SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
Amendment No. 4
to
Schedule 14D-1
Tender Offer Statement
Pursuant to Section 14(d)(1) of the Securities Exchange Act of 1934
and
Statement on
Schedule 13D
Under the Securities Exchange Act of 1934
Big B, Inc.
(Name of Subject Company)
---------------
RDS Acquisition Inc.
Revco D.S., Inc.
(Bidders)
---------------
Common Stock, Par Value $0.001 Per Share
(Including the Associated Common Stock Purchase Rights)
(Title of Class of Securities)
0888917106
(CUSIP Number of Classes of Securities)
---------------
Jack A. Staph, Esq.
Senior Vice President, Secretary and General Counsel
Revco D.S., Inc.
1925 Enterprise Parkway
Twinsburg, OH 44087
(216) 487-1667
(Name, Address and Telephone Number of Persons Authorized to
Receive Notices and Communications on Behalf of Bidders)
---------------
Copy to:
Richard Hall, Esq.
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, New York 10019-7475
(212) 474-1293
<PAGE>
RDS Acquisition Inc. (the "Purchaser") and Revco D.S.,
Inc. ("Parent") hereby amend and supplement their Tender Offer
Statement on Schedule 14D-1 and Statement on Schedule 13D (as
amended prior to the date hereof, the "Schedule 14D-1"), originally
filed on September 10, 1996, with respect to their offer to purchase
all outstanding shares of Common Stock, par value $0.001 per share,
including the associated common stock purchase rights, of Big B,
Inc., an Alabama corporation (the "Company"), as set forth in this
Amendment No. 4. Capitalized terms not defined herein have the
meanings assigned thereto in the Schedule 14D-1.
Item 10. Additional Information
(a) On September 23, 1996, the Company sent Parent a
proposed form of Confidentiality Agreement. On September 27,
1996, D. Dwayne Hoven, President and Chief Executive Officer
of Parent sent to Anthony J. Bruno, Chairman of the Board and
Chief Executive Officer of the Company the following letter:
September 27, 1996
Mr. Anthony J. Bruno
Chairman of the Board and
Chief Executive Officer
Big B, Inc.
2600 Morgan Road, S.E.
Bessemer, AL 35023
Dear Anthony:
We have reviewed the proposed form of confidentiality agreement
that you sent us, and we have proposed changes in your form of
agreement. Unfortunately, it appears that Big B has not been
willing to negotiate any meaningful changes in its terms, which
we believe are seriously detrimental to Revco and to Big B's
shareholders.
We are willing to negotiate a reasonable confidentiality
agreement that will allow us access to confidential information
available to other bidders to ensure that your shareholders
receive the highest value for their shares. However, we have a
number of serious problems with the form of confidentiality
agreement you provided us:
<PAGE>
o Your proposed agreement and poison pill would prohibit
your shareholders from accepting our offer or any other
offer not approved by your Board at least until January
31, 1997. Indeed, we or any other party could be
prohibited from consummating an offer until June 30 of
next year due to the poison pill. We cannot
conceive of any reason why you need as much as four
months (or even longer) to determine whether an offer
superior to our $15 offer is available to your
shareholders. We are willing to agree to delay
consummating our offer for a reasonable period of time
that will permit you to solicit competing bids, but we
do not believe the substantial delay you envision is
justified.
o Your proposed form of agreement would require us to
give up all our rights as a shareholder to challenge
the validity of your poison pill even though you have
yourself instituted litigation against us on that very
subject.
o Your proposed agreement would prohibit us from
soliciting your shareholders to determine whether they
wish to eliminate your poison pill in order to accept
our offer or any other offer at least until January 31,
1997. In fact, your proposed agreement does not require
you to remove your poison pill and does not prevent you
from interposing other obstacles to our offer once a
reasonable period to solicit bids has elapsed.
o Your proposed agreement does not obligate you to
provide Revco with equal access to confidential
information with other parties and an equal opportunity
to bid.
We were disappointed that your Board of Directors chose to
adopt a poison pill that interferes with the rights of your
shareholders to accept an offer from Revco or any other party.
If your Board believes that our $15 cash offer is inadequate,
we would have much preferred to engage in meaningful
negotiations with you to determine whether an agreement for a
mutually acceptable transaction could be reached. We are still
willing to discuss our offer with you and are prepared to meet
at any time and place with you and your advisors.
On September 25, 1996, the Hart-Scott-Rodino waiting period
applicable to our offer expired. The only obstacle to your
shareholders now accepting our offer is your poison pill. The
fact is that the only real offer to acquire Big B has been made
by Revco, and there is no assurance that any other party will
make an offer. Even if another party is willing to make an
offer to acquire Big B, there is no assurance that that offer
can be consummated or will not be substantially delayed for
antitrust or other reasons.
<PAGE>
Your Board of Directors should allow your shareholders to
decide on their own whether they wish to accept our offer. If
any other party is prepared to make a superior offer that can
be consummated, they do not need four months (or even longer)
to do so.
Enclosed for your information is the form of confidentiality
agreement that we would be willing to sign. We hope you will
reconsider your position against negotiating an agreement on
this basis.
We look forward to hearing from you and discussing a mutually
acceptable agreement that will result in the best, most
expeditious transaction for your shareholders.
Sincerely,
/s/ D. Dwayne Hoven
D. Dwayne Hoven
Enclosure
A copy of a revised form of Confidentiality Agreement
incorporating Parent's proposed changes was enclosed with the above
letter and is attached as Exhibit (c)(1) to this Amendment No. 4. In
addition, a copy of the same form of Confidentiality Agreement,
marked to show the differences between it and the form sent by the
Company on September 23, 1996, is attached as Exhibit (c)(2).
On September 30, 1996, the Purchase and Parent filed (a)
an Answer and Counterclaims of Parent and the Purchaser (which is
attached as Exhibit (g)(5)) in response to the action filed by the
Company on September 23, 1996 seeking declaratory and injunctive
relief, (ii) a Motion for Preliminary Injunction seeking to enjoin
the operation and enforcement of the Rights Agreement and the
continuing breaches of fiduciary duties, and an order compelling the
Company to redeem the Rights associated with the Rights Agreement,
(iii) Parent's Memorandum in Support of the Motion for Preliminary
Injunction with supporting affidavits, and (iv) a Motion for
Expedited Hearing.
<PAGE>
Item 11. Material to be filed as Exhibits.
(a)(11) Text of Press Release dated September 30, 1996.
(c)(1) Revised form of Confidentiality Agreement sent by
Parent to the Company on September 27, 1996.
(c)(2) Revised form of Confidentiality Agreement sent by
Parent to the Company on September 27, 1996, marked to show the
differences between it and the form sent by the Company on September
23, 1996.
(g)(5) Answer and Counterclaims filed by the Purchaser and
Parent on September 30, 1996, in the action entitled Big B, Inc. v.
Revco D.S., Inc. and RDS Acquisition Inc. v. Anthony J. Bruno,
Vincent J. Bruno, James A. Bruno and Arthur M. Jones, Sr. (United
States District Court for the Northern District of Alabama, Southern
Division).
<PAGE>
SIGNATURE
After due inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this
Amendment No. 4 is true, complete and correct.
Dated: September 30, 1996
REVCO D.S., INC.,
by
/s/ Jack A. Staph
--------------------
Name: Jack A. Staph
Title: Senior Vice President,
Secretary and General
Counsel
RDS ACQUISITION INC.,
by
/s/ Jack A. Staph
--------------------
Name: Jack A. Staph
Title: Vice President and
Secretary
<PAGE>
Exhibit Index
-------------
Page
----
Exhibit (a)(11) Text of Press Release dated
September 30, 1996.
Exhibit (c)(1) Revised Form of Confidentiality Agreement
sent by Parent to the Company on
September 27, 1996.
Exhibit (c)(2) Revised form of Confidentiality Agreement
sent by Parent to the Company on
September 27, 1996, marked to show the
differences betwen it and the form sent
by the Company on September 23, 1996.
Exhibit (g)(5) Answer and Counterclaims filed by Parent on
September 30, 1996, in the action
entitled Big B, Inc. v. Revco D.S., Inc.
and RDS Acquisition Inc. v. Anthony J.
Bruno, Vincent J. Bruno, James A. Bruno
and Arthur M. Jones, Sr. (United States
District Court for the Northern District
of Alabama, Southern Division).
FOR IMMEDIATE RELEASE
Media Contact: Investor Contact:
Thomas Dingledy Dianne McCormick
216 / 425-9811 x6145 216 / 425-9811 x1900
Joele Frank / Dan Katcher
Abernathy MacGregor Group
212 / 371-5999
REVCO SEEKS TO ENJOIN BIG B POISON PILL
Responds To Big B's Proposed Confidentiality Agreement
Twinsburg, Ohio (September 30, 1996) -- Revco D.S., Inc. [NYSE: RXR]
announced today that it has filed a counterclaim against Big B, Inc.
[NASDAQ: BIGB] in the Federal District Court in Birmingham, Alabama,
and is making a motion for a preliminary injunction against Big B's
poison pill. On September 23, 1996, Big B announced that its Board
of Directors had adopted a poison pill rights plan and that the
rights would be distributed to the holders of record of Big B common
stock as of the close of business on October 3, 1996.
Revco's counterclaim alleges that Big B's poison pill violates
Alabama law. The counterclaim also more specifically alleges that
the poison pill's provisions discriminating against holders of 10%
or more of its common stock and allowing only the existing directors
to redeem the pill illegally interfere with the rights of Big B's
shareholders.
Revco also announced that D. Dwayne Hoven, President and Chief
Executive Officer of Revco, sent a letter last Friday to Anthony J.
Bruno, Chairman of the Board and Chief Executive Officer of Big B,
regarding the form of confidentiality agreement provided by Big B to
Revco.
Mr. Hoven said, "We have reviewed the proposed confidentiality
agreement that Big B sent us and we have sent them proposed changes
in Big B's form of agreement. Big B is still asking Revco to execute
the confidentiality agreement while its poison pill remains in
place, unchallenged. This, among other provisions of the proposed
agreement, simply deprives Big B's shareholders of the opportunity
to receive prompt value for their shares."
- more -
<PAGE>
Following is the complete text of a letter sent last Friday from Mr.
Hoven to Mr. Bruno. Copies were also sent to the Board of Directors
of Big B:
September 27, 1996
Mr. Anthony J. Bruno
Chairman of the Board and
Chief Executive Officer
Big B, Inc.
2600 Morgan Road, S.E.
Bessemer, AL 35023
Dear Anthony:
We have reviewed the proposed form of confidentiality agreement
that you sent us, and we have proposed changes in your form of
agreement. Unfortunately, it appears that Big B has not been
willing to negotiate any meaningful changes in its terms, which
we believe are seriously detrimental to Revco and to Big B's
shareholders.
We are willing to negotiate a reasonable confidentiality
agreement that will allow us access to confidential information
available to other bidders to ensure that your shareholders
receive the highest value for their shares. However, we have a
number of serious problems with the form of confidentiality
agreement you provided us:
o Your proposed agreement and poison pill would
prohibit your shareholders from accepting our offer or
any other offer not approved by your Board at least until
January 31, 1997. Indeed, we or any other party could be
prohibited from consummating an offer until June 30 of
next year due to the poison pill. We cannot conceive of
any reason why you need as much as four months (or even
longer) to determine whether an offer superior to our $15
offer is available to your shareholders. We are willing
to agree to delay consummating our offer for a reasonable
period of time that will permit you to solicit competing
bids, but we do not believe the substantial delay you
envision is justified.
o Your proposed form of agreement would require us
to give up all our rights as a shareholder to challenge
the validity of your poison pill even though you have
yourself instituted litigation against us on that very
subject.
o Your proposed agreement would prohibit us from
soliciting your shareholders to determine whether they
wish to eliminate your poison pill in order to accept our
offer or any other offer at least until January 31, 1997.
In fact, your proposed agreement does not require you to
remove your poison pill and does not prevent you from
interposing other obstacles to our offer once a
reasonable period to solicit bids has elapsed.
- more -
<PAGE>
o Your proposed agreement does not obligate you to
provide Revco with equal access to confidential
information with other parties and an equal opportunity
to bid.
We were disappointed that your Board of Directors chose to
adopt a poison pill that interferes with the rights of your
shareholders to accept an offer from Revco or any other party.
If your Board believes that our $15 cash offer is inadequate,
we would have much preferred to engage in meaningful
negotiations with you to determine whether an agreement for a
mutually acceptable transaction could be reached. We are still
willing to discuss our offer with you and are prepared to meet
at any time and place with you and your advisors.
On September 25, 1996, the Hart-Scott-Rodino waiting period
applicable to our offer expired. The only obstacle to your
shareholders now accepting our offer is your poison pill. The
fact is that the only real offer to acquire Big B has been made
by Revco, and there is no assurance that any other party will
make an offer. Even if another party is willing to make an
offer to acquire Big B, there is no assurance that that offer
can be consummated or will not be substantially delayed for
antitrust or other reasons.
Your Board of Directors should allow your shareholders to
decide on their own whether they wish to accept our offer. If
any other party is prepared to make a superior offer that can
be consummated, they do not need four months (or even longer)
to do so.
Enclosed for your information is the form of confidentiality
agreement that we would be willing to sign. We hope you will
reconsider your position against negotiating an agreement on
this basis.
We look forward to hearing from you and discussing a mutually
acceptable agreement that will result in the best, most
expeditious transaction for your shareholders.
Sincerely,
/s/ D. Dwayne Hoven
D. Dwayne Hoven
DDH:vsd
Revco, recognized as a Fortune 500 company, is the second largest
drugstore chain in the U.S. operating 2,202 stores in 14 contiguous
Midwestern, Southeastern and Eastern states. The stores sell
prescription and over-the-counter drugs, health and beauty aids and
other consumer products. Revco employs more than 32,000 associates
in its stores, network of five distribution centers, regional
offices and corporate offices in Twinsburg, Ohio.
BIG B, INC.
2600 Morgan Road S.E.
Bessemer, Alabama 35023
September 23, 1996
Revco D.S., Inc.
1925 Enterprise Parkway
Twinsburg, Ohio 44087
Attention: Mr. D. Dwayne Hoven
CONFIDENTIALITY AGREEMENT
Revco D.S., Inc. has requested that Big B, Inc.
(the "Company") furnish it with certain information as it
may reasonably request relating to the Company which is
non-public, confidential and proprietary in nature in
connection with its proposed transaction with the Company
(the "Transaction"). All such information (whether written
or oral) furnished (whether before or after the date hereof)
by the Company or its directors, officers, employees,
affiliates, representatives (including, without limitation,
financial advisors, attorneys and accountants) or agents
(collectively, "our Representatives") to you and your
directors, officers, employees, affiliates, representatives
(including, without limitation, financial advisors,
attorneys, proxy solicitors, public relations consultants
and accountants) or agents (collectively, "your
Representatives") and all analyses, compilations, forecasts,
studies or other notes or documents prepared by your or your
Representatives which contain or reflect, or are generated
from, any such information is hereinafter referred to as the
"Information." The term Information will not, however,
include information which (i) is already in your possession
(other than information provided to you or your
Representatives by the Company), (ii) is or becomes publicly
available other than as a result of a disclosure by you or
your Representative in breach of this Agreement, (iii) is or
becomes available to you on a nonconfidential basis from a
source (other than the Company or our Representatives)
which, to the best of your knowledge after due inquiry, is
not prohibited from disclosing such information to you by a
legal, contractual, fiduciary or other obligation to the
<PAGE>
Revco D.S., Inc.
September 23, 1996
Page 2
Company, (iv) is or becomes available to you on a
nonconfidential basis from the Company or its
Representatives pursuant to statutory or other legal rights
to inspect or receive information or (v) any analysis or
other documents prepared by you or your Representatives from
the information described in clauses (i), (ii), (iii) or
(iv) above.
As a condition to, and in consideration of the Company
providing you with, Information, you acknowledge and agree
as follows:
1. You and your Representatives (i) will keep the
Information confidential and will not (except as
required by applicable law, regulation or legal
process, and only after compliance with paragraph 2
below), without our prior written consent, disclose any
Information in any manner whatsoever, and (ii) will not
use any Information other than in connection with the
Transaction. You further agree to disclose the
Information only to your Representatives (a) who need
to know the Information in connection with negotiating
or evaluating the Transaction, (b) who are informed by
you of the confidential nature of the Information and
(c) who have agreed to be bound by the terms of this
letter agreement. You agree to prepare a list of those
individuals and entities to whom any Information has
been disclosed and present the list to the Company
promptly upon request. The Company will keep the list
confidential. Notwithstanding any provision to the
contrary contained herein, you shall be permitted to
disclose such of the Information as you are advised by
counsel is legally required to be disclosed under the
United States securities laws, and paragraph 2 shall
not apply to such disclosure. You agree that you will
be responsible for any breach of this letter agreement
by any of your Representatives.
2. In the event that you or any of your Representatives
are requested or required (by oral questions,
interrogations, requests for information documents,
subpoena, civil investigative demand, any informal or
formal investigation by any government or governmental
agency or authority or otherwise) to disclose any of
the Information (other than in any litigation between
<PAGE>
Revco D.S., Inc.
September 23, 1996
Page 3
the Company, or any of its Representatives, on the one
hand, and you or any of your Representatives, on the
other hand), you will notify the Company promptly in
writing so that we may seek a protective order or other
appropriate remedy or, in our sole discretion, waive
compliance with the terms of this letter agreement. You
agree not to oppose any action by the Company to obtain
a protective order or other appropriate remedy. In the
event that no such protective order or other remedy is
obtained, or that the Company waives compliance with
the terms of this letter agreement, you agree that you
will furnish only that portion of the Information which
you are advised by counsel is legally required.
3. You shall keep a record of each location of the
Information. You agree, immediately upon a request from
the Company, to return to the Company all Information,
and no copies, extracts or other reproductions of the
Information shall be retained by you or your
Representatives. Any portion of the Information that
consists solely of analyses, compilations, forecasts,
schedules or other notes or documents prepared by you
or your Representatives, in lieu of being returned to
the Company, may be destroyed by you or such
Representative, in which event one of your authorized
officers shall provide certification to the Company
that materials have in fact been so destroyed;
provided, however, that your financial advisors and
legal advisors may retain for their files, in
accordance with their usual practice, one copy of any
Information prepared by them. Any oral Information that
is retained by you or your Representatives will
continue to be subject to this letter agreement.
4. You acknowledge that none of the Company, nor our
Representatives, nor any of our or their respective
officers, directors, employees, agents or controlling
persons within the meaning of Section 20 of the
Securities Exchange Act of 1934, as amended (the
"Exchange Act"), makes any express or implied
representation or warranty as to the accuracy or
completeness of the Information, and you agree, to the
fullest extent permitted by law, that no such person
will have any liability to you or any of your
<PAGE>
Revco D.S., Inc.
September 23, 1996
Page 4
Representatives on any basis (including, without
limitation, in contract or tort, under federal or state
securities laws or otherwise) with respect to the
Transaction as a result of this letter agreement, your
participation in evaluating the Transaction, your
review of the Company, the use of the Information by
you or your representatives or any errors therein or
omission from the Information. Nothing in the foregoing
provision shall be deemed to waive or limit in any
respect any rights or claims you may have based on any
actual or alleged breaches of the fiduciary duties owed
by the Company's Board of Directors to the Company and
its shareholders. You further agree that you are not
entitled to rely on the accuracy or completeness of the
Information and that you will be entitled to rely
solely on such representations and warranties as may be
included in any definitive agreement with respect to
the Transaction, subject to such limitations and
restrictions as may be contained therein.
5. You acknowledge that you are aware, and you will advise
your Representatives who are informed of the matters
that are the subject of this letter agreement, of the
restrictions imposed by the United States securities
laws on the purchase or sale of securities by any
person who has received material, non-public
information from the issuer of such securities, which
may include certain portions of the Information, and on
the communication of such information to any other
person.
6. You agree that, from the date of this Agreement through
the earlier of November 15, 1996, and the execution by
the Company of a definitive agreement for the
acquisition of the Company (the "Termination Date"),
neither you nor any of your affiliates will, without
the prior written consent of the Company: (i) acquire,
offer to acquire, or agree to acquire, directly or
indirectly, by purchase or otherwise, any voting
securities or direct or indirect rights to acquire any
voting securities of the Company; (ii) make, or in any
way participate in, directly or indirectly, any
"solicitation" of "proxies" (as such terms are used in
the rules of the Securities and Exchange Commission)
<PAGE>
Revco D.S., Inc.
September 23, 1996
Page 5
whether before or after the formal commencement of any
such solicitation, or seek to advise or influence any
person or entity with respect to the voting of, any
voting securities of the Company; (iii) call, or seek
to call, a meeting of the Company's shareholders or
execute any written consent or initiate any shareholder
proposal for action by shareholders of the Company;
(iv) otherwise act, alone or in concert with others, to
seek to acquire control of the Company or influence the
Board of Directors, management or policies of the
Company; or (v) induce any other person or entity to do
any of the foregoing; provided, however, that the
foregoing shall not prevent (x) any cash tender offer
for all the outstanding shares of common stock, par
value $0.001 per share, of the Company at a price of
not less than $15 per share, and any filings required
in connection therewith, (y) any transaction approved
by the Company's Board of Directors or (z) any action
or other legal proceeding to enforce this Agreement or
to contest the validity of the Company's shareholder
rights plan.
7. (a) Until the Termination Date, the Company shall not
(i) amend its shareholder rights plan in any
manner adverse to you, (ii) adopt any new
shareholder rights plan or (iii) take, adopt,
implement or enter into any other action, plan,
measure, agreement or arrangement with a view to
making, or a primary effect of which is to make,
an acquisition of the Company materially more
difficult or costly (any matter described in this
paragraph (a), together with the Company's
shareholder rights plan, a "Defensive Measure").
(b) Until the Termination Date, the Company shall give
you access to the same Company-produced
Information as is given to all other bidders for
the Company (taken together), and shall give you
the same opportunity to make proposals to acquire
the Company as is given to any other bidder.
(c) If, following November 15, 1996, you continue to
own over 6% of the Company's outstanding common
stock and you issue a written demand for a special
meeting of the Company's shareholders pursuant to
<PAGE>
Revco D.S., Inc.
September 23, 1996
Page 6
Section 10-2B-7.02 of the Alabama Business
Corporations Act, then the Company shall either
(i) redeem or terminate all Defensive Measures
then in effect or (ii) without regard for the 10%
requirement in such Section, (A) within seven days
of receipt of such demand call the requested
shareholders meeting, (B) set a record date for
such meeting between 10 and 15 days following the
calling of such meeting and (C) set a date for
such meeting between 30 and 40 days following the
calling of such meeting.
8. (a) You agree that either party will be irreparably
injured by a breach of this letter agreement by
the other party or its Representatives, that
monetary remedies are inadequate to protect
against any actual or threatened breach of this
letter agreement by either party or by its
Representatives, and that either party shall be
entitled to specific performance or other
equitable relief as a remedy for any breach. Such
remedy shall not be deemed to be the exclusive
remedy for a breach of this letter agreement but
shall be in addition to all other remedies
available at law or equity.
(b) It is further agreed that no failure or delay in
exercising any right, power or privilege hereunder
will operate as a waiver thereof, nor will any
single or partial exercise thereof preclude any
other or further exercise thereof or the exercise
of any right, power or privilege hereunder.
(c) This letter agreement will be governed by and
construed in accordance with the laws of the State
of Alabama, without regard to the principles of
conflict of laws thereof.
(d) This letter agreement contains the entire
agreement between you and us concerning the
subject matter hereof and supersedes all previous
agreements, written or oral, relating to the
subject matter hereof. No modifications of this
letter agreement or waiver of the terms and
<PAGE>
Revco D.S., Inc.
September 23, 1996
Page 7
conditions hereof will be binding upon you or us,
unless approved in writing by each of you and us.
(e) If any provision of this letter agreement shall
for any reason, be adjudged by any court of
competent jurisdiction to be invalid or
unenforceable, such judgment shall not affect,
impair or invalidate the remainder of this letter
agreement but shall be confined in its operation
to the provision of this agreement directly
involved in the controversy in which such judgment
shall have been rendered; provided, however, that
(i) all of paragraph 7 shall automatically
terminate if any portion of paragraph 6 is held to
be invalid and (ii) all of paragraphs 1, 2, 3 and
6 shall automatically terminate if any portion of
paragraph 7 is held to be invalid.
(f) This letter agreement may be executed in
counterparts, each of which shall be deemed to be
an original, but both of which shall constitute
the same agreement.
(g) This letter agreement shall inure to the benefit
of and be binding upon our respective successors
and assigns; provided, however, that neither this
letter agreement nor any of the rights, interests
or obligations hereunder shall be assigned by
either of us without the prior written consent of
the other party.
(h) All notices hereunder shall be made in writing, by
first class mail, by courier or by telecopier
(with a confirming copy sent by first class mail)
to, in the case of the Company, Big B, Inc.,
Attention: Chief Executive Officer, 2600 Morgan
Road S.E., Bessemer, Alabama 35023, telecopier:
(205) 425-3525, or, in the case of you, Revco
D.S., Inc., Attention: President and Chief
Executive Officer, 1925 Enterprise Parkway,
Twinsburg, Ohio 44087, telecopier: (216) 487-
1679.
<PAGE>
Revco D.S., Inc.
September 23, 1996
Page 8
Please confirm your agreement with the foregoing
by signing and returning to the undersigned the
duplicate copy of this letter enclosed herewith.
Very truly yours,
Big B, Inc.
By: /s/ Arthur M. Jones, Sr.
---------------------------
Name: Arthur M. Jones, Sr.
Title: President
Accepted and Agreed
as of the date first
written above:
Revco D.S., Inc.
By:
------------------------
Name:
Title:
[Marked to show changes from the form
sent to Revco D.S., Inc. on September 23,
1996. Additions appear surrounded by
[ ]. Deletions appear as endnotes
surrounded by < >.]
BIG B, INC.
2600 Morgan Road S.E.
Bessemer, Alabama 35023
September 23, 1996
Revco D.S., Inc.
1925 Enterprise Parkway
Twinsburg, Ohio 44087
Attention: Mr. D. Dwayne Hoven
CONFIDENTIALITY AGREEMENT
Revco D.S., Inc. has requested that Big B, Inc. (the
"Company") furnish it with certain information as it may reasonably
request relating to the Company which is non-public, confidential
and proprietary in nature in connection with its proposed
transaction with the Company (the "Transaction"). All such
information (whether written or oral) furnished (whether before or
after the date hereof) by the Company or its directors, officers,
employees, affiliates, representatives (including, without
limitation, financial advisors, attorneys and accountants) or agents
(collectively, "our Representatives") to you and your directors,
officers, employees, affiliates, representatives (including, without
limitation, financial advisors, attorneys[, proxy solicitors, public
relations consultants] and accountants) or agents (collectively,
"your Representatives") and all analyses, compilations, forecasts,
studies or other notes or documents prepared by your or your
Representatives which contain or reflect, or are generated from, any
such information <1> is hereinafter referred to as the
"Information." The term Information will not, however, include
information which (i) is already in your possession (other than
information provided to you or your Representatives by the Company),
(ii) is or becomes publicly available other than as a result of a
disclosure by you or your Representative in breach of this
Agreement, (iii) is or becomes available to you on a nonconfidential
basis from a source (other than the Company or our Representatives)
which, to the best of your knowledge after due inquiry, is not
prohibited from disclosing such information to you by a legal,
contractual, fiduciary or other obligation to the
<PAGE>
Revco D.S., Inc.
September 23, 1996
Page 2
Company <2>[, (iv) is or becomes available to you on a
nonconfidential basis from the Company or its Representatives
pursuant to statutory or other legal rights to inspect or receive
information or (v)] any analysis or other documents prepared by you
or your Representatives from the information described in clauses
(i), (ii) <3>[,] (iii)<4> [or (iv)] above.
As a condition to, and in consideration of the Company providing you
with, Information, you acknowledge and agree as follows:
1. You and your Representatives (i) will keep the Information
confidential and will not (except as required by applicable
law, regulation or legal process, and only after compliance
with paragraph 2 below), without our prior written consent,
disclose any Information in any manner whatsoever, and (ii)
will not use any Information other than in connection with the
Transaction. You further agree to disclose the Information only
to your Representatives (a) who need to know the Information in
connection with negotiating or evaluating the Transaction, (b)
who are informed by you of the confidential nature of the
Information and (c) who have agreed to be bound by the terms of
this letter agreement. You agree to prepare a list of those
individuals and entities to whom any Information has been
disclosed and present the list to the Company promptly upon
request. The Company will keep the list confidential.
Notwithstanding any provision to the contrary contained herein,
you shall be permitted to disclose such of the Information as
you are advised by counsel is legally required to be disclosed
under the United States securities laws[, and paragraph 2 shall
not apply to such disclosure]. You agree that you will be
responsible for any breach of this letter agreement by any of
your Representatives.
2. In the event that you or any of your Representatives are
requested or required (by oral questions, interrogations,
requests for information documents, subpoena, civil
investigative demand, any informal or formal investigation by
any government or governmental agency or authority or
otherwise) to disclose any of the Information [(other than in
any litigation between
<PAGE>
Revco D.S., Inc.
September 23, 1996
Page 3
the Company, or any of its Representatives, on the one hand,
and you or any of your Representatives, on the other hand)],
you will notify the Company promptly in writing so that we may
seek a protective order or other appropriate remedy or, in our
sole discretion, waive compliance with the terms of this letter
agreement. You agree not to oppose any action by the Company to
obtain a protective order or other appropriate remedy. In the
event that no such protective order or other remedy is
obtained, or that the Company waives compliance with the terms
of this letter agreement, you agree that you will furnish only
that portion of the Information which you are advised by
counsel is legally required.
3. You shall keep a record of each location of the Information.
You agree, immediately upon a request from the Company, to
return to the Company all Information, and no copies, extracts
or other reproductions of the Information shall be retained by
you or your Representatives. Any portion of the Information
that consists solely of analyses, compilations, forecasts,
schedules or other notes or documents prepared by you or your
Representatives, in lieu of being returned to the Company, may
be destroyed by you [or such Representative], in which <5>
[event] one of your authorized officers shall provide
certification to the Company that materials have in fact been
so destroyed[; provided, however, that your financial advisors
and legal advisors may retain for their files, in accordance
with their usual practice, one copy of any Information prepared
by them]. Any oral Information that is retained by you or your
Representatives will continue to be subject to this letter
agreement.
4. You acknowledge that none of the Company, nor our
Representatives, nor any of our or their respective officers,
directors, employees, agents or controlling persons within the
meaning of Section 20 of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), makes any express or implied
representation or warranty as to the accuracy or completeness
of the Information, and you agree, to the fullest extent
permitted by law, that no such person
<PAGE>
Revco D.S., Inc.
September 23, 1996
Page 4
will have any liability to you or any of your Representatives
on any basis (including, without limitation, in contract or
tort, under federal or state securities laws or otherwise) with
respect to the Transaction as a result of this letter
agreement, your participation in evaluating the Transaction,
your review of the Company, the use of the Information by you
or your representatives<6> [or] any errors therein or omission
from the Information<7>. Nothing in the foregoing provision
shall be deemed to waive or limit in any respect any rights or
claims you may have based on any actual or alleged breaches of
the fiduciary duties owed by the Company's Board of Directors
to the Company and its shareholders. You further agree that you
are not entitled to rely on the accuracy or completeness of the
Information and that you will be entitled to rely solely on
such representations and warranties as may be included in any
definitive agreement with respect to the Transaction, subject
to such limitations and restrictions as may be contained
therein.
5. You acknowledge that you are aware, and you will advise your
Representatives who are informed of the matters that are the
subject of this letter agreement, of the restrictions imposed
by the United States securities laws on the purchase or sale of
securities by any person who has received material, non-public
information from the issuer of such securities, which may
include certain portions of the Information, and on the
communication of such information to any other person.
6. You agree that, from the date of this Agreement through <8>
[the earlier of November 15, 1996, and the execution by the
Company of a definitive agreement for the acquisition of the
Company (the "Termination Date")], neither you nor any of your
affiliates will, without the prior written consent of the
Company: (i) acquire, offer to acquire, or agree to acquire,
directly or indirectly, by purchase or otherwise, any voting
securities or direct or indirect rights to acquire any voting
securities of the Company <9>; (ii) make, or in any way
participate in, directly or indirectly, any "solicitation" of
"proxies" (as such
<PAGE>
Revco D.S., Inc.
September 23, 1996
Page 5
terms are used in the rules of the Securities and Exchange
Commission) whether before or after the formal commencement of
any such solicitation, or seek to advise or influence any
person or entity with respect to the voting of, any voting
securities of the Company; (iii) call, or seek to call, a
meeting of the Company's shareholders or execute any written
consent or initiate any shareholder proposal for action by
shareholders of the Company; (iv) otherwise act, alone or in
concert with others, to seek to acquire control of the Company
or influence the Board of Directors, management or policies of
the Company; <10> [or (v) ]induce any other person or entity to
do any of the foregoing; provided, however, that <11> [the
foregoing shall not prevent (x) any cash tender offer for all
the outstanding shares of common stock, par value $0.001 per
share, of the Company at a price of not less than $15 per
share, and any filings required in connection therewith, (y)
any transaction approved by the Company's Board of Directors or
(z) any action or other legal proceeding to enforce this
Agreement or to contest the validity of the Company's
shareholder rights plan.]
<12> [7. (a) Until the Termination Date, the Company
shall not (i) amend its shareholder rights plan
in any manner adverse to you, (ii) adopt any
new shareholder rights plan or (iii) take,
adopt, implement or enter into any other
action, plan, measure, agreement or
arrangement with a view to making, or a
primary effect of which is to make, an
acquisition of the Company materially more
difficult or costly (any matter described in
this paragraph (a), together with the
Company's shareholder rights plan, a
"Defensive Measure").
(b) Until the Termination Date, the Company shall
give you access to the same Company-produced
Information as is given to all other bidders for
the Company (taken together), and shall give you
the same opportunity to make proposals to acquire
the Company as is given to any other bidder.
(c) If, following November 15, 1996, you continue to
own over 6% of the Company's outstanding common
<PAGE>
Revco D.S., Inc.
September 23, 1996
Page 6
stock and you issue a written demand for a special
meeting of the Company's shareholders pursuant to
Section 10-2B-7.02 of the Alabama Business
Corporations Act, then the Company shall either (i)
redeem or terminate all Defensive Measures then in
effect or (ii) without regard for the 10%
requirement in such Section, (A) within seven days
of receipt of such demand call the requested
shareholders meeting, (B) set a record date for such
meeting between 10 and 15 days following the calling
of such meeting and (C) set a date for such meeting
between 30 and 40 days following the calling of such
meeting.
8]. (a) You agree that <13> [either party] will be
irreparably injured by a breach of this letter
agreement by <14> [the other party] or <15>
[its] Representatives, that monetary remedies are
inadequate to protect <16> against any actual or
threatened breach of this letter agreement by
<17> [either party] or by <18> [its] Representatives,
and that <19> [either party] shall be entitled to
specific performance or other equitable relief as
a remedy for any breach. Such remedy shall not
be deemed to be the exclusive remedy for a breach
of this letter agreement but shall be in addition
to all other remedies available at law or equity.
(b) It is further agreed that no failure or delay in
exercising any right, power or privilege
hereunder will operate as a waiver thereof, nor will any
single or partial exercise thereof preclude any
other or further exercise thereof or the exercise
of any right, power or privilege hereunder.
(c) This letter agreement will be governed by and
construed in accordance with the laws of the
State of Alabama, without regard to the principles of
conflict of laws thereof.
(d) This letter agreement contains the entire
agreement between you and us concerning the
subject matter hereof and supersedes all previous
agreements, written or oral, relating to the
subject matter hereof. No modifications of this
<PAGE>
Revco D.S., Inc.
September 23, 1996
Page 7
letter agreement or waiver of the terms and
conditions hereof will be binding upon you or us,
unless approved in writing by each of you and us.
(e) If any provision of this letter agreement shall
for any reason, be adjudged by any court of
competent jurisdiction to be invalid or
unenforceable, such judgment shall not affect,
impair or invalidate the remainder of this letter
agreement but shall be confined in its operation
to the provision of this agreement directly
involved in the controversy in which such
judgment shall have been rendered[; provided, however,
that (i) all of paragraph 7 shall automatically
terminate if any portion of paragraph 6 is held
to be invalid and (ii) all of paragraphs 1, 2, 3
and 6 shall automatically terminate if any portion
of paragraph 7 is held to be invalid].
(f) This letter agreement may be executed in
counterparts, each of which shall be deemed to be
an original, but both of which shall constitute
the same agreement.
(g) This letter agreement shall inure to the benefit
of and be binding upon our respective successors
and assigns; provided, however, that neither this
letter agreement nor any of the rights, interests
or obligations hereunder shall be assigned by
either of us without the prior written consent of
the other party.
(h) All notices hereunder shall be made in writing,
by first class mail, by courier or by telecopier
(with a confirming copy sent by first class mail)
to, in the case of the Company, Big B, Inc.,
Attention: Chief Executive Officer, 2600 Morgan
Road S.E., Bessemer, Alabama 35023, telecopier:
(205) 425-3525, or, in the case of you, Revco
D.S., Inc., Attention: President and Chief
Executive Officer, 1925 Enterprise Parkway,
Twinsburg, Ohio 44087, telecopier: (216) 487-
1679.
<PAGE>
Revco D.S., Inc.
September 23, 1996
Page 8
Please confirm your agreement with the foregoing by
signing and returning to the undersigned the
duplicate copy of this letter enclosed herewith.
Very truly yours,
Big B, Inc.
By: /s/ Arthur M. Jones, Sr.
------------------------------
Name: Arthur M. Jones, Sr.
Title: President
Accepted and Agreed
as of the date first
written above:
Revco D.S., Inc.
By:____________________
Name:
Title:
<PAGE>
Revco D.S., Inc.
September 23, 1996
Page 9
- ------------------ DELETIONS ------------------
<1> or which reflect you or your Representatives review of, or your
interest in, the Transaction
<2> or (iv)
<3> or
<4> ,
<5> every
<6> ,
<7> , or otherwise
<8> June 30, 1997
<9> other than pursuant to a cash tender offer for all of the
outstanding shares of common stock, par value $0.001 per share, of
the Company at a price of not less than $15.00 per share or pursuant
to a transaction approved by the Company's Board of Directors
<10> (v) bring any action, or otherwise act through judicial
process, to contest the validity of the Company's shareholder rights
plan or to seek the redemption of the rights issued thereunder; or
(vi)
<11> if, by January 31, 1997, the Company has not publicly announced
that it has entered into a definitive agreement relating to the
acquisition of the Company (whether by sale, merger or otherwise),
then all restrictions imposed by this paragraph 6 shall cease to
apply.
<12> 7
<13> the Company
<14> you
<15> your
<PAGE>
Revco D.S., Inc.
September 23, 1996
Page 10
<16> us
<17> you
<18> your
<19> the Company
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ALABAMA
SOUTHERN DIVISION
- --------------------------------------------------
BIG B, INC.,
Plaintiff and Counterclaim-Defendant,
-against-
REVCO D.S., INC. and RDS ACQUISITION INC., Civil Action No.
Defendants and Counterclaim-Plaintiffs, CV-96-H-2496-S
-against-
ANTHONY J. BRUNO, VINCENT J. BRUNO,
JAMES A. BRUNO and ARTHUR M. JONES, SR.,
Additional Counterclaim-Defendants.
- --------------------------------------------------
ANSWER AND COUNTERCLAIMS OF DEFENDANTS
REVCO D.S., INC. AND RDS ACQUISITION INC.
Defendants, Revco D.S., Inc. ("Revco") and RDS Acquisition
Inc. ("RDS"), for their Answer to the Complaint for Declaratory and
Injunctive Relief (the "Complaint") of plaintiff Big B, Inc. ("Big
B") allege upon knowledge with respect to themselves and their own
acts, and upon information and belief as to all other matters, as
follows:
1. Revco and RDS admit the material averments, if any,
made in the first and final sentences of paragraph 1 of the
Complaint but are without sufficient information to admit or deny
the material averments, if any, made in the remainder of paragraph 1
of the Complaint.
<PAGE>
2. Revco and RDS admit the material averments, if any,
made in paragraph 2 of the Complaint.
3. Revco and RDS admit the material averments, if any,
made in paragraph 3 of the Complaint.
4. Revco and RDS are without sufficient information to
admit or deny the material averments, if any, made in paragraph 4 of
the Complaint except that Revco and RDS admit that, on September 23,
1996, Big B announced that its Board had voted to reject the Offer
and announced its intention to explore its alternatives.
5. Revco and RDS are without sufficient information to
admit or deny the material averments, if any, made in paragraph 5 of
the Complaint.
6. Revco and RDS admit only that the Big B Board of
Directors announced the adoption of a Shareholder Rights Agreement,
but deny all other material averments, if any, made in paragraph 6
of the Complaint.
7. Revco and RDS deny all material averments, if any, made
in the first sentence of paragraph 7 of the Complaint but are
without sufficient information to admit or deny the material
averments, if any, made in the second sentence of paragraph 7 of the
Complaint.
8. Revco and RDS admit only that the averments in
paragraph 8 of the Complaint describe certain features of the
Shareholder Rights Agreement.
9. Revco and RDS admit only that the averments in
paragraph 9 of the Complaint describe certain features of the
Shareholder Rights Agreement.
10. Revco and RDS admit only that the averments in
paragraph 10 of the Complaint describe certain features of the
Shareholder Rights Agreement.
<PAGE>
11. Revco and RDS admit only that the averments in
paragraph 11 of the Complaint describe certain features of the
Shareholder Rights Agreement.
12. Revco and RDS admit only that the averments in
paragraph 12 of the Complaint describe certain features of the
Shareholder Rights Agreement.
13. Revco and RDS are without sufficient information to
admit or deny the averments in paragraph 13 of the Complaint
regarding the intent of the Big B Board of Directors.
14. Revco and RDS deny the material averments, if any,
made in paragraph 14 of the Complaint.
15. Revco and RDS do contest the validity of the
Shareholder Rights Agreement, and do contend that it was adopted in
violation of applicable law and in violation of the Big B Board of
Directors' fiduciary duties.
16. Revco and RDS deny the material averments, if any,
made in paragraph 16 of the Complaint.
17. All averments not expressly admitted are denied.
18. Revco and RDS deny that Big B is entitled to any of
the relief sought.
ADDITIONAL DEFENSES
1. The Shareholder Rights Agreement violates Alabama law,
including, without limitation: Sections 10-2B-6.01, 10-2B-8.32,
10-2B-7.02, and 10-2B-8.01(b) of the Alabama Business Corporation
Act and Section 234, Article XII of the Alabama Constitution.
2. The Big B Board of Directors' adoption of the
Shareholder Rights Agreement violates the Board's fiduciary duty to
the shareholders.
<PAGE>
3. Revco and RDS reserve the right to raise additional
defenses following reasonable discovery if that were ever to become
necessary.
COUNTERCLAIMS
Revco and RDS, for their counterclaims, allege upon
knowledge with respect to themselves and their own acts, and upon
information and belief as to all other matters, as follows:
Nature of the Counterclaims
1. Counterclaim-plaintiffs Revco and RDS bring these
counterclaims for injunctive and/or declaratory relief:
(a) to prevent the recently adopted rights agreement (the
"Poison Pill") of counterclaim-defendant Big B from impeding or
delaying counterclaim-plaintiffs' tender offer and proposed
merger, in violation of Alabama law and the fiduciary duties of
Big B's Board of Directors; and
(b) to prevent Big B from otherwise taking actions that
impede or delay counterclaim-plaintiffs' tender offer and
proposed cash merger, which is made in compliance with all
applicable laws, obligations and agreements.
Jurisdiction and Venue
2. This Court has jurisdiction over the subject matter of
these counterclaims pursuant to 28 U.S.C. ss.ss. 1332(a) and
1367(a). The counterclaim-plaintiffs and counterclaim-defendants are
citizens of different states, and the matter in controversy exceeds
the sum of $50,000, exclusive of interest and costs.
3. Venue is proper in this district pursuant to 28 U.S.C.
ss. 1391(a) and (c).
<PAGE>
The Parties
4. Counterclaim-plaintiff Revco is a Delaware corporation
with its principal place of business in Twinsburg, Ohio. Revco
operates the second largest retail drugstore chain in the United
States in terms of store count while ranking third in sales volume.
Revco beneficially owns common stock of Big B.
5. Counterclaim-plaintiff RDS is a Delaware corporation
with its principal place of business in Twinsburg, Ohio. It is a
wholly owned subsidiary of Revco, was organized to acquire control
of Big B, and has not conducted any unrelated activities since its
organization. All outstanding shares of capital stock of RDS are
owned by Revco. RDS owns common stock of Big B.
6. Counterclaim-defendant Big B is an Alabama corporation
with its principal place of business in Bessemer, Alabama. Big B and
its subsidiaries operate a chain of drug stores in Alabama and four
other states in the Southeastern United States.
7. Counterclaim-defendant Anthony J. Bruno is a citizen of
the State of Alabama and is the Chairman of the Board of Directors
and Chief Executive Officer of Big B.
8. Counterclaim-defendant Vincent J. Bruno is a citizen of
the State of Alabama, is the nephew of Anthony J. Bruno and is a
Director and the Senior Vice-President of Purchasing and Advertising
of Big B.
9. Counterclaim-defendant James A. Bruno is a citizen of
the State of Alabama, is the son of Anthony J. Bruno and is a
Director, the Secretary and an Executive Vice-President of Big B.
10. Counterclaim-defendant Arthur M. Jones, Sr. is a
citizen of the State of Alabama and is a Director and the President
and Chief Operating Officer of Big B.
<PAGE>
Events Leading to the Offer
11. On August 1, 1996, Anthony J. Bruno, Chairman of the
Board of Directors of Big B, and Mr. Hoven, President and Chief
Executive Officer of Revco met in Birmingham, Alabama. At this
meeting, Mr. Hoven indicated Revco's interest in purchasing all the
common stock of Big B for cash or a combination of cash and
securities. Mr. Bruno stated that he believed that the Big B common
stock was undervalued by the market and that, as a result, Revco
would have to offer a significant premium over the then current
market price of Big B common stock.
12. On August 5, 1996, Mr. Hoven sent a letter to Mr.
Bruno whereby Revco proposed to acquire all the outstanding shares
of Big B common stock for $14.00 per share payable in cash, stock or
a combination of cash and stock. On August 5, 1996, the closing
price of Big B common stock was $10 per share.
13. On August 7, 1996, Mr. Hoven telephoned Mr. Bruno to
confirm receipt of Revco's offer. Mr. Bruno explained that he
believed that Revco's proposed offer was not adequate because Big B
common stock was undervalued in the market. Mr. Bruno also explained
that he would prefer that Big B remain independent.
14. On September 3, 1996, Mr. Hoven sent a letter to Mr.
Bruno (copies of which were also sent to all other Directors of Big
B) repeating Revco's offer to acquire all the outstanding shares of
Big B common stock for $14.00 per share in cash, stock or a
combination of cash and stock. Mr. Hoven pointed out that this offer
represented a 35 percent premium over the closing price of Big B's
common stock on Friday, August 30, 1996, and Mr. Hoven also
discussed the strategic benefits of a merger of Big B and Revco. The
letter also stated that Revco had already purchased in the open
market approximately 4.9 percent of the outstanding shares of Big B
common stock and intended to purchase additional
<PAGE>
shares if market conditions allowed. Mr. Hoven urged Mr. Bruno to
meet with him to discuss terms for a negotiated merger but stated
that, in the event Mr. Bruno chose not to commence negotiations with
Revco, Revco would consider making a proposal directly to Big B's
shareholders.
15. On September 5, 1996, Mr. Hoven telephoned Mr. Bruno,
who again stated his belief that Big B would benefit from remaining
an independent company.
The Offer and the Proposed Merger
16. On September 9, 1996, after more than a month of
unsuccessful efforts to commence negotiations with Big B, Revco
announced its intention to commence, through its wholly owned
subsidiary, RDS, a tender offer for all outstanding shares of Big B
common stock, at the price of $15.00 per share net to the seller in
cash (the "Offer"). On September 10, 1996, Revco and RDS filed with
the Securities and Exchange Commission a Tender Offer Statement on
Schedule 14D-1 describing the terms of the Offer. The Offer was
originally conditioned, inter alia, upon (a) the valid tender of a
majority of all outstanding shares of Big B's common stock on a
fully diluted basis, (b) the expiration or termination of all
waiting periods imposed by the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the regulations thereunder
(the "HSR Act") and (c) certain other conditions that are set forth
in detail in Section 14 of the Offer to Purchase, which is an
exhibit to counterclaim-plaintiffs' Schedule 14D-1.
17. Counterclaim-plaintiffs made the filings required
under the HSR Act, and the waiting period thereunder has already
expired, with the result that the Offer may proceed without further
federal antitrust review. Because of the adoption of the Poison Pill
by the Directors of Big B, however, counterclaim plaintiffs had to
add another condition to the
<PAGE>
Offer; namely, the redemption, invalidation or inapplicability to
the Offer and Proposed Merger (as defined below) of the Poison Pill.
18. The purpose of the Offer is to enable Revco to acquire
control of, and the entire equity interest in, Big B. As soon as
practicable following consummation of the Offer, Revco will act (1)
to have its nominees elected to Big B's Board of Directors to
replace the current Board of Directors and (2) to propose and seek
to have Big B consummate a merger with RDS or another direct or
indirect wholly owned subsidiary of Revco (the "Proposed Merger").
The purpose of the Proposed Merger is to acquire all Big B shares
not tendered and purchased pursuant to the Offer or otherwise.
Pursuant to the Proposed Merger, each then outstanding share (other
than shares owned by RDS, Revco or any of their subsidiaries, shares
held in the treasury of Big B and shares owned by shareholders who
perfect any available dissenters' rights under the Alabama Business
Corporation Act (the "ABCA")) would be converted into the right to
receive an amount in cash equal to the price per share paid pursuant
to the Offer.
19. The Offer is clearly in the best interests of Big B's
shareholders. It is a fully financed, all cash offer, available to
all Big B shareholders, for all outstanding shares. It is not
"front-end loaded" or otherwise coercive in nature. The Offer price
and the Proposed Merger price represent a full and fair value to Big
B's shareholders.
20. The Offer and Proposed Merger provide Big B's
shareholders with the opportunity to realize a substantial premium
over the market price of their shares prior to announcement of the
Offer. The Offer price and the Proposed Merger price represent a
substantial premium over the $9.81 per share average closing price
of Big B shares for the 90-day calendar period ended September 6,
1996, the last trading date before Revco announced the Offer.
<PAGE>
21. The Offer and Proposed Merger do not pose any threat
to the interests of Big B's shareholders or to Big B's corporate
policy and effectiveness.
22. The Offer and Proposed Merger comply or will comply
with all applicable laws, obligations and agreements. The tender
offer documents fairly disclose all information material to the
decision of Big B's shareholders whether to accept or reject the
Offer, in compliance with counterclaim-plaintiffs' obligations under
the securities laws. Counterclaim-plaintiffs have made the filings
required by the HSR Act and the waiting periods thereunder have
expired.
Big B's Poison Pill
23. On September 23, 1996, Big B announced that, on
September 20, 1996, the Board of Directors of Big B voted to
recommend that Big B's shareholders reject the Offer and adopted the
Poison Pill, which prevents the consummation of the Offer and
Proposed Merger. The adoption of the Poison Pill in these
circumstances represents the Board's attempt to block
counterclaim-plaintiffs from proceeding with their acquisition of
Big B, regardless of the interests and wishes of the owners of Big
B, the shareholders. In light of its opposition to a combination or
merger, Big B may also attempt to use other defensive measures in
order to prevent the shareholders from deciding upon the merits of
counterclaim-plaintiffs' Offer for themselves.
24. As part of the Poison Pill, the Board authorized and
declared a dividend of one common stock purchase right (a "Right")
per share of common stock of Big B, payable on October 3, 1996 to
shareholders of record as of the close of business on October 3,
1996. The Rights will expire on June 30, 1997, unless the Rights are
earlier redeemed or the expiration date is extended by the Big B
Board (the "Final Expiration Date").
<PAGE>
25. The Poison Pill provides that the Rights do not become
exercisable until after the "Distribution Date". The Distribution
Date is defined as the earlier of (a) the close of business on the
tenth day after the first public announcement that a person has
acquired beneficial ownership of 10 percent or more of the
outstanding shares of Big B common stock (the "Stock Acquisition
Date") or (b) the close of business on such date as determined by
the Board during the pendency of a tender or exchange offer the
consummation of which would result in the beneficial ownership by a
person of 10 percent or more of the outstanding shares of common
stock.
26. Each Right initially entitles the holder to purchase
one share of Big B common stock at a price of $40 (the "Purchase
Price"). The closing price of Big B common stock on September 20,
1996 (the day the Poison Pill was adopted) was $16.25 per share. The
number of shares a holder can purchase per Right is subject to
adjustment as described below:
a. In the event that any person (other than members of the
Bruno family and certain other excluded entities related to Big
B) (an "Acquiring Person") becomes the beneficial owner of 10
percent or more of the outstanding shares of Big B common stock
(except pursuant to a tender or exchange offer for all
outstanding shares of Big B common stock, which offer has been
determined to be fair and in the best interests of Big B and
its shareholders by a majority of those Big B directors who are
Continuing Directors (as defined therein)), then each holder of
a Right, other than an Acquiring Person, is entitled, after
exercising the Right and tendering the Purchase Price, to
receive common stock having a market value equal to two times
the Purchase Price. The effect of this provision (the "Flip-In
Provision") is to entitle the holder of a Right to purchase Big
B common stock having a value of $80 after paying
<PAGE>
the Purchase Price of only $40. Alternatively, the Big B Board
may elect to exchange Rights (other than those held by an
Acquiring Person) for shares of Big B common stock on a
one-for-one basis. This provision becomes effective after Big
B's right of redemption has expired.
b. In the event that Big B is acquired pursuant to a
merger or other business combination in which (1) Big B is not
the surviving corporation or (2) Big B is the surviving
corporation, but all of its outstanding common stock is
exchanged for the securities of another entity or for cash, the
holder of a Right, other than an Acquiring Person, is entitled,
after exercising the Right and tendering the Purchase Price, to
receive common stock of the acquiring company having a market
value equal to two times the Purchase Price. This provision
(the "Flip-Over Provision") becomes effective after Big B's
right of redemption has expired.
27. At any time prior to the earlier of (a) the close of
business on the tenth day following the Stock Acquisition Date or
(b) the Final Expiration Date, Big B's Board, subject to the
restrictions discussed below, may redeem the Rights in whole, but
not in part, at a price of $0.01 per Right.
28. The Board's ability to redeem the Rights, however, is
purportedly restricted by a provision of the Poison Pill that serves
no purpose other than to entrench the current Board (the "Dead Hand
Restriction"). Under this provision, in the event that redemption by
the Board occurs after (a) a person becomes the beneficial owner of
10 percent or more of the outstanding shares of Big B common stock
(becomes an Acquiring Person) or (b) a majority of the members of
the Board has been replaced pursuant to a proxy or consent
solicitation in which a person participating in the solicitation has
stated that it intends to become an Acquiring Person, then
redemption by the Board is only effective if
<PAGE>
that Board includes "Continuing Directors" and a majority of the
"Continuing Directors" concurred with the decision to redeem the
Rights. "Continuing Directors" is defined as directors who were
members of the Board on September 23, 1996 or whose nomination was
approved or recommended by a majority of the Continuing Directors.
29. As an alternative to redemption, at any time prior to
the Distribution Date, Big B's Board may amend the Poison Pill in
any respect--including an amendment to make the Poison Pill
inapplicable to the Offer and Proposed Merger. However, because the
Offer is currently pending, the current Board of Big B could declare
the Distribution Date at any time in order to foreclose the
possibility of such an amendment. Moreover, the Poison Pill
restricts the ability of certain Directors to make such an
amendment. Specifically, any such amendment can only be approved by
Directors who are not officers of Big B and who are not
representatives, nominees, Affiliates or Associates (as defined
therein) of an Acquiring Person.
30. Given the nature of the Offer and the Proposed Merger
and their substantial value to Big B's shareholders, adoption of,
use of or reliance upon Big B's Poison Pill or other defensive
measures against the Offer or Proposed Merger represents an
unreasonable response to the Offer and Proposed Merger, forecloses
effective shareholder action and is in violation of Alabama law, the
bylaws of Big B and the fiduciary duties owed to plaintiffs.
31. Big B's Poison Pill is designed to make it
prohibitively expensive to acquire control of Big B, and thus allows
the Board to withhold approval of the Offer and Proposed Merger
regardless of the interests or wishes of Big B's shareholders. Given
the nature and value of the Offer and the Proposed Merger, Big B
should redeem the Rights under the provisions of the Poison Pill, or
amend the Poison Pill to make the Rights
<PAGE>
inapplicable to the Offer and Proposed Merger, to enable the
shareholders to exercise their right as the owners of Big B to
decide upon the merits of the Offer and Proposed Merger for
themselves.
32. The adoption of the Poison Pill and the failure to
redeem the Rights or amend the Poison Pill violates the fiduciary
duties owed to counterclaim-plaintiffs because it will deny
counterclaim-plaintiffs meaningful access to or control over the
assets of Big B and will hinder or prevent counterclaim-plaintiffs
from exercising their fundamental shareholder rights under Alabama
law. Plaintiffs will suffer irreparable injury as a result of the
loss of the unique opportunity to acquire control of Big B.
33. Under Alabama law, all shares of Big B, which has only
one class and series of common stock, must have identical
preferences, limitations and relative rights. See ABCA
ss. 10-2B-6.01(a). Because the Rights become void in the hands of an
Acquiring Person, the Flip-In and Flip-Over Provisions have the
discriminatory effect of diluting the equity and voting rights of
Acquiring Persons. The Poison Pill was adopted precisely because it
would have that effect on counterclaim-plaintiffs should they
proceed with the Offer, making consummation of the Offer and
Proposed Merger a practical impossibility. Further discriminatory
treatment within this single class of stock is evident in that the
definition of Acquiring Person excludes, inter alia, the three
members of the founding family of Big B who are currently Directors
of Big B and their family members. The Poison Pill therefore
violates Alabama law.
34. Under Alabama law, Big B may issue stock only for
money, labor done, or money or property actually received; and all
fictitious increase of stock is void. See Alabama Constitution,
Art. XII, Sec. 234. Because the Flip-In provision has the effect
<PAGE>
of allowing holders of the Rights to receive $80 worth of stock upon
payment of $40, or one free share for no additional consideration,
the Poison Pill violates Alabama law.
35. Under Alabama law, no president, director or officer
of Big B shall make any statement or take any action with the intent
to depreciate the market value of Big B's Stock and with the further
intent to permit any such person or any other person to buy Big B's
Stock at less then its real value. See ABCA ss. 10-2B-8.32. Because
the effect of the Flip-In provision is to depreciate the market
value of each share of Big B Common Stock and to enable officers,
directors and other persons to buy Big B Common Stock at less than
its real value, the Poison Pill violates Alabama law.
36. Under Alabama law, shareholders holding 10 percent or
more of Big B's stock have the right to demand a special
shareholders meeting for the purpose of replacing the current Board
of Directors or for any other proper purpose. See ABCA
ss. 10-2B-7.02(a)(2). The effect and purpose of the 10 percent
threshold in the Poison Pill's definition of "Acquiring Person" is
to prevent counterclaim-plaintiffs, or any other shareholders other
than the Bruno family and certain other entities related to Big B,
from purchasing sufficient shares to enable them to demand a
special meeting without first becoming an Acquiring Person.
Further, the effect and purpose of the broad definition in the
Poison Pill of "Beneficial Owner" is to deter or prevent
coordinated action by counterclaim-plaintiffs and other Big B
shareholders to demand a special meeting because it is unclear
whether the counterclaim-plaintiffs would be deemed "Beneficial
Owners" of the shares of all such other shareholders, and would
therefore become an Acquiring Person (collectively, these effects
are hereinafter referred to as the "Special Meeting Trigger").
Because the Special Meeting Trigger is intended to deter or prevent
counterclaim-plaintiffs, or any other shareholders other than the
Bruno family, from exercising their fundamental shareholder
<PAGE>
right to demand, or to join with other shareholders in demanding, a
special meeting, the Special Meeting Trigger violates Alabama law.
37. The Special Meeting Trigger is a blatant attempt to
entrench the current Board and to prevent counterclaim-plaintiffs,
or any other group of shareholders other than the Bruno family, from
calling a special meeting. The effect of the Special Meeting Trigger
is to impose significant risks upon shareholders of Big B exercising
their statutory rights to replace the current Board of Directors or
to take other action on the part of the shareholders permitted under
the ABCA. The adoption of the Special Meeting Trigger is in
violation of Big B's Board's fiduciary duties and represents an
intentional effort by the current Board to manipulate the corporate
machinery so as to prevent a shareholder vote.
38. The Dead Hand Restriction purports to allow the
current Board to withhold approval of the Offer and Proposed Merger,
even if that Board is replaced by a vote of the shareholders of Big
B. Under the Dead Hand Restriction, directors, other than Continuing
Directors, elected pursuant to a proxy solicitation in which an
Acquiring Person (or a person who intends to become an Acquiring
Person) participates, are purportedly without power or authority to
redeem the Rights so that the Offer and Proposed Merger may go
forward.
39. Under Alabama law, the shareholders of Big B have the
right to elect and remove directors. See, e.g., ABCA ss. 10-
2B-8.08(a). Subject only to limitations contained in the articles of
incorporation or in a shareholder agreement, the duly elected
directors are statutorily empowered to exercise all corporate powers
and to direct the management of the business and affairs of the
corporation. See ABCA ss. 10-2B-8.01(b).
40. Because the Dead Hand Restriction, which is not
contained in the Articles of Incorporation of Big B or any
shareholder agreement, purports to prevent future directors
<PAGE>
from exercising certain corporate powers and to limit the ability of
future directors to direct the management of the business and
affairs of the corporation, the Dead Hand Restriction violates
Alabama law.
41. The Dead Hand Restriction is a blatant attempt to
entrench the current Board and to prevent counterclaim-plaintiffs
from consummating the Offer and Proposed Merger regardless of the
interests or wishes of Big B's shareholders. The effect of the Dead
Hand Restriction is to deny the shareholders of Big B the
opportunity to replace the current Board of Directors and to prevent
any person intending to become an Acquiring Person, such as
counterclaim-plaintiffs, from soliciting votes to replace the
current Board. The adoption of the Dead Hand Restriction is in
violation of Big B's Board's fiduciary duties, is designed to
prevent future directors from acting in the best interests of the
company and represents an intentional effort by the current Board to
manipulate the corporate machinery so as to prevent the
effectiveness of a shareholder vote.
42. The Offer and Proposed Merger cannot be completed
successfully unless the Poison Pill ceases to be applicable to the
Offer and Proposed Merger. Because of the Special Meeting Trigger,
counterclaim-plaintiffs are effectively prevented from soliciting
other shareholders to demand a special meeting for the purpose of
allowing the shareholders to decide whether to take action to remove
the Poison Pill. Because of the Dead Hand Restriction, even if a
special meeting could be called, the new directors would be unable
to remove the Poison Pill. Given the nature of the Offer and
Proposed Merger and their benefits, Big B should remove these
barriers. In any event, Big B should not be permitted to attempt to
delay consummation of the Offer and Proposed Merger or to prevent
the calling of a special meeting by litigation in other forums,
including litigation on the propriety of its Poison Pill.
<PAGE>
Irreparable Injury
43. Big B's use of or reliance upon its Poison Pill or
other defensive measures to obstruct the Offer and Proposed Merger
and any attempt to demand a special meeting will deny
counterclaim-plaintiffs meaningful access to or control over the
assets of Big B, will hinder or prevent counterclaim-plaintiffs from
exercising their fundamental shareholder rights under Alabama law
and will cause counterclaim-plaintiffs irreparable injury as a
result of the loss of the unique opportunity to acquire control of
Big B. These injuries will be suffered directly by
counterclaim-plaintiffs and are separate and distinct from the
injuries that such actions will cause Big B's other shareholders,
who will be deprived of the fundamental right to decide for
themselves whether or not to accept the Offer and to sell their
shares for a substantial premium.
44. Counterclaim-plaintiffs have no adequate remedy at
law. Only through the exercise of the Court's equitable powers will
counterclaim-plaintiffs be protected from immediate and irreparable
injury. Unless the Court enjoins the application of Big B's Poison
Pill to the Offer, Proposed Merger and any attempt to demand a
special meeting and enjoins Big B from impeding the Offer, Proposed
Merger or any attempt to demand a special meeting by any other
defensive measures, including litigation in other forums,
counterclaim-plaintiffs will be precluded from consummating the
Offer and Proposed Merger, will be denied any meaningful access to
or control over the assets of Big B and will be hindered in or
prevented from exercising their fundamental shareholder rights under
Alabama law. Should that occur, counterclaim-plaintiffs will have
lost the unique opportunity to acquire control of Big B.
<PAGE>
Declaratory Relief
45. The Court may grant the declaratory relief sought
herein pursuant to 28 U.S.C. ss. 2201 and Fed. R. Civ. P. 57. Big
B's recent adoption of the Poison Pill in response to
counterclaim-plaintiffs' Offer and Proposed Merger and its filing of
an action seeking declaratory and injunctive against Revco and RDS
with respect to the Poison Pill plainly demonstrate that there is a
substantial controversy between the parties. The adverse legal
interests of the parties are real and immediate. The granting of the
declaratory relief requested herein will serve the public interest
by affording relief from uncertainty and by avoiding delay and will
conserve judicial resources by avoiding piecemeal litigation.
COUNT ONE
(DECLARATORY AND INJUNCTIVE RELIEF)
46. Counterclaim-plaintiffs repeat, reaver, and
incorporate each averment contained in Paragraphs 1 through 45 of
these Counterclaims as if fully set forth herein.
47. The Offer is fully financed; it is non-coercive and
non-discriminatory; it is fair to Big B's shareholders; and it
represents a substantial premium over the pre-Offer market price of
Big B shares.
48. The Proposed Merger is fully financed; it is non-
coercive and non-discriminatory; it is fair to Big B's shareholders;
and it represents a substantial premium over the pre-Offer market
price of Big B shares.
49. The Offer and Proposed Merger comply with all
applicable laws, obligations and agreements and pose no threat to
the interests of Big B's shareholders or to Big B's corporate policy
or effectiveness. The adoption of, use of or reliance upon Big B's
Poison Pill or any other defensive measures to prevent Big B's
shareholders from deciding for themselves whether or not to accept
the Offer is not proportionate to any threat posed,
<PAGE>
nor within the range of reasonable responses to the Offer
or Proposed Merger, forecloses effective shareholder action and
is in breach of the fiduciary duties owed to counterclaim-
plaintiffs. Counterclaim-plaintiffs seek injunctive relief
against such breaches of fiduciary duties.
50. Counterclaim-plaintiffs seek injunctive and
declaratory relief enjoining the operation or enforcement of the
Poison Pill and these continuing breaches of fiduciary duties and an
order compelling counterclaim-defendants to redeem the Rights
associated with the Poison Pill.
COUNT TWO
(DECLARATORY AND INJUNCTIVE RELIEF)
51. Counterclaim-plaintiffs repeat, reaver and incorporate
each averment contained in Paragraphs 1 through 50 of these
Counterclaims as if fully set forth herein.
52. The Poison Pill violates Alabama law and was adopted
in violation of the fiduciary duties of the Board of Directors of
Big B. See, inter alia, Ala. Const., Art. XII, Sec. 234; ABCA
ss.ss. 10-2B-6.01(a) and 10-2B-8.32.
53. Counterclaim-plaintiffs seek injunctive and
declaratory relief enjoining the operation or enforcement of the
Poison Pill and these continuing breaches of fiduciary duties and an
order compelling counterclaim-defendants to redeem the Rights
associated with the Poison Pill.
COUNT THREE
(DECLARATORY AND INJUNCTIVE RELIEF)
54. Counterclaim-plaintiffs repeat, reaver and incorporate
each averment contained in Paragraphs 1 through 53 of these
Counterclaims as if fully set forth herein.
<PAGE>
55. The Special Meeting Trigger and the Dead Hand
Restriction violate Alabama law and were adopted in violation of the
fiduciary duties of the Board of Directors of Big B in an attempt to
manipulate the corporate machinery so as to entrench the current
Board of Directors and to prevent future directors from acting in
the best interests of the company.
56. The adoption of the Special Meeting Trigger and the
Dead Hand Restriction also violate the fiduciary duties owed to
counterclaim-plaintiffs because they will deny counterclaim-
plaintiffs meaningful access to or control over the assets of Big B
and will hinder or prevent counterclaim plaintiffs from exercising
their fundamental shareholder rights under Alabama law.
57. Counterclaim-plaintiffs seek injunctive declaratory
relief against the operation or enforcement of these illegal
provisions and against these continuing breaches of fiduciary duty.
COUNT FOUR
(DECLARATORY AND INJUNCTIVE RELIEF)
58. Counterclaim-plaintiffs repeat, reaver and incorporate
each averment contained in Paragraphs 1 through 57 of these
Counterclaims as if fully set forth herein.
59. The Offer and Proposed Merger comply or will comply
with all applicable laws, obligations and agreements. Big B should
not be permitted to attempt to delay consummation of the Offer or
Proposed Merger or any special meeting by litigation in other
forums. To prevent any unnecessary impediment to consummation of the
Offer or Proposed Merger or to any attempt to demand a special
meeting, counterclaim-plaintiffs seek declaratory and injunctive
relief against Big B's commencement of proceedings in any forum
<PAGE>
other than this Court which would impede their commencement,
continuation or consummation.
WHEREFORE, counterclaim-plaintiffs respectfully request that this
Court enter an order:
(a) denying all relief sought in Big B's Complaint;
(b) enjoining Big B, its directors, officers, successors,
agents, servants, subsidiaries, employees and attorneys, and
all persons acting in concert or participating with them, from
taking any steps to impede or frustrate the ability of Big B's
shareholders to consider and make their own determination as to
whether to accept the terms of the Offer, taking any other
action to thwart or interfere with the Offer or Proposed
Merger, or taking any action to impede, thwart, or frustrate
any attempts to demand a special meeting;
(c) compelling Big B to redeem the Rights associated with
the Poison Pill or to amend the Poison Pill so as to make the
Rights inapplicable to the Offer, Proposed Merger and any
attempt to demand a special meeting, and enjoining Big B, its
directors, officers, successors, agents, servants,
subsidiaries, employees and attorneys, and all persons acting
in concert or participating with them, from taking any action
to implement, distribute or recognize any rights or powers with
respect to said Rights (other than to redeem the Rights), and
from taking any actions pursuant to the Poison Pill that would
dilute or interfere with counterclaim-plaintiffs' voting rights
or equity interests or in any other way discriminate against
counterclaim-plaintiffs in the exercise of their rights with
respect to their Big B stock;
(d) declaring and adjudging that the Poison Pill, the
Special Meeting Trigger and the Dead Hand Restriction are in
violation of Alabama law and the fiduciary
<PAGE>
duties owed to counterclaim-plaintiffs and all other Big B
shareholders; compelling Big B to redeem the Poison Pill; and
enjoining Big B, its directors, officers, successors, agents,
servants, subsidiaries, employees and attorneys, and all
persons acting in concert or participation with them, from
taking any actions to enforce or apply the Poison Pill or the
Special Meeting Trigger or the Dead Hand Restriction that
would: interfere with counterclaim-plaintiffs' voting rights;
discriminate in any way against counterclaim-plaintiffs in the
exercise of their rights with respect to their Big B stock;
impede or frustrate the ability of Big B's shareholders to
consider and make their own determination as to whether to
accept the terms of the Offer; or otherwise interfere, impede
or delay the commencement, continuation or consummation of the
Offer or Proposed Merger;
(e) declaring and adjudging that the Offer and Proposed
Merger comply with all applicable laws, obligations and
agreements;
(f) declaring and adjudging that Big B, its directors,
officers, successors, agents, servants, subsidiaries, employees
and attorneys, and all persons acting in concert or
participation with them, may not commence, and enjoining them
from commencing, in any forum other than this Court, any
judicial proceedings that would require litigation, by way of
claim, defense or counterclaim, of any of the claims, defenses
or counterclaims which may be asserted in this lawsuit and that
would delay or impede commencement, continuation or
consummation of the Offer, Proposed Merger or any special
meeting, including, without limitation, any proceedings
challenging the Offer or Proposed Merger or seeking to enforce,
apply or declare the validity of any of Big B's Poison Pill or
other defensive measures;
<PAGE>
(g) awarding counterclaim-plaintiffs their costs and
disbursements in this action, including reasonable attorneys'
fees; and
(h) granting such other and further relief as to the Court
seems just and proper.
------------------------
Hobart A. McWhorter, Jr.
------------------------
Philip J. Carroll, III
------------------------
Matthew A. Aiken
Attorneys for Defendants
and Counterclaim-Plaintiffs
Revco D.S., Inc. and
RDS Acquisition Inc.
OF COUNSEL:
BRADLEY, ARANT, ROSE & WHITE
P.O. Box 830709
Birmingham, Alabama 35283-0709
(205) 521-8000
Rory O. Millson
Julie A. North
CRAVATH, SWAINE & MOORE
825 Eighth Avenue
New York, New York 10019
(212) 474-1000
<PAGE>
CERTIFICATE OF SERVICE
I hereby certify that I have this date served the
foregoing on Kaye H. Turberville, Esq., Sirote & Permutt, P.C., 2222
Arlington Avenue South, Birmingham, Alabama 35255 by delivering a
copy of same to her on this day of September, 1996.
------------------------
OF COUNSEL
