SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): August 2, 1998
AMERICAN STORES COMPANY
(Exact Name of Registrant as Specified in Charter)
Delaware 1-5392 87-0207226
(State of Incorporation) (Commission (IRS Employer
File Number) Identification No.)
299 South Main Street
Salt Lake City, Utah 84111
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (801) 539-0112
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ITEM 5. OTHER EVENTS.
On August 3, 1998, American Stores Company (the "Company") and
Albertson's, Inc. ("Albertson's") announced that they entered into a definitive
merger agreement in which the two companies will be combined. Under the terms of
the transaction, the Company's shareholders will receive 0.63 shares of
Albertson's common stock for each share of the Company's common stock they own.
The merger is subject to certain conditions, including, among others, approval
by the shareholders of both companies, regulatory approval and other customary
conditions. The merger is intended to qualify as a tax-free reorganization and
to be accounted for as a pooling of interests.
The foregoing description of the transaction is qualified in its entirety
by reference to the Agreement and Plan of Merger, dated as of August 2, 1998
(the "Merger Agreement"), among Albertson's, Abacus Holdings, Inc., a Delaware
corporation and wholly-owned subsidiary of Albertson's ("Merger Sub"), and the
Company, pursuant to which Merger Sub will be merged with and into the Company,
with the Company continuing as the surviving corporation (the "Merger"). A copy
of the Merger Agreement is filed as an exhibit hereto and is incorporated by
reference herein.
On August 2, 1998, the Company and Albertson's also entered into cross
option agreements, pursuant to which (x) Albertson's has been granted an option
to purchase up to 19.9 percent of the Company's common stock under certain
conditions set forth therein (the "Company Stock Option Agreement") and (y) the
Company has been granted an option to purchase up to 19.9 percent of Albertson's
common stock under certain conditions set forth therein (the "Albertson's Stock
Option Agreement" and, collectively with the Company Stock Option Agreement, the
"Stock Option Agreements"). A copy of each of the Stock Option Agreements is
filed as an exhibit hereto and is incorporated by reference herein.
On August 3, 1998, the Company and Albertson's issued a joint press
release announcing the proposed Merger and the signing of the Merger Agreement
and the Stock Option Agreements. A copy of the joint press release is filed as
an exhibit hereto and is incorporated by reference herein.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(c) Exhibits. The following exhibits are filed as part of this report:
2.1 Agreement and Plan of Merger, dated as of August 2,
1998, by and between Albertson's, Merger Sub and the
Company.
4.1 Albertson's Stock Option Agreement, dated August 2,
1998, between Albertson's and the Company.
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4.2 Company Stock Option Agreement, dated August 2, 1998,
between the Company and Albertson's.
99.1 Joint press release, dated August 3, 1998, issued by
the Company and Albertson's, and additional press
materials.
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SIGNATURE
Pursuant to the requirements of Section 12 of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned hereunto duly authorized.
Dated: August 4, 1998
AMERICAN STORES COMPANY
By: /s/ Kathleen E. McDermott
Name: Kathleen E. McDermott
Title: Chief Legal Officer
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EXHIBIT INDEX
Exhibit
Number Description
2.1 Agreement and Plan of Merger, dated as of August 2, 1998, by and
between Albertson's, Merger Sub and the Company.
4.1 Albertson's Stock Option Agreement, dated August 2, 1998, between
Albertson's and the Company.
4.2 Company Stock Option Agreement, dated August 2, 1998, between
the Company and Albertson's.
99.1 Joint press release, dated August 3, 1998, issued by the Company
and Albertson's, and additional press materials.
AGREEMENT AND PLAN OF MERGER
DATED AS OF
AUGUST 2, 1998
BY AND BETWEEN
ALBERTSON'S, INC.,
ABACUS HOLDINGS, INC.,
AND
AMERICAN STORES COMPANY
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TABLE OF CONTENTS
ARTICLE I ..............................................................2
Section 1.1 The Merger.................................................2
Section 1.2 The Closing; Effective Time................................2
Section 1.3 Subsequent Actions.........................................2
Section 1.4 Certificate of Incorporation; Bylaws; Directors
and Officers of the Surviving Corporation..................3
ARTICLE II ..............................................................4
Section 2.1 Treatment of Capital Stock.................................4
Section 2.2 Conversion of Common Stock.................................4
Section 2.3 Cancellation of Excluded Shares............................4
Section 2.4 Conversion of Common Stock of Abacus Holdings..............4
Section 2.5 Exchange Agent; Exchange Procedures........................4
Section 2.6 Transfer Books.............................................6
Section 2.7 No Fractional Share Certificates; Termination of
Exchange Fund..............................................6
Section 2.8 Options to Purchase Abacus Shares..........................7
Section 2.9 Appraisal Rights...........................................8
Section 2.10 Dividends.................................................8
Section 2.11 Certain Adjustments.......................................8
ARTICLE III ..............................................................8
Section 3.1 Organization and Qualification; Subsidiaries...............8
Section 3.2 Certificate of Incorporation and Bylaws....................9
Section 3.3 Capitalization.............................................9
Section 3.4 Power and Authority; Authorization; Valid & Binding.......10
Section 3.5 No Conflict; Required Filings and Consents................10
Section 3.6 SEC Reports; Financial Statements.........................12
Section 3.7 Absence of Certain Changes................................12
Section 3.8 Litigation and Liabilities................................13
Section 3.9 No Violation of Law; Permits..............................14
Section 3.10 Employee Matters; ERISA..................................14
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Section 3.11 Labor Matters............................................16
Section 3.12 Environmental Matters....................................17
Section 3.13 Board Action; Vote Required..............................19
Section 3.14 Opinion of Financial Advisor.............................19
Section 3.15 Brokers..................................................19
Section 3.16 Tax Matters..............................................20
Section 3.17 Intellectual Property....................................21
Section 3.18 Insurance................................................21
Section 3.19 Contracts and Commitments................................21
Section 3.20 Accounting and Tax Matters...............................22
Section 3.21 Ownership of Shares of Alphabet..........................22
ARTICLE IV .............................................................22
Section 4.1 Organization and Qualification; Subsidiaries..............23
Section 4.2 Certificate of Incorporation and Bylaws...................23
Section 4.3 Capitalization............................................23
Section 4.4 Power and Authority; Authorization; Valid & Binding.......24
Section 4.5 No Conflict; Required Filings and Consents................25
Section 4.6 SEC Reports; Financial Statements.........................26
Section 4.7 Absence of Certain Changes................................27
Section 4.8 Litigation and Liabilities................................28
Section 4.9 No Violation of Law; Permits..............................28
Section 4.10 Employee Matters; ERISA..................................28
Section 4.11 Labor Matters............................................31
Section 4.12 Environmental Matters....................................31
Section 4.13 Board Action; Vote Required..............................32
Section 4.14 Opinion of Financial Advisor.............................32
Section 4.15 Brokers..................................................33
Section 4.16 Tax Matters..............................................33
Section 4.17 Intellectual Property....................................33
Section 4.18 Insurance................................................34
Section 4.19 Contracts and Commitments................................34
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Section 4.20 Accounting and Tax Matters...............................35
Section 4.21 Ownership of Shares of Alphabet..........................35
Section 4.22. Rights Agreement........................................36
ARTICLE V .............................................................36
Section 5.1 Interim Operations of Abacus..............................36
Section 5.2 Interim Operations of Alphabet............................38
Section 5.3 No Solicitation by Abacus.................................40
Section 5.4 No Solicitation by Alphabet...............................42
ARTICLE VI .............................................................45
Section 6.1 Meetings of Stockholders..................................45
Section 6.2 Filings Best Efforts......................................45
Section 6.3 Publicity.................................................47
Section 6.4 Registration Statement....................................48
Section 6.5 Listing Application.......................................48
Section 6.6 Further Action............................................48
Section 6.7 Expenses..................................................49
Section 6.8 Notification of Certain Matters...........................49
Section 6.9 Access to Information.....................................49
Section 6.10 Review of Information....................................50
Section 6.11 Indemnification, Directors' and Officers'
Insurance.................................................50
Section 6.12 Employee Benefit Plans...................................51
Section 6.13 Alphabet Board of Directors..............................53
Section 6.14 Affiliates...............................................53
Section 6.15 Pooling-of-Interests.....................................54
Section 6.16 Tax-Free Reorganization..................................54
Section 6.17 Accountant's Comfort Letters.............................54
Section 6.18 Accountant's Pooling Letters.............................54
ARTICLE VII .............................................................55
Section 7.1 Conditions to Obligations of the Parties to
Consummate the Merger.....................................55
Section 7.2 Additional Conditions to Obligations of Alphabet
and Abacus Holdings.......................................56
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Section 7.3 Additional Conditions to Obligations of Abacus............57
ARTICLE VIII .............................................................58
Section 8.1 Termination...............................................58
Section 8.2 Effect of Termination and Abandonment.....................60
Section 8.3 Amendment.................................................63
ARTICLE IX .............................................................63
Section 9.1 Non-Survival of Representations, Warranties and
Agreements................................................63
Section 9.2 Notices...................................................63
Section 9.3 Certain Definitions; Interpretation.......................64
Section 9.4 Headings..................................................66
Section 9.5 Severability..............................................66
Section 9.6 Entire Agreement; No Third-Party Beneficiaries............66
Section 9.7 Assignment................................................66
Section 9.8 Governing Law.............................................66
Section 9.9 Counterparts..............................................67
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INDEX OF DEFINED TERMS
DEFINED TERM..........................................................Page No.
Abacus.......................................................................1
Abacus Capital Stock Disclosure Date.........................................9
Abacus Common Stock..........................................................1
Abacus Contracts............................................................21
Abacus Disclosure Letter.....................................................8
Abacus Equity Rights.........................................................9
Abacus ERISA Affiliate......................................................15
Abacus Holdings..............................................................1
Abacus Material Adverse Effect..............................................64
Abacus Options...............................................................7
Abacus Pension Plan.........................................................15
Abacus Preferred Stock.......................................................9
Abacus SEC Reports..........................................................12
Abacus Shares................................................................1
Abacus Stock Option Agreement................................................1
Abacus Surviving Corporation.................................................2
Acquisition Proposal....................................................41, 44
Acquisition Transaction.................................................42, 43
affiliate...................................................................65
Agreement....................................................................1
Alphabet.....................................................................1
Alphabet Capital Stock Disclosure Date......................................24
Alphabet Disclosure Letter..................................................22
Alphabet Equity Rights......................................................24
Alphabet ERISA Affiliate....................................................30
Alphabet Material Adverse Effect............................................65
Alphabet Pension Plan.......................................................29
Alphabet Preferred Stock....................................................23
Alphabet SEC Reports........................................................26
Alphabet Stock Option Agreement..............................................1
Certificate of Incorporation.................................................3
Closing......................................................................2
Closing Date.................................................................2
Code.........................................................................1
Confidentiality Agreement...................................................41
Consents....................................................................56
control.....................................................................65
Current Premium.............................................................50
D&O Insurance...............................................................50
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DGCL.........................................................................2
Disclosure..................................................................50
Effective Time...............................................................2
Environmental...............................................................31
Environmental Claim.........................................................18
Environmental Laws..........................................................18
Environmental Permits.......................................................17
Equity Rights...............................................................24
ERISA.......................................................................65
Exchange Agent...............................................................4
Exchange Fund................................................................4
Exchange Ratio...............................................................4
Excluded Shares..............................................................4
Fees and Expenses...........................................................61
Filings.....................................................................56
Form S-4....................................................................48
GAAP.........................................................................1
Governmental Entity.........................................................11
Hazardous Materials.........................................................18
HSR Act.....................................................................11
Indemnified Parties.........................................................50
knowledge...................................................................65
Merger.......................................................................1
Merger Sub...................................................................1
NYSE.........................................................................6
Party........................................................................1
Pension Plan................................................................15
Person......................................................................65
Proxy Statement/Prospectus..................................................48
Release.....................................................................19
Representative..........................................................40, 43
SEC..........................................................................1
Securities Act..............................................................11
Subsidiary..................................................................65
Superior Proposal.......................................................41, 43
Surviving Corporation........................................................2
Tax.........................................................................20
Tax Return..................................................................21
Taxable.....................................................................20
Taxes.......................................................................20
Termination Date............................................................58
Termination Fee.............................................................60
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of August 2, 1998 (this
"Agreement"), between Albertson's, Inc. ("Alphabet") a Delaware corporation,
Abacus Holdings, Inc. ("Abacus Holdings" or "Merger Sub"), a Delaware
corporation and a wholly-owned subsidiary of Alphabet, and American Stores
Company ("Abacus"), a Delaware corporation. Alphabet and Abacus are sometimes
referred to herein, individually, as a "Party," and together, as the "Parties."
W I T N E S S E T H:
WHEREAS, the respective Boards of Directors of Alphabet, Abacus
Holdings and Abacus have each determined that the merger of Abacus Holdings with
and into Abacus (the "Merger") upon the terms and subject to the conditions set
forth in this Agreement is advisable, fair to and in the best interests of their
respective corporations and stockholders and have approved the Merger;
WHEREAS, it is intended that, for federal income tax purposes, the
Merger will qualify as a tax-free reorganization under Section 368 of the
Internal Revenue Code of 1986, as amended and the rules and regulations
promulgated thereunder (the "Code");
WHEREAS, it is intended that, for accounting purposes, the Merger
will be accounted for as a pooling-of-interests under United States generally
accepted accounting principles ("GAAP") and applicable rules and regulations of
the Securities and Exchange Commission (the "SEC").
WHEREAS, concurrently with the execution and delivery of this
Agreement and as a condition and inducement to Alphabet's willingness to enter
into this Agreement, Alphabet and Abacus have executed and delivered a Stock
Option Agreement, dated as of the date hereof (the "Abacus Stock Option
Agreement"), pursuant to which Abacus is granting to Alphabet an option to
purchase, under certain circumstances, up to a number of shares of common stock,
par value $1.00 per share, of Abacus (the "Abacus Common Stock" or "Abacus
Shares") equal to 19.9% of the outstanding shares of Abacus Common Stock with an
exercise price per share equal to $30.24.
WHEREAS, concurrently with the execution and delivery of this
Agreement and as a condition and inducement to Abacus' willingness to enter into
this Agreement, Abacus and Alphabet have executed and delivered a Stock Option
Agreement, dated as of the date hereof (the "Alphabet Stock Option Agreement"
and together with the Abacus Stock Option Agreement, the "Stock Option
Agreements"), pursuant to which Alphabet is granting to Abacus an option to
purchase, under certain circumstances, up to a number of shares of common stock,
par value $1.00 per share, of Alphabet, together with the associated preferred
stock purchase rights (the "Alphabet
<PAGE>
Common Stock" or "Alphabet Shares") equal to 19.9% of the outstanding shares of
Alphabet Common Stock with an exercise price per share equal to $48.00.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements contained in this Agreement, and intending to be
legally bound hereby, the parties hereto agree as follows (certain capitalized
terms used herein are defined in Section 9.3 hereof):
ARTICLE I
Section 1.1 The Merger. At the Effective Time (as defined in Section
1.2(b)) and subject to and upon the terms and conditions of this Agreement and
in accordance with the Delaware General Corporation Law (the "DGCL"), Abacus
Holdings shall be merged with and into Abacus and the separate corporate
existence of Abacus Holdings shall cease. Abacus shall continue as the surviving
corporation (sometimes referred to herein as the "Surviving Corporation") in the
Merger, and as of the Effective Time shall be a wholly-owned subsidiary of
Alphabet. The Merger shall have the effects specified in Section 259(a) of the
DGCL.
Section 1.2 The Closing; Effective Time. (a) The closing of the Merger
(the "Closing") shall take place (i) at the offices of Fried, Frank, Harris,
Shriver & Jacobson, One New York Plaza, New York, New York, 10004, at 10:00 A.M.
local time, on the second business day following the date on which the last to
be satisfied or waived of the conditions set forth in Article VII (other than
those conditions that by their nature are to be satisfied at the Closing, but
subject to the satisfaction or, where permitted, waiver of those conditions)
shall be satisfied or waived in accordance with this Agreement or (ii) at such
other place, time and/or date as Alphabet and Abacus shall agree (the date of
the Closing, the "Closing Date").
(b) On the Closing Date, Alphabet, Abacus and Abacus Holdings
shall cause a certificate of merger in respect of the Merger to be properly
executed, and filed with the Secretary of State of the State of Delaware as
provided in Section 251 of the DGCL. The Merger shall become effective at such
time at which such certificate of merger shall be duly filed with Secretary of
State of Delaware, or at such later time reflected in such certificate of merger
as shall be agreed by Alphabet and Abacus (the time that the Merger becomes
effective, the "Effective Time").
Section 1.3 Subsequent Actions. 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 continue in, vest, perfect or confirm of record or
otherwise in the Surviving Corporation's right, title or interest in, to or
under any of the rights, properties, privileges, franchises or assets of either
of its constituent corporations acquired or to be acquired by the Surviving
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Corporation as a result of, or in connection with, the Merger, or otherwise to
carry out the intent of this Agreement, the officers and directors of the
Surviving Corporation shall be authorized to execute and deliver, in the name
and on behalf of either of the constituent corporations of the Merger, all such
deeds, bills of sale, assignments and assurances and to take and do, in the name
and on behalf of each of such corporations 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,
privileges, franchises or assets in the Surviving Corporation or otherwise to
carry out the intent of this Agreement.
Section 1.4 Certificate of Incorporation; Bylaws; Directors and
Officers of the Surviving Corporation. Unless otherwise agreed by Alphabet and
Abacus prior to the Closing, at the Effective Time:
(a) The Amended and Restated Certificate of Incorporation of
Abacus, as amended (the "Abacus Certificate of Incorporation;" it and the
Amended and Restated Certificate of Incorporation of Alphabet, as amended (the
"Alphabet Certificate of Incorporation"), are each sometimes referred to herein
as a "Certificate of Incorporation"), as in effect immediately prior to the
Effective Time shall be at and after the Effective Time (until amended as
provided by law and by such Certificate of Incorporation) the certificate of
incorporation of the Surviving Corporation, except that Article Fourth of the
Abacus Certificate of Incorporation shall be amended to read in its entirety as
follows: "The aggregate number of shares that the Corporation shall have the
authority to issue is 1,000 shares of Common Stock, par value $1.00 per share."
(b) The Bylaws of Abacus as in effect immediately prior to the
Effective Time shall be at and after the Effective Time (until amended as
provided by law, its Certificate of Incorporation and its Bylaws, as applicable)
the Bylaws of the Surviving Corporation;
(c) The officers of Abacus immediately prior to the Effective Time
shall continue to serve in their respective offices of the Surviving Corporation
from and after the Effective Time, until their successors are elected or
appointed and qualified or until their resignation or removal; and
(d) The directors of Abacus Holdings immediately prior to the
Effective Time shall be the directors of the Surviving Corporation from and
after the Effective Time, until their successors are elected or appointed and
qualified or until their resignation or removal.
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ARTICLE II
Section 2.1 Treatment of Capital Stock. The manner and basis of
converting the shares of common stock of Abacus and Abacus Holdings, by virtue
of the Merger and without any action on the part of any holder thereof, shall be
as set forth in this Article II.
Section 2.2 Conversion of Common Stock. (a) Each share of Abacus Common
Stock issued and outstanding immediately prior to the Effective Time (excluding
those held in the treasury of Abacus, by any of its Subsidiaries or by Alphabet
or any of its Subsidiaries (collectively, the "Excluded Shares")), and all
rights in respect thereof, shall at the Effective Time, without any action on
the part of any holder thereof, forthwith cease to exist and be converted into
the right to receive .63 (the "Exchange Ratio") validly issued, fully paid and
nonassessable shares of Alphabet Common Stock.
(b) Except as otherwise provided herein, commencing immediately
after the Effective Time, each certificate which, immediately prior to the
Effective Time, represented issued and outstanding shares of Abacus Common Stock
shall evidence the right to receive shares of Alphabet Common Stock on the basis
set forth in paragraph (a) above (and cash in lieu of any fractional shares
pursuant to Section 2.7 hereof).
Section 2.3 Cancellation of Excluded Shares. At the Effective Time, each
Excluded Share, by virtue of the Merger and without any action on the part of
the holder thereof, shall cease to be outstanding, shall be canceled and
retired, and no shares of stock or other securities of Alphabet or the Surviving
Corporation shall be issuable, and no payment or other consideration shall be
made or paid, in respect thereof.
Section 2.4 Conversion of Common Stock of Abacus Holdings. At the
Effective Time, each share of common stock of Abacus Holdings issued and
outstanding immediately prior to the Effective Time, and all rights in respect
thereof, shall, without any action on the part of Alphabet, forthwith cease to
exist and be converted into one validly issued, fully paid and nonassessable
share of common stock of the Surviving Corporation.
Section 2.5 Exchange Agent; Exchange Procedures. (a) Subject to the
terms and conditions of this Agreement, at or prior to the Effective Time,
Alphabet shall appoint ChaseMellon Shareholder Services, L.L.C., or such other
exchange agent selected by Alphabet that is reasonably acceptable to Abacus (the
"Exchange Agent"), to effect the exchange of Abacus Shares for shares of
Alphabet Common Stock in accordance with the provisions of this Article II. As
soon as reasonably practicable following the Effective Time, Alphabet shall
deposit, or cause to be deposited, with the Exchange Agent certificates
representing the shares of Alphabet Common Stock to be issued in the Merger, any
cash payable in respect of fractional shares in accordance with Section 2.7
hereof and the amount of any dividends or distributions in accordance with
Section 2.5(b) hereof (the "Exchange Fund").
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(b) As soon as reasonably practicable after the Effective Time,
Alphabet shall instruct the Exchange Agent to mail to each record holder of a
certificate or certificates which immediately prior to the Effective Time
represented Abacus Shares (i) a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to such certificates
shall pass, only upon delivery to the Exchange Agent and shall be in such form
and have such other provisions as Alphabet shall reasonably specify) and (ii)
instructions for use in effecting the surrender of certificates which
immediately prior to the Effective Time represented Abacus Shares for
certificates representing shares of Alphabet Common Stock and cash in lieu of
fractional shares, if any. Commencing immediately after the Effective Time, upon
the surrender to the Exchange Agent of such certificate or certificates,
together with a duly executed and completed letter of transmittal and all other
documents and other materials required by the Exchange Agent to be delivered in
connection therewith, the holder thereof shall be entitled to receive a
certificate or certificates representing the number of whole shares of Alphabet
Common Stock into which the shares of Abacus Common Stock which immediately
prior to the Effective Time were represented by the certificate or certificates
so surrendered shall have been converted in accordance with the provisions of
Section 2.2, together with a cash payment (net of any applicable tax
withholdings) in lieu of fractional shares, if any. Unless and until any
certificate or certificates which immediately prior to the Effective Time
represented shares of Abacus Common Stock are so surrendered, no dividend or
other distribution, if any, payable to the holders of record of shares of
Alphabet Common Stock as of any date subsequent to the Effective Time shall be
paid to the holder of such certificate or certificates in respect thereof.
Except as otherwise provided herein, upon the surrender of any certificate or
certificates which immediately prior to the Effective Time represented Abacus
Shares, the record holder of the certificate or certificates representing shares
of Alphabet Common Stock issued in exchange therefore shall be entitled to
receive (i) at the time of surrender, the amount of any dividends or other
distributions (net of any applicable tax withholdings) having a record date
after the Effective Time and a payment date prior to the surrender date, payable
in respect of such shares of Alphabet Common Stock and (ii) at the appropriate
payment date, the amount of dividends or other distributions (net of any
applicable tax withholdings) having a record date after the Effective Time and a
payment date subsequent to the date of such surrender, payable in respect of
such shares of Alphabet Common Stock. No interest shall be payable in respect of
the payment of dividends or distributions pursuant to the immediately preceding
sentence.
(c) Notwithstanding anything in this Agreement to the contrary,
certificates surrendered for exchange by any "affiliate" (as defined in Section
6.14 hereof) of Abacus shall not be exchanged for shares of Alphabet Common
Stock until Alphabet shall have received a signed agreement from such
"affiliate" as provided in Section 6.14 hereof.
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Section 2.6 Transfer Books. The stock transfer books of Abacus shall be
closed at the Effective Time and no transfer of any Abacus Shares will
thereafter be recorded on any of such stock transfer books. In the event of a
transfer of ownership of any Abacus Shares that is not registered in the stock
transfer records of Abacus at the Effective Time, a certificate or certificates
representing the number of full shares of Alphabet Common Stock into which such
Abacus Shares shall have been converted in the Merger shall be issued to the
transferee together with a cash payment (net of any applicable tax withholdings)
in lieu of fractional shares, if any, in accordance with Section 2.7, and a cash
payment in accordance with Section 2.5(b) of dividends or distributions, if any,
only if the certificate or certificates which immediately prior to the Effective
Time represented such Abacus Shares are surrendered as provided in Section 2.5,
accompanied by all documents required to evidence and effect such transfer and
by evidence of payment of any applicable stock transfer taxes.
Section 2.7 No Fractional Share Certificates; Termination of Exchange
Fund. (a) No scrip or fractional share certificate for Alphabet Common Stock
will be issued upon the surrender for exchange of a certificate or certificates
which immediately prior to the Effective Time represented Abacus Shares, and no
outstanding fractional share interest will entitle the holder thereof to vote or
receive dividends or distributions or any other rights of a stockholder of
Alphabet with respect to such fractional share interest. Each holder entitled to
receive a fractional share of Alphabet Common Stock but for this Section 2.7(a)
shall be entitled to receive an amount of cash (net of applicable tax
withholdings) equal to the product obtained by multiplying (i) the fractional
share interest to which such holder would otherwise be entitled (after taking
into account all shares of Abacus Common Stock held immediately prior to the
Effective Time by such holder) by (ii) the closing price for a share of Alphabet
Common Stock on the New York Stock Exchange (the "NYSE") Composite Transaction
Tape on the trading day immediately prior to the Closing Date. No interest shall
be payable in respect of any cash payment for fractional share interests.
(b) Any portion of the Exchange Fund which remains undistributed
one year after the Effective Time shall be delivered to Alphabet upon demand,
and each holder of Abacus Shares who had not theretofore surrendered
certificates or certificates which immediately prior to the Effective Time
represented Abacus Shares in accordance with the provisions of this Article II
shall thereafter look only to Alphabet for satisfaction of such holder's claims
for shares of Alphabet Common Stock, any cash in lieu of fractional shares of
Alphabet Common Stock and any dividends or distributions payable in accordance
with Section 2.5(b). Notwithstanding the foregoing, none of Alphabet, the
Surviving Corporation, the Exchange Agent or any other Person shall be liable to
any former holder of Abacus Shares for any amount properly delivered to a public
official pursuant to applicable abandoned property, escheat or similar laws.
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Section 2.8 Options to Purchase Abacus Shares. (a) Prior to the
Effective Time, Abacus shall take all action necessary with respect to each of
the plans or arrangements of Abacus and its Subsidiaries pursuant to which
options to purchase Abacus Shares (the "Abacus Options") will be outstanding
immediately prior to the Effective Time such that as of and after the Effective
Time each Abacus Option shall entitle the holder thereof to purchase such number
of shares of Alphabet Common Stock as is equal to the product of (x) the number
of shares of Abacus Common Stock subject to such option immediately prior to the
Effective Time and (y) the Exchange Ratio; and the exercise price per share of
Alphabet Common Stock subject to such option shall be equal to (x) the exercise
price per share of Abacus Common Stock immediately prior to the Effective Time
divided by (y) the Exchange Ratio. Abacus shall take no action to cause any
Abacus Option which pursuant to its terms as in effect as of the date hereof
would not become vested or exercisable by reason of the transactions
contemplated by this Agreement to become vested or exercisable in connection
herewith, and nothing contained in this Agreement shall be interpreted as
causing any such Abacus Option to become vested or exercisable.
(b) Notwithstanding the foregoing, the number of shares of
Alphabet Common Stock deliverable upon exercise of each Abacus Option at and
after the Effective Time as contemplated by paragraph (a) above shall be
rounded, if necessary, to the nearest whole share, and the exercise price with
respect thereto shall be rounded, if necessary, to the nearest one one-hundredth
of a cent. Other than as provided in paragraph (a) above and in the prior
sentence of this paragraph (b), as of and after the Effective Time, each Abacus
Option shall be subject to the same terms and conditions as in effect
immediately prior to the Effective Time, but giving effect to the Merger (it
being understood that all Options exercisable at the same price and granted on
the same date shall be aggregated for this purpose).
(c) As soon as practicable after the Effective Time, Alphabet
shall deliver (i) to the holders of Abacus Options which become fully vested and
exercisable by virtue of the Merger a notice stating that by virtue of the
Merger and pursuant to the terms of the relevant Abacus Benefit Plan (as herein
defined) such Abacus Options have become fully vested and exercisable and (ii)
to the holders of all Abacus Options a notice stating that the agreements
evidencing the grants of such Abacus Options shall continue in effect on the
same terms and conditions (subject to the adjustments required by this Section
2.8 after giving effect to the Merger and the terms of the relevant Abacus
Benefit Plan).
(d) Alphabet shall take all corporate action necessary to
reserve for issuance a sufficient number of shares of Alphabet Common Stock for
delivery upon exercise of Abacus Options in accordance with this Section 2.8.
Promptly after the Effective Time, Alphabet shall file a registration statement
on Form S-8 (if available) (or any successor or other appropriate forms) with
respect to the shares of Alphabet Common
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Stock subject to such options and shall use all reasonable efforts to maintain
the effectiveness of such registration statement (and maintain the current
status of the prospectus or prospectuses contained therein) for so long as such
options remain outstanding.
Section 2.9 Appraisal Rights. In accordance with Section 262 of the
DGCL, no appraisal rights shall be available to holders of Abacus Shares in
connection with the Merger.
Section 2.10 Dividends. Alphabet and Abacus shall coordinate with each
other the declaration of, and the setting of record dates and payment dates for,
dividends in respect of their respective common stock so that, in respect of any
fiscal quarter, holders thereof (i) do not receive dividends in respect of both
(x) Abacus Shares and (y) shares of Alphabet Common Stock received pursuant to
the Merger in respect thereof or (ii) fail to receive a dividend in respect of
both (x) Abacus Shares and (y) the shares of Alphabet Common Stock received
pursuant to the Merger in respect thereof.
Section 2.11 Certain Adjustments. If between the date of this Agreement
and the Effective Time, the outstanding shares of Abacus Common Stock or
Alphabet Common Stock shall be changed into a different number of shares by
reason of any stock split, combination of shares, or any dividend payable in
stock shall be declared thereon with a record date within such period, the
Exchange Ratio shall be appropriately adjusted to provide the holders of Abacus
Shares the same economic effect as contemplated by this Agreement prior to such
event.
ARTICLE III
Except as set forth in the corresponding sections or subsections of
the disclosure letter, dated the date hereof, delivered by Abacus to Alphabet
(the "Abacus Disclosure Letter"), Abacus hereby represents and warrants to
Alphabet and Abacus Holdings as follows:
Section 3.1 Organization and Qualification; Subsidiaries. (a) Abacus is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware. Each of the Subsidiaries of Abacus is a
corporation or other business entity duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation or
organization, and each of Abacus and its Subsidiaries has the requisite
corporate or other organizational power and authority to own, operate or lease
its properties and to carry on its business as it is now being conducted, and is
duly qualified as a foreign corporation to do business, and is in good standing,
in each jurisdiction where the character of its properties owned, operated or
leased or the nature of its activities makes such qualification necessary, in
each case except as would not, individually or in the aggregate, reasonably be
expected to have an Abacus Material Adverse Effect.
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(b) All of the outstanding shares of capital stock and other
equity securities of the Significant Subsidiaries of Abacus have been validly
issued and are fully paid and nonassessable, and are owned, directly or
indirectly, by Abacus, free and clear of all pledges and security interests. All
outstanding shares of capital stock and other equity interests of each
Subsidiary of Abacus owned directly or indirectly by Abacus are free and clear
of all liens, claims or encumbrances as would, individually or in the aggregate,
reasonably be expected to have an Abacus Material Adverse Effect. There are no
subscriptions, options, warrants, calls, commitments, agreements, conversion
rights or other rights of any character (contingent or otherwise) entitling any
Person to purchase or otherwise acquire from Abacus or any of its Significant
Subsidiaries at any time, or upon the happening of any stated event, any shares
of capital stock or other equity securities of any of the Significant
Subsidiaries of Abacus. The Abacus Disclosure Letter lists the name and
jurisdiction of incorporation or organization of each of the Significant
Subsidiaries of Abacus.
(c) Except for interests in its Subsidiaries, neither Abacus nor
any of its Subsidiaries owns directly or indirectly any material equity interest
in any Person or has any obligation or made any commitment to acquire any such
interest or make any such investment.
Section 3.2 Certificate of Incorporation and Bylaws. Abacus has
furnished, or otherwise made available, to Alphabet a complete and correct copy
of the certificate of incorporation and bylaws, as amended to the date of this
Agreement, of Abacus. Such certificate of incorporation and bylaws are in full
force and effect. Abacus is not in violation of any of the provisions of its
certificate of incorporation or bylaws.
Section 3.3 Capitalization. (a) The authorized capital stock of Abacus
consists of 700,000,000 shares of Abacus Common Stock and 10,000,000 shares of
Preferred Stock, par value $1.00 per share (the "Abacus Preferred Stock"). At
the close of business on June 28, 1998 (the "Abacus Capital Stock Disclosure
Date"), (i) 274,216,016 shares of Abacus Common Stock, and no shares of Abacus
Preferred Stock, were issued and outstanding and (ii) 25,562,456 shares of
Abacus Common Stock, and no shares of Abacus Preferred Stock, were held by
Abacus in its treasury. The Abacus Disclosure Letter lists the number of shares
of Abacus Common Stock and Abacus Preferred Stock reserved for issuance as of
the Abacus Capital Stock Disclosure Date under each of the Abacus Benefit Plans
(as defined in Section 3.10) or otherwise. Since the Abacus Capital Stock
Disclosure Date until the date of this Agreement, no shares of Abacus Common
Stock or Abacus Preferred Stock have been issued or reserved for issuance,
except in respect of the exercise, conversion or exchange of Abacus Equity
Rights (as defined below) outstanding as of the Abacus Capital Stock Disclosure
Date and in connection with the Abacus Stock Option Agreement. For purposes of
this Agreement, "Abacus Equity Rights" shall mean subscriptions, options,
warrants, calls, commitments, agreements, conversion rights or other rights of
any character (contingent
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or otherwise) to purchase or otherwise acquire from Abacus or any of its
Subsidiaries at any time, or upon the happening of any stated event, any shares
of the capital stock of Abacus. The Abacus Disclosure Letter sets forth the
number and type of Abacus Equity Rights (including the number and class of
Abacus' capital stock for or into which such Abacus Equity Rights are
exercisable, convertible or exchangeable and any Abacus Benefit Plan pursuant to
which such Abacus Equity Rights were granted or issued) outstanding as of the
Abacus Capital Stock Disclosure Date. Other than the Abacus Equity Rights
disclosed in the Abacus Disclosure Letter and the Abacus Equity Rights granted
pursuant to the Abacus Stock Option Agreement, Abacus does not have outstanding
any Abacus Equity Rights as of the date of this Agreement. Except as disclosed
in the Abacus SEC Reports (defined below), no stockholders of Abacus are party
to any voting agreement, voting trust or similar arrangement with respect to
Abacus Shares to which Abacus or any Subsidiary of Abacus is a Party.
(b) There are no outstanding obligations of Abacus or any of its
Subsidiaries to repurchase, redeem or otherwise acquire any shares of Abacus
Common Stock or any Abacus Equity Rights (except in connection with the
exercise, conversion or exchange of outstanding Abacus Equity Rights). All of
the issued and outstanding shares of Abacus Common Stock are validly issued,
fully paid, nonassessable and free of preemptive rights. The Abacus Disclosure
Letter sets forth the number of shares of Abacus Common Stock repurchased, and
the number issued, by Abacus or any of its Subsidiaries since July 1, 1996.
Section 3.4 Power and Authority; Authorization; Valid & Binding. Abacus
has the necessary corporate power and authority to enter into and deliver this
Agreement and to perform its obligations hereunder and to consummate the
transactions contemplated hereby, except that the Merger is subject to the
adoption and approval of this Agreement and the Merger by Abacus' stockholders
as required by the DCGL. The execution and delivery of this Agreement by Abacus,
the performance by it of its obligations hereunder and the consummation by
Abacus of the transactions contemplated hereby, have been duly authorized by all
necessary corporate action on the part of Abacus (other than with respect to the
Merger, the adoption and approval of this Agreement and the Merger by its
stockholders as required by the DGCL). This Agreement has been duly executed and
delivered by Abacus and, assuming the due authorization, execution and delivery
by Alphabet and Merger Sub, constitutes a legal, valid and binding obligation of
Abacus enforceable against it in accordance with the terms hereof or thereof,
subject to bankruptcy, insolvency, fraudulent transfer, moratorium,
reorganization and similar laws of general applicability relating to or
affecting creditors' rights and to general equity principles (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
Section 3.5 No Conflict; Required Filings and Consents. (a) The
execution and delivery of this Agreement and the Abacus Stock Option Agreement
by Abacus does
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not, and the performance by Abacus of its obligations hereunder and thereunder
and the consummation by Abacus of the transactions contemplated hereby, and
thereby will not, (i) violate or conflict with the certificate of incorporation,
or bylaws of Abacus, (ii) subject to obtaining or making the notices, reports,
filings, waivers, consents, approvals or authorizations referred to in paragraph
(b) below, conflict with or violate any law, regulation, court order, judgment
or decree applicable to Abacus or any of its Subsidiaries or by which any of
their respective property is bound or affected, (iii) result in any breach of or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
cancellation, vesting, modification, alteration or acceleration of any
obligation under, result in the creation of a lien, claim or encumbrance on any
of the properties or assets of Abacus or any of its Subsidiaries pursuant to,
result in the loss of any material benefit under (including an increase in the
price paid by, or cost to, Abacus or any of its Subsidiaries), require the
consent of any other party to, or result in any obligation of the part of Abacus
or any of its Subsidiaries to repurchase (with respect to a bond or a note), any
agreement, contract, instrument, bond, note, indenture, permit, license or
franchise to which Abacus or any of its Subsidiaries is a party or by which
Abacus, any of its Subsidiaries or any of their respective property is bound or
affected, except, in the case of clauses (ii) and (iii) above, as would not,
individually or in the aggregate, reasonably be expected to have an Abacus
Material Adverse Effect.
(b) Except for applicable requirements, if any, under the
premerger notification requirements of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), the filing of a
certificate of merger with respect to the Merger as required by the DGCL,
filings with the SEC under the Securities Act of 1933, as amended (the
"Securities Act"), and the Exchange Act, any filings required pursuant to any
state securities or "blue sky" laws, any filings required pursuant to any state
liquor, gaming or pharmacy laws, any applicable Environmental Laws (as defined
herein) governing the transfer of any interest in real property or of business
operations (including without limitation transfer acts, notifications, and deed
restrictions), and the transfer or application requirements with respect to the
environmental permits of Abacus or its Subsidiaries, or pursuant to the rules
and regulations of any stock exchange on which the Abacus Shares are listed,
neither Abacus nor any of its Subsidiaries is required to submit any notice,
report or other filing with any Governmental Entity (defined below) in
connection with the execution, delivery, performance or consummation of this
Agreement, the Stock Option Agreements or the Merger except for such notices,
reports or filings that, if not made, would not, individually or in the
aggregate, reasonably be expected to have an Abacus Material Adverse Effect.
Except as set forth in the immediately preceding sentence, no waiver, consent,
approval or authorization of any governmental or regulatory authority, court,
agency, commission or other governmental entity or any securities exchange or
other self-regulatory body, domestic or foreign ("Governmental Entity"), is
required to be obtained by Abacus or any of its Subsidiaries in connection with
its execution, delivery, performance or consummation of this
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Agreement, the Stock Option Agreement or the transactions contemplated hereby
except for such waivers, consents, approvals or authorizations that, if not
obtained or made, would not, individually or in the aggregate, reasonably be
expected to have, an Abacus Material Adverse Effect.
Section 3.6 SEC Reports; Financial Statements. (a) Abacus has filed all
forms, reports and documents (including all Exhibits, Schedules and Annexes
thereto) required to be filed by it with the SEC since January 1, 1995,
including any amendments or supplements thereto (collectively, including any
such forms, reports and documents filed after the date hereof, the "Abacus SEC
Reports"), and, with respect to the Abacus SEC Reports filed by Abacus after the
date hereof and prior to the Closing Date, will deliver or make available, to
Alphabet all of its Abacus SEC Reports in the form filed with the SEC. The
Abacus SEC Reports (i) were (and any Abacus SEC Reports filed after the date
hereof will be) in all material respects in accordance with the requirements of
the Securities Act or the Exchange Act, as the case may be, and the rules and
regulations promulgated thereunder, and (ii) as of their respective filing
dates, did not (and any Abacus SEC Reports filed after the date hereof will not)
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
(b) The financial statements, including all related notes and
schedules, contained in the Abacus SEC Reports (or incorporated therein by
reference) fairly present in all material respects (or, with respect to
financial statements contained in the Abacus SEC Reports filed after the date
hereof, will fairly present in all material respects) the consolidated financial
position of Abacus and its consolidated subsidiaries as of the respective dates
thereof and the consolidated results of operations, retained earnings and cash
flows of Abacus and its consolidated subsidiaries for the respective periods
indicated, in each case in accordance with GAAP applied on a consistent basis
throughout the periods involved (except for changes in accounting principles
disclosed in the notes thereto) and the rules and regulations of the SEC, except
that interim financial statements are subject to normal year-end adjustments
which are not and are not expected to be, individually or in the aggregate,
material in amount and do not include certain notes which may be required by
GAAP but which are not required by Form 10-Q of the SEC.
Section 3.7 Absence of Certain Changes. Except as disclosed in the
Abacus SEC Reports filed prior to the date hereof, since the end of Abacus'
fiscal year last ended, (a) Abacus and each of its Subsidiaries has conducted
its business in all material respects in the ordinary and usual course of its
business consistent with past practice and there has not been any change in the
financial condition, business or results of operations of Abacus and its
Subsidiaries, or any development or combination of developments that,
individually or in the aggregate, has had or would reasonably be expected to
have an
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Abacus Material Adverse Effect and (b) since the end of Abacus' fiscal year last
ended until the date hereof there has not been (i) any declaration, setting
aside or payment of any dividend or other distribution in respect of the capital
stock of Abacus, other than regular cash dividends consistent with past
practice; (ii) any change by Abacus to its accounting policies, practices or
methods; (iii) any amendment or change to the terms of any of its indebtedness
material to Abacus and its Subsidiaries taken as a whole; (iv) any incurrence of
any material indebtedness outside of the ordinary course of business; (v)
outside the ordinary course of business, any transfer, lease, license, sale,
mortgage, pledge, encumbrance or other disposition of assets or properties
material to Abacus and its Subsidiaries taken as a whole; (vi) any material
damage, destruction or other casualty loss with respect to any asset or property
owned, leased or otherwise used by Abacus or its Subsidiaries material to Abacus
and its Subsidiaries taken as a whole, whether or not covered by insurance;
(vii) except on a case-by-case basis in the ordinary course of business
consistent with past practice for employees other than executive officers or
directors, or except as required by applicable law or pursuant to a contractual
obligation in effect as of the date of this Agreement, (A) any execution,
adoption or amendment of any agreement or arrangement relating to severance or
any employee benefit plan or employment or consulting agreement (including,
without limitation, the Abacus Benefit Plans referred to in Section 3.10 hereof)
or (B) any grant of any stock options or other equity related award; or (viii)
any agreement or commitment entered into with respect to any of the foregoing.
With respect to Abacus, any action taken by Abacus pursuant to and consistent
with its corporate and functional consolidations or its Delta Plan shall be
deemed for the purposes hereof to be an action of Abacus that is consistent with
past practice.
Section 3.8 Litigation and Liabilities. (a) Except as disclosed in the
Abacus SEC Reports filed prior to the date hereof, there are no civil, criminal
or administrative actions, suits or claims, proceedings (including condemnation
proceedings) or, to the knowledge of Abacus, hearings or investigations, pending
or, to the knowledge of Abacus, threatened against, or otherwise adversely
affecting Abacus or any of its Subsidiaries or any of their respective
properties and assets, except for any of the foregoing which would not,
individually or in the aggregate, reasonably be expected to have an Abacus
Material Adverse Effect.
(b) Neither Abacus nor any of its Subsidiaries has any liabilities
(absolute, accrued, contingent or otherwise) the existence of which would,
individually or in the aggregate, reasonably be expected to have an Abacus
Material Adverse Effect except (i) liabilities, described in the Abacus SEC
Reports filed with the SEC prior to the date hereof or reflected on Abacus'
consolidated balance sheet (and related notes thereto) as of the end of its most
recently completed fiscal year filed in the Abacus SEC Reports, (ii) liabilities
incurred since the end of Abacus' most recently completed fiscal year in the
ordinary course of business consistent with past practice that would not,
individually or in
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the aggregate, reasonably be expected to have an Abacus Material Adverse Effect
or (iii) liabilities permitted to be incurred pursuant to Section 5.1.
Section 3.9 No Violation of Law; Permits. The business of Abacus and
each of its Subsidiaries is being conducted in accordance with all applicable
statutes of law, ordinances, regulations, judgments, orders or decrees of any
Governmental Entity, and not in violation of any permits, franchises, licenses,
authorizations or consents granted by any Governmental Entity, and Abacus and
each of its Subsidiaries has obtained all permits, franchises, licenses,
authorizations or consents necessary for the conduct of its business, except, in
each case, as would not, individually or in the aggregate, reasonably be
expected to have an Abacus Material Adverse Effect. Neither Abacus nor any of
its Subsidiaries is subject to any cease and desist or other order, judgment,
injunction or decree issued by, or is a party to any written agreement, consent
agreement or memorandum of understanding with, or, to the knowledge of Abacus,
is a party to any commitment letter or similar undertaking to, or, to the
knowledge of Abacus, is subject to any order or directive by, or has adopted any
board resolutions at the request of, any Governmental Entity, that materially
restricts the conduct of its business (whether the type of business, the
location thereof or otherwise) and which, individually or in the aggregate,
would reasonably be expected to have an Abacus Material Adverse Effect, nor to
the knowledge of Abacus, has Abacus been advised in writing that any
Governmental Entity has proposed issuing or requesting any of the foregoing.
Section 3.10 Employee Matters; ERISA. (a) Set forth in the Abacus
Disclosure Letter is a complete list of each Abacus Benefit Plan and each Abacus
Multiemployer Plan. The term "Abacus Benefit Plan" shall mean (i) each plan,
program, policy, contract or agreement providing for compensation, severance,
termination pay, performance awards, stock or stock-related awards, fringe
benefits or other employee benefits of any kind, including, without limitation,
any "employee benefit plan," within the meaning of Section 3(3) of ERISA but
excluding any "multiemployer plan" within the meaning of Sections 3(37) or
4001(a)(3) of ERISA, and (ii) each employment, severance, consulting,
non-compete, confidentiality, or similar agreement or contract, in each case,
with respect to which Abacus or any Subsidiary of Abacus has or may have any
liability (accrued, contingent or otherwise). The term "Abacus Multiemployer
Plan" shall mean any "multiemployer plan" within the meaning of Section
4001(a)(3) of ERISA in respect to which Abacus or any Subsidiary of Abacus has
or may have any liability (accrued, contingent or otherwise).
(b) Abacus has provided or made available, or has caused to be
provided or made available, to Alphabet (i) current, accurate and complete
copies of all documents embodying each Abacus Benefit Plan, including all
amendments thereto, written interpretations thereof (which interpretation
materially increases the liabilities of Abacus and its Subsidiaries taken as a
whole under the relevant Abacus Benefit Plan) and all trust or funding
agreements with respect thereto; (ii) the most recent annual actuarial
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valuation, if any, prepared for each Abacus Benefit Plan; (iii) the most recent
annual report (Series 5500 and all schedules thereto), if any, required under
ERISA in connection with each Abacus Benefit Plan or related trust; (iv) the
most recent determination letter received from the Internal Revenue Service, if
any, for each Abacus Benefit Plan and related trust which is intended to satisfy
the requirements of Section 401(a) of the Code; (v) if any Abacus Benefit Plan
is funded, the most recent annual and periodic accounting of such Abacus Benefit
Plan's assets; (vi) the most recent summary plan description together with the
most recent summary of material modifications, if any, required under ERISA with
respect to each Abacus Benefit Plan; and (vii) all material communications to
any one or more current, former or retired employee, officer, consultant,
independent contractor, agent or director of Abacus or any Subsidiary of Abacus
(each, an "Abacus Employee" and collectively, the "Abacus Employees") relating
to each Abacus Benefit Plan (which communication materially increases the
liabilities of Abacus and its Subsidiaries taken as a whole under the relevant
Abacus Benefit Plan). The Board of Directors of Abacus has adopted a resolution
described on Schedule 3.10(b).
(c) All Abacus Benefit Plans have been administered in all
respects in accordance with the terms thereof and all applicable laws except for
violations which, individually or in the aggregate, would not reasonably be
expected to have an Abacus Material Adverse Effect. Each Abacus Benefit Plan
which is an "employee pension benefit plan" within the meaning of Section 3(2)
of ERISA ("Pension Plan") and which is intended to be qualified under Section
401(a) of the Code (each, an "Abacus Pension Plan"), has received a favorable
determination letter from the Internal Revenue Service, and Abacus is not aware
of any circumstances that would reasonably be expected to result in the
revocation or denial of such qualified status. Except as otherwise set forth in
the Abacus Disclosure Letter or in the Abacus SEC Reports filed prior to the
date hereof, there is no pending or, to Abacus' knowledge, threatened, claim,
litigation, proceeding, audit, examination or investigation relating to any
Abacus Benefit Plans or Abacus Employees that, individually or in the aggregate,
would reasonably be expected to have an Abacus Material Adverse Effect.
(d) No material liability under Title IV of ERISA has been or is
reasonably expected to be incurred by Abacus or any Subsidiaries of Abacus or
any entity which is considered a single employer with Abacus or any Subsidiary
of Abacus under Section 4001(a)(15) of ERISA or Section 414 of the Code (an
"Abacus ERISA Affiliate"). No notice of a "reportable event," within the meaning
of Section 4043 of ERISA for which the 30-day reporting requirement has not been
waived, has been required to be filed for any Abacus Pension Plan within the
past twelve (12) months.
(e) All contributions, premiums and payments (other than
contributions, premiums or payments that are not material, in the aggregate)
required to be made under the terms of any Abacus Benefit Plan have been made.
No Abacus Pension Plan has an
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"accumulated funding deficiency" (whether or not waived) within the meaning of
Section 412 of the Code or Section 302 of ERISA. Neither Abacus nor any
Subsidiaries of Abacus nor any Abacus ERISA Affiliate has provided, or is
required to provide, security to any Abacus Pension Plan pursuant to Section
401(a)(29) of the Code.
(f) Except as set forth in the Abacus SEC Reports filed prior to
the date hereof, under each Abacus Pension Plan which is a defined benefit plan,
as of the last day of the most recent plan year ended prior to the date hereof,
the actuarially determined present value of all "benefit liabilities", within
the meaning of Section 4001(a)(16) of ERISA (as determined on the basis of the
actuarial assumptions contained in each such Pension Plan's most recent
actuarial valuation) did not exceed the then current value of the assets of such
Pension Plan, and there has been no adverse change in the financial condition of
such Pension Plan (with respect to either assets or benefits) since the last day
of the most recent plan year of such Pension Plan.
(g) As of the Closing Date, neither Abacus, any Subsidiary of
Abacus nor any Abacus ERISA Affiliate will have incurred any withdrawal
liability as described in Section 4201 of ERISA for withdrawals that have
occurred on or prior to the Closing Date that has not previously been satisfied.
Neither Abacus, any Subsidiary of Abacus nor any Abacus ERISA Affiliate has
knowledge that any Abacus Multiemployer Plan fails to qualify under Section
401(a) of the Code, is insolvent or is in reorganization within the meaning of
Part 3 of Subtitle E of Title IV of ERISA nor of any condition that would
reasonably be expected to result in an Abacus Multiemployer Plan becoming
insolvent or going into reorganization.
(h) The execution of, and performance of the transactions
contemplated in, this Agreement will not (either alone or upon the occurrence of
any additional or subsequent events) (i) constitute an event under any Abacus
Benefit Plan, trust or loan that will or may result in any payment (whether of
severance pay or otherwise), acceleration, forgiveness of indebtedness, vesting,
distribution, increase in benefits or obligation to fund benefits with respect
to any Abacus Employee, or (ii) result in the triggering or imposition of any
restrictions or limitations on the right of Abacus, any Subsidiary of Abacus or
Alphabet to amend or terminate any Abacus Benefit Plan. No payment or benefit
which will or may be made by Abacus, any Subsidiary of Abacus, Alphabet or any
of their respective affiliates with respect to any Abacus Employee will be
characterized as an "excess parachute payment," within the meaning of Section
280G(b)(1) of the Code.
Section 3.11 Labor Matters. (a) Except as set forth in the Abacus SEC
Reports filed prior to the date hereof, and except for those matters that would
not, individually or in the aggregate, reasonably be expected to have an Abacus
Material Adverse Effect no work stoppage, slowdown, lockout or labor strike
against Abacus or any Subsidiary of
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Abacus by Abacus Employees (or any union that represents them) is pending or, to
the knowledge of Abacus, threatened.
(b )Except as set forth in the Abacus SEC Reports filed prior to
the date hereof and as, individually or in the aggregate, would not reasonably
be expected to have an Abacus Material Adverse Effect, as of the date of this
Agreement, neither Abacus nor any Subsidiary of Abacus is involved in or, to the
knowledge of Abacus, threatened with any labor dispute, grievance, or
arbitration or union organizing activity (by it or any of its employees)
involving any Abacus Employees.
Section 3.12 Environmental Matters. Except as set forth in the Abacus SEC
Reports filed prior to the date hereof and except for those matters that would
not, individually or in the aggregate, reasonably be expected to have an Abacus
Material Adverse Effect:
(i) Abacus and each of its Subsidiaries is in compliance with
all applicable Environmental Laws (as defined below), and neither Abacus nor any
of its Subsidiaries has received any written communication from any Person or
Governmental Entity that alleges that Abacus or any of its Subsidiaries is not
in compliance with applicable Environmental Laws.
(ii) Abacus and each of its Subsidiaries has obtained or has
applied for all applicable environmental, health and safety permits, licenses,
variances, approvals and authorizations required under Environmental Laws
(collectively, the "Environmental Permits") necessary for the construction of
its facilities or the conduct of its operations, and all those Environmental
Permits are in effect or, where applicable, a renewal application has been
timely filed and is pending agency approval, and Abacus and its Subsidiaries are
in compliance with all terms and conditions of such Environmental Permits.
(iii) There is no Environmental Claim (as defined below)
pending or, to the knowledge of Abacus, threatened (i) against Abacus or any of
its Subsidiaries, (ii) against any Person whose liability for any Environmental
Claim has been retained or assumed contractually by Abacus or any of its
Subsidiaries, or (iii) against any real or personal property or operations which
Abacus or any of its Subsidiaries owns, leases or operates, in whole or in part.
(iv) There have been no Releases (as defined below) of any
Hazardous Material (as defined below) that would be reasonably likely to form
the basis of any Environmental Claim against Abacus or any of its Subsidiaries,
or against any Person whose liability for any Environmental Claim has been
retained or assumed contractually by Abacus or any of its Subsidiaries.
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(v) None of the properties owned, leased or operated by
Abacus, its Subsidiaries or any predecessor thereof are now, or were in the
past, listed on the National Priorities List of Superfund Sites or any analogous
state list (excluding easements that transgress those Superfund sites).
For purposes of this Agreement:
(i) "Environmental Claim" means any and all administrative,
regulatory or judicial actions, suits, demands, demand letters, directives,
claims, liens, investigations, proceedings or notices of noncompliance or
violation (written or oral) by any person (including any federal, state, local
or foreign governmental authority) alleging potential liability (including,
without limitation, potential responsibility for or liability for enforcement,
investigatory costs, cleanup costs, governmental response costs, removal costs,
remedial costs, natural resources damages, property damages, personal injuries
or penalties) arising out of, based on or resulting from (A) the presence, or
Release or threatened Release into the environment, of any Hazardous Materials
at any location, whether or not owned, operated, leased or managed by the
representing Party or any of its Subsidiaries; or (B) circumstances forming the
basis of any violation or alleged violation of any Environmental Law; or (C) any
and all claims by any third party seeking damages, contribution,
indemnification, cost recovery, compensation or injunctive relief resulting from
the presence or Release of any Hazardous Materials.
(ii) "Environmental Laws" means all applicable foreign,
federal, state and local laws, rules, requirements and regulations relating to
pollution, the environment (including, without limitation, ambient air, surface
water, groundwater, land surface or subsurface strata) or protection of human
health as it relates to the environment including, without limitation, laws and
regulations relating to Releases of Hazardous Materials, or otherwise relating
to the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Materials or relating to management of
asbestos in buildings.
(iii) "Hazardous Materials" means (A) any petroleum or any
by-products or fractions thereof, asbestos or asbestos-containing materials,
urea formaldehyde foam insulation, any form of natural gas, explosives,
polychlorinated biphenyls ("PCBs"), radioactive materials, ionizing radiation,
electromagnetic field radiation or microwave transmissions; (B) any chemicals,
materials or substances, whether waste materials, raw materials or finished
products, which are now defined as or included in the definition of "hazardous
substances," "hazardous wastes," "hazardous materials," "extremely hazardous
substances," "restricted hazardous wastes," "toxic substances," "toxic
pollutants," "pollutants," "contaminants," or words of similar import under any
Environmental Law; and (C) any other chemical, material or substance, whether
waste materials, raw materials or finished products, regulated or forming the
basis of liability under any Environmental Law.
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(iv) "Release" means any release, spill, emission, leaking,
injection, deposit, disposal, discharge, dispersal, leaching or migration into
the environment (including without limitation ambient air, atmosphere, soil,
surface water, groundwater or property).
Section 3.13 Board Action; Vote Required. (a) Abacus' Board of Directors
has approved this Agreement, the Abacus Stock Option Agreement and the
transactions contemplated hereby and thereby, including the Merger, has
determined that the Merger is advisable, fair to and in the best interests of
Abacus and its stockholders and has resolved to recommend to stockholders that
they vote in favor of approving and adopting this Agreement and approving the
Merger. Neither Section 203 of the DGCL nor any other state takeover or similar
statute or regulation applies to the Merger, this Agreement, the Abacus Stock
Option Agreement (including the purchase of shares of Abacus Common Stock
thereunder) or any of the transactions contemplated hereby or thereby. The Board
of Directors of Abacus has duly adopted (and not withdrawn) a resolution
rescinding any authorization previously granted permitting Abacus to repurchase
shares of Abacus Common Stock. In connection with each Abacus Benefit Plan under
which a holder of an option granted pursuant thereto would be entitled, in
respect of such option, to receive cash upon a change of control, the Board of
Directors (or the appropriate Committee thereof) has taken all necessary action
so that in connection with the Merger such holder would be entitled to exercise
such option solely for shares of Abacus Common Stock or, following the Merger,
Alphabet Common Stock.
(b) The affirmative vote of the holders of a majority of all of
the outstanding shares of Abacus Common Stock is necessary to approve and adopt
this Agreement and the Merger. Such vote is the only vote of the holders of any
class or series of Abacus' capital stock required to approve this Agreement, the
Abacus Stock Option Agreement and the transactions contemplated hereby and
thereby.
Section 3.14 Opinion of Financial Advisor. Abacus or its Board of
Directors has received the written opinion of The Blackstone Group, dated as of
the date hereof, to the effect that, as of the date hereof, the Exchange Ratio
is fair to the holders of shares of Abacus Common Stock from a financial point
of view. An executed copy of such opinion has been delivered to Alphabet.
Section 3.15 Brokers. Set forth in the Abacus Disclosure Letter is a list
of each broker, finder or investment banker and other Person entitled to any
brokerage, finder's, investment banking or other similar fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Abacus or any of its Subsidiaries and the
expected amounts of such fees and commissions. Abacus has previously provided to
Alphabet copies of any agreements giving rise to any such fee or commission.
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Section 3.16 Tax Matters. (a) All material Tax Returns (defined below)
required to be filed by Abacus or its Subsidiaries on or prior to the Effective
Time or with respect to taxable periods ending on or prior to the Effective Time
have been or will be prepared in good faith and timely filed with the
appropriate Governmental Entity on or prior to the Effective Time or by the due
date thereof including extensions except where the failure to so file would not,
individually or in the aggregate, reasonably be expected to have an Abacus
Material Adverse Effect.
(b) Except where the failure to pay, collect or withhold would
not, individually or in the aggregate, reasonably be expected to have an Abacus
Material Adverse Effect (i) all Taxes (defined below), that are required to be
paid, have been or will be fully paid (except with respect to matters contested
in good faith as set forth in the Abacus Disclosure Letter) or as of May 2, 1998
adequately reflected as a liability on Abacus' or its Subsidiaries' books and
records (without taking into account any deferred Tax liabilities) and (ii) all
Taxes required to be collected or withheld from third parties have in all
material respects been collected or withheld.
(c) Abacus and each of its Subsidiaries have not waived any
statute of limitations with respect to federal income Taxes or agreed to any
extension of time with respect to federal income or material state Tax
assessment or deficiency.
(d) As of the date hereof, there are not pending or, to the
knowledge of Abacus, threatened in writing, any audits, examinations,
investigations or other proceedings in respect of Taxes or Tax matters that (i)
were raised by any Taxing authority in a written communication to Abacus or any
Subsidiary and (ii) would, individually or in the aggregate, reasonably be
expected to have an Abacus Material Adverse Effect after taking into account any
reserves for Taxes set forth on the most recent balance sheet contained in the
Abacus SEC Reports filed prior to the date hereof.
(e) Abacus has made available to Alphabet true and correct copies
of the United States federal income and all material state income or franchise
Tax Returns filed by Abacus and its Subsidiaries for each of its fiscal years
ended on or about January 31, 1995, 1996, and 1997.
As used in this Agreement, (i) the term "Tax " (including, with
correlative meaning, the terms "Taxes " and "Taxable ") includes all federal,
state, local and foreign income, profits, franchise, gross receipts, license,
premium, environmental (including taxes under Section 59A of the Code), capital
stock, severance, stamp, payroll, sales, employment, unemployment, disability,
use, transfer, property, withholding, excise, production, occupation, windfall
profits, customs duties, social security (or similar), registration, value
added, alternative or add-on minimum, estimated, occupancy and other taxes,
duties or governmental assessments of any nature whatsoever, together with all
interest, penalties and additions imposed with respect to such amounts and any
interest in
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respect of such penalties and additions, and (ii) the term "Tax Return "
includes all returns and reports (including elections, declarations,
disclosures, schedules, estimates and information returns) required to be
supplied to a Tax authority relating to Taxes.
Section 3.17 Intellectual Property. Neither Abacus nor any of its
Subsidiaries currently utilizes, or to the knowledge of the general counsel and
members of the legal department of Abacus involved in intellectual property, has
in the past utilized, any existing or pending patent, trademark, trade name,
service mark, copyright, software, trade secret or know-how, except for those
which are owned, possessed or lawfully used by Abacus or its Subsidiaries in
their business operations, and neither Abacus nor any of its Subsidiaries
infringes upon or unlawfully uses any patent, trademark, trade name, service
mark, copyright or trade secret owned or validly claimed by another Person
except, in each case, as would not, individually or in the aggregate, reasonably
be expected to have an Abacus Material Adverse Effect. Abacus and its
Subsidiaries own, have a valid license to use or have the right validly to use
all existing and pending patents, trademarks, tradenames, service marks,
copyrights and software necessary to carry on their respective businesses
substantially as currently conducted except the failure of which to own, validly
license or have the right validly to use, individually or in the aggregate,
would not reasonably be expected to have an Abacus Material Adverse Effect.
Section 3.18 Insurance. Except to the extent adequately accrued on the
most recent balance sheet contained in the Abacus SEC Reports filed as of the
date hereof, neither Abacus nor its Subsidiaries has any obligation (contingent
or otherwise) to pay in connection with any insurance policies any retroactive
premiums or "retro-premiums" that, individually or in the aggregate, would
reasonably be expected to have an Abacus Material Adverse Effect.
Section 3.19 Contracts and Commitments. Set forth in the Abacus
Disclosure Letter is a complete and accurate list of all of the following
contracts (written or oral), plans, undertakings, commitments or agreements
("Abacus Contracts") to which Abacus or any of its Subsidiaries is a party or by
which any of them is bound as of the date of this Agreement:
(a) each distribution, supply, inventory purchase, franchise,
license, sales, agency or advertising contract involving annual expenditures or
liabilities in excess of $30,000,000 which is not cancelable (without material
penalty, cost or other liability) within one year;
(b) each promissory note, loan, agreement, indenture, evidence of
indebtedness or other instrument providing for the lending of money, whether as
borrower, lender or guarantor, in excess of $20,000,000;
(c) each contract, lease, agreement, instrument or other
arrangement containing any "radius clause" applicable to markets in which
Alphabet has operations
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the compliance (or failure to comply) with which would reasonably be expected,
individually or in the aggregate, to have an Abacus Material Adverse Effect;
(d) each joint venture or partnership agreement pursuant to which
any third party is entitled to develop any property and/or facility on each
behalf of Abacus or any of its Subsidiaries material to Abacus and its
Subsidiaries taken as a whole; and
(e) any contract that would constitute a "material contract" (as
such term is defined in Item 601(b)(10) of Regulation S-K of the SEC).
True and complete copies of the written Abacus Contracts, as amended
to date, that would be required to be filed as exhibits to Abacus' Form 10-K if
such Form 10-K were being filed on the date hereof, that are identified in the
Abacus Disclosure Letter and have not been filed prior to the date hereof as
Exhibits to the Abacus SEC Reports have been delivered or made available to
Alphabet.
To the knowledge of Abacus, each Abacus Contract is valid and
binding on Abacus, any Subsidiary of Abacus which is a party thereto and each
other party thereto and is in full force and effect, and Abacus and its
Subsidiaries have performed and complied with all obligations required to be
performed or compiled with by them under each Abacus Contract, except in each
case as would not, individually or in the aggregate, reasonably be expected to
have an Abacus Material Adverse Effect.
Section 3.20 Accounting and Tax Matters. Neither Abacus nor any of its
affiliates has taken or agreed to take any action, nor does Abacus have any
knowledge of any fact or circumstance with respect to Abacus, which would
prevent the business combination to be effected pursuant to the Merger from
being accounted for as a "pooling-of-interests" under GAAP or the rules and
regulations of the SEC or prevent the Merger from qualifying as a
"reorganization" within the meaning of Section 368 of the Code.
Section 3.21 Ownership of Shares of Alphabet. Abacus and its Subsidiaries
do not beneficially own (as defined in Rule 13d-3 under the Exchange Act) any
capital stock or other equity securities of Alphabet or any Alphabet Equity
Rights (as defined herein) other than pursuant to the Alphabet Stock Option
Agreement.
ARTICLE IV
Except as set forth in the corresponding sections or subsections of
the disclosure letter, dated the date hereof, delivered by Alphabet to Abacus
(the "Alphabet Disclosure Letter"), Alphabet and Abacus Holdings
hereby represent and warrant to Abacus as follows:
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Section 4.1 Organization and Qualification; Subsidiaries. (a) Alphabet
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware. Each of the Subsidiaries of Alphabet (including
Abacus Holdings) is a corporation or other business entity duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation or organization, and each of Alphabet and its Subsidiaries has the
requisite corporate or other organizational power and authority to own, operate
or lease its properties and to carry on its business as it is now being
conducted, and is duly qualified as a foreign corporation to do business, and is
in good standing, in each jurisdiction where the character of its properties
owned, operated or leased or the nature of its activities makes such
qualification necessary, in each case except as would not, individually or in
the aggregate, reasonably be expected to have an Alphabet Material Adverse
Effect.
(b) All of the outstanding shares of capital stock and other
equity securities of the Significant Subsidiaries of Alphabet (including Abacus
Holdings) have been validly issued and are fully paid and nonassessable, and are
owned, directly or indirectly, by Alphabet, free and clear of all pledges and
security interests. All outstanding shares of capital stock and other equity
interests of each Subsidiary of Alphabet owned directly or indirectly by
Alphabet are free and clear of all liens, claims or encumbrances as would,
individually or in the aggregate, reasonably be expected to have an Alphabet
Material Adverse Effect. There are no subscriptions, options, warrants, calls,
commitments, agreements, conversion rights or other rights of any character
(contingent or otherwise) entitling any Person to purchase or otherwise acquire
from Alphabet or any of its Significant Subsidiaries at any time, or upon the
happening of any stated event, any shares of capital stock or other equity
securities of any of the Subsidiaries of Alphabet (including Abacus Holdings).
The Alphabet Disclosure Letter lists the name and jurisdiction of incorporation
or organization of each of the Significant Subsidiaries of Alphabet.
(c) Except for interests in Subsidiaries, neither Alphabet nor any
of its Subsidiaries owns directly or indirectly any material equity interest in
any Person or, other than pursuant to this Agreement, has any obligation or made
any commitment to acquire any such interest or make any such investment.
Section 4.2 Certificate of Incorporation and Bylaws. Alphabet has
furnished, or otherwise made available, to Abacus a complete and correct copy of
the certificate of incorporation and bylaws, as amended to the date of this
Agreement, of Alphabet. Such certificate of incorporation and bylaws are in full
force and effect. Alphabet is not in violation of any of the provisions of its
certificate of incorporation or bylaws.
Section 4.3 Capitalization. (a) The authorized capital stock of Alphabet
consists of 1,200,000,000 shares of Alphabet Common Stock and 10,000,000 shares
of Preferred Stock, par value $1.00 per share (the "Alphabet Preferred Stock").
At the close
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of business on July 30, 1998 (the "Alphabet Capital Stock Disclosure Date"), (i)
245,507,844 shares of Alphabet Common Stock, and no shares of Alphabet Preferred
Stock, were issued and outstanding and (ii) no shares of Alphabet Common Stock,
and no shares of Alphabet Preferred Stock, were held by Alphabet in its
treasury. The Alphabet Disclosure Letter lists the number of shares of Alphabet
Common Stock and Alphabet Preferred Stock reserved for issuance as of the
Alphabet Capital Stock Disclosure Date under each of the Alphabet Benefit Plans
(as defined in Section 4.10) or otherwise. Since the Alphabet Capital Stock
Disclosure Date until the date of this Agreement, no shares of Alphabet Common
Stock or Alphabet Preferred Stock have been issued or reserved for issuance,
except in respect of the exercise, conversion or exchange of Alphabet Equity
Rights outstanding as of the Alphabet Capital Stock Disclosure Date and in
connection with the Alphabet Stock Option Agreement. For purposes of this
Agreement, "Alphabet Equity Rights" shall mean subscriptions, options, warrants,
calls, commitments, agreements, conversion rights or other rights of any
character (contingent or otherwise) to purchase or otherwise acquire from
Alphabet or any of its Subsidiaries at any time, or upon the happening of any
stated event, any shares of the capital stock of Alphabet. The Alphabet
Disclosure Letter sets forth the number and type of Alphabet Equity Rights
(including the number and class of Alphabet's capital stock for or into which
such Alphabet Equity Rights are exercisable, convertible or exchangeable and any
Alphabet Benefit Plan pursuant to which such Alphabet Equity Rights were granted
or issued) outstanding as of the Alphabet Capital Stock Disclosure Date. Other
than the Alphabet Equity Rights disclosed in the Alphabet Disclosure Letter and
the Alphabet Equity Rights granted pursuant to the Alphabet Stock Option
Agreement, Alphabet does not have any outstanding Alphabet Equity Rights as of
the date of this Agreement. Except as disclosed in the Alphabet SEC Reports
(defined below), no stockholders of Alphabet are party to any voting agreement,
voting trust or similar arrangement with respect to Alphabet Shares to which
Alphabet or any Subsidiary of Alphabet is a Party.
(b) There are no outstanding obligations of Alphabet or any of its
Subsidiaries to repurchase, redeem or otherwise acquire any shares of Alphabet
Common Stock or any Alphabet Equity Rights (except in connection with the
exercise, conversion or exchange of outstanding Alphabet Equity Rights). All of
the issued and outstanding shares of Alphabet Common Stock are validly issued,
fully paid, nonassessable and free of preemptive rights. The Alphabet Disclosure
Letter sets forth the number of shares of Alphabet Common Stock repurchased, and
the number issued, by Alphabet or any of its Subsidiaries since July 1, 1996.
Section 4.4 Power and Authority; Authorization; Valid & Binding. Each of
Alphabet and Abacus Holdings has the necessary corporate power and authority to
deliver this Agreement and, in the case of Alphabet, the Stock Option
Agreements, to perform its obligations hereunder, as applicable, and to
consummate the transactions contemplated hereby, as applicable, except that the
issuance of shares of Alphabet Common Stock in accordance with the terms of this
Agreement is subject to the approval
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of stockholders of Alphabet as required by the rules and regulations of the
NYSE. The execution and delivery by each of Alphabet and Abacus Holdings of this
Agreement and, in the case of Alphabet, the Stock Option Agreements, the
performance by it of its obligations hereunder and thereunder, as applicable,
and the consummation by Alphabet of the transactions contemplated hereby and
thereby, as applicable, have been duly authorized by all necessary corporate
action on the part of Alphabet, except that the issuance of shares of Alphabet
Common Stock in accordance with the terms of this Agreement and the Merger is
subject to the approval of stockholders of Alphabet as required by the rules and
regulations of the NYSE. This Agreement has been duly executed and delivered by
Alphabet and Abacus Holdings and, assuming the due authorization, execution and
delivery by Abacus, constitutes a legal, valid and binding obligation of
Alphabet and Abacus Holdings enforceable against such parties in accordance with
the terms hereof or thereof, subject to bankruptcy, insolvency, fraudulent
transfer, moratorium, reorganization and similar laws of general applicability
relating to or affecting creditors' rights and to general equity principles
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
Section 4.5 No Conflict; Required Filings and Consents. (a) The
execution and delivery of this Agreement by each of Alphabet and Abacus Holdings
and the Alphabet Stock Option Agreement by Alphabet does not, and the
performance by Alphabet of its obligations hereunder and thereunder and the
consummation by Alphabet of the transactions contemplated hereby and thereby
will not, (i) violate or conflict with the certificate of incorporation or
bylaws of Alphabet (ii) subject to obtaining or making the notices, reports,
filings, waivers, consents, approvals or authorizations referred to in paragraph
(b) below, conflict with or violate any law, regulation, court order, judgment
or decree applicable to Alphabet or any of its Subsidiaries or by which any of
their respective property is bound or affected, (iii) subject to obtaining the
approval of the stockholders of Alphabet for the issuance of shares of Alphabet
Common Stock in accordance with the terms hereof, result in any breach of or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
cancellation, vesting, modification, alteration or acceleration of any
obligation under, result in the creation of a lien, claim or encumbrance on any
of the properties or assets of Alphabet or any of its Subsidiaries pursuant to,
result in the loss of any material benefit under (including an increase in the
price paid by, or cost to, Alphabet or any of its Subsidiaries), require the
consent of any other party to, or result in any obligation on the part of
Alphabet or any of its Subsidiaries to repurchase (with respect to a bond or a
note), any agreement, contract, instrument, bond, note, indenture, permit,
license or franchise to which Alphabet or any of its Subsidiaries is a party or
by which Alphabet, any of its Subsidiaries or any of their respective property
is bound or affected, except, in the case of clauses (ii) and (iii) above, as
would not, individually or in the aggregate, reasonably be expected to have an
Alphabet Material Adverse Effect.
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(b) Except for applicable requirements, if any, under the
premerger notification requirements of the HSR Act, the filing of a certificate
of merger with respect to the Merger as required by the DGCL, filings with the
SEC under the Securities Act and the Exchange Act, any filings required pursuant
to any state securities or "blue sky" laws any filings required pursuant to any
state liquor, gaming or pharmacy laws, any applicable Environmental Laws (as
defined herein) governing the transfer of any interest in real property or of
business operations (including without limitation transfer acts, notifications,
and deed restrictions), and the transfer or application requirements with
respect to the environmental permits of Alphabet or its Subsidiaries, or
pursuant to the rules and regulations of any stock exchange on which the
Alphabet Shares are listed, and approval of stockholders required under the
rules and regulations of the NYSE, neither Alphabet nor any of its Subsidiaries
(including Abacus Holdings) is required to submit any notice, report or other
filing with any Governmental Entity in connection with the execution, delivery,
performance or consummation of this Agreement, the Stock Option Agreements or
the Merger except for such notices, reports or filings, that, if not made, would
not, individually or in the aggregate, reasonably be expected to have an
Alphabet Material Adverse Effect. Except as set forth in the immediately
preceding sentence, no waiver, consent, approval or authorization of any
Governmental Entity is required to be obtained by Alphabet or any of its
Subsidiaries (including Abacus Holdings) in connection with its execution,
delivery, performance or consummation of this Agreement, the Stock Option
Agreements or the transactions contemplated hereby and thereby except for such
waivers, consents, approvals or authorizations that, if not obtained or made,
would not, individually or in the aggregate, reasonably be expected to have an
Alphabet Material Adverse Effect.
Section 4.6 SEC Reports; Financial Statements. (a) Alphabet has filed
all forms, reports and documents (including all Exhibits, Schedules and Annexes
thereto) required to be filed by it with the SEC since January 1, 1995,
including any amendments or supplements thereto (collectively, including any
such forms, reports and documents filed after the date hereof, the "Alphabet SEC
Reports"), and, with respect to the Alphabet SEC Reports filed by Alphabet after
the date hereof and prior to the Closing Date, will deliver or make available,
to Abacus all of its Alphabet SEC Reports in the form filed with the SEC. The
Alphabet SEC Reports (i) were (and any Alphabet SEC Reports filed after the date
hereof will be) in all material respects in accordance with the requirements of
the Securities Act or the Exchange Act, as the case may be, and the rules and
regulations promulgated thereunder, and (ii) as of their respective filing
dates, did not (and any Alphabet SEC Reports filed after the date hereof will
not) contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
(b) The financial statements, including all related notes and
schedules, contained in the Alphabet SEC Reports (or incorporated therein by
reference) fairly
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present in all material respects (or, with respect to financial statements
contained in the Alphabet SEC Reports filed after the date hereof, will fairly
present in all material respects) the consolidated financial position of
Alphabet and its consolidated subsidiaries as at the respective dates thereof
and the consolidated results of operations, retained earnings and cash flows of
Alphabet and its consolidated subsidiaries for the respective periods indicated,
in each case in accordance with GAAP applied on a consistent basis throughout
the periods involved (except for changes in accounting principles disclosed in
the notes thereto) and the rules and regulations of the SEC, except that interim
financial statements are subject to normal year-end adjustments which are not
and are not expected to be, individually or in the aggregate, material in amount
and do not include certain notes which may be required by GAAP but which are not
required by Form 10-Q of the SEC.
Section 4.7 Absence of Certain Changes. Except as disclosed in the
Alphabet SEC Reports filed prior to the date hereof, (a) since the end of
Alphabet's fiscal year last ended, Alphabet and each of its Subsidiaries has
conducted its business in all material respects in the ordinary and usual course
of its business consistent with past practice and there has not been any change
in the financial condition, business or results of operations of Alphabet and
its Subsidiaries or any development or combination of developments that,
individually or in the aggregate, has had or would reasonably be expected to
have an Alphabet Material Adverse Effect and (b) since the end of Alphabet's
fiscal year last ended until the date hereof, there has not been (i) any
declaration, setting aside or payment of any dividend or other distribution in
respect of the capital stock of Alphabet, other than regular cash dividends
consistent with past practice; (ii) any change by Alphabet to its accounting
policies, practices or methods; (iii) any amendment or change to the terms of
any of its indebtedness material to Alphabet and its Subsidiaries taken as a
whole; (iv) any incurrence of any material indebtedness outside of the ordinary
course of business; (v) outside the ordinary course of business, any transfer,
lease, license, sale, mortgage, pledge, encumbrance or other disposition of
assets or properties material to Alphabet and its Subsidiaries taken as a whole;
(vi) any material damage, destruction or other casualty loss with respect to any
asset or property owned, leased or otherwise used by Alphabet or its
Subsidiaries material to Alphabet and its Subsidiaries taken as a whole, whether
or not covered by insurance; (vii) except on a case-by-case basis in the
ordinary course of business consistent with past practice for employees other
than executive officers or directors, or except as required by applicable law or
pursuant to a contractual obligation in effect as of the date of this Agreement,
(A) any execution, adoption or amendment of any agreement or arrangement
relating to severance or any employee benefit plan or employment or consulting
agreement (including, without limitation, the Alphabet Benefit Plans referred to
in Section 4.10 hereof) or (B) any grant of any stock options or other equity
related award; or (viii) any agreement or commitment entered into with respect
to any of the foregoing.
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Section 4.8 Litigation and Liabilities. (a) Except as disclosed in the
Alphabet SEC Reports filed prior to the date hereof, there are no civil,
criminal or administrative actions, suits or claims, proceedings (including
condemnation proceedings) or, to the knowledge of Alphabet, hearings or
investigations, pending or, to the knowledge of Alphabet, threatened against, or
otherwise adversely affecting Alphabet or any of its Subsidiaries or any of
their respective properties and assets, except for any of the foregoing which
would not, individually or in the aggregate, reasonably be expected to have an
Alphabet Material Adverse Effect.
(b) Neither Alphabet nor any of its Subsidiaries has any
liabilities (absolute, accrued, contingent or otherwise) the existence of which
would, individually or in the aggregate, reasonably be expected to have an
Alphabet Material Adverse Effect, except (i) liabilities described in the
Alphabet SEC Reports filed with the SEC prior to the date hereof or reflected on
the Alphabet's consolidated balance sheet (and related notes thereto) as of the
end of its most recently completed fiscal year filed in the Alphabet SEC
Reports, (ii) liabilities incurred since the end of Alphabet's most recently
completed fiscal year in the ordinary course of business consistent with past
practice, that would not, individually or in the aggregate, reasonably be
expected to have an Alphabet Material Adverse Effect or (iii) liabilities
permitted to be incurred pursuant to Section 5.2.
Section 4.9 No Violation of Law; Permits. The business of Alphabet and
each of its Subsidiaries is being conducted in accordance with all applicable
statutes of law, ordinances, regulations, judgments, orders or decrees of any
Governmental Entity, and not in violation of any permits, franchises, licenses,
authorizations or consents granted by any Governmental Entity, and Alphabet and
each of its Subsidiaries has obtained all permits, franchises, licenses,
authorizations or consents necessary for the conduct of its business, except, in
each case, as would not, individually or in the aggregate, reasonably be
expected to have an Alphabet Material Adverse Effect. Neither Alphabet nor any
of its Subsidiaries is subject to any cease and desist or other order, judgment,
injunction or decree issued by or is a party to any written agreement, consent
agreement or memorandum of understanding with, or to the knowledge of Alphabet,
is a party to any commitment letter or similar undertaking to, or, to the
knowledge of Alphabet, is subject to any order or directive by, or has adopted
any board resolutions at the request of, any Governmental Entity, that
materially restricts the conduct of its business (whether the type of business,
the location thereof or otherwise) and which, individually or in the aggregate,
would reasonably be expected to have an Alphabet Material Adverse Effect, nor to
the knowledge of Alphabet, has Alphabet been advised in writing that any
Governmental Entity has proposed issuing or requesting any of the foregoing.
Section 4.10 Employee Matters; ERISA. (a) Set forth in the Alphabet
Disclosure Letter is a complete list of each Alphabet Benefit Plan and each
Alphabet Multiemployer Plan. The term "Alphabet Benefit Plan" shall mean (i)
each plan,
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program, policy, contract or agreement providing for compensation, severance,
termination pay, performance awards, stock or stock-related awards, fringe
benefits or other employee benefits of any kind including, without limitation,
any "employee benefit plan," within the meaning of Section 3(3) of ERISA but
excluding any "multiemployer plan" within the meaning of Sections 3(37) or
4001(a)(3) of ERISA, and (ii) each employment, severance, consulting,
non-compete, confidentiality, or similar agreement or contract, in each case,
with respect to which Alphabet or any Subsidiary of Alphabet has or may have any
liability (accrued, contingent or otherwise). The term "Alphabet Multiemployer
Plan" shall mean any "multiemployer plan" within the meaning of Section
4001(a)(3) of ERISA in respect to which Alphabet or any Subsidiary of Alphabet
has or may have any liability (accrued, contingent or otherwise).
(b) Alphabet has provided or made available, or has caused to be
provided or made available, to Abacus (i) current, accurate and complete copies
of all documents embodying each Alphabet Benefit Plan, including all amendments
thereto, written interpretations thereof (which interpretation materially
increases the liabilities of Alphabet and its Subsidiaries taken as a whole
under the relevant Alphabet Benefit Plan) and all trust or funding agreements
with respect thereto; (ii) the most recent annual actuarial valuation, if any,
prepared for each Alphabet Benefit Plan; (iii) the most recent annual report
(Series 5500 and all schedules thereto), if any, required under ERISA in
connection with each Alphabet Benefit Plan or related trust; (iv) the most
recent determination letter received from the Internal Revenue Service, if any,
for each Alphabet Benefit Plan and related trust which is intended to satisfy
the requirements of Section 401(a) of the Code; (v) if any Alphabet Benefit Plan
is funded, the most recent annual and periodic accounting of such Alphabet
Benefit Plan's assets; (vi) the most recent summary plan description together
with the most recent summary of material modifications, if any, required under
ERISA with respect to each Alphabet Benefit Plan; and (vii) all material
communications to any one or more current, former or retired employee, officer,
consultant, independent contractor, agent or director of Alphabet or any
Subsidiary of Alphabet (each, an "Alphabet Employee" and collectively, the
"Alphabet Employees") relating to each Alphabet Benefit Plan (which
communication materially increases the liabilities of Alphabet and its
Subsidiaries taken as a whole under the relevant Alphabet Benefit Plan).
(c) All Alphabet Benefit Plans have been administered in all
respects in accordance with the terms thereof and all applicable laws except for
violations which, individually or in the aggregate, would not reasonably be
expected to have an Alphabet Material Adverse Effect. Each Alphabet Benefit Plan
which is a Pension Plan and which is intended to be qualified under Section
401(a) of the Code (each, an "Alphabet Pension Plan"), has received a favorable
determination letter from the Internal Revenue Service, and Alphabet is not
aware of any circumstances that would reasonably be expected to result in the
revocation or denial of such qualified status. Except as otherwise set forth in
the Alphabet Disclosure Letter or in the Alphabet SEC Reports filed prior to the
date
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hereof, there is no pending or, to Alphabet's knowledge, threatened, claim,
litigation, proceeding, audit, examination or investigation relating to any
Alphabet Benefit Plans or Alphabet Employees that, individually or in the
aggregate, would reasonably be expected to have an Alphabet Material Adverse
Effect.
(d) No material liability under Title IV of ERISA has been or is
reasonably expected to be incurred by Alphabet or any Subsidiaries of Alphabet
or any entity which is considered a single employer with Alphabet or any
Subsidiary of Alphabet under Section 4001(a)(15) of ERISA or Section 414 of the
Code (an "Alphabet ERISA Affiliate"). No notice of a "reportable event," within
the meaning of Section 4043 of ERISA for which the 30-day reporting requirement
has not been waived, has been required to be filed for any Alphabet Pension Plan
within the past twelve (12) months.
(e) All contributions, premiums and payments (other than
contributions, premiums or payments that are not material, in the aggregate)
required to be made under the terms of any Alphabet Benefit Plan have been made.
No Alphabet Pension Plan has an "accumulated funding deficiency" (whether or not
waived) within the meaning of Section 412 of the Code or Section 302 of ERISA.
Neither Alphabet nor any Subsidiaries of Alphabet nor any Alphabet ERISA
Affiliate has provided, or is required to provide, security to any Alphabet
Pension Plan pursuant to Section 401(a)(29) of the Code.
(f) Except as set forth in the Alphabet SEC Reports filed prior to
the date hereof, under each Alphabet Pension Plan which is a defined benefit
plan, as of the last day of the most recent plan year ended prior to the date
hereof, the actuarially determined present value of all "benefit liabilities",
within the meaning of Section 4001(a)(16) of ERISA (as determined on the basis
of the actuarial assumptions contained in each such Pension Plan's most recent
actuarial valuation) did not exceed the then current value of the assets of such
Pension Plan, and there has been no adverse change in the financial condition of
such Pension Plan (with respect to either assets or benefits) since the last day
of the most recent plan year of such Pension Plan.
(g) As of the Closing Date, neither Alphabet, any Subsidiary of
Alphabet nor any Alphabet ERISA Affiliate will have incurred any withdrawal
liability as described in Section 4201 of ERISA for withdrawals that have
occurred on or prior to the Closing Date that has not previously been satisfied.
Neither Alphabet, any Subsidiary of Alphabet nor any Alphabet ERISA Affiliate
has knowledge that any Alphabet Multiemployer Plan fails to qualify under
Section 401(a) of the Code, is insolvent or is in reorganization within the
meaning of Part 3 of Subtitle E of Title IV of ERISA nor of any condition that
would reasonably be expected to result in an Alphabet Multiemployer Plan
becoming insolvent or going into reorganization.
(h) The execution of, and performance of the transactions
contemplated in, this Agreement will not (either alone or upon the occurrence of
any additional or
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subsequent events) (i) constitute an event under any Alphabet Benefit Plan,
trust or loan that will or may result in any payment (whether of severance pay
or otherwise), acceleration, forgiveness of indebtedness, vesting, distribution,
increase in benefits or obligation to fund benefits with respect to any Alphabet
Employee, or (ii) result in the triggering or imposition of any restrictions or
limitations on the right of Alphabet or any Subsidiary of Alphabet to amend or
terminate any Alphabet Benefit Plan. No payment or benefit which will or may be
made by Alphabet, any Subsidiary of Alphabet or any of their respective
affiliates with respect to any Alphabet Employee will be characterized as an
"excess parachute payment," within the meaning of Section 280G(b)(1) of the
Code.
Section 4.11 Labor Matters. (a) Except as set forth in the Alphabet SEC
Reports filed prior to the date hereof and except for those matters that would
not, individually or in the aggregate, reasonably be expected to have an
Alphabet Material Adverse Effect, no work stoppage, slowdown, lockout or labor
strike against Alphabet or any Subsidiary of Alphabet by Alphabet Employees (or
any union that represents them) is pending or, to the knowledge of Alphabet,
threatened.
(b) Except as set forth in the Alphabet SEC Reports filed prior to
the date hereof and as, individually or in the aggregate, would not reasonably
be expected to have an Alphabet Material Adverse Effect, as of the date of this
Agreement, neither Alphabet nor any Subsidiary of Alphabet is involved in or, to
the knowledge of Alphabet, threatened with any labor dispute, grievance, or
arbitration or union organizing activity (by it or any of its employees)
involving any Alphabet Employees.
Section 4.12 Environmental Matters. Except as set forth in Alphabet's SEC
Reports filed prior to the date hereof and except for those matters that would
not, individually or in the aggregate, reasonably be expected to have an
Alphabet Material Adverse Effect:
(i) Alphabet and each of its Subsidiaries is in compliance
with all applicable Environmental Laws, and neither Alphabet nor any of its
Subsidiaries has received any written communication from any Person or
Governmental Entity that alleges that Alphabet or any of its Subsidiaries is not
in compliance with applicable Environmental Laws.
(ii) Alphabet and each of its Subsidiaries has obtained or has
applied for all Environmental Permits necessary for the construction of its
facilities or the conduct of its operations, and all those Environmental Permits
are in effect or, where applicable, a renewal application has been timely filed
and is pending agency approval, and Alphabet and its Subsidiaries are in
compliance with all terms and conditions of such Environmental Permits.
(iii) There is no Environmental Claim pending or, to the
knowledge of Alphabet, threatened (i) against Alphabet or any of its
Subsidiaries,
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(ii) against any Person whose liability for any Environmental Claim has been
retained or assumed contractually by Alphabet or any of its Subsidiaries, or
(iii) against any real or personal property or operations which Alphabet or any
of its Subsidiaries owns, leases or operates, in whole or in part.
(iv) There have been no Releases of any Hazardous Material
that would be reasonably likely to form the basis of any Environmental Claim
against Alphabet or any of its Subsidiaries, or against any Person whose
liability for any Environmental Claim has been retained or assumed contractually
by Alphabet or any of its Subsidiaries.
(v) None of the properties owned, leased or operated by
Alphabet, its Subsidiaries or any predecessor thereof are now, or were in the
past, listed on the National Priorities List of Superfund Sites or any analogous
state list (excluding easements that transgress those Superfund sites).
Section 4.13 Board Action; Vote Required. (a) Alphabet's Board of
Directors has approved this Agreement, the Alphabet Stock Option Agreement and
the transactions contemplated hereby and thereby, including the Merger, has
determined that the Merger is advisable, fair to and in the best interests of
Alphabet and its stockholders and has resolved to recommend to its stockholders
that they vote in favor of the issuance of shares of Alphabet Common Stock
pursuant to the terms hereof. Neither Section 203 of the DGCL, nor any other
state takeover or similar statute or regulation applies to the Merger, this
Agreement, the Alphabet Stock Option Agreement (including the purchase of shares
of Alphabet Common Stock thereunder) or any of the transactions contemplated
hereby or thereby. The Board of Directors of Alphabet has duly adopted (and not
withdrawn) a resolution rescinding any authorization previously granted
permitting Alphabet to repurchase shares of Alphabet Common Stock.
(b) The affirmative vote of the holders of a majority of the
shares of Alphabet Common Stock present in person or by proxy at a duly convened
and held meeting of the stockholders of Alphabet is necessary to approve the
issuance by Alphabet of the shares of Alphabet Common Stock pursuant to the
terms hereof. Such vote is the only vote of the holders of any class or series
of Alphabet's capital stock required in connection with this Agreement, the
Stock Option Agreements and the transactions contemplated hereby and thereby.
Section 4.14 Opinion of Financial Advisor. Alphabet or its Board of
Directors has received the written opinion of Merrill Lynch, Pierce, Fenner &
Smith Incorporated dated as of the date hereof, to the effect that, as of the
date hereof, the Exchange Ratio is fair from a financial point of view to
Alphabet. An executed copy of such opinion has been delivered to Abacus.
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Section 4.15 Brokers. Set forth in the Alphabet Disclosure Letter is a
list of each broker, finder or investment banker and other Person entitled to
any brokerage, finder's, investment banking or other similar fee or commission
in connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Alphabet or any of its Subsidiaries and the
expected amounts of such fees and commissions. Alphabet has previously provided
to Abacus copies of any agreements giving rise to any such fee or commission.
Section 4.16 Tax Matters. (a) All material Tax Returns required to be
filed by Alphabet or its Subsidiaries on or prior to the Effective Time or with
respect to taxable periods ending on or prior to the Effective Time have been or
will be prepared in good faith and timely filed with the appropriate
Governmental Entity on or prior to the Effective Time or by the due date thereof
including extensions except where the failure to so file would not, individually
or in the aggregate, reasonably be expected to have an Alphabet Material Adverse
Effect.
(b) Except where the failure to pay, collect or withhold would
not, individually or in the aggregate, reasonably be expected to have an
Alphabet Material Adverse Effect (i) all Taxes that are required to be paid have
been or will be fully paid (except with respect to matters contested in good
faith as set forth in the Alphabet Disclosure Letter) or as of May 2, 1998
adequately reflected as a liability on Alphabet's or its Subsidiaries' books and
records (without taking into account any deferred Tax liabilities) and (ii) all
Taxes required to be collected or withheld from third parties have in all
material respects been collected or withheld.
(c) Alphabet and each of its Subsidiaries have not waived any
statute of limitations with respect to federal income Taxes or agreed to any
extension of time with respect to a federal income or material state Tax
assessment or deficiency.
(d) As of the date hereof, there are not pending or, to the
knowledge of Alphabet, threatened in writing, any audits, examinations,
investigations or other proceedings in respect of Taxes or Tax matters that (i)
were raised by any Taxing authority in a written communication to Alphabet or
any Subsidiary and (ii) would, individually or in the aggregate, reasonably be
expected to have an Alphabet Material Adverse Effect after taking into account
any reserves for Taxes set forth on the most recent balance sheet contained in
the Alphabet SEC Report filed prior to the date hereof.
(e) Alphabet has made available to Abacus true and correct copies
of the United States federal income and all material state income or franchise
Tax Returns filed by Alphabet and its Subsidiaries for each of its fiscal years
ended on or about January 31, 1995, 1996, 1997.
Section 4.17 Intellectual Property. Neither Alphabet nor any of its
Subsidiaries currently utilizes, or to the knowledge of the general counsel and
the members of the
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legal department of Alphabet involved in intellectual property, has in the past,
utilized any existing or pending patent, trademark, trade name, service mark,
copyright, software, trade secret or know-how, except for those which are owned,
possessed or lawfully used by Alphabet or its Subsidiaries in their business
operations, and neither Alphabet nor any of its Subsidiaries infringes upon or
unlawfully uses any patent, trademark, trade name, service mark, copyright or
trade secret owned or validly claimed by another Person except, in each case, as
would not, individually or in the aggregate, reasonably be expected to have an
Alphabet Material Adverse Effect. Alphabet and its Subsidiaries own or have a
valid license to use or have the right validly to use all existing and pending
patents, trademarks, tradenames, service marks, copyrights and software
necessary to carry on their respective businesses substantially as currently
conducted except the failure of which to own, or validly license, or have the
right to validly use individually or in the aggregate, would not reasonably be
expected to have an Alphabet Material Adverse Effect.
Section 4.18 Insurance. Except to the extent adequately accrued on the
most recent balance sheet contained in the Alphabet SEC Reports filed as of the
date hereof, neither Alphabet nor its Subsidiaries has any obligation
(contingent or otherwise) to pay in connection with any insurance policies any
retroactive premiums or "retro premiums" that, individually in the aggregate,
would reasonably be expected to have, an Alphabet Material Adverse Effect.
Section 4.19 Contracts and Commitments. Set forth in the Alphabet
Disclosure Letter is a complete and accurate list of all of the following
contracts (written or oral), plans, undertakings, commitments or agreements
("Alphabet Contracts") to which Alphabet or any of its Subsidiaries is a party
or by which any of them is bound as of the date of this Agreement.
(a) each distribution, supply, inventory purchase, franchise,
license, sales, agency or advertising contract involving annual expenditures or
liabilities in excess of $30,000,000 which is not cancelable (without material
penalty, cost or other liability) within one (1) year;
(b) each promissory note, loan, agreement, indenture, evidence of
indebtedness or other instrument providing for the lending of money, whether as
borrower, lender or guarantor, in excess of $20,000,000;
(c) each contract, lease, agreement, instrument or other
arrangement containing any "radius clause" applicable to markets in which
Alphabet has operations the compliance (or failure to comply) with which would
not reasonably be expected, individually or in the aggregate, to have an
Alphabet Material Adverse Effect;
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(d) each joint venture or partnership agreement pursuant to which
any third party is entitled to develop any property and/or facility on each
behalf of Alphabet or any of its Subsidiaries material to Alphabet and its
Subsidiaries taken as a whole;
(e) any contract that would constitute a "material contract" (as
such term is defined in Item 601(b)(10) of Regulation S-K of the SEC); and
(f) except as would not reasonably be expected to have,
individually or in the aggregate, an Alphabet Material Adverse Effect, each
contract, lease, agreement, plan (including Alphabet Benefit Plans), instrument,
note, indenture or other arrangement to which Alphabet or any of its
Subsidiaries is a party or otherwise bound under the terms of which any of the
rights or obligations of a party thereto (or any other Person who has rights or
obligations thereunder) may be terminated, accelerated, vested, modified or
altered as a result of the execution and delivery of this Agreement and the
Stock Option Agreement, the performance by the parties of their obligations
hereunder or thereunder or consummation of the transactions contemplated hereby
and thereby;
True and complete copies of the written Alphabet Contracts, as
amended to date, that would be required to be filed as exhibits to Alphabet's
Form 10-K if such Form 10-K were being filed on the date hereof, that are
identified in the Alphabet Disclosure Letter and have not been filed prior to
the date hereof as Exhibits to the Alphabet SEC Reports have been delivered or
made available to Abacus.
To the knowledge of Alphabet, each Alphabet Contract is valid and
binding on Alphabet, any Subsidiary of Alphabet which is a party thereto and
each other party thereto and is in full force and effect, and Alphabet and its
Subsidiaries have performed and complied with all obligations required to be
performed or compiled with by them under each Alphabet Contract, except in each
case as would not, individually or in the aggregate, reasonably be expected to
have an Alphabet Material Adverse Effect.
Section 4.20 Accounting and Tax Matters. Neither Alphabet nor any of its
affiliates has taken or agreed to take any action, nor does Alphabet have any
knowledge of any fact or circumstance with respect to Alphabet or Merger Sub,
which would prevent the business combination to be effected pursuant to the
Merger from being accounted for as a "pooling-of-interests" under GAAP or the
rules and regulations of the SEC or prevent the Merger from qualifying as a
"reorganization" within the meaning of Section 368 of the Code.
Section 4.21 Ownership of Shares of Alphabet. Alphabet and its
Subsidiaries do not beneficially own (as defined in Rule 13d-3 under the
Exchange Act) any capital stock or other equity securities of Abacus or any
Abacus Equity Rights other than the Abacus Stock Option Agreement.
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Section 4.22. Rights Agreement. No "Distribution Date," "Stock Acquisition
Date" or "Triggering Event" (as such terms are defined in the Rights Agreement,
dated as of December 9, 1996, between Alphabet and ChaseMellon Shareholder
Services L.L.C., as Rights Agent (the "Alphabet Rights Agreement")) has occurred
as of the date hereof. The execution and delivery of this Agreement and the
Alphabet Stock Option Agreement and the consummation of the transactions
contemplated hereby and thereby will not result in the ability of any Person to
exercise any rights ("Alphabet Rights") issued under the Alphabet Rights
Agreement or cause the Alphabet Rights to separate from the shares of Alphabet
Common Stock to which they are attached or to be triggered or become
exercisable.
ARTICLE V
Section 5.1 Interim Operations of Abacus. Abacus covenants and agrees as
to itself and its Subsidiaries that, after the date hereof and prior to the
Effective Time (unless Alphabet shall otherwise approve in writing, or unless as
otherwise expressly contemplated by this Agreement or disclosed in the Abacus
Disclosure Letter):
(i) the business of Abacus and its Subsidiaries shall be
conducted in all material respects in the ordinary and usual course and, to the
extent consistent therewith, each of Abacus and its Subsidiaries shall use its
reasonable best efforts to preserve its business organization intact in all
material respects, keep available the services of its officers and employees as
a group (subject to changes in the ordinary course) and maintain its existing
relations and goodwill in all material respects with customers, suppliers,
regulators, distributors, creditors, lessors, and others having business
dealings with it;
(ii) Abacus shall not (A) amend its Certificate of
Incorporation or Bylaws, or adopt any shareholders rights plan or enter into any
agreement with any of its stockholders in their capacity as such; (B) split,
combine, subdivide or reclassify its outstanding shares of capital stock; (C)
declare, set aside or pay any dividend or distribution payable in cash, stock or
property in respect of any of its capital stock, other than regular quarterly
cash dividends in amounts consistent with past practice which dividends shall
not exceed the per share quarterly dividend amounts set forth on the Abacus
Disclosure Letter; or (D) repurchase, redeem or otherwise acquire or permit any
of its Subsidiaries to purchase, redeem or otherwise acquire, any shares of its
capital stock or any Abacus Equity Rights (it being understood that this
provision shall not prohibit the exercise (cashless or otherwise) of options);
(iii) neither Abacus nor any of its Subsidiaries shall take
any action that to the knowledge of Abacus would prevent the business
combination to be effected pursuant to the Merger from qualifying for "pooling
of interests" accounting treatment under GAAP and the rules and regulations of
the SEC, or would prevent the
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Merger from qualifying as a "reorganization" within the meaning of Section 368
of the Code or take any action that it knows would cause any of its
representations and warranties herein to become inaccurate in any material
respect;
(iv) except as expressly permitted by this Agreement, and
except as required by applicable law or pursuant to contractual obligations in
effect on the date hereof, Abacus shall not, and shall not permit its
Subsidiaries to, (A) enter into, adopt or amend (except for renewals on
substantially identical terms) any agreement or arrangement relating to
severance, (B) enter into, adopt or amend (except for renewals on substantially
identical terms) any employee benefit plan or employment or consulting agreement
(including, without limitation, the Abacus Benefit Plans referred to in Section
3.10 hereof; provided however that Abacus and its Subsidiaries may enter into
consulting agreements in the ordinary course of business consistent with past
practice pursuant to the Abacus Delta Program as in effect on the date hereof),
or (C) grant any stock options or other equity related awards except issuances
of restricted stock in accordance with the existing obligations of Abacus under
its Performance Incentive Plan as in effect on the date hereof;
(v) except for (A) borrowings under lines of credit as
existing as of the date hereof, (B) any amendments, renewals, replacements or
extensions of such lines of credit that will not increase the aggregate amount
of borrowing permitted thereunder, (C) the issuance and roll-over of commercial
paper, (D) the issuance of medium term notes with a maturity date not later than
364 days from the date of issuance to renew, replace or refinance existing
indebtedness and (E) new indebtedness with a maturity date not later than 364
days from the date of issuance in the aggregate principal amount not to exceed
$300,000,000, in each case in the ordinary course of business, neither Abacus
nor any of its Subsidiaries shall issue, incur or amend the terms of any
indebtedness for borrowed money or guarantee any such indebtedness (other than
indebtedness of Abacus or any wholly-owned Subsidiary thereof);
(vi) neither Abacus nor any of its Subsidiaries shall make any
capital expenditures in any twelve month period after the date hereof in an
aggregate amount in excess of the aggregate amount reflected in the capital
expenditure budget for such twelve month period, a copy of which is attached to
the Abacus Disclosure Letter;
(vii) other than in the ordinary course of business consistent
with past practice, neither Abacus nor any of its Subsidiaries shall transfer,
lease, license, sell, mortgage, pledge, encumber or otherwise dispose of any of
its or its Subsidiaries' property or assets (including capital stock of any of
its Subsidiaries) material to Abacus and its Subsidiaries taken as a whole,
except pursuant to contracts existing as of the date hereof (the terms of which
have been previously disclosed to Alphabet);
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(viii) neither Abacus nor any of its Subsidiaries shall issue,
deliver, sell or encumber shares of any class of its capital stock or any
securities convertible into, or any rights, warrants or options to acquire, any
such shares, except any such shares issued pursuant to options and other awards
outstanding on the date hereof under Abacus Benefit Plans and awards of options
and other awards granted hereafter under Abacus Benefit Plans in accordance with
the terms of this Agreement and shares issuable pursuant to such awards;
(ix) neither Abacus nor any of its Subsidiaries shall acquire
any business, including any stores or other facilities, whether by merger,
consolidation, purchase of property or assets or otherwise, except to the extent
provided for in the capital expenditure budget attached to the Abacus Disclosure
Letter in respect of any twelve month period after the date hereof;
(x) Abacus shall not change its accounting policies, practices
or methods except as required by GAAP or by the rules and regulations of the
SEC;
(xi) other than pursuant to this Agreement, Abacus shall not,
and shall not permit any of its Subsidiaries to, take any action to cause Abacus
Shares to cease to be listed on the NYSE;
(xii) Abacus shall not, and shall not permit any of its
Subsidiaries to, enter into any Abacus Contract described in clauses (a), (c)
and (d) of Section 3.19, or amend any distribution, supply, inventory, purchase,
franchise, license, sales agency or advertising contract such that annual
expenditures or liabilities thereunder increase by more than $30,000,000 and
Abacus' inability to cancel or terminate such contract is extended by more than
one year, but in no event to a date later than June 30, 2000;
(xiii) Abacus shall not change or, other than in the ordinary
course of business consistent with past practice, make any material Tax
election; or
(xiv) Abacus shall not enter into, or permit any of its
Subsidiaries to enter into, any commitments or agreements to do any of the
foregoing.
Section 5.2 Interim Operations of Alphabet. Alphabet covenants and
agrees as to itself and its Subsidiaries that, after the date hereof and prior
to the Effective Time (unless Abacus shall otherwise approve in writing and
except as otherwise expressly contemplated by this Agreement or disclosed in the
Alphabet Disclosure Letter):
(i) the business of Alphabet and its Subsidiaries shall be
conducted in all material respects in the ordinary and usual course and to the
extent consistent therewith, each of Alphabet and its Subsidiaries shall use its
reasonable best efforts to preserve its business organization intact in all
material respects, keep available the services of its executive officers and
employees as a group (subject to changes in the
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ordinary course) and maintain its existing relationships and goodwill in all
material respects with customers, suppliers, regulators, distributors,
creditors, lessors and others having business dealings with it; provided,
however, that nothing contained in this clause (i) shall prohibit Alphabet from
acquiring, or exploring the acquisition of, any retail business, including any
stores or facilities, whether by merger, consolidation, purchase of property or
assets or otherwise to the extent that such acquisition is not reasonably
expected to interfere with or delay (in any material respect) the consummation
of the Merger provided that the aggregate fair market value of the consideration
paid in connection with any single acquisition or series of integrally related
acquisitions shall not exceed $1,000,000,000;
(ii) Alphabet shall not issue, deliver, grant or sell any
additional shares of Alphabet Common Stock or any Alphabet Equity Rights, (other
than the issuance, delivery, grant or sale of shares of Alphabet Common Stock or
Alphabet Equity Rights (w) pursuant to a stock split or stock dividend, (x) in
the ordinary course of business consistent with past practice pursuant to
Alphabet Benefit Plans, (y) pursuant to the exercise or conversion of Equity
Rights outstanding as of the date hereof or issued by Alphabet after the date
hereof in accordance with subclauses (x) and (z) of this clause (ii) and, (z)
representing, in the aggregate (but not including shares of Alphabet Common
Stock or Alphabet Equity Rights issued, delivered, granted or sold pursuant to
subclauses (w), (x) and (y) hereof), not more than such number of shares of
Alphabet Common Stock as would represent more than 15% of the then outstanding
capital stock of Alphabet.
(iii) Alphabet shall not (A) amend its Certificate of
Incorporation, or Bylaws or amend the Alphabet Rights Agreement or redeem the
Alphabet Rights; (B) reclassify its outstanding shares of capital stock; (C)
declare, set aside or pay any dividend or distribution payable in cash, stock or
property in respect of any of its capital stock, other than regular quarterly
cash dividends in amounts consistent with past practice; or (D) repurchase,
redeem or otherwise acquire or permit any of its Subsidiaries to purchase,
redeem or otherwise acquire, any shares of its capital stock or any Alphabet
Equity Rights (it being understood that this provision shall not prohibit the
exercise (cashless or otherwise) of options);
(iv) neither Alphabet nor any of its Subsidiaries shall take
any action that to the knowledge of Alphabet would prevent the business
combination to be effected pursuant to Merger from qualifying for "pooling of
interests" accounting treatment under GAAP and the rules and regulations of the
SEC, or would prevent the Merger from qualifying as a "reorganization" within
the meaning of Section 368 of the Code or take any action that it knows would
cause any of its representations and warranties herein to become inaccurate in
any material respect;
(v) other than in the ordinary course of business consistent
with past practice, neither Alphabet nor any of its Subsidiaries shall transfer,
lease, license,
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sell or otherwise dispose of any of its or its Subsidiaries' property or assets
(including capital stock of any of its Subsidiaries) material to Alphabet and
its Subsidiaries taken as a whole, except pursuant to contracts existing as of
the date hereof (the terms of which have been previously disclosed to Abacus)
and except for any sale or disposition of assets in a single transaction or
series of integrally related sales or dispositions the proceeds of which have a
fair market value of not more than $1,000,000,000;
(vi) Alphabet shall not change its accounting policies,
practices or methods except as required by GAAP or by the rules and regulations
of the SEC;
(vii) other than pursuant to this Agreement, Alphabet shall
not, and shall not permit any of its Subsidiaries to, take any action to cause
the shares of its common stock to cease to be listed on the NYSE; and
(viii) Alphabet shall not enter into, or permit any of its
Subsidiaries to enter into, any commitments or agreements to do any of the
foregoing.
Nothing in this Section 5.2 shall prohibit Alphabet from amending
the Alphabet, Inc. Executive Deferred Compensation Trust, the Alphabet, Inc.
Executive Make-Up Trust and the Alphabet, Inc. 1990 Deferred Compensation Trust
(collectively, the "Trusts") to provide that the transactions contemplated by
this Agreement (including, without limitation, the Merger) do not constitute a
"Change in Control" (as defined in the Trusts) for purposes of the Trusts.
Section 5.3 No Solicitation by Abacus. (a) Abacus shall immediately
cease and terminate any existing solicitation, initiation, encouragement,
activity, discussion or negotiation with any Persons conducted heretofore by
Abacus, its Subsidiaries or any of their respective Representatives (defined
below) with respect to any proposed, potential or contemplated Abacus
Acquisition Transaction (as defined below).
(b) From and after the date hereof, without the prior written
consent of Alphabet, Abacus will not, will not authorize or permit any of its
Subsidiaries to, and shall use its reasonable best efforts to cause any of its
or their respective officers, directors, employees, financial advisors, agents
or representatives (each a "Representative") not to, directly or indirectly,
solicit, initiate or encourage (including by way of furnishing information) or
take any other action to facilitate any inquiries or the making of any proposal
which constitutes or may reasonably be expected to lead to an Abacus Acquisition
Proposal (as defined below) from any Person, or engage in any discussion or
negotiations relating thereto or accept any Abacus Acquisition Proposal;
provided, however, that, notwithstanding any other provision hereof, Abacus may
(i) engage in discussions or negotiations with a third party who (without any
solicitation, initiation or encouragement, directly or indirectly, by or with
Abacus, its Subsidiaries or any of their respective Representatives after the
date hereof) seeks to initiate such discussions or negotiations and may furnish
such third party information concerning
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Abacus, its Subsidiaries and their business, properties and assets if, and only
to the extent that, (A)(x) the third party has first made a bona fide Abacus
Acquisition Proposal in writing prior to the date upon which the Agreement and
the Merger shall have been approved and adopted by the required vote of the
stockholders of Abacus, (y) Abacus' Board of Directors concludes in good faith
(after consultation with its financial advisor) that the Abacus Acquisition
Transaction contemplated by such Abacus Acquisition Proposal is reasonably
capable of being completed, taking into account all legal, financial, regulatory
and other aspects of the Acquisition Proposal and the Person making the Abacus
Acquisition Proposal, and could, if consummated, reasonably be expected to
result in a transaction more favorable to Abacus' stockholders from a financial
point of view than the Merger contemplated by this Agreement (any such
Acquisition Proposal, an "Abacus Superior Proposal") and (z) Abacus' Board of
Directors shall have concluded in good faith, after considering applicable
provisions of state law, and after consultation with outside counsel, that such
action is required for the Board of Directors to act in a manner consistent with
its fiduciary duties under applicable law and (B) prior to furnishing such
information to or entering into discussions or negotiations with such Person,
Abacus (x) provides prompt notice to Alphabet to the effect that Abacus is
furnishing information to or entering into discussions or negotiations with such
Person and (y) receives from such Person an executed confidentiality agreement
in reasonably customary form on terms not in the aggregate materially more
favorable to such Person than the terms contained in the confidentiality
agreement, dated as of June 23, 1998, among Alphabet, Abacus and the other party
thereto (the "Confidentiality Agreement").
(c) Abacus agrees not to release any third party from, or waive
any provision of, any standstill agreement to which it is a party or any
confidentiality agreement between it and another Person who has made, or who may
reasonably be considered likely to make, an Abacus Acquisition Proposal, or who
Abacus or any of its Representatives have had discussions with regarding a
proposed, potential or contemplated Abacus Acquisition Transaction unless the
Abacus Board of Directors shall conclude in good faith, after considering
applicable provisions of state law, and after consultation with outside counsel,
that such action is required for the Board of Directors to act in a manner
consistent with its fiduciary duties under applicable law. Abacus shall notify
Alphabet orally and in writing of any such inquiries, offers or proposals
(including, without limitation, the terms and conditions of any such offers or
proposals, any amendments or revisions thereto, and the identity of the Person
making it), as promptly as practicable following the receipt thereof, and shall
keep Alphabet reasonably informed of the status and material terms of any such
inquiry, offer or proposal. For purposes of this Agreement, "Abacus Acquisition
Proposal" shall mean, with respect to Abacus, any inquiry, proposal or offer
from any Person (other than Alphabet or any of its Subsidiaries) relating to any
(i) direct or indirect acquisition or purchase of a business of Abacus or any of
its Subsidiaries, that constitutes 15% or more of the consolidated net revenues,
net income or assets of Abacus and its Subsidiaries, (ii) direct or indirect
acquisition or purchase of 15% or more of any class of equity securities of
Abacus or any of its
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Subsidiaries whose business constitutes 15% or more of the consolidated net
revenues, net income or assets of Abacus and its Subsidiaries, (iii) tender
offer or exchange offer that if consummated would result in any person
beneficially owning 15% or more of the capital stock of Abacus, or (iv) merger,
consolidation, business combination, recapitalization, liquidation, dissolution
or similar transaction involving Abacus or any of its Subsidiaries whose
business constitutes 15% or more of the consolidated net revenues, net income or
assets of Abacus and its Subsidiaries. Each of the transactions referred to in
clauses (i) - (iv) of the definition of Acquisition Proposal, other than any
such transaction to which Alphabet or any of its Subsidiaries is a party, is
referred to herein as an "Abacus Acquisition Transaction".
(d) Except as expressly permitted by this Section 5.3 or in
connection with its termination of this Agreement in accordance with the terms
and conditions of Section 8.1(g), neither the Board of Directors of Abacus nor
any committee thereof shall (i) withdraw or modify, or propose publicly to
withdraw or modify, in a manner adverse to Alphabet, the approval or
recommendation by such Board of Directors of this Agreement or the Merger, (ii)
approve or recommend, or propose publicly to approve or recommend, any Abacus
Acquisition Proposal or Abacus Acquisition Transaction or (iii) cause Abacus to
enter into any letter of intent, agreement in principle, acquisition agreement
or other similar agreement related to any Abacus Acquisition Proposal or Abacus
Acquisition Transaction. Notwithstanding the foregoing, in the event that the
Board of Directors of Abacus shall conclude in good faith, after considering
applicable state law, and after consultation with outside counsel, that such
action is required for it to act in a manner consistent with its fiduciary
duties under applicable law, the Board of Directors of Abacus may withdraw or
modify its approval or recommendation of this Agreement and the Merger.
(e) Nothing contained in this Section 5.3 shall prohibit Abacus
(x) from taking and disclosing to its stockholders a position contemplated by
Rule 14e-2(a) promulgated under the Exchange Act or (y) from making any
disclosure to its stockholders if, the Board of Directors of Abacus shall
conclude in the good faith, after considering applicable provisions of state
law, and after consultation with outside counsel, that failure so to disclose
would violate its obligations under applicable law; provided, however, that,
except in accordance with paragraph (d) of this Section 5.3 or in connection
with its termination of this Agreement in accordance with the terms and
conditions of Section 8.1(g), neither Abacus nor its Board of Directors shall
approve or recommend, an Abacus Acquisition Proposal or Abacus Acquisition
Transaction.
Section 5.4 No Solicitation by Alphabet. (a) Alphabet shall immediately
cease and terminate any existing solicitation, initiation, encouragement,
activity, discussion or negotiation with any Persons conducted heretofore by
Alphabet, its Subsidiaries or any of their respective Representatives (defined
below) with respect to any proposed, potential or contemplated Alphabet
Acquisition Transaction (as defined below).
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(b) From and after the date hereof, without the prior written
consent of Abacus, Alphabet will not, will not authorize or permit any of its
Subsidiaries to, and will not authorize any of its or their respective officers,
directors, employees, financial advisors, agents or representatives (each a
"Representative") to, and shall use reasonable best efforts to cause its
Representatives not to, directly or indirectly, solicit, initiate or encourage
(including by way of furnishing information) or take any other action to
facilitate any inquiries or the making of any proposal which constitutes or may
reasonably be expected to lead to an Alphabet Acquisition Proposal (as defined
below) from any Person, or engage in any discussion or negotiations relating
thereto or accept any Alphabet Acquisition Proposal; provided, however, that,
notwithstanding any other provision hereof, Alphabet may (i) engage in
discussions or negotiations with a third party who (without any solicitation,
initiation or encouragement, directly or indirectly, by or with Alphabet, its
Subsidiaries or any of their respective Representatives after the date hereof)
seeks to initiate such discussions or negotiations and may furnish such third
party information concerning Alphabet, its Subsidiaries and their business,
properties and assets if, and only to the extent that, (A)(x) the third party
has first made a bona fide Alphabet Acquisition Proposal in writing prior to the
date upon which the issuance of Alphabet Shares pursuant to this Agreement shall
have been approved and adopted by the required vote of the stockholders of
Alphabet and (y) Alphabet's Board of Directors concludes in good faith (after
consultation with its financial advisor) that the Alphabet Acquisition
Transaction contemplated by such Alphabet Acquisition Proposal is reasonably
capable of being completed, taking into account all legal, financial, regulatory
and other aspects of the Acquisition Proposal and the Person making the Alphabet
Acquisition Proposal, and could, if consummated, reasonably be expected to
result in a transaction more favorable to Alphabet's stockholders from a
financial point of view than the Merger contemplated by this Agreement (any such
Acquisition Proposal, an "Alphabet Superior Proposal") and (z) Alphabet's Board
of Directors shall have concluded in good faith, after considering applicable
provisions of state law, and after consultation with outside counsel, that such
action is required for the Board of Directors to act in a manner consistent with
its fiduciary duties under applicable law and (B) prior to furnishing such
information to or entering into discussions or negotiations with such Person,
Alphabet (x) provides prompt notice to Abacus to the effect that Alphabet is
furnishing information to or entering into discussions or negotiations with such
Person and (y) receives from such Person an executed confidentiality agreement
in reasonably customary form on terms not in the aggregate materially more
favorable to such Person than the terms contained in the Confidentiality
Agreement.
(c) Alphabet agrees not to release any third party from, or waive
any provision of, any standstill agreement to which it is a party or any
confidentiality agreement between it and another Person who has made, or who may
reasonably be considered likely to make, an Alphabet Acquisition Proposal, or
who Alphabet or any of its Representatives have had discussions with regarding a
proposed, potential or contemplated Alphabet Acquisition Transaction unless the
Alphabet Board of Directors
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shall conclude in good faith, after considering applicable provisions of state
law, and after consulting with outside counsel, that such action is required for
the Board of Directors to act in a manner consistent with its fiduciary duties
under applicable law. Alphabet shall notify Abacus orally and in writing of any
such inquiries, offers or proposals (including, without limitation, the terms
and conditions of any such offers or proposals, any amendments or revisions
thereto, and the identity of the Person making it), as promptly as practicable
following the receipt thereof, and shall keep Abacus reasonably informed of the
status and material terms of any such inquiry, offer or proposal. For purposes
of this Agreement, "Alphabet Acquisition Proposal" shall mean, with respect to
Alphabet, any inquiry, proposal or offer from any Person (other than Abacus or
any of its Subsidiaries) relating to any (i) direct or indirect acquisition or
purchase of a business of Alphabet or any of its Subsidiaries, that constitutes
15% or more of the consolidated net revenues, net income or assets of Alphabet
and its Subsidiaries, (ii) direct or indirect acquisition or purchase of 15% or
more of any class of equity securities of Alphabet or any of its Subsidiaries
whose business constitutes 15% or more of the consolidated net revenues, net
income or assets of Alphabet and its Subsidiaries, (iii) tender offer or
exchange offer that if consummated would result in any person beneficially
owning 15% or more of the capital stock of Alphabet, or (iv) merger,
consolidation, business combination, recapitalization, liquidation, dissolution
or similar transaction involving Alphabet or any of its Subsidiaries whose
business constitutes 15% or more of the consolidated net revenues, net income or
assets of Alphabet and its Subsidiaries; provided, however, that an Alphabet
Acquisition Transaction does not include a Transaction permitted pursuant to
Section 5.2 as long as such transaction is not reasonably expected to interfere
with or delay (in any material respect) the consummation of the Merger.
(d) Except as expressly permitted by this Section 5.4 or in
connection with its termination of this Agreement in accordance with the terms
and conditions of Section 8.1(g), neither the Board of Directors of Alphabet nor
any committee thereof shall (i) withdraw or modify, or propose publicly to
withdraw or modify, in a manner adverse to Abacus, the approval or
recommendation by such Board of Directors of this Agreement or the Merger, (ii)
approve or recommend, or propose publicly to approve or recommend, any Alphabet
Acquisition Proposal or Alphabet Acquisition Transaction or (iii) cause Alphabet
to enter into any letter of intent, agreement in principle, acquisition
agreement or other similar agreement related to any Alphabet Acquisition
Proposal or Alphabet Acquisition Transaction. Notwithstanding the foregoing, in
the event that the Board of Directors of Alphabet shall conclude in good faith,
after considering applicable state law, and after consultation with outside
counsel, that such action is required for it to act in a manner consistent with
its fiduciary duties under applicable law, the Board of Directors of Alphabet
may withdraw or modify its approval or recommendation of this Agreement and the
Merger.
(e) Nothing contained in this Section 5.4 shall prohibit Alphabet
(x) from taking and disclosing to its stockholders a position contemplated by
Rule 14e-2(a)
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promulgated under the Exchange Act or (y) from making any disclosure to its
stockholders if, the Board of Directors of Alphabet shall conclude in good
faith, after considering applicable provisions of state law, and after
consultation with outside counsel, that failure so to disclose would violate its
obligations under applicable law; provided, however, that, except in accordance
with paragraph (d) of this Section 5.4 or in connection with its termination of
this Agreement in accordance with the terms and conditions of Section 8.1(g),
neither Alphabet nor its Board of Directors shall approve or recommend, an
Alphabet Acquisition Proposal or Alphabet Acquisition Transaction.
ARTICLE VI
Section 6.1 Meetings of Stockholders. Each of the Parties will take all
action necessary in accordance with applicable law and its Certificate of
Incorporation and Bylaws to convene a meeting of its stockholders as promptly as
practicable to consider and vote upon the approval of this Agreement and the
Merger, in the case of Abacus, or the issuance of shares of Alphabet Common
Stock in accordance with the terms hereof, in the case of Alphabet. The Board of
Directors of each Party shall, subject to Sections 5.3 and 5.4, recommend such
approval and each of the Parties shall take all lawful action to solicit such
approval including, without limitation, timely mailing the Proxy
Statement/Prospectus (as defined in Section 6.4). The Parties shall coordinate
and cooperate with respect to the timing of such meetings and shall use their
reasonable best efforts to hold such meetings on the same day.
Section 6.2 Filings Best Efforts
(a) Subject to the terms and conditions herein provided, Abacus
and Alphabet shall:
(i) within 20 business days from the date hereof, make
their respective filings under the HSR Act with respect to the Merger and
thereafter shall promptly make any other required submissions under the HSR
Act;
(ii) use their reasonable best efforts to cooperate with one
another in (i) determining which filings are required to be made prior to the
Effective Time with, and which consents, approvals, permits or authorizations
are required to be obtained prior to the Effective Time from, Governmental
Entities of the United States and the several states in connection with the
execution and delivery of this Agreement and the consummation of the Merger and
the transactions contemplated hereby; (ii) timely making all such filings and
timely seeking all such consents, approvals, permits or authorizations; and
(iii) as promptly as practicable responding to any request for information from
such Governmental Entities;
(iii) subject to any restrictions under the antitrust
laws, to the extent practicable, promptly notify each other of any
communication to that party from any
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Governmental Entity and permit the other party to review in advance any proposed
communication to any Governmental Entity;
(iv) not agree to participate in any meeting with any
Governmental Entity in respect of any filings, investigation or other inquiry
unless it consults with the other party in advance and, to the extent permitted
by such Governmental Entity, gives the other party the opportunity to attend and
participate thereat, in each case to the extent practicable;
(v) subject to any restrictions under the antitrust laws,
furnish the other party with copies of all correspondence, filings, and
communications (and memoranda setting forth the substance thereof) between them
and their affiliates and their respective representatives on the one hand, and
any Governmental Entity or members or its staffs on the other hand, with respect
to this Agreement and the transactions contemplated hereby (excluding documents
and communications which are subject to preexisting confidentiality agreements
and to attorney client privilege); and
(vi) furnish the other party with such necessary information
and reasonable assistance as such other Party and its affiliates may reasonably
request in connection with their preparation of necessary filings,
registrations, or submissions of information to any Governmental Entities,
including without limitation, any filings necessary or appropriate under the
provisions of the HSR Act.
(b) Without limiting Section 6.2(a), Alphabet and Abacus shall
(i) each use its reasonable best efforts to avoid the entry of, or
to have vacated or terminated, any decree, order, or judgment that would
restrain, prevent or delay the Closing, on or before June 30, 1999, including
without limitation defending through litigation on the merits any claim asserted
in any court by any party; and
(ii) each take any and all steps necessary to avoid or eliminate
each and every impediment under any antitrust, competition or trade regulation
law that may be asserted by any Governmental Entity with respect to the Merger
so as to enable the Closing to occur as soon as reasonably possible (and in any
event no later than June 30, 1999), including, without limitation, proposing,
negotiating, committing to and effecting, by consent decree, hold separate
order, or otherwise, the sale, divestiture or disposition of such assets or
businesses of Alphabet or Abacus (or any of their respective subsidiaries) or
otherwise take or commit to take any actions that limits its freedom of action
with respect to, or its ability to retain, any of the businesses, product lines
or assets of Alphabet, Abacus or their respective Subsidiaries, as may be
required in order to avoid the entry of, or to effect the dissolution of, any
injunction, temporary restraining order, or other order in any suit or
proceeding, which would otherwise have the effect of preventing or delaying the
Closing. At the request of Alphabet, Abacus shall agree to divest, hold
separate, or otherwise take or commit to take any action that limits its
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freedom of action with respect to, or its ability to retain, any of the
businesses, product lines or assets of Abacus or any of its Subsidiaries,
provided that any such action is conditioned upon the consummation of the
Merger. Abacus agrees and acknowledges that, in connection with any filing or
submission required, action to be taken or commitment to be made by Alphabet,
Abacus or any of its respective Subsidiaries to consummate the Merger or other
transactions contemplated in this Agreement, neither Abacus nor any of its
Subsidiaries shall, without Alphabet's prior written consent, divest any assets,
commit to any divestiture or assets or businesses of Abacus and its subsidiaries
or take any other action or commit to take any action that would limit Abacus',
Alphabet's or any of their subsidiaries freedom of action with respect to, or
their ability to retain any of their businesses, product lines or assets.
Notwithstanding the foregoing, (x) nothing herein shall require
Alphabet to agree to the sale, transfer, divestiture or other disposition of
stores of Alphabet, Abacus or any of their subsidiaries having aggregate gross
annual sales for the fiscal year ended in January 1998 in excess of 6% of the
combined gross annual sales of Abacus, Alphabet and their respective
subsidiaries taken as a whole for such period, (y) and other than the sale,
transfer, divestiture or other disposition of stores having revenues up to the
gross annual amount referenced in clause (x) of this paragraph (b), neither
party shall be required to take any actions or make any commitments or
agreements pursuant to paragraph (b)(ii) above, if the taking of such action or
the making of any commitments or the consequences thereof, individually or in
the aggregate, would be reasonably likely to have an Alphabet Material Adverse
Effect. Any actions taken by Alphabet or Abacus to comply with their respective
obligations under Section 6.2(b)(ii), including a decision by Alphabet to waive
any of the provisions of this paragraph, shall not be considered to constitute
or result in an Alphabet Material Adverse Effect or an Abacus Material Adverse
Effect, as applicable.
(c) If any "fair price," "moratorium," "control share acquisition"
or similar anti-takeover statute or regulation is or may become applicable to
the Merger, each Party and its Boards of Directors shall grant such approvals
and take such actions as are necessary so that the Merger may be consummated as
promptly as practicable on the terms contemplated by this Agreement and
otherwise act to eliminate or minimize the effects of such statute or regulation
on such transactions.
Section 6.3 Publicity. The Parties agree that the initial press release
with respect to the Merger shall be a joint press release. Thereafter, subject
to their respective legal obligations (including requirements of stock exchanges
and other similar regulatory bodies), the Parties shall consult with each other,
and use reasonable best efforts to agree upon the text of any press release,
before issuing any such press release or otherwise making public statements with
respect to the Merger and in making any filings with any federal or state
governmental or regulatory agency or with any national securities exchange with
respect thereto.
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Section 6.4 Registration Statement. The Parties shall cooperate and
promptly prepare and Alphabet shall file with the SEC as soon as practicable a
Registration Statement on Form S-4 (the "Form S-4") under the Securities Act
with respect to the Alphabet Common Stock issuable in the Merger, a portion of
which Registration Statement shall also serve as the joint proxy
statement/prospectus with respect to the meetings of the stockholders of each of
the Parties in connection with the Merger (the "Proxy Statement/Prospectus").
The Parties will cause the Proxy Statement/Prospectus and the Form S-4 to comply
as to form in all material respects with the applicable provisions of the
Securities Act, the Exchange Act and the rules and regulations thereunder.
Alphabet shall use its reasonable best efforts to, and Abacus will cooperate
with Alphabet to, have the Form S-4 declared effective by the SEC as promptly as
practicable. Alphabet shall use its reasonable best efforts to obtain, prior to
the effective date of the Form S-4, all necessary state securities law or "blue
sky" permits or approvals required to carry out the Merger (provided that
Alphabet shall not be required to qualify to do business in any jurisdiction in
which it is not now so qualified). Each of the Parties agree that the
information provided by it for inclusion in the Proxy Statement/Prospectus and
each amendment or supplement thereto, at the time of mailing thereof, at the
time of the respective meetings of stockholders of the Parties, and at the time
it is filed or becomes effective, will not include an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
Section 6.5 Listing Application. Alphabet shall promptly prepare and
submit to the NYSE and all other securities exchanges on which the shares of
Alphabet Common Stock are listed a listing application with respect to the
shares of Alphabet Common Stock issuable in the Merger, and shall use its
reasonable best efforts to obtain, prior to the Effective Time, approval for the
listing of such Alphabet Common Stock on such exchanges, subject to official
notice of issuance.
Section 6.6 Further Action. Each of the Parties shall, subject to the
fulfillment at or before the Effective Time of each of the conditions of
performance set forth herein or the waiver thereof and use its reasonable best
efforts to perform such further acts and execute such documents as may be
reasonably required to effect the transactions contemplated hereby. Each of the
Parties will comply in all material respects with all applicable laws and with
all applicable rules and regulations of any Governmental Entity in connection
with its execution, delivery and performance of this Agreement and the Stock
Option Agreements and the transactions contemplated hereby and thereby. Each of
the Parties agrees to use its reasonable best efforts to obtain in a timely
manner all necessary waivers, consents, approvals and opinions and to effect all
necessary registrations and filings, and to use its reasonable best efforts to
take, or cause to be taken, all other actions and to do, or cause to be done,
all other things necessary, proper or advisable to consummate and make effective
as promptly as practicable the Merger.
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Section 6.7 Expenses. Whether or not the Merger is consummated, all
costs and expenses incurred in connection with this Agreement and the
transactions contemplated thereby, including the Merger shall be paid by the
party hereto incurring such expenses except as expressly provided herein and
except that (a) the filing fees in connection with the filing of the Form S-4
and the Proxy Statement/Prospectus with the SEC, (b) all filing fees in
connection with any filings, permits or approvals required under applicable
state securities or "blue sky" laws, and (c) the expenses incurred in connection
with printing and mailing of the Form S-4 and the Proxy Statement/Prospectus
shall be shared by Alphabet and Abacus equally.
Section 6.8 Notification of Certain Matters. Each Party shall give
prompt notice to the other Party of the following:
(a) the occurrence or nonoccurrence of any event whose occurrence
or nonoccurrence is reasonably expected to cause any of the conditions precedent
set forth in Article VII not to be satisfied;
(b) the status of matters relating to completion of the Merger,
including promptly furnishing the other with copies of notice or other
communications received by any Party or any of its respective Subsidiaries from
any Governmental Entity or other third party with respect to this Agreement or
the transactions contemplated thereby, including the Merger; and
(c) any facts relating to that Party which would make it necessary
or advisable to amend the Proxy Statement/Prospectus or the Form S-4 in order to
make the statements therein not misleading or to comply with applicable law;
provided, however, that the delivery of any notice pursuant to this Section 6.8
shall not limit or otherwise affect the remedies available hereunder to the
Party receiving such notice.
Section 6.9 Access to Information. (a) From this date to the Effective
Time, each of the Parties shall, and shall cause its respective Subsidiaries,
and its and their officers, directors, employees, auditors, counsel and agents
to afford the officers, employees, auditors, counsel and agents of the other
Party reasonable access at reasonable times upon reasonable notice to each of
the Party's and its Subsidiaries' officers, employees, auditors, counsel,
agents, properties, offices and other facilities and to all of their respective
books and records, and shall furnish the other Party with all financial,
operating and other data and information as such other Party may reasonably
request, in each case only to the extent, in the judgment of counsel to such
Party, permitted by law, including antitrust law, and provided no Party shall be
obligated to make any disclosure which would cause forfeiture of attorney-client
privilege or would violate confidentiality agreements (so long as such Party
shall have used commercially reasonable efforts to obtain a release or waiver
from the applicable confidentiality agreement in respect of such disclosure).
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(b) Each of the Parties agrees that all information so received
from the other Parties shall be deemed received pursuant to the Confidentiality
Agreement, and that Party shall, and shall cause its affiliates and each of its
and their Representatives to, comply with the provisions of the Confidentiality
Agreement with respect to such information and the provisions of the
Confidentiality Agreement are hereby incorporated herein by reference with the
same effect as if fully set forth in this Agreement.
Section 6.10 Review of Information. Subject to applicable laws relating
to the exchange of information, each Party shall have the right to review in
advance, and to the extent practicable each will consult the other on, all the
information relating to it, or any of its respective Subsidiaries, that appear
in any filing made with, or written materials submitted to, any third party
and/or any Governmental Entity in connection with the Merger. In exercising the
foregoing right, each of the Parties shall act reasonably and as promptly as
practicable.
Section 6.11 Indemnification, Directors' and Officers' Insurance. (a)
From and after the Effective Time, Alphabet shall, or shall cause the Surviving
Corporation to, indemnify and hold harmless each present and former director and
officer of Abacus or any of its Subsidiaries (when acting in such capacity) (the
"Indemnified Parties"), against any costs or expenses (including reasonable
attorneys' fees), judgments, fines, losses, claims, damages or liabilities
incurred in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative, for
acts or omissions existing or occurring at or prior to the Effective Time,
whether asserted or claimed prior to, at or after the Effective Time, to the
fullest extent permitted under the DGCL or other applicable law, as applicable
(and Alphabet shall, or shall cause the Surviving Corporation to, also advance
expenses as incurred to the fullest extent permitted under the DGCL or other
applicable law, provided the Person to whom expenses are advanced provides an
undertaking to repay such advances if it is ultimately determined that such
Person is not entitled to indemnification).
(b) Alphabet shall maintain, or cause the Surviving Corporation to
maintain, a policy of officers' and directors' liability insurance for acts and
omissions occurring prior to the Effective Time ("D&O Insurance") with coverage
in amount and scope at least as favorable as its existing directors' and
officers' liability insurance coverage for a period of six years after the
Effective Time; provided, however, if the existing D&O Insurance expires, is
terminated or canceled, or if the annual premium therefor is increased to an
amount in excess of 200% of the last annualized premium paid prior to this date
(the "Current Premium"), in each case during such six year period, Alphabet
shall, or shall cause the Surviving Corporation to, obtain D&O Insurance in an
amount and scope as great as can be obtained for the remainder of such period
for a premium not in excess (on an annualized basis) of 200% of the Current
Premium.
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(c) If Alphabet or the Surviving Corporation or any of their
respective successors or assigns (i) shall consolidate with or merge into any
other corporation or other entity and shall not be the continuing or surviving
corporation or entity of the consolidation or merger or (ii) shall transfer all
or substantially all of its properties and assets to any individual, corporation
or other entity, then and in each such case, proper provisions shall be made so
that the successors and assigns of Alphabet or the Surviving Corporation shall
assume all of the obligations set forth in this Section 6.11.
(d) The provisions of this Section 6.11 are intended to be for the
benefit of, and shall be enforceable by, each of the Indemnified Parties, their
heirs and their representatives.
Section 6.12 Employee Benefit Plans. (a) From and after the Effective
Time, Alphabet will cause the Surviving Corporation and its Subsidiaries to
honor, in accordance with their terms, all existing employment and severance
agreements between Abacus and its Subsidiaries and any officer, director or
employee of Abacus or any of its Subsidiaries and all obligations of Abacus
under the Abacus Benefit Plans. Nothing in this Section 6.12 shall be
interpreted to prohibit Alphabet or any of its Subsidiaries from amending or
terminating any Abacus Benefit Plan in accordance with the terms thereof.
(b) For a period of one year after the Effective Time, Alphabet
shall cause to be provided to each Abacus Employee (other than any person who is
subject to a collective bargaining agreement or party to a change in control
employment or similar agreement, including those persons listed on Schedule 3.10
as party to a change in control employment agreement) who continues to remain
employed by Alphabet or any of its Subsidiaries after the Effective Time
("Abacus Covered Employees") base salary not less than his or her base salary in
effect immediately prior to the date hereof and welfare (including severance),
retirement and savings benefits, in each case, substantially identical to those
provided to such person immediately prior to the Effective Time. In addition,
during the one-year period after the Effective Time, Abacus Covered Employees
shall have (i) annual cash bonus opportunities substantially identical to those
of similarly situated employees of Alphabet and its Subsidiaries and (ii)
opportunities to receive equity-based awards of Alphabet on the same basis as
similarly situated employees of Alphabet and its Subsidiaries. For purposes of
determining eligibility and vesting (but not for benefits accrual) under any
Alphabet Benefit Plan in which an Abacus Employee or any of its Subsidiaries
participates after the Effective Time, such employee shall be credited with his
or her years of service with Abacus or its Subsidiaries, but only to the extent
that those years of service would have been credited under the relevant Alphabet
Benefit Plan if such Abacus Employee had been a similarly situated Alphabet
Employee during the relevant period of time. To the extent that any Alphabet
Benefit Plan in which an Abacus Employee participates after the Effective Time
provides medical, dental or vision benefits, Alphabet shall cause all
pre-existing condition exclusions and actively at work requirements of such plan
to be waived for such employee and his or her covered dependents except to the
extent such employee and his or her covered
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dependents were subject to such requirements under the applicable Abacus Benefit
Plans, and Alphabet shall cause any eligible expenses incurred by such employee
on or before the Effective Time to be taken into account under such plan for
purposes of satisfying all deductible, coinsurance and maximum out-of-pocket
requirements applicable to such employee and his or her covered dependents for
the applicable plan year.
(c) Prior to the Effective Time, Abacus shall amend Section 5(h)
of the American Stores Company Termination Allowance Plan (the "Allowance Plan")
to provide that with respect to periods after the later of the Closing Date and
December 31, 1998 (such later date, the "Renewal Date") (i) the Allowance Plan
shall remain in effect without further amendment (except as provided in this
Agreement) with respect to terminations of employment occurring on or before the
first anniversary of the Closing Date, it being understood that Alphabet may
cause the Allowance Plan to be terminated immediately following such first
anniversary with respect to terminations occurring after such first anniversary
and no amendment to the Allowance Plan after the date hereof shall in any way
limit Alphabet's ability to do so, (ii) relocation benefits shall be payable
thereunder only if the individual is terminated by Alphabet or its Subsidiaries
without cause, or voluntarily terminates his or her own employment within three
months following receipt of notification from Alphabet of an event described in
subclause (A), (B) or (C) of clause (iii) of the immediately following sentence,
in either case within one year following the Change of Control (as defined in
the Allowance Plan) and such individual relocates within six months of such
termination, (iii) the maximum aggregate cash and non-cash relocation benefit
with respect to any individual (and his or her family and dependents) pursuant
to Section 5(h) shall be $40,000, and (iv) the benefits set forth in such
Section 5(h) shall not be provided to any individual other than Abacus Covered
Employees who have "Relocated" under the Relocation Program (as defined in said
Section 5(h)) within four years preceding the Closing Date and who are employed
at the time of termination in Salt Lake City, Utah (the "Abacus Covered Salt
Lake Employees"). In addition, prior to the Effective Time Abacus shall amend
the Allowance Plan to provide that (i) each Abacus Covered Salt Lake Employee
who is not an officer and who is so employed on the date hereof and at the
Effective Time shall be paid a lump sum payment on the Closing Date equal to
five times his or her weekly Pay (as defined in the Allowance Plan), (ii) with
respect to Abacus Covered Salt Lake Employees who are not officers and who are
employed on the date hereof and at the Effective Time, the minimum termination
allowance payable pursuant to Section 5 thereof shall be seven weeks' Pay, and
(iii) a Participant (as defined in the Allowance Plan) shall be entitled to a
termination allowance pursuant to Section 5 thereof if he or she voluntarily
terminates his or her employment within three months following receipt of
notification from Alphabet that (A) his or her base salary (whether expressed as
an hourly rate or a salary) is being reduced to an amount less than 80% of his
or her base salary as of the date hereof, (B) he or she is being required by
Alphabet or its Subsidiaries to relocate his or her employment to a facility
more than 35 miles further from his or her then current home than such home
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is from his or her then current workplace (but only if he or she does not so
relocate) or (C) his or her target bonus opportunity in the aggregate under all
applicable annual cash bonus plans in which he or she then participates is less
than 80% of the amount of such opportunity as of the date hereof under the bonus
plans of Abacus in which he or she participates as of the date hereof, and, in
each case, the Participant is otherwise entitled to a termination allowance
under the Allowance Plan.
(d) On or prior to the Effective Time, Abacus shall take all such
actions as are necessary to terminate its Employee Stock Purchase Plan at or
prior to the Effective Time. Abacus shall, in connection with such termination,
cause all participants in such plan not to be permitted to have Abacus withhold
any monies for investment in such plan after October 7, 1998 and, prior to the
Effective Time, cause each such participant either to receive previously
invested cash or purchase Abacus Common Stock pursuant to such plan.
(e) If and to the extent that participants in the Abacus
Performance Incentive Plan become entitled to receive restricted stock
thereunder after the Effective Time, such stock shall be shares of Alphabet
Common Stock rather than Abacus Common Stock, and if the number of shares of
restricted stock to which participants are entitled is determined based upon the
value of Abacus Common Stock before the Effective Time, the number of shares of
Alphabet Common Stock to be so issued shall be determined using the Exchange
Ratio. The foregoing does not in any way limit Alphabet's or its Subsidaries'
ability after the Effective Time to amend in any manner or terminate the Abacus
Performance Incentive Plan.
Section 6.13 Alphabet Board of Directors. As of the Effective Time,
Alphabet shall increase the size of its Board of Directors by adding five
directorships. As of the Effective Time, the five individuals listed in the
Abacus Disclosure Letter shall be elected to the Board of Directors of Alphabet,
and each such individual shall become a member of that class of the Board of
Directors of Alphabet that is specified for such member in the Abacus Disclosure
Letter. In the event that any of such individuals shall be unable or unwilling
to serve as a member of the Board of Directors of Alphabet as of the Effective
Time, his or her replacement shall be selected by Abacus, provided that any such
replacement shall be reasonably acceptable to Alphabet.
Section 6.14 Affiliates. (a) Not less than 45 days prior to the Effective
Time, each Party (x) shall have delivered to the other Party a letter
identifying all Persons who, in the opinion of the Party delivering such letter,
may be, as of the date this Agreement is submitted for adoption by such Party's
stockholders, its "affiliates" for purposes of Rule 145 under the Securities Act
or SEC Accounting Series Releases 130 and 135, and (ii) shall use its reasonable
best efforts to cause each Person who is identified as an "affiliate" of it in
such letter to deliver, as promptly as practicable but in no event later than 30
days prior to the Closing (or after such later date as the Parties may agree), a
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signed agreement, in the case of affiliates of Abacus, to Abacus and Alphabet
substantially in the form customary for transactions of this type, and in the
case of affiliates of Alphabet, to Alphabet substantially in the form customary
for transactions of this type. Each Party shall notify each other Party from
time to time after the delivery of the letter described in the prior sentence of
any Person not identified on such letter who then is, or may be, such an
"affiliate" and use its reasonable best efforts to cause each additional Person
who is identified as an "affiliate" to execute a signed agreement as set forth
in this Section 6.14(a).
(b) Shares of Alphabet Common Stock and shares of Abacus Common
Stock beneficially owned by each such "affiliate" of Alphabet or Abacus who is
not provided a signed agreement in accordance with Section 6.14(a) shall not be
transferable during any period prior to and after the Effective Time if, as a
result of such transfer during any such period, taking into account the nature,
extent and timing of such transfer and similar transfers by all other
"affiliates" of Alphabet and Abacus, such transfer will, in the reasonable
judgment of accountants of Alphabet, interfere with, or prevent the Merger from
being accounted for, as a pooling-of-interests. Neither Alphabet or Abacus shall
register, or allow its transfer agent to register, on its books the transfer of
any shares of Alphabet Common Stock or Abacus Common Stock of any affiliate of
Abacus or Alphabet who has not provided a signed agreement in accordance with
Section 6.14(a) unless the transfer is made in compliance with the foregoing.
The restrictions on the transferability of shares held by Persons who execute an
agreement pursuant to Section 6.14(a) shall be as provided in those agreements.
Section 6.15 Pooling-of-Interests. Each of the Parties will use its
reasonable best efforts to cause the Merger to be accounted for as a
pooling-of-interests in accordance with GAAP and the rules and regulations of
the SEC.
Section 6.16 Tax-Free Reorganization. Each of the Parties will use its
reasonable best efforts to cause the Merger to qualify as a tax-free
"reorganization" under Section 368 of the Code.
Section 6.17 Accountant's Comfort Letters. Each Party shall use its
reasonable best efforts to cause to be delivered to the other Party two letters
from its independent public accountants, one dated a date within two business
days before the date on which the Form S-4 shall become effective and one dated
the Closing Date, in form and substance reasonably satisfactory to recipient and
customary in scope and substance for comfort letters delivered by independent
accountants in connection with registration statements similar to the Form S-4.
Section 6.18 Accountant's Pooling Letters. Abacus shall use its
reasonable best efforts to cause to be delivered to Alphabet from Ernst & Young
LLP ("E&Y") (or any other independent public accounting firm reasonably
satisfactory to Alphabet) two letters
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each addressed to Alphabet and Deloitte & Touche LLP ("Deloitte") (or any other
independent public accounting firm selected by Alphabet), one dated the date
upon which the Form S-4 becomes effective and one dated the Closing Date,
stating that as of the respective dates of its letters, E&Y is not aware of any
conditions that exist that would preclude Abacus' ability to be a party in a
business combination to be accounted for as a pooling of interests. Alphabet
shall use its reasonable best efforts to cause to be delivered to Abacus from
Deloitte (or any other independent public accounting firm reasonably
satisfactory to Abacus) two letters, each addressed to Abacus and E&Y (or any
other independent public accounting firm selected by Abacus), one dated the date
upon which the Form S-4 becomes effective and one dated the Closing Date,
stating that accounting for the Merger as a pooling of interests under Opinion
16 of the Accounting Principles Board and applicable SEC rules and regulations
is appropriate if the Merger is closed and consummated as contemplated by this
Agreement.
ARTICLE VII
Section 7.1 Conditions to Obligations of the Parties to Consummate
the Merger. The respective obligation of each party to consummate the Merger
shall be subject to the satisfaction of each of the following conditions:
(a) Stockholder Approval. This Agreement and the Merger shall have
been approved and adopted by the requisite vote of the stockholders of Abacus
and the issuance of shares of Alphabet Common Stock in connection with the
Merger shall have been approved by the requisite vote of the stockholders of
Alphabet, in each case in accordance with the DGCL or the rules and regulations
of the NYSE, as applicable.
(b) Legality. No order, decree or injunction shall have been
entered or issued by any Governmental Entity which is in effect and has the
effect of making the Merger illegal or otherwise prohibiting consummation of the
Merger. Each Party agrees that, in the event that any such order, decree or
injunction shall be entered or issued, it shall use its reasonable best efforts
to cause any such order, decree or injunction to be lifted or vacated.
(c) HSR Act. The waiting period (or extension thereof) under the
HSR Act applicable to the Merger shall have expired or been terminated.
(d) Registration Statement Effective. The Registration
Statement shall have become effective prior to the mailing by each of the
Parties of the Joint Proxy/Prospectus to its respective stockholders and no
stop order suspending the effectiveness of the Registration Statement shall
then be in effect;
(e) Stock Exchange Listing. The shares of Alphabet Common Stock to
be issued pursuant to the Merger shall have been duly approved for listing on
the NYSE, subject to official notice of issuance.
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Section 7.2 Additional Conditions to Obligations of Alphabet and
Abacus Holdings. The obligations of Alphabet and Abacus Holdings to consummate
the Merger shall also be subject to the satisfaction or waiver of each of the
following conditions:
(a) Representations and Warranties. (i) The representations and
warranties of Abacus contained in this Agreement that are qualified by Abacus
Material Adverse Effect shall be true and correct on and as of the Closing Date
(except to the extent such representations and warranties shall have been
expressly made as of an earlier date, in which case such representations and
warranties shall have been true and correct as of such earlier date) with the
same force and effect as if made on and as of the Closing Date and (ii) the
representations and warranties of Abacus contained in this Agreement that are
not qualified as to Abacus Material Adverse Effect shall be true and correct on
and as of the Closing Date (except to the extent such representations and
warranties shall have been expressly made as of an earlier date, in which case
such representations and warranties shall have been true and correct as of such
earlier date) with the same force and effect as if made on and as of the Closing
Date, except to the extent that any failures of such representations and
warranties to be so true and correct (determined without regard to materiality
qualifiers or limitations contained therein), individually or in the aggregate,
would not reasonably be expected to have resulted in an Abacus Material Adverse
Effect.
(b) Agreements and Covenants. Abacus shall have performed or
complied in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by it on or before the Effective
Time.
(c) Certificates. Alphabet shall have received a certificate of an
executive officer of Abacus that the conditions set forth in paragraphs (a) and
(b) above have been satisfied.
(d) Consents. Except as set forth in the Abacus Disclosure Letter,
Abacus shall have obtained all consents, approvals, releases or authorizations
("Consents") from, and Abacus shall have made all filings and registrations
("Filings") to or with, any Person, including without limitation any
Governmental Entity, necessary to be obtained or made in order for Alphabet and
Abacus Holdings to consummate the Merger or issue shares of Alphabet Common
Stock pursuant thereto, as applicable, unless the failure to obtain such
Consents or make such Filings would not, individually or in the aggregate,
reasonably be expected to have an Abacus Material Adverse Effect.
(e) Tax Opinion. Alphabet shall have received an opinion of Fried,
Frank, Harris, Shriver & Jacobson (or, in the event Fried, Frank, Harris,
Shriver & Jacobson fails to provide such opinion, the opinion of Wachtell,
Lipton, Rosen & Katz), dated as of the Closing Date, in form and substance
reasonably satisfactory to it, substantially to the effect that, on the basis of
the facts and assumptions described in the
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opinion, the Merger constitutes a tax-free reorganization under Section 368 of
the Code. In rendering such opinion, counsel may require and rely upon
representations and covenants including those contained in this Agreement or in
certificates of officers of the Parties and others; and
(f) Accountants Letters. Alphabet shall have received each of the
accountants' letters contemplated by Sections 6.17 and 6.18 hereof to be
received by it.
Section 7.3 Additional Conditions to Obligations of Abacus. The
obligations of Abacus to consummate the Merger shall also be subject to the
satisfaction or waiver of each of the following conditions:
(a) Representations and Warranties. (i) The representations and
warranties of Alphabet and Abacus Holdings contained in this Agreement that are
qualified by Alphabet Material Adverse Effect shall be true and correct on and
as of the Closing Date (except to the extent such representations and warranties
shall have been expressly made as of an earlier date, in which case such
representations and warranties shall have been true and correct as of such
earlier date) with the same force and effect as if made on and as of the Closing
Date, and (ii) the representations and warranties of Alphabet and Abacus
Holdings contained in this Agreement shall have been true and correct and as of
the date hereof, and shall also be true and correct on and as of the Closing
Date (except to the extent such representations and warranties shall have been
expressly made as of an earlier date, in which case such representations and
warranties shall have been true and correct as of such earlier date) with the
same force and effect as if made on and as of the Closing Date, except to the
extent that any failures of such representations and warranties to be so true
and correct (determined without regard to materiality qualifiers or limitations
contained therein), individually or in the aggregate, would not reasonably be
expected to have resulted in an Alphabet Material Adverse Effect;
(b) Agreements and Covenants. Each of Alphabet and Abacus Holdings
shall have performed or complied in all material respects with all agreements
and covenants required by this Agreement to be performed or complied with by it
on or before the Effective Time.
(c) Certificates. Abacus shall have received a certificate of
an executive officer of Alphabet that the conditions set forth in
paragraphs (a) and (b) above have been satisfied;
(d) Consents. Except as set forth in the Alphabet Disclosure
Letter, Alphabet shall have obtained all Consents from, and Alphabet shall have
made all Filings to or with, any Person, including without limitation any
Governmental Entity, necessary to be obtained or made in order for Abacus to
consummate the Merger, unless the failure
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to obtain such Consents or make such Filings would not, individually or in the
aggregate, be reasonably expected to have an Alphabet Material Adverse Effect.
(e) Tax Opinion. Abacus shall have received an opinion of
Wachtell, Lipton, Rosen & Katz (or other counsel reasonably satisfactory to it),
dated as of the Closing Date, in form and substance reasonably satisfactory to
it, substantially to the effect that, on the basis of the facts and assumptions
described in the opinion, the Merger constitutes a tax-free reorganization under
Section 368 of the Code. In rendering such opinion, counsel may require and rely
upon representations and covenants including those contained in this Agreement
or in certificates of officers of the Parties and others; and
(f) Accountants Letters. Abacus shall have received each of the
accountants' letters contemplated by Sections 6.17 and 6.18 hereof to be
received by it.
ARTICLE VIII
Section 8.1 Termination. This Agreement may be terminated at any time
before the Effective Time (except as otherwise provided) as follows:
(a) by mutual written consent of each of Alphabet and Abacus;
(b) by any Party, if the Effective Time shall not have occurred on
or before June 30, 1999 (the "Termination Date"); provided, however, that the
right to terminate this Agreement under this Section 8.1(b) 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 the Termination Date;
(c) by any Party, if a Governmental Entity shall have issued an
order, decree or injunction having the effect of making the Merger illegal or
permanently prohibiting the consummation of the Merger, and such order, decree
or injunction shall have become final and nonappealable (but only if such Party
shall have used its reasonable best efforts to cause such order, decree or
injunction to be lifted or vacated);
(d) by either Abacus or Alphabet, if (x) there shall have been a
material breach by the other of any of its representations, warranties,
covenants or agreements contained in this Agreement, which breach would result
in the failure to satisfy one or more of the conditions set forth in Section
7.2(a) or (b) (in the case of a breach by Abacus) or Section 7.3(a) or (b) (in
the case of a breach by Alphabet), and such breach shall be incapable of being
cured or, if capable of being cured, shall not have been cured within 30 days
after written notice thereof shall have been received by the Party alleged to be
in breach.
(e) (i) by Alphabet, if the Board of Directors of Abacus or any
committee of the Board of Directors of Abacus (w) shall withdraw or modify in
any
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manner adverse to Alphabet, its approval or recommendation of this Agreement and
the Merger, (x) shall fail to reaffirm such approval or recommendation within 15
days of Alphabet's request, which request may only be made with respect to any
Abacus Acquisition Proposal on a single occasion, after (1) any Abacus
Acquisition Proposal shall have been made to Abacus and made known to Abacus'
stockholders generally or shall have been made directly to its stockholders
generally or (2) any Person shall have publicly announced an intention (whether
or not conditional) to make an Abacus Acquisition Proposal (y) shall approve or
recommend any Abacus Acquisition Proposal or Abacus Acquisition Transaction or
(z) shall resolve to take any of the actions specified in clauses (w), (x) or
(y) above; or
(ii) by Abacus, if the Board of Directors of Alphabet or any
committee of the Board of Directors of Alphabet (w) shall withdraw or modify in
any manner adverse to Abacus, its approval or recommendation of the issuance of
shares of Alphabet Common Stock pursuant to the Merger, (x) shall fail to
reaffirm such approval or recommendation within 15 days of Abacus' request,
which request may only be made with respect to any Alphabet Acquisition
Proposal on a single occasion, after (1) any Alphabet Acquisition Proposal
shall have been made to Alphabet and made known to Alphabet's stockholders
generally or shall have been made directly to its stockholders generally or (2)
any Person shall have publicly announced an intention (whether or not
conditional) to make an Abacus Acquisition Proposal, (y) shall approve or
recommend any Alphabet Acquisition Proposal or Alphabet Transaction or (z)
shall resolve to take any of the actions specified in clauses (w), (x) or (y)
above.
(f) by either Party, if the required approvals of the stockholders
of the other Party shall not have been obtained at a duly held stockholders'
meeting, including any adjournments or postponements thereof; and
(g) if the Board of Directors of Abacus shall conclude in good
faith, after considering applicable state law, after consulting with outside
counsel, that in light of an Abacus Superior Proposal such action is required to
act in a manner consistent with its fiduciary duties under applicable law,
Abacus may (only after Abacus has made such payments as are provided for in
Section 8.2 and only prior to the approval of this Agreement by Abacus'
stockholders) terminate this Agreement solely in order to concurrently enter
into a definitive acquisition agreement or similar agreement with respect to any
Abacus Superior Proposal; provided, however, Abacus may not terminate the
Agreement pursuant to this clause (g) until after the second business day
following the delivery to Alphabet of written notice advising Alphabet that the
Board of Directors of Abacus is prepared to enter into a definitive acquisition
agreement with respect to an Abacus Superior Proposal and only if, during such
two-business day period, Abacus and its Representatives shall, if requested by
Alphabet, have negotiated in good faith with Alphabet to make such adjustments
to the terms and conditions of this Agreement as would enable Abacus to proceed
with the Merger on such adjusted terms.
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(h) if the Board of Directors of Alphabet shall conclude in good
faith, after considering applicable state law, and after consultation with
outside counsel, that in light of an Alphabet Superior Proposal such action is
required in order to act in a manner consistent with its fiduciary duties under
applicable law, Alphabet may (only after Alphabet has made such payments as are
provided for in Section 8.2 and only prior to the approval of the issuance of
Alphabet Common Stock pursuant to this Agreement by Alphabet stockholders)
terminate this Agreement solely in order to concurrently enter into a definitive
acquisition agreement or similar agreement with respect to an Alphabet Superior
Proposal; provided, however, Alphabet may not terminate this Agreement pursuant
to this clause (h) until after the second business day following the delivery to
Abacus of written notice advising Abacus that the Board of Directors of Alphabet
is prepared to enter into a definitive acquisition agreement with respect to an
Alphabet Superior Proposal and only if, during such two-business-day period,
Alphabet and its Representatives shall, if requested by Abacus, have negotiated
in good faith with Abacus to make such adjustments to the terms and conditions
of this Agreement as would enable Alphabet to proceed with the Merger in such
adjusted terms.
Section 8.2 Effect of Termination and Abandonment. (a) In the event of
termination of this Agreement pursuant to this Article VIII, this Agreement
(other than as set forth in Section 9.1) shall become void and of no effect with
no liability on the part of any party hereto (or of any of its Representatives);
provided, however, no such termination shall relieve any party hereto from (x)
any liability for damages resulting from any willful and intentional breach of
this Agreement or (y) any obligation to provide reimbursement for or pay the
Abacus Termination Fee (defined below) or the Alphabet Termination Fee (defined
below) (each a "Termination Fee"), or Fees and Expenses (as defined below)
pursuant to this Section 8.2;
(b) In the event that Abacus terminates this Agreement pursuant to
Section 8.1(g), simultaneously with such termination, Abacus shall pay to
Alphabet a fee equal to $177,000,000 (the "Abacus Termination Fee"). In the
event that Alphabet terminates this Agreement pursuant to Section 8.1(h),
simultaneously with such termination, Alphabet shall pay to Abacus a fee equal
to $240,000,000 (the "Alphabet Termination Fee").
(c) (i) In the event that an Abacus Business Combination Proposal
(defined below) shall have been made to Abacus and made known to its
stockholders generally or shall have been made directly to its stockholders
generally or any Person shall have publicly announced an intention (whether or
not conditional) to make an Abacus Business Combination Proposal prior to the
meeting of Abacus' stockholders duly convened and held to vote in respect of
this Agreement and the Merger and thereafter (i) this Agreement is terminated
pursuant to Section 8.1(f) by reason of the failure of the stockholders of
Abacus to approve this Agreement or the Merger at such meeting and (ii) within
six months of the termination of this Agreement, Abacus enters into an agreement
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with any Person with respect to an Abacus Business Combination Proposal or an
Abacus Business Combination Proposal is consummated. Abacus shall, upon the
occurrence of the event described in clause (ii) above, pay to Alphabet the
Abacus Termination Fee.
(ii) In the event that an Alphabet Business Combination
Proposal (defined below) shall have been made to Alphabet and made known to its
stockholders generally or shall have been made directly to its stockholders
generally or any Person shall have publicly announced an intention (whether or
not conditional) to make an Alphabet Business Combination Proposal prior to the
meeting of Alphabet's stockholders duly convened and held to vote in respect to
the issuance of shares pursuant to this Agreement and thereafter (i) this
Agreement is terminated pursuant to Section 8.1(f) by reason of the failure of
the stockholders of Alphabet to approve such issuance at such meeting and (ii)
within six months of the termination of this Agreement, Abacus enters into an
agreement with any Person with respect to an Alphabet Business Combination
Proposal or an Alphabet Business Combination Proposal is consummated. Alphabet
shall, upon the occurrence of the event described in clause (ii) above, pay to
Abacus the Alphabet Termination Fee.
(d) In the event that this Agreement is terminated pursuant to
Section 8.1(f) by reason of the failure of any Party's stockholders to approve
this Agreement or the Merger at a meeting of stockholders duly convened and held
to vote in respect of this Agreement and the Merger or the issuance of shares
pursuant thereto, such Party shall promptly upon such termination (following
receipt of a statement therefor) reimburse the other Party for all fees and
expenses (including, without limitation, fees and expenses of counsel, financial
advisors, accountants, consultants and other advisors and Representatives)
incurred by it in connection with this Agreement and the Merger ("Fees and
Expenses ").
(e) In the event that this Agreement is terminated as a result of
Abacus' Board of Directors taking any of the actions described in Section
8.1(e)(i), Abacus shall promptly after such termination pay to Alphabet the
Abacus Termination Fee. In the event that this Agreement is terminated as a
result of Alphabet's Board of Directors taking any of the actions described in
Section 8.1 (e) (ii), Alphabet shall promptly after such termination pay to
Abacus the Alphabet Termination Fee.
(f) (i) In the event that an Abacus Business Combination Proposal
shall have been made to Abacus and made known to its stockholders generally or
shall have been made directly to its stockholders generally, or any Person shall
have publicly announced an intention (whether or not conditional) to make an
Abacus Business Combination Proposal, and this Agreement is subsequently
terminated pursuant to Section 8.1(d) as a result of an intentional breach by
Abacus of its representations, warranties and covenants by Abacus, and within
six months after such termination, Abacus shall enter into an agreement with any
Person for an Abacus Business
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Combination Proposal or an Abacus Business Combination Proposal is consummated,
simultaneously with its entering into such agreement or upon such consummation,
Abacus shall pay to Alphabet the Termination Fee.
(ii) In the event that an Alphabet Business Combination Proposal
shall have been made to Alphabet and made known to its stockholders generally or
shall have been made directly to its stockholders generally, or any Person shall
have publicly announced an intention (whether or not conditional) to make an
Alphabet Business Combination Proposal with respect to such Party and this
Agreement is subsequently terminated pursuant to Section 8.1(d) as a result of
an intentional breach by Alphabet of its representations, warranties and
covenants by Alphabet, and within six months after such termination, Alphabet
shall enter into an agreement with any Person for an Alphabet Business
Combination Proposal or an Alphabet Business Combination Proposal is
consummated, simultaneously with its entering into such agreement or upon such
consummation, Alphabet shall pay to Abacus the Alphabet Termination Fee.
(g) Reimbursements of Fees and Expenses hereunder and any
Termination Fee payable hereunder shall be payable by wire transfer of
immediately available funds.
The reimbursement of Fees and Expenses shall be credited against any
Termination Fee payable by such Party. In no event shall more than one
Termination Fee be payable by a Party. No Party which is in material breach of
its covenants, agreements or representations shall be entitled to receive Fees
and Expenses or a Termination Fee.
(h) The Parties acknowledge that the agreements contained in this
Section 8.2 are an integral part of the transactions contemplated by this
Agreement, and that, without these agreements, Alphabet would not enter into
this Agreement, and the fees payable as reimbursable hereunder constitute
liquidated damages and not a penalty; accordingly, if Abacus fails to pay
promptly amount due pursuant to this Section 8.2, and, in order to obtain such
payment, Alphabet commences a suit which results in a judgment against Abacus
for such amount (or any portion thereof), Abacus shall pay the costs and
expenses (including attorneys fees) of Alphabet in connection with such suit,
together with interest on such amount in respect of the period from the date
such amount became due until paid at the prime rate of The Chase Manhattan Bank
in effect from time to time during such period.
(i) "Abacus Business Combination Proposal" shall mean (x) any
merger, consolidation or other business combination as a result of which the
stockholders of Abacus prior to such transaction would cease to hold at least
66-2/3% of the voting securities of the entity surviving or resulting from such
transaction (or the ultimate parent entity thereof), (y) the acquisition by a
Person of at least 50% of the outstanding voting securities of Abacus, or (z)
the sale, lease, exchange or other disposition of at least 50%
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of the assets of Abacus and its Subsidiaries taken as a whole; provided,
however, that, with respect to Section 8.2.(c)(i) and 8.2(f)(i), the reference
in this definition to 66-2/3% shall be deemed to be a reference to 80% if the
Person (or an Affiliate of such Person) which enters into an agreement with
respect to, or consummates, an Abacus Business Combination Proposal after the
termination of this Agreement, had made an Abacus Business Combination Proposal
prior to the termination of this Agreement.
(j) "Alphabet Business Combination Proposal" shall mean (x) any
merger, consolidation or other business combination as a result of which the
stockholders of Alphabet prior to such transaction would cease to hold at least
66-2/3% of the voting securities of the entity surviving or resulting from such
transaction (or the ultimate parent entity thereof), (y) the acquisition by a
Person at least 50% of the outstanding voting securities of Alphabet, or (z) the
sale, lease, exchange or other disposition of at least 50% of the assets of
Alphabet and its Subsidiaries taken as a whole; provided, however that, with
respect to Section 8.2(c)(ii) and 8.2(f)(ii), the reference in this definition
to 66-2/3% shall be deemed to be a reference to 80% if the Person (or an
Affiliate of such Person) which enters into an agreement with respect to, or
consummates, an Alphabet Business Combination Proposal after the termination of
this Agreement, had made an Alphabet Business Combination Proposal prior to the
termination of this Agreement.
Section 8.3 Amendment. This Agreement may be amended at any time before
the Effective Time but only pursuant to a writing executed and delivered by
Alphabet and Abacus.
ARTICLE IX
Section 9.1 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 8.1, as the case may be, except that (a) the agreements set forth in
Sections 1.3, 6.11 and 6.12 shall survive the Effective Time, and (b) the
agreements set forth in Sections 6.7, 6.9(b) and 8.2 shall survive termination
indefinitely.
Section 9.2 Notices. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given
or made as of the date of receipt and shall be delivered personally or mailed by
registered or certified mail (postage prepaid, return receipt requested), sent
by overnight courier or sent by telecopy, to the applicable party at the
following addresses or telecopy numbers (or at such other address or telecopy
number for a party as shall be specified by like notice):
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(a) if to Abacus:
American Stores Company
299 South Main Street
Salt Lake City, Utah 84111
Attention: Kathleen E. McDermott, Esq.
Telecopy No.: (801) 537-7808
with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Richard D. Katcher, Esq.
Eric S. Robinson, Esq.
Telecopy No.: (212) 403-2000
(b) if to Alphabet or Abacus Holdings:
Albertson's, Inc.
250 Parkcenter Blvd.
Boise, Idaho 83726
Attention: Thomas R. Saldin, Esq.
Telecopy No.: (208) 395-6225
with a copy to:
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, New York 10004
Attention: Sanford Krieger, Esq.
Jeffrey Bagner, Esq.
Telecopy No.: (212) 859-4000
Section 9.3 Certain Definitions; Interpretation. (a) For purposes of
this Agreement, the following terms shall have the following meanings:
(i) "Abacus Material Adverse Effect" means any change in or
effect (x) that is or will be materially adverse to the business, results of
operations, or financial condition of Abacus and its Subsidiaries taken as a
whole, or (y) that will prevent or materially impair Abacus' ability to
consummate the Merger, provided that an Abacus Material Adverse Effect shall not
include changes or effects (1) relating to economic conditions or financial
markets in general or the retail food and drug industry in
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general, (2) resulting from the voluntary termination of employment by employees
of Abacus and its Subsidiaries between the date hereof and the Closing Date or
(3) resulting from actions required to be taken by the terms of this Agreement.
A decline in the stock market price of the shares of Abacus Common Stock in and
of itself shall not be deemed an "Abacus Material Adverse Effect."
(ii) "Alphabet Material Adverse Effect" means any change in or
effect (x) that is or will be materially adverse to the business, results of
operations or financial conditions of Alphabet and its Subsidiaries taken as a
whole, or (y) that is or will prevent or materially impair Alphabet's ability to
consummate the Merger or to issue shares of Alphabet Common Stock in accordance
with the terms hereof, provided that an Alphabet Material Adverse Effect shall
not include changes or effects relating to economic conditions or financial
markets in general or the retail food and drug industry in general or, (2)
changes or effects resulting from actions required to be taken by the terms of
this Agreement. A decline in the stock market price of the shares of Alphabet
Common Stock in and of itself shall not be deemed an "Alphabet Material Adverse
Effect."
(iii) "affiliate" of a Person means a Person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, the first mentioned Person.
(iv) "control" (including the terms "controlled by" and "under
common control with") means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of stock, as trustee or executor, by contract or
credit arrangement or otherwise.
(v) "ERISA" means the Employee Retirement Income Security Act
of 1974, as amended and the rules and regulations promulgated thereunder.
(vi) "knowledge" of any Party shall mean the actual knowledge
of the executive officers of that Party.
(vii) "Person" means an individual, corporation, partnership,
limited liability company, association, trust, unincorporated organization,
entity or group (as defined in the Exchange Act).
(viii) "Significant Subsidiary" shall have the meaning set
forth in Rule 1-02 of Regulation S-X of the SEC.
(ix) "Subsidiary," of a Person means any corporation or other
legal entity of which such Person (either alone or through or together with any
other Subsidiary or Subsidiaries) is the general partner or managing entity or
of which at least a majority of the stock or other equity interests the holders
of which are generally entitled
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to vote for the election of the board of directors or others performing similar
functions of such corporation or other legal entity is directly or indirectly
owned or controlled by such Person (either alone or through or together with any
other Subsidiary or Subsidiaries).
(b) When a reference is made in this Agreement to Articles,
Sections, Disclosure Letters or Exhibits, such reference is to an Article or a
Section of, or an Exhibit to, this Agreement, unless otherwise indicated. The
table of contents and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. Whenever the words "include," "includes" or "including" are used
in this Agreement, they shall be understood to be followed by the words "without
limitation."
Section 9.4 Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
Section 9.5 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
materially adverse to any Party. Upon a determination that any term or other
provision is invalid, illegal or incapable of being enforced, the Parties shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the Parties as closely as possible in an acceptable manner to the end
that the transactions contemplated hereby are fulfilled to the maximum extent
possible.
Section 9.6 Entire Agreement; No Third-Party Beneficiaries. This
Agreement and the Confidentiality Agreement constitute the entire agreement and
supersede any and all other prior agreements and undertakings, both written and
oral, among the parties hereto, or any of them, with respect to the subject
matter hereof and, except for Section 6.11 (Indemnification, Directors' and
Officers' Insurance), does not, and is not intended to, confer upon any Person
other than the parties hereto any rights or remedies hereunder.
Section 9.7 Assignment. This Agreement shall not be assigned by any
party hereto by operation of law or otherwise without the express written
consent of each of the other parties.
Section 9.8 Governing Law. This Agreement shall be governed by and
construed in accordance with, the laws of the State of Delaware without regard
to the conflicts of laws provisions thereof. Each of the Parties hereby
irrevocably and unconditionally consents to submit to the exclusive jurisdiction
of the courts of the State of Delaware and the courts of the United States of
America located in the State of Delaware for any litigation arising out of or
relating to this Agreement or the Merger or
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any of the other transactions contemplated hereby (and agrees not to commence
any litigation relating hereto except in such courts), and further agrees that
service of any process, summons, notice or document by U.S. registered mail to
its respective address set forth in Section 9.2 shall be effective service of
process for any litigation brought against it in any such court. Each of the
Parties hereby irrevocably and unconditionally waives any objection to the
laying of venue of any litigation arising out of this Agreement or the Merger or
any of the other transactions contemplated hereby in the courts of the State of
Delaware or the courts of the United States of America located in the State of
Delaware and hereby further irrevocably and unconditionally waives and agrees
not to plead or claim in any such court that any such litigation brought in any
such court has been brought in an inconvenient forum. Each of the parties hereto
hereby irrevocably and unconditionally waives any right it may have to trial by
jury in connection with any litigation arising out of or relating to this
agreement, the stock option agreement, the merger or any of the other
transactions contemplated hereby or thereby.
Section 9.9 Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties in separate counterparts, each of
which when executed shall be deemed to be an original, but all of which shall
constitute one and the same agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the date first written above by their respective officers
thereunto duly authorized.
ALBERTSON'S, INC.
By: /s/ Michael F. Reuling
Name: Michael F. Reuling
Title: Executive Vice President; Store
Development
ABACUS HOLDINGS, INC.
By: /s/ Michael F. Reuling
Name: Michael F. Reuling
Title: Vice President
AMERICAN STORES COMPANY
By: /s/ Victor L. Lund
Name: Victor L. Lund
Title: Chief Executive Officer
68
THE TRANSFER OF THIS AGREEMENT IS SUBJECT
TO CERTAIN PROVISIONS CONTAINED HEREIN
AND TO RESALE RESTRICTIONS UNDER THE
SECURITIES ACT OF 1933, AS AMENDED
STOCK OPTION AGREEMENT, dated as of August 2, 1998 (this
"Agreement"), between Albertson's, Inc., a Delaware corporation ("Issuer"), and
American Stores Company, a Delaware corporation ("Grantee").
WHEREAS, Issuer, Grantee, and a wholly-owned subsidiary of Issuer
(the "Merger Sub") propose to enter into an Agreement and Plan of Merger, to be
dated as of the date hereof (the "Merger Agreement"), pursuant to which Merger
Sub is to merge with and into Issuer, with Grantee continuing as the surviving
corporation and a wholly owned subsidiary of Issuer after such merger, and in
such merger, each share of common stock, par value $1.00 per share, of Grantee
("Common Stock") will be converted to a right to receive shares of common stock,
par value $1.00 per share, of Issuer as provided in the Merger Agreement;
WHEREAS, as an inducement and condition to Grantee's willingness to
enter into the Merger Agreement and in consideration thereof, Issuer is granting
to Grantee, pursuant to the terms and subject to the conditions contained in
this Agreement, an option to purchase 19.9 % of the outstanding shares of Common
Stock; and
WHEREAS, the Board of Directors of Issuer has approved the grant by
Issuer to Grantee of the Option (defined below) pursuant to this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements set forth in this Agreement and in the Merger
Agreement, the parties agree as follows:
1. The Option. Issuer hereby grants to Grantee an unconditional,
irrevocable option (the "Option") to purchase, pursuant to the terms and subject
to the conditions hereof, up to 48.8 million fully paid and nonassessable shares
of Common Stock at a price of $48 per share (the "Option Price"); provided,
however, that in no event shall the number of shares for which the Option is
exercisable exceed 19.9 % of the shares of Common Stock issued and outstanding
at the time of exercise (without giving effect to the shares of Common Stock
issued or issuable under the Option). The number of shares of Common Stock
purchasable upon exercise of the Option and the Option Price are subject to
adjustment as set forth in this Agreement.
<PAGE>
2. Exercise; Closing.
(a) Conditions to Exercise; Termination. Grantee or any other person
that shall become a holder of all or a part of the Option in accordance with the
terms of this Agreement (each such person, including Grantee, being referred to
as "Holder") may exercise the Option, in whole or in part, from time to time,
and prior to the occurrence of an Exercise Termination Event (as defined below),
provided that the Holder shall have delivered a written notice as provided in
Section 2(d) within 120 days of the occurrence of a Triggering Event (as defined
in Section 2(b)). The right to exercise the Option shall terminate upon either
(i) the occurrence of the Effective Time (as defined in the Merger Agreement) or
(ii) (A) if a Notice Date (as defined in Section 2(d) hereof) has not previously
occurred, the close of business on the earlier of (x) the day that is 120 days
after the date of a Triggering Event, (y) the date upon which the Merger
Agreement is terminated if no Termination Fee could be payable by Issuer
pursuant to the terms of the Merger Agreement upon the occurrence of certain
events or the passage of time, and (z) 270 days following the date upon which
the Merger Agreement is terminated, and (B) if the Notice Date has previously
occurred, 120 days after the Notice Date (the events in (i) or (ii) being
referred to as "Exercise Termination Events".)
(b) Triggering Event. A "Triggering Event" shall have occurred at
such time at which the Grantee becomes entitled to receive from Issuer a
Termination Fee pursuant to Section 8.2 of the Merger Agreement.
(c) Notice of Trigger Event by Issuer. Issuer shall notify Grantee
promptly in writing of the occurrence of any Triggering Event (it being
understood that the giving of the notice by Issuer shall not be a condition to
the right of Holder to exercise the option).
(d) Notice of Exercise. If Holder shall be entitled to and desires
to exercise the Option, in whole or in part, it shall send to Issuer a written
notice (any date on which such notice is given, in accordance with Section 15
hereof, is referred to as a "Notice Date") specifying (i) the total number of
shares that Holder will purchase pursuant to the exercise and (ii) a place and
date (a "Closing Date") not earlier than three business days nor later than 60
business days from the Notice Date for the closing of the purchase (a
"Closing"); provided, that if a filing or any approval is required under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), or prior notification to or prior approval from any regulatory authority
is required under any other law, statute, rule or regulation (including
applicable rules and regulations of national securities exchanges) in connection
with such purchase, Holder or Issuer, as required, promptly after the Notice
Date, shall file all necessary notices and applications for approval and shall
expeditiously process the same and the period of time referred to in clause (ii)
shall commence on the date on which all required notification and waiting
periods, if any, shall have expired or been terminated and all required
approvals, if any,
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shall have been obtained. Any exercise of the Option shall be
deemed to occur on the date of the Notice Date relating thereto. Each of Holder
and Issuer agrees to use its reasonable best efforts to cooperate with and
provide information to the other, for the purpose of any required notice or
application for approval.
(e) Payment of Purchase Price; Delivery of Common Stock. (i) At each
Closing, Holder shall pay to Issuer the aggregate purchase price for the shares
of Common Stock purchased pursuant to the exercise of the Option in immediately
available funds by a wire transfer to a bank account designated by Issuer;
provided, that failure or refusal of Issuer to designate a bank account shall
not preclude Holder from exercising the Option, in whole or in part.
(ii) At each Closing, simultaneously with the payment of the
aggregate purchase price by Holder, Issuer shall deliver to Holder a certificate
or certificates representing the number of shares of Common Stock purchased by
Holder and, if the Option shall be exercised in part only, a new Agreement
providing for an Option evidencing the rights of Holder to purchase the balance
(as adjusted pursuant to Section l(b)) of the shares then purchasable hereunder
and the Holder shall deliver this Agreement and a letter agreeing that the
Holder will not offer to sell or otherwise dispose of such shares in violation
of applicable laws or the provisions of this Agreement.
(iii) Notwithstanding anything to the contrary contained in
paragraphs (i) and (ii) of this Section 2(e), Holder shall have the right (a
"Cashless Exercise Right") to direct the Issuer, in the written notice of
exercise referred to in Section 2(d), to reduce the number of shares of Common
Stock required to be delivered by Issuer to Holder at any Closing by such number
of shares of Common Stock that have an aggregate Market/Offer Price (as defined
in Section 9(a)) equal to the aggregate purchase price payable at such Closing
(but for this paragraph (iii)), or any portion thereof, in lieu of Holder paying
to the Issuer at such Closing such aggregate purchase price or portion thereof,
as the case may be. Any exercise of the Option in which, and to the extent to
which, Holder exercises its Cashless Exercise Right pursuant to this paragraph
(iii) shall be referred to as a "Cashless Exercise."
(f) Restrictive Legend. Certificates for Common Stock delivered at a
Closing may be endorsed with a restrictive legend that shall read substantially
as follows:
"The transfer of the shares represented by this certificate is
subject to certain provisions of an agreement between the registered
holder hereof and Issuer, a copy of which agreement is on file at the
principal office of Issuer, and to resale restrictions arising under the
Securities Act of 1933, as amended. A copy of the aforementioned agreement
will be mailed to the holder without charge promptly after receipt by
Issuer of a written request therefor."
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It is understood and agreed that: (i) the reference to the resale restrictions
of the Securities Act of 1933, as amended (the "Securities Act"), in the above
legend shall be removed by delivery of substitute certificate(s) without such
reference if Holder shall have delivered to Issuer a copy of a letter from the
staff of the Securities and Exchange Commission, or a written opinion of
counsel, in form and substance reasonably satisfactory to Issuer, to the effect
that such legend is not required for purposes of the Securities Act; (ii) the
reference to the provisions of this Agreement in the above legend shall be
removed by delivery of substitute certificate(s) without such reference if the
shares have been sold or transferred in compliance with the provisions of this
Agreement and under circumstances that do not require the retention of such
reference; and (iii) the legend shall be removed in its entirety if the
conditions in the preceding clauses (i) and (ii) both are satisfied. In
addition, the certificates shall bear any other legend as may be required by
applicable law.
(g) Ownership of Record; Tender of Purchase Price; Expenses. Upon
the giving by Holder to Issuer of the written notice of exercise referred to in
Section 2(d) and, except to the extent such notice relates to a Cashless
Exercise, the tender of the applicable purchase price in immediately available
funds, Holder shall be deemed to be the holder of record of the shares of Common
Stock issuable upon such exercise, notwithstanding that the stock transfer books
of Issuer shall then be closed or that certificates representing such shares of
Common Stock shall not have been actually delivered to Holder. Issuer shall pay
all expenses, and any and all United States federal, state and local taxes and
other charges that may be payable in connection with the preparation, issuance
and delivery of stock certificates under this Section 2 in the name of Holder or
its assignee, transferee or designee.
3. Covenants of Issuer. In addition to its other agreements and
covenants herein, Issuer agrees:
(a) Shares Reserved for Issuance. To maintain, free from preemptive
rights, sufficient authorized but unissued or treasury shares of Common Stock so
that the Option may be fully exercised without additional authorization of
Common Stock after giving effect to all other options, warrants, convertible
securities and other rights of third parties to purchase shares of Common Stock;
(b) No Avoidance. Not to avoid or seek to avoid (whether by charter
amendment or through reorganization, consolidation, merger, issuance of rights,
dissolution or sale of assets, or by any other voluntary act) the observance or
performance of any of the covenants, agreements or conditions to be observed or
performed hereunder by Issuer and not to take any action which would cause any
of its representations or warranties not to be true; and
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(c) Further Assurances. Promptly after the date hereof to take all
actions as may from time to time be required (including (i) complying with all
applicable premerger notification, reporting and waiting period requirements
under the HSR Act and (ii) in the event that any other prior approval of or
notice to any regulatory authority is necessary under any applicable federal,
state or local law before the Option may be exercised, cooperating fully with
Holder in preparing and processing the required applications or notices) in
order to permit Holder to exercise the Option and purchase shares of Common
Stock pursuant to such exercise.
4. Representations and Warranties of Issuer. Issuer hereby
represents and warrants to Holder that Issuer has all requisite corporate power
and authority and has taken all corporate action necessary to authorize,
execute, deliver and perform its obligations under this Agreement and to
consummate the transactions contemplated hereby; and that this Agreement has
been duly and validly authorized, executed and delivered by Issuer. Issuer
hereby further represents and warrants to Holder that it has taken all necessary
corporate action to authorize and reserve for issuance upon exercise of the
Option the number of shares of Common Stock equal to the maximum number of
shares of Common Stock at any time or from time to time issuable upon exercise
of the Option and that all shares of Common Stock, upon issuance pursuant to the
Option, will be delivered free and clear of all claims, liens, encumbrances, and
security interests (other than those created by this Agreement) and not subject
to any preemptive rights. The execution and delivery of this Agreement, the
grant of the Option hereunder and the exercise in whole or in part of the Option
in accordance with this Agreement, will not (i) result in the occurrence of any
"Distribution Date," "Stock Acquisition Date" or "Triggering Event" under the
Alphabet Rights Agreement (as defined in the Merger Agreement) of Abacus, (ii)
permit any Person to exercise any rights issued under any rights agreements of
Abacus, or (iii) cause the separation of any such rights from the shares of
Common Stock to which they are attached or such rights becoming exercisable.
Issuer has taken all action necessary to make inapplicable to Grantee any state
takeover, business combination, control share or other similar statute and any
charter provisions which would otherwise be applicable to Grantee or any
transaction involving Issuer and Grantee by reason of the grant of the Option,
the acquisition of beneficial ownership of shares of Common Stock as a result of
the grant of the Option, or the acquisition of shares of Common Stock upon
exercise of the Option, except for statutes or provisions which by their terms
cannot be waived or rendered inapplicable by any action of Issuer or the Board
of Directors of Issuer.
5. Representations and Warranties of Grantee. Grantee hereby
represents and warrants to Issuer that Grantee has all requisite corporate power
and authority and has taken all corporate action necessary in order to
authorize, execute, deliver and perform its obligations under this Agreement and
to consummate the transactions contemplated hereby. This Agreement has been duly
and validly authorized, executed and delivered by Grantee. Grantee represents
and warrants to Issuer that any
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<PAGE>
shares of Common Stock acquired upon exercise of the Option will be acquired for
Grantee's own account, and will not be, and the Option is not being, acquired by
Grantee with a view to the distribution thereof in violation of any applicable
provision of the Securities Act. Grantee has such knowledge and experience in
business and financial matters as to be capable of utilizing the information
which is available to Grantee to evaluate the merits and risks of an investment
by Grantee in the Common Stock and Grantee is able to bear the economic risks of
any investment in the shares of Common Stock which Grantee may acquire upon
exercise of the Option.
6. Exchange; Replacement. This Agreement and the Option are
exchangeable, without expense, at the option of Holder, upon presentation and
surrender of this Agreement at the principal office of Issuer, for other
Agreements providing for Options of different denominations entitling the holder
thereof to purchase on the same terms and subject to the same conditions as set
forth herein in the aggregate the same number of shares of Common Stock
purchasable at such time hereunder, subject to corresponding adjustments in the
number of shares of Common Stock purchasable upon exercise so that the aggregate
number of such shares under all Agreements issued in respect of this Agreement
shall not exceed 19.9 % of the outstanding shares of Common Stock of the Issuer
(without giving effect to shares of Common Stock issued or issuable pursuant to
the Option). Unless the context shall require otherwise, the terms "Agreement"
and "Option" as used in this Agreement include any Agreements and related
options for which this Agreement (and the Option granted hereby) may be
exchanged. Upon (i) receipt by Issuer of reasonably satisfactory evidence of the
loss, theft, destruction, or mutilation of this Agreement, (ii) receipt by
Issuer of reasonably satisfactory indemnification in the case of loss, theft or
destruction and (iii) surrender and cancellation of this Agreement in the case
of mutilation, Issuer will execute and deliver a new Agreement of like tenor and
date. Any new Agreement executed and delivered shall constitute an additional
contractual obligation on the part of Issuer, whether or not the Agreement so
lost, stolen, destroyed or mutilated shall at any time be enforceable by any
person other than the holder of the new Agreement.
7. Adjustments. The total number of shares of Common Stock
purchasable upon the exercise of the Option and the Option Price shall be
subject to adjustment from time to time as follows:
In the event of any change in, or distribution in respect of,
the outstanding shares of Common Stock by reason of stock dividends, split-ups,
mergers, recapitalizations, combinations, subdivisions, conversions, exchanges
of shares or the like, the type (including, in the event of any Major
Transaction described in Section 9(d) hereof in which Issuer is not the
surviving or continuing corporation, to provide that the Option shall be
exercisable for shares of common stock of the surviving or continuing
corporation in such Major Transaction) and number of shares of Common Stock
purchasable upon exercise of the Option and the Option Price shall be
appropriately
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adjusted in such manner as shall fully preserve the economic
benefits contemplated hereby, and proper provision shall be made in the
agreements governing any such transactions to provide for such proper adjustment
and the full satisfaction of Issuer's obligation hereunder.
8. Registration. At any time after a Triggering Event occurs and
prior to an Exercise Termination Event, Issuer shall, at the request of Grantee
delivered in the written notice of exercise of the Option provided for in
Section 2(d), and, with respect to the first demand registration as to which the
Grantee exercises its demand rights under this Section 8, delivered no later
than 90 days following such Triggering Event, as promptly as practicable
prepare, file and keep current a shelf registration statement under the
Securities Act covering any or all shares issued and issuable pursuant to the
Option and shall use its reasonable best efforts to cause such registration
statement to become effective and remain current in order to permit the sale or
other disposition of any shares of Common Stock issued upon total or partial
exercise of the Option ("Option Shares") in accordance with any plan of
disposition requested by Grantee; provided, however, that Issuer may postpone
filing a registration statement relating to a registration request by Grantee
under this Section 8 for a period of time (not in excess of 90 days) if in
Grantee's judgment such filing would require the disclosure of material
information that Issuer has a bona fide business purpose for preserving as
confidential. Issuer will use its reasonable best efforts to cause such
registration statement first to become effective and then to remain effective
for 365 days after the day the registration statement first becomes effective or
such shorter time as is reasonably appropriate to effect such sales or other
dispositions. Grantee shall have the right to demand two such registrations. In
connection with any such registration, Issuer and Holder shall provide each
other with representations, warranties, indemnities and other agreements
customarily given in connection with such registrations. To the extent requested
by Holder in connection with such registration, Issuer) shall (x) become a party
to any underwriting agreement relating to the sale of such shares, but only to
the extent of obligating Issuer in respect of representations, warranties,
indemnities, contribution and other agreements (in each case reasonably
acceptable to Issuer) customarily made by issuers in such underwriting
agreements, and (y) use its reasonable best efforts to take all further actions
which shall be reasonably necessary to effect such registration and sale
(including participating in road-show presentations and causing to be delivered
customary certificates, opinions of counsel and "comfort letters").
Notwithstanding anything to the contrary contained herein, in no event shall
Issuer be obligated to effect more than two registrations pursuant to this
Section 8 by reason of the fact that there shall be more than one Grantee as a
result of any assignment or division of this Agreement. Upon the effectiveness
of a registration statement demanded pursuant to this Section 8, the Holder of
the Option Shares that are the subject of such registration may not thereafter
require the Issuer to repurchase such Option Shares so long as such registration
statement remains effective as required hereby.
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<PAGE>
9. Repurchase of Option and/or Shares.
(a) Repurchase; Repurchase Price. Upon the occurrence of a
Triggering Event prior to an Exercise Termination Event, (i) at the request of
Holder, delivered in writing within 120 days of such occurrence (or such later
period as provided in Section 2(d) with respect to any required notice or
application or in Section 10), Issuer shall repurchase the Option from Holder,
in whole or in part, at a price (the "Option Repurchase Price") equal to the
number of shares of Common Stock then purchasable upon exercise of the Option
(or such lesser number of shares as may be designated in the Repurchase Notice
(as defined in Section 9(b))) multiplied by the amount by which the Market/Offer
Price (as defined below) exceeds the Option Price or (ii) at the request of any
owner of Option Shares (an "Owner") delivered in writing within 120 days of such
occurrence (or such later period as provided in Section 2(d) with respect to any
required notice or application or in Section 10), Issuer shall repurchase such
number of Option Shares from such Owner as such Owner shall designate in the
Repurchase Notice at a price (the "Option Share Repurchase Price") equal to the
number of shares designated multiplied by the Market/Offer Price. The term
"Market/Offer Price" shall mean the highest of (x) the price per share of Common
Stock at which a tender or exchange offer for Common Stock either has been
consummated, or at which a Person has publicly announced its intention to
commence a tender or exchange offer, after the date of this Agreement and prior
to the delivery of the Repurchase Notice, and which offer either has been
consummated and not withdrawn or terminated as of the date payment of the
Repurchase Price is made, or has been publicly announced and such intention to
make a tender or exchange offer has not been withdrawn as of the date payment of
the Repurchase Price is made, (y) the price per share of Common Stock to be paid
by any third party pursuant to an agreement with Issuer for a merger, share
exchange, consolidation or reorganization entered into after the date hereof and
on or prior to the delivery of the Repurchase Notice and (z) the average closing
price for shares of Common Stock on the New York Stock Exchange (the "NYSE")
(or, if the Common Stock is not then listed on the NYSE, any other national
securities exchange or automated quotation system on which the Common Stock is
then listed or quoted) for the twenty consecutive trading days immediately
preceding the delivery of the Repurchase Notice. In the event that a tender or
exchange offer is made for the Common Stock or an agreement is entered into for
a merger, share exchange, consolidation or reorganization involving
consideration other than cash, the value of the securities or other property
issuable or deliverable in exchange for the Common Stock shall be determined in
good faith by a nationally recognized investment banking firm mutually selected
by Issuer and Holder or Owner, as the case may be.
(b) Method of Repurchase. Holder or Owner, as the case may be, may
exercise its right to require Issuer to repurchase the Option, in whole or in
part, and/or any Option Shares then owned by Holder or Owner pursuant to this
Section 9 by surrendering for this purpose to Issuer, at its principal office,
this Agreement or
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<PAGE>
certificates for Option Shares, as applicable, accompanied by
a written notice or notices stating that Holder or Owner elects to require
Issuer to repurchase the Option and/or such Option Shares in accordance with the
provisions of this Section 9 (each such notice, a "Repurchase Notice"). Within
four business days after the surrender of the Agreement for the Option and/or
certificates representing Option Shares and the receipt of the Repurchase
Notice, Issuer shall deliver or cause to be delivered to Holder or Owner of
Option Shares, as the case may be, the applicable Option Repurchase Price and/or
the Option Share Repurchase Price or, in either case, the portion that Issuer is
not then prohibited under applicable law and regulation from so delivering in
immediately available funds by a wire transfer to a bank account designated by
grantee. In the event that the Repurchase Notice shall request the repurchase of
the Option in part, Issuer shall deliver with the Option Repurchase Price a new
Agreement evidencing the right of the Holder to purchase that number of shares
of Common Stock purchasable pursuant to the Option at the time of delivery of
the Repurchase Notice minus the number of shares of Common Stock represented by
that portion of the Option then being repurchased.
(c) Effect of Statutory or Regulatory Restraints on Repurchase. To
the extent that, upon or following the delivery of a Repurchase Notice, Issuer
is prohibited under applicable law or regulation from repurchasing the Option
(or a portion thereof) and/or any Option Shares subject to such Repurchase
Notice (and Issuer hereby undertakes to use its reasonable best efforts to
obtain all required regulatory and legal approvals and to file any required
notices as promptly as practicable in order to accomplish this repurchase),
Issuer shall promptly so notify Holder or Owner, as the case may be, in writing
and thereafter deliver or cause to be delivered, from time to time, to Holder or
Owner, as the case may be, the portion of the Option Repurchase Price and the
Option Share Repurchase Price that Issuer is no longer prohibited from
delivering, within four business days after the date on which it is no longer so
prohibited; provided, however, that upon notification by Issuer in writing of
this prohibition, Holder or Owner, as the case may be, may, within 5 days of
receipt of this notification from Issuer, revoke in writing its Repurchase
Notice, whether in whole or to the extent of the prohibition, whereupon, in the
latter case, Issuer shall promptly (i) deliver to Holder or Owner, as the case
may be, that portion of the Option Repurchase Price and/or the Option Share
Repurchase Price that Issuer is not prohibited from delivering; and (ii) (a)
deliver to Holder with respect to the Option, a new Agreement evidencing the
right of Holder to purchase that number of shares of Common Stock for which the
surrendered Agreement was exercisable at the time of delivery of the Repurchase
Notice less the number of shares as to which the Option Repurchase Price has
theretofore been delivered to Holder, and/or (b) deliver to the owner of Option
Shares, with respect to its Option Shares, a certificate for the Option Shares
as to which the Option Share Repurchase Price has not theretofore been delivered
to such owner. Notwithstanding anything to the contrary in this Agreement,
including, without limitation, the time limitations on the exercise of the
Option, Holder may exercise the Option at least until 120 days after such date
upon which Issuer is no longer prohibited from delivering all of the Option
Repurchase Price.
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<PAGE>
(d) Major Transactions. Issuer hereby agrees that, prior to the
occurrence of an Exercise Termination Event, Issuer shall not enter into or
agree to enter into any agreement for a Major Transaction (defined below) unless
the other party or parties thereto agree to assume in writing Issuer's
obligations under this Agreement. "Major Transaction" shall mean any merger or
consolidation involving the Issuer and any transaction involving a sale,
transfer or other disposition of a majority of the assets or shares of capital
stock of the Issuer.
10. Extension of Exercise Periods. The 120 and 270 day periods for
exercise of certain rights under Sections 2 and 9 shall be extended in each such
case at the request of Holder or Owner to the extent necessary to avoid
liability by a Holder or Owner under Section 16(b) of the Securities Exchange
Act of 1934, as amended, by reason of such exercise.
11. Assignment. Neither party hereto may assign any of its rights or
obligations under this Agreement or the Option to any other person without the
express written consent of the other party except that Holder or Owner may
assign its rights in whole or in part to any of its affiliates and, in the event
that a Triggering Event shall have occurred prior to the occurrence of an
Exercise Termination Event, Holder or Owner may within 90 days following such
Triggering Event assign the Option or any of its other rights hereunder, in
whole or in part to one or more third parties, provided that the affiliate and
any such third party shall execute this Agreement and agree to become subject to
its terms. Any attempted assignment in contravention of the preceding sentence
shall be null and void.
12. Filings; Other Actions. Each party hereto will use its
reasonable best efforts to make all filings with, and to obtain consents of, all
third parties and govern mental authorities necessary for the consummation of
the transactions contemplated by this Agreement.
13. Specific Performance. The parties acknowledge that damages would
be an inadequate remedy for a breach of this Agreement by either party and that
the obligations of the parties shall be specifically enforceable through
injunctive or other equitable relief.
14. Severability; Etc. If any term, provision, covenant, or
restriction contained in this Agreement is held by a court or a federal or state
regulatory agency of competent jurisdiction to be invalid, void, or
unenforceable, the remainder of the terms, provisions, covenants, and
restrictions contained in this Agreement shall remain in full force and effect,
and shall in no way be affected, impaired, or invalidated. If for any reason a
court or regulatory agency determines that Holder is not permitted to acquire,
or Issuer is not permitted to repurchase pursuant to Section 9, any portion of
the Option or the full number of shares of Common Stock provided in Section l(a)
hereof (as adjusted
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pursuant Section 1(b) and 7 hereof), it is the express intention of the parties
to allow Holder to acquire or to require Issuer to repurchase such lesser
portion of the Option or number of shares as may be permissible, without any
amendment or modification of this Agreement.
15. Notices. All notices, requests, instructions, or other documents
to be given hereunder shall be furnished in accordance with Section 9.2 of the
Merger Agreement.
16. Expenses. Except as otherwise expressly provided in this
Agreement or in the Merger Agreement, all costs and expenses incurred in
connection with this Agreement and the transactions contemplated by this
Agreement shall be paid by the party incurring the expense, including fees and
expenses of its own financial consultants, investment bankers, accountants, and
counsel.
17. Entire Agreement, Etc. This Agreement and Merger Agreement
constitute the entire agreement, and supersede all other prior agreements,
understandings, representations and warranties, both written and oral, between
the parties, with respect to the subject matter of this Agreement. The terms and
conditions of this Agreement shall inure to the benefit of and be binding upon
the parties hereto and their respective successors and permitted assigns.
Nothing in this Agreement, expressed or implied, is intended to confer upon any
party, other than the parties, and their respective successors and permitted
assigns, any rights, remedies, obligations or liabilities under or by reason of
this Agreement, except as expressly provided in this Agreement.
18. Limitation on Profit. (a) Notwithstanding any other provision of
this Agreement, in no event shall the Total Profit (as hereinafter defined) plus
any Liquidation Amounts (as defined below) exceed in the aggregate $360 million
and, if it otherwise would exceed this amount, the Grantee, at its sole
election, shall either (i) reduce the number of shares of Common Stock subject
to this Option, (ii) deliver to the Issuer for cancellation Option Shares
previously purchased by Grantee or any other Holder or Owner, (iii) pay to the
Issuer cash or refund in cash Liquidation Amounts previously paid or reduce or
waive the amount of any Liquidation Amount payable pursuant to Section 8.2, or
(iv) any combination thereof, so that Grantee's realized Total Profit, when
aggregated with any Liquidation Amounts so paid or payable to Grantee, shall not
exceed $360 million after taking into account the foregoing actions.
As used herein the term "Liquidation Amounts" means the aggregate
amount of all Fees and Expenses, and Termination Fees, payable or paid to
Grantee and its assigns pursuant to Section 8.2 of the Merger Agreement (and not
repaid or refunded to the Issuer pursuant to Section 18 or otherwise).
(b) Notwithstanding any other provision of this Agreement, the
Option may not be exercised for a number of shares as would, as of the date of
exercise, result in
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a Notional Total Profit (as defined below) which, together with any Liquidation
Amount theretofore paid or then payable to Grantee (and not repaid or refunded
to the Issuer pursuant to Section 18 or otherwise), would exceed $360 million
provided, that nothing in this sentence shall restrict any exercise of the
Option permitted hereby on any subsequent date.
(c) As used in this Agreement, the term "Total Profit" shall mean
the aggregate amount (before taxes) of the following: (i) (x) the amount
received by Grantee, any other Holder and any Owner pursuant to Issuer's
repurchase of the Option (or any portion thereof) or any Option Shares pursuant
to Section 9, less, in the case of any repurchase of Option Shares, (y) the
Grantee's, any other Holder's and any Owner's purchase price for such Option
Shares, as the case may be, (ii) (x) the net cash amounts (and the fair market
value of any other consideration) received by Grantee, any other Holder and any
Owner pursuant to the sale of Option Shares (or any other securities into which
such Option Shares are converted or exchanged) to any unaffiliated party, less
(y) the Grantee's (or any other Holder's or Owner's) purchase price of such
Option Shares, and (iii) the net cash amounts (and the fair market value of any
other consideration) received by Grantee (or any other Holder) on the transfer
of the Option (or any portion thereof) to any unaffiliated party. In the case of
clauses (ii)(x) and (iii) above, the Grantee and each Holder and Owner agrees to
furnish as promptly as reasonably practicable after any disposition of all or a
portion of the Option or Option Shares a complete and correct statement,
certified by a responsible executive officer or partner of Grantee, Holder or
Owner, as applicable, of the net cash amounts (and the fair market value of any
other consideration) received in connection with any sale or transfer of the
Option or Option Shares.
(d) As used in this Agreement, the term "Notional Total Profit" with
respect to any number of shares as to which Grantee and any other Holder may
propose to exercise the Option shall be the Total Profit determined as of the
date of such proposal (taking into account the provision of Section 18(a)
hereof) assuming that the Option were exercised on such date for such number of
shares and assuming that such shares, together with all other Option Shares held
by Grantee and any other Holders and Owners and their respective affiliates as
of such date were sold for cash at the closing market price for the Common Stock
on the New York Stock Exchange Composite Transaction Tape as of the close of
business on the preceding trading day (less customary brokerage commissions).
19. Captions. The section, paragraph and other captions in this
Agreement are for convenience of reference only, do not constitute part of this
Agreement and shall not be deemed to limit or otherwise affect any of the
provisions of this Agreement.
20. Counterparts. This Agreement may be executed in one or more
counterparts, and by both parties in separate counterparts, each of which when
exercised
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<PAGE>
shall be deemed to be an original, but all of which shall constitute
one and the same agreement.
21. Restrictions on Certain Actions; Covenants of Grantee. From and
after the date of exercise of the Option in whole or part, and for as long as
Grantee owns shares of Common Stock acquired pursuant to the exercise of the
Option:
(a) Without the prior consent of the Board of Directors of Issuer
specifically expressed in a resolution, Grantee will not, and will not permit
any of its Affiliates (as defined in Section 23) to:
(i)acquire or agree, offer, seek or propose to acquire,
ownership (including, but not limited to, beneficial
ownership as defined in Rule 13d-3 under the Securities
Exchange Act of 1934, as amended) of more than 20% of any
class of Voting Securities (as defined in Section 23), or
any rights or options to acquire such ownership (including
from a third party);
(ii) propose a merger, consolidation or similar transaction
involving the Issuer;
(iii) offer, seek or propose to purchase, lease or otherwise
acquire all or a substantial portion of the assets of the
Issuer;
(iv) seek or propose to influence or control the management or
policies of the Issuer or to obtain representation on the
Issuer's Board of Directors, or solicit or participate in
the solicitation of any proxies or consents with respect to
the securities of the Issuer;
(v)enter into any discussions, negotiations, arrangements or
understandings with any third party with respect to any of
the foregoing; or
(vi) seek or request permission to do any of the foregoing or
seek any permission to make any public announcement with
respect to any of the foregoing.
The provisions of this Section 21 shall not apply to actions taken
pursuant to the Merger Agreement; and
(b) Grantee may not sell, transfer any beneficial interest in,
pledge, hypothecate or otherwise dispose of any Voting Securities at any time
except as follows:
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<PAGE>
(i)pursuant to a tender offer, exchange offer, merger or
consolidation of the Issuer, or in connection with a sale
of all or substantially all of the Issuer's assets; or
(ii) pursuant to a registered public offering under Section 8;
or
(iii) in compliance with Rule 144 of the General Rules and
Regulations under the Securities Act (or any similar
successor rule); and
(c) (i) Grantee agrees to be present in person or to be represented
by proxy at all stockholder meetings of Issuer so that all shares of Voting
Securities beneficially owned by it or its Affiliates may be counted for the
purpose of determining the presence of a quorum at such meetings.
(ii) Grantee agrees to vote or cause to be voted all Voting
Securities beneficially owned by it or its Affiliates proportionately with the
votes cast by all other stockholders present and voting.
(iii) The provision of this Section 21 shall terminate at such
time as (x) Grantee beneficially owns more than 50% of the outstanding Common
Stock of Issuer or (y) the Option granted hereby expires without having been
exercised in whole or part.
22. Governing Law. This Agreement shall be governed by and continued
in accordance with the internal law of the State of Delaware
23. Definitions. For the purposes of this Agreement the following
terms shall have the meanings specified with respect thereto below:
"Affiliate" shall mean, as to any Person, any other Person
which directly or indirectly controls, or is under common control with, or is
controlled by, such Person. As used in this definition, "control" (including,
with its correlative meanings, "controlled by" and "under common control with")
shall mean the possession, directly or indirectly, of the power to direct or
cause the direction of management or policies, whether through ownership or
securities or partnership or other ownership interest, by contract or
otherwise).
"Voting Securities" means the shares of Common Stock,
preferred stock and any other securities of Issuer entitled to vote generally
for the election of directors or any other securities (including, without
limitation, rights and options), convertible into, exchangeable into or
exercisable for, any of the foregoing (whether or not presently exercisable,
convertible or exchangeable).
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"Person" means an individual, corporation, partnership,
limited liability company, association, trust, unincorporated organization,
entity or group (as defined in the Exchange Act).
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IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the duly authorized officers of the parties hereto as of the date
first written above.
ALBERTSON'S, INC.
By: /s/ Michael F. Reuling
Name: Michael F. Reuling
Title: Executive Vice President;
Store Development
AMERICAN STORES COMPANY
By: /s/ Victor L. Lund
Name: Victor L. Lund
Title: Chief Executive Officer
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THE TRANSFER OF THIS AGREEMENT IS SUBJECT TO CERTAIN
PROVISIONS CONTAINED HEREIN AND TO RESALE RESTRICTIONS UNDER
THE SECURITIES ACT OF 1933, AS AMENDED
STOCK OPTION AGREEMENT, dated as of August 2, 1998 (this
"Agreement"), between American Stores Company, a Delaware corporation
("Issuer"), and Albertson's, Inc., a Delaware corporation ("Grantee").
WHEREAS, Issuer, Grantee, and a wholly-owned subsidiary of
Grantee (the "Merger Sub") propose to enter into an Agreement and Plan of
Merger, to be dated as of the date hereof (the "Merger Agreement"), pursuant to
which Merger Sub is to merge with and into Issuer, with Issuer continuing as the
surviving corporation and a wholly owned subsidiary of Grantee after such
merger, and in such merger, each share of common stock, par value $1.00 per
share, of Issuer ("Common Stock") will be converted to a right to receive shares
of common stock, par value $1.00 per share, of Grantee as provided in the Merger
Agreement;
WHEREAS, as an inducement and condition to Grantee's
willingness to enter into the Merger Agreement and in consideration thereof,
Issuer is granting to Grantee, pursuant to the terms and subject to the
conditions contained in this Agreement, an option to purchase 19.9 % of the
outstanding shares of Common Stock; and
WHEREAS, the Board of Directors of Issuer has approved the
grant by Issuer to Grantee of the Option (defined below) pursuant to this
Agreement.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements set forth in this Agreement and in the Merger
Agreement, the parties agree as follows:
1. The Option. Issuer hereby grants to Grantee an
unconditional, irrevocable option (the "Option") to purchase, pursuant to the
terms and subject to the conditions hereof, up to 54.5 million fully paid and
nonassessable shares of Common Stock at a price of $30.24 per share (the "Option
Price"); provided, however, that in no event shall the number of shares for
which the Option is exercisable exceed 19.9 % of the shares of Common Stock
issued and outstanding at the time of exercise (without giving effect to the
shares of Common Stock issued or issuable under the Option). The number of
shares of Common Stock purchasable upon exercise of the Option and the Option
Price are subject to adjustment as set forth in this Agreement.
<PAGE>
2. Exercise; Closing.
(a) Conditions to Exercise; Termination. Grantee or any other
person that shall become a holder of all or a part of the Option in accordance
with the terms of this Agreement (each such person, including Grantee, being
referred to as "Holder") may exercise the Option, in whole or in part, from time
to time, and prior to the occurrence of an Exercise Termination Event (as
defined below), provided that the Holder shall have delivered a written notice
as provided in Section 2(d) within 120 days of the occurrence of a Triggering
Event (as defined in Section 2(b)). The right to exercise the Option shall
terminate upon either (i) the occurrence of the Effective Time (as defined in
the Merger Agreement) or (ii) (A) if a Notice Date (as defined in Section 2(d)
hereof) has not previously occurred, the close of business on the earlier of (x)
the day that is 120 days after the date of a Triggering Event, (y) the date upon
which the Merger Agreement is terminated if no Termination Fee could be payable
by Issuer pursuant to the terms of the Merger Agreement upon the occurrence of
certain events or the passage of time, and (z) 270 days following the date upon
which the Merger Agreement is terminated, and (B) if the Notice Date has
previously occurred, 120 days after the Notice Date (the events in (i) or (ii)
being referred to as "Exercise Termination Events".)
(b) Triggering Event. A "Triggering Event" shall have occurred
at such time at which the Grantee becomes entitled to receive from Issuer a
Termination Fee pursuant to Section 8.2 of the Merger Agreement.
(c) Notice of Trigger Event by Issuer. Issuer shall notify
Grantee promptly in writing of the occurrence of any Triggering Event (it being
understood that the giving of the notice by Issuer shall not be a condition to
the right of Holder to exercise the option).
(d) Notice of Exercise. If Holder shall be entitled to and
desires to exercise the Option, in whole or in part, it shall send to Issuer a
written notice (any date on which such notice is given, in accordance with
Section 15 hereof, is referred to as a "Notice Date") specifying (i) the total
number of shares that Holder will purchase pursuant to the exercise and (ii) a
place and date (a "Closing Date") not earlier than three business days nor later
than 60 business days from the Notice Date for the closing of the purchase (a
"Closing"); provided, that if a filing or any approval is required under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), or prior notification to or prior approval from any regulatory authority
is required under any other law, statute, rule or regulation (including
applicable rules and regulations of national securities exchanges) in connection
with such purchase, Holder or Issuer, as required, promptly after the Notice
Date, shall file all necessary notices and applications for approval and shall
expeditiously process the same and the period of time referred to in clause (ii)
shall commence on the date on which all required notification and waiting
periods, if any, shall have expired or been terminated and all required
approvals, if any,
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shall have been obtained. Any exercise of the Option shall be deemed to occur on
the date of the Notice Date relating thereto. Each of Holder and Issuer agrees
to use its reasonable best efforts to cooperate with and provide information to
the other, for the purpose of any required notice or application for approval.
(e) Payment of Purchase Price; Delivery of Common Stock. (i)
At each Closing, Holder shall pay to Issuer the aggregate purchase price for the
shares of Common Stock purchased pursuant to the exercise of the Option in
immediately available funds by a wire transfer to a bank account designated by
Issuer; provided, that failure or refusal of Issuer to designate a bank account
shall not preclude Holder from exercising the Option, in whole or in part.
(ii) At each Closing, simultaneously with the payment of the
aggregate purchase price by Holder, Issuer shall deliver to Holder a certificate
or certificates representing the number of shares of Common Stock purchased by
Holder and, if the Option shall be exercised in part only, a new Agreement
providing for an Option evidencing the rights of Holder to purchase the balance
(as adjusted pursuant to Section l(b)) of the shares then purchasable hereunder
and the Holder shall deliver this Agreement and a letter agreeing that the
Holder will not offer to sell or otherwise dispose of such shares in violation
of applicable laws or the provisions of this Agreement.
(iii) Notwithstanding anything to the contrary contained in
paragraphs (i) and (ii) of this Section 2(e), Holder shall have the right (a
"Cashless Exercise Right") to direct the Issuer, in the written notice of
exercise referred to in Section 2(d), to reduce the number of shares of Common
Stock required to be delivered by Issuer to Holder at any Closing by such number
of shares of Common Stock that have an aggregate Market/Offer Price (as defined
in Section 9(a)) equal to the aggregate purchase price payable at such Closing
(but for this paragraph (iii)), or any portion thereof, in lieu of Holder paying
to the Issuer at such Closing such aggregate purchase price or portion thereof,
as the case may be. Any exercise of the Option in which, and to the extent to
which, Holder exercises its Cashless Exercise Right pursuant to this paragraph
(iii) shall be referred to as a "Cashless Exercise."
(f) Restrictive Legend. Certificates for Common Stock
delivered at a Closing may be endorsed with a restrictive legend that shall read
substantially as follows:
"The transfer of the shares represented by this certificate is
subject to certain provisions of an agreement between the registered
holder hereof and Issuer, a copy of which agreement is on file at the
principal office of Issuer, and to resale restrictions arising under
the Securities Act of 1933, as amended. A copy of the aforementioned
agreement will be mailed to the holder without charge promptly after
receipt by Issuer of a written request therefor."
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It is understood and agreed that: (i) the reference to the resale restrictions
of the Securities Act of 1933, as amended (the "Securities Act"), in the above
legend shall be removed by delivery of substitute certificate(s) without such
reference if Holder shall have delivered to Issuer a copy of a letter from the
staff of the Securities and Exchange Commission, or a written opinion of
counsel, in form and substance reasonably satisfactory to Issuer, to the effect
that such legend is not required for purposes of the Securities Act; (ii) the
reference to the provisions of this Agreement in the above legend shall be
removed by delivery of substitute certificate(s) without such reference if the
shares have been sold or transferred in compliance with the provisions of this
Agreement and under circumstances that do not require the retention of such
reference; and (iii) the legend shall be removed in its entirety if the
conditions in the preceding clauses (i) and (ii) both are satisfied. In
addition, the certificates shall bear any other legend as may be required by
applicable law.
(g) Ownership of Record; Tender of Purchase Price; Expenses.
Upon the giving by Holder to Issuer of the written notice of exercise referred
to in Section 2(d) and, except to the extent such notice relates to a Cashless
Exercise, the tender of the applicable purchase price in immediately available
funds, Holder shall be deemed to be the holder of record of the shares of Common
Stock issuable upon such exercise, notwithstanding that the stock transfer books
of Issuer shall then be closed or that certificates representing such shares of
Common Stock shall not have been actually delivered to Holder. Issuer shall pay
all expenses, and any and all United States federal, state and local taxes and
other charges that may be payable in connection with the preparation, issuance
and delivery of stock certificates under this Section 2 in the name of Holder or
its assignee, transferee or designee.
3. Covenants of Issuer. In addition to its other
agreements and covenants herein, Issuer agrees:
(a) Shares Reserved for Issuance. To maintain, free from
preemptive rights, sufficient authorized but unissued or treasury shares of
Common Stock so that the Option may be fully exercised without additional
authorization of Common Stock after giving effect to all other options,
warrants, convertible securities and other rights of third parties to purchase
shares of Common Stock;
(b) No Avoidance. Not to avoid or seek to avoid (whether by
charter amendment or through reorganization, consolidation, merger, issuance of
rights, dissolution or sale of assets, or by any other voluntary act) the
observance or performance of any of the covenants, agreements or conditions to
be observed or performed hereunder by Issuer and not to take any action which
would cause any of its representations or warranties not to be true; and
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(c) Further Assurances. Promptly after the date hereof to take
all actions as may from time to time be required (including (i) complying with
all applicable premerger notification, reporting and waiting period requirements
under the HSR Act and (ii) in the event that any other prior approval of or
notice to any regulatory authority is necessary under any applicable federal,
state or local law before the Option may be exercised, cooperating fully with
Holder in preparing and processing the required applications or notices) in
order to permit Holder to exercise the Option and purchase shares of Common
Stock pursuant to such exercise.
4. Representations and Warranties of Issuer. Issuer hereby
represents and warrants to Holder that Issuer has all requisite corporate power
and authority and has taken all corporate action necessary to authorize,
execute, deliver and perform its obligations under this Agreement and to
consummate the transactions contemplated hereby; and that this Agreement has
been duly and validly authorized, executed and delivered by Issuer. Issuer
hereby further represents and warrants to Holder that it has taken all necessary
corporate action to authorize and reserve for issuance upon exercise of the
Option the number of shares of Common Stock equal to the maximum number of
shares of Common Stock at any time or from time to time issuable upon exercise
of the Option and that all shares of Common Stock, upon issuance pursuant to the
Option, will be delivered free and clear of all claims, liens, encumbrances, and
security interests (other than those created by this Agreement) and not subject
to any preemptive rights. The execution and delivery of this Agreement, the
grant of the Option hereunder and the exercise in whole or in part of the Option
in accordance with this Agreement, will not (i) result in the occurrence of any
"Distribution Date," Stock Acquisition Date" or "Triggering Event" under any
rights agreement of the Issuer, (ii) permit any Person to exercise any rights
issued under such rights agreement, or (iii) cause the separation of any such
rights from the shares of Common Stock to which they are attached or such rights
becoming exercisable. Issuer has taken all action necessary to make inapplicable
to Grantee any state takeover, business combination, control share or other
similar statute and any charter provisions which would otherwise be applicable
to Grantee or any transaction involving Issuer and Grantee by reason of the
grant of the Option, the acquisition of beneficial ownership of shares of Common
Stock as a result of the grant of the Option, or the acquisition of shares of
Common Stock upon exercise of the Option, except for statutes or provisions
which by their terms cannot be waived or rendered inapplicable by any action of
Issuer or the Board of Directors of Issuer.
5. Representations and Warranties of Grantee. Grantee hereby
represents and warrants to Issuer that Grantee has all requisite corporate power
and authority and has taken all corporate action necessary in order to
authorize, execute, deliver and perform its obligations under this Agreement and
to consummate the transactions contemplated hereby. This Agreement has been duly
and validly authorized, executed and delivered by Grantee. Grantee represents
and warrants to Issuer that any shares of Common Stock acquired upon exercise of
the Option will be acquired for
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Grantee's own account, and will not be, and the Option is not being, acquired by
Grantee with a view to the distribution thereof in violation of any applicable
provision of the Securities Act. Grantee has such knowledge and experience in
business and financial matters as to be capable of utilizing the information
which is available to Grantee to evaluate the merits and risks of an investment
by Grantee in the Common Stock and Grantee is able to bear the economic risks of
any investment in the shares of Common Stock which Grantee may acquire upon
exercise of the Option.
6. Exchange; Replacement. This Agreement and the Option are
exchangeable, without expense, at the option of Holder, upon presentation and
surrender of this Agreement at the principal office of Issuer, for other
Agreements providing for Options of different denominations entitling the holder
thereof to purchase on the same terms and subject to the same conditions as set
forth herein in the aggregate the same number of shares of Common Stock
purchasable at such time hereunder, subject to corresponding adjustments in the
number of shares of Common Stock purchasable upon exercise so that the aggregate
number of such shares under all Agreements issued in respect of this Agreement
shall not exceed 19.9 % of the outstanding shares of Common Stock of the Issuer
(without giving effect to shares of Common Stock issued or issuable pursuant to
the Option). Unless the context shall require otherwise, the terms "Agreement"
and "Option" as used in this Agreement include any Agreements and related
options for which this Agreement (and the Option granted hereby) may be
exchanged. Upon (i) receipt by Issuer of reasonably satisfactory evidence of the
loss, theft, destruction, or mutilation of this Agreement, (ii) receipt by
Issuer of reasonably satisfactory indemnification in the case of loss, theft or
destruction and (iii) surrender and cancellation of this Agreement in the case
of mutilation, Issuer will execute and deliver a new Agreement of like tenor and
date. Any new Agreement executed and delivered shall constitute an additional
contractual obligation on the part of Issuer, whether or not the Agreement so
lost, stolen, destroyed or mutilated shall at any time be enforceable by any
person other than the holder of the new Agreement.
7. Adjustments. The total number of shares of Common Stock
purchasable upon the exercise of the Option and the Option Price shall be
subject to adjustment from time to time as follows:
In the event of any change in, or distribution in
respect of, the outstanding shares of Common Stock by reason of stock dividends,
split-ups, mergers, recapitalizations, combinations, subdivisions, conversions,
exchanges of shares or the like, the type (including, in the event of any Major
Transaction described in Section 9(d) hereof in which Issuer is not the
surviving or continuing corporation, to provide that the Option shall be
exercisable for shares of common stock of the surviving or continuing
corporation in such Major Transaction) and number of shares of Common Stock
purchasable upon exercise of the Option and the Option Price shall be
appropriately adjusted in such manner as shall fully preserve the economic
benefits contemplated
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hereby, and proper provision shall be made in the agreements governing any such
transactions to provide for such proper adjustment and the full satisfaction of
Issuer's obligation hereunder.
8. Registration. At any time after a Triggering Event occurs and prior to an
Exercise Termination Event, Issuer shall, at the request of Grantee delivered in
the written notice of exercise of the Option provided for in Section 2(d), and,
with respect to the first demand registration as to which Grantee exercises its
demand rights under this Section 8, delivered no later than 90 days following
such Triggering Event, as promptly as practicable prepare, file and keep current
a shelf registration statement under the Securities Act covering any or all
shares issued and issuable pursuant to the Option and shall use its reasonable
best efforts to cause such registration statement to become effective and remain
current in order to permit the sale or other disposition of any shares of Common
Stock issued upon total or partial exercise of the Option ("Option Shares") in
accordance with any plan of disposition requested by Grantee; provided, however,
that Issuer may postpone filing a registration statement relating to a
registration request by Grantee under this Section 8 for a period of time (not
in excess of 90 days) if in Grantee's judgment such filing would require the
disclosure of material information that Issuer has a bona fide business purpose
for preserving as confidential. Issuer will use its reasonable best efforts to
cause such registration statement first to become effective and then to remain
effective for 365 days after the day the registration statement first becomes
effective or such shorter time as is reasonably appropriate to effect such sales
or other dispositions. Grantee shall have the right to demand two such
registrations. In connection with any such registration, Issuer and Holder shall
provide each other with representations, warranties, indemnities and other
agreements customarily given in connection with such registrations. To the
extent requested by Holder in connection with such registration, Issuer shall
(x) become a party to any underwriting agreement relating to the sale of such
shares, but only to the extent of obligating Issuer in respect of
representations, warranties, indemnities, contribution and other agreements (in
each case reasonably acceptable to Issuer) customarily made by issuers in such
underwriting agreements, and (y) use its reasonable best efforts to take all
further actions which shall be reasonably necessary to effect such registration
and sale (including participating in road-show presentations and causing to be
delivered customary certificates, opinions of counsel and "comfort letters").
Notwithstanding anything to the contrary contained herein, in no event shall
Issuer be obligated to effect more than two registrations pursuant to this
Section 8 by reason of the fact that there shall be more than one Grantee as a
result of any assignment or division of this Agreement. Upon the effectiveness
of a registration statement demanded pursuant to this Section 8, the Holder of
the Option Shares that are the subject of such registration may not thereafter
require the Issuer to repurchase such Option Shares so long as such registration
statement remains effective as required hereby.
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9. Repurchase of Option and/or Shares.
(a) Repurchase; Repurchase Price. Upon the occurrence of a
Triggering Event prior to an Exercise Termination Event, (i) at the request of
Holder, delivered in writing within 120 days of such occurrence (or such later
period as provided in Section 2(d) with respect to any required notice or
application or in Section 10), Issuer shall repurchase the Option from Holder,
in whole or in part, at a price (the "Option Repurchase Price") equal to the
number of shares of Common Stock then purchasable upon exercise of the Option
(or such lesser number of shares as may be designated in the Repurchase Notice
(as defined in Section 9(b))) multiplied by the amount by which the Market/Offer
Price (as defined below) exceeds the Option Price or (ii) at the request of any
owner of Option Shares (an "Owner") delivered in writing within 120 days of such
occurrence (or such later period as provided in Section 2(d) with respect to any
required notice or application or in Section 10), Issuer shall repurchase such
number of Option Shares from such Owner as such Owner shall designate in the
Repurchase Notice at a price (the "Option Share Repurchase Price") equal to the
number of shares designated multiplied by the Market/Offer Price. The term
"Market/Offer Price" shall mean the highest of (x) the price per share of Common
Stock at which a tender or exchange offer for Common Stock either has been
consummated, or at which a Person has publicly announced its intention to
commence a tender or exchange offer, after the date of this Agreement and prior
to the delivery of the Repurchase Notice, and which offer either has been
consummated and not withdrawn or terminated as of the date payment of the
Repurchase Price is made, or has been publicly announced and such intention to
make a tender or exchange offer has not been withdrawn as of the date payment of
the Repurchase Price is made, (y) the price per share of Common Stock to be paid
by any third party pursuant to an agreement with Issuer for a merger, share
exchange, consolidation or reorganization entered into after the date hereof and
on or prior to the delivery of the Repurchase Notice and (z) the average closing
price for shares of Common Stock on the New York Stock Exchange (the "NYSE")
(or, if the Common Stock is not then listed on the NYSE, any other national
securities exchange or automated quotation system on which the Common Stock is
then listed or quoted) for the twenty consecutive trading days immediately
preceding the delivery of the Repurchase Notice. In the event that a tender or
exchange offer is made for the Common Stock or an agreement is entered into for
a merger, share exchange, consolidation or reorganization involving
consideration other than cash, the value of the securities or other property
issuable or deliverable in exchange for the Common Stock shall be determined in
good faith by a nationally recognized investment banking firm mutually selected
by Issuer and Holder or Owner, as the case may be.
(b) Method of Repurchase. Holder or Owner, as the case may be,
may exercise its right to require Issuer to repurchase the Option, in whole or
in part, and/or any Option Shares then owned by Holder or Owner pursuant to this
Section 9 by surrendering for this purpose to Issuer, at its principal office,
this Agreement or
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certificates for Option Shares, as applicable, accompanied by a written notice
or notices stating that Holder or Owner elects to require Issuer to repurchase
the Option and/or such Option Shares in accordance with the provisions of this
Section 9 (each such notice, a "Repurchase Notice"). Within four business days
after the surrender of the Agreement for the Option and/or certificates
representing Option Shares and the receipt of the Repurchase Notice, Issuer
shall deliver or cause to be delivered to Holder or Owner of Option Shares, as
the case may be, the applicable Option Repurchase Price and/or the Option Share
Repurchase Price or, in either case, the portion that Issuer is not then
prohibited under applicable law and regulation from so delivering in immediately
available funds by a wire transfer to a bank account designated by grantee. In
the event that the Repurchase Notice shall request the repurchase of the Option
in part, Issuer shall deliver with the Option Repurchase Price a new Agreement
evidencing the right of the Holder to purchase that number of shares of Common
Stock purchasable pursuant to the Option at the time of delivery of the
Repurchase Notice minus the number of shares of Common Stock represented by that
portion of the Option then being repurchased.
(c) Effect of Statutory or Regulatory Restraints on
Repurchase. To the extent that, upon or following the delivery of a Repurchase
Notice, Issuer is prohibited under applicable law or regulation from
repurchasing the Option (or a portion thereof) and/or any Option Shares subject
to such Repurchase Notice (and Issuer hereby undertakes to use its reasonable
best efforts to obtain all required regulatory and legal approvals and to file
any required notices as promptly as practicable in order to accomplish this
repurchase), Issuer shall promptly so notify Holder or Owner, as the case may
be, in writing and thereafter deliver or cause to be delivered, from time to
time, to Holder or Owner, as the case may be, the portion of the Option
Repurchase Price and the Option Share Repurchase Price that Issuer is no longer
prohibited from delivering, within four business days after the date on which it
is no longer so prohibited; provided, however, that upon notification by Issuer
in writing of this prohibition, Holder or Owner, as the case may be, may, within
5 days of receipt of this notification from Issuer, revoke in writing its
Repurchase Notice, whether in whole or to the extent of the prohibition,
whereupon, in the latter case, Issuer shall promptly (i) deliver to Holder or
Owner, as the case may be, that portion of the Option Repurchase Price and/or
the Option Share Repurchase Price that Issuer is not prohibited from delivering;
and (ii) (a) deliver to Holder with respect to the Option, a new Agreement
evidencing the right of Holder to purchase that number of shares of Common Stock
for which the surrendered Agreement was exercisable at the time of delivery of
the Repurchase Notice less the number of shares as to which the Option
Repurchase Price has theretofore been delivered to Holder, and/or (b) deliver to
the owner of Option Shares, with respect to its Option Shares, a certificate for
the Option Shares as to which the Option Share Repurchase Price has not
theretofore been delivered to such owner. Notwithstanding anything to the
contrary in this Agreement, including, without limitation, the time limitations
on the exercise of the Option, Holder may exercise the Option at least until 120
days after such date upon which Issuer is no longer prohibited from delivering
all of the Option Repurchase Price.
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(d) Major Transactions. Issuer hereby agrees that, prior to
the occurrence of an Exercise Termination Event, Issuer shall not enter into or
agree to enter into any agreement for a Major Transaction (defined below) unless
the other party or parties thereto agree to assume in writing Issuer's
obligations under this Agreement. "Major Transaction" shall mean any merger or
consolidation involving the Issuer and any transaction involving a sale,
transfer or other disposition of a majority of the assets or shares of capital
stock of the Issuer.
10. Extension of Exercise Periods. The 120 and 270 day periods
for exercise of certain rights under Sections 2 and 9 shall be extended in each
such case at the request of Holder or Owner to the extent necessary to avoid
liability by a Holder or Owner under Section 16(b) of the Securities Exchange
Act of 1934, as amended, by reason of such exercise.
11. Assignment. Neither party hereto may assign any of its
rights or obligations under this Agreement or the Option to any other person
without the express written consent of the other party except that Holder or
Owner may assign its rights in whole or in part to any of its affiliates and, in
the event that a Triggering Event shall have occurred prior to the occurrence of
an Exercise Termination Event, Holder or Owner may within 90 days following such
Triggering Event assign the Option or any of its other rights hereunder, in
whole or in part to one or more third parties, provided that the affiliate and
any such third party shall execute this Agreement and agree to become subject to
its terms. Any attempted assignment in contravention of the preceding sentence
shall be null and void.
12. Filings; Other Actions. Each party hereto will use its
reasonable best efforts to make all filings with, and to obtain consents of, all
third parties and govern mental authorities necessary for the consummation of
the transactions contemplated by this Agreement.
13. Specific Performance. The parties acknowledge that damages
would be an inadequate remedy for a breach of this Agreement by either party and
that the obligations of the parties shall be specifically enforceable through
injunctive or other equitable relief.
14. Severability; Etc. If any term, provision, covenant, or
restriction contained in this Agreement is held by a court or a federal or state
regulatory agency of competent jurisdiction to be invalid, void, or
unenforceable, the remainder of the terms, provisions, covenants, and
restrictions contained in this Agreement shall remain in full force and effect,
and shall in no way be affected, impaired, or invalidated. If for any reason a
court or regulatory agency determines that Holder is not permitted to acquire,
or Issuer is not permitted to repurchase pursuant to Section 9, any portion of
the Option or the full number of shares of Common Stock provided in Section l(a)
hereof (as adjusted
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pursuant Section 1(b) and 7 hereof), it is the express intention of the parties
to allow Holder to acquire or to require Issuer to repurchase such lesser
portion of the Option or number of shares as may be permissible, without any
amendment or modification of this Agreement.
15. Notices. All notices, requests, instructions, or other
documents to be given hereunder shall be furnished in accordance with Section
9.2 of the Merger Agreement.
16. Expenses. Except as otherwise expressly provided in this
Agreement or in the Merger Agreement, all costs and expenses incurred in
connection with this Agreement and the transactions contemplated by this
Agreement shall be paid by the party incurring the expense, including fees and
expenses of its own financial consultants, investment bankers, accountants, and
counsel.
17. Entire Agreement, Etc. This Agreement and Merger Agreement
constitute the entire agreement, and supersede all other prior agreements,
understandings, representations and warranties, both written and oral, between
the parties, with respect to the subject matter of this Agreement. The terms and
conditions of this Agreement shall inure to the benefit of and be binding upon
the parties hereto and their respective successors and permitted assigns.
Nothing in this Agreement, expressed or implied, is intended to confer upon any
party, other than the parties, and their respective successors and permitted
assigns, any rights, remedies, obligations or liabilities under or by reason of
this Agreement, except as expressly provided in this Agreement.
18. Limitation on Profit. (a) Notwithstanding any other
provision of this Agreement, in no event shall the Total Profit (as hereinafter
defined) plus any Liquidation Amounts (as defined below) exceed in the aggregate
$265 million, and, if it otherwise would exceed this amount, the Grantee, at its
sole election, shall either (i) reduce the number of shares of Common Stock
subject to this Option, (ii) deliver to the Issuer for cancellation Option
Shares previously purchased by Grantee or any other Holder or Owner, (iii) pay
to the Issuer cash or refund in cash Liquidation Amounts previously paid or
reduce or waive the amount of any Liquidation Amount payable pursuant to Section
8.2, or (iv) any combination thereof, so that Grantee's realized Total Profit,
when aggregated with any Liquidation Amounts so paid or payable to Grantee,
shall not exceed $265 million after taking into account the foregoing actions.
As used herein the term "Liquidation Amounts" means the
aggregate amount of all Fees and Expenses, and Termination Fees, payable or paid
to Grantee and its assigns pursuant to Section 8.2 of the Merger Agreement (and
not repaid or refunded to the Issuer pursuant to this Section 18 or otherwise).
(b) Notwithstanding any other provision of this Agreement, the
Option may not be exercised for a number of shares as would, as of the date of
exercise, result in
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a Notional Total Profit (as defined below) which, together with any Liquidation
Amount theretofore paid or then payable to Grantee (and not repaid or refunded
to the Issuer pursuant to this Section 18 or otherwise), would exceed $265
million provided, that nothing in this sentence shall restrict any exercise of
the Option permitted hereby on any subsequent date.
(c) As used in this Agreement, the term "Total Profit" shall
mean the aggregate amount (before taxes) of the following: (i) (x) the amount
received by Grantee, any other Holder and any Owner pursuant to Issuer's
repurchase of the Option (or any portion thereof) or any Option Shares pursuant
to Section 9, less, in the case of any repurchase of Option Shares, (y) the
Grantee's, any other Holder's and any Owner's purchase price for such Option
Shares, as the case may be, (ii) (x) the net cash amounts (and the fair market
value of any other consideration) received by Grantee, any other Holder and any
Owner pursuant to the sale of Option Shares (or any other securities into which
such Option Shares are converted or exchanged) to any unaffiliated party, less
(y) the Grantee's (or any other Holder's or Owner's) purchase price of such
Option Shares, and (iii) the net cash amounts (and the fair market value of any
other consideration) received by Grantee (or any other Holder) on the transfer
of the Option (or any portion thereof) to any unaffiliated party. In the case of
clauses (ii)(x) and (iii) above, the Grantee and each Holder and Owner agrees to
furnish as promptly as reasonably practicable after any disposition of all or a
portion of the Option or Option Shares a complete and correct statement,
certified by a responsible executive officer or partner of Grantee, Holder or
Owner, as applicable, of the net cash amounts (and the fair market value of any
other consideration) received in connection with any sale or transfer of the
Option or Option Shares.
(d) As used in this Agreement, the term "Notional Total
Profit" with respect to any number of shares as to which Grantee and any other
Holder may propose to exercise the Option shall be the Total Profit determined
as of the date of such proposal (taking into account the provision of Section
18(a) hereof) assuming that the Option were exercised on such date for such
number of shares and assuming that such shares, together with all other Option
Shares held by Grantee and any other Holders and Owners and their respective
affiliates as of such date were sold for cash at the closing market price for
the Common Stock on the New York Stock Exchange Composite Transaction Tape as of
the close of business on the preceding trading day (less customary brokerage
commissions).
19. Captions. The section, paragraph and other captions in
this Agreement are for convenience of reference only, do not constitute part of
this Agreement and shall not be deemed to limit or otherwise affect any of the
provisions of this Agreement.
20. Counterparts. This Agreement may be executed in one or
more counterparts, and by both parties in separate counterparts, each of which
when exercised
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shall be deemed to be an original, but all of which shall constitute one and the
same agreement.
21. Restrictions on Certain Actions; Covenants of Grantee.
From and after the date of exercise of the Option in whole or part, and for as
long as Grantee owns shares of Common Stock acquired pursuant to the exercise of
the Option:
(a) Without the prior consent of the Board of Directors of
Issuer specifically expressed in a resolution, Grantee will not, and will not
permit any of its Affiliates (as defined in Section 23) to:
(i) acquire or agree, offer, seek or propose to
acquire, ownership (including, but not limited
to, beneficial ownership as defined in Rule 13d-3
under the Securities Exchange Act of 1934, as
amended) of more than 20% of any class of Voting
Securities (as defined in Section 23), or any
rights or options to acquire such ownership
(including from a third party);
(ii) propose a merger, consolidation or similar
transaction involving the Issuer;
(iii) offer, seek or propose to purchase, lease or
otherwise acquire all or a substantial portion of
the assets of the Issuer;
(iv)seek or propose to influence or control the
management or policies of the Issuer or to obtain
representation on the Issuer's Board of
Directors, or solicit or participate in the
solicitation of any proxies or consents with
respect to the securities of the Issuer;
(v) enter into any discussions, negotiations,
arrangements or understandings with any third
party with respect to any of the foregoing; or
(vi)seek or request permission to do any of the
foregoing or seek any permission to make any
public announcement with respect to any of the
foregoing.
The provisions of this Section 21 shall not apply to actions
taken pursuant to the Merger Agreement; and
(b) Grantee may not sell, transfer any beneficial interest in,
pledge, hypothecate or otherwise dispose of any Voting Securities at any time
except as follows:
13
<PAGE>
(i) pursuant to a tender offer, exchange offer,
merger or consolidation of the Issuer, or in
connection with a sale of all or substantially
all of the Issuer's assets; or
(ii)pursuant to a registered public offering under
Section 8; or
(iii) in compliance with Rule 144 of the General
Rules and Regulations under the Securities Act
(or any similar successor rule); and
(c) (i) Grantee agrees to be present in person or to be
represented by proxy at all stockholder meetings of Issuer so that all shares of
Voting Securities beneficially owned by it or its Affiliates may be counted for
the purpose of determining the presence of a quorum at such meetings.
(ii) Grantee agrees to vote or cause to be voted all
Voting Securities beneficially owned by it or its Affiliates proportionately
with the votes cast by all other stockholders present and voting.
(iii) The provisions of this Section 21 shall
terminate at such time as (x) Grantee
beneficially owns more than 50% of the outstanding Common Stock of Issuer or (y)
the Option granted hereby expires without having been exercised in whole or
part.
22. Governing Law. This Agreement shall be governed by
and continued in accordance with the internal law of the State of Delaware
23. Definitions. For the purposes of this Agreement
the following terms shall have the meanings specified with respect thereto
below:
"Affiliate" shall mean, as to any Person, any other
Person which directly or indirectly controls, or is under common control with,
or is controlled by, such Person. As used in this definition, "control"
(including, with its correlative meanings, "controlled by" and "under
common control with") shall mean the possession, directly or indirectly,
of the power to direct or cause the direction of management or policies,
whether through ownership or securities or partnership or other ownership
interest, by contract or otherwise).
"Voting Securities" means the shares of Common Stock,
preferred stock and any other securities of Issuer entitled to vote generally
for the election of directors or any other securities (including, without
limitation, rights and options), convertible into, exchangeable into or
exercisable for, any of the foregoing (whether or not presently exercisable,
convertible or exchangeable).
14
<PAGE>
"Person" means an individual, corporation,
partnership, limited liability company, association, trust, unincorporated
organization, entity or group (as defined in the Exchange Act).
15
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the duly authorized officers of the parties hereto as of the date
first written above.
AMERICAN STORES COMPANY
By: /s/ Victor L. Lund
Name: Victor L. Lund
Title: Chief Executive Officer
ALBERTSON'S, INC.
By: /s/ Michael F. Reuling
Name: Michael F. Reuling
Title: Executive Vice President;
Store Development
16
ALBERTSON'S, INC. AND AMERICAN STORES COMPANY TO MERGE
BOISE, Idaho -- (BUSINESS WIRE) -- August 3, 1998 -- Albertson's, Inc.
(NYSE:ABS) and American Stores Company (NYSE:ASC) today announced that they have
entered into a definitive merger agreement in which the two companies will be
combined, forming the largest retail food and drug company in the United States.
The combined company, Albertson's, Inc., will operate more than 2,470 stores in
37 states, with pro forma 1998 estimated annual sales of approximately $36
billion and more than 218,000 employees.
The transaction, which is expected to close in early 1999, has a total
value of approximately $11.7 billion, consisting of equity value of $8.3 billion
and net debt of $3.4 billion. Excluding one-time charges, the transaction is
expected to be accretive to Albertson's earnings per share in 1999 and to
accelerate Albertson's annual earnings growth in subsequent years through the
realization of approximately $300 billion of annual cost savings.
Under the terms of the transaction, American Stores Company shareholders
will receive 0.63 shares of Albertson's Common Stock for each share of American
Stores Company Common stock they own. Based upon Albertson's July 31, 1998,
closing stock price of $48.00 per share, the transaction has a value of $30.24
per share for American Stores Company shareholders. Albertson's will issue
approximately 172.8 million shares in the transaction. Following closing of the
merger, American Stores Company shareholders would own 41.3 percent of
Albertson's. The companies have entered into cross options under which each
company has been granted an option to purchase up to 19.9 percent of the other
company's common stock under certain conditions.
"This transaction provides for the strategic combination of two
outstanding companies with complementary strengths and common values, said Gary
G. Michael, chairman and chief executive officer of Albertson's, Inc. "At a time
when the supermarket industry is under increasing pressure to enhance value to
customers through cost effective operations, this merger has been designed to
assist us in continuing to provide superior value and service to our customers
and compete successfully in today's marketplace."
"We expect the new Albertson's will be an industry leader, with well-known
store names and private label brands," Mr. Michael continued. "We will have a
seasoned and proven management team at both the corporate and division levels.
We will have a sound balance sheet and strong cash flow, which will enable us to
continue our combined capital spending and debt reduction programs at current
levels. In short, our potential for enhanced revenue and earnings growth is
tremendous."
Victor L. Lund, chairman and chief executive officer of American Stores
Company, said, "We are pleased to be joining forces with Albertson's, which is
one of the most admired and best managed companies in our industry. In forming
the largest food and drug retailer in the country, this transaction will provide
new opportunities for our employees, who are among the best in the business. It
will also ensure that our customers continue to receive high quality, great
value and excellent service.
"I believe that this strategic combination is in the best interests of our
employees, customers and shareholders, providing them with the opportunity to
participate in the growth of an exciting company with outstanding people and a
promising future. Because of our consistent business philosophies and similar
corporate cultures, I am confident the integration of these two companies will
go very smoothly."
The transaction was unanimously approved by the boards of directors of
both companies. The merger is subject to certain conditions, including approval
by the shareholders of both companies and regulatory approval. The combination
has been structured to be a tax-free transaction and is expected to be accounted
for as a pooling of interests.
Upon completion of the merger, Mr. Michael will continue as chairman and
CEO of Albertson's. Mr. Lund will serve as vice chairman of the combined
company. Albertson's will increase its board from 15 to 20 directors. In
addition to Mr. Lund, four other current members of the American Stores Company
board will join the Albertson's board.
Albertson's corporate headquarters will remain in Boise, Idaho.
Albertson's intends to retain both companies' current store names, although the
names of individual stores may change, depending on their size, location and
other factors.
Following the merger, Albertson's expects to record significant one-time
charges in connection with the combination. The magnitude of the one-time
charges has not yet been determined.
Both Albertson's and American Stores Company announced that they have
rescinded their respective stock buyback programs.
Mr. Michael said, "This merger will yield significant strategic and
financial benefits and is a defining milestone in our ongoing program to
accelerate sales growth, increase profitability and enhance shareholder
value."
"From a strategic standpoint, this transaction will strengthen our
presence in many of our existing markets across the country -- particularly in
Northern and Southern California and the Southwest -- and enables us to enter
important urban markets like Chicago and Philadelphia for the first time."
"Additionally, we will enter the stand-along drug store business for the
first time. By combining our fast-growing pharmacy businesses we expect to
achieve significant benefits such as improved procurement and distribution, more
efficient systems and processes, and an enhanced ability to participate in
third-party pharmacy reimbursement plans.
"Financially, we expect to achieve substantial food and drug synergies
through a combination of cost reductions, enhanced purchasing ability and
greater volumes and efficiencies in our existing markets. We expect these annual
synergies to total approximately $300 million in the third year, with at least
$100 million occurring by the end of the first year."
Albertson's expects to achieve savings of approximately $100 million from
buying and distribution efficiencies in the combined food and drug operations.
The company expects savings of approximately $200 million from a reduction of
overhead, including redundant administrative functions and information systems,
as well as a reduction of advertising expenditures in overlapping markets. The
company will streamline operations, with common systems and a best practices
approach in all areas.
"We are pleased to welcome the well-trained, motivated and loyal employees
of American Stores Company. Their commitment to customer service is a great fit
with Albertson's outstanding employees," Mr. Michael concluded.
Merrill Lynch & Co. served as financial advisor to Albertson's and The
Blackstone Group served as financial advisor to American Stores Company. Fried,
Frank, Harris, Shriver & Jacobson served as legal advisor to Albertson's and
Wachtell, Lipton, Rosen & Katz served as legal advisor to American Stores
Company.
American Stores Company operates 1,558 stores in 26 states including 269
food and drug combination stores, 539 supermarkets and 750 stand-along drug
stores. Its supermarkets and combination stores operate under the Acme Markets,
Jewel Food Stores, and Lucky Stores names. Its drug stores operate under the
Osco Drug and Sav-on names.
Albertson's, Inc. is one of the largest retail food-drug chains in the
United States. The Boise, Idaho-based company currently operates 916 retail
stores in 23 Western, Midwestern and Southern states.
This news release contains certain forward-looking statements including,
among other things, statements regarding expected synergies, cost savings and
other strategic and financial benefits. These forward-looking statements are
based on current expectations, but actual results may differ materially from
those projected or suggested in such forward-looking information. The companies
do not undertake to update such forward-looking statements to reflect actual
results, changes in the assumptions or changes in other factors affecting such
forward-looking information. Assumptions that could cause actual results to
differ from those set forth in the forward-looking information include the
companies ability to successfully implement their strategy and financial plans
in connection with the merger. Additional assumptions and other information can
be found in the companies Forms 10-Q, filed with the Securities and Exchange
commission.
CONTACT: Albertson's, Inc., Boise, Idaho
Investor Relations
A. Craig Olson 208/395-6284
Renee Bergquist 208/395-6622
News Media 208/395-6392
Mike Read
Jenny Enochson
OR
American Stores Company
Salt Lake City, Utah
Investor Relations/New Media
Dan Zvonek 801/961-4525
<PAGE>
DESCRIPTION OF ALBERTSON'S, INC.
ALBERTSON'S, INC.
Business: Retail supermarkets and combination stores
Operates: 916 stores in 23 states plus 44 pending from Buttrey
Food and Drug and 15 pending from Bruno's
1997 Revenues: $14.7 billion
Employees: Approximately 97,000 employees
Corporate Office: Boise, Idaho
ALBERTSON'S FOOD & DRUG
Business: Supermarkets/Combo Stores
Primary Markets: Operates in 20 states
Stores: 859 stores (790 Combo, 69 Conventional)
MAX FOODS
Business: Warehouse Food Stores
Primary Markets: California, Denver, Dallas/Ft. Worth
Stores: 34 stores
SEESSEL'S
Business: Supermarkets/Combo Stores
Primary Markets: Memphis, Tennessee
Stores: 10 stores (8 Combo and 2 Conventional)
SMITTY'S
Business: Supermarkets/Combo Stores
Primary Markets: Springfield and Joplin, Missouri
Stores: 10 Combo stores
SUPER ONE
Business: Warehouse Food Stores
Primary Markets: Des Moines, Iowa
Stores: 3 stores
BUTTREY FOOD & DRUG/BRUNO'S (1)
Business: Supermarkets/Combo Stores
Primary Markets:
Buttrey: Montana, Wyoming, North Dakota
Bruno's: Nashville and Chattanooga, Tennessee
Stores: 59 stores (38 Combo and 21 Conventional)
(1) Pending final approval and completion of transaction.
<PAGE>
DESCRIPTION OF AMERICAN STORES COMPANY
AMERICAN STORES COMPANY
Business: Retail supermarkets and drug stores
Operates: 1,558 stores in 26 states under the "Acme", "Lucky",
"Jewel", "Osco" and "Sav-on" names
1997 Revenues: $19.1 billion
Employees: Approximately 121,000 employees
Corporate Office: Salt Lake City, Utah
JEWEL
Business: Supermarkets/Combo Stores
Primary Markets: Chicago
Stores: 184 stores (157 Combo Stores)
OSCO DRUG
Business: Drug Stores
Primary Markets: Chicago, Kansas City, Phoenix, New England and other
areas
Stores: 438 stores
SAV-ON
Business: Drug Stores
Primary Markets: Southern California, Las Vegas
Stores: 312 stores
LUCKY STORES
Business: Supermarkets/Combo Stores
Primary Markets: California, Las Vegas, New Mexico
Stores: 447 stores (56 Combo Stores)
ACME MARKETS
Business: Supermarkets/Combo Stores
Primary Markets: Philadelphia
Stores: 177 stores (56 Combo Stores)
<PAGE>
STORE LOCATION MAP AND DISTRIBUTION OPERATIONS MAP
Map of United States captioned "Store Location Map" showing the location of
975 Albertson's, Inc. supermarkets and combo stores, 808 American Stores Company
supermarkets and combo stores and 750 American Stores Company stand-alone drug
stores.
Map of United States captioned "Distribution Operations Map" showing the
location of the distribution centers of Albertson's, Inc. and American Stores
Company.
<PAGE>
STRATEGIC RATIONALE
Creates largest retail food and drug company in the United States
Pro forma 1998 estimated annual revenues of approximately $36 billion
More than 2,470 stores in 37 states
More than 218,000 full-time and part-time employees
Strengthens Albertson's position in existing markets
Northern California
Southern California
Southwest
Enables Albertson's to enter important new urban markets
Chicago
Philadelphia
Enables Albertson's to enter stand-alone drug store business
New format
Creates tremendous opportunities for fast-growing pharmacy business
Lower cost of goods sold
Enhanced participation in third-party pharmacy reimbursement plans
Accelerates Albertson's earnings growth
Accretive in first year, excluding one-time charges
$300 million of annual cost savings by the third year
<PAGE>
SIGNIFICANT SYNERGIES
Greater volumes and efficiencies in existing markets
Lower cost of goods sold through enhanced buying and distribution efficiencies
$100 million of annual savings
Substantial cost reductions
$200 million of annual savings from reduction of overhead and advertising
expenditures
ANNUAL SAVINGS OF $300 MILLION BY THE THIRD YEAR
$100 MILLION BY THE END OF THE FIRST YEAR
<PAGE>
AN INDUSTRY LEADER
An experienced management team
Gary Michael continues as chairman and CEO
Victor Lund becomes vice chairman
A proven operating strategy
Albertson's has traditionally been among the most profitable companies in
the industry
A presence in important and promising markets across the country
Strong potential for enhanced shareholder value
Enhanced revenue growth
Strong cash generation
Accelerated earnings growth
<PAGE>
DESCRIPTION YEAR 1 YEAR 2 YEAR 3
General Adopt ABS general office cost 40 80 100
office disciplines. Reduce duplication of
consolidation management, occupancy and general
corporate costs.
Eliminate Move to single "best-of-breed" system 10 25 70
systems in each area. Savings from non-
redundancy repetitive IS&T development and
maintenance, communication networks
and lower depreciation.
In-market Direct costs savings such as 20 25 30
synergies overlapping advertising and field
supervision.
Cost of Opportunities expected primarily in 20 50 70
goods the areas of private label, general
improvement merchandise, pharmacy and seasonal
category.
Distribution Take advantage of potential geograph- 10 20 30
opportunities ic sourcing re-alignments (ABS Omaha
& Des Moines food stores out of ASC
Chicago facility, ASC Phoenix drug
stores out of ABS Phoenix facility,
etc.).
GRAND TOTAL 100 200 300
The chart indicates that the first three items in the year 3 column total "200"
and the last two items total "100".
