SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------------------------------
SCHEDULE 13D
Under the Securities Exchange Act of 1934
RYKOFF-SEXTON, INC.
(Name of Issuer)
Common Stock, Par Value $.10 Per Share
(Title of Class of Securities)
783759103
(CUSIP Number)
Merrill Lynch Capital Partners, Inc.
225 Liberty Street
New York, New York 10080-6123
Attention: James V. Caruso
Telephone: (212) 236-7753
(Name, Address and Telephone Number of
Person Authorized to Receive Notices and
Communications)
Copy to:
Marcia L. Tu, Esq.
Merrill Lynch & Co., Inc.
World Financial Center
North Tower
New York, New York 10281-1323
Telephone: (212) 449-8412
May 17, 1996
(Date of Event which Requires Filing of this Statement)
================================================================================
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box |_|. Check
the following box if a fee is being paid with this statement /X/.
<PAGE>
CUSIP No. 783759103
(1) Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
MERRILL LYNCH & CO, INC.
(2) Check the Appropriate Box if a Member of Group (See Instructions)
|_| (a)
|_| (b)
(3) SEC Use Only
(4) Sources of Funds (See Instructions) OO
(5) Check if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e).
(6) Citizenship or Place of Organization Delaware
Number of (7) Sole Voting Power -0-
Shares
Beneficially (8) Shared Voting Power 10,078,104
Owned by
Each (9) Sole Dispositive Power -0-
Reporting
Person (10) Shared Dispositive Power 10,078,104
With
(11) Aggregate Amount Beneficially Owned by Each
Reporting Person 10,078,104
(12) Check if the Aggregate Amount in Row (11) Excludes Certain Shares
(See Instructions)
(13) Percent of Class Represented by Amount in Row (11) 36.4%
(14) Type of Reporting Person (See Instructions) HC, CO
<PAGE>
CUSIP No. 783759103
(1) Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
MERRILL LYNCH GROUP, INC.
(2) Check the Appropriate Box if a Member of Group (See Instructions)
|_| (a)
|_| (b)
(3) SEC Use Only
(4) Sources of Funds (See Instructions) OO
(5) Check if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e).
(6) Citizenship or Place of Organization Delaware
Number of (7) Sole Voting Power -0-
Shares
Beneficially (8) Shared Voting Power 10,076,004
Owned by
Each (9) Sole Dispositive Power -0-
Reporting
Person (10) Shared Dispositive Power 10,076,004
With
(11) Aggregate Amount Beneficially Owned by Each
Reporting Person 10,076,004
(12) Check if the Aggregate Amount in Row (11) Excludes Certain Shares
(See Instructions)
(13) Percent of Class Represented by Amount in Row (11) 36.4%
(14) Type of Reporting Person (See Instructions) HC, CO
<PAGE>
CUSIP No. 783759103
(1) Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
MERRILL LYNCH MBP INC.
(2) Check the Appropriate Box if a Member of Group (See Instructions)
|_| (a)
|_| (b)
(3) SEC Use Only
(4) Sources of Funds (See Instructions) OO
(5) Check if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e).
(6) Citizenship or Place of Organization Delaware
Number of (7) Sole Voting Power -0-
Shares
Beneficially (8) Shared Voting Power 10,076,004
Owned by
Each (9) Sole Dispositive Power -0-
Reporting
Person (10) Shared Dispositive Power 10,076,004
With
(11) Aggregate Amount Beneficially Owned by Each
Reporting Person 10,076,004
(12) Check if the Aggregate Amount in Row (11) Excludes Certain Shares
(See Instructions)
(13) Percent of Class Represented by Amount in Row (11) 36.4%
(14) Type of Reporting Person (See Instructions) CO
<PAGE>
CUSIP No. 783759103
(1) Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
MERCHANT BANKING L.P. NO. II
(2) Check the Appropriate Box if a Member of Group (See Instructions)
|_| (a)
|_| (b)
(3) SEC Use Only
(4) Sources of Funds (See Instructions) OO
(5) Check if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e).
(6) Citizenship or Place of Organization Delaware
Number of (7) Sole Voting Power -0-
Shares
Beneficially (8) Shared Voting Power 10,076,004
Owned by
Each (9) Sole Dispositive Power -0-
Reporting
Person (10) Shared Dispositive Power 10,076,004
With
(11) Aggregate Amount Beneficially Owned by Each
Reporting Person 10,076,004
(12) Check if the Aggregate Amount in Row (11) Excludes Certain Shares
(See Instructions)
(13) Percent of Class Represented by Amount in Row (11) 36.4%
(14) Type of Reporting Person (See Instructions) PN
<PAGE>
CUSIP No. 783759103
(1) Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
MERRILL LYNCH CAPITAL PARTNERS, INC.
(2) Check the Appropriate Box if a Member of Group (See Instructions)
|_| (a)
|_| (b)
(3) SEC Use Only
(4) Sources of Funds (See Instructions) OO
(5) Check if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e).
(6) Citizenship or Place of Organization Delaware
Number of (7) Sole Voting Power -0-
Shares
Beneficially (8) Shared Voting Power 10,076,004
Owned by
Each (9) Sole Dispositive Power -0-
Reporting
Person (10) Shared Dispositive Power 10,076,004
With
(11) Aggregate Amount Beneficially Owned by Each
Reporting Person 10,076,004
(12) Check if the Aggregate Amount in Row (11) Excludes Certain Shares
(See Instructions)
(13) Percent of Class Represented by Amount in Row (11) 36.4%
(14) Type of Reporting Person (See Instructions) CO
<PAGE>
CUSIP No. 783759103
(1) Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
ML EMPLOYEES LBO MANAGERS, INC.
(2) Check the Appropriate Box if a Member of Group (See Instructions)
|_| (a)
|_| (b)
(3) SEC Use Only
(4) Sources of Funds (See Instructions) OO
(5) Check if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e).
(6) Citizenship or Place of Organization Delaware
Number of (7) Sole Voting Power -0-
Shares
Beneficially (8) Shared Voting Power 10,076,004
Owned by
Each (9) Sole Dispositive Power -0-
Reporting
Person (10) Shared Dispositive Power 10,076,004
With
(11) Aggregate Amount Beneficially Owned by Each
Reporting Person 10,076,004
(12) Check if the Aggregate Amount in Row (11) Excludes Certain Shares
(See Instructions)
(13) Percent of Class Represented by Amount in Row (11) 36.4%
(14) Type of Reporting Person (See Instructions) CO
<PAGE>
CUSIP No. 783759103
(1) Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
ML EMPLOYEES LBO PARTNERSHIP NO. I, L.P.
(2) Check the Appropriate Box if a Member of Group (See Instructions)
|_| (a)
|_| (b)
(3) SEC Use Only
(4) Sources of Funds (See Instructions) OO
(5) Check if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e).
(6) Citizenship or Place of Organization Delaware
Number of (7) Sole Voting Power -0-
Shares
Beneficially (8) Shared Voting Power 10,076,004
Owned by
Each (9) Sole Dispositive Power -0-
Reporting
Person (10) Shared Dispositive Power 10,076,004
With
(11) Aggregate Amount Beneficially Owned by Each
Reporting Person 10,076,004
(12) Check if the Aggregate Amount in Row (11) Excludes Certain Shares
(See Instructions)
(13) Percent of Class Represented by Amount in Row (11) 36.4%
(14) Type of Reporting Person (See Instructions) PN
<PAGE>
CUSIP No. 783759103
(1) Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
MERRILL LYNCH LBO PARTNERS NO. IV, L.P.
(2) Check the Appropriate Box if a Member of Group (See Instructions)
|_| (a)
|_| (b)
(3) SEC Use Only
(4) Sources of Funds (See Instructions) OO
(5) Check if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e).
(6) Citizenship or Place of Organization Delaware
Number of (7) Sole Voting Power -0-
Shares
Beneficially (8) Shared Voting Power 10,076,011
Owned by
Each (9) Sole Dispositive Power -0-
Reporting
Person (10) Shared Dispositive Power 10,076,011
With
(11) Aggregate Amount Beneficially Owned by Each
Reporting Person 10,076,011
(12) Check if the Aggregate Amount in Row (11) Excludes Certain Shares
(See Instructions)
(13) Percent of Class Represented by Amount in Row (11) 36.4%
(14) Type of Reporting Person (See Instructions) PN
<PAGE>
CUSIP No. 783759103
(1) Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
MERRILL LYNCH CAPITAL APPRECIATION PARTNERSHIP NO. XIII, L.P.
(2) Check the Appropriate Box if a Member of Group (See Instructions)
|_| (a)
|_| (b)
(3) SEC Use Only
(4) Sources of Funds (See Instructions) OO
(5) Check if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e).
(6) Citizenship or Place of Organization Delaware
Number of (7) Sole Voting Power -0-
Shares
Beneficially (8) Shared Voting Power 10,076,004
Owned by
Each (9) Sole Dispositive Power -0-
Reporting
Person (10) Shared Dispositive Power 10,076,004
With
(11) Aggregate Amount Beneficially Owned by Each
Reporting Person 10,076,004
(12) Check if the Aggregate Amount in Row (11) Excludes Certain Shares
(See Instructions)
(13) Percent of Class Represented by Amount in Row (11) 36.4%
(14) Type of Reporting Person (See Instructions) PN
<PAGE>
CUSIP No. 783759103
(1) Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
ML OFFSHORE LBO PARTNERSHIP NO. XIII
(2) Check the Appropriate Box if a Member of Group (See Instructions)
|_| (a)
|_| (b)
(3) SEC Use Only
(4) Sources of Funds (See Instructions) OO
(5) Check if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e).
(6) Citizenship or Place of Organization Cayman Islands
Number of (7) Sole Voting Power -0-
Shares
Beneficially (8) Shared Voting Power 10,076,004
Owned by
Each (9) Sole Dispositive Power -0-
Reporting
Person (10) Shared Dispositive Power 10,076,004
With
(11) Aggregate Amount Beneficially Owned by Each
Reporting Person 10,076,004
(12) Check if the Aggregate Amount in Row (11) Excludes Certain Shares
(See Instructions)
(13) Percent of Class Represented by Amount in Row (11) 36.4%
(14) Type of Reporting Person (See Instructions) PN
<PAGE>
CUSIP No. 783759103
(1) Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
MERRILL LYNCH LBO PARTNERS NO. B-IV, L.P.
(2) Check the Appropriate Box if a Member of Group (See Instructions)
|_| (a)
|_| (b)
(3) SEC Use Only
(4) Sources of Funds (See Instructions) OO
(5) Check if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e).
(6) Citizenship or Place of Organization Delaware
Number of (7) Sole Voting Power -0-
Shares
Beneficially (8) Shared Voting Power 10,076,004
Owned by
Each (9) Sole Dispositive Power -0-
Reporting
Person (10) Shared Dispositive Power 10,076,004
With
(11) Aggregate Amount Beneficially Owned by Each
Reporting Person 10,076,004
(12) Check if the Aggregate Amount in Row (11) Excludes Certain Shares
(See Instructions)
(13) Percent of Class Represented by Amount in Row (11) 36.4%
(14) Type of Reporting Person (See Instructions) PN
<PAGE>
CUSIP No. 783759103
(1) Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
MERRILL LYNCH CAPITAL APPRECIATION
PARTNERSHIP NO. B-XVIII, L.P.
(2) Check the Appropriate Box if a Member of Group (See Instructions)
|_| (a)
|_| (b)
(3) SEC Use Only
(4) Sources of Funds (See Instructions) OO
(5) Check if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e).
(6) Citizenship or Place of Organization Delaware
Number of (7) Sole Voting Power -0-
Shares
Beneficially (8) Shared Voting Power 10,076,004
Owned by
Each (9) Sole Dispositive Power -0-
Reporting
Person (10)Shared Dispositive Power 10,076,004
With
(11) Aggregate Amount Beneficially Owned by Each
Reporting Person 10,076,004
(12) Check if the Aggregate Amount in Row (11) Excludes Certain Shares
(See Instructions)
(13) Percent of Class Represented by Amount in Row (11) 36.4%
(14) Type of Reporting Person (See Instructions) PN
<PAGE>
CUSIP No. 783759103
(1) Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
ML OFFSHORE LBO PARTNERSHIP NO. B-XVIII
(2) Check the Appropriate Box if a Member of Group (See Instructions)
|_| (a)
|_| (b)
(3) SEC Use Only
(4) Sources of Funds (See Instructions) OO
(5) Check if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e).
(6) Citizenship or Place of Organization Cayman Islands
Number of (7) Sole Voting Power -0-
Shares
Beneficially (8) Shared Voting Power 10,076,004
Owned by
Each (9) Sole Dispositive Power -0-
Reporting
Person (10) Shared Dispositive Power 10,076,004
With
(11) Aggregate Amount Beneficially Owned by Each
Reporting Person 10,076,004
(12) Check if the Aggregate Amount in Row (11) Excludes Certain Shares
(See Instructions)
(13) Percent of Class Represented by Amount in Row (11) 36.4%
(14) Type of Reporting Person (See Instructions) PN
<PAGE>
CUSIP No. 783759103
(1) Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
MLCP ASSOCIATES L.P. NO. II
(2) Check the Appropriate Box if a Member of Group (See Instructions)
|_| (a)
|_| (b)
(3) SEC Use Only
(4) Sources of Funds (See Instructions) OO
(5) Check if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e).
(6) Citizenship or Place of Organization Delaware
Number of (7) Sole Voting Power -0-
Shares
Beneficially (8) Shared Voting Power 10,076,004
Owned by
Each (9) Sole Dispositive Power -0-
Reporting
Person (10) Shared Dispositive Power 10,076,004
With
(11) Aggregate Amount Beneficially Owned by Each
Reporting Person 10,076,004
(12) Check if the Aggregate Amount in Row (11) Excludes Certain Shares
(See Instructions)
(13) Percent of Class Represented by Amount in Row (11) 36.4%
(14) Type of Reporting Person (See Instructions) PN
<PAGE>
CUSIP No. 783759103
(1) Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
MLCP ASSOCIATES L.P. NO. IV
(2) Check the Appropriate Box if a Member of Group (See Instructions)
|_| (a)
|_| (b)
(3) SEC Use Only
(4) Sources of Funds (See Instructions) OO
(5) Check if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e).
(6) Citizenship or Place of Organization Delaware
Number of (7) Sole Voting Power -0-
Shares
Beneficially (8) Shared Voting Power 10,076,004
Owned by
Each (9) Sole Dispositive Power -0-
Reporting
Person (10) Shared Dispositive Power 10,076,004
With
(11) Aggregate Amount Beneficially Owned by Each
Reporting Person 10,076,004
(12) Check if the Aggregate Amount in Row (11) Excludes Certain Shares
(See Instructions)
(13) Percent of Class Represented by Amount in Row (11) 36.4%
(14) Type of Reporting Person (See Instructions) PN
<PAGE>
CUSIP No. 783759103
(1) Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
ML IBK POSITIONS, INC.
(2) Check the Appropriate Box if a Member of Group (See Instructions)
|_| (a)
|_| (b)
(3) SEC Use Only
(4) Sources of Funds (See Instructions) OO
(5) Check if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e).
(6) Citizenship or Place of Organization Delaware
Number of (7) Sole Voting Power -0-
Shares
Beneficially (8) Shared Voting Power 10,076,004
Owned by
Each (9) Sole Dispositive Power -0-
Reporting
Person (10) Shared Dispositive Power 10,076,004
With
(11) Aggregate Amount Beneficially Owned by Each
Reporting Person 10,076,004
(12) Check if the Aggregate Amount in Row (11) Excludes Certain Shares
(See Instructions)
(13) Percent of Class Represented by Amount in Row (11) 36.4%
(14) Type of Reporting Person (See Instructions) CO
<PAGE>
CUSIP No. 783759103
(1) Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
KECALP INC.
(2) Check the Appropriate Box if a Member of Group (See Instructions)
|_| (a)
|_| (b)
(3) SEC Use Only
(4) Sources of Funds (See Instructions) OO
(5) Check if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e).
(6) Citizenship or Place of Organization Delaware
Number of (7) Sole Voting Power -0-
Shares
Beneficially (8) Shared Voting Power 10,076,004
Owned by
Each (9) Sole Dispositive Power -0-
Reporting
Person (10) Shared Dispositive Power 10,076,004
With
(11) Aggregate Amount Beneficially Owned by Each
Reporting Person 10,076,004
(12) Check if the Aggregate Amount in Row (11) Excludes Certain Shares
(See Instructions)
(13) Percent of Class Represented by Amount in Row (11) 36.4%
(14) Type of Reporting Person (See Instructions) CO
<PAGE>
CUSIP No. 783759103
(1) Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
MERRILL LYNCH KECALP L.P. 1987
(2) Check the Appropriate Box if a Member of Group (See Instructions)
|_| (a)
|_| (b)
(3) SEC Use Only
(4) Sources of Funds (See Instructions) OO
(5) Check if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e).
(6) Citizenship or Place of Organization Delaware
Number of (7) Sole Voting Power -0-
Shares
Beneficially (8) Shared Voting Power 10,076,004
Owned by
Each (9) Sole Dispositive Power -0-
Reporting
Person (10) Shared Dispositive Power 10,076,004
With
(11) Aggregate Amount Beneficially Owned by Each
Reporting Person 10,076,004
(12) Check if the Aggregate Amount in Row (11) Excludes Certain Shares
(See Instructions)
(13) Percent of Class Represented by Amount in Row (11) 36.4%
(14) Type of Reporting Person (See Instructions) PN
<PAGE>
CUSIP No. 783759103
(1) Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
MERRILL LYNCH KECALP L.P. 1991
(2) Check the Appropriate Box if a Member of Group (See Instructions)
|_| (a)
|_| (b)
(3) SEC Use Only
(4) Sources of Funds (See Instructions) OO
(5) Check if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e).
(6) Citizenship or Place of Organization Delaware
Number of (7) Sole Voting Power -0-
Shares
Beneficially (8) Shared Voting Power 10,076,004
Owned by
Each (9) Sole Dispositive Power -0-
Reporting
Person (10) Shared Dispositive Power 10,076,004
With
(11) Aggregate Amount Beneficially Owned by Each
Reporting Person 10,076,004
(12) Check if the Aggregate Amount in Row (11) Excludes Certain Shares
(See Instructions)
(13) Percent of Class Represented by Amount in Row (11) 36.4%
(14) Type of Reporting Person (See Instructions) PN
<PAGE>
CUSIP No. 783759103
(1) Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
MERRILL LYNCH KECALP L.P. 1994
(2) Check the Appropriate Box if a Member of Group (See Instructions)
|_| (a)
|_| (b)
(3) SEC Use Only
(4) Sources of Funds (See Instructions) OO
(5) Check if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e).
(6) Citizenship or Place of Organization Delaware
Number of (7) Sole Voting Power -0-
Shares
Beneficially (8) Shared Voting Power 10,076,004
Owned by
Each (9) Sole Dispositive Power -0-
Reporting
Person (10) Shared Dispositive Power 10,076,004
With
(11) Aggregate Amount Beneficially Owned by Each
Reporting Person 10,076,004
(12) Check if the Aggregate Amount in Row (11) Excludes Certain Shares
(See Instructions)
(13) Percent of Class Represented by Amount in Row (11) 36.4%
(14) Type of Reporting Person (See Instructions) PN
<PAGE>
Item 1. Security and Issuer.
The class of equity securities to which this Statement on Schedule
13D relates is the common stock, par value $.10 per share (the "Issuer Common
Stock"), of Rykoff-Sexton, Inc., a Delaware corporation (the "Issuer"). The
address of the Issuer's principal executive offices is 1050 Warrenville Road,
Lisle, Illinois 60523-5201.
Item 2. Identity and Background.
This Statement is being filed by (a) Merchant Banking L.P. No. II,
(b) ML Employees LBO Partnership No. I, L.P., (c) Merrill Lynch Capital
Appreciation Partnership No. XIII, L.P., (d) ML Offshore LBO Partnership No.
XIII, (e) Merrill Lynch Capital Appreciation Partnership No. B-XVIII, L.P., (f)
ML Offshore LBO Partnership No. B-XVIII, (g) MLCP Associates L.P. No. II, (h)
MLCP Associates L.P. No. IV, (i) ML IBK Positions, Inc., (j) Merrill Lynch
KECALP L.P. 1987, (k) Merrill Lynch KECALP L.P. 1991, (l) Merrill Lynch KECALP
L.P. 1994 (collectively, the "ML Investors"), (m) Merrill Lynch & Co., Inc., (n)
Merrill Lynch Group, Inc., (o) Merrill Lynch MBP Inc., (p) Merrill Lynch Capital
Partners, Inc., (q) ML Employees LBO Managers, Inc., (r) Merrill Lynch LBO
Partners No. IV, (s) Merrill Lynch LBO Partners No. B-IV and (t) KECALP, Inc.
(collectively with the ML Investors, the "Filing ML Entities").
Merrill Lynch Group, Inc. is a wholly owned subsidiary of Merrill
Lynch & Co. Inc. Merrill Lynch MBP Inc., Merrill Lynch Capital Partners, Inc.,
ML IBK Positions, Inc. and KECALP Inc. are wholly owned subsidiaries of Merrill
Lynch Group, Inc. Merrill Lynch MBP Inc. is the general partner of Merchant
Banking L.P. II. Merrill Lynch Capital Partners, Inc. is the general partner of
Merrill Lynch LBO Partners No. IV, Merrill Lynch LBO Partners No. B-IV, MLCP
Associates L.P. No. II and MLCP Associates L.P. No. IV. ML Employees LBO
Managers, Inc. is a wholly owned subsidiary of Merrill Lynch Capital Partners,
Inc. ML Employees LBO Managers, Inc. is the general partner of ML Employees LBO
Partnership No. I L.P. Merrill Lynch LBO Partners No. IV is the general partner
of Merrill Lynch Capital Appreciation Partnership No. XIII, L.P. and the
investment general partner of ML Offshore LBO Partnership No. XIII. Merrill
Lynch LBO Partners No. B-IV is the general partner of Merrill Lynch Capital
Appreciation Partnership No. B-XVIII, L.P. and the investment general partner of
ML Offshore LBO Partnership No. B-XVIII. KECALP, Inc. is the general partner of
Merrill Lynch KECALP L.P. 1987, Merrill Lynch KECALP L.P. 1991 and Merrill Lynch
KECALP L.P. 1994. Merrill Lynch International, Inc. is a wholly owned subsidiary
of Merrill Lynch & Co., Inc., and Merrill Lynch International Capital Management
(Guernsey) II Limited is a wholly owned subsidiary of Merrill Lynch
International, Inc. Merrill Lynch International Capital Management (Guernsey) II
Limited is the administrative general partner of both ML Offshore LBO
Partnership No. XIII and ML Offshore LBO Partnership No. B-XVIII.
Merrill Lynch & Co., Inc., Merrill Lynch Group, Inc., Merrill
Lynch MBP Inc., Merrill Lynch Capital Partners, Inc., ML IBK Positions, Inc.,
KECALP Inc., ML Employees LBO Managers, Inc. and Merrill Lynch International,
Inc. (collectively, the "ML Domestic Corporate Entities") are each corporations
organized under the laws of the state of Delaware, and Merrill Lynch
International Capital
<PAGE>
Management (Guernsey) II Limited (together with the ML Domestic Corporate
Entities, the "ML Corporate Entities") is a corporation organized under the laws
of Guernsey, Channel Islands. Merchant Banking L.P. No. II, ML Employees LBO
Partnership No. I, L.P., Merrill Lynch LBO Partners No. IV, Merrill Lynch LBO
Partners No. B-IV, Merrill Lynch Capital Appreciation Partnership No. XIII,
L.P., Merrill Lynch Capital Appreciation Partnership No. B-XVIII, L.P., MLCP
Associates L.P. No. II, MLCP Associates L.P. No. IV, Merrill Lynch KECALP L.P.
1987, Merrill Lynch KECALP L.P. 1991 and Merrill Lynch KECALP L.P. 1994
(collectively, the "ML Domestic Partnerships") are each limited partnerships
organized under the laws of the State of Delaware. ML Offshore LBO Partnership
No. XIII and ML Offshore LBO Partnership No. B-XVIII (collectively, the "ML
Offshore Partnerships") are each limited partnerships organized under the laws
of the Cayman Islands.
Attached hereto as Appendix A is a list of each of the ML
Corporate Entities, each of the ML Domestic Partnerships and each of the ML
Offshore Partnerships setting forth the following information with respect to
each such entity:
(a) name;
(b) principal business; and
(c) address of principal business and office.
Attached hereto as Appendix B is a list of the executive officers
and directors of each ML Corporate Entity setting forth the following
information with respect to each such person:
(a) name;
(b) business address (or residence where indicated);
(c) present principal occupation or employment and the name,
principal business and address of any corporation or other
organization in which such employment is conducted; and
(d) citizenship.
During the last five years, no entity listed on Appendix A and, to
the knowledge of the Filing ML Entities, no person listed on Appendix B, has
been (i) convicted in a criminal proceeding (excluding traffic violations or
similar misdemeanors) or (ii) has been a party to a civil proceeding of a
judicial or administrative body of competent jurisdiction and, as a result of
such proceeding, was or is subject to a judgment, decree or final order
enjoining future violations of, or prohibiting or mandating activities subject
to, federal or state securities laws or finding any violation with respect to
such laws.
Item 3. Source and Amount of Funds or Other Consideration.
This statement relates to shares of the Issuer Common Stock that
the ML Investors have received as consideration in the merger (the "Merger") of
US
<PAGE>
Foodservice, a Delaware corporation ("US Foodservice"), with and into USF
Acquisition Corporation, a Delaware corporation and a direct wholly owned
subsidiary of the Issuer ("Merger Sub"), in accordance with the terms and
conditions of an Agreement and Plan of Merger dated February 2, 1996 (the
"Merger Agreement") among the Issuer, Merger Sub and US Foodservice. On May 17,
1996, pursuant to the terms and conditions of the Merger Agreement, (A) the
Merger was consummated, and (B) each outstanding share of (i) Class A Common
Stock, par value $.01 per share, of US Foodservice (the "Class A Common Stock")
and (ii) Class B Common Stock, par value $.01 per share, of US Foodservice (the
"Class B Common Stock" and, together with the Class A Common Stock, the "US
Foodservice Common Stock") (other than shares of US Foodservice Common Stock
held by holders who have demanded and perfected appraisal rights) was converted
into the right to receive 1.457 shares of the Issuer Common Stock. Immediately
prior to the Merger, the ML Entities owned 6,915,588, shares of the Class A
Common Stock, which represented approximately 78.2% of the then total
outstanding shares of US Foodservice Common Stock.
A copy of the Merger Agreement is attached hereto as Exhibit A and
is hereby incorporated herein by reference.
Item 4. Purpose of Transaction.
The Issuer Common Stock was acquired by the ML Investors pursuant
to the Merger. The Issuer Common Stock so acquired by the ML Investors is being
held for investment purposes and not with the intention of acquiring control of
the Issuer.
The Filing ML Entities from time to time intend to review their
respective investments in the Issuer on the basis of various factors, including
the Issuer's business, financial condition, results of operations and prospects,
general economic and industry conditions, the securities markets in general and
those for the Issuer's securities in particular, as well as other developments
and other investment opportunities. Based upon such review, and subject to the
restrictions set forth in the agreements referred to below, the Filing ML
Entities will take such actions in the future as the Filing ML Entities may deem
appropriate in light of the circumstances existing from time to time.
Merrill Lynch Capital Partners, Inc. and the ML Investors
(collectively, the "ML Entities") are parties to certain agreements with the
Issuer, described in Item 6 below, that, among other things, prohibit the
acquisition by the ML Entities of any additional shares of Issuer Common Stock
and impose substantial restrictions on the ability of the ML Investors to
dispose of their shares of Issuer Common Stock. In addition, pursuant to such
agreements (i) the ML Investors have agreed to vote in favor of the Issuer's
nominees to the Issuer's Board of Directors and to abstain from taking certain
actions relating to the control of the Issuer, (ii) the ML Investors have the
right to nominate up to four of the twelve directors of the Issuer, with such
number of nominees decreasing as the ownership of the ML Investors decreases and
(iii) the Issuer has granted the ML Investors certain "demand" and "piggy back"
registration rights. Upon the consummation of the Merger, the Board of Directors
of the Issuer was increased from eight to twelve directors and the vacancies
created thereby were filled by appointees of the ML Investors.
<PAGE>
None of the Filing ML Entities has formulated any plans or
proposals that relate to or would result in any of the actions specified in
clauses (a) through (j) of Item 4 of Schedule 13D.
Item 5. Interest in Securities of the Issuer.
The Filing ML Entities beneficially own an aggregate of 10,080,211
shares of Issuer Common Stock, representing approximately 36.4% of the total
currently outstanding.
For each Filing ML Entity, the information contained in Items 7-11
and Item 13 on the applicable cover page hereto regarding such Filing ML Entity
is hereby incorporated herein by reference.
Each Filing ML Entity disclaims beneficial ownership of the shares
of Issuer Common Stock not held of record by such Filing ML Entity.
None of the entities listed on Schedule I and, to the knowledge of
the Filing ML Entities, no person listed on Schedule II has effected any
transaction in the Issuer Common Stock during the past 60 days, in each case
other than the acquisition of the Issuer Common Stock pursuant to the Merger.
The Merger and the Merger Agreement are described in Item 3 hereof, and the
information contained in Item 3 is hereby incorporated herein by reference.
Item 6. Contracts, Arrangements, Understandings or Relationships with Respect
to Securities of the Issuer.
The ML Entities have entered into certain agreements with the
Issuer with respect to, among other things, the acquisition of additional Issuer
Common Stock by the ML Entities and the transfer and voting of the Issuer Common
Stock held by the ML Investors.
The Issuer and the ML Entities are parties to an agreement (the
"Standstill Agreement") providing, among other things, (i) for the designation
by the ML Entities of four nominees to the Issuer's Board of Directors, which
has twelve members, with such number of nominees and Board members decreasing if
the percentage of outstanding shares of Issuer Common Stock held by the ML
Entities falls below certain levels, (ii) that, for a period of ten years, the
ML Entities will not acquire beneficial ownership of additional voting
securities of the Issuer representing voting power in excess of 36.4% of the
outstanding voting securities of the Issuer and will not take certain other
actions relating to the control of the Issuer, (iii) that the ML Entities will
vote in favor of the Issuer's nominees for the Issuer's Board of Directors, (iv)
for certain restrictions on transfer of the Issuer's voting securities held by
the ML Entities and (v) for a right of first refusal, under specified
circumstances, for the Issuer in respect of certain transfers by the ML Entities
of shares of Issuer Common Stock. Notwithstanding the foregoing, Merrill Lynch,
Pierce, Fenner & Smith Incorporated ("MLPF&S") and its affiliates (other than
the ML Entities) may effect or recommend transactions in the ordinary course of
its or their business provided that they do not acquire beneficial ownership of
more than 2% of the outstanding voting securities of the Issuer (with such
percentage increasing up to 5% if the percentage of outstanding voting
securities of the Issuer held by the ML Entities
<PAGE>
falls below certain levels). A copy of the Standstill Agreement is attached
hereto as Exhibit B and is incorporated herein by reference.
The Issuer and the ML Investors are parties to an agreement (the
"Registration Rights Agreement") which provides the ML Investors with certain
"demand" and "piggyback" registration rights and certain other parties with
"piggyback" registration rights, subject to certain conditions, requiring the
Issuer to register for sale under the Securities Act all or a portion of the
Issuer Common Stock owned by them. A copy of the Registration Rights Agreement
is attached hereto as Exhibit C and is incorporated herein by reference.
The Issuer and certain former stockholders of US Foodservice,
including all of the ML Investors, are parties to an agreement (the "Tax
Agreement") that provides assurances in connection with the qualification of the
Merger as a tax-free reorganization for federal income tax purposes. Each
stockholder of US Foodservice that is a party to the Tax Agreement has agreed,
for the two-year period following the Effective Time, not to sell, exchange,
distribute or otherwise dispose of in any manner more than approximately 49% of
the shares of Issuer Common Stock received in the Merger by such stockholder.
For purposes, however, of applying the transfer restrictions in the Tax
Agreement to the ML Investors, all of the shares of Issuer Common Stock received
in the Merger by the ML Investors are to be aggregated, and the ML Investors are
treated as a single stockholder. Provided that a stockholder of US Foodservice
that is a party to the Tax Agreement complies with the transfer restrictions
contained therein and satisfies certain other conditions, the Issuer and each
other stockholder of US Foodservice that is a party to the Tax Agreement waives
and releases any claims that any of them might have against such stockholder
under the Tax Agreement or otherwise resulting from the failure of the Merger to
qualify as a tax-free reorganization for federal income tax purposes. A copy of
the Tax Agreement is attached hereto as Exhibit D and is incorporated herein by
reference.
Except for the Standstill Agreement, the Registration Rights
Agreement and the Tax Agreement, none of the entities listed on Schedule I and,
to the knowledge of the Filing ML Entities, none of the persons listed on
Schedule II has any contract, arrangement, understanding or relationship (legal
or otherwise) with any person with respect to any securities of the Issuer,
including, but not limited to, transfer or voting of any such securities,
finder's fees, joint ventures, loan or option arrangements, puts or calls,
guarantees of profits, division of profits or loss, or the giving or withholding
of proxies.
<PAGE>
Item 7. Material to be Filed as Exhibits.
A. Agreement and Plan of Merger dated February 2, 1996, among the Issuer,
Merger Sub and US Foodservice.
B. Standstill Agreement dated as of May 17, 1996 among the ML Entities,
certain other stockholders of the Issuer and the Issuer.
C. Registration Rights Agreement dated as of May 17, 1996 among the ML
Investors and the Issuer.
D. Tax Agreement dated as of May 17, 1996 among the ML Investors and the
Issuer.
E. Joint Filing Agreement dated as of May 28, 1996 among the Filing ML
Entities.
<PAGE>
Signature
After reasonable inquiry and to the best of our knowledge and
belief, we certify that the information set forth in this Statement is true,
complete and correct.
May 28, 1996 MERRILL LYNCH CAPITAL
PARTNERS, INC.
By: /s/ James V. Caruso
--------------------------
Name: James V. Caruso
Title: Vice President
<PAGE>
Exhibit Index
Exhibit Description
A. Agreement and Plan of Merger dated February 2,
1996 among the Issuer, Merger Sub and US
Foodservice.
B. Standstill Agreement dated as of May 17, 1996
among the ML Entities and the Issuer.
C. Registration Rights Agreement dated as of May 17,
1996 among the ML Entities and the Issuer.
D. Tax Agreement dated as of May 17, 1996 among
the ML Entities and the Issuer.
E. Join Filing Agreement dated as of May 28, 1996
among the Filing ML Entities.
<PAGE>
APPENDIX A
CORPORATIONS AND LIMITED PARTNERSHIPS
The names and principal businesses of the reporting entities are set
forth below. Unless otherwise noted, the ML Corporate Entities and the ML
Domestic Partnerships have as the address of their principal business and office
225 Liberty St., New York, NY 10080; and the ML Offshore Partnerships have as
the address of their principal business and office Roseneath, The Grange, St.
Peter Port, Guernsey, Channel Islands GYI 3AP.
<TABLE>
<CAPTION>
NAME PRINCIPAL BUSINESS
---- ------------------
<S> <C>
ML Corporate Entities
- ---------------------
Merrill Lynch & Co., Inc. (1) Holding Company that,
through its subsidiaries
and affiliates, provides
investment, financing,
insurance and related
services on a global
basis.
Merrill Lynch Group, Inc.(2) Holding Company.
Merrill Lynch MBP Inc. Acts as general partner for Merchant Banking
L.P. No. II.
Merrill Lynch Capital Partners, Inc. Acts as general partner for various investment
partnerships.
ML IBK Positions, Inc. Holds proprietary investments for Merrill
Lynch & Co., Inc.
KECALP Inc. Acts as general partner for various KECALP
investment partnerships.
ML Employees LBO Managers, Inc. Acts as general partner for ML Employees
LBO Partnership No. 1, L.P.
Merrill Lynch International Incorporated(3) Provides through its subsidiaries
and affiliates
investment, financing,
insurance and related
services outside the US
and Canada.
Merrill Lynch International Capital Management Acts as administrative General Partner for
(Guernsey) II Limited(4) various investment partnerships.
<FN>
- --------
1 250 Vesey St., New York, NY 10281.
2 250 Vesey St., New York, NY 10281.
3 250 Vesey St., New York, NY 10281.
4 Roseneath, The Grange,
St. Peter Port, Guernsey, Channel Islands
GYI 3AP
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NAME PRINCIPAL BUSINESS
---- ------------------
<S> <C>
ML Domestic Partnerships
- ------------------------
Merchant Banking L.P. No. II Investment partnership.
ML Employees LBO Partnership No. I, L.P. Investment partnership.
Merrill Lynch LBO Partners No. IV Acts as general partner for various investment
partnerships.
Merrill Lynch LBO Partners No. B-IV Acts as general partner for various investment
partnerships.
Merrill Lynch Capital Appreciation Partnership Investment partnership.
No. XIII, L.P.
Merrill Lynch Capital Appreciation Partnership Investment partnership.
No. B-XVIII, L.P.
MLCP Associates L.P. No. II Investment partnership.
MLCP Associates L.P. No. IV Investment partnership.
Merrill Lynch KECALP L.P. 1987 Investment partnership.
Merrill Lynch KECALP L.P. 1991 Investment partnership.
Merrill Lynch KECALP L.P. 1994 Investment partnership.
ML Offshore Partnerships
- ------------------------
ML Offshore LBO Partnership No. XIII Investment partnership.
ML Offshore LBO Partnership No. B-XVIII Investment partnership.
</TABLE>
<PAGE>
APPENDIX B
EXECUTIVE OFFICERS AND DIRECTORS
The names and principal occupations of each of the executive officers
and directors of Merrill Lynch & Co., Inc.; Merrill Lynch Group, Inc.; Merrill
Lynch MBP Inc.; Merrill Lynch Capital Partners, Inc.; ML IBK Positions, Inc.;
KECALP Inc.; ML Employees LBO Managers, Inc.; Merrill Lynch International
Incorporated; and Merrill Lynch International Capital Management (Guernsey) II
Limited are set forth below. Unless otherwise noted, all of these persons are
United States citizens, and have as their business address World Financial
Center, New York, NY 10281.
<TABLE>
<CAPTION>
NAME/POSITION PRESENT PRINCIPAL OCCUPATION
- ------------- ----------------------------
<S> <C>
Merrill Lynch & Co., Inc.
- -------------------------
Daniel P. Tully Same
Chairman & CEO
Herbert M. Allison, Jr. Same
Exec. VP, Corporate and Institutional Client
Group
William O. Bourke(1) Former Chairman and Chief Executive Officer, Reynolds Metals
Director Co.
Worley H. Clark(2) Former Chairman and Chief Executive Officer, Nalco Chemical
Director Co.
Jill K. Conway(3) Visiting Scholar, Massachusetts Institute of
Director Technology
Edward L. Goldberg Same
Exec. VP, Operations,
Systems & Communications
<FN>
- --------
1 Reynolds Metal Company
6601 West Broad St.
Richmond, VA 23230
2 W. H. Clark Associates, Ltd.
135 South LaSalle St.
Suite 1117
Chicago, IL 60603
3 Massachusetts Institute of Technology
Program on Science, Technology & Society
STS Building
E-51, Room 209 F
Cambridge, MA 02139
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NAME/POSITION PRESENT PRINCIPAL OCCUPATION
- ------------- ----------------------------
<S> <C>
Stephen L. Hammerman Same
Vice Chairman, Director & General Counsel
Earle H. Harbison, Jr.(4) Chairman, Harbison Corporation
Director
George B. Harvey(5) Chairman, President & Chief Executive Officer, Pitney Bowes
Director Inc.
William R. Hoover(6) Chairman & Former Chief Executive Officer, Computer Sciences
Director Corp.
Jerome P. Kenney Same
Exec. VP, Corp. Strategy, Credit & Research
David H. Komansky Same
President, COO & Director
Robert P. Luciano(7) Chairman, Schering-Plough Corporation
Director
Aulana L. Peters(8) Partner of Gibson, Dunn & Crutcher
Director
John J. Phelan, Jr. Senior Advisor, Boston Consulting Group
Director
<FN>
- --------
4 Harbison Corporation
7700 Bonhomme Ave.
Suite 750
St. Louis, MO 63105
5 Pitney Bowes Inc.
World Headquarters
Location #65-27
One Elmcroft Road
Stamford, CT 06926-0700
6 Computer Sciences Corp.
2100 East Grand Ave.
El Segundo, CA 90245
7 Schering-Plough Corp.
P.O. Box 1000
One Giralda Farms
Madison, NJ 07940-1000
8 Gibson, Dunn & Crutcher
333 South Grand Ave.
47th Floor
Los Angeles, CA 90071
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NAME/POSITION PRESENT PRINCIPAL OCCUPATION
- ------------- ----------------------------
<S> <C>
Winthrop H. Smith, Jr.(9) Same
Chairman, Merrill Lynch International
John L. Steffens Same
Exec. VP, Private Client Group
William L. Weiss(10) Chairman Emeritus, Ameritech Corporation
Director
Joseph T. Willet Same
CFO & Senior VP
Arthur H. Zeikel(11) Same
President, Merrill Lynch Asset Management
Merrill Lynch Group, Inc.
- -------------------------
Rosemary T. Berkery Senior Vice President and Associate General Counsel
Director & Vice President
Theresa Lang Senior Vice President and Treasurer
Director & President & Treasurer
Stanley Schaefer(12) Director of Tax
Director & Vice President
Frank T. Vayda Director, Corporate Reporting
Director & Vice President
Daniel C. Cochran(13) Chief Administrative Officer, Merrill Lynch International
Vice President
<FN>
- --------
9 225 Liberty St.
New York, NY 10080
10 One First National Plaza
21 South Clark St.
Suite 2530C
Chicago, IL 60603-2006
11 Merrill Lynch Asset Management
800 Scudders Mill Rd.
Plainsboro, NJ 08536
12 225 Liberty St.
New York, NY 10080
13 18/F, Asia Pacific Finance Tower
3 Garden Road, Central
Hong Kong
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NAME/POSITION PRESENT PRINCIPAL OCCUPATION
- ------------- ----------------------------
<S> <C>
H. Allen White(14) Director, Corporate Real Estate and Purchasing
Vice President
Merrill Lynch MBP Inc.
- ----------------------
Herbert M. Allison, Jr Executive Vice President, Corporate and Institutional Client
Vice President & Director Group
Matthias B. Bowman Vice Chairman, Investment Banking
President
James V. Caruso(15) Director, Partnership Analysis and Management
Treasurer & Vice President
Thomas W. Davis Co-head, Investment Banking
Vice President & Director
Barry S. Friedberg Executive Vice President
Director
Theresa Lang Senior Vice President and Treasurer
Vice President & Director
Jack Levy Managing Director and Co-head, M&A
Vice President & Director
Robert F. Tully(16) Vice President, Investment Banking
Treasurer & Vice President
Merrill Lynch Capital Partners, Inc.
- ------------------------------------
Gerald S. Armstrong Partner, Stonington Partners, Inc.
Director
Daniel H. Bayly Co-head, Investment Banking
Director
Matthias B. Bowman Vice Chairman, Investment Banking
President, Director
<FN>
- --------
14 225 Liberty St.
New York, NY 10080
15 225 Liberty St.
New York, NY 10080
16 225 Liberty St.
New York, NY 10080
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NAME/POSITION PRESENT PRINCIPAL OCCUPATION
- ------------- ----------------------------
<S> <C>
James J. Burke, Jr.(17) Managing Partner, Stonington Partners, Inc.
Director
James V. Caruso Director, Partnership Analysis and Management
Vice President, Treasurer
Thomas W. Davis Co-head, Investment Banking
Director
Robert F. End(18) Partner, Stonington Partners, Inc.
Director
Albert J. Fitzgibbons III(19) Partner, Stonington Partners, Inc.
Director
Barry S. Friedberg Executive Vice President
Director
Jerome P. Kenney Executive Vice President
Director
Theresa Lang Senior Vice President and Treasurer
Director
Mark McAndrews Chief Administrative Officer, Investment Banking
Director
Stephen M. McLean(20) Partner, Stonington Partners, Inc.
Director
<FN>
- --------
17 Stonington Partners, Inc.
767 Fifth Avenue
48th Floor
New York, NY 10153
18 Stonington Partners, Inc.
767 Fifth Avenue
48th Floor
New York, NY 10153
19 Stonington Partners, Inc.
767 Fifth Avenue
48th Floor
New York, NY 10153
20 Stonington Partners, Inc.
767 Fifth Avenue
48th Floor
New York, NY 10153
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NAME/POSITION PRESENT PRINCIPAL OCCUPATION
- ------------- ----------------------------
<S> <C>
Ross D. McMahon(21) Vice President, Partnership Analysis and Management
Vice President
Alexis P. Michas(22) Partner and Chief Operating Officer, Stonington Partners, Inc.
Director
Jerry G. Rubenstein(23) Independent Adviser, Omni Management
Director Associates
Rupinder S. Sidhu(24) Partner, Stonington Partners, Inc.
Director
Nathan C. Thorne Managing Director, Investment Banking
Vice President, Director
Michael von Clemm(25) Chairman, Highmount Capital, Inc.
Director
Robert W. Williamson(26) Senior Vice President and Chief Credit Officer
Director
ML IBK Positions, Inc.
- ----------------------
Matthias B. Bowman Vice Chairman, Investment Banking
President, Director
<FN>
- --------
21 225 Liberty St.
New York, NY 10080
22 Stonington Partners, Inc.
767 Fifth Avenue
48th Floor
New York, NY 10153
23 123 Coulter Ave.
Ardmore, PA 19003
24 Stonington Partners, Inc.
767 Fifth Avenue
48th Floor
New York, NY 10153
25 2 Drayson Mews
London W8 4LY, England
26 225 Liberty St.
New York, NY 10080
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NAME/POSITION PRESENT PRINCIPAL OCCUPATION
- ------------- ----------------------------
<S> <C>
James V. Caruso(27) Director, Partnership Analysis and Management
Vice President, Director
Barry S. Friedberg Executive Vice President
Director
Jeffrey A. Gelfand Financial Vice President and Director, Finance & Administration
Vice President
Jeffrey S. Martin Managing Director, Investment Banking
Vice President, Director
Mark McAndrews Chief Administrative Officer, Investment Banking
Vice President
Martin J. McInerney(28) Vice President, Accounting
Vice President
Nathan C. Thorne Managing Director, Investment Banking
Vice President
Neven Viducic Vice President, Accounting
Treasurer
KECALP, Inc.
- ------------
Rosemary T. Berkery Senior Vice President and Associate General Counsel
Vice President & Director
James V. Caruso(29) Director, Partnership Analysis and Management
Director
Andrew J. Melnick Director, Global Fundamental Equity Research
Vice President & Director
Walter Perlstein(30) Same
Outside Director
John L. Steffens
President & Director
<FN>
- --------
27 225 Liberty St.
New York, NY 10080
28 225 Liberty St.
New York, NY 10080
29 225 Liberty St.
New York, NY 10080
30 225 Liberty St.
New York, NY 10080
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NAME/POSITION PRESENT PRINCIPAL OCCUPATION
- ------------- ----------------------------
<S> <C>
Patrick J. Walsh Senior Vice President and Director, Human Resources
Vice President & Director
ML Employees LBO Managers, Inc.
- -------------------------------
Kevin K. Albert Managing Director, Private Equity Group,
Director Investment Banking
Daniel H. Bayly Co-head, Investment Banking
Director
Matthias B. Bowman Vice Chairman, Investment Banking
President, Director
James V. Caruso(31) Director, Partnership Analysis and Management
Vice President, Treasurer, Director
Alfred F. Hurley, Jr.
Director
Jeffrey S. Martin Managing Director, Investment Banking
Vice President, Director
Jeffrey M. Peek Director, Research
Vice President, Director
Nathan C. Thorne Managing Director, Investment Banking
Vice President
Merrill Lynch International Incorporated
- ----------------------------------------
Winthrop H. Smith, Jr.(32) Same
Chairman, Director
Michael J.P. Marks(33) Co-head, Global Equities, Merrill Lynch
Deputy Chairman, Director International
Donald N. Gershuny General Counsel, Private Client
Senior Vice President, Director
Carlos M. Morales Senior Vice President and General Counsel, Corporate &
Senior Vice President, Director Institutional Client
<FN>
- --------
31 225 Liberty St.
New York, NY 10080
32 225 Liberty St.
New York, NY 10080
33 P.O. Box 293
20 Farringdon Road
London EC1M 3NH, England
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NAME/POSITION PRESENT PRINCIPAL OCCUPATION
- ------------- ----------------------------
<S> <C>
Ronald J. Strauss Financial Vice President, Merrill Lynch International
Senior Vice President and COO, Director
Gregory E. Andrews Senior Finance Officer, Private Client Group
Senior Vice President & CFO
Anthony Vanadia Same
Vice President & Treasurer
Merrill Lynch International Capital
Management (Guernsey) II Ltd.
- -----------------------------------
John L. Loveridge(34) Senior Manager, Mutual Funds, Bank of
Director Butterfield Intl. (Cayman)
Martin R. Wise(35) Director, European Operations
Director
James J. Burke, Jr.(36) Managing Partner, Stonington Partners, Inc.
Director
<FN>
- --------
34 Bank of Butterfield Intl. (Cayman)
PO Box 705, Butterfield House
Fort St., George Town
Grand Cayman, Cayman Islands
British West Indies
35 Ropemaker Place
25 Ropemaker Street
London, England
EC2Y 9LY
36 Stonington Partners, Inc.
767 Fifth Avenue
48th Floor
New York, NY 10153
</FN>
</TABLE>
Exhibit A
AGREEMENT AND PLAN OF MERGER
AMONG
RYKOFF-SEXTON, INC.,
USF ACQUISITION CORPORATION
AND
US FOODSERVICE INC.
DATED FEBRUARY 2, 1996
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS....................................................A-1
ARTICLE II THE MERGER; EFFECTIVE TIME; CLOSING............................A-8
2.1. The Merger.....................................................A-8
2.2. Effective Time.................................................A-9
2.3. Closing........................................................A-9
ARTICLE III TERMS OF MERGER................................................A-9
3.1. Certificate of Incorporation...................................A-9
3.2. The By-Laws....................................................A-9
3.3. Directors......................................................A-9
3.4. Officers.......................................................A-9
ARTICLE IV MERGER CONSIDERATION; CONVERSION OR
CANCELLATION OF SHARES IN THE MERGER..........................A-10
4.1. Share Consideration; Conversion or Cancellation of Shares in
the Merger....................................................A-10
4.2. Payment for Shares in the Merger..............................A-12
4.3. Fractional Shares.............................................A-14
4.4. Transfer of Shares after the Effective Time...................A-14
4.5. Dissenting Shares.............................................A-14
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE
COMPANY.......................................................A-15
5.1. Organization, Etc. of the Company.............................A-15
5.2. Subsidiaries..................................................A-15
5.3. Agreement.....................................................A-16
5.4. Capital Stock.................................................A-16
5.5. Other Interests...............................................A-18
5.6. Litigation....................................................A-18
5.7. Compliance with Other Instruments, Etc........................A-18
5.8. Employee Benefit Plans........................................A-19
5.9. Labor Matters.................................................A-22
5.10. Taxes.........................................................A-22
5.11. Intellectual Property.........................................A-24
5.12. Properties....................................................A-24
5.13. Environmental Matters.........................................A-25
5.14. Registration Statement and Financial Statements...............A-25
5.15. Absence of Certain Changes or Events..........................A-26
5.16. Contracts and Leases..........................................A-27
5.17. Affiliated Transactions.......................................A-27
5.18. Brokers and Finders...........................................A-28
5.19. S-4 Registration Statement and Proxy Statement/Prospectus....A-28
5.20. Tax Matters...................................................A-28
5.21. Stockholders Agreement........................................A-28
5.22. Opinion of Financial Advisor..................................A-28
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ARTICLE VI REPRESENTATIONS AND WARRANTIES OF RSI AND
MERGER SUB....................................................A-29
6.1. Organization, Etc. of RSI.....................................A-29
6.2. Subsidiaries..................................................A-29
6.3. Agreement.....................................................A-30
6.4. Capital Stock.................................................A-31
6.5. Authorization for RSI Common Shares...........................A-31
6.6. Other Interests...............................................A-32
6.7. Litigation....................................................A-32
6.8. Compliance with Other Instruments, Etc........................A-32
6.9. Employee Benefit Plans........................................A-33
6.10. Labor Matters.................................................A-35
6.11. Taxes.........................................................A-35
6.12. Intellectual Property.........................................A-37
6.13. Properties....................................................A-37
6.14. Environmental Matters.........................................A-38
6.15. Reports and Financial Statements..............................A-38
6.16. Absence of Certain Changes or Events..........................A-39
6.17. Contracts and Leases..........................................A-40
6.18. Affiliated Transactions.......................................A-40
6.19. Ownership of Merger Sub; No Prior Activities; Assets of
Merger Sub....................................................A-40
6.20. Brokers and Finders...........................................A-41
6.21. S-4 Registration Statement and Proxy Statement/Prospectus....A-41
6.22. Tax Matters...................................................A-42
6.23. Company Management Loans......................................A-42
6.24. Opinion of Financial Advisor..................................A-42
ARTICLE VII ADDITIONAL COVENANTS AND AGREEMENTS...........................A-42
7.1. Conduct of Business of the Company............................A-42
7.2. Other Transactions............................................A-44
7.3. Stockholder Votes.............................................A-45
7.4. Registration Statement........................................A-45
7.5. Reasonable Efforts............................................A-47
7.6. Access to Information; Confidentiality........................A-47
7.7. Listing of RSI Common Shares..................................A-48
7.8. Rule 145 Affiliates...........................................A-48
7.9. Conduct of Business of RSI....................................A-48
7.10. Preferred Stock Redemption; Withdrawal of S-1 Registration
Statement; USDA Matter........................................A-51
7.11. Commitment Letter.............................................A-52
7.12. Publicity.....................................................A-53
7.13. Director and Officer Indemnification..........................A-53
7.14. Conveyance Taxes..............................................A-53
7.15. Parachute Payments............................................A-53
7.16. RSI Loans.....................................................A-54
7.17. RSI Change in Control Arrangements............................A-54
ARTICLE VIII CONDITIONS....................................................A-54
8.1. Conditions to Each Party's Obligations........................A-54
8.2. Conditions to Obligations of RSI and Merger Sub...............A-56
8.3. Conditions to Obligations of the Company......................A-58
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ARTICLE IX TERMINATION...................................................A-60
9.1. Termination by Mutual Consent.................................A-60
9.2. Termination by Either RSI or the Company......................A-60
9.3. Termination by RSI............................................A-60
9.4. Termination by the Company....................................A-61
9.5. Effect of Termination and Abandonment.........................A-61
ARTICLE X MISCELLANEOUS AND GENERAL......................................A-62
10.1. Expenses......................................................A-62
10.2. Notices, Etc..................................................A-62
10.3. Amendments, Waivers, Etc......................................A-63
10.4. No Assignment.................................................A-63
10.5. Entire Agreement..............................................A-64
10.6. Specific Performance..........................................A-64
10.7. Remedies Cumulative...........................................A-64
10.8. No Waiver.....................................................A-64
10.9. No Third Party Beneficiaries..................................A-64
10.10. Jurisdiction..................................................A-64
10.11. Governing Law.................................................A-65
10.12. Name, Captions, Etc...........................................A-65
10.13. Counterparts..................................................A-65
10.14. Knowledge.....................................................A-65
10.15. Nonsurvival of Representations and Warranties.................A-65
10.16. No Other Representations and Warranties.......................A-65
Exhibits
A - Affiliate Letter
B - Items to be Covered in Opinions of Counsel to the Company
C - Items to be Covered in Opinions of Counsel to RSI
D - Employment Agreements
E-1 - Tax Opinion of Morgan, Lewis & Bockius LLP
E-2 - Tax Opinion of Jones, Day, Reavis & Pogue
E-3 - Tax Opinion of Shearman & Sterling
Disclosure Statements
Company Disclosure Statement
RSI Disclosure Statement
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (hereinafter called this "Agreement"),
dated February 2, 1996, among Rykoff-Sexton, Inc., a Delaware corporation
("RSI"), USF Acquisition Corporation, a Delaware corporation, and a direct
Wholly-Owned Subsidiary of RSI ("Merger Sub"), and US Foodservice Inc., a
Delaware corporation (the "Company").
W I T N E S S E T H:
WHEREAS, the Boards of Directors of RSI, Merger Sub and the Company
each have determined that it is in the best interests of their respective
stockholders for the Company to merge with and into Merger Sub, upon the terms
and subject to the conditions of this Agreement;
WHEREAS, as a condition to its willingness to enter into this
Agreement, RSI has required that, simultaneously with the execution hereof, the
ML Entities (as hereinafter defined) enter into the Agreement, dated as of the
date hereof (the "ML Agreement") with RSI pursuant to which the ML Entities are
agreeing to vote all of their Shares (as hereinafter defined) for approval and
adoption of this Agreement and the Merger (as hereinafter defined), and certain
other matters;
WHEREAS, RSI, Merger Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger; and
WHEREAS, for federal income tax purposes, it is intended that the
Merger shall qualify as a reorganization within the meaning of Section 368(a) of
the Code (as hereinafter defined).
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants and agreements set forth herein, RSI, Merger Sub and the
Company hereby agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms shall have the
respective meanings set forth below:
"Affiliate": As defined in Rule 12b-2 under the Exchange
Act.
"Affiliate Letter": As defined in Section 7.8.
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"Alternative Sara Lee Bridge Financing": As defined in Section 7.10(a).
"Associate": As defined in Rule 12b-2 under the Exchange Act.
"Assumed Options": As defined in Section 4.1(e).
"Assumed Warrants": As defined in Section 4.1(e).
"Authorization": Any consent, approval or authorization of, expiration
or termination of any waiting period requirement (including pursuant to the HSR
Act) by, or filing, registration, qualification, declaration or designation
with, any Governmental Body.
"Benefit Arrangement": As defined in Section 5.8(a).
"Bridge Financing": As defined in Section 7.10(a).
"Business Day": A day on which the principal offices of the SEC in
Washington, D.C. are open to accept filings, or in the case of determining a
date on which any payment is due, a day other than Saturday, Sunday or any day
on which banks located in New York City are authorized or obligated by law to
close.
"Certificate of Merger": The certificate of merger with respect to the
merger of the Company with and into Merger Sub, containing the provisions
required by, and executed in accordance with, Section 251 of the DGCL.
"Certificates": As defined in Section 4.2(b).
"Class A Common Stock": Class A Common Stock, par value $.01 per share,
of the Company.
"Class B Common Stock": Class B Common Stock, par value $.01 per share,
of the Company.
"Closing": The closing of the Merger.
"Closing Date": The date on which the Closing occurs.
"Closing Date Market Price": With respect to one RSI Common Share, the
arithmetic average of the Closing Prices for such a share during the period of
the 20 most recent trading days ending on the third Business Day prior to the
Closing Date.
"Closing Price": On any day, the last reported sale price of one RSI
Common Share on the NYSE, as reported in the New York Stock Exchange Composite
Tape.
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"Code": The Internal Revenue Code of 1986, as amended, and all
regulations promulgated thereunder, as in effect from time to time.
"Commitment Letter": As defined in Section 7.11.
"Common Stock": The Class A Common Stock and Class B Common Stock.
"Company": US Foodservice Inc., a Delaware corporation.
"Company Alternative Proposal": As defined in Section 7.2.
"Company Charter": As defined in Section 7.10(d).
"Company Disclosure Statement": The disclosure statement dated the date
of this Agreement delivered by the Company to RSI.
"Company Management Loans": The loans made by the Company to certain
members of management of the Company or any of its Subsidiaries to enable them
to the purchase Shares, pursuant to the Non-Recourse Promissory Notes in the
amounts and to the individuals described in the Company Disclosure Statement.
"Company Material Adverse Effect": A material adverse effect on the
business, properties, operations or financial condition of the Company and its
Subsidiaries taken as a whole.
"Company Tax Matters Certificate": As defined in Section 5.20.
"Company Update Letter": As defined in Section 8.2(i).
"Continuing Director": As defined in Article Thirteenth of the Restated
Certificate of Incorporation of RSI, as amended from time to time.
"Controlled Group Liability": As defined in Section 5.8(e).
"Covered Company Proceeding": As defined in Section 8.2(i).
"Covered RSI Proceeding": As defined in Section 8.3(g).
"Dissenting Shares": As defined in Section 4.5.
"DGCL": The Delaware General Corporation Law.
"Effective Time": As defined in Section 2.2.
"Employee Plan": As defined in Section 5.8(a).
"Employees": As defined in Section 5.8(a).
"Environmental Laws": As defined in Section 5.13.
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"Equitable Entities": Equitable Deal Flow Fund, L.P., the Equitable
Life Assurance Society of the United States and Equitable Variable Life
Insurance Company.
"ERISA": The Employee Retirement Income Security Act of 1974, as
amended, and all regulations promulgated thereunder, as in effect from time to
time.
"ERISA Affiliate": Any trade or business, whether or not incorporated,
that is now or has at any time in the past been treated as a single employer
with the Company or RSI (as applicable) or any of their respective Subsidiaries
under Section 414(b), (c), (m) or (o) of the Code and the Treasury Regulations
thereunder.
"Exchange Act": The Securities Exchange Act of 1934, as amended.
"Exchange Agent": As defined in Section 4.2(a).
"Exchange Fund": As defined in Section 4.2(a).
"Exchange Ratio": As defined in Section 4.1(a).
"Exchangeable Preferred Stock": Preferred Stock, par value $.01 per
share, designated as $15.00 Cumulative Exchangeable Redeemable Preferred Stock,
Series A, in Article Fourth B.3. of the Company's Restated Certificate of
Incorporation.
"Expenses": All out-of-pocket expenses (including, without limitation,
all fees and expenses of counsel, accountants, investment bankers, experts and
consultants to a party hereto) incurred in connection with or related to the
authorization, preparation, negotiation, execution and performance of this
Agreement and the transactions contemplated hereby.
"Goldman Sachs": As defined in Section 6.20.
"Governmental Body": Any Federal, state, municipal, political
subdivision or other governmental department, commission, board, bureau, agency
or instrumentality, domestic or foreign.
"HSR Act": The Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended.
"Indemnified Party": As defined in Section 7.13(a).
"Intellectual Property": All industrial and intellectual property
rights including, but not limited to, Proprietary Technology, patents, patent
applications, trademarks, trademark applications and registrations, service
marks, service mark applications and registrations, copyrights, know-how,
licenses, trade secrets, proprietary processes, formulae and customer
A-4
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lists. "Proprietary Technology" means all proprietary processes, formulae,
inventions, trade secrets, know-how, development tools and other proprietary
rights used by the Company and its Subsidiaries or RSI and its Subsidiaries, as
the case may be, pertaining to any product or service manufactured, marketed,
licensed or sold by the Company and its Subsidiaries or RSI and its
Subsidiaries, as the case may be, in the conduct of their business or used,
employed or exploited in the development, license, sale, marketing, distribution
or maintenance thereof, and all documentation and media constituting, describing
or relating to the above, including, but not limited to, manuals, memoranda,
know-how, notebooks, software, records and disclosures.
"Liens": As defined in Section 5.12.
"Merger": The merger of the Company with and into Merger Sub as
contemplated by Section 2.1.
"Merger Sub": USF Acquisition Corporation, a Delaware corporation.
"Merrill Lynch": As defined in Section 5.18.
"ML Agreement": As defined in the second recital.
"ML Entities": Merrill Lynch Capital Appreciation Partnership No.
B-XVIII, L.P., a Delaware limited partnership, ML Offshore LBO Partnership No.
B-XVIII, a Cayman Islands limited partnership, Merrill Lynch Capital
Appreciation Partnership No. XIII, L.P., a Delaware limited partnership, ML IBK
Positions, Inc., a Delaware corporation, Merrill Lynch KECALP L.P. 1991, a
Delaware limited partnership, Merrill Lynch KECALP L.P. 1994, a Delaware limited
partnership, MLCP Associates L.P. No. II, a Delaware limited partnership, MLCP
Associates L.P. No. IV, a Delaware limited partnership, ML Offshore LBO
Partnership No. XIII, a Cayman Islands limited partnership, ML Employees LBO
Partnership No. I, L.P., a Delaware limited partnership, Merchant Banking L.P.
No. II, a Delaware limited partnership, Merrill Lynch KECALP L.P. 1987, a
Delaware limited partnership, and MLCP.
"MLCP": Merrill Lynch Capital Partners, Inc., a Delaware corporation.
"NYSE": The New York Stock Exchange, Inc.
"Option": As defined in Section 4.1(e).
"Option Plans": As defined in Section 4.1(e).
"Person": Any individual or corporation, company, partnership, trust,
incorporated or unincorporated association, joint venture or other entity of any
kind.
A-5
<PAGE>
"Preferred Stock": The 10% Preferred Stock and Exchangeable Preferred
Stock.
"Preferred Stock Redemption Agreements": The Redemption Agreement dated
as of September 26, 1995 between Sara Lee Corporation and the Company, as
amended by the Amendment to Redemption Agreement dated November 20, 1995 and by
the Sara Lee Amendment (if executed), the Redemption Agreement dated as of
September 8, 1995 among ML IBK Positions, Inc., Merchant Banking L.P. No. IV and
the Company, as amended as of December 29, 1995 and February 2, 1996 and the
Redemption Agreement dated as of September 11, 1995 between Bankamerica Capital
Corporation and the Company.
"10% Preferred Stock": Preferred Stock, par value $.01 per share,
designated as "10.0% Preferred Stock" in Article Fourth B.2. of the Company's
Restated Certificate of Incorporation.
"Preliminary Prospectus": The Company's Preliminary Prospectus dated
November 21, 1995 relating to the Company's proposed Common Stock offering and
filed as a part of the Amendment No. 3 to the S-1 Registration Statement.
"Previous Company Auditor's Letter": As defined in Section 8.2(i).
"Previous RSI Auditor's Letter": As defined in Section 8.3(g).
"Proxy Statement/Prospectus": As defined in Section 7.4.
"Respective Representatives": As defined in Section 7.6.
"Registration Rights Agreement": The Registration Rights Agreement
among RSI and the other parties thereto in the form attached to the ML Agreement
as Exhibit A.
"Rights Agreement": The Rights Agreement, dated as of December 8, 1986,
as amended, between RSI and Bank of America National Trust and Savings
Association, as Rights Agent.
"RSI": Rykoff-Sexton, Inc., a Delaware corporation.
"RSI Alternative Proposal": A bona fide written offer submitted to RSI
or the holders of RSI Common Shares from any Person (other than the Company or
any Affiliate of the Company), unsolicited by RSI, for the acquisition or
purchase of all or a material amount of the assets or securities of, or any
merger, consolidation or business combination with, RSI or any Subsidiary of
RSI.
"RSI Benefit Arrangement": As defined in Section 6.09(a).
A-6
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"RSI Common Shares": Shares of common stock, par value of $.10 per
share, of RSI.
"RSI Disclosure Statement": The disclosure statement dated the date of
this Agreement delivered by RSI to the Company.
"RSI Employee Plan": As defined in Section 6.09(a).
"RSI Employees": As defined in Section 6.09(a).
"RSI Material Adverse Effect": A material adverse effect on the
business, properties, operations or financial condition of RSI and its
Subsidiaries taken as a whole.
"RSI SEC Reports": As defined in Section 6.15.
"RSI Stockholders Meeting": As defined in Section 7.3(b).
"RSI Tax Matters Certificate": As defined in Section 6.22.
"RSI Update Letter": As defined in Section 8.3(g).
"Rule 145 Affiliate": As defined in Section 7.8.
"S-1 Registration Statement": The Registration Statement of the Company
on Form S-1 (No. 33-96704) filed with the SEC on September 8, 1995 as amended by
Amendment No. 1 filed with the SEC on October 2, 1995, Amendment No. 2 filed
with the SEC on October 30, 1995 and Amendment No. 3 filed with the SEC on
November 21, 1995.
"S-4 Registration Statement": As defined in Section 7.4.
"Sara Lee": As defined in Section 7.10(a).
"Sara Lee Amendment": As defined in Section 7.10(a).
"Sara Lee Bridge Financing": As defined in Section 7.10(a).
"Sara Lee Redemption Agreement": As defined in Section 7.10(a).
"SEC": The Securities and Exchange Commission.
"Securities Act": The Securities Act of 1933, as amended.
"Share Consideration": As defined in Section 4.1(b).
"Shares": Collectively, the shares of Common Stock.
"Significant Subsidiary": As defined under Rule 12b-l of the Exchange
Act.
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"Standstill Agreement": The Standstill Agreement between RSI and the ML
Entities in the form attached to the ML Agreement as Exhibit B.
"Stock Split": The .396-for-1 reverse stock split of the Common Stock,
effective January 31, 1996.
"Stockholders Agreement": The Amended and Restated Stockholders
Agreement, dated September 22, 1993, among the Company, certain of the ML
Entities, the Equitable Entities, and the other signatories thereto.
"Subsidiary": As to any Person, any other Person of which at least 50%
of the equity or voting interests are owned, directly or indirectly, by such
first Person.
"Surviving Corporation": The surviving corporation in the Merger.
"Tax Agreement": The Agreement between RSI and each ML Entity and
certain other stockholders of the Company in the form attached as Exhibit C to
the ML Agreement.
"Tax Returns": As defined in Section 5.10.
"Termination Agreement": As defined in Section 5.21.
"Warrants": Warrants each dated September 4, 1992, for the purchase of
an aggregate of 227,700 shares of Common Stock exercisable at $15.35 per share
held by the Warrantholders.
"Warrantholders": Nippon Credit Bank, Ltd., Teachers Insurance and
Annuity Association of America, Dresdner Bank AG, New York Branch and Dresdner
Bank AG, Grand Cayman Branch.
"Wholly-Owned Subsidiary": A Subsidiary of which 100% of the equity
interest is owned directly or indirectly by the relevant parent company.
ARTICLE II
THE MERGER; EFFECTIVE TIME; CLOSING
2.1. The Merger. Subject to the terms and conditions of this Agreement,
at the Effective Time, the Company shall be merged with and into Merger Sub in
accordance with the provisions of Section 251 of the DGCL and with the effect
provided in Sections 259 and 261 of the DGCL. The separate corporate existence
of the Company shall thereupon cease and Merger Sub shall be the Surviving
Corporation and shall continue its corporate existence under the laws of the
State of Delaware.
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<PAGE>
2.2. Effective Time. The Merger shall become effective on the date and
at the time (the "Effective Time") that the Certificate of Merger shall have
been accepted for filing by the Secretary of State of the State of Delaware (or
such later date and time as may be specified in the Certificate of Merger as may
be permitted by such Secretary of State), which shall be the Closing Date or as
soon as practicable thereafter.
2.3. Closing. Subject to the fulfillment or waiver of the conditions
set forth in Article VIII, the Closing shall take place (i) at the offices of
Jones, Day, Reavis & Pogue, Chicago, Illinois, at 10:00 a.m. on the third
Business Day following the date of the RSI Stockholders Meeting or (ii) at such
other place and/or time and/or on such other date as RSI and the Company may
agree or as may be necessary to permit the fulfillment or waiver of the
conditions set forth in Article VIII.
ARTICLE III
TERMS OF MERGER
3.1. Certificate of Incorporation. The Certificate of Incorporation of
Merger Sub as in effect immediately prior to the Effective Time shall be the
Certificate of Incorporation of the Surviving Corporation, until duly amended in
accordance with the terms thereof and of the DGCL, except that Article FIRST
thereof shall be amended to read as follows:
"The name of the Corporation (which is hereinafter
called the "Corporation") is US Foodservice Inc."
3.2. The By-Laws. The By-Laws of Merger Sub in effect at the Effective
Time shall be the By-Laws of the Surviving Corporation, until duly amended in
accordance with the terms thereof, and in accordance with the Certificate of
Incorporation of the Surviving Corporation and the DGCL.
3.3. Directors. The directors of Merger Sub at the Effective Time
shall, from and after the Effective Time, be the directors of the Surviving
Corporation until their successors have been duly elected or appointed and
qualified or until their earlier death, resignation or removal in accordance
with the Surviving Corporation's Certificate of Incorporation and By-Laws.
3.4. Officers. The officers of the Company at the Effective Time shall,
from and after the Effective Time, be the officers of the Surviving Corporation
until their successors have been duly elected or appointed and qualified or
until their earlier death, resignation or removal in accordance with the
Surviving Corporation's Certificate of Incorporation and By-Laws.
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ARTICLE IV
MERGER CONSIDERATION; CONVERSION OR
CANCELLATION OF SHARES IN THE MERGER
4.1. Share Consideration; Conversion or Cancellation of Shares in the
Merger. Subject to the provisions of this Article IV, at the Effective Time, by
virtue of the Merger and without any action on the part of the holders thereof,
the shares of the constituent corporations shall be converted as follows:
(a) Each Share issued and outstanding immediately prior to the
Effective Time (other than Shares, if any, held by RSI, Merger Sub or any other
Subsidiary of RSI) shall be converted into that number of RSI Common Shares,
rounded to the nearest thousandth of a share, or if there shall not be a nearest
thousandth of a share, to the next higher thousandth of a share, equal to the
quotient (the "Exchange Ratio") derived by dividing $25 by the Closing Date
Market Price of one RSI Common Share; provided, however, that (i) if the
foregoing would result in an Exchange Ratio greater than 1.457, the Exchange
Ratio shall be deemed to be 1.457, and (ii) if the foregoing would result in an
Exchange Ratio less than 1.244 the Exchange Ratio shall be deemed to be 1.244.
If, prior to the Effective Time, RSI should split, reclassify or combine the RSI
Common Shares, or pay a stock dividend or other stock distribution in RSI Common
Shares, or otherwise change or convert the RSI Common Shares into any other
securities, or make any other dividend or distribution on the RSI Common Shares
(other than normal cash dividends, subject to Section 7.9(c)), or if a record
date with respect to any of the foregoing shall have been set, then the Exchange
Ratio will be appropriately adjusted to reflect such split, reclassification,
combination, dividend or other distribution or change.
(b) All Shares to be converted into RSI Common Shares pursuant to this
Section 4.1 shall cease to be outstanding, shall be canceled and retired and
shall cease to exist, and each holder of a certificate representing any such
Shares shall thereafter cease to have any rights with respect to such Shares,
except the right to receive for each of the Shares, upon the surrender of such
certificate in accordance with Section 4.2, the amount of RSI Common Shares
specified in accordance with Section 4.1(a) (the "Share Consideration") and cash
in lieu of fractional RSI Common Shares as contemplated by Section 4.3.
(c) Shares, if any, held by RSI, Merger Sub or any other Subsidiary of
RSI and each Share held by the Company as treasury stock immediately prior to
the Effective Time shall cease to be outstanding, shall be canceled and retired
without payment of any consideration therefor, and shall cease to exist.
(d) Each share of common stock, par value of $.01 per share, of Merger
Sub issued and outstanding immediately prior to the Effective Time shall
continue to be one share of common stock
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of the Surviving Corporation, with the same rights, powers and privileges as
such share of common stock of Merger Sub immediately prior to the Effective
Time.
(e) (i) Each outstanding option to purchase Shares listed on Schedule
4.1(e) in the Company Disclosure Statement (each, an "Option") issued pursuant
to the Company's stock option plans (collectively, the "Option Plans") filed as
an exhibit to the S-1 Registration Statement, whether or not vested or
exercisable, shall be assumed by RSI and shall constitute an option to acquire,
on the same terms and conditions as were applicable under such Option, a number
of RSI Common Shares, rounded up or down to the nearest thousandth of a share,
or if there shall not be a nearest thousandth of a share, to the next higher
thousandth of a share, equal to the product of the Exchange Ratio and the number
of Shares subject to such Option immediately prior to the Effective Time, at a
price per share equal to the aggregate exercise price for the Shares subject to
such Option divided by the number of RSI Common Shares deemed to be purchasable
pursuant to such Option ("Assumed Options"); provided that with respect to those
Options which are performance options, not vested in accordance with their
terms, the performance criteria shall be deemed satisfied on the first
anniversary of the Effective Time; provided further, that the conversion of any
Option into an Assumed Option with an exercise price less than $.10 per RSI
Common Share shall be subject to the optionee's agreement that upon exercise,
(x) to the extent RSI is holding RSI Common Shares as treasury shares that are
not reserved for any other purpose, RSI shall issue the appropriate number of
such treasury shares to the optionee and (y) to the extent that no such treasury
shares are available, such optionee shall pay an exercise price of $.10 per RSI
Common Share; and (ii) each Warrant shall be assumed by RSI and shall constitute
a warrant to acquire, on the same terms and conditions as were applicable under
such Warrant, a number of RSI Common Shares equal to the product of the Exchange
Ratio and the number of Shares subject to such Warrant at a price per share
equal to the aggregate exercise price for the Shares subject to such Warrant
divided by the number of RSI Common Shares deemed to be purchasable pursuant to
such Warrant ("Assumed Warrants"). At the Effective Time, RSI shall deliver to
holders of Assumed Options and Assumed Warrants appropriate option and warrant
agreements representing the right to acquire RSI Common Shares on the same terms
and conditions as contained in the Options and Warrants (subject to any
adjustments required by the preceding sentence), upon surrender of the
outstanding Options and Warrants. RSI shall comply with the terms of the Option
Plans as they apply to the Options assumed as set forth above. RSI shall take
all corporate action necessary to reserve for issuance a sufficient number of
RSI Common Shares for delivery upon exercise of the Assumed Options and Assumed
Warrants in accordance with this Section 4.1(e). RSI shall file a registration
statement on Form S-8 (or any successor form) or another appropriate form,
effective as of the Effective Time, with respect to RSI Common Shares subject to
Assumed Options and shall use commercially
A-11
<PAGE>
reasonable efforts to maintain the effectiveness of such registration statement
or registration statements (and maintain the current status of the prospectus or
prospectuses contained therein) for so long as the Assumed Options remain
outstanding. RSI shall cause the Assumed Options to be administered by RSI's
Management Development - Compensation and Stock Option Committee or any
successor committee.
4.2. Payment for Shares in the Merger. The manner of
making payment for Shares in the Merger shall be as follows:
(a) At the Effective Time, RSI shall make available to an exchange
agent selected by RSI and reasonably acceptable to the Company (the "Exchange
Agent"), for the benefit of those Persons who immediately prior to the Effective
Time were the holders of Shares, for exchange in accordance with this Article
IV, a sufficient number of certificates representing RSI Common Shares required
to effect the delivery of the aggregate Share Consideration required to be
issued pursuant to Section 4.1 (the certificates representing RSI Common Shares
comprising such aggregate Share Consideration being hereinafter referred to as
the "Exchange Fund"). The Exchange Agent shall, pursuant to irrevocable
instructions to be given by RSI at or prior to the Effective Time following
approval thereof by the Company, such approval not to be unreasonably withheld,
deliver the RSI Common Shares contemplated to be issued pursuant to Section 4.1
out of the Exchange Fund. Except as provided in Section 4.3, the Exchange Fund
shall not be used for any other purpose.
(b) Promptly after the Effective Time, the Exchange Agent shall mail to
each holder of record (other than holders of certificates for Shares referred to
in Section 4.1(c)) of a certificate or certificates which immediately prior to
the Effective Time represented outstanding Shares (the "Certificates") (i) a
form of letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
proper delivery of the Certificates to the Exchange Agent) and (ii) instructions
for use in effecting the surrender of the Certificates for payment therefor.
Upon surrender of Certificates for cancellation to the Exchange Agent, together
with such letter of transmittal duly executed and any other documents as may be
reasonably required, the holder of such Certificates shall be entitled to
receive for each of the Shares represented by such Certificates the Share
Consideration and the Certificates so surrendered shall forthwith be canceled.
Until so surrendered, Certificates shall represent solely the right to receive
the Share Consideration and any cash in lieu of fractional RSI Common Shares as
contemplated by Section 4.3 with respect to each of the Shares represented
thereby. No dividends or other distributions that are declared after the
Effective Time on RSI Common Shares and payable to the holders of record thereof
after the Effective Time will be paid to Persons entitled by reason of the
Merger to receive RSI Common Shares until such Persons surrender their
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Certificates. Upon such surrender, there shall be paid to the Person in whose
name the RSI Common Shares are issued any dividends or other distributions
having a record date after the Effective Time and payable with respect to such
RSI Common Shares between the Effective Time and the time of such surrender.
After such surrender there shall be paid to the Person in whose name the RSI
Common Shares are issued any dividends or other distributions on such RSI Common
Shares which shall have a record date after the Effective Time and prior to such
surrender and a payment date after such surrender and such payment shall be made
on such payment date. In no event shall the Persons entitled to receive such
dividends or other distributions be entitled to receive interest on such
dividends or other distributions. If any cash or any certificate representing
RSI Common Shares is to be paid to or issued in a name other than that in which
the Certificate surrendered in exchange therefor is registered, it shall be a
condition of such exchange that the Certificate so surrendered shall be properly
endorsed and otherwise in proper form for transfer and that the Person
requesting such exchange shall pay to the Exchange Agent any transfer or other
taxes required by reason of the issuance of certificates for such RSI Common
Shares in a name other than that of the registered holder of the Certificate
surrendered, or shall establish to the satisfaction of the Exchange Agent that
such tax has been paid or is not applicable. Notwithstanding the foregoing,
neither the Exchange Agent nor any party hereto shall be liable to a holder of
Shares for any RSI Common Shares or dividends thereon or, in accordance with
Section 4.3, cash in lieu of fractional interests, delivered to a public
official pursuant to applicable escheat law. The Exchange Agent shall not be
entitled to vote or exercise any rights of ownership with respect to the RSI
Common Shares held by it from time to time hereunder, except that it shall
receive and hold all dividends or other distributions paid or distributed with
respect to such RSI Common Shares for the account of the Persons entitled
thereto.
(c) Certificates surrendered for exchange by any Person constituting a
Rule 145 Affiliate of the Company shall not be exchanged for certificates
representing RSI Common Shares until RSI has received an Affiliate Letter from
such Person as provided in Section 7.8.
(d) Any portion of the Exchange Fund which remains unclaimed by the
former stockholders of the Company for one year after the Effective Time shall
be delivered to RSI, upon demand of RSI, and any former stockholders of the
Company shall thereafter look only to RSI for payment of their claim for the
Share Consideration for the Shares or for any cash in lieu of fractional RSI
Common Shares.
(e) In the event any certificates representing Shares shall have been
lost, stolen or destroyed, the Exchange Agent shall issue in exchange for such
lost, stolen or destroyed certificates, upon the making of such affidavit of
that fact by
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the holder thereof or the delivery of such other documents and instruments
(including, without limitation, any indemnity bond) as the Exchange Agent shall
require, such RSI Common Shares as may be required pursuant to Section 4.2.
4.3. Fractional Shares. No fractional RSI Common Shares shall be issued
in the Merger. In lieu of any such fractional securities, each holder of Shares
who would otherwise have been entitled to a fraction of an RSI Common Share upon
surrender of Certificates for exchange pursuant to this Article IV will be paid
an amount in cash (without interest), rounded to the nearest cent, determined by
multiplying (a) the Closing Date Market Price by (b) the fractional interest to
which such holder otherwise would be entitled. As soon as practicable after the
determination of the amount of cash to be paid to former stockholders of the
Company in lieu of any fractional interests, RSI shall deposit with the Exchange
Agent the cash necessary for this purpose.
4.4. Transfer of Shares after the Effective Time. No
transfers of Shares shall be made on the stock transfer books of
the Company after the close of business on the day prior to the
date of the Effective Time.
4.5. Dissenting Shares. (a) Notwithstanding the provisions of Section
4.1 or any other provision of this Agreement to the contrary, Shares that are
issued and outstanding immediately prior to the Effective Time and are held by
stockholders who have not voted such Shares in favor of the adoption of this
Agreement or consented thereto in writing and who properly demand appraisal of
such Shares in accordance with Section 262 of the DGCL (the "Dissenting Shares")
will not be converted as provided in Section 4.1(a) at or after the Effective
Date unless and until the holder of such Dissenting Shares fails to perfect or
effectively withdraws or loses such right to appraisal and payment under the
DGCL. If a holder of Dissenting Shares so fails to perfect or effectively
withdraws or loses such right to appraisal and payment, then, as of the
Effective Time or the occurrence of such event, whichever last occurs, such
holder's Dissenting Shares will be converted into and represent solely the right
provided in Section 4.1(a).
(b) The Company will give RSI (i) prompt written notice of any written
demands for appraisal, withdrawals of demands for appraisal and any other
instruments served pursuant to Section 262 of the DGCL and received by the
Company and (ii) the opportunity to direct all negotiations and proceedings with
respect to demands for appraisal under Section 262 of the DGCL. The Company will
not voluntarily make any payment with respect to any demands for appraisals and
will not, except with the prior written consent of RSI, settle or offer to
settle any such demands.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to RSI and Merger Sub that,
except as set forth in the S-1 Registration Statement or the Company Disclosure
Statement:
5.1. Organization, Etc. of the Company. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has all requisite corporate power and authority to own and
operate its properties, to carry on its business as now conducted and proposed
by the Company to be conducted, to enter into this Agreement and to carry out
the provisions of this Agreement and consummate the transactions contemplated
hereby. The Company is duly qualified and 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 necessary and where the
failure to be so qualified has or would be reasonably expected (so far as can be
foreseen at the time) to have a Company Material Adverse Effect. The Company has
obtained from the appropriate Governmental Bodies all approvals and licenses
necessary for the conduct of its business and operations as currently conducted,
which approvals and licenses are valid and remain in full force and effect,
except where the failure to have obtained such approvals or licenses or the
failure of such licenses and approvals to be valid and in full force and effect
does not have and would not be reasonably expected (so far as can be foreseen at
the time) to have a Company Material Adverse Effect. The Company is not subject
to any order, complaint, proceeding or investigation pending or, to the
knowledge of the Company, threatened, which affects or would reasonably be
expected (so far as can be foreseen at the time) to affect the validity of any
such approvals or licenses or impair the renewal thereof, except where the
invalidity of any such approvals or licenses or the non-renewal thereof does not
have and would not be reasonably expected (so far as can be foreseen at the
time) to have a Company Material Adverse Effect.
5.2. Subsidiaries. Each Subsidiary of the Company (a) is a corporation
or other legal entity duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization and has the full
corporate power and authority to own its properties and conduct its business and
operations as currently conducted, except where the failure to be duly
organized, validly existing and in good standing does not have, and would not be
reasonably expected (so far as can be foreseen at the time) to have, a Company
Material Adverse Effect, (b) is duly qualified and 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 necessary, except where
the failure to be so qualified does not have and would not be reasonably
expected (so far as can be
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foreseen at the time) to have a Company Material Adverse Effect, (c) has
obtained from the appropriate Governmental Bodies all approvals and licenses
necessary for the conduct of its business and operations as currently conducted,
which licenses and approvals are valid and remain in full force and effect,
except where the failure to have obtained such approvals and licenses or the
failure of such licenses and approvals to be valid and in full force and effect
does not have and would not be reasonably expected (so far as can be foreseen at
the time) to have a Company Material Adverse Effect, and (d) is subject to no
order, complaint, proceeding or investigation pending or, to the knowledge of
the Company or such Subsidiary, threatened, which would be reasonably expected
(so far as can be foreseen at the time) to affect the validity of any such
approvals or licenses or impair the renewal thereof, except where the invalidity
of any such approvals or licenses or the non-renewal thereof does not have and
would not be reasonably expected (so far as can be foreseen at the time) to have
a Company Material Adverse Effect. Exhibit 22 to the S-1 Registration Statement
sets forth an accurate and complete list of all Subsidiaries of the Company.
5.3. Agreement. The Board of Directors of the Company has approved, by
the unanimous vote of those directors present, the Merger, this Agreement and
the transactions contemplated hereby and have approved recommending approval of
the Merger, this Agreement and the transactions contemplated hereby to the
stockholders of the Company. This Agreement has been duly executed and delivered
by a duly authorized officer of the Company and constitutes a valid and binding
agreement of the Company, enforceable against the Company in accordance with its
terms, except as may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other similar laws of general application which
may affect the enforcement of creditors' rights generally and by general
equitable principles. The Company has delivered to RSI true and correct copies
of resolutions adopted by the Board of Directors of the Company approving this
Agreement.
5.4. Capital Stock. The authorized capital stock of the Company
consists of (a) 50,000,000 shares of Class A Common Stock, of which 8,019,037
shares are issued and outstanding and 37,152 shares are held as treasury stock
as of the date hereof, (b) 50,000,000 shares of Class B Common Stock, of which
821,206 shares are issued and outstanding as of the date hereof and no shares
are held as treasury stock, (c) 2,000,000 shares of Preferred Stock, of which
(i) 33,564.35 shares are designated as 10% Preferred Stock, of which 27,934
shares are issued and outstanding as of the date hereof and no shares are held
as treasury stock, and (ii) 314,000 shares are designated as Exchangeable
Preferred Stock, of which 246,179 shares are issued and outstanding as of the
date hereof and no shares are held as treasury stock. Schedule 4.1(e) in the
Company Disclosure Statement sets forth a true, accurate and complete list of
(a) each holder of record of shares of Class A Common Stock and
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Class B Common Stock and the number of such shares held of record by each such
holder, (b) each optionee under the Options and the number of shares of Class A
Common Stock or Class B Common Stock issuable upon exercise of such Options and
(c) each holder of record of Warrants, and the number of shares of Class A
Common Stock and Class B Common Stock issuable upon exercise of such Warrants.
All of the outstanding shares of Class A Common Stock and Class B Common Stock
are duly authorized, validly issued, fully paid and nonassessable. As of the
date hereof, the 64,952 shares of Exchangeable Preferred Stock formerly held by
Bankamerica Capital Corporation have been redeemed by the Company at a total
redemption price (including interest to the date of redemption) of
$6,677,395.09, and such redemption was made in accordance with the terms of the
Preferred Stock Redemption Agreement with Bankamerica Capital Corporation.
Schedule 7.10 in the Company Disclosure Statement sets forth true and accurate
redemption amounts for the 10% Preferred Stock and the Exchangeable Preferred
Stock as of the respective redemption dates set forth therein calculated in
accordance with the terms of the Company's Restated Certificate of
Incorporation. Other then pursuant to the Stockholders Agreement, no class of
capital stock of the Company is entitled to preemptive rights. No options,
warrants or other rights to acquire capital stock from the Company or any
stockholder of the Company are outstanding, other than (a) the right to convert
shares of Class B Common Stock into Class A Common Stock and the right to
convert Class A Common Stock into Class B Common Stock pursuant to the Restated
Certificate of Incorporation of the Company, (b) Options and Warrants described
on Schedule 4.1(e) in the Company Disclosure Statement representing in the
aggregate the right to purchase up to 973,290 shares of Common Stock and (c)
pursuant to Section VII of the Stockholders Agreement. Except as described under
the heading "Capitalization" as the Company's actual capitalization in the
Preliminary Prospectus, there are no outstanding bonds, debentures, notes or
other obligations the holders of which have the right to vote or which are
convertible into or exercisable for securities having the right to vote with
stockholders of the Company on any matter. All outstanding shares of capital
stock of the Subsidiaries of the Company are owned by the Company or a direct or
indirect Wholly-Owned Subsidiary of the Company, free and clear of all liens,
charges, encumbrances, claims and options of any nature. The Company Disclosure
Statement or the S-1 Registration Statement list, and the Company has delivered
to RSI true and complete copies of, all agreements and contracts, whether oral
or written, relating to shares of capital stock of the Company or options,
warrants or other rights to acquire capital stock of the Company (including,
without limitation, any rights of first refusal), including the Preferred Stock
Redemption Agreements and all amendments thereto, and all such agreements and
contracts are in full force in effect. Subject to the redemption of the
Preferred Stock in accordance with the Preferred Stock Redemption Agreements or
as otherwise contemplated by Section 7.10, no approval or consent of
securityholders of the Company is required under the Company's
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Restated Certificate of Incorporation or Bylaws, the DGCL, the Stockholders
Agreement or any other agreement, with respect to this Agreement, the Merger and
the transactions contemplated hereby, other than (i) the execution by each party
to the Stockholders Agreement of the Termination Agreement, which has been
effected, (ii) the affirmative vote of 66-2/3% of the outstanding shares of
Class A Common Stock and Class B Common Stock voting together as a class and
(iii) the affirmative vote of a majority of the votes represented by the
outstanding shares of Class A Common Stock, Class B Common Stock and
Exchangeable Preferred Stock, voting together as a class. The ML Entities
collectively hold of record a sufficient number of shares of Class A Common
Stock to approve this Agreement, the Merger and the transactions contemplated
hereby in accordance with the Company's Restated Certificate of Incorporation
and Bylaws, the Stockholders Agreement and the DGCL. The Stock Split was
effective on January 31, 1996, and effected in accordance with the Company's
Restated Certificate of Incorporation and Bylaws, the Stockholders Agreement and
the DGCL.
5.5. Other Interests. Except for interests in the Company's
Subsidiaries, neither the Company nor any of the Company's Subsidiaries owns,
directly or indirectly, any interest or investment (whether equity or debt) in
any corporation, partnership, joint venture, business, trust or entity (other
than (i) non-controlling investments in the ordinary course of business and
cooperative marketing and similar undertakings and arrangements entered into in
the ordinary course of business (ii) other investments, consisting of cash
equivalents and equity interests in former customers in settlement of
indebtedness, of less than $3,000,000 in the aggregate and (iii) Company
Management Loans and other loans to employees described in the Company
Disclosure Statement.
5.6. Litigation. There are no actions, suits, investigations or
proceedings pending or, to the knowledge of the Company, threatened against the
Company or any of its Subsidiaries, or any property of the Company or any such
Subsidiary in any court or before any arbitrator of any kind or before or by any
Governmental Body, except actions, suits, investigations or proceedings which,
in the aggregate, do not have and would not be reasonably expected (so far as
can be foreseen at the time) to (a) have a Company Material Adverse Effect or
(b) have the effect of preventing or materially delaying the performance by the
Company of its obligations under this Agreement.
5.7. Compliance with Other Instruments, Etc. Neither the Company nor
any Subsidiary of the Company is in violation of any term of (a) its charter,
bylaws or other organizational documents, (b) any agreement or instrument
related to indebtedness for borrowed money or any other agreement to which it is
a party or by which it is bound, (c) any applicable law, ordinance, rule or
regulation of any Governmental Body, or
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(d) any applicable order, judgment or decree of any court, arbitrator or
Governmental Body, the consequences of which violation, whether individually or
in the aggregate, have or would be reasonably expected (so far as can be
foreseen at the time) to (i) have a Company Material Adverse Effect or (ii) have
the effect of preventing or materially delaying the performance by the Company
of its obligations under this Agreement. The execution, delivery and performance
of this Agreement by the Company will not result in any violation of or conflict
with, constitute a default under, or require any consent under any terms of the
charter, by-laws or other organizational document of the Company (or any of its
Subsidiaries) or any such agreement, instrument, law, ordinance, rule,
regulation, order, judgment or decree or result in the creation of (or impose
any obligation on the Company or any of its Subsidiaries to create) any
mortgage, lien, charge, security interest or other encumbrance upon any of the
properties or assets of the Company or any of its Subsidiaries pursuant to any
such term, except where such violation, conflict or default, or the failure to
obtain such consent, individually or in the aggregate, does not have and would
not be reasonably expected (so far as can be foreseen at the time) to (i) have a
Company Material Adverse Effect or (ii) have the effect of preventing or
materially delaying the performance by the Company of its obligations under this
Agreement.
5.8. Employee Benefit Plans. (a) The Preliminary Prospectus, the
"Exhibit Index" to the S-1 Registration Statement or the Company Disclosure
Statement sets forth a true and complete list of all the following: (x) each
"employee benefit plan," as such term is defined in Section 3(3) of ERISA,
pursuant to which the Company or any of its Subsidiaries has (A) any liability
in respect of current or former employees, agents, directors, or independent
contractors of the Company or its Subsidiaries ("Employees") or any
beneficiaries or dependents of any Employees or (B) any obligation to issue
capital stock of the Company or any of its Subsidiaries (each, an "Employee
Plan"), and (y) each other plan, program, policy, contract or arrangement
providing for bonuses, pensions, deferred pay, stock or stock related awards,
severance pay, salary continuation or similar benefits, hospitalization,
medical, dental or disability benefits, life insurance or other employee
benefits, or compensation to or for any Employees or any beneficiaries or
dependents of any Employees (other than directors' and officers' liability
policies), whether or not insured or funded, (A) pursuant to which the Company
or any of its Subsidiaries has any material liability or (B) constituting an
employment or severance agreement or arrangement with any officer or director of
the Company or any Subsidiary or with any holder of Shares (each, a "Benefit
Arrangement"). The Company has used its reasonable efforts to provide to RSI
with respect to each Employee Plan and Benefit Arrangement: (i) a true and
complete copy of all written documents comprising such Employee Plan or Benefit
Arrangement and any related trust agreement, insurance contract or other
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funding vehicle (including amendments and individual agreements relating
thereto, or, if there is no such written document, an accurate and complete
description of such Employee Plan or Benefit Arrangement); (ii) the most recent
Form 5500 or Form 5500-C/R (including all schedules thereto), if applicable;
(iii) the most recent financial statements and actuarial reports or valuations,
if any; (iv) the summary plan description currently in effect and all material
modifications thereof, if any; and (v) the most recent Internal Revenue Service
determination letter, if any. Any such Employee Plans and Benefit Arrangements
for which the Company has not so provided such documents after using its
reasonable efforts are not in the aggregate material to the Company and its
Subsidiaries taken as a whole.
(b) Each Employee Plan and Benefit Arrangement has been established,
operated and maintained in all material respects in accordance with its terms
and in material compliance with all applicable laws and the rules and
regulations thereunder, including, but not limited to, ERISA and the Code.
Neither the Company nor any of its Subsidiaries or former Subsidiaries nor any
of their respective current or former directors, officers, or employees, nor, to
the best knowledge of the Company, any other disqualified person or
party-in-interest with respect to any Employee Plan, have engaged directly or
indirectly in any "prohibited transaction," as such term is defined in Section
4975 of the Code or Section 406 of ERISA, with respect to which the Company or
its Subsidiaries could have or has any material liability. All contributions and
other payments required to be made for any period through the date to which this
representation speaks to the Employee Plans and Benefit Arrangements (or to any
person pursuant to the terms thereof) have been made or paid in a timely
fashion, or, to the extent not required to be made or paid on or before the date
to which this representation speaks, have been reflected in the Company's
financial statements. Each Employee Plan that is intended to be qualified under
Section 401(a) of the Code has, as amended or proposed to be amended to comply
with the Tax Reform Act of 1986 and subsequent legislation, been determined by
the Internal Revenue Service to be so qualified or an application for such a
determination, which was filed before the expiration of the applicable remedial
amendment period, is pending, and, to the best knowledge of the Company, no
circumstances exist that are reasonably expected by the Company to result in the
revocation of any such determination.
(c) With respect to each Employee Plan that is subject to Title IV of
ERISA: (i) as of the last applicable annual valuation date, the present value of
all benefits under such Employee Plan did not exceed the value of the assets of
such Employee Plan allocable to such benefits, on a projected benefits basis,
using the actuarial methods, factors and assumptions used for the most recent
actuarial report with respect to such Employee Plan; and (ii) there has been no
termination, partial termination or "reportable event" (as defined in Section
4043 of ERISA) with
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respect to any such Employee Plan. No Employee Plan that is subject to Section
412 of the Code has incurred any "accumulated funding deficiency" (as defined in
Section 412 of the Code), whether or not waived. No event has occurred, and, to
the best knowledge of the Company, there do not exist any circumstances, that
could subject the Company or any Subsidiary of the Company to any material
liability arising under ERISA. With respect to the Employee Plans and Benefit
Arrangements, individually and in the aggregate, no event has occurred, and, to
the best knowledge of the Company, there do not exist any circumstances, that
could subject the Company or any Subsidiary of the Company to any material
liability under the Code or other applicable law, or under any indemnity
agreement to which the Company or any Subsidiary of the Company is a party,
excluding liability for benefit claims, administrative expenses and funding
obligations payable in the ordinary course.
(d) No Employee Plan is a "multiemployer plan" as that term is defined
in Section 3(37) of ERISA or a "multiple employer plan" described in Section
4063(a) of ERISA, nor has the Company or any ERISA Affiliate of the Company at
any time since January 1, 1992, contributed to or been obligated to contribute
to such a multiemployer plan or multiple employer plan.
(e) Except with respect to an Employee Plan, neither the Company nor
any ERISA Affiliate of the Company has any Controlled Group Liability, nor do
any circumstances exist that could result in any of them having any Controlled
Group Liability. "Controlled Group Liability" means any and all liabilities
under (i) Title IV of ERISA, (ii) Section 302 of ERISA, (iii) Sections 412 and
4971 of the Code and (iv) the continuation coverage requirements of Section 601
et seq. of ERISA and Section 4980B of the Code.
(f) Neither the execution or delivery of this Agreement, nor the
consummation of the transactions contemplated hereby (either alone or together
with any additional or subsequent events), constitutes an event under any
Employee Plan, Benefit Arrangement, loan to, or individual agreement or contract
with, an Employee that may result in any payment (whether of severance pay or
otherwise), restriction or limitation upon the assets of any Employee Plan or
Benefit Arrangement, acceleration of payment or vesting, increase in benefits or
compensation, or required funding, with respect to any Employee, or the
forgiveness of any loan or other commitment of any Employees.
(g) There are no actions, suits, arbitrations, inquiries,
investigations or other proceedings (other than routine claims for benefits)
pending or, to the Company's knowledge, threatened, with respect to any Employee
Plan or Benefit Arrangement.
(h) No Employees and no beneficiaries or dependents of
Employees are or may become entitled under any Employee Plan or
Benefit Arrangement to post-employment or retiree welfare
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benefits of any kind, including without limitation death or medical benefits,
other than coverage mandated by Part 6 of Title I of ERISA or Section 4980B of
the Code or other applicable law.
5.9. Labor Matters. There are no agreements with, or pending petitions
for recognition of, a labor union or association as the exclusive bargaining
agent for any of the employees of the Company or any of its Subsidiaries; no
such petitions have been pending at any time within two years of the date of
this Agreement and, to the best knowledge of the Company, there has not been any
organizing effort by any union or other group seeking to represent any employees
of the Company or any of its Subsidiaries as their exclusive bargaining agent at
any time within two years of the date of this Agreement. There are no labor
strikes, work stoppages or other labor troubles, other than routine grievance
matters, now pending, or, to the Company's knowledge, threatened, against the
Company or any of its Subsidiaries, nor have there been any such labor strikes,
work stoppages or other labor troubles, other than routine grievance matters,
with respect to the Company or any of its Subsidiaries at any time within two
years of the date of this Agreement.
5.10. Taxes. (a) The Company and its Subsidiaries have timely filed all
federal, state, county, local and foreign tax returns, reports, declarations and
forms ("Tax Returns") required to be filed by them, or requests for extensions
to file such Tax Returns have been timely filed and granted and have not
expired, and all Tax Returns are complete and accurate in all respects, except
to the extent that such failures to file or be complete and accurate in all
respects, as applicable, individually or in the aggregate do not have and would
not reasonably be expected (so far as can be foreseen at the time) to have a
Company Material Adverse Effect. The Company and each of its Subsidiaries has
paid (or the Company has paid on its behalf) or made adequate provision for all
taxes shown as due on such Tax Returns. The Company and each of its Subsidiaries
have paid or made adequate provision for all taxes required to be paid without
the filing of any Tax Returns which have become due and payable. The most recent
financial statements contained in the Preliminary Prospectus reflect adequate
reserves for all taxes payable by the Company and its Subsidiaries for all
taxable periods and portions thereof accrued through the date of such financial
statements, and no deficiencies for any taxes have been proposed, asserted or
assessed against the Company or any of its Subsidiaries that are not adequately
reserved for, except for inadequately reserved taxes and inadequately reserved
deficiencies that, individually or in the aggregate, do not have and would not
reasonably be expected (so far as can be foreseen at the time) to have a Company
Material Adverse Effect. Neither the Company nor any of its Subsidiaries has any
reasonable basis to believe that any such deficiencies exist in excess of such
established reserves. The consolidated federal income tax returns of the Company
have been audited by the Internal Revenue Service (or closed by
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applicable statute of limitations), and all liabilities in respect thereof have
been finally determined, for all taxable years up to and including the taxable
year ended December 31, 1991. Neither the Company nor any of its Subsidiaries is
a party to any pending or has knowledge of any threatened action or proceeding
by any taxing authority for the determination, assessment or collection of any
taxes of the Company or any of its Subsidiaries or relating to their respective
businesses and operations. There are no liens for taxes (other than for current
taxes not yet due and payable) on the assets of the Company or its Subsidiaries.
No requests for waivers of the time to assess any taxes against the Company or
any of its Subsidiaries have been granted or are pending, except for requests
with respect to such taxes that have been adequately reserved for in the most
recent financial statements contained in the Preliminary Prospectus, or, to the
extent not adequately reserved, the assessment of which, individually or in the
aggregate, do not have and would not reasonably be expected (so far as can be
foreseen at the time) to have a Company Material Adverse Effect. Neither the
Company nor any of its Subsidiaries is a party to or bound by any agreement
providing for the allocation or sharing of taxes. Neither the Company nor any of
its Subsidiaries has filed a consent pursuant to or agreed to the application of
Section 341(f) of the Code. Each of the Company and its Subsidiaries has
disclosed on its federal income tax returns all positions taken therein that
could give rise to a substantial understatement of federal income tax within the
meaning of Section 6662 of the Code. All taxes that are required by the laws of
the United States, any state or political subdivision thereof, or any foreign
country to be withheld or collected by the Company or any of its Subsidiaries
have been duly withheld or collected and, to the extent required, have been paid
to the proper governmental authorities or properly deposited as required by
applicable laws. None of the Company and its Subsidiaries (i) has been a member
of an affiliated group filing a consolidated federal income tax return (other
than a group the common parent of which was the Company), or (ii) has any
liability for the taxes of any Person (other than any of the Company and its
Subsidiaries) under Treas. Reg. ss. 1.1502-6 (or any similar provision of state,
local, or foreign law), as a transferee or successor, by contract or otherwise.
Neither the Company nor any of its Subsidiaries will be required, as a result of
a change in method of accounting for a taxable year beginning on or before the
Closing Date, to include any adjustment under Section 481(a) of the Code in its
taxable income for any taxable year beginning after the Closing Date. Neither
the Company nor any of its Subsidiaries is or has been a United States real
property holding corporation within the meaning of Section 897(c)(2) of the
Code. For purposes of this Agreement, the term tax (including, with correlative
meaning, the terms "taxes" and "taxable") shall include all federal, state,
local, and foreign income, profits, franchise, gross receipts, payroll, sales,
employment, use, property, withholding, excise, and other taxes, duties, or
assessments of any nature whatsoever,
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together with all interest, penalties, and additions imposed with respect to
such amounts.
(b) The Company Disclosure Statement sets forth each state in which the
Company and its Subsidiaries (i) filed an income or franchise tax return,
whether on a consolidated, combined or separate return basis, for the taxable
year ended December 31, 1995, and (ii) collected or remitted any sales and/or
use taxes as of December 31, 1995.
(c) Neither the Company nor any of its Subsidiaries owns any real
property in the State of New York. The only real property leased by the Company
or any of its Subsidiaries in the State of New York consists of three offices,
designated as Office #100, Office #101B and Office #105, located in the Pickard
Office Building, 5858 East Molloy Road, Syracuse, New York 13211.
(d) Neither the Company nor any of its Subsidiaries has taken or agreed
to take any action that would prevent the Merger from qualifying as a
reorganization within the meaning of Section 368(a) of the Code.
5.11. Intellectual Property. The Company and its Subsidiaries own, or
possess valid licenses or other valid rights to use, the Intellectual Property
used in the Company's business, except where the failure to own or have the
right to use such Intellectual Property, in the aggregate, does not have and
would not be reasonably expected (so far as can be foreseen at the time) to have
a Company Material Adverse Effect.
5.12. Properties. Except as disclosed or reserved against in the most
recent financial statements contained in the Preliminary Prospectus, the Company
and each of its Subsidiaries have good and marketable title to all of the
material properties and assets, tangible or intangible, reflected in such
financial statements as being owned by the Company and each of its Subsidiaries
as of the dates thereof, free and clear of all liens, encumbrances, charges,
defaults or equities of whatever character except such imperfections or
irregularities of title, liens, encumbrances, charges or defaults that do not
affect the use thereof in any material respect and statutory liens securing
payments not yet due ("Liens"). All leased buildings and all leased fixtures,
equipment and other property and assets that are material to the Company's
business on a consolidated basis are held under leases or subleases that are
valid and binding instruments enforceable in accordance with their respective
terms, and there is not under any of such leases, any existing material default
or event of default (or event which with notice or lapse of time, or both, would
constitute a material default), except where the lack of such validity and
binding nature or the existence of such default or event of default does not
have and would not reasonably be expected (so far as can be foreseen at the
time) to have a Company Material Adverse Effect.
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5.13. Environmental Matters. Except in all cases that, in the
aggregate, have not had and would not reasonably be expected (so far as can be
foreseen at the time) to have a Company Material Adverse Effect, the Company and
each of its Subsidiaries (i) have obtained all applicable permits, licenses and
other authorizations which are required to be obtained under all applicable
federal, state, local or foreign laws or any regulation, code, plan, order,
decree, judgment, notice or demand letter issued, entered, promulgated or
approved thereunder relating to pollution or protection of the environment
("Environmental Laws"), including laws relating to emissions, discharges,
releases or threatened releases of pollutants, contaminants, or hazardous or
toxic materials or wastes into ambient air, surface water, ground water, or land
or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling of pollutants, contaminants
or hazardous or toxic materials or wastes by the Company or its Subsidiaries (or
their respective agents); (ii) are in compliance with all terms and conditions
of such required permits, licenses and authorization, and also are in compliance
with all other limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables contained in applicable
Environmental Laws; (iii) as of the date hereof, are not aware of nor have
received notice of any past or present violations of Environmental Laws, or any
event, condition, circumstance, activity, practice, incident, action or plan
which is reasonably likely to interfere with or prevent continued compliance
with or which would give rise to any common law or statutory liability, or
otherwise form the basis of any claim, action, suit or proceeding, against the
Company or any of its Subsidiaries based on or resulting from the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling, or the emission, discharge or release into the environment, of any
pollutant, contaminant or hazardous or toxic material or waste; and (iv) have
taken all actions necessary under applicable Environmental Laws to register any
products or materials required to be registered by the Company or its
Subsidiaries (or any of their respective agents) thereunder.
5.14. Registration Statement and Financial Statements. The Company has
previously furnished or made available to RSI a true and complete copy of the
S-1 Registration Statement and all exhibits thereto that were filed with the
SEC. The S-1 Registration Statement, as of the date of the Preliminary
Prospectus, contained no untrue statement of material fact nor omitted to state
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading; provided, however, that RSI acknowledges that (i) the Company's
recapitalization, refinancing, initial public offering, new stock option plan,
option vesting and forgiveness of the Company Management Loans as described in
the S-1 Registration Statement have not been consummated, and (ii) the
descriptions of the
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amended and restated Stockholders Agreement, the Company's Restated Certificate
of Incorporation and the Company's Bylaws contained in the S-1 Registration
Statement reflect amendments which have not been implemented. Each of the
balance sheets (including the related notes) included in the S-1 Registration
Statement presents fairly, in all material respects, the consolidated financial
position of the Company and its Subsidiaries as of the respective dates thereof,
and the other related statements (including the related notes) included therein
present fairly, in all material respects, the results of operations, changes in
shareholders equity and cash flows of the Company and its Subsidiaries for the
respective periods or as of the respective dates set forth therein, all in
conformity with generally accepted accounting principles consistently applied
during the periods involved, except as otherwise noted therein, and subject, in
the case of the unaudited interim financial statements, to normal year-end
adjustments and any other adjustments described therein. The Company has
provided to RSI true and correct copies of the Company's unaudited consolidated
financial statements as of, and for the year ended, December 31, 1995. Such
unaudited financial statements present fairly in all material respects, the
results of operations and cash flows of the Company and its Subsidiaries as of,
and for the year ended, December 31, 1995, all in conformity with general
accepted accounting principles consistently applied during the period involved
except as otherwise noted therein and except for the absence of footnote
disclosure, and subject to normal audit adjustments and any other adjustments
described therein. The S-1 Registration Statement, as of its date, complied in
all material respects with the disclosure requirements of Form S-1 and
Regulation S-K under the Securities Act.
5.15. Absence of Certain Changes or Events. During the period since
December 31, 1995, the business of the Company and its Subsidiaries has been
conducted only in the ordinary course, consistent with past practice, and
neither the Company nor any Subsidiary of the Company has entered into any
material transaction other than in the ordinary course, consistent with past
practice, and there has not been (a) any change in the business, financial
condition, results of operations, properties, assets or liabilities of the
Company and its Subsidiaries taken as a whole that, individually or in the
aggregate, has or would reasonably be expected to have (so far as can be
foreseen at the time) a Company Material Adverse Effect, (b) any damage,
destruction or loss (whether or not covered by insurance) with respect to any
property or asset of the Company or any of its Subsidiaries which, individually
or in the aggregate, has or would reasonably be expected (so far as can be
foreseen at the time) to have a Company Material Adverse Effect, (c) any change
by the Company in its accounting, methods, principles or practices, other than
immaterial changes consistent with generally accepted accounting principles, (d)
any declaration, setting aside or payment of any dividend or distribution in
respect of any capital stock of the Company or any of its
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Subsidiaries or any redemption, purchase or other acquisition of any of their
respective securities other than dividends by any Subsidiary of the Company to
the Company and other than the redemption of the Preferred Stock held by
Bankamerica Capital Corporation for the amount of $6,677,395.09 which occurred
on December 15, 1995 in accordance with the Preferred Stock Redemption Agreement
with Bankamerica Capital Corporation, (e) except after the date hereof as
permitted by Section 7.1(d), any entering into, establishment or amendment of,
any Employee Plan or Benefit Arrangement (including, without limitation, the
granting of stock options, stock appreciation rights, performance awards, or
restricted stock awards), or any other increase (other than ordinary course
increases) in the compensation payable or to become payable to any officers or
key employees of the Company or any Subsidiary of the Company, except for
immaterial severance payments to departing employees consistent with past
practice.
5.16. Contracts and Leases. The S-1 Registration Statement and the
Company Disclosure Statement contain an accurate and complete listing of all
contracts, leases, agreements or understandings, whether written or oral,
required to be described in, or filed as exhibits to, the S-1 Registration
Statement pursuant to the Securities Act and the applicable rules and
regulations thereunder, or which are otherwise material to the business,
properties, operations or financial condition of the Company and its
Subsidiaries taken as a whole. Each of such contracts, leases, agreements and
understandings is in full force and effect and (a) none of the Company or its
Subsidiaries or, to the Company's best knowledge, any other party thereto, has
breached or is in default thereunder, (b) no event has occurred which, with the
passage of time or the giving of notice would constitute such a breach or
default, (c) no claim of default thereunder has, to the Company's best
knowledge, been asserted or threatened and (d) none of the Company or its
Subsidiaries or, to the Company's best knowledge, any other party thereto is
seeking the renegotiation thereof or substitute performance thereunder, except
where such breach or default, or attempted renegotiation or substitute
performance, individually or in the aggregate, does not have and would not be
reasonably expected (so far as can be foreseen at the time) to have a Company
Material Adverse Effect. The Company has provided RSI or its representative with
accurate and complete copies of all such contracts, leases, agreements and
understandings.
5.17. Affiliated Transactions. The S-1 Registration Statement contains
an accurate and complete description of all contracts, leases, agreements or
understandings, whether written or oral, with or on behalf of any Affiliate of
the Company, to which the Company or any of its Subsidiaries is a party or is
otherwise bound and which is required to be described in the S-1 Registration
Statement pursuant to the Securities Act and the applicable rules and
regulations thereunder.
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<PAGE>
5.18. Brokers and Finders. Except for the fees and expenses payable to
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"), which fees
and expenses are reflected in its agreement with the Company, a true and
complete copy of which has been furnished to RSI, the Company has not employed
any investment banker, broker, finder or intermediary in connection with the
transactions contemplated by this Agreement or any other transactions which
would be entitled to any investment banking, brokerage, finder's or similar fee
or commission in connection with this Agreement, the transactions contemplated
hereby or any other transactions.
5.19. S-4 Registration Statement and Proxy Statement/ Prospectus. None
of the information supplied or to be supplied by the Company for inclusion in
the S-4 Registration Statement or the Proxy Statement/Prospectus will (a) in the
case of the S-4 Registration Statement, at the time it becomes effective,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein not misleading or (b) in the case of the Proxy Statement/Prospectus, at
the time of the mailing of the Proxy Statement/Prospectus and at the time of the
RSI Stockholders Meeting, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading. If at any time prior to the Effective Time any
event with respect to the Company, its officers and directors or any of its
Subsidiaries should occur which is required to be described in an amendment of,
or a supplement to, the Proxy Statement/Prospectus or the S-4 Registration
Statement, the Company shall notify RSI thereof by reference to this Section
5.19 and such event shall be so described to RSI.
5.20. Tax Matters. The representations set forth in the numbered
paragraphs of the form of Tax Matters Certificate of the Company attached to the
Company Disclosure Statement (the "Company Tax Matters Certificate") are true
and correct in all respects, and such representations are hereby incorporated
herein by reference with the same effect as if set forth herein in their
entirety.
5.21. Stockholders Agreement. The Company has delivered to RSI a true
and complete copy of an amendment to the Stockholders Agreement executed by each
stockholder of the Company and providing that immediately prior to the Effective
Time all terms and provisions of the Stockholders Agreement shall be terminated
and of no further force and effect (the "Termination Agreement"). As of the
Effective Time, the Termination Agreement shall be in full force and effect, and
shall not have been amended or modified in any respect.
5.22. Opinion of Financial Advisor. Merrill Lynch has
delivered to the Board of Directors of the Company its written
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opinion to the effect that, as of the date of such opinion, the Exchange Ratio
was fair, from a financial point of view, to the Company's stockholders.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF RSI AND MERGER SUB
RSI and Merger Sub each represents and warrants to the Company that,
except as set forth in the RSI SEC Reports or the RSI Disclosure Statement:
6.1. Organization, Etc. of RSI. RSI is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has all requisite corporate power and authority to own and operate its
properties, to carry on its business as now conducted and proposed by RSI to be
conducted, to enter into this Agreement and to carry out the provisions of this
Agreement and consummate the transactions contemplated hereby. RSI is duly
qualified and 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 necessary and where the failure to be so qualified has or
would be reasonably expected (so far as can be foreseen at the time) to have an
RSI Material Adverse Effect. RSI has obtained from the appropriate Governmental
Bodies all approvals and licenses necessary for the conduct of its business and
operations as currently conducted, which approvals and licenses are valid and
remain in full force and effect, except where the failure to have obtained such
approvals or licenses or the failure of such licenses and approvals to be valid
and in full force and effect does not have and would not be reasonably expected
(so far as can be foreseen at the time) to have an RSI Material Adverse Effect.
RSI is not subject to any order, complaint, proceeding or investigation pending
or, to the knowledge of RSI, threatened, which affects or would be reasonably
expected (so far as can be foreseen at the time) to affect the validity of any
such approvals or licenses or impair the renewal thereof, except where the
invalidity of any such approvals or licenses or the non-renewal thereof does not
have and would not be reasonably expected (so far as can be foreseen at the
time) to have an RSI Material Adverse Effect.
6.2. Subsidiaries. Each Subsidiary of RSI (a) is a corporation or other
legal entity duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization and has the full corporate power
and authority to own its properties and conduct its business and operations as
currently conducted, except where the failure to be duly organized, validly
existing and in good standing does not have, and would not be reasonably
expected (so far as can be foreseen at the time) to have, an RSI Material
Adverse Effect, (b) is duly qualified and in good standing in each jurisdiction
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in which the property owned, leased or operated by it or the nature of the
business conducted by it makes such qualification necessary, except where the
failure to be so qualified does not have and would not be reasonably expected
(so far as can be foreseen at the time) to have an RSI Material Adverse Effect
(c) has obtained from the appropriate Governmental Bodies all approvals and
licenses necessary for the conduct of its business and operations as currently
conducted, which licenses and approvals are valid and remain in full force and
effect, except where the failure to have obtained such approvals and licenses or
the failure of such licenses and approvals to be valid and in full force and
effect does not have and would not be reasonably expected (so far as can be
foreseen at the time) to have an RSI Material Adverse Effect, and (d) is subject
to no order, complaint, proceeding or investigation pending or, to the knowledge
of RSI or such Subsidiary, threatened, which would be reasonably expected (so
far as can be foreseen at the time) to affect the validity of any such approvals
or licenses or impair the renewal thereof, except where the invalidity of any
such approvals or licenses or the non-renewal thereof does not have and would
not be reasonably expected (so far as can be foreseen at the time) to have an
RSI Material Adverse Effect. RSI has no Subsidiaries other than Merger Sub, RSI,
Inc., John Sexton & Co. and Duke Associates.
6.3. Agreement. On February 2, 1996, the Board of Directors of RSI and
Merger Sub approved, by the unanimous vote of those directors present, the
Merger, this Agreement and the transactions contemplated hereby, and on such
date the Board of Directors of RSI approved recommending approval of the
issuance of RSI Common Shares in connection with the Merger to the stockholders
of RSI. RSI as sole stockholder of Merger Sub has approved the Merger, this
Agreement and the transactions contemplated hereby. This Agreement has been duly
executed and delivered by a duly authorized officer of each of RSI and Merger
Sub and constitutes a valid and binding agreement of RSI and Merger Sub,
enforceable against RSI and Merger Sub in accordance with its terms, except as
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
and other similar laws of general application which may affect the enforcement
of creditors' rights generally and by general equitable principles. RSI has
delivered to the Company true and correct copies of resolutions adopted by the
Board of Directors of each of RSI and Merger Sub approving this Agreement. The
Board of Directors of RSI has taken all necessary action to cause the
supermajority vote provisions of Section 203 of the DGCL and Articles Twelfth
and Fourteenth of RSI's Amended and Restated Certificate of Incorporation to be
inapplicable to the transactions contemplated and authorized by this Agreement.
The Board of Directors of RSI has taken all necessary action to cause the
dilution provisions of the Rights Agreement to be inapplicable to the
transactions contemplated and authorized by this Agreement, without any payment
to the holders of the rights issued pursuant thereto. RSI has executed and
delivered the
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Second Amendment and Third Amendment to the Rights Agreement, true and complete
copies of which have been furnished to the Company. The Second Amendment to the
Rights Agreement is in full force and effect, and upon execution of the Third
Amendment to the Rights Agreement by the Rights Agent, will be superseded by the
Third Amendment to the Rights Agreement. No approval or consent of
securityholders of RSI is required under RSI's Amended and Restated Certificate
of Incorporation or Bylaws, the DGCL, RSI's NYSE listing agreement or any other
agreement, with respect to this Agreement, the Merger and the transactions
contemplated and authorized hereby, other than such vote required by NYSE Rule
312.05.
6.4. Capital Stock. The authorized capital stock of RSI consists of (a)
40,000,000,000 RSI Common Shares and (ii) 10,000,000 shares of preferred stock,
of the par value of $.10 per share, 50,000 of which have been designated as
Series A Junior Participating Preferred Stock. All of the outstanding shares of
capital stock of RSI are duly authorized, validly issued, fully paid and
nonassessable. As of the close of business on January 26, 1996, 14,796,516 RSI
Common Shares and no shares of preferred stock were issued and outstanding. No
class of capital stock of RSI is entitled to preemptive rights. No options,
warrants or other rights to acquire capital stock from RSI are outstanding,
other than as set forth in the RSI SEC Reports or as heretofore otherwise
disclosed in writing to the Company. Except as set forth in the RSI SEC Reports,
there are no outstanding bonds, debentures, notes or other obligations the
holders of which have the right to vote or which are convertible into or
exercisable for securities having the right to vote with stockholders of RSI on
any matter. Except as disclosed in the RSI SEC Reports, all outstanding shares
of capital stock of the Subsidiaries of RSI are owned by RSI, free and clear of
all liens, charges, encumbrances, claims and options of any nature. The RSI
Disclosure Statement or the RSI SEC Reports list, and RSI has delivered to the
Company true and complete copies of, all agreements, contracts or
understandings, whether oral or written, relating to shares of capital stock of
RSI or options, warrants or other rights to acquire capital stock of RSI
(including, without limitation, any rights of first refusal), and all such
agreements, contracts and understandings are in full force and effect.
6.5. Authorization for RSI Common Shares. Prior to the Effective Time,
RSI will have taken all necessary action to permit it to issue the number of RSI
Common Shares required to be issued pursuant to Article IV. The RSI Common
Shares issued pursuant to Article IV will, when issued, be duly authorized,
validly issued, fully paid and nonassessable and no stockholder of RSI will have
any preemptive right of subscription or purchase in respect thereof. The RSI
Common Shares will, when issued, be registered under the Securities Act and the
Exchange Act, and registered or exempt from registration under any applicable
state securities laws and listed on the New York Stock Exchange.
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6.6. Other Interests. Except for interests in RSI's Subsidiaries,
neither RSI nor any of RSI's Subsidiaries owns, directly or indirectly, any
interest or investment (whether equity or debt) in any corporation, partnership,
joint venture, business, trust or entity (other than (i) non-controlling
investments in the ordinary course of business and cooperative marketing and
similar undertakings and arrangements entered into in the ordinary course of
business and (ii) other investments, consisting of cash equivalents and equity
interests in former customers in settlement of indebtedness, of less than
$3,000,000 in the aggregate).
6.7. Litigation. The RSI Disclosure Statement lists all actions, suits,
investigations or proceedings pending or, to the knowledge of RSI, threatened
against RSI or any of its Subsidiaries, or any property of RSI or any such
Subsidiary, in any court or before any arbitrator of any kind or before or by
any Governmental Body, except actions, suits, investigations or proceedings
which, in the aggregate, do not have and would not be reasonably expected (so
far as can be foreseen at the time) to (a) have an RSI Material Adverse Effect
or (b) have the effect of preventing or materially delaying the performance by
RSI of its obligations under this Agreement.
6.8. Compliance with Other Instruments, Etc. Neither RSI nor any
Subsidiary of RSI is in violation of any terms of (a) its charter, by-laws or
other organizational documents, (b) any agreement or instrument related to
indebtedness for borrowed money or any other agreement to which it is a party or
by which it is bound, (c) any applicable law, ordinance, rule or regulation of
any Governmental Body, or (d) any applicable order, judgment or decree of any
court, arbitrator or Governmental Body, the consequences of which violation,
whether individually or in the aggregate, have or would be reasonably expected
(so far as can be foreseen at the time) to (i) have an RSI Material Adverse
Effect or (ii) have the effect of preventing or materially delaying the
performance by RSI of its obligations under this Agreement. The execution,
delivery and performance of this Agreement by each of RSI and Merger Sub will
not result in any violation of or conflict with, constitute a default under, or
require any consent under any terms of the charter or by-laws of RSI (or any of
its Subsidiaries) or any such agreement, instrument, law, ordinance, rule,
regulation, order, judgment or decree or result in the creation of (or impose
any obligation on RSI or any of its Subsidiaries to create) any mortgage, lien,
charge, security interest or other encumbrance upon any of the properties or
assets of RSI or any of its Subsidiaries pursuant to any such term, except where
such violation, conflict or default, or the failure to obtain such consent,
individually or in the aggregate, does not have and would not be reasonably
expected (so far as can be foreseen at the time) to (i) have an RSI Material
Adverse Effect or (ii) have the effect of preventing or materially delaying the
performance by RSI of its obligations under this Agreement.
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6.9. Employee Benefit Plans. (a) The RSI SEC Reports or the RSI
Disclosure Statement sets forth a true and complete list of all the following:
(x) each "employee benefit plan," as such term is defined in Section 3(3) of
ERISA, pursuant to which RSI or any of its Subsidiaries has (A) any liability in
respect of current or former employees, agents, directors, or independent
contractors of RSI or its Subsidiaries ("RSI Employees") or any beneficiaries or
dependents of any RSI Employees or (B) any obligation to issue capital stock of
RSI or any of its Subsidiaries (each, an "RSI Employee Plan"), and (y) each
other plan, program, policy, contract or arrangement providing for bonuses,
pensions, deferred pay, stock or stock related awards, severance pay, salary
continuation or similar benefits, hospitalization, medical, dental or disability
benefits, life insurance or other employee benefits, or compensation to or for
any RSI Employees or any beneficiaries or dependents of any RSI Employees (other
than directors' and officers' liability policies), whether or not insured or
funded, (A) pursuant to which RSI or any of its Subsidiaries has any material
liability or (B) constituting an employment or severance agreement or
arrangement with any officer or director of RSI or any Subsidiary or with any
holder of RSI Common Shares (each, an "RSI Benefit Arrangement"). RSI has used
its reasonable efforts to provide to the Company with respect to each RSI
Employee Plan and RSI Benefit Arrangement: (i) a true and complete copy of all
written documents comprising such RSI Employee Plan or RSI Benefit Arrangement
and any related trust agreement, insurance contract or other funding vehicle
(including amendments and individual agreements relating thereto, or, if there
is no such written document, an accurate and complete description of such RSI
Employee Plan or RSI Benefit Arrangement); (ii) the most recent Form 5500 or
Form 5500-C/R (including all schedules thereto), if applicable; (iii) the most
recent financial statements and actuarial reports or valuations, if any; (iv)
the summary plan description currently in effect and all material modifications
thereof, if any; and (v) the most recent Internal Revenue Service determination
letter, if any. Any such RSI Employee Plans and RSI Benefit Arrangements for
which RSI has not so provided such documents after using its reasonable efforts
are not in the aggregate material to RSI and its Subsidiaries taken as a whole.
(b) Each RSI Employee Plan and RSI Benefit Arrangement has been
established, operated and maintained in all material respects in accordance with
its terms and in material compliance with all applicable laws and the rules and
regulations thereunder, including, but not limited to, ERISA and the Code.
Neither RSI nor any of its Subsidiaries or former Subsidiaries nor any of their
respective current or former directors, officers, or employees, nor, to the best
knowledge of RSI, any other disqualified person or party-in-interest with
respect to any RSI Employee Plan, have engaged directly or indirectly in any
"prohibited transaction," as such term is defined in Section 4975 of the Code or
Section 406 of ERISA, with respect to which RSI or its Subsidiaries could have
or has any material liability. All
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contributions and other payments required to be made for any period through the
date to which this representation speaks to the RSI Employee Plans and RSI
Benefit Arrangements (or to any person pursuant to the terms thereof) have been
made or paid in a timely fashion, or, to the extent not required to be made or
paid on or before the date to which this representation speaks, have been
reflected in the RSI's financial statements. Each RSI Employee Plan that is
intended to be qualified under Section 401(a) of the Code has, as amended or
proposed to be amended to comply with the Tax Reform Act of 1986 and subsequent
legislation, been determined by the Internal Revenue Service to be so qualified
or an application for such a determination, which was filed before the
expiration of the applicable remedial amendment period, is pending, and, to the
best knowledge of RSI, no circumstances exist that are reasonably expected by
RSI to result in the revocation of any such determination.
(c) With respect to each RSI Employee Plan that is subject to Title IV
of ERISA: (i) as of the last applicable annual valuation date, the present value
of all benefits under such RSI Employee Plan did not exceed the value of the
assets of such RSI Employee Plan allocable to such benefits, on a projected
benefits basis, using the actuarial methods, factors and assumptions used for
the most recent actuarial report with respect to such RSI Employee Plan; and
(ii) there has been no termination, partial termination or "reportable event"
(as defined in Section 4043 of ERISA) with respect to any such RSI Employee
Plan. No RSI Employee Plan that is subject to Section 412 of the Code has
incurred any "accumulated funding deficiency" (as defined in Section 412 of the
Code), whether or not waived. No event has occurred, and, to the best knowledge
of RSI there do not exist any circumstances, that could subject RSI or any
Subsidiary of RSI to any material liability arising under ERISA. With respect to
the RSI Employee Plans and RSI Benefit Arrangements, individually and in the
aggregate, no event has occurred, and, to the best knowledge of RSI there do not
exist any circumstances, that could subject RSI or any Subsidiary of RSI to any
material liability arising under the Code or other applicable law, or under any
indemnity agreement to which RSI or any Subsidiary of RSI is a party, excluding
liabilities for benefit claims, administrative expenses and funding obligations
payable in the ordinary course.
(d) No RSI Employee Plan is a "multiple employer plan" described in
Section 4063(a) of ERISA, nor has RSI or any ERISA Affiliate of RSI at any time
since January 1, 1994, contributed to or been obligated to contribute to such a
multiple employer plan. With respect to any "multiemployer plan" as defined in
Section 3(37) of ERISA contributed to by RSI or any ERISA Affiliate, to the best
knowledge of RSI, after due inquiry, if RSI or any Subsidiary of RSI were to
have withdrawn from all such multiemployer plans during 1995, any withdrawal
liability that would have been assessed against RSI with respect to such
withdrawal would not have an RSI Material Adverse Effect.
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(e) Except with respect to an RSI Employee Plan, neither RSI nor any
ERISA Affiliate of RSI has any Controlled Group Liability, nor do any
circumstances exist that could result in any of them having any Controlled Group
Liability.
(f) Neither the execution or delivery of this Agreement, nor the
consummation of the transactions contemplated hereby (either alone or together
with any additional or subsequent events), constitutes an event under any RSI
Employee Plan, RSI Benefit Arrangement, loan to, or individual agreement or
contract with, an RSI Employee that may result in any payment (whether of
severance pay or otherwise), restriction or limitation upon the assets of any
RSI Employee Plan or RSI Benefit Arrangement, acceleration of payment or
vesting, increase in benefits or compensation, or required funding, with respect
to any RSI Employee, or the forgiveness of any loan or other commitment of any
RSI Employees.
(g) There are no actions, suits, arbitrations, inquiries,
investigations or other proceedings (other than routine claims for benefits)
pending or, to RSI's knowledge, threatened, with respect to any RSI Employee
Plan or RSI Benefit Arrangement.
(h) No RSI Employees and no beneficiaries or dependents of RSI
Employees are or may become entitled under any RSI Employee Plan or RSI Benefit
Arrangement to post-employment or retiree welfare benefits of any kind,
including without limitation death or medical benefits, other than coverage
mandated by Part 6 of Title I of ERISA or Section 4980B of the Code or other
applicable law.
6.10. Labor Matters. There are no agreements with, or pending petitions
for recognition of, a labor union or association as the exclusive bargaining
agent for any of the employees of RSI or any of its Subsidiaries; no such
petitions have been pending at any time within two years of the date of this
Agreement and, to the best knowledge of RSI, there has not been any organizing
effort by any union or other group seeking to represent any employees of RSI or
any of its Subsidiaries as their exclusive bargaining agent at any time within
two years of the date of this Agreement. There are no labor strikes, work
stoppages or other labor troubles, other than routine grievance matters, now
pending, or, to RSI's knowledge, threatened, against RSI or any of its
Subsidiaries, nor have there been any such labor strikes, work stoppages or
other labor troubles, other than routine grievance matters, with respect to RSI
or any of its Subsidiaries at any time within two years of the date of this
Agreement.
6.11. Taxes. (a) RSI and its Subsidiaries have timely
filed all Tax Returns required to be filed by them, or requests
for extensions to file such Tax Returns have been timely filed
and granted and have not expired, and all Tax Returns are
complete and accurate in all respects, except to the extent that
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such failures to file or be complete and accurate in all respects, as
applicable, individually or in the aggregate, do not have and would not
reasonably be expected (so far as can be foreseen at the time) to have an RSI
Material Adverse Effect. RSI and each of its Subsidiaries has paid (or RSI has
paid on its behalf) or made adequate provision for all taxes shown as due on
such Tax Returns. RSI and each of its Subsidiaries have paid or made adequate
provision for all taxes required to be paid without the filing of any Tax Return
which have become due and payable. The most recent financial statements
contained in the RSI SEC Reports reflect adequate reserves for all taxes payable
by RSI and its Subsidiaries for all taxable periods and portions thereof accrued
through the date of such financial statements, and no deficiencies for any taxes
have been proposed, asserted or assessed against RSI or any of its Subsidiaries
that are not adequately reserved for, except for inadequately reserved taxes and
inadequately reserved deficiencies that, individually or in the aggregate, do
not have and would not reasonably be expected (so far as can be foreseen at the
time) to have an RSI Material Adverse Effect. Neither RSI nor any of its
Subsidiaries has any reasonable basis to believe that any such deficiencies
exist in excess of such established reserves. The consolidated federal income
tax returns of RSI have been audited by the Internal Revenue Service (or closed
by applicable statute of limitations), and all liabilities in respect thereof
have been finally determined, for all taxable years up to and including the
taxable year ended May 2, 1992. Neither RSI nor any of its Subsidiaries is a
party to any pending or has knowledge of any threatened action or proceeding by
any taxing authority for the determination, assessment or collection of any
taxes of RSI or any of its Subsidiaries or relating to their respective
businesses and operations. There are no liens for taxes (other than for current
taxes not yet due and payable) on the assets of RSI or its Subsidiaries. No
requests for waivers of the time to assess any taxes against RSI or any of its
Subsidiaries have been granted or are pending, except for requests with respect
to such taxes that have been adequately reserved for in the most recent
financial statements contained in the RSI SEC Reports, or, to the extent not
adequately reserved, the assessment of which, individually or in the aggregate,
do not have and would not reasonably be expected (so far as can be foreseen at
the time) to have an RSI Material Adverse Effect. Neither RSI nor any of its
Subsidiaries is a party to or bound by any agreements providing for the
allocation or sharing of taxes. Neither RSI nor any of its Subsidiaries has
filed a consent pursuant to or agreed to the application of Section 341(f) of
the Code. Each of RSI and its Subsidiaries has disclosed on its federal income
tax returns all positions taken therein that could give rise to a substantial
understatement of federal income tax within the meaning of Section 6662 of the
Code. All taxes that are required by the laws of the United States, any state or
political subdivision thereof, or any foreign country to be withheld or
collected by RSI or any of its Subsidiaries have been duly withheld or collected
and, to the extent required, have been paid to the
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proper governmental authorities or properly deposited as required by applicable
laws. None of RSI and its Subsidiaries (i) has been a member of an affiliated
group filing a consolidated federal income tax return (other than a group the
common parent of which was RSI), or (ii) has any liability for the taxes of any
Person (other than any of RSI and its Subsidiaries) under Treas. Reg.
ss.1.1502-6 (or any similar provision of state, local or foreign law), as a
transferee or successor, by contract or otherwise. Neither RSI nor any of its
Subsidiaries will be required, as a result of a change in method of accounting
for a taxable year beginning on or before the Closing Date, to include any
adjustment under Section 481(a) of the Code in its taxable income for any
taxable year beginning after the Closing Date.
(b) The RSI Disclosure Statement sets forth each state in
which RSI and its Subsidiaries (i) filed an income or franchise tax return,
whether on a consolidated, combined or separate return basis, for the taxable
year ended April 29, 1995, and (ii) collected or remitted any sales and/or use
taxes as of December 31, 1995.
(c) None of RSI, Merger Sub or any other Subsidiary of RSI has
taken or agreed to take any action that would prevent the Merger from qualifying
as a reorganization within the meaning of Section 368(a) of the Code.
6.12. Intellectual Property. RSI and its Subsidiaries own, or possess
valid licenses or other valid rights to use, the Intellectual Property used in
RSI's business, except where the failure to own or have the right to use such
Intellectual Property, in the aggregate, does not have and would not be
reasonably expected (so far as can be foreseen at the time) to have an RSI
Material Adverse Effect.
6.13. Properties. Except as disclosed or reserved against in the most
recent financial statements contained in the RSI SEC Reports, RSI and each of
its Subsidiaries have good and marketable title to all of the material
properties and assets, tangible or intangible, reflected in such financial
statements as being owned by RSI and each of its Subsidiaries as of the dates
thereof, free and clear of all Liens. All leased buildings and all leased
fixtures, equipment and other property and assets that are material to RSI's
business on a consolidated basis are held under leases or subleases that are
valid and binding instruments enforceable in accordance with their respective
terms, and there is not, under any of such leases, any existing material default
or event of default (or event which with notice or lapse of time, or both, would
constitute a material default), except where the lack of such validity and
binding nature or the existence of such default or event of default does not
have and would not reasonably be expected (so far as can be foreseen at the
time), to have an RSI Material Adverse Effect.
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6.14. Environmental Matters. Except in all cases that, in the
aggregate, have not had and would not reasonably be expected (so far as can be
foreseen at the time) to have an RSI Material Adverse Effect, RSI and each of
its Subsidiaries (i) have obtained all applicable permits, licenses and other
authorizations which are required to be obtained under all applicable
Environmental Laws, including laws relating to emissions, discharges, releases
or threatened releases of pollutants, contaminants, or hazardous or toxic
materials or wastes into ambient air, surface water, ground water, or land or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport, or handling of pollutants, contaminants or
hazardous or toxic materials or wastes by RSI or its Subsidiaries (or their
respective agents); (ii) are in compliance with all terms and conditions of such
required permits, licenses and authorization, and also are in compliance with
all other limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables contained in applicable
Environmental Laws; (iii) as of the date hereof, are not aware of nor have
received notice of any past or present violations of Environmental Laws, or any
event, condition, circumstance, activity, practice, incident, action or plan
which is reasonably likely to interfere with or prevent continued compliance
with or which would give rise to any common law or statutory liability, or
otherwise form the basis of any claim, action, suit or proceeding, against RSI
or any of its Subsidiaries based on or resulting from the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling, or the emission, discharge or release into the environment, of any
pollutant, contaminant or hazardous or toxic material or waste; and (iv) have
taken all actions necessary under applicable Environmental Laws to register any
products or materials required to be registered by RSI or its Subsidiaries (or
any of their respective agents) thereunder.
6.15. Reports and Financial Statements. RSI has filed all reports
required to be filed with the SEC since May 1, 1995 through the date hereof
(collectively, the "RSI SEC Reports"), and has previously furnished or made
available to the Company true and complete copies of all RSI SEC Reports. None
of the RSI SEC Reports, as of their respective dates (as amended through the
date hereof), contained any untrue statement of material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. Each of the balance sheets (including the related notes)
included in the RSI SEC Reports presents fairly, in all material respects, the
consolidated financial position of RSI and its Subsidiaries as of the respective
dates thereof, and the other related statements (including the related notes)
included therein present fairly, in all material respects, the results of
operations, the changes in shareholders equity and cash flows of RSI and its
Subsidiaries for the respective periods or as of the respective dates set forth
therein, all in conformity with generally
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accepted accounting principles consistently applied during the periods involved,
except as otherwise noted therein and subject, in the case of the unaudited
interim financial statements, to normal year-end adjustments and any other
adjustments described therein. RSI has provided to the Company true and correct
copies of RSI's unaudited consolidated statement of operations and statement of
cash flows for the eight months ended, and RSI's consolidated balance sheet as
of, December 30, 1995 (the "RSI Unaudited Financial Statements"). Such RSI
Unaudited Financial Statements present fairly in all material respects the
results of operations and cash flows for the eight months ended, and the
financial position of RSI and its Subsidiaries as of, December 30, 1995, all in
conformity with generally accepted accounting principles consistently applied
during the period involved except as otherwise noted therein and except for the
absence of footnote disclosure, and subject to (x) normal year-end adjustments,
(y) any adjustments required to reflect a physical inventory for the months of
November and December, 1995, and (z) any other adjustments described therein.
All of the RSI SEC Reports, as of their respective dates (as amended through the
date hereof), complied in all material respects with the requirements of the
Exchange Act.
6.16. Absence of Certain Changes or Events. During the period since
December 30, 1995, the business of RSI and its Subsidiaries has been conducted
only in the ordinary course, consistent with past practice, and neither RSI nor
any Subsidiary of RSI has entered into any material transaction other than in
the ordinary course, consistent with past practice, and there has not been (a)
any change in the business, financial condition, results of operations,
properties, assets or liabilities of RSI and its Subsidiaries taken as a whole
that, individually or in the aggregate, has or would reasonably be expected to
have (so far as can be foreseen at the time) an RSI Material Adverse Effect, (b)
any damage, destruction or loss, (whether or not covered by insurance) with
respect to any property or asset of RSI or any of its Subsidiaries which,
individually or in the aggregate, has or would reasonably be expected to have
(so far as can be foreseen at the time) an RSI Material Adverse Effect, (c) any
change by RSI in its accounting methods, principles or practices, other than
immaterial changes consistent with generally accepted accounting principles, (d)
any declaration, setting aside or payment of any dividend or distribution in
respect of any capital stock of RSI or any of its Subsidiaries, or any
redemption, purchase or other acquisition of any of their respective securities,
other than regular semi-annual dividends on RSI Common Shares not in excess of
$.03 per share and dividends by any Subsidiary of RSI to RSI, (e) except after
the date hereof as permitted by Section 7.9(d), any entering into, establishment
or amendment of, any RSI Employee Plan or RSI Benefit Arrangement (including,
without limitation, the granting of stock options, stock appreciation rights,
performance awards, or restricted stock awards), or any other increase in the
compensation payable or to become payable to any officers or key
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employees of RSI or any Subsidiary of RSI, except for immaterial severance
payments to departing employees consistent with past practice.
6.17. Contracts and Leases. The RSI SEC Reports and the RSI Disclosure
Statement contain an accurate and complete listing of all contracts, leases,
agreements or understandings, whether written or oral, required to be described
in, or filed as exhibits to, the RSI SEC Reports pursuant to the Exchange Act
and the applicable rules and regulations thereunder, or which are otherwise
material to the business, properties, operations, financial condition of RSI and
its Subsidiaries taken as a whole. Each of such contracts, leases, agreements
and understandings is in full force and effect and (a) none of RSI or its
Subsidiaries or, to RSI's best knowledge, any other party thereto, has breached
or is in default thereunder, (b) no event has occurred which, with the passage
of time or the giving of notice, would constitute such a breach or default, (c)
no claim of default thereunder has, to RSI's best knowledge, been asserted or
threatened and (d) none of RSI or its Subsidiaries or, to RSI's best knowledge,
any other party thereto is seeking the renegotiation thereof or substitute
performance thereunder, except where such breach or default, or attempted
renegotiation or substitute performance, individually or in the aggregate, does
not have and would not be reasonably expected so far as can be foreseen at the
time) to have an RSI Material Adverse Effect. RSI has provided the Company or
its representatives with accurate and complete copies of all such contracts,
leases, agreements and understandings.
6.18. Affiliated Transactions. The RSI SEC Reports contain an accurate
and complete description of all contracts, leases, agreements or understandings,
whether written or oral, with or on behalf of any Affiliate of RSI, to which RSI
or any of its Subsidiaries is a party or is otherwise bound and which is
required to be described in any RSI SEC Report pursuant to the Exchange Act and
the applicable rules and regulations thereunder.
6.19. Ownership of Merger Sub; No Prior Activities; Assets
of Merger Sub. (a) Merger Sub was formed by RSI solely for the
purpose of engaging in the transactions contemplated hereby.
(b) As of the date hereof and the Effective Time, the capital stock of
Merger Sub is and will be owned 100% by RSI directly. Further, there are not as
of the date hereof and there will not be at the Effective Time any outstanding
or authorized options, warrants, calls, rights, commitments or any other
agreements of any character which Merger Sub is a party to, or may be bound by,
requiring it to issue, transfer, sell, purchase, redeem or acquire any shares of
capital stock or any securities or rights convertible into, exchangeable for, or
evidencing the right to subscribe for or acquire, any shares of capital stock of
Merger Sub.
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(c) As of the date hereof and the Effective Time, except for
obligations or liabilities incurred in connection with its incorporation or
organization and the transactions contemplated thereby and hereby (including the
refinancing of all or any portion of the debt of the Company and its
Subsidiaries), Merger Sub has not and will not have incurred, directly or
indirectly through any Subsidiary or Affiliate, any obligations or liabilities
or engaged in any business or activities of any type or kind whatsoever or
entered into any arrangements or arrangements with any Person.
6.20. Brokers and Finders. Except for the fees and expenses payable to
Goldman, Sachs & Co. ("Goldman Sachs") and BA Partners, which fees and expenses
will be paid by RSI and are reflected in RSI's respective agreements with each
of Goldman Sachs and BA Partners, true and complete copies of which have been
furnished to the Company, RSI has not employed any investment banker, broker,
finder or intermediary in connection with the transactions contemplated by this
Agreement which would be entitled to any investment banking, brokerage, finder's
or similar fee or commission in connection with this Agreement or the
transactions contemplated hereby.
6.21. S-4 Registration Statement and Proxy Statement/ Prospectus.
Neither the S-4 Registration Statement nor the Proxy Statement/Prospectus
(including, without limitation, unless otherwise modified in the S-4
Registration Statement, the information contained in the RSI SEC Reports), will
(a) in the case of the S-4 Registration Statement, at the time it becomes
effective, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein not misleading or (b) in the case of the Proxy
Statement/Prospectus, at the time the stockholders of the Company take action to
approve this Agreement and the Merger as contemplated by Section 7.3(a) and at
the time of the mailing of the Proxy Statement/Prospectus and at the time of the
RSI Stockholders Meeting, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading; provided, however, that RSI makes no
representation with respect to information supplied in writing by the Company
for inclusion in the S-4 Registration Statement or the Proxy
Statement/Prospectus. If at any time prior to the Effective Time any event with
respect to RSI, its officers and directors or any of its Subsidiaries shall
occur which is required to be described in the Proxy Statement/Prospectus or the
S-4 Registration Statement, such event shall be so described, and an amendment
or supplement shall be promptly filed with the SEC and, as required by law,
disseminated to the stockholders of RSI and such amendment or supplement shall
comply with all provisions of applicable law. The S-4 Registration Statement
will, at the time it becomes effective, comply as to form in all material
respects with the provisions of the Securities Act.
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6.22. Tax Matters. The representations set forth in the numbered
paragraphs of the form of Tax Matters Certificate of RSI attached to the RSI
Disclosure Statement (the "RSI Tax Matters Certificate") are true and correct in
all respects, and such representations are hereby incorporated herein by
reference with the same effect as if set forth herein in their entirety.
6.23. Company Management Loans. RSI acknowledges that the Company
Management Loans shall be forgiven in their entirety immediately prior to the
Effective Time, and consents to the forgiveness thereof, provided, that each
management employee of the Company subject to a Company Management Loan agrees
that, provided RSI complies with Section 7.16 hereof, the shares of Common Stock
purchased by management employees with the proceeds of the Company Management
Loans (and the RSI Common Shares issuable to such employee upon conversion of
such shares of Common Stock in the Merger) will not be sold for a period of one
year from the Effective Time or such earlier date on which such individual
ceases to be an employee due to resignation, retirement or termination.
6.24. Opinion of Financial Advisor. Goldman Sachs has delivered to the
Board of Directors of RSI its written opinion to the effect that, as of the date
of this Agreement, the aggregate number of RSI Common Shares to be issued as
consideration for the outstanding shares of Common Stock pursuant to this
Agreement is fair to RSI.
ARTICLE VII
ADDITIONAL COVENANTS AND AGREEMENTS
7.1. Conduct of Business of the Company. Except as contemplated by this
Agreement or the Commitment Letter, as set forth in the Company Disclosure
Statement or as otherwise permitted by the prior written consent of RSI, during
the period from the date of this Agreement to the Effective Time (i) the Company
will, and will cause each of its Subsidiaries to, conduct its operations in the
ordinary course of business consistent with past practice, and (ii) the Company
will not, and will cause each of its Subsidiaries not to, enter into any
material transaction other than in the ordinary course of business consistent
with past practice. Without limiting the generality of the foregoing, and except
as otherwise permitted in this Agreement or as contemplated in the Commitment
Letter, prior to the Effective Time, the Company will not, and will not permit
any of its Subsidiaries to, without the prior written consent of RSI (except to
the extent set forth in the Company Disclosure Statement):
(a) except for Shares issued upon exercise of Options and Warrants
outstanding as of the date hereof and the issuance of Class A or Class B Common
Stock, as the case may be, upon the conversion of Class B or Class A Common
Stock as required by the Company's Restated Certificate of Incorporation, issue,
deliver,
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sell, dispose of, pledge or otherwise encumber, or authorize or propose the
issuance, sale, disposition or pledge or other encumbrance of (A) any shares of
its capital stock of any class (including the Shares), or any securities or
rights convertible into, exchangeable for, or evidencing the right to subscribe
for any shares of its capital stock, or any rights, warrants, options, calls,
commitments or any other agreements of any character to purchase or acquire any
shares of its capital stock or any securities or rights convertible into,
exchangeable for, or evidencing the right to subscribe for, any shares of its
capital stock, or (B) any other securities in respect of, in lieu of, or in
substitution for, Shares outstanding on the date hereof;
(b) redeem, purchase or otherwise acquire, or propose to redeem,
purchase or otherwise acquire, any of its outstanding securities (including the
Shares), except for redemption of the Preferred Stock in accordance with the
Preferred Stock Redemption Agreements or as otherwise contemplated by Section
7.10;
(c) split, combine, subdivide or reclassify any shares of its capital
stock or declare, set aside for payment or pay any dividend, or make any other
actual, constructive or deemed distribution in respect of any shares of its
capital stock or otherwise make any payments to stockholders in their capacity
as such;
(d) (A) other than in the ordinary course of business consistent with
past practices, and as approved by the Board of Directors of the Company, (i)
grant any increases in the base compensation of any of its directors, officers
or key employees, or (ii) pay or agree to pay any material pension, retirement
allowance or other employee benefit not required by any of the Employee Plans or
Benefit Arrangements as in effect on the date hereof to any such director,
officer or key employees, whether past or present, or (B) (i) enter into any new
or amend any existing employment or severance agreement with any director,
officer or key employee of the Company or any Subsidiary of the Company, except
as permitted in the Company Disclosure Statement, or (ii) except as may be
required to comply with applicable law, become obligated under any new Employee
Plan or Benefit Arrangement which was not in existence on the date hereof, or
amend any such Employee Plan or Benefit Arrangement in existence on the date
hereof if such amendment would have the effect of accelerating or materially
enhancing any benefits thereunder;
(e) adopt a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other reorganization
of the Company or any of its Subsidiaries (other than the Merger);
(f) other than as disclosed in the Company's current capital budget,
make any acquisition or disposition, by means of merger, consolidation or
otherwise, of any material assets (other
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than sales of inventory in the ordinary course of business, and the disposition
of obsolete assets or assets no longer used in the business) or other business
enterprise or operation;
(g) adopt any amendments to its Restated Certificate of Incorporation
or Bylaws or alter through merger, liquidation, reorganization, restructuring or
in any other fashion the corporate structure or ownership of any Subsidiary;
(h) other than (i) borrowings under existing credit facilities, (ii)
other borrowings in the ordinary course in the aggregate at any time outstanding
up to $10 million after the date hereof, (iii) borrowings in connection with the
redemption of Preferred Stock to the extent permitted by Section 7.10 hereof,
and (iv) borrowings of up to $35 million to be used for construction of a new
operating facility for Biggers Brothers, Inc., incur any indebtedness for
borrowed money or guarantee any such indebtedness or, except in the ordinary
course consistent with past practice, make any loans, advances or capital
contributions to, or investments in, any other Person (other than to the Company
or any Wholly-Owned Subsidiary of the Company);
(i) enter into any agreement providing for acceleration of payment of
any material obligation or performance of any material benefit or payment or
other consequence as a result of a change of control of the Company or its
Subsidiaries;
(j) except as disclosed in the Company's current capital budget, a true
and complete copy of which has been delivered to RSI, enter into any contract,
arrangement or understanding requiring the lease or purchase of equipment,
materials, supplies or services over a period greater than 12 months, which is
not cancelable without penalty on 30 days' or less notice;
(k) take any actions, which would, or would be reasonably likely to,
adversely affect the qualification of the Merger as a reorganization within the
meaning of Section 368(a) of the Code, and the Company shall use all reasonable
efforts to achieve such result; or
(l) enter into any contract, agreement, commitment or
arrangement to do any of the foregoing.
7.2. Other Transactions. From the date hereof until the Effective Time,
neither the Company nor any of its Subsidiaries, employees, officers, agents or
representatives, shall, directly or indirectly (a) solicit or initiate any
inquiry, proposal or offer from any Person relating to any acquisition or
purchase of all or a material amount of the assets of, or any securities of, or
any merger, consolidation or business combination with, the Company or any
Subsidiary (any such inquiry, proposal or offer being hereinafter referred to as
a "Company Alternative Proposal"), or (b)(i) participate in any negotiations
with respect to a Company Alternative Proposal, (ii) furnish to any
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other Person any confidential information with respect to the Company or its
business, or (iii) otherwise cooperate in any way with, or assist or participate
in, or facilitate any Company Alternative Proposal. The Company shall promptly
notify RSI if any Company Alternative Proposal is made.
7.3. Stockholder Votes. (a) As soon as practicable, and in any case
within ten Business Days after RSI has delivered to the Company copies of the
Proxy Statement/Prospectus in the form mailed to RSI stockholders and copies of
the RSI SEC Reports incorporated by reference into the Proxy
Statement/Prospectus, the Company will cause to be taken all stockholder action
necessary in accordance with applicable law, the Company's Restated Certificate
of Incorporation and Bylaws, the Stockholders Agreement and the DGCL to approve
this Agreement and the Merger. If such action is taken by less than unanimous
written consent of the stockholders of the Company, the Company will deliver
prompt notice of the taking of such action to all stockholders of the Company
who did not consent to such action, in accordance with DGCL Section 228. The
Board of Directors of the Company will recommend and declare advisable such
approval. Pursuant to the ML Agreement, each of the ML Entities have agreed to
vote all Shares owned by them or which they have the right to vote in support
and in favor of approval of the Merger and this Agreement, which vote the
Company represents and warrants shall be sufficient to obtain the requisite
approval of the Merger and this Agreement. The Company shall promptly provide to
RSI copies of all notices, letters and other materials delivered to the
stockholders of the Company (other than the Proxy Statement/Prospectus and the
RSI SEC Reports incorporated therein by reference) in connection with such
stockholder action, and will keep RSI apprised of the status of such stockholder
action.
(b) As soon as practicable after the effectiveness of the S-4
Registration Statement, and following an appropriate notice period in accordance
with applicable law, RSI's Restated Certificate of Incorporation or RSI's
Bylaws, RSI will take all action necessary in accordance with applicable law and
its Restated Certificate of Incorporation and Bylaws to convene a meeting of its
stockholders (the "RSI Stockholders Meeting") to consider and vote upon the
approval of the issuance of the RSI Common Shares in connection with the Merger.
The Board of Directors of RSI shall recommend and declare advisable such
approval and RSI shall take all lawful action to solicit, and use all reasonable
efforts to obtain, such approval. RSI, as the sole stockholder of Merger Sub,
has consented to the adoption of this Agreement by Merger Sub and agrees that
such consent shall be treated for all purposes as a vote duly adopted at a
meeting of the stockholders of Merger Sub held for this purpose.
7.4. Registration Statement. RSI and the Company shall
cooperate and promptly prepare and RSI shall file with the SEC
as soon as practicable a Registration Statement on Form S-4 under
the Securities Act with respect to the RSI Common Stock issuable
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in the Merger (the "S-4 Registration Statement"), a portion of which
Registration Statement shall also serve as the proxy statement with respect to
the RSI Stockholder Meeting (such proxy statement/prospectus, together with any
amendments thereof or supplements thereto, in each case in the form or forms
mailed to stockholders, is herein called the "Proxy Statement/Prospectus"). RSI
will cause the Proxy Statement/Prospectus and the S-4 Registration Statement to
comply as to form in all material respects with the applicable provisions of the
Securities Act, the Exchange Act and the rules and regulations thereunder. RSI
shall use all reasonable efforts, and the Company will cooperate with RSI, to
have the S-4 Registration Statement declared effective by the SEC as promptly as
practicable and to keep the S-4 Registration Statement effective as long as is
necessary to consummate the Merger. RSI shall, as promptly as practicable,
provide the Company copies of any written, and will inform the Company of any
oral, comments on the S-4 Registration Statement received from the SEC. RSI
shall use its best efforts to obtain, prior to the effective date of the S-4
Registration Statement, all necessary state securities law or "Blue Sky" permits
or approvals required to carry out the transactions contemplated by this
Agreement and will pay all expenses incident thereto. RSI agrees that the Proxy
Statement/Prospectus and each amendment or supplement thereto at the time of
mailing thereof and at the time of the RSI Stockholders Meeting, or, in the case
of the S-4 Registration Statement, at the time it becomes effective, as it may
be amended or supplemented, will not include an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading; provided, however, that the foregoing shall not apply
to the extent that any such untrue statement of a material fact or omission to
state a material fact was made by RSI in reliance upon and in conformity with
written information concerning the Company furnished to RSI by the Company for
inclusion in the Proxy Statement/Prospectus and the S-4 Registration Statement,
as it may be amended or supplemented. The Company agrees that the written
information concerning the Company, its Subsidiaries, and its officers and
directors provided by it for inclusion in the Proxy Statement/Prospectus and
each amendment or supplement thereto, at the time of mailing thereof and at the
time of the RSI Stockholders Meeting, or, in the case of written information
concerning the Company provided by the Company for inclusion in the S-4
Registration Statement or any amendment or supplement thereto, at the time it is
filed or becomes effective, will not include an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading. No amendment or supplement to the Proxy
Statement/Prospectus that amends or supplements information relating to the
Company will be made by RSI without the approval of the Company, such approval
not to be unreasonably withheld. RSI will advise the Company, promptly after it
receives notice
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thereof, of the time when the S-4 Registration Statement has become effective or
any supplement or amendment has been filed, the issuance of any stop order, the
suspension of a qualification of the RSI Common Shares issuable in connection
with the Merger for offering or sale in any jurisdiction, or any written request
by the SEC for amendment of the Proxy Statement/Prospectus or the S-4
Registration Statement or for additional information. As soon as practicable
after the S-4 Registration Statement has become effective, RSI will provide the
Company with sufficient copies of the Proxy Statement/Prospectus in the form
mailed to RSI stockholders, as well as sufficient copies of the RSI SEC Reports
incorporated by reference into the Proxy Statement/Prospectus, to enable the
Company to deliver a copy to each stockholder of record of the Company.
7.5. Reasonable Efforts. The Company and RSI shall and shall use
reasonable best efforts to cause their respective Subsidiaries to: (i) promptly
make all filings and seek to obtain all Authorizations required under all
applicable laws with respect to the Merger and the other transactions
contemplated hereby and will cooperate with each other with respect thereto; and
(ii) promptly take, or cause to be taken, all other actions and do, or cause to
be done, all other things necessary, proper or appropriate to satisfy the
conditions set forth in Article VIII and to consummate and make effective the
transactions contemplated by this Agreement on the terms and conditions set
forth herein as soon as practicable (including, without limitation, using their
respective reasonable best efforts to avoid the entry of (or, if entered, to
have lifted, vacated or reversed) any order, decree, judgment or ruling of any
court or Governmental Body restraining or preventing the consummation of the
transactions contemplated by this Agreement on the basis of any federal or state
antitrust laws or regulations; provided, however, that in connection with any
filing or submission required or action to be taken by either the Company or RSI
or any of their Subsidiaries to effect the Merger and to consummate the other
transactions contemplated hereby, (A) neither the Company nor any of its
Subsidiaries shall, without RSI's prior written consent, commit to any
divestiture or hold separate or similar transaction and (B) neither RSI nor any
of its Subsidiaries shall be required to divest or hold separate or otherwise
take or commit to take any action, in each case, that materially limits its
freedom of action with respect to, or its ability to retain, the Company or any
of its Subsidiaries or any material portion of the assets of the Company and its
Subsidiaries or any existing (as of the date hereof) and material business,
product line or asset of RSI or any of its Subsidiaries.
7.6. Access to Information; Confidentiality. (a) Upon
reasonable notice, each of the Company and RSI shall (and shall
cause each of its Subsidiaries to) afford to officers, employees,
counsel, accountants and other authorized representatives of the
other party ("Respective Representatives") access, during normal
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business hours throughout the period prior to the Effective Time, to its
properties, books and records (including, without limitation, the work papers of
independent accountants) and, during such period, shall (and shall cause each of
its Subsidiaries to) furnish promptly to such Respective Representatives all
information concerning its business, properties and personnel as may reasonably
be requested, provided that no investigation pursuant to this Section 7.6 shall
affect or be deemed to modify any of the respective representations or
warranties made by RSI or the Company.
(b) All confidential information obtained by the Company respecting RSI
and its Subsidiaries pursuant to this Section 7.6 or prior to the date hereof
shall be kept confidential in accordance with the Confidentiality Agreement
dated as of November 20, 1995 between RSI and the Company.
(c) All confidential information respecting the Company and its
Subsidiaries obtained by RSI pursuant to this Section 7.6 or prior to the date
hereof shall be kept confidential in accordance with the Confidentiality
Agreement dated as of December 11, 1995 between the Company and RSI.
7.7. Listing of RSI Common Shares. RSI will use its reasonable best
efforts to cause the RSI Common Shares to be issued pursuant to this Agreement,
and upon exercise of Assumed Options and Assumed Warrants, to be listed for
trading on the NYSE.
7.8. Rule 145 Affiliates. The Company shall use reasonable efforts to
cause each party (other than RSI and the ML Entities) to the Registration Rights
Agreement (the "Rule 145 Affiliates") or who may otherwise be deemed to be an
Affiliate of the Company to deliver to RSI on or prior to the Effective Time, a
written agreement, in the form attached as Exhibit A hereto, providing, inter
alia, that such Rule 145 Affiliate will not sell, pledge, transfer or otherwise
dispose of any shares of RSI Common Shares issued to such Rule 145 Affiliate
pursuant to the Merger, except pursuant to an effective registration statement
or in compliance with Rule 145 or an exemption from the registration
requirements of the Securities Act ("Affiliate Letter"). Concurrently with the
execution of this Agreement, each of the ML Entities have agreed to execute such
Affiliate Letters.
7.9. Conduct of Business of RSI. Except as contemplated by this
Agreement or the Commitment Letter, as set forth in the RSI Disclosure Statement
or as otherwise permitted by the prior written consent of the Company, during
the period from the date of this Agreement to the Effective Time, (i) RSI will,
and will cause each of its Subsidiaries to, conduct its operations in the
ordinary course of business consistent with past practice, and (ii) RSI will
not, and will cause each of its Subsidiaries not to, enter into any material
transaction other than in the ordinary course of business consistent with past
practice.
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Without limiting the generality of the foregoing, and except as otherwise
permitted in this Agreement or as contemplated by the Commitment Letter, prior
to the Effective Time, RSI will not, and will not permit any of its Subsidiaries
to, without the prior written consent of the Company (except to the extent set
forth in the RSI Disclosure Statement):
(a) issue, deliver, sell, dispose of, pledge or otherwise encumber, or
authorize or propose the issuance, sale, disposition or pledge or other
encumbrance of (A) any shares of its capital stock of any class, or any
securities or rights convertible into, exchangeable for, or evidencing the right
to subscribe for any shares of its capital stock, or any rights, warrants,
options, calls, commitments or any other agreements of any character to purchase
or acquire any shares of its capital stock or any securities or rights
convertible into, exchangeable for, or evidencing the right to subscribe for,
any shares of its capital stock, or (B) any other securities in respect of, in
lieu of, or in substitution for, shares of capital stock outstanding on the date
hereof;
(b) redeem, purchase or otherwise acquire, or propose to
redeem, purchase or otherwise acquire, any of its outstanding
securities;
(c) split, combine, subdivide or reclassify any shares of its capital
stock or declare, set aside for payment or pay any dividend (other than normal
cash dividends in the ordinary course, but not in an amount to exceed $.03 per
share semi-annually, and other than dividends of Subsidiaries of RSI to RSI), or
make any other actual, constructive or deemed distribution in respect of any
shares of its capital stock or otherwise make any payments to stockholders in
their capacity as such;
(d) (A) other than in the ordinary course of business consistent with
past practices and as approved by the Board of Directors of RSI, (i) grant any
increases in the base compensation of any of its directors, officers or key
employees, or (ii) pay or agree to pay any material pension, retirement
allowance or other employee benefit not required by any of the RSI Employee
Plans or RSI Benefit Arrangements as in effect on the date hereof to any such
director, officer or key employees, whether past or present, or (B) (i) enter
into any new or amend any existing employment or severance agreement with any
such director, officer or key employee, except as contemplated by Section 7.17
or as permitted in the RSI Disclosure Statement, or (ii) except as may be
required to comply with applicable law, become obligated under any new RSI
Employee Plan or RSI Benefit Arrangement which was not in existence on the date
hereof, or amend any such RSI Employee Plan or RSI Benefit Arrangement in
existence on the date hereof if such amendment would have the effect of
accelerating or materially enhancing any benefits thereunder;
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(e) adopt a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other reorganization
of RSI or any of its Subsidiaries (other than the Merger);
(f) other than as disclosed in RSI's current capital budget, make,
engage in negotiations with any third party respecting, or directly or
indirectly solicit or initiate any inquiry, proposal or offer respecting, the
acquisition or disposition, by means of merger, consolidation, business
combination or otherwise, all or a material amount of assets of, or any
securities of, RSI or any Subsidiary thereof (other than sales of inventory in
the ordinary course of business, the disposition of obsolete assets or assets no
longer used in the business or the sale of U.S. Lace Paperworks); provided,
however, that nothing contained in this Section 7.9(f) shall require the Board
of Directors of RSI to act or refrain from acting in connection with taking and
disclosing to RSI's stockholders a position contemplated by Rules 14d-9 and
14e-2 under the Exchange Act;
(g) adopt any amendments to its Restated Certificate of Incorporation
or Bylaws (except for Bylaw amendments which are required in connection with the
performance by RSI of its obligations hereunder or under any other agreement
contemplated hereunder) or alter through merger, liquidation, reorganization,
restructuring or in any other fashion the corporate structure or ownership of
any Subsidiary;
(h) other than (i) borrowings under existing credit facilities, (ii)
other borrowings in the ordinary course in the aggregate at any time outstanding
up to $10 million after the date hereof, incur any indebtedness for borrowed
money or guarantee any such indebtedness or, except in the ordinary course
consistent with past practice, make any loans, advances or capital contributions
to, or investments in, any other Person (other than to RSI or any Wholly-Owned
Subsidiary of RSI);
(i) except in connection with modifications to RSI's Change in Control
Agreements as contemplated by Section 7.17 or otherwise on terms no more
favorable than contemplated by Section 7.17 for those executives not named in
such Section, enter into any agreement providing for acceleration of payment of
any material obligation or performance of any material benefit or obligation or
other consequence as a result of a change of control of RSI or its Subsidiaries;
(j) except as disclosed in RSI's current budget, a true and complete
copy of which has been delivered to the Company, enter into any contract,
arrangement or understanding requiring the lease or purchase of equipment,
materials, supplies or services over a period greater than 12 months, which is
not cancelable without penalty on thirty (30) days or less notice;
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(k) take any actions, which would, or would be reasonably likely to,
adversely affect the qualification of the Merger as a reorganization within the
meaning of Section 368(a) of the Code, and RSI shall use all reasonable efforts
to achieve such result; or
(l) enter into any contract, agreement, commitment or
arrangement to do any of the foregoing.
7.10. Preferred Stock Redemption; Withdrawal of S-1 Registration
Statement; USDA Matter. (a) The Company shall use its best efforts prior to
February 16, 1996 (i) to obtain an amendment to the Redemption Agreement dated
as of September 26, 1995 between Sara Lee Corporation ("Sara Lee") and the
Company, as amended by the Amendment to Redemption Agreement dated November 20,
1995 (the "Sara Lee Redemption Agreement") to (x) extend the termination date
set forth in Section 7.1(b) thereof to at least the earlier of the Closing or
July 31, 1996 ("Sara Lee Amendment"), and (y) acknowledge and agree that RSI or
Merger Sub shall be entitled to purchase the 10% Preferred Stock upon payment of
the purchase price therefor as set forth in the Sara Lee Redemption Agreement
and Sara Lee Amendment, and (ii) negotiate and arrange committed bank loan
financing (and any necessary consents) to enable the Company to fund prior to
March 15, 1996 the full purchase price for the purchase of the 10% Preferred
Stock as set forth in Section 1.2 of the Sara Lee Redemption Agreement ("Sara
Lee Bridge Financing"). "Best efforts" shall not require the Company to make or
agree to make any material payments to, or to be bound by any material
commitment with respect to, Sara Lee. If by February 16, 1996, the Company shall
not have obtained either the Sara Lee Amendment or Sara Lee Bridge Financing on
terms and conditions reasonably acceptable to RSI, RSI shall be entitled to
arrange for the Sara Lee Bridge Financing with such Persons and on such terms as
RSI may negotiate and which are as a whole more favorable to the Company than
the Sara Lee Bridge Financing and which are reasonably acceptable to the Company
("Alternative Sara Lee Bridge Financing") on the Company's behalf.
(b) If by March 10, 1996 the Company shall not have obtained the Sara
Lee Amendment, the Company shall execute and deliver such documents and perform
such acts as may be necessary to effect the Sara Lee Bridge Financing or the
Alternative Sara Lee Bridge Financing ("Bridge Financing") and shall effect the
purchase of the 10% Preferred Stock in accordance with the terms of the Sara Lee
Redemption Agreement. The Company shall have complied with its obligations under
subsections (a) and (b) of this Section 7.10 if by March 15, 1996 it shall have
either (a) obtained the Sara Lee Amendment, or (b) redeemed the 10% Preferred
Stock in accordance with the Sara Lee Redemption Agreement.
(c) Except as expressly provided by this Section 7.10, the
Company shall not amend any of the Preferred Stock Redemption
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Agreements or redeem the Preferred Stock prior to the earlier of the Closing
Date or July 31, 1996 without the prior written consent of RSI.
(d) If prior to March 15, 1996 the Company shall not have obtained the
Sara Lee Amendment or effected the Bridge Financing and purchased the 10%
Preferred Stock, at the Closing (i) the 10% Preferred Stock shall be redeemed in
accordance with Article Fourth, Paragraph (B)(2)(4) of the Company's Restated
Certificate of Incorporation ("Company Charter"), and (ii) the Exchangeable
Preferred Stock shall be acquired by RSI or Merger Sub for a price equal to the
price payable upon redemption by the Company in accordance with Article Fourth,
Paragraph (B)(3)(5) of the Company Charter; provided, however, that in no event
shall the redemption amount or the price payable for such Preferred Stock exceed
the amounts set forth on Schedule 7.10. Nothing set forth in this Section
7.10(d) shall be deemed to have had a Company Material Adverse Effect.
(e) Any redemption of Preferred Stock after March 15, 1996 pursuant to
this Agreement shall be deemed to occur immediately prior to the Effective Time.
(f) In the event that the Preferred Stock is redeemed on the Closing
Date and in connection with the consummation of the transactions contemplated by
this Agreement, RSI and the Company agree that RSI shall make, on behalf of the
Company, all the required payments under the Preferred Stock Redemption
Agreements directly to the respective holders of the Preferred Stock.
(g) No later than one Business Day after the date of this Agreement,
the Company shall request the withdrawal of the S-1 Registration Statement from
the SEC in accordance with the Securities Act.
(h) The Company shall keep RSI apprised of the status of, and new
developments concerning, the USDA matter referred to in the S-1 Registration
Statement, including, without limitation, promptly providing copies of all
notices, orders, proposals or other material correspondence to or from the USDA
regarding such matter and promptly providing RSI with prior notice of, and a
reasonable opportunity to comment on, any proposed settlement of such matter.
7.11. Commitment Letter. RSI and the Company shall use their respective
reasonable best efforts to consummate the transactions set forth in the
commitment letter dated February 2, 1996 from Bank of America National Trust and
Savings Association, BA Securities, Inc., The Chase Manhattan Bank, N.A., and
Chase Securities, Inc. to RSI and the Company (the "Commitment Letter") which
has been executed and delivered by RSI and which, to the best knowledge of each
of RSI and the Company, remains in full force and effect.
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7.12. Publicity. The initial press release relating to this Agreement
shall be a joint press release and thereafter the Company and RSI shall, subject
to their respective legal obligations, consult with each other, and use
reasonable efforts to agree upon the text of any press release, before issuing
any such press release or otherwise making public statements with respect to the
transactions contemplated hereby and in making any filings with any federal or
state governmental or regulatory agency or with any national securities exchange
with respect to the transactions contemplated hereby.
7.13. Director and Officer Indemnification. (a) Subject to the receipt
by RSI of a waiver and release by the ML Entities, in the form attached to the
ML Agreement, and by any officer or director of the Company who is also a
stockholder of the Company, in substantially the same form, of any claims
against present or former directors and officers of the Company arising from or
pertaining to acts or omissions, or alleged acts or omissions, occurring prior
to the Effective Time, from and after the Effective Time, RSI will, and will
cause the Surviving Corporation to, indemnify and hold harmless each person who
is now, or has been at any time prior to the date hereof, an officer or director
of the Company (individually, an "Indemnified Party", and collectively, the
"Indemnified Parties") with respect to acts or omissions occurring prior to the
Effective Time to the extent required by Article VIII of the Company's By-Laws
as filed as Exhibit 3.12 to the S-1 Registration Statement.
(b) After the Effective Time, RSI shall cause the directors
and officers of the Surviving Corporation and its Subsidiaries to be covered by
directors' and officers' liability insurance maintained by RSI on terms and
conditions no less favorable to such directors and officers as are applicable to
similarly situated directors and officers of Subsidiaries of RSI; provided that
such insurance shall not include coverage for any acts or omissions occurring
prior to the Effective Time.
7.14. Conveyance Taxes. RSI and the Company will cooperate in the
preparation, execution and filing of all returns, questionnaires, applications
or other documents regarding any real property transfer or gains, sales, use,
transfer, value added, stock transfer and stamp taxes, any transfer, recording,
registration and other fees and any similar taxes which become payable in
connection with the transactions contemplated by this Agreement that are
required or permitted to be filed on or before the Effective Time and each party
will pay any such tax or fee which becomes payable by it on or before the
Effective Time. RSI agrees to assume liability for and hold stockholders of the
Company harmless against liability for real property transfer or gain tax
imposed on such stockholders by the State of New York as a result of the Merger.
7.15. Parachute Payments. With respect to any "payments"
required to be made by the Company to "disqualified persons"
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pursuant to any employment, severance, supplemental retirement, stock option or
loan agreement or in connection with the cancellation thereof which may
constitute a "parachute payment" with respect to the transactions contemplated
by this Agreement (as such terms are defined by Section 280G of the Code), the
Company shall (i) in consultation with RSI, obtain stockholder approval of such
payments in accordance with Section 280G (b)(5)(B) of the Code and the
regulations (including any proposed or temporary regulations) thereunder and
(ii) at least 15 days prior to the Closing Date, provide evidence satisfactory
to RSI that such approval has been obtained.
7.16. RSI Loans. After the Effective Time, RSI shall extend loans to
those management employees of the Company for whom Company Management Loans were
forgiven at the Effective Time and whose RSI Common Shares are subject to
restriction as provided in Section 6.23, in an amount sufficient to cover the
federal and state income tax due from such management employees as a result of
such forgiveness. Such loans shall be made pursuant to terms and documentation
reasonably satisfactory to RSI, shall bear interest at a rate not less than that
prescribed by Section 7872 of the Code and shall be due and payable in full
ninety days after the expiration of the restrictions on the RSI Common Shares
referred to in Section 6.23 (whether such expiration occurs because of the
passage of one year from the Effective Time or because of the resignation,
retirement or termination of such employee).
7.17. RSI Change in Control Arrangements. Pursuant to Amended and
Restated Change in Control Agreements in the form of Schedule 7.17 hereto, RSI
has taken such action as may be necessary so that the consummation of the
transactions contemplated by this Agreement does not result in a "Change in
Control", as such term is defined in individual agreements with Messrs. Van
Stekelenburg, Harter, Martin, Feather and Giuliani, subject to the satisfaction
of the terms of such Amended and Restated Change in Control Agreements.
ARTICLE VIII
CONDITIONS
8.1. Conditions to Each Party's Obligations. The respective obligations
of each party to consummate the transactions contemplated by this Agreement are
subject to the fulfillment at or prior to the Effective Time of each of the
following conditions, any or all of which may be waived in whole or in part by
the party being benefitted thereby, to the extent permitted by applicable law:
(a) Stockholder Approval. This Agreement and the
transactions contemplated hereby shall have been duly approved by
the requisite holders of Shares in accordance with applicable
law, the Restated Certificate of Incorporation and Bylaws of the
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Company, and the Stockholders Agreement; and the issuance of RSI Common Shares
in connection with the Merger shall have been duly approved by the requisite
holders of RSI Common Shares in accordance with the rules of the NYSE.
(b) Government Consents, Etc. Except for the filing of a certificate of
merger in accordance with the DGCL, all Authorizations required in connection
with the execution and delivery of this Agreement and the performance of the
obligations hereunder shall have been made or obtained, except where the failure
to have made or obtained any such Authorizations would not have a material
adverse effect on the business, properties, operations or financial condition of
RSI and its Subsidiaries (including the Surviving Corporation) following the
Effective Time.
(c) No Injunction. There shall not be in effect any judgment, writ,
order, injunction or decree of any court of Governmental Body of competent
jurisdiction, restraining, enjoining or otherwise preventing consummation of the
transactions contemplated by this Agreement.
(d) Registration Statement. The S-4 Registration Statement shall have
been declared effective by the SEC under the Securities Act and shall be
effective at the Effective Time, and no stop order suspending effectiveness
shall have been issued, no action, suit, proceeding or investigation by the SEC
to suspend the effectiveness thereof shall have been initiated and be
continuing, and all necessary approvals under state securities laws or the
Securities Act or Exchange Act relating to the issuance or trading of the RSI
Common Shares to be issued in the Merger shall have been received.
(e) Listing of RSI Common Shares on NYSE. The RSI Common Shares
required to be issued hereunder (including upon exercise of Options and Warrants
as provided in Section 4.1(e)) shall have been approved for listing on the NYSE,
subject only to official notice of issuance.
(f) Financing. All conditions precedent to the closing of the financing
described to in the Commitment Letter shall have been satisfied, and the
transactions contemplated by such commitment letter shall have been consummated.
(g) Redemption of Preferred Stock. (i) All shares of Exchangeable
Preferred Stock shall have been purchased by RSI or Merger Sub pursuant to the
Redemption Agreement dated as of September 8, 1995 among ML IBK Positions, Inc.,
Merchant Banking L.P. No. IV and the Company, as amended as of December 29, 1995
and February 2, 1996 or otherwise in accordance with the terms of Section 7.10;
and (ii) all shares of 10% Preferred Stock shall have been redeemed in
accordance with the terms and conditions set forth in the Sara Lee Redemption
Agreement or otherwise in accordance with the terms of Section 7.10, or redeemed
by the
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Company or purchased by RSI or Merger Sub pursuant to the Sara Lee Amendment.
(h) Tax Opinion. The Company shall have received an opinion of Morgan,
Lewis & Bockius LLP, dated the Closing Date, in substantially the form attached
hereto as Exhibit E-1, to the effect that the Merger will be treated for federal
income tax purposes as a reorganization within the meaning of Section 368(a) of
the Code. In rendering such opinion, Morgan, Lewis & Bockius LLP may receive and
rely upon the representations of certain stockholders of the Company contained
in the Tax Agreement and representations contained in certificates of the
Company, stockholders of the Company, RSI, Merger Sub and others, including
without limitation the Company Tax Matters Certificate and the RSI Tax Matters
Certificate.
(i) Tax Opinions. RSI shall have received an opinion of Jones, Day,
Reavis & Pogue (addressed to RSI) in substantially the form attached hereto as
Exhibit E-2, dated the Closing Date, to the effect that the Merger should be
treated for federal income tax purposes as a reorganization within the meaning
of Section 368(a) of the Code. RSI shall have received an opinion of Shearman &
Sterling (addressed to the ML Entities) in substantially the form attached
hereto as Exhibit E-3, dated the Closing Date, to the effect that the Merger
will be treated for federal income tax purposes as a reorganization within the
meaning of Section 368(a) of the Code. In rendering such opinions, Jones, Day,
Reavis & Pogue and Shearman & Sterling may receive and rely upon the
representations of certain stockholders of the Company contained in the Tax
Agreement and representations contained in certificates of the Company,
stockholders of the Company, RSI, Merger Sub and others, including without
limitation the Company Tax Matters Certificate and the RSI Tax Matters
Certificate.
8.2. Conditions to Obligations of RSI and Merger Sub. The respective
obligations of RSI and Merger Sub to consummate the transactions contemplated by
this Agreement are subject to the fulfillment at or prior to the Effective Time
of each of the following conditions, any or all of which may be waived in whole
or part by RSI and Merger Sub, as the case may be, to the extent permitted by
applicable law:
(a) Representations and Warranties True. (i) The representations and
warranties of the Company contained in Article V or otherwise required hereby to
be made after the date hereof in a writing expressly referred to herein by or on
behalf of the Company pursuant to this Agreement shall have been true in all
material respects when made and at the time of the Closing with the same effect
as though such representations and warranties had been made at such time, except
(x) for changes specifically permitted by this Agreement or resulting from the
consummation of the transactions contemplated hereby, and (y) that those
representations and warranties which address
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matters only as of a particular date shall remain true and correct in all
material respects as of such date, and (ii) the representations and warranties
of each of the ML Entities contained in the ML Agreement or otherwise required
hereby or thereby to be made by any ML Entity after the date hereof in a writing
expressly referred to herein or in the ML Agreement by or on behalf of any ML
Entity pursuant to this Agreement or the ML Agreement shall have been true in
all material respects when made and at the time of the Closing with the same
effect as though such representations and warranties had been made at such time,
except for changes specifically permitted by this Agreement or the ML Agreement
or resulting from the consummation of the transactions contemplated hereby or by
the ML Agreement.
(b) Performance. (i) The Company shall have performed or complied in
all material respects with all agreements and conditions contained herein
required to be performed or complied with by it prior to or at the time of the
Closing, and (ii) each ML Entity shall have performed or complied in all
material respects with all agreements and conditions contained in the ML
Agreement required to be performed or complied with by it prior to or at the
time of the Closing.
(c) Compliance Certificate. (i) The Company shall have delivered to RSI
a certificate, dated the date of the Closing, signed by the President or any
Vice President of the Company, certifying as to the fulfillment of the
conditions specified in Section 8.2(a)(i) and (b)(i) and (ii) each ML Entity
shall have delivered to RSI a certificate, dated the date of the Closing, signed
by a duly authorized representative of such ML Entity, certifying as to the
fulfillment of the conditions specified in Section 8.2(a)(ii) and (b)(ii).
(d) Opinion of Counsel for the Company. RSI shall have received from
Morgan, Lewis & Bockius LLP and/or other counsel for the Company satisfactory to
RSI an opinion, dated the Closing Date, covering the items specified in Exhibit
B attached hereto.
(e) Standstill Agreement. RSI shall have received the Standstill
Agreement executed by each ML Entity, together with the opinion of Shearman &
Sterling or other counsel for the ML Entities satisfactory to RSI, dated the
Closing Date, covering the items specified in Exhibit E attached to the ML
Agreement.
(f) Fairness Opinion. The opinion of Goldman Sachs dated
the date of this Agreement shall not have been withdrawn, or
materially modified or amended, on or prior to the date of the
Proxy Statement/Prospectus.
(g) Stockholders Agreement. The Stockholders Agreement
shall have been terminated and be of no further force and effect.
(h) Tax Agreement. RSI shall have received a Tax Agreement
executed by each ML Entity and the other parties thereto.
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(i) Legal Proceedings. With respect to any action, suit, arbitration or
other proceeding pending against the Company or any Subsidiary thereof as of the
date of this Agreement where the amount in controversy exceeds $10.0 million
("Covered Company Proceeding"), (i) a final non-appealable judgment or award
shall have been entered in such Covered Company Proceeding, or a binding
settlement agreement of such Covered Company Proceeding shall have been executed
and delivered, providing in each such case for (A) a judgment or award in favor
of the Company or such Subsidiary, or (B) payment by the Company or such
Subsidiary of, or the imposition of fines or other remedies against the Company
or such Subsidiary involving, an amount (I) not in excess of the range specified
in any letter or opinion of the Company's counsel in such Covered Company
Proceeding to the Company's auditors during the 12 months preceding the date of
this Agreement ("Previous Company Auditor's Letter") or (II) if such amount is
in excess of such range, the payment of such amount does not have, or would not
reasonably be expected to have (so far as can be foreseen at the time), a
Company Material Adverse Effect, or (ii) if such Covered Company Proceeding has
not been finally resolved, (x) the Company shall have received an update
("Company Update Letter") to the Previous Company Auditor's Letter which
specifies a range above which an award or judgment is not favored by the balance
of probabilities, and (y) (A) such range shall not exceed that specified in the
Previous Company Auditor's Letter, or (B) if such range as set forth in the
Company Update Letter exceeds the range set forth in the Previous Company
Auditor's Letter, an award or judgment in such range would not have, or would
not reasonably be expected to have so far as can be foreseen at the time, a
Company Material Adverse Effect.
8.3. Conditions to Obligations of the Company. The obligations of the
Company to consummate the transactions contemplated by this Agreement are
subject to the fulfillment at or prior to the Effective Time of each of the
following conditions, any or all of which may be waived in whole or in part by
the Company to the extent permitted by applicable law:
(a) Representations and Warranties True. The representations and
warranties of RSI and Merger Sub contained in Article VI or otherwise required
hereby to be made after the date hereof in a writing expressly referred to
herein by or on behalf of RSI and Merger Sub pursuant to this Agreement shall
have been true in all material respects when made and at the time of the Closing
with the same effect as though such representations and warranties had been made
at such time, except (i) for changes specifically permitted by this Agreement or
resulting from the consummation of the transactions contemplated hereby and (ii)
that those representations and warranties which address matters only as of a
particular date shall remain true and correct in all material respects as of
such date.
(b) Performance. RSI and Merger Sub shall have performed
or complied in all material respects with all agreements and
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conditions contained herein required to be performed or complied with by them
prior to or at the time of the Closing.
(c) Compliance Certificate. RSI shall have delivered to
the Company a certificate, dated the date of the Closing, signed
by the President or any Vice President of RSI, certifying as to
the fulfillment of the conditions specified in Section 8.3(a) and
(b).
(d) Opinions of Counsel for RSI. The Company shall have received from
Jones, Day, Reavis & Pogue and Maslon Edelman Borman & Brand, or other counsel
for RSI satisfactory to the Company, opinions, dated the Closing Date, covering
the items specified in Exhibit C attached to this Agreement.
(e) Registration Rights Agreement. The Registration Rights
Agreement, duly executed by RSI, shall have been received by the
other parties thereto.
(f) Employment Agreements. The individuals listed on the
employment agreements included as Exhibit D hereto shall have
received executed employment agreements from RSI in the
respective forms of such exhibit.
(g) Legal Proceedings. With respect to any action, suit, arbitration or
other proceeding pending against RSI or any Subsidiary thereof as of the date of
this Agreement where the amount in controversy exceeds $10.0 million ("Covered
RSI Proceeding"), (i) a final non-appealable judgment or award shall have been
entered in such Covered RSI Proceeding, or a binding settlement agreement of
such Covered RSI Proceeding shall have been executed and delivered, providing in
each such case for (A) a judgment or award in favor of RSI or such Subsidiary,
or (B) payment by RSI or such Subsidiary of, or the imposition of fines or other
remedies against RSI or such Subsidiary involving, an amount (I) not in excess
of the range specified in any letter or opinion of RSI's counsel in such Covered
RSI Proceeding to RSI's auditors during the 12 months preceding the date of this
Agreement ("Previous RSI Auditor's Letter") or (II) if such amount is in excess
of such range, the payment of such amount does not have, or would not reasonably
be expected to have (so far as can be foreseen at the time), an RSI Material
Adverse Effect, or (ii) if such Covered RSI Proceeding has not been finally
resolved, (x) RSI shall have received an update ("RSI Update Letter") to the
Previous RSI Auditor's Letter which specifies a range above which an award or
judgment is not favored by the balance of probabilities, and (y) (A) such range
shall not exceed that specified in the Previous RSI Auditor's Letter, or (B) if
such range as set forth in the RSI Update Letter exceeds the range set forth in
the Previous RSI Auditor's Letter, an award or judgment in such range would not
have, or would not reasonably be expected to have so far as can be foreseen at
the time, an RSI Material Adverse Effect.
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ARTICLE IX
TERMINATION
9.1. Termination by Mutual Consent. This Agreement may be terminated
and the Merger may be abandoned at any time prior to the Effective Time, before
or after approval of matters presented in connection with the Merger by holders
of RSI Common Shares or holders of the Shares, by the mutual written consent of
the Boards of Directors of each of RSI and the Company.
9.2. Termination by Either RSI or the Company. This Agreement may be
terminated (upon notice from the terminating party to the other parties) and the
Merger may be abandoned by action of the Board of Directors of either RSI or the
Company at any time prior to the Effective Time, before or after approval of the
issuance of RSI Common Shares in connection with the Merger by holders of the
Shares or holders of the RSI Common Shares, if (a) the Merger shall not have
been consummated by July 31, 1996 (provided that the right to terminate this
Agreement under this clause (a) shall not be available to any party whose
failure to perform its covenants set forth in this Agreement has been the cause
of or resulted in the failure of the Merger to occur on or before such date),
(b) any court of competent jurisdiction in the United States or Governmental
Body in the United States shall have issued an order, decree or ruling or taken
any other action permanently restraining, enjoining or otherwise prohibiting the
Merger and such order, decree, ruling or other action shall have become final
and nonappealable; provided, that the party seeking to terminate this Agreement
pursuant to this clause (b) shall have used all reasonable efforts to remove
such order, decree, ruling or other action, or (c) the approval of RSI's
stockholders required by Section 8.1(a) is not obtained at the RSI Stockholders
Meeting or at any adjournment thereof.
9.3. Termination by RSI. This Agreement may be terminated (upon notice
from RSI to the Company) and the Merger may be abandoned at any time prior to
the Effective Time, before or after approval of the issuance of RSI Common
Shares in connection with the Merger by holders of RSI Common Shares, by action
of the Board of Directors of RSI, if (i) the Company shall have failed to comply
in any material respect with any of the covenants, conditions or agreements
contained in this Agreement to be complied with or performed by the Company at
or prior to such date of termination, which failure to comply has not been cured
within thirty Business Days following receipt by the Company of notice of such
failure to comply, (ii) any of the ML Entities shall have failed to comply in
any material respect with any of the covenants, conditions or agreements
contained in the ML Agreement to be complied with or performed by any of the ML
Entities at or prior to the such date of termination, which failure to comply
has not been cured by such ML Entity within thirty Business Days following
receipt by such ML Entity of notice of such failure to comply, (iii) any
representation or
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warranty of the Company contained in this Agreement shall not be true in all
material respects when made (provided such breach has not been cured within
thirty Business Days following receipt by the Company of notice of the breach)
or on and as of the Effective Time as if made on and as of the Effective Time,
except that those representations and warranties which address matters only as
of a particular date shall remain true in all material respects as of such date,
or (iv) any representation or warranty of any ML Entity contained in the ML
Agreement shall not be true in all material respects when made (provided such
breach has not been cured within thirty Business Days following receipt by such
ML Entity of notice of the breach) or on and as of the Effective Time as if made
on and as of the Effective Time, except that those representations and
warranties which address matters only as of a particular date shall remain true
in all material respects as of such date.
9.4. Termination by the Company. This Agreement may be terminated (upon
notice from the Company to RSI) and the Merger may be abandoned at any time
prior to the Effective Time, before or after the approval by holders of the
Shares, by action of the Board of Directors of the Company, if (i) RSI or Merger
Sub shall have failed to comply in any material respect with any of the
covenants, conditions or agreements contained in this Agreement to be complied
with or performed by RSI or Merger Sub at or prior to such date of termination,
which failure to comply has not been cured with thirty Business Days following
receipt by the breaching party of notice of such failure to comply, or (ii) any
representation or warranty of RSI or Merger Sub contained in this Agreement
shall not be true in all material respects when made (provided such breach has
not been cured within thirty Business Days following receipt by the breaching
party of notice of the breach) or on and as of the Effective Time as if made on
and as of the Effective Time, except that those representations and warranties
which address matters only as of a particular date shall remain true in all
material respects as of such date. Notwithstanding anything to the contrary
contained in this Section 9.4, the Company may terminate this Agreement if, (x)
as permitted pursuant to the proviso to Section 7.5, RSI has refused to consent
to any divestiture, hold separate or similar transaction on the part of the
Company, or RSI refuses to take or commit to take any action referred to in such
proviso, in each case that is required, in the reasonable opinion of the
Company, for the consummation of the transactions contemplated by this
Agreement, and (y) RSI has failed to make such consent or to take or commit to
be taken such action, within ten Business Days following receipt by RSI of
notice of the Company's intention to terminate this Agreement on that basis.
9.5. Effect of Termination and Abandonment. In the event
of termination of this Agreement and abandonment of the Merger
pursuant to this Article IX, no party hereto (or any of its
directors or officers) shall have any liability or further
obligation under this Agreement, except the obligations of the
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parties pursuant to Sections 7.6(b) and (c), 7.12, 10.1, 10.2, 10.4, 10.5, 10.6,
10.7, 10.9, 10.10, 10.11, 10.12 and 10.13, except that nothing herein will
relieve any party from liability for any wilful breach of any of its
representations and warranties, covenants or other agreements set forth in this
Agreement; provided, however, that the failure of RSI or the Company to close
the transactions contemplated by the Commitment Letter shall not be deemed to be
a wilful breach of any of its representations and warranties, covenants or other
agreements set forth in this Agreement; provided, further, however, that the
payment by RSI of the amounts referred to in Section 10.1(b) shall be liquidated
damages and following the payment of such amounts, RSI shall have no liability
or further obligation under this Agreement except pursuant to Section 7.6(c),
7.12, 10.1, 10.2, 10.4, 10.5, 10.6, 10.7, 10.9, 10.10, 10.11, 10.12 and 10.13.
ARTICLE X
MISCELLANEOUS AND GENERAL
10.1. Expenses. (a) Except as set forth in this Section 10.1, each
party shall bear its own Expenses, except that in the event of a dispute
concerning the terms or enforcement of this Agreement, the prevailing party in
any such dispute shall be entitled to reimbursement of reasonable legal fees and
disbursements from the other party or parties to such dispute.
(b) RSI agrees that if (i) an RSI Alternative Proposal shall
have been publicly announced or sent to holders of RSI Common Shares after the
date of this Agreement and prior to the RSI Stockholders Meeting, and (ii) the
issuance of the RSI Common Shares in connection with the Merger shall not have
been approved by the requisite holders of RSI Common Shares in accordance with
the rules of the NYSE at the RSI Stockholders Meeting and (iii) within 12 months
of the date on which such meeting is held a definitive agreement with respect to
such RSI Alternative Proposal is executed by RSI, then simultaneous with the
execution of such definitive agreement, unless RSI shall have properly
terminated this Agreement pursuant to Section 9.2(a) or (b), or Section 9.3, RSI
shall pay to the Company an amount equal to $4,500,000 plus all Expenses (not to
exceed $1,000,000) incurred by the Company.
10.2. Notices, Etc. All notices, requests, demands or other
communications required by or otherwise with respect to this Agreement shall be
in writing and shall be deemed to have been duly given to any party when
delivered personally (by courier service or otherwise), when delivered by
telecopy and confirmed by return telecopy, or seven days after being mailed by
first-class mail, postage prepaid and return receipt requested in each case to
the applicable addresses set forth below:
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If to the Company:
US Foodservice Inc.
1065 Highway 315
Crosscreek Pointe
Wilkes-Barre, PA 18702
Attn: Frank H. Bevevino, Chairman of the Board
and Chief Executive Officer
Telecopy: (717) 822-0909
with a copy to:
Philip H. Werner, Esq.
Morgan, Lewis & Bockius LLP
101 Park Avenue
New York, NY 10178
Telecopy: (212) 309-6273
If to RSI:
Rykoff-Sexton, Inc.
1050 Warrenville Road
Lisle, IL 60532-5201
Attn: Mark Van Stekelenburg, Chairman,
President and Chief Executive
Officer
Telecopy: (708) 971-6588
with a copy to:
Elizabeth C. Kitslaar, Esq.
Jones, Day, Reavis & Pogue
77 W. Wacker
Chicago, IL 60601-1692
Telecopy: (312) 782-8585
or to such other address as such party shall have designated by notice so given
to each other party.
10.3. Amendments, Waivers, Etc. This Agreement may not be amended,
changed, supplemented, waived or otherwise modified except by an instrument in
writing signed by all the parties hereto. This Agreement may be amended by the
parties hereto, by action taken by their respective Board of Directors, at any
time before or after approval of matters presented in connection with the Merger
by the stockholders of the Company, Merger Sub and RSI, but after any such
stockholder approval, no amendment shall be made which by law requires the
further approval of stockholders without obtaining such further approval.
10.4. No Assignment. This Agreement shall be binding upon
and shall inure to the benefit of and be enforceable by the
parties and their respective successors and assigns; provided
that, except as otherwise expressly set forth in this Agreement,
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neither the rights nor the obligations of any party may be assigned or delegated
without the prior written consent of the other party.
10.5. Entire Agreement. This Agreement (together with the ML Agreement,
the Exhibits and Schedules hereto and thereto, the Company Disclosure Statement,
the RSI Disclosure Statement and the Confidentiality Agreements dated as of
November 20, 1995 and December 11, 1995, between RSI and the Company) embodies
the entire agreement and understanding between the parties relating to the
subject matter hereof and supersedes all prior agreements and understandings
relating to such subject matter. There are no representations, warranties or
covenants by the parties hereto relating to such subject matter other than those
expressly set forth in this Agreement (including the Company Disclosure
Statement and the RSI Disclosure Statement) and any writings expressly required
hereby.
10.6. Specific Performance. The parties acknowledge that money damages
are not an adequate remedy for violations of this Agreement and that any party
may, in its sole discretion, apply to a court of competent jurisdiction for
specific performance or injunctive or such other relief as such court may deem
just and proper in order to enforce this Agreement or prevent any violation
hereof and, to the extent permitted by applicable law, each party waives any
objection to the imposition of such relief.
10.7. Remedies Cumulative. All rights, powers and remedies provided
under this Agreement or otherwise available in respect hereof at law or in
equity shall be cumulative and not alternative, and the exercise or beginning of
the exercise of any thereof by any party shall not preclude the simultaneous or
later exercise of any other such right, power or remedy by such party.
10.8. No Waiver. The failure of any party hereto to exercise any right,
power or remedy provided under this Agreement or otherwise available in respect
hereof at law or in equity, or to insist upon compliance by any other party
hereto with its obligations hereunder, and any custom or practice of the parties
at variance with the terms hereof, shall not constitute a waiver by such party
of its right to exercise any such or other right, power or remedy or to demand
such compliance.
10.9. No Third Party Beneficiaries. Except as provided in
Sections 7.13, 7.14 and 7.16, the provisions of which may be
enforced by the intended beneficiaries thereof, this Agreement is
not intended to be for the benefit of and shall not be
enforceable by any Person who or which is not a party hereto.
10.10. Jurisdiction. Each party hereby irrevocably submits
to the exclusive jurisdiction of the Court of Chancery in the
State of Delaware in any action, suit or proceeding arising in
connection with this Agreement, and agrees that any such action,
suit or proceeding shall be brought only in such court (and
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waives any objection based on forum non conveniens or any other objection to
venue therein); provided, however, that such consent to jurisdiction is solely
for the purpose referred to in this Section 10.10 and shall not be deemed to be
a general submission to the jurisdiction of said Court other than for such
purpose. RSI and the Company hereby waive any right to a trial by jury in
connection with any such action, suit or proceeding.
10.11. Governing Law. This Agreement and all disputes hereunder shall
be governed by and construed and enforced in accordance with the internal laws
of the State of Delaware, without regard to principles of conflict of laws that
would apply the laws of any other jurisdiction.
10.12. Name, Captions, Etc. The name assigned this Agreement and the
section captions used herein are for convenience of reference only and shall not
affect the interpretation or construction hereof. Unless otherwise specified,
(a) the terms "hereof", "herein" and similar terms refer to this Agreement as a
whole and (b) references herein to Articles or Sections refer to articles or
sections of this Agreement.
10.13. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one instrument. Each counterpart may consist of a
number of copies each signed by less than all, but together signed by all, the
parties hereto.
10.14. Knowledge. The term "knowledge" or "best knowledge" and any
derivatives thereof when applied to any party to this Agreement shall refer only
to the actual knowledge of that party (or in the case of a corporation,
partnership or other entity, the actual knowledge of its executive officers),
but no information known by any other employee, or any attorney, accountant or
other representative, of such party shall be imputed to such party.
10.15. Nonsurvival of Representations and Warranties. All
representations and warranties and agreements in this Agreement or in any
certificate delivered pursuant to this Agreement (a) shall be deemed to the
extent expressly provided herein to be conditions to the Merger and (b) shall
not survive the Merger, provided, however, that the agreements contained in
Article IV, this Article X and Sections 7.13, 7.14 and 7.16 shall survive the
Merger and Section 9.5 shall survive termination.
10.16. No Other Representations and Warranties. Without limiting the
generality of Section 10.5, each party agrees that neither it nor any Affiliate
or stockholder thereof, nor any of their respective partners, officers,
directors, employees or representatives makes, has made or shall be deemed to
have made, any representation or warranty, express or implied, to any other
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party or to any Affiliate or stockholder thereof or any of their respective
partners, officers, directors, employees or representatives with respect to (a)
the execution and delivery of this Agreement or the transactions contemplated
hereby; (b) any financial projections heretofore or hereafter delivered to or
made available to any such Persons or their counsel, accountants, advisors,
representatives or Affiliates, and agrees that it has not and will not rely on
such financial projections in connection with its evaluation of any other party
or the Merger; or (c) any information, statement or document heretofore or
hereafter delivered to or made available to any such Persons or their counsel,
accountants, advisors, representatives or Affiliates with respect to any other
party or the businesses, operations or affairs of any other party, except (with
respect to clauses (a) and (c) only), to the extent and as expressly covered by
a representation and warranty contained in Articles V or VI hereof or contained
in the ML Agreement or the other agreements expressly referred to herein or
therein.
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IN WITNESS WHEREOF, this Agreement has been executed and delivered by
the parties set forth below.
US FOODSERVICE INC.
By: /s/ Frank H. Bevevino
---------------------------------
Name: Frank H. Bevevino
Title: Chairman and Chief
Executive Officer
RYKOFF-SEXTON, INC.
By: /s/ Mark Van Stekelenburg
---------------------------------
Name: Mark Van Stekelenburg
Title: Chairman, President
and Chief Executive
Officer
USF ACQUISITION CORPORATION
By: /s/ Mark Van Stekelenburg
---------------------------------
Name: Mark Van Stekelenburg
Title: President
A-67
Exhibit B
STANDSTILL AGREEMENT
STANDSTILL AGREEMENT (the "Agreement"), dated as of May 17,
1996, by and between RYKOFF-SEXTON, INC., a Delaware corporation
("RSI"), on the one hand, and the other Persons set forth on the
signature pages hereto (collectively, the "ML Entities"), on the
other hand.
W I T N E S S E T H:
WHEREAS, RSI, USF Acquisition Corporation, a Delaware
corporation and wholly-owned subsidiary of RSI ("Merger Sub"),
and US Foodservice Inc., a Delaware corporation (the "Company"),
have entered into an Agreement and Plan of Merger dated February
2, 1996 (the "Merger Agreement"; capitalized terms used without
definition herein having the meanings ascribed thereto in the
Merger Agreement);
WHEREAS, as a result of the Merger, the ML Entities will
beneficially own approximately 36.4% of the issued and
outstanding RSI Common Shares, depending upon the Exchange Ratio;
and
WHEREAS, pursuant to the Agreement dated as of February 2,
1996 (the "ML Agreement") between RSI, on the one hand, and the
ML Entities, on the other hand, RSI and the ML Entities have
agreed that at the Effective Time they shall enter into a
Standstill Agreement in the form of this Agreement.
NOW, THEREFORE, in consideration of the mutual
representations, warranties, covenants and agreements set forth
herein, RSI and the ML Entities hereby agree as follows:
ARTICLE I
DEFINITIONS
For purposes of this Agreement, the following terms have the
following meanings:
(a) "Additional Percentage" shall mean (w) 2% of the Total
Voting Power, in the event that the ML Entities and their
Affiliates beneficially own Voting Securities representing in the
aggregate at least 30% of the Total Voting Power; (x) 3% of the
Total Voting Power, in the event that the ML Entities and their
Affiliates beneficially own Voting Securities representing in the
aggregate less than 30%, but at least 22%, of the Total Voting
Power; (y) 4% of the Total Voting Power, in the event that the ML
Entities and their Affiliates beneficially own Voting Securities
representing in the aggregate less than 22%, but at least 16%, of
<PAGE>
the Total Voting Power; and (z) 5% of the Total Voting Power, in
the event that the ML Entities and their Affiliates beneficially
own Voting Securities representing in the aggregate less than
16%, but at least 10%, of the Total Voting Power.
(b) "Affiliate" shall have the meaning set forth in
Rule 12b-2 of the Securities and Exchange Act of 1934, as amended
(the "Exchange Act"); provided, however, that any corporation in
which an ML Entity or any of its Affiliates owns less than a
majority of the securities entitled generally to vote for the
election of directors shall not be considered an Affiliate of
such ML Entity or such Affiliate unless such ML Entity or such
Affiliate otherwise controls such corporation.
(c) "Beneficial ownership" and "beneficially own"
shall have the meanings set forth in Rule 13d-3 under the
Exchange Act.
(d) "Continuing Director" and "Continuing Director
Quorum" shall have the meanings set forth in Article Thirteenth
of the Restated Certificate of Incorporation of RSI, as amended
from time to time; provided, however, that no ML Director shall
constitute a Continuing Director or be counted in determining the
presence of a Continuing Director Quorum.
(e) "Control" shall mean, with respect to a Person or
a Group, (i) beneficial ownership by such Person or Group of
securities entitling it to exercise in the aggregate more than 50
percent of the votes in any election of directors or other
governing body of the entity in question; or (ii) possession by
such Person or Group of the power, directly or indirectly, (x) to
elect a majority of the board of directors (or equivalent
governing body) of the entity in question or (y) in case of a
non-corporate entity, to manage or govern the business,
operations or investments of any such non-corporate entity.
(f) "Group" shall have the meaning comprehended by
Section 13(d)(3) of the Exchange Act; provided that, solely for
purposes of Section 3.1(a)(iv) of this Agreement, the ML Entities
shall not by themselves constitute a "Group."
(g) "Person" shall have the meaning set forth in
Section 3(a)(9) of the Exchange Act.
(h) "ML Representative" means any natural person who
has been chosen in writing, with notice thereof to RSI, by the ML
Entities holding beneficial ownership of Voting Securities
representing in the aggregate a majority of the Total Voting
Power held by the ML Entities, Matthias B. Bowman being hereby
designated as the initial ML Representative.
(i) "Schedule 13D Filer" means any Person or Group
which, based on its direct or indirect beneficial ownership of
any Voting Securities, is, or after the acquisition of such
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beneficial ownership would be, required to file a statement on
Schedule 13D with the SEC in accordance with Rule 13d-1 under the
Exchange Act, but shall not include any Schedule 13G Filer.
(j) "Schedule 13G Filer" means any Person or Group
which, based on its direct or indirect beneficial ownership of
any Voting Securities, is, or after the acquisition of such
beneficial ownership would be, required to file a statement on
Schedule 13D with the SEC in accordance with Rule 13d-1 under the
Exchange Act, but which in lieu of such filing may instead file a
short-form statement on Schedule 13G in accordance with such
Rule.
(k) "Standstill Percentage" means 36.4% of the Total
Voting Power; provided that in the event that the percentage of
the Total Voting Power represented by the shares of Voting
Securities beneficially owned by the ML Entities and their
Affiliates from time to time is less than 36.4%, then the
Standstill Percentage shall be automatically reduced to the
percentage of Total Voting Power represented by shares of Voting
Securities beneficially owned by the ML Entities and their
Affiliates from time to time; provided further, that (x)
following any such reduction in the Standstill Percentage, the
Standstill Percentage shall not thereafter be subject to any
increase (other than as provided for in the following clause
(y)), and (y) if the percentage of Total Voting Power represented
by shares of Voting Securities beneficially owned by the ML
Entities and their Affiliates is increased as a result of any RSI
Action (as defined in Section 3.1(a)(i) of this Agreement), the
Standstill Percentage shall be automatically increased to reflect
such RSI Action.
(l) "Total Voting Power" means, at any time, the
aggregate number of votes which may be cast by holders of
outstanding Voting Securities.
(m) "Transfer" means sell, transfer, assign, pledge,
hypothecate, give away or in any manner dispose of any Voting
Securities.
(n) "Voting Securities" means the RSI Common Shares
and any other securities (including voting preferred stock)
issued by RSI which are entitled to vote generally for the
election of directors of RSI, whether currently outstanding or
hereafter issued (other than securities having such powers only
upon the occurrence of a contingency).
ARTICLE II
BOARD REPRESENTATION
2.1 Initial Board Representation. At the Effective Time,
RSI will (a) take such action as may be necessary to increase the
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size of the Board of Directors of RSI (the "Board of Directors")
to 12, and (b) use its best efforts to fill four of the vacancies
thereby created in the three classes of directors with directors
designated by the ML Representative (each, a "ML Director" and,
collectively, the "ML Directors") in accordance with Article
Thirteenth of RSI's Restated Certificate of Incorporation. Of
the four initial ML directors, one shall be appointed to Class A
(current term expiring in 1996), one shall be appointed to Class
B (current term expiring in 1998) and two shall be appointed to
Class C (current terms expiring in 1997). The ML Entities
acknowledge that any designees of ML Directors who are not
employees of either an ML Entity which is controlled by Merrill
Lynch & Co., Inc. or an Affiliate of an ML Entity which is
controlled by Merrill Lynch & Co., Inc. must be reasonably
acceptable to the Continuing Directors of RSI.
2.2 Continuing Board Representation. Until such time as
the ML Entities no longer beneficially own Voting Securities
representing in the aggregate at least 10% of the Total Voting
Power, RSI covenants and agrees as follows:
(a) except as contemplated by this Agreement or as
otherwise agreed to by a majority of the ML Directors, RSI will
not take or recommend to its stockholders any action which would
(i) cause the Board of Directors to consist of any number of
directors other than twelve directors divided into three classes
of four directors each or (ii) result in any amendment to the By-
Laws of RSI or the By-Laws or Regulations of any Subsidiary (as
defined in Section 2.3(b) hereof) in effect on the date hereof
that would impose any qualifications to the eligibility of
directors of RSI or any Subsidiary to serve on any committee of
the Board of Directors, any Subsidiary Board or any committee of
any Subsidiary Board, except as may be required by applicable
law;
(b) so long as the ML Entities beneficially own Voting
Securities representing in the aggregate at least 34% of the
Total Voting Power, RSI will use its best efforts to cause the
Nominating Committee of the Board of Directors (the "Nominating
Committee") (or if the Nominating Committee makes no such
recommendation, the Board of Directors) to recommend for election
in the applicable year in which the respective class term
expires, one ML Director in Class A, one ML Director in Class B
and two ML Directors in Class C, in each case as designated by
the ML Representative; provided, that if despite such best
efforts, any such ML Director is not elected by the stockholders
of RSI, RSI shall have no further obligations under this Section
2.2(b) for the applicable year;
(c) in the event that the ML Entities beneficially own
Voting Securities representing in the aggregate less than 34%,
but at least 27%, of the Total Voting Power, RSI will use its
best efforts to cause the Nominating Committee (or if the
Nominating Committee makes no such recommendation, the Board of
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Directors) to recommend for election in the applicable year in
which the respective class term expires, one ML Director in Class
A, one ML Director in Class B and one ML Director in Class C, in
each case as designated by the ML Representative; provided, that
if despite such best efforts, any such ML Director is not elected
by the stockholders of RSI, RSI shall have no further obligations
under this Section 2.2(c) for the applicable year;
(d) in the event that the ML Entities beneficially own
Voting Securities representing in the aggregate less than 27%,
but at least 16%, of the Total Voting Power, RSI will use its
best efforts to cause the Nominating Committee (or if the
Nominating Committee makes no such recommendation, the Board of
Directors) to recommend for election in the applicable year in
which the respective class term expires, one ML Director in Class
A and one ML Director in Class B or Class C, in each case as
designated by the ML Representative; provided, that if despite
such best efforts, any such ML Director is not elected by the
stockholders of RSI, RSI shall have no further obligations under
this Section 2.2(d) for the applicable year; and
(e) in the event that the ML Entities beneficially own
Voting Securities representing in the aggregate less than 16%,
but at least 10%, of the Total Voting Power, RSI will use its
best efforts to cause the Nominating Committee (or if the
Nominating Committee makes no such recommendation, the Board of
Directors) to recommend for election in the applicable year in
which the respective class term expires, one ML Director in Class
A; provided, that if despite such best efforts, such ML Director
is not elected by the stockholders of RSI, RSI shall have no
further obligations under this Section 2.2(e) for the applicable
year.
2.3 Committee Representation; Subsidiary Board
Representation. (a) Until such time as the ML Entities no
longer beneficially own Voting Securities representing in the
aggregate at least 16% of the Total Voting Power, to the extent
that, and for so long as, any of the ML Directors is qualified
under the then-current rules and regulations of the New York
Stock Exchange ("NYSE Rules"), the rules and regulations under
the Internal Revenue Code of 1986, as amended, relating to the
qualification of employee stock benefit plans, the rules and
regulations under Section 16(b) of the Exchange Act, including
Rule 16b-3 thereunder or any successor rule, and RSI's By-laws,
RSI shall use its best efforts to cause the Board of Directors to
designate one of the ML Directors to serve on each of the
committees of the Board of Directors to the same extent, and on
the same basis, as the other members of the Board of Directors;
provided, however, that subject to the foregoing director
qualification requirements, in the event that, and for so long
as, the ML Entities own Voting Securities representing in the
aggregate at least 10% of the Total Voting Power, RSI shall use
its best efforts to cause the Board of Directors to designate one
of the ML Directors to serve on the Nominating Committee and the
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Management Development Compensation and Stock Option Committee of
the Board of Directors to the same extent, and on the same basis,
as the other members of the Board of Directors.
(b) Until such time as the ML Entities no longer
beneficially own Voting Securities representing in the aggregate
at least 10% of the Total Voting Power, to the extent that (I)
any Continuing Director who is not an officer or employee of RSI
("Outside Director") is also a director of any wholly-owned
subsidiary of RSI ("Subsidiary"), and (II) the ML Directors are
qualified under the By-laws or Regulations of the relevant
Subsidiary, RSI shall cause to be included (i) on the board of
directors of such Subsidiary a number of ML Directors equal to
the product of (x) the number of Continuing Directors on the
board of directors of such Subsidiary (a "Subsidiary Board"),
multiplied by (y) a quotient, the numerator of which shall be the
total number of ML Directors which RSI is required to use its
best efforts to cause the Nominating Committee to recommend for
election pursuant to Section 2.2(b), 2.2(c), 2.2(d) or 2.2(e), as
the case may be, and the denominator of which shall be twelve,
provided that if the product calculated above is less than 1,
then to the extent that any Outside Director is also a director
of any such Subsidiary, one ML Director designated by the ML
Representative shall be entitled to sit on such Subsidiary Board
so long as the ML Entities beneficially own Voting Securities
representing at least 10% of the Total Voting Power; and (ii) on
each committee of each Subsidiary Board, if an ML Director is
entitled to sit on any Subsidiary Board, one ML Director
designated by the ML Representative, subject to the rules and
regulations described in Section 2.3(a) and qualification under
the By-laws or Regulations of the relevant Subsidiary.
2.4 Removal of Directors; Vacancies. The ML Representative
shall have the right, with cause, to request the removal from the
Board of Directors of any ML Director. Any such removal shall be
subject to the applicable provisions of the Restated Certificate
of Incorporation and By-Laws of RSI (including, without
limitation, any stockholder vote requirement), as well as
applicable statutory provisions; provided that RSI will use its
best efforts to cause the Continuing Directors to vote, subject
to Section 2.6, in favor of such requested removal. In the event
that any ML Director for any reason ceases to serve as a member
of the Board of Directors during his or her term of office and at
such time the ML Representative would have the right to a
designation hereunder if an election for the resulting vacancy
were to be held, (a) the director to fill such vacancy ("ML
Director Vacancy") shall be designated by the ML Representative
and, if not an employee of an ML Entity which is controlled by
Merrill Lynch & Co., Inc. or an Affiliate of an ML Entity which
is controlled by Merrill Lynch & Co, Inc., shall be reasonably
acceptable to the Continuing Directors of RSI, and (b) such ML
Director Vacancy shall be filled in accordance with Article
Thirteenth of RSI's Restated Certificate of Incorporation. In
the event that, and for so long as, any ML Director is a member
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of the Nominating Committee of the Board of Directors, the ML
Entities shall cause the ML Directors to take such action as may
be necessary and to vote in accordance with the recommendation of
the Continuing Directors to fill any vacancies in the Board of
Directors (other than an ML Director Vacancy).
2.5 Resignation. In the event that the percentage of Total
Voting Power represented by the Voting Securities beneficially
owned in the aggregate by the ML Entities at any time decreases
below the minimum percentage thresholds specified in Sections
2.2(b), (c), (d) or (e) or Sections 2.3(a) or (b), the ML
Entities shall cause such number of ML Directors to resign as is
necessary to adjust the number of remaining ML Directors to the
number (if any) to which the ML Entities would have been entitled
under such Sections if the nominations to the Board of Directors
or Subsidiary Board or the selections for committees of the Board
of Directors or Subsidiary Board were made at such time; provided
that in the event of any such decrease below any such minimum
percentage threshold, any subsequent increase in the percentage
of the Total Voting Power represented in the aggregate by the
Voting Securities beneficially owned by the ML Entities above
such minimum percentage threshold shall not entitle the ML
Entities to have any additional ML Directors named or elected to
the Board of Directors or any committee thereof or any Subsidiary
Board or any committee thereof.
2.6 Charter and By-laws; Fiduciary Duties. The obligations
of RSI set forth in this Article II are subject to compliance
with the provisions of Article Thirteenth of RSI's Restated
Certificate of Incorporation and RSI's By-laws, and the fiduciary
duties of the Board of Directors and the Nominating Committee to
RSI's stockholders. Nothing contained in this Article II shall
require RSI to violate any such provisions or to require any
director of RSI to breach any such fiduciary duty.
2.7 No Voting Trust. This Agreement does not create or
constitute, and shall not be construed as creating or
constituting, a voting trust agreement under the Delaware General
Corporation Law or any other applicable corporation law.
2.8 Notification of Nominations. The rights of the ML
Entities, ML Directors and ML Representative and the obligations
of RSI under this Article II shall be subject to compliance with
Article III, Section 3a of RSI's By-laws.
2.9 No Duty to Designate; Reduction of Board
Representation. Nothing contained in this Article II shall be
construed as requiring the ML Entities to designate any ML
Directors or, once designated and elected, to require any ML
Director to continue to serve in office if such ML Director
elects to resign. Until such time as the ML Entities no longer
beneficially own Voting Securities representing in the aggregate
at least 10% of the Total Voting Power, in the event of any
vacancy created by the resignation or removal of an ML Director
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or the failure of the ML Representative to designate an ML
Director, other than a vacancy created by the resignation or
removal of an ML Director pursuant to Section 2.5 hereof, upon
the written request of the ML Representative, RSI shall take such
action as may be necessary to reduce the size of the Board of
Directors to a number equal to (x) 12 (or such lesser number as
exists following one or more previous reductions of the size of
the Board pursuant to this Section 2.9) minus (y) the number of
such vacancies, and thereafter, notwithstanding any other
provisions of this Article II, the ML Entities shall have no
right to designate any ML Directors to the extent of such
reduction.
2.10 Effect of Change in Control. Notwithstanding anything
to the contrary contained in this Agreement, the rights under
this Article II are for the benefit of, and shall only extend to,
those ML Entities which are controlled by Merrill Lynch & Co.,
Inc. In the event of any transaction, including any Transfer of
any securities or partnership interests, resulting in Merrill
Lynch & Co., Inc. no longer controlling such ML Entity, such ML
Entity shall no longer have any rights under this Article II and
shall not be deemed to be an ML Entity for purposes of this
Article II, but shall remain bound by the other provisions of
this Agreement.
ARTICLE III
STANDSTILL RESTRICTIONS; VOTING MATTERS
3.1 Standstill Restrictions. (a) During the term of this
Agreement, each of the ML Entities covenants and agrees that
without the prior affirmative vote of a majority of the
Continuing Directors at a meeting at which a Continuing Director
Quorum is present, the ML Entities shall not, and shall not
permit any of their respective Affiliates to, directly or
indirectly:
(i) acquire, propose to acquire (or publicly
announce or otherwise disclose an intention to propose to
acquire) or offer to acquire, by purchase or otherwise, any
Voting Securities, if the effect of such acquisition would
be to increase the outstanding number of shares of Voting
Securities then beneficially owned by the ML Entities and
their Affiliates, in the aggregate, to an amount
representing Total Voting Power in excess of the Standstill
Percentage; provided that this Section 3.1(a)(i) shall not
be applicable, and no ML Entity shall be obligated to
dispose of Voting Securities, if the aggregate percentage of
the Total Voting Power represented by Voting Securities
beneficially owned by the ML Entities is increased as a
result of corporate action taken solely by RSI and not
caused by any action taken by any ML Entity or any Affiliate
of any ML Entity ("RSI Action");
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(ii) propose (or publicly announce or otherwise
disclose an intention to propose), solicit, offer, seek to
effect, negotiate with or provide any confidential
information relating to RSI or its business to any other
Person with respect to, any tender or exchange offer,
merger, consolidation, share exchange, business combination,
restructuring, recapitalization or similar transaction
involving RSI; provided, that nothing set forth in this
Section 3.1(a)(ii) shall prohibit ML Entities from
soliciting, offering, seeking to effect and negotiating with
any Person with respect to Transfers of Voting Securities
otherwise permitted by Article IV of this Agreement;
provided further, that in so doing the ML Entities shall not
(x) issue any press release or otherwise make any public
statements (other than statements made in response to any
request by any Person for confirmation by any ML Entity or
any Affiliate of an ML Entity of information contained in
any statement on Schedule 13D under the Exchange Act) with
respect to such action other than in accordance with Section
9.14 hereof (provided that the ML Entities may, and may
permit their Affiliates to, make any statement required by
applicable law, including without limitation, the amendment
of any statement on Schedule 13D under the Exchange Act), or
(y) provide any confidential information relating to RSI or
its business to any such Person.
(iii) make, or in any way participate in, any
"solicitation" of "proxies" to vote (as such terms are
defined in Rule 14a-1 under the Exchange Act), solicit any
consent with respect to the voting of any Voting Securities
or become a "participant" in any "election contest" (as such
terms are defined or used in Rule 14a-11 under the Exchange
Act) with respect to RSI;
(iv) except to the extent contemplated by the
Registration Rights Agreement, form, participate in or join
any Person or Group with respect to any Voting Securities
(except an arrangement solely among any or all of the ML
Entities), or otherwise act in concert with any third Person
(other than an ML Entity) for the purpose of (x) acquiring
any Voting Securities or (y) holding or disposing of Voting
Securities for any purpose otherwise prohibited by this
Section 3.1(a);
(v) deposit any Voting Securities into a voting
trust or subject any Voting Securities to any arrangement or
agreement with respect to the voting thereof (except for
this Agreement and except for any such arrangement solely
among any or all of the ML Entities);
(vi) initiate, propose or otherwise solicit
stockholders for the approval of one or more stockholder
proposals with respect to RSI as described in Rule 14a-8
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under the Exchange Act, or induce or attempt to induce any
other Person to initiate any stockholder proposal;
(vii) except as specifically provided for in
Article II hereof or as contemplated by Section 3.1(e), seek
election to or seek to place a representative on the Board
of Directors, or seek the removal of any member of the Board
of Directors (other than an ML Director);
(viii) call or seek to have called any meeting of
the stockholders of RSI for any purpose otherwise prohibited
by this Section 3.1(a);
(ix) take any other action to seek to control RSI;
(x) demand, request or propose to amend, waive or
terminate the provisions of this Section 3.1(a); or
(xi) agree to do any of the foregoing, or advise,
assist, encourage or persuade any third party to take any
action with respect to any of the foregoing.
(b) Each of the ML Entities agrees that it will notify
RSI promptly if any inquiries or proposals are received by, any
information is exchanged with respect to, or any negotiations or
discussions are initiated or continued with, any ML Entity or, to
the knowledge of any officer of Merrill Lynch Capital Partners,
Inc. or ML IBK Positions, Inc., any of their respective
Affiliates, regarding any matter described in Section 3.1(a)
hereof; provided, however, that the foregoing obligation is
subject to any confidentiality policies of any such Affiliate of
any ML Entity. The ML Entities and RSI shall mutually agree upon
an appropriate response to be made to any such proposals received
by any ML Entity, or, to the knowledge of any such officer, any
Affiliate of such ML Entity or any such officer.
(c) Notwithstanding the provisions of Section 3.1(a),
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill
Lynch") and its Affiliates (other than the ML Entities) may
effect or recommend transactions, either as principal or as agent
on behalf of third parties, in the ordinary course of Merrill
Lynch's business or the business of such Affiliates, in, relating
to or involving Voting Securities, including, without limitation,
transactions in which Merrill Lynch or such Affiliates are acting
as an investment banking organization providing advisory
services, an investment advisor, an investment company, a broker
or dealer in securities, as an underwriter or placement agent of
securities, a market maker, a specialist, an arbitrageur or a
block positioner; provided, however, that (i) in no event shall
Merrill Lynch and its Affiliates (other than the ML Entities)
acquire beneficial ownership of Voting Securities representing
Total Voting Power in excess of the Additional Percentage; and
(ii) for purposes of this Section 3.1(c), transactions in the
ordinary course of Merrill Lynch's or its Affiliates' business
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shall in no event be deemed to include any activities or
transactions which have the purpose or effect of seeking to
control or influence the management, policies or affairs of RSI,
including, without limitation, through advising any Person with
respect to any unsolicited bid for control of, or any other offer
for securities of or any business combination involving, RSI;
provided, however, that this Section 3.1(c)(ii) shall not
prohibit or restrict Merrill Lynch from performing such
obligations as may be required by law or the rules or other
requirements of any regulatory authority.
(d) The ML Entities shall not be deemed to have
breached Section 3.1(a)(i) of this Agreement if (i) the ML
Entities or their Affiliates inadvertently and in good faith
acquire Voting Securities so as to cause the Total Voting Power
represented by the Voting Securities beneficially owned by the ML
Entities and their Affiliates to exceed the Standstill
Percentage, and (ii) the ML Entities as soon as practicable
divest a sufficient number of shares of Voting Securities
beneficially owned by the ML Entities and their Affiliates so as
to result in the Total Voting Power represented by the Voting
Securities beneficially owned by the ML Entities and their
Affiliates to be equal to or less than the Standstill Percentage.
(e) Nothing contained in this Article III shall be
deemed to restrict the manner in which the ML Directors may
participate in deliberations or discussions of the Board of
Directors or individual consultations with the Chairman of the
Board or any other members of the Board of Directors, so long as
such actions do not otherwise violate any provision of Section
3.1(a).
3.2 Voting. Until such time as the ML Entities no longer
beneficially own Voting Securities representing in the aggregate
at least 10% of the Total Voting Power, the ML Entities will take
all such action as may be required so that all Voting Securities
owned by the ML Entities and their Affiliates, as a group, are
(i) voted (in person or by proxy) for RSI's nominees to the Board
of Directors, in accordance with the recommendation of the
Nominating Committee (or, if the Nominating Committee makes no
such recommendation, the Board of Directors), provided that if
the ML Representative has requested representation on the
Nominating Committee, RSI shall have performed its obligations
described in the proviso to Section 2.3(a) hereof, provided
further that if the ML Entities have a reasonable, good faith
objection to any one (and only one) such nominee for election to
the Board of Directors at any annual meeting of RSI stockholders
(other than any nominee who was a member of the Board of
Directors as of the date of the Merger Agreement), based on such
nominee's personal qualifications to serve as a member of the
Board of Directors ("Objectionable Nominee"), the ML Entities may
abstain from, or vote against, the election of such Objectionable
Nominee at such meeting, but only if (x) the board of directors
of the general partner of such ML Entity determines in good faith
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that such action is required to fulfill its fiduciary duties to
the limited partners of such ML Entity under applicable law based
upon the advice of outside counsel (who may be such general
partner's regularly engaged outside counsel) and (y) at least two
Business Days in advance of the date of mailing of the proxy
statement for such annual meeting of RSI stockholders, one or
more ML Directors objects to the proposed nomination of the
Objectionable Nominee in writing to RSI or orally during a
meeting of the Board of Directors or the Nominating Committee,
and (ii) on all other matters to be voted on by holders of Voting
Securities, actually voted (in person or by proxy) by the ML
Entities. Each of the ML Entities shall be present, in person or
by proxy, at all duly held meetings of stockholders of RSI so
that all Voting Securities held by the ML Entities may be counted
for the purposes of determining the presence of a quorum at such
meetings.
ARTICLE IV
TRANSFERS; RIGHT OF FIRST REFUSAL
4.1 Transfers of Voting Securities. None of the ML
Entities shall, directly or indirectly, Transfer any Voting
Securities except:
(a) to RSI;
(b) pursuant to a merger or consolidation of RSI or
pursuant to a plan of liquidation of RSI, which has been approved
by the affirmative vote of a majority of the members of the Board
of Directors then in office; provided that at the time of such
approval the number of ML Directors then serving on the Board of
Directors shall not exceed the number contemplated by Article II
hereof;
(c) provided that the rights of the ML Entities under
this Agreement shall not transfer to the transferee of such
securities, pursuant to a bona fide public offering registered
under the Securities Act of 1933, as amended (the "Securities
Act"), in which the ML Entities shall use commercially reasonable
efforts to (i) effect as wide a distribution of such Voting
Securities as is reasonably practicable, and (ii) prevent any
Person or Group from acquiring pursuant to such offering
beneficial ownership of Voting Securities or securities
convertible into Voting Securities representing in the aggregate
5% or more of the Total Voting Power;
(d) provided that the rights of the ML Entities under
this Agreement shall not transfer to the transferee of such
securities, pursuant to Rule 144 under the Securities Act;
(e) provided that the rights of the ML Entities under
this Agreement shall not transfer to the transferee of such
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securities, pursuant to a pro rata distribution (including any
such distribution pursuant to any liquidation or dissolution of
any ML Entity) by any ML Entity to its partners or stockholders
if no successor or distributee, as the case may be, and no Person
that controls such successor or distributee, acquires from any ML
Entity beneficial ownership of Voting Securities representing
more than 3% of the Total Voting Power in such distribution (in
each case other than any distributee which is an Affiliate of an
ML Entity provided that such Affiliate shall thereafter promptly
distribute all such Voting Securities to its own partners or
stockholders and such partners or stockholders do not thereby
acquire from such Affiliate beneficial ownership of Voting
Securities representing more than 3% of the Total Voting Power in
such distribution).
(f) provided that the rights of the ML Entities under
this Agreement shall not transfer to the transferee of such
securities, (i) Transfers of Voting Securities to any Person or
Group which is a Schedule 13D Filer and which, after giving
effect to such Transfer, would beneficially own Voting Securities
representing in the aggregate less than 5% of the Total Voting
Power, and (ii) Transfers to any Person or Group which is a
Schedule 13G Filer of Voting Securities representing in the
aggregate less than 10% of the Total Voting Power;
(g) provided that (i) the rights of the ML Entities
under this Agreement shall not transfer to the transferee of such
securities, and (ii) the Transfer is made on or after January 1,
2000 in connection with the required dissolution of any ML
Entity, Transfers of Voting Securities to any Person or Group (A)
which, after giving effect to such Transfer would beneficially
own Voting Securities representing in the aggregate less than the
greater of (x) 15% of the Total Voting Power or (y) such other
percentage of the Total Voting Power as would make such Person or
Group an "Acquiring Person" under RSI's shareholders' rights plan
or (B) approved by the prior affirmative vote of a majority of
the Continuing Directors at a meeting at which a Continuing
Director Quorum is present;
(h) pursuant to a tender offer or exchange offer that
the Board of Directors, by action taken by the affirmative vote
of a majority of the members of the Board of Directors then in
office, has determined not to oppose; or
(i) in accordance with the provisions of Section 4.2.
4.2 Right of First Refusal. Except as otherwise permitted
by Section 4.1, if any ML Entity or ML Entities (each a "Selling
ML Entity" and, collectively, the "Selling ML Entities") shall
receive an offer from, or have entered into any agreement or
understanding with, a third party or parties to purchase or
otherwise acquire Voting Securities from such Selling ML Entity,
such Selling ML Entity shall have the right, provided that the
rights of such Selling ML Entity under this Agreement shall not
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<PAGE>
transfer to such third party or parties, to Transfer the amount
of Voting Securities which are the subject of such offer by, or
agreement or understanding with, such third party or parties if,
prior to such Transfer, RSI shall have been given the
opportunity, in the following manner, to purchase such Voting
Securities:
(a) The Selling ML Entities shall give notice (the
"Transfer Notice") to RSI in writing of such proposed Transfer
specifying the amount of Voting Securities proposed to be sold or
transferred, the proposed price therefor (the "Transfer
Consideration"), the identity of the offeror and the other
material terms upon which such Transfer is proposed to be made.
(b) RSI shall have the right, exercisable by written
notice given by RSI to the Selling ML Entities within 15 Business
Days after receipt of the Transfer Notice, to purchase from such
Selling ML Entities all, but not less than all, the Voting
Securities specified in such Transfer Notice for cash in an
amount equivalent to the Transfer Consideration.
(c) If the Transfer Consideration specified in the
Transfer Notice includes any property other than cash, such
Transfer Consideration shall be deemed to be the amount of any
cash included in the Transfer Consideration plus the value (as
jointly determined by a nationally recognized investment banking
firm selected by each party) of such other property included in
such Transfer Consideration. For this purpose, the parties shall
use their reasonable best efforts to cause any determination of
the value of any such other property included in the Transfer
Consideration to be made within ten Business Days after the date
of delivery of the Transfer Notice. If the firms selected by RSI
and the Selling ML Entities are unable to agree upon the value of
any such other property within such ten Business Day period, such
firms shall promptly select a third nationally recognized
investment banking firm whose determination shall be conclusive.
(d) If RSI exercises its right of first refusal
hereunder, the closing of the purchase of the Voting Securities
with respect to which such right has been exercised shall take
place within 60 days after RSI gives notice of such exercise,
which period of time shall be extended as necessary (but in no
event for a period of time longer than 60 days after the end of
such 60 day period) in order to comply with applicable securities
and other laws and regulations or any listing agreement to which
RSI is a party. Upon exercise of its right of first refusal, RSI
shall be legally obligated to consummate the purchase
contemplated thereby, shall use its reasonable best efforts to
secure all approvals required in connection therewith, and shall
be liable in damages to the Selling ML Entities if for any
reason, including the failure to obtain any requisite approvals,
the purchase is not consummated; provided, however, that if RSI
does not obtain any required approval of its stockholders with
respect to such purchase, (i) RSI shall have no liability to the
14
<PAGE>
Selling ML Entities with respect to the failure of such purchase
to be consummated and (ii) the Voting Securities with respect to
which such right was exercised shall not thereafter be subject to
the right of first refusal under this Section 4.2 unless to the
extent that RSI specifies a designee to purchase Voting
Securities pursuant to Section 4.2(f) hereof and such designee
consummates its purchase of Voting Securities within the time
remaining in the time period during which RSI was to have
consummated its purchase of such Voting Securities.
(e) If RSI does not exercise its right of first
refusal hereunder within the time specified for such exercise,
the Selling ML Entities shall be free, during the period of 60
days following the expiration of such time for exercise (which
period of time may be extended as necessary (but in no event for
a period of time longer than 60 days after the end of such 60 day
period) in order to comply with applicable securities and other
laws and regulations), to Transfer the Voting Securities
specified in the Transfer Notice to the offeror specified in the
Transfer Notice on the terms described in the Transfer Notice and
at a price not less than the Transfer Consideration. If the
Selling ML Entities fail to Transfer the Voting Securities
specified in the Transfer Notice in such manner within such
period, the Voting Securities specified in the Transfer Notice
shall again be subject to the terms of Sections 4.1 and 4.2
hereof.
(f) If RSI elects to exercise any of its rights under
this Section 4.2, RSI may specify, prior to closing such
purchase, another Person as its designee to purchase the Voting
Securities to which such notice of intention to exercise such
rights relates. If RSI designates another Person as the
purchaser pursuant to this Section 4.2, RSI shall be legally
obligated, in accordance with Section 4.2(d) above, to complete
such purchase if its designee fails to do so.
ARTICLE V
Legends and Stop Transfer Orders
5.1 Legend. All certificates evidencing Voting Securities
beneficially owned by any of the ML Entities shall bear the
following legend:
"The securities represented by this certificate are
subject to the restrictions on disposition and to the other
provisions of a Standstill Agreement dated as of May __,
1996 among Rykoff-Sexton, Inc., Merrill Lynch Capital
Partners, Inc., Merrill Lynch Capital Appreciation
Partnership No. B-XVIII, L.P., Merrill Lynch KECALP L.P.
1994, ML Offshore LBO Partnership No. B-XVIII, ML IBK
Positions, Inc., MLCP Associates L.P. No. II, MLCP
Associates L.P. No. IV, Merrill Lynch KECALP L.P. 1991,
15
<PAGE>
Merrill Lynch Capital Appreciation Partnership No. XIII,
L.P., ML Offshore LBO Partnership No. XIII, ML Employees LBO
Partnership No. I, L.P., Merrill Lynch KECALP L.P. 1987,
Merchant Banking L.P. No. II. Copies of such Agreement are
on file at the respective offices of such parties."
5.2 Stop Transfer Orders. The ML Entities each hereby
consent to the entry of stop transfer orders with the transfer
agents of any such Voting Securities against the transfer of such
legended certificates representing such Voting Securities except
in compliance with this Agreement.
5.3 Removal or Modification of Legend. RSI agrees that
upon any Transfer of the securities represented by such
certificates made in compliance with the provisions of this
Agreement, it will, upon the presentation to its transfer agent
of the certificates containing such legend, remove such legend
from the certificates being sold or registered.
ARTICLE VI
Representations and Warranties
6.1 Representations and Warranties of the ML Entities. Each
of the ML Entities severally and not jointly represent and
warrant to RSI as follows:
(a) Merrill Lynch Capital Partners, Inc. and ML IBK
Positions, Inc. are each corporations duly organized, validly
existing and in good standing under the laws of the State of
Delaware. Merrill Lynch Capital Appreciation Partnership No. B-
XVIII, L.P., MLCP Associates L.P. No. II, MLCP Associates L.P.
No. IV, Merrill Lynch KECALP L.P. 1991, Merrill Lynch KECALP L.P.
1994, Merrill Lynch Capital Appreciation Partnership No. XIII,
L.P., ML Employees LBO Partnership No. I, L.P., Merrill Lynch
KECALP L.P. 1987 and Merchant Banking L.P. No. II are each
limited partnerships, duly organized, validly existing and in
good standing under the laws of the State of Delaware. ML
Offshore LBO Partnership No. B-XVIII and ML Offshore LBO
Partnership No. XIII are each limited partnerships, duly
organized, validly existing and in good standing under the laws
of the Cayman Islands.
(b) Assuming that (i) the ML Entities Shares (as
defined below) are duly authorized, validly issued, fully paid
and nonassessable, and, immediately prior to their receipt by the
ML Entities, are free and clear of all security interests, liens,
claims, proxies, charges, encumbrances and options of any nature
whatsoever created by any Person other than an ML Entity (other
than those created by this Agreement, the Registration Rights
Agreement and the Tax Agreement), and (ii) the issuance of the ML
Entities Shares to the ML Entities is properly recorded in the
stock ledger of RSI, then, upon the issuance of the ML Entities
16
<PAGE>
Shares to the ML Entities pursuant to Sections 4.1 and 4.2 of the
Merger Agreement, each of the ML Entities will be the beneficial
and record owner of RSI Common Shares in the respective amounts
set forth in Schedule I attached hereto (the "ML Entities
Shares"), free and clear of all security interests, liens,
claims, proxies, charges, encumbrances and options of any nature
whatsoever, and there will be no outstanding options, warrants or
rights to purchase or acquire, or agreements relating to, any of
the ML Entities Shares (other than those created by this
Agreement, the Registration Rights Agreement and the Tax
Agreement).
(c) Except for the ML Entities Shares and 2,100 shares
of Voting Securities owned by Merrill Lynch, neither any of the
ML Entities, nor any of their Affiliates, owns beneficially or of
record, directly or indirectly, any Voting Securities or any
options, warrants or rights of any nature (including conversion
and exchange rights) to acquire beneficial ownership of any
Voting Securities.
(d) Each of the ML Entities has full legal right,
power and authority to enter into and perform this Agreement.
This Agreement has been duly authorized, executed and delivered
by each of the ML Entities. This Agreement constitutes a legally
valid and binding agreement of each of the ML Entities,
enforceable in accordance with its terms, except that such
enforceability may be subject to bankruptcy, insolvency,
receivership, reorganization, moratorium or other similar laws
relating to creditors' rights now or hereafter in effect and by
general equitable principles.
(e) The execution and delivery of this Agreement by
the ML Entities does not conflict with or constitute a violation
of or default under the respective certificates of incorporation,
partnership agreements or certificates of partnership (or
comparable documents) of any of the ML Entities or any statute,
law, regulation, order or decree applicable to any of the ML
Entities, or any contract, commitments, agreement, arrangement or
restriction of any kind to which any of the ML Entities are a
party or by which any of the ML Entities are bound, other than
such violations as would not prevent or materially delay the
performance by such ML Entity of its obligations hereunder or
otherwise subject RSI to any claim or liability.
(f) Schedule II hereto sets forth a true, accurate and
complete list of the percentage ownership interests of each
partner or securityholder (without naming them) in each ML Entity
listed thereon. Schedule III hereto sets forth, with respect to
each ML Entity listed thereon, the latest dissolution date for
such ML Entity under the terms of its partnership agreement.
6.2 Representations and Warranties of RSI. RSI hereby
represents and warrants to the ML Entities as follows:
17
<PAGE>
(a) RSI is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Delaware.
(b) RSI has full legal right, power and authority to
enter into and perform this Agreement and the execution and
delivery of this Agreement by RSI have been duly authorized by
all necessary corporate action on behalf of RSI. This Agreement
constitutes a legally valid and binding agreement of RSI,
enforceable in accordance with its terms, except that such
enforceability may be subject to bankruptcy, insolvency,
receivership, reorganization, moratorium or other similar laws
relating to creditors' rights now or hereafter in effect, and by
general equitable principles.
(c) Neither the execution and delivery of this
Agreement nor the consummation by RSI of the transactions
contemplated hereby conflicts with or constitutes a violation of
or default under the Restated Certificate of Incorporation or By-
laws of RSI, any statute, law, regulation, order or decree
applicable to RSI, or any contract, commitment, agreement,
arrangement or restriction of any kind to which RSI is a party or
by which RSI is bound, other than such violations as would not
prevent or materially delay the performance by RSI of its
obligations hereunder or otherwise subject any ML Entity to any
claim or liability.
ARTICLE VII
Further Assurances
Each party shall execute and deliver such additional
instruments and other documents and shall take such further
actions as may be necessary or appropriate to effectuate, carry
out and comply with all of their obligations under this
Agreement. If reasonably requested by RSI, each ML Entity agrees
to execute a letter to RSI confirming that the beneficial
ownership of Voting Securities by the ML Entities and their
Affiliates does not represent in the aggregate Total Voting Power
in excess of the Standstill Percentage as of the date of such
letter.
ARTICLE VIII
Termination
Unless earlier terminated by written agreement of the
parties hereto, this Agreement shall terminate on the earlier of
(i) the tenth anniversary of the Effective Date and (ii) the date
on which the ML Entities and their Affiliates beneficially own
Voting Securities representing in the aggregate less than 10% of
the Total Voting Power; provided, that if, prior to the tenth
18
<PAGE>
anniversary of the Effective Date, (x) the ML Entities shall
beneficially own Voting Securities representing in the aggregate
10% or more of the Total Voting Power, or (y) the ML Entities and
their Affiliates shall beneficially own Voting Securities
representing in the aggregate 5% or more of the Total Voting
Power which causes them to be a Schedule 13D Filer, this
Agreement shall automatically be reinstated. Any termination of
this Agreement as provided herein shall be without prejudice to
the rights of any party arising out of the breach by any other
party of any provisions of this Agreement which occurred prior to
the termination.
ARTICLE IX
Miscellaneous
9.1 Notices, Etc. All notices, requests, demands or other
communications required by or otherwise with respect to this
Agreement shall be in writing and shall be deemed to have been
duly given to any party when delivered personally (by courier
service or otherwise), when delivered by telecopy and confirmed
by return telecopy, or seven days after being mailed by
first-class mail, postage prepaid in each case to the applicable
addresses set forth below:
If to RSI:
Rykoff-Sexton, Inc.
1050 Warrenville Road
Lisle, Illinois 60532-5201
Attn: Mark Van Stekelenburg, Chairman,
President and Chief Executive
Officer
Telecopy: (708) 971-6588
with a copy to:
Elizabeth C. Kitslaar, Esq.
Jones, Day, Reavis & Pogue
77 West Wacker
Chicago, Illinois 60601-1692
Telecopy: (312) 782-8585
If to the ML Entities:
Merrill Lynch Capital Partners, Inc.
225 Liberty Street
New York, New York 10080-6123
Attn: James V. Caruso
Telecopy: (212) 236-7364
with a copy to:
19
<PAGE>
Marcia L. Tu, Esq.
Merrill Lynch & Co.
World Financial Center
North Tower
250 Vesey Street
New York, New York 10281-1323
Telecopy: (212) 449-3207
with a copy to:
Bonnie Greaves, Esq.
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Telecopy: (212) 848-7179
or to such other address as such party shall have designated by
notice so given to each other party.
9.2 Amendments, Waivers, Etc. This Agreement may not be
amended, changed, supplemented, waived or otherwise modified or
terminated except by an instrument in writing signed by the
holders of a majority in number of the ML Entities Shares and by
RSI following approval thereof by a majority of the Continuing
Directors.
9.3 Successors and Assigns. Except as otherwise provided
herein, including, without limitation, Section 2.10, this
Agreement shall be binding upon and shall inure to the benefit of
and be enforceable by the parties and their respective Affiliates
and their respective successors and assigns, including without
limitation in the case of any corporate party hereto any
corporate successor by merger or otherwise. Except as otherwise
provided herein, this Agreement shall not be assignable.
9.4 Entire Agreement. This Agreement embodies the entire
agreement and understanding among the parties relating to the
subject matter hereof and supersedes all prior agreements and
understandings relating to such subject matter. There are no
representations, warranties or covenants by the parties hereto
relating to such subject matter other than those expressly set
forth in this Agreement, the Merger Agreement and the ML
Agreement.
9.5 Specific Performance. The parties acknowledge that
money damages are not an adequate remedy for violations of this
Agreement and that any party may, in its sole discretion, apply
to a court of competent jurisdiction for specific performance or
injunctive or such other relief as such court may deem just and
proper in order to enforce this Agreement or prevent any
violation hereof and, to the extent permitted by applicable law,
each party waives any objection to the imposition of such relief.
20
<PAGE>
9.6 Remedies Cumulative. All rights, powers and remedies
provided under this Agreement or otherwise available in respect
hereof at law or in equity shall be cumulative and not
alternative, and the exercise or beginning of the exercise of any
thereof by any party shall not preclude the simultaneous or later
exercise of any other such right, power or remedy by such party.
9.7 No Waiver. The failure of any party hereto to exercise
any right, power or remedy provided under this Agreement or
otherwise available in respect hereof at law or in equity, or to
insist upon compliance by any other party hereto with its
obligations hereunder, and any custom or practice of the parties
at variance with the terms hereof, shall not constitute a waiver
by such party of its right to exercise any such or other right,
power or remedy or to demand such compliance.
9.8 No Third Party Beneficiaries. This Agreement is not
intended to be for the benefit of and shall not be enforceable by
any Person who or which is not a party hereto.
9.9 Jurisdiction. Each party hereby irrevocably submits to
the exclusive jurisdiction of the Court of Chancery in the State
of Delaware in any action, suit or proceeding arising in
connection with this Agreement, and agrees that any such action,
suit or proceeding shall be brought only in such court (and
waives any objection based on forum non conveniens or any other
objection to venue therein); provided, however, that such consent
to jurisdiction is solely for the purpose referred to in this
Section 9.9 and shall not be deemed to be a general submission to
the jurisdiction of said court or in the State of Delaware other
than for such purposes. Each party hereto hereby waives any
right to a trial by jury in connection with any such action, suit
or proceeding.
9.10 Governing Law. This Agreement and all disputes
hereunder shall be governed by and construed and enforced in
accordance with the law of the State of Delaware.
9.11 Name, Captions. The name assigned to this Agreement
and the section captions used herein are for convenience of
reference only and shall not affect the interpretation or
construction hereof.
9.12 Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an
original, but all of which together shall constitute one
instrument. Each counterpart may consist of a number of copies
each signed by less than all, but together signed by all, the
parties hereto.
9.13 Expenses. Each of the parties hereto shall bear their
own expenses incurred in connection with this Agreement and the
transactions contemplated hereby, except that in the event of a
dispute concerning the terms or enforcement of this Agreement,
21
<PAGE>
the prevailing party in any such dispute shall be entitled to
reimbursement of reasonable legal fees and disbursements from the
other party or parties to such dispute.
9.14 Press Releases. The initial press release relating to
this Agreement shall be a joint press release and, thereafter,
RSI and the ML Representative shall consult with each other
before issuing any press release or otherwise making any public
statements with respect to this Agreement, and neither RSI nor
any ML Entity shall issue any such press release or make any such
public statement without the consent (which shall not be
unreasonably withheld) of the other (the ML Representative acting
on behalf of the ML Entities for such purpose), except to the
extent required by applicable law or the rules and requirements
of the New York Stock Exchange, in which case the issuing party
shall use its reasonably best efforts to consult with the other
party (the ML Representative in case of the ML Entities) before
issuing any such release or making any such public statement.
22
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this
Agreement as of the date first above written.
RYKOFF-SEXTON, INC.
By: /s/ Mark Van Stekelenburg
---------------------------------
Name: Mark Van Stekelenburg
Title: Chairman, President and
Chief Executive Officer
MERRILL LYNCH CAPITAL PARTNERS,
INC.
By: /s/ James V. Caruso
---------------------------------
Name: James V. Caruso
Title: Vice President
MERRILL LYNCH CAPITAL APPRECIATION
PARTNERSHIP NO. B-XVIII, L.P.
By: Merrill Lynch LBO Partners
No. B-IV, L.P., as General
Partner
By: Merrill Lynch Capital
Partners,
Inc., as General Partner
By: /s/ James V. Caruso
---------------------------------
Name: James V. Caruso
Title: Vice President
MERRILL LYNCH KECALP L.P. 1994
BY: KECALP Inc., as General Partner
By: /s/ James V. Caruso
---------------------------------
Name: James V. Caruso
Title: Vice President
23
<PAGE>
ML OFFSHORE LBO PARTNERSHIP
NO. B-XVIII
By: Merrill Lynch LBO Partners
No. B-IV, L.P., as Investment
General Partner
By: Merrill Lynch Capital
Partners, Inc., as General
Partner
By: /s/ James V. Caruso
---------------------------------
Name: James V. Caruso
Title: Vice President
ML IBK POSITIONS, INC.
By: /s/ James V. Caruso
---------------------------------
Name: James V. Caruso
Title: Vice President
MLCP ASSOCIATES L.P. NO. II
By: Merrill Lynch Capital
Partners, Inc., as
General Partner
By: /s/ James V. Caruso
---------------------------------
Name: James V. Caruso
Title: Vice President
MLCP ASSOCIATES L.P. NO. IV
By: Merrill Lynch Capital
Partners, Inc., as
General Partner
By: /s/ James V. Caruso
---------------------------------
Name: James V. Caruso
Title: Vice President
MERRILL LYNCH KECALP L.P. 1991
By: KECALP Inc., as General
Partner
By: /s/ James V. Caruso
---------------------------------
Name: James V. Caruso
Title: Vice President
24
<PAGE>
MERRILL LYNCH CAPITAL APPRECIATION
PARTNERSHIP NO. XIII, L.P.
By: Merrill Lynch LBO Partners
No. IV, L.P., as General
Partner
By: Merrill Lynch Capital
Partners, Inc., as General
Partner
By: /s/ James V. Caruso
---------------------------------
Name: James V. Caruso
Title: Vice President
ML OFFSHORE LBO PARTNERSHIP NO.
XIII
By: Merrill Lynch LBO Partners
No. IV, L.P., as Investment
General Partner
By: Merrill Lynch Capital
Partners, Inc., as General
Partner
By: /s/ James V. Caruso
---------------------------------
Name: James V. Caruso
Title: Vice President
ML EMPLOYEES LBO PARTNERSHIP NO. I,
L.P.
By: ML Employees LBO Managers,
Inc., as General Partner
By: /s/ James V. Caruso
---------------------------------
Name: James V. Caruso
Title: Vice President
MERRILL LYNCH KECALP L.P. 1987
By: KECALP Inc., as General
Partner
By: /s/ James V. Caruso
---------------------------------
Name: James V. Caruso
Title: Vice President
25
<PAGE>
MERCHANT BANKING L.P. NO. II
By: Merrill Lynch MBP Inc., as
General Partner
By: /s/ James V. Caruso
---------------------------------
Name: James V. Caruso
Title: Vice President
26
<PAGE>
SCHEDULE I
SHARE OWNERSHIP
Name of Stockholder RSI Common Shares
MERRILL LYNCH CAPITAL 4,357,505
APPRECIATION PARTNERSHIP NO.
B-XVIII, L.P.
MERRILL LYNCH KECALP L.P. 67,879
1994
ML OFFSHORE LBO PARTNERSHIP 2,192,382
NO. B-XVIII
ML IBK POSITIONS, INC. 1,440,181
MLCP ASSOCIATES L.P. NO. II 52,257
MLCP ASSOCIATES L.P. NO. IV 13,575
MERRILL LYNCH KECALP L.P. 189,793
1991
MERRILL LYNCH CAPITAL 1,620,103
APPRECIATION PARTNERSHIP NO.
XIII, L.P.
ML OFFSHORE LBO PARTNERSHIP 41,188
NO. XIII
ML EMPLOYEES LBO PARTNERSHIP 40,273
NO. I, L.P.
MERRILL LYNCH KECALP L.P. 30,434
1987
MERCHANT BANKING L.P. NO. II 30,434
<PAGE>
SCHEDULE II
PERCENTAGE OWNERSHIPS
DISTRIBUTION TO ML OFFSHORE LBO PARTNERSHIP NO. B-XVIII
DISTRIBUTION OF 100% OF US FOODSERVICE COMMON SHARES
JANUARY 1996
<TABLE>
EXCHANGE
US FOODSERVICE
% OF SHARES FOR
US FOODSERVICE US FOODSERVICE 1.457 SHARES OF
CAPITAL ORIGINAL DISTRIBUTION SHARES REVERSE STOCK RYKOFF-SEXTON
PARTNERS CONTRIBUTION PERCENTAGE OF SHARES OUTSTANDING SPLIT OF .396 COMMON STOCK
- --------------------------------------- ------------ ---------- ------------ -------------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
MERRILL LYNCH CAPITAL $17,120,179 71.82% 2,728,888 12.22% 1,080,640 1,574,492
APRECIATION COMPANY LIMITED II
MERRILL LYNCH CAPITAL APPRECIATION 6,480,221 27.18% 1,032,921 4.63% 409,037 595,967
LIMITED PARTNERSHIP II (SPECIAL LP)
MERRILL LYNCH CAPITAL PARTNERS, INC 0 0.00% 0 0.00% 0 0
INVESTMENT GENERAL PARTNER 238,290 1.00% 37,983 0.17% 15,041 21,915
ADMINISTRATIVE GENERAL PARTNER 100 0.00% 16 0.00% 6 9
----------- ------ --------- ----- --------- ---------
TOTAL $23,838,790 100.00% 3,799,808 17.02% 1,504,724 2,192,383
=========== ====== ========= ===== ========= =========
</TABLE>
<PAGE>
SECOND TIER DISTRIBUTION TO SHAREHOLDERS OF MERRILL LYNCH
CAPITAL APPRECIATION COMPANY LIMITED II FROM ML OFFSHORE
LBO PARTNERSHIP NO. B-XVIII AS A RESULT OF THE DISTRIBUTION
OF 100% OF US FOODSERVICE COMMON SHARES
JANUARY 1996
<TABLE>
EXCHANGE
US FOODSERVICE
% OF SHARES FOR
% DISTRIBUTION US FOODSERVICE US FOOSERVICE 1.457 SHARES OF
OF TOTAL OF SHARES REVERSE STOCK RYKOFF-SEXTON
# SHARES SHARES SHARES OUTSTANDING SPLIT OF .396 COMMON STOCK
- --- -------- -------- ------------ -------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
1 7,513 43.85% 1,196,645* 5.36% 473,872 690,432
2 5,009 29.24% 797,817* 3.57% 315,936 460,319
3 1,373 8.01% 218,687 0.98% 86,600 126,176
4 501 2.92% 79,798 0.36% 31,600 46,041
5 1,036 6.05% 165,011 0.74% 65,344 95,206
6 440 2.57% 70,082 0.31% 27,752 40,435
7 402 2.35% 64,029 0.29% 25,355 36,942
8 176 1.03% 28,033 0.13% 11,101 16,174
9 201 1.17% 32,015 0.14% 12,678 18,472
10 240 1.40% 38,226 0.17% 15,138 22,056
11 198 1.16% 31,537 0.14% 12,489 18,196
12 44 0.26% 7,008 0.03% 2,775 4,043
------ ------- --------- ----------------------------------------------
17,133 100.00% 2,728,888 12.22% 1,080,640 1,574,492
====== ======= ========= ==============================================
<FN>
* REPRESENTS OVER 1% OF O/S STOCK. (2 INVESTORS)
</FN>
</TABLE>
<PAGE>
SECOND TIER DISTRIBUTION TO PARTNERS OF MERRILL LYNCH
CAPITAL APPRECIATION LIMITED PARTNERSHIP II (SPECIAL LP)
FROM ML OFFSHORE LBO PARTNERSHIP NO. B-XVIII AS A RESULT OF
THE DISTRIBUTION OF 100% OF US FOODSERVICE COMMON SHARES
JANUARY 1996
<TABLE>
EXCHANGE
CAPITAL US FOODSERVICE
ACCOUNT FOR PERCENT % OF SHARES FOR
B-XVIII OF TOTAL DISTRIBUTION US FOODSERVICE US FOOSERVICE 1.457 SHARES OF
INVESTMENT CAPITAL OF SHARES REVERSE STOCK RYKOFF-SEXTON
# @ 1/1/95 ACCOUNT SHARES OUTSTANDING SPLIT OF .396 COMMON STOCK
- --- --------------- ---------------------- -------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
1 $2,039,980.00 31.43% 324,678* 1.45% 128,571 187,328
2 917,990.00 14.14% 146,105 0.65% 57,858 84,299
3 506,995.00 7.81% 80,692 0.36% 31,954 46,557
4 917,990.00 14.14% 146,105 0.65% 57,858 84,299
5 463,995.00 7.15% 73,848 0.33% 29,244 42,609
6 407,996.00 6.29% 64,936 0.29% 25,715 37,467
7 1,003,990.00 15.47% 159,792 0.72% 63,278 92,196
8 0.00 0.00% 0 0.00% 0 0
9 230,998.00 3.56% 36,765 0.16% 14,559 21,212
------------- -------------------- ----------------------------------------------
$6,489,934.00 100.00% 1,032,921 4.63% 409,037 595,967
============= ==================== ==============================================
<FN>
* REPRESENTS OVER 1% OF O/S STOCK. (1 INVESTOR)
</FN>
</TABLE>
<PAGE>
MERRILL LYNCH CAPITAL APPRECIATION FUND I & II
& OTHER MERRILL LYNCH ENTITIES
PORTFOLIO INVESTMENT POSITION IN COMMON STOCK OF
US FOODSERVICE, INC.
DECEMBER 31, 1995
<TABLE>
Ownership of
# Partnership/Corporation Common Shares
- --- ---------------------------------------------------------------- -------------
<S> <C>
1. Merrill Lynch Capital Appreciation Partnership No. XIII, L.P. 2,807,941.6552
2. ML Offshore LBO Partnership No. XIII 71,387.8790
3. Merrill Lynch Capital Appreciation Partnership No. B-XVIII, L.P. 7,552,369.5000
4. ML Offshore LBO Partnership No. B-XVIII 3,799,808.0000
5. ML IBK Positions, Inc.* 2,496,102.7370
6. ML Employees LBO Partnership No. I, L.P. 69,802.2183
7. MLCP Associates L.P. No II 90,572.5000
8. MLCP Associates L.P. No IV 23,529.0000
9. Merrill Lynch KECALP L.P. 1987 52,748.5393
10. Merrill Lynch KECALP L.P. 1991 328,947.0000
11. Merrill Lynch KECALP L.P. 1994 117,647.0000
12. Merchant Banking L.P. No II 52,748.5393
---------------
Total 17,463,604.5681
===============
<FN>
* - Merrill Lynch itself.
</FN>
</TABLE>
<PAGE>
MERRILL LYNCH CAPITAL APPRECIATION PARTNERSHIP NO. XIII, L.P.
DISTRIBUTION OF 100% OF US FOODSERVICE COMMON SHARES
JANUARY 1996
<TABLE>
US FOODSERVICE
% OF SHARES FOR
TOTAL % DISTRIBUTION US FOODSERVICE US FOODSERVICE 1,457 SHARES OF
CAPITAL OF OF SHARES REVERSE STOCK RYKOFF-SEXTON
# COMMITMENT OWNERSHIP SHARES OUTSTANDING SPLIT OF .396 COMMON STOCK
- --- ------------- ------------ ------------ --------------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
1 $ 90,000,000 25.42% 706,745* 3.16% 279,869 407,769
2 30,000,000 8.47% 235,582* 1.05% 93,290 135,924
3 29,500,000 8.33% 231,655* 1.04% 91,735 133,658
4 25,000,000 7.06% 196,318 0.88% 77,742 113,270
5 25,000,000 7.06% 196,318 0.88% 77,742 113,270
6 19,000,000 5.37% 149,202 0.67% 59,084 86,085
7 15,000,000 4.24% 117,791 0.53% 46,645 67,962
8 10,000,000 2.82% 78,527 0.35% 31,097 45,308
9 10,000,000 2.82% 78,527 0.35% 31,097 45,308
10 10,000,000 2.82% 78,527 0.35% 31,097 45,308
11 10,000,000 2.82% 78,527 0.35% 31,097 45,308
12 6,000,000 1.69% 47,116 0.21% 18,658 27,185
13 5,000,000 1.41% 39,264 0.18% 15,549 22,655
14 5,000,000 1.41% 39,264 0.18% 15,549 22,655
15 5,000,000 1.41% 39,264 0.18% 15,549 22,655
16 5,000,000 1.41% 39,264 0.18% 15,549 22,655
17 5,000,000 1.41% 39,264 0.18% 15,549 22,655
18 5,000,000 1.41% 39,264 0.18% 15,549 22,655
19 4,000,000 1.13% 31,411 0.14% 12,439 18,124
20 4,000,000 1.13% 31,411 0.14% 12,439 18,124
21 4,000,000 1.13% 31,411 0.14% 12,439 18,124
22 3,000,000 0.85% 23,558 0.11% 9,329 13,592
23 3,000,000 0.85% 23,558 0.11% 9,329 13,592
24 3,000,000 0.85% 23,558 0.11% 9,329 13,592
25 3,000,000 0.85% 23,558 0.11% 9,329 13,592
26 3,000,000 0.85% 23,558 0.11% 9,329 13,592
27 2,500,000 0.71% 19,632 0.09% 7,774 11,327
28 2,500,000 0.71% 19,632 0.09% 7,774 11,327
29 2,500,000 0.71% 19,632 0.09% 7,774 11,327
30 2,000,000 0.56% 15,705 0.07% 6,219 9,061
31 2,000,000 0.56% 15,705 0.07% 6,219 9,061
32 2,000,000 0.56% 15,705 0.07% 6,219 9,061
33 2,000,000 0.56% 15,705 0.07% 6,219 9,061
34 2,000,000 0.56% 15,705 0.07% 6,219 9,061
------------ ------- --------- ------ ---------- ----------
$354,000,000 100.00% 2,779,863 12.45% $1,100,826 $1,603,903
------------ ======= --------- ------ ---------- ----------
3,575,758 28,079 0.13% 11,119 16,201
------------ --------- ------ ---------- ----------
$357,575,758 2,807,942 12.57% 1,111,945 1,620,104
============ ========= ====== ========== ==========
<FN>
* REPRESENTS OVER 1% OF O/S STOCK. (3 INVESTORS)
</FN>
</TABLE>
<PAGE>
MERRILL LYNCH CAPITAL APPRECIATION PARTNERSHIP NO. B-XVIII, L.P.
DISTRIBUTION OF 100% OF US FOODSERVICE COMMON SHARES
JANUARY 1996
<TABLE>
EXCHANGE
US FOODSERVICE
% OF SHARES FOR
CAPITAL ACCOUNT % DISTRIBUTION US FOODSERVICE US FOODSERVICE 1,457 SHARES OF
BALANCE AT OF OF SHARES REVERSE STOCK RYKOFF-SEXTON
# JANUARY 1, 1995 OWNERSHIP SHARES OUTSTANDING SPLIT OF .396 COMMON STOCK
- --- --------------- ----------- ------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
1. $2,267,896 4.50% 336,522* 1.51% 133,262 194,163
2. 3,469,299 6.89% 514,792* 2.31% 203,856 297,016
3. 1,120,249 2.22% 166,228 0.74% 65,826 95,908
4. 2,655,143 5.27% 393,983* 1.76% 156,017 227,317
5. 2,601,973 5.16% 386,093* 1.73% 152,893 222,765
6. 2,857,970 5.67% 424,079* 1.90% 167,935 244,681
7. 2,601,974 5.16% 386,094* 1.73% 152,893 222,765
8. 2,036,418 4.04% 302,174* 1.35% 119,661 174,346
9. 1,642,568 3.26% 243,732* 1.09% 96,518 140,627
10. 3,917,840 7.78% 581,348* 2.60% 230,214 335,422
11. 2,381,643 4.73% 353,400* 1.58% 139,946 203,901
12. 1,896,530 3.76% 281,416* 1.26% 111,441 162,370
13. 2,168,310 4.30% 321,744* 1.44% 127,411 185,638
14. 1,295,989 2.57% 192,305 0.86% 76,153 110,955
15. 2,083,124 4.13% 309,104* 1.38% 122,405 178,344
16. 1,036,791 2.06% 153,844 0.69% 60,922 88,763
17. 619,206 1.23% 91,881 0.41% 36,385 53,013
18. 518,396 1.03% 76,922 0.34% 30,461 44,382
19. 952,658 1.89% 141,360 0.63% 55,979 81,561
20. 412,805 0.82% 61,254 0.27% 24,257 35,342
21. 758,611 1.51% 112,566 0.50% 44,576 64,947
22. 471,962 0.94% 70,032 0.31% 27,733 40,407
23. 758,611 1.51% 112,566 0.50% 44,576 64,947
24. 952,658 1.89% 141,360 0.63% 55,979 81,561
25. 518,396 1.03% 76,922 0.34% 30,461 44,382
26. 867,325 1.72% 128,698 0.58% 50,964 74,255
27. 758,611 1.51% 112,566 0.50% 44,576 64,947
28. 412,805 0.82% 61,254 0.27% 24,257 35,342
29. 518,396 1.03% 76,922 0.34% 30,461 44,382
30. 518,396 1.03% 76,922 0.34% 30,461 44,382
31. 518,396 1.03% 76,922 0.34% 30,461 44,382
32. 833,248 1.65% 123,641 0.55% 48,962 71,338
33. 606,890 1.20% 90,053 0.40% 35,661 51,958
34. 311,037 0.62% 46,153 0.21% 18,277 26,630
35. 259,197 0.51% 38,461 0.17% 15,231 22,192
36. 226,789 0.45% 33,652 0.15% 13,326 19,416
37. 259,197 0.51% 38,461 0.17% 15,231 22,192
38. 259,197 0.51% 38,461 0.17% 15,231 22,192
39. 433,660 0.86% 64,349 0.29% 25,482 37,127
40. 259,197 0.51% 38,461 0.17% 15,231 22,192
41. 207,358 0.41% 30,769 0.14% 12,185 17,754
42. 207,358 0.41% 30,769 0.14% 12,185 17,754
43. 207,358 0.41% 30,769 0.14% 12,185 17,754
44. 124,471 0.25% 18,470 0.08% 7,314 10,656
45. 239,418 0.48% 35,526 0.16% 14,068 20,497
46. 155,518 0.31% 23,077 0.10% 9,138 13,314
47. 129,599 0.26% 19,231 0.09% 7,615 11,095
48. 77,760 0.15% 11,538 0.05% 4,569 6,657
----------- ------- --------- ------ --------- ---------
50,388,201 100.00% 7,476,846 33.48% 2,960,831 4,313,931
----------- ======= --------- ====== --------- ---------
508,971 75,524 0.34% 29,908 43,576
----------- --------- ------ --------- ---------
$50,897,172 7,552,370 33.82% 2,990,739 4,357,507
=========== ========= ====== ========= =========
<FN>
* REPRESENTS OVER 1% OF O/S STOCK. (13 INVESTORS)
</FN>
</TABLE>
<PAGE>
SCHEDULE III
DISSOLUTION DATES
Latest
------
Name of Stockholder Dissolution Date
------------------- ----------------
MERRILL LYNCH CAPITAL APPRECIATION December 31, 2003
PARTNERSHIP NO. B-XVIII, L.P.
MERRILL LYNCH KECALP L.P. 1994 December 31, 2034
ML OFFSHORE LBO PARTNERSHIP NO. B-XVIII December 31, 2003
ML IBK POSITIONS, INC. None.
MLCP ASSOCIATES L.P. NO. II December 31, 2002
MLCP ASSOCIATES L.P. NO. IV December 31, 2006
MERRILL LYNCH KECALP L.P. 1991 December 31, 2033
MERRILL LYNCH CAPITAL APPRECIATION December 31, 2000
PARTNERSHIP NO. XIII, L.P.
ML OFFSHORE LBO PARTNERSHIP NO. XIII December 31, 2000
ML EMPLOYEES LBO PARTNERSHIP NO. I, L.P. December 31, 2004
MERRILL LYNCH KECALP L.P. 1987 December 31, 2029
MERCHANT BANKING L.P. NO. II December 31, 2000
Exhibit C
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT dated as of May 17, 1996, between
RYKOFF-SEXTON, INC., a Delaware corporation (the "Company"), and the other
signatories hereto listed on the signature pages hereof.
W I T N E S S E T H:
WHEREAS, pursuant to an Agreement and Plan of Merger dated
February 2, 1996 (the "Merger Agreement"), between the Company, USF Acquisition
Corporation, a Delaware corporation ("Merger Sub") and a wholly owned subsidiary
of the Company, and US Foodservice Inc., a Delaware corporation ("USF"), USF has
merged into Merger Sub on the date hereof, and pursuant thereto shares of Class
A Common Stock, par value $.01 per share, and Class B Common Stock, par value
$.01 per share, of USF ("USF Common Stock"), held by the USF stockholders have
been converted into shares of Common Stock, of the par value of $.10 per share,
of the Company ("Common Stock"); and
WHEREAS, pursuant to an Agreement dated as of February 2,
1996, as amended by Amendment No. 1 to Agreement dated as of April 8, 1996 (as
so amended, the "ML Agreement"), the Company has agreed to enter into this
Agreement to provide certain registration rights to the Shareholders with
respect to such shares of Common Stock.
NOW, THEREFORE, it is hereby agreed as follows:
1. Definitions. Capitalized terms used but not
otherwise defined herein shall have the meanings assigned to such
terms in the Merger Agreement. For purposes of this Agreement,
the following terms shall have the following meanings:
"Affiliate" has the meaning specified in Rule 12b-2
under the Exchange Act.
"Blackout Period" has the meaning specified in
Section 6(a).
"Business Day" means a day on which the principal offices of
the SEC in Washington, D.C. are open to accept filings, or in the case of
determining a date on which any payment is due, a day other than Saturday,
Sunday or any day on which banks located in New York City are authorized or
obligated by law to close.
<PAGE>
"Counsel to the Holders" means the single law firm from time
to time representing the Holders, as appointed by the Holders of a majority in
number of the Registrable Securities.
"Effective Period" means, with respect to any Holder, a period
commencing on the date of this Agreement and ending on the earlier of (i) the
first date as of which all Registrable Securities cease to be Registrable
Securities and (ii) the date on which such Holder may sell Registrable
Securities in accordance with Rule 145(d)(3) under the Securities Act.
"Equitable Holder" means each of the Equitable Entities (as
such term in defined in the Merger Agreement) that is a holder of Registrable
Securities.
"Exchange Act" means the Securities Exchange Act of
1934, as amended.
"Holder" means each Shareholder, and each Person who is an
Affiliate of such Shareholder, that is a holder of Registrable Securities.
"Initiating Holder" has the meaning specified in
Section 3(a).
"Inspectors" has the meaning specified in Section 7(l).
"ML Holder" means each of the ML Entities (as such term in
defined in the Merger Agreement), and each Affiliate of ML IBK Positions, Inc.,
that is a holder of Registrable Securities.
"NASD" means the National Association of Securities
Dealers, Inc.
"Prospectus" means the prospectus included in any Registration
Statement, as amended or supplemented by any prospectus supplement with respect
to the terms of the offering of any portion of the Registrable Securities
covered by any Registration Statement and by all other amendments and
supplements to the prospectus, including post-effective amendments and all
material incorporated by reference in such prospectus.
"Records" has the meaning specified in Section 7(l).
"Registrable Securities" means, collectively, (i) the shares
of Common Stock issued to the Persons signatory hereto pursuant to the Merger,
(collectively, the "Shares") and (ii) any securities paid, issued or distributed
in respect of any Shares by way of stock dividend or distribution or stock split
or in connection with a combination of shares, recapitalization, reorganization,
merger, consolidation or otherwise. Securities will cease to be Registrable
Securities in accordance with Section 2 hereof.
2
<PAGE>
"Registration Expenses" means any and all out-of-pocket
expenses incident to the Company's performance of or compliance with this
Agreement, including, without limitation, (i) all SEC, NASD and securities
exchange registration and filing fees, (ii) all fees and expenses of complying
with state securities or blue sky laws (including reasonable fees and
disbursements of counsel for any underwriters in connection with blue sky
qualifications of the Registrable Securities), (iii) all printing, messenger and
delivery expenses, (iv) all fees and expenses incurred in connection with the
listing of the Registrable Securities on any securities exchange or automated
quotation system pursuant to Section 7(h), (v) the fees and disbursements of
counsel for the Company and of its independent public accountants, (vi) the
reasonable fees and expenses of any special experts retained by the Company in
connection with the requested registration, (vii) the reasonable fees and
expenses of Counsel to the Holders and (viii) out-of-pocket expenses of
underwriters customarily paid by the issuer to the extent provided for in any
underwriting agreement, but excluding (x) underwriting discounts and
commissions, transfer taxes, if any, and documentary stamp taxes, if any, and
(y) any fees or disbursements of counsel to the Holders or any Holder (other
than Counsel to the Holders).
"Registration Statement" means any registration statement of
the Company referred to in Section 3 or 4, including any Prospectus, amendments
and supplements to any such registration statement, including post-effective
amendments, and all exhibits and all material incorporated by reference in any
such registration statement.
"Registration Hold Period" means a Section 7(e) Period
or a Section 7(m) Period.
"Related Securities" means any securities of the Company
similar or identical to any of the Registrable Securities, including, without
limitation, Common Stock and all options, warrants, rights and other securities
convertible into, or exchangeable or exercisable for, Common Stock.
"Requesting Holder" has the meaning specified in
Section 3(a).
"SEC" means the Securities and Exchange Commission.
"Section 7(e) Period" has the meaning specified in
Section 7(e).
"Section 7(m) Period" has the meaning specified in
Section 7(m).
"Securities Act" means the Securities Act of 1933, as
amended.
3
<PAGE>
"Shareholder" means each of the Persons other than the Company
who are parties to this Agreement; provided, however, that for purposes of
Section 3 of this Agreement, Frank H. Bevevino shall be a Shareholder only as of
such date he ceases to be an employee of the Company or any Subsidiary of the
Company.
"Shelf Registration" means a "shelf" registration statement on
an appropriate form pursuant to Rule 415 under the Securities Act (or any
successor rule that may be adopted by the SEC).
"Underwritten Registration or Underwritten Offering" shall
mean an underwritten offering in which securities of the Company are sold to an
underwriter for reoffering to the public.
"Warrantholders Securities" means the securities proposed to
be sold by those holders of the Company's Common Stock Purchase Warrants who
exercise their registration rights pursuant to Section 20.2 thereof.
2. Securities Subject to This Agreement. The securities
entitled to the benefits of this Agreement are the Registrable Securities. For
the purposes of this Agreement, any particular Registrable Securities will cease
to be Registrable Securities when and to the extent that (i) a Registration
Statement covering such Registrable Securities has been declared effective under
the Securities Act and such Registerable Securities have been disposed of
pursuant to such effective Registration Statement, (ii) such Registrable
Securities are distributed to the public pursuant to Rule 144 (or any similar
provision then in force) under the Securities Act, (iii) such Registrable
Securities shall have been otherwise transferred or disposed of, new
certificates therefor not bearing a legend restricting further transfer shall
have been delivered by the Company and, at such time, subsequent transfer or
disposition of such securities shall not require registration or qualification
of such securities under the Securities Act or any similar state law then in
force or (iv) such Registrable Securities have ceased to be outstanding.
3. Piggy-Back Registration Rights. a. Whenever
during the Effective Period the Company shall propose to file a
registration statement under the Securities Act relating to the
public offering of Company Common Stock for the Company's own
account (other than pursuant to a registration statement on Form
S-4 or Form S-8 or any successor forms, or filed in connection
with an exchange offer or an offering of securities solely to
existing stockholders or employees of the Company) or for the
account of any holder of Common Stock (the "Initiating Holder")
and on a form and in a manner that would permit registration of
Registrable Securities for sale to the public under the
Securities Act, the Company shall (i) give written notice at
least 20 Business Days prior to the filing thereof to each Holder
of Registrable Securities then outstanding, specifying the
4
<PAGE>
approximate date on which the Company proposes to file such registration
statement and advising such Holder of its right to have any or all of the
Registrable Securities then held by such Holder included among the securities to
be covered thereby and (ii) at the written request of any such Holder given to
the Company within 15 days after such Holder's receipt of written notice from
the Company, include among the securities covered by such registration statement
the number of Registrable Securities which such Holder ("Requesting Holder")
shall have requested be so included (subject, however, to reduction in
accordance with paragraph (b) of this Section).
b. Each Holder of Registrable Securities
desiring to participate in an offering pursuant to Section 3(a) may include
shares of Company Common Stock in any Registration Statement relating to such
offering to the extent that the inclusion of such shares of Company Common Stock
shall not reduce the number of shares of Company Common Stock to be offered and
sold by the Company or any Initiating Holder pursuant thereto. If the lead
managing underwriter selected by the Company for an underwritten offering
pursuant to Section 3(a) determines that marketing factors require a limitation
on the number of shares of Company Common Stock to be offered and sold by
Requesting Holders in such offering, there shall be included in the offering
only that number of shares of Company Common Stock, if any, that such lead
managing underwriter reasonably and in good faith believes will not jeopardize
the success of the offering of all the shares of Company Common Stock that the
Company desires to sell for its own account or that the Initiating Holder
desires to sell for its own account, as the case may be. In such event and
provided the lead managing underwriter has so notified the Company in writing,
the shares of Company Common Stock to be included in such offering shall consist
of (i) first, the securities the Company or the Initiating Holder, as the case
may be, proposes to sell, and (ii) second, the number, if any, of Registrable
Securities and Warrantholders Securities requested to be included in such
registration that, in the opinion of such lead managing underwriter can be sold
without jeopardizing the success of the offering of all the securities that the
Company or the Initiating Holder, as the case may be, desires to sell for its
own account, such amount to be allocated on a pro rata basis among the holders
of Registrable Securities and Warrantholders Securities who have requested their
securities to be so included based on the number of Registrable Securities and
Warrantholders Securities that each holder thereof has requested to be so
included.
c. Nothing in this Section 3 shall create any
liability on the part of the Company to the Holders of Registrable Securities if
the Company for any reason should decide not to file a registration statement
proposed to be filed under Section 3(a) or to withdraw such registration
statement subsequent to its filing, regardless of any action whatsoever that a
Holder may have taken, whether as a result of the issuance by the Company of any
notice hereunder or otherwise.
5
<PAGE>
d. A request by Holders to include Registrable
Securities in a proposed underwritten offering pursuant to Section 3(a) shall
not be deemed to be a request for a demand registration pursuant to Section 4.
4. Demand Registration Rights. (a) Upon the written request
during the Effective Period of ML Holders holding at least a majority in number
of the Registrable Securities held by the ML Holders that the Company effect the
registration with the SEC under and in accordance with the provisions of the
Securities Act of all or part of such ML Holder's or ML Holders' Registrable
Securities (which written request shall specify the aggregate number of shares
of Registrable Securities requested to be registered and the means of
distribution), the Company will file a Registration Statement covering such ML
Holder's or ML Holders' Registrable Securities requested to be registered within
30 Business Days after receipt of such request; provided, however, that the
Company shall not be required to take any action pursuant to this Section 4:
(1) if prior to the date of such request the
Company shall have effected four registrations pursuant
to this Section 4;
(2) if the Company has effected a
registration pursuant to this Section 4 within the 180-day
period next preceding such request which permitted ML Holders
holding Registrable Securities to register Registrable
Securities;
(3) if the Company shall at the time have
effective a Shelf Registration pursuant to which the ML Holder
or ML Holders that requested registration could effect the
disposition of such ML Holder's or ML Holders' Registrable
Securities in the manner requested;
(4) if the Registrable Securities which the
Company shall have been requested to register shall have a
then current market value of less than $50,000,000, unless
such registration request is for all remaining Registrable
Securities held by the ML Holders; or
(5) during the pendency of any Blackout
Period;
provided, however, that the Company shall be permitted to satisfy its
obligations under this Section 4(a) by amending (to the extent permitted by
applicable law) within 10 Business Days after a written request for
registration, any Registration Statement previously filed by the Company under
the Securities Act so that such Registration Statement (as amended) shall permit
the disposition (in accordance with the intended methods of
6
<PAGE>
disposition specified as aforesaid) of all of the Registrable Securities for
which a demand for registration has been made under this Section 4(a). If the
Company shall so amend a previously filed Registration Statement, it shall be
deemed to have effected a registration for purposes of this Section 4.
b. The ML Holders delivering such request may
distribute the Registrable Securities covered by such request by means of an
underwritten offering or any other means, as determined by the ML Holders
holding a majority of Registrable Securities so requested to be registered.
c. Except for a Registration Statement subject
to Section 4(d), a registration requested pursuant to this Section 4 shall not
be deemed to be effected for purposes of this Section 4 if it has not been
declared effective by the SEC or become effective in accordance with the
Securities Act and the rules and regulations thereunder.
d. ML Holders holding a majority in number of
the Registrable Securities held by ML Holders to be included in a Registration
Statement pursuant to this Section 4 may, at any time prior to the effective
date of the Registration Statement relating to such registration, revoke such
request by providing a written notice to the Company revoking such request. If a
Registration Statement is so revoked, the ML Holders holding Registrable
Securities requesting the filing of such Registration Statement shall reimburse
the Company for all its out-of-pocket expenses incurred in the preparation,
filing and processing of the Registration Statement.
e. The Company will not include any securities
which are not Registrable Securities in any Registration Statement filed
pursuant to a demand made under this Section 4 without the prior written consent
of the ML Holders holding a majority in number of the Registrable Securities
held by ML Holders and covered by such Registration Statement.
5. Selection of Underwriters. In connection with any
underwritten offering pursuant to a Registration Statement filed pursuant to a
demand made pursuant to Section 4, ML Holders holding a majority in number of
the Registrable Securities to be included in the Registration Statement shall
have the right to select a lead managing underwriter or underwriters to
administer the offering, which lead managing underwriter or underwriters shall
be reasonably satisfactory to the Company; provided, however, that the Company
shall have the right to select a co-managing underwriter or underwriters for
the offering, which co-managing underwriter or underwriters shall be reasonably
satisfactory to the ML Holders holding a majority in number of the Registrable
Securities held by ML Holders to be included in the Registration Statement.
7
<PAGE>
6. Blackout Periods; Holdback. a. If the Company determines in
good faith that the registration and distribution of Registrable Securities (i)
would materially impede, delay, interfere with or otherwise adversely affect any
pending financing, registration of securities, acquisition, corporate
reorganization or other significant transaction involving the Company or (ii)
would require disclosure of non-public material information that the Company has
a bona fide business purpose for preserving as confidential, as determined by
the Board of Directors of the Company in good faith, the Company shall promptly
give the Holders notice of such determination and shall be entitled to postpone
the filing or effectiveness of a Registration Statement for the shortest period
of time reasonably required, but in any event not to exceed 180 days with
respect to matters covered by clause (i) above, and not to exceed 90 days with
respect to matters covered by clause (ii) above (a "Blackout Period"); provided,
that a Blackout Period with respect to a registration of securities proposed by
the Company may, at the election of the Company, commence on the date that is 30
days prior to the date the Company in good faith estimates will be the date of
filing of, and end no later than the date, following the effective date of such
registration, specified in the form of underwriting agreement relating to such
registration during which the Company shall be prohibited from selling, offering
or otherwise disposing of Common Stock, but in no event to exceed 180 days;
provided further, that the Company shall not obtain any deferral under this
Section 6(a) more than once in any twelve-month period, other than normal
deferrals required prior to the public release of quarterly financial results of
the Company. The Company shall promptly notify each Holder of the expiration or
earlier termination of a Blackout Period.
b. Each Holder from time to time of more than 1%
of Company Common Stock agrees by acquisition of the Registrable Securities, if
so requested in writing by any managing underwriter, not to effect any public
sale or distribution of such securities or Related Securities during the seven
days prior to and the 120 days after the effective time of any underwritten
registration by the Company (either for its own account, or for the benefit of
the Holders of any securities of the Company, including Registrable Securities,
in each case as to which the Holders are entitled to request to be included
pursuant to Section 3) has become effective or such period of time shorter than
120 days that is sufficient and appropriate, in the opinion of the managing
underwriter, in order to complete the sale and distribution of securities
included in such registration.
7. Registration Procedures. If and whenever the
Company is required to use reasonable best efforts to effect or
cause the registration of any Registrable Securities under the
Securities Act as provided in this Agreement, the Company will:
a. prepare and file with the SEC a Registration
Statement with respect to such Registrable Securities on any
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<PAGE>
form for which the Company then qualifies or which counsel for the
Company shall deem appropriate, and which form shall be available for
the sale of the Registrable Securities in accordance with the intended
methods of distribution thereof (including, if so requested by the
Holders, distributions under Rule 415 under the Securities Act pursuant
to a Shelf Registration Statement), and use its reasonable best efforts
to cause such Registration Statement to become and remain effective;
b. prepare and file with the SEC amendments and post-effective
amendments to such Registration Statement (including any Shelf
Registration referred to in Section 4(a)) and such amendments and
supplements to the Prospectus used in connection therewith as may be
necessary to maintain the effectiveness of such registration or as may
be required by the rules, regulations or instructions applicable to the
registration form utilized by the Company or by the Securities Act or
rules and regulations thereunder necessary to keep such Registration
Statement effective (i) in the case of a firm commitment underwritten
public offering, until each underwriter has completed the distribution
of all securities purchased by it and (ii) in the case of any other
registration, for up to 90 days (or longer period in the event of a
Registration Hold Period during such offering, as provided in this
Section 7) and cause the Prospectus as so supplemented to be filed
pursuant to Rule 424 under the Securities Act, and to otherwise comply
with the provisions of the Securities Act with respect to the
disposition of all securities covered by such Registration Statement
until the earlier of (x) such 90th day (or longer period) and (y) such
time as all Registrable Securities covered by such Registration
Statement have ceased to be Registrable Securities;
c. furnish to each Holder of such Registrable Securities such
number of copies of such Registration Statement and of each amendment
and post-effective amendment thereto, any Prospectus or Prospectus
supplement and such other documents as such Holder may reasonably
request in order to facilitate the disposition of the Registrable
Securities by such Holder (the Company hereby consenting to the use
(subject to the limitations set forth in the last paragraph of this
Section 7) of the Prospectus or any amendment or supplement thereto in
connection with such disposition);
d. use its reasonable best efforts to register or qualify such
Registrable Securities covered by such Registration Statement under
such other securities or blue sky laws of such jurisdictions as each
Holder shall reasonably request, and do any and all other acts and
things which may be reasonably necessary or advisable to enable such
Holder to consummate the disposition in such
9
<PAGE>
jurisdictions of the Registrable Securities owned by such Holder,
except that the Company shall not for any such purpose be required to
qualify generally to do business as a foreign corporation in any
jurisdiction where, but for the requirements of this Section 7(d), it
would not be obligated to be so qualified, to subject itself to
taxation in any such jurisdiction, or to consent to general service of
process in any such jurisdiction;
e. notify each Holder of any such Registrable Securities
covered by such Registration Statement, at any time when a Prospectus
relating thereto is required to be delivered under the Securities Act
within the appropriate period mentioned in Section 7(b), of the
Company's becoming aware that the Prospectus included in such
Registration Statement, as then in effect, includes an untrue statement
of a material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing (the period
during which the Holders are required to refrain from effecting public
sales or distributions in such case being referred to as a "Section
7(e) Period"), and prepare and furnish to such Holder a reasonable
number of copies of an amendment to such Registration Statement or
related Prospectus as may be necessary so that, as thereafter delivered
to the purchasers of such Registrable Securities, such Prospectus shall
not include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then
existing, and the time during which such Registration Statement shall
remain effective pursuant to Section 7(b) shall be extended by the
number of days in the Section 7(e) Period;
f. notify each Holder of Registrable Securities
covered by such Registration Statement at any time,
(1) when the Prospectus or any Prospectus
supplement or post-effective amendment has been filed, and,
with respect to the Registration Statement or any
post-effective amendment, when the same has become effective;
(2) of any request by the SEC for amendments
or supplements to the Registration Statement or the
Prospectus or for additional information;
(3) of the issuance by the SEC of any stop
order of which the Company or its counsel is aware or should
be aware suspending the effectiveness of the Registration
Statement or any order preventing the use of a related
Prospectus, or the initiation or any threats of any
proceedings for such purposes; and
10
<PAGE>
(4) of the receipt by the Company of any
written notification of the suspension of the
qualification of any of the Registrable Securities for
sale in any jurisdiction or the initiation or any
threats of any proceeding for that purpose;
g. otherwise use its reasonable best efforts to comply with
all applicable rules and regulations of the SEC, and make available to
its stockholders an earnings statement which shall satisfy the
provisions of Section 11(a) of the Securities Act, provided that the
Company shall be deemed to have complied with this paragraph if it has
complied with Rule 158 under the Securities Act;
h. use its reasonable best efforts to cause all such
Registrable Securities to be listed on any securities exchange or
automated quotation system on which the Common Stock is then listed, if
such Registrable Securities are not already so listed and if such
listing is then permitted under the rules of such exchange or automated
quotation system, and to provide a transfer agent and registrar for
such Registrable Securities covered by such Registration Statement no
later than the effective date of such Registration Statement;
i. if the registration is an underwritten
registration, enter into a customary underwriting agreement
and in connection therewith:
(1) make such representations and warranties
to the underwriters in form, substance and scope as are
customarily made by issuers to underwriters in
comparable underwritten offerings;
(2) obtain opinions of counsel to the
Company (in form, scope and substance reasonably satisfactory
to the managing underwriters), addressed to the underwriters,
and covering the matters customarily covered in opinions
requested in comparable underwritten offerings;
(3) obtain "cold comfort" letters and bring-
downs thereof from the Company's independent certified public
accountants addressed to the underwriters, such letters to be
in customary form and covering matters of the type customarily
covered in "cold comfort" letters by independent accountants
in connection with underwritten offerings;
(4) if requested, provide indemnification in
accordance with the provisions and procedures of
Section 10 hereof to all parties to be indemnified
pursuant to said Section; and
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<PAGE>
(5) deliver such documents and certificates
as may be reasonably requested by the managing underwriters to
evidence compliance with clause (f) above and with any
customary conditions contained in the underwriting agreement.
j. cooperate with the Holders of Registrable Securities
covered by such Registration Statement and the managing underwriter or
underwriters or agents, if any, to facilitate the timely preparation
and delivery of certificates (not bearing any restrictive legends)
representing the securities to be sold under such Registration
Statement, and enable such securities to be in such denominations and
registered in such names as the managing underwriter or underwriters or
agents, if any, or such Holders may request;
k. if reasonably requested by the managing underwriter or
underwriters or a Holder of Registrable Securities being sold in
connection with an underwritten offering, incorporate in a Prospectus
supplement or post-effective amendment such information as the managing
underwriters and the Holders of a majority in number of the Registrable
Securities being sold agree should be included therein relating to the
plan of distribution with respect to such Registrable Securities,
including, without limitation, information with respect to the
principal amount of Registrable Securities being sold to such
underwriters, the purchase price being paid therefor by such
underwriters and with respect to any other terms of the underwritten
offering of the Registrable Securities to be sold in such offering and
make all required filings of such Prospectus supplement or
post-effective amendment as promptly as practicable upon being notified
of the matters to be incorporated in such Prospectus supplement or
post-effective amendment;
l. provide any Holder of Registrable Securities included in
such Registration Statement, any underwriter participating in any
disposition pursuant to such Registration Statement and any attorney,
accountant or other agent retained by any such Holder or underwriter
(collectively, the "Inspectors") with reasonable access during normal
business hours to appropriate officers of the Company and the Company's
subsidiaries to ask questions and to obtain information reasonably
requested by any such Inspector and make available for inspection all
financial and other records and other information, pertinent corporate
documents and properties of any of the Company and its subsidiaries and
affiliates (collectively, the "Records"), as shall be reasonably
necessary to enable them to exercise their due diligence
responsibility; provided, however, that the Records that the Company
determines, in good faith, to be confidential and which it notifies the
Inspectors in writing are confidential shall not be disclosed to any
12
<PAGE>
Inspector unless such Inspector signs or is otherwise bound by a
confidentiality agreement reasonably satisfactory to the Company; and
m. in the event of the issuance of any stop order of which the
Company or its counsel is aware or should be aware suspending the
effectiveness of the Registration Statement or of any order suspending
or preventing the use of any related Prospectus or suspending the
qualification of any Registrable Securities included in the
Registration Statement for sale in any jurisdiction, the Company will
use its reasonable best efforts promptly to obtain its withdrawal; and
the period for which the Registration Statement shall be kept effective
shall be extended by a number of days equal to the number of days
between the issuance and withdrawal of any stop orders (a "Section 7(m)
Period").
The Company may require each Holder of Registrable Securities
as to which any registration is being effected to furnish the Company with such
information regarding such Holder and pertinent to the disclosure requirements
relating to the registration and the distribution of such securities as the
Company may from time to time reasonably request.
Each Holder of Registrable Securities agrees that, upon
receipt of any notice from the Company of the happening of any event of the kind
described in Sections 7(e) or 7(m), such Holder will forthwith discontinue
disposition of Registrable Securities pursuant to the Prospectus or Registration
Statement covering such Registrable Securities until such Holder's receipt of
the copies of the supplemented or amended Prospectus contemplated by Section
7(e) or the withdrawal of any stop order contemplated by Section 7(m), and, if
so directed by the Company, such Holder will deliver to the Company all copies,
other than permanent file copies then in such Holder's possession, of the
Prospectus covering such Registrable Securities at the time of receipt of such
notice.
8. Registration Expenses. The Company will pay all
Registration Expenses in connection with all registrations of Registrable
Securities pursuant to Sections 3 and 4, and each Holder shall pay (x) any fees
or disbursements of counsel to such Holder (other than Counsel to the Holders)
and (y) all underwriting discounts and commissions and transfer taxes, if any,
and documentary stamp taxes, if any, relating to the sale or disposition of such
Holder's Registrable Securities pursuant to the Registration Statement.
9. Reports Under the Exchange Act. The Company
agrees to:
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<PAGE>
a. file with the SEC in a timely manner all reports
and other documents required of the Company under the
Exchange Act; and
b. furnish to any Holder, during the Effective Period,
forthwith upon request (A) a written statement by the Company that it
has complied with the current public information and reporting
requirements of Rule 144 under the Securities Act and the Exchange Act
and (B) a copy of the most recent annual or quarterly report of the
Company and such other reports and documents so filed by the Company
with the SEC under the Exchange Act.
10. Indemnification; Contribution.
a. Indemnification by the Company. The Company
agrees to indemnify and hold harmless each Holder of Registrable Securities, its
officers, directors, agents, trustees, stockholders and each Person who controls
such Holder (within the meaning of Section 15 of the Securities Act or Section
20 of the Exchange Act), against all losses, claims, damages, liabilities and
expenses (including reasonable attorneys' fees, disbursements and expenses, as
incurred) incurred by such party pursuant to any actual or threatened action,
suit, proceeding or investigation arising out of or based upon any untrue or
alleged untrue statement of a material fact contained in the Registration
Statement, any Prospectus or preliminary Prospectus, or any amendment or
supplement to any of the foregoing or any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein (in the case of a Prospectus or a preliminary Prospectus, in
light of the circumstances then existing) not misleading, except in each case
insofar as the same arise out of or are based upon any such untrue statement or
omission made in reliance on and in conformity with information with respect to
such indemnified party furnished in writing to the Company by such indemnified
party or its counsel expressly for use therein. In connection with an
underwritten offering, the Company will indemnify the underwriters thereof,
their officers, directors, agents, trustees, stockholders and each Person who
controls such underwriters (within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act) to the same extent as provided above with
respect to the indemnification of the Holders of Registrable Securities.
Notwithstanding the foregoing provisions of this Section 10(a), the Company will
not be liable to any Person who participates as an underwriter in the offering
or sale of Registrable Securities or any other Person, if any, who controls such
underwriter (within the meaning of Section 15 of the Securities Act or Section
20 of the Exchange Act), under the indemnity agreement in this Section 10(a) for
any such loss, claim, damage, liability (or action or proceeding in respect
thereof) or expense that arises out of such Person's failure to send or deliver
a copy of the final Prospectus to the Person asserting an untrue statement or
alleged untrue statement or
14
<PAGE>
omission or alleged omission at or prior to the written confirmation of the sale
of the Registrable Securities to such Person if such statement or omission was
corrected in such final Prospectus and the Company has previously furnished
copies thereof to such Holder or other Person in accordance with this Agreement.
b. Indemnification by Holders of Registrable
Securities. In connection with any Registration Statement filed pursuant hereto,
each Holder of Registrable Securities to be covered thereby will furnish to the
Company in writing such information with respect to such Holder, including the
name, address and the amount of Registrable Securities held by such Holder, as
the Company reasonably requests for use in such Registration Statement or the
related Prospectus and agrees severally and not jointly to indemnify and hold
harmless the Company, all other Holders or any underwriter, as the case may be,
and their respective directors, officers, agents, trustees, stockholders and
controlling Persons (within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act), against any losses, claims, damages,
liabilities and expenses (including reasonable attorneys' fees, disbursements
and expenses, as incurred), incurred by such party pursuant to any actual or
threatened action, suit, proceeding or investigation arising out of or based
upon any untrue or alleged untrue statement of a material fact contained in, or
any omission or alleged omission of a material fact required to be stated in,
such Registration Statement, Prospectus or preliminary Prospectus or any
amendment or supplement to any of the foregoing or necessary to make the
statements therein (in case of a Prospectus or preliminary Prospectus, in the
light of the circumstances then existing) not misleading, but only to the extent
that any such untrue statement or omission is made in reliance on and in
conformity with information with respect to such Holder furnished in writing to
the Company by such Holder or its counsel specifically for inclusion therein;
provided, however, that the liability of each Holder hereunder shall be limited
to the proportion of any such loss, claim, damage, liability or expense that is
equal to the proportion that the net proceeds from the sale of shares sold by
such Holder under such registration statement bears to the total net proceeds
from the sale of all securities sold thereunder, but not in any event to exceed
the net proceeds received by such Holder from the sale of Registrable Securities
covered by such Registration Statement.
c. Conduct of Indemnification Proceedings. Any
Person entitled to indemnification hereunder agrees to give prompt written
notice to the indemnifying party after the receipt by such indemnified party of
any written notice of the commencement of any action, suit, proceeding or
investigation or threat thereof made in writing for which such indemnified party
may claim indemnification or contribution pursuant to this Agreement (provided
that failure to give such notification shall not affect the obligations of the
indemnifying party pursuant to
15
<PAGE>
this Section 10 except to the extent the indemnifying party shall have been
actually prejudiced as a result of such failure). In case any such action shall
be brought against any indemnified party and it shall notify the indemnifying
party of the commencement thereof, the indemnifying party shall be entitled to
participate therein and, to the extent that it shall wish, jointly with any
other indemnifying party similarly notified, to assume the defense thereof, with
counsel reasonably satisfactory to such indemnified party, and after notice from
the indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party shall not be liable to such
indemnified party under these indemnification provisions for any legal expenses
of other counsel or any other expenses, in each case subsequently incurred by
such indemnified party, in connection with the defense thereof other than
reasonable costs of investigation, unless in the reasonable judgement of any
indemnified party a conflict of interest is likely to exist, based on the
written opinion of counsel, between such indemnified party and any other of such
indemnified parties with respect to such claim, in which event the indemnifying
party shall not be liable for the fees and expenses of (i) more than one counsel
for all Holders of Registrable Securities who are indemnified parties, selected
by a majority of the Holders of Registrable Securities who are indemnified
parties (which choice shall be reasonably satisfactory to the Company), (ii)
more than one counsel for the underwriters or (iii) more than one counsel for
the Company in connection with any one action or separate but similar or related
actions. An indemnifying party who is not entitled to, or elects not to, assume
the defense of a claim will not be obligated to pay the fees and expenses of
more than one counsel for all parties indemnified by such indemnifying party
with respect to such claims, unless in the reasonable judgment of any
indemnified party based on the written opinion of counsel a conflict of interest
may exist between such indemnified party and any other of such indemnified
parties with respect to such claim, in which event the indemnifying party shall
be obligated to pay the fees and expenses of such additional counsel or
counsels. No indemnifying party, in defense of any such action, suit, proceeding
or investigation, shall, except with the consent of each indemnified party,
consent to the entry of any judgment or entry into any settlement which does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such indemnified party of a release from all liability in respect to such
action, suit, proceeding or investigation to the extent the same is covered by
the indemnity obligation set forth in this Section 10. No indemnified party
shall consent to entry of any judgment or enter into any settlement without the
consent of each indemnifying party.
d. Contribution. If the indemnification from
the indemnifying party provided for in this Section 10 is unavailable to an
indemnified party hereunder in respect of any losses, claims, damages,
liabilities or expenses referred to herein, then the indemnifying party, in lieu
of indemnifying such
16
<PAGE>
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages, liabilities and
expenses in such proportion as is appropriate to reflect the relative fault of
the indemnifying party and indemnified party in connection with the actions
which resulted in such losses, claims, damages, liabilities and expenses, as
well as any other relevant equitable considerations; provided, however, that the
liability of each Holder hereunder shall be limited to the proportion of any
such loss, claim, damage, liability or expense that is equal to the proportion
that the net proceeds from the sale of shares sold by such Holder under such
Registration Statement bears to the total net proceeds from the sale of all
securities sold thereunder, but not in any event to exceed the net proceeds
received by such Holder from the sale of Registrable Securities covered by such
Registration Statement. The relative fault of such indemnifying party and
indemnified party shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue statement
of a material fact or omission or alleged omission to state a material fact, has
been made by, or relates to information supplied by, such indemnifying party or
indemnified party, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action. The amount paid
or payable by a party as a result of the losses, claims, damages, liabilities
and expenses referred to above shall be deemed to include, subject to the
limitations set forth in Section 10(c), any legal and other fees and expenses
reasonably incurred by such indemnified party in connection with any
investigation or proceeding.
No Person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation.
If indemnification is available under this Section 10, the
indemnifying parties shall indemnify each indemnified party to the full extent
provided in Section 10(a) or (b), as the case may be, without regard to the
relative fault of said indemnifying parties or indemnified party or any other
equitable consideration provided for in this Section 10(d).
e. The provisions of this Section 10 shall be in
addition to any liability which any indemnifying party may have to any
indemnified party and shall survive the termination of this Agreement.
11. Participation in Underwritten Offerings. No Holder of
Registrable Securities may participate in any underwritten offering pursuant to
Section 3 hereunder unless such Holder (a) agrees to sell such Holder's
securities on the basis provided in any underwriting arrangements approved by
the Company in its reasonable discretion and (b) completes and executes all
questionnaires, powers of attorney, custody agreements,
17
<PAGE>
indemnities, underwriting agreements and other documents reasonably required
under the terms of such underwriting arrangements.
12. Miscellaneous. a. Remedies. The parties
acknowledge that money damages are not an adequate remedy for
violations of this Agreement and that any party may, in its sole
discretion, apply to a court of competent jurisdiction for
specific performance or injunctive or such other relief as such
court may deem just and proper in order to enforce this Agreement
or prevent any violation hereof and, to the extent permitted by
applicable law, each party waives any objection to the imposition
of such relief.
b. Amendments and Waivers. Except as otherwise
provided herein, the provisions of this Agreement may not be amended, modified
or supplemented, and waivers or consents to departures from the provisions
hereof may not be given, unless the Company has obtained the written consent of
Holders of at least a majority in number of the Registrable Securities then
outstanding.
c. Notices. Any notice required to be given
hereunder shall be sufficient if in writing, and sent by facsimile transmission
and by courier service (with proof of service), hand delivery or certified or
registered mail (return receipt requested and first-class postage prepaid),
addressed as follows:
(i) if to an ML Holder to:
Merrill Lynch Capital Partners, Inc.
225 Liberty Street
New York, NY 10080-6123
Attn: James V. Caruso
Telecopy: (212) 236-7364
with a copy to:
Marcia L. Tu, Esq.
Merrill Lynch & Co., Inc.
World Financial Center
North Tower
250 Vesey Street
New York, NY 10281-1323
Telecopy: (212) 449-3207
with a copy to:
Bonnie Greaves, Esq.
Shearman & Sterling
599 Lexington Avenue
New York, NY 10022
Telecopy: (212) 848-7179
18
<PAGE>
(ii) if to an Equitable Holder to:
Alliance Corporate Finance
Group Incorporated
1285 Avenue of the Americas
19th Floor
New York, NY 10019
Attention: Corporate Finance
Department
Telecopy: (212) 554-1032
(iii) if to Frank H. Bevevino to:
Frank H. Bevevino
US Foodservice Inc.
Crosscreek Pointe
1065 Highway 315, Suite 101
Wilkes-Barre, PA 18702
Telecopy: (717) 822-0909
(iv) if to the Company to:
Rykoff-Sexton, Inc.
1050 Warrenville Road
Lisle, IL 60532-5201
Attn: Mark Van Stekelenburg, Chairman,
President and Chief Executive
Officer
Telecopy: (708) 971-6588
with copies to:
Elizabeth C. Kitslaar, Esq.
Jones, Day, Reavis & Pogue
77 West Wacker
Chicago, IL 60601-1692
Telecopy: (312) 782-8585
or to such other address as any party shall specify by written notice so given,
and such notice shall be deemed to have been delivered as of the date so
telecommunicated, personally delivered or mailed.
d. Successors and Assigns. This Agreement shall
inure to the benefit of and be binding upon the parties hereto, any Holder other
than the Shareholders and any successors thereof; provided, however, that (i)
any Holder shall have agreed in writing to become a Holder under this Agreement
and to be bound by the terms and conditions hereof and (ii) subject to clause
(i), this Agreement and the provisions of this Agreement that are for the
benefit of the Holders shall not be assignable by any Holder to any Person that
is not so permitted to be a Holder, and any such purported assignment shall be
null and void.
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<PAGE>
e. Counterparts. This Agreement may be executed
in one or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when one or more counterparts have been
signed by each of the parties and delivered to the other parties.
f. Descriptive Headings. The descriptive
heading used herein are inserted for convenience of reference only and are not
intended to be part of or to affect the meaning or interpretation of this
Agreement.
g. Governing Law. This Agreement shall be
governed by and construed in accordance with the laws of the
State of New York.
h. Severability. If any term of this Agreement
or the application thereof to any party or circumstance shall be held invalid or
unenforceable to any extent, the remainder of this Agreement and the application
of such term to the other parties or circumstances shall not be affected thereby
and shall be enforced to the greatest extent permitted by applicable law,
provided that in such event the parties shall negotiate in good faith in an
attempt to agree to another provision (in lieu of the term or application held
to be invalid or unenforceable) that will be valid and enforceable and will
carry out the parties' intentions hereunder.
i. Entire Agreement. This Agreement constitutes
the entire agreement and understanding among the parties relating to the subject
matter hereof and supersedes all prior agreements and understandings relating to
such subject matter. There are no representations, warranties or covenants by
the parties hereto relating to such subject matter other than those expressly
set forth in this Agreement.
20
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
RYKOFF-SEXTON, INC.
By: /s/ Mark Van Stekelenburg
__________________________________
Mark Van Stekelenburg
Chairman, President and Chief
Executive Officer
MERRILL LYNCH CAPITAL APPRECIATION
PARTNERSHIP NO. B-XVIII, L.P.
By: Merrill Lynch LBO Partners
No. B-IV, L.P., as General
Partner
By: Merrill Lynch Capital
Partners, Inc., as General
Partner
By: /s/ James V. Caruso
__________________________________
James V. Caruso
Vice President
MERRILL LYNCH KECALP L.P. 1994
By: KECALP Inc., as General Partner
By: /s/ James V. Caruso
__________________________________
James V. Caruso
Vice President
ML OFFSHORE LBO PARTNERSHIP
NO. B-XVIII
By: Merrill Lynch LBO Partners
No. B-IV, L.P., as Investment
General Partner
By: Merrill Lynch Capital
Partners, Inc., as General
Partner
By: /s/ James V. Caruso
__________________________________
James V. Caruso
Vice President
21
<PAGE>
ML IBK POSITIONS, INC.
By: /s/ James V. Caruso
__________________________________
James V. Caruso
Vice President
MLCP ASSOCIATES L.P. NO. II
By: Merrill Lynch Capital
Partners, Inc., as General
Partner
By: /s/ James V. Caruso
__________________________________
James V. Caruso
Vice President
MERRILL LYNCH KECALP L.P. 1991
By: KECALP Inc., as General
Partner
By: /s/ James V. Caruso
__________________________________
James V. Caruso
Vice President
MERRILL LYNCH CAPITAL APPRECIATION
PARTNERSHIP NO. XIII, L.P.
By: Merrill Lynch LBO Partners
No. IV, L.P., as General
Partner
By: Merrill Lynch Capital
Partners, Inc., as General
Partner
By: /s/ James V. Caruso
__________________________________
James V. Caruso
Vice President
ML OFFSHORE LBO PARTNERSHIP NO.
XIII
By: Merrill Lynch LBO Partners
No. IV, L.P., as Investment
General Partner
22
<PAGE>
By: Merrill Lynch Capital
Partners, Inc., as General
Partner
By: /s/ James V. Caruso
__________________________________
James V. Caruso
Vice President
ML EMPLOYEES LBO PARTNERSHIP NO. I,
L.P.
By: ML Employees LBO Managers,
Inc., as General Partner
By: /s/ James V. Caruso
__________________________________
James V. Caruso
Vice President
MERRILL LYNCH KECALP L.P. 1987
By: KECALP Inc., as General
Partner
By: /s/ James V. Caruso
__________________________________
James V. Caruso
Vice President
MERCHANT BANKING L.P. NO. II
By: Merrill Lynch MBP Inc., as
General Partner
By: /s/ James V. Caruso
__________________________________
James V. Caruso
Vice President
MLCP ASSOCIATES L.P. NO. IV
By: Merrill Lynch Capital
Partners, Inc., as General
Partner
By: /s/ James V. Caruso
__________________________________
James V. Caruso
Vice President
23
<PAGE>
THE EQUITABLE LIFE ASSURANCE
SOCIETY OF THE UNITED STATES
By: /s/ U. Peter C. Gummeson
__________________________________
U. Peter C. Gummeson
Investment Officer
EQUITABLE DEAL FLOW FUND, L.P.
By: EQUITABLE MANAGED ASSETS,
L.P., as General Partner
By: THE EQUITABLE LIFE ASSURANCE
SOCIETY OF THE UNITED STATES,
as General Partner
By: /s/ U. Peter C. Gummeson
__________________________________
U. Peter C. Gummeson
Investment Officer
EQUITABLE VARIABLE LIFE INSURANCE
COMPANY
By: /s/ U. Peter C. Gummeson
__________________________________
U. Peter C. Gummeson
Investment Officer
/s/ Frank H. Bevevino
_______________________________________
Frank H. Bevevino
24
Exhibit D
TAX AGREEMENT
This Tax Agreement (the "Agreement"), dated as of May 17,
1996, by and among Rykoff-Sexton, Inc., a Delaware corporation ("RSI"), and each
other Person listed on the signature pages hereof (each a "Shareholder" and,
collectively, the "Shareholders").
W I T N E S S E T H:
WHEREAS, RSI, USF Acquisition Corporation, a Delaware
corporation and a wholly owned subsidiary of RSI ("Merger Sub"), and US
Foodservice Inc., a Delaware corporation (the "Company"), have entered into an
Agreement and Plan of Merger, dated February 2, 1996 (the "Merger Agreement",
capitalized terms used but not defined herein having the same meanings ascribed
to such terms in the Merger Agreement), pursuant to which the Company shall
merge with and into Merger Sub;
WHEREAS, it is the intention of the parties to the Merger
Agreement that the Merger shall qualify as a reorganization within the meaning
of Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code");
WHEREAS, each Shareholder is the beneficial and record owner
of the number of shares of Class A Common Stock or Class B Common Stock set
forth opposite its respective name on Schedule I to this Agreement, all of which
will be converted into a number of RSI Common Shares in the Merger pursuant to
Section 4.1 of the Merger Agreement; and
WHEREAS, pursuant to Section 8.2(h) of the Merger Agreement,
it is a condition to the respective obligations of RSI and Merger Sub to
consummate the transactions contemplated by the Merger Agreement that RSI and
the Shareholders enter into this Agreement.
NOW THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements set forth herein, the parties hereto agree as
follows:
Section 1. Covenants of the Shareholders and RSI. (a) During
the two-year period commencing on the date hereof, each Shareholder agrees that
such Shareholder shall not, other than incident or pursuant to an Extraordinary
Transaction, (i) sell, exchange, distribute or otherwise dispose of in any
manner, or enter into one or more transactions whereby such Shareholder gives up
substantially all of the benefits and burdens of ownership in (all such actions
hereinafter collectively referred to as a "Transfer"), or (ii) enter into one or
more contracts or other agreements to Transfer, or that would
<PAGE>
by its or their terms require a Transfer of, a number of RSI Common Shares
received by such Shareholder in the Merger that exceeds in the aggregate (x) the
number of RSI Common Shares received by such Shareholder in the Merger
multiplied by (y) the Permitted Sales Factor. For purposes of this Agreement,
the "Permitted Sales Factor" shall be a number equal to 1.00 minus the
Continuity Factor, and the "Continuity Factor" shall be a fraction, the
numerator of which shall be the aggregate number of RSI Common Shares that must
continue to be owned by the stockholders of the Company to satisfy the
"continuity of interest" requirement of Treas. Reg. ss. 1.368-1(b) (the
"Continuity Shares Number"), and the denominator of which shall be the aggregate
number of RSI Common Shares issued in the Merger and held at the Effective Time
by the Shareholders and by stockholders of the Company who have executed and
delivered to RSI an instrument in the form of Exhibit B attached hereto. For
purposes of computing the Continuity Factor, the "Continuity Shares Number"
shall be determined by applying the formula set forth on Schedule II attached
hereto.
(b) For purposes of this Agreement, an Extraordinary
Transaction means a merger, consolidation or other business combination, tender
or exchange offer, share exchange, restructuring, recapitalization or other
similar transaction involving RSI so long as any such transaction is not
arranged as part of an overall plan to which such Shareholder is a party and
pursuant to which the Merger is also being consummated.
(c) As soon as practicable following the Effective Time, RSI
and Merrill Lynch Capital Partners, Inc., a Delaware corporation ("MLCP"), shall
mutually determine the Continuity Factor and thereafter RSI shall deliver to
each Shareholder a notice setting forth the total number of RSI Common Shares
that such Shareholder must hold during the two-year period commencing on the
date hereof in order to comply with the covenant of such Shareholder set forth
in Section 1(a) above (with respect to each Shareholder, the "Restricted Shares
Number"), and setting forth in reasonable detail the calculation thereof.
(d) Certificates evidencing the RSI Common Shares received by
each Shareholder in the Merger shall bear the following legend, in addition to
any other legend that may be required by the Merger Agreement, the ML Agreement,
the Standstill Agreement or any other agreement contemplated by any such
Agreements:
"The shares of common stock represented by this certificate
are subject to a Tax Agreement dated as of May 17, 1996, with
Rykoff-Sexton, Inc. that imposes, among other things, certain
restrictions on the transfer of such shares. Copies of the Tax
Agreement are on file at the principal office of
Rykoff-Sexton, Inc."
- 2 -
<PAGE>
(e) In the case of any Shareholder not subject to aggregation
treatment under Section 7 hereof, the legend referred to in Section 1(d) hereof
shall be placed only on certificates evidencing a number of RSI Common Shares
received by such Shareholder in the Merger equal to the Restricted Shares Number
determined with respect to such Shareholder.
(f) Each Shareholder hereby consents to the entry of stop
transfer orders with RSI's transfer agents with respect to RSI Common Shares
prohibiting the Transfer of any certificates representing RSI Common Shares that
bear the legend referred to in Section 1(d) hereof, except for Transfers that
are made in compliance with the provisions of this Agreement.
(g) In the case of a Transfer of any certificates representing
RSI Common Shares and bearing the legend referred to in Section 1(d) hereof that
is made in compliance with the provisions of this Agreement, RSI shall instruct
its transfer agents with respect to RSI Common Shares to permit such Transfer
upon the presentation to any such transfer agent of the legended certificates
together with a certificate in the form of Exhibit A attached hereto, and RSI
shall remove such legend from the certificates being Transferred.
(h) RSI agrees that upon expiration of the two-year period
provided for in Section 1(a) hereof, RSI shall, upon the presentation to any of
its transfer agents of any certificates representing RSI Common Shares and
containing the legend referred to in Section 1(d) hereof, remove such legend
from the certificates.
Section 2. Tax Representations of the Shareholders. Each
Shareholder hereby represents and warrants to RSI that, as of the date hereof,
such Shareholder has no plan or intention to Transfer a number of RSI Common
Shares received by such Shareholder in the Merger that would exceed in the
aggregate (x) the number of RSI Common Shares received by such Shareholder in
the Merger multiplied by (y) the Permitted Sales Factor.
Section 3. Waiver of Claims. In the case solely of a
Shareholder that has not breached the covenant contained in Section 1(a) hereof
or any of its representations and warranties set forth in Section 6 hereof, RSI
and each other Shareholder (collectively the "Releasors") hereby waive and
release any and all claims, rights, causes of action, suits, whether known or
unknown, that as of the date hereof could have been, or in the future might be
asserted by or on behalf of any Releasor or any of its respective associates,
affiliates, parents, subsidiaries, present or former officers, directors,
employees, attorneys, financial advisors or other advisors or agents, heirs,
executors, personal representatives, estates, administrators, and successors and
assigns against such Shareholder under this Agreement or otherwise resulting
from or relating to the failure of the Merger
- 3 -
<PAGE>
to qualify as a reorganization within the meaning of Section
368(a) of the Code.
Section 4. Reliance. Each Shareholder understands and agrees
that the representations and warranties made by the Shareholder in Section 2
hereof will be relied upon by Morgan, Lewis & Bockius LLP, Shearman & Sterling,
and Jones, Day, Reavis & Pogue, respectively, in connection with their opinions
to be delivered pursuant to Section 8.1(h) and Section 8.1(i) of the Merger
Agreement with respect to the treatment of the Merger for federal income tax
purposes as a tax-free reorganization within the meaning of Section 368(a) of
the Code.
Section 5. Representations and Warranties of RSI. RSI
represents and warrants to each of the Shareholders as follows:
This Agreement has been approved by the Board of Directors of
RSI, and has been duly executed and delivered by a duly
authorized officer of RSI. This Agreement constitutes a valid
and binding agreement of RSI, enforceable against RSI in
accordance with its terms, except as may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium and other
similar laws of general application which may affect the
enforcement of creditors' rights generally and by general
equitable principles. The execution and delivery of this
Agreement by RSI does not conflict with or constitute a violation
of or default under the Restated Certificate of Incorporation or
By-laws of RSI, any statute, law, rule, regulation, order or
decree applicable to RSI, or any contract, commitment, agreement,
arrangement or restriction of any kind to which RSI is a party or
by which RSI is bound, other than such violations as would not
prevent or materially delay the performance by RSI of its
obligations hereunder or otherwise subject any Shareholder to any
claim or liability.
Section 6. Representations and Warranties of the Shareholder.
Each Shareholder represents and warrants to RSI as follows: This Agreement has
been duly authorized, executed and delivered by such Shareholder. This Agreement
constitutes the valid and binding agreement of such Shareholder, enforceable
against such Shareholder in accordance with its terms, except as may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium and other
similar laws of general application which may affect the enforcement of
creditors' rights generally and by general equitable principles. Except as
disclosed on Schedule III attached hereto, immediately prior to the Effective
Time, such Shareholder is the record and beneficial owner, under U.S. federal
income tax principles, of the number of shares of Class A Common Stock or Class
B Common Stock set forth opposite its respective name on Schedule I to this
Agreement, in each case free and clear of all claims, liens, pledges, security
interests, restrictions or encumbrances of any nature whatsoever, with no
restrictions on voting rights and other incidents of record and beneficial
ownership incident thereto, other than the
- 4 -
<PAGE>
Stockholders Agreement. The execution and delivery of this Agreement by such
Shareholder does not conflict with or constitute a violation of or default under
the certificate of incorporation, by-laws, partnership agreement or certificate
of partnership (or other comparable documents) of such Shareholder, any
provisions of any statute, law, rule, regulation, order or decree applicable to
such Shareholder, or any contract, commitment, agreement, arrangement or
restriction of any kind to which such Shareholder is a party or by which such
Shareholder is bound, other than such violations as would not prevent or
materially delay the performance by such Shareholder of its obligations
hereunder or subject RSI to any claim or liability.
Section 7. Aggregation of Shareholders. For purposes of
Sections 1 and 2 hereof, the RSI Common Shares held by any Shareholder of which
MLCP or an Affiliate of MLCP is a general partner, or which is controlled by
MLCP or an Affiliate of MLCP, shall be aggregated, and such Shareholders shall
be regarded as a single Shareholder.
Section 8. Distribution by Equitable Deal Flow Fund, L.P. If
the Equitable Deal Flow Fund, L.P. ("Equitable L.P.") becomes required by the
terms of its partnership agreement to distribute to its partners a number of RSI
Common Shares received by it in the Merger in a Transfer that would otherwise be
in violation of Section 1(a) hereof, Equitable L.P. shall be permitted to effect
such distribution provided that (i) the shares of RSI Common Stock so
distributed to its partners are distributed in accordance with the partners'
respective interests in Equitable L.P., (ii) each of such partners shall have
executed and delivered to RSI in advance of such distribution a document
evidencing such partner's agreement to be bound by and to comply with all of the
terms and provisions of Section 1 hereof, which document shall be satisfactory
in form and substance to RSI in its reasonable discretion, and (iii) at the
written request of each such partner, which request shall specify the total
number of RSI Common Shares to be distributed to such partner and such partner's
pro rata share of the Restricted Shares Number determined with respect to
Equitable L.P., RSI shall cause two stock certificates to be issued to each such
partner representing such RSI Common Shares to be so distributed to such
partner, one of which shall evidence a number of RSI Common Shares equal to such
partner's pro rata share of the Restricted Shares Number determined with respect
to Equitable L.P. and which shall bear the legend referred to in Section 1(d)
hereof, and one of which shall evidence the balance of the RSI Common Shares to
be distributed to such partner and which shall not bear the legend referred to
in Section 1(d) hereof.
Section 9. Miscellaneous.
(a) Notices, Etc. All notices, requests, demands or
other communications required by or otherwise with respect to
- 5 -
<PAGE>
this Agreement shall be in writing and shall be deemed to have been duly given
to any party when delivered personally (by courier service or otherwise), when
delivered by telecopy and confirmed by return telecopy, or seven days after
being mailed by first-class mail, postage prepaid in each case to the applicable
addresses set forth below:
If to a Shareholder that is one of the ML Entities:
Merrill Lynch Capital Partners, Inc.
225 Liberty Street
New York, NY 10080-6123
Attn: James V. Caruso
Telecopy: (212) 236-7364
with a copy to:
Marcia L. Tu, Esq.
Merrill Lynch & Co., Inc.
World Financial Center
North Tower
250 Vesey Street
New York, NY 10281-1323
Telecopy: (212) 449-3207
with a copy to:
Bonnie Greaves, Esq.
Shearman & Sterling
599 Lexington Avenue
New York, NY 10022
Telecopy: (212) 848-7179
If to RSI:
Rykoff-Sexton, Inc.
1050 Warrenville Road
Lisle, IL 60532-5201
Attn: Mark Van Stekelenburg, Chairman,
President and Chief Executive Officer
Telecopy: (708) 971-6588
with a copy to:
Elizabeth C. Kitslaar, Esq.
Jones, Day, Reavis & Pogue
77 West Wacker
Chicago, IL 60601-1692
Telecopy: (312) 782-8585
and if to a Shareholder that is not one of the ML Entities, to
the address set forth below the name of such Shareholder on the
- 6 -
<PAGE>
signature pages to this Agreement, or to such other address as any such party
shall have designated by notice so given to each other party.
(b) Amendments, Waivers, Etc. This Agreement may not
be amended, changed, supplemented, waived or otherwise modified
or terminated except by an instrument in writing signed by each
of the parties hereto.
(c) Successors and Assigns. This Agreement shall be binding
upon and shall inure to the benefit of and be enforceable by the parties and
their respective successors and assigns, including without limitation in the
case of any corporate party hereto any corporate successor by merger or
otherwise. Except with the prior written consent of the other parties hereto, no
party may assign any of its rights or obligations hereunder.
(d) Entire Agreement. This Agreement constitutes the entire
agreement and understanding among the parties relating to the subject matter
hereof and supersedes all prior agreements and understandings relating to such
subject matter. There are no representations, warranties or covenants by the
parties hereto relating to such subject matter other than those expressly set
forth in this Agreement.
(e) Severability. If any term of this Agreement or the
application thereof to any party or circumstance shall be held invalid or
unenforceable to any extent, the remainder of this Agreement and the application
of such term to the other parties or circumstances shall not be affected thereby
and shall be enforced to the greatest extent permitted by applicable law,
provided that in such event the parties shall negotiate in good faith in an
attempt to agree to another provision (in lieu of the term or application held
to be invalid or unenforceable) that will be valid and enforceable and will
carry out the parties' intentions hereunder.
(f) Specific Performance. The parties acknowledge that money
damages are not an adequate remedy for violations of this Agreement and that any
party may, in its sole discretion, apply to a court of competent jurisdiction
for specific performance or injunctive or such other relief as such court may
deem just and proper in order to enforce this Agreement or prevent any violation
hereof and, to the extent permitted by applicable law, each party waives any
objection to the imposition of such relief.
(g) Remedies Cumulative. All rights, powers and remedies
provided under this Agreement or otherwise available in respect hereof at law or
in equity shall be cumulative and not alternative, and the exercise or beginning
of the exercise of any thereof by any party shall not preclude the simultaneous
or later exercise of any other such right, power or remedy by such party.
- 7 -
<PAGE>
(h) No Waiver. The failure of any party hereto to exercise any
right, power or remedy provided under this Agreement or otherwise available in
respect hereof at law or in equity, or to insist upon compliance by any other
party hereto with its obligations hereunder, and any custom or practice of the
parties at variance with the terms hereof, shall not constitute a waiver by such
party of its right to exercise any such or other right, power or remedy or to
demand such compliance.
(i) No Third Party Beneficiaries. Except as provided
in Section 4 hereof, this Agreement is not intended to be for the
benefit of and shall not be enforceable by any person or entity
who or which is not a party hereto.
(j) Jurisdiction. Each party hereby irrevocably submits to the
exclusive jurisdiction of the Court of Chancery in the State of Delaware in any
action, suit or proceeding arising in connection with this Agreement, and agrees
that any such action, suit or proceeding shall be brought only in such court
(and waives any objection based on forum non conveniens or any other objection
to venue therein); provided, however, that such consent to jurisdiction is
solely for the purpose referred to in this paragraph (j) and shall not be deemed
to be a general submission to the jurisdiction of said Court or in the State of
Delaware other than for such purposes. Each party hereto hereby waives any right
to a trial by jury in connection with any such action, suit or proceeding.
(k) Governing Law. This Agreement and all disputes
hereunder shall be governed by and construed and enforced in
accordance with the law of the State of Delaware.
(l) Name, Captions. The name assigned to this
Agreement and the section captions used herein are for
convenience of reference only and shall not affect the
interpretation or construction hereof.
(m) Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original, but all of
which together shall constitute one instrument. Each counterpart may consist of
a number of copies each signed by less than all, but together signed by all, the
parties hereto.
(n) Expenses. Each of the parties hereto shall bear its own
expenses incurred in connection with this Agreement and the transactions
contemplated hereby, except that in the event of a dispute concerning the terms
or enforcement of this Agreement, the prevailing party in any such dispute shall
be entitled to reimbursement of reasonable legal fees and disbursements from the
other party or parties to such dispute.
- 8 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first written.
RYKOFF-SEXTON, INC.
By: /s/ Mark Van Stekelenburg
-----------------------------
Name: Mark Van Stekelenburg
Title: Chairman, President and
Chief Executive Officer
[Counterpart Signature Pages To Follow]
- 9 -
<PAGE>
[Counterpart Signature Page To Tax Agreement]
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first written.
MERRILL LYNCH CAPITAL APPRECIATION
PARTNERSHIP NO. B-XVIII, L.P.
By: Merrill Lynch LBO Partners
No. B-IV, L.P., as General
Partner
By: Merrill Lynch Capital
Partners,Inc., as General
Partner
By: /s/ James V. Caruso
--------------------------------
Name: James V. Caruso
Title: Vice President
Address:
<PAGE>
[Counterpart Signature Page To Tax Agreement]
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first written.
MERRILL LYNCH KECALP L.P. 1994
By: KECALP Inc., as General
Partner
By: /s/ James V. Caruso
--------------------------------
Name: James V. Caruso
Title: Vice President
Address:
<PAGE>
[Counterpart Signature Page To Tax Agreement]
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first written.
ML OFFSHORE LBO PARTNERSHIP
NO. B-XVIII
By: Merrill Lynch LBO Partners No.
B-IV, L.P., as Investment
General Partner
By: Merrill Lynch Capital
Partners, Inc., as General
Partner
By: /s/ James V. Caruso
--------------------------------
Name: James V. Caruso
Title: Vice President
Address:
<PAGE>
[Counterpart Signature Page To Tax Agreement]
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first written.
ML IBK POSITIONS, INC.
By: /s/ James V. Caruso
--------------------------------
Name: James V. Caruso
Title: Vice President
Address:
<PAGE>
[Counterpart Signature Page To Tax Agreement]
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first written.
MLCP ASSOCIATES L.P. NO. II
By: Merrill Lynch Capital
Partners, Inc., as General
Partner
By: /s/ James V. Caruso
--------------------------------
Name: James V. Caruso
Title: Vice President
Address:
<PAGE>
[Counterpart Signature Page To Tax Agreement]
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first written.
MERRILL LYNCH KECALP L.P. 1991
By: KECALP Inc., as General
Partner
By: /s/ James V. Caruso
--------------------------------
Name: James V. Caruso
Title: Vice President
Address:
<PAGE>
[Counterpart Signature Page To Tax Agreement]
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first written.
MERRILL LYNCH CAPITAL APPRECIATION
PARTNERSHIP NO. XIII, L.P.
By: Merrill Lynch LBO Partners
No. IV, L.P., as General
Partner
By: Merrill Lynch Capital
Partners, Inc., as General
Partner
By: /s/ James V. Caruso
--------------------------------
Name: James V. Caruso
Title: Vice President
Address:
<PAGE>
[Counterpart Signature Page To Tax Agreement]
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first written.
ML OFFSHORE LBO PARTNERSHIP NO.
XIII
By: Merrill Lynch LBO Partners No.
IV, L.P., as Investment
General Partner
By: Merrill Lynch Capital
Partners, Inc., as General
Partner
By: /s/ James V. Caruso
--------------------------------
Name: James V. Caruso
Title: Vice President
Address:
<PAGE>
[Counterpart Signature Page To Tax Agreement]
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first written.
ML EMPLOYEES LBO PARTNERSHIP NO. I,
L.P.
By: ML Employees LBO Managers,
Inc., as General Partner
By: /s/ James V. Caruso
--------------------------------
Name: James V. Caruso
Title: Vice President
Address:
<PAGE>
[Counterpart Signature Page To Tax Agreement]
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first written.
MERRILL LYNCH KECALP L.P. 1987
By: KECALP Inc., as General
Partner
By: /s/ James V. Caruso
--------------------------------
Name: James V. Caruso
Title: Vice President
Address:
<PAGE>
[Counterpart Signature Page To Tax Agreement]
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first written.
MERCHANT BANKING L.P. NO. II
By: Merrill Lynch MBP Inc., as
General Partner
By: /s/ James V. Caruso
--------------------------------
Name: James V. Caruso
Title: Vice President
Address:
<PAGE>
[Counterpart Signature Page To Tax Agreement]
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first written.
MLCP ASSOCIATES L.P. NO. IV
By: Merrill Lynch Capital
Partners, Inc., as General
Partner
By: /s/ James V. Caruso
--------------------------------
Name: James V. Caruso
Title: Vice President
Address:
<PAGE>
[Counterpart Signature Page To Tax Agreement]
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first written.
EQUITABLE DEAL FUND FLOW, L.P.
By: /s/ U. Peter C. Gummeson
--------------------------------
Name: U. Peter C. Gummeson
Title: Investment Officer
Address:
<PAGE>
[Counterpart Signature Page To Tax Agreement]
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first written.
EQUITABLE LIFE ASSURANCE SOCIETY OF
THE UNITED STATES
By: /s/ U. Peter C. Gummeson
--------------------------------
Name: U. Peter C. Gummeson
Title: Investment Officer
Address:
<PAGE>
[Counterpart Signature Page To Tax Agreement]
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first written.
EQUITABLE VARIABLE LIFE INSURANCE
COMPANY
By: /s/ U. Peter C. Gummeson
--------------------------------
Name: U. Peter C. Gummeson
Title: Investment Officer
Address:
<PAGE>
[Counterpart Signature Page To Tax Agreement]
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first written.
FRANK H. BEVEVINO
By: /s/ Frank H. Bevevino
-------------------------------
Name: Frank H. Bevevino
Address:
<PAGE>
[Counterpart Signature Page To Tax Agreement]
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first written.
THOMAS G. MCMULLEN
By: /s/ Thomas G. McMullen
-------------------------------
Name: Thomas G. McMullen
Address:
<PAGE>
[Counterpart Signature Page To Tax Agreement]
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first written.
JOHN R. BEVEVINO
By: /s/ John R. Bevevino
-------------------------------
Name: John R. Bevevino
Address:
<PAGE>
[Counterpart Signature Page To Tax Agreement]
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first written.
THOMAS BEVEVINO
By: /s/ Thomas Bevevino
-------------------------------
Name: Thomas Bevevino
Address:
<PAGE>
[Counterpart Signature Page To Tax Agreement]
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first written.
KENNETH B. KOZEL
By: /s/ Kenneth B. Kozel
-------------------------------
Name: Kenneth B. Kozel
Address:
<PAGE>
[Counterpart Signature Page To Tax Agreement]
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first written.
MARGARET CRAMPTON
By: /s/ Margaret Crampton
-------------------------------
Name: Margaret Crampton
Address:
<PAGE>
[Counterpart Signature Page To Tax Agreement]
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first written.
WILLIAM WALTRIP
By: /s/ William Waltrip
-------------------------------
Name: William Waltrip
Title:
Address:
<PAGE>
SCHEDULE I
SHARE OWNERSHIP
Class A Class B
Name of Stockholder Common Stock Common Stock
------------------- ------------ ------------
Merrill Lynch Capital 2,990,738.3220 0
Appreciation Partnership
No. B-XVIII, L.P.
Merrill Lynch KECALP L.P. 46,588.2120 0
1994
ML Offshore LBO Partnership 1,504,723.9680 0
No. B-XVIII
ML IBK Positions, Inc. 988,456.6839 0
MLCP Associates L.P. No. II 35,866.7100 0
Merrill Lynch KECALP L.P. 130,263.0120 0
1991
Merrill Lynch Capital 1,111,944.8955 0
Appreciation Partnership
No. XIII, L.P.
ML Offshore LBO Partnership 28,269.6001 0
No. XIII
ML Employees LBO 27,641.6784 0
Partnership No. I, L.P.
Merrill Lynch KECALP L.P. 20,888.4216 0
1987
Merchant Banking L.P. No. 20,888.4216 0
II
MLCP Associates L.P. No. IV 9,317.4840 0
Equitable Deal Fund Flow, 0 410,603.1230
L.P.
Equitable Life Assurance 0 369,543.1759
Society of the United
States
Equitable Variable Life 0 41,059.9477
Insurance Company
Frank H. Bevevino 276,787.9620 0
Thomas G. McMullen 125,067.9870 0
<PAGE>
Class A Class B
Name of Stockholder Common Stock Common Stock
------------------- ------------ ------------
John R. Bevevino 87,623.3160 0
Thomas Bevevino 82,504.8180 0
Kenneth B. Kozel 46,100.3400 0
Margaret Crampton 45,934.8120 0
William Waltrip 41,991.4440 0
<PAGE>
SCHEDULE II
CONTINUITY SHARES NUMBER =
.40[(A x E) + (B x E) + (C x E) + (D x E) + F]
------------------------------------------------
Y
Where A = the total number of Shares converted into RSI
Common Shares in the Merger (excluding fractional RSI
Common Shares) and held by Shareholders* at the
Effective Time;
B = the total number of Shares converted into
RSI Common Shares in the Merger (excluding
fractional RSI Common Shares) and held by
persons that were stockholders of the
Company immediately prior to the Merger that
are not Shareholders at the Effective Time;
C = the total number of Dissenting Shares;
D = the total number of Shares that would be
issued upon the deemed exercise of all
Options granted by the Company under the US
Foodservice Inc. 1992 Stock Option Plan
(Effective September 4, 1992; As Amended
September 23, 1993) that have an adjusted
exercise price of either $.02 per share or
$2.00 per share and that have not been
exercised as of the Effective Time (the
"Deemed Exercised Options");
E = the fair market value of a Share at the
Effective Time determined as follows:
E = Y x the Exchange Ratio; and
- --------
* At the option of MLCP, certain stockholders owning
fewer than 25,000 shares of Class A Common Stock
immediately prior to the Effective Time may be asked to
make only the representations and warranties contained
in Section 2 of this Agreement pursuant to an
instrument in the form of Exhibit B attached to this
Agreement.
<PAGE>
F = the total amount paid as consideration to redeem
the Preferred Stock pursuant to the Preferred Stock
Redemption Agreements (other than the Preferred Stock
Redemption Agreement between RSI and Bankamerica
Capital Corporation) and the total cash consideration
paid in lieu of fractional RSI Common Shares;
Y = the fair market value of an RSI Common
Share at the Effective Time, which shall be
deemed to be equal to the mean between the
high and low trading prices on the NYSE of
one RSI Common Share on the Closing Date, as
reported in the New York Stock Exchange
Composite Tape.
<PAGE>
SCHEDULE III
ENCUMBRANCES
Name of Stockholder Description
- ------------------- -----------
Kenneth B. Kozel
Mr. Kozel has pledged 31,185 shares of Class
A Common Stock, to secure repayment of a
loan made by Sara Lee Corporation to Mr.
Kozel in 1988 in the outstanding principal
amount of $168,000.
<PAGE>
EXHIBIT A
TO: Chemical Mellon Shareholder Services, L.L.C.
Please refer to the Tax Agreement, dated May 17, 1996, among
Rykoff-Sexton, Inc., a Delaware corporation ("RSI"), and each other person
listed on the signature pages thereof (the "Agreement"), that imposes, among
other things, certain restrictions on the transfer of shares of Common Stock,
par value $.10 per share, of RSI ("RSI Common Shares") received by the
undersigned in the merger of US Foodservice Inc. with and into USF Acquisition
Corporation, a Delaware corporation and a wholly owned subsidiary of RSI. The
undersigned hereby certifies that the RSI Common Shares represented by the
certificate attached hereto are being transferred in compliance with the
provisions of the Agreement.
Dated: ______________________
[NAME OF TRANSFERRING SHAREHOLDER]
By: _________________________________________
[Authorized Signature]
<PAGE>
EXHIBIT B
[Effective Time], 1996
Rykoff-Sexton, Inc.
1050 Warrenville Road
Lisle, Illinois 60532-5201
Re: Agreement and Plan of Merger among Rykoff-Sexton,
Inc., USF Acquisition Corporation and US
Foodservice, Inc. Dated February 2, 1996
Dear Sirs:
This letter is furnished to you in connection with the planned
merger (the "Merger") of US Foodservice Inc., a Delaware corporation (the
"Company"), with and into USF Acquisition Corporation, a Delaware corporation
("Merger Sub") and a wholly owned subsidiary of Rykoff-Sexton, Inc. ("RSI"),
pursuant to an Agreement and Plan of Merger, dated February 2, 1996, among RSI,
Merger Sub and the Company (the "Merger Agreement").
The following representations are provided to you for your
benefit to induce you to consummate the Merger. The undersigned understands and
agrees that such representations will be relied upon by Morgan, Lewis & Bockius
LLP, Shearman & Sterling, and Jones, Day, Reavis & Pogue, respectively, in
connection with their opinions to be delivered pursuant to Sections 8.1(h) and
8.1(i) of the Merger Agreement with respect to the treatment of the Merger for
federal income tax purposes as a tax-free reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as amended. Capitalized
terms used but not defined herein shall have the same meanings given to such
terms in the Merger Agreement.
1. The undersigned is the record and beneficial owner,
under U.S. federal income tax principles, of ______
shares of Class A Common Stock, all of which will be
converted into a number of RSI Common Shares in the
Merger pursuant to Section 4.1 of the Merger
Agreement.
2. The undersigned has no plan or intention to sell,
exchange, distribute or otherwise dispose of in
<PAGE>
any manner, or enter into one or more transactions whereby
the undersigned gives up substantially all of the benefits
and burdens of ownership in, a number of RSI Common Shares
received by the undersigned in the Merger that would
exceed in the aggregate (x) the number of RSI Common
Shares received by the undersigned in the Merger
multiplied by (y) the Permitted Sales Factor. For purposes
of this representation, the "Permitted Sales Factor" shall
be a number equal to 1.00 minus the Continuity Factor, and
the "Continuity Factor" shall be a fraction, the numerator
of which shall be the aggregate number of RSI Common
Shares that must continue to be owned by the stockholders
of the Company to satisfy the "continuity of interest"
requirement of Treas. Reg. ss. 1.368-1(b) (the "Continuity
Shares Number"), and the denominator of which shall be the
aggregate number of RSI Common Shares issued in the Merger
and held at the Effective Time by the Shareholders and by
stockholders of the Company that have executed and
delivered to RSI an instrument in the form of this Exhibit
B. For purposes of computing the Continuity Factor, the
"Continuity Shares Number" shall be determined by applying
the formula set forth on Schedule I** attached hereto.
Very truly yours,
------------------------------
(Print Name of Stockholder)
By:___________________________
(Authorized Signature)
- --------
** Schedule I to Exhibit B will be identical to
Schedule II to the Agreement.
Exhibit E
JOINT FILING AGREEMENT
The undersigned hereby agree that the Statement on Schedule 13D, dated
as of May 28, 1996 (the "Schedule 13D"), with respect to the common stock, par
value $.01 per share, of Rykoff-Sexton, Inc. is, and any amendments thereto
shall be, filed on behalf of each of us pursuant to and in accordance with the
provisions of Rule 13d-1(f)(1) under the Securities and Exchange Act of 1934, as
amended, and that this Agreement shall be included as an Exhibit to the Schedule
13D and each such amendment. Each of the undersigned agrees to be responsible
for the timely filing of the Schedule 13D and any amendments thereto, and for
the completeness and accuracy of the information concerning itself contained
therein. Each of the undersigned further agrees that Merrill Lynch Capital
Partners, Inc. may file the Schedule 13D, and any and all amendments thereto, on
its behalf. This Agreement may be executed in any number of counterparts, all of
which when taken together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
this 28th day of May, 1996.
MERRILL LYNCH & CO., INC.
By /s/ Marcia L. Tu
----------------------------
Name: Marcia L. Tu
Title: Attorney-in-fact
MERRILL LYNCH GROUP, INC.
By /s/ Marcia L. Tu
----------------------------
Name: Marcia L. Tu
Title: Attorney-in-fact
MERRILL LYNCH MBP INC.
By /s/ James V. Caruso
----------------------------
Name: James V. Caruso
Title: Vice President
<PAGE>
MERCHANT BANKING L.P. NO. II
By: Merrill Lynch MBP Inc., as
General Partner
By /s/ James V. Caruso
----------------------------
Name: James V. Caruso
Title: Vice President
MERRILL LYNCH CAPITAL
PARTNERS, INC.
By /s/ James V. Caruso
----------------------------
Name: James V. Caruso
Title: Vice President
ML EMPLOYEES LBO
MANAGERS, INC.
By /s/ James V. Caruso
----------------------------
Name: James V. Caruso
Title: Vice President
ML EMPLOYEES LBO
PARTNERSHIP NO. I, L.P.
By: ML Employees LBO Managers, Inc.
as General Partner
By /s/ James V. Caruso
----------------------------
Name: James V. Caruso
Title: Vice President
MERRILL LYNCH LBO
PARTNERS NO. IV, L.P.
By: Merrill Lynch Capital Partners, Inc.,
as General Partner
By /s/ James V. Caruso
----------------------------
Name: James V. Caruso
Title: Vice President
<PAGE>
MERRILL LYNCH CAPITAL
APPRECIATION PARTNERSHIP
NO. XIII, L.P.
By: Merrill Lynch LBO Partners
No. IV, L.P., as General Partner
By: Merrill Lynch Capital Partners, Inc.,
as General Partner
By /s/ James V. Caruso
----------------------------
Name: James V. Caruso
Title: Vice President
ML OFFSHORE LBO
PARTNERSHIP NO. XIII
By: Merrill Lynch LBO Partners
No. IV, L.P., as General Partner
By: Merrill Lynch Capital Partners, Inc.,
as General Partner
By /s/ James V. Caruso
----------------------------
Name: James V. Caruso
Title: Vice President
MERRILL LYNCH LBO
PARTNERS NO. B-IV, L.P.
By: Merrill Lynch Capital Partners, Inc.,
as General Partner
By /s/ James V. Caruso
----------------------------
Name: James V. Caruso
Title: Vice President
<PAGE>
MERRILL LYNCH CAPITAL
APPRECIATION PARTNERSHIP
NO. B-XVIII, L.P.
By: Merrill Lynch LBO Partners
No. B-IV, L.P., as General Partner
By: Merrill Lynch Capital Partners, Inc.,
as General Partner
By /s/ James V. Caruso
----------------------------
Name: James V. Caruso
Title: Vice President
ML OFFSHORE LBO
PARTNERSHIP NO. B-XVIII
By: Merrill Lynch LBO Partners
No. B-IV, L.P., as General Partner
By: Merrill Lynch Capital Partners, Inc.,
as General Partner
By /s/ James V. Caruso
----------------------------
Name: James V. Caruso
Title: Vice President
MLCP ASSOCIATES L.P. NO. II
By: Merrill Lynch Capital Partners, Inc.,
as General Partner
By /s/ James V. Caruso
----------------------------
Name: James V. Caruso
Title: Vice President
MLCP ASSOCIATES L.P. NO. IV
By: Merrill Lynch Capital Partners, Inc.,
as General Partner
By /s/ James V. Caruso
----------------------------
Name: James V. Caruso
Title: Vice President
<PAGE>
ML IBK POSITIONS, INC.
By /s/ James V. Caruso
----------------------------
Name: James V. Caruso
Title: Vice President
KECALP, INC.
By /s/ James V. Caruso
----------------------------
Name: James V. Caruso
Title: Vice President
MERRILL LYNCH KECALP L.P. 1987
By: KECALP, Inc., as General Partner
By /s/ James V. Caruso
----------------------------
Name: James V. Caruso
Title: Vice President
MERRILL LYNCH KECALP L.P. 1991
By: KECALP, Inc., as General Partner
By /s/ James V. Caruso
----------------------------
Name: James V. Caruso
Title: Vice President
MERRILL LYNCH KECALP L.P. 1994
By: KECALP, Inc., as General Partner
By /s/ James V. Caruso
----------------------------
Name: James V. Caruso
Title: Vice President
POWER OF ATTORNEY
To Prepare and Execute Documents Pursuant to Sections 13 and 16
of the Securities Exchange Act of 1934, as Amended,
and Rules Thereunder, by and on Behalf of
MERRILL LYNCH & CO., INC.
Know all by these presents, that the undersigned hereby constitutes and
appoints Marcia L. Tu its true and lawful attorney-in-fact to:
(1) to prepare and execute, for and on behalf of the undersigned, any
and all forms, schedules, reports and other documents relating to Merrill Lynch
& Co., Inc.'s direct or indirect ownership of securities that are required to be
filed with the United States Securities and Exchange Commission pursuant to
Section 13 and 16 of the Securities Exchange Act of 1934, as amended, and the
rules thereunder (collectively, the "Exchange Act");
(2) do and perform any and all acts for and on behalf of the
undersigned which may be necessary or desirable to comply with the requirements
of Sections 13 and 16 of the Exchange Act including, but not limited to,
executing documents required by said sections of the Exchange Act and effecting
the timely filing thereof with the United States Securities and Exchange
Commission and any other authority; and
(3) take any other action of any type whatsoever in connection with the
foregoing which, in the opinion of such attorney-in-fact, may be of benefit to,
in the best interest of, or legally required by, the undersigned, it being
understood that the documents executed by such attorney-in-fact on behalf of the
undersigned pursuant to this Power of Attorney shall be in such form and shall
contain such terms and conditions as such attorney-in-fact may approve in his
discretion.
The undersigned hereby grants to such attorney-in-fact full power and
authority to do and perform all and every act and thing whatsoever requisite,
necessary and proper to be done in the exercise of any of the rights and powers
herein granted, as fully to all intents and purposes as such attorney-in-fact
might or could do if personally present, hereby ratifying and conforming all
that such attorney-in-fact shall lawfully do or cause to be done by virtue of
this power of attorney and the rights and powers herein granted. The undersigned
acknowledges that the foregoing attorney-in-fact, in serving in such capacity at
the request of the undersigned, is not assuming any of the undersigned's
responsibilities to comply with Sections 13 or 16 of the Exchange Act.
IN WITNESS WHEREOF, the undersigned has caused this Power of Attorney
to be executed as of this 30th day of November 1994.
Merrill Lynch & Co., Inc.
By: /s/ Barry S. Friedberg
-----------------------------
Barry S. Friedberg
Executive Vice President
<PAGE>
POWER OF ATTORNEY
To Prepare and ExecuteDocuments Pursuant to Sections 13 and 16
of the Securities Exchange Act of 1934, as Amended,
and Rules Thereunder, by and on Behalf of
MERRILL LYNCH GROUP, INC.
Know all by these presents, that the undersigned hereby constitutes and
appoints Marcia L. Tu its true and lawful attorney-in-fact to:
(1) to prepare and execute, for and on behalf of the undersigned, any
and all forms, schedules, reports and other documents relating to Merrill Lynch
Group, Inc.'s direct or indirect ownership of securities that are required to be
filed with the United States Securities and Exchange Commission pursuant to
Section 13 and 16 of the Securities Exchange Act of 1934, as amended, and the
rules thereunder (collectively, the "Exchange Act");
(2) do and perform any and all acts for and on behalf of the
undersigned which may be necessary or desirable to comply with the requirements
of Sections 13 and 16 of the Exchange Act including, but not limited to,
executing documents required by said sections of the Exchange Act and effecting
the timely filing thereof with the United States Securities and Exchange
Commission and any other authority; and
(3) take any other action of any type whatsoever in connection with the
foregoing which, in the opinion of such attorney-in-fact, may be of benefit to,
in the best interest of, or legally required by, the undersigned, it being
understood that the documents executed by such attorney-in-fact on behalf of the
undersigned pursuant to this Power of Attorney shall be in such form and shall
contain such terms and conditions as such attorney-in-fact may approve in his
discretion.
The undersigned hereby grants to such attorney-in-fact full power and
authority to do and perform all and every act and thing whatsoever requisite,
necessary and proper to be done in the exercise of any of the rights and powers
herein granted, as fully to all intents and purposes as such attorney-in-fact
might or could do if personally present, hereby ratifying and conforming all
that such attorney-in-fact shall lawfully do or cause to be done by virtue of
this power of attorney and the rights and powers herein granted. The undersigned
acknowledges that the foregoing attorney-in-fact, in serving in such capacity at
the request of the undersigned, is not assuming any of the undersigned's
responsibilities to comply with Sections 13 or 16 of the Exchange Act.
IN WITNESS WHEREOF, the undersigned has caused this Power of Attorney
to be executed as of this 1st day of December 1994.
Merrill Lynch Group, Inc.
By: /s/ Rosemary T. Berkery
-----------------------------
