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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-1
TENDER OFFER STATEMENT
PURSUANT TO SECTION 14(d)(1) OF THE SECURITIES EXCHANGE ACT OF 1934
------------------------
DOMINICK'S SUPERMARKETS, INC.
(NAME OF SUBJECT COMPANY)
WINDY CITY ACQUISITION CORP.
SAFEWAY INC.
(BIDDERS)
COMMON STOCK, PAR VALUE $.01 PER SHARE
NON-VOTING COMMON STOCK, PAR VALUE $.01 PER SHARE
(TITLE OF CLASS OF SECURITIES)
COMMON STOCK -- 257159103
NON-VOTING COMMON STOCK -- NONE
(CUSIP NUMBERS OF CLASS OF SECURITIES)
MICHAEL C. ROSS, ESQ.
SENIOR VICE PRESIDENT, SECRETARY AND GENERAL COUNSEL
SAFEWAY INC.
5918 STONERIDGE MALL ROAD
PLEASANTON, CALIFORNIA 94588
TELEPHONE: (925) 467-3000
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED
TO RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF BIDDERS)
COPY TO:
CHARLES I. COGUT, ESQ.
SIMPSON THACHER & BARTLETT
425 LEXINGTON AVENUE
NEW YORK, NEW YORK 10017
TELEPHONE: (212) 455-2000
CALCULATION OF FILING FEE
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TRANSACTION VALUATION* AMOUNT OF FILING FEE**
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$1,114,579,921 $222,916
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</TABLE>
* Based on the offer to purchase all of the outstanding shares of Common Stock
and Non-Voting Common Stock of the Subject Company at $49 cash per Share, and
21,541,091 Shares outstanding and 1,205,438 outstanding options as of October
8, 1998.
** 1/50 of 1% of Transaction Valuation.
[ ] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
Amount Previously Paid: Filing Party:
Form or Registration No.: Date Filed:
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<PAGE> 2
This Tender Offer Statement on Schedule 14D-1 relates to the offer by Windy
City Acquisition Corp., a Delaware corporation (the "Purchaser"), and a
wholly-owned subsidiary of Safeway Inc., a Delaware corporation (the "Parent"),
to purchase all of the outstanding shares of Common Stock, par value $.01 per
share (the "Voting Shares"), and Non-Voting Common Stock, par value $.01 per
share (the "Non-Voting Shares" and, together with the Voting Shares, the
"Shares"), of Dominick's Supermarkets, Inc., a Delaware corporation (the
"Company"), at a purchase price of $49 per Share, net to the seller in cash,
upon the terms and subject to the conditions set forth in the Offer to Purchase
dated as of October 19, 1998 (the "Offer to Purchase"), a copy of which is
attached hereto as Exhibit (a)(1), and in the related Letter of Transmittal
(which, together with the Offer to Purchase, as amended from time to time,
constitute the "Offer"), a copy of which is attached hereto as Exhibit (a)(2).
ITEM 1. SECURITY AND SUBJECT COMPANY.
(a) The name of the subject company is Dominick's Supermarkets, Inc. The
information set forth in Section 7 ("Certain Information Concerning the
Company") of the Offer to Purchase is incorporated herein by reference.
(b) The exact titles of the classes of equity securities being sought in
the Offer are (i) Common Stock, par value $.01 per share, and (ii) Non-Voting
Common Stock, par value $.01 per share, of the Company. The information set
forth in the Introduction (the "Introduction") of the Offer to Purchase is
incorporated herein by reference.
(c) The information set forth in Section 6 ("Price Range of Shares;
Dividends") of the Offer to Purchase is incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(d) and (g) This Statement is filed by the Purchaser and the Parent.
The information set forth in Section 8 ("Certain Information Concerning the
Purchaser and the Parent") of the Offer to Purchase and in Schedule I thereto is
incorporated herein by reference.
(e) and (f) During the last five years, neither the Purchaser nor the
Parent nor, to the best knowledge of the Purchaser or the Parent, any of the
persons listed in Schedule I to the Offer to Purchase (i) has been convicted in
a criminal proceeding (excluding traffic violations or similar misdemeanors) or
(ii) was a party to a civil proceeding of a judicial or administrative body of
competent jurisdiction and as a result of such proceeding was or is subject to a
judgment, decree or final order enjoining future violations of, or prohibiting
activities subject to, federal or state securities laws or finding any violation
of such laws.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
(a) and (b) The information set forth in Section 8 ("Certain Information
Concerning the Purchaser and the Parent"), Section 10 ("Background of the Offer;
Contacts with the Company") and Section 11 ("The Merger Agreement") of the Offer
to Purchase is incorporated herein by reference.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a) and (b) The information set forth in Section 9 ("Source and Amount of
Funds") of the Offer to Purchase is incorporated herein by reference.
(c) Not applicable.
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER.
(a)-(e) The information set forth in the Introduction, Section 10
("Background of the Offer; Contacts with the Company"), Section 11 ("The Merger
Agreement") and Section 12 ("Purpose of the Offer; the Merger; Plans for the
Company") of the Offer to Purchase is incorporated herein by reference.
2
<PAGE> 3
(f)-(g) The information set forth in Section 14 ("Effect of the Offer on
the Market for the Shares, Stock Exchange Listing and Exchange Act
Registration") of the Offer to Purchase is incorporated herein by reference.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a) and (b) The information set forth in the Introduction and Section 8
("Certain Information Concerning the Purchaser and the Parent") of and Schedule
I to the Offer to Purchase is incorporated herein by reference.
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO THE SUBJECT COMPANY'S SECURITIES.
The information set forth in the Introduction, Section 8 ("Certain
Information Concerning the Purchaser and the Parent"), Section 10 ("Background
of the Offer; Contacts with the Company"), Section 11 ("The Merger Agreement")
and Section 12 ("Purpose of the Offer; the Merger; Plans for the Company") of
the Offer to Purchase is incorporated herein by reference.
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth in the Introduction and Section 17 ("Fees and
Expenses") of the Offer to Purchase is incorporated herein by reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
The information set forth in Section 8 ("Certain Information Concerning the
Purchaser and the Parent") of the Offer to Purchase is incorporated herein by
reference.
ITEM 10. ADDITIONAL INFORMATION.
(a) None.
(b) and (c) The information set forth in Section 16 ("Certain Legal Matters
and Regulatory Approvals") of the Offer to Purchase is incorporated herein by
reference.
(d) The information set forth in Section 14 ("Effect of the Offer on the
Market for the Shares, Stock Exchange Listing and Exchange Act Registration")
and Section 16 ("Certain Legal Matters and Regulatory Approvals") of the Offer
to Purchase is incorporated herein by reference.
(e) None.
(f) The information set forth in the Offer to Purchase and the Letter of
Transmittal is incorporated herein by reference.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
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(a)(1) Offer to Purchase dated October 19, 1998.
(a)(2) Letter of Transmittal.
(a)(3) Notice of Guaranteed Delivery.
(a)(4) Letter from the Dealer Manager to Brokers, Dealers,
Commercial Banks, Trust Companies and Nominees.
(a)(5) Letter to clients for use by Brokers, Dealers, Commercial
Banks, Trust Companies and Nominees.
(a)(6) Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9.
</TABLE>
3
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(a)(7) Summary Advertisement as published on October 19, 1998.
(a)(8) Press Release jointly issued by Safeway Inc. and Dominick's
Supermarkets, Inc. on October 13, 1998 (incorporated by
reference to Exhibit 99.1 to Safeway Inc.'s Current Report
on Form 8-K dated October 13, 1998).
(b)(1) Credit Agreement dated as of April 8, 1997, among Safeway
Inc., The Vons Companies, Inc. and Canada Safeway Limited as
Borrowers; Bankers Trust Company as Administrative Agent;
The Chase Manhattan Bank as Syndication Agent; The Bank of
Nova Scotia and Bank of America National Trust and Savings
Association as Documentation Agents; the agents listed
therein as Agents; and the lenders listed therein as Lenders
(incorporated by reference to Exhibit 4(i).1 of Safeway
Inc.'s Quarterly Report on Form 10-Q for the period ended
March 22, 1997).
(c)(1) Agreement and Plan of Merger, dated as of October 13, 1998,
by and among Safeway Inc., Windy City Acquisition Corp. and
Dominick's Supermarkets, Inc.
(c)(2) Stockholders Agreement, dated as of October 13, 1998, by and
among Safeway Inc., Windy City Acquisition Corp. and each of
the stockholders of Dominick's Supermarkets, Inc. named on
the signature pages thereto.
(d) None.
(e) Not applicable.
(f) Not applicable.
</TABLE>
4
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SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this Statement is true, complete and correct.
SAFEWAY INC.
By: /s/ MICHAEL C. ROSS
------------------------------------
Name: Michael C. Ross
Title: Senior Vice President,
Secretary
and General Counsel
WINDY CITY ACQUISITION CORP.
By: /s/ MICHAEL C. ROSS
------------------------------------
Name: Michael C. Ross
Title: Vice President and Secretary
Date: October 19, 1998
5
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EXHIBIT INDEX
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EXHIBIT PAGE
NO. DESCRIPTION NO.
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(a)(1) Offer to Purchase dated October 19, 1998....................
(a)(2) Letter of Transmittal.......................................
(a)(3) Notice of Guaranteed Delivery...............................
(a)(4) Letter from the Dealer Manager to Brokers, Dealers,
Commercial Banks, Trust Companies and Nominees..............
(a)(5) Letter to clients for use by Brokers, Dealers, Commercial
Banks, Trust Companies and Nominees.........................
(a)(6) Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9...............................
(a)(7) Summary Advertisement as published on October 19, 1998......
(a)(8) Press Release jointly issued by Safeway Inc. and Dominick's
Supermarkets, Inc. on October 13, 1998 (incorporated by
reference to Exhibit 99.1 to Safeway Inc.'s Current Report
on Form 8-K dated October 13, 1998).........................
(b)(1) Credit Agreement dated as of April 8, 1997, among Safeway
Inc., The Vons Companies, Inc. and Canada Safeway Limited as
Borrowers; Bankers Trust Company as Administrative Agent;
The Chase Manhattan Bank as Syndication Agent; The Bank of
Nova Scotia and Bank of America National Trust and Savings
Association as Documentation Agents; the agents listed
therein as Agents; and the lenders listed therein as Lenders
(incorporated by reference to Exhibit 4(i).1 of Safeway
Inc.'s Quarterly Report on Form 10-Q for the period ended
March 22, 1997).............................................
(c)(1) Agreement and Plan of Merger, dated as of October 13, 1998,
by and among Safeway Inc., Windy City Acquisition Corp. and
Dominick's Supermarkets, Inc. ..............................
(c)(2) Stockholders Agreement, dated as of October 13, 1998, by and
among Safeway Inc., Windy City Acquisition Corp. and each of
the stockholders of Dominick's Supermarkets, Inc. named on
the signature pages thereto.................................
</TABLE>
6
<PAGE> 1
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF
COMMON STOCK AND NON-VOTING COMMON STOCK
OF
DOMINICK'S SUPERMARKETS, INC.
AT
$49 NET PER SHARE
BY
WINDY CITY ACQUISITION CORP.
A WHOLLY-OWNED SUBSIDIARY OF
SAFEWAY INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON MONDAY, NOVEMBER 16, 1998 UNLESS THE OFFER IS EXTENDED.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (A) THERE BEING VALIDLY
TENDERED AND NOT PROPERLY WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER A
NUMBER OF SHARES OF COMMON STOCK, PAR VALUE $.01 PER SHARE, AND NON-VOTING
COMMON STOCK, PAR VALUE $.01 PER SHARE, OF DOMINICK'S SUPERMARKETS, INC. (THE
"COMPANY") (COLLECTIVELY, THE "SHARES") WHICH CONSTITUTES MORE THAN 50% OF THE
ISSUED AND OUTSTANDING SHARES (DETERMINED ON A FULLY DILUTED BASIS WITHOUT
GIVING EFFECT TO THE SHARES ISSUABLE UPON THE EXERCISE OF THE YUCAIPA WARRANT
(AS DEFINED HEREIN)) ON THE DATE OF PURCHASE AND (B) THE EXPIRATION OR
TERMINATION OF ALL APPLICABLE WAITING PERIODS UNDER THE HART-SCOTT-RODINO
ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED (THE "HSR ACT"). THE OFFER IS
ALSO SUBJECT TO OTHER TERMS AND CONDITIONS. SEE THE INTRODUCTION AND SECTIONS 1
AND 15.
------------------------
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY DETERMINED THAT THE
MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING EACH OF
THE OFFER AND THE MERGER, ARE ADVISABLE AND FAIR TO, AND IN THE BEST INTERESTS
OF, THE STOCKHOLDERS OF DOMINICK'S SUPERMARKETS, INC. AND RECOMMENDS THAT
HOLDERS OF SHARES ACCEPT THE OFFER AND TENDER ALL THEIR SHARES TO WINDY CITY
ACQUISITION CORP.
------------------------
IMPORTANT
Any stockholder desiring to tender all or any portion of such stockholder's
Shares should either (1) complete and sign the Letter of Transmittal (or a
facsimile thereof) in accordance with the instructions in the Letter of
Transmittal, mail or deliver the Letter of Transmittal (or such facsimile) and
any other required documents to First Chicago Trust Company of New York (the
"Depositary"), and either deliver the certificates representing the tendered
Shares and any other required documents to the Depositary or tender such Shares
pursuant to the procedure for book-entry transfer set forth in Section 3 or (2)
request such stockholder's broker, dealer, commercial bank, trust company or
other nominee to effect the transaction for such stockholder. Stockholders
having Shares registered in the name of a broker, dealer, commercial bank, trust
company or other nominee must contact such broker, dealer, commercial bank,
trust company or other nominee if they desire to tender Shares so registered.
A stockholder who desires to tender Shares and whose certificates
representing such Shares are not immediately available, or who cannot comply
with the procedure for book-entry transfer on a timely basis, may tender such
Shares by following the procedures for guaranteed delivery set forth in Section
3.
Questions and requests for assistance may be directed to Morgan Stanley &
Co. Incorporated ("Morgan Stanley" or the "Dealer Manager") or to Kissel Blake
Inc. (the "Information Agent") at their respective addresses and telephone
numbers set forth on the back cover of this Offer to Purchase. Additional copies
of this Offer to Purchase, the Letter of Transmittal and the Notice of
Guaranteed Delivery may also be obtained from the Information Agent or the
Dealer Manager, or from brokers, dealers, commercial banks or trust companies.
------------------------
The Dealer Manager for the Offer is:
MORGAN STANLEY DEAN WITTER
October 19, 1998
<PAGE> 2
TABLE OF CONTENTS
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PAGE
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INTRODUCTION................................................ 1
THE TENDER OFFER............................................ 3
1. Term of the Offer; Expiration Date................... 3
2. Acceptance for Payment and Payment for Shares........ 4
3. Procedure for Tendering Shares....................... 5
4. Withdrawal Rights.................................... 7
5. Certain Federal Income Tax Consequences.............. 8
6. Price Range of Shares; Dividends..................... 9
7. Certain Information Concerning the Company........... 9
8. Certain Information Concerning the Purchaser and the
Parent............................................... 11
9. Source and Amount of Funds........................... 12
10. Background of the Offer; Contacts with the Company... 13
11. The Merger Agreement................................. 14
12. Purpose of the Offer; The Merger; Plans for the
Company.............................................. 25
13. Dividends and Distributions.......................... 27
14. Effect of the Offer on the Market for the Shares;
Stock Exchange Listing; Exchange Act Registration.... 27
15. Certain Conditions of the Offer...................... 28
16. Certain Legal Matters and Regulatory Approvals....... 29
17. Fees and Expenses.................................... 31
18. Miscellaneous........................................ 31
</TABLE>
SCHEDULE I Certain Information Regarding the Directors and Executive Officers
of the Purchaser and the Parent
i
<PAGE> 3
To the Stockholders of Dominick's Supermarkets, Inc.:
INTRODUCTION
Windy City Acquisition Corp., a Delaware corporation (the "Purchaser") and
a wholly-owned subsidiary of Safeway Inc., a Delaware corporation (the
"Parent"), hereby offers to purchase all of the outstanding shares of Common
Stock, par value $.01 per share (the "Voting Shares"), and Non-Voting Common
Stock, par value $.01 per share (the "Non-Voting Shares" and, collectively with
the Voting Shares, the "Shares"), of Dominick's Supermarkets, Inc., a Delaware
corporation (the "Company"), at a purchase price of $49 per Share, net to the
seller in cash, upon the terms and subject to the conditions set forth in this
Offer to Purchase and in the related Letter of Transmittal (which, as amended
from time to time, together constitute the "Offer").
Tendering stockholders will not be obligated to pay brokerage fees or
commissions or, subject to Instruction 6 of the Letter of Transmittal, stock
transfer taxes on the transfer and sale of Shares pursuant to the Offer. The
Purchaser will pay all fees and expenses of Morgan Stanley & Co. Incorporated,
which is acting as Dealer Manager for the Offer ("Morgan Stanley" or the "Dealer
Manager"), First Chicago Trust Company of New York, which is acting as the
Depositary (the "Depositary"), and Kissel Blake Inc., which is acting as the
Information Agent (the "Information Agent"), incurred in connection with the
Offer. See Section 17.
THE BOARD OF DIRECTORS OF THE COMPANY (THE "COMPANY BOARD") HAS UNANIMOUSLY
DETERMINED THAT THE MERGER AGREEMENT (AS DEFINED BELOW) AND THE TRANSACTIONS
CONTEMPLATED THEREBY, INCLUDING EACH OF THE OFFER AND THE MERGER (AS DEFINED
BELOW), ARE ADVISABLE AND FAIR TO, AND IN THE BEST INTERESTS OF, THE
STOCKHOLDERS OF THE COMPANY AND RECOMMENDS THAT ALL HOLDERS OF THE SHARES ACCEPT
THE OFFER AND TENDER ALL THEIR SHARES TO THE PURCHASER.
The Company Board has received the written opinion of Donaldson, Lufkin &
Jenrette Securities Corporation ("DLJ"), financial advisor to the Company, that
the consideration to be received by the stockholders of the Company (other than
the holders of Shares that are affiliates of the Company) pursuant to the Merger
Agreement is fair to such stockholders from a financial point of view. A copy of
the opinion of DLJ is attached to the Company's Solicitation/Recommendation
Statement on Schedule 14D-9 (the "Schedule 14D-9") which is being distributed to
the stockholders of the Company. The DLJ opinion should be read in its entirety
for the assumptions made, the procedures followed, the matters considered and
the limits of the review made by DLJ in connection with such opinion. The DLJ
opinion was prepared for the Company Board and does not constitute a
recommendation to any stockholder as to whether to tender in the Offer. DLJ was
not retained as an advisor or agent to the Company's stockholders.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (i) THERE BEING VALIDLY
TENDERED AND NOT PROPERLY WITHDRAWN PRIOR TO THE EXPIRATION DATE (AS DEFINED IN
SECTION 1) A NUMBER OF SHARES WHICH IN THE AGGREGATE CONSTITUTES MORE THAN 50%
OF THE ISSUED AND OUTSTANDING SHARES (DETERMINED ON A FULLY DILUTED BASIS
WITHOUT GIVING EFFECT TO THE SHARES ISSUABLE UPON THE EXERCISE OF THE YUCAIPA
WARRANT (AS DEFINED IN SECTION 11)) ON THE DATE OF PURCHASE (THE "MINIMUM
CONDITION") AND (ii) THE EXPIRATION OR TERMINATION OF ALL APPLICABLE WAITING
PERIODS UNDER THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS
AMENDED THE ("HSR ACT"). SEE SECTIONS 1 AND 15. IF THE PURCHASER PURCHASES NOT
LESS THAN THAT NUMBER OF SHARES NEEDED TO SATISFY THE MINIMUM CONDITION, IT WILL
BE ABLE TO EFFECT THE MERGER WITHOUT THE AFFIRMATIVE VOTE OF ANY OTHER
STOCKHOLDER OF THE COMPANY. SEE SECTION 12.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of October 13, 1998 (the "Merger Agreement"), among the Parent, the Purchaser
and the Company. The Merger Agreement provides, among other things, for the
making of the Offer by the Purchaser, and further provides that, following the
completion of the Offer, upon the terms and subject to the conditions of the
Merger Agreement and the Delaware General Corporation Law (the "DGCL"), the
Purchaser will be merged with and into the Company (the "Merger"). Following the
Merger, the Company will continue as the surviving corporation
<PAGE> 4
(the "Surviving Corporation") and become a wholly-owned subsidiary of the
Parent, and the separate corporate existence of the Purchaser will cease.
Pursuant to a Stockholders Agreement dated as of October 13, 1998, among
the Parent, the Purchaser and certain stockholders of the Company owning
approximately 41% of the issued and outstanding Shares (the "Principal
Stockholders"), the Principal Stockholders have agreed, among other things,
during the term of the Stockholders Agreement (i) to tender their Shares
(including Shares to be issued upon exercise of any warrants (including the
Yucaipa Warrant) or options, the conversion of any convertible securities or
otherwise) in the Offer and not to withdraw any Shares so tendered, (ii) to
grant options to the Purchaser to buy their Shares at the $49 Offer price upon
the termination of the Merger Agreement in certain circumstances, (iii) to vote
their Shares in favor of the adoption of the Merger Agreement and against any
action or agreement that would impede, interfere with, delay, postpone or
attempt to discourage the Merger, (iv) not to directly or indirectly solicit,
initiate, facilitate or encourage any Alternative Transactions (as defined in
Section 11) or the sale of their Shares or the Yucaipa Warrant, as applicable,
and (v) not to sell, transfer, pledge, encumber, assign or otherwise dispose of
their Shares. See Section 11 for a discussion of the arrangements with the
Principal Stockholders.
In accordance with the Merger Agreement, the Company agrees, if and to the
extent permitted by law, and subject to the terms of the Merger Agreement, to
take all necessary and appropriate actions to cause the Merger to become
effective as soon as reasonably practicable after the purchase of the Shares
pursuant to the Offer without a meeting of the Company's stockholders in
accordance with the DGCL and the Company's Amended and Restated Certificate of
Incorporation. See Section 11.
At the effective time of the Merger (the "Effective Time"), each Share
issued and outstanding immediately prior to the Effective Time (other than
Shares held in the treasury of the Company and each Share, if any, owned by the
Parent or the Purchaser, or by any other direct or indirect wholly-owned
subsidiary of the Parent or the Company, which shall be canceled and retired
without payment of any consideration therefor, and other than Shares, if any
(collectively, "Dissenting Shares"), held by stockholders who have not voted in
favor of the Merger Agreement or consented thereto in writing and who have
properly demanded appraisal of their Shares in accordance with Section 262 of
the DGCL) will, by virtue of the Merger and without any action on the part of
the holders of capital stock, be converted into the right to receive $49 in cash
(the "Per Share Amount"), payable without interest, less any federal withholding
taxes required under applicable law, to the holder thereof upon the surrender of
the certificate that formerly represented such Share.
The Company has represented to the Parent that as of October 8, 1998, there
were 18,679,737 Voting Shares and 2,861,354 Non-Voting Shares issued and
outstanding, 3,874,492 Shares reserved for issuance upon the exercise of the
Yucaipa Warrant and 1,205,438 Shares reserved for issuance upon the exercise of
outstanding stock options and other stock rights. Based upon the foregoing, the
Purchaser believes that 11,373,265 Shares constitute a majority of the
outstanding Shares on a fully diluted basis, excluding the Shares to be issued
upon the exercise of the Yucaipa Warrant.
The Company has advised the Purchaser that, to the knowledge of the
Company, all the directors and officers of the Company intend to tender their
Shares pursuant to the Offer.
The Merger Agreement is more fully described in Section 11. Certain federal
income tax consequences of the sale of the Shares pursuant to the Offer and the
exchange of Shares for the Per Share Amount pursuant to the Merger are described
in Section 5.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH SHOULD BE READ BEFORE ANY DECISION IS MADE WITH
RESPECT TO THE OFFER.
2
<PAGE> 5
THE TENDER OFFER
1. TERM OF THE OFFER; EXPIRATION DATE. Upon the terms and subject to the
conditions of the Offer (including, if the Offer is extended or amended, the
terms and conditions of such extension or amendment), the Purchaser will accept
for payment, purchase and pay for all Shares validly tendered on or prior to the
Expiration Date and not properly withdrawn as permitted by Section 4. The term
"Expiration Date" means 12:00 Midnight, New York City time, on Monday, November
16, 1998, unless and until the Purchaser, in its sole discretion (but subject to
the terms and conditions of the Merger Agreement), shall have extended the
period during which the Offer is open, in which event the term "Expiration Date"
shall mean the latest time and date at which the Offer, as so extended by the
Purchaser, shall expire.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, SATISFACTION OF THE
MINIMUM CONDITION AND THE EXPIRATION OR TERMINATION OF ALL APPLICABLE WAITING
PERIODS UNDER THE HSR ACT. SEE SECTION 15, WHICH SETS FORTH IN FULL THE
CONDITIONS TO THE OFFER. SUBJECT TO THE PROVISIONS OF THE MERGER AGREEMENT AND
THE APPLICABLE RULES AND REGULATIONS OF THE SECURITIES AND EXCHANGE COMMISSION
(THE "COMMISSION"), THE PURCHASER RESERVES THE RIGHT, IN ITS SOLE DISCRETION, TO
WAIVE ANY OR ALL CONDITIONS TO THE OFFER (OTHER THAN THE MINIMUM CONDITION) AND
TO MAKE ANY OTHER CHANGES IN THE TERMS AND CONDITIONS OF THE OFFER. SUBJECT TO
THE PROVISIONS OF THE MERGER AGREEMENT, INCLUDING THE PROVISIONS OF THE MERGER
AGREEMENT DESCRIBED IN THE NEXT PARAGRAPH, AND THE APPLICABLE RULES AND
REGULATIONS OF THE COMMISSION, IF BY THE EXPIRATION DATE ANY OR ALL OF SUCH
CONDITIONS TO THE OFFER HAVE NOT BEEN SATISFIED, THE PURCHASER RESERVES THE
RIGHT (BUT SHALL NOT BE OBLIGATED) TO (i) TERMINATE THE OFFER AND RETURN ALL
TENDERED SHARES TO TENDERING STOCKHOLDERS, (ii) WAIVE SUCH UNSATISFIED
CONDITIONS AND PURCHASE ALL SHARES VALIDLY TENDERED OR (iii) EXTEND THE OFFER
AND, SUBJECT TO THE TERMS OF THE OFFER (INCLUDING THE RIGHTS OF STOCKHOLDERS TO
WITHDRAW THEIR SHARES), RETAIN THE SHARES WHICH HAVE BEEN TENDERED, UNTIL THE
TERMINATION OF THE OFFER, AS EXTENDED.
Subject to the applicable rules and regulations of the Commission and the
terms of the Merger Agreement, the Purchaser expressly reserves the right, in
its sole discretion, at any time and from time to time, and regardless of
whether or not any of the events set forth in Section 15 shall have occurred or
shall have been determined by the Purchaser to have occurred, to (i) extend the
period of time during which the Offer is open and thereby delay acceptance for
payment of, and the payment for, any Shares, by giving oral or written notice of
such extension to the Depositary and (ii) amend the Offer in any respect by
giving oral or written notice of such amendment to the Depositary. Under the
terms of the Merger Agreement, however, without the written consent of the
Company, neither the Parent nor the Purchaser will waive the Minimum Condition,
decrease the Per Share Amount payable in the Offer, decrease the number of
Shares to be purchased in the Offer, change the form of consideration to be paid
in the Offer, change or amend the conditions to the Offer set forth in the
Merger Agreement, including Annex A thereto (the "Offer Conditions") or impose
any additional conditions, change the expiration date of the Offer, or otherwise
add, amend or waive any other terms of the Offer in a manner which is adverse to
the holders of Shares. The Purchaser shall have no obligation to pay interest on
the purchase price of tendered Shares, including in the event the Purchaser
exercises its right to extend the period of time during which the Offer is open.
The rights reserved by the Purchaser in this paragraph are in addition to the
Purchaser's rights to terminate the Offer pursuant to Section 15.
Notwithstanding the foregoing, if on any scheduled expiration date of the Offer,
which shall initially be 12:00 Midnight on Monday, November 16, 1998, all
conditions to the Offer have not been satisfied or waived, the Purchaser may,
and at the request of the Company shall, from time to time, extend the
expiration date of the Offer for up to 10 additional business days (but in no
event will the Purchaser be required to extend the expiration date of the Offer
beyond April 15, 1999). In addition, the Purchaser may, without the consent of
the Company, (i) extend the Offer for any period required by any rule,
regulation, interpretation or position of the Commission or the staff thereof
applicable to the Offer, and (ii) extend the Offer if (A) the Offer Conditions
have been satisfied or waived and (B) the number of Shares validly tendered and
not withdrawn represent more than 65% but less than 90% of the issued and
outstanding shares of each of the Voting Shares and the Non-Voting Shares;
provided, however, that in no event shall the extensions permitted under the
foregoing clause (ii) exceed, in the aggregate, 10 business days. Subject to the
terms of the Offer, including the Offer Conditions, and subject to its right to
extend the Offer in order to attempt to satisfy the requirements of Section 253
of the DGCL so that the Merger could be effected without
3
<PAGE> 6
a meeting of the Company's stockholders, the Purchaser will accept for payment,
purchase and pay for all Shares validly tendered and not withdrawn as soon as it
is permitted to do so under applicable law.
Any extension, delay, termination, waiver or amendment will be followed as
promptly as practicable by public announcement thereof, and such announcement in
the case of an extension will be made in accordance with Rule 14e-1(d) under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), no later than
9:00 A.M., New York City time, on the next business day after the previously
scheduled Expiration Date. Without limiting the manner in which the Purchaser
may choose to make any public announcement, except as provided by applicable law
(including Rules 14d-4(c) and 14d-6(d) under the Exchange Act, which require
that material changes be promptly disseminated to holders of Shares), the
Purchaser shall have no obligation to publish, advertise or otherwise
communicate any such public announcement other than by issuing a release to the
Dow Jones News Service.
If the Purchaser makes a material change in the terms of the Offer or if it
waives a material condition of the Offer, the Purchaser will disseminate
additional tender offer materials and extend the Offer to the extent required by
Rules 14d-4(c), 14d-6(d) and 14e-1 under the Exchange Act. The minimum period
during which an offer must remain open following material changes in the terms
of the offer, other than a change in price or a change in the percentage of
securities sought, will depend upon the facts and circumstances, including the
materiality, of the changes. With respect to a change in price or, subject to
certain limitations, a change in the percentage of securities sought, a minimum
10 business day period from the day of such change is generally required to
allow for adequate dissemination to stockholders. For purposes of the Offer, a
"business day" means any day other than a Saturday, Sunday, or a federal holiday
and consists of the time period from 12:01 A.M. through 12:00 Midnight, New York
City time.
The Company has provided the Purchaser with the Company's stockholder list
and security position listings for the purpose of disseminating the Offer to
holders of Shares. This Offer to Purchase and the related Letter of Transmittal
and other relevant materials will be mailed by the Purchaser to record holders
of Shares and furnished to brokers, dealers, commercial banks, trust companies
and similar persons whose names, or the names of whose nominees, appear on the
stockholder list or, if applicable, who are listed as participants in a clearing
agency's security position listing, for subsequent transmittal to beneficial
owners of Shares.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES. Upon the terms and
subject to the conditions of the Offer (including, if the Offer is extended or
amended, the terms and conditions of any such extension or amendment), the
Purchaser will accept for payment, purchase and pay for all Shares validly
tendered and not withdrawn commencing at the later of (x) the Expiration Date
and (y) the satisfaction or waiver of the conditions of the Offer set forth in
Section 15, including, without limitation, the date of expiration or termination
of all applicable waiting periods under the HSR Act, except to the extent, as
described above, that the Purchaser extends the Offer in an effort to satisfy
the requirements of Section 253 of the DGCL. In addition, subject to the
applicable rules of the Commission, the Purchaser expressly reserves the right
to delay acceptance for payment of or payment for Shares pending receipt of any
other regulatory approvals specified in Section 16. Any such delays will be
effected in compliance with Rule 14e-1(c) under the Exchange Act.
For information with respect to approvals required to be obtained prior to
the consummation of the Offer, including the HSR Act, see Section 16.
In all cases, payment for Shares tendered and accepted for payment pursuant
to the Offer will be made only after timely receipt by the Depositary of (i)
certificates representing such Shares ("Share Certificates") or timely
confirmation (a "Book-Entry Confirmation") of a book-entry transfer of such
Shares into the Depositary's account at The Depository Trust Company (the
"Book-Entry Transfer Facility") pursuant to the procedures set forth in Section
3, (ii) the Letter of Transmittal (or a facsimile thereof), properly completed
and duly executed, with any required signature guarantees, or an Agent's Message
(as defined below) in connection with a book-entry transfer, and (iii) any other
documents required by the Letter of Transmittal.
The term "Agent's Message" means a message transmitted by the Book-Entry
Transfer Facility to and received by the Depositary and forming a part of a
Book-Entry Confirmation, which states that the Book-Entry Transfer Facility has
received an express acknowledgment from the participant in the Book-Entry
4
<PAGE> 7
Transfer Facility tendering the Shares that such participant has received and
agrees to be bound by the terms of the Letter of Transmittal and that the
Purchaser may enforce such agreement against such participant.
For purposes of the Offer, the Purchaser will be deemed to have accepted
for payment (and thereby purchased) Shares validly tendered and not properly
withdrawn as, if and when the Purchaser gives oral or written notice to the
Depositary of the Purchaser's acceptance for payment of such Shares pursuant to
the Offer. Upon the terms and subject to the conditions of the Offer, payment
for Shares accepted for payment pursuant to the Offer will be made by deposit of
the purchase price therefor with the Depositary, which will act as agent for
tendering stockholders for the purpose of receiving payments from the Purchaser
and transmitting such payments to stockholders whose Shares have been accepted
for payment. UNDER NO CIRCUMSTANCES WILL INTEREST ON THE PURCHASE PRICE FOR
SHARES BE PAID, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING
SUCH PAYMENT. If for any reason whatsoever acceptance for payment of or payment
for any Shares tendered pursuant to the Offer is delayed or the Purchaser is
unable to accept for payment or pay for Shares tendered pursuant to the Offer,
then without prejudice to the Purchaser's rights set forth herein, the
Depositary may nevertheless, on behalf of the Purchaser and subject to Rule
14e-1(c) under the Exchange Act, retain tendered Shares and such Shares may not
be withdrawn except to the extent that the tendering stockholder is entitled to
and duly exercises withdrawal rights as described in Section 4.
If any tendered Shares are not accepted for payment for any reason or if
Share Certificates are submitted for more Shares than are tendered, Share
Certificates evidencing unpurchased or untendered Shares will be returned
without expense to the tendering stockholder (or, in the case of Shares tendered
by book-entry transfer into the Depositary's account at the Book-Entry Transfer
Facility pursuant to the procedures set forth in Section 3, such Shares will be
credited to an account maintained at the Book-Entry Transfer Facility), as
promptly as practicable following the expiration, termination or withdrawal of
the Offer.
3. PROCEDURE FOR TENDERING SHARES. Valid Tenders. Except as set forth
below, in order for Shares to be validly tendered pursuant to the Offer, the
Letter of Transmittal (or a facsimile thereof), properly completed and duly
executed, together with any required signature guarantees, or an Agent's Message
in connection with a book-entry delivery of Shares, and any other documents
required by the Letter of Transmittal, must be received by the Depositary at one
of its addresses set forth on the back cover of this Offer to Purchase on or
prior to the Expiration Date and either (i) Share Certificates evidencing
tendered Shares must be received by the Depositary at such address or such
Shares must be tendered pursuant to the procedure for book-entry transfer
described below and a Book-Entry Confirmation must be received by the
Depositary, in each case on or prior to the Expiration Date, or (ii) the
guaranteed delivery procedures described below must be complied with. If Share
Certificates are forwarded separately to the Depositary, a properly completed
and duly executed Letter of Transmittal (or a facsimile thereof) must accompany
each such delivery.
Book-Entry Transfer. The Depositary will make a request to establish
accounts with respect to the Shares at the Book-Entry Transfer Facility for
purposes of the Offer within two business days after the date of this Offer to
Purchase. Any financial institution that is a participant in the system of the
Book-Entry Transfer Facility may make book-entry delivery of Shares by causing
the Book-Entry Transfer Facility to transfer such Shares into the Depositary's
account at the Book-Entry Transfer Facility in accordance with the Book-Entry
Transfer Facility's procedures for such transfer. However, although delivery of
Shares may be effected through book-entry transfer at the Book-Entry Transfer
Facility, the Letter of Transmittal (or a facsimile thereof), properly completed
and duly executed, together with any required signature guarantees, or an
Agent's Message in connection with a book-entry transfer, and any other
documents required by the Letter of Transmittal, must in any case be received by
the Depositary at one of its addresses set forth on the back cover of this Offer
to Purchase on or prior to the Expiration Date, or the guaranteed delivery
procedures described below must be complied with.
DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE
WITH THE BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY
TO THE DEPOSITARY.
THE METHOD OF DELIVERY OF SHARE CERTIFICATES AND ALL OTHER REQUIRED
DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY TRANSFER FACILITY, IS AT
THE OPTION AND RISK OF THE TENDERING STOCKHOLDER AND THE
5
<PAGE> 8
DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY
(INCLUDING, IN THE CASE OF BOOK-ENTRY TRANSFER, BY BOOK-ENTRY CONFIRMATION). IF
DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY
INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO
ENSURE TIMELY DELIVERY.
Signature Guarantees. Except as otherwise provided below, all signatures
on a Letter of Transmittal must be guaranteed by a financial institution
(including most banks, savings and loan associations and brokerage houses) which
is a member of a recognized Medallion Program approved by The Securities
Transfer Association Inc., including the Securities Transfer Agents Medallion
Program (STAMP), the Stock Exchange Medallion Program (SEMP) and the New York
Stock Exchange, Inc. Medallion Signature Program (MSP) (any such financial
institution an "Eligible Institution"). Signatures on a Letter of Transmittal
need not be guaranteed (a) if the Letter of Transmittal is signed by the
registered holder of the Shares tendered and such holder has not completed the
box entitled "Special Payment Instructions" or "Special Delivery Instructions"
on the Letter of Transmittal or (b) if such Shares are tendered for the account
of an Eligible Institution. See Instructions 1 and 5 of the Letter of
Transmittal.
Guaranteed Delivery. If a stockholder desires to tender Shares pursuant to
the Offer and such stockholder's Share Certificates are not immediately
available, or such stockholder cannot deliver the Share Certificates and all
other required documents to the Depositary on or prior to the Expiration Date,
or such stockholder cannot complete the procedure for delivery by book-entry
transfer on a timely basis, such Shares may nevertheless be tendered, provided
that all of the following conditions are satisfied:
(i) such tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery substantially in the form made available by the Purchaser is
received by the Depositary as provided below on or prior to the Expiration
Date; and
(iii) the Share Certificates (or a Book-Entry Confirmation),
representing all tendered Shares in proper form for transfer, together with
the Letter of Transmittal (or a facsimile thereof) properly completed and
duly executed, with any required signature guarantees (or, in the case of a
book-entry transfer, an Agent's Message) and any other documents required
by the Letter of Transmittal are received by the Depositary within three
New York Stock Exchange (the "NYSE") trading days after the date of
execution of such Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted
by telegram, telex, facsimile transmission or mail to the Depositary and must
include a guarantee by an Eligible Institution.
Notwithstanding any other provision hereof, payment for Shares accepted for
payment pursuant to the Offer will in all cases be made only after timely
receipt by the Depositary of Share Certificates for, or of Book-Entry
Confirmation with respect to, such Shares, a properly completed and duly
executed Letter of Transmittal (or a facsimile thereof), together with any
required signature guarantees (or, in the case of a book-entry transfer, an
Agent's Message), and any other documents required by the Letter of Transmittal.
Accordingly, payment might not be made to all tendering stockholders at the same
time and will depend upon when Share Certificates or Book-Entry Confirmations of
such Shares are received into the Depositary's account at the Book-Entry
Transfer Facility.
Appointment as Proxy. By executing the Letter of Transmittal, a tendering
stockholder irrevocably appoints designees of the Purchaser and each of them as
such stockholder's attorneys-in-fact and proxies, with full power of
substitution, in the manner set forth in the Letter of Transmittal, to the full
extent of such stockholder's rights with respect to the Shares tendered by such
stockholder and accepted for payment by the Purchaser (and with respect to any
and all other Shares, other securities or rights issued or issuable in respect
of such Shares on or after the date hereof). All such powers of attorney and
proxies shall be considered irrevocable and coupled with an interest in the
tendered Shares. Such appointment will be effective when, and only to the extent
that, the Purchaser accepts such Shares for payment. Upon such acceptance for
payment, all prior powers of attorney and proxies given by such stockholder with
respect to such Shares (and such other Shares and securities) will be revoked
without further action, and no subsequent powers of attorney and
6
<PAGE> 9
proxies may be given nor any subsequent written consents executed (and, if given
or executed, will not be deemed effective). The designees of the Purchaser will,
with respect to the Shares (and such other Shares and securities) for which such
appointment is effective, be empowered to exercise all voting and other rights
of such stockholder as they in their sole discretion may deem proper at any
annual or special meeting of the Company's stockholders or any adjournment or
postponement thereof, by written consent in lieu of any such meeting or
otherwise. The Purchaser reserves the right to require that, in order for Shares
to be deemed validly tendered, immediately upon the Purchaser's payment for such
Shares, the Purchaser must be able to exercise full voting rights with respect
to such Shares and other securities, including voting at any meeting of
stockholders.
Determination of Validity. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance for payment of any tender
of Shares will be determined by the Purchaser in its sole discretion, which
determination shall be final and binding on all parties. The Purchaser reserves
the absolute right to reject any and all tenders determined by it not to be in
proper form or the acceptance for payment of which may in the opinion of its
counsel be unlawful. The Purchaser also reserves the absolute right to waive any
defect or irregularity in any tender of Shares of any particular stockholder
whether or not similar defects or irregularities are waived in the case of other
stockholders. No tender of Shares will be deemed to have been validly made until
all defects and irregularities have been cured or waived. None of the Purchaser,
the Parent, any of their affiliates or assigns, the Dealer Manager, the
Depositary, the Information Agent or any other person will be under any duty to
give notification of any defects or irregularities in tenders or incur any
liability for failure to give any such notification. The Purchaser's
interpretation of the terms and conditions of the Offer (including the Letter of
Transmittal and the instructions thereto) will be final and binding.
Backup Federal Income Tax Withholding and Substitute Form W-9. Under the
"backup withholding" provisions of federal income tax law, the Depositary may be
required to withhold 31% of the amount of any payments of cash pursuant to the
Offer. In order to avoid backup withholding, each stockholder surrendering
Shares in the Offer must, unless an exemption applies, provide the payor of such
cash with such stockholder's correct taxpayer identification number ("TIN") on a
substitute Form W-9 and certify, under penalties of perjury, that such TIN is
correct and that such stockholder is not subject to backup withholding. If a
stockholder does not provide its correct TIN or fails to provide the
certifications described above, the Internal Revenue Service ("IRS") may impose
a penalty on such stockholder and payment of cash to such stockholder pursuant
to the Offer may be subject to backup withholding of 31%. All stockholders
surrendering Shares pursuant to the Offer should complete and sign the
substitute Form W-9 included in the Letter of Transmittal to provide the
information and certification necessary to avoid backup withholding (unless an
applicable exemption exists and is proved in a manner satisfactory to the
Depositary). Certain stockholders (including among others all corporations and
certain foreign individuals and entities) are not subject to backup withholding.
Noncorporate foreign stockholders should complete and sign a Form W-8,
Certificate of Foreign Status, a copy of which may be obtained from the
Depositary, in order to avoid backup withholding. See Instruction 9 of the
Letter of Transmittal.
Other Requirements. The Purchaser's acceptance for payment of Shares
tendered pursuant to any of the procedures described above will constitute a
binding agreement between the tendering stockholder and the Purchaser upon the
terms and subject to the conditions of the Offer, including the tendering
stockholder's representation and warranty that the stockholder is the holder of
the Shares within the meaning of, and that the tender of the Shares complies
with, Rule 14e-4(a)(4) under the Exchange Act.
4. WITHDRAWAL RIGHTS. Tenders of Shares made pursuant to the Offer may be
withdrawn at any time prior to the Expiration Date. Thereafter, such tenders are
irrevocable, except that they may be withdrawn after December 17, 1998 unless
theretofore accepted for payment as provided in this Offer to Purchase. If the
Purchaser extends the Offer, is delayed in its acceptance for payment of Shares
or is unable to purchase Shares validly tendered pursuant to the Offer for any
reason, then, without prejudice to the Purchaser's rights under the Offer, the
Depositary may, on behalf of the Purchaser, retain tendered Shares, and such
Shares may not be withdrawn except as otherwise described in this Section 4.
7
<PAGE> 10
For a withdrawal to be effective, a written, telegraphic, telex or
facsimile transmission notice of withdrawal must be timely received by the
Depositary at one of its addresses set forth on the back cover of this Offer to
Purchase. Any notice of withdrawal must specify the name of the person who
tendered the Shares to be withdrawn, the number of Shares to be withdrawn and
the name of the registered holder, if different from that of the person who
tendered such Shares. If the Shares to be withdrawn have been delivered or
otherwise identified to the Depositary, then prior to the physical release of
the certificates, the name of the registered holder (if different from the
tendering stockholder) and the serial numbers shown on such certificates must be
submitted to the Depositary, together with a signed notice of withdrawal, the
signatures on which must be guaranteed by an Eligible Institution unless such
Shares have been tendered for the account of any Eligible Institution. If Shares
have been tendered pursuant to the procedure for book-entry transfer as set
forth in Section 3, any notice of withdrawal must specify the name and number of
the account at the Book-Entry Transfer Facility to be credited with the
withdrawn Shares.
All questions as to the form and validity (including time of receipt) of
any notice of withdrawal will be determined by the Purchaser, in its sole
discretion, whose determination will be final and binding. The Purchaser
reserves the absolute right to reject any and all withdrawals determined by it
not to be in proper form. The Purchaser also reserves the absolute right to
waive any defect or irregularity in any withdrawal of Shares of any particular
stockholder whether or not similar defects or irregularities are waived in the
case of other stockholders. No withdrawal of Shares will be deemed to have been
validly made until all defects and irregularities have been cured or waived.
None of the Purchaser, the Parent, any of their affiliates or assigns, the
Dealer Manager, the Depositary, the Information Agent or any other person will
be under any duty to give notification of any defects or irregularities in any
notice of withdrawal or incur any liability for failure to give any such
notification.
Withdrawals of Shares may not be rescinded. Any Shares properly withdrawn
will thereafter be deemed not to have been validly tendered for purposes of the
Offer. However, withdrawn Shares may be re-tendered at any time prior to the
Expiration Date by following one of the procedures described in Section 3.
5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES. The summary of tax
consequences set forth below is for general information only and is based on the
law as currently in effect. The tax treatment of each stockholder will depend in
part upon such stockholder's particular situation. Special tax consequences not
described herein may be applicable to particular classes of taxpayers, such as
financial institutions, broker-dealers, insurance companies, foreign
corporations, foreign partnerships, foreign trusts, foreign estates, persons who
are not citizens or residents of the United States, tax-exempt entities,
stockholders who acquired their Shares through the exercise of an employee stock
option or otherwise as compensation, and persons who received payments in
respect of options to acquire Shares. ALL STOCKHOLDERS SHOULD CONSULT WITH THEIR
TAX ADVISORS AS TO THE PARTICULAR TAX CONSEQUENCES OF THE OFFER AND THE MERGER
TO THEM, INCLUDING THE APPLICABILITY AND EFFECT OF THE ALTERNATIVE MINIMUM TAX
AND ANY STATE, LOCAL OR FOREIGN INCOME OR OTHER TAX LAWS AND CHANGES IN SUCH TAX
LAWS.
The receipt of cash pursuant to the Offer or the Merger will be a taxable
transaction for federal income tax purposes under the Internal Revenue Code of
1986, as amended (the "Code"), and may also be a taxable transaction under
applicable state, local, foreign income or other tax laws. Generally, for
federal income tax purposes, a stockholder will recognize gain or loss in an
amount equal to the difference between the cash received by the stockholder
pursuant to the Offer or the Merger and the stockholder's adjusted tax basis in
the Shares purchased pursuant to the Offer or converted to cash in the Merger.
Gain or loss will be calculated separately for each block of Shares tendered and
purchased pursuant to the Offer or converted in the Merger, as the case may be.
For federal income tax purposes, such gain or loss will be a capital gain or
loss if the Shares are a capital asset in the hands of the stockholder, and a
long-term capital gain or loss if the stockholder's holding period is more than
one year as of the date the Purchaser accepts such Shares for payment pursuant
to the Offer or the effective date of the Merger, as the case may be. In the
case of a non-corporate stockholder, capital gain is currently eligible for a
maximum federal income tax rate of 20% (10% for non-corporate stockholders in
the 15% tax bracket) if the Shares were held for more than one year. There are
limitations on the deductibility of capital losses.
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<PAGE> 11
6. PRICE RANGE OF SHARES; DIVIDENDS. The Voting Shares are listed and
traded on the NYSE and the Chicago Stock Exchange under the symbol "DFF". The
Non-Voting Shares are not listed. According to the Company's 1997 Annual Report
on Form 10-K for the fiscal year ended November 1, 1997 (the "1997 Annual
Report"), prior to the Company's initial public offering on November 1, 1996,
there was no trading market for the Voting Shares. The following table sets
forth, for the quarters indicated, the high and low sales prices per Voting
Share on the NYSE with respect to periods occurring in 1996, 1997 and 1998 as
reported by the Dow Jones News Service. According to the 1997 Annual Report, the
Company has not paid any dividends on its Common Stock since the initial public
offering.
<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
YEAR ENDED NOVEMBER 2, 1996:
Fourth Quarter (from November 1)............................ $19 7/8 $19 1/2
YEAR ENDED NOVEMBER 1, 1997:
First Quarter............................................... 23 5/8 18 1/8
Second Quarter.............................................. 23 3/4 17 3/4
Third Quarter............................................... 30 15/16 20 1/4
Fourth Quarter.............................................. 38 25
YEAR ENDING OCTOBER 31, 1998:
First Quarter............................................... 42 1/8 34 1/8
Second Quarter.............................................. 47 7/8 38 5/16
Third Quarter............................................... 49 3/4 37 1/8
Fourth Quarter (through October 16, 1998)................... 49 1/4 37 3/16
</TABLE>
On October 12, 1998, the last full trading day prior to announcement of the
Offer, the closing sale price per Voting Share reported on the NYSE Composite
Transactions Tape was $41 3/8. On October 16, 1998, the last full trading day
before commencement of the Offer, the closing sale price per Voting Share
reported on the NYSE Composite Transactions Tape was $48 3/8. STOCKHOLDERS ARE
URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE VOTING SHARES.
7. CERTAIN INFORMATION CONCERNING THE COMPANY. The information concerning
the Company contained in this Offer to Purchase, including financial
information, has been taken from or based upon publicly available documents and
records on file with the Commission and other public sources. The summary
information concerning the Company in this Section 7 and elsewhere in this Offer
to Purchase is derived from the Company's 1997 Annual Report, the Company's
Quarterly Reports on Form 10-Q for the quarters ended August 8, 1998 and August
9, 1997 (the "Company 10-Q's") and other publicly available information. The
summary information set forth below is qualified in its entirety by reference to
such reports (which may be obtained and inspected as described below) and should
be considered in conjunction with the more comprehensive financial and other
information in such reports and other publicly available reports and documents
filed by the Company with the Commission and other publicly available
information. Although the Purchaser and the Parent do not have any knowledge
that would indicate that any statements contained herein based upon such reports
are untrue, neither the Purchaser nor the Parent assumes any responsibility for
the accuracy or completeness of the information contained therein, or for any
failure by the Company to disclose events that may have occurred and may affect
the significance or accuracy of any such information but which are unknown to
the Purchaser and the Parent.
General. The Company was incorporated in Delaware in January 1995 and
shortly thereafter acquired Dominick's Finer Foods, Inc. by acquiring all of the
outstanding capital stock of its parent, DFF Supermarkets, Inc. Approximately
13.6% of the outstanding Shares (without giving effect to the Shares issuable
upon the exercise of the Yucaipa Warrant) are beneficially owned by affiliates
of The Yucaipa Companies ("Yucaipa") and approximately 27.2% of the outstanding
Shares are beneficially owned by affiliates of Apollo Advisors, L.P. Giving
effect to the Shares issuable upon the exercise of the Yucaipa Warrant, Yucaipa
and Apollo beneficially own approximately 49.8% of the outstanding Shares. The
Company, together with its subsidiaries, is the second largest supermarket
operator in the greater Chicago metropolitan area, with 112
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<PAGE> 12
stores operated under the Dominick's(R) name. The Company's store base consists
of 18 conventional stores and 94 full-service combination food and drug stores.
The Company also owns and operates two primary distribution facilities and a
dairy processing plant. As of November 1, 1997, the Company had 19,449 employees
of which approximately 75% were full-time employees. The Company's principal
executive offices are located at 505 Railroad Avenue, Northlake, Illinois 60164.
The telephone number of the Company at such offices is (708) 562-1000.
Financial Information. Set forth below are certain selected consolidated
financial data for the Company which was derived from the unaudited financial
statements contained in the Company 10-Q's and the audited financial statements
contained in the Company's 1997 Annual Report. According to the Company 10-Q's,
the results of operations for the 40 weeks ended August 8, 1998 and August 9,
1997 contain all adjustments that are of a normal and recurring nature necessary
to present fairly the financial position and results of operations for such
period. The results for the 40 weeks ended August 8, 1998 are not necessarily
indicative of the results that may be expected for the full year. More
comprehensive financial information (including management's discussion and
analysis of financial condition and results of operations) is included in the
reports and other documents filed by the Company with the Commission, and the
following financial data is qualified in its entirety by reference to such
reports and other documents, including the financial statements and related
notes contained therein. Such reports and other documents may be examined and
copies thereof may be obtained from the offices of the Commission in the manner
set forth below.
DOMINICK'S SUPERMARKETS, INC.
SELECTED CONSOLIDATED FINANCIAL DATA
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOR THE 40 WEEKS ENDED FOR THE FISCAL YEAR ENDED
------------------------------- -------------------------------------------------------
AUGUST 8, 1998 AUGUST 9, 1997 NOVEMBER 1, 1997 NOVEMBER 2, 1996 OCTOBER 28, 1995*
-------------- -------------- ---------------- ---------------- -----------------
(UNAUDITED) (AUDITED)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT
Sales........................ $1,841.9 $2,000.1 $2,584.9 $2,512.0 $2,433.8
Cost of sales................ 1,360.8 1,521.6 1,960.8 1,933.0 1,881.7
Gross profit................. 481.1 478.5 624.1 579.0 552.1
Selling, general and
administrative expenses.... 400.7 403.7 526.1 491.4 482.2
Restructuring charge......... -- -- 74.4 -- --
Termination of Consulting
Agreement with Yucaipa..... -- -- -- 10.5 --
Operating income............. 80.4 74.8 23.6 77.1 69.9
Interest expense............. 43.7 45.2 58.9 70.3 72.4
Income tax expense........... 17.9 14.9 3.6 7.4 3.5
Extraordinary item........... -- -- 23.6 6.3 4.6
Net income (loss)............ $ 18.8 $ 14.7 $ (62.5) $ (6.9) $ (10.6)
Preferred stock dividend and
accretion.................. -- -- -- 7.9 6.3
Net income (loss) available
to common stockholders..... $ 18.8 $ 14.7 $ (62.5) $ (14.8) $ (16.9)
Diluted earnings (loss) per
common share............... $ 0.78 $ 0.66 $ (2.93) $ (0.96) $ (1.10)
Weighted average shares
outstanding-diluted........ 24.3 22.4 21.4 15.6 15.4
BALANCE SHEET (END OF PERIOD)
Working capital surplus
(deficit).................. $ (76.8) $ (29.4) $ (62.0) $ 17.1 **
Total assets................. 1,192.5 1,176.0 1,148.8 1,153.0 **
Total goodwill............... 367.6 411.8 375.3 420.2 **
Total debt................... 646.2 567.6 601.3 540.7 **
Stockholders' equity......... $ 135.9 $ 193.8 $ 116.6 $ 179.1 **
</TABLE>
- ------------
* Pro Forma
** Not available in the reports and other documents publicly filed by the
Company with the Commission
10
<PAGE> 13
The Company is subject to the informational filing requirements of the
Exchange Act and in accordance therewith is obligated to file periodic reports,
proxy statements and other information with the Commission relating to its
business, financial condition and other matters. The Company is required to
disclose in such proxy statements certain information, as of particular dates,
concerning the Company's directors and officers, their remuneration, options
granted to them, the principal holders of the Company's securities and any
material interest of such persons in transactions with the Company. Such
reports, proxy statements and other information should be available for
inspection at the public reference facilities of the Commission located at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and should also
be available for inspection and copying at prescribed rates at the regional
offices of the Commission located at Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661, and Seven World Trade Center, Suite 1300,
New York, New York 10048. Such reports, proxy statements and other information
may also be obtained at the Web site that the Commission maintains at
http://www.sec.gov. Copies of this material may also be obtained by mail, upon
payment of the Commission's customary fees, from the Commission's principal
office at 450 Fifth Street, N.W., Washington, D.C. 20549. Such material should
also be available for inspection at the library of the NYSE, 20 Broad Street,
New York, New York 10005.
8. CERTAIN INFORMATION CONCERNING THE PURCHASER AND THE PARENT. The
Purchaser, a Delaware corporation and a wholly-owned subsidiary of the Parent,
was organized for the sole purposes of entering into the Merger Agreement and
the Stockholders Agreement and consummating the transactions contemplated
thereby, including making the Offer, and has not carried on any activities to
date other than those incident to its formation, entering into such agreements
and the commencement of the Offer.
The Parent was originally incorporated in Delaware in 1986 under the name
"SSI Holdings Corporation". The Parent, together with its subsidiaries, is the
second largest food and drug chain in North America (based on sales) as of the
date of this Offer to Purchase. As of September 12, 1998, the Parent operated
1,381 stores. The Parent's retail operations are located principally in northern
California, southern California, Oregon, Washington, Colorado, Arizona, the
Mid-Atlantic region and western Canada. In support of its retail operations, the
Parent has an extensive network of distribution, manufacturing and food
processing facilities. In April 1997, the Parent completed its merger with The
Vons Companies, Inc. ("Vons"). The Parent also holds a 49% interest in Casa Ley,
S.A. de C.V., which operated 75 food and general merchandise stores in western
Mexico as of September 12, 1998. The Parent has approximately 147,000 employees.
Both the Parent and the Purchaser have their principal executive offices at
5918 Stoneridge Mall Road, Pleasanton, California 94588. The telephone number
for both the Parent and the Purchaser is (925) 467-3000.
The name, citizenship, business address, principal occupation or employment
and five-year employment history of each of the directors and executive officers
of the Purchaser and the Parent and certain other information are set forth in
Schedule I hereto.
The Parent is subject to the informational filing requirements of the
Exchange Act and in accordance therewith is obligated to file periodic reports,
proxy statements and other information with the Commission relating to its
business, financial condition and other matters. The Parent is required to
disclose in such proxy statements certain information, as of particular dates,
concerning the Parent's directors and officers, their remuneration, options
granted to them, the principal holders of the Parent's securities and any
material interest of such persons in transactions with the Parent. Such reports,
proxy statements and other information should be available for inspection at the
public reference facilities of the Commission located at Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549, and should also be available for
inspection and copying at prescribed rates at the regional offices of the
Commission located at Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661, and Seven World Trade Center, Suite 1300, New York, New
York 10048. Such reports, proxy statements and other information may also be
obtained at the Web site that the Commission maintains at http://www.sec.gov.
Copies of this material may also be obtained by mail, upon payment of the
Commission's customary fees, from the Commission's principal office at 450 Fifth
Street, N.W., Washington, D.C. 20549. Such material should also be available for
inspection at the offices of the NYSE, 20 Broad Street, New York, New York
10005.
11
<PAGE> 14
Except to the extent that the Shares owned by the Principal Stockholders
and the Yucaipa Warrant may be deemed to be beneficially owned by the Parent and
the Purchaser pursuant to Rule 13d-3 under the Exchange Act as a result of the
execution of the Stockholders Agreement, none of the Purchaser, the Parent nor,
to the best knowledge of the Purchaser and the Parent, any of the persons listed
on Schedule I hereto nor any associate or majority-owned subsidiary of the
Purchaser, the Parent or any of the persons so listed, beneficially owns or has
a right to acquire directly or indirectly any Shares, and none of the Purchaser,
the Parent nor, to the best knowledge of the Purchaser and the Parent, any of
the persons or entities referred to above, nor any of their respective executive
officers, directors or subsidiaries, has effected any transactions in the Shares
during the past 60 days.
Except as set forth in this Offer to Purchase, since November 1, 1994,
there have been no (i) transactions or series of similar transactions between
any of the Parent, the Purchaser or, to the best knowledge of the Purchaser and
the Parent, any of the persons listed in Schedule I hereto, on the one hand, and
(x) the Company or any of its affiliates which are corporations, on the other
hand, or (y) executive officers, directors or affiliates of the Company which
are not corporations, on the other hand, involving an aggregate amount exceeding
$40,000 or (ii) contacts, negotiations or transactions between any of the
Parent, the Purchaser or, to the best knowledge of the Purchaser and the Parent,
any of the persons listed in Schedule I hereto, on the one hand, and the Company
or its affiliates, on the other hand, concerning a merger, consolidation or
acquisition, a tender offer or other acquisition of securities, an election of
directors, or a sale or other transfer of a material amount of assets.
Except for the Merger Agreement and the Stockholders Agreement, to the best
knowledge of the Parent and the Purchaser, (a) there are no contracts,
arrangements, understandings or relationships (legal or otherwise) among the
persons named in Schedule I hereto and between such persons and any person with
respect to any securities of the Company, including but not limited to, transfer
or voting of any of the securities of the Company, finder's fees, joint
ventures, loan or option arrangements, puts or calls, guarantees or profits,
division of profits or loss, or the giving or withholding of proxies, and (b)
except for the pledge of 1,480,201 Shares held by Yucaipa Blackhawk Partners,
L.P. to Salomon Smith Barney for collateral purposes in connection with a margin
account, for which such stockholder has agreed to obtain a release prior to the
tender of the related Shares in the Offer, none of the Shares are pledged
otherwise subject to a contingency, the occurrence of which would give another
person voting power or investment power over the Shares.
9. SOURCE AND AMOUNT OF FUNDS. The total amount of funds required by the
Purchaser to purchase all outstanding Shares pursuant to the Offer and to pay
fees and expenses related to the Offer and the proposed Merger is estimated to
be approximately $1.2 billion. The Purchaser plans to obtain all funds needed
for the Offer and the proposed Merger through capital contributions or advances
made by the Parent. The Parent plans to obtain the funds for such capital
contributions and advances from its existing committed bank credit facility
and/or the issuance of commercial paper. The Parent also may obtain funds
through borrowings under a credit facility with one or more commercial banks in
respect of which the Parent has obtained a commitment letter providing
additional availability of $500 million. Such commitment letter indicates the
bank's willingness to provide funding on customary terms and conditions. In
addition, the Parent may choose to offer debt securities to the public on terms
not yet determined. Any debt incurred to fund the purchase of the Shares in the
Offer is expected to be repaid from funds internally generated by the Parent and
its subsidiaries. The Offer is not conditioned on obtaining financing.
The Parent, together with its wholly owned subsidiaries, Vons and Canada
Safeway Limited, is party to a bank credit agreement with a syndicate of banks
for which Bankers Trust Company is the administrative agent (the "Bank Credit
Agreement"). Of the $2.9 billion credit facility, $2.0 billion matures in 2002
and has two one-year extension options and $0.9 billion is renewable annually
through 2004. The restrictive covenants of the Bank Credit Agreement limit the
Parent with respect to, among other things, creating liens upon its assets and
disposing of material amounts of assets other than in the ordinary course of
business. The Parent also is required to meet certain financial tests under the
Bank Credit Agreement. Borrowings under the Bank Credit Agreement are made on an
unsecured basis. At September 12, 1998, the Company had total unused borrowing
capacity under the Bank Credit Agreement of $1.5 billion.
12
<PAGE> 15
U.S. dollar borrowings under the Bank Credit Agreement carry interest at
one of the following rates selected by the Parent: (i) the prime rate; (ii) the
rate based on rates at which Eurodollar deposits are offered to first-class
banks by the lenders in the Bank Credit Agreement plus a pricing margin based on
the Parent's debt rating or interest coverage ratio (the "Pricing Margin"); or
(iii) rates quoted at the discretion of the lenders. Canadian borrowings
denominated in U.S. dollars carry interest at one of the following rates
selected by the Parent; (i) the Canadian base rate; or (ii) the Canadian
Eurodollar rate plus the Pricing Margin. Canadian borrowings denominated in
Canadian dollars carry interest at one of the following rates selected by the
Company: (i) the Canadian prime rate or (ii) the rate for Canadian bankers
acceptances plus the Pricing Margin.
10. BACKGROUND OF THE OFFER; CONTACTS WITH THE COMPANY. On August 17,
1998, Steven A. Burd, the President, Chief Executive Officer and Chairman of the
Parent, made an unsolicited call to Ronald W. Burkle, the Chairman of the
Company and a principal of Yucaipa, and inquired whether the Company would be
interested in exploring a possible transaction. Mr. Burkle informed Mr. Burd
that the Company intended to retain an investment banker and said that the
Parent would have an opportunity to make a proposal.
On August 19, 1998 the Company issued a press release announcing that it
had retained an investment bank to assist it in the evaluation of various
strategic alternatives, including acquisitions, mergers or other business
combinations or other transactions that would enhance shareholder value.
On August 21, 1998, the Parent sent the Company a request for certain
preliminary financial and operational information concerning the Company.
Between August 24 and August 28, 1998, the Parent and the Company negotiated the
terms of a draft confidentiality agreement. On August 28, 1998, the Company and
the Parent entered into a confidentiality agreement (the "Confidentiality
Agreement"), and commencing on August 28, the Company and DLJ supplied the
Parent with certain confidential information regarding the Company and its
business, operations, results of operations and financial condition and the
Company's senior management afforded the Parent a telephonic question and answer
session.
On August 26, 1998, Yucaipa, on behalf of the Company, asked the Parent to
provide preliminary indications of interest by September 4, 1998.
On September 4, 1998, the Parent informed DLJ of the Parent's preliminary
expression of interest in acquiring the Company at a purchase price ranging from
the high $40's to $50 per Share, subject to satisfactory completion of its due
diligence and negotiation of a satisfactory acquisition agreement.
On September 17, 1998, the Company delivered a presentation to the senior
management of the Parent in Chicago, Illinois. Following the presentation,
members of the Parent's senior management met with Mr. Burkle, Robert A.
Mariano, the President and Chief Executive Officer of the Company, and certain
other members of Yucaipa's and the Company's senior management to discuss the
Company's business, operations, results of operations and financial condition,
and members of the Parent's senior management and of the Company's senior
management visited several of the Company's store locations. From September 17
through September 19, 1998, representatives of the Parent conducted a due
diligence investigation of the Company in Chicago, Illinois.
On September 23, 1998, DLJ invited the Parent to submit a written offer to
acquire all of the outstanding stock of the Company or to engage in such other
transaction as the Parent wished to propose. In connection therewith, the
Company furnished the Parent with forms of cash and stock merger agreements. The
Company requested a response from the Parent by October 1, 1998.
On September 25 and 29, 1998, representatives of the Parent conducted a
further due diligence investigation of the Company in Chicago, Illinois.
On October 1, 1998, the Parent sent the Company and DLJ a proposal letter
indicating the Parent's willingness to pay at least $48 per share in cash to
acquire all of the outstanding Shares, subject to the approval of the Parent's
Board of Directors and the satisfactory review of certain additional information
about the Company. The Company and DLJ subsequently contacted the Parent to seek
clarification of the offer to pay at least $48 per share and to suggest that the
price be raised.
13
<PAGE> 16
Between October 1 and October 5, 1998, at the request of the Parent,
representatives of the Company made available to the Parent certain additional
financial, legal and operational information regarding the Company. In addition,
representatives of the Parent and representatives of the Company had telephonic
discussions regarding the proposed price, the basis on which the Parent would be
willing to submit a firm proposal to acquire the Company and the expected timing
thereof.
On October 6, 1998, the Parent sent the Company and DLJ a letter submitting
a firm proposal to acquire all of the outstanding Shares for a price of $49 per
Share. The letter was followed by proposed revisions to the draft Merger
Agreement, and a draft Stockholders Agreement providing for the Principal
Stockholders to tender their Shares in the Offer, to grant an option to acquire
their Shares at $49 per Share in cash under certain circumstances, and certain
other matters. The Parent indicated that execution by the Principal Stockholders
of such an agreement would be a condition to the execution of a definitive
Merger Agreement.
During the period from October 8 through October 13, 1998, representatives
of the Parent and the Company discussed the terms of a possible acquisition and
negotiated the terms of the Merger Agreement, and representatives of the Parent
and the Principal Stockholders negotiated the terms of the Stockholders
Agreement.
On October 12, 1998, the Board of Directors of the Parent approved the
acquisition by the Purchaser of the Company for a purchase price of $49 in cash
per Share and the transactions contemplated by the Merger Agreement and the
Stockholders Agreement. On October 13, 1998, the Merger Agreement and the
Stockholders Agreement were executed, and the Merger was publicly announced.
On October 19, 1998, the Purchaser commenced the Offer.
The Parent is filing with the Commission on the date of this Offer to
Purchase a Schedule 13D reporting Shares that may be deemed to be beneficially
owned by the Parent and its affiliates as a result of the Stockholders
Agreement. See Section 11.
11. THE MERGER AGREEMENT. The following is a summary of the Merger
Agreement, which summary is qualified in its entirety by reference to the Merger
Agreement, which is filed as an exhibit to the Parent's Tender Offer Statement
on Schedule 14D-1 (the "Schedule 14D-1") and incorporated herein by reference.
The Offer. The obligations of the Purchaser to accept for payment,
purchase and pay for any and all shares validly tendered on or prior to the
expiration of the Offer and not withdrawn are subject to the satisfaction of the
Minimum Condition and the other Offer Conditions, any of which conditions may be
waived by the Purchaser in its sole discretion, except that the Purchaser may
not waive the Minimum Condition without the prior written consent of the
Company. The Purchaser expressly reserves the right, in its sole discretion, at
any time and from time to time, and regardless of whether or not any of the
events set forth in Section 15 shall have occurred or shall have been determined
by the Purchaser to have occurred, to (i) extend the period of time during which
the Offer is open and thereby delay acceptance for payment of, and the payment
for, any Shares, by giving oral or written notice of such extension to the
Depositary and (ii) amend the Offer in any respect by giving oral or written
notice of such amendment to the Depositary. Under the terms of the Merger
Agreement, however, without the written consent of the Company, neither the
Parent nor the Purchaser will waive the Minimum Condition, decrease the Per
Share Amount payable in the Offer, decrease the number of Shares to be purchased
in the Offer, change the form of consideration to be paid in the Offer, change
or amend the Offer Conditions or impose any additional conditions, change the
expiration date of the Offer, or otherwise add, amend or waive any other terms
of the Offer in a manner which is adverse to the holders of Shares. The rights
reserved by the Purchaser in this paragraph are in addition to the Purchaser's
rights to terminate the Offer upon the failure of the conditions in Section 15
to be satisfied on the Expiration Date. Notwithstanding the foregoing, if on any
scheduled expiration date of the Offer, which shall initially be 12:00 Midnight
on Monday, November 16, 1998, all conditions to the Offer have not been
satisfied or waived, the Purchaser may, and at the request of the Company shall,
from time to time, extend the expiration date of the Offer for up to 10
additional business days (but in no event will the Purchaser be required to
extend the expiration date of the Offer beyond April 15, 1999). In addition, the
Purchaser may, without the consent of the Company, (i) extend the Offer for any
period required by any rule, regulation,
14
<PAGE> 17
interpretation or position of the Commission or the staff thereof applicable to
the Offer, and (ii) extend the Offer if (A) the Offer Conditions have been
satisfied or waived and (B) the number of Shares validly tendered and not
withdrawn represent more than 65% but less than 90% of the issued and
outstanding shares of each of the Voting Shares and the Non-Voting Shares;
provided, however, that in no event shall the extensions permitted under the
foregoing clause (ii) exceed, in the aggregate, 10 business days. Subject to the
terms of the Offer, including the Offer Conditions, and except to the extent the
Offer is extended, the Purchaser will accept for payment, purchase and pay for
all Shares validly tendered and not withdrawn as soon as it is permitted to do
so under applicable law. The Purchaser shall have the right, in its sole
discretion, to extend the Offer as described above notwithstanding the prior
satisfaction of the Offer Conditions, in order to attempt to satisfy the
requirements of Section 253 of the DGCL so that the Merger could be effected
without a meeting of the Company's stockholders.
The Minimum Condition requires that at least that number of Shares
(including Voting Shares and Non-Voting Shares) constituting more than 50% of
the total issued and outstanding Shares (determined on a fully-diluted basis
without giving effect to the Shares issuable upon the exercise of the Yucaipa
Warrant) on the date such Shares are purchased shall have been validly tendered
and not withdrawn prior to the expiration of the Offer.
The Merger. The Merger Agreement provides that, at the Effective Time and
subject to the conditions set forth therein (and including those described in
Section 15 hereof) and the provisions of the DGCL, the Purchaser shall be merged
with and into the Company in accordance with the DGCL and substantially in the
manner described in the Offer, the separate corporate existence of the Purchaser
shall cease, and the Company shall continue as the surviving corporation in the
Merger (the "Surviving Corporation"). At the Parent's election, any direct or
indirect subsidiary of the Parent other than the Purchaser may be merged with
and into the Company instead of the Purchaser so long as such election (i) does
not cause or result in a delay or postponement of the consummation of the Offer
or the Effective Time and (ii) does not relieve the Purchaser of any of its
obligations under the Merger Agreement.
Pursuant to the Merger Agreement, at the Effective Time, each Share issued
and outstanding immediately prior to the Effective Time (other than Shares held
in the treasury of the Company, if any, and each Share owned by the Parent or
the Purchaser, or by any direct or indirect wholly-owned subsidiary of any of
them and Dissenting Shares) shall be converted into the right to receive the Per
Share Amount, without interest, less any withholding taxes required under
applicable law.
Treatment of Stock Options and Other Company Stock Rights. Pursuant to the
Merger Agreement, prior to the Effective Time, the Company may accelerate to the
day after the Effective Time the vesting of unvested nonqualified and incentive
stock options (or any portion thereof) granted to certain employees of the
Company and its subsidiaries pursuant to the Company's Restated 1995 Stock
Option Plan and 1996 Equity Participation Plan (and, collectively with the
vested portion of such stock options, the "Accelerated Options"); provided,
however, that other than the Accelerated Options, neither the Company, the
Company Board nor any committee thereof may accelerate the vesting or
exercisability of any stock option, restricted stock award, performance award,
dividend equivalent, deferred stock, stock payment, stock appreciation right or
share of capital stock (collectively, the "Company Stock Rights") granted,
awarded, earned or purchased pursuant to any of the Company's Restated 1995
Stock Option Plan, 1996 Equity Participation Plan, Directors Deferred
Compensation and Restricted Stock Plan and 1997 Employee Stock Purchase Plan or
any other stock option, performance unit or similar plan of the Company and its
subsidiaries (the "Stock Plans") prior to the Effective Time. Prior to the
Effective Time, the Company will enter into agreements in respect of the
Accelerated Options, which agreements will provide for the payment, upon
surrender of each Accelerated Option on the day after the Effective Time, of an
amount of cash per Share subject to each Accelerated Option equal to the excess,
if any, of the Per Share Amount over the exercise price of such Accelerated
Option (the "Spread Per Share") less an amount equal to all taxes required to be
withheld from such payment. Any such Company Stock Rights not so surrendered or
otherwise exercised prior to the Effective Time shall terminate at the Effective
Time in accordance with the terms of the applicable Stock Plan or the relevant
agreements with optionees. The Parent shall cause the Company to pay, on the day
after the Effective Time, the aggregate Spread Per Share to the holders of the
surrendered Accelerated Options.
15
<PAGE> 18
Pursuant to the Merger Agreement, the Parent will also assume the vested
and unvested portion of certain outstanding nonqualified and incentive stock
options granted to certain employees of the Company or its subsidiaries (the
"Assumed Options"). The Company will provide that at the Effective Time, all
outstanding Assumed Options will be converted automatically into options to
purchase shares of common stock, par value $.01 per share, of the Parent
("Common Stock") (collectively, "New Stock Rights") in an amount and, if
applicable, at an exercise price determined as follows: (i) the number of shares
of Parent Common Stock to be subject to the New Stock Right shall be equal to
the product of (x) the number of Shares remaining subject (as of immediately
prior to the Effective Time) to the Assumed Option multiplied by (y) the
quotient obtained by dividing the Per Share Amount by the average of the closing
prices of the Parent Common Stock on the NYSE as reported on the NYSE Composite
Transactions Tape for the 15 trading days randomly selected by lot out of the 35
trading days ending on the second trading day preceding the Effective Time (the
"Conversion Ratio"); provided, that any fractional shares shall be rounded down
to the nearest share; and (ii) the exercise price per share of Parent Common
Stock under the New Stock Right shall be equal to the exercise price per Share
under the original Company Stock Right divided by the Conversion Ratio, provided
that such exercise price shall be rounded down to the nearest cent.
The unvested portion of such New Stock Right shall otherwise continue in
effect on the same terms and conditions (including antidilution, vesting and
exercisability provisions) as were in effect for the Company Stock Rights prior
to the Effective Time (except that any references to the Company shall be
deemed, as appropriate, to include the Parent); provided, however, that any New
Stock Rights held by an employee or consultant of the Company or any subsidiary
whose employment or consulting arrangement, as the case may be, is terminated
without Cause (as defined in the Merger Agreement) or is subject to a
Constructive Termination (which term shall be defined in the agreements entered
into with the holders of the applicable Company Stock Rights in a manner
consistent with the definition of such term contained in the employment or
consulting agreements entered into with such individuals on October 9, 1998), in
either case after the Effective Time, shall become fully vested on the date of
such termination. The adjustments provided for in the Merger Agreement with
respect to any options that are "incentive stock options" (as defined in Section
422 of the Code shall be, and are intended to be, effected in a manner which is
consistent with Section 424(a) of the Code.
The Merger Agreement also provides that, other than the Accelerated
Options, the Assumed Options and any Company Stock Rights otherwise exercised
prior to the Effective Time, all other Company Stock Rights will terminate at
the Effective Time in accordance with the applicable Stock Plan or such
agreements with the holders of such Company Stock Rights.
After the Effective Time, no holder of a Company Stock Right or any
participant in any Stock Plan will have any right thereunder to acquire capital
stock of the Company, the Purchaser or the Surviving Corporation.
Upon the acceptance for payment of the Shares in the Offer, the Purchaser
or the Parent will purchase from Yucaipa that certain Class A Common Stock
Purchase Warrant No. W-1 issued by the Company to Yucaipa on March 22, 1995, as
amended (the "Yucaipa Warrant") for an amount equal to the product of 3,874,492
(the number of Shares underlying the Yucaipa Warrant) and the excess of the Per
Share Amount ($49) over the per share exercise price ($20.732 as of the date
hereof) for the Yucaipa Warrant.
The Merger Agreement provides that, unless otherwise stipulated, Dissenting
Shares shall not be converted into the right to receive the Per Share Amount
applicable to such Shares at or after the Effective Time but shall be entitled
to receive such amount as shall be determined pursuant to Section 262 of the
DGCL unless and until the holder of such Dissenting Shares shall have failed to
perfect or withdrawn or lost such right to appraisal and payment under the DGCL.
If a holder of Dissenting Shares shall have so failed to perfect or shall have
effectively withdrawn or lost such right to appraisal and payment, or if it is
determined that such holder does not have appraisal rights in accordance with
the DGCL, then such holder's Dissenting Shares shall be treated as if they had
been converted as of the Effective Time into the right to receive the Per Share
Amount applicable to such Shares, without any interest thereon.
16
<PAGE> 19
The Merger Agreement also provides that at the Effective Time and without
any further action on the part of the Company or the Purchaser, the Certificate
of Incorporation of the Company, as in effect immediately prior to the Effective
Time, shall be the certificate of incorporation of the Surviving Corporation
subject to certain changes described in the Merger Agreement. At the Effective
Time and without any further action on the part of the Company or the Purchaser,
the By-Laws of the Company, as in effect immediately prior to the Effective
Time, shall be the By-Laws of the Surviving Corporation. The Merger Agreement
provides that the directors of the Purchaser immediately prior to the Effective
Time shall be the initial directors of the Surviving Corporation, each to hold
office in accordance with the applicable provisions of the Certificate of
Incorporation and By-Laws of the Surviving Corporation, until their successors
shall be duly elected or appointed and qualified. At the Effective Time, the
officers of the Company immediately prior to the Effective Time shall be the
initial officers of the Surviving Corporation, until their respective successors
are duly elected or appointed (as the case may be) and qualified.
Stockholders Meeting. The Merger Agreement provides that to the extent
necessary to consummate the Merger, as soon as practicable following the
acquisition by the Purchaser of at least that number of Shares which constitutes
more than 50% of the issued and outstanding Shares (determined on a fully
diluted basis without giving effect to the Shares issuable upon the exercise of
the Yucaipa Warrant) (the "Minimum Shares") pursuant to the Offer, the Company
is required to, in accordance with applicable law, its Certificate of
Incorporation and By-Laws, convene and hold a meeting of its stockholders for
the purpose of approving and adopting the Merger Agreement and the transactions
contemplated thereby (the "Stockholders' Meeting"). The Company (i) is required
to recommend (and include such recommendation in the proxy statement, if any,
with respect to such Stockholders' Meeting) that the holders of the Shares
accept the Offer and approve the Merger Agreement and the other transactions
contemplated thereby, including the Merger, and (ii) is required to take all
reasonable and lawful action to solicit and obtain such approval. Subject to the
provisions of the following sentence, the Company Board may not withdraw, amend
or modify in a manner adverse to the Parent its recommendation referred to in
clause (i) of the preceding sentence (or announce publicly its intention to do
so), provided that disclosure of the receipt of an Alternative Transaction (as
defined below) or the fact that the Company Board is considering such
Alternative Transaction or reviewing it with its advisors (to the extent the
Company Board shall have determined in good faith that such disclosure is
required by law or any applicable securities exchange requirements) shall not
constitute such a withdrawal, modification or amendment. Prior to the acceptance
for payment of the Minimum Shares pursuant to the Offer, the Company Board shall
be permitted (each of the following is referred to herein as, a "Permitted
Action") (A) to withdraw, amend or modify its recommendation (or publicly
announce its intention to do so) of the Merger Agreement and the transactions
contemplated thereby, including the Offer and the Merger, in a manner adverse to
the Parent or (B) to approve or recommend or enter into an agreement with
respect to a Superior Transaction (as defined below) if (1) the Company has
complied with the provisions described under "No Solicitation of Transactions"
below, (2) a Superior Transaction shall have been proposed by any person other
than the Parent and such proposal is pending at the time of such action, (3) the
Company Board shall have determined in good faith, based on the advice of its
outside legal counsel, that the failure to withdraw, amend or modify its
recommendation or to approve or recommend or enter into such Superior
Transaction would constitute a breach of its fiduciary duties under applicable
law and (4) the Company shall have notified Parent of such Superior Transaction
proposal at least three business days in advance of such action.
"Alternative Transaction" shall mean any of the following events: (i) any
merger, consolidation or business combination between the Company or any of its
significant subsidiaries and any person other than the Parent, the Purchaser or
any of their respective affiliates (a "third party"); (ii) the acquisition or
purchase by a third party of 25% or more of the capital stock (including
securities exercisable or exchangeable for or convertible into capital stock) of
the Company or any material equity interest in any of its significant
subsidiaries or the consolidated assets of the Company and its subsidiaries,
taken as a whole; (iii) any tender offer or exchange offer which, if
consummated, would result in any third party owning 25% or more of the Shares;
or (iv) any proposal or offer with respect to the foregoing.
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<PAGE> 20
"Superior Transaction" shall mean any bona fide Alternative Transaction
involving at least 60% of the outstanding Shares on terms that the Company Board
determines in its good faith judgment (after consultation with DLJ or another
financial advisor of nationally recognized reputation, taking into account all
the terms and conditions of the Alternative Transaction, including any break-up
fees, expense reimbursement provisions, conditions to consummation and all other
legal, financial, regulatory and other aspects of the proposal and, to the
extent relevant to any of the foregoing, the identity of the person proposing
the Superior Transaction) are more favorable to the Company's stockholders from
a financial point of view than the Merger Agreement and the Merger taken as a
whole.
At the Stockholders' Meeting, the Parent will vote, or cause to be voted,
all Shares then owned by it or the Purchaser or any of the Parent's other
subsidiaries or affiliates in favor of the Merger and the adoption of the Merger
Agreement.
The Merger Agreement provides that, notwithstanding the foregoing, in the
event that the Purchaser acquires at least 90% of the outstanding shares of each
class of the capital stock of the Company following expiration of the Offer, the
Company will not be required to call the Stockholders' Meeting or file and mail
a proxy statement and the parties will, at the request of the Purchaser and
subject to the provisions of the Merger Agreement, take all necessary and
appropriate action to cause the Merger to become effective as soon as
practicable after such expiration without a meeting of the Company's
stockholders in accordance with Section 253 of the DGCL.
Proxy Statement. The Merger Agreement provides that, if required under
applicable law in order to effect the Merger, then promptly after consummation
of the Offer, the Company will file the Proxy Statement with the Commission
under the Exchange Act and will use its reasonable best efforts to have it
cleared by the Commission. The Parent, the Purchaser and the Company have agreed
to cooperate with each other in the preparation of the Proxy Statement,
including, in the case of the Parent and the Purchaser, by furnishing to the
Company the information relating to it required to be set forth in the Proxy
Statement. The Company has agreed to use its reasonable best efforts, after
consultation with the other parties hereto, to respond promptly to any comments
made by the Commission with respect to the Proxy Statement and any preliminary
version thereof filed by it and to cause the Proxy Statement to be mailed to the
Company's stockholders at the earliest practicable time.
Designation of Directors. The Merger Agreement provides that, promptly
upon acceptance for payment of, and payment by the Purchaser in accordance with
the Offer for, not less than a majority of the outstanding Shares (on a fully
diluted basis without giving effect to shares issuable upon the exercise of the
Yucaipa Warrant) pursuant to the Offer, the Purchaser will be entitled to
designate such number of members of the Company Board, rounded up to the next
whole number, equal to that number of directors which equals the product of the
total number of directors on the Company Board (after giving effect to the
directors elected pursuant to this sentence) multiplied by the percentage that
such number of Shares owned in the aggregate by the Purchaser or the Parent,
upon such acceptance for payment, bears to the number of Shares outstanding.
Notwithstanding the foregoing, until the Effective Time there shall be at least
one Continuing Director (as defined in the Merger Agreement). The Company will,
upon request of the Purchaser and on the date of such request, (i) either
increase the size of the Company Board or secure the resignations of such number
of its incumbent directors as is necessary to enable the Parent's designees to
be so elected to the Company Board, and (ii) cause the Parent's designees to be
so elected.
Access to Information; Confidentiality. Pursuant to the Merger Agreement
and subject to the terms thereof, from the date thereof to the earlier of the
Effective Time or the termination of the Merger Agreement, the Company will, and
will cause its subsidiaries, officers, directors, employees, auditors and other
agents, upon reasonable notice, to afford the officers, employees, auditors and
other agents of the Parent reasonable access during normal business hours to the
officers, employees, agents, properties, offices, plants and other facilities
and to all books and records of the Company and its subsidiaries and will
furnish the Parent and the Purchaser and their officers, employees and agents
all financial, operating and other data and information as the Parent and the
Purchaser may reasonably request.
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<PAGE> 21
The Merger Agreement further provides that each of the Company and the
Parent will cause its directors, officers, employees, agents, advisors and
controlling persons to hold all nonpublic information obtained by the Parent and
the Purchaser pursuant to the above paragraph in confidence on the same terms
and conditions as set forth in the Confidentiality Agreement.
In order to facilitate an orderly transition of the business of the Company
to the Parent and to permit the coordination of their related operations on a
timely basis, the Company has agreed, to the extent reasonably practicable and
permitted by applicable law, to consult with the Parent on significant strategic
and financial and operational matters, including, without limitation, retail
operations, store openings, closings and remodelings, marketing, advertising and
personnel.
No Solicitation of Transactions. The Merger Agreement required that,
immediately following the execution thereof, the Company cease, and cause its
subsidiaries and their respective officers, directors, employees, representative
and agents engaged in connection with the transactions contemplated by the
Merger Agreement to cease, any existing discussions or negotiations with any
parties conducted prior to the date of the Merger Agreement with respect to any
Alternative Transactions. Neither the Company nor any of its subsidiaries, nor
any of their respective directors, officers, employees or representatives and
agents engaged by the Company in connection with the transactions contemplated
by the Merger Agreement is permitted, directly or indirectly, to solicit,
initiate, facilitate or encourage the making of any proposal for an Alternative
Transaction, participate in any discussions or negotiations with, or provide any
information to, any person (other than the Parent, the Purchaser and their
designees) concerning an Alternative Transaction or grant any waiver or release
under any standstill or similar agreement with respect to any class of equity
securities of the Company and its subsidiaries, provided, however, that the
Company (and its subsidiaries and its and their respective officers, directors,
employees, representatives or agents) may, prior to the acceptance for payment
of the Minimum Shares pursuant to the Offer, participate in negotiations or
discussions with, or provide any information to, any person concerning an
Alternative Transaction not solicited after the date of the Merger Agreement
which is submitted in writing by such person to the Company Board after the date
of the Merger Agreement if (i) the Company Board, in its good faith judgment,
believes that such Alternative Transaction could reasonably be expected to
result in a Superior Transaction and (ii) determines in good faith, based on the
advice of outside legal counsel, that the failure to participate in such
discussions or negotiations or to furnish such information would constitute a
breach of its fiduciary duties under applicable law; provided, however, that
prior to participating in any such discussions or negotiations or furnishing any
information, the Company receives from such third party an executed
confidentiality agreement on terms at least as favorable to the Company, in all
material respects, as those contained in the Confidentiality Agreement, and
provided further, that the Company provides prompt notice to the Parent to the
effect that it is furnishing information to, or entering into discussions or
negotiations with, a third party. None of the above-described restrictions will
prohibit the Company Board from complying with Rule 14e-2 promulgated under the
Exchange Act with regard to a tender or exchange offer by a third party. The
Company is obligated to notify the Parent promptly if it receives any
unsolicited proposal concerning an Alternative Transaction, the identity of the
person making any such proposal and all the terms and conditions thereof and is
required to advise the Parent periodically of all material developments relating
thereto.
Directors and Officers Indemnification and Insurance. The Merger Agreement
provides that at all times after the Effective Time, the Parent will cause the
Surviving Corporation to indemnify and hold harmless each person who was as of
the date of the Merger Agreement, or has been at any time prior to the date of
the Merger Agreement, an officer or director of the Company or of any of the
Company's subsidiaries (individually, an "Indemnified Party") with respect to
any losses, claims, damages, judgments, settlements, liabilities, costs or
expenses incurred in connection with any claim, action, suit, proceeding or
investigation arising out of or pertaining to actual or alleged acts or
omissions by them in their capacities as such occurring at or prior to the
Effective Time (an "Indemnified Liability") to the fullest extent that the
Company or such subsidiaries would have been permitted, under applicable law and
the Certificate of Incorporation or By-laws of the Company or the organizational
documents of such subsidiaries each as in effect as of the date of the Merger
Agreement. In connection with the foregoing, the Parent will cause the Surviving
Corporation to purchase a four-year extended reporting period endorsement under
the Company's existing directors and
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<PAGE> 22
officers liability insurance policies, for a total amount not in excess of 175%
of the last annual premium paid by the Company for such existing insurance
policies prior to the date of the Merger Agreement; provided that such extended
reporting period endorsement will extend the directors and officers liability
coverage on terms that, in all material respects, are no less advantageous to
the intended beneficiaries thereof than such existing directors and officers
liability insurance policies.
Without limiting the foregoing, the Merger Agreement also provides that the
Parent will cause the Surviving Corporation to advance expenses as incurred to
the fullest extent permitted under applicable law upon receipt from an
Indemnified Party of an undertaking to reimburse the amounts so advanced in the
event of a final determination by a court of competent jurisdiction that such
Indemnified Party is not entitled thereto. To the extent that the Surviving
Corporation fails to comply with its indemnification obligations as provided in
the Merger Agreement, the Parent has agreed to indemnify and hold harmless each
of the Indemnified Parties to the same extent as the Surviving Corporation was
required to indemnify such Indemnified Parties thereunder.
Filings; Reasonable Efforts. The Merger Agreement provides that, upon the
terms and subject to the conditions thereof, each of the parties thereto will
use its reasonable best efforts to take, or cause to be taken, all appropriate
action, and to do or cause to be done, all things necessary, proper or advisable
under applicable laws and regulations to consummate and make effective the
transactions contemplated by the Merger Agreement, including, without limitation
(i) cooperating in the Offer and the preparation and filing of the Proxy
Statement, required filings under the HSR Act and any amendments to the
foregoing, (ii) using its reasonable best efforts to make promptly all required
regulatory filings and applications and to obtain all licenses, permits,
consents, approvals, authorizations, qualifications and orders of governmental
authorities and parties to contracts with the Company and its subsidiaries as
are necessary for the consummation of the transactions contemplated by the
Merger Agreement and to fulfill the conditions to the Offer and the Merger,
(iii) cooperating in all respects with each other in connection with obtaining
antitrust clearance and with any investigation or other inquiry, including any
proceeding initiated by a private party, in connection with the transactions
pursuant to the Merger Agreement and (iv) keeping the other party informed in
all material respects of any material communication received by such party from,
or given by such party to, the Federal Trade Commission, the Antitrust Division
of the Department of Justice or any other governmental authority and of any
material communication received or given in connection with any proceeding by a
private party, in each case regarding any of the transactions contemplated by
the Merger Agreement. Notwithstanding the foregoing, neither the Parent nor the
Company, in connection with the receipt of any regulatory approval, will be
required by the terms of the Merger Agreement to proffer or agree (i) to sell or
hold separate or agree to sell, divert or discontinue or to limit any assets,
businesses or interest in any assets or businesses of the Parent, the Company or
any of their respective affiliates (or to consent to any sale or agreement to
sell or discontinuance or limitation by the Parent or the Company, as the case
may be, of any of its assets or business) or (ii) agree to any conditions
relating to, or changes or restrictions in, the operations of any such asset or
business which, in either case, is reasonably likely to materially and adversely
impact the economic or business benefits to such party of the transactions
contemplated by the Merger Agreement.
Conduct of Business Pending the Merger. The Company has agreed that,
during the period from the date of the Merger Agreement until the Effective
Time, the businesses of it and its subsidiaries will be conducted, in all
material respects, in the ordinary course and in a manner consistent with past
practice and, in all material respects, in compliance with applicable laws. The
Company will also use its best efforts during such period to preserve
substantially intact the business organization of the Company and its
subsidiaries, to keep available the services of its present officers, employees
and consultants, and to preserve, in all material respects, its relationships
with customers, suppliers, advertisers, distributors and other persons with
which the Company or any of its subsidiaries has significant business relations.
The Company and its subsidiaries will also refrain from taking various
actions without the Parent's consent pending consummation of the Merger. These
limitations cover, among other things, making capital expenditures beyond
specified limits, incurring debt beyond specified limits, making changes in
governing documents, making changes in its capital stock, declaring or paying
any dividend or other distribution, engaging in any material corporate
transaction, including acquisitions and dispositions, increasing or granting
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<PAGE> 23
any severance or termination pay (except to the extent required, subject to
certain limits, under existing policies or agreements), increasing the
compensation payable to its directors, officers and employees (except to the
extent required under existing plans or agreements), entering into or modifying
contracts (including leases and collective bargaining agreements) beyond
specified limits, changing tax or accounting policies, making any material tax
election, paying or discharging any claims, liabilities or obligations, settling
any litigation beyond specified limits, adopting a plan of complete or partial
dissolution and entering into transactions with affiliates.
Employee Benefits Matters. The Purchaser has agreed that during the period
commencing at the Effective Time and continuing until December 31, 1999, the
Parent will 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, medical, health, dental, life insurance,
long-term disability, severance, pension, Section 401(k), retirement or savings
plans, policies or arrangements (collectively, "Employee Benefits") which, in
the aggregate, are no less favorable to such employees than the Employee
Benefits provided to such employees as of the date of the Merger Agreement. The
Company and the Surviving Corporation shall pay promptly or provide when due all
compensation and benefits required to be paid pursuant to the terms of any
benefit arrangements, multi-employer plans, pension plans and welfare plans
(collectively, "Employee Plans") or any individual agreement with any employee,
former employee, director or former director in effect and disclosed to the
Parent as of the date of the Merger Agreement. The Merger Agreement provides
that for all Employee Benefits (including Employee Plans and programs of the
Parent and its 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 the Parent and its affiliates for eligibility and
vesting purposes and for benefit accruals for purposes of severance and vacation
pay to the same extent that such service is taken into account by the Company
and its subsidiaries as of the date of the Merger Agreement, except to the
extent such treatment will result in duplication of benefits. From and after the
Effective Time, the Parent will, and will cause the Surviving Corporation to,
(i) cause any pre-existing condition or limitation and any eligibility waiting
periods (to the extent such conditions, limitations or waiting periods did not
apply to the employees under the Employee Plans in existence as of the date of
the Merger Agreement) under any group health plans of the Parent or any of its
subsidiaries to be waived with respect to employees and their eligible
dependents and (ii) give each employee credit for the plan year in which the
Effective Time occurs toward applicable deductions and annual out-of-pocket
limits for expenses incurred prior to the Effective Time (or such later date on
which participation commences) during the applicable plan year. Nothing in the
Merger Agreement shall require the continued employment of any person or prevent
the Company or any of its subsidiaries and/or the Surviving Corporation from
taking any action or refraining from taking any action which the Company or any
of its Subsidiaries could take or refrain from taking prior to or after the
Effective Time, including, without limitation, any action the Company or any of
its subsidiaries or the Surviving Corporation could take to terminate any plan
under its terms as in effect as of the date of the Merger Agreement.
Representations and Warranties. The Merger Agreement contains various
customary representations and warranties of the parties thereto, including
representations and warranties by the Company concerning the Company's
capitalization, required filings and consents, the Company Board's approval of
the Merger Agreement and the transactions contemplated thereby (including
approvals so as to render inapplicable thereto the limitation on business
combinations contained in Section 203 of the DGCL), the required stockholder
vote to approve the Merger Agreement, the receipt of an opinion as to the
fairness from a financial point of view, to the stockholders of the Company
(other than those holders of Shares that are affiliates of the Company), of the
consideration to be received by one stockholder of the Company pursuant to the
Merger Agreement, Commission filings and financial statements, absence of
certain changes or events, compliance with law, absence of litigation, employee
benefit plans, environmental matters, tax matters, real estate matters,
contracts, labor relations, intellectual property, affiliate transactions, the
absence of other agreements to sell the Company and brokers. Some of the
representations are qualified by a "Material Adverse Effect" clause. "Material
Adverse Effect" means any material adverse change in, or effect on, the
business, operations, assets, results of operations or condition (financial or
otherwise) of the Company and its subsidiaries taken as a whole
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<PAGE> 24
or any change which materially impairs or materially delays the ability of the
Company to consummate the transactions contemplated by the Merger Agreement.
Other Agreements, Acceleration of Outstanding Indebtedness. The Parent has
agreed that if, after the consummation of the Offer, any obligation of the
Company or any of its subsidiaries for borrowed money outstanding is accelerated
or the Company or any such subsidiary is otherwise required to repurchase, repay
or prepay any such obligation, the Parent will, within the time period specified
in the contract governing such obligation, loan to the Company an amount equal
to the amount which the Company or any such subsidiary is required to so
repurchase, repay or prepay (including any related prepayment premiums or
penalties).
Treatment of Management Agreement. The Parent has agreed that immediately
following the earlier of the consummation of the Offer and the Effective Time,
it will cause (i) the Management Agreement dated as of November 1, 1996, between
Yucaipa, the Company and Dominick's Finer Foods, Inc. (the "Management
Agreement") to be terminated and (ii) the Company to make a termination payment
to Yucaipa pursuant to Section 8.3 of the Management Agreement.
Conditions of the Merger. Under the Merger Agreement, the respective
obligations of the Parent and the Purchaser, on the one hand, and the Company,
on the other hand, to consummate the Merger are subject to the fulfillment of
the following conditions: (a) the Merger Agreement shall have been approved by
the affirmative vote of the holders of a majority of the outstanding Voting
Shares, unless the Purchaser shall have acquired 90% or more of the outstanding
shares of each class of the capital stock of the Company; (b) no statute, rule,
regulation, executive order, decree, ruling, injunction or other order (whether
temporary, preliminary or permanent) shall have been enacted, entered,
promulgated or enforced by any court or governmental authority of competent
jurisdiction which prohibits, restrains, enjoins or restricts the consummation
of the Merger, provided, however, that the parties will use their reasonable
best efforts to cause any such decree, ruling, injunction or other order to be
vacated or lifted; (c) any waiting period applicable to the Offer and the Merger
under the HSR Act shall have terminated or expired; and (d) the Purchaser shall
have (i) commenced the Offer and (ii) purchased, pursuant to the terms and
conditions of the Offer, all shares of Common Stock duly tendered and not
withdrawn, except that neither the Parent nor the Purchaser shall be entitled to
rely on the condition in clause (ii) if either of them shall have failed to
purchase Shares pursuant to the Offer in breach of their obligations under the
Merger Agreement.
Termination Events. The Merger Agreement may be terminated and the Merger
may be abandoned at any time prior to the Effective Time (notwithstanding any
approval thereof by the stockholders of the Company):
(a) by mutual written consent of the Parent and the Company as duly
authorized by their respective Boards of Directors;
(b) by the Company or the Parent, respectively, if the Parent or the
Purchaser, on the one hand, or the Company, on the other hand, breaches any
of their respective representations, warranties, covenants or agreements
contained in the Merger Agreement (without regard to any materiality or
Material Adverse Effect qualifier) which is reasonably likely to materially
adversely affect the Parent's or the Purchaser's ability to consummate the
Offer or the Merger, on the one hand, or to have a Material Adverse Effect
on the Company, on the other hand, and, with respect any such breach that
is reasonably capable of being remedied, the breach is not remedied within
ten business days after the non-breaching party has furnished the breaching
party with written notice of such breach;
(c) by the Parent or the Company:
(i) if the Effective Time shall not have occurred on or before
April 15, 1999 (provided that the right to terminate the Merger
Agreement pursuant to this clause (i) shall not be available to any
party whose failure to fulfill any obligation under the Merger Agreement
has been the cause of, or resulted in, the failure of the Effective Time
to occur on or before such date);
(ii) if there shall be any statute, law, rule or regulation that
makes consummation of the Offer or the Merger illegal or prohibited or
if any court of competent jurisdiction or other governmental authority
shall have issued an order, judgment, decree or ruling, or taken any
other action restraining, enjoining or otherwise prohibiting the Offer
or the Merger or prohibiting the Parent from
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<PAGE> 25
acquiring or holding or exercising rights of ownership of the Shares and
such order, judgment, decree, ruling or other action shall have become
final and non-appealable; or
(iii) if the Offer terminates or expires on account of the failure
of any condition specified in Section 15 of this Offer to Purchase
without the Purchaser having purchased any Shares thereunder (provided
that the right to terminate the Merger Agreement pursuant to this clause
(iii) shall not be available to any party whose failure to fulfill any
obligation under the Merger Agreement has been the cause of, or resulted
in, the failure of any such condition);
(d) by the Parent, prior to the acceptance for payment of the Minimum
Shares pursuant to the Offer, if (i) the Company Board withdraws, amends or
modifies its approval or recommendation of the Merger Agreement and the
transactions contemplated thereby (or publicly announces its intention to
do so) in a manner adverse to the Parent or (ii) the Company approves,
recommends or enters into an agreement with respect to, or consummates, an
Alternative Transaction; or
(e) by the Company, prior to the acceptance for payment of the Minimum
Shares pursuant to the Offer, if the Company Board takes any Permitted
Action as described above under "Stockholders Meeting"; provided that such
termination will not be effective until the Company has made payment of the
Termination Fee (as defined below).
In the event of termination of the Merger Agreement and abandonment or
rejection of the Offer as described above, no party hereto (or any of its
directors, officers, employees, advisors or other representatives) will have any
liability or further obligation to any other party to the Merger Agreement,
except as provided under "Termination Fees and Expenses" below, and except that
nothing herein will relieve any party from liability for any willful breach of
the Merger Agreement.
Termination Fee and Expenses. The Merger Agreement provides that if it is
terminated by the Parent pursuant to clause (d) under "Termination Events" or by
the Company pursuant to clause (e) under "Termination Events", the Company will
pay to the Parent $36.0 million (the "Termination Fee") plus reasonable
documented out-of-pocket expenses of the Parent relating to the transactions
contemplated by the Merger Agreement ("Expenses"), not to exceed $5.0 million.
The Merger Agreement further provides that the Company will pay to the
Parent an amount equal to the Termination Fee plus Expenses if:
(i) an Alternative Transaction is commenced, publicly disclosed,
publicly proposed or otherwise communicated to the Company prior to the
acceptance for payment of the Minimum Shares pursuant to the Offer and
either (A) the Parent or the Company terminates this Agreement pursuant to
clause (c)(i) under "Termination Events" or (B) the Company terminates this
Agreement pursuant to clause (c)(iii) under "Termination Events" or (3) the
Parent terminates the Merger Agreement pursuant to clause (b) under
"Termination Events"; and
(ii) thereafter, within 12 months of the date of termination, the
Company (A) enters into a definitive agreement with respect to, or
consummates, the Alternative Transaction described in clause (i) above or
(B) consummates a Superior Proposal (whether or not such Superior Proposal
was commenced, publicly disclosed, publicly proposed or otherwise
communicated to the Company prior to such termination).
The Merger Agreement also provides that the Surviving Corporation will pay
all charges and expenses, including those of the Paying Agent, in connection
with the transactions with respect to the Merger contemplated by Article III of
the Merger Agreement.
Stockholders Agreement. Concurrently with the execution and delivery of
the Merger Agreement, the Parent and the Principal Stockholders entered into the
Stockholders Agreement. The following is a summary of the Stockholders
Agreement, which summary is qualified in its entirety by reference to the
Stockholders Agreement, which is filed as an exhibit to the Schedule 14D-1 and
incorporated herein by reference.
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The Stockholders Agreement provides that during the term of the
Stockholders Agreement the Principal Stockholders will (i) tender their Shares
(including any Shares issued upon the exercise of any warrants or options, the
conversion of any convertible securities or otherwise, and in the case of
Yucaipa, the exercise of the Yucaipa Warrant, the "Subject Shares") pursuant to
the Offer and not to withdraw any Subject Shares so tendered, (ii) vote the
Subject Shares in favor of the adoption of the Merger Agreement and against any
action or agreement that would impede, interfere with, delay, postpone or
attempt to discourage the Merger or the Offer, (iii) not directly or indirectly
solicit, initiate, facilitate or encourage the making of any proposal for an
Alternative Transaction or the sale of any Subject Shares or, in the case of
Yucaipa, the Yucaipa Warrant and (iv) not sell, transfer, pledge, encumber,
assign or otherwise dispose of the Subject Shares or, in the case of Yucaipa,
the Yucaipa Warrant. The Parent has agreed that on the Offer Consummation Date,
the Purchaser or the Parent will instruct the Depositary, as paying agent, to
make payment by wire transfer to each Principal Stockholder of an amount equal
to the product of the Per Share Amount and the number of Shares held by such
Principal Stockholder (the "Purchase Price") for such Principal Stockholder's
Subject Shares to an account designated by such Principal Stockholder in the
Offer Documents.
In addition, pursuant to the Stockholders Agreement, each Principal
Stockholder has granted to the Purchaser an irrevocable option (the "Option") to
purchase such Principal Stockholder's Subject Shares for the Purchase Price. The
Option may be exercised by the Purchaser, as a whole and not in part, during the
period beginning upon the termination of the Merger Agreement in circumstances
where the Termination Fee is or may become payable as described under
"Termination Fee and Expenses" above (a "Triggering Event") and ending on the
date which is the 30th calendar day following the Triggering Event.
The Stockholders Agreement also provides that following the occurrence of a
Triggering Event, in the event that Yucaipa exercises the Yucaipa Warrant or
notifies the Parent of its intention to exercise the Yucaipa Warrant, the Parent
and the Purchaser will have the irrevocable right (the "Warrant Option") to
purchase either the Shares issued upon the exercise of the Yucaipa Warrant (the
"Warrant Shares") or the Yucaipa Warrant, as the case may be, for a price equal
to either $49 per Share or a price per Share equal to the difference between $49
and the exercise price of the Yucaipa Warrant ($20.732 as of the date hereof).
This right will be exercisable for a period of 30 calendar days following
receipt of notice from Yucaipa of its exercise or planned exercise of the
Yucaipa Warrant.
The Stockholders Agreement also provides that upon the earlier of the
purchase of the Minimum Shares in the Offer and the Effective Time, the Parent
or Merger Sub will purchase from Yucaipa the Yucaipa Warrant for an amount equal
to (i) the difference between the Per Share Amount ($49) and the per share
exercise price thereof ($20.732 as of the date hereof) multiplied by (ii) the
number of Shares underlying the Yucaipa Warrant (3,874,492 as of the date
hereof).
The Stockholders Agreement prohibits Yucaipa from exercising the Yucaipa
Warrant without the prior written consent of the Parent until the earlier to
occur of (i) the termination or expiration (without extension) of the Offer and
(ii) the termination of the Merger Agreement.
The Parent has also agreed that, in the event the Option or the Warrant
Option is exercised, as promptly as practicable thereafter, the Parent will
propose to the Company a merger, on terms and conditions substantially the same
as those provided for in the Merger Agreement, between itself or one of its
wholly owned subsidiaries and the Company pursuant to which the stockholders of
the Company will receive an amount of cash consideration per Share equal to the
Per Share Amount.
In the event the Option is exercised and the Parent or any of its
affiliates receives any consideration in connection with any Sale (as defined in
the Merger Agreement) of the Subject Shares during the period commencing upon
the date such Shares are acquired by the Parent or such affiliate and ending on
the first anniversary of such date, the Parent is required to pay to the
Principal Stockholders the excess (if any) of such consideration over the
aggregate purchase price paid for such Shares (less any taxes and other
out-of-pocket expenses in connection with such Sale).
The Parent and the Purchaser have agreed that, in connection with any
exercise of the Option and/or the Warrant Option, the Purchaser will purchase,
pursuant to "tag along" rights of certain stockholders of the
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Company, all Shares required to be purchased as a result of the sale by the
Principal Stockholders of any of the Subject Shares and/or the Warrant Shares at
the same purchase price as such Subject Shares and/or Warrant Shares.
12. PURPOSE OF THE OFFER; THE MERGER; PLANS FOR THE COMPANY. The purpose
of the Offer is to acquire control of, and the entire equity interest in, the
Company. The Offer is being made pursuant to the Merger Agreement. As promptly
as practicable following consummation of the Offer and after satisfaction or
waiver of all conditions to the Merger set forth in the Merger Agreement, the
Purchaser intends to acquire the remaining equity interest in the Company not
acquired in the Offer by consummating the Merger.
Vote Required to Approve the Merger; Stockholder Approval. The Company
Board has approved and adopted the Merger and the Merger Agreement in accordance
with the DGCL. The Company Board will be required to submit the Merger Agreement
to the Company's stockholders for approval at a stockholders' meeting convened
for that purpose in accordance with the DGCL. However, if the Purchaser acquires
more than 90% of the outstanding shares of each of the Voting Shares and the
Non-Voting Shares, the Purchaser intends to effect the Merger without a meeting
of the Company's stockholders under Section 253 of the DGCL. In the event the
conditions described in the foregoing sentence are not met and stockholder
approval is required, the DGCL requires that unless otherwise provided by the
Company's Certificate of Incorporation, the Merger Agreement must be approved by
the vote of the holders of a majority of the outstanding Voting Shares. The
Certificate of Incorporation of the Company provides that the Company's
stockholders may act by written consent provided that the action to be effected
and the taking of such action by written consent have expressly been approved in
advance by the Company Board. In the event that the Company's stockholders are
required to approve the Merger Agreement, immediately following the designation
of the Parent's representatives to the Company Board as described in Section 11
under "Designation of Directors", the Parent will seek to have the Company Board
approve the stockholders of the Company acting by written consent to approve the
Merger Agreement. If such approval is granted, the Parent will cause the
Purchaser to submit a written consent approving the Merger Agreement. In either
case, if the Minimum Condition is satisfied, the Purchaser will have the power,
which it intends to exercise, to approve the Merger Agreement without the
affirmative vote or written consent of any other stockholder.
THIS OFFER TO PURCHASE DOES NOT CONSTITUTE A SOLICITATION OF A PROXY,
CONSENT OR AUTHORIZATION FOR OR WITH RESPECT TO THE ANNUAL MEETING OR ANY
SPECIAL MEETING OF THE COMPANY'S STOCKHOLDERS OR ANY ACTION IN LIEU THEREOF. ANY
SUCH SOLICITATION, IF REQUIRED, WHICH THE PURCHASER MAY MAKE WILL BE MADE ONLY
PURSUANT TO SEPARATE PROXY MATERIALS IN COMPLIANCE WITH THE REQUIREMENTS OF
SECTION 14(a) OF THE EXCHANGE ACT.
THE OFFER IS CONDITIONED UPON THE MINIMUM CONDITION BEING SATISFIED.
Appraisal Rights. Stockholders do not have appraisal rights as a result of
the Offer. However, if the Merger is consummated, stockholders of the Company at
the time of the Merger who do not vote in favor of the Merger will have the
right under the DGCL to dissent and demand appraisal of, and receive payment in
cash of the fair value of, their Shares outstanding immediately prior to the
effective date of the Merger in accordance with Section 262 of the DGCL.
Under the DGCL, dissenting stockholders who comply with the applicable
statutory procedures will be entitled to receive a judicial determination of the
fair value of their Shares (exclusive of any element of value arising from the
accomplishment or expectation of such merger or similar business combination)
and to receive payment of such fair value in cash. Any such judicial
determination of the fair value of such Shares could be based upon
considerations other than or in addition to the price paid in the Offer and the
Merger and the market value of the Shares. In Weinberger v. UOP, Inc., the
Delaware Supreme Court stated, among other things, that "proof of value by any
techniques or methods which are generally considered acceptable in the financial
community and otherwise admissible in court" should be considered in an
appraisal proceeding. Stockholders should recognize that the value so determined
could be higher or lower than the Per Share Amount to be paid pursuant to the
Offer or the consideration per Share to be paid in the Merger or other similar
business combination.
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In addition, several decisions by Delaware courts have held that in certain
circumstances a controlling stockholder of a corporation involved in a merger
has a fiduciary duty to other stockholders that requires that the merger be fair
to other stockholders. In determining whether a merger is fair to minority
stockholders, Delaware courts have considered, among other things, the type and
amount of the consideration to be received by the stockholders and whether there
was fair dealing among the parties. The Delaware Supreme Court stated in
Weinberger and Rabkin v. Philip A. Hunt Chemical Corp. that the remedy
ordinarily available to minority stockholders in a cash-out merger is the right
to appraisal described above. However, a damages remedy or injunctive relief may
be available if a merger is found to be the product of procedural unfairness,
including fraud, misrepresentation or other misconduct.
THE FOREGOING SUMMARY OF THE RIGHTS OF OBJECTING STOCKHOLDERS DOES NOT
PURPORT TO BE A COMPLETE STATEMENT OF THE PROCEDURES TO BE FOLLOWED BY
STOCKHOLDERS DESIRING TO EXERCISE ANY AVAILABLE APPRAISAL RIGHTS. THE
PRESERVATION AND EXERCISE OF APPRAISAL RIGHTS REQUIRES STRICT ADHERENCE TO THE
APPLICABLE PROVISIONS OF THE DGCL.
The foregoing description of the DGCL is not necessarily complete and is
qualified in its entirety by reference to the DGCL.
Rule 13e-3. The Commission has adopted Rule 13e-3 under the Exchange Act
which is applicable to certain "going private" transactions and which may under
certain circumstances be applicable to the Merger following the purchase of
Shares pursuant to the Offer or any alternative transaction (including any
purchase of Shares in the open market following the purchase of Shares pursuant
to the Offer for the purpose of acquiring at least 90% of the outstanding shares
of each class of capital stock of the Company in order to effect the Merger
without a stockholder meeting in accordance with Section 253 of the DGCL) in
which the Purchaser seeks to acquire any remaining Shares. Rule 13e-3 should not
be applicable to the Merger if the Merger is consummated within one year after
the expiration or termination of the Offer and the price paid in the Merger is
not less than the Per Share Amount paid pursuant to the Offer. However, in the
event that the Purchaser is deemed to have acquired control of the Company
pursuant to the Offer and if the Merger is consummated more than one year after
completion of the Offer or an alternative acquisition transaction is effected
whereby stockholders of the Company receive consideration less than that paid
pursuant to the Offer, in either case at a time when the Shares are still
registered under the Exchange Act, the Purchaser may be required to comply with
Rule 13e-3 under the Exchange Act. If applicable, Rule 13e-3 would require,
among other things, that certain financial information concerning the Company
and certain information relating to the fairness of the Merger or such
alternative transaction and the consideration offered to minority stockholders
in the Merger or such alternative transaction be filed with the Commission and
disclosed to stockholders prior to consummation of the Merger or such
alternative transaction. The purchase of a substantial number of Shares pursuant
to the Offer may result in the Company being able to terminate its Exchange Act
registration. See Section 14. If such registration were terminated, Rule 13e-3
would be inapplicable to the Merger or any such alternative transaction.
Plans for the Company. It is currently expected that initially following
the purchase of the Shares and the consummation of the Offer the business and
operations of the Company will continue as they currently are conducted without
substantial change. The Parent will continue to evaluate all aspects of the
business, operations and management of the Company during the pendency of the
Offer and after the consummation of the Offer and will take such further actions
as it deems appropriate under the circumstances then existing. The Parent
expects to focus on implementing steps to apply its strategies to sales growth
and cost reduction, including through the reduction of administrative overhead.
Except as described in this Offer to Purchase, none of the Purchaser, the
Parent nor, to the best knowledge of the Purchaser and the Parent, any of the
persons listed on Schedule I have any present plans or proposals that would
relate to or result in an extraordinary corporate transaction such as a merger,
reorganization or liquidation involving the Company or any of its subsidiaries
or a sale or other transfer of a material amount of assets of the Company or any
of its subsidiaries, any material change in the capitalization or dividend
policy of the Company or any other material change in the Company's corporate
structure or business or the composition of its Board of Directors or
management.
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13. DIVIDENDS AND DISTRIBUTIONS. If the Company should, on or after the
date of the Merger Agreement, split, combine or otherwise change the Shares or
its capitalization, or disclose that it has taken any such action, then without
prejudice to the Purchaser's rights under Section 15, the Purchaser may make
such adjustments to the purchase price and other terms of the Offer as it deems
appropriate to reflect such split, combination or other change.
If on or after the date of the Merger Agreement, the Company should declare
or pay any cash or stock dividend or other distribution on, or issue any rights
with respect to, the Shares that is payable or distributable to stockholders of
record on a date prior to the transfer to the name of the Purchaser or the
nominee or transferee of the Purchaser on the Company's stock transfer records
of such Shares that are purchased pursuant to the Offer, then without prejudice
to the Purchaser's rights under Section 15, (i) the purchase price payable per
Share by the Purchaser pursuant to the Offer will be reduced to the extent any
such dividend or distribution is payable in cash and (ii) any non-cash dividend,
distribution (including additional Shares) or right received and held by a
tendering stockholder shall be required to be promptly remitted and transferred
by the tendering stockholder to the Depositary for the account of the Purchaser,
accompanied by appropriate documentation of transfer. Pending such remittance or
appropriate assurance thereof, the Purchaser will, subject to applicable law, be
entitled to all rights and privileges as owner of any such non-cash dividend,
distribution or right and may withhold the entire purchase price or deduct from
the purchase price the amount or value thereof, as determined by the Purchaser
in its sole discretion.
14. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES; STOCK EXCHANGE
LISTING; EXCHANGE ACT REGISTRATION. The purchase of Shares pursuant to the
Offer will reduce the number of Shares that might otherwise trade publicly and
could reduce the number of holders of Shares, which could adversely affect the
liquidity and market value of the remaining Shares held by the public. Following
completion of the Offer, at least a majority of the outstanding Shares will be
owned by the Purchaser.
The Voting Common Stock is currently listed on the NYSE and the Chicago
Stock Exchange. The Merger Agreement provides that the Surviving Corporation
will use its best efforts to cause the Voting Shares to be delisted from the
NYSE and the Chicago Stock Exchange as soon as practicable following the
Effective Time. According to the NYSE's published guidelines, the NYSE would
consider delisting the Shares if, among other things, the number of record
holders of at least 100 Shares should fall below 1,200, the number of publicly
held Shares (exclusive of holdings of officers, directors and their families and
other concentrated holdings of 10% or more ("NYSE Excluded Holdings")) should
fall below 600,000 or the aggregate market value of publicly held Shares
(exclusive of NYSE Excluded Holdings) should fall below $5,000,000. If, as a
result of the purchase of Shares pursuant to the Offer or otherwise, the Shares
no longer meet the requirements of the NYSE for continued listing and the
listing of the Shares is discontinued, the market for the Shares could be
adversely affected.
If the NYSE were to delist the Shares, it is possible that the Shares would
continue to trade on another securities exchange or in the over-the-counter
market and that price or other quotations would be reported by such exchange or
through the National Association of Securities Dealers Automated Quotation
System ("NASDAQ") or other sources. The extent of the public market therefor and
the availability of such quotations would depend, however, upon such factors as
the number of stockholders and/or the aggregate market value of such securities
remaining at such time, the interest in maintaining a market in the Shares on
the part of the securities firms, the possible termination of registration under
the Exchange Act as described below and other factors. The Purchaser cannot
predict whether the reduction in the number of Shares that might otherwise trade
publicly would have an adverse or beneficial effect on the market price for or
marketability of the Shares or whether it would cause future market prices to be
greater or less than the Offer price.
The Shares are currently registered under the Exchange Act. The purchase of
Shares pursuant to the Offer may result in the Shares becoming eligible for
deregistration under the Exchange Act. Registration of the Shares may be
terminated upon application of the Company to the Commission if the Shares are
not listed on a national securities exchange and there are fewer than 300 record
holders. The termination of the registration of the Shares under the Exchange
Act would substantially reduce the information required to be
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furnished by the Company to holders of the Shares and would make certain
provisions of the Exchange Act, such as the short-swing profit recovery
provisions of Section 16(b), the requirement of furnishing a proxy statement in
connection with stockholders' meetings and the requirements of Rule 13e-3 under
the Exchange Act with respect to "going private" transactions, no longer
applicable to the Shares or the holders thereof, as the case may be.
Furthermore, "affiliates" of the Company and persons holding "restricted
securities" of the Company may be deprived of the ability to dispose of the
securities pursuant to Rule 144 under the Securities Act of 1933.
If registration of the Shares under the Exchange Act were terminated, the
Shares would no longer be margin securities eligible for listing or for NASDAQ
reporting.
The Shares are currently "margin securities" under the rules of the Board
of Governors of the Federal Reserve System (the "Federal Reserve Board"), which
has the effect, among other things, of allowing brokers to extend credit on the
collateral of such Shares for the purpose of buying, carrying or trading in
securities ("purpose loans"). Depending upon factors similar to those described
above with respect to listing and market quotations, it is possible that,
following the Offer, the Shares might no longer constitute "margin securities"
for the purposes of the Federal Reserve Board's margin regulations and therefore
could no longer be used as collateral for purpose loans made by brokers.
15. CERTAIN CONDITIONS OF THE OFFER. Notwithstanding any other provisions
of the Offer, and in addition to the Minimum Condition, the Purchaser shall not
be obligated to accept for payment any Shares until expiration of all applicable
waiting periods under the HSR Act, and the Purchaser shall not be required to
accept for payment, purchase or pay for, and may delay the acceptance for
payment of or payment for, any Shares tendered in the Offer, or if the Minimum
Shares shall not have been validly tendered pursuant to the Offer and not
withdrawn, may terminate or amend the Offer, subject to the terms and conditions
of the Merger Agreement and the Purchaser's obligation to extend the Offer
pursuant to the terms of the Merger Agreement if, prior to the time of
acceptance for payment of any such Shares (whether or not any other Shares have
theretofore been accepted for payment or paid for pursuant to the Offer), any of
the following shall occur and remain in effect:
(a) a United States or state governmental authority or other agency or
commission or United States or state court of competent jurisdiction shall
have enacted, issued, promulgated, enforced or entered any statute, rule,
regulation, injunction or other order which is in effect and has the effect
of making the acquisition of Shares by the Purchaser illegal or prohibits
or imposes material limitations on the ability of the Purchaser to acquire
Shares or otherwise prohibiting (directly or indirectly) the consummation
of the transactions contemplated by the Merger Agreement or prohibits or
imposes material limitations on the ability of the Parent to own or operate
all or a material portion of the Company's and its subsidiaries' business
or assets, taken as a whole, subject to the Parent's and the Purchaser's
obligations pursuant to the Merger Agreement and the Parent's agreement not
to terminate the Offer as long as any such injunction or order has not
become final and non-appealable;
(b) either (i) any of the representations or warranties of the Company
in the Merger Agreement (without giving effect to any materiality or
Material Adverse Effect qualifier therein) shall not be true and correct
which inaccuracy, singly or in the aggregate, would have or be reasonably
likely to have a Material Adverse Effect and which are not reasonably
capable of being cured by the Company or have not been cured within 10
business days after the giving of written notice to the Company, in each
case as if such representations or warranties were made as of such time
(unless a representation speaks as of an earlier date, in which case it
shall be deemed to have been made as of such earlier date); or (ii) the
Company shall have failed to perform any obligation or comply with any
agreement or covenant of the Company to be performed or complied with by it
under the Merger Agreement, which failure, singly or in the aggregate,
would have or be reasonably likely to have a Material Adverse Effect and is
not reasonably capable of being cured by the Company or has not been cured
within 10 business days after the giving of written notice to the Company;
and an officer of the Company shall not have provided a certificate to the
effect that the conditions set forth in clauses (i) and (ii) have not
occurred on the date Shares are to be accepted for payment pursuant to the
Offer;
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(c) (i) the Company Board (A) shall have amended, modified or
withdrawn in a manner adverse to the Parent its approval or recommendation
of the Merger Agreement, the Offer, the Merger or any of the transactions
contemplated thereby or (B) shall have endorsed, approved or recommended
any Alternative Transaction or (ii) the Company shall have entered into any
agreement with respect to any Alternative Transaction;
(d) any person or group (as defined in Section 13(d)(3) of the
Exchange Act), other than the Parent or the Purchaser or any of their
respective subsidiaries or affiliates, shall have become the beneficial
owner (as defined in Rule 13d-3 promulgated under the Exchange Act), of
more than 25% of the outstanding Shares (either on a primary or a fully
diluted basis, without giving effect to the Shares issuable upon the
exercise of the Yucaipa Warrant); provided, however, that this provision
shall not apply to any person or group that beneficially owns Shares on the
date hereof so long as such person or group does not further increase its
beneficial ownership beyond the number of Shares such person or group
beneficially owns on the date of the Merger Agreement;
(e) the Merger Agreement shall have been terminated by the Company or
the Parent pursuant to its terms;
(f) there shall have occurred and be continuing (i) any general
suspension of, or limitation on prices for, trading in securities on the
NYSE (excluding suspensions or limitations (x) resulting solely from
physical damage or interference with such exchanges not related to market
conditions or (y) triggered on the NYSE by price fluctuations on a trading
day), (ii) a declaration of a banking moratorium or any suspension of
payments in respect of banks in the United States, (iii) any limitation by
any United States governmental authority on the extension of credit
generally by banks or other financial institutions; (iv) a commencement of
war or material armed hostilities or other national calamity directly
involving the United States which could reasonably be expected to
materially adversely affect the consummation of the Offer or (v) in the
case of any of the foregoing existing at the time of the commencement of
the Offer, a material acceleration or worsening thereof; or
(g) there shall have occurred and be continuing any change in the
Company's business, operations, condition (financial or otherwise), results
of operations, assets or liabilities, except for changes contemplated by
the Merger Agreement or changes which are not reasonably likely to have a
Material Adverse Effect;
which, in the reasonable judgment of the Parent and the Purchaser, in any such
case and regardless of the circumstances (including any action or inaction by or
giving rise to any such conditions) makes it inadvisable to proceed with the
Offer and/or with such acceptance for payment of or payment for Shares.
The foregoing conditions are for the sole benefit of the Parent and the
Purchaser and may be asserted by the Parent and the Purchaser regardless of the
circumstances giving rise to such condition or, except for the Minimum
Condition, may be waived by the Parent and the Purchaser in whole or in part at
any time and from time to time. The failure by the Parent or the Purchaser at
any time to exercise any of the foregoing rights shall not be deemed a waiver of
any such right, the waiver of any such right with respect to particular facts
and circumstances shall not be deemed a waiver with respect to any other facts
and circumstances, and each such right shall be an ongoing right that may be
asserted at any time and from time to time.
16. CERTAIN LEGAL MATTERS AND REGULATORY APPROVALS. General. Except as
set forth below, based upon its examination of publicly available filings by the
Company with the Commission and other publicly available information concerning
the Company, neither the Purchaser nor the Parent is aware of any licenses or
other regulatory permits that appear to be material to the business of the
Company and its subsidiaries, taken as a whole, that might be adversely affected
by the Purchaser's acquisition of Shares (and the indirect acquisition of the
stock of the Company's subsidiaries) as contemplated herein, or of any filings,
approvals or other actions by or with any domestic (federal or state), foreign
or supranational governmental authority or administrative or regulatory agency
that would be required prior to the acquisition of Shares (or the indirect
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acquisition of the stock of the Company's subsidiaries) by the Purchaser
pursuant to the Offer as contemplated herein. Should any such approval or other
action be required, it is the Purchaser's present intention to seek such
approval or action. However, the Purchaser does not presently intend to delay
the purchase of Shares tendered pursuant to the Offer pending the receipt of any
such approval or the taking of any such action (subject to the Purchaser's right
to delay or decline to purchase Shares if any of the conditions in Section 15
shall have occurred). There can be no assurance that any such approval or other
action, if needed, would be obtained without the imposition of substantial
conditions that must be complied with or that adverse consequences might not
result to the business of the Company, the Parent or the Purchaser as a result
of the imposition of such conditions or in the event that such approval was not
obtained or such other action was not taken, any of which could cause the
Purchaser to elect to terminate the Offer without the purchase of the Shares
thereunder. The Purchaser's obligation under the Offer to accept for payment and
pay for Shares is subject to certain conditions, including conditions relating
to the legal matters discussed in this Section 15.
State Takeover Laws. Except as described herein with respect to Section
203 of the DGCL, the Purchaser has not attempted to comply with any state
takeover statutes in connection with the Offer. The Purchaser reserves the right
to challenge the validity or applicability of any state law allegedly applicable
to the Offer and nothing in this Offer to Purchase nor any action taken in
connection herewith is intended as a waiver of that right. In the event that any
state takeover statute is found applicable to the Offer, the Purchaser might be
unable to accept for payment or purchase Shares tendered pursuant to the Offer
or be delayed in continuing or consummating the Offer. In such case, the
Purchaser may not be obligated to accept for purchase or pay for, any Shares
tendered. See Section 15.
Antitrust. Under the HSR Act and the rules that have been promulgated
thereunder by the Federal Trade Commission (the "FTC"), certain acquisition
transactions may not be consummated unless certain information has been
furnished to the FTC and the Antitrust Division of the Department of Justice
(the "Antitrust Division") and certain waiting period requirements have been
satisfied. The acquisition of Shares pursuant to the Offer is subject to such
requirements. See Section 2.
The Parent intends to file on October 20, 1998 with the FTC and the
Antitrust Division a Premerger Notification and Report Form in connection with
the purchase of Shares pursuant to the Offer. Under the provisions of the HSR
Act applicable to the Offer, the purchase of Shares pursuant to the Offer may
not be consummated until the expiration of a 15-calendar day waiting period
following such filing. Accordingly, the waiting period under the HSR Act
applicable to the purchase of Shares pursuant to the Offer will expire at 11:59
p.m., New York City time, on November 3, 1998, unless such waiting period is
extended by a request from the FTC or the Antitrust Division for additional
information or documentary material prior to the expiration of the waiting
period. If either the FTC or the Antitrust Division were to request additional
information or documentary material from the Parent, the waiting period would
expire at 11:59 p.m., New York City time, on the tenth calendar day after the
date of substantial compliance by the Parent with such request. Thereafter, the
waiting period could be extended only by court order or by an agreement
involving the Parent and the Company. If the acquisition of Shares is delayed
pursuant to a request by the FTC or the Antitrust Division for additional
information or documentary material pursuant to the HSR Act, the Offer may, but
need not, be extended and in any event the purchase of and payment for Shares
will be deferred until ten days after the request is substantially complied
with, unless the waiting period is sooner terminated by the FTC and the
Antitrust Division. See Section 2. Only one extension of such waiting period
pursuant to a request for additional information is authorized by the HSR Act
and the rules promulgated thereunder, except by court order. Any such extension
of the waiting period will not give rise to any withdrawal rights not otherwise
provided for by applicable law. See Section 4.
The FTC and the Antitrust Division frequently scrutinize the legality under
the antitrust laws of transactions such as the proposed acquisition of Shares by
the Purchaser pursuant to the Offer. At any time before or after the purchase by
the Purchaser of Shares pursuant to the Offer, either of the FTC or the
Antitrust Division could take such action under the antitrust laws as it deems
necessary or desirable in the public interest, including seeking to enjoin the
purchase of Shares pursuant to the Offer or seeking the divestiture of Shares
purchased by the Purchaser or the divestiture of substantial assets of the
Parent, its
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subsidiaries or the Company. Private parties and state attorneys general may
also bring legal action under federal or state antitrust laws under certain
circumstances.
Although the Purchaser believes that the acquisition of Shares pursuant to
the Offer would not violate the antitrust laws, there can be no assurance that a
challenge to the Offer on antitrust grounds will not be made or, if such
challenge is made, what the outcome will be. See Section 15 for certain
conditions to the Offer, including conditions with respect to litigation and
certain government actions.
Margin Credit Regulations. Federal Reserve Board Regulations G, T, U and X
(the "Margin Credit Regulations") restrict the extension or maintenance of
credit for the purpose of buying or carrying margin stock, including the Shares,
if the credit is secured directly or indirectly thereby. Such secured credit may
not be extended or maintained in an amount that exceeds the maximum loan value
of the margin stock. Under the Margin Credit Regulations, the Shares are
presently margin stock and the maximum loan value thereof is generally 50% of
their current market value. The definition of "indirectly secured" contained in
the Margin Credit Regulations provides that the term does not include an
arrangement with a customer if the lender in good faith has not relied upon
margin stock as collateral in extending or maintaining the particular credit.
17. FEES AND EXPENSES. Morgan Stanley is acting as Dealer Manager in
connection with the Offer. The Parent and the Purchaser will reimburse Morgan
Stanley for reasonable out-of-pocket expenses, including reasonable attorneys'
fees, and have also agreed to indemnify Morgan Stanley against certain
liabilities and expenses in connection with the Offer, including certain
liabilities under the federal securities laws.
The Purchaser has retained Kissel Blake Inc. to act as the Information
Agent and First Chicago Trust Company of New York to act as the Depositary in
connection with the Offer. The Information Agent may contact holders of Shares
by mail, telephone, telex, telegraph and personal interview and may request
brokers, dealers and other nominee stockholders to forward the Offer materials
to beneficial owners. The Information Agent and the Depositary will receive
reasonable and customary compensation for services relating to the Offer and
will be reimbursed for certain out-of-pocket expenses. The Purchaser and the
Parent have also agreed to indemnify the Information Agent and the Depositary
against certain liabilities and expenses in connection with the Offer, including
certain liabilities under the federal securities laws.
The Purchaser will not pay any fees or commissions to any broker or dealer
or any other person for soliciting tenders of Shares pursuant to the Offer
(other than to the Information Agent and the Depositary). Brokers, dealers,
commercial banks and trust companies will, upon request, be reimbursed by the
Purchaser for reasonable and customary mailing and handling expenses incurred by
them in forwarding offering materials to their customers.
18. MISCELLANEOUS. The Offer is being made solely by this Offer to
Purchase and the related Letter of Transmittal and is being made to all holders
of Shares. The Purchaser is not aware of any state where the making of the Offer
is prohibited by administrative or judicial action pursuant to any valid state
statute. If the Purchaser becomes aware of any valid state statute prohibiting
the making of the Offer or the acceptance of Shares pursuant thereto, the
Purchaser will make a good faith effort to comply with any such state statute.
If after such good faith effort, the Purchaser cannot comply with such state
statute, the Offer will not be made to nor will tenders be accepted from or on
behalf of the holders of Shares in such state. In any jurisdiction where the
securities, blue sky or other laws require the Offer to be made by a licensed
broker or dealer, the Offer shall be deemed to be made on behalf of the
Purchaser by the Dealer Manager or one or more registered brokers or dealers
that are licensed under the laws of such jurisdiction.
The Purchaser and the Parent have filed with the Commission the Schedule
14D-1 (including exhibits) pursuant to Rule 14d-3 under the Exchange Act,
furnishing certain additional information with respect to the Offer. Such
statement and any amendments thereto, including exhibits, may be inspected and
copies may be obtained from the offices of the Commission (except that they will
not be available at the regional offices of the Commission) in the manner set
forth in Section 7 of this Offer to Purchase.
31
<PAGE> 34
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION ON BEHALF OF THE PURCHASER OR THE PARENT NOT CONTAINED HEREIN OR
IN THE LETTER OF TRANSMITTAL AND IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
WINDY CITY ACQUISITION CORP.
October 19, 1998
32
<PAGE> 35
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS
OF THE PURCHASER AND THE PARENT
1. Directors and Executive Officers of the Purchaser. The name and
position with the Purchaser of each director and executive officer of the
Purchaser is set forth below. Unless set forth below, the other required
information with respect to each such person is set forth under "Directors and
Executive Officers of the Parent". All directors and executive officers listed
below are citizens of the United States.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
AND MATERIAL OCCUPATION, POSITIONS, OFFICES
NAME AND ADDRESS OR EMPLOYMENT HELD DURING THE LAST FIVE YEARS
---------------- ---------------------------------------------
<S> <C>
David G. Weed................................ Director; President.
Michael C. Ross.............................. Director; Vice President and Secretary.
Harvey K. Naito.............................. Director; Vice President, Treasurer and
5918 Stoneridge Mall Road Assistant Secretary; Vice President and
Pleasanton, CA 94588 Treasurer of Safeway Inc.
</TABLE>
2. Directors and Executive Officers of the Parent. The name, business
address, present principal occupation or employment and material occupations,
positions, offices or employments during the last five years of each director
and executive officer of the Parent and certain other information are set forth
below. Unless otherwise indicated, the business address of each such director
and executive officer is: c/o Safeway Inc., 5918 Stoneridge Mall Road,
Pleasanton, California 94588. Unless otherwise indicated, each occupation set
forth opposite an individual's name refers to employment with the Parent. All
directors and executive officers listed below are citizens of the United States
except for Donald P. Wright who is a citizen of Canada.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
AND MATERIAL OCCUPATION, POSITIONS, OFFICES
NAME AND ADDRESS OR EMPLOYMENT HELD DURING THE LAST FIVE YEARS
---------------- ---------------------------------------------
<S> <C>
DIRECTORS
Steven A. Burd....................... Director (since 1993); Chairman of the Board (since 5/98);
President (since 10/92) and Chief Executive Officer (since
4/93) of the Company.
James H. Greene, Jr.................. Director (since 1987); General Partner of KKR Associates,
2800 Sand Hill Road L.P. ("KKR Associates"); General Partner of Kohlberg Kravis
Suite 200 Roberts & Co. ("KKR") (1/93 -1/96); General Partner of
Menlo Park, CA 94025 limited liability company which serves as the general
partner of KKR (1/96 - present).
Paul Hazen........................... Director (since 1990); Chief Executive Officer of Wells
420 Montgomery Street Fargo & Co. and Wells Fargo Bank, National Association
San Francisco, CA 94104 (1995 - present); President and Chief Operating Officer of
Wells Fargo & Co. and Wells Fargo Bank, National
Association (1983 - 1995).
Henry R. Kravis...................... Director (since 1986); Partner of KKR and KKR Associates;
9 West 57th Street Managing Member of limited liability company which serves
Suite 4200 as the general partner of KKR (1/96 - present).
New York, NY 94588
Robert I. MacDonnell................. Director (since 1986); General Partner of KKR Associates;
2800 Sand Hill Road General Partner of KKR (until 1996); General Partner of
Suite 200 limited liability company which serves as the general
Menlo Park, CA 94025 partner of KKR (1/96 - present).
</TABLE>
I-1
<PAGE> 36
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
AND MATERIAL OCCUPATION, POSITIONS, OFFICES
NAME AND ADDRESS OR EMPLOYMENT HELD DURING THE LAST FIVE YEARS
---------------- ---------------------------------------------
<S> <C>
Peter A. Magowan..................... Director (since 1986); President and Managing General
3 Com Park Partner of the San Francisco Giants (11/92 - present); Chief
at Candlestick Point Executive Officer of the Company (11/86 - 4/93).
San Francisco, CA 94124
George R. Roberts.................... Director (since 1986); Partner of KKR and KKR Associates;
2800 Sand Hill Road Managing Member of limited liability company which serves
Suite 200 as the general partner of KKR (1/96 - present).
Menlo Park, CA 94025
William Y. Tauscher.................. Director (since 1998); Chief Executive Officer of Vanstar
1100 Abernathy Road Corporation (1988 - present); President of Vanstar
Building 500 Corporation (9/88 - 7/95).
Suite 1200
Atlanta, GA 30328
EXECUTIVE OFFICERS
Steven A. Burd....................... President and Chief Executive Officer
Kenneth W. Oder...................... Executive Vice President -- Labor Relations, Human
Resources, Legal & Public Affairs
David G. Weed........................ Executive Vice President and Chief Financial Officer; Senior
Vice President (1992 - 1995).
David F. Bond........................ Senior Vice President -- Finance & Control; Partner,
Deloitte & Touche LLP (6/88 - 8/97).
David T. Ching....................... Senior Vice President and Chief Information Officer
Dick W. Gonzales..................... Senior Vice President -- Corporate Human Resources; Senior
Vice President -- Human Resources, The Vons Companies, Inc.
(1/93 - 4/98).
Lyman C. Gordon...................... Senior Vice President -- Strategic Development
Lawrence V. Jackson.................. Senior Vice President -- Supply (10/97 - present); Senior
2800 Ygnacio Valley Road Vice President and Chief Operating Officer of PepsiCo Food
Walnut Creek, CA 94598 Systems (1995 - 1997); Vice President and General Manager,
Pepsi-Cola Company (1992 - 1994).
Melissa C. Plaisance................. Senior Vice President -- Finance & Public Affairs
Larree M. Renda...................... Senior Vice President -- Corporate Retail Operations; Vice
President, Corporate Retail Operations (3/93 - 2/94)
Michael C. Ross...................... Senior Vice President, Secretary and General Counsel
Gary D. Smith........................ Senior Vice President and Director of Marketing
(1995 - present); Vice President, Corporate Grocery (until
1995)
Donald P. Wright..................... Senior Vice President -- Real Estate & Engineering
Richard A. Wilson.................... Vice President -- Tax
</TABLE>
3. Ownership of Shares by Directors and Executive Officers.
None.
I-2
<PAGE> 37
Facsimile copies of the Letter of Transmittal, properly completed and duly
executed, will be accepted. The Letter of Transmittal, certificates for Shares
and any other required documents should be sent or delivered by each stockholder
of the Company or his broker, dealer, commercial bank, trust company or other
nominee to the Depositary as follows:
<TABLE>
<S> <C> <C>
The Depositary for the Offer is:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
By Mail: By Federal Express or other By Hand:
First Chicago Trust Company Courier: First Chicago Trust Company
of New York First Chicago Trust Company of New York
Tenders & Exchanges of New York c/o Securities Transfer and
Suite 4660 Tenders & Exchanges, Suite 4680 Reporting Services Inc.
P.O. Box 2569 14 Wall Street, 8th Floor Attn: Tenders & Exchanges
Jersey City, NJ 07303-2569 New York, NY 10005 One Exchange Plaza, Third Floor
New York, NY 10006
</TABLE>
Any questions and requests for assistance may be directed to the
Information Agent or the Dealer Manager at their respective telephone numbers
and addresses listed below. Additional copies of this Offer to Purchase, the
Letter of Transmittal and the Notice of Guaranteed Delivery may also be obtained
from the Information Agent. You may also contact your broker, dealer, commercial
bank or trust company for assistance concerning the Offer.
The Information Agent for the Offer is:
KISSEL BLAKE INC.
A Division of Shareholder Communications Corporation
110 Wall Street
New York, New York 10005
Banks and Brokers, Please Call (212) 344-6733
ALL OTHERS CALL TOLL-FREE: (800) 554-7733
The Dealer Manager for the Offer is:
MORGAN STANLEY DEAN WITTER
Morgan Stanley & Co. Incorporated
1585 Broadway
New York, NY 10036
Toll Free: (800) 701-8950 (ext. 18178)
<PAGE> 1
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK AND NON-VOTING COMMON STOCK
OF
DOMINICK'S SUPERMARKETS, INC.
PURSUANT TO THE OFFER TO PURCHASE DATED OCTOBER 19, 1998
BY
WINDY CITY ACQUISITION CORP.
A WHOLLY-OWNED SUBSIDIARY OF
SAFEWAY INC.
The Depositary for the Offer is:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
<TABLE>
<S> <C> <C>
By Mail: By Federal Express or other By Hand:
First Chicago Trust Company Courier: First Chicago Trust Company
of New York First Chicago Trust Company of New York
Tenders & Exchanges of New York c/o Securities Transfer and
Suite 4660 Tenders & Exchanges, Suite 4680 Reporting Services Inc.
P.O. Box 2569 14 Wall Street, 8th Floor Attn: Tenders & Exchanges
Jersey City, NJ 07303-2569 New York, NY 10005 One Exchange Plaza, Third Floor
New York, NY 10006
</TABLE>
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON MONDAY, NOVEMBER 16, 1998 UNLESS THE OFFER IS EXTENDED.
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE, OR TRANSMISSIONS OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN
AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
This Letter of Transmittal is to be completed by stockholders, either if
certificates for Shares (as defined below) are to be forwarded herewith or,
unless an Agent's Message (as defined in the Offer to Purchase) is utilized, if
tenders of Shares are to be made by book-entry transfer into the account of
First Chicago Trust Company of New York, as Depositary (the "Depositary"), at
The Depository Trust Company ("DTC" or the "Book-Entry Transfer Facility")
pursuant to the procedures set forth in Section 3 of the Offer to Purchase (as
defined below). Stockholders who tender Shares by book-entry transfer are
referred to herein as "Book-Entry Stockholders".
Holders of Shares whose certificates for such Shares (the "Share
Certificates") are not immediately available or who cannot deliver the Share
Certificates and all other required documents to the Depositary prior to the
Expiration Date (as defined in Section 1 of the Offer to Purchase), or who
cannot complete the procedure for book-entry transfer on a timely basis, must
tender their Shares according to the guaranteed delivery procedure set forth in
Section 3 of the Offer to Purchase. See Instruction 2. DELIVERY OF DOCUMENTS TO
THE BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
<PAGE> 2
- --------------------------------------------------------------------------------
DESCRIPTION OF SHARES TENDERED
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
NAME(S) & ADDRESS(ES) OF REGISTERED HOLDER(S)
(PLEASE FILL IN, IF BLANK, EXACTLY AS SHARE CERTIFICATE(S) AND SHARE(S) TENDERED
NAME(S) APPEAR(S) ON CERTIFICATE(S)) (ATTACH ADDITIONAL SIGNED LIST IF NECESSARY)
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL NUMBER
OF SHARES
SHARES CERTIFICATE REPRESENTED BY NUMBER OF SHARES
NUMBER(S)* CERTIFICATE(S) TENDERED**
<S> <C> <C> <C>
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
Total Shares
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Need not be completed by Book-Entry Stockholders.
** Unless otherwise indicated, all Shares represented by certificates
delivered to the Depositary will be deemed to have been tendered. See
Instruction 4.
- --------------------------------------------------------------------------------
[ ] CHECK HERE IF SHARES ARE BEING TENDERED BY BOOK-ENTRY TRANSFER MADE TO AN
ACCOUNT MAINTAINED BY THE DEPOSITARY WITH THE BOOK-ENTRY TRANSFER FACILITY
AND COMPLETE THE FOLLOWING (ONLY PARTICIPANTS IN THE BOOK-ENTRY TRANSFER
FACILITY MAY DELIVER SHARES BY BOOK-ENTRY TRANSFER):
Name of Tendering Institution
----------------------------------------------------------------------------
Check box of Book-Entry Transfer Facility:
[ ] The Depository Trust Company
Account Number
--------------------------------------- Transaction Code Number
---------------------------------------
[ ] CHECK HERE IF SHARES ARE BEING TENDERED PURSUANT TO A NOTICE OF GUARANTEED
DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING:
Name(s) of Registered Owner(s):
----------------------------------------------------------------------------
Window Ticket Number (if any):
----------------------------------------------------------------------------
Date of Execution of Notice of Guaranteed Delivery:
--------------------------------------------------------------------
Name of Institution that Guaranteed Delivery:
---------------------------------------------------------------------------
If delivered by Book-Entry Transfer, check box of Book-Entry Transfer
Facility:
[ ] The Depository Trust Company
Account Number
--------------------------------------- Transaction Code Number
---------------------------------------
<PAGE> 3
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The undersigned hereby tenders to Windy City Acquisition Corp., a Delaware
corporation (the "Purchaser"), and a wholly-owned subsidiary of Safeway Inc., a
Delaware corporation ("Parent"), the above-described shares of Common Stock, par
value $.01 per share (the "Voting Shares"), and/or shares of Non-Voting Common
Stock, par value $.01 per share (the "Non-Voting Shares" and, together with the
Voting Shares, the "Shares"), of Dominick's Supermarkets, Inc., a Delaware
corporation (the "Company"), at a purchase price of $49 per Share, net to the
seller in cash, without interest thereon, less applicable federal withholding
taxes, upon the terms and subject to the conditions set forth in the Offer to
Purchase dated October 19, 1998 (the "Offer to Purchase") and in this Letter of
Transmittal (which together constitute the "Offer"). The undersigned understands
that the Purchaser reserves the right to transfer or assign, in whole or from
time to time in part, to one or more of its wholly-owned subsidiaries, the right
to purchase all or any portion of the Shares tendered pursuant to the Offer,
receipt of which is hereby acknowledged.
Subject to, and effective upon, acceptance for payment for the Shares
tendered herewith in accordance with the terms of the Offer, the undersigned
hereby sells, assigns and transfers to, or upon the order of, the Purchaser all
right, title and interest in and to all of the Shares that are being tendered
hereby and any and all non-cash dividends, distributions (including additional
Shares) or rights declared, paid or issued with respect to the tendered Shares
on or after October 13, 1998 and payable or distributable to the undersigned on
a date prior to the transfer to the name of the Purchaser or nominee or
transferee of the Purchaser on the Company's stock transfer records of the
Shares tendered herewith (collectively, a "Distribution"), and appoints the
Depositary the true and lawful agent and attorney-in-fact of the undersigned
with respect to such Shares (and any Distribution) with full power of
substitution (such power of attorney being deemed to be an irrevocable power
coupled with an interest) to (a) deliver such Share Certificates (as defined
herein) (and any Distribution) or transfer ownership of such Shares (and any
Distribution) on the account books maintained by the Book-Entry Transfer
Facility, together in either case with appropriate evidences of transfer, to the
Depositary for the account of the Purchaser, (b) present such Shares (and any
Distribution) for transfer on the books of the Company and (c) receive all
benefits and otherwise exercise all rights of beneficial ownership of such
Shares (and any Distribution), all in accordance with the terms and subject to
the conditions of the Offer.
The undersigned irrevocably appoints designees of the Purchaser and each of
them as such stockholder's attorneys-in-fact and proxies, with full power of
substitution, to the full extent of such stockholder's rights with respect to
the Shares tendered by such stockholder and accepted for payment by the
Purchaser (and with respect to any and all other Shares, other securities or
rights issued or issuable in respect of such Shares on or after October 13,
1998). All such powers of attorney and proxies shall be considered irrevocable
and coupled with an interest in the tendered Shares. Such appointment will be
effective when, and only to the extent that, the Purchaser accepts such Shares
for payment. Upon such acceptance for payment, all prior proxies given by such
stockholder with respect to such Shares (and such other Shares and securities)
will be revoked without further action, and no subsequent powers of attorney and
proxies may be given nor any subsequent written consents executed (and, if given
or executed, will not be deemed effective). The designees of the Purchaser will,
with respect to the Shares (and such other Shares and securities) for which such
appointment is effective, be empowered to exercise all voting and other rights
of such stockholder as they in their sole discretion may deem proper at any
annual or special meeting of the Company's stockholders or any adjournment or
postponement thereof, by written consent in lieu of any such meeting or
otherwise. The Purchaser reserves the right to require that, in order for Shares
to be deemed validly tendered, immediately upon the Purchaser's payment for such
Shares, the Purchaser must be able to exercise full voting rights with respect
to such Shares and other securities, including voting at any meeting of
stockholders.
<PAGE> 4
The undersigned hereby represents and warrants that (a) the undersigned has
full power and authority to tender, sell, assign and transfer the Shares (and
any Distribution) tendered hereby and (b) when the Shares are accepted for
payment by the Purchaser, the Purchaser will acquire good, marketable and
unencumbered title to the Shares (and any Distribution), free and clear of all
liens, restrictions, charges and encumbrances, and the same will not be subject
to any adverse claim. The undersigned, upon request, will execute and deliver
any additional documents deemed by the Depositary or the Purchaser to be
necessary or desirable to complete the sale, assignment and transfer of the
Shares tendered hereby (and any Distribution). In addition, the undersigned
shall promptly remit and transfer to the Depositary for the account of the
Purchaser any and all Distributions in respect of the Shares tendered hereby,
accompanied by appropriate documentation of transfer; and pending such
remittance or appropriate assurance thereof, the Purchaser will be, subject to
applicable law, entitled to all rights and privileges as owner of any such
Distribution and may withhold the entire purchase price or deduct from the
purchase price the amount or value thereof, as determined by the Purchaser in
its sole discretion.
All authority herein conferred or agreed to be conferred shall not be
affected by and shall survive the death or incapacity of the undersigned and any
obligation of the undersigned hereunder shall be binding upon the heirs,
personal representatives, successors and assigns of the undersigned.
Tenders of Shares made pursuant to the Offer are irrevocable, except that
Shares tendered pursuant to the Offer may be withdrawn at any time prior to the
Expiration Date (as defined in the Offer to Purchase) and, unless theretofore
accepted for payment by the Purchaser pursuant to the Offer, may also be
withdrawn at any time after December 17, 1998. See Section 4 of the Offer to
Purchase.
The undersigned understands that tenders of Shares pursuant to any of the
procedures described in Section 3 of the Offer to Purchase and in the
instructions hereto will constitute a binding agreement between the undersigned
and the Purchaser upon the terms and subject to the conditions set forth in the
Offer, including the undersigned's representation that the undersigned owns the
Shares being tendered.
Unless otherwise indicated herein under "Special Payment Instructions",
please issue the check for the purchase price and/or issue or return any
certificate(s) for Shares not tendered or not accepted for payment in the
name(s) of the registered holder(s) appearing under "Description of Shares
Tendered". Similarly, unless otherwise indicated herein under "Special Delivery
Instructions", please mail the check for the purchase price and/or any
certificate(s) for Shares not tendered or not accepted for payment (and
accompanying documents, as appropriate) to the address(es) of the registered
holder(s) appearing under "Description of Shares Tendered". In the event that
both the Special Delivery Instructions and the Special Payment Instructions are
completed, please issue the check for the purchase price and/or any
certificate(s) for Shares not tendered or accepted for payment in the name of,
and deliver such check and/or such certificates to, the person or persons so
indicated. The undersigned recognizes that the Purchaser has no obligation,
pursuant to the Special Payment Instructions, to transfer any Shares from the
name(s) of the registered holder(s) thereof if the Purchaser does not accept for
payment any of the Shares so tendered.
<PAGE> 5
<TABLE>
<S> <C> <C>
- ----------------------------------------------------------------
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if certificate(s) for Shares not
tendered or not accepted for payment and/or the check
for the purchase price of Shares accepted for payment
are to be issued in the name of someone other than the
undersigned.
Issue [ ] check [ ] Certificate to:
Name ---------------------------------------------------
(Please Print)
Address
-------------------------------------------------
--------------------------------------------------------
(Include Zip Code)
--------------------------------------------------------
(Tax Id. or Social Security No.)
(See Substitute Form W-9 on the reverse side)
- ----------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C>
- ----------------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if certificate(s) for Shares not
tendered or not accepted for payment and/or the check
for the purchase price of Shares accepted for payment
are to be sent to someone other than the undersigned or
to the undersigned at an address other than that shown
above.
Mail [ ] check [ ] Certificate to:
Name ---------------------------------------------------
(Please Print)
Address
-------------------------------------------------
--------------------------------------------------------
(Include Zip Code)
- ----------------------------------------------------------------
</TABLE>
<PAGE> 6
SIGN HERE
AND COMPLETE SUBSTITUTE FORM W-9 ON REVERSE
SIGN HERE [Picture of Hand Pointing]
X
------------------------------------------------------------------
X
------------------------------------------------------------------
(SIGNATURE(S) OF HOLDER(S))
Dated: , 1998
----------------------------------------------------
(Must be signed by the registered holder(s) exactly as name(s)
appear(s) on Share Certificate(s) or on a security position
listing or by person(s) authorized to become registered holder(s)
by certificates and documents transmitted herewith. If signature
is by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a
fiduciary or representative capacity, please provide the following
information and see Instruction 5.)
Name(s):
------------------------------------------------------------------
------------------------------------------------------------------
(PLEASE PRINT)
Capacity (full title):
------------------------------------------------------------------
Address:
---------------------------------------------------------
------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone Number:
----------------------------------
Tax Identification or Social Security No.:
-----------------------
COMPLETE SUBSTITUTE FORM W-9 ON REVERSE
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 1 AND 5)
Authorized Signature:
--------------------------------------------
Name:
------------------------------------------------------------
Name of Firm:
----------------------------------------------------
(PLEASE PRINT)
Address:
---------------------------------------------------------
------------------------------------------------------------------
------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone Number:
----------------------------------
Dated: , 1998
----------------------------------------------------
<PAGE> 7
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. No signature guarantee is required on this
Letter of Transmittal (a) if this Letter of Transmittal is signed by the
registered holder(s) of Shares tendered herewith, unless such holder(s) has
completed either the box entitled "Special Payment Instructions" or the box
entitled "Special Delivery Instructions" above, or (b) if such Shares are
tendered for the account of a firm which is a bank, broker, dealer, credit
union, savings association or other entity which is a member in good standing of
the Securities Transfer Agents Medallion Program (each of the foregoing being
referred to as an "Eligible Institution"). In all other cases, all signatures on
this Letter of Transmittal must be guaranteed by an Eligible Institution. See
Instruction 5 of this Letter of Transmittal.
2. REQUIREMENTS OF TENDER. This Letter of Transmittal is to be completed
by stockholders either if certificates are to be forwarded herewith or, unless
an Agent's Message is utilized, if tenders are to be made pursuant to the
procedure for tender by book-entry transfer set forth in Section 3 of the Offer
to Purchase. Share Certificates, or timely confirmation (a "Book-Entry
Confirmation") of a book-entry transfer of such Shares into the Depositary's
account at the Book-Entry Transfer Facility, as well as this Letter of
Transmittal (or a facsimile hereof), properly completed and duly executed, with
any required signature guarantees, or an Agent's Message in connection with a
book-entry transfer, and any other documents required by this Letter of
Transmittal, must be received by the Depositary at one of its addresses set
forth herein prior to the Expiration Date (as defined in Section 1 of the Offer
to Purchase). Stockholders whose Share Certificates are not immediately
available or who cannot deliver their Share Certificates and all other required
documents to the Depositary prior to the Expiration Date or who cannot complete
the procedure for delivery by book-entry transfer on a timely basis may tender
their Shares by properly completing and duly executing a Notice of Guaranteed
Delivery pursuant to the guaranteed delivery procedure set forth in Section 3 of
the Offer to Purchase. Pursuant to such procedure: (i) such tender must be made
by or through an Eligible Institution; (ii) a properly completed and duly
executed Notice of Guaranteed Delivery, substantially in the form made available
by the Purchaser, must be received by the Depositary prior to the Expiration
Date; and (iii) the Share Certificates (or a Book-Entry Confirmation)
representing all tendered Shares, in proper form for transfer, in each case
together with the Letter of Transmittal (or a facsimile thereof), properly
completed and duly executed, with any required signature guarantees (or, in the
case of a book-entry delivery, an Agent's Message) and any other documents
required by this Letter of Transmittal, must be received by the Depositary
within three Nasdaq National Market trading days after the date of execution of
such Notice of Guaranteed Delivery.
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, SHARE CERTIFICATES
AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY
TRANSFER FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING STOCKHOLDER. IF
DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY
INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO
ENSURE TIMELY DELIVERY.
No alternative, conditional or contingent tenders will be accepted and no
fractional Shares will be purchased. All tendering stockholders, by execution of
this Letter of Transmittal (or a facsimile hereof), waive any right to receive
any notice of the acceptance of their Shares for payment.
3. INADEQUATE SPACE. If the space provided herein is inadequate, the
certificate numbers and/or the number of Shares and any other required
information should be listed on a separate signed schedule attached hereto.
4. PARTIAL TENDERS. (Not Applicable to Book-Entry Stockholders) If fewer
than all the Shares evidenced by any Share Certificate submitted are to be
tendered, fill in the number of Shares which are to be tendered in the box
entitled "Number of Shares Tendered". In such cases, new Share Certificates for
the Shares that were evidenced by your old Share Certificates, but were not
tendered by you, will be sent to you, unless otherwise provided in the
appropriate box on this Letter of Transmittal, as soon as practicable after the
Expiration Date. All Shares represented by Share Certificates delivered to the
Depositary will be deemed to have been tendered unless otherwise indicated.
5. SIGNATURES ON LETTER OF TRANSMITTAL, STOCK POWERS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder(s) of the Shares
tendered hereby, the signature(s) must correspond with the name(s) as written on
the face of the certificate(s) without alteration, enlargement or any change
whatsoever.
If any of the Shares tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
<PAGE> 8
If any of the tendered Shares are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many separate
Letters of Transmittal as there are different registrations of certificates.
If this Letter of Transmittal or any certificates or stock powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and proper evidence
satisfactory to the Purchaser of their authority so to act must be submitted.
If this Letter of Transmittal is signed by the registered holder(s) of the
Shares listed and transmitted hereby, no endorsements of certificates or
separate stock powers are required unless payment is to be made to or
certificates for Shares not tendered or not purchased are to be issued in the
name of a person other than the registered holder(s). Signatures on such
certificates or stock powers must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the certificate(s) listed, the certificate(s) must be
endorsed or accompanied by appropriate stock powers, in either case signed
exactly as the name(s) of the registered holder(s) appear(s) on the
certificate(s). Signatures on such certificates or stock powers must be
guaranteed by an Eligible Institution.
6. STOCK TRANSFER TAXES. Except as otherwise provided in this Instruction
6, the Purchaser will pay any stock transfer taxes with respect to the transfer
and sale of Shares to it or its order pursuant to the Offer. If, however,
payment of the purchase price is to be made to, or if certificate(s) for Shares
not tendered or accepted for payment are to be registered in the name of, any
person other than the registered holder(s), or if tendered certificate(s) are
registered in the name of any person other than the person(s) signing this
Letter of Transmittal, the amount of any stock transfer taxes (whether imposed
on the registered holder(s) or such person) payable on account of the transfer
to such person will be deducted from the purchase price unless satisfactory
evidence of the payment of such taxes or an exemption therefrom, is submitted.
Except as otherwise provided in this Instruction 6, it will not be
necessary for transfer tax stamps to be affixed to the certificate(s) listed in
this Letter of Transmittal.
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check is to be issued
in the name of, and/or certificates for Shares not tendered or not accepted for
payment are to be issued or returned to, a person other than the signer of this
Letter of Transmittal or if a check and/or such certificates are to be returned
to a person other than the person(s) signing this Letter of Transmittal or to an
address other than that shown in this Letter of Transmittal, the appropriate
boxes on this Letter of Transmittal must be completed.
8. WAIVER OF CONDITIONS. Subject to the terms and conditions of the
Merger Agreement, the conditions of the Offer (other than the Minimum Condition
(as defined in the Offer to Purchase)) may be waived by the Purchaser in whole
or in part at any time and from time to time in its sole discretion.
9. 31% BACKUP WITHHOLDING; SUBSTITUTE FORM W-9. Under U.S. federal income
tax law, a stockholder whose tendered Shares are accepted for payment is
required to provide the Depositary with such stockholder's correct taxpayer
identification number ("TIN") on The Substitute Form W-9 below. If the
Depositary is not provided with the correct TIN, the Internal Revenue Service
may subject the stockholder or other payee to a $50 penalty. In addition,
payments that are made to such stockholder or other payee with respect to Shares
purchased pursuant to the Offer may be subject to 31% backup withholding.
Certain stockholders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an exempt
recipient, the stockholder must submit a Form W-8, signed under penalties of
perjury, attesting to that individual's exempt status. A Form W-8 can be
obtained from the Depositary. See the enclosed "Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9" for more instructions.
If backup withholding applies, the Depositary is required to withhold 31%
of any such payments made to the stockholder or other payee. Backup withholding
is not an additional tax. Rather, the tax liability of persons subject to backup
withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained from the Internal
Revenue Service.
<PAGE> 9
The box in Part 3 of the Substitute Form W-9 may be checked if the
tendering stockholder has not been issued a TIN and has applied for a TIN or
intends to apply for a TIN in the near future. If the box in Part 3 is checked,
the stockholder or other payee must also complete the Certificate of Awaiting
Taxpayer Identification Number below in order to avoid backup withholding.
Notwithstanding that the box in Part 3 is checked and the Certificate of
Awaiting Taxpayer Identification Number is completed, the Depositary will
withhold 31% of all payments made prior to the time a properly certified TIN is
provided to the Depositary.
The stockholder is required to give the Depositary the TIN (e.g., social
security number or employer identification number) of the record owner of the
Shares or of the last transferee appearing on the transfers attached to, or
endorsed on, the Shares. If the Shares are in more than one name or are not in
the name of the actual owner, consult the enclosed "Guidelines for Certification
of Taxpayer Identification Number on Substitute Form W-9" for additional
guidance on which number to report.
10. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions or requests
for assistance may be directed to the Dealer Manager or the Information Agent at
their respective addresses and telephone numbers set forth below. Additional
copies of the Offer to Purchase, this Letter of Transmittal and the Notice of
Guaranteed Delivery may also be obtained from the Information Agent or the
Dealer Manager or from brokers, dealers, commercial banks or trust companies.
11. LOST, DESTROYED OR STOLEN CERTIFICATES. If any certificate
representing Shares has been lost, destroyed or stolen, the stockholder should
promptly notify First Chicago Trust Company of New York. The stockholder will
then be instructed as to the steps that must be taken in order to replace the
certificate. This Letter of Transmittal and related documents cannot be
processed until the procedures for replacing lost or destroyed certificates have
been followed.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A FACSIMILE HEREOF), TOGETHER
WITH CERTIFICATES OR CONFIRMATION OF BOOK ENTRY TRANSFER OR THE NOTICE OF
GUARANTEED DELIVERY, AND ALL OTHER REQUIRED DOCUMENTS, MUST BE RECEIVED BY THE
DEPOSITARY PRIOR TO THE EXPIRATION DATE.
<PAGE> 10
PAYER'S NAME: FIRST CHICAGO TRUST COMPANY OF NEW YORK
<TABLE>
<C> <S> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------------
SUBSTITUTE PART 1 -- PLEASE PROVIDE YOUR TIN IN THE Social Security Number or
FORM W-9 BOX AT THE RIGHT AND CERTIFY BY SIGNING
AND DATING BELOW. Employer Identification Number
------------------------------
-----------------------------------------------------------------------------------------
DEPARTMENT OF THE TREASURY PART 2 -- Certification -- Under penalties of perjury, I certify that:
INTERNAL REVENUE SERVICE (1) The number shown on this form is my correct Taxpayer Identification Number (or I
am waiting for a number to be issued to me) and
PAYER'S REQUEST FOR TAXPAYER (2) I am not subject to backup withholding because: (a) I am exempt from backup
IDENTIFICATION NUMBER ("TIN") withholding, or (b) I have not been notified by the Internal Revenue Service (the
"IRS") that I am subject to backup withholding as a result of a failure to report
all interest or dividends, or (c) the IRS has notified me that I am no longer
subject to backup withholding.
Certification Instructions -- You must cross out item (2) above if you have been
notified by the IRS that you are currently subject to backup withholding because
of under-reporting interest or dividends on your tax return. However, if after
being notified by the IRS that you were subject to backup withholding you
received another notification from the IRS that you are no longer subject to
backup withholding, do not cross out such Item (2).
- ---------------------------------------------------------------------------------------------------------------------------
SIGN HERE (ARROW) Signature ------------------------------ PART 3 --
Awaiting TIN [ ]
Date ----------------------------- , 1998
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE MERGER. PLEASE REVIEW
THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU
CHECKED THE BOX IN PART 3 OF SUBSTITUTE FORM W-9.
<PAGE> 11
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (1) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office, or (2)
I intend to mail or deliver an application in the near future. I understand that
if I do not provide a taxpayer identification number by the time of payment, 31%
of all reportable payments made to me will be withheld.
Signature Date , 1998
------------------------------------ ---------------------
<PAGE> 12
The Information Agent for the Offer is:
KISSEL BLAKE INC.
A Division of Shareholder Communications Corporation
110 Wall Street
New York, NY 10005
Banks and Brokers, Please Call: (212) 344-6733
ALL OTHERS CALL TOLL-FREE: 1 (800) 554-7733
The Dealer Manager for the Offer is:
MORGAN STANLEY DEAN WITTER
Morgan Stanley & Co. Incorporated
1585 Broadway
New York, NY 10036
Toll Free: (800) 761-8950 (ext. 18178)
October 19, 1998
<PAGE> 1
NOTICE OF GUARANTEED DELIVERY
TO
TENDER SHARES OF COMMON STOCK AND NON-VOTING COMMON STOCK
OF
DOMINICK'S SUPERMARKETS, INC.
As set forth in Section 3 of the Offer to Purchase described below, this
instrument or one substantially equivalent hereto must be used to accept the
Offer (as defined below) if certificates for Shares (as defined below) are not
immediately available or the certificates for Shares and all other required
documents cannot be delivered to the Depositary (as defined below) prior to the
Expiration Date (as defined in Section 1 of the Offer to Purchase) or if the
procedure for delivery by book-entry transfer cannot be completed on a timely
basis. This instrument may be delivered by hand or transmitted by facsimile
transmission or mail to the Depositary.
The Depositary for the Offer is:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
<TABLE>
<S> <C> <C>
By Mail: By Federal Express or other By Hand:
First Chicago Trust Company Courier: First Chicago Trust Company
of New York First Chicago Trust Company of New York
Tenders & Exchanges of New York c/o Securities Transfer and
Suite 4660 Tenders & Exchanges, Suite 4680 Reporting Services Inc.
P.O. Box 2569 14 Wall Street, 8th Floor Attn: Tenders & Exchanges
Jersey City, NJ 07303-2569 New York, NY 10005 One Exchange Plaza, Third Floor
New York, NY 10006
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION OTHER THAN AS SET FORTH
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
This form is not to be used to guarantee signatures. If a signature on a
Letter of Transmittal is required to be guaranteed by an Eligible Institution
under the instructions thereto, such signature guarantee must appear in the
applicable space provided in the signature box in the Letter of Transmittal.
Ladies and Gentlemen:
The undersigned hereby tender(s) to Windy City Acquisition Corp., a
Delaware corporation and a wholly-owned subsidiary of Safeway Inc., a Delaware
corporation, upon the terms and subject to the conditions set forth in the Offer
to Purchase dated October 19, 1998 (the "Offer to Purchase"), and in the related
Letter of Transmittal (which together constitute the "Offer"), receipt of which
is hereby acknowledged, the number of shares of Common Stock, par value $.01 per
share (the "Voting Shares") and/or shares of Non-Voting Common Stock, par value
$.01 per share (the "Non-Voting Shares" and, together with the Voting Shares,
the "Shares"), of Dominick's Supermarkets, Inc., a Delaware corporation,
pursuant to the guaranteed delivery procedure set forth in Section 3 of the
Offer to Purchase.
<PAGE> 2
Signature(s)
-----------------------------------------------
Name(s) of Record Holders
-----------------------------------------------------------
PLEASE TYPE OR PRINT
Number of Shares
----------------------
Certificate Nos. (If Available)
-----------------------------------------------------------
-----------------------------------------------------------
Dated , 1998
----------------------------------------------
Address(es)
------------------------------------------------
- ------------------------------------------------------------
ZIP CODE
Area Code and Tel. No(s)
-----------------------------------
(Check the box below if Shares will be tendered by book-entry transfer)
[ ] The Depository Trust Company
Account Number
--------------------------------------------
- -----------------------------------------------------------
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm which is a bank, broker, dealer, credit union,
savings association or other entity which is a member in good standing of the
Securities Transfer Agents Medallion Program, (a) represents that the above
named person(s) "own(s)" the Shares tendered hereby within the meaning of Rule
14e-4 under the Securities Exchange Act of 1934, as amended ("Rule 14e-4"),
(b) represents that such tender of Shares complies with Rule 14e-4, and (c)
guarantees to deliver to the Depositary either the certificates evidencing all
tendered Shares, in proper form for transfer, or to deliver Shares pursuant to
the procedure for book-entry transfer into the Depositary's account at The
Depository Trust Company (the "Book-Entry Transfer Facility"), in either case
together with the Letter of Transmittal (or a facsimile thereof), properly
completed and duly executed, with any required signature guarantees or an
Agent's Message (as defined in the Offer to Purchase) in the case of a
book-entry delivery, and any other required documents, all within three Nasdaq
National Market trading days after the date hereof.
-----------------------------------------------------------
NAME OF FIRM
-----------------------------------------------------------
ADDRESS
-----------------------------------------------------------
ZIP CODE
Area Code and Tel. No.
-----------------------------------
- -----------------------------------------------------------
AUTHORIZED SIGNATURE
Name
- ----------------------------------------------------
PLEASE TYPE OR PRINT
Title
- -----------------------------------------------------
Dated
- ----------------------------------------------, 1998
NOTE: DO NOT SEND CERTIFICATES FOR SHARES WITH THIS NOTICE. CERTIFICATES SHOULD
BE SENT WITH YOUR LETTER OF TRANSMITTAL.
2
<PAGE> 1
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK AND NON-VOTING COMMON STOCK
OF
DOMINICK'S SUPERMARKETS, INC.
AT
$49 NET PER SHARE
BY
WINDY CITY ACQUISITION CORP.
A WHOLLY-OWNED SUBSIDIARY OF
SAFEWAY INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON MONDAY, NOVEMBER 16, 1998 UNLESS THE OFFER IS EXTENDED.
October 19, 1998
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
We have been appointed by Windy City Acquisition Corp., a Delaware
corporation (the "Purchaser") and a wholly-owned subsidiary of Safeway Inc., a
Delaware corporation (the "Parent"), to act as Dealer Manager in connection with
the Purchaser's offer to purchase for cash all the outstanding shares of Common
Stock, par value $.01 per share (the "Voting Shares") and Non-Voting Common
Stock, par value $.01 per share (the "Non-Voting Shares", and together with the
Voting Shares, the "Shares"), of Dominick's Supermarkets, Inc., a Delaware
corporation (the "Company") at a purchase price of $49 per Share, net to the
seller in cash without interest thereon, less applicable federal withholding
taxes upon the terms and subject to the conditions set forth in the Offer to
Purchase, dated October 19, 1998 (the "Offer to Purchase"), and in the related
Letter of Transmittal (which together constitute the "Offer") enclosed herewith.
Holders of Shares whose certificates for such Shares (the "Share Certificates")
are not immediately available or who cannot deliver their Share Certificates and
all other required documents to the Depositary (as defined below) prior to the
Expiration Date (as defined in the Offer to Purchase), or who cannot complete
the procedures for book-entry transfer on a timely basis, must tender their
Shares according to the guaranteed delivery procedures set forth in Section 3 of
the Offer to Purchase.
Please furnish copies of the enclosed materials to those of your clients
for whose accounts you hold Shares registered in your name or in the name of
your nominee.
Enclosed herewith for your information and forwarding to your clients are
copies of the following documents:
1. The Offer to Purchase, dated October 19, 1998.
2. The Letter of Transmittal to tender Shares for your use and for
the information of your clients. Facsimile copies of the Letter of
Transmittal may be used to tender Shares.
3. The Notice of Guaranteed Delivery for Shares to be used to accept
the Offer if Share Certificates are not immediately available or if such
certificates and all other required documents cannot be delivered to First
Chicago Trust Company of New York (the "Depositary") by the Expiration Date
or if the procedure for book-entry transfer cannot be completed by the
Expiration Date.
4. The Letter to Stockholders of the Company from the Chairman of the
Board, President and Chief Executive Officer of the Company, accompanied by
the Company's Solicitation/Recommendation Statement on Schedule 14D-9.
<PAGE> 2
5. A printed form of letter which may be sent to your clients for
whose accounts you hold Shares registered in your name or in the name of
your nominee, with space provided for obtaining such clients' instructions
with regard to the Offer.
6. Guidelines of the Internal Revenue Service for Certification of
Taxpayer Identification Number on Substitute Form W-9.
7. A return envelope addressed to First Chicago Trust Company of New
York, the Depositary.
YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS
PROMPTLY AS POSSIBLE. PLEASE NOTE THAT THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT
12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, NOVEMBER 16, 1998 UNLESS THE
OFFER IS EXTENDED.
In order to take advantage of the Offer, (i) a duly executed and properly
completed Letter of Transmittal and any required signature guarantees, or an
Agent's Message (as defined in the Offer to Purchase) in connection with a book-
entry delivery of Shares, and other required documents should be sent to the
Depositary, and (ii) either Share Certificates, representing the tendered Shares
should be delivered to the Depositary, or such Shares should be tendered by
book-entry transfer into the Depositary's account maintained at one of the
Book-Entry Transfer Facilities (as described in the Offer to Purchase), all in
accordance with the instructions set forth in the Letter of Transmittal and the
Offer to Purchase.
If holders of Shares wish to tender, but it is impracticable for them to
forward their Share Certificates or other required documents on or prior to the
Expiration Date or to comply with the book-entry transfer procedures on a timely
basis, a tender may be effected by following the guaranteed delivery procedures
specified in Section 3 of the Offer to Purchase.
The Purchaser will not pay any commissions or fees to any broker, dealer or
other person (other than the Dealer Manager, the Depositary and Kissel-Blake
Inc. (the "Information Agent") (as described in the Offer to Purchase)) for
soliciting tenders of Shares pursuant to the Offer. The Purchaser will, however,
upon request, reimburse you for customary clerical and mailing expenses incurred
by you in forwarding any of the enclosed materials to your clients. The
Purchaser will pay or cause to be paid any stock transfer taxes payable on the
transfer of Shares to it, except as otherwise provided in Instruction 6 of the
Letter of Transmittal.
Any inquiries you may have with respect to the Offer should be addressed to
Morgan Stanley & Co. Incorporated, the Dealer Manager, or the Information Agent,
at their respective addresses and telephone numbers set forth on the back cover
of the Offer to Purchase. Additional copies of the enclosed materials may be
obtained from the Information Agent.
Very truly yours,
MORGAN STANLEY & CO. INCORPORATED
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
OR ANY OTHER PERSON THE AGENT OF THE PURCHASER, THE PARENT, THE DEALER MANAGER,
THE COMPANY, THE DEPOSITARY OR THE INFORMATION AGENT, OR ANY AFFILIATE OF ANY OF
THEM, OR AUTHORIZE YOU OR ANY OTHER PERSON TO MAKE ANY STATEMENT OR USE ANY
DOCUMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE
ENCLOSED DOCUMENTS AND THE STATEMENTS CONTAINED THEREIN.
2
<PAGE> 1
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK AND NON-VOTING COMMON STOCK
OF
DOMINICK'S SUPERMARKETS, INC.
AT
$49 NET PER SHARE
BY
WINDY CITY ACQUISITION CORP.
A WHOLLY-OWNED SUBSIDIARY OF
SAFEWAY INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON MONDAY, NOVEMBER 16, 1998 UNLESS THE OFFER IS EXTENDED.
To Our Clients:
Enclosed for your consideration is an Offer to Purchase dated October 19,
1998 (the "Offer to Purchase"), and the related Letter of Transmittal relating
to an offer by Windy City Acquisition Corp., a Delaware corporation (the
"Purchaser") and a wholly-owned subsidiary of Safeway Inc., a Delaware
corporation (the "Parent"), to purchase all of the outstanding shares of Common
Stock, par value $.01 per share (the "Voting Shares") and Non-Voting Common
Stock, par value $.01 per share (the "Non-Voting Shares" and, together with the
Voting Shares, the "Shares"), of Dominick's Supermarkets, Inc., a Delaware
corporation (the "Company"), at a purchase price of $49 per Share, net to the
seller in cash without interest thereon, less applicable federal withholding
taxes upon the terms and subject to the conditions set forth in the Offer to
Purchase and in the related Letter of Transmittal (which together constitute the
"Offer"). We are the holder of record of Shares held by us for your account. A
tender of such Shares can be made only by us as the holder of record and
pursuant to your instructions. The Letter of Transmittal is furnished to you for
your information only and cannot be used by you to tender Shares held by us for
your account.
We request instructions as to whether you wish to have us tender on your
behalf any or all of such Shares held by us for your account, pursuant to the
terms and subject to the conditions set forth in the Offer to Purchase.
Your attention is directed to the following:
1. The tender price is $49 per share, net to the seller in cash
without interest thereon.
2. The Offer is made for all of the outstanding Shares.
3. The Board of Directors of the Company has determined that the
Merger Agreement (as defined below) and the transactions contemplated
thereby, including each of the Offer and the Merger (as defined below), are
advisable and fair to and in the best interests of the stockholders of the
Company and recommends that holders of the Shares accept the Offer and
tender their Shares to the Purchaser.
4. The Offer is being made pursuant to the Agreement and Plan of
Merger, dated as of October 13, 1998 (the "Merger Agreement"), which
provides that subsequent to the consummation of the Offer, the Purchaser
will merge with and into the Company (the "Merger"). At the effective time
of the Merger (the "Effective Time"), each Share issued and outstanding
immediately prior to the Effective Time (other than Shares held in the
treasury of the Company and Shares, if any, owned by the Parent, the
Purchaser or any direct or indirect wholly-owned subsidiary of the Parent
or the Company, which shall be cancelled and retired without payment of any
consideration therefor, and other than Shares, if any, held by stockholders
who shall have properly demanded appraisal of their Shares in
<PAGE> 2
accordance with Section 262 of the Delaware General Corporation Law) shall
be converted into the right to receive $49 in cash, without interest, less
any withholding taxes required under applicable law.
5. The Offer and withdrawal rights will expire at 12:00 Midnight, New
York City time, on Monday, November 16, 1998 unless the Offer is extended.
6. Tendering stockholders will not be obligated to pay brokerage fees
or commissions or, except as set forth in Instruction 6 of the Letter of
Transmittal, stock transfer taxes on the purchase of Shares pursuant to the
Offer.
7. The Offer is conditioned upon, among other things, (i) there being
validly tendered and not withdrawn prior to the expiration of the Offer, a
number of Shares which constitutes more than 50% of the issued and
outstanding Shares (determined on a fully diluted basis without giving
effect to the Shares issuable upon the exercise of the Yucaipa Warrant (as
defined in the Offer to Purchase)) of all Shares and (ii) the expiration or
termination of all applicable waiting periods under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended.
The Offer is being made solely by the Offer to Purchase and the related
Letter of Transmittal and any ancillary documents thereto and is being made to
all holders of Shares. The Purchaser is not aware of any state where the making
of the Offer is prohibited by administrative or judicial action pursuant to a
state statute. If the Purchaser becomes aware of any state where the making of
the Offer is prohibited, the Purchaser will make a good faith effort to comply
with any such state statute or seek to have such statute declared inapplicable
to the Offer. If, after such good faith effort, the Purchaser cannot comply with
any applicable statute, the Offer will not be made to (nor will tenders be
accepted from or on behalf of) the holders of Shares in such state. In those
jurisdictions where the securities, "blue sky" or other laws require the Offer
to be made by a licensed broker or dealer, the Offer shall be deemed to be made
on behalf of the Purchaser by the Dealer Manager or one or more registered
brokers or dealers licensed under the laws of such jurisdiction.
If you wish to have us tender any or all of the Shares held by us for your
account, please instruct us by completing, executing and returning to us the
instruction form contained in this letter. If you authorize a tender of your
Shares, all such Shares will be tendered unless otherwise specified in such
instruction form. Your instructions should be forwarded to us in ample time to
permit us to submit a tender on your behalf prior to the expiration of the
Offer.
2
<PAGE> 3
INSTRUCTIONS WITH RESPECT TO THE OFFER TO
PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK AND NON-VOTING COMMON STOCK
OF
DOMINICK'S SUPERMARKETS, INC.
The undersigned acknowledge(s) receipt of your letter enclosing the Offer
to Purchase dated October 19, 1998 (the "Offer to Purchase"), and the related
Letter of Transmittal pursuant to an offer by Windy City Acquisition Corp., a
Delaware corporation and a wholly-owned subsidiary of Safeway Inc., a Delaware
corporation, to purchase all outstanding shares of Common Stock, par value $.01
per share (the "Voting Shares") and Non-Voting Common Stock, par value $.01 per
share (the "Non-Voting Shares" and, together with the Voting Shares, the
"Shares"), of Dominick's Supermarkets, Inc., a Delaware corporation.
This will instruct you to tender the number of Shares indicated below (or,
if no number is indicated below, all Shares) which are held by you for the
account of the undersigned, upon the terms and subject to the conditions set
forth in the Offer to Purchase and in the related Letter of Transmittal
furnished to the undersigned.
Number of Shares to be Tendered*
- ---------------------------------------------- Shares
Dated , 1998
-----------------------------------------
SIGN HERE
- ------------------------------------------------------
- ------------------------------------------------------
Signature(s)
- ------------------------------------------------------
Please print name(s)
- ------------------------------------------------------
Address
- ------------------------------------------------------
Area Code and Telephone Number
- ------------------------------------------------------
Tax Identification or Social Security Number
- ------------
* Unless otherwise indicated, it will be assumed that all of your Shares held by
us for your account are to be tendered.
<PAGE> 1
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE PAYER.
SOCIAL SECURITY NUMBERS HAVE NINE DIGITS SEPARATED BY TWO HYPHENS: I.E.
000-00-0000. EMPLOYER IDENTIFICATION NUMBERS HAVE NINE DIGITS SEPARATED BY ONLY
ONE HYPHEN: 00-0000000. THE TABLE BELOW WILL HELP DETERMINE THE NUMBER TO GIVE
THE PAYER.
<TABLE>
<C> <S> <C>
- ------------------------------------------------------------
GIVE THE
FOR THIS TYPE OF ACCOUNT: SOCIAL SECURITY
NUMBER OF--
- ------------------------------------------------------------
1. An individual's account The individual
2. Two or more individuals (joint The actual owner of
account) the account or, if
combined funds, the
first individual on
the account(1)
3. Custodian account of a minor The minor(2)
(Uniform Gift to Minors Act)
4. a. The usual revocable savings The grantor-
trust account (grantor is also trustee(1)
trustee)
b. So-called trust account that is The actual owner(1)
not a legal or valid trust
under State law
5. Sole proprietorship account The owner(3)
6. Sole proprietorship The owner(3)
7. A valid, estate, or pension trust The legal entity
(Do not furnish the
identifying number
of the personal
representative or
trustee unless the
legal entity itself
is not designated
in the account
title.)(4)
- ------------------------------------------------------------
- ------------------------------------------------------------
GIVE THE EMPLOYER
FOR THIS TYPE OF ACCOUNT: IDENTIFICATION
NUMBER OF--
- ------------------------------------------------------------
8. Corporate account The corporation
9. Religious, charitable or The organization
educational organization account
10. Partnership account held in the The partnership
name of the partnership
11. Association, club, or other tax- The organization
exempt organization
12. A broker or registered nominee The broker or
nominee
13. Account with the Department of The public entity
Agriculture in the name of a
public entity (such as a State or
local government, school district
or prison) that receives
agricultural program payments
- ------------------------------------------------------------
</TABLE>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) You must show your individual name, but you may also enter your business or
"doing business as" name. You may use either your social security number or
employer identification number.
(4) List first and circle the name of the legal trust, estate, or pension trust.
NOTE: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
<PAGE> 2
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
OBTAINING A NUMBER
If you do not have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card (for
individuals), or Form SS-4, Application for Employer Identification Number (for
business and all other entities), at the local office of the Social Security
Administration or the Internal Revenue Service.
To complete Substitute Form W-9 of you do not have a taxpayer identification
number, write "Applied For" in the space for the taxpayer identification number
in Part I, sign and date the Form, and give it to the requester. Generally, you
will then have 60 days to obtain a taxpayer identification number and furnish it
to the requester. If the requester does not receive your taxpayer identification
number within 60 days, backup withholding, if applicable, will begin and
continue until you furnish your taxpayer identification number to the requester.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
The following is a list of payees exempt from backup withholding. For interest
and dividends, all listed payees are exempt except item (9). For broker
transactions, payees listed in items (1) through (13) and a person registered
under the Investment Advisers Act of 1940 who regularly acts as a broker are
exempt. Payments subject to reporting under sections 6041 and 6041A are
generally exempt from backup withholding only if made to payees described in
items (1) through (7), except a corporation that provides medical and health
care services or bills and collects payments for such services is not exempt
from backup withholding. Only payees described in items (2) through (6) are
exempt from backup withholding for barter exchange transactions, patronage
dividends, and payments by certain fishing boat operators.
(1) A corporation
(2) An organization exempt from tax under section 501(a), or an IRA, or a
custodial account under section 403(b)(7).
(3) The United States or any of its agencies or instrumentalities.
(4) A state, the District of Columbia, a possession of the United States, or
any of their political subdivisions or instrumentalities.
(5) A foreign government or any of its political subdivisions, agencies, or
instrumentalities.
(6) An international organization or any of its agencies or
instrumentalities.
(7) A foreign central bank of issue.
(8) A dealer in securities or commodities required to register in the United
States or a possession of the United States.
(9) A futures commission merchant registered with the Commodity Futures
Trading Commission.
(10) A real estate investment trust.
(11) An entity registered at all times during the tax year under the
Investment Company Act of 1940.
(12) A common trust fund operated by a bank under section 584(a).
(13) A financial institution.
(14) A middleman known in the investment community as a nominee or listed in
the most recent publication of the American Society of Corporate
Securities, Inc., Nominee List.
(15) A trust exempt from tax under section 664 or described in section 4947.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
- Payments to nonresident aliens subject to withholding under Section 1441.
- Payments to partnership not engaged in a trade or business in the United
States and which have at least one nonresident partner.
- Payments of patronage dividends where the amount received is not paid in
money.
- Payments made by certain foreign organizations.
Payments of interest not generally subject to backup withholding include the
following:
- Payments of interest on obligations issued by individuals. Note: You may be
subject to backup withholding if this interest is $600 or more and is paid
in the course of the payer's trade or business and you have not provided
your correct taxpayer identification number to the payer.
- Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
- Payments described in section 6049(b)(5) to non-resident aliens.
- Payments on tax-free covenant bonds under section 1451 of the Code.
- Payments made by certain foreign organizations.
- Mortgage interest paid to you.
EXEMPT PAYEES DESCRIBED ABOVE SHOULD FILE SUBSTITUTE FORM W-9 TO AVOID POSSIBLE
ERRONEOUS BACKUP WITHHOLDING. FILE THIS FORM WITH THE PAYER. FURNISH YOUR
TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, SIGN AND
DATE THE FORM AND RETURN IT TO THE PAYER.
Certain payments other than interest, dividends, and patronage dividends, that
are not subject to information reporting are also not subject to backup
withholding. For details, see Sections 6041, 6041(a), 6042, 6044, 6045, 6049 and
6050A and 6050N of the Code and the regulations promulgated therein.
PRIVACY ACT NOTICE.--Section 6109 requires recipients of dividends, interest, or
other payments to give taxpayer identification numbers to payers who must report
the payments to IRS. The IRS uses the numbers for identification purposes and to
help verify the accuracy of your tax return. Payers must be given the numbers
whether or not recipients are required to file tax returns. Payers must
generally withhold 31% of taxable interest, dividends, and certain other
payments to a payee who does not furnish a taxpayer identification number to a
payer. Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you fail
to furnish your taxpayer identification number to a payer, you are subject to a
penalty of $50 for each such failure unless your failure is due to reasonable
cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX
CONSULTANT OR THE INTERNAL REVENUE SERVICE
<PAGE> 1
This announcement is neither an offer to purchase nor a solicitation
of an offer to sell Shares (as defined below). The Offer (as defined below) is
made solely by the Offer to Purchase dated October 19, 1998 and the related
Letter of Transmittal (and any amendments thereto) and is being made to all
holders of Shares. The Purchaser (as defined below) is not aware of any state
where the making of the Offer is prohibited by administrative or judicial action
pursuant to a state statute. If the Purchaser becomes aware of any state where
the making of the Offer is prohibited, the Purchaser will make a good faith
effort to comply with any such statute or seek to have such statute declared
inapplicable to the Offer. If, after such good faith effort, the Purchaser
cannot comply with any applicable statute, the Offer will not be made to (nor
will tenders be accepted from or on behalf of) the holders of Shares in such
state. In those jurisdictions where the securities, "blue sky" or other laws
require the Offer to be made by a licensed broker or dealer, the Offer shall be
deemed to be made on behalf of the Purchaser by Morgan Stanley & Co.
Incorporated or one or more registered brokers or dealers licensed under the
laws of such jurisdictions.
Notice of Offer to Purchase for Cash
All Outstanding Shares
of
Dominick's Supermarkets, Inc.
at
$49 Net Per Share
by
Windy City Acquisition Corp.
a wholly-owned subsidiary of
Safeway Inc.
Windy City Acquisition Corp., a Delaware corporation (the "Purchaser")
and a wholly-owned subsidiary of Safeway Inc., a Delaware corporation (the
"Parent"), is offering to purchase all of the outstanding shares of Voting
Common Stock, par value $.01 per share (the "Voting Shares"), and Non-Voting
Common Stock, par value $.01 per share (the "Non-Voting Shares" and, together
with the Voting Shares, the "Shares"), of Dominick's Supermarkets, Inc., a
Delaware corporation (the "Company"), at a purchase price of $49 per Share, net
to the seller in cash, without interest thereon, upon the terms and subject to
the conditions set forth in the Offer to Purchase dated October 19, 1998 (the
"Offer to Purchase") and in the related Letter of Transmittal (which, as amended
from time to time, together constitute the "Offer").
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON MONDAY, NOVEMBER 16, 1998, UNLESS THE OFFER IS EXTENDED.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (i) THERE BEING
VALIDLY TENDERED AND NOT PROPERLY WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER
A NUMBER OF SHARES WHICH CONSTITUTES MORE THAN 50% OF THE ISSUED AND OUTSTANDING
SHARES (DETERMINED ON A FULLY-DILUTED BASIS WITHOUT GIVING EFFECT TO THE SHARES
ISSUABLE UPON EXERCISE OF THE YUCAIPA WARRANT (AS DEFINED IN THE OFFER TO
PURCHASE)) ON THE DATE OF PURCHASE OF THE COMPANY AND (ii) THE EXPIRATION OR
TERMINATION OF ALL APPLICABLE WAITING PERIODS UNDER THE HART-SCOTT-RODINO
ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED.
The purpose of the Offer is to acquire control of, and the entire
equity interest in, the Company. Following the consummation of the Offer, the
Purchaser intends to effect the Merger described below. The Offer is being made
pursuant to an Agreement and Plan of Merger, dated as of October 13, 1998 (the
"Merger Agreement"), among the Parent, the Purchaser and the Company. The Merger
Agreement provides, among other things, for the making of the Offer by the
Purchaser, and further provides that, following the completion of the Offer,
upon the terms and subject to the conditions of the
Page 1
<PAGE> 2
Merger Agreement and the Delaware General Corporation Law ("DGCL"), the
Purchaser will be merged with and into the Company (the "Merger"), and each
Share issued and outstanding immediately prior to the effective time of the
Merger (other than Shares held in the treasury of the Company and each Share
owned by the Parent, the Purchaser or any direct or indirect wholly-owned
subsidiary of the Parent or the Company, which shall be canceled and retired
without payment of any consideration therefor, and other than Shares, if any,
held by stockholders who have not voted in favor of the Merger Agreement or
consented thereto in writing and who have properly demanded appraisal of such
Shares in accordance with Section 262 of the DGCL) will, by virtue of the Merger
and without any action on the part of the holders of the capital stock, be
converted into the right to receive $49 in cash, without interest, less any
federal withholding taxes required under applicable law. The Merger Agreement is
more fully described in Section 11 of the Offer to Purchase.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY DETERMINED THAT
THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE
OFFER AND THE MERGER, ARE ADVISABLE AND FAIR TO, AND IN THE BEST INTERESTS OF,
THE STOCKHOLDERS OF THE COMPANY AND RECOMMENDS THAT ALL HOLDERS OF SHARES ACCEPT
THE OFFER AND TENDER ALL OF THEIR SHARES TO THE PURCHASER.
For purposes of the Offer, the Purchaser will be deemed to have
accepted for payment (and thereby purchased) Shares validly tendered and not
properly withdrawn as, if and when the Purchaser gives oral or written notice to
First Chicago Trust Company of New York (the "Depositary") of the Purchaser's
acceptance of such Shares for payment pursuant to the Offer. Upon the terms and
subject to the conditions of the Offer, payment for Shares accepted for payment
pursuant to the Offer will be made by deposit of the purchase price therefor
with the Depositary, which will act as agent for tendering stockholders for the
purpose of receiving payments from the Purchaser and transmitting such payments
to stockholders whose Shares have been accepted for payment. UNDER NO
CIRCUMSTANCES WILL INTEREST ON THE PURCHASE PRICE FOR SHARES BE PAID, REGARDLESS
OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH PAYMENT. In all cases,
payment for Shares tendered and accepted for payment pursuant to the Offer will
be made only after timely receipt by the Depositary of (i) certificates
representing Shares (the "Share Certificates") or confirmation of a book-entry
transfer of such Shares into the Depositary's account at The Depository Trust
Company (the "Book-Entry Transfer Facility") pursuant to the procedures set
forth in Section 3 of the Offer to Purchase, (ii) the Letter of Transmittal (or
a facsimile thereof), properly completed and duly executed, with any required
signature guarantees, or an Agent's Message (as defined in Section 2 of the
Offer to Purchase) in connection with a book-entry transfer, and (iii) any other
documents required by the Letter of Transmittal.
Subject to the applicable rules and regulations of the United States
Securities and Exchange Commission (the "Commission") and the terms of the
Merger Agreement, the Purchaser expressly reserves the right, in its sole
discretion, at any time and from time to time, and regardless of whether or not
any of the events set forth in Section 15 of the Offer to Purchase shall have
occurred or shall have been determined by the Purchaser to have occurred, to (i)
extend the
Page 2
<PAGE> 3
period of time during which the Offer is open and thereby delay acceptance for
payment of, and the payment for, any Shares, by giving oral or written notice of
such extension to the Depositary and (ii) amend the Offer in any respect by
giving oral or written notice of such amendment to the Depositary.
Any extension, delay, termination, waiver or amendment will be followed
as promptly as practicable by public announcement thereof to be made no later
than 9:00 A.M., New York City time, on the next business day after the
previously scheduled Expiration Date. During any such extension, all Shares
previously tendered and not properly withdrawn will remain subject to the Offer,
subject to the rights of a tendering stockholder to withdraw such stockholder's
Shares. The term "Expiration Date" means 12:00 Midnight, New York City time, on
Monday, November 16, 1998, unless and until the Purchaser, in its sole
discretion (but subject to the terms and conditions of the Merger Agreement),
shall have extended the period during which the Offer is open, in which event
the term "Expiration Date" shall mean the latest time and date at which the
Offer, as so extended by the Purchaser, shall expire.
Tenders of Shares made pursuant to the Offer may be withdrawn at any
time prior to the Expiration Date. Thereafter, such tenders are irrevocable,
except that they may be withdrawn at any time after December 17, 1998 unless
theretofore accepted for payment by the Purchaser pursuant to the Offer. If the
Purchaser extends the Offer, is delayed in its acceptance for payment of Shares
or is unable to purchase Shares validly tendered pursuant to the Offer for any
reason, then without prejudice to the Purchaser's rights under the Offer, the
Depositary may, on behalf of the Purchaser, retain tendered Shares and such
Shares may not be withdrawn except as otherwise described in Section 4 of the
Offer to Purchase. For a withdrawal to be effective, a written, telegraphic,
telex or facsimile transmission notice of withdrawal must be timely received by
the Depositary at one of its addresses set forth on the back cover of the Offer
to Purchase. Any notice of withdrawal must specify the name of the person who
tendered the Shares to be withdrawn, the number of Shares to be withdrawn and
the name of the registered holder, if different from that of the person who
tendered such Shares. If the Shares to be withdrawn have been delivered or
otherwise identified to the Depositary, then prior to the physical release of
such certificates, the name of the registered holder (if different from the
tendering stockholder) and the serial numbers shown on such certificates must be
submitted to the Depositary, together with a signed notice of withdrawal, the
signatures on which must be guaranteed by an Eligible Institution (as defined in
the Offer to Purchase) unless such Shares have been tendered for the account of
any Eligible Institution. If Shares have been tendered pursuant to the procedure
for book-entry transfer as set forth in Section 3 of the Offer to Purchase, any
notice of withdrawal must specify the name and number of the account at the
Book-Entry Transfer Facility to be credited with the withdrawn Shares. All
questions as to the form and validity (including time of receipt) of any notice
of withdrawal will be determined by the Purchaser, in its sole discretion, whose
determination will be final and binding. None of the Purchaser, the Parent, any
of their affiliates or assigns, the Dealer Manager, the Depositary,
Page 3
<PAGE> 4
the Information Agent or any other person will be under any duty to give
notification of any defects or irregularities in any notice of withdrawal or
incur any liability for failure to give any such notification. Withdrawals of
Shares may not be rescinded. Any Shares properly withdrawn will thereafter be
deemed not to have been validly tendered for purposes of the Offer. However,
withdrawn Shares may be re-tendered at any time prior to the Expiration Date by
following one of the procedures described in Section 3 of the Offer to Purchase.
The information required to be disclosed by Rule 14d-6(e)(1)(vii) of
the General Rules and Regulations under the Securities Exchange Act of 1934, as
amended, is contained in the Offer to Purchase and is incorporated herein by
reference.
The Company has provided the Purchaser with the Company's stockholder
list and security position listings for the purpose of disseminating the Offer
to holders of Shares. This Offer to Purchase and the related Letter of
Transmittal and other relevant materials will be mailed by the Purchaser to
record holders of Shares and furnished to brokers, dealers, commercial banks,
trust companies and similar persons whose names, or the names of whose nominees,
appear on the stockholder list or, if applicable, who are listed as participants
in a clearing agency's security position listing, for subsequent transmittal to
beneficial owners of Shares.
THE OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE
WITH RESPECT TO THE OFFER.
Questions and requests for assistance may be directed to the Dealer
Manager or the Information Agent as set forth below. Requests for copies of the
Offer to Purchase and the related Letter of Transmittal and all other tender
offer materials may be directed to the Information Agent or the Dealer Manager,
and copies will be furnished promptly at the Purchaser's expense. The Purchaser
will not pay any fees or commissions to any broker or dealer or any other person
(other than the Dealer Manager and the Information Agent) for soliciting tenders
of Shares pursuant to the Offer.
The Information Agent for the Offer is:
KISSEL-BLAKE INC.
A Division of Shareholder Communication Corporation
110 Wall Street
New York, New York 10005
Banks and Brokers, Please Call: (212) 344-6733
All Others Call Toll-Free: 1 (800) 554-7733
The Dealer Manager for the Offer is:
MORGAN STANLEY DEAN WITTER
Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
Toll Free: (800) 761-8950 (ext. 18178)
October 19, 1998
Page 4
<PAGE> 1
EXHIBIT 1
AGREEMENT AND PLAN OF MERGER
AMONG
SAFEWAY INC.,
WINDY CITY ACQUISITION CORP.
AND
DOMINICK'S SUPERMARKETS, INC.
DATED AS OF OCTOBER 13, 1998
<PAGE> 2
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of October 13, 1998 (the
"Agreement"), among Safeway Inc., a Delaware corporation ("Parent"), Windy City
Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of
Parent ("Merger Sub"), and Dominick's Supermarkets, Inc., a Delaware corporation
(the "Company").
RECITALS
WHEREAS, the Boards of Directors of Parent, Merger Sub and the Company have
each approved the merger of Merger Sub with and into the Company and the Company
becoming a wholly-owned direct subsidiary of Parent (the "Merger") in accordance
with the Delaware General Corporation Law (the "DGCL") upon the terms and
subject to the conditions set forth herein;
WHEREAS, in order to facilitate the Merger, the Boards of Directors of
Parent, Merger Sub and the Company have each approved the offer by Merger Sub to
purchase for cash all of the issued and outstanding shares of Common Stock, par
value $.01 per share (the "Voting Common Stock"), and Non-Voting Common Stock,
par value $.01 per share (the "Non-Voting Common Stock" and, together with the
Voting Common Stock, the "Common Stock"), of the Company at a price per share
equal to the Price per Share (as defined below) subject to the terms and
conditions set forth herein and in Annex A hereto; and
WHEREAS, concurrently with the execution and delivery of this Agreement and
as a condition and inducement to Parent's willingness to enter into this
Agreement, Parent and certain holders of Common Stock (the "Stockholders") have
entered into a stockholders agreement, dated as of the date hereof and in the
form attached as Exhibit A hereto (the "Stockholders Agreement");
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.
DEFINITIONS
For purposes of this Agreement, the term:
"Action" shall mean any action, order, writ, injunction, judgment or decree
outstanding or claim, suit, litigation, proceeding, arbitration or investigation
by or before any court, governmental or other regulatory or administrative
agency or commission or any other Person.
"Affiliate" shall mean, with respect to any Person, any other Person that
directly, or through one or more intermediaries, controls or is controlled by or
is under common control with such Person.
"Agreement" shall have the meaning set forth in the Preamble.
"Alternative Transaction" shall mean any of the following events: (i) any
merger, consolidation or business combination between the Company or any of its
Significant Subsidiaries and any person other than Parent, Merger Sub or any
affiliate thereof (a "Third Party"); (ii) the acquisition or purchase by a Third
Party of 25% or more of the capital stock (including securities exercisable or
exchangeable for or convertible into capital stock) of the Company or any
material equity interest in any of its Significant Subsidiaries or consolidated
assets of the Company and its Subsidiaries, taken as a whole; (iii) any tender
offer or exchange offer that, if consummated, would result in any Third Party
owning 25% or more of the Common Stock; or (iv) any proposal or offer with
respect to the foregoing.
"Assets" shall mean, with respect to any Person, all land, buildings,
improvements, leasehold improvements, Fixtures and Equipment and other assets,
real or personal, tangible or intangible, owned, leased or licensed by such
Person or any of its Subsidiaries.
1
<PAGE> 3
"Average Parent Price" shall mean the average of the closing prices of the
Parent Common Stock on the NYSE as reported on the NYSE Composite Transaction
Tape for the 15 trading days randomly selected by lot out of the 35 trading days
ending on the second trading day preceding the Effective Time.
"Benefit Arrangement" shall mean, with respect to any Person, any
employment, consulting, severance, change in control or other similar contract,
arrangement or policy and each plan, arrangement (written or oral), program,
agreement or commitment providing for insurance coverage (including without
limitation any self-insured arrangements), workers' compensation, disability
benefits, life, health, disability or accident benefits (including without
limitation any "voluntary employees' beneficiary association" as defined in
Section 501(c)(9) of the Code providing for the same or other benefits) or for
deferred compensation, profit-sharing bonuses, stock options, stock appreciation
rights, stock purchases or other forms of incentive compensation other than
Welfare Plan, Pension Plan or Multiemployer Plan, in each case with respect to
which such Person or any ERISA Affiliate has or may have any liability (accrued,
contingent or otherwise).
"Business Day" shall have the meaning specified in Rule 14d-1(e)(6) of the
Exchange Act for purposes of Article II of this Agreement and for all other
purposes shall mean each day other than Saturdays, Sundays and days when
commercial banks are authorized to be closed for business in New York, New York.
"Bylaws" shall have the meaning set forth in Section 2.4(c).
"Cause" shall mean, with respect to any employee of the Company or the
Surviving Corporation, any acts or omissions on the part of such employee
involving: (i) material dishonesty or misappropriation adversely affecting the
Company or the Surviving Corporation, as the case may be, or its property or
funds; (ii) serious misconduct, including but not limited to reckless or willful
destruction of Company property, non-performance of employee's responsibilities
as an employee, violation of a material condition of employment, aiding a
competitor of the Company or the Surviving Corporation, as the case may be,
unauthorized disclosure or use of confidential information on trade secrets or
sexual, racial or other actionable harassment; (iii) conviction of, or a plea of
nolo contendere to, any felony; or (iv) illegal, unethical, dishonest,
fraudulent or other similar conduct tending to place such employee or the
Company or the Surviving Corporation, as the case may be, by reason of
association with such employee, in disrepute or to subject the Company or the
Surviving Corporation, as the case may be, to material financial loss or loss of
business, in each case as determined by the Company Board or the Board of
Directors of the Surviving Corporation, as the case may be.
"Certificate of Incorporation" shall have the meaning set forth in Section
2.4(c).
"Certificate of Merger" shall have the meaning set forth in Section 3.3.
"Certificate of Ownership" shall have the meaning set forth in Section 3.3.
"Certificates" shall have the meaning set forth in Section 3.9(b).
"Closing" shall have the meaning set forth in Section 3.2.
"Closing Date" shall have the meaning set forth in Section 3.2.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Common Stock" shall have the meaning set forth in the Recitals.
"Company" shall have the meaning set forth in the Preamble.
"Company Board" shall have the meaning set forth in Section 2.4(a).
"Company Disclosure Schedule" shall have the meaning set forth in Section
4.3.
"Company Financial Adviser" shall have the meaning set forth in Section
4.20.
"Company Stock Rights" shall mean all stock options, restricted stock
awards, performance awards, dividend equivalents, deferred stock, stock
payments, stock appreciation rights and shares of capital stock granted,
awarded, earned or purchased pursuant to any Stock Plan.
"Company Stockholder Meeting" shall have the meaning set forth in Section
7.1.
2
<PAGE> 4
"Confidentiality Agreement" shall have the meaning set forth in Section
7.2(b).
"Continuing Directors" shall have the meaning set forth in Section 2.4(c).
"Contract" shall mean any note, bond, mortgage, indenture, guarantee, other
evidence of indebtedness, lease, license, contract, agreement on other
instrument or obligation (written or oral) to which the Company or any of its
Subsidiaries is a party or by which any of them or any of their properties or
assets may be bound which (i) does not terminate or is otherwise not cancelable
within one (1) year without penalty, cost or liability or (ii) involves the
payment or receipt of money in excess of $500,000.
"Conversion Ratio" shall mean the quotient obtained by dividing the Price
Per Share by the Average Parent Price.
"Current Premium" shall have the meaning set forth in Section 7.6(d).
"DGCL" shall have the meaning set forth in the Recitals.
"DOJ" shall have the meaning set forth in Section 7.8.
"Effective Time" shall have the meaning set forth in Section 3.3.
"Employee Benefits" shall have the meaning set forth in Section 7.5.
"Employee Plans" shall mean all Benefit Arrangements, Multiemployer Plans,
Pension Plans and Welfare Plans.
"Encumbrances" shall mean any claim, lien, pledge, option, charge,
easement, security interest, deed of trust, mortgage, right-of-way, covenant,
condition, restriction, encumbrance or other rights of third parties.
"Environmental Laws" shall mean any federal, state or local law, statute,
ordinance, order, decree, rule or regulation relating to releases, discharges,
emissions or disposals to air, water, land or groundwater of Hazardous
Materials; to the use handling or disposal of polychlorinated biphenyls,
asbestos or urea formaldehyde or any other Hazardous Material; to the treatment,
storage, disposal or management of Hazardous Materials; to exposure to toxic,
hazardous or other controlled, prohibited or regulated substances; and to the
transportation, release or any other use of Hazardous Materials, including the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
9601, et seq. ("CERCLA"), the Resource Conservation and Recovery Act, 42 U.S.C.
6901, et seq. ("RCRA"), the Toxic Substances Control Act, 15 U.S.C. 2601, et
seq. ("TSCA"), the Occupational, Safety and Health Act, 29 U.S.C. 651, et seq.,
the Clean Air Act, 42 U.S.C. 7401, et seq., the Federal Water Pollution Control
Act, 33 U.S.C. 1251, et seq., the Safe Drinking Water Act, 42 U.S.C. 300f, et
seq., the Hazardous Materials Transportation act, 49 U.S.C. 1802 et seq.
("HMTA") and the Emergency Planning and Community Right to Know Act, 42 U.S.C.
11001 et seq. ("EPCRA"), and other comparable state and local laws and all
rules, regulations and guidance documents promulgated pursuant thereto or
published thereunder.
"Environmental Report" shall mean any written report, study, assessment,
audit or other similar document that addresses any issues of actual or potential
noncompliance with, or actual or potential liability under or cost arising out
of, any Environmental Law that may in any way affect the Company or any of its
Subsidiaries.
"ERISA" shall have the meaning set forth in Section 4.12(c).
"ERISA Affiliate" shall mean, with respect to any Person, any entity which
is (or at any relevant time was) a member of a "controlled group of
corporations" with, under "common control" with, or a member of as "affiliated
service group" with, such Person as defined in Section 414(b), (c) or (m) of the
Code.
"Exchange Act" shall mean the Securities and Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"Expenses" shall have the meaning set forth in Section 9.3(a).
"Facility" shall have the meaning set forth in Section 4.13(a).
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"Fixtures And Equipment" shall mean, with respect to any Person, all of the
furniture, fixtures, furnishings, machinery and equipment owned, leased or
licensed by such Person and located in, at or upon the facilities of such
Person.
"GAAP" shall mean generally accepted accounting principles in the United
States of America, as in effect from time to time, consistently applied.
"Hazardous Materials" shall mean each and every element, compound, chemical
mixture, contaminant, pollutant, material, waste or other substance which is
defined, determined or identified as hazardous or toxic under Environmental Laws
or the release of which is regulated under Environmental Laws. Without limiting
the generality of the foregoing, the term includes: "hazardous substances" as
defined in CERCLA; "extremely hazardous substances" as defined in EPCRA;
"hazardous waste" as defined in RCRA; "hazardous materials" as defined in HMTA;
"chemical substance or mixture" as defined in TSCA; crude oil, petroleum
products or any fraction thereof; radioactive materials including source,
byproduct or special nuclear materials; asbestos or asbestos-containing
materials; chlorinated fluorocarbons ("CFCs"); and radon.
"HSR Act" shall have the meaning set forth in Section 4.6(b).
"Indemnified Parties" shall have the meaning set forth in Section 7.6(a).
"Leases" shall mean, with respect to any Person, all leases (including
subleases, licenses, any occupancy agreement and any other agreement) of real or
personal property, in each case to which such Person or any of its Subsidiaries
is a party, whether as lessor, lessee, guarantor or otherwise, or by which any
of them or their respective properties or assets are bound, or which otherwise
relate to the operation of their respective businesses.
"Management Agreement" shall mean that certain Management Agreement, dated
as of November 1, 1996, by and among the Company, Dominick's Finer Foods, Inc.
and Yucaipa.
"Material Adverse Effect" shall mean, with respect to either of the Company
or Parent, as the context requires, a material adverse change in, or effect on,
the business, operations, assets, results of operations or condition (financial
or otherwise) of such Person and its Subsidiaries taken as a whole or any change
which materially impairs or materially delays the ability of such Person to
consummate the transactions contemplated by this Agreement.
"Merger" shall have the meaning set forth in the Recitals.
"Merger Consideration" shall have the meaning set forth in Section 3.7(a).
"Merger Sub" shall have the meaning set forth in the Preamble.
"Minimum Condition" shall have the meaning set forth in Section 2.1(a).
"Minimum Shares" shall have the meaning set forth in Section 2.1(a).
"Multiemployer Plan" shall mean, with respect to any Person, any
"multiemployer plan," as defined in Section 4001(a)(3) of ERISA which such
Person or any ERISA Affiliate has or may have any liability (accrued, contingent
or otherwise).
"New Stock Rights" shall have the meaning set forth in Section 3.8(b).
"NLRB" shall have the meaning set forth in Section 4.15.
"Non-Voting Common Stock" shall have the meaning set forth in the Recitals.
"NYSE" shall mean the New York Stock Exchange.
"Permits" shall have the meaning set forth in Section 4.7.
"Offer" shall have the meaning set forth in Section 2.1.
"Offer Consummation Date" shall mean the date Merger Sub accepts for
payment and pays for all shares of Common Stock that have been validly tendered
and not withdrawn pursuant to the Offer.
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"Offer Documents" shall have the meaning set forth in Section 2.2(a).
"Outside Date" shall mean April 15, 1999.
"Parent" shall have the meaning set forth in the Preamble.
"Parent Board" shall have the meaning set forth in Section 3.8(b).
"Parent Common Stock" shall have the meaning set forth in Section 3.8(b).
"Parent Financial Adviser" shall mean Morgan Stanley & Co. Incorporated.
"Paying Agent" shall have the meaning set forth in Section 3.9(a).
"Payment Fund" shall have the meaning set forth in Section 3.9(a).
"Pension Plan" shall mean, with respect to any Person, any "employee
pension benefit plan" as defined in Section 3(2) of ERISA (other than a
Multiemployer Plan) which such Person contributed to or was required to
contribute to, or under which such Person or any ERISA Affiliate has or may have
any liability (accrued, contingent or otherwise).
"Permitted Action" shall have the meaning set forth in Section 7.1(a).
"Permitted Encumbrances" shall mean any Encumbrances resulting from (i) all
statutory or other liens for Taxes or assessments which are not yet due or
delinquent or the validity of which are being contested in good faith by
appropriate proceedings for which adequate reserves are being maintained in
other accordance with GAAP; (ii) all cashiers', landlords', workers' and
repairers' liens, and other similar liens imposed by law, incurred in the
ordinary course of business; (iii) all laws and governmental rules, regulations,
ordinances and restrictions; (iv) all leases, subleases, licenses, concessions
or service contracts to which any Person or any of its Subsidiaries is a party;
(v) Encumbrances identified on title policies or preliminary title reports or
other documents or writings delivered or made available for inspection to Parent
prior to the date hereof or included in the Public Records; and (vi) all other
liens and mortgages, covenants, imperfections in title, charges, easements,
restrictions and other Encumbrances which, in the case of any such Encumbrances
pursuant to clause (i) through (vi), do not materially detract from or
materially interfere with the present use of the asset subject thereto or
affected thereby.
"Person" shall mean any individual, corporation, partnership, limited
liability company, joint venture, governmental agency or instrumentality, or any
other entity.
"Preferred Stock" shall have the meaning set forth in Section 4.3.
"Price Per Share" shall have the meaning set forth in Section 2.1(a).
"Property" shall have the meaning set forth in Section 4.13(a).
"Proxy Statement" shall have the meaning set forth in Section 4.19.
"Schedule 14D-1" shall have the meaning set forth in Section 2.2(a).
"Schedule 14D-9" shall have the meaning set forth in Section 2.2(b).
"SEC" shall have the meaning set forth in Section 2.2(a).
"SEC Reports" shall have the meaning set forth in Section 4.8(a).
"Securities Act" shall mean the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Significant Subsidiary" 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.
"Spread Per Share" shall have the meaning set forth in Section 3.8(a).
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<PAGE> 7
"Stock Plans" shall mean the 1995 Plan, 1996 Plan, Directors Deferred
Compensation and Restricted Stock Plan and Stock Purchase Plan and any other
stock option, performance unit or similar plan of the Company and its
Subsidiaries.
"Stock Purchase Plan" shall have the meaning set forth in Section 3.8(d).
"Stockholders" shall have the meaning set forth in the Recitals.
"Stockholders Agreement" shall have the meaning set forth in the Recitals.
"Subsidiary" shall mean, with respect to any Person, any corporation or
other organization, whether incorporated or unincorporated, of which such Person
directly or indirectly owns or controls at least a majority of the securities or
other interests having by their terms ordinary voting power to elect a majority
of the board of directors or others performing similar functions.
"Superior Transaction" shall mean any bona fide Alternative Transaction
involving at least 60% of the outstanding shares of Common Stock on terms that
the Company Board determines in its good faith judgment (after consultation with
the Company Financial Adviser or another financial adviser of nationally
recognized reputation, taking into account all the terms and conditions of the
Alternative Transaction, including any break-up fees, expense reimbursement
provisions, conditions to consummation and all other legal, financial,
regulatory and other aspects of the proposal and, to the extent relevant to any
of the foregoing, the identity of the Person proposing the Superior Transaction)
are more favorable to the Company's stockholders from a financial point of view
than this Agreement and the Merger taken as a whole.
"Surviving Corporation" shall have the meaning set forth in Section 3.1.
"Tax" or "Taxes" shall mean all federal, state, local, foreign and other
taxes, levies, imposts, assessments, impositions or other similar government
charges, including, without limitation, income, estimated income, business,
occupation, franchise, real property, payroll, personal property, sales,
transfer, stamp, use, employment, commercial rent or withholding, occupancy,
premium, gross receipts, profits, windfall profits, deemed profits, license,
lease, severance, capital, production, corporation, ad valorem, excise, duty or
other taxes, including interest, penalties and additions (to the extent
applicable) thereto whether disputed or not.
"Tax Return" shall mean any report, return, document, declaration or other
information or filing required to be supplied to any taxing authority or
jurisdiction (foreign or domestic) with respect to Taxes, including, without
limitation, information returns, any documents with respect to or accompanying
payments of estimated Taxes, or with respect to or accompanying requests for the
extension of time in which to file any such report, return, document,
declaration or other information.
"Termination Fee" shall have the meaning set forth in Section 9.3(a).
"Transfer Taxes" shall have the meaning set forth in Section 7.12.
"Voting Common Stock" shall have the meaning set forth in the Recitals.
"Welfare Plan" shall mean, with respect to any Person, any "employee
welfare benefit plan" as defined in Section 3(1) of ERISA which such Person has
or may have any liability (accrued, contingent or otherwise).
"Yucaipa" shall mean The Yucaipa Companies, a California general
partnership.
"Yucaipa Warrant" shall mean that certain Class A Common Stock Purchase
Warrant No. W-1 issued by the Company to Yucaipa on March 22, 1995.
"1995 Plan" shall mean the Company's Restated 1995 Stock Option Plan.
"1996 Plan" shall mean the Company's 1996 Equity Participation Plan.
"1996 Stockholders Agreement" shall have the meaning set forth in Section
4.2.
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ARTICLE II.
THE TENDER OFFER
SECTION 2.1. The Offer.
(a) Provided that this Agreement shall not have been terminated in
accordance with Article IX, then (i) not later than the first Business Day after
execution of this Agreement, Parent and the Company shall issue a public
announcement of the execution of this Agreement and (ii) Merger Sub shall, as
soon as practicable, but in no event later than five Business Days after the
date of such announcement, commence (within the meaning of Rule 14d-2(a) of the
Exchange Act) a tender offer (the "Offer") to purchase all of the outstanding
shares of Common Stock at a price of $49.00 per share, net to the seller in cash
(the "Price Per Share") subject to reduction only for any applicable federal
withholding taxes. The Offer shall be made pursuant to an Offer to Purchase and
related Letter of Transmittal in form reasonably satisfactory to the Company and
containing terms and conditions set forth in this Agreement. The obligation of
Merger Sub to accept for payment, purchase and pay for shares of Common Stock
tendered pursuant to the Offer shall be subject only to (i) at least that number
of shares of Common Stock equivalent to a majority of the total issued and
outstanding shares of Common Stock on a fully diluted basis (without giving
effect to the shares issuable upon the exercise of the Yucaipa Warrant) on the
date such shares are purchased pursuant to the Offer (the "Minimum Shares")
being validly tendered and not withdrawn prior to the expiration of the Offer
(the "Minimum Condition") and (ii) the satisfaction of the other conditions set
forth in Annex A hereto, any of which conditions may be waived by Merger Sub in
its sole discretion; provided, however, that Merger Sub shall not waive the
Minimum Condition without the prior written consent of the Company. The Company
agrees that no shares of Common Stock held by the Company or any of its
Subsidiaries will be tendered to Merger Sub pursuant to the Offer.
(b) Without the prior written consent of the Company, neither Parent nor
Merger Sub will (i) decrease the Price Per Share payable in the Offer, (ii)
decrease the number of shares of Common Stock sought pursuant to the Offer or
change the form of consideration payable in the Offer, (iii) change or amend the
conditions to the Offer (including the conditions set forth in Annex A hereto)
or impose additional conditions to the Offer, (iv) change the expiration date of
the Offer or (v) otherwise amend, add or waive any term or condition of the
Offer in any manner adverse to the holders of shares of Common Stock; provided,
however, that if on any scheduled expiration date of the Offer, which shall
initially be 20 Business Days after the commencement date of the Offer, all
conditions to the Offer have not been satisfied or waived, Merger Sub may, and
at the request of the Company shall, from time to time, extend the expiration
date of the Offer for up to 10 additional Business Days (but in no event shall
Merger Sub be required to extend the expiration date of the Offer beyond the
Outside Date); and provided further that Merger Sub may, without the consent of
the Company, (x) extend the Offer for any period required by any rule,
regulation, interpretation or position of the SEC or the Staff thereof
applicable to the Offer and (y) extend the Offer if (1) the Offer Conditions
shall have been satisfied or waived and (2) the number of shares of Common Stock
that have been validly tendered and not withdrawn represent more than 65% but
less than 90% of the issued and outstanding shares of each of the Voting Common
Stock and the Non-Voting Common Stock; provided, however, that in no event shall
the extensions permitted under the foregoing clause (y) exceed, in the
aggregate, 10 Business Days. Parent and Merger Sub will, subject to the terms
and conditions of this Agreement, use their best efforts to consummate the
Offer. Assuming the prior satisfaction or waiver of all the conditions to the
Offer set forth in Annex A, and subject to the terms and conditions of this
Agreement, Merger Sub shall, and Parent shall cause Merger Sub to, accept for
payment, purchase and pay for, in accordance with the terms of the Offer, all
shares of Common Stock validly tendered and not withdrawn pursuant to the Offer
as soon as permitted under applicable law, recognizing that the parties wish to
close as expeditiously as possible following expiration or termination of the
waiting period under the HSR Act. Parent shall provide, or cause to be provided,
to Merger Sub, on a timely basis, the funds necessary to purchase any shares of
Common Stock that Merger Sub becomes obligated to purchase pursuant to the
Offer.
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SECTION 2.2. SEC Filings.
(a) As soon as reasonably practicable on the commencement date of the
Offer, Parent and Merger Sub shall file with the Securities and Exchange
Commission (the "SEC"), with respect to the Offer, a Tender Offer Statement on
Schedule 14D-1 (the "Schedule 14D-1"). The Schedule 14D-1 will comply as to form
and content in all material respects with the applicable provisions of the
federal securities laws and will contain or incorporate by reference the Offer
to Purchase, the related Letter of Transmittal and other ancillary documents and
agreements pursuant to which the Offer will be made (the Schedule 14D-1, the
Offer to Purchase, the Letter of Transmittal and such other documents being
collectively referred to herein as the "Offer Documents"). The Company and its
counsel shall be given an opportunity to review and comment upon the Offer
Documents and any amendment or supplement thereto prior to the filing thereof
with the SEC, and Parent and Merger Sub shall consider such comments in good
faith. Parent and Merger Sub agree to provide to the Company and its counsel any
comments which Parent, Merger Sub or their counsel may receive from the Staff of
the SEC with respect to the Offer Documents promptly after receipt thereof.
Parent, Merger Sub and the Company agree to correct promptly any information
provided by any of them for use in the Offer Documents which shall have become
false or misleading in any material respect, and Parent and Merger Sub further
agree to take all steps necessary to cause the Schedule 14D-1 as so corrected to
be filed with the SEC and disseminated to the Company's stockholders, in each
case as and to the extent required by the applicable provisions of the federal
securities laws.
(b) As soon as reasonably practicable on the commencement date of the
Offer, the Company shall file with the SEC a Solicitation/Recommendation
Statement on Schedule 14D-9 (as amended from time to time, the "Schedule 14D-9")
containing the recommendation of the Company Board described in Section 4.22
(subject to the right of the Company Board to withdraw, amend or modify such
recommendation in accordance with Section 7.1(a)) which will comply as to form
and content in all material respects with the applicable provisions of the
federal securities laws. The Company will use its reasonable best efforts to
cause the Schedule 14D-9 to be filed on the same date that the Schedule 14D-1 is
filed; provided, however, that in any event the Schedule 14D-9 will be filed no
later than ten Business Days following the commencement date of the Offer. The
Company will cooperate with Parent and Merger Sub in mailing or otherwise
disseminating the Schedule 14D-9 with the appropriate Offer Documents to the
stockholders of the Company. Parent and its counsel shall be given an
opportunity to review and comment upon the Schedule 14D-9 and any amendment or
supplement thereto prior to the filing thereof with the SEC, and the Company
shall consider any such comments in good faith. The Company agrees to provide to
Parent and Merger Sub and their counsel any comments which the Company or its
counsel may receive from the Staff of the SEC with respect to the Schedule 14D-9
promptly after receipt thereof. The Company, Parent and Merger Sub agree to
correct promptly any information provided by any of them for use in the Schedule
14D-9 which shall have become false or misleading in any material respect, and
the Company further agrees to take all steps necessary to cause such Schedule
14D-9 as so corrected to be filed with the SEC and disseminated to the Company's
stockholders, in each case as and to the extent required by the applicable
provisions of the federal securities laws. Parent, Merger Sub and the Company
each hereby agree to provide promptly such information necessary to the
preparation of the exhibits and schedules to the Schedule 14D-9 and the Offer
Documents which the respective party responsible therefor shall reasonably
request.
SECTION 2.3. Company Action. Promptly upon execution of this Agreement and
in connection with the Offer, the Company shall furnish Merger Sub with such
information (including a list of the stockholders of the Company, mailing labels
and a list of securities positions, each as of a recent date), and shall
thereafter render such assistance, as Parent or Merger Sub may reasonably
request in communicating the Offer to the Company's stockholders. Subject to the
requirements of applicable law and except for such steps as are necessary to
disseminate the Offer Documents and any other documents necessary to consummate
the Merger, Parent and Merger Sub and each of their respective affiliates and
associates shall (a) hold in confidence the information contained in any of such
labels and lists, (b) use such information only in connection with the Offer and
the Merger and (c) if this Agreement is terminated, promptly deliver to the
Company all copies of such information then in their possession.
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SECTION 2.4. Composition of the Company Board.
(a) Promptly upon the acceptance for payment of, and payment by Merger Sub
in accordance with the Offer for, not less than a majority of the outstanding
shares of Common Stock on a fully diluted basis (without giving effect to the
shares issuable upon the exercise of the Yucaipa Warrant) pursuant to the Offer,
Merger Sub shall be entitled to designate such number of members of the Board of
Directors of the Company (the "Company Board"), rounded up to the next whole
number, equal to that number of directors which equals the product of the total
number of directors on the Company Board (giving effect to the directors elected
pursuant to this sentence) multiplied by the percentage that such number of
shares of Common Stock owned in the aggregate by Merger Sub or Parent, upon such
acceptance for payment, bears to the number of shares of Common Stock
outstanding; provided, however, that until the Effective Time there shall be at
least one Continuing Director. Upon the written request of Merger Sub, the
Company shall, on the date of such request, (i) either increase the size of the
Company Board or secure the resignations of such number of its incumbent
directors as is necessary to enable Parent's designees to be so elected to the
Company Board and (ii) cause Parent's designees to be so elected, in each case
as may be necessary to comply with the foregoing provisions of this Section
2.4(a).
(b) The Company's obligation to cause designees of Merger Sub to be elected
or appointed to the Company Board shall be subject to Section 14(f) of the
Exchange Act and Rule 14f-1 promulgated thereunder. The Company shall promptly
take all actions required pursuant to Section 14(f) and Rule 14f-1 in order to
fulfill its obligations under this Section 2.4, and shall include in the
Schedule 14D-9 such information with respect to the Company and its officers and
directors as is required under Section 14(f) and Rule 14f-1. Parent and Merger
Sub will supply to the Company any information with respect to any of them and
their nominees, officers, directors and affiliates required by Section 14(f) and
Rule 14f-1 and applicable rules and regulations.
(c) After the time that Merger Sub's designees constitute at least a
majority of the Company Board and until the Effective Time, any (i) amendment or
termination of this Agreement, (ii) amendment to the Amended and Restated
Certificate of Incorporation (the "Certificate of Incorporation") or bylaws (the
"Bylaws") of the Company or (iii) extension of time for the performance or
waiver of the obligations or other acts of Parent or Merger Sub or waiver of the
Company's rights hereunder shall require the approval of a majority of the then
serving directors, if any, who are directors as of the date hereof (the
"Continuing Directors"), except to the extent that applicable law requires that
such action be acted upon by the full Company Board, in which case such action
will require the concurrence of a majority of the Company Board, which majority
shall include each of the Continuing Directors. If there is more than one
Continuing Director and prior to the Effective Time, the number of Continuing
Directors is reduced for any reason, the remaining Continuing Director or
Directors shall be entitled to designate persons to fill such vacancies who
shall be deemed Continuing Directors for purposes of this Agreement. In the
event there is only one Continuing Director and he or she resigns or is removed
or if all Continuing Directors resign or are removed, he, she or they, as
applicable, shall be entitled to designate his, her or their successors, as the
case may be, each of whom shall be deemed a Continuing Director for purposes of
this Agreement. The Company Board shall not delegate any matter set forth in
this Section 2.4 to any committee of the Company Board.
ARTICLE III.
THE MERGER
SECTION 3.1. The Merger. Upon the terms and subject to the conditions of
this Agreement and in accordance with the DGCL, at the Effective Time, Merger
Sub shall be merged with and into the Company. As a result of the Merger, the
separate corporate existence of Merger Sub shall cease and the Company shall
continue as the surviving corporation of the Merger (the "Surviving
Corporation").
SECTION 3.2. Closing and Closing Date. Unless this Agreement shall have
been terminated and the transactions herein contemplated shall have been
abandoned pursuant to the provisions of Section 9.1, the closing (the "Closing")
of the Merger shall take place (a) at 9:00 a.m., New York City time, on the
second
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Business Day after all of the conditions to the respective obligations of the
parties set forth in Article VIII hereof shall have been satisfied or waived or
(b) at such other time and date as Parent and the Company shall agree (such date
and time on and at which the Closing occurs being referred to herein as the
"Closing Date"). The Closing shall take place at the offices of Latham & Watkins
located at 633 West Fifth Street, Sixth Floor, Los Angeles, California 90071.
SECTION 3.3. Effective Time. The parties hereto shall cause the Merger to
be consummated by either (i) filing a certificate of merger (the "Certificate Of
Merger") on the Closing Date with the Secretary of State of the State of
Delaware, or (ii) in the event Merger Sub shall have acquired 90% or more of the
outstanding shares of each class of capital stock of the Company, filing a
certificate of ownership and merger (the "Certificate of Ownership") with the
Secretary of State of the State of Delaware, in each case in such form as
required by and executed in accordance with the relevant provisions of the DGCL
(the date and time of the filing of the Certificate of Merger or the Certificate
of Ownership, as the case may be, with the Secretary of State of the State of
Delaware or at such later time or date after such filing as may be specified in
the Certificate of Merger or the Certificate of Ownership, as the case may be,
being the "Effective Time").
SECTION 3.4. Effects of the Merger. The Merger shall have the effects set
forth in the applicable provisions of the DGCL. Without limiting the generality
of the foregoing, and subject thereto, at the Effective Time all the property,
rights, privileges, immunities, powers and franchises 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. At Parent's election, any direct or
indirect subsidiary of Parent other than Merger Sub may be merged with and into
the Company instead of Merger Sub; provided, however, that such election (i)
does not cause or result in a delay or postponement of the consummation of the
Offer or the Effective Time and (ii) shall not relieve Merger Sub of any of its
obligations under this Agreement. In the event of such an election, the parties
agree to execute an appropriate amendment to this Agreement in order to reflect
such election.
SECTION 3.5. Certificate of Incorporation; Bylaws.
(a) At the Effective Time and without any further action on the part of the
Company and Merger Sub, the Certificate of Incorporation of the Company as in
effect immediately prior to the Effective Time shall be the Certificate of
Incorporation of the Surviving Corporation until duly amended as provided
therein and under the DGCL, except that the Certificate of Incorporation of the
Surviving Corporation shall provide for the authorized capitalization and for
the number of directors set forth in the Certificate of Merger filed with the
Secretary of State of the State of Delaware.
(b) At the Effective Time and without any further action on the part of the
Company and Merger Sub, the Bylaws of the Company as in effect immediately prior
to the Effective Time shall be the Bylaws of the Surviving Corporation until
duly amended as provided for therein and under the DGCL.
SECTION 3.6. 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 Certificate of
Incorporation and Bylaws 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 are
duly elected or appointed (as the case may be) and qualified.
SECTION 3.7. Conversion of Securities. At the Effective Time, by virtue of
the Merger and without any action on the part of Parent, Merger Sub, the Company
or the holders of any of the following securities:
(a) Subject to Section 3.7(d), each share of Common Stock issued and
outstanding immediately prior to the Effective Time (other than shares of
Common Stock to be canceled in accordance with Section 3.7(b) hereof) shall
be converted into and represent the right to receive the Price Per Share in
cash (the "Merger Consideration"). The Merger Consideration shall be
payable upon the surrender of the certificate formerly representing such
share of Common Stock. As of the Effective Time, all such shares of Common
Stock shall no longer be outstanding and shall automatically be canceled
and retired and shall cease to exist, and each holder of a certificate
representing any such shares of Common Stock shall cease to have any rights
with respect thereto, except the right to receive the Merger Consideration.
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(b) Each share of Common Stock that is (i) held in the treasury of the
Company or (ii) owned by Parent, Merger Sub or any other direct or indirect
wholly-owned subsidiary of Parent or the Company, in each case immediately
prior to the Effective Time, shall be canceled and retired without any
conversion thereof and shall cease to exist and no payment or distribution
shall be made with respect thereto.
(c) Each share of common, preferred or other capital stock of Merger
Sub issued and outstanding immediately prior to the Effective Time shall be
converted into and become one fully paid and nonassessable share of common,
preferred or other capital stock of the Surviving Corporation and shall
thereafter constitute all of the issued and outstanding capital stock of
the Surviving Corporation.
(d) Notwithstanding any other provision of this Agreement to the
contrary, shares of Common Stock outstanding immediately prior to the
Effective Time and held by a holder who has (i) not voted in favor of the
Merger or consented thereto in writing and (ii) demanded appraisal for such
Common Stock in accordance with the DGCL shall not be converted into a
right to receive the Merger Consideration, but shall be entitled to receive
such amount as shall be determined pursuant to Section 262 of the DGCL,
unless such holder fails to perfect or withdraws or otherwise loses its
right to appraisal or it is determined that such holder does not have
appraisal rights in accordance with the DGCL. If after the Effective Time
such holder fails to perfect or withdraws or loses its right to appraisal,
or if it is determined that such holder does not have an appraisal right,
such shares of Common Stock shall be treated as if they had been converted
as of the Effective Time for a right to receive the Merger Consideration
without any interest thereon. The Company shall give Parent and Merger Sub
prompt notice of any demands received by the Company for appraisal of
shares of Common Stock pursuant to Section 262 of the DGCL, any withdrawal
of such demands and any other instruments served pursuant to the DGCL and
received by the Company, and Parent and Merger Sub shall have the right to
direct all negotiations and proceedings with respect to such demands,
except as required by applicable law. The Company shall not, except with
the prior written consent of Parent and Merger Sub, make any payment with
respect to, or settle or offer to settle, any such demands.
(e) As of the Effective Time, the Yucaipa Warrant shall no longer be
outstanding and shall automatically be canceled and shall cease to exist,
and the holder thereof shall cease to have any rights with respect thereto,
except that in the event that the Yucaipa Warrant shall not have been
purchased by Parent or Merger Sub in accordance with the Stockholders
Agreement, the holder thereof shall have the right to receive the
consideration described in the Stockholders Agreement.
SECTION 3.8. Treatment of Employee Options and Other Company Stock Rights.
(a) Prior to the Effective Time, the Company may accelerate to the day
after the Effective Time the vesting of the unvested Company Stock Rights (or
any portion thereof) identified on Section 3.8(a) of the Company Disclosure
Schedule but, other than those Company Stock Rights permitted to be accelerated
hereunder, neither the Company, the Company Board nor any committee thereof
shall accelerate the vesting or exercisability of any Company Stock Rights prior
to the Effective Time. Prior to the Effective Time, the Company will enter into
agreements in respect of those outstanding Company Stock Rights heretofore
granted pursuant to the 1995 Plan and the 1996 Plan which are identified on
Section 3.8(a) of the Company Disclosure Schedule. Such agreements will provide
for the payment, upon surrender of each Company Stock Right on the day after the
Effective Time, of an amount of cash per share subject to the vested portion
(including any Company Stock Right or portion thereof for which the vesting is
accelerated pursuant to this Section 3.8(a)) of each such Company Stock Right
equal to the excess, if any, of the Price Per Share over the exercise price of
such Company Stock Right (the "Spread Per Share") less an amount equal to all
taxes required to be withheld from such payment. Subject to Section 3.8(b), any
Company Stock Rights not so surrendered or otherwise exercised prior to the
Effective Time shall terminate at the Effective Time in accordance with the
terms of the applicable Stock Plan or such agreements with optionees, and the
Company and the Company Board, or any committee thereof, shall take, or cause to
be taken, any action required or desirable to effectuate such termination.
Parent shall cause the Company to pay, on the day after the Effective Time, the
aggregate Spread Per Share to the holders of Company Stock Rights surrendered in
accordance with this Section 3.8(a).
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(b) Prior to the Effective Time, the Company Board (or, if appropriate, any
Committee thereof) and the Board of Directors of Parent (the "Parent Board")
shall adopt appropriate resolutions and take all other actions necessary (or
instruct the officers of the Company to take all such actions, including,
without limitation, causing the Company to enter into appropriate agreements
with the holders of all affected Company Stock Rights) to provide that effective
at the Effective Time, the vested and unvested portion of all outstanding
Company Stock Rights heretofore granted under the 1995 Plan and the 1996 Plan
other than those Company Stock Rights identified on Section 3.8(a) of the
Company Disclosure Schedule (which will be canceled in exchange for the payment
provided for in Section 3.8(a) above) shall be assumed by Parent and converted
automatically into options to purchase shares of common stock, par value $.01
per share, of Parent (the "Parent Common Stock") (collectively, "New Stock
Rights") in an amount and, if applicable, at an exercise price determined as
provided below:
(i) The number of shares of Parent Common Stock to be subject to the
New Stock Right shall be equal to the product of (x) the number of shares
of Common Stock remaining subject (as of immediately prior to the Effective
Time) to the Company Stock Right identified on Section 3.8(b) of the
Company Disclosure Schedule multiplied by (y) the Conversion Ratio,
provided that any fractional shares of Parent Common Stock resulting from
such multiplication shall be rounded down to the nearest share; and
(ii) The exercise price per share of Parent Common Stock under the New
Stock Right shall be equal to the exercise price per share of the Common
Stock under the original Company Stock Right divided by the Conversion
Ratio, provided that such exercise price shall be rounded down to the
nearest cent.
(iii) As soon as practicable (but in any event within fifteen (15)
Business Days) after the Effective Time, Parent shall deliver to each
holder of an outstanding Company Stock Right an appropriate notice setting
forth such holder's rights pursuant thereto, and the unvested portion of
such Company Stock Right shall otherwise continue in effect on the same
terms and conditions (including antidilution provisions) as were in effect
prior to the Effective Time.
(iv) Subject to any applicable limitations under the Securities Act,
Parent shall file a registration statement on Form S-8 (or any successor
form) or another appropriate form (or shall cause such New Stock Rights to
be deemed to be an option or other stock right issued pursuant to a stock
option or other equity compensation plan of Parent for which shares of
Parent Common Stock have previously been registered pursuant to an
appropriate registration form with the SEC), and shall cause such
registration statement to be effective on or prior to the date of the
Effective Time, with respect to the shares of Parent Common Stock issuable
upon exercise of the New Stock Rights, 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 New Stock Rights shall remain outstanding.
The adjustment provided herein with respect to any options which are "incentive
stock options" (as defined in Section 422 of the Code) shall be, and is intended
to be, effected in a manner which is consistent with Section 424(a) of the Code.
Except as otherwise provided for in this Section 3.8, after the Effective Time,
each New Stock Right shall be exercisable and shall vest upon the same terms and
conditions as were applicable to the related Company Stock Right immediately
prior to the Effective Time (except that with regard to such New Stock Right,
any references to the Company shall be deemed, as appropriate, to include
Parent); provided, however, that any New Stock Rights held by an employee or
consultant of the Company or any of its Subsidiaries whose employment or
consulting arrangement, as the case may be, is terminated without Cause or is
subject to a Constructive Termination (which term shall be defined in the
agreements entered into with the holders of the applicable Company Stock Rights
in a manner consistent with the definition of such term contained in the
Employment Agreements (each dated as of October 9, 1998) identified on Section
4.12 of the Company Disclosure Schedule), in either case after the Effective
Time, shall become fully vested on the date of such termination. Parent agrees
that it shall take all action necessary, on or prior to the Effective Time, to
authorize and reserve a number of shares of Parent Common Stock sufficient for
issuance upon exercise of New Stock Rights as contemplated by this Section 3.8.
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(c) Prior to the Effective Time, the Company will take all actions
necessary (i) to shorten the offering period under the Company's 1997 Employee
Stock Purchase Plan (the "Stock Purchase Plan") in which the Effective Time
occurs so that such offering period terminates on the day prior to the Effective
Time and (ii) to terminate the Stock Purchase Plan effective as of the Effective
Time.
(d) Prior to the Effective Time, the Company, the Company Board or any
committee thereof shall take such actions, including, without limitation, by
adopting appropriate resolutions and timely providing any notification required
pursuant to the terms of any Stock Plan or Company Stock Right necessary to
ensure that as of the Effective Time, no holder of a Company Stock Right or any
participant in any Stock Plan shall have any right thereunder to acquire capital
stock of the Company, Merger Sub or the Surviving Corporation. The Company, the
Company Board or any committee thereof will take such actions, including,
without limitation, by adopting appropriate resolutions and timely providing any
notification required pursuant to the terms of any Stock Plan or Company Stock
Right necessary to ensure that as of the Effective Time, none of Merger Sub, the
Company, the Surviving Corporation or any of their respective Subsidiaries is or
will be bound by any Company Stock Rights, other options, warrants, rights or
agreements which would entitle any person, other than Merger Sub or its
affiliates, to own any capital stock of the Company, Merger Sub, the Surviving
Corporation or any of their respective subsidiaries or to receive any payment in
respect thereof, except as otherwise provided herein.
SECTION 3.9. Surrender of Shares of Common Stock; Stock Transfer Books.
(a) Prior to the Closing Date, Merger Sub shall designate a bank or trust
company reasonably acceptable to the Company to act as agent for the holders of
shares of Common Stock in connection with the Merger (the "Paying Agent") to
receive the Merger Consideration to which holders of shares of Common Stock
shall become entitled pursuant to Section 3.7(a). Prior to the filing of the
Certificate of Merger or Certificate of Ownership, as the case may be, with the
Secretary of State of the State of Delaware, Parent or Merger Sub will deposit
with the Paying Agent, in trust for the benefit of the stockholders of the
Company, cash in an aggregate amount equal to the product of (i) the number of
shares of Common Stock outstanding (and not owned of record by Parent or Merger
Sub) immediately prior to the Effective Time multiplied by (ii) the Price Per
Share. The deposit made by Parent or Merger Sub pursuant to the preceding
sentence is hereinafter referred to as the "Payment Fund." The Paying Agent
shall cause the Payment Fund to be (i) held for the benefit of the holders of
Common Stock and (ii) promptly applied to making the payments provided for in
Section 3.9(b). The Payment Fund shall not be used for any purpose that is not
provided for herein.
(b) Promptly after the Effective Time, Parent shall, or shall cause the
Surviving Corporation to, cause to be mailed to each record holder, as of the
Effective Time, of an outstanding certificate or certificates which immediately
prior to the Effective Time represented shares of Common Stock (the
"Certificates"), a form of letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon proper delivery of the Certificates to the Paying Agent) and
instructions for use in effecting the surrender of the Certificates in exchange
for the Merger Consideration. Upon surrender to the Paying Agent of a
Certificate, together with such letter of transmittal, duly completed and
validly executed in accordance with the instructions thereto, and such other
documents as may be reasonably required pursuant to such instructions, the
holder of such Certificate shall be paid promptly, without interest thereon and
subject to any required withholding or taxes, the amount of cash to which such
holder is entitled pursuant to Section 3.7(a), and the Certificate so
surrendered shall forthwith be canceled. Until so surrendered and exchanged,
each Certificate, subject to Sections 3.7(b) and (d), shall represent solely the
right to receive the Merger Consideration into which the Common Stock it
theretofore represented shall have been converted pursuant to Section 3.7(a),
subject to any required withholding of taxes. If the payment of the Merger
Consideration is to be made to a person other than the person in whose name the
surrendered Certificate is registered, it shall be a condition of payment that
the Certificate so surrendered shall be properly endorsed or shall be otherwise
in proper form for transfer and that the person requesting such payment shall
have paid any transfer and other taxes required by reason of the payment of the
Merger Consideration to a person other than the registered holder of the
Certificate surrendered or shall have established to the satisfaction of the
Surviving Corporation that such tax either has been paid or is not applicable.
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(c) At any time after the six month anniversary of the Effective Time,
Parent shall be entitled to require the Paying Agent to deliver to Parent all
cash and any other instruments in its possession relating to the transactions
contemplated by this Agreement which had been made available to the Paying Agent
and which have not been distributed to holders of Certificates. Thereafter, each
holder of a Certificate, subject to Sections 3.7(b) and (d), may surrender such
Certificate to the Surviving Corporation and (subject to applicable abandoned
property, escheat or other similar laws) receive in exchange therefor the
consideration payable in respect thereto pursuant to Section 3.7(a), without
interest, but shall have no greater rights against the Surviving Corporation
than may be accorded to general creditors of the Surviving Corporation.
Notwithstanding the foregoing, none of Parent, the Surviving Corporation or the
Paying Agent shall be liable for the Price Per Share to any holder of a
Certificate if such amount is delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law.
(d) At the Effective Time, the stock transfer books of the Company shall be
closed and thereafter there shall be no further registration of transfers of
shares of Common Stock on the records of the Company. From and after the
Effective Time, the holders of Certificates evidencing ownership of shares of
Common Stock outstanding immediately prior to the Effective Time shall cease to
have any rights with respect to such shares of Common Stock except as otherwise
provided for herein or by applicable law.
(e) If, at any time after the Effective Time, the Surviving Corporation
shall consider or be advised that any deeds, bills of sale, assignments,
assurances or any other actions or things are necessary or desirable to vest,
perfect or confirm of record or otherwise in the Surviving Corporation its
right, title or interest in, to or under any of the rights, properties or assets
of either Merger Sub or the Company acquired or to be acquired by the Surviving
Corporation as a result of, or in connection with, the Merger or otherwise to
carry out this Agreement, the officers of the Surviving Corporation shall be
authorized to execute and deliver, in the name and on behalf of each of Merger
Sub and the Company or otherwise, all such deeds, bills of sale, assignments and
assurances and to take and do, in such names and on such behalves or otherwise,
all such other actions and things as may be necessary or desirable to vest,
perfect or confirm any and all right, title and interest in, to and under such
rights, properties or assets in the Surviving Corporation or otherwise to carry
out the purposes of this Agreement.
SECTION 3.10. Lost, Stolen or Destroyed Certificates. In the event any
Certificates shall have been lost, stolen or destroyed, the Paying Agent shall
pay with respect to such lost, stolen or destroyed Certificates, upon the making
of an affidavit of that fact by the holder thereof, such amount as may be
required pursuant to Section 3.9; 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 Paying Agent with respect to the Certificates alleged to
have been lost, stolen or destroyed.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Merger Sub that:
SECTION 4.1. Organization and Qualification. The Company and each of its
Subsidiaries is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization, with the corporate power and
authority to own and operate its business as presently conducted. The Company
and each of its Subsidiaries is duly qualified as a foreign corporation or other
entity to do business and is in good standing in each jurisdiction where the
character of its properties owned or held under lease or the nature of its
activities makes such qualification necessary, except for such failures of the
Company and any of its Subsidiaries to be so qualified as would not,
individually or in the aggregate, have a Material Adverse Effect. The Company
has previously made available to Parent true and correct copies of its
Certificate of Incorporation and Bylaws and the charter documents and bylaws or
other organizational documents of each of its Subsidiaries, as currently in
effect.
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SECTION 4.2. Authorization; Validity and Effect of Agreement. The Company
has the requisite corporate power and authority to execute, deliver and perform
its obligations under this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by the Company
and the performance by the Company of its obligations hereunder and the
consummation of the transactions contemplated hereby have been duly authorized
by the Company Board and all other necessary corporate action on the part of the
Company, other than the adoption and approval of this Agreement by the
stockholders of the Company, and no other corporate proceedings on the part of
the Company are necessary to authorize this Agreement and the transactions
contemplated hereby. The Company Board has approved for the purposes of Section
251(b) of the DGCL the agreement of merger contained in this Agreement. This
Agreement has been duly and validly executed and delivered by the Company and
constitutes a legal, valid and binding obligation of the Company, enforceable
against it in accordance with its terms, subject to the effects of bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other similar
laws relating to or affecting creditors' rights generally, general equitable
principles (whether considered in a proceeding in equity or at law) and an
implied covenant of good faith and fair dealing. The Amended and Restated
Stockholders' Agreement, dated as of November 1, 1996 and as amended as of the
date of this Agreement (the "1996 Stockholders Agreement"), a true and complete
copy of which has been provided to Parent, among the Company, Dominick's Finer
Foods, Inc. and the stockholders of the Company named therein (a) does not
restrict, prevent, prohibit or otherwise impede any holder of Common Stock from
(i) tendering its shares in the Offer or (ii) entering into a Stockholders
Agreement or performing its obligations thereunder and (b) will terminate upon
the consummation of the Offer. The amendment to the 1996 Stockholders Agreement
does not require the consent of any party to such agreement other than the
Stockholders. The Yucaipa Warrant, as amended as of the date of this Agreement,
a true and complete copy of which has been provided to Parent, permits the
transfer of the Yucaipa Warrant to Parent as described in the Stockholders
Agreement.
SECTION 4.3. Capitalization. The authorized capital stock of the Company
consists of 50,000,000 shares of Voting Common Stock, 10,000,000 shares of
Non-Voting Stock and 4,000,000 shares of preferred stock having a par value of
$.01 per share (the "Preferred Stock"). As of October 8, 1998, 18,679,737 shares
of Voting Common Stock (none of which are held in the Company treasury),
2,861,354 shares of Non-Voting Common Stock (none of which are held in the
Company treasury) and no shares of Preferred Stock were issued and outstanding.
As of October 8, 1998, (i) 1,205,438 shares of Voting Common Stock and no shares
of Non-Voting Stock were reserved for issuance and issuable upon or otherwise
deliverable in connection with the exercise of outstanding Company Stock Rights
and (ii) 3,874,492 shares of Voting Common Stock were reserved for issuance and
issuable upon or otherwise deliverable in connection with the exercise of the
Yucaipa Warrant. All of the issued and outstanding shares of Common Stock are
validly issued, fully paid and non-assessable. Except pursuant to the exercise
of Company Stock Rights prior to the date hereof, since October 8, 1998 no
shares of Common Stock or Preferred Stock have been issued. As of the date
hereof, except as otherwise disclosed in Section 4.3 of the disclosure schedule
delivered by the Company to Parent and Merger Sub prior to the execution of this
Agreement (the "Company Disclosure Schedule"), there are no existing options,
warrants, calls, subscriptions, convertible securities or other securities,
agreements, commitments, or obligations which would require the Company or any
of its Subsidiaries to issue or sell shares of Common Stock, Preferred Stock or
any other equity securities, or securities convertible into or exchangeable or
exercisable for shares of Common Stock, Preferred Stock or any other equity
securities of the Company or any of its Subsidiaries. Except as set forth in
Section 4.3 of the Company Disclosure Schedule, the Company has no commitments
or obligations to purchase or redeem any shares of Common Stock or the capital
stock of any of its Subsidiaries 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. Except as set forth in Section 4.3 of the
Company Disclosure Schedule, there are no stockholders' agreements, voting
trusts or other agreements or understandings to which the Company is a party or
by which it is bound relating to the voting or registration of any shares of
capital stock of the Company or any preemptive rights with respect thereto.
Provided that Merger Sub is not a bank holding company (as defined in 12 U.S.C.
Section 1841), or an Affiliate of a bank holding company, the shares of
Non-Voting Common Stock to be acquired by Merger Sub upon the Offer
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Consummation Date may be converted into Voting Common Stock in accordance with
the terms of the Company's Certificate of Incorporation.
SECTION 4.4. Subsidiaries. The only Subsidiaries of the Company are those
set forth in Section 4.4 of the Company Disclosure Schedule. All of the
outstanding shares of capital stock and other ownership interests of each of the
Company's Subsidiaries are validly issued, fully paid, non-assessable and free
of preemptive rights, rights of first refusal or similar rights. Except as set
forth in Section 4.4 of the Company Disclosure Schedule, the Company owns,
directly or indirectly, all of the issued and outstanding capital stock and
other ownership interests of each of its Subsidiaries, free and clear of all
Encumbrances, and there are no existing options, warrants, calls, subscriptions,
convertible securities or other securities, agreements, commitments or
obligations of any character relating to the outstanding capital stock or other
securities of any Subsidiary of the Company or which would require any
Subsidiary of the Company to issue or sell any shares of its capital stock,
ownership interests or securities convertible into or exchangeable for shares of
its capital stock or ownership interests.
SECTION 4.5. Other Interests. Except as set forth in Section 4.5 of the
Company Disclosure Schedule, neither the Company nor any of the Company's
Subsidiaries owns, directly or indirectly, any interest or investment in
(whether equity or debt) any corporation, partnership, limited liability
company, joint venture, business, trust or other Person (other than the
Company's Subsidiaries).
SECTION 4.6. No Conflict; Required Filings and Consents.
(a) Except as set forth in Section 4.6 of the Company Disclosure Schedule
with respect to clause (iii) below, neither the execution and delivery of this
Agreement nor the performance by the Company of its obligations hereunder, nor
the consummation of the transactions contemplated hereby, will: (i) conflict
with the Company's Certificate of Incorporation or Bylaws; (ii) assuming
satisfaction of the requirements set forth in Section 4.6(b) below, violate any
statute, law, ordinance, rule or regulation, applicable to the Company or any of
its Subsidiaries or any of their properties or assets; or (iii) violate, breach,
be in conflict with or constitute a default (or an event which, with notice or
lapse of time or both, would constitute a default) under, or permit the
termination of any provision of, or result in the termination of, the
acceleration of the maturity of, or the acceleration of the performance of any
obligation of the Company or any of its Subsidiaries under, or cause an
indemnity payment to be made by the Company or any of its Subsidiaries under, or
result in the creation or imposition of any lien upon any properties, assets or
business of the Company or any of its Subsidiaries under, any note, bond,
indenture, mortgage, deed of trust, lease, franchise, permit, authorization,
license, contract, instrument or other agreement or commitment or any order,
judgment or decree to which the Company or any of its Subsidiaries is a party or
by which the Company or any of its Subsidiaries or any of their respective
assets or properties is bound or encumbered, or give any Person the right to
require the Company or any of its Subsidiaries to purchase or repurchase any
notes, bonds or instruments of any kind except, in the case of clauses (ii) and
(iii), for such violations, breaches, conflicts, defaults or other occurrences
which, individually or in the aggregate, would not have a Material Adverse
Effect.
(b) Except (i) for 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"), (ii) for the filing of the
Certificate of Merger or Certificate of Ownership, as the case may be, pursuant
to the DGCL, (iii) with respect to matters set forth in Sections 4.6(a) or
4.6(b) of the Company Disclosure Schedule and (iv) for applicable requirements,
if any, of the Exchange Act, no consent, approval or authorization of, permit
from, notice to, or declaration, filing or registration with, any governmental
or regulatory authority, or any other Person or entity is required to be made or
obtained by the Company or its Subsidiaries in connection with the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby, except where the failure to obtain such
consent, approval, authorization, permit or declaration, to deliver such notice
or to make such filing or registration would not, individually or in the
aggregate, have a Material Adverse Effect.
SECTION 4.7. Compliance. The Company and each of its Subsidiaries is in
compliance with all foreign, federal, state and local laws and regulations
applicable to its operations or with respect to which compliance is a condition
of engaging in the business thereof, except to the extent that failure to comply
would not,
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individually or in the aggregate, have a Material Adverse Effect. To the
knowledge of the Company, neither the Company nor any of its Subsidiaries has
received any notice asserting a failure, or possible failure, to comply with any
such law or regulation, the subject of which notice has not been resolved as
required thereby or otherwise to the satisfaction of the party sending the
notice, except for such failure as would not, individually or in the aggregate,
have a Material Adverse Effect. The Company and its Subsidiaries have all
permits, licenses grants, authorizations, easements, consents, certificates,
approvals, orders and franchises (collectively, "Permits") from governmental
agencies required to conduct their respective businesses as they are now being
conducted and assuming that all necessary consents to transfer are obtained, all
such Permits will remain in effect after the consummation of the Offer and after
the Effective Time, except for such failures to have such Permits that would
not, individually or in the aggregate, have a Material Adverse Effect.
SECTION 4.8. SEC Documents.
(a) The Company has delivered or made available to Parent true and complete
copies of each registration statement, proxy or information statement, form,
report and other documents required to be filed by it with the SEC since January
1, 1997 (collectively, the "SEC Reports"). As of their respective dates, the SEC
Reports (i) complied, or, with respect to those not yet filed, will comply, in
all material respects with the applicable requirements of the Securities Act and
the Exchange Act and (ii) did not, or, with respect to those not yet filed, will
not, contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements made
therein, in the light of the circumstances under which they were made, not
misleading. The Company has filed all required SEC Reports required to be filed
by it under the Exchange Act since November 1, 1996. The Company has heretofore
made available or promptly will make available to Parent a complete and correct
copy of all amendments or modifications to any SEC Report which has been filed
prior to the date hereof or which is required to be filed but has not yet been
filed with the SEC.
(b) Each of the consolidated balance sheets of the Company included in or
incorporated by reference into the SEC Reports (including the related notes and
schedules) presents fairly, in all material respects, the consolidated financial
position of the Company and its consolidated Subsidiaries as of its date, and
each of the consolidated statements of income, retained earnings and cash flows
of the Company included in or incorporated by reference into the SEC Reports
(including any related notes and schedules) presents fairly, in all material
respects, the results of operations, retained earnings or cash flows, as the
case may be, of the Company and its Subsidiaries for the periods set forth
therein (subject, in the case of unaudited statements, to normal year-end audit
adjustments), in each case in accordance with GAAP consistently applied during
the periods involved, except as may be noted therein.
(c) Except as set forth in Section 4.8(c) of the Company Disclosure
Schedule and except as set forth in the SEC Reports, neither the Company nor any
of its Subsidiaries has any liabilities or obligations of any nature (whether
accrued, absolute, contingent or otherwise) that would be required to be
reflected on, or reserved against in, a consolidated balance sheet of the
Company and its Subsidiaries or in the notes thereto, prepared in accordance
with GAAP consistently applied, except for (i) liabilities or obligations that
were so reserved on, or reflected in (including the notes to), the consolidated
balance sheet of the Company as of August 8, 1998, (ii) liabilities or
obligations arising in the ordinary course of business (including trade
indebtedness) since August 8, 1998 and (iii) liabilities or obligations which
would not, individually or in the aggregate, have a Material Adverse Effect.
SECTION 4.9. Absence of Certain Changes. Except as set forth in Section 4.9
of the Company Disclosure Schedule and except as set forth in the SEC Reports
and except for the transactions expressly contemplated hereby, since November 1,
1997, the Company and its Subsidiaries have conducted their respective
businesses only in the ordinary and usual course consistent with past practices
and there has not been any (i) change in the Company's business, operations,
condition (financial or otherwise), results of operations, assets or
liabilities, except for changes contemplated hereby or changes which have not,
individually or in the aggregate, had a Material Adverse Effect, or (ii)
condition, event or occurrence which, individually or in the aggregate, could
reasonably be expected to result in a Material Adverse Effect. Except as set
forth in Section 4.9 of the Company Disclosure Schedule and except as set forth
in the SEC Reports, from
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August 8, 1998 through the date of this Agreement, neither the Company nor any
of its Subsidiaries has taken any of the actions prohibited by Section 6.1
hereof.
SECTION 4.10. Litigation. Except as set forth in Section 4.10 of the
Company Disclosure Schedule and except as set forth in the SEC Reports, there is
no Action instituted, pending or, to the knowledge of the Company, threatened,
in each case against the Company or any of its Subsidiaries, which would,
individually or in the aggregate, directly or indirectly, have a Material
Adverse Effect, nor is there any outstanding judgment, decree or injunction, in
each case against the Company or any of its Subsidiaries, or any order of any
domestic or foreign court, governmental department, commission or agency
applicable to the Company or any of its Subsidiaries which has or will have,
individually or in the aggregate, a Material Adverse Effect.
SECTION 4.11. Taxes. Except as set forth in Section 4.11 of the Company
Disclosure Schedule:
(a) The Company and its Subsidiaries have (A) duly filed (or there
have been filed on their behalf) with the appropriate governmental
authorities all Tax Returns required to be filed by them and such Tax
Returns are true, correct and complete in all material respects, except
where (other than in the case of federal income Tax Returns) any such
failure to file, or failure to be true, correct and complete, would not,
individually or in the aggregate, have a Material Adverse Effect, and (B)
duly paid in full, or adequately disclosed and fully provided for as a
liability on the financial statements of the Company and its Subsidiaries
included in the SEC Reports or delivered to Parent prior to the date
hereof, all material Taxes;
(b) The Company and its Subsidiaries have complied in all material
respects with all applicable laws, rules and regulations relating to the
withholding of Taxes and the payment of such withheld Taxes to the proper
governmental authorities, except where any such failure to comply, withhold
or pay over would not, individually or in the aggregate, have a Material
Adverse Effect;
(c) All federal income Tax Returns of the Company and its Subsidiaries
for periods through the taxable year ended on October 31, 1994 have been
audited, and no federal or material state, local or foreign audits or other
administrative proceedings or court proceedings are presently being
conducted with regard to any Taxes or Tax Returns of the Company or its
Subsidiaries and neither the Company nor its Subsidiaries has received a
written notice of any pending audits with respect to material Taxes or
material Tax Returns of the Company, and neither the Company nor any of its
Subsidiaries has waived in writing any statute of limitations with respect
to material Taxes;
(d) Neither the Internal Revenue Service nor any other taxing
authority (whether domestic or foreign) has asserted in writing against the
Company or any of its Subsidiaries any deficiency or claim for Taxes,
except where any such deficiency or claim for Taxes, if decided adversely
to the Company or any of its Subsidiaries, would not, individually or in
the aggregate, have a Material Adverse Effect;
(e) There are no material liens for Taxes upon any Assets of the
Company or any Subsidiary thereof, except for liens for Taxes not yet due
and payable and liens for Taxes that are being contested in good faith by
appropriate proceedings, and no material written power of attorney that has
been granted by the Company or its Subsidiaries (other than to the Company
or a Subsidiary) currently is in force with respect to any matter relating
to Taxes;
(f) Neither the Company nor any of its Subsidiaries has, with regard
to any assets or property held by any of them, agreed to have Section
341(f)(2) of the Code apply to any disposition of a subsection (f) asset
(as such term is defined in Section 341(f)(4) of the Code) owned by the
Company or any of its Subsidiaries;
(g) Since March 22, 1995, none of the Company or its Subsidiaries has
been a member of an affiliated group filing a consolidated federal income
tax return other than a group the common parent of which is the Company;
(h) As of the Closing Date, except as set forth in Section 4.11(h) of
the Company Disclosure Schedule, neither the Company nor any of its
Subsidiaries shall be party to, be bound by or have an obligation under,
any Tax sharing agreement or similar contract or arrangement or any
agreement that
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obligates it to make any payment computed by reference to Taxes, taxable
income or taxable losses of any other Person; and
(i) Neither the Company nor any of its Subsidiaries has agreed to
make, or is required to make, any material adjustment under Section 481(a)
of the Code.
(j) Neither the Company nor any of its Subsidiaries has issued or
assumed (i) any obligations described in Section 279(a) of the Code, (ii)
any applicable high yield discount obligation, as defined in Section 163(i)
of the Code or (iii) any registration-required obligation, within the
meaning of Section 163(f)(2) of the Code, that is not in registered form.
SECTION 4.12. Employee Benefit Plans.
(a) Section 4.12 of the Company Disclosure Schedule contains a complete
list of all Employee Plans of the Company and its ERISA Affiliates. True and
complete copies or descriptions of the Employee Plans of the Company and its
ERISA Affiliates, including, without limitation, trust instruments, if any, that
form a part thereof, and all amendments thereto have been furnished or made
available to Parent and its counsel.
(b) Except as described in Section 4.12 of the Company Disclosure Schedule,
each of the Employee Plans of the Company and its ERISA Affiliates (other than
any Multiemployer Plan) has been administered and is in compliance with the
terms of such Employee Plan and all applicable laws, rules and regulations
except for noncompliance which could not reasonably be expected, individually or
in the aggregate, to have a Material Adverse Effect.
(c) No "reportable event" (as such term is used in section 4043 of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")) for which
the notice requirements to the Pension Benefit Guaranty Corporation have not
been waived, "prohibited transaction" (as such term is used in section 406 of
ERISA or section 4975 of the Code) for which no exemption exists, "nondeductible
contributions" (as such term is used in Section 4972 of the Code) or
"accumulated funding deficiency" (as such term is used in section 412 or 4971 of
the Code) has heretofore occurred with respect to any Pension Plan (other than
any Multiemployer Plan) of the Company or its ERISA Affiliates, except for such
events which would not, individually or in the aggregate, have a Material
Adverse Effect.
(d) No litigation or administrative or other proceeding involving any
Employee Plans of the Company or any of its ERISA Affiliates has occurred or are
threatened where an adverse determination could, individually or in the
aggregate, have a Material Adverse Effect.
(e) Except as set forth in Section 4.12 of the Company Disclosure Schedule,
neither the Company nor any ERISA Affiliate has incurred any withdrawal
liability with respect to any Multiemployer Plan under Title IV of ERISA which
remains unsatisfied, except for such liabilities as would not, individually or
in the aggregate, have a Material Adverse Effect.
(f) Except as set forth in Section 4.12 of the Company Disclosure Schedule,
any termination of, or partial or complete withdrawal from, any Employee Plans
of the Company or its ERISA Affiliates, on or prior to the Closing Date, will
not subject the Company or any ERISA Affiliate to any liability that would
individually or in the aggregate have a Material Adverse Effect.
(g) Except as set forth in Section 4.12 of the Company Disclosure Schedule,
neither the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (i) result in any payment becoming due to
any employee (former or retired) of the Company or its Subsidiaries, (ii)
increase any benefits under any Employee Plan or (iii) result in the
acceleration of the time of payment or vesting of any such benefits.
(h) Except as disclosed in Section 4.12 of the Company Disclosure Schedule,
(i) the Company is not aware of any situation described in (b), (c) or (d) above
with respect to a Multiemployer Plan and (ii) the transactions contemplated by
this Agreement will not cause the occurrence of a situation described in Section
4.12 (b), (c), (d) or (e) as of the Effective Time.
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SECTION 4.13. Title to Assets.
(a) Section 4.13(a) of the Company Disclosure Schedule sets forth a
complete and accurate list of each improved or unimproved real property (whether
owned or leased, "Property") and/or store, office, plant or warehouse
("Facility") owned or leased by the Company or any of its Subsidiaries, and the
current use of such Property or Facility and indicating whether the Property or
Facility is owned or leased.
(b) Except as set forth in Section 4.13(b) of the Company Disclosure
Schedule, the Company and its Subsidiaries have good and marketable title to or
a valid leasehold estate in all of the material Property and Facilities. Except
as set forth in Section 4.13(b) of the Company Disclosure Schedule, the Company
and its Subsidiaries have good and marketable title or a valid right to use all
of the Property and Facilities that are necessary, and all of the personal
assets and properties that are necessary, for the conduct of the business of the
Company or any of its Subsidiaries free and clear of all Encumbrances (other
than Permitted Encumbrances).
(c) There are no pending or, to the best knowledge of the Company,
threatened condemnation or similar proceedings against the Company or any of its
Subsidiaries or to the knowledge of the Company, otherwise relating to any of
the Properties or Facilities of the Company and its Subsidiaries except for such
proceedings which would not, individually or in the aggregate, have a Material
Adverse Effect.
(d) Section 4.13(d) of the Company Disclosure Schedule sets forth a
complete and accurate list of all Leases (including subleases and licenses) of
personal property entered into by the Company or any of its Subsidiaries and
involving any annual expense to the Company or any such Subsidiary in excess of
$250,000 and/or not cancelable (without material liability) within one year.
(e) Section 4.13(e) of the Company Disclosure Schedule indicates each Lease
entered into by the Company or any of its Subsidiaries, as a tenant or
subtenant.
(f) The Company or its Subsidiaries, as the case may be, has in all
material respects performed all obligations on its part required to have been
performed with respect to (i) all Assets leased by it or to it (whether as
lessor or lessee), and (ii) all Leases and there exists no material default or
event which, with the giving of notice or lapse of time or both, would become a
default on the part of the Company or any of its Subsidiaries under any Lease,
in each case except where the failure to perform or such default or event would
not, individually or in the aggregate, have a Material Adverse Effect.
(g) To the knowledge of the Company, each of the Leases is valid, binding
and enforceable in accordance with its terms and is in full force and effect,
and assuming all consents required by the terms thereof or applicable law have
been obtained, the Leases will continue to be valid, binding and enforceable in
accordance with their respective terms and in full force and effect immediately
following the consummation of the transactions contemplated hereby, in each case
except where the failure to be valid, binding and enforceable and in full force
and effect would not, individually or in the aggregate, have a Material Adverse
Effect.
(h) Except as shown on Section 4.13(h) of the Company Disclosure Schedule,
the Company has delivered to Parent, or otherwise made available, originals or
true copies of all Leases (as the same may have been amended or modified, in any
material respect, from time to time) set forth in the Company Disclosure
Schedule.
(i) The Assets of the Company and its Subsidiaries, taken as a whole, are
sufficient to permit the Company and its Subsidiaries to conduct their business
as currently being conducted with only such exceptions as would not have a
Material Adverse Effect.
SECTION 4.14. Contracts. Each Contract is valid, binding and enforceable
and in full force and effect, and assuming all consents required by the terms
thereof or applicable law have been obtained, such Contracts will continue to be
valid, binding and enforceable and in full force and effect immediately
following the consummation of the transactions contemplated hereby, except where
failure to be valid, binding and enforceable and in full force and effect would
not have a Material Adverse Effect, and there are no material defaults
thereunder by the Company or its Subsidiaries or, to the best knowledge of the
Company, by any
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other party thereto. Section 4.14 of the Company Disclosure Schedule sets forth
each Contract of the Company or any of its Subsidiaries as of August 8, 1998 not
otherwise set forth in the Company Disclosure Schedule. No event has occurred
which either entitles, or would, on notice or lapse of time or both, entitle the
holder of any indebtedness for borrowed money of the Company or any of its
Subsidiaries to accelerate, or which does accelerate, the maturity of any
Contract relating to indebtedness of the Company or any of its Subsidiaries,
except as set forth in Section 4.14 of the Company Disclosure Schedule.
SECTION 4.15. Labor Relations. Neither the Company nor any of its
Subsidiaries is a party to any collective bargaining agreement or other labor
union contract applicable to persons employed by the Company or its Subsidiaries
except as disclosed in Section 4.15 of the Company Disclosure Schedule. Except
as set forth on Section 4.15 of the Company Disclosure Schedule, there is no
labor strike, slowdown or work stoppage or lockout pending or, to the best
knowledge of the Company, threatened against the Company or any of its
Subsidiaries, there is no unfair labor practice charge or other employment
related complaint pending or, to the best knowledge of the Company, threatened
against the Company or any of its Subsidiaries which if decided adversely could
have a Material Adverse Effect, and there is no representation claim or petition
pending before the National Labor Relations Board and no question concerning
representation exists with respect to the employees of the Company or its
Subsidiaries.
SECTION 4.16. Intellectual Property. Except as set forth in Section 4.16 of
the Company Disclosure Schedule, the Company and its Subsidiaries own or possess
adequate licenses or other valid rights to use "Dominick's", "Dominick's The
Fresh Store" and all other material trademarks, trademark rights, trade names,
trade name rights, copyrights, patents, patent rights, service marks, trade
secrets, applications for trademarks and for service marks, and other
proprietary rights and information used or held for use in connection with the
business of the Company and its Subsidiaries as currently conducted, except
where the failure to own or possess such licenses or rights would not have a
Material Adverse Effect, and the Company has no knowledge of any assertion or
claim challenging the validity of any of the foregoing.
SECTION 4.17. Affiliate Transactions. Except as set forth in the SEC
Reports and as set forth in Section 4.17 of the Company Disclosure Schedule,
from November 1, 1997 through the date of this Agreement there have been no
transactions, agreements, arrangements or understandings between the Company or
any of its Subsidiaries, on the one hand, and any Affiliates (other than
wholly-owned Subsidiaries) of the Company or other Persons, on the other hand,
that would be required to be disclosed under Item 404 of Regulation S-K under
the Securities Act.
SECTION 4.18. Environmental Matters.
(a) Except as set forth in the SEC Reports, and except to the extent that,
individually or in the aggregate, failure to satisfy the following
representations has 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 authorizations which are required to be obtained under all applicable
Environmental Laws by the Company or its Subsidiaries; (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) have
not received notice of any past or present violations of Environmental Laws, or
of any event, incident or action which is reasonably likely to prevent continued
compliance with such Environmental Laws, or which would give rise to any common
law environmental liability, or which would 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, use, treatment, storage,
disposal, transport, or handling, or the emission, discharge or release into the
environment, of any Hazardous Material; and (iv) have taken all actions required
under applicable Environmental Laws to register any products or materials
required to be registered by the Company or its Subsidiaries thereunder.
(b) The copies of the Environmental Reports provided by the Company to
Parent are true, correct and complete in all material respects.
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SECTION 4.19. Proxy Statement; Offer Documents; Other Information. None of
(a) the proxy statement, if any, for use relating to the approval by the
stockholders of the Company of the Merger and any amendment or supplement
thereto (collectively, the "Proxy Statement"), (b) the Schedule 14D-9 or (c) the
information supplied by the Company for inclusion or incorporation by reference
in the Offer Documents, the Schedule 14D-1 and any other documents to be filed
with the SEC or any regulatory agency in connection with the transactions
contemplated hereby, including any amendment or supplement to such documents,
will, at the respective times such documents are filed, and, with respect to the
Offer Documents and the Proxy Statement, if any, when first published, sent or
given to the stockholders of the Company, contain an untrue statement of
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they are made, not false or misleading or, in the case of the Offer
Documents and the Proxy Statement, if any, or any amendment thereof or
supplement thereto, at the time of the Company Stockholder Meeting, if any, and
at the Effective Time, contain an 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 made therein, in light of the circumstances under which they
are made, not false or misleading or necessary to correct any statement in any
earlier communication with respect to the Offer or the solicitation of proxies
for the Company Stockholder Meeting, if any, which shall have become false or
misleading. All documents which the Company files or is responsible for filing
with the SEC and any regulatory agency in connection with the Offer or the
Merger (including, without limitation, the Schedule 14D-9 and the Proxy
Statement, if any) will comply as to form and content in all material respects
with the provisions of applicable law. Notwithstanding the foregoing, the
Company makes no representations or warranties with respect to information that
has been supplied by Parent or Merger Sub, or their auditors, attorneys,
financial advisers, other consultants or advisers, specifically for use in the
Schedule 14D-9 and the Proxy Statement, if any, or in any other documents to be
filed with the SEC or any regulatory agency in connection with the transactions
contemplated hereby.
SECTION 4.20. Opinion of Financial Adviser. The Company has received the
written opinion of Donaldson, Lufkin & Jenrette Securities Corporation (the
"Company Financial Adviser"), dated as of October 12, 1998, to the effect that
the consideration to be received in the Merger by the Company's stockholders
(other than the holders of shares of Common Stock that are Affiliates of the
Company) is fair to such stockholders from a financial point of view. An
executed copy of such opinion has been provided to Parent. The Company has been
authorized by the Company Financial Adviser to permit, subject to prior review
and consent by such Company Financial Adviser, the inclusion of such fairness
opinion (or a reference thereto) in the Proxy Statement and the Schedule 14D-9.
SECTION 4.21. Brokers. Except as set forth in Section 4.21 of the Company
Disclosure Schedule, no consultant, broker, finder or investment banker (other
than the Company Financial Adviser) 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. The
Company has heretofore furnished to Parent a complete and correct copy of all
agreements between the Company and the Company Financial Adviser pursuant to
which such firm would be entitled to any payment relating to the transactions
contemplated hereby.
SECTION 4.22. Vote Required. The affirmative vote of the holders of a
majority of the outstanding shares of Voting Common Stock entitled to vote
thereon is the only vote of the holders of any class or series of the Company's
capital stock necessary to approve the Merger. The Company approves of, and
consents to, the Offer. The Company Board, at a meeting duly called and held, by
unanimous vote (i) determined that this Agreement and the transactions
contemplated hereby, including the Offer and the Merger, are advisable and fair
to, and in the best interests of, the stockholders of the Company, (ii) approved
this Agreement and the transactions contemplated hereby, including the Offer and
the Merger, and the Stockholders Agreement which approvals constitute approval
of this Agreement, the Offer and the Merger and the Stockholders Agreement for
purposes of Section 203 of the DGCL, and (iii) resolved, subject to Section
7.1(a), to recommend that the holders of the shares of Common Stock accept the
Offer and tender all of their shares of Common Stock to Purchaser and approve
this Agreement and the transactions contemplated hereby, including the Offer and
the Merger. The Company hereby agrees to the inclusion in the Schedule 14D-9
and, if required, the Proxy Statement of the recommendations of the Company
Board described in this Section 4.22
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(subject to the right of the Company Board to withdraw, amend or modify such
recommendation in accordance with Section 7.1(a)).
SECTION 4.23. No Other Agreements to Sell the Company or its Assets. The
Company has no legal obligation, absolute or contingent, to any other Person to
sell more than 5% of the Assets of the Company, to sell more than 5% of the
capital stock or other ownership interests of the Company or any of its
Significant Subsidiaries, or to effect any merger, consolidation or other
reorganization of the Company or any of its Significant Subsidiaries or to enter
into any agreement with respect thereto.
SECTION 4.24. DGCL Section 203; State Takeover Statutes. The action of the
Company Board in approving the Offer, the Merger, this Agreement and the
transactions contemplated by this Agreement and the Stockholders Agreement is
sufficient to render inapplicable to the Offer, the Merger, this Agreement and
the Stockholders Agreement the provisions of Section 203 of the DGCL. No
provision of the certificate of incorporation, by-laws or other governing
instruments of the Company or any of its Subsidiaries or any applicable law
would, directly or indirectly, restrict or impair the ability of Parent (i) to
vote, or otherwise to exercise the rights of a stockholder with respect to,
shares of the Company and its Subsidiaries that may be acquired or controlled by
Parent or (ii) to consummate the Merger.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Merger Sub hereby, jointly and severally, represent and warrant
to the Company that:
SECTION 5.1. Organization and Qualification. Each of Parent and Merger Sub
is duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization, with the corporate power and authority to own
and operate its businesses as presently conducted. Each of Parent and Merger Sub
is duly qualified as a foreign corporation or other entity to do business and is
in good standing in each jurisdiction where the character of its properties
owned or held under lease or the nature of its activities makes such
qualification necessary, except for such failures of Parent and Merger Sub to be
so qualified as would not, individually or in the aggregate, have a Material
Adverse Effect. Parent has previously made available to the Company true and
correct copies of the certificate of incorporation and bylaws of each of Parent
and Merger Sub.
SECTION 5.2. Authorization; Validity and Effect of Agreement. Each of
Parent and Merger Sub has the requisite corporate power and authority to
execute, deliver and perform its obligations under this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by Parent and Merger Sub and the performance by them of their
respective obligations hereunder and the consummation by them of the
transactions contemplated hereby have been duly authorized by the Parent Board
and the Board of Directors of Merger Sub, and no other corporate proceedings
(including, without limitation, stockholder action) on the part of Parent or
Merger Sub are necessary to authorize this Agreement and the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by Parent and Merger Sub and constitutes a legal, valid and binding
obligation of Parent and Merger Sub, enforceable against them in accordance with
its terms, subject to the effects of bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally, general equitable principles (whether
considered in a proceeding in equity or at law) and an implied covenant of good
faith and fair dealing.
SECTION 5.3. No Conflict; Required Filings and Consents.
(a) Neither the execution and delivery of this Agreement nor the
performance by Parent and Merger Sub of their obligations hereunder, nor the
consummation of the transactions contemplated hereby, will: (i) conflict with
Parent's or Sub's certificate of incorporation or bylaws; (ii) assuming
satisfaction of the requirements set forth in Section 5.3(b) below, violate any
statute, law, ordinance, rule or regulation, applicable to Parent or any of its
Subsidiaries or any of their properties or assets; or (iii) violate, breach, be
in conflict with or constitute a default (or an event which, with notice or
lapse of time or both, would constitute a
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default) under, or permit the termination of any provision of, or result in the
termination of, the acceleration of the maturity of, or the acceleration of the
performance of any obligation of Parent or any of its Subsidiaries under, or
cause an indemnity payment to be made by the Parent or any of its Subsidiaries
under, or result in the creation of imposition of any lien upon any properties,
assets or business of Parent or any of its Subsidiaries under, any note, bond,
indenture, mortgage, deed of trust, lease, franchise, permit, authorization,
license, contract, instrument or other agreement or commitment or any order,
judgment or decree to which Parent or any of its Subsidiaries is a party or by
which Parent or any of its Subsidiaries or any of their respective assets or
properties is bound or encumbered, or give any Person the right to require
Parent or any of its Subsidiaries to purchase or repurchase any notes, bonds or
instruments of any kind except, in the case of clauses (ii) and (iii), for such
violations, breaches, conflicts, defaults or other occurrences which,
individually or in the aggregate, would not have a Material Adverse Effect.
(b) Except (i) for the pre-merger notification requirements of the HSR Act
and (ii) for the filing of the Certificate of Merger or Certificate of
Ownership, as the case may be, pursuant to the DGCL and (iii) for applicable
requirements, if any, of the Exchange Act, no consent, approval or authorization
of, permit from, notice to or declaration, filing or registration with, any
governmental or regulatory authority, or any other Person or entity is required
to be made or obtained by Parent or Merger Sub in connection with the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby, except where the failure to obtain such
consent, approval, authorization, permit or declaration, to deliver such notice
or to make such filing or registration would not, individually or in the
aggregate, have a Material Adverse Effect.
SECTION 5.4. Proxy Statement; Offer Documents; Other Information. None of
(a) the Offer Documents, (b) the Schedule 14D-1 or (c) the information supplied
by Parent or Merger Sub for inclusion or incorporation by reference in the Proxy
Statement, if any, the Schedule 14D-9 and any other documents to be filed with
the SEC or any regulatory agency in connection with the transactions
contemplated hereby, including any amendment or supplement to such documents,
will, at the respective times such documents are filed, and, with respect to the
Proxy Statement, if any, and the Offer Documents, when first published, sent or
given to stockholders of the Company, 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 made the statements made therein, in light of the
circumstances under which they are made, not misleading or, in the case of the
Proxy Statement, if any, or any amendment thereof or supplement thereto, at the
time of the Company Stockholder Meeting, if any, and at the Effective Time,
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 made the statements
made therein, in light of the circumstances under which they are made, not false
or misleading or necessary to correct any statement in any earlier communication
with respect to the Offer or the solicitation of proxies for the Company
Stockholder Meeting, if any, which shall have become false or misleading. All
documents which Parent or Merger Sub files or is responsible for filing with the
SEC or any regulatory agency in connection with the Offer or the Merger
(including, without limitation, the Offer Documents and the Schedule 14D-1) will
comply as to form and content in all material respects with the provisions of
applicable law. Notwithstanding the foregoing, neither Parent nor Merger Sub
makes any representation or warranty with respect to any information that has
been supplied by the Company or its auditors, attorneys, financial advisers,
other consultants or advisers, specifically for use in the Offer Documents and
the Schedule 14D-1, or in any other documents to be filed with the SEC or any
regulatory agency in connection with the transactions contemplated hereby.
SECTION 5.5. Financial Resources. Parent and Merger Sub have, as of the
date of this Agreement, available cash or undrawn lines of credit sufficient to
consummate the Offer and the Merger on the terms contemplated by this Agreement,
and, at the expiration of the Offer and at the Effective Time of the Merger,
Parent and Merger Sub will have available all of the funds necessary for the
acquisition of all shares of Common Stock pursuant to the Offer and the Merger,
as the case may be, and to perform their respective obligations under this
Agreement.
SECTION 5.6. No Prior Activities. Merger Sub has not incurred nor will it
incur any liabilities or obligations, except those incurred in connection with
its organization and with the negotiation of this Agreement and the performance
hereof, and the consummation of the transactions contemplated hereby,
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including the Merger. Except as contemplated by this Agreement, Merger Sub has
not engaged in any business activities of any type or kind whatsoever, or
entered into any agreements or arrangements with any person or entity, or become
subject to or bound by any obligation or undertaking. As of the date hereof, all
of the issued and outstanding capital stock of Merger Sub is owned beneficially
and of record by Parent, free and clear of all Encumbrances (other than those
created by this Agreement and the transactions contemplated hereby).
SECTION 5.7. Ownership of Common Stock. To the best knowledge of Parent and
Merger Sub, none of Parent, Merger Sub or any of their respective affiliates,
beneficially or of record, owns any shares of Common Stock, other than shares of
Common Stock, if any, held by or for the account of employees or former
employees of Parent, Merger Sub or any of their respective affiliates pursuant
to any Employee Plan.
SECTION 5.8. Brokers. No consultant, broker, finder or investment banker
(other than the Parent Financial Adviser, the fees and expenses of which shall
be paid by Parent) 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.
ARTICLE VI.
CONDUCT OF BUSINESS OF THE COMPANY PENDING THE MERGER
Except as set forth in Section 6.1 of the Company Disclosure Schedule, the
Company covenants and agrees that, during the period from the date hereof to the
Effective Time (except as otherwise contemplated by the terms of this
Agreement), unless Parent shall otherwise agree (i) the businesses of the
Company and its Subsidiaries shall be conducted, in all material respects, in
the ordinary course and in a manner consistent with past practice and, in all
material respects, in compliance with applicable laws; and (ii) the Company
shall use its best efforts consistent with the foregoing 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, in all
material respects, the present relationships of the Company and its Subsidiaries
with customers, suppliers, advertisers, distributors and other persons with
which the Company or any of its Subsidiaries has significant business relations;
provided, however, that the Company shall not make any significant payment or
incur any significant obligations other than in the ordinary course of business
without Parent's prior written consent. In furtherance of the foregoing, neither
the Company nor any of its Subsidiaries shall (except as set forth in Section
6.1 of the Company Disclosure Schedule and except as otherwise contemplated by
the terms of this Agreement), between the date of this Agreement and the
Effective Time, directly or indirectly do, or propose or commit to do, any of
the following without the prior consent of Parent:
(a) make or commit to make any capital expenditures in excess of
$500,000 (such amount to increase by an additional $500,000 for each 20
Business Day period, or portion thereof, after the initial expiration date
of the Offer) in the aggregate, other than expenditures for routine or
emergency maintenance and repair or expenditures in amounts not exceeding
those reflected in capital expenditure budgets disclosed in the SEC Reports
or supplied to Parent prior to the date of this Agreement;
(b) incur any indebtedness for borrowed money or guarantee such
indebtedness of another Person (other than the Company or a wholly-owned
Subsidiary of the Company) or enter into any "keep well" or other agreement
to maintain the financial condition of another Person (other than the
Company or a wholly-owned Subsidiary of the Company) or make any loans, or
advances of borrowed money or capital contributions to, or equity
investments in, any other Person (other than the Company or a wholly-owned
Subsidiary of the Company) or issue or sell any debt securities, other than
borrowings under existing agreements in the ordinary course of business
consistent with past practice;
(c)(i) amend its Certificate of Incorporation or Bylaws or the charter
or bylaws of any of its Subsidiaries; (ii) split, combine or reclassify the
outstanding shares of its capital stock or other ownership interests or
declare, set aside or pay any dividend payable in cash, stock or property
or make any other distribution with respect to such shares of capital stock
or other ownership interests; (iii) redeem,
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purchase or otherwise acquire, directly or indirectly, any shares of its
capital stock or other ownership interests other than in connection with
the Stock Purchase Plan; or (iv) sell or pledge any stock of any of its
Subsidiaries;
(d)(i) other than upon exercise of outstanding Company Stock Rights or
warrants or pursuant to the Stock Purchase Plan (in each case disclosed in
Section 4.3 of the Company Disclosure Schedule) and in connection with the
conversion of Non-Voting Common Stock, issue or sell or agree to issue or
sell any additional shares of, or grant, confer or award any options,
warrants or rights of any kind to acquire any shares of, its capital stock
of any class; (ii) enter into any agreement, contract or commitment to
dispose of or acquire, or relating to the disposition or acquisition of, a
segment of its business or to sell, lease, license, close, shut down or
otherwise dispose of any stores or to relocate any stores; (iii) except in
the ordinary course of business consistent with past practice, sell,
pledge, dispose of or encumber any material Assets (including, without
limitation, any indebtedness owed to them or any claims held by them),
including real property; (iv) acquire (by merger, consolidation,
acquisition of stock or assets or otherwise) any corporation, partnership
or other business organization or division thereof or any material Assets
(other than inventory in the ordinary course of business consistent with
past practice), including real property, or make any material investment,
either by purchase of stock or other securities, or contribution to
capital, in any case, in any material amount of property or assets, in or
of any other Person or (v) remodel any stores, except for store remodels
which the Company has commenced or for which the Company has entered into
an agreement, or otherwise committed, as of the date of this Agreement;
(e) grant any severance or termination pay (other than pursuant to
policies or agreements in effect on the date hereof as disclosed in the SEC
Reports or set forth in Section 6.1(e) of the Company Disclosure Schedule)
or increase the benefits payable under its severance or termination pay
policies or agreements in effect on the date hereof or enter into any
employment or severance agreement with any officer, director or employee;
(f) adopt or amend any bonus, profit sharing, compensation, stock
option, pension, retirement, deferred compensation, employment or other
employee benefit plan, agreement, trust, fund or other arrangement for the
benefit or welfare of any director, officer or employee or increase in any
manner the compensation or fringe benefits of any director, officer or
employee or grant, confer, award or pay any forms of cash incentive,
bonuses or other benefit not required by any existing plan, arrangement or
agreement, in each case except in the ordinary course of business or as
required by law or other than in accordance with Section 3.8, amend or
modify the terms of any Company Stock Rights;
(g) enter into or amend any (i) Lease or (ii) contract, agreement,
commitment, understanding or other arrangement, in each case involving
annual expenditures or liabilities in excess of $250,000 and, in the case
of clause (ii), which is not cancelable within one (1) year without
penalty, cost or liability;
(h) enter into or modify, in any material respect, any material
collective bargaining agreements;
(i) make any material change in its tax or accounting policies or any
material reclassification of assets or liabilities except as required by
law or GAAP;
(j) change or make any material Tax elections, change materially any
method of accounting with respect to Taxes, file any amended Tax Return, or
settle or compromise any material federal, state, local or foreign Tax
liability;
(k) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise),
except the payment, discharge or satisfaction of (i) liabilities or
obligations in the ordinary course of business consistent with past
practice or in accordance with the terms thereof as in effect on the date
hereof or (ii) claims settled or compromised to the extent permitted by
Section 6.1(k), or waive, release, grant or transfer any rights of material
value or modify or change in any material respect any existing contract, in
each case other than in the ordinary course of business consistent with
past practice;
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(l) settle or compromise any litigation, other than litigation not in
excess of amounts reserved for in the most recent consolidated financial
statements of the Company included in the SEC Reports or, if not so
reserved for, in an aggregate amount not in excess of $500,000 (provided in
either case such settlement documents do not involve any material
non-monetary obligations on the part of the Company and its Subsidiaries);
(m) adopt a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other
reorganization of the Company or any of its Subsidiaries (other than the
Merger) or otherwise alter through merger, liquidation, reorganization,
restructuring or any other fashion the corporate structure and ownership of
any Subsidiary of the Company;
(n) make any payment to an Affiliate, except in accordance with the
terms of any contract or compensation to employees in the ordinary course
of business; or
(o) take, or offer or propose to take, or agree to take in writing or
otherwise, any of the actions described in Sections 6.1(a) through 6.1(n)
or any action which would result in any of the conditions set forth in
Annex A or Article VIII not being satisfied.
ARTICLE VII.
ADDITIONAL AGREEMENTS
SECTION 7.1. Stockholders Meeting.
(a) As soon as practicable following the acquisition by Merger Sub of the
Minimum Shares pursuant to the Offer, the Company, acting through the Company
Board, shall, in accordance with applicable law, its Certificate of
Incorporation and Bylaws and subject to the other provisions of this Section
7.1(a), to the extent necessary to consummate the Merger, promptly and duly
call, give notice of, convene and hold as soon as practicable a meeting of the
holders of Common Stock (the "Company Stockholder Meeting") for the purpose of
voting to approve and adopt this Agreement and the transactions contemplated
hereby and (i) recommend that the holders of the Common Stock accept the Offer
and tender all of their shares of Common Stock to Purchaser and approve this
Agreement and the transactions contemplated hereby, including the Merger, which
recommendation shall be included in the Proxy Statement, if any, and (ii) take
all reasonable and lawful action to solicit and obtain such approval. The
Company Board shall not withdraw, amend or modify in a manner adverse to Parent
its recommendation referred to in clause (i) of the preceding sentence (or
announce publicly its intention to do so) provided that the disclosure of (x)
the receipt of an Alternative Transaction or (y) the fact that the Company Board
is considering such Alternative Transaction or reviewing it with its advisers
(to the extent the Company Board shall have determined in good faith that any
such disclosure is required by law or any applicable securities exchange
requirement) shall not by itself constitute such a withdrawal, modification or
amendment. Notwithstanding the foregoing, prior to the acceptance for payment of
the Minimum Shares pursuant to the Offer, the Company Board shall be permitted
to (A) withdraw, amend or modify its recommendation (or publicly announce its
intention to do so) of this Agreement and the transactions contemplated hereby,
including the Offer and the Merger, in a manner adverse to Parent or (B) approve
or recommend or enter into an agreement with respect to a Superior Transaction
if: (i) the Company has complied with Section 7.3; (ii) a Superior Transaction
shall have been proposed by any Person other than Parent and such proposal is
pending at the time of such action; (iii) the Company Board shall have
determined in good faith, based on the advice of its outside legal counsel, that
the failure to withdraw, amend or modify its recommendation or to approve or
recommend or enter into such Superior Transaction would constitute a breach of
the Company Board's fiduciary duties under applicable law; and (iv) the Company
shall have notified Parent of such Superior Transaction proposal at least three
Business Days in advance of such action. No action by the Company Board
permitted by the preceding sentence (each, a "Permitted Action") shall
constitute a breach of this Agreement by the Company.
(b) Notwithstanding the preceding paragraph or any other provision of this
Agreement, in the event Merger Sub owns 90% or more of the outstanding shares of
each class of the capital stock of the Company following expiration of the
Offer, the Company shall not be required to call the Company Stockholder
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Meeting or to file or mail the Proxy Statement, and the parties hereto shall, at
the request of Parent and subject to Article VIII, take all necessary and
appropriate action to cause the Merger to become effective as soon as
practicable following such expiration without a meeting of stockholders of the
Company in accordance with Section 253 of the DGCL.
(c) If required by applicable law, as soon as practicable following
Parent's request, the Company shall file with the SEC under the Exchange Act and
the rules and regulations promulgated thereunder, and shall use its reasonable
best efforts to have cleared by the SEC, the Proxy Statement with respect to the
Company Stockholder Meeting. Parent, Purchaser and the Company will cooperate
with each other in the preparation of the Proxy Statement. Without limiting the
generality of the foregoing, each of Parent and Purchaser will furnish to the
Company the information relating to it required by the Exchange Act and the
rules and regulations promulgated thereunder to be set forth in the Proxy
Statement. The Company agrees to use its reasonable best efforts, after
consultation with the other parties hereto, to respond promptly to any comments
made by the SEC with respect to the Proxy Statement and any preliminary version
thereof filed by it and cause such Proxy Statement to be mailed to the Company's
stockholders at the earliest practicable time.
SECTION 7.2. Access to Information; Confidentiality.
(a) From the date hereof to the Effective Time, the Company shall, and
shall cause its Subsidiaries, officers, directors, employees, auditors and other
agents, upon reasonable notice, to afford the officers, employees, auditors and
other agents of Parent reasonable access during normal business hours to its
officers, employees, agents, properties, offices, plants and other facilities
and to all books and records, and shall furnish Parent with all financial,
operating and other data and information as Parent through its officers,
employees or agents may from time to time reasonably request; provided, however,
that, prior to the acceptance for payment of the Minimum Shares pursuant to the
Offer, the foregoing shall not require the Company to permit any inspection, or
to disclose any information, that in the reasonable judgment of the Company (i)
would result in the disclosure of any trade secrets of third parties or violate
any of its obligations with respect to confidentiality if the Company shall have
used all reasonable efforts to obtain the consent of such third party to such
inspection or disclosure, (ii) relates to Alternative Transactions to the extent
that any confidentiality agreement in existence on the date hereof with the
Company prohibits the Company from making such books, records and other
information available to Parent or (iii) which is subject to an attorney-client
privilege or which constitutes attorney work product; and provided further that,
prior to the acceptance for payment of the Minimum Shares pursuant to the Offer,
the Company may provide information which is of a sensitive competitive nature
in a form which minimizes the potential detriment to the Company from such
disclosure while addressing the legitimate business objectives of Parent in
seeking such information.
(b) Each of the Company and Parent will hold, and will cause its directors,
officers, employees, agents, advisers (including, without limitation, counsel
and auditors) and controlling persons to hold, any such information which is
nonpublic in confidence on the same terms and conditions as set forth in the
letter dated August 25, 1998, as amended from time to time, between the Company
and Parent (the "Confidentiality Agreement"). Each of the Company and the Parent
agree that the Confidentiality Agreement shall terminate immediately upon the
Effective Time. Each of the Company and Parent further agree that upon the
execution of this Agreement, (i) the fourth full paragraph of the
Confidentiality Agreement shall be superseded by Section 7.9 hereof, (ii) the
fourth sentence of the tenth full paragraph of the Confidentiality Agreement
shall be deemed to have been deleted and (iii) except for clause (ii)(b)
thereof, the eighth full paragraph of the Confidentiality Agreement shall be
deemed to have been deleted. Furthermore, in the event this Agreement is
terminated pursuant to Section 9.1(c)(ii), 9.1(d)(i) or 9.1(d)(iii) in a
circumstance where a Termination Fee may be payable pursuant to Section 9.3(b)
or Section 9.1(e) or 9.1(f) in a circumstance where a Termination Fee is
payable, the seventh full paragraph of the Confidentiality Agreement shall be
deemed deleted.
(c) No investigation pursuant to this Section 7.2 shall affect any
representations or warranties of the parties herein or the conditions to the
obligations of the parties hereto.
(d) In order to facilitate an orderly transition of the business of the
Company to a wholly-owned subsidiary of Parent and to permit the coordination of
their related operations on a timely basis, the Company
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shall, to the extent reasonably practical and permitted by applicable law,
consult with Parent on significant strategic and financial and operational
matters, including, without limitation, retail operations, store openings,
closings and remodelings, marketing, advertising and personnel.
SECTION 7.3. No Solicitation of Transactions. The Company shall, and shall
cause its Subsidiaries and their respective officers, directors, employees, and
representatives and agents engaged by the Company in connection with the
transactions contemplated hereby to, immediately cease any existing discussions
or negotiations, if any, with any parties conducted heretofore with respect to
any Alternative Transaction. Neither the Company or any of its Subsidiaries, nor
any of its or their respective officers, directors, employees or representatives
and agents engaged by the Company in connection with the transactions
contemplated hereby, shall, directly or indirectly, solicit, initiate,
facilitate or encourage the making of any proposal for an Alternative
Transaction, participate in discussions or negotiations with, or provide any
information to, any Person or group (other than Parent and Merger Sub or any
designees of Parent or Merger Sub) concerning an Alternative Transaction or
grant any waiver or release under any standstill or similar agreement with
respect to any class of equity securities of the Company and its Subsidiaries;
provided that the Company (and its Subsidiaries and its and their respective
officers, directors, employees, representatives or agents) may, prior to the
acceptance for payment of the Minimum Shares pursuant to the Offer, participate
in negotiations or discussions with, and provide information to, any Person
concerning an Alternative Transaction not solicited after the date hereof which
is submitted in writing by such Person to the Company Board after the date of
this Agreement if the Company Board, in its good faith judgment, believes that
such Alternative Transaction could reasonably be expected to result in a
Superior Transaction and the Company Board determines in good faith, based on
the advice of outside legal counsel, that the failure to participate in such
discussions or negotiations or to furnish such information would constitute a
breach of the Company Board's fiduciary duties under applicable law; provided,
however, that prior to participating in any such discussions or negotiations or
furnishing any information, the Company receives from such third party an
executed confidentiality agreement on terms at least as favorable to the
Company, in all material respects, as those contained in the Confidentiality
Agreement, and provided further that the Company provides prompt notice to
Parent to the effect that it is furnishing information to, or entering into
discussions or negotiations with, a third party. Nothing contained in this
Section 7.3 shall prohibit the Company Board from complying with Rule 14e-2
promulgated under the Exchange Act with regard to a tender or exchange offer.
The Company shall notify Parent promptly if it receives any unsolicited proposal
concerning an Alternative Transaction, the identity of the person making any
such proposal and all the terms and conditions thereof and shall advise Parent
periodically of all material developments relating thereto.
SECTION 7.4. Parent Vote. Parent shall vote all shares of Common Stock and
all proxies it holds in favor of the Merger. After the date hereof and prior to
the expiration of the Offer, Parent shall not purchase, offer to purchase, or
enter into any contract, agreement or understanding regarding the purchase of
shares of Common Stock, except pursuant to the terms of the Offer and the
Merger.
SECTION 7.5. Employee Benefits Matters. Commencing on the consummation of
the Offer and continuing until December 31, 1999, Parent shall cause the Company
and 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 which, in the aggregate, are no less
favorable to such employees than the Employee Benefits provided to such
employees as of the date hereof. Parent and the Company agree that the Company
and the Surviving Corporation shall pay promptly or provide when due all
compensation and benefits required to be paid pursuant to the terms of any
Employee Plan or any individual agreement with any employee, former employee,
director or former director in effect and disclosed to Parent as of the date
hereof. For all Employee Benefits (including, without limitation, Employee Plans
and other programs of Parent and its 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 and for benefit accruals for purposes of severance and vacation
pay 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. From and after the Effective Time,
Parent shall, and shall cause the Surviving
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Corporation to, (i) cause any pre-existing condition or limitation and any
eligibility waiting periods (to the extent such conditions, limitations or
waiting periods did not apply to the employees of the Company under the Employee
Plans in existence as of the date hereof) under any group health plans of Parent
or any of its Subsidiaries to be waived with respect to employees of the Company
and their eligible dependents and (ii) give each employee of the Company credit
for the plan year in which the Effective Time occurs toward applicable
deductions and annual out-of-pocket limits for expenses incurred prior to the
Effective Time (or such later date on which participation commences) during the
applicable plan year. "Employee Benefits" shall mean the following benefits: any
medical, health, dental, life insurance, long-term disability, severance,
pension, Section 401(k), retirement or savings plan, policy or arrangement,
including those such plans for which coverage is generally limited to officers
or a select group of highly compensated employees of the Company or any of its
Subsidiaries. Nothing herein shall require the continued employment of any
person or prevent the Company or any of its Subsidiaries and/or the Surviving
Corporation from taking any action or refraining from taking any action which
the Company or any of its Subsidiaries could take or refrain from taking prior
to or after the Effective Time, including, without limitation, any action the
Company or any of its Subsidiaries or the Surviving Corporation could take to
terminate any plan under its terms as in effect as of the date hereof.
SECTION 7.6. Directors' and Officers' Indemnification; Insurance.
(a) From and after the Effective Time, Parent shall cause the Surviving
Corporation to indemnify and hold harmless each person who is now, or has been
at any time prior to the date hereof, an officer or director of the Company or
any of its Subsidiaries (the "Indemnified Parties") against any losses, claims,
damages, judgments, settlements, liabilities, costs or expenses (including
without limitation reasonable attorneys' fees and out-of-pocket expenses)
incurred in connection with any claim, action, suit, proceeding or investigation
arising out of or pertaining to acts or omissions, or alleged acts or omissions,
by them in their capacities as such occurring at or prior to the Effective Time
(including, without limitation, in connection with the Offer, the Merger and the
other transactions contemplated by this Agreement), to the fullest extent that
the Company or such Subsidiaries would have been permitted, under applicable law
and the Certificate of Incorporation or Bylaws of the Company or the
organizational documents of such Subsidiaries each as in effect on the date of
this Agreement. In connection with the foregoing, Parent shall cause the
Surviving Corporation to advance expenses as incurred to the fullest extent
permitted under applicable law upon receipt from the Indemnified Party to whom
expenses are advanced of a written undertaking to repay such advances as
contemplated by Section 145(e) of the DGCL). Parent shall cause the Surviving
Corporation to pay all reasonable expenses, including reasonable attorneys'
fees, that may be incurred by any Indemnified Party in enforcing this Section
7.6. If the indemnity provided by this Section 7.6(a) is not available with
respect to any Indemnified Party, then Parent shall cause the Surviving
Corporation, on the one hand, and the Indemnified Party, on the other hand, to
contribute to the amount payable in such proportion as is appropriate to reflect
relative faults and benefits. If the Surviving Corporation or any of its
successors or assigns (i) consolidates with or merges into any other Person and
shall not be the continuing or surviving person or entity of such consolidation
or merger or (ii) transfers or conveys all or substantially all of its
properties and assets to any Person, then, and in each such case, to the extent
necessary, proper provision shall be made so that the successors and assigns of
the Surviving Corporation assume the obligations set forth in this Section 7.6.
The parties acknowledge and agree that to the extent that the Surviving
Corporation fails to comply with its indemnification obligations pursuant to
this Section 7.6, Parent shall indemnify and hold harmless each of the
Indemnified Parties to the same extent as the Surviving Corporation was required
to indemnify such Indemnified Parties hereunder.
(b) In any event of any such claim, action, suit, proceeding or
investigation, (i) any Indemnified Party wishing to claim indemnification under
this Section 7.6 shall, upon becoming aware of any such claim, action, suit,
proceeding or investigation, promptly notify the Surviving Corporation thereof
(provided that the failure to provide such notice shall not relieve the Parent
or the Surviving Corporation of any liability or obligation it may have to such
Indemnified Party under this Section 7.6 unless such failure materially
prejudices Parent or the Surviving Corporation), and shall deliver to Parent and
the Surviving Corporation the undertaking contemplated by Section 145(e) of the
DGCL, (ii) Parent shall cause the Surviving Corporation to pay the
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reasonable fees and expenses of counsel selected by the Indemnified Parties,
which counsel shall be reasonably acceptable to Parent and the Surviving
Corporation, (iii) Parent and the Surviving Corporation shall cooperate in the
defense of any such matter; provided, however, that neither Parent nor the
Surviving Corporation shall be liable for any settlement effected without its
prior written consent (which consent shall not be unreasonably withheld); and
provided further, that neither Parent nor the Surviving Corporation shall be
liable under this Section 7.6 for the fees and expenses of more than one counsel
for all Indemnified Parties in any single claim, action, suit, proceeding or
investigation, except to the extent that, in the opinion of counsel for the
Indemnified Parties, two or more of such Indemnified Parties have conflicting
interests in the outcome of such claim, action, suit, proceeding or
investigation such that additional counsel is required to be retained by such
Indemnified Parties under applicable standards of professional conduct.
(c) Unless otherwise required by law, (i) at the Effective Time, the
Certificate of Incorporation and Bylaws of the Surviving Corporation shall
contain provisions providing for exculpation of director and officer liability
and indemnification by the Surviving Corporation of the Indemnified Parties not
less favorable to the Indemnified Parties than those provisions providing for
exculpation of director and officer liability and indemnification by the Company
of the Indemnified Parties contained in the Certificate of Incorporation and
Bylaws of the Company as in effect on the date of this Agreement, and (ii) for a
period of six years from the Effective Time, the Surviving Corporation and the
Company's Subsidiaries shall not amend, repeal or modify any such provisions
contained in their respective certificates of incorporation and bylaws, or other
organizational documents of such Subsidiaries, to reduce or adversely affect the
rights of the Indemnified Parties thereunder in respect of actions or omissions
by them occurring at or prior to the Effective Time.
(d) Parent shall cause the Surviving Corporation to purchase a four-year
extended reporting period endorsement ("reporting tail coverage") under the
Company's existing directors' and officers' liability insurance coverage (or as
much coverage as can be obtained for a total not in excess of 175% of the
Current Premium), provided that such reporting tail coverage shall extend the
director and officer liability coverage in force as of the date hereof from the
Effective Time on terms, that in all material respects, are no less advantageous
to the intended beneficiaries thereof than the existing officers' and directors'
liability insurance. "Current Premium" shall mean the last annual premium paid
prior to the date hereof for the existing officers' and directors' liability
insurance, which the Company represents and warrants to be $445,500.
(e) This covenant is intended to be for the benefit of, and shall be
enforceable by, each of the Indemnified Parties and their respective heirs and
legal representatives.
SECTION 7.7. 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 non-occurrence of any event the occurrence or non-occurrence of
which would be likely to cause any representation or warranty contained in this
Agreement to be untrue or inaccurate and (ii) any failure of the Company, Parent
or Merger Sub, as the case may be, to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder;
provided, however, that the delivery of any notice pursuant to this Section 7.7
shall not limit or otherwise affect the remedies available hereunder to the
party receiving such notice.
SECTION 7.8. Further Action. Upon the terms and subject to the conditions
hereof, each of the parties hereto shall use its reasonable best efforts to
take, or cause to be taken, all appropriate action, and to do or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Agreement, including, without limitation, (i) cooperating in the Offer and
the preparation and filing of the Proxy Statement, required filings under the
HSR Act (no later than the fifth Business Day after the date of this Agreement)
and any amendments to the foregoing, (ii) using its reasonable best efforts to
make promptly all required regulatory filings and applications and to obtain all
licenses, permits, consents, approvals, authorizations, qualifications and
orders of governmental authorities and parties to contracts with the Company and
its Subsidiaries as are necessary for the consummation of the transactions
contemplated by this Agreement and to fulfill the conditions to the Offer and
the Merger, (iii) cooperating in all respects with each other in connection with
obtaining antitrust clearance and with any investigation or other inquiry,
including any proceeding initiated by a private party, in connection with the
transactions pursuant hereto, and (iv) keeping the other party informed
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in all material respects of any material communication received by such party
from, or given by such party to, the FTC, the Antitrust Division of the
Department of Justice ("DOJ") or any other governmental authority and of any
material communication received or given in connection with any proceeding by a
private party, in each case regarding any of the transactions contemplated
hereby. The Company and Parent each shall keep the other apprised of the status
of matters relating to completion of the transactions contemplated hereby,
including promptly furnishing the other with copies of notices or other
communications received by Parent or the Company, as the case may be, or any of
their Subsidiaries, from any governmental authority with respect to the Offer or
the Merger or any of the other transactions contemplated by this Agreement. The
parties hereto will consult and cooperate with one another, and consider in good
faith the views of one another in connection with any analyses, appearances,
presentations, memoranda, briefs, arguments, opinions and proposals made or
submitted by or on behalf of any party hereto in connection with proceedings
under or relating to the HSR Act or any other antitrust law. In case at any time
after the Effective Time any further action is necessary or desirable to carry
out the purposes of this Agreement, the proper officers and directors of each
party to this Agreement shall use their reasonable best efforts to take all such
necessary action. Notwithstanding the foregoing, nothing in this Section 7.8
shall require, or be construed to require, Parent or the Company, in connection
with the receipt of any regulatory approval, to proffer or agree (i) to sell or
hold separate or agree to sell, divert or discontinue or to limit, before or
after the Effective Time any assets, businesses or interest in any assets or
businesses of Parent, the Company or any of their respective affiliates (or to
consent to any sale or agreement to sell or discontinuance or limitation by
Parent or the Company, as the case may be, of any of its assets or business) or
(ii) to agree to any conditions relating to, or changes or restriction in, the
operations of any such asset or business which, in either case, is reasonably
likely to materially and adversely impact the economic or business benefits to
such party of the transactions contemplated by this Agreement. In furtherance
and not in limitation of the covenants of the parties contained in this Section
7.8, if any administrative or judicial action or proceeding, including any
proceeding by a private party, is instituted (or threatened to be instituted)
challenging any transaction contemplated by this Agreement as violative of any
antitrust law, each of the parties shall cooperate in all respects with each
other and use its reasonable best efforts to contest and resist any such action
or proceeding, and to have vacated, lifted, reversed or overturned any decree,
judgment, injunction or other order, whether temporary, preliminary or
permanent, that is in effect and that prohibits, prevents or restricts, and to
resolve any challenge or objection raised by any governmental authority or
private party.
SECTION 7.9. Public Announcements. The initial press release shall be a
joint press release and thereafter Parent and the Company shall consult with
each other before issuing any press release or otherwise making any public
statements with respect to the Offer or the Merger and shall not issue any such
press release or make any such public statement prior to such consultation,
except as may, upon the advice of outside legal counsel, be required by law or
any listing agreement with its securities exchange.
SECTION 7.10. Stock Exchange De-Listing. The Surviving Corporation shall
use its best efforts to cause the Voting Common Stock to be de-listed from the
NYSE and the Chicago Stock Exchange and de-registered under the Exchange Act as
soon as practicable following the Effective Time.
SECTION 7.11. Acceleration of Outstanding Indebtedness. If, after the Offer
Consummation Date, any obligation of the Company or any of its Subsidiaries for
borrowed money outstanding is accelerated or the Company or any such Subsidiary
is otherwise required to repurchase, repay or prepay any such obligation, Parent
agrees, within the time period specified in the contract governing such
obligation, to loan to the Company an amount equal to the amount which the
Company or any such Subsidiary is required to so repurchase, repay or prepay
(including any related prepayment premiums or penalties). The Company shall use
its best efforts prior to the acceptance for payment of the Minimum Shares in
the Offer to seek a waiver of any default under any obligation that would
otherwise be accelerated upon the purchase of such Minimum Shares, such waiver
to be effective until no earlier than the Effective Time; provided, however,
that the Company shall not make any significant payments in connection therewith
without Parent's prior written consent. Upon the reasonable request of Parent
(which shall not, prior to the Offer Consummation Date, require the Company to
expend any money), the Company will cooperate with Parent with respect to any
negotiations with lenders under the Company's credit facilities.
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SECTION 7.12. Transfer Taxes. The Company or the Surviving Corporation
shall pay all state or local real property transfer, real estate excise, gains
or similar Taxes, if any, of the Company (collectively, the "Transfer Taxes"),
attributable to the transfer of a controlling interest in the Company or the
beneficial ownership of real property or interests therein and any penalties or
interest with respect thereto, payable in connection with the consummation of
the Offer or the Merger. The Company shall cooperate with Parent in the filing
of any returns with respect to the Transfer Taxes, including supplying in a
timely manner a complete list of all real property or interests therein held by
the Company and its Subsidiaries and any information with respect to such
properties that is reasonably necessary to complete such returns.
SECTION 7.13. Shareholder Litigation. The Company and Parent agree that in
connection with any litigation which may be brought against the Company or its
directors or officers relating to the transactions contemplated hereby, the
Company will keep Parent, and any counsel which Parent may retain at its own
expense, informed of the course of such litigation, to the extent Parent is not
otherwise a party thereto, and the Company agrees that it will consult with
Parent prior to entering into any settlement or compromise of any such
shareholder litigation; provided, that, no such settlement or compromise will be
entered into without Parent's prior written consent, which consent shall not be
unreasonably withheld.
SECTION 7.14. Treatment of Management Agreement. At the earlier of the
Offer Consummation Date and the Effective Time, Parent will cause (a) the
Management Agreement to be terminated and (b) the Company to make a termination
payment to Yucaipa pursuant to Section 8.3 of the Management Agreement.
SECTION 7.15. Treatment of Yucaipa Warrant. At the earlier of the Offer
Consummation Date and the Effective Time, Parent or Merger Sub shall purchase
from Yucaipa the Yucaipa Warrant for an amount equal to the product of (i) the
difference between the Price Per Share and the per share exercise price thereof
($20.73 as of the date hereof) multiplied by (ii) the number of shares of Common
Stock underlying the Yucaipa Warrant (3,874,492 as of the date hereof). Upon the
purchase of the Yucaipa Warrant and payment of the purchase price therefor in
accordance with the provisions of this Section 7.15, Yucaipa shall cease to have
any rights with respect to the Yucaipa Warrant.
ARTICLE VIII.
CONDITIONS OF MERGER
The respective obligations of each party to effect the Merger shall be
subject to the satisfaction at or prior to the Closing Date of the following
conditions:
(a) this Agreement shall have been approved by the affirmative vote of
the holders of a majority of the outstanding shares of Voting Common Stock,
unless Merger Sub shall have acquired 90% or more of the outstanding shares
of each class of the capital stock of the Company;
(b) no statute, rule, regulation, executive order, decree, ruling,
injunction or other order (whether temporary, preliminary or permanent)
shall have been enacted, entered, promulgated or enforced by any court or
governmental authority of competent jurisdiction which prohibits,
restrains, enjoins or restricts the consummation of the Merger; provided,
however, that the parties shall use their reasonable best efforts to cause
any such decree, ruling, injunction or other order to be vacated or lifted;
(c) any waiting period applicable to the Offer and the Merger under
the HSR Act shall have terminated or expired; and
(d) Merger Sub shall have (i) commenced the Offer pursuant to Article
II hereof and (ii) purchased, pursuant to the terms and conditions of such
Offer, all shares of Common Stock duly tendered and not withdrawn;
provided, however, that neither Parent nor Merger Sub shall be entitled to
rely on the condition in clause (ii) above if either of them shall have
failed to purchase shares of Common Stock pursuant to the Offer in breach
of their obligations under this Agreement.
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ARTICLE IX.
TERMINATION, AMENDMENT AND WAIVER
SECTION 9.1. Termination. This Agreement may be terminated and the Merger
contemplated hereby may be abandoned at any time prior to the Effective Date,
whether before or after approval of matters presented in connection with the
Merger by the stockholders of the Company:
(a) by mutual written consent of Parent and the Company as duly
authorized by their respective Boards of Directors;
(b) by the Company, if Merger Sub shall have failed to commence the
Offer within the five-Business Day period specified in Section 2.1(a);
(c) (i) by the Company, if Parent or Merger Sub breaches any of their
respective representations, warranties, covenants or agreements contained
in this Agreement (without regard to any materiality or Material Adverse
Effect qualifier) which is reasonably likely to materially adversely affect
Parent's or Merger Sub's ability to consummate the Offer or the Merger and,
with respect to any such breach that is reasonably capable of being
remedied, the breach is not remedied within ten Business Days after the
Company has furnished Parent or Merger Sub with written notice of such
breach or (ii) by Parent, prior to the acceptance for payment of the
Minimum Shares pursuant to the Offer, if the Company breaches any of its
representations, warranties, covenants or agreements contained in this
Agreement (without regard to any materiality or Material Adverse Effect
qualifier) which is reasonably likely to have a Material Adverse Effect
and, with respect to any such breach that is reasonably capable of being
remedied, the breach is not remedied within ten Business Days after Parent
has furnished the Company with written notice of such breach;
(d) by Parent or the Company:
(i) if the Effective Time shall not have occurred on or before the
Outside Date (provided that the right to terminate this Agreement
pursuant to this clause (i) shall not be available to any party whose
failure to fulfill any obligation under this Agreement has been the
cause of, or resulted in, the failure of the Effective Time to occur on
or before such date);
(ii) if there shall be any statute, law, rule or regulation that
makes consummation of the Offer or the Merger illegal or prohibited or
if any court of competent jurisdiction or other governmental authority
shall have issued an order, judgment, decree or ruling, or taken any
other action restraining, enjoining, or otherwise prohibiting the Offer
or the Merger or prohibiting Parent from acquiring or holding or
exercising rights of ownership of the Company Stock and such order,
judgment, decree, ruling or other action shall have become final and
non-appealable; or
(iii) if the Offer terminates or expires on account of the failure
of any condition specified in Annex A without Merger Sub having
purchased any shares of Common Stock thereunder (provided that the right
to terminate this Agreement pursuant to this clause (iii) shall not be
available to any party whose failure to fulfill any obligation under
this Agreement has been the cause of, or resulted in, the failure of any
such condition);
(e) by Parent, prior to the acceptance for payment of the Minimum
Shares pursuant to the Offer, if (i) the Company Board withdraws, amends or
modifies its approval or recommendation of this Agreement and the
transactions contemplated hereby (or publicly announces its intention to do
so) in a manner adverse to Parent or (ii) the Company approves, recommends
or enters into an agreement with respect to, or consummates, an Alternative
Transaction; or
(f) by the Company, prior to the acceptance for payment of the Minimum
Shares pursuant to the Offer, if the Company Board shall have taken any
Permitted Action in accordance with the provisions of Section 7.1(a);
provided that such termination under this Section 9.1(f) shall not be
effective until the Company has made payment of the full Termination Fee
and Expenses required by Section 9.3.
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<PAGE> 36
SECTION 9.2. Effect of Termination. In the event of the termination of this
Agreement pursuant to Section 9.1, this Agreement shall forthwith become void
and there shall be no liability on the part of any party hereto except as set
forth in Section 9.3 and Section 10.1; provided, however, that nothing herein
shall relieve any party from liability for any willful breach hereof.
SECTION 9.3. Termination Fee and Expenses.
(a) In the event that this Agreement is terminated by Parent pursuant to
Section 9.1(e) or by the Company pursuant to Section 9.1(f), the Company shall
pay to Parent by wire transfer of immediately available funds to an account
designated by Parent on the next Business Day following such termination (or, in
the case of a termination pursuant to Section 9.1(f), prior to the effectiveness
of such termination, except that if documentation is not available, the Company
shall be permitted to make payment upon the provision by Parent of such
documentation) an amount equal to $36.0 million (the "Termination Fee") plus, no
later than two Business Days following the receipt of appropriate documentation,
reasonable out-of-pocket expenses of Parent relating to the transactions
contemplated by this Agreement (including reasonable fees and expenses of
Parent's counsel, accountants and financial advisers ("Expenses"); provided,
however, that the Company's reimbursement obligation for all such Expenses shall
not exceed $5.0 million.
(b) If all of the following events have occurred:
(i) an Alternative Transaction is commenced, publicly disclosed,
publicly proposed or otherwise communicated to the Company at any time on
or after the date of this Agreement and prior to the acceptance for payment
of the Minimum Shares pursuant to the Offer and either (1) Parent or the
Company terminates this Agreement pursuant to Section 9.1(d)(i) or (2) the
Company terminates this Agreement pursuant to Section 9.1(d)(iii) or (3)
Parent terminates this Agreement pursuant to Section 9.1(c)(ii); and
(ii) thereafter, within 12 months of the date of termination, the
Company (A) enters into a definitive agreement with respect to, or
consummates, the Alternative Transaction described in clause (i) above or
(B) consummates a Superior Proposal (whether or not such Superior Proposal
was commenced, publicly disclosed, publicly proposed or otherwise
communicated to the Company prior to such termination);
then, the Company shall pay to Parent an amount equal to the Termination Fee
plus Expenses (i) if payable pursuant to Section 9.3(b)(ii)(A), concurrently
with the execution of such definitive agreement or (ii) if payable pursuant to
Section 9.3(b)(ii)(B), concurrently with the consummation of such Superior
Proposal.
(c) The Surviving Corporation shall pay all charges and expenses, including
those of the Paying Agent, in connection with the transactions contemplated in
Article III. Except as otherwise specifically provided herein, each party shall
bear its own expenses in connection with this Agreement and the transactions
contemplated hereby.
(d) Notwithstanding the foregoing, in no event shall the Company be
obligated to pay more than one Termination Fee or more than $5.0 million in
Expenses with respect to all such occurrences.
SECTION 9.4. 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 before or after any required approval of matters presented in connection
with the Merger by the stockholders of the Company; provided, however, that
after any such approval, there shall be made no amendment that by law requires
further approval by such stockholders without the further approval of such
stockholders. This Agreement may not be amended except by an instrument in
writing signed by the parties hereto.
SECTION 9.5. Waiver. At any time prior to the Closing Date, any party
hereto may (a) extend the time for the performance of any of the obligations or
other acts of the other parties hereto, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto and (c) waive compliance with any of the agreements or
conditions contained herein. 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. The failure of any party to this Agreement to assert any of its rights
under this Agreement or otherwise shall not constitute a waiver of such rights.
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<PAGE> 37
ARTICLE X.
GENERAL PROVISIONS
SECTION 10.1. Non-Survival of Representations, Warranties and
Agreements. The representations, warranties and agreements in this Agreement
shall terminate at the Effective Time or upon the termination of this Agreement
pursuant to Section 9.1, as the case may be, except that the agreements set
forth in Article III and Section 7.5 and Section 7.6 shall survive the Effective
Time and those set forth in Section 7.2(b), Section 9.2 and Section 9.3 and the
Confidentiality Agreement in accordance with its terms shall survive termination
of this Agreement.
SECTION 10.2. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by telecopy,
overnight courier or by registered or certified mail (postage prepaid, return
receipt requested) to the respective parties at the following addresses (or at
such other address for a party as shall be specified by like notice):
if to Parent or Merger Sub:
Safeway Inc.
5918 Stoneridge Mall Road
Pleasanton, California 94588-3229
Attention: Michael C. Ross
Fax: (925) 467-3231
with an additional copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
Attention: Charles I. Cogut, Esq.
Fax: : (212) 455-2502
if to the Company:
Dominick's Supermarkets, Inc.
505 Railroad Avenue
Northlake, Illinois 60164-1696
Attention: Robert A. Mariano
Fax: : (708) 409-3886
with a copy to:
Latham & Watkins
633 West Fifth Street, Suite 4000
Los Angeles, California 90071
Attention: Thomas C. Sadler, Esq.
Fax: (213) 891-8763
and
The Yucaipa Companies LLC
10000 Santa Monica Boulevard, Fifth Floor
Los Angeles, California 90067
Attention: Ronald W. Burkle
Fax: (310) 789-7201
SECTION 10.3. 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
36
<PAGE> 38
possible in an acceptable manner to the end that the transactions contemplated
hereby are fulfilled to the fullest extent possible.
SECTION 10.4. Entire Agreement; Assignment. This Agreement and the
Stockholders Agreement, together with the Confidentiality Agreement, constitutes
the entire agreement among the parties with respect to the subject matter hereof
and supersedes all prior agreements and undertakings, both written and oral,
among the parties, or any of them, with respect to the subject matter hereof.
This Agreement shall not be assigned by any party hereto without the prior
written consent of the other parties, by operation of law or otherwise, except
that Parent and Purchaser may assign all or any of their respective rights and
obligations hereunder to any direct or indirect wholly-owned Subsidiary or
Subsidiaries of Parent, provided that no such assignment shall relieve the
assigning party of its obligations hereunder if such assignee does not perform
such obligations. Any attempted assignment which does not comply with the
provisions of this Section 10.4 shall be null and void ab initio.
SECTION 10.5. Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and, except as provided in the
following sentence, nothing in this Agreement, express or implied, is intended
to or shall confer upon any other person any rights, benefits or remedies of any
nature whatsoever under or by reason of this Agreement. The parties hereto
expressly intend the provisions of Sections 3.8 and 7.6 to confer a benefit upon
and be enforceable by, as third party beneficiaries of this Agreement, the third
persons referred to in, or intended to be benefited by, such provisions.
SECTION 10.6. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware, without
reference to the conflict of laws principles thereof.
SECTION 10.7. Headings. The descriptive headings contained in this
Agreement are included for convenience of reference only and shall not affect in
any way the meaning or interpretation of this Agreement.
SECTION 10.8. Specific Performance. Each of the parties hereto acknowledges
and agrees that the other parties hereto would be irreparably damaged in the
event any of the provisions of this Agreement were not performed in accordance
with their specific terms or were otherwise breached. Accordingly, each of the
parties hereto agrees that they each shall be entitled to an injunction or
injunctions to prevent breaches of the provisions of this Agreement and to
enforce specifically this Agreement and the terms and conditions hereof in any
action instituted in any court of the United States or any state having
competent jurisdiction, in addition to any other remedy to which such party may
be entitled, at law or in equity.
SECTION 10.9. Parent Guarantee. Parent hereby guarantees the due
performance of any and all obligations and liabilities of Merger Sub under or
arising out of this Agreement and the transactions contemplated hereby.
SECTION 10.10. Counterparts. This Agreement may be executed in two 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.
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<PAGE> 39
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 and
General Counsel
WINDY CITY ACQUISITION CORP.
By: /s/ MICHAEL C. ROSS
--------------------------------------
Name: Michael C. Ross
Title: Senior Vice President and
General Counsel
DOMINICK'S SUPERMARKETS, INC.
By: /s/ ROBERT A. MARIANO
--------------------------------------
Name: Robert A. Mariano
Title: President and Chief Executive
Officer
38
<PAGE> 40
ANNEX A
CONDITIONS TO THE OFFER
The Offer shall be conditioned upon at least that number of shares of
Common Stock equivalent to a majority of the total issued and outstanding shares
(on a fully diluted basis, without giving effect to the shares issuable upon the
exercise of the Yucaipa Warrant) of Common Stock on the date such shares are
purchased pursuant to the Offer (the "Minimum Shares") being validly tendered
and not withdrawn prior to the date which is 20 Business Days following the
commencement of the Offer in accordance with the terms hereof or such later date
as the Offer may be extended by an amendment to this Agreement in accordance
with the provisions of Section 9.4 or as provided in Section 2.1(b). Moreover,
notwithstanding any other provision of the Offer, and subject to the terms and
conditions of the Agreement, Merger Sub shall not be obligated to accept for
payment any shares of Common Stock until expiration of all applicable waiting
periods under the HSR Act, and Merger Sub shall not be required to accept for
payment, purchase or pay for, and may delay the acceptance for payment of or
payment for, any shares of Common Stock tendered in the Offer, or if the Minimum
Shares shall not have been validly tendered pursuant to the Offer and not
withdrawn, may terminate or amend the Offer, subject to the terms and conditions
of the Agreement and Merger Sub's obligation to extend the Offer pursuant to
Section 2.1(b) if, prior to the time of acceptance for payment of any such
shares of Common Stock (whether or not any other shares of Common Stock have
theretofore been accepted for payment or paid for pursuant to the Offer), any of
the following shall occur and remain in effect:
(a) a United States or state governmental authority or other agency or
commission or United States or state court of competent jurisdiction shall
have enacted, issued, promulgated, enforced or entered any statute, rule,
regulation, injunction or other order which is in effect and has the effect
of making the acquisition of Common Stock by Merger Sub illegal or
prohibits or imposes material limitations on the ability of Merger Sub to
acquire shares of Common Stock or otherwise prohibiting (directly or
indirectly) consummation of the transactions contemplated by this Agreement
or prohibits or imposes material limitations on the ability of Parent to
own or operate all or a material portion of the Company's and its
Subsidiaries' businesses or assets, taken as a whole, subject to Parent's
and Merger Sub's obligations pursuant to Sections 2.1(b) and 7.8 of the
Agreement and Parent's agreement not to terminate the Offer as long as any
such injunction or order has not become final and non-appealable;
(b) either (i) any of the representations or warranties of the Company
in the Agreement (without giving effect to any materiality or Material
Adverse Effect qualifier therein) shall not be true and correct which
inaccuracy, singly or in the aggregate, would have or be reasonably likely
to have a Material Adverse Effect and which are not reasonably capable of
being cured by the Company or have not been cured within 10 Business Days
after the giving of written notice to the Company, in each case as if such
representations or warranties were made as of such time (unless a
representation speaks as of an earlier date, in which case it shall be
deemed to have been made as of such earlier date); or (ii) the Company
shall have failed to perform any obligation or to comply with any agreement
or covenant of the Company to be performed or complied with by it under the
Agreement, which failure, singly or in the aggregate, would have or be
reasonably likely to have a Material Adverse Effect and is not reasonably
capable of being cured by the Company or has not been cured within 10
Business Days after the giving of written notice to the Company; and an
officer of the Company shall not have provided a certificate to the effect
that the conditions set forth in clauses (i) and (ii) have not occurred on
the date shares of Common Stock are to be accepted for payment pursuant to
the Offer;
(c) (i) the Company Board (A) shall have amended, modified or
withdrawn in a manner adverse to Parent its approval or recommendation of
this Agreement, the Offer, the Merger or any of the transactions
contemplated thereby or (B) shall have endorsed, approved or recommended
any Alternative Transaction or (ii) the Company shall have entered into any
agreement with respect to any Alternative Transaction;
(d) any person or group (as defined in Section 13(d)(3) of the
Exchange Act), other than Parent or Merger Sub or any of their respective
subsidiaries or affiliates, shall have become the beneficial owner
ANNEX A-1
<PAGE> 41
(as defined in Rule 13d-3 promulgated under the Exchange Act) of more than
25% of the outstanding shares of Common Stock (either on a primary or a
fully diluted basis, without giving effect to the shares issuable upon the
exercise of the Yucaipa Warrant); provided, however, that this provision
shall not apply to any person or group that beneficially owns shares of
Common Stock on the date hereof so long as such person or group does not
further increase its beneficial ownership beyond the number of shares of
Common Stock such person or group beneficially owns on the date of the
Agreement;
(e) the Agreement shall have been terminated by the Company or Parent
pursuant to its terms;
(f) there shall have occurred and be continuing (i) any general
suspension of, or limitation on prices for, trading in securities on the
NYSE (excluding suspensions or limitations (x) resulting solely from
physical damage or interference with such exchanges not related to market
conditions or (y) triggered on the NYSE by price fluctuations on a trading
day), (ii) a declaration of a banking moratorium or any suspension of
payments in respect of banks in the United States, (iii) any limitation by
any United States governmental authority on the extension of credit
generally by banks or other financial institutions; (iv) a commencement of
war or material armed hostilities or other national calamity directly
involving the United States which could reasonably be expected to
materially adversely affect the consummation of the Offer or (v) in the
case of any of the foregoing existing at the time of the commencement of
the Offer, a material acceleration or worsening thereof; or
(g) there shall have occurred and be continuing any change in the
Company's business, operations, condition (financial or otherwise), results
of operations, assets or liabilities, except for changes contemplated
hereby or changes which are not reasonably likely to have a Material
Adverse Effect;
which, in reasonable judgment of Parent and Merger Sub, in any such case, and
regardless of the circumstances (including any action or inaction by or giving
rise to any such conditions), makes it inadvisable to proceed with the Offer
and/or with such acceptance for payment of or payment for shares of Common
Stock.
The foregoing conditions are for the sole benefit of Parent and Merger Sub
and may be asserted by Parent and Merger Sub regardless of the circumstances
giving rise to such condition or, except for the Minimum Condition, may be
waived by Parent and Merger Sub in whole or in part at any time and from time to
time. The failure by Parent or Merger Sub at any time to exercise any of the
foregoing rights shall not be deemed a waiver of any such right, the waiver of
any such right with respect to particular facts and other circumstances shall
not be deemed a waiver with respect to any other facts and circumstances, and
each such right shall be deemed an ongoing right that may be asserted at any
time and from time to time.
ANNEX A-2
<PAGE> 1
EXHIBIT 3
STOCKHOLDERS AGREEMENT
STOCKHOLDERS AGREEMENT, dated as of October 13, 1998 (the
"Agreement"), by and among Safeway Inc., a Delaware corporation ("Parent"),
Windy City Acquisition Corp., a Delaware corporation and a wholly-owned
subsidiary of Parent ("Merger Sub"), and the parties listed on Annex A hereto
(each, a "Stockholder" and, collectively, the "Stockholders").
RECITALS
WHEREAS, Parent, Merger Sub and Dominick's Supermarkets, Inc., a
Delaware corporation (the "Company"), propose to enter into an Agreement and
Plan of Merger, dated as of October 12, 1998 (the "Merger Agreement"), which
provides, among other things, that Merger Sub will make a cash tender offer (the
"Offer") for all of the outstanding capital stock of the Company and, after
expiration of the Offer, will merge with and into the Company (the "Merger"), in
each case upon the terms and subject to the conditions in the Merger Agreement
(with all capitalized terms used but not defined herein having the meanings set
forth in the Merger Agreement);
WHEREAS, each Stockholder owns the number of shares of Voting Common
Stock, par value $.01 per share ("Voting Stock"), and/or Non-Voting Common
Stock, par value $.01 per share ("Non-Voting Stock"), of the Company (together,
the "Common Stock") set forth opposite its name on Annex A hereto (such shares
of Common Stock, together with any other shares of capital stock of the Company
acquired by such Stockholder after the date hereof and during the term of this
Agreement, including any shares issued upon the exercise of any warrants or
options, the conversion of any convertible securities or otherwise, and, with
respect to The Yucaipa Companies, a California general partnership ("Yucaipa"),
any shares issued upon exercise of the Class A Common Stock Purchase Warrant No.
W-1 issued by the Company to Yucaipa on March 22, 1995, as amended (the "Yucaipa
Warrant"), being collectively referred to herein as the "Subject Shares");
WHEREAS, Yucaipa owns the Yucaipa Warrant;
WHEREAS, as a condition to the willingness of Parent and Merger Sub to
enter into the Merger Agreement and make the Offer, Parent has required that
each Stockholder agree and, in order to induce Parent and Merger Sub to enter
into the Merger Agreement, each Stockholder has agreed, to enter into this
Agreement; and
WHEREAS, the Board of Directors of the Company (the "Company Board")
has approved Parent and Merger Sub becoming "interested stockholders" for
purposes of Section 203 of the Delaware General Corporation Law.
NOW, THEREFORE, to induce Parent and Merger Sub to enter into, and in
consideration of their entering into, the Merger Agreement, and in consideration
of the premises and the representations, warranties and agreements contained
herein, the parties agree as follows:
<PAGE> 2
1. Representations and Warranties of Each Stockholder. Each
Stockholder hereby, severally and not jointly, represents and warrants to Parent
and Merger Sub as of the date hereof solely in respect of itself as follows:
(a) Organization. Such Stockholder is a partnership duly formed
and validly existing under the laws of the jurisdiction of its
organization.
(b) Authority. Such Stockholder has the legal capacity and all
requisite power and authority to enter into this Agreement and to
perform its obligations and consummate the transactions contemplated
hereby. The execution, delivery and performance by such Stockholder of
this Agreement and the consummation by it of the transactions
contemplated hereby have been duly and validly authorized by such
Stockholder and no other partnership or other action or proceedings on
the part of such Stockholder are necessary to authorize the execution
and delivery by it of this Agreement and the consummation by it of the
transactions contemplated hereby. This Agreement has been duly
executed and delivered by the Stockholder and constitutes a valid and
binding obligation of the Stockholder enforceable in accordance with
its terms, subject to the effects of bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar
laws relating to or affecting creditors' rights generally, general
equitable principles (whether considered in a proceeding in equity or
at law) and an implied covenant of good faith and fair dealing.
(c) The Subject Shares. Except as set forth on Annex A hereto,
the Stockholder is the record and beneficial owner of, and has good
and marketable title to, the Subject Shares set forth opposite its
name on Annex A hereto and, in the case of Yucaipa, the Yucaipa
Warrant. The Stockholder does not own, of record or beneficially, any
shares of capital stock of the Company (or rights to acquire any such
shares) other than the Subject Shares set forth opposite its name on
Annex A hereto and, with respect to Yucaipa, the Yucaipa Warrant.
Except as set forth on Annex A hereto, the Stockholder has the sole
right to vote, sole power of disposition, sole power to issue
instructions with respect to the matters set forth in Sections 3, 4,
5, 6 (in the case of Yucaipa only) and 8 hereof, sole power of
conversion, sole power to demand appraisal rights and sole power to
agree to all of the matters set forth in this Agreement, in each case
with respect to all of such Stockholder's Subject Shares and, in the
case of Yucaipa, the Yucaipa Warrant and will have sole voting power,
sole power of disposition, sole power to issue instructions with
respect to the matters set forth in Sections 3, 4, 5, 6 (in the case
of Yucaipa only) and 8 hereof, sole power of conversion, sole power to
demand appraisal rights and sole power to agree to all of the matters
set forth in this Agreement, with respect to all of such Stockholder's
Subject Shares and, in the case of Yucaipa, the Yucaipa Warrant on the
Closing Date (as defined in Section 5(c)) or the Warrant Closing Date
(as defined in Section 6(c)(ii)), as the case may be, with no material
limitations, qualifications or restrictions on such rights, subject to
applicable federal securities laws and the terms of this Agreement.
Except for the 1996 Stockholders Agreement and this Agreement, and
except as set forth on Annex A hereto, none of the Subject Shares, or
with respect to Yucaipa, the Yucaipa Warrant, are subject to any
voting trust or other agreement, arrangement or restriction with
respect to the voting or disposition of such Subject Shares or the
Yucaipa Warrant, as the case may be. To the Stockholder's knowledge,
the
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Subject Shares are validly issued, fully paid and non-assessable. With
respect to the Stockholders not affiliated with Yucaipa (collectively,
"Apollo"), the Non-Voting Shares owned by Apollo may be converted into
Voting Stock by Apollo or following their transfer, by Parent in
accordance with the terms of the Company's Certificate of
Incorporation. With respect to Apollo, no shares of Non-Voting Stock
subject to this Agreement are or have ever been beneficially owned by
a bank holding company (as defined in 12 U.S.C. Section 1841) or an
Affiliate of a bank holding company.
(d) No Conflicts. Except for (i) filings under the HSR Act, if
applicable, (ii) the applicable requirements of the Exchange Act and
the Securities Act, (iii) the applicable requirements of state
securities, takeover or Blue Sky laws, (iv) such notifications,
filings, authorizing actions, orders and approvals as may be required
under other laws, (A) no material filing with, and no material permit,
authorization, consent or approval of, any state, federal or foreign
public body or authority is necessary for the execution of this
Agreement by such Stockholder and the consummation by such Stockholder
of the transactions contemplated hereby and (B) the execution and
delivery of this Agreement by such Stockholder do not, and the
consummation by it of the transactions contemplated hereby and
compliance with the terms hereof will not, conflict with, or result in
any violation of, or breach or default (with or without notice or
lapse of time or both) under (1) any partnership or other
organizational agreement of such Stockholder, (2) any provision of any
material trust, loan or credit agreement, note, bond, mortgage,
indenture, guarantee, lease or other agreement to which it is a party
or by which it is bound, including without limitation, the Amended and
Restated Stockholders Agreement dated as of November 1, 1996 by and
between, among others, the Company and the Stockholders, as amended
(the "1996 Stockholders Agreement") and, with respect to Yucaipa, the
Yucaipa Warrant, or (3) any material franchise, license, judgment,
order, writ, injunction, notice, decree, statute, law, ordinance, rule
or regulation applicable to the Stockholder or its property or assets.
The execution and delivery of the amendments dated as of the date
hereof to the 1996 Stockholders Agreement and the Yucaipa Warrant do
not require the consent or approval of any Person other than the
parties to such amendments.
2. Representations and Warranties of Parent and Merger Sub. Each of
Parent and Merger Sub hereby, jointly and severally, represents and warrants to
each Stockholder as of the date hereof as follows:
(a) Organization. Each of Parent and Merger Sub is a corporation
duly incorporated, validly existing and in good standing under the
laws of Delaware.
(b) Authority. Each of Parent and Merger Sub has all requisite
corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated hereby. The execution,
delivery and performance by Parent and Merger Sub of this Agreement
and the consummation by them of the transactions contemplated hereby,
have been duly and validly authorized by Parent and Merger Sub and no
other corporate or other action or proceedings on the part of Parent
and Merger Sub are necessary to authorize the execution and delivery
by them of this Agreement and the consummation by them of the
transactions contemplated hereby. This Agreement has
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<PAGE> 4
been duly executed and delivered by Parent and Merger Sub and
constitutes a valid and binding obligation of Parent and Merger Sub
enforceable in accordance with its terms, subject to the effects of
bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting creditors'
rights generally, general equitable principles (whether considered in
a proceeding in equity or at law) and an implied covenant of good
faith and fair dealing.
(c) No Conflicts. Except for (i) filings under the HSR Act, if
applicable, (ii) the applicable requirements of the Exchange Act and
the Securities Act, (iii) the applicable requirements of state
securities, takeover or Blue Sky laws, (iv) such notifications,
filings, authorizing actions, orders and approvals as may be required
under other laws, (A) no material filing with, and no material permit,
authorization, consent or approval of, any state, federal or foreign
public body or authority is necessary for the execution of this
Agreement by Parent and Merger Sub and the consummation by Parent and
Merger Sub of the transactions contemplated hereby and (B) the
execution and delivery of this Agreement by Parent and Merger Sub do
not, and the consummation by them of the transactions contemplated
hereby and compliance with the terms hereof will not, conflict with,
or result in any violation of, or breach or default (with or without
notice or lapse of time or both) under (1) the certificate of
incorporation or bylaws of Parent or Merger Sub, (2) any provision of
any material trust, loan or credit agreement, note, bond, mortgage,
indenture, guarantee, lease or other agreement to which Parent or
Merger Sub is a party or by which it is bound, or (3) any material
franchise, license, judgment, order, writ, injunction, notice, decree,
statute, law, ordinance, rule or regulation applicable to Parent or
Merger Sub or their respective properties or assets.
(d) Financial Condition. Parent and Merger Sub have, as of the
date of this Agreement, available cash or undrawn lines of credit
sufficient to consummate the Offer on the terms contemplated by this
Agreement, and, at the expiration of the Offer, Parent and Merger Sub
will have available all of the funds necessary for the acquisition of
all shares of Common Stock pursuant to the Offer and to perform their
respective obligations under this Agreement.
3. Tender of Subject Shares.
(a) Parent and Merger Sub jointly and severally agree (i) subject
to the conditions of the Offer set forth in Annex A to the Merger
Agreement and the other terms and conditions of the Merger Agreement,
that (x) Merger Sub will commence the Offer within five (5) Business
Days after Parent and the Company issue a public announcement of the
execution of the Merger Agreement and (y) Merger Sub will accept for
payment, purchase and pay for, in accordance with the terms of the
Offer and the Merger Agreement, all shares of Common Stock tendered
pursuant to the Offer as soon as permitted under applicable law and
(ii) not to decrease the Price Per Share below $49.00.
(b) Each Stockholder agrees (i) to tender the Subject Shares into
the Offer promptly, and in any event no later than the 10th Business
Day following the commencement of the Offer, or, if any Stockholder
has not received the Offer Documents by such time, within two Business
Days following receipt of such documents but in any
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<PAGE> 5
event prior to the date of expiration of such Offer, in each case,
free and clear of any Encumbrances except those set forth on Annex A
hereto and those arising from this Agreement and (ii) not to withdraw
any Subject Shares so tendered. Each Stockholder acknowledges that
Merger Sub's obligation to accept for payment and pay for the Subject
Shares in the Offer is subject to the terms and conditions of the
Offer.
(c) Subject to Section 3(a)(ii), each Stockholder will receive
the same Price Per Share received by other stockholders of the Company
in the Offer with respect to Subject Shares tendered by it in the
Offer. In the event that, notwithstanding the provisions of the first
sentence of Section 3(b), any Subject Shares are for any reason
withdrawn from the Offer or are not purchased pursuant to the Offer,
such Subject Shares will remain subject to the terms of this
Agreement. On the date the Subject Shares are accepted for payment and
purchased by Merger Sub pursuant to the Offer, Merger Sub or Parent,
as the case may be, shall instruct the Paying Agent to make payment by
wire transfer to each Stockholder of the purchase price for such
Stockholder's Subject Shares to an account designated by such
Stockholder in the Offer Documents.
(d) Each Stockholder hereby agrees to permit Parent to publish
and disclose in the Offer Documents and, if approval of the
stockholders of the Company is required under applicable law, the
Proxy Statement, its identity and ownership of Common Stock and the
nature of its commitments, arrangements and understandings under this
Agreement.
4. Agreement to Vote. Each Stockholder, severally and not jointly,
agrees that:
(a) At any meeting of stockholders of the Company called to vote
upon the Merger Agreement and the transactions contemplated thereby,
however called, or at any adjournment thereof or in connection with
any written consent of the holders of Common Stock or in any other
circumstances upon which a vote, consent or other approval with
respect to the Merger Agreement and the transactions contemplated
thereby is sought, the Stockholder shall be present (in person or by
proxy) and shall vote (or cause to be voted) all Subject Shares then
beneficially owned by such Stockholder in favor of the Merger and the
Merger Agreement and the transactions contemplated thereby; and
(b) At any meeting of stockholders of the Company, however
called, or at any adjournment thereof or in connection with any
written consent of the holders of Common Stock or in any other
circumstances upon which a vote, consent or other approval is sought,
the Stockholder shall vote (or cause to be voted) all Subject Shares
then beneficially owned by such Stockholder against any action or
agreement (other than the Merger Agreement or the transactions
contemplated thereby) that would impede, interfere with, delay,
postpone or attempt to discourage the Merger, the Offer or the other
transactions contemplated by this Agreement and the Merger Agreement,
including, but not limited to: (i) any extraordinary corporate
transaction, such as a merger, consolidation or other business
combination involving the Company and its Subsidiaries; (ii) a sale,
lease or transfer of a material amount of assets of the Company and
its Subsidiaries or a
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<PAGE> 6
reorganization, recapitalization, dissolution, winding up or
liquidation of the Company and its Subsidiaries; (iii) any change in
the management or board of directors of the Company, except as
otherwise agreed to in writing by Parent; (iv) any material change in
the present capitalization or dividend policy of the Company; or (v)
any other material change in the Company's corporate structure,
business, certificate of incorporation or by-laws.
(c) The provisions of this Section 4 shall terminate and be of no
further force and effect upon the earlier to occur of (1) the
termination of the Merger Agreement without the occurrence of any
Triggering Event (as defined in Section 5(b)) and (2) the expiration
of the Option Exercise Period (as defined in Section 5(b)) without
Parent having duly delivered the Option Exercise Notice (as defined in
Section 5(c)) in accordance with Section 19(b); provided however that
nothing herein shall relieve any party from liability for any breach
hereof.
5. Option.
(a) Subject to applicable law (including Rule 10b-13 under the
Exchange Act), each Stockholder, severally and not jointly, hereby
grants to Merger Sub an irrevocable option to purchase such
Stockholder's Subject Shares, on the terms and subject to the
conditions set forth herein (collectively, with respect to all the
Stockholders' Subject Shares, the "Option").
(b) The Option may be exercised by Merger Sub, as a whole and not
in part, during the period commencing upon the occurrence of any of
the following events and ending at 5:00 p.m., Los Angeles time, on the
date which is the 30th calendar day following the first to occur of
such events (each of such events a "Triggering Event," and such 30 day
period, the "Option Exercise Period"): (i) the Merger Agreement shall
have been terminated by Parent pursuant to Section 9.1(e) thereof;
(ii) the Merger Agreement shall have been terminated by the Company
pursuant to Section 9.1(f) thereof; or (iii) the Merger Agreement
shall have been terminated pursuant to Section 9.1(c)(ii), 9.1(d)(i)
or 9.1 (d)(iii) thereof in circumstances where a Termination Fee may
become payable pursuant to Section 9.3(b) thereof.
(c) If Merger Sub wishes to exercise the Option, Merger Sub shall
send a written notice (the "Option Exercise Notice") in accordance
with Section 19(b) to each Stockholder of its intention to exercise
the Option, specifying the place, and, if then known, the time and the
date (the "Closing Date") of the closing (the "Closing") of the
purchase. The Closing Date shall occur on the fifth Business Day (or
such longer period as may be required by applicable law or regulation)
after the later of (i) the date on which such notice is delivered and
(ii) the satisfaction of the conditions set forth in Section 5(f).
(d) At the Closing, each Stockholder shall deliver to Merger Sub
(or its designee) all of such Stockholder's Subject Shares, free and
clear of all Encumbrances (except those arising from this Agreement),
by delivery of a certificate or certificates evidencing such Subject
Shares in the denominations designated by Merger Sub in the
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Option Exercise Notice, duly endorsed to Merger Sub or accompanied by
stock powers duly executed in favor of Merger Sub, with all necessary
stock transfer stamps affixed.
(e) At the Closing, Merger Sub shall pay, and Parent shall cause
Merger Sub to pay, to the Stockholders, by wire transfer in
immediately available funds to the accounts the Stockholders specified
in writing no more than two Business Days prior to the Closing, an
amount equal to the product of $49.00 and the number of Subject Shares
purchased pursuant to the exercise of the Option (the "Purchase
Price").
(f) The Closing shall be subject to the satisfaction of each of
the following conditions: (i) no court, arbitrator or governmental
body, agency or official shall have issued any order, decree or ruling
and there shall not be any statute, rule or regulation, in each case,
restraining, enjoining or prohibiting the consummation of the purchase
and sale of the Subject Shares pursuant to the exercise of the Option;
(ii) any waiting period applicable to the consummation of the purchase
and sale of the Subject Shares under the HSR Act shall have expired or
been terminated; and (iii) all actions by or in respect of, and any
filing with, any governmental body, agency, official or authority
required to permit the consummation of the purchase and sale of the
Subject Shares shall have been obtained or made and shall be in full
force and effect; except, in the case of clause (iii), where the
failure to satisfy such condition would not materially delay the
Closing or materially impair the value of the Subject Shares.
(g) In the event the Option is exercised, the Stockholders shall
use their best efforts, consistent with their fiduciary duties as
directors under applicable law, to ensure that Parent is entitled to
representation on the Company Board proportionate (rounded up to the
next whole number) to the percentage determined by dividing the number
of Subject Shares by the number of outstanding shares of Common Stock;
provided that such representation shall not be rounded up to
constitute a majority of the Company Board.
(h) The provisions of this Section 5 shall terminate and be of no
further force and effect upon the earlier to occur of (1) the Closing
and (2) the expiration of the Option Exercise Period without Parent
having duly delivered the Option Exercise Notice in accordance with
Section 19(b); provided however that nothing herein shall relieve any
party from liability for any breach hereof.
6. Yucaipa Warrant.
(a) At the earlier of the Offer Consummation Date and the
Effective Time, Parent or Merger Sub shall purchase from Yucaipa the
Yucaipa Warrant for an amount equal to the product of (i) the
difference between the Price Per Share and the per share exercise
price thereof ($20.73 as of the date hereof) multiplied by (ii) the
number of shares of Common Stock underlying the Yucaipa Warrant
(3,874,492 as of the date hereof). Upon the purchase of the Yucaipa
Warrant and payment of the purchase price therefor in accordance with
the provisions of this Section 6, Yucaipa shall cease to have any
rights with respect to the Yucaipa Warrant.
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(b) Until the earlier to occur of (i) the termination or
expiration (without extension) of the Offer and (ii) the termination
of the Merger Agreement, Yucaipa shall not exercise the Yucaipa
Warrant without the prior written consent of Parent.
(c) (i) In the event that Yucaipa either (i) exercises the
Yucaipa Warrant or (ii) notifies Parent in writing of its intention to
exercise the Yucaipa Warrant (and concurrently surrenders to the
Company the Yucaipa Warrant together with a duly completed
subscription and, if the "cash exercise" box is checked, a check made
out to the Company in the amount set forth in such subscription,
accompanied by an irrevocable instruction to the Company (which
instruction shall state that it may be withdrawn only by Parent,
copies of the foregoing to be provided to Parent concurrently with
delivery of the notice) to exercise the Warrant on the second Business
Day following the expiration of the Warrant Option Exercise Period (as
defined below)) and that any applicable transfer restrictions have
been (or will be) waived or amended, in each case, at any time on or
after the occurrence of a Triggering Event and on or prior to the
earlier to occur of a Sale (as defined in Section 10(b)) and the first
anniversary of a Triggering Event (the earlier date being referred to
herein as the "Warrant Termination Date"), Parent shall have the
right, exercisable at any time on or prior to 5:00 p.m., Los Angeles
time, on the 30th calendar day following receipt by Parent of such
notice in accordance with Section 19(b) (such 30 day period, the
"Warrant Option Exercise Period"), to acquire (a) the shares of Common
Stock issuable upon such exercise (the "Warrant Shares") at a price of
$49 per share in the case of clause (i) or (b) acquire the Yucaipa
Warrant for the same price that Parent or Merger Sub would have been
obligated to pay under Section 6(a) had either of them purchased the
Yucaipa Warrant pursuant to such Section (and for such purpose the
Price Per Share is $49), in the case of clause (ii) (the "Warrant
Option"). All of the Warrant Shares (or, if applicable, the Yucaipa
Warrant) acquired pursuant to the preceding sentence shall be subject
to the provisions of Section 10(b) for the period of time commencing
with the Warrant Closing and ending on the first anniversary thereof.
Yucaipa shall not take any action, or enter into any agreement or
arrangement, that would have the effect of giving any Person the right
to acquire the Warrant Shares (or, if applicable, the Yucaipa Warrant)
which right would either have priority over Parent's right to acquire
the Warrant Shares (or, if applicable, the Yucaipa Warrant) upon the
exercise of the Warrant Option, or which would require Parent to
transfer such Warrant Shares (or, if applicable, the Yucaipa Warrant)
to any Person following such exercise, or give any Person the right to
control or share control of the power to vote or dispose of the
Warrant Shares (or, if applicable, the Yucaipa Warrant).
(ii) If Merger Sub wishes to exercise
the Warrant Option, Merger Sub shall send a written notice (the
"Warrant Option Exercise Notice") in accordance with Section 19(b) to
Yucaipa of its intention to exercise the Option, specifying the place,
and, if then known, the time and the date (the "Warrant Closing Date")
of the closing (the "Warrant Closing") of the purchase. The Warrant
Closing Date shall occur on the fifth Business Day (or such longer
period as may be required by applicable law or regulation) after the
later of (a) the date on which such notice is delivered and (b) the
satisfaction of the conditions set forth in Section 6(b)(v).
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(iii) At the Warrant Closing, Yucaipa shall
deliver to Merger Sub (or its designee) all of the Warrant Shares (or,
if applicable, the Yucaipa Warrant) by delivery of a certificate or
certificates evidencing such shares in the denominations designated by
Merger Sub in the Warrant Option Exercise Notice, duly endorsed to
Merger Sub or accompanied by stock powers duly executed in favor of
Merger Sub, with all necessary stock transfer stamps affixed.
(iv) At the Warrant Closing, Merger Sub
shall pay, and Parent shall cause Merger Sub to pay, to Yucaipa, by
wire transfer in immediately available funds to the account of The
Yucaipa Companies specified in writing no more than two Business Days
prior to the Closing, an amount equal to the product of $49.00 and the
number of shares purchased pursuant to the exercise of the Warrant
Option if Warrant Shares are purchased, or the price specified in
Section 6(c)(i) above, if the Yucaipa Warrant is purchased (the
"Warrant Option Price"); provided, however, that in connection with
the purchase of the Yucaipa Warrant, the Warrant Option Price will be
held in escrow, with a financial institution and under customary
arrangements, in each case, reasonably satisfactory to Parent and
Yucaipa, until such time as the Warrant Shares to be issued upon
exercise of the Yucaipa Warrant have been issued to Parent (or its
designee). In the event that such Warrant Shares have not been issued
to Parent by the end of the fifth Business Day following the Warrant
Closing Date, the Warrant Closing shall be cancelled. In such event
the Yucaipa Warrant shall be returned to Yucaipa and the Warrant
Option Price shall be returned to Parent. In addition, in such event,
no Warrant Option Exercise Period shall be deemed to have commenced
hereunder. Thereafter, Yucaipa shall not be entitled to give Parent
any further notice contemplated by Section 6(c)(ii) above.
(v) The Warrant Closing shall be subject
to the satisfaction of each of the following conditions: (1) no court,
arbitrator or governmental body, agency or official shall have issued
any order, decree or ruling and there shall not be any statute, rule
or regulation, in each case, restraining, enjoining or prohibiting the
consummation of the purchase and sale of the Warrant Shares (or, if
applicable, the Yucaipa Warrant); (2) any waiting period applicable to
the consummation of the purchase and sale of the Warrant Shares (or,
if applicable, the Yucaipa Warrant) under the HSR Act shall have
expired or been terminated; and (3) all actions by or in respect of,
and any filing with, any governmental body, agency, official, or
authority required to permit the consummation of the purchase and sale
of the Warrant Shares (or, if applicable, the Yucaipa Warrant) shall
have been obtained or made and shall be in full force and effect;
except, in the case of clause (iii), where the failure to satisfy any
such condition would not materially delay the Warrant Closing or
materially impair the value of the Warrant Shares (or, if applicable,
the Yucaipa Warrant).
(d) Except as set forth herein with respect to the application of
Section 10(b) to the Warrant Shares, the provisions of Section 6(c)
shall terminate upon the earlier to occur of the following: (i) the
Warrant Termination Date, (ii) the expiration of the Option Exercise
Period without Parent having duly delivered the Option Exercise Notice
in accordance with Section 19(b), (iii) the expiration of the Warrant
Option Exercise Period without Parent having duly delivered the
Warrant Option Exercise Notice
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in accordance with Section 19(b) and (iv) the Warrant Closing;
provided however that nothing herein shall relieve any party from
liability for any breach hereof.
7. Treatment of Management Agreement. At the earlier of the Offer
Consummation Date and the Effective Time, Parent will cause (a) the Management
Agreement to be terminated by the Company and (b) the Company to make a
termination payment to Yucaipa pursuant to Section 8.3 of the Management
Agreement.
8. Restriction on Transfer. Each Stockholder agrees not (a) to sell,
transfer, pledge, encumber, assign or otherwise dispose of (collectively,
"Transfer"), or enter into any contract, option or other arrangement or
understanding with respect to the Transfer by such Stockholder of, any of the
Subject Shares and, in the case of Yucaipa, the Yucaipa Warrant, or offer any
interest in any thereof to any Person other than pursuant to the terms of the
Offer, the Merger or this Agreement or (b) to enter into any voting arrangement
or understanding, whether by proxy, power of attorney, voting agreement, voting
trust or otherwise with respect to the Subject Shares, or, with respect to
Yucaipa, the Yucaipa Warrant, in connection with, directly or indirectly, any
Alternative Transaction or otherwise and agrees not to commit or agree to take
any of the foregoing actions or (c) take any action that would make any
representation or warranty of such Stockholder contained herein untrue or
incorrect in any material respect or have the effect of preventing or disabling
such Stockholder from performing its obligations under this Agreement.
Notwithstanding the foregoing, each Stockholder shall have the right to Transfer
Subject Shares and, with respect to Yucaipa, the Yucaipa Warrant to any
Affiliate upon the due execution and delivery to Parent by such transferee of a
legal, valid and binding counterpart to this Agreement so long as any such
Transfer is not intended to circumvent the provisions of this Agreement. The
transfer restrictions with respect to the Subject Shares shall terminate and be
of no further force and effect upon the earlier to occur of the following: (i)
the termination of the Merger Agreement without the occurrence of any Triggering
Event and (ii) the expiration of the Option Exercise Period without Parent
having duly delivered the Option Exercise Notice in accordance with Section
19(b). The transfer restrictions with respect to the Yucaipa Warrant set forth
herein shall terminate and be of no further force and effect upon the earlier to
occur of the following: (i) the Warrant Termination Date and (ii) the expiration
of the Option Exercise Period without Parent having duly delivered the Option
Exercise Notice in accordance with Section 19(b).
9. No Solicitation of Alternative Transactions. Each of the
Stockholders shall, and shall cause its respective officers, directors,
employees, and representatives and agents to immediately cease any existing
discussions or negotiations, if any, with any parties conducted heretofore with
respect to any Alternative Transaction or the sale of any Subject Shares, or
with respect to Yucaipa, the Yucaipa Warrant. No Stockholder, nor any of their
respective officers, directors, employees or representatives and agents, shall,
directly or indirectly, solicit, initiate, facilitate or encourage the making of
any proposal for an Alternative Transaction or the sale of any Subject Shares,
or with respect to Yucaipa, the Yucaipa Warrant, participate in discussions or
negotiations with, or provide any information to, any Person or group (other
than Parent and Merger Sub or any designees of Parent or Merger Sub) concerning
an Alternative Transaction or the sale of any Subject Shares, or with respect to
Yucaipa, the Yucaipa Warrant. Each Stockholder shall notify Parent promptly if
it receives any unsolicited proposal concerning an Alternative Transaction or
the sale of any Subject Shares, or with respect to Yucaipa,
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the Yucaipa Warrant, the identity of the person making any such proposal and
all the terms and conditions thereof and shall advise Parent periodically of all
material developments relating thereto.
10. Further Agreements of Parent.
(a) Parent hereby agrees that, in the event the Option or the
Warrant Option is exercised, as promptly as practicable thereafter,
Parent will propose to the Company a merger, on terms and conditions
substantially the same as those provided for in the Merger Agreement,
between itself or one of its wholly owned Subsidiaries and the Company
pursuant to which the stockholders of the Company (other than the
Company, any direct or indirect Subsidiary of the Company or Parent)
will receive an amount of cash consideration per share of Common Stock
equal to the Price Per Share, and will take such actions as may be
necessary or appropriate in order to effectuate such merger at the
earliest practicable time (such merger, the "Back-end Merger").
(b) If, after purchasing the Subject Shares pursuant to the
Option, Parent or any of its Affiliates receives any cash or non-cash
consideration in respect of the Subject Shares in connection with any
sale, transfer or other disposition, whether direct or indirect
(including without limitation by operation of law or through any
merger, consolidation or other change of control), to an unaffiliated
third party (a "Sale") during the period commencing on the date of the
Closing and ending on the first anniversary thereof, Parent shall
promptly pay over to the Stockholders (pro rata in accordance with the
number of Subject Shares acquired from each Stockholder pursuant to
the Option), as an addition to the Purchase Price, (x) the excess, if
any, of such consideration over the aggregate Purchase Price paid for
the Subject Shares by Parent or Merger Sub hereunder less (y) the sum
of (I) the amount of taxes payable by Parent or Merger Sub in
connection with such Sale and (II) the amount of out-of-pocket
expenses paid by Parent or Merger Sub in connection with such Sale;
provided that, (i) if the consideration received by Parent or such
affiliates shall be securities listed on a national securities
exchange or traded on the Nasdaq Stock Market ("NASDAQ"), the per
share value of such consideration shall be equal to the closing price
per share listed on such national securities exchange or NASDAQ on the
date such transaction is consummated and (ii) if the consideration
received by Parent or such Affiliate shall be in a form other than
securities, the per share value shall be determined in good faith as
of the date such transaction is consummated by Parent and the
Stockholders, or, if Parent and the Stockholders cannot reach
agreement, by a nationally recognized investment banking firm
reasonably acceptable to the parties. The provisions of this section
shall also apply to any Warrant Shares purchased by Parent or any of
its Affiliates, provided that the time period specified herein shall
commence with the Warrant Closing and end on the first anniversary
thereof.
(c) Parent and Merger Sub agree that, in connection with any
exercise of the Option and/or the Warrant Option, Merger Sub will
purchase, pursuant to "tag along" rights of certain stockholders of
the Company who are parties to the 1996 Stockholders Agreement or any
other similar agreements with any Stockholder (or any affiliate of
such Stockholder), all shares of Common Stock required to be purchased
as a
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result of the sale by the Stockholders of any of the Subject Shares
and/or Warrant Shares pursuant to such exercise of the Option and/or
Warrant Option. Any such purchase of shares of Common Stock from such
stockholders shall be for the same purchase price as the Subject
Shares and/or Warrant Shares purchased pursuant to such exercise of
the Option and/or Warrant Option and shall be made notwithstanding any
waiver or nonfulfillment by any such stockholder or any Stockholder
(or its affiliate) or any requirements for notice of sale or proper
exercise of such "tag along" rights.
11. Further Assurances. Upon the terms and subject to the conditions
hereof, each of the parties hereto shall use its reasonable best efforts to
take, or cause to be taken, all appropriate action, and to do or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Agreement. Without limiting the foregoing, each party hereto will, from
time to time, execute and deliver, or cause to be executed and delivered, such
additional or further consents, documents and other instruments and shall take
all such other action as any other party may reasonably request for the purpose
of effectively carrying out the transactions contemplated by this Agreement,
including (a) vesting good title to the Subject Shares in Merger Sub and (b)
using its reasonable best efforts to make promptly all regulatory filings and
applications, including, without limitation, under the HSR Act, and to obtain
all licenses, permits, consents, approvals, authorizations, qualification and
orders of governmental authorities and parties to contracts as are necessary for
the consummation of the transactions contemplated by this Agreement. Without in
any way limiting the foregoing, the relevant Stockholder shall, as soon as
practicable but in no event later than the date on which such Stockholder is
obligated to tender its Subject Shares pursuant to Section 3(b), obtain the
release of the Encumbrances set forth on Annex A hereto.
12. Termination. Except for Sections 4, 5, 6, 7, 8, 10 and 14 (and
Sections 11 and 15 through 19 to the extent they relate thereto), which shall
terminate in accordance with the terms set forth therein, this Agreement, and
all obligations, agreements and waivers hereunder, will terminate and be of no
further force and effect on the earliest of (a) the date the Merger Agreement is
terminated in accordance with its terms; (b) the purchase of, and payment for,
all the Subject Shares pursuant to the Offer in accordance with Section 5
hereof; and (c) the Effective Time; provided however that nothing herein shall
relieve any party from liability for any breach hereof.
13. Waiver of Appraisal and Dissenter's Rights. Each Stockholder
waives and agrees not to exercise any rights of appraisal or rights to dissent
from the Merger that such Stockholder may have with respect to such
Stockholder's Subject Shares.
14. Stockholder Capacity. No person executing this Agreement who is or
becomes during the term hereof a director or officer of the Company makes any
agreement or understanding herein in his or her capacity as such director or
officer. Each Stockholder signs solely in its capacity as the record holder and
beneficial owner of such Stockholder's Subject Shares and nothing herein shall
limit or affect any actions taken by any Stockholder in his or her capacity as
an officer or director of the Company to the extent specifically permitted by
the Merger Agreement. This Section shall survive termination of this Agreement.
12
<PAGE> 13
15. Parent Guarantee. Parent hereby guarantees the due performance of
any and all obligations and liabilities of Merger Sub under or arising out of
this Agreement and the transactions contemplated hereby.
16. Enforcement. The parties agree that irreparable damage would occur
in the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to the remedy of specific
performance of such provisions and to an injunction or injunctions and/or such
other equitable relief as may be necessary to prevent breaches of this Agreement
and to enforce specifically the terms and provisions of this Agreement in any
court of the United States located in the State of Delaware or in a Delaware
state court, this being in addition to any other remedy to which they are
entitled at law or in equity. In addition, each of the parties hereto (i)
consents to submit such party to the personal jurisdiction of any Federal court
located in the State of Delaware or any Delaware state court in the event any
dispute arises out of this Agreement or any of the transactions contemplated
hereby, (ii) agrees that such party will not attempt to deny or defeat such
personal jurisdiction by motion or other request for leave from any such court;
(iii) agrees that such party will not bring any action relating to this
Agreement or the transactions contemplated hereby in any court other than a
Federal court sitting in the State of Delaware or a Delaware state court and
(iv) waives any right to trial by jury with respect to any claim or proceeding
related to or arising out of this Agreement or any of the transactions
contemplated hereby.
17. Stop Transfer Order; Legend. In furtherance of this Agreement,
concurrently herewith, each Stockholder shall, and hereby does authorize the
Company's counsel to, notify the Company's transfer agent that there is a stop
transfer order with respect to all of the Subject Shares (and that this
Agreement places limits on the voting and transfer of such shares). If requested
by Parent, each Stockholder agrees as promptly as is reasonably practicable to
apply a legend to all certificates representing the Subject Shares referring to
the Option and other rights granted to Parent by this Agreement.
18. Adjustments to Prevent Dilution, Etc. In the event of a stock
dividend or distribution, or any change in the Company's Common Stock by reason
of any stock dividend, split-up, reclassification, recapitalization, combination
or the exchange of shares, the term "Subject Shares" shall be deemed to refer to
and include the Subject Shares as well as all such stock dividends and
distributions and any shares into which or for which any or all of the Subject
Shares may be changed or exchanged. In such event, the amount to be paid per
share by Purchaser shall be proportionately adjusted.
19. General Provisions.
(a) Amendments. This Agreement may not be modified, altered,
supplemented or amended except by an instrument in writing signed by
each of the parties hereto.
(b) Notice. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered personally or
sent by overnight courier (providing proof of delivery) to Parent or
Merger Sub in accordance with Section 10.2 of
13
<PAGE> 14
the Merger Agreement and to the Stockholders at their respective
addresses set forth in Annex A hereto (or to such other address as any
party may have furnished to the other parties in writing in accordance
herewith).
(c) Interpretation. When a reference is made in this Agreement to
Sections, such reference shall be to a Section to this Agreement
unless otherwise indicated. The headings contained in this Agreement
are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
(d) Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same
agreement, and shall become effective when one or more of the
counterparts have been signed by each of the parties and delivered to
the other party, it being understood that each party need not sign the
same counterpart.
(e) Entire Agreement; No Third-Party Beneficiaries. This
Agreement (including, without limitation, the documents and
instruments referred to herein) (i) constitutes the entire agreement
and supersedes all prior agreements and understandings, both written
and oral, among the parties with respect to the subject matter hereof
and (ii) is not intended to confer upon any Person other than the
parties hereto any rights or remedies hereunder.
(f) Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware.
(g) Costs and Expenses. All costs and expenses incurred in
connection with this Agreement and the consummation of the
transactions contemplated hereby shall be paid by the party incurring
such expenses.
(h) Substitution. In the event that Parent exercises the Option
or the Warrant Option, Parent shall be permitted, at its sole
discretion, to instruct the Stockholder to transfer and deliver the
Subject Shares or the Warrant Shares, as the case may be, to a direct
or indirect wholly owned Subsidiary of Parent, whether Merger Sub or
another Subsidiary.
(i) Multiple Stockholders. All representations, warranties,
covenants and agreements of the Stockholders in this Agreement are
several and not joint, and solely relate to matters involving the
subject Stockholder and not the other Stockholders.
[Signature Pages Follow]
14
<PAGE> 15
IN WITNESS WHEREOF, Parent, Merger Sub and each Stockholder have
caused this Agreement to be signed by their respective officer thereunto duly
authorized as of the date first written above.
SAFEWAY INC.
By: /s/ Michael C. Ross
---------------------------------
Name: Michael C. Ross
Title: Senior Vice President,
General Counsel and Corporate
Secretary
WINDY CITY ACQUISITION CORP.
By: /s/ Michael C. Ross
---------------------------------
Name: Michael C. Ross
Title: Senior Vice President
and General Counsel
STOCKHOLDERS:
YUCAIPA BLACKHAWK PARTNERS, L.P.
By: Yucaipa Management L.L.C.,
Its General Partner
By: /s/ Ronald W. Burkle
---------------------------------
Name: Ronald W. Burkle
Title: Managing Member
YUCAIPA CHICAGO PARTNERS, L.P.
By: Yucaipa Management L.L.C.,
Its General Partner
By: /s/ Ronald W. Burkle
---------------------------------
Name: Ronald W. Burkle
Title: Managing Member
S-1
<PAGE> 16
YUCAIPA DOMINICK'S PARTNERS, L.P.
By: Yucaipa Management L.L.C.,
Its General Partner
By: /s/ Ronald W. Burkle
-----------------------------
Name: Ronald W. Burkle
Title: Managing Member
THE YUCAIPA COMPANIES
By: /s/ Ronald W. Burkle
-----------------------------
Name: Ronald W. Burkle
Title: Managing General Partner
APOLLO INVESTMENT FUND, L.P.
By: Apollo Advisors, L.P.
Its General Partner
By: Apollo Capital Management, Inc.
Its Managing General Partner
By: /s/ David B. Kaplan
-----------------------------
Name: David B. Kaplan
Title: Vice President
APOLLO INVESTMENT FUND III, L.P.
By: Apollo Advisors, L.P.
Its General Partner
By: Apollo Capital Management, Inc.
Its Managing General Partner
By: /s/ David B. Kaplan
-----------------------------
Name: David B. Kaplan
Title: Vice President
S-2
<PAGE> 17
APOLLO OVERSEAS PARTNERS III, L.P.
By: Apollo Advisors, L.P.
Its General Partner
By: Apollo Capital Management, Inc.
Its Managing General Partner
By: /s/ David B. Kaplan
------------------------------
Name: David B. Kaplan
Title: Vice President
APOLLO (UK) PARTNERS III, L.P.
By: Apollo Advisors, L.P.
Its General Partner
By: Apollo Capital Management, Inc.
Its Managing General Partner
By: /s/ David B. Kaplan
------------------------------
Name: David B. Kaplan
Title: Vice President
S-3
<PAGE> 18
ANNEX A
<TABLE>
<CAPTION>
SHARES OF SHARES OF
NAME VOTING STOCK NON-VOTING STOCK
- ---- ------------ ----------------
<S> <C> <C>
Yucaipa Blackhawk Partners, L.P. 2,007,256(1)
10000 Santa Monica Blvd., Fifth Floor
Los Angeles, CA 90067
Yucaipa Chicago Partners, L.P. 253,470
10000 Santa Monica Blvd., Fifth Floor
Los Angeles, CA 90067
Yucaipa Dominick's Partners, L.P. 663,333
10000 Santa Monica Blvd., Fifth Floor
Los Angeles, CA 90067
The Yucaipa Companies 3,874,492(2)
10000 Santa Monica Blvd., Fifth Floor
Los Angeles, CA 90067
Apollo Investment Fund, L.P. 1,699,979 1,227,612
c/o Apollo Advisors, L.P.
1999 Avenue of the Stars, Suite 1900
Los Angeles, CA 90067
Attention: David B. Kaplan
Apollo Investment Fund III, L.P. 1,549,472 1,118,940
c/o Apollo Advisors, L.P.
1999 Avenue of the Stars, Suite 1900
Los Angeles, CA 90067
Attention: David B. Kaplan
Apollo Overseas Partners III, L.P. 92,935 67,100
c/o Apollo Advisors, L.P.
1999 Avenue of the Stars, Suite 1900
Los Angeles, CA 90067
Attention: David B. Kaplan
Apollo (UK) Partners III, L.P. 57,571 41,571
c/o Apollo Advisors, L.P.
1999 Avenue of the Stars, Suite 1900
Los Angeles, CA 90067
Attention: David B. Kaplan
</TABLE>
- --------
(1) Of this total, 1,480,201 shares are pledged to Salomon Smith Barney
for collateral purposes in connection with a margin account.
(2) Represents shares of Voting Stock issuable to Yucaipa upon exercise of
the Yucaipa Warrant.
A-1
