release or make such public statement as may upon the advice of counsel be
required by law or the rules and regulations of the NASDAQ National Market
("NASDAQ"), if it has used all reasonable efforts
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to consult with the other party prior thereto, and shall promptly notify the
other parties hereto thereof.
Section 5.9. Conveyance Taxes. The Purchasers and the Company shall
cooperate in the preparation, execution and filing of all returns,
questionnaires, applications, or other documents regarding any real property
transfer or gains, sales, use, transfer, value added, stock transfer and stamp
taxes, any transfer, recording, registration and other fees, and any similar
taxes which become payable in connection with the transactions contemplated
hereby that are required or permitted to be filed at or before the Closing and
the Company agrees that it will pay, and will hold the Purchasers harmless, from
any and all liability with respect to any such taxes which may be determined to
be payable in connection with the transactions contemplated hereby.
Section 5.10. Listing. The Company shall use its best efforts to continue
the quotation of the Common Stock on NASDAQ or a national securities exchange
during the term of this Agreement and for so long as any of the Shares or the
Conversion Shares are outstanding, and the Company shall continue to use its
best efforts to list the Senior Notes on a stock exchange or include the Senior
Notes for quotation on NASDAQ (as required under the Reorganization Plan).
Section 5.11. Consent of Banks. The Company shall use its reasonable
efforts to obtain from Bankers Trust Company, as Agent for the banks party to
the Company Credit Agreement, a consent of the Required Banks (as defined in the
Company Credit Agreement) to the transactions contemplated hereby and a waiver
of any defaults or required prepayments under the Company Credit Agreement
caused hereby; provided, however, no payment or accommodation shall be made by
the Company in connection with obtaining the foregoing without the Purchasers'
consent, which consent shall not be unreasonably withheld.
Section 5.12. Restrictions on Transfer. From the date of the First Closing
(or, if the First Closing shall not occur, the Principal Closing), through and
including the third anniversary of the later of the First Closing (if one shall
occur) or the Principal Closing, the Purchasers agree not to sell, convey,
hypothecate or otherwise transfer ("Transfer") any Shares or Conversion Shares
unless, immediately after giving effect to such Transfer, the aggregate number
of Shares and Conversion Shares so Transferred by all Purchasers after the date
hereof is not greater than the aggregate number of Shares purchased hereunder on
or prior to the date of determination multiplied by 1/3 (with each share of
Preferred Stock representing the number of Conversion Shares receivable upon
conversion of such share of Preferred Stock); provided, however, that there are
permitted hereunder transfers resulting from (i) the conversion or redemption of
Shares; (ii) any exchange of Shares for cash, any other securities or property
pursuant to a transaction to which the Company is a party (including, without
limitation, a merger, consolidation, sale of all or substantially all of the
Company's assets or a liquidation, recapitalization or reorganization of the
Company); or (iii) any distribution of Shares or Conversion Shares to any
affiliate of the Purchasers (in which event such affiliate shall be bound by
this provision); and provided, further, that the restrictions on transfer
contained in this Section 5.12 shall not apply to restrict any Transfer by the
Purchasers or any affiliate of the Purchasers of any Shares or Conversion Shares
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on and after December 31, 1996 if the First Closing shall have occurred and the
Principal Closing shall not have occurred on or prior to such date.
Notwithstanding the foregoing, from and after the third anniversary of the
Principal Closing, or, if the Principal Closing shall not have occurred, the
earlier of (i) the termination of this Agreement pursuant to Section 7.1 or (ii)
December 31, 1996, the Shares and the Conversion Shares shall be subject only to
such restrictions as are imposed by the Securities Act and Blue Sky Laws. Any
transfer by a holder of any Shares shall be made only in compliance with all
applicable provisions of the Securities Act and the rules and regulations
promulgated thereunder.
Section 5.13. Board Representation.
(a) Prior to or at the time of the First Closing, the Company shall
cause the size of its Board of Directors to be increased to nine (9)
members and on and after the First Closing Date, if any, shall cause two
nominees of the Purchasers to be appointed to the Board of Directors and
shall include such two nominees to be included in the Company's slate of
directors in connection with its 1996 annual meeting of stockholders and
any other meeting at which a slate of directors is presented by the
Company with a record date on or prior to September 1, 1997.
(b) Prior to or at the time of the Principal Closing, the Company
shall cause (if necessary) the size of its Board of Directors to be
increased to nine (9) members and on and after the Principal Closing Date
shall cause five nominees of the Purchasers to be appointed to the Board
of Directors (including in such five any nominees pursuant to Section
5.13(a) hereof) and shall include such five nominees in the Company's
slate of directors in connection with its 1996 annual meeting of
stockholders and any other meeting at which a slate of directors is
presented by the Company with a record date on or prior to September 1,
1997.
(c) After the Principal Closing, the Purchasers each covenant and
agree, on behalf of themselves and any of their affiliates to which Shares
or Conversion Shares have been distributed, (i) to cause (so long as the
Board is comprised of a majority of members nominated by the Purchasers
and such affiliates) the Board of Directors to consist of at least nine
(9) directors (unless otherwise required in accordance with the
Certificate of Designation) and to cause any slate of nominees to the
Board to include not less than a number of Disinterested Directors equal
to one-third (rounded to the nearest whole number) of all directors
(excluding any directors elected as required in accordance with Section
3(c) of the Certificate of Designation); provided, however, that in the
event the Purchasers hold less than 50% but more than 35% of the voting
securities of the Company, the Purchasers and such affiliates shall use
their best efforts to cause such slate of nominees to include not fewer
than a number of Disinterested Directors equal to four-ninths (rounded to
the nearest whole number) (excluding any directors elected as required in
accordance with Section 3(c) of the Certificate of Designation); and
provided, further, that in the event the Purchasers and such affiliates
hold less than 35% of the outstanding
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voting securities of the Company, they shall use their best efforts to
cause such slate of nominees to include not fewer than a number of
Disinterested Directors equal to five-ninths (rounded to the nearest whole
number) (excluding any directors elected as required in accordance with
Section 3(c) of the Certificate of Designation) and (ii) to vote the
Shares or Conversion Shares held by them from time to time in favor of the
election of the Disinterested Directors nominated pursuant to clause (i)
of this Section 5.13(c).
(d) The Purchasers hereby agree that as long as any of the members
of the Board of Directors shall be designated by the Purchasers, the
affirmative vote of at least a majority of the Disinterested Directors
shall be required to take any of the following actions: (i) make any
decision or take, or omit to take, any action on the Company's behalf with
respect to the Company's rights and obligations pursuant to this Agreement
and the other Transaction Documents; (ii) make any decision or take, or
omit to take, any action on the Company's behalf with respect to the
Preferred Stock, the Shares, or the Company's rights and obligations
pursuant to the Certificate of Designation; (iii) approve any transactions
between the Company, on the one hand, and affiliates of the Purchasers, or
either of them, on the other hand; and (iv) approve the Disinterested
Directors previously nominated by the nominating committee of the Board of
Directors for election as directors at any meeting of stockholders or the
Board of Directors of the Company, which approval shall not be
unreasonably withheld.
(e) The Purchasers hereby agree, for so long as a majority of the
Board of Directors shall consist of directors (other than Disinterested
Directors) designated by the Purchasers, that they shall not exercise any
right to which the Purchasers would otherwise be entitled pursuant to the
Certificate of Designation to elect two directors voting separately as a
class due to defaults in dividend payments.
(f) (1) At each meeting for the election of directors of the
Company, the Company shall include in the slate of directors nominated and
recommended by the Board of Directors of the Company to the stockholders
for election as directors one representative designated (a) by Trefoil as
long as Trefoil, together with its affiliates, owns securities of the
Company representing 10% or more of the total voting power of all of the
Company's outstanding securities, and (b) by GEI, as long as GEI, together
with its affiliates, owns securities of the Company representing 10% or
more of the total voting power of all of the Company's outstanding
securities (such representatives designated by Trefoil and GEI, being
referred to herein as the "Purchaser Designees"). The Company agrees that
it shall use its best efforts to cause each Purchaser Designee to be
elected to, and to be maintained as a member of, the Board of Directors of
the Company (including recommending to the stockholders of the Company the
election of each Purchaser Designee to the Board of Directors of the
Company and opposing any action to remove a Purchaser Designee at each
meeting of the stockholders of the Company at which the election or
removal of directors is considered), and shall take no action which would
diminish the prospects of any Purchaser Designee's being elected to, or
being maintained as a member of, the Board
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of Directors of the Company. In the event of any vacancy arising by reason
of the resignation, death, removal or inability to serve of either
Purchaser Designee, Trefoil or GEI, as the case may be, shall be entitled
to designate a successor to fill such vacancy until the next meeting for
the election of directors of the Company. Each of the Purchaser Designees
shall be a member of the Company's Board executive and audit committees,
if any, or any committee performing substantially similar functions,
provided, however, that if such Purchaser Designee would not qualify as a
"disinterested person" for purposes of any such committee of the Board
under Section 16 of the Exchange Act or Section 162(m) of the Code, and
the respective rules promulgated thereunder, or the rules and regulations
of any national securities exchange or national market system for
securities (as such terms are defined in the Exchange Act), then such
Purchaser Designee shall only be permitted to participate in the business
of such committee as a Non-Voting Observer (as defined below). The Company
agrees that if at any meeting for the election of directors either
Purchaser Designee is not elected to the Board of Directors of the
Company, or if for any other reason, at any time, either Purchaser
Designee is not a member of the Board of Directors, each of Trefoil and
GEI, as the case may be, as long as such Purchaser owns any securities of
the Company, will be entitled to have one observer (a "Non-voting
Observer") selected by such Purchaser in lieu of its Purchaser Designee,
present at all meetings of the Board of Directors and such observer shall
have the same access to information concerning the business and operations
of the Company and its subsidiaries and at the same time as directors of
the Company and shall be entitled to participate in discussions and
consult with, and make proposals and furnish advice to, the Board of
Directors, without voting; provided, however, that the Board of Directors
shall be under no obligation to take any action with respect to any
proposals made or advice furnished by any Non-voting Observer, other than
to take such proposals or advice seriously and give due consideration
thereto.
(2) In addition to any requirements specified in the By-laws of the
Company, the Company shall notify each Purchaser Designee and any
Non-voting Observer, by telecopy, of (a) every meeting (or action by
written consent) of the Board of Directors of the Company and (b) every
meeting (or action by written consent) of any committee of the Board of
Directors of the Company, to the extent, in the case of clause (b), that
such person is a member of such committee of the Board of Directors of the
Company, at least three days in advance of such meeting (or distribution
of written consents), or, if such notice under the circumstances is not
practicable, as soon before the meeting (or distribution) as is
practicable.
(3) The Company and each of the Purchasers acknowledge that the
provisions of this Agreement, including this Section 5.13(f), are intended
to provide each of Trefoil and GEI with "contractual management rights"
within the meaning of ERISA and the regulations promulgated thereunder.
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(g) The Purchasers hereby agree, that in the event the Purchasers
shall sell Shares and/or Conversion Shares constituting at least a
majority of the voting power of the Company's securities then outstanding,
on an as-converted basis, to a person, or persons constituting a group
under Section 13(d)(5) of the Exchange Act, in a transaction or series of
related transactions (such person or group, "Third Party Purchaser"), then
as a condition to such sale the Purchasers shall require the Third Party
Purchaser either: (i) to offer to purchase from the holders of Common
Stock all shares of Common Stock held by each such holder at the same per
share consideration offered to the Purchasers; or (ii) for so long as a
majority of the Board of Directors shall consist of directors (other than
Disinterested Directors) designated by the Third-Party Purchaser, (A) to
cause two Disinterested Directors to be included in the slate of nominees
for election to the Board of Directors of the Company and (B) to vote the
Shares or Conversion Shares held from time to time by such Third Party
Purchaser in favor of the Disinterested Directors nominated pursuant to
clause (A) of this Section 5.13(g)(ii).
Section 5.14. Certificate of Designation; Charter Amendment; By-Law
Amendment.
(a) The Company shall, prior to the First Closing (or, if the First
Closing shall not occur, the Principal Closing), cause to be filed with
the Secretary of State of Delaware, a certificate of designation in the
form attached hereto as Exhibit A, establishing the terms and conditions
of the Preferred Stock (the "Certificate of Designation").
(b) The Purchasers each hereby severally agree to vote in favor of
an amendment to the Company's Certificate of Incorporation in the form
attached hereto as Exhibit B (the "Charter Amendment").
(c) The Company shall, prior to the First Closing (or, if the First
Closing shall not occur, the Principal Closing), effect an amendment to
its By-Laws in the form attached hereto as Exhibit C (the "By-Law
Amendment").
Section 5.15. Subsequent Closings.
(a) Sale of Shares. Each Purchaser agrees and acknowledges that the
commitment it is making in this Agreement to purchase the Shares specified
for such Purchaser in Schedule I hereto is irrevocable, and that each
Subsequent Closing is subject only to the applicable limited conditions
set forth in Article VI of this Agreement.
(b) Acceleration of Subsequent Closing(s). Upon the occurrence of
any of the following events (each a "Trigger Event"), the Company and the
Purchasers may agree, as to clause (1) herein, or the Purchasers may
notify the Company, as to clause (2) herein, that any of the Subsequent
Closings is being accelerated, and the Third Closing Date, Fourth Closing
Date or Fifth Closing Date, as the case may be, shall be accelerated and
shall occur on the fifth business day following such notice:
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(1) the Company (by vote of the Disinterested Directors) and
the Purchasers shall agree to such acceleration of the Subsequent
Closing(s); or
(2) at any time the Purchasers, in their sole discretion
(acting together) shall determine that any or all of the Subsequent
Closings shall be accelerated, in the amount and with respect to the
number of Shares set forth in such notice.
The Company agrees that any such notice given pursuant to Paragraph (2)
above shall be binding and not subject to challenge.
Section 5.16. Pre-emptive Rights. After the Principal Closing, for so long
as the Purchasers or their affiliates shall own at least 50% of the total number
of Shares purchased hereunder, the Company will not issue or sell (other than
(i) pursuant to employee incentive stock option or other similar plans
established by the Company, (ii) pursuant to the Warrant Agreement, (iii) upon
conversion of the Shares, or (iv) in connection with any acquisition of all of
the assets or equity securities of any entity), any shares of Common Stock of
the Company, or options, warrants or other rights to purchase or subscribe for
such shares, or securities convertible into or exchangeable for such shares (for
purposes of this Section 5.16, collectively, the "Securities") unless, prior to
the issuance or sale of such Securities, each Purchaser, including affiliates of
the Purchasers to which Shares or Conversion Shares have been transferred (the
"Transferees"), shall have been given the opportunity to purchase (on the same
terms as such Securities are proposed to be sold) the same proportion of such
Securities being issued or offered for sale by the Company as (x) the number of
shares issuable upon conversion of all Shares then owned by such Purchaser or
Transferee on the day preceding the date of the notice required to be given to
such Purchaser and Transferees under this Section 5.16, bears to (y) all of the
Company's issued and outstanding Common Stock on that day, including, for this
purpose, the number of shares then issuable upon conversion of all of the
Company's convertible securities having preemptive rights then outstanding.
Prior to the issuance or sale by the Company of any Securities, the Company will
given written notice thereof to each Purchaser and to each Transferee who holds
of record. Such notice will specify the number of shares or amount of such
Securities proposed to be issued, the price and other terms of their proposed
issuance, the amount of such purchase, and the period during which such
Purchaser or Transferee may elect to purchase such Securities, which period
shall extend for at least thirty (30) days following the giving of such notice.
Each Purchaser and Transferee shall have the right to purchase its pro rata
share of any Securities which are subject to preemptive rights but not
subscribed for by the Purchaser or Transferee which was entitled to purchase
such Securities. Any such Securities which none of the Purchasers or Transferees
elect to purchase in accordance with the provisions of this Section may, within
a period of four (4) months after the expiration of the time for making such
election, be sold by the Company to any other person or persons at not less than
the price and upon other terms and conditions not less favorable to the Company
than those set forth in such notice. In the event that a Purchaser, a Transferee
or the Company fails to perform its obligations under this Section 5.16, the
injured party shall have the right, in addition to any other rights such party
may have, at law, in equity
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or otherwise, to specific performance of any and all of such other party's
obligations under this Section 5.16.
Section 5.17. Common Stock Purchase.
(a) If the Purchasers shall give notice of a First Closing as
provided in Section 1.3(a) hereof, and the Company shall notify the
Purchasers on or before the First Closing Date specified in such notice
that the Company is unable to obtain the consent referred to in Section
5.11 hereof on or prior to such specified First Closing Date, then the
Purchasers shall be entitled to purchase shares of the Common Stock as
provided in this Section 5.17. On any date during the period beginning on
the First Closing Date specified in such notice, and ending on the earlier
of the Principal Closing Date or December 31, 1996, the Purchasers shall
have the right, but not the obligation, to purchase from the Company, and
the Company agrees to sell on the terms and conditions set forth in this
Section 5.17, up to 2,352,941 authorized but unissued shares of the Common
Stock (the "Common Shares"), at a price of $6.375 per share.
(b) To exercise the purchase rights under this Section 5.17, the
Purchasers shall give written notice to the Company of their intent to
exercise these rights, specifying the number of Common Shares to be
purchased by each of the Purchasers hereunder, and the place and date
thereof (which shall be not less than one and not more than five business
days from the date of such notice).
(c) At any closing under this Section 5.17, the Purchasers shall
make payment to the Company for the aggregate price for the Common Shares
being purchased by wire transfer of immediately available funds to the
account designated by the Company in writing. At such closing, the Company
shall deliver to the Purchasers a duly executed certificate or
certificates registered in the name of each Purchaser representing the
number of Common Shares purchased by such Purchaser hereunder.
(d) The Company hereby represents and warrants to, and covenants and
agrees with, each of the Purchasers that, on the date of any closing under
this Section 5.17:
(1) the Company will have taken all necessary corporate action
to authorize and reserve for issuance sufficient authorized and
unissued shares of Common Stock to effect the issuance of Common
Shares hereunder;
(2) the Common Shares to be issued on such date, when paid for
as provided herein, will be duly authorized, validly issued, fully
paid and nonassessable; and
(3) the Company will not, except as set forth in a disclosure
certificate provided by an officer of the Company at or prior to
such Closing, be (A) subject to or obligated under any provisions of
its Certificate of Incorporation or By-laws or (B)
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subject to any order, decree, agreement, indenture, instrument, law,
rule or regulation, which would be breached or violated by its
executing and carrying out the provisions of this Section 5.17;
provided, that any exception listed on such disclosure certificate
shall not be a condition to the Company's obligations under this
Section 5.17.
(e) Each Purchaser, as to itself only, hereby represents and
warrants to, and covenants and agrees with, the Company that, on the date
of any closing under this Section 5.17, if such Purchaser exercises its
right to purchase Common Shares hereunder, it will not acquire any Common
Shares with a view to any public distribution thereof within the meaning
of the Securities Act.
(f) In the event of any change in the outstanding shares of Common
Stock by reason of stock dividends, split-ups, mergers, recapitalizations,
combinations, conversions, exchanges of shares or the like, the number and
kind of shares or securities subject to this Section 5.17 and the purchase
price per Common Share shall be appropriately adjusted. If, prior to the
expiration or exercise of the rights granted by this Section 5.17 in full,
the Company shall consolidate with or merge into another corporation or
liquidate, the Purchaser shall thereafter receive upon exercise of the
rights granted by this Section 5.17 the securities or property to which a
holder of the number of Common Shares deliverable upon the exercise
thereof would have been entitled upon such consolidation, merger or
liquidation, and the Company shall take such steps in connection with such
consolidation, merger or liquidation as may be necessary to assure that
the provisions hereof shall thereafter be applicable, as nearly as
reasonably may be practicable, in relation to any securities or property
thereafter deliverable upon exercise of the rights granted by this Section
5.17.
Section 5.18. Voting Agreements; NASD Approval. Promptly after the
execution of this Agreement, the Company shall prepare and file with the
National Association of Securities Dealers, Inc. ("NASD") a request for
confirmation that the Company may consummate the First Closing without approval
by the Company's stockholders at a meeting. The Company will use its reasonable
best efforts to obtain the agreement of its principal stockholders to enter into
Voting and Ratification Agreements (as defined in Section 6.3(f) hereof). The
Company agrees to prepare and file with the NASD, as promptly as practicable
after holders of more than 50% of the outstanding Common Stock shall enter into
Voting and Ratification Agreements, a request for confirmation that,
notwithstanding Rule 4460(i)(B) of the Nasdaq Stock Market Rules of the NASD
(the "NASD Rules"), the Company may consummate the Principal Closing and the
transactions contemplated hereby without approval by the Company's stockholders
at a meeting.
Section 5.19. The Company shall make a timely election pursuant to Section
382(1)(5)(H) of the Code and Treasury Regulation Section 1.382-9(i) not to apply
the provisions of Section 382(1)(5) of the Code to any ownership change (within
the meaning of Section 382(g) of the Code) occurring pursuant to the Second
Amended Chapter 11 Plan of Reorganization of the Grand Union Company, dated
April 19, 1995.
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Section 5.20. FIRPTA Certificate. At each Closing, the Company shall
provide each of the Purchasers a valid certification of non-foreign status
pursuant to Section 1445(b)(2) of the Code and Treasury Regulation Section
1.1445-2(b)(2). Such certification shall conform to the model certification
provided in Treasury Regulation Section 1.1445-2(b)(2)(iii)(B), or shall be in a
form otherwise acceptable to the Purchasers.
ARTICLE VI
CONDITIONS TO THE STOCK PURCHASE
Section 6.1. Conditions to Obligation of Each Party to Effect Any Closing.
The respective obligations of each party to effect any Closing of the Stock
Purchase shall be subject to the satisfaction at or prior to the relevant
Closing Date of the following conditions:
(a) No Injunctions or Restraints; Illegality. No temporary
restraining order, preliminary or permanent injunction or other order
issued by any court of competent jurisdiction or other legal restraint or
prohibition preventing the consummation of the Stock Purchase shall be in
effect, nor shall any proceeding brought by any administrative agency or
commission or other governmental authority or instrumentality, domestic or
foreign, seeking any of the foregoing be pending; and there shall not be
any action taken, or any statute, rule, regulation or order enacted,
entered, enforced or deemed applicable to the Stock Purchase, which makes
the consummation of the Stock Purchase illegal; and
(b) Governmental Actions. There shall not have been instituted,
pending or threatened any action or proceeding (or any investigation or
other inquiry that might result in such an action or proceeding) by any
governmental authority or administrative agency before any governmental
authority, administrative agency or court of competent jurisdiction, nor
shall there be in effect any judgment, decree or order of any governmental
authority, administrative agency or court of competent jurisdiction, in
either case, seeking to prohibit or limit the Purchaser from exercising
all material rights and privileges pertaining to its ownership of the
Common Stock, or seeking to compel the Company or any of its subsidiaries
to dispose of or hold separate all or any material portion of the business
or assets of the Company or any of its subsidiaries, as a result of the
Stock Purchase or the transactions contemplated by this Agreement.
Section 6.2. Conditions to Obligation of Each Party to Effect the
Principal Closing. The respective obligations of each party to effect the
Principal Closing of the Stock Purchase shall be subject to the satisfaction at
or prior to the Principal Closing Date of the following conditions:
(a) Stockholder Approval. This Agreement shall have been approved
and adopted by the requisite vote of the stockholders of the Company,
unless the NASD shall have waived such requirement; and
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(b) HSR Act. All waiting periods applicable to the consummation of
the Stock Purchase under the HSR Act shall have expired or been
terminated.
Section 6.3. Additional Conditions to Obligations of the Purchasers at the
First Closing. The obligations of the Purchasers to effect the purchase of the
Shares to be sold at the First Closing (if one should occur) are also subject to
the following conditions:
(a) Representations and Warranties. The representations and
warranties of the Company shall have been true and correct when made in
all respects and shall be true and correct at and as of the Closing Date
as if made at and as of such time, except for (i) changes not prohibited
by this Agreement, (ii) those representations and warranties which address
matters only as of a particular date (which shall have been true and
correct as of such date, subject to clause (iii)), or (iii) at and as of
the Closing Date where the failure to be true and correct could not, if
any qualification in such representations or warranties as to materiality
were deleted therefrom (including dollar thresholds), individually or in
the aggregate reasonably be expected to have a Material Adverse Effect and
the Purchasers shall have received a certificate to such effect signed by
the President and the Chief Financial Officer of the Company;
(b) Agreements and Covenants. The Company shall have performed or
complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by it at or
prior to the Closing Date, and the Purchasers shall have received a
certificate to such effect signed on behalf of the Company by the
President and the Chief Financial Officer of the Company;
(c) Consents Obtained. All consents, waivers, approvals,
authorizations or orders required to be obtained, and all filings required
to be made, by the Company for the due authorization, execution and
delivery of this Agreement and the consummation by it of the transactions
contemplated hereby shall have been obtained and made by the Company,
including without limitation the consent referred to in Section 5.11,
except for consents required to be obtained under contracts not material
to the operation of the business of the Company; the Company shall have
obtained all required approvals and consents, and shall have delivered all
required notices, of the transfer of ownership or control of the Company
as contemplated by this Agreement, with respect to material licenses and
permits held by the Company or any of its subsidiaries pursuant to any
federal, state or local laws governing the sale of alcoholic beverages,
pharmaceutical products, and cigarettes;
(d) Opinion of Counsel. The Purchasers shall have received a written
opinion of Ropes & Gray and Willkie, Farr & Gallagher, in form and
substance reasonably satisfactory to the Purchasers, substantially in the
form of Exhibit F-1 and Exhibit F-2 hereto;
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(e) Blue Sky Laws. The Company shall have received all permits and
other authorizations necessary under the Blue Sky Laws to issue the Shares
pursuant to the Stock Purchase;
(f) Ratification and Voting Agreements. The holders of more than 50%
of the shares of Common Stock then outstanding shall have entered into
agreements with the Company and the Purchasers in the form of Exhibit D
hereto, with such changes requested by the several shareholders as are
reasonably acceptable to the Purchasers (each such Agreement, a
"Ratification and Voting Agreement") and each such agreement shall be in
full force and effect;
(g) Registration Rights Agreement. A registration rights agreement
between the Company and the Purchasers (the "Registration Rights
Agreement") in the form of Exhibit H hereto shall be in full force and
effect;
(h) Management Services Agreement. A management services agreement
between the Company and SCA (the "Management Agreement") shall be in full
force and effect;
(i) Transaction Fee. The Company shall have paid to SCA and the GEI
Manager an aggregate transaction fee equal to 4.0% of the Purchase Price
of the Shares being purchased at such Closing; such transaction fee to be
paid by the Company one-half to SCA and one-half to the GEI Manager;
(j) Board of Directors. The Company shall have expanded the Board of
Directors to nine members and shall have caused to be elected two
directors of the Purchasers' choosing;
(k) Delivery of Shares. The Company shall have delivered the Shares
to be delivered pursuant to Section 1.2 hereof against the payment of the
Purchase Price;
(l) Bankruptcy. The Company shall not on the First Closing Date be a
party to any bankruptcy, insolvency, or reorganization proceedings,
whether voluntary or involuntary (other than the proceeding pursuant to
the Second Amended Chapter 11 Plan of Reorganization of the Grand Union
Company, dated April 19, 1995 (the "Reorganization Plan"); the
Reorganization Plan shall not have been amended, modified or rescinded,
and shall be in full force and effect; and
(m) Senior Notes. The Company shall have obtained the consent of
holders of not less than a majority in principal amount of the Company's
Senior Notes to the valid and effective amendment of the Indenture
pursuant to which amendments to the Indenture, in form and substance
satisfactory to the Purchasers, are made (the "Senior Note Condition").
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Section 6.4. Additional Conditions to Obligations of the Purchasers at the
Principal Closing. The obligations of the Purchasers to effect the purchase of
the Shares to be sold at the Principal Closing are also subject to the following
conditions:
(a) Representations and Warranties. The representations and
warranties of the Company shall have been true and correct when made in
all respects and shall be true and correct in all respects at and as of
the Closing Date as if made at and as of such time, except for (i) changes
not prohibited by this Agreement, (ii) those representations and
warranties which address matters only as of a particular date (which shall
have been true and correct as of such date, subject to clause (iii)), or
(iii) at and as of the Closing Date, where the failure to be true and
correct could not, if any qualification in such representations or
warranties as to materiality (and dollar thresholds) were deleted
therefrom, individually or in the aggregate reasonably be expected to have
a Material Adverse Effect, and the Purchasers shall have received a
certificate to such effect signed by the President and the Chief Financial
Officer of the Company;
(b) Agreements and Covenants. The Company shall have performed or
complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by it at or
prior to the Closing Date, and the Purchasers shall have received a
certificate to such effect signed on behalf of the Company by the
President and the Chief Financial Officer of the Company;
(c) Consents Obtained. All consents, waivers, approvals,
authorizations or orders required to be obtained, and all filings required
to be made, by the Company for the due authorization, execution and
delivery of this Agreement and the consummation by it of the transactions
contemplated hereby shall have been obtained and made by the Company,
including without limitation the consent referred to in Section 5.11,
except for consents required to be obtained under contracts not material
to the operation of the business of the Company; the Company shall have
obtained all required approvals and consents, and shall have delivered all
required notices, of the transfer of ownership or control of the Company
as contemplated by this Agreement, with respect to material licenses and
permits held by the Company or any of its subsidiaries pursuant to any
federal, state or local laws governing the sale of alcoholic beverages,
pharmaceutical products, and cigarettes;
(d) Opinion of Counsel. The Purchasers shall have received a written
opinion of Ropes & Gray, and Willkie, Farr & Gallagher in form and
substance reasonably satisfactory to the Purchasers, substantially in the
form of Exhibit F-1 and F-2, respectively;
(e) Blue Sky Laws. The Company shall have received all permits and
other authorizations necessary under the Blue Sky Laws to issue the Shares
pursuant to the Stock Purchase;
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(f) Registration Rights Agreement. The Registration Rights Agreement
shall be in full force and in effect;
(g) Management Services Agreement. The Management Agreement shall be
in full force and in effect;
(h) Transaction Fee. The Company shall have paid to SCA and the GEI
Manager an aggregate transaction fee with respect to such closing equal to
$4,000,000 less the amount of the transaction fee, if any, paid pursuant
to Section 6.3(i); such transaction fee to be paid by the Company one-half
to SCA and one-half to the GEI Manager;
(i) Board of Directors. The Company shall have expanded the Board of
Directors to nine members and shall have caused to be elected five
directors of the Purchasers' choosing;
(j) Delivery of Shares. The Company shall have delivered the Shares
to be delivered pursuant to Section 1.2 hereof against the payment of the
Purchase Price;
(k) Bankruptcy. The Company shall not on the Principal Closing Date
be a party to any bankruptcy, insolvency, or reorganization proceedings,
whether voluntary or involuntary (other than the proceeding pursuant to
the Reorganization Plan), the Reorganization Plan shall not have been
amended, modified or rescinded, and shall be in full force and effect; and
(l) Withdrawal Liability. The Purchasers shall have determined,
after an investigation by Ernst & Young to have commenced promptly after
the date hereof and to be completed no later than the date on which all
other conditions to the Principal Closing set forth in Sections 6.1 and
6.4 hereof have been satisfied (which shall not occur earlier than 45 days
from the date hereof), that the withdrawal liability that the Company
would incur with respect to (i) the Amalgamated Meat Cutters and Retail
Food Store Employees Union Pension Fund (Local 342) and (ii) the Local 174
Retail Pension Fund, if the Company were completely to withdraw as of the
Principal Closing Date from both such plans, would not exceed $6,000,000.
Section 6.5. Conditions to Obligation of the Purchasers at any Subsequent
Closing. The obligations of the Purchasers to purchase shares at any Subsequent
Closing shall be subject only to the fulfillment on or before such Subsequent
Closing of each of the following conditions unless waived by Purchasers:
(a) Representations and Warranties. The representations and
warranties of the Company contained in the first sentence of Section 2.1,
in the last sentence of Section 2.2 and in the penultimate sentence of
Section 2.3(b) of this Agreement shall be true and correct in all material
respects at and as of the Subsequent Closing Date as if made at and
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as of such time and the Purchasers shall have received a certificate to
such effect signed by the President and the Chief Financial Officer of the
Company;
(b) Opinion of Counsel. The Purchasers shall have received a written
opinion of Ropes & Gray, in form and substance reasonably satisfactory to
the Purchasers, substantially in the form of Exhibit I hereto; and
(c) Bankruptcy. The Company shall not be party to any bankruptcy,
insolvency, or reorganization proceedings, whether voluntary or
involuntary (except for proceedings pursuant to the Reorganization Plan).
Section 6.6. Additional Conditions to Obligation of the Company at the
First Closing and the Principal Closing. The obligation of the Company to effect
the Stock Purchase at each of the First Closing and the Principal Closing is
also subject to the following conditions:
(a) Representations and Warranties. The representations and
warranties of the Purchasers contained in this Agreement shall have been
true and correct in all respects when made and shall be true and correct
in all respects on and as of the Closing Date, except for (i) changes
contemplated by this Agreement and (ii) those representations and
warranties which address matters only as of a particular date (which shall
have been true and correct in all material respects as of such date), with
the same force and effect as if made on and as of the Closing Date, and
the Company shall have received a certificate to such effect signed by the
President and the Chief Financial Officer of the general partner of each
of the Purchasers;
(b) Agreements and Covenants. The Purchasers shall have performed or
complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by them on or
prior to the Closing Date, and the Company shall have received a
certificate to such effect signed by the President and the Chief Financial
Officer of the general partner of each of the Purchasers;
(c) Consents Obtained. All consents, waivers, approvals,
authorizations or orders required to be obtained, and all filings required
to be made, by the Purchasers for the due authorization, execution and
delivery of this Agreement and the consummation by it of the transactions
contemplated hereby shall have been obtained and made by the Purchasers;
(d) Opinion of Counsel. The Company shall have received a written
opinion from Fried, Frank, Harris, Shriver & Jacobson, and Dewey
Ballantine in form and substance reasonably satisfactory to the Company,
substantially in the form of Exhibit G-1 and G-2 hereto, respectively; and
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(e) Payment of Purchase Price. The Purchasers shall have delivered
payment of the aggregate Purchase Price for the Shares sold hereunder to
be purchased by them at the Closing as set forth in Section 1.2 hereof.
Section 6.7. Conditions to Obligations of the Company at any Subsequent
Closing. The obligations of the Company to effect the Stock Purchase at any
Subsequent Closing shall be subject to the fulfillment on or before such
Subsequent Closing of each of the following conditions unless waived by the
Company:
(a) Representations and Warranties. The representations and
warranties of the Purchasers contained in Section 3.1 and 3.3 of this
Agreement shall be true and correct in all material respects at and as of
the Subsequent Closing Date as if made at and as of such time and the
Company shall have received a certificate to such effect signed by the
President and the Chief Financial Officer of the general partner of each
of the Purchasers; and
(b) Payment of Purchase Price. The Purchasers shall have delivered
payment of the aggregate Purchase Price of the Shares to be purchased by
them at such Closing as set forth in Section 1.2.
ARTICLE VII
TERMINATION
Section 7.1. Termination. This Agreement may be terminated at any time
prior to the Principal Closing Date, notwithstanding approval thereof by the
stockholders of the Company:
(a) by mutual written consent duly authorized (i) by the Board of
Directors of the Company and the Purchasers at any time prior to the
Principal Closing or (ii) by the Disinterested Directors and the
Purchasers at any time after the first to occur of the First Closing or
the Principal Closing; or
(b) by either the Purchasers or the Company if the Principal Closing
shall not have been consummated by December 31, 1996 (provided that the
right to terminate this Agreement under this Section 7.1(b) shall not be
available to any party whose failure to fulfill any obligation under this
Agreement has been the cause of or resulted in the failure of the
Principal Closing to occur on or before such date); or
(c) by either the Purchasers or the Company if a court of competent
jurisdiction or governmental, regulatory or administrative agency or
commission shall have issued a nonappealable final order, decree or ruling
or taken any other action having the effect of permanently restraining,
enjoining or otherwise prohibiting the Stock Purchase; or
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(d) by the Purchasers, (i) if the condition specified in Section
6.2(a) shall not have been satisfied by December 31, 1996, or (ii) prior
thereto, if any party (other than the Purchasers) to any Ratification and
Voting Agreement shall have breached such agreement; or
(e) by the Purchasers, if: (i) the Board of Directors of the Company
shall withdraw, modify or change its approval or recommendation of this
Agreement or the Stock Purchase in a manner adverse to the Purchasers or
shall have resolved to do so; (ii) the Board of Directors of the Company
shall have recommended to the stockholders of the Company an Alternative
Transaction (as defined below); (iii) a tender offer or exchange offer for
35% or more of the outstanding shares of Common Stock is commenced (other
than by the Purchasers or affiliates of Purchasers) and the Board of
Directors of the Company recommends that the stockholders of the Company
tender their shares in such tender or exchange offer; (iv) any agreement
with a Third Party contemplating an Alternative Transaction is signed by
the Company or (v) any Third Party consummates an Alternative Transaction;
or
(f) by the Company if the Board of Directors of the Company
determines in good faith (upon advice of outside counsel) that in order to
discharge properly its fiduciary duties it is required to recommend to the
stockholders of the Company an Alternative Transaction; or
(g) by the Purchasers or the Company, (i) if any representation or
warranty of the Company or the Purchasers, respectively, set forth in this
Agreement shall be untrue when made, or (ii) upon a breach of any covenant
or agreement on the part of the Company or the Purchasers set forth in
this Agreement, such that the conditions set forth in any of Sections
6.3(a), 6.3(b), 6.4(a), 6.4(b), 6.6(a) or 6.6(b), as the case may be,
would not be satisfied (either (i) or (ii) above being a "Terminating
Breach"), provided, that, if such Terminating Breach is curable within
twenty-one (21) calendar days after notice of the other party's intent to
terminate this Agreement, through the exercise of reasonable efforts and
for so long as the Company or the Purchasers, as the case may be,
continues to exercise such reasonable efforts, neither the Purchasers nor
the Company, respectively, may terminate this Agreement under this Section
7.1(g) until after the last day of such period.
As used herein, "Alternative Transaction" means any of (i) the
acquisition, in one transaction or a series of transactions by any person (or
group of persons) other than the Purchasers or their affiliates (a "Third
Party") of more than 20% of the outstanding shares of Common Stock, whether from
the Company or pursuant to a tender offer or exchange offer or otherwise, (ii) a
merger or other business combination involving the Company pursuant to which any
Third Party acquires more than 35% of the voting power of the outstanding equity
securities of the Company or the entity surviving such merger or business
combination, or (iii) any other
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transaction pursuant to which any Third Party acquires or would acquire control
of assets (including for this purpose the outstanding equity securities of
subsidiaries of the Company, and the entity surviving any merger or business
combination including any of them) of the Company or any of its subsidiaries
having a fair market value (as determined by the Board of Directors of the
Company in good faith) equal to more than 35% of the fair market value of all
the assets of the Company and its subsidiaries, taken as a whole, immediately
prior to such transaction; provided, however, that (x) no person or group who
owns 20% or more of the Company's outstanding Common Stock on the date hereof
shall be deemed a "Third Party" for purposes of determining that an Alternative
Transaction shall have occurred, unless and until such holder shall have
acquired an additional aggregate of more than 10% of the outstanding Common
Stock from and after the date hereof, provided that such holder shall be, as of
the date hereof, and shall continue to be, entitled to file reports concerning
beneficial ownership and changes thereto required under the Exchange Act on
Schedule 13G; provided that, any requirement to file on Schedule 13D resulting
solely from the execution of Ratification and Voting Agreements shall not cause
a person to be considered a Third Party, and (y) no other person or group shall
be deemed a "Third Party" for purposes of determining that an Alternative
Transaction shall have occurred if it is, from and after the date of its
acquisition of Common Stock, and for so long as it remains, entitled to file
reports concerning beneficial ownership and changes thereto required under the
Exchange Act on Schedule 13G; provided that, any requirement to file on Schedule
13D resulting solely from the execution of Ratification and Voting Agreements
shall not cause a person to be considered a Third Party, at which time all of
any such holder's, person's or group's shares shall be counted for purposes of
determining whether an Alternative Transaction shall have occurred.
Section 7.2. Effect of Termination; Termination Fee. In the event of the
termination of this Agreement pursuant to Section 7.1, this Agreement shall
forthwith become void and there shall be no liability on the part of any party
hereto or any of its affiliates, directors, officers or stockholders except as
set forth in this Section 7.2 and Sections 7.3, 7.4 and 8.1 hereof, and nothing
herein shall relieve any party from liability for any breach hereof. In the
event of a termination:
(a) by the Company pursuant to Section 7.1(f) hereof or by the
Purchasers pursuant to Section 7.1(e) (i) through (iv) hereof, the Company
shall pay to SCA and the GEI Manager an aggregate of $2,600,000, in cash,
one-half to SCA and one-half to the GEI Manager;
(b) by the Purchasers pursuant to Section 7.1(d) (i) or 7.1(e)(v)
hereof, the Company shall pay to SCA and the GEI Manager an aggregate of
$2,600,000, either (i) in cash, one-half to SCA and one-half to the GEI
Manager or (ii) by issuing shares of Common Stock, one-half to SCA and
one-half to the GEI Manager, having an aggregate Fair Market Value equal
to such amount multiplied by 133-1/3%, such choice between cash or Common
Stock to be made by the Company;
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(c) by (i) either the Purchasers or the Company (A) pursuant to
Section 7.1(c) or (B) pursuant to Section 7.1(g) due solely to a
Terminating Breach resulting from a Force Majeure Event or (ii) the
Purchasers pursuant to Section 7.1(g) due solely to a failure of the
conditions set forth in Section 6.1(a) or 6.1(b) to be satisfied (a
"Section 6.1 Breach"), then the Company shall pay no termination fee; or
(d) by either the Purchasers or the Company pursuant to any other
provision of Section 7.1 (including termination by the Company for a
Section 6.1 Breach), the Company shall pay to SCA and the GEI Manager
either (i) an aggregate of $1,300,000 in cash, paid one-half to SCA and
one-half to the GEI Manager, or (ii) 108,000 shares of Common Stock to SCA
and 108,000 shares of Common Stock to the GEI Manager, such choice between
cash and Common Stock to be made by the Company.
Section 7.3. Return of Transaction Fee. If the Purchasers shall fail to
purchase Shares at any Subsequent Closing solely as a result of the breach of
this Agreement by the Purchasers, each of SCA and the GEI Manager (severally,
and not jointly) shall pay to the Company one-half by SCA and one-half by the
GEI Manager, as liquidated damages for the transaction fees paid pursuant to
Section 6.3(i) or 6.4(h), an aggregate amount equal to 4% of the Purchase Price
of the Shares to have been purchased by such Purchaser at such Subsequent
Closing, together with interest on such amount at a rate of 8 1/2% per annum,
accruing from the date of the Principal Closing to the date of such Subsequent
Closing as scheduled hereunder.
Section 7.4. Fees and Expenses. All fees and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the Company, whether or not the Stock Purchase is consummated; provided,
however, that, with respect to the Purchasers, such fees and expenses shall not
exceed $1,000,000.
ARTICLE VIII
GENERAL PROVISIONS
Section 8.1. Effectiveness of Representations, Warranties and Agreements;
Knowledge, Etc. Except as otherwise provided in this Section 8.1, the
representations, warranties and agreements of each party hereto shall remain
operative and in full force and effect regardless of any investigation made by
or on behalf of any other party hereto, any person controlling any such party or
any of their officers or directors, whether prior to or after the execution of
this Agreement. The representations, warranties and agreements in this Agreement
and in any certificates delivered at or prior to a Closing Date shall (i)
survive such Closing Date with respect only to the Shares purchased on such
Closing Date for a period of one year, at which time they shall terminate and be
of no further force or effect, except that (w) the representations and
warranties in Section 2.17 shall survive for five years from the Principal
Closing Date (or, if the Principal Closing does not occur, the First Closing
Date), (x) the representations and warranties
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in Sections 2.1, 2.2, 2.3, 2.4, 2.19 and 2.28 and the covenants contained in
Sections 5.4, 5.5, 5.10, 5.13, 5.16 and 5.17(d) shall survive indefinitely, (y)
the covenant set forth in Section 5.12, which shall survive for three years from
the Principal Closing Date (or, if the Principal Closing does not occur, the
First Closing Date) and (z) the representations, warranties and agreements set
forth in Section 2.16, which shall survive the Closing until the expiration of
the applicable statute of limitations, and (ii) terminate upon the termination
of this Agreement pursuant to Section 7.1, except that the agreements set forth
in Sections 7.2, 7.3 and 7.4 shall survive such termination indefinitely and
except that, if this Agreement shall terminate after a Closing has occurred,
clause (i) of this sentence shall apply; provided, however, that the Purchasers
shall have no claim with respect to any purchase of any Shares, with respect to
a breach of a representation, warranty or covenant hereunder, or otherwise,
unless and until the aggregate amount of all damages sustained by the Purchasers
in respect thereof shall exceed $500,000, in which event the Company shall be
liable to the Purchasers in the aggregate amount of all such damages.
Section 8.2. Restrictive Legends. No restricted shares may be transferred
without registration under the Securities Act and applicable state securities
laws unless in the opinion of Ropes & Gray or other counsel to the Company such
transfer may be effected without such registration. Each certificate
representing restricted shares shall bear legends in substantially the following
form:
The securities represented by this certificate have not been registered
under the Securities Act of 1933 or the securities laws of any state and
may not be sold or otherwise disposed of except pursuant to an effective
registration statement under such Act and applicable state securities laws
or an applicable exemption to the registration requirements of such Act or
such laws.
The securities represented by this certificate were issued pursuant to,
and the holder hereof is entitled to certain rights and subject to certain
obligations contained in, a Stock Purchase Agreement dated as of July 30,
1996, a copy of which is available for inspection at the principal office
of the issuer hereof, and will be furnished without charge to the holder
of such securities upon written request.
Section 8.3. Notices. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given
or made if and when delivered personally or by overnight courier to the parties
at the following addresses or sent by electronic transmission, with confirmation
received, to the telecopy numbers specified below (or at such other address or
telecopy number for a party as shall be specified by like notice):
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(a) If to the Purchasers:
Trefoil Capital Investors II, L.P.
c/o Shamrock Capital Advisors, Inc.
4444 Lakeside Drive
Burbank, CA 91505
Attn: Stanley P. Gold, President
Telecopier No.: (818) 845-9718
Telephone No.: (818) 845-4444
and
GE Investment Private Placement Partners
A Limited Partnership
3008 Summer Street
Stamford, CT 06905
Attn: Michael Pastore, Esq.
Telecopier No.: (203) 326-4177
Telephone No.: (203) 326-2312
With copies to:
Fried, Frank, Harris, Shriver & Jacobson
725 South Figueroa Street, Suite 3890
Los Angeles, CA 90017-5438
Attn: David K. Robbins, Esq.
Telecopier No.: (213) 689-1646
Telephone No.: (213) 689-5800
and
Dewey Ballantine
1301 Avenue of the Americas
New York, NY 10019
Attn: William J. Phillips, Esq.
Telecopier No.: (212) 259-6333
Telephone No.: (212) 259-8000
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(b) If to the Company:
Chief Executive Officer
The Grand Union Company
201 Willowbrook Blvd.
Wayne, NJ 07470-0966
Attn: Joseph T. McCaig
Telecopier No.: (201) 890-6012
Telephone No.: (201) 890-6000
With a copy to:
Ropes & Gray
One International Place
Boston, MA 02110
Attn: Winthrop G. Minot, Esq.
Telecopier No.: (617) 951-7050
Telephone No.: (617) 951-7364
Section 8.4. Certain Definitions. For purposes of this Agreement, the
term:
(a) "affiliate" means a person that directly or indirectly, through one
or more intermediaries, controls, is controlled by, or is under common
control with, the first mentioned person; including, without limitation,
any partnership or joint venture in which the first mentioned person
(either alone, or through or together with any other subsidiary) has,
directly or indirectly, an interest of 10% or more;
(b) "beneficial owner" with respect to any shares of Common Stock means
a person who shall be deemed to be the beneficial owner of such shares (i)
which such person or any of its affiliates or associates (as such term is
defined in Rule 12b-2 of the Exchange Act) beneficially owns, directly or
indirectly, (ii) which such person or any of its affiliates or associates
has, directly or indirectly, (A) the right to acquire (whether such right
is exercisable immediately or subject only to the passage of time),
pursuant to any agreement, arrangement or understanding or upon the
exercise of conversion rights, exchange rights, warrants or options, or
otherwise, or (B) the right to vote pursuant to any agreement, arrangement
or understanding, or (iii) which are beneficially owned, directly or
indirectly, by any other persons with whom such person or any of its
affiliates or associates has any agreement, arrangement or understanding
for the purpose of acquiring, holding, voting or disposing of any shares;
(c) "business day" means any day other than a day on which banks in
the State of New York are required or authorized to be closed;
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(d) "Company Credit Agreement" means that certain amended and restated
Credit Agreement dated as of June 15, 1995, as from time to time in effect
among the Company, the banks party thereto, and Bankers Trust Company as
Agent for the banks party thereto, as filed in the Company's SEC Reports,
together with such related transaction documents, amendments, extensions
and waivers in effect as of the date hereof, and the consent and waiver
secured pursuant to Section 5.11.
(e) "consent of the Purchasers" or "by the Purchasers" means the
consent of or action by, as the case may be, the Purchasers (i) if prior
to the Principal Closing, as are, in the aggregate, purchasing at least
51% of the Shares sold hereby and (ii) if after the Principal Closing, as
then own, in the aggregate, at least 51% of the Shares and the Conversion
Shares (voting as a single class);
(f) "control" (including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly or as trustee
or executor, of the power to direct or cause the direction of the
management or policies of a person, whether through the ownership of
stock, as trustee or executor, by contract or credit arrangement or
otherwise;
(g) "Conversion Shares" means the shares of Common Stock issuable upon
conversation of the Shares;
(h) "Current Market Price" when used with reference to shares of Common
Stock or other securities on any date, shall mean the volume weighted
average of the sales prices for shares of Common Stock or such other
securities on such date and, when used with reference to shares of Common
Stock or other securities for any period shall mean the volume weighted
average of the sale prices for shares of Common Stock or such other
securities for such period. If the Common Stock is not listed or admitted
to trading on a national securities exchange or an automated quotation
system that permits determination of weighted average sale prices over a
period of time, then "Current Market Price" for any period shall mean the
average of the last quoted sale price or, if not so quoted, the average of
the high bid and low asked prices in the over-the-counter market, as
reported by the National Association of Securities Dealers, Inc. Automated
Quotation System or such other system then in use, or, if on any such date
the Common Stock or such other securities are not quoted by any such
organization, the average of the closing bid and asked prices are
furnished by a professional market maker making a market in the Common
Stock or such other securities selected by the Board of Directors of the
Company. If the Common Stock or such other securities are not publicly
held or so listed or publicly traded, "Current Market Price" shall mean
the fair market value per share of Common Stock or of such other
securities as determined in good faith by the Board of Directors of the
Company based on an opinion of an independent investment banking firm with
an established national reputation as a valuer of securities, which
opinion may be based on such assumptions as such firm shall deem to be
necessary and appropriate;
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(i) "Disinterested Director" shall mean any member of the Board of
Directors of the Company who is not an Associate of either or both of the
Purchasers. "Associate" shall mean (i) a person who directly or indirectly
through one or more intermediaries controls, is controlled by, or is under
direct or indirect common control with, either of the Purchasers; (ii) a
person who is or has been within two years of the time in question, an
officer of the Company; (iii) a person who is or has been within two years
prior to the time in question, a director, officer or general partner of
either of the Purchasers or an Associate of a person (other than the
Company) referred to in clauses (i) or (iv); and (iv) Members of the
Immediate Family of any such Person. "Members of the Immediate Family"
shall mean, with respect to any individual, each spouse, parent, brother,
sister or child of such individual, each spouse of any such person, each
child of any of the aforementioned persons, each trust created in whole or
in part for the benefit of one or more of the aforementioned persons and
each custodian or guardian of any property of one or more of the
aforementioned persons. Notwithstanding the foregoing, a person shall not
be deemed to be an Associate of the Purchasers solely because such person
is a member of the Board of Directors of the Company;
(j)"Fair Market Value" shall mean, as to shares of Common Stock or any
other class of capital stock or securities of the Company or any other
issuer which are publicly traded, the Current Market Price of such shares
or securities for the 30 Trading Day period preceding the date as of which
the Fair Market Value is to be determined. The "Fair Market Value" of any
security which is not publicly traded or of any other property shall mean
the fair value thereof as determined by an independent investment banking
or appraisal firm experienced in the valuation of such securities or
property selected in good faith by the Board of Directors of the Company
or a committee thereof, or, if no such investment banking or appraisal
firm is in the good faith judgment of the Board of Directors or such
committee available to make such determination, as determined in good
faith by the Board of Directors of the Company or such committee;
(k) "Force Majeure Event" means a war involving the United States
(declared or undeclared), embargo, blockade or nuclear incident or any
hurricane, earthquake, flood, tornado, or other similar act of God;
(l) "generally accepted accounting principles" or "GAAP" shall mean
United States generally accepted accounting principles;
(m) "Indenture" means the indenture dated June 15, 1995, covering the
Company's 12% Senior Notes due September 1, 2004, and the related
transaction documents referenced therein;
(n) "knowledge" means the actual knowledge of any director or
executive officer;
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(o) "Material Adverse Effect" means, when used in connection with the
Company or any of the Company's subsidiaries, as the case may be, any
change, effect or circumstance that, individually or when taken together
with all other such changes, effects or circumstances that have occurred
prior to the date of determination of the occurrence of the Material
Adverse Effect and with respect to which such phrase is used, (a) is
materially adverse to the business, assets (including intangible assets)
financial condition or results of operations of the Company and its
subsidiaries, in each case taken as a whole, or (b) will delay or prevent
the consummation of the transactions contemplated hereby;
(p) "person" means an individual, corporation, partnership,
association, trust, unincorporated organization, other entity or group (as
defined in Section 13(d)(3) of the Exchange Act);
(q) "restricted shares" shall mean Shares which are and at all times
since the issuance thereof have been "restricted securities" within the
meaning of Rule 144(a)(3) under the Securities Act;
(r) "Senior Notes" means the Company's 12% Senior Notes due
September 1, 2004;
(s) "subsidiary" or "subsidiaries" of the Company or any other person
means any corporation, partnership, joint venture or other legal entity of
which the Company, or such other person, as the case may be (either alone
or through or together with any other subsidiary), owns, directly or
indirectly, more than 50% of the stock or other equity interests the
holders of which are generally entitled to vote for the election of the
board of directors or other governing body of such corporation or other
legal entity.
Each of the following terms shall have the meaning ascribed to it in the
section set forth beside such term in the table below:
Term Section
---- -------
"Acquisition Proposal" 4.2(a)
"Agreement" Recitals
"Alternative Transaction" 7.1
"Antitrust Division" 5.1
"Approvals" 2.1
"Blue Sky Laws" 2.5(d)
"By-Law Amendment" 5.14(c)
"Certificate of Designation" 5.14(a)
"Charter Amendment" 5.14(b)
"Closing" 1.3
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Term Section
---- -------
"Closing Date" 1.3(c)
"Code" 2.11(a)
"Common Shares" 5.17(a)
"Common Stock" 2.3(a)
"Company" Recitals
"Company Disclosure Schedule" Article II
"Company Employee Plans" 2.11(a)
"Company ERISA Affiliate" 2.11(a)
"Company Intellectual Property Rights" 2.18
"Company Permits" 2.6(b)
"Company SEC Reports" 2.7(a)
"Company Stock Option Plans" 2.3(a)
"Company Subsidiary Documents" 2.2
"DGCL" 2.4
"DLJ Engagement Letter" 2.22
"DLJ" 2.21
"Environmental Laws" 2.17
"ERISA" 2.11(a)
"Exchange Act" 2.5(a)
"First Closing" 1.3(a)
"First Closing Date" 1.3(a)
"14(f) Statement" 2.13(b)
"Fourth Closing" 1.3(c)
"FTC" 5.1
"GEI" Recitals
"GEI Manager" 3.4
"HSR Act" 2.5(d)
"IRS" 2.11(b)
"ISO" 2.11(c)
"Indemnified Parties" 5.8(b)
"Installment" 1.3
"Laws" 2.5(c)
"Leased Property" 2.14(b)
"Leases" 2.14(b)
"Liens" 2.3(c)
"Management Agreement" 6.2(h)
"NASD" 5.18
"NASD Rules" 5.18
"NASDAQ" 5.8
"1996 Company Balance Sheet" 2.9
"Non-Voting Observer" 5.13(e)
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Term Section
"Owned Property" 2.14(b)
"PBGC" 2.11(b)
"Preferred Stock" Recitals
"Principal Closing" 1.3(b)
"Principal Closing Date" 1.3(b)
"Proxy Statement" 2.13
"Purchase Price" 1.2
"Purchaser Designees 5.13(e)
"Purchasers" Recitals
"Ratification and Voting Agreement" 6.3(f)
"Registration Rights Agreement" 6.3(g)
"Reorganization Plan" 6.3(l)
"SCA" 3.4
"Schedule 14C" 2.13(b)
"SEC" 2.5(a)
"Section 6.1 Breach" 7.2(c)
"Securities" 5.16
"Securities Act" 2.5(d)
"Senior Note Condition" 6.3(m)
"Shares" 1.2
"Stock Options" 2.3(a)
"Stock Purchase" Recitals
"Stockholders Meeting" 2.13(a)
"Subsequent Closings" 1.3(c)
"Subsequent Closing Dates" 1.3(c)
"Takeover Statute" 2.23
"Tax", "Taxes" 2.16(a)
"Tax Returns" 2.16(a)
"Terminating Breach" 7.1(g)
"Third Closing" 1.3(c)
"Third Party" 7.1
"Third Party Purchaser" 5.13(f)
"Transaction Documents" 2.4
"Transfer" 5.12
"Transferees" 5.16
"Trefoil" Recitals
"Trigger Event" 5.15(b)
"Warrants" 2.3(a)
"Warrant Agreement" 2.3(a)
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Section 8.5. Amendment. This Agreement may be amended by the parties
hereto by action taken by or on behalf of their respective Boards of Directors
at any time prior to the Closing Date; provided, however, that, after approval
of the Stock Purchase by the stockholders of the Company, if required, no
amendment may be made which by law requires further approval by such
stockholders without such further approval. This Agreement may not be amended
except by an instrument in writing signed by the Company and each of the
Purchasers.
Section 8.6. Waiver. At any time prior to the Closing Date, the parties
hereto, upon the written consent of the Company and each Purchasers may (a)
extend the time for the performance of any of the obligations or other acts, (b)
waive any inaccuracies in the representations and warranties contained herein or
in any document delivered pursuant hereto, or (c) waive compliance with any of
the agreements or conditions contained herein.
Section 8.7. Cooperation. The Purchasers and the Company agree to take, or
to cause to be taken, all such reasonable and lawful action as may be necessary
to make effective and consummate the transactions contemplated by this
Agreement.
Section 8.8. Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
Section 8.9. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that the transactions contemplated hereby are fulfilled to the fullest extent
possible.
Section 8.10. Entire Agreement. This Agreement constitutes the entire
agreement and supersedes all prior agreements and undertakings (other than the
Confidentiality Letters), both written and oral, among the parties, or any of
them, with respect to the subject matter hereof.
Section 8.11. Assignment. This Agreement shall not be assigned by
operation of law or otherwise.
Section 8.12. 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 right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement, including, without limitation, by way of subrogation.
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Section 8.13. Failure or Indulgence Not Waiver; Remedies Cumulative. No
failure or delay on the part of any party hereto in the exercise of any right
hereunder shall impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty or agreement herein,
nor shall any single or partial exercise of any such right preclude any other or
further exercise thereof or of any other right. All rights and remedies existing
under this Agreement are cumulative to, and not exclusive of, any rights or
remedies otherwise available.
Section 8.14. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of New York
applicable to contracts executed and fully performed within the State of New
York.
Section 8.15. Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
[This space intentionally left blank.]
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IN WITNESS WHEREOF, the Company and the Purchasers have caused this Stock
Purchase Agreement to be executed as of the date first set forth above by their
respective officers thereunto duly authorized.
The Company:
THE GRAND UNION COMPANY
By: /s/ Joseph J. McCaig
____________________________
Name: Joseph J. McCaig
Title: President and Chief Executive Officer
The Purchasers:
TREFOIL CAPITAL INVESTORS
II, L.P.,
By: TREFOIL INVESTORS II, INC.,
its managing general partner
By: /s/ Geoffrey T. Moore
________________________________
Name: Geoffrey T. Moore
Title: Managing Director
GE INVESTMENT PRIVATE
PLACEMENT PARTNERS II, A LIMITED
PARTNERSHIP, a Delaware limited
partnership
By: GE INVESTMENT MANAGEMENT
INCORPORATED, a Delaware
corporation, as general partner
By: /s/ Michael M. Pastore
__________________________________
Name: Michael M. Pastore
Title: Vice President
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Schedule I
Number of Shares To Be Purchased
- --------------------------------------------------------------------------------
First Principal Third Fourth Fifth
Purchaser Closing Closing Closing Closing Closing
- --------------------------------------------------------------------------------
Trefoil 149,999 400,000(1) 200,000 200,000 200,000
- --------------------------------------------------------------------------------
GEI 149,999 400,000(1) 200,000 200,000 200,000
- --------------------------------------------------------------------------------
__________________________
(1) Less the number of Shares (if any) purchased at the First Closing.
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SCHEDULE II
Wire Transfer Instructions
--------------------------
Account Name: The Grand Union Company
Account Number: 00319409
ABA Number: 02100103
Bank Name: Banker's Trust Company
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Exhibit A
THE GRAND UNION COMPANY
CERTIFICATE OF DESIGNATION
OF CLASS A CONVERTIBLE PREFERRED STOCK
SETTING FORTH THE POWERS, PREFERENCES, RIGHTS,
QUALIFICATIONS, LIMITATIONS AND RESTRICTIONS OF
SUCH CLASS OF PREFERRED STOCK
Pursuant to Section 151 of the General Corporation Law of the State of
Delaware, The Grand Union Company (the "Corporation"), a corporation organized
and existing under the General Corporation Law of the State of Delaware, in
accordance with the provisions of Section 103 thereof, DOES HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of Directors of the
Corporation by Article __ of the Certificate of Incorporation of the Corporation
(the "Certificate of Incorporation"), and in accordance with the provisions of
Section 151 of the General Corporation Law of the State of Delaware, the Board
of Directors of the Corporation on ___ __, 1996, adopted the following
resolution creating a series of Preferred Stock designated as Class A
Convertible Preferred Stock (the "Class A Stock"):
RESOLVED that, pursuant to the authority vested in the Board of Directors
of the Corporation in accordance with the General Corporation Law of the State
of Delaware and the provisions of the Certificate of Incorporation, a class of
authorized Preferred Stock, par value $1.00 per share, of the Corporation is
hereby created and that the designation and number of shares thereof and the
voting powers, preferences and relative participating, optional and other
special rights of the shares of such class, and the qualifications, limitations
and restrictions thereof, are as follows:
Section 1. Stated Value.
The Class A Stock shall consist of [3,500,000] shares, par value $.01 per
share, each of which shall have a stated value of $50 per share (the "Stated
Value").
Section 2. Dividends and Distributions.
(a) The holders of shares of Class A Stock, in preference to the holders of
shares of Junior Dividend Stock (as defined in Section 11 hereof), shall be
entitled to receive, when, as and if declared by the Board of Directors, out of
the assets of the Corporation legally available therefor, dividends at an annual
rate of 8.50% of the Stated Value from and after the Issue Date (as defined in
Section 11 hereof) of such shares as long as shares of Class A Stock remain
outstanding. Dividends shall be payable in cash, or additional shares of Class A
Stock, as provided in paragraph (c) of this Section 2, or shares of Common
Stock, as provided in paragraph (c) of this Section 2. Dividends shall be
computed on the basis of the Stated Value, and shall
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accrue and be payable quarterly, in arrears, on the last Business Day (as
defined in Section 11) of March, June, September and December in each year (each
such date being referred to herein as a "Quarterly Dividend Payment Date"),
commencing on the first Quarterly Dividend Payment Date after the Issue Date of
such shares. To the extent that dividends on the Class A Stock are payable in
cash, such dividends shall be cumulative. Accrued dividends not paid on any
Quarterly Dividend Payment Date shall accrue additional dividends at an annual
dividend rate of 8.50% until paid in full.
(b) Dividends payable pursuant to paragraph (a) of this Section 2 shall
begin to accrue and be cumulative from the Issue Date of each share of Class A
Stock, whether or not earned or declared. The amount of dividends so payable
shall be determined on the basis of twelve 30-day months and a 360-day year.
Dividends paid on the shares of Class A Stock in an amount less than the total
amount of such dividends at the time accrued and payable on such shares shall be
allocated pro rata on a share-by-share basis among all such shares at the time
outstanding. The Board of Directors may fix a record date for the determination
of holders of shares of Class A Stock entitled to receive payment of a dividend
declared thereon, which record date shall be no more than sixty days prior to
the date fixed for the payment thereof.
(c) With respect to dividends paid on or prior to the third anniversary of
the Principal Issue Date (as defined in Section 11), the Corporation shall have
the option to pay such dividends in shares of Class A Stock valued at $50 per
share or in whole shares of Common Stock valued at Fair Market Value determined
as of the close of business on the third Business Day immediately preceding the
date of payment, instead of in cash. With respect to dividends paid after the
third anniversary of the Principal Issue Date but on or prior to the fifth
anniversary of the Principal Issue Date, the Corporation shall have the option
to pay such dividends in shares of Class A Stock valued at $50 per share or in
whole shares of Common Stock valued at Fair Market Value determined as of the
close of business on the third Business Day immediately preceding the date of
payment, instead of in cash, but only if the Corporation is prohibited from
paying such dividends in cash under the terms of its Bank Credit Agreement or
its Senior Notes. To the extent that the Corporation elects to pay any dividends
in shares of Common Stock, it shall pay a premium in additional shares of Common
Stock equal to 33-1/3% of the total number of shares of Common Stock that would
otherwise be paid as the dividend. After the fifth anniversary, all dividends
shall be paid in cash. The Corporation shall only have the right to pay
dividends in shares of Common Stock if, on the Quarterly Dividend Payment Date
in question, the Common Stock is listed and traded on the New York Stock
Exchange, the American Stock Exchange or the Nasdaq National Market System. In
connection with any payment of dividends in shares of Common Stock pursuant to
this Section 2(c), no fractions of shares of Common Stock shall be issued, but
in lieu thereof the Corporation shall either (i) deliver a whole share of Common
Stock in respect of the fractional share which the holder would otherwise have
been entitled to upon such dividend payment or (ii) pay a cash adjustment in
respect of such fractional interest in an amount equal to such fractional
interest multiplied by the Fair Market Value of a share of Common Stock
determined as of the close of business on the third Business Day immediately
preceding the date of payment.
2
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(d) Prior to the Principal Issue Date, all dividends on the Class A Stock
shall be paid in cash. Such dividends may be cumulated and not paid, without
penalty or other adverse consequence (including additional dividends on the
accrued and unpaid dividends), prior to the Required Issue Date, with all such
cumulated dividends to be paid in accordance with Sections 2(a) and 2(c) and the
first sentence of this Section 2(d) on the first Quarterly Dividend Payment Date
after the earlier of the Principal Issue Date and the Required Issue Date.
(e) The holders of shares of Class A Stock shall not be entitled to receive
any dividends or other distributions except as provided herein.
Section 3. Voting Rights.
In addition to any voting rights provided by law, the holders of shares of
Class A Stock shall have the following voting rights:
(a) In addition to voting rights provided elsewhere in this Section 3, and
as long as any of the Class A Stock is outstanding, each share of Class A Stock
shall entitle the holder thereof to vote on all matters, including with respect
to the election of directors, voted on by holders of Common Stock voting
together as a single class with other shares entitled to vote at all meetings of
the stockholders of the Corporation. With respect to any such vote, each share
of Class A Stock shall entitle the holder thereof to cast the number of votes
equal to the number of whole votes which could be cast in such vote by a holder
of the shares of capital stock of the Corporation into which such share of Class
A Stock is convertible on the record date for such vote; provided, however, that
if more than one share of Class A Stock shall be held by any holder of shares of
Class A Stock, the total number of votes which such holder shall be entitled to
cast pursuant to this Section 3(a) shall be computed on the basis of conversion
of the total number of shares of Class A Stock held by such holder, with any
then remaining fractional share disregarded for the purposes of this Section
3(a).
(b) In addition to the voting rights provided elsewhere in this Section 3,
the affirmative vote of the holders of at least a majority of the outstanding
shares of Class A Stock, voting separately as a single class, in person or by
proxy, at a special or annual meeting of stockholders called for the purpose,
shall be necessary to (A) except as contemplated by Section 2(c), authorize,
increase the authorized number of shares of, or issue (including on conversion
or exchange of any convertible or exchangeable securities or by
reclassification), any shares of any class or classes, or any series of any
class or classes, of the Corporation's capital stock ranking pari passu with or
prior to (either as to dividends or upon a change in control of the Corporation,
voluntary or involuntary liquidation, dissolution or winding up) the Class A
Stock, (B) except as contemplated pursuant to Section 2(c) or as permitted
pursuant to Section 10(a), increase the authorized number of shares of, or issue
(including on conversion or exchange of any convertible or exchangeable
securities or by reclassification) any shares of, Class A Stock, (C) alter,
amend or repeal any of the provisions of the Certificate of Incorporation of the
Corporation which in any manner would alter, change or otherwise adversely
affect in any way the powers, preferences or rights of the Class A Stock, (D)
approve the sale, lease or other disposition of all or substantially all of the
assets of the Corporation and its Subsidiaries (as defined in Section 11), or
(E) approve
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any merger of the Corporation with or into any other entity or any
reorganization, recapitalization, liquidation or other similar transaction
(including any issuance of equity securities, or securities convertible into
equity securities by the Corporation, to any person (other than the Purchasers
and their Affiliates) who would then own on a fully diluted basis more than 50%
of the total number of votes entitled to be cast (giving effect to such
issuance) by holders of the Corporation's capital stock on all matters,
including the election of directors) involving the Corporation; provided,
however, that the holders of the outstanding shares of Class A Stock shall only
have a class vote on the transactions described in clauses (D) and (E) prior to
the earlier of the effectiveness of a registration statement under the
Securities Act of 1933 relating to all such shares and, following the Principal
Issue Date, the date on which less than half of the total shares of Class A
Stock originally issued (not including any shares issued in payment of dividends
pursuant to Section 2(c)) remain outstanding. Notwithstanding the proviso to the
preceding sentence, the affirmative vote of the holders of at least a majority
of the outstanding shares of Class A Stock, voting separately as a single class,
in person or by proxy, at a special or annual meeting of stockholders called for
the purpose, shall be necessary to approve any merger of the Corporation with or
into any other entity or any reorganization, recapitalization, liquidation or
other similar transaction involving the Corporation where (i) the Class A Stock
is not remaining outstanding after such transaction under substantially the same
powers, preferences, rights, qualifications, limitations and restrictions as are
set forth in this Certificate of Designation or (ii) the cash, stock, securities
or other property to be received on conversion of one share of Class A Stock
following such transaction and the application of Section 8(h) has a Fair Market
Value at the closing of such transaction less than 150% of the Conversion Price.
If the Principal Issue Date has not occurred on or before the Required Issue
Date, then, for one year following the Required Issue Date, the Corporation may
complete any of the transactions described in clauses (D) and (E) without any
class vote of the Class A Stock so long as (i) the Corporation shall redeem, at
the option of the holder thereof, any shares of Class A Stock, at a redemption
price equal to 108.5% of the Stated Value thereof, in accordance with the
provisions of Section 5(f), and (ii) prior to consummating such transaction, the
other party or parties to such transaction (including any parent entity thereof)
agrees in writing for the benefit of the holders of the Class A Stock to provide
or cause to be provided the funds for such redemption and to guarantee the
Corporation's performance of its obligations pursuant to Section 5(f) and
provides reasonable evidence of its ability to provide such funds. In addition,
if the Corporation shall have failed to pay in full dividends on the Class A
Stock for six consecutive quarters, then the size of the Board of Directors of
the Corporation shall be increased by two, and the holders of shares of Class A
Stock, voting together as a single class, shall have the right to elect such two
directors. The right to elect such two directors under this Section 3(b) shall
terminate upon payment in full of all dividends payable on the Class A Stock, at
which time the Board of Directors shall return to its previous size and the
directors elected by the holders of the Class A Stock shall be removed.
(c) In addition to the voting rights provided elsewhere in this Section 3,
between the First Issue Date and the Principal Issue Date, the size of the Board
of Directors of the Corporation shall be increased by two, and the holders of
shares of Class A Stock, voting together as a single class, shall have the right
to elect two directors to fill such positions. While the holders of shares of
Class A Stock are entitled to elect such two directors under this Section 3(c),
they shall not be entitled to elect any directors under the penultimate sentence
of Section
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3(b). On and after the Principal Issue Date, the voting rights under this
Section 3(c) shall terminate, and thereafter the provisions of Sections 3(a) and
3(b) shall apply to the election of directors.
(d) (1) The rights of holders of shares of Class A Stock to take any
actions as provided in this Section 3 may be exercised, subject to the DGCL (as
defined in Section 11 hereof), at any annual meeting of stockholders or at a
special meeting of stockholders held for such purpose as hereinafter provided or
at any adjournment or postponement thereof, or by the written consent, delivered
to the Secretary of the Corporation, of the holders of the minimum number of
shares required to take such action.
As long as such right to vote continues (and unless such right has been
exercised by written consent of not less than the minimum number of shares
required to take such action), the Chairman of the Board of the Corporation may
call, and upon the written request of holders of record of 20% of the
outstanding shares of Class A Stock, addressed to the Secretary of the
Corporation at the principal office of the Corporation, shall call, a special
meeting of the holders of shares of Class A Stock entitled to vote as provided
herein. The Corporation shall use its best efforts to hold such meeting as
promptly as practicable, but in any event not later than 120 days after delivery
of such request to the Secretary of the Corporation, at the place and upon the
notice provided by law and in the Bylaws of the Corporation for the holding of
meetings of stockholders.
(2) At each meeting of stockholders at which the holders of shares of Class
A Stock shall have the right, voting separately as a single series, to take any
action, the presence in person or by proxy of the holders of record of a
majority of the total number of shares of Class A Stock then outstanding and
entitled to vote on the matter shall be necessary and sufficient to constitute a
quorum. At any such meeting or at any adjournment or postponement thereof, in
the absence of a quorum of the holders of shares of Class A Stock, holders of a
majority of such shares present in person or by proxy shall have the power to
adjourn the meeting as to the actions to be taken by the holders of shares of
Class A Stock from time to time and place to place without notice other than
announcement at the meeting until a quorum shall be present.
For the taking of any action as provided in Section 3(b) or (c) by the
holders of shares of Class A Stock, each such holder shall have one vote for
each share of Class A Stock standing in his name on the transfer books of the
Corporation as of any record date fixed for such purpose or, if no such date be
fixed, at the close of business on the Business Day next preceding the day on
which notice is given, or if notice is waived, at the close of business on the
Business Day next preceding the day on which the meeting is held.
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Section 4. Certain Restrictions.
(a) As long as any shares of Class A Stock remain outstanding, the
Corporation shall not: (A) declare or pay dividends, or make any other
distributions, on any shares of Junior Dividend Stock other than dividends or
distributions payable in Junior Dividend Stock; or (B) declare or pay dividends,
or make any other distributions, on any shares of Parity Dividend Stock (as
defined in Section 11 hereof), except (1) dividends or distributions payable in
Junior Dividend Stock and (2) dividends or distributions paid ratably on the
Class A Stock and all Parity Dividend Stock on which dividends are payable or in
arrears, in proportion to the total amounts to which the holders of all shares
of the Class A Stock and such Parity Dividend Stock are then entitled.
(b) As long as any shares of Class A Stock remain outstanding, the
Corporation shall not redeem, purchase or otherwise acquire for consideration
any shares of Junior Dividend Stock or Junior Liquidation Stock (as defined in
Section 11 hereof) or Parity Dividend Stock or Parity Liquidation Stock (as
defined in Section 11 hereof); provided, however, that (1) the Corporation may
at any time redeem, purchase or otherwise acquire shares of Junior Liquidation
Stock or Parity Liquidation Stock in exchange for any shares of capital stock of
the Corporation that rank junior to the Class A Stock as to dividends and upon
liquidation, dissolution and winding up; (2) the Corporation may accept shares
of any Parity Liquidation Stock for conversion into shares of capital stock of
the Corporation that rank junior to the Class A Stock as to dividends and upon
liquidation, dissolution and winding up; and (3) the Corporation may at any time
redeem, purchase or otherwise acquire shares as may be required pursuant to the
Corporation's employee and non-employee director stock plans, as they may be
amended from time to time, or similar employee stock plans hereafter adopted;
and provided further, however, that the Corporation (A) may accept shares of
Class A Stock surrendered for conversion into shares of capital stock of the
Corporation pursuant to Section 8 hereof, and (B) may redeem outstanding shares
of Class A Stock pursuant to Section 5 hereof. Whenever quarterly dividends
payable on shares of Class A Stock as provided in Section 2 hereof are not paid
in full, thereafter and until all unpaid dividends payable, whether or not
declared, on the outstanding shares of Class A Stock shall have been paid in
full, the Corporation shall not redeem or purchase or otherwise acquire for
consideration any shares of Class A Stock; provided, however, that the
Corporation (A) may accept shares of Class A Stock surrendered for conversion
into shares of capital stock of the Corporation pursuant to Section 8 hereof,
and (B) may elect to redeem outstanding shares of Class A Stock pursuant to
Section 5(a) hereof.
(c) The Corporation shall not permit any Subsidiary of the Corporation to
purchase or otherwise acquire for consideration any shares of capital stock of
the Corporation unless the Corporation could, pursuant to Section 4(b), purchase
such shares at such time and in such manner.
Section 5. Redemption.
(a) On and after the second anniversary of the Principal Issue Date, the
Corporation shall have the right, at its sole option and election made in
accordance with Section 5(c), to
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redeem, out of funds legally available therefor, shares of Class A Stock, in
whole or in part, at any time and from time to time, at a redemption price equal
to the Stated Value (except as described below), plus an amount per share equal
to all accrued and unpaid dividends, whether or not declared, to the date of
redemption (the "Redemption Price"); provided, however, that the Corporation
shall not have any such right unless (A) if the redemption is to occur between
the second and third anniversary of the Principal Issue Date, the Redemption
Fair Market Value (as defined in Section 11 hereof) of the Common Stock, as of
the close of business on the third Business Day immediately preceding the date
on which notice of redemption is given, is equal to at least 180% of the
Conversion Price (as defined in Section 11 hereof), and (B) if the redemption is
to occur between the third and fifth anniversary of the Principal Issue Date,
the Redemption Fair Market Value (as defined in Section 11 hereof) of the Common
Stock, as of the close of business on the third Business Day immediately
preceding the date on which notice of redemption is given, is equal to at least
200% of the Conversion Price (as defined in Section 11 hereof). Notwithstanding
the foregoing, if the redemption is to occur between the fifth and sixth
anniversaries of the Principal Issue Date, the Redemption Price shall be
$51.5938; if the redemption is to occur between the sixth and seventh
anniversaries of the Principal Issue Date, the Redemption Price shall be
$51.0625; and if the redemption is to occur between the seventh and eighth
anniversaries of the Principal Issue Date, the Redemption Price shall be
$50.5313; in each case plus an amount per share equal to all accrued and unpaid
dividends, whether or not declared, to the date of redemption. If less than all
shares of Class A Stock at the time outstanding are to be redeemed, the shares
to be redeemed shall be selected pro rata.
(b) The Corporation shall redeem, at the Redemption Price, all outstanding
shares of Class A Stock on June 1, 2005.
(c) Notice of any redemption of shares of Class A Stock pursuant to this
Section 5 shall be mailed at least 30, but not more than 60, days prior to the
date fixed for redemption to each holder of shares of Class A Stock to be
redeemed, at such holder's address as it appears on the transfer books of the
Corporation. Any such notice shall be irrevocable when given. In order to
facilitate the redemption of shares of Class A Stock, the Board of Directors may
fix a record date for the determination of Class A Stock to be redeemed, or may
cause the transfer books of the Corporation for the Class A Stock to be closed,
not more than sixty days or less than thirty days prior to the date fixed for
such redemption.
(d) On the date of any redemption being made pursuant to this Section 5
which is specified in a notice given pursuant to Section 5(c), the Corporation
shall, and at any time after such notice shall have been mailed and before the
date of redemption the Corporation may deposit for the benefit of the holders of
shares of Class A Stock to be redeemed the funds necessary for such redemption,
including the amount necessary to pay all accrued and unpaid dividends to the
date of redemption, with a bank or trust company in the City of New York having
a capital and surplus of at least $1,000,000,000. Any moneys so deposited by the
Corporation and unclaimed at the end of one year from the date designated for
such redemption shall revert to the general funds of the Corporation. After such
reversion, any such bank or trust company shall, upon demand, pay over to the
Corporation such unclaimed amounts and thereupon such bank or trust company
shall be relieved of all responsibility in respect thereof and
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any holder of shares of Class A Stock to be redeemed shall look only to the
Corporation for the payment of the Redemption Price. In the event that moneys
are deposited pursuant to this paragraph (d) in respect of shares of Class A
Stock that are converted in accordance with the provisions of Section 8, such
moneys shall, upon such conversion, revert to the general funds of the
Corporation and, upon demand, such bank or trust company shall pay over to the
Corporation such moneys and shall be relieved of all responsibility to the
holders of such converted shares in respect thereof. Any interest accrued on
funds deposited pursuant to this paragraph (d) shall be paid from time to time
to the Corporation for its own account.
(e) Notice of redemption having been given as aforesaid, upon the deposit
of funds pursuant to Section 5(d) in respect of shares of Class A Stock to be
redeemed pursuant to this Section 5, notwithstanding that any certificates for
such shares shall not have been surrendered for cancellation, from and after the
date of redemption designated in the notice of redemption (i) the shares
represented thereby shall no longer be deemed outstanding, (ii) the rights to
receive dividends thereon shall cease to accrue, and (iii) all rights of the
holders of shares of Class A Stock to be redeemed shall cease and terminate,
excepting only the right to receive the Redemption Price therefor, and the right
to convert such shares into shares of Common Stock until the close of business
on the Fifth Business Day next preceding the date of redemption, in accordance
with Section 8 hereof.
(f) (i) If, at the option of any holder of Class A Stock, the Corporation
is obligated to redeem any shares of Class A Stock pursuant to the provisions of
the third sentence of Section 3(b), then, within three Business Days after the
completion of any transaction described in clause (D) or (E) of Section 3(b),
the Corporation shall mail notice of the completion of such transaction to each
holder of shares of Class A Stock, at such holder's address as it appears on the
transfer books of the Corporation. Such notice shall specify the circumstances
of the completed transaction, the Repurchase Date (as defined in clause (ii)
below), the price at which the Corporation shall be obligated to redeem the
shares of Class A Stock, that the holder shall have the right, prior to the
Repurchase Date, to withdraw any shares of Class A Stock surrendered, a
description of the procedure which the holder must follow to exercise such
redemption right and to withdraw any surrendered shares, the place or places
where the holder is to surrender shares to be redeemed, and the amount of all
accrued and unpaid dividends on such shares to, but excluding, the Repurchase
Date. Together with such notice, the Corporation shall also mail a redemption
election form for the holder to complete in order to elect redemption of its
shares of Class A Stock.
(ii) Upon the circumstances contemplated in clause (i) of this Section
5(f), each holder of shares of Class A Stock shall have the right, at such
holder's option, to require the Corporation to redeem its shares of Class A
Stock on the date (the "Repurchase Date") that is thirty days after the date of
the completion of the relevant transaction described in clause (D) or (E) of
Section 3(b) (or, if such thirtieth day is not a Business Day, the next
succeeding Business Day). No failure of the Corporation to give the notice
required under clause (i) above and no defect therein shall limit any holder's
redemption rights or affect the validity of the proceedings for the repurchase
of shares of Class A Stock pursuant to this Section 5(f).
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(iii) For a holder's shares of Class A Stock to be redeemed pursuant to
this Section 5(f), the Corporation must receive by the Repurchase Date, at a
place where the holder is to surrender such shares (as set forth in the
Corporation's notice mailed pursuant to clause (i) above), such shares, together
with the redemption election form provided to the holder pursuant to clause (i)
above, with such form completed to elect redemption.
(iv) Unless otherwise specified in the notice to be provided by the
Corporation pursuant to clause (i) above, the record date for the determination
of Class A Stock to be redeemed pursuant to this Section 5(f) shall be ten days
prior to the Repurchase Date. The Board of Directors may fix a different record
date in its notice provided pursuant to clause (i) above, provided that the
record date so fixed shall be not more than twenty days or less than ten days
prior to the Repurchase Date.
(v) On the Repurchase Date, the Corporation shall, and at any time before
the Repurchase Date may, deposit for the benefit of the holders of shares of
Class A Stock to be redeemed the funds necessary for such redemption, including
the amount necessary to pay all accrued and unpaid dividends to the Repurchase
Date, with a bank or trust corporation in the City of New York having a capital
and surplus of at least $1,000,000,000. Any moneys so deposited by the
Corporation shall be treated in accordance with the provisions of Section 5(d).
(vi) On the Repurchase Date, the Corporation shall redeem all outstanding
shares of Class A Stock submitted in accordance with the provisions of clause
(ii) above and not withdrawn by any holder thereof prior to the Repurchase Date.
The Corporation shall redeem each such share for an amount equal to (i) the
redemption price set forth in the third sentence of Section 3(b) plus (ii) all
accrued and unpaid dividends whether or not declared on such share. Such payment
will be made promptly (but in no event more than three Business Days) following
the Repurchase Date by mailing checks for the amount payable to the holders of
such shares entitled thereto. From and after the Repurchase Date (i) the shares
redeemed on such date shall no longer be deemed outstanding, (ii) the rights to
receive dividends thereon shall cease to accrue, and (iii) all rights of the
holders of such shares shall cease and terminate with respect to such shares
(including any right to convert such shares into shares of Common Stock in
accordance with Section 8 hereof), excepting only the right to receive the
amounts set forth in the second sentence of this clause (vi).
(vii) If, on the Repurchase Date, the Corporation shall fail to satisfy its
obligation to redeem shares of Class A Stock pursuant to this Section 5(f) by
reason of the absence of legally available funds therefor, the shares otherwise
to be redeemed pursuant to this Section 5(f) shall not be redeemed. In such
event and in addition to any other remedies available to the holders of Class A
Stock under law, the liquidation preference on each such share shall increase to
be equal to the amount set forth in the second sentence of clause (vi) above,
which such amount shall thereafter increase daily at the rate of 8.5% per annum
until such share has been redeemed by the Corporation for an amount equal to
such increased liquidation preference. Upon the Company obtaining sufficient
funds to legally redeem the shares submitted for redemption on or before the
Repurchase Date pursuant to this Section 5(f), the holders of such shares shall
have the right, upon thirty days' prior written notice to the Company, to have
such
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shares redeemed by the Company for an amount equal to the liquidation preference
on such shares, increased in accordance with the provisions of the preceding
sentence.
(viii) The Corporation shall comply with the tender offer rules under the
Exchange Act which may then be applicable and will file Schedule 13E-4 or any
other schedule required thereunder in connection with any offer by the
Corporation to purchase shares at the option of holders pursuant to this Section
5(f). To the extent any provisions of the Exchange Act shall conflict with the
procedures set forth in this Section 5, the provisions of the Exchange Act shall
govern.
Section 6. Reacquired Shares.
Any shares of Class A Stock converted, redeemed, purchased or otherwise
acquired by the Corporation in any manner whatsoever shall be retired and
canceled promptly after the acquisition thereof. All such shares of Class A
Stock shall upon their cancellation, in accordance with the DGCL, become
authorized but unissued shares of Preferred Stock of the Corporation and may be
reissued as part of another series of Preferred Stock of the Corporation,
subject to the conditions or restrictions on issuance set forth herein.
Section 7. Liquidation, Dissolution or Winding Up.
(a) If the Corporation shall commence a voluntary case under the Federal
bankruptcy laws or any other applicable Federal or state bankruptcy, insolvency
or similar law, or consent to the entry of an order for relief in an involuntary
case under such law or to the appointment of a receiver, liquidator, assignee,
custodian, trustee, sequestrator (or other similar official) of the Corporation
or of any substantial part of its property, or make an assignment for the
benefit of its creditors, or admit in writing its inability to pay its debts
generally as they become due, or if a decree or order for relief in respect of
the Corporation shall be entered by a court having jurisdiction in the premises
in an involuntary case under the Federal bankruptcy laws or any other applicable
Federal or state bankruptcy, insolvency or similar law, or appointing a
receiver, liquidator, assignee, custodian, trustee, sequestrator (or other
similar official) of the Corporation or of any substantial part of its property,
or ordering the winding up or liquidation of its affairs, and any such decree or
order shall be unstayed and in effect for a period of ninety consecutive days
and on account of any such event the Corporation shall liquidate, dissolve or
wind up, or if the Corporation shall otherwise liquidate, dissolve or wind up,
no distribution shall be made (i) to the holders of shares of Junior Liquidation
Stock unless, prior thereto, the holders of shares of Class A Stock, subject to
Section 8, shall have received the Liquidation Preference (as defined in Section
11 hereof) with respect to each share, or (ii) to the holders of shares of
Parity Liquidation Stock, except distributions made ratably to the holders of
the Class A Stock and the Parity Liquidation Stock in proportion to the total
amounts to which the holders of all such shares of Class A Stock and Parity
Liquidation Stock would be entitled upon such liquidation, dissolution or
winding up. Upon any such liquidation, dissolution or winding up, the holders of
shares of Class A Stock shall be entitled to receive the Liquidation Preference
with respect to each such share and no more.
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(b) Neither the merger or other business combination of the Corporation
with or into any other Person (as defined in Section 11 hereof) or Persons nor
the sale of all or substantially all the assets of the Corporation shall be
deemed to be a liquidation, dissolution or winding up of the Corporation for
purposes of this Section 7.
Section 8. Conversion.
(a) Subject to the provisions for adjustment hereinafter set forth, each
share of Class A Stock shall be convertible at the option of the holder thereof
into fully paid and nonassessable shares of Common Stock. The number of shares
of Common Stock deliverable upon conversion of a share of Class A Stock,
adjusted as hereinafter provided, is referred to herein as the "Conversion
Ratio." The Conversion Ratio shall initially be 7.8431 and the Conversion Price
shall initially be $6.375. Upon the Principal Issue Date, the Conversion Price
shall be adjusted to equal the lower of (i) $7.25 and (ii) the greater of (x)
$6.50 and (y) 120% of the then applicable Fair Market Value (determined as of
the earlier of (1) the fifth Business day prior to the Principal Issue Date or
(2) the second Business Day prior to the final vote of stockholders, if any,
approving the issuance of the Class A Stock contemplated to be issued on the
Principal Issue Date) and the Conversion Ratio shall be adjusted to equal the
greater of (A) 6.8966 and (B) 50 divided by the greater of (x) $6.50 and (y)
120% of the then applicable Fair Market Value (determined as of the earlier of
(1) the fifth Business Day prior to the Principal Issue Date or (2) the second
Business Day prior to the final vote of stockholders, if any, approving the
issuance of the Class A Stock contemplated to be issued on the Principal Issue
Date). The Conversion Ratio and the Conversion Price are subject to further
adjustment from time to time pursuant to Section 8(g).
(b) Conversion of the Class A Stock may be effected by any such holder upon
the surrender to the Corporation at the principal office of the Corporation in
the State of Delaware (the "Transfer Agent") or at the office of any agent or
agents of the Corporation, as may be designated by the Board of Directors of the
Corporation, of the certificate for such Class A Stock to be converted
accompanied by a written notice stating that such holder elects to convert all
or a specified whole number of such shares in accordance with the provisions of
this Section 8 and specifying the name or names in which such holder wishes the
certificate or certificates for shares of Common Stock to be issued. In case
such notice shall specify a name or names other than that of such holder, such
notice shall be accompanied by payment of all transfer taxes payable upon the
issuance of shares of Common Stock in such name or names. Other than such taxes,
the Corporation will pay any and all issue and other taxes (other than taxes
based on income) that may be payable in respect of any issue or delivery of
shares of Common Stock on conversion of Class A Stock pursuant hereto. As
promptly as practicable, and in any event within five Business Days after the
surrender of such certificate or certificates and the receipt of such notice
relating thereto and, if applicable, payment of all transfer taxes (or the
demonstration to the satisfaction of the Corporation that such taxes have been
paid), the Corporation shall deliver or cause to be delivered (i) certificates
representing the number of validly issued, fully paid and nonassessable full
shares of Common Stock to which the holder of shares of Class A Stock being
converted shall be entitled and (ii) if less than the full number of shares of
Class A Stock evidenced by the surrendered certificate or certificates is being
converted, a new certificate
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or certificates, of like tenor, for the number of shares evidenced by such
surrendered certificate or certificates less the number of shares being
converted. Such conversion shall be deemed to have been made at the close of
business on the date of giving such notice and of such surrender of the
certificate or certificates representing the shares of Class A Stock to be
converted (the "Conversion Date") so that the rights of the holder thereof as to
the shares being converted shall cease except for the right to receive shares of
Common Stock in accordance herewith, and the Person entitled to receive the
shares of Common Stock shall be treated for all purposes as having become the
record holder of such shares of Common Stock at such time. The Corporation shall
not be required to convert, and no surrender of shares of Class A Stock shall be
effective for that purpose, while the transfer books of the Corporation for the
Common Stock are closed for any purpose (but not for any period in excess of
five days); but the surrender of shares of Class A Stock for conversion during
any period while such books are so closed shall become effective for conversion
immediately upon the reopening of such books, as if the conversion had been made
on the date such shares of Class A Stock were surrendered, and at the Conversion
Ratio in effect at the date of such surrender.
(c) In case any shares of Class A Stock are to be redeemed pursuant to
Section 5 (with the exception of Section 5(f)), such right of conversion shall
cease and terminate as to the shares of Class A Stock to be redeemed at the
close of business on the fifth Business Day next preceding the date fixed for
redemption unless the Corporation shall default in the payment of the Redemption
Price.
(d) The Conversion Ratio shall be subject to adjustment from time to time
in certain instances as hereinafter provided. Upon conversion, the holder of
shares of Class A Stock shall be entitled to receive any accrued and unpaid
dividends on the shares of Class A Stock surrendered for conversion to the
Conversion Date. Such accrued and unpaid dividends shall be payable by the
Corporation, at its option, in cash (to the extent funds are legally available
therefor) or in shares of Common Stock valued at the Fair Market Value as of the
third Business Day prior to the Conversion Date, instead of in cash.
(e) In connection with the conversion of any shares of Class A Stock, no
fractions of shares of Common Stock shall be issued, but in lieu thereof the
Corporation shall either (i) deliver a whole share of Common Stock in respect of
the fractional share to which the holder would otherwise have been entitled upon
such conversion or (ii) pay a cash adjustment in respect of such fractional
interest in an amount equal to such fractional interest multiplied by the
Current Market Price per share of Common Stock on the Trading Day on which such
shares of Class A Stock are deemed to have been converted. If more than one
share of Class A Stock shall be surrendered for conversion by the same holder at
the same time, the number of full shares of Common Stock issuable on conversion
thereof shall be computed on the basis of the total number of shares of Class A
Stock so surrendered.
(f) The Corporation shall at all times reserve and keep available for
issuance upon the conversion of the Class A Stock, free from any preemptive
rights, such number of its authorized but unissued shares of Common Stock as
will from time to time be sufficient to permit the conversion of all outstanding
shares of Class A Stock, and shall take all action required to
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increase the authorized number of shares of Common Stock if necessary to permit
the conversion of all outstanding shares of Class A Stock.
(g) The Conversion Ratio will be subject to adjustment from time to time as
follows:
(1) In case the Corporation shall at any time or from time to time
after the First Issue Date (A) pay a dividend, or make a distribution, on
the outstanding shares of Common Stock in shares of Common Stock, (B)
subdivide the outstanding shares of Common Stock, (C) combine the
outstanding shares of Common Stock into a smaller number of shares or (D)
issue by reclassification of the shares of Common Stock any shares of
capital stock of the Corporation, then, and in each such case, the
Conversion Ratio in effect immediately prior to such event or the record
date therefor, whichever is earlier, shall be adjusted so that the holder
of any shares of Class A Stock thereafter surrendered for conversion shall
be entitled to receive the number of shares of Common Stock or other
securities of the Corporation which such holder would have owned or have
been entitled to receive after the happening of any of the events described
above, had such shares of Class A Stock been surrendered for conversion
immediately prior to the happening of such event or the record date
therefor, whichever is earlier. An adjustment made pursuant to this clause
(i) shall become effective (x) in the case of any such dividend or
distribution, immediately after the close of business on the record date
for the determination of holders of shares of Common Stock entitled to
receive such dividend or distribution, or (y) in the case of such
subdivision, reclassification or combination, at the close of business on
the day upon which such corporate action becomes effective. No adjustment
shall be made pursuant to this clause (i) in connection with any
transaction to which paragraph (h) applies.
(2) In case the Corporation shall at any time or from time to time
after the First Issue Date declare, order, pay or make a dividend or other
distribution (including, without limitation, any distribution of stock or
other securities or property or rights or warrants to subscribe for
securities of the Corporation or any of its Subsidiaries by way of dividend
or spinoff), on its Common Stock, other than dividends or distributions of
shares of Common Stock which are referred to in clause (1) of this
paragraph (g), then the Conversion Ratio shall be adjusted so that the
holder of each share of Class A Stock shall be entitled to receive, upon
the conversion thereof, the number of shares of Common Stock determined by
multiplying (1) the applicable Conversion Ratio on the day immediately
prior to the record date fixed for the determination of stockholders
entitled to receive such dividend or distribution by (2) a fraction, the
numerator of which shall be the Current Market Price per share of Common
Stock for the period of 20 Trading Days preceding such record date, and the
denominator of which shall be such Current Market Price per share of Common
Stock less the Fair Market Value (as defined in Section 11 hereof) per
share of Common Stock (as determined in good faith by the Board of
Directors of the Corporation, a certified resolution with respect to which
shall be mailed to each holder of shares of Class A Stock) of such dividend
or distribution; provided, however, that in the event of a distribution of
capital stock of a Subsidiary of the Corporation (a "Spin-Off") made to
holders of shares of Common Stock, the numerator of such fraction shall be
the sum of the Current Market Price per share of Common Stock for the
period of 20 Trading Days preceding the 35th Trading Day after the
effective date of such Spin-Off and the Current Market Price of
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the number of shares (or the fraction of a share) of capital stock of the
Subsidiary which is distributed in such Spin-Off in respect of one share of
Common Stock for the period of 20 Trading Days preceding such 35th Trading
Day and the denominator of which shall be the Current Market Price per
share of Common Stock for the period of 20 Trading Days preceding such 35th
Trading Day. An adjustment made pursuant to this clause (2) shall be made
upon the opening of business on the next Business Day following the date on
which any such dividend or distribution is made and shall be effective
retroactively immediately after the close of business on the record date
fixed for the determination of stockholders entitled to receive such
dividend or distribution; provided, however, that if the proviso to the
preceding sentence applies, then such adjustment shall be made and be
effective as of such 35th Trading Day after the effective date of such
Spin-Off. No adjustment shall be made pursuant to this clause (2) in
connection with any transaction to which paragraph (h) applies.
(3) In case the Corporation shall issue shares of Common Stock (or
rights, warrants or other securities convertible into or exchangeable for
shares of Common Stock) after the First Issue Date and before the Principal
Issue Date at a price per share (or having a conversion price per share)
less than the Current Market Price as of the date of issuance of such
shares or of such convertible securities, then, and in each such case, the
Conversion Ratio shall be adjusted so that the holder of each share of
Class A Stock shall be entitled to receive, upon the conversion thereof,
the number of shares of Common Stock determined by multiplying (A) the
applicable Conversion Ratio on the day immediately prior to such date by
(B) a fraction, the numerator of which shall be the sum of (1) the number
of shares of Common Stock outstanding on such date and (2) the number of
additional shares of Common Stock issued (or into which the convertible
securities may convert), and the denominator of which shall be the sum of
(x) the number of shares of Common Stock outstanding on such date and (y)
the number of shares of Common Stock which the aggregate consideration
receivable by the Corporation for the total number of shares of Common
Stock so issued (or into which the rights, warrants or other convertible
securities may convert) would purchase at the Current Market Price on such
date. An adjustment made pursuant to this clause (3) shall be made on the
next Business Day following the date on which any such issuance is made and
shall be effective retroactively immediately after the close of business on
such date. For purposes of this clause (3), the aggregate consideration
receivable by the Corporation in connection with the issuance of shares of
Common Stock or of rights, warrants or other securities convertible into
shares of Common Stock shall be deemed to be equal to the sum of the
aggregate offering price (before deduction of underwriting discounts or
commissions and expenses payable to third parties) of all such Common
Stock, rights, warrants and convertible securities plus the minimum
aggregate amount, if any, payable upon exercise or conversion of any such,
rights, warrants and convertible securities into shares of Common Stock.
The issuance of any shares of Common Stock pursuant to (a) a dividend or
distribution on, or subdivision, combination or reclassification of, the
outstanding shares of Common Stock requiring an adjustment in the
Conversion Ratio pursuant to clause (1) of this paragraph (g), or (b) any
employee benefit or stock option plan or program of the Corporation, or (c)
any employment or option agreement with an officer of the Corporation (or
any of its Subsidiaries) and approved by the Board of Directors or (d) any
option, warrant, right, or convertible security, shall not be deemed to
constitute an issuance of Common Stock or convertible securities by the
Corporation to which this clause (3) applies. In addition,
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(A) Common Stock or convertible securities issued to acquire, or in the
acquisition of, all or any portion of a business as a going concern, in an
arm's length transaction between the Company and a third party which is not
an Affiliate of the Company, whether such acquisition shall be effected by
purchase of assets, exchange of securities, merger, consolidation or
otherwise, or (B) Common Stock or convertible securities issued in a bona
fide public offering pursuant to a firm commitment underwriting, shall not
be deemed to constitute an issuance of Common Stock or convertible
securities by the Corporation to which this clause (3) applies. Upon the
expiration unexercised of any options, warrants or rights to convert any
convertible securities for which an adjustment has been made pursuant to
this clause (3), the adjustments shall forthwith be reversed to effect such
rate of conversion as would have been in effect at the time of such
expiration or termination had such options, warrants or rights or
convertible securities, to the extent outstanding immediately prior to such
expiration or termination, never been issued. No adjustment shall be made
pursuant to this clause (3) in connection with any transaction to which
paragraph (h) applies.
(4) For purposes of this paragraph (g), the number of shares of Common
Stock at any time outstanding shall not include any shares of Common Stock
then owned or held by or for the account of the Corporation.
(5) The term "dividend," as used in this paragraph (g) shall mean a
dividend or other distribution upon Common Stock of the Corporation.
(6) Anything in this paragraph (g) to the contrary notwithstanding,
the Corporation shall not be required to give effect to any adjustment in
the Conversion Ratio unless and until the net effect of one or more
adjustments (each of which shall be carried forward), determined as above
provided, shall have resulted in a change of the Conversion Ratio by at
least one one-hundredth of one share of Common Stock, and when the
cumulative net effect of more than one adjustment so determined shall be to
change the Conversion Ratio by a least one one-hundredth of one share of
common Stock, such change in Conversion Ratio shall thereupon be given
effect.
(7) The certificate of any firm of independent public accountants of
recognized standing selected by the Board of Directors of the Corporation
(which may be the firm of independent public accountants regularly employed
by the Corporation) shall be presumptively correct for any computation made
under this paragraph (g).
(8) If the Corporation shall take a record of the holders of its
Common Stock for the purpose of entitling them to receive a dividend or
other distribution, and shall thereafter and before the distribution to
stockholders thereof legally abandon its plan to pay or deliver such
dividend or distribution, then thereafter no adjustment in the number of
shares of Common Stock issuable upon exercise of the right of conversion
granted by this paragraph (g) or in the Conversion Ratio then in effect
shall be required by reason of the taking of such record.
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(9) There shall be no adjustment of the Conversion Ratio in case of
the issuance of any stock of the Corporation in a merger, reorganization,
acquisition or other similar transaction except as set forth in paragraphs
(g)(1) and (3) and (h) of this Section 8.
(h) In case of any capital reorganization or reclassification of
outstanding shares of Common Stock (other than a reclassification covered by
Section 8(g)(1)), or in case of any merger of the Corporation with or into
another Corporation, or in case of any sale or conveyance to another Corporation
of all or substantially all of the assets or property of the Corporation (each
of the foregoing being referred to as a "Transaction"), each share of Class A
Stock then outstanding shall thereafter be convertible into, in lieu of the
Common Stock issuable upon such conversion prior to consummation of such
Transaction, the kind and amount of shares of stock and other securities and
property receivable (including cash or securities of the Surviving Person (as
defined in Section 11 hereof)) upon the consummation of such Transaction by a
holder of that number of shares of Common Stock into which one share of Class A
Stock was convertible immediately prior to such Transaction (including, on a pro
rata basis, the cash, securities or property received by holders of Common Stock
in any tender or exchange offer that is a step in such Transaction). In any such
case, if necessary, appropriate adjustment (as determined by the Board of
Directors) shall be made in the application of the provisions set forth in this
Section 8 with respect to rights and interests thereafter of the holders of
shares of Class A Stock to the end that the provisions set forth herein for the
protection of the conversion rights of the Class A Stock shall thereafter be
applicable, as nearly as reasonably may be, to any such other shares of stock
and other securities and property deliverable upon conversion of the shares of
Class A Stock remaining outstanding (with such adjustments in the conversion
price and number of shares issuable upon conversion and such other adjustments
in the provisions hereof as the Board of Directors shall determine to be
appropriate). In case securities or property other than Common Stock shall be
issuable or deliverable upon conversion as aforesaid, then all references in
this Section 8 shall be deemed to apply, so far as appropriate and as nearly as
may be, to such other securities or property.
Notwithstanding anything contained herein to the contrary, the Corporation
will not effect any Transaction unless, prior to the consummation thereof, the
Surviving Person thereof shall assume, by written instrument mailed to each
holder of shares of Class A Stock, the obligation to deliver to such holder such
cash, property or securities to which, in accordance with the foregoing
provisions, such holder is entitled.
(i) In case at any time or from time to time the Corporation shall pay any
dividend or make any other distribution to the holders of its Common Stock, or
shall offer for subscription pro rata to the holders of its Common Stock any
additional shares of stock of any class or any other right, or there shall by
any capital reorganization or reclassification of the Common Stock of the
Corporation or merger of the Corporation with or into another Corporation, or
any sale or conveyance to another Corporation of the property of the Corporation
as an entirety or substantially as an entirety, or there shall be a voluntary or
involuntary dissolution, liquidation or winding up of the Corporation, then, in
any one or more of said cases the Corporation shall give at least 20 days prior
written notice (the time of mailing of such notice shall be deemed to be the
time of giving thereof) to the registered holders of the Class A Stock at the
addresses of each as
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shown on the books of the Corporation maintained by the transfer agent thereof
as of the date on which (i) the books of the Corporation shall close or a record
shall be taken for such stock dividend, distribution or subscription rights or
(ii) such reorganization, reclassification, merger, sale or conveyance,
dissolution, liquidation or winding up shall take place, as the case may be,
provided that in the case of any Transaction to which paragraph (h) applies the
Corporation shall give at least thirty days prior written notice as aforesaid.
Such notice shall also specify the date as of which the holders of the Common
Stock of record shall participate in said dividend, distribution or subscription
rights or shall be entitled to exchange their Common Stock for securities or
other property deliverable upon such reorganization, reclassification, merger,
sale or conveyance or participate in such dissolution, liquidation or winding
up, as the case may be. Failure to give such notice shall not invalidate any
action so taken.
Section 9. Reports As to Adjustments.
Upon any adjustment of the Conversion Ratio then in effect and any increase
or decrease in the number of shares of Common Stock issuable upon the operation
of the conversion set forth in Section 8 hereof, then, and in each such case,
the Corporation shall promptly deliver to the transfer agent of the Class A
Stock and Common Stock, a certificate signed by the President or a Vice
President and by the Treasurer or an Assistant Treasurer or the Secretary or an
Assistant Secretary of the Corporation setting forth in reasonable detail the
event requiring the adjustment and the method by which such adjustment was
calculated and specifying the Conversion Ratio then in effect following such
adjustment and the increased or decreased number of shares issuable upon the
conversion set forth in Section 8 hereof. The Corporation shall also promptly
after the making of such adjustment give written notice to the registered
holders of the Class A Stock at the address of each holder as shown on the books
of the Corporation maintained by the Transfer Agent thereof, which notice shall
state the Conversion Ratio then in effect, as adjusted, and the increased or
decreased number of shares issuable upon the exercise of the right of conversion
granted by Section 8 hereof, and shall set forth in reasonable detail the method
of calculation of each and a brief statement of the facts requiring such
adjustment. Where appropriate, such notice to holders of the Class A Stock may
be given in advance and included as part of the notice required under the
provisions of Section 8(i) hereof.
Section 10. Certain Covenants.
(a) Following the First Issue Date, and except in payment of dividends
pursuant to Section 2(c), the Corporation shall only issue additional shares of
Class A Stock pursuant to the terms of the Stock Purchase Agreement dated as of
July __, 1996, by and among the Corporation, Trefoil Capital Investors, II, L.P.
and GE Investment Private Placement Partners II, A Limited Partnership, a
Delaware limited partnership, as it may be amended from time to time.
(b) Any registered holder of Class A Stock may proceed to protect and
enforce its rights and the rights of such holders by any available remedy by
proceeding at law or in equity to protect and enforce any such rights, whether
for the specific enforcement of any provision in this Certificate of
Designation, or in aid of the exercise of any power granted herein, or to
enforce any other proper remedy.
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Section 11. Definitions.
The following terms shall have the meanings indicated:
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified person. For the purposes of this definition,
"control" (including, with correlative meanings, the terms "controlled by" and
"under common control with"), as used with respect to any Person, shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities or by agreement or otherwise.
"Bank Credit Agreement" shall mean the Credit Agreement, dated as of June
15, 1995, among the Company, the banks party thereto, and Bankers Trust Company
as Agent for the bank parties thereto, as amended from time to time, and any
refinancings, renewals and replacements thereof.
"Business Day" shall mean any day other than Saturday, Sunday or a day on
which banking institutions in the State of Delaware are authorized or obligated
by law or executive order to close.
"Conversion Price" shall mean an amount equal to the Stated Value divided
by the Conversion Ratio (as adjusted pursuant to paragraph (g) of Section 8
hereof).
"Current Market Price," when used with reference to shares of Common Stock
or other securities on any date, shall mean the volume weighted average of the
sales prices for shares of Common Stock or such other securities on such date
and, when used with reference to shares of Common Stock or other securities for
any period shall mean the volume weighted average of the sale prices for shares
of Common Stock or such other securities for such period. If the Common Stock is
not listed or admitted to trading on a national securities exchange or an
automated quotation system that permits determination of weighted average sale
prices over a period of time, then "Current Market Price" for any period shall
mean the average of the last quoted sale price or, if not so quoted, the average
of the high bid and low asked prices in the over-the-counter market, as reported
by the National Association of Securities Dealers, Inc. Automated Quotation
System or such other system then in use, or, if on any such date the Common
Stock or such other securities are not quoted by any such organization, the
average of the closing bid and asked prices are furnished by a professional
market maker making a market in the Common Stock or such other securities
selected by the Board of Directors of the Corporation. If the Common Stock or
such other securities are not publicly held or so listed or publicly traded,
"Current Market Price" shall mean the fair market value per share of Common
Stock or of such other securities as determined in good faith by the Board of
Directors of the Corporation based on an opinion of an independent investment
banking firm with an established national reputation as a valuer of securities,
which opinion may be based on such assumptions as such firm shall deem to be
necessary and appropriate.
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"DGCL" shall mean the Delaware General Corporation Law, as amended.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
or any similar Federal statute, and the rules and regulations of the Securities
and Exchange Commission thereunder, all as the same shall be in effect at the
time. Reference to a particular section of the Exchange Act shall include
reference to the comparable section, if any, of any such similar Federal
statute.
"Fair Market Value" shall mean, as to shares of Common Stock or any other
class of capital stock or securities of the Corporation or any other issuer
which are publicly traded, the Current Market Price of such shares or securities
for the 30 Trading Day period preceding the date as of which the Fair Market
Value is to be determined. The "Fair Market Value" of any security which is not
publicly traded or of any other property shall mean the fair value thereof as
determined by an independent investment banking or appraisal firm experienced in
the valuation of such securities or property selected in good faith by the Board
of Directors of the Corporation or a committee thereof, or, if no such
investment banking or appraisal firm is in the good faith judgment of the Board
of Directors or such committee available to make such determination, as
determined in good faith by the Board of Directors of the Corporation or such
committee.
"First Issue Date" shall mean the first date that any shares of Class A
Stock are issued.
"Issue Date" shall mean, with respect to any share of Class A Stock, the
date on which such share of Class A Stock is issued.
"Junior Dividend Stock" shall mean (i) the Common Stock and (ii) any other
capital stock of the Corporation which ranks junior as to dividends to the Class
A Stock.
"Junior Liquidation Stock" shall mean (i) the Common Stock and (ii) any
other capital stock of the Corporation which ranks junior upon liquidation,
dissolution or winding up to the Class A Stock.
"Liquidation Preference" with respect to a share of Class A Stock shall
mean the Stated Value per share, plus an amount equal to all accrued but unpaid
dividends.
"Parity Dividend Stock" shall mean any capital stock of the Corporation
ranking on a parity as to dividends with the Class A Stock.
"Parity Liquidation Stock" shall mean any capital stock of the Corporation
ranking on a parity upon liquidation, dissolution or winding up with the Class A
Stock.
"Person" shall mean any individual, firm, corporation or other entity, and
shall include any successor (by merger or otherwise) of such entity.
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"Principal Issue Date" shall mean the first date on which shares of Class A
Stock are issued in an amount so that, following such issuance, the aggregate
stated value of all shares of Class A Stock issued through such date equals at
least $60 million.
"Purchasers" shall mean Trefoil Capital Investors, II, L.P., a Delaware
limited partnership, and GE Investment Private Placement Partners II, A Limited
Partnership, a Delaware limited partnership.
"Qualified Person" shall mean any Person that, immediately after giving
effect to the applicable Transaction, (i) is a solvent corporation or other
entity organized under the laws of any State of the United States of America
having its common stock or, in the case of an entity other than a corporation,
equivalent equity securities, listed on the New York Stock Exchange or the
American Stock Exchange or quoted by the Nasdaq National Market System or any
successor thereto or comparable system, and such common stock or equivalent
equity security continues to meet the requirements for such listing or quotation
and (ii) is required to file, and in each of its three fiscal years immediately
preceding the consummation of the applicable Transaction (or since its
inception) has filed, reports with the Securities and Exchange Commission
pursuant to Section 13 or 15(d) of the Exchange Act.
"Redemption Fair Market Value" shall mean, as to shares of Common Stock,
the Current Market Price of such shares or securities for the 60-day period
preceding the date as of which the Redemption Fair Market Value is to be
determined. The "Redemption Fair Market Value" of the Common Stock if it is not
publicly traded shall mean its Fair Market Value.
"Required Issue Date" shall mean December 31, 1996.
"Senior Notes" shall mean the Corporation's 12% Senior Notes due 2004 and
any other senior indebtedness of the Corporation the net proceeds of which are
used in full to pay principal, prepayment penalty and accrued interest on such
principal, the incurrence of which is approved by the vote of the holders of a
majority of the outstanding shares of Class A Stock.
"Subsidiary" of any Person means any corporation or other entity of which a
majority of the voting power of the voting equity securities or equity interest
is owned, directly or indirectly, by such Person.
"Surviving Person" shall mean the continuing or surviving Person of a
merger or other business combination, the Person receiving a transfer of all or
a substantial part of the properties and assets of the Corporation, or the
Person merging into the Corporation in a merger or other business combination in
which the Corporation is the continuing or surviving Person, but in connection
with which the Class A Stock or Common Stock of the Corporation is exchanged or
converted into the securities of any other Person or cash or any other property;
provided, however, if such surviving Person is a direct or indirect Subsidiary
of a Qualified Person, the parent entity that is a Qualified Person shall be the
Surviving Person.
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"Survivor Common Stock" with respect to any Surviving Person shall mean any
shares of such Surviving Person of any class or series which has no preference
or priority in the payment of dividends or in the distribution of assets upon
any voluntary or involuntary liquidation, dissolution or winding up of such
Surviving Person and which is not subject to redemption by such Surviving
Person; provided, however, that if at any time there shall be more than one such
class or series, the shares of each such class and series issuable upon
conversion of the Class A Stock then being converted shall be substantially in
the proportion to the total number of shares of each such class and series.
"Trading Day" means a day on which the principal national securities
exchange (including, if applicable, the Nasdaq Stock Market) on which the Common
Stock is listed or admitted to trading is open for the transaction of business
or, if the Common Stock is not listed or admitted to trading on any national
securities exchange, a Business Day.
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Exhibit B
FAIR PRICE PROVISION
Article ____:
(1) In addition to any affirmative vote required by law or this Certificate
of Incorporation or the By-laws of the Corporation, and except as otherwise
expressly provided in Section 2 of this Article ______, a Business Combination
(as hereinafter defined) with, or proposed by or on behalf of, any Interested
Stockholder (as hereinafter defined) or any Affiliate or Associate (as
hereinafter defined) of any Interested Stockholder or any person who thereafter
would be an Affiliate or Associate of such Interested Stockholder shall require
the affirmative vote of not less than seventy-five percent (75%) of the votes
entitled to be cast by the holders of all the then outstanding shares of Voting
Stock, voting together as a single class, excluding Voting Stock beneficially
owned by such Interested Stockholder. Such affirmative vote shall be required
notwithstanding the fact that no vote may be required, or that a lesser
percentage or separate class vote may be specified, by law or in any agreement
with any national securities exchange or otherwise.
(2) The provisions of Section 1 of this Article _____ shall not be
applicable to any particular Business Combination, and such Business Combination
shall require only such affirmative vote, if any, as is required by law or by
any other provision of this Certificate of Incorporation or the By-laws of the
Corporation, or any agreement with any national securities exchange or the
Nasdaq National Market, if all of the conditions specified in either of the
following Paragraphs (a) or (b) are met, or in the case of a Business
Combination not involving the payment of consideration to the holders of the
Corporation's outstanding Capital Stock (as hereinafter defined), if the
conditions specified in the following Paragraph (a) are met:
(a) The Business Combination shall have been approved, either
specifically or as a transaction which is within an approved category of
transactions, by a majority (whether such approval is made prior to or
subsequent to the acquisition of, or announcement or public disclosure of the
intention to acquire, beneficial ownership of the Voting Stock that caused the
Interested Stockholder to become an Interested Stockholder) of the Continuing
Directors (as hereinafter defined).
<PAGE>
(b) All of the following conditions shall have been met; provided,
however, that for purposes of all calculations set forth in this Section 2(b),
all acquisitions of Preferred Stock or Common Stock by Trefoil Capital Investors
II, L.P. and GE Investment Private Placement Partners II, A Limited Partnership
(collectively the "Purchasers") pursuant to the Stock Purchase Agreement dated
______ ___, 1996 (the "Stock Purchase Agreement") and all acquisitions of Common
Stock by the Purchasers upon the conversion of such Preferred Stock will be
excluded:
(i) The aggregate amount of cash and the Fair Market Value (as
hereinafter defined), as of the date of the consummation of the Business
Combination, of consideration other than cash to be received per share by
holders of Common Stock in such Business Combination shall be at least
equal to the amount determined under clause (A) below:
(A) (if applicable) the highest per share price (including
any brokerage commissions, transfer taxes and soliciting dealers'
fees) paid by or on behalf of the Interested Stockholder for any share
of Common Stock in connection with the acquisition by the Interested
Stockholder of beneficial ownership of shares of Common Stock (x)
within the two-year period immediately prior to the first public
announcement of the proposed Business Combination (the "Announcement
Date") or (y) in the transaction in which it became an Interested
Stockholder, whichever is higher, in either case as adjusted for any
subsequent stock split, stock dividend, subdivision or
reclassification with respect to the Common Stock.
(ii) The aggregate amount of cash and the Fair Market Value, as
of the date of the consummation of the Business Combination, of
consideration other than cash to be received per share by holders of shares
of any class or series of outstanding Capital Stock, other than Common
Stock, shall be at least equal to the amount determined under clause (A)
below:
(A) (if applicable) the highest per share price (including
any brokerage commissions, transfer taxes and soliciting dealers'
fees) paid by or on behalf of the Interested Stockholder for any share
of such class or series of Capital Stock in connection with the
acquisition by the Interested Stockholder of beneficial ownership of
shares of such class or series of Capital Stock (x) within the
two-year period immediately prior to the Announcement Date or (y) in
the transaction in which it became an Interested Stockholder,
whichever is higher, in either case as adjusted for any subsequent
stock split, stock dividend, subdivision or reclassification with
respect to such class or series of Capital Stock.
(iii) The consideration to be received by holders of a particular
class or series of outstanding Capital Stock shall be in cash or in the
same form as previously has been paid by or on behalf of the Interested
Stockholder in connection with its direct or
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indirect acquisition of beneficial ownership of shares of such class
or series of Capital Stock. If the consideration so paid for shares of
any class or series of Capital stock varied as to form, the form of
consideration for such class or series of Capital Stock shall be
either cash or the form used to acquire beneficial ownership of the
largest number of shares of such class or series of Capital Stock
previously acquired by the Interested Stockholder.
(iv) If a proxy or information statement is required to be mailed
pursuant to the Securities Exchange Act of 1934, as amended, and the rules
and regulations thereunder (the Exchange Act") (or any subsequent
provisions replacing such Exchange Act, rules or regulations), a proxy or
information statement describing the proposed Business Combination and
complying with the requirements of the Exchange Act shall be mailed to all
stockholders of the Corporation at least 30 days prior to the consummation
of such Business Combination.
(3) The following definitions shall apply with respect to this Article____:
(a) The term "Business Combination" shall mean, with respect to any
particular Interested Stockholder, any event described in clauses (i), (ii) or
(iii) of this Section 3(a) which occurs during the two-year period commencing on
the date on which the Interested Stockholder becomes an Interested Stockholder:
(i) any merger or consolidation of the Corporation or any
Subsidiary (as hereinafter defined) with (x) any Interested Stockholder or
(y) any other corporation (whether or not itself an Interested Stockholder)
which is or after such merger or consolidation would be an Affiliate or
Associate of an Interested Stockholder; or
(ii) any merger or consolidation of the Corporation with any of
its Subsidiaries that has the effect, directly or indirectly, of increasing
the proportionate share of any class or series of Capital Stock, or any
securities convertible into Capital Stock or into equity securities of any
Subsidiary, that is beneficially owned by any Interested Stockholder or any
Affiliate or Associate of any Interested Stockholder; or
(iii) any agreement, contract or other arrangement providing for
any one or more of the actions specified in the foregoing clauses (i) or
(ii).
(b) The term "Capital Stock" shall mean all capital stock of the
Corporation authorized to be issued from time to time under Article _____ of
this Certificate of Incorporation, and the term "Voting Stock" shall mean all
Capital Stock which by its terms may be voted on all matters submitted to
stockholders of the Corporation generally.
(c) The term "person" shall mean any individual, firm, corporation or
other entity and shall include any group comprised of any person and any other
person with whom such person or any Affiliate or Associate of such person has
any agreement arrangement or
3
<PAGE>
understanding, directly or indirectly, for the purpose of acquiring, holding,
voting or disposing of Capital Stock.
(d) The term "Interested Stockholder" shall mean any person (other
than the Corporation or any Subsidiary and other than any profit-sharing,
employee stock ownership or other employee benefit plan of the Corporation or
any Subsidiary or any trustee of or fiduciary with respect to any such plan when
acting in such capacity) who is or has announced or publicly disclosed a plan or
intention to become the beneficial owner of Voting Stock representing fifty
percent (50%) or more of the votes entitled to be cast by the holders of all
then outstanding shares of Voting Stock. For purposes of this Article _______,
the Purchasers will not be considered an Interested Stockholder with respect to
any acquisition of Preferred Stock pursuant to the Stock Purchase Agreement or
with respect to the acquisition of Common Stock by the Purchasers upon the
conversion of such Preferred Stock.
(e) A person shall be a "beneficial owner" of any Capital Stock (i)
which such person or any of its Affiliates or Associates beneficially owns,
directly or indirectly; (ii) which such person or any of its Affiliates or
Associates has, directly or indirectly, (A) the right to acquire (whether such
right is exercisable immediately or subject only to the passage of time),
pursuant to any agreement, arrangement or understanding or upon the exercise of
conversion rights, exchange rights, warrants or options, or otherwise, or (B)
the right to vote pursuant to any agreement, arrangement or understanding; or
(iii) which is beneficially owned, directly or indirectly, by any other person
with which such person or any of its Affiliates or Associates has any agreement,
arrangement or understanding for the purpose of acquiring, holding, voting or
disposing of any shares of Capital Stock. For the purpose of determining whether
a person is an Interested Stockholder pursuant to Paragraph (d) of this Section
(3), the number of shares of Capital Stock deemed to be outstanding shall
include shares deemed beneficially owned by such person through application of
this Paragraph (e) of Section (3), but shall not include any other shares of
Capital Stock that may be issuable pursuant to any agreement, arrangement or
understanding, or upon exercise of conversion rights, warrants or options, or
otherwise.
(f) The terms "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 under the Exchange Act as in
effect on the date of filing of this Certificate of Incorporation with the
Secretary of State of the State of Delaware (the term "registrant" in said Rule
12b-2 meaning in this case the Corporation).
(g) The term "Subsidiary" means any company of which a majority of any
class of equity security is beneficially owned by the Corporation; provided,
however, that for the purposes of the definition of Interested Stockholder set
forth in Paragraph (d) of this Section (3), the term "Subsidiary" shall mean
only a company of which a majority of each class of equity security is
beneficially owned by the Corporation.
(h) The term "Continuing Director" means any member of the Board of
Directors, while such person is a member of the Board of Directors, who is not
an Affiliate or Associate or representative of the Interested Stockholder and
was a member of the Board of
4
<PAGE>
Directors prior to the time that an Interested Stockholder became an Interested
Stockholder, and any successor of a Continuing Director while such successor is
a member of the Board of Directors, who is not an Affiliate or Associate or
representative of the Interested Stockholder and is recommended or elected to
succeed the Continuing Director by a majority of Continuing Directors. For
purposes of this Article _____, Roger Stangeland will be considered a Continuing
Director.
(i) "Fair Market Value" means (i) in the case of cash, the amount of
such cash; (ii) in the case of stock, the highest closing sale price during the
30-day period immediately preceding the date in question of a share of such
stock on the Composite Tape for New York Stock Exchange-Listed Stocks, or, if
such stock is not quoted on the Composite Tape, on the New York Stock Exchange,
or, if such stock is not listed on such Exchange, on the principal United States
securities exchange registered under the Exchange Act on which such stock is
listed, or, if such stock is not listed on any such exchange, the highest
closing bid quotation with respect to a share of such stock during the 30-day
period preceding the date in question on the National Association of Securities
Dealers, Inc. Automated Quotations System or any similar system then in use, or,
if no such quotations are available, the fair market value on the date in
question of a share of such stock as determined by a majority of the Continuing
directors in good faith; and (iii) in the case of property other than cash or
stock, the Fair Market Value of such property on the date in question as
determined in good faith by a majority of the Continuing Directors.
(j) In the event of any Business Combination in which the Corporation
survives, the phrase "consideration other than cash to be received" as used in
Paragraphs (b)(i) and (b)(ii) of Section (2) of this Article _____ shall include
the shares of Common Stock and/or the shares of any other class or series of
Capital Stock retained by the holders of such shares.
(4) A majority of the Continuing Directors shall have the power and duty to
determine for the purpose of this Article _____, on the basis of information
known to them after reasonable inquiry, all questions arising under this Article
_____, including, without limitation, (i) whether a person is an Interested
Stockholder, (ii) the number of shares of Capital Stock or other securities
beneficially owned by any person, (iii) whether a person is an Affiliate or
Associate of another, and (iv) whether a proposed action is with, or proposed
by, or on behalf of an Interested Stockholder or an Affiliate or Associate of an
Interested Stockholder. Any such determination made in good faith shall be
binding and conclusive on all parties.
(5) Nothing contained in this Article _____ shall be construed to relieve
any Interested Stockholder from any fiduciary obligation imposed by law.
(6) The fact that any Business Combination complies with the provisions of
Section (2) of this Article _____ shall not be construed to impose any fiduciary
duty, obligation or responsibility on the Board of Directors, or any member
thereof, to approve such Business Combination or recommend its adoption or
approval to the stockholders of the Corporation, nor shall such compliance
limit, prohibit or otherwise restrict in any manner the Board of Directors,
5
<PAGE>
or any member thereof, with respect to evaluations of, or actions and responses
taken with respect to, such Business Combination.
(7) For the purposes of this Article _____, a Business Combination is
presumed to have been proposed by, or on behalf of, an Interested Stockholder or
an Affiliate or Associate of an Interested Stockholder or a person who
thereafter would become such if (i) after the Interested Stockholder became
such, the Business Combination is proposed following the election of any
director of the Corporation who, with respect to such Interested Stockholder,
would not qualify to serve as a Continuing Director or (ii) such Interested
Stockholder, Affiliate, Associate or person votes for or consents to the
adoption of any such Business Combination, unless as to such Interested
Stockholder, Affiliate, Associate or person, a majority of the Continuing
Directors makes a good-faith determination that such Business Combination is not
proposed by or on behalf of such Interested Stockholder, Affiliate, Associate or
person, based on information known to them after reasonable inquiry.
(8) Notwithstanding any other provisions of this Certificate of
Incorporation or the By-laws of the Corporation (and notwithstanding the fact
that a lesser percentage or separate class vote may be specified by law, this
Certificate of Incorporation or the By-laws of the Corporation), the affirmative
vote of the holders of not less than seventy-five percent (75%) of the votes
entitled to be cast by the holders of all the then outstanding shares of Voting
Stock, voting together as a single class, excluding Voting Stock beneficially
owned by such Interested Stockholder, shall be required to amend or repeal, or
adopt any provisions inconsistent with, this Article _____; provided, however,
that this Section (8) shall not apply to, and such seventy-five percent (75%)
vote shall not be required for, any amendment, repeal or adoption unanimously
recommended by the Board of Directors if all of such directors are persons who
would be eligible to serve as Continuing Directors within the meaning of Section
(3), Paragraph (h) of this Article _____.
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<PAGE>
AMENDMENT TO BY-LAWS OF THE GRAND UNION COMPANY
The undersigned, John W. Schroeder, as an Assistant Secretary of The Grand
Union Company, a Delaware corporation (the "Corporation"), hereby certifies that
by unanimous resolution of the Board of Directors of the Corporation at a
meeting duly called and held on [DATE], at which meeting a quorum was present
and acting throughout, the following amendments to the Corporation's by-laws
(the "By-laws") were duly adopted:
1. Amendment to Article I, Section I. Article I, Section I of the By-
---------------------------------
laws is hereby amended by the addition of the following new paragraphs
immediately following the existing paragraph thereof:
"To be properly brought before the annual meeting, business must be
either (a) specified in the notice of meeting (or any supplement thereto) given
by or at the direction of the Board of Directors, (b) otherwise properly brought
before the meeting by or at the direction of the Board of Directors, or (c)
otherwise properly brought before the meeting by a stockholder. In addition to
any other applicable requirements, for business to be properly brought before
the annual meeting by a stockholder, the stockholder must have given timely
notice thereof in writing to the Secretary of the Corporation. To be timely, a
stockholder's notice must be delivered to or mailed and received at the
principal executive offices of the Corporation, addressed to the attention of
the Secretary of the Corporation, within the time specified in the federal proxy
rules for timely submission of a stockholder proposal or, if not within such
time, then not less than sixty days nor more than ninety days prior to the
meeting; provided, however, that in the event that less than fifty days' notice
or prior public disclosure of the date of the meeting is given or made to
stockholders, notice by the stockholder to be timely must be so received by the
earlier of (a) the close of business on the fifteenth day following the day on
which such notice of the date of the annual meeting was mailed or such public
disclosure was made, whichever first occurs, and (b) two days prior to the date
of the meeting. A stockholder's notice to the Secretary shall set forth as to
each matter the stockholder proposes to bring before the annual meeting (i) a
brief description of the business desired to be brought before the annual
meeting, (ii) the name and record address of the stockholder proposing such
business, (iii) the class and number of shares of the Corporation which are
beneficially owned by the stockholder, and (iv) any material interest of the
stockholder in such business. Notwithstanding anything in these by-laws to the
contrary, no business shall be conducted at the annual meeting except in
accordance with the procedures set forth in this paragraph; provided, however,
that nothing in this paragraph shall be deemed to preclude discussion by any
stockholder of any business properly brought before the annual meeting.
The Chairman of the Board of Directors shall, if the facts warrant,
determine and declare to the meeting that business was not properly brought
before the meeting in accordance with the provisions of this Section I, and if
he should so determine, he shall so
<PAGE>
declare to the meeting and any such business not properly brought before the
meeting shall not be transacted."
2. Addition of New Article I, Section IX. Article I of the By-laws is
-------------------------------------
hereby amended by the addition of the following new Section IX immediately
following Section VIII thereof:
"Section IX. Only persons who are nominated in accordance with the
following procedures shall be eligible for election as directors. Nominations
of persons for election to the Board of Directors at the annual meeting or by
the written consent of the shareholders, by or at the direction of the Board of
Directors, may be made by any Nominating Committee or person appointed by the
Board of Directors; nominations may also be made by any shareholder of the
Corporation entitled to vote for the election of directors at the meeting who
complies with the notice procedures set forth in this Section IX. Such
nominations, other than those made by or at the direction of the Board of
Directors, shall be made pursuant to timely notice in writing to the Secretary
of the Corporation. To be timely, a shareholder's notice shall be delivered to
or mailed and received at the principal executive offices of the corporation
addressed to the attention of the Secretary of the Corporation not less than
sixty days prior to the meeting or the date the shareholders are first solicited
for their consents as the case may be; provided, however, that, in the case of
an annual meeting and in the event that less than fifty days' notice or prior
public disclosure of the date of the meeting is given or made to shareholders,
notice by the shareholder to be timely must be so received not later than the
earlier of (a) the close of business on the fifteenth day following the day on
which such notice of the date of the meeting was mailed or such public
disclosure was made, whichever first occurs, or (b) two days prior to the date
of the meeting. Such shareholder's notice to the Secretary shall set forth (a)
as to each person whom the shareholder proposes to nominate for election or
reelection as a director, (i) the name, age, business address and residence
address of the person, (ii) the principal occupation or employment of the
person, (iii) the class and number of shares of capital stock of the Corporation
which are beneficially owned by the person, (iv) a statement as to the person's
citizenship, and (v) any other information relating to the person that is
required to be disclosed in solicitations for proxies for election of directors
pursuant to Section 14 of the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder, and (b) as to the shareholder
giving the notice, (i) the name and record address of the shareholder and (ii)
the class, series and number of shares of capital stock of the Corporation which
are beneficially owned by the shareholder. The Corporation may require any
proposed nominee to furnish such other information as may reasonably be required
by the Corporation to determine the eligibility of such proposed nominee to
serve as a director of the Corporation. No person shall be eligible as a
director of the Corporation unless nominated in accordance with the procedures
set forth herein.
In connection with any annual meeting, the Chairman of the Board of
Directors shall, if the facts warrant, determine and declare to the meeting that
a nomination was not made in
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<PAGE>
accordance with the foregoing procedure, and if he should so determine, he shall
so declare to the meeting and the defective nomination shall be disregarded."
--------------------------------------
John W. Schroeder, Assistant Secretary
-3-
<PAGE>
Exhibit D
RATIFICATION AND VOTING AGREEMENT
RATIFICATION AND VOTING AGREEMENT (the "Agreement"), dated as of July __,
1996, among Trefoil Capital Investors II, L.P., a Delaware limited partnership
("Trefoil II"), GE Investment Private Placement Partners II, A Limited
Partnership, a Delaware limited partnership (together with Trefoil II, the
"Purchasers"), and ____________________ (the "Shareholder").
PREAMBLE
The Grand Union Company, a Delaware corporation (the "Company"), and the
Purchasers have entered into a Stock Purchase Agreement (the "Purchase
Agreement"), dated as of July 30, 1996, which will provide, among other things,
for the acquisition by the Purchasers of shares of the Company's Class A
Convertible Preferred Stock (the "Preferred Stock"). A copy of the Purchase
Agreement has previously been made available to the Shareholder.
As of the date hereof, the Shareholder is the beneficial owner of and holds
sole voting power with respect to __________ shares of Common Stock (the
"Subject Shares").
In order to induce the Purchasers to consummate the transactions
contemplated by the Purchase Agreement (the "Transactions") and for other good
and valuable consideration, the Shareholder agrees to take reasonable steps to
facilitate the Transactions and to vote the Subject Shares as contemplated by
this Agreement.
ACCORDINGLY, the parties hereto agree as follows:
1. Voting in Favor of Purchase Agreement. The Shareholder agrees to support
the Purchase Agreement and the Transactions in any reasonable manner, including
by taking any reasonable action requested by the Purchasers. The Shareholder
will vote all of the Subject Shares in favor of the Purchase Agreement and the
Transactions, and against any agreement or course of action that would prohibit,
delay, interfere with or otherwise be inconsistent with the Purchase Agreement
or the Transactions, (a) at any annual or special meeting (or any adjournment or
postponement thereof) of the shareholders of the Company at which the Purchase
Agreement or the Transactions are submitted to a vote or (b) at the request of
the Purchasers, by its written consent.
2. Granting of Irrevocable Proxy. Upon the request of the Purchasers, the
Shareholder will deliver to one or more persons an irrevocable proxy (the
"Proxy") with respect to all of the Subject Shares, which such Proxy shall be
deemed to be coupled with an interest, to vote all of the Subject Shares in
favor of the Purchase Agreement and the Transactions at any annual or special
meeting of the shareholders of the Company at which the Purchase Agreement or
the Transactions are submitted to a vote in the same manner and with the same
effect as if the
<PAGE>
Shareholder was personally present at such meeting. Any such Proxy shall expire
upon the Expiration Date as defined in Section 6 hereof.
3. Third Party Offers. Between the date hereof and the Expiration Date, the
Shareholder shall not directly or indirectly solicit, initiate or encourage
inquiries or proposals, or participate in any negotiations leading to any
proposal, concerning any transaction involving the Company that would cause the
Company to fail to consummate the Transactions or that would otherwise be
inconsistent with, violate or breach the terms of this Agreement or the Purchase
Agreement. The Shareholder will promptly advise the Purchasers of any offers or
proposals it may receive relating to any such transaction.
4. Representations and Warranties of the Shareholder. The Shareholder
hereby represents and warrants to each of the Purchasers as follows:
4.1. The Shareholder is validly existing and in good standing under
the laws of the jurisdiction of its organization.
4.2. The Shareholder is the sole true and lawful record and beneficial
owner of the Subject Shares and has all necessary power and authority to enter
into this Agreement and to perform such Shareholder's obligations hereunder.
4.3. None of the Subject Shares owned by the Shareholder is subject to
any voting trust or, except pursuant to this Agreement, other agreement or
arrangement with respect to the voting of such Subject Shares.
4.4. The execution, delivery and performance of this Agreement by the
Shareholder and the consummation by it of the transactions contemplated hereby
have been approved by all necessary action on the part of the Shareholder.
4.5. This Agreement is the legal, valid and binding agreement of the
Shareholder.
4.6. The execution, delivery and performance of this Agreement by the
Shareholder does not and will not constitute a violation of, conflict with or
result in a default under (a) any contract, understanding or arrangement to
which the Shareholder is a party or by which such Shareholder is bound, or
require the consent of any other person or any party pursuant thereto, or (b)
any judgment, decree or order applicable to the Shareholder.
4.7. The number of Subject Shares set forth in the Preamble hereto are
the only Voting Securities of the Company beneficially owned by the Shareholder
and the Shareholder owns no options to purchase or rights to subscribe for or
otherwise acquire any other Voting Securities of the Company except for certain
warrants of the Company issued pursuant to the Warrant Agreement between the
Company and American Stock Transfer & Trust Company, dated as of June 15, 1995.
2
<PAGE>
5. Representations and Warranties of the Purchasers. Each Purchaser
represents and warrants to the Shareholder as follows:
5.1. Such Purchaser is validly existing and in good standing under the
laws of the jurisdiction of its organization.
5.2. The execution, delivery and performance of this Agreement by such
Purchaser and the consummation by it of the transactions contemplated hereby
have been approved by all necessary action on the part of such Purchaser.
5.3. This Agreement constitutes the legal, valid and binding
obligation of such Purchaser.
6. Termination. This Agreement shall terminate on the earlier of (a) the
date of the Principal Closing (as defined in the Purchase Agreement) and (b) the
tenth (10th) day following termination of the Purchase Agreement in accordance
with its terms (the "Expiration Date").
7. Remedies. The parties hereto acknowledge that damages would be an
inadequate remedy for a breach of the provisions of this Agreement and that, in
addition to any other remedy available at law, the obligations of the
Shareholder shall be specifically enforceable.
8. Miscellaneous.
8.1. Assignment. This Agreement shall not be assignable by the parties
hereto, except by operation of law and except that any Proxy granted pursuant to
the terms of this Agreement may be assigned by the Purchasers to any person
affiliated with the Purchasers.
8.2. Amendments. This Agreement may not be modified, amended, altered
or supplemented, except upon the execution and delivery of a written agreement
executed by the Purchasers and the Shareholder.
8.3. Notices. All notices, requests, claims, demands and other
communications hereunder shall be given in writing and shall be deemed
sufficiently given when delivered by hand or by conformed facsimile
transmission, on the second business day after a writing is consigned (freight
prepaid) to a commercial overnight courier, and on the fifth business day after
a writing is deposited in the mail, postage and other charges prepaid, addressed
as follows:
3
<PAGE>
(a) If to the Purchasers:
Trefoil Capital Investors II, L.P.
c/o Shamrock Capital Advisors, Inc.
4444 Lakeside Drive
Burbank, CA 91505
Attn: Stanley P. Gold, President
Telecopier No.: (818) 845-9718
Telephone No.: (818) 845-4444
and
GE Investment Private Placement Partners
II, A Limited Partnership
3003 Summer Street
Stamford, CT 06905
Attn: Michael Pastore
Telecopier No.: (303) 326-4177
Telephone No.: (303) 326-2300
With copies to:
Fried, Frank, Harris, Shriver & Jacobson
725 South Figueroa Street, Suite 3890
Los Angeles, CA 90017-5438
Attn: David K. Robbins, Esq.
Telecopier No.: (213) 689-1646
Telephone No.: (213) 689-5800
and
Dewey Ballantine
1301 Avenue of the Americas
New York, NY 10019
Attn: Richard A. Stenberg, Esq.
Telecopier No.: (212) 259-6333
Telephone No.: (212) 259-8000
4
<PAGE>
With copies to:
Chief Executive Officer
The Grand Union Company
201 Willowbrook Boulevard
Wayne, NJ 07470-0966
Telecopier No.:
Telephone No.: (201) 890-6000
and
Ropes & Gray
One International Place
Boston, MA 02110
Attn: Winthrop G. Minot, Esq.
Telecopier No.: (617) 951-7050
Telephone No.: (617) 951-7364
(b) If to the Shareholder:
______________________________
______________________________
______________________________
______________________________
Telecopier No.:
Telephone No.:
With copies to:
Chief Executive Officer
The Grand Union Company
201 Willowbrook Boulevard
Wayne, NJ 07470-0966
Telecopier No.:
Telephone No.: (201) 890-6000
and
Ropes & Gray
One International Place
Boston, MA 02110
Attn: Winthrop G. Minot, Esq.
Telecopier No.: (617) 951-7050
Telephone No.: (617) 951-7364
5
<PAGE>
or to such other address as the Purchasers may have furnished to the Shareholder
or the Shareholder may have furnished to the Purchasers, in either case in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
8.4. Governing Law. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of New York.
8.5. Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid, void
or unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall continue in full force and effect and shall
in no way be affected, impaired or invalidated.
8.6. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same Agreement.
IN WITNESS WHEREOF, the Purchasers and the Shareholder have caused this
Agreement to be duly executed as of the day and year first above written.
TREFOIL CAPITAL INVESTORS II, L.P.
By: TREFOIL INVESTORS II, INC.,
its managing general partner
By:_________________________________
Name:
Title:
GE INVESTMENT PRIVATE PLACEMENT
PARTNERS II, A LIMITED PARTNERSHIP
By: GE INVESTMENT MANAGEMENT
INCORPORATED, a general partner
By:_________________________________
Name:
Title:
6
<PAGE>
____________________________________
Shareholder
7
<PAGE>
SHAREHOLDERS ENTERING INTO
RATIFICATION AND VOTING AGREEMENTS
Number of
Name Shares
- ---- ------
8
<PAGE>
Exhibit E
__________________________________
REGISTRATION RIGHTS AGREEMENT
Dated as of July __, 1996
among
THE GRAND UNION COMPANY,
TREFOIL CAPITAL INVESTORS II, L.P.
and
GE INVESTMENT PRIVATE PLACEMENT PARTNERS II,
A LIMITED PARTNERSHIP
__________________________________
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT is made as of the ____ day of July, 1996
(this "Agreement"), among THE GRAND UNION COMPANY, a Delaware corporation (the
"Company"), TREFOIL CAPITAL INVESTORS II, L.P., a Delaware limited partnership
("Trefoil"), and GE Investment Private Placement Partners II, A Limited
Partnership, a Delaware limited partnership ("GEI") (GEI together with Trefoil,
the "Purchasers").
WITNESSETH:
WHEREAS, pursuant to a Stock Purchase Agreement among the Company and the
Purchasers (the "Purchase Agreement"), the Company is selling to the Purchasers
up to 2,000,000 shares of the Company's Class A Convertible Preferred Stock,
issuable in denominations of $50 stated value per share (the "Preferred
Shares"), convertible into, and dividends on which may be paid in additional
Preferred Shares and shares of, the Company's Common Stock, par value $1.00 per
share (the "Common Shares," and together with the Preferred Shares, the
"Securities");
WHEREAS, the Company has agreed to provide the Purchasers with certain
registration rights as set forth herein; and
WHEREAS, the execution of this Agreement is a condition to the closing
under the Purchase Agreement;
NOW, THEREFORE, in consideration of the premises, obligations and
agreements contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, and subject to and on
the terms and conditions herein set forth, the parties hereto agree as follows:
ARTICLE 1
CERTAIN DEFINITIONS
1.1. Definitions. As used herein, unless the context otherwise requires,
the following terms have the following respective meanings:
- 1 -
<PAGE>
"Blackout Termination Right" shall have the meaning ascribed to it in
Section 6.3(b) of this Agreement.
"Business Day" shall mean any day other than a Saturday, Sunday or any
other day on which commercial banks are authorized to close in New York, New
York.
"Company Offering" shall have the meaning ascribed to it in Section 2.1(b)
of this Agreement.
"Demand Registration" shall have the meaning ascribed to it in Section 2.1
of this Agreement.
"Holder" shall mean each Purchaser of Registrable Securities and such of
its successors, assigns, and transferees that acquire Registrable Securities,
directly or indirectly, from such Purchaser in accordance with the terms of the
Purchase Agreement.
"Information Blackout" shall have the meaning ascribed to it in Section
6.3(a) of this Agreement.
"Maximum Amount" shall have the meaning ascribed to it in Section 2.3(b)
and 4.3(b) of this Agreement.
"Other Registering Holders" shall have the meaning ascribed to it in
Section 5.1 of this Agreement.
"Participating Holders" shall have the meaning ascribed to it in Section
2.3(a) or 4.3(a) of this ______________________ Agreement.
"Person" shall mean an individual, a partnership (general or limited),
corporation, joint venture, business trust, cooperative, association or other
form of business organization, whether or not regarded as a legal entity under
applicable law, a trust (inter vivos or testamentary), an estate of a deceased,
insane or incompetent person, a quasi-governmental entity, a government or any
agency, authority, political subdivision or other instrumentality thereof, or
any other entity.
"Registrable Common Shares" shall mean the outstanding Common Shares
constituting Registrable Securities.
- 2 -
<PAGE>
"Registrable Preferred Shares" shall mean the outstanding shares of
Preferred Shares constituting Registrable Securities.
"Registrable Securities" shall mean any Securities issued at any time to
any of the Purchasers pursuant to the Purchase Agreement and any Securities
issued at any time as dividends upon or on conversion of any of the Securities.
As to any proposed offer or sale of Registrable Securities, such securities
shall cease to be Registrable Securities with respect to such proposed offer or
sale when (i) a registration statement with respect to the sale of such
securities shall have become effective under the Securities Act and such
securities shall have been disposed of in accordance with such registration
statement or (ii) such securities are permitted to be disposed of pursuant to
Rule 144(k) (or any successor provision to such Rule) under the Securities Act
as confirmed in a written opinion of counsel to the Company addressed to the
Holders, or (iii) such securities shall have been otherwise transferred pursuant
to an applicable exemption under the Securities Act, new certificates for such
securities not bearing a legend restricting further transfer shall have been
delivered by the Company and such securities shall be freely transferable to the
public without registration or qualification under the Securities Act or any
state securities or blue sky law then in place.
"Registration Expenses" shall mean any and all expenses incident to
performance of or compliance with this Agreement by the Company and its
subsidiaries, including, without limitation: (i) all SEC, stock exchange or
National Association of Securities Dealers, Inc. ("NASD") registration and
filing fees, including, if applicable, the fees and expenses of any "qualified
independent underwriter" (and its counsel) that is required to be retained in
accordance with the rules and regulations of the NASD, (ii) all fees and
expenses incurred in connection with compliance with state securities or blue
sky laws and compliance with the rules of the NASD (including reasonable fees
and disbursements of counsel in connection with the NASD and blue sky
qualification of any of the Registrable Securities and the preparation of a Blue
Sky Memorandum), (iii) all expenses of any Persons in preparing or assisting in
preparing, word processing, printing and distributing any Registration
Statement, any prospectus, any amendments or supplements thereto, any
underwriting agreements, transmittal letters, securities sales agreements, and
other documents relating to the performance of and compliance with this
Agreement, (iv) all fees and expenses incurred in connection with the listing,
if any, of any of the Registrable Securities on any securities exchange or
exchanges, (v) all rating agency fees, (vi) the fees and disbursements of
counsel for the Company and of the independent public accountants of the
Company, including the expenses of any special audits or "cold comfort"
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letters required by or incident to such performance and compliance, (vii) the
reasonable fees and disbursements of any special counsel representing the
Holders of Registrable Securities (the "special counsel"), (viii) any fees and
disbursements of the Underwriters customarily required to be paid by issuers or
sellers of securities and the reasonable fees and expenses of any special
experts retained by the Company in connection with any Registration Statement.
Notwithstanding the foregoing, Registration Expenses shall exclude underwriting
discounts and commissions and transfer taxes, if any, relating to the sale or
disposition of Registrable Securities by a Holder. Registration Expenses shall
not include the fees and disbursements of more than one counsel representing the
Holders of Registrable Securities.
"Requesting Holders" shall have the meaning ascribed to it in Section
2.3(a) and 4.3(a) of this Agreement.
"Sale Amount" shall have the meaning ascribed to it in Section 7.1 of this
Agreement.
"Sales Blackout Period" shall have the meaning ascribed to it in Section
6.3(a) of this Agreement.
"SEC" shall mean the Securities and Exchange Commission or its successor.
"Securities" shall have the meaning ascribed to it in the recitals to this
Agreement.
"Securities Act" shall mean the Securities Act of 1933, as amended, or any
similar federal statute, and the rules and regulations of the SEC thereunder,
all as the same shall be in effect from time to time, and a reference to a
particular section thereof shall be deemed to include a reference to the
comparable section, if any, of any such similar federal statute.
"selling Holders" shall mean any Holder exercising registration rights
pursuant to the relevant provisions of this Agreement.
ARTICLE 2
DEMAND REGISTRATION
2.1. Notice and Registration. Subject to the terms and conditions set forth
herein, the Holders of Registrable Securities may request, by written notice to
the Company, registration under the Securities Act of all or part of the
Registrable Securities (a "Demand Registration").
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Upon such written notice, which notice shall specify the intended method or
methods of disposition of such Registrable Securities, the Company will use its
best efforts to effect (at the earliest possible date) the registration under
the Securities Act of such Registrable Securities for disposition in accordance
with the intended method or methods of disposition stated in such request,
provided that:
(a) If the Company shall have previously effected a registration with
respect to Registrable Securities pursuant to Articles 3 or 4 hereof, the
Company shall not be required to effect a Demand Registration pursuant to this
Article 2 until a period of ninety (90) days shall have elapsed from the
effective date of the most recent such previous registration.
(b) If, upon receipt of a Demand Registration request pursuant to this
Article 2, the Company is advised in writing (with a copy to the selling Holders
of Registrable Securities) by a nationally recognized independent investment
banking firm selected by the Company to act as lead underwriter in connection
with a public offering of securities by the Company that, in such firm's
opinion, a registration at the time and on the terms requested would materially
adversely affect such public offering of securities by the Company (other than
an offering in connection with employee benefit and similar plans) (a "Company
Offering") that had been planned by the Company's Board of Directors prior to
the notice by the Holder who initially requested registration, the Company shall
not be required to effect a registration pursuant to this Article 2 until the
earliest of (i) three months after the completion of such Company Offering, (ii)
promptly after abandonment of such Company Offering or (iii) four months after
the date of written notice requesting registration from the Holders who
initially requested registration, in any event subject to any agreement limiting
the right to sell Registrable Securities entered into in connection with such
public offering between any underwriter and such selling Holder.
(c) If, while a Demand Registration request is pending pursuant to
this Article 2, the Company determines in the good faith judgment of the Board
of Directors of the Company, with the advice of counsel, that the filing of a
registration statement would require the disclosure of non-public material
information the disclosure of which would have a material adverse effect on the
Company or would otherwise adversely affect a material financing, acquisition,
disposition, merger or other comparable transaction, the Company shall deliver a
certificate to such effect signed by its Chief Executive Officer, President, or
any Executive Vice President to the selling Holders of Registrable Securities,
and the Company shall not be required to effect a registration pursuant to this
Article 2 until the earlier of (i) the date upon which such
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material information is disclosed to the public or ceases to be material or (ii)
sixty (60) days after the Company makes such good faith determination.
(d) The Company shall not be required to effect more than four (4)
registrations with respect to the Registrable Securities. No registration of
Registrable Securities under this Article 2 shall relieve the Company of its
obligation (if any) to effect registrations of Registrable Securities pursuant
to Articles 3 or 4.
2.2. Registration Expenses. The Company shall be responsible for the
payment of all Registration Expenses in connection with any registration
pursuant to this Article 2. In connection with any registration pursuant to this
Article 2, each Holder shall pay all underwriting discounts and commissions and
transfer taxes, if any, relating to the sale or disposition of such Holder's
Registrable Securities.
2.3. Other Holders of Registrable Securities. (a) Upon receipt of the
written notice from a Holder requesting registration under Section 2.1, the
Company shall give written notice to all other Holders of Registrable
Securities. Subject to Section 2.3(b), the Company shall be required to cause
the registration of securities for sale for the account of the Holders (the
"Participating Holders") in any registration of Registrable Securities requested
pursuant to this Article 2 who have delivered written notice to the Company
within fifteen (15) Business Days of the date of receipt by such Participating
Holders of the above-referenced written notice from the Company (which notice
from the Participating Holders to the Company shall specify the number of shares
to be disposed of and the intended method of disposition); provided that the
Company shall not be required to cause the registration of all of the securities
requested to be registered by Participating Holders if the Holders who requested
such registration (the "Requesting Holders") are advised in writing (with a copy
to the Company) by a nationally recognized independent investment banking firm
selected as set forth in Section 2.3(c) that, in such firm's opinion,
registration of all of such securities would materially adversely affect the
offering and sale of Registrable Securities then contemplated by the Requesting
Holders.
(b) If the Company cannot, pursuant to the terms of this Section 2.3,
register all of the shares requested to be registered, the Company shall
register the Maximum Amount (as defined below), and such amount shall be
allocated among the Holders, pro rata according to the number of shares for
which registration was initially requested by the Holders. For purposes of this
Section, "Maximum Amount" shall mean the largest number of shares (if any) that,
in the opinion of the nationally recognized underwriter selected as set forth in
Section 2.3(c), could be
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offered to the public without materially adversely affecting the offering and
sale of Registrable Securities as then contemplated by the selling Holders.
(c) The following Persons shall be entitled to select the lead
underwriter in an underwritten registered offering pursuant to this Article 2,
subject to the consent of the Company, which shall not be unreasonably withheld:
(a) if there is only one Requesting Holder in such offering, the Requesting
Holder; (b) if there is more than one Requesting Holder in such offering, the
first Holder to exercise Demand Registration rights with respect to such
offering; (c) in the event that more than one Holder exercises Demand
Registration rights on the same day, the Holder who requested a registration of
the larger number of shares on such day. Notwithstanding anything to the
contrary in this Agreement, if Trefoil or GEI (or General Electric Pension Trust
("GEPT") (or a direct or indirect subsidiary of GEPT) upon a distribution of
Securities by Trefoil or GEI to its respective partners) is participating in the
underwritten offering of Registrable Securities pursuant to Demand Registration
rights, GEPT (or Trefoil or GEI, acting on behalf of GEPT) shall have the
absolute right to disapprove in such underwritten offering any underwriter in
which General Electric Company has a direct or indirect five percent (5%) or
greater voting equity interest or that would otherwise require the offering to
be conducted in accordance with Schedule E under the rules of the National
Association of Securities Dealers, Inc. by virtue of GEPT's interest in any
shares being sold in such offering.
ARTICLE 3
PIGGYBACK REGISTRATION
3.1. Notice and Registration. If the Company proposes to register any
shares of its Common Shares for public sale under the Securities Act (whether
proposed to be offered for sale by the Company or by any other Person) on a form
and in a manner which would permit registration of any Registrable Common Shares
for sale to the public under the Securities Act, it will give prompt written
notice to the Holders of Registrable Securities of its intention to do so, and
upon the written request of any Holder of Registrable Securities delivered to
the Company within fifteen (15) Business Days after the giving of any such
notice (which request shall specify the number of Registrable Common Shares
intended to be registered by such Holder and the intended method of disposition
thereof), the Company will use all reasonable efforts to effect, in connection
with the registration of its Common Shares, the registration under the
Securities Act of all Registrable Common Shares which the Company has been so
requested to register to the extent required to permit the disposition (in
accordance with the intended method or methods thereof as aforesaid) of
Registrable Common Shares to be so registered, provided that:
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(a) The Company will not be required to effect any registration
pursuant to this Article 3 if the Company shall have been advised in writing
(with a copy to the selling Holders of Registrable Securities) by a nationally
recognized independent investment banking firm selected by the Company to act as
lead underwriter in connection with the public offering of securities by the
Company that, in such firm's opinion, a registration of the Registrable Common
Shares requested to be registered at that time would materially and adversely
affect the Company's own scheduled offering of Common Shares; provided, however,
that if the Company shall have been advised by such firm that an offering of
some but not all of the Registrable Common Shares requested to be registered by
the Holder(s) would not materially adversely affect the Company's offering of
Common Shares, the aggregate number of Registrable Common Shares requested to be
included in such offering by the Holders shall be reduced pro rata according to
the total number of Registrable Common Shares requested to be registered by such
Persons.
(b) The Company shall not be required to effect any registration of
Registrable Common Shares under this Article 3 incidental to the registration of
any of its securities in connection with mergers, acquisitions, exchange offers,
subscription offers, dividend reinvestment plans or stock options or other
employee benefit plans.
(c) Notwithstanding any request under this Section 3.1, a selling
Holder may elect in writing, not less than two business days prior to the
effective date of a registration under this Article 3, not to register its
Registrable Securities in connection with such registration.
(d) No registration of Registrable Common Shares effected under this
Article 3 shall relieve the Company of its obligation (if any) to effect
registrations of Registrable Securities pursuant to Articles 2 or 4.
3.2. Registration Expenses. The Company shall be responsible for the
payment of all Registration Expenses in connection with any registration
pursuant to this Article 3. In connection with any registration pursuant to this
Section 3, each Holder shall pay all underwriting discounts and commissions and
transfer taxes, if any, relating to the sale or disposition of such Holder's
Registrable Securities.
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ARTICLE 4
REGISTRATION ON FORM S-3
4.1. Notice and Registration. If the Company is permitted to register any
of its equity securities for public sale under the Securities Act (whether
proposed to be offered for sale by the Company or by any other Person) on a Form
S-3, subject to the terms and conditions set forth herein, any Holder or Holders
of Registrable Securities may request, by written notice to the Company,
registration under the Securities Act on Form S-3 for an amount of Registrable
Securities which are owned by such Holder or Holders in excess of the lesser of
250,000 Common Shares (treating any Preferred Shares for which registration is
sought as having been converted into Common Shares for purposes of determining
satisfaction of this threshold) and all remaining Registrable Securities held by
the Holders. Upon such written notice, which notice shall specify the intended
method or methods of disposition of such Registrable Securities, the Company
will use its best efforts to effect (at the earliest possible date) the
registration under the Securities Act of such Registrable Securities for
disposition in accordance with the intended method or methods of disposition
stated in such request, provided that:
(a) If the Company shall have previously effected a registration with
respect to Registrable Securities pursuant to Articles 2 or 3 hereof, the
Company shall not be required to effect a registration pursuant to this Article
4 until a period of ninety (90) days shall have elapsed from the effective date
of the most recent such previous registration.
(b) If, upon receipt of a registration request pursuant to this
Article 4, the Company is advised in writing (with a copy to the selling
Holders) by a nationally recognized independent investment banking firm selected
by the Company to act as lead underwriter in connection with a public offering
of securities by the Company that, in such firm's opinion, a registration at the
time and on the terms requested would materially adversely affect a Company
Offering that had been planned by the Company's Board of Directors prior to the
notice by the selling Holder who initially requested registration, the Company
shall not be required to effect a registration pursuant to this Article 4 until
the earliest of (i) three months after the completion of such Company Offering,
(ii) promptly after abandonment of such Company Offering or (iii) four months
after the date of written notice requesting registration from the selling Holder
who initially requested registration, in any event subject to any agreement
limiting the right to sell Registrable Securities entered into in connection
with such public offering between any underwriter and such selling Holder.
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(c) If, while a registration request is pending pursuant to this
Article 4, the Company determines in the good faith judgment of the Board of
Directors of the Company, with the advice of counsel, that the filing of a
registration statement would require the disclosure of non-public material
information the disclosure of which would have a material adverse effect on the
Company or would otherwise adversely affect a material financing, acquisition,
disposition, merger or other comparable transaction, the Company shall deliver a
certificate to such effect signed by its Chief Executive Officer, President, or
any Executive Vice President to the selling Holders, and the Company shall not
be required to effect a registration pursuant to this Article 4 until the
earlier of (i) the date upon which such material information is disclosed to the
public or ceases to be material or (ii) sixty (60) days after the Company makes
such good faith determination.
(d) The Holders of Registrable Securities shall have the right to an
unlimited number of registrations under this Section 4. No registration of
Registrable Securities under this Article 4 shall relieve the Company of its
obligation (if any) to effect registrations of Registrable Securities pursuant
to Articles 2 or 3.
4.2. Registration Expenses. The Company shall be responsible for the
payment of all Registration Expenses in connection with any registration
pursuant to this Article 4. In connection with any registration pursuant to this
Section 4, each Holder shall pay all underwriting discounts and commissions and
transfer taxes, if any, relating to the sale or disposition of such Holder's
Registrable Securities.
4.3. Other Holders of Registrable Securities. (a) Upon receipt of the
written notice from a Holder requesting registration under Section 4.1, the
Company shall give written notice to all other Holders of Registrable
Securities. Subject to Section 4.3(b), the Company shall be required to cause
the registration of securities for sale for the account of the Holders (the
"Participating Holders") in any registration of Registrable Securities requested
pursuant to this Article 4 who have delivered written notice to the Company
within fifteen (15) Business Days of the date of receipt by such Participating
Holders of the above-referenced written notice from the Company (which notice
from the Participating Holders to the Company shall specify the number of shares
to be disposed of and the intended method of disposition); provided that the
Company shall not be required to cause the registration of all of the securities
requested to be registered by Participating Holders if the Holders who requested
such registration (the "Requesting Holders") are advised in writing (with a copy
to the Company) by a nationally recognized independent investment banking firm
selected as set forth in Section 4.3(c) that, in such firm's opinion,
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registration of all of such securities would materially adversely affect the
offering and sale of Registrable Securities then contemplated by the Requesting
Holders.
(b) If the Company cannot, pursuant to the terms of this Section 4.3
register all of the shares requested to be registered, the Company shall
register the Maximum Amount (as defined below), and such amount shall be
allocated among the Holders, pro rata according to the number of shares for
which registration was initially requested by the Holders. For purposes of this
Section, "Maximum Amount" shall mean the largest number of shares (if any) that,
in the opinion of the nationally recognized underwriter selected as set forth in
Section 4.3(c), could be offered to the public without materially adversely
affecting the offering and sale of Registrable Securities as then contemplated
by the selling Holders.
(c) The following Persons shall be entitled to select the lead
underwriter in an underwritten registered offering pursuant to this Article 4,
subject to the consent of the Company, which shall not be unreasonably withheld:
(a) if there is only one Requesting Holder in such offering, the Requesting
Holder; (b) if there is more than one Requesting Holder in such offering, the
first Holder to exercise registration rights under this Article 4 with respect
to such offering; (c) in the event that more than one Holder exercises Demand
Registration rights on the same day, the Holder who requested a registration of
the larger number of shares on such day. Notwithstanding anything to the
contrary in this Agreement, if Trefoil or GEI (or General Electric Pension Trust
("GEPT") (or a direct or indirect subsidiary of GEPT) upon a distribution of
Securities by Trefoil to its partners) is participating in the underwritten
offering of Registrable Securities pursuant to such registration rights, GEPT
(or Trefoil or GEI, acting on behalf of GEPT) shall have the absolute right to
disapprove in such underwritten offering any underwriter in which General
Electric Company has a direct or indirect five percent (5%) or greater voting
equity interest or that would otherwise require the offering to be conducted in
accordance with Schedule E under the rules of the National Association of
Securities Dealers, Inc. by virtue of GEPT's interest in any shares being sold
in such offering.
ARTICLE 5
PRIORITIES
5.1. Demand and Form S-3 Registrations. If the lead underwriter in an
underwritten offering registered under Article 2 or Article 4 of this Agreement
advises the Company, the selling Holders or any other shareholders of the
Company exercising contractual registration rights (the "Other Registering
Holders") that in its good faith judgment the number of securities
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requested by the selling Holders to be included in such registration, when added
to the number of securities to be included in such registration by the Company
and/or all Other Registering Holders, exceeds the largest number (the "Sale
Amount") which can be sold in an orderly manner in such offering within a price
range acceptable to the Requesting Holders, the Company and/or the Other
Registering Holders, as the case may be, the Company will include in such
registration:
(a) first, the Registrable Securities the selling Holders propose to
sell; provided that if such securities exceed the Sale Amount, the Registrable
Securities to be included in the registration shall be determined in accordance
with the priorities set forth in Article 2 or 4 of this Agreement, as the case
may be;
(b) second, to the extent the Sale Amount is not exceeded, any
securities the Company proposes to register (subject to any agreement between
the Company and the remaining Other Registering Holders affecting registration
priorities); and
(c) third, to the extent the Sale Amount is not exceeded, any other
securities held by any remaining Other Registering Holders, on a pro rata basis,
based on the number of shares then owned by each such remaining Other
Registering Holder, or such other basis to which they may have agreed among
themselves.
5.2. Piggyback Registrations. If the lead underwriter in a underwritten
offering registered under Article 3 of this Agreement advises the Company, the
selling Holders or the Other Registering Holders that in its good faith judgment
the number of securities requested by the selling Holders to be included in such
registration, when added to the number of securities to be included in such
registration by the Company and/or all Other Registering Holders, exceeds the
Sale Amount, the Company will include in such registration:
(a) first, the Person or Persons (i.e., the Company or any Other
Registering Holders, as the case may be) that initially requested such
registration (any such Person an "Initiator");
(b) second, to the extent the Sale Amount is not exceeded, the
Registrable Securities the selling Holders propose to sell; provided that if
such securities exceed the Sale Amount, the Registrable Securities to be
included in the registration shall be determined in accordance with the
priorities set forth in Article 3 of this Agreement;
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(c) third, to the extent the Sale Amount is not exceeded, any
securities the Company proposes to register (if the Company is not the
Initiator);
(d) fourth, to the extent the Sale Amount is not exceeded, any other
securities held by any remaining Other Registering Holders (other than any
Initiators), on a pro rata basis, based on the number of shares then owned by
each such remaining Other Registering Holder, or such other basis to which they
may have agreed among themselves.
ARTICLE 6
REGISTRATION PROCEDURES
6.1. Registration and Qualification. In connection with the obligations of
the Company with respect to the registration of any Registrable Securities under
the Securities Act as provided in Articles 2, 3 or 4 of this Agreement, the
Company shall use its reasonable best efforts to effect or cause to be effected
the registration of the Registrable Securities under the Securities Act to
permit the sale of such Registrable Securities by the Holders in accordance with
their intended method or methods of distribution, and the Company shall, as
promptly as practicable:
(a) prepare, file and use all reasonable efforts to cause to become
effective a registration statement under the Securities Act regarding the
Registrable Securities to be offered;
(b) prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection therewith as
may be necessary to keep such registration statement effective and to comply
with the provisions of the Securities Act with respect to the disposition of all
Registrable Securities until the earlier of such time as all of such Registrable
Securities have been disposed of in accordance with the intended methods of
disposition by the selling Holders set forth in such registration statement or
the expiration of 90 days after such Registration Statement becomes effective in
the event of a registration under Article 2 or 3 and twelve months after such
Registration Statement becomes effective in the event of a registration under
Article 4;
(c) furnish to the selling Holders and to any underwriter of such
Registrable Securities such number of conformed copies of such registration
statement and of each such amendment and supplement thereto (in each case
including all exhibits), such number of copies of the prospectus included in
such registration statement (including each preliminary prospectus
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and any summary prospectus), in conformity with the requirements of the
Securities Act, such documents incorporated by reference in such registration
statement or prospectus, and such other documents as the selling Holders or such
underwriter may reasonably request;
(d) use all reasonable efforts to register or qualify all Registrable
Securities covered by such registration statement under such other securities or
blue sky laws of such jurisdictions as the selling Holders or any underwriter of
such Registrable Securities shall reasonably request, and do any and all other
acts and things which may be reasonably requested by the selling Holders or any
underwriter to consummate the disposition in such jurisdictions of the
Registrable Securities covered by such registration statement, except the
Company shall not for any such purpose be required to qualify generally to do
business as a foreign corporation in any jurisdiction wherein it is not so
qualified, or to subject itself to taxation in any jurisdiction where it is not
then subject to taxation, or to consent to general service of process in any
jurisdiction where it is not then subject to service of process;
(e) use all reasonable efforts to list or admit for trading the
Registrable Securities on the National Association of Securities Dealers, Inc.
Automated Quotation ("NASDAQ") System or any national securities exchange or
quotation system on which the Common Shares is then listed, if the listing of
such securities is then permitted under the rules of such exchange;
(f) if requested, (i) furnish to the selling Holders and any
underwriters an opinion of counsel for the Company, addressed to them, dated the
date of the closing under any underwriting agreement and otherwise the date of
effectiveness, and (ii) use all reasonable efforts to furnish to the selling
Holders and any underwriters a "comfort letter" signed by the independent public
accountants who have certified the Company's financial statements included in
such registration statement, addressed to them; provided that with respect to
such opinion and "comfort letter," the following shall apply: (A) the opinion
and "comfort letter" shall cover substantially the same matters with respect to
such registration statement (and the prospectus included therein) as are
customarily covered in opinions of issuer's counsel and in accountants' letters
delivered to underwriters in underwritten public offerings of securities and
such other matters as the selling Holders or any such underwriters may
reasonably request; (B) the "comfort letter" also shall cover events subsequent
to the date of such financial statements; and (C) the Company shall have no
obligations under this clause (f) unless the anticipated gross proceeds of the
sale of all securities under such registration statement (whether by the selling
Holders or otherwise) are greater than $5 million; and
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(g) notify the selling Holders immediately upon the happening of any
event as a result of which a prospectus included in a registration statement,
relating to a registration pursuant to Article 2, 3 or 4 hereof, as then in
effect, includes an untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, and at the request of the selling Holders prepare and furnish to the
selling Holders as many copies of a supplement to or an amendment of such
prospectus as the selling Holders reasonably request so that, as thereafter
delivered to the purchasers of such Registrable Securities, such prospectus
shall not include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
The Company may require the selling Holders to furnish the Company such
information regarding the selling Holders and the distribution of such
securities as the Company may from time to time reasonably request in writing
and as shall be required by law or by the SEC in connection with any
registration.
6.2. Underwriting. (a) If requested by the underwriters for any
underwritten offering of Registrable Securities pursuant to a registration
described in this Agreement, the Company will enter into and perform its
obligations under an underwriting agreement with such underwriters for such
offering, such agreement to contain such representations and warranties by the
Company and such other terms and provisions as are customarily contained in
underwriting agreements with respect to secondary distributions, including,
without limitation, indemnities and contribution to the effect and to the extent
provided in Article 8 hereof and the provision of opinions of counsel and
accountants' letters to the effect and to the extent provided in Section 6.1(f).
The representations and warranties by, and the other agreements on the part of,
the Company to and for the benefit of such underwriters in any such underwriting
agreement shall also be made to and for the benefit of such holders of
Registrable Securities, whether in such an underwriting agreement or otherwise.
(b) In the event that any registration pursuant to Articles 2, 3 or 4
hereof shall involve, in whole or in part, an underwritten offering, the Company
may require Registrable Securities requested to be registered pursuant to
Articles 2, 3 or 4 to be included in such underwriting on the same terms and
conditions as shall be applicable to the other Common Shares being sold through
underwriters under such registration. In such case, the holders of
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Registrable Securities on whose behalf Registrable Securities are to be
distributed by such underwriters shall be parties to any such underwriting
agreement. Such agreement shall contain such representations and warranties by
the Company and the selling Holders and such other terms and provisions as are
customarily contained in underwriting agreements with respect to secondary
distributions, including, without limitation, indemnities and contribution to
the effect and to the extent provided in Article 8. The representations and
warranties in such underwriting agreement by, and the other agreements on the
part of, the Company to and for the benefit of such underwriters shall also be
made to and for the benefit of such holders of Registrable Securities.
6.3. Blackout Periods. (a) At any time when a shelf registration statement
covering Registrable Securities is effective, upon written notice from the
Company to the selling Holders that the Board of Directors of the Company
determines in good faith, with the advice of counsel, that the selling Holders'
sale of Registrable Securities pursuant to the registration statement would
require disclosure of non-public material information the disclosure of which
would have a material adverse effect on the Company, the selling Holders shall
suspend sales of Registrable Securities pursuant to such shelf registration
statement until the earlier of:
(i) the date upon which such material information is disclosed to
the public; and
(ii) if the Company makes a good faith determination that the
disclosure of such information would have a material adverse effect on the
Company, the earlier of the date upon which such information ceases to be
material and sixty (60) days after the Company makes such good faith
determination.
(Any suspension under clause (ii) is hereinafter called an Information Blackout
and the number of days from such suspension of sales under clause (ii) by the
selling Holders until the day when such sales may be resumed under clause (i) or
(ii) hereof is hereinafter called a "Sales Blackout Period".)
(b) If an Information Blackout under Section 6.3(a) persists for
greater than fifteen (15) days, the selling Holders in such registration shall
be entitled to terminate the registration of the Registrable Securities covered
by the registration statement, and, if it is a Demand Registration under Article
2, recover the Demand Request. Under such circumstances,
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<PAGE>
such Demand Request shall not reduce the number of Demand Registration rights
available under Section 2.1(d).
(c) If there is an Information Blackout under Section 6.3(a), and if
the Holders do not exercise their cancellation right, if any, pursuant to 6.3(b)
above, or, if such cancellation right is not available, the time period set
forth in Section 6.1(b) shall be extended for a number of days equal to the
number of days in the Sales Blackout Period.
(d) At any time when a registration statement covering Registrable
Securities is effective, upon written notice from the Company to the selling
Holders that the Board of Directors of the Company determines in good faith,
with the advice of counsel, that the selling Holders' sale of Registrable
Securities pursuant to the registration statement would require disclosure of
non-public material information, the selling Holders shall suspend sales of
Registrable Securities pursuant to shelf registration statement until the date
upon which such material information is disclosed to the public, but the Company
shall not have the right to cause an Information Blackout.
(e) Whenever there is a suspension of sales pursuant to this Section
6.3, except under an Information Blackout, the Company shall promptly comply
with 6.1(b) relating to the material information the non-disclosure of which
caused such suspension so as to permit the resumption of sales as promptly as is
reasonably possible.
6.4. Conditions and Limitations on Registration of Registrable Securities.
The Company shall not be required to effect any registration of Registrable
Securities pursuant to Section 2.1 or 4.1 hereof if it shall deliver to the
Holder or Holders requesting such registration an opinion of counsel (which
opinion and counsel shall be reasonably satisfactory to such holder or holders)
to the effect that the Registrable Securities requested to be registered may be
sold by such holder without registration under the Securities Act.
6.5. Qualification for Rule 144 Sales. The Company will take all actions
reasonably necessary to comply with the filing requirements described in Rule
144(c)(1) so as to enable Holders to sell Registrable Securities without
registration under the Securities Act and, upon the written request of any
Holder, the Company will deliver to such Holder a written statement as to
whether it has complied with such filing requirements.
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<PAGE>
6.6 No Conflicting Agreements. The Company hereby covenants and agrees that
it will not enter into any agreements with any of its present or future
stockholders which will conflict with the rights of any Holder under this
Agreement.
ARTICLE 7
PREPARATION; REASONABLE INVESTIGATION
7.1. Preparation; Reasonable Investigation. In connection with the
preparation and filing of each registration statement registering Registrable
Securities under the Securities Act, the Company will give the selling Holders
and the underwriters, if any, and their respective counsel and accountants,
drafts of such registration statement for their review and comment prior to
filing and such reasonable and customary access to its books and records and
such opportunities to discuss the business of the Company with its officers and
the independent public accountants who have certified its financial statements
as shall be necessary, in the opinion of the selling Holders and such
underwriters or their respective counsel, to conduct a reasonable investigation
within the meaning of the Securities Act.
ARTICLE 8
INDEMNIFICATION AND CONTRIBUTION
8.1. Indemnification and Contribution. (a) In the event of any registration
of Registrable Securities hereunder, the Company will, and hereby does,
indemnify and hold harmless, each selling Holder, its respective directors,
officers, partners, agents, employees and affiliates and each other person who
participates as an underwriter in the offering or sale of such securities and
each other Person, if any, who controls each such selling Holder or any such
underwriter within the meaning of Section 15 of the Securities Act, against any
and all losses, claims, damages, expenses or liabilities, joint or several,
actions or proceedings (whether commenced or threatened) in respect thereof, to
which each such indemnified party may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages, expenses or liabilities (or
actions or proceedings, whether commenced or threatened, in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in any registration statement under which such
securities were registered under the Securities Act, any preliminary prospectus,
final prospectus or summary prospectus contained therein, or any amendment or
supplement thereto, or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein in light of the circumstances in which they were made not misleading,
and subject to Section 8.1(g)
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<PAGE>
the Company will reimburse as incurred each such selling Holder and each such
director, officer, partner, agent, employee or affiliate, underwriter and
controlling person for any legal or any other expenses reasonably incurred by
them in connection with investigating or defending any such loss, claim, damage,
expense, liability, action, or proceeding; provided, however, that (i) the
Company shall not be liable in any such case to the extent that any such loss,
claim, damage, expense or liability (or action or proceeding in respect thereof)
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in such registration statement, any such
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement in reliance upon and in conformity with written information furnished
to the Company through an instrument duly executed by or on behalf of such
selling Holder or underwriter specifically stating that it is for use in the
preparation thereof, and (ii) the Company shall not be liable to any person who
participates as an underwriter in the offering or sale of Registrable Securities
or any other person, if any, who controls or is controlled by such underwriter
within the meaning of the Securities Act, in any such case to the extent that
any such loss, claim, damage, expense or liability (or action or proceeding in
respect thereof) arises out of such underwriter's failure to send or give a copy
of the final prospectus, as the same may be then supplemented or amended, to the
person asserting an untrue statement or alleged untrue statement or omission or
alleged omission at or prior to the written confirmation of the sale of
Registrable Securities to such person if such statement or omission was
corrected in such final prospectus.
(b) Each selling Holder severally will, and hereby does, indemnify and
hold harmless the Company, its directors, its officers who sign the registration
statement, each Person who participates as an underwriter in the offering or
sale of such securities, and each Person, if any, who controls the Company or
any such underwriter within the meaning of the Securities Act against any and
all losses, claims, damages, expenses or liabilities, joint or several, actions
or proceedings (whether commenced or threatened) in respect thereof, to which
each such indemnified party may become subject under the Securities Act or
otherwise insofar as such losses, claims, damages, expenses or liabilities (or
actions or proceedings, whether commenced or threatened in respect thereof)
arise out of or are based upon an untrue statement or alleged untrue statement
of a material fact in or omission or alleged omission to state a material fact
in such registration statement, any preliminary prospectus, final prospectus or
summary prospectus contained therein, or any amendment or supplement thereto,
but only to the extent that such statement or omission was made in reliance upon
and in conformity with written information furnished by such selling Holder to
the Company through an instrument duly executed by or on behalf of such selling
Holder specifically stating that it is for use in preparation thereof.
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<PAGE>
(c) Promptly after receipt by any indemnified party hereunder of
notice of the commencement of any action or proceeding involving a claim
referred to in paragraphs (a) or (b) of this Section 8.1, the indemnified party
will notify the indemnifying party in writing of the commencement thereof; but
the omission so to notify the indemnifying party will not relieve the
indemnifying party from any liability which it may have to any indemnified party
under paragraphs (a) or (b) of this Section 8.1.
(d) If for any reason the indemnity under this Section 8.1 is
unavailable or is insufficient to hold harmless any indemnified party under
paragraph (a) or (b) of this Section 8.1, then the indemnifying parties shall
contribute to the amount paid or payable to the indemnified party as a result of
any loss, claim, expense, damage or liability (or actions or proceedings,
whether commenced or threatened, in respect thereof), and legal or other
expenses reasonably incurred by the indemnified party in connection with
investigating or defending any such loss, claim, expense, damage, liability,
action or proceeding, in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and the indemnified
party on the other. The relative fault shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the Company or the selling Holder and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such untrue statement or omission. If, however, the allocation provided
in the second preceding sentence is not permitted by applicable law, or if the
allocation provided in the second preceding sentence provides a lesser sum to
the indemnified party than the amount hereinafter calculated, then the
indemnifying party shall contribute to the amount paid or payable by the
indemnified party in such proportion as is appropriate to reflect not only such
relative fault but also the relative benefits of the indemnifying party and the
indemnified party as well as any other relevant equitable considerations. The
parties hereto agree that it would not be just and equitable if contributions
pursuant to this paragraph (d) of Section 8.1 were to be determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the preceding sentences of this
paragraph (d) of Section 8.1.
(e) Indemnification and contribution similar to that specified in this
Section 8.1 (with appropriate modifications) shall be given by the Company and
the selling Holders with respect to any required registration or other
qualification of securities under any federal, state or blue sky law or
regulation of any governmental authority other than the Securities Act.
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<PAGE>
(f) Notwithstanding any other provision of this Section 8.1, to the
extent that any director, officer, partner, agent, employee, affiliate, or other
representative (current or former) of any indemnified party is a witness in any
action or proceeding, the indemnifying party agrees to pay to the indemnified
party all expenses reasonably incurred by, or on the behalf of, the indemnified
party and such witness in connection therewith.
(g) If any action or proceeding shall be brought or asserted against
any selling Holder in respect of which indemnity may be sought from the Company
under this Section 8.1, upon notice to the Company in accordance with Section
8.1(c) hereof, the Company shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to such selling Holder and the
payment of all expenses. Such selling Holder shall have the right to employ
separate counsel in any such action and to participate in the defense thereof,
but the fees and expenses of the selling Holder shall be at the expense of such
selling Holder unless (a) the Company has agreed in writing to pay such fees and
expenses or (b) the Company shall have failed to assume the defense of such
action or proceeding or has failed to employ counsel reasonably satisfactory to
such selling Holder in any such action or proceeding or (c) the named parties to
any such action or proceeding (including any impleaded parties) include both
such selling Holder and the Company (in which case, if such selling Holder
notifies the Company in writing that it elects to employ separate counsel at the
expense of the Company, the Company shall not have the right to assume the
defense of such action or proceeding on behalf of such selling Holder, it being
understood, however, that the Company shall not, in connection with any one such
action or proceeding or separate but substantially similar or related actions or
proceedings in the same jurisdiction arising out of the same general allegations
or circumstances, be liable for the reasonable fees and expenses of more than
one separate firm of attorneys at any time for such selling Holder and any other
selling Holders, which firm shall be designated in writing by such selling
Holders). The Company shall not be liable for any settlement of any such action
or proceeding effected without its written consent, but if settled with its
written consent, or if there is a final judgment for the plaintiff in any such
action or proceeding, the Company agrees to indemnify and hold harmless such
selling Holders from and against any loss or liability by reason of such
settlement or judgment in accordance with the provisions of this Section 8.1.
(h) The termination of any proceeding by judgment, order, settlement
or conviction, or upon a plea of nolo contendere or its equivalent, shall not,
of itself, adversely affect the rights of any indemnified party to
indemnification hereunder or create a presumption that any indemnified party
violated any federal or state securities laws.
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<PAGE>
(i) In the event that advances are not made pursuant to this
Section 8.1 or payment has not otherwise been timely made, each indemnified
party shall be entitled to seek a final adjudication in an appropriate court of
competent jurisdiction of the entitlement of the indemnified party to
indemnification or advances hereunder.
(ii) The Company and the selling Holders agree that they shall be
precluded from asserting that the procedures and presumptions of this Section
8.1 are not valid, binding and enforceable. The Company and the selling Holders
further agree to stipulate in any such court that the Company and the selling
Holders are bound by all the provisions of this Section 8.1 and are precluded
from making any assertion to the contrary.
(iii) To the extent deemed appropriate by the court, interest
shall be paid by the indemnifying party to the indemnified party at a reasonable
interest rate for amounts which the indemnifying party has not timely paid as
the result of its indemnification and contribution obligations hereunder.
(i) In the event that any indemnified party is a party to or
intervenes in any proceeding in which the validity or enforceability of this
Section 8.1 is at issue or seeks an adjudication to enforce the rights of any
indemnified party under, or to recover damages for breach of, this Section 8.1,
the indemnified party, if the indemnified party prevails in whole in such
action, shall be entitled to recover from the indemnifying party and shall be
indemnified by the indemnifying party against, any expenses incurred by the
indemnified party. If it is determined that the indemnified party is entitled to
indemnification for part (but not all) of the indemnification so requested,
expenses incurred in seeking enforcement of such partial indemnification shall
be reasonably prorated among the claims, issues or matters for which the
indemnified party is entitled to indemnification and for such claims, issues or
matters for which the indemnified party is not so entitled.
(j) The indemnity agreements contained in this Section 8.1 shall be in
addition to any other rights (to indemnification, contribution or otherwise)
which any indemnified party may have pursuant to law or contract and shall
remain operative and in full force and effect regardless of any investigation
made or omitted by or on behalf of any indemnified party and shall survive the
transfer of any Registrable Securities by any Holder.
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<PAGE>
ARTICLE 9
BENEFITS OF REGISTRATION RIGHTS
9.1. Benefits of Registration Rights. Subject to the limitations of
Sections 2.1, 3.1 and 4.1, Holders of Registrable Securities may severally or
jointly exercise the registration rights hereunder in such proportion as they
shall agree among themselves. No consent of Holder shall be required to exercise
registration rights under this Agreement or otherwise to be entitled to the
benefits of this Agreement as applicable to all Holders.
ARTICLE 10
MISCELLANEOUS
10.1. Captions. The captions or headings in this Agreement are for
convenience and reference only, and in no way define, describe, extend or limit
the scope or intent of this Agreement.
10.2. Severability. If any clause, provision or section of this Agreement
shall be invalid or unenforceable, the invalidity or unenforceability of such
clause, provision or section shall not affect the enforceability or validity of
any of the remaining clauses, provisions or sections hereof to the extent
permitted by applicable law.
10.3. Governing Law. This Agreement, shall be construed and enforced in
accordance with the internal laws of the State of New York.
10.4. Modification and Amendment. This Agreement may not be changed,
modified, discharged or amended, except by an instrument signed by all of the
parties hereto.
10.5. Counterparts. This Agreement may be executed in counterparts, each of
which shall be an original, but all of which together shall constitute one and
the same instrument.
10.6. Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the successors, assigns and transferees of each of the
parties, including, without limitation and without the need for an express
assignment, subsequent Holders. If any successor, assignee or transferee of any
Holder shall acquire Registrable Securities in any manner, whether by operation
of law or otherwise, such Registrable Securities shall be held subject to all of
the terms of this Agreement, and by taking and holding such Registrable
Securities such Person shall
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<PAGE>
be conclusively deemed to have agreed to be bound by and to perform all of the
terms and provisions of this Agreement and, if such acquisition was effected in
accordance with the terms and provisions of the Purchase Agreements, such Person
shall be entitled to receive the benefits hereof.
10.7. Specific Performance. The parties hereto acknowledge that there would
be no adequate remedy at law if any party fails to perform any of its
obligations hereunder, and accordingly agree that each party, in addition to any
other remedy to which it may be entitled at law or in equity, shall be entitled
to compel specific performance of the obligations of any other party under this
Agreement in accordance with the terms and conditions of this Agreement in any
court of the United States or any State thereof having jurisdiction. Any remedy
under this Section 10.7 is subject to certain equitable defenses and to the
discretion of the court before which any proceedings therefor may be brought.
10.8. Entire Agreement. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, premises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted by the Company with respect to
the Securities sold pursuant to the Purchase Agreement. This Agreement
supersedes all prior agreements and understandings between the parties with
respect to such subject matter.
10.9. Notices. All notices, requests, demands, consents and other
communications required or permitted to be given pursuant to this Agreement
shall be in writing and delivered by hand, by overnight courier delivery service
or by certified mail, return receipt requested, postage prepaid. Notices shall
be deemed given when actually received, which shall be deemed to be not later
than the next Business Day if sent by overnight courier or after five (5)
Business Days if sent by mail. Notice to Holders shall be made to the address
listed on the stock transfer records of the Company.
10.10. Termination. If no Registrable Securities have been acquired and no
rights to acquire Registrable Securities have vested prior to or in connection
with the termination of the Purchase Agreement in accordance with its terms,
this Agreement shall terminate upon such termination.
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<PAGE>
11.11. Lock-Up Agreements. In connection with any underwritten offering
including shares being sold by the Company, any Holder that is selling
Registrable Securities in such offering or that holds Registrable Securities
representing at least 5% of the then outstanding Common Shares of the Company on
a fully diluted basis, shall enter into an agreement, upon request by the
managing underwriter for such offering, in a form usual for such offerings and
reasonably acceptable to the Holders, restricting such Holder's sale of
Preferred Shares or Common Shares for a period not to exceed the lesser of 90
days and the shortest period of time provided for in any similar agreements
entered into with such underwriter by any director, officer or other stockholder
of the Company. In connection with any underwritten offering under Articles 2 or
4, the Company shall, and shall use reasonable best efforts to cause its
directors and officers to, enter into an agreement, upon request by the managing
underwriter for such offering, in a form usual for such offerings and reasonably
acceptable to the Company and its directors and officers, restricting the
Company's and such directors' and officers' sale of Common Shares and other
securities convertible into Common Shares for a period not to exceed the lesser
of 90 days and the shortest period of time provided for in any similar
agreements entered into with such underwriter by any Holder.
* * * *
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement or
caused this Agreement to be executed as of the day and year first above written.
TREFOIL CAPITAL INVESTORS II, L.P.
By: TREFOIL INVESTORS II, INC.
its managing general partner
By:_________________________________
Name:
Title:
GE INVESTMENT PRIVATE PLACEMENT
PARTNERS II, A LIMITED PARTNERSHIP
By: GE INVESTMENT MANAGEMENT
INCORPORATED
a general partner
By:_________________________________
Name:
Title:
THE GRAND UNION COMPANY
By:_________________________________
Name:
Title:
- 26 -
<PAGE>
EXHIBIT F-1
[FORM OF ROPES & GRAY OPINION FOR FIRST AND PRINCIPAL CLOSINGS]
, 1996
Trefoil Capital Investors II, L.P.
GE Investment Private Placement Partners II,
a Limited Partnership
c/o Shamrock Capital Advisors, Inc.
4444 Lakeside Drive
Burbank, California 91505
Re: 2,000,000 Shares of Class A Convertible Preferred Stock, par value
$1.00 per share, of The Grand Union Company, a Delaware corporation
-------------------------------------------------------------------
(the "Company")
---------------
Ladies and Gentlemen:
We have acted as counsel for the Company in connection with the issuance
and sale by the Company of up to an aggregate of 2,000,000 shares (the "Shares")
of its Class A Convertible Preferred Stock, par value $1.00 per share (the
"Class A Preferred Stock"). This opinion is furnished to you pursuant to Section
[6.3(d)/6.4(d)] of the Stock Purchase Agreement (the "Purchase Agreement") dated
as of July 30, 1996 between the Company and you relating to the issuance and
sale of the Shares. Terms defined in the Purchase Agreement and not otherwise
defined herein are used herein with the meanings so defined.
We call your attention to the fact that our representation of the Company
began on June 16, 1995 and that, while this firm advises and represents the
Company on a regular basis, our advice and representation are limited to
specific matters referred to us from time to time by the Company.
We have attended the [First/Principal] Closing held today. We have
examined executed copies of the Purchase Agreement, the Registration Rights
Agreement and the Management Services Agreement (collectively, the "Agreements")
and such other documents as we have deemed necessary as a basis for the opinions
expressed herein.
We express no opinion as to the laws of any jurisdiction other than those
of The Commonwealth of Massachusetts, the General Corporation Law of the State
of Delaware and the federal laws of the United States of America. We call your
attention to the fact that each of the Agreements provides that it is to be
governed by and construed in accordance with the laws
<PAGE>
-2- , 1996
of the State of New York and that the other agreements and documents referred to
in paragraph 8 below provide that they are to be governed by the laws of various
jurisdictions. For purposes of rendering the opinions expressed in paragraphs 7
and 8 below, we have assumed that each Agreement and each other agreement and
document referred to in paragraph 8 below provides that it is to be governed by
and construed in accordance with the internal laws of The Commonwealth of
Massachusetts and that a court would apply such laws to the Agreements and such
other agreements and documents.
Insofar as this opinion related to factual matters information with respect
to which is in the possession of the Company, and insofar as matters are stated
as being "to our knowledge", we have made inquiries to the extent we believe
necessary as a basis for the opinions expressed herein with respect to such
matters and have relied upon representations made by the Company in the
Purchase Agreement and representations made to us by one or more officers of the
Company. Although we have not independently verified the accuracy of such
representations, we do not know of the existence or absence of any fact
contradicting such representations.
Based upon and subject to the foregoing, we are of the opinion that:
1. The Company is duly incorporated, validly existing and in good
standing under the laws of the State of Delaware, with corporate power and
authority under such laws (i) to execute and deliver the Agreements and to
perform its obligations thereunder, including without limitation to issue and
sell the Shares and to issue the shares of Common Stock issuable upon conversion
of the Shares, and (ii) to carry on the business now conducted by it and to own,
lease, license and use the assets and properties it now owns or operates.
2. Based solely on certificates of the Secretaries of State of the
following jurisdictions, the Company is duly qualified to do business as a
foreign corporation in New Jersey, New York, Connecticut and Vermont, these
being the only jurisdictions in which we have been informed by the Company that
the Company owns or leases real property.
3. Immediately prior to the Principal Closing, the authorized capital
stock of the Company consisted of (a) _______ shares of Common Stock, par value
$__ per share (the "Common Stock"), of which _______ shares were issued and
outstanding, _______ shares were reserved for issuance upon the conversion of
the Class A Preferred Stock and _______ shares were reserved for issuance upon
the exercise of outstanding options and warrants of the Company and (b) ______
shares of Preferred Stock, of which ______ shares have been designated as Class
A Preferred Stock, of which no shares were issued and outstanding. All of the
outstanding shares of capital stock of the Company are duly authorized, validly
issued, fully paid and nonassessable. Except as set forth in the Agreements,
the Company Disclosure Schedule and the Certificate of Designation, to our
knowledge, there are no outstanding stockholders' agreements, voting trusts,
subscriptions, options, warrants, rights, calls,
<PAGE>
-3- , 1996
understandings, restrictions or arrangements relating to the issuance, sale,
voting, transfer, ownership or other rights affecting any shares of capital
stock of the Company, including any right of conversion or exchange under any
outstanding security, instrument or agreement.
4. The Certificate of Designation has been duly authorized and adopted by
the Company, has been filed with the Secretary of State for the State of
Delaware and is in full force and effect.
5. The Shares delivered at the [First/Principal] Closing (the
"[First/Principal] Shares") have been duly authorized and validly issued and are
fully paid and non-assessable; and the shares of Common Stock issuable upon
conversion of the [First/Principal] Shares (the "Conversion Shares") have been
duly authorized and reserved for issuance and, when issued in accordance with
the provisions of the Company's Certificate of Incorporation, will be validly
issued, fully paid and non-assessable. [The shares of Common Stock and Preferred
Stock issuable as dividends on the Principal Shares in accordance with the terms
of the Certificate of Designation will, when so issued, be duly authorized,
validly issued, fully paid and non-assessable.]
6. The certificates evidencing the Shares comply as to form with the
DGCL.
7. Each of the Agreements has been duly authorized, executed and
delivered by the Company, is a legal, valid and binding obligation of the
Company and is enforceable against the Company in accordance with its terms, (a)
except to the extent limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the rights and remedies of creditors, (b)
subject to general principles of equity, regardless of whether applied to
proceedings in equity or at law and (c) except that we express no opinion with
respect to provisions relating to indemnification or contribution contained in
the Registration Rights Agreement.
8. The execution and delivery of the Agreements and the issuance and
delivery of the [First Principal] Shares do not result in any violation of the
charter or by-laws of the Company, and do not conflict with, or result in a
breach of any of the terms or provisions of, or constitute a default under, or
result in the creation or imposition of any lien upon any property or assets of
the Company under, or require any consent or approval under, (A) any contract,
indenture, mortgage, loan agreement, note, lease or any other agreement or
instrument to which the Company is a party and which (i) has been filed as an
exhibit with any of the Company SEC Reports or (ii) is listed on Section 2.5 of
the Company Disclosure Schedule, except for any such conflicts, breaches or
defaults or liens, which would not have a Material Adverse Effect or (B) any
existing applicable Massachusetts or federal law, rule or regulation (other than
the securities or blue sky laws of the United States or the various states, as
to which we express no opinion except as set forth in paragraph 9 below).
<PAGE>
-4- , 1996
9. Based upon your representations and warranties set forth in Section
3.3 of the Purchase Agreement, the issuance and sale of the [First/Principal]
Shares do not require registration of the [First/Principal] Shares under the
Securities Act of 1933, as amended.
10. To our knowledge based solely upon inquiry of the Company's executive
officers and without having searched any court dockets, there is no litigation,
arbitration or other governmental proceeding or investigation pending or
threatened that seeks to prohibit or otherwise challenges the consummation of
the transactions contemplated by the Agreements, or to obtain material damages
with respect thereto.
This opinion is furnished by us to you solely for your benefit pursuant to
the Purchase Agreement and, except as expressly consented to by us in writing,
may not be relied upon by you for any other purpose or relied upon by any other
person.
Very truly yours,
Ropes & Gray
<PAGE>
Exhibit F-2
Form of Opinion to be rendered by Willkie, Farr & Gallagher in connection
with the First Closing under the Stock Purchase Agreement, dated as of July __,
1996 (the "Purchase Agreement"), among The Grand Union Company (the "Company"),
Trefoil Capital Investors II, L.P.("Trefoil II") and GE Investment Private
Placement Partners II, A Limited Partnership ("GEIPPPII" and, collectively with
Trefoil II, the "Purchasers"). Capitalized terms used herein without definition
have the meanings given in the Purchase Agreement.
1. There has been substantial consummation, as such term is defined in
section 1101(2) of title 11 of the United States Code, of the Company's second
amended plan of reorganization and the transactions contemplated thereby.
<PAGE>
Exhibit G-1
Form of Opinion to be rendered by Fried, Frank, Harris, Shriver & Jacobson
in connection with the First Closing under the Stock Purchase Agreement, dated
as of July __, 1996 (the "Purchase Agreement"), among The Grand Union Company
(the "Company"), Trefoil Capital Investors II, L.P.("Trefoil II") and GE
Investment Private Placement Partners II, A Limited Partnership ("GEIPPPII" and,
collectively with Trefoil II, the "Purchasers"). Capitalized terms used herein
without definition have the meanings given in the Purchase Agreement.
1. Trefoil II is a validly existing partnership in good standing under the
laws of the State of Delaware.
2. Trefoil II has full partnership power and authority to execute and
deliver the Purchase Agreement and the Registration Rights Agreement (the
"Documents") and all other agreements therein contemplated to be executed by
Trefoil II, to perform its obligations thereunder, and to consummate the
transactions contemplated thereby.
3. The Documents have been duly authorized, executed and delivered by
Trefoil II.
4. The Documents are the legal, valid and binding obligations of Trefoil II
and (subject to applicable bankruptcy, insolvency, and other laws affecting the
enforceability of creditors' rights generally and general equitable principles)
are enforceable against Trefoil II in accordance with their respective terms.
5. The execution and delivery of the Documents and the consummation of the
transactions contemplated thereby and the fulfillment of and compliance with the
terms and conditions thereof will not (a) conflict with any terms, conditions or
provisions of the Certificate of Limited Partnership or the Agreement of Limited
Partnership, each as amended, of Trefoil II; or (b) violate any federal or state
laws, statutes, ordinances or regulations.
6. After due inquiry, we have no knowledge of any consent, authorization,
approval, order, license, certificate, or permit of or from, or declaration or
filing with, any person or entity or federal, state, local, or other
governmental authority or any court or other tribunal, except such consents,
authorizations, approvals, orders, licenses, certificates or permits that have
been obtained or waived prior to the date hereof, which are required of Trefoil
II for the execution or delivery by Trefoil II of the Documents or in connection
with its performance of its obligations thereunder.
7. To our knowledge after due inquiry, Trefoil II is not a party to,
subject to or bound by any judgment, award, judicial or administrative order,
writ, prohibition, injunction or decree (including a consent decree), license or
permit of any court, governmental body or arbitrator, and no action or
proceeding is pending against Trefoil II or threatened, which would prevent or
adversely affect the execution, delivery, or performance of the Documents and
all other agreements therein contemplated to be entered into by Trefoil II.
<PAGE>
Exhibit G-2
Form of Opinion to be rendered by Dewey Ballantine in connection with the
First Closing under the Stock Purchase Agreement, dated as of July __, 1996 (the
"Purchase Agreement"), among The Grand Union Company (the "Company"), Trefoil
Capital Investors II, L.P.("Trefoil II") and GE Investment Private Placement
Partners II, A Limited Partnership ("GEIPPPII" and, collectively with Trefoil
II, the "Purchasers"). Capitalized terms used herein without definition have the
meanings given in the Purchase Agreement.
1. GEIPPPII is a validly existing partnership in good standing under the
laws of the State of Delaware.
2. GEIPPPII has full partnership power and authority to execute and deliver
the Purchase Agreement and the Registration Rights Agreement (the "Documents")
and all other agreements therein contemplated to be executed by GEIPPPII, to
perform its obligations thereunder, and to consummate the transactions
contemplated thereby.
3. The Documents have been duly authorized, executed and delivered by
GEIPPPII.
4. The Documents are the legal, valid and binding obligations of GEIPPPII
and (subject to applicable bankruptcy, insolvency, and other laws affecting the
enforceability of creditors' rights generally and general equitable principles)
are enforceable against GEIPPPII in accordance with their respective terms.
5. The execution and delivery of the Documents and the consummation of the
transactions contemplated thereby and the fulfillment of and compliance with the
terms and conditions thereof will not (a) conflict with any terms, conditions or
provisions of the Certificate of Limited Partnership or the Agreement of Limited
Partnership, each as amended, of GEIPPPII; or (b) violate any federal or state
laws, statutes, ordinances or regulations.
6. After due inquiry, we have no knowledge of any consent, authorization,
approval, order, license, certificate, or permit of or from, or declaration or
filing with, any person or entity or federal, state, local, or other
governmental authority or any court or other tribunal, except such consents,
authorizations, approvals, orders, licenses, certificates or permits that have
been obtained or waived prior to the date hereof, which are required of GEIPPPII
for the execution or delivery by GEIPPPII of the Documents or in connection with
its performance of its obligations thereunder.
7. To our knowledge after due inquiry, GEIPPPII is not a party to, subject
to or bound by any judgment, award, judicial or administrative order, writ,
prohibition, injunction or decree (including a consent decree), license or
permit of any court, governmental body or arbitrator, and no action or
proceeding is pending against GEIPPPII or threatened, which would prevent or
adversely affect the execution, delivery, or performance of the Documents and
all other agreements therein contemplated to be entered into by GEIPPPII.
<PAGE>
Exhibit H
THE GRAND UNION COMPANY
201 Willowbrook Boulevard
Wayne, NJ 07470
July __, 1996
Shamrock Capital Advisors, Inc.
4444 Lakeside Drive
Burbank, California 91505
Attention: Geoffrey T. Moore
Gentlemen:
This letter will confirm our engagement of Shamrock Capital Advisors, Inc.,
a Delaware corporation ("SCA") to provide management and consulting services to
The Grand Union Company, a Delaware corporation (the "Company"), and its
subsidiaries for a period of three years commencing on the Principal Closing
Date (as that term is defined in the Purchase Agreement, defined below). We
understand that SCA is the investment manager for Trefoil Capital Investors II,
L.P., a Delaware limited partnership ("Trefoil"), which is a party to that Stock
Purchase Agreement, dated July __, 1996 (the "Purchase Agreement"), by and among
the Company, Trefoil and GE Investment Private Placement Partners II, A Limited
Partnership, a Delaware limited partnership ("GEI") (Trefoil and GEI to be
referred to collectively as the "Purchasers").
1. SCA will consult with, and provide advice to, the officers and
management employees of the Company concerning matters (i) relating to the
Company's financial policies and the development and implementation of the
Company's business plans and (ii) generally arising out of the business affairs
of the Company. It is understood that the Company shall have no obligation to
follow any of SCA's advice. SCA shall devote such time as it deems is necessary
to perform the services to be rendered by it hereunder, and SCA shall not be
required to devote any minimum amount of time to the performance of such
services. SCA may also be retained to provide additional special services to the
Company as approved from time to time by the independent directors of the
Company (directors of the Company neither affiliated nor associated with any of
the Purchasers), upon such terms and conditions and for such compensation as
shall be negotiated in good faith by SCA and the Company.
<PAGE>
2. SCA's compensation for management and consulting services hereunder will
be $300,000 in the first year of SCA's engagement to provide services hereunder
(each such year a "Service Year"), $400,000 in the second Service Year, and
$500,000 in the third Service Year, such amounts to be payable semiannually in
advance in equal installments each Service Year, with the initial semiannual
payment for the first Service Year to be made on the Principal Closing Date. The
Company shall also reimburse SCA (or cause SCA to be reimbursed) for all of its
reasonable out-of-pocket costs and expenses in connection with the performance
of its services hereunder, which shall include the reasonable fees and
disbursements of its counsel, upon documentation thereof. In addition to the
foregoing compensation, the officers, directors or employees of any of the
Purchasers or their respective affiliates serving as directors of the Company
will also be paid customary director fees paid to non-employee directors of the
Company and will be reimbursed for all of their reasonable out-of-pocket costs
and expenses in connection therewith.
3. The Company has been advised that SCA (and its officers and directors)
provides consulting, management and other services to Trefoil, entities in which
Trefoil invests, Shamrock Holdings, Inc., a Texas corporation ("Shamrock"),
entities in which Shamrock invests, and others and that SCA anticipates it will
continue to provide such services and similar services to other persons and
entities. Accordingly, the Company acknowledges and agrees that SCA shall not be
prevented or restricted, in any manner whatsoever, by this letter agreement from
providing services (pursuant to a written agreement or otherwise) to any other
person or entity and will be supplying services to the Company on a
non-exclusive basis.
4. The Company agrees to indemnify SCA and its affiliates in accordance
with Schedule A, as attached hereto.
5. This letter agreement may be terminated at any time, with or without
cause, by SCA or the Company. Termination of this letter agreement by the
Company shall not relieve the Company from its obligations (i) to pay to SCA any
unpaid portion of the total amount of fees due to SCA during the entire stated
term of this letter agreement, without giving effect to such termination
(including any and all expenses incurred by SCA but not yet reimbursed by the
Company in connection with the performance of services hereunder), which may be
paid in one lump sum at the time of termination or in accordance with paragraph
2 hereof, at the Company's option, and (ii) to indemnify SCA in accordance with
the provisions of Schedule A hereto, which obligations shall survive any
termination of this letter agreement by the Company or SCA.
6. SCA hereby agrees that it will, and will use its best efforts to, cause
its directors, officers, employees, agents and advisors ("Representatives") to,
maintain the
<PAGE>
confidentiality of all information obtained by it or its Representatives in
connection with its services hereunder; will not disclose such information to
any third party (including any other company to which SCA provides management
services), except for information which (i) is or becomes generally available to
the public other than as a result of a disclosure by SCA or its Representatives,
(ii) was within SCA's possession prior to its being furnished to you by or on
behalf of the Company pursuant hereto, provided that the source of such
information was not known by SCA to be bound by a confidentiality agreement with
or other contractual, legal or fiduciary obligation of confidentiality to the
Company or any other party with respect to such information or (iii) becomes
available to SCA on a nonconfidential basis from a source other than the Company
or any of its Representatives, provided that such source is not bound by a
confidentiality agreement with or other contractual, legal or fiduciary
obligation of confidentiality to the Company or any other party with respect to
such information.
<PAGE>
If this letter accurately sets forth our understanding with respect to the
subject matter hereof, please indicate that SCA will be bound hereby by
executing the enclosed copy of this letter in the space provided and return it
to us.
Very truly yours,
THE GRAND UNION COMPANY
By:_____________________________________
Name:
Title:
Agreed to and accepted
this __th day of July, 1996
SHAMROCK CAPITAL ADVISORS, INC.
By:____________________________
Managing Director
<PAGE>
SCHEDULE A
As part of the consideration for the agreement of SHAMROCK CAPITAL
ADVISORS, INC., a Delaware corporation ("SCA"), to furnish its services, THE
GRAND UNION COMPANY, a Delaware corporation (the "Company"), agrees to indemnify
and hold harmless SCA and its affiliates and the respective partners, officers,
directors, employees and agents of, and persons controlling, SCA or any of its
affiliates within the meaning of either Section 15 of the Securities Act of
1933, as amended, or Section 20 of the Securities Exchange Act of 1934, as
amended, and each of their respective successors and assigns (collectively, the
"indemnified persons") from and against all claims, liabilities, expenses,
losses or damages (or actions in respect thereof) related to or arising out of
actions taken (or omitted to be taken) by SCA pursuant to the terms of the
letter agreement, dated July __, 1996, between SCA on the one hand and the
Company on the other (the "Letter Agreement"), or SCA's role in connection
therewith; provided, however, that the Company shall not be responsible for any
claims, liabilities, expenses, losses and damages to the extent that it is
finally judicially determined that they result primarily from actions taken or
omitted to be taken by SCA in bad faith or due to SCA's gross negligence or
willful misconduct. If for any reason (other than the bad faith, gross
negligence or willful misconduct of SCA as provided above) the foregoing
indemnity is unavailable to SCA or insufficient to hold SCA harmless, then the
Company shall contribute to the amount paid or payable by SCA as a result of
such claim, liability, expense, loss or damage in such proportion as is
appropriate to reflect not only the relative benefits received by the Company on
the one hand and SCA on the other but also the relative fault of the Company and
SCA, as well as any relevant equitable considerations, subject to the
limitations that in any event SCA's aggregate contribution to all losses,
claims, expenses, liabilities and damages shall not exceed the amount of fees
actually received by SCA pursuant to the Letter Agreement. Promptly after
receipt by SCA of notice of any complaint or the commencement of any action or
proceeding with respect to which indemnification may be sought against the
Company, SCA will notify the Company in writing of the receipt or commencement
thereof, but failure to notify the Company will relieve the Company from any
liability which it may have hereunder only if, and to the extent that, such
failure results in the forfeiture of substantial rights and defenses, and will
not in any event relieve the Company from any other obligation to any
indemnified person other than under this indemnification agreement. The Company
shall assume the defense of such action (including payment of fees and
disbursements of counsel) insofar as such action shall relate to any alleged
liability in respect of which indemnity may be sought against the Company. SCA
shall have the right to employ separate counsel in any such action and to
participate in the defense thereof, but the fees and disbursements of such
counsel shall be at the expense of SCA unless employment of such counsel has
been specifically authorized by the Company in writing. The Company shall pay
the fees and expenses of one separate counsel for SCA and any other indemnified
persons if the named parties to any such action (including any impleaded
<PAGE>
parties) include the Company (or any of the directors of the Company) and SCA
and (i) in the good faith judgment of SCA the use of joint counsel would present
such counsel with an actual or potential conflict of interest, or (ii) SCA shall
have been advised by counsel that there may be one or more legal defenses
available to it which are different from or additional to those available to the
Company (or the director(s)). The Company shall not be liable to indemnify any
person for any settlement of any claim or action effected without the Company's
written consent, which consent shall not be unreasonably withheld. In addition,
the Company agrees to reimburse SCA and each other indemnified person for all
expenses (including reasonable fees and disbursements of counsel if the Company
does not assume the defense of such action) as they are incurred by SCA or any
indemnified person in connection with investigating, preparing or defending any
such action or claim, whether or not in connection with pending or threatened
litigation in which SCA or any such indemnified person is a party. SCA shall
have no liability to the Company or any other person in connection with the
services which they render pursuant to the Letter Agreement, except for SCA's
bad faith, gross negligence or willful misconduct judicially determined as
aforesaid. The indemnification, contribution and expense reimbursement
obligation the Company has under this paragraph shall be in addition to any
liability the Company may otherwise have.
<PAGE>
EXHIBIT I
[FORM OF ROPES & GRAY OPINION FOR SUBSEQUENT CLOSINGS]
, 199_
Trefoil Capital Investors II, L.P.
GE Investment Private Placement Partners II,
a Limited Partnership
c/o Shamrock Capital Advisors, Inc.
4444 Lakeside Drive
Burbank, California 91505
Re: 2,000,000 Shares of Class A Convertible Preferred Stock, par value
$1.00 per share, of The Grand Union Company, a Delaware corporation
-------------------------------------------------------------------
(the "Company")
---------------
Ladies and Gentlemen:
We have acted as counsel for the Company in connection with the issuance
and sale by the Company of up to an aggregate of 2,000,000 shares (the "Shares")
of its Class A Convertible Preferred Stock, par value $1.00 per share (the
"Class A Preferred Stock"). This opinion is furnished to you pursuant to Section
6.5(b) of the Stock Purchase Agreement (the "Purchase Agreement") dated as of
July 30, 1996 between the Company and you relating to the issuance and sale of
the Shares. Terms defined in the Purchase Agreement and not otherwise defined
herein are used herein with the meanings so defined.
We call your attention to the fact that our representation of the Company
began on June 16, 1995 and that, while this firm advises and represents the
Company on a regular basis, our advice and representation are limited to
specific matters referred to us from time to time by the Company.
We have attended the [Third/Fourth/Fifth] Closing held today. We have
examined executed copies of the Purchase Agreement and such other documents as
we have deemed necessary as a basis for the opinions expressed herein.
We express no opinion as to the laws of any jurisdiction other than those
of The Commonwealth of Massachusetts, the General Corporation Law of the State
of Delaware and the federal laws of the United States of America.
Based upon and subject to the foregoing, we are of the opinion that:
<PAGE>
-2- , 199_
1. The Company is duly incorporated, validly existing and in good
standing under the laws of the State of Delaware, with corporate power and
authority under such laws to execute and deliver the Purchase Agreement and to
perform its obligations thereunder, including without limitation to issue and
sell the Shares and to issue the shares of Common Stock issuable upon conversion
of the Shares.
2. The Shares delivered at the [Third/Fourth/Fifth] Closing (the
"[Third/Fourth/Fifth] Shares") have been duly authorized and validly issued and
are fully paid and non-assessable; and the shares of Common Stock issuable upon
conversion of the [Third/Fourth/Fifth] Shares (the "Conversion Shares") have
been duly authorized and reserved for issuance and, when issued in accordance
with the provisions of the Company's Certificate of Incorporation, will be
validly issued, fully paid and non-assessable. The shares of Common Stock and
Preferred Stock issuable as dividends on the [Third/Fourth/Fifth] Shares in
accordance with the terms of the Certificate of Designation will, when so
issued, be duly authorized, validly issued, fully paid and non-assessable.
This opinion is furnished by us to you solely for your benefit pursuant to
the Purchase Agreement and, except as expressly consented to by us in writing,
may not be relied upon by you for any other purpose or relied upon by any other
person.
Very truly yours,
Ropes & Gray
EXHIBIT 99.1
GRAND UNION TO RAISE $100 MILLION IN NEW EQUITY
The Shamrock Group and GE Investments
Become Majority Shareholders
WAYNE, NJ, July 30, 1996 --- The Grand Union Company's Board of
Directors today authorized the signing of a definitive agreement to sell
$100 million of convertible preferred stock to an investment group
comprised of the Shamrock Group and affiliates of GE Investments. The
Shamrock Group's investment partners include Shamrock executives, the Roy
E. Disney family and a subsidiary of the General Electric Pension Trust.
Shamrock Capital Advisors, Inc., of Burbank, CA, will provide on-going
advisory and consulting services to the Company.
The principal terms of the investment are:
- $100 million of convertible preferred stock;
- 8.5% dividend payable quarterly in cash, additional
shares of convertible preferred or common stock;
- Conversion price equal to a 20% premium over a 30-day
volume weighted average pre-closing stock price, subject to
a maximum conversion price of $7.25 and a minimum conversion
price of $6.50.
On a fully diluted basis, the Shamrock/GE Investments investor group
would own between 58% and 61% of Grand Union's common stock. They will be
entitled to appoint a majority of Grand Union's Board of Directors. Roger
E. Stangeland has agreed to continue as Chairman of the Board.
Proceeds from the sale of the convertible preferred stock will be used
to accelerate Grand Union's capital spending program over the next three
years. Consistent with the Company's customer-focused strategic plan for
long-term growth, the new equity capital will supplement internally
generated cash flow to fund 78 major store projects. This includes new
stores,
<PAGE>
replacement stores, enlargements and within-the-four-walls renovations. The
$100 million equity investment will be drawn down in stages beginning at
closing which could occur as early as mid-September. Subsequent,
unconditional draws will be made over the following two years.
Closing of the investment is subject to customary conditions,
including support by a majority of the Company's shareholders. The
Company's largest current shareholder, Putnam Investments, Inc., which
beneficially holds approximately 31% of its common stock, fully supports
the transaction. The Company is also seeking consents from its bank lenders
to permit the sale of convertible preferred stock and to provide the
Company additional operating flexibility consistent with its expanded
capital spending plan. The Company will seek similar consents from its 12%
Senior Noteholders.
Mr. Stangeland said "This infusion of new equity capital is a most
positive step for Grand Union and Grand Union shareholders. The additional
capital allows the Company to fully implement the business plan that was
developed in 1995. The vote of confidence expressed by GE Investments,
Shamrock and the Disney family is a strong endorsement of the progress made
at Grand Union in the past year. The investor group brings substantial
additional resources to Grand Union, forming a partnership dedicated to
enhancing long-term growth and shareholder value."
Stanley P. Gold, President and Chief Executive Officer of the Shamrock
Group, said the partnership is looking forward to a mutually-rewarding
relationship with Grand Union. "The Company has a strong franchise in a
most attractive market," Mr. Gold stated, "and we believe its business
fundamentals are sound. We are confident that under the leadership of Roger
and his team, Grand Union's new strategic plan will produce positive
results over both the near and long term."
Joseph J. McCaig, President and Chief Executive Officer of Grand
Union, added "This new capital will allow us to accelerate our store
network improvement program which is heavily skewed to the renovation of
existing
<PAGE>
stores. Of 78 total store projects, 50 are major existing building
remodelings of valuable locations using our new prototypes which we know
produce impressive productivity improvements. The 28 other projects are
enlargements, on-site replacements of existing stores or new stores.
Donaldson, Lufkin & Jenrette has acted as exclusive financial advisor
to Grand Union in this transaction.
Grand Union operates 229 retail food stores under the Grand Union
trade name in Connecticut, New Hampshire, New Jersey, New York,
Pennsylvania and Vermont. Its common stock is traded on the NASDAQ National
Market under the ticker symbol GUCO. Sales for the Company's 52-week fiscal
year ended March 30, 1996, were $2.3 billion.
