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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO
SECTION 14(d)(4) OF THE SECURITIES
EXCHANGE ACT OF 1934
GIANT FOOD INC.
(NAME OF SUBJECT COMPANY)
GIANT FOOD INC.
(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)
DAVID W. RUTSTEIN, ESQ.
SENIOR VICE PRESIDENT AND GENERAL COUNSEL
GIANT FOOD INC.
6300 SHERIFF ROAD
LANDOVER, MARYLAND 20785
(301) 341-4100
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON
AUTHORIZED TO RECEIVE NOTICE AND COMMUNICATIONS
ON BEHALF OF THE PERSON(S) FILING STATEMENT)
COPY TO:
WAYNE K. JOHNSON, ESQ.
JORDEN BURT BOROS CICCHETTI BERENSON & JOHNSON LLP
SUITE 400 EAST
1025 THOMAS JEFFERSON STREET, N.W.
WASHINGTON, D.C. 20007
(202) 965-8100
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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
$43.50 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"). The Expiration Date of the
Offer 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 the Class AC Shares
to the Purchaser pursuant to the Stock Purchase Agreement is conditioned upon,
among other things, the consummation of the Offer. Purchaser's obligation to
purchase the Class AC Shares pursuant to the Stock Purchase Agreement is
conditioned upon, among other things, that at any time on or after the date of
the Stock Purchase Agreement and at or before the time of payment for the Class
AC Shares thereunder, none of the Tender Offer Conditions (as defined below)
shall have occurred. 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. The Stock Purchase Agreement is filed
herewith as Exhibit 1.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and business address of the Company, which is the person
filing this statement, is set forth in Item 1 above.
(b)(1) The Company currently has outstanding three classes of common stock:
(i) the Class AC Shares, (ii) the Class AL Common Stock, par value $1.00 per
share (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, which are
owned by 1224, and 125,000 Class AL Shares, which 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. 1224 owns 500
Shares and Sainsbury owns 11,779,931 Shares (or approximately 20% of the
outstanding Shares).
1224 was established pursuant to the will of Israel Cohen, the son of one
of the founders of the Company. The outstanding capital stock of 1224 consists
of 125,000 shares of non-voting common stock and 500 shares of voting common
stock. All of the non-voting common stock of 1224 is owned by the Naomi and
Nehemiah
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Cohen Foundation, Inc. (the "Cohen Foundation") and each of the following
individuals owns 100 shares of the voting common stock of 1224: Pete L. Manos
(the Chairman of the Board, President and Chief Executive Officer of the
Company), Alvin Dobbin (a Director of the Company), David W. Rutstein (the
Senior Vice President -- General Counsel of the Company), Roger D. Olson (the
Senior Vice President -- Labor Relations and Personnel of the Company) and
Lillian Cohen Solomon, the sister of Mr. Cohen and the President of the Cohen
Foundation. The holders of the voting common stock of 1224 have the exclusive
right to exercise all the voting rights with respect to the Class AC Shares of
the Company owned by 1224. The Certificate of Incorporation of 1224 provides
that 1224 may sell the Class AC Shares only when authorized by a resolution
adopted by holders of 60% of the voting common stock of 1224, and such sale must
be part of a transaction pursuant to which all holders of Shares are afforded
the opportunity to participate in the sale on equal terms with 1224.
As of May 18, 1998, Mrs. Solomon beneficially owned 1,929,700 Shares, and
the Cohen Foundation owned 1,080,161 Shares.
Additional information with respect to contracts, agreements, arrangements
and understandings between the Company and certain of its directors, executive
officers and affiliates is contained in Part III of the Company's Annual Report
on Form 10-K for the fiscal year ended February 28, 1998 which is set forth in
Annex A hereto. The impact of the Stock Purchase Agreement on certain of those
arrangements is discussed in the following summary of the Stock Purchase
Agreement.
(b)(2) On May 19, 1998, 1224 and the Purchaser entered into the Stock
Purchase Agreement. Pursuant to the Stock Purchase Agreement, 1224 agreed to
sell, and the Purchaser agreed to purchase, subject to the terms and conditions
thereof, all of the Class AC Shares at a price of $43.00 per share. The Stock
Purchase Agreement, however, provided that if the Purchaser acquires, or enters
into a binding agreement to acquire, all of the Class AL Shares prior to the
Expiration Date of the Offer, the Offer Price of $43.00 per Share, net to the
seller in cash, would be increased to $43.50 per Share, net to the seller in
cash. Subsequent to the execution of the Stock Purchase Agreement, the Purchaser
and Sainsbury agreed, subject to agreement on documentation, for the acquisition
by the Purchaser of all of the Class AL Shares. Thereafter, the Purchaser
commenced the Offer at an Offer Price of $43.50 per Share, net to the seller in
cash. 1224 has agreed in the Stock Purchase Agreement to tender pursuant to the
Offer, upon the terms and subject to the conditions set forth in the Stock
Purchase Agreement, all of the Shares owned by 1224. As more fully described
below, the obligation of the Purchaser to purchase the Class AC Shares pursuant
to the Stock Purchase Agreement is subject to the satisfaction of the following
conditions: the truth of 1224's representations and warranties, the performance
by 1224 of its covenants, no injunctions, receipt of consents and approvals, the
non-occurrence of any Tender Offer Conditions, the resignation of the Directors
of the Company elected by 1224 and the approval of the Offer by the Board of
Directors of the Company. As more fully described below, the obligations of 1224
to sell the Class AC Shares is subject to the satisfaction of the following
conditions: the truth of the representations and warranties of the Purchaser,
the performance by the Purchaser of its covenants, no injunctions, the
expiration of waiting periods under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976 ("HSR Act") and consummation of the Offer.
CONDITIONS OF THE OFFER. The terms of the Offer provide that,
notwithstanding any other provision of the Offer or the Stock Purchase
Agreement, the Purchaser shall not be required to accept for payment or, subject
to any applicable rules and regulations of the Securities and Exchange
Commission (the "Commission"), including Rule 14e-1(c) under the Securities
Exchange Act of 1934 (the "Exchange Act"), pay for any Shares tendered pursuant
to the Offer and may terminate or amend the Offer and may postpone the
acceptance of and payment for Shares (i) if the Stock Purchase Agreement shall
have been terminated in accordance with its terms or the purchase and sale of
the Class AC Shares pursuant to the Stock Purchase Agreement shall not have been
consummated prior to or simultaneously with the consummation of the purchase of
the Shares pursuant to the Offer; or (ii) if, at any time on or after May 19,
1998 and before the Expiration Date, any of the following shall occur (each a
"Tender Offer Condition"):
(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
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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 Stock
Purchase Agreement, without 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 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 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 of the Stock Purchase Agreement, 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 (a "significant portion"), of the business or assets of
the Company 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 Company 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 Company or to substantially impair or
substantially reduce the overall benefits expected, as of the date of the
Stock Purchase Agreement, 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, (iii) seeking to impose limitations on the ability of the
Purchaser effectively to acquire, hold or exercise full rights of ownership
of any shares of capital stock of the Company, which limitations, in the
sole judgment of the Purchaser, are significant or (iv) seeking to require
divestiture by the Purchaser of any shares of capital stock of the Company;
(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 Company or any subsidiary of the Company or (ii) the
Offer, the acquisition of any shares of capital stock of the Company, 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 materials pursuant to 16
C.F.R. Sec. 803.20) to the purchase of the Class AC Shares pursuant to the
Stock Purchase 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
(as defined below under "Stock Purchase Agreement -- Interim Operations")
on the Company;
(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 Stock Purchase
Agreement or the Offer, (iii) any material limitation (whether or not
mandatory) by any U.S. Federal, state or foreign governmental authority or
agency on the extension of credit by banks or other lending institutions,
(iv) a commencement or escalation of a war or armed
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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 Offer, a material acceleration or worsening thereof;
(e) any of the representations or warranties made by 1224 in the Stock
Purchase Agreement (in the case of any representations or warranties with
respect to the Company, without regard to the knowledge of 1224) 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 Stock Purchase Agreement and the
scheduled expiration date of the 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 Company shall have failed to
approve or recommend the Offer, (ii) the Board of Directors of the Company
shall have withdrawn or modified in a manner adverse to the Purchaser the
approval or recommendation of the Offer or approved or recommended any
Acquisition Proposal (as defined below under "Stock Purchase
Agreement -- No Solicitation"), (iii) any corporation, partnership, person
or other entity or group shall have entered into a definitive agreement or
an agreement in principle with the Company with respect to any Acquisition
Proposal or (iv) the Board of Directors of the Company 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) 1224 shall have failed to perform in any material respect any
obligation or to comply in any material respect with any agreement or
covenant of 1224 to be performed or complied with by it under the Stock
Purchase Agreement and, in the case only of failures to perform any
agreement or covenant of 1224 described below under "Stock Purchase
Agreement -- Interim Operations", 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 Stock Purchase
Agreement or have a material adverse effect on the value of the Company and
its subsidiaries taken as a whole; or
(h) the Company or any of its subsidiaries shall have (i) failed to
act in accordance with (b)(iii)(A) and (B) under "Stock Purchase
Agreement -- Interim Operations" and (b)(i)(B) and (iv) under "Stock
Purchase Agreement -- No Solicitation" or (ii) taken any of the actions
listed in (c)(iii)(A)-(O) under "Stock Purchase Agreement -- Interim
Operations" or (b)(i)(A) under "Stock Purchase Agreement -- No
Solicitation" below;
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 acceptance for payment or payment.
The foregoing conditions are for the sole benefit of the Purchaser and may
be asserted by the Purchaser, or may be waived by 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 under "Conditions of the Offer"
will be final and binding upon all parties to the Stock Purchase Agreement.
The conditions to the Offer contained in the Stock Purchase Agreement
included a condition that there be validly tendered and not properly withdrawn
prior to the Expiration Date a number of Shares which constitutes at least 65%
of the outstanding shares on a fully diluted basis. Upon reaching agreement with
Sainsbury on May 19, 1998 to acquire the Class AL Shares, the Purchaser agreed
not to make this a condition of 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.
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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
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. 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, among other things, that
(i) Wasserstein Perella & Co., Inc. ("Wasserstein") has delivered to the
Strategic Planning Committee of the Board of Directors of the Company (the
"Special Committee") its opinion that the consideration to be received by the
holders 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, (ii) the Special Committee has determined unanimously that the
Offer is fair to, and in the best interests of, 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 and (iii) it has been
advised that five of the nine directors of the Company intend to vote to
recommend acceptance of the Offer by the holders of the Shares.
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
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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 of the Stock Purchase
Agreement) 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 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,
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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
Company or any of its subsidiaries, other than the transactions contemplated by
the Stock Purchase Agreement, 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 by the Stock Purchase
Agreement. (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
8
<PAGE> 9
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; 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.
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
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<PAGE> 10
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.
Conditions to Obligations. The obligation of the Purchaser to purchase the
Class AC Shares pursuant to the Stock Purchase Agreement is subject to the
satisfaction or waiver of a number of conditions including: (i) the
representations and warranties of 1224 contained in the Stock Purchase Agreement
being 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 representations and warranties of 1224 with
respect to the Company in the Stock Purchase Agreement being true and correct in
all material respects, without regard to the knowledge of 1224, on and as of the
Closing Date with the same effect as though such representations and warranties
had been made on such date; (ii) all of the agreements of 1224 to be performed
and all of the covenants of 1224 to be complied with pursuant to the Stock
Purchase Agreement prior to the Closing Date shall have been duly performed or
complied with, as applicable, in all material respects; (iii) 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 Offer, the purchase of the Class AC Shares or any of the
other transactions contemplated by the Stock Purchase Agreement; (iv) all
governmental and third-party consents, waivers and approvals, if any, disclosed
in any schedule to the Stock Purchase Agreement or necessary to permit the
consummation of the transactions contemplated by the Stock Purchase Agreement
shall have been received; all time periods under the HSR Act applicable to the
purchase of the Class AC shares shall have expired or been terminated; and no
governmental or other instrumentality or agency shall have required that, in
exchange for approval of the transactions contemplated by the Stock Purchase
Agreement, the Purchaser, the Company or any of their respective affiliates sell
or otherwise dispose of, or hold separate particular assets or categories of
assets, or businesses, 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 of
the Stock Purchase Agreement, 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
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<PAGE> 11
the Purchaser and its subsidiaries taken as a whole or the Company and its
subsidiaries taken as a whole; (v) at any time on or after the date of the Stock
Purchase Agreement and at or before the time of payment for the Class AC Shares
thereunder, none of the Tender Offer Conditions shall have occurred; (vi) each
of the persons elected by 1224 as a director of the Company shall have delivered
to the Purchaser a written resignation from such position; and (vii) the Board
of Directors of the Company shall have recommended acceptance of the Offer by
the holders of the Shares. The obligation of 1224 to sell the Class AC Shares
pursuant to the Stock Purchase Agreement is also subject to the satisfaction or
waiver of a number of conditions including: (i) the representations and
warranties of the Purchaser contained in the Stock Purchase Agreement being 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; (ii) all of the agreements of the Purchaser to be performed and all of the
covenants of the Purchaser to be complied with pursuant to the Stock Purchase
Agreement prior to the Closing Date shall have been duly performed or complied
with, as applicable; (iii) 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 Offer, the purchase of
the Class AC Shares or any of the other transactions contemplated by the Stock
Purchase Agreement; (iv) all applicable time periods under the HSR Act shall
have expired or been terminated; and (v) the purchase of the Shares pursuant to
the Offer shall be consummated simultaneously with the purchase of the Class AC
Shares pursuant to the Stock Purchase Agreement.
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 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 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
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<PAGE> 12
(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 (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.
SAINSBURY AGREEMENT. On May 19, 1998, the Purchaser and Sainsbury
announced an agreement, subject to agreement on documentation, (i) for Sainsbury
to sell, and for the Purchaser to purchase, all of the Class AL Shares for an
aggregate purchase price of $100,000,000 on the terms and conditions to be
agreed upon and (ii) for Sainsbury to tender pursuant to the Offer, upon the
terms and subject to the conditions set forth in the Offer to Purchase, all of
the Shares owned by Sainsbury. Subsequently, the Purchaser entered into a Stock
Purchase Agreement dated as of May 27, 1998 with Sainsbury and JS Mass.
Securities Corp. ("JS Mass") (the "Sainsbury Agreement"), a wholly-owned
subsidiary of Sainsbury, to such effect.
The following is a summary of the material terms of the Sainsbury
Agreement. The summary is qualified in its entirety by reference to the full
text of the Sainsbury Agreement which has been filed as Exhibit 2 hereto and
which is incorporated herein by reference.
Purchase of the Class AL Shares. Pursuant to the Sainsbury Agreement, JS
Mass has agreed, and Sainsbury has agreed to cause JS Mass, to sell, and the
Purchaser has agreed to purchase, subject to the terms and conditions thereof,
all of the Class AL Shares at an aggregate price of $100,000,000. JS Mass has
agreed
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<PAGE> 13
in the Sainsbury Agreement to tender pursuant to the Offer, upon the terms and
subject to the conditions set forth in the Sainsbury Agreement, all of the
Shares owned by JS Mass. As more fully described below, the obligation of the
Purchaser to purchase the Class AL Shares is subject to the satisfaction of the
following conditions: the truth of Sainsbury's and JS Mass' representations and
warranties, the performance by Sainsbury and JS Mass of their respective
covenants, no injunctions, receipt of consents and approvals, the non-occurrence
of the Tender Offer Conditions, the resignation of the Directors of the Company
elected by Sainsbury, the consummation of the purchase of the Class AC Shares
pursuant to the Stock Purchase Agreement and the consummation of the Offer. As
more fully described below, the obligation of JS Mass to, and of Sainsbury to
cause JS Mass to, sell the Class AL Shares is subject to the satisfaction of the
following conditions: the truth of the representations and warranties of the
Purchaser, the performance by the Purchaser of its covenants, no injunctions,
the consummation of the Offer and the consummation of the purchase of the Class
AC Shares pursuant to the Stock Purchase Agreement.
No Solicitation. The Sainsbury Agreement provides that Sainsbury, JS Mass
and each of their respective officers, directors and employees shall, and shall
instruct their respective agents to, immediately cease any discussions or
negotiations with any other parties that may be ongoing with respect to any
purchase of the Class AL Shares or any Sainsbury Acquisition Proposal (as
defined below). Neither Sainsbury nor JS Mass shall, directly or indirectly,
take (and neither Sainsbury nor JS Mass shall 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 AL Shares or any Sainsbury Acquisition Proposal,
(ii) enter into any agreement with respect to any offer to purchase the Class AL
Shares or any Sainsbury 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 knowingly, or that such person should have known would 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 AL Shares or any
Sainsbury Acquisition Proposal. "Sainsbury 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 AL
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 Company or any of its subsidiaries, other than the transactions
contemplated by the Sainsbury Agreement, or any other transaction involving the
Company or any of its securities or assets the consummation of which could
reasonably be expected to impede, interfere with, prevent or materially delay
the Offer, the acquisition of the Class AL Shares pursuant to the Sainsbury
Agreement or the acquisition of the Class AC Shares pursuant to the Stock
Purchase Agreement. In addition, the Sainsbury Agreement provides that each of
Sainsbury and JS Mass shall advise the Purchaser of any request for information
or of any offer to purchase the Class AL Shares or any Sainsbury Acquisition
Proposal, or any inquiry or proposal with respect to any offer to purchase the
Class AL Shares or any Sainsbury Acquisition Proposal, the material terms and
conditions of such request, offer or Sainsbury Acquisition Proposal and of any
material changes thereto, and the identity of the entity or person making any
such inquiry or proposal.
Conditions to Obligations. The obligation of the Purchaser to purchase the
Class AL Shares pursuant to the Sainsbury Agreement is subject to the
satisfaction or waiver of a number of conditions including: (i) the
representations and warranties of Sainsbury and JS Mass contained in the
Sainsbury Agreement being 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; (ii) all of the agreements of
Sainsbury and JS Mass to be performed and all of the covenants of Sainsbury and
JS Mass to be complied with pursuant to the Sainsbury Agreement prior to the
Closing Date shall have been duly performed or complied with, as applicable, in
all material respects; (iii) 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 Offer, the
purchase of the Class AL Shares or any of the other transactions contemplated by
the Stock Purchase Agreement; (iv) all governmental and third-party consents,
waivers and approvals, if any, specifically disclosed
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<PAGE> 14
in the Sainsbury Agreement or necessary to permit the consummation of the
transactions contemplated by the Sainsbury Agreement shall have been received;
all time periods under the HSR Act applicable to the purchase of the Class AC
Shares under the Stock Purchase Agreement shall have expired or been terminated;
and no governmental or other instrumentality or agency shall have required that,
in exchange for approval of the transactions contemplated by the Sainsbury
Agreement, the Purchaser, the Company or any of their respective affiliates sell
or otherwise dispose of, or hold separate particular assets or categories of
assets, or businesses, 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 of
the Sainsbury Agreement, 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; (v) at any time on or after the date of
the Sainsbury Agreement and at or before the time of payment for the Class AL
Shares thereunder, none of the Tender Offer Conditions shall have occurred; (vi)
each of the persons appointed by JS Mass as a director of the Company shall have
delivered to the Purchaser a written resignation from such position; and (vii)
the purchase of all of the Class AC Shares pursuant to the Stock Purchase
Agreement shall be consummated simultaneously with the purchase of the Class AL
Shares pursuant to the Sainsbury Agreement; and (viii) the purchase of any
Shares tendered pursuant to the Offer and not withdrawn prior to the expiration
of the Offer shall be consummated simultaneously with the purchase of the Class
AL Shares pursuant to the Sainsbury Agreement. The obligation of JS Mass to sell
the Class AL Shares pursuant to the Sainsbury Agreement is also subject to the
satisfaction or waiver of a number of conditions including: (i) the
representations and warranties of the Purchaser contained in the Sainsbury
Agreement being 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; (ii) all of the agreements of the Purchaser to be
performed and all of the covenants of the Purchaser to be complied with pursuant
to the Sainsbury Agreement prior to the Closing Date shall have been duly
performed or complied with, as applicable; (iii) 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 Offer, the purchase of the Class AL Shares or any of the
other transactions contemplated by the Sainsbury Agreement; (iv) the purchase of
the Shares pursuant to the Offer shall be consummated simultaneously with the
purchase of the Class AL Shares pursuant to the Sainsbury Agreement; and (v) the
purchase of the Class AC Shares pursuant to the Stock Purchase Agreement shall
be consummated simultaneously with the purchase of the Class AL Shares pursuant
to the Sainsbury Agreement.
Agreement to Use Best Efforts. Pursuant to the Sainsbury Agreement and
subject to the terms and conditions thereof, each of Sainsbury, JS Mass and the
Purchaser shall, 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 by the Sainsbury 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 Sainsbury, JS Mass or the Purchaser or any of their
subsidiaries in connection with the authorization, execution and delivery of the
Sainsbury 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 Sainsbury Agreement
and the transactions contemplated therein under any applicable laws or
regulations. In addition, the Sainsbury Agreement provides that Sainsbury, JS
Mass and the Purchaser shall 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. Sainsbury, JS Mass and the Purchaser shall 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 Sainsbury Agreement.
Notwith-
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standing anything to the contrary in this paragraph, none of Sainsbury, JS Mass,
the Purchaser 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, Sainsbury, JS Mass, 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
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
Sainsbury 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 Sainsbury Agreement, Sainsbury and
JS Mass have made customary representations and warranties to the Purchaser with
respect to, among other things, their organization, corporate authority,
ownership of the Class AL Shares and required consents and approvals.
Termination. If any precondition to the completion of the transactions
contemplated by the Sainsbury Agreement is not fulfilled on or prior to December
31, 1998, then any party may terminate the Sainsbury Agreement. In addition, the
Sainsbury Agreement shall terminate if the Stock Purchase Agreement or the Offer
shall be terminated pursuant to their respective terms prior to the purchase of
any Class AL Shares pursuant to the Sainsbury Agreement.
Other Agreements. Without the consent of Sainsbury and JS Mass, the
Purchaser shall not (a) reduce the number of Shares to be purchased pursuant to
the Offer, (b) reduce the Offer Price, (c) modify or add to the Tender Offer
Conditions in a manner that is materially adverse to the holders of the Shares
or (d) change the form of consideration payable in the Offer. In addition, if
the Purchaser purchases any Shares pursuant to the Offer, it will waive all
unsatisfied conditions to the Purchaser's obligations to purchase the Class AL
Shares under the Sainsbury Agreement and will purchase the Class AL Shares and
if the Purchaser purchases the Class AL Shares pursuant to the Sainsbury
Agreement, it will waive all unsatisfied Tender Offer Conditions and will
purchase any Shares validly tendered pursuant to the Offer and not withdrawn
prior to the expiration of the Offer.
CONFIDENTIALITY AGREEMENT. The following is a summary of the
Confidentiality Agreement dated as of February 2, 1998 between the Purchaser and
1224 (the "Confidentiality Agreement"). The summary is qualified in its entirety
by reference to the full text of the Confidentiality Agreement, a copy of which
is filed as Exhibit 3 hereto and which is incorporated herein by reference.
Under the Confidentiality Agreement, the Purchaser agreed to use
information furnished by 1224 and the Company that is not otherwise generally
available to the public (other than as a result of disclosure by the Purchaser
or its representatives) (the "Received Material") exclusively for the purpose of
evaluating an acquisition by the Purchaser from 1224 of the Class AC Shares. In
addition, the Purchaser agreed not to disclose any of the Received Materials
other than under certain circumstances.
EXCLUSIVITY AGREEMENT. The following is a summary of the Letter Agreement
dated April 27, 1998, between the Purchaser and 1224 regarding exclusivity (the
"Exclusivity Agreement"). The summary is qualified in its entirety by reference
to the full text of the Exclusivity Agreement, a copy of which is filed as
Exhibit 4 hereto and which is incorporated herein by reference.
Under the Exclusivity Agreement, 1224 agreed that from the date of the
Exclusivity Agreement until May 31, 1998, neither it nor any of its agents
would, directly or indirectly, take any action to enter into, solicit or
otherwise encourage (i) any proposal to acquire any of the Class AC Shares, a
substantial amount of the assets of the Company or more than 10% of any class of
equity securities, (ii) any tender or exchange offer, or (iii) any merger,
consolidation or similar transaction. However, pursuant to the Exclusivity
Agreement, 1224 could, in response to an unsolicited acquisition proposal from J
Sainsbury (USA) Holdings Inc. or any affiliate thereof (collectively the
"Sainsbury Group"), (i) enter into negotiations with the Sainsbury Group if
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<PAGE> 16
1224 determined that the unsolicited proposal from the Sainsbury Group was
superior to the proposal of the Purchaser and that failing to consider the
proposal from the Sainsbury Group would be a breach of fiduciary duty by the
Board of Directors of 1224 and (ii) after notice to the Purchaser, enter into an
acquisition agreement with the Sainsbury Group if 1224 and the Purchaser are
unable to enter into a stock purchase agreement meeting certain requirements.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) BACKGROUND AND RECOMMENDATION.
The following summary of the background to the Offer is based on the
summary of events described in the Purchaser's Offer to Purchase and the
Schedule 14D-9 filed by 1224. Although the Company does not have direct
knowledge of each of the events described below, it has attempted to confirm the
description of each of the events and has no reason to believe such descriptions
are materially inaccurate.
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 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, 1996, 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 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.
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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 draft documentation that
had previously been distributed by the Purchaser's legal advisors.
Subsequent to such meeting, representatives of PaineWebber, Wasserstein and
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"), the
financial advisor to the Purchaser, 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 Mr. O'Malley, 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 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
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<PAGE> 18
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
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
their May 5 meetings with Lord Sainsbury and David Bremner, Deputy Group Chief
Executive of Sainsbury, Mr. van der Hoeven and Mr. Manos were each informed by
Lord Sainsbury and Mr. Bremner that Sainsbury was not interested in selling its
interest in the Company to the Purchaser at such time. 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 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 Sainsbury had
agreed to participate in the transaction. 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
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<PAGE> 19
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
written opinion dated May 18, 1998 (which opinion was delivered prior to the
increase in the Offer Price from $43.00 to $43.50 per Share), 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.
The Company has been advised by the Purchaser that subsequently, on May 19,
1998, Mr. van der Hoeven informed Lord Sainsbury by telephone that the Purchaser
would announce its agreement to acquire the Class AC Shares and Offer later that
day even if Sainsbury did not expect to participate in the Offer or otherwise
sell its interest in the Company to the Purchaser. In response, Lord Sainsbury
informed Mr. van der Hoeven that Sainsbury would be willing to tender its Shares
into the Offer at the proposed price of $43.50 per Share, 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 Sainsbury's
proposal regarding the purchase price for the Class AL Shares with other members
of the Executive Board and the Purchaser's financial and legal advisors, Mr. van
der Hoeven called Lord Sainsbury and accepted the proposal, subject to
documentation. 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 pursuant to the Offer to $43.50 per Share and agreed to waive the 65%
minimum tender condition.
The Board of Directors of the Company (the "Board") met on May 28 and 29,
1998 to consider the Offer. The Board reviewed the terms of the Offer and the
provisions of the Stock Purchase Agreement and received and considered the
report of the Special Committee, in which the Special Committee expressed its
determination that the Offer is fair to and in the best interests of the Company
and the holders of the Shares and recommended that the Board recommend
acceptance of the Offer by the holders of the Shares. The Special Committee
reported that, in reaching such determination and making such recommendation, it
had the benefit of the financial advice of Wasserstein, including Wasserstein's
written opinion and confirmation letter, as described below. By unanimous vote
of all the directors, the Board determined that the Offer is in the best
interests of the Company and the holders of the Shares and recommended that the
holders of the Shares accept the Offer and tender their Shares to the Purchaser
pursuant to the Offer. A letter to stockholders of the Company communicating the
recommendation of the Board is filed herewith as Exhibit 5 and is incorporated
herein by reference.
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(b) REASONS FOR RECOMMENDATION. In reaching their conclusion with respect
to the Offer, the members of the Board considered a number of factors, including
the following:
(i) The Board considered (1) the determination made by the Special
Committee at its meeting on May 18, 1998 that the Offer is fair to and in
the best interests of the Company and the holders of the Shares, (2) the
recommendation of the Special Committee made to the Board at its meeting on
May 28, 1998 that the Board recommend acceptance of the Offer by the
holders of the Shares, and (3) that the Special Committee, in reaching such
determination and making such recommendation, had the benefit of the
financial advice of Wasserstein, including Wasserstein's written opinion,
dated May 18, 1998, that as of that date and based upon the review and
subject to the assumptions and limitations set forth therein, the
consideration to be received by the holders of the Shares pursuant to the
Offer is fair, from a financial point of view, to such holders, which
opinion was confirmed by letter dated May 28, 1998 addressed to the Special
Committee. Copies of the written opinion dated May 18, 1998 of Wasserstein,
which sets forth the assumptions made, factors considered and scope of the
review undertaken by Wasserstein, and the confirmation of such opinion
dated May 28, 1998, are attached hereto as Annex B and Annex C,
respectively. Holders of Shares are urged to read the full text of such
opinion and confirmation.
(ii) The Board considered that the per Share market price for the
Shares immediately prior to the Offer reflected to a significant degree an
anticipated takeover of the Company and that the cash offer price of $43.50
per Share provided for in the Stock Purchase Agreement represented a
premium of approximately 15% over $37.69, the reported closing price of
Shares on the American Stock Exchange on May 18, 1998, the last trading day
prior to the public announcement of the Stock Purchase Agreement and the
Offer, and represents a significant premium over the historical trading
prices for the Shares.
(iii) The Board considered its familiarity with the Company's
business, prospects, financial condition, results of operations and current
business strategy, the nature of the Company's industry position, and the
Board's 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.
(iv) The Board considered the Purchaser's business reputation, its
relationship with its 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.
1224 has advised the Company that, 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 dated July 11, 1996, the Company paid 1224 $55,000 in
reimbursement for payments made by 1224 to PaineWebber.
1224 has advised the Company that, 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 aggregate purchase price for all the shares of
the Company's common stock acquired 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. If all of the shares of the Company's common
stock are acquired at the closing of the transactions described in this
Statement, PaineWebber will be entitled to a fee (less amounts previously paid
and to be credited against such fee) of approximately $6.8 million. On May 29,
1998, the Company's Board, based on the recommendation of the Special Committee,
voted to cause the Company to assume the obligations of 1224 under its agreement
with PaineWebber.
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On February 15, 1996, the Special Committee and the Company retained
Wasserstein on an exclusive basis as financial and strategic advisor and to
provide certain financial advisory and investment banking services. The
engagement letter provided that Wasserstein would receive a retainer fee of
$75,000 for its initial services and that any further compensation would be
contingent on there being a transaction involving the sale of the Company or its
stock but would not be less than the compensation payable to PaineWebber in the
event of such transaction. The engagement letter also provided that the fee
payable by the Company to Wasserstein would be equal to 0.25% of the aggregate
purchase price for all the shares of the Company's common stock acquired
pursuant to a transaction involving a sale of the Company. If all of the shares
of the Company's common stock are acquired at the closing of the transactions
described in this Statement, Wasserstein will be entitled to a fee (less amounts
previously paid and to be credited against such fee) of approximately $6.8
million.
Neither the Company 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 or employees of
the Company may contact stockholders personally or by telephone on behalf of the
Company.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) Except as set forth in this Statement, no transactions in Shares have
been effected within the past 60 days by the Company or, to the best knowledge
of the Company, by any executive officer, director, subsidiary or affiliate of
the Company.
On May 20, 1998, Alvin Dobbin, a director of the Company, exercised options
to purchase 55,500 Shares at an average exercise price per Share of $34.35 and
sold all such Shares at a price per Share of $42.75. Effective February 28,
1998, Mr. Dobbin retired from his positions as an executive officer of the
Company. He was required to exercise his options to purchase Shares, if at all,
within 90 days after retirement.
On May 27, 1998, J Sainsbury (USA) Holdings Inc., a wholly-owned subsidiary
of Sainsbury and the then record holder of all the Class AL Shares and the
Shares beneficially owned by Sainsbury, merged with and into JS Mass. Securities
Corp., another wholly-owned subsidiary of Sainsbury, as a result of which JS
Mass. Securities Corp. became the owner of all the assets of J Sainsbury (USA)
Holdings Inc., including the Class AL Shares and such Shares.
(b) To the best knowledge of the Company, each of the Company's executive
officers, directors, subsidiaries 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 the best of the Company's
knowledge, no determination has been made.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a) Except as set forth in this Statement, no negotiation is being
undertaken or is underway by the Company in response to the Offer which relates
to or would result in (i) an extraordinary transaction such as a merger or
reorganization, involving the Company or any subsidiary of the Company; (ii) a
purchase, sale or transfer of a material amount of assets by the Company or any
subsidiary of the Company; (iii) a tender offer for or other acquisition of
securities by or of the Company; or (iv) any material change in the present
capitalization or dividend policy of the Company. In its Offer to Purchase, the
Purchaser states: "Upon the acquisition . . . of the Class AC Shares from [1224]
and the Class AL Shares from Sainsbury, the Purchaser would own 100% of the
outstanding capital stock of the Company entitled to vote. As a result, the
Purchaser will be able to cause the merger of a subsidiary of the Purchaser with
and into the Company. Any remaining holders of the Shares will not be entitled
to vote on such a merger. The Purchaser anticipates that it will take all
necessary and appropriate action to cause such a merger to become effective as
soon as reasonably practicable after its acquisition of the Class AC Shares and
the Class AL Shares. At the effective time of such merger, each outstanding
Share (other than those held by the Purchaser or any subsidiary thereof) will be
21
<PAGE> 22
converted into the highest price paid per Share pursuant to the Offer without
interest." The Purchaser has recently proposed that it and the Company now enter
into an agreement pursuant to which, among other things, the Purchaser would
commit to effect a merger in which any Shares not acquired pursuant to the Offer
would be acquired by the Purchaser, for the Offer Price, as promptly as
practicable after consummation of the Offer and the Purchaser's acquisition of
the Class AC and the Class AL Shares. However, there can be no assurance that
following the consummation of the Offer and the acquisition of the Class AC and
Class AL Shares that the Purchaser will seek to cause such a merger to become
effective or the timing of any such merger.
(b) Except as set forth in this Statement, there are no transactions, Board
resolutions, agreements in principle or signed contracts in response to the
Offer that relate to, or would result in, one or more of the events referred to
in Item 7(a) above.
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 -- Copy of the Stock Purchase Agreement dated as of May 27,
1998 among J Sainsbury plc, JS Mass. Securities Corp., and
Koninklijke Ahold N.V.
Exhibit 3 -- Confidentiality Agreement, as of February 2, 1998, between
Koninklijke Ahold N.V. and The 1224 Corporation.
Exhibit 4 -- Exclusivity Agreement, dated April 27, 1998, between
Koninklijke Ahold N.V. and The 1224 Corporation
Exhibit 5 -- Form of Letter to the Company's Stockholders, dated May 29,
1998.
Exhibit 6 -- Press release issued by the Company, dated May 29, 1998.
Exhibit 7 -- The Company's 1989 Non-Qualified Stock Option Plan.
Incorporated by Reference to the Company's Registration
Statement on Form S-8 (File No. 33-64745) filed December 5,
1995.
Exhibit 8 -- The Company's Non-Qualified Executive Stock Bonus Plan.
Exhibit 9 -- The Company's Split Dollar Insurance Program Summary.
Exhibit 10 -- The Company's Supplemental Retirement Plan.
Exhibit 11 -- The Company's Excess Benefit Plan.
Exhibit 12 -- Form of the Company's Change in Control and Severance
Agreement. Incorporated by Reference to the Company's Form
10-K filed May 19, 1998.
</TABLE>
22
<PAGE> 23
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.
GIANT FOOD INC.
By: /s/ David W. Rutstein
------------------------------------
David W. Rutstein
Senior Vice President and General
Counsel
Dated: May 29, 1998
23
<PAGE> 24
ANNEX A
-----------
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a) Identification of Directors
<TABLE>
<CAPTION>
TITLE OF ALL POSITIONS YEAR FIRST
NAME AGE HELD WITH THE COMPANY ELECTED DIRECTOR
- ---- --- ---------------------- ----------------
<S> <C> <C> <C>
Pete L. Manos................... 61 Chairman of the Board, 1995
President, and Chief Executive
Officer
Alvin Dobbin*................... 66 Executive Vice President, Chief 1996
Operating Officer, and Director
Constance M. Unseld............. 50 Director 1993
Peter F. O'Malley............... 59 Director 1993
David J. Sainsbury.............. 57 Director 1994
Harry G. Beckner................ 69 Director 1994
Rosemary P. Thorne.............. 46 Director 1996
Raymond A. Mason................ 61 Director 1996
David Bremner**................. 40 Director 1997
</TABLE>
- ---------------
* Although Mr. Dobbin retired from his corporate positions effective February
28, 1998, he remains a Director of the Company.
** Mr. Bremner replaced Michael W. Broomfield as a Director of the Company.
The present term of each of the above Directors will expire at the Annual
Meeting of Voting Shareholders currently scheduled for September 10, 1998.
Millard F. West, Jr. and Morton H. Wilner retired as active directors on
September 6, 1990, on which date they were elected Directors Emeritus. Messrs.
West and Wilner served as Board members 26 and 24 years, respectively.
(b) Identification of Executive Officers
<TABLE>
<CAPTION>
YEAR
OFFICER FIRST ELECTED PRESENT OFFICE
------- ----------------------------
<S> <C> <C> <C> <C>
Pete L. Manos........................... 61 1977 1992 (President)
Chairman of the Board, President, & 1995 (Chief Executive Officer)
Chief Executive Officer 1996 (Chairman of the Board)
Alvin Dobbin*........................... 66 1970 1996 (Executive Vice President)
Executive Vice President and 1996 (Chief Operating Officer)
Chief Operating Officer
Michael W. Broomfield**................. 55 1998 1998
Chief Operating Officer
David W. Rutstein....................... 53 1978 1981 (Sr. V.P. - General Counsel)
Senior Vice President-General Counsel, 1996 (Chief Admin. Officer)
Chief Administrative Officer, and
Secretary 1996 (Secretary)
Mark H. Berey........................... 46 1997 1997 (Sr. V.P. - Finance)
Senior Vice President
-Finance,Treasurer, 1997 (Treasurer)
Chief Financial Officer 1997 (Chief Financial Officer)
M. Davis Herriman....................... 59 1985 1996 (Sr. V.P. - Grocery, Bakery
Senior Vice President-Grocery, Bakery and Pharmacy Operations
and Pharmacy Operations and 1998 (Chief Merchandising
Officer)
and Chief Merchandising Officer
</TABLE>
A-1
<PAGE> 25
<TABLE>
<CAPTION>
YEAR
OFFICER FIRST ELECTED PRESENT OFFICE
------- ----------------------------
<S> <C> <C> <C> <C>
Roger D. Olson.......................... 53 1978 1988
Senior Vice President - Labor
Relations
and Personnel
Robert W. Schoening..................... 51 1985 1988
Senior Vice President - Information
Systems
Samuel E. Thurston...................... 54 1977 1988
Senior Vice President - Distribution
John P. Mason........................... 45 1996 1998
Senior Vice President - Perishable
Operations
</TABLE>
- ---------------
* Mr. Dobbin retired from these positions effective February 28, 1998.
** Mr. Broomfield was elected to the position of Chief Operating Officer
effective March 9, 1998.
The present term of each of the above Executive Officers will expire at the
first meeting of the Board of Directors subsequent to the Annual Meeting of
Voting Shareholders currently scheduled for September 10, 1998.
(c) Identification of Certain Significant Employees
Not applicable.
(d) Family Relationships
Not applicable.
(e) Business Experience
Each of the above-named executive officers of the Company has been employed
by the Company for a period of time in excess of five years except for Messrs.
Broomfield, Berey, and Green. Mr. Broomfield served as Managing Director of
Saveacentre (a subsidiary of J Sainsbury) from 1992-1996 when he was assigned by
J Sainsbury to work in the President's office at Giant where he stayed until he
assumed his position as Chief Operating Officer of Giant on March 9, 1998. Mr.
Berey served as President and Chief Executive Officer of Sutton Place Gourmet
since June of 1989, and in 1995 became that company's Chairman of the Board. Mr.
Berey stepped down from that position in July of 1996 and took personal time off
before assuming his position with Giant in August 1997. Mr. Green served as the
Vice President of Construction, Engineering, and Purchasing of Pathmark Stores
since 1992. Messrs. Broomfield, Berey, and Green each have more than five years
experience in the food-retail industry. The positions of each of the officers
with the Company are set forth above in subsection (b), and the duties of each
have been encompassed within the framework of their respective titles since
first becoming an officer of the Company.
The principal occupation, employment, and business experience during the
past five years of each of the Directors and Directors Emeritus of the Company
is set forth below:
Pete L. Manos -- see subsection (b) above.
Alvin Dobbin -- see subsection (b) above.
Constance M. Unseld is the founder and operator of the Unselds' School, a
state accredited, independent school in Baltimore, Maryland. She also serves as
a member of the Board of Regents of the University of Maryland system.
A-2
<PAGE> 26
Peter F. O'Malley is the founder and current counsel to the law firm of
O'Malley, Miles, Nylen & Gilmore of Prince George's County, Maryland. He
currently serves on the Boards of Directors of Potomac Electric Power Company,
Potomac Capital Investments and Legg Mason, Inc. The firm of O'Malley, Miles,
Nylen & Gilmore is one of a number of firms which provides legal services to the
Company.
David J. Sainsbury is Chairman of J Sainsbury plc where he has worked since
1963. Mr. Sainsbury is a great-grandson of the founder of J Sainsbury plc.
Harry G. Beckner was formerly President of Jewel Food Stores of Chicago,
Illinois and Chief Operating Officer of the H.E. Butt (H.E.B.) grocery company
of San Antonio, Texas. He serves on the Boards of Directors of H.E.B. and Shaw's
Supermarkets Inc.
Rosemary P. Thorne serves as Group Finance Director of J Sainsbury plc.
Miss Thorne is a non-executive director of the Board of the Department for
Education and Employment. She is also a member of the Financial Reporting Review
Panel, a board member of the Prince's Youth Business Trust and an active member
of the prestigious Hundred Group.
Raymond A. Mason is the Chairman, President and Chief Executive Officer of
Legg Mason, Inc. He has served as chairman of the Securities Industry
Association, The National Association of Security Dealers and chairman of the
Regional Firms Committee of the New York Stock Exchange.
David Bremner is Deputy Group Chief Executive for J Sainsbury plc. He is
also Chairman of Homebase (Sainsbury's chain of home improvement and garden
centers) and Chairman of Shaw's Supermarkets Inc.
Millard F. West, Jr., a Director Emeritus of the Company, is a former
Vice-President of the firm of Prudential Securities, Inc. (Members New York
Stock Exchange) and is a former Director of Dewey Electronics Corporation.
Morton H. Wilner, a Director Emeritus of the Company, is General Counsel
Emeritus of the Armed Forces Benefit Association and Vice Chairman of A.F.B.A.
Industrial Bank. He is also a Trustee Emeritus, for life, of the University of
Pennsylvania.
(f) Involvement in Certain Legal Proceedings
No Director, Director Emeritus or Executive Officer was involved in any
event during the past five years which would be responsive to this question.
(g) Promoters and Control Persons
Not applicable.
(h) Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file with the Securities
and Exchange Commission ("SEC") and the American Stock Exchange initial reports
of ownership and reports of changes in ownership of common stock and other
equity securities of the Company within prescribed time periods. Officers,
directors, and greater than ten-percent shareholders are required by SEC
regulation to furnish the Company with copies of all Section 16(a) forms they
file.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended February 28, 1998, except
for the report described below, all Section 16(a) filing requirements applicable
to officers, directors, and greater than ten-percent beneficial owners were met
on a timely basis.
George W. Hannis, Jr. inadvertently failed to file a Form 4 with respect to
his exercise of stock options upon his retirement from the Company. The error
was corrected by the filing of SEC Form 5 in April 1998.
A-3
<PAGE> 27
ITEM 11. EXECUTIVE COMPENSATION
The following tables and narrative text discuss the compensation paid in
Fiscal Year 1998 and the two prior fiscal years to the Company's Chief Executive
Officer and the Company's four other most highly-compensated executive officers.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION(1) LONG TERM COMPENSATION
---------------------------- -----------------------------------------
OTHER OPTIONS/ ALL OTHER
ANNUAL RESTRICTED SAR COMPENSA-
NAME AND FISCAL COMPEN- FISCAL STOCK AWARDS(#) LTIP TION
PRINCIPAL POSITION YEAR SALARY BONUS SATION(1) YEAR AWARDS(3) (4) PAYOUTS (5)(6)
------------------ ------ -------- -------- --------- ------ ---------- --------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Pete L. Manos.................. 1998 $579,519 $150,000 $5,772 1998 $9,027 32,500 0 $31,065
Chairman of the Board,
President 1997 $520,673 $260,000 $6,002 1997 $9,388 0* 0 $36,320
and CEO 1996 $327,028 $260,000 $6,134 1996 $9,596 102,500 0 $24,318
Alvin Dobbin................... 1998 $336,985 $ 93,600 $5,772 1998 $9,027 17,500 0 $18,397
Exec. V.P & COO 1997 $290,141 $160,000 $6,002 1997 $9,388 14,500 0 $25,415
1996 $254,431 $150,378 $6,134 1996 $9,596 9,500 0 $23,085
David W. Rutstein.............. 1998 $291,571 $ 96,825 $5,772 1998 $9,027 17,500 0 $16,725
Sr. V.P Gen. Counsel, CAO 1997 $264,654 $160,000 $6,002 1997 $9,388 9,500 0 $20,273
& Secretary 1996 $252,720 $149,363 $6,134 1996 $9,596 9,500 0 $18,855
M. Davis Herriman.............. 1998 $252,739 $ 82,200 $5,772 1998 $9,027 9,500 0 $17,473
Sr. V.P. Grocery, Bakery &
Pharmacy 1997 $217,657 $120,000 $6,002 1997 $9,388 12,500 0 $16,041
Operations and Chief
Merchandising 1996 $189,375 $118,807 $6,134 1996 $9,596 7,500 0 $14,170
Officer
Robert W. Schoening............ 1998 $264,291 $ 57,728 $5,772 1998 $9,027 17,500 0 $15,168
Sr. V.P Information Systems 1997 $187,488 $ 98,681 $6,002 1997 $9,388 9,500 0 $15,130
1996 $179,006 $ 98,681 $6,134 1996 $9,596 9,500 0 $14,390
</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 Non-Qualified Executive Stock Bonus
Plan II.
(3) Under this plan, the aggregate stock holdings of this group were 17,340.60
shares and the share value was $36.312 as of February 28, 1998. 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 shares of Class A non-voting common stock.
Distributions of those shares will be made to those participants who meet
any of the following conditions: (1) 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.
(4) All options granted to participants pursuant to these 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 from their
date of issuance.
* Incorrectly reported as 2,500 in the 1997 10K.
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.
(5) Includes Company matching contributions under 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 Giant Food
A-4
<PAGE> 28
Inc. Class A common stock 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, Mr.
Herriman $6,000, and Mr. Schoening $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, Mr. Herriman
$7,797.68, and Mr. Schoening $7,469.67.
(6) 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 pays 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. Herriman $3,675 and Mr. Schoening $1,698.
OPTION GRANTS IN LAST FISCAL YEAR (1)
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE VALUE OF
------------------------- ASSUMED RATES OF STOCK PRICE
NUMBER OF % OF TOTAL APPRECIATION FOR OPTION TERM
SECURITIES OPTIONS EXERCISE (10 YEARS)
UNDERLYING GRANTED TO OF BASE ---------------------------------
OPTIONS/SARS EMPLOYEES PRICE EXPIRATION 0% 5% 10%
NAME GRANTED(2) IN FY 98 ($/SH) DATE GAIN(3) GAIN(4)(5) GAIN(4)(5)
---- ------------ ---------- -------- ---------- ------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Pete L. Manos.......... 2,500 $32.88 03/03/07 $0 $ 51,695 $ 131,006
30,000 $33.56 06/09/07 0 633,171 1,604,580
------ -- -------- ----------
32,500 4.31% $0 $684,866 $1,735,586
====== == ======== ==========
Alvin Dobbin........... 2,500 $32.88 03/03/07 $0 $ 51,695 $ 131,006
15,000 $33.56 06/09/07 0 316,586 802,290
------ -- -------- ----------
17,500 2.32% $0 $368,281 $ 933,296
====== == ======== ==========
David W. Rutstein...... 2,500 $32.88 03/03/07 $0 $ 51,695 $ 131,006
15,000 $33.56 06/09/07 0 316,586 802,290
------ -- -------- ----------
17,500 2.32% $0 $368,281 $ 933,296
====== == ======== ==========
M. Davis Herriman...... 2,500 $32.88 03/03/07 $0 $ 51,695 $ 131,006
7,000 $33.56 06/09/07 0 147,740 374,402
------ -- -------- ----------
9,500 1.26% $0 $199,435 $ 505,408
====== == ======== ==========
Robert W. Schoening.... 2,500 $32.88 03/03/07 $0 $ 51,695 $ 131,006
15,000 $33.56 06/09/07 0 316,586 802,290
------ -- -------- ----------
17,500 2.32% $0 $368,281 $ 933,296
====== == ======== ==========
</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 requirements 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
A-5
<PAGE> 29
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.
(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 common stock 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 from the exercise price of the options listed above,
$32.88 and $33.56 based on the grant date of the options. Option grants are
at 100% of market value on the date of grant.
AGGREGATED OPTIONS/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION SAR/VALUES (1)
<TABLE>
<CAPTION>
SHARES SARS VALUE
ACQUIRED ON EXERC'D REALIZED
NAME EXERCISE(#) (#) ($)
---- ----------- ------- --------
<S> <C> <C> <C>
Pete L. Manos............................................... 0 0 0
Alvin Dobbin................................................ 0 0 0
David W. Rutstein........................................... 0 0 0
M. Davis Herriman........................................... 0 0 0
Robert W. Schoening......................................... 0 0 0
</TABLE>
<TABLE>
<CAPTION>
VALUE OF VALUE OF
NUMBER OF NUMBER OF UNEXERC'D UNEXERC'D
UNEXERC'D UNEXERC'D IN-THE-MONEY IN-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
M.Davis Herriman..................... 26,000 28,500 $273,355 $153,981
Robert Schoening..................... 26,500 36,500 $278,878 $195,709
</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-6
<PAGE> 30
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
HIGHEST FIVE OF CREDITED 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.
Herriman 27 years; and Mr. Schoening 21 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 earnings averaged over the five years
prior to retirement, less amounts payable from the Retirement Plan
A-7
<PAGE> 31
(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.
COMPENSATION OF DIRECTORS
During Fiscal Year 1998, Directors and Directors Emeritus who were not
employees received an annual fee of $35,000 and $10,000 respectively, and a fee
of $250 for committee meetings attended.
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
M. Davis Herriman................................ 773,800 773,800
Robert W. Schoening.............................. 570,164 498,893
</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.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mrs. Unseld and Messrs. Beckner and O'Malley comprise the Company's
Officers' Executive Compensation Committee. Mr. O'Malley is of counsel to the
law firm of O'Malley & Miles which represents the Company with respect to
certain legal matters.
A-8
<PAGE> 32
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) Security Ownership of Certain Beneficial Owners (as of May 1, 1998)
The following table sets forth information with respect to the ownership of
the voting securities of the Company as of May 1, 1998.
<TABLE>
<CAPTION>
NATURE
NUMBER OF
TITLE OF SHARES BENEFICIAL PERCENT
NAME AND ADDRESS CLASS OF STOCK OWNED OWNERSHIP OF CLASS
---------------- -------------- ------- ---------- --------
<S> <C> <C> <C> <C>
The 1224 Corporation(1)....................... Common AC 125,000 Direct 100.0%
6300 Sheriff Road
Landover, Maryland 20785
J Sainsbury (USA) Holdings Inc................ Common AL 125,000 Direct 100.0%
P.O. Box 3566
Portland, Maine 04104
</TABLE>
(b) Security Ownership of Management (as of May 1, 1998)
The following table sets forth the number of each class of equity
securities of the Company beneficially owned by each (i) director, (ii) named
executive officers and (iii) Directors and Executive Officers of the Company as
a group as of May 1, 1998.
<TABLE>
<CAPTION>
NATURE
NUMBER OF
TITLE OF SHARES BENEFICIAL PERCENT
NAME AND TITLE CLASS OF STOCK OWNED OWNERSHIP OF CLASS
-------------- --------------- --------- ---------- --------
<S> <C> <C> <C> <C>
David J. Sainsbury................. Common Stock A 0(2) Direct and 0%
Director (Non-Voting) Indirect
Harry Beckner...................... Common Stock A 1,000 Direct .0017%
Director (Non-Voting)
Pete L. Manos...................... Common Stock A 157,208(3) Direct and .2605%
Chairman of the Board, President Indirect
CEO, and Director
Alvin Dobbin....................... Common Stock A 147,932(4) Direct and .2451%
Exec. Vice Pres., Chief Operating (Non-Voting) Indirect
Officer, Director
Constance M. Unseld................ Common Stock A 1,000 Direct .0017%
Director (Non-Voting)
Peter F. O'Malley.................. Common Stock A 2,000 Indirect .0033%
Director (Non-Voting)
Rosemary P. Thorne................. Common Stock A 0 Direct 0%
Director (Non-Voting)
Raymond A. Mason................... Common Stock A 1,000 Direct .0017%
Director (Non-Voting)
David Bremner...................... Common Stock A 0 Direct 0%
Director (Non-Voting)
Millard F. West, Jr................ Common Stock A 23,800(5) Indirect .0394%
Director Emeritus (Non-Voting)
Morton H. Wilner................... Common Stock A 10,000 Indirect .0166%
Director Emeritus (Non-Voting)
David W. Rutstein.................. Common Stock A 129,382(6) Direct and .2144%
Sr. Vice President -- General (Non-Voting) Indirect
Counsel, Chief Administrative
Officer, Secretary
</TABLE>
A-9
<PAGE> 33
<TABLE>
<CAPTION>
NATURE
NUMBER OF
TITLE OF SHARES BENEFICIAL PERCENT
NAME AND TITLE CLASS OF STOCK OWNED OWNERSHIP OF CLASS
-------------- --------------- --------- ---------- --------
<S> <C> <C> <C> <C>
M. Davis Herriman.................. Common Stock A 68,950(7) Direct and .1143%
Sr. Vice President -- Grocery, (Non-Voting) Indirect
Bakery and Pharmacy and Chief
Merchandising Officer
Robert W. Schoening................ Common Stock A 55,600(8) Direct and .0921%
Sr. Vice President-- (Non-Voting) Indirect
Information Systems
All Directors and Officers as...... Common Stock A 1,396,528(9) Direct and 2.3141%
a Group (29 persons) (Non-Voting) Indirect
Common Stock AC 125,000(10) 100.000%
(Voting)
Common Stock AL 125,000(10) 100.000%
(Voting)
</TABLE>
- ---------------
NOTES:
(1) Pursuant to the Will of Israel Cohen, the Class AC Voting Common Stock was
transferred to The 1224 Corporation, a Delaware Corporation. The 1224
Corporation issued all of its non-voting stock to the Israel Cohen Estate
and all of its 500 outstanding voting shares to four officers of the
company, (Pete L. Manos, Alvin Dobbin, David W. Rutstein and Roger D.
Olson) and to Mr. Cohen's sister, Lillian Cohen Solomon (100 shares each).
The holders of The 1224 Corporation voting stock have the exclusive right
to exercise all the voting rights in the Class AC Voting Common Stock.
(2) Mr. Sainsbury disclaims beneficial ownership of the Common Stock of the
Company beneficially owned by J Sainsbury (USA) Holdings Inc. Mr. Sainsbury
is a director of J Sainsbury plc, the ultimate parent company of J
Sainsbury (USA) Holdings Inc. In addition to the 125,000 Class AL voting
shares listed above, J Sainsbury (USA) Holdings Inc. owns 11,779,931 Class
A non-voting shares.
(3) Includes 118,500 shares acquirable under stock option plans within sixty
days. Mr. Manos disclaims beneficial ownership of the Class AC shares held
by The 1224 Corporation except for 100 shares.
(4) Includes 43,500 shares acquirable under stock option plans within sixty
days. Mr. Dobbin disclaims beneficial ownership of the Class AC shares held
by the 1224 Corporation except for 100 shares.
(5) Includes 13,000 shares owned by wife for which Mr. West disclaims
beneficial ownership.
(6) Includes 41,500 shares acquirable under stock option plans within sixty
days. Mr. Rutstein disclaims beneficial ownership of the Class AC shares
held by the 1224 Corporation except for 100 shares.
(7) Includes 34,900 shares acquirable under stock option plans within sixty
days.
(8) Includes 33,600 shares acquirable under stock option plans within sixty
days.
(9) Includes shares acquirable under stock option plans within sixty days.
(10) As noted in Item 12(a) above.
Changes in Control
Not applicable.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
(a) Transactions with Management and Others
Not applicable.
A-10
<PAGE> 34
(b) Certain Business Relationships
During the Company's most recent fiscal year, the law firm of O'Malley &
Miles, to which Mr. O'Malley is of counsel, provided certain legal services to
the Company.
Mr. Mason is the Chairman, President, and CEO of Legg Mason, Inc. which
performs certain financial services for the Company. Services provided in Fiscal
Year 1998 were provided on a competitive market basis and were not financially
material to the Company
(c) Indebtedness of Management
Not applicable.
(d) Transactions with Promoters
Not applicable.
A-11
<PAGE> 35
ANNEX B
<TABLE>
<S> <C>
Wasserstein Perella & Co.,
Inc.
WASSERSTEIN 31 West 52nd Street
PERELLA & CO New York, New York 10019
Telephone 212-969-2700
Fax 212-969-7836
</TABLE>
May 18, 1998
Special Committee of Independent Directors
Giant Food Inc.
6300 Sheriff Road
Landover, MD 20785
Members of the Special Committee:
You have asked us to advise you with respect to the fairness, from a
financial point of view, to the holders of the Class A common stock, par value
$1.00 per share (the "Shares"), of Giant Food Inc., (the "Company") of the
consideration to be received by such holders pursuant to the terms of the Stock
Purchase Agreement, dated as of May 19, 1998 (the "Stock Purchase Agreement"),
by and among the Company, Koninklijke Ahold N.V. ("the Purchaser") and The 1224
Corporation. The Stock Purchase Agreement provides for, among other things, a
cash tender offer by the Purchaser to acquire all of the outstanding Shares at a
price of $43.00 per Share (the "Tender Offer").
In connection with rendering our opinion, we have reviewed a draft of the
Stock Purchase Agreement and for purposes hereof we have assumed that the final
form thereof will not differ in any material respect from the draft provided to
us. We have also reviewed and analyzed certain publicly available business and
financial information relating to the Company for recent years and interim
periods to date, as well as certain internal financial and operating
information, including financial forecasts, analyses and projections prepared by
or on behalf of the Company (or prepared by others and provided to us by the
Company) and provided to us for purposes of our analysis, and we have met with
management of the Company to review and discuss such information and, among
other matters, the Company's business, operations, assets, financial condition
and future prospects.
We have reviewed and considered certain financial and stock market data
relating to the Company, and we have compared that data with similar data for
certain other companies, the securities of which are publicly traded, that we
believe may be relevant or comparable in certain respects to the Company or one
or more of its businesses or assets, and we have reviewed and considered the
financial terms of certain recent acquisitions and business combination
transactions in the retail supermarket industry that we believe to be reasonably
comparable to the Tender Offer or otherwise relevant to our inquiry. We have
also performed such other studies, analyses, and investigations and reviewed
such other information as we considered appropriate for purposes of this
opinion.
In our review and analysis and in formulating our opinion, we have assumed
and relied upon the accuracy and completeness of all the financial and other
information provided to or discussed with us or publicly available, and we have
not assumed any responsibility for independent verification of any of such
information. We have also assumed and relied upon the reasonableness and
accuracy of the financial projections, forecasts and analyses (including certain
projections prepared by a third party that management of the Company has advised
us are reasonable and appropriate bases for our analysis) provided to us by the
Company's management and we have assumed, with your consent, that such
projections, forecasts and analyses were reasonably prepared in good faith and
on bases reflecting the best currently available judgments and estimates of the
Company's management, and we express no opinion with respect to such
projections, forecasts and analyses or the assumptions upon which they are
based. In addition, we have not reviewed any of the books and records of the
Company, or assumed any responsibility for conducting a physical inspection of
the properties or facilities of the Company, or for making or obtaining an
independent valuation or appraisal of the
B-1
<PAGE> 36
Special Committee of Independent Directors
May 18, 1998
Page 2
assets or liabilities of the Company and, except with respect to the real estate
holdings of the Company referred to below, no such independent valuation or
appraisal was provided to us. For purposes of analyzing the real estate holdings
of the Company, we have relied, without independent verification, upon an
appraisal thereof prepared by an independent party selected by the Company and
provided to us by the Company. We also have assumed that the transactions
described in the Stock Purchase Agreement will be consummated without waiver or
modification of any of the material terms or conditions contained therein by any
party hereto. Our opinion is necessarily based on economic and market conditions
and other circumstances as they exist and can be evaluated by us as of the date
hereof.
It should be noted that, in the context of our engagement by the Company,
we were not authorized to and did not solicit third party indications of
interest in acquiring all or any part of the Company, or investigate any
alternative transactions that may be available to the Company.
In the ordinary course of our business, we may actively trade the debt and
equity securities of the Company and the Purchaser for our own account and for
the accounts of customers and, accordingly, may at any time hold a long or short
position in such securities.
We are acting as financial advisor to the Company in connection with the
proposed Tender Offer and will receive a fee for our services, which is
contingent upon the consummation of the Tender Offer.
Our opinion addresses only the fairness from a financial point of view to
the holders of the Shares of the consideration to be received by such holders
pursuant to the Tender Offer, and we do not express any views as to the fairness
to the holders of any other class of securities of the Company or as to any
other terms of the transactions contemplated by the Stock Purchase Agreement.
Among other things, our opinion does not address the underlying business
decision of the Company to effect the transactions contemplated by the Stock
Purchase Agreement.
It is understood that this letter is for the benefit and use of the Special
Committee in its consideration of the Tender Offer and except for inclusion in
its entirety in any tender offer recommendation statement or Schedule 14D-9 from
the Company to holders of Shares relating to the Tender Offer, may not be
quoted, referred to or reproduced at any time or in any manner without our prior
written consent. This opinion does not constitute a recommendation to any
shareholder with respect to whether such holder should tender Shares pursuant to
the Tender Offer, and should not be relied upon by any shareholder as such.
Based upon and subject to the foregoing, including the various assumptions
and limitations set forth herein, it is our opinion that as of the date hereof,
the $43.00 per Share cash consideration to be received by the holders of Shares
pursuant to the Tender Offer is fair to such holders from a financial point of
view.
Very truly yours,
WASSERSTEIN PERELLA & CO., INC.
B-2
<PAGE> 37
ANNEX C
WASSERSTEIN
PERELLA & CO Wasserstein Perella &
Co., Inc.
31 West 52nd Street
New York, New York 10019
Telephone 212-969-2700
Fax 212-969-7836
May 28, 1998
Special Committee of Independent Directors
Giant Food Inc.
6300 Sheriff Road
Landover, MD 20785
Members of the Special Committee:
You have asked us to confirm whether our opinion to the Special Committee
dated May 18, 1998 (our "Opinion") remains in effect. Capitalized terms used but
not otherwise defined in this letter have the meanings ascribed thereto in the
Opinion.
In providing this confirmation, we have, in addition to the procedures and
analyses described in our Opinion, reviewed the Purchaser's Offer to Purchase
dated May 19, 1998 and considered the information set forth therein with respect
to developments that occurred following the delivery of our Opinion.
This confirmation is subject to all of the assumptions and limitations as
are set forth in our Opinion. In particular, but without limiting the foregoing,
our Opinion addressed and this confirmation addresses only the fairness from a
financial point of view to the holders of the Shares of the consideration to be
received by such holders pursuant to the Tender Offer, and we did not and do not
render any opinion as to the fairness to any other persons or of any other
transactions.
Based upon and subject to the foregoing, we hereby confirm that it remains
our opinion that the per Share cash consideration to be received by the holders
of the Shares pursuant to the Tender Offer (which has pursuant to the Stock
Purchase Agreement and the Offer to Purchase been increased to $43.50) is fair
to such holders from a financial point of view.
Very truly yours,
WASSERSTEIN PERELLA & CO., INC.
C-1
<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.
-2-
<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.
-3-
<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
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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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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
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<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,
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<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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<PAGE> 19
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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<PAGE> 23
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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<PAGE> 24
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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<PAGE> 26
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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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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(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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<PAGE> 36
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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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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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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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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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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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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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
STOCK PURCHASE AGREEMENT
Dated as of May 27, 1998
By and Among
J SAINSBURY PLC,
JS MASS. SECURITIES CORP.
and
KONINKLIJKE AHOLD N.V.
(Royal Ahold)
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
Page
<S> <C>
ARTICLE I
DEFINITIONS................................................................................................. 1
Section 1.1 Definitions....................................................................... 1
ARTICLE II
SALE OF STOCK AND TENDER OFFER.............................................................................. 4
Section 2.1 Sale of Transferred Shares........................................................ 4
Section 2.2 Purchase Price for Transferred Shares............................................. 4
Section 2.3 Closing........................................................................... 4
Section 2.4 Transfer Taxes.................................................................... 4
Section 2.5 Tender of Class A Shares.......................................................... 4
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PARENT AND THE SELLER................................................. 5
Section 3. Representations and Warranties of the Parent and the Seller................................. 5
Section 3.1 Legal Status...................................................................... 5
Section 3.2 Power and Authority; Enforceability............................................... 5
Section 3.3 Ownership of Transferred Shares................................................... 5
Section 3.4 No Conflicts; Consents of Third Parties; Compliance with Laws..................... 6
Section 3.5 Broker's or Finder's Fees......................................................... 6
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER............................................................. 6
Section 4. Representations and Warranties of the Purchaser............................................. 6
Section 4.1 Legal Status...................................................................... 6
Section 4.2 Power and Authority; Enforceability............................................... 6
Section 4.3 No Conflicts...................................................................... 7
Section 4.4 Broker's or Finder's Fees......................................................... 7
Section 4.5 Available Funds................................................................... 7
Section 4.6 Securities Act.................................................................... 7
ARTICLE V
EXCLUSIVE DEALING, OTHER COVENANTS.......................................................................... 8
Section 5.1 Exclusive Dealing................................................................. 8
Section 5.2 Further Assurances................................................................ 9
Section 5.3 Resignations...................................................................... 9
Section 5.4 Provisions Concerning Transferred Shares.......................................... 9
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
Section 5.5 Restriction on Transfer, Proxies and Non-Interference............................ 9
Section 5.6 Changes in Shares................................................................ 10
Section 5.7 Changes in Tender Offer.......................................................... 10
Section 5.8 Tender Offer Conditions.......................................................... 10
Section 5.9 Purchase of the Class A Shares and the Transferred Shares........................ 10
ARTICLE VI
CONDITIONS TO THE PURCHASER'S OBLIGATIONS................................................................... 10
Section 6. Conditions to the Purchaser's Obligations................................................... 10
Section 6.1 Truth of Representations and Warranties.......................................... 10
Section 6.2 Performance of Agreements........................................................ 11
Section 6.3 Injunction....................................................................... 11
Section 6.4 Consents and Approvals........................................................... 11
Section 6.5 Tender Offer Conditions......................................................... 11
Section 6.6 Resignations..................................................................... 11
Section 6.7 Class AC Stock Purchase Agreement................................................ 12
Section 6.8 Tender Offer..................................................................... 12
ARTICLE VII
CONDITIONS TO THE OBLIGATIONS OF THE PARENT AND THE SELLER.................................................. 12
Section 7. Conditions to the Obligations of the Parent and the Seller.................................. 12
Section 7.1 Truth of Representations and Warranties.......................................... 12
Section 7.2 Performance of Agreements........................................................ 12
Section 7.3 Injunction....................................................................... 12
Section 7.4 Tender Offer..................................................................... 12
Section 7.5 Class AC Stock Purchase Agreement................................................ 13
ARTICLE VIII
MISCELLANEOUS............................................................................................... 13
Section 8.1 Representations and Warranties................................................... 13
Section 8.2 Expenses......................................................................... 13
Section 8.3 Governing Law.................................................................... 13
Section 8.4 Headings......................................................................... 14
Section 8.5 Publicity........................................................................ 14
Section 8.6 Notices.......................................................................... 14
Section 8.7 Binding Effect; Benefit; Assignment.............................................. 15
Section 8.8 Best Efforts..................................................................... 15
Section 8.9 Counterparts..................................................................... 16
Section 8.10 Entire Agreement................................................................. 16
Section 8.11 Amendments....................................................................... 16
Section 8.12 Severability..................................................................... 16
Section 8.13 Termination of Agreement......................................................... 16
Section 8.14 Specific Performance............................................................. 16
Section 8.15 Remedies Cumulative.............................................................. 17
Section 8.16 No Waiver........................................................................ 17
</TABLE>
<PAGE> 4
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (this "Agreement") dated as of May
27, 1998, by and among J Sainsbury plc, a corporation organized and existing
under the laws of England and Wales (the "Parent"), JS Mass. Securities Corp., a
corporation organized and existing under the laws of the State of Massachusetts
and a wholly-owned subsidiary of Parent (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
Zaanstad) (the "Purchaser").
W I T N E S S E T H :
WHEREAS, the Parent and the Seller own beneficially and the
Seller will prior to and at the Closing (as hereinafter defined) own of record
125,000 shares of Class AL Common Stock, par value $1.00 per share (the "Class
AL Shares"), and 11,779,931 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 AL Shares (such Class AL Shares, collectively, the
"Transferred Shares"), on the terms and subject to the conditions set forth in
this Agreement; and
WHEREAS, the Purchaser has made 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 the Offer to Purchase dated May 19, 1998 (the "Offer to
Purchase") (including, without limitation, the conditions set forth in Section
14 thereof (the "Tender Offer Conditions") (the "Tender Offer"), at a price per
share equal to $43.50 (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).
"Acquisition Proposal" shall have the meaning provided in
Section 5.1(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 Person. A Person shall be deemed to control
another Person if such Person possesses, directly or
<PAGE> 5
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; provided that, for purposes of this
Agreement, the Corporation shall not be deemed an Affiliate of the Parent or the
Seller.
"Agents" shall have the meaning provided in Section 5.1(a)
hereof.
"Agreement" shall have the meaning provided in the recitals
hereto.
"Class AC Shares" shall mean the shares of Class AC Common
Stock, par value $1.00 per share, of the Corporation.
"Class AC Stock Purchase Agreement" shall mean the Stock
Purchase Agreement dated as of May 19, 1998 by and between the Purchaser and the
Selling AC Shareholder, as such agreement may be amended from time to time.
"Class AL Shares" shall have the meaning provided in the
recitals hereto.
"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.
"Corporation" shall have the meaning provided in the recitals
hereto.
"Director" shall have the meaning provided in Section 6.6
hereof.
"Existing Class A Shares" shall have the meaning provided in
Section 2.5 hereof.
"HSR Act" shall have the meaning set forth in Section 4.3(b)
hereof.
"Law" shall mean any constitution, treaty, statute, law, code,
ordinance, decree, order, rule, regulation, or judicial or arbitral decision or
judgment.
"Liens" shall mean liens, security interests, options, rights
of first refusal, charges, adverse claims, security agreements, or any other
encumbrances; provided, however, that with respect to the Transferred Shares,
"Liens" shall not include any restrictions imposed upon such Transferred Shares
by this Agreement, the Certificate of Incorporation or By-Laws of the
Corporation or the provisions of the General Corporation Law of the State of
Delaware.
"Offer to Purchase" shall have the meaning provided in the
recitals hereto.
"Parent" shall have the meaning provided in the preamble
hereto.
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<PAGE> 6
"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.
"Securities Act" shall have the meaning provided in Section
4.6 hereof.
"Seller" shall have the meaning provided in the preamble
hereto.
"Seller's Class A Shares" shall have the meaning provided in
Section 2.5 hereof.
"Selling AC Shareholder" shall mean The 1224 Corporation, a
corporation organized and existing under the laws of the State of Delaware.
"Share Register" shall mean, collectively, the register books
maintained by the Corporation setting forth the names and addresses of each of
the owners of the shares of capital 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.
"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
recitals hereto.
"Tender Offer Documents" shall have the meaning provided in
Section 2.6(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.
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<PAGE> 7
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 and the
Parent agrees to cause the Seller, 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, each of the Parent and 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 (or its designee) on the Closing Date One
Hundred Million Dollars ($100,000,000) 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"). 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 VI and VII 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 validly tendered pursuant to
the Tender Offer (the "Closing Date"). On the Closing Date, the Seller shall,
and the Parent shall cause the Seller to, deliver to the Purchaser, against
payment as provided in Section 2.2 hereof, certificates representing the
Transferred 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, and the Parent
shall cause the Seller to, 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 Tender of Class A Shares. (a) The Seller hereby
agrees, and the Parent agrees to cause the Seller, to tender validly (and not to
withdraw) pursuant to and in accordance with the terms of the Tender Offer, in a
timely manner for acceptance by the Purchaser in the Tender Offer, the
11,779,931 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"). Each of the
Parent and 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
-4-
<PAGE> 8
A Shares, is subject to the terms and conditions of the Tender Offer. The
Purchaser agrees to use its reasonable best efforts to cause the depositary for
the Tender Offer to agree to use its reasonable best efforts to notify each
holder of Class A Shares tendered pursuant to the Tender Offer, if requested by
such holder, of any defect in the tender of such Class A Shares which could
result in such Class A Shares not being deemed validly tendered pursuant to the
Tender Offer.
(b) Each of the Parent and the Seller hereby agrees to permit
the Purchaser to publish and disclose, and hereby consents to any prior
publication and disclosure, in the Tender Offer Statement on Schedule 14D-1 with
respect to the Tender Offer, the Offer to Purchase and form of related letter of
transmittal as well as all other information and exhibits and any supplements or
amendments thereto (the "Tender Offer Documents") its identity and the Seller's
ownership of Class A Shares and the Class AL Shares, and, to the extent required
by the Securities Exchange Act of 1934, as amended, an accurate summary of the
material terms of the agreements, arrangements and understandings among the
Parent, the Seller and the Purchaser under this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PARENT AND THE SELLER
Section 3. Representations and Warranties of the Parent and
the Seller. In order to induce the Purchaser to enter into this Agreement and to
acquire the Transferred Shares, each of the Parent and the Seller makes the
following representations and warranties.
Section 3.1 Legal Status. The Parent is a duly organized and
validly existing corporation under the Laws of England and Wales. The Seller is
a duly organized and validly existing corporation in good standing under the
Laws of the State of Massachusetts.
Section 3.2 Power and Authority; Enforceability. Each of the
Parent and the Seller has full requisite legal capacity, power and authority to
execute, deliver and perform its obligations pursuant to 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
Parent and the Seller of their respective obligations pursuant to this Agreement
and the consummation of the transactions contemplated hereby. This Agreement has
been duly authorized, executed and delivered by each of the Parent and the
Seller and constitutes a valid and legally binding obligation of each of the
Parent and the Seller enforceable against each of the Parent and 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.
Section 3.3 Ownership of Transferred Shares. The Parent and
the Seller are the beneficial owners of, and prior to and on the Closing Date
the Seller will be the lawful record owner of, all of the Class AL Shares and
the Existing Class A Shares, in each case free and clear of all Liens. Other
than as specified in the preceding sentence, as of the date of this Agreement
none of the Parent, the Seller or any Affiliate of the Parent owns 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 delivery to the Purchaser of the
-5-
<PAGE> 9
Transferred Shares against payment therefor pursuant to this Agreement and of
the Seller's Class A Shares pursuant to the Tender Offer against payment
therefore will, in each case, transfer to the Purchaser on the Closing Date good
and valid title thereto, free and clear of any Liens.
Section 3.4 No Conflicts; Consents of Third Parties;
Compliance with Laws. (a) The execution, delivery and performance by the Parent
and the Seller of this Agreement and the consummation of the purchase of the
Transferred Shares and the other transactions contemplated hereby will not (i)
conflict with the Memorandum and Articles of Association and By-Laws of the
Parent or the Articles of Organization or By-Laws of the Seller, (ii) conflict
with, or result in the breach or termination of, or constitute a default 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 of competent authority, domestic or
foreign, to which the Parent or the Seller is a party or by which the Parent or
the Seller or any of their respective properties or assets are bound, (iii)
constitute a violation by the Parent or the Seller of any Law applicable to the
Parent or the Seller or any of their respective properties or assets, or (iv)
result in the creation of any Lien upon the Transferred Shares, except in the
case of subclause (ii) above such conflicts, breaches, terminations and defaults
which would not prevent or substantially delay the consummation of the
transactions contemplated by this Agreement.
(b) 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 Parent or the Seller in connection with
the execution and delivery of this Agreement and the performance of the
transactions contemplated hereby.
Section 3.5 Broker's or Finder's Fees. No agent, broker,
person or firm acting on behalf of the Parent, the Seller or any of their
Affiliates is, or will be, entitled to any commission or broker's or finder's
fees from any of the parties hereto, other than the Parent, the Seller or their
Affiliates.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
Section 4. Representations and Warranties of the Purchaser. In
order to induce the Parent and the Seller to enter into this Agreement and to
sell the Transferred Shares, the Purchaser makes the following representations
and warranties.
Section 4.1 Legal Status. The Purchaser is a duly organized
and validly existing public company with limited liability under the laws of the
Netherlands.
Section 4.2 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
-6-
<PAGE> 10
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 4.3 No Conflicts. (a) Assuming the receipts of the
consents, approvals, permits, authorizations, designations or declarations, or
the making of the filings, 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 which the Purchaser or any of its properties or
assets are bound, or (iii) constitute a violation by the Purchaser of any Law
applicable to the Purchaser any of its properties or assets.
(b) Except (i) for filings under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), (ii) as required
by the Securities Exchange Act of 1934, as amended, 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 4.4 Broker's or Finder's Fees. Except for Merrill
Lynch, Pierce, Fenner & Smith Incorporated (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 4.5 Available Funds. The Purchaser has or will have
available to it at the Closing all funds necessary to satisfy all of its
obligations hereunder and in connection with the transactions contemplated by
this Agreement.
Section 4.6 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
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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.
ARTICLE V
EXCLUSIVE DEALING, OTHER COVENANTS
Section 5.1 Exclusive Dealing. (a) The Parent, the Seller and
each of their respective officers, directors and employees shall, and shall
instruct their respective representatives, consultants, investment bankers,
attorneys, accountants, agents and advisors (collectively "Agents") to,
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). Neither the Parent nor the Seller shall
directly or indirectly, take (and neither the Parent nor the Seller shall
authorize or permit its Agents to so take) any action to (i) encourage, solicit
or 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 knowingly, or that such Person
reasonably should have known would 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 AL 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 involving the Corporation or any of its
securities or assets the consummation of which could reasonably be expected to
impede, interfere with, prevent or materially delay the Tender Offer, the
acquisition of the Transferred Shares pursuant to this Agreement or the
acquisition of the Class AC Shares pursuant to the Class AC Stock Purchase
Agreement.
(b) In addition to the obligations of the Parent and the
Seller set forth in paragraph (a), on the date of receipt thereof, each of the
Parent and the Seller shall 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 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 material changes thereto, and
the identity of the entity or person making any such inquiry or proposal.
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Section 5.2 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 5.3 Resignations. On the Closing Date, the Seller
shall, and the Parent shall cause the Seller to, 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 5.4 Provisions Concerning Transferred Shares. Each of
the Parent and 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 8.12 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, and the Parent shall cause the Seller to, vote (or cause to be voted) the
Transferred Shares whether issued, heretofore owned or hereafter acquired,
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 would reasonably be expected, to impede, interfere with,
prevent or materially delay the Tender Offer, the acquisition of the Transferred
Shares pursuant to this Agreement or the acquisition of the Class AC Shares
pursuant to the Class AC Stock Purchase Agreement. The Seller shall not enter
into any agreement or understanding with any Person the effect of which the
Seller knows or reasonably should have known would be to violate the provisions
and agreements contained in this Section 5.4.
Section 5.5 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 8.12 hereof, neither
the Parent nor the Seller shall (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 Transferred Shares or Existing Class A Shares into a voting trust or enter
into a voting agreement with respect to any Transferred Shares or Existing Class
A Shares, or (iii) take any action that would, to their knowledge, make any
representation or warranty of the Parent or the Seller contained herein untrue
or incorrect or have the effect of preventing or disabling the Parent or the
Seller from performing its obligations under this Agreement.
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<PAGE> 13
Section 5.6 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 and equitably 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 5.7 Changes in Tender Offer. Without the consent of
the Parent 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.
Section 5.8 Tender Offer Conditions. If the Purchaser waives
any Tender Offer Condition for purposes of Section 6.5 hereof or the Tender
Offer, the Purchaser shall waive such condition with respect to the Tender Offer
or Section 6.5 hereof, as the case may be.
Section 5.9 Purchase of the Class A Shares and the Transferred
Shares. (a) The Purchaser agrees that if it purchases any Class A Shares validly
tendered pursuant to the Tender Offer and not withdrawn prior to the expiration
of the Tender Offer, it will waive all unsatisfied conditions to the Purchaser's
obligations set forth in Article VI hereof and will purchase the Transferred
Shares pursuant to this Agreement.
(b) The Purchaser agrees that if it purchases the Transferred
Shares pursuant to this Agreement, it will waive all unsatisfied Tender Offer
Conditions and will purchase any of the Seller's Class A Shares validly tendered
pursuant to the Tender Offer and not withdrawn prior to the expiration of the
Tender Offer.
ARTICLE VI
CONDITIONS TO THE PURCHASER'S OBLIGATIONS
Section 6. 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 6.1 Truth of Representations and Warranties. (a) The
representations and warranties of the Parent and the Seller contained in this
Agreement 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 each of the Parent and the Seller,
dated the Closing Date, to such effect.
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<PAGE> 14
Section 6.2 Performance of Agreements. All of the agreements
of the Parent and the Seller to be performed and all of the covenants of the
Parent and 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 each of the Parent and the Seller,
dated the Closing Date, to such effect.
Section 6.3 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 6.4 Consents and Approvals. All governmental and
third-party consents, waivers and approvals, if any, specifically disclosed in
this Agreement 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 Class AC Shares under the Class AC
Stock Purchase Agreement and the purchase of the Transferred Shares under this
Agreement 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 6.5 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 6.6 Resignations. Each Person who has been appointed
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
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<PAGE> 15
delivered such written resignation has been removed from such position effective
as of the Closing Date.
Section 6.7 Class AC Stock Purchase Agreement. The purchase of
all of the Class AC Shares pursuant to the terms of the Class AC Stock Purchase
Agreement shall be consummated simultaneously with the purchase of the
Transferred Shares pursuant to this Agreement.
Section 6.8 Tender Offer. The purchase of any Class A Shares
tendered pursuant to the Tender Offer and not withdrawn prior to the expiration
of the Tender Offer shall be consummated simultaneously with the purchase of the
Transferred Shares pursuant to this Agreement.
ARTICLE VII
CONDITIONS TO THE OBLIGATIONS OF THE PARENT AND THE SELLER
Section 7. Conditions to the Obligations of the Parent and the
Seller. The obligation of the Seller to, and of the Parent to cause 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 7.1 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 Parent and the Seller shall have received a certificate
signed by an authorized officer of the Purchaser, dated the Closing Date, to
such effect.
Section 7.2 Performance of Agreements. All of the agreements
of the Purchaser 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 Parent and the
Seller shall have received a certificate signed by an authorized officer of the
Purchaser, dated the Closing Date, to such effect.
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 of competent jurisdiction 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 7.4 Tender Offer. The purchase of any Class A Shares
tendered pursuant to the Tender Offer and not withdrawn prior to the expiration
of the Tender Offer shall be consummated simultaneously with the purchase of the
Transferred Shares pursuant to this Agreement.
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<PAGE> 16
Section 7.5 Class AC Stock Purchase Agreement. The purchase of
all of the Class AC Shares pursuant to the terms of the Class AC Stock Purchase
Agreement shall be consummated simultaneously with the purchase of the
Transferred Shares pursuant to this Agreement.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Representations and Warranties. The respective
representations and warranties of the Parent, 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 Parent,
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 8.1
shall have no effect upon any other obligation of the parties hereto.
Section 8.2 Expenses. 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.
Section 8.3 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 itself 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 federal 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 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 agrees to appoint an agent for service of process in the State of
Delaware within 10 business days of the date hereof;
(d) agrees that nothing herein shall affect the right to
effect service of process in any other manner permitted by law; and
(e) waives the right to require a trial by jury with respect
to any such action or proceeding.
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<PAGE> 17
Section 8.4 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 8.5 Publicity. Except as required by applicable U.S.
federal securities law or the rules and regulations of any U.S. or foreign
securities exchange upon which the securities of the parties hereto are listed
for trading, 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 (which shall not be unreasonably
withheld).
Section 8.6 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, Esq.
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.
If to the Parent or the Seller:
J Sainsbury plc
Stamford House
Stamford Street
London SE1 911
England
Telecopier: 011 44 171 695 7610
Attention: Nigel F. Matthews,
Corporate Secretary
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<PAGE> 18
with a copy to:
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
Telecopier: (212) 558-3588
Attention: Neil T. Anderson, Esq.
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 8.7 Binding Effect; Benefit; Assignment. This
Agreement shall inure to the benefit of and be binding upon the parties hereto
and 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 8.6 to the contrary, it
is expressly understood and agreed that the Purchaser may assign this Agreement
and its rights, interests and obligations hereunder to any wholly-owned
subsidiary of the Purchaser; provided, however, that no such assignment shall
relieve the Purchaser of any of its obligations hereunder. 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 8.8 Best Efforts. Subject to the terms and conditions
provided herein, each of the Purchaser, the Parent and the Seller shall, 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 Purchaser, the Parent, 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 any applicable laws or regulations. The Purchaser, the Parent and
the Seller shall 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, the Parent and the Seller shall 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 8.7, none of the Purchaser, the Parent,
the Seller, the Corporation or any of their respective
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<PAGE> 19
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 Parent, 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
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 8.9 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 8.10 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 8.11 Amendments. This Agreement may not be changed,
amended, waived, or modified orally, but only by an agreement in writing signed
by the Purchaser, the Parent and the Seller.
Section 8.12 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 8.13 Termination of Agreement. All parties hereto
agree to use their best efforts to fulfill the requirements of Articles VI and
VII 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 any party may terminate this Agreement and thereafter this Agreement
shall become void and have no effect, without any liability hereunder of either
party to the other party except for any breach of this Agreement. This Agreement
shall terminate and become void and have no effect, without any liability
hereunder of either party to the other party except for any breach of this
Agreement, if the Class AC Stock Purchase Agreement or the Tender Offer shall be
terminated pursuant to their respective terms prior to the purchase of any
Transferred Shares hereunder.
Section 8.14 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
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<PAGE> 20
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 8.15 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 8.16 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
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> 21
IN WITNESS WHEREOF, each of the Purchaser, the Parent 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.
J SAINSBURY PLC
By: /s/ DAVID M. BREMNER
-----------------------
Name: David M. Bremner
Title: Deputy Group Chief Executive
JS MASS. SECURITIES CORP.
By: /s/ SANDRA J. DORAN
-----------------------
Name: Sandra J. Doran
Title: President
KONINKLIJKE AHOLD N.V.
By: /s/ Robert Zwartendijk
-----------------------
Name: R. Zwartendijk
Title: Executive Vice President
<PAGE> 1
CONFIDENTIALITY AGREEMENT
AGREEMENT made as of February 2, 1998, between Koninklijke Ahold N.V.,
a public company with limited liability, incorporated under the laws of The
Netherlands with its corporate seat in Zaandam (municipality Zaanstad), The
Netherlands ("Ahold"), and 1224 Corporation, a Delaware corporation ("1224
Corp.") (each, a "Party" and collectively, the "Parties").
WHEREAS, the Parties have expressed an interest in discussing the
possibility of an acquisition from 1224 Corp. of outstanding shares of capital
stock of Giant Food Inc., a Delaware corporation ("Giant") (the "Transaction");
WHEREAS, in connection therewith Ahold has requested oral and written
information with respect to Giant's business, assets, financial condition,
operations and prospects which Giant will provide to Ahold; and
WHEREAS, as conditions to the exchange of such information, Ahold is
required to agree, as set forth below, (i) to treat confidentially such
information and any other information that Ahold or any representative thereof
receives from 1224 Corp., Giant or any of their respective representatives,
whether received before or after the date of this Agreement, together with all
analyses, compilations, studies or other documents or records prepared by Ahold
or any of its representatives which contain or otherwise reflect or are
generated from such information (collectively, "Received Material") and (ii) to
take or abstain from taking certain other actions as set forth below. As used
herein with respect to any Party, the term "representatives" means its
affiliates, directors, officers, employees, agents and representatives,
including financial advisors, consultants and counsel and the term "affiliate"
has the meaning provided in Rule 12b-2 promulgated pursuant to the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in any event, shall
include any person who on the date hereof or at the time of determination
thereof, directly or indirectly, owns 10% or more of such Party.
NOW, THEREFORE, in consideration of the mutual convenants and
agreements set forth herein, the Parties agree as follows:
1. Ahold acknowledges and agrees that Received Material is a valuable
and proprietary asset, has competitive value and is of a confidential nature.
2. Ahold agrees that, except as 1224 Corp. may otherwise agree in
writing in advance, it will, and each of its representatives will, treat
confidentially, preserve and protect with the same standard of care afforded by
Ahold to any of its documents and not disclose any Received Material and will
use Received Material solely to evaluate the Transaction; provided, however,
that Ahold may disclose Received Material or portions thereof only to those
representatives who need to know such information solely for the purpose
described above (it being understood that (a) each such representative shall be
informed of the confidential nature of Received Material and shall be directed
to treat Received Material confidentially, not to use it other than for the
purpose described above and to otherwise comply with the provisions hereof
applicable to representatives and (b) that, in any event, Ahold shall be
responsible for any actions
<PAGE> 2
taken by any of its representatives which if such representative was a party
hereto would breach a provision of this Agreement applicable to
representatives).
3. The term "Received Material" shall not include information (i) which
was or becomes generally available to the public other than as a result of a
disclosure by Ahold or by any representative thereof in breach of this
Agreement, (ii) which was or becomes available on a non-confidential basis from
a source other than 1224 Corp. or Giant or any representative thereof, provided
that such source is not and was not known to Ahold to be bound by a
confidentiality agreement with 1224 Corp. or Giant or any representative thereof
or by any other contractual, legal or fiduciary obligation to 1224 Corp. or
Giant which would prohibit the disclosure of such information to Ahold, or (iii)
which was within the possession of Ahold or any affiliate thereof prior to such
receipt. The term "Received Material" shall also not include any analyses,
compilations, studies or other documents or records that have been prepared by
Ahold or its representatives solely from information of the nature described in
any of clauses (i), (ii) or (iii) of this paragraph 3.
4. Each Party agrees that, without the prior written consent of the
other Party, it will not, and will direct its representatives not to, disclose
to any person the fact that discussions regarding the Transaction (or any other
discussions between or involving the Parties) are taking or have taken place or
other facts with respect to such discussions, including the status thereof, or
the fact (if such becomes the case) that any confidential information has been
exchanged, nor otherwise make any public disclosure (whether written or oral)
with respect to this Agreement or the matters contemplated hereby, except and
only to the extent that such Party has been advised by legal counsel that such
disclosure is required by law and then, to the extent practicable, only after
prior notice to the other Party. The term "person" as used in this Agreement
shall be broadly defined to include, without limitation, any corporation,
partnership, company or individual, but shall not include (i) those officers of
Giant who are informed of the Transaction in order to provide the information
requested by Ahold, (ii) those directors of Giant who are members of the Special
Committee of the Board of Directors of Giant and (iii) with the prior written
consent of Ahold, the remaining members of the Board of Directors of Giant.
5. If Ahold or any representative thereof is requested or required (by
deposition, interrogatory, request for documents, subpoena, civil investigative
demand or similar process) to disclose any Received Material, it will, to the
extent permitted by applicable law, notify 1224 Corp. promptly and, to the
extent practicable, prior to any disclosure, so that 1224 Corp. or Giant, as the
case may be, may seek any appropriate protective order and/or take any other
appropriate action. In the event such protective order is not obtained, or that
1224 Corp. waives compliance with the provisions hereof, (i) Ahold or its
representative, as the case may be, may disclose to any tribunal or regulatory
or administrative body with jurisdiction only that portion of the Received
Material which it is required to be disclosed, and shall exercise reasonable
best efforts to obtain assurance that confidential treatment will be accorded
such Received Material and (ii) Ahold shall not be liable for such disclosure
unless such disclosure to such tribunal or regulatory or administrative body was
caused by or resulted from a previous disclosure by Ahold or any representative
thereof not permitted by this Agreement.
2
<PAGE> 3
6. Each Party hereby acknowledges to the other Party that it is aware,
and will advise its representatives who are informed as to the matters which are
the subject of this Agreement, that the United States securities laws prohibit
any persons who are in possession of material, non-public information with
respect to an issuer from purchasing or selling securities of such issuer or,
subject to certain limited circumstances, from communicating such information to
any other person.
7. In the event that the Parties do not agree to a Transaction within
90 days of the date hereof (which period may be extended by the Parties by
mutual written agreement), or if either Party terminates discussions prior to
such 90-day period, Ahold and its representatives will, as promptly as practical
following a request from 1224 Corp., deliver to 1224 Corp. all Received Material
and any other material (whether in written, electronic, magnetic or other form)
containing or reflecting any information in the Received Material (whether
prepared by Ahold, its representatives or otherwise) and will not retain any
copy or other extract or reproduction in whole or in part thereof; except that,
all Received Material whether in written, electronic, magnetic or other form
whatsoever, prepared by Ahold or any representative thereof containing or
reflecting information in the Received Material may be destroyed and such
destruction shall be certified in writing to 1224 Corp. by an authorized officer
supervising such destruction.
8. Ahold understands that except as may be provided for in such
definitive agreement or agreements, if any, as may be entered into in connection
with a Transaction, none of 1224 Corp., Giant or any of their respective
representatives makes any representation or warranty as to the accuracy or
completeness of any Received Material and no liability (on any basis including,
without limitation, in contract, tort or otherwise) to Ahold or any
representative thereof shall result from its use.
9. Each party agrees that unless and until a definitive agreement
between the parties hereto with respect to a Transaction has been executed and
delivered, neither party will be under any legal obligation of any kind
whatsoever with respect to a Transaction by virtue of this or any written or
oral expression with respect to such a Transaction by any of its directors,
officers, employees, or other representatives or its advisors or representative
thereof except of the matters specifically agreed to in this letter.
10. It is understood and agreed that money damages would not be a
sufficient remedy for any breach of this Agreement and that the Parties shall be
entitled to specific performance and injunctive relief as remedies for any such
breach and neither the Parties nor their representatives will oppose the
granting of such relief. Such remedies shall not be deemed to be the exclusive
remedies for breach of this Agreement but shall be in addition to all other
remedies available at law or in equity to the Parties.
11. This Agreement shall inure to the benefit of and be enforceable by
the Parties and their successors.
12. The Parties agree and acknowledge that nothing contained herein
shall limit, restrict or otherwise affect the rights of the Parties to compete
with each other, provided that the
3
<PAGE> 4
Received Material will be used by Ahold solely to evaluate the Transaction and
not for any operating or other purpose.
13. It is further understood that no failure or delay by either Party
in exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any right, power or privilege
hereunder.
14. This Agreement shall remain in effect until the earlier of (i)
three years from the date hereof and (ii) consummation of the Transaction.
15. This Agreement (a) shall be governed and construed in accordance
with the laws of the State of Delaware applicable to agreements made and to be
performed within such State and (b) may not be terminated or modified nor any of
its provisions waived, except in a writing signed by a duly authorized officers
of both Parties.
16. Each of the Parties agrees that any legal action or proceeding with
respect to this Agreement may be brought in the Courts of the State of Delaware
or the United States District Court for the District of Delaware, by execution
and delivery of this Agreement, each Party hereby irrevocably submits itself in
respect of its property, generally and unconditionally to be the non-exclusive
jurisdiction of the aforesaid courts in any legal action or proceeding arising
out of this Agreement. Each of the Parties hereby irrevocably waives any
objection which it may now or hereafter have to the laying of venue of any of
the aforesaid actions or proceedings arising out of or in connection with this
Agreement brought in the courts referred to in the preceding sentence. Each
Party consents to process being served in any action or proceeding by the
mailing of a copy thereof to the address set forth opposite its name below and
agrees that such service upon receipt shall constitute good and sufficient
service of process or notice thereof. Nothing in this paragraph shall affect or
eliminate any right to serve process in any other matter permitted by law.
17. This Agreement may be executed in counterparts, each of which shall
be deemed an original and all of which shall be deemed the same instrument.
4
<PAGE> 5
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
Address: KONINKLIJKE AHOLD N.V.
Albert Heijnweg 1
1507 EH Zaandam, The Netherlands
By: /s/ A. M. Meurs
-------------------------------
Name: A. M. Meurs
Title: Executive Vice President
1013 Centre Road, 1224 CORPORATION
Wilmington, DE 19805
By: /s/ Pete Manos
-------------------------------
Name: Pete Manos
Title: Chairman and President
5
<PAGE> 1
KONINKLIJKE AHOLD N.V.
Albert Heijnweg 1
1507 EH Zaandam
The Netherlands
April 27, 1998
The 1224 Corporation
6300 Sheriff Road
Landover, Maryland 20785
Attention: David W. Rutstein
Gentlemen:
This letter confirms our mutual understandings and intentions
concerning negotiations between Koninklijke Ahold N.V. (the "Purchaser") and The
1224 Corporation (the "Seller"), regarding the possible purchase by the
Purchaser, directly or through one of its affiliates, of all of the outstanding
Class AC Voting Common Stock (the "AC Shares") of Giant Food Inc. (the
"Company") from the Seller. It is the parties' intention that the negotiations
regarding such possible purchase and of definitive transaction documents
continue after the execution of this letter and the parties each agree to
negotiate in good faith.
During the period from the date hereof until May 31, 1998,
none of the Seller, or any of its officers, directors, employees,
representatives, agents or advisors (collectively "Agents") shall, directly or
indirectly, take any action (other than an action directly related to
negotiations with the Purchaser) to (i) encourage, initiate or solicit the
making of an Acquisition Proposal (as defined below), (ii) engage in discussions
or negotiations with, or provide any information to, any entity or person 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, or (iii) enter into an agreement with respect to
an Acquisition Proposal; provided, however, that, subject to compliance by the
Seller with the immediately succeeding sentence, (a) the Seller, in response to
an unsolicited Acquisition Proposal from J. Sainsbury (USA) Holdings Inc. or any
affiliate thereof (collectively "Sainsbury"), may participate in discussions or
negotiations with, or furnish information to, Sainsbury if the Board of
Directors of the Seller reasonably determines that the unsolicited Acquisition
Proposal proposed by Sainsbury is reasonably likely to result in a Sainsbury
Superior Proposal (as defined below) and believes (based upon the advice of
outside legal advisors of recognized standing in the state of Delaware) that
failing to take such action is reasonably likely to constitute a breach of its
fiduciary duties and (b) the Seller may enter into an agreement with respect to
a Sainsbury Superior Proposal if, within ten days of receipt of written notice
from the Seller with respect to such Sainsbury Superior Proposal pursuant to
subclause (i) of the next succeeding sentence, the Purchaser fails to have (1)
executed and delivered to the Seller a Stock Purchase Agreement in substantially
the form of the April 17, 1998 draft of the Stock Purchase Agreement by and
between the Purchaser and the Seller relating to the purchase by the Purchaser
from the Seller of the AC Shares (the "Draft AC
<PAGE> 2
The 1224 Corporation
April 27, 1998
Page 2
Stock Purchase Agreement"), but as modified (w) to eliminate the condition
contained in Section 6.6 of the Draft AC Stock Purchase Agreement and all
references to a stock purchase agreement by and between the Purchaser and
Sainsbury, (x) to change all references to the Agreement and Plan of Merger by
and among the Purchaser, a wholly-owned subsidiary thereof and the Company (the
"Merger Agreement") so as to refer instead to the agreement referred to in
subclause (2) of this sentence, (y) to include in Section 2.2 thereof as the
price to be paid per AC Share by the Purchaser to the Seller thereunder the
Agreed Upon Price (as defined below) or, if there is no Agreed Upon Price, the
price per AC Share offered by Sainsbury to the Seller pursuant to the Sainsbury
Superior Proposal and (z) to reflect the mutually acceptable resolution of the
issues that have been raised by the Purchaser or the Seller with respect to the
Draft AC Stock Purchase Agreement and that have not been resolved prior to the
date hereof which resolution the Purchaser and the Seller agree to negotiate in
good faith, and (2) executed and delivered to the Company an agreement
containing the representations, warranties and covenants contained in the April
17, 1998 draft of the Merger Agreement (the "Draft Merger Agreement") as
modified to reflect the mutually acceptable resolution of the issues that have
been raised by the Purchaser, the Seller or the Company with respect to the
Draft Merger Agreement and that have not been resolved prior to the date hereof,
which resolution the Purchaser and the Seller agree (and the Seller agrees to
use its best efforts to cause the Company) to negotiate in good faith. The
Seller promptly shall advise the Purchaser (i) orally and in writing of the
receipt of any Acquisition Proposal (including from or otherwise involving
Sainsbury) and of the identity of the entity or person making such Acquisition
Proposal and of the material terms thereof and of any changes thereto and (ii)
orally prior to commencing any discussions or negotiations between the Seller or
any of its Agents, on the one hand, and Sainsbury or any of its Agents, on the
other hand, (x) regarding an Acquisition Proposal by Sainsbury or (y) which
could reasonably lead to a Sainsbury Superior Proposal, and subsequently
regarding the progress of any such negotiations or discussions.
As used herein the term "Acquisition Proposal" means any
proposal to purchase or acquire, directly or indirectly, all or any of the AC
Shares of the Company, a substantial amount of the assets of the Company or any
of its subsidiaries or 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
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 Company or any other transaction, the consummation of which could
reasonably be expected to dilute materially the benefits to the Purchaser of the
acquisition of the AC Shares. As used herein the term "Sainsbury Superior
Proposal" means any bona fide proposal from or otherwise involving Sainsbury to
purchase all of the AC Shares of the Company in cash at a price per share that
is either (x) greater than the price per AC Share agreed upon at the time by the
Purchaser and the Seller (the "Agreed Upon Price") or (y) if the Purchaser and
the Seller have not reached an agreement on the price to be paid per AC Share,
greater than the price per AC Share most recently proposed to the Seller by the
Purchaser, and on terms which the Board of Directors of the Seller determines in
its good faith reasonable judgment (based upon the advice of
<PAGE> 3
The 1224 Corporation
April 27, 1998
Page 3
outside financial and legal advisors) to be as or more favorable to the Seller
and the Company than the transactions contemplated by the Draft AC Stock
Purchase Agreement (i) which is not subject to a financing condition and as to
which Sainsbury has represented and warranted to the Seller in writing that
financing is or will be available and (ii) which does not provide for any
breakup fee or other inducement to Sainsbury other than reimbursement of
documented out-of-pocket expenses incurred in connection with the Sainsbury
Superior Proposal.
Except as otherwise required by law, neither of the parties
hereto (nor any affiliate, or Agent thereof) shall issue any press release or
make any other statement intended for public distribution relating to, or
connected with, this letter or the matters contained herein without obtaining
the prior approval of the other party hereto.
Each of the parties hereto recognizes and acknowledges that a
breach by it of any agreements contained in this letter 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 agreements and injunctive and other equitable
relief in addition to any other remedy to which it may be entitled, at law or in
equity.
Except for the agreements set forth in the three immediately
preceding paragraphs), this letter does not represent any binding commitment or
legal obligation of any kind whatsoever by the Purchaser or the Seller in
connection herewith with respect to the transaction contemplated hereby. Such
binding commitment or legal obligation shall arise only when and if the
definitive transaction documents, developed as a result of the negotiations
between the parties are in fact executed by the parties.
Notwithstanding anything contained in this letter to the
contrary, this letter may be terminated by either the Purchaser or the Seller
upon delivery of written notice to the other party to such effect if the
Purchaser and Seller have not agreed on or prior to May 4, 1998 upon the price
per AC Share that would be paid by the Purchaser to the Seller pursuant to the
AC Stock Purchase Agreement. In the event of such termination, this letter shall
become void and have no further effect.
This letter shall not be amended or modified except in writing
signed by the parties hereto.
This letter shall be governed by, and construed in accordance
with, the laws of the State of Delaware. The parties agree that any legal action
or proceeding relating to this letter, or for recognition and enforcement of any
judgment in respect thereof, shall be instituted in the courts of the State of
Delaware, the courts of the United States of America located in Delaware and
appellate courts of any thereof.
<PAGE> 4
The 1224 Corporation
April 27, 1998
Page 4
This letter may be executed in one or more counterparts, each
of which shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
If the foregoing correctly sets forth our mutual understanding
with respect to the proposed negotiations, please so indicate by signing the
enclosed copy of this letter and returning it to us.
KONINKLIJKE AHOLD N.V.
By /s/ Robert Zwartendijk
---------------------------------
Name: Robert Zwartendijk
Title: Executive Vice President
Acknowledged and Agreed, this
27 day of April, 1998
THE 1224 CORPORATION
By /s/ David W. Rutstein
---------------------------------------
Name: David W. Rutstein
Title: Vice President and Secretary
<PAGE> 1
GIANT FOOD INC.
6300 SHERIFF ROAD
LANDOVER, MARYLAND 20785
May 29, 1998
Dear Stockholder:
The Board of Directors of Giant has met to consider the tender offer that
Royal Ahold is making for all the outstanding shares of Class A (Non-Voting)
Common Stock of Giant at a price of $43.50 per share. As you are likely aware,
Royal Ahold has entered into an agreement with The 1224 Corporation to acquire
all the outstanding shares of Class AC (Voting) Common Stock and an agreement
with J Sainsbury plc to acquire all the outstanding shares of Class AL (Voting)
Common Stock. Under these two agreements, which are described more fully in the
enclosed Schedule 14D-9, Ahold will acquire all the voting securities of Giant.
Under the agreement with The 1224 Corporation, Ahold agreed to make the tender
offer, and it may not purchase the Class AC shares unless it also purchases all
the Class A shares that are tendered.
The Board of Directors has unanimously determined that the tender offer is
in the best interests of the Company and the holders of the Class A shares 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 gave careful
consideration to a number of factors which are described in the enclosed
Schedule 14D-9. The Schedule 14D-9 also contains additional information with
respect to the transaction. We urge you to consider this information carefully.
Sincerely yours,
/s/ Pete Manos
Pete L. Manos
Chairman of the Board, President,
and Chief Executive Officer
<PAGE> 1
[Giant Food Inc. Letterhead]
Contact: Barry F. Scher For release: Immediate
Giant Food Inc.
Work - (301) 341-4710
Home - (202) 244-2354
Giant Food Board of Directors Recommends Acceptance of Tender Offer by Royal
Ahold
Landover, MD ... May 29, 1998 -- At a meeting today, the Board of Directors of
Giant Food Inc. considered the tender offer being made by Royal Ahold for the
outstanding Class A Shares of Giant Food at a price of $43.50 per share, net to
the seller in cash. The Board of Directors unanimously recommended to the
holders of Giant Food Class A Shares that they accept the offer and tender their
shares. Further information is contained in the Schedule 14D-9
Solicitation/Recommendation Statement which Giant Food is filing with the
Securities and Exchange Commission today and mailing to the holders of its Class
A Shares.
May 29, 1998
<PAGE> 1
GIANT FOOD INC.
NON-QUALIFIED EXECUTIVE STOCK BONUS PLAN II
GIANT FOOD INC., a corporation organized and existing under and by
virtue of the laws of the State of Delaware (hereinafter the "Company"), desires
to advance the interests of the Company by rewarding the loyal, faithful, and
efficient services of eligible individuals. The Company desires to provide an
incentive and reward for those key officers, key senior executives, and other
key employees who have substantial responsibility for the direction and
management of the Company and who contribute most to the operating progress and
earning power of the Company. The Company desires to promote the success of the
business of the Company, by providing the aforesaid key officers, key senior
executives, and other key employees an incentive to increase their proprietary
interest in the success of the Company and to encourage them to remain in the
employ of the Company. In order to carry out these purposes, the Company has
accepted and sponsored the Non-Qualified Executive Stock Bonus Plan II
(hereinafter the "Plan").
ARTICLE I
Definitions
The following definitions shall be applicable to the terms used in
the Plan:
(a) Board. The Board of Directors of the Company.
(b) Cash Contributions. The amounts which may be contributed from
time to time by the Company to the Trust for allocation among the Participants,
investment for the benefit of the Participants and distribution to the
Participants pursuant to the terms of this Plan. For purposes of this Plan, Cash
Contributions shall also encompass contributions made in Common Stock as
hereinafter defined. For all purposes of this Plan where a contribution is made
in the form of Common Stock the contribution shall be treated as a Cash
Contribution in an amount equal to the fair market value of the Common Stock so
contributed (as determined by the Committee or the Board) followed by a purchase
of the Common Stock at a price equal to such fair market value.
(c) Cash Income. All net income including, but not limited to,
dividend and interest income received by the Plan from its investment of the
Cash Contributions in temporary investments and
1
<PAGE> 2
in Common Stock and from the reinvestment of the Cash Income of
the Plan.
(d) Code. The Internal Revenue Code of 1986, as presently in effect
or as hereafter amended.
(e) Committee. The Stock Bonus Plan II Committee appointed by the
Board to implement, interpret, and administer the Plan as provided in Article II
hereof.
(f) Common Stock. The Company's Class A Non-Voting Common Stock of
the par value of One Dollar ($1.00) per share, reserved for issuance in
accordance with this Plan.
(g) Company. GIANT FOOD INC., a Delaware corporation, and its
subsidiaries as defined in Section 425(f) of the Code.
(h) Compensation. The aggregate of all payments for services,
excluding bonuses, paid or accrued by the Company for the benefit of a
Participant during the calendar month preceding the date of the Cash
Contributions.
(i) Effective Date. January 1, 1990.
(j) Electing Participant. Any Participant who makes an election, as
described more fully in Article VI hereof, to include in his gross income the
fair market value of the Cash Contributions allocated to him for any year.
(k) Eligible Employee. Any person who is determined, in accordance
with Article III hereof, to be a key management employee. The term "Eligible
Employee" shall include officers, executives, and supervisory personnel, as well
as other employees.
(l) Participant. Any Eligible Employee who has executed a
Participant Acceptance Form.
(m) Participant Acceptance Form. The form to be executed by each
Eligible Employee. The Participant Acceptance Form shall include an agreement by
the Participant to be bound by all of the terms of this Plan and the Trust, and
any other terms and conditions described by the Committee of the Board.
(n) Plan. The Giant Food Inc. Non-Qualified Executive Stock Bonus
Plan II as set forth in this document as it may be amended from time to time.
2
<PAGE> 3
(o) Plan Year. The calendar year.
(p) Pre-Tax Earnings. The income before income taxes as reported in
the annual Report of the Company.
(q) Recipient. Any Eligible Employee of the Company to whom Cash
Contributions are allocated pursuant to this Plan, or his designated
beneficiary, surviving spouse, estate or legal representative; but for the
purposes hereof, any beneficiary, surviving spouse, estate or legal
representative shall be considered as one person with the Participant.
(r) Tax Distribution. The cash distribution, in the amount
determined in accordance with Article VI hereof, paid to an Electing Participant
by the Company.
(s) Termination Date. January 1, 2000.
(t) Total Contribution. The total amount allocated by the Company
each year to be applied to Cash Contributions to the Plan and to Tax
Distribution to Electing Participants.
(u) Trust. The Giant Food Inc. Non-Qualified Executive Stock Bonus
Plan II Trust as it may be amended from time to time.
ARTICLE II
Administration
(a) The Committee (if appointed by the Board) or the Board (in the
event that a Committee is not appointed) shall be responsible for the operation
and administration of the Plan. In the event a Committee is appointed, the
Board, in its sole discretion, shall be authorized to abolish or suspend the
Committee and to designate itself as responsible for the operation and
administration of the Plan,
(b) If the Board appoints a Committee, it shall consist of at least
three (3) but not more than five (5) persons, at least one of whom shall be a
member of the Board. The Committee shall select one of its members as its
Chairperson and shall hold its meetings at such times and places as it shall
deem advisable. Any member of the Committee may resign upon ten (10) days prior
written notice to the Board. The Board shall be authorized to remove any member
of the Committee at any time and, in its sole discretion, to appoint a successor
whenever a vacancy on the Committee occurs.
(c) The Committee shall have all powers necessary to
3
<PAGE> 4
administer the Plan in accordance with its terms, including (but not limited to)
the powers: (i) to determine the Eligible Employees of the Company who shall
become Participants in the Plan; (ii) to determine the allocation of the Cash
Contributions among the Participants; (iii) to determine the time or times and
the price or prices at which the Cash Contributions shall be used to purchase
shares of Common Stock in accordance with the provisions of Article III hereof;
(iv) to determine the fair market value of any Common Stock contributed to the
Plan; and (v) to pay the reasonable and necessary expenses of the administration
of the Plan from the assets of the Plan; and (vi) to interpret the Plan and
prescribe, amend, and rescind rules and regulations relating to it. All actions
of the Committee shall be taken by the majority vote of its members. Any action
may be taken by a written instrument signed by all the members of the Committee,
and action so taken shall be fully as effective as if it had been taken by a
vote of the members at a meeting duly called and held. The Committee may appoint
a secretary to keep minutes of its meetings and shall make rules and regulations
for the conduct of its business as it shall deem advisable.
(d) In the absence of contrary action by the Board, any action taken
by the Committee with respect to the implementation, interpretation, or
administration of the Plan shall be final, conclusive, and binding.
ARTICLE III
Eligibility and Awards
(a) The purpose of the Plan is to provide an incentive and reward
for those key management employees, including officers (specifically vice
presidents and above), senior executives, and other employees, who have
substantial responsibility for and the opportunity to contribute most to the
successful operation of the Company.
(b) The Board shall establish for each Plan Year beginning on or
after the Effective Date and ending on or before the Termination Date the
amount, if any, of the Total Contributions to be made with respect to the Plan.
For the 1990 Plan Year, the contribution shall be One Million Dollars
($1,000,000). For each Plan Year thereafter, the Board shall fix a contribution
which shall not exceed the greater of (i) One Million Dollars ($1,000,000), or
(ii) six-tenths of one percent (0.60%) of the Pre-Tax Earnings of the Company
for its fiscal year which ends with or within that Plan Year.
4
<PAGE> 5
(c) Once the Total Contributions are determined for a Plan Year, the
Committee shall determine the tax rate to be used to determine the maximum
amount of the Tax Distributions that are to be paid to all Electing Participants
under Article VI(c). The Cash Contributions for such Plan Year shall then be
determined by subtracting the amount determined in the preceding sentence from
the Total Contributions. The Cash Contributions shall be paid by the Company to
the Trust at such time as the Committee shall determine.
(d) The Committee shall determine the employees of the Company who
shall be eligible to participate in the Plan on the Effective Date. After the
initial implementation of the Plan and the initial determination of the Eligible
Employees, the Committee shall determine each year whether additional employees
of the Company should be designated as eligible to participate in the Plan.
(e) As soon as practicable after the initial determination by the
Committee of the Eligible Employees, the Committee shall give written notice
thereof to each Eligible Employee, which written notice shall be accompanied by
a copy of this Plan and the Trust. Each Eligible Employee shall agree in writing
to be bound by the terms of the Plan and of the Trust by executing a copy of the
Participant Acceptance Form and returning the same to the Committee within
thirty (30) days after receipt of such written notice, at which time the
Eligible Employee shall be deemed to be a Participant.
(f) The Committee shall determine for each year the allocation of
the Cash Contributions among the Participants in proportion to their respective
weighted participation in the allocation of Cash Contributions set forth in
Article III(a) below, and shall notify each Participant of the portion of the
Cash Contribution allocated to him. All such allocations shall be made in
accordance with the following procedure:
Class of Weighted Participation in the
Eligible Employees Allocation of Cash Contributions
- ------------------ --------------------------------
Officers 1.75
Senior Executive 1.5
Key Employee 1
It is intended that all Cash Contributions and all Cash Income shall be applied
to the purchase of additional shares of Company Common Stock.
(g) The Cash Contributions and all Cash Income shall be
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held in Trust. The Trustee shall, for purposes of illustration but not
limitation, be required to comply with the following:
(l) All Cash Contributions (to the extent not comprised of Common
Stock) and Cash Income not required for the payment of anticipated expenses of
the Plan shall be used by the Trustee as soon as is administratively practicable
to purchase Common Stock for the benefit of the Participants; provided, however,
that the Trustee shall not be required to purchase fractional shares of Company
Common Stock. The Trustee may purchase the required additional shares of Common
Stock directly from the Company or on an established securities exchange as the
Committee directs. In addition, the Trustee may aggregate its orders and
purchase Common Stock at the same time for and on behalf of more than one
account in order to minimize purchase costs.
(2) Although the Common Stock is non-voting stock, in the event that
the Common Stock becomes or is exchanged for voting stock, the Trustee shall
vote the Common Stock held by it after the Committee solicits instructions from
each Participant and instructs the Trustee accordingly.
(3) The Trustee shall not sell any of the Common Stock held in the
Trust except as directed by the Committee.
(h) The assets of the Plan, including all Common Stock, cash or
other assets shall be held by the Trustee for the benefit of the Participants
until the Common Stock and cash or other assets held by the Trustee are required
to be distributed to the Participants in accordance with the terms and
conditions specified in Article IV hereof. In the event that any Participant's
share of the Common Stock, cash and any other assets are forfeited, such
Participant's share of the Common Stock; cash and any shares and assets shall be
allocated pro rata among the Participants in accordance with the allocation of
the Cash Contributions for the year in which the forfeiture occurs.
(i) The Committee shall establish a separate account for each
Participant. This account shall be credited with:
(i) the amount of all Cash Contributions allocated to the
Participant,
(ii) the amount of all Cash Income allocated to the Participant,
(iii) the amount of any forfeitures from the accounts of any other
Participants, and
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(iv) the amount of all Common Stock allocated to the Participant.
The account of each Participant shall also be charged with:
(i) the amount of any Plan expenses in excess of current income
charged to such Participant,
(ii) the amount of any forfeitures from the account of such
Participant, and
(iii) the amount of all Common Stock, cash or other assets
distributed to the Participant.
The Committee shall also make such other credits and charges to the accounts of
the Participants as shall be necessary to carry out the provisions of the Plan,
and shall furnish an annual statement of account to each Participant.
ARTICLE IV
Restrictions
(a) Title to any shares of Common Stock, cash, or any other assets
held by the Plan for the benefit of the Participants, shall at all times remain
in the Trustee until such Common Stock, cash, or other assets have been
distributed free of trust to the Participants pursuant to the provisions of
Article IV(b) below.
(b) The Cash Contributions allocated to any Participant under the
Plan, together with any Common Stock, cash, or other assets obtained and held in
the Plan for such Participant, shall not vest in such Participant and shall be
subject to forfeiture until the earlier of:
(1) The completion of continuous service by the Participant as an
employee of the Company through January 1, 2000;
(2) The retirement by the Participant provided that he is receiving
retirement benefits under the Giant Food Inc. Retirement Plan and that he has
attained the age of at least sixty-two (62):
(3) The voluntary termination of employment with the Company by the
Participant by reason of the abolition of his position, or at the request of the
Company not involving either (i) the dishonesty or other wrongful conduct of the
Participant,
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or (ii) the failure of the Participant to competently perform his duties.
(4) The total and complete disability of the Participant;
or
(5) The death of the Participant.
Upon the occurrence of the earliest of the above events, the Common Stock, cash,
or other assets obtained and held in the Plan for the benefit of the
Participant, shall vest in the Participant and the amount so vested shall be
distributed to the Participant (or in case of a deceased Participant to the
Participant's beneficiary) free of trust within a reasonable period not to
exceed ninety (90) days from the occurrence of the event causing the vesting.
(c) If the employment of the Participant with the Company
ceases or is terminated on or before December 31, 1999, whether by the
Participant or by the Company for any reason other than by reason of the
occurrence of any of the events specified above in Article IV(b), then unless
the Committee (or the Board if no Committee is appointed) shall, in its sole
discretion determine that waiver of the forfeiture provisions and vesting of the
Common Stock, cash and other assets held in the Plan for the benefit of the
Participant in whole or in part is in the best interests of the Company, the
Participant shall forfeit all such Common Stock, cash, or other assets obtained
and held under the Plan for the benefit of the Participant. The Common Stock,
cash, or other assets so forfeited shall be reallocated to the other
Participants as provided in Article III(h).
(d) A Participant shall be deemed to have a total and complete
disability for purposes of this Article IV if a competent physician chosen by
the Participant and approved by the Committee determines that the Participant
has a physical or mental condition of an apparently permanent nature which
prevents the Participant from engaging in any substantial gainful employment.
(e) The beneficiary referred to in this Article IV may be designated
by the Participant as a Recipient (without the consent of any prior beneficiary)
on a form provided by the Committee and delivered to the Committee prior to the
death of the Participant. If no such beneficiary has been designated, or if no
designated beneficiary shall survive the Participant, the distribution of the
Common Stock, cash, or other assets shall be made to the Participant's estate.
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(f) Any Common Stock, cash, or other assets granted to or ultimately
distributed to a Participant shall not be deemed to be salary or any other
compensation to the Participant for the purpose of computing benefits to which
the Participant may be entitled under any pension plan, profit-sharing plan, or
other arrangement of the Company for the benefit to its employees.
(g) Each share of Common Stock distributed to a Participant pursuant
to the provisions of Article IV(b) above shall be so acquired for investment and
not for resale or other distribution, and the Participant shall furnish the
Company with a written statement to such effect at the time of receipt of such
shares: further, a reference to such investment warranty shall be inscribed on
the certificates representing such shares. Notwithstanding the foregoing, to the
extent that the applicable registration statements of the Company, which allow
"affiliates" (as that term is defined in the Securities Act of 1933) of the
Company to resell any share of Company Common Stock acquired pursuant to Article
IV(b) of this Plan, have been validity filed and are effective with the
Securities and Exchange Commission, each Participant shall be free to sell,
exchange or otherwise dispose of each share of Common Stock acquired pursuant to
the provisions of Article IV(b) of this Plan.
ARTICLE V
Assignability
The rights of a Participant under this Plan and the Trust shall not
be transferable otherwise than by will or the laws of descent and distribution.
Except as permitted by the preceding sentence, the rights of a Participant under
this Plan and the Trust shall not be transferred, assigned, pledged, or
hypothecated in any way (whether by operation of law or otherwise), and shall
not be subject to execution, attachment, or similar process. Upon any attempt so
to transfer, assign, pledge, hypothecate, or otherwise dispose of the rights of
a Participant under this Plan and the Trust or of any rights or privilege
conferred thereby, contrary to the provisions hereof, or upon the levy of any
attachment or similar process upon such rights and privileges, the shares and
such rights and privileges shall immediately become null void.
ARTICLE VI
Current Inclusion in Income
(a) Because the terms of the Plan impose a substantial risk of
forfeiture on the Participant until the occurrence of the earliest of one of the
events specified in Article IV(b) hereof,
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<PAGE> 10
Sections 83(a) and 402(b) of the Code provide, in effect, that neither the
initial granting of the Cash Contributions, nor the investment of the Cash
Contributions in Common Stock, nor the receipt of the Cash Income, nor the
investment of the Cash Income will result in taxable income to a Participant
until such time as the rights of the Participant under the Plan are no longer
subject to such substantial risk of forfeiture. Correspondingly, the Company
does not obtain a tax deduction on the accrual or payment of the Cash
Contributions until such time as the Participant has taxable income as a result
of the vesting of the Participant's interest in the Plan and the Trust.
(b) However, if a Participant (an "Electing Participant") makes an
election pursuant to Section 83(b) of the Code to include in his gross income,
in the taxable year in which a Cash Contribution is paid to the Plan and
allocated in part to his account, the amount of such Cash Contribution allocated
to the Participant will be considered compensation to the Participant paid and
deductible by the Company. Such compensation will also be considered wages
subject to federal and state withholding taxes.
(c) In order to further the purposes of the Plan, upon receipt of
satisfactory evidence that an Electing Participant has made an election under
Section 83(b) of the Code with respect to the Cash Contributions allocated to
his account for any year. The Company will distribute the Tax Distribution to
the Electing Participant. The Tax Distribution shall be equal to the amount of
the Federal income tax liability of the Participant which would result if the
sum of (i) the Cash Contribution allocated to the Electing Participant and (ii)
the amount of the Tax Distribution were multiplied by the sum of the highest
federal income tax rate applicable to individuals or such other approximate
percentage determined by the Committee. The amount of this Tax Distribution will
be subject to federal and state income tax withholding with respect to the
Electing Participant.
ARTICLE VII
Miscellaneous
(a) Listing and Registration of Shares. Any Common Stock purchased
with the Cash Contributions and/or the cash dividends on the previously
purchased Common Stock shall be subject to the requirement that if at any time
the Committee shall determine, in its sole discretion, that the listing,
registration, or qualification of the shares covered hereunder upon any
securities exchange or under any state or federal law or the consent or approval
of any governmental regulatory body, is necessary or
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<PAGE> 11
desirable as a condition of, or in connection with the distribution of Common
Stock to the Participants, such Common Stock may not be distributed to the
Participants unless and until such listing, registration, qualification,
consent, or approval shall have been effected or obtained free of any conditions
not acceptable to the Committee.
(b) Rights as a Stockholder. Except as otherwise provided, the
Participant shall have no rights as a stockholder with respect to any shares of
Common Stock purchased with the Cash Contributions and/or the cash dividends on
the previously purchased Common Stock until the date of issuance of a stock
certificate to him for such shares, at which time the Participant shall have all
the rights of a stockholder with respect to the Common Stock issued pursuant to
this Plan, including the right to vote the shares if such shares become eligible
to vote and to receive all dividends or other distributions paid or made with
respect thereto.
(c) Amendment of Plan. The Board may at any time and from time to
time modify and amend the Plan in any respect; provided, however, that no such
modification or amendment of the Plan shall, without the consent of a
Participant, affect his rights with respect to any Common Stock, cash or other
assets held in the Plan for his benefit as of the date of such amendment.
(d) Termination of the Plan. The Plan may be abandoned or terminated
at any time by the Board provided, however, that no such modification or
amendment of the Plan shall, without the consent of a Participant, affect his
rights with respect to any Common Stock, cash or other assets held in the Plan
for his benefit as of the date of such amendment.
(e) Indemnification of the Committee. In addition to all other
rights of indemnification which they may have as Directors of the Company, the
members of the Committee shall be indemnified by the Company against any and all
costs and expenses incurred by them (or any of them) in connection with any
action, suit, or proceeding to which they (or any of them) may be a party by
reason of any action taken or failure to act under or in connection with this
Plan or any award granted pursuant thereto, and against all amounts paid by them
(or any of them) in settlement thereof (provided such settlement is approved by
independent legal counsel selected by the Company), or paid by them in
satisfaction of a judgment in any such action, suit, or proceeding, except a
judgment based upon a finding of bad faith; provided that, upon institution of
any such action, suit, or proceeding, the person desiring any such
indemnification shall
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give the Company an opportunity, at its own cost and expense, to handle and
defend against the same.
(f) Costs and Expenses. All costs and expenses with respect to the
adoption of this Plan shall be borne by the Company. All costs and expenses
related to the implementation and administration of this Plan shall be borne by
the Plan and paid from its assets; provided that (i) the compensation benefits
and overhead of any Company employee assigned to the administration of this Plan
shall be borne solely by the Company, and (ii) the Company may in its sole
discretion pay other expenses of administration of the Plan, it being understood
that no such payment or payments shall obligate the Company to pay any past or
future expenses of the Plan.
(g) No Prior Right of Award. Nothing in this Plan shall be deemed to
give any top-management officer, executive, or other employee of the Company, or
his legal representatives or assigns, or any other person or entity claiming
under or through him, any contract or other right to participate in the benefits
of this Plan except under and subject to the terms and conditions specifically
set forth herein. Nothing in this Plan shall be construed as constituting a
commitment, guarantee, agreement, or understanding of any kind or nature that
the Company shall continue to employ any individual (whether or not a
Participant); nor shall this Plan affect in any way the right of the Company to
terminate the employment of any individual (whether or not a Participant) at any
time.
(h) Burden and Benefit. The terms and provisions of this Plan shall
be binding upon, and shall inure to the benefit of, each Participant, his
executors or administrators, heirs, personal and legal representatives.
(i) Governing Law. The validity, construction, and administration of
this Plan shall be determined under the laws of the State of Delaware.
(j) Gender. Where applicable, words in the masculine shall include
the feminine, words in the neuter shall include the masculine and feminine, and
words in the singular shall include the plural, and vice versa.
IN WITNESS WHEREOF, GIANT FOOD INC. has caused these presents to be
executed by its President and attested to by its Secretary and has caused its
corporate seal to be hereunto affixed pursuant to authority of its Board of
Directors, this 2nd day of January, 1991.
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ATTEST:
/s/ David B. Sykes /s/ Israel Cohen
David B. Sykes Israel Cohen
Secretary President
[Corporate Seal]
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CERTIFICATE OF RESOLUTION
I, David B. Sykes, Secretary of GIANT FOOD INC., a Delaware
Corporation, hereby certify that the attached is a true copy of a resolution
passed at a regular meeting of the Board of Directors on the 16th day of July,
1992, in accordance with the Charter and ByLaws of the Corporation.
IN WITNESS WHEREOF, I have hereunto set my hand as Secretary and affixed the
corporate seal this 22 day of July, 1992.
/s/ David B. Sykes
Secretary
[SEAL]
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GIANT FOOD INC.
CORPORATE RESOLUTION
WHEREAS, the Giant Food Inc. Non-Qualified Executive Stock Bonus
Plan II (the "Plan") was adopted by Giant Food Inc. (the "Company") on
September 7, 1989, pursuant to the authorization and approval of the
Board of Directors; and
WHEREAS, Article VII(c) of the Plan authorizes and empowers the Board
of Directors at any time and from time to time to modify and amend the Plan in
any respect; provided, however, that no modification or amendment of the Plan
shall, without the consent of a Participant, affect the rights of any
Participant with respect to any Common Stock, cash or other assets held in the
Plan for his benefit as of the date of the amendment; and
WHEREAS, the Company has determined that an amendment to the
procedures under the Plan with respect to forfeitures would simplify the
accounting procedures under the Plan and would not adversely affect the rights
of any Participant with respect to any Common Stock, cash or other assets held
in the Plan for his benefit as of the date of the amendment;
NOW, THEREFORE,
1. Article III(b) of the Plan is amended to read as follows:
(b) The Board shall establish for each Plan Year beginning on or after
the Effective Date and ending on or before the Termination Date the amount of
the Total Contributions to be made with respect to the Plan. For the 1990 Plan
Year, the contribution shall be One Million Dollars ($1,000,000). For each Plan
Year thereafter, the Board shall fix a contribution which shall not exceed the
sum of (A) the greater of (i) One Million Dollars ($1,000,000), or (ii)
six-tenths of one percent (0.60%) of the Pre-Tax Earnings of the Company for its
fiscal year which ends with or within that Plan Year, plus (B) the amount of any
Common Stock, cash and any other assets forfeited to the Company within that
Plan Year. In no event, however, shall the contribution for any Plan Year be
less than the amount of any Common Stock, cash and any other assets forfeited to
the Company within that Plan Year.
2. Article III(h) of the Plan is amended to read as follows:
(h) The assets of the Plan, including all Common Stock, cash or other
assets shall be held by the Trustee for the benefit of the Participants until
the Common Stock and cash or other assets held by the Trustee are required to be
distributed to the
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Participants in accordance with the terms and conditions specified in Article IV
hereof. In the event that any Participant's share of the Common Stock, cash and
any other assets are forfeited, such Participant's share of the Common Stock,
cash and any shares and assets shall immediately revert to the Company.
3. Article VI(c) of the Plan is amended to read as follows:
(c) In order to further the purposes of the Plan, upon receipt of
satisfactory evidence that an Electing Participant has made an election under
Section 83(b) of the Code with respect to the Cash Contributions allocated to
his account for any year. The Company will distribute the Tax Distribution to
the Electing Participant. The Tax Distribution shall be equal to the amount of
the Federal income tax liability of the Participant which would result if the
sum of (i) the Cash Contribution allocated to the Electing Participant (which
amount shall not include the amount of any Company Stock, cash and any other
assets forfeited to the Company which is included in the Company contribution to
the Plan for such year), plus (ii) the amount of the Tax Distribution, were
multiplied by the sum of the highest federal income tax rate applicable to
individuals or such other approximate percentage determined by the Committee.
The amount of this Tax Distribution will be paid over as federal and state
income tax withholding with respect to the Electing Participant.
The modifications to the Plan shall take effect for all purposes as of
the Effective Date.
Giant Food Inc.
Board of Directors
July 16, 1992
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<PAGE> 1
EXHIBIT 10.3
Split Dollar Insurance Plan Summary
Giant maintains a death benefit program for its employees who
are the level of director and above. Approximately 100 employees are eligible
for this program.
Pursuant to the plan, Giant purchases a whole life insurance
policy on the life of each eligible employee. Giant pays the entire policy
premium, but the term cost or "P.S. 58 value" is treated under the plan as
additional compensation to the participating employees and as a partial payment
of the premium by them. Giant remains the owner of the policy and the
beneficiary of the policy proceeds to the extent of premiums paid (excluding the
portion of the premium that is deemed to have been paid by the employee). Upon
the death of an eligible employee, Giant receives the insurance proceeds,
retains the amount of premiums paid (excluding the portion of the premium that
is deemed paid by the employee), and remits the difference to a beneficiary
named by the employee.
An employee who terminates employment prior to attaining age
65 and who has at least 15 years of service may be permitted to purchase the
policy, subject to Giant's approval, for a price equal to the sum (without
interest) of the premiums Giant has paid (excluding the portion of the premium
that is deemed to have been paid by the employee).
The beneficiaries of an employee who retires after attaining
age 62 with 25 years of services or who remains in Giant's employ until age 65
are entitled to receive a death benefit equal to the policy face amount payable
in 10 equal annual installments beginning shortly after the death of the
employee. With respect to these employees, Giant may, but need not, continue
paying premiums on the policy covering the individual's life. Any proceeds of
the polices, whether from a surrender of the policy for its cash value or a
payment at the death of the employee, will be part of Giant's general assets.
The distributions to beneficiaries of these death benefit amounts are treated
for tax purposes as payments under a deferred compensation arrangement rather
than as proceeds of life insurance.
Giant reserves the discretionary right to terminate the Plan
upon written notice.
<PAGE> 1
EXHIBIT 10.4
GIANT FOOD INC.
Supplemental Deferred Compensation Plan
(as of March 19, 1984)
<PAGE> 2
TABLE OF CONTENTS
ARTICLE 1 DECLARATION
1.1 Purpose
1.2 Form of Plan
ARTICLE 2 DEFINITIONS
2.1 Actuary
2.2 Actuarial Equivalent
2.3 Board
2.4 Company
2.5 Early Retirement Date
2.6 Earnings
2.7 Executive Retirement Benefit
2.8 Final Average Earnings
2.9 Fund A
2.10 Participant
2.11 Plan
2.12 Primary Social Security Benefit
2.13 Restated Retirement Plan
ARTICLE 3 BENEFITS
3.1 Executive Retirement Benefit
3.2 Executive Early Retirement Benefit
3.3 Delayed Retirement
3.4 Executive Disability Retirement Benefit
3.5 Reduction for Service
3.6 Form of Benefit
ARTICLE 4 ADMINISTRATION
4.1 Responsibility for Administration
4.2 Powers and Duties
4.3 Delegation of Authority
4.4 Limitation of Liability
ARTICLE 5 AMENDMENT
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ARTICLE 6 MISCELLANEOUS
6.1 No Guarantee of Employment
6.2 No Assignment
6.3 Payment to Incompetents
6.4 Noncompetition
6.5 Termination for Cause
6.6 Governing Law
6.7 Number
3
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ARTICLE I
DECLARATION
1.1 Purpose. The Supplemental Deferred Compensation Plan of Giant Food Inc. is
established as a means of providing retirement benefits to a select group
of executives and key employees of Giant Food Inc. who were in the employ
of the Company on April 29, 1976 and who are identified in the Board of
Directors minutes dated April 29, 1976.
1.2 Form of Plan. This plan has been established and shall be maintained as an
unfunded nonqualified form of executive deferred compensation in
accordance with Sections 201(a), 301(a)and 401(a)(1)of the Employee
Retirement Income Security Act of 1974.
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ARTICLE 2
DEFINITIONS
The terms defined in this Article 2 shall, for all purposes of this Plan, have
the meanings herein specified, unless the context expressly or by necessary
implication otherwise requires.
2.1 "Actuary" shall mean an enrolled actuary under the Employee Retirement
Income Security Act of 1974, appointed and compensated by the Company.
2.2 "Actuarial Equivalent" shall mean a benefit of equivalent value when
computed on the basis of mortality and interest rate assumptions
recommended by the Actuary and approved and adopted by the Board.
2.3 "Board" shall mean the Board of Directors of the Company.
2.4 "Company" shall mean Giant Food Inc.
2.5 "Early Retirement Date" shall mean the date payments commence upon Early
Retirement before age 65.
2.6 "Earnings" shall mean a Participant's annual compensation, including base
pay and bonus.
2.7 "Executive Retirement Benefit" shall have the meaning set forth in Article
3, Section 3.1.
2.8 "Final Average Earnings" shall mean the average annual Earnings paid to a
Participant during the last sixty (60) consecutive months of employment.
2.9 "Fund A" shall mean the fund maintained as one of the investment options
in the Giant Food Inc. Profit Sharing and Thrift Plan.
2.10 "Participant" shall mean an executive selected at the discretion of the
Board.
2.11 "Plan" shall mean Giant food Inc. Supplemental Deferred Compensation Plan,
as amended from time to time.
2.12 "Primary Social Security Benefit" shall mean the benefit payable under
Title II of the Social Security Act. If a Participant retires earlier than
age 65, as provided in Article 3.2 the Primary Social Security Benefit to
be used in determining the Executive Early Retirement Benefit is the
amount that would be payable at age 65, based on the provisions of the
Federal Social Security Act in effect on the Early Retirement Date
assuming zero Earnings from Early Retirement Date to age 65.
2.13 "Restated Retirement Plan" shall mean the Giant Food Inc. Restated
Retirement Plan as of
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May 1, 1983.
2.14 "Long Term Disability Plan" is that plan for partial income payments in
cases of total disability supplied by Giant Food Inc. to its executive and
administrative employees through the Prudential Insurance Company of
America (Group Policy #G-33446) or such successor plan as may be in
existence at the time a Participant becomes disabled.
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ARTICLE 3
BENEFITS
3.1 Executive Retirement Benefit. Upon attainment of age sixty-five (65), a
participant shall be entitled to an annual benefit for his life which
shall equal sixty percent (60%) of his Final Average Earnings
less(a), (b), and (c) below where
(a) is the life annuity payable at age sixty-five (65) to the
Participant under Section 5.01(a)(i) or Section 5.01(b), whichever
is applicable, of the Giant Food Inc. Restated Retirement Plan;
(b) is the life annuity at age sixty-five (65) which is the Actuarial
Equivalent of the sum of the Participant's account balances in the
Giant Food Inc. Profit Sharing and Thrift Plan and Tax Deferred
Savings Plan as of the most recent valuation date in such plan
assuming that such Participant contributed six percent (6%) of his
compensation (as such term is defined in the Giant Food Inc. Profit
Sharing and Thrift Plan) in each year of active service prior to the
Amendment of the Plan effective February 1, 1984, and that such
Participant contributed six percent (6%) of his compensation (as
such term is defined in the Giant Food Inc. Tax Deferred Savings
Plan) for each year of active service after the amendment of the
Profit Sharing and Thrift Plan effective February 1, 1984, during
which contributions could have been made and further assuming that
such contributions, together with matching Company contributions at
the rate of fifty percent (50%) of the Participant's contributions,
were credited with annual investment earnings at the rate earned by
Fund A; and
(c) is the annual Primary Social Security Benefit to which the
Participant is entitled at age sixty-five (65).
3.2 Executive Early Retirement Benefit. Upon approval of the Board, a
participant may retire early provided he is eligible for Early Retirement
under the Restated Retirement Plan. In the event a Participant does retire
early, an Executive Early Retirement Benefit is payable commencing on the
same date as his Early Retirement Benefit is payable from the Restated
Retirement Plan. The Executive Early Retirement Benefit is an annual
benefit payable for life equal to sixty percent (60%) of Final Average
Earnings, reduced by three percent (3%) per year, prorated for months, for
every month that Early Retirement Date precedes age 62, less (a), (b) and,
if applicable, (c) below, where
(a) is the life annuity payable at Early Retirement Date to the
Participant under Section 5.02(ii) and Section 5.02(b), if
applicable, of the Giant Food Inc. Restated Retirement Plan
(b) is the life annuity at Early Retirement Date which is the Actuarial
Equivalent of the sum of the Participant's account balances in the
Giant Food Inc. Profit Sharing and Thrift Plan and Tax Deferred
Savings Plan as of the most recent valuation date in
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such plan assuming that such Participant contributed six percent
(6%) of his compensation (as such term is defined in the Giant Food
Inc. Profit Sharing and Thrift Plan) in each year of active service
prior to the amendment of the Plan effective February 1, 1984 and
that such Participant contributed six percent (6%) of his
compensation (as such term is defined in the Giant Food Inc. Tax
Deferred Savings Plan)for each year of active service after the
amendment of the Profit Sharing and Thrift Plan effective February
1, 1984 during which contributions could have been made and further
assuming that such contributions, together with matching Company
contributions at the rate of fifty percent (50%) of the
Participant's contributions, were credited with annual investment
earnings at the rate earned by Fund A; and
(c) is the annual Primary Social Security Benefit to which the
Participant is entitled at age sixty-five (65), and which is
deducted after age 65 only.
If an Early Retirement Supplement is payable until age 65 from the Restated
Retirement Plan, the same amount of benefit shall be payable from this Plan,
commencing at age 65.
3.3 Delayed Retirement. In the event a Participant and the Board mutually
agree that the Participant shall continue his employment beyond age
sixty-five (65), the benefit to which a Participant shall be entitled on
his actual retirement date shall be calculated in accordance with Section
3.1 of this Article 3 on the basis of the Participant's Final Average
Earnings, account balances in the Giant Food Inc. Profit Sharing and
Thrift Plan and Tax Deferred Savings Plan and Primary Social Security
Benefit on the actual date of his retirement.
3.4 Executive Disability Retirement Benefit. In the event a Participant
becomes disabled and receives benefits under the Long Term Disability
Plan, the Participant may retire under this Plan upon approval from the
Board. The Executive Disability Retirement Benefit is an annual benefit
payable until age sixty-five (65), or earlier death, equal to sixty
percent (60%) of Final Average Earnings less (a) and (b) below where
(a) is the benefit payable to the Participant under the Giant Food Inc.
Long Term Disability Plan; and
(b) is the annual Primary Social Security Disability Benefit received by
the Participant.
At age sixty-five (65), an Executive Retirement Benefit is payable in accordance
with Section 3.1.
3.5 Reduction for Service. If a Participant shall have completed fewer than
fifteen (15) years of continuous service, his Executive Retirement
Benefit, as determined in Article 3.1, 3.2, or 3.3, as applicable, shall
be adjusted by multiplying the benefit before any offsets are applied by a
fraction, the numerator of which is the number of the Participant's years
of continuous service and denominator of which is fifteen (15).
8
<PAGE> 9
3.6 Form of Benefit. A Participant may elect to receive his Executive
Retirement Benefit determined in accordance with Article 3.1, 3.2 or 3.3,
as applicable, in any form which is the Actuarial Equivalent of a life
annuity and is approved by the Board; provided, however, that no benefit
under this Plan shall be payable as a lump sum.
9
<PAGE> 10
ARTICLE 4
ADMINISTRATION
4.1 Responsibility for Administration. The administration of the Plan shall be
the responsibility of the Board.
4.2 Powers and Duties. The Board shall have the power and the duty to take all
actions necessary and proper to carry out the provisions of this Plan. The
determinations of the Board shall be final and binding. The Board's duties
shall include the following:
(a) to furnish to all Participants, upon request, copies of the Plan;
(b) to instruct the Company as to payments to be made under this Plan;
(c) to make and enforce such rules and regulations as it shall deem
proper for the administration of this Plan;
(d) to interpret the Plan to resolve ambiguities, inconsistencies and
omissions;
(e) to determine the amount of benefits payable in accordance with
Article 3 of this Plan: and
(f) to take whatever actions is necessary in fulfilling the purposes and
intent of this Plan.
4.3 Delegation of Authority. The Board may appoint a person or persons to act
in the day-to-day administration of the Plan and may delegate such powers
and duties as it shall deem proper to a person or persons or a committee
of the Board. Such person or persons may or may not be a Participant or a
member of the Board.
4.4 Limitation on Liability. Except in circumstances involving bad faith, no
member of the Board, or the Chief Executive Officer of the Company, or any
person assisting in the Plan administration, shall be personally liable in
respect to this Plan, for any act, whether of commission or omission,
taken by himself or any other member of the Board, officer, agent or
employee of the Company. Any person claiming a benefit under this Plan
shall look solely to the Company for redress.
10
<PAGE> 11
ARTICLE 5
AMENDMENT
The Company reserves the right from time to time to extend, modify, amend or
revise this Plan in such respects as the Board by resolution may deem advisable;
provided that no such extension, modification, amendment or revision shall
deprive a Participant, or any beneficiary designated by a Participant, of any
benefit under this Plan to which such Participant, or beneficiary is then
entitled; and further provided that, in the event of amendment of the Plan, each
Participant shall be entitled to a benefit no less than his Executive Retirement
Benefit accrued to the date of the Plan's amendment based on the Participant's
years of continuous service and Final Average Earnings as of the date of the
amendment. Such benefit shall be payable at age sixty-five (65).
11
<PAGE> 12
ARTICLE 6
MISCELLANEOUS
6.1 No Guarantee of Employment. Nothing contained in this Plan shall be
construed or interpreted as granting to any Participant the right to be
retained in the service of the Company, or as limiting the right of the
Company to control the service or terminate the service of any Participant
at any time or for any reason.
6.2 No Assignment. Except to the extent required by law, no benefit hereunder
shall be subject to anticipation, alienation, garnishment, sale, pledge,
transfer, encumbrance, judgment or damage. Any attempt at such shall
authorize the Board to cancel the benefit.
6.3 Payment to Incompetents. If the Board determines that a person entitled to
benefits hereunder is incompetent, it may cause benefits to be paid to
another person for the use of the Participant or beneficiary, in total
discharge of the Plan's obligations. The Board may rely on the opinions of
experts in any determinations under this Section 6.3.
6.4 Noncompetition. If the Board finds that a person aged less than sixty-five
(65) who is potentially entitled to benefits under this Plan has acted or
is acting in a manner detrimental to the interests of the Company, it may,
in its sole discretion, terminate all further claims, benefits and
entitlements of that person under this Plan. Also, payments being made to
any person under this Plan may be terminated by the Board if the person
entitled to receive such payments engages in any act of competition with
the Company, or uses, divulges, furnishes or makes accessible to any
person, firm or corporation, any knowledge or information with respect to:
(a) any confidential, proprietary or secret aspect of the business or
any program of the Company; or
(b) any customers or suppliers lists other information relating to the
customers or suppliers of the Company.
6.5 Termination for Cause. Notwithstanding any of the above sections, any
Participant whose employment is terminated by way of employer discharge or
Participant resignation on account of an admitted or proven dishonest act
or disclosure of trade secrets or other sensitive business information by
the Participant in connection with employer business affairs shall forfeit
all benefits otherwise payable to him under this Plan.
6.6 Governing Law. The Plan shall be construed, regulated and administered
according to the laws of the State of Maryland.
12
<PAGE> 13
6.7 Number. Wherever used in this Plan, the singular shall include the plural,
except where the context clearly requires otherwise.
13
<PAGE> 14
CERTIFICATE OF RESOLUTION
I, David B. Sykes, Secretary of GIANT FOOD INC., a Delaware Corporation,
hereby certify that the attached is a true copy of a resolution amending the
Giant Food Inc. Supplemental Deferred Compensation Plan, passed at a regular
meeting of the Board of Directors on the 8th day of September, 1988, in
accordance with the Charter and By-Laws of the Corporation.
IN WITNESS WHEREOF, I have hereunto set my hand as Secretary and affixed
the corporate seal this 22nd day of September, 1988.
/s/ David B. Sykes
-------------------------
Secretary
[SEAL]
14
<PAGE> 15
RESOLUTION
WHEREAS, Article 5 of the Giant Food Inc. Supplemental Deferred
Compensation Plan (the "Plan") gives to Giant Food Inc. the right to amend the
Plan.
WHEREAS, Giant Food Inc. has determined that it is in the best interests
of the Participants and of Giant Food Inc. to amend the Plan to provide a death
benefit under the Plan, to provide a benefit which restores benefits which will
not be payable under the Giant Food Inc. Retirement Plan on account of the
$200,000 compensation limit set forth in Internal Revenue Code Section
401(a)(17), and which makes certain other amendments to the Plan which reflect
changes in the Retirement Plan and the adoption of the Giant Food Inc. Excess
Benefit Plan.
NOW, THEREFORE, effective May 1, 1988, the Plan is amended as follows:
(1) Section 2.10 of the Plan is amended to read as follows:
2.10 "Participant" shall mean an executive selected at the
discretion of the Board to participate in the Plan with
respect to the benefits provided in either (i) Article 3 in
its entirety, or (ii) Section 3.8 only.
(2) Article 3 of the Plan is amended and restated in its entirety to
read as follows:
ARTICLE 3
BENEFITS
3.1 Executive Retirement Benefit. Upon attainment of age
sixty-five (65), a Participant shall be entitled to an annual
benefit for his life which shall equal sixty percent (60%) of
his Final Average Earnings less (a), (b), (c), (d) and (e)
below where
(a) is the life annuity payable at age sixty-five (65) to
the Participant under Section 5.01(a)(i) and Section
5.01(a)(ii), if applicable, of the Giant Food Inc.
Restated Retirement Plan (determined regardless of the
actual method of distribution selected by the
Participant to receive his benefits under the
Retirement Plan);
(b) is the life annuity at age sixty-five (65) which is the
Actuarial Equivalent of the sum of the Participant's
account balances in the Giant Food Inc. Profit Sharing
and Thrift Plan and Tax Deferred Savings Plan as of the
most recent valuation date in such plan assuming that
such Participant contributed six
15
<PAGE> 16
percent (6%) of his compensation (as such term is
defined in the Giant Food Inc. Profit Sharing and Thrift
Plan) in each year of active service prior to the
Amendment of the Plan effective February 1, 1984, and
that such Participant contributed six percent (6%) of
his compensation (as such term is defined in the Giant
Food Inc. Tax Deferred Savings Plan) including those
contributions necessary to obtain the full Employer's
Contribution (as such term is defined in the Giant Food
Inc. Tax Deferred Savings Plan) for each year of active
service after the amendment of the Profit Sharing and
Thrift Plan effective February 1, 1984, during which
contributions could have been made and further assuming
that such contributions, together with matching Company
contributions at the rate of one hundred percent (100%)
of the first three percent (3%) of the Participant's
contributions, or such lesser amount as provided by the
Tax Deferred Savings Plan, were credited with annual
investment earnings at the rate earned by Fund A;
(c) is the life annuity which is the Actuarial Equivalent of
the retirement benefit payable at age sixty-five (65) to
the Participant under Section 2.1 of the Giant Food Inc.
Excess Benefit Plan;
(d) is the life annuity which is the Actuarial Equivalent of
the benefits payable under Section 3.8 hereof; and
(e) is the annual Primary Social Security Benefit to which
the Participant is entitled at age sixty-five (65).
3.2 Executive Early Retirement Benefit. Upon approval of the
Board, a Participant may retire early provided he is eligible
for Early Retirement under the Restated Retirement Plan. In
the event a Participant does retire early, an Executive Early
Retirement Benefit is payable commencing on the same date as
his Early Retirement Benefit is payable from the Restated
Retirement Plan. The Executive Early Retirement Benefit is an
annual benefit payable for life equal to sixty percent (60%)
of Final Average Earnings, reduced by three percent (3%) per
year, prorated for months, for every month the Early
Retirement Date precedes age 62, less (a), (b), (c), and, if
applicable, (d) and (e) below, where
(a) is the life annuity payable at Early Retirement Date to
the Participant under Section 5.02(b)(i) and Section
5.02(b)(ii),
16
<PAGE> 17
if applicable, of the Giant Food Inc. Restated
Retirement Plan;
(b) is the life annuity at Early Retirement Date which is
the Actuarial Equivalent of the sum of the Participant's
account balances in the Giant Food Inc. Profit Sharing
and Thrift Plan and Tax Deferred Savings Plan as of the
most recent valuation date in such plan assuming that
such Participant contributed six percent (6%) of his
compensation (as such term is defined in the Giant Food
Inc. Profit Sharing and Thrift Plan) in each year of
active service prior to the amendment of the Plan
effective February 1, 1984, and that such Participant
contributed six percent (6%) of his compensation (as
such term is defined in the Giant Food Inc. Tax Deferred
Savings Plan), including those contributions necessary
to obtain the full Employer's Contribution (as such term
is defined in the Giant Food Inc. Tax Deferred Savings
Plan) for each year of active service after the
amendment of the Profit Sharing and Thrift Plan
effective February 1, 1984, during which contributions
could have been made and further assuming that such
contributions, together with matching Company
contributions at the rate of one hundred percent (100%)
of the first three percent (3%) of the Participant's
contributions, or such lesser amount as provided by the
Tax Deferred Savings Plan, were credited with annual
investment earnings at the rate earned by Fund A;
(c) is the life annuity which is the Actuarial Equivalent of
the early retirement benefit payable to the Participant
under Section 2.1 of the Giant Food Inc. Excess Benefit
Plan;
(d) is the life annuity which is the Actuarial Equivalent of
the benefit payable under Section 3.8 hereof; and
(e) is the annual Primary Social Security Benefit to which
the Participant is entitled at age sixty-five (65), and
which is deducted after age 65 only.
If an Early Retirement Supplement is payable until age 65 from
the Restated Retirement Plan, the same amount of benefit shall
be payable from this Plan, commencing at age 65.
3.3 Delayed Retirement. In the event a Participant and the Board
mutually agree that the Participant shall continue his
employment
17
<PAGE> 18
beyond age sixty-five (65), the benefit to which a Participant
shall be entitled on his actual retirement date shall be
calculated in accordance with Section 3.1 of this Article 3 on
the basis of the Participant's Final Average Earnings, his
account balances in the Giant Food Inc Profit Sharing and
Thrift Plan and Tax Deferred Savings Plan, his account balance
under the Giant Food Inc. Excess Benefit Plan, and his Primary
Social Security Benefit on the actual date of his retirement.
3.4 Executive Disability Retirement Benefit. In the event a
Participant becomes disabled and receives benefits under the
Long Term Disability Plan, the Participant may retire under
this Plan upon approval from the Board. The Executive
Disability Retirement Benefit is an annual benefit payable
until age sixty-five (65), or earlier death, equal to sixty
percent (60%) of Final Average Earnings less (a) and (b) below
where
(a) is the benefit payable to the Participant under the
Giant Food Inc. Long Term Disability Plan; and
(b) is the annual Primary Social Security Disability Benefit
received by the Participant.
At age sixty-five (65), an Executive Retirement Benefit is
payable in accordance with Section 3.1.
3.5 Executive Death Benefit
(a) In the event a married Participant who has satisfied the
requirements for early retirement under the Restated
Retirement Plan dies prior to the date benefits commence
under this Plan, his beneficiary shall receive a monthly
annuity equal to thirty percent (30%) of the
Participant's Final Average Earnings, less (i), (ii),
(iii) and (iv) below, where
(i) is the death benefit payable to the beneficiary
under Article VI of the Restated Retirement Plan;
(ii) is a monthly annuity at the Participant's death
which is the actuarial equivalent of the
Participant's account balances in the Giant Food
Inc. Profit Sharing and Thrift Plan and Tax
Deferred Savings Plan at the time of his death;
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<PAGE> 19
(iii) is the death benefit payable under the Giant Food
Inc. Excess Benefit Plan; and
(iv) is the annual Primary Social Security Death
Benefit received by the Participant's beneficiary.
(b) In the event a married Participant who has not satisfied
the requirements for early retirement under the Restated
Retirement Plan dies prior to the date benefits commence
under this Plan, his beneficiary shall receive a monthly
annuity which is equal to the survivor annuity portion
of a joint and 50 percent survivor annuity which is the
actuarial equivalent of a monthly life annuity equal to
60 percent of the Participant's Final Average Earnings.
This monthly annuity shall be reduced by the amounts
described in subsections (i), (ii), (iii) and (iv) of
Section 3.5(a).
(c) In the event a Participant (whether or not married) dies
prior the date benefits commence under this Plan, having
attained age 65 and still in the employ of Giant, his
beneficiary shall receive a monthly annuity equal to the
survivor annuity portion of a joint and 100 percent
survivor annuity which is the actuarial equivalent of a
monthly life annuity equal to 60 percent of the
Participant's Final Average Earnings. This monthly
annuity shall be reduced by the amounts described in
subsections (i), (ii), (iii) and (iv) of Section 3.5(a).
(d) The Executive Death Benefit under this Section 3.5 shall
be paid in the same form, at the same time and to the
same beneficiary as the death benefits under Article VI
of the Retirement Plan are payable. Notwithstanding the
preceding sentence, the Executive Death Benefit shall
cease to be payable upon the death of the beneficiary.
3.6 Reduction for Service. If a Participant shall have completed
fewer than fifteen (15) years continuous service, his
Executive Retirement Benefit, as determined in Article 3.1,
3.2 or 3.3, as applicable, shall be adjusted by multiplying
the benefit before any offsets are applied by a fraction, the
numerator of which is the number of the Participant's years of
continuous service and denominator of which is fifteen (15).
3.7 Form of Benefit. A Participant may elect to receive his
Executive Retirement Benefit determined in accordance with
Article 3.1, 3.2 or
19
<PAGE> 20
3.3, as applicable, in any form which is the Actuarial
Equivalent of a life annuity and is approved by the Board;
provided, however, that no benefit under this Plan shall be
payable as a lump sum.
3.8 Compensation Restoration Benefit. Effective May 1, 1989, a
Participant or his beneficiary shall be entitled to a
retirement, termination or death benefit (as the case may be)
equal to the retirement, termination or death benefit payable
to the Participant under Article V, VI or VII of the Restated
Retirement Plan, as applicable, determined without reference
to the compensation limit set forth in Section 401(a)(17) of
the Code, reduced by (i) the retirement, termination or death
benefit payable under the Giant Food Inc. Excess Benefit Plan
and (ii) the retirement, termination or death benefit paid
under the Restated Retirement Plan. Benefits payable under
this Section shall be paid in the same form and at the same
time as the retirement, termination or death benefits are
payable under the Restated Retirement Plan.
20
<PAGE> 1
GIANT FOOD INC.
EXCESS BENEFIT SAVINGS PLAN
<PAGE> 2
GIANT FOOD INC.
EXCESS BENEFIT SAVINGS PLAN
TABLE OF CONTENTS
INTRODUCTION................................................................. 1
ARTICLE I.................................................................... 1
DEFINITIONS............................................................... 1
Section 1.1 Account................................................... 1
Section 1.2 Administrative Committee.................................. 1
Section 1.3 Beneficiary............................................... 1
Section 1.4 Eligible Employee......................................... 1
Section 1.5 Employee.................................................. 2
Section 1.6 Employee Savings Accumulation............................. 2
Section 1.7 Employee Savings Deferral................................. 2
Section 1.8 Employee Savings Plan Participant......................... 2
Section 1.9 Employee Savings Yield.................................... 2
Section 1.10 Employer Savings Deferral................................. 2
Section 1.11 Employer Savings Yield.................................... 2
Section 1.12 Excess Benefit............................................ 2
Section 1.13 Excess Benefit Savings Plan Participant................... 2
Section 1.14 Plan Regulations.......................................... 2
Section 1.15 Plan Year................................................. 2
Section 1.16 Retirement Plan........................................... 3
Section 1.17 Retirement Plan Reduction................................. 3
Section 1.18 TDSP...................................................... 3
ARTICLE II................................................................... 3
PARTICIPATION............................................................. 3
Section 2.1 Participation in Excess Benefits.......................... 3
Section 2.2 Participation in EBS Plan................................. 3
ARTICLE III.................................................................. 3
COMPUTATION OF EXCESS BENEFITS............................................ 3
Section 3.1 Executive Retirement Benefit.............................. 3
Section 3.2 Executive Early Retirement Benefit........................ 4
Section 3.3 Delayed Retirement........................................ 5
Section 3.4 Executive Disability Retirement Benefit................... 6
Section 3.5 Executive Death Benefit................................... 6
Section 3.6 Reduction for Service..................................... 7
Section 3.7 Form of Benefit........................................... 8
Section 3.8 Compensation Restoration Benefit.......................... 8
<PAGE> 3
Section 3.9 Preservation of Supplemental Deferred Compensation
Plan Benefits............................................. 8
ARTICLE IV................................................................... 8
COMPUTATION OF SAVINGS ACCUMULATION....................................... 8
Section 4.1 Employee Savings Deferrals................................ 8
Section 4.2 Employer Savings Deferrals................................ 9
Section 4.3 Computation of Yield...................................... 9
Section 4.4 Failure to Elect.......................................... 10
Section 4.5 No Funding................................................ 10
ARTICLE V.................................................................... 10
SAVINGS ACCUMULATION BENEFITS............................................. 10
Section 5.1 Aggregate Benefit......................................... 10
Section 5.2 Form of Payment........................................... 10
Section 5.3 Acknowledgment............................................ 11
ARTICLE VI................................................................... 11
EXCESS BENEFITS........................................................... 11
Section 6.1 Retirement or Termination Benefits........................ 11
Section 6.2 Death Benefits............................................ 11
Section 6.3 Preservation of Excess Benefit Plan Benefits.............. 11
ARTICLE VII.................................................................. 12
ADMINISTRATION AND FUNDING................................................ 12
Section 7.1 Administration............................................ 12
Section 7.2 Funding................................................... 12
Section 7.3 Good Faith................................................ 13
ARTICLE VIII................................................................. 13
MISCELLANEOUS............................................................. 13
Section 8.1 Assignability............................................. 13
Section 8.2 Contract.................................................. 13
Section 8.3 Noncompetition............................................ 13
Section 8.4 Termination for Cause..................................... 14
Section 8.5 Successors................................................ 15
Section 8.6 Tax....................................................... 15
Section 8.7 Gender and Number......................................... 15
Section 8.8 Governing Law............................................. 15
Section 8.9 Right to Amend or Terminate............................... 15
<PAGE> 4
GIANT FOOD INC.
EXCESS BENEFIT SAVINGS PLAN
INTRODUCTION
Giant Food Inc. (the "Company") has adopted this Excess Benefit Savings
Plan ("EBS Plan"), which shall generally be effective May 1, 1994, but which
shall also be effective as of May 1, 1987, for the limited purpose of preserving
the rights of all participants under the Giant Excess Benefit Plan dated May 22,
1987, to benefits accrued as of April 30, 1994.
The purposes of this EBS Plan are (i) to provide the pension benefits
which would have been payable under the Giant Food Inc. Retirement Plan
("Retirement Plan") but for the limitations imposed by Section 415 of the
Internal Revenue Code of 1986, as amended (the "Internal Revenue Code") and by
Section 5.07 of the Retirement Plan, and (ii) to provide a non-qualified
unfunded tax deferred supplement to the Giant Food Inc. Tax Deferred Savings
Plan ("TDSP") in the case of TDSP Participants whose deferrals are less than ten
percent (10%) up to the amount which would otherwise have been available under
the TDSP but for the application of the contribution and benefit limitation
provisions of the Internal Revenue Code to the TDSP.
It is intended that this EBS Plan be maintained on behalf of a select
group of management and highly compensated employees.
ARTICLE I
DEFINITIONS
Section 1.1 Account The record to be maintained as a part of the permanent
accounting records of the Company with respect to each EBS
Plan Participant showing the liability of the Company to such
EBS Plan Participant for benefits accrued under this EBS Plan.
Section 1.2 Administrative Committee The Committee chosen by the Company
to administer this EBS Plan.
Section 1.3 Beneficiary The person or persons designated by the
Participant or by the terms of the Retirement
<PAGE> 5
Supplemental Plan to receive death benefits under the
Retirement Supplemental Plan.
Section 1.4 Eligible Employee Any employee of the Company who (i) is a
participant in the Retirement Plan and/or in the TDSP, and
(ii) whose pension benefits payable under the Retirement Plan
are reduced by the limitations imposed by Section 415 of the
Internal Revenue Code and/or by Section 5.07 of the Retirement
Plan, or (iii) whose TDSP deferrals are less than ten percent
(10%) of Compensation and/or whose TDSP Employer Matching
Contributions are less than five percent (5%) of Compensation
by virtue of the application of the contribution and benefit
limitation provisions of the Internal Revenue Code to the
TDSP.
Section 1.5 Employee An employee of the Company or any of its
subsidiaries.
Section 1.6 Employee Savings Accumulation With respect to any Employee
Benefit Savings Plan Participant, the aggregate total of (i)
the Employee Savings Deferral, plus or minus (ii) the Employee
Savings Yield, plus (iii) the Employer Savings Deferral, plus
or minus (iv) the Employer Savings Yield.
Section 1.7 Employee Savings Deferral See Section 4.1.
Section 1.8 Employee Savings Plan Participant An Eligible Employee who
elects to defer amounts under this EBS Plan.
Section 1.9 Employee Savings Yield An amount (which may be positive or
negative) determined under Section 4.3 with respect to the
amounts designated by a Participant pursuant to Section 4.1
and credited to the Account of a Savings Participant as if
such amounts were invested under Section 4.1.
Section 1.10 Employer Savings Deferral See Section 4.2.
Section 1.11 Employer Savings Yield An amount (which may be positive or
negative) determined under Section 4.3 with respect to the
amounts credited to the Account of a
2
<PAGE> 6
Savings Participant under Section 4.2 as if such amounts were
invested under Section 4.1.
Section 1.12 Excess Benefit The pension benefits which would have been
payable under the Giant Food Inc. Retirement Plan but for the
limitations imposed by Section 415 of the Internal Revenue
Code and Section 5.07 of the Retirement Plan.
Section 1.13 Excess Benefit Savings Plan Participant A Participant in the
Retirement Plan who has a Retirement Plan Benefit Reduction.
Section 1.14 Plan Regulations The rules, regulations and procedures not
inconsistent with the terms hereof that are established from
time to time by the Administrative Committee.
Section 1.15 Plan Year The Plan Year for this EBS Plan shall be May 1
through April 30 commencing on May 1, 1994.
Section 1.16 Retirement Plan The Giant Food Inc. Retirement Plan as it may
be amended from time to time.
Section 1.17 Retirement Plan Reduction The excess, if any, of (i) the
accrued benefit of a Participant in the Retirement Plan
computed without regard to the provisions of Sections
401(a)(17) and 415 of the Internal Revenue Code and the
limitations of Section 5.07 of the Retirement Plan over (ii)
the accrued benefit of a Participant in the Retirement Plan
computed in accordance with the terms of the Plan and such
provisions and limitations.
Section 1.18 TDSP The Giant Food Inc. Tax Deferred Savings Plan as it may
be amended from time to time.
ARTICLE II
PARTICIPATION
Section 2.1 Participation in Excess Benefits Each Participant who has a
Retirement Plan Benefit Reduction shall to the extent of such
Retirement Plan Benefit Reduction be a
3
<PAGE> 7
Participant in the Excess Benefit provisions of this EBS Plan
under Article III.
Section 2.2 Participation in EBS Plan Each Eligible Employee who elects
in accordance with Section 4.1 and the Plan Regulations to
defer a portion of his or her compensation otherwise due from
the Company under and pursuant to the terms of this EBS Plan
shall be a Participant in the Savings provisions of this EBS
Plan under Articles IV and V.
ARTICLE III
COMPUTATION OF EXCESS BENEFITS
Section 3.1 Executive Retirement Benefit Upon attainment of age sixty-five
(65), a Participant who was an officer of Giant Food Inc. in
1976 shall be entitled to an annual benefit for his life which
shall equal sixty percent (60%) of his Final Average Earnings
less (a), (b), (c), (d), and (e) below where
(a) is the life annuity payable at age sixty-five (65) to
the Participant under Section 5.01(a)(i) and Section
5.01(a)(ii), if applicable, of the Giant Food Inc.
Retirement Plan (determined regardless of the actual
method of distribution selected by the Participant to
receive his benefits under the Retirement Plan);
(b) is the life annuity at age sixty-five (65) which is the
Actuarial Equivalent of the sum of the Participant's
account balances in the TDSP as of the most recent
valuation date in such plan assuming that such
Participant contributed six percent (6%) of his
compensation (as such term was defined in the Giant Food
Inc. Profit Sharing and Thrift Plan) in each year of
active service prior to the Amendment of the Plan
effective February 1, 1984, and that such Participant
contributed six percent (6%) of his compensation (as
such term is defined in the TDSP) including those
contributions necessary to obtain the full Employer's
4
<PAGE> 8
Contribution (as such term is defined in the TDSP) for
each year of active service after the amendment of the
Profit Sharing and Thrift Plan effective February 1,
1984, during which contributions could have been made
and further assuming that such contributions, together
with matching Company contributions at the rate of one
hundred percent (100%) of the first three percent (3%)
of the Participant's contributions, or such lesser
amount as provided by the TDSP, were credited with
annual investment earnings at the rate earned by the
Company on its short-term money market investments;
(c) is the life annuity which is the Actuarial Equivalent of
the retirement benefit payable at age sixty-five (65) to
the Participant under Section 6.1 of this EBS Plan;
(d) is the life annuity which is the Actuarial Equivalent of
the benefit payable under Section 3.8 hereof; and
(e) is the annual Primary Social Security Benefit to which
the Participant is entitled at age sixty-five (65).
Section 3.2 Executive Early Retirement Benefit Upon approval of the
Administrative Committee, a Participant who was an officer of
Giant Food Inc. in 1976 may retire early provided he is
eligible for Early Retirement under the Retirement Plan. In
the event a Participant does retire early, an Executive Early
Retirement Benefit is payable commencing on the same date as
his Early Retirement Benefit is payable from the Retirement
Plan. The Executive Early Retirement Benefit is an annual
benefit payable for life equal to sixty percent (60%) of Final
Average Earnings, reduced by three percent (3%) per year,
prorated for every month the Early Retirement Date precedes
age 62, less (a), (b), (c), and, if applicable, (d) and (e)
below, where
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(a) is the life annuity payable at Early Retirement Date to
the Participant under Section 5.02(b)(i) and Section
5.02(b)(ii), if applicable, of the Giant Food Inc.
Retirement Plan;
(b) is the life annuity at Early Retirement Date which is
the Actuarial Equivalent of the sum of the Participant's
account balances in the TDSP as of the most recent
valuation date in such plan assuming that such
Participant contributed six percent (6%) of his
compensation (as such term was defined in the TDSP),
including those contributions necessary to obtain the
full Employer's Contribution (as such term is defined in
the TDSP) for each year of active service after the
amendment of the Profit Sharing and Thrift Plan
effective February 1, 1984, during which contributions
could have been made and further assuming that such
contributions, together with matching Company
contributions at the rate of one hundred percent (100%)
of the first three percent (3%) of the Participant's
contributions, or such lesser amount as provided by the
TDSP, were credited with annual investment earnings at
the rate earned by the Company on its short-term
money-market investments;
(c) is the life annuity which is the Actuarial Equivalent of
the early retirement benefit payable to the Participant
under Section 6.1 of this EBS Plan;
(d) is the life annuity which is the Actuarial Equivalent of
the benefit payable under Section 3.8 hereof; and
(e) is the annual Primary Social Security Benefit to which
the Participant is entitled at age sixty-five (65), and
which is deducted after age 65 only.
If an Early Retirement Supplement is payable until age 65 from
the Retirement Plan, the same amount of benefit
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shall be payable from this EBS Plan, commencing at age 65.
Section 3.3 Delayed Retirement In the event a Participant who was an
officer of Giant Food Inc. in 1976 and the Administrative
Committee mutually agree that the Participant shall continue
his employment beyond age sixty-five (65), the benefit to
which a Participant shall be entitled on his actual retirement
date shall be calculated in accordance with Section 3.1 of
this Article 3 on the basis of the Participant's Final Average
Earnings, his account balances in the TDSP, his account
balance under the Giant Food Inc. Excess Benefit Plan, and his
Primary Social Security Benefit on the actual date of his
retirement.
Section 3.4 Executive Disability Retirement Benefit In the event a
Participant who was an officer of Giant Food Inc. in 1976
becomes disabled and received benefits under the Long Term
Disability Plan, the Participant may retire under this EBS
Plan upon approval from the Administrative Committee. The
Executive Disability Retirement Benefit is an annual benefit
payable until age sixty-five (65), or earlier death, equal to
sixty percent (60%) of Final Average Earnings less (a) and (b)
below where
(a) is the benefit payable to the Participant under the
Giant Food Inc. Long Term Disability Plan; and
(b) is the annual Primary Social Security Disability Benefit
received by the Participant.
At age sixty-five (65), an Executive Retirement Benefit is
payable in accordance with Section 3.1.
Section 3.5 Executive Death Benefit
(a) In the event a married Participant who was an officer of
Giant Food Inc. in 1976 and who has satisfied the
requirements for early retirement under the Retirement
Plan dies prior to the date benefits commence under this
EBS Plan, his
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beneficiary shall receive a monthly annuity equal to
thirty percent (30%) of the Participant's Final Average
Earnings, less (i), (ii), (iii) and (iv) below, where
(i) is the death benefit payable to the beneficiary
under Article VI of the Retirement Plan;
(ii) is a monthly annuity at the Participant's death
which is the actuarial equivalent of the
Participant's account balances in the TDSP at
the time of his death;
(iii) is the death benefit payable under Section 6.2
of this EBS Plan; and
(iv) is the annual Primary Social Security Death
Benefit received by the Participant's
beneficiary.
(b) In the event a married Participant who was an officer of
Giant Food Inc. in 1976 and who has not satisfied the
requirements for early retirement under the Retirement
Plan dies prior to the date benefits commence under this
EBS Plan, his beneficiary shall receive a monthly
annuity which is equal to the survivor annuity portion
of a joint and 50 percent survivor annuity which is the
actuarial equivalent of a monthly life annuity equal to
60 percent of the Participant's Final Average Earnings.
This monthly annuity shall be reduced by the amounts
described in subsections (i), (ii), (iii) and (iv) of
Section 3.5(a).
(c) In the event a Participant who was an officer of Giant
Food Inc. in 1976 (whether or not married) dies prior
the date benefits commence under this EBS Plan, having
attained age 65 and still in the employ of Giant, his
beneficiary shall receive a monthly annuity equal to the
survivor annuity portion of a joint and 100 percent
survivor annuity which is the actuarial equivalent of a
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monthly life annuity equal to 60 percent of the
Participant's Final Average Earnings. This monthly
annuity shall be reduced by the amounts described in
subsections (i), (ii), (iii) and (iv) of Section 3.5(a).
(d) The Executive Death Benefit under this Section 3.5 shall
be paid in the same form, at the same time and to the
same beneficiary as the death benefits under Article VI
of the Retirement Plan are payable. Notwithstanding the
preceding sentence, the Executive Death Benefit shall
cease to be payable upon the death of the beneficiary.
Section 3.6 Reduction for Service If a Participant who was an officer of
Giant Food Inc. in 1976 shall have completed fewer than
fifteen (15) years continuous service, his Executive
Retirement Benefit, as determined in Article 3.1, 3.2 or 3.3,
as applicable, shall be adjusted by multiplying the benefit
before any offsets are applied by a fraction, the numerator of
which is the number of the Participant's years of continuous
service and denominator of which is fifteen (15).
Section 3.7 Form of Benefit A Participant who was an officer of Giant Food
Inc. in 1976 may elect to receive his Executive Retirement
Benefit determined in accordance with Article 3.1, 3.2 or 3.3,
as applicable, in any form which is the Actuarial Equivalent
of a life annuity and is approved by the Administrative
Committee; provided, however, that no benefit under this EBS
Plan shall be payable as a lump sum.
Section 3.8 Compensation Restoration Benefit Effective May 1, 1989, a
Participant or his beneficiary shall be entitled to a
retirement, termination or death benefit (as the case may be)
equal to the retirement, termination or death benefit payable
to the Participant under Article V, VI or VII of the
Retirement Plan, as applicable, determined without reference
to the compensation limit set forth in Section 401(a)(17) of
the Internal Revenue Code, reduced by (i) the retirement,
termination or death benefit payable under Sections 3.1
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through 3.7 of this EBS Plan and (ii) the retirement,
termination or death benefit paid under the Retirement Plan.
Benefits payable under this Section 3.8 shall not be reduced
by the benefits payable under Article IV of this EBS Plan.
Benefits payable under this Section 3.8 shall be paid in the
same form and at the same time as the retirement, termination
or death benefits are payable under the Restated Retirement
Plan.
Section 3.9 Preservation of Supplemental Deferred Compensation Plan
Benefits The provisions of Section 3.1 through Section 3.8 of
this EBS Plan replace and supersede the Giant Food Inc.
Supplemental Deferred Compensation Plan in its entirety.
Notwithstanding the foregoing, the provisions of this Article
III and of this EBS Plan generally shall be construed so as to
preserve the benefits accrued by the participants in the Giant
Food Inc. Supplemental Deferred Compensation Plan prior to the
adoption of this EBS Plan.
ARTICLE IV
COMPUTATION OF SAVINGS ACCUMULATION
Section 4.1 Employee Savings Deferrals
(a) Each Eligible Employee shall be permitted, but shall not
be required, to defer under this EBS Plan by means of a
payroll reduction for each Plan Year, an amount
determined by such Eligible Employee, but not to exceed
10% of the Eligible Employee's current Compensation,
less the maximum permissible elective deferral allowable
during the Plan Year under the TDSP. All such deferrals
shall be credited to the Account of such Employee as an
Employee Savings Deferral.
(b) An Eligible Employee's election of a compensation
deferral under Section 4.1(a) shall be in writing on a
form supplied by the Administrative Committee and shall
state the percentage rate or dollar amount of the
Participant's deferral. Any such election must be
received by the Administrative Committee
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prior to the first day of the Plan Year as to which the
deferral election is to be effective.
(c) Each Eligible Employee may change the deferral rate of
his contribution under Section 4.1(a) or suspend his
contributions in writing on a form supplied by the
Administrative Committee, but no such change in the
deferral rate or suspension of deferrals shall take
effect prior to the first day of the next succeeding
Plan Year.
(d) An Employee Savings Plan Participant's Employee Savings
Deferrals and Employee Savings Yield shall at all times,
be fully vested and nonforfeitable. Subject to the
provisions of Sections 8.3 and 8.4 hereof, an Employee
Savings Plan Participant's Employer Savings Deferrals
and Employer Savings Yield shall vest in accordance with
the vesting schedule set forth in the TDSP.
Section 4.2 Employer Savings Deferrals Pursuant to Plan Regulations, the
Company shall, with respect to each Plan Year, credit to each
Participant's Account as an Employer Savings Deferral, an
amount equal to the amount of compensation deferred up to 3%
and 25% of the amount deferred between the next 3% through 6%
of the Participant's compensation, less the employer match
under the TDSP.
Section 4.3 Computation of Yield
(a) Pursuant to Plan Regulations, each Participant shall
have the right to make elections under this Section
4.3(a) pursuant to which the Employee Savings Yield with
respect to the deferrals made by him under Section
4.1(a) (and the accumulated Employee Savings Yield
thereon) and the Employer Savings Yield with respect to
the amount of the Employer deferrals credited to his
Account under Section 4.2 (and the Accumulated Employer
Savings Yield thereon) shall be determined by reference
to the increase (or decrease) in the value of such
Savings Participant's Account that would have occurred
had
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an amount equal to the balance of such account (as well
as additions to such Account) been invested in one or
more of the investment funds or indices selected by the
Administrative Committee pursuant to Section 6.2(c)
hereof. For purposes of this computation, it shall be
assumed that additions to each Account are invested
within seven days of the day on which they are made and
that the amounts so invested do not incur any federal,
state, or local income capital gains or withholding tax,
but that the amounts so invested are charged the actual
administrative expense established by the Administrative
Committee.
(b) A participant may change his election allocation once in
any Plan Quarter by giving written notice to the
Administrative Committee of the change not later than 15
days prior to the first day of the Plan Quarter.
Section 4.4 Failure to Elect Absent an election by a Participant pursuant
to Sections 4.1(b) or 4.3(a), the Savings Participant's
Account shall be determined by the increase (or decrease) in
the value of such Savings Participant's Account that would
have occurred had an amount equal to the balance of such
account been invested in the lowest risk investment utilized
by the Administrative Committee hereunder.
Section 4.5 No Funding An Eligible Employee's deferrals under Section
4.1(a) shall, at all times, be merely an unsecured, unfunded
obligation of the Company, and no Participant shall, by virtue
of having elected to participate in this EBS Plan, have any
ownership or security interest in any assets of the Company.
ARTICLE V
SAVINGS ACCUMULATION BENEFITS
Section 5.1 Aggregate Benefit The aggregate total of the Employee Savings
Accumulation of any Participant shall be an amount equal to
the sum of the Employee Savings
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Deferral, the Employee Savings Yield, the Employer Savings
Deferral, and the Employer Savings Yield of such Participant,
less deducted administrative expenses.
Section 5.2 Form of Payment Pursuant to Plan Regulations, a Participant is
required to choose the form that payment of his or her benefit
under this EBS Plan shall take in advance of making his or her
Employee Savings Deferral election.
Section 5.3 Acknowledgment Each Participant shall acknowledge in writing
that no representations of investment performance and no
investment advice has been provided by the Administrative
Committee or the Company.
ARTICLE VI
EXCESS BENEFITS
Section 6.1 Retirement or Termination Benefits The Company shall pay to
each Participant, or his Beneficiary, if applicable, if the
Participant retires or terminates employment for reasons other
than death, an amount equal to the excess (if any) of (i) the
retirement, or termination benefit due under Article V or
Article VII of the Retirement Plan as applicable, determined
without reference to Section 5.07 thereof, over (ii) the
retirement or termination benefit paid under the Retirement
Plan. Such excess payments shall be paid in the same form and
at the same time as the retirement or termination benefits
under the Retirement Plan are payable.
Section 6.2 Death Benefits In the event a Participant dies prior to the
later of separation from service or the annuity starting date,
the Company shall pay to the Participant's Beneficiary, in
addition to the benefits under Section 5.1 an amount equal to
the excess (if any) of (i) the death benefits due the
Beneficiary under Article VI of the Retirement Plan determined
without reference to Section 5.07 thereof, over (ii) the death
benefits due the Beneficiary under Article VI of the
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Retirement Plan. Such excess payments shall be paid in the same
form, at the same time and to the same Beneficiary as the death
benefits under Article VI of the Retirement Plan are payable.
Section 6.3 Preservation of Excess Benefit Plan Benefits The provisions of
Sections 6.1 and 6.2 of this EBS Plan replace and supersede the
Giant Food Inc. Excess Benefit Plan in its entirety.
Notwithstanding the foregoing, the provisions of this Article
VI and of this EBS Plan generally shall be construed so as to
preserve the benefits accrued by the Participants in the Giant
Food Inc. Excess Benefit Plan prior to the adoption of this EBS
Plan.
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ARTICLE VII
ADMINISTRATION AND FUNDING
Section 7.1 Administration
(a) This EBS Plan shall be administered by the
Administrative Committee. The Administrative Committee
shall have the full power to implement, construe and
administer this EBS Plan. The Administrative Committee
shall be comprised of at least three members, chosen by
the Company. Each member may, but need not, be an
employee of the Company.
(b) The Company may remove any member of the Administrative
Committee at any time, with or without cause, or any
member may resign at any time. No member shall be
entitled to act upon or decide any matter relating to
any of his individual rights to receive benefits under
this EBS Plan.
(c) All decisions of the Administrative Committee taken
within the scope of its authority shall be final and
binding on all parties.
Section 7.2 Funding
(a) This EBS Plan shall be unfunded. All payments under
this EBS Plan shall be made from the general assets of
the Company and the Company shall not be required to
establish any reserves or separate or special fund or
make any other segregation of assets to assure payment
of benefits under this EBS Plan. If, and to the extent
that, the Company establishes any reserves or separate
or special fund or makes any other segregation of
assets, such fund shall be solely for the benefit of the
Company and the Participants under this Plan. No
Participant shall have any priority, equity or security
interest in any such asset.
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(b) The Administrative Committee shall have the duty,
discretion, and responsibility to select the investment
indices or funds which the Employee Savings Yields and
Employer Savings Yields shall be determined. The
Administrative Committee, by majority vote, shall
determine the investment vehicles to be utilized to
measure the investment return to be attributed to these
deferrals in any given Fund. The Administrative
Committee may, from time to time, modify the investment
indices or funds so utilized, provided only that notice
of such modification be furnished to Participants at
least thirty days prior to the first day of the quarter
in which such new investment measures shall take effect.
(c) The Company has no obligation to make investments of any
amounts to fund its obligations under this EBS Plan, nor
retain any particular investment to the extent such
investments are made. Participants take no security
interest in any investments made by the Company.
Section 7.3 Good Faith To the extent it operates in good faith, the
Administrative Committee will be held harmless from any claim
of liability relating to the maintenance of this EBS Plan.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Assignability No Participant or Beneficiary shall have any
right to commute, sell, assign, transfer or otherwise convey
the right to receive any benefits hereunder, which payments
and rights thereto are expressly declared to be nonassignable
and nontransferable, nor shall any payments be subject to
attachment, garnishment or execution, or be transferable by
operation of law in event of bankruptcy or insolvency, except
to the extent otherwise provided by law.
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Section 8.2 Contract This EBS Plan is not an employment contract between
the Company and any Employee. Neither the establishment of
this EBS Plan nor any action taken thereunder, shall be
construed as giving to any Employee the right to be retained
in the employ of the Company.
Section 8.3 Noncompetition If the Administrative Committee finds that a
person who is potentially entitled to benefits under this EBS
Plan has acted or is acting in a manner detrimental to the
interests of the Company, it may, in its sole discretion, (i)
terminate all benefits to such person under Article III
hereof, (ii) terminate all benefits to person under Article VI
hereof, and (iii) terminate all further claims, benefits and
entitlements of that person to the Employer Savings Deferral
and Employer Savings Yield under this EBS Plan. Also, that
portion of any payments being made to any person under this
EBS Plan attributable to Employer Savings Deferrals and
Employer Savings Yield may be terminated by the Administrative
Committee if the person entitled to receive such payments
engages in any act of competition with the Company, or uses,
divulges, furnishes or makes accessible to any person, firm or
corporation, any knowledge or information with respect to:
(a) any confidential, proprietary or secret aspect of the
business or any program of the Company; or
(b) any customers' suppliers' lists or other information
relating to the customers or suppliers of the Company.
Section 8.4 Termination for Cause
(a) Notwithstanding any of the above sections, any
Participant who is not 100% vested in his Employer
Savings Deferral and whose employment is terminated by
way of discharge by the Company or Participant
resignation on account of an admitted or proven
dishonest act or disclosure of trade secrets or other
sensitive business information by
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the Participant in connection with the Company's
business affairs shall forfeit all amounts attributable
to Employer Savings Deferral and Employer Savings Yield
otherwise payable to him under this EBS Plan. A
Participant who is 100% vested in his Employer Savings
Deferral and Employer Savings Yield and whose employment
is terminated by way of discharge by the Company or
Participant resignation on account of an admitted or
proven dishonest act or disclosure of trade secrets or
other sensitive business information by the Participant
in connection with the Company's business affairs shall
forfeit all amounts attributable to Employer Savings
Deferral and Employer Savings Yield otherwise payable to
him under this EBS Plan until age 65.
(b) Notwithstanding any of the above sections, any
Participant whose employment is terminated by way of
discharge by the Company or Participant resignation on
account of an admitted or proven dishonest act or
disclosure of trade secrets or other sensitive business
information by the Participant in connection with the
Company's business affairs shall forfeit all benefits
otherwise payable to him under Articles III and IV of
this EBS Plan.
Section 8.5 Successors This EBS Plan shall be binding upon any successors
to the Company by merger, acquisition, consolidation or
otherwise.
Section 8.6 Tax The Company shall have the right to deduct and withhold
from payments any taxes to the extent required by law.
Section 8.7 Gender and Number Wherever applicable, the masculine gender as
used herein shall mean the feminine gender and the singular,
the plural.
Section 8.8 Governing Law This EBS Plan shall be governed in accordance
with the laws of the State of Maryland, except as preempted by
ERISA.
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Section 8.9 Right to Amend or Terminate The Company may amend or
terminate this EBS Plan at any time; provided, however, that
no amendment to this EBS Plan shall reduce a Participant's
benefits below the benefits due the Participant immediately
preceding such amendment or termination, and that any
termination of this EBS Plan shall operate only to forestall
future accruals under Articles III and VI hereof and future
credits to Accounts of Employee Savings Deferrals and Employer
Savings Deferrals and shall not alter or otherwise affect the
amounts theretofore accrued under Articles III and VI hereof
or accumulated as Employee Savings Deferrals, Employee Savings
Yields, Employer Savings Deferrals and Employer Savings Yields
nor shall any such amendment affect the future crediting of
Employee Savings Yields or Employer Savings Yields.
IN WITNESS WHEREOF, Giant Food Inc. has caused this EBS Plan to be executed by
its duly authorized officers this _____ day of April, 1994.
ATTEST: GIANT FOOD INC.
_________________________ By:_________________________
19
