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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 14
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
CALCULATION OF FILING FEE*
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TRANSACTION VALUATION* AMOUNT OF FILING FEE*
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$381,961,817 $76,393
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<FN>
* For purposes of calculating the amount of the filing fee only. The amount
assumes the purchase of 22,142,714 shares of Common Stock, par value $0.001
per share (including the associated Common Stock purchase rights), which,
based on the information provided by the Subject Company, represents all the
shares of Common Stock (including the associated Common Stock purchase rights)
outstanding as of October 24, 1996, plus the number of shares of Common Stock
(including the associated Common Stock purchase rights) currently issuable
upon the exercise of all options to purchase Common Stock (including the
associated Common Stock purchase rights) and upon conversion of Big B, Inc.'s
6.5% Convertible Subordinated Debentures Due 2003. As set forth below, $66,031
of the filing fee was previously paid.
</TABLE>
[X] Check box if any part of the fee is offset as provided by Rule 0-11 (a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
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Amount Previously Paid: $66,031 Filing Party: RDS Acquisition Inc.
Form or Registration No.: Schedule 14D-1 Revco D.S., Inc.
and Schedule 13D Date Filed: September 10, 1996
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<PAGE> 2
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. 14.
Capitalized terms not defined herein have the meanings assigned thereto in the
Schedule 14D-1.
Item 1. Security and Subject Company.
(b) The Purchaser has filed as Exhibit (a)(16) to this Amendment No. 14 a
Supplement to the Offer to Purchase dated October 29, 1996 (the "Supplement"),
amending and supplementing the Offer to Purchase. The Purchaser previously
amended the Offer to increase the Offer Price to $17.25 per Share, net to the
seller in cash, without interest thereon, upon the terms and subject to the
conditions set forth in the Offer to Purchase, as amended and supplemented,
including by the Supplement, and in the related Letter of Transmittal (which,
together with any amendments or supplements from time to time thereto,
collectively constitute the "Offer"). The related Letter of Transmittal is
attached hereto as Exhibit (a)(17). The information set forth in "Introduction"
and Section 1 ("Amended Terms of the Offer; Expiration Date") of the Supplement
is incorporated herein by reference.
(c) The information set forth in Section 3 ("Price Range of the Shares;
Dividends on the Shares") of the Supplement is incorporated herein by reference.
Item 3. Past Contacts, Transactions or Negotiations with the Subject
Company.
(a) The information set forth in Section 6 ("Contacts and Transactions with
the Company; Background of the Amended Offer") and Section 7 ("Purpose of the
Offer and the Merger; The Operative Agreements") of the Supplement is
incorporated herein by reference.
(b) The information set forth in Section 6 ("Contacts and Transactions with
the Company; Background of the Amended Offer") and Section 7 ("Purpose of the
Offer and the Merger; The Operative Agreements") of the Supplement is
incorporated herein by reference. The Merger Agreement (as defined in the
Supplement) and the Support Agreement (as defined in the Supplement) are
attached hereto as Exhibits (c)(7) and (c)(8), respectively.
Item 5. Purpose of the Tender Offer and Plans or Proposals of the Bidder.
(a) - (e) The information set forth in Section 7 ("Purpose of the Offer and
the Merger; The Operative Agreements") of the Supplement is incorporated herein
by reference.
Item 6. Interest in Securities of the Subject Company.
(a) and (b) The information set forth in "Introduction", Section 4
("Certain Information Concerning the Company"), Section 6 ("Contacts and
Transaction with the Company; Background of the Offer"), and Section 7 ("Purpose
of Offer and the Mergers; The Operative Agreements") is incorporated herein by
reference.
Item 7. Contracts, Arrangements, Understandings or Relationships with
Respect to the Subject Company's Securities.
The information set forth in "Introduction", Section 6 ("Contacts and
Transaction with the Company; Background of the Amended Offer"), and Section 7
("Purpose of the Offer and the Mergers; The Operative Agreements") of the
Supplement is incorporated herein by reference.
Item 9. Financial Statements of Certain Bidders.
The information set forth in "Introduction" and Section 5 ("Certain
Information Concerning the Purchaser and Parent") of the Supplement is
incorporated herein by reference.
1
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Item 10. Additional Information.
(a) The information set forth in Section 7 ("Purpose of the Offer and the
Merger; The Operative Agreements") of the Supplement is incorporated herein by
reference.
(e) The information set forth in Section 6 ("Contacts and Transactions with
the Company; Background of the Amended Offer") and Section 9 ("Shareholder
Litigation") of the Supplement is incorporated herein by reference.
(f) The information set forth in the Supplement and the Letter of
Transmittal is incorporated herein by reference.
Item 11. Material to be Filed as Exhibits.
(a)(16) Supplement to the Offer to Purchase.
(a)(17) Letter of Transmittal.
(a)(18) Notice of Guaranteed Delivery.
(a)(19) Letter to Brokers, Dealers, Banks, Trust Companies and other
Nominees.
(a)(20) Letter to Clients for use by Brokers, Dealers, Banks, Trust
Companies and other Nominees.
(a)(21) Form of Summary Advertisement dated October 29, 1996.
(c)(7) Agreement and Plan of Merger dated as of October 27, 1996, among
Parent, the Purchaser and the Company.
(c)(8) Support Agreement dated as of October 27, 1996, among Parent, the
Purchaser and Anthony J. Bruno, Arthur M. Jones, Sr., James A. Bruno, Vincent J.
Bruno and certain entities associated with Vincent J. Bruno.
2
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SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this Amendment No. 14 is true, complete and
correct.
Dated: October 29, 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
3
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EXHIBIT INDEX
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PAGE
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Exhibit (a)(16) Supplement to the Offer to Purchase..................................
Exhibit (a)(17) Letter of Transmittal................................................
Exhibit (a)(18) Notice of Guaranteed Delivery........................................
Exhibit (a)(19) Letter to Brokers, Dealers, Banks, Trust Companies and other
Nominees.............................................................
Exhibit (a)(20) Letter to Clients for use by Brokers, Dealers, Banks, Trust Companies
and other Nominees...................................................
Exhibit (a)(21) Form of Summary Advertisement dated October 29, 1996.................
Exhibit (c)(7) Agreement and Plan of Merger dated as of October 27, 1996, among
Parent, the Purchaser and the Company................................
Exhibit (c)(8) Support Agreement dated as of October 27, 1996, among Parent, the
Purchaser and certain shareholders of the Company consisting of
Anthony J. Bruno, Arthur M. Jones, Sr., James A. Bruno, Vincent J.
Bruno and certain entities associated with Vincent J. Bruno..........
</TABLE>
<PAGE> 1
SUPPLEMENT TO THE OFFER TO PURCHASE DATED SEPTEMBER 10, 1996
RDS ACQUISITION INC.,
a Wholly Owned Subsidiary of
REVCO D.S., INC.,
Has Increased the Price of Its Offer to Purchase for Cash
All Outstanding Shares of Common Stock
(Including the Associated Common Stock Purchase Rights)
of
BIG B, INC.
TO
$17.25 NET PER SHARE
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THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 9:00 A.M.,
NEW YORK CITY TIME, ON FRIDAY, NOVEMBER 15, 1996, UNLESS THE OFFER IS EXTENDED.
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THE OFFER IS CONDITIONED UPON THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN
PRIOR TO THE EXPIRATION DATE THAT NUMBER OF SHARES OF COMMON STOCK (TOGETHER
WITH THE ASSOCIATED COMMON STOCK PURCHASE RIGHTS, THE "SHARES") OF BIG B, INC.
(THE "COMPANY") THAT WOULD REPRESENT AT LEAST A MAJORITY OF ALL OUTSTANDING
SHARES ON A FULLY DILUTED BASIS ON THE DATE OF PURCHASE (THE "MINIMUM TENDER
CONDITION"). THE OFFER IS ALSO SUBJECT TO OTHER CONDITIONS. SEE THE INTRODUCTION
AND SECTIONS 1 AND 8 OF THIS SUPPLEMENT.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY DULY ADOPTED THE MERGER
AGREEMENT, INCLUDING THE PLAN OF MERGER CONTAINED THEREIN, APPROVED THE OFFER
AND THE MERGER, DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR TO, AND IN THE
BEST INTERESTS OF, THE SHAREHOLDERS OF THE COMPANY, AND RECOMMENDED THAT THE
SHAREHOLDERS OF THE COMPANY ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO
THE OFFER.
IMPORTANT
Any shareholder desiring to tender all or any portion of such shareholder's
Shares should either (i) complete and sign the Letter of Transmittal (or a copy
thereof) in accordance with the instructions in the Letter of Transmittal, have
such shareholder's signature thereon guaranteed if required by Instruction 1 to
the Letter of Transmittal, mail or deliver the Letter of Transmittal (or such
copy), or, in the case of a book-entry transfer effected pursuant to the
procedures set forth in Section 2 of the Offer to Purchase, an Agent's Message
(as defined in the Offer to Purchase), and any other required documents to the
Depositary and either deliver the certificates for such Shares to the Depositary
along with the Letter of Transmittal (or such copy) or deliver such Shares
pursuant to the procedures for book-entry transfer set forth in Section 2 of the
Offer to Purchase or (ii) request such shareholder's broker, dealer, bank, trust
company or other nominee to effect the transaction for such shareholder. A
shareholder having Shares registered in the name of a broker, dealer, bank,
trust company or other nominee must contact such broker, dealer, bank, trust
company or other nominee if such shareholder desires to tender such Shares.
If a shareholder desires to tender Shares and such shareholder's
certificates for Shares are not immediately available or the procedures for
book-entry transfer cannot be completed on a timely basis, or time will not
permit all required documents to reach the Depositary prior to the Expiration
Date, such shareholder's tender of Shares may be effected by following the
procedures for guaranteed delivery set forth in Section 2 of the Offer to
Purchase.
Questions and requests for assistance may be directed to Salomon Brothers
Inc, the Dealer Manager, or to D.F. King & Co., Inc., the Information Agent, at
their respective addresses and telephone numbers set forth on the back cover of
this Supplement. Additional copies of this Supplement, the Offer to Purchase,
the Letter of Transmittal, the Notice of Guaranteed Delivery and all other
tender offer materials may be obtained from the Information Agent or the Dealer
Manager or from brokers, dealers, commercial banks and trust companies, and will
be furnished promptly at the Purchaser's expense.
------------------------
The Dealer Manager for the Offer is:
SALOMON BROTHERS INC
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OCTOBER 29, 1996
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TABLE OF CONTENTS
<TABLE>
<S> <C>
Introduction......................................................................... 1
The Amended Offer.................................................................... 2
1. Amended Terms of the Offer; Expiration Date.................................... 2
2. Procedures for Tendering Shares................................................ 3
3. Price Range of the Shares; Dividends on the Shares............................. 4
4. Certain Information Concerning the Company..................................... 5
5. Certain Information Concerning the Purchaser and Parent........................ 13
6. Contacts and Transactions with the Company; Background of the Amended Offer.... 14
7. Purpose of the Offer and the Merger; The Operative Agreements.................. 21
8. Amended Conditions of the Offer................................................ 33
9. Shareholder Litigation......................................................... 35
10. Miscellaneous.................................................................. 35
</TABLE>
i
<PAGE> 3
TO THE HOLDERS OF COMMON STOCK (INCLUDING THE ASSOCIATED COMMON STOCK PURCHASE
RIGHTS) OF THE COMPANY:
INTRODUCTION
The following information amends and supplements the Offer to Purchase
dated September 10, 1996, as amended and supplemented to the date hereof (the
"Offer to Purchase"), of RDS Acquisition Inc., a Delaware corporation (the
"Purchaser"), which is a wholly owned subsidiary of Revco D.S., Inc., a Delaware
corporation ("Parent"). Pursuant to this Supplement, the Purchaser is now
offering to purchase all outstanding shares of Common Stock, par value $.001 per
share (the "Common Stock"), of Big B, Inc., an Alabama corporation (the
"Company"), together with the associated Common Stock purchase rights (the
"Rights") issued pursuant to the Rights Agreement dated as of September 23,
1996, as amended (the "Rights Agreement"), between the Company and First
National Bank of Boston, as Rights Agent (the Common Stock, together with the
associated Rights, being collectively herein referred to, unless the context
otherwise requires, as the "Shares"), at a price of $17.25 per Share, net to the
seller in cash, without interest thereon (the "Offer Price"), upon the terms and
subject to the conditions set forth in the Offer to Purchase, this Supplement,
and in the related Letter of Transmittal (which, together with any amendments or
supplements from time to time hereto or thereto, collectively constitute the
"Offer"). All references herein to the Rights shall include all benefits that
may inure to holders of the Rights pursuant to the Rights Agreement. See Section
4 of this Supplement.
Except as otherwise set forth in this Supplement and in the revised Letter
of Transmittal, the terms and conditions previously set forth in the Offer to
Purchase remain applicable in all respects to the Offer.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE (AS DEFINED IN SECTION 1
OF THIS SUPPLEMENT) THAT NUMBER OF SHARES (THE "MINIMUM NUMBER OF SHARES") THAT
WOULD REPRESENT AT LEAST A MAJORITY OF THE FULLY DILUTED SHARES (AS DEFINED IN
SECTION 8 OF THIS SUPPLEMENT) (THE "MINIMUM TENDER CONDITION"). SUBJECT TO
OBTAINING THE CONSENT OF THE COMPANY, THE PURCHASER RESERVES THE RIGHT, SUBJECT
TO THE APPLICABLE RULES AND REGULATIONS OF THE SECURITIES AND EXCHANGE
COMMISSION (THE "COMMISSION"), TO WAIVE OR REDUCE THE MINIMUM TENDER CONDITION
AND TO ELECT TO PURCHASE, PURSUANT TO THE OFFER, FEWER THAN THE MINIMUM NUMBER
OF SHARES. SEE SECTIONS 1 AND 8 OF THIS SUPPLEMENT.
Based on representations and warranties of the Company contained in the
Merger Agreement (as defined below), as of October 24, 1996, (i) there were
18,757,034 Shares issued and outstanding, (ii) there were 86,500 Shares subject
to outstanding options and (iii) the Company's 6.5% Convertible Subordinated
Debentures Due 2003 (the "Convertible Debentures") were convertible into Shares
at a price of $12.20 per Share, which represents 81.9672 Shares per $1,000
aggregate principal amount and an aggregate of not more than 3,299,180 Shares,
subject to adjustment. Based on the foregoing, there are currently 22,142,714
Shares outstanding on a fully diluted basis, which means that the number of
Shares needed to satisfy the Minimum Tender Condition is 11,071,358 Shares.
However, the actual Minimum Number of Shares will depend on the facts as they
exist on the date of purchase.
THE OFFER IS NO LONGER SUBJECT TO THE RIGHTS CONDITION DESCRIBED IN THE
OFFER TO PURCHASE. THE OFFER REMAINS SUBJECT TO CERTAIN OTHER TERMS AND
CONDITIONS DESCRIBED HEREIN IN ADDITION TO THE MINIMUM TENDER CONDITION. SEE
SECTION 8 OF THIS SUPPLEMENT.
The Purchaser is not offering to purchase the Convertible Debentures.
However, in lieu of converting the Convertible Debentures in order to tender
Shares, holders of Convertible Debentures may deliver certificates for
Convertible Debentures that are convertible into the number of Shares being
tendered. See Section 2 of the Offer to Purchase.
1
<PAGE> 4
Parent, the Purchaser and the Company have entered into an Agreement and
Plan of Merger dated as of October 27, 1996 (the "Merger Agreement"), which
provides for, among other things, (i) an increase in the price per Share to be
paid pursuant to the Offer from $15 per Share to $17.25 per Share, net to the
seller in cash, without interest thereon, (ii) the amendment of the conditions
to the Offer to eliminate the Rights Condition, (iii) the amendment and
restatement of certain other conditions to the Offer, including the Minimum
Tender Condition, as set forth in their entirety in Section 8 of this Supplement
and (iv) the merger of the Purchaser or another subsidiary of Parent with the
Company (the "Merger") following the purchase of Shares pursuant to the Offer.
In the Merger, each Share (other than Shares held in treasury of the Company,
Shares owned by Parent, the Purchaser or any other subsidiary of Parent or
Shares held by shareholders who properly exercise their dissenters' rights under
Alabama law) will be converted into the right to receive $17.25 per Share in
cash, without interest thereon.
In addition, the Purchaser has entered into a Support Agreement dated as of
October 27, 1996 (the "Support Agreement") with certain holders of Shares who
are executive officers and directors of the Company and certain related entities
(the "Shareholders"). Pursuant to the Support Agreement, the Shareholders, who
own in the aggregate not less than 1,187,486 Shares (representing approximately
6.3% of the outstanding Shares), have agreed, among other things, to vote all
Shares then beneficially owned by them in favor of the Merger, if a shareholder
vote is required to approve the Merger. Because of restrictions imposed by
Section 16 of the Exchange Act, a number of shareholders have informed Parent
that they do not expect to tender their Shares pursuant to the Offer. See
Section 7 of this Supplement.
The Merger Agreement and the Support Agreement, together, are referred to
in this Supplement as the "Operative Agreements."
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY DULY ADOPTED THE
MERGER AGREEMENT, INCLUDING THE PLAN OF MERGER CONTAINED THEREIN, APPROVED THE
OFFER, DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR TO, AND IN THE BEST
INTERESTS OF, THE SHAREHOLDERS OF THE COMPANY AND RECOMMENDED THAT SHAREHOLDERS
OF THE COMPANY ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER.
The Robinson-Humphrey Company, Inc. ("Robinson-Humphrey") has delivered to
the Board of Directors of the Company its opinion that, as of October 27, 1996,
the proposed cash consideration to be received by the holders of Shares (other
than Parent and its affiliates) pursuant to the Offer and the Merger is, taken
as a whole, fair to such holders from a financial point of view.
THIS SUPPLEMENT SHOULD BE READ IN CONJUNCTION WITH THE OFFER TO PURCHASE
AND THE RELATED LETTER OF TRANSMITTAL, COPIES OF WHICH MAY BE OBTAINED AT THE
PURCHASER'S EXPENSE IN THE MANNER SET FORTH ON THE BACK COVER OF THIS
SUPPLEMENT. THE OFFER TO PURCHASE AND THIS SUPPLEMENT CONTAIN IMPORTANT
INFORMATION THAT SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE WITH
RESPECT TO THE OFFER.
THE AMENDED OFFER
1. AMENDED TERMS OF THE OFFER; EXPIRATION DATE
The price per Share to be paid pursuant to the Offer has been increased
from $15 to $17.25 per Share, net to the seller in cash, without interest
thereon. Upon the terms and subject to the conditions of the Offer (including,
if the Offer is extended or amended, the terms and conditions of any such
extension or amendment), the Purchaser will promptly after the Expiration Date
accept for payment and will pay for all Shares validly tendered prior to the
Expiration Date and not properly withdrawn in accordance with Section 3 of the
Offer to Purchase. The term "Expiration Date" means 9:00 A.M., New York City
time, on Friday, November 15, 1996, unless and until the Purchaser, in
accordance with the Merger Agreement, extends the period of time during which
the Offer is open,
2
<PAGE> 5
in which event the term "Expiration Date" shall mean the latest time and date at
which the Offer, as so extended by the Purchaser, expires. All shareholders
whose Shares are accepted for payment pursuant to the Offer will receive the
increased Offer Price in respect of each Share so accepted. All references to
the Offer and the Offer Price in the Offer to Purchase, this Supplement and any
letter of transmittal are deemed to refer to the Offer as amended as described
above and the foregoing increased Offer Price, respectively.
THE OFFER IS CONDITIONED UPON SATISFACTION OF THE MINIMUM TENDER CONDITION
AND THE OTHER CONDITIONS SET FORTH IN SECTION 8 OF THIS SUPPLEMENT.
Subject to the applicable rules and regulations of the Commission and the
provisions of the Merger Agreement, the Purchaser reserves the right, in its
sole discretion, at any time and from time to time, and regardless of whether or
not any of the events or facts set forth in Section 8 of this Supplement shall
have occurred, to (a) extend the period of time during which the Offer is open,
and thereby delay acceptance for payment of and the payment for any Shares, by
giving oral or written notice of such extension to the Depositary and (b) amend
the Offer in any other respect by giving oral or written notice of such
amendment to the Depositary. During any such extension, all Shares previously
tendered and not properly withdrawn will remain subject to the Offer, subject to
the right of a tendering shareholder to withdraw such shareholder's Shares as
provided in Section 3 of the Offer to Purchase. UNDER NO CIRCUMSTANCES WILL
INTEREST BE PAID ON THE OFFER PRICE FOR TENDERED SHARES, REGARDLESS OF ANY
EXTENSION OF THE OFFER OR ANY DELAY IN PAYMENT FOR TENDERED SHARES.
2. PROCEDURES FOR TENDERING SHARES
Procedures for tendering Shares (including by holders of Convertible
Debentures (as defined below)) are set forth in Section 2 of the Offer to
Purchase, as amended and supplemented hereby.
Tendering shareholders may continue to use the original BLUE Letter of
Transmittal and the original GREY Notice of Guaranteed Delivery previously
circulated with the Offer to Purchase or may use the revised PINK Letter of
Transmittal and the revised BLUE Notice of Guaranteed Delivery circulated with
this Supplement. Although the Letter of Transmittal previously circulated with
the Offer to Purchase refers only to the Offer to Purchase, shareholders using
such document to tender their Shares will nevertheless receive the increased
Offer price of $17.25 per Share for each Share validly tendered and not properly
withdrawn and accepted for payment pursuant to the Offer, subject to the
conditions of the Offer.
In the Merger Agreement, the Company represented, among other things, that
it has taken or will take all necessary action to (i) render the Rights
inapplicable to the Offer, the Merger and the other transactions contemplated by
the Operative Agreements, and (ii) ensure that a Distribution Date (as defined
in Section 4 of this Supplement) does not occur by reason of the announcement or
consummation of the Offer, the Merger or any of the other transactions
contemplated by the Operative Agreements. Accordingly, Rights will continue to
be evidenced by the certificates for Shares. Unless separate certificates for
Rights are issued, a tender of Shares will also constitute a tender of the
associated Rights.
SHAREHOLDERS WHO HAVE PREVIOUSLY VALIDLY TENDERED AND NOT PROPERLY
WITHDRAWN THEIR SHARES PURSUANT TO THE OFFER ARE NOT REQUIRED TO TAKE ANY
FURTHER ACTION, EXCEPT AS MAY BE REQUIRED BY THE PROCEDURE FOR GUARANTEED
DELIVERY IF SUCH PROCEDURE WAS UTILIZED. IF SHARES ARE ACCEPTED FOR PAYMENT AND
PAID FOR BY THE PURCHASER PURSUANT TO THE OFFER, SUCH SHAREHOLDERS WILL RECEIVE,
SUBJECT TO THE CONDITIONS OF THE OFFER, THE INCREASED OFFER PRICE OF $17.25 PER
SHARE, WITHOUT INTEREST THEREON, LESS ANY APPLICABLE WITHHOLDING TAXES.
SEE SECTION 3 OF THE OFFER TO PURCHASE FOR THE PROCEDURES FOR WITHDRAWING
SHARES TENDERED PURSUANT TO THE OFFER.
3
<PAGE> 6
3. PRICE RANGE OF THE SHARES; DIVIDENDS ON THE SHARES
The Shares are included in the Nasdaq National Market and are traded under
the symbol BIGB. The following table sets forth, for each of the periods
indicated, the high and low sales quotations per Share as reported by the Nasdaq
National Market and the Dow Jones News Retrieval Service and the dividends paid
on the Shares as set forth in the Company 10-K and the Company 10-Q.
<TABLE>
<CAPTION>
SALES
QUOTATION
-------------
FISCAL YEAR HIGH LOW DIVIDENDS
- ------------------------------------------------------------------ ---- --- ---------
<S> <C> <C> <C>
1995
Quarter ended May 7, 1994....................................... $ 12 1/2 $ 9 7/8 $0.04
Quarter ended July 30, 1994..................................... $ 12 1/8 $10 5/8 $0.04
Quarter ended October 22, 1994.................................. $ 12 1/8 $10 3/8 $0.04
Quarter ended January 28, 1995.................................. $ 14 1/2 $11 1/2 $0.04
1996
Quarter ended May 8, 1995....................................... $ 15 1/4 $13 $0.04
Quarter ended July 29, 1995..................................... $ 15 1/8 $13 3/4 $0.05
Quarter ended October 26, 1995.................................. $ 16 1/8 $14 1/4 $0.05
Quarter ended February 3, 1996.................................. $ 14 3/4 $ 7 1/2 $0.05
1997
Quarter ended May 11, 1996...................................... $ 11 7/8 $ 9 1/4 $0.05
Quarter ended August 3, 1996.................................... $ 11 1/2 $ 7 7/8 $0.05
Quarter ending November 2 (through October 28, 1996)............ $ 17 1/4 $ 9 7/8 $0.05
</TABLE>
On September 6, 1996, the last full trading day before the first public
announcement of the Purchaser's intention to make the Offer, the last reported
sale price of the Shares on the Nasdaq National Market was $12 5/8 per Share. On
September 9, 1996, the last full trading day before the commencement of the
Offer, the last reported sale price of the Shares on the Nasdaq National Market
was $15 7/8 per Share. The average closing price for Shares for the 90-calendar
day period ended September 6, 1996 was $9.61. On October 25, 1996, the last full
trading day before the first public announcement of the execution of the Merger
Agreement, the last reported sale price of the Shares on the Nasdaq National
Market was $16 9/16 per Share. Shareholders are urged to obtain current market
quotations for the Shares.
4
<PAGE> 7
4. CERTAIN INFORMATION CONCERNING THE COMPANY.
The Company is an Alabama corporation with its principal offices at 2600
Morgan Road, S.E., Bessemer, Alabama 35023. According to the Company's Annual
Report on Form 10-K for the fiscal year ended February 3, 1996 (the "Company
10-K") filed with the Commission under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), the Company's principal line of business is
operating a chain of drug stores in five states in the southeastern United
States.
Set forth below is certain supplemental selected consolidated financial
information with respect to the Company and its subsidiaries excerpted from the
information contained in the Company's Quarterly Report on Form 10-Q for the
quarter ended August 3, 1996 (the "Company 10-Q") filed with the Commission
under the Exchange Act and in the Company 10-K filed with the Commission under
the Exchange Act. More comprehensive financial information is included in the
Offer to Purchase, the Company 10-K, the Company 10-Q and other documents filed
by the Company with the Commission, and the following summary is qualified in
its entirety by reference to the Company 10-K, the Company 10-Q and such other
documents and all the financial information (including any related notes)
contained therein. Additional information with respect to the Company and its
position with respect to the Offer is set forth in the
Solicitation/Recommendation Statement on Schedule 14D-9, as amended (the
"Schedule 14D-9"), filed by the Company with the Commission under the Exchange
Act. The Company 10-K, the Company 10-Q, the Schedule 14D-9 and such other
documents should be available for inspection and copies thereof should be
obtainable in the manner set forth in Section 8 of the Offer to Purchase under
"Available Information", except that the Schedule 14D-9 will not be available at
the regional offices of the Commission.
5
<PAGE> 8
BIG B, INC.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FISCAL SIX MONTHS
FISCAL YEAR ENDED ENDED
------------------------------------ --------------------
FEBRUARY 3, JANUARY 28, JANUARY 29, AUGUST 3, JULY 29,
1996 1995 1994 1996 1995
---------- ---------- ---------- --------- --------
(53 WEEKS) (52 WEEKS) (52 WEEKS) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
SUMMARY OF EARNINGS DATA:
Net sales............................ $737,146 $668,205 $595,712 $ 381,987 $354,742
Cost of products sold................ 521,186 460,925 412,560 269,611 247,115
Income before taxes.................. 4,724 23,775 18,434 5,311 12,877
Net income........................... 2,624 15,097 11,752 3,336 8,047
NET INCOME PER COMMON SHARE:
Primary.............................. $ 0.15 $ 0.97 $ 0.76 $ 0.18 $ 0.47
Fully diluted........................ $ 0.15 $ 0.89 $ 0.72 $ 0.18 $ 0.44
BALANCE SHEET DATA: (1)
Total current assets................. $214,456 $199,762 $ 223,853
Total assets......................... 298,836 273,492 306,519
Total current liabilities............ 68,452 79,092 77,251
Total liabilities.................... 153,588 166,759 158,899
Total stockholders' equity........... $145,248 $106,733 $ 147,620
- ---------------
<FN>
(1) At period end.
</TABLE>
Certain Company Financial Projections
During the course of inviting parties, including Parent, to express an
interest in acquiring the Company, the Company made available certain
information to Parent, including historical and projected financial information.
Such information, which the Company indicated it was making available to other
interested parties, included, among other things, five-year financial
projections prepared by the Company, portions of which are set forth on the
following pages.
6
<PAGE> 9
BIG B, INC.
COMPANY PROJECTIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
PROJECTED FISCAL YEARS
------------------------------------------------------------------------
INCOME STATEMENT 1997 1998 1999 2000 2001
- ---------------------------------------------- ---------- ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net Sales..................................... $794,697.0 $890,000.0 $1,000,000.0 $1,123,595.5 $1,262,466.9
Cost of Sales................................. 560,261.0 627,450.0 705,000.0 792,134.8 890,039.1
---------- ---------- ----------- ----------- -----------
Gross Profit................................ 234,436.0 262,550.0 295,000.0 331,460.7 372,427.7
Selling & Administrative Expenses............. 207,910.0 232,225.0 259,159.0 289,550.6 323,444.0
Add Back: Depreciation and Existing
Amortization................................ (12,544.0) (13,819.0) (15,201.0) (17,079.8) (19,190.8)
---------- ---------- ----------- ----------- -----------
EBITDA...................................... 39,070.0 44,144.0 51,042.0 58,989.9 68,174.5
Depreciation and Existing Amortization........ 12,544.0 13,819.0 15,201.0 17,079.8 19,190.8
Goodwill Amortization (30 Years).............. 0.0 0.0 0.0 0.0 0.0
Amortization of Transaction Costs (5 Years)... 0.0 0.0 0.0 0.0 0.0
---------- ---------- ----------- ----------- -----------
EBIT........................................ 26,526.0 30,325.0 35,841.0 41,910.1 48,983.3
Interest Expense:
Existing Long-Term Debt and Capital Leases.... 4,915.6 1,386.2 666.1 624.4 604.5
Other Interests Expenses (Income)........... (606.9) (965.4) (1,177.1) (2,266.2) (3,323.6)
---------- ---------- ----------- ----------- -----------
Net Cash Interest Expense................. 4,308.7 420.8 (511.1) (1,641.7) (2,719.1)
Other Non-Operating Expense (Inc.)............ 0.0 0.0 0.0 0.0 0.0
---------- ---------- ----------- ----------- -----------
Income Before Income Taxes................ 22,217.3 29,904.2 36,352.1 43,551.8 51,702.8
Income Taxes.................................. 8,176.0 11,004.7 13,377.6 16,027.1 19,026.6
Cumulative Effect of Accounting Charges &
Minority Interests.......................... 0.0 0.0 0.0 0.0 0.0
Preferred Dividend............................ 0.0 0.0 0.0 0.0 0.0
---------- ---------- ----------- ----------- -----------
Net Income Available to Common................ $ 14,041.3 $ 18,899.5 $ 22,974.5 $ 27,524.8 $ 32,676.2
========== ========== =========== =========== ===========
</TABLE>
7
<PAGE> 10
BIG B, INC.
COMPANY PROJECTIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
PROJECTED FISCAL YEARS
------------------------------------------------------------------
BALANCE STATEMENT 1997 1998 1999 2000 2001
- --------------------------------------------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Cash and Equivalents............................... $ 23,785.8 $ 14,831.3 $ 32,253.9 $ 58,392.2 $ 74,551.5
Notes and Accounts Receivable, Net................. 22,251.5 24,030.0 26,000.0 28,089.9 31,561.7
Inventories........................................ 173,680.9 181,960.5 190,350.0 198,033.7 222,509.8
Other Current Assets............................... 11,443.6 12,816.0 14,400 0 16,179.8 18,179.5
---------- ---------- ---------- ---------- ----------
Total Current Assets............................. 231,161.8 233,637.8 263,003.9 300,695.5 346,802.4
Fixed Assets....................................... 135,822.0 150,822.0 165,822.0 180,822.0 195,822.0
Less: Accumulated Depreciation..................... 60,391.0 74,210.0 89,411.0 106,490.8 125,681.5
---------- ---------- ---------- ---------- ----------
Net Fixed Assets................................. 75,431.0 76,612.0 76,411.0 74,331.2 70,140.5
Other Assets....................................... 8,155.0 8,155.0 8,155.0 $ 8,155.0 $ 8,155.0
---------- ---------- ---------- ---------- ----------
TOTAL ASSETS..................................... $314,747.8 $318,404.8 $347,569.9 $383,181.8 $425,097.9
========== ========== ========== ========== ==========
Accounts Payable................................... $ 52,664.9 $ 59,607.8 $ 66,975.0 $ 76,044.9 $ 85,443.8
Accrued Expenses................................... 17,244.9 19,313.0 21,700.0 24,382.0 27,395.5
Income Taxes Payable............................... 0.0 0.0 0.0 0.0 0.0
Other Current Liabilities.......................... 0.0 0.0 0.0 0.0 0.0
---------- ---------- ---------- ---------- ----------
Total Current Liabilities........................ 69,909.5 78,920.8 88,675.0 100,427.0 112,839.3
Existing Long-Term Debt and Capital Leases......... 32,072.0 10,581.0 9,913.0 9,300.0 9,300.0
---------- ---------- ---------- ---------- ----------
Total Long-Term Debt and Capital Leases............ 32,072.0 10,581.0 9,913.0 9,300.0 9,300.0
Deferred Liabilities............................... 10,569.5 11,837.0 13,300.0 14,943.8 16,790.8
Other Liabilities.................................. 6,357.6 7,120.0 8,000.0 8,988.8 10,099.7
Stockholders' Equity:
Common Stock and Paid in Capital................. 114,895.0 114,895.0 114,895.0 114,895.0 114,895.0
Retained Earnings................................ 80,944.3 95,051.0 112,786.9 134,627.2 161,173.1
Treasury Stock................................... 0.0 0.0 0.0 0.0 0.0
---------- ---------- ---------- ---------- ----------
Total Stockholders' Equity......................... 195,839.3 209,946.0 227,681.9 249,522.2 276,068.1
---------- ---------- ---------- ---------- ----------
TOTAL LIABILITIES & EQUITY......................... $314,747.8 $318,404.8 $347,569.9 $383,181.8 $425,097.9
========== ========== ========== ========== ==========
</TABLE>
8
<PAGE> 11
BIG B, INC.
COMPANY PROJECTIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
PROJECTED FISCAL YEARS
------------------------------------------------------------------
CASH FLOW STATEMENT 1997 1998 1999 2000 2001
- --------------------------------------------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATIONS
Net Income Available to Common..................... $ 14,041.3 $ 18,899.5 $ 22,974.5 $ 27,524.8 $ 32,676.2
Adjustments to Reconcile Net Income to Net Cash
Provided by (Used for) Operating Activities:
Deferred Liability............................... 3,620.5 1,267.5 1,463.0 1,643.8 1,847.0
Change in Other Liabilities...................... 1,341.6 762.4 880.0 988.8 1,111.0
Depreciation and Existing Amortization........... 12,544.0 13,819.0 15,201.0 17,079.8 19,190.8
---------- ---------- ---------- ---------- ----------
Reconciliation Sub Total....................... 17,506.0 15,849.0 17,544.0 19,712.4 22,148.7
Change in Current Assets Except Cash........... 6,588.9 (11,430.4) (11,943.5) (11,553.4) (29,947.6)
Change in Current Liabilities Except Debt...... 7,214.5 9,011.3 9,754.5 11,752.0 12,412.3
---------- ---------- ---------- ---------- ----------
Net Source (Use) of Cash Provided by Working
Capital........................................ 13,803.4 (2,419.1) (2,189.3) 198.6 (17,535.3)
---------- ---------- ---------- ---------- ----------
Net Cash Provided by Operations.................... $ 45,350.8 $ 32,329.3 $ 38,329.3 $ 47,435.7 $ 37,289.6
---------- ---------- ---------- ---------- ----------
CASH FLOW FROM INVESTING ACTIVITIES
Acquisition of Property and Equipment............ (11,750.0) (15,000.0) (15,000.0) (15,000.0) (15,000.0)
---------- ---------- ---------- ---------- ----------
Net Cash Used for Investments...................... $(11,750.0) $(15,000.0) $(15,000.0) $(15,000.0) $(15,000.0)
---------- ---------- ---------- ---------- ----------
CASH FLOW FROM FINANCING ACTIVITIES
Net Borrowings (Repayments) Under Existing Debt.. (6,606.0) (21,491.0) (688.0) (613.0) 0.0
Payment of Dividends............................. (3,700.0) (4,792.8) (5,238.6) (5,684.5) (6,310.3)
---------- ---------- ---------- ---------- ----------
Net Cash Used for Financing........................ $(10,306.0) $(26,283.5) $ (5,906.0) $ (6,297.5) $ (6,130.3)
---------- ---------- ---------- ---------- ----------
Total Net Cash Provided (Used)..................... $ 23,294.8 $ (8,954.5) $ 17,422.6 $ 26,138.3 $ 16,159.3
Beginning Cash Balance............................. $ 491.0 $ 23,785.8 $ 14,831.3 $ 32,253.9 $ 58,392.2
---------- ---------- ---------- ---------- ----------
ENDING CASH BALANCE................................ $ 23,785.8 $ 14,831.3 $ 32,253.9 $ 58,392.2 $ 74,551.5
========== ========== ========== ========== ==========
</TABLE>
9
<PAGE> 12
Parent was advised that the foregoing projections represent the Company's
management's outlook for the balance of fiscal year 1997 and for the full fiscal
years 1998-2001 and that the following information represents certain important
information and assumptions underlying the projections.
<TABLE>
<CAPTION>
ACTUAL PROJECTED
------------------- -------------------------------------------------------
1995 1996 1997 1998 1999 2000 2001
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Same store sales growth............ 7.1% 5.5% 5.0% 6.0% 7.0% 6.0% 6.0%
Gross margin....................... 29.3% 27.5% 29.5% 29.5% 29.5% 29.5% 29.5%
EBITDA margin...................... 6.1% 3.1% 4.9% 5.0% 5.1% 5.3% 5.4%
BALANCE SHEET DATA:
Inventory turn rate................ 3.7 3.0 3.2 3.4 3.7 4.0 4.0
Days in payables................... 43.3 33.8 34.3 34.7 34.7 35.0 35.0
CASH FLOW STATEMENT DATA:
Capital expenditures............... $22,685 $21,896 $11,750 $15,000 $15,000 $15,000 $15,000
(in thousands)
STORE DATA:
Store openings..................... 13 17 25 30 35 40 45
Total stores in operation.......... 367 384 409 439 474 514 559
</TABLE>
Parent was advised that the foregoing forecasts assume that the Convertible
Debentures are converted into Shares at the end of the current fiscal year.
The Company does not as a matter of course make public any projections as
to future performance or earnings, and the projections set forth above are
included in this Supplement only because the information was provided to Parent.
The Company projections were not prepared with a view to public disclosure or
compliance with the published guidelines of the Commission or the guidelines
established by the American Institute of Certified Public Accountants regarding
projections or forecasts. The Company's internal operating projections are, in
general, prepared solely for internal use and capital budgeting and other
management decisions and are subjective in many respects and thus susceptible to
various interpretations and periodic revisions based on actual experience and
business developments. The projections were based on a number of assumptions,
certain of which are described above, that are beyond the control of the
Company, the Purchaser or Parent or their respective financial advisors,
including economic forecasting (both general and specific to the Company's
business) that is inherently uncertain and subjective. None of the Company, the
Purchaser or Parent or their respective financial advisors assumes any
responsibility for the accuracy of any of the projections. The inclusion of the
foregoing projections should not be regarded as an indication that the Company,
the Purchaser, Parent or any other person who received such information
considers it an accurate prediction of future events. Neither the Company nor
Parent intends to update, revise or correct such projections if they become
inaccurate (even in the short term).
Shareholder Rights Plan
According to information disclosed by the Company in the Schedule 14D-9, on
September 20, 1996, the Board of Directors of the Company adopted the Rights
Agreement. Pursuant to the Rights Agreement, the Rights were distributed as a
dividend at the rate of one Right for each Share held by shareholders of record
as of the close of business on October 3, 1996. Each Right entitles the
registered holder to purchase from the Company one Share at a purchase price of
$40.00 per Share (the "Purchase Price"), subject to adjustment. The description
and terms of the Rights are set forth in the Rights Agreement.
On October 27, 1996, the Board of Directors met and unanimously duly
adopted the Merger Agreement, including the Plan of Merger contained therein,
approved the Offer, determined that the Offer and the Merger are fair to and in
the best interests of the shareholders of the Company and recommended that the
shareholders of the Company accept the Offer and tender their Shares
10
<PAGE> 13
pursuant to the Offer. The Company has also represented, among other things,
that (a) the Offer Price and the other terms of the Offer have been determined
by a majority of the members of the Board of Directors of the Company who are
not officers of the Company and who are not representatives, nominees,
Affiliates or Associates of an Acquiring Person (each as defined in the Rights
Agreement), after receiving advice from one or more investment banking firms, to
be (x) at a price which is fair to shareholders (taking into account all factors
that such members of the Board of Directors of the Company deem relevant
including prices that could reasonably be achieved if the Company or its assets
were sold on an orderly basis designed to realize maximum value) and (y)
otherwise in the best interests of the Company and its shareholders, and such
determination remains in full force and effect and (b) it has taken or will take
all necessary action to (i) render the Rights inapplicable to the Offer, the
Merger and the other transactions contemplated by the Operative Agreements, and
(ii) ensure that a Distribution Date (as defined below) does not occur by reason
of the announcement or consummation of the Offer, the Merger or any of the other
transactions contemplated by the Operative Agreements.
A copy of the Rights Agreement as originally executed on September 20,
1996, and the amendment thereto dated as of October 27, 1996, have been or will
be filed by the Company as exhibits to the Schedule 14D-9. The following summary
description of the Rights does not purport to be complete and is qualified in
its entirety by reference to the Rights Agreement.
The Rights are currently attached to all Certificates representing Shares,
and no separate Rights Certificate have been distributed. The Rights will
separate from Shares and a distribution date will occur upon the earlier of (i)
10 days following a public announcement that a person or group of affiliated or
associated persons (an "Acquiring Person") has acquired, or obtained the right
to acquire, beneficial ownership of 10% or more of the outstanding Shares (the
"Stock Acquisition Date") or (ii) such date as the Board of Directors of the
Company shall determine during the pendency of a tender or exchange offer that
would result in a person or group beneficially owning 10% or more of such
outstanding Shares (the earlier of (i) and (ii), the "Distribution Date"). The
foregoing notwithstanding, the definition of "Acquiring Person" does not include
any member of the Bruno family (consisting of Anthony J. Bruno, Vincent J.
Bruno, James A. Bruno and any of their siblings, lineal descendants, lineal
descendants of such siblings, any of their respective spouses, or any trust
established for any of their benefit) who might otherwise be an Acquiring Person
by reason of any deemed beneficial ownership arising from arrangements that may
be entered into among members of such family. The amendment dated as of October
27, 1996 to the Rights Agreement exempted Parent and the Purchaser from the
definition of "Acquiring Person" to the extent of (i) any acquisition of Shares
arising by virtue of the Support Agreement and (ii) any acquisitions of Shares
pursuant to the Offer. Until the Distribution Date, (i) the Rights will be
evidenced by the certificates for Shares and will be transferred with and only
with such certificates for Shares, (ii) new certificates for Shares will contain
a notation incorporating the Rights Agreement by reference and (iii) the
surrender for transfer of any certificates for outstanding Shares will also
constitute the transfer of the Rights associated with the Shares represented by
such certificate.
The Rights are not exercisable until the Distribution Date and will expire,
unless earlier redeemed by the Company as described below, at the close of
business on the earlier of (i) June 30, 1997 or (ii) the consummation date of a
transaction (including the Merger) pursuant to which the Company merges or
consolidates with another entity, which transaction shall have been approved by
the Board of Directors of the Company if at the time of such approval the Board
of Directors of the Company then includes one or more "Continuing Directors" and
a majority of such Continuing Directors shall have joined in such approval.
The term "Continuing Director" means any member of the Board of Directors
of the Company who was a member of the Board of Directors of the Company prior
to the date of the Rights Agreement and any person who is subsequently elected
to the Board of Directors of the Company if such person is recommended or
approved by a majority of the Continuing Directors, but such term
11
<PAGE> 14
does not include an Acquiring Person, or an affiliate or associate of an
Acquiring Person, or any representative of the foregoing entities.
As soon as practicable after the Distribution Date, Rights Certificates
will be mailed to holders of record of the Shares as of the close of business on
the Distribution Date and, thereafter, the separate Rights Certificates alone
will represent the Rights.
In the event that an Acquiring Person becomes the beneficial owner of 10%
or more of the then outstanding Shares (unless such acquisition is made pursuant
to a tender or exchange offer for all outstanding Shares at a price determined
by a majority of the independent directors of the Company who are not
representatives, nominees, affiliates or associates of an Acquiring Person to be
fair and otherwise in the best interest of the Company and its shareholders),
each holder of a Right will thereafter have the right to receive, upon exercise,
Shares (or, in certain circumstances, cash, property or other securities of the
Company), having a value equal to two times the Exercise Price of the Right. The
"Exercise Price" is the Purchase Price times the number of Shares associated
with each Right (currently, one). Notwithstanding any of the foregoing,
following the occurrence of any of the events set forth in this paragraph (the
"Flip-In Events"), all Rights that are, or (under certain circumstances
specified in the Rights Agreement) were, beneficially owned by any Acquiring
Person will be null and void. However, Rights are not exercisable following the
occurrence of any of the Flip-In Events set forth above until such time as the
Rights are no longer redeemable by the Company as set forth below.
In the event that, following the Stock Acquisition Date, (i) the Company
engages in a merger or business combination transaction in which the Company is
not the surviving corporation (other than a merger that follows a tender offer
determined to be fair to the shareholders of the Company, as described in the
preceding paragraph); (ii) the Company engages in a merger or business
combination transaction in which the Company is the surviving corporation and
the Shares are changed or exchanged (other than a merger that follows a tender
offer determined to be fair to the shareholders of the Company, as described in
the preceding paragraph); or (iii) 50% or more of the Company's assets, cash
flow or earning power is sold or transferred, each holder of a Right (except
Rights that have previously been voided as set forth above) shall thereafter
have the right to receive, upon exercise of the Right, common stock of the
acquiring corporation having a value equal to two times the Exercise Price of
the Right.
The Purchase Price payable, and the number of Shares or other securities or
property issuable upon exercise of the Rights, are subject to adjustment from
time to time to prevent dilution (i) in the event of a stock dividend on, or a
subdivision, combination or reclassification of, the Shares, (ii) if holders of
the Shares are granted certain rights or warrants to subscribe for Shares, or
(iii) upon the distribution to holders of the Shares of evidences of
indebtedness or assets (excluding regular quarterly cash dividends) or of
subscription rights or warrants (other than those referred to above).
With certain exceptions, no adjustments in the Purchase Price will be
required until cumulative adjustments amount to at least 1% of the Purchase
Price. No fractional shares will be issued and, in lieu thereof, an adjustment
in cash will be made based on the market price of the Shares on the last trading
date prior to the date of exercise.
At any time until 10 days following the Stock Acquisition Date, the Board
of Directors of the Company may redeem the Rights in whole, but not in part, at
a price of $0.01 per Right. Under certain circumstances set forth in the Rights
Agreement, the decision to redeem shall require the concurrence of a majority of
the Continuing Directors. Immediately upon the action of the Board of Directors
of the Company ordering redemption of the Rights, the Rights will terminate and
the only right of the holders of Rights will be to receive the $0.01 redemption
price.
The Board of Directors of the Company has the right to redeem all or a
portion of the Rights following the occurrence of a Flip-In Event by exchanging
Shares for outstanding Rights at a ratio of one to one. Upon exercise of the
exchange feature, Rights held by all shareholders will be
12
<PAGE> 15
exchanged (on a pro rata basis if less than all the Rights are to be exchanged),
other than those held by an Acquiring Person, which in accordance with the terms
of the plan would have become null and void.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a shareholder of the Company, including, without limitation, the right
to vote or to receive dividends. While the distribution of the Rights will not
be taxable to shareholders or to the Company, shareholders may, depending upon
the circumstances, recognize taxable income in the event that the Rights become
exercisable for Shares (or other consideration) of the Company as set forth
above.
Any of the provisions of the Rights Agreement may be amended by the Board
of Directors of the Company prior to the Distribution Date. After the
Distribution Date, the provisions of the Rights Agreement may be amended by the
Board of Directors of the Company in order to cure any ambiguity, to make
changes that do not adversely affect the interests of holders of Rights
(excluding the interests of any Acquiring Person), or to shorten or lengthen any
time period under the Rights Agreement; provided, however, that no amendment to
adjust the time period governing redemption shall be made at such time as the
Rights are not redeemable.
5. CERTAIN INFORMATION CONCERNING THE PURCHASER AND PARENT
Set forth below is certain selected consolidated financial information with
respect to Parent and its subsidiaries excerpted from the information contained
in Parent's 1996 Annual Report on Form 10-K (the "Parent 10-K") filed with the
Commission under the Exchange Act, Parent's 1996 Annual Report to Stockholders
(the "Parent Annual Report") and Parent's Quarterly Report on Form 10-Q for the
period ending August 21, 1996 (the "Parent 10-Q"). More comprehensive financial
information is included in the Parent 10-Q, the Parent 10-K, the Parent Annual
Report and other documents filed by Parent with the Commission, and the
following summary is qualified in its entirety by reference to the Parent 10-Q,
the Parent 10-K, the Parent Annual Report and such other documents and all the
financial information (including any related notes) contained therein. The
Parent 10-Q, the Parent 10-K, the Parent Annual Report and such other documents
should be available for inspection and copies thereof should be obtainable in
the manner set forth in Section 9 of the Offer to Purchase under "Available
Information."
13
<PAGE> 16
REVCO D.S., INC.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED FISCAL QUARTER ENDED
---------------------------------- ---------------------
JUNE 1 JUNE 3, MAY 28, AUG. 24, AUG. 25,
1996 1995 1994 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
SUMMARY OF EARNINGS DATA:
Net sales.......................... $5,087.7 $4,431.9 $2,504.0 $1,179.6 $1,076.7
Operating profit................... 206.2 175.7 100.5 37.9 31.0
Net income......................... 76.2 58.3 38.7 14.4 8.4
Net income per share of common
stock........................... $ 1.14 $ 0.91 $ 0.77 $ 0.21 $ 0.13
BALANCE SHEET DATA:(1)
Total current assets............... $1,116.8 $1,089.0 $1,148.7
Total assets....................... 2,133.5 2,149.8 2,151.2
Total current liabilities.......... 703.5 689.5 697.5
Total liabilities.................. 1,264.9 1,376.7 1,277.0
Total stockholder's equity......... $ 868.6 $ 773.1 $ 874.2
- ---------------
<FN>
(1) At period end.
</TABLE>
6. CONTACTS AND TRANSACTIONS WITH THE COMPANY; BACKGROUND OF THE AMENDED OFFER
On September 10, 1996, the Purchaser commenced a tender offer to purchase
all outstanding Shares at $15 per Share in cash, as set forth in the Offer to
Purchase. Certain contacts with the Company prior to September 10, 1996 are
described in Section 11 of the Offer to Purchase.
On September 13, 1996, the Purchaser delivered a demand (the "Demand") to
inspect the securityholder lists and related corporate records of the Company
pursuant to Section 16.02 of the Alabama Business Corporation Act (the "ABCA").
On September 17, 1996, the Company filed a complaint in Circuit Court of
Jefferson County, Alabama, Bessemer Division (the "State Court"), seeking
clarification of the Demand and a temporary restraining order and temporary and
permanent injunctions preventing the Purchaser from enforcing a portion of the
Demand. On September 18, 1996, the Purchaser filed a notice of removal removing
the matter before the State Court to the United States District Court in the
Northern District of Alabama (the "Federal Court"). After discussions between
representatives of the Purchaser and the Company, the Purchaser modified the
Demand and the Company agreed to comply with the Demand, as modified.
On September 23, 1996, Anthony J. Bruno, Chairman and Chief Executive
Officer of the Company, sent to D. Dwayne Hoven, President and Chief Executive
Officer of Parent, the following letter together with a proposed form of
confidentiality agreement:
September 23, 1996
Mr. D. Dwayne Hoven
President and Chief Executive Officer
Revco D.S., Inc.
1925 Enterprise Parkway
Twinsburg, Ohio 44087
Dear Dwayne:
The Board of Directors of Big B, Inc. has carefully considered the
terms and conditions of Revco's pending tender offer for Big B common stock
and the proposed subsequent merger of
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<PAGE> 17
Big B with a subsidiary of Revco. On behalf of the Board of Directors, I
wish to advise you that the Board of Directors has unanimously determined
that Revco's pending tender offer and related merger, as was the case with
Revco's previous acquisition proposal, is not in the best interests of Big
B's shareholders.
The foregoing conclusion is based on the Board of Director's
determination that the per share consideration in Revco's tender offer and
proposed merger of $15.00 in cash is inadequate.
The Board of Directors has authorized Big B's management, with the
assistance of its financial and legal advisors, to actively explore
alternatives to maximizing Big B shareholder value. We have already
received inquiries from other interested parties. The Board of Directors
has authorized Big B's management to provide confidential information
concerning Big B's business and operations to any interested party,
including Revco, who enters into a Confidentiality Agreement which is
acceptable to us. In addition, in order to allow sufficient time to develop
and consider possible alternatives, the Board has directed Big B's
management to implement a Shareholder Rights Plan. Although the Board of
Directors has made no decision to sell the Company, the Board will give
careful consideration to any acquisition proposal that appropriately
reflects Big B's intrinsic value.
We note that Revco has indicated in its Offer to Purchase that it
"intends to seek to negotiate with" Big B. If this remains the case, we
invite you to enter into a Confidentiality Agreement with us. In such
circumstances, we would be happy to meet with you, to make our advisors
available to you and to provide you access to our confidential financial
information. For your convenience, we have enclosed a form of
Confidentiality Agreement which is acceptable to us and which we will
propose be executed by all interested parties.
Very truly yours,
/s/ Anthony J. Bruno
Anthony J. Bruno
Chairman of the Board and
Chief Executive Officer
On September 23, 1996, the Company filed a complaint in an action entitled
Big B, Inc. v. Revco D.S., Inc. and RDS Acquisition Inc. in the State Court (the
"Rights Action") requesting the State Court to declare the Company's shareholder
rights plan valid and lawful and to enjoin temporarily, preliminarily and
permanently the Purchaser and all others acting in concert with it from bringing
any action attacking the Company's shareholder rights plan or the adoption by
the Company of the Company's shareholder rights plan. On September 23, 1996, the
Purchaser filed a notice of removal removing the Rights Action from the State
Court to the Federal Court.
On September 27, 1996, Mr. Hoven sent to Mr. Bruno 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
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<PAGE> 18
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:
- 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.
- 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.
- 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.
- 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.
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<PAGE> 19
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
A copy of a revised form of confidentiality agreement incorporating Parent's
proposed changes was enclosed with the above letter.
On September 30, 1996, the Purchaser and Parent filed with the Federal
Court (i) an answer and counterclaims in response to the Rights Action seeking
declaratory and injunctive relief and (ii) a motion for a preliminary injunction
and expedited hearing seeking to enjoin, among other things, the operation and
enforcement of the Rights Agreement and an order compelling the Company to
redeem the Rights to be issued pursuant to the Rights Agreement.
On October 1, 1996, Mr. Bruno sent Mr. Hoven the following letter:
October 1, 1996
Mr. Dwayne Hoven
President and Chief Executive Officer
Revco D.S., Inc.
1925 Enterprise Parkway
Twinsburg, Ohio 44087
Dear Dwayne:
I am writing in response to your letter to me of September 27, 1996
with which you included your proposed revisions to the confidentiality
agreement that I sent you on September 23, 1996.
As you know, one of Big B's objectives in the process that we have
undertaken is to promote the interests of Big B's shareholders by seeking
through confidentiality agreements to discourage potential acquirors of Big
B from efforts to minimize the value available to Big B's shareholders
through litigation pressure or other tactics. If you are sincere in your
repeatedly stated desire to work constructively with Big B, I encourage you
to join the other interested parties who are proceeding consistent with
this objective and promptly execute a confidentiality agreement on terms
that Big B can accept. Provided that a suitable agreement can be reached, I
and the other members of the Big B Board of Directors would welcome Revco's
active participation in the process.
In response to the specifics of your proposed confidentiality
agreement, let me begin by noting that a number of other potentially
interested parties have executed confidentiality agreements providing for
the same standstill restrictions that were included in the proposed form of
confidentiality agreement that I sent to you on September 23 and that no
party other than Revco has advised Big B that it will not execute a
confidentiality agreement because of reservations concerning such
standstill provisions. We believe that the responses from these parties,
each of whom has expressed an interest in developing an acquisition
proposal for Big B and is mindful that others are doing the same, clearly
demonstrate that the standstill restrictions as proposed are entirely
reasonable.
Even though what we have proposed has been found to be reasonable by
all of the others, Big B would still prefer to reach a mutually acceptable
confidentiality agreement with Revco. In the interests of doing so, I am
enclosing a revised form of confidentiality agreement that Big B is
prepared to execute with Revco and which I believe appropriately balances
Big B's and Revco's interests. In order to preserve the level playing field
for Revco and the other interested parties that we have sought to maintain,
we will be communicating with each of the other parties with
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<PAGE> 20
whom we have executed confidentiality agreements to offer to revise their
agreements in accordance with the revised form being provided to you,
whether or not we reach agreement with you.
Although the revised form of confidentiality agreement is
self-explanatory, several points deserve emphasis:
- We have retained the proposed December 15, 1996 termination date
previously discussed with your counsel rather than your November 15
proposal. The preliminary results of the process Big B has
undertaken has confirmed us in our initial judgment that the
additional time may be necessary for certain parties to formulate
their best proposals. We have, however, sought to address your other
expressed concerns by providing for an earlier termination in the
event that Big B enters into a definitive and binding agreement to
be acquired or takes certain other specified actions.
- We continue to believe that pursuit by Revco of rights plan
litigation at this juncture is clearly premature and would be
inimical to the process under which Big B is seeking to develop and
consider in an orderly manner alternative proposals. We have
accordingly proposed that such litigation be stayed by both parties
at this time but have agreed that it could be pursued once the
termination date occurs.
- We remain unwilling to include several Big B covenants proposed by
you because we believe that they would generally have the effect of
inappropriately restricting the Big B Board of Directors' ability to
comply with their fiduciary responsibilities while potentially
chilling interest on the part of other parties. We have, however,
sought to address your stated concerns that Big B not take certain
kinds of actions while Revco's actions are restricted by
accelerating the termination date under the circumstances described
above. In any event, neither the revised confidentiality agreement
nor the original proposed form of confidentiality agreement would
restrict Revco's ability to seek judicial redress (other than
concerning the rights plan as described above) at any time for
actions which are taken by Big B or the Big B Board of Directors and
which Revco believes violates its legal rights.
I remain hopeful that you will see the benefits for Revco that an
agreement promptly be reached which evidences Revco's willingness to be
part of an orderly process and which affords Revco access to Big B's
confidential financial information. Whether or not Revco chooses to exclude
itself from the confidential information, I assure you that the Big B Board
of Directors will continue to act in the best interests of Big B's
shareholders and will carefully consider any acquisition proposal that is
timely received from Revco or any other party that appropriately reflects
Big B's intrinsic value.
Very truly yours,
/s/ Anthony J. Bruno
Anthony J. Bruno
Chairman of the Board and
Chief Executive Officer
On October 1, 1996, the Company filed in the Federal Court a motion to
remand the Rights Action to the State Court. The Federal Court heard arguments
with respect to the Company's motion to remand at a hearing held on October 2,
1996 and issued an order denying the motion on October 3, 1996.
On October 3, 1996, Parent entered into a Confidentiality Agreement with
the Company (the "Confidentiality Agreement"). Pursuant to the Confidentiality
Agreement, Parent agreed that from October 3, 1996 through the Termination Date
(as defined below), neither Parent nor any of Parent's affiliates would, without
the prior written consent of the Company: (i) acquire, offer to
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<PAGE> 21
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 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 of the Company, management or
policies of the Company; (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; or (vi) 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 outstanding Shares at a price of not less than
$15 per Share, and any filings required in connection therewith, (y) any
transaction approved by the Board of Directors of the Company or (z) any action
or other legal proceeding to enforce the Confidentiality Agreement or any other
action or legal proceeding not restricted pursuant to clause (v) above. In
furtherance of the agreement set forth in clause (v) above, the Company and
Parent agreed to seek a stay of the Rights Action and to take no action to seek
a lifting of such stay until the Termination Date. For purposes of the
Confidentiality Agreement, "Termination Date" means the earliest to occur of (w)
November 30, 1996, (x) the execution by the Company of a definitive and binding
agreement providing for the acquisition of the Company, (y) the adoption of any
amendment to the Company's existing shareholder rights plan in any manner
adverse to Parent or the adoption of any new shareholder rights plan, or (z) any
public announcement by the Company of any proposal to amend its Articles
(Certificate) of Incorporation.
On October 14, 1996, officers and representatives of Parent met with Arthur
M. Jones, Sr., President of the Company, and reviewed documents and other
information made available by the Company as part of Parent's due diligence
investigation of the Company.
On October 15, 1996, Parent and the Purchaser received a letter from
Robinson-Humphrey on behalf of the Company indicating, among other things, that
any person interested in acquiring the Company should submit a written bid
package, including a proposed form of merger agreement, by 5:00 p.m. on October
25, 1996.
Prior to 5:00 p.m. on October 25, 1996, Mr. Hoven sent the following letter
to the Board of Directors of the Company:
October 25, 1996
The Board of Directors
Big B, Inc.
In care of Mr. Charlie Shelton
The Robinson-Humphrey Company, Inc.
Atlanta Financial Center
3333 Peachtree Road, NE
Atlanta, GA 30326
Dear Sirs:
We appreciate the opportunity to participate in the process you've
established for the sale of Big B, Inc. The due diligence we've done so
far, including our conversation with Mac Jones, has been very helpful. In
light of what we've learned, we are pleased to present you with the
following proposal for the combination of Revco and Big B.
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<PAGE> 22
Revco will increase the cash price for all outstanding Big B shares to
$17 per share. The shares will be acquired pursuant to a cash tender offer
and a subsequent cash merger in which all shares not tendered pursuant to
the tender offer would be acquired for the tender offer price.
As set forth in the proposed form of merger agreement attached hereto
as Annex I, Revco would amend its current all cash tender offer to increase
the per share offer price to $17 for all outstanding Big B shares as well
as to make the tender offer subject to the terms and conditions of the
enclosed form of merger agreement. In addition to the merger agreement,
Revco would simultaneously enter into a support agreement substantially in
the form attached hereto as Annex II pursuant to which, among other things,
the directors, executive officers and certain trusts related thereto would
agree to tender their shares to Revco.
Revco believes that this proposal would provide full and superior
value to your shareholders. In addition, for the reasons outlined below, a
transaction between Revco and Big B would be consummated more quickly than
a transaction with any other potential acquiror.
In reviewing our proposal, please note:
- Revco's offer is an all cash offer that is, therefore, not subject
to any valuation uncertainty.
- Revco's offer is not conditioned on its ability to secure financing,
and Revco has enough capacity under its current credit facility to
consummate the transactions contemplated hereby (including
refinancing of Big B's debt). You already have a copy of Revco's
bank credit agreement.
- As you know, Revco has already cleared the Hart-Scott-Rodino
antitrust waiting period. Revco does not foresee any other
regulatory impediments to a speedy consummation of a transaction.
- This proposal has been approved by Revco's Board of Directors. The
only third party approvals necessary in order to consummate the
transactions contemplated hereby are (i) if necessary, the approval
of the second-step merger by the shareholders of Big B and (ii) any
approvals applicable to Big B as described in the disclosure letter
to the merger agreement.
- Revco believes that its acquisition of Big B can be consummated very
quickly. Because Revco's offer is not subject to financing or
regulatory contingencies, Revco's amended tender offer can be
completed in 10 business days following adequate dissemination of
our price increase. The time necessary to consummate the second-step
merger would depend upon whether Revco could benefit from Alabama's
short-form merger statute, but in any event would be limited to the
time necessary to satisfy applicable statutory notice provisions
and, if necessary, to hold a shareholders meeting.
- Revco is prepared to sign and deliver the form of agreements
attached hereto upon satisfactory completion by Big B of the
necessary disclosure letter and the provision of information
necessary to fill in the blanks.
- Attached to this letter as Annex III is a working party list that
contains information for contacting members of our team. Georges
Azzam of Salomon Brothers Inc will be available to discuss financial
issues. Richard Hall of Cravath, Swaine & Moore and Jack Staph of
Revco are our principal legal contacts. Feel free to contact either
of them or any member of our team at any time with any questions or
comments.
This proposal will remain open until midnight on Sunday, October 27,
1996, unless definitive agreements are entered into by Revco, Big B and the
shareholders of Big B referred to above prior to that time. No contract or
agreement relating to the matters described in this proposal will be deemed
to exist between Revco and Big B or any of its shareholders unless and
until
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<PAGE> 23
definitive written agreements have been signed and delivered by Revco, Big
B and such shareholders. To that end, we would appreciate hearing from you
as early as possible so we can coordinate our discussions as quickly as
possible.
I look forward to completion of a successful transaction.
Very truly yours,
/s/ D. Dwayne Hoven
D. Dwayne Hoven
President and Chief Executive
Officer
Revco D.S., Inc.
On October 26 and 27, 1996, negotiations took place between representatives
of Parent and the Company concerning the price and other terms of Parent's
revised proposal. In the course of such negotiations, Parent increased its
proposed price to $17.25 per Share. On October 27, 1996 the Board of Directors
of the Company unanimously duly adopted the Merger Agreement, including the Plan
of Merger contained therein, approved the Offer and the Merger, determined that
the Offer and the Merger are fair to, and in the best interests of, the
shareholders of the Company, and recommended that shareholders of the Company
accept the Offer and tender their Shares pursuant to the Offer. Following such
approval by the Board of Directors of the Company, Parent, the Purchaser and the
Company executed and delivered the Merger Agreement and Parent, the Purchaser
and the Shareholders executed and delivered the Support Agreement. On October
28, 1996, the Company and Parent jointly issued a press release announcing the
execution of such agreements, the increase in the Offer Price to $17.25 per
Share and the extension of the Offer to 9:00 a.m. on Friday, November 15, 1996.
7. PURPOSE OF THE OFFER AND THE MERGER; THE OPERATIVE AGREEMENTS
Purpose of the Offer and the Merger
The purpose of the Offer and the Merger is to enable Parent to acquire
control of, and the entire equity interest in, the Company. In the Merger
Agreement, the Purchaser and the Company have agreed to effect the Merger in
accordance with the provisions of the Merger Agreement as promptly as
practicable following expiration of the Offer. In addition, the Purchaser has
entered into the Support Agreement wherein certain holders of Shares, who are
executive officers and directors of the Company and certain related entities,
have agreed, among other things, to vote all Shares then beneficially owned by
them in favor of the Merger, if a shareholder vote is required to approve the
Merger.
Set forth below is a summary of the material provisions of the Merger
Agreement, a copy of which was filed as Exhibit (c)(7) to Amendment No. 14 (the
"14D-1 Amendment") to the Tender Offer Statement on Schedule 14D-1 and Statement
on Schedule 13D of the Purchaser and Parent filed with the Commission in
connection with the amendment to the Offer (the "Schedule 14D-1"), and the
material provisions of the Support Agreement, a copy of which was filed as
Exhibit (c)(8) to the 14D-1 Amendment. Such Exhibits should be available for
inspection and copies should be obtainable, in the manner set forth in Section 8
of the Offer to Purchase (except that they will not be available at the regional
offices of the Commission). The following summary is qualified in its entirety
by reference to the Merger Agreement and the Support Agreement.
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The Merger Agreement
The Offer. In the Merger Agreement, the Purchaser has agreed, among other
things, to amend the Offer (a) to increase the purchase price offered from $15
per Share to $17.25 per Share and (b) to amend and restate the conditions to the
Offer to those set forth in Section 8 of this Supplement. The Merger Agreement
provides that, without the consent of the Company, the Purchaser will not (a)
reduce the number of Shares sought in the Offer, (b) amend the Offer so that it
is at a price less than $17.25 per Share, (c) modify, in any manner adverse to
the holders of Shares, or add to the conditions set forth in Section 8 of this
Supplement, (d) except as provided in the next sentence, extend the Offer, (e)
change the form of consideration payable in the Offer or (f) reduce or waive the
Minimum Tender Condition. Notwithstanding the foregoing, the Purchaser may,
without the consent of the Company, (a) extend the Offer if, at the scheduled
expiration date of the Offer, any of the conditions to the Purchaser's
obligation to purchase the Shares are not satisfied or waived, until such time
as such conditions are satisfied or waived, (b) extend the Offer for any period
required by any rule, regulation, interpretation or position of the Commission
or the staff thereof applicable to the Offer and (c) extend the Offer for a
period of not more than 10 business days beyond November 15, 1996, if on the
date of such extension less than 80% of the outstanding Shares on a fully
diluted basis have been validly tendered and not properly withdrawn pursuant to
the Offer. The Merger Agreement provides that, without limiting the right of the
Purchaser to extend the Offer pursuant to the immediately preceding sentence, in
the event that (i) the Minimum Tender Condition has not been satisfied or (ii)
any condition set forth in paragraph (a) of Section 8 of this Supplement is not
satisfied at the scheduled expiration date of the Offer, the Purchaser shall,
and Parent shall cause the Purchaser to, extend the expiration date of the Offer
in increments of five business days each until the earliest to occur of (x) the
satisfaction or waiver of the Minimum Tender Condition and such other condition
or Parent reasonably determines that any condition to the Offer is not capable
of being satisfied on or prior to December 24, 1996, (y) the termination of the
Merger Agreement in accordance with its terms and (z) December 24, 1996;
provided, however, that if any person or group (within the meaning of Section
13(d)(3) of the Exchange Act) has publicly made a Takeover Proposal (as defined
below) or disclosed in writing its intention to make a Takeover Proposal, the
Purchaser shall not be required pursuant to this sentence to extend the Offer
for more than 20 calendar days beyond the date on which such Takeover Proposal
was publicly announced or such intention was disclosed, if at the end of such 20
calendar day period such Takeover Proposal shall not have then been withdrawn
and the Minimum Tender Condition shall not then have been satisfied.
The Merger. The Merger Agreement provides that, following the satisfaction
or waiver of the conditions set forth therein, either, at Parent's election, the
Purchaser will be merged with and into the Company, with the Company continuing
as the surviving corporation (the "Surviving Corporation"), or the Company will
be merged with and into the Purchaser, with the Purchaser continuing as the
Surviving Corporation, and in either event, each then outstanding Share (other
than Shares held in the treasury of the Company, Shares owned by Parent, the
Purchaser or any other subsidiary of Parent or of the Company, or Shares held by
shareholders who properly exercise their dissenters' rights under Alabama law)
will be converted into the right to receive $17.25 per Share in cash, without
interest.
For a description of certain dissenters' rights available to shareholders
upon consummation of the Offer, see Section 12 of the Offer to Purchase.
Representations and Warranties. The Merger Agreement contains
representations and warranties by the Company with respect to, among other
things, its organization, its capitalization, its authority to enter into the
Merger Agreement, its filings with the Commission and its financial statements,
the absence of certain changes in its business, the information supplied by the
Company in connection with the Offer, the Company's employee benefit plans and
other compensation arrangements, the absence of certain litigation with respect
to the Company, compliance by the Company with applicable law, the
inapplicability of the Rights Agreement to the Offer and the
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Merger, tax matters relating to the Company, certain facts and the absence of
certain provisions of the articles of incorporation and By-laws of the Company's
subsidiaries related to certain state anti-takeover statutes and real property
matters.
The Merger Agreement also contains representations and warranties by Parent
and the Purchaser with respect to, among other things, their organization, their
authority to enter into the Operative Agreements, the information supplied by
them in connection with the Offer, their ability to finance the purchase of the
Shares and the absence of certain litigation with respect to Parent.
Covenants of the Company. In the Merger Agreement, the Company has agreed
that, among other things, during the period from the date of the Merger
Agreement until the time the Merger is effective, (a) the Company and its
subsidiaries will carry on their respective businesses in the usual, regular and
ordinary course in substantially the same manner as conducted through the date
of the Merger Agreement and, to the extent consistent therewith, use all
reasonable efforts to preserve intact their current business organizations, keep
available the services of their current officers and employees and preserve
their relationships with customers, suppliers, licensors, licensees,
distributors and others having business dealings with them to the end that their
goodwill and ongoing businesses is unimpaired at the effectiveness of the
Merger, and (b) the Company will not, and will not permit any of its
subsidiaries to: (i)(x) declare, set aside or pay any dividends on, or make any
other distributions in respect of, any of its capital shares, other than
dividends and distributions by any direct or indirect wholly owned subsidiary of
the Company to its parent (except for regular quarterly dividends on the Shares
declared and paid at times consistent with past practice in an amount not in
excess of $0.05 per Share per quarter), (y) split, combine or reclassify any of
its capital stock or issue or authorize the issuance of any other securities in
respect of, in lieu of or in substitution for shares of capital stock of the
Company or (z) repurchase, redeem or otherwise acquire, any shares of capital
stock of the Company or any of its subsidiaries or any other securities thereof
or any rights, warrants or options to acquire such shares or other securities;
(ii) issue, deliver, sell, pledge or otherwise encumber any capital shares, any
other voting securities or any securities convertible into, or any rights,
warrants or options to acquire, any such shares, voting securities or
convertible securities (other than (x) the issuance of Shares upon the exercise
of Employee Options (as defined below) outstanding on the date of the Merger
Agreement in accordance with their present terms and (y) the issuance of Shares
upon conversion of the Convertible Debentures); (iii) amend its Articles
(Certificate) of Incorporation, By-laws or other comparable charter or
organizational documents; (iv) acquire or agree to acquire (x) by merging or
consolidating with, or by purchasing a substantial portion of the assets of, or
by any other manner, any business or any corporation, partnership, joint
venture, association or other business organization or division thereof or (y)
any assets that are material, individually or in the aggregate, to the Company
and its subsidiaries taken as a whole, except purchases of inventory in the
ordinary course of business consistent with past practice or in the fulfillment
of contracts in existence on date of the Merger Agreement and copies of which
have been made available to Parent; (v) sell, lease, mortgage or otherwise
encumber or subject to any Lien or otherwise dispose of any of its material
properties or assets, except sales of inventory in the ordinary course of
business consistent with past practice; (vi) (y) incur any indebtedness for
borrowed money or guarantee any such indebtedness of another person, issue or
sell any debt securities or warrants or other rights to acquire any debt
securities of the Company or any of its subsidiaries, guarantee any debt
securities of another person, enter into any "keep well" or other agreement to
maintain any financial statement condition of another person or enter into any
arrangement having the economic effect of any of the foregoing, except for
short-term borrowings incurred in the ordinary course of business consistent
with past practice, or (z) make any loans, advances or capital contributions to,
or investments in, any other person, other than to the Company or any direct or
indirect wholly owned subsidiary of the Company; (vii) make or agree to make any
new capital expenditure or expenditures which, individually, is in excess of
$500,000 or, in the aggregate, are in excess of $5 million; (viii) make any tax
election or settle or compromise any income tax liability; (ix) except for
certain items previously disclosed to Parent, grant to any executive officer any
increase in compensation or in severance or
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termination pay, except in each case as was required under employment agreements
in effect as of the date of the Merger Agreement, or enter into any employment,
severance or termination agreement with any executive officer; (x) adopt or
implement any change in accounting methods, principles or practices materially
affecting its assets, liabilities or business, except insofar as may have been
required by a change in generally accepted accounting principles; (xi) pay,
discharge or satisfy any claims, liabilities or obligations (absolute, accrued,
asserted or unasserted, contingent or otherwise), other than any payment
required pursuant to an order of a court of competent jurisdiction and the
payment, discharge or satisfaction, in the ordinary course of business
consistent with past practice or in accordance with their terms, of liabilities
reflected or reserved against in, or contemplated by, the most recent
consolidated financial statements (or the notes thereto) of the Company included
in the documents filed with the Commission and publicly available prior to the
date of the Merger Agreement, or incurred in the ordinary course of business
consistent with past practice, or waive the benefits of, or agree to modify in
any manner, any confidentiality, standstill or similar agreement to which the
Company or any of its subsidiaries is a party; or (xii) authorize any of, or
commit or agree to take any of, the foregoing actions.
In addition to the foregoing, the Company has agreed in the Merger
Agreement that it will not take any action, or permit any of its subsidiaries to
take any action, that would, or could reasonably be expected to, result in (a)
any of the representations and warranties of the Company set forth in the Merger
Agreement that are qualified as to materiality becoming untrue, (b) any of such
representations and warranties that are not so qualified becoming untrue in any
material respect or (c) except as permitted pursuant to the provision described
below under "Prohibition on Solicitation", any of the conditions to the Offer
set forth in Section 8 to this Supplement or any of the conditions to the Merger
set forth in the Merger Agreement not being satisfied.
Prohibition on Solicitation. Pursuant to the Merger Agreement, the Company
has agreed that the Company and its officers, directors, employees,
representatives and agents shall immediately cease any discussions or
negotiations with any parties that may be ongoing with respect to any Takeover
Proposal. In addition, the Company shall not authorize or permit any of its
officers, directors or employees or any investment banker, financial advisor,
attorney, accountant or other representative or advisor retained by it or any of
its subsidiaries to (i) solicit, initiate or encourage (including by way of
furnishing information), or take any other action to facilitate, any inquiries
or the making of any proposal that constitutes, or may reasonably be expected to
lead to, a Takeover Proposal or (ii) participate in any discussions or
negotiations regarding any Takeover Proposal; provided, however, that, in the
event that prior to the acceptance for payment of Shares pursuant to the Offer
an unsolicited Takeover Proposal is made and the Board of Directors of the
Company determines in good faith, after consultation with outside counsel, that
it is necessary to do so in order to comply with its fiduciary duties to the
Company's shareholders under applicable law, the Company may deliver a written
notice to that effect promptly to Parent and thereafter, subject to compliance
with the provisions described in the second succeeding paragraph, (x) furnish,
pursuant to a confidentiality agreement that is not less favorable to the
Company than the Confidentiality Agreement, information with respect to the
Company to the person making such unsolicited Takeover Proposal and (y)
participate in discussions or negotiations regarding such Takeover Proposal.
Without limiting the foregoing, the Merger Agreement provides that any violation
of the restrictions set forth in the preceding sentence by any director or
employee of the Company or any of its subsidiaries or any investment banker,
financial advisor, attorney, accountant or other advisor, representative or
agent of the Company or any of its subsidiaries, whether or not such person is
purporting to act on behalf of the Company or any of its subsidiaries or
otherwise, shall be deemed to be a breach of the provisions described in this
paragraph by the Company. For purposes of the Merger Agreement, "Takeover
Proposal" means any inquiry, proposal or offer from any person relating to any
direct or indirect acquisition or purchase in any manner of a substantial amount
of assets of the Company and subsidiaries (taken as a whole) or an interest in
any substantial amount of voting securities of the Company or any Significant
Subsidiary (as defined in the Merger Agreement), any tender offer or exchange
offer that if consummated would result in any
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<PAGE> 27
person beneficially owning any voting securities of the Company or Significant
Subsidiary (as defined in the Merger Agreement), any merger, consolidation,
business combination, sale of all or substantially all the assets,
recapitalization, liquidation, dissolution or similar transaction involving the
Company or any of its subsidiaries, other than the transactions contemplated by
the Operative Agreements, or any other transaction the consummation of which
could reasonably be expected to impede, interfere with, prevent or materially
delay the Offer or the Merger or that would reasonably be expected to dilute
materially the benefits to Parent or the Purchaser of the transactions
contemplated by the Operative Agreements.
The Merger Agreement also provides that neither the Board of Directors of
the Company nor any committee thereof may (i) withdraw or modify, or propose to
withdraw or modify, in a manner adverse to Parent or Sub, the adoption, approval
or recommendation by such Board of Directors or any such committee of the Offer,
the Merger Agreement or the Merger, (ii) approve or recommend, or propose to
approve or recommend, any Takeover Proposal or take any action, or make any
determination, under the Rights Agreement to facilitate any Takeover Proposal or
(iii) cause or permit the Company to enter into any agreement with respect to
any Takeover Proposal. Notwithstanding the foregoing, in the event that prior to
the acceptance for payment of Shares pursuant to the Offer, the Board of
Directors of the Company determines in good faith, after consultation with
outside counsel, that it is necessary to do so in order to comply with its
fiduciary duties to the Company's shareholders under applicable law, the Board
of Directors of the Company may withdraw or modify its adoption, approval or
recommendation of the Offer, the Merger Agreement and the Merger at any time
following Parent's receipt of written notice (a "Notice of Superior Proposal")
advising Parent that the Board of Directors of the Company has received a
Superior Proposal and identifying the person making such Superior Proposal. For
purposes of the Merger Agreement, a "Superior Proposal" means any bona fide
Takeover Proposal for all outstanding Shares on terms that the Board of
Directors of the Company determines in its good faith judgment (based on the
written opinion of Robinson-Humphrey or another financial advisor of nationally
recognized reputation, which opinion takes into account all the terms and
conditions of the Takeover Proposal, including any break-up fees, expense
reimbursement provisions and conditions to consummation) are not more favorable
to the person or persons making such Takeover Proposal and provide greater
present value to all the Company's shareholders, in each case, than the Merger
Agreement, the Offer and the Merger taken as a whole.
In addition to the obligations of the Company described in the two
preceding paragraphs, the Merger Agreement provides that the Company shall
immediately advise Parent orally and in writing of any request for information
or of any Takeover Proposal, or of any inquiry with respect to or which could
lead to any Takeover Proposal and the material terms and conditions of such
request, Takeover Proposal or of inquiry and the identity of the person making
such request, Takeover Proposal or inquiry. The Company shall keep Parent fully
informed of the status and material terms (including amendments or proposed
amendments) of any such request, Takeover Proposal or inquiry.
The Merger Agreement provides that nothing described in the preceding three
paragraphs prohibits the Company from taking and disclosing to its shareholders
a position contemplated by Rule 14e-2(a) promulgated under the Exchange Act or
from making any disclosure to the Company's shareholders if the Board of
Directors of the Company determines in good faith, after consultation with
outside counsel, failure so to disclose would be inconsistent with its fiduciary
duties to the Company's shareholders under applicable law; provided, however,
that neither the Company nor its Board of Directors nor any committee thereof
shall, except as permitted by the provisions described in the second preceding
paragraph, withdraw or modify, or propose to withdraw or modify, its position
with respect to the Offer, the Merger Agreement or the Merger or approve or
recommend, or propose to approve or recommend, a Takeover Proposal.
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<PAGE> 28
Shareholder Approval; Preparation of Proxy Statement. The Merger Agreement
provides that if shareholder approval of the Merger Agreement is required by
law, the Company, shall, at Parent's request, as soon as practicable following
the expiration of the Offer, duly call, give notice of, convene and hold a
meeting of its shareholders (the "Shareholders Meeting") for the purpose of
approving the Merger Agreement and the Merger. The Merger Agreement also
provides that the Company shall, through its Board of Directors, recommend to
its shareholders approval of the Merger Agreement, including the Plan of Merger
contained therein, and the transactions contemplated by the Operative
Agreements, except to the extent that the Board of Directors of the Company
shall have withdrawn or modified its approval or recommendation of the Offer,
the Merger Agreement or the Merger as permitted by the provisions described in
the second paragraph under "Prohibition on Solicitation" above. Further, the
Company agreed that its obligations described in the first sentence of this
paragraph would not be affected by (i) the commencement, public proposal, public
disclosure or communication to the Company of any Takeover Proposal or (ii) the
withdrawal or modification by the Board of Directors of the Company of its
approval or recommendation of the Offer, the Merger Agreement or the Merger. The
Merger Agreement also provides that, if requested by Parent, the Company shall
from time to time postpone or adjourn the Shareholders Meeting to allow Parent
and the Company additional time to seek proxies in favor of approval of the
Merger Agreement and the transactions contemplated by the Operative Agreements.
The Merger Agreement provides that if shareholder approval of the Merger
Agreement is required by law, the Company shall at Parent's request, as soon as
practicable following the expiration of the Offer, prepare and file a
preliminary Proxy Statement with the Commission and shall use its best efforts
to respond to any comments of the Commission or its staff and to cause the Proxy
Statement to be mailed to the Company's shareholders as promptly as practicable
after such filing. The Merger Agreement provides that the Company shall notify
Parent promptly of the receipt of any comments from the Commission or its staff
and of any request by the Commission or its staff for amendments or supplements
to the Proxy Statement or for additional information and shall 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. The Merger Agreement provides
that if at any time prior to the approval of the Merger Agreement by the
Company's shareholders there shall occur any event that should be set forth in
an amendment or supplement to the Proxy Statement, the Company shall promptly
prepare and mail to its shareholders such an amendment or supplement. The Merger
Agreement provides that the Company shall not mail any Proxy Statement, or any
amendment or supplement thereto, to which Parent reasonably objects. The Merger
Agreement provides that Parent shall cause all Shares purchased pursuant to the
Offer and all other Shares owned by the Purchaser or any other subsidiary of
Parent to be voted in favor of the approval of the Merger Agreement.
Access to Information; Confidentiality. Pursuant to the Merger Agreement,
from the date of the Merger Agreement to the effectiveness of the Merger,
subject to the appropriate provisions of confidentiality agreements applicable
to the Company, the Company shall, and shall cause each of its subsidiaries to,
afford to Parent, and to Parent's officers, employees, accountants, counsel,
financial advisors and other representatives, reasonable access during normal
business hours during the period prior to the effectiveness of the Merger to all
their respective properties, books, contracts, commitments, personnel and
records and, during such period, the Company shall, and shall cause each of its
subsidiaries to, furnish promptly to Parent (i) 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 and (ii) all
other information concerning its business, properties and personnel as Parent
may reasonably request.
The Merger Agreement provides that except as required by law, Parent shall
hold, and shall cause its officers, employees, accountants, counsel, financial
advisors and other representatives and affiliates to hold, any nonpublic
information in confidence until such time as such information otherwise becomes
publicly available (otherwise than through the wrongful act of any such person)
26
<PAGE> 29
and shall use its best efforts to ensure that such persons do not disclose such
information to others without the prior written consent of the Company. The
Merger Agreement provides that in the event of termination of the Merger
Agreement for any reason, Parent shall promptly return or destroy all documents
containing nonpublic information so obtained from the Company or any of its
subsidiaries and any copies made of such documents. The Merger Agreement
provides that the Company or its representatives have requested the return or
destruction of confidential information of the Company provided by the Company
or its representatives from each of the parties that executed confidentiality or
standstill agreements following public announcement of the existing Offer and
the Company agreed not to waive, amend or modify any provision of any such
agreement without prior written consent of Parent.
Best Efforts; Notification. The Merger Agreement provides that, upon the
terms and subject to the conditions set forth in the Merger Agreement, unless,
to the extent permitted by the provisions described in the second paragraph
under "Prohibition on Solicitation" above, the Board of Directors of the Company
approves or recommends a Superior Proposal, each of the parties agreed 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 the Operative Agreements, including (i) the
obtaining of all necessary actions or nonactions, waivers, consents and
approvals from Governmental Entities (as defined in the Merger Agreement) and
the making of all necessary registrations and filings (including filings with
Governmental Entities, 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 Entity, (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 any Operative Agreement or the consummation of any of the
transactions contemplated by the Operative Agreements, including seeking to have
any stay or temporary restraining order entered by any court or other
Governmental Entity vacated or reversed and (iv) the execution and delivery of
any additional instruments necessary to consummate the transactions contemplated
by, and to fully carry out the purposes of, the Operative Agreements. The Merger
Agreement provides that in connection with and without limiting the foregoing,
the Company and its Board 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, any Operative Agreement or any of
the other transactions contemplated by the Operative Agreements and (ii) if any
state takeover statute or similar statute or regulation becomes applicable to
the Offer, the Merger, any Operative Agreement or any other transaction
contemplated by any Operative Agreement, take all action necessary to ensure
that the Offer, the Merger and the other transactions contemplated by the
Operative Agreements may be consummated as promptly as practicable on the terms
contemplated by the Operative Agreements and otherwise to minimize the effect of
such statute or regulation on the Offer, the Merger and the other transactions
contemplated by the Operative Agreements. The Merger Agreement provides that
notwithstanding the foregoing, the Board of Directors of the Company shall not
be prohibited from taking any action permitted by the provisions described in
the second paragraph under "Prohibition on Solicitation" above.
The Merger Agreement provides that the Company shall give prompt notice to
Parent, and Parent or the Purchaser shall give prompt notice to the Company, of
(i) any representation or warranty made by it contained in the Merger 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 or (ii) the failure by it to comply with
or satisfy in any material respect any covenant, condition or agreement to be
complied with or satisfied by it under the Merger 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 the Merger Agreement.
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<PAGE> 30
The Rights Agreement. The Company has agreed in the Merger Agreement that,
at the request of Parent upon five business days' prior notice, the Board of
Directors of the Company shall redeem the Rights prior to the effectiveness of
the Merger. The Company has also represented, among other things, that it has
taken or will take all necessary action to (i) render the Rights inapplicable to
the Offer, the Merger and the other transactions contemplated by the Operative
Agreements, and (ii) ensure that a Distribution Date does not occur by reason of
the announcement or consummation of the Offer, the Merger or any of the other
transactions contemplated by the Operative Agreements. The Merger Agreement
provides that except with the prior written consent of Parent, the Board of
Directors of the Company shall not (i) amend the Rights Agreement or (ii) take
any action with respect to, or make any determination under, the Rights
Agreement, in each case that could have the effect of rendering the Rights
applicable to the Offer, the Merger Agreement or any of the other transactions
contemplated by the Operative Agreements, including any amendment or supplement
to the Offer that includes a cash Offer Price that is not less than $17.25 per
Share for all Shares.
Board of Directors; Corporate Governance. The Merger Agreement provides
that, upon the Purchaser's acceptance for payment and payment for, Shares
pursuant to the Offer, the Purchaser will be entitled to designate such number
of directors on the Board of Directors of the Company as will give the
Purchaser, subject to compliance with Section 14(f) of the Exchange Act and the
ABCA, a majority of such directors. The Merger Agreement further provides that,
notwithstanding the foregoing, until the effectiveness of the Merger, the
Company shall have on the Board of Directors of the Company at least three
directors who were directors of the Company as of the date of the Merger
Agreement. Subject to applicable law, the Company has agreed to take all action
necessary to effect the election of the Purchaser's designees to the Board of
Directors and in connection therewith, the Company will promptly, at the option
of Parent, either increase the size of the Board of Directors of the Company
and/or obtain the resignation of such number of its current directors as is
necessary to enable the Purchaser designees to the Board of Directors and in
connection therewith, the Company will promptly, at the option of Parent, either
increase the size of the Company's Board of Directors and/or obtain the
resignation of such number of its current directors as is necessary to enable
the Purchaser's designees to be elected to the Board of Directors of the Company
as provided above.
Treatment of Stock Options; Certain Employee Benefits. Pursuant to the
Merger Agreement (a) as soon as practicable following the date of the Merger
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 employee stock options to purchase Shares ("Employee Options")
and all outstanding stock appreciation rights ("SARs") heretofore granted under
any stock option or stock appreciation rights plan, program or arrangement of
the Company (collectively, the "Stock Plans") to provide that each vested and
unvested Employee Option (and any SAR related thereto) outstanding immediately
prior to the acceptance for payment of Shares pursuant to the Offer shall be
cancelled in exchange for a cash payment by the Company immediately prior to the
effectiveness of the Merger of an amount equal to (i) the excess, if any, of (x)
the Offer Price over (y) the exercise price per Share subject to such Employee
Option, multiplied by (ii) the number of Shares for which such Employee Option
shall not theretofore have been exercised (the "Option Consideration").
The Merger Agreement provides that the Stock Plans shall terminate as of
the effectiveness of the Merger, and the provisions in any other Benefit Plan
providing for the issuance, transfer or grant of any capital stock of the
Company or any interest in respect of any capital stock of the Company shall be
deleted as of the effectiveness of the Merger, and the Company shall ensure that
following the effectiveness of the Merger no holder of an Employee Option or SAR
or any participant in any Stock Plan or other Benefit Plan shall have any right
thereunder to acquire any capital stock of the Company or the Surviving
Corporation.
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<PAGE> 31
Except as provided in the provisions in the immediately preceding
paragraph, the Merger Agreement provides that Parent shall cause the Surviving
Corporation to maintain for a period of one year after the effectiveness of the
Merger the Benefit Plans of the Company and its subsidiaries in effect on the
date of the Merger Agreement or to provide benefits for such period to employees
of the Company and its subsidiaries that are not materially less favorable in
the aggregate to such employees than those in effect on the date of the Merger
Agreement.
In the Merger Agreement, Parent agrees to cause the Surviving Corporation
to honor all severance policies and agreements, deferred compensation
agreements, employment agreements and death benefit agreements with the
Company's officers and employees disclosed to Parent, including certain proposed
additional agreements and modifications disclosed to Parent; provided, however,
that in no event shall the liability of the Surviving Corporation for severance,
post-termination health and other benefits, deferred compensation and
acceleration or non-vested stock options under all such policies and agreements
exceed $12.5 million. Parent also acknowledges in the Merger Agreement that the
transactions contemplated by the Operative Agreements will constitute a change
of control for purposes of the agreements described in the preceding sentence.
Parent acknowledges in the Merger Agreement that, in connection with the
Company's annual bonus plan for the fiscal year ending February 1, 1997, (i) the
Company shall be deemed to have achieved all targets under such plan and (ii)
any employee of the Company whose employment with the Company is terminated by
the Company (other than termination for dishonesty or violation of Company
policy) or who terminates his or her employment with the prior written consent
of the Company following consummation of the Offer and prior to February 1,
1997, shall upon termination be fully vested under such plan for fiscal year
1997; provided, however, that the liability of the Company under such plan shall
be $1,060,000 less any amounts attributable to employees who terminate their
employment prior to February 1, 1997, without the prior written consent of
Parent or whose employment with the Company is terminated prior to such date for
dishonesty or violation of Company policy.
Parent acknowledges in the Merger Agreement that, in connection with the
Company's profit sharing plan for the fiscal year ending February 1, 1997, the
Company shall make a discretionary contribution for such fiscal year in an
aggregate amount of $3,100,000.
Indemnification and Insurance. In the Merger Agreement, Parent and the
Purchaser have agreed that all rights to indemnification for acts or omissions
occurring prior to the effectiveness of the Merger that are in existence as of
the date of the Merger Agreement in favor of the current or former directors or
officers of the Company and its subsidiaries as provided in their respective
Articles or Certificates of Incorporation or By-laws or contractual arrangements
or as otherwise provided by applicable law shall survive the Merger and shall
continue in full force and effect in accordance with their terms for a period of
not less than six years from the effectiveness of the Merger. Pursuant to the
Merger Agreement, Parent will, for a period of six years from the effectiveness
of the Merger maintain in effect the Company's current directors' and officers'
liability insurance covering those persons who are currently covered by the
Company's directors' and officers' liability insurance policy except that, to
the extent that such coverage is not obtainable at less than or equal to 225% of
the current per annum cost (such 225% amount, the "Maximum Premium"), Parent
will be obligated to use its reasonable efforts to purchase only so much
coverage as may then be obtained for such amount. The Company represented in the
Merger Agreement to Parent that the Maximum Premium is $315,000.
Conditions to Merger. The Merger Agreement provides that the respective
obligations of each party to the Merger Agreement to effect the Merger shall be
subject to the satisfaction, prior to the closing of the transactions
contemplated by the Merger Agreement, to the following conditions: (a) if
required by applicable law, the Merger Agreement, and the appropriate Plan of
Merger contained therein, and the transactions contemplated thereby shall have
been approved by the
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<PAGE> 32
affirmative vote of the shareholders of the Company; and (b) no temporary
restraining order, preliminary or permanent injunctive or other order issued by
any court of competent jurisdiction or other legal restraint or prohibition
arising under the authority of any Governmental Entity preventing the
consummation of the Merger shall be in effect. The Merger Agreement provides
that the obligation of Parent and Purchaser to effect the Merger are further
subject to the condition that there shall not be pending any suit, action or
proceeding by any Governmental Entity that has a substantial likelihood of
success (other than any suit, action or proceeding pending on the date of
consummation of the Offer) (i) challenging the acquisition by Parent or the
Purchaser of any Shares, seeking to restrain or prohibit the consummation of the
Merger or any of the other transactions contemplated by any Operative Agreement,
or seeking to obtain from the Company, Parent or the Purchaser any damages that
are material in relation to the Company and its subsidiaries taken as a whole,
(ii) seeking to prohibit or limit 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 transactions contemplated by any
Operative Agreement, (iii) seeking to impose limitations on the ability of
Parent or the Purchaser to acquire or hold, or exercise full rights of ownership
of, any Shares, including, without limitation, the right to vote the Common
Stock purchased by it on all matters properly presented to the shareholders of
the Company or (iv) seeking to prohibit Parent or any of its subsidiaries from
effectively controlling in any material respect the business or operations of
the Company or its subsidiaries. For a description of the conditions to the
Offer, see Section 8 of this Supplement.
Termination. The Merger Agreement provides that it may be terminated at any
time prior to the effectiveness of the Merger, whether before or after approval
of matters presented in connection with the Merger by the shareholders of the
Company: (a) by mutual written consent of Parent and the Company; (b) by either
Parent or the Company: (i) if, upon a vote at a duly held Shareholders Meeting
or any adjournment thereof at which Parent voted all Shares beneficially owned
by it in accordance with the Merger Agreement, any required approval of the
Shareholders of the Company shall not have been obtained; provided, however,
that the Company shall not have the right to terminate the Merger Agreement
pursuant this clause (i) if (A) any Shares beneficially owned on the date of the
Merger Agreement by any Shareholder party to the Support Agreement that are not
purchased pursuant to the Offer are not voted in favor of the Merger and such
approval would have been obtained had all such Shares been so voted or (B) the
Company is in violation of any of the provisions above under "Prohibition on
Solicitation", "Shareholder Approval; Preparation of Proxy Statement" or "Best
Efforts; Notification"; (ii) if, as the result of the failure of any of the
conditions set forth in Section 8 of this Supplement, the Offer shall have
terminated or expired in accordance with its terms without the Purchaser having
purchased any Shares pursuant to the Offer; provided, however, that the right to
terminate the Merger Agreement pursuant to the provisions described in this
clause (ii) shall not be available to any party whose failure to fulfill any of
its obligations under, or breach of any provisions of, any Operative Agreement
results in the failure of any such condition; or (iii) 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 pursuant to the Offer or the Merger and such order, decree, ruling or
other action shall have become final and nonappealable; (c) by the Company if
(i) the Company shall have given Parent a Notice of Superior Proposal with
respect to a Takeover Proposal, (ii) at least five business days later, the
Board of Directors of the Company shall have determined in good faith (based on
the written opinion of Robinson-Humphrey or another financial advisor of
nationally recognized reputation, which opinion takes into account all the terms
of such Takeover Proposal, including any break-up fees, expense reimbursement
provisions and conditions to consummation) that the terms of such Takeover
Proposal are not more favorable to the person or persons making such Takeover
Proposal and provide greater present value to all the Company's shareholders, in
each case, than the Merger
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<PAGE> 33
Agreement, the Offer and the Merger taken as a whole in light of any improved
terms proposed by Parent or the Purchaser prior to the expiration of such five
business day period and (iii) the Company has paid to Parent the Termination Fee
as described in "Fees and Expenses" below; or (d) by Parent if it shall have
received a Notice of Superior Proposal pursuant to the provisions described in
the second paragraph under "Prohibition on Solicitation" above.
Fees and Expenses. The Merger Agreement provides that, except as provided
in the following paragraph, all fees and expenses incurred in connection with
the Offer, the Merger, the Merger Agreement and the transactions contemplated by
the Operative Agreements will be paid by the party incurring such fees or
expenses, whether or not the Offer or the Merger is consummated.
Under the Merger Agreement, the Company will pay to Parent upon demand in
cash a fee of $15 million (the "Termination Fee"), payable in same day funds,
if: (i) the Merger Agreement is terminated pursuant to the provisions described
in clause (b)(ii) under "Termination" above as a result of the failure of any
condition described in paragraph (d) (other than clause (ii)(A) thereof), (e) or
(f) of Section 8 of this Supplement; (ii)(v) after the date of the Merger
Agreement, any person or "group" (within the meaning of Section 13(d)(3) of the
Exchange Act) publicly makes a Takeover Proposal or amends a Takeover Proposal
made prior to the date of the Merger Agreement, or discloses its intention to do
either of the foregoing, in any case (A) at an all-cash price in excess of
$17.25 per Share or (B) for non-cash consideration or a combination of cash and
non-cash consideration, (w) the Offer remains open for the period contemplated
by Section 1 of this Supplement, (x) the Minimum Tender Condition (as defined in
Section 8 of this Supplement) is not satisfied at such expiration date, (y) the
Merger Agreement is thereafter terminated pursuant to the provisions described
in clause (b)(ii) under "Termination" above, and (z) either (A) the Board of
Directors of the Company, within five business days of being requested to do so
by Parent, failed to both reaffirm its recommendation of the Offer and the
Merger and recommend rejection of such Takeover Proposal on the grounds that it
is not in the best interests of the Company and its shareholders (such request
having been made following the making of such Takeover Proposal, such amendment
or such public disclosure and at least five business days prior to expiration of
the Offer) or (B) within twelve months after such termination the Company enters
into a definitive agreement providing for a Takeover Proposal or a Takeover
Proposal is consummated; or (iii) the Merger Agreement is terminated pursuant to
the provisions described in clause (c) under "Termination" above. The Merger
Agreement provides that if it is terminated as a result of a wilful and material
breach of the Merger Agreement by Parent or the Purchaser, Parent shall pay the
Company in cash, payable in same day funds, $5 million (the "Expenses") in lieu
of reimbursement of the Company for all fees and expenses incurred or paid by or
on behalf of it or any of its affiliates in connection with the Offer, the
Merger or the consummation of any of the transactions contemplated by the
Operative Agreements. The Merger Agreement provides that if it is terminated
pursuant to the provisions described in clause (b) (ii) under "Termination"
above as a result of the failure of the Minimum Tender Condition (except under
circumstances described in clause (ii) of the first sentence of this paragraph)
or pursuant to the provisions described in clause (d) under "Termination" above,
the Company shall pay Parent in cash, payable in same day funds, the Expenses.
The Merger Agreement further provides that any amount paid by the Company
pursuant to the immediately preceding sentence shall be a credit against any
amounts subsequently due from the Company pursuant to clause (ii) of the first
sentence of this paragraph.
Litigation. The Merger Agreement provides that Parent and the Company shall
promptly enter into stipulations dismissing without prejudice all litigation
currently pending between them or their respective affiliates and
representatives, or commenced by or on behalf of any of them in connection with
the Offer, and promptly to cause such stipulations to be filed in connection
with such litigation. The Merger Agreement provides that each such stipulation
shall provide that the relevant litigation shall be deemed to be dismissed with
prejudice from and after the effectiveness of the Merger. In addition, the
Merger Agreement provides that (a) the Company shall not reinstate (or permit
its affiliates or representatives to reinstate) any such litigation so long as
Parent and the Purchaser are
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<PAGE> 34
not in material breach of their respective obligations under the Merger
Agreement and (b) each of Parent and the Purchaser shall not reinstate (or
permit its affiliates or representatives to reinstate) any such litigation so
long as the Company is not in material breach of its obligations under the
Merger Agreement.
Amendment. The Merger Agreement provides that it may be amended by the
parties thereto, by action taken or authorized by their respective Boards of
Directors, provided, however, that after any approval of the Merger Agreement by
the shareholders of the Company, no amendment will be made to the Merger
Agreement which by laws requires further approval by such shareholders without
such further approval.
The Support Agreement
Parent and the Purchaser entered into the Support Agreement with Anthony J.
Bruno, Arthur M. Jones, Sr., James A. Bruno, Vincent J. Bruno and certain
entities associated with Vincent J. Bruno (collectively, the "Shareholders").
Pursuant to the Support Agreement, the Shareholders have agreed that at any
meeting of shareholders called to vote upon the Merger and the Merger Agreement
or at any adjournment thereof or in any other circumstances upon which a vote,
consent or other approval with respect to the Merger and the Merger Agreement is
sought, such Shareholder shall vote (or cause to be voted) all Shares then
beneficially owned by such Shareholder in favor of the Merger, the adoption by
the Company of the Merger Agreement and the approval of the terms thereof and
each of the other transactions contemplated by the Merger Agreement. The Support
Agreement further provides that at any meeting of shareholders or at any
adjournment thereof or in any other circumstances upon which such Shareholder's
vote, consent or other approval is sought, such Shareholder shall vote (or cause
to be voted) all Shares then beneficially owned by such Shareholder against (i)
any merger agreement or merger (other than the Merger Agreement and the Merger),
consolidation, combination, sale of substantial assets, reorganization,
recapitalization, dissolution, liquidation or winding up of or by the Company or
any other Takeover Proposal, (ii) any amendment of the Company's Articles
(Certificate) of Incorporation or By-laws or other proposal or transaction that
could impede, interfere with, prevent or materially delay the Merger or that
could reasonably be expected to dilute materially the benefits to Parent or the
Purchaser of the transactions contemplated by the Merger Agreement and (iii)
against any candidate for election to the Board of Directors of the Company not
approved by Parent.
Parent has been advised that the Shareholders currently directly own at
least 1,187,486 Shares (the "Subject Shares"), representing approximately 6.3%
of the outstanding Shares, and beneficially own an additional approximately
400,000 Shares, representing an additional approximately 1.8% of the outstanding
Shares. The Shareholders have also agreed that they will not (i) sell, transfer,
pledge assign or otherwise dispose of, or enter into any contract, option or
other arrangement (including any profit sharing arrangement) with respect to the
sale, transfer, pledge, assignment or other disposition of, the Subject Shares
to any person (A) other than the Purchaser or the Purchaser's designee or (B) by
operation of law upon the death of such Shareholder or (ii) enter into any
voting agreement, whether by proxy, voting agreement or otherwise, in
connection, directly or indirectly, with any Takeover Proposal.
The Support Agreement provides that a Shareholder shall not, nor shall it
permit any investment banker, attorney or other advisor or representative of
such Shareholder to, (i) directly or indirectly solicit, initiate or encourage
the submission of, any Takeover Proposal or (ii) directly or indirectly
participate in any discussions or negotiations regarding, or furnish to any
person any information with respect to, or take any other action to facilitate
any inquiries or the making of any proposal that constitutes, or may reasonably
be expected to lead to, any Takeover Proposal. In the Support Agreement each
Shareholder also grants to the Purchaser, with full power of substitution, a
proxy covering all the Subject Shares of such Shareholder to vote such Subject
Shares in accordance with the requirements of the Support Agreement. The proxy
is coupled with an interest and is irrevocable
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<PAGE> 35
to the maximum extent permitted by the ABCA. The obligations of the Shareholders
under the Support Agreement, including the proxy granted pursuant to the Support
Agreement, terminate on the termination of the Merger Agreement; provided,
however, that, if any Shareholder fails to comply with its obligations under the
Support Agreement to vote (or cause to be voted) all Shares then beneficially
owned by such Shareholder in favor of the Merger, the adoption by the Company of
the Merger Agreement and the approval of the terms thereof and each of the other
transactions contemplated by the Merger Agreement, the obligations of such
Shareholder under the Support Agreement described above shall not terminate
until the third anniversary of the date of the Support Agreement.
Arthur M. Jones, Sr. and James A. Bruno have informed Parent and the
Company that they intend to tender their Shares in the Offer. Because of
restrictions imposed by Section 16 of the Exchange Act, Anthony J. Bruno,
Vincent J. Bruno and certain associated trusts and other entities, holding in
the aggregate approximately 11% of the outstanding Shares, have informed Parent
that they do not expect to tender their Shares pursuant to the Offer.
8. AMENDED CONDITIONS OF THE OFFER
Notwithstanding any other term of the Offer or the Merger Agreement, the
Purchaser shall not be required to accept for payment or, subject to any
applicable rules and regulations of the Commission, including Rule 14e-l(c)
under the Exchange Act (relating to the Purchaser's obligation to pay for or
return tendered Shares after the termination or withdrawal of the Offer), to pay
for any Shares tendered pursuant to the Offer unless the Minimum Tender
Condition is satisfied through the valid tender prior to the expiration of the
Offer of that number of Shares which would represent at least a majority of the
Fully Diluted Shares. The term "Fully Diluted Shares" means all outstanding
securities entitled generally to vote in the election of directors of the
Company on a fully diluted basis, after giving effect to the exercise or
conversion of all options, rights and securities exercisable or convertible into
such voting securities, other than potential dilution attributable to the
Rights. Furthermore, notwithstanding any other term of the Offer or the Merger
Agreement, the Purchaser shall not be required to accept for payment or, subject
as aforesaid, to pay for any Shares not theretofore accepted for payment or paid
for, and may terminate or amend the Offer, with the consent of the Company or
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) there shall be threatened by any Governmental Entity, or there
shall be instituted or pending any suit, action, proceeding, application or
counterclaim by any Governmental Entity or any other person, or before any
court or governmental authority, agency or tribunal, domestic or foreign,
in each case that has a substantial likelihood of success, (i) challenging
the acquisition by Parent or the Purchaser of any Shares, seeking to
restrain or prohibit the making or consummation of the Offer or the Merger
or the performance of any of the other transactions contemplated by any
Operative Agreement, or seeking to obtain from the Company, Parent or the
Purchaser any damages that are material in relation to the Company and its
subsidiaries taken as whole, (ii) seeking to prohibit or limit 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
Offer or any of the other transactions contemplated by any Operative
Agreement, (iii) seeking to impose limitations on the ability of Parent or
the Purchaser to acquire or hold, or exercise full rights of ownership of,
any Shares, including, without limitation, the right to vote the Shares
purchased by it on all matters properly presented to the shareholders of
the Company, (iv) seeking to prohibit Parent or any of its subsidiaries
from effectively controlling in any material respect the business or
operations of the Company or its subsidiaries, or (v) which
33
<PAGE> 36
otherwise is reasonably likely to have a material adverse effect on the
business, properties, assets, condition (financial or otherwise), results
of operations or prospects of the Company and its subsidiaries taken as a
whole;
(b) there shall be any statute, rule, regulation, legislation,
interpretation, judgment, order or injunction enacted, entered, enforced,
promulgated, amended or issued with respect to, or deemed applicable to, or
any consent or approval withheld with respect to, (i) Parent, the Company
or any of their respective subsidiaries or (ii) the Offer, the Merger or
any of the other transactions contemplated by the Operative Agreements, by
any Governmental Entity or before any court or governmental authority,
agency or tribunal, domestic or foreign, that is reasonably likely to
result, directly or indirectly, in any of the consequences referred to in
clauses (i) through (v) of paragraph (a) above;
(c) there shall have occurred any material adverse change in the
Company, or any development that, insofar as reasonably can be foreseen,
has resulted in or is reasonably likely to result in a material adverse
change in the Company, other than any change arising from general economic
or industry conditions.
(d)(i) it shall have been publicly disclosed or Parent shall have
otherwise learned that beneficial ownership (determined for the purposes of
this paragraph as set forth in Rule 13d-3 promulgated under the Exchange
Act) of more than 50% of the outstanding Shares has been acquired by
another person, entity or "group" (within the meaning of Section 13(d)(3)
of the Exchange Act) other than acquisitions for bona fide arbitrage
purposes only and other than as disclosed in a Schedule 13D or 13G on file
with the Commission prior to the date of the Merger Agreement, (ii) the
Board of Directors of the Company or any committee thereof shall have (A)
withdrawn or modified in a manner adverse to Parent or the Purchaser its
approval or recommendation of the Offer, the Merger or the Merger
Agreement, (B) approved or recommended any Takeover Proposal or (C) taken
any action, or made any determination, under the Rights Agreement to
facilitate any Takeover Proposal, (iii) the Company shall have entered into
any agreement with respect to any Takeover Proposal or (iv) the Board of
Directors of the Company or any committee thereof shall have resolved to do
any of the foregoing;
(e) 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;
(f) the Company shall have failed to perform in any material respect
any obligation or to comply in any material respect with any agreement or
covenant of the Company to be performed or complied with by it under the
Merger Agreement; or
(g) the Merger Agreement shall have been terminated in accordance with
its terms.
The foregoing conditions are for the sole benefit of the Purchaser and
Parent and, subject to the provisions of the Merger Agreement, may be asserted
by the Purchaser or Parent regardless of the circumstances giving rise to such
condition or may be waived by the Purchaser and Parent in whole or in part at
any time and from time to time in their sole discretion. The failure by Parent,
the Purchaser 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.
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<PAGE> 37
9. SHAREHOLDER LITIGATION
On October 3, 1996, a purported class action entitled Brickell Partners v.
Anthony Bruno et al. was filed in the Federal Court. The action claims, among
other things, that certain individual directors of the Company as well as the
Company itself have unlawfully refused to consider the Offer and have taken
improper defensive actions including the adoption of the Rights Agreement and
the adoption of certain severance agreements designed to thwart the Offer while
at the same time entrenching the Company's current management. The complaint
seeks declaratory and injunctive relief and attorneys' fees and experts' fees.
10. MISCELLANEOUS
For purposes of the Offer, the Purchaser will be deemed to have accepted
for payment, and thereby purchased, Shares properly tendered to the Purchaser
and not withdrawn as, if and when the Purchaser gives oral or written notice to
the Depositary of the Purchaser's acceptance for payment of such Shares. Payment
for Shares accepted for payment pursuant to the Offer will be made by payment by
Parent to tendering shareholders or will be made by deposit of the purchase
price therefor with the Depositary, which will act as agent for tendering
shareholders for the purpose of receiving payment from the Purchaser and
transmitting payment to tendering shareholders. UNDER NO CIRCUMSTANCES WILL
INTEREST BE PAID ON THE PURCHASE PRICE OF THE SHARES TO BE PAID BY THE
PURCHASER, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH
PAYMENT.
Salomon Brothers Inc is acting as Dealer Manager in connection with the
Offer and is providing certain financial advisory services to the Purchaser and
Parent in connection with the Offer and the Merger.
No person has been authorized to give any information or to make any
representation on behalf of the Purchaser or Parent not contained herein, in the
Offer to Purchase or in the Letter of Transmittal and, if given or made, such
information or representation must not be relied upon as having been authorized.
If Parent elects to cause the Company to be merged with and into the
Purchaser without a vote of the shareholders of the Company in accordance with
the Merger Agreement, Parent will file a Plan of Merger in the form attached as
Schedule I to this Supplement along with any other required documents with the
Secretary of State of the State of Alabama and the Secretary of State of the
State of Delaware. Parent is providing the Plan of Merger attached as Schedule I
to this Supplement in order to satisfy the notice requirements of Section 11.04
of the ABCA.
The Purchaser has filed with the Commission the Schedule 14D-1 pursuant to
Rule 14d-3 and Rule 13d-1 under the Exchange Act, together with exhibits,
furnishing certain additional information with respect to the Offer, has filed
certain amendments thereto and may file additional amendments thereto. Such
Schedule 14D-1 and any amendments thereto, including exhibits, should be
available for inspection and copies should be obtainable in the manner set forth
in Section 8 of the Offer to Purchase (except that such material will not be
available at the regional offices of the Commission).
RDS Acquisition Inc.
October 29, 1996
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<PAGE> 38
SCHEDULE I
PLAN OF MERGER
SECTION 1.01. Constituent Corporations. RDS Acquisition Inc., a Delaware
corporation ("Sub"), and Big B. Inc., an Alabama corporation (the "Company"),
constitute the constituent corporations of this Plan of Merger.
SECTION 1.02. The Merger. Upon the terms and subject to the conditions set
forth in this Plan of Merger and in accordance with the Delaware General
Corporation Law (the "DGCL") and the Alabama Business Corporation Act (the
"ABCA"), the Company shall be merged with and into Sub at the Effective Time of
the Merger (as defined below). Following a merger pursuant to this Section 1.02
(the "Merger"), the separate corporate existence of the Company shall cease and
Sub shall continue as the surviving corporation (the "Surviving Corporation")
and shall succeed to and assume all the rights and obligations of the Company in
accordance with the DGCL and the ABCA.
SECTION 1.03. Effective Time. The parties shall file a certificate or
articles of merger and other appropriate documents. The Merger shall become
effective at such date and time as this Plan of Merger and any other required
documents (collectively, the "Certificates of Merger") are duly filed with the
Delaware Secretary of State and the Alabama Secretary of State (the time the
Merger becomes effective being the "Effective Time of the Merger").
SECTION 1.04. Effects of the Merger. The Merger shall have the effects set
forth in Section 259 of the DGCL and Section 11.06 of the ABCA.
SECTION 1.05. Certificate of Incorporation and By-laws. (a) The Certificate
of Incorporation of Sub, as in effect immediately prior to the Effective Time of
the Merger, shall be the Certificate of Incorporation of the Surviving
Corporation until thereafter changed or amended as provided therein or by
applicable law.
(b) The By-laws of Sub as in effect at the Effective Time of the Merger
shall be the By-laws of the Surviving Corporation until thereafter changed or
amended as provided therein or by applicable law.
SECTION 1.06. Directors. The directors of Sub at the Effective Time of the
Merger shall be the directors of the Surviving Corporation, until the earlier of
their resignation or removal or until their respective successors are duly
elected and qualified, as the case may be.
SECTION 1.07. Officers. The officers of the Company at the Effective Time
of the Merger shall be the officers of the Surviving Corporation, until the
earlier of their resignation or removal or until their respective successors are
duly elected and qualified, as the case may be.
SECTION 1.08. Effect on Capital Shares. As of 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, par value $0.001 per share, of the Company (the
"Common Stock"; the Common Stock and the associated common stock purchase rights
(the "Rights") issued pursuant to the Rights Agreement dated as of September 23,
1996, as amended, being hereinafter collectively referred to as the "Shares") or
any shares of capital stock of Sub:
(a) Capital Stock of Sub. Each issued and outstanding share of the
capital stock of Sub shall be converted into and become one fully paid and
nonassessable share of common stock of the Surviving Corporation.
(b) Cancellation of Treasury Shares and Parent Owned Shares. Each
Share that is owned by the Company or by any subsidiary of the Company and
each Share that is owned by Revco D.S., Inc., a Delaware corporation
("Parent"), Sub or any other subsidiary of Parent (together, in each case,
with the associated Right) shall automatically be cancelled and retired and
shall cease to exist, and no consideration shall be delivered in exchange
therefor.
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(c) Conversion of Shares. Subject to Section 1.08(d), each issued and
outstanding Share (other than Shares to be cancelled in accordance with
Section 1.08(b)) together with the associated Right shall be converted into
the right to receive from the Surviving Corporation in cash, without
interest, $17.25 (the "Merger Consideration"). As of the Effective Time of
the Merger, all such Shares (and the associated Rights) shall no longer be
outstanding and shall automatically be cancelled and retired and shall
cease to exist, and each holder of a certificate representing any such
Shares (and the associated Rights) shall cease to have any rights with
respect thereto, except the right to receive the Merger Consideration,
without interest.
(d) Shares of Dissenting Shareholders. Notwithstanding anything in
this Plan of Merger to the contrary, any issued and outstanding Shares held
by persons who object to the Merger and comply with all the provisions of
Alabama law concerning the right of holders of Shares to dissent from the
Merger and obtain payment of the fair value of their Shares ("Dissenting
Shareholders") shall not be converted as described in Section 1.08(c) but
shall become the right to receive such consideration as may be determined
to be due to such Dissenting Shareholder pursuant to the laws of the State
of Alabama; provided, however, that the Shares (together with the
associated Rights) outstanding immediately prior to the Effective Time of
the Merger and held by a Dissenting Shareholder 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 ABCA, shall be deemed to
be converted as of the Effective Time of the Merger into the right to
receive the Merger Consideration.
SECTION 1.09 Exchange of Certificates. (a) Paying Agent. [ ] is
the paying agent (the "Paying Agent") for the payment of the Merger
Consideration upon surrender of certificates representing Shares.
(b) Parent to Provide Funds. 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 pursuant to Section 1.08.
(c) Exchange Procedure. As soon as reasonably practicable after the
Effective Time of the Merger, the Paying Agent shall mail to each holder of
record of a certificate or certificates that immediately prior to the Effective
Time of the Merger represented outstanding Shares (the "Certificates") whose
Shares were converted into the right to receive the Merger Consideration
pursuant to Section 1.08, (i) a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon delivery of the Certificates to the Paying Agent and shall be in
a form and have such other provisions as Parent may reasonably specify) 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 such other
documents as may reasonably be required by the Paying Agent, the holder of such
Certificate shall be entitled to receive in exchange therefor the amount of cash
into which the Shares theretofore represented by such Certificate shall have
been converted pursuant to Section 1.08, and the Certificate so surrendered
shall forthwith be cancelled. In the event of a transfer of ownership of Shares
that 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 1.09, 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 theretofore represented by such
Certificate shall have been converted pursuant to Section 1.08. No interest
shall be paid or shall accrue on the cash payable upon the surrender of any
Certificate.
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(d) No Further Ownership Rights in Common Stock. All cash paid upon the
surrender of Certificates in accordance with the terms of this Plan of Merger
shall be deemed to have been paid in full satisfaction of all rights pertaining
to the Shares theretofore represented by such Certificates, and there shall be
no further registration of transfers on the share transfer books of the
Surviving Corporation of the Shares that 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 cancelled and exchanged as provided in this Plan of Merger.
(e) No Liability. None of Parent, Sub, the Company or the Paying Agent
shall be liable to any person in respect of any cash delivered to a public
official pursuant to any applicable abandoned property, escheat or similar law.
If any Certificates shall not have been surrendered prior to five years after
the Effective Time of the Merger (or immediately prior to such earlier date on
which any payment pursuant to this Plan of Merger would otherwise escheat to or
become the property of any governmental authority or agency, domestic or
foreign) the payment in respect of such Certificate shall, to the extent
permitted by applicable law, become the property of the Surviving Corporation,
free and clear of all claims or interest of any person previously entitled
thereto.
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<PAGE> 41
Manually signed copies of the Letter of Transmittal (or copies thereof)
will be accepted. The Letter of Transmittal, certificates for Shares and any
other required documents should be sent or delivered by each stockholder of the
Company or such stockholder's broker, dealer, commercial bank, trust company or
other nominee to the Depositary at one of its addresses set forth below.
The Depositary for the Offer is:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
<TABLE>
<S> <C>
By Mail By Hand or Overnight Delivery:
ChaseMellon Shareholder Services, L.L.C. ChaseMellon Shareholder Services, L.L.C.
Reorganization Department Reorganization Department
P.O. Box 798 120 Broadway
Midtown Station 13th Floor
New York, NY 10018 New York, NY 10271
</TABLE>
By Fax Transmission:
(201) 329-8936
For Fax Confirmation Only by Telephone:
(201) 296-4209
------------------------
Questions and requests for assistance may be directed to the Dealer Manager
or the Information Agent at their respective addresses or telephone numbers set
forth below. Additional copies of this Supplement, the Offer to Purchase, the
Letter of Transmittal and all other tender offer materials may be obtained from
the Information Agent or the Dealer Manager as set forth below, and will be
furnished promptly at the Purchaser's expense. You may also contact your broker,
dealer, commercial bank, trust company or other nominee for assistance
concerning the Offer.
The Information Agent for the Offer is:
D.F. KING & CO., INC.
77 Water Street
New York, NY 10005
Bankers and Brokers Call Collect: (212) 269-5550
Call Toll Free: (800) 488-8075
The Dealer Manager for the Offer is:
SALOMON BROTHERS INC
Seven World Trade Center
New York, NY 10048
Call Collect: (212) 783-7292
<PAGE> 1
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED COMMON STOCK PURCHASE RIGHTS)
OF
BIG B, INC.
PURSUANT TO THE OFFER TO PURCHASE DATED SEPTEMBER 10, 1996
AND THE SUPPLEMENT THERETO DATED OCTOBER 29, 1996
BY
RDS ACQUISITION INC.,
a Wholly Owned Subsidiary of
REVCO D.S., INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 9:00 A.M.,
NEW YORK CITY TIME, ON FRIDAY, NOVEMBER 15, 1996, UNLESS THE OFFER IS EXTENDED.
The Depositary for the Offer is:
ChaseMellon Shareholder Services, L.L.C.
<TABLE>
<S> <C>
By Mail By Hand or Overnight Delivery:
ChaseMellon Shareholder Services, L.L.C. ChaseMellon Shareholder Services, L.L.C.
Reorganization Department Reorganization Department
P.O. Box 798 120 Broadway
Midtown Station 13th Floor
New York, NY 10018 New York, NY 10271
</TABLE>
By Fax Transmission:
(201) 329-8936
For Fax Confirmation Only by Telephone:
(201) 296-4209
------------------------
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FAX TRANSMISSION OTHER THAN AS
SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. YOU MUST SIGN THIS LETTER
OF TRANSMITTAL WHERE INDICATED BELOW AND COMPLETE THE SUBSTITUTE FORM W-9
PROVIDED BELOW.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
This revised Letter of Transmittal or the previously circulated original
BLUE Letter of Transmittal is to be completed by securityholders of Big B, Inc.
(the "Company") either if certificates ("Certificates") evidencing Shares (as
defined below) and/or Convertible Debentures (as defined below) are to be
forwarded herewith or if delivery of Shares is to be made by book-entry transfer
to the account of ChaseMellon Shareholder Services, L.L.C. (the "Depositary") at
The Depository Trust Company or Philadelphia Depository Trust Company (each, a
"Book-Entry Transfer Facility" and collectively, the "Book-Entry Transfer
Facilities") pursuant to the book-entry transfer procedures described in the
section entitled "The Tender Offer--Procedures for Tendering Shares" of the
Offer to Purchase (as defined below), as amended and supplemented by the
Supplement (as defined below).
Securityholders whose Certificates are not immediately available or who
cannot deliver their Certificates and all other documents required hereby to the
Depositary prior to the Expiration Date (as defined in the Supplement) or who
cannot complete the procedures for delivery by book-entry transfer on a timely
basis and
<PAGE> 2
who wish to tender their Shares must do so pursuant to the guaranteed delivery
procedures described in the section entitled "The Tender Offer--Procedures for
Tendering Shares" of the Offer to Purchase, as amended and supplemented by the
Supplement. See Instruction 2.
[ ] CHECK HERE IF SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO THE
DEPOSITARY'S ACCOUNT AT ONE OF THE BOOK-ENTRY TRANSFER FACILITIES AND
COMPLETE THE FOLLOWING:
Name of Tendering Institution: ____________________________________________
Check box of Applicable Book-Entry Transfer Facility:
[ ] The Depository Trust Company
[ ] Philadelphia Depository Trust Company
Account Number ____________________________________________________________
Transaction Code Number ___________________________________________________
[ ] CHECK HERE IF SHARES ARE BEING TENDERED PURSUANT TO A NOTICE OF GUARANTEED
DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s): _________________________________________
Date of Execution of Notice of Guaranteed Delivery: ______________________
Name of Institution which Guaranteed Delivery: ___________________________
If Delivered by Book-Entry Transfer, Check Box of Applicable Book-Entry
Transfer Facility:
[ ] The Depository Trust Company
[ ] Philadelphia Depository Trust Company
Account Number ___________________________________________________________
Transaction Code Number __________________________________________________
<PAGE> 3
- --------------------------------------------------------------------------------
DESCRIPTION OF SHARES TENDERED
<TABLE>
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S)
(PLEASE FILL IN, IF BLANK, EXACTLY AS NAME(S) CERTIFICATE(S) AND SHARE(S) TENDERED
APPEAR(S) ON SHARE CERTIFICATE(S)) (ATTACH ADDITIONAL LIST IF NECESSARY)
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL NUMBER
OF SHARES NUMBER OF
CERTIFICATE EVIDENCED BY SHARES
NUMBER(S)(1) CERTIFICATE(S)(1)(2) TENDERED(2)
-----------------------------------------------------
-----------------------------------------------------
-----------------------------------------------------
-----------------------------------------------------
TOTAL SHARES OF COMMON STOCK
------------
<FN>
- --------------------------------------------------------------------------------
(1) Need not be completed by shareholders delivering Shares by book-entry
transfer.
(2) Includes whole Shares to be received upon conversion of Convertible
Debentures if certificates for Convertible Debentures are being
delivered to tender such Shares. Unless otherwise indicated, it will
be assumed that all Shares evidenced by each certificate for Shares
(and all whole Shares to be received upon conversion of Convertible
Debentures evidenced by each certificate for Convertible Debentures)
are being tendered. See Instruction 4.
- --------------------------------------------------------------------------------
</TABLE>
<PAGE> 4
NOTE: SIGNATURES MUST BE PROVIDED BELOW.
PLEASE READ THE INSTRUCTIONS SET FORTH IN THIS
LETTER OF TRANSMITTAL CAREFULLY
Ladies and Gentlemen:
The undersigned hereby tenders to RDS Acquisition Inc., a Delaware
corporation (the "Purchaser") and a wholly owned subsidiary of Revco D.S., Inc.,
a Delaware corporation, the above-described shares of Common Stock, par value
$0.001 per share (the "Common Stock"), of Big B, Inc., an Alabama corporation
(the "Company"), together with an equal number of associated Common Stock
purchase rights (the "Rights") issued pursuant to the Rights Agreement dated as
of September 23, 1996, as amended, between the Company and First National Bank
of Boston, as Rights Agent (the Common Stock, together with the associated
Rights being collectively herein referred to, unless the context otherwise
requires, as the "Shares"), upon the terms and subject to the conditions set
forth in the Purchaser's Offer to Purchase dated September 10, 1996 (the "Offer
to Purchase"), as amended and supplemented, including by the Supplement to the
Offer to Purchase dated October 29, 1996 (the "Supplement"), and in this Letter
of Transmittal (which together with any amendments or supplements hereto or
thereto, collectively constitute the "Offer"), receipt of which is hereby
acknowledged.
Upon the terms of the Offer, subject to, and effective upon, acceptance for
payment of, the Shares tendered herewith in accordance with the terms of the
Offer (including, if the Offer is extended or amended, the terms and conditions
of any such extension or amendment), the undersigned hereby sells, assigns and
transfers to, or upon the order of, the Purchaser all right, title and interest
in and to all the Shares that are being tendered hereby (and any and all other
Shares or other securities or rights issued or issuable in respect thereof on or
after September 10, 1996 (collectively, "Distributions")), and irrevocably
appoints the Depositary the true and lawful agent and attorney-in-fact of the
undersigned to the fullest extent of the undersigned's rights with respect to
such Shares and all Distributions, with full power of substitution (such power
of attorney being deemed to be an irrevocable power coupled with an interest),
to (a) deliver certificates evidencing such Shares and all Distributions, or
transfer ownership of such Shares and all Distributions on the account books
maintained by a Book-Entry Transfer Facility together, in any such case, with
all accompanying evidence of transfer and authenticity to, or upon the order of,
the Purchaser, (b) present such Shares and all Distributions for transfer on the
Company's books and (c) receive all benefits and otherwise exercise all rights
of beneficial ownership of such Shares and all Distributions, all in accordance
with the terms of the Offer.
By executing this Letter of Transmittal, the undersigned irrevocably
appoints Jack A. Staph, Brian P. Carney and Paul N. Harris as attorneys-in-fact
and proxies of the undersigned, each with full power of substitution, to the
full extent of the undersigned's rights with respect to the Shares tendered by
the undersigned and accepted for payment by the Purchaser (and any and all
Distributions). All such attorneys-in-fact and proxies shall be considered
coupled with an interest in the tendered Shares. This appointment will be
effective if, when, and only to the extent that, the Purchaser accepts such
Shares for payment as provided in the Offer to Purchase, as amended and
supplemented by the Supplement. Upon such acceptance for payment, all prior
powers of attorney and proxies given by the undersigned with respect to such
Shares and other securities will, without further action, be revoked, and no
subsequent powers of attorney or proxies may be given. The individuals named
above as attorneys-in-fact and proxies will, with respect to the Shares and
other securities for which the appointment is effective, be empowered to
exercise all voting and other rights of the undersigned as they in their sole
discretion may deem proper at any annual, special, adjourned or postponed
meeting of the Company's shareholders, by written consent or otherwise, and the
Purchaser reserves the right to require that in order for Shares or other
securities to be deemed validly tendered, immediately upon the Purchaser's
acceptance for payment of such Shares, the Purchaser must be able to exercise
full voting rights with respect to such Shares.
If the undersigned is tendering Shares by the delivery of certificates for
the Company's 6.5% Convertible Subordinated Debentures Due 2003 ("Convertible
Debentures"), in addition to the matters described above, the undersigned hereby
irrevocably appoints the Depositary the true and lawful agent and
attorney-in-fact of the undersigned, with full power of substitution (such power
of attorney being deemed to be an irrevocable
<PAGE> 5
power coupled with an interest), to the full extent of the undersigned's rights
with respect to such Convertible Debentures, (a) to convert Convertible
Debentures represented by such certificates into the Shares being tendered, (b)
to cause the transfer of record ownership of such Convertible Debentures into
the name of the undersigned or the Depositary if deemed by the Depositary or the
Purchaser to be necessary or appropriate to convert such Convertible Debentures
into the Shares being tendered and (c) to receive the Shares issuable upon
conversion of such Convertible Debentures and any cash in lieu of fractional
Shares payable upon such conversion. This appointment will be effective if, when
and only to the extent that, the Purchaser accepts such Shares for payment
pursuant to the Offer.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Shares
tendered hereby and all Distributions (including Shares and Distributions to be
received upon conversion of Convertible Debentures on behalf of the undersigned)
and that when the same are accepted for payment by the Purchaser, the Purchaser
will acquire good, marketable and unencumbered title thereto and to all
Distributions, free and clear of all liens, restrictions, charges and
encumbrances, and that none of such Shares and Distributions will be subject to
any adverse claim. The undersigned, upon request, shall execute and deliver all
additional documents deemed by the Depositary or the Purchaser to be necessary
or desirable to complete the sale, assignment and transfer of the Shares
tendered hereby and all Distributions. In addition, the undersigned shall remit
and transfer promptly to the Depositary for the account of the Purchaser all
Distributions in respect of the Shares tendered hereby, accompanied by
appropriate documentation of transfer, and, pending such remittance and transfer
or appropriate assurance thereof, the Purchaser shall be entitled to all rights
and privileges as owner of each such Distribution and may withhold the entire
purchase price of the Shares tendered hereby or deduct from such purchase price,
the amount or value of such Distribution as determined by the Purchaser in its
sole discretion.
If the undersigned is tendering Shares by the delivery of Certificates for
Convertible Debentures, the undersigned, upon request, shall execute and deliver
all additional documents deemed by the Depositary or the Purchaser to be
necessary or desirable to effectuate the conversion of such Convertible
Debentures into the Shares tendered hereby, including, without limitation, such
documents as shall be necessary to effect the transfer of record ownership of
such Convertible Debentures into the name of the undersigned or the Depositary.
No authority herein conferred or agreed to be conferred shall be affected
by, and all such authority shall survive, the death or incapacity of the
undersigned. All obligations of the undersigned hereunder shall be binding upon
the heirs, personal representatives, successors and assigns of the undersigned.
Except as stated in the Offer to Purchase or the Supplement this tender is
irrevocable.
The undersigned understands that tenders of Shares pursuant to any one of
the procedures described in the section entitled "The Tender Offer--Procedures
for Tendering Shares" of the Offer to Purchase, and in the instructions hereto
will constitute the undersigned's acceptance of the terms and conditions of the
Offer. The Purchaser's acceptance for payment of Shares tendered pursuant to the
Offer will constitute a binding agreement between the undersigned and the
Purchaser upon the terms and subject to the conditions of the Offer. The
undersigned recognizes that, under certain circumstances set forth in the Offer
to Purchase, as amended and supplemented by the Supplement, the Purchaser may
not be required to accept for payment any of the Shares tendered hereby.
Unless otherwise indicated herein in the box entitled "Special Payment
Instructions", please issue the check for the purchase price of all Shares
purchased (and if the undersigned is tendering Shares by the delivery of
Certificates for Convertible Debentures, the check for any cash in lieu of
fractional Shares received upon conversion of such Convertible Debentures), and
return all Certificates evidencing Shares not tendered or not purchased (and
Certificates evidencing Convertible Debentures convertible into Shares not
tendered or not purchased), in the name(s) of the registered holder(s) appearing
above under "Description of Shares Tendered". Similarly, unless otherwise
indicated in the box entitled "Special Delivery Instructions", please mail the
check for the purchase price of all Shares purchased (and if the undersigned is
tendering Shares by the delivery of Certificates for Convertible Debentures, the
check for any cash in lieu of fractional Shares received
<PAGE> 6
upon conversion of such Convertible Debentures) and return all certificates
evidencing Shares not tendered or not purchased (and Certificates evidencing
Convertible Debentures convertible into Shares not tendered or not purchased)
(and accompanying documents, as appropriate) to the address(es) of the
registered holder(s) appearing above under "Description of Shares Tendered". In
the event that the boxes entitled "Special Payment Instructions" and "Special
Delivery Instructions" are both completed, please issue the check for the
purchase price of all Shares purchased (and if the undersigned is tendering
Shares by the delivery of Certificates for Convertible Debentures, the check for
any cash in lieu of fractional Shares received upon conversion of such
Convertible Debentures) and return all Certificates evidencing Shares not
tendered or not purchased (and Certificates evidencing Convertible Debentures
convertible into Shares not tendered or not purchased) in the name(s) of, and
mail such check(s) and certificates to, the person(s) so indicated. Unless
otherwise indicated herein in the box entitled "Special Payment Instructions",
please credit any Shares tendered hereby and delivered by book-entry transfer,
but which are not purchased, by crediting the account at the Book-Entry Transfer
Facility designated above. The undersigned recognizes that the Purchaser has no
obligation, pursuant to the Special Payment Instructions, to transfer any Shares
(or convert or transfer any Convertible Debentures) from the name of the
registered holder(s) thereof if the Purchaser does not accept for payment any of
the Shares tendered hereby.
<PAGE> 7
[ ] CHECK HERE IF ANY OF THE CERTIFICATES REPRESENTING SHARES (OR CONVERTIBLE
DEBENTURES) THAT YOU OWN HAVE BEEN LOST OR DESTROYED AND SEE INSTRUCTION 10.
Number of Shares (or number of Shares to be received upon conversion of
Convertible Debentures) represented by the lost or destroyed
certificates:
-------------------
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if the check for the purchase price of the Shares
purchased (and if the undersigned is tendering Shares by the delivery of
Certificates for Convertible Debentures, the check for any cash in lieu of
fractional Shares received upon conversion of such Convertible Debentures) or
Certificates evidencing the Shares not tendered or not purchased (or
Certificates evidencing Convertible Debentures convertible into the Shares not
tendered or not purchased) are to be issued in the name of someone other than
the undersigned, or if the Shares tendered hereby and delivered by book-entry
transfer which are not purchased are to be returned by credit to an account at
one of the Book-Entry Transfer Facilities other than that designated above.
Issue: [ ] Check [ ] Certificate(s) to:
Name
--------------------------------------------------
(Please Print)
Address
- ------------------------------------------------------
(Include Zip Code)
- ------------------------------------------------------
(Taxpayer Identification or Social Security Number)
[ ] Credit Shares delivered by book-entry transfer and not purchased to the
account set forth below:
Check appropriate box:
[ ] The Depository Trust Company
[ ] Philadelphia Depository Trust Company
Account Number
----------------------------------------
SIGN HERE
(ALSO COMPLETE SUBSTITUTE FORM W-9 BELOW)
----------------------------------------
----------------------------------------
(SIGNATURE(S) OF HOLDER(S))
Dated: _________________ , 1996
(MUST BE SIGNED BY REGISTERED HOLDER(S) AS NAME(S) APPEAR(S) ON THE
CERTIFICATE(S) OR ON A SECURITY POSITION LISTING OR BY PERSON(S) AUTHORIZED TO
BECOME REGISTERED HOLDER(S) BY CERTIFICATES AND DOCUMENTS TRANSMITTED HEREWITH.
IF SIGNATURE IS BY TRUSTEES, EXECUTORS, ADMINISTRATORS, GUARDIANS,
ATTORNEYS-IN-FACT, OFFICERS OF CORPORATIONS OR OTHERS ACTING IN A FIDUCIARY OR
REPRESENTATIVE CAPACITY, PLEASE PROVIDE THE FOLLOWING INFORMATION. SEE
INSTRUCTION 5.)
Name(s)
--------------------------------------------------------
--------------------------------------------------------
(PLEASE PRINT)
Capacity (Full title)
------------------------------------------
Address
--------------------------------------------------------
--------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone Number ( )
---- --------------------------
Taxpayer Identification or Social Security
Number
---------------------------------------------------------
(SEE SUBSTITUTE FORM W-9)
GUARANTEE OF SIGNATURE(S)
(IF REQUIRED--SEE INSTRUCTIONS 1 AND 5)
Authorized Signature
-------------------------------------------
Name
-----------------------------------------------------------
(PLEASE PRINT)
Name of Firm
---------------------------------------------------
Address
--------------------------------------------------------
--------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone Number ( )
---- --------------------------
Dated: _________________ , 1996
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if the check for the purchase price of Shares
purchased (and if the undersigned is tendering Shares by the delivery of
Certificates for Convertible Debentures, the check for any cash in lieu of
fractional Shares received upon conversion of such Convertible Debentures) or
Certificates evidencing the Shares not tendered or not purchased (or
Certificates evidencing Convertible Debentures convertible into the Shares not
tendered or not purchased) are to be mailed to someone other than the
undersigned, or to the undersigned at an address other than that shown under
"Description of Shares Tendered".
Mail [ ] Check [ ] Certificate(s) to:
Name
----------------------------------------------------------------------------
(Please Print)
Address
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Include Zip Code)
- --------------------------------------------------------------------------------
(Taxpayer Identification or Social Security Number)
<PAGE> 8
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. No signature guarantee is required on this
Letter of Transmittal if (a) this Letter of Transmittal is signed by the
registered holder(s) (which term, for purposes of this document, includes any
participant in any of the Book-Entry Transfer Facilities' systems whose name
appears on a security position listing as the owner of Shares) of any of the
Shares tendered herewith and such registered holder(s) has not completed either
the box entitled "Special Payment Instructions" or the box entitled "Special
Delivery Instructions" above or (b) such Shares are tendered for the account of
a financial institution (including most commercial banks, savings and loan
associations and brokerage houses) that is a participant in the Security
Transfer Agents Medallion Program, the New York Stock Exchange Medallion
Signature Guarantee Program or the Stock Exchange Medallion Program (an
"Eligible Institution"). In all other cases, all signatures on this Letter of
Transmittal must be guaranteed by an Eligible Institution. See Instruction 5. If
Certificates evidencing Shares or Convertible Debentures are registered in the
name of a person other than the signer of this Letter of Transmittal, or if
payment is to be made or Certificates relating to tendered Shares not accepted
for payment are to be returned to a person other than the registered holder of
the Certificates surrendered, the tendered Certificate must be endorsed or
accompanied by appropriate stock powers, in either case signed exactly as the
name or name(s) of the registered holders or owners appear on the Certificate,
with the signatures on such Certificate or stock powers guaranteed as aforesaid.
See Instruction 5.
2. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES. This Letter of
Transmittal is to be used either if Certificates evidencing Shares or
Convertible Debentures are to be forwarded herewith or if Shares are to be
delivered by book-entry transfer pursuant to the procedure set forth in the
section entitled "The Tender Offer--Procedures for Tendering Shares" of the
Offer to Purchase, as amended and supplemented by the Supplement. Certificates
evidencing all tendered Shares (or Certificates evidencing Convertible
Debentures convertible into all tendered Shares), or confirmation of a
book-entry transfer of such Shares (a "Book-Entry Confirmation"), if such
procedure is available, into the Depositary's account at one of the Book-Entry
Transfer Facilities pursuant to the procedures set forth in the section entitled
"The Tender Offer--Procedures for Tendering Shares" of the Offer to Purchase, as
amended and supplemented by the Supplement, together with a properly completed
and duly executed Letter of Transmittal (or copy thereof) with any required
signature guarantees (or, in the case of a book-entry transfer, an Agent's
Message, as defined below) and any other required documents, must be received by
the Depositary at one of its addresses set forth herein prior to the Expiration
Date. If Certificates evidencing Shares or Convertible Debentures are forwarded
to the Depositary in multiple deliveries, a properly completed and duly executed
Letter of Transmittal must accompany each such delivery.
Securityholders whose Certificates are not immediately available, who
cannot deliver their Certificates and all other required documents to the
Depositary prior to the Expiration Date or who cannot complete the procedures
for delivery by book-entry transfer on a timely basis may tender Shares pursuant
to the guaranteed delivery procedures described in the section entitled "The
Tender Offer--Procedures for Tendering Shares" of the Offer to Purchase, as
amended and supplemented by the Supplement. Pursuant to such procedures: (i)
such tender must be made by or through an Eligible Institution; (ii) a properly
completed and duly executed Notice of Guaranteed Delivery, substantially in the
form provided by the Purchaser herewith, must be received by the Depositary
prior to the Expiration Date; and (iii) the Certificates evidencing all tendered
Shares (or Certificates evidencing Convertible Debentures convertible into all
tendered Shares), in proper form for transfer, or a confirmation of a book-entry
transfer of such Shares, if such procedures are available, into the Depositary's
account at one of the Book-Entry Transfer Facilities, together with a properly
completed and duly executed Letter of Transmittal (or copy thereof) with any
required signature guarantees (or, in the case of a book-entry transfer, an
Agent's Message), and any other required documents, must be received by the
Depositary within three trading days after the date of execution of the Notice
of Guaranteed Delivery, all as described in the section entitled "The Tender
Offer--Procedures for Tendering Shares" of the Offer to Purchase, as amended and
supplemented by the Supplement. A "trading day" is any day on which the Nasdaq
National Market is open for business.
<PAGE> 9
The term "Agent's Message" means a message, transmitted by a Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that such Book-Entry Transfer Facility has
received an express acknowledgment from the participant in such Book-Entry
Facility tendering the Shares that such participant has received and agrees to
be bound by the terms of this Letter of Transmittal and that the Purchaser may
enforce such agreement against the participant.
The signatures on this Letter of Transmittal cover Shares tendered hereby.
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, CERTIFICATES
EVIDENCING SHARES OR CONVERTIBLE DEBENTURES AND ALL OTHER REQUIRED DOCUMENTS,
INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER FACILITY, IS AT THE OPTION
AND RISK OF THE TENDERING SECURITYHOLDER, AND THE DELIVERY WILL BE DEEMED MADE
ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY MAIL,
REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED.
IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
No alternative, conditional or contingent tenders will be accepted and no
fractional Shares will be purchased. By execution of this Letter of Transmittal
(or a copy hereof), all tendering securityholders waive any right to receive any
notice of the acceptance of their Shares for payment.
3. INADEQUATE SPACE. If the space provided herein under "Description of
Shares Tendered" is inadequate, the Certificate numbers, the number of Shares
evidenced by such Certificates (or the number of Shares to be received upon
conversion of Convertible Debentures evidenced by such Certificates) and the
number of Shares tendered should be listed on a separate schedule and attached
hereto.
4. PARTIAL TENDERS. (Not applicable to shareholders who tender by
book-entry transfer.) If fewer than all the Shares evidenced by any Certificate
(or if fewer than all the whole Shares to be received upon conversion of
Convertible Debentures evidenced by any Certificate) delivered to the Depositary
herewith are to be tendered hereby, fill in the number of Shares that are to be
tendered in the box entitled "Number of Shares Tendered". In such cases, new
Certificate(s) evidencing the remainder of the Shares (or Debentures) that were
evidenced by the Certificates delivered to the Depositary herewith will be sent
to the person(s) signing this Letter of Transmittal, unless otherwise provided
in the box entitled "Special Delivery Instructions", as soon as practicable
after the expiration or termination of the Offer. All Shares evidenced by
Certificates (and all whole Shares to be received upon conversion of Convertible
Debentures evidenced by Certificates) delivered to the Depositary will be deemed
to have been tendered unless otherwise indicated.
5. SIGNATURES ON LETTER OF TRANSMITTAL, STOCK POWERS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder(s) of the Shares
tendered hereby (or the Convertible Debentures that are convertible into the
Shares tendered hereby), the signature(s) must correspond with the name(s) as
written on the face of the Certificate(s) without any alteration, enlargement or
change whatsoever.
If any Share tendered hereby (or any Convertible Debenture that is
convertible into any Share tendered hereby) is owned of record by two or more
persons, all such persons must sign this Letter of Transmittal.
If any of the Shares tendered hereby (or any Convertible Debenture that is
convertible into any Share tendered hereby) are registered in the names of
different holders, it will be necessary to complete, sign and submit as many
separate Letters of Transmittal as there are different registrations of such
Shares.
If this Letter of Transmittal is signed by the registered holder(s) of the
Shares tendered hereby (or any Convertible Debentures that are convertible into
any Shares tendered hereby), no endorsements of Certificates or separate stock
powers are required, unless payment is to be made to, or Certificates evidencing
Shares (or Convertible Debentures that are convertible into Shares) not tendered
or not purchased are to be issued in the name of a person other than the
registered holder(s), in which case the Certificate(s) evidencing the Shares
tendered hereby (or the Convertible Debentures that are convertible into the
Shares tendered hereby) must be endorsed or accompanied by appropriate stock
powers, in either case signed exactly as the name(s) of the registered holder(s)
appears(s) on such Certificate(s). Signatures on such Certificate(s) and stock
powers must be guaranteed by an Eligible Institution.
<PAGE> 10
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Shares tendered hereby (or any Convertible
Debentures that are convertible into Shares tendered hereby), the Certificate(s)
evidencing such Shares (or Convertible Debentures) must be endorsed or
accompanied by appropriate stock powers, in either case signed exactly as the
name(s) of the registered holder(s) appear(s) on such Certificate(s). Signatures
on such Certificate(s) and stock powers must be guaranteed by an Eligible
Institution.
If this Letter of Transmittal or any Certificate or stock power is signed
by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
such person should so indicate when signing, and proper evidence satisfactory to
the Purchaser of such person's authority so to act must be submitted.
6. STOCK TRANSFER TAXES. Except as provided in this Instruction 6, the
Purchaser will pay all stock transfer taxes with respect to the transfer and
sale of Shares to it or its order pursuant to the Offer. If, however, payment of
the purchase price of any Shares purchased is to be made to, or if Certificates
evidencing Shares not tendered or not purchased (or Certificates evidencing
Convertible Debentures convertible into Shares not tendered or not purchased)
are to be issued in the name of, a person other than the registered holder(s),
the amount of any transfer taxes (whether imposed on the registered owner(s),
such other person or otherwise) payable on account of the transfer to such other
person will be deducted from the purchase price of such Shares purchased, unless
satisfactory evidence to the Purchaser of the payment of such taxes or exemption
therefrom, is submitted.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE CERTIFICATES EVIDENCING THE SHARES
TENDERED HEREBY (OR THE CERTIFICATES EVIDENCING CONVERTIBLE DEBENTURES
CONVERTIBLE INTO THE SHARES TENDERED HEREBY).
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check for the purchase
price of any Shares tendered hereby (or if Shares are tendered by the delivery
of Certificates for Convertible Debentures, a check for any cash in lieu of
fractional Shares received upon conversion of such Convertible Debentures) is to
be issued, or Certificate(s) evidencing Shares not tendered or not purchased (or
Convertible Debentures convertible into Shares not tendered or not purchased)
are to be issued, in the name of a person other than the person(s) signing this
Letter of Transmittal or if any such check or any such Certificate is to be sent
to someone other than the person(s) signing this Letter of Transmittal or to the
person(s) signing this Letter of Transmittal but to an address other than that
shown above, the appropriate boxes on this Letter of Transmittal must be
completed. Shareholders delivering Shares tendered hereby by book-entry transfer
may request that Shares not purchased be credited to such account maintained at
a Book-Entry Transfer Facility as such shareholder may designate in the box
entitled "Special Payment Instructions" on the reverse hereof. If no such
instructions are given, all such Shares not purchased will be returned by
crediting the account at the Book-Entry Transfer Facility designated on the
reverse hereof as the account from which such Shares were delivered.
8. 31% BACKUP WITHHOLDING. In order to avoid backup withholding of Federal
income tax on payments of cash pursuant to the Offer, a securityholder tendering
Shares in the Offer must, unless an exemption applies, provide the Depositary
with such holder's correct taxpayer identification number (i.e., social security
number or employer identification number) ("TIN") on the Substitute Form W-9
below in this Letter of Transmittal and certify under penalties of perjury that
such TIN is correct and that such holder is not subject to backup withholding.
If a holder does not provide such holder's correct TIN or fails to provide the
certifications described above, the Internal Revenue Service (the "IRS") may
impose a $50 penalty on such holder and payment of cash to such holder pursuant
to the Offer may be subject to backup withholding of 31%.
Backup withholding is not an additional income tax. Rather, the amount of
the backup withholding may 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 may be obtained by the holder upon filing an income tax return.
<PAGE> 11
The securityholder is required to give the Depositary the TIN of the record
holder of the Shares (or in the case of Shares to be received upon conversion of
Convertible Debentures, the record holder of the Convertible Debentures). If the
Shares (or Convertible Debentures) are held in more than one name or are not in
the name of the actual owner, consult the enclosed "Guidelines for Certification
of Taxpayer Identification Number on Substitute Form W-9" for additional
guidance on which number to report.
The box in Part 3 of Substitute Form W-9 may be checked if the tendering
securityholder has not been issued a TIN and has applied for a TIN or intends to
apply for a TIN in the near future. If the box in Part 3 is checked, the
securityholder or other payee must also complete the Certificate of Awaiting
Taxpayer Identification Number below in order to avoid backup withholding.
Notwithstanding that the box in Part 3 is checked and the Certificate of
Awaiting Taxpayer Identification Number is completed, the Depositary will
withhold 31% on all payments made prior to the time a properly certified TIN is
provided to the Depositary. However, such amounts will be refunded to such
securityholder if a TIN is provided to the Depositary within 60 days.
Certain securityholders (including, among others, all corporations and
certain foreign individuals and entities) are not subject to backup withholding.
Noncorporate foreign securityholders must complete and sign a Form W-8,
Certificate of Foreign Status, a copy of which may be obtained from the
Depositary, in order to avoid backup withholding. See the enclosed "Guidelines
for Certification of Taxpayer Identification Number on Substitute Form W-9" for
more instructions.
9. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests for
assistance may be directed to Salomon Brothers Inc, the Dealer Manager, or to
D.F. King & Co., Inc., the Information Agent, at their respective addresses and
telephone numbers set forth below. Additional copies of the Offer to Purchase,
the Supplement, the Letter of Transmittal, the Notice of Guaranteed Delivery and
other related materials may be obtained from the Information Agent or the Dealer
Manager or from brokers, dealers, commercial banks and trust companies.
10. LOST, DESTROYED OR STOLEN CERTIFICATES. If any Certificate(s)
representing Shares (or Convertible Debentures) has been lost, destroyed or
stolen, the securityholder should promptly notify the Depositary by checking the
box immediately preceding the special payment/special delivery instructions and
indicating the number of Shares (or the number of Shares to be received upon
conversion of any Convertible Debentures) so lost, destroyed or stolen. The
securityholder will then be instructed by the Depositary as to the steps that
must be taken in order to replace the certificate. This Letter of Transmittal
and related documents cannot be processed until the procedures for replacing
lost, destroyed or stolen certificates have been followed.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A COPY HEREOF), PROPERLY
COMPLETED AND DULY EXECUTED, WITH ANY REQUIRED SIGNATURE GUARANTEES (TOGETHER
WITH CERTIFICATES FOR SHARES OR CONVERTIBLE DEBENTURES OR CONFIRMATION OF
BOOK-ENTRY TRANSFER), AND ALL OTHER REQUIRED DOCUMENTS OR A PROPERLY COMPLETED
AND DULY EXECUTED NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE
DEPOSITARY PRIOR TO THE EXPIRATION DATE (AS DEFINED IN THE SUPPLEMENT).
<PAGE> 12
PAYER'S NAME: CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
<TABLE>
<S> <C> <C>
- --------------------------------------------------------------------------------
SUBSTITUTE PART 1-- PLEASE PROVIDE YOUR TIN IN THE BOX AT RIGHT AND CERTIFY _______________________
BY SIGNING AND DATING BELOW. Social Security
FORM W-9 Number(s)
DEPARTMENT OF THE TREASURY OR
INTERNAL REVENUE SERVICE _______________________
PAYER'S REQUEST Employer Identification
FOR TAXPAYER Number(s)
IDENTIFICATION NUMBER ----------------------------------------------------------------
(TIN) PART 2--Certification--Under penalty of perjury, I certify that: PART 3--
(1) the number shown on this form is my correct Taxpayer Awaiting TIN
Identification Number (or I am waiting for a number to be [ ]
issued to me) and
(2) I am not subject to backup withholding because (a) I am
exempt from backup withholding or (b) I have not been
notified by the Internal Revenue Service (the "IRS") that I
am subject to backup withholding as a result of a failure to
report all interest or dividends or (c) the IRS has notified
me that I am no longer subject to backup withholding.
---------------------------
PART 4--
Exempt
[ ]
----------------------------------------------------------------------------------------------
CERTIFICATION INSTRUCTIONS--You must cross out item (2) in Part 2 above if you have been
notified by the IRS that you are subject to backup withholding because of under reporting
interest or dividends on your tax returns. However, if after being notified by the IRS that
you were subject to backup withholding you received another notification from the IRS stating
that you are no longer subject to backup withholding, do not cross out such item (2). If you
are exempt from backup withholding, check the box in Part 4 above.
</TABLE>
- --------------------------------------------------------------------------------
Signature ____________________________________ Date __________ , 1996
- --------------------------------------------------------------------------------
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN
PART 3 OF SUBSTITUTE FORM W-9.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalty of perjury that a taxpayer identification number
has not been issued to me, and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or (b)
I intend to mail or deliver an application in the near future. I understand
that, if I do not provide a taxpayer identification number to the Depositary,
31% of all reportable payments made to me will be withheld, but will be refunded
if I provide a certified taxpayer identification number within 60 days.
<TABLE>
<S> <C>
________________________________ _________________, 1996
Signature Date
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW
THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL INFORMATION.
<PAGE> 13
The Information Agent for the Offer is:
D.F. KING & CO., INC.
77 Water Street
New York, NY 10005
Bankers and Brokers Call Collect: (212) 269-5550
Call Toll Free: (800) 488-8075
The Dealer Manager for the Offer is:
SALOMON BROTHERS INC
Seven World Trade Center
New York, NY 10048
Call Collect: (212) 783-5141
<PAGE> 1
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED COMMON STOCK PURCHASE RIGHTS)
OF
BIG B, INC.
- --------------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 9:00, A.M., NEW YORK CITY TIME,
ON FRIDAY, NOVEMBER 15, 1996, UNLESS THE OFFER IS EXTENDED.
- --------------------------------------------------------------------------------
As set forth in the section entitled "The Tender Offer--Procedures for
Tendering Shares" of the Offer to Purchase (as defined below), as amended and
supplemented by the Supplement (as defined below), and in Instruction 2 of the
related Letter of Transmittal, this Notice of Guaranteed Delivery, or one
substantially in the form hereof, must be used to accept the Offer if (i)
certificates evidencing shares of Common Stock, par value $0.001 per share (the
"Common Stock"), of Big B, Inc., an Alabama corporation (the "Company"),
together with the associated Common Stock purchase rights (the "Rights") issued
pursuant to the Rights Agreement dated as of September 23, 1996, as amended,
between the Company and First National Bank of Boston, as Rights Agent (the
Common Stock, together with the associated Rights being collectively herein
referred to, unless the context otherwise requires, as the "Shares") (or
certificates evidencing the Company's 6.5% Convertible Subordinated Debentures
Due 2003 ("Convertible Debentures") that are convertible into Shares to be
tendered), are not immediately available, (ii) time will not permit all required
documents to reach ChaseMellon Shareholder Services, L.L.C. (the "Depositary"),
prior to the Expiration Date (as defined in the Supplement) or (iii) the
procedures for book-entry transfer cannot be completed on a timely basis. This
Notice of Guaranteed Delivery may be delivered by hand or transmitted by fax or
mail to the Depositary and must include a guarantee by an Eligible Institution
(as defined below). See the section entitled "The Tender Offer--Procedures for
Tendering Shares" of the Offer to Purchase, as amended and supplemented by the
Supplement.
The Depositary for the Offer is:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
<TABLE>
<S> <C>
By Mail By Hand or Overnight Delivery:
ChaseMellon Shareholder Services, L.L.C. ChaseMellon Shareholder Services, L.L.C.
Reorganization Department Reorganization Department
P.O. Box 798 120 Broadway
Midtown Station 13th Floor
New York, NY 10018 New York, NY 10271
</TABLE>
By Fax Transmission:
(201) 329-8936
For Fax Confirmation Only by Telephone:
(201) 296-4209
------------------------
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER
THAN AS SET FORTH ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA
FAX TRANSMISSION OTHER THAN AS SET FORTH ABOVE,
DOES NOT CONSTITUTE A VALID DELIVERY.
This form is not to be used to guarantee signatures. If a signature on a
Letter of Transmittal is required to be guaranteed by an Eligible Institution
under the instructions thereto, such signature guarantee must appear in the
applicable space provided in the signature box on the Letter of Transmittal.
<PAGE> 2
LADIES AND GENTLEMEN:
The undersigned hereby tenders to RDS Acquisition Inc., a Delaware
corporation (the "Purchaser"), upon the terms and subject to the conditions set
forth in the Offer to Purchase dated September 10, 1996 (the "Offer to
Purchase"), as amended and supplemented, including by the Supplement to the
Offer to Purchase dated October 29, 1996 (the "Supplement"), and the related
Letter of Transmittal (which, together with any supplements or amendments
thereto, collectively constitute the "Offer"), receipt of which is hereby
acknowledged, the number of Shares specified below pursuant to the guaranteed
delivery procedures set forth in the section entitled "The Tender
Offer--Procedures for Tendering Shares" of the Offer to Purchase, as amended and
supplemented by the Supplement.
<TABLE>
<S> <C>
Number of Shares:_______________________________ Dated: ___________________________________, 1996
Certificate Nos. (if available): Name(s) of Record Holder(s):
________________________________________________ ________________________________________________
________________________________________________
(Check ONE box if Shares will be tendered by (Please Print)
book-entry transfer)
[ ] The Depository Trust Company Address(es):____________________________________
[ ] Philadelphia Depository Trust Company ________________________________________________
Zip Code
Account Number:_________________________________
Area Code and Tel. No.:_________________________
Signature(s):___________________________________
________________________________________________
</TABLE>
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEES)
The undersigned, a participant in the Security Transfer Agents Medallion
Program, the New York Stock Exchange Medallion Signature Program or the Stock
Exchange Medallion Program (each, an "Eligible Institution"), hereby guarantees
delivery to the Depositary, at one of its addresses set forth above, of
certificates evidencing the Shares tendered hereby in proper form for transfer
(or certificates evidencing Convertible Debentures that are convertible into the
Shares tendered hereby in proper form for conversion), or confirmation of
book-entry transfer of such Shares into the Depositary's accounts at The
Depository Trust Company or Philadelphia Depository Trust Company, in each case
with delivery of a properly completed and duly executed Letter of Transmittal
(or copy thereof) with any required signature guarantees, or an Agent's Message
(as defined in the Offer to Purchase), and any other required documents within
three trading days after the date hereof. A "trading day" is any day on which
the Nasdaq National Market is open for business.
The Eligible Institution that completes this form must communicate the
guarantee to the Depositary and must deliver the Letter of Transmittal (or, in
the case of a book-entry transfer, an Agent's Message) and certificates for
Shares (or Convertible Debentures) to the Depositary within the time period
shown herein. Failure to do so could result in a financial loss to such Eligible
Institution.
<TABLE>
<S> <C>
Name of Firm:___________________________________ ___________________________________________
Address Authorized Signature
________________________________________________ Name_______________________________________
Zip Code Please Type or Print
Area Code and Title:_____________________________________
Telephone Number:_______________________________ Dated:_____________________________________
</TABLE>
NOTE: DO NOT SEND CERTIFICATES FOR SHARES (OR CONVERTIBLE DEBENTURES) WITH THIS
NOTICE. CERTIFICATES FOR SHARES (OR CONVERTIBLE DEBENTURES) SHOULD BE SENT
WITH YOUR LETTER OF TRANSMITTAL.
<PAGE> 1
------------------------------
SALOMON BROTHERS INC
------------------------------
SUPPLEMENT TO THE OFFER TO PURCHASE
DATED SEPTEMBER 10, 1996
RDS ACQUISITION INC.,
a Wholly Owned Subsidiary of
REVCO D.S., INC.,
Has Increased the Price of its Offer to Purchase for Cash
All Outstanding Shares of Common Stock
(Including the Associated Common Stock Purchase Rights)
of
BIG B, INC.
TO
$17.25 NET PER SHARE
- --------------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 9:00 A.M., NEW YORK CITY TIME,
ON FRIDAY, NOVEMBER 15, 1996, UNLESS THE OFFER IS EXTENDED.
- --------------------------------------------------------------------------------
October 29, 1996
To Brokers, Dealers, Commercial Banks,
Trust Companies and other Nominees:
We have been appointed by RDS Acquisition Inc., a Delaware corporation (the
"Purchaser") and a wholly owned subsidiary of Revco D.S., Inc., a Delaware
corporation, to act as the Dealer Manager in connection with its offer to
purchase all outstanding shares of Common Stock, par value $0.001 per share (the
"Common Stock"), of Big B, Inc., an Alabama corporation (the "Company"),
together with the associated Common Stock purchase rights (the "Rights") issued
pursuant to the Rights Agreement dated as of September 23, 1996, as amended,
between the Company and First National Bank of Boston, as Rights Agent (the
Common Stock, together with the associated Rights being collectively herein
referred to, unless the context otherwise requires, as the "Shares"), at a price
of $17.25 per Share, net to the seller in cash, without interest thereon, upon
the terms and subject to the conditions set forth in the Purchaser's Offer to
Purchase dated September 10, 1996 (the "Offer to Purchase"), as amended and
supplemented, including by the Supplement to the Offer to Purchase dated October
29, 1996 (the "Supplement"), and the related Letter of Transmittal (which,
together with any supplements or amendments thereto, collectively constitute the
"Offer").
Please furnish copies of the enclosed materials to those of your clients
for whose accounts you hold Shares or 6.5% Convertible Subordinated Debentures
Due 2003 of the Company ("Convertible Debentures") registered in your name or in
the name of your nominees.
Enclosed herewith are copies of the following documents:
1. The Supplement dated October 29, 1996;
2. The revised PINK Letter of Transmittal to be used by
securityholders of the Company in accepting the Offer;
<PAGE> 2
3. The revised BLUE Notice of Guaranteed Delivery to be used to accept
the Offer if the certificates evidencing such Shares (or certificates
evidencing the Convertible Debentures that are convertible into Shares to
be tendered) have not yet been issued, are not immediately available or
time will not permit all required documents to reach ChaseMellon
Shareholder Services, L.L.C. (the "Depositary") prior to the Expiration
Date (as defined in the Supplement) or the procedure for book-entry
transfer cannot be completed on a timely basis;
4. A letter which may be sent to your clients for whose accounts you
hold Shares or Convertible Debentures registered in your name or in the
name of your nominees, with space provided for obtaining such clients'
instructions with regard to the Offer;
5. The Letter to Shareholders of the Company from the Chairman and
Chief Executive Officer of the Company accompanied by the Company's amended
Solicitation/Recommendation Statement on Schedule 14D-9; and
6. A return envelope addressed to the Depositary.
Upon the terms and subject to the conditions of the Offer, the Purchaser
will accept for payment and pay for all Shares validly tendered prior to the
Expiration Date and not theretofore withdrawn in accordance with the provisions
set forth in Section 3 of the Offer to Purchase. Payment for Shares accepted for
payment pursuant to the Offer will in all cases be made only after timely
receipt by the Depositary of (a) the certificates for Shares (or in the case of
Shares being tendered by the delivery of certificates evidencing the Convertible
Debentures as described in the Offer to Purchase, certificates for such
Convertible Debentures) or timely confirmation of a book-entry transfer of such
Shares, if such procedure is available, into the Depositary's accounts at The
Depository Trust Company or Philadelphia Depository Trust Company pursuant to
the procedures set forth in the Offer to Purchase, (b) the Letter of Transmittal
(or copy thereof), properly completed and duly executed, or an Agent's Message
(as defined in the Offer to Purchase) and (c) any other required documents.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE THAT NUMBER OF SHARES
THAT WOULD REPRESENT AT LEAST A MAJORITY OF ALL OUTSTANDING SHARES ON A FULLY
DILUTED BASIS ON THE DATE OF PURCHASE.
PLEASE NOTE THAT THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 9:00 A.M.,
NEW YORK CITY TIME, ON FRIDAY, NOVEMBER 15, 1996, UNLESS THE OFFER IS EXTENDED.
WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE.
The Purchaser will not pay for fees or commissions to any broker or dealer
or other person (other than to the Dealer Manager and the Information Agent) for
soliciting tenders of Shares pursuant to the Offer. You will be reimbursed upon
request for customary mailing and handling expenses incurred by you in
forwarding the enclosed materials to your customers.
The Purchaser will pay any stock transfer taxes incident to the transfer to
it of validly tendered Shares, except as otherwise provided in Instruction 6 of
the Letter of Transmittal.
In order to take advantage of the Offer, a duly executed and properly
completed Letter of Transmittal (or copy thereof), with any required signature
guarantees and any other required documents, should be sent to the Depositary,
and certificates evidencing the tendered Shares (or in the case of holders of
Convertible Debentures, certificates for the Convertible Debentures convertible
into the tendered Shares) should be delivered or such Shares should be tendered
by book-entry transfer, all in accordance with the Offer to Purchase, the
Supplement and the Instructions set forth in the Letter of Transmittal.
If securityholders wish to tender Shares, but such securityholders are
unable to forward their certificates or other required documents prior to the
Expiration Date, a tender may be effected by
<PAGE> 3
following the guaranteed delivery procedures specified in the section entitled
"The Tender Offer--Procedures for Tendering Shares" of the Offer to Purchase.
Any inquiries you may have with respect to the Offer should be addressed to
Salomon Brothers Inc, the Dealer Manager, or D.F. King & Co., Inc., the
Information Agent, at their respective addresses and telephone numbers set forth
on the back cover page of the Supplement.
Additional copies of the enclosed materials may be obtained by calling the
Information Agent, D.F. King & Co., Inc., 77 Water Street, New York, NY 10005 at
(212) 269-5550 (Call Collect).
Very truly yours,
SALOMON BROTHERS INC
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
OR ANY OTHER PERSON THE AGENT OF THE PURCHASER, REVCO D.S., INC., THE COMPANY,
THE DEPOSITARY, THE INFORMATION AGENT OR THE DEALER MANAGER OR AUTHORIZE YOU OR
ANY OTHER PERSON TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION ON BEHALF OF
ANY OF THEM WITH RESPECT TO THE OFFER NOT CONTAINED IN THE OFFER TO PURCHASE,
THE SUPPLEMENT OR THE LETTER OF TRANSMITTAL.
<PAGE> 1
SUPPLEMENT TO THE OFFER TO PURCHASE
DATED OCTOBER 29, 1996
RDS ACQUISITION INC.,
a Wholly Owned Subsidiary of
REVCO D.S., INC.,
Has Increased the Price of its Offer to Purchase for Cash
All Outstanding Shares of Common Stock
(Including the Associated Common Stock Purchase Rights)
of
BIG B, INC.
TO
$17.25 NET PER SHARE
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 9:00 A.M., NEW YORK CITY TIME,
ON FRIDAY, NOVEMBER 15, 1996, UNLESS THE OFFER IS EXTENDED.
October 29, 1996
To Our Clients:
Enclosed for your consideration is a Supplement dated October 29, 1996 (the
"Supplement"), to the Offer to Purchase dated September 10, 1996 (the "Offer to
Purchase"), and the Letter of Transmittal related to the Supplement (the Offer
to Purchase, the Supplement and the related Letter of Transmittal, together with
any supplements or amendments thereto, collectively constitute the "Offer")
relating to the Offer by RDS Acquisition Inc., a Delaware corporation (the
"Purchaser"), to purchase all outstanding shares of Common Stock, par value
$0.001 per share (the "Common Stock"), of Big B, Inc., an Alabama corporation
(the "Company"), together with the associated Common Stock purchase rights (the
"Rights") issued pursuant to the Rights Agreement dated as of September 23,
1996, as amended, between the Company and First National Bank of Boston, as
Rights Agent (the Common Stock, together with the associated Rights being
collectively herein referred to, unless the context otherwise requires, as the
"Shares"), at a price of $17.25 per Share, net to the seller in cash, upon the
terms and subject to the conditions set forth in the Offer. Also enclosed is the
Letter to Shareholders of the Company from the Chairman and Chief Executive
Officer of the Company accompanied by the Company's amended
Solicitation/Recommendation Statement on Schedule 14D-9.
The Shares into which the Company's 6.5% Convertible Subordinated
Debentures Due 2003 ("Convertible Debentures") are convertible may be tendered
without first converting such Convertible Debentures by delivery of the
certificates for such Convertible Debentures.
Securityholders whose certificates evidencing Shares (or certificates
evidencing Convertible Debentures to be delivered to tender Shares into which
they are convertible) are not immediately available or who cannot deliver their
certificates for Shares and all other documents required by the Letter of
Transmittal to ChaseMellon Shareholder Services, L.L.C. (the "Depositary"),
prior to the Expiration Date (as defined in the Supplement) or who cannot
complete the procedures for delivery by book-entry transfer to the Depositary's
account at the Book-Entry Transfer Facility (as defined in the Offer to
Purchase) on a timely basis and who wish to tender their Shares must do so
pursuant to the guaranteed delivery procedures described in the section entitled
"The Tender Offer--Procedures for Tendering Shares" of the Offer to Purchase, as
amended and supplemented by the Supplement. See Instruction 2 of the Letter of
Transmittal. Delivery of documents to a Book-Entry Transfer Facility in
accordance with the Book-Entry Transfer Facility's procedures does not
constitute delivery to the Depositary.
<PAGE> 2
THIS MATERIAL IS BEING SENT TO YOU AS THE BENEFICIAL OWNER OF THE SHARES
HELD BY US FOR YOUR ACCOUNT BUT NOT REGISTERED IN YOUR NAME. WE ARE THE HOLDER
OF RECORD OF THE SHARES (OR CONVERTIBLE DEBENTURES) HELD BY US FOR YOUR ACCOUNT.
A TENDER OF SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF RECORD AND PURSUANT
TO YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR YOUR
INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER SHARES HELD BY US FOR YOUR
ACCOUNT.
We request instructions as to whether you wish to have us tender on your
behalf any of or all the Shares (or any of or all the whole Shares issuable upon
conversion of Convertible Debentures) held by us for your account, upon the
terms and conditions set forth in the Offer.
Your attention is directed to the following:
1. The offer price has been increased to $17.25 per Share, net to the
seller in cash, without interest thereon, upon the terms and subject to the
conditions of the Offer.
2. The Offer and withdrawal rights will expire at 9:00 A.M., New York
City time, on Friday, November 15, 1996, unless the Offer is extended.
3. The Offer is being made for all outstanding Shares.
4. The Offer is conditioned upon (i) there being validly tendered and
not withdrawn prior to the Expiration Date that number of Shares that would
represent at least a majority of all outstanding Shares on a fully diluted
basis on the date of purchase and (ii) the satisfaction of the other
conditions set forth in the Supplement.
5. Tendering securityholders will not be obligated to pay brokerage
fees or commissions or, except as set forth in Instruction 6 of the Letter
of Transmittal, stock transfer taxes on the purchase of Shares by the
Purchaser pursuant to the Offer.
6. The Board of Directors of the Company has approved the Offer and
has recommended that the shareholders of the Company accept the Offer and
tender their Shares pursuant to the Offer.
The Offer is made solely by the Offer to Purchase, as amended and
supplemented by the Supplement, and the related Letter of Transmittal and is
being made to all holders of Shares. The Purchaser is not aware of any state
where the making of the Offer is prohibited by administrative or judicial action
pursuant to any valid state statute. If the Purchaser becomes aware of any valid
state statute prohibiting the making of the Offer or the acceptance of Shares
pursuant thereto, the Purchaser will make a good faith effort to comply with
such state statute. If, after such good faith effort, the Purchaser cannot
comply with such state statute, the Offer will not be made to (nor will tenders
be accepted from or on behalf of) the holders of Shares in such state. In any
jurisdiction where the securities, blue sky or other laws require the Offer to
be made by a licensed broker or dealer, the Offer shall be deemed to be made on
behalf of the Purchaser by Salomon Brothers Inc, the Dealer Manager, or one or
more registered brokers or dealers licensed under the laws of such jurisdiction.
Payment for Shares accepted for payment pursuant to the Offer will in all
cases be made only after timely receipt by the Depositary of (a) certificates
for (or a timely Book-Entry Confirmation (as defined in the Offer to Purchase)
with respect to) such Shares, (b) a Letter of Transmittal (or a copy thereof),
properly completed and duly executed, with any required signature guarantees,
or, in the case of a book-entry transfer effected pursuant to the procedure set
forth in the section entitled "The Tender Offer--Procedures for Tendering
Shares" of the Offer to Purchase, as amended and supplemented by the Supplement,
an Agent's Message (as defined in the Offer to Purchase), and (c) any other
documents required by the Letter of Transmittal. Accordingly, tendering
securityholders may be paid at different times depending upon when certificates
for Shares or Book-Entry Confirmations with respect to Shares are actually
received by the Depositary. UNDER NO CIRCUM-
<PAGE> 3
STANCES WILL INTEREST BE PAID ON THE PURCHASE PRICE OF THE SHARES TO BE PAID BY
THE PURCHASER, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING
SUCH PAYMENT.
Securityholders who have previously validly tendered and not properly
withdrawn their Shares pursuant to the Offer are not required to take any
further action, except as may be required by the procedure for guaranteed
delivery if such procedure was utilized. If Shares are accepted for payment and
paid for by the Purchaser pursuant to the Offer, such shareholders will receive,
subject to the conditions of the Offer, the increased price of $17.25 per Share.
See Section 3 of the Offer to Purchase for the procedures for withdrawing Shares
tendered pursuant to the Offer.
If you wish to have us tender any of or all the Shares (including any whole
Shares into which Convertible Debentures may be converted) held by us for your
account, please so instruct us by completing, executing, detaching and returning
to us the instruction form contained in this letter. An envelope to return your
instructions to us is enclosed. If you authorize the tender of your Shares
(including any Shares into which Convertible Debentures may be converted), all
such Shares will be tendered unless otherwise specified on the instruction form
contained in this letter. YOUR INSTRUCTIONS SHOULD BE FORWARDED TO US IN AMPLE
TIME TO PERMIT US TO SUBMIT A TENDER ON YOUR BEHALF PRIOR TO THE EXPIRATION
DATE.
<PAGE> 4
INSTRUCTIONS WITH RESPECT TO
THE OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED COMMON STOCK PURCHASE RIGHTS)
OF
BIG B, INC.
The undersigned acknowledge(s) receipt of your letter and the Offer to
Purchase dated September 10, 1996 (the "Offer to Purchase"), as amended and
supplemented, including by the Supplement to the Offer to Purchase dated October
29, 1996 (the "Supplement") and the related Letter of Transmittal (which,
together with any amendments or supplements thereto, collectively constitute the
"Offer"), in connection with the offer by RDS Acquisition Inc., a Delaware
corporation (the "Purchaser"), to purchase all the outstanding shares of Common
Stock, par value $0.001 per share (the "Common Stock"), of Big B, Inc., an
Alabama corporation (the "Company"), together with the associated Common Stock
purchase rights (the "Rights") (the Common Stock, together with the associated
Rights being collectively herein referred to, unless the context otherwise
requires, as the "Shares").
This will instruct you to tender to the Purchaser the number of Shares
indicated below (or if no number is indicated below, all Shares) held by you for
the account of the undersigned, upon the terms and subject to the conditions set
forth in the Offer.
<TABLE>
<S> <C>
- ---------------------------------------------------------- SIGN HERE
Number of Shares to be Tendered:*
__________________________________________________________
____________ Shares
__________________________________________________________
Account Number:__________________________________________ (Signatures)
Dated _____________________________________________, 1996 __________________________________________________________
__________________________________________________________
- ---------------------------------------------------------- (Please type or print name(s) here)
__________________________________________________________
__________________________________________________________
(Please type or print address(es) here)
__________________________________________________________
(Area Code and Telephone Number)
__________________________________________________________
(Tax Identification or Social Security Number(s))
- ---------------
<FN>
*May include Shares to be received upon conversion of Convertible Debentures
held for the account of the undersigned. Unless otherwise indicated, it will be
assumed that all of your Shares (including any whole Shares into which
Convertible Debentures are convertible) held by us for your account are to be
tendered.
</TABLE>
<PAGE> 1
This announcement is neither an offer to purchase nor a solicitation of an
offer to sell Shares. The Offer is made solely by the Offer to Purchase
dated September 10, 1996, as amended and supplemented, including by the
Supplement thereto dated October 29, 1996, and the related Letter of
Transmittal, and is not being made to (nor will tenders be accepted
from or on behalf of) holders of Shares in any jurisdiction in
which the making of the Offer or the acceptance thereof would
not be in compliance with the laws of such jurisdiction. In
any jurisdictions where securities, blue sky or other laws
require the Offer to be made by a licensed broker
or dealer, the Offer will be deemed to be made on
behalf of the Purchaser by Salomon Brothers Inc
(the "Dealer Manager" or one or more registered
brokers or dealers licensed under the laws of
such jurisdiction.
RDS ACQUISITION INC.,
A WHOLLY OWNED SUBSIDIARY OF
REVCO D.S., INC.,
HAS INCREASED THE PRICE OF ITS
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED COMMON STOCK PURCHASE RIGHTS)
OF
BIG B, INC.
TO
$17.25 NET PER SHARE
RDS Acquisition Inc., a Delaware corporation (the "Purchaser"), which
is a wholly owned subsidiary of Revco D.S., Inc., a Delaware corporation
("Revco"), has amended its offer to purchase all outstanding shares of Common
Stock, par value $.001 per share (the "Common Stock"), of Big B, Inc., an
Alabama corporation (the "Company"), together with the associated Common Stock
purchase rights (the "Rights") issued pursuant to the Rights Agreement dated as
of September 23, 1996, as amended, between the Company and First National Bank
of Boston, as Rights Agent (the Common Stock, together with the associated
Rights being collectively herein referred to, unless the context otherwise
requires, as the "Shares"), so that the Purchaser is now offering to purchase
all outstanding Shares at a price of $17.25 per Share, net to the seller in
cash, without interest thereon, upon the terms and subject to the conditions set
forth in the Offer to Purchase dated September 10, 1996 (the "Offer to
Purchase"), as amended and supplemented, including by the Supplement thereto
dated October 29, 1996 (the "Supplement"), and in the related Letter of
Transmittal (which, together with any amendments or supplements thereto,
collectively constitute the "Offer").
The purpose of the Offer is to enable Revco to acquire control of, and
the entire equity interest in, the Company. The Offer, as the first step in the
acquisition of the Company, is intended to facilitate the acquisition of all the
Shares.
-----------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 9:00 A.M., NEW YORK CITY
TIME, ON FRIDAY, NOVEMBER 15, 1996, UNLESS THE OFFER IS EXTENDED.
-----------------------------------------------------------------------
THE OFFER IS CONDITIONED UPON THERE BEING VALIDLY TENDERED AND NOT
WITHDRAWN PRIOR TO THE EXPIRATION DATE (AS DEFINED IN THE SUPPLEMENT) THAT
NUMBER OF SHARES THAT WOULD REPRESENT A MAJORITY OF ALL OUTSTANDING SHARES ON A
FULLY DILUTED BASIS ON THE DATE OF PURCHASE. THE OFFER IS ALSO SUBJECT TO
CERTAIN OTHER CONDITIONS SET FORTH IN THE SUPPLEMENT.
The Offer is being made pursuant to an Agreement and Plan of Merger
dated as of October 27, 1996 (the "Merger Agreement"), among Revco, the
Purchaser and the Company pursuant to which, following consummation of the
Offer, the Purchaser will merge with the Company (the "Merger"). On the
effective date of the Merger, each outstanding Share (other than Shares owned by
the Purchaser, Revco or any of their subsidiaries, Shares held in the treasury
of the Company and Shares owned by shareholders who perfect any available
dissenters' rights under the Alabama Business Corporation Act) will be converted
into the right to receive $17.25 in cash, without interest thereon.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY DULY ADOPTED THE
MERGER AGREEMENT, INCLUDING THE PLAN OF MERGER CONTAINED THEREIN, APPROVED THE
OFFER AND THE MERGER, DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR TO, AND
IN THE BEST INTERESTS OF, THE SHAREHOLDERS OF THE COMPANY, AND RECOMMENDED THAT
SHAREHOLDERS OF THE COMPANY ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO
THE OFFER.
For purposes of the Offer, the Purchaser will be deemed to have
accepted for payment, and thereby purchased, Shares validly tendered to the
Purchaser and not properly withdrawn as, if and when the Purchaser gives oral or
written notice to ChaseMellon Shareholder Services, L.L.C. (the "Depositary")
of the Purchaser's acceptance for payment of such Shares. Upon the terms and
subject to the conditions of the Offer, payment for Shares accepted for payment
pursuant to the Offer will be made by deposit of the purchase price therefor
with the Depositary, which will act as agent for tendering shareholders for the
purpose of receiving payment from the Purchaser and transmitting payment to
tendering shareholders. In all cases, payment for Shares accepted for payment
pursuant to the Offer will be made only after timely receipt by the Depositary
of (i) certificates with respect to (or a timely Book-Entry Confirmation (as
defined in the Offer to Purchase) with respect to) such Shares, (ii) a Letter of
Transmittal (or a copy thereof), properly completed and duly signed, with any
required signature guarantees, and, in the case of a book-entry transfer, an
Agent's Message (as defined in the Offer to Purchase), and (iii) any other
required documents. Accordingly, tendering shareholders may be paid at
different times depending upon when such documents are actually received by the
Depositary. Under no circumstances will interest be paid on the purchase price
of the Shares to be paid by the Purchaser, regardless of any extension of the
Offer or any delay in making payment for tendered Shares.
Except as otherwise provided below, tenders of Shares are irrevocable.
Shares tendered pursuant to the Offer may be withdrawn at any time prior to the
Expiration Date, unless theretofore accepted for payment and paid for by the
Purchaser pursuant to the Offer. For a withdrawal to be effective, a written or
fax notice of withdrawal must be timely received by the Depositary at one of its
addresses as set forth below and must specify the name of the person having
tendered the Shares to be withdrawn, the number of Shares to be withdrawn and
the name of the registered holder of the certificate relating to the Shares to
be withdrawn, if different from the name of the person who tendered the Shares.
If certificates with respect to Shares have been delivered or otherwise
identified to the Depositary, then, prior to the physical release of such
certificates, the serial numbers shown on such certificates must be submitted to
the Depositary and, unless such Shares have been tendered by an Eligible
Institution (as defined in Section 2 of the Offer to Purchase), the signatures
on the notice of withdrawal must be guaranteed by an Eligible Institution. If
Shares have been delivered pursuant to the procedures for book-entry transfer as
set forth in Section 2 of the Offer to Purchase, any notice of withdrawal must
also specify the name and number of the account at the appropriate Book-Entry
Transfer Facility (as defined in the Offer to Purchase) to be credited with the
withdrawn Shares and otherwise comply with such Book-Entry Transfer Facility's
procedures. Withdrawals of tenders of Shares may not be rescinded, and any
Shares properly withdrawn will thereafter be deemed not validly tendered for any
purposes of the Offer. However, withdrawn Shares may be retendered by again
following one of the procedures described in Section 2 of the Offer to Purchase
at any time prior to the Expiration Date. All questions as to the form and
validity (including time of receipt) of notices of withdrawal will be determined
by the Purchaser in its sole discretion, which determination will be final and
binding. None of the Purchaser, Revco, the Company, the Depositary, the
Information Agent, the Dealer Manager or any other person will be under any duty
to give information of any defects or irregularities in any notice of withdrawal
or incur any liability for failure to give any such information.
Subject to the provisions of the Merger Agreement, the Purchaser
expressly reserves the right, in its sole discretion, at any time or from time
to time, to extend the period of time during which the Offer is open by giving
oral or written notice of such extension to the Depositary.
The information required to be disclosed by paragraph (e)(1)(vii) of
Rule 14d-6 under the Securities Exchange Act of 1934, as amended, is contained
in the Offer to Purchase and the Supplement, and is incorporated herein by
reference.
The Offer to Purchase has been, and the Supplement, the related Letter
of Transmittal and other relevant materials will be, mailed to record holders of
Shares, and will be furnished to brokers, dealers, commercial banks, trust
companies and similar persons whose names, or the names of whose nominees,
appear on the shareholder lists, or, if applicable, who are listed as
participants in a clearing agency's security position listing, for subsequent
transmittal to beneficial owners of Shares.
THE OFFER TO PURCHASE, THE SUPPLEMENT, AND THE LETTER OF TRANSMITTAL
CONTAIN IMPORTANT INFORMATION THAT SHOULD BE READ BEFORE ANY DECISION IS MADE
WITH RESPECT TO THE OFFER.
Questions and requests for assistance may be directed to the Dealer
Manager or the Information Agent at their respective addresses and telephone
numbers as set forth below. The Purchaser will not pay any fees or commissions
to any broker or dealer or to any other person (other than the Dealer Manager
and the Information Agent) for soliciting tenders of shares pursuant to the
Offer. Additional copies of the Offer to Purchase, the Supplement, the related
Letter of Transmittal and all other tender offer materials may be obtained from
the Information Agent or the Dealer Manager or from brokers, dealers, commercial
banks and trust companies, and will be furnished promptly at the Purchaser's
expense.
<PAGE> 2
The Information Agent for the Offer is:
D.F. KING & CO., INC.
77 Water Street
New York, NY 10005
Bankers and Brokers Call Collect:
(212) 269-5550
Toll Free (800) 488-8075
The Depositary for the Offer is:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
By Mail: By Hand or Overnight Delivery:
ChaseMellon Shareholder ChaseMellon Shareholder
Services, L.L.C. Services, L.L.C.
Reorganization Department Reorganization Department
P. O. Box 798 120 Broadway
Midtown Station 13th Floor
New York, NY 10018 New York, NY 10271
By Fax Transmission:
(201) 329-8936
For Fax Confirmation Only by
Telephone:
(201) 296-4209
The Dealer Manager for the Offer is:
SALOMON BROTHERS INC
Seven World Trade Center
New York, New York 10048
Call Collect (212) 783-5141
October 29, 1996
<PAGE> 1
EXECUTION COPY
================================================================================
AGREEMENT AND PLAN OF MERGER
Dated as of October 27, 1996
among
REVCO D.S., INC.,
RDS ACQUISITION INC.
and
BIG B, INC.
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE I
The Offer
----------
SECTION 1.01. The Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.02. Company Actions . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE II
The Merger
----------
SECTION 2.01. The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 2.02. Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 2.03. Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 2.04. Effects of the Merger . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 2.05. Certificate of Incorporation and By-laws . . . . . . . . . . . . . 6
SECTION 2.06. Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 2.07. Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE III
Effect of the Merger on the Capital Shares
------------------------------------------
of the Constituent Corporations; Exchange of Certificates
----------------------------------------------------------
SECTION 3.01. Effect on Capital Shares . . . . . . . . . . . . . . . . . . . . . 7
SECTION 3.02. Exchange of Certificates . . . . . . . . . . . . . . . . . . . . . 8
</TABLE>
<PAGE> 3
2
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE IV
Representations and Warranties
------------------------------
SECTION 4.01. Representations and Warranties of the Company . . . . . . . . . . . 9
SECTION 4.02. Representations and Warranties of Parent and Sub . . . . . . . . . 20
ARTICLE V
Covenants Relating to Conduct of Business
-----------------------------------------
SECTION 5.01. Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 5.02. No Solicitation . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE VI
Additional Agreements
---------------------
SECTION 6.01. Shareholder Approval; Preparation of Proxy
Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 6.02. Access to Information; Confidentiality . . . . . . . . . . . . . . 28
SECTION 6.03. Best Efforts; Notification . . . . . . . . . . . . . . . . . . . . 28
SECTION 6.04. Rights Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 6.05. Stock Options . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 6.06. Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 6.07. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 6.08. Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 6.09. Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 6.10. Public Announcements . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 6.11. Dismissal of Litigation . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 6.12. Shareholder Litigation . . . . . . . . . . . . . . . . . . . . . . 34
</TABLE>
<PAGE> 4
3
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE VII
Conditions Precedent
--------------------
SECTION 7.01. Conditions to Each Party's Obligations To Effect the Merger . . . . 34
SECTION 7.02. Conditions to Obligations of Parent and Sub . . . . . . . . . . . . 34
ARTICLE VIII
Termination, Amendment and Waiver
----------------------------------
SECTION 8.01. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 8.02 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 8.03. Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 8.04. Extension; Waiver . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 8.05. Procedure for Termination, Amendment, Extension or Waiver . . . . . 37
ARTICLE IX
General Provisions
------------------
SECTION 9.01. Nonsurvival of Representations and Warranties . . . . . . . . . . . 37
SECTION 9.02. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 9.03. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 9.04. Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 9.05. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 9.06. Entire Agreement; No Third-Party Beneficiaries . . . . . . . . . . 40
SECTION 9.07. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 9.08. Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 9.09. Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
</TABLE>
<PAGE> 5
4
EXHIBITS
Exhibit A Conditions to the Offer
Exhibit B Form of Section 2.01(a) Plan of Merger
Exhibit C Form of Section 2.01(b) Plan of Merger
<PAGE> 6
1
AGREEMENT AND PLAN OF MERGER dated as of October 27, 1996,
among REVCO D.S., INC., a Delaware corporation ("Parent"), RDS
ACQUISITION INC., a Delaware corporation ("Sub") and a wholly
owned subsidiary of Parent, and BIG B, INC., an Alabama
corporation (the "Company").
WHEREAS Sub has outstanding an offer (the "Existing Offer",
and, as amended from time to time in accordance with this Agreement, the
"Offer") to purchase all the outstanding shares of Common Stock, par value
$0.001 per share, of the Company (the "Common Stock"; the Common Stock and the
associated common stock purchase rights (the "Rights") issued pursuant to the
Rights Agreement dated as of September 23, 1996 (as amended from time to time,
the "Rights Agreement"), being hereinafter collectively referred to as the
"Shares"), upon the terms and subject to the conditions set forth in the Offer
to Purchase dated September 10, 1996, and in the related letter of transmittal;
WHEREAS, concurrently with the execution and delivery of this
Agreement, Parent, Sub and certain directors and officers of the Company who
hold Shares and certain related entities holding Shares are entering into a
support agreement (the "Support Agreement" and, together with this Agreement,
the "Operative Agreements");
WHEREAS the Board of Directors of the Company has (i)
determined that the Offer and the Merger (as defined below) are fair to and in
the best interests of the shareholders of the Company, (ii) approved (1) the
acquisition of the Company by Parent on the terms and subject to the conditions
set forth in this Agreement and (2) the transactions contemplated by the
Operative Agreements, (iii) adopted this Agreement, including the appropriate
Plan of Merger contained herein, and (iv) resolved to recommend acceptance of
the Offer and the Merger and approval of this Agreement, including the
appropriate Plan of Merger contained herein, by such shareholders;
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 not owned directly or indirectly by Parent or the
Company, except Shares held by persons who object to the Merger and comply with
all the provisions of Alabama law concerning the right of holders of Shares to
dissent from the Merger and obtain payment of the fair value of their Shares
("Dissenting Shareholders"), will be converted into the right to receive the
per share consideration paid pursuant to the Offer; and
WHEREAS Parent, Sub and the Company desire 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.
<PAGE> 7
2
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
The Offer
SECTION 1.01. The Offer. (a) Subject to the provisions of
this Agreement, as promptly as practicable after the date of this Agreement,
Sub shall, and Parent shall cause Sub to, amend the Existing Offer to reflect
the terms and conditions of this Agreement, including the purchase price of
$17.25 per Share (and associated Right), net to the seller in cash, without
interest thereon (the "Offer Price"), and to set November 15, 1996 (the
"Initial Expiration Date"), as the expiration date for the Offer. The
obligation of Sub to, and of Parent to cause Sub to, accept for payment, and
pay for, any Shares tendered pursuant to the Offer shall be subject only to the
conditions set forth in Exhibit A. Sub expressly reserves the right to modify
any term, or modify or waive any condition, of the Offer, except that, without
the consent of the Company (unless the Company takes any action permitted to be
taken pursuant to Section 5.02(b)), Sub shall not (i) reduce the number of
Shares subject to the Offer, (ii) reduce the price per Share to be paid
pursuant to the Offer, (iii) modify, in any manner adverse to the holders of
Shares, or add to the conditions set forth in Exhibit A, (iv) extend the Offer,
(v) change the form of consideration payable in the Offer or (vi) reduce or
waive the Minimum Tender Condition (as defined in Exhibit A). Notwithstanding
the foregoing, Sub may, without the consent of the Company, (i) extend the
Offer, if at the scheduled expiration date of the Offer any of the conditions
to Sub's obligation to purchase Shares 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 days beyond the Initial Expiration Date, if on the
date of such extension less than 80% of the outstanding Shares on a fully
diluted basis have been validly tendered and not properly withdrawn pursuant to
the Offer, and (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. Without
limiting the right of Sub to extend the Offer pursuant to the immediately
preceding sentence, in the event that (i) the Minimum Tender Condition has not
been satisfied or (ii) any condition set forth in paragraph (a) of Exhibit A is
not satisfied at the scheduled expiration date of the Offer, Sub shall, and
Parent shall cause Sub to, extend the expiration date of the Offer in
increments of five business days each until the earliest to occur of (x) the
satisfaction or waiver of the Minimum Tender Condition and such other condition
or Parent reasonably determines that any condition to the Offer is not capable
of being satisfied on or prior to December 24, 1996, (y) the termination of
this Agreement in accordance with its terms and (z) December 24, 1996;
provided, however, that if any person or group (within the meaning of Section
13(d)(3) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) has publicly made a Takeover Proposal (as defined below) or disclosed in
writing its intention to make a Takeover Proposal, Sub shall not be required
pursuant to this sentence to extend the Offer for more than 20 calendar days
beyond the date on which such Takeover Proposal was publicly announced or such
intention was disclosed if at the end of
<PAGE> 8
3
such 20 calendar day period such Takeover Proposal shall not have then been
withdrawn and the Minimum Tender Condition shall not then have been satisfied.
On the terms and subject to the conditions of the Offer, Sub shall, and Parent
shall cause Sub to, accept for payment, and pay for, all Shares validly
tendered and not withdrawn pursuant to the Offer that Sub becomes obligated to
accept for payment, and pay for, pursuant to the Offer as soon as practicable
after the expiration of the Offer.
(b) As soon as reasonably practicable after the date hereof,
Parent and Sub shall amend its Tender Offer Statement on Schedule 14D-1 and
Statement on Schedule 13D (the "Schedule 14D-1") with respect to the Offer that
was originally filed on September 10, 1996, and shall file such amendment (the
"14D-1 Amendment") with the SEC. The Schedule 14D-1 shall contain a supplement
to the Offer to Purchase dated September 10, 1996, and a revised form of the
related letter of transmittal and summary advertisement (which Schedule 14D-1,
Offer to Purchase and other related documents, as amended and supplemented,
together with any further supplements or amendments thereto, are herein
collectively referred to as the "Offer Documents"), which shall be mailed to
holders of Shares. The Offer Documents shall comply as to form in all material
respects with the requirements of the Exchange Act, and the rules and
regulations promulgated thereunder, and the Offer Documents, which shall be
mailed to holders of Shares, on the date filed with the SEC and on the date
first published, sent or given to the Company's shareholders, 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 shall promptly 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 shall 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
shareholders, in each case as and to the extent required by applicable Federal
securities laws. Parent and Sub shall 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.
(c) Parent shall provide or cause to be provided to Sub on a
timely basis the funds necessary to purchase any Shares that Sub becomes
obligated to purchase pursuant to the Offer.
SECTION 1.02. Company Actions. (a) Subject to Section
5.02(b), the Company hereby approves of and consents to the Offer and
represents that the Board of Directors of the Company, at a meeting duly called
and held, has unanimously duly adopted this Agreement, including the
appropriate Plan of Merger contained herein, approved the Offer and the Merger,
determined that the Offer and the Merger are fair to and in the best interests
of the Company's shareholders and recommended that the Company's shareholders
accept the Offer
<PAGE> 9
4
and tender their shares pursuant to the Offer and approve this Agreement and
the appropriate Plan of Merger contained herein. The Company represents that
its Board of Directors have received the opinion of The Robinson-Humphrey
Company, Inc. ("R-H") that, as of the date of such opinion, the proposed
consideration to be received by the holders of Shares pursuant to the Offer and
the Merger is fair to such holders from a financial point of view, and a
complete and correct signed copy of such opinion has been delivered by the
Company to Parent. The Company has been advised by each of its directors and
executive officers that such person intends to tender all Shares owned by such
person pursuant to the Offer, except to the extent that such tender could give
rise to "short-swing" profits under Section 16 of the Exchange Act.
(b) On the date the 14D-1 Amendment is filed with the SEC,
the Company shall file with the SEC a supplement to its
Solicitation/Recommendation Statement on Schedule 14D-9 originally filed on
September 23, 1996, with respect to the Offer (such Schedule 14D-9, as amended
from time to time, the "Schedule 14D-9") containing the recommendations
described in Section 1.02(a) and shall mail the Schedule 14D-9 to the
shareholders 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 shareholders, 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 shall promptly 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 shall 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
shareholders, in each case as and to the extent required by applicable Federal
securities laws. The Company shall 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.
(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 Shares as of a recent date and of those
persons becoming record holders subsequent to such date, together with copies
of all lists of shareholders, security position listings and computer files and
all other information in the Company's possession or control regarding the
beneficial owners of Shares, and shall furnish to Sub such information and
assistance (including updated lists of shareholders, security position listings
and computer files) as Parent may reasonably request in communicating the Offer
to the Company's shareholders.
<PAGE> 10
5
ARTICLE II
The Merger
SECTION 2.01. The Merger. (a) Unless Parent elects to merge
the Company into Sub in accordance with Section 2.01(b), upon the terms and
subject to the conditions set forth in this Agreement, and in accordance with
the Delaware General Corporation Law (the "DGCL") and the Alabama Business
Corporation Act (the "ABCA"), Sub shall be merged with and into the Company at
the Effective Time of the Merger (as defined in Section 2.03). Following a
merger pursuant to this Section 2.01(a), the separate corporate existence of
Sub shall cease and 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 ABCA.
(b) If (i) (x) Parent or Sub owns 80% or more of all
outstanding Shares after the expiration of the Offer and Parent elects to
effect the Merger pursuant to Section 11.04 of the ABCA or (y) Parent otherwise
elects and (ii) Parent reasonably determines that such election will result in
the Merger being effected no later than the time the Merger would be effected
if Sub were merged into the Company pursuant to Section 2.01(a), upon the terms
and subject to the conditions set forth in this Agreement and in accordance
with the DGCL and the ABCA, the Company shall be merged with and into Sub at
the Effective Time of the Merger. Following a Merger pursuant to this Section
2.01(b), the separate corporate existence of the Company shall cease and Sub
shall continue as the Surviving Corporation and shall succeed to and assume all
the rights and obligations of the Company in accordance with the DGCL and the
ABCA. Any election by Parent to effect the Merger pursuant to this Section
2.01(b) shall be made in writing prior to the approval by the shareholders of
the Company of this Agreement and the appropriate Plan of Merger included
herein.
(c) Notwithstanding the foregoing, at the election of Parent,
any direct or indirect subsidiary of Parent may be substituted for Sub as a
constituent corporation in the Merger by delivery of written notice to that
effect naming the subsidiary to be so substituted.
(d) If the Merger is effected pursuant to Section 2.01(a),
the Plan of Merger shall be the Plan of Merger attached hereto as Exhibit B.
If the Merger is effected pursuant to Section 2.01(b), the Plan of Merger shall
be the Plan of Merger attached hereto as Exhibit C.
SECTION 2.02. Closing. The closing of the Merger (the
"Closing") will take place 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 Section 7.02 shall be no later than the second business day after
satisfaction or waiver of the conditions set forth in Section 7.01
<PAGE> 11
6
(the "Closing Date"), at the offices of Cravath, Swaine & Moore, Worldwide
Plaza, 825 Eighth Avenue, New York, N.Y. 10019, unless another date or place is
agreed to in writing by the parties hereto.
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 file a certificate or articles of merger and other
appropriate documents, including, if the Merger is to be effected pursuant to
Section 2.01(a), a Plan of Merger in the form attached hereto as Exhibit B and,
if the Merger is to be effected pursuant to Section 2.01(b), a Plan of Merger
in the form attached hereto as Exhibit C (collectively, the "Certificates of
Merger") executed in accordance with the relevant provisions of the DGCL and
the ABCA, and the parties shall make all other filings or recordings required
under the DGCL and the ABCA. The Merger shall become effective at such date
and time as the Certificates of Merger are duly filed with the Delaware
Secretary of State and the Alabama Secretary of State, or at such other later
time as Sub and the Company (by mutual agreement) shall specify in the
Certificates of Merger (the time the Merger becomes effective being the
"Effective Time of the Merger").
SECTION 2.04. Effects of the Merger. The Merger shall have
the effects set forth in Section 259 of the DGCL and Section 11.06 of the ABCA.
SECTION 2.05. Certificate of Incorporation and By-laws. (a)
Unless Parent elects to merge the Company into Sub pursuant to Section 2.01(b),
the Articles (Certificate) of Incorporation of the Company, as in effect
immediately prior to the Effective Time of the Merger, shall be amended as of
the Effective Time of the Merger so that the first paragraph of Article IV of
such Articles (Certificate) of Incorporation reads in its entirety as follows:
"The total number of shares of all classes of stock that the corporation shall
have authority to issue is 1,000 shares, par value $0.001 per share." and, as
so amended, shall be the Articles (Certificate) of Incorporation of the
Surviving Corporation until thereafter changed or amended as provided therein
or by applicable law.
(b) If Parent elects to merge the Company into Sub pursuant
to Section 2.01(b)(i), the Certificate of Incorporation of Sub, as in effect
immediately prior to the Effective Time of the Merger, shall be the Certificate
of Incorporation of the Surviving Corporation. If Parent elects to merge the
Company into Sub pursuant to Section 2.01(b)(ii), unless the Merger is effected
pursuant to Section 11.04 of the ABCA, the Certificate of Incorporation of Sub,
as in effect immediately prior to the Effective Time of the Merger, shall be
amended as of the Effective Time of the Merger to change the name of Sub to
"Big B, Inc." and, as so amended, such Certificate of Incorporation shall be
the Certificate of Incorporation of the Surviving Corporation.
(c) If (i) the Merger is effected pursuant to Section
2.01(a), the By-laws of the Company as in effect at the Effective Time of the
Merger shall be the By-laws of the Surviving Corporation until thereafter
changed or amended as provided therein or by applicable law or (ii) the Merger
is effected pursuant to Section 2.01(b), the By-laws of Sub
<PAGE> 12
7
as in effect at the Effective Time of the Merger shall be the By-laws of the
Surviving Corporation until thereafter changed or amended as provided therein
or by applicable law.
SECTION 2.06. Directors. Regardless of whether the Merger is
effected pursuant to Section 2.01(a) or 2.01(b), the directors of Sub at the
Effective Time of the Merger shall be the directors of the Surviving
Corporation, until the earlier of their resignation or removal or until their
respective successors are duly elected and qualified, as the case may be.
SECTION 2.07. Officers. Regardless of whether the Merger is
effected pursuant to Section 2.01(a) or 2.01(b), the officers of the Company at
the Effective Time of the Merger shall be the officers of the Surviving
Corporation, until the earlier of their resignation or removal or until their
respective successors are duly elected and qualified, as the case may be.
ARTICLE III
Effect of the Merger on the Capital Shares of the
Constituent Corporations; Exchange of Certificates
SECTION 3.01. Effect on Capital Shares. As of the Effective
Time of the Merger, by virtue of the Merger and without any action on the part
of the holder of any Shares or any shares of capital stock of Sub:
(a) Capital Stock of Sub. Each issued and outstanding share
of the capital stock of Sub shall be converted into and become one
fully paid and nonassessable share of common stock of the Surviving
Corporation.
(b) Cancellation of Treasury Shares and Parent Owned Shares.
Each Share that is owned by the Company or by any subsidiary of the
Company and each Share that is owned by Parent, Sub or any other
subsidiary of Parent (together, in each case, with the associated
Right) shall automatically be canceled and retired and shall cease to
exist, and no consideration shall be delivered in exchange therefor.
(c) Conversion of Shares. Subject to Section 3.01(d), each
issued and outstanding Share (other than Shares to be cancelled in
accordance with Section 3.01(b)) together with the associated Right
shall be converted into the right to receive from the Surviving
Corporation in cash, without interest, the Offer Price (the "Merger
Consideration"). As of the Effective Time of the Merger, all such
Shares (and the associated Rights) shall no longer be outstanding and
shall automatically be cancelled and retired and shall cease to exist,
and each holder of a certificate
<PAGE> 13
8
representing any such Shares (and the associated Rights) shall cease
to have any rights with respect thereto, except the right to receive
the Merger Consideration, without interest.
(d) Shares of Dissenting Shareholders. Notwithstanding
anything in this Agreement to the contrary, any issued and outstanding
Shares held by a Dissenting Shareholder 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
Shareholder pursuant to the laws of the State of Alabama; provided,
however, that the Shares (together with the associated Rights)
outstanding immediately prior to the Effective Time of the Merger and
held by a Dissenting Shareholder 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 ABCA, 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 notices of any intent to demand payment
and any written demands for payment of Shares received by the Company
and (ii) the opportunity to direct all offers of payment, 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 Shares.
(b) Parent to Provide Funds. 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 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
holder of record of a certificate or certificates that immediately prior to the
Effective Time of the Merger represented outstanding Shares (the
"Certificates") whose Shares were converted into the right to receive the
Merger Consideration pursuant to Section 3.01, (i) a letter of transmittal
(which shall specify that delivery shall be effected, and risk of loss and
title to the Certificates shall pass, only upon delivery of the Certificates to
the Paying Agent and shall be in a form and have such other provisions as
Parent may reasonably specify) 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 such other documents as may
reasonably be required by
<PAGE> 14
9
the Paying Agent, the holder of such Certificate shall be entitled to receive
in exchange therefor the amount of cash into which the Shares theretofore
represented by such Certificate shall have been converted pursuant to Section
3.01, and the Certificate so surrendered shall forthwith be cancelled. In the
event of a transfer of ownership of Shares that 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 theretofore represented by such Certificate shall have been
converted pursuant to Section 3.01. No interest shall be paid or shall 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 theretofore represented by such Certificates,
and there shall be no further registration of transfers on the share transfer
books of the Surviving Corporation of the Shares that 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 cancelled and exchanged as provided in this Article
III.
(e) No Liability. None of Parent, Sub, the Company or the
Paying Agent shall be liable to any person in respect of any cash delivered to
a public official pursuant to any applicable abandoned property, escheat or
similar law. If any Certificates shall not have been surrendered prior to five
years after the Effective Time of the Merger (or immediately prior to such
earlier date on which any payment pursuant to this Article III would otherwise
escheat to or become the property of any Governmental Entity (as defined in
Section 4.01(d)), the payment in respect of such Certificate shall, to the
extent permitted by applicable law, become the property of the Surviving
Corporation, free and clear of all claims or interest of any person previously
entitled thereto.
<PAGE> 15
10
ARTICLE IV
Representations and Warranties
SECTION 4.01. Representations and Warranties of the Company.
The Company represents and warrants to Parent and Sub as follows:
(a) Organization, Standing and Corporate Power. Each of the
Company and each of its subsidiaries is a corporation duly organized,
validly existing and in good standing under the laws of the
jurisdiction in which it is incorporated and has the requisite
corporate power and authority to carry on its business as now being
conducted, except where the failure to be so organized, existing or in
good standing or to have such power and authority would not,
individually or in the aggregate, have a material adverse effect on
the Company. Except as disclosed in Section 4.01(a) of the letter
dated the date of this Agreement and delivered to Parent and Purchaser
concurrently with this Agreement (the "Company Disclosure Letter"),
each of the Company and each of its subsidiaries is duly qualified or
licensed to do business and is in good standing in each jurisdiction
in which the nature of its business or the ownership or leasing of its
properties makes such qualification or licensing necessary, other than
in such jurisdictions where the failure to be so qualified or licensed
(individually or in the aggregate) would not have a material adverse
effect on the Company. The Company has delivered to Parent complete
and correct copies of its Articles (Certificate) of Incorporation and
By-laws and the comparable charter or organizational documents of its
Significant Subsidiaries, in each case as amended to the date of this
Agreement. For purposes of this Agreement, a "Significant Subsidiary"
means any subsidiary of the Company that constitutes a significant
subsidiary within the meaning of Rule 1-02 of Regulation S-X of the
SEC.
(b) Subsidiaries. Section 4.01(b) of the Company Disclosure
Letter lists each subsidiary of the Company. All the outstanding
shares of capital stock of each such subsidiary have been validly
issued and are fully paid and nonassessable and are owned by the
Company, by another subsidiary of the Company or by the Company and
another such subsidiary, free and clear of all pledges, claims, liens,
charges, encumbrances and security interests of any kind or nature
whatsoever (collectively, "Liens"). Except for the capital shares of
its subsidiaries, the Company does not own, directly or indirectly,
any capital stock or other ownership interest in any corporation,
partnership, joint venture or other entity.
(c) Capital Structure. The authorized equity capital of the
Company consists of 100 million Shares. At the close of business on
October 24, 1996, (i) 18,757,034 Shares were issued and outstanding,
(ii) no Shares were held by the Company in its treasury, (iii)
1,000,000 Shares were reserved for issuance pursuant to, and 86,500
Shares were subject to outstanding options under, the Company's
Employee Stock Option Plan, (iv) not more than 3,299,180 Shares were
reserved for issuance
<PAGE> 16
11
and issuable upon conversion of the Company's 6.5% Convertible
Subordinated Debentures Due 2003 (the "Convertible Debentures"), and
(v) Shares reserved for issuance in connection with the Rights.
Except as set forth above, at the close of business on October 24,
1996, no capital shares or other voting securities of the Company were
issued, reserved for issuance or outstanding. There are no
outstanding SARs (as defined in Section 6.05) that were not granted in
tandem with a related Employee Option (as defined in Section 6.05).
All outstanding capital shares of the Company are, and all Shares that
may be issued pursuant to the Company's Employee Stock Option Plan
will be, when issued, duly authorized, validly issued, fully paid and
nonassessable and not subject to preemptive rights. There are not any
bonds, debentures, notes or other indebtedness of the Company having
the right to vote (or, other than the Convertible Debentures,
convertible into, or exchangeable for, securities having the right to
vote) on any matters on which shareholders of the Company may vote.
Except as set forth above, as of the date of this Agreement, there are
not any securities, options, warrants, calls, rights, commitments,
agreements, arrangements or undertakings of any kind to which the
Company or any of its subsidiaries is a party or by which any of them
is bound obligating the Company or any of its subsidiaries to issue,
deliver or sell, or cause to be issued, delivered or sold, additional
capital shares or other voting securities of the Company or of any of
its subsidiaries or obligating the Company or any of its subsidiaries
to issue, grant, extend or enter into any such security, option,
warrant, call, right, commitment, agreement, arrangement or
undertaking. As of the date of this Agreement, there are not any
outstanding contractual obligations of the Company or any of its
subsidiaries to repurchase, redeem or otherwise acquire any capital
shares of the Company or any of its subsidiaries. The Company has
delivered to Parent a complete and correct copy of the Rights
Agreement as amended and supplemented to the date of this Agreement.
(d) Authority; Noncontravention. The Company has the
requisite corporate power and authority to enter into this Agreement
and, subject in the case of the Merger to approval of this Agreement
by the holders of two-thirds of the outstanding Shares, to consummate
the transactions contemplated by this Agreement. The execution and
delivery of this Agreement by the Company and the consummation by the
Company of the transactions contemplated by the Operative Agreements
have been duly authorized by all necessary corporate action on the
part of the Company, subject, in the case of the Merger, to approval
of this Agreement by the holders of two- thirds of the outstanding
Shares. This Agreement has been duly executed and delivered by the
Company and, assuming that this Agreement constitutes a valid and
binding obligation of Parent and Sub, constitutes a valid and binding
obligation of the Company, enforceable against the Company in
accordance with its terms. The execution and delivery of the
Operative Agreements do not, and the consummation of the transactions
contemplated by the Operative Agreements and compliance with the
provisions of the Operative Agreements will not, conflict with, or
result in any violation of, or default (with or without notice or
lapse of time, or both) under, or
<PAGE> 17
12
give rise to a right of termination, cancellation or acceleration of
any obligation or to the loss of a material benefit under, or result
in the creation of any Lien upon any of the properties or assets of
the Company or any of its subsidiaries under, (i) the Articles
(Certificate) of Incorporation or By-laws of the Company or the
comparable charter or organizational documents of any of its
subsidiaries, (ii) any loan or credit agreement, note, bond, mortgage,
indenture, lease or other agreement, instrument, permit, concession,
franchise or license applicable to the Company or any of its
subsidiaries or their respective properties or assets or (iii) subject
to the governmental filings and other matters referred to in the
following sentence, any judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to the Company or any of its
subsidiaries or their respective properties or assets, other than, in
the case of clause (ii), (A) any such conflicts, violations, defaults,
rights or Liens that individually or in the aggregate would not (x)
have a material adverse effect on the Company, (y) impair the ability
of the Company to perform its obligations under this Agreement or (z)
prevent the consummation of any of the transactions contemplated by
the Operative Agreements, (B) any such conflicts, violations or
defaults under the Company's pharmacy, liquor and general business
licenses and any permits from the Federal Drug Administration relating
to controlled substances, (C) any such conflicts, violations or
defaults arising from the consummation of the Merger pursuant to
Section 2.01(b) that would not arise from consummation of the Merger
pursuant to Section 2.01(a), (D) the repurchase obligations of the
Company with respect to the Convertible Debentures and (E) any
defaults under the Company's bank credit agreement. No consent,
approval, order or authorization of, or registration, declaration or
filing with, any Federal, state or local government or any court,
administrative or regulatory agency or commission or other
governmental authority or agency, domestic or foreign (a "Governmental
Entity"), is required by or with respect to the Company or any of its
subsidiaries in connection with the execution and delivery of this
Agreement by the Company or the consummation of the transactions
contemplated by the Operative Agreements, except for (i) the filing
with the SEC of (x) the Schedule 14D-9, (y) a proxy or information
statement relating to the approval by the Company's shareholders of
this Agreement, if such approval is required by law (as amended or
supplemented from time to time, the "Proxy Statement"), and (z) such
reports under Sections 13(a), 13(d) and 16 of the Exchange Act as may
be required in connection with the Operative Agreements and the
transactions contemplated by the Operative Agreements, (ii) the filing
of the Certificates of Merger with the Delaware Secretary of State and
the Alabama Secretary of State and appropriate documents with the
relevant authorities of other states in which the Company is qualified
to do business, (iii) consents, approvals, orders, authorizations,
declarations and filings, in each case in connection with pharmacy,
liquor and general business licenses and (iv) consents, approvals,
orders, authorizations, declarations and filings in connection with
permits from the Federal Drug Administration relating to controlled
substances.
(e) SEC Documents; Undisclosed Liabilities. The Company has
filed all required reports, schedules, forms, statements and other
documents with the SEC
<PAGE> 18
13
since January 29, 1995 (the "SEC Documents"). As of their respective
dates, (i) the SEC Documents complied in all material respects with
the requirements of the Securities Act of 1933 (the "Securities Act"),
or the Exchange Act, as the case may be, and the rules and regulations
of the SEC promulgated thereunder applicable to such SEC Documents,
and none of the SEC Documents contained any untrue statement of a
material fact or omitted 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 and (ii) the financial statements of the Company included
in the SEC Documents comply as to form in all material respects with
applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, have been prepared in
accordance with generally accepted accounting principles (except, in
the case of unaudited statements, as permitted by Form 10-Q of the
SEC) applied on a consistent basis during the periods involved (except
as may be indicated in the notes thereto) and fairly present the
consolidated financial position of the Company and its consolidated
subsidiaries as of the dates thereof and the consolidated results of
their operations and cash flows for the periods then ended (subject,
in the case of unaudited statements, to normal year-end audit
adjustments). Except to the extent that information contained in any
SEC Document has been revised or superseded by a later filed SEC
Document, none of the SEC Documents contains any untrue statement of a
material fact or omits 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 as reflected, reserved against or otherwise
disclosed in the Filed SEC Documents (as defined below), neither the
Company nor any of its subsidiaries has any liabilities or obligations
of any nature (whether accrued, absolute, contingent or otherwise)
required by generally accepted accounting principles to be set forth
on a consolidated balance sheet of the Company and its consolidated
subsidiaries or in the notes thereto and which, individually or in the
aggregate, could reasonably be expected to have a material adverse
effect on the Company.
(f) Information Supplied. None of the information supplied
or to be supplied by the Company for inclusion or incorporation by
reference in the Offer Documents, the Schedule 14D-9, the information
statement to be filed by the Company in connection with the Offer
pursuant to Rule 14f-1 promulgated under the Exchange Act (the
"Information Statement") or the Proxy Statement shall, in the case of
the Offer Documents, the Schedule 14D-9 and the Information Statement,
at the respective times the Offer Documents, the Schedule 14D-9 and
the Information Statement are filed with the SEC or first published,
sent or given to the Company's shareholders, or, in the case of the
Proxy Statement, at the time the Proxy Statement is first mailed to
the Company's shareholders or at the time of the meeting of the
Company's shareholders 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 Schedule 14D-9, the
<PAGE> 19
14
Information Statement and the Proxy Statement shall 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.
(g) Absence of Certain Changes or Events. Except as
disclosed in the SEC Documents filed and publicly available prior to
the date of this Agreement (the "Filed SEC Documents") and except as
set forth in Section 4.01(g) of the Company Disclosure Letter, from
the date of the most recent audited financial statements included in
the SEC Documents to the date of this Agreement, the Company has
conducted its business only in the ordinary course, and there has not
been (i) any material adverse change in the Company and its
subsidiaries taken as a whole, other than changes arising from general
economic or industry conditions, (ii) except for the regular quarterly
dividend of $0.05 per Share paid on September 13, 1996 to holders of
record on August 30, 1996, any declaration, setting aside or payment
of any dividend or other distribution (whether in cash, stock or
property) with respect to any of the Company's capital shares, (iii)
any split, combination or reclassification of any of its capital
shares or any issuance or the authorization of any issuance of any
other securities in respect of, in lieu of or in substitution for
shares of its capital shares, (iv) (x) any granting by the Company or
any of its subsidiaries to any executive officer of the Company or any
of its subsidiaries of any increase in compensation, except in the
ordinary course of business consistent with prior practice or as was
required under employment agreements in effect as of the date of the
most recent audited financial statements included in the Filed SEC
Documents, (y) any granting by the Company or any of its subsidiaries
to any such executive officer of any increase in severance or
termination pay, except as was required under employment, severance or
termination agreements in effect as of the date of the most recent
audited financial statements included in the Filed SEC Documents or
(z) any entry by the Company or any of its subsidiaries into any
employment, severance or termination agreement with any such executive
officer, (v) any damage, destruction or loss, whether or not covered
by insurance, that has or could have a material adverse effect on the
Company and its subsidiaries taken as a whole or (vi) any change in
accounting methods, principles or practices by the Company materially
affecting its assets, liabilities or business, except insofar as may
have been required by a change in generally accepted accounting
principles.
(h) Litigation. Except as disclosed in the Filed SEC
Documents or in Section 4.01(h) of the Company Disclosure Letter,
there is no suit, action or proceeding pending or, to the knowledge of
the Company, threatened against or affecting the Company or any of its
subsidiaries (and the Company is not aware of any basis for any such
suit, action or proceeding) that, individually or in the aggregate,
could reasonably be expected to (i) have a material adverse effect on
the Company, (ii) impair the ability of the Company to perform its
obligations under this
<PAGE> 20
15
Agreement, or (iii) prevent the consummation of any of the
transactions contemplated by the Operative Agreements, nor is there
any judgment, decree, injunction, rule or order of any Governmental
Entity or arbitrator outstanding against the Company or any of its
subsidiaries having, or which, insofar as reasonably can be foreseen,
in the future would have, any such effect.
(i) Absence of Changes in Benefit Plans. Except as disclosed
in the Filed SEC Documents or in Section 4.01(i) of the Company
Disclosure Letter, since the date of the most recent audited financial
statements included in the Filed SEC Documents, there has not been any
adoption or amendment in any material respect by the Company or any of
its subsidiaries of any collective bargaining agreement or any bonus,
pension, salary reduction, profit sharing, deferred compensation,
incentive compensation, share ownership, share purchase, share option,
phantom share, retirement, vacation, severance, disability, death
benefit, hospitalization, medical or other plan, arrangement or
understanding (whether or not legally binding) providing benefits to
any current or former employee, officer or director of the Company or
any of its subsidiaries (collectively, "Benefit Plans"). Except as
disclosed in the Filed SEC Documents, there exist no employment,
consulting, severance, termination or indemnification agreements,
arrangements or understandings between the Company or any of its
subsidiaries and any current or former employee, officer or director
of the Company or any of its subsidiaries.
(j) ERISA Compliance; No Excess Parachute Payments. (i) The
Company has delivered to Parent true, complete and correct copies of
(v) all Benefit Plans that are "employee pension benefit plans" (as
defined in Section 3(2) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA")) (sometimes referred to herein as
"Pension Plans") and all Benefit Plans that are "employee welfare
benefit plans" (as defined in Section 3(1) of ERISA) maintained, or
contributed to, by the Company or any of its subsidiaries for the
benefit of any current or former employees, officers or directors of
the Company or any of its subsidiaries, (w) each other Benefit Plan
(or, in the case of any unwritten Benefit Plans, descriptions
thereof), (x) the most recent summary plan description for each
Benefit Plan for which such summary plan description is required, (y)
each trust agreement and group annuity contract relating to any
Benefit Plan and (z) the most recent actuarial valuations relating to
each of the Pension Plans. Section 4.01(j) of the Company Disclosure
Letter sets forth a complete list of all Benefit Plans.
(ii) All Pension Plans that are intended to be tax qualified
have been the subject of determination letters from the Internal
Revenue Service to the effect that such Pension Plans are qualified
and exempt from Federal income taxes under Sections 401(a) and 501(a),
respectively, of the Internal Revenue Code of 1986, as amended (the
"Code"), and no such determination letter has been revoked nor, to the
knowledge of the Company, has revocation been threatened, nor has any
such Pension
<PAGE> 21
16
Plan been amended since the date of its most recent determination
letter or application therefor in any respect that would adversely
affect its qualification.
(iii) No Pension Plan that the Company or any of its
subsidiaries maintains, or to which the Company or any of its
subsidiaries is obligated to contribute, other than any Pension Plan
that is a "multiemployer plan" (as such term is defined in Section
4001(a)(3) of ERISA; collectively, the "Multiemployer Pension Plans"),
had, as of the respective last annual valuation date for each such
Pension Plan, an "unfunded benefit liability" (as such term is defined
in Section 4001(a)(18) of ERISA), based on actuarial assumptions which
have been furnished to Parent. None of the Pension Plans has an
"accumulated funding deficiency" (as such term is defined in Section
302 of ERISA or Section 412 of the Code), whether or not waived. None
of the Company, any of its subsidiaries, any officer of the Company or
any of its subsidiaries or any of the Benefit Plans which are subject
to ERISA, including the Pension Plans, any trusts created thereunder
or any trustee or administrator thereof, has engaged in a "prohibited
transaction" (as such term is defined in Section 406 of ERISA or
Section 4975 of the Code) or any other breach of fiduciary
responsibility that could subject the Company, any of its subsidiaries
or any officer of the Company or any of its subsidiaries to the tax or
penalty on prohibited transactions imposed by such Section 4975 or to
any liability under Section 502(i) or (1) of ERISA, other than any
such taxes, penalties or liabilities that have been satisfied in full
or that would not, either individually or in the aggregate, have a
material adverse effect on the Company. Neither any of such Benefit
Plans nor any of such trusts has been terminated, nor has there been
any "reportable event" (as that term is defined in Section 4043 of
ERISA) with respect thereto, during the last five years, which
termination or event would have a material adverse effect on the
Company. Neither the Company nor any of its subsidiaries has suffered
or otherwise caused a "complete withdrawal" or a "partial withdrawal"
(as such terms are defined in Section 4203 and Section 4205,
respectively, of ERISA), the liability with respect to which has not
been satisfied in full, since the effective date of such Sections 4203
and 4205 with respect to any of the Multiemployer Pension Plans.
(iv) With respect to any Benefit Plan that is an employee
welfare benefit plan (x) no such Benefit Plan is unfunded or funded
through a "welfare benefits fund", as such term is defined in Section
419(e) of the Code, (y) each such Benefit Plan that is a "group health
plan", as such term is defined in Section 5000(b)(1) of the Code,
complies in all material respects with the applicable requirements of
Section 4980B(f) of the Code and (z) each such Benefit Plan (including
any such Plan covering retirees or other former employees), other than
the Company's Continuity and Deferred Compensation Agreements, may be
amended or terminated without material liability to the Company or any
of its subsidiaries on or at any time after the consummation of the
Offer.
<PAGE> 22
17
(v) Any amount that is permitted to be received (whether in
cash or property or the vesting of property) as a result of any of the
transactions contemplated by the Operative Agreements by any employee,
officer or director of the Company or any of its affiliates who is a
"disqualified individual" (as such term is defined in proposed
Treasury Regulation Section 1.280G-1) under any employment, severance
or termination agreement, other compensation arrangement or Benefit
Plan currently in effect pursuant to the terms thereof would not be
characterized as an "excess parachute payment" (as such term is
defined in Section 280G(b)(1) of the Code). The Company has delivered
to Parent the information the Company used in verifying the accuracy
of the preceding sentence, including (i) the amount that is currently
expected to be paid to each employee, officer or director of the
Company as a result of the transactions contemplated by the Operative
Agreements under all employment, severance and termination agreements,
other compensation arrangements and Benefit Plans currently in effect
and (ii) the approximate "base amount" (as such term is defined in
Section 280G(b)(3) of the Code) for each such person calculated as of
the date of this Agreement, subject to the assumptions set forth in
such information the Company delivered to Parent.
(k) Taxes. Each of the Company and each of its subsidiaries
has filed all tax returns and reports required to be filed by it and
has paid (or the Company has paid on its behalf) all taxes shown to be
due thereon and the most recent financial statements contained in the
Filed SEC Documents reflect an adequate reserve for all taxes payable
by the Company and its subsidiaries for all taxable periods and
portions thereof through the date of such financial statements. No
deficiencies for any taxes have been proposed, asserted or assessed
against the Company or any of its subsidiaries that would in the
aggregate have a material adverse effect on the Company, and no
requests for waivers of the time to assess any such taxes are pending.
The Federal income tax returns of the Company and each of its
subsidiaries consolidated in such returns have been examined by and
settled with the United States Internal Revenue Service for all years
through 1993. As used in this Agreement, "taxes" means all Federal,
state, local and foreign income, property, sales, excise and other
taxes, tariffs or governmental charges of any nature whatsoever.
(l) Labor Matters. The Company has made available to Parent
copies of all collective bargaining agreements, contracts or other
agreements or understandings with a labor union or labor organization
to which the Company or any of its subsidiaries is a party or by which
any of them is bound. There is no unfair labor practice or labor
arbitration proceeding pending or, to the knowledge of the Company,
threatened against the Company or its subsidiaries relating to their
business, except for any such proceeding which would not have,
individually or in the aggregate, a material adverse effect on the
Company. 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 its subsidiaries.
<PAGE> 23
18
(m) Voting Requirements. No vote of any holders of any
securities of the Company is required to consummate the Offer or
approve the Operative Agreements or any of the transactions
contemplated by the Operative Agreement other than the Merger. The
affirmative vote of the holders of two-thirds of the outstanding
Shares approving this Agreement is the only vote of the holders of any
class or series of securities of the Company necessary to approve the
Merger.
(n) State Takeover Statutes. The By-laws of Big B Drugs,
Inc., a Georgia corporation and a wholly owned subsidiary of the
Company, do not contain any provision that purports to cause Section
1133 of the Georgia Business Corporation Code to be applicable to Big
B Drugs, Inc. Each of the Company and each of its subsidiaries either
has (i) less than 500 residents of Florida as employees or (ii) a
gross annual payroll of less than $5 million to Florida residents.
(o) Rights Agreement. The Offer Price and the other terms of
the Offer have been determined by a majority of the members of the
Board of Directors of the Company who are not officers of the Company
and who are not representatives, nominees, Affiliates or Associates of
an Acquiring Person (each as defined in the Rights Agreement), after
receiving advice from one or more investment banking firms, to be (x)
at a price which is fair to shareholders (taking into account all
factors that such members of the Board of Directors of the Company
deem relevant including prices that could reasonably be achieved if
the Company or its assets were sold on an orderly basis designed to
realize maximum value) and (y) otherwise in the best interests of the
Company and its shareholders, and such determination remains in full
force and effect. The Company has taken or will take all necessary
action to (i) render the Rights inapplicable to the Offer, the Merger
and the other transactions contemplated by the Operative Agreements,
and (ii) ensure that (y) neither Parent nor any of its affiliates is
an Acquiring Person (as defined in the Rights Agreement) and (z) a
Distribution Date (as defined in the Rights Agreement) does not occur
by reason of the announcement or consummation of the Offer or the
Merger or the consummation of any of the other transactions
contemplated by the Operative Agreements in accordance with their
respective terms or the execution of any Operative Agreement. Other
than as disclosed to Parent prior to the date of this Agreement,
neither the Company nor the Board of Directors of the Company has
prior to the date of this Agreement (A) redeemed the Rights, (B)
amended the Rights Agreement, (C) made any determinations under the
Rights Agreement with respect to any Takeover Proposal or (D) approved
or authorized any of the foregoing.
(p) Compliance with Laws. (i) Except as set forth in Section
4.01(p) of the Company Disclosure Letter, neither the Company nor any
of its subsidiaries has violated or failed to comply with any statute,
law, ordinance, regulation, rule, judgment, decree or order of any
Governmental Entity applicable to its business or operations, except
for violations and failures to comply that could not, individually or
<PAGE> 24
19
in the aggregate, reasonably be expected to result in a material
adverse effect on the Company.
(ii) Except as disclosed in the Filed SEC Documents, (A) to
the best knowledge of the Company after due inquiry, the Company and
each of its subsidiaries is in compliance with all applicable federal,
state and local laws and regulations relating to pollution or
protection of human health or the environment (collectively,
"Environmental Laws"), which compliance includes the possession of all
material permits and other governmental authorizations required under
applicable Environmental Laws, and compliance with the terms and
conditions thereof, except for non-compliance that would not have,
individually or in the aggregate, a material adverse effect on the
Company, and (B) neither the Company nor any of its subsidiaries has
received written notice of, or, to the knowledge of the Company, is
the subject of, any action, cause of action, claim, investigation,
demand or notice by any person or entity alleging liability under or
non-compliance with any Environmental Law that would have,
individually or in the aggregate, a material adverse effect on the
Company.
(q) Real Property. The Company has made available to Parent
copies of its leases, subleases, licenses or other agreements under
which the Company or any of its subsidiaries uses or occupies or has
the right to use or occupy, now or in the future, any real property
(the "Real Property Leases"). Each Real Property Lease is valid,
binding and in full force and effect, free and clear of all liens
except those that do not or will not individually or in the aggregate
materially interfere with its ability to conduct its business at such
real property as currently conducted, all rent and other sums and
charges payable by the Company and its subsidiaries as tenants
thereunder are current, and no termination event or condition or
uncured default of a material nature on the part of the Company or any
such subsidiary or, to the knowledge of the Company, as to a landlord
exists under any Real Property Lease, except for any of the foregoing
matters which would not have, individually or in the aggregate, a
material adverse effect on the Company. Except as set forth in
Section 4.01(q) of the Company Disclosure Letter and except for any of
the following matters which would not have, individually or in the
aggregate, a material adverse effect on the Company, the Company (i)
has not granted any leases, subleases, licenses or other agreements
granting to any person other than the Company any right to possession,
use, occupancy or enjoyment of the stores covered by the Real Property
Leases or owned by the Company, or any portion thereof, (ii) is not
obligated under any option, right of first refusal or any contractual
right to purchase, acquire, sell or dispose of any real property
covered by the Real Property Leases or owned by the Company and (iii)
has good and marketable title to all real property reflected in the
Filed SEC Documents as owned by the Company or any of its subsidiaries
free and clear of all liens except those that do not or will not
individually or in the aggregate materially interfere with its ability
to conduct its business at such real property as currently conducted.
<PAGE> 25
20
(r) Brokers; Schedule of Fees and Expenses. No broker,
investment banker, financial advisor or other person, other than R-H,
the fees and expenses of which will be paid by the Company, is
entitled to any broker's, finder's, financial advisor's or other
similar fee or commission in connection with the transactions
contemplated by the Operative Agreements based upon arrangements made
by or on behalf of the Company. The arrangements made by the Company
with respect to the fees of R-H are accurately described in the
Schedule 14D-9.
(s) Certain Contracts. The Company (i) has delivered, or
made available for copying, true and correct copies of (A) what the
Company reasonably believes to be the nine largest by sales volume
existing managed care contractual arrangements and (B) all material
supplier contractual arrangements (collectively, the "Contracts") to
Parent, (ii) is in compliance, in all material respects, with the
terms and conditions of each of the Contracts, and (iii) has taken no
action to cancel or terminate any of the Contracts except to the
extent any such cancellation or termination would not result in the
Company's payment of any penalty or similar fee and would not,
individually or together with any other cancellations or terminations,
have a material adverse effect on the Company. The information
provided by the Company to Parent regarding margins on managed care
contractual arrangements is true and correct in all material respects.
(t) Opinion of Financial Advisor. The Company has received
the opinion of R-H, dated the date of this Agreement, to the effect
that, as of such date, the consideration to be received in the Offer
and the Merger by the Company's shareholders is fair to the Company's
shareholders from a financial point of view, and a signed copy of such
opinion has been delivered to Parent.
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 State of Delaware and has the
requisite corporate power and authority to carry on its business as
now being conducted. Each of Parent and Sub is duly qualified or
licensed to do business and is in good standing in each jurisdiction
in which the nature of its business or the ownership or leasing of its
properties makes such qualification or licensing necessary, other than
in such jurisdictions where the failure to be so qualified or licensed
individually or in the aggregate would not have a material adverse
effect on Parent.
(b) Authority; Noncontravention. Parent and Sub have all
requisite corporate power and authority to enter into the Operative
Agreements and to consummate the transactions contemplated by the
Operative Agreements. The execution and delivery of the Operative
Agreements and the consummation of the transactions contemplated
<PAGE> 26
21
by the Operative Agreements, in each case by Parent and Sub, as the
case may be, have been duly authorized by all necessary corporate
action on the part of Parent and Sub. The Operative Agreements have
been duly executed and delivered by Parent and Sub, as the case may
be, and, assuming that the Operative Agreements constitute valid and
binding obligations of the parties thereto other than Parent and Sub,
each constitutes a valid and binding obligation of such party,
enforceable against such party in accordance with its terms. The
execution and delivery of the Operative Agreements do not, and the
consummation of the transactions contemplated by the Operative
Agreements and compliance with the provisions of the Operative
Agreements will not, conflict with, or result in any violation of, or
default (with or without notice or lapse of time, or both) under, or
give rise to a right of termination, cancellation or acceleration of
any obligation or to loss of a material benefit under, or result in
the creation of any Lien upon any of the properties or assets of
Parent or any of its subsidiaries under, (i) the certificate of
incorporation or by-laws of Parent or Sub or the comparable charter or
organizational documents of any other subsidiary of Parent, (ii) any
loan or credit agreement, note, bond, mortgage, indenture, lease or
other agreement, instrument, permit, concession, franchise or license
applicable to Parent or Sub or their respective properties or assets
or (iii) subject to the governmental filings and other matters
referred to in the following sentence, any judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to Parent, Sub
or any other subsidiary of Parent or their respective properties or
assets, other than, in the case of clause (ii), any such conflicts,
violations, defaults, rights or Liens that individually or in the
aggregate would not (x) have a material adverse effect on Parent and
its subsidiaries taken as a whole, (y) impair the ability of Parent
and Sub to perform their respective obligations under the Operative
Agreements or (z) prevent the consummation of any of the transactions
contemplated by the Operative Agreements. No consent, approval, order
or authorization of, or registration, declaration or filing with, any
Governmental Entity is required by or with respect to Parent, Sub or
any other subsidiary of Parent in connection with the execution and
delivery of the Operative Agreements by Parent or Sub, as the case may
be, or the consummation by Parent or Sub, as the case may be, of any
of the transactions contemplated by the Operative Agreements, except
for (i) the filing with the SEC of the Offer Documents, and such
reports under Sections 13 and 16 of the Exchange Act as may be
required in connection with the Operative Agreements and the
transactions contemplated by the Operative Agreements, (ii) the filing
of the Certificates of Merger with the Delaware Secretary of State and
the Alabama Secretary of State and appropriate documents with the
relevant authorities of other states in which Parent is qualified to
do business and (iii) such other consents, approvals, orders,
authorizations, registrations, declarations and filings as may be
required under the "takeover" or "blue sky" laws of various states.
(c) 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 Information
Statement or the Proxy Statement shall, in the
<PAGE> 27
22
case of the Offer Documents, the Schedule 14D-9 and the Information
Statement, at the respective times the Offer Documents, the Schedule
14D-9 and the Information Statement are filed with the SEC or first
published, sent or given to the Company's shareholders, or, in the
case of the Proxy Statement, at the date the Proxy Statement is first
mailed to the Company's shareholders or at the time of the meeting of
the Company's shareholders held to vote on approval 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 shall 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
information supplied by the Company specifically for inclusion or
incorporation by reference therein.
(d) Brokers. No broker, investment banker, financial advisor
or other person, other than Salomon Brothers Inc ("Salomon"), 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 the
Operative Agreements based upon arrangements made by or on behalf of
Parent or Sub.
(e) Financing. Parent and Sub have funds available
sufficient to consummate the Offer and the Merger on the terms
contemplated by this Agreement, and, at the expiration of the Offer
and the Effective Time of the Merger, Parent and Sub will have
available all funds necessary for the acquisition of all Shares on a
fully diluted basis pursuant to the Offer and the Merger, as the case
may be, and to perform their respective obligations under this
Agreement.
(f) Litigation. Except as set forth in any report, schedule,
form, statement or other document filed by Parent with the SEC and
publicly available prior to the date hereof, there is no suit, action
or proceeding pending or, to the knowledge of Parent, threatened
against or affecting Parent or any of its subsidiaries (and Parent is
not aware of any basis for any such suit, action or proceeding) that,
individually or in the aggregate, could reasonably be expected to (i)
have a material adverse effect on Parent, (ii) impair the ability of
Parent to perform its obligations under the Operative Agreements, or
(iii) prevent the consummation of any of the transactions contemplated
by the Operation Agreements, nor is there any judgment, decree,
injunction, rule or order of any Governmental Entity or arbitrator
outstanding against Parent or any of its subsidiaries having, or
which, insofar as reasonably can be foreseen, in the future would
have, any such effect.
<PAGE> 28
23
ARTICLE V
Covenants Relating to Conduct of Business
SECTION 5.01. Conduct of Business. (a) Ordinary Course.
During the period from the date of this Agreement to the Effective Time of the
Merger, the Company shall, and shall cause its subsidiaries to, carry on their
respective businesses in the usual, regular and ordinary course in
substantially the same manner as heretofore conducted and, to the extent
consistent therewith, use all reasonable efforts to preserve intact their
current business organizations, keep available the services of their current
officers and employees and preserve their relationships with customers,
suppliers, licensors, licensees, distributors and others having business
dealings with them to the end that their goodwill and ongoing businesses shall
be unimpaired at the Effective Time of the Merger. Without limiting the
generality of the foregoing, during the period from the date of this Agreement
to the Effective Time of the Merger, the Company shall not, and shall not
permit any of its subsidiaries to:
(i) (x) declare, set aside or pay any dividends on, or make
any other distributions in respect of, any of its capital shares,
other than dividends and distributions by any direct or indirect
wholly owned subsidiary of the Company to its parent (except to
regular quarterly dividends on the Shares declared and paid at times
consistent with past practice in an amount not in excess of $0.05 per
Share per quarter), (y) split, combine or reclassify any of its
capital stock or issue or authorize the issuance of any other
securities in respect of, in lieu of or in substitution for shares of
its capital stock or (z) purchase, redeem or otherwise acquire any
shares of capital stock of the Company or any of its subsidiaries or
any other securities thereof or any rights, warrants or options to
acquire any such shares or other securities;
(ii) issue, deliver, sell, pledge or otherwise encumber any
capital shares, any other voting securities or any securities
convertible into, or any rights, warrants or options to acquire, any
such shares, voting securities or convertible securities (other than
(x) the issuance of Shares upon the exercise of Employee Options
outstanding on the date of this Agreement in accordance with their
present terms and (y) the issuance of Shares upon conversion of the
Convertible Debentures);
(iii) amend its Articles (Certificate) of Incorporation,
By-laws or other comparable charter or organizational documents;
(iv) acquire or agree to acquire (x) by merging or
consolidating with, or by purchasing a substantial portion of the
assets of, or by any other manner, any business or any corporation,
partnership, joint venture, association or other business organization
or division thereof or (y) any assets that are material, individually
or in the aggregate, to the Company and its subsidiaries taken as a
whole, except purchases of inventory in the ordinary course of
business consistent with past practice or in the
<PAGE> 29
24
fulfillment of contracts in existence on the date hereof and copies of
which have been made available to Parent;
(v) sell, lease, mortgage or otherwise encumber or subject to
any Lien or otherwise dispose of any of its material properties or
assets, except sales of inventory in the ordinary course of business
consistent with past practice;
(vi) (y) incur any indebtedness for borrowed money or
guarantee any such indebtedness of another person, issue or sell any
debt securities or warrants or other rights to acquire any debt
securities of the Company or any of its subsidiaries, guarantee any
debt securities of another person, enter into any "keep well" or other
agreement to maintain any financial statement condition of another
person or enter into any arrangement having the economic effect of any
of the foregoing, except for short-term borrowings incurred in the
ordinary course of business consistent with past practice, or (z) make
any loans, advances or capital contributions to, or investments in,
any other person, other than to the Company or any direct or indirect
wholly owned subsidiary of the Company;
(vii) make or agree to make any new capital expenditure or
expenditures which, individually, is in excess of $500,000 or, in the
aggregate, are in excess of $5 million;
(viii) make any tax election or settle or compromise any
income tax liability;
(ix) except as permitted by Section 6.06, grant to any
executive officer any increase in compensation or in severance or
termination pay, except in each case as was required under employment
agreements in effect as of the date hereof, or enter into any
employment, severance or termination agreement with any executive
officer;
(x) adopt or implement any change in accounting methods,
principles or practices materially affecting its assets, liabilities
or business, except insofar as may have been required by a change in
generally accepted accounting principles;
(xi) pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than any payment required pursuant to an order of a
court of competent jurisdiction and the payment, discharge or
satisfaction, in the ordinary course of business consistent with past
practice or in accordance with their terms, of liabilities reflected
or reserved against in, or contemplated by, the most recent
consolidated financial statements (or the notes thereto) of the
Company included in the Filed SEC Documents or incurred in the
ordinary course of business consistent with past practice, or waive
the benefits of, or agree to modify in any manner, any
confidentiality, standstill or similar agreement to which the Company
or any of its subsidiaries is a party; or
<PAGE> 30
25
(xii) authorize any of, or commit or agree to take any of, the
foregoing actions.
(b) Other Actions. The Company shall not, and shall not
permit any of its subsidiaries to, take any action that would, or that could
reasonably be expected to, result in (i) any of the representations and
warranties of the Company set forth in this Agreement that are qualified as to
materiality becoming untrue, (ii) any of such representations and warranties
that are not so qualified becoming untrue in any material respect or (iii)
except as otherwise permitted by Section 5.02, any of the conditions to the
Offer set forth in Exhibit A, or any of the conditions to the Merger set forth
in Article VII, not being satisfied.
(c) Advice of Changes. The Company shall promptly advise
Parent orally and in writing of any change or event having, or which, insofar
as can reasonably be foreseen, would have, a material adverse effect on the
Company and its subsidiaries taken as a whole.
SECTION 5.02. No Solicitation. (a) The Company and its
officers, directors, employees, representatives and agents shall immediately
cease any discussions or negotiations with any parties that may be ongoing with
respect to any Takeover Proposal (as defined below). The Company shall not
authorize or permit any of its officers, directors or employees or any
investment banker, financial advisor, attorney, accountant or other
representative or advisor retained by it or any of its subsidiaries to (i)
solicit, initiate or encourage (including by way of furnishing information), or
take any other action to facilitate, any inquiries or the making of any
proposal that constitutes, or may reasonably be expected to lead to, a Takeover
Proposal or (ii) participate in any discussions or negotiations regarding any
Takeover Proposal; provided, however, that, in the event that prior to the
acceptance for payment of Shares pursuant to the Offer an unsolicited Takeover
Proposal is made and the Board of Directors of the Company determines in good
faith, after consultation with outside counsel, that it is necessary to do so
in order to comply with its fiduciary duties to the Company's shareholders
under applicable law, the Company may deliver a written notice to that effect
promptly to Parent and thereafter, subject to compliance with Section 5.02(c),
(x) furnish, pursuant to a confidentiality agreement that is not less favorable
to the Company than the Confidentiality Agreement dated October 3, 1996,
between Parent and the Company (the "Confidentiality Agreement"), information
with respect to the Company to the person making such unsolicited Takeover
Proposal and (y) participate in discussions or negotiations regarding such
Takeover Proposal. Without limiting the foregoing, it is understood that any
violation of the restrictions set forth in the preceding sentence by any
director or employee of the Company or any of its subsidiaries or any
investment banker, financial advisor, attorney, accountant or other advisor,
representative or agent of the Company or any of its subsidiaries, whether or
not such person is purporting to act on behalf of the Company or any of its
subsidiaries or otherwise, shall be deemed to be a breach of this Section
5.02(a) by the Company. For purposes of this Agreement, "Takeover Proposal"
means any inquiry, proposal or offer from any person relating to any direct or
indirect acquisition or purchase in any manner of a substantial amount of
assets of the Company and subsidiaries (taken as a
<PAGE> 31
26
whole) or an interest in any substantial amount of voting securities of the
Company or any Significant Subsidiary, any tender offer or exchange offer that
if consummated would result in any person beneficially owning any voting
securities of the Company or Significant Subsidiary, any merger, consolidation,
business combination, sale of all or substantially all the assets,
recapitalization, liquidation, dissolution or similar transaction involving the
Company or any of its subsidiaries, other than the transactions contemplated by
the Operative Agreements, or any other transaction the consummation of which
could reasonably be expected to impede, interfere with, prevent or materially
delay the Offer or the Merger or that would reasonably be expected to dilute
materially the benefits to Parent or Sub of the transactions contemplated by
the Operative Agreements.
(b) Except as set forth in this Section 5.02(b), neither the
Board of Directors of the Company nor any committee thereof may (i) withdraw or
modify, or propose to withdraw or modify, in a manner adverse to Parent or Sub,
the adoption, approval or recommendation by such Board of Directors or any such
committee of the Offer, this Agreement or the Merger, (ii) approve or
recommend, or propose to approve or recommend, any Takeover Proposal or (except
pursuant to Section 6.04(a)) take any action, or make any determination, under
the Rights Agreement to facilitate any Takeover Proposal or (iii) cause or
permit the Company to enter into any agreement with respect to any Takeover
Proposal. Notwithstanding the foregoing, in the event that prior to the
acceptance for payment of Shares pursuant to the Offer, the Board of Directors
of the Company determines in good faith, after consultation with outside
counsel, that it is necessary to do so in order to comply with its fiduciary
duties to the Company's shareholders under applicable law, the Board of
Directors of the Company may withdraw or modify its adoption, approval or
recommendation of the Offer, this Agreement and the Merger at any time
following Parent's receipt of written notice (a "Notice of Superior Proposal")
advising Parent that the Board of Directors of the Company has received a
Superior Proposal and identifying the person making such Superior Proposal.
For purposes of this Agreement, a "Superior Proposal" means any bona fide
Takeover Proposal for all outstanding Shares on terms that the Board of
Directors of the Company determines in its good faith judgment (based on the
written opinion of R-H or another financial advisor of nationally recognized
reputation, which opinion takes into account all the terms and conditions of
the Takeover Proposal, including any break-up fees, expense reimbursement
provisions and conditions to consummation) are not more favorable to the person
or persons making such Takeover Proposal and provide greater present value to
all the Company's shareholders, in each case, than this Agreement, the Offer
and the Merger taken as a whole.
(c) In addition to the obligations of the Company set forth
in Sections 5.02(a) and 5.02(b), the Company shall immediately advise Parent
orally and in writing of any request for information or of any Takeover
Proposal, or any inquiry with respect to or which could lead to any Takeover
Proposal, the material terms and conditions of such request, Takeover Proposal
or inquiry and the identity of the person making such request, Takeover
Proposal or inquiry. The Company shall keep Parent fully informed of the
status and
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27
material terms (including amendments or proposed amendments) of any such
request, Takeover Proposal or inquiry.
(d) Nothing contained in this Section 5.02 shall prohibit the
Company from taking and disclosing to its shareholders a position contemplated
by Rule 14e-2(a) promulgated under the Exchange Act or from making any
disclosure to the Company's shareholders if the Board of Directors of the
Company determines in good faith, after consultation with outside counsel,
failure so to disclose would be inconsistent with its fiduciary duties to the
Company's shareholders under applicable law; provided, however, that neither
the Company nor its Board of Directors nor any committee thereof shall, except
as permitted by Section 5.02(b), withdraw or modify, or propose to withdraw or
modify, its position with respect to the Offer, this Agreement or the Merger or
approve or recommend, or propose to approve or recommend, a Takeover Proposal.
ARTICLE VI
Additional Agreements
SECTION 6.01. Shareholder Approval; Preparation of Proxy
Statement. (a) If shareholder approval of this Agreement is required by law,
the Company shall, at Parent's request, as soon as practicable following the
expiration of the Offer, duly call, give notice of, convene and hold a meeting
of its shareholders (the "Shareholders Meeting") for the purpose of approving
this Agreement, including the appropriate Plan of Merger contained herein, and
the transactions contemplated by the Operative Agreements. The Company shall,
through its Board of Directors, recommend to its shareholders approval of this
Agreement, including the appropriate Plan of Merger contained herein, and the
transactions contemplated by the Operative Agreements, except to the extent
that the Board of Directors of the Company shall have withdrawn or modified its
approval or recommendation of the Offer, this Agreement or the Merger as
permitted by Section 5.02(b). Without limiting the generality of the
foregoing, the Company agrees that its obligations pursuant to the first
sentence of this Section 6.01(a) shall not be affected by (i) the commencement,
public proposal, public disclosure or communication to the Company of any
Takeover Proposal or (ii) the withdrawal or modification by the Board of
Directors of the Company of its approval or recommendation of the Offer, this
Agreement or the Merger. If requested by Parent, the Company shall from time
to time postpone or adjourn the Shareholders Meeting to allow Parent and the
Company additional time to seek proxies in favor of approval of this Agreement,
including the appropriate Plan of Merger contained herein, and the transactions
contemplated by the Operative Agreements.
(b) If shareholder approval of this Agreement is required by
law, the Company shall, at Parent's request, as soon as practicable following
the expiration of the Offer, prepare and file a preliminary Proxy Statement
with the SEC and shall use its best efforts to respond to any comments of the
SEC or its staff and to cause the Proxy Statement
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28
to be mailed to the Company's shareholders as promptly as practicable after
such filing. The Company shall 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 shall 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
shareholders there shall occur any event that should be set forth in an
amendment or supplement to the Proxy Statement, the Company shall promptly
prepare and mail to its shareholders such an amendment or supplement. The
Company shall not mail any Proxy Statement, or any amendment or supplement
thereto, to which Parent reasonably objects.
(c) Parent shall cause all Shares purchased pursuant to the
Offer and all other Shares owned by Sub or any other subsidiary of Parent to be
voted in favor of the approval of this Agreement.
SECTION 6.02. Access to Information; Confidentiality. (a)
The Company shall, and shall cause each of its subsidiaries to, afford to
Parent, and to Parent's officers, employees, accountants, counsel, financial
advisors and other representatives, reasonable access during normal business
hours during the period prior to the Effective Time of the Merger to all their
respective properties, books, contracts, commitments, personnel and records
and, during such period, the Company shall, and shall cause each of its
subsidiaries to, furnish promptly to Parent (i) 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 and
(ii) all other information concerning its business, properties and personnel as
Parent may reasonably request.
(b) Except as required by law, Parent shall hold, and shall
cause its officers, employees, accountants, counsel, financial advisors and
other representatives and affiliates to hold, any nonpublic information in
confidence until such time as such information otherwise becomes publicly
available (otherwise than through the wrongful act of any such person) and
shall use its best efforts to ensure that such persons do not disclose such
information to others without the prior written consent of the Company. In the
event of termination of this Agreement for any reason, Parent shall promptly
return or destroy all documents containing nonpublic information so obtained
from the Company or any of its subsidiaries and any copies made of such
documents. The Company or its representatives have requested the return or
destruction of confidential information of the Company provided by the Company
or its representatives from each of the parties that executed confidentiality
or standstill agreements following public announcement of the Existing Offer
and shall not waive, amend or modify any provision of any such agreement
without the prior written consent of Parent.
SECTION 6.03. Best Efforts; Notification. (a) Upon the
terms and subject to the conditions set forth in this Agreement, unless, to the
extent permitted by Section 5.02(b), the Board of Directors of the Company
approves or recommends a Superior
<PAGE> 34
29
Proposal, 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 the Operative Agreements, including (i) the obtaining of all necessary
actions or nonactions, waivers, consents and approvals from Governmental
Entities and the making of all necessary registrations and filings (including
filings with Governmental Entities, 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 Entity, (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 any Operative Agreement or the consummation of any
of the transactions contemplated by the Operative Agreements, including seeking
to have any stay or temporary restraining order entered by any court or other
Governmental Entity vacated or reversed and (iv) the execution and delivery of
any additional instruments necessary to consummate the transactions
contemplated by, and to fully carry out the purposes of, the Operative
Agreements. In connection with and without limiting the foregoing, the Company
and its Board 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, any Operative Agreement or any of the
other transactions contemplated by the Operative Agreements and (ii) if any
state takeover statute or similar statute or regulation becomes applicable to
the Offer, the Merger, any Operative Agreement or any other transaction
contemplated by any Operative Agreement, take all action necessary to ensure
that the Offer, the Merger and the other transactions contemplated by the
Operative Agreements may be consummated as promptly as practicable on the terms
contemplated by the Operative Agreements and otherwise to minimize the effect
of such statute or regulation on the Offer, the Merger and the other
transactions contemplated by the Operative Agreements. Notwithstanding the
foregoing, the Board of Directors of the Company shall not be prohibited from
taking any action permitted by Section 5.02(b).
(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 or (ii) the failure by it to comply with or
satisfy in any material respect 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. Rights Agreement. (a) At the request of
Parent upon five business days' prior written notice, the Board of Directors of
the Company shall redeem the Rights prior to the Effective Time of the Merger.
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30
(b) Except with the prior written consent of Parent, the
Board of Directors of the Company shall not (i) amend the Rights Agreement or
(ii) take any action with respect to, or make any determination under, the
Rights Agreement, in each case that could have the effect of rendering the
Rights applicable to the Offer, the Merger Agreement, or any of the other
transactions contemplated by the Operative Agreements, including any amendment
or supplement to the Offer that includes a cash Offer Price that is not less
than $17.25 per Share for all Shares.
SECTION 6.05. Stock Options. (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 employee stock options to purchase
Shares ("Employee Options") and all outstanding stock appreciation rights
("SARs") heretofore granted under any stock option or stock appreciation rights
plan, program or arrangement of the Company (collectively, the "Stock Plans")
to provide that each Employee Option (and any SAR related thereto) outstanding
immediately prior to the acceptance for payment of Shares pursuant to the
Offer, including all vested and unvested Employee Options, shall be cancelled
in exchange for a cash payment by the Company immediately prior to the
Effective Time of the Merger of an amount equal to (i) the excess, if any, of
(x) the Offer Price over (y) the exercise price per Share subject to such
Employee Option, multiplied by (ii) the number of Shares for which such
Employee Option shall not theretofore have been exercised (the "Option
Consideration").
(b) All amounts payable pursuant to this Section 6.05 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 Employee Options as shall be necessary to effectuate the
foregoing to any such holder. Notwithstanding anything to the contrary
contained in this Agreement, payment shall, at Parent's request, be withheld in
respect of any Employee Option until any necessary consent of such holder is
obtained.
(c) The Stock Plans shall terminate as of the Effective Time
of the Merger, and the provisions in any other Benefit Plan providing for the
issuance, transfer or grant of any capital stock of the Company or any interest
in respect 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 an Employee Option or SAR or any
participant in any Stock Plan or other Benefit Plan shall have any right
thereunder to acquire any capital stock of the Company or the Surviving
Corporation.
SECTION 6.06. Benefit Plans. (a) Except as provided in
Section 6.05(c), Parent shall cause the Surviving Corporation to maintain for a
period of one year after the Effective Time of the Merger the Benefit Plans of
the Company and its subsidiaries in effect on the date of this Agreement or to
provide benefits for such period to employees of the Company and its
subsidiaries that are not materially less favorable in the aggregate to such
employees than those in effect on the date of this Agreement.
<PAGE> 36
31
(b) Parent shall cause the Surviving Corporation to honor all
severance policies and agreements, deferred compensation agreements, employment
agreements and death benefit agreements with the Company's officers and
employees disclosed in Section 4.01(j) of the Company Disclosure Letter,
including the proposed additional agreements and modifications described in
Section 4.01(j) of the Company Disclosure Letter; provided, however, that in no
event shall the liability of the Surviving Corporation for severance,
post-termination health and other benefits, deferred compensation and
acceleration of non-vested stock options under all such policies and agreements
exceed $12.5 million. Parent acknowledges that the transactions contemplated
by the Operative Agreements will constitute a change of control for purposes of
the agreements described in the preceding sentence.
(c) For purposes of the Company's Annual Bonus Plan for the
fiscal year ending February 1, 1997, Parent acknowledges that (i) the Company
shall be deemed to have achieved all targets under such Plan and (ii) any
employee of the Company whose employment with the Company is terminated by the
Company (other than termination for dishonesty or violation of Company policy)
or who terminates his or her employment with the prior written consent of the
Company following consummation of the Offer and prior to February 1, 1997,
shall upon termination be fully vested under such Plan for fiscal year 1997;
provided, however, that the liability of the Company under such Plan shall be
$1,060,000 less any amounts attributable to employees who terminate their
employment prior to February 1, 1997, without the prior written consent of
Parent or whose employment with the Company is terminated prior to such date
for dishonesty or violation of Company policy.
(d) For purposes of the Company's Profit Sharing Plan for the
fiscal year ending February 1, 1997, Parent acknowledges that the Company shall
make a discretionary contribution for such fiscal year in an aggregate amount
of $3,100,000.
SECTION 6.07. Indemnification. Parent and Sub agree that all
rights to indemnification for acts or omissions occurring prior to the
Effective Time of the Merger now existing in favor of the current or former
directors or officers of the Company and its subsidiaries as provided in their
respective certificates of incorporation or by-laws shall survive the Merger
and shall continue in full force and effect in accordance with their terms for
a period of not less than six years from the Effective Time of the Merger.
Parent shall cause to be maintained for a period of not less than six years
from the Effective Time of the Merger the Company's current directors' and
officers' insurance and indemnification policy to the extent that it provides
coverage for events occurring prior to the Effective Time of the Merger (the
"D&O Insurance") for all persons who are directors and officers of the Company
on the date of this Agreement, so long as the annual premium therefor would not
be in excess of 225% of the last annual premium paid prior to the date of this
Agreement (such 225% amount, the "Maximum Premium"). If the existing D&O
Insurance expires, is terminated or cancelled during such six-year period,
Parent will use all reasonable efforts to cause to be obtained as much D&O
Insurance as can be obtained for the remainder of such
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32
period for an annualized premium not in excess of the Maximum Premium, on terms
and conditions no less advantageous than the existing D&O Insurance. The
Company represents to Parent that the Maximum Premium is $315,000.
SECTION 6.08. Directors. Promptly upon the acceptance for
payment of, and payment by Sub for, any Shares 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 and the ABCA, 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
(giving effect to the directors elected pursuant to this sentence) multiplied
by (b) the percentage that (i) such number of Shares so accepted for payment
and paid for by Sub plus the number of Shares otherwise owned by Sub or any
other subsidiary of Parent bears to (ii) the number of such shares outstanding,
and the Company shall, at such time, cause Sub's designees to be so elected;
provided, however, that in the event that Sub's designees are appointed or
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 (the "Continuing Directors"); and
provided further that, in such event, if the number of Continuing Directors
shall be reduced below three for any reason whatsoever, any remaining
Continuing Directors (or Continuing Director, if there shall be only one
remaining) shall be entitled to designate persons to fill such vacancies who
shall be deemed to be Continuing Directors for purposes of this Agreement or,
if no Continuing Directors then remain, the other directors shall designate
three persons to fill such vacancies who shall not be officers, shareholders or
affiliates of the Company, Parent or Sub, and such persons shall be deemed to
be Continuing Directors for purposes of this Agreement. Subject to applicable
law, the Company shall take all action requested by Parent necessary to effect
any such election, including mailing to its shareholders 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 shall 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 6.09. Fees and Expenses. (a) Except as set forth
below, all fees and expenses incurred in connection with the Offer, the Merger,
this Agreement and the transactions contemplated by the Operative Agreements,
including all fees and expenses in connection with all litigation subject to
Sections 6.11 and 6.12, shall be paid by the party incurring such fees or
expenses, whether or not the Offer or the Merger is consummated.
(b) The Company shall pay to Parent upon demand in cash a fee
of $15 million (the "Termination Fee"), payable in same day funds, if:
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33
(i) this Agreement is terminated pursuant to Section
8.01(b)(ii) as a result of the failure of any condition set forth in
paragraph (d) (other than clause (ii)(A) thereof), (e) or (f) of
Exhibit A;
(ii)(v) after the date of this Agreement, any person or
"group" (within the meaning of Section 13(d)(3) of the Exchange Act)
publicly makes a Takeover Proposal or amends a Takeover Proposal made
prior to the date of this Agreement or discloses its intention to do
either of the foregoing, in any case (A) at an all-cash price in
excess of $17.25 per Share or (B) for non-cash consideration or a
combination of cash and non-cash consideration, (w) the Offer remains
open for the period contemplated by Section 1.01, (x) the Minimum
Tender Condition is not satisfied at such expiration date, (y) this
Agreement is thereafter terminated pursuant to Section 8.01(b)(ii),
and (z) either (A) the Board of Directors of the Company, within five
business days of being requested to do so by Parent, failed to both
reaffirm its recommendation of the Offer and the Merger and recommend
rejection of such Takeover Proposal on the grounds that it is not in
the best interests of the Company and its shareholders (such request
having been made following the making of such Takeover Proposal, such
amendment or such public disclosure and at least five business days
prior to expiration of the Offer) or (B) within twelve months after
such termination the Company enters into a definitive agreement
providing for a Takeover Proposal or a Takeover Proposal is
consummated; or
(iii) this Agreement is terminated pursuant to Section
8.01(c).
(c) If this Agreement is terminated as a result of a wilful
and material breach of this Agreement by Parent or Sub, Parent shall pay the
Company in cash, payable in same day funds, $5 million (the "Expenses") in lieu
of reimbursement of the Company for all fees and expenses incurred or paid by
or on behalf of it or any of its affiliates in connection with the Offer, the
Merger or the consummation of any of the transactions contemplated by the
Operative Agreements. If this Agreement is terminated pursuant to Section
8.01(b)(ii) as a result of the failure of the Minimum Tender Condition (except
under circumstances described in Section 6.09(b)(ii)) or pursuant to Section
8.01(d), the Company shall pay Parent in cash, payable in same day funds, the
Expenses. Any amount actually paid by the Company pursuant to the immediately
preceding sentence shall be a credit against any amounts subsequently due from
the Company pursuant to Section 6.09(b)(ii).
SECTION 6.10. Public Announcements. Parent and Sub, on the
one hand, and the Company, on the other hand, shall 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 the Operative Agreements, 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 any
national securities exchange.
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34
SECTION 6.11. Dismissal of Litigation. Each of the parties
shall promptly enter into stipulations dismissing without prejudice all
litigation currently pending between them or their respective affiliates and
representatives, or commenced by or on behalf of any of them in connection with
the Offer, and promptly to cause such stipulations to be filed in connection
with such litigation. Each such stipulation shall provide that the relevant
litigation shall be deemed to be dismissed with prejudice from and after the
Effective Time of the Merger. In addition, (a) the Company shall not reinstate
(or permit its affiliates or representatives to reinstate) any such litigation
so long as Parent and Sub are not in material breach of their respective
obligations under this Agreement and (b) each of Parent and Sub shall not
reinstate (or permit its affiliates or representatives to reinstate) any such
litigation so long as the Company is not in material breach of its obligations
under this Agreement.
SECTION 6.12. Shareholder Litigation. The Company shall give
Parent the opportunity to participate in the defense or settlement of any
shareholder litigation against the Company or its directors or officers
relating to any of the transactions contemplated by the Operative Agreements;
provided, however, that no such settlement shall be agreed to without Parent's
consent, which shall not be unreasonably withheld.
ARTICLE VII
Conditions Precedent
SECTION 7.01. Conditions to Each Party's Obligation To Effect
the Merger. The respective obligation of each party to effect the Merger is
subject to the satisfaction or waiver on or prior to the Closing Date of the
following conditions:
(a) Shareholder Approval. If required by applicable law,
this Agreement and the appropriate Plan of Merger contained herein
shall have been approved and adopted by the affirmative vote or
consent of the holders of two-thirds of the outstanding Shares in
accordance with the ABCA and the Company's Articles (Certificate) of
Incorporation.
(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 arising under the authority of any Governmental Entity
preventing the 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.
SECTION 7.02. Conditions to Obligations of Parent and Sub.
The obligations of Parent and Sub to effect the Merger are further subject to
the condition that there shall not be pending any suit, action or proceeding by
any Governmental Entity that has
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35
a substantial likelihood of success (other than any suit, action or proceeding
pending on the date of consummation of the Offer), (i) challenging the
acquisition by Parent or Sub of any Shares, seeking to restrain or prohibit the
consummation of the Merger or any of the other transactions contemplated by any
Operative Agreement, or seeking to obtain from the Company, Parent or Sub any
damages that are material in relation to the Company and its subsidiaries taken
as a whole, (ii) seeking to prohibit or limit 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 transactions
contemplated by any Operative Agreement, (iii) seeking to impose limitations on
the ability of Parent or Sub to acquire or hold, or exercise full rights of
ownership of, any Shares, including, without limitation, the right to vote the
Common Stock purchased by it on all matters properly presented to the
shareholders of the Company or (iv) seeking to prohibit Parent or any of its
subsidiaries from effectively controlling in any material respect the business
or operations of the Company or its subsidiaries.
ARTICLE VIII
Termination, Amendment and Waiver
SECTION 8.01. Termination. This Agreement may be terminated
at any time prior to the Effective Time of the Merger, whether before or after
approval of matters presented in connection with the Merger by the shareholders
of the Company:
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company:
(i) if, upon a vote at a duly held Shareholders
Meeting or any adjournment thereof at which Parent voted all
Shares beneficially owned by it in accordance with this
Agreement, any required approval of the Shareholders of the
Company shall not have been obtained; provided, however, that
the Company shall not have the right to terminate this
Agreement pursuant to this Section 8.01(b)(i) if (A) any
Shares beneficially owned on the date of this Agreement by any
shareholder party to the Support Agreement that are not
purchased pursuant to the Offer are not voted in favor of the
Merger and such approval would have been obtained had all such
Shares been so voted or (B) the Company is in violation of
Section 5.02, 6.01 or 6.03;
(ii) if, as the result of the failure of any of the
conditions set forth in Exhibit A to this Agreement, the Offer
shall have terminated or expired in
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36
accordance with its terms without Sub having purchased any
Shares pursuant to the Offer; provided, however, 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, or breach of any
provisions of, any Operative Agreement results in the failure
of any such condition; or
(iii) 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 pursuant to the Offer or the Merger and such order,
decree, ruling or other action shall have become final and
nonappealable;
(c) by the Company if (i) the Company shall have given Parent
a Notice of Superior Proposal with respect to a Takeover Proposal,
(ii) at least five business days later, the Board of Directors of the
Company shall have determined in good faith (based on the written
opinion of R-H or another financial advisor of nationally recognized
reputation, which opinion takes into account all the terms of such
Takeover Proposal, including any break-up fees, expense reimbursement
provisions and conditions to consummation) that the terms of such
Takeover Proposal are not more favorable to the person or persons
making such Takeover Proposal and provide greater present value to all
the Company's shareholders, in each case, than this Agreement, the
Offer and the Merger taken as a whole in light of any improved terms
proposed by Parent or Sub prior to the expiration of such five
business day period and (iii) the Company has paid to Parent the
Termination Fee pursuant to Section 6.09(b)(ii); or
(d) by Parent if it shall have received a Notice of Superior
Proposal pursuant to Section 5.02(b).
SECTION 8.02. Effect of Termination. In the event of
termination of this Agreement by either the Company or Parent 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 Parent, Sub or the Company,
other than the provisions of Section 4.01(r), Section 4.02(d), Section 6.02(b),
Section 6.04(b) (other than following termination of this Agreement by Parent
or Sub), Section 6.09, this Section 8.02 and Article IX and except to the
extent that such termination results from the wilful and material breach by a
party of any of its representations, warranties, covenants or agreements set
forth in the Operative Agreements.
SECTION 8.03. Amendment. 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 shareholders 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 shareholders without
the further approval of such shareholders. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties.
<PAGE> 42
37
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 hereafter or the duly authorized designee of such members; provided,
however, that in the event that Sub's designees are appointed or elected to the
Board of Directors of the Company as provided in Section 6.08, after the
acceptance for payment of Shares pursuant to the Offer and prior to the
Effective Time of the Merger, the affirmative vote of a majority of the
Continuing Directors, in lieu of the vote required pursuant to clause (b)
above, shall be required by the Company to (i) amend or terminate this
Agreement, (ii) exercise or waive any of the Company's rights or remedies under
this Agreement or (iii) extend the time for performance of Parent's and Sub's
respective obligations under this Agreement.
ARTICLE IX
General Provisions
SECTION 9.01. Nonsurvival of Representations and Warranties.
None of the representations and warranties in this Agreement or in any
instrument delivered pursuant to this Agreement shall survive the Effective
Time of the Merger. This Section 9.01 shall not limit any covenant or
agreement of the parties which by its terms contemplates performance after the
Effective Time of the Merger.
SECTION 9.02. Notices. All notices, requests, claims,
demands and other communications under this Agreement shall be in writing and
shall be deemed given if delivered personally, sent by overnight courier
(providing proof of delivery) or faxed to the
<PAGE> 43
38
parties at the following addresses or fax numbers (or at such other address or
fax number for a party as shall be specified by like notice):
(a) if to Parent or Sub, to:
Revco D.S., Inc.
1925 Enterprise Parkway
Twinsburg, OH 44087
Fax: (216) 487-1679
Attention: Jack A. Staph, Esq.
with a copy to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019-7475
Fax: (212) 474-3700
Attention: Richard Hall, Esq.
(b) if to the Company, to:
Big B, Inc.
2600 Morgan Road
Bessemer, AL 35023
Fax: (205) 425-3525
Attention: Mr. Anthony J. Bruno
with copies to:
Sirote & Permutt
2222 Arlington Avenue South
Birmingham, AL 35205
Fax: (205) 930-5301
Attention: Richard Cohn, Esq.
<PAGE> 44
39
and
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, NY 10022
Fax: (212) 735-2000
Attention: Randall H. Doud, Esq.
SECTION 9.03. Definitions. For purposes of this Agreement:
An "affiliate" of any person means another person that
directly or indirectly, through one or more intermediaries, controls,
is controlled by, or is under common control with, such first person;
"material adverse change" or "material adverse effect" means,
when used in connection with the Company or Parent, any change or
effect (or any development that, insofar as can reasonably be
foreseen, is likely to result in any change or effect) that is
materially adverse to the business, properties, assets, condition
(financial or otherwise), results of operations or prospects of such
party and its subsidiaries taken as a whole;
"person" means an individual, corporation, partnership, joint
venture, association, trust, unincorporated organization or other
entity;
A "subsidiary" of any person means another person, an amount
of the voting securities, other voting ownership or voting partnership
interests of which is sufficient to elect at least a majority of its
Board of Directors or other governing body (or, if there are no such
voting Interests, 50% or more of the equity interests of which) is
owned directly or indirectly by such first person;
SECTION 9.04. Interpretation. When a reference is made in
this Agreement to a Section, Exhibit or Schedule, such reference shall be to a
Section of, or an Exhibit or Schedule to, this Agreement unless otherwise
indicated. The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include", "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation".
SECTION 9.05. Counterparts. This Agreement may be executed
in one or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when one or more counterparts have been
signed by each of the parties and delivered to the other parties.
<PAGE> 45
40
SECTION 9.06. Entire Agreement; No Third-Party Beneficiaries.
The Operative Agreements (a) constitute the entire agreement, and supersedes
all prior agreements and understandings, both written and oral, among the
parties with respect to the subject matter of the Operative Agreements
(including the Confidentiality Agreement which is hereby terminated) and (b)
except for the provisions of Article III and Sections 6.06 and 6.07, are not
intended to confer upon any person other than the parties any rights or
remedies hereunder.
SECTION 9.07. Governing Law. This Agreement shall be
governed by, and construed in accordance with, the laws of the State of
Delaware (except to the extent that Alabama law mandatorily applies),
regardless of the laws that might otherwise govern under applicable principles
of conflict of laws thereof.
SECTION 9.08. Assignment. Neither this Agreement nor any of
the rights, interests or obligations under this Agreement shall be assigned, in
whole or in part, by operation of law or otherwise by any of the parties
without the prior written consent of the other parties, except that Sub may
assign, in its sole discretion, any of or all its rights, interests and
obligations under this Agreement to Parent or to any direct or indirect wholly
owned subsidiary of Parent, but no such assignment shall relieve Sub of any of
its obligations under this Agreement. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of, and be enforceable by,
the parties and their respective successors and assigns.
<PAGE> 46
41
SECTION 9.09. Enforcement. Each of the parties hereto (a)
consents to submit itself to the personal jurisdiction of any Federal court
located in the State of New York in the event any dispute arises out of any
Operative Agreement or any of the transactions contemplated by any Operative
Agreement, (b) agrees that it will not attempt to deny or defeat such personal
jurisdiction by motion or other request for leave from any such court and (c)
agrees that it will not bring any action relating to any Operative Agreement or
any of the transactions contemplated by any Operative Agreement in any court
other than a Federal or state court sitting in the State of New York.
IN WITNESS WHEREOF, Parent, Sub and the Company have caused
this Agreement to be signed by their respective officers thereunto duly
authorized, all as of the date first written above.
REVCO D.S., INC.,
by /s/ BRIAN P. CARNEY
----------------------------------------
Name: Brian P. Carney
Title: Senior Vice President, Finance
RDS ACQUISITION INC.,
by /s/ BRIAN P. CARNEY
----------------------------------------
Name: Brian P. Carney
Title: Treasurer
BIG B, INC.,
by /s/ ANTHONY J. BRUNO
----------------------------------------
Name: Anthony J. Bruno
Title: Chairman and Chief Executive Officer
<PAGE> 47
1
EXHIBIT A
Conditions of the Offer
Notwithstanding any other term of the Offer or this 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 after
the termination or withdrawal of the Offer), to pay for any Shares tendered
pursuant to the Offer unless there shall have been validly tendered and not
withdrawn prior to the expiration of the Offer that number of Shares which
would represent at least a majority of the Fully Diluted Shares (the "Minimum
Tender Condition"). The term "Fully Diluted Shares" means all outstanding
securities entitled generally to vote in the election of directors of the
Company on a fully diluted basis, after giving effect to the exercise or
conversion of all options, rights and securities exercisable or convertible
into such voting securities, other than potential dilution attributable to the
Rights. Furthermore, notwithstanding any other term of the Offer or this
Agreement, Sub shall not be required to accept for payment or, subject as
aforesaid, to pay for any Shares not theretofore accepted for payment or paid
for, and may terminate or amend the Offer, with the consent of the Company or
if, at any time on or after the date of this Agreement and before the
acceptance of such Shares for payment or the payment therefor, any of the
following conditions exists:
(a) there shall be threatened by any Governmental Entity, or
there shall be instituted or pending any suit, action, proceeding,
application or counterclaim by any Governmental Entity or any other
person, or before any court or governmental authority, agency or
tribunal, domestic or foreign, in each case that has a substantial
likelihood of success, (i) challenging the acquisition by Parent or
Sub of any Shares, seeking to restrain or prohibit the making or
consummation of the Offer or the Merger or the performance of any of
the other transactions contemplated by any Operative Agreement, or
seeking to obtain from the Company, Parent or Sub any damages that are
material in relation to the Company and its subsidiaries taken as
whole, (ii) seeking to prohibit or limit 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 Offer or
any of the other transactions contemplated by any Operative Agreement,
(iii) seeking to impose limitations on the ability of Parent or Sub to
acquire or hold, or exercise full rights of ownership of, any Shares,
including, without limitation, the right to vote the Shares purchased
by it on all matters properly presented to the shareholders of the
Company, (iv) seeking to prohibit Parent or any of its subsidiaries
from effectively controlling in any material respect the business or
operations of the Company or its subsidiaries, or (v) which otherwise
is reasonably likely to have a
<PAGE> 48
2
material adverse effect on the business, properties, assets, condition
(financial or otherwise), results of operations or prospects of the
Company and its subsidiaries taken as a whole;
(b) there shall be any statute, rule, regulation, legislation,
interpretation, judgment, order or injunction enacted, entered,
enforced, promulgated, amended or issued with respect to, or deemed
applicable to, or any consent or approval withheld with respect to,
(i) Parent, the Company or any of their respective subsidiaries or
(ii) the Offer, the Merger or any of the other transactions
contemplated by the Operative Agreements, by any Governmental Entity
or before any court or governmental authority, agency or tribunal,
domestic or foreign, that is reasonably likely to result, directly or
indirectly, in any of the consequences referred to in clauses (i)
through (v) of paragraph (a) above;
(c) there shall have occurred any material adverse change in
the Company, or any development that, insofar as reasonably can be
foreseen, has resulted in or is reasonably likely to result in a
material adverse change in the Company, other than any change arising
from general economic or industry conditions;
(d)(i) it shall have been publicly disclosed or Parent shall
have otherwise learned that beneficial ownership (determined for the
purposes of this paragraph as set forth in Rule 13d-3 promulgated
under the Exchange Act) of more than 50% of the outstanding Shares has
been acquired by another person, entity or "group" (within the meaning
of Section 13(d)(3) of the Exchange Act) other than acquisitions for
bona fide arbitrage purposes only and other than as disclosed in a
Schedule 13D or 13G on file with the SEC prior to the date of this
Agreement, (ii) the Board of Directors of the Company or any committee
thereof shall have (A) withdrawn or modified in a manner adverse to
Parent or Sub its approval or recommendation of the Offer, the Merger
or this Agreement, (B) approved or recommended any Takeover Proposal
or (C) taken any action, or made any determination, under the Rights
Agreement to facilitate any Takeover Proposal, (iii) the Company shall
have entered into any agreement with respect to any Takeover Proposal
or (iv) the Board of Directors of the Company or any committee thereof
shall have resolved to do any of the foregoing;
(e) any of the representations and warranties of the Company
set forth in this 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;
<PAGE> 49
3
(f) the Company shall have failed to perform in any material
respect any obligation or to comply in any material respect with any
agreement or covenant of the Company to be performed or complied with
by it under this Agreement; or
(g) this Agreement shall have been terminated in accordance
with its terms.
The foregoing conditions are for the sole benefit of Sub and
Parent and, subject to Section 1.01(a), 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.
<PAGE> 50
1
EXHIBIT B
[FORM OF]
Plan of Merger
SECTION 1.01. Constituent Corporations. RDS Acquisition
Inc., a Delaware corporation ("Sub"), and Big B, Inc., an Alabama corporation
(the "Company"), constitute the constituent corporations of this Plan of
Merger.
SECTION 1.02. The Merger. Upon the terms and subject to the
conditions set forth in this Plan of Merger, and in accordance with the
Delaware General Corporation Law (the "DGCL") and the Alabama Business
Corporation Act (the "ABCA"), Sub shall be merged with and into the Company at
the Effective Time of the Merger (as defined below). Following a merger
pursuant to this Section 1.02 (the "Merger"), the separate corporate existence
of Sub shall cease and 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 ABCA.
SECTION 1.03. Effective Time. The Merger shall become
effective at such date and time as this Plan of Merger and any other required
documents (collectively, the "Certificates of Merger") are duly filed with the
Delaware Secretary of State and the Alabama Secretary of State (the time the
Merger becomes effective being the "Effective Time of the Merger").
SECTION 1.04. Effects of the Merger. The Merger shall have
the effects set forth in Section 259 of the DGCL and Section 11.06 of the ABCA.
SECTION 1.05. Certificate of Incorporation and By-laws. (a)
The Articles (Certificate) of Incorporation of the Company, as in effect
immediately prior to the Effective Time of the Merger, shall be amended as of
the Effective Time of the Merger so that the first paragraph of Article IV of
such Articles (Certificate) of Incorporation reads in its entirety as follows:
"The total number of shares of all classes of stock that the corporation shall
have authority to issue is 1,000 shares, par value $0.001 per share." and, as
so amended, shall be the Articles (Certificate) of Incorporation of the
Surviving Corporation until thereafter changed or amended as provided therein
or by applicable law.
(b) The By-laws of the Company as in effect at the Effective
Time of the Merger shall be the By-laws of the Surviving Corporation until
thereafter changed or amended as provided therein or by applicable law.
SECTION 1.06. Directors. The directors of Sub at the
Effective Time of the Merger shall be the directors of the Surviving
Corporation, until the earlier of
<PAGE> 51
2
their resignation or removal or until their respective successors are duly
elected and qualified, as the case may be.
SECTION 1.07. Officers. The officers of the Company at the
Effective Time of the Merger shall be the officers of the Surviving
Corporation, until the earlier of their resignation or removal or until their
respective successors are duly elected and qualified, as the case may be.
SECTION 1.08. Effect on Capital Shares. As of 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, par value $0.001 per share, of the
Company (the "Common Stock"; the Common Stock and the associated common stock
purchase rights (the "Rights") issued pursuant to the Rights Agreement dated as
of September 23, 1996, as amended, being hereinafter collectively referred to as
the "Shares") or any shares of capital stock of Sub:
(a) Capital Stock of Sub. Each issued and outstanding share
of the capital stock of Sub shall be converted into and become one
fully paid and nonassessable share of common stock of the Surviving
Corporation.
(b) Cancellation of Treasury Shares and Parent Owned Shares.
Each Share that is owned by the Company or by any subsidiary of the
Company and each Share that is owned by Revco D.S., Inc., a Delaware
corporation ("Parent"), Sub or any other subsidiary of Parent
(together, in each case, with the associated Right) shall
automatically be cancelled and retired and shall cease to exist, and
no consideration shall be delivered in exchange therefor.
(c) Conversion of Shares. Subject to Section 1.08(d), each
issued and outstanding Share (other than Shares to be cancelled in
accordance with Section 1.08(b)) together with the associated Right
shall be converted into the right to receive from the Surviving
Corporation in cash, without interest, $17.25 (the "Merger
Consideration"). As of the Effective Time of the Merger, all such
Shares (and the associated Rights) shall no longer be outstanding and
shall automatically be cancelled and retired and shall cease to exist,
and each holder of a certificate representing any such Shares (and the
associated Rights) shall cease to have any rights with respect
thereto, except the right to receive the Merger Consideration, without
interest.
(d) Shares of Dissenting Shareholders. Notwithstanding
anything in this Agreement to the contrary, any issued and outstanding
Shares held by persons who object to the Merger and comply with all
the provisions of Alabama law concerning the right of holders of
Shares to dissent from the Merger and obtain payment of the fair value
of their Shares ("Dissenting
<PAGE> 52
3
Shareholders"), shall not be converted as described in Section 1.08(c)
but shall become the right to receive such consideration as may be
determined to be due to such Dissenting Shareholder pursuant to the
laws of the State of Alabama; provided, however, that the Shares
(together with the associated Rights) outstanding immediately prior to
the Effective Time of the Merger and held by a Dissenting Shareholder
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 ABCA, shall be deemed to be converted as of the Effective Time
of the Merger, into the right to receive the Merger Consideration.
SECTION 1.09. Exchange of Certificates. (a) Paying Agent.
[ ] is the paying agent (the "Paying Agent") for the payment of the Merger
Consideration upon surrender of certificates representing Shares.
(b) Parent to Provide Funds. 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 pursuant to Section 1.08.
(c) Exchange Procedure. As soon as reasonably practicable
after the Effective Time of the Merger, the Paying Agent shall mail to each
holder of record of a certificate or certificates that immediately prior to the
Effective Time of the Merger represented outstanding Shares (the
"Certificates") whose Shares were converted into the right to receive the
Merger Consideration pursuant to Section 1.08, (i) a letter of transmittal
(which shall specify that delivery shall be effected, and risk of loss and
title to the Certificates shall pass, only upon delivery of the Certificates to
the Paying Agent and shall be in a form and have such other provisions as
Parent may reasonably specify) 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 such other documents as may
reasonably be required by the Paying Agent, the holder of such Certificate
shall be entitled to receive in exchange therefor the amount of cash into which
the Shares theretofore represented by such Certificate shall have been
converted pursuant to Section 1.08, and the Certificate so surrendered shall
forthwith be cancelled. In the event of a transfer of ownership of Shares that
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 1.09, each Certificate shall
be deemed at any time after the Effective Time of the Merger to
<PAGE> 53
4
represent only the right to receive upon such surrender the amount of cash,
without interest, into which the Shares theretofore represented by such
Certificate shall have been converted pursuant to Section 1.08. No interest
shall be paid or shall 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
Plan of Merger shall be deemed to have been paid in full satisfaction of all
rights pertaining to the Shares theretofore represented by such Certificates,
and there shall be no further registration of transfers on the share transfer
books of the Surviving Corporation of the Shares that 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 cancelled and exchanged as provided in this Plan of
Merger.
(e) No Liability. None of Parent, Sub, the Company or the
Paying Agent shall be liable to any person in respect of any cash delivered to
a public official pursuant to any applicable abandoned property, escheat or
similar law. If any Certificates shall not have been surrendered prior to five
years after the Effective Time of the Merger (or immediately prior to such
earlier date on which any payment pursuant to this Plan of Merger would
otherwise escheat to or become the property of any governmental authority or
agency, domestic or foreign), the payment in respect of such Certificate shall,
to the extent permitted by applicable law, become the property of the Surviving
Corporation, free and clear of all claims or interest of any person previously
entitled thereto.
<PAGE> 54
1
EXHIBIT C
[FORM OF]
Plan of Merger
SECTION 1.01. Constituent Corporations. RDS Acquisition
Inc., a Delaware corporation ("Sub"), and Big B, Inc., an Alabama corporation
(the "Company"), constitute the constituent corporations of this Plan of
Merger.
SECTION 1.02. The Merger. Upon the terms and subject to the
conditions set forth in this Plan of Merger and in accordance with the Delaware
General Corporation Law (the "DGCL") and the Alabama Business Corporation Act
(the "ABCA"), the Company shall be merged with and into Sub at the Effective
Time of the Merger (as defined below). Following a merger pursuant to this
Section 1.02 (the "Merger"), the separate corporate existence of the Company
shall cease and Sub shall continue as the surviving corporation (the "Surviving
Corporation") and shall succeed to and assume all the rights and obligations of
the Company in accordance with the DGCL and the ABCA.
SECTION 1.03. Effective Time. The parties shall file a
certificate or articles of merger and other appropriate documents. The Merger
shall become effective at such date and time as this Plan of Merger and any
other required documents (collectively, the "Certificates of Merger") are duly
filed with the Delaware Secretary of State and the Alabama Secretary of State
(the time the Merger becomes effective being the "Effective Time of the
Merger").
SECTION 1.04. Effects of the Merger. The Merger shall have
the effects set forth in Section 259 of the DGCL and Section 11.06 of the ABCA.
SECTION 1.05. Certificate of Incorporation and By-laws. (a)
The Certificate of Incorporation of Sub, as in effect immediately prior to the
Effective Time of the Merger, shall be the Certificate of Incorporation of the
Surviving Corporation until thereafter changed or amended as provided therein or
by applicable law.
(b) The By-laws of Sub as in effect at the Effective Time of
the Merger shall be the By-laws of the Surviving Corporation until thereafter
changed or amended as provided therein or by applicable law.
SECTION 1.06. Directors. The directors of Sub at the
Effective Time of the Merger shall be the directors of the Surviving
Corporation, until the earlier of
<PAGE> 55
2
their resignation or removal or until their respective successors are duly
elected and qualified, as the case may be.
SECTION 1.07. Officers. The officers of the Company at the
Effective Time of the Merger shall be the officers of the Surviving
Corporation, until the earlier of their resignation or removal or until their
respective successors are duly elected and qualified, as the case may be.
SECTION 1.08. Effect on Capital Shares. As of 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, par value $0.001 per share, of the
Company (the "Common Stock"; the Common Stock and the associated common stock
purchase rights (the "Rights") issued pursuant to the Rights Agreement dated as
of September 23, 1996, as amended, being hereinafter collectively referred to as
the "Shares") or any shares of capital stock of Sub:
(a) Capital Stock of Sub. Each issued and outstanding share
of the capital stock of Sub shall be converted into and become one
fully paid and nonassessable share of common stock of the Surviving
Corporation.
(b) Cancellation of Treasury Shares and Parent Owned Shares.
Each Share that is owned by the Company or by any subsidiary of the
Company and each Share that is owned by Revco D.S., Inc., a Delaware
corporation ("Parent"), Sub or any other subsidiary of Parent
(together, in each case, with the associated Right) shall
automatically be cancelled and retired and shall cease to exist, and
no consideration shall be delivered in exchange therefor.
(c) Conversion of Shares. Subject to Section 1.08(d), each
issued and outstanding Share (other than Shares to be cancelled in
accordance with Section 1.08(b)) together with the associated Right
shall be converted into the right to receive from the Surviving
Corporation in cash, without interest, $17.25 (the "Merger
Consideration"). As of the Effective Time of the Merger, all such
Shares (and the associated Rights) shall no longer be outstanding and
shall automatically be cancelled and retired and shall cease to exist,
and each holder of a certificate representing any such Shares (and the
associated Rights) shall cease to have any rights with respect
thereto, except the right to receive the Merger Consideration, without
interest.
(d) Shares of Dissenting Shareholders. Notwithstanding
anything in this Agreement to the contrary, any issued and outstanding
Shares held by persons who object to the Merger and comply with all
the provisions of Alabama law concerning the right of holders of
Shares to dissent from the Merger and obtain payment of the fair value
of their Shares ("Dissenting
<PAGE> 56
3
Shareholders") shall not be converted as described in Section 1.08(c)
but shall become the right to receive such consideration as may be
determined to be due to such Dissenting Shareholder pursuant to the
laws of the State of Alabama; provided, however, that the Shares
(together with the associated Rights) outstanding immediately prior to
the Effective Time of the Merger and held by a Dissenting Shareholder
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 ABCA, shall be deemed to be converted as of the Effective Time
of the Merger, into the right to receive the Merger Consideration.
SECTION 1.09. Exchange of Certificates. (a) Paying Agent.
[ ] is the paying agent (the "Paying Agent") for the payment of the
Merger Consideration upon surrender of certificates representing Shares.
(b) Parent to Provide Funds. 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 pursuant to Section 1.08.
(c) Exchange Procedure. As soon as reasonably practicable
after the Effective Time of the Merger, the Paying Agent shall mail to each
holder of record of a certificate or certificates that immediately prior to the
Effective Time of the Merger represented outstanding Shares (the
"Certificates") whose Shares were converted into the right to receive the
Merger Consideration pursuant to Section 1.08, (i) a letter of transmittal
(which shall specify that delivery shall be effected, and risk of loss and
title to the Certificates shall pass, only upon delivery of the Certificates to
the Paying Agent and shall be in a form and have such other provisions as
Parent may reasonably specify) 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 such other documents as may
reasonably be required by the Paying Agent, the holder of such Certificate
shall be entitled to receive in exchange therefor the amount of cash into which
the Shares theretofore represented by such Certificate shall have been
converted pursuant to Section 1.08, and the Certificate so surrendered shall
forthwith be cancelled. In the event of a transfer of ownership of Shares that
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 1.09, each Certificate shall
be deemed at any time after the Effective Time of the Merger to
<PAGE> 57
4
represent only the right to receive upon such surrender the amount of cash,
without interest, into which the Shares theretofore represented by such
Certificate shall have been converted pursuant to Section 1.08. No interest
shall be paid or shall 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
Plan of Merger shall be deemed to have been paid in full satisfaction of all
rights pertaining to the Shares theretofore represented by such Certificates,
and there shall be no further registration of transfers on the share transfer
books of the Surviving Corporation of the Shares that 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 cancelled and exchanged as provided in this Plan of
Merger.
(e) No Liability. None of Parent, Sub, the Company or the
Paying Agent shall be liable to any person in respect of any cash delivered to
a public official pursuant to any applicable abandoned property, escheat or
similar law. If any Certificates shall not have been surrendered prior to five
years after the Effective Time of the Merger (or immediately prior to such
earlier date on which any payment pursuant to this Plan of Merger would
otherwise escheat to or become the property of any governmental authority or
agency, domestic or foreign) the payment in respect of such Certificate shall,
to the extent permitted by applicable law, become the property of the Surviving
Corporation, free and clear of all claims or interest of any person previously
entitled thereto.
<PAGE> 1
EXECUTION COPY
SUPPORT AGREEMENT dated as of October 27,
1996, among REVCO D.S., INC., a Delaware corporation
("Parent"), RDS ACQUISITION INC., a Delaware
corporation ("Sub") and a wholly owned subsidiary of
Parent, and the parties listed on Schedule A hereto
(each a "Shareholder" and, collectively, the
"Shareholders").
WHEREAS Parent, Sub and Big B, Inc., an Alabama corporation
(the "Company"), are concurrently entering into an Agreement and Plan of Merger
dated as of the date hereof (as the same may be amended or supplemented, the
"Merger Agreement") providing for the making of a cash tender offer (as such
offer may be amended or supplemented from time to time, the "Offer") by Sub for
all outstanding shares of Common Stock, par value $0.001 per share (the "Common
Stock"), of the Company together with the associated Rights (as defined in the
Merger Agreement) (the Common Stock, together with the associated Rights,
collectively, the "Shares") and the merger of the Company and Sub or another
subsidiary of Parent (the "Merger");
WHEREAS each Shareholder owns not less than the number of
Shares of the Company set forth opposite his or its name on Schedule A hereto;
such number of Shares, as it may be adjusted by conversion or by any stock
dividend, stock split, recapitalization, combination or exchange of Shares,
merger, consolidation or reorganization of or by the Company, being referred to
herein as the "Subject Shares"; and
WHEREAS, as a condition to their willingness to enter into the
Merger Agreement, Parent and Sub have requested that the Shareholders enter
into this Agreement.
NOW, THEREFORE, the parties hereto agrees as follows:
SECTION 1. Representations and Warranties of the Shareholder.
Each Shareholder hereby, severally and not jointly, represents and warrants to
Parent in respect of himself or itself as follows:
(a) Authority. Such Shareholder has all requisite power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. This Agreement has been duly executed and delivered by
such Shareholder and constitutes a valid and binding obligation of such
Shareholder enforceable in accordance with its terms. The execution and
delivery of this Agreement does not, and the consummation of the transactions
contemplated hereby and compliance with the terms hereof will not, conflict
with, or result in any violation of, or default (with or without notice or
lapse of time or both) under any provision of, any trust agreement, loan or
credit agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise, license, judgment, order, notice,
decree, statute, law, ordinance, rule or regulation applicable to such
Shareholder or to such Shareholder's property or assets. Except for filings
with the Securities and Exchange Commission under Sections 13(d) and 16 of the
Securities Exchange
<PAGE> 2
2
Act of 1934, as amended, no consent, approval, order or authorization of, or
registration, declaration or filing with, any court, administrative agency or
commission or other governmental authority or instrumentality, domestic,
foreign or supranational, is required by or with respect to such Shareholder in
connection with the execution and delivery of this Agreement or the
consummation by such Shareholder of the transactions contemplated hereby.
(b) The Subject Shares. Such Shareholder has good and
marketable title to the Subject Shares, free and clear of any claims, liens,
encumbrances and security interests whatsoever.
(c) Revocation of Prior Proxies. Such Shareholder has
validly revoked any and all prior proxies granted with respect to the Subject
Shares.
SECTION 2. Representations and Warranties of Parent and Sub.
Parent and Sub hereby represent and warrant to each Shareholder that each of
Parent and Sub has all requisite corporate power and authority to enter into
this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement by Parent and Sub, and the
consummation of the transactions contemplated hereby, have been duly authorized
by all necessary corporate action on the part of Parent and Sub. This
Agreement has been duly executed and delivered by Parent and Sub and
constitutes a valid and binding obligation of Parent and Sub enforceable in
accordance with its terms.
SECTION 3. Covenants of the Shareholder. Each Shareholder,
severally and not jointly, agrees as follows:
(a) Approval of Merger. At any meeting of shareholders
called to vote upon the Merger and the Merger Agreement or at any adjournment
thereof or in any other circumstances upon which a vote, consent or other
approval with respect to the Merger and the Merger Agreement is sought, such
Shareholder shall vote (or cause to be voted) all Shares then beneficially
owned by such Shareholder in favor of the Merger, the adoption by the Company
of the Merger Agreement and the approval of the terms thereof and each of the
other transactions contemplated by the Merger Agreement.
(b) Rejection of Other Proposals. At any meeting of
shareholders or at any adjournment thereof or in any other circumstances upon
which such Shareholder's vote, consent or other approval is sought, such
Shareholder shall vote (or cause to be voted) all Shares then beneficially
owned by such Shareholder against (i) any merger agreement or merger (other
than the Merger Agreement and the Merger), consolidation, combination, sale of
substantial assets, reorganization, recapitalization, dissolution, liquidation
or winding up of or by the Company or any other Takeover Proposal (as defined
in the Merger Agreement), (ii) any amendment of the Company's Articles
(Certificate) of Incorporation or By-laws or other proposal or transaction that
could impede, interfere with, prevent or materially delay the Merger or that
could reasonably be expected to dilute materially the benefits to Parent or
<PAGE> 3
3
Sub of the transactions contemplated by the Merger Agreement and (iii) against
any candidate for election to the Board of Directors of the Company not
approved by Parent.
(c) Negative Pledge. Such Shareholder shall not (i) sell,
transfer, pledge, assign or otherwise dispose of, or enter into any contract,
option or other arrangement (including any profit sharing arrangement) with
respect to the sale, transfer, pledge, assignment or other disposition of, the
Subject Shares to any person (A) other than Sub or Sub's designee or (B) by
operation of law upon the death of such Shareholder or (ii) enter into any
voting arrangement, whether by proxy, voting agreement or otherwise, in
connection, directly or indirectly, with any Takeover Proposal.
(d) No Solicitation. Such Shareholder shall not, nor shall
it permit any investment banker, attorney or other advisor or representative of
such Shareholder to, (i) directly or indirectly solicit, initiate or encourage
the submission of, any Takeover Proposal or (ii) directly or indirectly
participate in any discussions or negotiations regarding, or furnish to any
person any information with respect to, or take any other action to facilitate
any inquiries or the making of any proposal that constitutes, or may reasonably
be expected to lead to, any Takeover Proposal.
(e) Proxy. Such Shareholder hereby grants to Sub, with full
power of substitution, a proxy covering all the Subject Shares of such
Shareholder to vote such Subject Shares in accordance with this Section 3.
This proxy is coupled with an interest and shall be irrevocable to the maximum
extent permitted by the Alabama Business Corporation Act.
(f) Termination. The obligations of such Shareholder under
this Section 3, including the proxy granted pursuant to Section 3(e), shall
terminate on the termination of the Merger Agreement (the "Expiration Date");
provided, however, that, if any Shareholder fails to comply with Section 3(a),
the obligations of such Shareholder under this Section 3 shall not terminate
until the third anniversary of the date of this Agreement.
SECTION 4. Shareholder Capacity. No person executing this
Agreement who is or becomes during the term hereof a director or officer of the
Company makes any agreement or understanding herein in his or her capacity as
such director or officer. Each Shareholder signs solely in his or her capacity
as the record holder and beneficial owner of, or the trustee of a trust whose
beneficiaries are the beneficial owners of, such Shareholder's Subject Shares
and nothing herein shall limit or affect any actions taken by a Shareholder in
such Shareholder's capacity as an officer or director of the Company to the
extent specifically permitted by the Merger Agreement, including without
limitation Section 5.02 thereof.
SECTION 5. Further Assurances. Each Shareholder shall, from
time to time, execute and deliver, or cause to be executed and delivered, such
additional or further instruments as Parent or Sub may reasonably request for
the purpose of effectively carrying out the transactions contemplated by this
Agreement.
<PAGE> 4
4
SECTION 6. Assignment. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties without the prior written consent of the other parties, except that Sub
may assign, in its sole discretion, any or all of its rights, interests and
obligations hereunder to Parent or to any direct or indirect subsidiary of
Parent. Subject to the preceding sentence, this Agreement shall be binding
upon, inure to the benefit of and be enforceable by the parties and their
respective successors and assigns.
SECTION 7. Enforcement. The parties agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions of this Agreement in any court of the
United States located in the State of New York, this being in addition to any
other remedy to which they are entitled at law or in equity. In addition, each
of the parties hereto (i) consents to submit such party to the personal
jurisdiction of any Federal court in the event any dispute arises out of this
Agreement or any of the transactions contemplated hereby, (ii) agrees that such
party will not attempt to deny or defeat such personal jurisdiction by motion
or other request for leave from any such court, (iii) agrees that such party
will not bring any action relating to this Agreement or any of the transactions
contemplated hereby in any court other than a Federal court sitting in the
state of New York and (iv) waives any right to trial by jury with respect to
any claim or proceeding related to or arising out of this Agreement or any of
the transactions contemplated hereby. Each Shareholder shall pay all
reasonable fees and expenses of counsel to Parent and Sub incurred in enforcing
this Agreement against such Shareholder.
(b) Expenses. Except as set forth in Section 7(a), all costs
and expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expense.
(c) Amendments. This Agreement may not be amended except by
an instrument in writing signed by each of the parties hereto.
(d) Notice. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally or sent
by overnight courier
<PAGE> 5
5
(providing proof of delivery) or faxed to the parties at the following
addresses or fax numbers (or at such other address for a party as shall be
specified by like notice):
(i) if to Parent or Sub, to:
Revco D.S., Inc.
1925 Enterprise Parkway
Twinsburg, OH 44087
Fax: (216) 487-1679
Attention: Jack A. Staph, Esq.
with a copy to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019-7475
Fax: (212) 474-3700
Attention: Richard Hall, Esq.
(ii) if to a Shareholder, to the address set forth under the
name of such Shareholder on Schedule A hereto
with copies to:
Sirote & Permutt
2222 Arlington Avenue South
Birmingham, AL 35205
Fax: (205) 930-5301
Attention: Richard Cohn, Esq.
and
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, NY 10022
Fax (212) 735-2000
Attention: Randall H. Doud, Esq.
(e) Interpretation. When a reference is made in this
Agreement to Sections, such reference shall be to a Section to this Agreement
unless otherwise indicated. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Wherever the words "include",
<PAGE> 6
6
"includes" or "including" are used in this Agreement, they shall be deemed to
be followed by the words "without limitation".
(f) Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement,
and shall become effective when one or more of the counterparts have been
signed by each of the parties and delivered to the other party, it being
understood that each party need not sign the same counterpart.
(g) Entire Agreement; No Third-Party Beneficiaries. This
Agreement (including the documents and instruments referred to herein) (i)
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof and (ii) is not intended to confer upon any person other
than the parties hereto any rights or remedies hereunder.
(h) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware (except to the
extent Alabama law mandatorily applies), regardless of the laws that might
otherwise govern under applicable principles of conflicts of laws thereof.
(i) Severability. If any provision of this Agreement or the
application of any such provision to any person or circumstance shall be held
invalid, illegal or unenforceable in any respect by a court of competent
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision hereof.
SECTION 8. Performance by Sub. Parent shall cause Sub to
perform in full each obligation of Sub set forth in this Agreement.
IN WITNESS WHEREOF, each party has duly executed this
Agreement as of the date first written above.
REVCO D.S., INC.,
by /s/ BRIAN P. CARNEY
----------------------------------
Name: Brian P. Carney
Title: Senior Vice President,
Finance
<PAGE> 7
7
RDS ACQUISITION INC.,
by /s/ BRIAN P. CARNEY
----------------------------------
Name: Brian P. Carney
Title: Treasurer
/s/ ANTHONY J. BRUNO
-------------------------------------
Anthony J. Bruno
/s/ ARTHUR M. JONES, SR.
-------------------------------------
Arthur M. Jones, Sr.
/s/ JAMES A. BRUNO
-------------------------------------
James A. Bruno
/s/ VINCENT J. BRUNO
-------------------------------------
Vincent J. Bruno, in his individual
capacity and in his capacity as
custodian for the entities listed on
Schedule B.
<PAGE> 8
Schedule A
List of Shareholders
<TABLE>
<CAPTION>
Subject Shares
---------------
<S> <C>
Anthony J. Bruno 636,504
1212 South Cove Lane
Birmingham, AL 35216
Arthur M. Jones, Sr. 60,508
5000 Castle Rock Drive
Hoover, AL 35242
Vincent J. Bruno 418,854
2854 Shook Hill Circle
Birmingham, AL 35223
James A. Bruno 71,620
7090 Old Overton Club Drive
Vestavia Hills, AL 35242
</TABLE>
<PAGE> 9
Schedule B
List of Shareholder Trusts
<TABLE>
<S> <C>
Vincent Bruno, C/F Lee John Bruno AUGMA 48,300
Vincent Bruno, C/F Brannon Bruno AUGMA 26,200
Vincent Bruno, C/F Paul Vincent Bruno AUGMA 24,200
Vincent Bruno, C/F Vincent Joseph Bruno AUGMA 15,400
</TABLE>
