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Exhibit 5
STOCK OPTION AGREEMENT
AGREEMENT, dated as of November 29, 1995, by and among Rite Aid Corporation,
a Delaware corporation ("Parent"), Ocean Acquisition Corporation, a Delaware
corporation and a wholly owned subsidiary of Parent ("Sub"), and Revco D.S.,
Inc., a Delaware corporation (the "Company").
W I T N E S S E T H:
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WHEREAS, immediately prior to the execution of this Agreement, Parent, Sub
and the Company, have entered into an Agreement and Plan of Merger (as such
agreement may hereafter be amended from time to time, the "Merger Agreement"),
pursuant to which Sub will be merged with and into the Company (the "Merger");
WHEREAS, in furtherance of the Merger, Parent and the Company desire that as
soon as practicable (but in no event later than five business days) after the
execution of the Merger Agreement, Sub shall commence an offer (the "Offer") to
purchase for cash not less than 35,144,833 shares and up to all of the issued
and outstanding Company Common Stock (as defined in Section 1 hereof), or such
greater number of shares as equals 50.1% of the shares outstanding on a fully
diluted basis as of the expiration of the Offer, at a price of $27.50 per share
of Company Common Stock; and
WHEREAS, as an inducement and a condition to entering into the Merger
Agreement, Parent and Sub have required that the Company agree, and the Company
has agreed, to enter into this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the mutual promises,
representations, warranties, covenants and agreements contained herein, the
parties hereto, intending to be legally bound hereby, agree as follows:
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1. CERTAIN DEFINITIONS. Capitalized terms used and not defined herein have
the respective meanings ascribed to them in the Merger Agreement. For purposes
of this Agreement:
a. "BENEFICIALLY OWN" OR "BENEFICIAL OWNERSHIP" with respect to any
securities shall mean having "beneficial ownership" of such securities (as
determined pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act")), including pursuant to any agreement, arrangement
or understanding, whether or not in writing. Without duplicative counting of
the same securities by the same holder, securities Beneficially Owned by a
Person shall include securities Beneficially Owned by all other Persons with
whom such Person would constitute a "group" within the meaning of Section 13(d)
of the Exchange Act.
b. "COMPANY COMMON STOCK" shall mean at any time the common stock, $.01 par
value, of the Company.
c. "PERSON" shall mean an individual, corporation, limited liability
company, partnership, joint venture, association, trust, unincorporated
organization or other entity.
2. GRANT OF STOCK OPTION. In order to induce Parent and Sub to enter
into the Merger Agreement, the Company hereby grants to Parent an
unconditional, irrevocable option (a "Stock Option") to purchase up to
13,251,010 fully paid and nonassessable shares of Company Common Stock at a
purchase price of $27.50 per share (the "Purchase Price"), or such other number
of shares of Company Common Stock as equals 19.9% of the Company's issued and
outstanding shares of Company Common Stock at the time of exercise of the Stock
Option; provided that in no event shall the number of shares of Company Common
Stock for which the Stock Option is exercisable exceed 19.9% of the shares of
Company Common Stock issued and outstanding at the time of exercise of the
Stock Option (the "Option Shares"). The number of shares of Company Common
Stock that may be received upon the exercise of the Stock Option is subject to
adjustments as herein set forth.
3. EXERCISE OF STOCK OPTION. (a) Upon (x) the occurrence of a Trigger
Event (as defined in Section
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7.3 of the Merger Agreement), or (y) the occurrence of the condition set forth
in clause (h) of Annex A to the Merger Agreement, the Stock Option shall become
immediately exercisable, in whole or in part, and remain exercisable in whole
or in part until the later of (i) the date which is six months after the date
the Stock Option first became exercisable and (ii) the fifth business day
following expiration or termination of any applicable waiting period under the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the "HSR
Act") (the "Option Period").
(b) In the event that Parent is entitled to and wishes to exercise the
Stock Option, Parent shall, during the Option Period, send a written notice
(the "Notice") to the Company identifying the place and date for the closing of
such purchase and the number of Option Shares to be purchased. Upon the giving
by Parent to the Company of the Notice and the tender of the aggregate Purchase
Price at the closing so specified, Parent shall be deemed to be the holder of
record of the shares of Company Common Stock issuable upon such exercise,
notwithstanding that the stock transfer books of the Company shall then be
closed or that certificates representing such shares of Company Common Stock
shall not then be actually delivered to Parent. The Company 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, issue and
delivery of stock certificates under this Section 3 in the name of Parent or
its assignee, transferee or designee.
4. SALE OF OPTION SHARES. If, at any time following the exercise of the
Option, Parent shall either (i) transfer, sell or otherwise dispose of any or
all of the Option Shares, including, without limitation, by means of tender or
exchange of any or all of the Option Shares pursuant to a tender or exchange
offer involving the capital stock of the Company, or (ii) convert such Option
Shares into cash, capital stock, other securities or any other consideration of
any third party in a merger any recapitalization or restructuring or similar
business combination transaction (a "Business Combination Transaction"), Parent
shall pay to the Company within five days the amount equal to the Profit (as
defined below) Parent shall receive, if any, pursuant to such Disposition or
Business Combination Transaction. "Profit", for purposes
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of this Agreement, shall equal (i) the product of (a) the number of Option
Shares Parent transfers, sells, tenders, exchanges or otherwise disposes of
pursuant to a Disposition or a Business Combination Transaction by (b) the
excess of the per Share consideration received by Parent pursuant to such
Disposition or Business Combination Transaction valuing any non-cash
consideration at its fair market value on the date of such consummation (not
including any increase in such aggregate per Share consideration after the date
thereof) over the Purchase Price. For purposes hereof, the fair market value
of any non-cash consideration shall be the closing price or the last sale
price, or, in case no such sale takes place on the day of consummation of such
Business Combination Transaction, the average of the closing bid and asked
prices, in either case as reported in the principal consolidated transaction
reporting system with respect to securities listed or admitted to trading on
the principal national securities exchange on which such consideration is
listed or admitted to trading or, if such consideration is not listed or
admitted to trading on any national securities exchange, the last quoted price
or, if not so quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported by the National Association of Securities
Dealers, Inc. Automated Quotation System or such other system then in use, or,
if not so determinable, the fair value of such consideration on such date shall
be determined in good faith by the Board of Directors of Parent.
5. COVENANTS, REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
hereby represents and warrants to, and agrees with, Parent and Sub as follows:
a. ORGANIZATION. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, has all
requisite corporate power or other power and authority to execute and deliver
this Agreement and perform its obligations hereunder. The execution and
delivery by the Company of this Agreement and the performance by the Company of
its obligations hereunder have been duly and validly authorized by the Board of
Directors of the Company and no other corporate proceedings on the part of the
Company are necessary to authorize the execution, delivery or performance of
this Agreement or the consummation of the transactions contemplated hereby.
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b. CORPORATE AUTHORIZATION. This Agreement has been duly and validly
executed and delivered by the Company and constitutes a valid and binding
agreement enforceable against the Company in accordance with its terms, except
that (i) such enforcement may be subject to applicable bankruptcy, insolvency
or other similar laws, now or hereafter in effect, affecting creditors' rights
generally, and (ii) the remedy of specific performance and injunctive and other
forms of equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor may be brought.
c. AUTHORIZED STOCK. The Company has taken all necessary corporate and
other action to authorize, reserve and permit it to issue, and, at all times
from the date hereof until the obligation to deliver the Option Shares upon the
exercise of the Stock Option terminates, will have reserved for issuance, upon
exercise of the Stock Option, shares of Company Common Stock necessary for
Parent to exercise the Stock Option, and the Company will take all necessary
corporate action to (x) authorize and reserve for issuance all additional
shares of Company Common Stock or other securities which may be issued pursuant
to Section 7 upon exercise of the Stock Option and (y) protect the rights of
Parent against dilution. The shares of Company Common Stock to be issued upon
due exercise of the Stock Option, including all additional shares of Company
Common Stock or other securities which may be issuable pursuant to Section 7,
upon issuance pursuant hereto, shall be duly and validly issued, fully paid and
nonassessable, and shall be delivered free and clear of all liens, claims,
charges and encumbrances of any kind or nature whatsoever, including any
preemptive rights of any stockholder of the Company.
d. NO CONFLICTS. Except for filings, authorizations, consents and
approvals as may be required under the HSR Act, the Exchange Act and the
Securities Act of 1933, as amended (the "Securities Act"), (i) no filing with,
and no permit, authorization, consent or approval of, any state or federal
public body or authority is necessary for the execution of this Agreement by
the Company and the consummation by the Company of the transactions
contemplated hereby and (ii) none of the execution and delivery of this
Agreement by the Company, the consummation by the Company of the transactions
con-
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templated hereby or compliance by the Company with any of the provisions hereof
shall (A) conflict with or result in any breach of any applicable
organizational documents applicable to the Company or any of its subsidiaries,
(B) result in a violation or breach of, or constitute (with or without notice
or lapse of time or both) a default (or give rise to any third party right of
termination, cancellation, material modification or acceleration) under any of
the terms, conditions or provisions of any note, loan agreement, pledge, bond,
mortgage, indenture, license, contract, commitment, arrangement, understanding,
agreement or other instrument or obligation of any kind to which the Company or
any subsidiary is a party or by which the Company or any subsidiary or any of
their respective properties or assets may be bound, or (C) violate any order,
writ, injunction, decree, judgment, statute, rule or regulation applicable to
the Company or any of its subsidiaries or any of its properties or assets.
e. RELIANCE BY PARENT. The Company understands and acknowledges that
Parent is entering into, and causing Sub to enter into, the Merger Agreement in
reliance upon the Company's execution and delivery of this Agreement.
f. FURTHER ASSURANCES. From time to time, at the other party's request and
without further consideration, each party hereto shall execute and deliver such
additional documents and take all such further lawful action as may be
necessary or desirable to consummate and make effective, in the most
expeditious manner practicable, the transactions contemplated by this
Agreement.
g. LISTING ON NEW YORK STOCK EXCHANGE. Upon the exercise of the Stock
Option, the Company shall use its best efforts to promptly list on the New York
Stock Exchange, Inc. (the "NYSE"), subject to official notice of issuance, the
shares of Company Common Stock to be issued pursuant to this Agreement.
6. REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB. Parent and Sub hereby
represent and warrant to the Company as follows:
a. ORGANIZATION. Each of Parent and Sub is a corporation duly organized,
validly existing and in good
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standing under the laws of the State of Delaware, has all requisite corporate
power or other power and authority to execute and deliver this Agreement and
perform their respective obligations hereunder. The execution and delivery by
Parent and Sub of this Agreement and the performance by Parent and Sub of their
respective obligations hereunder have been duly and validly authorized by the
Board of Directors of each of Parent and Sub and no other corporate proceedings
on the part of Parent or Sub are necessary to authorize the execution, delivery
or performance of this Agreement or the consummation of the transactions
contemplated hereby.
b. CORPORATE AUTHORIZATION. This Agreement has been duly and validly
executed and delivered by Parent and Sub and constitutes a valid and binding
agreement of each of Parent and Sub enforceable against each of Parent and Sub
in accordance with its terms, except that (i) such enforcement may be subject
to applicable bankruptcy, insolvency or other similar laws, now or hereafter in
effect, affecting creditors' rights generally, and (ii) the remedy of specific
performance and injunctive and other forms of equitable relief may be subject
to equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.
c. NO CONFLICTS. Except for filings, authorizations, consents and
approvals as may be required under the HSR Act, the Exchange Act and the
Securities Act (i) no filing with, and no permit, authorization, consent or
approval of, any state or federal public body or authority is necessary for the
execution of this Agreement by Parent or Sub and the consummation by Parent or
Sub of the transactions contemplated hereby and (ii) none of the execution and
delivery of this Agreement by Parent of Sub, the consummation by Parent or Sub
of the transactions contemplated hereby or compliance by Parent or Sub with any
of the provisions hereof shall (A) conflict with or result in any breach of any
applicable organizational documents applicable to Parent or Sub, (B) result in
a violation or breach of, or constitute (with or without notice or lapse of
time or both) a default (or give rise to any third party right of termination,
cancellation, material modification or acceleration) under any of the terms,
conditions or provisions of any note, loan agreement, bond, mortgage,
indenture, license,
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contract, commitment, arrangement, understanding, agreement or other instrument
or obligation of any kind to which Parent or Sub is a party or by which Parent
or Sub or any of their respective properties or assets may be bound, or (C)
violate any order, writ, injunction, decree, judgment, statute, rule or
regulation applicable to Parent or Sub or any of their respective properties or
assets.
7. ADJUSTMENT UPON CHANGES IN CAPITALIZATION. In the event of any change
in Company Common Stock by reason of stock dividends, split-ups,
recapitalizations, combinations, exchanges of shares or the like, the type and
number of shares of Company Common Stock subject to the Stock Option and the
Purchase Price shall be appropriately adjusted and proper provision shall be
made so that, in the event that any additional shares of Company Common Stock
are issued or otherwise become outstanding as a result of any such change after
the date of this Agreement (other than pursuant to this Agreement), the number
of shares of Company Common Stock subject to the Stock Option shall be adjusted
so that, after such issuance and together with shares of Company Common Stock
previously issued pursuant to the exercise of the Stock Option (as adjusted on
account of any of the foregoing change in Company Common Stock), it equals
19.9% of the number of shares of Company Common Stock then issued and
outstanding. Nothing contained in this Section 7 shall be deemed to authorize
the Company to breach any provision of the Merger Agreement.
8. REGISTRATION RIGHTS. The Company shall, if requested by Parent at any
time and from time to time within three years of the first exercise of the
Stock Option, promptly prepare, file and keep current a registration statement
under the Securities Act in order to permit the sale or other disposition of
the shares of Company Common Stock that have been acquired by or are issuable
to Parent upon exercise of the Stock Option in accordance with the intended
method of sale or other disposition stated by Parent, including a "shelf"
registration statement under Rule 415 of the Securities Act or any successor
provision, and the Company shall use its best efforts to qualify such shares or
other securities under any applicable state securities laws. Parent shall
provide all information reasonably requested by the Company for inclusion in
any registration statement to be
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filed hereunder. The Company will use its best efforts to cause such
registration statement first to become effective and then to remain effective
for such period not in excess of 180 days from the day such registration
statement first becomes effective or such shorter time as may be reasonably
necessary to effect such sales or other dispositions. Parent shall have the
right to demand one such registration. The Company shall bear the costs of
such registration (including, but not limited to, the Company's attorneys'
fees, printing costs and filing fees, except for underwriting discounts or
commissions, brokers' fees and the fees and disbursements of Parent's counsel
related thereto). If requested by Parent, in connection with such
registration, the Company will become a party to any underwriting agreement
relating to the sale of such shares, but only to the extent of obligating
itself in respect of representations, warranties, indemnities, and other
agreements customarily included in such underwriting agreements. Upon
receiving any request from the Company or assignee thereof under this Section
8, the Company agrees to send a copy thereof to Parent and to any assignee
thereof known to the Company, in each case by promptly mailing the same,
postage prepaid, to the address of record of the person entitled to receive
such copies.
9. TERMINATION. Except as otherwise provided herein, the covenants and
agreements contained herein with respect to the Option Shares shall terminate
upon the earlier of (i) the consummation of the Merger and (ii) the expiration
of the Option Period.
10. MISCELLANEOUS.
a. ENTIRE AGREEMENT. Except as otherwise expressly provided herein, this
Agreement contains the entire agreement between the parties with respect to the
transactions contemplated hereunder and supersedes all prior arrangements or
understandings with respect thereto, written or oral. 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 assigns. Nothing in this Agreement,
expressed or implied, is intended to confer upon any party, other than the
parties hereto, and their respective successors and assigns, any rights,
remedies, obligations or liabilities
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under or by reason of this Agreement, except as expressly provided herein.
b. ASSIGNMENT. This Agreement shall not be assigned by operation of law or
otherwise without the prior written consent of the other party, provided that
Parent may assign, in its sole discretion, its rights and obligations hereunder
to any direct or indirect wholly owned subsidiary of Parent, but no such
assignment shall relieve Parent of its obligations hereunder if such assignee
does not perform such obligations.
c. AMENDMENTS, WAIVERS, ETC. This Agreement may not be amended, changed,
supplemented, waived or otherwise modified or terminated, except upon the
execution and delivery of a written agreement executed by the parties hereto.
d. NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly received if given) by hand delivery or telecopy (with
a confirmation copy sent for next day delivery via courier service, such as
Federal Express), or by any courier service, such as Federal Express, providing
proof of delivery. All communications hereunder shall be delivered to the
respective parties at the following addresses:
If to the Company: Revco D.S., Inc.
0000 Xxxxxxxxxx Xxxxxxx
Xxxxxxxxx, Xxxx 00000
Attention: Chief Executive Officer
Telephone No: (000) 000-0000
Telecopy No: (000) 000-0000
copy to: Xxxxxxx X.X. Xxxxx, Esq.
Benesch, Friedlander,
Xxxxxx & Xxxxxxx
0000 XX Xxxxxxx Xxxxxxxx
000 Xxxxxx Xxxxxx
Xxxxxxxxx, Xxxx 00000
Telephone No: 000-000-0000
Telecopy No: 000-000-0000
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If to Parent Rite Aid Corporation
or Sub: 00 Xxxxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxxxx 00000
Attention: Chief Executive Officer
Telephone No: (000) 000-0000
Telecopy No: (000) 000-0000
copy to: Xxxxx X. Xxxxxxxxx, Esq.
Skadden, Arps, Slate,
Xxxxxxx & Xxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone No: (000) 000-0000
Telecopy No: (000) 000-0000
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
e. SEVERABILITY. Whenever possible, each provision or
portion of any provision of this Agreement will be interpreted in such manner
as to be effective and valid under applicable law but if any provision or
portion of any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or portion of any provision in such jurisdiction, and this
Agreement will be reformed, construed and enforced in such jurisdiction as if
such invalid, illegal or unenforceable provision or portion of any provision
had never been contained herein.
f. SPECIFIC PERFORMANCE. Each of the parties hereto
recognizes and acknowledges that a breach by it of any covenants or agreements
contained in this Agreement will cause the other party to sustain damages for
which it would not have an adequate remedy at law for money damages, and
therefore each of the parties hereto agrees that in the event of any such
breach the aggrieved party shall be entitled to the remedy of specific
performance of such covenants and agreements and injunctive and other equitable
relief in addition to any other remedy to which it may be entitled, at law or
in equity.
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g. REMEDIES CUMULATIVE. All rights, powers and remedies
provided under this Agreement or otherwise available in respect hereof at law
or in equity shall be cumulative and not alternative, and the exercise of any
thereof by any party shall not preclude the simultaneous or later exercise of
any other such right, power or remedy by such party.
h. NO WAIVER. The failure of any party hereto to exercise
any right, power or remedy provided under this Agreement or otherwise available
in respect hereof at law or in equity, or to insist upon compliance by any
other party hereto with its obligations hereunder, and any custom or practice
of the parties at variance with the terms hereof, shall not constitute a waiver
by such party of its right to exercise any such or other right, power or remedy
or to demand such compliance.
i. NO THIRD PARTY BENEFICIARIES. This Agreement is not
intended to be for the benefit of, and shall not be enforceable by, any person
or entity who or which is not a party hereto.
j. GOVERNING LAW. This Agreement shall be governed and
construed in accordance with the laws of the State of Delaware, without giving
effect to the principles of conflicts of law thereof.
k. JURISDICTION. Each party hereby irrevocably submits to
the exclusive jurisdiction of the Court of Chancery in the State of Delaware in
any action, suit or proceeding arising in connection with this Agreement, and
agrees that any such action, suit or proceeding shall be brought only in such
court (and waives any objection based on forum non conveniens or any other
objection to venue therein); provided, however, that such consent to
jurisdiction is solely for the purpose referred to in this paragraph (l) and
shall not be deemed to be a general submission to the jurisdiction of said
Court or in the State of Delaware other than for such purposes. Each party
hereto hereby waives any right to a trial by jury in connection with any such
action, suit or proceeding.
l. DESCRIPTIVE HEADINGS. The descriptive headings used
herein are inserted for convenience of reference only and are not intended to
be part of or to affect the meaning or interpretation of this Agreement.
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m. COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original, but all of
which, taken together, shall constitute one and the same Agreement.
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IN WITNESS WHEREOF, Parent, Sub and the Company have caused
this Agreement to be duly executed as of the day and year first above written.
RITE AID CORPORATION
By: /s/ Xxxxxx X. Grass
----------------------------
Name: Xxxxxx X. Grass
Title: Chairman of the Board
and Chief Executive
Officer
OCEAN ACQUISITION CORPORATION
By: /s/ Xxxxxx X. Grass
----------------------------
Name: Xxxxxx X. Grass
Title: President
REVCO D.S., INC.
By: /s/ D. Xxxxxx Xxxxx
----------------------------
Name: D. Xxxxxx Xxxxx
Title: President and Chief
Executive Officer
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