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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
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Date of Report (Date of Earliest Event Reported): August 19, 1999
HANNAFORD BROS. CO.
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(Exact Name of Registrant as Specified in its Charter)
MAINE
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(State or Other Jurisdiction of Incorporation)
1-7603 01-0085930
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Commission File Number) (I.R.S. Employer Identification No.)
145 PLEASANT HILL ROAD 04074
SCARBOROUGH, MAINE
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(Address of Principal Executive offices) (Zip Code)
(207) 883-2911
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(Registrant's Telephone Number, Including Area Code
N/A
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(Former Name or Former Address, if changed Since Last Report)
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Item 5. Other Events.
Hannaford Bros. Co., a Maine corporation (the "Company"), has entered
into an Agreement and Plan of Merger, dated as of August 17, 1999 (the "Merger
Agreement"), with Food Lion, Inc., a North Carolina corporation ("Food Lion"),
and FL Acquisition Sub, Inc., a Maine corporation and a wholly-owned subsidiary
of Food Lion ("Merger Subsidiary"). The Merger Agreement provides that,
following the satisfaction or waiver of the conditions set forth therein, Merger
Subsidiary will be merged with and into the Company (the "Merger"). The Merger
Agreement is attached hereto as Exhibit 2.1 and incorporated herein by
reference.
Pursuant to the Merger Agreement, each share of common stock, par
value $0.75 per share, of the Company ("Company Common Stock"), issued and
outstanding immediately prior to the effective time of the Merger, other than
shares owned by Food Lion (which will include the shares received by Food Lion
from the Empire Stockholders pursuant to the Stock Exchange Agreement referred
to below) or shares held by persons who properly have demanded appraisal of
their shares under applicable law, will be converted into the right to receive
(A) $79.00 in cash, without interest, or (B) the number of fully paid and
non-assessable shares of Class A common stock of Food Lion ("Food Lion Common
Stock") equal to $79.00 divided by (i) the average of the per share last sales
prices, regular way (rounded to 4 decimal points) of Food Lion Common Stock as
reported on the New York Stock Exchange, Inc. composite transactions reporting
system as reported in the New York City edition of The Wall Street Journal, or,
if not reported therein, another authoritative source, for the ten consecutive
trading days prior to (but not including) the closing date of the Merger (the
"Food Lion Average Stock Price") or (ii) $9.00, whichever is higher.
The aggregate number of shares of Company Common Stock to be
converted into the right to receive cash in the Merger (the "Cash Election
Number") will be 27,316,686 shares (representing 86% of the outstanding shares
of Company Common Stock as of August 16, 1999 excluding the shares to be
exchanged by the Empire Stockholders pursuant to the Stock Exchange Agreement)
plus 86% of any shares of Company Common Stock issued after the date of the
Merger Agreement pursuant to the exercise of Company stock options outstanding
at the date of the Merger Agreement. The remaining number of shares of Company
Common Stock outstanding immediately prior to the effective time of the Merger
(the "Stock Election Number") will be converted into the right to receive Food
Lion Common Stock in the Merger. There were 42,182,153 shares of Company Common
Stock outstanding on August 16, 1999.
Hannaford shareholders will have the right to elect cash or Food Lion
Common Stock in respect of each of their shares of Company Common Stock.
Elections in excess of the Cash Election Number or Stock Election Number will
result in allocations on a pro-rata basis pursuant to the procedures set forth
in the Merger Agreement.
In connection with the execution of the Merger Agreement, Empire
Company Limited and E.C.L. Investments Limited (collectively, the "Empire
Stockholders")
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entered into a Stock Exchange Agreement with Food Lion. Pursuant
to the Stock Exchange Agreement, immediately prior to the closing of the Merger,
the Empire Stockholders will exchange 10,418,565 shares of their Company Common
Stock for aggregate consideration of $823,066,635 (the "Total Consideration"),
determined and payable as follows: (A) $365,000,000 (the "Share Consideration")
payable in Food Lion Common Stock, with the number of shares of Food Lion Common
Stock to be delivered to the Empire Stockholders being calculated as
$365,000,000 divided by the Food Lion Average Stock Price or $9.00, whichever is
greater and (B) an amount in cash (the "Cash Consideration") equal to the
difference between the Total Consideration and the Share Consideration. Empire
Stockholders may elect to adjust, upwards or downwards, the cash and stock mix
of the Total Consideration, provided that the Share Consideration may in no
event be less than $315,000,000 (subject to adjustment as set forth in the
agreement) or in excess of $421,000,000.
In connection with the execution of the Merger Agreement, the Empire
Stockholders also entered into a Voting Agreement with Food Lion pursuant to
which, among other things, the Empire Stockholders agreed to vote 10,418,565 of
their shares of Company Common Stock (representing approximately 24.7% of the
outstanding Company Common Stock) in favor of the Merger. Copies of the Voting
Agreement and Stock Exchange Agreement are attached as Exhibits A and B to the
Merger Agreement attached hereto as Exhibit 2.1.
Consummation of the Merger is conditioned upon, among other things,
the receipt of the requisite vote of Hannaford shareholders and the expiration
of all applicable waiting periods under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended. The Company anticipates that the Merger
will be consummated in the first or second quarter of 2000.
On August 18, 1999, the Company and Food Lion issued a joint press
release (the "Press Release") announcing the execution of the Merger Agreement.
The Press Release is attached hereto as Exhibit 99 and is incorporated herein by
reference.
Item 7. Financial Statements
Pro Forma Financial Information and Exhibits.
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(a) - (b) Not Applicable.
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(c) Exhibits Required by Item 601 of Regulation S-K.
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2.1 Agreement and Plan of Merger, dated as of August
17, 1999, among Food Lion, Inc., Hannaford Bros.
Co. and FL Acquisition Sub, Inc. (the Voting
Agreement and Stock Exchange Agreement are
attached thereto as Exhibits A and B,
respectively)
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99 Press Release issued by Food Lion, Inc. and
Hannaford Bros. Co. dated August 17, 1999.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HANNAFORD BROS. CO.
By: /s/ Charles H. Crockett
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Name: Charles H. Crockett
Title: Assistant Secretary
Date: August 19, 1999
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EXHIBIT INDEX
Exhibit No. Exhibit
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2.1 Agreement and Plan of Merger, dated as of August 17, 1999, among Food
Lion, Inc., Hannaford Bros. Co. and FL Acquisition Sub, Inc. (the
Voting Agreement and Stock Exchange Agreement are attached thereto as
Exhibits A and B, respectively)
99 Press Release issued by Food Lion, Inc. and Hannaford Bros. Co. dated
August 17, 1999.
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EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
dated as of
August 17, 1999
among
FOOD LION, INC.,
HANNAFORD BROS. CO.
AND
FL ACQUISITION SUB, INC.
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<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
<S> <C>
Article 1 The Merger...........................................................................................2
Section 1.01 The Merger.................................................................................2
Section 1.02 Articles of Incorporation..................................................................2
Section 1.03 Bylaws.....................................................................................2
Section 1.04 Directors and Officers.....................................................................2
Article 2 Conversion of Securities.............................................................................3
Section 2.01 Conversion of Securities...................................................................3
Section 2.02 Surrender of Certificates..................................................................6
Section 2.03 No Further Ownership Rights in Company Common Stock........................................8
Section 2.04 Lost, Stolen or Destroyed Certificates.....................................................8
Section 2.05 Withholding Rights.........................................................................8
Section 2.06 Dissenting Shares..........................................................................9
Section 2.07 Stock Option and Other Stock Plans.........................................................9
Article 3 Representations and Warranties of Company...........................................................11
Section 3.01 Organization and Power....................................................................11
Section 3.02 Corporate Authorization...................................................................12
Section 3.03 Governmental Authorization................................................................12
Section 3.04 Non-Contravention.........................................................................13
Section 3.05 Capitalization of Company.................................................................13
Section 3.06 Capitalization of Subsidiaries............................................................14
Section 3.07 SEC Filings...............................................................................14
Section 3.08 Financial Statements......................................................................15
Section 3.09 Disclosure Documents......................................................................15
Section 3.10 Information Supplied......................................................................15
Section 3.11 Absence of Certain Changes................................................................16
Section 3.12 No Undisclosed Material Liabilities.......................................................17
Section 3.13 Litigation................................................................................17
Section 3.14 Taxes.....................................................................................18
Section 3.15 Employee Benefit Plans; ERISA.............................................................19
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TABLE OF CONTENTS
(CONTINUED)
PAGE
Section 3.16 Compliance with Laws; No Default..........................................................21
Section 3.17 No Default................................................................................21
Section 3.18 Finders' Fees.............................................................................22
Section 3.19 Environmental Matters.....................................................................22
Section 3.20 Opinion of Financial Advisor..............................................................23
Section 3.21 [Intentionally deleted]...................................................................23
Section 3.22 Takeover Statutes.........................................................................23
Section 3.23 Affiliates................................................................................23
Section 3.24 Company's Articles of Incorporation.......................................................23
Section 3.25 Company Rights Agreement..................................................................24
Article 4 Representations and Warranties of Parent............................................................24
Section 4.01 Organization and Power....................................................................24
Section 4.02 Corporate Authorization...................................................................24
Section 4.03 Governmental Authorization................................................................25
Section 4.04 Non-Contravention.........................................................................25
Section 4.05 Capitalization of Parent..................................................................25
Section 4.06 Capitalization of Subsidiaries............................................................26
Section 4.07 SEC Filings...............................................................................27
Section 4.08 Financial Statements......................................................................27
Section 4.09 Disclosure Documents......................................................................27
Section 4.10 Information Supplied......................................................................28
Section 4.11 Absence of Certain Changes................................................................28
Section 4.12 No Undisclosed Material Liabilities.......................................................29
Section 4.13 Litigation................................................................................29
Section 4.14 Taxes.....................................................................................30
Section 4.15 Employee Benefits, ERISA..................................................................30
Section 4.16 Compliance with Laws......................................................................32
Section 4.17 No Default................................................................................32
Section 4.18 Finders' Fees.............................................................................32
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TABLE OF CONTENTS
(CONTINUED)
PAGE
Section 4.19 Environmental Matters.....................................................................32
Section 4.20 [Intentionally Deleted]...................................................................33
Section 4.21 Takeover Statutes.........................................................................33
Section 4.22 Affiliates................................................................................33
Section 4.23 Merger Subsidiary.........................................................................33
Section 4.24 Financing.................................................................................33
Article 5 Covenants...........................................................................................34
Section 5.01 Conduct of Company........................................................................34
Section 5.02 Conduct of Parent.........................................................................36
Section 5.03 Shareholder Meeting; Proxy Materials; Form S-4............................................38
Section 5.04 Access to Information.....................................................................39
Section 5.05 No Solicitation...........................................................................40
Section 5.06 Notice of Certain Events..................................................................41
Section 5.07 Reasonable Best Efforts...................................................................42
Section 5.08 Cooperation...............................................................................43
Section 5.09 Public Announcements......................................................................43
Section 5.10 Further Assurances........................................................................44
Section 5.11 Affiliates................................................................................44
Section 5.12 Director and Officer Liability............................................................44
Section 5.13 Obligations of Merger Subsidiary..........................................................45
Section 5.14 Listing of Stock..........................................................................45
Section 5.15 Antitakeover Statutes.....................................................................45
Section 5.16 Parent Board..............................................................................45
Section 5.17 Employee Benefits.........................................................................45
Section 5.18 Stock Exchange Agreement..................................................................46
Section 5.19 Definitive Financing Documents............................................................46
Article 6 Conditions to the Merger............................................................................47
Section 6.01 Conditions to the Obligations of Each Party...............................................47
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TABLE OF CONTENTS
(CONTINUED)
PAGE
Section 6.02 Conditions to the Obligations of Parent and Merger Subsidiary.............................47
Section 6.03 Conditions to the Obligations of Company..................................................48
Article 7 Termination.........................................................................................48
Section 7.01 Termination...............................................................................48
Section 7.02 Effect of Termination.....................................................................49
Section 7.03 Payments..................................................................................50
Article 8 Miscellaneous.......................................................................................50
Section 8.01 Certain Definitions.......................................................................50
Section 8.02 Notices...................................................................................51
Section 8.03 Entire Agreement;Non-Survival of Representations and Warranties;
Third Party Beneficiaries.............................................................51
Section 8.04 Amendments; No Waivers....................................................................52
Section 8.05 Successors and Assigns....................................................................52
Section 8.06 Governing Law.............................................................................52
Section 8.07 Jurisdiction..............................................................................52
Section 8.08 Counterparts; Effectiveness...............................................................53
Section 8.09 Interpretation............................................................................53
Section 8.10 Severability..............................................................................53
Section 8.11 Specific Performance......................................................................53
Section 8.12 Joint and Several Liability...............................................................53
Schedules
Exhibit A Form of Company Voting Agreement
Exhibit B Stock Exchange Agreement
Exhibit C Registration Rights Agreement
</TABLE>
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of August 17, 1999,
among FOOD LION, INC., a North Carolina corporation ("Parent"), HANNAFORD BROS.
CO., a Maine corporation ("Company"), and FL ACQUISITION SUB, INC., a Maine
corporation and a wholly-owned subsidiary of Parent ("Merger Subsidiary").
WHEREAS, the respective Boards of Directors of Parent and
Company have approved, and deem it advisable and in the best interests of their
respective shareholders to consummate, the merger of Merger Subsidiary with and
into Company on the terms and conditions set forth herein;
WHEREAS, pursuant to the Merger, among other things, each
issued and outstanding share of Company Common Stock, including Company Rights
(each as defined in Section 2.01(a)), issued and outstanding immediately prior
to the effective time, other than shares held directly by Parent or shares held
by Dissenting Holders (as defined in Section 2.06) will be converted into the
right to receive Merger Consideration (as defined in Section 2.02(b));
WHEREAS, as a condition and inducement to Parent's
willingness to enter into this Agreement, concurrently with the execution and
delivery of this Agreement, Parent and certain stockholders of Company (the
"Voting Stockholders") are entering into a voting agreement dated as of the date
of this Agreement (the "Company Voting Agreement"), a form of which is attached
hereto as Exhibit A, pursuant to which such stockholders agree to vote their
shares of Company Common Stock (as hereinafter defined) in favor of the proposal
to approve and adopt the Merger and this Agreement;
WHEREAS, simultaneously with the execution of this
Agreement, Parent and the Voting Stockholders are entering into a Stock Exchange
Agreement (the "Stock Exchange Agreement"), a form of which is attached hereto
as Exhibit B, whereby the Voting Stockholders agree to sell shares of Company
Common Stock to Parent in exchange for shares of Parent Common Stock (as defined
herein) and cash as set forth therein, such transaction to be consummated
immediately prior to the consummation of the Merger; and
WHEREAS, simultaneously with the execution of this
Agreement, Parent and certain stockholders are entering into a Registration
Rights Agreement, a form of which is attached hereto as Exhibit C, whereby
Company has agreed to register the resale of the shares of Parent Common Stock
that such stockholders will receive in connection with the Merger and the Stock
Exchange Agreement.
NOW, THEREFORE, in consideration of the premises and the
respective representations, warranties, covenants, and agreements set forth
herein, the parties hereto agree as follows:
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Article 1
The Merger
Section 1.01 The Merger. (a) Upon the terms and subject to the conditions set
forth in this Agreement, at the Effective Time (as hereinafter defined), Merger
Subsidiary shall be merged (the "Merger") with and into Company in accordance
with the Maine Business Corporation Act (the "Maine Law"), whereupon the
separate existence of Merger Subsidiary shall cease, and Company shall continue
as the surviving corporation (the "Surviving Corporation").
(a) Upon the terms and subject to the conditions of this Agreement, the closing
of the Merger (the "Closing") shall take place at 10:00 a.m. on a date (the
"Closing Date") which shall be the second business day after satisfaction or
waiver of the conditions set forth in Article 6, other than those conditions
that by their nature are to be satisfied at the Closing, but subject to the
fulfillment or waiver of those conditions, at the offices of Weil, Gotshal &
Manges LLP, 767 Fifth Avenue, New York, New York 10153, or at such other time,
date or place as agreed to in writing by the parties hereto.
(b) Upon the Closing, Company and Merger Subsidiary will file articles of
merger, with an attached plan of merger in a form to be agreed upon by the
parties in accordance with the terms of this Agreement, with the Secretary of
State of the State of Maine and make all other filings or recordings required by
the Maine Law in connection with the Merger. The Merger shall become effective
at such time as the articles of merger are duly filed with the Secretary of
State of the State of Maine or at such later time as is agreed by Parent and
Company and specified in the articles of merger (the "Effective Time").
(c) The Merger shall have the effects set forth in Section 905 of the Maine Law.
Section 1.02 Articles of Incorporation. The articles of incorporation of Company
shall be the articles of incorporation of the Surviving Corporation, except
that, at the Effective Time, certain amendments thereto as agreed to by Parent
and Company shall be effected in the articles of merger filed pursuant to
Section 1.01(c).
Section 1.03 Bylaws. The bylaws of Merger Subsidiary in effect at the Effective
Time shall be the bylaws of the Surviving Corporation until amended in
accordance with applicable law.
Section 1.04 Directors and Officers. From and after the Effective Time, until
successors are duly elected or appointed and qualified in accordance with the
Maine Law and the articles of incorporation and bylaws of the Surviving
Corporation, (a) the directors of Merger Subsidiary at the Effective Time shall
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be the directors of the Surviving Corporation, and (b) the officers of Company
at the Effective Time shall be the officers of the Surviving Corporation.
Article 2
Conversion of Securities
Section 2.01 Conversion of Securities. As of the Effective Time, by virtue of
the Merger and without any action on the part of any holder of any capital stock
of Parent, Merger Subsidiary or Company:
(a) Company Common Stock. Each share of common stock, par value $0.75 per share,
of Company ("Company Common Stock"), including the associated right (the
"Company Rights") to purchase shares of Series A Junior Participating Preferred
Stock, no par value, of Company, pursuant to the terms of the Rights Agreement,
dated as of December 16, 1997, between Company and Continental Stock Transfer
and Trust Company (the "Company Rights Agreement"), issued and outstanding
immediately prior to the Effective Time (other than any shares of Company Common
Stock held directly by Parent, all of which shares shall be cancelled and
extinguished, or shares held by Dissenting Holders (as defined in Section 2.06))
automatically will be converted into the right to receive, pursuant to the
provisions of this Section 2.01:
(i) (A) $79.00 in cash, without interest (the "Per Share Cash Amount") or (B)
the number of fully paid and non-assessable shares of Class A common stock
("Parent Common Stock"), of Parent equal to $79.00 divided by (i) the average of
the per share last sales prices, regular way (rounded to 4 decimal points, the
"Average Parent Price") of Parent as reported on the New York Stock Exchange,
Inc. (the "NYSE") composite transactions reporting system as reported in the New
York City edition of The Wall Street Journal, or, if not reported therein,
another authoritative source) for the ten consecutive trading days (the "Average
Period") prior to (but not including) the Closing Date or (ii) $ 9.00, whichever
is higher (the "Exchange Ratio") or (C) a combination of cash and shares of
Parent Common Stock, all as determined in accordance with this Section 2.01.
(ii) The aggregate number of shares of Company Common Stock to be converted into
the right to receive cash in the Merger (the "Cash Election Number") shall be
27,316,686 shares plus 86% of any shares of Company Common Stock issued after
the date hereof pursuant to the exercise of Company Stock Options outstanding at
the date hereof. The remaining number of shares of Company Common Stock
outstanding immediately prior to the Effective Time (the "Stock Election
Number"), will be converted into the right to receive Parent Common Stock in the
Merger.
(iii) Subject to the allocation and election procedures set forth in this
Section 2.01, each record holder of shares of Company Common Stock immediately
prior to the Effective Time will be entitled in respect of each such share to
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(i) elect to receive cash for such share (a "Cash Election"), (ii) elect to
receive Parent Common Stock for such share (a "Stock Election"), or (iii)
indicate that such record holder has no preference as to the receipt of cash or
Parent Common Stock for such share (a "Non-Election"). All such elections will
be made on a form designated for that purpose (a "Form of Election").
(iv) If the aggregate number of shares covered by Cash Elections (the "Cash
Election Shares") exceeds the Cash Election Number, all shares of Company Common
Stock covered by Stock Elections (the "Stock Election Shares") and all shares of
Company Common Stock covered by Non-Elections or as to which no election is made
(the "Non-Election Shares") will be converted into the right to receive Parent
Common Stock, and the Cash Election Shares (which, for the purposes of the
calculation below, shall include Dissenting Shares, if any) will be converted
into the right to receive cash and Parent Common Stock in the following manner:
Each Cash Election Share will be converted into the right
to receive (A) an amount of cash, without interest, equal
to the product of (x) the Per Share Cash Amount and (y) a
fraction (the "Cash Fraction"), the numerator of which is
the Cash Election Number and the denominator of which will
be the total number of Cash Election Shares, and (B) a
number of shares of Parent Common Stock equal to the
product of (x) the Exchange Ratio and (y) a fraction equal
to one minus the Cash Fraction.
(v) If the aggregate number of Stock Election Shares exceeds the Stock Election
Number, all Cash Election Shares and all Non-Election Shares will be converted
into the right to receive cash, and all Stock Election Shares will be converted
into the right to receive Parent Common Stock and cash in the following manner:
Each Stock Election Share will be converted into the right
to receive (A) an amount of shares of Parent Common Stock
equal to the product of (x) the Exchange Ratio and (y) a
fraction (the "Stock Fraction"), the numerator of which
will be the Stock Election Number and the denominator of
which will be the total number of Stock Election Shares,
and (B) an amount in cash, without interest, equal to the
product of (x) the Per Share Cash Amount and (y) a fraction
equal to one minus the Stock Fraction.
(vi) In the event that neither subparagraph (iv) or subparagraph (v) above is
applicable, all Cash Election Shares will be converted into the right to receive
cash, all Stock Election Shares will be converted into the right to receive
Parent Common Stock, and all Non-Election Shares will be converted into the
right to receive (A) an amount in cash equal to the product of (x) the Per Share
Cash Amount and (y) a fraction, the numerator of which is the Cash Election
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Number less the Cash Election Shares (which, for the purposes of this
calculation, shall include Dissenting Shares, if any) and the denominator of
which is the Non-Election Shares and (B) a number of shares of Parent Common
Stock equal to the product of (x) the Exchange Ratio and (y) a fraction, the
numerator of which is the Stock Election Number less the Stock Election Shares
and the denominator of which is the Non-Election Shares.
(b) Election Procedure.
(i) Parent and Company each will use its reasonable best efforts to cause a Form
of Election to be mailed not less than thirty (30) days prior to the anticipated
Effective Time to all holders of record of shares of Company Common Stock and to
make the Form of Election available to all persons who become record holders of
Company Common Stock subsequent to such time. Elections will be made by record
holders of Company Common Stock by mailing to the Exchange Agent a Form of
Election. Holders of record of shares of Company Common Stock who hold such
shares as nominees, trustees or in other representative capacities (a "Stock
Representative") may submit multiple Forms of Election, provided that such Stock
Representative certifies that each such Form of Election covers all the shares
of Company Common Stock held by each Stock Representative for a particular
beneficial owner. To be effective, a Form of Election must be properly
completed, signed and submitted to the Exchange Agent. Parent will have the
discretion, which it may delegate in whole or in part to the Exchange Agent, to
determine whether Forms of Election have been properly completed, signed and
submitted or revoked and to disregard immaterial defects in Forms of Election.
The decision of Parent (or the Exchange Agent) in such matters, if reasonably
reached, will be conclusive and binding. Neither Parent nor the Exchange Agent
will be under any obligation to notify any person of any defect in a Form of
Election submitted to the Exchange Agent. The Exchange Agent will make all
computations contemplated by this Section 2.01 and all such computations will be
conclusive and binding on the holders of Company Common Stock.
(ii) For the purposes hereof, a record holder of Company Common Stock who does
not submit a Form of Election that is received by the Exchange Agent prior to
the Election Deadline (as defined herein) will be deemed to have made a
Non-Election. If Parent or the Exchange Agent determine that any purported Cash
Election or Stock Election was not properly made (and any such defect is not
subsequently cured), such purported Cash Election or Stock Election will be
deemed to be of no force and effect and the shareholder making such purported
election will for purposes hereof be deemed to have made a Non-Election.
(iii) A Form of Election must be received by the Exchange Agent by the close of
business on the last business day prior to the day during which the Effective
Time occurs (the "Election Deadline") in order to be effective. All elections
may be revoked by record holders submitting the Forms of Election if such
revocation is in writing and received by the Exchange Agent prior to the
Election Deadline.
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(c) Cancellation of Certain Shares. Each share of Company Common Stock held in
the treasury of Company or owned by Parent or Merger Subsidiary immediately
prior to the Effective Time shall be cancelled and extinguished, and no
consideration shall be delivered therefor.
(d) Capital Stock of Merger Subsidiary. Each share of Common Stock, $0.75 par
value, of Merger Subsidiary issued and outstanding immediately prior to the
Effective Time shall automatically be converted into one validly issued, fully
paid and non-assessable share of common stock, $0.75 par value, of the Surviving
Corporation.
(e) Adjustment. The Exchange Ratio shall be adjusted to reflect fully the effect
of any stock split, reverse split, stock dividend (including any dividend or
distribution of securities convertible into Parent Common Stock),
reorganization, recapitalization or other like change with respect to Parent
Common Stock occurring after the date hereof and having a record or effective
date prior to the Effective Time.
(f) Fractional Shares. No fraction of a share of Parent Common Stock will be
issued by virtue of the Merger, but in lieu thereof each holder of shares of
Company Common Stock who would otherwise be entitled to a fraction of a share of
Parent Common Stock (after aggregating all fractional shares of Parent Common
Stock to be received by such holder) shall receive from Parent an amount of cash
(rounded down to the nearest whole cent), without interest thereon, equal to the
product of (i) such fraction and (ii) the Closing Date Price.
For purposes hereof, the "Closing Date Price" of a share of Parent Common Stock
shall be the closing sales price of a share of Parent Common Stock as reported
on the NYSE for the trading day immediately prior to the day during which the
Effective Time occurs.
Section 2.02 Surrender of Certificates.
(a) Exchange Agent. Parent shall select a bank or trust company reasonably
acceptable to Company, which may be Parent's existing transfer agent, to act as
the exchange agent (the "Exchange Agent") in the Merger.
(b) Parent to Provide Merger Consideration. At the Closing, Parent shall make
available to the Exchange Agent for exchange in accordance with this Article 2
certificates for the shares of Parent Common Stock issuable, and cash payable,
pursuant to Section 2.01(a) in exchange for outstanding shares of Company Common
Stock and cash in an amount sufficient for payment in lieu of fractional shares
pursuant to Section 2.01(f) and any dividends or distributions to which holders
of shares of Company Common Stock may be entitled pursuant to Section 2.02(d).
The shares of Parent Common Stock issuable pursuant to Section 2.01(a) and the
cash payable pursuant to Sections 2.01(a) and (f) and Section 2.02(d) are
referred to collectively as the "Merger Consideration."
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(c) Exchange Procedures. Promptly after the Effective Time, Parent shall cause
the Exchange Agent to mail to each holder of record as of the Effective Time a
certificate or certificates (the "Certificates") that immediately prior to the
Effective Time represented outstanding shares of Company Common Stock whose
shares were converted into the right to receive a pro rata portion of the Merger
Consideration (i) a letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon delivery of the Certificates to the Exchange Agent and shall be in
such form and have such other provisions as Parent shall reasonably specify) and
(ii) instructions for effecting the exchange of the Certificates for a pro rata
portion of the Merger Consideration. Upon surrender of a Certificate for
cancellation to the Exchange Agent or to such other agent or agents as may be
appointed by Parent, together with such letter of transmittal duly completed and
validly executed in accordance with the instructions thereto, the holder of such
Certificate shall be entitled to receive in exchange therefor a pro rata portion
of the Merger Consideration in accordance with Section 2.01, and the Certificate
so surrendered shall forthwith be cancelled. Until so surrendered, each
outstanding Certificate will be deemed from and after the Effective Time, for
all corporate purposes, subject to Section 2.02(d) as to the payment of
dividends, to evidence only the ownership of the number of full shares of Parent
Common Stock and the aggregate Per Share Cash Amount into which the shares of
Company Common Stock evidenced by such Certificate shall have been so converted
and the right to receive an amount in cash in lieu of the issuance of any
fractional shares in accordance with Section 2.01(f) and any dividends or
distributions payable pursuant to Section 2.02(d).
(d) Distributions With Respect to Unexchanged Shares. No dividends or other
distributions declared or made after the date of this Agreement with respect to
Parent Common Stock with a record date after the Effective Time will be paid to
the holder of any unsurrendered Certificate with respect to the shares of Parent
Common Stock represented thereby until the holder of record of such Certificate
shall surrender such Certificate. Subject to the effect of applicable abandoned
property, escheat or similar laws, following surrender of any such Certificate,
there shall be delivered to the record holder thereof, (i) a certificate
representing whole shares of Parent Common Stock and the aggregate Per Share
Cash Amount issuable and payable in exchange for such Certificate, without
interest, (ii) payments of the amount of dividends or other distributions with a
record date after the Effective Time then payable with respect to such whole
shares of Parent Common Stock and (iii) cash in lieu of any fractional shares in
accordance with Section 2.01(f).
(e) Transfers of Ownership. If any certificate for shares of Parent Common Stock
is to be issued in a name other than that in which the Certificate surrendered
in exchange therefor is registered or if any other portion of the Merger
Consideration is to be payable to a person other than the person to whom such
Certificate is registered, it will be a condition of the issuance and payment
thereof that the Certificate so surrendered will be properly endorsed,
accompanied by any documents required to evidence and effect such transfer and
otherwise be in proper form for transfer and that the person requesting such
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exchange will have paid to Parent or any agent designated by it any applicable
transfer taxes required by reason of the issuance of a certificate for shares of
Parent Common Stock in any name, or the payment of any other portion of the
Merger Consideration to any person, other than that of the registered holder of
the Certificate surrendered, or shall provide evidence that any applicable
transfer taxes have been paid.
(f) No Liability. Notwithstanding anything to the contrary in this Section 2.02,
none of the Exchange Agent, Parent, the Surviving Corporation nor any other
party hereto shall be liable to any person in respect of any Merger
Consideration for any amount properly delivered to a public official pursuant to
any applicable abandoned property, escheat or similar law.
(g) Termination of Exchange Agent. Any Merger Consideration made available to
the Exchange Agent pursuant to Section 2.02(b) and not exchanged within twelve
months after the Effective Time pursuant to this Section 2.02 shall be returned
by the Exchange Agent to Parent, which shall thereafter act as Exchange Agent,
and thereafter any holder of unsurrendered Certificates shall look as a general
creditor only to Parent for payment of any funds to which such holder may be
due, subject to applicable law.
Section 2.03 No Further Ownership Rights in Company Common Stock. The Merger
Consideration issued and paid in exchange of shares of Company Common Stock in
accordance with the terms hereof shall be deemed to have been issued and paid in
full satisfaction of all rights pertaining to such shares of Company Common
Stock, and there shall be no further registration of transfers on the records of
the Surviving Corporation of shares of Company Common Stock that were
outstanding immediately prior to the Effective Time. If after the Effective
Time, Certificates are presented to the Surviving Corporation for any reason,
they shall be cancelled and exchanged as provided in this Article 2.
Section 2.04 Lost, Stolen or Destroyed Certificates. In the event any
Certificates shall have been lost, stolen or destroyed, the Exchange Agent shall
deliver in exchange for such lost, stolen or destroyed Certificates, upon the
making of an affidavit of that fact by the holder thereof, the Merger
Consideration; provided, however, that Parent may, in its discretion and as a
condition precedent to such delivery, require the owner of such lost, stolen or
destroyed Certificates to deliver a bond in such sum as it may reasonably direct
as indemnity against any claim that may be made against Parent or the Exchange
Agent with respect to the Certificates alleged to have been lost, stolen or
destroyed.
Section 2.05 Withholding Rights. Each of the Surviving Corporation and Parent
shall be entitled, or shall be entitled to cause the Exchange Agent, to deduct
and withhold from the Merger Consideration otherwise payable pursuant to this
Agreement to any holder of shares of Company Common Stock such amounts as it is
required to deduct and withhold with respect to the making of such payment under
the Code and the rules and regulations promulgated thereunder, or any provision
of a Tax law. To the extent that amounts are so withheld by the Surviving
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Corporation, Parent or the Exchange Agent, as the case may be, such amounts
shall be treated for all purposes of this Agreement as having been paid to the
holder of the shares of Company Common Stock in respect to which such deduction
and withholding was made by the Surviving Corporation or Parent, as the case may
be.
Section 2.06 Dissenting Shares.
(a) Notwithstanding any provision of this Agreement to the contrary, any issued
and outstanding shares of Company Common Stock held by a person who has demanded
appraisal of such shares in accordance with Section 909 of the Maine Law
("Dissenting Holder") and as of the Effective Time has neither effectively
withdrawn nor lost his right to such appraisal ("Dissenting Shares"), shall not
be converted into or represent a right to receive cash and/or Parent Common
Stock pursuant to Section 2.01(a) but such Dissenting Holder thereof shall be
entitled to only such rights in respect thereof as are granted by Section 909 of
the Maine Law.
(b) Notwithstanding the provision of subsection (a) of this Section, if any
Dissenting Holder who demands appraisal of his shares of Company Common Stock
under the Maine Law shall effectively withdraw or lose his right to appraisal,
then as of the Effective Time or the occurrence of such event, whichever later
occurs, such shares automatically shall be converted into and represent only the
right to receive cash and/or Parent Common Stock as provided in Section 2.01(a),
without interest thereon, upon surrender of the certificate or certificates
representing such shares.
(c) Company shall give Parent (i) prompt notice of any written demands for
appraisal or payment of the fair value of any shares of Company Common Stock,
withdrawals of such demands and any other related instruments served pursuant to
the Maine Law received by Company and (ii) the opportunity to direct all
negotiations and proceedings with respect to demands for appraisal under the
Maine Law. Company shall not voluntarily make any payment with respect to any
demands for appraisal and shall not, except with the prior written consent of
Parent and Merger Subsidiary, settle or offer to settle any such demands.
Section 2.07 Stock Option and Other Stock Plans.
(a) As soon as practicable following the date of this Agreement, Parent and
Company shall take such action with respect to Company's 1998 Stock Option Plan,
Employee Stock Purchase Plan, 1988 Stock Plan and Stock Ownership Plan for
Outside Directors (collectively, the "Company Option Plans") as may be required
to effect the following provisions of this Section 2.07(a). At the Effective
Time, each option to purchase shares of Company Common Stock pursuant to the
Company Option Plans that is then outstanding, whether vested or unvested (each
a "Company Stock Option"), shall be, at the option of each holder, to be made
within 30 days of the receipt of the notices and election forms specified in
subsection (b) below, (i) converted into the right to receive cash in an amount
equal to the excess of the "blended value" of the Merger Consideration over the
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per share exercise price of the option multiplied by the number of shares
subject to such option, (ii) assumed by Parent and converted into an immediately
exercisable option (or a new substitute option shall be granted) (each, as so
adjusted, an "Adjusted Option") to purchase the number of shares of Parent
Common Stock (rounded up to the nearest whole share) equal to (x) the number of
shares of Company Common Stock subject to such option multiplied by (y) the
Exchange Ratio, at an exercise price per share of Parent Common Stock (rounded
down to the nearest penny) equal to (A) the former exercise price per share of
Company Common Stock under such option immediately prior to the Effective Time
divided by (B) the Exchange Ratio or (iii) if the Average Parent Price is less
than $9.00, assumed by Parent and converted into an Adjusted Option to purchase
the number of shares of Parent Common Stock (rounded up to the nearest whole
share) equal to (x) the number of shares of Company Common Stock subject to such
option multiplied by (y) $79 divided by the Average Parent Price, at an exercise
price per share of Parent Common Stock (rounded down to the nearest penny) equal
to (A) the former exercise price per share of Company Common Stock under such
option immediately prior to the Effective Time divided by (B) $79 divided by the
Average Parent Price; provided, however, that any such exchanged Company Stock
Option pursuant to this clause (iii) may not be exercised earlier than one year
following the Effective Time; provided, further, however, that in the case of
any Company Stock Option to which Section 421 of the Code applies by reason of
its qualification under Section 422 of the Code, the conversion formula in
clauses (ii) and (iii) shall be adjusted, if necessary, to comply with Section
424(a) of the Code. Except as provided above, the Adjusted Options shall be
subject to the same terms and conditions as were applicable to the converted
option immediately prior to the Effective Time. For purposes hereof, "blended
value" means (x) divided by (y), with (x) being (i) the Cash Election Number
multiplied by $79 plus (ii) the number of shares of Parent Common Stock issued
in the Merger multiplied by the Average Parent Price, and (y) being the Cash
Election Number plus the Stock Election Number.
(b) As soon as practicable after the Effective Time (but in no event more than
30 days thereafter), Parent shall deliver to the holders of Company Stock
Options appropriate notices and election forms setting forth such holders'
rights pursuant to the respective Company Option Plans and the agreements
evidencing the grants of such Company Stock Options and stating that, to the
extent the cash election is not exercised, such Company Stock Options and
agreements shall be assumed by Parent and shall continue in effect on the same
terms and conditions (subject to the adjustments required by this Section 2.07
after giving effect to the Merger). Parent shall comply with the terms of the
Company Option Plans and ensure that the Company Stock Options that qualified as
incentive stock options prior to the Effective Time continue to qualify as
incentive stock options after the Effective Time.
(c) Parent shall take such actions as are reasonably necessary for the
assumption of the Company Option Plans pursuant to this Section 2.07, including
the reservation, issuance and listing of Parent Common Stock as is necessary to
effectuate the transactions contemplated by this Section 2.07. Parent shall
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prepare and file with the SEC (as hereinafter defined) a registration statement
on Form S-8 or other appropriate form with respect to shares of Parent Common
Stock subject to Adjusted Options issued under such Company Option Plans and
shall use its reasonable best efforts to have such registration statement
declared effective immediately following the Effective Time and to maintain the
effectiveness of such registration statement or registration statements covering
such Adjusted Options (and maintain the current status of the prospectus or
prospectuses contained therein) for so long as such Adjusted Options remain
outstanding.
Article 3
Representations and Warranties of Company
Company represents and warrants to Parent that:
Section 3.01 Organization and Power. (a) Each of Company and its Subsidiaries is
a corporation, partnership or other entity duly organized, validly existing and
in good standing under the laws of the jurisdiction of its incorporation or
organization, and has the requisite corporate or other power and authority to
own, lease and operate its properties and to carry on its business as now being
conducted. Each of Company and its Subsidiaries is duly qualified or licensed to
do business 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 where the failure to be
so duly qualified or licensed and in good standing would not, individually or in
the aggregate, have a Material Adverse Effect on Company.
For purposes of this Agreement, a "Material Adverse Effect" with respect to
Company or Parent, as the case may be, means a material adverse effect (i) on
the financial condition, business, properties, or results of operations of such
person and its Subsidiaries, taken as a whole, or (ii) on the ability of such
person to perform its obligations under or to consummate the transactions
contemplated by this Agreement, provided that none of the following shall
constitute a Material Adverse Effect: (i) occurrences affecting Company's or
Parent's or any of their respective Subsidiaries' businesses as a result of the
announcement of the execution of this Agreement; (ii) general economic
conditions; (iii) any changes generally affecting the industries in which
Company and its Subsidiaries or Parent and its Subsidiaries operate; or (iv)
changes in Company's business after the date hereof attributable solely to
actions taken by Parent.
(a) Section 3.01 of the disclosure schedule delivered by Company to Parent prior
to the execution of this Agreement (the "Company Disclosure Schedule") sets
forth a complete list of Company's Subsidiaries that are "significant
subsidiaries", as such term is defined in Section 1-02 of Regulation S-X under
the Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder (the "1934 Act") (each, a "Significant Subsidiary").
Company has heretofore delivered to Parent true and complete copies of Company's
articles of incorporation and bylaws as currently in effect.
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Section 3.02 Corporate Authorization. (a) The execution, delivery and
performance by Company of this Agreement and the consummation by Company of the
transactions contemplated hereby are within Company's corporate powers and,
except as set forth in the next succeeding sentence of this Section 3.02, have
been duly authorized by all necessary corporate action. The affirmative vote of
the holders of a majority of the outstanding shares of Company Common Stock
entitled to vote on this Agreement (the "Company Requisite Vote") is the only
vote of any class or series of Company's capital stock necessary to approve and
adopt this Agreement and the transactions contemplated by this Agreement. This
Agreement has been duly executed and delivered by Company and constitutes a
valid and binding agreement of Company, enforceable against Company in
accordance with its terms (subject to applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and other similar laws affecting
creditors' rights generally from time to time in effect and to general
principles of equity, including concepts of materiality, reasonableness, good
faith and fair dealing, regardless of whether in a proceeding at equity or at
law).
(a) The Board of Directors of Company (the "Company Board") has, by unanimous
vote of those present, duly and validly authorized the execution and delivery of
this Agreement and approved the consummation of the transactions contemplated
hereby, and taken all corporate actions required to be taken by the Company
Board for the consummation of the transactions, including the Merger,
contemplated hereby and has resolved to (i) deem this Agreement and the
transactions contemplated hereby, including the Merger, taken together,
advisable and fair to, and in the best interests of, Company and its
shareholders and (ii) recommend that the shareholders of Company approve and
adopt this Agreement. The Company Board has directed that this Agreement be
submitted to the shareholders of Company for their approval.
Section 3.03 Governmental Authorization. The execution, delivery and performance
by Company of this Agreement, and the consummation by Company of the
transactions contemplated hereby, require no action by or in respect of, or
filing with, any federal, state or local government or any court, administrative
agency or commission or other governmental agency or authority (a "Governmental
Authority") other than: (a) the filing of articles of merger with respect to the
Merger with the Secretary of State of the State of Maine and appropriate
documents with the relevant authorities of other states in which Company is
qualified to do business; (b) compliance with any applicable requirements of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act")
and similar state antitrust statutes; (c) compliance with any applicable
requirements of the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder (the "1933 Act"); (d) compliance with any
applicable requirements of the 1934 Act; (e) compliance with any other
applicable securities laws; (f) those that may be required solely by reason of
Parent's or Merger Subsidiary's (as opposed to any other third party's)
participation in the transactions contemplated by this Agreement; (g) actions or
filings which, if not taken or made, would not, individually or in the
aggregate, have a Material Adverse Effect on Company; and (h) filings and
notices not required to be made or given until after the Effective Time.
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Section 3.04 Non-Contravention. Except as set forth on Section 3.04 of the
Company Disclosure Schedule, the execution, delivery and performance by Company
of this Agreement do not, and the consummation by Company of the transactions
contemplated hereby will not: (a) assuming receipt of the approval of
shareholders referred to in Section 3.02, contravene or conflict with the
articles of incorporation, bylaws or similar organizational documents of Company
or any of its Significant Subsidiaries; (b) assuming compliance with the matters
referred to in Section 3.03, contravene or conflict with or constitute a
violation of any provision of any law, regulation, judgment, injunction, order
or decree binding upon or applicable to Company or its Subsidiaries; (c)
constitute a default (or an event which with notice, the lapse of time or both
would become a default) under or give rise to a right of termination,
cancellation or acceleration of any right or obligation of Company or any of its
Subsidiaries or to a loss of any benefit to which Company or any of its
Subsidiaries is entitled under any provision of any agreement, contract or other
instrument binding upon Company or any of its Subsidiaries and which either has
a term of more than one year or involves the payment or receipt of money in
excess of $1,000,000 (a "Company Agreement") or any license, franchise, permit
or other similar authorization held by Company or any of its Subsidiaries; or
(d) result in the creation or imposition of any Lien on any asset of Company or
any of its Subsidiaries, except for such contraventions, conflicts or violations
referred to in clause (b) or defaults, rights of termination, cancellation or
acceleration, losses or Liens referred to in clause (c) or (d) that would not,
individually or in the aggregate, have a Material Adverse Effect on Company. For
purposes of this Agreement, "Lien" means, with respect to any asset, any
mortgage, lien, pledge, charge, security interest or encumbrance of any kind in
respect of such asset.
Section 3.05 Capitalization of Company. (a) The authorized capital stock of
Company consists of 110,000,000 shares of Company Common Stock, 2,000,000 shares
of preferred stock, no par value (the "Class A Serial Preferred Stock") and
28,000,000 shares of preferred stock, par value $.01 per share (the "Class B
Serial Preferred Stock"). As of the close of business on August 16, 1999,
42,182,153 shares of Company Common Stock were issued and outstanding, 625,000
shares of Company Common Stock were reserved for issuance under Company's
Employee Stock Purchase Plan, 200,000 shares of Company Common Stock were
reserved for issuance under Company's 1998 Restricted Stock Plan (the
"Restricted Stock Plan"), 2,487,981 shares of Company Common Stock were reserved
for issuance pursuant to options previously granted pursuant to the Company
Stock Option Plans and no shares of Class A Serial Preferred Stock or Class B
Serial Preferred Stock were issued and outstanding. 2,000,000 shares of Series A
Junior Participating Preferred Stock have been designated from the Class A
Serial Preferred Stock and reserved for issuance pursuant to the Company Rights
Agreement. All the outstanding shares of Company's capital stock are, and all
shares which may be issued pursuant to the Company Stock Option Plans and the
Restricted Stock Plan will be, when issued in accordance with the respective
terms thereof, duly authorized, validly issued, fully paid and non-assessable.
Except (i) as set forth in this Section 3.05 or in Section 5.01 of the Company
Disclosure Schedule, (ii) for the transactions contemplated by this Agreement,
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including those permitted in accordance with Section 5.01(f), (iii) for changes
since August 16, 1999 resulting from the exercise of employee and director stock
options outstanding on such date and (iv) for rights to purchase shares of
Series A Junior Participating Preferred Stock issuable pursuant to the Company
Rights Agreement, there are outstanding (x) no shares of capital stock or other
voting securities of Company, (y) no securities of Company convertible into or
exchangeable for shares of capital stock or voting securities of Company, and
(z) no options, warrants or other rights to acquire from Company, and no
preemptive or similar rights, subscriptions or other rights, convertible
securities, agreements, arrangements or commitments of any character, relating
to the capital stock of Company, obligating Company to issue, transfer or sell,
any capital stock, voting securities or securities convertible into or
exchangeable for capital stock or voting securities of Company or obligating
Company to grant, extend or enter into any such option, warrant, subscription or
other right, convertible security, agreement, arrangement or commitment (the
items in clauses (x), (y) and (z) being referred to collectively as the "Company
Securities"). None of Company or its Subsidiaries has any contractual obligation
to redeem, repurchase or otherwise acquire any Company Securities or any Company
Subsidiary Securities (as hereinafter defined), including as a result of the
transactions contemplated by this Agreement.
(a) Except as set forth in Section 3.05 of the Company Disclosure Schedule,
there are no voting trusts or other agreements or understandings to which
Company or any of its Subsidiaries is a party with respect to the voting of the
capital stock of Company or any of its Subsidiaries.
Section 3.06 Capitalization of Subsidiaries. Except as set forth in Section 3.06
of the Company Disclosure Schedule, all of the outstanding shares of capital
stock of, or other ownership interests in, each Subsidiary of Company, is owned
by Company, directly or indirectly, free and clear of any consensual Lien
(including any restriction on the right to vote, sell or otherwise dispose of
such capital stock or other ownership interests). There are no outstanding (i)
securities of Company or any of its Subsidiaries convertible into or
exchangeable for shares of capital stock or other voting securities or ownership
interests in any Subsidiary of Company, or (ii) options or other rights to
acquire from Company or any of its Subsidiaries, and no other obligation of
Company or any of its Subsidiaries to issue, any capital stock, voting
securities or other ownership interests in, or any securities convertible into
or exchangeable for, any capital stock, voting securities or ownership interests
in, any Subsidiary of Company (the items in clauses (i) and (ii) being referred
to collectively as the "Company Subsidiary Securities").
Section 3.07 SEC Filings. (a) Company has filed all required reports, schedules,
forms, statements and other documents with the Securities and Exchange
Commission (the "SEC") since June 30, 1997 (the "Company SEC Documents").
(a) As of its filing date, each Company SEC Document filed pursuant to the 1934
Act did not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in the light of
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the circumstances under which they were made, not misleading, except to the
extent that such statements have been modified or superseded by a later filed
Company SEC Document.
(b) Each Company SEC Document that is a registration statement, as amended or
supplemented, if applicable, filed pursuant to the 1933 Act as of the date such
registration statement or amendment became effective did not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading,
except to the extent that such statements have been modified or superseded by a
later filed Company SEC Document.
Section 3.08 Financial Statements. The audited consolidated financial statements
and unaudited consolidated interim financial statements of Company included in
Company's Annual Report on Form 10-K for the fiscal year ended January 2, 1999
and its Quarterly Report on Form 10-Q for the fiscal quarter ended July 3, 1999
(the "Company 10-Q") have been prepared in accordance with GAAP (except, in the
case of unaudited statements, as permitted by Form 10-Q of the SEC) applied on a
consistent basis during the periods involved (except as may be indicated in the
notes thereto) and fairly present the consolidated financial position of Company
and its consolidated Subsidiaries as of the dates thereof and their consolidated
results of operations and cash flows for the periods then ended (subject to
normal year-end adjustments in the case of the unaudited interim financial
statements). For purposes of this Agreement, "Company Balance Sheet" means the
consolidated balance sheet of Company as of July 3, 1999 set forth in the
Company 10-Q and "Company Balance Sheet Date" means July 3, 1999.
Section 3.09 Disclosure Documents. Insofar as the information contained therein
relates solely to Company, neither the proxy statement of Company (the "Company
Proxy Statement") to be filed with the SEC in connection with the Merger, nor
any amendment or supplement thereto, will, at the date the Company Proxy
Statement or any such amendment or supplement is first mailed to shareholders of
Company or at the time such shareholders vote on the adoption and approval of
this Agreement, contain any untrue statement of a material fact or omit to state
any material fact necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. The Company Proxy
Statement will, when filed, comply as to form in all material respects with the
requirements of the 1934 Act. No representation or warranty is made by Company
in this Section 3.09 with respect to statements made or incorporated by
reference therein based on information supplied by Parent or Merger Subsidiary
for inclusion or incorporation by reference in the Company Proxy Statement.
Section 3.10 Information Supplied. None of the information supplied or to be
supplied by Company for inclusion or incorporation by reference in the Form S-4
(as hereinafter defined) or any amendment or supplement thereto will, at the
time the Form S-4 or any such amendment or supplement becomes effective under
the 1933 Act or at the Effective Time, contain any untrue statement of a
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material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading.
Section 3.11 Absence of Certain Changes. Except as disclosed in the Company SEC
Documents filed prior to the date of this Agreement or as disclosed in Section
3.11 of the Company Disclosure Schedule, since July 3, 1999, Company and its
Subsidiaries have conducted their business in the ordinary course consistent
with past practice and there has not been:
(a) any event, occurrence or development which, individually or in the
aggregate, has had a Material Adverse Effect on Company;
(b) any declaration, setting aside or payment of any dividend or other
distribution with respect to any shares of capital stock of Company, or any
repurchase, redemption or other acquisition by Company or any of its
Subsidiaries of any amount of outstanding shares of capital stock or other
equity securities of, or other ownership interests in, Company or any of its
Subsidiaries;
(c) any amendment of any term of any outstanding security of Company or any of
its Subsidiaries that would materially increase the obligations of Company or
such Subsidiary under such security;
(d) (x) any incurrence or assumption by Company or any of its Subsidiaries of
any indebtedness for borrowed money other than under existing credit facilities
(or any renewals, replacements or extensions that do not increase the aggregate
commitments thereunder) (A) in the ordinary course of business consistent with
past practice (it being understood that any indebtedness incurred prior to the
date hereof in respect of capital expenditures shall be considered to have been
in the ordinary course of business consistent with past practice) or (B) in
connection with any acquisition or capital expenditure permitted by Section 5.01
or (y) any guarantee, endorsement or other incurrence or assumption of liability
(whether directly, contingently or otherwise) by Company or any of its
Subsidiaries for the obligations of any other person (other than any wholly
owned Subsidiary of Company), other than in the ordinary course of business
consistent with past practice;
(e) any creation or assumption by Company or any of its Subsidiaries of any
consensual Lien on any material asset of Company or any of its Subsidiaries
other than in the ordinary course of business consistent with past practice;
(f) any making of any loan, advance or capital contribution to or investment in
any person by Company or any of its Subsidiaries other than (i) any acquisition
permitted by Section 5.01, (ii) loans, advances or capital contributions to or
investments in wholly-owned Subsidiaries of Company or (iii) loans or advances
to employees of Company or any of its Subsidiaries made in the ordinary course
of business consistent with past practice;
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(g) (i) any contract or agreement entered into by Company or any of its
Subsidiaries on or prior to the date hereof relating to any material acquisition
or disposition of any assets or business or (ii) any modification, amendment,
assignment, termination or relinquishment by Company or any of its Subsidiaries
of any contract, license or other right (including any insurance policy naming
it as a beneficiary or a loss payable payee) that, individually or in the
aggregate, would have a Material Adverse Effect on Company, other than, in the
case of (i) and (ii), transactions, commitments, contracts or agreements in the
ordinary course of business consistent with past practice and those contemplated
by this Agreement;
(h) any material change in any method of accounting or accounting principles or
practice by Company or any of its Subsidiaries, except for any such change
required by reason of a change in GAAP; or
(i) except for items permitted by Section 5.17, any (i) grant of any severance
or termination pay to any director, officer or employee of Company or any of its
Subsidiaries, (ii) entering into of any employment, deferred compensation or
other similar agreement (or any amendment to any such existing agreement) with
any director, officer or employee of Company or any of its Subsidiaries, (iii)
increase in benefits payable under any existing severance or termination pay
policies or employment agreements or (iv) increase in compensation, bonus or
other benefits payable to directors, officers or employees of Company or any of
its Subsidiaries other than, in the case of clause (iv) only, increases prior to
the date hereof in compensation, bonus or other benefits payable to employees of
Company or any of its Subsidiaries in the ordinary course of business consistent
with past practice or merit increases in salaries of employees at regularly
scheduled times in customary amounts consistent with past practices.
Section 3.12 No Undisclosed Material Liabilities. There have been no liabilities
or obligations (whether pursuant to contracts or otherwise) of any kind
whatsoever incurred by Company or any of its Subsidiaries since July 3, 1999,
whether accrued, contingent, absolute, determined, determinable or otherwise,
other than:
(a) liabilities or obligations disclosed or provided for in the Company Balance
Sheet or in the notes thereto or in the Company SEC Documents filed prior to the
date hereof;
(b) liabilities or obligations which, individually and in the aggregate, have
not had and would not have a Material Adverse Effect on Company; or
(c) liabilities or obligations under this Agreement or incurred in connection
with the transactions contemplated hereby.
Section 3.13 Litigation. Except as disclosed in the Company SEC Documents filed
prior to the date hereof, there is no action, suit, investigation or proceeding
pending against, or to the knowledge of Company, threatened against or
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affecting, Company or any of its Subsidiaries or any of their respective
properties which, individually or in the aggregate, would have a Material
Adverse Effect on Company.
Section 3.14 Taxes. Except as set forth on Section 3.14 of the Company
Disclosure Schedule:
(a) Company and each of its Subsidiaries, and each affiliated group (within the
meaning of Section 1504 of the Code) of which Company or any of its Subsidiaries
is or has been a member, has timely filed (or has had timely filed on its
behalf) or will file or cause to be timely filed, all material Tax Returns
required by applicable law to be filed by it prior to or as of the Effective
Time, and all such material Tax Returns are, or will be at the time of filing,
true, correct and complete in all material respects;
(b) Company and each of its Subsidiaries has paid (or has had paid on its
behalf) all Taxes shown due with respect to Tax Returns for periods ending prior
to or as of the Effective Time;
(c) The federal income Tax Returns of Company have been examined and settled
with the Internal Revenue Service (the "Service") (or the applicable statutes of
limitation for the assessment of federal income Taxes for such periods have
expired) for all years through 1996;
(d) There are no material Liens or encumbrances for Taxes on any of the assets
of Company or its Subsidiaries (other than for current Taxes not yet due and
payable);
(e) Company and its Subsidiaries have complied in all material respects with all
applicable laws, rules and regulations relating to the payment and withholding
of Taxes;
(f) None of Company or its Subsidiaries is a party to any tax allocation, tax
sharing, tax indemnity or similar agreement (whether or not in writing),
arrangement or practice with respect to Taxes (including any adverse pricing
agreement, closing agreement or other agreement relating to Taxes with any
taxing authority), except among themselves;
(g) No federal, state, local or foreign audits or administrative proceedings are
presently pending with regard to a material amount of Taxes or a material Tax
Return of Company or its Subsidiaries and none of them has received a written
notice or has any knowledge (including the knowledge of any employees
responsible for Tax matters), of any proposed audit or proceeding;
(h) The Company Balance Sheet reflects an adequate reserve for all Taxes payable
by the Company and its Subsidiaries for all taxable periods through the date of
the Company Balance Sheet; and
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(i) No payment which Company or its Subsidiaries is obligated to pay to any
director, officer, employee or independent contractor pursuant to the terms of
an employment agreement, severance agreement or otherwise will constitute an
excess parachute payment as defined in Section 280G of the Code.
(j) "Taxes" shall mean any and all taxes, charges, fees, levies or other
assessments, including income, gross receipts, excise, real or personal
property, sales, withholding, social security, retirement, unemployment,
occupation, use, goods and services, service use, license, value added, capital,
net worth, payroll, profits, franchise, transfer and recording taxes, fees and
charges, and any other taxes, assessment or similar charges imposed by the
Service or any other taxing authority (whether domestic or foreign including any
state, county, local or foreign government or any subdivision or taxing agency
thereof (including a United States possession)) (a "Taxing Authority"), whether
computed on a separate, consolidated, unitary, combined or any other basis; and
such term shall include any interest whether paid or received, fines, penalties
or additional amounts, and any joint, several and/or transferee liabilities,
attributable to, or imposed upon, or with respect to, any such taxes, charges,
fees, levies or other assessments. "Tax Return" shall mean any report, return,
document, declaration or other information or filing required to be supplied to
any taxing authority or jurisdiction (foreign or domestic) with respect to
Taxes, including information returns, any documents with respect to or
accompanying payments of estimated Taxes, or with respect to or accompanying
requests for the extension of time in which to file any such report, return,
document, declaration or other information.
Section 3.15 Employee Benefit Plans; ERISA. (a) Except as set forth in Section
3.15(a) of the Company Disclosure Schedule, there are no material employee
benefit plans (including any plans for the benefit of directors or former
directors), arrangements, practices, contracts or agreements (including
employment agreements and severance agreements, incentive compensation, bonus,
stock option, stock appreciation rights and stock purchase plans) of any type
(including plans described in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")), maintained by Company, any of its
Subsidiaries or any trade or business, whether or not incorporated (an "ERISA
Affiliate"), that together with Company would be deemed a "controlled group"
within the meaning of Section 4001(a)(14) of ERISA, or with respect to which
Company or any of its Subsidiaries has or may have a liability (the "Company
Benefit Plans"). Except as disclosed in Section 3.15(a) of the Company
Disclosure Schedule (or as otherwise permitted by this Agreement): (1) neither
Company nor any ERISA Affiliate has any formal plan or commitment, whether
legally binding or not, to create any additional Company Benefit Plan or modify
or change any existing Company Benefit Plan that would affect any employee or
terminated employee of Company or any ERISA Affiliate; and (2) since July 3,
1999, there has been no change, amendment, modification to, or adoption of, any
Company Benefit Plan, in each case, that has had, or would have, a Material
Adverse Effect on Company. Company has provided, or has caused to be provided,
to Parent (i) current, accurate and complete copies of all documents embodying
each Company Benefit Plan, including all amendments thereto, written
interpretations thereof and trust or funding agreements with respect thereto;
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(ii) the two most recent annual actuarial valuations, if any, prepared for each
Company Benefit Plan; (iii) the two most recent annual reports (Series 5500 and
all schedules thereto), if any, required under ERISA in connection with each
Company Benefit Plan or related trust; (iv) a statement of alternative form of
compliance pursuant to Department of Labor Regulation ss.2520.104-23, if any,
filed for each Company Benefit Plan that is an "employee pension benefit plan"
as defined in Section 3(2) of ERISA for a select group of management or highly
compensated employees; (v) the most recent determination letter received from
the IRS, if any, for each Company Benefit Plan and related trust which is
intended to satisfy the requirements of Section 401(a) of the Code; (vi) if the
Company Benefit Plan is funded, the most recent annual and periodic accounting
of such Company Benefit Plan assets; and (vii) the most recent summary plan
description together with the most recent summary of material modifications, if
any, required under ERISA with respect to each Company Benefit Plan.
(a) With respect to each Company Benefit Plan, except as disclosed in Section
3.15(b) of the Company Disclosure Schedule or as would not, individually or in
the aggregate, have a Material Adverse Effect on Company: (i) if intended to
qualify under Section 401(a), 401(k) or 403(a) of the Code, such plan so
qualifies, and its trust is exempt from taxation under Section 501(a) of the
Code; (ii) such plan has been administered in accordance with its terms and
applicable law; (iii) no breaches of fiduciary duty have occurred; (iv) no
non-exempt prohibited transaction within the meaning of Section 406 of ERISA has
occurred; (v) as of the date of this Agreement, no lien imposed under the Code
or ERISA exists; (vi) all contributions and premiums due (including any
extensions for such contributions and premiums) have been made in full; and
(vii) there are no actions, proceedings, arbitrations, suits or claims pending,
or to the knowledge of Company threatened (other than routine claims for
benefits), against Company or any ERISA Affiliate or any administrator, trustee
or other fiduciary of any Company Benefit Plan.
(b) None of the Company Benefit Plans has incurred any "accumulated funding
deficiency", as such term is defined in Section 412 of the Code, whether or not
waived.
(c) Except as disclosed in Section 3.15(d) of the Company Disclosure Schedule,
neither Company nor any ERISA Affiliate has incurred any liability under Title
IV of ERISA (including Sections 4063-4064 and 4069 of ERISA) that has not been
satisfied in full except as, individually or in the aggregate, would not have a
Material Adverse Effect on Company or that has not been reflected on Company's
consolidated financial statements.
(d) With respect to each Company Benefit Plan that is a "welfare plan" (as
defined in Section 3(1) of ERISA), except as specifically disclosed in Section
3.15(e) of the Company Disclosure Schedule, no such plan provides medical or
death benefits with respect to current or former employees of Company or any of
its Subsidiaries beyond their termination of employment, other than as may be
required under Part 6 of Title I of ERISA and at the expense of the participant
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or the participant's beneficiary and except as would not, individually or in the
aggregate, have a Material Adverse Effect on Company.
(e) Except with respect to payments under the Agreements and programs specified
in Section 3.15(f) of the Company Disclosure Schedule, the consummation of the
transactions contemplated by this Agreement will not entitle any individual to
severance pay or any tax "gross-up" payments with respect to the imposition of
any tax pursuant to Section 4999 of the Code or accelerate the time of payment
or vesting, or increase the amount, of compensation or benefits due to any
individual with respect to any Company Benefit Plan.
(f) Except as disclosed in Section 3.15(a) of the Company Disclosure Schedule,
there is no Company Benefit Plan that is a "multiemployer plan", as such term is
defined in Section 3(37) of ERISA, or which is covered by Section 4063 or 4064
of ERISA.
(g) Section 3.15(h) of the Company Disclosure Schedule identifies each
collective bargaining agreement to which Company or any of its Significant
Subsidiaries is a party and copies of each such agreement have been furnished to
or made available to Parent. Except as set forth on Section 3.15(h) of the
Company Disclosure Schedule, or except as would not, individually or in the
aggregate, have a Material Adverse Effect on Company, (i) there is no labor
strike, slowdown or work stoppage or lockout against Company or any of its
Significant Subsidiaries and (ii) there is no unfair labor practice charge or
complaint against or pending before the National Labor Relations Board. As of
the date of this Agreement, there is no representation, claim or petition
pending before the National Labor Relations Board and, to the knowledge of
Company, no material concerted effort relating to representation exists with
respect to the employees of Company or any of its Significant Subsidiaries.
Section 3.16 Compliance with Laws; No Default. Neither Company nor any of its
Subsidiaries is in violation of any statute, law, ordinance, regulation, rule,
judgment, decree, order, writ, injunction, permit or license or other
authorization or approval of any Governmental Authority applicable to its
business or operations, except for violations and failures to comply that have
not had and would not, individually or in the aggregate, result in a Material
Adverse Effect on Company.
Section 3.17 No Default. Each Company Agreement is a valid, binding and
enforceable obligation of Company and in full force and effect, except where the
failure to be valid, binding and enforceable and in full force and effect would
not, individually or in the aggregate, have a Material Adverse Effect on
Company. None of Company or any of its Subsidiaries is in default or violation
of any term, condition or provision of (i) its respective articles of
incorporation or by-laws or similar organizational documents or (ii) except as
disclosed in Section 3.17 of the Company Disclosure Schedule, any Company
Agreement, except, in the case of clause (i) (with respect to organizational
documents that are partnership, joint venture or similar documents) and (ii),
for defaults or violations that, individually or in the aggregate, have not had
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and would not have a Material Adverse Effect on Company. Company has all permits
and licenses necessary to carry on the business conducted by it as of the date
hereof, except where the failure to have such permit or license would not,
individually or in the aggregate, have a Material Adverse Effect on Company.
Section 3.18 Finders' Fees. Except for Morgan Stanley & Co. Incorporated, a copy
of whose engagement agreement has been provided to Parent, no investment banker,
broker, finder, other intermediary or other person is entitled to any fee or
commission from Company or any of its Subsidiaries upon consummation of the
transactions contemplated by this Agreement.
Section 3.19 Environmental Matters. (a) Except as disclosed in the Company SEC
Documents filed prior to the date hereof, to the knowledge of Company:
(i) no notice, notification, demand, request for information, citation, summons
or order has been received by, no complaint has been filed against, no penalty
has been assessed against, and no investigation, action, claim, suit, proceeding
or review is pending or threatened by any person or Governmental Authority
against, Company or any of its Subsidiaries with respect to any matters relating
to or arising out of any Environmental Law which, individually or in the
aggregate, would have a Material Adverse Effect on Company;
(ii) no Hazardous Substance has been discharged, disposed of, dumped, injected,
pumped, deposited, spilled, leaked, emitted or released at, on or under any
property now or, to the knowledge of Company, previously owned, leased or
operated by Company or any of its Subsidiaries, or any adjacent properties,
which circumstance, individually or in the aggregate, would have a Material
Adverse Effect on Company; and
(iii) there are no Environmental Liabilities that, individually or in the
aggregate, have had or would have a Material Adverse Effect on Company.
(b) For purposes of this Section, the following terms shall have the meanings
set forth below:
(i) "Company" and its "Subsidiaries" shall include any entity which is, in whole
or in part, a predecessor of Company or any of its Subsidiaries;
(ii) "Environmental Laws" means any and all federal, state, local and foreign
law (including common law), treaty, judicial decision, regulation, rule,
judgment, order, decree, injunction, permit, or governmental restrictions or any
agreement with any governmental authority or other third party, relating to
human health and safety, the environment or to pollutants, contaminants, wastes
or chemicals or toxic, radioactive, ignitable, corrosive, reactive or otherwise
hazardous substances, wastes or materials;
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(iii) "Environmental Liabilities" means any and all liabilities of or relating
to Company or any of its Subsidiaries of any kind whatsoever, whether accrued,
contingent, absolute, determined, determinable or otherwise, which (A) arise
under or relate to matters covered by Environmental Laws and (B) arise from
actions occurring or conditions existing on or prior to the Effective Time; and
(iv) "Hazardous Substances" means any pollutant, contaminant, waste or chemical
or any toxic, radioactive, corrosive, reactive or otherwise hazardous substance,
waste or material, or any substance having any constituent elements displaying
any of the foregoing characteristics, including, without limitation, petroleum,
its derivatives, by-products and other hydrocarbons, or any substance, waste or
material regulated under any Environmental Laws.
Section 3.20 Opinion of Financial Advisor. Company has received the opinion of
Morgan Stanley & Co. Incorporated to the effect that, as of the date of such
opinion, the Merger Consideration to be received by the holders of shares of
Company Common Stock in connection with the Merger is fair to such holders from
a financial point of view.
Section 3.21 [Intentionally deleted]
Section 3.22 Takeover Statutes. The Company Board has approved the Merger and
this Agreement, and such approval is sufficient to render inapplicable to the
Merger, this Agreement, and the transactions contemplated by this Agreement, the
shareholder voting requirements of Section 611-A of the Maine Law, assuming
however that neither Parent nor Merger Subsidiary has ever been a beneficial
owner of 25% or more of the outstanding voting stock of Company within the
meaning of Section 611-A. To the best of Company's knowledge, no other "fair
price", "moratorium", "control share acquisition" or other similar antitakeover
statute or regulation enacted under state or federal laws in the United States
(each, a "Takeover Statute") applicable to Company or any of its Subsidiaries is
applicable to the Merger or the other transactions contemplated hereby. The
stock purchase requirements of Section 910 of the Maine Law will not be
applicable to Parent or Merger Subsidiary so long as neither corporation
acquires (other than by reason of the Merger) voting power over 25% or more of
the outstanding voting stock of Company (or becomes a member of a group that has
such voting power).
Section 3.23 Affiliates. Section 3.23 of the Company Disclosure Schedule sets
forth each person who, as of the date hereof, is, to the best of Company's
knowledge, deemed to be an Affiliate of Company.
Section 3.24 Company's Articles of Incorporation. The provisions of Company's
Articles of Incorporation regarding transactions with controlling persons will
not, prior to the termination of this Agreement, apply to this Agreement, the
Merger or to the transactions contemplated hereby.
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Section 3.25 Company Rights Agreement. Prior hereto, Company has delivered to
Parent a true and complete copy of the Company Rights Agreement in effect on the
date hereof, and the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby will not result in a
"Distribution Date" as defined in the Company Rights Agreement or the triggering
of any other right or entitlement of the Company's shareholders under the
Company Rights Agreement.
Article 4
Representations and Warranties of Parent
Parent represents and warrants to Company that:
Section 4.01 Organization and Power. (a) Each of Parent and its Subsidiaries is
a corporation, partnership or other entity duly organized, validly existing and
is in good standing under the laws of the jurisdiction of its incorporation or
organization, and has the requisite corporate or other power and authority to
own, lease and operate its properties and to carry on its business as now being
conducted. Each of Parent and its Subsidiaries is duly qualified or licensed to
do business 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 where the failure to be
so duly qualified or licensed and in good standing would not, individually or in
the aggregate, have a Material Adverse Effect on Parent.
(a) Section 4.01 of the disclosure schedule delivered by Parent to Company prior
to the execution of the Agreement (the "Parent Disclosure Schedule") sets forth
a complete list of Parent's Significant Subsidiaries. Parent has delivered to
Company true and complete copies of Parent's and Merger Subsidiary's articles of
incorporation and bylaws as currently in effect.
Section 4.02 Corporate Authorization. The execution, delivery and performance by
Parent and Merger Subsidiary of this Agreement and the consummation by Parent
and Merger Subsidiary of the transactions contemplated hereby are within the
corporate powers of Parent and Merger Subsidiary and have been duly authorized
by all necessary corporate action, including by resolution of the Board of
Directors of Parent. No vote of any class or series of Parent's capital stock is
necessary in connection with the execution of this Agreement and the
consummation of the transactions contemplated hereby. This Agreement has been
duly executed and delivered by each of Parent and Merger Subsidiary and
constitutes a valid and binding agreement of each of Parent and Merger
Subsidiary, enforceable against Parent and Merger Subsidiary, as applicable, in
accordance with its terms (subject to applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and other similar laws affecting
creditors' rights generally from time to time in effect and to general
principles of equity, including concepts of materiality, reasonableness, good
faith and fair dealing, regardless of whether in a proceeding at equity or at
law). The shares of Parent Common Stock to be issued pursuant to the Merger,
when issued in accordance with the terms hereof, will be duly authorized,
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validly issued, fully paid and nonassessable and not subject to preemptive
rights.
Section 4.03 Governmental Authorization. The execution, delivery and performance
by Parent and Merger Subsidiary of this Agreement, and the consummation by
Parent and Merger Subsidiary of the transactions contemplated hereby, require no
action, by or in respect of, or filing with, any Governmental Authority other
than: (a) the filing of articles of merger with respect to the Merger with the
Secretary of State of the State of Maine and appropriate documents with the
relevant authorities of other states in which Merger Subsidiary is qualified to
do business; (b) compliance with any applicable requirements of the HSR Act and
similar state antitrust statutes; (c) compliance with any applicable
requirements of the 1933 Act; (d) compliance with any applicable requirements of
the 1934 Act; (e) compliance with any other applicable securities laws; (f)
those that may be required solely by reason of Company's (as opposed to any
other third party's) participation in the transactions contemplated by this
Agreement; (g) actions or filings which, if not taken or made, would not,
individually or in the aggregate, have a Material Adverse Effect on Parent; and
(h) filings and notices not required to be made or given until after the
Effective Time.
Section 4.04 Non-Contravention. Except as set forth on Section 4.04 of the
Parent Disclosure Schedule, the execution, delivery and performance by Parent
and Merger Subsidiary of this Agreement do not, and the consummation by Parent
and Merger Subsidiary of the transactions contemplated hereby will not: (a)
contravene or conflict with the articles of incorporation, bylaws or similar
organizational documents of Parent or any of its Subsidiaries; (b) assuming
compliance with the matters referred to in Section 4.03, contravene or conflict
with or constitute a violation of any provision of any law, regulation,
judgment, injunction, order or decree binding upon or applicable to Parent or
Merger Subsidiary; (c) constitute a default (or an event which with notice, the
lapse of time or both would become a default) under or give rise to a right of
termination, cancellation or acceleration of any right or obligation of Parent
or Merger Subsidiary or to a loss of any benefit to which Parent or Merger
Subsidiary is entitled under any provision of any agreement, contract or other
instrument binding upon Parent or Merger Subsidiary and which either has a term
of more than one year or involves the payment or receipt of money in excess of
$1,000,000 (a "Parent Agreement") or any license, franchise, permit or other
similar authorization held by Parent or Merger Subsidiary; or (d) result in the
creation or imposition of any Lien on any asset of Parent or Merger Subsidiary,
except for such contraventions, conflicts or violations referred to in clause
(b) or defaults, rights of termination, cancellation or acceleration, losses or
Liens referred to in clause (c) or (d) that would not, individually or in the
aggregate, have a Material Adverse Effect on Parent.
Section 4.05 Capitalization of Parent. (a) The authorized capital stock of
Parent consists of 1,500,000,000 shares of Parent Common Stock and 1,500,000,000
shares of Class B common stock, par value $0.50 per share ("Parent Class B
Common Stock"), and no shares of preferred stock. As of the close of business on
August 16, 1999, 239,853,031 shares of Parent Common Stock are issued and
outstanding, 4,048,781 shares of Parent Common Stock are reserved for additional
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grants under option and other stock-based plans and 4,083, 203 shares of Parent
Common Stock are reserved for issuance pursuant to options previously granted
pursuant to Parent option plans. As of the close of business on August 16, 1999,
225,922,064 shares of Parent Class B Common Stock are issued and outstanding, no
shares are reserved for additional grants under option and other stock-based
plans and no shares of Parent Class B Common Stock are reserved for issuance
pursuant to options previously granted pursuant to Parent option plans. All the
outstanding shares of Parent's capital stock are, and all shares which may be
issued pursuant to Parent option plans will be, when issued in accordance with
the respective terms thereof, duly authorized, validly issued, fully paid and
non-assessable. Except as set forth in this Section 4.05, except for the
transactions contemplated by this Agreement (including those permitted in
Section 5.02(d)), and except for changes since August 16, 1999 resulting from
the exercise of employee and director stock options outstanding on such date, as
of the date hereof, there are outstanding (x) no shares of capital stock or
other voting securities of Parent, (y) no securities of Parent convertible into
or exchangeable for shares of capital stock or voting securities of Parent, and
(z) no options, warrants or other rights to acquire from Parent, and no
preemptive or similar rights, subscriptions or other rights, convertible
securities, agreements, arrangements or commitments of any character, relating
to the capital stock of Parent, obligating Parent to issue, transfer or sell,
any capital stock, voting securities or securities convertible into or
exchangeable for capital stock or voting securities of Parent or obligating
Parent to grant, extend or enter into any such option, warrant, subscription or
other right, convertible security, agreement, arrangement or commitment (the
items in clauses (x), (y) and (z) being referred to collectively as the "Parent
Securities"). None of Parent or its Subsidiaries has any contractual obligation
to redeem, repurchase or otherwise acquire any Parent Securities or any Parent
Subsidiary Securities, including as a result of the transactions contemplated by
this Agreement.
(a) Except as set forth in Section 4.05 of the Parent Disclosure Schedule, there
are no voting trusts or other agreements or understandings to which Parent or
any of its Subsidiaries is a party with respect to the voting of the capital
stock of Parent or any of its Subsidiaries.
Section 4.06 Capitalization of Subsidiaries. Except as set forth in Section 4.06
of the Parent Disclosure Schedule, all of the outstanding shares of capital
stock of, or other ownership interests in, each Subsidiary of Parent, is owned
by Parent, directly or indirectly, free and clear of any consensual Lien
(including any restriction on the right to vote, sell or otherwise dispose of
such capital stock or other ownership interests). There are no outstanding (i)
securities of Parent or any of its Subsidiaries convertible into or exchangeable
for shares of capital stock or other voting securities or ownership interests in
any of its Subsidiaries, or (ii) options or other rights to acquire from Parent
or any of its Subsidiaries, and no other obligation of Parent or any of its
Subsidiaries to issue, any capital stock, voting securities or other ownership
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interests in, or any securities convertible into or exchangeable for, any
capital stock, voting securities or ownership interests in, any of its
Subsidiaries (the items in clauses (i) and (ii) being referred to collectively
as the "Parent Subsidiary Securities").
Section 4.07 SEC Filings. (a) Parent has filed all required reports, schedules,
forms, statements and other documents with the SEC since June 30, 1997 (the
"Parent SEC Documents").
(a) As of its filing date, each Parent SEC Document filed pursuant to the 1934
Act did not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading.
(b) Each Parent SEC Document that is a registration statement, as amended or
supplemented, if applicable, filed pursuant to the 1933 Act as of the date such
registration statement or amendment became effective did not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading,
except to the extent that such statements have been modified or superseded by a
later filed Parent SEC Document.
Section 4.08 Financial Statements. The audited consolidated financial statements
and unaudited consolidated interim financial statements of Parent included in
Parent's Annual Report on Form 10-K for the fiscal year ended January 2, 1999
(the "Parent 10-K") and its Quarterly Report on Form 10-Q for the fiscal quarter
ended June 19, 1999 (the "Parent 10-Q") have been prepared in accordance with
GAAP (except, in the case of unaudited statements, as permitted by Form 10-Q of
the SEC) applied on a consistent basis during the periods involved (except as
may be indicated in the notes thereto) and fairly present the consolidated
financial position of Parent and its consolidated Subsidiaries as of the dates
thereof and their consolidated results of operations and cash flows for the
periods then ended (subject to normal year-end adjustments in the case of the
unaudited interim financial statements). For purposes of this Agreement, "Parent
Balance Sheet" means the consolidated balance sheet of Parent as of June 19,
1999 set forth in the Parent 10-Q and "Parent Balance Sheet Date" means June 19,
1999.
Section 4.09 Disclosure Documents. (a) The Registration Statement on Form S-4 of
Parent (the "Form S-4") to be filed under the 1933 Act relating to the issuance
of Parent Common Stock in the Merger required to be filed with the SEC in
connection with the issuance of shares of Parent Common Stock pursuant to the
Merger and any amendments or supplements thereto, will, when filed, subject to
the last sentence of Section 4.09(b), comply as to form in all material respects
with the applicable requirements of the 1933 Act and the 1934 Act.
(a) Insofar as the information contained therein relates solely to Parent,
neither the Form S-4 nor any amendment or supplement thereto will at the time it
becomes effective under the 1933 Act or at the Effective Time 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 not misleading. No
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representation or warranty is made by Parent in this Section 4.09 with respect
to statements made or incorporated by reference therein based on information
supplied by Company for inclusion or incorporation by reference in any Parent
Disclosure Document.
Section 4.10 Information Supplied. None of the information supplied or to be
supplied by Parent for inclusion or incorporation by reference in the Company
Proxy Statement or any amendment or supplement thereto will, at the date the
Company Proxy Statement or any amendment or supplement thereto is first mailed
to shareholders of Company and at the time such shareholders vote on the
adoption and approval of this Agreement and the transactions contemplated
hereby, contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
Section 4.11 Absence of Certain Changes. Except as disclosed in the Parent SEC
Documents filed prior to the date of this Agreement or as disclosed in Section
4.11 of the Parent Disclosure Schedule, since June 19, 1999, Parent and its
Subsidiaries have conducted their business in the ordinary course consistent
with past practice and there has not been:
(a) any event, occurrence or development which, individually or in the
aggregate, has had or would have a Material Adverse Effect on Parent;
(b) any declaration, setting aside or payment of any dividend or other
distribution with respect to any shares of capital stock of Parent (other than
payment of Parent' regular quarterly cash dividend on Parent Common Stock) or
any repurchase, redemption or other acquisition by Parent or any of its
Subsidiaries of any amount of outstanding shares of capital stock or other
equity securities of, or other ownership interests in, Parent or any of its
Subsidiaries;
(c) any amendment of any term of any outstanding security of Parent or any of
its Subsidiaries that would materially increase the obligations of Parent or
such Subsidiary under such security;
(d) (x) any incurrence or assumption by Parent or any of its Subsidiaries of any
indebtedness for borrowed money other than under existing credit facilities (or
any renewals, replacements or extensions thereof that do not materially increase
the commitments thereunder except to the extent of the amount required to
refinance any indebtedness for borrowed money of Parent and its Subsidiaries as
of the Closing Date) (A) in the ordinary course of business consistent with past
practices (it being understood that any indebtedness incurred prior to the date
hereof in respect of capital expenditures shall be considered to have been in
the ordinary course of business consistent with past practice) or (B) in
connection with any acquisition or capital expenditure permitted by Section
5.02, or (y) any guarantee, endorsement or other incurrence or assumption of
liability (whether directly, contingently or otherwise) by Parent or any of its
Subsidiaries for the obligations of any other person (other than any Subsidiary
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of Parent), other than in the ordinary course of business consistent with past
practice or in connection with obligations of Parent and its Subsidiaries
assumed at the Effective Time;
(e) any creation or assumption by Parent or any of its Subsidiaries of any
consensual Lien on any material asset of Parent or any of its Subsidiaries other
than in the ordinary course of business consistent with past practice;
(f) any making of any loan, advance or capital contribution to or material
investment in any person by Parent or any of its Subsidiaries other than (i)
loans, advances or capital contributions to or investments in wholly-owned
Subsidiaries of Parent or (ii) loans or advances to employees of Parent or any
of its Subsidiaries made in the ordinary course of business consistent with past
practice;
(g) (i) any contract or agreement entered into by Parent or any of its
Subsidiaries on or prior to the date hereof relating to any material acquisition
or disposition of any assets or business or (ii) any modification, amendment,
assignment, termination or relinquishment by Parent or any of its Subsidiaries
of any contract, license or other right (including any insurance policy naming
it as a beneficiary or a loss payable payee) that, individually or in the
aggregate, would have a Material Adverse Effect on Parent, other than, in the
case of (i) and (ii), transactions, commitments, contracts or agreements in the
ordinary course of business consistent with past practice and those contemplated
by this Agreement; or
(h) any material change in any method of accounting or accounting principles or
practice by Parent or any of its Subsidiaries, except for any such change
required by reason of a change in GAAP.
Section 4.12 No Undisclosed Material Liabilities. There have been no liabilities
or obligations (whether pursuant to contracts or otherwise) of any kind
whatsoever incurred by Parent or any of its Subsidiaries since June 19, 1999,
whether accrued, contingent, absolute, determined, determinable or otherwise,
other than:
(a) liabilities or obligations (i) disclosed or provided for in the Parent
Balance Sheet or in the notes thereto, (ii) disclosed in the Parent SEC
Documents filed prior to the date hereof or (iii) disclosed in Section 4.12 of
the Parent Disclosure Schedule;
(b) liabilities or obligations which, individually and in the aggregate, have
not had and would not have a Material Adverse Effect on Parent; or
(c) liabilities or obligations under this Agreement or incurred in connection
with the transactions contemplated hereby.
Section 4.13 Litigation. Except as disclosed in the Parent SEC Documents filed
prior to the date hereof, there is no action, suit, investigation or proceeding
pending against, or to the knowledge of Parent, threatened against or affecting,
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Parent or any of its Subsidiaries or any of their respective properties which,
individually or in the aggregate, would have a Material Adverse Effect on
Parent.
Section 4.14 Taxes. Except as set forth on Section 4.14 of the Parent Disclosure
Schedule:
(a) Parent and each of its Subsidiaries, and each affiliated group (within the
meaning of Section 1504 of the Code) of which Parent or any of its Subsidiaries
is or has been a member, has timely filed (or has had timely filed on its
behalf) or will file or cause to be timely filed, all material Tax Returns
required by applicable law to be filed by it prior to or as of the Effective
Time, and all such material Tax Returns are, or will be at the time of filing,
true, correct and complete in all material respects;
(b) Parent and each of its Subsidiaries has paid (or has had paid on its behalf)
all Taxes shown due with respect to Tax Returns for periods ending prior to or
as of the Effective Time;
(c) The federal income Tax Returns of Parent have been examined by and settled
with the Service (or the applicable statutes of limitation for the assessment of
federal income Taxes for such periods have expired) for all years through 1994;
(d) There are no material Liens or encumbrances for Taxes on any of the assets
of Parent or its Subsidiaries (other than for current Taxes not yet due and
payable);
(e) Parent and its Subsidiaries have complied in all material respects with all
applicable laws, rules and regulations relating to the payment and withholding
of Taxes;
(f) None of Parent or its Subsidiaries is a party to any tax allocation, tax
sharing, tax indemnity or similar agreement (whether or not in writing),
arrangement or practice with respect to Taxes (including any adverse pricing
agreement, closing agreement or other agreement relating to Taxes with any
taxing authority), except among themselves;
(g) No federal, state, local or foreign audits or administrative proceedings are
presently pending with regard to a material amount of Taxes or a material Tax
Return of Parent or its Subsidiaries and none of them has received a written
notice or has any knowledge (including the knowledge of any employee responsible
for Tax matters) of any proposed audit or proceeding; and
(h) The Parent Balance Sheet reflects an adequate reserve for all Taxes payable
by Parent and its Subsidiaries for all taxable periods through the date of the
Parent Balance Sheet.
Section 4.15 Employee Benefits, ERISA. (a) Except as set forth in Section 4.15
of the Parent Disclosure Schedule, there are no material employee benefit plans
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(including any plans for the benefit of directors or former directors),
arrangements, practices, contracts or agreements (including employment
agreements and severance agreements, incentive compensation, bonus, stock
option, stock appreciation rights and stock purchase plans) of any type
(including plans described in Section 3(3) of ERISA), maintained by Parent, any
of its Subsidiaries or any ERISA Affiliate, that together with Parent would be
deemed a "controlled group" within the meaning of Section 4001(a)(14) of ERISA,
or with respect to which Parent or any of its Subsidiaries has or may have a
liability (the "Parent Benefit Plans"). Since June 19,1999, there has been no
change, amendment, modification to, or adoption of, any Parent Benefit Plan, in
each case, that has had, or would have, a Material Adverse Effect on Parent.
(a) With respect to each Parent Benefit Plan, except as would not, individually
or in the aggregate, have a Material Adverse Effect on Parent: (i) if intended
to qualify under Section 401(a), 401(k) or 403(a) of the Code, such plan so
qualifies, and its trust is exempt from taxation under Section 501(a) of the
Code; (ii) such plan has been administered in accordance with its terms and
applicable law; (iii) no breaches of fiduciary duty have occurred; (iv) no
non-exempt prohibited transaction within the meaning of Section 406 of ERISA has
occurred; (v) as of the date of this Agreement, no Lien imposed under the Code
or ERISA exists; (vi) all contributions and premiums due (including any
extensions for such contributions and premiums) have been made in full; and
(vii) there are no actions, proceedings, arbitrations, suits or claims pending,
or to the knowledge of Parent threatened (other than routine claims for
benefits), against Parent or any ERISA Affiliate or any administrator, trustee
or other fiduciary of any Parent Benefit Plan.
(b) None of the Parent Benefit Plans has incurred any "accumulated funding
deficiency", as such term is defined in Section 412 of the Code, whether or not
waived.
(c) Neither Parent nor any ERISA Affiliate has incurred any liability under
Title IV of ERISA (including Sections 4063-4064 and 4069 of ERISA) that has not
been satisfied in full except as, individually or in the aggregate, would not
have a Material Adverse Effect on Parent or that has not been reflected on
Parent's consolidated financial statements.
(d) With respect to each Parent Benefit Plan that is a "welfare plan" (as
defined in Section 3(1) of ERISA), no such plan provides medical or death
benefits with respect to current or former employees of Parent or any of its
Subsidiaries beyond their termination of employment, other than as may be
required under Part 6 of Title I of ERISA and at the expense of the participant
or the participant's beneficiary and except as would not, individually or in the
aggregate, have a Material Adverse Effect on Parent.
(e) The consummation of the transactions contemplated by this Agreement will not
entitle any individual to severance pay or any tax "gross-up" payments with
respect to the imposition of any tax pursuant to Section 4999 of the Code or
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accelerate the time of payment or vesting, or increase the amount, of
compensation or benefits due to any individual with respect to any Parent
Benefit Plan.
(f) There is no Parent Benefit Plan that is a "multiemployer plan", as such term
is defined in Section 3(37) of ERISA, or which is covered by Section 4063 or
4064 of ERISA.
(g) Neither Parent nor any of its Significant Subsidiaries is a party to any
collective bargaining agreement. Except as would not, individually or in the
aggregate, have a Material Adverse Effect on Parent, (i) there is no labor
strike, slowdown or work stoppage or lockout against Parent or any of its
Significant Subsidiaries and (ii) there is no unfair labor practice charge or
complaint against or pending before the National Labor Relations Board. As of
the date of this Agreement, there is no representation claim or petition pending
before the National Labor Relations Board and, to the knowledge of Parent, no
material concerted effort relating to representation exists with respect to the
employees of Parent or any of its Significant Subsidiaries.
Section 4.16 Compliance with Laws. Neither Parent nor any of its Subsidiaries is
in violation of any statute, law, ordinance, regulation, rule, judgment, decree,
order, writ, injunction, permit or license or other authorization or approval of
any Governmental Authority applicable to its business or operations, except for
violations and failures to comply that would not, individually or in the
aggregate, result in a Material Adverse Effect on Parent.
Section 4.17 No Default. Each Parent Agreement is a valid, binding and
enforceable obligation of Parent and in full force and effect, except where the
failure to be valid, binding and enforceable and in full force and effect would
not, individually or in the aggregate, have a Material Adverse Effect on Parent.
None of Parent or any of its Subsidiaries is in default or violation of any
term, condition or provision of (i) its respective articles of incorporation or
by-laws or similar organizational documents or (ii) any Parent Agreement,
except, in the case of clauses (i) (with respect to organizational documents
that are partnership, joint venture or similar documents) and (ii), for defaults
or violations that, individually or in the aggregate, have not had and would not
have a Material Adverse Effect on Parent. Parent has all permits and licenses
necessary to carry on the business conducted by it as of the date hereof, except
where the failure to have such permit or license would not, individually or in
the aggregate, have a Material Adverse Effect on Parent.
Section 4.18 Finders' Fees. Except for JP Morgan & Co. Incorporated, a copy of
whose engagement agreement has been provided to Company, no investment banker,
broker, finder, other intermediary or other person is entitled to any fee or
commission from Parent or any of its Subsidiaries upon consummation of the
transactions contemplated by this Agreement.
Section 4.19 Environmental Matters. (a) Except as set forth in the Parent 10-K,
to the knowledge of Parent:
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(i) no notice, notification, demand, request for information, citation, summons
or order has been received by, no complaint has been filed against, no penalty
has been assessed against, and no investigation, action, claim, suit, proceeding
or review is pending or, to the knowledge of Parent or any of its Subsidiaries,
is threatened by any person or Governmental Authority, against Parent or any of
its Subsidiaries with respect to any matters relating to or arising out of any
Environmental Law which, individually or in the aggregate, would have a Material
Adverse Effect on Parent;
(ii) no Hazardous Substance has been discharged, disposed of, dumped, injected,
pumped, deposited, spilled, leaked, emitted or released at, on or under any
property now or, to the knowledge of Parent, previously owned, leased or
operated by Parent or any of its Subsidiaries, or any adjacent properties, which
circumstance, individually or in the aggregate, would have a Material Adverse
Effect on Parent; and
(iii) to the knowledge of Parent, there are no Environmental Liabilities that,
individually or in the aggregate, have had or would have a Material Adverse
Effect on Parent.
(b) For purposes of this Section, capitalized terms used shall have the meanings
assigned to them in Section 3.19(b), except that in all cases the word "Parent"
shall be substituted for the word "Company".
Section 4.20 [Intentionally Deleted]
Section 4.21 Takeover Statutes. To the best of Parent's knowledge, no Takeover
Statute applicable to Parent or any of its Subsidiaries, is applicable to the
Merger or the other transactions contemplated hereby. Neither Parent nor Merger
Subsidiary has ever been a beneficial owner of 25% or more of the outstanding
Company Common Stock, within the meaning of Section 611-A of the Maine Law.
Section 4.22 Affiliates. Section 4.22 of the Parent Disclosure Schedule sets
forth each person who, as of the date hereof, is, to the best of Parent's
knowledge, deemed to be an Affiliate of Parent.
Section 4.23 Merger Subsidiary. Merger Subsidiary is a newly-formed direct
wholly-owned Subsidiary of Parent that has engaged in no business activities
other than as specifically contemplated by this Agreement.
Section 4.24 Financing. Parent has, as of the date hereof, and will have as of
the Effective Time, sufficient funds to make the cash payments required pursuant
to this Agreement. Parent has delivered to Company true, complete and correct
copies of the commitment letter of J.P. Morgan Securities Inc. and Morgan
Guaranty Trust Company of New York dated the date hereof to provide Parent with
the debt financing necessary to enable Parent to consummate the transactions
contemplated hereby (the "Commitment Letter"). Parent agrees to promptly notify
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Company if at any time prior to the Closing Date it no longer believes in good
faith that it will be able to obtain financing substantially on the terms
described in the Commitment Letter.
Article 5
Covenants
Section 5.01 Conduct of Company. Company covenants and agrees that, from the
date hereof until the Effective Time, except as expressly provided otherwise in
this Agreement, including Sections 3.11 and 5.01 of the Company Disclosure
Schedule hereto, or as reasonably necessary for Company to fulfill its
obligations hereunder, Company and its Subsidiaries shall conduct their business
in the ordinary course consistent with past practice and shall use their
reasonable best efforts to preserve intact their business organizations and
relationships with customers, suppliers, creditors and business partners and
shall use their reasonable efforts to keep available the services of their
present officers and employees. Without limiting the generality of the
foregoing, from the date hereof until the Effective Time, without the prior
written approval of Parent (which approval shall not be unreasonably withheld):
(a) Company will not adopt or propose any change in its articles of
incorporation or any material change in its bylaws, other than changes effected
to facilitate the Merger;
(b) Company will not, and will not permit any of its Subsidiaries to, adopt a
plan or agreement of complete or partial liquidation, dissolution, merger,
consolidation, restructuring, recapitalization or other material reorganization
of Company or any of its Subsidiaries (other than a liquidation or dissolution
of any Subsidiary or a merger or consolidation between wholly owned
Subsidiaries);
(c) Company will not, and will not permit any of its Subsidiaries to, make any
investment in or acquisition of any business of any person or any material
amount of assets (other than inventory), except for (i) acquisitions for cash
not to exceed $1,000,000 per acquisition and $10,000,000 in the aggregate for
all acquisitions and (ii) without duplication, any capital expenditure permitted
by Section 5.01(j);
(d) Company will not, and will not permit any of its Subsidiaries to, sell,
lease, license, close, shut down or otherwise dispose of any assets (other than
inventory), except (i) pursuant to existing contracts or commitments listed on
Section 5.01 of the Company Disclosure Schedule or (ii) sales, leases, licenses,
closings, shutdowns or other dispositions of assets in the ordinary course of
business consistent with past practice;
(e) Company will not, and will not permit any of its Subsidiaries to, declare,
set aside or pay any dividend or other distribution payable in cash, stock or
property with respect to its capital stock other than (i) cash dividends payable
by Company in an aggregate amount not in excess of $.165 per share per calendar
quarter and (ii) dividends paid by any wholly owned Subsidiary of Company to
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Company or any other Subsidiary of Company;
(f) Company will not, and will not permit any of its Subsidiaries to, issue,
sell, transfer, pledge, dispose of or encumber any additional shares of, or
securities convertible into or exchangeable for, or options, warrants, calls,
commitments or rights of any kind to acquire, any shares of capital stock of any
class or series of Company or its Subsidiaries, other than (i) issuances
pursuant to the exercise of stock-based awards or options (including under the
plans described in Section 3.05(a)) outstanding on the date hereof, (ii)
issuances by any Subsidiary of Company to Company or any other Subsidiary of
Company and (iii) shares of Common Stock issuable pursuant to options granted to
newly hired management level employees in accordance with Company's past
practice;
(g) Company will not, and will not permit any of its Subsidiaries to, redeem,
purchase or otherwise acquire directly or indirectly any of Company's capital
stock;
(h) Company will not, and will not permit any of its Subsidiaries to, move the
location, close, shut down or otherwise eliminate Company's headquarters or
distribution centers or effect a general staff reduction at such headquarters or
distribution centers;
(i) Except in connection with investments or acquisitions permitted by Section
5.01(c) or investments or acquisitions in the ordinary course of business
consistent with past practice, Company will not, and will not permit any of its
Subsidiaries to, (i) enter into (or commit to enter into) any new lease (except
pursuant to commitments for such lease entered into as of the date hereof) or
(ii) purchase or acquire or enter into any agreement to purchase or acquire any
real estate (except pursuant to commitments existing as of the date hereof);
(j) Company will not, and will not permit any of its Subsidiaries to, make or
commit to make any capital expenditure (including for store remodelings, store
signage and information systems) except for individual capital expenditure
projects or items not exceeding $1,000,000 per project or item or $10,000,000 in
the aggregate for all projects and items and those projects or items committed
to or budgeted for prior to the date of this Agreement (all of which projects
and items are set forth in Section 5.01(j) of the Company Disclosure Schedule);
(k) Company will not, and will not permit any of its Subsidiaries to, change any
tax election, change any annual tax accounting period, change any method of tax
accounting, file any amended Tax Return, enter into any closing agreement,
settle any Tax claim or assessment, surrender any right to claim a Tax refund or
consent to any extension or waiver (other than a reasonable extension or waiver)
of the limitations period applicable to any Tax claim or assessment, if any such
action in this clause (k) would have the effect of materially increasing the
aggregate Tax liability or materially reducing the aggregate tax assets of
Company and its Subsidiaries, taken as a whole;
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(l) Company will not, and will not permit any of its Subsidiaries to, increase
the compensation or benefits of any director, officer or employee, except for
normal increases in the ordinary course of business consistent with past
practice (which increases shall not exceed, on an annual basis, 6% in the
aggregate for all directors, officers and employees) or as required under
applicable law or existing agreement or commitment;
(m) Company will not, and will not permit any of its Subsidiaries to, accelerate
any income, postpone any expense or reverse any reserve, except on a basis
consistent with past practice or as otherwise required by law;
(n) Company will not, and will not permit any of its Subsidiaries to, agree or
commit to do any of the foregoing; and
(o) Company will not, and will not permit any of its Subsidiaries to, take or
agree or commit to take any action that would make any representation and
warranty of Company hereunder inaccurate in any material respect at, or as of
any time prior to, the Effective Time.
Section 5.02 Conduct of Parent. From the date hereof until the Effective Time,
except as expressly provided otherwise in this Agreement, including Section 5.02
of the Parent Disclosure Schedule or as reasonably necessary for Parent to
fulfill its obligations hereunder, Parent and its Subsidiaries shall conduct
their business in the ordinary course consistent with past practice and shall
use their reasonable best efforts to preserve intact their business
organizations and relationships with customers, suppliers, creditors and
business partners and shall use their reasonable efforts to keep available the
services of their present officers and employees. Without limiting the
generality of the foregoing but subject to the preceding sentence, from the date
hereof until the Effective Time, without the prior written approval of Company
(which approval shall not be unreasonably withheld):
(a) Parent will not adopt or propose any material change in its articles of
incorporation or any material change in its bylaws;
(b) Parent will not, and will not permit any of its Subsidiaries to, (i) adopt a
plan or agreement of complete or partial liquidation, dissolution, merger,
consolidation, restructuring, recapitalization or other material reorganization
of Parent or any of its Subsidiaries (other than a liquidation or dissolution of
any wholly owned Subsidiary or a merger or consolidation between wholly owned
Subsidiaries) or (ii) make any material acquisition of the business of any
person (other than a wholly owned Subsidiary);
(c) Parent will not, and will not permit any of its Subsidiaries to, make any
investment in or acquisition of any business of any person or any material
amount of assets (other than inventory), except for (i) acquisitions not to
exceed $100,000,000 in the aggregate for all acquisitions and (ii) without
duplication, any capital expenditure permitted by Section 5.02(j);
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(d) Parent will not, and will not permit any of its Subsidiaries to, sell,
lease, license, close, shut down or otherwise dispose of any assets (other than
inventory) in an amount that would be material to Parent and its Subsidiaries,
taken as a whole, except (i) pursuant to existing contracts or commitments or
(ii) sales, leases, licenses, closings, shutdowns or other dispositions of
assets in the ordinary course of business consistent with past practice;
(e) Parent will not, and will not permit any of its Subsidiaries to, issue,
sell, transfer, pledge, dispose of or encumber any additional shares of, or
securities convertible into or exchangeable for, or options, warrants, calls,
commitments or rights of any kind to acquire, any shares of capital stock of any
class or series of Parent or its Subsidiaries, other than (x) issuances by any
Subsidiary of Parent to Parent or any other Subsidiary of Parent, (y) issuances
pursuant to the exercise of stock-based awards or options, including under the
plans described in Section 4.05(a), outstanding on the date hereof or granted as
contemplated in clause (z) below, and (z) any grant of options or other stock
based awards in respect of Parent Common Stock to employees or directors of
Parent or any of its Subsidiaries that could result in the issuance of not more
than 125% of the aggregate amount of shares of Parent Common Stock issuable
under all grants of options or other stock based awards during the fiscal year
ended January 2, 1999;
(f) Parent will not, and will not permit any of its Subsidiaries to, declare,
set aside or pay any dividend or other distribution payable in cash, stock or
property with respect to its capital stock other than (i) cash dividends payable
by Parent in an aggregate amount not in excess of $0.0504 per share per calendar
quarter, and (ii) dividends paid by any Subsidiary of Parent to Parent or any
other Subsidiary of Parent;
(g) Parent will not, and will not permit any of its Subsidiaries to, redeem,
purchase or otherwise acquire directly or indirectly any of Parent's capital
stock;
(h) Parent will not, and will not permit any of its Subsidiaries to, move the
location, close, shut down or otherwise eliminate Parent's headquarters or
distribution centers or effect a general staff reduction at such headquarters or
distribution centers;
(i) except in connection with investments or acquisitions permitted by Section
5.02(c) or investments or acquisitions in the ordinary course of business
consistent with past practice, Parent will not, and will not permit any of its
Subsidiaries to, (i) enter into (or commit to enter into) any new lease (except
pursuant to commitments for such lease entered into as of the date hereof) or
(ii) purchase or acquire or enter into any agreement to purchase or acquire any
real estate (except pursuant to commitments existing as of the date hereof);
(j) Parent will not, and will not permit any of its Subsidiaries to, make or
commit to make any capital expenditure (including for store remodelings, store
signage and information systems) except for individual capital expenditure
projects or items not exceeding $15,000,000 per project or item or $100,000,000
in the aggregate for all projects and items and those projects or items
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committed to or budgeted for prior to the date of this Agreement (all of which
projects and items are set forth in Section 5.02(j) of the Parent Disclosure
Schedule);
(k) Parent will not, and will not permit any of its Subsidiaries to, change any
tax election, change any annual tax accounting period, change any method of tax
accounting, file any amended Tax Return, enter into any closing agreement,
settle any Tax claim or assessment, surrender any right to claim a Tax refund or
consent to any extension or waiver (other than a reasonable extension or waiver)
of the limitations period applicable to any Tax claim or assessment, if any such
action in this clause (l) would have the effect of materially increasing the
aggregate Tax liability or materially reducing the aggregate tax assets of
Parent and its Subsidiaries, taken as a whole;
(l) Parent will not, and will not permit any of its Subsidiaries to, increase
the compensation or benefits of any director, officer or employee, except for
normal increases in the ordinary course of business consistent with past
practice or as required under applicable law or existing agreement or
commitment;
(m) Parent will not, and will not permit any of its Subsidiaries to, agree or
commit to do any of the foregoing; and
(n) Parent will not, and will not permit any of its Subsidiaries to take or
agree or commit to take any action that would make any representation and
warranty of Parent hereunder inaccurate in any material respect at, or as of any
time prior to, the Effective Time.
Section 5.03 Shareholder Meeting; Proxy Materials; Form S-4.
(a) Company shall cause a meeting of its shareholders (the "Company Shareholder
Meeting") to be duly called and held as soon as reasonably practicable (subject
to the receipt of all necessary approvals and subject to the other transactions
contemplated by this Agreement) after the date of this Agreement for the purpose
of voting on the approval and adoption of this Agreement (the "Company
Shareholder Approval"). Except as provided in the next sentence, the Company
Board shall recommend approval and adoption of this Agreement by Company's
shareholders. The Company Board shall be permitted to (i) not recommend to
Company's shareholders that they give the Company Shareholder Approval or (ii)
withdraw or modify in a manner adverse to Parent its recommendation to Company's
shareholders that they give the Company Shareholder Approval, only if and to the
extent that the Company Board, upon receipt of a Superior Proposal (as
hereinafter defined), and after consultation with and based upon the advice of
independent legal counsel, by a majority vote determines in its good faith
judgment that such action is necessary for the Company Board to comply with its
fiduciary duties to Company's shareholders under applicable law. In connection
with the Company Shareholder Meeting, Company will (x) promptly prepare and file
with the SEC, will use its reasonable best efforts to have cleared by the SEC
and will thereafter mail to its shareholders as promptly as practicable the
Company Proxy Statement and all other proxy materials for such meeting, (y) use
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its reasonable best efforts, subject to the immediately preceding sentence, to
obtain the Company Shareholder Approval and (z) otherwise comply with all legal
requirements applicable to such meetings.
(b) Parent shall promptly prepare and file with the SEC the Form S-4 with
respect to the Parent Common Stock issuable in connection with the Merger and
take any action required to be taken in connection with such issuance of Parent
Common Stock. Subject to the terms and conditions of this Agreement, Parent
shall use its reasonable best efforts to have the Form S-4 declared effective
under the 1933 Act as promptly as practicable after the Form S-4 is filed.
(c) Company and Parent shall each use their reasonable best efforts to cause to
be delivered to each other letters from their respective independent
accountants, dated a date within two business days before the effective date of
the Form S-4, in form reasonably satisfactory to the recipient and customary in
scope for comfort letters delivered by independent accountants in connection
with registration statements on Form S-4 under the Securities Act.
Section 5.04 Access to Information. (a) To the extent permitted by applicable
law, from the date hereof until the Effective Time, Company will give Parent,
its counsel, financial advisors, auditors and other authorized representatives
reasonable access during normal business hours to the offices, properties, books
and records of Company and its Subsidiaries, will furnish to Parent, its
counsel, financial advisors, auditors and other authorized representatives such
financial and operating data and other information as such persons may
reasonably request and will instruct Company's employees, auditors, counsel and
financial advisors to cooperate with Parent in its investigation of the business
of Company and its Subsidiaries; provided that no investigation pursuant to this
Section shall affect any representation or warranty given by Company to Parent
hereunder. The foregoing information shall be held in confidence to the extent
required by, and in accordance with, the provisions of the letter agreement
executed by Parent and Company as to confidentiality and other matters (the
"Parent Confidentiality Agreement").
(a) To the extent permitted by applicable law, from the date hereof until the
Effective Time, Parent will give Company, its counsel, financial advisors,
auditors and other authorized representatives reasonable access during normal
business hours to the offices, properties, books and records of Parent and its
Subsidiaries, will furnish to Company, its counsel, financial advisors, auditors
and other authorized representatives such financial and operating data and other
information as such persons may reasonably request and will instruct Parent's
employees, auditors, counsel and financial advisors to cooperate with Company in
its investigation of the business of Parent and its Subsidiaries; provided that
no investigation pursuant to this Section shall affect any representation or
warranty given by Parent to Company hereunder. Such information shall be held in
confidence to the extent required by, and in accordance with, the provisions of
the letter agreement executed by Company and Parent as to confidentiality and
other matters (the "Company Confidentiality Agreement").
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Section 5.05 No Solicitation. From the date hereof until the termination hereof,
Company will not and will cause its Subsidiaries and the officers, directors,
employees, investment bankers, consultants and other agents of Company and its
Subsidiaries not to, directly or indirectly, take any action to solicit,
initiate, encourage or facilitate the making of any Acquisition Proposal or any
inquiry with respect thereto or engage in discussions or negotiations with any
person with respect thereto, or disclose any non-public information relating to
Company or any of its Subsidiaries or afford access to the properties, books or
records of Company or any of its Subsidiaries to, any person that has made any
Acquisition Proposal; provided that nothing contained in this Section 5.05 shall
prevent Company from furnishing non-public information to, or entering into
discussions or negotiations with, any person in connection with an unsolicited
bona fide Acquisition Proposal received from such person that the Company Board
determines in good faith is reasonably likely to lead to a Superior Proposal, so
long as prior to furnishing non-public information to, or entering into
discussions or negotiations with, such person, Company receives from such person
an executed confidentiality agreement with terms no less favorable to Company
than those contained in the Parent Confidentiality Agreement; provided, further
that nothing contained in this Agreement shall prevent the Company Board from
complying with Rule 14e-2 or 14d-9 under the 1934 Act with regard to an
Acquisition Proposal. Company will promptly notify (which notice shall be
provided orally and in writing and shall identify the person making such
Acquisition Proposal and set forth the material terms thereof) Parent, within 24
hours after receipt of any Acquisition Proposal or any request for nonpublic
information relating to Company or any of its Subsidiaries or for access to the
properties, books or records of Company or any of its Subsidiaries by any person
that may be considering making, or has made, an Acquisition Proposal if Company
is prepared to provide such person with access to such nonpublic information or
properties, books or records. Company shall give Parent two business days'
advance notice (which notice shall include the terms and conditions of such
proposal with respect to an Acquisition Proposal) of any definitive agreement
providing for an Acquisition Proposal to be entered into with any person or
entity making any such inquiry, offer or proposal. Company shall not be
permitted to terminate this Agreement pursuant to Section 7.01(d)(1) unless it
shall have satisfied the obligations of this Section 5.05 and prior to any such
termination, Company shall, and shall cause its financial and legal advisors to,
during the two business day period referenced in the preceding sentence,
negotiate in good faith with Parent to make such adjustments in the terms and
conditions of this Agreement as would enable Company to proceed with the
transactions contemplated herein. Company will, and will cause the other persons
listed in the first sentence of this Section 5.05 to, immediately cease and
cause to be terminated all discussions and negotiations, if any, that have taken
place prior to the date hereof with any parties with respect to any Acquisition
Proposal. Subject to compliance with their fiduciary duties, as determined in
good faith by the Company Board, and subject to the exceptions set forth in this
Section 5.05, the Company Board shall not authorize Company to waive any
standstill or confidentiality provisions contained in agreements to which
Company is a party or to which Company is subject, other than the Parent
Confidentiality Agreement.
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For purposes of this Agreement, "Acquisition Proposal" means any bona fide
inquiry, proposal or offer from any person relating to any direct or indirect
acquisition or purchase of more than 25% of the aggregate assets of Company and
its Subsidiaries, taken as a whole, or more than 25% of the voting power of the
shares of Company Common Stock then outstanding or any merger, consolidation,
business combination, recapitalization, liquidation, dissolution or similar
transaction involving the Company, other than the transactions contemplated by
this Agreement or the Stock Exchange Agreement. For purposes of this Agreement,
"Superior Proposal" means any bona fide Acquisition Proposal on terms that the
Company Board determines in its good faith judgment (based on the advice of a
financial advisor of nationally recognized reputation, taking into account all
the terms and conditions of the Acquisition Proposal, including any break-up
fees, expense reimbursement provisions and conditions to consummation) are more
favorable to Company's shareholders than this Agreement and the Merger taken as
a whole, and for which financing, to the extent required, is then fully
committed or reasonably determined to be available by the Company Board.
Section 5.06 Notice of Certain Events. (a) Company and Parent shall promptly
notify each other of:
(i) any notice or other communication from any person alleging that the consent
of such person is or may be required in connection with the transactions
contemplated by this Agreement;
(ii) any notice or other communication from any Governmental Authority in
connection with the transactions contemplated by this Agreement; and
(iii) any notice of, or other communications relating to, a default or event
that, with notice or lapse of time or both, would become a default, received by
it or any of its Subsidiaries subsequent to the date of this Agreement, under
any Company Agreement.
(b) Company shall promptly notify Parent of any actions, suits, claims,
investigations or proceedings commenced or, to its knowledge threatened against,
relating to or involving or otherwise affecting Company or any of its
Subsidiaries which, if pending on the date of this Agreement, would have been
required to have been disclosed pursuant to Section 3.13 or which relate to the
consummation of the transactions contemplated by this Agreement.
(c) Parent shall promptly notify Company of any actions, suits, claims,
investigations or proceedings commenced or, to its knowledge threatened against,
relating to or involving or otherwise affecting Parent or any Subsidiary of
Parent which, if pending on the date of this Agreement, would have been required
to have been disclosed pursuant to Section 4.13 or which relate to the
consummation of the transactions contemplated by this Agreement.
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Section 5.07 Reasonable Best Efforts. (a) Subject to the terms and conditions of
this Agreement, each party will use its reasonable best efforts to take, or
cause to be taken, all actions and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate the Merger and the other transactions contemplated by this Agreement.
In furtherance and not in limitation of the foregoing, each party hereto agrees
to make an appropriate filing of a Notification and Report Form pursuant to the
HSR Act with respect to the transactions contemplated hereby as promptly as
practicable and in any event within ten business days of the date hereof and to
supply as promptly as practicable any additional information and documentary
material that may be requested pursuant to the HSR Act and to take all other
actions reasonably necessary to cause the expiration or termination of the
applicable waiting periods under the HSR Act as soon as practicable.
(a) Each of Parent and Company shall, in connection with the efforts referenced
in Section 5.07(a) to obtain all requisite approvals and authorizations for the
transactions contemplated by this Agreement under the HSR Act or any other
Antitrust Law (as defined below), use its reasonable best efforts to (i)
cooperate in all respects with each other in connection with any filing or
submission and in connection with any investigation or other inquiry, including
any proceeding initiated by a private party; (ii) keep the other party informed
in all material respects of any material communication received by such party
from, or given by such party to, the Federal Trade Commission (the "FTC"), the
Antitrust Division of the Department of Justice (the "DOJ") or any other
Governmental Authority and of any material communication received or given in
connection with any proceeding by a private party, in each case regarding any of
the transactions contemplated hereby; and (iii) permit the other party to review
any material communication given by it to, and consult with each other in
advance of any meeting or conference with, the FTC, the DOJ or any such other
Governmental Authority or, in connection with any proceeding by a private party,
with any other person, and to the extent permitted by the FTC, the DOJ or such
other applicable Governmental Authority or other person, give the other party
the opportunity to attend and participate in such meetings and conferences. For
purposes of this Agreement, "Antitrust Law" means the Sherman Act, as amended,
the Clayton Act, as amended, the HSR Act, the Federal Trade Commission Act, as
amended, and all other federal, state and foreign, if any, statutes, rules,
regulations, orders, decrees, administrative and judicial doctrines and other
laws that are designed or intended to prohibit, restrict or regulate actions
having the purpose or effect of monopolization or restraint of trade or
lessening of competition through merger or acquisition.
(b) In furtherance and not in limitation of the covenants of the parties
contained in Sections 5.07(a) and (b), each of Parent and Company shall use its
reasonable best efforts to resolve such objections if any, as may be asserted
with respect to the transactions contemplated hereby under any Antitrust Law. In
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connection with the foregoing, if any administrative or judicial action or
proceeding, including any proceeding by a private party, is instituted (or
threatened to be instituted) challenging any transaction contemplated by this
Agreement as violative of any Antitrust Law, each of Parent and Company shall
cooperate in all respects with each other and use its respective reasonable best
efforts to contest and resist any such action or proceeding and to have vacated,
lifted, reversed or overturned any decree, judgment, injunction or other order,
whether temporary, preliminary or permanent, that is in effect and that
prohibits, prevents or restricts consummation of the transactions contemplated
by this Agreement. Notwithstanding the foregoing or any other provision of this
Agreement, nothing in this Section 5.07 shall limit a party's right to terminate
this Agreement pursuant to Section 7.01(b)(i) or 7.01(c) so long as such party
has up to then complied in all material respects with its obligations under this
Section 5.07.
(c) If any objections are asserted with respect to the transactions contemplated
hereby under any Antitrust Law or if any suit is instituted by any Governmental
Authority or any private party challenging any of the transactions contemplated
hereby as violative of any Antitrust Law, each of Parent and Company shall use
its reasonable best efforts to resolve any such objections or challenge as such
Governmental Authority or private party may have to such transactions under such
Antitrust Law so as to permit consummation of the transactions contemplated by
this Agreement. In furtherance and not in limitation of the foregoing, each of
Parent and Company (and, to the extent required by any Governmental Authority,
its respective Subsidiaries and Affiliates over which it exercises control)
shall be required to enter into a settlement, undertaking, consent decree,
stipulation or other agreement (each, a "Settlement") with a Governmental
Authority regarding antitrust matters in connection with the transactions
contemplated by this Agreement, including, without limitation, any Settlement
that requires Parent and/or Surviving Corporation to hold separate (including by
establishing a trust or otherwise) or to sell or otherwise dispose of stores of
Parent (and its Subsidiaries) and/or Surviving Corporation (and its
Subsidiaries).
Section 5.08 Cooperation. Without limiting the generality of Section 5.07,
Parent and Company shall together, or pursuant to an allocation of
responsibility to be agreed between them, coordinate and cooperate (i) in
connection with the preparation of the Company Proxy Statement and the Form S-4,
(ii) in determining whether any action by or in respect of, or filing with, any
Governmental Authority is required, or any actions, consents, approvals or
waivers are required to be obtained from parties to any material contracts, in
connection with the consummation of the transactions contemplated by this
Agreement, and (iii) in seeking any such actions, consents, approvals or waivers
or making any such filings, furnishing information required in connection
therewith or with the Company Proxy Statement or the Form S-4 and seeking timely
to obtain any such actions, consents, approvals or waivers.
Section 5.09 Public Announcements. So long as this Agreement is in effect,
Parent and Company will consult with each other before issuing any press release
or making any SEC filing or other public statement with respect to this
Agreement or the transactions contemplated hereby and, except as may be required
by applicable law, will not issue any such press release or make any such SEC
filing or other public statement prior to such consultation and providing the
other party with a reasonable opportunity to comment thereon.
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Section 5.10 Further Assurances. At and after the Effective Time, the officers
and directors of the Surviving Corporation will be authorized to execute and
deliver, in the name and on behalf of Company or Merger Subsidiary, any deeds,
bills of sale, assignments or assurances and to take and do, in the name and on
behalf of Company or Merger Subsidiary, any other actions and things to vest,
perfect or confirm of record or otherwise in the Surviving Corporation any and
all right, title and interest in, to and under any of the rights, properties or
assets of Company acquired or to be acquired by the Surviving Corporation as a
result of, or in connection with, the Merger.
Section 5.11 Affiliates. Prior to the Closing Date, Company shall cause to be
delivered to Parent a letter identifying, to the best of Company's knowledge,
all persons who are, at the time of the Company Shareholder Meeting described in
Section 5.03(a), deemed to be "affiliates" of Company for purposes of Rule 145
under the 1933 Act (the "1933 Act Affiliates"). Company shall use its reasonable
best efforts to cause each person who is so identified as a 1933 Act Affiliate
to deliver to Parent on or prior to the Closing Date a letter agreement
substantially in the form of Exhibit B-2 to this Agreement.
Section 5.12 Director and Officer Liability. Parent agrees that at all times
after the Effective Time, it shall, or shall cause the Surviving Corporation and
its Subsidiaries to indemnify each person who is now, or has been at any time
prior to the date hereof, an employee, agent, director or officer of Company or
of any of its Subsidiaries, its successors and assigns (individually an
"Indemnified Party" and collectively the "Indemnified Parties"), with respect to
any claim, liability, loss, damage, judgment, fine, penalty, amount paid in
settlement or compromise, cost or expense (including reasonable fees and
expenses of legal counsel), against any Indemnified Party in his or her capacity
as an employee, agent, officer or director of Company or its Subsidiaries,
whenever asserted or claimed, based in whole or in part on, or arising in whole
or in part out of, any facts or circumstances occurring at or prior to the
Effective Time whether commenced, asserted or claimed before or after the
Effective Time, including liability arising under the 1933 Act, the 1934 Act or
state law. In the event of any claim, liability, loss, damage, judgment, fine,
penalty, amount paid in settlement or compromise, cost or expense described in
the preceding sentence, Parent shall pay the reasonable fees and expenses of
counsel selected by the Indemnified Parties promptly after statements are
received and otherwise advance to such Indemnified Party upon request
reimbursement of documented expenses reasonably incurred.
Parent shall, or shall cause the Surviving Corporation to, maintain in effect
for not less than six years after the Effective Time the current policies of
directors' and officers' liability insurance maintained by Company and its
Subsidiaries on the date hereof (provided that Parent may substitute therefor
policies with reputable and financially sound carriers having at least the same
coverage and amounts thereof and containing terms and conditions which are no
less advantageous to the persons currently covered by such policies as insured)
with respect to facts or circumstances occurring at or prior to the Effective
Time; provided that if the aggregate annual premiums for such insurance during
such six-year period shall exceed 300% of the per annum rate of the aggregate
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premium currently paid by Company and its Subsidiaries for such insurance on the
date of this Agreement, then Parent shall cause the Surviving Corporation to,
and the Surviving Corporation shall, provide the most advantageous coverage that
shall then be available at an annual premium equal to 300% of such rate. Parent
agrees to pay all expenses (including fees and expenses of counsel) that may be
incurred by any Indemnified Party in successfully enforcing the indemnity or
other obligations under this Section 5.12. The rights under this Section 5.12
are in addition to rights that an Indemnified Party may have under the articles
of incorporation, bylaws, or other similar organizational documents of Company
or any of its Subsidiaries or the Maine Law. The rights under this Section 5.12
shall survive consummation of the Merger and are expressly intended to benefit
each Indemnified Party. Parent agrees to cause the Surviving Corporation and any
of its Subsidiaries (or their successors) to maintain in effect for a period of
six years the provisions of its articles of incorporation or bylaws or similar
organizational documents providing for indemnification of Indemnified Parties,
with respect to facts or circumstances occurring at or prior to the Effective
Time, to the fullest extent provided by law.
Section 5.13 Obligations of Merger Subsidiary. Parent will take all action
necessary to cause Merger Subsidiary to perform its obligations under this
Agreement and to consummate the Merger on the terms and conditions set forth in
this Agreement.
Section 5.14 Listing of Stock. Parent shall use its reasonable best efforts to
cause the shares of Parent Common Stock to be issued in connection with the
Merger to be approved for listing on the NYSE on or prior to the Closing Date,
subject to official notice of issuance.
Section 5.15 Antitakeover Statutes. If any Takeover Statute is or may become
applicable to the Merger, each of Parent and Company shall take such actions as
are necessary so that the transactions contemplated by this Agreement may be
consummated as promptly as practicable on the terms contemplated hereby and
otherwise act to eliminate or minimize the effects of any Takeover Statute on
the Merger.
Section 5.16 Parent Board. Parent will take all necessary action (including,
without limitation, amending the stockholders' agreement between Parent and
Etablissements Delhaize Freres et Cie "Le Lion" S.A.) to cause Hugh G.
Farrington, from and after the date the Merger is consummated, to be appointed
(a) Vice Chairman of Parent, (b) a member of Parent's Executive Committee and
(c) a member of the Board of Directors of Parent.
Section 5.17 Employee Benefits. (a) Following the Effective Time, Parent shall,
or shall cause the Surviving Corporation to (i) honor all obligations under
employment or severance agreements of Company or its Subsidiaries and (ii) pay
all benefits accrued through the Effective Time under employee benefit plans,
programs, policies and arrangements of Company or its Subsidiaries in accordance
with the terms thereof. In furtherance and not in limitation of the foregoing,
Parent agrees to provide, or cause the Surviving Corporation to provide,
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employees of Company who continue to be employed by the Surviving Corporation or
its Subsidiaries as of the Effective Time ("Continuing Employees") for a period
of not less than two years following the Effective Time with (A) annual
compensation not less favorable than the annual compensation which they were
receiving immediately prior to the Effective Time, and (B) benefits which, in
the aggregate, are no less favorable than the benefits provided to such
employees immediately prior to the Effective Time. Nothing herein shall require
the continuation of employment of any of the Continuing Employees for any period
of time following the Effective Time. In addition to the foregoing, for a period
of two years following the Effective Time, Parent shall, or shall cause the
Surviving Corporation or its Subsidiaries to, establish and maintain a plan to
provide severance and termination benefits to all non-union employees of Company
and its Subsidiaries which are no less favorable than the severance and
termination benefits provided under Company's plans and arrangements in effect
as of the date of this Agreement. If Continuing Employees are included in any
benefit plan (including without limitation, provision for vacation) of Parent or
its Subsidiaries, the Continuing Employees shall receive credit as employees of
Company and its Subsidiaries for service prior to the Effective Time with
Company and its Subsidiaries to the same extent such service was counted under
similar Company Benefit Plans for purposes of eligibility, vesting, eligibility
for retirement and benefit accrual. If Continuing Employees are included in any
medical, dental or health plan other than the plan or plans they participated in
as of the Effective Time, any such plans shall not include pre-existing
condition exclusions, except to the extent such exclusions were applicable under
the similar Company Benefit Plan as of the Effective Time, and shall provide
credit for any deductibles and co-payments applied or made with respect to each
Continuing Employee in the calendar year of the change. The rights under this
Section 5.17 shall survive consummation of the Merger and are expressly intended
to benefit each Continuing Employee.
(a) Upon the Effective Time, Company's Employee Stock Purchase Plan shall be
terminated with the effect that the then current offering period under such plan
will be terminated effective as of the Effective Time.
Section 5.18 Stock Exchange Agreement. Parent has provided Company with a true
and complete copy of the Stock Exchange Agreement, a copy of which is attached
hereto as Exhibit B. Parent agrees that it will not amend or waive any provision
of the Stock Exchange Agreement without the prior written consent of Company.
Parent agrees that it will not issue consideration per share to the Voting
Shareholders under the Stock Exchange Agreement that (i) is greater than the
blended value of the Merger Consideration or (ii) consists of more than 86% in
cash.
Section 5.19 Definitive Financing Documents. On or prior to the later of (i) 10
days prior to the Company Shareholder Meeting or (ii) 120 days after the date of
this Agreement, Parent shall provide Company with substantially final
documentation relating to the debt financing described in the Commitment Letter
(the "Financing Documents") together with a written confirmation from Parent and
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the lenders thereunder to the effect that they are prepared to enter into such
documentation upon the satisfaction or waiver of the conditions to the Merger.
Article 6
Conditions to the Merger
Section 6.01 Conditions to the Obligations of Each Party. The obligations of
Company, Parent and Merger Subsidiary to consummate the Merger are subject to
the satisfaction (or waiver by the party for whose benefit the applicable
condition exists) of the following conditions:
(a) this Agreement and the transactions contemplated hereby shall have been
approved and adopted by the shareholders of Company by the Company Requisite
Vote;
(b) any applicable waiting period under the HSR Act relating to the transactions
contemplated by this Agreement shall have expired;
(c) no provision of any applicable law or regulation and no judgment,
injunction, order or decree shall prohibit or enjoin the consummation of the
Merger;
(d) the Form S-4 shall have been declared effective under the 1933 Act and no
stop order suspending the effectiveness of the Form S-4 shall be in effect and
no proceedings for such purpose shall be pending before or threatened by the
SEC; and
(e) the shares of Parent Common Stock to be issued in the Merger shall have been
approved for listing on the NYSE, subject to official notice of issuance.
Section 6.02 Conditions to the Obligations of Parent and Merger Subsidiary. The
obligations of Parent and Merger Subsidiary to consummate the Merger are subject
to the satisfaction (or waiver by Parent) of the following further condition:
(a) Company shall have performed in all material respects all of its obligations
and complied in all material respects with all of its covenants hereunder
required to be performed or complied with by it at or prior to the Effective
Time and (b) the representations and warranties of Company contained in this
Agreement (without considering any qualification as to materiality) shall be
true and correct at and as of the Effective Time, as if made at and as of such
time (other than representations and warranties that address matters only as of
a particular date, which shall be true and correct as of such date), with only
such exceptions as, individually or in the aggregate, have not had and would not
have a Material Adverse Effect on Company; and Parent shall have received a
certificate signed by an executive officer of Company to the effect set forth in
clauses (a) and (b).
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Section 6.03 Conditions to the Obligations of Company. The obligations of
Company to consummate the Merger are subject to the satisfaction (or waiver by
Company) of the following further condition:
(a) Parent shall have performed in all material respects all of its obligations
and complied in all material respects with all of its covenants hereunder
required to be performed or complied with by it at or prior to the Effective
Time and (b) the representations and warranties of Parent contained in this
Agreement (without considering any qualification as to materiality) shall be
true and correct at and as of the Effective Time, as if made at and as of such
time (other than representations and warranties that address matters only as of
a particular date which shall be true and correct as of such date), with only
such exceptions as, individually or in the aggregate, have not had and would not
have a Material Adverse Effect on Parent; and Company shall have received a
certificate signed by an executive officer of Parent to the effect set forth in
clauses (a) and (b).
Article 7
Termination
Section 7.01 Termination. This Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Time (notwithstanding any approval
of this Agreement by the shareholders of Company):
(a) by mutual written consent of Company and Parent;
(b) by either Company or Parent,
(i) if the Merger has not been consummated by August 17, 2000 (the "End Date");
or
(ii) if the Company Shareholder Approval shall not have been obtained by reason
of the failure to obtain the Company Requisite Vote at a duly held meeting of
shareholders or any adjournment thereof;
(c) by either Company or Parent (so long as such party has complied in all
material respects with its obligations under Section 5.07), if consummation of
the Merger would be prohibited by any law or regulation or if any injunction,
judgment, order or decree enjoining Company or Parent from consummating the
Merger is entered and such injunction, judgment, order or decree shall become
final and nonappealable;
(d) by Company:
(i) if the Company Board shall have received an Acquisition Proposal which the
Company Board has determined in good faith is a Superior Proposal; provided that
Company shall have given Parent at least forty-eight hours advance actual notice
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of any termination pursuant to this Section 7.01(d)(i) and shall have made the
payment referred to in Section 7.03(b) hereof;
(ii) upon a breach of any representation, warranty, covenant or agreement of
Parent, or if any representation or warranty of Parent shall become untrue, in
either case which breach or misrepresentation or warranty shall not have been
cured within 30 days following written notice from Company such that the
conditions set forth in Section 6.03(a) would be incapable of being satisfied by
the End Date; or
(iii) if Parent shall have failed to deliver to Company the Financing Documents
within the period described in Section 5.19.
(e) by Parent:
(i) if (x) the Company Board shall have failed to recommend or withdrawn, or
modified or changed in a manner adverse to Parent its approval or recommendation
of this Agreement or the Merger or shall have recommended a Superior Proposal or
(y) Company shall have entered into a definitive agreement providing for a
Superior Proposal with a person other than Parent or its Subsidiaries (or the
Company Board resolves to do any of the foregoing); or
(ii) upon a breach of any representation, warranty, covenant or agreement of
Company, or if any representation or warranty of Company shall become untrue, in
either case which breach or misrepresentation or warranty shall not have been
cured within a reasonable period of time following written notice from Parent
such that the conditions set forth in Section 6.02(a) would be incapable of
being satisfied by the End Date (a "Company Breach").
The party desiring to terminate this Agreement pursuant to clauses (b), (c), (d)
or (e) of this Section 7.01 shall give written notice of such termination to the
other party in accordance with Section 8.02, specifying the provision hereof
pursuant to which such termination is effected. Notwithstanding anything else
contained in this Agreement, (A) the right to terminate this Agreement under
this Section 7.01 shall not be available to any party whose failure to fulfill
its obligations or to comply with its covenants under this Agreement in all
material respects has been the cause of, or resulted in, the failure to satisfy
any condition to the obligations of either party hereunder, and (B) no party
that is in material breach of its obligations hereunder shall be entitled to any
payment of any amount from the other party pursuant to Section 7.03(b).
Section 7.02 Effect of Termination. If this Agreement is terminated pursuant to
Section 7.01, this Agreement shall become void and of no effect with no
liability on the part of any party hereto, except that (a) the agreements
contained in this Section 7.02 and in Section 7.03 and in the Parent
Confidentiality Agreement and Company Confidentiality Agreement shall survive
the termination hereof and (b) no such termination shall relieve any party of
any liability or damages resulting from any willful material breach by that
party of this Agreement.
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Section 7.03 Payments. (a) Except as otherwise specified in this Section 7.03 or
agreed in writing by the parties, all costs and expenses incurred in connection
with this Agreement and the transactions contemplated by this Agreement shall be
paid by the party incurring such cost or expense.
(a) If (x) Company shall terminate this Agreement pursuant to Section 7.01(d)(i)
hereof, or (y) Parent shall terminate this Agreement pursuant to Section
7.01(e)(i) hereof (each such case of termination being referred to as a "Trigger
Event"), Company shall pay to Parent (by wire transfer of immediately available
funds not later than the date of termination of this Agreement) an amount equal
to $90,000,000 (the "Termination Fee"). Additionally, if Parent terminates this
Agreement pursuant to Section 7.0l(e)(ii), and an Acquisition Proposal has been
made to Company after the date hereof, but prior to such termination, and within
twelve months after the termination of this Agreement (A) a transaction
constituting an Acquisition Proposal is consummated, or (B) a definitive
agreement for such a transaction is entered into by Company, then Company shall
pay to Parent the Termination Fee upon the consummation of any such transaction
or the execution of any such definitive agreement. Acceptance by Parent of the
Termination Fee shall constitute conclusive evidence that this Agreement has
been validly terminated and upon payment of such amount Company shall be fully
released and discharged from any liability or obligation resulting from or under
this Agreement.
Article 8
Miscellaneous
Section 8.01 Certain Definitions. For purposes of this Agreement, the following
terms shall have the meanings specified in this Section 8.01:
(a) "know" or "knowledge" means, with respect to any party, the actual knowledge
of such party's executive officers, except as specified in Section 3.14(g) and
4.14(g).
(b) "person" means an individual, corporation, limited liability company,
partnership, association, trust, unincorporated organization, other entity or
group (as defined in the Exchange Act).
(c) "Subsidiary" means, when used with reference to any entity, any corporation
or other organization, whether incorporated or unincorporated, (i) of which such
party or any other subsidiary of such party is a general or managing partner or
(ii) the outstanding voting securities or interests of which, having by their
terms ordinary voting power to elect a majority of the Board of Directors or
others performing similar functions with respect to such corporation or other
organization, is directly or indirectly owned or controlled by such party or by
any one or more of its subsidiaries.
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Section 8.02 Notices. All notices, requests and other communications to any
party hereunder shall be in writing (including telecopy or similar writing) and
shall be given:
if to Parent, to:
Food Lion, Inc.
2110 Executive Drive
Salisbury, NC 28147
Attention: General Counsel
with a copy to:
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
1700 Pacific Avenue, Suite 4100
Dallas, TX 75201-4675
Attention: Ford Lacy
if to Company, to:
Hannaford Bros. Co.
145 Pleasant Hill Road
Scarborough, ME 04074
Attention: Andrew P. Geoghegan
General Counsel
with a copy to:
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, NY 10153
Attention: Stephen E. Jacobs
Raymond O. Gietz
or such other address or telecopy number as such party may hereafter specify for
the purpose by notice to the other parties hereto. Each such notice, request or
other communication shall be effective (a) if given by telecopy, when such
telecopy is transmitted to the telecopy number specified in this Section 8.02
and the appropriate telecopy confirmation is received or (b) if given by any
other means, when delivered at the address specified in this Section 8.02.
Section 8.03 Entire Agreement; Non-Survival of Representations and Warranties;
Third Party Beneficiaries. (a) This Agreement (including any exhibits hereto),
the other agreements referred to in this Agreement and the Parent
Confidentiality Agreement and the Company Confidentiality Agreement constitute
the entire Agreement among the parties with respect to the subject matter hereof
51
<PAGE>
and thereof and supersede all prior agreements, understandings and negotiations,
both written and oral, between the parties with respect to such subject matter.
None of this Agreement, the Parent Confidentiality Agreement, the Company
Confidentially Agreement or any other agreement contemplated hereby or thereby
(or any provision hereof or thereof) is intended to confer on any person other
than the parties hereto or thereto any rights or remedies (except that Article 1
and Sections 5.12, and 5.17 are intended to confer rights and remedies on the
persons specified therein).
(a) The representations and warranties contained herein or in any schedule,
instrument or other writing delivered pursuant hereto shall not survive the
Effective Time.
Section 8.04 Amendments; No Waivers. (a) Any provision of this Agreement may be
amended or waived prior to the Effective Time if, and only if, such amendment or
waiver is in writing and signed, in the case of an amendment, by Company and
Parent or, in the case of a waiver, by the party against whom the waiver is to
be effective; provided that after the adoption of this Agreement by the
shareholders of Company, there shall be made no amendment that by law requires
further approval by shareholders without the further approval of such
shareholders.
(a) No failure or delay by any 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 other right, power or privilege. The rights and remedies herein provided
shall be cumulative and not exclusive of any rights or remedies provided by law.
Section 8.05 Successors and Assigns. The provisions of this Agreement shall be
binding upon, inure to the benefit of and be enforceable by the parties hereto
and their respective successors and assigns; provided that no party may assign,
delegate or otherwise transfer any of its rights or obligations under this
Agreement without the written consent of the other parties hereto.
Section 8.06 Governing Law. This Agreement shall be construed in accordance with
and governed by the law of the State of Maine (without regard to principles of
conflict of laws).
Section 8.07 Jurisdiction. Any suit, action or proceeding seeking to enforce any
provision of, or based on any matter arising out of or in connection with, this
Agreement or the transactions contemplated by this Agreement may be brought
against any of the parties in any Federal court located in the State of Maine,
or any Maine state court located in Cumberland County, and each of the parties
hereto hereby consents to the exclusive jurisdiction of such courts (and of the
appropriate appellate courts therefrom) in any such suit, action or proceeding
and waives any objection to venue laid therein. Process in any such suit, action
or proceeding may be served on any party anywhere in the world, whether within
or without the State of Maine. Without limiting the generality of the foregoing,
52
<PAGE>
each party hereto agrees that service of process upon such party at the address
referred to in Section 8.01, together with written notice of such service to
such party, shall be deemed effective service of process upon such party.
Section 8.08 Counterparts; Effectiveness. This Agreement may be signed in any
number of counterparts, each of which shall be an original, with the same effect
as if the signatures thereto and hereto were upon the same instrument. This
Agreement shall become effective when each party hereto shall have received
counterparts hereof signed by all of the other parties hereto.
Section 8.09 Interpretation. When a reference is made in this Agreement to a
Section or Disclosure Schedule, such reference shall be to a Section of this
Agreement or to the Company Disclosure Schedule or Parent Disclosure Schedule as
applicable, unless otherwise indicated. The table of contents and headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. Whenever the words
"include", "includes" or "including" are used in this Agreement they shall be
deemed to be followed by the words "without limitation". The phrases "the date
of this Agreement", "the date hereof", and terms of similar import, unless the
context otherwise requires, shall be deemed to refer to August 17, 1999.
Section 8.10 Severability. If any term, provision, covenant or restriction of
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 of this Agreement
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated. Upon such determination that any term, provision, covenant or
restriction of this Agreement is invalid, void, unenforceable or against
regulatory policy, the parties hereto shall negotiate in good faith to modify
this Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner to the end that the transactions contemplated
hereby are fulfilled to the extent possible.
Section 8.11 Specific Performance. The parties hereto agree that irreparable
damage would occur in the event any provision of this Agreement was not
performed in accordance with the terms hereof and that the parties shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions of this Agreement in any
Federal court located in the State of Maine or any Maine state court, in
addition to any other remedy to which they are entitled at law or in equity.
Section 8.12 Joint and Several Liability. Parent and Merger Subsidiary hereby
agree that they will be jointly and severally liable for all covenants,
agreements, obligations and representations and warranties made by either of
them in this Agreement.
53
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective
authorized officers as of the day and year first above written.
FOOD LION, INC.
By: /s/ R. William McCanless
--------------------------------------------
Name: R. William McCanless
Title: President & Chief Executive
Officer
HANNAFORD BROS. CO.
By: /s/ Hugh G. Farrington
--------------------------------------------
Name: Hugh G. Farrington
Title: President and Chief Executive
Officer
FL ACQUISITION SUB, INC.
By: /s/ R. William McCanless
--------------------------------------------
Name: R. William McCanless
Title: President & Chief Executive
Officer
54
<PAGE>
EXHIBT A
--------
VOTING AGREEMENT
----------------
This VOTING AGREEMENT (this "Agreement"), dated as of August 17,
1999, is entered into by and among Food Lion, Inc., a North Carolina corporation
(the "Parent"), and the other parties listed on the signature page hereof or
their respective assigns (the "Stockholders").
RECITALS:
---------
A. The Parent, FL Acquisition Sub, Inc., a Maine corporation and a
wholly owned subsidiary of Parent ("Merger Sub"), and Hannaford Brothers Co., a
Maine corporation (the "Company"), have entered into an Agreement and Plan of
Merger of even date herewith (the "Merger Agreement"), pursuant to which the
parties thereto have agreed, upon the terms and subject to the conditions set
forth therein, to merge the Merger Sub with and into the Company Sub (the
"Merger").
B. As of the date hereof, each Stockholder is the owner of the number of shares
of Company Common Stock (the "Shares") set forth opposite such Stockholder's
name on Schedule 1 attached hereto.
C. As of the date hereof, the stockholders and the Company have entered into a
Stock Exchange Agreement with respect to the Shares.
D. In consideration of the Parent's agreement to enter into the
Merger Agreement, each of the Stockholders agrees to vote in favor of the Merger
the Shares.
E. Capitalized terms used but not otherwise defined herein and
defined in the Merger Agreement shall have the meanings given such terms in the
Merger Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and premises
contained in this Agreement and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Parent and the
Stockholders, intending to be legally bound, hereby agree as follows:
Section 1. Voting of Shares.
-----------------
1.1 Voting Agreement.
-----------------
Each Stockholder hereby agrees to vote (or cause
to be voted) the Shares, at any annual, special or other meeting of the
stockholders of the Company, and at any adjournment or adjournments thereof, or
pursuant to any consent in lieu of a meeting or otherwise:
<PAGE>
(i) in favor of the Merger and the approval and
adoption of the terms contemplated by the Merger Agreement and any actions
required in furtherance thereof;
(ii) against any action or agreement that is
reasonably likely to result in a breach in any material respect of any covenant,
representation or warranty or any other obligation of the Parent under this
Agreement or the Merger Agreement; and
(iii) except for all such actions which may be
permitted to the Company under Section 5.01 of the Merger Agreement, against (a)
any extraordinary corporate transaction, such as a merger, rights offering,
reorganization, recapitalization or liquidation involving the Company or any of
its subsidiaries other than the Merger, (b) a sale or transfer of a material
amount of assets of the Company or any of its material subsidiaries or the
issuance of any securities of the Company or any subsidiary, (c) any change in
the Board of Directors of the Company other than in connection with an annual
meeting of the shareholders of the Company with respect to the slate of
directors proposed by the incumbent Board of Directors of the Company (in which
case they agree to vote for the slate proposed by the incumbent Board) or (d)
any action that is reasonably likely to materially impede, interfere with,
delay, postpone or adversely affect in any material respect the Merger and the
transactions contemplated by the Merger Agreement.
Section 2. Representations and Warranties of Stockholders. Each Stockholder
represents and warrants to the Parent as follows in each case as of the date
hereof:
2.1 Binding Agreement. Each Stockholder has the capacity to execute
and deliver this Agreement and to consummate the transactions contemplated
hereby. Each Stockholder has duly and validly executed and delivered this
Agreement and this Agreement constitutes a legal, valid and binding obligation
of each Stockholder, enforceable against the Stockholder in accordance with its
terms, except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization or other similar laws affecting creditors' rights
generally and by general equitable principles (regardless of whether
enforceability is considered in a proceeding in equity or at law).
2.2 No Conflict. Neither the execution and delivery of this
Agreement, nor the compliance with any of the provisions hereof, in each case by
each Stockholder will (i) require any consent, approval, authorization or permit
of, registration, declaration or filing with, or notification to, any
Governmental Authority, except for filings on Schedule 13D under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), (ii) result in a default
(or an event which, with notice or lapse of time or both, would become a
default) or give rise to any right of termination by any third party,
cancellation, amendment or acceleration under any contract or understanding, or
result in the creation of a Lien with respect to any of the Shares, (iii)
require any material consent, authorization or approval of any Person or
Governmental Authority which has not been obtained, or (iv) violate or conflict
with any order or law applicable to such Stockholder or the Shares.
2.3 Ownership of Shares. Each Stockholder is the record and beneficial owner of
such Stockholder's Shares free and clear of any Liens on the right to vote such
Shares.
2
<PAGE>
Each Stockholder holds exclusive power to vote such Stockholder's Shares,
subject to the limitations set forth in Section 1 of this Agreement. The number
of Shares set forth opposite each Stockholder's name on Schedule 1 represents
all of the shares of capital stock of the Company beneficially owned by each
Stockholder.
2.4 Absence of Certain Agreements. None of the Stockholders nor any
of their representatives has entered into any agreement, letter of intent or
similar agreement (whether written or oral) with any party other than the Parent
whereby such Stockholder has agreed to support, directly or indirectly, any
proposal or offer (whether or not in writing and whether or not delivered to the
stockholders of the Company generally) for a merger or other business
combination involving the Company or to acquire in any matter, directly or
indirectly, a material equity interest in, any voting securities of, or a
substantial portion of the assets of the Company, other than the transactions
contemplated by the Merger Agreement.
Section 3. Representations and Warranties of the Parent. The Parent
represents and warrants to each Stockholder as follows, in each case as of the
date hereof:
3.1 Binding Agreement. The Parent is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of North
Carolina and has full corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the Merger Agreement by the Parent and the
consummation of the transactions contemplated hereby and thereby have been duly
and validly authorized by the Board of Directors of the Parent, and no other
corporate proceedings on the part of the Parent are necessary to authorize the
execution, delivery and performance of this Agreement and the Merger Agreement
by the Parent and the consummation of the transactions contemplated hereby and
thereby. The Parent has duly and validly executed this Agreement and this
Agreement constitutes a legal, valid and binding obligation of the Parent,
enforceable against the Parent in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization or other similar laws affecting creditors' rights generally and
by general equitable principles (regardless of whether enforceability is
considered in a proceeding in equity or at law).
3.2 No Conflict. Neither the execution and delivery of this
Agreement, the consummation by the Parent of the transactions contemplated
hereby, nor the compliance by the Parent with any of the provisions hereof will
(i) conflict with or result in a breach of any provision of its Articles of
Incorporation or Bylaws, (ii) require any consent, approval, authorization or
permit of, registration, declaration or filing with, or notification to, any
Governmental Authority, (iii) result in a default (or an event which, with
notice or lapse of time or both, would become a default) or give rise to any
right of termination by any third party, cancellation, amendment or acceleration
under any contract or understanding, (iv) require any material consent,
authorization or approval of any Person or Governmental Authority which has not
been obtained, or (v) violate or conflict with any order or law applicable to
the Company.
Section 4. Transfer and Other Restrictions. For so long as the Merger
Agreement is in effect:
3
<PAGE>
4.1 Certain Prohibited Transfers. Except for the Stock Exchange
Agreement between the parties hereto entered into as of the date hereof, each
Stockholder agrees not to:
(i) sell, transfer, assign or otherwise dispose
of, or enter into any contract, option or other arrangement or understanding
with respect to the sale, transfer, assignment or other disposition of, such
Stockholder's Shares or any interest contained therein, other than sales,
transfers, assignments or other dispositions by a Stockholder to a direct or
indirect wholly-owned subsidiary of either Stockholder;
(ii) except as contemplated by this Agreement,
grant any proxy or power of attorney or enter into a voting agreement or other
arrangement with respect to such Stockholder's Shares, other than this
Agreement; or
(iii) except as provided in the Hannaford-Sobey
Voting Trust Agreement, dated as of February 4, 1988, as amended, deposit such
Stockholder's Shares into a voting trust.
4.2 Additional Shares. Without limiting the provisions of the Merger
Agreement, in the event (i) of any stock dividend, stock split,
recapitalization, reclassification, combination or exchange of shares of capital
stock of the Company on, of or affecting the Shares or (ii) any Stockholder
shall become the beneficial owner of any additional shares of Company Common
Stock or other securities entitling the holder thereof to vote or give consent
with respect to the matters set forth in Section 1 hereof, then the terms of
this Agreement shall apply to the shares of capital stock or other securities of
the Company held by any Stockholder immediately following the effectiveness of
the events described in clause (i) or the Stockholder becoming the beneficial
owner thereof, as described in clause (ii), as though they were Shares
hereunder. Each Stockholder hereby agrees, while this Agreement is in effect, to
promptly notify the Parent of the number of any new shares of Company Common
Stock acquired by the Stockholder, if any, after the date hereof.
Section 5. Specific Enforcement. Each of the parties hereto acknowledges
and agrees that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with the terms
hereof or were otherwise breached and that each party shall be entitled to seek
specific performance of the terms hereof, in addition to any other remedy that
may be available at law or in equity.
Section 6. Termination. This Agreement shall terminate on the earlier of
(i) the termination of the Merger Agreement, (ii) the agreement of the parties
hereto to terminate this Agreement, (iii) consummation of the Merger and (iv)
the date such Stockholder ceases to own any Shares.
Section 7. Notices. All notices, requests and other communications to any
party hereunder shall be in writing (including telecopy or similar writing) and
shall be given:
If to the Parent, to:
Food Lion, Inc.
4
<PAGE>
2110 Executive Drive
Salisbury, North Carolina 28147
Attention: R. William McCanless
Facsimile No.: (704) 637-8803
With a copy to (such copy shall not constitute notice):
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
1333 New Hampshire Avenue, N.W.
Suite 400
Washington, D.C. 20036
Attention: Richard L. Wyatt, Jr.
Facsimile No.: (202) 887-4288
If to the Stockholders, to:
Empire Company Limited
115 King Street
Stellarton, Nova Scotia B0K 1S0
Attention: President
Facsimile No.: (902) 755-6477
With a copy to (such copy shall not constitute notice):
Skadden, Arps, Slate, Meagher
& Flom LLP
919 Third Avenue
New York, New York 10022
Attention: Milton G. Strom
Facsimile No.: (212) 735-2000
Stewart McKelvey Stirling Scales
1959 Upper Water Street
Suite 900, P.O. Box 997
Halifax, NS Canada
B3J 2X2
Attn: James M. Dickson
Facsimile No.: (902) 420-1417
or such other address or telecopy number as such party may hereafter specify for
the purpose by notice to the other parties hereto. Each such notice, request or
other communication shall be effective (i) if given by telecopy, when such
telecopy is transmitted to the telecopy number specified in this Section 7 and
the appropriate telecopy confirmation is received or (ii) if given by any other
means, when delivered at the address specified in this Section 7.
5
<PAGE>
Section 8. Entire Agreement. This Agreement (including the documents and
instruments referred to herein) constitutes the entire agreement and supersedes
all other prior agreements and understandings, both written and oral, among the
parties, or any of them, with respect to the subject matter hereof.
Section 9. Consideration. This Agreement is granted in consideration of the
execution and delivery of the Merger Agreement by the Parent.
Section 10. Amendment. This Agreement may not be modified, amended, altered
or supplemented except upon the execution and delivery of a written agreement
executed by the parties hereto.
Section 11. Successors and Assigns. Except as provided in Section 4.1
hereof, this Agreement shall not be assigned by operation of law or otherwise
without the prior written consent of the other parties hereto. This Agreement
will be binding upon, inure to the benefit of and be enforceable by each party
and such party's respective heirs, beneficiaries, executors, representatives and
permitted assigns.
Section 12. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
Section 13. Governing Law. This Agreement shall be governed in all
respects, including validity, interpretation and effect, by the laws of the
State of Maine without giving effect to the provisions thereof relating to
conflicts of law.
Section 14. Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable such provision shall be interpreted
to be only so broad as is enforceable.
Section 15. Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
Section 16. Stockholder Capacity. No Stockholder or designee of any
Stockholder who is or becomes during the term hereof a director or officer of
the Company makes any agreement or understanding herein in his or her capacity
as such director or officer. Each Stockholder signs solely in such Stockholder's
capacity as the record holder and beneficial owner of such Stockholder's Shares
and nothing herein shall limit or affect any actions taken by a Stockholder or
any designee of any Stockholder in his or her capacity as an officer or director
of the Company.
6
<PAGE>
Section 17. Further Assurances. Each party hereto shall execute and deliver
such additional documents as may be necessary or desirable to consummate the
transactions contemplated by this Agreement.
Section 18. Third Party Beneficiaries. Nothing in this Agreement, expressed
or implied, shall be construed to give any person other than the parties hereto
any legal or equitable right, remedy or claim under by reason of this Agreement
or any provision contained herein.
[The next page is the signature page.]
7
<PAGE>
IN WITNESS WHEREOF, the undersigned or each of their respective duly
authorized officers or representatives have executed this Agreement effective as
of the date first set forth above.
FOOD LION, INC.
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
EMPIRE COMPANY LIMITED
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
E.C.L. INVESTMENTS LIMITED
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
<PAGE>
SCHEDULE 1
STOCKHOLDINGS
-------------
Name of Stockholder Number of Shares
------------------- ----------------
Empire Company Limited 5,550,461
E.C.L. Investment Limited 4,868,104
Empire Company Limited
<PAGE>
EXHIBIT B
---------
STOCK EXCHANGE AGREEMENT
This Stock Exchange Agreement (this "Agreement") is entered into as
of the 17th day of August, 1999, by and among Food Lion, Inc., a North Carolina
corporation ("Food Lion" or the "Company"), and each of the other parties listed
on the signature page hereof or their respective assigns (the "Selling
Stockholders").
RECITALS
WHEREAS, the Selling Stockholders desire to exchange the outstanding
shares of common stock, par value $0.75 per share (the "Hannaford Common
Stock"), of Hannaford Brothers Co., a Maine corporation ("Hannaford"), owned by
them as set forth on Schedule 1 hereof, on the terms and subject to the
conditions set forth in this Agreement.
WHEREAS, the Company, FL Acquisition Sub, Inc., a wholly-owned
subsidiary of the Company, and Hannaford have agreed to enter into an Agreement
and Plan of Merger dated the date hereof attached hereto as Exhibit A (the
"Merger Agreement").
WHEREAS, the Selling Stockholders have agreed, pursuant to a Voting
Agreement dated the date hereof, to vote the Hannaford Common Stock in favor of
the Merger (as defined in the Merger Agreement).
WHEREAS, as a condition to its willingness to enter into the Merger
Agreement, the Selling Stockholders have required that the Company enter into
this Agreement.
WHEREAS, capitalized terms used but not otherwise defined herein
shall have the meaning ascribed to such terms in the Merger Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and subject
to the conditions hereinafter set forth, the parties agree as follows:
1. EXCHANGE.
---------
1.1 Exchange. Subject to the terms and conditions of this Agreement,
immediately prior to Closing, the Selling Stockholders will exchange their
Hannaford Common Stock for aggregate consideration of $823,066,635 (the "Total
Consideration") determined and payable as follows:
(a) $365,000,000 (the "Share Consideration") payable in Class A
common stock, par value $.50 per share, of the Company (the "Food Lion Common
Stock"), with the number of such Food Lion Common Stock to be delivered by the
Company to the Selling
<PAGE>
Stockholders being calculated as 365,000,000 divided by the Average Parent Price
or $9.00, whichever is greater; and
(b) an amount (the "Cash Consideration") equal to the difference
between the Total Consideration and the Share Consideration, payable by bank
draft drawn upon a major money center bank.
1.2 Payment. At the closing, the Selling Stockholders shall deliver to the
Company certificates for the Common Stock duly endorsed in blank, or accompanied
by a stock power or stock powers duly executed in blank, in proper form for
transfer, and Food Lion shall issue and deliver to the Selling Stockholders the
cash set forth in Section 1.2 and the Share Consideration.
1.3 Taxes. The Selling Stockholders will be responsible for all sales and
similar transfer taxes which may be due by the Selling Stockholders as a result
of the exchange of the Common Stock or any reconveyance as set forth in Section
5 herein.
1.4 Adjustment.
-----------
(a) The Total Consideration shall be adjusted to reflect fully the
effect of any stock split, reverse split, stock dividend (including any dividend
or distribution of securities convertible into Food Lion Common Stock),
reorganization, recapitalization or other like change with respect to Food Lion
Common Stock occurring after the date hereof and having a record or effective
date prior to the Effective Time.
(b) The Company agrees to give the Selling Stockholders written
notice five Business Days prior to the Closing of the number of shares of Food
Lion Common Stock outstanding as of the date of such notice and the number of
shares of Food Lion Common Stock which may be issuable under any outstanding
options, rights or other securities during such five-day period. Upon receipt of
such notice, the Selling Stockholders may elect to adjust, upwards or downwards,
the consideration set forth in Section 1.1(a) hereof provided that:
(i) the Share Consideration shall in no event be less than
$315,000,000, subject to adjustment as set forth in subparagraph 1.4(d) below;
and
(ii) the Share Consideration shall in no event exceed
$421,000,000.
(c) The Company agrees that if the Selling Stockholders give the
Company prior written notice at least five Business Days prior to the Effective
Date, the Company will adjust the manner in which the consideration provided for
in Paragraph 1.1, for some or all of the shares of Hannaford Common Stock is
paid so that the number of shares of Hannaford Common Stock or fractions thereof
acquired by the Company for cash and the number of shares of Hannaford Common
Stock or fractions thereof acquired by the Company for Selling Stockholders'
Shares should be as the Selling Stockholders so direct.
(d) The Company shall notify the Selling Stockholders five Business
Days prior to the Closing of the number of options to acquire shares of either
Hannaford or the
2
<PAGE>
Company which have been exercised since the date of this Agreement, whereupon
the minimum Share Consideration set forth in subparagraph (b)(i) above shall be
adjusted upwards to reflect the issuance of stock upon such exercise, provided
that the Minimum Share Consideration shall in no event exceed $321,717,524.
2. REPRESENTATIONS AND WARRANTIES OF THE SELLING STOCKHOLDERS. Each Selling
Stockholder represents, warrants and covenants to the Company as follows:
2.1 Authority. Such Selling Stockholder has the capacity to execute
and deliver this Agreement and to consummate the transactions contemplated
hereby. Such Selling Stockholder has duly and validly executed and delivered
this Agreement and this Agreement constitutes a legal, valid and binding
obligation of such Selling Stockholder, enforceable against the Selling
Stockholder in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization or other similar
laws affecting creditors' rights generally and by general equitable principles
(regardless of whether enforceability is considered in a proceeding in equity or
at law). Neither the execution and delivery of this Agreement, nor the
compliance with any of the provisions hereof, in each case by such Selling
Stockholder will (i) require any consent, approval, authorization or permit of,
registration, declaration or filing with or notification to, any U.S. or
Canadian Governmental Authority, except for filings on Schedule 13D under the
Exchange Act and under the HSR Act, (ii) result in a default (or an event which,
with notice or lapse of time or both, would become a default) or give rise to
any right of termination by any third party, cancellation, amendment or
acceleration under any contract or understanding, or result in the creation of a
Lien with respect to any of the shares of Hannaford Common Stock, (iii) require
any material consent, authorization or approval of any Person or Governmental
Authority which has not been obtained, or (iv) violate or conflict with any
order or law applicable to such Selling Stockholder or the shares of Hannaford
Common Stock.
2.2 Ownership. The shares of Hannaford Common Stock owned by such Selling
Stockholder are validly issued, fully paid and non-assessable and owned
beneficially and of record by such Selling Stockholder. Such Selling Stockholder
will convey good and valid title to the shares of Hannaford Common Stock, free
and clear of any Liens.
2.3 Investment Representation. Such Selling Stockholder is acquiring the
shares of Food Lion Common Stock for its own account, for investment purposes
only and not with a view to the distribution of the shares of Food Lion Common
Stock, except in compliance with the Securities Act of 1933, as amended.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents,
warrants and covenants to the Selling Stockholders as follows:
3.1 Authority. The Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of North Carolina and
has full corporate power and authority to execute and deliver this Agreement and
to consummate the transactions contemplated hereby. The execution and delivery
of this Agreement by the Company and the consummation of the transactions
contemplated hereby have been duly and validly authorized by
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the Board of Directors of the Company, and no other corporate proceedings on the
part of the Company are necessary to authorize the execution, delivery and
performance of this Agreement by the Company and the consummation of the
transactions contemplated hereby. The Company has duly and validly executed this
Agreement and this Agreement constitutes a legal, valid and binding obligation
of Food Lion, enforceable against the Company in accordance with its terms,
except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization or other similar laws affecting creditors' rights
generally and by general equitable principles (regardless of whether
enforceability is considered in a proceeding in equity or at law). Neither the
execution and delivery of this Agreement, the consummation by the Company of the
transaction contemplated hereby, nor the compliance by the Company with any of
the provisions hereof will (i) conflict with or result in a breach of any
provision of its Articles of Incorporation or Bylaws, (ii) require any consent,
approval, authorization or permit of, registration, declaration or filing with,
or notification to, any Governmental Authority except for filings on Schedule
13D under the Exchange Act and under the HSR Act, (iii) result in a default (or
an event which, with notice or lapse of time or both, would become a default) or
give rise to any right of termination by any third party, cancellation,
amendment or acceleration under any contract or understanding, (iv) require any
material consent, authorization or approval of any Person or Governmental
Authority which has not been obtained, or (v) violate or conflict with any order
or law applicable to the Company.
3.2 Ownership. The shares of Food Lion Common Stock to be issued to the
Selling Stockholders hereunder upon issuance will be validly issued, fully paid
and nonassessable. As of the close of business on August 16, 1999, 239,853,031
shares of Food Lion Common Stock are issued and outstanding, 4,048,781 shares of
Food Lion Common Stock are reserved for additional grants under option and other
stock-based plans and 4,083,203 shares of Food Lion Common Stock are reserved
for issuance pursuant to options previously granted pursuant to Food Lion
options plans.
4. CONDITIONS TO CLOSING. The obligations of the parties hereto to consummate
the transactions contemplated hereby are subject to the parties to the Merger
Agreement having satisfied or waived the conditions set forth in the Merger
Agreement and the parties thereto agreeing that they are ready, willing and able
to close the Merger immediately following the Closing of the transaction
contemplated hereto.
5. RECONVEYANCE. If the transactions contemplated by this Agreement are
consummated and the Merger is not consummated, the parties hereto agree to use
their best efforts to take all actions necessary to unwind the transactions so
that the Parties are in the same position they were in prior to the closing of
the transactions contemplated hereby.
6. BOARD SEAT. The Company agrees to take all necessary action to cause a
representative of Empire Company Limited to be appointed a member of the Board
of Directors of the Company.
7. MISCELLANEOUS.
7.1 All notices and other communications required or permitted hereunder
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<PAGE>
shall be in writing and shall be deemed given when so delivered in person, one
business day after delivery to an overnight courier, upon facsimile transmission
(with receipt confirmed by telephone or by automatic transmission report) or two
business days after being sent by registered or certified mail (postage prepaid,
return receipt requested), as follows:
(a) If to the Company, to:
Food Lion, Inc.
2110 Executive Drive
Salisbury, NC 28147
Attn: Lester C. Nail
Telephone: (704) 633-8250 x2305
Facsimile: (704) 639-1353
(b) If to Selling Stockholders, to:
Skadden, Arps, Slate, Meagher
& Flom LLP
919 Third Avenue
New York, NY 10022
Attn: Milton G. Strom
Fax: (212) 735-2000
-and-
Stewart McKelvey Stirling Scales
1959 Upper Water Street
Suite 900, P.O. Box 997
Halifax, NS Canada
B3J 2X2
Attn: James M. Dickson
Facsimile No.: (902) 420-1417
Any party may by notice given in accordance with this Section 7.1 to the other
party designate another address or person for receipt of notices hereunder.
7.2 This Agreement shall be construed in accordance with and governed
by the internal laws of the State of Maine. Each party hereby irrevocably
submits to the non-exclusive jurisdiction of any state or federal court in the
State of Maine or the State of Maine with respect to any suit, action,
proceeding or judgment relating to or arising out of this Agreement.
7.3 This Agreement may be amended, modified or supplemented only by
written agreement of the parties hereto.
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7.4 This Agreement and all of the provisions hereof shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors, heirs, estates and permitted assigns. This Agreement is not
assignable without the prior written consent of the other party hereto;
provided, however, that a party hereto may assign its rights to a direct or
indirect wholly-owned subsidiary of either of the Selling Stockholders.
7.5 This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
7.6 This Agreement contains the entire agreement between the parties
in respect of the subject matter contained herein, and supersedes all prior
agreements, written or oral, with respect thereto.
7.7 If one or more provisions of this Agreement are held to be
unenforceable under applicable law, such provision shall be excluded from this
Agreement and the balance of the Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
7.8 The parties hereto each acknowledge that, in view of the
uniqueness of the subject matter hereof, the parties hereto would not have an
adequate remedy at law for money damages in the event that this Agreement were
not performed in accordance with its terms, and therefore agree that the parties
hereto shall be entitled to specific enforcement of the terms hereof in addition
to any other remedy to which the parties hereto may be entitled at law or in
equity.
[The next page is the signature page]
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IN WITNESS WHEREOF, the undersigned or each of their respective duly
authorized officers or representatives have executed this Agreement effective as
of the date first set forth above.
FOOD LION, INC.
By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
EMPIRE COMPANY LIMITED
By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
E.C.L. INVESTMENTS LIMITED
By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
<PAGE>
SCHEDULE 1
STOCKHOLDERS HOLDINGS
---------------------
Name of Stockholder Number of Shares
- ------------------- ----------------
Empire Company Limited 5,550,461
E.C.L. Investment Limited 4,868,104
Empire Company Limited
EXHIBIT 99
FOR IMMEDIATE RELEASE:
FOOD LION, INC. AND HANNAFORD BROS. CO.
ANNOUNCE $3.6 BILLION MERGER
CREATES 6TH LARGEST U.S. FOOD RETAILER
HANNAFORD TO MAINTAIN BRAND IDENTITY
SALISBURY, NC, and SCARBOROUGH, ME, AUGUST 18, 1999--Food Lion, Inc. (Nasdaq:
FDLNA, FDLNB) and Hannaford Bros. Co. (NYSE: HRD) today jointly announced that
they have entered into a definitive merger agreement in which Delhaize America,
Inc., a holding company to be formed by Food Lion this September, will acquire
all the outstanding shares of Hannaford in a cash and stock transaction valued
at approximately $3.6 billion including the assumption of debt, to create the
6th largest food retailer in the United States. Upon completion of the
transaction, Hannaford will operate as a subsidiary of Delhaize America.
Under the terms of the transaction, Food Lion will pay $79 per share through a
combination of cash and stock for all of the outstanding Hannaford shares. The
aggregate cash consideration is expected to approximate $2.7 billion or 80% of
the total consideration, and the $650 million dollar balance will be paid in
Food Lion Class A common stock. Delhaize America will assume approximately $300
million of Hannaford debt. The acquisition will be accounted for as a purchase
transaction.
Bill McCanless, President and Chief Executive Officer of Food Lion, Inc., said,
`This is a strategic acquisition that will help fuel our future growth, build
long-term shareholder value and position Delhaize America as a premier
multi-regional food retailer for the 21st Century. The acquisition of Hannaford
into the Delhaize America family of food retailers will provide an exceptional
growth opportunity for both organizations.'
Food Lion, Inc., with 1,258 stores in the Mid-Atlantic and Southeastern states
from Pennsylvania to Florida, under the brand names of Food Lion, Kash n' Karry,
and Save 'n Pack, had 1998 revenues of $10.2 billion. Hannaford Bros., with 152
stores in New England, New York and the Southeast, recorded 1998 revenues of
$3.3 billion under the brand names of Hannaford and Shop `n Save. On a pro forma
basis, the combined company will have over 1,400 stores throughout the eastern
United States from Maine to Florida, with total annual revenues of approximately
$13.5 billion and more than 116,000 full-time and part-time employees.
<PAGE>
The transaction has been approved by the boards of directors of both companies.
The merger is subject to certain conditions, including approval by Hannaford
shareholders as well as customary regulatory approvals. The transaction has the
approval of the largest shareholders of each company, namely Etablissements
Delhaize Freres et CIE "Le Lion" S.A. and its wholly owned subsidiary, Delhaize
The Lion America, Inc., which in the aggregate own approximately 42% of Food
Lion's Class A common stock and 55% of its Class B common stock; and The Empire
Company, which owns approximately 25% of the outstanding Hannaford stock.
Upon completion of the merger, Hugh G. Farrington, President and CEO of
Hannaford, will join the Delhaize America Board of Directors as Vice Chairman
and will continue to operate Hannaford. In addition, a representative of Empire
will also be named to the Delhaize America Board. Mr. McCanless will continue as
CEO of Delhaize America. Both Mr. Farrington and Mr. McCanless will report to
Pierre Beckers, Chairman of Delhaize America.
Mr. McCanless said, "We have always admired Hannaford for the strength of its
management, for its corporate culture which emphasizes customer and employee
satisfaction, and as a highly profitable and well-run business. We look forward
to building the Hannaford brand and expanding our platform of multi-format
stores under one organization.
"Together, we are very complementary companies, both operationally and
geographically. We have strong traditions of performance and leadership within
our industry. Both companies have consistently reported among the highest
operating margins in the food retail industry. Hannaford has many distinctive
qualities upon which we can build within the Delhaize America organization, such
as its expertise in general merchandise and in-store services. Food Lion brings
to Delhaize America its strength in marketing, cost containment and real estate
development. And, we each have strengths in information technology, category
management and associate relations. We view this as an outstanding building
block to continue creating value for our shareholders."
Mr. McCanless noted that the acquisition of Hannaford will be dilutive to GAAP
earnings per share, but will be accretive on a cash earnings per share basis to
Delhaize America in the first year based on its historical and estimated 1999
cash earnings per share. Delhaize America expects to record a one-time charge in
connection with the combination. Standard & Poor's has reviewed this transaction
and has given Food Lion a BBB- investment grade rating.
Furthermore, the combination is expected to result in synergies estimated at
approximately $40 million in the first year and approximately $75 million
annually by year three, in such areas as cost savings, procurement efficiencies,
distribution, information systems, category management, marketing and training.
Mr. Farrington said, "We are extremely pleased to join forces with Delhaize
America and that our shareholders will receive a very attractive premium for
their shares. Delhaize
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America is an excellent strategic growth partner in an industry which continues
to consolidate. Its structure will enable us to expand our operations and ensure
that we will continue to provide our customers with the highest-quality products
and services. Both management teams have long respected one another, and we look
forward to working together.
"At the same time, we are also pleased that Hannaford will maintain its
Scarborough headquarters and we have no plans for reduction in the number of our
associates," Mr. Farrington added.
J.P. Morgan & Co. served as financial advisor to Food Lion, and Morgan Stanley
Dean Witter & Co. served as financial advisor to Hannaford. Akin, Gump, Strauss,
Hauer & Feld, LLP was legal advisor Food Lion, and Weil, Gotshal & Manges LLP
advised Hannaford.
Hannaford Bros. Co., based in Scarborough, Maine, operates 152 supermarkets in
Maine, New Hampshire, Vermont, Massachusetts, New York, Virginia and North and
South Carolina. A publicly held company (NYSE-HRD) with annual sales of $3.3
billion, Hannaford employs 24,000 associates in eight states.
With 1998 sales of $10.2 billion, Food Lion, Inc. is one of the nation's largest
supermarket chains. The Company and its more than 92,000 employees serve more
than 10 million customers a week at 1,143 Food Lion supermarkets in 11 states,
and 104 Kash n' Karry and 11 Save 'n Pack supermarkets in Central Florida.
This document contains forward-looking statements that involve uncertainties.
Factors that could cause results to differ materially from those in the
forward-looking statements are detailed from time to time in reports filed by
the Companies with the SEC, including Forms 8K, 10Q and 10K.
# # #
For Further Information:
For: Food Lion, Inc. For: Hannaford Bros. Co.
Chris Ahearn (Media Relations) Beryl Wolfe (Media Relations)
(704) 633-8250, ext. 2892 Wolfe Public Relations
(207) 775-5115
David Hogan (Investor Relations)
(704) 633-2529, ext. 2529 Chuck Crockett (Investor Relations)
(207) 885-2349
David Lilly
Jeffrey Taufield
Kekst and Company
(212) 521-4800
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