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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported): December 15, 1996
SAFEWAY INC.
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(Exact name of registrant as specified in its charter)
Delaware 1-000041 94-3019135
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(State of (Commission File Number) (IRS Employer
Incorporation) Identification No.)
5918 Stoneridge Mall Road, Pleasanton, California 94588
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(Address of principal executive offices) (Zip Code)
(510) 467-3000
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(Registrant's telephone number, including area code)
Fourth & Jackson St., Oakland, California 94660
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(former name or former address, if changed since last report)
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Item 5. Other Events.
On December 15, 1996, Safeway Inc., a Delaware company (the
"Company" or "Safeway"), entered into an Agreement and Plan of Merger, dated as
of December 15, 1996 (the "Merger Agreement"), by and among the Company, SSCI
Merger Sub, Inc., a Michigan corporation and an indirect wholly owned
subsidiary of the Company ("Merger Sub"), and The Vons Companies, Inc., a
Michigan corporation ("Vons"), pursuant to which Merger Sub will merge with and
into Vons (the "Merger"), with Vons surviving the Merger as an indirect wholly
owned subsidiary of the Company.
Upon the consummation of the transactions contemplated by the
Merger Agreement, each outstanding share of common stock, par value $0.10 per
share, of Vons (the "Vons Common Stock") (excluding any Vons Common Stock held
directly or indirectly by the Company which will be cancelled) will be
converted into the right to receive 1.425 shares of common stock, par value
$0.01 per share, of Safeway (the "Company Common Stock"). In addition, each
outstanding option to purchase Vons Common Stock under the Vons employee stock
option plans will be assumed by the Company. Consummation of the merger
remains subject to certain conditions, including (a) the approval of the
Merger, the Merger Agreement and the transactions contemplated thereby at the
meeting of the stockholders of Vons held for such purpose (the "Vons
Stockholders Meeting") by a majority of the outstanding shares of Vons not
owned by Safeway or its affiliates and (b) satisfaction of regulatory
requirements (including, but not limited to, compliance with applicable
provisions of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended). It is also a condition to Vons' obligation to consummate the Merger
that the Purchase Agreement (as defined below) be in full force and effect in
accordance with its terms and that no circumstance exists that would prevent
the Repurchase (as defined below) from being consummated immediately following
the effectiveness of the Merger. Safeway currently owns approximately 34.4%
of the outstanding Vons Common Stock. A copy of the Merger Agreement is filed
herewith as Exhibit 2.1 and incorporated by reference herein. The description
of the Merger Agreement set forth herein does not purport to be complete and is
qualified in its entirety by the provisions of the Merger Agreement.
On December 15, 1996, and in connection with the execution and
delivery of the Merger Agreement, Safeway entered into a Stock Repurchase
Agreement (the "Purchase Agreement") with its principal stockholder, SSI
Associates, L.P. ("SSI Associates"), a partnership affiliated with Kohlberg
Kravis Roberts & Co. ("KKR"). Pursuant to the terms of the Purchase Agreement,
immediately following the consummation of the Merger, Safeway will purchase
(the "Repurchase") an aggregate of 15,000,000 shares of Company Common Stock
(or warrants to purchase Company Common Stock) from SSI Associates or other
partnerships affiliated with KKR at a price per share equal to the greater of
(i) $38.375 (the closing sales price of Company Common Stock on December 13,
1996) and (ii) the volume-weighted average sales price of Company Common Stock
for the ten consecutive trading day period beginning on the twentieth trading
day prior to the date first publicly announced by Vons as the date of the Vons
Stockholders Meeting. A copy of the Purchase Agreement is filed herewith as
Exhibit 2.2 and incorporated by reference herein. The description of the
Purchase Agreement set forth herein does not purport to be complete and is
qualified in its entirety by the provisions of the Purchase Agreement.
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Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(c) The following exhibits are filed as part of this Report:
2.1 Agreement and Plan of Merger, dated as of December
15, 1996, by and among Safeway Inc., SSCI Merger Sub,
Inc. and The Vons Companies, Inc. (without exhibits).
2.2 Stock Repurchase Agreement, dated as of December 15,
1996, by and between Safeway Inc. and SSI
Associates, L.P.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
Dated: December 17, 1996
SAFEWAY INC.
By: /s/ Michael C. Ross
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Name: Michael C. Ross
Title: Senior Vice President -
General Counsel
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EXHIBIT INDEX
Exhibits.
2.1 Agreement and Plan of Merger, dated as of December 15, 1996,
by and among Safeway Inc., SSCI Merger Sub, Inc. and The Vons
Companies, Inc. (without exhibits).
2.2 Stock Repurchase Agreement, dated as of December 15, 1996, by
and between Safeway Inc. and SSI Associates, L.P.
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EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
SAFEWAY INC.,
SSCI MERGER SUB, INC.
AND
THE VONS COMPANIES, INC.
Dated as of December 15, 1996
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TABLE OF CONTENTS
ARTICLE I.
THE MERGER
SECTION 1.01. The Merger................................................ 1
SECTION 1.02. Effective Time............................................ 2
SECTION 1.03. Effect of the Merger...................................... 2
SECTION 1.04. Articles of Incorporation; By-Laws........................ 2
SECTION 1.05. Directors and Officers.................................... 2
SECTION 1.06. Effect on Capital Stock................................... 3
SECTION 1.07. Exchange of Certificates.................................. 4
SECTION 1.08. Stock Transfer Books...................................... 6
SECTION 1.09. No Further Ownership Rights in Company Common Stock....... 6
SECTION 1.10. Lost, Stolen or Destroyed Certificates.................... 6
SECTION 1.11. Tax Consequences.......................................... 7
SECTION 1.12. Taking of Necessary Action; Further Action................ 7
ARTICLE II.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 2.01. Organization and Qualification; Subsidiaries.............. 7
SECTION 2.02. Articles of Incorporation and By-Laws..................... 8
SECTION 2.03. Capitalization............................................ 8
SECTION 2.04. Authority Relative to this Agreement; Vote Required;
State Takeover Statutes....................... 8
SECTION 2.05. No Conflict; Required Filings and Consents................ 9
SECTION 2.06. Compliance; Permits....................................... 10
SECTION 2.07. SEC Filings; Financial Statements......................... 10
SECTION 2.08. Absence of Certain Changes or Events...................... 11
SECTION 2.09. [Intentionally Left Blank]................................ 11
SECTION 2.10. Employee Benefit Plans; Employment Agreements............. 11
SECTION 2.11. Labor Matters............................................. 13
SECTION 2.12. Registration Statement; Proxy Statement/Prospectus........ 14
SECTION 2.13. [Intentionally Left Blank]................................ 14
SECTION 2.14. Title to Property......................................... 14
SECTION 2.15. Taxes..................................................... 15
SECTION 2.16. Environmental Matters..................................... 16
SECTION 2.17. Brokers................................................... 16
SECTION 2.18. Intellectual Property Rights.............................. 16
SECTION 2.19. Opinion of Financial Advisor.............................. 17
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Page
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ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
SECTION 3.01. Organization and Qualification; Subsidiaries............... 17
SECTION 3.02. Certificate of Incorporation and By-Laws................... 17
SECTION 3.03. Capitalization............................................. 18
SECTION 3.04. Authority Relative to this Agreement; Vote Required........ 18
SECTION 3.05. No Conflict; Required Filings and Consents................. 19
SECTION 3.06. Compliance; Permits........................................ 20
SECTION 3.07. SEC Filings; Financial Statements.......................... 20
SECTION 3.08. Absence of Certain Changes or Events....................... 21
SECTION 3.09. [Intentionally Left Blank]................................. 21
SECTION 3.10. Employee Benefit Plans..................................... 21
SECTION 3.11. Labor Matters.............................................. 21
SECTION 3.12. Registration Statement; Proxy Statement/Prospectus......... 21
SECTION 3.13. Environmental Matters...................................... 22
SECTION 3.14. Brokers.................................................... 22
SECTION 3.15. Purchase Agreement......................................... 22
SECTION 3.16. Ownership of SSCI and Merger Sub;
Capitalization of Merger Sub; No Prior Activities.... 22
SECTION 3.17. Opinion of Financial Advisor............................... 23
SECTION 3.18. Takeover Statutes.......................................... 23
ARTICLE IV.
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 4.01. Conduct of Business by the Company Pending the Merger...... 23
SECTION 4.02. No Solicitation............................................ 26
SECTION 4.03. Conduct of Business by Parent Pending the Merger........... 27
SECTION 4.04. Parent Repurchase Right.................................... 28
ARTICLE V.
ADDITIONAL AGREEMENTS
SECTION 5.01. HSR Act; Etc. ............................................. 29
SECTION 5.02. Proxy Statement/Prospectus; Registration Statement......... 29
SECTION 5.03. Stockholders Meetings...................................... 30
SECTION 5.04. Access to Information; Confidentiality..................... 30
SECTION 5.05. Consents; Approvals........................................ 31
SECTION 5.06. Agreements with Respect to Affiliates...................... 31
SECTION 5.07. Indemnification and Insurance.............................. 31
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SECTION 5.08. Notification of Certain Matters............................... 32
SECTION 5.09. Further Action/Tax Treatment.................................. 33
SECTION 5.10. Public Announcements.......................................... 33
SECTION 5.11. Employee Benefit Arrangements................................. 33
SECTION 5.12. Use of Name; Headquarters..................................... 34
SECTION 5.13. Listing of Shares............................................. 34
SECTION 5.14. Conveyance Taxes.............................................. 34
ARTICLE VI.
CONDITIONS TO THE MERGER
SECTION 6.01. Conditions to Obligations of Each Party to Effect the Merger... 34
SECTION 6.02. Additional Conditions to Obligations of Parent and Merger Sub.. 35
SECTION 6.03. Additional Conditions to Obligations of the Company............ 36
ARTICLE VII.
TERMINATION
SECTION 7.01. Termination.................................................... 36
SECTION 7.02. Effect of Termination.......................................... 38
SECTION 7.03. Fees and Expenses.............................................. 38
ARTICLE VIII.
GENERAL PROVISIONS
SECTION 8.01. Effectiveness of Representations, Warranties and
Agreements; Knowledge, Etc........................ 39
SECTION 8.02. Notices........................................................ 39
SECTION 8.03. Certain Definitions............................................ 40
SECTION 8.04. Amendment...................................................... 41
SECTION 8.05. Extension; Waiver.............................................. 41
SECTION 8.06. Headings....................................................... 42
SECTION 8.07. Severability................................................... 42
SECTION 8.08. Entire Agreement............................................... 42
SECTION 8.09. Assignment..................................................... 42
SECTION 8.10. Parties in Interest............................................ 42
SECTION 8.11. Failure or Indulgence Not Waiver; Remedies Cumulative.......... 42
SECTION 8.12. Governing Law.................................................. 42
SECTION 8.13. Counterparts................................................... 43
SECTION 8.14. WAIVER OF JURY TRIAL........................................... 43
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of December 15, 1996 (the
"Agreement"), among SAFEWAY INC., a Delaware corporation ("Parent"), SSCI MERGER
SUB, INC., a Michigan corporation and an indirect wholly owned subsidiary of
Parent ("Merger Sub"), and THE VONS COMPANIES, INC., a Michigan corporation (the
"Company").
WITNESSETH:
WHEREAS, the Boards of Directors of Parent, Merger Sub and the Company
have determined that it is advisable and in the best interests of their
respective stockholders for Parent and Merger Sub to enter into a business
combination with the Company upon the terms and subject to the conditions set
forth herein;
WHEREAS, in furtherance of such combination, the Boards of Directors of
Parent, Merger Sub and the Company have each approved the merger of Merger Sub
with and into the Company (the "Merger"), upon the terms and subject to the
conditions set forth herein, in accordance with the applicable provisions of the
Michigan Business Corporation Act of the State of Michigan (the "MBCA"), in the
case of the Company and Merger Sub, and the Delaware General Corporation Law of
the State of Delaware (the "DGCL"), in the case of Parent;
WHEREAS, Parent, Safeway Southern California, Inc., a wholly owned
subsidiary of Parent ("SSCI"), Merger Sub and the Company intend, by approving
resolutions authorizing this Agreement, to adopt this Agreement as a plan of
reorganization within the meaning of Section 368(a) of the Internal Revenue Code
of 1986, as amended (the "Code"), and the regulations promulgated thereunder;
and
WHEREAS, pursuant to the Merger, each outstanding share (a "Share") of
the Company's common stock, $0.10 par value (the "Company Common Stock"), shall
be converted into the right to receive the Merger Consideration (as defined in
Section 1.07(b)), upon the terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, Parent, Merger Sub and the Company hereby agree as follows:
ARTICLE I.
THE MERGER
SECTION 1.01. The Merger. (a) Effective Time. At the Effective Time (as
defined in Section 1.02 hereof), and subject to and upon the terms and
conditions of this Agreement and
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the MBCA, Merger Sub shall be merged with and into the Company, the separate
corporate existence of Merger Sub shall cease, and the Company shall continue as
the surviving corporation and as an indirect wholly owned subsidiary of Parent.
The Company as the surviving corporation after the Merger is hereinafter
sometimes referred to as the "Surviving Corporation."
(b) Closing. Unless this Agreement shall have been terminated and the
transactions herein contemplated shall have been abandoned pursuant to Section
7.01, and subject to the satisfaction or waiver, if permissible, of the
conditions set forth in Article VI, the closing of the transactions contemplated
by this Agreement (the "Closing") shall take place (a) at the offices of Latham
& Watkins, 505 Montgomery St., San Francisco, California, as promptly as
practicable (and in any event within two business days) after satisfaction or
waiver, if permissible, of the conditions set forth in Article VI or (b) at such
other time, date or place as Parent and the Company may agree.
SECTION 1.02. Effective Time. As promptly as practicable after the
satisfaction or waiver of the conditions set forth in Article VI, the parties
hereto shall cause the Merger to be consummated by filing a certificate of
merger as contemplated by the MBCA (the "Certificate of Merger"), together with
any required related documents, with the appropriate administrator, as indicated
in the MBCA, in such form as required by, and executed in accordance with the
relevant provisions of, the MBCA. The Merger shall be effective at the time
indicated in such Certificate of Merger (the "Effective Time").
SECTION 1.03. Effect of the Merger. At the Effective Time, the effect
of the Merger shall be as provided in this Agreement, the Certificate of Merger
and the applicable provisions of the MBCA. Without limiting the generality of
the foregoing, and subject thereto, at the Effective Time all the property,
rights, privileges, powers and franchise of the Company and Merger Sub shall
vest in the Surviving Corporation, and all debts, liabilities and duties of the
Company and Merger Sub shall become the debts, liabilities and duties of the
Surviving Corporation.
SECTION 1.04. Articles of Incorporation; By-Laws. (a) Articles of
Incorporation. At the Effective Time the Articles of Incorporation of the
Company, as in effect immediately prior to the Effective Time, shall be the
Articles of Incorporation of the Surviving Corporation until thereafter duly
amended in accordance with applicable law and the terms of this Agreement.
(b) By-Laws. At the Effective Time, the By-Laws of Merger Sub, as in
effect immediately prior to the Effective Time, shall be the By-Laws of the
Surviving Corporation until thereafter duly amended in accordance with
applicable law and the terms of this Agreement.
SECTION 1.05. Directors and Officers. The directors of Merger Sub
immediately prior to the Effective Time shall be the initial directors of the
Surviving Corporation, each to hold office in accordance with the Articles of
Incorporation and By-Laws of the Surviving Corporation and the officers of the
Company immediately prior to the Effective Time shall be the initial officers of
the Surviving Corporation, in each case until their respective successors
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are duly elected or appointed and qualified in the manner provided in the
Articles of Incorporation and By-laws of the Surviving Corporation and in
accordance with applicable law. The Company shall cause each director of the
Company's subsidiaries which are corporations to tender his or her resignation
prior to the Effective Time, with each such resignation to be effective as of
the Effective Time.
SECTION 1.06. Effect on Capital Stock. At the Effective Time, by virtue
of the Merger and without any further action on the part of Parent, Merger Sub,
the Company or the holders of any of the following securities:
(a) Conversion of Securities. Each Share issued and outstanding
immediately prior to the Effective Time (excluding any Shares to be canceled
pursuant to Section 1.06(b)) shall be converted, subject to Section 1.06(e) and
1.06(f), into the right to receive 1.425 (the "Exchange Ratio") of validly
issued, fully paid and nonassessable shares ("Parent Shares") of common stock,
$0.01 par value, of Parent ("Parent Common Stock").
(b) Cancellation. Each Share held in the treasury of the Company and
each Share owned by Parent, Merger Sub or any direct or indirect wholly owned
subsidiary of the Company or Parent immediately prior to the Effective Time
shall, by virtue of the Merger and without any action on the part of the holder
thereof, automatically cease to be outstanding, be canceled and retired without
payment of any consideration therefor and cease to exist.
(c) Assumption of Stock Options.
(i) At the Effective Time, each outstanding option to purchase
Company Common Stock (a "Stock Option") granted under the Company's
1987 Stock Option Plan and 1990 Stock Option Plan, each as amended to
date (collectively, the "Company Stock Option Plans"), whether vested
or unvested, shall be assumed by Parent and constitute an option to
acquire, on the same terms and conditions as were applicable under such
Stock Option prior to the Effective Time, the number (rounded up to the
nearest whole number) of Parent Shares as the holder of such Stock
Option would have been entitled to receive pursuant to the Merger had
such holder exercised such Stock Option in full immediately prior to
the Effective Time (not taking into account whether or not such Stock
Option was in fact exercisable), at a price per share equal to (x) the
aggregate exercise price for Company Common Stock otherwise purchasable
pursuant to such Stock Option divided by (y) the number of Parent
Shares deemed purchasable pursuant to such Stock Option. At and after
the Effective Time, Parent will honor all obligations with respect to
such Stock Options under the terms of such Stock Options and the
Company Stock Option Plans as in effect on the date hereof. At the
Effective Time, the Company Stock Option Plans shall be amended to
require that the shares of stock issuable and deliverable upon the
exercise of a Stock Option, or any portion thereof, shall be unissued
shares or issued shares which then have been reacquired by Parent, but
no other amendments shall be made except as provided herein.
(ii) As soon as practicable after the Effective Time (but in
any event within five (5) business days), Parent shall deliver to each
holder of an outstanding Stock Option
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an appropriate notice setting forth such holder's rights pursuant
thereto, and such Stock Option shall otherwise continue in effect on
the same terms and conditions (including antidilution provisions) as
were in effect prior to the Effective Time.
(iii) Parent has taken all corporate action necessary to
reserve for issuance a sufficient number of Parent Shares for delivery
pursuant to the terms set forth in this Section 1.06(c).
(iv) Subject to any applicable limitations under the
Securities Act of 1933, as amended, and the rules and regulations
thereunder (the "Securities Act"), Parent shall file a Registration
Statement on Form S-8 (or any successor form), which may be in the form
of a post-effective amendment to the Registration Statement (as defined
below), with the Securities and Exchange Commission (the "SEC"),
effective on the date of the Effective Time, with respect to the shares
of Parent Common Stock issuable upon exercise of the Stock Options, and
shall use all reasonable efforts to maintain the effectiveness of such
registration statement (and maintain the current status of the
prospectus or prospectuses contained therein) for so long as such Stock
Options shall remain outstanding.
(d) Capital Stock of Merger Sub. The capitalization of Merger Sub as of
the date hereof is as set forth in Section 3.16. Each share of common stock,
$0.01 par value, of Merger Sub issued and outstanding immediately prior to the
Effective Time shall be converted into and exchanged for one validly issued,
fully paid and nonassessable share of common stock, $0.01 par value, of the
Surviving Corporation.
(e) Adjustments to Exchange Ratio. The Exchange Ratio shall be adjusted
to reflect fully the effect of any stock split, reverse split, stock dividend
(including any dividend or distribution of securities convertible into Parent
Common Stock), reorganization, recapitalization or other like change with
respect to Parent Common Stock occurring after the date hereof and prior to the
Effective Time.
(f) Fractional Shares. No certificates or scrip representing fractional
shares of Parent Common Stock shall be issued in connection with the Merger, and
such fractional share interests will not entitle the owner thereof to vote or to
any rights as a stockholder of Parent. In lieu of any such fractional shares,
each holder of Company Common Stock upon surrender of a certificate (a
"Certificate") for exchange shall be paid an amount in cash (without interest),
rounded up to the nearest cent, determined by multiplying (i) the closing price
of Parent Common Stock as reported on the New York Stock Exchange ("NYSE")
Composite Tape on the last trading day immediately preceding the second business
day prior to the Effective Time by (ii) the fractional interest to which such
holder would otherwise be entitled (after taking into account all shares of
Company Common Stock then held of record by such holder).
SECTION 1.07. Exchange of Certificates. (a) Exchange Agent. At or prior
to the Effective Time, Parent shall supply, or shall cause to be supplied, to or
for the account of such bank or trust company as shall be designated by Parent
and subject to the reasonable approval of the Company (the "Exchange Agent"), in
trust for the benefit of the holders of Company
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Common Stock, for exchange in accordance with this Section 1.07 through the
Exchange Agent, (i) certificates evidencing the Parent Shares issuable pursuant
to Section 1.06(a) in exchange for outstanding Shares and (ii) cash in an
aggregate amount sufficient to pay for fractional shares pursuant to Section
1.06(f) (the shares and cash so deposited, together with any dividends or
distributions with respect to such Parent Shares payable after the Effective
Time which shall also be deposited with the Exchange Agent, being hereinafter
referred to collectively as the "Exchange Fund"). Any interest, dividends or
other income earned on the investment of cash or other property held in the
Exchange Fund shall be for the account of and payable to Parent.
(b) Exchange Procedures. Promptly after the Effective Time, Parent will
instruct the Exchange Agent to mail to each holder of record of Certificates (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 proper
delivery of the Certificates to the Exchange Agent and shall be in such form and
have such other provisions as Parent may reasonably specify), and (ii)
instructions to effect the surrender of the Certificates in exchange for the
certificates evidencing Parent Shares. Upon surrender of a Certificate for
cancellation to the Exchange Agent together with such letter of transmittal,
duly executed, and such other customary documents as may be required pursuant to
such instructions, the holder of such Certificate shall be entitled to receive
in exchange therefor (A) certificates evidencing that number of whole Parent
Shares which such holder has the right to receive in accordance with the
Exchange Ratio in respect of the Shares formerly evidenced by such Certificate,
(B) any dividends or other distributions to which such holder is entitled
pursuant to Section 1.07(c), and (C) cash in respect of fractional shares as
provided in Section 1.06(f) (Parent Shares, dividends, distributions and cash
being, collectively, the "Merger Consideration"), and the Certificate so
surrendered shall forthwith be canceled. In the event of a transfer of ownership
of Shares which is not registered in the transfer records of the Company as of
the Effective Time, Parent Shares, dividends and distributions may be issued and
paid in accordance with this Article I to a transferee if the Certificate
evidencing such Shares is presented to the Exchange Agent, accompanied by all
documents required to evidence and effect such transfer pursuant to this Section
1.07(b) and by evidence that any applicable stock transfer taxes have been paid.
Until so surrendered, each outstanding Certificate that, prior to the Effective
Time, represented Shares will be deemed from and after the Effective Time, for
all corporate purposes, other than the payment of dividends and subject to
Section 1.06(f), to evidence the ownership of the number of full Parent Shares
into which such shares of the Company Common Stock shall have been so converted.
(c) Distributions With Respect to Unexchanged Parent Shares. No
dividends or other distributions declared or made after the Effective Time with
respect to Parent Shares with a record date after the Effective Time shall be
paid to the holder of any unsurrendered Certificate with respect to Parent
Shares they are entitled to receive until the holder of such Certificate shall
surrender such Certificate. Subject to applicable law, following surrender of
any such Certificate, there shall be paid to the record holder of the
certificates representing whole Parent Shares issued in exchange therefor,
without interest, at the time of such surrender, the amount of dividends or
other distributions with a record date after the Effective Time theretofore paid
with respect to such whole Parent Shares.
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(d) Transfers of Ownership. If any certificate for Parent Shares is to
be issued in a name other than that in which the Certificate surrendered in
exchange therefor is registered, it will be a condition of the issuance thereof
that the Certificate so surrendered will be properly endorsed and otherwise in
proper form for transfer and that the person requesting such exchange will have
paid to Parent or any agent designated by it any transfer or other taxes
required by reason of the issuance of a certificate for Parent Shares in any
name other than that of the registered holder of the certificate surrendered, or
have established to the reasonable satisfaction of Parent or any agent
designated by it that such tax has been paid or is not payable.
(e) Termination of Exchange Fund. Any portion of the Exchange Fund
which remains undistributed to the holders of Company Common Stock as of the
date which is eighteen months after the Effective Time shall be delivered to
Parent, upon demand, and thereafter such holders of Company Common Stock who
have not theretofore complied with this Section 1.07 shall be entitled to look
only to Parent for payment of the Merger Consideration to which they are
entitled pursuant hereto.
(f) No Liability. Except as required by applicable law, none of Parent,
Merger Sub or the Company shall be liable to any holder of Company Common Stock
for any Merger Consideration delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law.
(g) Withholding Rights. Parent or the Exchange Agent shall be entitled
to deduct and withhold from the Merger Consideration otherwise payable pursuant
to this Agreement to any holder of Company Common Stock such amounts as Parent
or the Exchange Agent is required to deduct and withhold with respect to the
making of such payment under the Code, or any provision of state, local or
foreign tax law. To the extent that amounts are so withheld by Parent or the
Exchange Agent, such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the holder of the Shares in respect of which
such deduction and withholding was made by Parent or the Exchange Agent.
SECTION 1.08. Stock Transfer Books. At the Effective Time, the stock
transfer books of the Company shall be closed, and there shall be no further
registration of transfers of the Company Common Stock thereafter on the records
of the Company.
SECTION 1.09. No Further Ownership Rights in Company Common Stock. The
Merger Consideration delivered upon the surrender for exchange of Shares in
accordance with the terms hereof shall be deemed to have been issued in full
satisfaction of all rights pertaining to such Shares, and there shall be no
further registration of transfers of Shares which were outstanding immediately
prior to the Effective Time on the records of the Surviving Corporation. If,
after the Effective Time, Certificates are presented to the Surviving
Corporation for any reason, they shall be canceled and exchanged as provided in
this Article I.
SECTION 1.10. Lost, Stolen or Destroyed Certificates. In the event any
Certificates shall have been lost, stolen or destroyed, the Exchange Agent shall
issue in exchange for such lost, stolen or destroyed Certificates, upon the
making of an affidavit of that fact by the holder
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thereof, such Parent Shares as may be required pursuant to Section 1.06;
provided, however, that Parent may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, stolen or
destroyed Certificates to deliver a bond in such sum as it may reasonably direct
as indemnity against any claim that may be made against Parent or the Exchange
Agent with respect to the Certificates alleged to have been lost, stolen or
destroyed.
SECTION 1.11. Tax Consequences. It is intended by the parties hereto
and SSCI that the Merger shall constitute a reorganization within the meaning of
Section 368(a) of the Code. The parties hereto hereby adopt this Agreement as a
"plan of reorganization" within the meaning of Sections 1.368-2(g) and
1.368-3(a) of the United States Treasury Regulations.
SECTION 1.12. Taking of Necessary Action; Further Action. Each of
Parent, Merger Sub and the Company will take all such reasonable and lawful
action as may be necessary or appropriate in order to effectuate the Merger in
accordance with this Agreement as promptly as practicable. If, at any time after
the Effective Time, any such further action is necessary or desirable to carry
out the purposes of this Agreement and to vest the Surviving Corporation with
full right, title and possession to all the property, rights, privileges, power
and franchises of the Company and Merger Sub, the officers and directors of the
Company and Merger Sub immediately prior to the Effective Time are fully
authorized in the name of their respective corporations or otherwise to take,
and will take, all such lawful and necessary action.
ARTICLE II.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Merger Sub
that:
SECTION 2.01. Organization and Qualification; Subsidiaries. The Company
is a corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation and has the requisite corporate
power and authority and is in possession of all franchises, grants,
authorizations, licenses, permits, easements, consents, certificates, approvals
and orders ("Approvals") necessary to own, lease and operate the properties it
purports to own, operate or lease and to carry on its business as it is now
being conducted, except where the failure to be so organized, existing and in
good standing or to have such power, authority and Approvals would not have a
Material Adverse Effect. The Company is duly qualified or licensed as a foreign
corporation to do business, and is in good standing, in each jurisdiction where
the character of its properties owned, leased or operated by it or the nature of
its activities makes such qualification or licensing necessary, except for such
failures to be so duly qualified or licensed and in good standing that would not
have a Material Adverse Effect. The Company has no significant subsidiaries. A
true and complete list of all of the Company's subsidiaries, together with the
jurisdiction of incorporation of each subsidiary, and the percentage of each
subsidiary's outstanding capital stock owned by the Company or another
subsidiary is set forth in Section 2.01 of the disclosure schedule (the "Company
Disclosure Schedule") prepared by the Company and delivered to Parent in
connection with the execution of this Agreement. Except as set forth in Section
2.01 of the
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Company Disclosure Schedule or the Company SEC Reports (as defined in Section
2.07), the Company does not directly or indirectly own any equity or similar
interest in, or any interest convertible into or exchangeable or exercisable
for, any equity or similar interest in, any corporation, partnership, joint
venture or other business association or entity, with respect to which interest
the Company has invested or is required to invest $1,000,000 or more.
SECTION 2.02. Articles of Incorporation and By-Laws. The Company has
heretofore furnished to Parent a complete and correct copy of its Articles of
Incorporation and By-Laws as most recently restated and subsequently amended to
date. Such Articles of Incorporation and By-Laws are in full force and effect.
The Company is not in violation of any of the provisions of its Articles of
Incorporation or By-Laws. There are no dissenters' rights provided for in any
resolutions of the Company's Board of Directors.
SECTION 2.03. Capitalization. (a) The authorized capital stock of the
Company consists of 120,000,000 shares, consisting of 100,000,000 shares of
Company Common Stock and 20,000,000 shares of Company preferred stock, par value
$0.01 per share (the "Company Preferred Stock"). As of December 15, 1996, (i)
43,966,667 shares of Company Common Stock were issued and outstanding, all of
which are validly issued, fully paid and nonassessable and no shares were held
in treasury, (ii) no shares of Company Preferred Stock were issued and
outstanding, (iii) no shares of Company Common Stock were held by subsidiaries
of the Company, and (iv) 3,064,584 shares of Company Common Stock were reserved
for future issuance pursuant to outstanding stock options granted under the
Company Stock Option Plans. Except as set forth in this Section 2.03 or in
Section 2.03 of the Company Disclosure Schedule, there are no options, warrants
or other rights, agreements or arrangements to which the Company is a party or
by which the Company is bound relating to the issued or unissued capital stock
of the Company or any of its subsidiaries or obligating the Company or any of
its subsidiaries to issue or sell any shares of capital stock of, or other
equity interests in, the Company or any of its subsidiaries.
(b) Except as disclosed in Section 2.03 of the Company Disclosure
Schedule or the Company SEC Reports, there are no obligations, contingent or
otherwise, of the Company or any of its subsidiaries to repurchase, redeem or
otherwise acquire any shares of Company Common Stock or the capital stock of any
subsidiary or to provide funds to or make any investment (in the form of a loan,
capital contribution or otherwise) in any such subsidiary or any other entity
other than guarantees of bank obligations of subsidiaries entered into in the
ordinary course of business.
SECTION 2.04. Authority Relative to this Agreement; Vote Required;
State Takeover Statutes. (a) The Company has all necessary corporate power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder and (subject only, with respect to the Merger, to the approval and
adoption of this Agreement by the holders of at least a majority of the
outstanding shares of Company Common Stock entitled to vote in accordance with
the MBCA and the Company's Articles of Incorporation and By-Laws) to consummate
the transactions contemplated hereby. The execution and delivery of this
Agreement by the Company and the consummation by the Company of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action on the part of the Company,
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and no other corporate proceedings on the part of the Company are necessary to
authorize this Agreement or to consummate the transactions so contemplated
(other than the adoption of this Agreement by the holders of at least a majority
of the outstanding shares of Company Common Stock entitled to vote in accordance
with the MBCA and the Company's Articles of Incorporation and By-Laws). As of
the date hereof, the Board of Directors of the Company has determined that the
Merger, upon the terms and subject to the conditions of this Agreement, is
advisable to and in the best interest of the Company and its stockholders. This
Agreement has been duly and validly executed and delivered by the Company.
(b) Assuming the due authorization, execution and delivery by Parent
and Merger Sub, as applicable, this Agreement constitutes a legal, valid and
binding obligation of the Company, enforceable against the Company in accordance
with its terms, except as such enforceability may be limited by any applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally, and except as the
availability of equitable remedies may be limited by the application of general
principles of equity (regardless of whether such equitable principles are
applied in a proceeding at law or in equity).
(c) Subject to Section 6.01(b)(ii), the approval of the holders of a
majority of the outstanding shares of Company Common Stock is the only vote of
the holders of any class or series of the Company's capital stock necessary to
approve the Merger, this Agreement and the transactions contemplated hereby.
(d) The Board of Directors of the Company has approved the Merger, this
Agreement and the transactions contemplated hereby and such approval is
sufficient to render the provisions of Article VII of the Company's Articles of
Incorporation inapplicable to the Merger, this Agreement and the other
transactions contemplated by this Agreement.
(e) The Company had an interested shareholder as defined in Section
778(2) of the MBCA on the effective date of Chapter 7A of the MBCA (May 29,
1984), and the Board of Directors of the Company has not at any time after the
effective date of Chapter 7A of the MBCA (May 29, 1984), elected to be subject,
in whole or in part, as to specifically identified or unidentified interested
shareholders, to the requirements of Section 780. The Company is not an "issuing
public corporation" within the meaning of Section 793(1) of the MBCA.
SECTION 2.05. No Conflict; Required Filings and Consents. (a) Except as
set forth in Section 2.05(a) of the Company Disclosure Schedule, the execution
and delivery of this Agreement by the Company does not, and the performance of
this Agreement by the Company will not, (i) conflict with or violate the
Articles of Incorporation or By-Laws of the Company, (ii) conflict with or
violate any law, rule, regulation, order, judgment or decree applicable to the
Company or any of its subsidiaries or by which its or any of their respective
properties is bound or affected, or (iii) result in any violation or breach of
or constitute a default (or an event that with notice or lapse of time or both
would become a default) under, or impair the Company's or any of its
subsidiaries' rights or alter the rights or obligations of any third party
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or encumbrance on any of
the properties or
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assets of the Company or any of its subsidiaries pursuant to, any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which the Company or any of its subsidiaries
is a party or by which the Company or any of its subsidiaries or its or any of
their respective properties is bound or affected, except in the case of clauses
(ii) or (iii) for any such conflicts, violations, breaches, defaults, or other
occurrences that would not reasonably be expected to have a Material Adverse
Effect or prevent the Company from otherwise performing its obligations under
this Agreement in any material respect.
(b) The execution and delivery of this Agreement by the Company does
not, and the performance of this Agreement by the Company will not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any governmental, judicial or regulatory authority, domestic or foreign,
except (i) for applicable requirements, if any, of the Securities Act, the
Securities Exchange Act of 1934, as amended, and the rules and regulations
thereunder (the "Exchange Act"), state securities laws ("Blue Sky Laws"), state
takeover laws, the pre-merger notification requirements of the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, and the rules and regulations
thereunder (the "HSR Act"), the listing requirements of the NYSE and the filing
and recordation of the Certificate of Merger or other documents as required by
the MBCA, and (ii) where the failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, would not
prevent or materially delay consummation of the Merger, or otherwise prevent or
materially delay the Company from performing its obligations under this
Agreement, or would not have a Material Adverse Effect.
SECTION 2.06. Compliance; Permits. (a) Except as disclosed in Section
2.06(a) of the Company Disclosure Schedule, neither the Company nor any of its
subsidiaries is in conflict with, or in default or violation of, (i) any law,
statute, rule, regulation, order, judgment, writ, injunction or decree
applicable to the Company or any of its subsidiaries or by which its or any of
their respective properties is bound or affected or (ii) any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which the Company or any of its subsidiaries
is a party or by which the Company or any of its subsidiaries or its or any of
their respective properties is bound or affected, except for any such conflicts,
defaults or violations which would not have a Material Adverse Effect.
(b) Except as disclosed in Section 2.06(b) of the Company Disclosure
Schedule, the Company and its subsidiaries hold all permits, licenses,
easements, variances, exemptions, consents, certificates, orders and approvals
from governmental authorities which are material to the operation of the
business of the Company and its subsidiaries taken as a whole as it is now being
conducted (collectively, the "Company Permits"). The Company and its
subsidiaries are in compliance with the terms of the Company Permits, except
where the failure to so comply would not have a Material Adverse Effect.
SECTION 2.07. SEC Filings; Financial Statements. (a) The Company has
filed all forms, reports, statements and other documents required to be filed by
it with the SEC since January 1, 1995 (such forms, reports, statements and other
documents are hereinafter referred to as the "Company SEC Reports"). Except as
disclosed in Section 2.07 of the Company
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Disclosure Schedule, the Company SEC Reports (i) were prepared in all material
respects in accordance with the applicable requirements of the Securities Act or
the Exchange Act, as the case may be, and (ii) did not at the time they were
filed (or if amended or superseded by a filing prior to the date of this
Agreement, then on the date of such filing) contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. None of the Company's
subsidiaries is required to file any forms, reports or other documents with the
SEC.
(b) The consolidated financial statements (including, in each case, any
related notes or schedules thereto) contained in the Company SEC Reports were
prepared in accordance with generally accepted accounting principles ("GAAP")
applied on a consistent basis throughout the periods involved (except as may be
indicated therein or in the notes thereto), and fairly presented in all material
respects the consolidated financial position of the Company and its consolidated
subsidiaries as at the respective dates thereof and the consolidated results of
its operations and cash flows for the periods indicated, except that the
unaudited interim financial statements were or are subject to normal and
recurring year-end adjustments.
SECTION 2.08. Absence of Certain Changes or Events. Except as set forth
in Section 2.08 of the Company Disclosure Schedule or the Company SEC Reports,
since October 6, 1996, the Company has conducted its business in the ordinary
course and there has not occurred: (i) any Material Adverse Effect; (ii) any
amendments or changes in the Articles of Incorporation or By-laws of the
Company; (iii) any sale of, or material pledge of or material encumbrance upon
property of the Company with a value in excess of $5,000,000; (iv) any material
change by the Company in its accounting methods, principles or practices except
as required by any change in GAAP or as a result of a change in law or (v) any
material revaluation by the Company of any of its assets, including, without
limitation, writing down the value of inventory or writing off notes or accounts
receivable other than in the ordinary course of business.
SECTION 2.09. [Intentionally Left Blank].
SECTION 2.10. Employee Benefit Plans; Employment Agreements. (a)
Section 2.10(a) of the Company Disclosure Schedule lists all employee pension
plans (as defined in Section 3(2) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA")), all material employee welfare plans (as defined
in Section 3(1) of ERISA), and all other material bonus, stock option, stock
purchase, incentive, deferred compensation, supplemental retirement, severance
and other similar fringe or employee benefit plans, programs and arrangements
for the benefit of, or relating to, any employee or former employee of the
Company or any trade or business (whether or not incorporated) which is a member
of a controlled group including the Company or which is under common control
with the Company (an "ERISA Affiliate") within the meaning of Section 414 of the
Code and which is maintained by or contributed to by the Company or any ERISA
Affiliate, as well as each plan with respect to which the Company or any ERISA
Affiliate could incur liability under Section 4069 (if such plan has been or
were terminated) or Section 4212(c) of ERISA (together, the "Employee Plans").
There have been made available to Parent with respect to
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each Employee Plan, other than a "multiemployer plan" as such term is defined in
Section 3(37) of ERISA (a "Multiemployer Plan"), copies of (i) each such written
Employee Plan (other than those referred to in Section 4(b)(4) of ERISA), (ii)
the most recent annual report on Form 5500 series, with accompanying schedules
and attachments, filed with respect to each such Employee Plan required to make
such a filing, and (iii) the most recent actuarial valuation for each such
Employee Plan subject to Title IV of ERISA. For purposes of this Section
2.10(a), the term "material," used with respect to any Employee Plan or
liability shall mean that the Company or an ERISA Affiliate has incurred or may
incur obligations in an amount exceeding $1,000,000 in the aggregate with
respect to all such Employee Plans and liabilities.
(b) Except as set forth in Section 2.10(b) of the Company Disclosure
Schedule or the Company SEC Reports: (i) none of the Employee Plans, excluding
any Multiemployer Plan, promises or provides retiree medical or other retiree
welfare benefits to any person except to the extent required by Part 6 of Title
I of ERISA; (ii) there has been no "prohibited transaction," as such term is
defined in Section 406 of ERISA and Section 4975 of the Code, with respect to
any Employee Plan, excluding any Multiemployer Plan, which could result in any
material liability of the Company or any of its subsidiaries; (iii) all Employee
Plans, excluding any Multiemployer Plan, are in compliance in all material
respects with the requirements prescribed by any and all statutes (including
ERISA and the Code), orders, or governmental rules and regulations currently in
effect with respect thereto (including all applicable requirements for
notification to participants or the Department of Labor, Internal Revenue
Service (the "IRS"), Pension Benefit Guaranty Corporation or Secretary of the
Treasury), and the Company and each of its subsidiaries have performed all
material obligations required to be performed by them under, are not in any
material respect in default under or violation of, and have no knowledge of any
default or violation by any other party to, any of the Employee Plans, except
where such non-compliance, non-performance or default could not reasonably be
expected to result in a material liability to the Company or its subsidiaries;
(iv) each Employee Plan, excluding any Multiemployer Plan, intended to qualify
under Section 401(a) of the Code and each trust intended to qualify under
Section 501(a) of the Code is the subject of a favorable determination letter
from the IRS, and nothing has occurred which may reasonably be expected to
impair such determination, except to the extent such impairment could not
reasonably be expected to result in a material liability to the Company or its
subsidiaries; (v) all contributions required to be made by the Company or any of
its subsidiaries to any Employee Plan pursuant to Section 412 of the Code, or
the terms of the Employee Plan or any collective bargaining agreement, have been
made on or before their due dates; (vi) with respect to each Employee Plan,
excluding any Multiemployer Plan, no "reportable event" within the meaning of
Section 4043 of ERISA (excluding any such event for which the 30 day notice
requirement has been waived under the regulations to Section 4043 of ERISA) nor
any event described in Section 4062, 4063 or 4041 of ERISA has occurred; (vii)
neither the Company nor any ERISA Affiliate has incurred, nor reasonably expects
to incur, any material liability under Title IV of ERISA that has not been
satisfied (other than liability for premium payments to the Pension Benefit
Guaranty Corporation arising in the ordinary course); (viii) neither the Company
nor any ERISA Affiliate has at any time withdrawn from a Multiemployer Plan in a
"complete withdrawal" or a "partial withdrawal" as defined in Section 4203 and
4205 of ERISA, respectively, so as to result in a material
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<PAGE> 17
liability of the Company or any ERISA Affiliate that has not been satisfied,
contingent or otherwise (including, but not limited to, the obligations pursuant
to an agreement entered into in accordance with Section 4204 of ERISA); and (ix)
if as of the Effective Time, the Company and all ERISA Affiliates were to
withdraw from all Multiemployer Plans to which any of them has contributed or
been obligated to contribute, they would incur no material liabilities to such
plans under Title IV of ERISA.
(c) Section 2.10(c) of the Company Disclosure Schedule sets forth a
list that is true and complete in all material respects of each current or
former employee, officer or director of the Company or any of its subsidiaries
who holds (i) any option to purchase Company Common Stock as of the date hereof,
together with the number of shares of Company Common Stock subject to such
option, the option price of such option (to the extent determined as of the date
hereof), and the expiration date of such option; and (ii) any other right,
directly or indirectly, to acquire Company Common Stock, together with the
number of shares of Company Common Stock subject to such right. Section 2.10(c)
of the Company Disclosure Schedule also sets forth the total number of options
and other rights. No such option is intended to qualify as an incentive stock
option within the meaning of Section 422(b) of the Code (an "ISO"). Except as
set forth in Section 2.10(c) of the Company Disclosure Schedule, no action has
been taken which would result in the acceleration of the vesting of the Stock
Options following the consummation of the Merger (assuming the assumption of the
Stock Options as set forth in Article II).
(d) Section 2.10(d) of the Company Disclosure Schedule sets forth a
list that is true and complete in all material respects of (i) all employment
agreements with officers of the Company or any of its subsidiaries; (ii) all
agreements with consultants who are individuals obligating the Company or any of
its subsidiaries to make annual cash payments on an amount exceeding $250,000;
(iii) all severance agreements of the Company or any of its subsidiaries with or
relating to its employees; (iv) with respect to the Amended and Restated
Severance Plan for Key Employees, the name and level of participation of each
participant therein, and for each such participant, the base salary as in effect
on the date of this Agreement and the actual annual cash bonuses paid with
respect to 1994 and 1995 and the maximum annual cash bonus payable with respect
to 1996, the amount of taxable compensation shown on Form W-2 for each of 1992
through 1995; (v) a list that is true and complete in all material respects of
all employees whose Stock Options will be subject to accelerated vesting as a
result of the Merger, for any reason other than termination of employment by the
Company or any of its subsidiaries (along with the number of shares issuable
upon exercise of such Stock Options, the exercise price and vesting dates); and
(vi) all plans, programs, agreements and other arrangements of the Company or
any of its subsidiaries with or relating to its employees which contain change
in control provisions pursuant to which the Company or any of its subsidiaries
could incur a material liability.
SECTION 2.11. Labor Matters. Except as set forth in Section 2.11 of the
Company Disclosure Schedule or the Company SEC Reports, (i) there are no claims
or proceedings pending or, to the knowledge of the Company, threatened, between
the Company or any of its subsidiaries and any of their respective employees,
which claims or proceedings have or would reasonably be expected to have a
Material Adverse Effect; (ii) neither the Company nor any
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of its subsidiaries is a party to any material collective bargaining agreement
or other labor union contract applicable to persons employed by the Company or
its subsidiaries, and (iii) the Company is not aware of any strikes, slowdowns,
work stoppages, lockouts, boycotts, corporate campaigns or threats thereof, by
or with respect to any employees of the Company or any of its subsidiaries which
would reasonably be expected to have a Material Adverse Effect.
SECTION 2.12. Registration Statement; Proxy Statement/Prospectus.
Subject to the accuracy of the representations of Parent in Section 3.12, the
information supplied by the Company for inclusion in the Registration Statement
(as defined in Section 5.02) pursuant to which the Parent Common Stock to be
issued in the Merger will be registered with the SEC shall not at the time the
Registration Statement is declared effective by the SEC contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein not
misleading. The information supplied by the Company for inclusion in the Proxy
Statement/Prospectus (as defined in Section 5.02) to be sent to the stockholders
of the Company in connection with the meeting of the stockholders of the Company
to consider the Merger (the "Company Stockholders Meeting") and, if required to
satisfy the condition in Section 6.01(c) hereof, to be sent to the stockholders
of Parent in connection with the meeting of the stockholders of Parent to
consider the issuance of the Parent Common Stock in connection with the Merger
(the "Parent Stockholders Meeting"), will not, on the date the Proxy
Statement/Prospectus (or any amendment thereof or supplement thereto) is first
mailed to the stockholders of the Company at the time of the Company
Stockholders Meeting and, if required, Parent at the time of the Parent
Stockholders Meeting, or at the Effective Time, contain any statement which, at
such time and in light of the circumstances under which it shall be made, is
false or misleading with respect to any material fact, or shall omit to state
any material fact necessary in order to make the statements made therein not
false or misleading. If at any time prior to the Effective Time any event
relating to the Company or any of its respective affiliates, officers or
directors should be discovered by the Company which should be set forth in an
amendment to the Registration Statement or a supplement to the Proxy
Statement/Prospectus, the Company shall promptly inform Parent and Merger Sub.
Notwithstanding the foregoing, the Company makes no representation or warranty
with respect to any information supplied by Parent or Merger Sub which is
contained or incorporated by reference in any of the foregoing documents.
SECTION 2.13. [Intentionally Left Blank.]
SECTION 2.14. Title to Property. Except as set forth in Section 2.14 of
the Company Disclosure Schedule, the Company and each of its subsidiaries have
good and defensible title to all of their properties and assets, free and clear
of all liens, charges and encumbrances, except liens for taxes not yet due and
payable and such liens or other imperfections of title, if any, which would not
have a Material Adverse Effect; and all leases pursuant to which the Company or
any of its subsidiaries lease from others material amounts of real or personal
property, are in good standing, valid and effective in accordance with their
respective terms, and there is not under any of such leases any existing
material default or event of default (or event which with notice or lapse of
time, or both, would constitute a material default), except where the lack of
such good standing, validity and effectiveness or the existence of such default
or event of default would not have a Material Adverse Effect.
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SECTION 2.15. Taxes. (a) For purposes of this Agreement, "Tax" or
"Taxes" shall mean taxes, fees, levies, duties, tariffs, premiums, assessments,
imposts, and governmental impositions or charges of any kind in the nature of
(or similar to) taxes, payable to any federal, state, local or foreign taxing
(or similar) authority, including (without limitation) (i) income, franchise,
profits, gross receipts, ad valorem, net worth, value added, sales, use,
service, real or personal property, special assessments, capital stock, license,
payroll, withholding, employment, social security, workers' compensation,
unemployment compensation, utility, severance, production, excise, stamp,
occupation, premiums, windfall profits, transfer and gains taxes, and (ii)
interest, penalties, additional taxes or amounts and additions to tax imposed
with respect thereto; and "Tax Returns" shall mean returns, reports,
declarations, information statements and other documents with respect to Taxes
required to be filed with the IRS or any other taxing (or similar) authority,
domestic or foreign, including, without limitation, consolidated, combined and
unitary tax returns.
(b) Other than as disclosed in Section 2.15(b) of the Company
Disclosure Schedule or the Company SEC Reports: The Company and its subsidiaries
have filed all United States federal income and state income or franchise Tax
Returns and all other material Tax Returns required to be filed by them, and the
Company and its subsidiaries have paid and discharged all Taxes due in
connection with or with respect to the periods or transactions covered by such
Tax Returns and have paid all other Taxes as are due from the Company and its
subsidiaries or for which they could be liable (whether to taxing authorities or
to other persons or entities), except for such Taxes as to which the failure to
pay, individually or in the aggregate, would not constitute a Material Adverse
Effect. There are no other material Taxes that would be due if asserted by a
taxing authority, except with respect to which the Company is maintaining
reserves to the extent currently required by GAAP. Neither the Company nor any
of its subsidiaries has granted any waiver of any statute of limitations with
respect to, or any extension of a period for the assessment of, any Tax.
(c) Other than as disclosed in Section 2.15(c) of the Company
Disclosure Schedule or the Company SEC Reports, neither the Company nor any of
its subsidiaries is obligated under any agreements with respect to industrial
development bonds or other obligations with respect to which the excludability
from gross income of the holder for federal or state income tax purposes would
be affected by the transactions contemplated hereunder. Neither the Company nor
any of its subsidiaries is, or has been, a United States real property holding
corporation (as defined in Section 897(c)(2) of the Code) during the applicable
period specified in Section 897(c)(1)(A)(ii) of the Code. To the best knowledge
of the Company, neither the Company nor any of its subsidiaries owns any
property of a character, the indirect transfer of which, pursuant to this
Agreement, would give rise to any material documentary, stamp or other transfer
tax.
(d) Except as disclosed in Section 2.15 (d) of the Company Disclosure
Schedule, neither the Company nor any of its subsidiaries (i) is a party to or
bound by (nor will it become a party to or become bound by) any tax-indemnity,
tax sharing or tax allocation agreement (or administrative or accounting
practice having substantially the same effect as such an agreement); (ii) has
filed a consent under Section 341(f) of the Code (or any corresponding provision
of state, local, or foreign income tax law) or agreed to have Section 341(f) of
the
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Code (or any corresponding provision of state, local, or foreign income tax law)
apply to any disposition of any asset owned by it; (iii) has agreed to make or
is required to make any material adjustment under Section 481(a) of the Code by
reason of a change in accounting method or otherwise; (iv) has been a member of
an affiliated group of corporations, within the meaning of Section 1504 of the
Code, other than the affiliated group of which the Company is the common parent
corporation; or (v) owns material assets that directly or indirectly secure debt
the interest on which is tax-exempt under Section 103(a) of the Code.
SECTION 2.16. Environmental Matters. Except as set forth in Section
2.16 of the Company Disclosure Schedule or the Company SEC Reports, and except
in all cases as, in the aggregate, have not had and would not reasonably be
expected to have a Material Adverse Effect, the Company and each of its
subsidiaries to the best of the Company's knowledge (i) have obtained all
applicable permits, licenses and other authorization which are required to be
obtained under all applicable federal, state or local laws or any regulation,
code, plan, order, decree, judgment, notice or demand letter issued, entered,
promulgated or approved thereunder ("Environmental Laws") relating to pollution
or protection of the environment, including laws relating to emissions,
discharges, releases or threatened releases of pollutants, contaminants, or
hazardous or toxic wastes into ambient air, surface water, ground water, or land
or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling of pollutants, contaminants
or hazardous or toxic materials or wastes by the Company or its subsidiaries (or
their respective agents); (ii) are in compliance with all terms and conditions
of such required permits, licenses and authorization, and also are in compliance
with all other limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables contained in applicable
Environmental Laws; (iii) as of the date hereof, are not aware of nor have
received notice of any past or present violations of Environmental Laws or any
event, condition, circumstance, activity, practice, incident, action or plan
which is reasonably likely to interfere with or prevent continued compliance
with or which could give rise to any common law or statutory liability, or
otherwise form the basis of any claim, action, suit or proceeding, against the
Company or any of its subsidiaries based on or resulting from the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling, or the emission, discharge or release into the environment, or any
pollutant, contaminant or hazardous or toxic material or waste; and (iv) have
taken all actions necessary under applicable Environmental Laws to register any
products or materials required to be registered by the Company or its
subsidiaries (or any of their respective agents) thereunder.
SECTION 2.17. Brokers. Except as set forth in Section 2.17 of the
Company Disclosure Schedule, no broker, finder or investment banker is entitled
to any brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Company.
SECTION 2.18. Intellectual Property Rights. The Company owns or
possesses legally enforceable rights to use the "Vons" and "Pavilions" trade
names, trademarks and service names used in the business of the Company and its
subsidiaries as currently conducted.
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SECTION 2.19. Opinion of Financial Advisor. The Company has been
advised by its financial advisor, CS First Boston Corporation, that in its
opinion, as of the date hereof, the Exchange Ratio set forth herein is fair from
a financial point of view to the holders of Shares (other than Parent or any
direct or indirect wholly owned subsidiary or affiliate of Parent).
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub hereby, jointly and severally, represent and
warrant to the Company that:
SECTION 3.01. Organization and Qualification; Subsidiaries. Each of
Parent and its significant subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation and has the requisite corporate power and authority and is in
possession of all Approvals necessary to own, lease and operate the properties
it purports to own, operate or lease and to carry on its business as it is now
being conducted, except where the failure to be so organized, existing and in
good standing or to have such power, authority and Approvals would not have a
Material Adverse Effect (as defined in Section 8.03). Each of Parent and each of
its significant subsidiaries is duly qualified or licensed as a foreign
corporation to do business, and is in good standing, in each jurisdiction where
the character of its properties owned, leased or operated by it or the nature of
its activities makes such qualification or licensing necessary, except for such
failures to be so duly qualified or licensed and in good standing that would not
have a Material Adverse Effect. A true and complete list of all of Parent's
subsidiaries, together with the jurisdiction of incorporation of each subsidiary
and the percentage of each subsidiary's outstanding capital stock owned by
Parent or another subsidiary, is set forth in Section 3.01 of the disclosure
schedule prepared by Parent and delivered to the Company in connection with the
execution of this Agreement (the "Parent Disclosure Schedule"). Except as set
forth in Section 3.01 of the Parent Disclosure Schedule or the Parent SEC
Reports (as defined in Section 3.07), Parent does not directly own any equity or
similar interest in, or any interest convertible into or exchangeable or
exercisable for, any equity or similar interest in, any corporation,
partnership, joint venture or other business association or entity, with respect
to which Parent has invested or is required to invest $1,000,000 or more,
excluding shares of Company Common Stock and the equity interest in Casa Ley
S.A. de C.V. and the limited partnership interests in SSI Equity Associates L.P.
held by Parent or any direct or indirect subsidiary of Parent.
SECTION 3.02. Certificate of Incorporation and By-Laws. Parent has
heretofore furnished to the Company a complete and correct copy of its
Certificate of Incorporation and By-Laws, as amended to date. Such Certificate
of Incorporation and By-Laws are in full force and effect. Merger Sub has
heretofore furnished to the Company a complete and correct copy of its Articles
of Incorporation and By-Laws, as amended to date. Such Articles of Incorporation
and By-Laws are in full force and effect. Neither Parent nor Merger Sub is in
violation of any of the provisions of its respective Certificate or Articles of
Incorporation, as the case may be, or By-Laws.
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SECTION 3.03. Capitalization. (a) As of December 10, 1996, the
authorized capital stock of Parent consisted of (i) 750,000,000 shares of Parent
Common Stock of which: 220,993,985 shares were issued and outstanding, all of
which are validly issued, fully paid and non-assessable, no shares were held in
treasury, 23,405,953 shares were reserved for future issuance upon exercise of
outstanding warrants, 19,435,620 shares were reserved for future issuance upon
exercise of outstanding options to purchase Parent Common Stock granted under
Parent's stock option plans and an additional 7,184,631 shares were reserved for
issuance under Parent's stock option plans; and (ii) 25,000,000 shares of
preferred stock, of which no shares of preferred stock were issued and
outstanding. No material change in such capitalization has occurred between
December 10, 1996 and the date hereof. Except as set forth in Section 3.03 of
the Parent Disclosure Schedule or the Parent SEC Reports, there are no options,
warrants or other rights, agreements, or arrangements to which Parent is a party
or by which Parent is bound relating to the issued or unissued capital stock of
Parent or any of its subsidiaries or obligating Parent or any of its
subsidiaries to issue or sell any shares of capital stock of, or other equity
interests in, Parent or any of its subsidiaries.
(b) Except as set forth in Section 3.03 of the Parent Disclosure
Schedule or the Parent SEC Reports, or pursuant to the Purchase Agreement, there
are no obligations, contingent or otherwise, of Parent or any of its
subsidiaries to repurchase, redeem or otherwise acquire any shares of Parent
Common Stock or the capital stock of any subsidiary or to provide funds to or
make any investment (in the form of a loan, capital contribution or otherwise)
in any such subsidiary other than guarantees of bank obligations of subsidiaries
entered into in the ordinary course of business. Except as set forth in Section
3.01 or 3.03 of the Parent Disclosure Schedule, all of the outstanding shares of
capital stock of each of Parent's significant subsidiaries is duly authorized,
validly issued, fully paid and nonassessable and all such shares (other than
directors' qualifying shares) are owned by Parent or another subsidiary free and
clear of all security interests, liens, claims, pledges, agreements, limitations
in Parent's voting rights, charges or other encumbrances of any nature
whatsoever.
SECTION 3.04. Authority Relative to this Agreement; Vote Required. (a)
Each of Parent and Merger Sub has all necessary corporate power and authority to
execute and deliver this Agreement and to perform its obligations hereunder and
to consummate the transactions contemplated hereby. The execution and delivery
of this Agreement by Parent and Merger Sub and the consummation by Parent and
Merger Sub of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action on the part of Parent and Merger
Sub, and no other corporate proceedings on the part of Parent or Merger Sub are
necessary to authorize this Agreement or to consummate the transactions
contemplated hereby (other than (a) any approval of the issuance of Parent
Common Stock in connection with the Merger by the holders of at least a majority
of the outstanding shares of Parent Common Stock entitled to vote in accordance
with the DGCL and Parent's Certificate of Incorporation and ByLaws which is
required to satisfy the condition in Section 6.01(c) hereof and (b) the adoption
of this Agreement, the Merger and the transactions contemplated hereby by SSCI,
as the sole holder of the outstanding shares of Common Stock of Merger Sub). As
of the date hereof, the Board of Directors of Parent has determined that it is
advisable and in the best interest of Parent's stockholders for Parent to enter
into a business combination with the Company upon
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the terms and subject to the conditions of this Agreement. This Agreement has
been duly and validly executed and delivered by Parent and Merger Sub.
(b) Assuming the due authorization, execution and delivery by the
Company, this Agreement constitutes a legal, valid and binding obligation of
Parent and Merger Sub, enforceable against Parent and Merger Sub in accordance
with its terms, except as such enforceability may be limited by any applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally, and except as the
availability of equitable remedies may be limited by the application of general
principles of equity (regardless of whether such equitable principles are
applied in a proceeding at law or in equity).
(c) Subject to Section 6.01(c)(ii), the approval of the holders of a
majority of the shares of Parent Common Stock voting at the meeting called to
approve the issuance of the Parent Shares in the Merger is the only vote of the
holders of any class or series of Parent capital stock necessary to approve the
issuance of Parent Common Stock in connection with the Merger. The approval of
SSCI, as the sole shareholder of all capital stock of Merger Sub, is the only
shareholder approval necessary to approve the Merger, this Agreement and the
transactions contemplated hereby on behalf of Merger Sub.
SECTION 3.05. No Conflict; Required Filings and Consents. (a) Except as
set forth in Section 3.05(a) of the Parent Disclosure Schedule, the execution
and delivery of this Agreement by Parent and Merger Sub do not, and the
performance of this Agreement by Parent and Merger Sub will not, (i) conflict
with or violate the Certificate or Articles of Incorporation, as the case may
be, or By-Laws of Parent or Merger Sub, (ii) conflict with or violate any law,
rule, regulation, order, judgment or decree applicable to Parent or any of its
subsidiaries or by which its or any of their respective properties are bound or
affected, or (iii) result in any violation or breach of or constitute a default
(or an event which with notice or lapse of time or both would become a default)
under, or impair Parent's or any of its subsidiaries' rights or alter the rights
or obligations of any third party under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or encumbrance on any of the properties or assets of Parent
or any of its subsidiaries pursuant to, any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which Parent or any of its subsidiaries is a party or by which
Parent or any of its subsidiaries or its or any of their respective properties
are bound or affected, except, in the case of clauses (ii) or (iii), for any
such conflicts, violations, breaches, defaults or other occurrences that would
not reasonably be expected to have a Material Adverse Effect or otherwise
prevent Parent or Merger Sub from performing their obligations under this
Agreement in any material respect.
(b) The execution and delivery of this Agreement by Parent and Merger
Sub does not, and the performance of this Agreement by Parent and Merger Sub
will not, require any consent, approval, authorization or permit of, or filing
with or notification to, any governmental, judicial or regulatory authority,
domestic or foreign, except (i) for applicable requirements, if any, of the
Securities Act, the Exchange Act, the Blue Sky Laws, state takeover laws, the
pre-merger notification requirements of the HSR Act, the listing
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requirements of the NYSE and the filing and recordation of the Certificate of
Merger or other documents as required by the MBCA, and (ii) where the failure to
obtain such consents, approvals, authorizations or permits, or to make such
filings or notifications, would not prevent or materially delay consummation of
the Merger, or otherwise prevent or materially delay Parent or Merger Sub from
performing their respective obligations under this Agreement, and would not have
a Material Adverse Effect.
SECTION 3.06. Compliance; Permits. (a) Except as disclosed in Section
3.06(a) of the Parent Disclosure Schedule, neither Parent nor any of its
subsidiaries is in conflict with, or in default or violation of, (i) any law,
statute, rule, regulation, order, judgment, writ, injunction or decree
applicable to Parent or any of its subsidiaries or by which its or any of their
respective properties is bound or affected or (ii) any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which Parent or any of its subsidiaries is a party
or by which Parent or any of its subsidiaries or its or any of their respective
properties is bound or affected, except for any such conflicts, defaults or
violations which would not reasonably be expected to have a Material Adverse
Effect.
(b) Except as disclosed in Section 3.06(b) of the Parent Disclosure
Schedule, Parent and its subsidiaries hold all permits, licenses, easements,
variances, exemptions, consents, certificates, orders and approvals from
governmental authorities which are material to the operation of the business of
Parent and its subsidiaries taken as a whole as it is now being conducted
(collectively, the "Parent Permits"). Parent and its subsidiaries are in
compliance with the terms of Parent Permits, except where the failure to so
comply would not reasonably be expected to have a Material Adverse Effect.
SECTION 3.07. SEC Filings; Financial Statements. (a) Parent has filed
all forms, reports, statements and other documents required to be filed by it
with the SEC since January 1, 1995 (such forms, reports, statements and other
documents are hereinafter referred to as the "Parent SEC Reports"). Except as
disclosed in Section 3.07 of the Parent Disclosure Schedule, the Parent SEC
Reports (i) were prepared in all material respects in accordance with the
applicable requirements of the Securities Act or the Exchange Act, as the case
may be, and (ii) did not at the time they were filed (or if amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such filing) contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. None of Parent's subsidiaries is required to file any
forms, reports or other documents with the SEC.
(b) The consolidated financial statements (including, in each case, any
related notes and schedules thereto) contained in the Parent SEC Reports were
prepared in accordance with GAAP applied on a consistent basis throughout the
periods involved (except as may be indicated therein or in the notes thereto)
and fairly presented in all material respects the consolidated financial
position of Parent and its consolidated subsidiaries as at the respective dates
thereof and the consolidated results of its operations and cash flows for the
periods indicated, except that the unaudited interim financial statements were
or are subject to normal and recurring year-end adjustments.
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SECTION 3.08. Absence of Certain Changes or Events. Except as set forth
in Section 3.08 of the Parent Disclosure Schedule or the Parent SEC Reports,
since September 7, 1996, Parent has conducted its business in the ordinary
course and there has not occurred (i) any Material Adverse Effect; (ii) any
amendments or changes in the Certificate of Incorporation or By-Laws of Parent;
(iii) any sale of a material amount of assets of Parent; (iv) any material
change by Parent in its accounting methods, principles or practices except as
required by any change in GAAP or as a result of a change in law; or (v) any
material revaluation by Parent of any of its assets, including without
limitation, writing down the value of inventory or writing off notes or accounts
receivable other than in the ordinary course of business.
SECTION 3.09. [Intentionally Left Blank.]
SECTION 3.10. Employee Benefit Plans. Except as provided in the Parent
SEC Reports or as would not have a Material Adverse Effect, (i) all employee
benefit plans or programs maintained for the benefit of the current or former
employees or directors of Parent or any subsidiary of Parent that are sponsored,
maintained or contributed to by Parent or any subsidiary of Parent, or with
respect to which Parent or any subsidiary of Parent has any liability, including
any such plan that is an "employee benefit plan" as defined in Section 3(3) of
ERISA, are in compliance with all applicable requirements of law, including
ERISA and the Code, and (ii) neither Parent nor any subsidiary of Parent has any
liabilities or obligations with respect to any such employee benefit plans or
programs, whether accrued, contingent or otherwise, except liabilities or
obligations incurred in the ordinary course.
SECTION 3.11. Labor Matters. Except as set forth in Section 3.11 of the
Parent Disclosure Schedule or the Parent SEC Reports, (i) there are no claims or
proceedings pending or, to the knowledge of Parent, threatened, between Parent
or any of its subsidiaries and any of their respective employees, which claims
or proceedings have or would reasonably be expected to have a Material Adverse
Effect and (ii) Parent is not aware of any strikes, slowdowns, work stoppages,
lockouts, boycotts, corporate campaigns or threats thereof, by or with respect
to any employees of Parent or any of its subsidiaries which would reasonably be
expected to have a Material Adverse Effect.
SECTION 3.12. Registration Statement; Proxy Statement/Prospectus.
Subject to the accuracy of the representations of the Company in Section 2.12,
the Registration Statement shall not, at the time the Registration Statement
(including amendments or supplements thereto) is declared effective by the SEC,
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements included therein not misleading.
The information supplied by Parent for inclusion in the Proxy
Statement/Prospectus will not, on the date the Proxy Statement/Prospectus is
first mailed to the stockholders of the Company and, if required, Parent at the
time of the Company Stockholders Meeting and, if required, the Parent
Stockholders Meeting and at the Effective Time, contain any statement which, at
such time and in light of the circumstances under which it shall be made, is
false or misleading with respect to any material fact, or shall omit to state
any material fact necessary in order to make any statement made therein not
false or misleading. If at any time prior to the Effective Time any event
relating to Parent, Merger Sub or any of their respective affiliates, officers
or directors should be discovered by Parent or Merger Sub
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which should be set forth in an amendment to the Registration Statement or a
supplement to the Proxy Statement/Prospectus, Parent or Merger Sub will promptly
inform the Company. Notwithstanding the foregoing, Parent and Merger Sub make no
representation or warranty with respect to any information supplied by the
Company which is contained or incorporated by reference in any of the foregoing
documents.
SECTION 3.13. Environmental Matters. Except as set forth in Section
3.13 of the Parent Disclosure Schedule or the Parent SEC Reports, and except in
all cases as, in the aggregate, have not had and would not reasonably be
expected to have a Material Adverse Effect, Parent and each of its subsidiaries
to the best of Parent's knowledge (i) have obtained all applicable permits,
licenses and other authorization which are required to be obtained under all
applicable Environmental Laws by Parent or its subsidiaries (or their respective
agents); (ii) are in compliance with all terms and conditions of such required
permits, licenses and authorization, and also are in compliance with all other
limitations, restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules and timetables contained in applicable Environmental
Laws; (iii) as of the date hereof, are not aware of nor have received notice of
any past or present violations of Environmental Laws, or any event, condition,
circumstance, activity, practice, incident, action or plan which is reasonably
likely to interfere with or prevent continued compliance with or which would
give rise to any common law or statutory liability, or otherwise form the basis
of any claim, action, suit or proceeding, against Parent or any of its
subsidiaries based on or resulting from the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or handling, or the
emission, discharge or release into the environment, of any pollutant,
contaminant or hazardous or toxic material or waste; and (iv) have taken all
actions necessary under applicable Environmental Laws to register any products
or materials required to be registered by Parent or its subsidiaries (or any of
their respective agents) thereunder.
SECTION 3.14. Brokers. Except as set forth in Section 3.14 of the
Parent Disclosure Schedule, no broker, finder or investment banker is entitled
to any brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Parent or Merger Sub.
SECTION 3.15. Purchase Agreement. Effective as of the date hereof,
Parent and SSI Associates, L.P. have entered into a Stock Repurchase Agreement
(the "Purchase Agreement") for the purchase by Parent of an aggregate of
15,000,000 shares of Parent Common Stock (or warrants to purchase Parent Common
Stock) (the "Repurchase") in the form attached hereto as Exhibit A.
SECTION 3.16. Ownership of SSCI and Merger Sub; Capitalization of
Merger Sub; No Prior Activities. SSCI is a direct wholly owned subsidiary of
Parent. As of the date hereof, the authorized capital stock of Merger Sub
consists of 1,000 shares of common stock, all of which are issued and
outstanding and held by SSCI. Merger Sub was formed solely for the purpose of
engaging in the transaction contemplated by this Agreement. As of the date
hereof and the Effective Time, except for obligations or liabilities incurred in
connection with its incorporation or organization and the transactions
contemplated by this Agreement and except for this Agreement and any other
agreement or arrangements contemplated by this Agreement,
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Merger Sub has not and will not have incurred, directly or indirectly, through
any subsidiary or affiliate, any obligations or liabilities or engaged in any
business activities of any type or kind whatsoever or entered into any
agreements or arrangements with any person.
SECTION 3.17. Opinion of Financial Advisor. Parent has been advised by
its financial advisor, Morgan Stanley & Co. that in its opinion, as of the date
hereof, the Exchange Ratio set forth herein is fair from a financial point of
view to Parent.
SECTION 3.18. Takeover Statutes. Parent has taken all action necessary
so that the restrictions set forth in Section 203 of the General Corporation Law
of the State of Delaware will not and do not apply to the Support/Voting
Agreements dated as of the date hereof between the Company and certain Parent
stockholders.
ARTICLE IV.
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 4.01. Conduct of Business by the Company Pending the Merger.
During the period from the date of this Agreement and continuing until the
earlier of the termination of this Agreement or the Effective Time, the Company
covenants and agrees that, unless Parent shall otherwise agree in writing, (i)
the Company shall conduct its business and shall cause the businesses of its
subsidiaries to be conducted only in, and the Company and its subsidiaries shall
not take any action except in, the ordinary course of business and in a manner
consistent with past practice; (ii) the Company shall, and shall cause its
subsidiaries to, use commercially reasonable efforts to keep in full force and
effect adequate insurance coverages consistent with past practice and maintain
and keep its properties and assets in good repair, working order and condition,
normal wear and tear excepted; and (iii) the Company shall use its reasonable
efforts to preserve substantially intact the business organization of the
Company and its subsidiaries, to keep available the services of the present
officers, employees and consultants of the Company and its subsidiaries and to
preserve the present relationships of the Company and its subsidiaries with
customers, suppliers and other persons with which the Company or any of its
subsidiaries has significant business relations. By way of amplification and not
limitation, except as contemplated by this Agreement, neither the Company nor
any of its subsidiaries shall, during the period from the date of this Agreement
and continuing until the earlier of the termination of this Agreement or the
Effective Time, directly or indirectly do, or propose to do, any of the
following without the prior written consent of Parent:
(a) amend or otherwise change its Articles of Incorporation or By-laws;
(b) issue, sell, pledge, dispose of or encumber, or authorize the
issuance, sale, pledge, disposition or encumbrance of, any shares of capital
stock of any class, or any options, warrants, convertible securities or other
rights of any kind to acquire any shares of capital stock, or any other
ownership interest (including, without limitation, any phantom interest) in the
Company or any of its subsidiaries, except for the issuance of shares of Company
Common
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Stock issuable upon the exercise of Stock Options which were granted under the
Company Stock Option Plans and are outstanding on the date hereof;
(c) except as set forth on Schedule 4.01(c) of the Company Disclosure
Schedule, sell, pledge, dispose of or encumber any real property (whether a fee
or leasehold interest) or any other assets of the Company or any of its
subsidiaries, except for (i) sales of non-real property assets in the ordinary
course of business and in a manner consistent with past practice or (ii)
dispositions of obsolete or worthless assets;
(d) (i) declare, set aside, make or pay any dividend or other
distribution (whether in cash, stock or property or any combination thereof) in
respect of any of its capital stock, except that a wholly owned subsidiary of
the Company may declare and pay a dividend to its parent, (ii) split, combine or
reclassify any of its capital stock or issue or authorize or propose the
issuance of any other securities in respect of, in lieu of or in substitution
for shares of its capital stock, (iii) repurchase, redeem or otherwise acquire,
or agree to commit to repurchase, redeem or otherwise acquire, any shares of
capital stock or other equity or debt securities or equity interests of the
Company or any of its subsidiaries or (iv) amend the terms, change the period of
exercisability or accelerate the exercisability of, purchase, repurchase, redeem
or otherwise acquire, or permit any subsidiary to purchase, repurchase, redeem
or otherwise acquire, any of its securities or any securities of its
subsidiaries, including, without limitation, shares of Company Common Stock or
any Stock Option or other option, warrant or right, directly or indirectly, to
acquire shares of Company Common Stock, or propose to do any of the foregoing;
provided that clauses (iii) and (iv) shall not prohibit the exercise of Stock
Options through the use of Company Common Stock issuable upon exercise of Stock
Options (or other shares of Company Common Stock held by the holder of such
Option) to pay the exercise price or to satisfy tax withholding obligations
pursuant to the terms of Stock Options in effect as of the date hereof.
(e) (i) acquire (by merger, consolidation, or acquisition of stock,
equity securities, interests or assets) any corporation, partnership, joint
venture, association or other business organization or division thereof; (ii)
except as set forth in Schedule 4.01(e) of the Company Disclosure Schedule,
incur any indebtedness for borrowed money (including draw downs on lines of
credit or letters of credit) or issue any debt securities or assume, guarantee
(other than borrowings under the Company's bank debt or entered into in the
ordinary course of business consistent with past practice) or endorse or
otherwise as an accommodation become responsible for, the obligations of any
person, or make any loans or advances, except in the ordinary course of business
consistent with past practice or pursuant to the VAT Partnership or VAT II
Partnership described in Section 2.01(a) of the Company Disclosure Schedule;
(iii) other than leases or contracts to purchase real property as set forth in
clause (iv) below or as described in Section 4.01(e) of the Company Disclosure
Schedule, enter into or amend any material contract or agreement or any
agreement with a term longer than one year; (iv) except as described in Section
4.01(e) of the Company Disclosure Schedule, acquire any interest in real
properties; or (v) except as described in Section 4.01(e) of the Company
Disclosure Schedule or in order to fulfill its obligations under a written
agreement, contract or arrangement to which the Company or a subsidiary is a
party or by which it is bound, authorize any capital expenditures or purchase or
lease of property or services (other than purchasing or
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merchandising product in the ordinary course of business consistent with past
practice) (A) which are in the aggregate for any individual store, distribution
center, office, warehouse or other Company facility (a "Facility"), in excess of
$500,000, (B) which are in the aggregate for any single vendor (including any
affiliates thereof) in excess of $1,000,000 over the term of the contract or (C)
from any single vendor (including any affiliates thereof) which property or
services are to be employed at or provided to more than five Facilities.
(f) increase the compensation payable or to become payable to any
director, officer, consultant or employee of the Company or any of its
subsidiaries, except for increases in salaries or wages of employees which are
required pursuant to collective bargaining agreements or other written
agreements entered into prior to the date hereof, or grant any severance or
termination pay to, or enter into any employment or severance agreement with any
director, officer (except for officers who are terminated on an involuntary
basis) or other employee of the Company or any of its subsidiaries, or
establish, adopt, enter into or amend any collective bargaining, bonus, profit
sharing, thrift, compensation, stock option, restricted stock, pension,
retirement, deferred compensation, employment, termination, severance or other
plan, agreement, trust, fund, policy or arrangement for the benefit of any
current or former directors, officers or employees (any of the foregoing being
an "Employee Benefit Arrangement"), except, in each case, as may be required by
law or collective bargaining agreement, and except as set forth on Schedule
4.01(f) of the Company Disclosure Schedule;
(g) take any action to change in any material respect accounting
policies or procedures, except as may be required by GAAP or as a result of a
change in law;
(h) except as set forth on Schedule 4.01(h) of the Company Disclosure
Schedule, make any material tax election inconsistent with past practice or
settle or compromise any material federal, state, local or foreign tax liability
or agree to an extension of a statute of limitations, except to the extent the
amount of any such settlement has been reserved for in the financial statements
contained in the Company SEC Reports filed prior to the date of this Agreement;
(i) except as set forth on Schedule 4.01(i) of the Company Disclosure
Schedule, pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
the payment, discharge or satisfaction in the ordinary course of business and
consistent with past practice of liabilities reflected or reserved against in
the financial statements contained in the Company SEC Reports filed prior to the
date of this Agreement or incurred in the ordinary course of business and
consistent with past practice;
(j) elect, pursuant to Section 783 of the MBCA, to be covered by the
provisions of Section 780 of the MBCA or take any action which could cause the
Company or the shares of Company Common Stock held by Parent or any direct or
indirect wholly owned subsidiary of Parent to be covered by the provisions of
Section 790 et seq. of the MBCA;
(k) adopt a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other reorganization
of the Company and its subsidiaries;
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(l) adopt any resolutions of the Board of Directors which would grant
the Company's stockholders dissenters' rights pursuant to the MBCA; or
(m) take, or agree (in writing or otherwise) to take, any of the
actions described in Sections 4.01(a) through (l) above, or any action which
would make any of the representations or warranties of the Company contained in
this Agreement untrue or incorrect or prevent the Company from performing or
cause the Company not to perform its covenants hereunder or permit any of the
conditions set forth in Article VI from not being satisfied.
SECTION 4.02 No Solicitation. (a) Neither the Company nor any of its
subsidiaries shall, nor shall it authorize any of its officers, directors,
employees, agents, investment bankers, attorneys, financial advisors or other
representatives retained by it or any of its subsidiaries (collectively,
"Company Representatives") to, directly or indirectly, (i) solicit or initiate
the submission of, any Acquisition Proposal (as defined in Section 4.02(c)),
(ii) participate in any discussions or negotiations regarding, or furnish to any
person any information with respect to, or take any other action intended to
facilitate any inquiries or the making of any proposal that constitutes or would
reasonably be expected to lead to, an Acquisition Proposal or (iii) enter into
any agreement with respect to, agree to, approve or recommend any Acquisition
Proposal. Nothing in this Section 4.02(a) shall prevent the Board of Directors
of the Company (or any committee thereof) from considering, negotiating,
discussing, approving and recommending to the stockholders of the Company a bona
fide Acquisition Proposal not solicited in violation of this Agreement, provided
the Board of Directors of the Company determines in good faith, based upon
advice of outside legal counsel, that it is required to do so in order to
discharge properly its fiduciary duties. Nothing contained in this Section
4.02(a) shall prevent the Board of Directors of the Company from taking and
disclosing to the Company's stockholders a position with regard to a tender
offer or exchange offer contemplated by Rules 14d-9 and 14e-2(a) promulgated
under the Exchange Act and making such disclosure to the stockholders of the
Company as may be required under applicable law; provided, that the Board of
Directors of the Company shall not recommend that the stockholders of the
Company tender their shares of Company Common Stock in connection with such
tender or exchange offer unless the Board of Directors of the Company determines
in good faith, based upon advice of outside legal counsel, that making such
recommendation is required in order to discharge properly its fiduciary duties.
(b) The Company shall immediately notify Parent after receipt of any
Acquisition Proposal, or any modification of or amendment to any Acquisition
Proposal, or any request for nonpublic information relating to the Company or
any of its subsidiaries in connection with an Acquisition Proposal or for access
to the properties, books or records of the Company or any subsidiary by any
person or entity that informs the Board of Directors of the Company or such
subsidiary that it is considering making, or has made, an Acquisition Proposal.
(c) As used in this Agreement, "Acquisition Proposal" shall mean any
proposal or offer from any person (other than Parent, Merger Sub or any other
direct or indirect wholly owned subsidiary of Parent) relating to (i) any direct
or indirect acquisition or purchase of any equity interest in, or a substantial
amount of assets of, the Company or its subsidiaries, (ii) any tender offer or
exchange offer (including a self-tender offer), (iii) any merger, consolidation,
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recapitalization, liquidation, business combination or similar transaction
involving the Company other than the transactions contemplated by this Agreement
or (iv) any other extraordinary transaction the consummation of which would or
could reasonably be expected to impede, interfere with, prevent or materially
delay the Merger.
(d) The Company shall immediately cease and cause to be terminated any
existing discussions or negotiations with any persons (other than Parent and
Merger Sub) conducted heretofore with respect to any of the foregoing. The
Company agrees not to release any third party from the confidentiality
provisions of any confidentiality agreement to which the Company is a party
unless the Board of Directors of the Company determines in good faith, based
upon advice of outside legal counsel, that making such release is required in
order to discharge properly its fiduciary duties. If the Board of Directors of
the Company receives a request for material nonpublic information by a person
who makes, or indicates that it is considering making, a bona fide Acquisition
Proposal, and the Board of Directors determines in good faith and upon the
advice of outside legal counsel that it is required to cause the Company to act
as provided in this Section 4.02(d) in order to discharge properly the
directors' fiduciary duties, then, provided such person has executed a
confidentiality agreement substantially similar to the one then in effect
between the Company and Parent, the Company may provide such person with access
to information regarding the Company.
(e) The Company shall advise the Company Representatives of the
restrictions described in this Section 4.02.
SECTION 4.03 Conduct of Business by Parent Pending the Merger. During
the period from the date of this Agreement and continuing until the earlier of
the termination of this Agreement or the Effective Time, Parent covenants and
agrees that, unless the Company shall otherwise agree in writing, (i) Parent
shall conduct its business and shall cause the businesses of its subsidiaries to
be conducted only in, and Parent and its subsidiaries shall not take any action
except in, the ordinary course of business and in a manner consistent with past
practice; (ii) Parent shall, and shall cause its subsidiaries to, use
commercially reasonable efforts to keep in full force and effect adequate
insurance coverages consistent with past practice and maintain and keep its
properties and assets in good repair, working order and condition, normal wear
and tear excepted; and (iii) Parent shall use its reasonable efforts to preserve
substantially intact the business organization of Parent and its subsidiaries,
to keep available the services of the present officers, employees and
consultants of Parent and its subsidiaries and to preserve the present
relationships of Parent and its subsidiaries with customers, suppliers and other
persons with which Parent or any of its subsidiaries has significant business
relations. By way of amplification and not limitation, except as contemplated by
this Agreement, neither Parent nor any of its subsidiaries shall, during the
period from the date of this Agreement and continuing until the earlier of the
termination of this Agreement or the Effective Time, directly or indirectly do,
or propose to do, any of the following without the prior written consent of the
Company:
(a) amend or otherwise change Parent's Certificate of Incorporation or
By-Laws;
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(b) acquire or agree to acquire, by merging or consolidating with, by
purchasing an equity interest in or a portion of the assets of, or by any other
manner, any business or any corporation, partnership, association or other
business organization or division thereof, or otherwise acquire or agree to
acquire any assets of any other person, which, in any such case, would prevent
or materially delay the consummation of the transactions contemplated by this
Agreement;
(c) declare, set aside, make or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in respect of
any of its capital stock, except that a wholly owned subsidiary of Parent may
declare and pay a dividend to its parent;
(d) take or agree in writing or otherwise to take any action which
would make any of the representations or warranties of Parent contained in this
Agreement untrue or incorrect or prevent Parent from performing or cause Parent
not to perform its covenants hereunder or prevent any of the conditions set
forth in Article VI not being satisfied;
(e) take any action to change in any material respect accounting
policies or procedures, except as may be required by GAAP or as a result of a
change in law; or
(f) adopt a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other reorganization
of Parent and its subsidiaries.
SECTION 4.04 Parent Repurchase Right. Except as contemplated by the
Purchase Agreement during the period from the date of this Agreement and
continuing through the earlier termination of this Agreement or the Effective
Time, Parent will not, directly or indirectly, repurchase, redeem or otherwise
acquire or agree to commit to repurchase, redeem or otherwise acquire, directly
or indirectly any shares of capital stock or other equity security of Parent or
any of its subsidiaries, including, without limitation, shares of Parent Common
Stock, or other option, warrant or right, directly or indirectly, to acquire
shares of Parent Common Stock ("Parent Equity Securities"); provided, however,
that Parent may repurchase, redeem or otherwise acquire or agree to commit to
repurchase, redeem or otherwise acquire Parent Equity Securities so long as (i)
such repurchase or agreement to repurchase has been approved by at least two
independent members of Parent's Board of Directors and (ii) Parent has received
a written opinion from a nationally recognized investment banking firm that, as
of the date rendered, the price to be paid for such Parent Equity Securities is
fair from a financial point of view to Parent and its stockholders (which, if
relevant for purposes of such opinion, shall not be deemed to include any
stockholder, or any affiliate of any stockholder, who is selling Parent Equity
Securities in the transaction); provided further that this Section 4.04 shall
not prohibit the exercise of stock options to purchase Parent Common Stock
through the use of Parent Common Stock issuable upon exercise of such stock
options (or other shares of Parent Common Stock held by the holder of such
options) to pay the exercise price or to satisfy tax withholding obligations
pursuant to the terms of such stock options in effect as of the date hereof.
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ARTICLE V.
ADDITIONAL AGREEMENTS
SECTION 5.01. HSR Act; Etc. As promptly as practicable after the date
of the execution of this Agreement, the Company and Parent shall file
notifications under and in accordance with the HSR Act. The Company and Parent
shall respond as promptly as practicable to any inquiries received from the
Federal Trade Commission and the Antitrust Division of the Department of Justice
for additional information or documentation and shall respond as promptly as
practicable to all inquiries and requests received from any State Attorney
General or other governmental authority (foreign or domestic) in connection with
antitrust matters.
SECTION 5.02. Proxy Statement/Prospectus; Registration Statement. (a)
As promptly as practicable after the execution of this Agreement, (i) the
Company shall prepare and file with the SEC (with appropriate requests for
confidential treatment) under the Exchange Act a proxy statement/prospectus and
a form of proxy (or, to the extent a Parent Stockholders Meeting, as defined
below, is required to be held, the Company and Parent shall prepare and file
with the SEC under the Exchange Act a joint proxy statement/prospectus and forms
of proxies) (such proxy statement/prospectus or joint proxy
statement/prospectus, as the case may be, together with any amendments thereof
or supplements thereto, in each case in the form or forms delivered to the
stockholders of the Company and, if applicable, the stockholders of Parent, the
"Proxy Statement/Prospectus") relating to the Company Stockholders Meeting and
the vote of the stockholders of the Company with respect to the Merger (and, if
applicable, the Parent Stockholders Meeting and the vote of the stockholders of
Parent with respect to the issuance of Parent Common Stock in connection with
the Merger) and (ii) following clearance by the SEC of the Proxy Statement,
Parent shall prepare and file with the SEC under the Securities Act a
registration statement on Form S-4 or any other form as may be appropriate (such
registration statement, together with any amendments thereof or supplements
thereto, the "Registration Statement") with respect to the Parent Common Stock
to be issued by Parent in connection with the Merger, which Registration
Statement shall include the Proxy Statement/Prospectus as a prospectus. Parent
and the Company will cause the Registration Statement and the Proxy
Statement/Prospectus to comply in all material respects with the Securities Act,
the Exchange Act and the rules and regulations thereunder. Each of Parent and
the Company shall use all reasonable efforts to have or cause the Registration
Statement to become effective (including clearing the Proxy Statement/Prospectus
with the SEC) as promptly as practicable thereafter, and shall take any and all
actions required under any applicable federal or state securities or Blue Sky
Laws in connection with the issuance of shares of Parent Common Stock pursuant
to the Merger. Without limiting the generality of the foregoing, each of Parent
and the Company agrees to use all reasonable efforts, after consultation with
the other such party, to respond promptly to any comments made by the SEC with
respect to the Proxy Statement/Prospectus (including each preliminary version
thereof) and the Registration Statement (including each amendment thereof and
supplement thereto). Each of Parent and the Company shall, and shall cause its
respective representatives to, fully cooperate with the other such party and its
respective representatives in the preparation of the Proxy Statement/Prospectus
and the Registration Statement, and shall, upon request, furnish the other
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such party with all information concerning it and its affiliates, directors,
officers and stockholders as the other may reasonably request in connection with
the preparation of the Proxy Statement/Prospectus and the Registration
Statement. As promptly as practicable after the Registration Statement shall
have become effective, the Company and, if applicable, Parent shall cause the
Proxy Statement/Prospectus to be mailed to their respective stockholders.
(b) Without limiting the generality of the foregoing (i) the Company
and Parent shall each notify the other as promptly as practicable upon becoming
aware of any event or circumstance which should be described in an amendment of,
or a supplement to, the Proxy Statement/Prospectus or the Registration
Statement, and (ii) the Company and Parent shall each notify the other as
promptly as practicable after the receipt by it of any written or oral comments
of the SEC on, or of any written or oral request by the SEC for amendments or
supplements to, the Proxy Statement/Prospectus or the Registration Statement,
and shall promptly supply the other with copies of all correspondence between it
or any of its representatives and the SEC with respect to any of the foregoing
filings.
SECTION 5.03 Stockholders Meetings. The Company and, if required to
satisfy the condition set forth in Section 6.01(c), Parent shall call and hold
the Company Stockholders Meeting and the Parent Stockholders Meeting,
respectively, as promptly as practicable and in accordance with applicable laws
for the purpose of voting upon the approval of the Merger and the adoption of
this Agreement, in the case of the Company Stockholders Meeting, and the
issuance of Parent Common Stock in connection with the Merger, in the case of
any required Parent Stockholders Meeting. The Company and, if required, Parent
shall use all reasonable efforts to hold their respective stockholders meetings
as soon as practicable after the date on which the Registration Statement
becomes effective and, if a Parent Stockholders Meeting is required, on the same
day (and at the same time of such day). Unless otherwise required under the
applicable fiduciary duties of the respective directors of the Company and
Parent, as determined by such directors in good faith after consultation with
and based upon the advice of their respective outside legal counsel, the Company
and, if required to satisfy the condition set forth in Section 6.01(c), Parent
shall (a) recommend, in the case of the Company, that the Company stockholders
vote in favor of the approval and adoption this Agreement, the Merger and the
other transactions contemplated herein and, in the case of Parent, that Parent's
stockholders vote in favor of the issuance of Parent Common Stock in connection
with the Merger, and include in the Proxy Statement/Prospectus each such
recommendation and (b) use all reasonable efforts to solicit from their
respective stockholders proxies in favor of the approval and adoption of the
proposals recommended by them in subclause (a) above and take all other action
necessary or advisable to secure the vote or consent of stockholders to obtain
such approval. At the Company Stockholders Meeting, Parent agrees to vote or to
cause to be voted in favor of approval of the Merger, this Agreement and the
transactions contemplated hereby, all shares of Company Common Stock for which
the beneficial owner is Parent or its subsidiaries.
SECTION 5.04 Access to Information; Confidentiality. Upon reasonable
notice and subject to restrictions contained in confidentiality agreements to
which such party is subject (from which such party shall use reasonable efforts
to be released), the Company and Parent shall each (and shall cause each of
their subsidiaries to) afford to the officers, employees,
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accountants, counsel and other representatives of the other, reasonable access,
during the period prior to the Effective Time, to all its properties, books,
contracts, commitments and records and, during such period, the Company and
Parent each shall (and shall cause each of their subsidiaries to) furnish
promptly to the other all information concerning its business, properties and
personnel as such other party may reasonably request, and each shall make
available to the other appropriate individuals (including attorneys, accountants
and other professionals) for discussion of the other's business, properties and
personnel as either Parent or the Company may reasonably request. Each party
shall keep such information confidential in accordance with the terms of the
respective confidentiality letters, dated November 11, 1996, November 25, 1996
and December 5, 1996 (the "Confidentiality Letters"), between Parent and the
Company.
SECTION 5.05 Consents; Approvals. The Company and Parent shall each use
its reasonable efforts to obtain all consents, waivers, approvals,
authorizations or orders (including, without limitation, all United States and
foreign governmental and regulatory rulings and approvals), and the Company and
Parent shall make all filings (including, without limitation, all filings with
United States and foreign governmental or regulatory agencies) required in
connection with the authorization, execution and delivery of this Agreement by
the Company and Parent and the consummation by them of the transactions
contemplated hereby.
SECTION 5.06 Agreements with Respect to Affiliates. The Company shall
request each person who is identified by the Company as being an "affiliate" of
the Company at the time of the Company Stockholders Meeting for purposes of Rule
145 under the Securities Act ("Rule 145") to deliver to Parent, prior to the
Effective Time, a written agreement in connection with restrictions on
affiliates under Rule 145 in the form attached hereto as Exhibit B.
SECTION 5.07 Indemnification and Insurance. (a) The Articles of
Incorporation and By-Laws of the Surviving Corporation shall contain provisions
with respect to indemnification and exculpation no less favorable than those set
forth in the Articles of Incorporation and ByLaws of the Company, which
provisions shall not be amended, repealed or otherwise modified for a period of
six years from the Effective Time in any manner that would adversely affect the
rights thereunder of individuals who at the Effective Time were directors,
officers, employees or agents of the Company, unless such modification is
required by law.
(b) The Company shall, to the fullest extent permitted under applicable
law or under the Company's Articles of Incorporation or By-Laws and regardless
of whether the Merger becomes effective, indemnify and hold harmless, and, after
the Effective Time, Parent and the Surviving Corporation shall, to the fullest
extent permitted under applicable law or under the Surviving Corporation's
Articles of Incorporation or By-Laws, indemnify and hold harmless, each present
and former director, officer or employee of the Company or any of its
subsidiaries (collectively, the "Indemnified Parties") against any costs or
expenses (including attorneys' fees), judgments, fines, losses, claims, damages,
liabilities and amounts paid in settlement in connection with any claim, action,
suit, proceeding or investigation, whether civil, criminal, administrative or
investigative, (x) arising out of or pertaining to the transactions contemplated
by this Agreement or (y) otherwise with respect to any act or omissions
occurring at or prior
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to the Effective Time, in each case for a period of six years after the date
hereof. In the event of any such claim, action, suit, proceeding or
investigation (whether arising before or after the Effective Time), (i) any
counsel retained by the Indemnified Parties for any period after the Effective
Time shall be reasonably satisfactory to the Surviving Corporation, (ii) after
the Effective Time, the Surviving Corporation shall pay the reasonable fees and
expenses of such counsel, promptly after statements therefor are received, and
(iii) the Surviving Corporation will cooperate in the defense of any such
matter; provided, however, the Surviving Corporation shall not be liable for any
settlement effected without its written consent (which consent shall not be
unreasonably withheld); and provided, further, that, in the event that any claim
or claims for indemnification are asserted or made within such six-year period,
all rights to indemnification in respect of any such claim or claims shall
continue until the disposition of any and all such claims. The Indemnified
Parties as a group may retain only one law firm to represent them with respect
to any single action unless there is, under applicable standards of professional
conduct, a conflict on any significant issue between the positions of any two or
more Indemnified Parties in which case this limitation shall not apply.
(c) For a period of four years after the Effective Time, Parent shall
cause the Surviving Corporation to maintain in effect, if available, directors'
and officers' liability insurance covering those persons who are currently
covered by the Company's directors' and officers' insurance policy (a copy of
which has been made available to Parent) on terms comparable to those now
applicable to directors and officers of the Company; provided, however, (i) that
Parent and the Surviving Corporation may substitute therefor policies of at
least the same coverage and amounts containing terms and conditions that are no
less advantageous to such covered persons) or provide for such coverage under
Parent's directors' and officers' liability insurance policy (a copy of which
has been made available to the Company) if Parent's policy provides at least the
same coverage and amounts on terms and conditions that are no less favorable to
covered persons than the Company's current policy; and (ii) that in no event
shall Parent or the Surviving Corporation be required to expend in excess of
$1,070,000 for such coverage; and provided further, that if the premium for such
coverage exceeds such amount, Parent or the Surviving Corporation shall purchase
a policy with the greatest coverage available for such amount.
(d) From and after the Effective Time, Parent shall guarantee the
obligations of the Surviving Corporation under this Section 5.07.
(e) This Section 5.07 shall survive the consummation of the Merger at
the Effective Time, is intended to benefit the Company, the Surviving
Corporation and the Indemnified Parties, shall be binding on all successors and
assigns of the Surviving Corporation and shall be enforceable by the Indemnified
Parties.
SECTION 5.08 Notification of Certain Matters. The Company shall give
prompt notice to Parent, and Parent shall give prompt notice to the Company, of
(i) the occurrence or nonoccurrence of any event the occurrence or nonoccurrence
of which would be likely to cause any representation or warranty contained in
this Agreement to be materially untrue or inaccurate, or (ii) any failure of the
Company, Parent or Merger Sub, as the case may be, materially to comply with or
satisfy any covenant, condition or agreement to be complied with
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or satisfied by it hereunder; provided, however, that the delivery of any notice
pursuant to this Section 5.08 shall not limit or otherwise affect the remedies
available hereunder to the party receiving such notice; and provided further
that failure to give such notice shall not be treated as a breach of covenant
for the purposes of Sections 6.02(b) or 6.03(b) unless the failure to give such
notice results in material prejudice to the other party.
SECTION 5.09 Further Action/Tax Treatment. Upon the terms and subject
to the conditions hereof, each of the parties hereto shall use all reasonable
efforts to take, or cause to be taken, all actions and to do, or cause to be
done, all other things necessary, proper or advisable to consummate and make
effective as promptly as practicable the transactions contemplated by this
Agreement, to obtain in a timely manner all necessary waivers, consents and
approvals and to effect all necessary registrations and filings, and otherwise
to satisfy or cause to be satisfied all conditions precedent to its obligations
under this Agreement. Each of Parent, Merger Sub and the Company shall use its
best efforts to cause the Merger to qualify, and will not (both before and after
consummation of the Merger) take any actions which to its knowledge could
reasonably be expected to prevent the Merger from qualifying as a reorganization
under the provisions of Section 368(a) of the Code.
SECTION 5.10 Public Announcements. Parent and the Company shall consult
with each other before issuing any press release with respect to the Merger or
this Agreement and shall not issue any such press release or make any such
public statement without the prior consent of the other party, which shall not
be unreasonably withheld; provided, however, that a party may, without the prior
consent of the other party, issue such press release or make such public
statement as may upon the advice of outside legal counsel be required by
applicable law or the rules and regulations of the NYSE, if it has used all
reasonable efforts to consult with the other party and its counsel and allow
such other party and its counsel to comment thereon.
SECTION 5.11 Employee Benefit Arrangements. Parent agrees that the
Company will honor and, from and after the Effective Time, Parent will cause the
Surviving Corporation to honor, all obligations under Employee Benefit
Arrangements to which the Company or any of its subsidiaries is presently a
party which are listed in Section 5.11 of the Company Disclosure Schedule. Until
December 31, 1997, Parent shall cause the Surviving Corporation to continue to
provide to employees of the Company and its subsidiaries (excluding employees
covered by collective bargaining agreements), as a whole, Employee Benefits (as
defined below) which, in the aggregate, have a value which is substantially
comparable to the value of such Employee Benefits provided to such employees as
of the date hereof; and from January 1, 1998 until December 31, 1998, Parent
shall cause the Surviving Corporation to provide to employees of the Company and
its subsidiaries (excluding employees covered by collective bargaining
agreements), as a whole, Employee Benefits which, in the aggregate, have a value
which is substantially comparable to the value of such Employee Benefits
provided by Parent to its employees employed in Parent's Northern California
Division; provided, that nothing in this sentence shall be deemed to limit or
otherwise affect the right of the Surviving Corporation to terminate employment
or change the place of work, responsibilities, status, designation or employee
benefits of any employee or group of employees as the Surviving Corporation may
determine in the exercise of its business judgment and in compliance with
applicable laws. For all Employee Benefits (including without limitation plans
or programs of Parent and its
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affiliates after the Effective Time), all service with the Company or any of its
subsidiaries prior to the Effective Time of employees (excluding employees
covered by collective bargaining agreements) shall be treated as service with
Parent and its affiliates for eligibility and vesting purposes, but not for the
purpose of benefit accrual, to the same extent that such service is taken into
account by the Company and its subsidiaries as of the date hereof, except to the
extent such treatment will result in duplication of benefits. "Employee
Benefits" means only the following benefits: any medical, health, dental, life
insurance, long-term disability, severance, pension, retirement or savings plan,
policy or arrangement, whose coverage is not generally limited to officers or a
select group of highly compensated employees of the Company or any of its
subsidiaries. This Section 5.11 is not intended to be for the benefit of and
shall not be enforceable by any employee, former employee or dependent or
beneficiary thereof or any collective bargaining representative thereof.
SECTION 5.12 Use of Name; Headquarters. (a) With respect to Company
stores that Parent or its subsidiaries operate after the Effective Time, Parent
agrees that for a period of at least two years from and after the Effective
Time, Parent and/or its subsidiaries will operate such stores under the "Vons"
or "Pavilions" names.
(b) Parent's present intention is to maintain a division headquarters
for the Surviving Corporation's operations in Arcadia, California for two years
following the Effective Time; provided that if Parent determines to relocate the
headquarters, it will use commercially reasonable efforts during such two-year
period to keep the headquarters in the San Gabriel Valley.
SECTION 5.13 Listing of Shares. The Company shall use its best efforts
to continue the listing of the Company Common Stock on the NYSE during the term
of this Agreement and Parent shall use its best efforts to cause the Parent
Shares to be issued in the Merger to be listed, upon official notice of
issuance, on the NYSE prior to the Effective Time.
SECTION 5.14 Conveyance Taxes. Parent and the Company shall cooperate
in the preparation, execution and filing of all returns, questionnaires,
applications, or other documents regarding any real property transfer or gains,
sales, use, transfer, value added, stock transfer and stamp taxes, any transfer,
recording, registration and other fees, and any similar taxes which become
payable in connection with the transactions contemplated hereby that are
required or permitted to be filed on or before the Effective Time.
ARTICLE VI.
CONDITIONS TO THE MERGER
SECTION 6.01 Conditions to Obligations of Each Party to Effect the
Merger. The respective obligations of each party to effect the Merger shall be
subject to the satisfaction at or prior to the Effective Time of the following
conditions:
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(a) Effectiveness of the Registration Statement. The Registration
Statement shall have been declared effective by the SEC. No stop order
suspending the effectiveness of the Registration Statement shall have been
issued by the SEC and no proceedings for that purpose and no similar proceeding
in respect of the Proxy Statement/Prospectus shall have been initiated or
threatened by the SEC;
(b) Company Stockholder Approval. This Agreement, the Merger and the
transactions contemplated hereby shall have been approved and adopted by (i) the
requisite vote of the stockholders of the Company and (ii) a majority of the
outstanding shares of Company Common Stock not held by Parent or its affiliates;
(c) Parent Stockholder Approval. Either (i) the issuance of Parent
Common Stock in the Merger pursuant to this Agreement shall have been approved
by the requisite vote of the stockholders of Parent or (ii) Parent and the
Company, upon the advice of outside legal counsel, shall have determined that
the approval by Parent's stockholders of the issuance of the Parent Common Stock
in the Merger pursuant to the terms of this Agreement is not required by the
Policies and Procedures of the NYSE;
(d) Listing. The shares of Parent Common Stock to be issued in the
Merger shall have been authorized for listing on the NYSE, subject to official
notice of issuance;
(e) HSR Act. All waiting periods applicable to the consummation of the
Merger under the HSR Act shall have expired or been terminated; and
(f) No Injunctions or Restraints; Illegality. No temporary restraining
order, preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the Merger, shall be in effect; and there shall not be any
action taken, or any statute, rule, regulation or order enacted, entered or
enforced which makes the consummation of the Merger illegal.
SECTION 6.02 Additional Conditions to Obligations of Parent and Merger
Sub. The obligations of Parent and Merger Sub to effect the Merger are also
subject to the following conditions:
(a) Representations and Warranties. The representations and warranties
of the Company contained in this Agreement (other than those set forth in
Sections 2.03(a) and 2.04(a), (c), (d) and (e)) shall be true and correct in all
respects on and as of the Effective Time, except for (i) changes contemplated by
this Agreement, (ii) those representations and warranties which address matters
only as of a particular date (which shall have been true and correct as of such
date) and (iii) where the failure or failures of such representations and
warranties to be so true and correct, individually or in the aggregate, results
or would reasonably be expected to result in a Material Adverse Effect, and the
representations and warranties of the Company set forth in Sections 2.03(a) and
2.04(a), (c), (d) and (e) shall be true and correct in all material respects,
subject to clauses (i) and (ii) above. Parent and Merger Sub shall have received
a certificate to such effect signed by the President of the Company;
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(b) Agreements and Covenants. The Company shall have performed or
complied in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by it on or prior to the
Effective Time, and Parent and Merger Sub shall have received a certificate to
such effect signed by the President of the Company.
SECTION 6.03 Additional Conditions to Obligations of the Company. The
obligation of the Company to effect the Merger is also subject to the following
conditions:
(a) Representations and Warranties. The representations and warranties
of the Parent and Merger Sub contained in this Agreement (other than those set
forth in Sections 3.03(a) and 3.04(a) and (c)) shall be true and correct in all
respects on and as of the Effective Time, except for (i) changes contemplated by
this Agreement, (ii) those representations and warranties which address matters
only as of a particular date (which shall have been true and correct as of such
date) and (iii) where the failure or failures of such representations and
warranties to be so true and correct, individually or in the aggregate, results
or would reasonably be expected to result in a Material Adverse Effect, and the
representations and warranties of Parent and Merger Sub set forth in Sections
3.03(a) and 3.04(a) and (c) shall be true and correct in all material respects,
subject to clauses (i) and (ii) above. The Company shall have received a
certificate to such effect signed by the President of Parent;
(b) Agreements and Covenants. Parent and Merger Sub shall have
performed or complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by them on or prior
to the Effective Time, and the Company shall have received a certificate to such
effect signed by the President of Parent;
(c) Tax Opinion. The Company shall have received a written opinion of
Wachtell, Lipton, Rosen & Katz (addressed to the Company and the Company's
stockholders) in form and substance reasonably satisfactory to the Company to
the effect that the Merger will constitute a reorganization within the meaning
of Section 368(a) of the Code; and
(d) Purchase Agreement. The Purchase Agreement shall be in full force
and effect in accordance with its terms and no circumstance shall exist that
would prevent the Repurchase from being consummated immediately following the
Effective Time.
ARTICLE VII.
TERMINATION
SECTION 7.01 Termination. This Agreement may be terminated at any time
prior to the Effective Time, notwithstanding approval thereof by the
stockholders of the Company or Parent:
(a) by mutual written consent duly authorized by the Boards of
Directors of Parent and the Company; or
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(b) by either Parent or the Company, if the Merger shall not have been
consummated by June 30, 1997 (provided that the right to terminate this
Agreement under this Section 7.01(b) shall not be available to any party whose
failure to fulfill any obligation under this Agreement has been the cause of or
a substantial contributor to the failure of the Merger to occur on or before
such date); or
(c) by either Parent or the Company, if a court of competent
jurisdiction or governmental, regulatory or administrative agency or commission
shall have issued a nonappealable final order, decree or ruling or taken any
other action having the effect of permanently restraining, enjoining or
otherwise prohibiting the Merger (provided that the right to terminate this
Agreement under this Section 7.01(c) shall not be available to any party who has
not complied with its obligations under Section 5.09 and such noncompliance
materially contributed to the issuance of any such order, decree or ruling or
the taking of such action);
(d) by Parent, if (i) the Board of Directors of the Company shall
withdraw, modify or change its approval or recommendation of this Agreement or
the Merger in a manner adverse to Parent or shall have resolved to do so; or
(ii) the Board of Directors of the Company shall have recommended to the
stockholders of the Company an Acquisition Proposal (as defined in Section
4.02(c)); or (iii) a tender offer or exchange offer for 20% or more of the
outstanding shares of Company Common Stock is commenced (other than by Parent or
an affiliate of Parent) and the Board of Directors of the Company recommends
that the stockholders of the Company tender their shares in such tender or
exchange offer;
(e) by the Company, if (i) the Board of Directors of the Company shall
determine in good faith, based upon advice of outside legal counsel, that it is
required, in order to discharge properly its fiduciary duties, to withdraw,
modify or change its approval or recommendation of this Agreement or the Merger
in a manner adverse to Parent or shall have resolved to do so; (ii) the Board of
Directors of the Company shall have recommended to the stockholders of the
Company an Acquisition Proposal (as defined in Section 4.02(c)); or (iii) a
tender offer or exchange offer for 20% or more of the outstanding shares of
Company Common Stock is commenced (other than by Parent or an affiliate of
Parent) and the Board of Directors of the Company recommends that the
stockholders of the Company tender their shares in such tender or exchange
offer; provided, that, the Company shall not be entitled to exercise any
termination rights under clause (ii) or (iii) of this Section 7.01(e) unless (x)
any action of the Board of Directors in order to discharge its fiduciary duties
in good faith upon advice of counsel and (y) the Company has complied with its
obligations in Section 4.02; or
(f) by Parent or the Company, if, at a duly held meeting of the
stockholders of the Company (including any adjournment thereof) held for the
purpose of voting on the Merger, this Agreement and the consummation of the
transactions contemplated hereby, the holders of a majority of the outstanding
shares of Company Common Stock (without giving effect to the shares of Company
Common Stock owned by Parent and its affiliates) shall not have approved the
Merger, this Agreement and the consummation of the transactions contemplated
hereby;
(g) by the Company, if, at a duly held meeting of the stockholders of
Parent (including any adjournment thereof) held for the purpose of voting on the
issuance of the
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Parent Common Stock in connection with the Merger, the requisite vote of a
majority of the holders of the outstanding shares of Parent Common Stock shall
not have approved such issuance.
SECTION 7.02 Effect of Termination. In the event of the termination of
this Agreement pursuant to Section 7.01, this Agreement shall forthwith become
void and there shall be no liability on the part of any party hereto or any of
its affiliates, directors, officers or stockholders except (i) as set forth in
Section 7.03 and Section 8.01 hereof, and (ii) nothing herein shall relieve any
party from liability for any breach hereof.
SECTION 7.03 Fees and Expenses. (a) Except as set forth in this Section
7.03, all fees and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
expenses, whether or not the Merger is consummated; provided, however, that
Parent and the Company shall share equally all fees and expenses, other than
attorneys' and accountants' fees, incurred in connection with the printing and
filing of the Proxy Statement/Prospectus (including any preliminary materials
related thereto) and the Registration Statement (including financial statements
and exhibits) and any amendments or supplements thereto.
(b) In order to induce Parent to enter into this Agreement, the Company
agrees that if: (x) prior to termination of this Agreement, any person other
than Parent and its affiliates shall have commenced, publicly proposed or
communicated to the Company an Acquisition Proposal (a "Pre-Termination
Acquisition Proposal") and (y) within three months of the termination of this
Agreement, such person, or any affiliate of such person, enters into any
definitive agreement to effect a transaction contemplated by an Acquisition
Proposal (which is related to such Pre-Termination Acquisition Proposal), then
the Company shall pay to Parent within five business days following the
consummation of the transaction that was contemplated by the Acquisition
Proposal a fee (the "Fee") of $50,000,000 in cash; provided, however, that in no
event shall the Company be obligated to pay more than one such fee with respect
to all such occurrences and provided further, no such fee shall be payable if
there has been a material misrepresentation by or material breach of any
material obligation of Parent hereunder which would entitle the Company to
terminate this Agreement under Section 7.01.
(c) If a Fee is payable to Parent pursuant to Section 7.03(b), then the
Company shall also reimburse Parent (not later than five business days after
submission of statements therefor) for all documented out-of-pocket (not
including allocation of overhead) fees and expenses ("Expenses") actually
incurred by it prior to such termination in connection with the proposed Merger
and the consummation of all transactions contemplated by this Agreement
(including fees and expenses of counsel, investment banking firms, accountants,
experts and consultants); provided, that the aggregate amount of Expenses
required to be reimbursed pursuant to this Section 7.03(c) shall not exceed
$5,000,000.
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ARTICLE VIII.
GENERAL PROVISIONS
SECTION 8.01 Effectiveness of Representations, Warranties and
Agreements; Knowledge, Etc. (a) Except as otherwise provided in this Section
8.01, the representations, warranties and agreements of each party hereto shall
remain operative and in full force and effect regardless of any investigation
made by or on behalf of any other party hereto, any person controlling any such
party or any of their officers or directors, whether prior to or after the
execution of this Agreement. The representations, warranties and agreements in
this Agreement shall terminate at the Effective Time or upon the termination of
this Agreement pursuant to Section 7.01, as the case may be, except that the
agreements set forth in Article I, Section 5.07 and Section 5.11 shall survive
the Effective Time indefinitely and those set forth in Section 7.03 shall
survive termination indefinitely. The Confidentiality Letters shall survive
termination of this Agreement as provided therein.
(b) Any disclosure made with reference to one or more Sections of the
Company Disclosure Schedule or the Parent Disclosure Schedule shall be deemed
disclosed with respect to each other section therein as to which such disclosure
is relevant provided that such relevance is reasonably apparent.
SECTION 8.02 Notices. All notices and other communications given or
made pursuant hereto shall be in writing and shall be deemed to have been duly
given or made if and when delivered personally or by overnight courier to the
parties at the following addresses or sent by electronic transmission, with
confirmation received, to the telecopy numbers specified below (or at such other
address or telecopy number for a party as shall be specified by like notice):
(a) If to Parent or Merger Sub:
Safeway Inc.
5918 Stoneridge Mall Road
Pleasanton, California 94588-3229
Telecopier No.: (510) 208-5863
Telephone No.: (510) 467-3000
Attention: President
With a copy to:
Latham & Watkins
505 Montgomery St.
San Francisco, California
Telecopier No.: (415) 395-8095
Telephone No.: (415) 391-0600
Attention: Scott R. Haber, Esq.
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(b) If to the Company:
The Vons Companies, Inc.
618 Michillinda Avenue
Arcadia, California 91007
Telecopier No.: (818) 821-7594
Telephone No.: (818) 821-2596
Attention: Chairman and Chief Executive Officer
With a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Telecopier No.: (212) 403-1000
Telephone No.: (212) 403-2000
Attention: Daniel A. Neff, Esq.
David A. Katz, Esq.
SECTION 8.03 Certain Definitions. For purposes of this Agreement, the
term:
(a) "affiliates" means a person that directly or indirectly, through
one or more intermediaries, controls, is controlled by, or is under common
control with, the first mentioned person;
(b) "beneficial owner" with respect to any shares of Company Common
Stock means a person who shall be deemed to be the beneficial owner of such
shares (i) which such person or any of its affiliates or associates (as such
term is defined in Rule 12b-2 of the Exchange Act) beneficially owns, directly
or indirectly, (ii) which such person or any of its affiliates or associates
has, directly or indirectly, (A) the right to acquire (whether such right is
exercisable immediately or subject only to the passage of time), pursuant to any
agreement, arrangement or understanding or upon the exercise of consideration
rights, exchange rights, warrants or options, or otherwise, or (B) the right to
vote pursuant to any agreement, arrangement or understanding, or (iii) which are
beneficially owned, directly or indirectly, by any other persons with whom such
person or any of its affiliates or associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or disposing of any
shares;
(c) "business day" means any day other than a day on which banks in New
York are required or authorized to be closed;
(d) "control" (including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly or as trustee or
executor, of the power to direct or cause the direction of the management or
policies of a person, whether through the ownership of stock, as trustee or
executor, by contract or credit arrangement or otherwise;
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(e) "Material Adverse Effect," when used in connection with the Company
or any of its subsidiaries, or Parent or any of its subsidiaries, as the case
may be, means any change, effect or event that, individually or when taken
together with all other such changes, effects or events that have occurred prior
to the date of determination of the occurrence of the Material Adverse Effect,
is materially adverse to the business, assets (including intangible assets),
financial condition or EBITDA (considered on an annual basis) of the Company and
its subsidiaries or Parent and its subsidiaries, as the case may be, in each
case taken as a whole; provided, however, that "Material Adverse Effect" when
used in connection with the Company or any of its subsidiaries shall exclude (i)
items disclosed in the Company SEC Reports prior to the date hereof and (ii)
departures of officers, directors, consultants, employees or agents of the
Company resulting from the announcement or expectation of the Merger; and
provided further, that "Material Adverse Effect" when used in connection with
Parent or any of its subsidiaries shall exclude items disclosed in the Parent
SEC Reports prior to the date hereof.
(f) "person" means an individual, corporation, partnership,
association, trust, unincorporated organization, other entity or group (as
defined in Section 13(d)(3) of the Exchange Act); and
(g) "significant subsidiary" or "significant subsidiaries" of the
Company, the Surviving Corporation, Parent or any other person means any
subsidiary that would be a "significant subsidiary" as defined in Article 1,
Rule 1-02 of Regulation S-X, promulgated pursuant to the Securities Act, as such
regulation is in effect on the date hereof.
(h) "subsidiary" or "subsidiaries" of the Company, the Surviving
Corporation, Parent or any other person means any corporation, partnership,
joint venture or other legal entity of which the Company, the Surviving
Corporation, Parent or such other person, as the case may be (either alone or
through or together with any other subsidiary), owns, directly or indirectly,
more than 50% of the stock or other equity interests the holders of which are
generally entitled to vote for the election of the board of directors or other
legal entity.
SECTION 8.04 Amendment. This Agreement may be amended by the parties
hereto by action taken by or on behalf of their respective Boards of Directors
at any time prior to the Effective Time; provided, however, that, no amendment
shall be binding upon the Company unless also approved by the Special Committee
of the Company's Board of Directors, and provided further, that after approval
of the Merger by the stockholders of the Company, no amendment may be made which
by law requires further approval by such stockholders without such further
approval. This Agreement may not be amended except by an instrument in writing
signed by the parties hereto.
SECTION 8.05 Extension; Waiver. At any time prior to the Effective
Time, any party hereto may with respect to any other party hereto (a) extend the
time for the performance of any of the obligations or other acts, (b) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto, or (c) subject to Section 8.04, waive
compliance with any of the agreements or conditions (other than the condition
set forth in Section 6.01(b)(i)) contained herein; provided, however, that, no
extension or waiver set forth in subclauses (a), (b) or (c) above may be granted
by the Company
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hereunder unless approved by the Special Committee of the Company's Board of
Directors. Any such extension or waiver shall be valid if set forth in an
instrument in writing signed by the party or parties to be bound thereby.
SECTION 8.06 Headings. 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.
SECTION 8.07 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that transactions contemplated hereby are fulfilled to the extent possible.
SECTION 8.08 Entire Agreement. This Agreement constitutes the entire
agreement and supersedes all prior agreements and undertakings (other than the
Confidentiality Letters and the Support/Voting Agreements), both written and
oral, among the parties, or any of them, with respect to the subject matter
hereof and, except as otherwise expressly provided herein.
SECTION 8.09 Assignment. This Agreement shall not be assigned by
operation of law or otherwise, except that Parent and Merger Sub may assign all
or any of their rights hereunder to Parent or any direct or indirect wholly
owned subsidiary of Parent provided that no such assignment shall release the
assigning party of its obligations hereunder. Parent guarantees the full
performance by Merger Sub of all the obligations hereunder of Merger Sub or any
such assignees.
SECTION 8.10 Parties in Interest. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person any right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement, including, without limitation, by way of subrogation, other
than Section 5.07 (which is intended to be for the benefit of the Indemnified
Parties and may be enforced by such Indemnified Parties) and Section 1.06(c).
SECTION 8.11 Failure or Indulgence Not Waiver; Remedies Cumulative. No
failure or delay on the part of any party hereto in the exercise of any right
hereunder shall impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty or agreement herein,
nor shall any single or partial exercise of any such right preclude other or
further exercise thereof or of any other right. All rights and remedies existing
under this Agreement are cumulative to, and not exclusive of, any rights or
remedies otherwise available.
SECTION 8.12 Governing Law. Except to the extent that the laws of the
jurisdiction of organization of any party hereto, or any other jurisdiction, are
mandatorily applicable to the
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Merger or to matters arising under or in connection with this Agreement, this
Agreement shall be governed by the laws of the State of New York.
SECTION 8.13 Counterparts. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original but all of which
taken together shall constitute one and the same agreement.
SECTION 8.14. WAIVER OF JURY TRIAL. EACH OF PARENT, MERGER SUB AND THE
COMPANY HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ALL
RIGHTS TO TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM (WHETHER
BASED UPON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY.
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IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
SAFEWAY INC.
By: /s/ MICHAEL C. ROSS
---------------------------------------
Name: Michael C. Ross
Title: Senior Vice President, Secretary
and General Counsel
SSCI MERGER SUB, INC.
By: /s/ MICHAEL C. ROSS
---------------------------------------
Name: Michael C. Ross
Title: Vice President and Secretary
THE VONS COMPANIES, INC.
By: /s/ LAWRENCE A. DEL SANTO
---------------------------------------
Name: Lawrence A. Del Santo
Title: Chairman and Chief Executive
Officer
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EXHIBIT 2.2
STOCK REPURCHASE AGREEMENT
This Stock Repurchase Agreement, dated as of December 15, 1996 (this
"Agreement"), is made and entered into by Safeway Inc., a Delaware corporation
("Parent"), and SSI Associates, L.P., a Delaware limited partnership ("SSI").
WHEREAS, concurrently herewith Parent is entering into that certain
Agreement and Plan of Merger, dated the date hereof (the "Merger Agreement"), by
and among Parent, SSCI Merger Sub, Inc., a Michigan corporation and an indirect
wholly owned subsidiary of Parent ("Merger Sub"), and The Vons Companies, Inc.,
a Michigan corporation (the "Company"), pursuant to which Merger Sub would be
merged with and into the Company (the "Merger") and Parent would indirectly
acquire all of the outstanding shares of common stock of the Company (other than
shares owned by Parent or its subsidiaries) in exchange for shares of common
stock, par value $.01 per share, of Parent ("Parent Stock"); and
WHEREAS, the Company has advised Parent that it believes that the
Merger will be of greater benefit to the Company's stockholders if Parent
reduces its outstanding equity through a substantial share and/or warrant
repurchase; and
WHEREAS, SSI is a substantial holder of the outstanding equity of
Parent; and
WHEREAS, the Company has required as a condition to its entering into
the Merger Agreement that Parent enter into this Agreement; and
WHEREAS, Parent wishes to repurchase, and SSI wishes to sell, 15
million shares of Parent Stock (the "Shares") on the terms and subject to the
conditions set forth herein.
The Parties hereto agree as follows:
1. Repurchase by Parent; Purchase Price.
(a) At the Closing (as herein defined), Parent will repurchase from
SSI, and SSI will sell, assign and transfer ("Transfer") to Parent or any Parent
subsidiary designated by Parent, the Shares (the "Repurchase"). At the Closing,
(i) SSI shall deliver to Parent certificates representing the Shares, with
documentation satisfactory to Parent evidencing the Transfer of the Shares and
(ii) Parent shall pay to SSI in immediately available funds by wire transfer to
an account designated by SSI an amount equal to the number of shares of Parent
Stock to be Transferred to Parent multiplied by an amount equal to the greater
of (1) $38.375 (representing the closing sales price of Parent Stock on the New
York Stock Exchange ("NYSE") on December 13, 1996) and (2) the Volume-Weighted
Average Trading Price (as defined below) (such amount, the
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"Price Per Share"). "Volume-Weighted Average Trading Price" means an amount, as
determined by Lehman Brothers Inc., equal to (i) the cumulative sum, for each
trade of Parent Stock during the Period (as hereinafter defined) on the NYSE, of
the product of (x) the sale price times (y) the number of shares of Parent Stock
sold at such price, divided by (ii) the total number of shares of Parent Stock
so traded during the Period. "Period" shall mean the ten (10) consecutive
trading day period beginning on the twentieth (20th) trading day prior to the
date first publicly announced by the Company as the date of the meeting of the
Company's stockholders to consider and vote upon the Merger and the Merger
Agreement.
(b) SSI may assign to SSI Equity Associates, L.P., a Delaware limited
partnership ("SSI Equity") and/or KKR Partners II, L.P., a Delaware limited
partnership ("Partners"), a portion of its rights and obligations under this
Agreement; provided that no such assignment shall be effective until SSI Equity
and/or Partners, as the case may be, has executed an agreement with Parent
substantially in the form hereof (with such changes to the form hereof as may be
appropriate to reflect the fact that SSI Equity may Transfer warrants as
described below) or such other form as may be agreed upon by Parent and SSI
Equity and/or Partners, as the case may be; and provided further that no such
assignment shall relieve SSI of its obligations hereunder. In the event of a
partial assignment to SSI Equity of SSI's obligation hereunder to Transfer 15
million shares of Parent Stock to Parent (or a subsidiary designated by Parent),
SSI Equity may, in lieu of transferring shares of Parent Stock, Transfer to
Parent (or a subsidiary designated by Parent) outstanding warrants to purchase
Parent Stock, provided that the aggregate Parent Stock and/or warrants to
purchase Parent Stock Transferred to Parent (or a subsidiary designated by
Parent) at Closing pursuant to this Agreement shall represent a total of 15
million shares of Parent Stock (treating any warrant as if it were exercised).
At the Closing, Parent shall pay or cause to be paid to SSI Equity in
immediately available funds by wire transfer to an account designated by SSI
Equity an amount in respect of each warrant Transferred to Parent pursuant to
this Agreement equal to (i) the number of shares underlying such warrant
multiplied by (ii) an amount equal to the excess of (1) the Price Per Share over
(2) the exercise price per share of such warrant.
(c) In the event of any assignment pursuant to Section 1(b), SSI shall
notify Parent in writing at least five business days prior to the date of
Closing with respect to the type (shares and/or warrants) and amount of equity
securities to be Transferred to Parent (or a subsidiary designated by Parent) at
Closing by each of SSI, SSI Equity and/or Partners.
2. Closing. The closing (the "Closing") of the
Repurchase shall occur immediately following the Effective Time
(as such term is defined in the Merger Agreement) of the Merger.
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3. SSI's Representations and Warranties. SSI hereby represents and
warrants, as of the date hereof and as of the Closing, that:
(a) Organization. SSI is duly organized and validly
existing under the laws of the State of Delaware. SSI has all
requisite partnership power and authority to carry on its
business as now conducted.
(b) Authorization. SSI has taken all action necessary for the
authorization, execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby. This Agreement constitutes
SSI's valid and legally binding obligation, enforceable in accordance with its
terms, subject to bankruptcy and other laws of general application affecting the
rights and remedies of creditors and the availability of equitable remedies,
including specific performance.
(c) Ownership of the Shares. SSI has, and at the time of the Closing
will have, good title to the Shares; has, and at the Closing will have, full,
complete and unrestricted legal right, power and authority to Transfer and
deliver the Shares pursuant to this Agreement; and upon the delivery of and
payment for the Shares to be sold by it pursuant to the provisions of this
Agreement, Parent will receive good title thereto, free and clear of all liens,
claims, encumbrances, rights and restrictions of every kind.
(d) Non-Contravention. The execution and delivery by SSI of this
Agreement does not, and the performance of its obligations hereunder will not,
(i) contravene or conflict with the partnership agreement or other
organizational documentation of SSI or (ii) contravene or conflict with or
constitute a violation of or default under or give rise to a right of
termination, cancellation or acceleration of any right or obligation of SSI
under any provision of applicable law or regulation of the United States or any
state thereof or of any agreement, contract, judgment, injunction, order, decree
or other instrument binding upon SSI.
(e) No Consents Required. No application, notice, order, registration,
qualification, waiver, consent, approval or other action is required to be
filed, given, obtained or taken by SSI by virtue of the execution, delivery and
performance of this Agreement or the Repurchase.
4. Parent's Representations and Warranties. Parent hereby represents
and warrants, as of the date hereof and as of the Closing, that:
(a) Organization. Parent is a corporation duly organized and validly
existing under the laws of the State of Delaware. Parent has all requisite
corporate power and authority to carry
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on its business as now conducted and to purchase the Shares pursuant to this
Agreement.
(b) Authorization. Parent has taken all corporate or other action
necessary for the authorization, execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby. This
Agreement constitutes Parent's valid and legally binding obligation, enforceable
in accordance with its terms, subject to bankruptcy and other laws of general
application affecting the rights and remedies of creditors and the availability
of equitable remedies, including specific performance.
(c) Non-Contravention. The execution and delivery by Parent of this
Agreement does not, and the performance of its obligations hereunder will not,
(i) contravene or conflict with the certificate of incorporation or by-laws of
Parent or (ii) contravene or conflict with or constitute a violation of or
default under or give rise to a right of termination, cancellation or
acceleration of any right or obligation of Parent under any provision of
applicable law or regulation of the United States or any state thereof or of any
agreement, contract, judgment, injunction, order, decree or other instrument
binding upon Parent.
(d) No Consents Required. No application, notice, order, registration,
qualification, waiver, consent, approval or other action is required to be
filed, given, obtained or taken by Parent by virtue of the execution, delivery
and performance of this Agreement or the Repurchase.
(e) Fairness Opinion. The Independent Committee of the Board of
Directors of Parent has received an oral opinion (with a written opinion to
follow) of Lehman Brothers Inc. stating that the Repurchase is fair to Parent
(which term for purposes of such opinion does not include SSI and certain
related parties) from a financial point of view.
5. Indemnification.
(a) Parent shall, with respect to any Proceeding (as hereinafter
defined) indemnify and hold harmless SSI, SSI Equity, Partners and their
respective affiliates, officers, directors, general and limited partners (and
the general and limited partners thereof), employees, agents, successors and
assigns (other than any of the foregoing solely to the extent acting in his
capacity as a director of Parent) such persons, each an "Indemnified Person" and
collectively, the "Indemnified Persons") with respect to all Expenses (as
hereinafter defined) reasonably incurred in connection with the investigation
and defense of such Proceeding (whether or not any such Indemnified Person is a
party to any such Proceeding). Nothing contained in this Agreement shall limit
or otherwise affect any rights to indemnification to which any person may
otherwise be entitled.
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(b) In case any Proceeding shall be instituted involving any
Indemnified Person in any manner whatsoever in respect of which indemnity may be
sought pursuant to paragraph (a) of this Section 5, such Indemnified Person
shall promptly notify Parent in writing, and SSI, on behalf of all Indemnified
Persons involved in such Proceeding, may retain counsel reasonably satisfactory
to Parent ("Retained Counsel") to represent all such Indemnified Persons with
respect to such Proceeding. Except as provided in the next sentence, it is
understood that Parent shall not, in respect of the attorneys' fees and related
expenses of any Indemnified Person in connection with any Proceeding or related
Proceedings in the same jurisdiction, be liable for the attorneys' fees and
related expenses of more than one separate firm (in addition to any local
counsel) for all Indemnified Persons. In any Proceeding, any Indemnified Person
shall have the right to retain counsel in addition to or in lieu of Retained
Counsel ("Additional Counsel"), but the fees and expenses of such Additional
Counsel shall be at the expense of such Indemnified Person unless (i) Parent and
the Indemnified Person shall have mutually agreed to the retention of such
Additional Counsel or (ii) it is the advice of counsel for such Indemnified
Person (which may be counsel other than the Retained Counsel) that the
representation of such Indemnified Person and any other person represented by
the Retained Counsel with respect to such Proceeding would be inappropriate due
to actual or potential differing interests between them. It is agreed that all
Expenses for which indemnification is provided under this Section 5 shall be
reimbursed as they are incurred. The failure of any Indemnified Person to give
notice as provided in this Section 5(b) shall relieve Parent of its obligations
hereunder only to the extent, if at all, that Parent is prejudiced by such
failure.
(c) Parent shall not settle or compromise any Proceeding pending
against Parent, which Proceeding is also pending against any Indemnified Person,
without the written consent of SSI, which consent shall not be unreasonably
withheld; provided, however, that the foregoing limitation on Parent shall not
apply to any settlement or compromise by Parent of any Proceeding as it relates
to parties other than Parent and any Indemnified Person so long as subsequent
thereto the Proceeding remains pending against Parent.
(d) "Expenses" shall include only the following: attorneys' fees and
related expenses, retainers, court costs, transcripts, fees of experts, witness
fees, travel expenses, duplicating costs, printing and binding costs, telephone
charges, postage, delivery service fees, and other similar disbursements or
out-of-pocket expenses incurred in connection with either the investigation or
defense of a Proceeding. Notwithstanding the preceding sentence, Expenses shall
include the premium cost of obtaining an appeal bond, which Expense shall not
exceed 2% of the amount of the necessary bond. Notwithstanding the foregoing
provisions of this paragraph 5(d),
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Expenses shall not include amounts with respect to attorneys' fees and related
expenses to the extent inconsistent with the provisions of paragraph 5(b) above.
(e) "Proceeding" shall mean any threatened, pending or completed
action, claim, suit, demand, arbitration, alternate dispute resolution
mechanism, investigation, administrative hearing or any other proceeding whether
civil, criminal, administrative or investigative, that relates to this Agreement
or the Repurchase, regardless of whether the Repurchase is consummated and
including any proceeding by any Indemnified Person to enforce its rights
hereunder.
6. Miscellaneous Matters.
(a) Succession. This Agreement shall be binding upon and shall inure to
the benefit of the parties, their heirs, personal representatives, successors
and assigns; provided, however, that SSI shall not be entitled to assign its
rights or delegate its obligations under this Agreement except as provided in
Section 1(b) hereof.
(b) Severability. If any provision of this Agreement is found to be
unenforceable, such provision shall be deemed to be limited or modified to the
minimum extent necessary to permit enforceability, and as so limited or
modified, such provision and the balance of this Agreement shall be enforceable
in accordance with their terms.
(c) Law of Agreement. This Agreement shall be interpreted under and
enforced in accordance with the laws of the State of New York, excluding the
choice of law principles thereof.
(d) Further Assurances. Each party hereto agrees to perform any further
acts and to execute and deliver any further documents which may be reasonably
necessary to carry out the provisions of this Agreement.
(e) Counterparts. This Agreement may be executed in two or more
counterparts and shall be effective when each party has executed at least one of
the counterparts notwithstanding that all parties have not executed the same
counterpart.
(f) Waivers. Any of the terms and conditions of this Agreement may be
waived at any time by a writing signed by the party entitled to the benefit
thereof; but a waiver in one instance shall not be deemed to constitute a waiver
in any other instance.
(g) Notices. All notices and other communications given or made
pursuant to this Agreement shall be in writing and shall be deemed to have been
duly given or made if and when delivered personally or by overnight courier to
the parties at the following addresses or sent by electronic transmission, with
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confirmation received, to the telecopy numbers specified below (or at such other
address or telecopy number for a party as shall be specified by like notice):
(1) if to Parent:
Safeway Inc.
5918 Stoneridge Mall Road
Pleasanton, California 94588-3229
Telecopier No.: (510) 208-5863
Telephone No.: (510) 467-3000
Attention: President
(2) if to SSI:
SSI Associates, L.P.
c/o Kohlberg Kravis Roberts & Co.
2800 Sand Hill Road, Suite 200
Menlo Park, California 94025
Attention: James H. Greene, Jr.
Telecopier No.: 415-233-6574
Telephone No.: 415-233-6575
and
Attention: Robert I. MacDonnell
Telecopier No.: 415-233-6524
Telephone No.: 415-233-6560
(h) Termination. This Agreement shall terminate concurrently with any
termination of the Merger Agreement; provided, however, that the provisions of
Sections 5 and 6 shall survive any termination of this Agreement; and provided
further, that no such termination of this Agreement shall relieve any party
hereto from liability for any breach hereof prior to such termination.
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(i) Limited Recourse. No partner of SSI, SSI Equity or Partners or of
the general partner of SSI, SSI Equity or Partners shall have any personal
liability for the performance of any of SSI's, SSI Equity's or Partner's
obligations hereunder. Any liability or obligation of SSI shall be limited to
and satisfied only out of the property of SSI. Any liability or obligation of
SSI Equity shall be limited to and satisfied only out of the property of SSI or
SSI Equity, as the case may be. Any liability or obligation of Partners shall be
limited to and satisfied only out of the property of SSI or Partners, as the
case may be.
(j) Integrated Agreement. This Agreement constitutes the entire
agreement between the parties hereto with respect to the subject hereof, and
there are no agreements, understandings, restrictions, warranties or
representations between the parties with respect to the subject hereof other
than those set forth herein or herein provided for.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
SAFEWAY INC.
By /s/ MICHAEL C. ROSS
-------------------
Michael C. Ross
SSI ASSOCIATES, L.P.
By: KKR ASSOCIATES, L.P.
By: /s/ JAMES H. GREENE, JR.
------------------------
James H. Greene, Jr.
General Partner
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