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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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SCHEDULE 14D-9
(Amendment No. 2)
Solicitation/Recommendation Statement Pursuant to
Section 14(d)(4) of the Securities Exchange Act of 1934
SUPERMARKETS GENERAL HOLDINGS
CORPORATION
(Name of Subject Company)
----------------------------
SUPERMARKETS GENERAL HOLDINGS
CORPORATION
(Name of Person Filing Statement)
$3.52 Cumulative Exchangeable Redeemable Preferred Stock,
par value $.01 per share
(Title of Class of Securities)
868446204
(CUSIP Number of Class of Securities)
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Marc A. Strassler, Esq.
Senior Vice President, Secretary and General Counsel
Supermarkets General Holdings Corporation
200 Milik Street
Carteret, New Jersey 07008-1194
(732) 499-3000
(Name, Address and Telephone Number of Person authorized to
Receive Notices and Communications on Behalf of
the Person Filing Statement)
-----------------------------
With a copy to:
Spencer D. Klein, Esq.
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
212-848-4000
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<PAGE>
This Amendment No. 2 amends and supplements the
Solicitation/Recommendation Statement on Schedule 14D-9, dated March 15, 1999,
as amended by Amendment No. 1, dated March 26, 1999 (as amended, the "Schedule
14D-9") relating to a tender offer disclosed in the Tender Offer Statement on
Schedule 14D-1, dated March 15, 1999, as amended by Amendment No. 1, dated March
26, 1999 and Amendment No. 2, dated May 20, 1999 (as amended, the "Schedule
14D-1") filed by Koninklijke Ahold N.V., a company organized under the laws of
The Netherlands ("Parent"), Croesus, Inc., a Delaware corporation and an
indirect wholly owned subsidiary of Parent, Ahold U.S.A. Inc., a Delaware
corporation and an indirect wholly owned subsidiary of Parent, and Ahold
Acquisition, Inc., a Delaware corporation and an indirect wholly owned
subsidiary of Parent, to purchase all of the issued and outstanding shares of
$3.52 Cumulative Exchangeable Redeemable Preferred Stock, par value $.01 per
share (the "Preferred Stock"), of Supermarkets General Holdings Corporation, a
Delaware corporation (the "Company"), at a price of $38.25 per share, net to the
seller in cash, without interest thereon.
Capitalized terms used but not defined herein have the meanings ascribed
to such terms in the Schedule 14D-9.
Item 8. ADDITIONAL INFORMATION TO BE FURNISHED
Item 8 is hereby amended and supplemented to add the following:
Settlement of Litigation. As previously described in the Schedule 14D-9,
the Company, SMG-II, the Purchaser and the directors of the Company are
defendants (collectively, the "Defendants") in a purported stockholder class
action lawsuit entitled Wolfson v. Supermarkets General Holdings Corporation,
et al., C.A. No. 17047 (the "Action"), in which the plaintiff alleged, among
other things, that the defendant directors of the Company and SMG-II breached
their fiduciary duties to the holders of the Preferred Stock. The plaintiff, by
his counsel, has entered into a Memorandum of Understanding, dated May 19, 1999
(the "Memorandum of Understanding"), with the Defendants (by their counsel)
pursuant to which the parties have agreed to settle the Action. The proposed
settlement is subject to, among other things, the approval of the settlement by
the Court of Chancery of the State of Delaware (the "Court").
The Memorandum of Understanding provides for the following: (i) the
certification of the Action as a class action under the rules of the Court,
which class would consist of all holders of the Preferred Stock of the Company
from and including March 9, 1999 through and including the consummation of the
SMG-II Merger, or, if the SMG-II Merger fails to close, the Alternative Stock
Purchase (the "Class"); (ii) the complete and final compromise, settlement,
discharge and release of all claims, demands, rights, actions, causes of action,
liabilities, damages, losses, obligations, judgments, suits, matters and issues
of any kind or nature whatsoever, whether known or unknown, contingent or
absolute, suspected or unsuspected, disclosed or undisclosed, hidden or
concealed, matured or unmatured, arising under federal, state or any other law,
that have been, could have been, or in the future can or might be asserted in
the Action or in any court, tribunal or proceeding by or on behalf of any member
of the Class (the "Releasing
<PAGE>
2
Parties"), whether individual, class, derivative, representative, legal,
equitable or any other type or in any other capacity, against Defendants or any
of their families, parent entities, affiliates, subsidiaries, predecessors,
successors or assigns, and each and all of their respective past, present or
future officers, directors, associates, stockholders, controlling persons,
representatives, employees, attorneys, financial or investment advisors,
consultants, accountants, investment bankers, commercial bankers, engineers,
advisors, insurers or agents, heirs, executors, trustees, general or limited
partners or partnerships, personal representatives, estates or administrators,
predecessors, successors and assigns (collectively, the "Released Persons"),
which have arisen, could have arisen, or will arise out of, or which are related
in any manner to, the allegations, facts, events, transactions, acts,
occurrences, statements, representations, misrepresentations, omissions or any
other matter, set forth or otherwise related, directly or indirectly, to the
complaint filed in the Action, the SMG-II Merger, the Alternative Stock
Purchase, public filings or statements by Defendants or their representatives in
connection with the SMG-II Merger or the Alternative Stock Purchase, or any
other actions of the Defendants relating in any way to the SMG-II Merger or the
Alternative Stock Purchase (collectively, the "Settled Claims") (subject to
certain limited exceptions); (iii) the Defendants have denied, and continue to
deny, that they have committed or attempted to commit any violation of law or
breaches of duty of any kind; and (iv) the Defendants are entering into the
Memorandum of Understanding and will be entering into the proposed settlement
documentation solely because the proposed settlement would eliminate the burden,
risk and expense of further litigation and is in the best interests of the
Company and all of its stockholders. In addition, the Company has agreed to
amend the Schedule 14D-9 to provide certain supplemental information.
In addition, the parties have agreed in the Memorandum of Understanding
that plaintiff's counsel in the Action will apply to the Court for a total award
of attorneys' fees and expenses in an amount not to exceed $1,956,268.40, or
$0.40 per share of Preferred Stock, which Defendants have agreed not to oppose,
provided, however, such amount shall be payable only after Final Court Approval
(as defined below), and only if the Offer at the New Offer Price (as defined
below) closes. In the event the Offer at the New Offer Price does not close, but
the Alternative Stock Purchase does, pursuant to the terms of the Memorandum of
Understanding, the Released Persons shall continue to enjoy all of the benefits
of the settlement and plaintiff's counsel reserves their right to petition the
Court for an award of attorneys' fees and expenses, and the Defendants reserve
their rights to oppose any such petition.
Pursuant to the terms of the Memorandum of Understanding, the Defendants
have agreed, subject to Final Court Approval, that the Purchaser shall increase
the Offer Price to $40.25 per share of Preferred Stock, less the total amount
awarded as fees and expenses to plaintiff's counsel by the Court divided by the
total number of outstanding shares of Preferred Stock (the "New Offer Price").
As described above, plaintiff's counsel currently intends to apply to the Court
for an award of fees and expenses in an aggregate amount of $1,956,268.40, or
$0.40 per share of Preferred Stock. Thus, if the Court approves the settlement
and the fees and
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3
expenses of counsel for the plaintiff in full, the New Offer Price will be
$39.85 per share of Preferred Stock.
In addition, promptly following the approval of the settlement by the
Court, the Defendants have also agreed to amend the SMG-II Merger Agreement and
the Alternative Stock Purchase Agreement to permit either party to the SMG-II
Merger Agreement and the Alternative Stock Purchase Agreement, in the event that
Final Court Approval is not obtained on or prior to November 15, 1999, to extend
unilaterally the December 15, 1999 termination date set forth in the SMG-II
Merger Agreement and the Alternative Stock Purchase Agreement, to a new date 30
days after the date of the Final Court Approval or a final determination that
does not constitute Final Court Approval (the "New Termination Date"), provided,
however, that the New Termination Date shall not in any event be later than
April 17, 2000 unless otherwise mutually agreed by the parties to the SMG-II
Merger Agreement and the Alternative Stock Purchase Agreement, respectively.
The Defendants have also agreed that the Purchaser, at its sole option,
may elect on any date during the period from March 1, 2000 through April 1,
2000, if prior to such date neither Final Court Approval nor a final
determination that does not constitute Final Court Approval (an "Adverse
Determination") has been received, to cause the SMG-II Merger Agreement to be
amended to reduce the merger consideration to be received by the holders of the
capital stock of SMG-II pursuant to the SMG-II Merger Agreement by $9,781,342
(being the product of (x) the amount equal to the difference between the New
Offer Price and the Offer Price and (y) the number of outstanding shares of
Preferred Stock) (the "Escrow Amount"), which amount shall be held in escrow for
the benefit of the holders of the Preferred Stock pending Final Court Approval.
Upon any such election by the Purchaser, pursuant to the terms of the Memorandum
of Understanding, the Purchaser shall be deemed to have waived on behalf of all
parties any requirement under the settlement of obtaining Final Court Approval
prior to closing the Offer and the SMG-II Merger or the Alternative Stock
Purchase. In addition, the Defendants have agreed that in the event that the
Purchaser makes such an election, but Final Court Approval ultimately is not
obtained, the Escrow Amount, (i) if the Offer closes, shall remain in escrow and
be available for satisfaction of an adverse judgment against Defendants, if any,
or (ii) if the Alternative Stock Purchase closes, shall be released to PTK.
In addition, the Defendants have also agreed that in the event that an
Adverse Determination is received at any time before termination or closing of
the Offer, then the parties shall proceed with the SMG-II Merger and Alternative
Stock Purchase on the terms set forth in the original SMG-II Merger Agreement or
original Alternative Stock Purchase Agreement; provided, however, that if the
Purchaser has made the election described above and subsequent to such election,
but prior to the closing of the Offer or the Alternative Stock Purchase, an
Adverse Determination is received, then the parties shall proceed with the
SMG-II Merger or the Alternative Stock Purchase on the terms set forth in the
original SMG-II Merger Agreement and
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4
the original Alternative Stock Purchase Agreement only if SMG-II provides notice
to the Purchaser by April 1, 2000 of its election to proceed on those terms.
Pursuant to the terms of the Memorandum of Understanding, any of the
Defendants shall have the right to withdraw from the proposed settlement in the
event that (i) any claims related to the SMG-II Merger, the Alternative Stock
Purchase, or the subject matter of the Action are commenced by any member of the
Class against any Released Persons in any court prior to Final Court Approval of
the settlement, and the court in which such claims are pending denies
Defendants' application to dismiss or stay such action in contemplation of
dismissal or (ii) any of the other conditions to the consummation of the
settlement described below shall not have been satisfied. The consummation of
the settlement is subject to (i) the drafting and execution of the settlement
documents and the other agreements necessary to effectuate the terms of the
proposed settlement; (ii) Final Court Approval of the settlement; (iii)
dismissal of the Action by the Court with prejudice and without awarding fees or
costs to any party; and (iv) the Purchaser closing (A) the Offer and the SMG-II
Merger or (B) the Alternative Stock Purchase.
For purposes hereof, "Final Court Approval" of the settlement means an
order entered by the Court approving the settlement and awarding plaintiff's
counsel's fees and expenses and such order is finally affirmed, without
modification of any substantive right of any party to the Memorandum of
Understanding, on appeal or is no longer subject to appeal and time for any
petition for reargument, appeal or review, by certiorari or otherwise, has
expired, provided that any modification of the order approving the settlement
with respect to the amount of attorneys' fees and expenses awarded and/or any
additional supplemental disclosure required shall not be considered a
modification of a substantive right affecting Final Court Approval.
Extension Agreement. Concurrently with the execution of the Memorandum of
Understanding and as required by Parent and the Purchaser, Parent, the Purchaser
and the SMG-II Stockholders entered into an extension agreement, pursuant to
which the SMG-II Stockholders have agreed to extend the Stockholders Agreement
Termination Date to a new date that is two months after the New Termination
Date.
Item 9. MATERIAL TO BE FILED AS EXHIBITS
The following are hereby added as exhibits:
Exhibit No.
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(a) (12) Press release issued by the Company on May 19, 1999.
(a) (13) Press release issued by Parent on May 20, 1999.
(c) (9) Memorandum of Understanding dated May 19, 1999.
+(c) (10) Extension Agreement dated May 19, 1999 among Parent, the Purchaser
and the Stockholders listed on Exhibit I thereto.
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+ Filed as an exhibit to the Schedule 14D-1 and is incorporated herein
by reference.
<PAGE>
5
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Supermarkets General Holdings Corporation
By: /s/ Marc A. Strassler
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Name: Marc A. Strassler
Title: Senior Vice President, Secretary
and General Counsel
Dated: May 20, 1999
<PAGE>
EXHIBIT INDEX
Exhibit No.
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*(a)(1) Offer to Purchase dated March 15, 1999.
*(a)(2) Letter of Transmittal dated March 15, 1999.
*(a)(3) Agreement and Plan of Merger dated March 9, 1999 among Parent, the
Purchaser and SMG-II.
*(a)(4) Stock Purchase Agreement dated March 9, 1999 among Parent, the
Purchaser, SMG-II and PTK.
*(a)(5) Stockholders Agreement dated March 9, 1999 among Parent, the Purchaser
and Stockholders listed on Exhibit I thereto.
*(a)(6) Confidentiality Agreement dated December 30, 1998 between Parent and
SMG-II.
*(a)(7) A copy of pages 58 through 63 of the Annual Report on Form 10K that
was filed by the Company with the SEC on April 28, 1998.
*(a)(8) Sale and Transition agreement between Pathmark and James L. Donald
dated March 8, 1999.
*(a)(9) Letter from the Company to holders of the Shares dated March 15, 1999.
*(a)(10) Joint Press Release issued by the Company and Parent on March 9, 1999.
*(a)(11) Press Release issued by Parent on March 26, 1999.
(a)(12) Press Release issued by the Company on May 19, 1999.
(a)(13) Press Release issued by Parent on May 20, 1999.
*(c)(1) Employment Agreement between Pathmark and Eileen Scott dated
February 1, 1999.
*(c)(2) Employment Agreement between Pathmark and John Sheehan dated
February 1, 1999.
*(c)(3) Employment Agreement between Pathmark and Marc A. Strassler dated
February 1, 1999.
*(c)(4) Employment Agreement between Pathmark and Frank Vitrano dated
February 1, 1999.
*(c)(5) Employment Agreement between Pathmark and Joseph Adelhardt dated
February 1, 1999.
*(c)(6) Employment Agreement between Pathmark and Harvey Gutman dated
February 1, 1999.
*(c)(7) Employment Agreement between Pathmark and Robert Joyce dated
February 1, 1999.
*(c)(8) Employment Agreement between Pathmark and Myron D. Waxberg dated
February 1, 1999.
(c)(9) Memorandum of Understanding dated May 19, 1999.
+(c)(10) Extension Agreement dated May 19, 1999 among Parent, the Purchaser
and the Stockholders listed on Exhibit I thereto.
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* Previously filed.
+ Filed as an exhibit to the Schedule 14D-1 and is incorporated herein
by reference.
Exhibit (a)(12)
SUPERMARKETS GENERAL HOLDINGS CORPORATION
200 Milik Street, Carteret, New Jersey 07008
FOR IMMEDIATE RELEASE
Contact: Harvey Gutman
732-499-3205
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Carteret, New Jersey, May 19, 1999. Supermarkets General Holdings Corporation
("SMGH") announced today that it and the other defendants in a purported
stockholder class action lawsuit have reached an agreement in principle with the
plaintiff to settle. The lawsuit, entitled Wolfson v. Supermarkets General
Holding Corporation, et. al., C.A. No. 17047, was filed on March 23, 1999, on
behalf of the holders of the SMGH preferred stock against SMGH and its
directors, its parent company SMG-II Holdings Corporation and Royal Ahold's
wholly-owned subsidiary Ahold Acquisition, Inc.
The action relates to the pending tender offer by Ahold Acquisition to purchase
all of the outstanding shares of preferred stock of SMGH at $38.25 per share
that was announced on March 9, 1999. The offer has been made pursuant to an
agreement under which Royal Ahold, the international food retailer, will acquire
all of the outstanding shares of the capital stock of SMG-II. SMG-II controls
the U.S. supermarket company Pathmark Stores, Inc.
The proposed settlement is subject to, among other things, execution of a
definitive settlement agreement and related documentation with the plaintiff and
the approval of the settlement by the Court of Chancery of the State of Delaware
(the "Court"). Upon such approval becoming final, SMGH and Ahold Acquisition
have agreed that Ahold Acquisition will increase the offer price in its tender
offer to $40.25 per share of SMGH preferred stock, less any fees and expenses
awarded to plaintiff's counsel by the Court. Plaintiff's counsel currently
intends to apply to the Court for an award of fees and expenses in an aggregate
amount of $1,956,268.40, or $0.40 per share of SMGH preferred stock. Thus, if
the Court approves the settlement and the counsel for the plaintiff's petition
for fees and expenses in full, the amended offer price will be $39.85 per share
of SMGH preferred stock.
*****
Exhibit (a)(13)
May 20, 1999
31 75 659-5720
Royal Ahold extends tender offer
Zaandam, The Netherlands, May 20, 1999 - Ahold Acquisition, Inc., a wholly-owned
subsidiary of Royal Ahold, is extending the tender offer for the Preferred Stock
of Supermarkets General Holdings Corporation ("SMGH") until 5:00 p.m., New York
City time, on Friday, September 3, 1999. The offer had been scheduled to expire
on Friday, May 21, 1999.
The offer has been made pursuant to an agreement under which Royal Ahold will
acquire all of the outstanding shares of the capital stock of SMG-II Holdings
Corporation ("SMG-II"). SMG-II controls the US supermarket company Pathmark
Stores Inc. Based upon information provided by Citibank N.A., as depositary for
the offer, as of the close of business on May 17, 1999, approximately 1.1
million shares (22.4%) of the outstanding Preferred Stock have been tendered and
not withdrawn. Completion of the tender offer is subject to a number of
conditions, including obtaining necessary regulatory approvals and at least 66
2/3% of the shares of Preferred Stock being tendered in the offer and not
withdrawn. (It is standard practice that the majority of shares will not be
tendered until the final two days of the offering period.)
Ahold Acquisition agreed to extend the tender offer in connection with a
Memorandum of Understanding that has been entered into on May 19th. The
Memorandum set forth an agreement in principle of all concerned parties to
settle a purported stockholder class action lawsuit on behalf of the holders of
the SMGH Preferred Stock that had been brought against SMGH, its directors, its
parent company SMG-II and Ahold Acquisition. The action relates to the pending
tender offer and the allocation of the total consideration to be paid in the
transaction among the equity owners of SMGH and SMG-II.
The proposed settlement is subject to a number of conditions, including the
approval of the settlement by the Court of Chancery of the State of Delaware. If
such approval becomes final, Ahold Acquisition has agreed to amend its tender
offer to increase the offer price for the SMGH Preferred Stock to $40.25 per
share, less any fees and expenses awarded to plaintiff's counsel by the court
(which could total $0.40 per share of SMGH Preferred Stock). In such event, the
total amount of merger consideration to be paid to the holders of the capital
stock of SMG-II will be reduced accordingly. As a result, the overall
consideration Ahold Acquisition will pay in connection with the Pathmark
acquisition will not increase.
The total price payable by Ahold Acquisition for all of the capital stock of
SMG-II and the preferred stock of SMGH is approximately USD 250 million.
Pursuant to the agreement, Royal Ahold will also indirectly assume all of the
indebtedness of Pathmark, amounting to approximately USD 1.5 billion.
Ahold Public Relations, tel. +31 75 659 5720
After office hours: Hans Gobes: +31 6 55 82 22 98/Jans
Hol: +31 6 22 933 137
Exhibit (c)(9)
MEMORANDUM OF UNDERSTANDING
This MEMORANDUM OF UNDERSTANDING is entered into as of May 19, 1999 among
the plaintiff ("Plaintiff") in the Action (as defined herein), and Supermarkets
General Holdings Corporation ("SMG"), SMG-II Holdings Corporation ("SMG-II"),
members of SMG's Board of Directors, and Ahold Acquisition, Inc. ("Ahold")
(collectively, "Defendants") by the undersigned attorneys.
WHEREAS, there is now pending an action in the Court of Chancery of the
State of Delaware, styled Wolfson v. Supermarkets General Holdings Corp., et
al., C.A. No. 17047 (the "Action"); and
WHEREAS, the Action was filed as a putative class action on behalf of the
public holders of SMG's $3.52 Cumulative Exchangeable Redeemable Preferred
Stock, par value $0.01 per share (the "Preferred Stock"), relating to the
proposed acquisition of SMG-II and SMG, the ultimate corporate parents of
Pathmark Stores, Inc. ("Pathmark"), via a tender offer and merger (the
"Transaction"), and an alternative transaction structure whereby, under certain
circumstances, Ahold will acquire the Pathmark stock owned by PTK Holdings, Inc.
("PTK"), a wholly-owned subsidiary of SMG (the "Alternative Transaction"); and
<PAGE>
WHEREAS, the Action names as defendants SMG, SMG-II, Ahold, and individual
members of the SMG Board of Directors; and
WHEREAS, the Action seeks injunctive and declaratory relief and/or
monetary damages with respect to the Transaction and the Alternative Transaction
based upon the allegation, inter alia, that the conduct of SMG-II (as majority
shareholder of SMG) and the members of the SMG Board of Directors in connection
with the Transaction and the Alternative Transaction constitutes a breach of
their fiduciary duties, aided and abetted by Ahold; and
WHEREAS, the Defendants deny that they have committed or have attempted to
commit any violation of law or breach of duty, including breach of any duty to
SMG's shareholders, or have otherwise acted in any improper manner; and
WHEREAS, following expedited document production, depositions, briefing
and arms-length negotiations between the parties, counsel for the parties have
reached an agreement in principle providing for the proposed settlement of the
Action on the terms and conditions set forth below (the "Settlement"); and
WHEREAS, counsel for the parties believe that the proposed Settlement is
in the best interests of the holders of the Preferred Stock;
NOW THEREFORE, IT IS HEREBY AGREED IN PRINCIPLE AS FOLLOWS:
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<PAGE>
1. Principal Terms of Settlement. Subject to the additional conditions,
terms and limitations described herein, as a result of the bringing of the
Action, the parties agree in principle as follows:
(a) The price in Ahold's March 15, 1999 tender offer as set forth in
its Offer to Purchase (the "Offer to Purchase"), and as thereafter extended (the
"Tender Offer"), is $38.25 per share of Preferred Stock (the "Per Share
Amount"). In consideration of the Settlement and release set forth herein and as
a result of the Action, subject to Final Court Approval (as defined below), the
Defendants agree to an increase of the Per Share Amount, such that Ahold will
revise its Tender Offer to increase the Per Share Amount to $40.25 per share of
Preferred Stock, less the total amount awarded as fees and expenses to
Plaintiff's counsel by the Court divided by the total number of outstanding
shares of Preferred Stock (the "New Per Share Amount"). Promptly following
approval of the Settlement by the Delaware Court of Chancery, (1) the SMG-II
Merger Agreement (as defined in the Schedule 14D-9 dated March 15, 1999) shall
be amended (i) to permit either party to the SMG-II Merger Agreement, in the
event that Final Court Approval is not obtained on or prior to November 15,
1999, to extend unilaterally the December 15, 1999 date set forth in Section
8.1(c) of such agreement to a new date thirty (30) days after
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<PAGE>
the date of Final Court Approval or a final determination that does not
constitute Final Court Approval (the "New Drop Dead Date"), provided, however,
that the New Drop Dead Date shall not in any event be later than April 17, 2000
unless otherwise mutually agreed by the parties to the SMG-II Merger Agreement,
and (ii) to reflect that, during the time the Settlement remains operative only,
a condition precedent to the obligations of the parties to the SMG-II Merger
Agreement to consummate the Tender Offer shall be obtaining Final Court
Approval, and (2) the Alternative Stock Purchase Agreement (as defined in the
Schedule 14D-9) shall be amended to permit either party to the Alternative Stock
Purchase Agreement, in the event that Final Court Approval is not obtained on or
prior to November 15, 1999, to extend unilaterally the December 15, 1999 date
set forth in Section 8.1(c) of such agreement to the New Drop Dead Date,
provided, however, that the New Drop Dead Date shall not in any event be later
than April 17, 2000 unless otherwise mutually agreed by the parties to the
Alternative Stock Purchase Agreement. Each party to the SMG-II Merger Agreement
shall sign such additional instruments and agreements necessary to give effect
to such amendment, and, in the case of the Alternative Stock Purchase Agreement,
SMG-II shall cause PTK to sign such additional instruments and agreements
necessary to give effect to such amendment. Promptly following Final Court
Approval of
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<PAGE>
the Settlement, (1) the SMG-II Merger Agreement shall be amended (i) to reflect
the New Per Share Amount and corresponding reduction in merger consideration to
be received by holders of capital stock of SMG-II pursuant to the SMG-II Merger
Agreement, as set forth in the Settlement as approved, and (ii) to require
SMG-II to obtain the necessary stockholder approval promptly in accordance with
Section 5.4 of the SMG-II Merger Agreement but in no event later than ten (10)
business days after Final Court Approval, (2) the Tender Offer shall be revised
to increase the Per Share Amount to the New Per Share Amount, and (3) the
Company Merger Agreement (as defined in the Schedule 14D-9) shall be amended to
reflect the New Per Share Amount, as necessary. The aggregate amount of merger
consideration allocated to the capital stock of SMG-II pursuant to the SMG-II
Merger Agreement shall be reduced by (1) an amount equal to the increase in the
aggregate price to be paid to the holders of the Preferred Stock pursuant to the
Tender Offer and the Company Merger Agreement and (2) any fees and expenses
awarded to Plaintiff's counsel by the Court. Under no circumstances shall Ahold
be required to increase the amount of overall consideration it is paying in
connection with the transactions contemplated by the SMG-II Merger Agreement,
the Alternative Stock Purchase Agreement, and related documents.
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<PAGE>
Ahold, at its sole option, may elect on any date during the period from
March 1, 2000 through April 1, 2000, if prior to such date neither Final Court
Approval nor a final determination that does not constitute Final Court Approval
(an "Adverse Determination") has been received, to cause the SMG-II Merger
Agreement to be amended to reduce the merger consideration to be received by
holders of the capital stock of SMG-II pursuant to the SMG-II Merger Agreement
by $9,781,342 (being the amount equal to the difference between $40.25 per share
and the Per Share Amount multiplied by the number of currently outstanding
shares of Preferred Stock) (the "Escrow Amount"), which Escrow Amount shall be
held in escrow for the benefit of the holders of the Preferred Stock pending
Final Court Approval (less the total amount awarded as fees and expenses to
Plaintiff's counsel by the Court), upon which election (i) Ahold shall be deemed
to have waived on behalf of all parties any requirement under this Settlement of
obtaining Final Court Approval prior to closing the Transaction (or the
Alternative Transaction, if applicable), and (ii) SMG-II shall be required to
obtain the necessary stockholder approval no later than ten (10) business days
after notice of such election by Ahold. Upon such election, Ahold will revise
the Tender Offer and proceed accordingly. Ahold's election to proceed with the
Tender Offer prior to obtaining Final Court Approval shall
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<PAGE>
not prejudice or affect Ahold's right to proceed with the Alternative
Transaction if the Minimum Condition is not satisfied. If Ahold makes such
election but Final Court Approval ultimately is not obtained, the Escrow Amount,
(i) if the Tender Offer closes, shall remain in escrow and be available for
satisfaction of an adverse judgment against Defendants, if any, or (ii) if the
Alternative Transaction closes, shall be released to PTK. In the event that
neither Final Court Approval nor an Adverse Determination has been received
prior to April 1, 2000 (whether or not the Minimum Condition has been
satisfied), and Ahold does not make the election described above, then the
Tender Offer shall remain open until the New Drop Dead Date (it being understood
that Ahold shall not waive the condition of Final Court Approval without the
approval of SMG-II, which SMG-II may withhold in its sole discretion) and, if
Final Court Approval is not obtained prior to the New Drop Dead Date (whether or
not the Minimum Condition has been satisfied), the SMG-II Merger Agreement and
the Alternative Stock Purchase Agreement shall terminate with the effect set
forth therein. In the event Ahold makes such election to waive for all parties
any requirement or condition of Final Court Approval prior to closing the
Transaction or the Alternative Transaction, each party to the SMG-II Merger
Agreement and the Alternative Stock Purchase Agreement shall sign amendments or
such additional
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<PAGE>
instruments and agreements necessary to give effect to such election.
In the event that an Adverse Determination is received at any time before
termination or closing of the Tender Offer, then the parties shall proceed with
the Transaction and the Alternative Transaction on the terms set forth in the
original SMG-II Merger Agreement or original Alternative Stock Purchase
Agreement; provided, however, that if Ahold has made the election described in
the preceding paragraph and subsequent to such election, but prior to the
closing of the Tender Offer or the Alternative Transaction, an Adverse
Determination is received, then the parties shall proceed with the Transaction
or Alternative Transaction on the terms set forth in the original SMG-II Merger
Agreement and original Alternative Stock Purchase Agreement only if SMG-II
provides notice to Ahold by April 1, 2000 of its election to proceed on those
terms.
Except as expressly set forth in this paragraph 1(a), none of the rights
or obligations of the parties set forth in the SMG-II Merger Agreement, the
Alternative Stock Purchase Agreement, and related documents shall in any way be
changed, modified, abridged or amended, including, without limitation, Ahold's
right to proceed with the Alternative Transaction under the terms of the SMG-II
Merger Agreement and the Alternative Stock Purchase Agreement. It is the
intention of the parties
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that Ahold's participation in this Settlement is primarily to accommodate the
reallocation of the consideration it is offering between the various classes of
securities which make up the capital structure of SMG.
(b) Regardless of whether SMG is legally required to do so, SMG
agrees that it will amend the Schedule 14D-9 dated March 15, 1999 to provide
supplemental disclosures. The parties shall use their reasonable best efforts to
agree upon the substance of the supplemental disclosures.
(c) Reasonably promptly following the execution of this Memorandum
of Understanding by the parties, Defendants shall publicly disclose the terms of
the proposed Settlement set forth herein in a manner deemed reasonable by
Defendants, with prior notice to Plaintiff's counsel.
2. Stipulation of Settlement. The parties to the Action will attempt in
good faith to agree upon and execute an appropriate Stipulation of Settlement
(the "Stipulation") and such other documentation as may be required in order to
obtain Final Court Approval of the Settlement and the dismissal of the Action
upon the terms set forth in this Memorandum of Understanding (collectively, the
"Settlement Documents"). The Stipulation will expressly provide, inter alia,
that:
(a) Plaintiff will petition the Court for certification of a non-opt
out settlement class pursuant to
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Delaware Court of Chancery Rules 23(b)(1) and (b)(2) of all record and
beneficial owners of SMG Preferred Stock from and including March 9, 1999
through and including the consummation of the Transaction, or, if the
Transaction fails to close, the Alternative Transaction, including their
successors in interest, predecessors, legal representatives, trustees, heirs,
assigns or transferees, immediate and remote (the "Class");
(b) Plaintiff will petition the Court for entry of a judgment
dismissing the Action "with prejudice";
(c) Plaintiff will petition the Court for a complete and final
compromise, settlement, discharge and release of all claims, demands, rights,
actions, causes of action, liabilities, damages, losses, obligations, judgments,
suits, matters and issues of any kind or nature whatsoever, whether known or
unknown, contingent or absolute, suspected or unsuspected, disclosed or
undisclosed, hidden or concealed, matured or unmatured, arising under federal,
state or any other law, that have been, could have been, or in the future can or
might be asserted in the Action or in any court, tribunal or proceeding by or on
behalf of any member of the Class (the "Releasing Parties"), whether individual,
class, derivative, representative, legal, equitable or any other type or in any
other capacity, against Defendants or any of their families, parent entities,
affiliates, subsidiaries, predecessors,
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successors or assigns, and each and all of their respective past, present or
future officers, directors, associates, stockholders, controlling persons,
representatives, employees, attorneys, financial or investment advisors,
consultants, accountants, investment bankers, commercial bankers, engineers,
advisors, insurers or agents, heirs, executors, trustees, general or limited
partners or partnerships, personal representatives, estates or administrators,
predecessors, successors and assigns (collectively, the "Released Persons"),
which have arisen, could have arisen, or will arise out of, or which are related
in any manner to, the allegations, facts, events, transactions, acts,
occurrences, statements, representations, misrepresentations, omissions or any
other matter, set forth or otherwise related, directly or indirectly, to the
complaint filed in the Action, the Transaction, the Alternative Transaction,
public filings or statements by Defendants or their representatives in
connection with the Transaction or the Alternative Transaction, or any other
actions of the Defendants relating in any way to the Transaction or the
Alternative Transaction (collectively, the "Settled Claims"); provided, however,
that the Settled Claims shall not include (i) any claims for appraisal pursuant
to 8 Del. C. ss.262 of the Delaware General Corporation Law, or (ii) the right
of any members of the
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Class, Releasing Parties or Released Persons to enforce the terms of the
Settlement;
(d) that Defendants have denied and continue to deny that they have
committed or attempted to commit any violations of law or breaches of duty of
any kind; that Defendants are entering into the Stipulation solely because the
proposed Settlement as described above would eliminate the burden, risk and
expense of further litigation, and is in the best interests of SMG and all of
its shareholders; and
(e) that any of the Defendants shall have the right to withdraw from
the proposed Settlement in the event that (i) any claims related to the
Transaction, the Alternative Transaction, or the subject matter of the Action
(whether direct, derivative or otherwise) are commenced by any member of the
Class against any Released Persons in any court prior to Final Court Approval of
the Settlement, and the court in which such claims are pending denies
Defendants' application to dismiss or stay such action in contemplation of
dismissal or (ii) any of the additional conditions set forth in paragraph 4
below shall not have been satisfied. The parties agree to use their best efforts
to obtain the dismissal or stay in contemplation of dismissal of any action
covered by clause (i) in the foregoing sentence on the terms set forth herein
and further agree that the Defendants shall have the right to
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withdraw from this Memorandum of Understanding if such efforts do not result in
the dismissal or stay in contemplation of dismissal of such an action.
3. Notice and Court Approval. Subject to prior Court approval of the
Stipulation and the form of the Settlement Documents, the parties to the
respective Action will present the Settlement Documents to the Delaware Court of
Chancery for approval as soon as practicable following appropriate notice of the
proposed Settlement to the SMG shareholders as to all claims asserted in the
Action by the named Plaintiff and the holders of SMG's Preferred Stock on whose
behalf the Action was brought, without costs to any party except as provided
herein. SMG shall pay the costs and expenses related to providing notice of the
Settlement to the SMG shareholders. As used herein, "Final Court Approval" of
the Settlement means that the Delaware Court of Chancery has entered an order
approving the Settlement and awarding Plaintiff's attorneys' fees and expenses
and that such order is finally affirmed, without modification of any substantive
right of any party hereto, on appeal or is no longer subject to appeal and the
time for any petition for reargument, appeal or review, by certiorari or
otherwise, has expired, provided that any modification of the order approving
the Settlement with respect to the amount of attorneys' fees and expenses
awarded and/or any additional supplemental disclosure
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<PAGE>
required shall not be considered a modification of a substantive right affecting
Final Court Approval. Plaintiff's counsel intend to apply to the Delaware Court
of Chancery for an award of attorneys' fees and reasonable out-of-pocket
disbursements. Subject to the terms and conditions of this Memorandum of
Understanding and the contemplated Stipulation of Settlement, Plaintiff's
counsel will apply for a total award of attorneys' fees and expenses in an
amount not exceeding $1,956,268.40, which amount shall be payable only out of
the amount made available in order to increase in the Tender Offer price as set
forth in paragraph 1(a) above, only after Final Court Approval, and only if the
Tender Offer at the New Per Share Amount closes. The Defendants and other
releasees will not oppose the foregoing application, but reserve their rights to
object to any other or different application for attorneys' fees and expenses.
In the event the Tender Offer at the New Per Share Amount does not close, but
the Alternative Transaction does, the Released Persons shall continue to enjoy
all of the benefits of the Settlement, including the release contemplated
thereby, and Plaintiff's counsel reserves their right to petition the Court of
Chancery for an award of attorneys' fees and expenses, and Defendants reserve
their rights to oppose any such petition; provided, however, that any such award
of attorneys' fees and expenses approved by the Court shall be payable solely by
PTK
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<PAGE>
(at the direction of SMG) upon Final Court Approval and closing of the
Alternative Transaction.
4. Other Conditions. The consummation of the Settlement is subject to: (a)
the drafting and execution of the Settlement Documents and the other agreements
necessary to effectuate the terms of the proposed Settlement; (b) Final Court
Approval of the Settlement; (c) dismissal of the Action by the Court with
prejudice and without awarding fees or costs to any party, except as provided
herein; and (d) Ahold closing the Tender Offer and the SMG-II Merger, or the
Alternative Transaction. In the event that the Settlement is not consummated,
this Memorandum of Understanding shall not be deemed to prejudice in any way the
positions of the parties with respect to the Action, shall be subject to Rule
408 of the Delaware Rules of Evidence, and shall not entitle any party to
recover any costs or expenses incurred in connection with the implementation of
this Memorandum of Understanding.
5. Interim Stay of the Action. The parties to the Action agree that except
as expressly provided herein, the Action shall be stayed pending submission of
the proposed Settlement to the Court for its consideration.
6. Miscellaneous. (a) This Memorandum of Understanding may be executed in
counterparts by any of the signatories hereto and as so executed shall
constitute one
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agreement; (b) this Memorandum of Understanding and the Settlement contemplated
by it shall be governed by and construed in accordance with the laws of the
State of Delaware without regard to that State's rules concerning conflict of
laws; (c) this Memorandum of Understanding shall be binding upon and inure to
the benefit of the parties and their respective agents, executors, heirs,
successors and assigns, subject to the conditions set forth herein; (d)
Plaintiff and his counsel represent and warrant that none of the claims or
causes of action asserted in the Action have been assigned, encumbered or in any
manner transferred, in whole or in part; (e) except as provided herein, the
Defendants in the Action shall bear no expenses, costs, damages or fees alleged
or incurred by the Plaintiff, any member of the Class or their respective
attorneys, experts, advisors, agents or representatives; and (f) the provisions
contained in this Memorandum of Understanding shall not be deemed a presumption,
concession or admission by any Defendant in the Action of any breach of duty,
liability, default or wrongdoing as to any facts or claims alleged or asserted
in the Action, or in any other actions or proceedings, and shall not be
interpreted, construed, deemed, invoked, offered or received in evidence or
otherwise used by any person in the Action or in any other action or proceeding
of any nature whatsoever.
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PRICKETT, JONES, ELLIOTT & KRISTOL
/s/ Thomas A. Mullen
----------------------------------
April Caso Ishak
Ronald A. Brown, Jr.
Thomas A. Mullen
1310 King Street
P.O. Box 1328
Wilmington, DE 19899
(302) 888-6500
Attorneys for Plaintiff
Elliot Wolfson
MORRIS, NICHOLS, ARSHT & TUNNELL
/s/ William M. Lafferty
----------------------------------
Martin P. Tully
William M. Lafferty
Christopher F. Carlton
1201 N. Market Street
P.O. Box 1347
Wilmington, DE 19899-1347
(302) 658-9200
Attorneys for the SMG Defendants
OF COUNSEL:
SHEARMAN & STERLING
599 Lexington Avenue
New York, NY 10022
(212) 848-4000
RICHARDS, LAYTON & FINGER, P.A.
/s/ Gregory V. Varallo
----------------------------------
Gregory V. Varallo
Kelly A. Herring
One Rodney Square
P.O. Box 551
Wilmington, DE 19899
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(302) 658-6541
Attorneys for Defendant
Ahold Acquisition, Inc.
OF COUNSEL:
WHITE & CASE LLP
1155 Avenue of the Americas
New York, NY 10036
(212) 819-8200
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