<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
SCHEDULE 14D-1
TENDER OFFER STATEMENT PURSUANT TO SECTION 14(D)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934
AND
SCHEDULE 13D
UNDER THE SECURITIES
EXCHANGE ACT
OF 1934
ORCHARD SUPPLY HARDWARE STORES
CORPORATION
(NAME OF SUBJECT COMPANY)
SEARS, ROEBUCK AND CO.
GROVE ACQUISITION CORP.
(BIDDER)
COMMON STOCK, $.01 PAR VALUE
(TITLE OF CLASS OF SECURITIES)
685691107
(CUSIP NUMBER OF CLASS OF SECURITIES)
MICHAEL D. LEVIN, ESQ.
SEARS, ROEBUCK AND CO.
3333 BEVERLY ROAD
HOFFMAN ESTATES, ILLINOIS 60179
TELEPHONE: (847) 286-2500
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSONS AUTHORIZEDTO RECEIVE NOTICES
AND COMMUNICATIONS ON BEHALF OF BIDDER)
----------------
COPY TO:
MARC D. BASSEWITZ, ESQ.
LATHAM & WATKINS
SEARS TOWER, SUITE 5800
233 SOUTH WACKER DRIVE
CHICAGO, ILLINOIS 60606-6401
TELEPHONE: (312) 876-7700
CALCULATION OF FILING FEE
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<TABLE>
<CAPTION>
TRANSACTION VALUATION* AMOUNT OF FILING FEE**
- ---------------------------------------------------------
<S> <C>
$321,594,805 $64,318.97
</TABLE>
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* For the purpose of calculating the fee only, this amount assumes the
purchase of 9,174,298 shares of Common Stock of Orchard Supply Hardware
Stores Corporation ("Shares") at $35.00 per Share. Such number of shares
consists of (i) 7,542,323 Shares outstanding as of August 1, 1996, (ii)
366,100 Shares issuable upon exercise of all options outstanding as of such
date and (iii) 1,280,000 Shares issuable upon conversion of all shares of
6% Cumulative Convertible Preferred Stock, $.01 par value per share, of
Orchard Supply Hardware Stores Corporation.
** 1/50 of 1% of the Transaction Valuation.
[_]Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
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<PAGE>
14D-1
CUSIP NO. 68569110-7
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS
SEARS, ROEBUCK AND CO. (I.R.S. IDENTIFICATION NUMBER 36-1750680)
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(A) [_]
(B) [_]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS
WC
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS
2(E) OR 2(F)
[_]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
STATE OF NEW YORK
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7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
SEE INTRODUCTION AND SECTION 13 OF THE OFFER TO PURCHASE
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8 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES
N/A [_]
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9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
18.2%*
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10 TYPE OF REPORTING PERSON
CO
*Sears, Roebuck and Co. hereby disclaims beneficial ownership of these Shares.
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2
<PAGE>
14D-1
CUSIP NO. 68569110-7
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1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS
GROVE ACQUISITION CORP. (I.R.S. IDENTIFICATION NUMBER TO BE APPLIED FOR)
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(A) [_]
(B) [_]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS
AF
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS
2(E) OR 2(F)
[_]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
STATE OF DELAWARE
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7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
SEE INTRODUCTION AND SECTION 13 OF THE OFFER TO PURCHASE
- --------------------------------------------------------------------------------
8 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES
[_]
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9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
18.2%*
- --------------------------------------------------------------------------------
10 TYPE OF REPORTING PERSON
CO
*Grove Acquisition Corp. hereby disclaims beneficial ownership of these Shares.
- --------------------------------------------------------------------------------
3
<PAGE>
TENDER OFFER
This Tender Offer Statement on Schedule 14D-1 (the "Statement") relates to
the offer by Grove Acquisition Corp., a Delaware corporation (the "Offeror")
and a wholly owned subsidiary of Sears, Roebuck and Co., a New York
corporation ("Parent"), to purchase all outstanding shares of Common Stock,
par value $.01 per share (the "Shares"), of Orchard Supply Hardware Stores
Corporation, a Delaware corporation (the "Company"), at a price of $35.00 per
Share, net to the seller in cash, without interest, upon the terms and subject
to the conditions set forth in Offeror's Offer to Purchase dated August 21,
1996 (the "Offer to Purchase") and in the related Letter of Transmittal
(together with any amendments or supplements thereto, which collectively
constitute the "Offer"), copies of which are submitted herewith as Exhibits
(a)(1) and (a)(2), respectively. This Schedule 14D-1 also constitutes the
statement on Schedule 13D of the Offeror and the Parent with respect to
certain Shares which they may be deemed to beneficially own as a result of the
Stockholder Tender and Option Agreement, which is described in the Offer to
Purchase and is filed as Exhibit (c)(2) hereto. The Offeror and the Parent
hereby disclaim beneficial ownership of the Shares. The item numbers and
responses thereto below are in accordance with the requirements of Schedule
14D-1.
ITEM 1. SECURITY AND SUBJECT COMPANY.
(a) The name of the subject company is Orchard Supply Hardware Stores
Corporation, a Delaware corporation (the "Company"), which has its
principal executive offices at 6450 Via Del Oro, San Jose, California
95119.
(b) The class of equity securities being sought is all the outstanding
shares of Common Stock, par value $.01 per share, of the Company. The
information set forth in the Introduction to the Offer to Purchase is
incorporated herein by reference.
(c) The information concerning the principal market in which the Shares
are traded and certain high and low sales prices for the Shares in
such principal market set forth in Section 6 ("Price Range of Shares;
Dividends") of the Offer to Purchase is incorporated herein by
reference.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(d) and (g)
This Schedule 14D-1 is being filed by the Parent and the Offeror. The
information set forth in the Introduction and Section 9 ("Certain
Information Concerning the Parent and the Offeror") of the Offer to
Purchase, and in Annex I thereto, is incorporated herein by
reference.
(e)-(f)
Neither the Offeror, nor the Parent, nor, to the best of their
knowledge, any of the persons listed in Annex I of the Offer to
Purchase, has during the last five years (i) been convicted in a
criminal proceeding (excluding traffic violations or similar
misdemeanors) or (ii) been a party to a civil proceeding of a
judicial or administrative body of competent jurisdiction and as a
result of such proceeding was or is subject to a judgment, decree or
final order enjoining future violations of, or prohibiting activities
subject to, federal or state securities laws or finding any violation
of such laws.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
(a) The information set forth in Section 9 ("Certain Information
Concerning the Parent and the Offeror") is incorporated herein by
reference.
(b) The information set forth in the Introduction, Section 8 ("Certain
Information Concerning the Company"), and Section 11 ("Background of
the Offer; Past Contacts, Transactions or Negotiations with the
Company") of the Offer to Purchase is incorporated herein by
reference.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a)-(c)
The information set forth in Section 10 ("Source and Amount of
Funds") of the Offer to Purchase is incorporated herein by reference.
4
<PAGE>
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER.
(a)-(e)
The information set forth in the Introduction, Section 11
("Background of the Offer; Past Contacts, Transactions or
Negotiations with the Company") and Section 12 ("Purpose of the Offer
and the Merger; Plans for the Company") and Section 13 ("Merger
Agreement, Stockholder Agreement and Confidentiality Agreement") of
the Offer to Purchase is incorporated herein by reference. Except as
set forth in Sections 12 and 13 of the Offer to Purchase, neither the
Parent nor the Offeror have any present plans or proposals that would
result in an extraordinary corporate transaction, such as a merger,
reorganization, liquidation or sale or transfer of a material amount
of assets involving the Company, or any other material changes in the
Company's capitalization, dividend policy, corporate structure or
business or composition of its management or personnel.
(f)-(g)
The information set forth in Section 7 ("Certain Effects of the
Transaction") of the Offer to Purchase is incorporated herein by
reference.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a)-(b)
The information set forth in the Introduction, Section 9 ("Certain
Information Concerning the Parent and the Offeror") and Section 13
("Merger Agreement, Stockholder Agreement and Confidentiality
Agreement") of the Offer to Purchase is incorporated herein by
reference.
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO THE SUBJECT COMPANY'S SECURITIES.
The information set forth in the Introduction and Section 11
("Background of the Offer; Past Contacts, Transactions or
Negotiations with the Company") and Section 13 ("Merger Agreement,
Stockholder Agreement and Confidentiality Agreement") of the Offer to
Purchase is incorporated herein by reference.
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth in the Introduction and Section 17 ("Fees
and Expenses") of the Offer to Purchase is incorporated herein by
reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
The information set forth in Section 9 ("Certain Information
Concerning the Parent and the Offeror") of the Offer to Purchase is
incorporated herein by reference.
The incorporation by reference herein of the above-mentioned
financial information does not constitute an admission that such
information is material to a decision by a security holder of the
Company as to whether to sell, tender or hold Shares being sought in
the Offer.
ITEM 10. ADDITIONAL INFORMATION.
(a) The information set forth in Section 11 ("Background of the Offer;
Past Contacts, Transactions or Negotiations with the Company") and
Section 12 ("Purpose of the Offer and the Merger; Plans for the
Company") of the Offer to Purchase is incorporated herein by
reference.
(b)-(c)
The information set forth in Section 16 ("Certain Regulatory and
Legal Matters") of the Offer to Purchase is incorporated herein by
reference.
(d) The information set forth in Section 7 ("Certain Effects of the
Transaction") is incorporated herein by reference.
(e) The information set forth in Section 16 ("Certain Regulatory and
Legal Matters") of the Offer to Purchase is incorporated herein by
reference.
5
<PAGE>
(f) The information set forth in the Offer to Purchase and the Letter of
Transmittal is incorporated herein by reference in its entirety.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
(a)(1)
Offer to Purchase dated August 21, 1996.
(a)(2)
Letter of Transmittal.
(a)(3)
Letter to Brokers, Dealers, Commercial Banks, Trust Companies and
Other Nominees.
(a)(4)
Letter from Brokers, Dealers, Commercial Banks, Trust Companies and
Other Nominees to Clients.
(a)(5)
Notice of Guaranteed Delivery.
(a)(6)
Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
(a)(7)
Summary Advertisement, dated August 21, 1996.
(a)(8)
Press Release issued by the Parent and the Company on August 15,
1996.
(b) None.
(c)(1)
Agreement and Plan of Merger, dated as of August 14, 1996, among the
Parent, the Offeror and the Company.
(c)(2)
Stockholder Tender and Option Agreement, dated as of August 14, 1996,
among the Parent, the Offeror, the Company, FS Equity Partners II,
L.P., FS Equity Partners III, L.P. and FS Equity Partners
International, L.P.
(c)(3)
Confidentiality Agreement, dated May 31, 1996, between the Company
and the Parent.
(c)(4)
Notice and Agreement Regarding Conversion and Tender, dated as of
August 14, 1996, by and among the Company, the Offeror, the Parent,
FS Equity Partners III, L.P., FS Equity Partners International, L.P.
and ChaseMellon Shareholder Services, L.L.C.
(d) None.
(e) Not applicable.
(f) None.
6
<PAGE>
SIGNATURE
AFTER DUE INQUIRY AND TO THE BEST OF THE UNDERSIGNED'S KNOWLEDGE AND BELIEF,
THE UNDERSIGNED CERTIFIES THAT THE INFORMATION SET FORTH IN THIS STATEMENT IS
TRUE, CORRECT AND COMPLETE.
Sears, Roebuck and Co.
/s/ Gary L. Crittenden
By __________________________________
Executive Vice President
Dated: August 21, 1996
7
<PAGE>
SIGNATURE
AFTER DUE INQUIRY AND TO THE BEST OF THE UNDERSIGNED'S KNOWLEDGE AND BELIEF,
THE UNDERSIGNED CERTIFIES THAT THE INFORMATION SET FORTH IN THIS STATEMENT IS
TRUE, CORRECT AND COMPLETE.
Grove Acquisition Corp.
/s/ Gary L. Crittenden
By __________________________________
Executive Vice Presidentand
Treasurer
Dated: August 21, 1996
8
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
------- ----------- ------------
<C> <S> <C>
(a)(1) Offer to Purchase, dated August 21, 1996
(a)(2) Letter of Transmittal
(a)(3) Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees
(a)(4) Letter from Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees to Clients
(a)(5) Notice of Guaranteed Delivery
(a)(6) Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9
(a)(7) Summary Advertisement, dated August 21, 1996
(a)(8) Press Release issued by the Parent and the Company on
August 15, 1996
(b) None.
(c)(1) Agreement and Plan of Merger, dated as of August 14,
1996, among the Parent, the Offeror and the Company
(c)(2) Stockholder Tender and Option Agreement, dated as of
August 14, 1996, among the Parent, the Offeror, the
Company, FS Equity Partners II, L.P., FS Equity
Partners III, L.P. and FS Equity Partners
International, L.P.
(c)(3) Confidentiality Agreement, dated May 31, 1996, between
the Company and the Parent.
(c)(4) Notice and Agreement Regarding Conversion and Tender,
dated as of August 14, 1996, by and among the Company,
the Offeror, the Parent, FS Equity Partners III, L.P.,
FS Equity Partners International, L.P. and ChaseMellon
Shareholder Services, L.L.C.
(d) None.
(e) Not applicable.
(f) None.
</TABLE>
9
<PAGE>
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
ORCHARD SUPPLY HARDWARE STORES CORPORATION
AT
$35.00 NET PER SHARE
BY
GROVE ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY OF
SEARS, ROEBUCK AND CO.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON WEDNESDAY, SEPTEMBER 18, 1996, UNLESS THE OFFER IS
EXTENDED.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY
TENDERED BY THE EXPIRATION DATE AND NOT WITHDRAWN THAT NUMBER OF SHARES OF
COMMON STOCK OF ORCHARD SUPPLY HARDWARE STORES CORPORATION (THE "COMPANY")
WHICH WOULD REPRESENT AT LEAST A MAJORITY OF THE OUTSTANDING FULLY DILUTED
SHARES OF COMMON STOCK AND (II) SATISFACTION OF CERTAIN OTHER TERMS AND
CONDITIONS. SEE SECTION 15.
THE OFFER IS BEING MADE PURSUANT TO AN AGREEMENT AND PLAN OF MERGER DATED AS
OF AUGUST 14, 1996, AMONG SEARS, ROEBUCK AND CO., GROVE ACQUISITION CORP. AND
THE COMPANY.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE OFFER,
THE MERGER, THE MERGER AGREEMENT AND THE STOCKHOLDER AGREEMENT, HAS DETERMINED
THAT THE OFFER AND THE MERGER ARE FAIR TO AND IN THE BEST INTERESTS OF THE
COMPANY'S STOCKHOLDERS AND RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS ACCEPT
THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER.
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR MERITS
OF SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION
CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
IMPORTANT
Any stockholder desiring to tender all or a portion of such stockholder's
shares of Common Stock, par value $.01 per share (the "Shares") should either
(i) complete and sign the Letter of Transmittal or a facsimile thereof in
accordance with the instructions in the Letter of Transmittal and mail or
deliver the Letter of Transmittal together with the Certificate(s)
representing tendered Shares and all other required documents to the
Depositary, or tender such Shares pursuant to the procedure for book-entry
transfer set forth in Section 3 or (ii) request such stockholder's broker,
dealer, commercial bank, trust company or other nominee to effect the
transaction for such stockholder. Stockholders having Shares registered in the
name of a broker, dealer, commercial bank, trust company or other nominee must
contact such person if they desire to tender their Shares.
Any stockholder who desires to tender Shares and whose certificates
representing such Shares are not immediately available, or who cannot comply
with the procedures for book-entry transfer on a timely basis, may tender such
Shares pursuant to the guaranteed delivery procedure set forth in Section 3.
Questions and requests for assistance or additional copies of this Offer to
Purchase and the Letter of Transmittal may be directed to the Information
Agent or to the Dealer Manager at their respective addresses and telephone
numbers set forth on the back cover of this Offer to Purchase. Additional
copies of this Offer to Purchase, the Letter of Transmittal, the Notice of
Guaranteed Delivery and other related materials may be obtained from the
Information Agent or from brokers, dealers, commercial banks and trust
companies.
The Dealer Manager for the Offer is:
MERRILL LYNCH & CO.
August 21, 1996
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INTRODUCTION.............................................................. 2
1.Terms of the Offer................................................... 3
2.Acceptance for Payment and Payment for Shares........................ 5
3.Procedure for Tendering Shares....................................... 6
4.Withdrawal Rights.................................................... 8
5.Certain Federal Income Tax Consequences.............................. 9
6.Price Range of Shares; Dividends..................................... 10
7.Certain Effects of the Transaction................................... 10
8.Certain Information Concerning the Company........................... 11
9.Certain Information Concerning the Parent and the Offeror............ 14
10.Source and Amount of Funds........................................... 16
11.Background of the Offer; Past Contacts, Transactions or Negotiations
with the Company....................................................... 16
12.Purpose of the Offer and the Merger; Plans for the Company........... 18
13.Merger Agreement, Stockholder Agreement and Confidentiality
Agreement.............................................................. 20
14.Dividends and Distributions.......................................... 30
15.Certain Conditions of the Offer...................................... 30
16.Certain Regulatory and Legal Matters................................. 32
17.Fees and Expenses.................................................... 34
18.Miscellaneous........................................................ 34
ANNEX I--Certain Information Concerning the Directors and Executive
Officers of the Parent and the Offeror.......................... I-1
ANNEX II--Section 262 of the General Corporation Law of the State of
Delaware................................................................. II-1
</TABLE>
i
<PAGE>
To The Holders of Common Stock of
ORCHARD SUPPLY HARDWARE STORES CORPORATION
INTRODUCTION
Grove Acquisition Corp., a Delaware corporation (the "Offeror") and a wholly
owned subsidiary of Sears, Roebuck and Co., a New York corporation (the
"Parent"), hereby offers to purchase all outstanding shares of Common Stock,
par value $.01 per share (the "Shares"), of Orchard Supply Hardware Stores
Corporation, a Delaware corporation (the "Company"), at a purchase price of
$35.00 per Share, net to the seller in cash, without interest, upon the terms
and subject to the conditions set forth in this Offer to Purchase and in the
related Letter of Transmittal (which, as amended and supplemented from time to
time, together constitute the "Offer"). Tendering holders of Shares will not
be obligated to pay brokerage fees or commissions or, except as set forth in
the Letter of Transmittal, transfer taxes on the purchase of Shares by the
Offeror pursuant to the Offer. The Offeror will pay all charges and expenses
of Merrill Lynch & Co. ("Merrill"), which is acting as Dealer Manager (the
"Dealer Manager") in connection with the Offer, ChaseMellon Shareholder
Services, L.L.C. (the "Depositary") and D.F. King & Co., Inc. (the
"Information Agent"), in connection with the Offer. See Section 17.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE OFFER,
THE MERGER (AS HEREINAFTER DEFINED), THE MERGER AGREEMENT (AS HEREINAFTER
DEFINED) AND THE STOCKHOLDER AGREEMENT (AS HEREINAFTER DEFINED), HAS
DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR TO AND IN THE BEST INTERESTS
OF THE COMPANY'S STOCKHOLDERS AND RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS
ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE HAVING BEEN VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER A NUMBER OF
SHARES WHICH WOULD REPRESENT AT LEAST A MAJORITY OF THE OUTSTANDING FULLY
DILUTED SHARES (THE "MINIMUM CONDITION"). THE OFFER IS ALSO SUBJECT TO OTHER
TERMS AND CONDITIONS. SEE SECTION 15.
MONTGOMERY SECURITIES ("MONTGOMERY"), THE COMPANY'S FINANCIAL ADVISOR, HAS
DELIVERED TO THE COMPANY'S BOARD OF DIRECTORS ITS WRITTEN OPINION THAT THE
CONSIDERATION TO BE RECEIVED BY THE STOCKHOLDERS OF THE COMPANY PURSUANT TO
THE OFFER AND THE MERGER IS FAIR TO SUCH STOCKHOLDERS FROM A FINANCIAL POINT
OF VIEW. A COPY OF SUCH OPINION IS CONTAINED IN THE COMPANY'S STATEMENT ON
SCHEDULE 14D-9 WHICH IS BEING DISTRIBUTED TO THE COMPANY'S STOCKHOLDERS, AND
STOCKHOLDERS ARE URGED TO READ THE OPINION IN ITS ENTIRETY AND THE DISCUSSION
THEREOF IN THE COMPANY'S SCHEDULE 14D-9 FOR A DESCRIPTION OF THE ASSUMPTIONS
MADE, FACTORS CONSIDERED AND PROCEDURES FOLLOWED BY MONTGOMERY.
The Offer is being made pursuant to the Agreement and Plan of Merger, dated
as of August 14, 1996 (the "Merger Agreement"), by and among the Parent, the
Offeror and the Company. The Merger Agreement provides that, among other
things, as soon as practicable after the purchase of Shares pursuant to the
Offer and the satisfaction of the other conditions set forth in the Merger
Agreement and in accordance with the relevant provisions of the General
Corporation Law of the State of Delaware (the "DGCL"), the Offeror will be
merged with and into the Company (the "Merger"). See Section 12. Following
consummation of the Merger, the Company will continue as the surviving
corporation (the "Surviving Corporation") and will be a wholly owned
subsidiary of the Parent. At the effective time of the Merger (the "Effective
Time"), each issued and outstanding Share (other than Shares owned by the
Company as treasury stock, Shares owned by the Parent or the Offeror or any
subsidiary thereof, or Shares with respect to which appraisal rights are
properly exercised under Delaware law ("Dissenting Shares")), will be
converted into and represent the right to receive $35.00 (or any other price
2
<PAGE>
that may be paid for each Share pursuant to the Offer) in cash, without
interest thereon (the "Offer Price"). See Section 5 for a description of
certain tax consequences of the Offer and the Merger and Section 13 with
respect to the Merger.
The Company has advised the Offeror that as of August 15, 1996, there were
(a) 7,542,323 Shares issued and outstanding, (b) 366,100 Shares reserved for
issuance in connection with outstanding options to purchase common stock of
the Company ("Options") under the Company's Stock Option Plans (as defined in
Section 13), (c) 1,280,000 Shares reserved for issuance upon conversion of the
Company's 6% Cumulative Convertible Preferred Stock, par value $.01 per share
(the "Preferred Shares"), and (d) 800,000 Preferred Shares outstanding. See
Sections 11 and 13. In order to induce the Offeror and the Parent to enter
into the Merger Agreement, certain stockholders of the Company (the "Seller
Stockholders"), have entered into a Stockholder Tender and Option Agreement
dated as of August 14, 1996 (the "Stockholder Agreement"), pursuant to which
the Seller Stockholders have agreed to convert any Preferred Shares owned by
them into Shares and to tender and sell all Shares owned by them (including
any Shares acquired upon conversion of Preferred Shares) pursuant to and in
accordance with the terms of this Offer. In addition, the Seller Stockholders
have granted the Parent an option to purchase all of the Shares and Preferred
Shares owned by such stockholders, exercisable upon the terms and conditions
set forth in the Stockholder Agreement. The Stockholder Agreement also
provides that, if such option is exercised and the Merger Agreement is
terminated, the Parent is required to remit to the Seller Stockholders
specified amounts under certain circumstances in connection with certain
subsequent transactions involving the Shares. See Section 13. The Company has
advised the Offeror that the Seller Stockholders beneficially own an aggregate
of 1,604,043 Shares (including 1,280,000 Shares issuable upon conversion of
the Preferred Shares). As of the date hereof, other than the Parent's rights
under the option described above, neither the Offeror nor the Parent
beneficially owns any Shares. As a result of the ownership of Shares and
Preferred Shares by the Seller Stockholders, the Offeror will need to have
only 2,807,119 Shares validly tendered and not withdrawn pursuant to the Offer
(assuming no exercise of outstanding Options), in addition to the Shares and
Preferred Shares subject to the Stockholder Agreement, in order to satisfy the
Minimum Condition. If the Offeror acquires at least 4,411,162 Shares in the
Offer or otherwise (assuming no exercise of outstanding Options), it will
control a majority of the outstanding Shares on a fully diluted basis and will
be able to approve the Merger without the vote of any other stockholder. In
the event the Offeror acquires 90% or more of the outstanding Shares through
the Offer or otherwise, the Offeror and the Parent would be able to effect the
Merger pursuant to the short form merger provisions of the DGCL, without prior
notice to, or any action by, any other stockholder of the Company. See Section
13.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH SHOULD BE READ BEFORE ANY DECISION IS MADE WITH
RESPECT TO THE OFFER.
1. TERMS OF THE OFFER.
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any extension or
amendment), the Offeror will accept for payment and pay for all Shares validly
tendered prior to the Expiration Date and not theretofore withdrawn in
accordance with Section 4. The term "Expiration Date" means 12:00 Midnight,
New York City time, on September 18, 1996, unless the Offeror shall have
extended the period of time for which the Offer is open, in which event the
term "Expiration Date" shall mean the latest time and date at which the Offer,
as so extended by the Offeror, shall expire.
If the Offeror shall decide, in its sole discretion, to increase the
consideration offered in the Offer to holders of Shares and if, at the time
that notice of such increase is first published, sent or given to holders of
Shares in the manner specified below, the Offer is scheduled to expire at any
time earlier than the expiration of a period ending on the tenth business day
from, and including, the date that such notice is first so published, sent or
given, then the Offer will be extended until the expiration of such period of
ten business days. For purposes of the Offer, a "business day" means any day
other than a Saturday, Sunday or a federal holiday, and consists of the time
period from 12:01 a.m. through 12:00 Midnight, New York City time.
THE OFFER IS CONDITIONED UPON SATISFACTION OF THE MINIMUM CONDITION. SEE
SECTIONS 13 AND 15. THE OFFER IS ALSO SUBJECT TO OTHER TERMS AND CONDITIONS,
INCLUDING THE EXPIRATION OR TERMINATION OF THE WAITING PERIOD APPLICABLE TO
THE
3
<PAGE>
OFFEROR'S ACQUISITION OF SHARES PURSUANT TO THE OFFER UNDER THE HART-SCOTT-
RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED (THE "HSR ACT"). SEE
SECTION 15. The Offeror reserves the right (but shall not be obligated), in
accordance with applicable rules and regulations of the United States
Securities and Exchange Commission (the "Commission"), subject to the
limitations set forth in the Merger Agreement and described below, to waive or
reduce the Minimum Condition or to waive any other condition of the Offer. If
the Minimum Condition or any of the other conditions described in Section 15
have not been satisfied by 12:00 Midnight, New York City time, on September
18, 1996 (or any other time then set as the Expiration Date), the Offeror may,
subject to the terms of the Merger Agreement as described below, elect to (1)
extend the Offer and, subject to applicable withdrawal rights, retain all
tendered Shares until the expiration of the Offer, as extended, (2) subject to
complying with applicable rules and regulations of the Commission, waive such
condition and accept for payment all Shares so tendered and not extend the
Offer or (3) terminate the Offer and not accept for payment any Shares and
return all tendered Shares to tendering stockholders. Under the terms of the
Merger Agreement, the Offeror may not (except as described in the next
sentence), without prior written consent of the Company, make any change in
the Offer which decreases the price per Share payable in the Offer, which
changes the form of consideration to be paid in the Offer, which imposes
conditions to the Offer in addition to the conditions described in Section 15,
which increases the minimum number of Shares that must be tendered as a
condition to the acceptance for payment and payment for the Shares, which
waives the Minimum Condition if such waiver would result in less than a
majority of the outstanding Fully Diluted Shares (as defined in Section 13)
being accepted for payment or paid for pursuant to the Offer, or which
otherwise amends the terms of the Offer (including any of the conditions
described in Section 15) in a manner that is materially adverse to the holders
of Shares. Notwithstanding the foregoing, the Offeror may, without the consent
of the Company, extend the Offer if, at the then scheduled Expiration Date,
any of the conditions to the Offeror's obligation to accept for payment and
pay for Shares shall not be satisfied or waived, until such time as such
conditions are satisfied or waived. Assuming the prior satisfaction or waiver
of the conditions of the Offer and subject to the preceding sentence, the
Offeror shall, and the Parent shall cause the Offeror to, accept for payment
and pay for Shares validly tendered and not withdrawn pursuant to the Offer as
soon as legally permitted after the commencement thereof.
Subject to the limitations set forth in the Merger Agreement and described
above, the Offeror reserves the right (but will not be obligated), at any time
or from time to time in its sole discretion, to extend the period during which
the Offer is open by giving oral or written notice of such extension to the
Depositary and by making a public announcement of such extension. There can be
no assurance that the Offeror will exercise its right to extend the Offer.
Under certain circumstances, the Merger Agreement requires the Offeror to
extend the Offer from time to time until no later than December 31, 1996. See
Section 13. Any extension of the period during which the Offer is open, delay
in acceptance for payment or payment, termination or amendment of the Offer
will be followed, as promptly as practicable, by public announcement thereof,
such announcement in the case of an extension to be issued not later than 9:00
a.m., New York City time, on the next business day after the previously
scheduled Expiration Date in accordance with the public announcement
requirements of Rules 14d-4(c) and 14e-1(d) under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"). Without limiting the obligation of
the Offeror under such rules or the manner in which the Offeror may choose to
make any public announcement, the Offeror currently intends to make
announcements by issuing a press release to the Dow Jones News Service and
making any appropriate filing with the Commission.
Subject to the applicable rules and regulations of the Commission and
subject to the limitations set forth in the Merger Agreement, the Offeror also
expressly reserves the right, at any time and from time to time, in its sole
discretion, (i) to delay payment for any Shares regardless of whether such
Shares were theretofore accepted for payment, or to terminate the Offer and
not to accept for payment or pay for any Shares not theretofore accepted for
payment or paid for, upon the occurrence of any of the conditions set forth in
Section 15, by giving oral or written notice of such delay or termination to
the Depositary and (ii) at any time or from time to time, to amend the Offer
in any respect. The Offeror's right to delay payment for any Shares or not to
pay for any Shares theretofore accepted for payment is subject to the
applicable rules and regulations of the Commission, including Rule 14e-1(c) of
the Exchange Act, relating to the Offeror's obligation to pay for or return
tendered Shares promptly after the termination or withdrawal of the Offer.
4
<PAGE>
If the Offeror makes a material change in the terms of the Offer or the
information concerning the Offer, or if it waives a material condition of the
Offer (including a waiver of the Minimum Condition), the Offeror will
disseminate additional tender offer materials and extend the Offer if and to
the extent required by Rules 14d-4(c), 14d-6(d) and 14e-1 under the Exchange
Act or otherwise. The minimum period during which a tender offer must remain
open following material changes in the terms of the offer or the information
concerning the offer, other than a change in price or a change in percentage
of securities sought, will depend upon the facts and circumstances, including
the relative materiality of the terms or information changes. With respect to
a change in price or a change in percentage of securities sought, a minimum
ten business day period is generally required to allow for adequate
dissemination to stockholders and investor response.
The Company has provided the Offeror with the Company's list of stockholders
and security position listings for the purpose of disseminating the Offer to
holders of Shares. This Offer to Purchase and the Letter of Transmittal will
be mailed to record holders of Shares and will be furnished to brokers,
dealers, commercial banks, trust companies and similar persons whose names, or
the names of whose nominees, appear on the list of stockholders or, if
applicable, who are listed as participants in a clearing agency's security
position listing for subsequent transmittal to beneficial owners of Shares.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES.
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any such extension
or amendment), the Offeror will accept for payment and will pay for, all
Shares validly tendered prior to the Expiration Date and not theretofore
withdrawn in accordance with Section 4 promptly after the later to occur of
(a) the Expiration Date and (b) subject to compliance with the applicable
rules and regulations of the Commission, including Rule 14e-1(c) under the
Exchange Act, the satisfaction or waiver of the conditions set forth in
Section 15. Subject to such compliance, the Offeror expressly reserves the
right to delay payment for Shares in order to comply in whole or in part with
any applicable law. See Sections 1 and 16. In all cases, payment for Shares
accepted for payment pursuant to the Offer will be made only after timely
receipt by the Depositary of (i) certificates for such Shares or timely
confirmation (a "Book-Entry Confirmation") of a book-entry transfer of such
Shares into the Depositary's account at The Depository Trust Company or the
Philadelphia Depository Trust Company (collectively, the "Book-Entry Transfer
Facilities"), pursuant to the procedures set forth in Section 3, (ii) a
properly completed and duly executed Letter of Transmittal (or a manually
signed facsimile thereof) with all required signature guarantees or, in the
case of a book-entry transfer, an Agent's Message (as defined below) and (iii)
any other documents required by the Letter of Transmittal.
The term "Agent's Message" means a message transmitted by a Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that such Book-Entry Transfer Facility
has received an express acknowledgment from the participant in such Book-Entry
Transfer Facility tendering the Shares that such participant has received and
agrees to be bound by the terms of the Letter of Transmittal and that the
Offeror may enforce such agreement against the participant.
For purposes of the Offer, the Offeror will be deemed to have accepted for
payment, and thereby purchased, Shares validly tendered and not withdrawn as,
if and when the Offeror gives oral or written notice to the Depositary of the
Offeror's acceptance of such Shares for payment. In all cases, payment for
Shares purchased pursuant to the Offer will be made by deposit of the purchase
price with the Depositary, which will act as agent for tendering stockholders
for the purpose of receiving payment from the Offeror and transmitting such
payment to tendering stockholders. Upon the deposit of funds with the
Depositary for the purpose of making payments to tendering stockholders, the
Offeror's obligation to make such payment shall be satisfied, and tendering
stockholders must thereafter look solely to the Depositary for payment of
amounts owed to them by reason of the acceptance for payment of Shares
pursuant to the Offer. If, for any reason whatsoever, acceptance for payment
of any Shares tendered pursuant to the Offer is delayed, or the Offeror is
unable to accept for payment Shares tendered pursuant to the Offer, then,
without prejudice to the Offeror's rights under Section 1, the
5
<PAGE>
Depositary may, nevertheless, on behalf of the Offeror, retain tendered
Shares, and, subject to compliance with the applicable rules and regulations
of the Commission, including Rule 14e-1(c) under the Exchange Act, such Shares
may not be withdrawn, except to the extent that the tendering stockholders are
entitled to withdrawal rights as described in Section 4 below. Under no
circumstances will interest be paid by the Offeror, regardless of any delay in
making such payment.
If any tendered Shares are not accepted for payment pursuant to the terms
and conditions of the Offer for any reason, or if certificates are submitted
representing more Shares than are tendered, certificates representing such
unpurchased or untendered Shares will be returned, without expense to the
tendering stockholder (or, in the case of Shares delivered by book-entry
transfer to a Book-Entry Transfer Facility, such Shares will be credited to an
account maintained within such Book-Entry Transfer Facility), as promptly as
practicable after the expiration, termination or withdrawal of the Offer.
If, prior to the Expiration Date, the Offeror increases the price being paid
for Shares accepted for payment pursuant to the Offer, such increased
consideration will be paid to all stockholders whose Shares are purchased
pursuant to the Offer.
The Offeror reserves the right to transfer or assign, in whole or from time
to time in part, to one or more of its affiliates the right to purchase Shares
tendered pursuant to the Offer, but any such transfer or assignment will not
relieve the Offeror of its obligations under the Offer or prejudice the rights
of tendering stockholders to receive payment for Shares validly tendered and
accepted for payment.
3. PROCEDURE FOR TENDERING SHARES.
Valid Tenders. For Shares to be validly tendered pursuant to the Offer, a
properly completed and duly executed Letter of Transmittal (or a manually
signed facsimile thereof), with any required signature guarantees, or, in the
case of a book-entry transfer, an Agent's Message, and any other required
documents, must be received by the Depositary at one of its addresses set
forth on the back cover of this Offer to Purchase prior to the Expiration
Date, or the tendering stockholder must comply with the guaranteed delivery
procedure set forth below. In addition, either (i) certificates representing
such Shares must be received by the Depositary along with the Letter of
Transmittal or such Shares must be tendered pursuant to the procedure for
book-entry transfer set forth below, and a Book-Entry Confirmation must be
received by the Depositary, in each case prior to the Expiration Date or (ii)
the guaranteed delivery procedure set forth below must be complied with. No
alternative, conditional or contingent tenders will be accepted. DELIVERY OF
DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH SUCH BOOK-ENTRY
TRANSFER FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
Book-Entry Transfer. The Depositary will make a request to establish an
account with respect to the Shares at each Book-Entry Transfer Facility for
purposes of the Offer within two business days after the date of this Offer to
Purchase. Any financial institution that is a participant in a Book-Entry
Transfer Facility's system may make book-entry delivery of Shares by causing a
Book-Entry Transfer Facility to transfer such Shares into the Depositary's
account at a Book-Entry Transfer Facility in accordance with such Book-Entry
Transfer Facility's procedures for transfer. Although delivery of Shares may
be effected through book-entry at a Book-Entry Transfer Facility prior to the
Expiration Date, (i) the Letter of Transmittal (or a manually signed facsimile
thereof), properly completed and duly executed, with any required signature
guarantees, or an Agent's Message in connection with a book-entry transfer,
and any other required documents, must, in any case, be transmitted to and
received by the Depositary at one of its addresses set forth on the back cover
of this Offer to Purchase prior to the Expiration Date or (ii) the guaranteed
delivery procedures described below must be complied with.
Signature Guarantee. Signatures on the Letter of Transmittal must be
guaranteed by a member in good standing of the Securities Transfer Agents
Medallion Program, or by any other bank, broker, dealer, credit union, savings
association or other entity which is an "eligible guarantor institution," as
such term is defined in Rule 17Ad-15 under the Exchange Act (each of the
foregoing being referred to as an "Eligible Institution" and, collectively, as
"Eligible Institutions"), unless the Shares tendered thereby are tendered (i)
by a registered holder
6
<PAGE>
of Shares who has not completed either the box labeled "Special Delivery
Instructions" or the box labeled "Special Payment Instructions" on the Letter
of Transmittal or (ii) for the account of any Eligible Institution. If the
certificates evidencing Shares are registered in the name of a person or
persons other than the signer of the Letter of Transmittal, or if payment is
to be made, or delivered to, or certificates for unpurchased Shares are to be
issued or returned to, a person other than the registered owner or owners,
then the tendered certificates must be endorsed or accompanied by duly
executed stock powers, in either case signed exactly as the name or names of
the registered owner or owners appear on the certificates, with the signatures
on the certificates or stock powers guaranteed by an Eligible Institution as
provided in the Letter of Transmittal. See Instructions 1 and 5 to the Letter
of Transmittal.
Guaranteed Delivery. If a stockholder desires to tender Shares pursuant to
the Offer and such stockholder's certificates for Shares are not immediately
available or time will not permit all required documents to reach the
Depositary prior to the Expiration Date or the procedure for book-entry
transfer cannot be completed on a timely basis, such Shares may nevertheless
be tendered if all of the following guaranteed delivery procedures are duly
complied with:
(i) the tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by the Offeror herewith, is
received by the Depositary, as provided below, prior to the Expiration
Date; and
(iii) the certificates for all tendered Shares, in proper form for
transfer (or a Book-Entry Confirmation), together with a properly completed
and duly executed Letter of Transmittal (or a manually signed facsimile
thereof), and any required signature guarantees, or, in the case of a book-
entry transfer, an Agent's Message, and any other documents required by the
Letter of Transmittal are received by the Depositary within three New York
Stock Exchange, Inc. ("NYSE") trading days after the date of execution of
such Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted by
telegram, telex, facsimile transmission or mail to the Depositary and must
include a guarantee by an Eligible Institution in the form set forth in the
Notice of Guaranteed Delivery.
THE METHOD OF DELIVERY OF SHARES, THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER
FACILITY, IS AT THE OPTION AND RISK OF THE STOCKHOLDER TENDERING SUCH SHARES.
IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED,
PROPERLY INSURED, IS RECOMMENDED.
Notwithstanding any other provision hereof, payment for Shares accepted for
payment pursuant to the Offer will in all cases be made only after timely
receipt by the Depositary of (i) certificates for such Shares or a Book-Entry
Confirmation, (ii) a properly completed and duly executed Letter of
Transmittal (or a manually signed facsimile thereof), with all required
signature guarantees, or, in the case of a book-entry transfer, an Agent's
Message and (iii) any other documents required by the Letter of Transmittal.
Backup Federal Income Tax Withholding. To prevent backup federal income tax
withholding with respect to payment of the Offer Price of Shares purchased
pursuant to the offer, each tendering stockholder must provide the Depositary
with his or her correct Taxpayer Identification Number ("TIN") and certify
that such stockholder is not subject to backup federal income tax withholding
by completing the Substitute Form W-9 included in the Letter of Transmittal.
See Section 5 of this Offer to Purchase and Instruction 8 set forth in the
Letter of Transmittal. If the stockholder is a nonresident alien or foreign
entity not subject to back-up withholding, the stockholder must give the
Depositary a completed Form W-8 Certificate of Foreign Status prior to receipt
of any payments.
7
<PAGE>
Determination of Validity. All questions as to the form of documents and the
validity, eligibility (including time of receipt) and acceptance for payment
of any tender of Shares will be determined by the Offeror, in its sole
discretion, and its determination will be final and binding on all parties.
The Offeror reserves the absolute right to reject any or all tenders of any
Shares that are determined by it not to be in proper form or the acceptance of
or payment for which may, in the opinion of the Offeror, be unlawful. The
Offeror also reserves the absolute right to waive any of the conditions of the
Offer, subject to the limitations set forth in the Merger Agreement, or any
defect or irregularity in the tender of any Shares. The Offeror's
interpretation of the terms and conditions of the Offer (including the Letter
of Transmittal and the Instructions to the Letter of Transmittal) will be
final and binding on all parties except with respect to the interpretation of
the Offeror's obligation to extend the Offer under certain circumstances,
which interpretation will be made jointly with the Company. No tender of
Shares will be deemed to have been validly made until all defects and
irregularities have been cured or waived. None of the Offeror, the Parent, the
Dealer Manager, the Depositary, the Information Agent or any other person will
be under any duty to give notification of any defects or irregularities in
tenders or incur any liability for failure to give any such notification.
Other Requirements. By executing the Letter of Transmittal as set forth
above (including through delivery of an Agent's Message), a tendering
stockholder irrevocably appoints designees of the Offeror as such
stockholder's attorneys-in-fact and proxies, each with full power of
substitution, in the manner set forth in the Letter of Transmittal, to the
full extent of such stockholder's right with respect to the Shares tendered by
such stockholder and accepted for payment by the Offeror (and any and all
other Shares or other securities or rights issued or issuable in respect of
such Shares on or after August 14, 1996). All such powers of attorney and
proxies shall be considered coupled with an interest in the tendered Shares.
This appointment is effective upon the acceptance for payment of the Shares by
the Offeror. Upon acceptance for payment, all prior powers of attorney and
proxies given by the stockholder with respect to such Shares or other
securities or rights will, without further action, be revoked and no
subsequent proxies may be given or written consent executed (and, if given or
executed, will not be deemed effective). The designees of the Offeror will,
with respect to the Shares and other securities or rights, be empowered to
exercise all voting and other rights of such stockholder as they in their sole
judgment deem proper in respect of any annual or special meeting of the
Company's stockholders, or any adjournment or postponement thereof. The
Offeror reserves the right to require that, in order for Shares to be deemed
validly tendered, immediately upon the Offeror's payment for such Shares, the
Offeror must be able to exercise full voting and other rights with respect to
such Shares and the other securities or rights issued or issuable in respect
of such Shares, including voting at any meeting of stockholders (whether
annual or special or whether or not adjourned) or acting by written consent
without a meeting in respect of such Shares.
A tender of Shares pursuant to any one of the procedures described above
will constitute the tendering stockholder's acceptance of the terms and
conditions of the Offer, as well as the tendering stockholder's representation
and warranty that (i) such stockholder has the full power and authority to
tender, sell, assign and transfer the tendered Shares (and any and all other
shares of Common Stock or other securities issued or issuable in respect of
such Shares on or after August 14, 1996), and (ii) when the same are accepted
for payment by the Offeror, the Offeror will acquire good and unencumbered
title thereto, free and clear of all liens, restrictions, charges and
encumbrances and not subject to any adverse claims. The Offeror's acceptance
for payment of Shares tendered pursuant to the Offer will constitute a binding
agreement between the tendering stockholder and the Offeror upon the terms and
subject to the conditions of the Offer.
4. WITHDRAWAL RIGHTS.
Except as otherwise provided in this Section 4, tenders of Shares made
pursuant to the Offer are irrevocable. Shares tendered pursuant to the Offer
may be withdrawn at any time prior to the Expiration Date and, unless
theretofore accepted for payment pursuant to the Offer, may also be withdrawn
at any time after October 19, 1996. If purchase of or payment for Shares is
delayed for any reason or if the Offeror is unable to purchase or pay for
Shares for any reason, then, without prejudice to the Offeror's rights under
the Offer, tendered Shares may be retained by the Depositary on behalf of the
Offeror and may not be withdrawn except to the extent that tendering
stockholders are entitled to withdrawal rights as set forth in this Section 4,
subject to Rule 14e-1(c) under the Exchange Act, which provides that no person
who makes a tender offer shall fail to pay the consideration offered or return
the securities deposited by or on behalf of security holders promptly after
the termination or withdrawal of the Offer.
8
<PAGE>
For a withdrawal to be effective, a written, telegraphic, telex or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover of this Offer to Purchase.
Any notice of withdrawal must specify the name of the person who tendered the
Shares to be withdrawn, the number of Shares to be withdrawn and the name in
which the certificates representing such Shares are registered, if different
from that of the person who tendered the Shares. If certificates for Shares to
be withdrawn have been delivered or otherwise identified to the Depositary,
then, prior to the physical release of such certificates, the serial numbers
shown on such certificates must be submitted to the Depositary and, unless
such Shares have been tendered by an Eligible Institution, the signatures on
the notice of withdrawal must be guaranteed by an Eligible Institution. If
Shares have been tendered pursuant to the procedure for book-entry transfer
set forth in Section 3, any notice of withdrawal must also specify the name
and number of the account at the applicable Book-Entry Transfer Facility to be
credited with the withdrawn Shares. All questions as to the form and validity
(including time of receipt) of notices of withdrawal will be determined by the
Offeror, in its sole discretion, and its determination will be final and
binding on all parties. None of the Offeror, the Parent, the Dealer Manager,
the Depositary, the Information Agent or any other person will be under any
duty to give notification of any defects or irregularities in any notice of
withdrawal or incur any liability for failure to give any such notification.
Any Shares properly withdrawn will be deemed not validly tendered for
purposes of the Offer, but may be retendered at any subsequent time prior to
the Expiration Date by following any of the procedures described in Section 3.
5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES.
The following is a summary of the principal federal income tax consequences
of the Offer and the Merger to holders whose Shares are purchased pursuant to
the Offer or whose Shares are converted to cash in the Merger (including
pursuant to the exercise of appraisal rights). The discussion applies only to
holders of Shares in whose hands Shares are capital assets, and may not apply
to Shares received pursuant to the exercise of employee stock options or
otherwise as compensation, or to holders of Shares who are in special tax
situations (such as insurance companies, tax-exempt organizations, non-U.S.
persons or persons who have engaged in "straddles" or other hedging
transactions with respect to their Shares).
THE FEDERAL INCOME TAX CONSEQUENCES SET FORTH BELOW ARE INCLUDED FOR GENERAL
INFORMATIONAL PURPOSES ONLY AND ARE BASED UPON CURRENT LAW. BECAUSE INDIVIDUAL
CIRCUMSTANCES MAY DIFFER, EACH HOLDER OF SHARES SHOULD CONSULT SUCH HOLDER'S
OWN TAX ADVISOR TO DETERMINE THE APPLICABILITY OF THE RULES DISCUSSED BELOW TO
SUCH HOLDER AND THE PARTICULAR TAX EFFECTS OF THE OFFER AND THE MERGER,
INCLUDING THE APPLICATION AND EFFECT OF STATE, LOCAL AND OTHER INCOME TAX
LAWS.
The receipt of cash for Shares pursuant to the Offer or the Merger
(including pursuant to the exercise of appraisal rights) will be a taxable
transaction for federal income tax purposes and also may be a taxable
transaction under applicable state, local and other income tax laws. In
general, for federal income tax purposes, a holder of Shares will recognize
gain or loss equal to the difference between his or her adjusted tax basis in
the Shares sold pursuant to the Offer or converted to cash in the Merger and
the amount of cash received therefor. Gain or loss must be determined
separately for each block of Shares (i.e., Shares acquired at the same cost in
a single transaction) sold pursuant to the Offer or converted to cash in the
Merger. Such gain or loss generally will be capital gain or loss and will be
long-term capital gain or loss if, on the date of sale (or, if applicable, the
date of the Merger), the Shares were held for more than one year. If a holder
exercises such holder's appraisal rights and receives an amount treated as
interest for federal income tax purposes, such amount will be taxed as
ordinary income.
Payments in connection with the Offer or the Merger may be subject to
"backup withholding" at a rate of 31%. Backup withholding generally applies if
the holder (a) fails to furnish such holder's social security number or TIN,
(b) furnishes an incorrect TIN, (c) is subject to backup withholding due to
previous failures to include
9
<PAGE>
reportable interest or dividend payments on such holder's federal income tax
return, or (d) under certain circumstances, fails to provide a certified
statement, signed under penalties of perjury, that the TIN provided is such
holder's correct number and that such holder is not subject to backup
withholding. Backup withholding is not an additional tax, but rather it is an
advance tax payment that is subject to refund if and to the extent that it
results in an overpayment of tax. Certain taxpayers are generally exempt from
backup withholding, including corporations and financial institutions. Certain
penalties apply for failure to furnish correct information and for failure to
include reportable payments in income. Each holder of Shares should consult
with his or her own tax advisor as to his or her qualification for exemption
from backup withholding and the procedure for obtaining such exemption.
Tendering holders of Shares may be able to prevent backup withholding by
completing the Substitute Form W-9 included in the Letter of Transmittal. See
Section 3.
6. PRICE RANGE OF SHARES; DIVIDENDS.
The Shares are listed on the NYSE under the symbol "ORH." Prior to April 10,
1996, the Shares were quoted on the Nasdaq National Market under the symbol
"OSHC." The following table sets forth for the periods indicated the high and
low sales prices per Share on the NYSE and Nasdaq National Market based on
published financial sources.
<TABLE>
<CAPTION>
HIGH LOW
-------- -------
<S> <C> <C>
CALENDAR 1994:
First Quarter......................................... $ 15 1/2 $11 3/4
Second Quarter........................................ $ 15 1/2 $12
Third Quarter......................................... $ 13 1/4 $ 9
Fourth Quarter........................................ $ 10 $ 6 1/4
CALENDAR 1995:
First Quarter......................................... $ 9 $7
Second Quarter........................................ $ 14 1/4 $8 9/16
Third Quarter......................................... $ 16 3/4 $13 1/4
Fourth Quarter........................................ $ 26 1/2 $14
CALENDAR 1996:
First Quarter......................................... $ 27 $22 1/8
Second Quarter........................................ $ 33 1/4 $25 3/8
Third Quarter
(through August 20, 1996)............................. $ 34 3/4 $26 7/8
</TABLE>
On August 14, 1996, the last full day of trading prior to the public
announcement of the execution of the Merger Agreement, the closing price per
Share as reported on the NYSE was $29 3/4. On August 20, 1996, the last full
day of trading prior to the commencement of the Offer, the closing price per
Share as reported on the NYSE was $34 5/8. HOLDERS OF SHARES ARE URGED TO
OBTAIN CURRENT MARKET QUOTATIONS FOR THE SHARES.
The Company has not paid any cash dividends on the Shares. See Section 14.
7. CERTAIN EFFECTS OF THE TRANSACTION.
The purchase of the Shares by the Offeror pursuant to the Offer will reduce
the number of Shares that might otherwise trade publicly and will reduce the
number of holders of Shares, which will adversely affect the liquidity and
market value of the remaining Shares held by holders of Shares other than the
Offeror. The Company has advised the Offeror that, as of March 29, 1996, there
were approximately 300 holders of Shares of record and as of August 15, 1996,
there were approximately 2,700 beneficial owners of the Shares.
10
<PAGE>
Depending upon the number of Shares purchased pursuant to the Offer and the
aggregate market value of any Shares not purchased pursuant to the Offer, the
Shares may no longer meet the standards for continued listing on the NYSE and
may be delisted from the NYSE. The NYSE's published guidelines indicate that
the NYSE would consider delisting the Shares if, among other things, the
number of record holders of 100 or more Shares should fall below 1,200
(including beneficial holders of Shares held in the name of a NYSE member
organization) or if the number of publicly held Shares (exclusive of Shares
held by directors, officers, or their immediate families and other
concentrated holdings of 10% or more) should fall below 600,000 or if the
aggregate market value of the publicly held Shares should fall below
$5,000,000.
To the extent that the Shares are delisted from any exchange, the market for
Shares could be adversely affected. If the NYSE were to delist the Shares, it
is possible that the Shares would trade on another exchange or on the over-
the-counter market and that price quotations for the Shares would be reported
by such exchange or through the Nasdaq National Market or by other sources.
The extent of the public market for the Shares and availability of such
quotations would, however, depend upon the number of holders of Shares
remaining at such time, the interest in maintaining a market in the Shares on
the part of securities firms, the possible termination of registration under
the Exchange Act, as described below, and other factors. The Offeror cannot
predict whether the reduction in the number of Shares that might otherwise
trade publicly would have an adverse or beneficial effect on the market price
for or marketability of the Shares or whether it would cause future market
prices to be greater or less than the Offer Price.
The Shares are currently registered under the Exchange Act. Such
registration may be terminated upon application by the Company to the
Commission if there are fewer than 300 record holders of Shares. It is the
intention of the Offeror to seek to cause an application for such termination
to be made as soon after consummation of the Offer as the requirements for
termination of registration of the Shares are met. If such registration were
terminated, the Company would no longer legally be required to disclose
publicly in proxy materials distributed to stockholders the information which
it now must provide under the Exchange Act or to make public disclosure of
financial and other information in annual, quarterly and other reports
required to be filed with the Commission under the Exchange Act; the
requirements of Rule 13e-3 under the Exchange Act with respect to "going
private" transactions would no longer be applicable to the Company; and the
executive officers and directors of the Company and beneficial owners of more
than 10% of the Shares would no longer be subject to the "short-swing" insider
trading reporting and profit recovery provisions of the Exchange Act.
Furthermore, if such registration were terminated, persons holding "restricted
securities" of the Company may be deprived of their ability to dispose of such
securities under Rule 144 promulgated under the Securities Act of 1933, as
amended.
If registration of the Shares is not terminated prior to the Merger, then
the Shares will cease to be listed on the NYSE and the registration of the
Shares under the Exchange Act will be terminated following the Merger. The
Shares are currently "margin securities" under the regulations of the Board of
Governors of the Federal Reserve System (the "Federal Reserve Board"), which
has the effect, among other things, of allowing brokers to extend credit on
the collateral of the Shares. Depending upon factors similar to those
described above regarding listing and market quotations, it is possible that,
following the Offer, the Shares would no longer constitute "margin securities"
for the purposes of the margin regulations of the Federal Reserve Board and
therefore could no longer be used as collateral for loans made by brokers. If
registration of Shares under the Exchange Act were terminated, the Shares
would no longer be "margin securities."
8. CERTAIN INFORMATION CONCERNING THE COMPANY.
The Company operates 61 hardware superstores in California which average
approximately 40,000 square feet of interior and exterior selling space and
carry over 45,000 stock keeping units ("SKUs"). The Company primarily targets
the "fix-it" homeowner focused on repair and maintenance projects and is
positioned in a unique niche between small, high-priced independent hardware
retailers and large warehouse home center chains. The Company strives to offer
the service and convenience of a "mom and pop" hardware store while providing
a greater depth and breadth of "fix-it" products in its core product
categories than the large warehouse home center chains.
11
<PAGE>
Historically, the Company's market has been Northern and Central California,
where the Company currently operates 50 stores. The Company successfully
entered the Southern California market in fiscal 1994 with the opening of six
stores in metropolitan Los Angeles and one store near Santa Barbara. The
Company subsequently added four stores in metropolitan Los Angeles.
Except as otherwise set forth herein, the information concerning the Company
contained in this Offer to Purchase, including financial information, has been
furnished by the Company or has been taken from or based upon publicly
available documents and records on file with the Commission and other public
sources. Although neither the Offeror, the Parent nor the Dealer Manager has
any knowledge that would indicate that statements contained herein based upon
such documents are untrue, neither the Offeror, the Parent nor the Dealer
Manager assumes any responsibility for the accuracy or completeness of the
information concerning the Company, furnished by the Company, or contained in
such documents and records or for any failure by the Company to disclose
events which may have occurred or may affect the significance or accuracy of
any such information but which are unknown to the Offeror, the Parent or the
Dealer Manager.
Set forth below is certain summary consolidated financial data with respect
to the Company excerpted or derived in part from financial information
contained in the Company's Annual Report on Form 10-K for the year ended
January 28, 1996 and the Company's Quarterly Report on Form 10-Q for the three
months ended April 28, 1996. More comprehensive financial information is
included in such reports and other documents filed by the Company with the
Commission. For the periods covered by such reports, the following summary is
qualified in its entirety by reference to such reports and such other
documents and all the financial information (including any related notes)
contained therein. Such reports and other documents should be available for
inspection and copies thereof should be obtainable in the manner set forth
below. Income Statement Data for the six months ended July 28, 1996 and July
30, 1995 was derived from the Company's earnings press release issued August
15, 1996.
ORCHARD SUPPLY HARDWARE STORES CORPORATION AND SUBSIDIARY
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
(THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE YEAR ENDED
----------------- -----------------------
JULY 28, JULY 30, JANUARY 28, JANUARY 29,
1996 1995 1996 1995
-------- -------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA
Sales............................... $303,052 $270,817 $532,439 $441,646
Cost of Goods Sold.................. 191,644 172,850 339,764 281,379
-------- -------- -------- --------
Gross Margin........................ 111,408 97,967 192,675 160,267
Operating Expenses.................. 88,524 79,094 161,040 137,858
Pre-opening Expenses................ 568 1,022 2,400 7,525
-------- -------- -------- --------
Operating Income.................... 22,316 17,851 29,235 14,884
Interest Expense, net............... 6,283 6,919 13,337 12,587
-------- -------- -------- --------
Income Before Income Taxes.......... 16,033 10,932 15,898 2,297
Income Tax Provision (1)............ 6,583 2,409 4,289 --
-------- -------- -------- --------
Net Income.......................... $ 9,450 $ 8,523 $ 11,609 $ 2,297
======== ======== ======== ========
Preferred Stock Dividends........... $ 600 $ 600 $ 1,200 $ 1,115
======== ======== ======== ========
Income Per Common Share:
Primary (2)....................... $ 1.18 $ 1.13 $ 1.48 $ 0.17
======== ======== ======== ========
Fully Diluted..................... $ 1.07 $ 1.03 $ 1.38 $ 0.17
======== ======== ======== ========
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
APRIL 28, JANUARY 28, JANUARY 29,
1996 1996 1995
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
BALANCE SHEET DATA
Working Capital........................... $ 91,092 $ 76,155 $ 71,049
Total Assets.............................. 325,498 305,536 292,659
Long-Term Debt and Capital Leases......... 132,008 132,242 135,232
Stockholders' Equity...................... 108,031 93,257 82,578
</TABLE>
- --------
(1) The provision for fiscal 1995 reflects the reversal of a previously
established valuation allowance against deferred tax assets, primarily net
operating losses.
(2) Primary earnings per common share are calculated after preferred stock
dividends to reflect the income available to common stock for all periods.
The Parent has received certain non-public information from the Company (the
"June Projections"). The non-public information included, among other things,
certain financial projections for the fiscal years 1996 through 1999,
including income statement projections which are summarized below. The June
Projections do not take into account any of the potential effects of the
transactions contemplated by the Offer and the Merger.
According to the Company, the Company had not prepared financial projections
other than for budgetary purposes, and the June Projections did not take into
account certain more conservative assumptions which were developed by the
Company in August, 1996 in consultation with Montgomery to produce the
financial forecasts for 1996 and 1997 used by Montgomery in preparing its
fairness opinion. Such forecasts were not provided to the Parent or the
Offeror. Neither the Parent, the Offeror, nor, according to the Company,
Montgomery or the Company's Board of Directors relied on the June Projections
in evaluating the proposed transaction.
<TABLE>
<CAPTION>
FISCAL YEAR
-----------------------------------
1996 1997 1998 1999
-------- -------- -------- --------
(THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Net Sales................................ $593,148 $671,201 $760,236 $856,136
Operating Income......................... 37,156 44,633 51,255 59,724
Interest Expense......................... 12,480 11,793 11,067 10,010
Pre-Tax Income........................... 24,676 32,840 40,188 49,714
Provision for Income Taxes............... 10,117 13,464 16,477 20,383
Net Income............................... 14,559 19,376 23,711 29,331
Net Income Per Share
Primary................................ $ 1.77 $ 2.16 $ 2.61 $ 3.20
Fully Diluted.......................... 1.63 2.16 2.61 3.20
</TABLE>
The Company also provided the Parent with certain assumptions relating to
the June Projections, including revenue growth based on historical trends
adjusted for the relative ages of the Company's existing and projected store
locations; five new store openings in 1996 and one relocation, and seven new
store openings annually in 1997 through 1999; consistent gross profit
performance, with expense trends (including pre-opening expenses for new
stores) and inflation assumptions generally based on recent historical
experience and the terms of existing leases; the anticipated increase in the
costs of distribution expense and a related reduction in transportation costs
from a Southern California distribution center the Company planned to open in
1998; and the conversion of the Preferred Shares in 1996.
13
<PAGE>
THE COMPANY HAS ADVISED THE OFFEROR THAT IT DOES NOT AS A MATTER OF COURSE
DISCLOSE PROJECTIONS AS TO FUTURE SALES OR INCOME, AND THAT THE PROJECTIONS
SET FORTH ABOVE WERE NOT INTENDED TO FORECAST LIKELY OR ANTICIPATED RESULTS OR
PROVIDE A BASIS FOR EVALUATING THE COMPANY, BUT INSTEAD WERE MERELY ONE
SCENARIO INTENDED TO REPRESENT INTERNAL ESTIMATES AND ILLUSTRATE CAPITAL NEEDS
BASED ON A FINANCIAL MODEL. THE PROJECTIONS SET FORTH ABOVE WERE NOT PREPARED
WITH A VIEW TO PUBLIC DISCLOSURE OR COMPLIANCE WITH PUBLISHED GUIDELINES OF
THE COMMISSION OR THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS FOR
PROSPECTIVE FINANCIAL INFORMATION. THE PROJECTIONS ARE INCLUDED HEREIN SOLELY
BECAUSE SUCH INFORMATION WAS FURNISHED TO THE PARENT IN JUNE, 1996. THE
COMPANY HAS ADVISED THE PARENT THAT SUCH PROJECTIONS VARIED IN CERTAIN
RESPECTS FROM THE FORECASTS USED BY THE COMPANY'S FINANCIAL ADVISOR IN ITS
ANALYSIS, WHICH FORECASTS WERE NOT PROVIDED TO PARENT. ACCORDINGLY, THE
INCLUSION OF THE PROJECTIONS IN THIS OFFER TO PURCHASE SHOULD NOT BE REGARDED
AS AN INDICATION THAT THE PARENT, THE OFFEROR, THE COMPANY OR THEIR RESPECTIVE
FINANCIAL ADVISORS (INCLUDING THE DEALER MANAGER) OR THEIR RESPECTIVE OFFICERS
AND DIRECTORS CONSIDER SUCH INFORMATION TO BE ACCURATE OR RELIABLE, AND NONE
OF SUCH PERSONS OR ENTITIES ASSUMES ANY RESPONSIBILITY FOR THE ACCURACY
THEREOF. SUCH PROJECTIONS WERE SUBJECTIVE IN MANY RESPECTS WHEN MADE IN JUNE
1996, AND THUS SUSCEPTIBLE TO VARIOUS INTERPRETATIONS AND PERIODIC REVISION
BASED UPON ACTUAL EXPERIENCE. IN ADDITION, BECAUSE THE ESTIMATES AND
ASSUMPTIONS UNDERLYING SUCH PROJECTIONS, INCLUDING THOSE SUMMARIZED ABOVE, ARE
INHERENTLY SUBJECT TO SIGNIFICANT ECONOMIC AND COMPETITIVE UNCERTAINTIES AND
CONTINGENCIES, WHICH ARE DIFFICULT OR IMPOSSIBLE TO PREDICT ACCURATELY AND ARE
BEYOND THE CONTROL OF THE COMPANY, THE PARENT AND THE OFFEROR, THERE CAN BE NO
ASSURANCE THAT SUCH PROJECTIONS WILL BE REALIZED. ACCORDINGLY, IT IS EXPECTED
THAT THERE WILL BE DIFFERENCES BETWEEN ACTUAL AND PROJECTED RESULTS, AND
ACTUAL RESULTS MAY BE MATERIALLY HIGHER OR LOWER THAN THOSE SET FORTH ABOVE.
The Company is subject to the informational requirements of the Exchange Act
and in accordance therewith files periodic reports, proxy statements and other
information with the Commission relating to its business, financial condition
and other matters. The Company is required to disclose in such proxy
statements certain information, as of particular dates, concerning the
Company's directors and officers, their remuneration, stock options granted to
them, the principal holders of the Company's securities and any material
interests of such persons in transactions with the Company. Such reports,
proxy statements and other information may be inspected at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the regional offices of the
Commission located at Seven World Trade Center, 13th Floor, New York, New York
10048 and Citicorp Center, 500 West Madison Street (Suite 400), Chicago,
Illinois 60661. Such material should also be available for inspection at the
offices of the New York Stock Exchange, 20 Broad Street, New York, New York
10005.
9. CERTAIN INFORMATION CONCERNING THE PARENT AND THE OFFEROR.
The Offeror is a Delaware corporation and a wholly owned subsidiary of the
Parent, a New York corporation. To date, the Offeror has not conducted any
business other than that incident to its formation, the execution and delivery
of the Merger Agreement and the commencement of the Offer.
The principal executive offices of the Offeror and the Parent are located at
3333 Beverly Road, Hoffman Estates, Illinois 60179.
The Parent originated from an enterprise established in 1886. It was
incorporated under the laws of New York in 1906. With its consolidated
subsidiaries, the Parent conducts Domestic and International merchandising and
credit operations. The Parent, a multi-line retailer, is among the largest
retailers in the world on the basis of sales of merchandise and services.
14
<PAGE>
Domestic operations include merchandising and credit operations in the
United States and Puerto Rico. The Domestic credit operations primarily relate
to the Sears Card, the largest proprietary credit card in the United States,
which is used to pay for purchases of goods and services from Retail Store,
Home Services and Direct Response Marketing businesses.
International operations consist of merchandising and credit operations
conducted through majority-owned subsidiaries in Canada and Mexico.
Set forth below is certain selected historical consolidated financial
information with respect to the Parent excerpted or derived from financial
information contained in the Parent's Annual Report on Form 10-K for the year
ended December 31, 1995 and the Parent's Quarterly Report on Form 10-Q for the
six months ended June 29, 1996. More comprehensive financial information is
included in such reports and other documents filed by the Parent with the
Commission, and the following summary is qualified in its entirety by
reference to such reports and such other documents and all the financial
information (including any related notes) contained therein.
SEARS, ROEBUCK AND CO.
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
(MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
AS OF AND FOR
THE AS OF AND FOR THE
SIX MONTHS ENDED 52 WEEKS ENDED
---------------- -------------------------
JUNE 29, JULY 1, DECEMBER 30, DECEMBER 31,
1996 1995 1995 1994
-------- ------- ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
OPERATING RESULTS
Revenues.......................... $17,127 $15,689 $34,925 $33,025
Operating income.................. 682 554 1,705 1,454
Income from continuing operations. 425 342 1,025 857
Income from discontinued
operations....................... -- 776 776 402
Extraordinary gain related to
early extinguishment of debt..... -- -- -- 195
Net income........................ 425 1,118 1,801 1,454
Earnings per common share
From continuing operations...... $ 1.03 $ 0.84 $ 2.53 $ 2.13
From discontinued operations.... -- 1.98 1.97 1.03
Extraordinary gain.............. -- -- -- 0.50
Net income...................... 1.03 2.82 4.50 3.66
FINANCIAL POSITION
Total assets...................... $33,409 $30,353 $33,130 $37,312
Long-term debt and capitalized
lease obligations................ 11,212 9,331 10,044 8,844
Shareholders' equity.............. 4,636 4,141 4,385 10,801
</TABLE>
The Parent is subject to the informational requirements of the Exchange Act
and in accordance therewith files periodic reports and other information with
the Commission relating to its business, financial condition and other
matters. Such reports and other information are available for inspection and
copying at the offices of the Commission in the same manner as set forth with
respect to the Company in Section 8.
Except as described in this Offer to Purchase, none of the Offeror, the
Parent, nor, to the best knowledge of the Offeror and the Parent, any of the
persons listed in Annex I to this Offer to Purchase owns or has any right to
acquire any Shares and none of them has effected any transaction in the Shares
during the past 60 days.
15
<PAGE>
10. SOURCE AND AMOUNT OF FUNDS.
If all Shares (including Shares issuable upon the conversion of the
Preferred Shares) are validly tendered and purchased by the Offeror, the
aggregate purchase price and all estimated fees and expenses will be
approximately $318.0 million. The Offeror will obtain all of such funds
through the Parent, which will provide such funds from its general corporate
funds.
The Company's $100.0 million of outstanding principal amount of 9 3/8%
Senior Notes due 2002 ("Senior Notes") contains a covenant that permits the
holders of Senior Notes to require the Company to repurchase such Senior Notes
for 101% of the principal amount thereof upon the occurrence of a "Change of
Control" as defined in the indenture governing such Senior Notes. Consummation
of the Offer would constitute such a Change of Control, and, to the extent the
holders of the Senior Notes exercise such repurchase rights, the Company
expects to obtain the funds necessary to effect such repurchases from the
Parent, which will provide such funds from its general corporate funds.
Approximately $31.5 million of other long-term indebtedness of the Company
could become due upon consummation of the Offer, and the Company expects to
obtain the funds to repay such indebtedness, if required, from the Parent,
which will provide such funds from its general corporate funds.
11. BACKGROUND OF THE OFFER; PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH
THE COMPANY.
On April 8, 1996, representatives of Montgomery, co-underwriter of the
Company's March 1996 public offering, attended a meeting with representatives
of the Parent to review with the Parent possible acquisition candidates,
including the Company. In late April 1996, representatives of Montgomery
mentioned to representatives of Freeman Spogli & Co. Incorporated ("FS&Co.")
that the Parent might be interested in pursuing acquisition discussions with
the Company. Also in late April, John Berg, Managing Director of Montgomery,
the Company's financial advisor, telephoned Alan Lacy, Executive Vice
President and Chief Financial Officer of the Parent, to discuss the
possibility of a transaction involving the Company and the Parent. On May 21,
1996, representatives of FS&Co. discussed with the Company's management
authorizing Montgomery to continue discussions with the Company concerning the
possible acquisition of the Company by the Parent. At a May 23, 1996 meeting
of the Board of Directors of the Company, the Board determined to pursue
preliminary discussions with the Parent concerning the Parent's possible
acquisition of the Company.
On May 31, 1996, the Company and the Parent entered into the Confidentiality
Agreement (as defined in Section 13). On the same date, representatives of the
Parent met in San Jose, California with Maynard Jenkins, President and Chief
Executive Officer of the Company, J. Frederick Simmons of FS&Co., a director
of the Company, and Mr. Berg to discuss the Parent's and the Company's
business and operations. During the week of June 3, 1996, general financial
and other operational information was provided to the Parent as part of its
due diligence review of the Company.
On June 24, 1996, representatives of the Parent met with representatives of
the Company, including Mr. Jenkins, and FS&Co. in San Jose, California, to
further discuss a possible transaction between the Parent and the Company. The
parties agreed to a two-stage due diligence process in which the Parent would
initially review non-public information which the Company considered to be
less competitively sensitive, after which the Parent would state the
approximate value it would consider paying in an acquisition, subject to due
diligence, Board approval and other conditions, the type of consideration to
be paid, and the process the Parent would be willing to follow in proceeding
with due diligence and potential acquisition discussions. Later that week,
additional information was provided to the Parent.
On June 28, 1996, the Board of Directors of the Company held a telephonic
meeting and reviewed the status of discussions with the Parent and the
information, including operating projections prepared by management of the
Company, that had been provided to the Parent. The Board did not, and had not
previously, analyzed or approved these projections and the assumptions
underlying the projections. The Board authorized and directed Mr. Simmons and
Matt L. Figel of FS & Co., a director of the Company, working with management,
to engage in further discussions with the Parent in an effort to obtain an
acquisition proposal to be presented to the Board. The Board authorized and
approved the retention of Montgomery as the Board's independent financial
advisor for a possible transaction with the Parent.
16
<PAGE>
On July 1, 1996, Susan Field, Managing Director Mergers & Acquisitions of
Merrill, the Parent's financial advisor in connection with the transaction,
had a telephone conversation with Mr. Berg. During this conversation, the
financial advisors of the two companies discussed the Company's business
generally and the possibility of a transaction between the Company and the
Parent.
On July 10, 1996, representatives of the Company, including Mr. Jenkins,
FS&Co. and Montgomery, met in Chicago, Illinois with representatives of the
Parent, including Arthur Martinez, Chairman of the Board and Chief Executive
Officer of the Parent, and Merrill, to exchange further information and
further discuss and review the Company and its business and the Parent and its
business.
On July 17, 1996, Ms. Field telephoned Mr. Berg to explain that the Parent,
based on its due diligence review of the Company to date, and subject to
further extensive due diligence, negotiation of a satisfactory definitive
agreement, and approval by the Parent's Board of Directors, was interested in
acquiring the Company at a price of $34.00 per share. On July 23, 1996, Mr.
Berg telephoned Ms. Field to suggest that the Company expected the price per
share to be in the range of $37.00 per share. Mr. Berg also stated that if the
Parent confirmed its interest at $37.00 per share, the Company was prepared to
provide the next level of confidential information to the Parent, although the
most sensitive information would not be provided until later in the process
after the parties had reached general agreement on major definitive agreement
issues. Ms. Field telephoned Mr. Berg on July 24, 1996 to respond that the
Parent, subject to further diligence, negotiation of a satisfactory definitive
agreement and Parent Board approval, was interested in acquiring the Company
at a price of $35.00 per Share. On July 24, 1996, Mr. Figel contacted members
of the Board of the Company to discuss the status of the discussions to date,
the Parent's further due diligence requirements, the agreed-upon due diligence
process, and the schedule for continuing discussions and negotiation of a
definitive agreement.
During the week of July 29, 1996, counsel to the Parent furnished the
Company and FS&Co. with drafts of the Merger Agreement and the Stockholder
Agreement. On August 2, 1996, representatives of the Parent, Ms. Field and
counsel for the Parent met in Los Angeles, California with representatives of
the Company, Montgomery and counsel for the Company and FS&Co. to negotiate
major issues in the Merger Agreement and the Stockholder Agreement, including
the provisions relating to other potential bidders, termination fees,
conditions to the tender offer, the scope of the representations and
warranties and the general terms and conditions of the option on the Shares
and the Preferred Shares owned by the Seller Stockholders, which option the
Parent required as a condition to entering into the Merger Agreement. During
the week of August 5, 1996, counsel for the Company and FS&Co. and counsel for
the Parent continued negotiations on the terms of the Merger Agreement and the
Stockholder Agreement.
During the weeks of July 29 and August 5 and 12, representatives of the
Parent, counsel for the Parent, and the Parent's accountants conducted an
extensive due diligence review of the Company, including reviewing store
leases, accounting and tax-related information, employee benefit plans and
other matters. Representatives of the Parent also met with Mr. Jenkins and Mr.
Figel to discuss employee benefit arrangements for the Company's employees
following consummation of the Offer, as well as retention bonuses and
severance benefits to be paid by the Parent after completion of the Offer.
On August 12, 1996, the Board of the Company reviewed the terms of the
Offer, the Merger Agreement and the Stockholder Agreement and received
presentations from Montgomery and legal counsel. On August 14, 1996, the Board
of Directors of the Parent determined to make an offer to acquire the Company
at a price of $35.00 per Share in cash. Also on August 14, 1996, the Board of
Directors of the Company held a special meeting to review, with the assistance
of the Board's financial and legal advisors, the proposed Merger Agreement,
Stockholder Agreement and the transactions contemplated thereby, including the
Offer and the Merger. At such meeting, the Company's management and financial
and legal advisors discussed the transaction with the Board, and Montgomery
provided its written opinion to the effect that the consideration to be
received by the holders of Shares pursuant to the Offer and the Merger is fair
from a financial point of view to such holders. The opinion of Montgomery is
described in and is attached to the Company's Schedule 14D-9. Stockholders are
urged to read the full text of that opinion. Following the review of the
transaction by the Board
17
<PAGE>
of Directors of the Company, the Board, by unanimous vote, authorized the
execution and delivery of the Merger Agreement and the Stockholder Agreement,
determined that the Offer and the Merger are fair to, and in the best
interests of, the stockholders of the Company, recommended that the Company's
stockholders accept the Offer and tender their Shares pursuant to the Offer,
and recommended that stockholders of the Company approve and adopt the Merger
Agreement. The Board of the Company also approved, for purposes of Section 203
of the DGCL, the Merger Agreement and the Stockholder Agreement. In the
evening on August 14, 1996, the Merger Agreement and the Stockholder Agreement
were executed, and the transactions were publicly announced on August 15,
1996.
12. PURPOSE OF THE OFFER AND THE MERGER; PLANS FOR THE COMPANY.
The purpose of the Offer, the Merger and the Merger Agreement is to enable
the Parent to acquire control of, and the entire equity interest in, the
Company. Upon consummation of the Merger, the Company will become a direct
wholly owned subsidiary of the Parent. The Offer is being made pursuant to the
Merger Agreement.
Under the DGCL and the Company's Certificate of Incorporation, the approval
of the Board of Directors of the Company, and the affirmative vote of the
holders of a majority of the outstanding Shares are required to approve and
adopt the Merger Agreement and the transactions contemplated thereby,
including the Merger. Section 203 of the DGCL prevents certain "business
combinations" with an "interested stockholder" (generally, any person who owns
or has the right to acquire 15% or more of a corporation's outstanding voting
stock) for a period of three years following the time such person became an
interested stockholder unless, among other things, prior to the time the
interested stockholder became such the board of directors of the corporation
approved either the business combination or the transaction in which the
interested stockholder became such.
The Board of Directors of the Company has unanimously approved the Offer,
the Merger, the Merger Agreement and the Stockholder Agreement and the
transactions contemplated thereby for the purposes of Section 203 of the DGCL.
Unless the Merger is consummated pursuant to the short-form merger provisions
under the DGCL described below (in which case no further corporate action by
the stockholders of the Company will be required to complete the Merger), the
only remaining required corporate action of the Company will be the approval
and adoption of the Merger Agreement and the transactions contemplated thereby
by the affirmative vote of the holders of a majority of the Shares.
Short Form Merger. Under the DGCL, if the Offeror acquires at least 90% of
the outstanding Shares (including Shares tendered following conversion of the
outstanding Preferred Shares as contemplated by the Stockholder Agreement),
the Offeror will be able to approve the Merger without a vote of the Company's
stockholders. In such event, the Offeror anticipates that it will take all
necessary and appropriate action to cause the Merger to become effective as
soon as reasonably practicable after such acquisition without a meeting of the
Company's stockholders. If the Offeror does not otherwise acquire at least 90%
of the outstanding Shares pursuant to the Offer or otherwise, a significantly
longer period of time may be required to effect the Merger, because a vote or
the consent of the Company's stockholders would be required under the DGCL.
Pursuant to the Merger Agreement, the Company has agreed to take all action
necessary under the DGCL and its Certificate of Incorporation and Bylaws to
convene a meeting of its stockholders promptly following consummation of the
Offer to consider and vote on the Merger, if a stockholders' vote is required.
If the Offeror owns a majority of the outstanding Shares (including any Shares
acquired upon exercise of the Parent's option under the Stockholder
Agreement), approval of the Merger can be obtained without the affirmative
vote of any other stockholder of the Company.
Appraisal Rights. No appraisal rights are available in connection with the
Offer. However, if the Merger is consummated, stockholders of the Company at
the time of the Merger will have certain rights under the DGCL to dissent and
demand appraisal of, and to receive payment in cash of the fair value of,
their Shares. Such rights to dissent, if the statutory procedures are complied
with, could lead to a judicial determination of the fair value of the Shares
(excluding any element of value arising from the accomplishment or expectation
of the Merger), required to be paid in cash to such dissenting holders for
their Shares. See Section 16. Annex II sets forth Section 262 of the DGCL
regarding appraisal rights, which will only be available in connection with
the Merger. In addition, such dissenting stockholders would be entitled to
receive payment of a fair rate of interest from the
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date of consummation of the Merger on the amount determined to be the fair
value of their Shares. In determining the fair value of the Shares, a Delaware
court would be required to take into account all relevant factors.
Accordingly, such determination could be based upon considerations other than,
or in addition to, the market value of the Shares, including, among other
things, asset values and earning capacity of the Company. In Weinberger v.
UOP, Inc., the Delaware Supreme Court stated, among other things, that "proof
of value by any techniques or methods which are generally considered
acceptable in the financial community and otherwise admissible in court"
should be considered in an appraisal proceeding. Therefore, the value so
determined in any appraisal proceeding could be different from the price being
paid in the Offer. The Delaware Supreme Court stated in Weinberger and Rabkin
v. Philip A. Hunt Chemical Corp. that although the remedy ordinarily available
to minority stockholders in a cash-out merger is the right to appraisal
described above, a damages remedy or injunctive relief may be available if a
merger is found to be the product of procedural unfairness, including fraud,
misrepresentation or other misconduct.
Severance and Other Arrangements. The Parent has agreed that certain senior
executives of the Company (other than Mr. Jenkins) will be eligible for a cash
severance payment if they are involuntarily terminated by the Company (other
than for cause). In the case of each of Messrs. Ward and Hilberg, payment
would equal 100% of his annual base salary, plus 100% of his annual target
bonus for the year of termination. Other senior executives will be eligible to
receive a severance payment in cash in an amount determined by Mr. Jenkins
consistent with past practice but not to exceed an amount equal to 100% of
annual base salary plus 100% of annual target bonus for the year of
termination. In consideration of such severance arrangements, the senior
executives will agree to customary non-compete arrangements in the event of
voluntary termination of employment with the Company.
The Parent has agreed that certain senior executives of the Company (other
than Mr. Jenkins) will be eligible for a retention bonus if they continue in
employment with the Company until the first anniversary of the Effective Time.
Mr. Jenkins will determine the amount of each such executive's bonus, but it
will not be less than 50% of such executive's annual base salary. The
aggregate of all such retention bonuses will not exceed $1,400,000.
The Parent and Mr. Jenkins have had preliminary discussions regarding the
compensation and benefits that Mr. Jenkins may receive after the Effective
Time. Mr. Jenkins may become eligible to participate in the Parent's Annual
Incentive and Long-Term Incentive Plans, and may receive common shares of the
Parent, stock options and other rights with respect to common shares of the
Parent. Also, Mr. Jenkins may become eligible to receive performance
incentives, bonuses and other compensation and benefits under other programs
of the Parent. The Parent and Mr. Jenkins have not entered into an agreement
or made any commitment with respect to the nature or amount of such
compensation and benefits.
Plans for the Company. Except as otherwise set forth in this Offer to
Purchase, it is expected that, initially following the Merger, the business
and operations of the Company will be continued by the Surviving Corporation
substantially as they are currently being conducted.
The Parent will continue to evaluate the business and operations of the
Company during the pendency of the Offer and after the consummation of the
Offer and the Merger, and will take such actions as it deems appropriate under
the circumstances then existing. The Parent intends to conduct a comprehensive
review of the Company's business, operations, capitalization and management
with a view to optimizing the Company's potential in conjunction with the
Parent's business.
Except as indicated in this Offer to Purchase, the Parent does not have any
present plans or proposals which relate to or would result in an extraordinary
corporate transaction, such as a merger, reorganization or liquidation,
involving the Company or any of its subsidiaries, a sale or transfer of a
material amount of assets of the Company or any of its subsidiaries or any
material change in the Company's capitalization or dividend policy or any
other material changes in the Company's corporate structure or business, or
the composition of the Company's Board of Directors or management.
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13. MERGER AGREEMENT, STOCKHOLDER AGREEMENT AND CONFIDENTIALITY AGREEMENT.
The following is a summary of the material terms of the Merger Agreement,
the Stockholder Agreement and the Confidentiality Agreement entered into
between the Company and the Parent dated May 31, 1996 (the "Confidentiality
Agreement"). Such summary is not a complete description of these agreements
and is qualified in its entirety by reference to the complete texts of the
agreements, copies of which are filed as exhibits to the Schedule 14D-1 filed
with the Commission by the Parent and the Offeror, and are incorporated by
reference herein. Capitalized terms not otherwise defined herein shall have
the meanings set forth in the agreements.
THE MERGER AGREEMENT
The Offer. The Merger Agreement provides for the making of the Offer by the
Offeror. The obligation of the Offeror to accept for payment and pay for
Shares tendered pursuant to the Offer is subject to the satisfaction of the
Minimum Condition and certain other conditions that are described in Section
15. The Offeror has agreed that, without the written consent of the Company,
no change in the Offer may be made which changes the form of consideration to
be paid or decreases the price per Share payable in the Offer, which imposes
conditions to the Offer in addition to the Minimum Condition and those other
conditions described in Section 15, which increases the minimum number of
Shares that must be tendered as a condition to the acceptance for payment and
payment for the Shares, which waives the Minimum Condition if such waiver
would result in less than a majority of the outstanding Shares on a fully
diluted basis, assuming the exercise of all outstanding Options to purchase
shares of Common Stock ("Options") and the conversion of all outstanding
Preferred Shares in accordance with their terms (the "Fully Diluted Shares"),
being accepted for payment or paid for pursuant to the Offer, or which
otherwise amends the terms of the Offer (including any of the conditions set
forth in Section 15) in a manner that is materially adverse to the holders of
Shares. The Offeror may, without the consent of the Company, extend the Offer
if, at the scheduled expiration date of the Offer, any of the conditions to
the Offeror's obligation to purchase Shares have not been satisfied until such
time as such conditions are satisfied. In the event that at any scheduled
expiration date of the Offer, either of the conditions described in paragraphs
(ii) (which relates to expiration of the waiting period under the HSR Act) and
(iii)(a) or (b) (which generally relate to government proceedings, but only in
the event that clause (b) is not satisfied due to the entry of an appealable
judgment, order or injunction) of Section 15 is not satisfied, the Offeror
shall extend the Offer from time to time until no later than December 31, 1996
(any such extension, an "Extension Period"). During any Extension Period, the
parties shall consult with each other and use their respective best efforts to
cause paragraph (ii) or (iii)(a) or (b) (but only in the event that clause (b)
is not satisfied due to the entry of an appealable judgment, order or
injunction), as the case may be, of Section 15 to be satisfied. Except as set
forth in the two immediately preceding sentences, the conditions described in
Section 15 are for the sole benefit of the Parent and the Offeror and may be
asserted by the Parent or the Offeror regardless of the circumstances giving
rise to any such condition (including any action or inaction by the Offeror,
unless any such action or inaction by the Offeror would constitute a breach by
the Offeror of any of its covenants under the Merger Agreement) or may be
waived by the Parent or the Offeror, in whole or in part at any time and from
time to time, in its sole discretion. The Parent will make available
sufficient funds sufficiently in advance of the Effective Time (as defined
below) to consummate the Offer in accordance with the provisions of the Merger
Agreement.
The Merger. The Merger Agreement provides that, following the purchase of
Shares pursuant to the Offer, the approval of the Merger Agreement by the
stockholders of the Company (if required) and the satisfaction or waiver of
the other conditions to the Merger, the Offeror will be merged with and into
the Company (the "Surviving Corporation"). The Merger shall become effective
at such time as a Certificate of Merger or, if applicable, a Certificate of
Ownership and Merger is filed with the Secretary of State of the State of
Delaware, or at such later time as is specified therein (the "Effective
Time"). As a result of the Merger, all of the properties, rights, privileges
and franchises of the Company and the Offeror shall vest in the Surviving
Corporation, and all debts, liabilities and duties of the Company and the
Offeror shall become the debts, liabilities and duties of the Surviving
Corporation.
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At the Effective Time, by virtue of the Merger (i) each issued and
outstanding Share held in the treasury of the Company, or by the Parent or any
wholly owned subsidiary of the Parent, shall be cancelled, and no payment
shall be made with respect thereto; (ii) each share of Common Stock of the
Offeror then outstanding shall be converted into and become one share of
Common Stock of the Surviving Corporation; (iii) each Share outstanding
immediately prior to the Effective Time shall, except as otherwise provided in
(i) above and except for Shares held by stockholders exercising appraisal
rights pursuant to Section 262 of the DGCL, be converted into the right to
receive $35.00 in cash or any higher price per Share that may be paid pursuant
to the Offer, without interest and (iv) each Preferred Share outstanding
immediately prior to the Effective Time shall be converted into the right to
receive cash in an amount equal to the product of $35.00 (or such higher price
per Share that may be paid pursuant to the Offer) and the number of Shares
into which such Preferred Share is convertible immediately prior to the
Effective Time plus accrued and unpaid dividends with respect thereto in
accordance with the terms of the Preferred Shares, without interest.
The Merger Agreement provides that the Certificate of Incorporation of the
Company will be amended at the Effective Time to read as set forth in Exhibit
A to the Merger Agreement, and the By-Laws of the Offeror at the Effective
Time will be the By-Laws of the Surviving Corporation, subject to the
obligation of the Offeror and the Parent to continue in force and effect
certain indemnification provisions of the Company's By-Laws. The Merger
Agreement also provides that the directors of the Offeror at the Effective
Time will be the directors of the Surviving Corporation and the officers of
the Company at the Effective Time will be the officers of the Surviving
Corporation.
Stock Options. The Company has advised the Parent that pursuant to the
Merger Agreement the Company entered into separate option payment agreements
(collectively, the "Payment Agreements") with holders of outstanding Options
under the Company's Amended 1989 Nonqualified Stock Option Plan (the "1989
Plan"), the Company's 1993 Stock Option Plan, the Company's 1993 Non-Employee
Directors Stock Option Plan and the Company's 1996 Non-Employee Directors
Stock Option Plan (the "1996 Plan") (collectively, the "Stock Option Plans")
and any other Options the Company has granted that are identified in the
Merger Agreement. The Payment Agreements described, as applicable, the various
termination and acceleration provisions of the Stock Option Plans that are
triggered by the Offer or the Merger, the Board's determination to accelerate
the vesting provisions of all outstanding Options to the date of consummation
of the Offer and provide for the surrender to the Company of all Options for
an amount in cash equal to the Merger Consideration less the applicable
exercise price per share of the Options and less all taxes required to be
withheld from such payment (the "Option Consideration"). Any Options not so
surrendered or exercised one day prior to the Effective Time, or 10 days prior
to the Effective Time in the case of the 1989 Plan, shall terminate in
accordance with the terms of the applicable Stock Option Plan or option
agreement pursuant to which such Options were granted. The Payment Agreements
further provide that payment of the Option Consideration will be made after
the acceptance of the Shares for payment and purchase pursuant to the Offer
and the surrender by the optionholder of the Options. Certain directors of the
Company will be paid $10,000 each after consummation of the Offer to
relinquish option rights under the 1996 Plan with respect to the option each
elected in lieu of receiving an annual retainer of $10,000.
Recommendation. The Company represents and warrants in the Merger Agreement
that the Board of Directors of the Company has (i) determined that the Merger
Agreement and the transactions contemplated thereby, including the Offer and
the Merger, are fair to, and in the best interests of, the stockholders of the
Company, (ii) approved and adopted the Merger Agreement and the transactions
contemplated thereby, including the Offer, the Merger and the Stockholder
Agreement and the transactions contemplated thereby and (iii) resolved to
recommend acceptance of the Offer, the tender of the Shares thereunder and
approval and adoption of the Merger Agreement and the Merger by the Company's
stockholders. This recommendation of the Board of Directors may be withdrawn,
modified or amended if the Board determines in its good faith judgment, based
as to legal matters on the written advice of outside legal counsel, that the
exercise of the directors' fiduciary duties requires such withdrawal,
amendment or modification. Any such withdrawal, modification or amendment may
give rise to certain termination rights on the part of the Parent and the
Offeror, as described below.
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Interim Agreements of the Parent, Offeror and the Company. Pursuant to the
Merger Agreement, the Company has covenanted and agreed that, during the
period from the date of the Merger Agreement to the Effective Time, the
Company will conduct its business and operations only in the ordinary and
usual course of business consistent with past practice. The Merger Agreement
provides that the Company and its subsidiaries will use their reasonable best
efforts to preserve intact the business organization of the Company and its
subsidiaries, to keep available the services of their operating personnel and
to preserve the goodwill of suppliers and others having business relationships
with them; provided, however, that any inability of the Company or its
subsidiaries to keep available the services of such quality personnel or to
maintain any such business relationships (including with suppliers) despite
its aforesaid reasonable best efforts to do so shall not constitute a breach
of the Merger Agreement. Pursuant to the Merger Agreement, without limiting
the generality of the foregoing, and except as otherwise expressly provided in
the Merger Agreement, prior to the Effective Time, neither the Company nor any
of its subsidiaries will, without the prior written consent of the Parent: (i)
amend its Certificate of Incorporation or By-Laws; (ii)(a) create, incur or
assume any indebtedness for money borrowed, including obligations in respect
of capital leases, except (A) purchase money mortgages granted in a manner
consistent with past practice, and (B) indebtedness for borrowed money
incurred in the ordinary course of business, provided, however, that the
Company and its subsidiaries may incur (x) indebtedness for borrowed money
under credit facilities existing as of April 28, 1996 and (y) indebtedness
which refinances indebtedness which is declared due and payable or tendered to
the Company or any subsidiary in accordance with the terms thereof as a result
of the consummation of the Offer, provided, that (1) Purchaser shall not have
designated a majority of directors to serve on the Board pursuant to the
Merger Agreement and (2) the Company shall have consulted with the Parent and
the Parent shall have approved the terms of such refinancing indebtedness
(which consent may not be unreasonably withheld) or (b) assume, guarantee,
endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other person; provided,
however, that the Company may endorse negotiable instruments in the ordinary
course of business consistent with past practice; (iii) declare, set aside or
pay any dividend or other distribution (whether in cash, stock or property or
any combination thereof) in respect of the Common Stock and Preferred Shares
(except for regular dividends on the Preferred Shares in accordance with their
terms) or any other capital stock of any subsidiary; (iv) issue, sell, grant,
purchase or redeem, or issue, whether by dividend or otherwise, or sell any
securities convertible into or exercisable for, or options with respect to, or
warrants to purchase or rights to subscribe to or otherwise purchase, or
subdivide or in any way reclassify, any shares of capital stock or other
securities of the Company, except for the issuance of Shares issuable upon
conversion of the Preferred Shares in accordance with their terms or the
exercise of Options outstanding on the date of the Merger Agreement; (v)(a)
increase the aggregate amount of compensation payable or to become payable by
the Company or any subsidiary to its directors, officers or employees whether
by salary or bonus or (b) increase the rate or term of, or otherwise alter,
any bonus, insurance, pension, severance or other employee benefit plan,
payment or arrangement made to, for or with any such directors, officers or
employees; (vi) enter into any agreement, commitment or transaction, except
agreements, commitments or transactions in the ordinary course of business
consistent with past practice or settlements with the Internal Revenue Service
or other similar authority as permitted by the Merger Agreement; (vii) sell,
transfer, mortgage, pledge or grant any security interest, lien or other
encumbrance on any asset other than in the ordinary course of business
consistent with past practice and except (a) pursuant to the Credit Agreement
dated as of August 8, 1995 between the Company and the Bank of America
National Trust and Savings Association or (b) in connection with purchase
money mortgages permitted by Section 6.01(b)(i) of the Merger Agreement;
(viii) waive any right under any contract or other agreement identified in the
Company Disclosure Letter; (ix) other than as and when required by any change
in generally accepted accounting principles, make any material change in its
accounting or tax methods or practices or make any material change in
depreciation or amortization policies or rates adopted by it for accounting or
tax purposes or, other than normal writedowns or writeoffs consistent with
past practices, make any writedowns of inventory or writeoffs of notes or
accounts receivable; (x) make any loan or advance to any of its stockholders,
officers, directors, employees (other than advances to field sales personnel,
vacation advances, relocation advances and travel advances in each case made
in the ordinary course of business in a manner consistent with past practice),
or make any other loan or advance to any other person or group otherwise than
in the ordinary course of business consistent with past practice; (xi)
terminate or fail to renew, where such renewal is at the Company's or
subsidiary's option, any
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contract or other agreement other than in the ordinary course of business, the
termination or failure of which to renew would have a Material Adverse Effect
(as defined below); (xii) enter into any collective bargaining agreement or
employment agreement; (xiii) make any addition to or modification of the
Company's existing employee benefits plans or adopt any new employee benefit
plan; (xiv) take, agree to take or do, or with respect to anything within the
Company's or subsidiary's control, knowingly permit to be done or to be taken
any action in the conduct of its business which (a) would cause any of the
representations of the Company to be or become untrue in any material respect,
and (b) would reasonably be expected to have a Material Adverse Effect; (xv)
fail to comply with all applicable filing, payment, withholding, collection
and record retention obligations under all applicable federal, state, local
and foreign tax laws; or (xvi) agree to do any of the foregoing.
When used in the Merger Agreement, the term "Material Adverse Effect" means
a material adverse effect on the business, assets, financial condition or
results of operations of the Company and its subsidiaries considered on a
consolidated basis or on the ability of the Company, the Parent or the Offeror
to consummate the transactions contemplated by the Merger Agreement, or any
event or events which, individually or in the aggregate, constitute or, with
the passage of time, would constitute a "Material Adverse Effect."
Other Agreements of the Parent, the Offeror and the Company. In the Merger
Agreement, the Company, its present affiliates and their respective officers,
directors, employees, investment bankers, attorneys and other representatives
and agents have agreed that they shall immediately cease any existing
discussions or negotiations, if any, with any parties conducted heretofore
with respect to any acquisition of all or any material portion of the assets
of, or any equity interest in, the Company or any business combination with
the Company, subject to certain exceptions. The Company may, directly or
indirectly, furnish information and access, in each case only in response to
unsolicited written requests therefor, to any corporation, partnership, person
or other entity or group pursuant to confidentiality agreements in customary
form that (i) do not prohibit or restrict disclosure of any matter to the
Parent other than confidential information regarding any such corporation,
partnership, person or other entity or group and (ii) contain terms not more
favorable to such corporation, partnership, person or other entity or group
than the terms contained in the Confidentiality Agreement, and may participate
in discussions and negotiate with such corporation, partnership, person or
other entity or group concerning any proposed merger, sale of assets, sale of
shares of capital stock, acquisition of Shares other than pursuant to the
Offer or the Merger or similar transaction involving the Company or any
division or subsidiary of the Company (an "Acquisition Proposal"), only if the
Board of Directors of the Company determines in its good faith judgment, based
as to legal matters on the written advice of outside legal counsel, (i) that
the exercise of the fiduciary duties of the directors requires the taking of
such action, and, after consultation with all its principal advisors in
connection with the transactions contemplated in the Merger Agreement and (ii)
that such Acquisition Proposal is a bona fide written Acquisition Proposal
that would, upon consummation thereof, result in a transaction more favorable
to the stockholders of the Company than the transactions contemplated in the
Merger Agreement and in the good faith reasonable judgment of the Board (based
upon the advice of all of its principal advisors in connection with the
transactions contemplated in the Merger Agreement), is proposed by a
corporation, partnership, person or other entity or group with sufficient
financial resources available to it or available from third parties to
consummate such transaction and is probable to be consummated (a "Superior
Proposal"). Except as set forth above, neither the Company or any of its
present affiliates, nor any of its or their respective officers, directors,
employees, representatives or agents shall, directly or indirectly, encourage,
solicit, participate in or initiate discussions or negotiations with, or
provide any information to, any corporation, partnership, person or other
entity or group (other than the Parent and the Offeror, any affiliate or
associate of the Parent and the Offeror or any designees of the Parent and the
Offeror) concerning any Acquisition Proposal or take any other action to
facilitate the making of a proposal that constitutes or could reasonably be
expected to lead to an Acquisition Proposal. The Company shall advise the
Parent orally and in writing of any Acquisition Proposal and any inquiry or
contact with any person with respect to the acquisition of a substantial
equity interest in or substantial assets of the Company or its subsidiaries
(including without limitation, successive Acquisition Proposals, inquiries or
contacts) and will, in such notice, indicate the identity of the offeror and
the material terms and conditions of any such Acquisition Proposal, including
without limitation, price. The Company shall
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give the Parent one business day's advance notice of any agreement to be
entered into or any information to be supplied to the person making such
Acquisition Proposal. Except in accordance with the terms of the Merger
Agreement, neither the Board nor any committee thereof shall (i) withdraw or
modify, or propose to withdraw or modify, in a manner adverse to the Parent or
the Offeror the approval or recommendation by the Board of the Offer, the
Merger or the Merger Agreement, or (ii) approve or recommend, or propose to
approve or recommend, any Acquisition Proposal. Notwithstanding the foregoing,
nothing in the Merger Agreement shall prevent the Board from approving or
recommending to the Company's stockholders any unsolicited Acquisition
Proposal by a third party as contemplated by Rules 14d-9 and 14e-2 promulgated
under the Exchange Act (and, in connection therewith, withdrawing or modifying
the approval or recommendation by the Board of the Offer, the Merger or the
Merger Agreement) in the event any unsolicited Acquisition Proposal shall have
been made by a third party, if, in the good faith judgment of the Board, based
as to legal matters on the written advice of outside legal counsel,
withdrawing or modifying such approval or recommendation is required under
applicable law in the proper discharge of the directors' fiduciary duties.
Pursuant to the Merger Agreement, between the date of the Merger Agreement
and the Effective Time, the Company will give the Parent and the Offeror and
their authorized representatives reasonable access to all personnel, books,
records, stores, offices, and other facilities and properties of the Company
and its subsidiaries, will permit the Parent and the Offeror to make such
inspections (other than environmental investigations) as the Parent and the
Offeror may reasonably request and will cause the Company's officers to
furnish Offeror with such financial and operating data and other information
with respect to the business and properties of the Company and its
subsidiaries as Offeror may from time to time reasonably request.
The Merger Agreement provides that promptly upon the purchase by Offeror of
the Shares pursuant to the Offer, and from time to time thereafter, the
Offeror shall be entitled to designate such number of directors, rounded up to
the next whole number, on the Company's Board that equals the product of (i)
the total number of directors on the Board (giving effect to the election of
directors pursuant to this paragraph) and (ii) the percentage that the
aggregate number of Shares owned by the Offeror or any affiliate of Offeror
bears to the total number of Shares then outstanding, and the Company shall,
at such time, promptly take all actions necessary to cause the Offeror's
designees to be elected as directors of the Company, including increasing the
size of the Board or securing the resignations of incumbent directors, or
both. The Company shall cause persons designated by the Offeror to constitute
the same percentage as persons designated by the Offeror shall constitute of
the Board to be appointed to (i) each committee of the Board, (ii) the board
of directors of each subsidiary and (iii) each committee of each such board,
in each case only to the extent permitted by applicable law. Notwithstanding
the foregoing, until the earlier of (i) the time the Offeror acquires a
majority of the Fully Diluted Shares, and (ii) the Effective Time, the Company
shall use its best efforts to ensure that all the members of the Board and
each committee of the Board and such boards and committees of each subsidiary
as of the date of the Merger Agreement who are not employees of the Company
shall remain members of the Board and of such boards and committees. If the
Offeror exercises its right to designate directors of the Company, it expects
to nominate the directors of Offeror identified on Annex I hereto and, if
additional directors are necessary to comprise a majority of the Board, to
select from among such of the Parent's executive officers identified in Annex
I hereto who agree to be nominated and to serve as directors of the Company,
as further described on Schedule I to the Company's Schedule 14D-9 being
mailed with this Offer to Purchase.
Pursuant to the Merger Agreement, the Company shall cause a meeting of its
stockholders (the "Company Stockholder Meeting") to be duly called and held as
soon as practicable (provided the Offeror shall have accepted for payment
Shares tendered pursuant to the Offer) for the purposes of voting on the
approval and adoption of the Merger Agreement, the Merger and the transactions
contemplated thereby, except as set forth below.
The Merger Agreement provides that, at the Parent's request, the Company
will promptly prepare and file with the Commission under the Exchange Act a
proxy statement relating to the Company Stockholder Meeting (the "Proxy
Statement") and cause the Proxy Statement to be mailed to its stockholders at
the earliest practicable
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time and obtain the necessary approvals by its stockholders of the Merger
Agreement. The Parent has agreed to vote and to cause its affiliates
(including without limitation, the Offeror) to vote all Shares owned by them
and to exercise all voting rights or proxies held by them in favor of adoption
of the Merger Agreement. Notwithstanding the foregoing, in the event that
Offeror acquires at least 90% of the outstanding Shares (assuming conversion
of all outstanding Preferred Shares in accordance with their terms) and the
Offeror so requests, the Parent, the Offeror and the Company will take all
actions necessary and appropriate to cause the Merger to become effective
without a meeting of the stockholders of the Company in accordance with
Section 253 of the DGCL.
The Parent has agreed that all rights to indemnification now existing in
favor of present and former directors, officers and employees of the Company
and its subsidiaries ("Indemnified Parties") as provided in the Company's By-
Laws or limitations of liability in the Company's Certificate of Incorporation
as of the date of the Merger Agreement shall survive the Merger and shall
continue in full force and effect for a period of at least five years. The
Parent has agreed to cause to remain in full force and effect and cause the
Surviving Corporation to fully perform all indemnity agreements with
Indemnified Parties in effect on the date of the Merger Agreement. For a
period of at least five years after the Effective Time, the Parent and the
Surviving Corporation will indemnify and hold harmless, to the maximum extent
permitted by applicable law, each Indemnified Party and advance expenses in
connection with such indemnification. In addition, the Parent has agreed that
for five years after the Effective Time, the Parent will cause the Surviving
Corporation to use reasonable efforts to maintain, if available for an annual
premium not in excess of $60,000, officers' and directors' liability insurance
with respect to acts or omissions occurring prior to the Effective Time
covering each such person currently covered by the Company's officers' and
directors' liability insurance policy on terms no less favorable than those of
such policy in effect on the date of the Merger Agreement or at the Effective
Time, or if such insurance coverage is not available for an annual premium not
in excess of $60,000, to obtain the amount of coverage that is available for
an annual premium of $60,000.
The Merger Agreement provides that the Company, the Offeror and the Parent
will each use their best efforts to consummate the transactions contemplated
by the Merger Agreement.
Representations and Warranties. The Merger Agreement contains various
customary representations and warranties of the parties thereto, including
without limitation, representations by the Company as to corporate existence
and good standing, subsidiaries, capital structure, corporate authorization,
consents and approvals, taxes, brokers and finders, undisclosed liabilities,
certain changes or events concerning its businesses, compliance with
applicable law, employee benefit plans, litigation and environmental
liabilities. In addition, the Company represented to the Parent and the
Offeror that the Board of Directors of the Company, at a meeting duly called
and held, has (i) determined that the Merger Agreement and the transactions
contemplated thereby, including the Offer and the Merger, are fair to, and in
the best interests of, the stockholders of the Company, and (ii) approved and
adopted the Merger Agreement and the transactions contemplated thereby,
including the Offer, the Merger, and the Stockholder Agreement and the
transactions contemplated thereby in all respects and that such approval
constitutes approval of the Offer, the Merger Agreement, the Merger and the
Stockholder Agreement and the transactions contemplated thereby for purposes
of Section 203 of the DGCL.
Conditions to the Merger. The obligations of each of the Parent, the Offeror
and the Company to effect the Merger are subject to the satisfaction of
certain conditions, which have not been waived at or prior to the Closing of
the Merger, including (i) the Merger Agreement shall have been adopted by the
requisite vote, if any is required, of the stockholders of the Company in
accordance with applicable law; (ii) no order, statute, rule, regulation,
executive order, stay, decree, judgment or injunction shall have been enacted,
entered, issued, promulgated or enforced by any court or governmental
authority which prohibits or restricts the consummation of the Merger; and
(iii) any waiting period (and any extension thereof) applicable to the Merger
under the HSR Act shall have terminated or expired. The obligation of the
Offeror and the Parent to effect the Merger is further
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subject to satisfaction of the conditions, unless waived by the Parent, that
(i) the Offeror shall have accepted for payment Shares tendered pursuant to
the Offer, provided that this condition will be deemed satisfied with respect
to the Offeror and the Parent if the Offeror shall have failed to purchase
Shares pursuant to the Offer in violation of the terms of the Offer, (ii) the
Company shall have performed and complied in all material respects with the
agreements and obligations contained in the Merger Agreement required to be
performed and complied with by it at or prior to the Effective Time, provided
that this clause (ii) shall not apply after Offeror has designated a majority
of directors to serve on the Board of Directors of the Company as provided in
the Merger Agreement and Offeror's designees constitute a majority of the
Board and (iii) there shall have been no change in the Board's recommendation
that the stockholders of the Company accept the Offer. The obligation of the
Company to effect the Merger is further subject, unless waived by the Company,
to the Parent and the Offeror having performed and complied in all material
respects with the agreements and obligations contained in the Merger Agreement
required to be performed and complied with by each of them at or prior to the
Effective Time.
Termination. The Merger Agreement may be terminated and the Offer (if the
Offeror has not accepted Shares for payment) and the Merger may be abandoned
at any time prior to the Effective Time: (i) by mutual written consent of the
Parent, the Offeror and the Company; (ii) by the Parent and the Offeror or by
the Company if Shares have not been purchased pursuant to the Offer on or
before December 31, 1996 or the Closing of the Merger shall not have occurred
on or prior to June 30, 1997; (iii) by the Parent and the Offeror or the
Company if any court of competent jurisdiction in the United States or other
United States governmental body shall have issued an order, decree or ruling
or taken any other final action restraining, enjoining or otherwise
prohibiting the Merger or the acceptance for payment of and payment for the
Shares and such order, decree, ruling or other action shall have become
nonappealable; (iv) by the Parent and the Offeror if, due to an occurrence or
circumstance which would result in a failure to satisfy any of the conditions
set forth in Section 15, but subject to the Offeror's obligation to extend the
Offer in certain circumstances set forth in the Merger Agreement, the Offeror
shall have (a) failed to commence the Offer within five business days of the
public announcement of the Offer and the Merger or (b) terminated the Offer or
allowed the Offer to expire without the purchase of any Shares thereunder; (v)
by the Company if (a) there shall not have been a material breach of any
representation, warranty, covenant or agreement on the part of the Company
which would entitle the Parent or the Offeror to terminate the Merger
Agreement pursuant to clause (vi) of this paragraph and, due to an occurrence
or circumstance which would result in a failure to satisfy any of the
conditions set forth in Section 15, the Offeror shall have (A) failed to
commence the Offer within five business days of the public announcement of the
Offer and the Merger or (B) terminated the Offer or allowed the Offer to
expire without the purchase of any Shares thereunder, or (b) prior to the
purchase of Shares pursuant to the Offer, a corporation, partnership, person
or other entity or group shall have made a Superior Proposal and based as to
legal matters on the written advice of outside legal counsel, the Board of
Directors of the Company in its good faith judgment has determined that the
exercise of the directors' fiduciary duties requires the Company to terminate
the Merger Agreement, provided that such termination under this clause (b)
shall not be effective until payment of the Termination Fee (as defined
below); (vi) by the Parent and the Offeror prior to the purchase of Shares
pursuant to the Offer if (a) there shall have been a breach of any
representation or warranty on the part of the Company having a Material
Adverse Effect, (b) there shall have been a breach of any covenant or
agreement on the part of the Company resulting in a Material Adverse Effect or
(c) the Board shall have withdrawn or modified (including by amendment of the
Schedule 14D-9) in a manner adverse to the Offeror its approval or
recommendation of the Offer, the Merger Agreement or the Merger or shall have
recommended another offer, or shall have adopted any resolution to effect any
of the foregoing, provided that the Parent and the Offeror may not terminate
the Merger Agreement pursuant to this clause (c) if, as a result of the
Company's receipt of an Acquisition Proposal from a third party, (A) the
Company issues to its stockholders a communication that contains only the
statements permitted by Rule 14d-9(e) under the Exchange Act (and does not
otherwise withdraw, modify or amend its approval of recommendation of the
transactions contemplated by the Merger Agreement) and (B) within five
business days of issuing such communications the Company publicly reconfirms
its approval and recommendation of the transactions contemplated by the Offer,
this Agreement and the Merger; or (vii) by the Company if (a) there shall have
been a breach of any representation or warranty on the part of the Parent or
the Offeror which materially adversely affects the consummation of the Offer
or the Merger, or (b) there shall have been a material
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breach of any covenant or agreement on the part of the Parent or the Offeror
and which materially adversely affects the consummation of the Offer or the
Merger.
Termination Fee and Expenses. In the event that (i) the Parent and the
Offeror terminate the Merger Agreement pursuant to clause (vi)(a) or (vi)(b)
of the preceding paragraph, (ii) the Merger Agreement is terminated in the
manner described in clause (v)(b) or (vi)(c) of the preceding paragraph, or
(iii) an entity or group (other than the Parent or the Offeror) shall have
made and not withdrawn a proposal with respect to a Third Party Acquisition
(as defined below) and (x) the Offer shall have remained open until December
31, 1996, (y) the Minimum Condition shall not have been satisfied at such
date, and (z) within six months after December 31, 1996, a Third Party
Acquisition shall be consummated, the Company shall reimburse the Parent, the
Offeror and their affiliates (not later than one business day after submission
of statements therefor) for all actual documented out-of-pocket fees and
expenses actually and reasonably incurred by any of them or on their behalf in
connection with the Offer and the Merger and the consummation of all
transactions contemplated by the Merger Agreement (including, without
limitation, reasonable attorneys' fees, reasonable fees payable to financing
sources, investment bankers, counsel to any of the foregoing, and accountants
and filing fees and printing costs) up to the maximum sum of $1,500,000. In
the event that (i) the Company terminates the Merger Agreement pursuant to
clause (v)(b) of the preceding paragraph, (ii) the Parent and the Offeror
terminate the Merger Agreement pursuant to clause (vi)(c) of the preceding
paragraph or (iii) the consummation of a Third Party Acquisition as described
in clause (iii) of the first sentence of this paragraph, the Company shall pay
to the Offeror the amount of $14,000,000 (the "Termination Fee") as liquidated
damages immediately upon such termination or consummation of a Third Party
Acquisition as well as all amounts to which the Parent and the Offeror would
be entitled pursuant to the immediately preceding sentence.
"Third Party Acquisition" means the occurrence of any of the following
events: (i) the acquisition of the Company by merger or otherwise by any
person (which includes any partnership, limited partnership, syndicate or
other "group" (as such term is used in Section 13(d)(3) of the Exchange Act))
or entity other than the Parent, the Offeror or any affiliate thereof (a
"Third Party"); (ii) the acquisition by a Third Party of more than 50% of the
total assets of the Company and its subsidiaries; (iii) the acquisition by a
Third Party of 50% or more of the Shares, assuming conversion of outstanding
Preferred Shares in accordance with their terms; or (iv) the adoption by the
Company of a plan of liquidation or the declaration or payment of an
extraordinary dividend.
Pursuant to the Merger Agreement, in the event of the termination of the
Merger Agreement and abandonment of the Offer and the Merger, the Merger
Agreement will become void and have no effect, without any liability on the
part of any party or its affiliates, directors, officers or stockholders,
provided that a party will not be relieved from liability for any damages
arising out of any wilful or intentional breach of the Merger Agreement or
from their obligations with respect to brokers and finders, the Termination
Fee, expenses of the parties and confidentiality of information.
Costs and Expenses. Except as discussed above, the Merger Agreement provides
that all costs and expenses incurred in connection with the transactions
contemplated by the Merger Agreement shall be paid by the party incurring such
costs and expenses.
Amendments and Modifications. Subject to applicable law, at any time prior
to the Effective Time, the Merger Agreement may be amended, modified or
supplemented by a written agreement of the Parent, the Offeror and the Company
executed by duly authorized officers of the respective parties except that
after the earlier of (i) the purchase by the Offeror of a majority of the
Fully Diluted Shares and (ii) the meeting of the stockholders of the Company
to approve the Merger, the price per Share to be paid pursuant to the Merger
Agreement to the holders of the Shares may not be decreased and the form of
consideration to be received by the holders of the Shares in the Merger may
not be altered, and no other amendment which would adversely affect the
holders of Shares or Preferred Shares may be made, without approval of the
applicable holders.
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THE STOCKHOLDER AGREEMENT
Concurrently with the execution of the Merger Agreement, the Offeror and the
Parent entered into the Stockholder Agreement with the Seller Stockholders and
the Company. The Seller Stockholders own an aggregate of 1,604,043 Shares,
assuming full conversion of 800,000 Preferred Shares held by the Seller
Stockholders (representing approximately 18.2% of the Shares outstanding on
August 1, 1996 on a fully diluted basis, assuming no exercise of outstanding
Options, and 17.5% assuming the exercise of all outstanding Options). Pursuant
to the Stockholder Agreement, each Seller Stockholder has agreed to convert
all of the Preferred Shares owned by it into Shares, and to tender and sell
all Shares owned by it (including any Shares acquired upon conversion of
Preferred Shares) to the Offeror pursuant to and in accordance with the terms
of the Offer. On the date the Shares are accepted for payment and purchased by
the Offeror pursuant to the Offer, the Offeror will make payment to each
Seller Stockholder of the purchase price for such Shares, which shall be the
same purchase price per Share received by the other stockholders of the
Company in the Offer. In the event the Offer is consummated (i) on or after
September 1, 1996 but not later than September 15, 1996 or (ii) on or after
December 1, 1996 but not later than December 15, 1996, the Parent shall pay to
each Seller Stockholder cash equal to the amount of the dividend which
otherwise would be paid on September 15, 1996 or December 15, 1996, as the
case may be on any Preferred Shares owned of record by such Seller Stockholder
on the preceding September 1 or December 1, as the case may be.
Pursuant to the Stockholder Agreement, each Seller Stockholder has granted
to the Parent an irrevocable option (the "Stock Option") to purchase the
Shares and Preferred Shares owned by it (collectively, the "Option Shares") at
a purchase price per share of $35.00 and $56.00, respectively. The option
price for the Preferred Shares equals the Offer Price multiplied by the number
of Shares into which the Preferred Shares are convertible. In the event that
(i) the Company terminates the Merger Agreement for the reason that, prior to
the purchase of Shares pursuant to the Offer, a third party shall have made a
Superior Proposal and, based as to legal matters on the written advice of
outside legal counsel, the failure to terminate the Merger Agreement and
accept such offer would constitute a breach of the fiduciary duties of the
directors under applicable law, (ii) the Parent and the Offeror terminate the
Merger Agreement for the reason that the Board of Directors of the Company
shall have withdrawn or modified (including by amendment of the Schedule 14D-
9) in a manner adverse to the Offeror its approval or recommendation of the
Offer, the Merger Agreement or the Merger or shall have recommended another
offer, or shall have adopted any resolution to effect any of the foregoing or
(iii) the Offer is consummated, the Stock Option will become immediately
exercisable upon the first to occur of any such events and remain exercisable
until the date which is 60 days after the occurrence of such event (except in
the case of clause (iii) above, in which case the Stock Option shall be
exercised in full by the Parent immediately with the purchase price per Share
paid in the Offer (with the purchase price for the Preferred Shares adjusted
to an as converted basis, if appropriate) to be paid on the same business day
to the Seller Stockholders by wire transfer), but shall not be exercisable in
each case unless: (x) all waiting periods under the HSR Act required for the
purchase of Shares and Preferred Shares upon such exercise shall have expired
or been waived, with the Parent hereby agreeing to use its best efforts to
promptly cause such waiting period to be terminated, and with the HSR Act
filing for the Offer and Merger also covering full exercise of the Stock
Option and (y) there shall not then be in effect any preliminary or final
injunction or other order issued by any court or governmental, administrative
or regulatory agency or authority prohibiting the exercise of the Stock Option
pursuant to the Stockholder Agreement, provided that if such injunction or
other order has become final and nonappealable, the Stock Option shall
terminate; and provided further, that if the Stock Option is not exercisable
because the circumstances described in clauses (x) and (y) do not exist, then
the Stock Option shall be exercisable for the 10-day period commencing on the
date that the circumstances set forth in clauses (x) and (y) do exist.
Pursuant to the Stockholder Agreement, if the Parent exercises the Stock
Option pursuant to clause (i) or (ii) of the preceding paragraph and, within
one year following the termination of the Merger Agreement in accordance with
its terms, the Parent (i) transfers, sells or otherwise disposes of any or all
of the Option Shares, including without limitation, by means of a tender or
exchange of any or all of the Option Shares pursuant to a tender or exchange
offer involving the capital stock of the Company (a "Disposition"), provided
that any
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conversion of the Preferred Shares into Common Stock in accordance with their
terms shall not constitute a Disposition, (ii) converts the Option Shares into
or receives cash, capital stock, other securities or any other consideration
in or as a result of a Third Party Acquisition (as such term is defined in the
Merger Agreement), or (iii) alone or as part of a syndicate or group, other
than pursuant to the Merger Agreement, (x) acquires the Company by merger or
otherwise, (y) acquires more than 50% of the assets of the Company and its
subsidiaries, taken as a whole, or (z) acquires 50% or more of the Shares
(assuming conversion of all outstanding Preferred Shares in accordance with
their terms), the Parent shall pay to the Seller Stockholders within five days
thereafter the amount equal to the Profit (as defined below) the Parent shall
receive, if any, pursuant to a Disposition or Third Party Acquisition or the
Spread (as defined below) in the case of a transaction described in clause
(iii) above. "Profit", for purposes of the Stockholder Agreement, means the
product of (a) the number of Option Shares the Parent transfers, sells,
tenders, exchanges or otherwise disposes of pursuant to a Disposition or Third
Party Acquisition times (b) the amount of the per share consideration received
by the Parent pursuant to such Disposition or Third Party Acquisition in
excess of the purchase price of such Option Shares set forth in the preceding
paragraph (adjusted to reflect the conversion of the Preferred Shares, if
appropriate). "Spread", for purposes of the Stockholder Agreement, means the
product of (a) the aggregate number of Option Shares times (b) the amount of
the highest per share price paid by the Parent to other stockholders of the
Company in a transaction described in clause (iii) above (valuing any non-cash
consideration at its fair market value on the date of such consummation) in
excess of the purchase price of such Option Shares set forth in the preceding
paragraph (adjusted to reflect the conversion of the Preferred Shares, if
appropriate).
Pursuant to the Stockholder Agreement, the Company and certain of the Seller
Stockholders have amended the Registration Rights Agreement between the
Company and two of the Seller Stockholders (the "Registration Rights
Agreement"). The amendment provides for, among other things, demand and
"piggyback" registration rights for all of the Shares (including Shares issued
upon conversion of Preferred Shares) owned by such Seller Stockholders and
limits the holder of such shares to two demand registration requests. The
Seller Stockholders have agreed to assign all of their rights under the
Registration Rights Agreement to the Parent, such assignment to be effective
upon exercise of the Stock Option.
The Stockholder Agreement remains in effect until the earliest to occur of
(i) the date the Merger Agreement is terminated in accordance with its terms,
provided that the provisions regarding the Stock Option described above and
the restrictions on transfer described in the next succeeding paragraph shall
not terminate until 60 days thereafter (or such later time as permitted by the
Stockholder Agreement) if the Merger Agreement was terminated pursuant to
clause (i) or (ii) of the third preceding paragraph, (ii) the purchase of all
the Shares pursuant to the Offer and (iii) February 15, 1997; provided that if
the Stock Option is exercised, the provisions regarding registration rights
shall survive termination of the Stockholder Agreement.
During the term of the Stockholder Agreement, no Seller Stockholder will,
except pursuant to the terms of the Offer, (i) offer to sell, sell, pledge or
otherwise dispose of or transfer (except by operation of law in a merger or
business combination of the Company with or into any other entity or entities)
any interest in or encumber with any lien any of the Shares or Preferred
Shares, (ii) acquire any shares of Common Stock, Preferred Stock or other
securities (except for additional shares of Common Stock or securities issued
upon conversion of the Preferred Shares in accordance with their terms or as a
result of a stock dividend, stock split, recapitalization or similar event and
any such additional shares of Common Stock or securities will be deemed to
constitute Shares for purposes of the Stockholder Agreement), (iii) deposit
the Shares into a voting trust or arrangement with respect to the Shares or
grant any proxy or power of attorney with respect to the Shares or (iv) enter
into any contract, option or other arrangement or undertaking with respect to
the sale, assignment or other disposition of or transfer of any interest in or
the voting of any Shares or any other securities of the Company. In addition,
each Seller Stockholder has agreed not to initiate, solicit (including by way
of furnishing information), encourage or respond to or take any other action
knowingly to facilitate, any inquiries or the making of any proposal by any
person or entity (other than the Parent or an affiliate of the Parent) with
respect to the Company that constitutes or reasonably may be expected to lead
to, an Acquisition Proposal, or enter into or maintain or continue discussions
or negotiate with any person or entity in furtherance of such inquiries or to
obtain any Acquisition Proposal, or agree to or endorse any Acquisition
Proposal, or authorize or permit any person or entity acting on behalf of such
Seller Stockholder to do any of the foregoing.
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Pursuant to the Stockholder Agreement, beginning on the date thereof and
ending on the earlier of the termination of the Stockholder Agreement or the
last date the Stock Option is exercisable, each Seller Stockholder has agreed
to vote each Share owned by it at any annual, special or adjourned meeting of
the stockholders of the Company or execute a written consent in lieu thereof:
(i) in favor of the Merger, the execution and delivery by the Company of the
Merger Agreement and the approval and adoption of the terms thereof; (ii)
against any action or agreement that would result in a breach in any respect
of any covenant, agreement, representation or warranty of the Company under
the Merger Agreement; and (iii) against the following actions (other than the
Merger and the other transactions contemplated by the Merger Agreement): (a)
any extraordinary corporate transaction, such as a merger, consolidation or
other business combination involving the Company; (b) a sale, lease or
transfer of a material amount of assets of the Company or its subsidiaries, or
a reorganization, recapitalization, dissolution or liquidation of the Company
or its subsidiaries; and (c)(1) any change in a majority of the persons who
constitute the Board of Directors of the Company as of the date of the
Stockholder Agreement, except as contemplated by the Merger Agreement; (2) any
change in the present capitalization of the Company or any amendment of the
Company's Certificate of Incorporation or By-Laws, as amended to the date of
the Stockholder Agreement; (3) any other material change in the Company's
corporate structure or business; or (4) any other action which, in the case of
each of the matters referred to in clauses (c)(1), (2), (3) and (4), is
intended, or could reasonably be expected, to impede, interfere with, delay,
postpone, or adversely affect the Merger and the other transactions
contemplated by the Merger Agreement and the Stockholder Agreement.
THE CONFIDENTIALITY AGREEMENT
The Confidentiality Agreement contains customary provisions pursuant to
which, among other matters, the Parent agreed to keep confidential all
information concerning the Company furnished to it by the Company (the
"Evaluation Material"), to use the Evaluation Material solely for the purpose
of evaluating and negotiating a possible business combination or acquisition
transaction (a "Transaction") involving the Company, and, except in connection
with the Offer and the Merger, not to, without the prior written consent of
the Board of Directors of the Company, until May 31, 1998, acquire or offer to
acquire any securities or assets of the Company or enter into or propose to
enter into any business combination involving the Company or seek to influence
the management of the Company or interfere with the Company's employment
relationship with any person who becomes known to the Parent in connection
with a Transaction.
14. DIVIDENDS AND DISTRIBUTIONS.
The Merger Agreement provides that the Company will not, among other things,
prior to the Effective Time (i) declare, set aside or pay any dividend or make
any other distribution or payment with respect to any shares of its capital
stock, (ii) directly or indirectly redeem, purchase, or otherwise acquire any
shares of capital stock of the Company or capital stock of any of its
subsidiaries or make any commitment for any such action or (iii) split,
combine or reclassify any of its capital stock.
15. CERTAIN CONDITIONS OF THE OFFER.
Notwithstanding any other provision of the Merger Agreement or the Offer,
subject to any applicable rules and regulations of the Commission, including
Rule 14e-1(c) under the Exchange Act, the Offeror will not be required to
accept for payment, purchase or pay for any Shares of the Company tendered,
and may terminate or, subject to the terms of the Merger Agreement, amend the
Offer and may postpone the acceptance for payment of and payment for any
Shares, if prior to the expiration of the Offer:
(i) at least a majority of the outstanding Fully Diluted Shares shall not
have been validly tendered and, if tendered, not withdrawn immediately
prior to the expiration of the Offer (the "Minimum Condition"), provided
that solely for purposes of determining whether the Minimum Condition has
been satisfied, any Shares owned by the Parent or Offeror shall be deemed
to have been validly tendered and not withdrawn pursuant to the Offer;
(ii) any waiting period applicable to the Offer pursuant to the HSR Act
shall not have expired or been terminated, subject to Section 1.01(a) of
the Merger Agreement and the Offeror's obligation to extend the Offer
thereunder;
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(iii) at any time before the time of acceptance for payment for any such
Shares any of the following shall occur or exist:
(a) there shall have been instituted or be pending any action,
proceeding, application, claim or counterclaim by any government or
governmental authority or agency, domestic or foreign, before any court
or governmental regulatory or administrative agency, authority or
tribunal, domestic or foreign, challenging the acquisition by the
Parent or the Offeror of the Shares, seeking to restrain or prohibit
the making or consummation of the Offer or the Merger which could
reasonably be expected to have a Material Adverse Effect, or seeking to
obtain from the Parent or the Offeror any damages that would result in
a Material Adverse Effect (as defined below) if such were assessed
against the Company, provided that there is a reasonable likelihood
that such damages will be assessed; or
(b) there shall be any statute, rule, regulation, judgment, order or
injunction, enacted, promulgated, entered, enforced or deemed
applicable to the Offer, the Merger or the Merger Agreement, or any
other action shall have been taken by any government, governmental
authority or court with respect to a proceeding described in paragraph
(a) above, domestic or foreign, other than the routine application to
the Offer or the Merger of waiting periods under the HSR Act, that has,
or has a substantial likelihood of resulting in, any of the
consequences referred to in paragraph (a) above; or
(c) the Company shall have breached or failed to perform in any
material respect any of its obligations, covenants or agreements
contained in the Merger Agreement resulting in a Material Adverse
Effect, or any of the representations and warranties of the Company set
forth in the Merger Agreement shall have been breached when made and
such breach has a Material Adverse Effect or, except for any
representations and warranties made as of a specific date, shall have
been breached on and as of the scheduled expiration of the Offer, as it
may be extended from time to time (the "Expiration Date") and such
breach has a Material Adverse Effect (or, in the case of
representations and warranties that are specifically qualified as to
Material Adverse Effect, shall not have been true and correct when
made, or except for any representations and warranties made as of a
specific date, shall have ceased to be true and correct on and as of
the Expiration Date); or
(d) there shall have occurred (i) any general suspension of trading
in, or limitation on prices for, securities on the New York Stock
Exchange, Inc., any other national securities exchange or NASDAQ for
one full trading day (ii) the declaration of a banking moratorium or
any suspension of payments in respect of banks in the United States
(whether or not mandatory), (iii) the commencement of a war or armed
hostilities involving the United States and, with respect to this
clause (iii), having a Material Adverse Effect on or materially
adversely affecting (or materially delaying) the consummation of the
Offer; or
(e) the Merger Agreement shall have been terminated in accordance
with its terms; or
(f) prior to the purchase of Shares pursuant to the Offer, the
Company's Board of Directors shall have withdrawn or modified
(including by amendment of the Schedule 14D-9) its approval or
recommendation of the Offer, the Merger Agreement or the Merger or
shall have recommended any other merger, sale of substantially all
assets or other similar transaction, which, in the sole judgment of the
Parent in any such case, and regardless of the circumstances (including
any action or omission by the Parent) giving rise to such condition,
makes it inadvisable to proceed with such acceptance for payment except
where as a result of the Company's receipt of an unsolicited
acquisition proposal from a third party (A) the Company issues to its
stockholders a communication that contains only the statements
permitted by Rule 14d-9(e) under the Securities Exchange Act of 1934
(and does not otherwise withdraw, modify or amend its approval or
recommendation of the transactions contemplated by the Merger
Agreement) and (B) within five business days of issuing such
communication the Company publicly reconfirms its approval and
recommendation of the transactions contemplated by the Offer and the
Merger Agreement; or
(g) there shall have occurred since April 28, 1996 a change,
occurrence or circumstance in the Company's business having a Material
Adverse Effect thereon.
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For purposes of the Merger Agreement, "Material Adverse Effect" means a
material adverse effect on the business, assets, prospects, financial
condition or results of operations of the Company and its subsidiaries
considered on a consolidated basis or on the ability of the Company, the
Parent or the Offeror to consummate the transactions contemplated by the
Merger Agreement, or any event or events which individually or in the
aggregate, constitute or, with the passage of time, would constitute a
"Material Adverse Effect."
Except with respect to the obligations of the parties to use their best
efforts to cause paragraph (ii) and (iii)(a) and (b) (but only in the event
clause (b) is not satisfied due to the entry of an appealable judgment, order
or injunction), as the case may be, to be satisfied, the foregoing conditions
are for the sole benefit of the Offeror and may be asserted by the Offeror
regardless of the circumstances giving rise to any such condition and may be
waived by the Offeror, in whole or in part, at any time and from time to time,
in the sole discretion of the Offeror. The failure by the Offeror at any time
to exercise any of the foregoing rights will not be deemed a waiver of any
right, the waiver of such right with respect to any particular facts or
circumstances shall not be deemed a waiver with respect to any other facts or
circumstances, and each right will be deemed an ongoing right which may be
asserted at any time and from time to time.
Should the Offer be terminated pursuant to the foregoing provisions, all
tendered Shares not theretofore accepted for payment shall forthwith be
returned by the Depositary to the tendering stockholders.
16. CERTAIN REGULATORY AND LEGAL MATTERS.
Except as set forth in this Section, the Offeror is not aware of any
approval or other action by any governmental or administrative agency which
would be required for the acquisition or ownership of Shares by the Offeror as
contemplated herein. Should any such approval or other action be required, it
will be sought, but the Offeror has no current intention to delay the purchase
of Shares tendered pursuant to the Offer pending the outcome of any such
matter, subject, however, to the Offeror's right to decline to purchase Shares
if any of the conditions specified in Section 15 shall have occurred. There
can be no assurance that any such approval or other action, if needed, would
be obtained or would be obtained without substantial conditions, or that
adverse consequences might not result to the Company's business or that
certain parts of the Company's business might not have to be disposed of if
any such approvals were not obtained or other action taken.
Antitrust. Under the provisions of the HSR Act applicable to the Offer, the
acquisition of Shares under the Offer may be consummated only following the
expiration or early termination of the applicable waiting period under the HSR
Act.
Under the provisions of the HSR Act applicable to the purchase of Shares
pursuant to the Offer, such purchase may not be made until the expiration of a
15-calendar day waiting period following the required filing of a Notification
Report Form under the HSR Act by the Parent, which the Parent expects to
submit on August 21, 1996. Accordingly, if the Notification and Report Form is
filed on August 21, 1996, the waiting period under the HSR Act would expire at
11:59 P.M., New York City time, on September 5, 1996, unless early termination
of the waiting period is granted by the Federal Trade Commission ("FTC") and
the Department of Justice, Antitrust Division (the "Antitrust Division") or
the Parent receives a request for additional information or documentary
material prior thereto. If either the FTC or the Antitrust Division issues a
request for additional information or documentary material from the Parent
prior to the expiration of the 15-day waiting period, the waiting period will
be extended and will expire at 11:59 P.M., New York City time, on the tenth
calendar day after the date of substantial compliance by the Parent with such
request unless terminated earlier by the FTC and the Antitrust Division. If
such a request is issued, the purchase of and payment for Shares pursuant to
the Offer will be deferred until the additional waiting period expires or is
terminated. Only one extension of such waiting period pursuant to a request
for additional information or documentary material is authorized by the rules
promulgated under the HSR Act. Thereafter, the waiting period can be extended
only by court order or by consent of the Parent. Although the Company is
required to file certain information and documentary material with the
Antitrust Division and the FTC in connection with the Offer, neither the
Company's failure to make such filings nor a request to the Company from the
Antitrust Division or the FTC for additional information or documentary
material will extend the waiting period.
32
<PAGE>
The Antitrust Division and the FTC frequently scrutinize the legality under
the antitrust laws of transactions such as the Offeror's proposed acquisition
of the Company. At any time before or after the Offeror's acquisition of
Shares pursuant to the Offer, the Antitrust Division or the FTC could take
such action under the antitrust laws as either deems necessary or desirable in
the public interest, including seeking to enjoin the purchase of Shares
pursuant to the Offer or the consummation of the Merger or seeking the
divestiture of Shares acquired by the Offeror or the divestiture of
substantial assets of the Company or its subsidiaries or the Parent or its
subsidiaries. Private parties and states Attorneys General may also bring
legal action under the antitrust laws under certain circumstances. There can
be no assurance that a challenge to the Offer on antitrust grounds will not be
made, or, if such a challenge is made, of the result thereof. See Section 15.
If the Antitrust Division, the FTC, a state or a private party raises
antitrust concerns in connection with a proposed transaction, the Offeror may
engage in negotiations with the relevant governmental agency or party
concerning possible means of addressing these issues and may delay
consummation of the Offer or the Merger while such discussions are ongoing.
Both the Parent and the Company have agreed to use their respective best
efforts to resolve any antitrust issues.
State Takeover Laws. The Company is incorporated under the laws of the State
of Delaware. In general, Section 203 of the DGCL prevents an "interested
stockholder" (e.g. a person who owns or has the right to acquire 15% or more
of a corporation's outstanding voting stock) from engaging in a "business
combination" (defined to include mergers and certain other transactions) with
a Delaware corporation for a period of three years following the time such
person became an interested stockholder unless, among other things, the
corporation's board of directors approves such business combination or the
transaction in which the interested stockholder becomes such prior to the time
the interested stockholder becomes such. The Board of Directors of the Company
has approved the Offer, the Merger, the Merger Agreement and the Stockholder
Agreement for the purposes of Section 203 of the DGCL. A number of other
states have adopted laws and regulations applicable to attempts to acquire
securities of corporations which are incorporated, or have substantial assets,
stockholders, principal executive offices or principal places of business, or
whose business operations otherwise have substantial economic effects in such
states. In Edgar v. MITE Corp., the Supreme Court of the United States
invalidated on constitutional grounds the Illinois Business Takeover statute,
which, as a matter of state securities law, made takeovers of corporations
meeting certain requirements more difficult. However in 1987, in CTS Corp. v.
Dynamics Corp. of America, the Supreme Court held that the State of Indiana
may, as a matter of corporate law and, in particular, with respect to those
aspects of corporate law concerning corporate governance, constitutionally
disqualify a potential acquiror from voting on the affairs of a target
corporation without the prior approval of the remaining presenting
stockholders. The state law before the Supreme Court was by its terms
applicable only to corporations that had a substantial number of stockholders
in the state and were incorporated there.
Except as described above with respect to Section 203 of the DGCL, the
Offeror has not attempted to comply with the takeover laws of any other state.
Should any person seek to apply any state takeover law, the Offeror will take
such action as then appears desirable, which may include challenging the
validity or applicability of any such statute in appropriate court
proceedings. In the event it is asserted that one or more state takeover laws
is applicable to the Offer or the Merger, and an appropriate court does not
determine that it is inapplicable or invalid as applied to the Offer, the
Offeror might be required to file certain information with, or receive
approvals from, the relevant state authorities. In addition, if enjoined, the
Offeror might be unable to accept for payment any Shares tendered pursuant to
the Offer, or be delayed in continuing or consummating the Offer and the
Merger. In such case, the Offeror may not be obligated to accept for payment
any Shares tendered. See Section 15.
Appraisal Rights. Holders of the Shares do not have appraisal rights as a
result of the Offer. However, if the Merger is consummated, holders of the
Shares at the time of the Merger will have certain rights pursuant to the
provisions of Section 262 of the DGCL to dissent and demand appraisal of their
Shares. Under Section 262,
33
<PAGE>
dissenting stockholders who comply with the applicable statutory procedures
will be entitled to receive a judicial determination of the fair value of
their Shares (exclusive of any element of value arising from the
accomplishment or expectation of the Merger) and to receive payment of such
fair value in cash, together with a fair rate of interest, if any. Any such
judicial determination of the fair value of the Shares could be based upon
factors other than, or in addition to, the price per share to be paid in the
Merger or the market value of the Shares. The value so determined could be
more or less than the price per share to be paid in the Merger. See Annex II.
Going Private Transactions. The Commission has adopted Rule 13e-3 under the
Exchange Act which is applicable to certain "going private" transactions and
which may under certain circumstances be applicable to the Merger or any other
merger involving the Company. However, Rule 13e-3 would be inapplicable if (a)
the Shares are deregistered under the Exchange Act prior to any such merger or
(b) any such merger is consummated within one year after the purchase of the
Shares pursuant to the Offer and such merger provides for stockholders to
receive cash for their Shares in an amount at least equal to the amount paid
per Share in the Offer. If applicable, Rule 13e-3 requires, among other
things, that certain financial information concerning the fairness of the
proposed transaction and the consideration offered to minority stockholders in
such transaction be filed with the Commission and disclosed to stockholders
prior to the consummation of the transaction.
Legal Proceedings. The Offeror is not aware of any pending or overtly
threatened legal proceedings which would affect the Offer or the Merger. If
any such matters were to arise, the Merger Agreement provides that, under
certain circumstances, the Offeror could decline to accept for payment or pay
for any Shares tendered in the Offer. See Section 15.
17. FEES AND EXPENSES.
The Parent and the Offeror have engaged Merrill as the Dealer Manager in
connection with the Offer. In addition, Merrill is acting as financial advisor
to the Parent and the Offeror in connection with the proposed acquisition of
the Company. In consideration for these services the Parent and the Offeror
have agreed to pay Merrill a fee equal to $2,900,000 (of which $250,000 became
payable upon execution of the Merger Agreement) contingent upon and payable at
the consummation of the Merger. The Offeror also has agreed to reimburse
Merrill for its expenses, including reasonable counsel fees, and to indemnify
it against certain liabilities and expenses, including certain liabilities
under the federal securities laws.
The Offeror has retained D.F. King & Co., Inc. as Information Agent and
ChaseMellon Shareholder Services, L.L.C. as Depositary in connection with the
Offer. The Information Agent and the Depositary will receive reasonable and
customary compensation for their services hereunder and reimbursement for
their reasonable out-of-pocket expenses. The Information Agent and the
Depositary will also be indemnified by the Offeror against certain liabilities
in connection with the Offer.
Neither the Offeror nor the Parent, nor any officer, director, stockholder,
agent or other representative of the Offeror or the Parent, will pay any fees
or commissions to any broker, dealer or other person (other than the
Information Agent and the Dealer Manager) for soliciting tenders of Shares
pursuant to the Offer. Brokers, dealers, commercial banks and trust companies
and other nominees will, upon request, be reimbursed by the Offeror for
customary mailing and handling expenses incurred by them in forwarding
materials to their customers.
18. MISCELLANEOUS.
The Offer is not being made to, nor will tenders be accepted from or on
behalf of, holders of Shares residing in any jurisdiction in which the making
or acceptance thereof would not be in compliance with the securities, blue sky
or other laws of such jurisdiction. In any jurisdiction where the securities,
blue sky or other laws require the Offer to be made by a licensed broker or
dealer, the Offer shall be deemed to be made on behalf of the Offeror by one
or more registered brokers or dealers licensed under the laws of such
jurisdiction.
34
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF THE OFFEROR OTHER THAN AS CONTAINED IN THIS OFFER
TO PURCHASE OR IN THE LETTER OF TRANSMITTAL, AND, IF ANY SUCH INFORMATION OR
REPRESENTATION IS GIVEN OR MADE, IT SHOULD NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE OFFEROR.
The Offeror and the Parent have filed with the Commission the Schedule 14D-
1, pursuant to Section 14(d)(1) of the Exchange Act and Rule 14d-1 promulgated
thereunder, furnishing certain information with respect to the Offer. Such
Schedule 14D-1 and any amendments thereto, including exhibits, may be examined
and copies may be obtained at the same places and in the same manner as set
forth with respect to the Company in Section 8 (except that they will not be
available at the regional offices of the Commission).
GROVE ACQUISITION CORP.
August 21, 1996
35
<PAGE>
ANNEX I
CERTAIN INFORMATION CONCERNING THE DIRECTORS AND EXECUTIVE
OFFICERS OF PARENT AND THE OFFEROR
1. DIRECTORS AND EXECUTIVE OFFICERS OF THE PARENT. The names, present
principal occupation or employment, and material occupations, positions,
offices, or employments during the last five years of each director and
executive officer of Sears, Roebuck and Co. are set forth below. Unless
otherwise noted, the officers and directors have held the positions indicated
below with the Parent for the last five years or have served the Parent in
various administrative or executive capacities for at least that long. The
business address of each person listed below is 3333 Beverly Road, Hoffman
Estates, Illinois 60179, and each person is a citizen of the United States.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
POSITION WITH THE PARENT AND FIVE-YEAR EMPLOYMENT
DIRECTORS HISTORY
- --------- -------------------------------------------------
<S> <C>
Hall Adams, Jr................... Director since 1993. Chairman of the Board and Chief
Executive Officer of Leo Burnett Company, Inc.
(advertising agency) from January 1987 until his
retirement on January 1, 1992, Mr. Adams is also a
director of The Dun & Bradstreet Corporation and
McDonald's Corporation and a Trustee of Rush-
Presbyterian St. Luke's Medical Center.
Warren L. Batts.................. Director since 1986. Chairman of Premark International,
Inc. (consumer and commercial products) since September
1986 and Chairman and Chief Executive Officer of
Tupperware Corporation since June 1996, Mr. Batts is
also a director of Premark International, Inc.,
Tupperware Corporation, The Allstate Corporation,
Cooper Industries, Inc. and Sprint Corporation. He is
also a Trustee of the Art Institute of Chicago,
Children's Memorial Hospital of Chicago and
Northwestern University.
Alston D. Correll................ Director since 1996. Chairman and Chief Executive
Officer of Georgia-Pacific Corp. since December 1993;
President and Chief Operating Officer of Georgia-
Pacific Corp. from 1991 to 1993, Mr. Correll is also a
Director of Trust Company of Georgia and The Southern
Company.
James W. Cozad................... Director since 1993. Chairman and Chief Executive
Officer of Whitman Corporation (a diversified consumer
and commercial products company) from January 1990
until his retirement on May 9, 1992, Mr. Cozad is also
a director of Eli Lilly and Company, GATX Corporation,
Inland Steel Industries, Inc., Inland Steel Company,
and Whitman Corporation. He is also President of the
Lyric Opera of Chicago, a director of the Indiana
University Foundation and a Life Trustee of the
Northwestern Memorial Hospital Corporation.
Arthur C. Martinez............... Director since 1995. Chairman of the Board, President
and Chief Executive Officer of the Parent since August
1995 and Chairman and Chief Executive Officer of the
former Merchandise Group of the Parent from September
1992 until August 1995, Mr. Martinez previously served
as Vice Chairman and a director of Saks Fifth Avenue
from August 1990 to August 1992. Mr. Martinez is a
member of the board of directors of Ameritech
Corporation, the Federal Reserve Bank of Chicago and
Northwestern Memorial Hospital and is a trustee of
Northwestern University, the Orchestral Association of
the Chicago Symphony Orchestra and the Art
</TABLE>
I-1
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
POSITION WITH THE PARENT AND FIVE-YEAR EMPLOYMENT
DIRECTORS HISTORY
- --------- -------------------------------------------------
<S> <C>
Institute of Chicago. Mr. Martinez serves as chairman
of the National Minority Supplier Development Council,
Inc. (NMSDC) and is Chairman of the Board of Trustees
of Polytechnic University.
Michael A. Miles................. Director since 1992. Chairman of the Board and Chief
Executive Officer of Philip Morris Companies Inc. (a
holding company engaged primarily in the manufacture
and sale of various consumer products) from September
1991 until his retirement in July 1994, Mr. Miles
served as Deputy Chairman of Philip Morris Companies
Inc. from April 1991 to August 1991. Mr. Miles is a
Special Limited Partner of Forstmann Little & Co. (a
New York investment firm with interests in electronics,
aerospace, publishing and other industries). He is also
a director of The Allstate Corporation, Dean Witter,
Discover & Co., Dell Computer Corp. and Time Warner
Inc. and a member of the International Advisory
Committee of Chase Manhattan Bank. Mr. Miles is also a
Trustee of Northwestern University.
Richard C. Notebaert............. Director since 1996. Chairman of the Board, President
and Chief Executive Officer of Ameritech Corporation
(telephone, data and video communications company)
since April 1994. Mr. Notebaert served as President and
Chief Executive Officer of Ameritech from January 1994
to April 1994, as President and Chief Operating Officer
from June 1993 to January 1994 and as Vice Chairman
from January 1993 to June 1993. He served as President
of Ameritech Services, Inc. (a wholly-owned subsidiary
of Ameritech's five state telephone companies) from
June 1992 to January 1993, as President of Ameritech's
Indiana Bell subsidiary from 1989 to 1992 and as
President of Ameritech Mobile Communications, Inc. from
1986 to 1989. Mr. Notebaert is a trustee of
Northwestern University and the Chicago Symphony
Orchestra and is a member of The Chicago Council on
Foreign Relations, the Civic Committee of The
Commercial Club of Chicago, The Economic Club of
Chicago, The Business Roundtable, The Council on
Competitiveness, The Committee for Economic Development
and The Business Council.
Nancy C. Reynolds................ Director since 1982. Senior Consultant to The Wexler
Group, a unit of Hill and Knowlton, Inc., since August
1992, Mrs. Reynolds was Vice Chairman of The Wexler
Group and Senior Vice President of Hill and Knowlton
Public Affairs Worldwide (a public affairs consulting
firm in Washington, D.C.) from August 1990 until August
1992. Mrs. Reynolds is also a director of The Allstate
Corporation, Norrell Corporation, The Wackenhut
Corporation, The National Park Foundation, The Central
Africa Foundation-USA and a Trustee of The
Smithsonian's National Museum of the American Indian.
Clarence B. Rogers, Jr........... Director since 1980. Chairman of the Board of Equifax
Inc. (information-based administrative services) since
January 1996 and Chairman and Chief Executive Officer
of Equifax Inc. from October 1992 until December 1995.
Mr. Rogers was President and
</TABLE>
I-2
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
POSITION WITH THE PARENT AND FIVE-YEAR EMPLOYMENT
DIRECTORS HISTORY
- --------- -------------------------------------------------
<S> <C>
Chief Executive Officer of Equifax Inc. from October
1989 until October 1992. He is also a director of
Briggs & Stratton Corporation, Dean Witter, Discover &
Co., Equifax Canada Inc., Oxford Industries, Inc. and
Teleport Communications Group, Inc.
Donald H. Rumsfeld............... Director since 1977. Mr. Rumsfeld is currently in
private business and serves as Chairman of the Board of
Trustees of the RAND Corporation. He served as
Chairman, President and Chief Executive Officer of
General Instrument Corporation (an electronics company)
from October 1990 until August 1993. Mr. Rumsfeld was
senior advisor to William Blair & Co. (an investment
banking firm) from October 1985 until October 1990.
From 1977 to 1985, he served as CEO of G.D. Searle &
Co. He is also a director of The Allstate Corporation,
Amylin Pharmaceuticals Inc., Gilead Sciences, Inc.,
Kellogg Company, Metricom, Inc. and Tribune Company.
Mr. Rumsfeld served as Personal Representative of the
President of the United States in the Middle East from
November 1983 to May 1984 and was on leave of absence
as a director during that period. Prior to joining
Searle, Mr. Rumsfeld served in a variety of U.S.
Government posts from 1957 to 1977, including U.S.
Congress, Ambassador to NATO, White House Chief of
Staff and Secretary of Defense.
Dorothy A. Terrell............... Director since 1995. President of SunExpress, Inc.
(operating company of Sun Microsystems, Inc., a leading
supplier of open network computing products and
services) and Corporate Executive Officer of Sun
Microsystems, Inc. since August, 1991. Ms. Terrell
previously served as a Group Manager in Digital
Equipment Corporation from October, 1987 to July, 1991.
She is a member of the board of directors of General
Mills, Inc., Massachusetts Technology Development
Corporation and The Computer Museum. Her professional
affiliations include The Boston Club and the
Massachusetts Governor's Council on Economic Growth and
Technology.
</TABLE>
I-3
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
POSITION WITH THE PARENT AND FIVE-YEAR EMPLOYMENT
EXECUTIVE OFFICERS HISTORY
- ------------------ -------------------------------------------------
<S> <C>
Paul A. Baffico.................. President, Automotive Group and Tire Division since
1992.
John H. Costello................. Senior Executive Vice President, General Manager,
Marketing since April 1993; prior to joining the Parent
he was President of Nielsen Marketing Research USA.
Gary L. Crittenden............... Executive Vice President, Strategy and Business
Development since 1996; prior to joining the Parent he
had been Senior Vice President and Chief Financial
Officer of Melville Corporation (a diversified
specialty retailer) since 1994 and Executive Vice
President and Chief Financial Officer of Filene's
Basement from 1991 to 1994.
Russell S. Davis................. Executive Vice President since 1990.
Steven D. Goldstein.............. President, Credit and Chairman of Sears National Bank
since April 1996; prior to joining the Parent he had
been Chairman and Chief Executive Officer of American
Express Bank from April 1991 to February 1996.
Alan J. Lacy..................... Executive Vice President and Chief Financial Officer
since January 1, 1995; prior to joining the Parent he
had been Vice President, Financial Services and Systems
of Philip Morris Companies, Inc. and President of
Philip Morris Capital Corporation since September 1993,
and Senior Vice President of Kraft General Foods in
charge of finance, strategy and development matters
from September 1989 to September 1993.
Michael D. Levin................. Senior Vice President and General Counsel since January
1996; Secretary of the Parent since March 1, 1996;
partner in the law firm of Latham & Watkins from 1982
to 1996.
Robert L. Mettler................ President, Apparel and Home Fashions Group, Office of
the President of Mall Stores since February 1993; prior
to joining the Parent he had been President and Chief
Executive Officer of Robinson's Inc.
William G. Pagonis............... Executive Vice President, Logistics since November
1993; prior to joining the Parent he had been a
Lieutenant General in the U.S. Army.
Anthony J. Rucci................. Executive Vice President, Administration since October
1993; prior to joining the Parent he had been Senior
Vice President, Strategy, Business Development and
External Affairs and Senior Vice President, Human
Resources, of Baxter International, Inc.
William L. Salter................ President, Hardlines, Office of the President of Mall
Stores since 1995.
Marvin M. Stern.................. President, Home Stores since 1988.
Allan B. Stewart................. President, Retail Stores, Office of the President of
Mall Stores since 1984.
Jane J. Thompson................. President, Home Services and Acting Executive Vice
President, Credit since 1988.
</TABLE>
I-4
<PAGE>
2. DIRECTORS AND EXECUTIVE OFFICERS OF THE OFFEROR. Unless otherwise
indicated, each person identified below has been employed by the Parent for
the last five years and all information concerning the current business
address, present principal occupation or employment and five-year employment
history for each person is the same as the information given above. In
addition to holding the offices indicated, all persons listed below are also
directors of the Offeror. All persons listed below are citizens of the United
States.
<TABLE>
<S> <C>
Arthur C. Martinez.. President and Chief Executive Officer
Alan J. Lacy........ Executive Vice President and Chief Financial Officer
Gary L. Crittenden.. Executive Vice President and Treasurer
Anthony J. Rucci.... Executive Vice President
Michael D. Levin.... Senior Vice President and Secretary
</TABLE>
<PAGE>
ANNEX II
Set forth below is Section 262 of the General Corporation Law of the State
of Delaware regarding appraisal rights, which rights will only be available in
connection with the Merger.
SECTION 262 OF THE GENERAL CORPORATION LAW OF THE STATE OF DELAWARE
262 APPRAISAL RIGHTS--(a) Any stockholder of a corporation of this State who
holds shares of stock on the date of the making of a demand pursuant to
subsection (d) of this section with respect to such shares, who continuously
holds such shares through the effective date of the merger or consolidation,
who has otherwise complied with subsection (d) of this section and who has
neither voted in favor of the merger or consolidation nor consented thereto in
writing pursuant to 228 of this title shall be entitled to an appraisal by the
Court of Chancery of the fair value of his shares of stock under the
circumstances described in subsections (b) and (c) of this section. As used in
this section, the word "stockholder" means a holder of record of stock in a
stock corporation and also a member of record of a nonstock corporation; the
words "stock" and "share" mean and include what is ordinarily meant by those
words and also membership or membership interest of a member of a nonstock
corporation; and the words "depository receipt" mean a receipt or other
instrument issued by a depository representing an interest in one or more
shares, or fractions thereof, solely of stock of a corporation, which stock is
deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to
be effected pursuant to (S) 251 (other than a merger effected pursuant to
subsection (g) of (S) 251), 252, 254, 257, 258, 263 or 264 of this title:
(1) Provided, however, that no appraisal rights under this section shall
be available for the shares of any class or series of stock, which stock,
or depository receipts in respect thereof, at the record date fixed to
determine the stockholders entitled to receive notice of and to vote at the
meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the holders of the surviving corporation as
provided in subsection (f) of (S) 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to (S)
251, 252, 254, 257, 258, 263 and 264 of this title to accept for such stock
anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect
thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock or depository receipts at the
effective date of the merger or consolidation will be either listed on
a national securities exchange or designated as a national market
system security on an interdealer quotation system by the National
Association of Securities Dealers, Inc. or held of record by more than
2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.
II-1
<PAGE>
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under 253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall
be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets
of the corporation. If the certificate of incorporation contains such a
provision, the procedures of this section, including those set forth in
subsections (d) and (e) of this section, shall apply as nearly as is
practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting,
shall notify each of its stockholders who was such on the record date for
such meeting with respect to shares for which appraisal rights are
available pursuant to subsections (b) or (c) hereof that appraisal rights
are available for any or all of the shares of the constituent corporations,
and shall include in such notice a copy of this section. Each stockholder
electing to demand the appraisal of his shares shall deliver to the
corporation, before the taking of the vote on the merger or consolidation,
a written demand for appraisal of his shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the
appraisal of his shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder electing to
take such action must do so by a separate written demand as herein
provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become
effective; or
(2) If the merger or consolidation was approved pursuant to Section 228 or
Section 253 of this title, each constituent corporation, either before the
effective date of the merger or consolidation or within ten days thereafter,
shall notify each of the holders of any class or series of stock of such
constituent corporation who are entitled to appraisal rights of the approval
of the merger or consolidation and that appraisal rights are available for any
or all shares of such class or series of stock of such constituent
corporation, and shall include in such notice a copy of this section, provided
that, if the notice is given on or after the effective date of the merger or
consolidation, such notice shall be given by the surviving or resulting
corporation to all such holders of any class or series of stock of a
constituent corporation that are entitled to appraisal rights. Such notice
may, and, if given on or after the effective date of the merger or
consolidation, shall, also notify such stockholders of the effective date of
the merger or consolidation. Any stockholder entitled to appraisal rights may,
within twenty days after the date of mailing of such notice, demand in writing
from the surviving or resulting corporation the appraisal of such holder's
shares. Such demand will be sufficient if it reasonably informs the
corporation of the identity of the stockholder and that the stockholder
intends thereby to demand the appraisal of such holder's shares. If such
notice did not notify stockholders of the effective date of the merger or
consolidation, either (i) each such constituent corporation shall send a
second notice before the effective date of the merger or consolidation
notifying each of the holders of any class or series of stock of such
constituent corporation that are entitled to appraisal rights of the effective
date of the merger or consolidation or (ii) the surviving or resulting
corporation shall send such a second notice to all such holders on or within
10 days after such effective date; provided, however, that if such second
notice is sent more than 20 days following the sending of the first notice,
such second notice need only be sent to each stockholder who is entitled to
appraisal rights and who has demanded appraisal of such holder's shares in
accordance with this subsection. An affidavit of the secretary or assistant
secretary or of the transfer agent of the corporation that is required to give
either notice that such notice has been given shall, in the absence of fraud,
be prima facie evidence of the facts stated therein. For purposes of
determining the stockholders entitled to receive either notice, each
constituent corporation may fix, in advance, a
II-2
<PAGE>
record date that shall be not more than 10 days prior to the date the notice
is given; provided that, if the notice is given on or after the effective date
of the merger or consolidation, the record date shall be such effective date.
If no record date is fixed and the notice is given prior to the effective
date, the record date shall be the close of business on the day next preceding
the day on which the notice is given.
(e) Within 120 days after the effective date of the merger or consolidation,
the surviving or resulting corporation or any stockholder who has complied
with subsections (a) and (d) hereof and who is otherwise entitled to appraisal
rights, may file a petition in the Court of Chancery demanding a determination
of the value of the stock of all such stockholders. Notwithstanding the
foregoing, at any time within 60 days after the effective date of the merger
or consolidation, any stockholder shall have the right to withdraw his demand
for appraisal and to accept the terms offered upon the merger or
consolidation. Within 120 days after the effective date of the merger or
consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not
voted in favor of the merger or consolidation and with respect to which
demands for appraisal have been received and the aggregate number of holders
of such shares. Such written statement shall be mailed to the stockholder
within 10 days after his written request for such a statement is received by
the surviving or resulting corporation or within 10 days after expiration of
the period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a copy
thereof shall be made upon the surviving or resulting corporation, which shall
within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the
addresses therein stated. Such notice shall also be given by 1 or more
publications at least 1 week before the day of the hearing, in a newspaper of
general circulation published in the City of Wilmington, Delaware or such
publication as the Court deems advisable. The forms of the notices by mail and
by publication shall be approved by the Court, and the costs thereof shall be
borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled
to appraisal rights. The Court may require the stockholders who have demanded
an appraisal for their shares and who hold stock represented by certificates
to submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as
to such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any
element of value arising from the accomplishment or expectation of the merger
or consolidation, together with a fair rate of interest, if any, to be paid
upon the amount determined to be the fair value. In determining such fair
value, the Court shall take into account all relevant factors. In determining
the fair rate of interest, the Court may consider all relevant factors,
including the rate of interest which the surviving or resulting corporation
would have had to pay to borrow money during the pendency of the proceeding.
Upon application by the surviving or resulting corporation or by any
stockholder entitled to participate in the appraisal proceeding, the Court
may, in its discretion, permit discovery or other pretrial proceedings and may
proceed to trial upon the appraisal prior to the final determination of the
stockholder entitled to an appraisal. Any stockholder whose name appears on
the list filed by the surviving or resulting corporation pursuant to
subsection (f) of this section and who has submitted his certificates of stock
to the Register in Chancery, if such is required, may participate fully in all
proceedings until it is finally determined that he is not entitled to
appraisal rights under this section.
II-3
<PAGE>
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to
the stockholders entitled thereto. Interest may be simple or compound, as the
Court may direct. Payment shall be so made to each such stockholder, in the
case of holders of uncertificated stock forthwith, and the case of holders of
shares represented by certificates upon the surrender to the corporation of
the certificates representing such stock. The Court's decree may be enforced
as other decrees in the Court of Chancery may be enforced, whether such
surviving or resulting corporation be a corporation of this State or of any
state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection
(d) of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation);
provided, however, that if no petition for an appraisal shall be filed within
the time provided in subsection (e) of this section, or if such stockholder
shall deliver to the surviving or resulting corporation a written withdrawal
of his demand for an appraisal and an acceptance of the merger or
consolidation, either within 60 days after the effective date of the merger or
consolidation as provided in subsection (e) of this section or thereafter with
the written approval of the corporation, then the right of such stockholder to
an appraisal shall cease. Notwithstanding the foregoing, no appraisal
proceeding in the Court of Chancery shall be dismissed as to any stockholder
without the approval of the Court, and such approval may be conditioned upon
such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which the shares
of such objecting stockholders would have been converted had they assented to
the merger or consolidation shall have the status of authorized and unissued
shares of the surviving or resulting corporation.
II-4
<PAGE>
Facsimile copies of the Letter of Transmittal will be accepted. The Letter of
Transmittal and certificates for Shares and any other required documents should
be sent or delivered by each stockholder of the Company or his broker, dealer,
commercial bank, trust company or other nominee to the Depositary at one of the
addresses set forth below:
The Depositary for the Offer is:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
----------------
Facsimile Transmission:
(201) 329-8936
Confirm by Telephone:
(201) 296-4209
By Mail:
By Hand or Overnight Delivery:
Midtown Station 120 Broadway, 13th Floor
P.O. Box 798 New York, New York 10271
New York, New York 10018 Attn: Reorganization Department
Attn: Reorganization Department
Any questions or requests for assistance or additional copies of the Offer to
Purchase and the Letter of Transmittal and Notice of Guaranteed Delivery may be
directed to the Dealer Manager or the Information Agent at their respective
telephone numbers and locations listed below. Stockholders may also contact
their broker, dealer, commercial bank, trust company or other nominee for
assistance concerning the Offer.
THE DEALER MANAGER FOR THE OFFER IS:
MERRILL LYNCH & CO.
World Financial Center
North Tower
New York, New York 10281
(212) 236-4565 (call collect)
THE INFORMATION AGENT FOR THE OFFER IS:
D.F. KING & CO., INC.
77 Water Street
New York, New York 10005
Toll Free (800) 848-3405
Banks and Brokerage Firms, please call:
(212) 269-5550
<PAGE>
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
OF
ORCHARD SUPPLY HARDWARE STORES CORPORATION
PURSUANT TO THE OFFER TO PURCHASE
DATED AUGUST 21, 1996
OF
GROVE ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY OF
SEARS, ROEBUCK AND CO.
THIS OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON WEDNESDAY, SEPTEMBER 18, 1996, UNLESS THE OFFER IS EXTENDED.
The Depositary for the Offer is:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
By Hand Delivery or Overnight By Mail:
Delivery: Midtown Station
P.O. Box 798
120 Broadway-13th Fl. New York, NY 10018
New York, NY 10271
Attention: Reorganization Dept.
Attention: Reorganization Dept.
By Facsimile Transmission:
(201) 329-8936
For Confirmation of Facsimile Transmission:
(201) 296-4209
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION OTHER THAN AS
SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
DESCRIPTION OF SHARES TENDERED
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S)A
(PLEASE FILL IN, IF BLANK, EXACTLY AS
NAME(S) SHARE CERTIFICATE(S) AND SHARE(S) TENDERED
APPEAR(S) ON SHARE CERTIFICATE(S)) (ATTACH ADDITIONAL LIST, IF NECESSARY)
------------------------------------------------------------------------------------------------------
TOTAL NUMBER
OF SHARES
SHARE EVIDENCED BY NUMBER OF
CERTIFICATE SHARE SHARES
NUMBER(S)* CERTIFICATE(S) TENDERED**
-------------------------------------------------------------------
-------------------------------------------------------------------
-------------------------------------------------------------------
-------------------------------------------------------------------
-------------------------------------------------------------------
-------------------------------------------------------------------
<S> <C> <C> <C>
TOTAL SHARES
</TABLE>
- -------------------------------------------------------------------------------
*Need not be completed by stockholders delivering Shares by book-
entry transfer.
** Unless otherwise indicated, it will be assumed that all Shares
evidenced by each Share Certificate delivered to the Depositary
are being tendered hereby. See Instruction 4.
<PAGE>
This Letter of Transmittal is to be completed by stockholders of Orchard
Supply Hardware Stores Corporation (the "Company") if certificates are to be
forwarded herewith or, unless an Agent's Message (as defined in the Offer to
Purchase) is utilized, if delivery of Shares (as defined below) is to be made
by book-entry transfer to the Depositary's account at The Depository Trust
Company ("DTC") or the Philadelphia Depository Trust Company ("PDTC")
(hereinafter collectively referred to as the "Book-Entry Transfer Facilities")
pursuant to the procedures set forth in Section 3 of the Offer to Purchase (as
defined below).
Stockholders whose certificates representing Shares (each a "Share
Certificate") are not immediately available or who cannot deliver their Share
Certificate and all other documents required hereby to the Depositary by the
Expiration Date (as defined in the Offer to Purchase), or who cannot comply
with the book-entry transfer procedures on a timely basis, may nevertheless
tender their Shares pursuant to the guaranteed delivery procedure set forth in
Section 3 of the Offer to Purchase. See Instruction 2. Delivery of documents
to a Book-Entry Transfer Facility does not constitute delivery to the
Depositary.
THE COMPANY AGREES THAT THIS LETTER OF TRANSMITTAL SHALL SERVE AS A
"NOTICE OF CONVERSION" IN ACCORDANCE WITH SECTION 6(C) OF THE CERTIFICATE
OF DESIGNATION OF RIGHTS AND PREFERENCES OF THE 6% CUMULATIVE CONVERTIBLE
PREFERRED STOCK, $.01 PAR VALUE PER SHARE, OF THE COMPANY (THE "PREFERRED
SHARES"), WITH RESPECT TO ANY AND ALL PREFERRED SHARES TENDERED WITH THIS
LETTER OF TRANSMITTAL. BY EXECUTING THIS LETTER OF TRANSMITTAL, EACH OWNER
OF PREFERRED SHARES HEREBY INSTRUCTS CHASEMELLON SHAREHOLDER SERVICES,
L.C.C., IN ITS CAPACITY AS TRANSFER AGENT, TO CONVERT SUCH PREFERRED SHARES
TO SHARES AND TO TENDER SUCH SHARES TO THE DEPOSITARY IN ACCORDANCE WITH
THE NOTICE AND AGREEMENT REGARDING CONVERSION AND TENDER SET FORTH AS AN
EXHIBIT TO THE SCHEDULE 14D-1.
[_] CHECK HERE IF SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO THE
DEPOSITARY'S ACCOUNT AT ONE OF THE BOOK-ENTRY TRANSFER FACILITIES AND
COMPLETE THE FOLLOWING:
Name of Tendering Institution _______________________________________________
Check Box of Applicable Book-Entry Transfer Facility:
(check one)
[_] DTC [_] PDTC
Account Number ____________________________________________________________
Transaction Code Number ___________________________________________________
[_] CHECK HERE IF SHARES ARE BEING TENDERED PURSUANT TO A NOTICE OF GUARANTEED
DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s) _____________________________________________
Window Ticket No. (if any) __________________________________________________
Date of Execution of Notice of Guaranteed Delivery __________________________
Name of Institution which Guaranteed Delivery _______________________________
<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The undersigned hereby tenders to Grove Acquisition Corp., a Delaware
corporation (the "Offeror"), and a wholly owned subsidiary of Sears, Roebuck
and Co., a New York corporation (the "Parent"), the above-described shares of
common stock, $.01 par value per share (the "Shares"), of Orchard Supply
Hardware Stores Corporation, a Delaware corporation (the "Company"), pursuant
to the Offeror's offer to purchase all of the outstanding Shares at a purchase
price of $35.00 per Share, net to the seller in cash, without interest, upon
the terms and subject to the conditions set forth in the Offer to Purchase,
dated August 21, 1996 (the "Offer to Purchase"), receipt of which is hereby
acknowledged, and in this Letter of Transmittal (which together with the Offer
to Purchase constitute the "Offer"). The Offer is being made in connection
with the Agreement and Plan of Merger, dated as of August 14, 1996, among the
Parent, the Offeror and the Company.
Subject to and effective upon acceptance for payment of and payment for the
Shares tendered herewith, the undersigned hereby sells, assigns and transfers
to or upon the order of the Offeror all right, title and interest in and to
all the Shares that are being tendered hereby and any and all other Shares or
other securities issued or issuable in respect thereof on or after August 14,
1996 (a "Distribution") and appoints the Depositary the true and lawful agent
and attorney-in-fact of the undersigned with respect to such Shares (and any
Distributions), with full power of substitution (such power of attorney being
deemed to be an irrevocable power coupled with an interest), to (a) deliver
Share certificates (and any Distributions), or transfer ownership of such
Shares (and any Distributions) on the account books maintained by any of the
Book-Entry Transfer Facilities, together, in any such case, with all
accompanying evidences of transfer and authenticity, to or upon the order of
the Offeror, (b) present such Shares (and any Distributions) for transfer on
the books of the Company and (c) receive all benefits and otherwise exercise
all rights of beneficial ownership of such Shares (and any Distributions), all
in accordance with the terms of and subject to the conditions to the Offer.
The undersigned hereby irrevocably appoints designees of the Offeror as the
attorneys and proxies of the undersigned, each with full power of
substitution, to exercise all voting and other rights of the undersigned in
such manner as each such attorney and proxy or his substitute shall in his
sole judgment deem proper, with respect to all of the Shares tendered hereby
which have been accepted for payment by the Offeror prior to the time of any
vote or other action (and any Distributions), at any meeting of stockholders
of the Company (whether annual or special and whether or not an adjourned
meeting) or otherwise. This power of attorney and proxy are irrevocable, are
coupled with an interest in the Shares tendered hereby, and are granted in
consideration of, and effective upon, the acceptance for payment of such
Shares by the Offeror in accordance with the terms of the Offer. Such
acceptance for payment shall revoke any other proxy or written consent granted
by the undersigned at any time with respect to such Shares (and any
Distributions), and no subsequent proxies will be given or written consents
executed by the undersigned (and if given or executed, will not be deemed
effective).
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, sell, assign and transfer the Shares tendered
hereby (and any Distributions) and that when the same are accepted for payment
by the Offeror, the Offeror will acquire good and unencumbered title thereto,
free and clear of all liens, restrictions, charges and encumbrances and not
subject to any adverse claims. The undersigned will, upon request, execute and
deliver any additional documents deemed by the Depositary or the Offeror to be
necessary or desirable to complete the sale, assignment and transfer of the
Shares tendered hereby (and any Distributions).
All authority herein conferred or agreed to be conferred shall survive the
death or incapacity of the undersigned, and any obligation of the undersigned
hereunder shall be binding upon the heirs, personal representatives,
successors and assigns of the undersigned. Except as stated in the Offer, this
tender is irrevocable.
The undersigned understands that tenders of Shares pursuant to any one of
the procedures described in Section 3 of the Offer to Purchase and in the
instructions hereto will constitute an agreement between the undersigned and
the Offeror upon the terms and subject to the conditions of the Offer.
<PAGE>
Unless otherwise indicated under "Special Payment Instructions," please
issue the check for the purchase price of any Shares purchased, and return any
Share Certificates evidencing any Shares not tendered or not purchased, in the
name(s) of the undersigned (and, in the case of Shares tendered by book-entry
transfer, by credit to the account at the Book-Entry Transfer Facility
designated above). Similarly, unless otherwise indicated under "Special
Delivery Instructions," please mail the check for the purchase price of any
Shares purchased and return any certificates for Shares not tendered or not
purchased (and accompanying documents, as appropriate) to the undersigned at
the address shown below the undersigned's signature(s). In the event that both
"Special Payment Instructions" and "Special Delivery Instructions" are
completed, please issue the check for the purchase price of any Shares
purchased and return any Share Certificates evidencing any Shares not tendered
or not purchased in the name(s) of, and mail said check and any certificates
to, the person(s) so indicated. The undersigned recognizes that the Offeror
has no obligation, pursuant to the "Special Payment Instructions," to transfer
any Shares from the name of the registered holder(s) thereof if the Offeror
does not accept for payment any of the Shares so tendered.
SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS (SEE
(SEE INSTRUCTIONS 1, 5, 6 AND INSTRUCTIONS 1, 5, 6 AND 7)
7)
To be completed ONLY if the check
To be completed ONLY if the check for the purchase price of Shares
for the purchase price of Shares purchased or Share Certificates
purchased or Share Certificates evidencing Shares not tendered or
evidencing Shares not tendered or not purchased are to be mailed to
not purchased are to be issued in someone other than the under-
the name of someone other than the signed, or to the undersigned at
undersigned, or if Shares tendered an address other than that shown
hereby and delivered by book-entry under the undersigned's signature.
transfer which are not purchased
are to be returned by credit to an
account at one of the Book-Entry
Transfer Facilities other than
that designated above.
Mail [_] check [_] Share Certif-
icate(s) to:
Name ______________________________
(PLEASE PRINT)
Address ___________________________
Issue [_] check [_] Share ___________________________________
Certificate(s) to: (ZIP CODE)
___________________________________
Name ______________________________ (TAXPAYER IDENTIFICATION OR SOCIAL
(PLEASE PRINT) SECURITY NUMBER)
Address ___________________________ (SEE SUBSTITUTE FORM W-9 ON
___________________________________ REVERSE SIDE)
(ZIP CODE)
___________________________________
(TAXPAYER IDENTIFICATION OR SOCIAL
SECURITY NUMBER)
(SEE SUBSTITUTE FORM W-9 ON
REVERSE SIDE)
[_]Credit Shares delivered by
book-entry transfer and not
purchased to the account set
forth below:
Check appropriate box:
[_] DTC [_] PDTC
Account Number ____________________
<PAGE>
IMPORTANT
STOCKHOLDERS: SIGN HERE
(PLEASE COMPLETE SUBSTITUTE FORM W-9 ON OTHER SIDE)
----------------------------------------------------
----------------------------------------------------
SIGNATURE(S) OF HOLDER(S)
Dated: _______________________________________, 199
(MUST BE SIGNED BY REGISTERED HOLDER(S) EXACTLY
AS NAME(S) APPEAR(S) ON SHARE CERTIFICATES OR ON A
SECURITY POSITION LISTING OR BY PERSON(S)
AUTHORIZED TO BECOME REGISTERED HOLDER(S) BY
CERTIFICATES AND DOCUMENTS TRANSMITTED HEREWITH. IF
SIGNATURE IS BY A TRUSTEE, EXECUTOR, ADMINISTRATOR,
GUARDIAN, ATTORNEY-IN-FACT, OFFICER OF A
CORPORATION OR OTHER PERSON ACTING IN A FIDUCIARY
OR REPRESENTATIVE CAPACITY, PLEASE PROVIDE THE
FOLLOWING INFORMATION AND SEE INSTRUCTION 5.)
Name(s): ___________________________________________
____________________________________________________
(PLEASE PRINT)
Capacity (full title): _____________________________
Address: ___________________________________________
____________________________________________________
(INCLUDE ZIP CODE)
Area Code and Telephone No.: _______________________
TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NO.: ____
(SEE SUBSTITUTE FORM W-9 ON REVERSE SIDE)
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 1 AND 5)
Authorized Signature: ______________________________
Name: ______________________________________________
(PLEASE TYPE OR PRINT)
Title: _____________________________________________
Name of Firm: ______________________________________
Address: ___________________________________________
(INCLUDE ZIP CODE)
Area Code and Telephone No.: _______________________
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. Except as otherwise provided below, signatures
on all Letters of Transmittal must be guaranteed by a firm that is a bank,
broker, dealer, credit union, savings association or other entity which is a
member in good standing of the Securities Transfer Agents Medallion Program or
by any other bank, broker, dealer, credit union, savings association or other
entity which is an "eligible guarantor institution," as such term is defined
in Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended (each of
the foregoing constituting an "Eligible Institution"), unless the Shares
tendered thereby are tendered (i) by a registered holder of Shares who has not
completed either the box labeled "Special Payment Instructions" or the box
labeled "Special Delivery Instructions" on the Letter of Transmittal or (ii)
for the account of an Eligible Institution. See Instruction 5. If the
certificates are registered in the name of a person or persons other than the
signer of this Letter of Transmittal, or if payment is to be made or delivered
to, or certificates evidencing unpurchased Shares are to be issued or returned
to, a person other than the registered owner or owners, then the tendered
certificates must be endorsed or accompanied by duly executed stock powers, in
either case signed exactly as the name or names of the registered owner or
owners appear on the certificates or stock powers, with the signatures on the
certificates or stock powers guaranteed by an Eligible Institution as provided
herein. See Instruction 5.
2. DELIVERY OF LETTER OF TRANSMITTAL AND SHARE CERTIFICATES. This Letter of
Transmittal is to be used either if Share Certificates are to be forwarded
herewith or, unless an Agent's Message (as defined in the Offer to Purchase)
is utilized, if the delivery of Shares is to be made by book-entry transfer
pursuant to the procedures set forth in Section 3 of the Offer to Purchase.
Certificates for all physically delivered Shares, or a confirmation of a book-
entry transfer into the Depositary's account at one of the Book-Entry Transfer
Facilities of all Shares delivered electronically, as well as a properly
completed and duly executed Letter of Transmittal (or a manually signed
facsimile thereof) and any other documents required by this Letter of
Transmittal, or an Agent's Message in the case of a book entry delivery, must
be received by the Depositary at one of its addresses set forth on the front
page of this Letter of Transmittal by the Expiration Date. Stockholders who
cannot deliver their Share Certificates and all other required documents to
the Depositary by the Expiration Date must tender their Shares pursuant to the
guaranteed delivery procedure set forth in Section 3 of the Offer to Purchase.
Pursuant to such procedure: (a) such tender must be made by or through an
Eligible Institution; (b) a properly completed and duly executed Notice of
Guaranteed Delivery, substantially in the form provided by the Offeror, must
be received by the Depositary prior to the Expiration Date; and (c) the Share
Certificates for all tendered Shares, in proper form for tender, or a
confirmation of a book-entry transfer into the Depositary's account at one of
the Book-Entry Transfer Facilities of all Shares delivered electronically, as
well as a properly completed and duly executed Letter of Transmittal (or a
manually signed facsimile thereof), and any other documents required by this
Letter of Transmittal, must be received by the Depositary within three New
York Stock Exchange trading days after the date of execution of such Notice of
Guaranteed Delivery, all as provided in Section 3 of the Offer to Purchase.
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, SHARE CERTIFICATES AND
ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY
TRANSFER FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING STOCKHOLDER, AND
THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE
DEPOSITARY. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT
REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
No alternative, conditional or contingent tenders will be accepted, and no
fractional Shares will be purchased. By execution of this Letter of
Transmittal (or a manually signed facsimile hereof), all tendering
stockholders waive any right to receive any notice of the acceptance of their
Shares for payment.
3. INADEQUATE SPACE. If the space provided herein is inadequate, the
certificate numbers and/or the number of Shares should be listed on a separate
schedule attached thereto.
4. PARTIAL TENDERS (NOT APPLICABLE TO STOCKHOLDERS WHO TENDER BY BOOK-ENTRY
TRANSFER). If fewer than all the Shares represented by any Share Certificate
delivered to the Depositary are to be tendered, fill in the number of Shares
which are to be tendered in the box entitled "Number of Shares Tendered." In
such case, a new Share Certificate for the remainder of the Shares represented
by the old Share Certificate will be sent to the person(s) signing this Letter
of Transmittal, unless otherwise provided in the appropriate box on this
Letter of Transmittal, as promptly as practicable following the expiration or
termination of the Offer. All Shares represented by Share Certificates
delivered to the Depositary will be deemed to have been tendered unless
otherwise indicated.
<PAGE>
5. SIGNATURES ON LETTER OF TRANSMITTAL; STOCK POWERS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder(s) of the Shares
tendered hereby, the signature(s) must correspond with the name(s) as written
on the face of the certificates without alteration, enlargement or any other
change whatsoever.
If any of the Shares tendered hereby are owned of record by two or more
persons, all such persons must sign this Letter of Transmittal.
If any of the Shares tendered hereby are registered in different names on
different certificates, it will be necessary to complete, sign and submit as
many separate Letters of Transmittal as there are different registrations of
certificates.
If this Letter of Transmittal is signed by the registered holder(s) of the
Shares tendered hereby, no endorsements of certificates or separate stock
powers are required unless payment of the purchase price is to be made, or
Shares not tendered or not purchased are to be returned, in the name of any
person other than the registered holder(s). Signatures on any such
certificates or stock powers must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Shares tendered hereby, the certificate must be
endorsed or accompanied by, appropriate stock powers, in either case, signed
exactly as the name(s) of the registered holder(s) appear(s) on the
certificates for such Shares. Signature(s) on any such certificates or stock
powers must be guaranteed by an Eligible Institution.
If this Letter of Transmittal or any certificate or stock power is signed by
a trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
such person should so indicate when signing, and proper evidence satisfactory
to the Offeror of the authority, of such person so to act must be submitted.
6. STOCK TRANSFER TAXES. The Offeror will pay any stock transfer taxes with
respect to the sale and transfer of any Shares to it or its order pursuant to
the Offer. If, however, payment of the purchase price is to be made to, or
Shares not tendered or not purchased are to be returned in the name of, any
person other than the registered holder(s), then the amount of any stock
transfer taxes (whether imposed on the registered holder(s), such other person
or otherwise) payable on account of the transfer to such person will be
deducted from the purchase price unless satisfactory evidence of the payment
of such taxes, or exemption therefrom, is submitted. EXCEPT AS PROVIDED IN
THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR TRANSFER OF TAX STAMPS TO BE
AFFIXED TO THE CERTIFICATES LISTED IN THIS LETTER OF TRANSMITTAL.
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If the check for the purchase
price of any Shares purchased is to be issued, or any Shares not tendered or
not purchased are to be returned, in the name of a person other than the
person(s) signing this Letter of Transmittal or if the check or any
certificates for Shares not tendered or not purchased are to be mailed to
someone other than the person(s) signing this Letter of Transmittal or to the
person(s) signing this Letter of Transmittal at an address other than that
shown above, the appropriate boxes on this Letter of Transmittal should be
completed. Stockholders tendering Shares by book-entry transfer may request
that Shares not purchased be credited to such account at any of the Book-Entry
Transfer Facilities as such stockholder may designate under "Special Payment
Instructions." If no such instructions are given, any such Shares not
purchased will be returned by crediting the account at the Book-Entry Transfer
Facilities designated above.
8. SUBSTITUTE FORM W-9. The tendering holder of Shares is required to
provide the Depositary with such holder's correct taxpayer identification
number ("TIN") on Substitute Form W-9, which is provided below, unless an
exemption applies. In the case of such a holder who has completed the box
entitled "SPECIAL PAYMENT INSTRUCTIONS" above, however, the correct TIN on
Substitute Form W-9 should be provided for the recipient of the payment
pursuant to such INSTRUCTIONS. Failure to provide the information on the
Substitute Form W-9 may subject the tendering holder of Shares to a $50
penalty and to 31% federal income tax backup withholding on the payment of the
purchase price for the Shares.
9. QUESTIONS AND REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Requests for
assistance or additional copies of the Offer to Purchase and this Letter of
Transmittal may be obtained from the Information Agent or the Dealer Manager
at their respective addresses or telephone numbers set forth below.
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A MANUALLY SIGNED FACSIMILE COPY
HEREOF (TOGETHER WITH CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND
ALL OTHER REQUIRED DOCUMENTS) OR NOTICE OF GUARANTEED DELIVERY MUST BE
RECEIVED BY THE DEPOSITARY ON OR PRIOR TO THE EXPIRATION DATE (AS DEFINED IN
THE OFFER TO PURCHASE).
<PAGE>
IMPORTANT TAX INFORMATION
Under the federal income tax law, a holder of Shares whose tendered Shares
are accepted for payment is required by law to provide the Depositary (as
payer) with such holder's correct TIN on Substitute Form W-9 below. The holder
of Shares must also state that (i) such holder has not been notified by the
Internal Revenue Service that such holder is subject to backup withholding as
a result of a failure to report all interest or dividends or (ii) the Internal
Revenue Service has notified such holder that such holder is no longer subject
to backup withholding. If the Depositary is not provided with the correct TIN,
the holder of Shares may be subject to a $50 penalty imposed by the Internal
Revenue Service and payments made to such holder may be subject to backup
withholding.
Certain holders of Shares (including, among others, all corporations and
certain foreign individuals) are not subject to these backup withholding and
reporting requirements. In order for a foreign individual to qualify as an
exempt recipient, such individual must submit a statement, signed under
penalties of perjury, attesting to such individual's exempt status. Forms of
such statements can be obtained from the Depositary. See the enclosed
Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9 for additional instructions.
If backup withholding applies, the Depositary is required to withhold 31% of
any payments made to the holder of Shares. Backup withholding is not an
additional tax. Rather, the tax withheld pursuant to backup withholding rules
will be available as a credit against such holder's tax liabilities. If
withholding results in an overpayment of taxes, a refund may be obtained from
the Internal Revenue Service.
WHAT NUMBER TO GIVE THE DEPOSITARY
If the holder of Shares is an individual, the correct TIN is his or her
social security number. In other cases, the correct TIN may be the employer
identification number of the record holder of the Shares tendered hereby. If
the Shares are in more than one name or are not in the name of the actual
owner, consult the enclosed Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 for additional guidance on which
number to report. If the tendering holder of Shares has not been issued a TIN
and has applied for a number or intends to apply for a number in the near
future, the holder should write "Applied For" in the space provided for the
TIN in Part I, and sign and date the Substitute Form W-9. If "Applied For" is
written in Part I and the Depositary is not provided with a TIN within 30
days, the Depositary may withhold 31% of all payments of the purchase price to
such holder until a TIN is provided to the Depositary.
<PAGE>
PAYER'S NAME: CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
- --------------------------------------------------------------------------------
SUBSTITUTE PART I--Taxpayer PART III--Social
FORM W-9 Identification Number--For Security Number OR
DEPARTMENT OF all accounts, enter taxpayer Employer Identification
THE TREASURY identification number in the Number
box at right. (For most
individuals, this is your
social security number. If
you do not have a number, see
OBTAINING A NUMBER in the
enclosed Guidelines.) Certify
by signing and dating below.
NOTE:If the account is in
more than one name, see chart
in the enclosed Guidelines to
determine which number to
give the payer.
INTERNAL
REVENUE ------------------------
SERVICE (If awaiting TIN write
"Applied For")
PAYER'S REQUEST FOR TAXPAYER IDENTIFICATION NUMBER (TIN)
- --------------------------------------------------------------------------------
PART II--For Payees exempt from backup withholding, see the enclosed
Guidelines and complete as instructed therein.
- --------------------------------------------------------------------------------
CERTIFICATION--Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct Taxpayer Identification
Number (or I am waiting for a number to be issued to me); and
(2) I am not subject to backup withholding either because (a) I have not
been notified by the Internal Revenue Service (IRS) that I am subject to
backup withholding as a result of a failure to report all interest or
dividends, or (b) the IRS has notified me that I am no longer subject to
backup withholding.
CERTIFICATION INSTRUCTIONS--You must cross out item (2) above if you have
been notified by the IRS that you are subject to backup withholding because
of underreporting interest or dividends on your tax return. However, if,
after being notified by the IRS that you were subject to backup withholding,
you received another notification from the IRS that you were no longer
subject to backup withholding, do not cross out item (2). (Also see
instructions in the enclosed Guidelines.)
- --------------------------------------------------------------------------------
SIGNATURE ____________________________ DATE _________________________________
NAME ________________________________________________________________________
ADDRESS _____________________________________________________________________
CITY ____________________ STATE ____________________ ZIP ____________________
NOTE: FAILURE TO COMPLETE AND RETURN THE SUBSTITUTE FORM W-9 MAY RESULT IN
BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE
OFFER TO PURCHASE. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR
CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9
FOR ADDITIONAL DETAILS.
<PAGE>
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU ARE AWAITING (OR WILL SOON
APPLY FOR) A TAXPAYER IDENTIFICATION NUMBER
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification
number has not been issued to me, and either (a) I have mailed or delivered
an application to receive a taxpayer identification number to the
appropriate Internal Revenue Service Center or Social Security
Administration Office or (b) I intend to mail or deliver an application in
the near future. I understand that, notwithstanding the information I
provided in Part III of the Substitute Form W-9 (and the fact that I have
completed this Certificate of Awaiting Taxpayer Identification Number), if
I do not provide a correct TIN to the Depositary within thirty (30) days,
31% of all reportable payments made to me pursuant to the Offer may be
withheld.
------------------------------------ ------------------------------------
Signature Date
If you have any questions regarding the Offer, please contact the Information
Agent or the Dealer Manager.
The Information Agent for the Offer is:
D. F. KING & CO., INC.
77 Water Street
New York, New York 10005
(212) 269-5550 (Call Collect)
(800) 848-3405 (Call Toll Free)
The Dealer Manager for the Offer is:
MERRILL LYNCH & CO.
World Financial Center
North Tower
New York, New York 10281-1330
(212) 236-4565 (Call Collect)
<PAGE>
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
ORCHARD SUPPLY HARDWARE STORES CORPORATION
AT
$35.00 NET PER SHARE
BY
GROVE ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY OF
SEARS, ROEBUCK AND CO.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON WEDNESDAY, SEPTEMBER 18, 1996, UNLESS THE OFFER IS EXTENDED.
August 21, 1996
To: Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees:
Grove Acquisition Corp., a Delaware corporation (the "Offeror"), and a
wholly owned subsidiary of Sears, Roebuck and Co., a New York corporation (the
"Parent"), is offering to purchase all outstanding shares of common stock, par
value $.01 per share (the "Shares"), of Orchard Supply Hardware Stores
Corporation, a Delaware corporation (the "Company"), at a purchase price of
$35.00 per Share, net to the seller in cash, without interest, upon the terms
and subject to the conditions set forth in the Offer to Purchase, dated August
21, 1996 (the "Offer to Purchase"), and in the related Letter of Transmittal
(which together constitute the "Offer") enclosed herewith.
The Offer is being made in connection with the Agreement and Plan of Merger,
dated as of August 14, 1996, among the Parent, the Offeror and the Company
(the "Merger Agreement").
Holders of Shares whose certificates for such Shares (the "Certificates")
are not immediately available or who cannot deliver their Certificates and all
other required documents to the Depositary or complete the procedures for
book-entry transfer prior to the Expiration Date (as defined in Section 1 of
the Offer to Purchase) must tender their Shares according to the guaranteed
delivery procedures set forth in Section 3 of the Offer to Purchase.
Please furnish copies of the enclosed materials to those of your clients for
whose accounts you hold Shares in your name or in the name of your nominee.
Enclosed herewith for your information and forwarding to your clients are
copies of the following documents:
1. The Offer to Purchase dated August 21, 1996.
2. The Letter of Transmittal to tender Shares for your use and for the
information of your clients. Facsimile copies of the Letter of Transmittal
(with manual signatures) may be used to tender Shares.
3. A letter to stockholders of the Company from Maynard Jenkins, the
President and Chief Executive Officer of the Company, together with a
Solicitation/Recommendation Statement on Schedule 14D-9 filed with the
Securities and Exchange Commission by the Company and mailed to the
stockholders of the Company, each recommending that stockholders accept the
Offer and tender their Shares.
4. The Notice of Guaranteed Delivery for Shares to be used to accept the
Offer if neither of the two procedures for tendering Shares set forth in
the Offer to Purchase can be completed on a timely basis.
5. A printed form of letter which may be sent to your clients for whose
accounts you hold Shares registered in your name, with space provided for
obtaining such clients' instructions with regard to the Offer.
<PAGE>
6. Guidelines of the Internal Revenue Service for Certification of
Taxpayer Identification Number on Substitute Form W-9.
7. A return envelope addressed to the Depositary.
YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS
PROMPTLY AS POSSIBLE. PLEASE NOTE THAT THE OFFER AND WITHDRAWAL RIGHTS EXPIRE
AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON WEDNESDAY, SEPTEMBER 18, 1996,
UNLESS THE OFFER IS EXTENDED.
Please note the following:
1. The tender price is $35.00 per Share, net to the seller in cash,
without interest.
2. The Offer is being made for all of the outstanding Shares.
3. The Offer is being made pursuant to the Agreement and Plan of Merger
dated as of August 14, 1996, among the Parent, the Offeror and the Company.
The Board of Directors of the Company has unanimously approved the Offer,
the Merger, the Merger Agreement and the Stockholder Agreement (as defined
in the Offer to Purchase) and has determined that the Offer and the Merger
are fair to and in the best interests of the Company's Stockholders and
recommends that the Company's Stockholders accept the Offer and tender
their Shares pursuant to the Offer.
4. The Offer is conditioned upon (i) there being validly tendered by the
expiration date and not withdrawn that number of Shares representing at
least a majority of all outstanding shares of common stock of the Company
on a fully diluted basis and (ii) satisfaction of certain other terms and
conditions set forth in the Offer to Purchase.
5. Tendering stockholders will not be obligated to pay brokerage fees or
commissions or, except as set forth the Letter of Transmittal, stock
transfer taxes on the transfer of Shares pursuant to the Offer.
In order to take advantage of the Offer, (i) a duly executed and properly
completed Letter of Transmittal (or a manually signed facsimile thereof) and
any required signature guarantees or, in the case of a book-entry transfer, an
Agent's Message (as defined in the Offer to Purchase), and any other required
documents should be sent to the Depositary and (ii) Certificates representing
the tendered Shares or a timely Book-Entry Confirmation (as defined in the
Offer to Purchase) should be delivered to the Depositary in accordance with
the instructions set forth in the Offer.
If holders of Shares wish to tender, but it is impracticable for them to
forward their Certificates or other required documents or complete the
procedures for book-entry transfer prior to the Expiration Date, a tender may
be effected by following the guaranteed delivery procedures specified in
Section 3 of the Offer to Purchase.
Neither the Offeror, the Parent nor any officer, director, stockholder,
agent or other representative of the Offeror will pay any fees or commissions
to any broker, dealer or other person (other than the Dealer Manager, the
Depositary and the Information Agent as described in the Offer to Purchase)
for soliciting tenders of Shares pursuant to the Offer. The Offeror will,
however, upon request, reimburse you for customary mailing and handling
expenses incurred by you in forwarding any of the enclosed materials to your
clients. The Offeror will pay or cause to be paid any transfer taxes payable
on the transfer of Shares to it, except as otherwise provided in the Letter of
Transmittal.
Any inquiries you may have with respect to the Offer should be addressed to
D. F. King & Co., Inc. 77 Water Street, New York, New York 10005, (212) 269-
5550 or (800) 848-3405.
Requests for copies of the enclosed materials may be directed to the
Information Agent at the above address and telephone number.
Very truly yours,
Merrill Lynch & Co.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
OR ANY OTHER PERSON THE AGENT OF THE PARENT, THE OFFEROR, THE DEPOSITARY, THE
INFORMATION AGENT, THE DEALER MANAGER OR ANY AFFILIATE OF ANY OF THEM, OR
AUTHORIZE YOU OR ANY OTHER PERSON TO MAKE ANY STATEMENT OR USE ANY DOCUMENT ON
BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE ENCLOSED
DOCUMENTS AND THE STATEMENTS CONTAINED THEREIN.
2
<PAGE>
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
ORCHARD SUPPLY HARDWARE STORES CORPORATION
AT
$35.00 NET PER SHARE
BY
GROVE ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY OF
SEARS, ROEBUCK AND CO.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON WEDNESDAY, SEPTEMBER 18, 1996, UNLESS THE OFFER IS EXTENDED.
August 21, 1996
To Our Clients:
Enclosed for your consideration are the Offer to Purchase, dated August 21,
1996 (the "Offer to Purchase"), and the related Letter of Transmittal (which
together constitute the "Offer") relating to an offer by Grove Acquisition
Corp., a Delaware corporation (the "Offeror"), and a wholly owned subsidiary
of Sears, Roebuck and Co., a New York corporation (the "Parent"), to purchase
all outstanding shares of common stock, par value $.01 per share (the
"Shares"), of Orchard Supply Hardware Stores Corporation, a Delaware
corporation (the "Company"), at a purchase price of $35.00 per Share, net to
the seller in cash, without interest, upon the terms and subject to the
conditions set forth in the Offer.
The Offer is being made in connection with the Agreement and Plan of Merger,
dated as of August 14, 1996, among the Parent, the Offeror and the Company
(the "Merger Agreement").
This material is being forwarded to you as the beneficial owner of Shares
carried by us in your account but not registered in your name.
A TENDER OF SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF RECORD AND
PURSUANT TO YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU
FOR YOUR INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER SHARES HELD BY
US FOR YOUR ACCOUNT.
Accordingly, we request instructions as to whether you wish to tender any or
all of the Shares held by us for your account, upon the terms and conditions
set forth in the Offer.
Please note the following:
1. The tender price is $35.00 per Share, net to the seller in cash,
without interest.
2. The Offer is being made for all of the outstanding Shares.
3. The Offer and withdrawal rights will expire at 12:00 midnight, New
York City time, on Wednesday, September 18, 1996, unless the Offer is
extended.
4. The Offer is being made pursuant to the Agreement and Plan of Merger
dated as of August 14, 1996, among the Parent, the Offeror and the Company.
The Board of Directors of the Company has unanimously approved the Offer,
the Merger, the Merger Agreement and the Stockholder Agreement (as defined
in the Offer to Purchase) and has determined that the Offer and the Merger
are fair to and in the best interests of the Company's stockholders and
recommends that the Company's stockholders accept the Offer and tender
their Shares pursuant to the Offer.
5. The Offer is conditioned upon (i) there being validly tendered by the
expiration date and not withdrawn that number of Shares representing at
least a majority of all outstanding shares of common stock of the Company
on a fully diluted basis and (ii) satisfaction of certain other terms and
conditions set forth in the Offer to Purchase.
6. Tendering stockholders will not be obligated to pay brokerage fees or
commissions or, except as set forth in the Letter of Transmittal, stock
transfer taxes on the transfer of Shares pursuant to the Offer.
If you wish to have us tender any or all of your Shares, please so instruct
us by completing, executing, detaching and returning to us the instruction
form contained in this letter. An envelope to return your instruction to us is
enclosed. If you authorize tender of your Shares, all such Shares will be
tendered unless otherwise indicated in such instruction form. PLEASE FORWARD
YOUR INSTRUCTIONS TO US AS SOON AS POSSIBLE TO ALLOW US AMPLE TIME TO TENDER
YOUR SHARES ON YOUR BEHALF PRIOR TO THE EXPIRATION OF THE OFFER.
The Offer is made solely by the Offer to Purchase and the related Letter of
Transmittal and any supplements or amendments thereto. The Offer is not being
made to, nor will tenders be accepted from or on behalf of, holders of Shares
residing in any jurisdiction in which the making of the Offer or acceptance
thereof would not be in compliance with the securities laws of such
jurisdiction.
<PAGE>
INSTRUCTIONS WITH RESPECT TO THE OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
ORCHARD SUPPLY HARDWARE STORES CORPORATION
The undersigned acknowledge(s) receipt of your letter and the enclosed Offer
to Purchase dated August 21, 1996 (the "Offer to Purchase"), and the related
Letter of Transmittal (which together constitute the "Offer") in connection
with the offer by Grove Acquisition Corp., a Delaware corporation (the
"Offeror"), and a wholly owned subsidiary of Sears, Roebuck and Co., a New
York corporation, to purchase all outstanding shares of common stock, par
value $.01 per share ("Shares"), of Orchard Supply Hardware Stores
Corporation, a Delaware corporation.
This will instruct you to tender to the Offeror the number of Shares
indicated below (or if no number is indicated below, all Shares) which are
held by you for the account of the undersigned, upon the terms and subject to
the conditions set forth in the Offer.
Date: _______________
NUMBER OF SHARES OF COMMON STOCK TO BE TENDERED:*
Account Number: ________________
SIGN HERE
___________________________________________
(Signature(s))
___________________________________________
(Print Name(s))
___________________________________________
(Print Address(es))
___________________________________________
(Area Code and Telephone Number(s))
___________________________________________
(Taxpayer Identification or Social
Security Number(s))
- -------
* Unless otherwise indicated, it will be assumed that all Shares held by us
for your account are to be tendered.
2
<PAGE>
NOTICE OF GUARANTEED DELIVERY FOR
TENDER OF SHARES OF COMMON STOCK
OF
ORCHARD SUPPLY HARDWARE STORES CORPORATION
TO
GROVE ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY
OF
SEARS, ROEBUCK AND CO.
(NOT TO BE USED FOR SIGNATURE GUARANTEES)
----------------
This Notice of Guaranteed Delivery, or one substantially in the form hereof,
must be used to accept the Offer (as defined below) if certificates evidencing
shares of Common Stock, par value $.01 per share (the "Shares"), of Orchard
Supply Hardware Stores Corporation, a Delaware corporation (the "Company"),
are not immediately available, or if the procedure for book-entry transfer
cannot be completed on a timely basis or time will not permit all required
documents to reach the Depositary on or prior to the Expiration Date (as
defined in the Offer to Purchase). Such form may be delivered by hand or
facsimile transmission, or mail to the Depositary. See Section 3 of the Offer
to Purchase, dated August 21, 1996 (the "Offer to Purchase").
The Depositary for the Offer is:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
By Mail: By Hand or Overnight Delivery:
MIDTOWN STATION 120 BROADWAY
P.O. BOX 798 13TH FLOOR
NEW YORK, NY 10018 NEW YORK, NY 10271
ATTENTION: REORGANIZATION DEPARTMENT ATTENTION: REORGANIZATION DEPT.
By Facsimile Transmission:
(201) 329-8936
For Confirmation of Facsimile Transmission:
(201) 296-4209
----------------
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION
OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to Grove Acquisition Corp., a Delaware
corporation and a wholly owned subsidiary of Sears, Roebuck and Co., a New
York corporation, upon the terms and subject to the conditions set forth in
the Offer to Purchase, dated August 21, 1996 (the "Offer to Purchase"), and
the related Letter of Transmittal (which together constitute the "Offer"),
receipt of which are hereby acknowledged, the number of Shares specified below
pursuant to the guaranteed delivery procedures described in Section 3 of the
Offer to Purchase.
Number of Shares: ................... .....................................
Certificate Nos. (If Available): .... .....................................
SIGNATURE(S) OF HOLDER(S)
.....................................
Dated:........................., 1996
Check ONE box if Shares will be
delivered by book-entry transfer: Name(s) of Holder(s): ...............
[_]The Depository Trust Company .....................................
[_]Philadelphia Depository Trust .....................................
Company PLEASE TYPE OR PRINT
Account Number: ..................... .....................................
ADDRESS
.....................................
ZIP CODE
.....................................
AREA CODE AND TELEPHONE NO.
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a bank, broker, dealer, credit union, savings association
or other equity which is a member in good standing of the Securities Transfer
Agents Medallion Program or a bank, broker, dealer, credit union, savings
association or other entity which is an "eligible guarantor institution," as
such term is defined in Rule 17Ad-15 under the Securities Exchange Act of
1934, as amended, guarantees the delivery to the Depository of the Shares
tendered hereby, together with a properly completed and duly executed Letter
of Transmittal (or manually signed facsimile(s) thereof) and any other
required documents, or an Agent's Message (as defined in the Offer to
Purchase) in the case of a book-entry delivery of Shares, all within three New
York Stock Exchange trading days of the date hereto.
The Eligible Institution that completes this form must communicate the
guarantee to the Depositary and must deliver the Letter of Transmittal and
Share Certificates to the Depositary within the time period shown herein.
Failure to do so could result in a financial loss to such Eligible
Institution.
..................................... .....................................
NAME OF FIRM AUTHORIZED SIGNATURE
..................................... .....................................
ADDRESS TITLE
..................................... Name: ...............................
ZIP CODE PLEASE TYPE OR PRINT
..................................... Dated: ........................, 1996
AREA CODE AND TELEPHONE NO.
NOTE: DO NOT SEND SHARE CERTIFICATES WITH THIS NOTICE.
SHARE CERTIFICATES SHOULD BE SENT WITH YOUR
LETTER OF TRANSMITTAL.
2
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER.-- Social Security numbers have nine digits separated by two hyphens,
i.e., 000-00-0000. Employer identification numbers have nine digits separated
by only one hyphen, i.e., 00-0000000. The table below will help determine the
number to give the payer.
- ----------------------------------- -----------------------------------
<TABLE>
<CAPTION>
GIVE THE
SOCIAL SECURITY
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
- --------------------------------------------
<S> <C>
1. Individual The individual
2. Two or more individuals The actual owner
(joint account) of the account
or, if combined
funds, the first
individual on
the account(1)
3. Husband and wife (joint The actual owner
account) of the account
or, if joint
funds, either
person(1)
4. Custodian account of a The minor(2)
minor (Uniform Gift to
Minors Act)
5. Adult and minor (joint The adult or, if
account) the minor is the
only
contributor, the
minor(1)
6. Account in the name of The ward, minor
guardian or committee or incompetent
for a designated ward, person(3)
minor or incompetent
person
7.a. The usual revocable The grantor-
savings trust account trustee(1)
(grantor is also
trustee)
b. So-called trust account The actual
that is not a legal or owner(1)
valid trust under State
law
8. Sole proprietorship The owner(4)
- --------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
GIVE THE EMPLOYER
IDENTIFICATION
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
---
<S> <C>
9. A valid trust, estate The legal
or pension trust entity(5)
10. Corporate The corporation
11. Religious, charitable The organization
or educational
organization
12. Partnership account The partnership
held in the name of the
business
13. Association, club or The organization
other tax-exempt
organization
14. A broker or registered The broker or
nominee nominee
15. Account with the The public
Department of entity
Agriculture in the name
of a public entity
(such as a State or
local government,
school district or
prison) that receives
agricultural program
payments
---
</TABLE>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) The name of the owner must be shown.
(5) List first and circle the name of the legal trust, estate or pension
trust. Do not furnish the identification number of the personal
representative or trustee unless the legal entity itself is not designated
in the account title.
NOTE: If no name is circled when there is more than one name, the number will
be considered to be that of the first name listed.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card (for
individuals), or Form SS-4, Application for Employer Identification Number
(for businesses and all other entities), at the local office of the Social
Security Administration or the Internal Revenue Service and apply for a
number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees generally exempted from backup withholding on payments include the
following:
. A corporation.
. A financial institution.
. An organization exempt from tax under Section 501(a) of the Internal
Revenue Code of 1986, as amended (the "Code"), or an individual retirement
plan.
. The United States or any agency or instrumentality thereof.
. A State, the District of Columbia, a possession of the United States or
any political subdivision or instrumentality thereof.
. A foreign government, a political subdivision of a foreign government or
any agency or instrumentality thereof.
. An international organization or any agency or instrumentality thereof.
. A dealer in securities or commodities required to register in the United
States or a possession thereof.
. A real estate investment trust.
. A common trust fund operated by a bank under Section 584(a) of the Code.
. An entity registered at all times during the tax year under the Investment
Company Act of 1940.
. A foreign central bank of issue.
Payments of dividends and patronage dividends generally not subject to backup
withholding include the following:
. Payments to nonresident aliens subject to withholding under Section 1441
of the Code.
. Payments to partnerships not engaged in a trade or business in the United
States and which have at least one nonresident partner.
. Payments of patronage dividends where the amount received is not paid in
money.
. Payments made by certain foreign organizations.
Payments of interest generally not subject to backup withholding include the
following:
. Payments of interest on obligations issued by individuals.
NOTE: Payees may be subject to backup withholding if this interest is $600
or more and is paid in the course of the payer's trade or business and the
payee has not provided his or her correct taxpayer identification number to
the payer.
. Payments of tax-exempt interest (including exempt-interest dividends under
Section 852 of the Code).
. Payments described in Section 6049(b)(5) of the Code to nonresident
aliens.
. Payments on tax-free covenant bonds under Section 1451 of the Code.
. Payments made by certain foreign organizations.
Exempt payees described above must still complete the Substitute Form W-9
enclosed herewith to avoid possible erroneous backup withholding. FILE
SUBSTITUTE FORM W-9 WITH THE PAYER, REMEMBERING TO CERTIFY YOUR TAXPAYER
IDENTIFICATION NUMBER ON THE FORM AND WRITE "EXEMPT" ON THE FACE OF THE FORM.
Payments that are not subject to information reporting are also not subject to
backup withholding. For details, see the regulations under Sections 6041,
6041A(a), 6042, 6044, 6045, 6049, 6050A and 6050N of the Code.
PRIVACY ACT NOTICE--Section 6109 of the Code requires most recipients of
dividend, interest or other payments to give taxpayer identification numbers
to payers who must report the payments to the IRS. The IRS uses the numbers
for identification purposes and to help verify the accuracy of the recipient's
tax return. Payers must be given the numbers whether or not recipients are
required to file tax returns. Payers must generally withhold 31% of taxable
interest, dividend and certain other payments to a payee who does not furnish
a taxpayer identification number to a payer. Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER--If you fail
to furnish your correct taxpayer identification number to a payer, you are
subject to a penalty of $50 for each such failure unless your failure is
due to reasonable cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING--If you
make a false statement with no reasonable basis which results in no
imposition of backup imposition of withholding, you are subject to a
penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION--Willfully falsifying
certifications or affirmations may subject you to criminal penalties
including fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
<PAGE>
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This announcement is neither an offer to purchase nor a solicitation of an
offer to sell Shares. The Offer is made solely by the Offer to Purchase
dated August 21, 1996 and the related Letter of Transmittal, and is being
made to all holders of Shares. The Offeror is not aware of any state
where the making of the Offer is prohibited by administrative or
judicial action pursuant to any valid state statute. If the Offeror
becomes aware of any valid state statute prohibiting the making of
the Offer or the acceptance of Shares pursuant thereto, the
Offeror will make a good faith effort to comply with such state
statute. If, after such good faith effort, the Offeror cannot
comply with such state statute, the Offer will not be made
to (nor will tenders be accepted from or on behalf of)
the holders of Shares in such state. In any
jurisdiction where the securities, blue sky or other
laws require the offer to be made by a licensed
broker or dealer, the Offer shall be deemed to be
made on behalf of the Offeror by Merrill Lynch &
Co. ("Merrill") or one or more registered
brokers or dealers licensed under the laws
of such jurisdiction.
Notice of Offer to Purchase for Cash
All Outstanding Shares of Common Stock
of
ORCHARD SUPPLY
HARDWARE STORES CORPORATION
at
$35.00 Net Per Share
by
GROVE ACQUISITION CORP.
a wholly owned subsidiary of
SEARS, ROEBUCK AND CO.
Grove Acquisition Corp., a Delaware corporation (the "Offeror") and a wholly
owned subsidiary of Sears, Roebuck and Co., a New York corporation (the
"Parent"), is offering to purchase all outstanding shares of Common Stock, par
value $.01 per share (the "Shares"), of Orchard Supply Hardware Stores
Corporation, a Delaware corporation (the "Company"), at a price of $35.00 per
Share, net to the seller in cash, without interest thereon, upon the terms and
subject to the conditions set forth in the Offer to Purchase dated August 21,
1996 (the "Offer to Purchase") and in the related Letter of Transmittal (which
together constitute the "Offer"). Following the Offer, the Offeror intends to
effect the Merger described below.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,NEW YORK CITY
TIME, ON WEDNESDAY, SEPTEMBER 18, 1996, UNLESS THE OFFER IS EXTENDED.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER A NUMBER OF
SHARES THAT CONSTITUTES AT LEAST A MAJORITY OF THE SHARES OUTSTANDING ON A
FULLY DILUTED BASIS (INCLUDING SHARES ISSUABLE UPON EXERCISE OF OUTSTANDING
EMPLOYEE AND DIRECTOR STOCK OPTIONS, AND ASSUMING CONVERSION OF ALL 6%
CUMULATIVE CONVERTIBLE PREFERRED STOCK, $.01 PAR VALUE PER SHARE, OF THE
COMPANY, IN ACCORDANCE WITH THEIR TERMS).
The Offer is being made pursuant to an Agreement and Plan of Merger dated as
of August , 1996 (the "Merger Agreement") among the Parent, the Offeror and
the Company. The Merger Agreement provides that, among other things, as soon as
practicable after the purchase of the Shares pursuant to the Offer and the
satisfaction or waiver of the other conditions set forth in the Merger
Agreement and in accordance with relevant provisions of the General Corporation
Law of the State of Delaware ("Delaware Law"), the Offeror will be merged with
and into the Company (the "Merger"). Following consummation of the Merger, the
Company will continue as the surviving corporation (the "Surviving
Corporation") and will be a wholly owned subsidiary of the Parent. At the
effective time of the Merger (the "Effective Time"), each issued and
outstanding Share (other than Shares owned by the Company as treasury stock,
Shares owned by the Parent or the Offeror or any subsidiary thereof, or Shares
with respect to which appraisal rights are properly exercised under Delaware
Law) will be cancelled and converted automatically into the right to receive
$35.00 in cash, or any higher price that may be paid per Share in the Offer,
without interest.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE OFFER, THE
MERGER, THE MERGER AGREEMENT AND THE STOCKHOLDER AGREEMENT (AS DEFINED IN THE
OFFER TO PURCHASE) AND HAS DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR TO
AND IN THE BEST INTERESTS OF THE COMPANY'S STOCKHOLDERS AND RECOMMENDS THAT THE
COMPANY'S STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE
OFFER.
For purposes of the Offer, the Offeror will be deemed to have accepted for
payment (and thereby purchased) Shares validly tendered and not properly
withdrawn if and when the Offeror gives oral or written notice to ChaseMellon
Shareholder Services, L.L.C. (the "Depositary") of the Offeror's acceptance for
payment of such Shares pursuant to the Offer. Upon the terms and subject to the
conditions of the Offer, payment for Shares accepted for payment pursuant to
the Offer will be made by deposit of the purchase price therefor with the
Depositary, which will act as agent for tendering stockholders for the purpose
of receiving payments from the Offeror and transmitting such payments to
tendering stockholders whose Shares have been accepted for payment. UNDER NO
CIRCUMSTANCES WILL INTEREST ON THE PURCHASE PRICE FOR THE SHARES BE PAID,
REGARDLESS OF ANY DELAY IN MAKING SUCH PAYMENT. In all cases, payment for
Shares tendered and accepted for payment pursuant to the Offer will be made
only after timely receipt by the Depositary of (i) the certificates evidencing
such Shares (the "Share Certificates") or timely confirmation (a "Book-Entry
Confirmation") of a book-entry transfer of such Shares into the Depositary's
account at one of the Book-Entry Transfer Facilities (as defined in Section 2
of the Offer to Purchase) pursuant to the procedures set forth in Section 3 of
the Offer to Purchase, (ii) the Letter of Transmittal (or a facsimile thereof),
properly completed and duly executed, with any required signature guarantees or
an Agent's Message, as defined below, in
<PAGE>
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- --------------------------------------------------------------------------------
connection with a book-entry transfer and (iii) any other documents required
under the Letter of Transmittal. The term "Agent's Message" means a message,
transmitted by a Book-Entry Transfer Facility to, and received by, the
Depositary and forming a part of a Book-Entry Confirmation, which states that
such Book-Entry Transfer Facility has received an express acknowledgement from
the participant in such Book-Entry Transfer Facility tendering the Shares that
are the subject of such Book-Entry Confirmation, that such participant has
received and agrees to be bound by the terms of the Letter of Transmittal and
that the Offeror may enforce such agreement against such participant.
Subject to the terms and conditions of the Merger Agreement, the Offeror
expressly reserves the right, at any time and from time to time, to extend the
period of time during which the Offer is open, including the occurrence of any
condition specified in Section 15 of the Offer to Purchase, by giving oral or
written notice of such extension to the Depositary. Any such extension will be
followed as promptly as practicable by public announcement thereof, such
announcement to be made not later than 9:00 a.m., New York City time, on the
next business day after the previously scheduled expiration date of the Offer.
During any such extension, all Shares previously tendered and not withdrawn
will remain subject to the Offer and to the rights of a tendering stockholder
to withdraw such stockholder's Shares.
Tenders of Shares made pursuant to the Offer are irrevocable except that such
Shares may be withdrawn at any time prior to 12:00 Midnight, New York City
time, on Wednesday, September 18, 1996 (or the latest time and date at which
the Offer, if extended by the Offeror, shall expire) and, unless theretofore
accepted for payment by the Offeror pursuant to the Offer, may also be
withdrawn at any time after October 19, 1996. For the withdrawal to be
effective, a written, telegraphic, telex or facsimile transmission notice of
withdrawal must be timely received by the Depositary at its address set forth
on the back cover page of the Offer to Purchase. Any such notice of withdrawal
must specify the name of the person who tendered the Shares to be withdrawn,
the number of Shares to be withdrawn and the name of the registered holder of
such Shares, if different from that of the person who tendered such Shares. If
Share Certificates evidencing Shares to be withdrawn have been delivered or
otherwise identified to the Depositary, then, prior to the physical release of
such Share Certificates, the serial numbers shown on such Share Certificates
must be submitted to the Depositary and the signature(s) on the notice of
withdrawal must be guaranteed by an Eligible Institution (as defined in Section
3 of the Offer to Purchase), unless such Shares have been tendered for the
account of an Eligible Institution. If Shares have been tendered pursuant to
the procedures for book-entry transfer as set forth in Section 3 of the Offer
to Purchase, any notice of withdrawal must specify the name and number of the
account at the Book-Entry Transfer Facility to be credited with the withdrawn
Shares and must otherwise comply with such Book-Entry Transfer Facility's
procedures. All questions as to the form and validity (including the time of
receipt) of any notice of withdrawal will be determined by the Offeror, in its
sole discretion, whose determination will be final and binding.
The information required to be disclosed by Rule 14d-6(e)(1)(vii) of the
General Rules and Regulations under the Securities Exchange Act of 1934, as
amended, is contained in the Offer to Purchase and is incorporated herein by
reference.
The Company has provided the Offeror with the Company's stockholder list and
security position listings for the purpose of disseminating the Offer to
holders of Shares. The Offer to Purchase and the related Letter of Transmittal
will be mailed to record holders of Shares whose names appear on the Company's
stockholder list and will be furnished to brokers, dealers, commercial banks,
trust companies and similar persons whose names, or the names of whose
nominees, appear on the stockholder list or, if applicable, who are listed as
participants in a clearing agency's security position listing for subsequent
transmittal to beneficial owners of Shares.
THE OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION WHICH SHOULD BE READ BEFORE ANY DECISION IS MADE WITH RESPECT TO
THE OFFER.
Questions and requests for assistance or for copies of the Offer to Purchase
and the related Letter of Transmittal, and other tender offer materials may be
directed to the Information Agent or the Dealer Manager as set forth below, and
copies will be furnished promptly at the Offeror's expense. No fees or
commissions will be paid to brokers, dealers or other persons (other than the
Dealer Manager) for soliciting tenders of Shares pursuant to the Offer.
The Information Agent for the Offer is:
D.F. KING & CO., INC.
77 Water Street
New York, New York 10005
(212) 269-5550 (Call Collect)
(800) 848-3405 (Call Toll Free)
The Dealer Manager for the Offer is:
MERRILL LYNCH & CO.
World Financial Center
North Tower
New York, New York 10281-1330
(212) 236-4565 (Call Collect)
August 21, 1996
<PAGE>
EXHIBIT 4
FOR IMMEDIATE RELEASE AUGUST 15, 1996
SEARS TO ACQUIRE ORCHARD SUPPLY HARDWARE
CHICAGO, Illinois and SAN JOSE, California--Sears, Roebuck and Co. [NYSE: S]
and Orchard Supply Hardware Stores Corporation [NYSE: ORH] today announced the
signing of a definitive agreement providing for the acquisition of Orchard by
Sears for $35.00 per share or a total transaction value of approximately $415
million. Orchard operates 61 hardware superstores in California.
"By combining the strengths of Orchard and Sears Hardware Stores, we will
accelerate the growth of our successful off-the-mall hardware business," said
Arthur C. Martinez, Sears Chairman and Chief Executive Officer. "Orchard is
one of the most successful convenience-oriented hardware retailers in the
country, with a well-deserved reputation for excellent assortment, service and
management. Adding Orchard's high-performance locations to Sears Hardware
business and, in turn, extending the power of Sears Craftsman and DieHard
brands to Orchard's merchandise mix, will give Sears a unique profile in the
important California market."
"We believe this transaction is attractive for our stockholders and creates
an exciting opportunity for Orchard and its employees," said Maynard Jenkins,
President and Chief Executive Officer of Orchard. "Joining with Sears will
help both companies by combining the best practices of each company and will
help Orchard to fulfill its expansion plans."
Under the agreement, Sears will begin a cash tender offer on or about August
21, 1996 for all of Orchard's approximately 8,800,000 outstanding common
shares (including 1,280,000 shares issuable upon conversion of outstanding
shares of preferred stock) at a price of $35.00 net per share. The Orchard
Board of Directors unanimously approved the agreement and recommended that
Orchard stockholders tender their shares pursuant to the offer. After
successful completion of the tender offer, remaining shares of Orchard will be
acquired at the tender offer price through a merger. Orchard's Board of
Directors has received the opinion of Montgomery Securities that the
consideration payable in the tender offer and merger is fair, from a financial
point of view, to Orchard stockholders.
In connection with the acquisition agreement, affiliates of Freeman Spogli &
Co. Incorporated, Orchard's largest stockholders, have agreed to tender their
1,604,043 shares of common stock (including shares issued upon conversion of
preferred stock), which represent approximately 18.2% of Orchard's current
outstanding stock, and have also granted Sears an option on such shares at
$35.00 per share of common stock, which can be exercised under certain
circumstances. The definitive agreement provides for payment to Sears under
certain circumstances of a termination fee and reimbursement of expenses if
the Orchard Board of Directors, in the exercise of its fiduciary
responsibilities, terminates the definitive agreement or withdraws or modifies
its recommendation that Orchard stockholders tender their shares pursuant to
the offer.
Merrill Lynch & Co. will act as Dealer Manager for the tender offer. The
consummation of the tender offer is subject to certain customary conditions,
including the tender of a majority of Orchard's outstanding shares (on a fully
diluted basis) and expiration of the waiting period under the Hart-Scott-
Rodino Antitrust Improvements Act.
Orchard, through its 61 hardware superstores in California, specializes in
serving the needs of the "fix-it" homeowner focused on repair and maintenance
projects. Freeman Spogli & Co. Incorporated acquired Orchard in May 1989 and
the company completed its initial public offering in March 1993.
Sears, Roebuck and Co. owns and operates more than 2,300 department and
specialty stores in the U.S., including HomeLife furniture, Sears Hardware,
and automotive parts and tire outlets, which include 390 Western Auto stores.
Sears retail network also extends to 400 Sears-authorized dealer stores and
900 independently owned and operated Western Auto retail locations. Sears,
Roebuck and Co. is majority owner of Sears Canada and Sears Mexico. The
Hoffman Estates, Ill.-based company has annual revenue of more than $34
billion.
<PAGE>
For more information, please contact:
Sears, Roebuck and Co.
Janice R. Drummond
(847) 286-8316
Orchard Supply Hardware Stores Corporation
Stephen M. Hilberg, Vice President and Chief Financial Officer
(408) 365-2608
<PAGE>
AGREEMENT AND PLAN OF MERGER
By and among
ORCHARD SUPPLY HARDWARE
STORES CORPORATION,
GROVE ACQUISITION CORP.,
and
SEARS, ROEBUCK AND CO.
Dated as of August 14, 1996
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
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<S> <C> <C>
ARTICLE I -- THE TENDER OFFER..................................... 3
1.01 The Offer.............................................. 3
1.02 Company Action......................................... 5
ARTICLE II -- THE MERGER.......................................... 6
2.01 The Merger............................................. 6
2.02 Effective Time......................................... 7
2.03 Certificate of Incorporation........................... 7
2.04 By-Laws................................................ 7
2.05 Directors and Officers................................. 7
2.06 Further Assurances..................................... 7
2.07 Stockholders' Meeting.................................. 8
2.08 Company Board Representation; Section 14(f)............ 9
ARTICLE III -- CONVERSION OR CANCELLATION OF SHARES; STOCK RIGHTS. 10
3.01 Conversion or Cancellation of Shares................... 10
3.02 Exchange of Certificates; Paying Agent................. 11
3.03 Dissenters' Rights..................................... 12
3.04 Transfer of Shares After the Effective Time............ 13
3.05 Company Stock Rights................................... 13
ARTICLE IV -- REPRESENTATIONS AND WARRANTIES OF THE COMPANY....... 13
4.01 Organization, Qualification............................ 14
4.02 Company Subsidiaries................................... 14
4.03 The Company's Capitalization........................... 14
4.04 Company Investments.................................... 15
4.05 Authority.............................................. 15
4.06 Consents and Approvals; No Violation................... 16
4.07 SEC Reports; Financial Statements...................... 16
4.08 Proxy Statement; Offer Documents....................... 17
4.09 Undisclosed Liabilities................................ 17
4.10 Absence of Certain Changes or Events................... 18
4.11 Title, Etc............................................. 18
4.12 Patents, Trademarks, Etc............................... 19
4.13 Insurance.............................................. 19
4.14 Employee Benefit Plans................................. 19
</TABLE>
i
<PAGE>
<TABLE>
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<S> <C> <C>
4.15 Legal Proceedings, Etc................................ 21
4.16 Taxes................................................. 21
4.17 Material Agreements................................... 24
4.18 Compliance with Law................................... 24
4.19 Insider Interests..................................... 24
4.20 Environmental Protection.............................. 24
4.21 Labor Matters......................................... 26
4.22 Brokers and Finders................................... 26
ARTICLE V -- REPRESENTATIONS AND WARRANTIES OF
THE PARENT AND THE PURCHASER................................ 27
5.01 Corporation Organization.............................. 27
5.02 Authorized Capital.................................... 27
5.03 Authority............................................. 27
5.04 No Prior Activities................................... 27
5.05 No Financing Contingency.............................. 28
5.06 Governmental Filings; No Violations................... 28
5.07 Brokers and Finders................................... 28
5.08 Offer Documents; Proxy Statement; Other Information... 28
ARTICLE VI -- COVENANTS OF THE PARTIES........................... 29
6.01 Conduct of Business of the Company.................... 29
6.02 Notification of Certain Matters....................... 31
6.03 Access to Information................................. 31
6.04 Further Information................................... 32
6.05 Further Assurances.................................... 32
6.06 Best Efforts.......................................... 32
6.07 Filings............................................... 33
6.08 Public Announcements.................................. 33
6.09 Indemnity; D&O Insurance.............................. 33
6.10 Other Potential Bidders............................... 35
6.11 Employee Benefits..................................... 36
ARTICLE VII -- CONDITIONS TO THE MERGER.......................... 37
7.01 Conditions to Each Party's Obligation
to Effect the Merger.................................. 37
7.02 Conditions to the Obligations of the
Parent and the Purchaser to Effect the Merger......... 37
7.03 Conditions to the Obligations of the
Company to Effect the Merger.......................... 37
</TABLE>
ii
<PAGE>
<TABLE>
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<S> <C> <C>
ARTICLE VIII -- CLOSING.......................................... 38
8.01 Time and Place........................................ 38
8.02 Filings at the Closing................................ 38
ARTICLE IX -- TERMINATION; AMENDMENT; WAIVER..................... 38
9.01 Termination........................................... 38
9.02 Effect of Termination................................. 39
9.03 Fees and Expenses..................................... 40
ARTICLE X -- MISCELLANEOUS....................................... 41
10.01 Survival of Representations, Warranties,
Covenants and Agreements.............................. 41
10.02 Amendment and Modification............................ 41
10.03 Waiver of Compliance; Consents........................ 41
10.04 Counterparts.......................................... 41
10.05 Governing Law; Submission to Jurisdiction............. 41
10.06 Notices............................................... 42
10.07 Entire Agreement, Assignment Etc...................... 43
10.08 Validity.............................................. 43
10.09 Headings; Certain Definitions......................... 43
10.10 Specific Performance.................................. 43
</TABLE>
iii
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (hereinafter called this "Agreement"), dated
as of August 14, 1996, among Orchard Supply Hardware Stores Corporation, a
Delaware corporation (the "Company"), Grove Acquisition Corp., a Delaware
corporation (the "Purchaser"), and Sears, Roebuck and Co., a New York
corporation (the "Parent").
WHEREAS, the Board of Directors of the Company has determined that it is in
the best interests of its stockholders for the Purchaser to acquire the Company
upon the terms and subject to the conditions set forth herein;
WHEREAS, the Company, the Parent and the Purchaser desire to make certain
representations, warranties and agreements in connection with this Agreement;
WHEREAS, in furtherance of such acquisition, the Parent proposes to cause
the Purchaser to make the Offer (as defined in Section 1.01) to purchase all of
the issued and outstanding shares of common stock of the Company, par value $.01
per share (the "Common Stock"), upon the terms and subject to the conditions of
this Agreement, and the Board of Directors of the Company has approved the Offer
and determined to recommend that the Company's stockholders accept the Offer;
and
WHEREAS, to complete such acquisition, the respective Boards of Directors
of the Parent, the Purchaser and the Company, and the Parent acting as the sole
stockholder of the Purchaser, have approved the Offer and the merger of the
Purchaser with and into the Company upon the terms and subject to the conditions
of this Agreement, whereby each issued and outstanding share of Common Stock not
owned directly or indirectly by the Parent or the Company, except shares of
Common Stock held by persons who assert dissenters' rights of appraisal in
connection with such merger and demand payment of the value of their shares of
Common Stock, will be converted into the right to receive in cash the same price
per share of Common Stock paid pursuant to the Offer;
WHEREAS, in order to induce the Purchaser and the Parent to enter into this
Agreement, FS Equity Partners II, L.P., FS Equity Partners III, L.P. and FS
Equity Partners International, L.P., stockholders of the Company, and the
Company have entered into a Stockholder Tender and Option Agreement of even date
herewith (the "Stockholder Agreement"), pursuant to which such stockholders have
agreed to convert all of their Preferred Shares (as defined in Section 4.03)
into Common Stock and to tender such shares of Common Stock and all other shares
of Common Stock owned by them pursuant to and in accordance with the terms of
the Offer and have granted to the Parent an option to purchase all of the
Preferred Shares and shares of Common Stock owned by such Stockholders,
exercisable upon the terms and conditions set forth in such agreement; and
2
<PAGE>
NOW, THEREFORE, in consideration of the representations, warranties and
agreements herein contained, and subject to the terms and conditions herein
contained, the parties hereto hereby agree as follows:
ARTICLE I
THE TENDER OFFER
1.011 The Offer. (a) Provided that this Agreement shall not have been
terminated in accordance with Article IX and none of the events or conditions
set forth in Annex A shall have occurred and be existing, then, not later than
the first business day after execution of this Agreement, the Parent shall issue
a public announcement of the execution of this Agreement, and within five
business days of the date of the public announcement of the execution of this
Agreement, the Parent shall cause the Purchaser, subject to the provisions of
this Agreement, to commence a tender offer (the "Offer") for all of the
outstanding shares of Common Stock (the "Shares") at a price of $35.00 per
Share, net to the seller in cash. The Purchaser shall, and the Parent shall
cause the Purchaser to, accept for payment and pay for all Shares that have been
validly tendered and not withdrawn pursuant to the Offer at the earliest time
following expiration of the Offer that all conditions to the Offer set forth in
Annex A hereto shall have been satisfied or waived by the Purchaser. The
obligation of the Purchaser to accept for payment, purchase and pay for Shares
tendered pursuant to the Offer shall be subject to the conditions set forth in
Annex A hereto, including the condition that a number of Shares representing not
less than a majority of the outstanding Shares on a fully diluted basis,
assuming the conversion of all outstanding Preferred Shares in accordance with
their terms and the exercise of all outstanding Options (the "Fully Diluted
Shares"), shall have been validly tendered and not withdrawn prior to the
expiration date of the Offer (the "Minimum Condition"). Solely for purposes of
determining whether the Minimum Condition has been satisfied, any Shares owned
by Parent or Purchaser shall be deemed to have been validly tendered and not
withdrawn pursuant to the Offer. The Purchaser expressly reserves the right to
increase the price per Share payable in the Offer or to make any other changes
in the terms and conditions of the Offer; provided, however, that, unless
previously approved by the Company in writing, no change may be made that (i)
decreases the price per Share payable in the Offer, (ii) changes the form of
consideration to be paid in the Offer, (iii) imposes conditions to the Offer in
addition to those set forth in Annex A hereto, (iv) increases the minimum number
of Shares that must be tendered as a condition to the acceptance for payment and
payment for Shares in the Offer, (v) waives the Minimum Condition if such waiver
would result in less than a majority of Fully Diluted Shares being accepted for
payment or paid for pursuant to the Offer, or (vi) otherwise amends the terms of
the Offer (including any of the conditions set forth in Annex A) in a manner
that is materially adverse to holders of Shares. Notwithstanding the foregoing,
the Purchaser may, without the consent of the Company, extend the Offer if, at
the scheduled expiration date of the Offer, any of the conditions to the
Purchaser's obligation to purchase Shares are not satisfied until such time as
such conditions are satisfied. In the event that at any scheduled expiration
date of the Offer, either of the conditions set forth in paragraphs (ii) and
(iii)(a) or (b) (but only in the event that clause (b) is not satisfied due to
the entry of an appealable judgment, order or injunction) of Annex A shall not
have been satisfied, and the Purchaser and the Company shall reasonably believe
that such condition can be satisfied,
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the Purchaser shall extend the Offer from time to time until no later than
December 31, 1996 (any such extension, an "Extension Period"). During any
Extension Period, the parties shall consult with each other and use their
respective best efforts to cause paragraph (ii) or (iii)(a) or (b) (but only in
the event that clause (b) is not satisfied due to the entry of an appealable
judgment, order or injunction), as the case may be, of Annex A to be satisfied.
Except as set forth in the two immediately preceding sentences, it is agreed
that the conditions set forth in Annex A are for the sole benefit of the Parent
and the Purchaser and may be asserted by the Parent or the Purchaser regardless
of the circumstances giving rise to any such condition (including any action or
inaction by the Purchaser, unless any such action or inaction by the Purchaser
would constitute a breach by the Purchaser of any of its covenants under this
Agreement) or may be waived by the Parent or the Purchaser, in whole or in part
at any time and from time to time, in its sole discretion. The failure by the
Parent or the Purchaser at any time to exercise any of the foregoing rights
shall not be deemed a waiver of any such right and each such right shall be
deemed an ongoing right which may be asserted at any time and from time to time.
Any determination by the Parent or the Purchaser with respect to any of the
conditions set forth on Annex A (including, without limitation, the satisfaction
of such conditions) shall be final and binding on the parties, except with
respect to the Purchaser's extension obligation described above which shall be
subject to the determination to be made with the Company described above. The
Company agrees that no Shares held by the Company will be tendered in the Offer.
(b) As promptly as reasonably practicable following execution of this
Agreement, the Parent and the Purchaser shall file with the Securities and
Exchange Commission (the "SEC") a Tender Offer Statement on Schedule 14D-1 with
respect to the Offer, which shall contain an offer to purchase and related
letter of transmittal and summary advertisement (such Schedule 14D-1 and the
documents therein pursuant to which the Offer will be made, together with any
supplements or amendments thereto, the "Offer Documents"). The Offer Documents
shall comply as to form in all material respects with the requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules
and regulations promulgated thereunder and, on the date filed with the SEC and
on the date first published, sent or given to the holders of Shares, shall not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading, except that no representation is made by the Parent or the Purchaser
with respect to information supplied by the Company in writing specifically for
inclusion in the Offer Documents. Each of the Parent, the Purchaser and the
Company agrees promptly to correct any information supplied by it specifically
for inclusion in the Offer Documents if and to the extent that such information
shall have become false or misleading in any material respect, and each of the
Parent and the Purchaser further agrees to take all steps necessary to cause the
Offer Documents as so corrected to be filed with the SEC and to be disseminated
to holders of Shares, in each case as and to the extent required by applicable
federal securities laws. The Parent and the Purchaser agree to provide the
Company and its counsel in writing with any comments the Parent, the Purchaser
or their counsel may receive from the SEC or its Staff with respect to the Offer
Documents promptly after the receipt of such comments. The Company and its
counsel shall be given a reasonable opportunity to review and comment upon the
Offer Documents and all amendments
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and supplements thereto prior to their filing with the SEC or dissemination to
the stockholders of the Company.
(c) The Parent will make available to the Purchaser sufficient funds
sufficiently in advance of the Effective Time to consummate the Offer and the
Merger in accordance with the provisions of this Agreement.
1.012 Company Action. (a) The Company hereby approves of and consents to
the Offer and represents and warrants that the Board of Directors of the Company
(the "Board"), at a meeting duly called and held, has adopted resolutions (i)
determining that this Agreement and the transactions contemplated hereby,
including the Offer and the Merger (as defined in Section 2.01), are fair to,
and in the best interests of, the stockholders of the Company, (ii) approving
and adopting this Agreement and the transactions contemplated hereby, including
the Offer, the Merger and the Stockholder Agreement and the transactions
contemplated thereby, in all respects and that such approval constitutes
approval of the Offer, this Agreement, the Merger and the Stockholder Agreement
and the transactions contemplated hereby and thereby, for purposes of Section
203 of the General Corporation Law of the State of Delaware (the "DGCL") and
similar provisions of any other similar state statutes that might be deemed
applicable to the transactions contemplated hereby and (iii) recommending that
the stockholders of the Company accept the Offer, tender their Shares thereunder
to the Purchaser and approve and adopt this Agreement and the Merger; provided,
however, that such recommendation may be withdrawn, modified or amended to the
extent that the Board determines in its good faith judgment, based as to legal
matters on the written advice of outside legal counsel, that the directors are
required to do so for the proper discharge of their fiduciary duties under
applicable law.
(b) The Company has been advised by each of its executive officers and
each of its Directors, that each such person intends to tender pursuant to the
Offer all Shares owned or controlled by such person. The Company represents that
the Board has received the opinion of Montgomery Securities ("Montgomery") that
the consideration to be received by holders of Shares pursuant to the Offer and
the Merger is fair to such holders from a financial point of view, and the
Company has provided a copy of such opinion to the Parent.
(c) The Company shall use its best efforts to file with the SEC a
Solicitation/Recommendation Statement on Schedule 14D-9 with respect to the
Offer (such Schedule 14D-9, as amended from time to time, the "Schedule 14D-9")
on the date the Offer Documents are filed with the SEC, and in any event shall
file with the SEC the Schedule 14D-9 not later than the date the Offer is
commenced, containing the recommendation described in Section 1.02(a) and shall
mail the Schedule 14D-9 to the stockholders of the Company. The Schedule 14D-9
shall comply in all material respects with the requirements of the Exchange Act
and the rules and regulations promulgated thereunder on the date filed with the
SEC and on the date first published, sent or given to the Company's
stockholders, and shall not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading, except that no representation is made by the
Company with respect to information supplied in writing by the Parent or the
Purchaser specifically for inclusion or incorporation by reference in
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the Schedule 14D-9. Each of the Company, the Parent and the Purchaser agrees
promptly to correct any information provided by it for use in the Schedule 14D-9
if and to the extent that such information shall have become false or misleading
in any material respect, and the Company further agrees to take all steps
necessary to amend or supplement the Schedule 14D-9 and to cause the Schedule
14D-9 as so amended or supplemented to be filed with the SEC and disseminated to
the Company's stockholders, in each case as and to the extent required by
applicable federal securities laws. The Parent and its counsel shall be given a
reasonable opportunity to review and comment upon the Schedule 14D-9 and all
amendments and supplements thereto prior to their filing with the SEC or
dissemination to stockholders of the Company.
(d) In connection with the Offer, the Company will, and will cause its
transfer agent (the "Transfer Agent") to, furnish promptly to the Parent and the
Purchaser mailing labels containing the names and addresses of all record
holders of Shares as of the most recent practicable date and of those persons
becoming record holders after such date, together with copies of all lists of
stockholders and security position listing and computer files and all other
information in the Company's possession and control regarding the beneficial
ownership of Shares. The Company shall promptly furnish the Parent and the
Purchaser such additional information (including, but not limited to, updated
lists of holders of Shares and their addresses, mailing labels and security
position listings and computer files) and such other assistance as the Parent
and the Purchaser or their agents may reasonably request in communicating the
Offer to the record and beneficial holders of Shares. Subject to the
requirements of law, and except for such steps as are necessary or advisable to
disseminate the Offer and any other documents necessary to consummate the Merger
and to solicit tenders of Shares and the approval of the Merger, Parent and
Purchaser and each of their affiliates shall hold in confidence the information
contained in any of such labels, lists and additional information, shall use
such information only in connection with the Offer and the Merger, and, if this
Agreement shall be terminated, shall deliver to the Company all copies of such
information then in their possession or under their control.
ARTICLE II
THE MERGER
1.021 The Merger. Subject to the terms and conditions of this Agreement,
at the Effective Time (as defined in Section 2.02), the Parent shall cause the
Purchaser to merge (the "Merger") with and into the Company and the separate
corporate existence of the Purchaser shall thereupon cease. The Company shall
be the surviving corporation in the Merger (the Purchaser and the Company are
sometimes hereinafter referred to as the "Constituent Corporations" and the
Company is sometimes hereinafter referred to as the "Surviving Corporation") and
shall, following the Merger, be governed by the laws of the State of Delaware,
and the separate corporate existence of the Company, with all its rights,
privileges, immunities, powers and
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franchises, of a public as well as of a private nature, shall continue
unaffected by the Merger. From and after the Effective Time, the Merger shall
have the effects specified in the DGCL.
1.022 Effective Time. At the Closing contemplated in Section 8.01, the
Company and the Parent will cause a Certificate of Merger (the "Delaware
Certificate of Merger") or, if applicable, a Certificate of Ownership and Merger
to be filed with the Secretary of State of the State of Delaware as provided in
the DGCL. The Merger shall become effective as of the date and at the time the
Delaware Certificate of Merger or, if applicable, a Certificate of Ownership and
Merger is duly filed with the Secretary of State of the State of Delaware (or
such later time as may be specified therein), and such time is hereinafter
referred to as the "Effective Time."
1.023 Certificate of Incorporation. Subject to the obligations of the
Parent and the Purchaser under Section 6.09 to continue in force and effect
certain provisions of the Company's Certificate of Incorporation, the
Certificate of Incorporation of the Company (the "Certificate of Incorporation")
shall be amended at the Effective Time to read as set forth in Exhibit A hereto,
until duly amended in accordance with the terms thereof and the DGCL.
1.024 By-Laws. Subject to the obligations of the Parent and the Purchaser
under Section 6.09 to continue in force and effect certain provisions of the
Company's By-Laws, the By-Laws of the Purchaser as in effect immediately prior
to the Effective Time shall be the By-Laws of the Surviving Corporation, until
duly amended in accordance with the terms thereof and the DGCL.
1.025 Directors and Officers. At the Effective Time, the directors of the
Purchaser immediately prior to the Effective Time shall be the directors of the
Surviving Corporation, each of such directors to hold office, subject to the
applicable provisions of the Certificate of Incorporation and By-Laws of the
Surviving Corporation, until their respective successors shall be duly elected
or appointed and qualified. The officers of the Company immediately prior to
the Effective Time shall be the initial officers of the Surviving Corporation,
in each case until their respective successors are duly elected or appointed and
qualified.
1.026 Further Assurances. If at any time after the Effective Time the
Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments or assurances or any other acts or things are necessary,
desirable or proper: (a) to vest, perfect or confirm, of record or otherwise,
in the Surviving Corporation, its right, title or interest in, to or under any
of the rights, privileges, powers, franchises, properties or assets of either of
the Constituent Corporations, or (b) otherwise to carry out the purposes of this
Agreement, the proper officers and directors of the Surviving Corporation are
hereby authorized on behalf of the respective Constituent Corporations to
execute and deliver, in the name and on behalf of the respective Constituent
Corporations, all such deeds, bills of sale, assignments and assurances and do,
in the name and on behalf of the Constituent Corporations, all such other acts
and things necessary, desirable or proper to vest, perfect or confirm its right,
title or interest in, to or under any of the rights, privileges, powers,
franchises, properties or assets of the Constituent Corporations and otherwise
to carry out the purposes of this Agreement.
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1.027 Stockholders' Meeting. (a) In the event that the Purchaser owns
less than 90 percent of the outstanding shares of each class of the capital
stock of the Company following expiration of the Offer, the Company shall take
all action to the extent necessary to consummate the Merger in accordance with
applicable law, including:
(i) duly call, give notice of, convene and hold an annual or special
meeting of its stockholders (the "Stockholders' Meeting"), to be held as soon as
practicable, for the purpose of approving and adopting this Agreement, the
Merger and the transactions contemplated hereby and thereby;
(ii) except as otherwise required by the fiduciary duties of the Board or
as permitted by this Agreement, include in the Proxy Statement (as defined in
Section 4.08) the recommendation of the Board that stockholders of the Company
vote in favor of the approval and adoption of this Agreement and the Merger and
the other transactions contemplated hereby and thereby and the determination of
the Board that this Agreement and the transactions contemplated hereby,
including the Offer and the Merger, are fair to, and in the best interests of,
the stockholders of the Company; and
(iii) as soon as practicable after the Parent's request, prepare and file
a preliminary Proxy Statement with the SEC and, after consultation with the
Parent and the Purchaser, respond promptly to any comments made by the SEC with
respect to the Proxy Statement and any preliminary version thereof and cause the
Proxy Statement to be mailed to its stockholders at the earliest practicable
time after responding to all such comments to the satisfaction of the Staff of
the SEC and to obtain the necessary approvals by its stockholders of this
Agreement. Without limiting the generality of the foregoing, other than as
specifically set forth in clause (ii) above, the Company agrees that its
obligations pursuant to this Section 2.07(a) shall not be affected by either the
commencement, public proposal, public disclosure or other communication to the
Company by any third party of any offer to acquire some or all of the Shares or
all or any substantial portion of the assets of the Company or any change in the
recommendation of the Board.
(b) The Company, the Parent and the Purchaser, as the case may be, shall
promptly prepare and file any other filings required under the Exchange Act or
any other Federal or state securities or corporate laws relating to the Merger
and the transactions contemplated herein (the "Other Filings"). Each of the
parties hereto shall notify the other parties hereto promptly of the receipt by
it of any comments from the SEC or its Staff and of any request of the SEC for
amendments or supplements to the Proxy Statement or by the SEC or any other
governmental officials with respect to any Other Filings or for additional
information and will supply the other parties hereto with copies of all
correspondence between it and its representatives, on the one hand, and the SEC
or the members of its Staff or any other governmental officials, on the other
hand, with respect to the Proxy Statement, any Other Filings or the Merger. The
Company, the Parent and the Purchaser each shall use its best efforts to obtain
and furnish the information required to be included in the Proxy Statement, any
Other Filings or the Merger. If at any time prior to the time of approval and
adoption of this Agreement by the Company's stockholders there shall occur any
event that should be set forth in an
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amendment or supplement to the Proxy Statement, the Company shall promptly
prepare and mail to its stockholders such amendment or supplement. The Company
shall not mail the Proxy Statement or, except as required by the Exchange Act or
the rules and regulations promulgated thereunder, any amendment or supplement
thereto, to the Company's stockholders unless the Company has first obtained the
consent of the Parent to such mailing. The date set forth in Section 9.01(b)
shall be extended by the number of days elapsed between the date such proposed
amendment or supplement is provided to the Parent and the date the Parent
consents to such mailing.
(c) At the Stockholders' Meeting, the Parent, the Purchaser and their
affiliates will vote all Shares owned by them and will exercise all voting
rights or proxies held by them in favor of approval and adoption of this
Agreement, the Merger, and the transactions contemplated hereby and thereby.
(d) Notwithstanding the foregoing, in the event that the Purchaser shall
acquire at least 90 percent of the outstanding Shares (assuming the conversion
of all outstanding Preferred Shares in accordance with their terms), the parties
hereto agree, at the request of the Purchaser, to take all necessary and
appropriate action to cause the Merger to become effective, in accordance with
Section 253 of the DGCL, as soon as reasonably practicable after such
acquisition and satisfaction or waiver of the conditions of Article VII, without
a meeting of the stockholders of the Company.
2.08 Company Board Representation; Section 14(f).
(a) Promptly upon the purchase by the Purchaser of the Shares pursuant to
the Offer, and from time to time thereafter, the Purchaser shall be entitled to
designate up to such number of directors, rounded up to the next whole number,
on the Board as shall give the Purchaser representation on the Board equal to
the product of the total number of directors on the Board (giving effect to the
directors elected pursuant to this sentence) multiplied by the percentage,
expressed as a decimal, that the aggregate number of shares of Common Stock
beneficially owned by the Purchaser or any affiliate of the Purchaser following
such purchase bears to the total number of shares of Common Stock then
outstanding, and the Company shall, at such time and promptly take all actions
necessary to cause the Purchaser's designees to be elected as directors of the
Company, including increasing the size of the Board or securing the resignations
of incumbent directors, or both. The Company shall cause persons designated by
the Purchaser to constitute the same percentage as persons designated by the
Purchaser shall constitute of the Board to be appointed to (i) each committee of
the Board, (ii) the board of directors of each subsidiary of the Company and
(iii) each committee of each such board, in each case only to the extent
permitted by applicable law. Notwithstanding the foregoing, until the earlier
of (i) the time the Purchaser acquires a majority of the Fully Diluted Shares,
and (ii) the Effective Time, the Company shall use its best efforts to ensure
that all the members of the Board and each committee of the Board and such
boards and committees of each subsidiary of the Company as of the date hereof
who are not employees of the Company shall remain members of the Board and of
such boards and committees.
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(b) The Company shall promptly take all actions required pursuant to
Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder in order
to fulfill its obligations under this Section 2.08, and shall include in the
Schedule 14D-9 such information with respect to the Company and its officers and
directors as is required under Section 14(f) and Rule 14f-1 to fulfill such
obligations. The Parent and the Purchaser shall supply to the Company and be
solely responsible for any information with respect to either of them and their
nominees, officers, directors and affiliates required by such Section 14(f) and
Rule 14f-1.
(c) Following the election or appointment of designees of the Purchaser
pursuant to this Section 2.08, prior to the Effective Time, the Parent and the
Purchaser each specifically acknowledge and agree that any amendment of this
Agreement or, subject to the provisions of Section 6.09 of this Agreement, the
Certificate of Incorporation or Bylaws of the Company, any termination of this
Agreement by the Company, any extension by the Company of the time for the
performance of any of the obligations or other acts of the Company or the
Purchaser or waiver of any of the Company's rights hereunder, shall require the
concurrence of a majority of the directors of the Company then in office who
neither were designated by the Purchaser nor are employees of the Company.
ARTICLE III
CONVERSION OR CANCELLATION OF SHARES; STOCK RIGHTS
1.031 Conversion or Cancellation of Shares. At the Effective Time, by virtue of
the Merger and without any action on the part of the holders thereof:
(a) Each Share issued and outstanding immediately prior to the Effective
Time (other than Shares owned by the Parent or any wholly-owned subsidiary of
the Parent (collectively, the "Parent Companies"), Shares held by stockholders
exercising appraisal rights pursuant to Section 262 of the DGCL (the "Dissenting
Stockholders"), and any shares held in the treasury of the Company) shall be
converted into and represent the right to receive, without interest, an amount
in cash equal to the greater of $35.00 net or the amount per share which may be
paid pursuant to the Offer as it may be amended (the "Merger Consideration")
upon surrender of the certificate or certificates that, immediately prior to the
Effective Time, represented issued and outstanding Shares (the "Certificates").
As of the Effective Time, all such Shares shall no longer be outstanding, shall
be automatically cancelled and shall cease to exist, and each holder of a
Certificate which formerly represented any such Shares shall thereafter cease to
have any rights with respect to such Shares, except the right to receive the
Merger Consideration without interest for such Shares upon the surrender of such
Certificate or Certificates in accordance with Section 3.02.
(b) Each Share issued and outstanding immediately prior to the Effective
Time and owned by any of the Parent Companies, and each Share issued and held in
the Company's treasury immediately prior to the Effective Time, shall no longer
be outstanding, shall
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be cancelled without payment of any consideration therefor and shall cease to
exist, and each holder of a Certificate representing any such Shares shall
thereafter cease to have any rights with respect to such Shares.
(c) Each share of Common Stock, par value $.01 per share, of the Purchaser
issued and outstanding immediately prior to the Effective Time shall be
converted into and become one fully-paid and non-assessable share of Common
Stock, par value $.01 per share, of the Surviving Corporation.
(d) Each Preferred Share issued and outstanding immediately prior to the
Effective Time shall be converted into and represent the right to receive,
without interest, an amount in cash equal to the product of the Merger
Consideration and the number of shares of Common Stock into which such Preferred
Shares are convertible immediately prior to the Effective Time plus any accrued
and unpaid dividends with respect thereto in accordance with the certificate of
designation with respect to the Preferred Shares prior to the Effective Time,
upon surrender of the Certificates representing any such Preferred Shares.
1.032 Exchange of Certificates; Paying Agent. (a) Prior to the Closing,
the Parent shall select a bank or trust company to act as paying agent (the
"Paying Agent") for the payment of the cash consideration specified in Section
3.01 pursuant to irrevocable instructions from the Parent upon surrender of
Certificates converted into the right to receive cash pursuant to the Merger.
Prior to the Effective Time, the Parent shall make available, or cause the
Purchaser to make available, to the Paying Agent immediately available funds in
the amount of the Merger Consideration multiplied by the number of outstanding
Shares (assuming the conversion of all outstanding Preferred Shares in
accordance with their terms) (the "Funds") upon surrender of Certificates and
certificates for Preferred Shares pursuant to Section 3.01, it being understood
that any and all interest earned on the Funds shall be paid over by the Paying
Agent as the Parent shall direct. The Funds shall be held as a separate fund and
not used for any purpose except as provided herein. The Company shall have the
right to approve the Parent's agreement with the Paying Agent, which approval
shall not be unreasonably withheld and may not be withheld if such agreement
contains customary terms and conditions for such agreements and is not
inconsistent with this Agreement.
(b) Promptly after the Effective Time, the Paying Agent shall mail to each
person who was, at the Effective Time, a holder of record of a Certificate or
Certificates, other than the Company or any of the Parent Companies, a letter of
transmittal and instructions for use in effecting the surrender, in exchange for
payment in cash therefor, of the Certificates. The letter of transmittal shall
specify that delivery shall be effected, and risk of loss and title shall pass,
only upon proper delivery to and receipt of such Certificates by the Paying
Agent and shall be in such form and have such provisions as the Parent shall
reasonably specify. Upon surrender to the Paying Agent of such Certificates,
together with the letter of transmittal, duly executed and completed in
accordance with the instructions thereto and such other documents as may be
Paying Agent shall promptly pay to the persons entitled thereto, out of the
Funds, a check in the amount to which such persons are entitled pursuant to
Section 3.01(a), after giving effect to any required tax withholdings, and such
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Certificate shall forthwith be cancelled. No interest will be paid or will
accrue on the amount payable upon the surrender of any such Certificates. If
payment is to be made to a person other than the registered holder of the
Certificates surrendered, it shall be a condition of such payment that the
Certificates so surrendered shall be properly endorsed or otherwise in proper
form for transfer and that the person requesting such payment shall pay any
transfer or other taxes required by reason of the payment to a person other than
the registered holder of the Certificates surrendered or establish to the
satisfaction of the Surviving Corporation or the Paying Agent that such tax has
been paid or is not applicable. Until surrendered as contemplated by this
Section 3.02, each Certificate shall be deemed at any time after the Effective
Time to represent only the right to receive upon such surrender the amount of
cash, without interest, into which the Shares theretofore represented by such
Certificate shall have been converted pursuant to Section 3.01. No interest
shall accrue or be paid on any portion of the Merger Consideration.
(c) One hundred eighty days following the Effective Time, the Surviving
Corporation shall be entitled to cause the Paying Agent to deliver to it any
Funds (including any interest, dividends, earnings or distributions received
with respect thereto which shall be paid as directed by the Parent) made
available to the Paying Agent by the Parent which have not been disbursed, and
thereafter holders of Certificates who have not theretofore complied with the
instructions for exchanging their Certificates shall be entitled to look only to
the Surviving Corporation for payment as general creditors thereof with respect
to the cash payable upon due surrender of their Certificates.
(d) Except as otherwise provided herein, the Parent shall pay all charges
and expenses, including those of the Paying Agent, in connection with the
exchange of the Merger Consideration for Certificates.
(e) Notwithstanding anything to the contrary in this Section 3.02, none of
the Paying Agent, the Parent, the Company, the Surviving Corporation or the
Purchaser shall be liable to a holder of a Certificate formerly representing
Shares for any amount properly delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law. If Certificates are not
surrendered prior to two years after the Effective Time (or immediately prior to
such earlier date on which any payment pursuant to this Article III would
otherwise escheat or become the property of any Federal, state or local
government agency or authority, court or commission), unclaimed funds payable
with respect to such Certificates shall, to the extent permitted by applicable
law, become the property of the Surviving Corporation, free and clear of all
claims or interest of any person previously entitled thereto.
1.033 Dissenters' Rights. Notwithstanding the provisions of Section 3.01
or any other provision of this Agreement to the contrary, Shares that have not
been voted in favor of the approval and adoption of the Merger and with respect
to which appraisal rights shall have been demanded and perfected in accordance
with Section 262 of the DGCL (the "Dissenting Shares") and not withdrawn shall
not be converted into the right to receive cash at or after the Effective Time,
but such Shares shall become the right to receive such consideration as may be
determined to be due to holders of Dissenting Shares pursuant to the laws of the
State of Delaware unless and until the holder of such Dissenting Shares
withdraws his or her demand for such appraisal in
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accordance with the DGCL or becomes ineligible for such appraisal. If a holder
of Dissenting Shares shall withdraw his or her demand for such appraisal or
shall become ineligible for such appraisal (through failure to perfect or
otherwise), then, as of the Effective Time or the occurrence of such event,
whichever last occurs, such holder's Dissenting Shares shall automatically be
converted into and represent the right to receive the Merger Consideration,
without interest, as provided in Section 3.01(a) and in accordance with the
DGCL. The Company shall give the Parent (i) prompt notice of any demands for
appraisal of Shares received by the Company and (ii) the opportunity to
participate in and direct all negotiations and proceedings with respect to any
such demands. The Company shall not, without the prior written consent of the
Parent, make any payment with respect to, or settle, offer to settle or
otherwise negotiate, any such demands.
1.034 Transfer of Shares After the Effective Time. No transfers of Shares
shall be made in the stock transfer books of the Surviving Corporation at or
after the Effective Time. If, after the Effective Time, Certificates formerly
representing Shares are presented to the Surviving Corporation, they shall be
cancelled and exchanged for the Merger Consideration set forth in Section 3.01.
1.035 Company Stock Rights. Prior to consummation of either the Offer or
the Effective Time or both, the Company may enter into agreements in respect of
outstanding options to purchase shares of Common Stock of the Company (the
"Options") pursuant to the Company's 1989 Nonqualified Stock Option Plan (the
"1989 Plan"), its 1993 Non-Employee Directors Stock Option Plan, its 1993 Stock
Option Plan and its 1996 Non-Employee Directors Stock Option Plan (collectively,
the "Stock Option Plans") and any other Options set forth on Schedule 3.05,
providing for the payment upon surrender of the Option upon consummation of the
Offer or at the Effective Time of an amount of cash per share subject to each
such Option equal to the difference between the exercise price of such Option
and the Merger Consideration, less an amount equal to all taxes required to be
withheld from such payment. Any Options not so surrendered or exercised one day
prior to the Effective Time (or earlier in the case of the 1989 Plan) shall
terminate in accordance with the terms of the Stock Option Plans or agreements
with optionees. The Company may accelerate the vesting of any outstanding
Options in accordance with the terms thereof.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Parent and the Purchaser
that:
1.041 Organization, Qualification. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and has all requisite corporate power and authority to own, lease and
operate its properties and carry on its business as now being conducted. The
Company is duly qualified to do business and is in good standing in each
jurisdiction in which the nature of the Company's business or the location of
its properties
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makes such qualification necessary, except for any such failure to qualify or be
in good standing as shall not have a Material Adverse Effect (as defined in
Section 4.06) on the Company. The Company Disclosure Letter (as defined in
Section 4.06) identifies, and the Company has heretofore made available to the
Parent, complete and correct copies of the Certificate of Incorporation and By-
Laws of the Company, as currently in effect.
1.042 Company Subsidiaries. The Company Disclosure Letter lists all
subsidiaries of the Company. Except as indicated in the Company Disclosure
Letter, all of the outstanding shares of capital stock of each such subsidiary
are owned by the Company either directly or indirectly through another of its
subsidiaries. Except as set forth in the Company Disclosure Letter, no equity
securities of any subsidiary of the Company are or may be required to be issued
(other than to the Company or its other subsidiaries) by reason of any Equity
Rights (as defined in Section 4.03) for shares of the capital stock of any
subsidiary of the Company, and there are no contracts, commitments,
understandings or arrangements by which any subsidiary of the Company is bound
to issue (other than to the Company) additional shares of its capital stock or
options, warrants or rights to purchase or acquire any additional shares of its
capital stock. Except as set forth in the Company Disclosure Letter, there are
no contracts, commitments, understandings or arrangements by which the Company
or any of its subsidiaries is or may be obligated to transfer any shares of the
capital stock of any subsidiary of the Company. Except as set forth in the
Company Disclosure Letter, all of the shares of capital stock of each subsidiary
of the Company held by the Company or any subsidiary of the Company are fully
paid and nonassessable and are owned by the Company or such subsidiary of the
Company free and clear of any claim, lien or encumbrance other than restrictions
on transferability under federal and any applicable state securities laws. Each
subsidiary of the Company is duly organized, validly existing and in good
standing under the laws of the jurisdiction in which it is incorporated or
organized, has the corporate power and authority necessary for it to own or
lease its properties and assets and to carry on its business as it is now being
conducted, and is duly qualified to do business and in good standing in the
states of the United States in which the ownership of its property or the
conduct of its business requires it to be so qualified, except for such
jurisdictions in which the failure to be so qualified and in good standing would
not have a Material Adverse Effect. As used in this Agreement, the term
"subsidiary" shall mean, with respect to the Company, any corporation or other
legal entity of which the Company or any of its subsidiaries controls or owns,
directly or indirectly, 50% or more of the stock or other equity interest
entitled to vote on the election of members to the board of directors or similar
governing body.
1.043 The Company's Capitalization. The authorized capital stock of the
Company consists of (i) 16,000,000 Shares, and (ii) 2,000,000 shares of
Preferred Stock, $.01 par value ("Preferred Stock"). As of the close of business
on March 29, 1996, there were (i) 7,528,198 Shares issued and outstanding and no
Shares held in the Company's treasury and (ii) 800,000 shares of Preferred Stock
denominated the 6% Cumulative Preferred Stock Series 1 and 2 (collectively, the
"Preferred Shares") issued and outstanding. All outstanding Shares have been
duly authorized and validly issued, and are fully paid, nonassessable and free
of preemptive rights. Except for the Options described in Section 3.05 hereof
and except as set forth on the Company Disclosure Letter, there are not now, and
at the Effective Time there will not be, any subscriptions, options, warrants,
calls, rights, agreements or commitments relating to the
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issuance, sale, delivery or transfer by the Company (including any right of
conversion or exchange under any outstanding security or other instrument) of
its Shares (collectively, "Equity Rights"). There are no outstanding contractual
obligations of the Company to repurchase, redeem or otherwise acquire any
Shares. The Company Disclosure Letter contains a complete and accurate list of
all holders of Options and any other options or rights of any kind to purchase
or acquire shares of the Common Stock of the Company, together with the number
of such options and the terms of such options held by each such holder.
1.044 Company Investments. Except for interests in the Company's
subsidiaries and except as set forth in the Company Disclosure Letter, neither
the Company nor any of the Company's subsidiaries owns or has the right to
acquire, directly or indirectly, any interest or investment (whether equity or
debt) in any corporation, partnership, joint venture, business, trust or entity,
other than (i) non-controlling investments made in the ordinary course of
business and corporate partnering, development, cooperative marketing and
similar undertakings and arrangements entered into in the ordinary course of
business, and (ii) other investments of less than $250,000 in the aggregate.
1.045 Authority. The Company has full corporate power and authority to
execute, deliver and perform (subject to approval by the Company's stockholders)
this Agreement and the Stockholder Agreement and to consummate the transactions
contemplated hereby and thereby. This Agreement and the Stockholder Agreement
have been duly and validly approved by the Board, and the execution, delivery
and performance of this Agreement and the Stockholder Agreement and the
consummation of the transactions contemplated hereby and thereby have been duly
and validly authorized by the Board and, except for the approval of the Merger
by the holders of at least a majority of the Shares in accordance with the DGCL,
no other corporate actions on the part of the Company are necessary to authorize
this Agreement and the Stockholder Agreement or to consummate the transactions
contemplated hereby and thereby, including the acquisition of Shares pursuant to
the Offer and the Merger. The Company has taken all actions necessary to render
the prohibitions of Section 203 of the DGCL to be inapplicable to the execution
and delivery of this Agreement and the Stockholder Agreement and the
transactions contemplated hereby and thereby , including the acquisition of the
Shares pursuant to the Offer and the Merger. To the knowledge of the Company, no
other "fair price," "merger moratorium," "control share acquisition" or other
anti-takeover statute or similar statute or regulation applies or purports to
apply to the Merger, this Agreement, the Stockholder Agreement or any of the
transactions contemplated hereby or thereby. This Agreement and the Stockholder
Agreement have been duly and validly executed and delivered by the Company and,
assuming due authorization, execution and delivery by the Parent and the
Purchaser, constitute valid and binding agreements of the Company, enforceable
against the Company in accordance with their terms, except to the extent that
enforceability may be limited by applicable bankruptcy, reorganization,
insolvency, moratorium or other laws affecting the enforcement of creditors'
rights generally and by general principles of equity, regardless of whether such
enforceability is considered in a proceeding in equity or at law.
1.046 Consents and Approvals; No Violation. Except as set forth on the
Company Disclosure Letter delivered to the Parent as of the date of this
Agreement (the
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"Company Disclosure Letter"), and except for any required approval of the Merger
by the stockholders of the Company and the filing of the Delaware Certificate of
Merger in accordance with the DGCL, neither the execution, delivery and
performance of this Agreement and the Stockholder Agreement by the Company nor
the consummation by it of the transactions contemplated hereby and thereby will
(i) conflict with or result in any breach of any provision of the Certificate of
Incorporation or By-Laws of the Company; (ii) require any consent, approval,
authorization or permit of, or filing with or notification to, any governmental
or regulatory authority, except (A) in connection with the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), (B) in
connection with the Securities Act of 1933, as amended (the "Securities Act")
and the Exchange Act and (C) where the failure to obtain such consent, approval,
authorization or permit, or to make such filing or notification, would not have
a Material Adverse Effect; (iii) constitute a breach or result in a default
under, or give rise to any right of termination, amendment, cancellation or
acceleration under, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, license, contract, agreement or other instrument or
obligation of any kind to which the Company is a party or by which the Company
or any of its assets may be bound, except for any such breach, default or right
as to which requisite waivers or consents have been obtained or which, in the
aggregate, would not have a Material Adverse Effect; or (iv) assuming compliance
with the DGCL and the HSR Act, violate any order, writ, injunction, judgment,
decree, law, statute, rule, regulation or governmental permit or license
applicable to the Company or any of its assets, which violation would have a
Material Adverse Effect.
For purposes of this Agreement, "Material Adverse Effect" means a material
adverse effect on the business, assets, financial condition or results of
operation of the Company and its subsidiaries considered on a consolidated basis
or on the ability of the Company, the Parent or the Purchaser to consummate the
transactions contemplated by this Agreement, or any event or events which,
individually or in the aggregate, constitute or, with the passage of time, would
constitute a "Material Adverse Effect."
1.047 SEC Reports; Financial Statements. The Company has filed all
required forms, reports and documents with the SEC since April 6, 1993
(collectively, the "SEC Reports"), each of which has complied in all material
respects with all applicable requirements of the Securities Act, and the
Exchange Act, each as in effect on the dates so filed. None of such forms,
reports or documents, including, without limitation, any financial statements or
schedules included or incorporated by reference therein, contained, when filed,
any untrue statement of a material fact or omitted to state a material fact
required to be stated or incorporated by reference therein or necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading. The Company has heretofore made available or promptly
will make available to the Parent, a complete and correct copy of any amendment
to the SEC Reports. The Company has previously furnished to the Parent audited
consolidated balance sheets of the Company and its subsidiaries as of the end of
each fiscal year in the three-year period ended January 28, 1996, and the
related audited consolidated statements of income, statements of cash flow or
changes in financial position and changes in stockholders' equity of the Company
and its subsidiaries for the fiscal years then ended (collectively, the "Related
Statements"), together with the respective reports thereon of Arthur Andersen
LLP. The
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unaudited consolidated balance sheet of the Company and its subsidiaries as of
April 28, 1996 is hereinafter referred to as the "Company Balance Sheet." Each
of the balance sheets included in the financial statements referred to in this
Section 4.07 (including the related notes thereto) presents fairly the financial
position of the Company and its subsidiaries as of their respective dates, and
the Related Statements included therein (including the related notes thereto)
present fairly the consolidated results of operations, the cash flows or changes
in financial position, and changes in stockholders' equity for the periods then
ended, all in conformity with generally accepted accounting principles applied
on a consistent basis, except as otherwise noted therein.
1.048 Proxy Statement; Offer Documents. Any proxy or similar materials
distributed to the Company's stockholders in connection with the Merger,
including any amendments or supplements thereto (the "Proxy Statement"), will
comply in all material respects with applicable federal securities laws and will
not contain any untrue statements of a material fact required to be stated
therein or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading, except that no representation is
made by the Company with respect to information supplied by the Parent or the
Purchaser in writing for inclusion in the Proxy Statement. None of the
information supplied by the Company in writing for inclusion in the Offer
Documents or provided by the Company in the Schedule 14D-9 will, at the
respective times that the Offer Documents and the Schedule 14D-9 or any
amendments or supplements thereto are filed with the SEC and are first published
or sent or given to holders of Shares, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
1.049 Undisclosed Liabilities. Except as set forth on the Company
Disclosure Letter or reflected in the financial statements referred to in
Section 4.07 or with respect to liabilities incurred in the ordinary course of
business since the date of the Company Balance Sheet, neither the Company nor
any of its subsidiaries has any material liability or obligation, secured or
unsecured (whether absolute, accrued, contingent or otherwise, and whether due
or to become due) which would be required to be disclosed in financial
statements prepared in accordance with generally accepted accounting principles.
Except as set forth in the Company Disclosure Letter, the Company has not
engaged, and prior to the Effective Time will not engage in any hedging
transactions or transactions in derivative securities.
4.10 Absence of Certain Changes or Events. Except as set forth on the
Company Disclosure Letter, since the date of the Company Balance Sheet (i) the
business of the Company and its subsidiaries has been conducted in the ordinary
course (except as otherwise contemplated by this Agreement) and (ii) there has
not been any change which has had a Material Adverse Effect.
4.11 Title, Etc. (a) The Company Disclosure Letter sets forth a list of
all of the real property (the "Real Property") which is owned in fee by the
Company and any of its subsidiaries. The Company or such subsidiary, as the
case may be, has, with respect to personal property, good, and, with respect to
Real Property, good, marketable and insurable, title to all of
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the properties and assets which it purports to own and which are material to the
business, operation or financial condition of the Company and its subsidiaries
free and clear of all mortgages, security interests, liens, claims, charges or
other encumbrances of any nature whatsoever, except for (i) any mortgages,
security interests, claims, charges, liens, encumbrances or defects reflected in
the Company Balance Sheet or disclosed in the notes thereto; (ii) any mortgages,
security interests, claims, charges, liens, encumbrances or defects which do not
materially detract from the aggregate fair market value (free of such liens,
encumbrances or defects) of the property or assets subject thereto or materially
interfere with the current use by the Company and its subsidiaries of the
property or assets subject thereto or affected thereby or otherwise have a
Material Adverse Effect; (iii) any liens or encumbrances for taxes not
delinquent or which are being contested in good faith, provided that adequate
reserves for the same have been established on the Company Balance Sheet to the
extent required by generally accepted accounting principles; (iv) any liens or
encumbrances for current taxes and assessments not yet past due; (v) any
inchoate mechanic's and materialmen's liens and encumbrances for construction in
progress; (vi) any workmen's, repairmen's, warehousemen's and carriers' liens
and encumbrances arising in the ordinary course of business, so long as such
liens have not been filed; (vii) any liens of the type referred to in (vi) above
that have been filed, so long as such liens do not aggregate in excess of
$100,000 (excluding any such liens that are being contested in good faith in
appropriate proceedings); (viii) liens securing obligations under the Credit
Agreement (as defined in Section 6.01); and (ix) with respect to Real Property,
any restrictions, licenses, "covenants, conditions and restrictions", liens,
encumbrances, defects, irregularities in title and other similar charges or
encumbrances, including but not limited to, easements, quasi-easements, rights
of way, land use ordinances and zoning plans, which do not materially interfere
with the current use by the Company and its subsidiaries of the Real Property.
(b) The Company Disclosure Letter sets forth a list of all of the material
leases and subleases (the "Real Property Leases") under which, as of the date
hereof, the Company or any subsidiary has the right to occupy space. The Company
has heretofore delivered to the Parent a true, correct and complete copy of all
of the Real Property Leases, including all amendments thereto. All Real Property
Leases and material leases pursuant to which the Company or any subsidiary
leases personal property from others are, in all material respects, valid,
binding and enforceable in accordance with their terms; neither the Company nor
any subsidiary has received notice of any default by the Company or any
subsidiary under any Real Property Lease which would have a Material Adverse
Effect; there are no existing defaults, or, to the knowledge of the Company, any
condition or event which with the giving of notice or lapse of time would
constitute a default, by the Company or any subsidiary thereunder which would
have a Material Adverse Effect; and, with respect to the Company's or any
subsidiary's obligations thereunder without qualification and with respect to
the obligations of all other parties thereto, to the knowledge of the Company,
no uncured default or event or condition on the part of any landlord exists
under any Real Property Lease which with the giving of notice or the lapse of
time would constitute a default thereunder which would have a Material Adverse
Effect.
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(c) Except as set forth in the Company Disclosure Letter, all of the land,
buildings, structures and other improvements occupied by the Company and its
subsidiaries in the conduct of its business are included in the Real Property or
the Real Property Leases.
(d) Except as set forth in the Company Disclosure Letter, neither the
Company or any subsidiary owns or holds, nor is obligated under or a party to,
any option, right of first refusal or other contractual right to purchase,
acquire, sell or dispose of the Real Property and the Real Property Leases or
any portion thereof or interest therein.
4.12 Patents, Trademarks, Etc. The Company Disclosure Letter identifies
all registered trademarks, copyrights and patents owned or licensed by the
Company and its subsidiaries as of the date hereof, other than trademarks, trade
names and other similar rights owned by third parties and licensed for use by
the Company in the sale of products in the ordinary course of its business. To
the Company's best knowledge, the Company or its subsidiaries own, or are
licensed or otherwise have adequate right to use, all patents, patent rights,
trademarks, trademark rights, service marks, service mark rights, trade names,
trade name rights, copyrights, know-how, technology, trade secrets and other
proprietary information (collectively, the "Intellectual Property") which are
material to the conduct of the business of the Company and its subsidiaries.
Except as set forth in the Company Disclosure Letter, subsequent to July 31,
1991, (i) no claims have been asserted by any person and (ii) neither the
Company nor any of its subsidiaries has asserted a claim against any person,
with respect to any of the Intellectual Property owned or used by the Company or
its subsidiaries or challenging or questioning the validity or effectiveness of
any license or agreement relating thereto to which the Company or any subsidiary
is a party.
4.13 Insurance. The Company Disclosure Letter identifies all material
property, general liability and casualty and workers' compensation insurance
policies which currently insure the Company and its subsidiaries and the Company
shall use its reasonable efforts to keep such policies in full force and effect
up to the Closing Date. Such policies are adequate in the view of the management
of the Company for the assets and operations of the Company and its
subsidiaries.
4.14 Employee Benefit Plans. (a) For purposes of this Section 4.14,
"Company Benefit Plans" means (i) all employee pension and welfare benefit
plans, agreements and arrangements described in section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), including without
limitation, all qualified retirement plans and medical, dental, life insurance
and other similar plans, maintained by the Company or any subsidiary, to which
the Company or any subsidiary has contributed or been required to contribute, or
with respect to which the Company or any subsidiary of the Company has a
liability, whether direct or indirect, actual or contingent, (ii) all stock
option, change of control and similar plans, agreements and arrangements
maintained by the Company or any subsidiary of the Company, and (iii) all
material employment, bonus, incentive, and similar plans, agreements and
arrangements maintained by the Company or any subsidiary of the Company.
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(b) The Company Disclosure Letter sets forth a list of all Company Benefit
Plans and the Company has delivered or made available to the Parent, where
applicable, accurate and complete copies of all Company Benefit Plan texts and
related agreements and any summary plan descriptions with respect thereto.
(c) Except as set forth in the Company Disclosure Letter with respect to
each Company Benefit Plan: (i) such Plan has been administered and enforced in
all material respects in accordance with its terms and ERISA, the Code and other
applicable law; (ii) to the best knowledge of the Company and its subsidiaries,
no breach of fiduciary duty or non-exempt prohibited transaction that could
result in a material liability has occurred; (iii) no actions, suits, claims or
disputes with respect to material liabilities, are pending or, to the best
knowledge of the Company and its subsidiaries, threatened, other than routine
claims for benefits; (iv) all contributions and premiums due which are material
in amount have been made on a timely basis; (v) all contributions and all
distributions which are material in amount made or required to be made under
such Company Benefit Plan meet the requirements for deductibility under the
Internal Revenue Code of 1986, as amended (the "Code"); and (vi) such Company
Benefit Plan is not a multiemployer plan (as defined in ERISA section 3(37)), a
multiple employer plan within the meaning of the Code or ERISA, a defined
benefit plan within the meaning of ERISA section 3(35), a plan subject to
section 302 of ERISA, section 412 of the Code or Title IV of ERISA, or funded
through a "welfare benefit fund" (as defined in Section 419(e) of the Code).
(d) Except as set forth on the Company Disclosure Letter or as specifically
provided in Section 3.05, the consummation of the transactions contemplated by
this Agreement will not (i) entitle any individual to severance pay, or (ii)
accelerate the time of payment or vesting, or increase the amount, of
compensation due to any individual. The Company has delivered to the Parent
true, correct and complete copies of each Company Benefit Plan, relating to the
foregoing, including all amendments thereto.
(e) The Company Disclosure Letter sets forth a description of all
obligations of the Company and its subsidiaries with respect to retiree medical
and retiree life insurance and disability benefits under the Company Benefit
Plans. The Company has delivered to the Parent written material which is
representative in all material respects of communications of the Company and its
subsidiaries with respect to retiree medical and retiree life insurance and
disability benefits under the Company Benefit Plans, a list of which is set
forth on the Company Disclosure Letter.
(f) Each Company Benefit Plan intended to be qualified under section 401(a)
of the Code is so qualified, and each trust or other funding vehicle related
thereto is exempt from federal income tax under section 501(a) of the Code.
(g) With respect to any insurance policy providing funding for benefits
under any Company Benefit Plan, (i) there is no material liability of the
Company or any subsidiary of the Company in the nature of a retroactive or
retrospective rate adjustment, loss sharing arrangement, or other actual or
contingent liability, nor would there be any such material liability if such
insurance policy were terminated, and (ii) to the best knowledge of the Company
and its
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subsidiaries, no insurance company issuing any such policy is in receivership,
conservatorship, liquidation or similar proceeding and, to the best knowledge of
the Company and its subsidiaries, no such proceeding with respect to any insurer
is imminent.
(h) The Company Disclosure Letter sets forth the name and current
compensation of each officer, director or employee of the Company and its
subsidiaries whose current annual rate of compensation from the Company
(including bonuses but excluding commission-only compensation) exceeds $100,000.
4.15 Legal Proceedings, Etc. Except as set forth on the Company
Disclosure Letter and except for pending or threatened claims, actions,
proceedings or investigations seeking or which would seek, if instituted,
damages or injunctive relief with respect to the transactions contemplated by
this Agreement, (i) there is no claim, action, proceeding or investigation
pending or, to the knowledge of the Company, threatened against or relating to
the Company or any subsidiary before any court or governmental or regulatory
authority or body which could have a Material Adverse Effect, and (ii) neither
the Company nor any subsidiary is subject to any outstanding order, writ,
judgment, injunction or decree of any court or governmental or regulatory
authority or body which could have a Material Adverse Effect.
4.16 Taxes.
(a) Filing of Tax Returns. The Company (including, for purposes of this
Section 4.16, each of its subsidiaries from time to time) has timely filed with
the proper taxing or other governmental authorities all returns (including,
without limitation, information returns, estimated Tax filings and other Tax-
related information) in respect of Taxes (as such term is defined in Section
4.16(f)) required to be filed through the date hereof. Such returns, filings
and information filed are complete, correct and accurate in all material
respects. The Company has delivered to Parent complete and accurate copies of
all of the Company's federal, state and local Tax returns filed for its taxable
years ended January, 1990, 1991, 1992, 1993, 1994 and 1995. The Company has not
filed any federal, state or local tax returns for its taxable years ended
January, 1996 and 1997, or has delivered to Parent complete and accurate copies
of all such returns that have been filed for such taxable years.
(b) Payment of Taxes. All Taxes for which the Company shown as owing on
any Tax return for any period or portion thereof ending on or before the Closing
Date, shall have been paid, or an adequate reserve (in conformity with generally
accepted accounting principles applied on a consistent basis and the Company's
past custom and practice) has been established therefor, and the Company has no
material liability for Taxes in excess of the amounts so paid or reserves so
established. All Taxes that the Company has been required to collect or
withhold have been duly collected or withheld and, to the extent required when
due, have been or will be duly paid to the proper taxing or other governmental
authority.
(c) Audit History. Except as set forth in the Company Disclosure Letter:
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(i) No deficiencies for Taxes of the Company have been claimed,
proposed or assessed by any taxing or other governmental authority.
(ii) There are no pending or, to the best of the Company's
knowledge, threatened audits, investigations or claims for or relating to any
liability in respect of Taxes of the Company, and there are no matters under
discussion with any taxing or other governmental authority with respect to Taxes
of the Company.
(iii) All audits of federal, state and local returns for Taxes by the
relevant taxing or other governmental authority have been completed for all
periods.
(iv) The Company has not been notified that any taxing or other
governmental authority intends to audit a return for any other period.
(v) No extension of a statute of limitations relating to Taxes is
in effect with respect to the Company.
(d) Tax Elections. Except as set forth in the Company Disclosure Letter:
(i) There are no material elections with respect to Taxes affecting
the Company.
(ii) The Company has not made an election, and is not required, to
treat any asset of the Company as owned by another person or as tax-exempt bond
financed property or tax-exempt use property within the meaning of Section 168
of the Internal Revenue Code of 1986, as amended (the "Code") or under any
comparable state or local income Tax or other Tax provision.
(iii) The Company is not a party to or bound by any binding tax
sharing, tax indemnity or tax allocation agreement or other similar arrangement
with any other person or entity.
(iv) The Company has not filed a consent pursuant to the collapsible
corporation provisions of Section 341(f) of the Code (or any corresponding
provision of state or local law) or agreed to have Section 341(f)(2) of the Code
(or any corresponding provision of state or local law) apply to any disposition
of any asset owned by it.
(e) Additional Representations. Except as set forth in the Company
Disclosure Letter:
(i) There are no liens for Taxes (other than for Taxes not yet
delinquent) upon the assets of the Company.
(ii) The Company has never been a member of an affiliated group of
corporations within the meaning of Section 1504 of the Code, nor has the Company
or any present
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or former Subsidiary, or any predecessor or affiliate of any of them, become
liable (whether by contract, as transferee or successor, by law or otherwise)
for the Taxes of any other person or entity under Treasury Regulation Section
1.1502-6 or any similar provision of state, local or foreign law.
(iii) The Company has not made, requested or agreed to make, nor is
it required to make, any adjustment under Section 481(a) of the Code by reason
of a change in accounting method or otherwise for any taxable year.
(iv) The Company is not a party to any agreement, contract,
arrangement or plan that has resulted or would result, separately or in the
aggregate, in the payment of any amount as to which a deduction may be denied
under Section 162(m) of the Code.
(v) The Company is not a party to any joint venture, partnership,
or other arrangement or contract which could be treated as a partnership for
federal, state, local or foreign Tax purposes.
(vi) The Company has prepared and made available to Parent all of
the Company's books and working papers that clearly demonstrate the income and
activities of the Company for the last full reporting period ending prior to the
date hereof.
(vii) The Company has not been a "United States real property holding
corporation" within the meaning of Section 897(c)(2) of the Code during the
applicable period specified in Section 897(c)(1)(A)(ii).
(viii) The Company has properly requested, received and retained all
necessary exemption certificates and other documentation supporting any claimed
exemption or waiver of Taxes on sales or other transactions as to which the
Company would have been obligated to collect or withhold Taxes except for any
failure to do so which would not be expected to have a Material Adverse Effect.
(f) Definition of Taxes. For purposes of this Agreement, the term "Taxes"
shall mean all federal, state, local, foreign and other taxes, assessments or
other governmental charges, including, without limitation, income, estimated
income, gross receipts, profits, occupation, franchise, capital stock, real or
personal property, sales, use, value added, transfer, license, commercial rent,
payroll, employment or unemployment, social security, disability, withholding,
alternative or add-on minimum, customs, excise, stamp or environmental taxes,
and further including all interest, penalties and additions in connection
therewith for which the Company may be liable.
4.17 Material Agreements. Except as set forth on the Company Disclosure
Letter and except for agreements made for the purpose of completing the
transactions contemplated by this Agreement, neither the Company nor any of its
subsidiaries is a party to, or bound by, any material agreement of any kind to
be performed in whole or in part after the Effective Time. Solely for the
purpose of this Section, the term "material agreement" shall mean any single
agreement which involves the payment or receipt by the Company or any
subsidiary, subsequent to the date of this Agreement, of more than $500,000,
other than (i) purchase orders in the ordinary course of business,
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(ii) leases described in Section 4.11 and (iii) Company Benefit Plans described
in Section 4.14. Except as set forth on the Company Disclosure Letter, to the
best knowledge of the Company, there is no breach or default and there are no
facts which with notice or the passage of time would constitute a breach or
default under, or give rise to any right of termination, amendment, cancellation
or acceleration under, whether as a result of the consummation of the
transactions contemplated hereby or otherwise, any obligation to be performed by
any party to a material agreement to which the Company or any subsidiary is a
party, which breach, default or right (assuming the exercise thereof) would have
a Material Adverse Effect.
4.18 Compliance with Law. Except as set forth on the Company Disclosure
Letter the business of the Company and its subsidiaries is not being conducted
and the properties and assets of the Company and its subsidiaries are not
currently owned or operated in violation of any law, ordinance, regulation,
order, judgment, injunction, award or decree of any governmental or regulatory
entity or court or arbitrator, except for possible violations which either
individually or in the aggregate do not, and so far as can be reasonably
foreseen will not, have a Material Adverse Effect.
4.19 Insider Interests. The Company Disclosure Letter sets forth all
material contracts, agreements with and other obligations to officers,
directors, employees or stockholders of the Company and its subsidiaries.
Except as set forth on the Company Disclosure Letter, no officer, director or
stockholder of the Company or any subsidiary, and no entity controlled by any
such officer, director or stockholder, and no relative or spouse who resides
with any such officer, director or stockholder (i) owns, directly or indirectly,
any material interest in any person that is or is engaged in business, other
than on an arm's-length basis, as a competitor, lessor, lessee, customer or
supplier of the Company or any subsidiary or (ii) owns, in whole or in part, any
tangible or intangible property that the Company or any subsidiary uses in the
conduct of the business of the Company and its subsidiaries.
4.20 Environmental Protection.
The following definitions shall apply to this section:
A. "Environmental Claims" shall mean all written allegations, notices
of violation, liens, claims, demands, suits, or causes of action for
any damage, including, without limitation, personal injury, property
damage, lost use of property or consequential damages, arising directly or
indirectly out of Environmental Conditions or Environmental Laws. By way of
example only, Environmental Claims include (i) violations of or obligations
under any contract related to Environmental Laws or Environmental
Conditions, (ii) actual or threatened damages to natural resources, (iii)
claims for nuisance or its statutory equivalent, (iv) claims for the
recovery of response costs, or administrative or judicial orders directing
the performance of investigations, responses or remedial actions under any
Environmental Laws, (v) requirements to implement "corrective action"
pursuant to any order or permit issued pursuant to Environmental Laws, (vi)
fines, penalties or liens of any kind against property related to
Environmental Laws or Environmental
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Conditions, and (vii) with regard to any present or former employees,
claims relating to exposure to or injury from Environmental
Conditions.
B. "Environmental Conditions" shall mean the state of the
environment, including natural resources, soil, surface water, ground
water, or ambient air, relating to or arising out of the use, storage,
treatment, transportation, release, disposal, dumping or threatened
release of Hazardous Substances.
C. "Environmental Laws" shall mean all applicable federal, state,
district, local and foreign laws, all rules or regulations promulgated
thereunder, and all orders, consent orders, judgments, notices,
permits or demand letters issued or entered pursuant thereto, relating
to pollution or protection of the environment (e.g., ambient air,
surface water, ground water, or soil). Environmental Laws shall
include, without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, the Toxic
Substances Control Act, as amended, the Hazardous Materials
Transportation Act, as amended, the Resource Conservation and Recovery
Act, as amended, the Clean Water Act, as amended, the Safe Drinking
Water Act, as amended, the Clean Air Act, as amended, the Atomic
Energy Act of 1954, as amended, the Occupational Safety and Health
Act, as amended, and all analogous laws promulgated or issued by any
state or other governmental authority.
D. "Environmental Reports" shall mean any and all written analyses,
summaries or explanations, in the possession or control of the Company
or any subsidiary, of (a) any Environmental Conditions in, on or about
the Properties (defined below) of the Company or any subsidiary or (b)
the Company's or any Subsidiary's compliance with Environmental Laws.
E. "Hazardous Substances" shall mean all pollutants, contaminants,
chemicals, wastes, and any other carcinogenic, ignitable, corrosive,
reactive, toxic or otherwise hazardous substances or materials subject
to regulation, control or remediation under Environmental Laws,
including but not limited to petroleum, urea formaldehyde, flammable,
explosive and radioactive materials, PCBs, pesticides, herbicides,
asbestos, sludge, slag, acids, metals, and solvents.
Except as set forth on the Company Disclosure Letter, (i) the Company and each
of its subsidiaries are currently in compliance with all Environmental Laws,
including without limitation all permits or licenses required thereunder except
where any failure to comply would not reasonably be expected to have a Material
Adverse Effect; (ii) neither the Company nor any of its subsidiaries has
received any outstanding written notice that the Company or any Subsidiary is
not in compliance with, or that it is in violation of, any such Environmental
Laws which involves a matter that would reasonably be expected to have a
Material Adverse Effect; (iii) there are no Environmental Claims against the
Company or any subsidiary except for any Environmental Claims which would not
reasonably be expected to have a Material Adverse Effect; (iv) no underground
storage tank for Hazardous Substances, no PCBs, and no asbestos containing
material is currently located at or on the properties owned or leased by the
Company or any subsidiary (the "Properties") except where the occurrence
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of any of the foregoing would not reasonably be expected to have a Material
Adverse Effect; and (v) there have been no releases of Hazardous Substances in
quantities exceeding the reportable quantities as defined under Environmental
Laws on, upon or into the Properties other than those authorized by
Environmental Laws except for any such releases which would not reasonably be
expected to have a Material Adverse Effect. In addition, true and correct copies
of the Environmental Reports at any Property or any facility formerly owned or
operated by the Company or any Subsidiary have been made available to Purchaser,
and a list of all such Environmental Reports is set forth on the Company
Disclosure Letter.
4.21 Labor Matters. None of the employees of the Company and its
subsidiaries are covered by a collective bargaining agreement. As of the date
of this Agreement, neither the Company nor its Subsidiaries knows of any
activity or proceedings of any labor union (or representatives thereof) to
organize any unorganized employees employed by the Company or its Subsidiaries,
nor of any strikes, slowdowns, work stoppages, lockouts or threats thereof, by
or with respect to any of the employees of the Company or its Subsidiaries.
Except as set forth in the Company Disclosure Letter, as of the date of this
Agreement, neither the Company nor its Subsidiaries has received any notice of
any claim, or has knowledge of any facts which are likely to give rise to any
claim, that they have not complied in any respect with any laws relating to the
employment of labor, including, without limitation, any provisions thereof
relating to wages, hours, collective bargaining, the payment of social security
and similar taxes, equal employment opportunity, employment discrimination or
employment safety, except such claims which, in the aggregate, would not have a
Material Adverse Effect.
4.22 Brokers and Finders. Neither the Company or its subsidiaries nor
any of their respective officers, directors or employees has employed any
broker, finder or investment banker or incurred any liability for any brokerage
fees, commissions, finders' fees or investment banking fees in connection with
the transactions contemplated herein, except that the Company has employed, and
will pay the fees and expenses of, Montgomery as its financial advisor pursuant
to a Letter Agreement dated August 14, 1996, a copy of which will be delivered
to the Parent prior to August 16, 1996.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF
THE PARENT AND THE PURCHASER
The Parent and the Purchaser hereby represent and warrant to the
Company that:
1.051 Corporation Organization. The Parent is a corporation duly organized and
validly existing and in good standing under the laws of the State of New York
and the Purchaser is a corporation duly organized and validly existing and in
good standing under the laws of the State of Delaware. The Parent and the
Purchaser each has all requisite corporate power and authority to own its assets
and carry on its business as now being conducted or proposed to be conducted.
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1.052 Authorized Capital. The authorized capital stock of the Purchaser
consists of 1,000 shares of Common Stock, par value $.01 per share, of which
1,000 shares are outstanding as of the Effective Time and are owned,
beneficially or of record, by Parent. All of the issued and outstanding shares
of capital stock of the Purchaser are validly issued, fully paid, nonassessable
and free of preemptive rights and all liens.
1.053 Authority. Each of the Parent and the Purchaser has the necessary
corporate power and authority to enter into this Agreement and to carry out its
obligations hereunder. The execution and delivery of this Agreement by each of
the Parent and the Purchaser, the performance by the Parent and the Purchaser of
their respective obligations hereunder and the consummation by the Parent and
the Purchaser of the transactions contemplated hereby have been duly authorized
by its Board of Directors and approved by the Parent as sole stockholder of the
Purchaser, and no other corporate proceeding on the part of the Parent or the
Purchaser is necessary for the execution and delivery of this Agreement by the
Parent and the Purchaser and the performance by the Parent and the Purchaser of
their respective obligations hereunder and the consummation by the Parent and
the Purchaser of the transactions contemplated hereby. This Agreement has been
duly executed and delivered by each of the Parent and the Purchaser and,
assuming the due authorization, execution and delivery hereof by the Company, is
a legal, valid and binding obligation of the Parent and the Purchaser,
enforceable against each of the Parent and the Purchaser in accordance with its
terms, except to the extent that its enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other laws affecting the
enforcement of creditors' rights generally or by general equitable principles,
regardless of whether such enforceability is considered in a proceeding in
equity or at law.
1.054 No Prior Activities. The Purchaser has not incurred nor will it
incur, directly or indirectly, any liabilities or obligations, except those
incurred in connection with its incorporation or with the negotiation of this
Agreement, the Stockholder Agreement, the Offer Documents and the consummation
of the transactions contemplated hereby and thereby. The Purchaser has not
engaged, directly or indirectly, in any business or activity of any type or
kind, or entered into any agreement or arrangement with any person or entity,
and is not subject to or bound by any obligation or undertaking, that is not
contemplated by or in connection with this Agreement, the Stockholder Agreement,
the Offer Documents and the transactions contemplated hereby and thereby.
1.055 No Financing Contingency. The Parent has sufficient funds to
consummate all of the transactions contemplated by this Agreement and will make
available to the Purchaser sufficient funds in sufficient time to consummate the
Offer and the Merger in accordance with the terms of this Agreement.
1.056 Governmental Filings; No Violations. (a) No notices, reports or other
filings are required to be made by the Parent or the Purchaser with, nor are any
consents, registrations, approvals, permits or authorizations required to be
obtained by the Parent or the Purchaser from, any governmental or regulatory
authorities of the United States, the several States or any foreign
jurisdictions in connection with the execution and delivery of this Agreement by
the Parent and the Purchaser and the consummation by the Parent and the
Purchaser of the transactions contemplated hereby, the failure to make or obtain
any or all of which could prevent, delay or burden the
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transactions contemplated by this Agreement, except (A) in connection with the
HSR Act, and (B) in connection with the Exchange Act.
(b) Neither the execution and delivery of this Agreement by the Parent or
the Purchaser nor the consummation by the Parent or the Purchaser of the
transactions contemplated hereby nor compliance by the Parent or the Purchaser
with any of the provisions hereof will: (i) conflict with or result in any
breach of any provision of its Certificate of Incorporation or By-Laws, (ii)
result in a violation or breach of, or constitute (with or without due notice or
lapse of time or both) a default (or give rise to any right of termination,
cancellation or acceleration) under, or require any consent under, any of the
terms, conditions or provisions of any note, bond, mortgage, indenture, license,
contract, agreement or other instrument or obligation to which the Parent or the
Purchaser is a party or by which it or any of its properties or assets may be
bound, (iii) require the creation or imposition of any lien upon or with respect
to the properties of the Parent or the Purchaser or (iv) violate any order,
writ, injunction, decree, statute, rule or regulation applicable to the Parent
or the Purchaser or any of its properties or assets, excluding from the
foregoing clauses (iii) and (iv) violations, breaches or defaults which in the
aggregate, would neither have a material adverse effect on the business,
financial condition or operations of the Parent or the Purchaser nor prevent,
materially delay or materially burden the transactions contemplated by this
Agreement.
1.057 Brokers and Finders. Neither the Parent, the Purchaser nor any of its
officers, directors or employees has employed any broker, finder or investment
banker or incurred any liability for any brokerage fees, commissions, finders
fees or investment banking fees in connection with the transactions contemplated
herein, except that the Parent has employed and will pay the fees and expenses
of Merrill Lynch, Pierce, Fenner & Smith Incorporated.
1.058 Offer Documents; Proxy Statement; Other Information. None of the
information included in the Offer Documents (including any amendments or
supplements thereto) or any schedules required to be filed with the SEC in
connection therewith and described therein as being supplied by the Parent or
the Purchaser will, at the respective times that the Offer Documents or any
amendments or supplements thereto or any such schedules are filed with the SEC,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. None of the information supplied in writing by the Parent or the
Purchaser specifically for inclusion in the Proxy Statement, Schedule 14D-9 or
any statement required pursuant to Section 14(f) of the Exchange Act or any
other schedules or statements required to be filed with the SEC in connection
therewith will contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein not misleading.
ARTICLE VI
COVENANTS OF THE PARTIES
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1.061 Conduct of Business of the Company. The Company and its subsidiaries
shall use their reasonable best efforts to preserve intact the business
organization of the Company and its subsidiaries, to keep available the services
of its operating personnel and to preserve the goodwill of those having business
relationship with each of them, including, without limitation, suppliers;
provided, however, that any inability of the Company or its subsidiaries to keep
available the services of such operating personnel or to maintain any such
business relationships (including with suppliers) despite its aforesaid
reasonable best efforts to do so shall not constitute a breach of this Section
6.01. Except as contemplated by this Agreement or as set forth on the Company
Disclosure Letter, during the period from the date of this Agreement to the
Effective Time, the Company and its subsidiaries will conduct their business and
operations only in the ordinary and usual course of business consistent with
past practice. Without limiting the generality of the foregoing, and, except as
contemplated in this Agreement or as set forth on the Company Disclosure Letter,
prior to the Effective Time, without the advance written consent of the Parent,
neither the Company nor any of its subsidiaries will:
(a) Amend its Certificate of Incorporation or By-Laws or similar governing
documents;
(b) (i) Create, incur or assume any indebtedness for money borrowed,
including obligations in respect of capital leases, except (A) purchase money
mortgages granted in a manner consistent with past practice, and (B)
indebtedness for borrowed money incurred in the ordinary course of business,
provided, however, that the Company and its subsidiaries may incur, (x)
indebtedness for borrowed money under credit facilities existing as of the date
of the Company Balance Sheet and (y) indebtedness which refinances indebtedness
which is declared due and payable or tendered to the Company or any subsidiary
in accordance with the terms thereof as a result of the consummation of the
Offer, provided, that (1) Purchaser shall not have designated a majority of
directors to serve on the Board pursuant to Section 2.08 and (2) the Company
shall have consulted with the Parent and the Parent shall have approved the
terms of such refinancing indebtedness (which consent may not be unreasonably
withheld) or (ii) assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently or otherwise) for the obligations of
any other person; provided, however, that the Company and its subsidiaries may
endorse negotiable instruments in the ordinary course of business consistent
with past practice;
(c) Declare, set aside or pay any dividend or other distribution (whether
in cash, stock or property or any combination thereof) in respect of the Common
Stock and Preferred Shares of the Company (except for regular dividends on the
Preferred Shares in accordance with their terms) or any capital stock of any
subsidiary;
(d) Issue, sell, grant, purchase or redeem, or issue, whether by dividend
or otherwise, or sell any securities convertible into or exercisable for, or
options with respect to, or warrants to purchase or rights to subscribe to or
otherwise purchase, or subdivide or in any way reclassify, any shares of capital
stock or other securities of the Company, except for the issuance of Shares
issuable upon conversion of the Preferred Shares in accordance with their terms
or the exercise of Options outstanding on the date hereof;
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(e) (i) Increase the aggregate amount of compensation payable or to become
payable by the Company or any subsidiary to its directors, officers or
employees, whether by salary or bonus, or (ii) increase the rate or term of, or
otherwise alter, any bonus, insurance, pension, severance or other employee
benefit plan, payment or arrangement made to, for or with any such directors,
officers or employees;
(f) Enter into any agreement, commitment or transaction, except agreements,
commitments or transactions in the ordinary course of business consistent with
past practice or Settlements permitted by Section 6.02(b);
(g) Sell, transfer, mortgage, pledge or grant any security interest, lien
or other encumbrance on any asset other than in the ordinary course of business
consistent with past practice and except (i) pursuant to the Credit Agreement
dated as of August 8, 1995 between the Company and Bank of America National
Trust and Savings Association (the "Credit Agreement") or (ii) in connection
with purchase money mortgages permitted by Section 6.01(b)(i);
(h) Waive any right under any contract or other agreement identified on the
Company Disclosure Letter;
(i) Other than as and when required by any change in generally accepted
accounting principles, make any material change in its accounting or tax methods
or practices or make any material change in depreciation or amortization
policies or rates adopted by it for accounting or tax purposes or, other than
normal writedowns or writeoffs consistent with past practices, make any
writedowns of inventory or writeoffs of notes or accounts receivable;
(j) Make any loan or advance to any of its stockholders, officers,
directors, employees (other than advances to field sales personnel, vacation
advances, relocation advances and travel advances in each case made in the
ordinary course of business in a manner consistent with past practice) or make
any other loan or advance to any other person or group otherwise than in the
ordinary course of business consistent with past practice;
(k) Terminate or fail to renew, where such renewal is at the Company's or a
subsidiary's option, any contract or other agreement other than in the ordinary
course of business, the termination or failure of which to renew would have a
Material Adverse Effect;
(l) Enter into any collective bargaining agreement or employment agreement;
(m) Make any addition to or modification of any existing Company Benefit
Plans or adopt any new Company Benefit Plan;
(n) Take, agree to take, or do, or with respect to anything within the
Company's or its subsidiaries control, knowingly permit to be done or to be
taken any action in the conduct of its business which (i) would cause any of the
representations of the Company to be or become untrue in any material respect,
and (ii) would reasonably be expected to have a Material Adverse Effect;
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(o) Fail to comply with all applicable filing, payment, withholding,
collection and record retention obligations under all applicable federal, state,
local and foreign Tax laws; or
(p) Agree to do any of the foregoing.
1.062 Notification of Certain Matters. (a) The Company shall give prompt
notice to the Parent of: (i) any notice or other communication from any third
party alleging that the consent of such third party is or may be required in
connection with the transactions contemplated by this Agreement; (ii) any notice
or other communication from any regulatory authority in connection with the
transactions contemplated by this Agreement; and (iii) the occurrence of any
event having, or which insofar as can be reasonably foreseen would have, a
Material Adverse Effect.
(b) Between the date of this Agreement and the Effective Time, the Company
shall give prompt notice to the Parent of: (i) the initiation of any audit or
other review by the Internal Revenue Service (the "IRS") or any other state,
local or foreign taxing or other governmental authority with respect to any Tax
return or that may result in any additional liability for Taxes, (ii) any
proposed adjustment or assessment by the IRS or any such authority that may
result in any material additional liability for Taxes, (iii) any proposed
settlement or similar agreement ("Settlement") with the IRS or any other such
authority. Between the date of this Agreement and the Effective Time, the
Company shall not enter into any Settlement with respect to Taxes without the
prior written consent of the Parent, which consent shall not be unreasonably
withheld.
1.063 Access to Information. (a) Between the date of this Agreement and the
Effective Time, the Company will during ordinary business hours and upon
reasonable advance notice, (i) give the Parent and the Parent's authorized
representatives all access the Parent shall reasonably request to all of its and
its subsidiaries' books, records (including, without limitation, the workpapers
of the Company's outside accountants), contracts, commitments, stores, offices
and other facilities and properties, and its and its subsidiaries' personnel,
representatives, accountants and agents; provided, however, that all such access
shall take place after appropriate prior consultation with the officers of the
Company, (ii) permit the Parent to make such inspections (except that Parent and
Purchaser may not conduct environmental investigations) thereof as it may
reasonably request (including, without limitation, observing the Company's or a
subsidiary's physical inventory of its assets), (iii) cause its and its
subsidiaries' officers and advisors to furnish to the Parent its financial and
operating data and such other existing information with respect to its business,
properties, assets, liabilities and personnel (including, without limitation,
title insurance reports, real property surveys and environmental reports, if
any), as the Parent may from time to time reasonably request, (iv) take such
actions as the Parent reasonably deems appropriate to verify the existence and
condition of equipment leased by the Company or any of its subsidiaries to its
customers, and (v) permit the Parent's accountants to conduct such confirmation
and testing procedures with respect to the inventory of the Company and its
subsidiaries as the Parent reasonably deems appropriate; provided, however, that
any such investigation shall be conducted in such a manner as not to interfere
unreasonably with the operation of the business of the Company.
(b) Any information provided pursuant to this Agreement shall be held by
the Parent in accordance with and shall be subject to the terms of the
Confidentiality Agreement dated May 31,
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1996 between the Company and the Parent (the "Confidentiality Agreement").
Notwithstanding anything herein or in the Confidentiality Agreement to the
contrary, the Parent, the Purchaser or the Company may disclose any information
required to be disclosed pursuant to the Exchange Act, or otherwise required or
requested to be disclosed by the SEC.
1.064 Further Information. The Company and the Parent shall give prompt
written notice to the other of (i) any representation or warranty made by it
contained in this Agreement becoming untrue or inaccurate in any material
respect or (ii) the failure by it to comply with or satisfy in any material
respect any covenant, condition or agreement to be complied with or satisfied by
it under this Agreement; provided, however, that no such notification shall
affect the representations, warranties, covenants or agreements of the parties
or the conditions to the obligations of the parties under this Agreement.
1.065 Further Assurances. Consistent with the terms and conditions hereof,
each party hereto will execute and deliver such instruments and take such other
action as the other parties hereto may reasonably require in order to carry out
this Agreement and the transactions contemplated hereby.
1.066 Best Efforts. Subject to the terms and conditions of this Agreement,
each of the parties hereto will use their best efforts to take, or cause to be
taken, all action, and to do, or cause to be done, all things necessary, proper
or advisable under applicable laws and regulations to consummate and make
effective the transactions contemplated by this Agreement and shall use its best
efforts to satisfy the conditions to the transactions contemplated hereby and to
obtain all waivers, permits, consents and approvals and to effect all
registrations, filings and notices with or to third parties or governmental or
public bodies or authorities which are necessary or desirable in connection with
the transactions contemplated by this Agreement, including, but not limited to,
filings to the extent required under the Exchange Act and HSR Act. If at any
time after the Effective Time any further action is necessary or desirable to
carry out the purposes of this Agreement, the proper officers or directors of
each of the parties hereto shall take such action. Without limiting the
generality of the foregoing, the Parent as the sole stockholder of the
Purchaser, and the Purchaser as a stockholder of the Company, will consent
and/or vote in favor of the transactions contemplated hereunder, and Company,
the Parent, and the Purchaser will vigorously defend against any lawsuit or
proceeding, whether judicial or administrative, challenging this Agreement or
the consummation of any of the transactions contemplated hereby. Subject to the
terms and conditions of this Agreement, from time to time after the date hereof,
without further consideration, the Company will, at its own expense, execute and
deliver such documents to the Parent as the Parent may reasonably request in
order to consummate the transactions contemplated by this Agreement. Subject to
the terms and conditions of this Agreement, from time to time after the date
hereof, without further consideration, each of the Parent and the Purchaser
will, at its own expense, execute and deliver such documents to the Company as
the Company may reasonably request in order to consummate the transactions
contemplated by this Agreement.
1.067 Filings. The Company and the Parent will file, or cause to be filed,
as promptly as possible and, in the case of the Parent in no event later than
five business days after the date hereof, with the United States Federal Trade
Commission (the "FTC") and the Antitrust
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Division of the United States Department of Justice (the "Department of
Justice") pursuant to the HSR Act the notification required by the HSR Act,
including all requisite documents, materials and information therefor, and
request early termination of the waiting period under the HSR Act. Each of the
Company and the Parent shall furnish to the other such necessary information and
reasonable assistance as the other may request in connection with its
preparation of any filing or submission which is necessary under the HSR Act.
The Company and the Parent shall each keep the other apprised of the status of
any inquiries or requests for additional information made by any governmental
authority and shall comply promptly with any such inquiry or request.
1.068 Public Announcements. The initial press release with respect to the
transactions contemplated hereby shall be a joint press release, and thereafter
the Company and the Parent shall consult with each other before issuing any
press release or otherwise making any public statements with respect to the
transactions contemplated hereby and shall not issue any such press release or
make any such public statement prior to such consultation, except as may be
required by law, fiduciary duty upon advice of outside legal counsel or any
listing agreement with a national securities exchange.
6.09 Indemnity; D&O Insurance. (a) The Parent shall cause (i) all rights to
indemnification by the Company now existing in favor of each present and former
director, officer or employee of the Company and its subsidiaries (hereinafter
referred to in this Section as the "Indemnified Parties") as provided in the
Company's By-Laws and (ii) limitations of liability in the Company's Certificate
of Incorporation to survive the Merger and to continue in full force and effect
as rights to indemnification and limitations on liability, respectively, by the
Surviving Corporation for a period of five years following the Effective Time,
and shall cause to remain in full force and effect and cause the Surviving
Corporation to fully perform all indemnity agreements with Indemnified Parties
in effect on the date hereof (the "Indemnity Agreements").
(b) Subject to the terms set forth herein, the Parent and the Surviving
Corporation shall indemnify and hold harmless, to the fullest extent permitted
under applicable law (and shall also advance expenses as incurred by an
Indemnified Party to the extent permitted under applicable law, provided the
person to whom expenses are advanced provides an undertaking to repay such
advances if it is ultimately determined that such person is not entitled to
indemnification), each Indemnified Party against any costs or expenses
(including attorneys' fees), judgments, fines, losses, claims, damages,
liabilities and amounts paid in settlement in connection with any claim, action,
suit, proceeding or investigation, whether civil, criminal, administrative or
investigative, arising out of or pertaining to any action, alleged action,
omission or alleged omission occurring on or prior to the Effective Time in
their capacity as director, officer or employee (including, without limitation,
any claims, actions, suits, proceedings and investigations which arise out of or
relate to the transactions contemplated by this Agreement) for a period of five
years after the Effective Time, provided that, in the event any claim or claims
are asserted or made within such five-year period, all rights to indemnification
in respect of any such claim or claims shall continue until final disposition of
any and all such claims.
(c) Any Indemnified Party wishing to claim indemnification under this
Section 6.09, upon learning of any such claim, action, suit, proceeding or
investigation, shall promptly notify the
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Parent and the Surviving Corporation thereof, but the failure to so notify shall
not relieve the Parent and the Surviving Corporation of any obligation to
indemnify such Indemnified Party or of any other obligation imposed by this
Section 6.09 unless and to the extent that such failure prejudices the Parent or
the Surviving Corporation; it being understood that it shall be deemed to
materially prejudice the Parent or the Surviving Corporation, as the case may
be, if, as a result of such failure to notify, the Parent or the Surviving
Corporation is not given an opportunity to assume the defense of such claim,
action, suit, proceeding or investigation within a reasonably prompt time after
such claim, action, suit, proceeding or investigation is asserted or initiated.
In the event of any such claim, action, suit, proceeding or investigation, (i)
the Surviving Corporation or the Parent shall have the right to assume the
defense thereof and shall not be liable to such Indemnified Party for any legal
expenses of other counsel or any other expenses subsequently incurred by such
Indemnified Party in connection with the defense hereof, except that if the
Parent or Surviving Corporation elects not to assume such defense or counsel for
the Indemnified Party advises that there are issues which raise conflicts of
interest between the Parent or Surviving Corporation and the Indemnified Party,
the Indemnified Party may retain counsel satisfactory to it, and the Surviving
Corporation shall pay all reasonable fees and expenses of such counsel for the
Indemnified Party promptly as statements therefore are received; provided,
however, that in no event shall the Parent or Surviving Corporation be required
to pay fees and expenses, including disbursements and other charges, for more
than one firm of attorneys in any one legal action or group of related legal
actions unless (A) counsel for the Indemnified Party advises that there is a
conflict of interest that requires more than one firm of attorneys, or (B) local
counsel of record is needed in any jurisdiction in which any such action is
pending, (ii) the Parent and the Indemnified Party shall cooperate in the
defense of any such matter, and (iii) the Parent and the Surviving Corporation
shall not be liable for any settlement effected without the prior written
consent of one of them (which consent shall not be unreasonably withheld); and
provided, further, that the Parent and Surviving Corporation shall not have any
obligation hereunder to any Indemnified Party if and to the extent a court of
competent jurisdiction ultimately determines, and such determination shall have
become final, that the indemnification of such Indemnified Party in the manner
contemplated hereby is prohibited by applicable law.
(d) For five years after the Effective Time, the Parent shall cause the
Surviving Corporation to use reasonable efforts to maintain, if available for an
annual premium not in excess of $60,000, the officers' and directors' liability
insurance covering the Indemnified Parties who are presently covered by the
Company's officers' and directors' liability insurance, with respect to acts or
omissions occurring at or prior to the Effective Time, on terms no less
favorable than those in effect on the date hereof or at the Effective Time, or
if such insurance coverage is not available for an annual premium not in excess
of $60,000, to obtain the amount of coverage that is available for an annual
premium of $60,000.
(e) In the event that any of the provisions of Section 6.09(a), (b) or (c)
above would conflict with any of the provisions of the Company's By-Laws,
Certificate of Incorporation or Indemnity Agreements in a manner that, if held
applicable, would limit or restrict, or impose conditions or obligations on the
exercise by any of the Indemnified Parties of, any of the indemnification rights
or limitations of liability granted to them under the Company's By-Laws,
Certificate of Incorporation or Indemnity
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Agreements shall control, as it is the intention of the parties that the
Indemnified Parties shall have indemnification rights or limitations of
liability no less favorable than those which they have under the Company's By-
Laws, Certificate of Incorporation or Indemnity Agreements, as in effect on the
date hereof.
(f) The covenants contained in this Section 6.09 shall survive the
Effective Time until fully discharged, are intended to benefit each of the
Indemnified Parties and shall be binding on all successors and assignees of the
Parent and the Surviving Corporation.
6.10 Other Potential Bidders. The Company, its present affiliates and
their respective officers, directors, employees, investment bankers, attorneys
and other representatives and agents shall immediately cease any existing
discussions or negotiations, if any, with any parties conducted heretofore with
respect to any acquisition of all or any material portion of the assets of, or
any equity interest in, the Company or any business combination with the
Company. Prior to the termination of this Agreement, the Company, directly or
indirectly, (a) may refer third parties to this Section 6.10, (b) may furnish
information and access, in each case only in response to unsolicited written
requests therefor, to any corporation, partnership, person or other entity or
group, provided that any information or access so furnished shall be provided
pursuant to a confidentiality agreement in customary form that (i) does not
prohibit or restrict disclosure to the Parent of any matter other than
confidential information regarding any such corporation, partnership, person or
other entity or group and (ii) contains terms not more favorable to such
corporation, partnership, person or other entity or group than the terms
contained in the Confidentiality Agreement (as defined in Section 6.03(b)) and
(c) may participate in discussions and negotiate with such corporation,
partnership, person or other entity or group concerning any proposed merger,
sale of assets, sale of shares of capital stock, acquisition of Shares other
than pursuant to the Offer or the Merger or similar transaction involving the
Company or any division or subsidiary of the Company (an "Acquisition
Proposal"), only if the Board has determined in its good faith judgment, based
as to legal matters on the written advice of outside legal counsel, (i) that the
exercise of the directors' fiduciary duties requires the taking of such action,
and, after consultation with all its principal advisors in connection with the
transactions contemplated herein, (ii) that such Acquisition Proposal is a bona
fide written Acquisition Proposal that would, upon consummation thereof, result
in a transaction more favorable to the stockholders of the Company than the
transactions contemplated herein and in the good faith reasonable judgment of
the Board (based upon the advice of all of its principal advisors in connection
with the transactions contemplated herein), is proposed by a corporation,
partnership, person or other entity or group with sufficient financial resources
available to it or available from third parties to consummate such transaction
and is probable to be consummated (a "Superior Proposal"). Except as set forth
above, neither the Company or any of its present affiliates, nor any of its or
their respective officers, directors, employees, representatives or agents,
shall, directly or indirectly, encourage, solicit, participate in or initiate
discussions or negotiations with, or provide any information to, any
corporation, partnership, person or other entity or group (other than the Parent
and the Purchaser, any affiliate or associate of the Parent and the Purchaser or
any designees of the Parent and the Purchaser) concerning any Acquisition
Proposal, or take any other action to facilitate the making of a proposal that
constitutes or could reasonably be expected to lead to an Acquisition Proposal.
The Company shall use its best efforts to ensure that the officers, directors
and employees of the Company and its subsidiaries and any investment banker or
other advisor or
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representatives retained by the Company are aware of the restrictions set forth
in the preceding sentences. The Company promptly shall advise the Parent orally
and in writing of any Acquisition Proposal and any inquiry or contact with any
person with respect to the acquisition of a substantial equity interest in or
substantial assets of the Company or its subsidiaries (including without
limitation, successive Acquisition Proposals, inquiries or contacts) and shall,
in such notice, indicate the identity of the offeror and the material terms and
conditions of any such Acquisition Proposal, including without limitation,
price. The Company shall give the Parent one business day's advance notice of
any agreement to be entered into or any information to be supplied to the person
making such Acquisition Proposal. Except in accordance with the terms of this
Agreement, neither the Board nor any committee thereof shall (i) withdraw or
modify, or propose to withdraw or modify, in a manner adverse to the Parent or
the Purchaser the approval or recommendation by the Board of the Offer, the
Merger or this Agreement, or (ii) approve or recommend, or propose to approve or
recommend, any Acquisition Proposal. Notwithstanding the foregoing, nothing
contained in this Agreement shall prevent the Board from approving or
recommending to the Company stockholders any unsolicited Acquisition Proposal by
a third party as contemplated by Rules 14d-9 and 14e-2 promulgated under the
Exchange Act (and, in connection therewith, withdrawing or modifying the
approval or recommendation by the Board of the Offer, the Merger or this
Agreement) in the event any unsolicited Acquisition Proposal shall have been
made by a third party if, in the good faith judgment of the Board, based as to
legal matters on the written advice of outside legal counsel, withdrawing or
modifying such approval or recommendation is required under applicable law in
the proper discharge of its fiduciary duties.
6.11 Employee Benefits. For a period of two years following the
Effective Time, the Parent shall cause the Surviving Corporation to provide the
employees of the Company and its subsidiary with overall employee benefits that
are, on annualized basis, at least as favorable in the aggregate as those
currently provided by the Company and its subsidiaries. This Section 6.11 is not
intended and shall not be deemed to confer any right, benefit or obligation upon
any person (other than the parties to this Agreement) as a third party
beneficiary or otherwise.
ARTICLE VII
CONDITIONS TO THE MERGER
7.01 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligations of each party to this Agreement to consummate the Merger
shall be subject to the following conditions, which have not been waived at or
prior to the Closing:
(a) This Agreement and the Merger shall have been approved and
adopted by the requisite vote or consent, if any is required, of the
stockholders of the Company required by the Company's Certificate of
Incorporation and the DGCL;
(b) Any waiting period (and any extension thereof) applicable to the
Merger under the HSR Act shall have expired or been terminated; and
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(c) No order, statute, rule, regulation, execution order, stay,
decree, judgment, or injunction shall have been enacted, entered, issued,
promulgated or enforced by any court or governmental authority which prohibits
or restricts the consummation of the Merger.
1.072 Conditions to the Obligations of the Parent and the Purchaser
to Effect the Merger. The obligation of the Purchaser and the Parent to effect
the Merger shall be further subject to satisfaction of the conditions, unless
waived by the Parent, that (i) the Purchaser shall have accepted for payment
Shares tendered pursuant to the Offer, provided that this condition will be
deemed satisfied with respect to the Purchaser and the Parent if the Purchaser
shall have failed to purchase Shares pursuant to the Offer in violation of the
terms of the Offer, (ii) the Company shall have performed and complied in all
material respects with the agreements and obligations contained in this
Agreement required to be performed and complied with by it at or prior to the
Effective Time, provided that this clause (ii) shall not apply after Purchaser
has designated a majority of directors to serve on the Board pursuant to Section
2.08 and Purchaser's designees constitute a majority of the Board and (iii)
there shall have been no change in the Board's recommendation that the
stockholders of the Company accept the Offer pursuant to Section 1.02(a).
1.073 Conditions to the Obligations of the Company to Effect the
Merger. The obligation of the Company to effect the Merger shall be further
subject, unless waived by the Company, to the Parent and the Purchaser having
performed and complied in all material respects with the agreements and
obligations contained in this Agreement required to be performed and complied
with by each of them at or prior to the Effective Time.
ARTICLE VIII
CLOSING
1.081 Time and Place. The closing of the Merger (the "Closing") shall take
place at the offices of Latham & Watkins, Sears Tower, Suite 5800, Chicago,
Illinois at 9:00 a.m. local time on a date to be specified by the parties which
shall be no later than the third business day after the date on which the last
of the closing conditions set forth in Article VII is satisfied or waived (if
waivable) unless another time, date or place is agreed upon in writing by the
parties hereto. The date on which the Closing actually occurs is herein referred
to as the "Closing Date."
1.082 Filings at the Closing. At the Closing, the Purchaser shall
cause the Delaware Certificate of Merger or, if applicable, a Certificate of
Ownership and Merger to be filed and recorded with the Secretary of State of the
State of Delaware in accordance with the provisions of Section 103 of the DGCL
and/or Section 253 of the DGCL, if applicable, and shall take any and all other
lawful actions and do any and all other lawful things necessary to cause the
Merger to become effective.
ARTICLE IX
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TERMINATION; AMENDMENT; WAIVER
1.091 Termination. This Agreement may be terminated and the Offer (if Purchaser
has not accepted Shares for payment) and the Merger may be abandoned at any time
prior to the Effective Time:
(a) by mutual written consent of the Parent, the Purchaser and the
Company;
(b) by the Parent and the Purchaser or by the Company if Shares have
not been purchased pursuant to the Offer on or before December 31, 1996 or
the Closing shall not have occurred on or prior to June 30, 1997;
(c) by the Parent and the Purchaser or the Company if any court of
competent jurisdiction in the United States or other United States
governmental body shall have issued an order, decree or ruling or taken any
other final action restraining, enjoining or otherwise prohibiting the
Merger or the acceptance for payment and payment for the Shares in the
Offer and such order, decree, ruling or other action is or shall have
become nonappealable;
(d) by the Parent and the Purchaser if, due to an occurrence or
circumstance which would result in a failure to satisfy any of the
conditions set forth in Annex A hereto, but subject to Section 1.01(a) and
the Purchaser's obligation to extend the Offer thereunder, the Purchaser
shall have (A) failed to commence the Offer within five business days of
the public announcement of the Offer and the Merger or (B) terminated the
Offer or allowed the Offer to expire without the purchase of any Shares
thereunder;
(e) by the Company if (i) there shall not have been a material breach
of any representation, warranty, covenant or agreement on the part of the
Company which would entitle the Parent or the Purchaser to terminate this
Agreement pursuant to Section 9.01(f) and, due to an occurrence or
circumstance which would result in a failure to satisfy any of the
conditions set forth in Annex A hereto, the Purchaser shall have (A) failed
to commence the Offer within five business days of the public announcement
of the Offer and the Merger or (B) terminated the Offer or allowed the
Offer to expire without the purchase of any Shares thereunder, or (ii)
prior to the purchase of Shares pursuant to the Offer, a corporation,
partnership, person or other entity or group shall have made a Superior
Proposal and, based as to legal matters on the written advice of outside
legal counsel, the Board in its good faith judgment has determined that the
exercise of the directors' fiduciary duties requires the Company to
terminate this Agreement, provided that such termination under this clause
(ii) shall not be effective until payment of the fee required by Section
9.03(b) hereof;
(f) by the Parent and the Purchaser prior to the purchase of Shares
pursuant to the Offer, if (i) there shall have been a breach of any
representation or warranty on the part of the Company having a Material
Adverse Effect, (ii) there shall have been a breach of any covenant or
agreement on the part of the Company resulting in a Material Adverse Effect
or (iii) the Board shall have withdrawn or modified (including by amendment
of the Schedule
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14D-9) in a manner adverse to the Purchaser, its approval or recommendation
of the Offer, this Agreement or the Merger or shall have recommended
another offer, or shall have adopted any resolution to effect any of the
foregoing, provided, that the Parent and the Purchaser may not terminate
this Agreement pursuant to this clause (iii) if, as a result of the
Company's receipt of an Acquisition Proposal from a third party (A) the
Company issues to its stockholders a communication that contains only the
statements permitted by Rule 14d-9(e) under the Exchange Act (and does not
otherwise withdraw, modify or amend its approval of recommendation of the
transactions contemplated hereby) and (B) within five business days of
issuing such communications the Company publicly reconfirms its approval
and recommendation of the transactions contemplated by the Offer, this
Agreement and the Merger; or
(g) by the Company if (i) there shall have been a breach of any
representation or warranty on the part of the Parent or the Purchaser which
materially adversely affects the consummation of the Offer or the Merger or
(ii) there shall have been a material breach of any covenant or agreement
on the part of the Parent or the Purchaser and which materially adversely
affects the consummation of the Offer or the Merger.
1.092 Effect of Termination. In the event of the termination of this
Agreement and the abandonment of the Offer and the Merger pursuant to Section
9.01, this Agreement shall forthwith become void and have no effect, without any
liability on the part of any party hereto or its affiliates, directors, officers
or stockholders, provided that no such termination shall relieve any of the
Company, the Parent or the Purchaser from (a) liability for damages arising from
any willful or intentional breach of this Agreement or (b) their obligations
under Sections 4.22, 5.07, 6.03(b) and 9.03, this Section 9.02 and Article X.
Notwithstanding the termination of this Agreement as provided herein, the
provisions of the Confidentiality Agreement shall continue in full force and
effect.
1.093 Fees and Expenses. (a) In the event that (i) the Parent and the
Purchaser terminate this Agreement pursuant to Section 9.01(f)(i) or 9.01(f)(ii)
hereof, (ii) this Agreement is terminated pursuant to Section 9.01(e)(ii) or
9.01(f)(iii), or (iii) an entity or group (other than the Parent or the
Purchaser) shall have made and not withdrawn a proposal with respect to a Third
Party Acquisition (as defined below) and, with respect to this clause (iii), (x)
the Offer shall have remained open until December 31, 1996, (y) the Minimum
Condition shall not have been satisfied at such date, and (z) within six months
of December 31, 1996, a Third Party Acquisition shall be consummated, the
Company shall reimburse the Parent, the Purchaser and their affiliates (not
later than one business day after submission of statements therefor) for all
actual documented out-of-pocket fees and expenses actually and reasonably
incurred by any of them or on their behalf in connection with the Offer and the
Merger and the consummation of all transactions contemplated by this Agreement
(including, without limitation, reasonable attorneys' fees, reasonable fees
payable to financing sources, investment bankers, counsel to any of the
foregoing, and accountants and filing fees and printing costs) up to the maximum
sum of $1,500,000.
(b) In the event (i) the Company terminates this Agreement pursuant
to Section 9.01(e)(ii), (ii) the Parent and the Purchaser terminate this
Agreement pursuant to Section 9.01(f)(iii)
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or (iii) a Third Party Acquisition is consummated under the circumstances
described in Section 9.03(a)(iii), the Parent and the Purchaser would suffer
direct and substantial damages, which damages cannot be determined with
reasonable certainty. To compensate the Parent and the Purchaser for such
damages, and as the Parent's and the Purchaser's exclusive remedy, the Company
shall pay to the Purchaser the amount of $14,000,000 as liquidated damages
immediately upon such a termination, or consummation of a Third Party
Acquisition as described in Section 9.03(a)(iii), as well as all amounts to
which the Parent and the Purchaser would be entitled pursuant to Section
9.03(a). It is specifically agreed that the amount to be paid pursuant to this
Section 9.03 represents liquidated damages and not a penalty.
"Third Party Acquisition" means the occurrence of any of the following
events (i) the acquisition of the Company by merger or otherwise by any person
(which includes any partnership, limited partnership, syndicate or other "group"
(as such term is used in Section 13(d)(3) of the Exchange Act)) or entity other
than the Parent, the Purchaser or any affiliate thereof (a "Third Party"); (ii)
the acquisition by a Third Party of more than 50% of the total assets of the
Company and its subsidiaries, taken as a whole; (iii) the acquisition by a Third
Party of 50% or more of the Shares, assuming conversion of all outstanding
Preferred Shares in accordance with their terms; or (iv) the adoption by the
Company of a plan of liquidation or the declaration or payment of an
extraordinary dividend.
(c) Except as specifically provided in this Section 9.03 each party
shall bear its own expenses in connection with this Agreement and the
transactions contemplated hereby.
ARTICLE X
MISCELLANEOUS
1.101 Survival of Representations, Warranties, Covenants and Agreements. The
representations, warranties and agreements of the parties contained in Sections
2.06, 3.01, 3.02 (but only to the extent that such Section expressly relates to
actions to be taken after the Effective Time), 3.03, 3.04, 3.05, 6.05, 6.08,
6.09 and Article X hereof, shall survive the consummation of the Offer and the
Merger. The agreements of the parties contained in Sections 6.03(b), 9.02, 9.03
and Article X hereof and the representations and warranties in Sections 4.22 and
5.07 shall survive the termination of this Agreement without termination. All
other representations, warranties, agreements and covenants in this Agreement
shall not survive the consummation of the Offer and the Merger or the
termination of this Agreement.
1.102 Amendment and Modification. Subject to applicable law, this
Agreement may be amended, modified or supplemented only by written agreement of
the Parent, the Purchaser and the Company at any time prior to the Effective
Time with respect to any of the terms contained herein executed by duly
authorized officers of the respective parties, except that after the earlier of
(a) the purchase by the Purchaser of a majority of the Fully Diluted Shares and
(b) the meeting of stockholders to approve the Merger contemplated by this
Agreement, the price per Share to be paid
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pursuant to this Agreement to the holders of Shares shall in no event be
decreased and the form of consideration to be received by the holders of the
Shares in the Merger shall in no event be altered, and no other amendment which
would adversely affect the holders of Shares or Preferred Shares shall be made,
without the approval of the applicable holders.
1.103 Waiver of Compliance; Consents. At any time prior to the
Effective Time, the parties hereto may extend the time for performance of any of
the obligations or other acts or waive any inaccuracies in the representations
and warranties contained herein or in the documents delivered pursuant hereto.
Any failure of the Parent (for itself and the Purchaser), on the one hand, or
the Company, on the other hand, to comply with any obligation, covenant,
agreement or condition herein may be waived in writing by the Parent (for itself
and the Purchaser) or the Company, respectively, but such waiver or failure to
insist upon strict compliance with such obligation, covenant, agreement or
condition shall not operate as a waiver of or estoppel with respect to any
subsequent or other failure. Whenever this Agreement requires or permits consent
by or on behalf of any party hereto or any extensions, such consent or extension
shall be given in writing in a manner consistent with the requirements for a
waiver of compliance as set forth in this Section 10.03.
1.104 Counterparts. This Agreement may be executed in any number of
counterparts each of which shall be deemed an original but all of which together
shall constitute one and the same instrument.
1.105 Governing Law; Submission to Jurisdiction. This Agreement shall
be governed by and construed in accordance with the laws of the State of
Delaware without regard to its conflicts of laws rules. Each party hereto hereby
(i) irrevocably and unconditionally submits in any legal action or proceeding
relating to this Agreement, or for recognition and enforcement of any judgment
in respect thereof, to the exclusive general jurisdiction of the state and
federal courts in the state of Delaware, and appellate courts from any thereof
and (ii) consents that any action or proceeding may be brought in such courts
and waives any objection that it may now or hereafter have to the venue of any
such action or proceeding in any such court or that such action or proceeding
was brought in an inconvenient court and agrees not to plead or claim the same.
1.106 Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered personally or mailed by
registered or certified mail (return receipt requested) or by overnight courier
service to the parties at the following addresses (or at such other address for
a party as shall be specified by like notice):
(a) If to the Company, to:
Prior to the Effective Time,
Orchard Supply Hardware Stores Corporation
6450 Via Del Oro
San Jose, California 95119
Attention: Maynard Jenkins,
President and Chief Executive Officer
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After the Effective Time,
Orchard Supply Hardware Stores Corporation
6450 Via Del Oro
San Jose, California 95119
Attention: Maynard Jenkins,
President and Chief Executive Officer
with copies to:
Riordan & McKinzie
300 South Grand Avenue
29th Floor
Los Angeles, California 90071
Attention: Richard Welch, Esq.
(b) if to the Parent or the Purchaser, to:
Sears, Roebuck and Co.
Grove Acquisition Corp.
3333 Beverly Road
Hoffman Estates, Illinois 60179
Attention: General Counsel
with copies to:
Latham & Watkins
Sears Tower, Suite 5800
233 South Wacker Drive
Chicago, Illinois 60606
Attention: Marc D. Bassewitz, Esq.
1.107 Entire Agreement, Assignment Etc. This Agreement, which hereby
incorporates the Company Disclosure Letter, the Parent Disclosure Letter, the
Confidentiality Agreement and the Stockholder Agreement, embodies the entire
agreement and understanding of the parties hereto in respect of the subject
matter hereof and is not intended to confer upon any other person any rights or
remedies hereunder. This Agreement supersedes all prior agreements and
understanding of the parties with respect to the subject matter hereof other
than the Confidentiality Agreement. This Agreement and all of the provisions
hereof shall be binding upon and inure to the benefit of the parties hereto and
their respective successors and permitted assigns, and (except for Indemnified
Parties as defined in Section 6.09) no other person shall have any right,
benefit or obligation under this Agreement as a third party beneficiary or
otherwise. Neither this Agreement nor any of the rights, interest or obligations
hereunder shall be assigned by any party hereto without the prior written
consent of the other parties hereto, except that the Parent shall have the right
to assign the rights of the Purchaser to any other (directly or indirectly)
wholly-owned subsidiary of the
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Parent without the prior written consent of the Company, provided that the
Parent shall remain fully responsible for and shall cause such subsidiary to
duly and timely perform, all obligations of the Purchaser hereunder.
1.108 Validity. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provisions of this Agreement, which shall remain in full force and effect.
1.109 Headings; Certain Definitions. The Articles and Section
headings contained in this Agreement are solely for the purpose of reference,
are not part of the agreement of the parties and shall not affect in any way the
meaning or interpretation of this Agreement. Every reference herein to the word
"days," if not preceded by the word "business," shall mean calendar days, and
every reference herein to the words "business days" shall mean each Monday,
Tuesday, Wednesday, Thursday and Friday that is not a day on which banking
institutions in the city of New York are authorized or obligated by law to
close.
10.10 Specific Performance. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any state or federal court in
the state of Delaware, this being in addition to any other remedy to which they
are entitled at law or in equity.
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IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the duly authorized officers of the parties hereto as of the date
first above written.
ORCHARD SUPPLY HARDWARE
STORES CORPORATION
By:
--------------------------------
Name:
-----------------------------
Title:
----------------------------
GROVE ACQUISITION CORP.
By:
--------------------------------
Name:
-----------------------------
Title:
----------------------------
SEARS, ROEBUCK AND CO.
By:
--------------------------------
Name:
-----------------------------
Title:
----------------------------
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ANNEX A
The capitalized terms used herein have the meanings set forth in the
Agreement and Plan of Merger to which this Annex A is attached.
Notwithstanding any other provision of the Agreement and Plan of
Merger to which this ANNEX A is attached (the "MERGER AGREEMENT") or the Offer,
but subject to Section 1.01(a) of the Merger Agreement and the Purchaser's
obligation to extend the Offer thereunder, the Purchaser shall not be required
to accept for payment, purchase or pay for any Shares of the Company tendered,
and may terminate or, subject to the terms of the Merger Agreement, amend the
Offer and may postpone the acceptance for payment of and payment for any Shares,
if prior to the time of acceptance for payment of Shares tendered pursuant to
the Offer:
(i) at least a majority of the outstanding Fully Diluted Shares
shall not have been validly tendered and, if tendered, not withdrawn
immediately prior to the expiration of the Offer (the "MINIMUM CONDITION"),
provided that solely for purposes of determining whether the Minimum
Condition has been satisfied, any Shares owned by Parent or Purchaser shall
be deemed to have been validly tendered and not withdrawn pursuant to the
Offer;
(ii) any waiting period applicable to the Offer pursuant to the HSR
Act shall not have expired or been terminated, subject to Section 1.01(a)
of the Merger Agreement and the Purchaser's obligation to extend the Offer
thereunder;
(iii) at any time before the time of acceptance for payment for any
such Shares any of the following shall occur or exist:
(a) there shall have been instituted or be pending any action,
proceeding, application, claim or counterclaim by any government or
governmental authority or agency, domestic or foreign, before any
court or governmental regulatory or administrative agency, authority
or tribunal, domestic or foreign, challenging the acquisition by the
Parent or the Purchaser of the Shares, seeking to restrain or prohibit
the making or consummation of the Offer or the Merger which could
reasonably be expected to have a Material Adverse Effect, or seeking
to obtain from the Parent or the Purchaser any damages that would
result in a Material Adverse Effect if such were assessed against the
Company, provided that there is a reasonable likelihood that such
damages will be assessed; or
(b) there shall be any statute, rule, regulation, judgment, order
or injunction enacted, promulgated, entered, enforced or deemed
applicable to the Offer, the Merger or the Merger Agreement, or any
other action shall have been taken by any government, governmental
authority or court with respect to a proceeding described in paragraph
(a) above, domestic or foreign, other than the routine application to
the Offer or the Merger of waiting periods under the HSR Act, that
has,
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or has a substantial likelihood of resulting in, any of the
consequences referred to in paragraph (a) above; or
(c) the Company shall have breached or failed to perform in any
material respect any of its obligations, covenants or agreements
contained in the Merger Agreement resulting in a Material Adverse
Effect, or any of the representations and warranties of the Company
set forth in the Merger Agreement shall have been breached when made
and such breach has a Material Adverse Effect or, except for any
representations and warranties made as of a specific date, shall have
been breached on and as of the scheduled expiration of the Offer, as
it may be extended from time to time (the "EXPIRATION DATE") and such
breach has a Material Adverse Effect (or, in the case of
representations and warranties that are specifically qualified as to
Material Adverse Effect, shall not have been true and correct when
made, or except for any representations and warranties made as of a
specific date, shall have ceased to be true and correct on and as of
the Expiration Date); or
(d) there shall have occurred (i) any general suspension of
trading in, or limitation on prices for, securities on the New York
Stock Exchange, Inc., any other national securities exchange or NASDAQ
for one full trading day (ii) the declaration of a banking moratorium
or any suspension of payments in respect of banks in the United States
(whether or not mandatory), or (iii) the commencement of a war or
armed hostilities involving the United States and, with respect to
this clause (iii), having a Material Adverse Effect on or materially
adversely affecting (or materially delaying) the consummation of the
Offer; or
(e) the Merger Agreement shall have been terminated in accordance
with its terms; or
(f) prior to the purchase of Shares pursuant to the Offer, the
Company Board of Directors shall have withdrawn or modified (including
by amendment of the Schedule 14D-9) its approval or recommendation of
the Offer, the Merger Agreement or the Merger or shall have
recommended any other merger, sale of substantially all assets or
other similar transaction, which, in the sole judgment of the Parent
in any such case, and regardless of the circumstances (including any
action or omission by the Parent) giving rise to such condition, makes
it inadvisable to proceed with such acceptance for payment except
where as a result of the Company's receipt of an unsolicited
acquisition proposal from a third party (A) the Company issues to its
stockholders a communication that contains only the statements
permitted by Rule 14d-9(e) under the Securities Exchange Act of 1934
(and does not otherwise withdraw, modify or amend its approval or
recommendation of the transactions contemplated hereby) and (B) within
five business days of issuing such communication the Company publicly
reconfirms its approval and recommendation of the transactions
contemplated by the Offer and the Merger Agreement; or
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(g) There shall have occurred since April 28, 1996 a change,
occurrence or circumstance in the Company's business having a Material Adverse
Effect thereon.
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STOCKHOLDER TENDER AND OPTION AGREEMENT
by and among
GROVE ACQUISITION CORP.,
SEARS, ROEBUCK AND CO.,
ORCHARD SUPPLY HARDWARE STORES CORPORATION,
FS EQUITY PARTNERS II, L.P.,
FS EQUITY PARTNERS III, L.P.
and
FS EQUITY PARTNERS INTERNATIONAL, L.P.
Dated as of August 14, 1996
<PAGE>
STOCKHOLDER TENDER AND OPTION AGREEMENT
STOCKHOLDER TENDER AND OPTION AGREEMENT, dated as of August 14, 1996
(this "Agreement"), by and among Grove Acquisition Corp., a Delaware corporation
("Purchaser"), Sears, Roebuck and Co., a New York corporation ("Parent"),
Orchard Supply Hardware Stores Corporation, a Delaware corporation (the
"Company"), FS Equity Partners II, L.P., a California limited partnership ("FS
II"), FS Equity Partners III, L.P., a Delaware limited partnership ("FS III"),
and FS Equity Partners International, L.P., a Delaware limited partnership ("FS
International"). FS II, FS III and FS International are referred to herein
collectively as "Stockholders" and individually as a "Stockholder."
WHEREAS, each Stockholder is the owner of the number of shares of
Common Stock, par value $.01 per share (the "Common Stock"), of the Company set
forth opposite its name on Exhibit A hereto (the "Shares") and/or the number of
shares of the Company's 6% Cumulative Convertible Preferred Stock, $.01 par
value per share (the "Preferred Stock"), set forth opposite its name on Exhibit
A hereto (the "Preferred Shares"); and
WHEREAS, the Parent, the Purchaser and the Company, have entered into
an Agreement and Plan of Merger, dated as of the date hereof (as amended from
time to time, the "Merger Agreement"), which provides, among other things, that,
upon the terms and subject to the conditions therein, Purchaser will make a cash
tender offer (the "Offer") for all of the outstanding shares of Common Stock and
will merge with the Company (the "Merger"); and
WHEREAS, as a condition to the willingness of Parent and Purchaser to
enter into the Merger Agreement, Purchaser has requested that the Stockholders
agree, and in order to induce Parent and Purchaser to enter into the Merger
Agreement, the Stockholders have agreed, to enter into this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the
representations, warranties, covenants and agreements set forth herein, and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, and subject to the terms and conditions set forth herein,
the parties hereto hereby agree as follows:
I. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS. Each Stockholder
represents and warrants to the Purchaser and the Parent as follows:
(a) Such Stockholder is the sole record and beneficial owner (as
defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), which meaning will apply for all purposes of this Agreement)
of, and has good title to, all of the Shares and the Preferred Shares set forth
opposite its name on Exhibit A hereto, and there exist no liens, claims,
security interests, options, proxies, voting agreements, charges or encumbrances
of whatever nature, except for restrictions applicable thereto under federal and
state securities laws ("Liens") affecting the Shares and the Preferred Shares.
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(b) Upon transfer to the Purchaser or the Parent, as the case may be,
by such Stockholder of the Shares hereunder, Purchaser will have good title to
the Shares, free and clear of all Liens.
(c) The Shares and the Preferred Shares constitute all of the
securities (as defined in Section 3(10) of the Exchange Act, which definition
will apply for all purposes of this Agreement) of the Company beneficially
owned, directly or indirectly, by such Stockholder (including any securities
beneficially owned by any of its affiliates or associates (as such terms are
defined in Rule 12b-2 under the Exchange Act, which definition will apply for
all purposes of this Agreement) as to which such Stockholder has voting or
investment power).
(d) Except for the Shares and the Preferred Shares, such Stockholder
does not, directly or indirectly, beneficially own or have any option, warrant
or other right to acquire any securities of the Company that are or may by their
terms become entitled to vote or any securities that are convertible or
exchangeable into or exercisable for any securities of the Company that are or
may by their terms become entitled to vote, nor is such Stockholder subject to
any contract, commitment, arrangement, understanding or relationship (whether or
not legally enforceable) that allows or obligates him to vote or acquire any
securities of the Company.
(e) The execution and delivery of this Agreement by such Stockholder
does not, and the performance by such Stockholder of its obligations hereunder
will not, constitute a violation of, conflict with, result in a default (or an
event which, with notice or lapse of time or both, would result in a default)
under, or result in the creation of any Lien on any Shares or the Preferred
Shares under, (i) any contract, commitment, agreement, understanding,
arrangement or restriction of any kind to which such Stockholder is a party or
by which such Stockholder is bound or (ii) any judgment, writ, decree, order or
ruling applicable to such Stockholder.
(f) Such Stockholder has full partnership power and authority to
execute, deliver and perform this Agreement and to consummate the transactions
contemplated hereby. This Agreement has been duly and validly authorized by
such Stockholder, and the execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby have been duly and
validly authorized and no other actions on the part of such Stockholder are
necessary to authorize this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by such Stockholder and, assuming due authorization, execution and
delivery by the Purchaser, constitutes a valid and binding agreement of such
Stockholder, enforceable against such Stockholder in accordance with its terms,
except to the extent that enforceability may be limited by applicable
bankruptcy, reorganization, insolvency, moratorium or other laws affecting the
enforcement of creditors' rights generally and by general principles of equity,
regardless of whether such enforceability is considered in a proceeding in
equity or at law.
(g) Neither the execution and delivery of this Agreement nor the
performance by such Stockholder of its obligations hereunder will violate any
law, decree, statute, rule or regulation applicable to such Stockholder or
require any consent, authorization or
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approval of, filing with or notice to, any court, administrative agency or other
governmental body or authority, other than any required notices or filings
pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and the rules and regulations promulgated thereunder (the "HSR Act") or
the federal securities laws.
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to the Purchaser and the Parent as follows:
(a) The Company is duly organized and validly existing and in good
standing under the laws of the State of Delaware, has the requisite corporate
power and authority to execute and deliver this Agreement and the Amended
Registration Rights Agreement (as defined below) and to consummate the
transactions contemplated hereby and thereby, and has taken all necessary
corporate action to authorize the execution, delivery and performance of this
Agreement and the Amended Registration Rights Agreement. Each of this Agreement
and the Amended Registration Rights Agreement has been duly and validly executed
and delivered by the Company and constitutes the legal, valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, except to the extent that enforceability may be limited by applicable
bankruptcy, reorganization, insolvency, moratorium or other laws affecting the
enforcement of creditors' rights generally and by general principles of equity,
regardless of whether such enforceability is considered in a proceeding in
equity or at law.
(b) The execution and delivery of the Amended Registration Rights
Agreement by the Company does not, and the performance by the Company of its
obligations thereunder will not, constitute a violation of, conflict with, or
result in a default (or an event which, with notice or lapse of time or both,
would result in a default) under, its certificate of incorporation or bylaws or
any contract, commitment, agreement, understanding, arrangement or restriction
of any kind to which the Company is a party or by which the Company is bound or
any judgment, writ, decree, order or ruling applicable to the Company.
(c) Neither the execution and delivery of the Amended Registration
Rights Agreement nor the performance by the Company of its obligations
thereunder will violate any order, writ, injunction, judgment, law, decree,
statute, rule or regulation applicable to the Company or require any consent,
authorization or approval of, filing with, or notice to, any court,
administrative agency or other governmental body or authority, other than any
required notices or filings pursuant to the HSR Act or the federal securities
laws.
2. REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser represents
and warrants to the Stockholders as follows:
(a) Purchaser is duly organized and validly existing and in good
standing under the laws of the State of Delaware, has the requisite corporate
power and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby, and has taken all necessary corporate action
to authorize the execution, delivery and performance of this Agreement. This
Agreement has been duly and validly executed and delivered by Purchaser and
constitutes the legal, valid and binding obligation of Purchaser, enforceable
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<PAGE>
against Purchaser in accordance with its terms, except to the extent that
enforceability may be limited by applicable bankruptcy, reorganization,
insolvency, moratorium or other laws affecting the enforcement of creditors'
rights generally and by general principles of equity, regardless of whether such
enforceability is considered in a proceeding in equity or at law.
(b) The execution and delivery of this Agreement by Purchaser does
not, and the performance by Purchaser of its obligations hereunder will not,
constitute a violation of, conflict with, or result in a default (or an event
which, with notice or lapse of time or both, would result in a default) under,
its certificate of incorporation or bylaws or any contract, commitment,
agreement, understanding, arrangement or restriction of any kind to which
Purchaser is a party or by which Purchaser is bound or any judgment, writ,
decree, order or ruling applicable to Purchaser.
(c) Neither the execution and delivery of this Agreement nor the
performance by Purchaser of its obligations hereunder will violate any order,
writ, injunction, judgment, law, decree, statute, rule or regulation applicable
to Purchaser or require any consent, authorization or approval of, filing with,
or notice to, any court, administrative agency or other governmental body or
authority, other than any required notices or filings pursuant to the HSR Act or
the federal securities laws.
3. CONVERSION OF PREFERRED SHARES. In connection with the Offer,
each Stockholder will convert the Preferred Shares into shares of Common Stock
in accordance with the certificate of designation with respect to such Preferred
Shares. Such conversion may be effected by delivery of the certificates
representing such Preferred Shares to the Depository for the Offer, together
with an irrevocable notice or election directing that the Preferred Shares be
converted into Shares of Common Stock immediately prior to acceptance of the
Shares for purchase by Purchaser in the Offer or such other mechanism reasonably
acceptable to the Stockholders and the Parent. All shares of Common Stock
acquired by each Stockholder upon conversion of Preferred Shares shall be deemed
Shares and included in the Shares subject to this Agreement. In the event that
the Offer is consummated (i) on or after September 1, 1996 but not later than
September 15, 1996 or (ii) on or after December 1, 1996 but not later than
December 15, 1996, the Parent shall pay to each Stockholder cash equal to the
amount of the dividend which otherwise would be paid on September 15, 1996 or
December 15, 1996, as the case may be, on any Preferred Shares owned of record
by such Stockholder on the preceding September 1 or December 1, as the case may
be.
4. TENDER OF SHARES.
(a) Each Stockholder will tender and sell (and not withdraw) pursuant
to and in accordance with the terms of the Offer all of the Shares. Upon the
purchase of all the Shares pursuant to the Offer in accordance with this Section
5, this Agreement will terminate. Each Stockholder will receive the same price
per Share received by other stockholders of the Company in the Offer. In the
event that, notwithstanding the provisions of the first sentence of this Section
5, any Shares are for any reason withdrawn from the Offer or are not purchased
pursuant to the Offer, such Shares will remain subject to the terms of this
Agreement. Each
5
<PAGE>
Stockholder acknowledges that Purchaser's obligation to accept for payment and
pay for the Shares in the Offer is subject to all the terms and conditions of
the Offer. On the date the Shares are accepted for payment and purchased by
Purchaser pursuant to the Offer or on the date the Stock Option is exercised by
Parent, Purchaser or Parent, as the case may be, shall make payment by wire
transfer to each Stockholder of the purchase price for such Shares.
(b) Each Stockholder hereby agrees to permit Parent and Purchaser to
publish and disclose in the Offer Documents (as such term is defined in the
Merger Agreement) and, if approval of the stockholders of the Company is
required under applicable law, the Proxy Statement (as such term is defined in
the Merger Agreement, including all documents and schedules filed with the SEC),
its identity and ownership of Common Stock and Preferred Stock and the nature of
its commitments, arrangements and understandings under this Agreement.
5. OPTION TO PURCHASE.
(a) Each Stockholder hereby grants to Parent, subject to the terms and
conditions hereof, an irrevocable option (the "Stock Option") (a) to purchase
the Shares at a purchase price per share equal to $35.00 and (b) to purchase the
Preferred Shares at a purchase price per share equal to $56.00 (collectively,
the "Option Shares"). In the event that (i) the Company terminates the Merger
Agreement pursuant to Section 9.01(e)(ii) of the Merger Agreement or in the
event the Parent and the Purchaser terminate the Merger Agreement pursuant to
Section 9.01(f)(iii) of the Merger Agreement, or (ii) the Offer is consummated,
the Stock Option shall, in any such case, become immediately exercisable, in
whole only, upon the first to occur of any such event and remain exercisable, in
whole only, until the date which is 60 days after the date of the occurrence of
such event (except in the case of clause (ii) above, in which case the Stock
Option shall be exercised in full by Parent immediately with the purchase price
per Share paid in the Offer (with the purchase price for the Preferred Shares
adjusted to an as converted basis, if appropriate) to be paid on the same
business day to the Stockholders by wire transfer), but shall not be exercisable
in each case unless: (x) all waiting periods under the HSR Act required for the
purchase of Shares and Preferred Shares upon such exercise shall have expired or
been waived, with Parent hereby agreeing to use its best efforts to promptly
cause such waiting period to be terminated, and with the HSR Act filing for the
Offer and Merger also covering full exercise of this Stock Option and (y) there
shall not then be in effect any preliminary or final injunction or other order
issued by any court or governmental, administrative or regulatory agency or
authority prohibiting the exercise of the Stock Option pursuant to this
Agreement, provided that if such injunction or other order has become final and
nonappealable, the Stock Option shall terminate; and provided further, that if
the Stock Option is not exercisable because the circumstances described in
clauses (x) and (y) do not exist, then the Stock Option shall be exercisable for
the 10-day period commencing on the date that the circumstances set forth in
clauses (x) and (y) do exist. In the event that Parent wishes to exercise the
Stock Option, Parent shall send a written notice to the Stockholder identifying
the place for the closing of such purchase at least three business days prior to
such closing.
(b) If Parent exercises the Stock Option pursuant to clause (i) of
paragraph (a) of this Section 6 and, within one year following the termination
of the Merger
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Agreement in accordance with its terms, Parent shall (i) transfer, sell or
otherwise dispose of any or all of the Option Shares, including without
limitation, by means of tender or exchange of any or all of the Option Shares
pursuant to a tender or exchange offer involving the capital stock of the
Company (a "Disposition"), provided that any conversion of the Preferred Shares
into Common Stock in accordance with their terms shall not constitute a
Disposition, (ii) convert such Option Shares into or receive cash, capital
stock, other securities or any other consideration in or as a result of a Third
Party Acquisition (as such term is defined in the Merger Agreement) or (iii)
alone or as part of a syndicate or group, other than pursuant to the Merger
Agreement, (x) acquires the Company by merger or otherwise, (y) acquires more
than 50% of the assets of the Company and its subsidiaries, taken as a whole, or
(z) acquires 50% or more of the Shares (assuming the conversion of all
outstanding Preferred Shares in accordance with their terms), Parent shall pay
to the Stockholders within five days thereafter the amount equal to the Profit
(as defined below) Parent shall receive, if any, pursuant to a Disposition or
Third Party Acquisition or the Spread (as defined below) in the case of a
transaction described in clause (iii) above. "Profit", for purposes of this
Agreement, shall equal (i) the product of (a) the number of Option Shares Parent
transfers, sells, tenders, exchanges or otherwise disposes of pursuant to a
Disposition or a Third Party Acquisition times (b) the amount of the per share
consideration received by Parent pursuant to such Disposition or Third Party
Acquisition (valuing any non-cash consideration at its fair market value on the
date of such consummation) in excess of the purchase price of such Option Shares
set forth in paragraph (a) of this Section 6 (adjusted to reflect the conversion
of the Preferred Shares, if appropriate). "Spread", for purposes of this
Agreement, shall equal the product of (a) the aggregate number of Option Shares
times (b) the amount of the highest per share price paid by the Parent to other
stockholders of the Company in a transaction described in clause (iii) above
(valuing any non-cash consideration at its fair market value on the date of such
consummation) in excess of the purchase price of such Option Shares set forth in
paragraph (a) of this Section 6 (adjusted to reflect the conversion of the
Preferred Shares, if appropriate). For purposes hereof, the fair market value of
any non-cash consideration shall be the closing price or the last sale price,
or, in case no such sale takes place on the day of consummation of such
Disposition, Third Party Acquisition or other transaction described in clause
(iii) above, the average of the closing bid and asked prices, in either case as
reported in the principal consolidated transaction reporting system with respect
to securities listed or admitted to trading on the principal national securities
exchange on which such consideration is listed or admitted to trading or, if
such consideration is not listed or admitted to trading on any national
securities exchange, the last quoted 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 not so determinable, the fair value of
such consideration on such date shall be determined in good faith by the Board
of Directors of Parent.
6. TRANSFER OF THE SHARES. During the term of this Agreement, except
as otherwise provided herein, no Stockholder will (a) offer to sell, sell,
pledge or otherwise dispose of or transfer (except by operation of law in a
merger or business combination of the Company with or into any other entity or
entities) any interest in or encumber with any Lien any of the Shares or
Preferred Shares, (b) acquire any shares of Common Stock, Preferred Stock or
other securities of the Company (otherwise than pursuant to Section 4 or 5 or in
connection with a
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transaction of the type described in Section 12 and any such additional shares
or securities will be deemed Shares and included in the Shares subject to this
Agreement), (c) deposit the Shares into a voting trust, enter into a voting
agreement or arrangement with respect to the Shares or grant any proxy or power
of attorney with respect to the Shares, or (d) enter into any contract, option
or other arrangement or undertaking with respect to the direct or indirect
acquisition or sale, assignment or other disposition of or transfer of any
interest in or the voting of any shares of Common Stock or any other securities
of the Company.
7. NO SOLICITATION. Beginning on the date hereof and ending on the
earlier of termination of this Agreement or the last date the Stock Option is
exercisable pursuant to Section 6(a) hereof, no Stockholder shall, in its
capacity as such, directly or indirectly, initiate, solicit (including by way of
furnishing information), encourage or respond to or take any other action
knowingly to facilitate, any inquiries or the making of any proposal by any
person or entity (other than Parent or any affiliate of Parent) with respect to
the Company that constitutes or reasonably may be expected to lead to, an
Acquisition Proposal (as such term is defined in the Merger Agreement), or enter
into or maintain or continue discussions or negotiate with any person or entity
in furtherance of such inquiries or to obtain any Acquisition Proposal, or agree
to or endorse any Acquisition Proposal, or authorize or permit any Person or
entity acting on behalf of such Stockholder to do any of the foregoing, provided
that the foregoing shall not be construed to limit or restrict a director of the
Company from performing his or her fiduciary duties as a director. If a
Stockholder receives any inquiry or proposal regarding any Acquisition Proposal,
such Stockholder shall promptly inform Parent of that inquiry or proposal and
the details thereof.
8. WAIVER OF APPRAISAL RIGHTS. Each Stockholder hereby irrevocably
waives any rights of appraisal or rights to dissent from the Merger that such
Stockholder may have.
9. VOTING OF SHARES. Beginning on the date hereof and ending on the
earlier of termination of this Agreement or the last date the Stock Option is
exercisable pursuant to Section 6(a) hereof, each Stockholder hereby agrees to
vote each Share at any annual, special or adjourned meeting of the stockholders
of the Company or execute a written consent in lieu thereof (a) in favor of the
Merger, the execution and delivery by the Company of the Merger Agreement and
the approval and adoption thereof; (b) against any action or agreement that
would result in a breach in any respect of any covenant, agreement,
representation or warranty of the Company under the Merger Agreement; and (c)
against the following actions (other than the Merger and the other transactions
contemplated by the Merger Agreement): (i) any extraordinary corporate
transaction, such as a merger, consolidation or other business combination
involving the Company or its subsidiaries; (ii) a sale, lease or transfer of a
material amount of assets of the Company or one of its subsidiaries, or a
reorganization, recapitalization, dissolution or liquidation of the Company or
its subsidiaries; (iii) (A) any change in a majority of the persons who
constitute the board of directors of the Company as of the date hereof, except
as contemplated by the Merger Agreement; (B) any change in the present
capitalization of the Company or any amendment of the Company's Certificate of
Incorporation or By-Laws, as amended to date; (C) any other material change in
the Company's corporate structure or business; or (D) any other action which, in
the case of each of the matters referred to in clauses (iii)(A),
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(B), (C) and (D), is intended, or could reasonably be expected, to impede,
interfere with, delay, postpone, or adversely affect the Merger and the other
transactions contemplated by this Agreement and the Merger Agreement.
10. ENFORCEMENT OF THE AGREEMENT. Each Stockholder acknowledges that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that Purchaser will be entitled to
an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any court of the United
States or any state having jurisdiction, this being in addition to any other
remedy to which it is entitled at law or in equity.
11. ADJUSTMENTS. The number and type of securities subject to this
Agreement will be appropriately adjusted in the event of any stock dividends,
stock splits, recapitalizations, combinations, exchanges of shares or the like
or any other action that would have the effect of changing the Stockholders'
ownership of the Company's capital stock or other securities.
12. TERMINATION. This Agreement will terminate on the earliest of (a)
the date the Merger Agreement is terminated in accordance with its terms;
provided, however, that the provisions of Sections 6 and 7 shall not terminate
until 60 days thereafter (or such later time as permitted by this Agreement) if
the Merger Agreement was terminated pursuant to Section 9.01(e)(ii) or
9.01(f)(iii), (b) the purchase of all the Shares pursuant to the Offer in
accordance with Section 5, and (c) February 15, 1997; provided, however, that if
the Stock Option is exercised, the provisions of Section 16 shall survive any
termination of this Agreement.
13. EFFECTIVENESS. This Agreement shall not be effective unless and
until it shall have been approved by the Company's Board of Directors.
14. BROKERAGE. Purchaser and each Stockholder represent and warrant
to the other that the negotiations relevant to this Agreement have been carried
on by Purchaser, on the one hand, and such Stockholder, on the other hand,
directly with the other, and that there are no claims for finder's fees or
brokerage commissions or other like payments in connection with this Agreement
or the transactions contemplated hereby. Purchaser, on the one hand, and each
Stockholder, on the other hand, will indemnify and hold harmless the other from
and against any and all claims or liabilities for finder's fees or brokerage
commissions or other like payments incurred by reason of action taken by him, it
or any of them, as the case may be.
15. REGISTRATION RIGHTS. The Company, FS III and FS International
hereby amend the Registration Rights Agreement dated as of December 29, 1993, as
supplemented or amended to the date of this Agreement, by and among the Company,
FS III and FS International, a copy of which is attached as Exhibit A hereto
(the "Registration Rights Agreement" and, as amended pursuant to this Section
16, the "Amended Registration Rights Agreement") as follows:
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(a) The definition of "Restricted Securities" on page 2 of the
Registration Rights Agreement is hereby amended effective upon exercise of the
Stock Option to include the shares of Common Stock of the Company owned by FS
II.
(b) FS II is added as an additional party to the Registration Rights
Agreement for purposes of making the assignment of its rights thereunder to
Parent pursuant to this Section 16.
(c) Section 3 of the Registration Rights Agreement is hereby amended
effective upon exercise of the Stock Option to provide that all holders of
Restricted Securities shall be limited to two requests for registration of
Restricted Securities pursuant to Section 3(a) of the Registration Rights
Agreement.
The Stockholders hereby assign all of their rights under the Amended
Registration Rights Agreement to the Parent, such assignment to be effective
upon the Parent's exercise of the Stock Option pursuant hereto.
16. MISCELLANEOUS.
(a) All representations and warranties contained herein will survive
for one year after the termination hereof.
(b) Any provision of this Agreement may be waived at any time by the
party that is entitled to the benefits thereof. No such waiver, amendment or
supplement will be effective unless in a writing and is signed by the party or
parties sought to be bound thereby. Any waiver by any party of a breach of any
provision of this Agreement will not operate as or be construed to be a waiver
of any other breach of such provision or of any breach of any other provision of
this Agreement. The failure of a party to insist upon strict adherence to any
term of this Agreement or one or more sections hereof will not be considered a
waiver or deprive that party of the right thereafter to insist upon strict
adherence to that term or any other term of this Agreement.
(c) This Agreement contains the entire agreement among the parties
with respect to the subject matter hereof, and supersedes all prior agreements
among the parties with respect to such matters. This Agreement may not be
amended, changed, supplemented, waived or otherwise modified, except upon the
delivery of a written agreement executed by the parties hereto.
(d) This Agreement will be governed by and construed in accordance
with the laws of the State of Delaware applicable to contracts made and
performed in that state. Each party hereto hereby (i) irrevocably and
unconditionally submits in any legal action or proceeding relating to this
Agreement, or for recognition and enforcement of any judgment in respect
thereof, to the exclusive general jurisdiction of the state and federal courts
in the state of Delaware, and appellate courts from any thereof and (ii)
consents that any action or proceeding may be brought in such courts and waives
any objection that it may now or hereafter have to the
10
<PAGE>
venue of any such action or proceeding in any such court or that such action or
proceeding was brought in an inconvenient court and agrees not to plead or claim
the same.
(e) The descriptive headings contained herein are for convenience and
reference only and will not affect in any way the meaning or interpretation of
this Agreement.
(f) All notices and other communications hereunder will be in writing
and will be given (and will be deemed to have been duly given upon receipt) by
delivery in person, by telecopy, or by registered or certified mail, postage
prepaid, return receipt requested, addressed as follows:
If to a Stockholder to the address set forth beneath such
Stockholder's name on Exhibit A hereto.
If to the Purchaser or Parent to:
Grove Acquisition Corp.
Sears, Roebuck and Co.
3333 Beverly Road
Hoffman Estates, Illinois 60179
Attention: General Counsel
Telecopier: (847) 286-6544
with a copy to:
Latham & Watkins
Sears Tower, Suite 5800
233 South Wacker Drive
Chicago, Illinois 60606
Attention: Marc D. Bassewitz, Esq.
Telecopier: (312) 993-9767
If to the Company to:
Orchard Supply Hardware Stores Corporation
6450 Via Del Oro
San Jose, California 95119
Attention: Mayard Jenkins,
President and Chief Executive Officer
Telecopier: (408) 629-7174
with a copy to:
Riordan & McKinzie
300 South Grand Avenue, 29th Floor
11
<PAGE>
Los Angeles, California 90071
Attention: Richard Welch, Esq.
Telecopier: (213) 229-8550
or to such other address as any party may have furnished to the other parties in
writing in accordance herewith.
(g) This Agreement may be executed in any number of counterparts, each
of which will be deemed to be an original, but all of which together will
constitute one agreement.
(h) This Agreement is binding upon and is solely for the benefit of
the parties hereto and their respective successors, legal representatives and
assigns. Neither this Agreement nor any of the rights, interests or obligations
under this Agreement will be assigned by any of the parties hereto without the
prior written consent of the other parties, except that (i) Purchaser will have
the right to assign to Parent or any other direct or indirect wholly owned
subsidiary of Parent any and all rights and obligations of Purchaser under this
Agreement, including the right to purchase Shares tendered by the Stockholders
pursuant to the terms hereof and the Offer, provided that any such assignment
will not relieve Purchaser from any of its obligations hereunder and (ii) Parent
will have the right to assign to Purchaser or any other direct or indirect
wholly owned subsidiary of Parent any and all rights and obligations of Parent
under this Agreement, including the right to purchase Shares and Preferred
Shares held by the Stockholders pursuant to the terms hereof, provided that any
such assignment will not relieve Parent from any of its obligations hereunder.
(i) If any term or other provision of this Agreement is determined to
be invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other terms and provisions of this Agreement will 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 hereto. Upon any such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto will
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 by this Agreement are consummated to the
extent possible.
(j) All rights, powers and remedies provided under this Agreement or
otherwise available in respect hereof at law or in equity will be cumulative and
not alternative, and the exercise of any thereof by either party will not
preclude the simultaneous or later exercise of any other such right, power or
remedy by such party.
12
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement on the date first above written.
GROVE ACQUISITION CORP. STOCKHOLDERS:
FS EQUITY PARTNERS II, L.P.
<TABLE>
<CAPTION>
<S> <C>
By: __________________________ By: Freeman, Spogli & Co.
Name: ________________________ Its: General Partner
Title: _______________________
By: ___________________________
Name: ___________________________
Title: __________________________
SEARS, ROEBUCK AND CO. FS EQUITY PARTNERS III, L.P.
By: FS Capital Partners, L.P.
Its: General Partner
By: _________________________
Name: ________________________ By: FS Holdings, Inc.
Title: _______________________ Its: General Partner
By: ________________________
Name: ______________________
Title:______________________
ORCHARD SUPPLY HARDWARE FS EQUITY PARTNERS INTERNATIONAL, L.P.
STORES CORPORATION
By: FS & Co. International, L.P.
Its: General Partner
By: _________________________ By: FS International Holdings Limited
Name: _______________________ Its: General Partner
Title: ______________________
By: ______________________
Name: ____________________
Title: ___________________
</TABLE>
13
<PAGE>
EXHIBIT A
<TABLE>
<CAPTION>
Number of Shares Number of Shares
Stockholder of Common Stock Owned of Preferred Stock Owned
- ----------- --------------------- ------------------------
<S> <C> <C>
FS Equity Partners II, L.P. 324,043 0
1110 Santa Monica Boulevard
Suite 1900
Los Angeles, California 90025
Attention: William Wardlaw
Telecopier: (310) 444-1870
FS Equity Partners, III, L.P. 0 772,135
1110 Santa Monica Boulevard
Suite 1900
Los Angeles, California 90025
Attention: William Wardlaw
Telecopier: (310) 444-1870
FS Equity Partners International, L.P. 0 27,865
1110 Santa Monica Boulevard
Suite 1900
Los Angeles, California 90025
Attention: William Wardlaw
Telecopier: (310) 444-1870
</TABLE>
14
<PAGE>
EXHIBIT 8
May 31, 1996
Sears, Roebuck and Co.
3333 Beverly Road
Hoffman Estate, IL 60179
Attn: Gary Crittenden, Executive Vice President,
Business Planning and Strategy
Gentlemen:
In connection with your consideration of a possible business combination or
acquisition transaction (a "Transaction") with Orchard Supply Hardware Stores
Corporation (together with its subsidiary, Orchard Supply Hardware
Corporation, the "Company") certain financial, operational and other
information concerning the Company is being furnished to you. As a condition
to your receipt of such information, you agree, as set forth below, to treat
any information concerning the Company (irrespective of its source or form of
communication) that may be furnished to you by or on behalf of the Company
(collectively referred to as "Evaluation Material"), whether furnished before,
on or after the date of this Confidentiality Agreement ("Confidentiality
Agreement"), in accordance with the provisions hereof and you further agree to
abide by the other provisions contained in this Confidentiality Agreement. The
term Evaluation Material shall include any notes, analyses, compilations,
studies or other documents or records prepared by you or others, which contain
or reflect or are generated from information supplied by the Company or its
representatives. The term Evaluation Material shall not include information
which you can prove by documentary evidence (i) is now or becomes generally
available to the public other than as a result of a disclosure by you or your
representatives in violation of this Confidentiality Agreement, (ii) was
available to you on a non-confidential basis from a source other than the
Company or its representatives, prior to receipt in accordance with this
Confidentiality Agreement provided such information is not known by you to be
subject to another confidentiality agreement with or other obligation of
secrecy to the Company or another party, (iii) becomes available to you on a
non-confidential basis from sources other than the Company or its
representatives, provided that such source is not known by you or your
representatives to be prohibited from transmitting the information to you by a
contractual, legal or fiduciary obligation, or (iv) was or is independently
developed by you or on your behalf without the use of any Evaluation Material
and not otherwise in violation of clause (iii) of this paragraph.
You agree that the Evaluation Material will be used solely for the purpose
of evaluating and negotiating a possible Transaction involving the Company and
will not be used by you for any other purpose and that the Evaluation Material
will be kept confidential by you; provided, however, that any of such
information may be disclosed to your directors, officers, employees, potential
financing sources and professional service providers (collectively referred to
as "your representatives") who, in your reasonable judgment, need to know such
information for the purpose described above, it being understood that prior to
any disclosure of Evaluation Material, each of your representatives shall be
informed by you of the terms of this Confidentiality Agreement, that the
provisions hereof shall be deemed to be fully applicable to him or her, and of
the confidential nature of the Evaluation Material. You shall be responsible
for any breach of this Confidentiality Agreement by you or any of your
representatives.
Except as provided below, without the prior written consent of the other
party, neither you nor the Company will disclose, and each of you and the
Company will direct its respective representatives not to disclose, to any
person other than its respective representatives, the fact that the Evaluation
Material has been made available to you, the fact that you or we are
considering a Transaction, or any information with respect to the discussions
or
<PAGE>
Sears, Roebuck and Co.
May 31, 1996
Page 2
negotiations, including the status thereof. The term "person" as used in this
Confidentiality Agreement shall be broadly interpreted to include, without
limitation, any corporation, company, partnership or individual.
Disclosure of any portion of Evaluation Material by either party or its
respective representatives or of any matter covered in the preceding paragraph
by either party or its respective representatives shall not be precluded under
this Agreement, if such disclosure is, in the reasonable opinion of counsel to
the disclosing party: (i) required by law or the rules and regulations of any
stock exchange on which the securities of the disclosing party are traded or
of any other regulatory authority having jurisdiction over the disclosing
party, (ii) necessary to establish rights under this Agreement, (iii)
consented to in writing by the other party or (iv) in response to a valid
subpoena or order of a court or other governmental body or other valid legal
process; provided that (a) with respect to any such subpoena, order or legal
process, the disclosing party shall first give notice to the other party and
use reasonable efforts to cooperate with the other party so that such other
party may take legally available steps to resist or narrow such subpoena,
order or legal process and obtain an appropriate protective order or other
assurance that confidential treatment will be accorded such information and
(b) the disclosing party will furnish only such of the Evaluation Material
being sought as such party is advised by its counsel is legally required in
response to the subpoena, order or other legal process. Prior to making any
disclosure permitted by this paragraph, the disclosing party will, to the
extent practicable, consult with the other party with respect to the proposed
disclosure.
You and your representatives will upon the request of the Company at your
election either (1) promptly deliver to the Company all Evaluation Material in
or under your or your representatives' possession or control, without
retaining any copy, extract or reproduction thereof, or (2) promptly destroy
all Evaluation Material in or under your or your representatives' possession
or control, and such destruction shall be certified in writing to the Company
by one of your officers supervising such destruction. Notwithstanding the
return or destruction of the Evaluation Material, you and your representatives
will continue to be bound by the confidentiality and other obligations created
hereby.
You acknowledge that you are aware, and that you will advise, or have
advised, your representatives who are informed as to the matters which are the
subject of this Confidentiality Agreement, that the United States securities
laws prohibit any person who has received from an issuer material, nonpublic
information concerning the matters which are the subject of this
Confidentiality Agreement from purchasing or selling securities of such issuer
or from communicating such information to any other person under circumstances
in which it is reasonably foreseeable that such person is likely to purchase
or sell such securities while in possession of material nonpublic information.
You hereby further acknowledge that the Evaluation Material is being
furnished to you in further consideration of your agreement that except with
respect to the evaluation and negotiation of a Transaction as contemplated by
this Confidentiality Agreement (and, in such connection, only with or to the
Company, its Board of Directors and/or representatives), neither you nor any
of your subsidiaries will, for a period of two years from the date hereof,
directly or indirectly, alone or with others, (a) negotiate with or provide
any information to any party with respect to, or make any statement or
proposal to the Board of Directors of the Company, to any of its agents or to
any stockholder of the Company with respect to, or make any public
announcement or proposal or offer whatsoever (including, but not limited to
any "solicitation" of "proxies" as such terms are defined or used in
Regulation 14A of the Securities Exchange Act of 1934) with respect to, or
otherwise solicit, seek or offer to effect (i) any form of business
combination or transaction involving the Company or any affiliate thereof,
including, without limitation, a merger, tender or exchange offer or
liquidation of the Company's assets, (ii) any form of restructuring,
recapitalization or similar transaction with respect to the Company or any
affiliate thereof, (iii) any purchase of any securities or assets, or rights
to acquire any securities or assets, of the Company, or
<PAGE>
Sears, Roebuck and Co.
May 31, 1996
Page 3
(iv) any proposal to seek representation on the Board of Directors of the
Company or otherwise to seek to control or influence the management, Board of
Directors or policies of the Company, (v) any request or proposal to waive,
terminate or amend the provisions of this paragraph, or (vi) any proposal or
other statement inconsistent with the terms of this paragraph, (b) instigate,
encourage or assist any third party to do any of the foregoing, or (c) become
the beneficial owner of more than 1% of any class of securities of the
Company, unless and until you have received the prior written invitation or
approval of a majority of the Board of Directors of the Company to do any of
the foregoing; provided, however, that the foregoing shall not prohibit,
subject to the provisions of this Confidentiality Agreement, any of your
affiliates which is in the business of acquiring and maintaining investment
portfolios from acquiring or owning securities of the Company in the ordinary
course of its business for investment and not with an intention of obtaining
or exercising control of the Company.
You agree that without the prior consent of the Company, neither you nor any
of your representatives will contact any employee, supplier, customer or
representative of the Company concerning the Evaluation Material or the
Transaction, or except in the ordinary course of business, any aspect of the
Company's business, assets, prospects or finances. It is understood and agreed
that Maynard Jenkins, the Company's Chief Executive Officer, or J. Frederick
Simmons of Freeman Spogli & Company Incorporated ((310) 444-1832) shall
arrange for appropriate contacts at the Company. It is also understood that
all (a) communications regarding a possible transaction, (b) requests for
additional information, (c) requests for facility tours or management meetings
and (d) discussions or questions regarding procedures will be submitted or
directed through Mr. Jenkins or Mr. Simmons.
In the event that you decide to proceed with your review of the Evaluation
Material and consideration of a possible Transaction after the preliminary
meeting to be held on May 31, 1996, you agree that without the Company's prior
written consent, for a period of two years from the date hereof, you will not
directly or indirectly solicit for employment (other than through general
advertising) any management employee of the Company who become known to you in
the course of your (or your representatives') review of the Evaluation
Material or investigation and inquiries in connection with your evaluation of
the Company regard to a potential Transaction; and you will not initiate,
participate in, include or contribute to any interference with the Company's
employment relationship with any such person.
You acknowledge and agree that the Company would not have an adequate remedy
at law and would be irreparably harmed in the event that any of the provisions
of this Confidentiality Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
Company shall be entitled to injunctive relief to prevent breaches of this
Confidentiality Agreement and to specifically enforce the terms and provisions
hereof, in addition to any other remedy to which the Company may be entitled
at law or in equity. The prevailing party in any litigation shall, after a
final non-appealable judgment has been issued, be entitled to recover from the
other party its legal expenses, including reasonable legal fees, incurred in
connection therewith. It is further understood and agreed that no failure to
or delay in exercising any right, power or privilege hereunder shall operate
as a waiver thereof, and no single or partial exercise of any right, power or
privilege hereunder shall preclude any other or further exercise of any right,
power or privilege.
You understand that the Company does not make any representation or warranty
as to the accuracy or completeness of the Evaluation Material. Only those
representations and warranties contained in the final definitive agreement
covering the Transaction, when, as and if executed, and subject to such
limitations as may be specified therein, will have any legal effect. You agree
that unless and until a definitive agreement (expressly excluding any executed
letter of intent or other preliminary written agreement and any written or
oral acceptance of an offer or a bid) with respect to any Transaction has been
executed and delivered, neither the Company nor you will be under any legal
obligation of any kind whatsoever with respect to such a transaction by virtue
of this
<PAGE>
Sears, Roebuck and Co.
May 31, 1996
Page 4
letter agreement or any written or oral expression with respect to such a
Transaction by either party or any of its respective agents except, in the
case of this Confidentiality Agreement, for the matters specifically agreed to
herein.
You acknowledge and agree that we reserve the right, in our sole discretion,
to change the procedures relating to our consideration of a possible
Transaction at any time without prior notice to you, to reject any and all
proposals made by you or any of your representatives, and to terminate
discussions and negotiations with you at any time and for any reason. Unless
and until a written definitive agreement concerning the Transaction has been
executed, neither we nor any of our representatives will have any liability to
you with respect to the Transaction or the evaluation and the bidding process
and procedures, whether by virtue of this Confidentiality Agreement, any other
written or oral expression with respect to the Transaction or otherwise except
as expressly provided in this Agreement. Unless and until a written definitive
agreement concerning the Transaction has been executed, neither you nor any of
your representatives will have any liability to us with respect to a
Transaction, whether by virtue of this Confidentiality Agreement, any other
written or oral expression with respect to the Transaction or otherwise,
except as expressly provided in this Agreement. We understand that you reserve
the right to terminate discussions and negotiations with us at any time and
for any reason.
This Confidentiality Agreement shall be governed by and construed in
accordance with the laws of the State of California applicable to agreements
made and to be performed within such State. Each of the Company and you agrees
and consents to personal jurisdiction and venue in any action brought in any
court, federal or state, within the State of California having subject matter
jurisdiction in connection with any matter arising under this Confidentiality
Agreement and irrevocably waives any defense of inconvenient forum in respect
of any such action.
This Confidentiality Agreement shall remain in effect for a period of two
years from the date hereof and may be modified or waived only by a separate
writing by the Company and you that expressly so modifies or waives this
Confidentiality Agreement.
Please confirm your agreement with the foregoing by signing and returning
one copy of this letter agreement to the undersigned, whereupon this
Confidentiality Agreement shall become a binding agreement between you and the
undersigned.
Very truly yours,
ORCHARD SUPPLY HARDWARE STORES
CORPORATION
By: /s/ Maynard Jenkins
----------------------------------
Maynard Jenkins,
President and Chief Executive
Officer
Agreed to and Accepted:
SEARS, ROEBUCK AND CO.
By: /s/ Gary Crittenden
---------------------------
Gary Crittenden,
Executive Vice President,
Business Planning and Strategy
Date:
<PAGE>
EXHIBIT 10
NOTICE AND AGREEMENT REGARDING CONVERSION AND TENDER
THIS NOTICE AND AGREEMENT (this "Agreement") is made as of August 14, 1996,
by and among ORCHARD SUPPLY HARDWARE STORES CORPORATION, a Delaware
corporation (the "Company"), GROVE ACQUISITION CORP., a Delaware corporation
(the "Purchaser"), SEARS, ROEBUCK AND CO., a New York corporation (the
"Parent"), FS EQUITY PARTNERS III, L.P., a Delaware limited partnership ("FSEP
III"), FS EQUITY PARTNERS INTERNATIONAL, L.P., a Delaware limited partnership
("FSEP International," and collectively with FSEP III, the "FS Entities"),
CHASEMELLON SHAREHOLDER SERVICES, L.L.C. (the "Transfer Agent" and the
"Depositary").
R E C I T A L S
---------------
WHEREAS, the Purchaser has agreed to file a tender offer on Schedule 14D-1
(the "Offer") to acquire any and all shares of common stock, $.01 par value
per share (the "Common Stock") of the Company upon the terms and subject to
the conditions of the Agreement and Plan of Merger dated as of August ,
1996, among the Parent, the Purchaser and the Company (the "Merger Plan");
WHEREAS, the FS Entities collectively own 800,000 shares of the Company's 6%
Cumulative Convertible Preferred Stock, par value $.01 per share (the
"Preferred Stock"); and
WHEREAS, the FS Entities are prepared to convert their Preferred Stock into
Common Stock and to tender such Common Stock into the Offer if, and only if,
such Common Stock is to be accepted for purchase and payment pursuant to the
Offer.
W I T N E S S E T H
-------------------
NOW, THEREFORE, in consideration of the covenants and agreements of the
parties contained herein, and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties agree as
follows:
1. Delivery. The FS Entities hereby give notice to the Company that the
FS Entities intend to effect the conversion of the FS Entities' Preferred
Stock in accordance with the terms of this Agreement and agree to deliver
the Preferred Stock certificates to the Transfer Agent and Depositary prior
to the expiration of the Offer. The FS Entities hereby agree to convert the
Preferred Stock into Common Stock, with such conversion to be effective as
of the close of business on the business day immediately prior to, and
subject to, the acceptance of such shares of Common Stock by Purchaser for
purchase and payment pursuant to the Offer, with such acceptance to be
evidenced by Purchaser's notification of acceptance to the Depositary and
to the Transfer Agent. The conversion of the Preferred Stock into Common
Stock and the issuance of certificates evidencing such shares of Common
Stock by the Transfer Agent is subject to and expressly conditioned upon
the acceptance by Purchaser of the Common Stock for purchase and payment
pursuant to the Offer. The Transfer Agent shall not convert such Preferred
Stock into Common Stock until the Depositary has received notice from the
Purchaser to accept Common Stock for payment.
2. Stock Certificates. Upon the conversion of the Preferred Stock into
Common Stock contemplated by Section 1 of this Agreement, the Transfer
Agent shall prepare stock certificates (the "FS Certificates") evidencing
the ownership of 1,235,416 shares of Common Stock by FS Equity Partners
III, L.P. (tax identification number 95-4437287) and 44,584 shares of
Common Stock by FS Equity Partners International, L.P. (tax identification
number 98-0151673) (collectively, the "FS Shares"). The address of record
for both FSEP III and FSEP International is 11100 Santa Monica Boulevard,
Los Angeles, California
1
<PAGE>
90025. The FS Shares shall be issued with such legend or legends as
presently are required with regard to the Preferred Stock.
3. Letters of Transmittal.
a. Delivery. Upon receipt of notice from the Purchaser that the
Common Stock is to be accepted for purchase and payment pursuant to the
Offer and this Agreement, the Transfer Agent hereby agrees to deliver
the FS Certificates to the Depositary as shares tendered by the FS
Entities and delivered to the Depositary pursuant to the Offer. The FS
Entities will complete letters of transmittal with respect to such
shares of Common Stock and deliver such letters of transmittal prior to
the expiration of the Offer (collectively, the "FS Letters of
Transmittal").
b. Effectiveness. Such FS Letters of Transmittal shall become
effective with respect to the shares of Common Stock evidenced by the
FS Certificates upon the issuance of such shares by the Transfer Agent.
4. Proceeds. Upon acceptance of shares of Common Stock for payment by the
Purchaser pursuant to the Offer, and subject to the terms and conditions
hereof, the Purchaser shall cause the Depositary to wire the proceeds of
the purchase price for the FS Shares in same day funds (the "FS Proceeds")
to each of the FS Entities to the accounts provided in the FS Letters of
Transmittal, or otherwise provided in writing by the FS Entities.
5. Purchaser's Acknowledgment. The Purchaser hereby acknowledges that it
consents to and agrees to the procedures contemplated by this Agreement.
The Purchaser hereby acknowledges that such procedures comply with the FS
Entities' obligations under Section 4 and 5 of that certain Stockholder
Tender and Option Agreement, dated as of August , 1996, by and among the
Purchaser, the Parent and the FS Entities.
6. Indemnification. The Purchaser and the Parent jointly and severally
covenant to indemnify and hold you and your officers, directors, employees,
agents, contractors, subsidiaries and affiliates harmless from and against
any loss, liability, damageor expense (including without limitation any
loss, liability, damage or expense incurred for submitting for transfer
Shares tendered without a signature guarantee pursuant to the Letter of
Transmittal, or in connection with any communication or message transmitted
or purported to be transmitted through electronic means to or from a book-
entry transfer facility, and the reasonable fees and expenses of counsel)
incurred (a) without gross negligence or bad faith or (b) as a result of
your acting upon the instruction of or failing to take an action if so
instructed by the Purchaser, Parent, any dealer-manager or information
agent, arising out of or in connection with the Offer, this Agreement or
the administration of your duties hereunder, including without limitation
the reasonable costs and expenses of defending and appealing against any
action, proceeding, suit or claim in the premises. In no case shall the
Purchaser or the Parent be liable under this indemnity with respect to any
action, proceeding, suit or claim against you unless the Purchaser or the
Parent shall be notified by you, by letter or by telex or facsimile
transmission confirmed by letter, of the written assertion of any action,
proceeding, suit or claim made or commenced against you, promptly after you
shall have been served with the summons or other first legal process or
have received the first written insertion giving information as to the
nature and basis of the action, proceeding, suit or claim, but failure so
to notify the Purchaser or the Parent shall not release the Purchaser or
the Parent of any liability which it may otherwise have on account of this
Agreement. The Purchaser or the Parent shall be entitled to participate at
its own expense in the defense of any such action, proceeding, suit or
claim. Anything in this agreement to the contrary notwithstanding, in no
event shall you be liable for special, indirect or consequential loss or
damage of any kind whatsoever (including but not limited to lost profits),
even if you have been advised of the likelihood of such loss or damage and
regardless of the form of action.
7. Parties in Interest. All of the terms and provisions of this Agreement
shall be binding upon and inure to the benefit of and be enforceable by the
respective successors and assigns of the parties hereto.
2
<PAGE>
8. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware.
9. Entire Agreement. This Agreement embodies the entire agreement and
understanding of the parties hereto in respect of the subject matter
contained herein and therein and supersede all prior negotiations,
agreements and understandings among the parties with respect to such
subject matter.
10. Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original and all of which, when taken together,
shall constitute one and the same Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, as of
August 14, 1996.
ORCHARD SUPPLY HARDWARE STORES
CORPORATION
By: _________________________________
Name: _______________________________
Title: ______________________________
GROVE ACQUISITION CORP.
By: _________________________________
Name: _______________________________
Title: ______________________________
SEARS, ROEBUCK AND CO.
By: _________________________________
Name: _______________________________
Title: ______________________________
FS EQUITY PARTNERS III, L.P.
By: FS Capital Partners, L.P.
Its: General Partner
By: FS Holdings, Inc.
Its: General Partner
By: _________________________________
Name: _______________________________
Title: ______________________________
3
<PAGE>
FS EQUITY PARTNERS INTERNATIONAL,
L.P.
By: FS&Co. International, L.P.
Its: General Partner
By: FS International Holdings
Limited
Its: General Partner
By: _________________________________
Name: _______________________________
Title: ______________________________
CHASEMELLON SHAREHOLDER SERVICES,
L.L.C., as Transfer Agent and
Depositary
By: _________________________________
Name: _______________________________
Title: ______________________________
4
