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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
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SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO
SECTION 14(D)(4) OF THE SECURITIES
EXCHANGE ACT OF 1934
GIANT FOOD INC.
(NAME OF SUBJECT COMPANY)
THE 1224 CORPORATION
(NAME OF PERSON(S) FILING STATEMENT)
CLASS A COMMON STOCK (NON-VOTING), $1.00 PAR VALUE
(TITLE OF CLASS OF SECURITIES)
374478105
(CUSIP NUMBER OF CLASS OF SECURITIES)
SAMUEL P. KASTNER, ESQ.
GINSBURG, FELDMAN AND BRESS
1250 CONNECTICUT AVENUE, N.W.
WASHINGTON, D.C. 20036
(202) 637-9164
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON
AUTHORIZED TO RECEIVE NOTICE AND COMMUNICATIONS
ON BEHALF OF THE PERSON(S) FILING STATEMENT)
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PRELIMINARY NOTE
The person filing this statement has been advised that the following
development occurred after execution of the Stock Purchase Agreement discussed
herein and substantial completion of this statement:
On May 19, 1998, Mr. van der Hoeven, the President and Chief Executive
Officer of the Purchaser, telephoned Lord Sainsbury of J Sainsbury plc, the
owner of the Company's Class AL Shares, and informed him that the Purchaser
would later that day announce its agreement to acquire the Class AC Shares
and its Offer for the Class A Shares even if Sainsbury did not expect to
participate in the Offer or otherwise sell its interest in the Company to
the Purchaser. Lord Sainsbury informed Mr. van der Hoeven that Sainsbury
would be willing to tender its Shares into the Offer if the Offer Price
were increased to $43.50 and if the Purchaser would agree to pay $100
million for the Class AL Shares held by Sainsbury. Mr. van der Hoeven said
that he would need to consult with the other members of the Executive Board
of the Purchaser and its advisors. After discussing Lord Sainsbury's
proposal with other members of the Executive Board and the Purchaser's
financial and legal advisors, Mr. van der Hoeven called Lord Sainsbury and
accepted his proposal. As a result of Sainsbury's agreement to participate
in the transaction, the Purchaser increased the price to be paid for the
Class AC Shares and pursuant to the Offer to $43.50 per share. The
Purchaser also agreed to waive the 65% minimum tender condition.
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is Giant Food Inc., a Delaware corporation
(the "Company."). The address of the Company's principal executive offices is
6300 Sheriff Road, Landover, Maryland 20785. The title of the class of equity
securities to which this statement relates is the Company's Class A Common Stock
(Non-Voting), par value $1.00 per share (the "Shares").
ITEM 2. TENDER OFFER OF THE PURCHASER.
This statement relates to a tender offer by Koninklijke Ahold N.V., a
public company with limited liability incorporated under the laws of The
Netherlands with its corporate seat in Zaandam (Municipality Zanstaad) (the
"Purchaser"), to purchase for cash all of the outstanding Shares at a price of
$43.00 per Share, net to the seller in cash, without interest thereon (the
"Offer Price"), upon the terms and subject to the conditions set forth in the
Purchaser's Offer to Purchase, dated May 19, 1998 (the "Offer to Purchase"), and
the related Letter of Transmittal (which, as may be amended and supplemented
from time to time, together constitute the "Offer"). If, before the Expiration
Date of the Offer, the Purchaser or any of its affiliates acquires or enters
into a binding agreement to acquire all of the shares of the Company's Class AL
Common Stock, par value $1.00 per share (the "Class AL Shares"), the Offer Price
of $43.00 per Share, net to the seller in cash, shall be increased to $43.50 per
Share, net to the seller in cash. The Expiration Date is June 17, 1998, unless
the Offer is extended. The Offer to Purchase states that the principal executive
offices of the Purchaser are located at Albert Heijnweg 1, 1507 EH Zaandam, The
Netherlands.
The Offer is being made pursuant to a Stock Purchase Agreement, dated as of
May 19, 1998, between the Purchaser and The 1224 Corporation ("1224") (the
"Stock Purchase Agreement"). Pursuant to the Stock Purchase Agreement, 1224 (i)
has agreed to sell, and the Purchaser has agreed to purchase, all of the shares
of the Company's Class AC Common Stock, par value $1.00 per share (the "Class AC
Shares"), on the terms and subject to the conditions set forth in the Stock
Purchase Agreement at a price per share equal to the Offer Price and (ii) has
agreed to tender validly (and not to withdraw) pursuant to and in accordance
with the terms of the Offer all of the Shares that are owned by it (which, as of
the date hereof, is 500 Shares). 1224's obligation to sell and the Purchaser's
obligation to purchase the Class AC Shares are conditioned upon the consummation
of the Offer. The Certificate of Incorporation of 1224 provides that the Class
AC Shares owned by it can only be sold as part of a transaction pursuant to
which the holders of Shares are afforded the opportunity to participate in such
sale on equal terms with 1224. Purchaser's obligation to purchase the Shares is
subject to a number of conditions, including the condition of there being
validly tendered and not properly withdrawn prior to the expiration of the Offer
at least 65% of the Shares outstanding on a fully diluted basis. The Stock
Purchase Agreement is filed herewith as Exhibit 1 and is incorporated herein by
reference.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The person filing this statement is 1224. 1224's business address is
6300 Sheriff Road, Landover, Maryland 20785.
(b)(1) The Company currently has outstanding three classes of common stock:
(i) the Class AC Shares, (ii) the Class AL Shares and (iii) the Shares. All such
classes of common stock have the same rights and privileges except that the
Class AC Shares and the Class AL Shares have voting rights and the Shares have
no voting rights. Each of the Class AC Shares and the Class AL Shares has 50% of
the shareholder voting power. Currently there are outstanding 125,000 Class AC
shares and 125,000 Class AL Shares.
1224 is the record and beneficial owner of all of the outstanding Class AC
Shares and 500 Shares. The Class AL Shares are owned indirectly by J Sainsbury
plc, ("Sainsbury"). Pursuant to the Certificate of Incorporation of the Company,
the Class AC Shares have the right to elect five of the nine directors of the
Board of Directors of the Company, no more than two of whom may be full time
employees of the Company, and the Class AL Shares have the right to elect four
of the nine directors of the Board of Directors of the Company, no more than one
of whom may be a full time employee of the Company.
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1224 was established and became the owner of the Class AC Shares pursuant
to the Last Will and Testament of Israel Cohen, the former Chairman and Chief
Executive Officer of Green and owner of the Class AC Shares who died in
November, 1995. 1224 currently has outstanding two classes of common stock: (i)
125,000 shares of Non-Voting Class AN Common Stock, which are owned by the Naomi
and Nehemiah Cohen Foundation, Inc. (the "Cohen Foundation"), which is the
residuary beneficiary of Mr. Cohen's estate; and (ii) 500 shares of Voting Class
AV Common Stock, of which 100 shares are held by each of the five directors and
officers of 1224. The Certificate of Incorporation of 1224 provides that 1224
may sell or exchange all or substantially all of the Company's Class AC Shares
only when and as authorized by the holders of 60% of the outstanding Voting
Class AV of 1224 Common Stock and that no such sale or exchange may be made
except as part of a transaction pursuant to which all the holders of the Shares
are afforded the opportunity to participate in any such sale or exchange on
equal terms with 1224 and no separate consideration is paid to any stockholder
of 1224 as an inducement for the approval of such sale or exchange.
The members of the Board of Directors of the Company who have been elected
by the Class AC Shares are: Pete L. Manos, Alvin Dobbin, Constance M. Unseld,
Peter F. O'Malley, and Raymond A. Mason. Mr. Manos is Chairman of the Board and
the President and Chief Executive Officer of the Company. Mr. Dobbin was
Executive Vice President and Chief Operating Officer of the Company until his
retirement from those positions effective February 28, 1998. Mrs. Unseld and
Messrs. O'Malley and Mason are not employees of the Company.
Mrs. Unseld is the founder and operator of the Unselds' School, a
state-accredited, independent school in Baltimore, Maryland, and serves as a
member of the Board of Regents of the University of Maryland System. Mr.
O'Malley is the founder and current counsel to the law firm of O'Malley, Miles,
Nylen & Gilmore of Prince George's County, Maryland, which law firm provides
legal services to the Company. Mr. Mason is the Chairman, President and Chief
Executive Officer of Legg Mason, Inc., an investment banking firm which performs
certain financial services for the Company. Since February 15, 1996, Mrs. Unseld
and Messrs. O'Malley and Mason have served on the Strategic Planning Committee
of the Company's Board of Directors (the "Special Committee") which was
established on that date to review the effect upon the Company and the holders
of the Shares of a transaction in which all of the stock or assets of the
Company are acquired by a third party. Mr. O'Malley has served as the Chairman
of the Special Committee. Mrs. Unseld and Mr. O'Malley are two of the three
members of the Officers' Executive Compensation Committee of the Company's Board
of Directors. During the Company's fiscal year ended February 28, 1998,
directors of the Company who were not also employees received an annual fee of
$35,000 and a fee of $250 for committee meetings attended.
The following table identifies the directors and executive officers of 1224
and shows their positions, if any, as directors or executive officers of the
Company:
<TABLE>
<CAPTION>
NAME POSITION WITH 1224 POSITION WITH THE COMPANY
---- ------------------------------ ------------------------------
<S> <C> <C>
Pete L. Manos........................ Chairman of the Board, Chairman of the Board,
President President and Chief Executive
Officer
Alvin Dobbin......................... Director, Vice President and Director
Treasurer
David W. Rutstein.................... Director, Vice President and Senior Vice
Treasurer President -- General Counsel,
Chief Administrative Officer
and Secretary
Roger D. Olson....................... Director, Vice President, Senior Vice President -- Labor
Assistant Treasurer and Relations and Personnel
Assistant Secretary
Lillian Cohen Solomon................ Director, Vice President, None
Assistant Treasurer and
Assistant Secretary
</TABLE>
Additional information with respect to contracts, agreements, arrangements
and understandings between 1224 or its directors and executive officers and the
Company or its directors and executive officers, including
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information relating to compensation by the Company of executive officers of the
Company who are also directors or executive officers of 1224 and ownership of
Company securities, is set forth in Annex A hereto.
(b)(2) On May 19, 1998, 1224 and the Purchaser entered into the Stock
Purchase Agreement. The Stock Purchase Agreement provides that, subject to its
terms and conditions, Purchaser will purchase from 1224, and 1224 will sell to
Purchaser, all of the Class AC Shares at a purchase price of $43.00 per share,
and that Purchaser will make a tender offer for all the outstanding Shares at a
price per Share equal to the per share price to be paid to 1224 for the Class AC
Shares. If, before the Expiration Date of the Offer, the Purchaser or any of its
affiliates acquires or enters into a binding agreement to acquire all of the
Class AL Shares, the Offer Price of $43.00 per Share, net to the seller in cash,
shall be increased to $43.50 per Share, net to the seller in cash. 1224's
obligation to sell and the Purchaser's obligation to purchase the Class AC
Shares are conditioned upon the consummation of the Offer. The Purchaser's
obligation to purchase the Shares is subject to a number of conditions,
including the condition of there being validly tendered and not properly
withdrawn prior to the expiration of the Offer at least 65% of the Shares
outstanding on a fully diluted basis.
1224 has been advised that the Special Committee of the Board of Directors
of the Company, at a meeting held on May 18, 1998, unanimously determined that
the Offer is fair to, and in the best interests of, the holders of the Shares
and unanimously recommended to the Board of Directors of the Company that it
recommend that the holders of the Shares accept the Offer and tender their
Shares pursuant to the Offer. As of the date hereof, the full Board of Directors
of the Company has not reviewed the Offer and has not taken a position with
respect to the Offer. 1224 has been advised that five of the nine directors of
the Company intend to vote to approve the Offer and recommend that the holders
of the Shares accept the Offer and tender their Shares pursuant to the Offer.
STOCK PURCHASE AGREEMENT. The following is a summary of the material terms
of the Stock Purchase Agreement. The summary is qualified in its entirety by
reference to the full text of the Stock Purchase Agreement which has been filed
as Exhibit 1 hereto and which is incorporated herein by reference.
The Offer. The Stock Purchase Agreement provides that, subject to the
terms and conditions thereof, the Purchaser will commence the Offer and that the
obligation of the Purchaser to consummate the Offer and to accept for payment
and to pay for any Shares tendered pursuant to the Offer shall be subject to
only those conditions set forth in the Stock Purchase Agreement, which are
described in Section 14 of the Offer to Purchase. As one of those conditions,
each person who has been elected by 1224 to the Board of Directors of the
Company shall have either resigned or been removed. If any such director has not
so resigned or been removed, the Purchaser plans to, in accordance with the
provisions of the Certificate of Incorporation and By-Laws of the Company and
the General Corporation Law of the State of Delaware (the "DGCL"), remove such
director. The Purchaser plans to replace the directors who were elected by 1224
and replace them with directors to be elected by the Purchaser. The Purchaser
may waive any of the conditions described in Section 14 of the Offer to
Purchase.
The Purchaser reserves the right to modify the terms of the Offer,
including, without limitation, to extend the Offer beyond any scheduled
expiration date, except that, without the consent of 1224, the Purchaser will
not reduce the number of Shares sought in the Offer, reduce the Offer Price,
modify or add to the conditions of the Offer described in Section 14 of the
Offer to Purchase in a manner that is materially adverse to the holders of the
Shares or change the form of consideration payable in the Offer. If the
Purchaser or any of its affiliates acquires or enters into a binding agreement
to acquire all of the Class AL Shares before the Expiration Date, the Offer
Price of $43.00 per Share, net to the seller in cash shall be increased to
$43.50 per Share, net to the seller in cash, without interest thereon. Subject
to the terms and conditions set forth in the Stock Purchase Agreement (including
the rights to terminate, extend or modify the Offer) and the terms and
conditions of the Offer, the Purchaser agrees to use its best efforts to
consummate the Offer as soon as legally permissible.
In the Stock Purchase Agreement, 1224 represented that Wasserstein Perella
& Co., Inc. ("Wasserstein") has delivered to the Special Committee its opinion
that the consideration to be received by the holders
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of Shares pursuant to the Offer is fair, from a financial point of view, to
holders of Shares, subject to the assumptions and qualifications contained in
such opinion.
Interim Operations. (a) The Stock Purchase Agreement provides that during
the period from the date of the Stock Purchase Agreement to the date that the
Class AC Shares are purchased in accordance with the terms and provisions of the
Stock Purchase Agreement and the Shares are purchased pursuant to the Offer
(collectively the "Closing Date"), except as permitted, required or specifically
contemplated by, or otherwise described in, the Stock Purchase Agreement or
otherwise consented to or approved in writing by the Purchaser, 1224 (i) shall
not vote the Class AC Shares in favor of any action that would cause, or that is
part of a transaction that would cause, (ii) shall cause the directors of the
Company who are also directors of 1224 not to vote in favor of any action that
would cause, or that is a part of a transaction that would cause, and (iii)
shall otherwise use its reasonable best efforts to cause the Company and each of
its subsidiaries not to take any action that would cause, any of the
representations or warranties with respect to the Company set forth in the Stock
Purchase Agreement to be untrue or incorrect. (b) In addition, the Stock
Purchase Agreement provides that during the period from the date of the Stock
Purchase Agreement to the Closing Date, except as permitted, required or
specifically contemplated by, or otherwise described in, the Stock Purchase
Agreement or otherwise consented to or approved in writing by the Purchaser,
1224 (i) shall vote the Class AC Shares in favor of any action that would cause,
or that is part of a transaction that would cause, (ii) shall cause the
directors of the Company who are also directors of 1224 to vote in favor of any
action that would cause, or that is a part of a transaction that would cause,
and (iii) shall otherwise use its reasonable best efforts to cause, in each
case, the Company and each of its subsidiaries to do the following: (A) conduct
their respective operations only according to their ordinary and usual course of
business consistent with past practice; and (B) use their best efforts to
preserve intact their respective business organization, keep available the
services of their officers and employees and maintain satisfactory relationships
with licensors, suppliers, distributors, clients, landlords, joint venture
partners, employees, agents and others having business relationships with them.
(c) In addition, the Stock Purchase Agreement provides that during the period
from the date of the Stock Purchase Agreement to the Closing Date, except as
permitted, required or specifically contemplated by, or otherwise described in,
the Stock Purchase Agreement or otherwise consented to or approved in writing by
the Purchaser, 1224 (i) shall not vote the Class AC Shares in favor of, and
shall affirmatively vote the Class AC Shares against, any action that would
cause, or that is part of a transaction that would cause, (ii) shall cause the
directors of the Company who are also directors of 1224 not to vote in favor of,
and to affirmatively vote against, any action that would cause, or that is a
part of a transaction that would cause, and (iii) shall otherwise use its
reasonable best efforts to cause, in each case, the Company and each of its
subsidiaries not to do any of the following: (A) make any change in or amendment
to the Certificate of Incorporation or By-Laws (or comparable governing
documents) of the Company or any subsidiary, (B) issue, sell or acquire any
shares of its capital stock (other than in connection with the exercise of all
the stock options and other rights to purchase Shares outstanding on the date
hereof) or any of its other securities, or issue any securities convertible
into, or options, warrants or rights to purchase or subscribe to, or enter into
any arrangement or contract with respect to the issuance or sale of, any shares
of its capital stock or any of its other securities, or make any other changes
in its capital structure, (C) sell or pledge or agree to sell or pledge any
stock owned by it in any of its subsidiaries, (D) declare, pay, set aside or
make any dividend or other distribution or payment with respect to, or split,
combine, redeem or reclassify, or purchase or otherwise acquire any shares of
its capital stock or its other securities, other than dividends and
distributions by a direct or indirect wholly-owned subsidiary to its parent and
regular annual cash dividends by the Company on its capital stock in an amount
not in excess of $0.80 per share per fiscal annum at the same time such
dividends are customarily declared and paid, (E) (1) except as set forth in the
Stock Purchase Agreement, enter into any contract or commitment with respect to
(x) any individual capital expenditure in excess of $7,500,000 in the case of
certain budgeted capital expenditures or $2,000,000 in the case of unbudgeted
capital expenditures or (y) capital expenditures that in the aggregate exceed
$40,000,000 in any thirteen week period, (2) acquire (by merger, consolidation,
or acquisition of stock or assets) any corporation, partnership or other
business or division thereof, or (3) enter into, amend, modify, supplement or
cancel any other material contract, (F) acquire a material amount of assets or
securities or release or relinquish any material contract rights other than in
the ordinary course of business in accordance with past practice and the
Company's short term
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investment program, (G) except to the extent required under existing employee
and director benefit plans, agreements or arrangements as in effect on the date
of the Stock Purchase Agreement, increase the compensation or fringe benefits of
any of its directors, officers or employees, except for increases in salary or
wages of employees of the Company or its subsidiaries in the ordinary course of
business in accordance with past practice, or grant any severance or termination
pay not currently required to be paid under existing severance plans or enter
into any employment, consulting or severance agreement or arrangement with any
present or former director, officer or other employee of the Company or any of
its subsidiaries, or establish, adopt, enter into or amend or terminate any
collective bargaining (except for the termination of certain collective
bargaining agreements which will expire in accordance with their terms prior to
the Closing Date), bonus, profit sharing, thrift, compensation, stock option,
restricted stock, pension, retirement, deferred compensation, employment,
termination, severance or other plan, agreement, trust, fund, policy or
arrangement for the benefit of any directors, officers, employees or former
employees and/or directors, (H) transfer, lease, license, guarantee, sell,
mortgage, pledge, dispose of, encumber or subject to any lien, any material
assets or incur or modify any indebtedness or other liability or issue any debt
securities or assume, guarantee or endorse or otherwise as an accommodation
become responsible for the obligations of any person or, other than in the
ordinary course of business consistent with past practice, make any loan or
other extension of credit, (I) agree to the settlement of any material claim or
litigation (including, but not limited to any claim or litigation in respect of
or related to any environmental law), (J) make any material tax election or
settle or compromise any material tax liability, (K) permit any insurance policy
naming it as beneficiary or a loss payable payee to be canceled without notice
to the Purchaser unless (1) such insurance policy is immediately replaced, with
no gaps or lapses in coverage, with an insurance policy issued by a financially
sound and reputable insurance company in at least such amounts and against at
least such risks as the canceled policy or (2) such cancellation would not have
a material adverse effect on the business, properties, assets, liabilities,
condition (financial or otherwise), operations, results of operations or
prospects of the Company and its subsidiaries taken as a whole (a "Material
Adverse Effect"), (L) make any material change in its method of accounting, (M)
adopt a plan of complete or partial liquidation, dissolution, merger,
consolidation, restructuring, recapitalization or other reorganization of the
Company or any of its subsidiaries not constituting an inactive subsidiary, (N)
take any action, including, without limitation, the adoption of any stockholder
rights plan or amendments to its Certificate of Incorporation (or other
organizational or governing documents), which would, directly or indirectly,
restrict or impair the ability of the Purchaser to vote, or otherwise to
exercise the rights and receive the benefits of a stockholder with respect to,
securities of the Company that may be acquired or controlled by the Purchaser or
permit any stockholder to acquire securities of the Company on a basis not
available to the Purchaser in the event that the Purchaser were to acquire
securities of the Company, or (O) agree, in writing or otherwise, to take any of
the foregoing actions.
No Solicitation. The Stock Purchase Agreement provides that 1224 and each
of its officers, directors, employees, representatives, consultants, investment
bankers, attorneys, accountants, agents or advisors (collectively "Agents")
shall immediately cease any discussions or negotiations with any other parties
that may be ongoing with respect to any purchase of the Class AC Shares or any
Acquisition Proposal (as defined below). 1224 shall not, directly or indirectly,
take (and 1224 shall not authorize or permit its Agents to so take) any action
to (i) encourage, solicit or initiate the making of any offer to purchase the
Class AC Shares or any Acquisition Proposal, (ii) enter into any agreement with
respect to any offer to purchase the Class AC Shares or any Acquisition
Proposal, or (iii) participate in any way in discussions or negotiations with,
or furnish or disclose any information to, any person (other than the Purchaser)
in connection with, or take any other action to facilitate any inquiries or the
making of any proposal that constitutes, or may reasonably be expected to lead
to, any offer to purchase the Class AC Shares or any Acquisition Proposal. For
purposes of this Section, "Acquisition Proposal" shall mean any inquiry,
proposal or offer from any person (other than the Purchaser) relating to any
direct or indirect acquisition or purchase of all or any of the Class AC Shares,
of a substantial amount of assets of the Company or any of its subsidiaries or
of more than 10% of any class of equity securities of the Company or any of its
subsidiaries, any tender offer or exchange offer that if consummated would
result in any person beneficially owning more than 10% of any other class of
equity securities of the Company or any of its subsidiaries, any merger,
consolidation, business combination, sale of substantially all the assets,
recapitalization, liquidation, dissolution or similar transaction involving the
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Company or any of its subsidiaries, other than the transactions contemplated
hereby, or any other transaction the consummation of which could reasonably be
expected to impede, interfere with, prevent or materially delay the Offer or
which would reasonably be expected to dilute materially the benefits to the
Purchaser of the transactions contemplated hereby. (b) In addition, the Stock
Purchase Agreement provides that during the period from the date of the Stock
Purchase Agreement to the Closing Date, except as permitted, required or
specifically contemplated by, or otherwise described in, the Stock Purchase
Agreement or otherwise consented to or approved in writing by the Purchaser,
1224 (i) shall use its reasonable best efforts to cause (A) the Company and its
Agents immediately to cease any discussions or negotiations with any other
parties that may be ongoing with respect to any Acquisition Proposal and (B) the
Company and its subsidiaries not to take, directly or indirectly, (and the
Company not to authorize or permit its or its subsidiaries' Agents to take) any
action to (1) encourage, solicit or initiate the making of any Acquisition
Proposal, (2) enter into any agreement with respect to any Acquisition Proposal,
or (3) participate in any way in discussions or negotiations with, or furnish or
disclose any information to, any Person (other than the Purchaser) in connection
with, or take any other action to facilitate any inquiries or the making of any
proposal that constitutes, or may reasonably be expected to lead to, any
Acquisition Proposal, (ii) shall not vote the Class AC Shares in favor of any
Acquisition Proposal, (iii) shall cause the directors of the Company who are
also directors of 1224 not to vote to approve or recommend, or propose to
approve or recommend, any Acquisition Proposal or in favor of the Company
entering into any agreement with respect to any Acquisition Proposal, and (iv)
shall otherwise use its reasonable best efforts to cause the Board of Directors
of the Company not to approve, recommend or propose to approve or recommend any
Acquisition Proposal or the entering into by the Company of any Acquisition
Proposal. (c) The Stock Purchase Agreement provides that 1224 shall, or shall
use its reasonable best efforts to cause the Company to, advise the Purchaser of
any request for information or of any offer to purchase the Class AC Shares or
any Acquisition Proposal, or any inquiry or proposal with respect to any offer
to purchase the Class AC Shares or any Acquisition Proposal, the material terms
and conditions of such request, offer or Acquisition Proposal and of any changes
thereto, and the identity of the entity or person making any such inquiry or
proposal.
Directors' and Officers' Insurance and Indemnification. The Purchaser has
agreed in the Stock Purchase Agreement that for a period of six years from the
Closing Date, the Purchaser shall cause the directors of the Company elected by
the Purchaser to the Board of Directors of the Company not to vote to, and shall
otherwise use its reasonable best efforts to cause the Company not to, amend,
repeal or otherwise modify the provisions with respect to indemnification and
exculpation from liability set forth in the Company's Certificate of
Incorporation and By-Laws on the date of the Stock Purchase Agreement in any
manner that would adversely affect the rights thereunder of individuals who on
or prior to the Closing Date were directors, officers, employees or agents of
the Company, unless such modification is required by law. In addition, the Stock
Purchase Agreement provides that for a period of three years from the Closing
Date, the Purchaser (i) shall cause the directors of the Company elected by the
Purchaser to the Board of Directors of the Company to vote to, and shall
otherwise use its reasonable best efforts to cause the Company to, maintain in
effect the Company's current directors' and officers' liability insurance
covering those persons who are currently covered on the date of the Stock
Purchase Agreement by the Company's directors' and officers' liability insurance
policy (the "Indemnified Parties"); provided, however, that in no event shall
the Company be required to expend in any one year an amount in excess of 150% of
the annual premiums currently paid by the Company for such insurance which 1224
has represented to be $200,160 for the most recent twelve month period, provided
further, that if the annual premiums of such insurance coverage exceed such
amount, the Company shall be obligated to obtain a policy with the greatest
coverage available for a cost not exceeding such amount; provided further that
the Company may substitute for such Company policies, policies with at least the
same coverage containing terms and conditions which are no less advantageous and
provided that said substitution does not result in any gaps or lapses in
coverage with respect to matters occurring prior to the Closing Date or,
alternatively, (ii) shall cause the Purchaser's directors' and officers'
liability insurance then in effect to cover those persons who are covered on the
date of the Stock Purchase Agreement by the Company's directors' and officers'
liability insurance policy with respect to those matters covered by the
Company's directors' and officers' liability policy.
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Compensation and Benefits. The Stock Purchase Agreement states that the
Purchaser currently intends that, during the period commencing at the Closing
Date and ending on December 31, 1999, the active employees of the Company and
its subsidiaries who are not covered by collective bargaining agreements
("Non-Union Employees") will be provided with employee benefits (other than
stock option and other non-tax-qualified plans or arrangements involving the
potential issuance of securities of the Company or of the Purchaser) which are
in the aggregate not materially less favorable to those currently provided by
the Company and its subsidiaries to such Non-Union Employees; provided, that (i)
the covenants contained in this paragraph shall only be effective to the extent
permitted under laws and regulations in force from time to time, and (ii) the
Purchaser reserves the right to review all employee benefit plans and
arrangements of the Company after the Closing Date and to make such changes of
an administrative or investment management nature as it, in its discretion,
deems appropriate. Notwithstanding the foregoing, Non-Union Employees who are
currently accruing benefits under Section 3.8 of Article III and Article VI of
the Giant Food Inc. Excess Benefit Savings Plan (the "EBS Plan") at the Closing
Date shall continue to participate in the EBS Plan and to accrue benefits under
those provisions at the same accrual rates in effect on the Closing Date. The
preceding sentence shall not apply to any other benefits under the EBS Plan
including, without limitation, benefits under Article IV therein. Non-Union
Employees who meet the minimum eligibility requirements under the stock option
plans maintained by the Purchaser after the Closing Date shall be eligible to be
granted stock options thereunder in accordance with the terms of such plans.
Options. Pursuant to the Stock Purchase Agreement, prior to the Closing
Date, 1224 will cause appropriate resolutions to be voted on by the Board of
Directors of the Company (or, if appropriate, any committee thereof), shall
cause the directors of the Company who are also directors of 1224 to vote in
favor of the adoption of such resolutions and shall otherwise use its reasonable
best efforts to cause such resolutions to be adopted, and use its reasonable
best efforts to take all other actions necessary including, but not limited to,
using its reasonable best efforts to cause the Company to obtain the consent and
release of all of the holders of all the outstanding stock options and other
rights to purchase Shares (the "Options") heretofore granted under any stock
option plan of the Company or otherwise (the "Stock Plans"), to (i) provide for
the cancellation, effective at the Closing Date, subject to the payment provided
for in the next sentence being made, of all Options, (ii) terminate, as of the
Closing Date, the Stock Plans and any other plan, program or arrangement
providing for the issuance or grant of any other interest in respect of the
capital stock of the Company or any subsidiary (collectively with the Stock
Plans, referred to as the "Stock Incentive Plans") with respect to any interest
in the capital stock of the Company and (iii) amend, as of the Closing Date, the
provisions in any other Employee Benefit Plan providing for the issuance,
transfer or grant of any capital stock of the Company or any interest in respect
of any capital stock of the Company to provide no continuing rights to acquire,
hold, transfer or grant any capital stock of the Company or any interest in the
capital stock of the Company (other than in respect of cash payments through the
Offer). Immediately prior to the Closing Date, each Option, whether or not then
vested or exercisable, shall no longer be exercisable for the purchase of Shares
but shall entitle each holder thereof, in cancellation and settlement therefor,
to payments by the Company in cash, subject to any applicable withholding taxes
(the "Cash Payment"), at the Closing Date, equal to the product of (x) the total
number of Shares subject to such Option, whether or not then vested or
exercisable and (y) the excess of the Offer Price over the exercise price per
Share subject to such Option, each such Cash Payment to be paid to each holder
of an outstanding Option at the Closing Date. Incident to the foregoing, any
then outstanding stock appreciation rights or limited stock appreciation rights
shall be canceled immediately prior to the Closing Date without any payment
therefor. In addition, the Stock Purchase Agreement provides that 1224 shall use
its reasonable best efforts to cause the Company to take all steps to ensure
that neither the Company nor any of its subsidiaries is or will be bound by any
Options, other options, warrants, rights or agreements which would entitle any
person, other than the Purchaser or its affiliates, to own any capital stock of
the Company or any of its subsidiaries or to receive any payment in respect
thereof. Notwithstanding any other provision of this paragraph to the contrary,
payment of the Cash Payment may be withheld with respect to any Option until
necessary consents and releases are obtained.
Agreement to Use Best Efforts. Pursuant to the Stock Purchase Agreement
and subject to the terms and conditions thereof, each of the Purchaser and 1224
shall, and 1224 shall use its reasonable best efforts to cause the Company to,
with respect to matters within their respective control, cooperate and use their
respective best
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efforts to (i) take, or cause to be taken, all appropriate action, and do, or
cause to be done, all reasonable things necessary and proper under applicable
law to consummate the transactions contemplated by the Stock Purchase Agreement
as promptly as practicable, (ii) obtain from any governmental authority,
regulatory organization or other instrumentality or agency or any other third
party any licenses, permits, consents, waivers, approvals, authorizations,
qualifications, or orders required to be obtained or made by the Company, the
Purchaser or 1224 or any of their subsidiaries in connection with the
authorization, execution and delivery of the Stock Purchase Agreement and the
consummation of the transactions contemplated therein, and (iii) as promptly as
practicable, make, or cause to be made, all filings necessary, proper or
advisable with respect to the Stock Purchase Agreement and the transactions
contemplated therein under (x) the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended (the "HSR Act"), and any related governmental request
thereunder, and (y) any other applicable laws or regulations; provided, however,
that no loan agreement or contract for borrowed money shall be repaid except as
currently required by its terms, in whole or in part, and no contract shall be
amended to increase the amount payable thereunder or otherwise to be more
burdensome to the Company or any of its subsidiaries in order to obtain any such
consent, approval or authorization without first obtaining the written approval
of the Purchaser. In addition, the Stock Purchase Agreement provides that the
Purchaser and 1224 shall, and 1224 shall use its reasonable best efforts to
cause the Company to, cooperate with each other in connection with the making of
all such filings, including providing copies of all such documents to the
non-filing party and its advisors prior to filing and, if requested, to accept
all reasonable additions, deletions or changes suggested in connection
therewith. The Purchaser and 1224 shall, and 1224 shall use its reasonable best
efforts to cause the Company to, use their respective best efforts to furnish to
each other all information required for any application or other filing to be
made pursuant to the rules and regulations of any applicable law in connection
with the transactions contemplated by the Stock Purchase Agreement.
Notwithstanding anything to the contrary in this paragraph, none of the
Purchaser, 1224 or the Company or any of their respective subsidiaries shall be
required to sell or otherwise dispose of, or hold separate (through the
establishment of a trust or otherwise) particular assets or categories of
assets, or business of the Purchaser, 1224, the Company or any of their
affiliates or withdraw from doing business in a particular jurisdiction or take
any other action that, in the aggregate, in the sole judgment of the Purchaser,
would reasonably be expected to substantially impair or substantially reduce the
Purchaser's ability to control, direct or manage on a day-to-day basis the
business or affairs of the Company or to substantially impair or substantially
reduce the overall benefits expected, as of the date hereof, to be realized by
the Purchaser from the consummation of the transactions contemplated by the
Stock Purchase Agreement or would have a material adverse effect on the
business, properties, assets, liabilities, condition (financial or otherwise),
prospects, operations or results of operations of the Purchaser and its
subsidiaries taken as a whole or the Company and its subsidiaries taken as a
whole.
Representations and Warranties. In the Stock Purchase Agreement, 1224 has
made customary representations and warranties to the Purchaser with respect to,
among other things, its organization, corporate authority, ownership of Class AC
Shares and consents and approvals. In addition, in the Stock Purchase Agreement,
1224 has made customary representations and warranties to the best of its
knowledge to the Purchaser with respect to, among other things, the Company's
organization, corporate authority, capitalization, consent and approvals,
financial statements, public filings, the absence of any material adverse
changes in the Company since February 23, 1997, compliance with laws, employee
benefit plans, undisclosed liabilities and litigation, taxes, intellectual
property, environmental matters, labor relations, vote required, stockholder
rights plan and opinion of financial advisor.
Termination. The Stock Purchase Agreement may be terminated and the
transactions contemplated thereby may be abandoned by the Purchaser, on the one
hand, or 1224, on the other hand, if any condition to the completion of the
transactions contemplated thereby is not fulfilled on or prior to December 31,
1998.
Payment of Certain Fees and Expenses Upon Termination. Except as provided
in the next succeeding sentence, all expenses incurred in connection with the
Stock Purchase Agreement and the consummation of the transactions contemplated
thereby shall be paid by the party incurring such expenses. If (i) the
transactions contemplated by the Stock Purchase Agreement are not consummated
due to a material breach of the representations or warranties of 1224 or a
material failure by 1224 to fulfill a covenant or agreement
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<PAGE> 11
(other than in respect of a breach of the covenant specified under the heading
"No Solicitation" above) or due to (x) the occurrence of any of the events set
forth in subparagraph (iii)(e) of Section 14 of the Offer to Purchase or (y) the
occurrence of any of the events set forth in subparagraph (iii)(g) or (h) of
Section 14 of the Offer to Purchase (other than in respect of a breach of the
covenant specified under the heading "No Solicitation" above) and (ii) 1224
sells all or any portion of the Class AC Shares and/or the Shares within two
years from the date of the Stock Purchase Agreement then in any such case 1224
shall pay to the Purchaser, in lieu of reimbursement of the Purchaser's
out-of-pocket expenses, $2,500,000 or such lesser amount as 1224 shall receive
in the aggregate from all sales of the Class AC Shares and Shares during such
two year period, such amount to be paid by or on behalf of 1224 in same day
funds within two business days after each sale of the Class AC Shares and/or
Shares until the amount so received by the Purchaser equals $2,500,000. If (i)
the transactions contemplated by the Stock Purchase Agreement are not
consummated due to a breach of the covenant specified under the heading "No
Solicitation" above or due to (1) the occurrence of any of the events set forth
in subparagraph (iii)(f) of Section 14 of the Offer to Purchase or (2) the
occurrence of any of the events set forth in subparagraph (iii)(g) or (h) of
Section 14 of the Offer to Purchase (but only in respect of a breach of the
covenant specified under the heading "No Solicitation" above), and (ii) 1224
sells all or any portion of the Class AC Shares or the Shares within two years
from the date of the Stock Purchase Agreement then in any such case, as a
condition to such sale, 1224 shall pay or cause to be paid to the Purchaser
$10,000,000, such amount to be paid by or on behalf of 1224 in same day funds
within two business days after the first such sale of the Class AC Shares and/or
Shares.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) BACKGROUND AND RECOMMENDATION.
Following the death of Israel Cohen on November 22, 1995 and the
organization of 1224 shortly thereafter, the officers of 1224 began discussions
regarding procedures for ascertaining and achieving the best interests of the
Company and the holders of the Shares and the Class AC Shares. On January 31,
1996, 1224 engaged PaineWebber Incorporated ("PaineWebber") as its financial
advisor to conduct an initial investment advisory study and make recommendations
regarding strategic and financial alternatives available to 1224 and the
Company. After reviewing PaineWebber's report and recommendations, the directors
of 1224 informed the Board of Directors of the Company that 1224 was
contemplating a sale of the Class AC Shares.
At a meeting held on February 15, 1996, the Company's Board of Directors
unanimously established a Strategic Planning Committee (the "Special Committee")
comprised of directors who had been elected by 1224 but who were not officers or
directors of 1224 and were not employees of the Company (Peter F. O'Malley,
Esq., Constance M. Unseld and Raymond A. Mason) to review the effect upon the
Company and the holders of the Shares of a third party acquisition of the stock
or assets of the Company. The Company's Board of Directors authorized the
Special Committee to retain professional advisors who would be responsible to
the Special Committee but whose compensation would be paid by the Company. The
Board of Directors also unanimously approved the payment by the Company of the
initial compensation due from 1224 to PaineWebber and the legal fees incurred by
1224 in the course of its organization and its acquisition of the Class AC
Shares. The Special Committee retained Wasserstein Perella & Co. ("Wasserstein")
on an exclusive basis as its financial and strategic advisor and to provide
certain financial advisory and investment banking services.
On April 18, 1996, 1224 engaged PaineWebber to act as exclusive financial
advisor to 1224 in connection with any proposed sale by 1224 of all of the Class
AC Shares and to advise and assist 1224 in identifying potential purchasers. In
April, May and early June, 1996, 1224 and Sainsbury discussed a purchase by
Sainsbury of the Class AC Shares and the Shares. On June 6, Sainsbury advised
1224 that it wished to delay further discussions. On August 6, 1996, Sainsbury
purchased 2,000,000 Shares from the Israel Cohen Estate at a price of $31.00 per
share, plus a "price protection" clause under which the Estate would receive any
price increment if Sainsbury were to acquire the Class AC Shares within the next
four years.
On March 5, 1997, 1224 decided to revive active consideration of its
options regarding the Class AC Shares. On March 10, 1997, a representative of
PaineWebber Incorporated ("PaineWebber"), the financial
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advisor to 1224, contacted the Purchaser to inquire whether the Purchaser would
be interested in acquiring the Class AC Shares and the Shares and was informed
that the Purchaser would be interested in an acquisition of all of the capital
stock in the Company. On May 3, 1997, Alvin Dobbin, then the Executive Vice
President of the Company and the Vice President and Treasurer of 1224, Cees H.
van der Hoeven, the President and Chief Executive Officer of the Purchaser, and
Robert G. Tobin, then Chief Executive Officer of The Stop & Shop Companies,
Inc., a subsidiary of the Purchaser, met while attending an industry conference
and discussed the interest of the Purchaser in an acquisition of the Company.
Subsequently, Mr. Tobin and Pete L. Manos, the Chairman of the Board, President
and Chief Executive Officer of the Company and the Chairman of the Board and
President of 1224, had occasional telephone conversations regarding such
possible acquisition.
On October 10, 1997, Mr. Tobin and Mr. Manos met and each expressed
interest in considering a transaction at some point in the future. On October
29, 1997, Mr. Manos telephoned Mr. Tobin to inform him that 1224 was prepared to
enter into active negotiations with the Purchaser. As a result, a meeting was
arranged in November among Mr. van der Hoeven, Mr. Tobin, Robert Zwartendijk, an
Executive Vice President of the Purchaser and the Chief Executive Officer of
Ahold U.S.A., Inc., and Mr. Manos to discuss a possible acquisition by the
Purchaser. At such meeting, Mr. van der Hoeven expressed the Purchaser's
continued interest in such an acquisition but only if it included the
acquisition of the Class AL Shares owned by Sainsbury and requested that 1224
inquire whether Sainsbury would be willing to sell the Class AL Shares to the
Purchaser. At a meeting on December 4, 1997, 1224 advised Sainsbury of its
discussions with the Purchaser, and Sainsbury stated that it would not sell its
Class AL Shares and that it was interested in reviving earlier discussions
concerning a purchase by it of the Class AC Shares and the Shares by May or June
of 1998.
During December 1997 and January 1998, representatives of the Purchaser and
1224 had telephone conversations regarding possible acquisition structures. On
January 19, 1998, while attending another industry conference, Mr. van der
Hoeven, Mr. Zwartendijk and Mr. Tobin met with Mr. Manos to discuss further a
possible acquisition transaction. As a result of this meeting and subsequent
telephone conversations among representatives of 1224 and the Purchaser, a
meeting was held on January 28, 1998, among Paul J. Butzelaar, the Senior Vice
President and General Counsel of the Purchaser, David W. Rutstein, the Senior
Vice President -- General Counsel of the Company and a Vice President of 1224,
representatives of PaineWebber and legal advisors to the Purchaser, 1224 and the
Special Committee. At this meeting the legal structure of, the documentation
required for and other aspects of a possible transaction were discussed. Mr.
Butzelaar stated that any acquisition by the Purchaser of the Class AC Shares
from 1224 would be conditioned upon the Purchaser's acquisition of the Class AL
Shares. Subsequent to such meeting, Messrs. Butzelaar and Rutstein had several
conversations further addressing the issues raised at the January 28 meeting.
On February 2, 1998, a confidentiality agreement was entered into by the
Purchaser and 1224. Subsequent thereto, representatives of the Purchaser
conducted due diligence with respect to certain matters. In addition, during
February further meetings were held among Mr. Butzelaar, Mr. Rutstein, the legal
advisors to the Purchasers and the financial and legal advisors to 1224 and the
Special Committee at which the structure of the transaction and other issues
were discussed. On March 26, a meeting was held among the representatives of the
Purchaser, 1224 and the Special Committee to discuss the drafts of a proposed
stock purchase agreement and exclusivity agreement, each to be entered into
between the Purchaser
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and 1224, and a proposed merger agreement to be entered into between the
Purchaser and the Company that had previously been distributed by the
Purchaser's legal advisors.
Subsequent to such meeting, representatives of PaineWebber, Wasserstein and
Merrill Lynch had several conversations regarding the transaction. At a meeting
on March 31, 1998, representatives of Merrill Lynch indicated to representatives
of PaineWebber and Wasserstein that the Purchaser would be willing to offer
$41.25 for the Class AC Shares and the Shares, subject to the condition that the
Purchaser is able to acquire the Class AL Shares from Sainsbury. The
representatives of PaineWebber and Wasserstein stated that they believed their
clients would not accept such an offer. On April 7, 1998, representatives of
Merrill Lynch met with representatives of PaineWebber and Wasserstein, at which
meeting PaineWebber and Wasserstein made a presentation regarding the Company's
financial results, stock trading history, northern division and cost savings
initiatives. On April 15, 1998, meetings were held between representatives of
Sainsbury and the Chairman of the Special Committee and later that day between
representatives of 1224 and Sainsbury at which Sainsbury advised that although
it was content to maintain its current investment in the Company, it was unable
and unwilling, based on the current market price of approximately $38.00 for the
Shares, to purchase the Class AC Shares or any additional Shares.
On April 27, 1998, the Purchaser and 1224 executed an exclusivity agreement
pursuant to which 1224 agreed from the date of such agreement until May 31,
1998, not to solicit or encourage any proposal to acquire the Class AC Shares,
any tender or exchange offer for the Company's common shares, or any merger or
similar transaction involving the Company, except as otherwise specifically
permitted thereby. Subsequently on such date, at a meeting among the financial
advisors to the Purchaser, 1224 and the Special Committee, representatives of
Merrill Lynch indicated that the Purchaser would be willing to increase the
price it would pay for the Class AC Shares and the Shares to $41.75 per share.
The financial advisors to 1224 and the Special Committee responded that such
price was less than what 1224 and the Special Committee were willing to accept.
On April 28, 1998, Mr. Zwartendijk proposed in a telephone call to Mr. Manos an
increased offer price of $42.00 per share.
On April 29, 1998, Messrs. Butzelaar and Rutstein, the legal advisors to
the Purchaser, 1224 and the Special Committee and a representative of Merrill
Lynch met to continue negotiation of the draft agreements. During a portion of
such meeting, Mr. Manos and Mr. Zwartendijk participated by conference
telephone. After some discussion between the parties, Mr. Zwartendijk and Mr.
Manos agreed to a price of $43.50 per share for the Class AC Shares and the
Class A Shares, but conditioned upon the Purchaser's acquisition of the Class AL
Shares from Sainsbury and the approval by the Executive and Supervisory Boards
of the Purchaser, the Board of Directors of 1224 and the Special Committee. It
was agreed that Mr. van der Hoeven and Mr. Manos should separately call Lord
David Sainsbury, the Chairman of Sainsbury, to arrange separate meetings with
him to discuss an acquisition by the Purchaser of Sainsbury's interest in the
Company. Subsequently, Mr. van der Hoeven and Mr. Manos separately called Lord
Sainsbury and arranged separate meetings with him in London on May 5, 1998.
On May 4, 1998, Mr. van der Hoeven met with Mr. Manos and Mr. Rutstein at
an industry conference to discuss the upcoming meetings with Lord Sainsbury. At
the May 5 meetings with Lord Sainsbury, Mr. van der Hoeven and Mr. Manos were
each informed by Lord Sainsbury that Sainsbury was not interested in selling its
interest in the Company to the Purchaser. After such meetings, Mr. van der
Hoeven, Mr. Manos and Mr. Rutstein met and Mr. Manos asked Mr. van der Hoeven
whether the Purchaser would be willing to drop its condition that it acquire the
Class AL Shares. Mr. van der Hoeven indicated that he could not respond to such
request without further discussions with the Purchaser's Executive Board and
Supervisory Board.
On May 12, Mr. Zwartendijk called Mr. Manos to inform him that the
Supervisory Board of the Purchaser had authorized the Purchaser to proceed with
an acquisition of the Class AC Shares and the Shares not conditioned upon its
acquisition of the Class AL Shares from Sainsbury subject to approval of the
final
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terms by the Executive Board of the Purchaser. In such call, Mr. Zwartendijk
further informed Mr. Manos that the Purchaser was unwilling to pay the $43.50
per share price it would have been willing to pay if its obligation to purchase
were conditioned on its acquisition of the Class AL Shares. In addition, Mr.
Zwartendijk stated that the tender offer would need to be subject to a 70%
minimum tender condition. Mr. Zwartendijk further informed Mr. Manos that if an
agreement were reached between the parties it would have to be approved by the
Executive Board of the Purchaser at a meeting scheduled to be held on Monday,
May 18, 1998. Mr. Manos indicated that he would have to discuss Mr.
Zwartendijk's proposal with the rest of the directors of 1224 and with the
Special Committee.
On May 13, 1998, Mr. Zwartendijk proposed to Mr. Manos a price of $43.00
per share and a 65% minimum tender condition, subject to approval, in the case
of the Purchaser, by its Executive Board, and in the case of 1224, by its Board
of Directors, as well as the Special Committee. On May 14, 1998, Mr. Manos
phoned Mr. Zwartendijk and indicated that the $43.00 per share price would be
acceptable if the Purchaser would agree that, if it were to acquire the Class AL
Shares during the pendency of the tender offer, the price to be paid for the
Class AC Shares and the Shares in the tender offer would be increased to $43.50.
On Friday, May 15, Mr. Butzelaar informed Mr. Rutstein by telephone that Mr.
Manos' proposal would be acceptable to the Purchaser.
During the period from May 13 through May 18, 1998, the parties and their
financial and legal advisors continued to negotiate the terms of the proposed
stock purchase agreement.
On May 18, 1998, the Board of Directors of 1224 reviewed the terms of the
proposed Stock Purchase Agreement. PaineWebber made a presentation to the Board
of Directors of 1224 and delivered its opinion that, as of that date and based
upon its review and analysis and subject to the assumptions and qualification
set forth therein, the $43.00 per share cash consideration to be received by
1224 for the Class AC Shares is fair to 1224 from a financial point of view.
Upon consideration and discussion of such presentation and opinion and other
information provided to it, the Board of Directors of 1224 (who are also the
holders of all the outstanding voting shares of 1224) unanimously determined
that the Purchaser's offer is fair to and in the best interests of 1224 and the
holders of the Shares and approved the proposed Stock Purchase Agreement.
On May 18, 1998, the Special Committee met to review the effect upon the
Company and the holders of the Shares of the proposed Stock Purchase Agreement.
Wasserstein made a presentation to the Special Committee and delivered its
opinion that, as of that date and based upon its review and analysis and subject
to the assumptions and qualifications contained therein, the $43.00 per share
cash consideration to be received by the holders of the Shares pursuant to the
Offer, is fair to such stockholders from a financial point of view. Upon
consideration and discussion of such presentation and opinion and other
information provided to it, the Special Committee unanimously determined that
the Offer is fair to and in the best interests of the Company and the holders of
the Shares and recommended to the Board of Directors of the Company that it
recommend acceptance of the Offer by the holders of the Shares. 1224 advised the
Purchaser of the action taken by the Special Committee. On the morning of May
19, the Purchaser and 1224 executed and delivered the Stock Purchase Agreement.
1224 recommends that the holders of the Shares accept the Offer and tender
their Shares pursuant to the Offer. A letter to stockholders of the Company
communicating 1224's recommendation is filed herewith as Exhibit 5.
(b) REASONS FOR RECOMMENDATION. In reaching its conclusion with respect to
the Offer, the Board of Directors of 1224 considered a number of factors,
including the following:
(i) The Board of Directors of 1224 considered that the current per
Share market price for the Shares reflects to a significant degree an
anticipated takeover of the Company and that the cash offer price of $43.00
per Share (or $43.50 per Share if the Purchaser or any of its affiliates
acquires or enters into a binding agreement to acquire all of the Class AL
Shares before the Expiration Date) provided for in the Stock Purchase
Agreement represents a substantial premium over the historical trading
prices for the Shares.
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(ii) The Board of Directors of 1224 considered the written opinion of
PaineWebber, delivered on May 18, 1998 that, as of that date and based upon
its review and analysis and subject to the assumptions and qualifications
set forth therein, the $43.00 per share cash consideration to be received
by 1224 for the Class AC Shares is fair to 1224 from a financial point of
view. A copy of the written opinion dated May 18, 1998 of PaineWebber,
which sets forth the assumptions made, factors considered and scope of the
review undertaken by PaineWebber, is attached hereto as Annex B and is
incorporated herein by reference. Holders of Shares are urged to read the
full text of such opinion.
(iii) The Board of Directors of 1224 considered, in consultation with
PaineWebber, that at a per Share price equal to or greater than the Offer
Price the Company is not attractive for purchase in a leveraged buy-out or
similar transaction and that the position of Sainsbury as the holder of the
Class AL Shares significantly limits the attractiveness of the Class AC
Shares and the Shares to any strategic buyers.
(iv) The Board of Directors of 1224 considered that 1224's obligation
to execute the Stock Purchase Agreement is dependent upon the determination
by the Special Committee at its meeting held on May 18, 1998 that the Offer
is fair to and in the best interests of the Company and the holders of the
Shares and its recommendation that the Board of Directors of the Company
recommend acceptance of the Offer by the holders of the Shares, which
determination and recommendation by the Special Committee are in turn
dependent on its receipt from its financial advisor, Wasserstein Perella &
Co., Inc., of an opinion that the $43.00 per share cash consideration, as
of the date of and subject to the assumptions and qualifications stated in
the opinion, is fair to the holders of the Shares from a financial point of
view.
(v) The Board of Directors considered its familiarity with the
Company's business, prospects, financial condition, results of operations
and current business strategy; the nature of its industry position; and its
belief that the Company is facing increasing competition in both its
primary and expansion territories which makes it advisable that the Company
become part of and share the cost savings and efficiencies available to a
larger organization such as the Purchaser.
(vi) The Board of Directors considered the Purchaser's business
reputation, its relationship with existing United States subsidiaries and
its good relationship with their management and employees, and its ability
to finance the acquisition.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
On January 31, 1996, 1224 engaged PaineWebber to act as its financial
advisor in evaluating potential strategic and financial alternatives available
to 1224 and the Company concerning the Class AC Shares and the Shares. In
consideration for such services, 1224 agreed to pay PaineWebber a fee of $50,000
and to reimburse PaineWebber for its reasonable out-of-pocket costs not
exceeding $5,000. Pursuant to a resolution of the Company's Board of Directors
dated July 11, 1996, the Company paid 1224 $55,000 in reimbursement for payments
made by 1224 to PaineWebber.
On April 18, 1996, 1224 engaged PaineWebber to act as exclusive financial
advisor to 1224 in connection with any proposed sale by 1224 of all of the Class
AC Shares, including to advise and assist 1224 in identifying potential
purchasers. In consideration for such services, 1224 agreed to pay PaineWebber a
fee of $250,000 for any fairness opinion requested by 1224 and rendered by
PaineWebber (the "Opinion fee"), and, if during the course of such engagement or
within 18 months thereafter the Company or 1224 entered into a definitive
agreement resulting in a sale transaction involving a purchaser as to which
PaineWebber advised 1224, a transaction fee of 0.25% of the purchase price
payable at the closing of such transaction (the "Transaction fee"). The parties
agreed that any Opinion fee paid to PaineWebber would be deducted from any
Transaction fee to which PaineWebber is entitled. 1224 further agreed to
reimburse PaineWebber for its reasonable out-of-pocket expenses not exceeding
$25,000. In the Stock Purchase Agreement, 1224 has agreed to use its reasonable
best efforts to cause the President of the Company to call a special meeting of
the Board of Directors of the Company, in accordance with the Certificate of
Incorporation and Bylaws of the Company and the provisions of the DGCL, for the
purpose of considering the assumption by the Company of 1224's
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obligations to PaineWebber resulting from the purchase of the Class AC shares
and the consummation of the Offer (the "PaineWebber Obligations"). 1224 further
agreed to cause the directors of the Company who are also directors of 1224, and
to use its reasonable best efforts to cause the other directors of the Company,
not to abstain and to vote to approve the assumption by the Company of the
PaineWebber Obligations.
Neither 1224 nor any person acting on its behalf currently intends to
employ, retain or compensate any other person to make solicitations or
recommendations to holders of the Shares, except that officers of 1224 may
contact such stockholders personally or by telephone on behalf of 1224.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) To the best knowledge of 1224, no transactions in Shares have been
effected within the past 60 days by 1224 or by any executive officer, director
or affiliate of 1224.
(b) To the best knowledge of 1224, each of 1224's executive officers,
directors and affiliates presently intends to tender all of the Shares which are
held of record or beneficially owned by such person pursuant to the Offer. The
foregoing does not include any Shares over which, or with respect to which, any
such executive officer, director or affiliate acts in a fiduciary capacity and
is subject to the instructions of some third party in respect of the Offer, as
to which Shares, to 1224's knowledge, no determination has been made.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
Not applicable.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
None.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<S> <C> <C>
Exhibit 1 -- Copy of the Stock Purchase Agreement, dated as of May 19,
1998, between Koninklijke Ahold N.V. and The 1224
Corporation.
Exhibit 2 -- Form of Letter to the Company's Associates, dated May 19 ,
1998, and Question and Answer Memoranda for such Associates.
Exhibit 3 -- Text of Speech of Pete L. Manos, President of The 1224
Corporation, to the Company's Associates.
Exhibit 4 -- Press release issued by The 1224 Corporation, dated May 19,
1998.
Exhibit 5 -- Supplemental press release issued by The 1224 Corporation,
dated May 19, 1998.
Exhibit 6 -- Form of Letter from the 1224 Corporation to the Company's
Stockholders, dated May 19, 1998.
</TABLE>
14
<PAGE> 17
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
THE 1224 CORPORATION
By: /s/ DAVID W. RUTSTEIN
------------------------------------
David W. Rutstein
Vice President
Dated: May 19, 1998
15
<PAGE> 18
ANNEX A
This Annex contains additional information with respect to contracts,
agreements, arrangements and understandings between 1224 or its directors and
executive officers and the Company or its directors and executive officers,
including information relating to compensation by the Company of executive
officers of the Company who are also directors or executive officers of 1224 and
their ownership of Company securities.
EXECUTIVE COMPENSATION
The following tables and narrative text discuss the compensation paid by
the Company in its fiscal year ended February 28, 1998 ("Fiscal Year 1998") and
the two prior fiscal years to its executive officers who are also directors or
executive officers of 1224.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION (1)
<TABLE>
<CAPTION>
FISCAL OTHER ANNUAL
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1)
--------------------------- ------ -------- -------- ---------------
<S> <C> <C> <C> <C>
Pete L. Manos.................................. 1998 $579,519 $150,000 $5,772
President & CEO 1997 $520,673 $260,000 $6,002
1996 $327,028 $260,000 $6,134
Alvin Dobbin................................... 1998 $336,985 $ 93,600 $5,772
Exec. V.P. & COO 1997 $290,141 $160,000 $6,002
1996 $254,431 $150,378 $6,134
David W. Rutstein.............................. 1998 $291,571 $ 96,825 $5,772
Sr. V.P. -- Gen. Counsel, CAO & Secretary 1997 $264,654 $160,000 $6,002
1996 $252,720 $149,363 $6,134
Roger D. Olson................................. 1998 $194,480 $ 61,704 $5,772
Sr. V.P. -- Labor Relations and Personnel 1997 $181,436 $103,383 $6,002
1996 $165,948 $ 95,383 $6,134
</TABLE>
- ---------------
(1) Aggregate value of perquisites does not exceed the lesser of $50,000 or 10%
of the total amount of annual salary and bonus. Includes cash payments for
income taxes to each named officer on the value of the restricted shares and
the tax payment itself pursuant to the Company's Non-Qualified Executive
Stock Bonus Plan II.
A-1
<PAGE> 19
LONG TERM COMPENSATION
<TABLE>
<CAPTION>
RESTRICTED ALL OTHER
STOCK OPTIONS/SAR LTIP COMPENSATION
NAME AND PRINCIPAL POSITION FISCAL YEAR AWARDS(2) AWARDS(#)(3) PAYOUTS (4)(5)
--------------------------- ----------- ---------- ------------ ------- ------------
<S> <C> <C> <C> <C> <C>
Pete L. Manos.................... 1998 $9,027 32,500 0 $31,065
President & CEO 1997 $9,388 0 0 $36,320
1996 $9,596 102,500 0 $24,318
Alvin Dobbin..................... 1998 $9,027 17,500 0 $18,397
Exec. V.P. 1997 $9,388 14,500 0 $25,415
& COO 1996 $9,596 9,500 0 $23,085
David W. Rutstein................ 1998 $9,027 17,500 0 $16,725
Sr. V.P. -- Gen. Counsel, 1997 $9,388 9,500 0 $20,273
CAO & Secretary 1996 $9,596 9,500 0 $18,855
Roger D. Olson................... 1998 $9,027 9,500 0 $13,516
Sr. V.P. -- Labor 1997 $9,388 9,500 0 $15,241
Relations and Personnel 1996 $9,596 9,500 0 $14,194
</TABLE>
- ---------------
(2) Dividends are paid on the stock held under this plan.
Under this plan, the Company makes an annual contribution not exceeding the
greater of (i) $1,000,000 or (ii) six-tenths of one percent (0.60%) of the
pre-tax earnings of the Company. The Company's cash contributions are used
to purchase Class A Shares.
Distributions of those shares will be made to those participants who meet
any of the following conditions: (i) ten years' participation in the Plan;
(2) retirement after attainment of age 62; (3) abolition of the
participant's job; (4) total and complete disability or (5) death.
(3) All options granted to participants pursuant to those stock option plans are
issued at 100% of fair market value on the date issued and may be exercised,
on a graduated basis, after the later of one year from the date of grant or
two years' continued employment. All options terminate 10 years form their
date of issuance.
The Company receives no cash consideration for granting options. In order to
acquire shares, the optionee must pay the full purchase price of the shares
being exercised, plus appropriate withholding taxes. Optionees are not
permitted to receive cash for any excess of market value over option price.
The Stock Purchase Agreement provides that 1224 will use its reasonable best
efforts to cause the Company to arrange for the vesting of all options to be
accelerated to the Closing Date, at which time the options will be canceled
and optionees will receive from the Company cash in an amount equal to the
difference between the Offer Price and the exercise prices of the options.
(4) Includes Company matching contributions under the Company's Qualified
Tax-Deferred Savings Plan ("Qualified Plan") and the Company's Non-Qualified
Excess Benefits Savings Plan ("Non-Qualified Plan").
Participants in the Qualified Plan and Non-Qualified Plan are permitted to
contribute portions of their compensation, subject to legal limitations for
the Qualified Plan and without legal limitations for the Non-Qualified Plan,
for which the Company contributes an amount in cash equal to the
participant's initial 3% pre-tax contribution. In addition, the Company
provides supplemental contributions (in the form of Class A Shares for the
Qualified Plan) and the Non-Qualified Plan to match participants'
contributions (partially or totally) in excess of 3% of salary up to 6% of
salary. Such Company contributions are limited to .4% of its pre-tax
earnings.
In Fiscal Year 1998 the Company made matching contributions under the
Qualified Plan as follows: Mr. Manos $6,000, Mr. Dobbin $6,000, Mr. Rutstein
$6,000, and Mr. Olson $6,000 . In Fiscal Year 1998 the Company made matching
contributions under the Non-Qualified Plan as follows: Mr. Manos $25,065.65,
Mr. Dobbin $12,396.93, Mr. Rutstein $10,724.81, and Mr. Olson $5,169.75.
(5) Includes premium payments under the Company's Split Dollar Insurance Program
in which participants are provided with permanent life insurance owned by
the Company. The Company pay for premiums and will recover amounts equal to
its investment in the insurance policies at the deaths of the participants.
During Fiscal Year 1998 the Company made insurance premium payments as
follows: Mr. Olson $2,346.
A-2
<PAGE> 20
OPTION GRANTS IN LAST FISCAL YEAR(1)
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO
OPTIONS/SARS EMPLOYEES IN EXERCISE OF BASE
NAME GRANTED(2) FY 1998 PRICE (S/SH) EXPIRATION DATE
---- ------------ ------------ ---------------- ---------------
<S> <C> <C> <C> <C>
Pete L. Manos....................... 2,500 $32.88 03/03/07
30,000 $33.56 06/09/07
------
32,500 4.31%
======
Alvin Dobbin........................ 2,500 $32.88 03/03/07
15,000 $33.56 06/09/07
------
17,500 2.32%
======
David W. Rutstein................... 2,500 $32.88 03/03/07
15,000 $33.56 06/09/07
------
17,500 2.32%
======
Roger D. Olson...................... 2,500 $32.88 03/03/07
7,000 $33.56 06/09/07
------
9,500 1.26%
======
</TABLE>
- ---------------
(1) No SARs were awarded in the 1998 Fiscal Year.
(2) Options granted under the 1989 Non-Qualified Stock Option Plan have a term
of up to ten years as determined by the Stock Option Plan Committee
("Committee"). Options become exercisable after the later of one year from
date of grant or the completion of two years of continued employment. After
such date, optioned shares are exercisable only to the extent of one-fifth
of the total number of optioned shares per year. After the fourth year,
option grants are exercisable in full. The Committee may prescribe longer
time periods and additional requirement with respect to the exercise of an
option and may terminate unexercised options based on the performance of the
employee. The Company is required to withhold income taxes from income
realized by an employee on the exercise of an option. The Company will (i)
reduce the amount of stock issued to reflect the necessary withholding, (ii)
withhold the appropriate tax from other compensation due to the optionee, or
(iii) condition transfer of any stock to the employee on the payment to the
Company of the required taxes. The Stock Purchase Agreement provides that
1224 will use its reasonable best efforts to cause the Company to arrange
for the vesting of all options to be accelerated to the Closing Date, at
which time the options will be canceled and optionees will receive from the
Company cash in an amount equal to the difference between the Offer Price
and the exercise prices of the options.
A-3
<PAGE> 21
POTENTIAL REALIZABLE VALUE OF ASSUMED
RATE OF STOCK PRICE APPRECIATION FOR
OPTION TERM (10 YEARS)
<TABLE>
<CAPTION>
NAME 0% GAIN(3) 5% GAIN(4)(5) 10% GAIN(4)(5)
---- ---------- ------------- --------------
<S> <C> <C> <C>
Pete L. Manos...................................... $0 $ 51,695 $ 131,006
0 633,171 1,604,580
-- -------- ----------
0 $684,866 $1,735,586
== ======== ==========
Alvin Dobbin....................................... $0 $ 51,695 $ 131,006
0 316,586 802,290
-- -------- ----------
0 $368,281 $ 933,296
== ======== ==========
David W. Rutstein.................................. $0 $ 51,695 $ 131,006
0 316,586 802,290
-- -------- ----------
0 $368,281 $ 933,296
== ======== ==========
Roger D. Olson..................................... $0 $ 51,695 $ 131,006
0 147,740 374,402
-- -------- ----------
0 $199,435 $ 505,408
== ======== ==========
</TABLE>
- ---------------
(3) As shown in this column, no gain to the named officers or all optionees is
possible without appreciation in the price of the Company's stock, which
will benefit all shareholders.
(4) The price of Class A Shares at the end of the ten-year term of the option
grant at a 5% annual appreciation would be $53.56 and $54.67, and at a 10%
annual appreciation would be $85.28 and $87.05. These appreciation rates are
the result of calculations required by the Securities and Exchange
Commission's rules, and therefore are not intended to forecast future
appreciation, if any, in the stock price of the Company.
(5) The gain is calculated form the exercise price of the options listed above,
$32.88 and $33.56 based on the grant date of the options. Option grants are
at 100% of market value on the date of grant.
AGGREGATED OPTIONS/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION SAR/VALUES(1)
<TABLE>
<CAPTION>
SHARES ACQUIRED ON
NAME EXERCISE(#) SARS EXERC'D(#) VALUE REALIZED($)
---- ------------------ --------------- -----------------
<S> <C> <C> <C>
Pete L. Manos.............................. 0 0 0
Alvin Dobbin............................... 0 0 0
David W. Rutstein.......................... 0 0 0
Roger D. Olson............................. 0 0 0
</TABLE>
<TABLE>
<CAPTION>
VALUE OF VALUE OF
NUMBER OF NUMBER OF UNEXERC'D IN- UNEXERC'D IN-
UNEXERC'D UNEXERC'D THE-MONEY THE-MONEY
OPTIONS/SARS OPTIONS/SARS OPTIONS/SARS OPTIONS/SARS
AT FY-END AT FY-END AT FY-END($) AT FY-END($)
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Pete L. Manos........................... 82,500 107,500 $670,276 $529,699
Alvin Dobbin............................ 30,000 40,500 $315,157 $176,578
David W. Rutstein....................... 29,000 36,500 $312,785 $195,709
Roger D. Olson.......................... 31,500 28,500 $350,291 $173,689
</TABLE>
- ---------------
(1) Value is before taxes. The dollar values are computed by determining the
difference between the fair market value of the underlying common stock and
the exercise price at fiscal year end.
A-4
<PAGE> 22
PENSION TABLE
PENSION PLAN:
The Company maintains a tax-qualified defined benefit pension plan for
approximately 2,500 salaried employees. The following table provides an example
of benefits at the normal retirement age of 65 payable as a life annuity:
<TABLE>
<CAPTION>
ESTIMATED ANNUAL BENEFITS
-------------------------------------
PENSION FROM RETIREMENT PLAN FOR
FOLLOWING NUMBER OF YEARS OF CREDITED
HIGHEST FIVE SERVICE*
YEAR AVERAGE -------------------------------------
EARNINGS 10 20 30
------------ --------- ---------- ----------
<S> <C> <C> <C>
$ 40,000............................................ $ 3,844 $ 8,087 $ 12,731
70,000............................................ 7,894 16,487 25,781
100,000............................................ 11,944 24,887 38,831
150,000............................................ 18,694 38,887 60,581
200,000............................................ 25,444 52,887 82,331
250,000............................................ 32,194 66,887 104,081
300,000............................................ 38,944 80,887 125,801
350,000............................................ 45,694 94,887 147,581
400,000............................................ 52,444 108,887 169,331
500,000............................................ 65,944 136,887 212,831
600,000............................................ 79,444 164,887 256,331
700,000............................................ 92,944 192,887 299,831
800,000............................................ 106,444 220,887 343,331
</TABLE>
- ---------------
* The amounts shown include benefits payable from the Supplemental Retirement
Arrangements.
A participant's annual pension payable to him/her as of his/her normal
retirement date will be equal to:
(i) .85% of "final average earnings" plus .50% of that portion of
final average earnings in excess of "covered compensation" times number of
years of credited service not to exceed 15, plus
(ii) 1.05% of final average earnings plus .50% of that portion of
final average earnings in excess of "covered compensation" times number of
years of credited service over 15, not to exceed 15, plus
(iii) .50% of final average earnings times years of credited service
over 30.
For purposes of determining plan benefits, earnings are the gross cash
compensation provided to a participant, including overtime and bonuses.
EARLY RETIREMENT BENEFITS ARE PAYABLE UNDER THE PENSION PLAN.
Generally, the payment of benefits will be in the form of a straight-life
annuity for participants who are not married and a joint and survivor annuity
for those who are married.
The number of years of credited service of the executive officers listed in
the remuneration table under the Retirement Plan, determined as of February 28,
1998 are: Mr. Manos, 27 years; Mr. Dobbin, 27 years; Mr. Rutstein, 20 years; Mr.
Olson 27 years.
SUPPLEMENTAL RETIREMENT ARRANGEMENTS:
An unfunded non-qualified pension plan, the Excess Benefit Savings Plan,
provides a make-up benefit for those executives who are impacted by the
compensation limitations of Section 401(a)(17) of the Internal Revenue Code and
by the maximum benefit limitations of Section 415 of the Internal Revenue Code.
A provision of this plan also provides that certain officers are entitled to a
make-up benefit equal to 60% of their
A-5
<PAGE> 23
earnings averaged over the five years prior to retirement, less amounts payable
from the Retirement Plan (including non-qualified pension plan benefits
described above), the Profit Sharing and Thrift Plans, and from social security.
Mr. Dobbin is the only person who qualified for the 60% provision. However,
it was not applicable because his benefits payable from the pension plan, the
Profit Sharing and Thrift Plan, and social security exceeded 60% of his average
earnings over the five years prior to his retirement.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL
ARRANGEMENTS
Officers of the corporation have contracts that provide benefits in the
event of job loss after change in control, or severance. Subject to the
satisfaction of several requirements; (1) an officer who loses his/her job
within two years of a change in control will receive for a period of 24 months;
or (2) an officer who is terminated will receive severance for a period of one
month per year of service to the Company, (but not more than 24 months nor less
than 3 months and only until retirement age or said retirement benefits are
paid):
A. Base salary continued at the rate in effect on the date prior to
termination;
B. Bonus continuation based on the average bonus percentage paid
during the three prior years under the Company's executive bonus plan; and
C. Medical and life insurance coverage comparable to that provided to
other officers who remain in the employ of the Company.
If any of the events had occurred on February 28, 1998, the following
individuals would have been entitled to receive the following amounts:
<TABLE>
<CAPTION>
CHANGE IN CONTROL SEVERANCE
----------------- ---------
<S> <C> <C>
Pete L. Manos............................................ 1,651,650 1,651,650
Alvin Dobbin*............................................ 0 0
David W. Rutstein........................................ 875,800 729,833
Roger D. Olson........................................... 568,512 568,512
</TABLE>
- ---------------
* Mr. Dobbin is not entitled to any payments under the Change in Control and
Severance Agreement because the plan prohibits payments to anyone over the age
65. The Company provided an informal arrangement for Mr. Dobbin, pursuant to
which Mr. Dobbin will continue to be paid his base pay and car allowance in
effect on February 28, 1998, through December 31, 1998. These payments will
total $290,000.
SECURITY OWNERSHIP
The following table sets forth the number of each class of equity
securities of the Company beneficially owned by each director and executive
officer of the Company who is also a director or executive officer of 1224 and
all such persons as a group as of May 1, 1998 (or as of such other date stated).
<TABLE>
<CAPTION>
NUMBER NATURE OF
TITLE OF SHARES BENEFICIAL PERCENT
NAME AND TITLE CLASS OF STOCK OWNED OWNERSHIP OF CLASS
-------------- -------------- ------- ---------- --------
<S> <C> <C> <C> <C>
Pete L. Manos........................... Common Stock A 157,208(1) Direct and .2605%
President, Chief Executive Officer,
Director (Non-Voting) Indirect
Alvin Dobbin............................ Common Stock A 147,932(2) Direct .2451%
Exec. Vice Pres., Chief Operating
Officer, (Non-Voting)
Director
</TABLE>
A-6
<PAGE> 24
<TABLE>
<CAPTION>
NUMBER NATURE OF
TITLE OF SHARES BENEFICIAL PERCENT
NAME AND TITLE CLASS OF STOCK OWNED OWNERSHIP OF CLASS
-------------- -------------- ------- ---------- --------
<S> <C> <C> <C> <C>
David W. Rutstein....................... Common Stock A 129,382(3) Direct and .2144%
Sr. Vice President -- General Counsel, (Non-Voting) Indirect
Chief Administrative Officer,
Secretary
Roger D. Olson.......................... Common Stock A 67,644(4) Direct and .1120%
Sr. Vice President -- Labor Relations
and (Non-Voting) Indirect
Personnel
</TABLE>
- ---------------
(1) Includes 118,500 shares acquirable under stock option plans within sixty
days. Mr. Manos disclaims beneficial ownership of the Class AC shares held
by 1224 except for 100 shares.
(2) Includes 43,500 shares acquirable under stock option plans within sixty
days. Mr. Dobbin disclaims beneficial ownership of the Class AC shares held
by 1224 except for 100 shares.
(3) Includes 41,500 shares acquirable under stock option plans within sixty
days. Mr. Rutstein disclaims beneficial ownership of the Class AC shares
held by 1224 except for 100 shares.
(4) Includes 24,900 shares acquirable under stock option plans within sixty
days.
As of May 18, 1998, Lillian Cohen Solomon, who is an officer and director
of 1224 and the President of the Naomi and Nehemiah Cohen Foundation, Inc, (the
"Cohen Foundation"), beneficially owned 1,929,700 of the Class A Shares. As of
that date, the Cohen Foundation owned 1,080,161 of the Class A Shares.
A-7
<PAGE> 25
ANNEX B
PaineWebber Incorporated
1285 Avenue of the Americas
New York, NY 10019
212-713-2000
May 18, 1998
Confidential
Board of Directors
The 1224 Corporation
6300 Sheriff Road
Landover, MD 20785
Madame and Gentlemen:
The 1224 Corporation ("1224") and Koninklijke Ahold NV ("Ahold") propose to
enter into a Stock Purchase Agreement (the "Agreement") pursuant to which Ahold
will purchase One Hundred Twenty Five Thousand (125,000) shares of Giant Food
Inc. (the "Company") Class AC Common Stock, par value $1.00 per share (the
"Class AC Shares"). Pursuant to the Agreement, Ahold will purchase from 1224 the
Class AC Shares at a price of $43.00 per share (the "Purchase Price Per Share")
net to 1224 in cash (the "Transaction"). Subject to the terms and conditions of
the Agreement, the Purchase Price Per Share could be amended to $43.50 per share
net to 1224 in cash.
As required by the Certificate of Incorporation of 1224, it is proposed
that a subsidiary of Ahold ("Sub") will make a tender offer (the "Tender Offer")
to purchase any and all of the issued and outstanding Company Class A Common
Stock, par value $1.00 per share (the "Class A Shares"), subject to the terms
and conditions of the Agreement, at a price per share equal to the per share
price to be paid to 1224 for the Class AC Shares.
You have asked us whether or not, in our opinion, the Purchase Price Per
Share is fair, from a financial point of view, to the holder of the Class AC
Shares.
In arriving at the opinion set forth below, we have, among other things:
(1) Reviewed the Company's Annual Reports, Forms 10-K and related financial
information for the four fiscal years ended February 22, 1997 and the
Company's audited financial information for the fiscal year ended
February 28, 1998 as contained in the Company's draft 10-K;
(2) Reviewed Ahold's Annual Reports, Forms 20-F and related financial
information for the four fiscal years ended December 31, 1996 and
Ahold's audited financial information for the fiscal year ended
December 31, 1997 as contained in Ahold's March 10, 1998 interim
report;
(3) Reviewed certain information, including financial forecasts, relating
to the business, earnings, cash flow, assets and prospects of the
Company, furnished to us by the Company;
(4) Conducted discussions with members of senior management of the Company
concerning its businesses and prospects;
(5) Reviewed the historical market prices and trading activity for the
Class A Shares and compared them with those of certain publicly traded
companies which we deemed to be relevant;
(6) Compared the financial position and results of operations of the
Company with those of certain publicly traded companies which we deemed
to be relevant;
(7) Compared the proposed financial terms of the Transaction with the
financial terms of certain other mergers and acquisitions which we
deemed to be relevant;
B-1
<PAGE> 26
(8) Reviewed a draft of the Agreement dated May 15, 1998; and
(9) Reviewed such other financial studies and analyses and performed such
other investigations and took into account such other matters as we
deemed necessary, including our assessment of general economic, market
and monetary conditions.
In preparing our opinion, we have relied on the accuracy and completeness
of all information that was publicly available, supplied or otherwise
communicated to us by or on behalf of 1224 and the Company, and we have not
assumed any responsibility to independently verify such information. With
respect to the financial forecasts examined by us, we have assumed, with your
consent, that they were reasonably prepared on bases reflecting the best
currently available estimates and good faith judgements of the management of the
Company as to the future performance of the Company. We have also relied upon
the assurances of the management of the Company that it is unaware of any facts
that would make the information or financial forecasts provided to us incomplete
or misleading. We have not made an independent evaluation or appraisal of the
assets or liabilities (contingent or otherwise) of the Company nor have we been
furnished with any such evaluations or appraisals. We have also assumed, with
your consent, that all material liabilities (contingent or otherwise, known or
unknown) of the Company are as set forth in the consolidated financial
statements of the Company.
Our opinion is directed to the Board of Directors of 1224 and does not
constitute a recommendation to any shareholder of the Company as to whether any
such shareholder should or should not tender his shares in the Tender Offer.
This opinion does not address the relative merits of the Transaction in
comparison to any other transactions or business strategies that may have been
discussed by the Board of Directors of 1224 as alternatives to the Transaction
or the decision of the Board of Directors of 1224 to proceed with the
Transaction. In addition, this opinion does not address the relative merits of
the Tender Offer. No opinion is expressed herein as to the price at which the
Class A Shares may trade at any time subsequent to the Transaction. Our opinion
is based on general economic, market and monetary conditions existing on the
date hereof.
In the ordinary course of our business, we may trade in the securities of
the Company and Ahold for our own account and for the accounts of our customers
and, accordingly, may at any time hold long or short positions in such
securities.
PaineWebber Incorporated is currently acting as financial advisor to 1224
in connection with the Transaction and will receive a fee in connection with the
rendering of this opinion and another fee upon the consummation of the Tender
Offer.
In rendering this opinion, we have not been engaged to act as an agent or
fiduciary of, and the Board of Directors of 1224 has expressly waived any duties
or liabilities we may have otherwise be deemed to have had to, 1224's equity
holders or any other third party.
This opinion has been prepared at the request and for the information of
the Board of Directors of 1224 in connection with the Transaction and shall not
be reproduced, summarized, described or referred to, provided to any person or
otherwise made public or used for any other purpose without the prior written
consent of PaineWebber Incorporated.
On the basis of, and subject to the foregoing, we are of the opinion that,
as of the date hereof, the Purchase Price Per Share is fair, from a financial
point of view, to the holder of the Class AC Shares.
Very truly yours,
PAINEWEBBER INCORPORATED
B-2
<PAGE> 1
================================================================================
STOCK PURCHASE AGREEMENT
Dated as of May 19, 1998
By and Between
KONINKLIJKE AHOLD N.V.
(Royal Ahold)
and
THE 1224 CORPORATION
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I DEFINITIONS............................................................................ 1
Section 1.1 Definitions........................................................ 1
ARTICLE II SALE OF STOCK AND TENDER OFFER........................................................ 6
Section 2.1 Sale of Transferred Shares......................................... 6
Section 2.2 Purchase Price for Transferred Shares.............................. 6
Section 2.3 Closing............................................................ 6
Section 2.4 Transfer Taxes..................................................... 6
Section 2.5 The Tender Offer................................................... 6
Section 2.6 Corporation Actions................................................ 7
Section 2.7 Tender of Class A Shares........................................... 10
Section 2.8 Stock Option and Other Plans. ..................................... 10
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE SELLER......................................... 11
Section 3. Representations and Warranties of the Seller....................... 11
Section 3.1 Legal Status....................................................... 11
Section 3.2 Power and Authority; Enforceability................................ 11
Section 3.3 Ownership of Transferred Shares.................................... 12
Section 3.4 No Conflicts; Consents of Third Parties; Compliance with Laws...... 12
Section 3.5 Disclosure......................................................... 13
Section 3.6 Broker's or Finder's Fees.......................................... 13
Section 3.7. Tender Offer Documents and Schedules 14D-9 ........................ 13
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE SELLER REGARDING
THE CORPORATION....................................................................... 14
Section 4. Representations and Warranties of the Seller Regarding the
Corporation........................................................ 14
Section 4.1 Due Organization, Good Standing and Corporate Power................ 14
Section 4.2 Capitalization..................................................... 14
Section 4.3 Consents and Approvals; No Violations.............................. 15
Section 4.4 Company Reports; Financial Statements and 1998 Budget.............. 16
Section 4.5 Absence of Certain Changes......................................... 17
Section 4.6 Compliance with Laws............................................... 17
Section 4.7 Employee Benefit Plans............................................. 17
Section 4.8 Employee Benefit Plan Triggering Events............................ 22
Section 4.9 Liabilities........................................................ 22
Section 4.10 Litigation........................................................ 22
Section 4.11 Taxes............................................................. 22
</TABLE>
(i)
<PAGE> 3
<TABLE>
<S> <C>
Section 4.12 Intellectual Properties........................................... 23
Section 4.13 Environmental Laws and Regulations................................ 23
Section 4.14 Labor Relations................................................... 24
Section 4.15 Tender Offer Documents and Corporation's Schedule 14D-9 .......... 24
Section 4.16 State Takeover Statutes........................................... 25
Section 4.17 Rights Agreements................................................. 25
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE PURCHASER ....................................... 25
Section 5. Representations and Warranties of the Purchaser.................... 25
Section 5.1 Legal Status....................................................... 25
Section 5.2 Power and Authority; Enforceability................................ 25
Section 5.3 No Conflicts....................................................... 25
Section 5.4 Broker's or Finder's Fees.......................................... 26
Section 5.5 Available Funds.................................................... 26
Section 5.6 Securities Act..................................................... 26
Section 5.7 Schedules l4D-9.................................................... 26
ARTICLE VI CONDUCT OF BUSINESS, EXCLUSIVE DEALING,REVIEW, OTHER COVENANTS........................ 26
Section 6.1 Access to Information Concerning Properties and Records............ 26
Section 6.2 Confidentiality.................................................... 27
Section 6.3 Conduct of Business of the Corporation............................. 27
Section 6.4 Approval by Purchaser of Changes................................... 29
Section 6.5 Exclusive Dealing.................................................. 29
Section 6.6 Notification of Certain Matters.................................... 31
Section 6.7 Directors' and Officers' Insurance ................................ 31
Section 6.8 Employee Benefits.................................................. 32
Section 6.9 Further Assurances................................................. 32
Section 6.10 Resignations...................................................... 32
Section 6.11 Provisions Concerning Transferred Shares.......................... 32
Section 6.12 Restriction on Transfer, Proxies and Non-Interference............. 33
Section 6.13 Changes in Shares................................................. 33
Section 6.14 Broker's and Finder's Fees........................................ 33
ARTICLE VII CONDITIONS TO THE PURCHASER'S OBLIGATIONS............................................ 34
Section 7. Conditions to the Purchaser's Obligations........................... 34
Section 7.1 Truth of Representations and Warranties............................ 34
Section 7.2 Performance of Agreements.......................................... 34
Section 7.3 Injunction......................................................... 34
Section 7.4 Consents and Approvals............................................. 35
Section 7.5 Tender Offer Conditions........................................... 35
Section 7.6 Resignations....................................................... 35
Section 7.7 Approval of Tender Offer........................................... 35
</TABLE>
(ii)
<PAGE> 4
<TABLE>
<S> <C>
ARTICLE VIII CONDITIONS TO THE OBLIGATIONS OF THE SELLER......................................... 35
Section 8. Conditions to the Obligations of the Seller........................ 35
Section 8.1 Truth of Representations and Warranties............................ 35
Section 8.2 Performance of Agreements.......................................... 36
Section 8.3 Injunction......................................................... 36
Section 8.4 HSR................................................................ 36
Section 8.5 Tender Offer....................................................... 36
ARTICLE IX MISCELLANEOUS......................................................................... 36
Section 9.1 Representations and Warranties; Knowledge of the Seller............ 36
Section 9.2 Expenses........................................................... 37
Section 9.3 Governing Law...................................................... 37
Section 9.4 Headings........................................................... 38
Section 9.5 Publicity.......................................................... 38
Section 9.6 Notices............................................................ 38
Section 9.7 Binding Effect; Benefit; Assignment................................ 39
Section 9.8 Best Efforts....................................................... 40
Section 9.9 Counterparts....................................................... 41
Section 9.10 Entire Agreement.................................................. 41
Section 9.11 Amendments........................................................ 41
Section 9.12 Severability...................................................... 41
Section 9.13 Termination of Agreement.......................................... 41
Section 9.14 Specific Performance.............................................. 41
Section 9.15 Remedies Cumulative............................................... 41
Section 9.16 No Waiver......................................................... 41
</TABLE>
EXHIBITS
Exhibit A 1997 10-K
(iii)
<PAGE> 5
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (this "Agreement") dated as of May
19, 1998, by and between The 1224 Corporation, a corporation organized and
existing under the laws of the State of Delaware (the "Seller"), and Koninklijke
Ahold N.V. (Royal Ahold), a public company with limited liability organized
under the laws of the Netherlands with its corporate seat in Zaandam
(Municipality Zanstaad) (the "Purchaser").
W I T N E S S E T H :
WHEREAS, the Seller owns, beneficially and of record, 125,000
shares of Class AC Common Stock, par value $1.00 per share (the "Class AC
Shares"), and 500 shares of Class A Common Stock, par value $1.00 per share (the
"Class A Shares"), in each case of Giant Food Inc., a corporation organized and
existing under the laws of the State of Delaware (the "Corporation");
WHEREAS, the Seller desires to sell, and the Purchaser desires
to purchase, all of the Class AC Shares (such Class AC Shares, collectively, the
"Transferred Shares"), on the terms and subject to the conditions set forth in
this Agreement; and
WHEREAS, as required by the Certificate of Incorporation of
the Seller, it is proposed that the Purchaser will make a tender offer to
purchase any and all of the issued and outstanding Class A Shares, subject to
the terms and conditions set forth in this Agreement (including, without
limitation, the conditions set forth in Section 2.5 hereof) (the "Tender
Offer"), at a price per share equal to the per share price to be paid to the
Seller hereunder for the Transferred Shares (as such price may be increased in
accordance with Section 2.2, the "Tender Offer Price").
NOW, THEREFORE, in consideration of the premises and of the
promises hereinafter set forth, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. When used in this Agreement, the
following terms shall have the respective meanings specified therefor below
(such meanings to be equally applicable to both the singular and plural forms of
the terms defined).
"Action" shall have the meaning provided in Section 6.4
hereof.
"Acquisition Proposal" shall have the meaning provided in
Section 6.5(a) hereof.
"Affiliate" shall mean, with respect to any Person, any other
Person directly or indirectly controlling, controlled by, or under direct or
indirect common control with, such
<PAGE> 6
Person. A Person shall be deemed to control another Person if such Person
possesses, directly or indirectly, the power to direct or cause the direction of
the management and policies of such other Person, or the power to appoint or
dismiss the managing directors of such other Person, whether through the
ownership of voting securities, by contract or otherwise.
"Agents" shall have the meaning provided in Section 6.5(a)
hereof.
"Agreement" shall have the meaning provided in the recitals
hereto.
"Alcohol and Drug Laws" shall have the meaning provided in
Section 4.3 hereof.
"Budget" shall have the meaning provided in Section 4.4(c)
hereof.
"Cash Payment" shall have the meaning provided in Section 2.8
hereof.
"Claims" shall have the meaning provided in Section 4.13
hereof.
"Class AC Shares" shall have the meaning provided in the
recitals hereof.
"Class AL Shares" shall have the meaning provided in Section
2.2 hereof.
"Class A Shares" shall have the meaning provided in the
recitals hereto.
"Closing" shall have the meaning provided in Section 2.3
hereof.
"Closing Date" shall have the meaning provided in Section 2.3
hereof.
"Code" shall have the meaning provided in Section 4.7(a)
hereof.
"Corporation" shall have the meaning provided in the recitals
hereto.
"Corporation Property" shall have the meaning provided in
Section 4.13 hereof.
"Corporation's Schedule 14D-9" shall have the meaning provided
in Section 2.6(c) hereof.
"DGCL" shall have the meaning provided in Section 2.6(b)
hereof.
"Director" shall have the meaning provided in Section 7.6
hereof.
"Directors' Schedule 14D-9" shall have the meaning provided in
Section 2.6(f) hereof.
"EBS Plan" shall have the meaning provided in Section 6.8
hereof.
"Employee Benefit Plans" shall have the meaning provided in
Section 4.7(a) hereof.
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<PAGE> 7
"Environmental Claims" shall have the meaning provided in
Section 4.13 hereof.
"Environmental Law" shall have the meaning provided in Section
4.13 hereof.
"ERISA" shall have the meaning provided in Section 4.7(a)
hereof.
"Exchange Act" shall have the meaning provided in Section
2.5(a) hereof.
"Existing Class A Shares" shall have the meaning provided in
Section 2.7 hereof.
"GAAP" shall mean generally accepted accounting principles in
the United States consistently applied during a relevant period.
"Hazardous Materials" shall have the meaning provided in
Section 4.13 hereof.
"HSR Act" shall have the meaning set forth in Section 3.4(b)
hereof.
"Indemnified Parties" shall have the meaning provided in
Section 6.7(b) hereof.
"IRS" shall have the meaning provided in Section 4.7(c)
hereof.
"Law" shall mean any constitution, treaty, convention,
statute, law, Environmental Law, code, ordinance, decree, order, rule,
regulation, guideline, interpretation, direction, policy or request, or judicial
or arbitral decision or judgment.
"Letter of Transmittal" shall have the meaning provided in
Section 2.5(b) hereof.
"Liens" shall mean liens, security interests, options, rights
of first refusal, easements, mortgages, charges, claims, indentures, deeds of
trust, rights of way, restrictions on the use of real property, encroachments,
licenses to third parties, leases to third parties, security agreements, or any
other encumbrances and other restrictions or limitations on use of real or
personal property or irregularities in title thereto; provided, however, that
with respect to the Transferred Shares, "Liens" shall not include any
restrictions imposed upon such Transferred Shares by the Certificate of
Incorporation or By-Laws of the Corporation or by the DGCL.
"Material Adverse Effect" shall mean an effect that is, or is
reasonably likely to be, materially adverse to the business, properties, assets,
liabilities, condition (financial or otherwise), operations, results of
operations or prospects of the Corporation and its subsidiaries taken as a
whole.
"Multiemployer Plan" shall have the meaning provided in
Section 4.7(c) hereof.
"Non-Union Employees" shall have the meaning provided in
Section 6.8 hereof.
"Offer to Purchase" shall have the meaning provided in Section
2.5(b) hereof.
"Options" shall have the meaning provided in Section 2.8
hereof.
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<PAGE> 8
"PaineWebber" shall have the meaning provided in Section 3.6
hereof.
"PaineWebber Agreement" shall have the meaning provided in
Section 3.6 hereof.
"PaineWebber Obligations" shall have the meaning provided in
Section 6.14 hereof.
"PBGC" shall have the meaning provided in Section 4.7(c)
hereof.
"Permitted Liens" shall mean (i) Liens consisting of zoning or
planning restrictions or regulations, easements, and other restrictions or
limitations on the use of real property or irregularities in, or exceptions to,
title thereto which do not materially detract from the value of, or materially
impair the use of, such property by the Corporation in the operation of its
business, (ii) Liens for taxes, assessments or governmental charges or levies on
property not yet due and payable or due but not delinquent or being contested in
good faith by appropriate proceedings, and (iii) Liens individually identified
and disclosed in the 1997 10-K.
"Person" shall mean any individual, partnership, limited
liability company, corporation, trust, unincorporated association or other
entity which is recognized as having legal personality under national or
international Law.
"Purchase Price" shall have the meaning provided in Section
2.2 hereof.
"Purchaser" shall have the meaning provided in the preamble
hereto.
"Schedule 14D-1" shall have the meaning provided in Section
2.5(b) hereof.
"SEC" shall have the meaning provided in Section 2.5(b)
hereof.
"SEC Filings" shall have the meaning provided in Section
4.4(a) hereof.
"Securities Act" shall have the meaning provided in Section
5.6 hereof.
"Seller" shall have the meaning provided in the preamble
hereto.
"Seller System" shall have the meaning provided in Section
4.12 hereof.
"Seller's Class A Shares" shall have the meaning provided in
Section 2.7 hereof.
"Seller's Schedule 14D-9" shall have the meaning provided in
Section 2.6(e) hereof.
"Shares" shall have the meaning provided in Section 4.2(a)
hereof.
"Share Register" shall mean, collectively, the register book
maintained by the Corporation setting forth the names and addresses of each of
the owners of the shares of capital
-4-
<PAGE> 9
stock of the Corporation and the number of such shares owned by each such owner,
and indicating each transfer or encumbrance of such shares by any owner thereof.
"Single Employer Plan" shall have the meaning provided in
Section 4.7(e) hereof.
"Special Committee" shall have the meaning provided in Section
2.6(a) hereof.
"Stock Incentive Plans" shall have the meaning provided in
Section 2.8 hereof.
"Stock Plans" shall have the meaning provided in Section 2.8
hereof.
"subsidiary" shall mean each subsidiary of the Corporation
that is a "subsidiary" within the meaning of Regulation S-X promulgated by the
SEC.
"Tax" or "Taxes" shall mean any net income, alternative or
add-on minimum tax, advance corporation, gross income, gross receipts, sales,
use, ad valorem, franchise, profits, license, value-added, withholding, payroll,
employment, excise, transfer, stamp or occupation tax, governmental fee or other
like assessment or charge of any kind whatsoever, together with any interest or
any penalty imposed by any governmental authority with respect thereto and any
liability for such amounts as a result of either being a member of an affiliated
group or of a contractual obligation to indemnify any other entity.
"Tender Offer" shall have the meaning provided in the recitals
hereto.
"Tender Offer Conditions" shall have the meaning provided in
Section 2.5(a) hereof.
"Tender Offer Documents" shall have the meaning provided in
Section 2.5(b) hereof.
"Tender Offer Price" shall have the meaning provided in the
recitals hereto.
"Transferred Shares" shall have the meaning provided in the
recitals hereto.
"WARN Act" shall have the meaning provided in Section 4.14
hereof.
"Wasserstein" shall have the meaning provided in Section 2.6
hereof.
"1997 10-K" shall have the meaning provided in Section 4.4(a)
hereof.
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<PAGE> 10
ARTICLE II
SALE OF STOCK AND TENDER OFFER
Section 2.1 Sale of Transferred Shares. On the terms and
subject to the conditions set forth in this Agreement, the Seller agrees to sell
and transfer to the Purchaser at the Closing, and the Purchaser agrees to
purchase from the Seller at the Closing, the Transferred Shares, free and clear
of all Liens. At or immediately following the Closing, the Seller shall use its
reasonable best efforts to cause the Corporation to duly enter the transfer of
the Transferred Shares in the Share Register.
Section 2.2 Purchase Price for Transferred Shares. In full
consideration for the purchase by the Purchaser of the Transferred Shares, the
Purchaser shall pay to the Seller on the Closing Date Forty-Three Dollars
($43.00) per Transferred Share (Five Million Three Hundred Seventy Five Thousand
Dollars ($5,375,000) in the aggregate) by wire transfer in immediately available
funds to the account specified by the Seller to the Purchaser at least two
business days prior to the Closing (the "Purchase Price"). Notwithstanding the
foregoing, if the Purchaser or any Affiliate of the Purchaser acquires, or
enters into a binding agreement to acquire, all of the shares of Class AL Common
Stock, par value $1.00 per share (the "Class AL Shares"), before the expiration
of the Tender Offer, then the Purchase Price of $43.00 per Transferred Share
shall be increased to $43.50 per Transferred Share. For purposes of this Section
2.2, "business day" shall mean any day other than a Saturday, a Sunday or a day
on which the banks in the United States or the Netherlands are authorized or
obligated by Law to close.
Section 2.3 Closing. The sale referred to in Section 2.1 (the
"Closing") shall take place at the offices of White & Case LLP, 601 Thirteenth
Street, NW, Suite 600 South, Washington, DC, as soon as practicable after the
last of the conditions set forth in Articles VII and VIII hereof is fulfilled or
waived (subject to applicable law) but (a) in no event later than the fifth
business day thereafter, or at such other time and place and on such other date
as the Purchaser and the Seller shall mutually agree and (b) in any case
simultaneously with the purchase of Class A Shares pursuant to the Tender Offer
(the "Closing Date"). On the Closing Date, the Seller shall deliver to the
Purchaser, against payment as provided in Section 2.2 hereof, certificates
representing the Class AC Shares, duly endorsed in blank, or accompanied by
stock powers duly endorsed in blank, with all necessary transfer tax and other
revenue stamps, acquired at the Purchaser's expense, affixed thereto.
Section 2.4 Transfer Taxes. The Seller shall pay all Taxes
charged to grantors, transferors or assignors under applicable Law, provided
that the Purchaser shall pay any stock transfer and stamp taxes which become
payable in connection with the purchase of the Transferred Shares hereunder.
Section 2.5 The Tender Offer. (a) So long as none of the
events set forth in Annex A hereto (the "Tender Offer Conditions") shall have
occurred and are continuing, as promptly as practicable, but in no event later
than the fifth business day (within the meaning of Rule 14d-1 promulgated under
the Securities Exchange Act of 1934, as amended (the "Exchange Act")) after the
date of this Agreement, the Purchaser shall commence (within the meaning of Rule
14d-2 promulgated under the Exchange Act) the Tender Offer. The obligations of
the
-6-
<PAGE> 11
Purchaser to accept for payment and to pay for any Class A Shares tendered shall
be subject to the Tender Offer Conditions, any of which may be waived by the
Purchaser in its sole discretion. The Tender Offer Conditions are for the sole
benefit of the Purchaser and may be asserted by the Purchaser regardless of the
circumstances giving rise to any such Tender Offer Conditions or may be waived
by the Purchaser in whole or in part. The Purchaser expressly reserves the right
to modify the terms of the Tender Offer, including, without limitation, to
extend the Tender Offer beyond any scheduled expiration date; provided; however,
(i) without the consent of the Corporation and the Seller, the Purchaser shall
not (A) reduce the number of Class A Shares to be purchased in the Tender Offer,
(B) reduce the Tender Offer Price, (C) modify or add to the Tender Offer
Conditions in a manner that is materially adverse to the holders of Class A
Shares or (D) change the form of consideration payable in the Tender Offer and
(ii) if any Tender Offer Condition is waived for purposes of Section 7.5 hereof,
the Purchaser shall waive such condition with respect to the Tender Offer.
(b) As soon as reasonably practicable on the date the Tender
Offer is commenced, the Purchaser shall file with the Securities and Exchange
Commission (the "SEC") a Tender Offer Statement on Schedule 14D-1 (together with
all amendments and supplements thereto, the "Schedule 14D-1") with respect to
the Tender Offer. The Schedule 14D-1 shall contain (included as an exhibit) or
shall incorporate by reference an offer to purchase (the "Offer to Purchase")
and a form of the related letter of transmittal (the "Letter of Transmittal"),
as well as all other information and exhibits required by Law (which Schedule
14D-1, Offer to Purchase, Letter of Transmittal and such other information and
exhibits, together with any supplements or amendments thereto, are referred to
herein collectively as the "Tender Offer Documents"). The Schedule 14D-1 will
comply in all material respects with the provisions of applicable federal
securities laws and, on the date filed with the SEC and the date first
published, sent or given to the holders of the Class A 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 Purchaser with respect
to any information supplied by the Corporation or the Seller or their respective
officers, directors or affiliates for inclusion in the Schedule 14D-1. The
Purchaser agrees promptly to correct any information provided by it for use in
the Tender Offer Documents that shall be, or have become, false or misleading in
any material respect, and the Purchaser further agrees to take all steps
necessary to cause the Schedule 14D-1 as so corrected to be filed with the SEC
and the other Tender Offer Documents as so corrected to be disseminated to
holders of Class A Shares, in each case as and to the extent required by
applicable federal securities laws. The Purchaser agrees to provide the Seller,
the Corporation and their respective counsel with copies of any written comments
the Purchaser or its counsel may receive from the SEC or its staff with respect
to the Tender Offer Documents promptly after the receipt of such comments.
Section 2.6 Corporation Actions. (a) The Seller hereby
represents that (i) Wasserstein Perella & Co., Inc. ("Wasserstein") has
delivered to the Special Committee its opinion that, as of the date of this
Agreement, the consideration to be received by the holders of Class A Shares
pursuant to the Tender Offer is fair to the holders of Class A Shares from a
financial point of view, subject to the assumptions and qualifications contained
in such opinion,
-7-
<PAGE> 12
and a complete and correct signed copy of such opinion has been, or promptly
upon receipt thereof by the Special Committee will be, delivered to the
Purchaser and (ii) the Strategic Planning Committee of the Board of Directors of
the Corporation (the "Special Committee"), at a meeting duly called and held,
has (A) determined unanimously that the Tender Offer is fair to, and in the best
interests of, the holders of Class A Shares and (B) recommended to the Board of
Directors of the Corporation that it approve and recommend acceptance of the
Tender Offer by the holders of the Class A Shares.
(b) The Seller hereby further represents that the President of
the Corporation has called, or will call no later than the date hereof, a
special meeting of the Board of Directors of the Corporation, such meeting to
take place on or before May 26, 1998, and has given, or will give no later than
the date hereof, notice in writing of such special meeting to all the directors
of the Corporation on or before the date hereof, in each case, in accordance
with the Certificate of Incorporation and By-Laws of the Corporation and the
provisions of the General Corporation Law of the State of Delaware (the "DGCL").
The Seller shall cause the directors of the Corporation who are also directors
of the Seller, and shall use its reasonable best efforts to cause the other
directors of the Corporation who were appointed by the Seller, to vote to
approve and recommend acceptance of the Tender Offer by the holders of the Class
A Shares. The Seller has been advised that each of the directors of the
Corporation appointed by the Seller intends to vote to approve and recommend
acceptance of the Tender Offer by the holders of the Class A Shares.
(c) The Seller shall use its reasonable best efforts to cause
the Corporation to file with the SEC, as soon as practicable after the date of
the commencement of the Tender Offer, a Solicitation/Recommendation Statement on
Schedule 14D-9 of the Corporation (the "Corporation's Schedule l4D-9")
containing the recommendation of the Board of Directors of the Corporation with
respect to the Tender Offer and to disseminate the Corporation's Schedule 14D-9
as required by Rule 14d-9 promulgated under the Exchange Act. The Seller shall
use its reasonable best efforts to cause the Corporation to give the Purchaser
and its counsel the opportunity to review and comment upon the Corporation's
Schedule l4D-9 prior to its filing with the SEC. The Seller shall use its
reasonable best efforts to cause the Corporation's Schedule 14D-9 to comply in
all material respects with the provisions of applicable federal securities laws
and, on the date filed with the SEC and on the date first published, sent or
given to the holders of the Class A Shares, not to 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 Seller with respect to information supplied by the
Purchaser in writing for inclusion in the Corporation's Schedule 14D-9. The
Seller agrees to use its reasonable best efforts to cause the Corporation
promptly to correct any information provided by it for use in the Corporation's
Schedule 14D-9 that shall be, or have become, false or misleading in any
material respect, and the Seller further agrees to use its reasonable best
efforts to cause the Corporation to take all steps necessary to cause the
Corporation's Schedule 14D-9 as so corrected to be filed with the SEC as
required by applicable federal securities laws. The Seller agrees to use its
reasonable best efforts to cause the Corporation to provide the Purchaser and
its counsel with any comments the Corporation or its counsel may receive from
the SEC or its staff with respect to the Corporation's Schedule 14D-9 promptly
after the receipt of such comments
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<PAGE> 13
and to provide the Purchaser and its counsel an opportunity to participate,
including by way of discussions with the SEC or its staff, in the response of
the Corporation to such comments.
(d) In connection with the Tender Offer, the Seller will use
its reasonable best efforts to cause the Corporation promptly to furnish the
Purchaser with mailing labels, security position listings and any available
listing or computer list containing the names and addresses of the record
holders of the Class A Shares as of the most recent practicable date and to
furnish the Purchaser with such additional information (including, but not
limited to, updated lists of holders of Class A Shares and their addresses,
mailing labels and lists of security positions) and such other assistance as the
Purchaser or its agents may reasonably request in communicating the Tender Offer
to the holders of the Class A Shares.
(e) The Seller shall file with the SEC, as soon as practicable
on the date hereof, a Solicitation/Recommendation Statement on Schedule 14D-9
(the "Seller's Schedule l4D-9") containing its recommendation of the Tender
Offer and shall disseminate the Seller's Schedule 14D-9 as required by Rule
14d-9 promulgated under the Exchange Act. The Purchaser and its counsel shall be
given the opportunity to review and comment upon the Seller's Schedule l4D-9
prior to its filing with the SEC. The Seller's Schedule 14D-9 will comply in all
material respects with the provisions of applicable federal securities laws and,
on the date filed with the SEC and on the date first published, sent or given to
the holders of the Class A 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 were made, not misleading, except that no
representation is made by the Seller with respect to information supplied by the
Purchaser in writing for inclusion in the Seller's Schedule 14D-9. The Seller
agrees promptly to correct any information provided by it for use in the
Seller's Schedule 14D-9 that shall be, or have become, false or misleading in
any material respect, and the Seller further agrees to take all steps necessary
to cause the Seller's Schedule 14D-9 as so corrected to be filed with the SEC as
required by applicable federal securities laws. The Seller agrees to provide the
Purchaser and its counsel with any comments the Seller or its counsel may
receive from the SEC or its staff with respect to the Seller's Schedule 14D-9
promptly after the receipt of such comments and shall provide the Purchaser and
its counsel an opportunity to participate, including by way of discussions with
the SEC or its staff, in the response of the Seller to such comments.
(f) To the extent required by the Exchange Act and the rules
promulgated thereunder, the Seller shall use its reasonable best efforts to
cause the directors of the Corporation appointed by the Seller and officers of
the Corporation to file with the SEC, as soon as practicable on the date hereof,
a Solicitation/Recommendation Statement on Schedule 14D-9 of the Corporation
(the "Directors' Schedule l4D-9") containing the recommendation of such
directors and officers of the Corporation with respect to the Tender Offer and
to disseminate the Directors' Schedule 14D-9 as required by Rule 14d-9
promulgated under the Exchange Act. The Seller shall use its reasonable best
efforts to cause such directors and officers to give the Purchaser and its
counsel the opportunity to review and comment upon the Directors' Schedule l4D-9
prior to its filing with the SEC. The Seller shall use its reasonable best
efforts to cause the Directors' Schedule 14D-9 to comply in all material
respects with the provisions of applicable federal
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securities laws and, on the date filed with the SEC and on the date first
published, sent or given to the holders of the Class A Shares, not to 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 Seller with respect to
information supplied by the Purchaser in writing for inclusion in the Directors'
Schedule 14D-9. The Seller agrees to use its reasonable best efforts to cause
such directors and officers promptly to correct any information provided by it
for use in the Directors' Schedule 14D-9 that shall be, or have become, false or
misleading in any material respect, and the Seller further agrees to cause such
directors and officers to take all steps necessary to cause the Directors'
Schedule 14D-9 as so corrected to be filed with the SEC as required by
applicable federal securities laws. The Seller agrees to use its reasonable best
efforts to use its reasonable best efforts to cause such directors and officers
to provide the Purchaser and its counsel with any comments such directors and
officers or their counsel may receive from the SEC or its staff with respect to
the Directors' Schedule 14D-9 promptly after the receipt of such comments and to
provide the Purchaser and its counsel an opportunity to participate, including
by way of discussions with the SEC or its staff, in the response of such
directors and officers to such comments.
Section 2.7 Tender of Class A Shares. (a) The Seller hereby
agrees to validly tender (and not to withdraw) pursuant to and in accordance
with the terms of the Tender Offer (provided that the Tender Offer is not
amended in a manner prohibited under Section 2.5), in a timely manner for
acceptance by the Purchaser in the Tender Offer, the 500 Class A Shares owned by
the Seller on the date hereof (the "Existing Class A Shares") and any Class A
Shares that may be acquired by the Seller after the date hereof and prior to the
termination of this Agreement whether upon the exercise of options, warrants or
rights, the conversion or exchange of convertible or exchangeable securities, or
by means of purchase, dividend, distribution or otherwise (such Class A Shares,
together with the Existing Class A Shares, are referred to herein as the
"Seller's Class A Shares"). The Seller hereby acknowledges and agrees that the
Purchaser's obligation to accept for payment and pay for Class A Shares tendered
in the Tender Offer, including the Seller's Class A Shares, is subject to the
terms and conditions of the Tender Offer.
(b) The Seller hereby agrees to permit the Purchaser to
publish and disclose in the Tender Offer Documents its identity and ownership of
Class A Shares and the nature of its commitments, arrangements and
understandings under this Agreement.
(c) The Seller has been advised that each of the directors of
the Corporation who are also directors of the Seller intends to tender pursuant
to the Tender Offer all Class A Shares owned of record and beneficially by him
or her.
Section 2.8 Stock Option and Other Plans. Prior to the Closing
Date, the Seller shall cause appropriate resolutions to be voted on by the Board
of Directors of the Corporation (or, if appropriate, any committee thereof),
shall cause the directors of the Corporation who are also directors of the
Seller to vote in favor of the adoption of such resolutions and shall otherwise
use its reasonable best efforts to cause such resolutions to be adopted, and use
its reasonable best
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efforts to take all other actions necessary including, but not limited to, using
its reasonable best efforts to cause the Corporation to obtain the consent and
release of all of the holders of all the outstanding stock options and other
rights to purchase Class A Common Stock (the "Options") heretofore granted under
any stock option plan of the Corporation or otherwise (the "Stock Plans"), to
(i) provide for the cancellation, effective at the Closing Date, subject to the
payment provided for in the next sentence being made, of all Options, (ii)
terminate, as of the Closing Date, the Stock Plans and any other plan, program
or arrangement providing for the issuance or grant of any other interest in
respect of the capital stock of the Corporation or any subsidiary (collectively
with the Stock Plans, referred to as the "Stock Incentive Plans") with respect
to any interest in the capital stock of the Corporation and (iii) amend, as of
the Closing Date, the provisions in any other Employee Benefit Plan providing
for the issuance, transfer or grant of any capital stock of the Corporation or
any interest in respect of any capital stock of the Corporation to provide no
continuing rights to acquire, hold, transfer or grant any capital stock of the
Corporation or any interest in the capital stock of the Corporation (other than
in respect of cash payments through the Offer). Immediately prior to the Closing
Date, each Option, whether or not then vested or exercisable, shall no longer be
exercisable for the purchase of shares of Class A Common Stock but shall entitle
each holder thereof, in cancellation and settlement therefor, to payments by the
Corporation in cash, subject to any applicable withholding taxes (the "Cash
Payment"), at the Closing Date, equal to the product of (x) the total number of
shares of Class A Common Stock subject to such Option, whether or not then
vested or exercisable and (y) the excess of the Tender Offer Price over the
exercise price per share of Class A Common Stock subject to such Option, each
such Cash Payment to be paid to each holder of an outstanding Option at the
Closing Date. Incident to the foregoing, any then outstanding stock appreciation
rights or limited stock appreciation rights shall be cancelled immediately prior
to the Closing Date without any payment therefor. The Seller shall use its
reasonable best efforts to cause the Corporation to take all steps to ensure
that neither the Corporation nor any of its subsidiaries is or will be bound by
any Options, other options, warrants, rights or agreements which would entitle
any Person, other than the Purchaser or its affiliates, to own any capital stock
of the Corporation or any of its subsidiaries or to receive any payment in
respect thereof. Notwithstanding any other provision of this Section 2.8 to the
contrary, payment of the Cash Payment may be withheld with respect to any Option
until necessary consents and releases are obtained.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLER
Section 3. Representations and Warranties of the Seller. In
order to induce the Purchaser to enter into this Agreement, to acquire the
Transferred Shares and to make the Tender Offer, the Seller makes the following
representations and warranties.
Section 3.1 Legal Status. The Seller is a duly organized and
validly existing corporation in good standing under the Laws of the State of
Delaware.
Section 3.2 Power and Authority; Enforceability. The Seller
has full requisite legal capacity, power and authority to execute, deliver and
perform the terms and provisions of this Agreement and to consummate the
transactions contemplated hereby and has taken all
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necessary corporate action to authorize the execution, delivery and performance
by the Seller of this Agreement and the consummation of the transactions
contemplated hereby. This Agreement has been duly authorized, executed and
delivered by the Seller and constitutes a valid and legally binding obligation
of the Seller enforceable against the Seller in accordance with its terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar Laws of general applicability relating to or affecting
creditors' rights and to general equitable principles. The sale by the Seller of
the Transferred Shares to the Purchaser pursuant to this Agreement has been duly
authorized by a resolution adopted by the holders of at least 60% of the
outstanding Class AV Common Stock of the Seller in compliance with the
provisions of Article Sixth of the Certificate of Incorporation of the Seller.
Section 3.3 Ownership of Transferred Shares. The Seller is the
lawful record and beneficial owner of all of the Class AC Shares and the
Existing Class A Shares, in each case free and clear of all Liens. Other than as
specified in the preceding sentence, the Seller does not own any shares of
capital stock of the Corporation. The Seller has full legal right, power and
authority to sell, assign, transfer and convey the Transferred Shares pursuant
to this Agreement. The Seller has sole power of disposition and sole power to
agree to all of the matters set forth in this Agreement with respect to all of
the Transferred Shares and all of the Seller's Class A Shares, with no
limitations, qualifications or restrictions on such rights, subject to
applicable securities laws and the terms of this Agreement. The delivery to the
Purchaser of the Transferred Shares pursuant to this Agreement and of the
Seller's Class A Shares pursuant to the Tender Offer will, in each case,
transfer to the Purchaser on the Closing Date good and marketable title thereto,
free and clear of any Liens. The Transferred Shares and the certificates
representing the Transferred Shares and the Seller's Class A Shares are now, and
at all times during the term hereof will be, held by the Seller or by a nominee
or custodian for the benefit of the Seller, free and clear of all Liens,
proxies, voting trusts or agreements, understandings or arrangements, except for
any Lien arising hereunder. The transfer by the Seller of the Transferred Shares
to the Purchaser hereunder and the Seller's Class A Shares pursuant to the
Tender Offer shall pass to and unconditionally vest in the Purchaser good and
valid title to all the Transferred Shares and the Seller's Class A Shares, as
the case may be, free and clear of all Liens.
Section 3.4 No Conflicts; Consents of Third Parties;
Compliance with Laws. (a) Assuming the receipts of the consents, approvals, etc.
specified in clause (b) below and except as set forth on Schedule 3.4(a)
attached hereto, the execution, delivery and performance by the Seller of this
Agreement and the consummation of the purchase of the Transferred Shares, the
Tender Offer and the other transactions contemplated hereby will not (i)
conflict with the Certificate of Incorporation or By-Laws of the Seller, (ii)
conflict with, or result in the breach or termination of, or constitute a
default (or give rise to any third party right of termination, cancellation,
material modification or acceleration) under, any lease, charter, note, bond,
mortgage, license, permit, indenture, contract, agreement, commitment,
arrangement or other instrument or obligation, or any order, judgment, decree,
injunction, regulation or ruling of any governmental authority or regulatory
organization, domestic or foreign, to which the Seller is a party or by which
the Seller or any of its properties or assets are bound, (iii) constitute a
violation by the Seller of any Law applicable to the Seller or any of its
properties or assets, or (iv) result in the creation of any Lien upon the
Transferred Shares.
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<PAGE> 17
(b) Except (i) as set forth on Schedule 3.4(b) attached
hereto, (ii) for filings under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended (the "HSR Act"), and (iii) as required by the Exchange Act
and the rules and regulations thereunder in connection with the Tender Offer, no
consent, approval, permit or authorization of, or designation, declaration or
filing with, any governmental authorities or third parties is required on the
part of the Seller or the Corporation in connection with the execution and
delivery of this Agreement and the performance of the transactions contemplated
hereby.
Section 3.5 Disclosure. None of this Agreement, any Schedule
attached hereto, certificate delivered pursuant to this Agreement or any
document or statement in writing which has been supplied by or on behalf of the
Seller or any of its directors or officers in connection with the transactions
contemplated by this Agreement contains any untrue statement of a material fact,
or omits any statement of a material fact necessary in order to make the
statements contained herein or therein not misleading. There is no fact known to
the Seller which materially and adversely affects the business, operations,
condition (financial or otherwise) or prospects of the Corporation or any of its
subsidiaries or their respective properties or assets, which has not been set
forth in (a) this Agreement, (b) the financial statements referred to in this
Agreement (including the footnotes thereto), (c) any Schedule attached hereto or
delivered pursuant to this Agreement or (d) any document or statement in writing
which has been supplied by or on behalf of the Seller or by any of the
Corporation's or any of its subsidiaries' directors or officers in connection
with the transactions contemplated by this Agreement.
Section 3.6 Broker's or Finder's Fees. Except for Wasserstein
(whose fees and expenses will be paid by the Corporation in accordance with the
Corporation's agreement with such firm, a copy of which has been previously
provided to the Purchaser) and PaineWebber Incorporated ("PaineWebber") (whose
fees and expenses will be paid as provided in Section 6.14 hereof in accordance
with the Seller's agreement with such firm, a copy of which has been previously
provided to the Purchaser (the "PaineWebber Agreement")), no agent, broker,
person or firm acting on behalf of the Seller or any of its Affiliates (other
than the Corporation) or, to the best knowledge of the Seller, the Corporation
or any of its Affiliates is, or will be, entitled to any commission or broker's
or finder's fees from any of the parties hereto, or from any Person controlling,
controlled by or under common control with any of the parties hereto, in
connection with any of the transactions contemplated by this Agreement.
Section 3.7. Tender Offer Documents and Schedules 14D-9 . None
of the information supplied by the Seller for inclusion or incorporation by
reference in the Tender Offer Documents, the Corporation's Schedule 14D-9 or the
Directors' Schedule 14D-9, at the respective times the Tender Offer Documents,
the Corporation's Schedule 14D-9 or the Directors' Schedule 14D-9 are filed with
the SEC and the date first published, sent or given to the holders of the Class
A Shares, will contain any untrue statement of a material fact or omit to state
any material fact necessary in order to make the statements made, in light of
the circumstances under which they are made, not misleading. The Seller agrees
promptly to correct any information provided by it for use in the Tender Offer
Documents, the Corporation's Schedule 14D-9 or the Directors' Schedule 14D-9
that shall be, or shall have become, false or misleading in any material
respect.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SELLER REGARDING THE CORPORATION
Section 4. Representations and Warranties of the Seller
Regarding the Corporation. In order to induce the Purchaser to enter into this
Agreement, to acquire the Transferred Shares and to make the Tender Offer, the
Seller makes the following representations and warranties to the best of its
knowledge:
Section 4.1 Due Organization, Good Standing and Corporate
Power. Each of the Corporation and each of its subsidiaries is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and each such corporation has the corporate
power and authority to own, lease and operate its properties and assets and to
carry on its business as now being conducted. Each of the Corporation and its
subsidiaries is duly qualified or licensed to do business as a foreign
corporation and is in good standing in each jurisdiction in which the property
owned, leased or operated by it or the nature of the business conducted by it
makes such qualification or licensing necessary, except in such jurisdictions
where the failure to be so qualified or licensed and in good standing would not
have a Material Adverse Effect and set forth on Schedule 4.1 attached hereto is
a list of each such jurisdiction. The Purchaser has been provided with complete
and correct copies of the Certificates of Incorporation and By-Laws or other
organizational documents of each of the Corporation and each of its
subsidiaries, in each case as amended to the date of this Agreement. The
respective Certificates of Incorporation and By-Laws or other organizational
documents of the subsidiaries of the Corporation do not contain any provision
limiting or otherwise restricting the ability of the Corporation to control such
subsidiaries.
Section 4.2 Capitalization. (a) On the Closing Date, the
Corporation will have an authorized capitalization consisting of 75,000,000
Class A Shares, 125,000 Class AC Shares and 125,000 Class AL Shares (the Class A
Shares, the Class AC Shares and the Class AL Shares, collectively the "Shares").
As of May 13, 1998, (A) 59,914,510 Class A Shares, 125,000 Class AC Shares and
125,000 Class AL Shares are issued and outstanding, (B) 100,627 Class A Shares
are held in the Corporation's treasury and (C) 3,422,994 Class A Shares are
reserved for issuance pursuant to outstanding Options granted under the Stock
Plans. On the Closing Date, all issued and outstanding shares will have been
duly authorized, validly issued, fully paid and nonassessable and were not
issued in violation of any preemptive rights. Except as set forth in this
Section 4.2(a) or on Schedule 4.2(a) attached hereto, no Shares of the
Corporation are, or on the Closing Date will be, reserved for issuance or held
in the treasury of the Corporation and there are or, on the Closing Date, will
be no outstanding options, warrants, rights, calls, subscriptions, claims,
agreements, obligations, convertible or exchangeable securities or other
commitments, contingent or otherwise, relating to the Shares of the Corporation
or pursuant to which the Corporation is or may become obligated to issue or
exchange any shares of capital stock, other than as contemplated by this
Agreement. Other than as provided in the Certificate of Incorporation of the
Corporation, no shareholder of the Corporation has or, on the Closing Date, will
have any preemptive or other rights to acquire any of the Shares. Other than
pursuant to the Certificate of Incorporation of the Corporation and under the
provisions of the DGCL, there are or, on the Closing Date, will be no
restrictions on (i) transfers of the Shares, (ii) voting of the Shares, or (iii)
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the declaration or payment of any dividend or distribution in respect of the
Shares. The Corporation has no authorized or outstanding bonds, debentures,
notes or other indebtedness the holders of which have the right to vote (or
convertible or exchangeable into or exercisable for securities having the right
to vote) with the stockholders of the Corporation or any of its subsidiaries on
any matter.
(b) Schedule 4.2(b) attached hereto lists all of the
Corporation's subsidiaries. All of the outstanding shares of capital stock of
each subsidiary of the Corporation have been duly authorized and validly issued,
are fully paid and nonassessable and are not subject to, nor were they issued in
violation of, any preemptive rights, and, except as set forth in Schedule 4.2(b)
attached hereto, are owned, of record and beneficially, by the Corporation, free
and clear of any Liens. Except as set forth on Schedule 4.2(b) attached hereto,
no shares of capital stock of any subsidiary of the Corporation are or, on the
Closing Date, will be reserved for issuance or held in the treasury of such
subsidiary and there are or, on the Closing Date, will be no outstanding
options, warrants, rights, calls, subscriptions, claims, agreements,
obligations, convertible or exchangeable securities or other commitments,
contingent or otherwise, relating to the capital stock of any subsidiary of the
Corporation or pursuant to which any subsidiary of the Corporation is or may
become obligated to issue or exchange any shares of capital stock.
(c) Neither the Corporation nor any subsidiary of the
Corporation owns, directly or indirectly, any capital stock or other equity or
ownership or proprietary interest in any corporation, limited liability company,
partnership, association, trust, joint venture or other entity except as set
forth on Schedule 4.2(c) attached hereto.
(d) Other than restrictions imposed or permitted by existing
indebtedness agreements or under applicable corporate law, there are no
restrictions of any kind which prevent the payment of dividends by any of the
Corporation's subsidiaries.
Section 4.3 Consents and Approvals; No Violations . Other than
in connection with or in compliance with the specific provisions of (a) the HSR
Act regarding the purchase of the Class AC Shares pursuant to this Agreement,
(b) the Exchange Act and the rules and regulations promulgated thereunder as may
be applicable to the Tender Offer, (c) the "blue sky" laws of various states,
(d) applicable alcohol beverage control and licensing laws and drug and pharmacy
laws and regulations ("Alcohol and Drug Laws"), and (e) applicable local permit
laws, rules and regulations pertaining to the operation of the business of the
Corporation and its subsidiaries, and except as disclosed in Schedule 4.3
attached hereto, the execution, delivery and performance by the Seller of this
Agreement and the consummation of the purchase of the Transferred Shares, the
Tender Offer and the other transactions contemplated hereby will not: (1)
violate any provision of the Certificate of Incorporation or By-Laws (or other
organizational document) of the Corporation or any of its subsidiaries, (2)
violate any Law applicable to the Corporation or any of its subsidiaries or by
which any of their respective properties or assets may be bound, (3) require any
filing with, or permit, consent or approval of, or the giving of any notice to,
any governmental or regulatory body, agency or authority, or (4) result in a
violation or breach of, conflict with, constitute (with or without due notice or
lapse of time or both) a default (or give rise to any right of termination,
cancellation, payment or acceleration) under, or result in the
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<PAGE> 20
creation of any Lien upon any of the properties or assets of the Corporation or
any of its subsidiaries under, any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, license, franchise, permit, agreement, lease,
franchise agreement or other instrument or obligation to which the Corporation
or any of its subsidiaries is a party, or by which it or any of their respective
properties or assets, except in the case of clauses (2), (3) or (4) above for
such filings, permits, consents, approvals or violations, which would not have a
Material Adverse Effect or could not be reasonably likely to prevent or
materially delay consummation of the transactions contemplated by this
Agreement.
Section 4.4 Company Reports; Financial Statements and 1998
Budget. (a) Since January 1, 1997, the Corporation has filed all forms, reports
and documents with the SEC required to be filed by it pursuant to the federal
securities laws and the SEC rules and regulations thereunder, and all forms,
reports and documents filed with the SEC have complied in all material respects
with all applicable requirements of the federal securities laws and the SEC
rules and regulations promulgated thereunder. The Corporation has, prior to the
date of this Agreement, made available to the Purchaser true and complete copies
of all forms, reports, registration statements and other filings filed by the
Corporation with the SEC since January 1, 1997 (such forms, reports,
registration statements and other filings and financials, together with any
exhibits, any amendments thereto and information incorporated by reference
therein, are sometimes collectively referred to as the "SEC Filings"). Attached
hereto as Exhibit A is the Corporation's Annual Report on Form 10-K for the
fiscal year ended February 28, 1998 (the "1997 10-K"), filed or to be filed with
the SEC on the date hereof. As of their respective dates, the SEC Filings and
the 1997 10-K did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. Each of the consolidated balance sheets included in the SEC
Filings and in the 1997 10-K were prepared in accordance with GAAP (except as
may be indicated therein or in the notes or schedules thereto) and fairly
present in all material respects the consolidated financial position of the
Corporation and its consolidated subsidiaries as of the dates thereof and the
results of their operations and their cash flows for the periods then ended.
(b) The Seller will use its reasonable best efforts to cause
the Corporation to deliver to the Purchaser as soon as they become available
true and complete copies of any report or statement mailed by it to its
stockholders generally or filed by it with the SEC subsequent to the date hereof
and prior to the Closing Date. As of their respective dates, such reports and
statements (excluding any information therein provided by the Purchaser, as to
which the Seller makes no representation) will not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they are made, not misleading and will comply in all
material respects with all applicable requirements of the federal securities
laws and the SEC rules and regulations thereunder. The consolidated financial
statements of the Corporation to be included in such reports and statements
(excluding any information therein provided by the Purchaser or Seller, as to
which the Seller makes no representation) will be prepared in accordance with
GAAP (except as may be indicated therein or in the notes or schedules thereto)
and will fairly present in all material respects the consolidated financial
position of the Corporation and its consolidated
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<PAGE> 21
subsidiaries as of the dates thereof and the results of their operations and
their cash flows for the periods then ended (subject, in the case of any
unaudited financial statements, to normal year-end audit adjustments).
(c) The Seller will use its reasonable best efforts to cause
the Corporation to deliver to the Purchaser simultaneously with the execution
and delivery of this Agreement a true and complete copy of its 1998 Fiscal Year
Annual Budget (the "Budget").
Section 4.5 Absence of Certain Changes. Except as previously
disclosed in the SEC Filings or as otherwise disclosed in Schedule 4.5 attached
hereto or as otherwise contemplated by this Agreement, since February 23, 1997
and up to the Closing Date, (i) there has not been and will not be any Material
Adverse Change, (ii) the businesses of the Corporation and each of its
subsidiaries have been and will be conducted only in the ordinary course, (iii)
neither the Corporation nor any of its subsidiaries has incurred or will incur
any material liabilities (direct, contingent or otherwise) or engaged in any
material transaction or entered into any material agreement outside the ordinary
course of business, (iv) the Corporation and its subsidiaries have not and will
not increase the compensation of any officer or grant any general salary or
benefits increase to their employees other than in the ordinary course of
business or pursuant to collective bargaining agreements, (v) there has been no,
and will not be any, declaration, setting aside or payment of any dividend or
other distribution with respect to the capital stock of the Corporation other
than regular annual cash dividends by the Corporation on its capital stock in an
amount not in excess of $0.80 per share per fiscal annum which have been or will
be declared and paid at the same time such dividends are customarily declared
and paid, (vi) there has been no, and will not be any, change by the Corporation
in accounting principles, practices or methods, and (vii) neither the
Corporation nor any of its subsidiaries has agreed or will agree, whether or not
in writing, to do any of the foregoing.
Section 4.6 Compliance with Laws. Except as previously
disclosed in the SEC Filings, the Corporation and its subsidiaries are in
compliance with all applicable Laws, except where the failure to so comply would
not have a Material Adverse Effect or could be reasonably likely to prevent or
materially delay consummation of the transactions contemplated by this
Agreement.
Section 4.7 Employee Benefit Plans.
(a) List of Plans. Set forth on Schedule 4.7 attached hereto
is an accurate and complete list of all domestic and foreign (i) "employee
benefit plans," within the meaning of Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended, and the rules and regulations
thereunder ("ERISA"), (ii) bonus, stock option, stock purchase, restricted
stock, incentive, fringe benefit, profit-sharing, pension, or retirement,
deferred compensation, medical, life, disability, accident, salary continuation,
severance, accrued leave, vacation, sick pay, sick leave, supplemental
retirement and unemployment benefit plans, programs, arrangements, commitments
and/or practices (whether or not insured), and (iii) employment, consulting,
termination, and severance contracts or agreements; for active, retired or
former employees or directors, whether or not any such plans, programs,
arrangements, commitments, contracts, agreements and/or practices (referred to
in (i), (ii) or (iii) above) are in writing or are otherwise
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<PAGE> 22
exempt from the provisions of ERISA, that have been established, maintained or
contributed to (or with respect to which an obligation to contribute has been
undertaken) or with respect to which any potential liability is borne by the
Corporation or any of its subsidiaries (including, for this purpose and for the
purpose of all of the representations in this Section 4.7, any predecessors to
the Corporation or to any of its subsidiaries and all employers (whether or not
incorporated) that would be treated together with the Corporation and/or any of
its subsidiaries as a single employer (A) within the meaning of Section 414 of
the Internal Revenue Code of 1986, as amended, and the rules and regulations
thereunder (the "Code") or (B) as a result of the Corporation or any of its
subsidiaries being or having been a general partner of any such employer) since
September 2, 1974 ("Employee Benefit Plans").
(b) Status of Plans. Each Employee Benefit Plan (including any
related trust) complies in form with the requirements of all applicable laws,
including, without limitation, ERISA and the Code, and has at all times been
maintained and operated in substantial compliance with its terms and the
requirements of all applicable laws, including, without limitation, ERISA and
the Code. No complete or partial termination of any Employee Benefit Plan has
occurred or is expected to occur, and no proceedings have been instituted, and
no condition exists and no event has occurred that could constitute grounds,
under Title IV of ERISA to terminate, or appoint a trustee to administer, any
Employee Benefit Plan. Neither the Corporation nor any of its subsidiaries has
any commitment, intention or understanding to create, modify or terminate any
Employee Benefit Plan. Except as required to maintain the tax-qualified status
of any Employee Benefit Plan intended to qualify under Section 401(a) of the
Code, no condition or circumstance exists that would prevent the amendment or
termination of any Employee Benefit Plan. No event has occurred and no condition
or circumstance has existed that could result in a material increase in the
benefits under or the expense of maintaining any Employee Benefit Plan from the
level of benefits or expense incurred for the most recent fiscal year ended
thereof. No Employee Benefit Plan is a plan described in Section 4063(a) of
ERISA.
(c) Liabilities. No Employee Benefit Plan subject to Section
412 or 418B of the Code or Section 302 of ERISA has incurred any accumulated
funding deficiency within the meaning of Section 412 or 418B of the Code or
Section 302 of ERISA, respectively, or has applied for or obtained a waiver from
the Internal Revenue Service ("IRS") of any minimum funding requirement or an
extension of any amortization period under Section 412 of the Code or Section
303 or 304 of ERISA. Except for payments of premiums to the Pension Benefit
Guaranty Corporation ("PBGC"), which have been timely paid in full, neither the
Corporation nor any of its subsidiaries has incurred any liability (including,
for this purpose and for the purpose of all of the representations in this
Section 4.7 any indirect, contingent, or secondary liability) to the PBGC in
connection with any Employee Benefit Plan covering any active, retired or former
employees or directors of the Corporation or any of its subsidiaries, including,
without limitation, any liability under Section 4069 or 4212(c) of ERISA or any
penalty imposed under Section 4071 of ERISA, or ceased operations at any
facility or withdrawn from any such Employee Benefit Plan in a manner which
could subject it to liability under Section 4062, 4063 or 4064 of ERISA, or
knows of any facts or circumstances that might give rise to any liability of the
Corporation or any of its subsidiaries to the PBGC under Title IV of ERISA that
could reasonably be anticipated to result in any claims being made against the
Purchaser by the PBGC.
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Neither the Corporation nor any of its subsidiaries has
incurred any withdrawal liability (including any contingent or secondary
withdrawal liability) within the meaning of Section 4201 or 4204 of ERISA to any
Employee Benefit Plan which is a "multiemployer plan" (as such term is defined
in Section 4001(a)(3) of ERISA) ("Multiemployer Plan") which has not been
satisfied in full, and no event has occurred and no condition or circumstance
has existed, that presents a material risk of the occurrence of any withdrawal
from or the partition, termination, reorganization or insolvency of any such
Multiemployer Plan which could result in any liability of the Corporation or any
of its subsidiaries to any such Multiemployer Plan.
Except as disclosed on Schedule 4.7 attached hereto, neither
the Corporation nor any of its subsidiaries maintains any Employee Benefit Plan
which is a "group health plan" (as such term is defined in Section 5000(b)(1) of
the Code or Section 607(1) of ERISA) that has not been administered and operated
in all respects in compliance with the applicable requirements of Part 6 of
Title 1 of ERISA and Section 4980B of the Code and neither the Corporation nor
any of its subsidiaries is subject to any liability, including, without
limitation, additional contributions, fines, taxes, penalties or loss of tax
deduction as a result of such administration and operation. Each Employee
Benefit Plan that is intended to meet the requirements of Section 125 of the
Code meets such requirements, and each program of benefits for which employee
contributions are provided pursuant to elections under any Employee Benefit Plan
meets the requirements of the Code applicable thereto. Neither the Corporation
nor any of its subsidiaries maintains any Employee Benefit Plan which is an
"employee welfare benefit plan" (as such term is defined in Section 3(1) of
ERISA) that has provided any "disqualified benefit" (as such term is defined in
Section 4976(b) of the Code) with respect to which an excise tax could be
imposed.
Except as disclosed on Scheduled 4.7 attached hereto, neither
the Corporation nor any of its subsidiaries maintains any Employee Benefit Plan
(whether qualified or non-qualified under Section 401(a) of the Code) providing
for post-employment or retiree health, life insurance and/or other welfare
benefits and having unfunded liabilities, and neither the Corporation nor any of
its subsidiaries have any obligation to provide any such benefits to any retired
or former employees or active employees following such employees' retirement or
termination of service. Neither the Corporation nor any of its subsidiaries has
any unfunded liabilities pursuant to any Employee Benefit Plan that is not
intended to be qualified under Section 401(a) of the Code.
Except as disclosed on Schedule 4.7 attached hereto, neither
the Corporation nor any of its subsidiaries has incurred any liability for any
tax or excise tax arising under Chapter 43 of the Code, and no event has
occurred and no condition or circumstance has existed that could give rise to
any such liability.
No asset of the Corporation or any of its subsidiaries is
subject to any lien arising under Section 302(f) of ERISA or Section 412(n) of
the Code, and no event has occurred and no condition or circumstance has existed
that could give rise to any such lien. Neither the Corporation nor any of its
subsidiaries has been required to provide any security under Section 307 of
ERISA or Section 401(a)(29) or 412(f) of the Code, and no event has occurred and
no condition or circumstance has existed that could give rise to any such
requirement to provide any such security.
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There are no actions, suits, claims or disputes pending or, to
the best knowledge and belief of the Corporation, threatened, anticipated or
expected to be asserted against or with respect to any Employee Benefit Plan or
the assets of any such plan (other than routine claims for benefits and appeals
of denied routine claims). No civil or criminal action brought pursuant to the
provisions of Title I, Subtitle B, Part 5 of ERISA is pending, threatened,
anticipated, or expected to be asserted against the Corporation or any of its
subsidiaries or any fiduciary of any Employee Benefit Plan, in any case with
respect to any Employee Benefit Plan. No Employee Benefit Plan or any fiduciary
thereof is the direct or indirect subject of an audit, investigation or
examination by any governmental or quasi-governmental agency.
(d) Contributions. Full payment has been timely made of all
amounts which the Corporation or any of its subsidiaries is required, under
applicable law or under any Employee Benefit Plan or any agreement relating to
any Employee Benefit Plan to which the Corporation or any of its subsidiaries is
a party, to have paid as contributions or premiums thereto as of the last day of
the most recent fiscal year of such Employee Benefit Plan ended prior to the
date hereof. All such contributions and/or premiums have been fully deducted for
income tax purposes and no such deduction has been challenged or disallowed by
any governmental entity, and to the best knowledge and belief of the Corporation
no event has occurred and no condition or circumstance has existed that could
give rise to any such challenge or disallowance. The Corporation has made
adequate provision for reserves to meet contributions and premiums and any other
liabilities that have not been paid or satisfied because they are not yet due
under the terms of any Employee Benefit Plan, applicable law or related
agreements. Benefits under all Employee Benefit Plans are as represented and
have not been increased subsequent to the date as of which documents have been
provided.
(e) Funded Status; Withdrawal Liability. As of the date of
this Agreement, the current value of the accumulated benefit obligations (based
upon actuarial assumptions which are in the aggregate reasonable in all respects
and which have been furnished to and relied upon by Parent) under each Employee
Benefit Plan which is covered by Title IV of ERISA and which is a "single
employer plan" (as such term is defined in Section 4001(a)(15) of ERISA)
("Single Employer Plan") did not exceed the current fair value of the assets of
each such Single Employer Plan allocable to such accrued benefits, and since the
date of the 1997 10-K, there has been (A) no material adverse change in the
financial condition of any Single Employer Plan, (B) no change in the actuarial
assumptions with respect to any Single Employer Plan, and (C) no increase in
benefits under any Single Employer Plan as a result of plan amendments, written
interpretations or announcements (whether written or not), change in applicable
law or otherwise, which individually or in the aggregate, would result in the
current value of any Single Employer Plan's accrued benefits exceeding the
current value of all such Single Employer Plan's assets. No Employee Benefit
Plan holds as an asset any interest in any annuity contract, guaranteed
investment contract or any other investment or insurance contract, policy or
instrument issued by an insurance company that, to the best knowledge and belief
of the Corporation, is or may be the subject of bankruptcy, conservatorship,
insolvency, liquidation, rehabilitation or similar proceedings.
As of the date of this Agreement, using actuarial assumptions
and computation methods consistent with Part 1 of Subtitle E of Title IV of
ERISA, (A) the Corporation and its
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subsidiaries would have no liability to the FELRA and UFCW Pension Fund, the
Warehouse Employees Union Local No. 730 Pension Trust, and the Bakers and
Confectionary and Industry International Health Benefits and Pension Fund in the
event of a complete withdrawal therefrom, as of the close of the most recent
fiscal year of each such Multiemployer Plan ended prior to the date hereof and
(B) the aggregate liabilities of the Corporation and its subsidiaries to all
other Multiemployer Plans in the aggregate in the event of a complete withdrawal
therefrom, as of the close of the most recent fiscal year of each such
Multiemployer Plan ended prior to the date hereof, would not result in a
material liability. To the best knowledge of the Corporation, there has been no
material change in the financial condition of any Multiemployer Plan, in any
such actuarial assumption or computation method or in the benefits under any
Multiemployer Plan as a result of collective bargaining or otherwise since the
close of each such fiscal year which, individually or in the aggregate, would
materially increase such liability.
(f) Tax Qualification. Except as disclosed on Schedule 4.7
attached hereto, each Employee Benefit Plan intended to be qualified under
Section 401(a) of the Code has, as currently in effect, been determined to be so
qualified by the IRS. Each trust established in connection with any Employee
Benefit Plan which is intended to be exempt from Federal income taxation under
Section 501(a) of the Code has, as currently in effect, been determined to be so
exempt by the IRS. Since the date of each most recent determination referred to
in this paragraph (vi), no event has occurred and no condition or circumstance
has existed that resulted or is likely to result in the revocation of any such
determination or that could adversely affect the qualified status of any such
Employee Benefit Plan or the exempt status of any such trust.
(g) Transactions. No "reportable event" (as such term is
defined in Section 4043 of ERISA) for which the 30-day notice requirement has
not been waived by the PBGC has occurred or is expected to occur with respect to
any Employee Benefit Plan. Neither the Corporation nor any of its subsidiaries
nor any of their respective directors, officers, employees or, to the best
knowledge and belief of the Corporation, other persons who participate in the
operation of any Employee Benefit Plan or related trust or funding vehicle, has
engaged in any transaction with respect to any Employee Benefit Plan or breached
any applicable fiduciary responsibilities or obligations under Title I of ERISA
that would subject any of them to a tax, penalty or liability for prohibited
transactions or breach of any obligations under ERISA or the Code or would
result in any claim being made under, by or on behalf of any such Employee
Benefit Plan by any party with standing to make such claim.
(h) Documents. The Corporation has delivered or caused to be
delivered to the Purchaser and its counsel true and complete copies of all
material documents in connection with each Employee Benefit Plan, including,
without limitation (where applicable): (i) all Employee Benefit Plans as in
effect on the date hereof, together with all amendments thereto, including, in
the case of any Employee Benefit Plan not set forth in writing, a written
description thereof; (ii) all current summary plan descriptions, summaries of
material modifications, and material communications; (iii) all current trust
agreements, declarations of trust and other documents establishing other funding
arrangements (and all amendments thereto and the latest financial statements
thereof); (iv) the most recent IRS determination letter obtained with respect to
each Employee Benefit Plan intended to be qualified under Section 401(a) of the
Code or exempt under Section
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501(a) of the Code; (v) the annual report on IRS Form 5500-series for each of
the last three years for each Employee Benefit Plan required to file such form;
(vi) the most recently prepared actuarial valuation report for each Employee
Benefit Plan covered by Title IV of ERISA; (vii) the most recently prepared
financial statements; and (viii) all contracts and agreements relating to each
Employee Benefit Plan, including, without limitation, service provider
agreements, insurance contracts, annuity contracts, investment management
agreements, subscription agreements, participation agreements, and recordkeeping
agreements and collective bargaining agreements.
Section 4.8 Employee Benefit Plan Triggering Events. Except as
disclosed on Schedule 4.8 attached hereto, the Tender Offer does not constitute
a triggering event under any Employee Benefit Plan, policy, arrangement,
statement, commitment or agreement, whether or not legally enforceable, which
(either alone or upon the occurrence of any additional or subsequent event) will
or may result in any payment (whether of severance pay or otherwise), "parachute
payment" (as such term is defined in Section 280G of the Code), acceleration,
vesting or increase in benefits to any employee or former employee or director
of the Corporation or any of its subsidiaries. No Employee Benefit Plan provides
for the payment of severance, termination, change in control or similar-type
payments or benefits.
Section 4.9 Liabilities. Except as set forth in the SEC
Filings or as disclosed in Schedule 4.9 attached hereto or as otherwise
contemplated by this Agreement, since February 23, 1997 to the date of this
Agreement, neither the Corporation nor any of its subsidiaries has incurred any
material outstanding claims, liabilities or indebtedness, contingent or
otherwise, that would be required to be disclosed in the Corporation's
consolidated financial statements prepared in accordance with GAAP, other than
liabilities incurred subsequent to February 23, 1997 in the ordinary course of
business not involving borrowings by the Corporation or any of its subsidiaries.
Section 4.10 Litigation. (a) Except as set forth on Schedule
4.10 attached hereto, there is no action, suit, proceeding at law or in equity,
arbitration or administrative or other proceeding by or before (or to the best
knowledge of the Corporation any investigation by) any governmental or other
instrumentality or agency, pending or, to the best knowledge of the Corporation,
threatened, against or affecting the Corporation or any of its subsidiaries, or
any of their properties or rights which, individually or in the aggregate, could
have a Material Adverse Effect.
(b) Except as set forth on Schedule 4.10 attached hereto,
neither the Corporation nor any of its subsidiaries is subject to any judgment,
order or decree entered in any lawsuit or proceeding which could have a Material
Adverse Effect.
Section 4.11 Taxes. (a) Tax Returns. Except as set forth on
Schedule 4.11 attached hereto, the Corporation has timely filed or caused to be
timely filed or will timely file or cause to be timely filed with the
appropriate taxing authorities all returns, statements, forms and reports for
Taxes that are required by Law to be filed by, or which include, the Corporation
or any of its subsidiaries on or prior to the Closing Date. Such tax returns
accurately reflect all liability for Taxes of the Corporation and each of its
subsidiaries for the periods covered thereby.
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(b) Payment of Taxes. Except as set forth on Schedule 4.11
attached hereto, all Taxes and Tax liabilities of the Corporation due for all
taxable years or periods that end on or before the Closing Date and, with
respect to any taxable year or period beginning before and ending after the
Closing Date, the portion of such taxable year or period ending on and including
the Closing Date, have been timely paid or are reserved in accordance with GAAP
in financial statements of the Corporation on or prior to the Closing Date.
(c) Tax Audits. Except as set forth on Schedule 4.11 attached
hereto, no examination of any tax return of the Corporation is currently in
progress and there are no outstanding agreements or waivers extending the
statutory period of limitation applicable to any tax return of the Corporation.
Section 4.12 Intellectual Properties. The costs to the
Corporation and its subsidiaries of ensuring that the equipment and software and
other computer programs used by the Corporation or any of its subsidiaries (each
a "Seller System") will be Year 2000 compliant (a) are estimated to be
approximately $15,000,000, (b) are expensed as incurred, and (c) the balance of
such cost is not expected to have a material adverse impact on the Corporation's
financial position, results of operations or cash flows in future periods. For
purposes of this paragraph, "Year 2000 compliant" means that a change of,
reference to or use after December 31, 1999 of date-related data for dates
before, on or after December 31, 1999 in the operation of that Seller System,
whether alone or in conjunction with each other Seller System or item of
equipment, software or other computer program under the control of a third party
with whom the Corporation or any of its subsidiaries routinely exchanges date
information, will not have a material adverse effect on, nor give rise to a
material increased inconvenience in, the operation of that Seller System.
Section 4.13 Environmental Laws and Regulations. There are no
facts or circumstances, conditions or occurrences regarding any Corporation
Property (as defined below) that could reasonably be anticipated (a) to form the
basis of an Environmental Claim (as defined below) against the Corporation or
any of its subsidiaries or any Corporation Property or (b) to cause such
Corporation Property to be subject to any restrictions on its ownership,
occupancy, use or transferability under any Environmental Law (as defined
below).
For purposes of this Agreement, the following terms shall have
the following meanings: (a) "Corporation Property" means any real property and
improvements owned, leased, used, operated or occupied by the Corporation or any
of its subsidiaries; (b) "Hazardous Materials" means (i) any petroleum or
petroleum products, radioactive materials, asbestos in any form that is friable,
urea formaldehyde foam insulation, transformers or other equipment that contain
dielectric fluid containing levels of polychlorinated biphenyls, and radon gas,
(ii) any chemicals, materials or substances defined as or included in the
definition of "hazardous substances," "hazardous wastes," "hazardous materials,"
"extremely hazardous wastes," "restricted hazardous wastes," "toxic substances,"
"toxic pollutants," or words of similar import, under any applicable
Environmental Law, and (iii) any other chemical, material or substance, exposure
to which is prohibited, limited or regulated by any governmental authority; (c)
"Environmental Law" means any federal, state or local statute, law, rule,
regulation, ordinance, code, policy or rule of
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common law in effect and in each case as amended as of the date hereof and
Closing Date, and any judicial or administrative interpretation thereof as of
the date hereof and Closing Date, including any judicial or administrative
order, consent decree or judgment, relating to the environment, health, safety
or Hazardous Materials, including without limitation the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended, 42
U.S.C. Section 9601 et seq.; the Resource Conservation and Recovery Act, as
amended, 42 U.S.C. Section 6901 et seq.; the Federal Water Pollution Control
Act, as amended, 33 U.S.C. Section 1251 et seq.; the Toxic Substances Control
Act, 15 U.S.C. Section 2601 et seq.; the Clean Air Act, 42 U.S.C. Section 7401
et seq.; the Safe Drinking Water Act, 42 U.S.C. Section 3808 et seq.; and state
and local equivalent statutes and regulations; and (d) "Environmental Claims"
means any and all administrative, regulatory or judicial actions, suits,
demands, demand letters, claims, liens, notices of noncompliance or violation,
investigations or proceedings relating in any way to any Environmental Law (for
purposes of this subclause (d), "Claims") or any permit issued under any such
Environmental Law, including without limitation (i) any and all Claims by
governmental or regulatory authorities for enforcement, cleanup, removal,
response, remedial or other actions or damages pursuant to any applicable
Environmental Law and (ii) any and all Claims by any third party seeking
damages, contribution, indemnification, cost recovery, compensation or
injunctive relief resulting from Hazardous Materials or arising from alleged
injury or threat of injury to health, safety or the environment.
Section 4.14 Labor Relations. Except as set forth on Schedule
4.14 attached hereto, there is no strike, labor dispute, slowdown or stoppage
pending or, to the best knowledge of the Corporation, threatened against the
Corporation or any of its subsidiaries which would be reasonably likely to have
a Material Adverse Effect on the Corporation. The Corporation and its
subsidiaries have complied with the Worker Adjustment and Retraining
Notification Act (the "WARN Act"). None of the present or former employees of
the Corporation or its subsidiaries has suffered an employment loss or mass
layoff as that term is defined in the WARN Act in the 6-month period ending on
the Closing Date.
Section 4.15 Tender Offer Documents and Corporation's Schedule
14D-9 . None of the information supplied by the Corporation for inclusion or
incorporation by reference in the Tender Offer Documents will at the respective
times the Tender Offer Documents are filed with the SEC contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements made, in light of the circumstance under which they
are made, not misleading. None of the information in the Corporation's Schedule
14D-9, at the respective times the Corporation's Schedule 14D-9 is filed with
the SEC and first published, sent or given to the holders of the Class A Shares,
will contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under
which they are made, not misleading. Notwithstanding the foregoing, no
representation or warranty is made with respect to any information with respect
to the Purchaser or its officers, directors or affiliates provided to the
Corporation by the Purchaser in writing for inclusion in the Corporation's
Schedule 14D-9. The Corporation's Schedule 14D-9 will comply in all material
respects with the Exchange Act and the rules and regulations thereunder and any
other applicable laws. If at any time prior to the expiration or termination of
the Tender Offer any event occurs which should be described in an amendment or
supplement to the Corporation's Schedule 14D-9 or any amendment or supplement
thereto, the Seller will use its reasonable best
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<PAGE> 29
efforts to cause the Corporation to file and disseminate, as required, an
amendment or supplement which complies in all material respects with the
Exchange Act and the rules and regulations thereunder and any other applicable
laws. The Seller shall use its reasonable best efforts to cause the Corporation
to deliver any amendment or supplement to the Purchaser and its counsel prior to
its filing with the SEC.
Section 4.16 State Takeover Statutes. The provisions of
Section 203 of the DGCL are not applicable to the Corporation and, as a result,
no action by the Board of Directors of the Corporation is required under such
Section in respect of the Tender Offer. No other state takeover statute or
similar statute or regulation applies or purports to apply to the Tender Offer.
Section 4.17 Rights Agreements. The Corporation has no
stockholder rights plan or similar agreement in effect.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
Section 5. Representations and Warranties of the Purchaser. In
order to induce the Seller to enter into this Agreement and to sell the
Transferred Shares, the Purchaser makes the following representations and
warranties.
Section 5.1 Legal Status. The Purchaser is a duly organized
and validly existing public company with limited liability under the laws of the
Netherlands.
Section 5.2 Power and Authority; Enforceability. The Purchaser
has full requisite legal capacity, power and authority to execute, deliver and
perform the terms and provisions of this Agreement and to consummate the
transactions contemplated hereby and has taken all necessary corporate action to
authorize the execution, delivery and performance by the Purchaser of this
Agreement and the consummation of the transactions contemplated hereby. This
Agreement has been duly authorized, executed and delivered by the Purchaser and
constitutes a valid and legally binding obligation of the Purchaser enforceable
against the Purchaser in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar Laws of
general applicability relating to or affecting creditor's rights and to general
equitable principles.
Section 5.3 No Conflicts. (a) Assuming the receipts of the
consents, approvals, etc. specified in clause (b) below, the execution, delivery
and performance of this Agreement by the Purchaser and the performance of the
provisions regarding the Tender Offer will not (i) conflict with the Articles of
Association of the Purchaser, (ii) conflict with, result in the breach or
termination of, or constitute a default (or give rise to any third party right
of termination, cancellation, material modification or acceleration) under, any
lease, charter, note, bond, mortgage, license, indenture, contract, agreement,
commitment, arrangement or other instrument or obligation or any order,
judgment, decree, injunction, regulation or ruling of any governmental authority
or regulatory organization, domestic or foreign, to which the Purchaser is a
party or by
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which the Purchaser or any of its properties or assets are bound, or (iii)
constitute a violation by the Purchaser of any Law or regulation applicable to
the Purchaser any of its properties or assets.
(b) Except (i) for filings under the HSR Act, (ii) as required
by the Exchange Act and the rules and regulations thereunder in connection with
the Tender Offer, (iii) the "blue sky" laws of various states, (iv) applicable
Alcohol and Drug Laws and (v) applicable local permit laws, rules and
regulations pertaining to the operation of the business of the Corporation and
its subsidiaries, no consent, approval, permit, or authorization of, or
designation, declaration or filing with, any governmental authorities or third
parties is required on the part of the Purchaser in connection with the
execution and delivery of this Agreement and the performance by the Purchaser of
the transactions contemplated hereby.
Section 5.4 Broker's or Finder's Fees. Except for Merrill
Lynch & Co. (whose fees and expenses will be paid by the Purchaser), no agent,
broker, person or firm acting on behalf of the Purchaser or any Affiliate
thereof is, or will be, entitled to any commission or broker's or finder's fees
from any of the parties hereto, or from any Person controlling, controlled by or
under common control with any of the parties hereto, in connection with any of
the transactions contemplated by this Agreement.
Section 5.5 Available Funds. The Purchaser has or will have
available to it all funds necessary to satisfy all of its obligations hereunder
and in connection with the transactions contemplated by this Agreement.
Section 5.6 Securities Act. The Purchaser is acquiring the
Transferred Shares solely for the purpose of investment and not with a view to,
or for sale in connection with, any distribution thereof in violation of the
Securities Act of 1933, as amended (the "Securities Act"). The Purchaser
acknowledges that the Transferred Shares are not registered under the Securities
Act or any applicable state securities law, and that the Transferred Shares may
not be transferred or sold except pursuant to the registration provisions of the
Securities Act or pursuant to an applicable exemption therefrom and pursuant to
state securities laws and regulations as applicable.
Section 5.7 Schedules l4D-9. The written information supplied
or to be supplied by the Purchaser for inclusion in the Corporation's Schedule
l4D-9, the Seller's Schedule 14D-9 or the Directors' Schedule 14D-9 will not
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements made, in light of the
circumstances under which they are made, not misleading.
ARTICLE VI
CONDUCT OF BUSINESS, EXCLUSIVE DEALING,
REVIEW, OTHER COVENANTS
Section 6.1 Access to Information Concerning Properties and
Records. During the period commencing on the date hereof and ending on the
Closing Date, the Seller shall use its reasonable best efforts to cause the
Corporation and each of its subsidiaries to, upon reasonable notice, afford the
Purchaser, and its counsel, accountants, consultants and other authorized
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representatives, full access during normal business hours to the employees,
properties, books and records of the Corporation and its subsidiaries in order
that they may have the opportunity to make such investigations as they shall
desire of the affairs of the Corporation and its subsidiaries and all other
information concerning its or its subsidiaries' business, properties and
personnel as the Purchaser may request; such investigation shall not, however,
affect the representations and warranties made by the Seller in this Agreement.
The Seller shall use its reasonable best efforts to cause the Corporation to
furnish promptly to the Purchaser (a) a copy of each report, schedule,
registration statement and other document filed by the Corporation or its
subsidiaries during such period pursuant to the requirements of Federal or state
securities laws and (b) such additional financial and operating data and all
other information concerning the Corporation's or its subsidiaries' business,
properties and personnel in the possession of the Seller as the Purchaser may
reasonably request.
Section 6.2 Confidentiality. Information obtained by the
Purchaser pursuant to Section 6.1 hereof or otherwise pursuant to this Agreement
shall be subject to the provisions of the Confidentiality Agreement between the
Seller and the Purchaser dated as of February 2, 1998.
Section 6.3 Conduct of Business of the Corporation. (a) During
the period from the date of this Agreement to the Closing Date, except as
permitted, required or specifically contemplated by, or otherwise described in,
this Agreement or otherwise consented to or approved in writing by the
Purchaser, the Seller (i) shall not vote the Class AC Shares in favor of any
action that would cause, or that is part of a transaction that would cause, (ii)
shall cause the directors of the Corporation who are also directors of the
Seller not to vote in favor of any action that would cause, or that is a part of
a transaction that would cause, and (iii) shall otherwise use its reasonable
best efforts to cause the Corporation and each of its subsidiaries not to take
any action that would cause, any of the representations or warranties with
respect to the Corporation set forth in Article IV of this Agreement to be
untrue or incorrect.
(b) During the period from the date of this Agreement to the
Closing Date, except as permitted, required or specifically contemplated by, or
otherwise described in, this Agreement or otherwise consented to or approved in
writing by the Purchaser, the Seller (i) shall vote the Class AC Shares in favor
of any action that would cause, or that is part of a transaction that would
cause, (ii) shall cause the directors of the Corporation who are also directors
of the Seller to vote in favor of any action that would cause, or that is a part
of a transaction that would cause, and (iii) shall otherwise use its reasonable
best efforts to cause, in each case, the Corporation and each of its
subsidiaries to do the following:
(A) conduct their respective operations only according to
their ordinary and usual course of business consistent with past
practice; and
(B) use their best efforts to preserve intact their respective
business organization, keep available the services of their officers
and employees and maintain satisfactory relationships with licensors,
suppliers, distributors, clients, landlords, joint venture partners,
employees, agents and others having business relationships with them.
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<PAGE> 32
(c) During the period from the date of this Agreement to the
Closing Date, except as permitted, required or specifically contemplated by, or
otherwise described in, this Agreement or otherwise consented to or approved in
writing by the Purchaser, the Seller (i) shall not vote the Class AC Shares in
favor of, and shall affirmatively vote the Class AC Shares against, any action
that would cause, or that is part of a transaction that would cause, (ii) shall
cause the directors of the Corporation who are also directors of the Seller not
to vote in favor of, and to affirmatively vote against, any action that would
cause, or that is a part of a transaction that would cause, and (iii) shall
otherwise use its reasonable best efforts to cause, in each case, the
Corporation and each of its subsidiaries not to do any of the following:
(A) make any change in or amendment to the Certificate of
Incorporation or By-Laws (or comparable governing documents) of the
Corporation or any subsidiary, (B) issue, sell or acquire any shares of
its capital stock (other than in connection with the exercise of
Options outstanding on the date hereof) or any of its other securities,
or issue any securities convertible into, or options, warrants or
rights to purchase or subscribe to, or enter into any arrangement or
contract with respect to the issuance or sale of, any shares of its
capital stock or any of its other securities, or make any other changes
in its capital structure, (C) sell or pledge or agree to sell or pledge
any stock owned by it in any of its subsidiaries, (D) declare, pay, set
aside or make any dividend or other distribution or payment with
respect to, or split, combine, redeem or reclassify, or purchase or
otherwise acquire any shares of its capital stock or its other
securities, other than dividends and distributions by a direct or
indirect wholly-owned subsidiary to its parent and regular annual cash
dividends by the Corporation on its capital stock in an amount not in
excess of $0.80 per share per fiscal annum at the same time such
dividends are customarily declared and paid, (E) (1) except as set
forth on Schedule 6.3 attached hereto, enter into any contract or
commitment with respect to (x) any individual capital expenditure in
excess of $7,500,000 in the case of capital expenditures provided for
in the Corporation's Budget or $2,000,000 in the case of capital
expenditures not provided for in the Budget or (y) capital expenditures
that in the aggregate exceed $40,000,000 in any thirteen week period,
(2) acquire (by merger, consolidation, or acquisition of stock or
assets) any corporation, partnership or other business or division
thereof, or (3) enter into, amend, modify, supplement or cancel any
other material contract, (F) acquire a material amount of assets or
securities or release or relinquish any material contract rights other
than in the ordinary course of business in accordance with past
practice and the Corporation's short term investment program, (G)
except to the extent required under existing employee and director
benefit plans, agreements or arrangements as in effect on the date of
this Agreement, increase the compensation or fringe benefits of any of
its directors, officers or employees, except for increases in salary or
wages of employees of the Corporation or its subsidiaries in the
ordinary course of business in accordance with past practice, or grant
any severance or termination pay not currently required to be paid
under existing severance plans or enter into any employment, consulting
or severance agreement or arrangement with any present or former
director, officer or other employee of the Corporation or any of its
subsidiaries, or establish, adopt, enter into or amend or terminate any
collective bargaining (except for the termination of the collective
bargaining agreements which will expire in accordance with their terms
prior to the Closing Date, all
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of which are listed on Schedule 6.3(c) attached hereto), bonus, profit
sharing, thrift, compensation, stock option, restricted stock, pension,
retirement, deferred compensation, employment, termination, severance
or other plan, agreement, trust, fund, policy or arrangement for the
benefit of any directors, officers, employees or former employees
and/or directors, (H) transfer, lease, license, guarantee, sell,
mortgage, pledge, dispose of, encumber or subject to any lien, any
material assets or incur or modify any indebtedness or other liability
or issue any debt securities or assume, guarantee or endorse or
otherwise as an accommodation become responsible for the obligations of
any person or, other than in the ordinary course of business consistent
with past practice, make any loan or other extension of credit, (I)
agree to the settlement of any material claim or litigation (including,
but not limited to any claim or litigation in respect of or related to
any Environmental Law), (J) make any material tax election or settle or
compromise any material tax liability, (K) permit any insurance policy
naming it as beneficiary or a loss payable payee to be canceled without
notice to the Purchaser unless (1) such insurance policy is immediately
replaced, with no gaps or lapses in coverage, with an insurance policy
issued by a financially sound and reputable insurance company in at
least such amounts and against at least such risks as the canceled
policy or (2) such cancellation would not have a Material Adverse
Effect, (L) make any material change in its method of accounting, (M)
adopt a plan of complete or partial liquidation, dissolution, merger,
consolidation, restructuring, recapitalization or other reorganization
of the Corporation or any of its subsidiaries not constituting an
inactive subsidiary, (N) take any action, including, without
limitation, the adoption of any stockholder rights plan or amendments
to its Certificate of Incorporation (or other organizational or
governing documents), which would, directly or indirectly, restrict or
impair the ability of the Purchaser to vote, or otherwise to exercise
the rights and receive the benefits of a stockholder with respect to,
securities of the Corporation that may be acquired or controlled by the
Purchaser or permit any stockholder to acquire securities of the
Corporation on a basis not available to the Purchaser in the event that
the Purchaser were to acquire securities of the Corporation, or (O)
agree, in writing or otherwise, to take any of the foregoing actions.
Section 6.4 Approval by Purchaser of Changes. If the Seller
makes a request in writing to the Purchaser for the Purchaser's approval of an
action or inaction enumerated in Section 6.3(b) or (c) of this Agreement (an
"Action"), the Purchaser will use all reasonable efforts to approve or reject
such request within five business days of receipt thereof. If the Seller does
not receive notice from the Purchaser within such five business day period, the
action or inaction specified in such written request shall be deemed to be
approved by the Purchaser. No approval or consent of a single Action shall
constitute an approval or consent to any Action not specified in the request to
which the Purchaser was responding.
Section 6.5 Exclusive Dealing. (a) The Seller and each of its
officers, directors, employees, representatives, consultants, investment
bankers, attorneys, accountants, agents or advisors (collectively "Agents")
shall immediately cease any discussions or negotiations with any other parties
that may be ongoing with respect to any purchase of the Transferred Shares or
any Acquisition Proposal (as defined below). The Seller shall not, directly or
indirectly, take (and the Seller shall not authorize or permit its Agents to so
take) any action to (i) encourage, solicit or
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initiate the making of any offer to purchase the Transferred Shares or any
Acquisition Proposal, (ii) enter into any agreement with respect to any offer to
purchase the Transferred Shares or any Acquisition Proposal, or (iii)
participate in any way in discussions or negotiations with, or furnish or
disclose any information to, any Person (other than the Purchaser) in connection
with, or take any other action to facilitate any inquiries or the making of any
proposal that constitutes, or may reasonably be expected to lead to, any offer
to purchase the Transferred Shares or any Acquisition Proposal.
"Acquisition Proposal" shall mean any inquiry, proposal or
offer from any Person (other than the Purchaser) relating to any direct or
indirect acquisition or purchase of all or any of the Class AC Shares, of a
substantial amount of assets of the Corporation or any of its subsidiaries or of
more than 10% of any class of equity securities of the Corporation or any of its
subsidiaries, any tender offer or exchange offer that if consummated would
result in any person beneficially owning more than 10% of any other class of
equity securities of the Corporation or any of its subsidiaries, any merger,
consolidation, business combination, sale of substantially all the assets,
recapitalization, liquidation, dissolution or similar transaction involving the
Corporation or any of its subsidiaries, other than the transactions contemplated
hereby, or any other transaction the consummation of which could reasonably be
expected to impede, interfere with, prevent or materially delay the Tender Offer
or which would reasonably be expected to dilute materially the benefits to the
Purchaser of the transactions contemplated hereby.
(b) During the period from the date of this Agreement to the
Closing Date, except as permitted, required or specifically contemplated by, or
otherwise described in, this Agreement or otherwise consented to or approved in
writing by the Purchaser, the Seller (i) shall use its reasonable best efforts
to cause (A) the Corporation and its Agents immediately to cease any discussions
or negotiations with any other parties that may be ongoing with respect to any
Acquisition Proposal and (B) the Corporation and its subsidiaries not to take,
directly or indirectly, (and the Corporation not to authorize or permit its or
its subsidiaries' Agents to take) any action to (1) encourage, solicit or
initiate the making of any Acquisition Proposal, (2) enter into any agreement
with respect to any Acquisition Proposal, or (3) participate in any way in
discussions or negotiations with, or furnish or disclose any information to, any
Person (other than the Purchaser) in connection with, or take any other action
to facilitate any inquiries or the making of any proposal that constitutes, or
may reasonably be expected to lead to, any Acquisition Proposal, (ii) shall not
vote the Class AC Shares in favor of any Acquisition Proposal, (iii) shall cause
the directors of the Corporation who are also directors of the Seller not to
vote to approve or recommend, or propose to approve or recommend, any
Acquisition Proposal or in favor of the Corporation entering into any agreement
with respect to any Acquisition Proposal, and (iv) shall otherwise use its
reasonable best efforts to cause the Board of Directors of the Corporation not
to approve, recommend or propose to approve or recommend any Acquisition
Proposal or the entering into by the Corporation of any Acquisition Proposal.
(c) In addition to the obligations of the Seller set forth in
paragraphs (a) and (b), on the date of receipt thereof, the Seller shall, or
shall use its reasonable best efforts to cause the Corporation to, advise the
Purchaser of any request for information or of any offer to purchase the
Transferred Shares or any Acquisition Proposal, or any inquiry or proposal with
respect to any
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offer to purchase the Transferred Shares or any Acquisition Proposal, the
material terms and conditions of such request, offer or Acquisition Proposal and
of any changes thereto, and the identity of the entity or person making any such
inquiry or proposal.
Section 6.6 Notification of Certain Matters. The Seller shall
(to the extent known by the Seller), and shall use its reasonable best efforts
to cause the Corporation to, give prompt notice to the Purchaser of: (a) any
notice of, or other communication relating to, a default or event that, with
notice or lapse of time or both, would become a default, received by the
Corporation or any of its subsidiaries subsequent to the date of this Agreement
and prior to the Closing Date, under any material contract to which the
Corporation or any of its subsidiaries is a party or is subject; (b) any change
that might have a Material Adverse Effect on the Corporation and its
subsidiaries taken as a whole or the occurrence of any event which is reasonably
likely to result in a Material Adverse Effect; (c) the occurrence, or
non-occurrence, of any events the occurrence, or non-occurrence, of which would
cause either (i) a representation or warranty of the Seller contained in this
Agreement to be untrue or inaccurate in any respect at any time from the date
hereof to the date Class A Shares are accepted for payment pursuant to the
Tender Offer or (ii) any of the Tender Offer Conditions to be unsatisfied in any
material respect at any time from the date hereof to the date Class A Shares are
purchased pursuant to the Tender Offer. The Seller shall (to the extent known by
the Seller), and shall use its reasonable best efforts to cause the Corporation
to, and the Purchaser shall give prompt notice to the other party of 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.
Section 6.7 Directors' and Officers' Insurance . (a) For a
period of six years from the Closing Date, the Purchaser shall cause the
directors of the Corporation elected by the Purchaser to the Board of Directors
of the Corporation not to vote to, and shall otherwise use its reasonable best
efforts to cause the Corporation not to, amend, repeal or otherwise modify the
provisions with respect to indemnification and exculpation from liability set
forth in the Corporation's Certificate of Incorporation and By-Laws on the date
of this Agreement in any manner that would adversely affect the rights
thereunder of individuals who on or prior to the Closing Date were directors,
officers, employees or agents of the Corporation, unless such modification is
required by law.
(b) For a period of three years from the Closing Date, the
Purchaser (i) shall cause the directors of the Corporation elected by the
Purchaser to the Board of Directors of the Corporation to vote to, and shall
otherwise use its reasonable best efforts to cause the Corporation to, maintain
in effect the Corporation's current directors' and officers' liability insurance
covering those persons who are currently covered on the date of this Agreement
by the Corporation's directors' and officers' liability insurance policy (a copy
of which has been heretofore delivered to the Purchaser) (the "Indemnified
Parties"); provided, however, that in no event shall the Corporation be required
to expend in any one year an amount in excess of 150% of the annual premiums
currently paid by the Corporation for such insurance which the Seller represents
to be $200,160 for the most recent twelve month period; provided further, that
if the annual premiums of such insurance coverage exceed such amount, the
Corporation shall be obligated to obtain a policy with the greatest coverage
available for a cost not exceeding such
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amount; provided further that the Corporation may substitute for such
Corporation policies, policies with at least the same coverage containing terms
and conditions which are no less advantageous and provided that said
substitution does not result in any gaps or lapses in coverage with respect to
matters occurring prior to the Closing Date or, alternatively, (ii) shall cause
the Purchaser's directors' and officers' liability insurance then in effect to
cover those persons who are covered on the date of this Agreement by the
Corporation's directors' and officers' liability insurance policy with respect
to those matters covered by the Corporation's directors' and officers' liability
policy.
Section 6.8 Employee Benefits. The Purchaser currently intends
that, during the period commencing at the Closing Date and ending on December
31, 1999, the active employees of the Corporation and its subsidiaries who are
not covered by collective bargaining agreements ("Non-Union Employees") will be
provided with employee benefits (other than stock option and other
non-tax-qualified plans or arrangements involving the potential issuance of
securities of the Corporation or of the Purchaser) which are in the aggregate
not materially less favorable to those currently provided by the Corporation and
its subsidiaries to such Non-Union Employees; provided, that (i) the covenants
contained in this subsection (a) shall only be effective to the extent permitted
under laws and regulations in force from time to time and (ii) the Purchaser
reserves the right to review all employee benefit plans and arrangements of the
Corporation after the Closing Date and to make such changes of an administrative
or investment management nature as it, in its discretion, deems appropriate.
Notwithstanding the foregoing, Non-Union Employees who are currently accruing
benefits under Section 3.8 of Article III and Article VI of the [Green] Excess
Benefit Savings Plan (the "EBS Plan") on the Closing Date shall continue to
participate in the EBS Plan and to accrue benefits under those provisions at the
same accrual rates in effect on the Closing Date. The preceding sentence shall
not apply to any other benefits under the EBS Plan including, without
limitation, benefits under Article IV therein. Non-Union Employees who meet the
minimum eligibility requirements under the stock option plans maintained by the
Purchaser after the Closing Date shall be eligible to be granted stock options
thereunder in accordance with the terms of such plans.
Section 6.9 Further Assurances. Each of the parties shall
execute, acknowledge, deliver and file, without further consideration, all such
additional documents and take such other actions as may be necessary or
reasonably requested by the other party to consummate or evidence the
transactions and fulfill the obligations contemplated by this Agreement.
Section 6.10 Resignations. On the Closing Date, the Seller
shall cause each Person who has been elected by the Seller to the Board of
Directors of the Corporation to resign effective as of the Closing Date.
Section 6.11 Provisions Concerning Transferred Shares. The
Seller hereby agrees that during the period commencing on the date hereof and
continuing until the earlier of (i) the Closing Date or (ii) the termination
date set forth in Section 9.13 hereof, at any meeting of the holders of capital
stock of the Corporation, however called, or in connection with any written
consent of the holders of capital stock of the Corporation, the Seller shall
vote (or cause to be voted) the Transferred Shares whether issued, heretofore
owned or hereafter acquired, (x) in
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favor of each of the actions contemplated by this Agreement and any actions
required in furtherance hereof, (y) against any action or agreement that would
result in a breach in any respect of any covenant, representation or warranty or
any other obligation or agreement of the Seller under this Agreement, and (z)
except as otherwise agreed to in writing in advance by the Purchaser, against
the following actions: (A) any extraordinary corporate transaction, such as a
merger, consolidation or other business combination involving the Corporation or
its subsidiaries; (B) a sale, lease or transfer of a material amount of assets
of the Corporation or its subsidiaries, or a reorganization, recapitalization,
dissolution or liquidation of the Corporation or its subsidiaries; or (C) (1)
any change in a majority of the persons who constitute the Board of Directors of
the Corporation, (2) any change in the present capitalization of the Corporation
or any amendment of the Corporation's Certificate of Incorporation or By-Laws,
(3) any other material change in the Corporation's corporate structure or
business, or (4) any other action involving the Corporation or its subsidiaries
which is intended, or could reasonably be expected, to impede, interfere with,
delay, postpone, or materially adversely affect the transactions contemplated by
this Agreement. The Seller shall not enter into any agreement or understanding
with any Person the effect of which would be to violate the provisions and
agreements contained in this Section 6.11.
Section 6.12 Restriction on Transfer, Proxies and
Non-Interference. Beginning on the date hereof and ending on the earlier of the
Closing Date or the termination date set forth in Section 9.13 hereof, the
Seller shall not (i) directly or indirectly, offer for sale, sell, transfer,
tender, pledge, encumber, assign or otherwise dispose of, or enter into any
contract, option or other arrangement or understanding with respect to or
consent to the offer for sale, transfer, tender, pledge, encumbrance, assignment
or other disposition of, any of the Transferred Shares or any of the Existing
Class A Shares or any interest therein, (ii) except as contemplated by this
Agreement, grant any proxies or powers of attorney, deposit any Shares into a
voting trust or enter into a voting agreement with respect to any Shares, or
(iii) take any action that would make any representation or warranty of the
Seller contained herein untrue or incorrect or have the effect of preventing or
disabling the Seller from performing its obligations under this Agreement.
Section 6.13 Changes in Shares. In the event of a stock
dividend or distribution, or any change in the capital stock of the Corporation
by reason of any stock dividend, split-up, recapitalization, combination,
exchange of shares or the like, the term "Transferred Shares" shall be deemed to
refer to and include the Transferred Shares as well as all such stock dividends
and distributions and any shares into which or for which any or all of the
Transferred Shares may be changed or exchanged and the Purchase Price shall be
appropriately adjusted. The Seller shall be entitled to receive any cash
dividend paid during the term of this Agreement by the Corporation on the
Transferred Shares until the Transferred Shares are purchased hereunder and on
the Seller's Class A Shares as and to the extent provided in the Tender Offer
Documents.
Section 6.14 Broker's and Finder's Fees. The Seller shall use
its reasonable best efforts to cause the President of the Corporation to call a
special meeting of the Board of Directors of the Corporation, in accordance with
the Certificate of Incorporation and Bylaws of the Corporation and the
provisions of the DGCL, for the purpose of considering the assumption by the
Corporation of the obligations of the Seller to PaineWebber under the
PaineWebber Agreement as a result of the purchase of the Transferred Shares and
the consummation of the
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Tender Offer as contemplated by this Agreement (the "PaineWebber Obligations").
The Seller shall cause the Directors of the Corporation who are also Directors
of the Seller, and shall use its reasonable best efforts to cause the other
Directors of the Corporation, not to abstain and to vote to approve the
assumption by the Corporation of the PaineWebber Obligations.
ARTICLE VII
CONDITIONS TO THE PURCHASER'S OBLIGATIONS
Section 7. Conditions to the Purchaser's Obligations. The
obligation of the Purchaser to purchase the Transferred Shares on the Closing
Date is subject to the satisfaction, at or prior to the Closing, of the
following conditions:
Section 7.1 Truth of Representations and Warranties. (a) The
representations and warranties of the Seller contained in this Agreement or in
any Schedule attached hereto shall be true and correct in all material respects
on and as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of such date, and the
Purchaser shall have received a certificate signed by an executive officer of
the Seller, dated the Closing Date, to such effect and (b) the representations
and warranties of the Seller with respect to the Corporation contained in this
Agreement or in any Schedule attached hereto shall be true and correct in all
material respects, without regard to the knowledge of the Seller, on and as of
the Closing Date with the same effect as though such representations and
warranties had been made on and as of such date.
Section 7.2 Performance of Agreements. (a) All of the
agreements of the Seller to be performed and all of the covenants of the Seller
to be complied with prior to the Closing pursuant to the terms of this Agreement
shall have been duly performed or complied with, as applicable, in all material
respects and the Purchaser shall have received a certificate signed by an
executive officer of the Seller, dated the Closing Date, to such effect and (b)
the Corporation and each of its subsidiaries shall not have (i) failed to act in
accordance with Section 6.3(b)(iii)(A) and (B) and Section 6.5(b)(i)(B) and (iv)
of this Agreement or (ii) taken any of the actions listed in Section
6.3(c)(iii)(A)-(O) or Section 6.5(b)(i)(A) of this Agreement and the Purchaser
shall have received a certificate signed by an executive officer of the Seller,
dated the Closing Date, to such effect but which certificate can be based upon
the reasonable best knowledge of the Seller after due inquiry.
Section 7.3 Injunction. No preliminary or permanent injunction
or other order shall have been issued by any court or by any governmental or
regulatory agency, body or authority which prohibits the consummation of the
Tender Offer, the purchase of the Transferred Shares or any of the other
transactions contemplated by this Agreement and which is in effect at the
Closing Date, provided, however, that, in the case of a decree, injunction or
other order, each of the parties shall have used reasonable efforts to prevent
the entry of any such injunction or other order and to appeal as promptly as
possible any decree, injunction or other order that may be entered.
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Section 7.4 Consents and Approvals. All governmental and
third-party consents, waivers and approvals, if any, disclosed on any Schedule
attached hereto or necessary to permit the consummation of the transactions
contemplated by this Agreement shall have been received. All time periods under
the HSR Act applicable to the purchase of the Transferred Shares hereunder shall
have expired or been terminated. No governmental or other instrumentality or
agency shall have required that, in exchange for approval of the transactions
contemplated by this Agreement, the Purchaser, the Corporation or any of their
respective Affiliates sell or otherwise dispose of, or hold separate (through
the establishment of a trust or otherwise) particular assets or categories of
assets, or businesses of the Purchaser, the Corporation or any of their
respective Affiliates or withdraw from doing business in a particular
jurisdiction or take any other action that, in the aggregate, in the sole
judgment of the Purchaser, would reasonably be expected to substantially impair
or substantially reduce the Purchaser's ability to control, direct or manage on
a day-to-day basis the business or affairs of the Corporation or to
substantially impair or substantially reduce the overall benefits expected, as
of the date hereof, to be realized by the Purchaser from the consummation of the
transactions contemplated by this Agreement or would have a material adverse
effect on the business, properties, assets, liabilities, condition (financial or
otherwise), prospects, operations or results of operations of the Purchaser and
its subsidiaries taken as a whole or the Corporation and its subsidiaries taken
as a whole.
Section 7.5 Tender Offer Conditions. At any time on or after
the date hereof and at or before the time of payment for the Transferred Shares
hereunder, none of the Tender Offer Conditions shall have occurred.
Section 7.6 Resignations. Each Person who has been elected by
the Seller to the Board of Directors of the Corporation (each a "Director")
shall have delivered to the Purchaser their written resignation from such
position effective as of the Closing Date or the Purchaser shall have received
written evidence satisfactory to it that any Director who has not delivered such
written resignation has been removed from such position effective as of the
Closing Date.
Section 7.7 Approval of Tender Offer. The Board of Directors
of the Corporation shall have approved the Tender Offer and recommended
acceptance of the Tender Offer by the holders of Class A Shares.
ARTICLE VIII
CONDITIONS TO THE OBLIGATIONS OF THE SELLER
Section 8. Conditions to the Obligations of the Seller. The
obligation of the Seller to sell the Transferred Shares on the Closing Date is
subject to satisfaction, at or prior to such date, of the following conditions:
Section 8.1 Truth of Representations and Warranties. The
representations and warranties of the Purchaser contained in this Agreement
shall be true and correct in all respects on and as of the Closing Date with the
same effect as though such representations and warranties had been made on and
as of such date, and the Seller shall have received a certificate signed by an
authorized officer of the Purchaser, dated the Closing Date, to such effect.
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Section 8.2 Performance of Agreements. All of the agreements
of the Purchaser, including without limitation compliance with Section 2.5
hereof, to be performed and all of the covenants of the Purchaser to be complied
with prior to the Closing pursuant to the terms of this Agreement shall have
been duly performed or complied with, as applicable, and the Seller shall have
received a certificate signed by an authorized officer of the Purchaser, dated
the Closing Date, to such effect.
Section 8.3 Injunction. No preliminary or permanent injunction
or other order shall have been issued by any court or by any governmental or
regulatory agency, body or authority which prohibits the consummation of the
Tender Offer, the purchase of the Transferred Shares or any of the other
transactions contemplated by this Agreement and which is in effect at the
Closing Date, provided, however, that, in the case of a decree, injunction or
other order, each of the parties shall have used reasonable efforts to prevent
the entry of any such injunction or other order and to appeal as promptly as
possible any decree, injunction or other order that may be entered.
Section 8.4 HSR. All applicable time periods under the HSR Act
shall have expired or been terminated.
Section 8.5 Tender Offer. The purchase of the Class A Shares
pursuant to the Tender Offer shall be consummated simultaneously with the
purchase of the Transferred Shares pursuant to this Agreement.
ARTICLE IX
MISCELLANEOUS
Section 9.1 Representations and Warranties; Knowledge of the
Seller. The respective representations and warranties of the Seller and the
Purchaser contained herein or in any certificates or other documents delivered
prior to or at the Closing shall not be deemed waived or otherwise affected by
any investigation made by any party. Each and every such representation and
warranty shall serve solely as a condition to closing and shall expire with, and
be terminated and extinguished by, the Closing and thereafter none of the
Seller, the Purchaser nor any of their respective officers, directors,
employees, representatives, consultants, investment bankers, attorneys,
accountants or other agents shall be under or subject to any liability
whatsoever with respect to any such representation or warranty. This Section 9.1
shall have no effect upon any other obligation of the parties hereto. Where any
representation or warranty contained in this Agreement is expressly qualified by
reference to the best knowledge of the Seller, (i) the Seller confirms that it
has made due and diligent inquiry of appropriate officers or employees of the
Corporation as to the matters that are the subject of such representations and
warranties and (ii) the Seller will be deemed to have knowledge of any matter if
it is known by any director or officer of the Seller. If in the course of its
investigation of the Corporation, the Purchaser discovers any fact or
circumstance which would cause any of the representations or warranties of the
Seller set forth in this Agreement to be untrue, incorrect or breached and of
which the Purchaser believes that none of the Seller's or the Corporation's
officers, directors, employees, representatives, consultants, investment
bankers, attorneys, accountants and/or other agents are aware, the Purchaser
will use its reasonable efforts to notify the Seller of such fact or
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circumstance, provided that the failure by the Purchaser to so notify the Seller
shall not have any effect upon such representation or warranty or any rights
that the Purchaser may have hereunder or in respect of the Tender Offer.
Section 9.2 Expenses. (a) Except as provided in paragraph (b)
below, the parties hereto shall pay all of their own expenses relating to the
transactions contemplated by this Agreement, including, without limitation, the
fees and expenses of their respective counsel and financial advisers.
(b) If (i) the transactions contemplated by this Agreement are
not consummated due to the non-satisfaction of the conditions enumerated in (A)
Section 7.1, (B) Section 7.2 (other than in respect of a breach of Section 6.5
of this Agreement) or (C) Section 7.5 due to (x) the occurrence of any of the
events set forth in clause (iii) (e) of Annex A hereto or (y) the occurrence of
any of the events set forth in clause (iii) (g) or (h) of Annex A hereto (other
than in respect of a breach of Section 6.5 of this Agreement) and (ii) the
Seller sells all or any portion of the Class AC Shares and/or the Class A Shares
within two years from the date of this Agreement then in any such case the
Seller shall pay to the Purchaser, in lieu of reimbursement of the Purchaser's
out-of-pocket expenses, $2,500,000 or such lesser amount as the Seller shall
receive in the aggregate from all sales of the Class AC Shares and Class A
Shares during such two year period, such amount to be paid by or on behalf of
the Seller in same day funds within two business days after each sale of the
Class AC Shares and/or Class A Shares until the amount so received by the
Purchaser equals $2,500,000.
(c) If (i) the transactions contemplated by this Agreement are
not consummated due to the non-satisfaction of the conditions enumerated in (A)
Section 7.2 (but only in respect of a breach of Section 6.5 of this Agreement)
or (B) Section 7.5 due to (1) the occurrence of any of the events set forth in
clause (iii) (f) of Annex A hereto or (2) the occurrence of any of the events
set forth in clause (iii) (g) or (h) of Annex A hereto (but only in respect of a
breach of Section 6.5 of this Agreement), and (ii) the Seller sells all or any
portion of the Class AC Shares or the Class A Shares within two years from the
date of this Agreement then in any such case, as a condition to such sale, the
Seller shall pay or cause to be paid to the Purchaser $10,000,000, such amount
to be paid by or on behalf of the Seller in same day funds within two business
days after the first such sale of the Class AC Shares and/or Class A Shares.
Section 9.3 Governing Law. This Agreement shall be construed
in accordance with, and be governed by, the Laws of the State of Delaware. Each
of the parties hereby irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement, or for recognition and
enforcement of any judgment in respect thereof, to the general
jurisdiction of the courts of the State of Delaware, the courts of the
United States of America located in Delaware and appellate courts from
any thereof;
(b) consents that any such 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
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<PAGE> 42
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;
(c) agrees that service of process in any such action or
proceeding will be in accordance with the laws of the State of Delaware
and, in the case of the Purchaser, agrees to appoint an agent for
service of process in the State of Delaware within 20 business days of
the date hereof; and
(d) agrees that nothing herein shall affect the right to
effect service of process in any other manner permitted by law.
Section 9.4 Headings. The headings in this Agreement are
intended solely for convenience of reference and shall be given no effect in the
construction or interpretation of this Agreement.
Section 9.5 Publicity. Except as required by Law or as
otherwise provided for in this Agreement, no announcement or other publicity
relating to this Agreement or the Corporation shall be made or issued directly
or indirectly by or on behalf of any party hereto without the prior approval of
the other parties hereto.
Section 9.6 Notices. All notices, requests, demands and other
communications required or permitted to be given hereunder shall be in writing
and shall be deemed to have been duly given when delivered in person, or when
sent by telex or telecopy or other facsimile transmission (with receipt
confirmed), or when sent via express delivery service and addressed as follows
(or at such other addresses as the parties may designate by written notice in
the manner aforesaid):
If to the Purchaser:
Koninklijke Ahold N.V.
Albert Heijnweg 1
1507 EH Zaandam
The Netherlands
Telecopier: 011 31 75 659 83 66
Attention: Paul P.J. Butzelaar
with a copy to:
White & Case LLP
1155 Avenue of the Americas
New York, New York 10036
Telecopier: (212) 354-8113
Attention: Maureen Brundage, Esq.
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<PAGE> 43
If to the Seller:
The 1224 Corporation
c/o Samuel Kastner, Esq.
Ginsburg, Feldman and Bress
1250 Connecticut Avenue, NW
Washington, DC 20036
Telecopier: (202) 637-9195
with a copy to:
Ginsburg, Feldman and Bress
1250 Connecticut Avenue, NW
Washington, DC 20036
Telecopier: (202) 637-9195
Attention: Samuel Kastner, Esq.
If to the Corporation:
Giant Food Inc.
6300 Sheriff Road
Landover , MD
Telecopier: (301) 341-3954
Attention: David W. Rutstein, Mark Berey
with a copy to:
Jorden, Burt, Berenson & Johnson
1025 Thomas Jefferson St. NW
Suite 400 East
Washington, DC 20007
Telecopier: (202) 965-8104
Attention: Wayne Johnson
or to such other person as shall be designated in writing by any such party, and
such notice or communication shall be deemed to have been given as of the date
so delivered, sent by telecopier or mailed.
Section 9.7 Binding Effect; Benefit; Assignment. This
Agreement shall inure to the benefit of and be binding upon the parties hereto
and, with respect to the provisions of Section 6.7 hereof, shall inure to the
benefit of the Persons benefiting from the provisions thereof who are intended
to be third party beneficiaries thereof and, in each such case, their respective
successors and permitted assigns, but neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto without the prior written consent of the other parties.
Notwithstanding anything in this Section 9.7 to the contrary, it is
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<PAGE> 44
expressly understood and agreed that the Purchaser may assign this Agreement and
its rights, interests and obligations hereunder to any Affiliate of the
Purchaser. Nothing in this Agreement, expressed or implied, is intended to
confer on any Person other than the parties hereto or their respective
successors and permitted assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
Section 9.8 Best Efforts. Subject to the terms and conditions
provided herein, each of the Purchaser and the Seller shall, and the Seller
shall use its reasonable best efforts to cause the Corporation to, with respect
to matters within their respective control, cooperate and use their respective
best efforts to, (i) take, or cause to be taken, all appropriate action, and do,
or cause to be done, all reasonable things necessary and proper under applicable
law to consummate the transactions contemplated hereby as promptly as
practicable, (ii) obtain from any governmental authority, regulatory
organization or other instrumentality or agency or any other third party any
licenses, permits, consents, waivers, approvals, authorizations, qualifications,
or orders required to be obtained or made by the Corporation, the Purchaser, the
Seller or any of their subsidiaries in connection with the authorization,
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby, and (iii) as promptly as practicable, make, or
cause to be made, all filings and other submissions necessary, proper or
advisable with respect to this Agreement and the transactions contemplated
hereby under (x) the HSR Act and any related governmental request thereunder and
(y) any other applicable laws or regulations; provided, however, that no loan
agreement or contract for borrowed money shall be repaid except as currently
required by its terms, in whole or in part, and no contract shall be amended to
increase the amount payable thereunder or otherwise to be more burdensome to the
Corporation or any of its subsidiaries in order to obtain any such consent,
approval or authorization without first obtaining the written approval of the
Purchaser. The Purchaser and the Seller shall, and the Seller shall use its
reasonable best efforts to cause the Corporation to, cooperate with each other
in connection with the making of all such filings, including providing copies of
all such documents to the non-filing party and its advisors prior to filing and,
if requested, to accept all reasonable additions, deletions or changes suggested
in connection therewith. The Purchaser and the Seller shall, and the Seller
shall use its reasonable best efforts to cause the Corporation to, use their
respective best efforts to furnish to each other all information required for
any application or other filing to be made pursuant to the rules and regulations
of any applicable law in connection with the transactions contemplated by this
Agreement. Notwithstanding anything to the contrary in this Section 9.8, none of
the Purchaser, the Seller or the Corporation or any of their respective
subsidiaries shall be required to sell or otherwise dispose of, or hold separate
(through the establishment of a trust or otherwise) particular assets or
categories of assets, or business of the Purchaser, the Seller, the Corporation
or any of their affiliates or withdraw from doing business in a particular
jurisdiction or take any other action that, in the aggregate, in the sole
judgment of the Purchaser, would reasonably be expected to substantially impair
or substantially reduce the Purchaser's ability to control, direct or manage on
a day-to-day basis the business or affairs of the Corporation or to
substantially impair or substantially reduce the overall benefits expected, as
of the date hereof, to be realized by the Purchaser from the consummation of the
transactions contemplated by this Agreement or would have a material adverse
effect on the business, properties, assets, liabilities, condition (financial or
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<PAGE> 45
otherwise), prospects, operations or results of operations of the Purchaser and
its subsidiaries taken as a whole or the Corporation and its subsidiaries taken
as a whole.
Section 9.9 Counterparts. This Agreement may be executed in
two or more counterparts, each of which shall be deemed an original, but all of
which shall constitute the same Agreement.
Section 9.10 Entire Agreement. This Agreement, including the
other documents referred to herein which form a part hereof, contains the entire
understanding of the parties hereto with respect to the subject matter contained
herein and therein. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
Section 9.11 Amendments. This Agreement may not be changed,
amended, waived, or modified orally, but only by an agreement in writing signed
by the Purchaser and the Seller.
Section 9.12 Severability. If any term, provision, covenant or
restriction contained in this Agreement is held by a court of competent
jurisdiction or other authority to be invalid, void, unenforceable or against
its regulatory policy, the remainder of the terms, provisions, covenants and
restrictions contained in this Agreement shall remain in full force and effect
and shall in no way be affected, impaired or invalidated.
Section 9.13 Termination of Agreement. All parties hereto
agree to use their best efforts to fulfill the requirements of Articles VII and
VIII as soon as practicable. If any precondition to the completion of the
transactions contemplated hereby is not fulfilled on or prior to December 31,
1998, then this Agreement shall terminate and become void and have no effect,
without any liability hereunder of either party to the other party.
Section 9.14 Specific Performance. Each of the parties hereto
recognizes and acknowledges that a breach by it of any covenants or agreements
contained in this Agreement will cause the other party to sustain damages for
which it would not have an adequate remedy at law for money damages, and
therefore each of the parties hereto agrees that in the event of any such breach
the aggrieved party shall be entitled to the remedy of specific performance of
such covenants and agreements and injunctive and other equitable relief in
addition to any other remedy to which it may be entitled, at law or in equity.
Section 9.15 Remedies Cumulative. All rights, powers and
remedies provided under this Agreement or otherwise available in respect hereof
at law or in equity shall be cumulative and not alternative, and the exercise of
any thereof by any party shall not preclude the simultaneous or later exercise
of any other such right, power or remedy by such party.
Section 9.16 No Waiver. The failure of any party hereto to
exercise any right, power or remedy provided under this Agreement or otherwise
available in respect hereof at law or in equity, or to insist upon compliance by
any other party hereto with its obligations hereunder, and any custom or
practice of the parties at variance with the terms hereof shall not constitute a
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<PAGE> 46
waiver by such party of its right to exercise any such or other right, power or
remedy or to demand such compliance.
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<PAGE> 47
IN WITNESS WHEREOF, each of the Purchaser and the Seller has
caused its corporate name to be hereunto subscribed by its officer thereunto
duly authorized all as of the day and year first above written.
KONINKLIJKE AHOLD N.V.
By: /s/ Robert Zwartendijk
Name: Robert Zwartendijk
Title: Executive Vice President
THE 1224 CORPORATION
By: /s/ Pete L. Manos
Name: Pete L. Manos
Title: President
<PAGE> 48
ANNEX A
The capitalized terms used in this Annex A shall have the
meanings set forth in the Stock Purchase Agreement to which this Annex A is
annexed (the "Agreement").
Notwithstanding any other provision of the Tender Offer or the
Agreement, the Purchaser shall not be required to accept for payment or, subject
to any applicable rules and regulations of the SEC, including Rule 14e-1c under
the Exchange Act, pay for any Class A Shares tendered pursuant to the Tender
Offer and may terminate or amend the Tender Offer and may postpone the
acceptance of and payment for Class A Shares (i) if there shall not have been
validly tendered and not withdrawn prior to the expiration of the Tender Offer a
number of Class A Shares which represents at least sixty-five percent (65%) of
the total Class A Shares outstanding on a fully diluted basis, (ii) if the
Agreement shall have been terminated in accordance with its terms or the
purchase and sale of the Class AC Shares pursuant to the Agreement shall not
have been consummated prior to or simultaneously with the consummation of the
purchase of the Class A Shares pursuant to the Tender Offer, or (iii) if, at any
time on or after the date of the Agreement and at or before the time of payment
for any such Class A Shares (whether or not any Class A Shares have theretofore
been accepted for payment or paid for pursuant to the Tender Offer), any of the
following shall occur:
(a) there shall be threatened, instituted or pending any
action or proceeding by any government or governmental authority or agency,
domestic or foreign, or by any other Person, domestic or foreign, before any
court or governmental authority or agency, domestic or foreign, other than the
routine application of the waiting period provisions of the HSR Act (including a
request for additional information or documentary material pursuant to 16 C.F.R.
Sec. 803.20) to the purchase of the Class AC Shares pursuant to the Agreement,
without the consent of the Purchaser, (i) challenging or seeking to, or which
could reasonably be expected to make illegal, impede, materially delay or
otherwise directly or indirectly restrain, prohibit or make more costly the
acquisition of the Class AC Shares or the Tender Offer or seeking to obtain
material damages, (ii) seeking to prohibit or limit the ownership or operation
by the Purchaser of all, or, in the sole judgment of the Purchaser, a portion
that would reasonably be expected to substantially impair or substantially
reduce the Purchaser's ability to control, direct or manage on
<PAGE> 49
Annex A
Page 2
a day-to-day basis the business or affairs of the Corporation or to
substantially impair or substantially reduce the overall benefits expected, as
of the date hereof, to be realized by the Purchaser from the consummation of the
transactions contemplated by the Agreement or would have a material adverse
effect on the business, properties, assets, liabilities, condition (financial or
otherwise), prospects, operations or results of operations of the Purchaser and
its subsidiaries taken as a whole or the Corporation and its subsidiaries taken
as a whole (a "significant portion"), of the business or assets of the
Corporation or any of its subsidiaries or to compel the Purchaser to dispose of
or hold separately all, or, in the sole judgment of the Purchaser, a significant
portion of the business or assets of the Purchaser or the Corporation or any of
its subsidiaries, or seeking to impose any limitation on the ability of the
Purchaser to conduct such business or own such assets which limitation, in the
sole judgment of the Purchaser, would reasonably be expected to substantially
impair or substantially reduce the Purchaser's ability to control, direct or
manage on a day-to-day basis the business or affairs of the Corporation or to
substantially impair or substantially reduce the overall benefits expected, as
of the date hereof, to be realized by the Purchaser from the consummation of the
transactions contemplated by the Agreement or would have a material adverse
effect on the business, properties, assets, liabilities, condition (financial or
otherwise), prospects, operations or results of operations of the Purchaser and
its subsidiaries taken as a whole or the Corporation and its subsidiaries taken
as a whole, (iii) seeking to impose limitations on the ability of the Purchaser
effectively to acquire, hold or exercise full rights of ownership of any Shares,
which limitations, in the sole judgment of the Purchaser, are significant, or
(iv) seeking to require divestiture by the Purchaser of any Shares;
(b) there shall be any action taken, or any statute, rule,
regulation, legislation, interpretation, judgment, order or injunction proposed,
enacted, enforced, promulgated, amended, issued or deemed applicable to (i) the
Purchaser, the Corporation or any subsidiary of the Corporation or (ii) the
Tender Offer or the acquisition of any Shares, by any legislative body, court,
government or governmental, administrative or regulatory authority or agency,
domestic or foreign, other than the routine application of the waiting period
provisions of the HSR Act (including a request for additional information or
documentary material pursuant to 16 C.F.R. Sec. 803.20) to the purchase of the
Class AC Shares pursuant to the Agreement, which could reasonably be expected to
directly or indirectly, result in any of the consequences referred to in clauses
(i) through (iv) of paragraph (a) above;
(c) any change shall have occurred or been threatened (or any
condition, event or development shall have occurred or been threatened involving
a prospective change), or the Purchaser shall have become aware of any fact,
that is reasonably likely to have a Material Adverse Effect on the Corporation;
(d) there shall have occurred (i) any general suspension of
trading in, or limitation on prices for, securities on any national securities
exchange or in the over-the-counter market (excluding any coordinated trading
halt triggered solely as a result of a specified decrease in a market index),
(ii) a declaration of a banking moratorium or any suspension of payments in
respect of banks in the United States, the Netherlands or any other jurisdiction
of incorporation or organization of any bank or other financial institution in
any manner involved with the financing of the purchase of the Class AC Shares
pursuant to the Agreement or the Tender Offer, (iii) any material limitation
(whether or not mandatory) by any U.S. Federal, state or foreign governmental
<PAGE> 50
Annex A
Page 3
authority or agency on the extension of credit by banks or other lending
institutions, (iv) a commencement or escalation of a war or armed hostilities or
other national or international calamity directly or indirectly involving the
United States or the Netherlands or (v) in the case of any of the foregoing
existing at the time of the commencement of the Tender Offer, a material
acceleration or worsening thereof;
(e) any of the representation or warranties made by the Seller
in the Agreement (in the case of any representations or warranties with respect
to the Corporation, without regard to the knowledge of the Seller) that are
qualified as to materiality shall be untrue or incorrect in any respect or any
such representations and warranties that are not so qualified shall be untrue or
incorrect in any respect which would have a Material Adverse Effect, in each
case as of the date of the Agreement and the scheduled expiration date of the
Tender Offer as if such representation or warranty were made at the time of such
determination and except as to any such representation or warranty which speaks
as of a specific date or for a specific period, which must be untrue or
incorrect in the foregoing respects as of such specific date or period;
(f) (i) the Board of Directors of the Corporation shall have
failed to approve or recommend the Tender Offer, (ii) the Board of Directors of
the Corporation shall have withdrawn or modified in a manner adverse to the
Purchaser the approval or recommendation of the Tender Offer or approved or
recommended any Acquisition Proposal, (iii) any corporation, partnership, person
or other entity or group shall have entered into a definitive agreement or an
agreement in principle with the Corporation with respect to any Acquisition
Proposal, or (iv) the Board of Directors of the Corporation or any committee
thereof shall have resolved to do any of the things set forth in clauses (ii) or
(iii) of this paragraph (f);
(g) the Seller shall have failed to perform in any material
respect any obligation or to comply in any material respect with any agreement
or covenant of the Seller to be performed or complied with by it under the
Agreement and, in the case only of failures to perform any agreement or covenant
of the Seller pursuant to Section 6.3 of the Agreement, such failure to perform
would have a Material Adverse Effect or materially adversely affect the ability
of the Purchaser to consummate the transactions contemplated by the Agreement or
have a material adverse effect on the value of the Corporation and its
subsidiaries taken as a whole; or
(h) the Corporation or any of its subsidiaries shall have (i)
failed to act in accordance with Section 6.3(b)(iii)(A) and (B) and Section
6.5(b)(i)(B) and (iv) of the Agreement or (ii) taken any of the actions listed
in Section 6.3(c)(iii)(A)-(O) or Section 6.5(b)(i)(A) of the Agreement;
which, in the reasonable judgment of the Purchaser, in any such case and
regardless of the circumstances giving rise to any such condition, makes it
inadvisable to proceed with such payment.
The foregoing conditions (including those set forth in clauses
(i)-(iii) above) are for the sole benefit of the Purchaser and may be asserted
by the Purchaser, or may be waived by
<PAGE> 51
Annex A
Page 4
the Purchaser, in whole or in part at any time and from time to time in its sole
discretion. The failure by 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 Purchaser concerning the events
described in this Annex A will be final and binding upon all parties.
<PAGE> 1
Exhibit 2
The 1224 Corporation
6300 Sheriff Road
Landover, Maryland 20785
May 19, 1998
Dear Giant Associates:
As you may have heard by now, The 1224 Corporation has announced that
Izzy Cohen's controlling shares of Giant Class AC voting stock will be sold to
Royal Ahold, a leading international food retailer with annual sales of more
than $26 billion. (As you may recall, Izzy's stock is held and voted by The 1224
Corporation, whose Board is comprised of four Giant officers and Izzy's sister,
Lillian Solomon.)
I know that this news may have come as a surprise to you, but I want to
quickly assure you that The 1224 Corporation's decision to sell to Ahold is the
result of careful planning and analysis over a long period of time. In making
our decision, we, the members of The 1224 Corporation, have kept the traditions
and culture of Giant uppermost in our minds.
Why did we choose Ahold? The answer is quite simple. We looked for the
company which most closely approximates our own. We see in Ahold much of what we
see in ourselves: a consistent record of integrity, good employee and community
relations and service to customers. After careful study, we concluded that Ahold
best shares our philosophy of putting people first and not compromising on
quality, value or service.
You are undoubtedly aware of the many recent mergers in the supermarket
industry. The trend towards consolidation has been profound and wide ranging. In
announcing this acquisition, we recognize that over time, the winners in this
industry will be those companies who have joined together to be the strongest
competitors by achieving the greatest synergies and efficiencies. These mergers
ultimately bring the greatest value to the customer. By making this move now
with such a successful company, we are helping to secure the future of Giant and
all of its associates.
For many years, we have watched the growth and success of Ahold with
great admiration. Ahold has a clear, long-term vision and the capacity and
skills to achieve its vision. It is one of the leaders of the retail grocery
industry in this country and in the world. More than half of the Ahold-owned
companies, both union and non-union, are in the United States, including Giant
of Carlisle, BI-LO and Stop & Shop.
What will happen to Giant as we know it? Historically, Ahold has left
the management of companies it acquires in place because they know local
management has the best feel for current associates, customers and local
operating conditions. That's what they've done with their U.S. companies, and
that's what we expect to happen here. The widely respected Giant name and Giant
brands will continue. This transaction offers Giant the opportunity to be even
stronger in
<PAGE> 2
the years ahead. Of course, there will be changes, but we expect them to be
positive for Giant in all respects.
To help you get to know Ahold, I'm enclosing a question and answer
sheet, which includes a description of Ahold and its affiliates, along with
information about Giant and how we believe this acquisition will affect it and
you. If you have additional questions, beginning Wednesday, we've also
established hot lines for you to call (tel. 301-341-4362 and 301-341-4230)
between the hours of 10:00 a.m. and 4:00 p.m.
We'll continue to keep you informed as we work through the details of
the transaction, but I wanted to let you know immediately about this very
positive step for Giant and all its associates. We are excited about Giant's
future with Ahold.
Very truly yours,
The 1224 Corporation
Pete Manos, President
<PAGE> 3
QUESTIONS AND ANSWERS
TO: Giant Associates
FROM: The 1224 Corporation
DATE: May 19, 1998
MEMORANDUM
SUBJ: Sale of Giant Controlling Shares to Ahold
Here is a list of the questions that we thought would be foremost in
your minds on hearing our announcement of the sale. We've answered the
questions to the best our ability based on the transaction as we know it today.
However, these answers may need some adjustment as the transaction progresses.
Please keep in mind, too, that in the meantime, changes may be made by Giant in
the ordinary course of business.
We will continue to keep you updated as new information becomes
available.
QUESTION 1: How will this sale benefit Giant and why did The 1224 Corporation
decide to sell?
ANSWER: As you have been reading in the newspapers (and as you have seen in our
marketplace) in the last several years and even in the last several months, the
trend toward consolidation of American companies has been profound. American
supermarkets have been merging at record rates.
We've watched a number of high-quality regional food chains like Giant
merge with other companies. Ralphs, Vons, Stop & Shop, Shoppers Food Warehouse,
Quality Food Centers, and many others, have decided to join forces with other,
bigger supermarket chains to compete better in a rapidly changing marketplace.
We have realized that size means stability, opportunity for growth and, most
importantly, the strength to compete aggressively and successfully. Over time,
that combination means protection of existing jobs and the creation of new jobs,
while benefiting our customers.
Giant and Ahold are each highly successful companies who bring
expertise, experience and commitment to the table. Combined with Ahold, Giant
will be hard to beat. Izzy Cohen, who was the ultimate competitor, would have
been very pleased.
QUESTION 2: Who is Ahold?
ANSWER: Ahold, the 5th largest food retailer in the United States, is one of the
largest and most respected supermarket chains in the world. Ahold's U.S.
headquarters is in Atlanta, Georgia, and their international headquarters is in
the Netherlands. After the completion of this sale, Ahold will own more than
1,000 stores and employ almost 140,000 associates in the U.S.
<PAGE> 4
Like Giant, food is Ahold's core business, and they believe that the customer
comes first. Ahold has a history of 110 years in the business, with more than 20
years in the United States. They are experienced in achieving economies of
scale, and their commitment to innovation and quality is unshakable. Ahold
shares Giant's philosophy of putting people first, without compromising quality,
value or service.
QUESTION 3: When will the sale be complete?
ANSWER: We must receive regulatory approvals from the government. We expect to
close the transaction sometime this summer.
QUESTION 3A: Do you expect any significant antitrust issues with Ahold's
acquisition of Giant?
ANSWER: No. The acquisition is highly complementary. There is very little
geographical overlap between the Ahold and Giant supermarket chains. We do not
expect any significant antitrust divestitures.
QUESTION 4: What will happen to Giant after the sale?
ANSWER: Historically, Ahold has kept the management of companies it acquires in
place because they believe local management has the best view of local customers
and local operating conditions. That's what they've done with their other U.S.
companies and that's what we expect to see here. The Giant name and Giant brands
will continue, and Giant's stores will continue to operate as usual. Giant's
growth will benefit from the access to Ahold's capital and its purchasing
efficiencies.
QUESTION 5: What will happen to my benefits, such as:
--retirement plan;
--vacation and paid holidays;
--health care plan;
--dental plan;
--vision plan;
--prescription plan;
--employee assistance services plan;
--Flex/Fund account;
--life insurance;
--short term disability benefit;
--long term disability benefit;
--Giant employee check cashing card; and
--credit union.
ANSWER: At least through December 31, 1999, the sale should have no material
effect upon these benefits. However, as has always occurred at Giant,
administrative associates' benefits are subject to review and may be modified at
any time. Of course, union associates' benefits are determined through the
collective bargaining process.
QUESTION 6: What will happen to my 401K plan?
ANSWER: Your 401K plan benefits will remain substantially unchanged at least
through
<PAGE> 5
December 31, 1999, except that the stock match will be changed to a cash match.
If Ahold does terminate Giant's 401K plan and transfers your funds into Ahold's
current 401K plan, all of your funds would be protected, but the matching
contribution percentages would be reduced after the transfer.
QUESTION 7: Will Giant's stock continue to trade between now and the closing of
the sale?
ANSWER: Yes.
QUESTION 8: If I am a Giant stockholder, what will happen to my Giant stock?
ANSWER: Ahold is making an offer (called a "tender offer") to buy all of the
Giant Class A Common Stock at $43.00 per share. The price could increase to
$43.50 if Sainsbury sells its Class AL Shares to Ahold before the closing. You
will receive the tender offer in the mail. PLEASE REMEMBER THAT THE SPECIFIC
TERMS OF THAT TENDER OFFER CONTROL AND THAT THE TENDER OFFER PROCESS WILL
PROCEED STRICTLY IN ACCORDANCE WITH THE PRECISE TERMS OF THE TENDER OFFER. If
you decide to sell your stock pursuant to the tender offer and if the sale is
approved by the appropriate regulatory authorities, you will be paid cash for
your shares of stock under the terms of the tender offer. This sale will be a
taxable event and may even be capital gains event, in accordance with IRS
regulations.
QUESTION 8A: Is there any guarantee that this transaction will close?
ANSWER: Ahold and The 1224 Corporation fully expect that the transaction will
close, but there are no guarantees.
QUESTION 9: What if I don't want to wait for the tender offer and decide to sell
my stock now?
ANSWER: That is the individual's personal decision and you are free to do so.
QUESTION 10: If I decide to sell my stock pursuant to the tender offer, when
will I get my money?
ANSWER: You will receive a check after the closing, which we expect to occur
sometime this summer.
QUESTION 11: What if I have Giant stock in my 401K Plan?
ANSWER: Any Giant stock held in the 401K can be tendered at the sale price, as
set out in the answer to Question 8 above. After closing, Giant stock will not
be an investment option. The dollar amount you are currently investing in Giant
stock in the plan will be reallocated in accordance with your investment
choices.
QUESTION 12: What about dividends on Giant stock?
ANSWER: The dividend to shareholders of record on May 8, 1998, is payable on
June 5, 1998. As always, Giant's Board of Directors may decide to declare future
dividends on a quarter-by-quarter basis.
QUESTION 13: What about the employee's stock purchase plan?
ANSWER: As set out in answer to Question 8 above, you will receive information
regarding
<PAGE> 6
the tender offer from Ahold for any Giant stock you currently own or purchase
between now and the closing date. The Giant stock purchase plan will cease as of
the closing date but you will be eligible to participate in Ahold's Stock
Purchase Plan.
QUESTION 14: If I'm a Giant option holder, what happens to my Giant stock
options?
ANSWER: Option holders will receive a separate memo explaining the procedures
for exercising options.
QUESTION 15: Will Giant continue to build new stores?
ANSWER: We expect that Giant will continue to pursue attractive new store
opportunities, expansions and renovations. With $26 billion in sales, Ahold
provides a strong capital foundation for our future expansion.
QUESTION 16: What will happen to Giant's non-store operations after the sale?
ANSWER: Over the last year, Giant has been appraising all of its operations and
policies to insure that they are efficient. We expect this program will continue
after the sale.
QUESTION 17: How will this sale affect Giant's union contracts?
ANSWER: Giant's contracts will be honored, and we expect no changes in Giant's
union relationships as a result of this transaction.
QUESTION 18: Will Pete Manos still be President and CEO of Giant after the
closing?
ANSWER: Yes.
QUESTION 19: Will Giant's headquarters remain in Landover?
ANSWER: Yes.
QUESTION 20: Will my paycheck still come from Giant?
ANSWER: Yes.
QUESTION 21: Where will my personnel records be kept?
ANSWER: Giant will continue to hold and handle your personnel records.
QUESTION 22: What other U.S. operations does Ahold own?
ANSWER: Ahold owns BI-LO, Stop & Shop, Giant of Carlisle (Pennsylvania)
(including Edwards), and Tops (including Finast) supermarkets.
QUESTION 23: Who is the President of Ahold?
ANSWER: The President and CEO of the parent company, Royal Ahold, is Cees
(pronounced "Case") van der Hoven (pronounced "von der Hooven"). The President
and CEO of the American subsidiary, Ahold USA, is Rob Zwartendijk (pronounced
"Schwartz en dak")
QUESTION 24: Will there be career opportunities through Ahold?
ANSWER: Ahold has a proven track record in the area of encouraging interested
and qualified employees to develop their career opportunities throughout all of
Ahold's affiliates.
<PAGE> 7
QUESTION 25: What will happen to Sainsbury after the sale?
ANSWER: That is something that Sainsbury must decide.
QUESTION 26: What will happen to The 1224 Corporation after the sale?
ANSWER: On completion of the transaction, The 1224 Corporation will cease to
exist.
QUESTION 27: How will I be kept informed of changes as they occur?
ANSWER: You'll be kept informed by routine bulletins, e-mail and your
manager/supervisor.
QUESTION 28: Will I receive an updated benefits handbook?
ANSWER: Yes, further information will be detailed in an updated benefits book
that you will receive as soon as possible as the changes take place, and the
changes will be highlighted for quick reference.
QUESTION 29: What if I have additional questions?
ANSWER: Specific hot lines have been established beginning Wednesday during the
hours of 10:00 a.m. and 4:00 p.m. to take your questions. The telephone numbers
are (301) 341-4362 and (301) 341-4230.
<PAGE> 8
QUESTIONS AND ANSWERS
TO: Giant Associates
FROM: The 1224 Corporation
DATE: May 19, 1998
MEMORANDUM
SUBJ: GIANT STOCK OPTIONS
Here's a list of the questions and answers regarding Giant Stock
Options. We've answered the questions to the best of our ability for active
associates based on the transaction as we know it today. We will continue to
keep you updated as new information becomes available.
QUESTION 1: What will happen to my Giant stock options at the closing of the
sale?
ANSWER: You will be paid cash for your stock options, vested or unvested, for
the difference per share between the option price(s) and $43.00 All of your
unvested stock options will accelerate and become vested. For example, if you
hold an option for 100 shares which was granted on March 1, 1998, you will be
paid for all 100 options. All waiting periods will be waived.
QUESTION 2: When will I be paid for my stock options?
ANSWER: You will receive a check after the closing, which we expect to occur
sometime this summer.
QUESTION 3: Can I exercise my stock options prior to the closing of the sale?
ANSWER: You can continue to exercise vested options in the same manner as
always, subject to the terms of your option agreement. As always, if you choose
to exercise your options through a broker, you will be responsible for the
payment of any fees charged by the broker. Your unvested options will accelerate
at the time of the closing and be handled as described in the answer to
Questions 1 and 2 above.
QUESTION 3A: What if I hold stock options that expire within the next several
months?
ANSWER: The expiration date of existing stock options will not be
modified or extended. Therefore, you would want to act on your unexercised
options prior to their expiration date.
QUESTION 4: Will the Giant stock option plan continue after the closing?
ANSWER: No, the Giant stock option plan will end. Ahold does have a stock option
plan for certain levels of management and has bonus programs which serve as
incentives for a broader management group.
QUESTION 5: Will additional stock options be granted while this transaction is
pending?
ANSWER: No.
<PAGE> 1
PETE MANOS COMMENTS
TO GIANT ASSOCIATES
Izzy Cohen died two and a half years ago this week.
Since his death, we have all heard questions, comments and speculation
as to what will happen to his AC shares - the shares that control our company.
As you know, in his Will, Izzy created The 1224 Corporation in which I
and four of my colleagues were given the responsibility as Directors to make
that decision. During the last two and half years, the five of us have been
working hard on this important subject. We have consulted with experts; we have
carefully analyzed all of the alternatives; and we have brought to bear our best
judgement, all with the objective of protecting the shareholders and associates
of Giant as Izzy requested us to do in his Will.
Today marks the culmination of our work. We announce today that we have
reached an agreement to sell the controlling AC shares to Royal Ahold - the
fifth largest supermarket chain in the United States, and one of the largest and
most respected supermarket chains in the world. Ahold has agreed to buy the AC
shares for $43.00 per share and, as required by Izzy's Will, to offer the same
price ($43.00) for all of the Class A Common shares. If Ahold purchases the
class AL voting shares now owned by the Sainsburys, that price would increase to
$43.50.
Why did we choose Ahold? The answer is quite simple. We looked for the
company which most closely approximates our own. We see in Royal Ahold much of
what we see in ourselves: A consistent record of integrity, good employee and
community relations, and service to customers. After careful study, we concluded
that Ahold best shares our philosophy of putting people first and not
compromising on quality, value or service.
Royal Ahold, which is based in The Netherlands, is the food retailer of
choice for
<PAGE> 2
approximately 20 million customers who shop at its 3,200 stores in 17 countries
every week. They employ 220,000 associates and had sales of $26 billion last
year. During the last two years, they have increased their net earnings compared
with the prior year by an average of more than forty percent.
Under the leadership of Cees van der Hoeven, Ahold has had a clear,
long-term vision, and the capacity and the skills to achieve its vision. Ahold
is committed to the United States. After the completion of this purchase, Ahold
will have more than 1,000 stores in the U.S. and will employ almost 140,000
people in this country. Ahold itself has had a history of commercial success for
more than 110 years and for more than 20 years, has owned and operated retail
grocery stores under local United States management. Its shares are traded on
the New York Stock Exchange.
You might ask why we chose to sell in the first place. Why not hold the
AC shares indefinitely and compete just as we are? Well, as you have been
reading in the newspapers (and as you have seen in our marketplace), in the last
several years and even in the last several months, the trend towards
consolidation of American companies has been profound. American supermarkets
have been merging at record rates.
We have watched a number of high-quality regional food chains like ours
merge with other companies. Ralph's, Vons, Stop and Shop, Shoppers Food
Warehouse, Quality Food Centers and many others have decided to join forces with
other, bigger supermarket chains to compete better in a rapidly changing
marketplace. They have realized, as we do today, that size means stability,
opportunity for growth and most importantly, the strength to compete
aggressively and successfully. Over time, that combination means protection of
existing jobs and the creation of new jobs, while benefitting our customers.
In our case, it also means the joinder of two highly-successful
companies who
2
<PAGE> 3
bring expertise, experience and commitment. This will be an unbeatable
combination. Izzy Cohen, who was the ultimate competitor, would have been very
pleased.
We will continue to operate under the Giant Food name. Historically,
Ahold has kept in place the management of the companies it acquires, because
Ahold believes that local management has the best view of local customers and
local operating conditions. That's what they've done with their other American
companies, and that's what we expect to see here.
Ahold has been successful because it has developed a unique worldwide
system to achieve efficiencies while keeping the focus on the local customer.
Those efficiencies enable each member company to reduce expenses and thereby add
value for the customer. Ahold has stores around the world, but its strategy
depends upon decentralized, local decision-making. As in all Ahold companies,
our local Giant management team will continue to be responsible for market
operations, store formats, quality control, consumer marketing, and most
importantly, service to our customers.
I would now like you to see a short video presentation about Ahold.
I know that you will have many questions. I'd like to turn the program
over to David Rutstein, our Chief Administrative Officer, to discuss same of the
details. After David speaks, we welcome your questions.
3
<PAGE> 1
CONTACT: FOR RELEASE: Immediate
TELEPHONE:
CONTACTS: The 1224 Corporation Ahold
Barry F. Scher Hans Gobes
Work- (301) 341-4710 Work- 011-31-75-659-5665
Home- (202) 244-2354 Home- 011-31-23-527-0456
Note: The time zone in the
Netherlands is six
hours ahead of
eastern daylight
savings time in the
U.S.
ROYAL AHOLD AGREES TO ACQUIRE CONTROLLING STOCK OF GIANT FOOD INC.
Landover, Maryland-Based Company to Maintain Name, Management Team
Landover, MD. May 19, ---- The 1224 Corporation, the owner of the controlling AC
stock of Giant Food Inc. (see appendix for Giant Food stock class description)
announced today that it has entered into an historic agreement under which all
of the controlling Class AC Voting Stock will be acquired by Royal Ahold, a
leading international food retailer with annual sales of more than $26 billion.
Executives of The 1224 Corporation and Ahold expressed satisfaction over the
agreement - one which is expected to advance both companies" long-term vision
and commitment to quality and community service.
According to terms of the stock purchase agreement signed by The 1224
Corporation and Ahold, Ahold will acquire all of The 1224 Corporation"s Class AC
Voting Stock at a price of $43.00 per share -- giving Ahold controlling interest
in Giant Food by virtue of its ability to elect a majority of directors on
Giant"s Board of Directors. Ahold is now commencing a tender offer for all
outstanding Class A Non-Voting Common shares of Giant at the same price of
$43.00 per share in cash. If, in addition, Ahold enters into a binding agreement
to acquire all of the Class AL voting shares now owned by J. Sainsbury plc
before the expiration date of the tender offer, that price would increase to
$43.50 per share. The purchase is subject to government regulatory approvals an
other customary conditions.
In acquiring Giant Food"s controlling shares, Ahold assumes ownership of one of
the best known and most respected names in food retailing. Founded in 1936,
Giant"s last Chairman and CEO, Izzy Cohen guided the growth of the Company from
a single store operation to an Eastern Seaboard multi-state food chain. In doing
so, Giant Food has always maintained its adherence to Izzy Cohen"s values:
quality, service and community involvement. According to President of The 1224
Corporation Pete Manos, "In his will, Izzy Cohen appointed five people,
including myself, to make all decisions concerning the Class AC Voting Stock.
After a careful, deliberative process, we have decided to sell our shares to
Ahold - a company whom we believe is extraordinarily well-equipped to sustain
Izzy"s and Giant"s record of integrity, solid employee
<PAGE> 2
and community relations and service to customers. Ahold has a clear, long-term
commitment to growth and the capacity and skills to achieve its vision - a
vision which is parallel to our own."
Indeed, after the stock purchase, Giant"s 164 stores in Virginia, the District
of Columbia, and Maryland and 13 Super G stores in New Jersey, Pennsylvania and
Delaware, including 3 free-standing pharmacies will continue to conduct its
business as usual with the same management team. This team, which oversaw the
company"s recently reported annual sales of $4.2 billion and net profits of $71
million for their fiscal year which ended in February 28, 1998, also will
continue to lead Giant"s 28,000 employees from Giant"s corporate headquarters in
Landover, Maryland.
Royal Ahold, a rapidly expanding international food retailer, owns and operates
within their Ahold USA division four leading supermarket chains in the United
States. They are Bi Lo headquartered in Mauldin, South Carolina, Stop & Shop,
based in Quincy, Massachusetts, Giant Food Stores (including Edwards) of
Carlisle, Pennsylvania; and Tops Markets (including Finast) headquartered in
Buffalo, New York. Ahold has operated stores in the United States since 1977 and
ranks among the top food retailers in the U.S. with 830 stores and 1997 U.S.
sales of $14.3 billion. Their U.S. stores employ over 110,000 people. The
company operates a total of over 3,200 supermarkets, hypermarkets and specialty
stores with 1997 sales of over $26 billion. Ahold"s total employment is
approximately 220,000 people and the company serves over 20 million customers
every week.
Ahold's USA CEO and President, Robert Zwartendijk, stated, "We are delighted to
welcome Giant Food into the Ahold USA family. Geographically, it is the perfect,
natural fit to our existing operations along the Eastern Seaboard.
Strategically, Giant adds critical mass and highly-developed food retailing
expertise. Locally, Giant Food has long been a highly respected supermarket
company enjoying a healthy reputation for quality, innovation and customer
service. It's a win-win situation for both companies."
Giant Food Inc. is traded on the American Stock Exchange under the symbol GFSA.
Ahold's sponsored American Depository Receipts are traded on the New York Stock
Exchange under the symbol AHO.
May 19, 1998
2
<PAGE> 3
Appendix---Description Of Giant Food's Capital Structure
Background
Giant Food's capital structure consists of three classes of shares:
- 125,000 shares of Class AC Voting Stock which elects five
directors. All of the Class AC Voting Stock is owned by The
1224 Corporation, a Delaware corporation created under the
Will of Israel Cohen who died in November, 1995.
- 125,000 shares of Class AL Voting Stock which elects four
directors. All of the Class AL Voting Stock is owned by J
Sainsbury USA Holdings, Inc., which is a subsidiary of J
Sainsbury plc, London, England.
- Approximately 59,000,000 shares of Class A Non-Voting Stock
which trades on the American Stock Exchange.
3
<PAGE> 1
FOR RELEASE: IMMEDIATE
<TABLE>
<S> <C>
CONTACTS: The 1224 Corporation Barry F. Scher Ahold
Work-(301) 341-4710 Home-(202) 244- Hans Gobes
2354 Work-011-31-75-659-5665
Home-011-31-23-527-0456
Note: The time zone in the Netherlands is six
hours ahead of eastern daylight savings
time in the U.S.
</TABLE>
As publicly announced at 9:00 a.m. May 19, 1998, Royal Ahold, the
international food retailer, and the holding company 1224 Corporation, the owner
of the controlling AC Stock of Giant Food Inc., today signed an agreement for
the purchase by Ahold of all the Class AC voting shares in Giant Food Inc. held
by the 1224 Corporation and a tender for all of the Class A non-voting stock.
Both the tender for the Class A stock and the sale of the Class AC stock will be
at a price per share of USD 43.50. WE CAN ALSO NOW REPORT THAT AHOLD HAS REACHED
AGREEMENT, SUBJECT TO CONTRACT, TO ACQUIRE FOR THE AGGREGATE AMOUNT OF USD 100
MILLION ALL THE CLASS AL VOTING SHARES CURRENTLY OWNED BY J. SAINSBURY USA
HOLDINGS INC., A SUBSIDIARY OF THE BRITISH SUPERMARKET COMPANY J. SAINSBURY
PLC., LONDON, UK. SAINSBURY WILL ALSO TENDER ITS 11.8 MILLION CLASS A NON-VOTING
SHARES IN GIANT FOOD INC.
<PAGE> 1
Exhibit 6
The 1224 Corporation
6300 Sheriff Road
Landover, Maryland 20785
May 19, 1998
Dear Giant Stockholder:
Since Izzy Cohen died two and a half years ago, we have all heard
questions, comments and speculation as to what will happen to his AC shares --
the shares that control Giant. As many of you know, in his will, Izzy created
The 1224 Corporation in which I and four of my colleagues were given the
responsibility to make that decision. During the last two and half years, the
five of us have been working hard on this important subject. We have consulted
with experts, we have carefully analyzed alternatives and we have brought to
bear our best judgment, all with the objective of protecting the stockholders
and associates of Giant as Izzy requested us to do in his will.
Today marks the culmination of our work. We have reached an agreement
to sell the AC shares to Ahold -- the fifth largest supermarket chain in the
United States and one of the largest and most respected supermarket chains in
the world. 1224 and Ahold have entered into a Stock Purchase Agreement dated May
19, 1998 under which Ahold has agreed to buy the AC shares for $43.00 per share
and, as required by Izzy's will, to offer the same price to all the holders of
Class A Common Stock. Ahold has agreed to make a tender offer for all the
outstanding Class A shares, and it may not purchase the AC shares unless it
purchases all of the Class A shares that are tendered. Ahold's obligation to
purchase shares is subject to customary conditions. Subsequent to entering into
the Stock Purchase Agreement, Ahold increased the per share price to $43.50 for
the reasons set forth in the Preliminary Note to the enclosed Schedule 14D-9.
The Board of Directors of 1224 has unanimously approved the Stock
Purchase Agreement and the tender offer and recommends that stockholders accept
the offer and tender all of their Class A shares pursuant to the offer.
In arriving at its recommendation, the Board of Directors of 1224 gave
careful consideration to a number of factors which are described in the Schedule
14D-9, including its receipt of an opinion from its financial advisor,
PaineWebber Incorporated, that the per share consideration is fair to the
holders of the AC shares from a financial point of view and the requirement that
the Strategic Planning Committee of Giant's Board of Directors receive from its
financial advisor, Wasserstein Perella & Co., Inc., an opinion that the per
share consideration is fair to the Class A holders from a financial point of
view and determine that the offer is fair to and in the best interests of the
holders of Class A shares and recommend to the Giant Board that it recommend to
the holders of the Class A shares that they accept the offer.
Additional information with respect to the transaction is contained in
the enclosed Schedule 14D-9, and we urge you to consider this information
carefully.
We appreciate and thank you for the support you have given to Giant
over the years.
Sincerely yours,
The 1224 Corporation
Pete Manos, President
