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SCHEDULE 14C
(RULE 14C-101)
INFORMATION REQUIRED IN INFORMATION STATEMENT
SCHEDULE 14C INFORMATION
INFORMATION STATEMENT PURSUANT TO SECTION 14(C)
OF THE SECURITIES EXCHANGE ACT OF 1934
Check the appropriate box:
[X] Preliminary Information Statement [ ] Confidential, for use of the
[ ] Definitive Information Statement Commission only (as permitted
by Rule 14c-5(d)(2))
RISER FOODS, INC.
(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[X] Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
1) Title of each class of securities to which transaction applies:
Class A Common Stock $.01 par value
2) Aggregate number of securities to which transaction applies.
341,240 shares of Class A Common Stock
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act rule 0-11: $42.00
4) Proposed maximum aggregate value of transaction: $14,332,080
5) Total Fee paid: $299.88*
[X] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid: $61,339.70*
2) Form, Schedule or Registration Statement No.: Schedule 14D-1
3) Filing Party: Talon Acquisition Company and Giant Eagle, Inc.
4) Date Filed: May 20, 1997
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*The amount previously paid was based upon 7,309,488 shares of Class A
Common Stock outstanding as of May 13, 1997. Talon Acquisition Company
("Talon") purchased 7,002,948 shares of Class A Common Stock pursuant to its
Offer to Purchase dated May 20, 1997. As of July 15, there were 7,344,188
shares of Class A Common Stock outstanding, representing 7,002,948 shares
purchased by Talon and 341,240 shares held by persons other than Talon. The
total fee with respect to the securities to which this transaction applies is
$2,866.42, of which $299.88 is paid herewith (representing the fee with respect
to the difference between the 7,308,488 shares outstanding as of May 13, 1997
and the 7,344,188 shares currently outstanding).
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RISER FOODS, INC.
5300 RICHMOND ROAD
BEDFORD HEIGHTS, OHIO 44146
-----------------------------------------------------
INFORMATION STATEMENT
-----------------------------------------------------
JULY __, 1997
-----------------------------------------------------
This Information Statement is furnished by the Board of Directors (the
"Board") of Riser Foods, Inc., a Delaware corporation ("Riser"), to holders of
outstanding shares of Class A Common Stock, par value $.01 per share (the
"Shares") of Riser in connection with the Agreement and Plan of Merger, dated as
of May 13, 1997, (the "Merger Agreement") by and among Riser, Giant Eagle, Inc.,
a Pennsylvania corporation ("Giant Eagle"), and Talon Acquisition Company, a
Delaware corporation ("Purchaser"), pursuant to which Purchaser will be merged
with and into Riser, and Riser will be the surviving company (the "Merger"). As
a result of the Merger, Riser will be a wholly-owned subsidiary of Giant Eagle,
and each outstanding Share (other than Shares that are owned by Riser, Giant
Eagle or Purchaser or by stockholders who have validly perfected their appraisal
rights under Delaware law) will be converted into the right to receive $42.00 in
cash (the "Merger Consideration"). A copy of the Merger Agreement is attached
hereto as Annex I.
The Merger is the second step of a two-step transaction pursuant to
which Giant Eagle, as the owner of all of the outstanding shares of
Purchaser, will acquire the entire equity interest in Riser (other then certain
preferred shares). The first step was a tender offer for the outstanding Shares
at $42.00 per Share net to the seller in cash (the "Offer"). Purchaser acquired
7,002,948 Shares upon the consummation of the Offer on June 20, 1997,
representing approximately 95% of the issued and outstanding Shares.
As a result of the consummation of the Offer, Purchaser owns and has
the right to vote a sufficient number of outstanding Shares to approve and adopt
the Merger Agreement without the affirmative vote of any other holder of Shares,
thereby assuring such approval and adoption. Purchaser plans to execute and
deliver to Riser a written consent in lieu of a meeting of stockholders
approving and adopting the Merger Agreement and authorizing the consummation of
the Merger. SUCH WRITTEN CONSENT WILL BE SIGNED AND THE MERGER WILL BECOME
EFFECTIVE 20 DAYS AFTER THIS INFORMATION STATEMENT IS FIRST MAILED TO
STOCKHOLDERS OF RISER. RISER CURRENTLY ANTICIPATES THAT THE EFFECTIVE DATE OF
THE MERGER WILL BE ON OR ABOUT AUGUST __, 1997.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND
US A PROXY. PLEASE DO NOT SEND IN ANY OF YOUR STOCK CERTIFICATES AT THIS
TIME.
This Information Statement is first being mailed to stockholders on or
about July __, 1997.
This Information Statement is dated July __, 1997
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TABLE OF CONTENTS
PAGE
----
SUMMARY ...................................................................3
GENERAL ...................................................................8
REQUIRED VOTE; WRITTEN CONSENT IN LIEU OF MEETING...........................8
PROCEDURE FOR RECEIPT OF MERGER CONSIDERATION...............................9
APPRAISAL RIGHTS...........................................................10
THE MERGER.................................................................13
REGULATORY MATTERS.........................................................23
THE MERGER AGREEMENT.......................................................23
SOURCE AND AMOUNT OF FUNDS.................................................27
BUSINESS ..................................................................28
SELECTED FINANCIAL DATA....................................................33
PRINCIPAL STOCKHOLDERS AND STOCK OWNERSHIP OF MANAGEMENT...................34
AVAILABLE INFORMATION......................................................35
INDEX TO FINANCIAL STATEMENTS AND EXHIBITS.................................35
ANNEX I AGREEMENT AND PLAN OF MERGER..................................36
ANNEX II SECTION 262 OF THE GENERAL CORPORATION LAW OF DELAWARE.......101
ANNEX III HOULIHAN LOKEY OPINION.......................................105
ANNEX IV MCDONALD OPINION.............................................108
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SUMMARY
The following is a summary of the more detailed information contained
in this Information Statement. This Summary is not intended to be complete and
is qualified in its entirety by the more detailed information contained
elsewhere in this Information Statement, in the Annexes hereto and other
documents referred to and incorporated herein by reference. Terms used but not
defined in this Summary have the meanings ascribed to them elsewhere in this
Information Statement. Cross references in this Summary are to the captions of
sections in this Information Statement.
Stockholders are urged to read this Information Statement and the
Annexes hereto in their entirety.
THE COMPANIES
Riser is a Delaware corporation with its principal executive offices at
5300 Richmond Road, Bedford Heights, Ohio 44146. Riser's principal line of
business is the distribution of groceries and related items through its retail
supermarket subsidiary, Rini-Rego Supermarkets, Inc., and its wholesale
distribution subsidiary, American Seaway Foods, Inc.
Purchaser is a Delaware corporation and a wholly-owned subsidiary of
Giant Eagle. Purchaser was organized to acquire Riser and has not conducted any
unrelated activities since its organization. The principal offices of Purchaser
are located at 101 Kappa Drive, RIDC Park, Pittsburgh, Pennsylvania 15238-2809.
All outstanding shares of capital stock of Purchaser are owned by
Giant Eagle, a Pennsylvania corporation. Giant Eagle is principally engaged
in the retail sale and distribution of groceries and related items. The
principal offices of Giant Eagle are located at 101 Kappa Drive, RIDC Park,
Pittsburgh, Pennsylvania 15238-2809.
GENERAL
This Information Statement is being delivered in connection with the
merger of Purchaser into Riser. As a result of the Merger, Riser will be a
wholly-owned subsidiary of Giant Eagle, and each outstanding Share (other than
Shares that are owned by Riser, Giant Eagle or Purchaser or by stockholders who
have validly perfected their appraisal rights under Delaware law) will be
converted into the right to receive $42.00 in cash. A copy of the Merger
Agreement is attached hereto as Annex I.
The Merger is the second step of a two-step transaction pursuant to
which Giant Eagle, as the owner of all of the outstanding shares of Purchaser,
will acquire the entire equity interest in Riser, except for certain preferred
shares of Riser that are owned by a subsidiary. The first step was the Offer for
the outstanding Shares at $42.00 per Share net to the seller in cash. Purchaser
acquired 7,002,948 Shares upon the consummation of the Offer on June 20, 1997,
representing approximately 95% of the issued and outstanding Shares.
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REQUIRED VOTE; WRITTEN CONSENT IN LIEU OF MEETING
The Delaware General Corporation Law ("DGCL") provides that the
adoption of any plan of merger or consolidation by Riser requires the approval
of the Board of Directors and the affirmative vote of a majority of the
outstanding shares entitled to vote thereon (including the votes of any Shares
owned by the Purchaser). The Board of Directors of Riser has authorized and
approved the Offer and the Merger. Under Riser's Second Amended Certificate of
Incorporation (the "Riser Certificate") the holders of not less than 80% of the
outstanding Shares and shares of Class B Common Stock, $.01 par value ("Class B
Shares"), voting together as a single class, must also approve the Merger. In
addition, the Riser Certificate requires that any change in the Riser
Certificate which adversely affects the holders of the Class B Shares must be
approved by the holders of at least 80% of the outstanding Class B Shares. All
of the Class B Shares were tendered to and purchased by Purchaser, but the Riser
Certificate prohibits transfer of Class B Shares to anyone who is not a
"Permitted Transferee", as such term is defined in the Riser Certificate, and
provides that any Class B Shares transferred in violation of such prohibition
are automatically converted into Shares. Accordingly, there are no Class B
Shares presently outstanding.
As a result of the consummation of the Offer, Purchaser owns and has
the right to vote a sufficient number of outstanding Shares to approve and adopt
the Merger Agreement without the affirmative vote of any other holder of Shares,
thereby assuring such approval and adoption. Purchaser plans to execute and
deliver to Riser a written consent in lieu of a meeting of stockholders
approving and adopting the Merger Agreement and authorizing the consummation of
the Merger.
PROCEDURE FOR RECEIPT OF MERGER CONSIDERATION
A Letter of Transmittal will be sent to all stockholders of Riser under
separate cover following the consummation of the Merger. The Letter of
Transmittal must be completed and returned as directed therein along with
certificates representing the Shares covered thereby or the Shares covered
thereby must be delivered by book entry transfer. Checks for the Merger
Consideration will be sent to stockholders as soon as practicable after receipt
of Letters of Transmittal and certificates or Shares, as applicable. Detailed
instructions concerning the procedure for receipt of Merger Consideration are
set forth in the Letter of Transmittal and elsewhere herein. See "PROCEDURE FOR
RECEIPT OF MERGER CONSIDERATION."
APPRAISAL RIGHTS
Under Delaware law, holders of Shares who do not vote to approve the
Merger and who otherwise strictly comply with the applicable requirements of the
General Corporation Law of Delaware may dissent from the Merger and demand
payment in cash of the fair value of their Shares. See "APPRAISAL RIGHTS" and
Annex II hereto.
THE MERGER
BACKGROUND TO THE MERGER. For a description of events leading to the
approval of the Merger Agreement by the Board of Riser, see "THE MERGER -
Background to the Merger".
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APPROVAL OF THE BOARD. On May 13, 1997, the Board of Riser unanimously
determined that each of the Merger Agreement, the Offer and the Merger is fair
to and in the best interests of the stockholders of Riser and approved and
adopted the Merger Agreement. See "THE MERGER - Background to the Merger".
INTEREST OF CERTAIN PERSONS IN THE MERGER. On May 13, 1997, in
connection with the execution of the Merger Agreement, Giant Eagle entered into
five-year Employment Agreements with Anthony C. Rego, Chairman of the Board and
Chief Executive Officer of Riser, and Charles A. Rini, Sr., President and Chief
Operating Officer of Riser. Pursuant to the Employment Agreements, Mr. Rego will
be the Vice Chairman of Giant Eagle and Chief Executive Officer of Riser, and
Mr. Rini will be the Executive Vice President of Giant Eagle and President and
Chief Operating Officer of Riser. See "THE MERGER - Employment Agreements".
Each of the executive officers of Riser held stock options to purchase
Shares. All of such options were canceled in exchange for a cash payment to the
holder of an amount equal to the excess, if any, of $42.00 over the exercise
price under such option. See "THE MERGER - Stock Plans".
The Delaware General Corporation Law permits a company to indemnify its
officers and directors under certain specified circumstances and also requires
such indemnification under specified circumstances. In addition, as permitted by
law, the Riser Certificate contains a provision eliminating the personal
liability of a director to Riser and its stockholders for monetary damages for
breach of fiduciary duty as a director, subject to certain statutory exceptions.
Riser's Bylaws also contain a provision providing for mandatory indemnification
of officers and directors in certain circumstances. The Merger Agreement
provides that the Certificate of Incorporation of Riser shall contain provisions
with respect to matters occurring prior to the Effective Time that are no less
favorable with respect to indemnification than are set forth in Article XV of
the Riser Certificate, which provisions shall not be amended, repealed or
otherwise modified in any manner that would have an adverse effect on the rights
thereunder of individuals who as of May 13, 1997 or at the Effective Time are
directors, officers, employees, fiduciaries or agents of Riser, unless such
modification shall be required by law. See "THE MERGER - Indemnification of
Officers and Directors".
OPINIONS OF FINANCIAL ADVISORS. Houlihan Lokey Howard & Zukin, Inc.
("Houlihan Lokey"), Riser's financial advisor, and McDonald & Company
Securities, Inc. ("McDonald"), financial advisor to certain of Riser's
non-officer directors, delivered written opinions, dated May 13, 1997, to the
Board of Directors that the consideration to be received by the stockholders of
Riser in the Offer and the Merger is fair from a financial point of view. Such
opinions will not be updated to a more current date. The full text of the
Houlihan Lokey opinion is set forth in Annex III hereto, and the full text of
the McDonald opinion is set forth in Annex IV hereto. Both opinions should be
read in their entirety. See "THE MERGER - Recommendation of Board".
PURPOSE OF THE MERGER. The purpose of the Merger is to enable Giant
Eagle, through Purchaser, to acquire the remaining equity interest in Riser not
currently owned by Purchaser except for 24,858 shares of preferred stock held by
5300 Richmond Road Corp., a subsidiary of Riser, which will remain outstanding
after the Merger.
CONDITIONS TO THE MERGER. The Merger Agreement provides that the
respective obligations of each party to effect the Merger are subject to the
satisfaction or waiver on or prior to the Merger becoming effective (the
"Effective Time") of the following conditions: (1) the Merger Agreement shall
have been approved and
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adopted by the affirmative vote of Riser's stockholders by the requisite
percentage in accordance with applicable law and the Riser Certificate, and the
Certificate of Merger shall have been executed and delivered by Riser and filed
with the Secretary of State of the State of Delaware, (2) no temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal restraint or prohibition
preventing the consummation of the Merger shall be in effect; provided, however,
that each of the parties has agreed to use its best efforts to prevent the entry
of any such injunction or other order and to appeal as promptly as possible any
injunction or other order that may be entered, (3) all regulatory and related
approvals (in addition to any approval contemplated by the HSR Act) shall have
been obtained on terms mutually satisfactory to Giant Eagle and Riser, except
for any approval the failure of which to obtain would not have a material
adverse effect on either Giant Eagle or the Riser and (4) Purchaser or its
permitted assignee shall have purchased all Shares validly tendered and not
withdrawn pursuant to the Offer; provided, however, that this condition shall
not be applicable to the obligations of Giant Eagle or Purchaser if, in breach
of the Merger Agreement or the terms of the Offer, Purchaser fails to purchase
any Shares validly tendered and not withdrawn pursuant to the Offer. The
conditions set forth in clauses (3) and (4) above have been satisfied, and the
condition set forth in clause (1) will be satisfied by Purchaser executing a
written consent in lieu of a meeting to approve and adopt the Merger Agreement.
Therefore, only the condition set forth in clause (2) above relating to legal
actions has not presently been satisfied or waived.
REGULATORY MATTERS. The waiting period under the HSR Act was terminated
on May 30, 1997. No other regulatory approval is required for the Merger. See
"THE MERGER - Regulatory Matters".
CERTAIN FEDERAL INCOME TAX CONSEQUENCES. Sales of Shares pursuant to
the Offer and the receipt of the right to receive cash by stockholders of Riser
pursuant to the Merger will be taxable transactions for Federal income tax
purposes under the Internal Revenue Code of 1986, as amended (the "Code"), and
may also be taxable transactions under applicable state, local, foreign and
other tax laws. See "THE MERGER - Certain Income Tax Consequences".
SOURCE AND AMOUNT OF FUNDS
Giant Eagle funded the purchase price of the Shares purchased in the
Offer, and the repayment of certain debt of Riser, and intends to fund the
aggregate Merger Consideration, through borrowings under a credit agreement with
its bank. Purchaser and Giant Eagle estimate that the total amount of the funds
required by the Purchaser to fund the aggregate Merger Consideration payable in
respect of the remaining 341,240 Shares outstanding is $14,332,080. See "SOURCE
AND AMOUNT OF FUNDS".
SELECTED HISTORICAL FINANCIAL DATA OF RISER
Set forth below is certain selected consolidated financial information
with respect to Riser and its subsidiaries excerpted or derived from the
information contained in Riser's Annual Report on Form 10-K for the fiscal year
ended June 29, 1996, as well as Riser's Quarterly Report on Form 10-Q for the
quarter ended April 5, 1997. More comprehensive financial information is
included in such reports and other documents filed by Riser with the Securities
and Exchange Commission (the "Commission") and incorporated herein by reference,
and the following selected financial data is qualified in its entirety by
reference to such reports and such other documents and all the financial
information (including any related notes) contained therein. Such reports and
other documents should be available for inspection and copies thereof should be
obtainable in the manner set forth below under "AVAILABLE INFORMATION".
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RISER FOODS, INC.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(in millions, except per share data and ratios)
<TABLE>
<CAPTION>
40 WEEKS ENDED FISCAL YEAR ENDED
---------------------- -------------------------------------
APRIL 5, APRIL 6, JUNE 29, JULY 1, JULY 2,
1997 1996 1996 1995 1994
---- ---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Net sales $1,030.7 $984.9 $1,285.2 $1,185.0 $1,121.6
Net income 14.4 11.7 16.6 11.6 8.4
Net income per share 1.77 1.45 2.05 1.42 1.03
<CAPTION>
At At At
April 5, June 29, July 1,
1997 1996 1995
---- ---- ----
(unaudited)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Working capital $20.9 $15.0 $23.9
Property, equipment & capital leases, net 144.2 124.0 118.1
Total assets 284.1 262.3 268.5
Long-term obligations
Debt 48.0 32.5 55.7
Capital leases 4.7 5.5 6.8
Liabilities-to-equity ratio 1.7 1.9 2.6
</TABLE>
PRICE RANGE OF THE SHARES; DIVIDENDS ON THE SHARES
The Shares are traded on the American Stock Exchange ("AMEX") under the
symbol "RSR". The following table sets forth, for each of the periods
indicated, the high and low reported sales prices per Share as reported by the
AMEX and the Dow Jones News Retrieval Service.
<TABLE>
<CAPTION>
SALES PRICE
---------------------
HIGH LOW
---- -----
<S> <C> <C>
Fiscal year ended June 29, 1996
First Quarter $14.50 $ 9.75
Second Quarter 16.38 13.38
Third Quarter 20.00 14.13
Fourth Quarter 24.00 17.75
Fiscal year ended June 28, 1997
First Quarter $27.75 $23.25
Second Quarter 32.13 25.38
Third Quarter 34.13 30.00
Fourth Quarter 43.50 31.88
Fiscal year ending June 27, 1998
First Quarter (through July __, 1997) $__.__ $__.__
</TABLE>
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On May 13, 1997, the last full day of trading before the public
announcement of the execution of the Merger Agreement, the reported closing sale
price of the Shares on the AMEX was $40.88 per Share. On May 19, 1997, the last
full day of trading before the commencement of the Offer, the reported closing
sale price of the Shares on the AMEX was $41.63 per Share. On July __, 1997, the
reported closing sale price of the Shares on the AMEX was $__.__ per share.
STOCKHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR THE SHARES.
Riser has paid a regular quarterly cash dividend of $.05 per Share
since October 10, 1995, which quarterly dividend was increased to $.06 per Share
with the dividend paid on October 8, 1996.
GENERAL
This Information Statement is being delivered in connection with the
merger of Purchaser into Riser. As a result of the Merger, Riser will be a
wholly-owned subsidiary of Giant Eagle, and each outstanding Share (other than
Shares that are owned by Riser, Giant Eagle or Purchaser or by stockholders who
have validly perfected their appraisal rights under Delaware law) will be
converted into the right to receive $42.00 in cash. A copy of the Merger
Agreement is attached hereto as Annex I.
The Merger is the second step of a two-step transaction pursuant to
which Giant Eagle, as the owner of all of the outstanding shares of Purchaser,
will acquire the entire equity interest in Riser, except for certain preferred
shares. The first step was the Offer for the outstanding Shares at $42.00 per
Share net to the seller in cash. Purchaser acquired 7,002,948 Shares upon the
consummation of the Offer on June 20, 1997, representing approximately 95% of
the issued and outstanding Shares.
REQUIRED VOTE; WRITTEN CONSENT IN LIEU OF MEETING
The Delaware General Corporation Law ("DGCL") provides that the
adoption of any plan of merger or consolidation by Riser requires the approval
of the Board of Directors and the affirmative vote of a majority of the
outstanding shares entitled to vote thereon (including the votes of any Shares
owned by the Purchaser). The Board of Directors of Riser has authorized and
approved the Offer and the Merger. Under the Riser Certificate, the holders of
not less than 80% of the outstanding Shares and Class B Shares, voting together
as a single class, must also approve the Merger. In addition, the Riser
Certificate requires that any change in the Riser Certificate which adversely
affects the holders of the Class B Shares must be approved by the holders of at
least 80% of the outstanding Class B Shares. All of the outstanding Class B
Shares were tendered to and purchased by Purchaser for $42.00 per share, but the
Riser Certificate prohibits transfer of Class B Shares to anyone who is not a
"Permitted Transferee", as such term is defined in the Riser Certificate, and
provides that any Class B Shares transferred in violation of such prohibition
are automatically converted into Shares. Accordingly, there are no Class B
Shares presently outstanding.
As a result of the consummation of the Offer, Purchaser owns and has
the right to vote a sufficient number of outstanding Shares to approve and adopt
the Merger Agreement without the affirmative vote of any other holder of Shares,
thereby assuring such approval and adoption. Purchaser plans to execute and
deliver to Riser a written consent in lieu of a meeting of stockholders
approving and adopting the Merger Agreement and authorizing the consummation of
the Merger.
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The Merger will become effective upon the filing of a certificate of
merger with the Secretary of State of the State of Delaware in accordance with
the DGCL. As used in this Information Statement, "Effective Time" means the
effective time of the Merger under the DGCL.
PROCEDURE FOR RECEIPT OF MERGER CONSIDERATION
VALID SURRENDER OF SHARES. A Letter of Transmittal will be sent to the
Riser stockholders under separate cover promptly following the Effective Time.
For a stockholder validly to surrender Shares pursuant to the Merger, a properly
completed and duly executed Letter of Transmittal (or facsimile thereof),
together with any required signature guarantees and any other required
documents, must be received by the Depositary at one of its addresses set forth
on the Letter of Transmittal and either certificates for tendered Shares must be
received by the Depositary named in the Letter of Transmittal at one of such
addresses or such Shares must be delivered pursuant to the procedure for
book-entry transfer set forth below (and a Book-Entry Confirmation (as defined
below) received by the Depositary).
BOOK-ENTRY TRANSFER. The Depositary will establish an account with
respect to the Shares at The Depository Trust Company and the Philadelphia
Depository Trust Company (the "Book-Entry Transfer Facilities") for purposes of
the Merger. Any financial institution that is a participant in any of the
Book-Entry Transfer Facilities' systems may make book-entry delivery of Shares
by causing a Book-Entry Transfer Facility to transfer such Shares into the
Depositary's account in accordance with such Book-Entry Transfer Facility's
procedures for such transfer. However, although delivery of Shares may be
effected through book-entry transfer into the Depositary's account at a
Book-Entry Transfer Facility, the Letter of Transmittal (or facsimile thereof),
properly completed and duly executed, with any required signature guarantees and
any other required documents, must, in any case, be transmitted to, and received
by, the Depositary at one of its addresses set forth on the Transmittal Letter,
or the surrendering stockholder must comply with the guaranteed delivery
procedure described below. The confirmation of a book-entry transfer of Shares
into the Depositary's account at a Book-Entry Transfer Facility as described
above is referred to herein as a "Book-Entry Confirmation". DELIVERY OF
DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH SUCH BOOK-ENTRY
TRANSFER FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
THE METHOD OF DELIVERY OF SHARES, THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE SURRENDERING
STOCKHOLDER. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT
REQUESTED, PROPERLY INSURED, IS RECOMMENDED.
SIGNATURE GUARANTEES. No signature guarantee is required on the Letter
of Transmittal if (1) the Letter of Transmittal is signed by the registered
holder of Shares (which term, for purposes of this Section, includes any
participant in any of the Book-Entry Transfer Facilities' systems whose name
appears on a security position listing as the owner of the Shares) tendered
therewith and such registered holder has not completed either the box entitled
"Special Delivery Instructions" or the box entitled "Special Payment
Instructions" on the Letter of Transmittal or (2) such Shares are tendered for
the account of a firm that is a member of a registered national securities
exchange or of the National Association of Securities Dealers, Inc. (the
"NASD"), or a commercial bank or trust company having an office or correspondent
in the United States or by any other "eligible guarantor institution", as such
term is defined in Rule 17Ad-15 under the Exchange Act (each, an "Eligible
Institution"). In all other cases, all signatures on the Letters of Transmittal
must be
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guaranteed by an Eligible Institution. If the certificates for Shares are
registered in the name of a person other than the signer of the Letter of
Transmittal, or if payment is to be made or certificates for Shares not
tendered or not accepted for payment are to be issued to a person other than
the registered holder of the certificates surrendered, the surrendered
certificates must be endorsed or accompanied by appropriate stock powers, in
either case signed exactly as the name or names of the registered holders
or owners appear on the certificates, with the signatures on the certificates
or stock powers guaranteed as aforesaid.
DETERMINATION OF VALIDITY. All questions as to the validity, form,
eligibility and acceptance of any surrender of Shares will be determined by
Giant Eagle in its sole discretion, which determination will be final and
binding.
BACKUP WITHHOLDING. In order to avoid "backup withholding" of Federal
income tax on payments of cash pursuant to the Merger, a stockholder
surrendering Shares in the Merger must provide the Depositary with such
stockholder's correct taxpayer identification number ("TIN") on a Substitute
Form W-9 and certify under penalties of perjury that such TIN is correct and
that such stockholder is not subject to backup withholding. Certain stockholders
(including, among others, all corporations and certain foreign individuals and
entities) are not subject to backup withholding. If a stockholder does not
provide its correct TIN or fails to provide the certifications described above,
the Internal Revenue Service ("IRS") may impose a penalty on such stockholder
and payment of cash to such stockholder pursuant to the Offer may be subject to
backup withholding of 31%. All stockholders surrendering Shares pursuant to the
Merger should complete and sign the main signature form and the Substitute Form
W-9 included as part of the Letter of Transmittal to provide the information and
certification necessary to avoid backup withholding (unless an applicable
exemption exists and is proved in a manner satisfactory to Purchaser and the
Depositary). Noncorporate foreign stockholders should complete and sign the main
signature form and a Form W-8, Certificate of Foreign Status, a copy of which
may be obtained from the Depositary, in order to avoid backup withholding.
APPRAISAL RIGHTS
Holders of Shares are entitled to appraisal rights in accordance with
Section 262 of the DGCL (which is reproduced in full in Annex II hereto). Such
appraisal rights, if the statutory procedures are complied with, would result in
a judicial determination of the "fair value" of the Shares owned by such
holders. Any such judicial determination of the fair value of the Shares could
be based upon considerations other than or in addition to the price paid in the
Offer and to be paid in the Merger and the market value of the Shares, including
asset values, the investment value of the Shares and any other valuation
considerations generally accepted in the investment community. In WEINBERGER V.
UOP, INC., the Delaware Supreme Court stated that "proof of value by any
techniques or methods which are generally considered acceptable in the financial
community and otherwise admissible in court" should be considered in an
appraisal proceeding. The Weinberger court also noted that under Section 262 of
the DGCL, fair value is to be determined "exclusive of any element of value
arising from the accomplishment or expectation of the merger." In CEDE & CO. V.
TECHNICOLOR, INC., however, the Delaware Supreme Court stated that, in the
context of a two-step cash merger, "to the extent that value has been added
following a change in majority control before cash-out, it is still value
attributable to the going concern," to be included in the appraisal process. As
a consequence of the foregoing, the fair value determined for Shares could be
the same as or more or less than the value of the consideration
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per Share paid pursuant to the Offer and to be paid in the Merger and payment of
such consideration would take place subsequent to payment pursuant to the
Merger.
Several recent decisions by the Delaware courts have held that a
substantial stockholder of a corporation involved in a merger has a fiduciary
duty to the other stockholders which requires that the merger be fair to such
other stockholders. In determining whether a merger is fair to minority
stockholders, the Delaware courts have considered, among other things, the type
and amount of consideration received by the stockholders and whether there was
fair dealing among the parties. The Delaware Supreme Court indicated in
Weinberger and in RABKIN V. PHILIP A. HUNT CHEMICAL CORP. that ordinarily the
remedy available to stockholders in a merger that is found not to be "fair" to
minority stockholders is the right to appraisal described above or a damages
remedy based on essentially the same principles.
No provision has been made by Riser, Purchaser or Giant Eagle to allow
access to Riser's files by unaffiliated stockholders or to obtain counsel or
appraisal services at the expense of Riser, Purchaser or Giant Eagle.
THE FOLLOWING SUMMARY IS NOT A COMPLETE STATEMENT OF THE LAW RELATING
TO APPRAISAL RIGHTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO ANNEX II.
THIS SUMMARY AND ANNEX II SHOULD BE REVIEWED CAREFULLY BY ANY HOLDER WHO WISHES
TO EXERCISE STATUTORY APPRAISAL RIGHTS OR WHO WISHES TO PRESERVE THE RIGHT TO DO
SO BECAUSE FAILURE TO COMPLY STRICTLY WITH THE PROCEDURES SET FORTH HEREIN AND
THEREIN WILL RESULT IN THE LOSS OF APPRAISAL RIGHTS.
In accordance with Section 262, any stockholder entitled to appraisal
rights may, within 20 days after the date of mailing of this Information
Statement, demand in writing from Riser the appraisal of the fair value of such
stockholder's Shares. Such demand must reasonably inform Riser of the identity
of the stockholder and that the stockholder intends thereby to demand the
appraisal of the fair value of such stockholder's Shares. Any stockholder (other
than a record owner who is acting as a nominee holder for different beneficial
owners) seeking to exercise appraisal rights for a portion, but not all, of such
stockholder's Shares should consult with legal counsel before taking any such
action. Riser believes that Delaware law has not clearly addressed the ability
of such a stockholder to exercise appraisal rights with respect to a portion,
but not all, of such stockholder's Shares. Stockholders should be aware of the
risk that should a stockholder seek to exercise appraisal rights with respect to
a portion, but not all, of such stockholder's Shares, Riser may assert that by
doing so such stockholder has waived such stockholder's appraisal rights and a
Delaware court may find that such stockholder has so waived such stockholder's
appraisal rights. A stockholder who elects to exercise appraisal rights must
mail or deliver such stockholder's written demand to the President of Riser at
5300 Richmond Road, Bedford Heights, Ohio 44146.
A demand for appraisal must be executed by or for the stockholder of
record, fully and correctly, as such stockholder's name appears on the
certificate or certificates representing his Shares. If the Shares are owned of
record in a fiduciary capacity, such as by a trustee, guardian, or custodian,
such demand must be executed by the fiduciary. If the Shares are owned of record
by more than one person, as in a joint tenancy or tenancy in common, such demand
must be executed by all joint owners. An authorized agent, including an agent
for two or more joint owners, may execute the demand for appraisal for a
stockholder of record;
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however, the agent must identify the record owner and expressly disclose the
fact that, in exercising the demand, such person is acting as agent for the
record owner.
A record owner, such as a broker, who holds Shares as a nominee for
others, may exercise appraisal rights with respect to the Shares held for all or
less than all beneficial owners of Shares as to which such person is the record
owner. In such case, the written demand must set forth the number of Shares
covered by such demand. Where the number of Shares is not expressly stated, the
demand will be presumed to cover all Shares outstanding in the name of such
record owner. Beneficial owners who are not record owners and who intend to
exercise appraisal rights should instruct the record owner to comply strictly
with the statutory requirements with respect to the exercise of appraisal
rights.
Within 120 days after the Effective Time, either Riser, as the
surviving corporation in the Merger (the "Surviving Corporation"), or any
stockholder who has complied with the required conditions of Section 262 may
file a petition in the Delaware Court of Chancery (the "Delaware Chancery
Court") demanding a determination of the fair value of the Shares of the
dissenting stockholders. If a petition for an appraisal is timely filed, after a
hearing on such petition, the Delaware Chancery Court will determine which
stockholders are entitled to appraisal rights and will appraise the Shares
formerly owned by such stockholders, determining the fair value of such Shares,
exclusive of any element of value arising from the accomplishment or expectation
of the Merger, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Delaware Chancery Court is to take into account all relevant factors.
Stockholders considering seeking appraisal should note that the "fair
value" of their Shares determined under Section 262 could be more than, the same
as or less than $42.00 per Share, and that opinions of investment banking firms
as to fairness, from a financial point of view, are not opinions as to fair
value under Section 262. The cost of the appraisal proceeding may be determined
by the Delaware Chancery Court and taxed against the parties as the Delaware
Chancery Court deems equitable in the circumstances. Upon application of a
dissenting stockholder, the Delaware Chancery Court may order that all or a
portion of the expenses incurred by any dissenting stockholder in connection
with the appraisal proceeding, including without limitation, reasonable
attorneys' fees and the fees and expenses of experts, be charged pro rata
against the value of all Shares entitled to appraisal.
From and after the Effective Time, no stockholder who has duly demanded
appraisal in compliance with Section 262 will be entitled to vote for any
purpose the Shares subject to such demand or to receive payment of dividends or
other distributions on such Shares, except for dividends or distributions
payable to stockholders of record at a date prior to the Effective Date.
At any time within 60 days after the Effective Time, any stockholder
shall have the right to withdraw such stockholder's demand for appraisal and to
accept the terms offered in the Merger Agreement; after this period, a
stockholder may withdraw such stockholder's demand for appraisal only with the
consent of the Riser. If no petition for appraisal is filed with the Delaware
Chancery Court within 120 days after the Effective Time, stockholders' rights to
appraisal shall cease, and all stockholders who had previously demanded
appraisal shall thereafter be entitled to receive the Merger Consideration in
cash, without interest thereon, upon surrender of the certificates that formerly
represented their Shares. Inasmuch as Riser has no obligation to file such a
petition, and has no present intention to do so, any stockholder who desires
such a petition to be filed is advised to file it on a timely basis. However, no
petition timely filed in the Delaware
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Chancery Court demanding appraisal shall be dismissed as to any stockholder
without the approval of the Delaware Chancery Court, and such approval may be
conditioned upon such terms as the Delaware Chancery Court deems just.
FAILURE TO FOLLOW THE STEPS REQUIRED BY SECTION 262 OF THE DGCL FOR
PERFECTING APPRAISAL RIGHTS MAY RESULT IN THE LOSS OF SUCH RIGHTS.
THE MERGER
BACKGROUND OF THE OFFER AND THE MERGER
Set forth below is a description of the background of the Offer and the
Merger.
In 1991, Riser and Giant Eagle engaged in preliminary discussions about
a possible combination of the two companies. Riser engaged Houlihan Lokey to
assist in evaluating Riser and Giant Eagle. However, after several weeks of
discussions and evaluation, Giant Eagle and Riser elected not to proceed with
such a transaction and terminated the discussions.
Between 1991 and 1996, representatives of Riser and Giant Eagle had
occasional conversations about their respective businesses but did not resume
discussions concerning a possible combination.
On August 22, 1996, representatives of Riser and Giant Eagle met to
discuss their respective businesses, the growth of their respective companies
and the existence of a strategic fit between the companies, and they renewed
discussions concerning a possible combination of the companies. Discussions
between representatives of the companies resumed on November 22, 1996, at which
time Giant Eagle indicated that it had a serious interest in pursuing a
combination with Riser, and continued at various meetings held in December 1996
and January 1997, at which time various acquisition and combination strategies,
the synergies between the companies, management and operational issues and
related issues were discussed.
On January 16, 1997, Riser and Giant Eagle entered into a
Confidentiality Agreement pursuant to which each party agreed to treat as
confidential the discussions and negotiations and certain information provided
to it by or on behalf of the other party.
In February 1997, management of Riser informed the directors of Riser
about the discussions regarding a potential business combination involving a
stock-for-stock merger. On February 12, 1997, representatives of Riser met with
a representative of Houlihan Lokey in New York regarding a potential business
combination. On February 13, 1997, representatives of Riser and Houlihan Lokey
met in Pittsburgh with representatives of Giant Eagle and Giant Eagle's
financial advisor, Parker/Hunter Incorporated ("Parker/Hunter"), at which time
issues regarding the valuation of Riser and Giant Eagle were discussed.
Thereafter, representatives of Riser and Giant Eagle continued discussions
regarding due diligence, document preparation and various legal issues,
including Giant Eagle's requirement that Messrs. Rego and Rini enter into
employment agreements with Giant Eagle concurrently with any agreement regarding
a merger. On February 28, 1997, Riser formally engaged Houlihan Lokey to assist
Riser in its evaluation of a possible transaction with Giant Eagle.
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On March 7, 1997, the Board held its regular quarterly meeting. As part
of that meeting, management of Riser updated the directors on the status of
negotiations with Giant Eagle with respect to a proposed stock-for-stock merger.
The Board discussed the benefits and challenges of such a merger and the process
that would be necessary to complete it. Management responded to various
questions concerning Giant Eagle, and legal counsel to Riser discussed certain
legal aspects of the proposed merger. Houlihan Lokey presented the Board with
its analysis of a stock-for-stock transaction and led the Board through a
detailed discussion of its analysis, including available alternatives. The Board
also considered information provided by Houlihan Lokey and Riser's management
regarding alternative transactions and other potential acquirors of Riser. The
Board was advised by management and Houlihan Lokey that there were a limited
number of potential merger candidates or acquirors having a contiguous
geographic location which would be strategically compatible with an acquisition
of Riser or whose structure would complement Riser's retail and wholesale
structure. Of that limited number, none had made any proposals or offers for
Riser. No action was taken by the Board at this meeting with respect to the
proposed merger, but the Board directed management to continue discussions with
Giant Eagle.
Representatives of Riser and Giant Eagle met on March 13, 1997 in
Youngstown, Ohio and on March 21, 1997 in Pittsburgh to continue discussions
regarding various management, control and operational issues and to discuss the
structure of the proposed stock-for-stock merger. However, the companies were
unable to reach a definitive agreement on the proposed stock-for-stock merger,
and at this time, they decided to suspend discussions while Riser and Giant
Eagle evaluated the advantages and disadvantages of the structure and
consequences of a business combination of that type. Thereafter, representatives
of Riser and Giant Eagle had occasional telephone conversations regarding
whether to renew discussions regarding the proposed merger.
On April 25, 1997, representatives of Riser, Giant Eagle, Houlihan
Lokey and Parker/Hunter resumed negotiations at a meeting in Pittsburgh. At this
meeting, Giant Eagle informed Riser that it had decided to remain a
privately-held company and was therefore unwilling to proceed with the
stock-for-stock merger. However, Giant Eagle stated it was prepared to make a
cash tender offer at $40.00 per share for all of Riser's Class A Common Stock
which, if successful, would be followed by a merger in which the holders of
Shares who did not tender and the holders of Class B Shares would also be paid
$40.00 per share. Giant Eagle's offer was conditioned upon negotiation of
definitive agreements, including but not limited to the Employment Agreements
for Messrs. Rego and Rini. On April 28, 1997, a representative of Parker/Hunter
met with representatives of Houlihan Lokey in New York to determine if there was
a basis on which they could recommend to their respective clients that
discussions should continue regarding an acquisition by Giant Eagle of 100% of
the Shares and Class B Shares. Thereafter, representatives of Riser and Giant
Eagle engaged in continuing discussions regarding the value of Giant Eagle's
proposed tender offer, the Stockholders Agreement, the Employment Agreements and
various other terms of the tender offer, including a $11 million termination fee
proposed by Giant Eagle. These discussions ultimately resulted in Giant Eagle
increasing its offer to $42.00 per share.
Riser issued a press release on May 2, 1997 in which it stated that it
was engaged in negotiations with an unidentified supermarket chain and that
there was no assurance that a transaction would result from those negotiations.
On May 4, 1997, the Board held a special meeting by telephone at which
management of Riser apprised the directors that Giant Eagle had made an offer of
$42.00 per Share and discussed other changes
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in the proposed transaction with Giant Eagle since the March 7, 1997 meeting of
Riser's Board of Directors. Houlihan Lokey also presented a summary of its
financial analysis of the proposed transaction. On May 4, 1997, certain
non-employee directors of Riser, namely, Robert H. Kanner, William A. Miller,
Jack A. Robinson and James A. Schlindwein (the "Outside Directors"), retained
legal counsel to advise them regarding the proposed transaction.
Prior to the opening of trading on the AMEX on May 5, 1997, Riser
issued another press release in which it disclosed that it had received a cash
tender offer of $42.00 per share from an unidentified supermarket chain, but
that no agreement had been reached between the parties and that there could be
no assurance that the transaction would be consummated.
Later on May 5, 1997, the Outside Directors met with their legal
counsel to discuss their duties, and following their meeting, the Board held a
special meeting to further consider the cash tender offer and proposed merger.
At the meeting, Riser's management and legal counsel apprised the Board of the
status of negotiations and discussed the likely timing of the transaction, the
structure of the transaction and the conditions to consummation of the offer,
the right of the Board to terminate the merger and to accept a superior proposal
after Riser paid a termination fee of $11 million and the other principal terms
of the Merger Agreement, the Stockholders Agreement and the Employment
Agreements. Management of Riser and Houlihan Lokey reiterated their comments
originally expressed at the Board's meeting on March 7, 1997 regarding the
limited number of potential merger candidates or acquirors. Houlihan Lokey then
provided the Board with a copy of its financial presentation concerning the
Offer and formally stated its opinion (the "Houlihan Lokey Fairness Opinion")
that, based upon and subject to certain considerations and assumptions, the
consideration to be received by the holders of Shares and Class B Shares
pursuant to the Offer and the Merger is fair from a financial point of view to
such holders. A copy of the Houlihan Lokey Fairness Opinion containing the
assumptions made, procedures followed, matters considered and limits of its
review is attached hereto as Annex III and is incorporated herein by reference.
THE FULL TEXT OF THE HOULIHAN LOKEY FAIRNESS OPINION SHOULD BE READ IN
CONJUNCTION WITH THIS INFORMATION STATEMENT. After discussing whether to
actively solicit additional bidders, the Board decided not to do so out of
concern that actively contacting other bidders would likely cause Giant Eagle to
withdraw its offer. The Board also took account of the limited number of
potential merger candidates or acquirors and Riser's public announcements on May
2 and May 5, 1997. The Board concluded that these announcements gave sufficient
notice to any potential bidders. At the request of the Outside Directors, the
Board concluded that it would be prudent to explore obtaining a second opinion
regarding the fairness of the transaction from a financial point of view. The
Board also concluded that it would be willing to pursue Giant Eagle's proposal
subject to certain conditions, including but not limited to (1) reduction of the
termination fee, (2) elimination of the financing contingency provisions in the
Merger Agreement, (3) providing that in the event of an Acquisition Proposal the
Stockholders Agreement would terminate at the same time as the Merger Agreement,
thereby permitting a superior proposal to proceed and (4) investigation of the
ability to obtain a second fairness opinion from another investment banking
firm.
In the evening of May 5, 1997, representatives of Riser informed
representatives of Giant Eagle of the action taken by Riser's Board. In
response, on May 6, 1997 Giant Eagle demanded that Riser's full Board
unconditionally approve the Offer by May 7, 1997 or it would have no alternative
but to terminate the Offer. After additional negotiations, Giant Eagle and Riser
entered into an agreement on May 7, 1997 pursuant to which, among other matters,
Giant Eagle agreed to extend the Offer until May 13, 1997, and Riser agreed to
pay Giant Eagle a reduced termination fee of $10 million in the event its Board
approved or recommended to the Riser stockholders an acquisition proposal other
than Giant Eagle's on or before November 30, 1997.
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On May 8, 1997, Riser retained McDonald to perform its analysis and determine if
it could provide a second fairness opinion. During the period between May 7 and
May 13, 1997, representatives of the companies continued to negotiate the terms
of the Merger Agreement, Stockholders Agreement and Employment Agreements and to
address the conditions raised by the Board at its meeting on May 5, 1997.
The Board met again on May 12, 1997 to discuss the latest negotiations
and changes to the agreements. At this meeting, the Board heard a presentation
from Riser's legal counsel concerning the terms and conditions of the Merger
Agreement, the Stockholders Agreement and the Employment Agreements. The Board
directed management to continue negotiations with Giant Eagle.
On May 13, 1997, the Outside Directors met with their legal counsel to
discuss the Offer and the Merger, and following their meeting, the full Board
met a final time to reach its decision concerning the Offer and the Merger. The
Board reviewed the changes to the Merger Agreement, Stockholders Agreement and
Employment Agreements, including the agreement by Giant Eagle to permit the
Stockholders Agreement to terminate at the same time as the Merger Agreement if
the Merger Agreement was terminated because of an Acquisition Proposal and if
the termination fee was paid. Houlihan Lokey affirmed the conclusions of the
Houlihan Lokey Fairness Opinion. McDonald then provided the Board with a copy of
its financial presentation concerning the Offer and formally stated its opinion
(the "McDonald Fairness Opinion") that, based upon and subject to certain
considerations and assumptions, the consideration to be received by the holders
of Shares and Class B Shares pursuant to the Offer and the Merger is fair from a
financial point of view to such holders. A copy of the McDonald Fairness Opinion
containing the assumptions made, procedures followed, matters considered and
limits of its review is attached hereto as Annex IV and is incorporated herein
by reference. THE FULL TEXT OF THE MCDONALD FAIRNESS OPINION SHOULD BE READ IN
CONJUNCTION WITH THIS INFORMATION STATEMENT. Management and Houlihan Lokey
stated that no proposals from any other potential acquirors had been received,
and both Houlihan Lokey and McDonald stated their belief that potential
acquirors had had sufficient time to make a proposal since the press release by
Riser containing the $42.00 offer price on May 5, 1997. Thereafter, the Board
unanimously (1) approved the Offer and the Merger, (2) approved and adopted the
Merger Agreement, Stockholders Agreement and Employment Agreements and the
transactions contemplated thereby, (3) delegated authority to the Executive
Committee, consisting of Messrs. Rini and Rego, to conduct final negotiations
with respect to the foregoing agreements, including obtaining Giant Eagle's
agreement to remove its financing contingency, and (4) determined that the terms
of the Offer and the Merger were fair and in the best interests of the
stockholders of Riser and recommended that the stockholders of Riser accept the
Offer and tender their shares of Class A Common Stock to Purchaser pursuant to
the Offer.
Negotiations continued thereafter, culminating in Giant Eagle,
Purchaser and Riser agreeing upon the final forms of the Merger Agreement,
Stockholders Agreement and Employment Agreements late in the evening on May 13,
1997. The final agreements, which reflect the instructions given by the full
Board earlier that day, were approved by the Executive Committee pursuant to the
authority conferred upon it by the Board. The Merger Agreement and Employment
Agreements were executed on May 13, 1997, the Stockholders Agreement was
executed on May 14, 1997, and the transactions were publicly announced on May
14, 1997.
RECOMMENDATION OF BOARD
At its meeting held on May 13, 1997, as discussed above, the Board
unanimously approved and adopted the Merger Agreement, approved the Offer, the
Merger, the Stockholders Agreement and the
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transactions contemplated by the Merger Agreement and determined that the terms
of the Offer and the Merger were fair to and in the best interest of the
stockholders of Riser and recommended that the stockholders of Riser accept the
Offer and tender their Shares to Purchaser pursuant to the Offer. In making its
recommendations to the stockholders of Riser with respect to the Offer and the
Merger, the Board considered a number of factors, including the following:
Financial Condition, Results of Operations, Business and Prospects of
Riser. The Board considered the financial condition, results of operations,
business and prospects of Riser, including its prospects if it were to remain
independent. The Board discussed Riser's current strategic plan, including the
costs of such plan and the risks for Riser involved in its implementation. The
Board also discussed the highly-competitive environment in which Riser operates.
Other Potential Transactions. The Board also considered information
provided by Houlihan Lokey and Riser's management regarding alternative
transactions and other potential merger candidates or acquirors of Riser. The
Board noted that none of the potential merger candidates or acquirors identified
by Riser's management or Houlihan Lokey had made any proposals or offers for
Riser, and that Riser had not actively solicited any such offers. The Board
noted, however, that Giant Eagle, by virtue of its ownership of grocery stores
in Ohio and Pennsylvania, could realize substantial operating synergies from an
acquisition of Riser. The Board also noted that the Merger Agreement would
permit Riser to terminate the Merger to accept a superior proposal from a third
party (subject to payment of the $10 million termination fee).
Historical Stock Price Performance. The Board reviewed the historical
stock price performance of Riser and noted that the consideration to be received
by Riser's stockholders pursuant to the Offer and the Merger would represent a
premium of approximately 12% over the closing price of the Shares on the
American Stock Exchange on the day before the first announcement of the Offer on
May 5, 1997 and a premium of approximately 16% over the 30-day average closing
price for the Shares prior to May 5, 1997.
Houlihan Lokey Presentations. The Board took into account the
presentations and advice of Houlihan Lokey with respect to the financial and
other terms of the Offer and the Merger and the Houlihan Lokey Fairness Opinion
as of the date of its opinion that the consideration to be received by the
holders of Shares pursuant to the Merger Agreement is fair from a financial
point of view to such holders. The Board considered the presentations of
Houlihan Lokey in connection with such opinion as to various financial and other
considerations deemed relevant to the Board's evaluation of the Offer and the
Merger. In connection with the preparation of its opinion, Houlihan Lokey
informed the Board that it had (a) analyzed certain publicly available financial
statements and other information of Riser; (b) analyzed certain internal
financial statements and other financial and operating data concerning Riser
prepared by the management of Riser; (c) analyzed and discussed certain
financial projections prepared by the management of Riser; (d) discussed the
past and current operations and financial condition and the prospects and
projected operations and performance of Riser with senior executives of Riser;
(e) reviewed the reported prices and trading activity for the Shares; (f)
compared the financial performance of Riser and the prices and trading activity
of the Shares with that of certain other comparable publicly-traded companies
and their securities; (g) reviewed the financial terms, to the extent publicly
available, of certain comparable acquisition transactions; (h) reviewed the
Merger Agreement and certain related documents, including the Employment
Agreements; and (i) performed such other analyses and considered such other
factors as Houlihan Lokey deemed appropriate.
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A copy of the Houlihan Lokey Fairness Opinion is attached as Annex III
to this Information Statement and is incorporated herein by reference. Holders
of Shares should read the Houlihan Lokey Fairness Opinion in its entirety for a
description of procedures followed, assumptions and qualifications made, matters
considered and limitations on the review undertaken by Houlihan Lokey. In
considering such opinion, the Board was aware that upon delivery thereof,
Houlihan Lokey became entitled to certain fees described below in connection
with its engagement by Riser and that, in addition, Houlihan Lokey expressed no
opinion or recommendation as to whether the shareholders of Riser should accept
the Offer and the Merger.
McDonald Presentation. The Board also took into account the
presentation and advice of McDonald with respect to the financial and other
terms of the Offer and the Merger and the McDonald Fairness Opinion as of the
date of its opinion that the consideration to be received by the holders of
Shares pursuant to the Merger Agreement is fair from a financial point of view
to such holders. The Board considered the presentations of McDonald in
connection with such opinion as to various financial and other considerations
deemed relevant to the Board's evaluation of the Offer and the Merger. In
connection with the preparation of its opinion, McDonald informed the Board that
it had (a) analyzed certain publicly available financial statements and other
information of Riser; (b) analyzed certain internal financial statements and
other financial and operating data concerning Riser prepared by the management
of Riser; (c) analyzed and discussed certain financial projections prepared by
the management of Riser; (d) discussed the past and current operations and
financial condition and the prospects of Riser with the chief financial officer
of Riser; (e) reviewed the reported prices and trading activity for the Shares;
(f) compared the financial performance of Riser and the prices and trading
activity of the Shares with that of certain other comparable publicly-traded
companies and their securities; (g) reviewed the financial terms, to the extent
publicly available, of certain comparable acquisition transactions; (h) examined
Riser facilities, including a representative group of Riser's grocery stores;
(i) reviewed the Merger Agreement and certain related documents, including the
Employment Agreements; and (j) performed such other analyses and considered such
other factors as McDonald deemed appropriate.
A copy of the McDonald Fairness Opinion is attached as Annex IV to this
Information Statement and is incorporated herein by reference. Holders of Shares
should read the McDonald Fairness Opinion in its entirety for a description of
procedures followed, assumptions and qualifications made, matters considered and
limitations on the review undertaken by McDonald. In considering such opinion,
the Board was aware that upon delivery thereof, McDonald became entitled to
certain fees described below in connection with its engagement by Riser and
that, in addition, McDonald expressed no opinion or recommendation as to whether
the shareholders of Riser should accept the Offer and the Merger.
Terms and Conditions of the Offer and the Merger. The Board also
considered the terms and conditions of the Offer and the Merger Agreement
including that the Offer is not subject to financing but is subject to minimum
tender conditions and that it contemplates the payment or reimbursement to Giant
Eagle, under certain circumstances and subject to certain limits, of certain
fees and expenses. In analyzing the conditions, the Board considered, among
other things, the risk of the Offer's non-consummation. In assessing the
termination fees, the Board considered the likelihood of any third party making
a proposal for a third party transaction and that the effect of the termination
fee would be to increase by the amount of such termination fee the costs to a
third party of acquiring Riser. The Board noted that the transaction was being
structured as a cash tender offer for all Shares, and it would permit all
holders of Shares to participate on the same basis. The Board considered that
certain Class B stockholders were committing to the transaction but were not
being afforded any preferential treatment in connection with the Offer and the
Merger. The Board also considered
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the terms of the Stockholders Agreement, including the fact that such agreement
would terminate if the Merger Agreement terminated because of an Acquisition
Proposal and the $10 million termination fee was paid, thus enabling the Board
to pursue a superior proposal from a third party.
Other Considerations. The Board also considered the financial ability
of the Giant Eagle to consummate the Offer and the Merger; the possible impact
of the Offer and the Merger and of alternatives thereto on Riser's business and
prospects; and the fact that following the consummation of the Offer and the
Merger, the current shareholders of Riser will no longer be able to participate
in any increases or decreases in the value of Riser's business and profits.
The foregoing discussion of the information and factors considered and
given weight by the Board is not intended to be exhaustive. In view of the
variety of factors considered in connection with its evaluation of the Offer and
the Merger, the Board did not find it practicable to, and did not, quantify or
otherwise assign relative weights to the specific factors considered in reaching
its determination. In addition, individual members of the Board may have given
different weights to different factors.
Fees Paid to Houlihan Lokey and McDonald. Pursuant to a letter
agreement dated February 28, 1997, between Riser and Houlihan Lokey, Riser has
agreed to pay Houlihan Lokey a retainer fee of $75,000, a fee of $75,000 upon
the public announcement of the Offer, a fee of $300,000 at the time of the
delivery by Houlihan Lokey of its written fairness opinion for inclusion in
Riser's Schedule 14D-9 for dissemination to Riser's stockholders and a fee of
$1,500,000 at the closing of the Merger (against which previously paid fees will
be credited). In addition, Riser has agreed to reimburse Houlihan Lokey for
certain out-of-pocket expenses, if any, and legal fees not to exceed $20,000,
whether or not any transaction is consummated, and to indemnify Houlihan Lokey
and certain related persons against certain liabilities in connection with their
engagement.
Pursuant to a letter agreement dated May 8, 1997, between Riser and
McDonald, Riser has agreed to pay McDonald a fee of $250,000. In addition, Riser
has agreed to reimburse McDonald for certain out-of-pocket expenses, including
legal fees, in an amount not to exceed $5,000, and to indemnify McDonald and
certain related persons against certain liabilities in connection with its
engagement.
PURPOSE OF THE OFFER AND THE MERGER
The purpose of the Offer and the Merger is to enable Giant Eagle,
through Purchaser, to acquire, in one or more transactions, control of the Board
and the entire equity interest in Riser, other than certain preferred
shares owned by a subsidiary of Riser. The Offer was intended to increase the
likelihood that the Merger will be completed promptly.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
EMPLOYMENT AGREEMENTS. The following is a summary of the material terms
of the Employment Agreements between Giant Eagle and Anthony C. Rego, Chairman
of the Board and Chief Executive Officer of Riser, and Charles A. Rini Sr.,
President and Chief Operating Officer of Riser. This summary is qualified in
its entirety by reference to the Employment Agreements which are exhibits to
the Merger Agreement, and which have been filed with the Commission as exhibits
to the Schedule 14D-1, and which are incorporated herein by reference.
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In connection with the execution of the Merger Agreement, Giant Eagle
entered into five-year Employment Agreements with Messrs. Rego and Rini.
Pursuant to the Employment Agreements, Mr. Rego will be the Vice Chairman of
Giant Eagle and Chief Executive Officer of Riser, and Mr. Rini will be the
Executive Vice President of Giant Eagle and President and Chief Operating
Officer of Riser. The Employment Agreements provide for payment to Messrs. Rego
and Rini of a base salary at their current base salary rates with Riser. In
addition, Messrs. Rego and Rini will be entitled to (1) an annual incentive
bonus under the annual bonus program applicable to Giant Eagle's senior
executive officers and (2) a long-term incentive bonus under Giant Eagle's
Long-Term Incentive Plan ("LTIP") so that (a) during fiscal years 1998, 1999 and
2000 (i) in the event that the LTIP threshold has been met, they each will
receive a bonus of $500,000, (ii) in the event that the LTIP target has been
met, they each will receive a bonus of $1,500,000, and (iii) in the event that
the LTIP maximum has been achieved, they each will receive a bonus of
$3,000,000; and (b) during fiscal years 2001 and 2002, (i) in the event that the
LTIP (or such successor long-term incentive plan for executives of Giant Eagle
which is a successor of the LTIP) threshold has been met, they each will receive
a bonus of $300,000, (ii) in the event that the LTIP (or successor plan) target
has been met, they each will receive a bonus of $1,000,000, and (iii) in the
event that the LTIP (or successor plan) maximum has been achieved, they each
will receive a bonus of $2,000,000. Giant Eagle will also provide Messrs. Rego
and Rini with certain life insurance and other standard fringe benefits. In the
Employment Agreements, Messrs. Rego and Rini have agreed not to compete with
Riser during the term of the Employment Agreements and for a period of two years
thereafter.
The Merger Agreement and a letter dated May 13, 1997 delivered by Giant
Eagle to each of Mr. Rini and Mr. Rego in connection with their execution of the
Employment Agreements provides that Giant Eagle shall cause Messrs. Rego and
Rini to be elected to the Board of Directors of Giant Eagle effective as of the
Effective Time.
STOCKHOLDERS AGREEMENT. Giant Eagle has entered into a Stockholder
Voting Agreement dated as of May 14, 1997 (the "Stockholders Agreement"), with
all holders of Class B Shares (collectively, the "Selling Stockholders"),
pursuant to which each Selling Stockholder agreed, among other things, to (1)
tender in the Offer and not withdraw all Shares owned by such Selling
Stockholder and (2) vote all Shares and Class B Shares beneficially owned
by such Selling Stockholder in favor of the Merger. All of the outstanding
Class B Shares were tendered to and purchased by Purchaser in connection
with its consummation of the Offer. The Stockholders Agreement has been filed
with the Commission as an exhibit to the Schedule 14D-1 and is incorporated
herein by reference.
CONFIDENTIALITY AGREEMENT. Riser and Giant Eagle signed a
Confidentiality Agreement dated January 16, 1997 (the "Confidentiality
Agreement"), providing for each of them to keep confidential their discussions
and negotiations regarding the Offer and the Merger and all information
exchanged by them concerning Riser or Giant Eagle. The Confidentiality Agreement
has been filed with the Commission as an exhibit to the Schedule 14D-1 filed by
Riser with the Commission on May 20, 1997 and is incorporated herein by
reference.
STOCK PLANS. Pursuant to the Merger Agreement, the Board of Directors
of Riser adopted resolutions to adjust the terms of all outstanding stock
options to purchase Shares ("Stock Options") granted prior to the date of the
Merger Agreement under any stock option, plan, program or arrangement of Riser
(collectively, the "Stock Plans") to provide that each Stock Option outstanding
immediately prior to the acceptance for payment of Shares pursuant to the Offer,
whether or not vested, shall be canceled in exchange for a cash
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payment to the holder by Purchaser of an amount equal to (1) the excess, if any,
of (a) the price per Share to be paid pursuant to the Offer over (b) the
exercise price per Share subject to such Stock Option, multiplied by (2) the
number of Shares for which such Stock Option shall not therefore have been
exercised.
Each of the executive officers of Riser held stock options to
purchase Shares. All of such options were canceled in exchange for a cash
payment to the holder of an amount equal to the excess, if any, of $42.00 over
the exercise price under such option.
All amounts payable pursuant to the terms described in the preceding
paragraph are subject to any required withholding of taxes and were paid
without interest. Riser agreed in the Merger Agreement to use its best efforts
to obtain all consents of the holders of the Stock Options as shall be
necessary to effectuate the foregoing. Notwithstanding anything to the contrary
contained in the Merger Agreement, payment shall, at Giant Eagle's request, be
withheld in respect of any Stock Option with respect to any holder until all
necessary consents are obtained from such holder.
The Merger Agreement provides further that all Stock Plans shall
terminate as of the Effective Time of the Merger, and the provisions in any
other benefit, stock or other plan providing for the issuance, transfer or grant
of any capital stock of Riser, any interest in respect of any capital stock of
Riser, or any amounts derived from the value of any capital stock of Riser shall
be deleted at the time of the Merger, and Riser shall ensure that following the
Merger no holder of a Stock Option or any participant in any Stock Plan or other
employee benefit plan of Riser or any of its subsidiaries will have any right
thereunder to acquire any capital stock of Riser.
BENEFIT PLANS. The Merger Agreement provides, except as may be required
by law, that Giant Eagle will, and will cause Purchaser to, continue for at
least one year after the Effective Time to follow Riser's policies with respect
to employees and employee benefits in effect immediately prior to the Effective
Time.
INDEMNIFICATION, EXCULPATION AND INSURANCE. The Merger Agreement
provides that the Certificate of Incorporation of Riser shall contain provisions
with respect to matters occurring prior to the Effective Time that are no less
favorable with respect to indemnification than are set forth in Article XV of
the Riser Certificate, which provisions shall not be amended, repealed or
otherwise modified in any manner that would have an adverse effect on the rights
thereunder of individuals who as of May 13, 1997 or at the Effective Time are
directors, officers, employees, fiduciaries or agents of Riser, unless such
modification shall be required by law.
The Merger Agreement also provides that Riser shall, to the fullest
extent permitted under applicable law and regardless of whether the Merger
becomes effective, indemnify and hold harmless, each present and former
director, officer, employee, fiduciary and agent of Riser and each of its
subsidiaries and each fiduciary and agent of each such director and officer
(collectively, the "Indemnified Parties") against all costs and expenses
(including attorneys' fees), judgments, fines, losses, claims, damages,
liabilities and settlement amounts paid in connection with any claim, action,
suit, proceeding or investigation (whether arising before or after the Effective
Time), whether civil, criminal, administrative or investigative, arising out of
or pertaining to any action or omission in their capacity as an officer,
director, employee, fiduciary or agent of Riser or any of its subsidiaries,
occurring before the Effective Time, until the expiration of the statute of
limitations relating thereto (and shall pay any expenses in advance of the final
disposition of such action or proceeding to each Indemnified Party to the
fullest extent permitted under the DGCL, upon receipt from the
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Indemnified Party to whom expenses are advanced of any undertaking to repay such
advances required under DGCL). Giant Eagle has agreed to guarantee the
obligations of Riser as described in this paragraph.
The Merger Agreement provides that Giant Eagle shall cause Riser to,
and Riser shall, use its reasonable efforts to maintain in effect for six years
from the Effective Time, if available, the current directors' and officers'
liability insurance policies maintained by Riser (provided that Riser may
substitute therefore policies of at least the same coverage containing terms and
conditions which are not materially less favorable) with respect to matters
occurring prior to the Effective Time; provided, however, that in no event shall
Riser be required to expend pursuant to this paragraph more than an amount per
year equal to 200% of current annual premiums paid by Riser for such insurance.
In the event that, but for the proviso to the immediately preceding sentence,
Riser would be required to expend more than 200% of current annual premiums,
Riser shall obtain the maximum amount of such insurance obtainable by payment of
annual premiums equal to 200% of current annual premiums.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES. The receipt of the right to
receive cash by stockholders of Riser pursuant to the Merger will be a taxable
transaction for Federal income tax purposes under the Code and may also be a
taxable transaction under applicable state, local, foreign and other tax laws.
For Federal income tax purposes, a stockholder will generally recognize gain or
loss equal to the difference between the amount of cash received by the
stockholder pursuant to the Merger and the aggregate tax basis in the Shares
surrendered by the stockholder and purchased pursuant to the Merger. Gain or
loss will be calculated separately for each block of Shares converted into cash
pursuant to the Merger.
If Shares are held by a stockholder as capital assets, gain or loss
recognized by the stockholder will be capital gain or loss, which will be
long-term capital gain or loss if the stockholder's holding period for the
Shares exceeds one year. Under present law, long-term capital gains recognized
by an individual stockholder will generally be taxed at a maximum Federal
marginal tax rate of 28%, and long-term capital gains recognized by a corporate
stockholder will be taxed at a maximum Federal marginal tax rate of 35%.
A stockholder (other than certain exempt stockholders including, among
others, all corporations and certain foreign individuals) that surrenders Shares
in the Merger may be subject to 31% backup withholding unless the stockholder
provides its TIN and certifies that such number is correct or properly certifies
that it is awaiting a TIN. A stockholder that does not furnish its TIN may be
subject to a penalty imposed by the IRS. Each stockholder should complete and
sign the Substitute Form W-9 included as part of the Letter of Transmittal so as
to provide the information and certification necessary to avoid backup
withholding.
If backup withholding applies to a stockholder, the Depositary is
required to withhold 31% from payments to such stockholder. Backup withholding
is not an additional tax. Rather, the amount of the backup withholding can be
credited against the Federal income tax liability of the person subject to the
backup withholding, provided that the required information is given to the IRS.
If backup withholding results in an overpayment of tax, a refund can be obtained
by the stockholder upon filing an income tax return.
THE FOREGOING DISCUSSION MAY NOT BE APPLICABLE WITH RESPECT TO SHARES
RECEIVED PURSUANT TO THE EXERCISE OF EMPLOYEE STOCK OPTIONS OR OTHERWISE AS
COMPENSATION OR WITH RESPECT TO HOLDERS OF SHARES WHO ARE SUBJECT TO SPECIAL TAX
TREATMENT UNDER THE CODE, SUCH AS NON-U.S. PERSONS, LIFE INSURANCE COMPANIES,
TAX-EXEMPT ORGANIZATIONS AND FINANCIAL INSTITUTIONS, AND MAY NOT APPLY TO A
HOLDER OF SHARES IN LIGHT OF ITS INDIVIDUAL CIRCUMSTANCES. STOCKHOLDERS ARE
URGED TO CONSULT THEIR OWN TAX ADVISORS TO
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DETERMINE THE PARTICULAR TAX CONSEQUENCES TO THEM (INCLUDING THE APPLICATION AND
EFFECT OF ANY STATE, LOCAL OR FOREIGN INCOME AND OTHER TAX LAWS) OF THE MERGER.
REGULATORY MATTERS
The waiting period under the HSR Act was terminated on May 30, 1997.
The Federal Trade Commission (the "FTC") and the Antitrust Division of the
Department of Justice frequently scrutinize the legality under the antitrust
laws of transactions such as Purchaser's acquisition of Riser. At any time, the
Antitrust Division or the FTC could take such action under the antitrust laws as
it deems necessary or desirable in the public interest, including seeking to
enjoin the consummation of the Merger or seeking the divestiture of Shares
acquired by Purchaser or the divestiture of substantial assets of Giant Eagle or
its subsidiaries, or Riser or its subsidiaries. Private parties may also bring
legal action under certain circumstances. There can be no assurance that a
challenge to the Merger on antitrust grounds will not be made or, if such a
challenge is made, of the result thereof.
THE MERGER AGREEMENT
The following is a summary of the material terms of the Merger
Agreement. This summary is not a complete description of the terms and
conditions of the Merger Agreement and is qualified in its entirety by reference
to the full text thereof, which is attached hereto as Annex I. Capitalized terms
used and not otherwise defined herein shall have the meanings assigned to them
in the Merger Agreement.
THE OFFER. The Merger Agreement provides for the commencement of the
Offer. The Offer commenced on May 20 and expired on June 17, 1997, and on June
20, 1997, Purchaser purchased 7,002,948 Shares tendered pursuant to the Offer,
representing approximately 95% of the issued and outstanding Shares.
CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The Merger
Agreement provides that the respective obligations of each party to effect the
Merger are subject to the satisfaction or waiver on or prior to the Effective
Time of the following conditions: (1) the Merger Agreement shall have been
approved and adopted by the affirmative vote of Riser's stockholders by the
requisite percentage in accordance with applicable law and the Riser
Certificate, and the Certificate of Merger shall have been executed and
delivered by Riser and filed in the Department of State of the State of
Delaware, (2) no temporary restraining order, preliminary or permanent
injunction or other order issued by any court of competent jurisdiction or other
legal restraint or prohibition preventing the consummation of the Merger shall
be in effect; provided, however, that each of the parties has agreed to use its
best efforts to prevent the entry of any such injunction or other order and to
appeal as promptly as possible any injunction or other order that may be
entered, (3) all regulatory and related approvals (in addition to any approval
contemplated by the HSR Act) shall have been obtained on terms mutually
satisfactory to Giant Eagle and Riser, except for any approval the failure of
which to obtain would not have a material adverse effect on either Giant Eagle
or Riser and (4) Purchaser or its permitted assignee shall have purchased all
Shares validly tendered and not withdrawn pursuant to the Offer; provided,
however, that this condition shall not be applicable to the obligations of Giant
Eagle or Purchaser if, in breach of the Merger Agreement or the terms of the
Offer, Purchaser fails to purchase any Shares validly tendered and not withdrawn
pursuant to the Offer. The conditions set forth in clauses (3) and (4) above
have been satisfied, and the condition set forth in clause (1) will be satisfied
by Purchaser executing a written consent in lieu of a meeting to approve and
adopt the Merger Agreement. Therefore, only the condition set forth in clause
(2) above relating to legal actions has not presently been satisfied or waived.
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TERMINATION OF THE MERGER AGREEMENT. The Merger Agreement may be
terminated and the Merger contemplated thereby may be abandoned at any time
prior to the Effective Time, notwithstanding approval thereof by the
stockholders of Riser, (1) by mutual written consent of Riser and Giant Eagle,
except if Shares have been purchased pursuant to the Offer, (2) by any of Riser,
Giant Eagle or Purchaser if (a) upon a vote at a duly held stockholders meeting
or any adjournment thereof, any required approval of the stockholders of Riser
shall not have been obtained; (b) (i) Purchaser shall not have commenced the
Offer within five business days after the date of the Merger Agreement, (ii) as
a result of the failure of the conditions to the Offer, the Offer shall have
been terminated by Giant Eagle or expired in accordance with its terms without
Purchaser having purchased Shares pursuant to the Offer or (iii) Purchaser shall
not have purchased Shares pursuant to the Offer within 90 days following the
date of the Merger Agreement; provided, however, that the passage of the period
referred to in this clause (iii) shall be tolled for any part thereof during
which any party shall be subject to a nonfinal order, decree, ruling or action
restraining, enjoining or otherwise prohibiting the purchase of Shares pursuant
to the Offer or the consummation of the Merger; and provided, further, that the
right to terminate the Merger Agreement pursuant to this clause (2)(b) shall not
be available to any party whose failure to fulfill any of its obligations under
the Merger Agreement results in the failure of any such condition; (c) the
Merger shall not have been consummated on or before the date six months
following the date of the Merger Agreement, unless the failure to consummate the
Merger is the result of a willful and material breach of the Merger Agreement by
the party seeking to terminate the Merger Agreement; provided, however, that the
passage of such period shall be tolled for any part thereof during which any
party shall be subject to a nonfinal order, decree, ruling or action
restraining, enjoining or otherwise prohibiting the consummation of the Merger
or the calling or holding of the stockholders meeting; provided further, that no
party shall be entitled to terminate the Merger Agreement pursuant to this
clause (2)(c) if Shares have been purchased pursuant to the Offer; or (d) any
governmental entity shall have issued an order, decree or ruling or taken any
other action permanently enjoining, restraining or otherwise prohibiting the
purchase of Shares or Class B Shares pursuant to the Offer or the Merger and
such order, decree, ruling or other action shall have become final and
nonappealable; or (3) by either Giant Eagle or Riser under the circumstances
described below under Acquisition Proposals. In the event the Merger Agreement
is terminated by any of Riser, Giant Eagle or Purchaser as described in this
paragraph, the Merger Agreement shall forthwith become void and have no effect,
without any liability or obligation on the part of Riser, Purchaser or Giant
Eagle, except with respect to certain specified provisions (including the
provisions described below under Fees and Expenses) and, in the case of
Purchaser and Giant Eagle, except to the extent that such termination results
from the material breach by Purchaser or Giant Eagle of any of its
representations, warranties, covenants or agreements set forth in the Merger
Agreement.
ACQUISITION PROPOSALS. The Merger Agreement provides that Riser shall
not, nor shall it permit any of its subsidiaries to, nor shall it authorize or
permit any director, officer or employee of, or other agents of, Riser or any of
its subsidiaries to, directly or indirectly, (1) take any action to solicit,
initiate or encourage the submission of any Acquisition Proposal (as defined
below) or (2) engage in negotiations with, or disclose any nonpublic information
relating to Riser or any of its subsidiaries or afford access to their
respective properties, books or records to any person in connection with an
Acquisition Proposal. Notwithstanding the foregoing, Riser and its Board of
Directors (or any committee thereof) will not be prohibited from (a) taking and
disclosing a position with respect to a tender offer by a third party pursuant
to Rules 14d-9 and 14e-2(a) promulgated by the Commission under the Exchange
Act, or (b) considering, negotiating, discussing, approving or recommending to
the stockholders of Riser a bona fide Acquisition Proposal not solicited in
violation of the Merger Agreement if and only to the extent that, (i) such Board
of Directors determines in good faith upon the advice of counsel that such
action is required for the Board of Directors to comply with
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its fiduciary duties to stockholders imposed by law, and (ii) prior to
furnishing such information to, or entering into discussions or negotiations
with, such person or entity, Riser provides written notice to Giant Eagle to the
effect that it is furnishing information to, or entering into discussions or
negotiations with, such person or entity. Either Giant Eagle or (provided Riser
and its Board of Directors have complied with the requirements described in this
paragraph) Riser may terminate the Merger Agreement if Riser or its Board of
Directors approves or recommends to Riser's stockholders an Acquisition Proposal
or the Board of Directors of Riser withdraws its recommendation that the
stockholders accept and approve the transactions contemplated by the Merger
Agreement. The Merger Agreement defines "Acquisition Proposal" as any proposal
or offer from any person (other than Giant Eagle or Purchaser) relating to (i)
any direct or indirect acquisition or purchase of any equity interest in, or a
substantial amount of assets of, Riser or its subsidiaries, (ii) any tender
offer or exchange offer (including a self-tender offer) involving the equity
securities of Riser, (iii) any merger, consolidation, recapitalization,
liquidation, business combination or similar transaction involving Riser other
than the transactions contemplated by the Merger Agreement or (iv) any other
extraordinary transaction the consummation of which would or could reasonably be
expected to impede, interfere with, prevent or materially delay the transactions
contemplated by the Merger Agreement.
FEES AND EXPENSES. The Merger Agreement provides that, except as
provided below, all fees and expenses in connection with the Offer, the Merger,
the Merger Agreement and the transactions contemplated by the Merger Agreement
shall be paid by the party incurring such fees or expenses, whether or not the
Offer or the Merger is consummated.
Giant Eagle shall be entitled to receive from Riser (1) a termination
fee in the amount of $10,000,000 if the Merger Agreement is terminated or
Purchaser does not purchase Shares pursuant to the Offer because Riser or its
Board of Directors approves or recommends to Riser's stockholders an Acquisition
Proposal or in connection with an Acquisition Proposal the Board of Directors of
Riser withdraws its recommendation that the stockholders of Riser accept and
approve the transactions contemplated by the Merger Agreement; (2) a termination
fee in the amount of $5,000,000 if the Purchaser has not purchased Shares
pursuant to the Offer as a result of (a) the failure of certain conditions to
the Offer or (b) the failure of holders of Shares to have validly tendered and
not withdrawn prior to the expiration of the Offer that number of Shares that
would represent the minimum number of outstanding Shares, determined immediately
prior to the consummation of the Offer, that would enable Giant Eagle and
Purchaser to consummate the Merger under the Riser Certificate notwithstanding
the negative vote of all Shares not acquired by Purchaser in the Offer and the
negative vote of all Class B Shares as to which the beneficial owners have not
executed and delivered the Stockholders Agreement; and (iii) a topping fee in
the amount of $10,000,000 in the event that, following any termination of the
Merger Agreement (other than solely because Giant Eagle or Purchaser failed to
fulfill any of their obligations under the Merger Agreement), the Board of
Directors of Riser approves or recommends an Acquisition Proposal to Riser's
stockholders on or before November 30, 1997, which amount shall be due and
payable upon consummation of the transactions contemplated by such Acquisition
Proposal. Under no circumstances will Riser be obligated to pay more than
$10,000,000 pursuant to the provisions of this paragraph.
Giant Eagle has also agreed that if it has received the full amount of
any payment under the foregoing paragraph, neither Giant Eagle nor Purchaser
shall assert or pursue, directly or indirectly, whether arising under tort,
contract, or otherwise, any claim or cause of action against any of Riser or any
person making an Acquisition Proposal or their respective directors, officers or
representatives based in whole or part upon its
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or their receipt, consideration, recommendation or approval of an Acquisition
Proposal, including Riser's exercise of its right of termination pursuant to the
provisions of the Merger Agreement.
CONDUCT OF BUSINESS BY RISER. The Merger Agreement provides that,
except as otherwise set forth in the Merger Agreement and described in a
schedule to the Merger Agreement, Riser will, and will cause each of its
subsidiaries to, conduct its business in the ordinary course and consistent with
past practice and use its reasonable best efforts to preserve intact its
respective business organization and relationships with third parties and to
keep available the services of its officers and key employees. The Merger
Agreement further provides that, without limiting the generality of the
foregoing, during the period from the date of the Merger Agreement to the
Effective Time of the Merger, without the prior written consent of Giant Eagle,
which consent shall not be unreasonably withheld: (1) Riser will not adopt or
propose any change in the Riser Certificate or By-Laws; (2) other than
declaration and payment of regular quarterly dividends not to exceed $.06 per
share of Common Stock, Riser will not, and will not permit any of its
subsidiaries to, declare, set aside or pay any dividend or other distribution
with respect to any shares of capital stock of Riser, or contract for or effect
any repurchase, redemption or other acquisition or investment by Riser or any of
its subsidiaries of any outstanding shares of capital stock or other securities
of, or other ownership interests in, Riser or any of its subsidiaries; (3) Riser
will not, and will not permit any of its subsidiaries to, merge or consolidate
with any other person or acquire a material amount of assets of any other
person; (4) Riser will not, and will not permit any of its subsidiaries to,
sell, lease, license or otherwise surrender, relinquish or dispose of any assets
or property which are material to Riser and its subsidiaries, taken as a whole,
except (a) pursuant to existing contracts or commitments (the terms of which
have been disclosed to Giant Eagle prior to the date of the Merger Agreement),
or (b) in the ordinary course of business consistent with past practice; (5)
Riser will not settle any material tax audit, make or change any material tax
election or file amended tax returns; (6) Riser will not issue or grant any
securities or option or warrant to acquire any securities (except pursuant to
existing obligations), enter into any amendment of any material term of any
outstanding security of Riser or of any of its subsidiaries, incur any
indebtedness or guarantee obligations of others except pursuant to existing
credit facilities or arrangements, fail to make any required contribution to any
of Riser's employee benefit plans, increase compensation, bonus or other
benefits payable to any employee or former employee or enter into any settlement
or consent with respect to any pending litigation, except in the ordinary course
of business consistent with past practice or as otherwise permitted by the
Merger Agreement; (7) Riser will not change any method of accounting or
accounting practice by Riser or any of its subsidiaries, except for any such
required change in generally accepted accounting principles; (8) Riser will not
commit to any capital expenditures not in the ordinary course of business; and
(9) Riser will not, and will not permit any of its subsidiaries to, agree or
commit to do any of the foregoing.
The Merger Agreement also provides that, except to the extent necessary
to comply with the requirements of applicable laws and regulations, Riser will
not, and will not permit any of its subsidiaries to (1) take, or agree or commit
to take, any action that would make any representation and warranty of Riser in
the Merger Agreement inaccurate in any respect at, or as of any time prior to,
the Effective Time or (2) omit, or agree or commit to omit, to take any action
necessary to prevent any such representation or warranty from being inaccurate
in any respect at any such time, provided, however that Riser shall be permitted
to take or omit to take such action which can (without any uncertainty) be cured
at or prior to the Effective Time.
BOARD OF DIRECTORS. The Merger Agreement provides that, promptly upon
the acceptance for payment of and payment by Purchaser for, any Shares pursuant
to the Offer, Purchaser will be entitled to designate such number of directors
on the Board of Directors of Riser as will give Purchaser, subject to compliance
with
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Section 14(f) of the Exchange Act, representation on such Board of Directors
equal to at least that number of directors which is the product of (1) the
total number of directors on such Board of Directors who are elected by the
holders of the Shares pursuant to the Riser Certificate (giving effect to the
directors elected pursuant to this sentence) multiplied by (2) the percentage
that (a) such number of Shares so accepted for payment and paid for by
Purchaser plus the number of Shares otherwise owned by Purchaser or any other
subsidiary of Giant Eagle bears to (b) the number of total Shares outstanding,
and Riser shall, at such time, cause Purchaser's designees to be appointed or
elected; provided, however, that, in the event Purchaser's designees are to be
appointed or elected to Riser's Board of Directors, until the Effective Time of
the Merger, the Board of Directors of Riser will have at least three directors
who are Independent Directors; and provided further that, in such event, if the
number of Independent Directors shall be reduced below three for any reason
whatsoever, any remaining Independent Directors (or Independent Director, if
there shall be only one remaining) shall be entitled to designate persons to
fill such vacancies, who shall be deemed to be Independent Directors for
purposes of the Merger Agreement, or, if no Independent Directors then remain,
the other directors shall designate three persons to fill such vacancies who
are not officers, stockholders or affiliates of Riser, Giant Eagle or
Purchaser, and such persons shall be deemed to be Independent Directors for
purposes of the Merger Agreement. Subject to applicable law, Riser has agreed
to take all action requested by Giant Eagle necessary to effect any such
appointment or election, including mailing to its stockholders an information
statement containing the information required by Section 14(f) of the Exchange
Act and Rule 14f-1 promulgated thereunder. In connection with the foregoing,
the Merger Agreement provides that Riser will promptly, at the option of
Purchaser (which Purchaser intends to exercise), either increase the size of
Riser's Board of Directors or obtain the resignation of such number of its
current directors as is necessary to enable Purchaser's designees to be elected
or appointed to Riser's Board of Directors as provided above. As of the date of
this Information Statement, Giant Eagle has not yet exercised its right to
designate such directors.
SOURCE AND AMOUNT OF FUNDS
The total amount of funds required by the Purchaser to purchase all
outstanding Shares pursuant to the Offer and the Merger, all outstanding Class B
Shares pursuant to the Stockholders Agreement and the Merger and all outstanding
stock options, to pay fees and expenses related to the Offer and the Merger and
to assume existing debt of Riser is estimated to be approximately $403 million.
The Purchaser obtained all funds needed for the Offer and the Merger through (i)
a loan made to Giant Eagle by Mellon Bank, N.A. ("Mellon"), which loan was
subsequently syndicated to a group of financial institutions led by Mellon and
(ii) an intercompany loan made by Giant Eagle to Purchaser.
The senior secured loans provided by the syndicate (the "Facilities")
consist of a $250,000,000 revolving credit loan (the "Revolving Credit Loan")
and a $225,000,000 term loan (the "Term Loan") to be used by Giant Eagle to
provide funds to effect the Offer and the Merger, refinance certain existing
indebtedness of Giant Eagle and Riser and finance general working capital and
corporate purpose needs.
The Revolving Credit Loan matures six years from the date of closing of
the Facilities (the "Loan Closing Date") and must be repaid in full on or prior
to such date. Draws under the Revolving Credit Loan may also take the form of
requests for issuance of standby letters of credit for the account of Giant
Eagle to be issued by Mellon or an affiliate of Mellon. The aggregate amount of
such letters of credit shall not exceed $30,000,000. Such letters of credit
shall expire not later than 12 months after the date of original issuance and,
in any event, not later than the maturity date of the Facilities. At no time
shall the sum of the outstanding
27
<PAGE> 29
advances under the Revolving Credit Loan, undrawn letters of credit and
unreimbursed letter of credit drawings exceed $250,000,000.
The Term Loan matures six years from the Loan Closing Date and will
require quarterly repayments of principal beginning September 30, 1997 in
amounts ranging from $2,500,000 to $13,750,000.
Interest shall accrue on the amount outstanding under the Facilities at
either the Base Rate (defined as the higher of (i) the federal funds rate plus
.50% or (ii) Mellon's prime rate) or on a LIBOR basis with margins fixed until
the end of Giant Eagle's second full fiscal quarter after the Loan Closing Date
and thereafter to be adjusted quarterly based on the consolidated cash flow
coverage ratio of Giant Eagle and its consolidated subsidiaries for the
preceding four consecutive fiscal quarters.
Mandatory prepayments of the Facilities are required in an amount equal
to (i) the net cash proceeds of certain permitted asset sales, (ii) the proceeds
of casualty insurance recoveries not reinvested in the businesses, (iii) the net
cash proceeds of certain equity issuances (iv) 50% of excess cash flow and (v) a
formula amount in the event a required number of leasehold mortgages are not
delivered within 90 days of the Loan Closing Date. Giant Eagle will enter into
interest rate caps, collars or swaps to hedge interest rate exposure under the
Term Loan.
The Facilities are secured by a first priority lien on and a security
interest in substantially all of the properties and assets of Giant Eagle and
each of its subsidiaries (including Riser) including, in any case (i) all of the
capital stock of each subsidiary, (ii) cash and investments, (iii) accounts
receivable and notes receivable, (iv) assignments of leases, (v) real property,
equipment and other tangible personal property and (vi) trademarks and other
intellectual property. After January 1, 1999, security will be released upon the
achievement, based on the prior 12 months, of a leverage ratio of less than or
equal to 2.0 to 1.0 and a consolidated cash flow coverage ratio of greater than
or equal to 1.10 to 1.0.
Giant Eagle expects that it will repay any amounts borrowed under the
Facilities with cash flow from operations.
BUSINESS
Riser and its subsidiaries are engaged in the distribution of groceries
and related items through its retail supermarket subsidiary, Rini-Rego
Supermarkets, Inc., and its wholesale distribution subsidiary, American Seaway
Foods, Inc. All references to Riser shall include Riser and its consolidated
subsidiaries.
Retail Operations
- -----------------
As of June 28, 1997, Riser operated 35 retail supermarkets in the
northeast Ohio area, 27 of which operate under the conventional "Rini-Rego
Stop-N-Shop" neighborhood store format, and eight of which operate under the
updated and expanded "Rini-Rego Marketplace" format.
Riser's retail stores offer a large selection of food items, including
dry groceries, meat, dairy, produce, frozen foods, deli products and baked
goods, as well as a number of non-food items such as greeting cards
28
<PAGE> 30
and health and beauty care items. Certain of Riser's stores also contain
specialty and service departments such as "fresh to go" prepared foods, service
meat, service seafood, service floral and general merchandise. In addition,
selected stores feature walk-in beer coolers, expanded periodical and book
selections, full service bank branches, one-hour photo processing and
"TicketMaster" ticket outlets.
Riser's merchandising strategy is to offer a broad selection of quality
products at competitive prices with an emphasis on superior customer service,
quality and one-stop shopping convenience. Riser sells most nationally known
brands of merchandise, regional brands and a variety of private label products.
Riser has an ongoing program of remodeling, upgrading and replacing its
retail supermarket locations with either its conventional, neighborhood store
format or its Marketplace store format based upon the location and demographics
of the market that such store serves. Since the introduction of Riser's
Marketplace store format in fiscal 1994, Riser has built, or remodeled and
converted from its traditional format, eight Marketplace stores with four
additional locations in various stages of construction or remodeling as
Marketplace stores. Over the past five fiscal years, Riser has also built or
remodeled 11 neighborhood stores.
In general, Riser's Marketplace stores are larger than Riser's
neighborhood stores and range in size from approximately 60,000 to 75,000 square
feet. The Marketplace stores feature updated decor packages and fixturing and
offer broader selections of traditional merchandise with additional emphasis on
fresh, high quality perishables, prepared food items and a variety of service
departments for one-stop shopping convenience.
Advertising and promotion are important factors in Riser's
merchandising strategy. All of Riser's stores are affiliated with the
Association of Stop-N-Shop Supermarkets (the "Association"), an association of
independent grocery retailers established as a cooperative advertising and
purchasing organization. The Association advertises in newspapers, circulars,
and television and radio advertising comparable to the other supermarket
companies which operate in the northeast Ohio market area. This advertising
generally features high demand products at competitive prices while emphasizing
Riser's quality image.
Riser offers the Stop-N-Shop Preferred Shoppers Club program which is a
free membership club that offers special values to its member customers. These
include "bonus buy" automatic discounts, "clipless coupons" and other
promotions and check cashing card capabilities.
All of Riser's retail supermarkets are equipped with electronic
checkout systems which are integrated with the Preferred Shoppers Club.
Most of Riser's retail stores offer on-line debit and credit card payment
options. Riser also utilizes in-store microcomputers for various tasks such as
electronic time keeping, labor scheduling and shelf-price auditing systems.
Wholesale Operations
- --------------------
Riser operates one of the largest wholesale grocery distribution
operations in the Midwest doing business as "Seaway". Riser offers a
comprehensive selection of national brand, regional brand and private label
products to Company-operated retail stores, other independently-operated retail
grocery chains and independent grocers, primarily in northeast Ohio, and to a
lesser extent, in central Ohio, western Pennsylvania and southeastern Michigan.
Riser also supplies various products to PharMor, Inc., a regional deep discount
29
<PAGE> 31
drug chain, and Hills Department Stores, Inc., a regional mass merchandising
chain at certain of their locations in additional states.
Riser is continually in the process of expanding its wholesale customer
base and increasing penetration in existing customers by upgrading its available
product lines to include a wider assortment of grocery, frozen foods, dairy,
meat, produce and bakery items.
Riser offers its wholesale customers a wide variety of operational
support services which include advertising, promotion, marketing and
merchandising services, retail operations counseling, and technical and
information systems support. In addition, Riser assists wholesale customers in
the upgrading and/or enlarging of their stores by providing inventory and
equipment financing, store layout, equipment planning and design, and
engineering and construction services.
Riser utilizes an on-line computerized buying and inventory control
system for the purchase and sale of its inventory, including the use of
Electronic Data Interchange to process orders with some of its vendors and the
Tripmaster on-board truck computer system. Riser operates a trucking fleet
consisting of 106 tractors, 136 refrigerated trailers and 139 dry trailers.
Riser purchases the majority of its products from large, national
manufacturers of consumer foods and grocery-related products and the remainder
of its products from several other suppliers. Riser is also a member of various
purchasing cooperatives which provide Riser with enhanced purchasing
opportunities and assistance with the development of its private label program.
Riser operates its own health and beauty care/general merchandise
(HBC/GM) distribution facility and the Eagle Ice Cream Company which
manufactures branded ice cream and distributes purchased ice cream and frozen
novelty products.
Consistent with the industry practices of other food distribution
retailers and wholesalers, Riser maintains inventory levels at its distribution
centers and retail locations at levels which minimize out of stock products for
its customers. Riser permits the return of damaged or defective products from
customers.
Competition
- -----------
The supermarket industry is highly competitive and may be affected by
general economic conditions. During the past several years, competition in the
northeast Ohio market area has intensified due in part to a stagnant or
declining consumer population and an increase in the number of competitor's
stores. Riser continually emphasizes quality, customer service and value to
maintain its market share and compensate for the lack of population growth in
Riser's market area. Riser estimates that it is one of the largest retailers in
terms of grocery sales in the northeast Ohio market area.
Competition at the retail level varies by store location.
Company-operated retail stores primarily compete with regional supermarket
chains and voluntary supermarket associations. Riser also competes with
supercenter format stores, warehouse and wholesale clubs, convenience stores,
deep discount drug stores and restaurants. The principal areas of competition
pertain to price, selection and quality of perishables and other food products,
customer service, store conditions and store location. These companies compete
with Riser's corporate stores at the retail level and the independent retailers
that Riser supplies.
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<PAGE> 32
The wholesale food distribution industry is also highly competitive in
the market area served by Riser. Management believes that the principal
competitive factors include service, price, breadth of product line and the
availability of support services to its wholesale customers. Riser competes
directly with regional and national wholesalers.
Seasonality and Regulation
- --------------------------
Riser's business is generally not seasonal in nature. Riser anticipates
that its compliance with federal, state and local laws relating to the
protection of the environment has not had and is not expected to have a
significant effect on Riser's capital expenditures, earnings or competitive
position.
Customers and Suppliers
- -----------------------
No single customer or group of customers under common control accounted
for 10% or more of Riser's consolidated revenues for the fiscal year ended June
28, 1997 ("1997 Fiscal Year"). Groceries, general merchandise and raw materials
are generally available from many sources.
Employees
- ---------
As of June 28, 1997, Riser employed approximately 5,800 persons, on
both a full and part-time basis. The majority of Riser's work force is unionized
and are members of either the United Food and Commercial Workers Union, Local
No. 880 (retail) ("Local 880") or the International Brotherhood of Teamsters,
Local No. 507 (wholesale) ("Local 507"). Riser's contract with Local 880, which
is negotiated through the Cleveland Food Industry Committee ("CFIC"), expires on
September 12, 1999. Members of the CFIC include Riser, the other members of the
Association and Riser's primary grocery store competitors, First National
Supermarkets, Inc. and Heinen's. Riser's contract with Local 507 is in effect
until April 1, 1998.
Corporate Background
- --------------------
Riser was incorporated under the laws of the State of Delaware on
December 18, 1987. Riser was formed to act as the parent holding company in
connection with the combination of Fisher Foods, Inc. ("Fisher"), Rini Holding
Company ("Rini"), Rego Supermarkets, Inc. ("Rego"), and American Seaway Foods,
Inc. and two of its affiliated partnerships (collectively, "Seaway"), through
the exchange of Riser stock for the stock of Fisher, Rini, Rego and Seaway, and
a merger which was effective June 8, 1988 (the "Combination"). Following the
Combination, Riser consolidated the wholesale operations of Seaway and Fisher
into one operating unit and consolidated its retail operations through the
merger of Rini and Rego into Fisher and changed Fisher's name to Rini-Rego
Supermarkets, Inc. As of the close of the 1996 Fiscal Year, Riser merged its
Seaway Food Services, Inc. subsidiary with and into its American Seaway Foods,
Inc. subsidiary.
Properties
- ----------
Riser owns a warehouse and office facility in Bedford Heights, Ohio,
containing approximately 850,000 square feet which serves as Riser's corporate
headquarters and principal distribution center. This facility is currently under
construction to expand its capacity by approximately 120,000 additional square
feet. Riser also owns the following properties: a warehouse, office facility and
garage in Maple Heights, Ohio containing approximately 356,000 square feet,
approximately 349,000 square feet of which is used in its
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<PAGE> 33
HBC/GM operations and approximately 7,000 square feet is leased to an
unaffiliated company; a warehouse and office facility in Cuyahoga Heights, Ohio
containing approximately 187,000 square feet of which approximately 140,000
square feet is leased to others and the remainder is used in its wholesale
operations; a warehouse facility in Cleveland, Ohio containing approximately
29,100 square feet which is used in its wholesale operations; and an ice cream
plant in Bedford, Ohio containing approximately 39,000 square feet.
Six retail store properties are owned by Riser through its Rini-Rego
Supermarkets, Inc. subsidiary, four of which are used in its retail operations
and two of which are subleased to unaffiliated parties. Riser leases the
remainder of its operating retail locations. Most of Riser's leased properties
are under long-term leases of varying terms, the majority of which obligate
Riser to pay certain increases in property taxes and insurance, percentage rent,
common area and maintenance charges. As of June 29, 1996, the aggregate minimum
annual rentals of all operating and capital leases with initial noncancellable
terms of more than one year were approximately $14,802,000.
Legal Proceedings
- -----------------
On August 14, 1996, a purported class action lawsuit JUDITH E.
CHAMBERLAIN, ET AL, V. THE AMERICAN TOBACCO COMPANY, INC. ET AL, Case No.
CV313491, was filed in the Court of Common Pleas, Cuyahoga County, Ohio
asserting claims against a substantial number of tobacco manufacturers (the
"Manufacturers"), two distributors of tobacco products and The Kroger Co. and
Riser Foods, Inc. as retailers that sold cigarettes through their stores
(collectively, the "Defendants"). The Defendants have filed a Notice of Removal
to transfer the case to the United States District Court of the Northern
District of Ohio, where it is presently pending as Case No. 1:96 CV 2005. The
Complaint was amended and Rini-Rego Supermarkets, Inc. was added as a defendant.
The Amended Complaint asserts that, through the fraudulent course of conduct,
the Manufacturers have manufactured, promoted, marketed, supplied and sold
cigarettes to millions of Ohioans while knowing, but concealing, that the
cigarettes contained a highly addictive drug, nicotine, and that they have
controlled and manipulated the amount of nicotine in the cigarettes with the
intention of creating and sustaining addiction to cigarettes. The Plaintiffs
purport to represent all nicotine dependent persons who are residents and/or
citizens of Ohio that have purchased and smoked cigarettes manufactured by the
tobacco companies that are Defendants, and certain persons affiliated with such
purported Plaintiffs. The Plaintiffs seek compensatory damages for economic
losses, personal injuries, emotional distress, as well as punitive and exemplary
damages and equitable relief, including the establishment of a medical
monitoring fund in order to remedy alleged violations by the Manufacturers under
the common law doctrines of fraud, civil conspiracy, negligent
misrepresentation, negligence, intentional infliction of emotional distress,
negligent infliction of serious emotional distress, product liability, breach of
expressed and implied warranties and violations of certain Ohio consumer
protection laws. The Amended Complaint seeks similar relief against the
distributors and retailers, including Riser, for alleged negligence, strict
liability and breach of warranties. The Plaintiffs
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have moved to remove the case to state court. The Court has not yet certified
the case as a class action, nor has discovery on the merits begun. Riser intends
to defend itself vigorously.
On September 16, 1996, an additional purported class action lawsuit,
THOMAS COYNE (MAYOR OF BROOK PARK) AND TIMOTHY HAGAN (CUYAHOGA COUNTY
COMMISSIONER) ON BEHALF OF THE STATE OF OHIO AND ALL OHIO TAXPAYERS V. THE
AMERICAN TOBACCO COMPANY, INC. ET AL., Case No. CV 315249, was filed in the
Court of Common Pleas, Cuyahoga County, Ohio against all of the same Defendants.
The Defendants subsequently filed a Notice of Removal to remove the case to the
United States District Court for the Northern District of Ohio, where it is
presently pending as Case No. 1:96 CV 2247. The allegations in this lawsuit are
essentially the same as in the CHAMBERLAIN action, except that the damages
sought are restitution and the repayment to the State of Ohio and the Medicaid
Program for monies allegedly expended as a result of wrongful acts of the
Defendants, as well as punitive damages. The Plaintiffs have moved to remand
this case to state court.
Riser's liability, if any, from these claims cannot be determined at
this time. However, Riser's management believes that it has meritorious defenses
to the allegations raised in the Complaints and Riser intends to defend itself
vigorously in this litigation. Management also believes that Riser may have
available certain rights to indemnification and/or insurance with respect to the
damage claims that may arise out of this litigation. Based upon current
information, Riser believes that any liability arising out of this litigation
will not have a material adverse effect on the financial condition or results of
operations of Riser.
SELECTED FINANCIAL DATA
The audited consolidated balance sheets of Riser and subsidiaries as of
June 29, 1996 and July 1, 1995, and the related audited consolidated statements
of income, stockholders' equity and cash flows for each of the three fiscal
years in the period ended June 29, 1996, together with the report of independent
public accountants thereon, are incorporated herein by reference to Riser's
Annual Report on Form 10-K for the fiscal year ended June 29, 1996, filed with
the Commission on September 24, 1996. Such financial statements are located on
pages 26-44 of the Form 10-K and are filed as Exhibit 1 to this Information
Statement.
The unaudited consolidated condensed balance sheets of Riser and
subsidiaries as of April 5, 1997 and June 29, 1996, and the consolidated
condensed statements of income and cash flows for the 40 weeks ended April 5,
1997 and April 6, 1996, and for the 12 weeks ended April 5, 1997 and April 6,
1996, are incorporated herein by reference to Riser's Quarterly Report on Form
10-Q for the quarterly period ended April 5, 1997, filed with the Commission on
May 20, 1997. Such financial statements are located on pages 3-28 of the Form
10-Q and are filed as Exhibit 2 to this Information Statement.
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<PAGE> 35
PRINCIPAL STOCKHOLDERS AND STOCK OWNERSHIP OF MANAGEMENT
The following table sets forth certain information, as of July 15,
1997, regarding the beneficial ownership of Riser's Shares owned by each
director of Riser, all directors and officers as a group and each person known
to Riser to own beneficially more than five percent (5%) of the outstanding
shares of either class ("Five Percent Stockholder"). The information with
respect to the holdings of Five Percent Stockholders is derived solely from
Riser's review of Schedules 13D and 13G on file with the Commission and from
correspondence received from and telephone conversations with such stockholders.
No Class B Shares were outstanding on July 15, 1997.
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE
CLASS A OF CLASS
NAME OF BENEFICIAL OWNER SHARES A SHARES
- ------------------------ --------- ----------
<S> <C> <C>
Talon Acquisition Company(1) 7,002,948(2) 95%
101 Kappa Drive, RIDC Park
Pittsburgh, PA 15238
Directors and officers as -0- -0-
a group (25 persons)
<FN>
- --------
(1) Talon Acquisition Company, which is referred to throughout this
Information Statement as "Purchaser", is a wholly-owned subsidiary of Giant
Eagle, Inc. See "Summary - The Companies". Accordingly, Giant Eagle, Inc. may be
deemed to beneficially own the Shares owned by Purchaser
(2) Does not include 863,412 Class B Shares purchased by Talon and
automatically converted into Shares.
</TABLE>
34
<PAGE> 36
AVAILABLE INFORMATION
Riser is subject to the reporting requirements of the Exchange Act and,
in accordance therewith, is required to file reports and other information with
the Commission relating to its business, financial condition and other matters.
Information as of particular dates concerning Riser's directors and officers,
their remuneration, stock options and other matters, the principal holders of
Riser's securities and any material interest of such persons in transactions
with Riser is required to be disclosed in proxy statements distributed to
Riser's stockholders and filed with the Commission. Such reports, proxy
statements and other information should be available for inspection at the
public reference facilities of the Commission located at 450 Fifth Street, N.W.,
Washington, DC 20549, and at the regional offices of the Commission located in
the Northwestern Atrium Center, 500 West Madison Street (Suite 1400), Chicago,
Illinois 60661, and Seven World Trade Center, 13th Floor, New York, New York
10048. Such reports, proxy statements and other information may also be obtained
at the web site that the Commission maintains at http://www.sec.gov. Copies
should be obtainable, by mail, upon payment of the Commission's customary
charges, by writing to the Commission's principal office at 450 Fifth Street,
N.W., Washington, DC 20549. Such information should also be on file at the
American Stock Exchange, 86 Trinity Place, New York, New York 10006-1881.
INDEX TO FINANCIAL STATEMENTS AND EXHIBITS
Exhibit 1 Audited consolidated balance sheets of Riser and subsidiaries
as of June 29, 1996, and July 1, 1995, and the related audited
consolidated statements of income, stockholders' equity and
cash flows for each of the three fiscal years in the period
ended June 29, 1996, together with the report of independent
accountants thereon (incorporated herein by reference to
Riser's Annual Report on Form 10-K for the fiscal year ended
June 29, 1996, filed with the Commission on September 24, 1996).
Exhibit 2 Unaudited consolidated condensed balance sheets of Riser and
subsidiaries as of April 5, 1997 and June 29, 1996, and the
consolidated condensed statements of income and cash flows for
the 40 weeks ended April 5, 1997 and April 6, 1996
(incorporated herein by reference to Riser's Quarterly Report
on Form 10-Q for the quarterly period ended April 5, 1997,
filed with the Commission on May 20, 1997.)
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<PAGE> 37
Annex I
AGREEMENT AND PLAN OF MERGER
Dated as of May 13, 1997,
Among
GIANT EAGLE, INC.
TALON ACQUISITION COMPANY
And
RISER FOODS, INC.
<PAGE> 38
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I THE OFFER......................................................................2
SECTION 1.01. The Offer........................................................2
SECTION 1.02. Company Actions..................................................4
ARTICLE II THE MERGER....................................................................5
SECTION 2.01. The Merger.......................................................5
SECTION 2.02. Closing..........................................................6
SECTION 2.03. Effective Time...................................................6
SECTION 2.04. Effects of the Merger............................................6
SECTION 2.05. Articles of Incorporation and Bylaws.............................7
SECTION 2.06. Directors and Officers...........................................7
ARTICLE III EFFECT OF THE MERGER ON THE CAPITAL
STOCK OF THE CONSTITUENT CORPORATIONS;
EXCHANGE OF CERTIFICATES........................................................7
SECTION 3.01. Effect on Capital Stock..........................................7
SECTION 3.02. Exchange of Certificates.........................................8
ARTICLE IV REPRESENTATIONS AND WARRANTIES...............................................10
SECTION 4.01. Representations and Warranties of the Company...................10
SECTION 4.02. Representations and Warranties of Parent and Sub................26
ARTICLE V CONDUCT OF BUSINESS PENDING THE MERGER........................................28
SECTION 5.01. Conduct of Business by the Company..............................28
ARTICLE VI ADDITIONAL AGREEMENTS........................................................29
SECTION 6.01. Stockholder Approval; Preparation of Proxy Statement............30
SECTION 6.02. Access to Information; Confidentiality..........................31
SECTION 6.03. Best Efforts; Notification......................................31
SECTION 6.04. Stock Plans.....................................................32
SECTION 6.05. Company Plans...................................................33
SECTION 6.06. Indemnification.................................................33
SECTION 6.07. Directors.......................................................35
SECTION 6.08. Public Announcements............................................36
SECTION 6.09. Stockholder Litigation..........................................37
SECTION 6.10 Acquisition Proposals...........................................37
</TABLE>
-i-
<PAGE> 39
<TABLE>
<S> <C>
SECTION 6.11. Filings; Other Action...........................................38
SECTION 6.12. Directors of Parent.............................................39
SECTION 6.13. Additional Agreements...........................................39
SECTION 6.14. Shares Held by Company Subsidiaries.............................39
SECTION 6.15. Employment Agreements...........................................39
SECTION 6.16. Merger Certificate..............................................39
SECTION 6.17. Provision of Funds..............................................39
ARTICLE VII CONDITIONS PRECEDENT........................................................40
SECTION 7.01. Conditions to Each Party's Obligation to Effect the Merger......40
ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER..........................................41
SECTION 8.01. Termination.....................................................41
SECTION 8.02. Effect of Termination...........................................42
SECTION 8.03. Amendment.......................................................42
SECTION 8.04. Extension; Waiver...............................................42
SECTION 8.05. Procedure for Termination. Amendment, Extension or Waiver.......43
SECTION 8.06. Effect of Termination and Abandonment...........................43
ARTICLE IX GENERAL PROVISIONS...........................................................45
SECTION 9.01. Survival of Representations, Warranties and Agreements..........45
SECTION 9.02. Notices.........................................................45
SECTION 9.03. Descriptive Headings............................................46
SECTION 9.04. Entire Agreement; Assignment....................................46
SECTION 9.05. Governing Law...................................................46
SECTION 9.06. Expenses and Fees...............................................47
SECTION 9.07. Counterparts; Effectiveness.....................................47
SECTION 9.08. Severability; Validity; Parties in Interest.....................47
SECTION 9.09. Jurisdiction....................................................47
</TABLE>
-ii-
<PAGE> 40
THIS AGREEMENT AND PLAN OF MERGER, dated as of May 13, 1997 (this
"Agreement"), among GIANT EAGLE, INC., a Pennsylvania corporation (the
"Parent"), TALON ACQUISITION COMPANY, a Delaware corporation and a wholly-owned
subsidiary of Parent (the "Sub"), and RISER FOODS, INC., a Delaware corporation
(the "Company"),
W I T N E S S E T H:
WHEREAS, the respective Boards of Directors of Parent and Sub have
each determined that it is advisable and in the best interest of the Parent and
Sub, respectively, to engage in a transaction whereby Parent will acquire the
Company on the terms and subject to the conditions set forth in this Agreement;
WHEREAS, the Board of Directors of the Company has determined that it
is advisable and in the best interest of the Company and its stockholders to
engage in a transaction whereby Parent will acquire the Company on the terms
and subject to the conditions set forth in this Agreement and that the Offer
and Merger are fair to the stockholders of the Company;
WHEREAS, in furtherance of such acquisition, Parent proposes to cause
Sub to make a tender offer (as it may be amended from time to time as permitted
under this Agreement, the "Offer") to purchase all the issued and outstanding
shares of Class A Common Stock, par value $.01 per share, of the Company (the
"Class A Common Stock"), at a price per share of Class A Common Stock of $42.00
in cash, upon the terms and subject to the conditions set forth in this
Agreement; and the Board of Directors of the Company has adopted resolutions
approving the Offer and the Merger (as hereinafter defined) and recommending
that the Company's stockholders accept the Offer;
WHEREAS, the respective Boards of Directors of Parent, Sub and the
Company have approved the merger of Sub into the Company, or the Company into
Sub, at the election of Parent as set forth below (the "Merger"), upon the
terms and subject to the conditions set forth in this Agreement, whereby each
issued and outstanding share of Common Stock (as hereinafter defined in Section
1.01) not owned directly or indirectly by Parent or the Company, except shares
of Common Stock held by persons who object to the Merger and comply with all
the provisions of Delaware law concerning the right of holders of Common Stock
to dissent from the Merger and require appraisal of their shares of Common
Stock ("Dissenting Stockholders"), will be converted into the right to receive
the per share consideration paid pursuant to the Offer;
<PAGE> 41
WHEREAS, the Company, Parent and Sub wish to make certain
representations, warranties, covenants and agreements in connection with the
Offer and the Merger and also to prescribe various conditions to the Offer and
the Merger; and
WHEREAS, concurrently with the execution and delivery of this
Agreement, the holders of Class B Common Stock (as hereinafter defined) of the
Company will be asked to enter into an agreement (the "Stockholders'
Agreement"), a copy of which is attached hereto as Exhibit C, pursuant to which
such shareholders will, among other things, tender their shares of Class A
Common Stock in the Offer and vote their shares of Class B Common Stock in
favor of the Merger upon the terms and subject to the conditions set forth
therein.
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants and agreements, and upon the terms and subject to the
conditions hereinafter set forth, and intending to be legally bound, the
parties agree as follows:
ARTICLE I
THE OFFER
SECTION 1.01. The Offer. (a) Subject to the provisions of this
Agreement, as promptly as practicable but in no event later than five business
days after the date of this Agreement, Sub shall, and Parent shall cause Sub
to, commence the Offer. The obligation of Sub to, and of Parent to cause Sub
to, commence the Offer and accept for payment, and pay for, any shares of Class
A Common Stock tendered pursuant to the Offer shall be subject to the terms and
conditions set forth in Exhibit A (any of which may be waived by Sub in its
sole discretion, subject to limitations imposed by applicable law) and
completion of the recapitalization of the shares of Class A Stock owned by 5300
Richmond Road Corp. Sub expressly reserves the right to modify the terms of the
Offer, except that, without the consent of the Company, Sub shall not (i)
reduce the number of shares of Class A Common Stock subject to the Offer, (ii)
reduce the price per share of Class A Common Stock to be paid pursuant to the
Offer, (iii) modify or add to the conditions set forth in Exhibit A, (iv)
except as provided in the following sentence, extend the offer or (v) change
the form of consideration payable in the Offer. Notwithstanding the foregoing,
Sub may, without the consent of the Company, (i) extend the Offer for a period
of not more than 20 business days beyond the date on which the Offer would
otherwise expire if on the date of such extension any of the conditions to
Sub's obligation to purchase shares of Class A Common Stock shall not be
satisfied, until such time as such conditions are satisfied or waived, (ii)
extend the Offer for a period of not more than 10 business
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days beyond the date on which the Offer would otherwise expire if on the date
of such extension the Minimum Tender Condition (as defined in Exhibit A) shall
not be satisfied or if on the date of such extension the holders of less than
80% of the outstanding shares of the Company's Class B Common Stock, par value
$.01 per share (the "Class B Common Stock" and, together with the Class A
Common Stock, the "Common Stock"), have executed the Stockholder's Agreement,
(iii) extend the Offer for any period required by any rule, regulation,
interpretation or position of the Securities and Exchange Commission (the
"SEC") or the staff thereof applicable to the Offer and (iv) extend the Offer
for any reason for a period of not more than 10 business days beyond the latest
expiration date that would otherwise be permitted under clause (i), (ii) or
(iii) of this sentence. Subject to the terms and conditions of the Offer, Sub
shall, and Parent shall cause Sub to, pay for all shares of Class A Common
Stock validly tendered and not withdrawn pursuant to the Offer that Sub becomes
obligated to purchase pursuant to the Offer as soon as practicable after the
expiration of the Offer, but no later than as required by applicable law.
(b) On the date of commencement of the Offer, Parent and Sub
shall file with the SEC a Tender Offer Statement on Schedule 14D-1 with respect
to the Offer, which shall contain an offer to purchase and a related letter of
transmittal and summary advertisement (such Schedule 14D-1 and the documents
included therein pursuant to which the offer will be made, together with any
supplements or amendments thereto, the "Offer Documents") and on such date
shall mail the Offer Documents to the Company's stockholders. The Offer
Documents shall comply as to form in all material respects with the
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the rules and regulations promulgated thereunder and, on the date
filed with the SEC and on the date first published, sent or given to the
Company's stockholders, shall not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, except that no
representation is made by Parent or Sub with respect to information supplied by
the Company for inclusion in the Offer Documents. Each of Parent, Sub and the
Company agrees promptly to correct any information provided by it for use in
the Offer Documents if and to the extent that such information shall have
become false or misleading in any material respect, and each of Parent and Sub
further agrees to take all steps necessary to amend or supplement the Offer
Documents and to cause the Offer Documents as so amended or supplemented to be
filed with the SEC and to be disseminated to the Company's stockholders, in
each case as and to the extent required by applicable law. Parent and Sub agree
to provide the Company and its counsel in writing with any comments Parent, Sub
or their counsel may receive from the SEC or its staff with respect to the
Offer Documents promptly after the receipt of such comments. The Company agrees
to share with Parent and Sub information in its possession necessary to enable
Parent and Sub to prepare the Offer Documents.
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(c) Subject to the terms and condition of the Offer, Parent
shall provide or cause to be provided to Sub on a timely basis the funds
necessary to purchase any shares of Common Stock that Sub becomes obligated to
purchase pursuant to the Offer.
SECTION 1.02. Company Actions. (a) The Company hereby approves of and
consents to the Offer and represents and warrants to Parent and Sub that the
Board of Directors of the Company (at a meeting duly called and held) has duly
adopted resolutions approving this Agreement, the Offer and the Merger,
determining that the terms of the Offer and the Merger are fair to, and in the
best interest of, the Company's stockholders and recommending that the
Company's stockholders accept the Offer and tender their shares pursuant to the
Offer and, if required, approve and adopt this Agreement. The Company
represents and warrants to Parent and Sub that, in connection with its
consideration of this Agreement, its Board of Directors received the written
opinion of Houlihan Lokey Howard & Zukin Capital ("Houlihan Lokey") and the
independent directors of the Company received the written opinion of McDonald &
Company Securities, Inc. ("McDonald") that the consideration to be received by
the Company's stockholders in the Offer and the Merger is fair, from a
financial point of view, to such stockholders. The Company has been or will be
authorized by Houlihan Lokey to include a copy of such opinion in the Offer
Documents. A complete and correct signed copy of such opinion has been
delivered by the Company to the Parent.
(b) On the date the Offer Documents are filed with the SEC,
the Company shall file with the SEC a Solicitation / Recommendation Statement
on Schedule 14D-9 with respect to the Offer (such Schedule 14D-9, as amended
from time to time, the "Schedule 14D-9") containing the recommendations
described in paragraph (a) and shall mail the Schedule 14D-9 to the
stockholders of the Company. The Schedule 14D-9 shall comply as to form in all
material respects with the requirements of the Exchange Act and the rules and
regulations promulgated thereunder and, on the date filed with the SEC and on
the date first published, sent or given to the Company's stockholders, shall
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading, except that no representation is made by the Company with
respect to information supplied by Parent or Sub for inclusion in the Schedule
14D-9. Each of the Company, Parent and Sub agrees promptly to correct any
information provided by it for use in the Schedule 14D-9 if and to the extent
that such information shall have become false or misleading in any material
respect, and the Company further agrees to take all steps necessary to amend or
supplement the Schedule 14D-9 and to cause the Schedule 14D-9 as so amended or
supplemented to be filed with the SEC and disseminated to the Company's
stockholders, in each case as and to the extent
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required by applicable law. The Company agrees to provide Parent and its
counsel in writing with any comments the Company or its counsel may receive
from the SEC or its staff with respect to the Schedule 14D-9 promptly after the
receipt of such comments. Parent and Sub agree to share with the Company
information in their possession necessary to enable the Company to prepare the
Schedule 14D-9.
(c) In connection with the Offer, the Company shall cause its
transfer agent to furnish Sub promptly with mailing labels containing the names
and addresses of the record holders of Common Stock as of a recent date and of
those persons becoming record holders subsequent to such date, together with
copies of all lists of stockholders, security position listings and computer
files and all other information in the Company's possession or control
regarding the beneficial owners of Common Stock, and shall furnish to Sub such
information and assistance (including updated lists of stockholders, security
position listings and computer files) as Sub may reasonably request in
communicating the Offer to the Company's stockholders. Subject to the
requirements of applicable law, and except for such steps as are necessary to
disseminate the Offer Documents and any other documents necessary to consummate
the Merger, Parent and Sub shall hold in confidence the information contained
in any such labels, listings and files, will use such information only in
connection with the Offer and the Merger and, if this Agreement shall be
terminated, will, upon request, deliver to the Company all copies of such
information then in their possession.
ARTICLE II
THE MERGER
SECTION 2.01. The Merger. Upon the terms and subject to the conditions
hereof, and pursuant to Section 251 of the Delaware General Corporation Law
(the "DGCL"), Sub shall be merged with and into the Company at the Effective
Time (as hereinafter defined) of the Merger. Following the Merger, the Company
shall continue as the surviving corporation (the "Surviving Corporation") and
shall succeed to and assume all the rights and obligations of Sub in accordance
with the DGCL, and the separate corporate existence of Sub shall cease.
Notwithstanding the foregoing, Parent may elect at any time prior to the
Merger, instead of merging Sub into the Company as provided above, to merge the
Company with and into Sub; provided, however, (i) that the Company shall not be
deemed to have breached any of its representations, warranties, covenants or
agreements set forth in this Agreement solely by reason of such election and
(ii) Parent may not so elect if doing so would have a material adverse effect
on the financial interests of the Company and its stockholders. In such event,
the parties agree to execute an appropriate amendment to this Agreement in
order to reflect the foregoing and,
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where appropriate, to provide that Sub shall be the Surviving Corporation. At
the election of Parent, any direct or indirect subsidiary of Parent may be
substituted for Sub as a constituent corporation in the Merger; provided that
no such substitution shall affect Parent's obligations hereunder. In such
event, the parties agree to execute an appropriate amendment to this Agreement
in order to reflect the foregoing.
SECTION 2.02. Closing. The closing of the Merger (the "Closing") shall take
place (i) at 10:00 a.m, on a date to be specified by the parties, which
(subject to satisfaction or waiver of the conditions set forth in Article VII)
shall be no later than the second business day after satisfaction or waiver of
the conditions set forth in Article VII (the "Closing Date"), at the offices of
Cohen & Grigsby, P.C., 2900 CNG Tower, 625 Liberty Avenue, Pittsburgh,
Pennsylvania 15222, or (ii) at such other place and/or on such other date as
the parties hereto may agree in writing.
SECTION 2.03. Effective Time. As soon as practicable following the
satisfaction or waiver of the conditions set forth in Article VII, the parties
shall cause a certificate of merger or other appropriate documents (in any such
case, the "Certificate of Merger") to be executed and filed in the Department
of State of the State of Delaware as provided in Section 251 of the DGCL. The
Merger shall become effective (i) at the time and date of filing of the
Certificate of Merger in the Department of State of the State of Delaware or
(ii) at such other time as is agreed upon by the parties and specified in the
Certificate of Merger (such time as the Merger becomes effective is hereinafter
referred to as the "Effective Time" of the Merger).
SECTION 2.04. Effects of the Merger. The Merger shall have the effects
set forth in the DGCL. As of the Effective Time of the Merger, Parent shall
own, directly or indirectly, all of the issued and outstanding Common Stock of
the Surviving Corporation.
SECTION 2.05. Articles of Incorporation and Bylaws. At the Effective
Time, Sub's Articles of Incorporation and By-laws shall be the Articles of
Incorporation and By-laws of the Surviving Corporation; except that (i) Article
First of Sub's Articles of Incorporation shall be amended to read as set forth
in Schedule 2.05 and (ii) such other amendments as are necessary to effectuate
the provisions of Section 6.06 hereof shall be adopted.
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SECTION 2.06. Directors and Officers. At the Effective Time of the
Merger, the persons listed on Schedule 2.06 shall become the directors and
officers of the Surviving Corporation until their successors are duly elected
and qualified.
ARTICLE III
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
SECTION 3.01. Effect on Capital Stock. At the Effective Time of the
Merger, by virtue of the Merger and without any action on the part of the holder
of any shares of Common Stock or any shares of capital stock of Sub:
(a) Capital Stock of Sub. Each share of common stock, par
value $0.01 per share, of Sub shall be converted into and become one fully paid
and nonassessable, issued and outstanding share of common stock, par value
$0.01 per share, of the Surviving Corporation.
(b) Cancellation of Treasury Stock and Parent Owned Stock.
Each share of Common Stock issued and held immediately prior to the Effective
Time of the Merger in the Company's treasury or by any Company Subsidiary (as
defined in Section 4.01(c)) and each share of Common Stock that is owned by
Parent, Sub or any other subsidiary of Parent shall automatically be canceled
and retired without payment of any consideration therefor and cease to exist.
(c) Conversion of Common Stock. Subject to Section 3.01(d),
each share of Common Stock issued and outstanding immediately prior to the
Effective Time of the Merger that is not owned by the Parent or Sub or any
other subsidiary of Parent (other than shares to be canceled in accordance with
Section 3.01(b)) shall be converted into the right to receive from the
Surviving Corporation in cash, without interest, the price per share of Class A
Common Stock paid pursuant to the Offer (the "Merger Consideration"). As of the
Effective Time of the Merger, all such shares of Common Stock shall no longer
be outstanding and shall automatically be canceled and retired and shall cease
to exist, and each holder of a certificate representing any such shares of
Common Stock shall cease to have any rights with respect thereto, except the
right to receive the Merger Consideration, without interest.
(d) Shares of Dissenting Stockholders. Notwithstanding
anything in this Agreement to the contrary, any issued and outstanding shares
of Common Stock held by a Dissenting Stockholder shall not be converted as
described in Section 3.01(c) but shall become the right to receive such
consideration as may be determined to be due to such Dissenting Stockholder
pursuant to the laws of the
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State of Delaware; provided, however, that the shares of Common Stock
outstanding immediately prior to the Effective Time of the Merger and held by a
Dissenting Stockholder who shall, after the Effective Time of the Merger,
withdraw his demand for appraisal or lose his right of appraisal, in either
case pursuant to the DGCL, shall be deemed to be converted as of the Effective
Time of the Merger into the right to receive the Merger Consideration. The
Company shall give Parent (i) prompt notice of any written demands for
appraisal of shares of Common Stock received by the Company and (ii) the
opportunity to direct all negotiations and proceedings with respect to any such
demands. The Company shall not, without the prior written consent of Parent,
voluntarily make any payment with respect to, or settle, offer to settle or
otherwise negotiate, any such demands.
SECTION 3.02. Exchange of Certificates.
(a) Paying Agent. Prior to the Effective Time of the Merger,
Parent shall select a bank or trust company to act as paying agent (the "Paying
Agent") for the payment of the Merger Consideration upon surrender of
certificates representing Common Stock. Unless Parent notifies the Company
otherwise, the Paying Agent will be Mellon Bank, N.A.
(b) Parent To Provide Funds. Subject to the provisions of
this Agreement, Parent shall take all steps necessary to enable and cause the
Surviving Corporation to provide to the Paying Agent on a timely basis, as and
when needed after the Effective Time of the Merger, funds necessary to pay for
the shares of Common Stock pursuant to Section 3.01.
(c) Exchange Procedure. As soon as reasonably practicable
after the Effective Time of the Merger, the Paying Agent shall mail to each
record holder of a certificate or certificates which immediately prior to the
Effective Time of the Merger represented outstanding shares of Common Stock
(the "Certificates") whose shares were converted into the right to receive the
Merger Consideration pursuant to Section 3.01, (i) a notice and 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 Paying Agent and shall be in a form and have such other
provisions as Parent may reasonably specify, including instructions with
respect to lost certificates) and advising such holder of the effectiveness of
the Merger and (ii) instructions for use in effecting the surrender of the
Certificates in exchange for the Merger Consideration. Upon surrender of a
Certificate for cancellation to the Paying Agent or to such other agent or
agents as may be appointed by the Parent, together with such letter of
transmittal, duly executed and completed in accordance with the instructions
thereon, and such other documents as may reasonably be required by the Paying
Agent, the holder of such Certificate shall be
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entitled to receive in exchange therefor the amount of cash into which the
shares of Common Stock theretofore represented by such Certificate shall have
been converted pursuant to Section 3.01, and the Certificate so surrendered
shall forthwith be canceled. In the event of a transfer of ownership of Common
Stock which is not registered in the transfer records of the Company, payment
may be made to a person other than the person in whose name the Certificate so
surrendered is registered, if such Certificate shall be properly endorsed or
otherwise be in proper form for transfer and the person requesting such payment
shall pay any transfer or other taxes required by reason of the payment to a
person other than the registered holder of such Certificate or establish to the
satisfaction of the Surviving Corporation that such tax has been paid or is not
applicable. Until surrendered as contemplated by this Section 3.02, each
Certificate shall be deemed at any time after the Effective Time of the Merger
to represent only the right to receive upon such surrender the amount of cash,
without interest, into which the shares of Common Stock theretofore represented
by such Certificate shall have been converted pursuant to Section 3.01. No
interest will be paid or will accrue on the cash payable upon the surrender of
any Certificate.
(d) No Further Ownership Rights in Common Stock. All cash
paid upon the surrender of Certificates in accordance with the terms of this
Article III shall be deemed to have been paid in full satisfaction of all
rights pertaining to the shares of Common Stock theretofore represented by such
Certificates, and there shall be no further registration of transfers on the
stock transfer books of the Surviving Corporation of the shares of Common Stock
which were outstanding immediately prior to the Effective Time of the Merger.
If, after the Effective Time of the Merger, Certificates are presented to the
Surviving Corporation for any reason, they shall be canceled and exchanged as
provided in this Article III.
(e) No Liability. Any portion of the funds delivered to the
Paying Agent in accordance with Section 3.02(b) hereof and which remain
unclaimed by the former stockholders of the Company one year after the
Effective Time shall be delivered by the Paying Agent to Parent. Any former
stockholders of the Company who have not theretofore complied with this Article
III shall thereafter look only to Parent for payment of the Merger
Consideration, without any interest thereon. None of Parent, Sub, the Company
or the Paying Agent or any other person will be liable to any former holder of
Common Shares for any amount properly delivered to a public official pursuant
to applicable abandoned property, escheat or similar laws.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the Company. Except as
otherwise disclosed to Parent and Sub in a letter delivered to them prior to
the execution hereof (which letter shall contain appropriate references to
identify the representations and warranties herein to which the information in
such letter relates) (the "Company Disclosure Letter"), the Company represents
and warrants to Parent and Sub as follows:
(a) Organization. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has the corporate power to carry on its business as it is now
being conducted or presently proposed to be conducted. The Company is duly
qualified as a foreign corporation to do business, and is in good standing, in
each jurisdiction where the character of its properties owned or held under
lease or the nature of its activities makes such qualification necessary,
except where the failure to be so qualified would not individually or in the
aggregate have a material adverse effect on the business, assets, liabilities,
results of operations or financial condition of the Company and the Company
Subsidiaries (as defined below), taken as a whole (a "Company Material Adverse
Effect"; such material adverse effects with respect to Parent and its
subsidiaries, a "Parent Material Adverse Effect"); provided, however, that
"Company Material Adverse Effect" when used in connection with Company or any
of the Company Subsidiaries (as defined below) shall exclude (i) items
disclosed in the Company SEC Reports (as defined below) prior to the date
hereof and (ii) departures of officers, directors, consultants, employees or
agents of the Company or the Company Subsidiaries resulting from the
announcement or expectation of the transactions contemplated hereby.
(b) Capitalization. The authorized capital stock of the
Company consists of 20,000,000 shares of Class A Common Stock; 5,000,000 Shares
of Class B Common Stock and 30,000 shares of Company preferred stock, par value
$100 per share (the "Company Preferred Shares"). As of May 6, 1997 (i)
7,299,488 shares of Class A Common Stock were issued and outstanding (it being
understood, for this purpose, that shares of Class A Common Stock held by a
Company Subsidiary are not considered to be outstanding), 901,912 shares of
Class B Common Stock were issued and outstanding and no Company Preferred
Shares were issued and outstanding, (ii) stock options to acquire 353,700
shares of Class A Common Stock were outstanding under all stock option plans
and agreements of the Company and (iii) 879,500 shares of Class A Common Stock
(including 353,700 shares issuable upon exercise of the options identified in
clause (ii) above) were reserved for issuance pursuant to all employee plans of
the Company. The Company has no outstanding stock appreciation rights or stock
purchase rights. All of the issued and outstanding shares of Common Stock are
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validly issued, fully paid and nonassessable and free of preemptive rights.
Except as set forth above or as specified on Schedule 4.01(b) of the Company
Disclosure Letter, as of the date of this Agreement there are no shares of
capital stock of the Company issued or outstanding or any options, warrants,
subscriptions, calls, rights, convertible securities or other agreements or
commitments obligating Company to issue, transfer, sell, redeem, repurchase or
otherwise acquire any shares of its capital stock or securities. Except as
provided in this Agreement or as set forth on Schedule 4.01(b) of the Company
Disclosure Letter, after the Effective Time, the Company will have no
obligation to issue, transfer or sell any shares of its capital stock pursuant
to any employee benefit plan or otherwise.
(c) Subsidiaries.
(i) Each of the subsidiaries of the Company
(the "Company Subsidiaries") is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation and
has all requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as now being conducted, except where the
failure to be so organized, existing and in good standing or to have such power
and authority would not individually or in the aggregate have a Company Material
Adverse Effect. Each Company Subsidiary is duly qualified or licensed and in
good standing to do business in each jurisdiction in which the property owned,
leased or operated by it or the nature of the business conducted by it makes
such qualification or licensing necessary, except in such jurisdictions where
the failure to be so duly qualified or licensed and in good standing would not
individually or in the aggregate have a Company Material Adverse Effect.
(ii) Except as set forth on Schedule
4.01(c)(ii) of the Company Disclosure Letter, the Company is, directly or
indirectly, the record and beneficial owner of all of the outstanding shares of
capital stock of each of the Company Subsidiaries, there are no proxies with
respect to any such shares, and no equity securities of any Company Subsidiary
are or may become required to be issued by reason of any options, warrants,
rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into or exchangeable or
exercisable for, shares of any capital stock of any Company Subsidiary, and
there are no contracts, commitments, understandings or arrangements by which the
Company or any Company Subsidiary is or may be bound to issue, redeem, purchase
or sell additional shares of its capital stock or of any Company Subsidiary or
securities convertible into or exchangeable or exercisable for any such shares.
All of such shares so owned by the Company are validly issued, fully paid and
nonassessable and are owned by it free and clear of any claim, mortgage, deed of
trust, pledge, lien, security interest, charge, encumbrance, or similar
agreement of any kind or nature whatsoever ("Lien"), restraint on alienation, or
any other restriction with respect to the
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transferability or assignability thereof (other than restrictions on transfer
imposed by federal or state securities laws).
(d) Material Investments. Except as set forth on Schedule
4.01(d) of the Company Disclosure Letter, the Company does not directly or
indirectly own any equity or similar interest in, or any interest convertible
into or exchangeable or exercisable for any equity or similar interest in, any
corporation (other than a subsidiary), partnership, joint venture or other
business association or entity which is material to the Company. Except as set
forth on Schedule 4.01(d) of the Company Disclosure Letter, the Company has
heretofore delivered to Parent financial statements (audited to the extent
available) and interim unaudited financial statements of each of such entities
(through the most recently concluded fiscal quarter for each of such entities)
and, to the best knowledge of the Company, such financial statements fairly
present, in conformity with GAAP applied on a consistent basis (except as may
be indicated in the notes thereto or on Schedule 4.01(d) of the Company
Disclosure Letter), the financial condition of each and the results of
operations for the periods so indicated (subject to normal year-end adjustments
in the case of the interim unaudited financial statements), and the Company's
disclosures with respect to its investment in each of such entities otherwise
included in the Company's SEC Reports (as defined below) do not contain any
untrue statements of material fact or omit to state any material fact required
to be stated therein or which are necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Except as set forth on Schedule 4.01(d) of the Company Disclosure
Letter, the Company (or, as indicated thereon, a Company Subsidiary) has good
and marketable title to the securities evidencing its investment in the Company
Subsidiaries, which have been validly issued and are fully paid and
non-assessable and are held by Company (or, as indicated thereon, a Company
Subsidiary) free and clear of any Lien, restraint on alienation, or any other
restriction with respect of the transferability or assignability thereof (other
than restrictions on transfer imposed by federal or state securities laws).
(e) Authority Relative to this Agreement. The Company has the
power to enter into this Agreement and to carry out its obligations hereunder
(subject only, with respect to the Merger, to the approval and adoption of this
Agreement and the transactions contemplated hereby by the holders of at least
eighty percent (80%) of the outstanding shares of Common Stock entitled to vote
in accordance with the DGCL and the Company's Certificate of Incorporation and
By-Laws). The execution, delivery and performance of this Agreement by the
Company and the consummation by the Company of the transactions contemplated
hereby have been duly authorized by the Company's Board of Directors and,
except for the approval of its stockholders (if required under applicable law),
no other corporate proceedings on the part of the Company are necessary to
authorize this Agreement or the transactions contemplated hereby. Subject to
the foregoing, this Agreement has been duly and validly executed and
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delivered by the Company and constitutes a legal, valid and binding agreement of
the Company, enforceable against the Company in accordance with its terms. The
Company has taken all action necessary so that the restrictions set forth in
Section 203 of the DGCL will not and do not apply to the Merger.
(f) Consents and Approvals; No Violations. Except for
applicable requirements of the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act"), the Securities Act of 1933, as amended (the
"Securities Act"), the Exchange Act (the HSR Act, Securities Act and Exchange
Act, collectively, the "Governmental Requirements), state or foreign laws
relating to takeovers, if applicable, state securities or blue sky laws, and
the filing of the Certificate of Merger, no filing with, and no permit,
authorization, consent or approval of, any court or tribunal or administrative,
governmental or regulatory body, agency, public body or authority is necessary
for the execution, delivery and performance of this Agreement by the Company of
the transactions contemplated by this Agreement, except in the case of permits,
authorizations, consents or approvals which, if not obtained, would not
individually or in the aggregate have a Company Material Adverse Effect.
Neither the execution, delivery and performance of this Agreement by the
Company, nor the consummation by the Company of the transactions contemplated
hereby, nor compliance by the Company with any of the provisions hereof, will
(i) conflict with or result in any breach of any provisions of the Certificate
of Incorporation or By-Laws of Company or the Certificate or Articles of
Incorporation, as the case may be, or By-Laws of any of the Company
Subsidiaries, (ii) except as set forth on Schedule 4.01(f)(ii) of the Company
Disclosure Letter, result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default under (or give rise to
any right of termination, cancellation, vesting, payment, exercise,
acceleration, suspension or revocation), any of the terms, conditions or
provisions of any note, bond, mortgage, deed of trust, security interest,
indenture, lease, license, contract, agreement, insurance policy, plan or other
instrument or obligation to which the Company or any of the Company
Subsidiaries is a party or by which any of them or any of their properties or
assets may be bound or affected, (iii) except as set forth on Schedule
4.01(f)(iii) of the Company Disclosure Letter, violate any order, writ,
injunction, decree, statute, rule or regulation applicable to the Company, any
of the Company Subsidiaries or any of their properties or assets, (iv) except
as set forth on Schedule 4.01(f)(iv) of the Company Disclosure Letter, result
in the creation or imposition of any Lien on any asset of the Company or any
Company Subsidiary or (v) except as set forth on Schedule 4.01(f)(v) of the
Company Disclosure Letter, cause the suspension, termination or revocation of
any certificates of need, accreditation, registrations, licenses, permits and
other consents or approvals of governmental agencies, except in the case of
clauses (ii), (iii), (iv) and (v) for violations, breaches, defaults,
terminations, cancellations, accelerations, creations, impositions, suspensions
or revocations which would not individually or in the aggregate have a Company
Material Adverse Effect.
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(g) Company SEC Reports. Exclusive of the exhibits thereto,
the Company has delivered to Parent true and complete copies of each
registration statement, periodic and other reports and information or proxy
statements, including, without limitation, its Annual Reports to Stockholders
incorporated in material part by reference in certain of such reports, in the
form (including any amendments thereto) required to be filed with the SEC since
July 2, 1994 (collectively, the "Company SEC Reports"). As of the respective
dates the Company SEC Reports were filed or, if any such Company SEC Report was
amended or supplemented, as of the date such amendment or supplement was filed,
each of the Company SEC Reports (i) complied in all material respects with all
applicable requirements of the Securities Act and the Exchange Act, and the
rules and regulations promulgated thereunder, and (ii) did not contain any
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. Each of
the audited consolidated financial statements and unaudited consolidated
interim financial statements of the Company (including any related notes and
schedules) included (or incorporated by reference) in its Annual Reports on
Form 10-K for each of the fiscal years ended June 29, 1996, July 1, 1995 and
July 2, 1994 and its Quarterly Reports on Form 10-Q for all interim periods
subsequent to June 29, 1996 fairly present, in conformity with GAAP applied on
a consistent basis (except as may be indicated in the notes thereto), the
consolidated financial position of the Company as of its date and the
consolidated results of operations and changes in financial position for the
period then ended (subject to normal year-end adjustments in the case of any
unaudited interim financial statements).
(h) Absence of Certain Changes or Events. Since January 11,
1997 (the "Company Financial Statement Date"), except as set forth on Schedule
4.01(h) of the Company Disclosure Letter or in the SEC Reports, the Company and
the Company Subsidiaries have in all material respects conducted their business
in the ordinary course consistent with past practices and there has not
occurred: (i) any Company Material Adverse Effect; (ii) any amendments or
changes in the Certificate of Incorporation or By-Laws of the Company; (iii)
any sale of, or material pledge of or material encumbrance upon, property of
the Company with a value in excess of $3,000,000; (iv) any material change by
the Company in its accounting methods, principles or practices except as
required by any change in GAAP or as a result of a change in law; or (v) any
material revaluation by Company of any of its assets, including, without
limitation, writing down the value of inventory or writing off notes or
accounts receivable other than in the ordinary course of business.
(i) Litigation. Except for litigation disclosed in the
Company SEC Reports or as set forth on Schedule 4.01(i) of the Company
Disclosure Letter, there is no suit, action or proceeding (whether at law or
equity, before or by any federal, state or foreign commission, court, tribunal,
board, agency or instrumentality, or
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before any arbitrator) pending or, to the knowledge of the Company, threatened
against or affecting the Company or any of the Company Subsidiaries, the outcome
of which, in the reasonable judgment of the Company, would individually or in
the aggregate have a Company Material Adverse Effect, nor is there any judgment,
decree, injunction, rule or order of any court, governmental department,
commission, agency, instrumentality or arbitrator outstanding against the
Company or any of the Company Subsidiaries having, or which, insofar as can
reasonably be foreseen, in the future may have, any such effect. The Company has
disclosed to Parent all litigation in which the Company or a Company Subsidiary
is named as a party except for litigation the outcome of which, individually or
in the aggregate, in the reasonable judgment of the Board of Directors of the
Company would not have a Company Material Adverse Effect.
(j) Absence of Undisclosed Liabilities. Except for
liabilities or obligations which are accrued or reserved against in the
Company's financial statements (or reflected in the notes thereto) included in
the SEC Reports or which were incurred after the Company Financial Statement
Date in the ordinary course of business and consistent with past practices, the
Company and the Company Subsidiaries do not have any material liabilities or
obligations (whether absolute, accrued, contingent or otherwise) of a nature
required by GAAP to be reflected in a consolidated balance sheet (or reflected
in the notes thereto).
(k) No Default. Except as set forth on Schedule 4.01(k) of
the Company Disclosure Letter, neither the Company nor any of the Company
Subsidiaries is in violation or breach of, or default under (and no event has
occurred which with notice or the lapse of time or both would constitute a
violation or breach of, or a default under) any term, condition or provision of
(i) its Certificate of Incorporation or By-Laws, (ii) any note, bond, mortgage,
deed of trust, security interest, indenture, license, agreement, plan,
contract, lease, insurance policy, commitment or other instrument or obligation
to which the Company or any of the Company Subsidiaries is a party or by which
they or any of their properties or assets may be bound or affected, (iii) any
order, writ, injunction, decree, statute, rule or regulation applicable to the
Company or any of the Company Subsidiaries or any of their properties or
assets, or (iv) any license, permit and other consent or approval of
governmental agencies or accreditation organizations, except in the case of
clauses (ii), (iii) and (iv) above for breaches, defaults or violations which
would not individually or in the aggregate have a Company Material Adverse
Effect.
(l) Taxes. Except as set forth on Schedule 4.01(l) of
the Company Disclosure Letter:
(A) The Company and each of the Company
Subsidiaries has (i) timely filed (or has had timely filed on its behalf) or
will cause to be timely filed all material Tax Returns (as defined below)
required by applicable law to be
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filed by any of them for tax years ended prior to the date of this Agreement and
all such Tax Returns and amendments thereto are or will be true, complete, and
correct in all material respects, (ii) paid (or has had paid on its behalf) all
Taxes (as defined below) due or has properly accrued or reserved for all such
Taxes for such periods and (iii) accrued for all Taxes for periods commencing
after the periods covered by such Tax Returns and ending prior to the date
hereof.
(B) There are no material liens for Taxes
upon the assets of the Company or any of the Company Subsidiaries, except
liens for taxes not yet due.
(C) There are no material deficiencies or
adjustments for Taxes that have been proposed or assessed (except as heretofore
disclosed by the Company to Parent) by any Tax Authority (as defined below)
against the Company or any of the Company Subsidiaries and which remain unpaid.
(D) Prior to the date hereof, the Company
and the Company Subsidiaries have disclosed all material Tax sharing, Tax
indemnity, or similar agreements to which the Company or any of the Company
Subsidiaries is a party, is bound by, or has any obligation or liability for
Taxes.
(E) The Company and the Company Subsidiaries
have not paid, and do not expect to pay, in any taxable year commencing on or
after July 1, 1994, remuneration that would result in a disallowance of any
material amount of tax deductions under section 162(m) of the Code. There are no
changes in the tax accounting methods subject to section 481(a) of the Code
which have an ongoing material effect on Company or any of the Company
Subsidiaries. No "consent" within the meaning of section 341(f) of the Code has
been filed with respect to the Company or any of the Company Subsidiaries.
(F) As used herein, (i) "Audit" shall mean any
audit, assessment of taxes, other examination by any Tax Authority, proceeding
or appeal of such proceeding relating to Taxes, (ii) "Taxes" shall mean all
Federal, state, local and foreign taxes, and other assessments of a similar
nature (whether imposed directly or through withholding), including any
interest, additions to tax, or penalties applicable thereto, (iii) "Tax
Authority" shall mean the Internal Revenue Service and any other domestic or
foreign governmental authority responsible for the administration of any Taxes,
and (iv) "Tax Returns" shall mean all "Federal, state, local and foreign tax
returns, declarations, statements, reports, schedules, forms and information
returns and any amended Tax Return relating to Taxes.
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(m) Title to Certain Properties; Encumbrances.
A. Real Property.
Except as otherwise disclosed on
Schedule 4.01(m)A of the Company Disclosure Letter, to the extent the buildings
and other improvements located on the real property owned or leased by the
Company or any Company Subsidiary are not in good repair and operating
condition, the aggregate cost of putting such buildings and other improvements
in good repair and operating condition would not have a Company Material Adverse
Effect. The Company has provided Parent with copies of all real property leases
to which the Company or a Company Subsidiary is a party and has provided to
Parent a list of all real property owned or leased by the Company or a Company
Subsidiary except such leases or property which individually or in the aggregate
are immaterial.
B. Personal Property.
(i) Except as otherwise disclosed on
Schedule 4.01(m)B(i) of the Company Disclosure Letter, to the extent the
equipment and machinery which is used in the Company's or any Company
Subsidiary's business ("Company E & M") is not in good repair and operating
condition, the aggregate cost of putting such machinery and equipment in good
repair and operating condition would not have a Company Material Adverse Effect.
(ii) Except as otherwise disclosed on
Schedule 4.01(m)B(ii) of the Company Disclosure Letter, all inventory of the
Company or any Company Subsidiary is of a quantity and quality usable and
salable in the ordinary course of the Company's or the Company Subsidiary's
business, except to the extent the failure to be so usable and salable would not
have a Company Material Adverse Effect.
Except as otherwise disclosed on Schedule 4.01(m) of the
Company Disclosure Letter, the Company or the Company Subsidiaries, as the case
may be, hold (x) good and marketable title to all real and personal property
purported to be owned by them and (y) good leasehold title to all real and
personal property purported to be leased by them, in each case free and clear
of all material Liens.
(n) Compliance with Applicable Law. Each of the
Company and the Company Subsidiaries is in compliance with all applicable
laws, except where the failure to be in such compliance would not
individually or in the aggregate have a Company Material Adverse Effect.
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(o) Labor Matters. Except as set forth on Schedule 4.01(o) of
the Company Disclosure Letter, neither Company nor any of the Company
Subsidiaries is a party to, or bound by, any collective bargaining agreement,
contract or other agreement or understanding with a labor union or labor
organization. There is no unfair labor practice or labor arbitration proceeding
pending or, to the knowledge of the Company, threatened against the Company or
the Company Subsidiaries relating to their business, except for any such
proceedings which would not have individually or in the aggregate a Company
Material Adverse Effect. To the knowledge of the Company, there are no
organizational efforts with respect to the formation of a collective bargaining
unit presently being made or threatened involving employees of the Company or
any of the Company Subsidiaries, nor, except as pursuant to the collective
bargaining agreements set forth on Schedule 4.01(o) does any labor union or
organization claim to represent the employees of the Company or any of the
Company Subsidiaries. There is no labor strike, dispute, slow down, work
stoppage, or lockout actually pending or, to the knowledge of the Company,
threatened against the Company or the Company Subsidiaries. The Company has
provided Parent with all collective bargaining agreements to which the Company
or any Company Subsidiary is a party or may be bound.
(p) Employee Benefit Plans; ERISA.
(A) With respect to each of the bonus,
deferred compensation, incentive compensation, stock purchase, stock option,
severance or termination pay, hospitalization or other medical, life or other
insurance, supplemental unemployment benefits, profit-sharing, pension, or
retirement plan, program, agreement or arrangement, and each other employee
benefit plan, program, agreement or arrangement of the Company and the Company's
Subsidiaries (the "Company Plans") in force on or after January 1, 1994, except
for multiemployer plans as defined in Section 3(37)(A) of ERISA and except as
disclosed on Schedule 4.01(p)(A) of the Company Disclosure Letter, the Company
has heretofore delivered to Parent true and complete copies of each of the
following documents: (i) a copy of the Company Plans (including all amendments
thereto), (ii) a copy of the annual report and actuarial report, if required
under ERISA, with respect to each of the Company Plans that is an "employee
benefit plan", as that term is defined in Section 3(3) of ERISA (the "Company
ERISA Plans"), for the last two years, (iii) a copy of the most recent Summary
Plan Description, together with each Summary of Material Modifications, required
under ERISA with respect to the Company ERISA Plans, (iv) if the Company Plans
are funded through a trust or any third party funding vehicle, a copy of the
trust or other funding agreement (including all amendments thereto) and the
latest financial statements thereof, and (v) the most recent determination
letter received from the Internal Revenue Service with respect to each Company
ERISA Plan intended to qualify under Section 401(a) of the Code.
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(B) No liability under Title IV of ERISA has
been incurred by the Company, any Company Subsidiary or any company that is an
affiliate of the Company under ERISA (a "Company ERISA Affiliate") since the
effective date of ERISA that has not been satisfied in full, and except as
disclosed on Schedule 4.01(p)B of the Company Disclosure Letter, no condition
exists that presents a material risk to the Company, any Company Subsidiary or
any Company ERISA Affiliate of incurring any liability under such Title (other
than liability for premiums due to PBGC). To the extent this representation
applies to Sections 4064, 4069 or 4204 of Title IV of ERISA, it is made not only
with respect to the Company ERISA Plans but also with respect to any employee
benefit plan, program, agreement or arrangement subject to Title IV of ERISA to
which the Company, a Company Subsidiary or a Company ERISA Affiliate made, or
was required to make, contributions during the five-year period ending on the
date of this Agreement.
(C) With respect to each Company ERISA
Plan which is subject to Title IV of ERISA, except as set forth on Schedule
4.01(p)C of the Company Disclosure Letter, the present value of accrued benefits
under such plan, based upon the actuarial assumptions used for financial
reporting purposes in either the most recent actuarial report prepared by such
plan's actuary with respect to such plan or in information disclosed to the
Company by a multiemployer plan as defined in Section 3(37)(A) of ERISA, did not
exceed, as of its latest valuation date, the then current value of the assets of
such plan allocable to such accrued benefits.
(D) Except as disclosed on Schedule 4.01(p)(D)
of the Company Disclosure Letter, no Company ERISA Plan or any trust established
thereunder has incurred any "accumulated funding deficiency" (as defined in
Section 302 of ERISA and Section 412 of the Code) , whether or not waived, as of
the last day of the most recent fiscal year of each Company ERISA Plan ended
prior to the date of this Agreement, and all contributions required to be made
with respect thereto (whether pursuant to the terms of any Company ERISA Plan or
otherwise) on or prior to the date of this Agreement have been timely made.
(E) Except as set forth on Schedule 4.01(p)E
of the Company Disclosure Letter, no ERISA Plan is a "multi-employer pension
plan," as defined in Section 3(37)(A) of ERISA, nor is any Company ERISA Plan a
plan described in Section 4063(a) of ERISA.
(F) Except as set forth on Schedule 4.01(p)F
of the Company Disclosure Letter and except for any multiemployer plan as
defined in Section 3(37)(A) of ERISA, each Company ERISA Plan intended to be
"qualified" within the meaning of Section 401(a) of the Code has been determined
by the Internal Revenue Service to be so qualified and the trusts maintained
thereunder have been determined to be exempt from taxation under Section 501(a)
of the Code
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and, to the best knowledge of the Company, no event has occurred nor
does any condition exist which would adversely affect such qualification and
exemption.
(G) Except as set forth on Schedule 4.01(p)G
of the Company Disclosure Letter and except for any multiemployer plan as
defined in Section 3(37)(A) of ERISA, each of the Company Plans has been
operated and administered in all material respects in accordance with applicable
laws, including, but not limited to, ERISA and the Code except for requirements
which would not individually or in the aggregate have a Company Material Adverse
Effect.
(H) Except as set forth on Schedule 4.01(p)H
of the Company Disclosure Letter, no amounts payable under the Company Plans or
any other contract, arrangement or agreement will fail to be deductible for
federal income tax purposes by virtue of Section 280G of the Code.
(I) Except as set forth on Schedule 4.01(p)I
of the Company Disclosure Letter, no Company Plan provides benefits, including
without limitation death or medical benefits (whether or not insured), with
respect to current or former employees of the Company, any Company Subsidiary or
any Company ERISA Affiliate beyond such employees' retirement or other
termination of service, other than (i) coverage mandated by applicable law, (ii)
death benefits or retirement benefits under any "employee pension plan", as that
term is defined in Section 3(2) of ERISA, (iii) deferred compensation benefits
accrued as liabilities on the books of the Company, any Company Subsidiary or
any Company ERISA Affiliate or (iv) benefits the full cost of which is borne by
such employees or their beneficiaries.
(J) Except as set forth on Schedule 4.01(p)J
of the Company Disclosure Letter, the consummation of the transactions
contemplated by this Agreement will not (i) entitle any current or former
employee or officer of the Company, any Company Subsidiary or any Company ERISA
Affiliate to severance pay, unemployment compensation or any other payment,
except as expressly provided in this Agreement, (ii) accelerate the time of
payment or vesting, or increase the amount, of any compensation due any such
employee or officer, or (iii) result in any prohibited transaction described in
Section 406 of ERISA or Section 4975 of the Code for which an exemption is not
available.
(K) With respect to each Company Plan that is
funded wholly or partially through an insurance policy, there will be no
liability of the Company, any Company Subsidiary or any Company ERISA Affiliate,
as of the Effective Time, under any such insurance policy or ancillary agreement
with respect to such insurance policy in the nature of a retroactive rate
adjustment, loss sharing arrangement or other actual or contingent liability
arising wholly or partially out of events occurring prior to the closing.
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(L) Except as set forth on Schedule 4.01(p)(L)
of the Company Disclosure Letter, there are no pending, threatened or
anticipated claims by or on behalf of any of the Company Plans, by any employee
or beneficiary covered under any such Company Plan, or otherwise involving any
such Company Plan (other than routine claims for benefits).
(M) None of the Company, any Company
Subsidiary, any Company ERISA Affiliate, any of the Company ERISA Plans, any
trust created thereunder or any trustee or administrator thereof has engaged in
a transaction in connection with which the Company, any Company Subsidiary or
any Company ERISA Affiliate, any of the Company ERISA Plans, any such trust, or
any trustee or administrator thereof, or any party dealing with the Company
ERISA Plans or any such trust could be subject to either a material civil
liability under Section 409 of ERISA, Section 502(i) of ERISA, or Section 502(1)
of ERISA or a material tax imposed pursuant to Section 4975 or 4976 of the Code.
(q) Intellectual Property. The Company and the Company
Subsidiaries, as the case may be, have the lawful right to use all intellectual
property currently used in any of their businesses, and no such use infringes
upon the lawful rights of any other person, except as would not individually or
in the aggregate result in a Company Material Adverse Effect. No person is
using any intellectual property in a manner which infringes upon the lawful
rights of the Company or any Company Subsidiary, except as would not
individually or in the aggregate result in a Company Material Adverse Effect.
(r) Insurance. There are no claims by the Company or any of
the Company Subsidiaries under any of the Company's insurance policies as to
which any insurance company is denying liability or defending under a
reservation of rights clause, in each case except as would not individually or
in the aggregate result in a Company Material Adverse Effect. Except as set
forth on Schedule 4.01(r) of the Company Disclosure Letter, the Company is
unaware of any reason why any of the Company's or any Company Subsidiary's
comprehensive general liability carriers would deny coverage in connection with
any litigation disclosed in the Company SEC Reports.
(s) Brokers. No broker, finder or investment banker (other
than Houlihan Lokey and McDonald) is entitled to any brokerage, finder's fee or
other fee or commission payable by the Company in connection with the
transactions contemplated by this Agreement based upon arrangements made by and
on behalf of the Company.
(t) Customers and Suppliers. Except as set forth on Schedule
4.01(t) of the Company Disclosure Letter, no supplier of the Company or any
Company Subsidiary with aggregate sales to the Company and the Company
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Subsidiaries in the 12-month period ending December 31, 1996 of $1,000,000 or
more has terminated its relationship with, or materially reduced its sales to
the Company or any Company Subsidiary.
(u) Governmental Permits. The Governmental Permits (as
hereinafter defined) obtained by the Company have been validly acquired, are in
full force and effect and, except as would not individually or in the aggregate
result in a Company Material Adverse Effect, represent all Governmental Permits
necessary under applicable law for the Company or any Company Subsidiary to
carry on its business as now being conducted and to own, occupy or use its
properties and assets. The Company and the Company Subsidiaries are in
compliance with all such Governmental Permits, except where the failure to so
comply would not reasonably be expected to have a Company Material Adverse
Effect. "Government Permit" means any permit, license, franchise, certificate,
authorization, approval or consent obtained from or issued by any Governmental
Person which is necessary for the Company or the Company Subsidiary to carry on
its business as now being conducted or to own, operate or use its properties
and assets; "Governmental Person" means any governmental, quasi-governmental,
judicial, public or statutory instrumentality, authority, agency, bureau, body
or entity of the United States of America or of any state, county, municipality
or other political subdivision located therein.
(v) Environmental Matters. Except as otherwise
disclosed on Schedule 4.01(v) of the Company Disclosure Letter:
(A) no Hazardous Substances (as hereinafter
defined) have been or are being generated, used, processed, treated, stored,
released, transported or disposed of by the Company and the Company
Subsidiaries, except in material compliance with applicable Environmental Rules
(as hereinafter defined);
(B) to the Company's knowledge, no Hazardous
substances are present on or under any real property owned, leased, occupied or
used by the Company or any Company Subsidiary, or in any improvement located
thereon, in quantities or at levels which require reporting or remediation under
any applicable Environmental Rule; and
(C) to the Company's knowledge, no event has
occurred and no condition exists with respect to Company or any Company
Subsidiary or their business, properties or assets which has resulted in, or is
likely to result in, any material liability, cost or expense to Company or any
Company Subsidiary under any applicable Environmental Rule, and neither the
Company nor any Company Subsidiary has received any notice from any Governmental
Person of its intention to impose any such liability, cost or expense upon the
Company.
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As used in this Agreement, "Environmental Rule" means any
governmental rule which relates to Hazardous Substances, pollution or
protection of the environment, natural resources or public health or safety,
including without limitation any governmental rule relating to the generation,
use, processing, treatment, storage, release, transport or disposal of
Hazardous Substances and any common laws of nuisance, negligence and strict
liability relating thereto, together with all rules, regulations and orders
issued thereunder.
As used in this Agreement, "Hazardous Substance" means any
substance which constitutes, in whole or in part, a pollutant, contaminant or
toxic or hazardous substance or waste under, or the generation, use, processing,
treatment, storage, release, transport or disposal of which is regulated by, any
governmental rule, and shall specifically include without limitation any
substance which (a) constitutes a "hazardous substance" under the Comprehensive
Environmental Response Compensation and Liability Act, 42 U.S.C. Section 9601 et
seq., or a "hazardous waste" under the Resource Conservation and Recovery Act,
42 U.S.C. Section 6901 et seq., (b) exhibits any of the hazardous
characteristics enumerated in 40 C.F.R. Sections 261.20-261.24, inclusive, (c)
constitutes any of those extremely hazardous substances referred to in Section
302 of the Superfund Amendments and Reauthorization Act of 1986, Public Law
99-499, 100 Stat. 1613, at 42 U.S.C. Section 11002, (d) constitutes a hazardous
material which, when transported, is subject to regulation by the United States
Department of Transportation at 49 C.F.R. Parts 171-199 or (e) constitutes
asbestos, urea formaldehyde, chlorinated biphenyls (polychlorinated or
monochlorinated) or petroleum products.
(w) Material Agreements. Except as otherwise disclosed on
Schedule 4.01(w) of the Company Disclosure Letter, each contract, agreement,
instrument or document involving the payment by or to the Company or any
Company Subsidiary (whether direct or indirect, fixed or contingent) of more
than $1,000,000 over the term thereof (a "Material Contract"), each real
property lease to which the Company is a party, each labor agreement to which
the Company is a party and each agreement, document, instrument that creates,
evidences or secures any indebtedness of $1,000,000 or more of the Company or
any Company Subsidiary or pursuant to which the Company or any Company
Subsidiary has guaranteed indebtedness or other obligations of $1,000,000 or
more, and each Company ERISA Plan (each a "Company Material Agreement") is in
full force and effect and is enforceable in accordance with its terms. Except
as otherwise disclosed on Schedule 4.01(w) of the Company Disclosure Letter,
the Company or the Company Subsidiary, as the case may be, is in compliance
with each Company Material Agreement, except, in each case, for such
non-compliance as does not give rise to a Company Material Adverse Effect. All
other parties to the Company Material Agreements are in substantial compliance
with the terms thereof except, in each case, for such non-compliance as does
not give rise to a Company Material Adverse Effect. Prior to the date hereof, a
true, correct and complete copy of the
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Company Certificate of Incorporation and By-Laws have been provided by Company
to Parent.
(x) Transactions with Affiliates. Except as set forth on
Schedule 4.01(x) to the Company Disclosure Letter, or disclosed in the Company
SEC Reports or specifically excluded pursuant to the last sentence of this
subsection (x):
(A) none of the customers, suppliers,
distributors or sales representatives of the Company are Affiliates of
the Company;
(B) none of the properties or assets of the
Company are owned or used by or leased to any Affiliate of the Company and
(C) no Affiliate of the Company is a party to
any agreement with the Company.
(D) any agreement between the Company and any
Affiliate of the Company contains commercially reasonable terms and conditions.
(E) As used in this Agreement, "Affiliate"
means with respect to any person, any person who directly or indirectly controls
or is controlled by, or is under common control with, such person. As used in
this definition, the term "control" shall mean, with respect to any person, the
possession, direct or indirect, of the power to direct or cause the direction of
the management and policies of such person, whether through ownership of voting
securities, by contract or otherwise.
It is understood and agreed that no disclosure under this
subsection (x) is required for any of the items listed in (A) through (D) above
if disclosure thereof would not be required in any of the Company SEC Reports.
(y) No Other Representations or Warranties. Except for the
representations and warranties contained in this Agreement, anything described
in or listed in the Company Disclosure Letter, or any other document delivered
pursuant to this Agreement, neither the Company nor any other person makes any
representation or warranty to Parent or Sub, express or implied, and the
Company and each Company Subsidiary hereby disclaims any such representation or
warranty, whether by the Company or a Company Subsidiary or any of their
respective officers, directors, employees, agents or representatives or any
other person of any document or other information.
(z) Information Supplied. None of the information supplied or
to be supplied by the Company for inclusion or incorporation by reference in
(i) the Offer Documents, (ii) the Schedule 14D-9, or (iii) the information to
be filed by the
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Company in connection with the Offer pursuant to Rule 14f-1 promulgated under
the Exchange Act (the "Rule 14f-1 Statement") or any proxy or information
statement will, at the respective times the Offer Documents, the Schedule 14D-9
and the Rule 14f-1 Statement are filed with the SEC or first published, sent or
given to the Company's stockholders or, in the case of any proxy or information
statement, at the time the proxy or information statement is first mailed to the
Company's stockholders or at the time of the meeting of the Company's
stockholders held to vote on approval and adoption of this Agreement, if
necessary, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein, in light of the circumstances under
which they are made, not misleading. The Schedule 14D-9, the Rule 14f-1
Statement and any such proxy or information statement will comply as to form in
all material respects with the requirements of the Exchange Act and the rules
and regulations thereunder, except that no representation or warranty is made by
the Company with respect to statements made or incorporated by reference therein
based on information supplied by Parent or Sub for inclusion or incorporation by
reference therein.
(aa) Certain Expenses. The Company has previously
disclosed to Parent the Company's fee arrangements with Houlihan Lokey and
McDonald, and such arrangements continue and will continue in effect
without alteration.
SECTION 4.02. Representations and Warranties of Parent and Sub.
Parent and Sub represent and warrant to the Company as follows:
(a) Organization, Standing and Corporate Power. Each of
Parent and Sub is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has all
requisite corporate power and authority to carry on its business as it is now
being conducted or presently proposed to be conducted.
(b) Authority. Each of Parent and Sub has the power to enter
into this Agreement and to carry out its obligations hereunder. The execution,
delivery and performance of this Agreement by each of Parent and Sub and the
consummation by each of Parent and Sub of the transactions contemplated hereby
have been duly authorized by the Board of Directors of each of Parent and Sub
and by the sole Shareholder of Sub and, no other corporate proceedings on the
part of Parent or Sub are necessary to authorize this Agreement or the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by each of Parent and Sub and constitutes a legal, valid
and binding agreement of each of Parent and Sub, enforceable against each of
Parent and Sub in accordance with its terms.
(c) Consents and Approvals; No Violations. Except for
applicable Governmental Requirements, state or foreign laws relating to
takeovers, if
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applicable, state securities or blue sky laws, and the filing of the Certificate
of Merger, no filing with, and no permit, authorization, consent or approval of,
any court or tribunal or administrative, governmental or regulatory body,
agency, public body or authority is necessary for the execution, delivery and
performance of this Agreement by Parent or Sub of the transactions contemplated
by this Agreement. Neither the execution, delivery and performance of this
Agreement by Parent or Sub, nor the consummation by Parent or Sub of the
transactions contemplated hereby, nor compliance by Parent or Sub with any of
the provisions hereof, will (i) conflict with or result in any breach of any
provisions of the Articles or Certificate of Incorporation or By-Laws of Parent
or Sub, as the case may be, (ii) except as previously disclosed by Parent to the
Company in writing, result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right of termination, cancellation, vesting, payment, exercise, acceleration,
suspension or revocation) under, any of the terms, conditions or provisions of
any note, bond, mortgage, deed of trust, security interest, indenture, lease,
license, contract, agreement, insurance policy plan or other instrument or
obligation to which Parent or Sub is a party or by which either of them or
either of their properties or assets may be bound or affected, (iii) violate any
order, writ, injunction, decree, statute, rule or regulation applicable to
Parent or Sub or any of their properties or assets, (iv) result in the creation
or imposition of any Lien on any asset or (v) cause the suspension, termination
or revocation of any registrations, licenses, permits and other consents or
approvals of governmental agencies, except in the case of clauses (ii), (iii),
(iv) and (v) for violations, breaches, defaults, terminations, cancellations,
accelerations, creations, impositions, suspensions or revocations which would
not individually or in the aggregate have a Parent Material Adverse Effect or
prevent the consummation of the transactions contemplated hereby.
(d) Information Supplied. None of the information supplied or
to be supplied by Parent or Sub for inclusion or incorporation by reference in
the Offer Documents, the Schedule 14D-9, the Rule 14F-1 Statement or any proxy
or information statement will, at the respective times the Offer Documents, the
Schedule 14D-9 and the Rule 14F-1 Statement are filed with the SEC or first
published, sent or given to the Company's stockholders, or, in the case of any
proxy or information statement, at the time any proxy or information statement
is first mailed to the Company's stockholders or at the time of the meeting of
the Company's stockholders held to vote on approval and adoption of this
Agreement, 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. The Offer Documents will comply as to form in all material
respects with the requirements of the Exchange Act and the rules and
regulations promulgated thereunder, except that no representation or warranty
is made by Parent or Sub with respect to statements made or incorporated by
reference therein based on
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information supplied by the Company for inclusion or incorporation by reference
therein.
(e) Brokers. No broker, investment banker, financial advisor
or other person, other than Parker/Hunter Incorporated, the fees and expenses
of which will be paid by Parent, is entitled to any broker's, finder's,
financial advisor's or other similar fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Parent or Sub.
(f) Financing. Parent has provided to the Company a complete
and correct copy of its commitment letter from its financing source for the
Offer and the Merger (the "Commitment Letter").
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 5.01. Conduct of Business by the Company. From the date hereof
until the Effective Time, unless Parent shall otherwise agree in writing, or
except as set forth on Schedule 5.01 of the Company Disclosure Letter, or as
otherwise contemplated by this Agreement, the Company and the Company
Subsidiaries shall conduct their business in the ordinary course consistent
with past practice and shall use their reasonable best efforts to preserve
intact their business organizations and relationships with third parties and to
keep available the services of their present officers and key employees,
subject to the terms of this Agreement. Without limiting the foregoing and
except as otherwise provided in this Agreement, from the date hereof until the
Effective Time, without the prior written consent of Parent , which consent
shall not be unreasonably withheld:
(a) The Company will not adopt or propose any change in
its Certificate of Incorporation or By-Laws;
(b) Other than declaration and payment of regular quarterly
dividends not to exceed $0.06 per share of Common Stock, the Company will not,
and will not permit any Company Subsidiary to, declare, set aside or pay any
dividend or other distribution with respect to any shares of capital stock of
the Company, or contract for or effect any repurchase, redemption or other
acquisition or investment by the Company or any Company Subsidiary of any
outstanding shares of capital stock or other securities of, or other ownership
interests in, the Company or any Company Subsidiary;
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(c) The Company will not, and will not permit any Company
Subsidiary to, merge or consolidate with any other person or acquire a material
amount of assets of any other person;
(d) The Company will not, and will not permit any Company
Subsidiary to, sell, lease, license or otherwise surrender, relinquish or
dispose of any assets or property which are material to the Company and the
Company Subsidiaries, taken as a whole, except (x) pursuant to existing
contracts or commitments (the terms of which have been disclosed to Parent
prior to the date hereof), or (y) in the ordinary course of business consistent
with past practice;
(e) The Company will not settle any material Audit,
make or change any material Tax election or file amended Tax Returns;
(f) The Company will not issue or grant any securities or
option or warrant to acquire any securities (except pursuant to existing
obligations), enter into any amendment of any material term of any outstanding
security of the Company or of any Company Subsidiary, incur any indebtedness or
guarantee obligations of others except pursuant to existing credit facilities
or arrangements, fail to make any required contribution to any Company ERISA
Plan, increase compensation, bonus or other benefits payable to any employee or
former employee or enter into any settlement or consent with respect to any
pending litigation, except in the ordinary course of business consistent with
past practice or as otherwise permitted by this Agreement;
(g) The Company will not change any method of accounting or
accounting practice by the Company or any Company Subsidiary, except for any
such required change in GAAP;
(h) The Company will not commit to any capital expenditures
not in the ordinary course of business;
(i) The Company will not, and will not permit any
Company Subsidiary to, agree or commit to do any of the foregoing; and
(j) except to the extent necessary to comply with the
requirements of applicable laws and regulations, the Company will not, and will
not permit any Company Subsidiary to (i) take, or agree or commit to take, any
action that would make any representation and warranty of the Company hereunder
inaccurate in any respect at, or as of any time prior to, the Effective Time or
(ii) omit, or agree or commit to omit, to take any action necessary to prevent
any such representation or warranty from being inaccurate in any respect at any
such time, provided, however that the Company shall be permitted to take or omit
to take such action which can (without any uncertainty) be cured at or prior to
the Effective Time.
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ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. Stockholder Approval; Preparation of Proxy Statement.
(a) If stockholder approval of this Agreement is required by
law, the Company will, at Parent's request, duly call, give notice of, convene
and hold a meeting of its stockholders (the "Stockholders Meeting") for the
purpose of approving this Agreement and the transactions contemplated by this
Agreement. The Company will, through its Board of Directors, recommend to its
stockholders approval of this Agreement and the transactions contemplated by
this Agreement; provided that Sub has purchased shares of Class A Common Stock
pursuant to the Offer. Notwithstanding the foregoing, if Parent shall acquire
such number of the outstanding shares of Class A Common Stock and Class B
Common Stock as to be able to cause the Merger to become effective without a
Stockholders' Meeting, the parties shall, at the request of Parent, take all
necessary and appropriate action to cause the Merger to become effective
without a Stockholders Meeting in accordance with the Company's Certificate of
Incorporation and Section 253 of the DGCL.
(b) If stockholder approval of this Agreement is required by
law, the Company will, at Parent's request, prepare and file a preliminary
Proxy Statement with the SEC and will use its best efforts to respond to any
comments of the SEC or its staff and to cause the Proxy Statement to be mailed
to the Company's stockholders as promptly as practicable after such filing. The
Company will notify Parent promptly of the receipt of any comments from the SEC
or its staff and of any request by the SEC or its staff for amendments or
supplements to the Proxy Statement or for additional information and will
supply Parent with copies of all correspondence between the Company or any of
its representatives, on the one hand, and the SEC or its staff, on the other
hand, with respect to the Proxy Statement or the Merger. If at any time prior
to the approval of this Agreement by the Company's stockholders there shall
occur any event that should be set forth in an amendment or supplement to the
Proxy Statement, the Company will promptly prepare and mail to its stockholders
such an amendment or supplement. The Company will not mail any Proxy Statement,
or any amendment or supplement thereto, to which Parent reasonably objects.
(c) Sub agrees to vote, and Parent agrees to cause, all
shares of Class A Common Stock purchased pursuant to the Offer and all other
shares of Common Stock owned by Sub or any other subsidiary of Parent to be
voted in favor of the approval of this Agreement.
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SECTION 6.02. Access to Information; Confidentiality. During the
period prior to the Effective Time of the Merger, the Company will, and will
cause each Company Subsidiary to, (i) give Parent, and Parent's officers,
employees, accountants, counsel, financial advisors and other authorized
representatives, reasonable access during regular business hours to all of its
plants, offices, warehouses and other properties and to their employees,
agents, independent accountants and all of their books, records, contracts and
commitments AND, during such period, the Company will, and will cause each of
its subsidiaries to, furnish promptly to Parent a copy of each report,
schedule, registration statement and other document filed by it during such
period pursuant to the requirements of Federal or state securities laws; (ii)
permit Parent, at its own expense, and its authorized representatives to make
such inspections, including, without limitation, environmental assessments or
surveys, during regular business hours as the Parent may reasonably require and
(iii) cause the Company officers and those of its subsidiaries to furnish
Parent and its authorized representatives with such financial and operating
data and other information with respect to the business and properties of the
Company and the Company subsidiaries as Parent may from time to time reasonably
request; provided, however, that such access shall be conducted in such a
manner as to (1) avoid any undue disruption of the normal business operations
of the Company and the Company Subsidiaries and (2) maintain the
confidentiality of the Confidential Information, as defined in the
Confidentiality Agreement, dated January 16, 1997 (the "Confidentiality
Agreement"), between Parent and the Company, in accordance with the provisions
set forth therein.
SECTION 6.03. Best Efforts; Notification.
(a) Upon the terms and subject to the conditions set forth in
this Agreement, each of the parties agrees to use its best efforts to take, or
cause to be taken, all actions, and to do, or cause to be done, and to assist
and cooperate with the other parties in doing, all things necessary, proper or
advisable to consummate and make effective, in the most expeditious manner
practicable, the Offer and the Merger, and the other transactions contemplated
by this Agreement, including (i) the obtaining of all necessary actions or
nonactions, waivers, consents and approvals from Governmental Persons and the
making of all necessary registrations and filings (including filings with
Governmental Persons, if any) and the taking of all reasonable steps as may be
necessary to obtain an approval or waiver from, or to avoid an action or
proceeding by, any Governmental Person, (ii) the obtaining of all necessary
consents, approvals or waivers from third parties, (iii) the defending of any
lawsuits or other legal proceedings, whether judicial or administrative,
challenging this Agreement or the consummation of any of the transactions
contemplated by this Agreement, including seeking to have any stay or temporary
restraining order entered by any court or other Governmental Person vacated or
reversed and (iv) the execution and delivery of any additional
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instruments necessary to consummate the transactions contemplated by, and to
fully carry out the purposes of, this Agreement. In connection with and without
limiting the foregoing and to the extent possible under applicable law, the
Company, Parent and Sub and their respective Boards of Directors shall (i) take
all action necessary to ensure that no state takeover statute or similar statute
or regulation is or becomes applicable to the Offer, the Merger, this Agreement
or any of the other transactions contemplated by this Agreement, other than any
such statutes or regulations the sole effect of which is to require a filing or
notice, provided that the Company, Parent and Sub, as applicable, shall take all
action necessary to comply with such filing and notice requirements, and (ii) if
any state takeover statute or similar statute or regulation becomes applicable
to the Offer, the Merger, this Agreement or any other transaction contemplated
by this Agreement, take all action necessary to ensure that the Offer, the
Merger and the other transactions contemplated by this Agreement may be
consummated as promptly as practicable on the terms contemplated by this
Agreement and otherwise to minimize the effect of such statute or regulation on
the Offer, the Merger and the other transactions contemplated by this Agreement.
(b) The Company shall give prompt notice to Parent, and
Parent or Sub shall give prompt notice to the Company, of (i) any
representation or warranty made by it contained in this Agreement that is
qualified as to materiality becoming untrue or inaccurate in any respect or any
such representation or warranty that is not so qualified becoming untrue or
inaccurate in any material respect, including if necessary, by amendment to the
Company Disclosure Letter (which amendments shall not affect or amend the
representations and warranties of the Company set forth herein), and (ii) any
failure by it to comply with or satisfy any covenant, condition or agreement to
be complied with or satisfied by it under this Agreement; provided, however,
that no such notification shall affect the representations, warranties,
covenants or agreements of the parties or the conditions to the obligations of
the parties under this Agreement.
SECTION 6.04. Stock Plans.
(a) As soon as practicable following the date of this
Agreement, the Board of Directors of the Company (or, if appropriate, any
committee administering the Stock Plans, as defined below), shall adopt such
resolutions or take such other actions as are required to adjust the terms of
all outstanding stock options to purchase shares of Common Stock ("Stock
Options") heretofore granted under any stock option, program or arrangement of
the Company (collectively, the "Stock Plans") to provide that each Stock Option
outstanding immediately prior to the acceptance for payment of shares of Common
Stock pursuant to the Offer, whether or not vested, shall be canceled in
exchange for a cash payment by Sub within five business days of the day shares
of Class A Common Stock are
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purchased pursuant to the Offer, an amount equal to (i) the excess, if any, of
(x) the price per share of Class A Common Stock to be paid pursuant to the Offer
over (y) the exercise price per share of Common Stock subject to such Stock
Option, multiplied by (ii) the number of shares of Common Stock for which such
Stock Option shall not theretofore have been exercised (the "Option
Consideration").
(b) All amounts payable pursuant to this Section 6.04 shall
be subject to any required withholding of taxes and shall be paid without
interest. The Company shall use its best efforts to obtain all consents of the
holders of the Stock Options as shall be necessary to effectuate the foregoing.
Notwithstanding anything to the contrary contained in this Agreement, payment
shall, at Parent's request, be withheld in respect of any Stock Option with
respect to any holder until all necessary consents with respect to such holder
are obtained.
(c) The Stock Plans shall terminate as of the Effective Time
of the Merger, and the provisions in any other employee benefit, stock or other
plan of the Company providing for the issuance, transfer or grant of any
capital stock of the Company, any interest in respect of any capital stock of
the Company, or any amounts derived from the value of any capital stock of the
Company shall be deleted as of the Effective Time of the Merger, and the
Company shall ensure that following the Effective Time of the Merger no holder
of a Stock Option or any participant in any Stock Plan or other Company Plan
shall have any right thereunder to acquire any capital stock of the Company or
the Surviving Corporation.
SECTION 6.05. Company Plans. Except as may be required by law, Parent
agrees, and shall cause Sub, to continue for at least one year after the
Effective Time to follow the Company's policies with respect to employees and
employee benefits in effect immediately prior to the Effective Date. As set
forth in Section 9.08, none of the employees of the Company is intended to be a
third party beneficiary of this Section 6.05.
SECTION 6.06. Indemnification.
(a) The Certificate of Incorporation of the Surviving
Corporation shall contain provisions with respect to matters occurring prior to
the Effective Time that are no less favorable with respect to indemnification
than are set forth in Article XV of the Second Restated Certificate of
Incorporation of the Company (the "Company Certificate"), which provisions
shall not be amended, repealed or otherwise modified in any manner that would
have an adverse effect on the rights thereunder of individuals who as of the
date of this Agreement or at the Effective Time are directors, officers,
employees, fiduciaries or agents of the Company, unless such modification shall
be required by law.
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(b) The Company shall, to the fullest extent permitted under
applicable law and regardless of whether the Merger becomes effective,
indemnify and hold harmless, and, after the Effective Time, the Surviving
Corporation shall, to the fullest extent permitted under applicable law,
indemnify and hold harmless, each present and former director, officer,
employee, fiduciary and agent of the Company and each Company Subsidiary and
each fiduciary and agent of each such director and officer (collectively, the
"Indemnified Parties") against all costs and expenses (including attorneys'
fees), judgments, fines, losses, claims, damages, liabilities and settlement
amounts ("Losses") paid in connection with any claim, action, suit, proceeding
or investigation (whether arising before or after the Effective Time), whether
civil, criminal, administrative or investigative, arising out of or pertaining
to any action or omission in their capacity as an officer, director, employee,
fiduciary or agent of the Company or any Company Subsidiary, occurring before
the Effective Time, until the expiration of the statute of limitations relating
thereto (and shall pay any expenses in advance of the final disposition of such
action or proceeding to each Indemnified Party to the fullest extent permitted
under Delaware Law, upon receipt from the Indemnified Party to whom expenses
are advanced of any undertaking to repay such advances required under Delaware
Law). In the event of any claim, action, suit, proceeding or investigation, to
extent provided in the Company Certificate or the Certificate of the Surviving
Corporation, as the case may be, (i) the Company or the Surviving Corporation,
as the case may be, shall pay the reasonable fees and expenses of counsel
selected by the Indemnified Parties, which counsel shall be reasonably
satisfactory to the Company or the Surviving Corporation, promptly after
statements therefor are received, and (ii) the Company and the Surviving
Corporation shall cooperate in the defense of any such matter; provided,
however, that neither the Company nor the Surviving Corporation shall be liable
for any settlement effected without its written consent (which consent shall
not be unreasonably withheld); and provided, further, that neither the Company
nor the Surviving Corporation shall be obligated pursuant to this Section
6.06(b) to pay the fees and expenses of more than one counsel (plus appropriate
local counsel) for all Indemnified Parties in any single action except to the
extent that two or more of such Indemnified Parties shall have conflicting
interests in the outcome of such action, in which case such additional counsel
(including local counsel) as may be required to avoid any such likely conflict
may be retained by the Indemnified Parties at the expense of the Company or the
Surviving Corporation, to the extent that payment of such expense is permitted
under the Company Certificate or the Certificate of the Surviving Corporation,
as the case may be; and provided further that, in the event that any claim for
indemnification is asserted or made, all rights to indemnification in respect
of such claim shall continue until the disposition of such claim. Parent hereby
guarantees the obligations of the Surviving Corporation and, following
consummation of the Offer, of the Company under this Section 6.06(b).
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(c) Parent shall cause the Surviving Corporation to, and the
Surviving Corporation shall, use its reasonable efforts to maintain in effect
for six years from the Effective Time, if available, the current directors' and
officers' liability insurance policies maintained by the Company (provided that
the Surviving Corporation may substitute therefore policies of at least the
same coverage containing terms and conditions which are not materially less
favorable) with respect to matter occurring prior to the Effective Time;
provided, however, that in no event shall the Surviving Corporation be required
to expend pursuant to this Section 6.06(c) more than an amount per year equal
to 200% of current annual premiums paid by the Company for such insurance. In
the event that, but for the proviso to the immediately preceding sentence, the
Surviving Corporation would be required to expend more than 200% of current
annual premiums, the Surviving Corporation shall obtain the maximum amount of
such insurance obtainable by payment of annual premiums equal to 200% of
current annual premiums.
(d) In the event the Company or the Surviving Corporation or
any of their respective successors or assigns (i) consolidates with or merges
into any other person and shall not be the continuing or surviving corporation
or entity of such consolidation or merger or (ii) transfers all or
substantially all of its properties and assets to any person, then, and in each
such case, proper provision shall be made so that the successors and assigns of
the Company or the Surviving Corporation, as the case may be, or at Parent's
option, Parent, shall assume the obligations set forth in this Section 6.06.
(e) Each of the Indemnified Parties is made a third party
beneficiary of the obligations of the Parent, Sub, Company and Surviving
Corporation under this Section 6.06.
SECTION 6.07. Directors. Promptly upon the acceptance for payment of,
and payment by Sub for, shares of Class A Common Stock pursuant to the Offer,
Sub shall be entitled to designate such number of directors on the Board of
Directors of the Company as will give Sub, subject to compliance with Section
14(f) of the Exchange Act, representation on such Board of Directors equal to
at least that number of directors, rounded up to the next whole number, which
is the product of (a) the total number of directors on such Board of Directors
who are elected by the holders of Class A Common Stock pursuant to the Company
Certificate (giving effect to the directors elected pursuant to this sentence)
multiplied by (b) the percentage that (i) such number of shares of Class A
Common Stock so accepted for payment and paid for by Sub plus the number of
shares of Class A Common Stock otherwise owned by Sub or any other subsidiary
of Parent bears to (ii) the total number of shares of Class A Common Stock
outstanding, and the Company shall, at such time, cause Sub's designees to be
appointed or elected; provided, however, that in the event that Sub's designees
are to be appointed or
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elected to the Board of Directors of the Company, until the Effective Time of
the Merger, such Board of Directors shall have at least three directors who are
directors on the date of this Agreement and who are not officers of the Company
(the "Independent Directors"); and provided further that, in such event, if the
number of Independent Directors shall be reduced below three for any reason
whatsoever, any remaining Independent Directors (or Independent Director, if
there shall be only one remaining) shall be entitled to designate persons to
fill such vacancies who shall be deemed to be Independent Directors for purposes
of this Agreement or, if no Independent Directors then remain, the other
directors shall designate three persons to fill such vacancies who shall not be
officers, stockholders or affiliates of the Company, Parent or Sub, and such
persons shall be deemed to be Independent Directors for purposes of this
Agreement. Subject to applicable law, the Company shall take all action
requested by Parent necessary to effect any such appointment or election,
including mailing to its stockholders the Information Statement containing the
information required by Section 14(f) of the Exchange Act and Rule 14f-1
promulgated thereunder, and the Company agrees to make such mailing with the
mailing of the Schedule 14D-9 (provided that Sub shall have provided to the
Company on a timely basis all information required to be included in the
Information Statement with respect to Sub's designees). In connection with the
foregoing, the Company will promptly, at the option of Sub, either increase the
size of the Company's Board of Directors or obtain the resignation of such
number of its current directors as is necessary to enable Sub's designees to be
elected or appointed to the Company's Board of Directors as provided above.
SECTION 6.08. Public Announcements. Parent and Sub, on the one hand,
and the Company, on the other hand, will consult with each other before
issuing, and provide each other the opportunity to review and comment upon, any
press release or other public statements with respect to the transactions
contemplated by this Agreement, including the Offer and the Merger, and shall
not issue any such press release or make any such public statement prior to
such consultation, except as may be required by applicable law, court process
or by obligations pursuant to any listing agreement with, or regulations or
requirements of, any securities exchange. The parties agree that the initial
press release to be issued with respect to the transactions contemplated by
this Agreement is set forth in Exhibit B to this Agreement.
SECTION 6.09. Stockholder Litigation. The Company shall consult with
Parent in the defense or settlement of any stockholder litigation against the
Company and its directors relating to any of the transactions contemplated by
this Agreement; provided, however, that no such settlement shall be agreed to
without Parent's consent, which consent shall not be unreasonably withheld.
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SECTION 6.10 Acquisition Proposals.
(a) From the date hereof until the termination hereof, the
Company and the Company Subsidiaries will not, and will cause their respective
officers, directors, employees or other agents not to, directly or indirectly,
(i) take any action to solicit, initiate or encourage any Acquisition Proposal
(as hereinafter defined) provided that no public announcement made by the
Company prior to the date hereof regarding the transactions contemplated hereby
shall be deemed a violation of this Section 6.10(a)(i), or (ii) engage in
negotiations with, or disclose any nonpublic information relating to the
Company or the Company Subsidiaries, respectively, or afford access to their
respective properties, books or records to any person in connection with an
Acquisition Proposal. Nothing contained in this Section 6.10 shall prohibit the
Company and its Board of Directors (or any committee thereof) from (x) taking
and disclosing a position with respect to a tender offer by a third party
pursuant to Rules 14d-9 and 14e-2(a) promulgated by the SEC under the Exchange
Act, or (y) considering, negotiating, discussing, approving or recommending to
the stockholders of the Company a bona fide Acquisition Proposal not solicited
in violation of this Agreement if and only to the extent that, (A) such Board
of Directors determines in good faith upon the advice of counsel that such
action is required for the Board of Directors to comply with its fiduciary
duties to stockholders imposed by law, and (B) prior to furnishing such
information to, or entering into discussions or negotiations with, such person
or entity, the Company provides written notice to Parent to the effect that it
is furnishing information to, or entering into discussions or negotiations
with, such person or entity. Either Parent or (provided the Company and its
Board of Directors have complied with the above requirements of this Section
6.10(a)) the Company may terminate this Agreement if the Company or its Board
of Directors approves or recommends to the Company's stockholders an
Acquisition Proposal or the Board of Directors of the Company withdraws its
recommendation that the stockholders accept and approve the transactions
contemplated by this Agreement.
(b) The term "Acquisition Proposal" as used herein means any
proposal or offer from any person (other than Parent or Sub) relating to (i)
any direct or indirect acquisition or purchase of any equity interest in, or a
substantial amount of assets of, the Company or Subsidiaries, (ii) any tender
offer or exchange offer (including a self-tender offer) involving the equity
securities of the Company, (iii) any merger, consolidation, recapitalization,
liquidation, business combination or similar transaction involving the Company
other than the transactions contemplated by this Agreement or (iv) any other
extraordinary transaction the consummation of which would or could reasonably
be expected to impede, interfere with, prevent or materially delay the
transactions contemplated by this Agreement.
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(c) The Company shall immediately cease and cause to be
terminated any existing discussions or negotiations with any persons (other
than each other) conducted heretofore with respect to any of the foregoing
transactions referenced in this Section 6.10.
SECTION 6.11. Filings; Other Action. Subject to the terms and
conditions herein provided, as promptly as practicable, the Company, Parent and
Sub shall: (i) promptly make all filings and submissions under the HSR Act as
may be required to be made in connection with this Agreement and the
transactions contemplated hereby, (ii) use all reasonable efforts to cooperate
with each other in (A) determining which filings are required to be made prior
to the Effective Time with, and which material consents, approvals, permits or
authorizations are required to be obtained prior to the Effective Time from,
governmental or regulatory authorities of the United States, the several states
or District of Columbia, and foreign jurisdictions in connection with the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby and (B) timely making all such filings and
timely seeking all such consents, approvals, permits or authorizations, and
(iii) use all reasonable efforts to take, or cause to be taken, all other
action and do, or cause to be done, all other things necessary or appropriate
to consummate the transactions contemplated by this Agreement. In connection
with the foregoing, the Company will provide Parent, and Parent and Sub will
provide the Company, with copies of correspondence, filings or communications
(or memoranda setting forth the substance thereof) between such party or any of
its representatives, on the one hand, and any governmental agency or authority
or members of their respective staffs, on the other hand, with respect to this
Agreement and the transactions contemplated hereby. Each of Parent, Sub and the
Company acknowledge that certain actions may be necessary with respect to the
foregoing in making notifications and obtaining clearances, consents,
approvals, waivers or similar third party actions which are material to the
consummation of the transactions contemplated hereby, and each of Parent, Sub
and the Company agree to take such action as is necessary to complete such
notifications and obtain such clearances, approvals, waivers or third party
actions.
SECTION 6.12. Directors of Parent. Effective as of the Effective
Time, Parent shall cause Anthony C. Rego and Charles A. Rini to be elected to
the Board of Directors of Parent.
SECTION 6.13. Additional Agreements. Subject to the terms and
conditions herein provided, each of the parties hereto agrees to use all
reasonable efforts to take, or cause to be taken, all action and to do, or
cause to be done, all things necessary, proper or advisable under applicable
laws and regulations to
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consummate and make effective the transactions contemplated by this Agreement,
including using all reasonable efforts to obtain all necessary waivers, consents
and approvals in connection with the Governmental Requirements, to effect all
necessary registrations and filings and to obtain all necessary financing. In
case at any time after the Effective Time any further action is necessary or
desirable to carry out the purposes of this Agreement, the proper officers
and/or directors of Parent, Sub and the Company shall take all such necessary
action.
SECTION 6.14. Shares Held by Company Subsidiaries. The Company agrees
to cause each of the Company Subsidiaries that owns any shares of Common Stock
to not tender any such shares pursuant to the Offer.
SECTION 6.15. Employment Agreements. Concurrently herewith, the
employment agreements attached as Exhibits D and E hereto shall be executed
by all parties thereto.
SECTION 6.16. Merger Certificate. Parent shall file or cause Sub to
file the Certificate of Merger referenced in Section 7.01(a) as soon as
practicable, but in no event more than two business days after the satisfaction
of the conditions set forth in Article VII.
SECTION 6.17. Provision of Funds. Parent shall make available
to Sub all funds required to consummate the Offer and the Merger.
ARTICLE VII
CONDITIONS PRECEDENT
SECTION 7.01. Conditions to Each Party's Obligation to Effect the
Merger. The respective obligations of each party to effect the Merger are
subject to the satisfaction or waiver on or prior to the Effective Time of the
Merger of the following conditions:
(a) Stockholder Approval. If required by applicable law, this
Agreement shall have been approved and adopted by the affirmative vote of the
stockholders of the Company by the requisite percentage in accordance with
applicable law and the Company's Certificate of Incorporation, and the
Certificate of Merger shall have been executed and delivered by the Surviving
Corporation and filed in the Department of State of the State of Delaware.
(b) No Injunctions or Restraints. No temporary restraining
order, preliminary or permanent injunction or other order issued by any court
of competent jurisdiction or other legal restraint or prohibition preventing
the
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consummation of the Merger shall be in effect; provided, however, that each
of the parties shall have used its best efforts to prevent the entry of any
such injunction or other order and to appeal as promptly as possible any
injunction or other order that may be entered,
(c) Regulatory Approvals. All regulatory and related
approvals (in addition to any approval contemplated by the HSR Act) shall have
been obtained on terms mutually satisfactory to Parent and the Company, except
for any the failure of which to obtain would not have a material adverse effect
on either Parent or the Surviving Corporation,
(d) Offer. Sub or its permitted assignee shall have purchased
all Class A Common Stock validly tendered and not withdrawn pursuant to the
Offer; provided, however, that this condition shall not be applicable to the
obligations of Parent or Sub if, in breach of this Agreement or the terms of
the Offer, Sub fails to purchase any Class A Common Stock validly tendered and
not withdrawn pursuant to the Offer.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. Termination. This Agreement may be terminated and the
Merger contemplated hereby may be abandoned at any time notwithstanding
approval thereof by the stockholders of the Company, but prior to the Effective
Time of the Merger, in any one of the following circumstances:
(a) by mutual written consent of Parent and the Company
except if shares of Class A Stock have been purchased pursuant to the
Offer;
(b) by either Parent, Sub or the Company:
(i) if, upon a vote at a duly held
Stockholders Meeting or any adjournment thereof, any
required approval of the Stockholders of the Company
shall not have been obtained;
(ii) if (x) Sub shall not have commenced the Offer
within the time required by Section 1.01 of this Agreement,
(y) as the result of the failure of any of the conditions set
forth in Exhibit A to this Agreement, the Offer shall have
been terminated by Parent or expired in accordance with its
terms without Sub having purchased shares of Class A Common
Stock pursuant to the Offer or (z) Sub
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shall not have purchased shares of Class A Common Stock
pursuant to the Offer within 90 days following the date of
this Agreement; provided, however, that the passage of the
period referred to in clause (z) shall be tolled for any part
thereof during which any party shall be subject to a nonfinal
order, decree, ruling or action restraining, enjoining or
otherwise prohibiting the purchase of shares of Class A Common
Stock pursuant to the Offer or the consummation of the Merger;
and provided further that the right to terminate this
Agreement pursuant to this Section 8.01(b)(ii) shall not be
available to any party whose failure to fulfill any of its
obligations under this Agreement results in the failure of any
such condition;
(iii) if the Merger shall not have been consummated
on or before the date six (6) months following the date of
this Agreement, unless the failure to consummate the Merger
is the result of a willful and material breach of this
Agreement by the party seeking to terminate this Agreement;
provided, however, that the passage of such period shall be
tolled for any part thereof during which any party shall be
subject to a nonfinal order, decree, ruling or action
restraining, enjoining or otherwise prohibiting the
consummation of the Merger or the calling or holding of the
Stockholders Meeting; provided, further that no party shall
be entitled to terminate this Agreement pursuant to this
Section 8.01(b)(iii) if shares of Class A Common Stock have
been purchased pursuant to the Offer; or
(iv) if any Governmental Entity shall have issued an
order, decree or ruling or taken any other action permanently
enjoining, restraining or otherwise prohibiting the purchase
of shares of Class A Common Stock or Class B Common Stock
pursuant to the Offer or the Merger and such order, decree,
ruling or other action shall have become final and
nonappealable; or
(c) by either Parent or Company pursuant to Section
6.10.
SECTION 8.02. Effect of Termination. Subject to Section 8.06(b), in
the event of termination of this Agreement by either the Company, Parent or Sub
as provided in Section 8.01, this Agreement shall forthwith become void and
have no effect, without any liability or obligation on the part of (i) the
Company, other than the provisions of Sections 8.06 and 9.06 or (ii) on the
part of Parent or Sub, other than the provisions of Section 9.06, except to the
extent that such termination results from the material breach by Parent or Sub
of any of its representations, warranties, covenants or agreements set forth in
this Agreement.
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SECTION 8.03. Amendment. To the extent permitted by applicable law,
this Agreement may be amended by the parties at any time before or after any
required approval of matters presented in connection with the Merger by the
stockholders of the Company; provided, however, that after any such approval,
there shall not be made any amendment that by law requires further approval by
such stockholders without the further approval of such stockholders. This
Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties.
SECTION 8.04. Extension; Waiver. At any time prior to the Effective
Time of the Merger, the parties may (a) extend the time for the performance of
any of the obligations or other acts of the other parties, (b) waive any
inaccuracies in the representations and warranties contained in this Agreement
or in any document delivered pursuant to this Agreement or (c) subject to the
proviso of Section 8.03, waive compliance with any of the agreements or
conditions contained in this Agreement. Any agreement on the part of a party to
any such extension or waiver shall be valid only if set forth in an instrument
in writing signed on behalf of such party. The failure of any party to this
Agreement to assert any of its rights under this Agreement or otherwise shall
not constitute a waiver of those rights.
SECTION 8.05. Procedure for Termination, Amendment, Extension or
Waiver. A termination of this Agreement pursuant to Section 8.01, an amendment
of this Agreement pursuant to Section 8.03 or an extension or waiver pursuant
to Section 8.04 shall, in order to be effective, require (a) in the case of
Parent, Sub or the Company, action by its Board of Directors or the duly
authorized designee of its Board of Directors and (b) in the case of the
Company, action by a majority of the members of the Board of Directors of the
Company who were members thereof on the date of this Agreement and remain as
such thereafter or the duly authorized designee of such members and approval by
a majority of Independent Directors.
SECTION 8.06. Effect of Termination and Abandonment.
(a) Termination Fees and Expenses.
(i) Parent shall be entitled to receive from the
Company a termination fee in the amount of $10,000,000 if
this Agreement is terminated or Sub does not purchase shares
of Class A Common Stock pursuant to the Offer because the
Company or its Board of Directors approves or recommends to
the Company's stockholders an Acquisition Proposal or in
connection with an Acquisition Proposal
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the Board of Directors of the Company withdraws its
recommendation that the stockholders of the Company accept
and approve the transactions contemplated by this Agreement;
(ii) Parent shall be entitled to receive from the
Company a termination fee in the amount of $5,000,000 if Sub
has not purchased shares of Class A Common Stock pursuant to
the Offer as a result of (x) the failure of the conditions
set forth in clause (ii) of the first paragraph of Exhibit A
to this Agreement or paragraph (f) of Exhibit A to this
Agreement to be satisfied or (y) the failure of the holders
of Class A Common Stock to have validly tendered and not
withdrawn prior to the expiration of the Offer that number of
shares of Class A Common Stock which would represent the
minimum number of outstanding shares of Class A Common Stock,
determined immediately prior to the consummation of the
Offer, that would enable Parent and Sub to consummate the
Merger under the Company's Certificate of Incorporation
notwithstanding the negative vote of all shares of Class A
Stock not acquired by Sub in the Offer and the negative vote
of all shares of Class B stock as to which the beneficial
owners have not executed and delivered the Stockholders'
Agreement; and
(iii) Parent shall be entitled to receive from the
Company a topping fee in the amount of $10,000,000 in the
event that following any termination of this Agreement (other
than solely because Parent or Sub failed to fulfill any of
their obligations under this Agreement) the Board of
Directors of the Company approves or recommends an
Acquisition Proposal to the Company's stockholders on or
before November 30, 1997, which amount shall be due and
payable upon consummation of the transactions contemplated by
such Acquisition Proposal.
Under no circumstances shall the Company be obligated to pay
more than $10,000,000 pursuant to this Section 8.06(a). Therefore, if the
Company has paid $5,000,000 pursuant to Section 8.06(a)(ii) and subsequently
becomes obligated to make a payment to Parent pursuant to Section 8.06(a)(iii),
the $10,000,000 payment under Section 8.06(a)(iii) shall be reduced by the
$5,000,000 payment previously paid under Section 8.06(a)(ii). If circumstances
should occur giving rise to the payment of fees under more than one of the
above clauses, the Company shall pay solely under the clause requiring the
highest fee.
(b) If Parent has received the full amount of any payment
under Section 8.06(a), neither Parent nor Sub shall assert or pursue, directly
or indirectly, whether arising under tort, contract, or otherwise, any claim or
cause of action against any of the Company or any person making an Acquisition
Proposal
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or their respective directors, officers or representatives based in whole or
part upon its or their receipt, consideration, recommendation or approval of an
Acquisition Proposal, including the Company's exercise of its right of
termination pursuant to this Article VIII.
(c) It is understood and agreed by the parties hereto that
the termination and topping fees provided for in Section 8.06(a)(i), (ii) and
(iii) are intended to constitute liquidated damages, since the actual amount of
damages which would be sustained by Parent and Sub as a result of such
termination is difficult, if not impossible, of ascertainment and that the
agreement of the parties with regard to the payment of the foregoing sum as
liquidated damages represents a good faith effort by each of the parties to
establish the reasonable amount of restitution necessary to provide for
recovery of all costs and expenses associated with efforts to consummate the
Offer and the Merger, including, without limitation, opportunity costs.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01. Survival of Representations, Warranties and Agreements.
No representations or warranties in this Agreement or in any instrument
delivered pursuant to this Agreement shall survive beyond the Effective Time.
This Section 9.01 shall not limit any covenant or agreement after the Effective
Time.
SECTION 9.02. Notices. All notices, claims, demands and other
communications hereunder shall be in writing and shall be deemed given upon (a)
confirmation of receipt of a facsimile transmission, (b) confirmed delivery by
a standard overnight carrier or when delivered by hand or (c) the expiration of
five business days after the day when mailed by registered or certified mail
(postage prepaid, return receipt requested), addressed to the respective
parties at the following addresses (or such other address for a party as shall
be specified by like notice):
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<PAGE> 83
(a) If to Parent or Sub, to:
Talon, Inc.
101 Kappa Drive
RIDC Park
Pittsburgh, PA 15238-2809
Attention: David S. Shapira
Facsimile: (412) 963-2540
with a copy to:
Cohen & Grigsby, P.C.
2900 CNG Tower
625 Liberty Avenue
Pittsburgh, PA 15222
Attention: Charles C. Cohen, Esquire
Facsimile: (412) 391-3382
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<PAGE> 84
(b) if to Company, to:
Mojo, Inc.
5300 Richmond Road
Bedford Heights, OH 44146
Attention: Anthony C. Rego, Charles A. Rini, Sr.
Facsimile: (216) 591-2972
with a copy to:
Kohrman Jackson & Krantz P.L.L.
1375 East Ninth Street
One Cleveland Center, 20th Floor
Cleveland, OH 44114
Attention: S. Lee Kohrman, Esquire
Facsimile: (216) 621-6536
SECTION 9.03. Descriptive Headings. Headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
SECTION 9.04. Entire Agreement; Assignment. This Agreement (including
the Schedules, Exhibits and other documents and instruments referred to herein
which are incorporated herein and made a part of this Agreement) (a)
constitutes the entire agreement and supersedes all other prior agreements and
understandings both written and oral among the parties or any of them, with
respect to the subject matter hereof, including, without limitation, any
transaction between or among the parties hereto except the terms of the
Confidentiality Letter shall remain in full force and effect; (b) is not
intended to confer upon any other person any rights or remedies hereunder; and
(c) shall not be assigned by operation of law or otherwise.
SECTION 9.05. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of Pennsylvania
without giving effect to the provisions thereof relating to conflicts of law.
SECTION 9.06. Expenses and Fees. Whether or not the Merger is
consummated, all costs and expenses incurred in connection with this Agreement
and the transactions contemplated hereby and thereby shall be paid by the party
incurring such expenses. The provisions of Section 8.06 shall survive the
termination of this Agreement.
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<PAGE> 85
SECTION 9.07. Counterparts; Effectiveness. This Agreement may be
executed in two or more counterparts, each of which shall be deemed to be an
original but all of' which shall constitute one and the same agreement. This
Agreement shall become effective when each party hereto shall have received
counterparts thereof signed by all of the other parties hereto.
SECTION 9.08. Severability; Validity; Parties in Interest. If any
provision of this Agreement, or the application thereof to any person or
circumstance is held invalid or unenforceable, the remainder of this Agreement,
and the application of such provision to other persons or circumstances, shall
not be affected thereby, and to such end, the provisions of this Agreement are
agreed to be severable. Except as set forth in Section 6.06, nothing in this
Agreement, express or implied, is intended to confer upon any other person any
rights or remedies of any nature whatsoever under or by reason of this
Agreement.
SECTION 9.09. Jurisdiction. Any legal action or proceeding with
respect to this Agreement or any document related hereto shall be brought by
Company, Parent or Sub in the Court of Common Pleas, Allegheny County,
Pennsylvania or the United States District Court for the Western District of
Pennsylvania, and by execution and delivery of this Agreement or any document
related hereto, each of the Company, Parent or Sub hereby consents, for itself
and in respect of its property, to this jurisdiction of the aforesaid courts.
Each of the parties hereto hereby irrevocably waives, to the extent permitted
by applicable law, any objection, including, without limitation, any objection
to the laying of venue or based on the grounds of forum non conveniens, which
such party may now or hereafter have to the bringing of any action or
proceeding in such jurisdiction in respect of this Agreement or any document
related hereto.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, each of the parties has caused this Agreement to
be executed on its behalf by an officer thereunto duly authorized on the day
and year first above written,
GIANT EAGLE, INC.
By /s/ DAVID S. SHAPIRA
---------------------------------
Name: David S. Shapira
Title: CEO
TALON ACQUISITION COMPANY
By /s/ RAYMOND J. BURGO
---------------------------------
Name: Raymond J. Burgo
Title: President
RISER FOODS, INC.
By /s/ ANTHONY C. REGO
---------------------------------
Name: Anthony C. Rego
Title: Chairman of the Board and
Chief Executive Officer
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<PAGE> 87
EXHIBIT A
CONDITIONS OF THE OFFER
Notwithstanding any other term of the Offer or the Agreement
and Plan of Merger dated May _____, 1997 among [to come], (the "Merger
Agreement") Sub shall not be required to accept for payment or, subject to any
applicable rules and regulations of the SEC, including Rule 14e-l(c) under the
Exchange Act (relating to Sub's obligation to pay for or return tendered shares
of Class A Common Stock after the termination or withdrawal of the Offer), to
pay for any shares of Class A Common Stock tendered pursuant to the Offer
unless (i) there shall have been validly tendered and not withdrawn prior to
the expiration of the Offer that number of shares of Class A Stock which would
represent at least 80% of the outstanding shares of Class A Stock as determined
immediately prior to the acceptance of shares tendered in the Offer (the
"Minimum Tender Condition"), (ii) the holders of at least 80% of the issued and
outstanding shares of Class B Common Stock shall have executed and delivered
the Stockholders' Agreement not later than 5:00 p.m. Eastern Time, on [insert
date which is 15 days after Offer Documents are mailed] and shall have fully
performed their obligations thereunder, and (iii) any waiting period under the
HSR Act applicable to the purchase of shares of Common Stock pursuant to the
Offer and/or the Merger shall have expired or been terminated. Furthermore,
notwithstanding any other term of the Offer or the Merger Agreement, Sub shall
not be required to commence or continue the Offer or accept for payment or,
subject as aforesaid, to pay for any shares of Class A Common Stock not
theretofore accepted for payment or paid for, and may terminate or amend the
Offer if, at any time on or after the date of the Merger Agreement and before
the acceptance of such shares for payment or the payment therefor, any of the
following conditions exists:
(a) No Litigation. There shall have been entered in any
action or proceeding before any Governmental Person an injunction or
order, (i) prohibiting or limiting the acquisition by Parent or Sub of
any shares of Common Stock, (ii) restraining or prohibiting or
otherwise rendering unenforceable the consummation of the Merger or
any of the other transactions contemplated by or provisions of the
Merger Agreement or the Stockholders' Agreement, (iii) prohibiting or
limiting the ownership or operation by the Company, Parent or any of
their respective subsidiaries of any material portion of the business
or assets of the Company, Parent or any of their respective
subsidiaries, or to compel the Company, Parent or any of their
respective subsidiaries to dispose of or hold separate any material
portion of the business or assets of the Company, Parent or any of
their respective subsidiaries, as a result of the Merger or any of the
other
<PAGE> 88
transactions contemplated by the Merger Agreement, (iv) imposing
limitations on the ability of Parent or Sub to acquire or hold, or
exercise full rights of ownership of, any shares of Common Stock,
including, without limitation, the right to vote the Common Stock
purchased by Sub on all matters properly presented to the stockholders
of the Company, or (v) requiring the Company, Parent or Sub to pay
damages that reasonably can be foreseen, or are reasonably likely, to
result in a Company Material Adverse Effect; or
(b) there shall be any statute, rule, regulation,
legislation, interpretation, judgment, order or injunction that is or
could reasonably be expected to result, directly or indirectly, in any
of the consequences referred to in clauses (i) through (v) of
paragraph (a) above; or
(c) there shall have occurred any material adverse change, or
any development that, insofar as reasonably can be foreseen, is
reasonably likely to result in a Company Material Adverse Effect; or
(d) there shall have occurred (i) any general suspension of
trading in, or limitation on prices for, securities on any national
securities exchange or in the over-the-counter market in the United
States (excluding any coordinated trading halt triggered solely as a
result of a specified decrease in a market index), (ii) any material
adverse change in the financial markets, commodities markets or major
stock exchange indices in the United States, (iii) a declaration of a
banking moratorium or any suspension of payments in respect of banks
in the United States, or (iv) a commencement of a war or armed
hostilities or other national or international calamity directly or
indirectly involving the United States; or
(e) (i) the Board of Directors of the Company or any
committee thereof shall have withdrawn or modified in a manner adverse
to Parent or Sub its approval or recommendation of the Offer, the
Merger or the Merger Agreement, or approved or recommended any
Acquisition Proposal, (ii) the Company shall have entered into any
agreement (other than a confidentiality agreement or engagement letter
with an investment bank) with respect to any Acquisition Proposal or
(iii) the Board of Directors of the Company or any committee thereof
shall have resolved to do any of the foregoing; or
(f) (i) any of the representations and warranties of the
Company set forth in the Merger Agreement that are qualified as to
materiality shall not be true and correct and any such representations
and warranties that are not so qualified shall not be true and correct
in any material respect, in each case as if such representations and
warranties were made as of such time; or (ii) the Company shall have
failed to perform in any material respect any obligation or to comply
in any material respect with any agreement or
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<PAGE> 89
covenant of the Company to be performed or complied with by it under
the Merger Agreement and such failure continues for five business days
after receipt by the Company of notice from Parent specifying such
failure; or
(g) the Merger Agreement shall have been terminated in
accordance with its terms, including without limitation a termination
by Parent or the Company pursuant to Section 6.10; or
(h) Sub, Parent and the Company (with the approval of a
majority of its Independent Directors) shall have mutually agreed that
Sub shall terminate the Offer or postpone the acceptance for payment
of or payment for shares of Class A Common Stock thereunder;
which, in the sole judgment of Sub or Parent, in any such case, and regardless
of the circumstances giving rise to any such condition (including any action or
inaction by Parent or any of its affiliates), makes it inadvisable to proceed
with such acceptance for payment or payment,
The foregoing conditions are for the sole benefit of Sub and
Parent and may be asserted by Sub or Parent regardless of the circumstances
giving rise to such condition or may be waived by Sub and Parent in whole or in
part at any time and from time to time in their sole discretion. The failure by
Parent, Sub or any other affiliate of Parent at any time to exercise any of the
foregoing rights shall not be deemed a waiver of any such right, the waiver of
any such right with respect to particular facts and circumstances shall not be
deemed a waiver with respect to any other facts and circumstances and each such
right shall be deemed an ongoing right that may be asserted at any time and
from time to time.
Capitalized terms used herein and not otherwise defined shall
have the meanings set forth in the Merger Agreement.
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ANNEX II
SECTION 262 OF THE GENERAL CORPORATION LAW OF DELAWARE
SECTION 262 APPRAISAL RIGHTS. (a) Any stockholder of a corporation of this
State who holds shares of stock on the date of the making of a demand pursuant
to subsection (d) of this section with respect to such shares, who continuously
holds such shares through the effective date of the merger or consolidation, who
has otherwise complied with subsection (d) of this section and who has neither
voted in favor of the merger or consolidation nor consented thereto in writing
pursuant to ss. 228 of this title shall be entitled to an appraisal by the Court
of Chancery of the fair value of his shares of stock under the circumstances
described in subsections (b) and (c) of this section. As used in this section,
the word "stockholder" means a holder of record of stock in a stock corporation
and also a member of record of a nonstock corporation; the words "stock" and
"share" mean and include what is ordinarily meant by those words and also
membership or membership interest of a member of a nonstock corporation; and the
words "depository receipt" mean a receipt or other instrument issued by a
depository representing an interest in one or more shares, or fractions thereof,
solely of stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to ss. 251 (other than a merger effected pursuant to
subsection (g) of ss. 251), 252, 254, 257, 258, 263 or 264 of this title:
(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of stock, which
stock, or depository receipts in respect thereof, at the record date fixed
to determine the stockholders entitled to receive notice of and to vote at
the meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the holders of the surviving corporation as
provided in subsection (f) of ss. 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal
rights under this section shall be available for the shares of any class
or series of stock of a constituent corporation if the holders thereof are
required by the terms of an agreement of merger or consolidation pursuant
to ss.ss. 251, 252, 254, 257, 258, 263 and 264 of this title to accept for
such stock anything except:
a. Shares of stock of the corporation surviving or resulting
from such merger or consolidation, or depository receipts in respect
thereof;
b. Shares of stock of any other corporation, or depository
receipts in respect thereof, which shares of stock or depository
receipts at the effective date of the merger or consolidation will be
either listed on a national securities exchange or
<PAGE> 91
designated as a national market system security on an interdealer
quotation system by the National Association of Securities Dealers,
Inc. or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts
and cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a., b. and c. of
this paragraph.
(3) In the event all of the stock of a subsidiary Delaware
corporation party to a merger effected under ss. 253 of this title is not
owned by the parent corporation immediately prior to the merger, appraisal
rights shall be available for the shares of the subsidiary Delaware
corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal
rights are provided under this section is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days prior to
the meeting, shall notify each of its stockholders who was such on the
record date for such meeting with respect to shares for which appraisal
rights are available pursuant to subsections (b) or (c) hereof that
appraisal rights are available for any or all of the shares of the
constituent corporations, and shall include in such notice a copy of this
section. Each stockholder electing to demand the appraisal of his shares
shall deliver to the corporation, before the taking of the vote on the
merger or consolidation, a written demand for appraisal of his shares. Such
demand will be sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends thereby to
demand the appraisal of his shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder electing to
take such action must do so by a separate written demand as herein
provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become
effective; or
(2) If the merger or consolidation was approved pursuant to ss.228
or ss.253 of this title, each constituent corporation, either before the
effective date of the merger or consolidation or within ten days
thereafter, shall notify each of the holders of any class or
<PAGE> 92
series of stock of such constituent corporation who are entitled to
appraisal rights of the approval of the merger or consolidation and that
appraisal rights are available for any or all shares of such class or
series of stock of such constituent corporation, and shall include in such
notice a copy of this section; provided that, if the notice is given on or
after the effective date of the merger or consolidation, such notice shall
be given by the surviving or resulting corporation to all such holders of
any class or series of stock of a constituent corporation that are entitled
to appraisal rights. Such notice may, and, if given on or after the
effective date of the merger or consolidation, shall, also notify such
stockholders of the effective date of the merger or consolidation. Any
stockholder entitled to appraisal rights may, within 20 days after the date
of mailing of such notice, demand in writing from the surviving or
resulting corporation the appraisal of such holder's shares. Such demand
will be sufficient if it reasonably informs the corporation of the identity
of the stockholder and that the stockholder intends thereby to demand the
appraisal of such holder's shares. If such notice did not notify
stockholders of the effective date of the merger or consolidation, either
(i) each such constituent corporation shall send a second notice before the
effective date of the merger or consolidation notifying each of the holders
of any class or series of stock of such constituent corporation that are
entitled to appraisal rights of the effective date of the merger or
consolidation or (ii) the surviving or resulting corporation shall send
such a second notice to all such holders on or within 10 days after such
effective date; provided, however, that if such second notice is sent more
than 20 days following the sending of the first notice, such second notice
need only be sent to each stockholder who is entitled to appraisal rights
and who has demanded appraisal of such holder's shares in accordance with
this subsection. An affidavit of the secretary or assistant secretary or of
the transfer agent of the corporation that is required to give either
notice that such notice has been given shall, in the absence of fraud, be
prima facie evidence of the facts stated therein. For purposes of
determining the stockholders entitled to receive either notice, each
constituent corporation may fix, in advance, a record date that shall be
not more than 10 days prior to the date the notice is given, provided, that
if the notice is given on or after the effective date of the merger or
consolidation, the record date shall be such effective date. If no record
date is fixed and the notice is given prior to the effective date, the
record date shall be the close of business on the day next preceding the
day on which the notice is given.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation of any stockholder who has
complied with subsections 9(a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of stock of all such stockholders. Notwithstanding
the foregoing, at any time within 60 days after the effective date of the merger
or consolidation, any stockholder shall have the right to withdraw his demand
for appraisal and to accept the terms offered upon the merger or consolidation.
Within 120 days after the effective date of the merger or consolidation, any
stockholder who has complied with the requirements of subsections (a) and (d)
hereof, upon written request, shall be entitled to receive from the corporation
surviving the merger or resulting from the consolidation statement setting forth
the aggregate number of shares not voted in favor of the merger or consolidation
and with respect to which demands for appraisal have been received and the
aggregate number of holders of such shares. Such written statement shall be
mailed to the stockholder within 10 days after his written request for such a
statement is received by the
<PAGE> 93
surviving or resulting corporation or within 10 days after expiration of the
period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at
least 1 week before the day of the hearing, in such a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
shall be approved as the Court deems advisable. The forms of the notices by mail
and by publication shall be approved by the Court, and the costs thereof shall
be borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have been become
entitled to appraisal rights. The Court may require the stockholders who have
demanded an appraisal for their shares and who hold stock represented by
certificates to submit their certificates of stock to the Register in Chancery
for notation thereon of the pendency of the appraisal proceedings; and if any
stockholder fails to comply with such direction, the Court may dismiss the
proceedings as to such stockholder.
(h) After determining the stockholders entitled to an appraisal, the
Court shall appraise the shares, determining their fair value exclusive of any
element of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrower money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted his
certificates of stock to the Register in Chancery, if such is required, may
participate fully in all proceedings until it is finally determined that he is
not entitled to appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertified stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such
<PAGE> 94
stock. The Court's decree may be enforced as other decrees in the Court of
Chancery may be enforced, whether such surviving or resulting corporation be a
corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be changed pro rata against the value of all of
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection (d)
of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation); provided,
however, that if no petition for an appraisal shall be filed within the time
provided in subsection (e) of this section, or if such stockholder shall deliver
to the surviving or resulting corporation a written withdrawal of his demand for
an appraisal and an acceptance of the merger or consolidation, either within 60
days after the effective date of the merger or consolidation as provided in
subsection (e) of this section or thereafter with the written approval of the
corporation, then the right of such stockholder to an appraisal shall cease.
Notwithstanding the foregoing, no appraisal proceedings in the Court of Chancery
shall be dismissed as to any stockholder without the approval of the Court, and
such approval may be conditioned upon such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
<PAGE> 95
ANNEX III
HOULIHAN LOKEY OPINION
HOULIHAN LOKEY HOWARD & ZUKIN CAPITAL
INVESTMENT BANKERS
May 13, 1997
To The Board of Directors
Riser Foods, Inc.
To The Board of Directors
Riser Foods, Inc.
Gentlemen:
We understand that Riser Foods, Inc. (the "Company") is entering into an
agreement (the "Agreement") with Giant Eagle, Inc. ("Giant Eagle"), pursuant to
which the Company would become a wholly-owned subsidiary of Giant Eagle. We
further understand that pursuant to the Agreement, Giant Eagle proposes to
acquire all of the outstanding shares of the Company's Class A and Class B
common stock at a price per share of $42.00 in cash (the "Consideration"),
pursuant to a tender offer for the Class A common shares (the "Tender Offer"),
followed by the merger in which all of the Company's Class A common shares not
previously purchased in the Tender Offer and all of the Company's Class B common
shares, subject to the rights of Dissenting Stockholders (as defined in the
Agreement), would receive $42.00 per share in cash (collectively, the
"Transaction").
Houlihan Lokey Howard & Zukin Capital ("Houlihan Lokey") is an investment
banking firm primarily engaged in the valuation of businesses and securities,
the financial restructuring of businesses and their capital structures, the
purchase and sale of businesses for clients and the financing of businesses.
Houlihan Lokey has been retained by the Company to advise and assist it
with respect to the Transaction. We have advised the Company in the past with
respect to other investment banking matters. We have not been requested to, and
did not, solicit third party indications of interest in acquiring all or any
part of the Company or the Class A or Class B common shares.
You have requested our opinion (the "Opinion") as to the fairness from a
financial point of view to the stockholders of the Company of the Consideration
to be received by the stockholders in connection with the Transaction. The
Opinion does not address the Company's underlying business decision to effect
the Transaction.
In connection with this Opinion, we have made such reviews, analyses and
inquiries as we have deemed necessary and appropriate under the circumstances.
Among other things, we have:
<PAGE> 96
1. reviewed the Company's annual reports to shareholders and on Form
10-K for the fiscal years ended June 30, 1992 through June 30, 1996, Form
10-Qs for the periods ended October 19, 1996 and January 11, 1997
(including financial statements contained therein), and unaudited financial
statements for the quarter ended April 5, 1997, which the Company's
management has identified as being the most current financial statements
available;
2. reviewed the Agreement and Plan of Merger among the Company,
Giant Eagle, and Merger Company ("Merger Agreement"), dated May 13, 1997;
3. reviewed the employment agreements between Giant Eagle and each
of the two senior executives of the Company, dated May 13, 1997;
4. discussed with certain members of the senior management of the
Company the operations, financial condition, future prospects and projected
operations and performance of the Company;
5. visited certain retail stores and other facilities of the
Company;
6. reviewed detailed projected financial statements, dated February
22, 1997, prepared by the Company's management with respect to the Company
for the years ended June 28, 1997 through June 29, 2002; also, reviewed
more recent earnings per share estimates prepared by the Company's
management for the periods through fiscal year 2002;
7. reviewed the historical market prices and trading volume for the
Company's publicly traded securities;
8. reviewed certain publicly available financial data for certain
companies that we deem comparable to the Company, and publicly available
prices and premiums paid in other transactions that we considered similar
to the Transaction; and
9. conducted such other studies, analyses and inquiries as we have
deemed appropriate.
In our review and analysis and in arriving at the Opinion, we have relied
upon and assumed, without independent verification, the accuracy and
completeness of all of the financial and other information provided us or
publicly available. We have also relied upon and assumed, without independent
verification, that the detailed projected financial statements provided to us
have been reasonably prepared and reflect the best currently available estimates
of the future financial results and condition of the Company, and that there has
been no material change in the assets, financial condition, business or
prospects of the Company since the date of the most recent financial statements
made available to us.
We have not made any physical inspection or independent appraisal of any of
the properties or assets of the Company. Our opinion is necessarily based on
business, economic, market and other conditions as they exist and can be
evaluated by us at the date of this letter.
<PAGE> 97
Based upon the foregoing, and in reliance thereon, it is our opinion that
the Consideration to be received by the stockholders of the Company in
connection with the Transaction is fair from a financial point of view.
NEW YORK
31 WEST 52ND STREET, 11TH FLOOR
NEW YORK, NEW YORK 10019-6118
TEL 212.582.5000 FAX 212.582.7405
BROKER/DEALER SERVICES THROUGH
HOULIHAN LOKEY HOWARD & ZUKIN CAPITAL.
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
LOS ANGELES CHICAGO SAN FRANCISCO MINNEAPOLIS WASHINGTON, D.C. DALLAS ATLANTA TORONTO
</TABLE>
<PAGE> 98
ANNEX IV
McDONALD OPINION
MEMBER NEW YORK STOCK EXCHANGE
MCDONALD INVESTMENT CENTER
800 SUPERIOR AVENUE
CLEVELAND, OHIO 44114-2603
216-443-2300
May 13, 1997
The Independent Directors
Riser Foods, Inc.
5300 Richmond Rd.
Bedford Heights, OH 44146
Gentlemen:
You have requested our opinion (the "Opinion") as to the fairness, from
a financial point of view, of the consideration of $42.00 per common share (the
"Consideration") to be paid by Giant Eagle, Inc. ("GEI") to the holders of the
issued and outstanding Class A and Class B shares of Common Stock (the "Common
Stock") of Riser Foods, Inc. (the "Company") in conjunction with the proposed
acquisition of all of the outstanding shares of the Company's Class A Common
Stock and Class B Common Stock by GEI (the "Transaction").
McDonald and Company Securities, Inc. ("McDonald"), as part of its
investment banking business, is customarily engaged in the valuation of
businesses and their securities in connection with mergers and acquisitions,
negotiated underwritings, competitive biddings, secondary distributions of
listed and unlisted securities, private placements and valuations for estate,
corporate and other purposes. McDonald has not had an investment banking
relationship with the Company and has not been involved in identifying
prospective purchasers of the Company or negotiating the price or terms of the
Transaction.
In rendering the Opinion we have made such reviews and analyses as we
have deemed necessary. Among other things, we have reviewed and analyzed the
following information:
(i) the "Draft" Agreement and Plan of Merger dated May 5, 1997
(the "Agreement");
(ii) the Company's Annual and 10K Reports for the years ended June
29, 1996, July 1, 1995, July 2, 1994, July 3, 1993 and June
27, 1992;
(iii) the Company's 10Q reports for the first two quarters of Fiscal
1997;
<PAGE> 99
(iv) the Company's Proxy Statements for the years ended June 29,
1996, July 1, 1995 and July 2, 1994;
(v) the Company's detailed internal financial reports for the
period ended April 5, 1997 and for the years ended June 29,
1996 and July 1, 1995;
(vi) the Company's internal budgets for the fourth quarter of
Fiscal 1997;
(vii) the Company's capital expenditure budgets for the fourth
quarter of Fiscal 1997, as well as the entire Fiscal 1998
budget;
(viii) Management's detailed projections of the Company's results of
operations of each of the five fiscal years ended June 29,
2002, prepared for internal planning purposes (the "Base Case
Projections"), together with management's projections of
earnings per share for such periods assuming revenue and
earnings growth exceeding the levels reflected in the Base
Case Projections;
(ix) the performance of the Company's Common Stock in public
trading since June, 1988 with emphasis on the latest twelve
months;
(x) certain publicly available information concerning the Company,
including reports published by equity analysts with other
investment banks containing annual earnings estimates for the
Company through 1998;
(xi) certain publicly available information with respect to certain
other retail and wholesale grocery companies that we believe
to be comparable to the Company and the trading markets for
certain of such other companies' securities;
(xii) certain publicly available information concerning the nature
and terms of other transactions involving retail and wholesale
grocery companies that we consider relevant to our inquiry;
(xiii) the condition of the Bedford Heights, Ohio Warehouse and
Corporate Headquarters, the Maple Heights, Ohio Warehouse, the
Bedford Heights, Ohio Ice Cream plant, and a representative
group of the retail grocery stores;
(xiv) the Company's leases of its retail grocery stores;
(xv) the Company's agreements with its two primary labor unions;
(xvi) the draft employment agreements with GEI concerning certain
senior managers;
(xvii) data and explanations discussed during interviews with the
Company's Chief Financial Officer.
<PAGE> 100
We also considered such other data and information we judged necessary
to render the Opinion.
In our review and analysis and in arriving at the Opinion, we have
assumed and relied upon the accuracy and completeness of all of the financial
and other information provided us or publicly available and have assumed and
relied upon the representations and warranties of the Company contained in the
Agreement. We have not been engaged to, and have not independently attempted to,
verify such information. We have also relied upon the management of the Company
as to the reasonableness and achievability of the Company's financial and
operating projections (and the assumptions and basis therefor) provided to us
and, have assumed that the Base Case Projections reflect the best currently
available estimates and judgments of the Company's management and that such
projections and forecasts will be realized in the amounts and in the time
periods currently estimated by the management of the Company. We have not been
engaged to assess the achievability of such projections or the assumptions on
which they were based and express no view as to such projections or assumptions.
In addition, we have not conducted an appraisal of any of the assets, properties
or facilities of the Company nor have we been furnished with any such appraisal.
We have also assumed that the conditions to the Transaction as set forth in the
Agreement would be satisfied and the Transaction would be consummated on a
timely basis in the manner contemplated by the Agreement.
It is understood that the Opinion was prepared for the use of the
Independent Directors of the Company. The Independent Directors and the
remaining members of the Company's Board of Directors will be entitled to rely
on the Opinion in their assessment of the Transaction. The Opinion may be
included in a Proxy Statement upon McDonald's review and consent. The Opinion
does not constitute a recommendation to any shareholder of the Company as to
whether or not to tender shares pursuant to any tender offer contemplated by the
Agreement nor as to how such shareholders should vote at any shareholders'
meeting held in connection with the Transaction.
It should be noted that the Opinion is based on economic and market
conditions and other circumstances existing on, and information made available
as of, the date hereof and does not address any matters subsequent to such date.
In addition, the Opinion is, in any event, limited to the fairness, as of the
date hereof, from a financial point of view, of the Consideration to be received
by the holders of the Company's Common Stock.
McDonald will receive a fee from the Company for our services in
rendering the Opinion, none of which is contingent upon the consummation of the
Transaction, as well as the Company's agreement to indemnify us under certain
circumstances.
Based upon and subject to the foregoing, it is our opinion that, as of
the date hereof, the Consideration to be received by the holders of the
Company's Common Stock pursuant to the Agreement is fair, from a financial point
of view, to the shareholders.
Very truly yours,
McDONALD & COMPANY SECURITIES, INC.
<PAGE> 101
By: Mark A. Filippell
Mark A. Filippell
Managing Director
<PAGE> 1
ARTHUR ANDERSEN LLP
Exhibit 3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Riser Foods, Inc. and Subsidiaries:
As independent public accountants, we hereby consent to the incorporation by
reference in this information statement of our report dated August 30, 1996
included in Riser Foods, Inc. Form 10-K for the year ended June 29, 1996 and
incorporated by reference into this information statement.
/s/ Arthur Andersen LLP
Cleveland, Ohio
July 8, 1997
