Exhibit 1
OPTION AND VOTING AGREEMENT
AGREEMENT dated as of February 8, 1998 among CVS Corporation,
a Delaware corporation ("Buyer"), and the holders (the "Stockholders") of the
shares of common stock, $0.01 par value (the "Shares") of Arbor Drugs, Inc., a
Michigan corporation ("Company"), listed on the signature pages hereof.
WHEREAS, in order to induce Buyer to enter into the Agreement
and Plan of Merger (the "Merger Agreement") with Company dated as of the date
hereof, Buyer has requested the Stockholders, and the Stockholders have
agreed, to enter into this Agreement.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE 1
Defined Terms; Stock Option
Section 1.1. Defined Terms. Capitalized terms used but not
defined in this Agreement are used as defined in the Merger Agreement.
Section 1.2. Grant of Stock Option. Each Stockholder hereby
grants to Buyer an irrevocable option (the "Option") to purchase all Shares
presently owned by such Stockholder as set forth on the signature page hereto
and any additional Shares acquired by the Stockholder (whether by purchase or
otherwise) after the date of this Agreement (the "Stockholder Shares") at a
purchase price of $23 per Stockholder Share (the "Purchase Price"); provided
that the Stockholders may retain an aggregate of 600,000 Shares for purposes
of donation to charity, which shall not be Stockholder Shares subject to the
Option.
Section 1.3. Exercise of Option. (a) Subject to the
conditions set forth in Section 1.05 hereof, the Option may be exercised by
Buyer, in whole but not in part, at any time after the occurrence of a Trigger
Event (as defined below) and prior to the first anniversary after the
termination of the Merger Agreement in accordance with the terms thereof. In
the event Buyer wishes to exercise the Option for all of the Stockholder
Shares, Buyer shall send a written notice (the "Exercise Notice") to the
Stockholders specifying the place, the date (not less than one nor more than
20 business days from the date of the Exercise Notice), and the time for the
closing of such purchase, provided that such date and time may be earlier than
one day after the Exercise Notice if reasonably practicable. The closing of
the purchase of Stockholder Shares (the "Closing") shall take place at the
place, on the date and at the time designated by Buyer in its Exercise Notice,
provided that if, at the date of the Closing herein provided for, the
conditions set forth in Section 1.05 shall not have been satisfied (or waived
by the Stockholders), Buyer may postpone the Closing until a date within five
business days after such conditions are satisfied.
(b) Buyer shall not be under any obligation to deliver any Exercise
Notice and may allow the Option to terminate without purchasing any
Stockholder Shares hereunder; provided, however, that once Buyer has delivered
to the Stockholders an Exercise Notice, subject to the terms and conditions of
this Agreement, Buyer shall be bound to effect the purchase as described in
such Exercise Notice.
Section 1.4. Closing. Each Stockholder shall deliver to Buyer
a certificate or certificates (the "Certificates") representing (or cause to
be made book entry delivery to an account designated by Buyer) such Stockholder
Shares, in the case of certificates, duly endorsed or accompanied by stock
powers duly executed in blank and at Buyer's election, Buyer shall deliver to
such Stockholder either (x) a certified or bank cashier's check or checks
payable to or upon the order of such Stockholder in an amount equal to (i) the
number of Stockholder Shares being purchased at such Closing multiplied by
(ii) the Purchase Price (the "Purchase Amount") or (y) the number of shares
of the Parent Common Stock equal to the Purchase Amount divided by the
closing price on the NYSE of Parent Common Stock on the trading day prior to
delivery of the Exercise Notice. If Buyer elects to deliver the Parent Common
Stock pursuant to the immediately preceding sentence, Buyer shall concurrently
enter into a Registration Rights Agreement with the Stockholders in respect of
shares of Parent Common Stock delivered to the Stockholders hereunder. Such
agreement shall be substantially in the form of Exhibit B to the Merger
Agreement.
Section 1.5. Conditions to the Stockholder's Obligations. The
obligation of any Stockholder to sell Stockholder Shares at the Closing is
subject to the following conditions:
(a) The representations and warranties of
Buyer contained in Article 4 shall be true and correct in all
material respects on the date thereof and Buyer shall not be in
material breach of its obligations under the Merger Agreement.
(b) All waiting periods under the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as
amended, and the rules and regulations promulgated thereunder
(the "HSR Act") applicable to such exercise of the Option shall
have expired or been terminated.
(c) There shall be no preliminary or permanent
injunction or other order, decree or ruling issued by a court of
competent jurisdiction or by a governmental, regulatory or
administrative agency or commission, nor any statute, rule,
regulation or order promulgated or enacted by any governmental
authority, prohibiting or otherwise restraining such exercise of
the Option.
(d) (i) the Merger Agreement has been
terminated by Company pursuant to Section 7.01(e) of the Merger
Agreement; (ii) the Merger Agreement has been terminated by
Buyer pursuant to Section 7.01(d) of the Merger Agreement or
(iii) a termination fee is payable under Section 8.04(b)(z)(1)
of the Merger Agreement (each of (i), (ii) and (iii) being a
"Trigger Event").
Section 1.6. Adjustment Upon Change in Capitalization or
Merger. (a) In the event of any change in Company's capital stock by reason
of stock dividends, stock splits, mergers, consolidations, recapitalizations,
combinations, conversions, exchanges of shares, extraordinary or liquidating
dividends, or other changes in the corporate or capital structure of Company
which would have the effect of diluting or changing Buyer's rights hereunder,
the number and kind of shares or securities subject to the Option and the
purchase price per Stockholder Share (but not the total purchase price) shall
be appropriately and equitably adjusted so that Buyer shall receive upon
exercise of the Option the number and class of shares or other securities or
property that Buyer would have received in respect of the Stockholders Shares
purchasable upon exercise of the Option if the Option had been exercised
immediately prior to such event. The Shareholders shall take such steps in
connection with such consolidation, merger, liquidation or other such action as
may be necessary to assure that the provisions hereof shall thereafter apply as
nearly as possible to any securities or property thereafter deliverable upon
exercise of the Option.
(b) In the event the consideration per Share to be paid by Buyer
pursuant to the Merger is increased, the Purchase Price shall be similarly
increased and in the event the Closing hereunder shall have occurred, Buyer
shall promptly pay to the Stockholder the product of the amount of such
increase in the Purchase Price multiplied by the number of Stockholder Shares
as to which the Stockholder Option has been exercised.
ARTICLE 2
Voting
Section 2.1. Voting of Company Common Stock. Each Stockholder
hereby agrees that at any meeting (whether annual or special and whether or
not an adjourned or postponed meeting) of the holders of Company Common Stock,
however called, or in connection with any written consent of the holders of
Company Common Stock, such Stockholder will appear at the meeting or otherwise
cause the Stockholder Shares to be counted as present thereat for purposes of
establishing a quorum and such Stockholder shall vote or consent (or cause to
be voted or consented) the Stockholder Shares in favor of the Merger, the
execution and delivery by Company of the Merger Agreement and the approval and
adoption of the terms thereof and each of the other actions contemplated by
the Merger Agreement and this Agreement and any actions required in
furtherance thereof and hereof.
ARTICLE 3
Representations and Warranties of the Stockholders
Each of the Stockholders represents and warrants to Buyer as to
itself that:
Section 3.1. Ownership of Shares. Such Stockholder has sole
voting power and sole power to issue instructions with respect to the matters
set forth in Articles 1 and 2 hereof, sole power of disposition, sole power to
demand appraisal rights and sole power to agree to all of the matters set forth
in this Agreement, in each case with respect to all of the Stockholder Shares
held by such Stockholder with no limitations, qualifications or restrictions on
such rights, subject to applicable securities laws and the terms of this
Agreement.
Section 3.2. Authorization. This Agreement has been duly and
validly executed and delivered by such Stockholder and constitutes a valid and
binding agreement enforceable against such Stockholder in accordance with its
terms except to the extent such enforcement may be limited by applicable
bankruptcy, insolvency or similar laws affecting creditors rights and 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.
Section 3.3. No Conflicts. Except for filings, authorizations,
consents and approvals as may be required under the HSR Act, the 1934 Act and
the 1933 Act, no filing with, and no permit, authorization, consent or
approval of, any state or federal governmental body or authority is necessary
for the execution and delivery of this Agreement by the Stockholder and the
consummation by the Stockholder of the transactions contemplated hereby and
none of the execution and delivery of this Agreement by the Stockholder, the
consummation by the Stockholder of the transactions contemplated hereby or
compliance by the Stockholder with any of the provisions hereof shall conflict
with or result in any breach of the organizational documents of the
Stockholder, 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, contract, commitment,
arrangement, understanding, agreement or other instrument or obligation of any
kind to which the Stockholder is a party or by which the Stockholder or any of
its properties or assets may be bound, or violate any order, writ, injunction,
decree, judgment, statute, law, rule or regulation applicable to the
Stockholder or any of its properties or assets.
Section 3.4. No Encumbrances. Except as expressly provided in
this Agreement, the Stockholder Shares and the Certificates are now, and at all
times during the term hereof, will be, held by the Stockholder, or by a
nominee or custodian for the benefit of the Stockholder, free and clear of all
liens, claims, security interests, proxies, voting trusts or agreements,
understandings or arrangements or any other encumbrances whatsoever, except
for any such encumbrances or proxies arising hereunder and other than liens
arising from securities margin accounts.
Section 3.5. No Finder's Fees. Other than as contemplated by
the Merger Agreement with respect to fees payable by Company, no broker,
investment banker, financial advisor or other Person is entitled to any
broker's, finder's, financial adviser's or other similar fee or commission in
connection with the transactions contemplated hereby based upon arrangements
made by or on behalf of the Stockholder.
Section 3.6. Reliance by Buyer. The Stockholder understands
and acknowledges that Buyer is entering into the Merger Agreement in reliance
upon the Stockholder's execution and delivery of this Agreement.
ARTICLE 4
Representations and Warranties of Buyer
Buyer represents and warrants to each of the Stockholders:
Section 4.1. Organization. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Delaware, has all requisite corporate power and authority to execute and
deliver this Agreement and perform its obligations hereunder. The execution
and delivery by Buyer of this Agreement and the performance by Buyer of its
obligations hereunder have been duly and validly authorized by the Board of
Directors of Buyer and no other corporate proceedings on the part of Buyer are
necessary to authorize the execution, delivery or performance of this
Agreement or the consummation of the transactions contemplated hereby.
Section 4.2. Corporate Authorization. This Agreement has been
duly and validly executed and delivered by Buyer and constitutes a valid and
binding agreement of Buyer enforceable against Buyer in accordance with its
terms except to the extent (i) such enforcement may be limited by applicable
bankruptcy, insolvency or similar laws affecting creditors rights 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.
Section 4.3. No Conflicts. Except for filings, authorizations,
consents and approvals as may be required under the XXX Xxx, xxx 0000 Xxx xxx
xxx 0000 Xxx, (x) no filing with, and no permit, authorization, consent or
approval of, any state or federal governmental body or authority is necessary
for the execution and delivery of this Agreement by Buyer and the consummation
by Buyer of the transactions contemplated hereby and (ii) none of the
execution and delivery of this Agreement by Buyer, the consummation by Buyer
of the transactions contemplated hereby or compliance by Buyer with any of the
provisions hereof shall (A) conflict with or result in any breach of the
certificate of incorporation or by-laws of Buyer, (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,
contract, commitment, arrangement, understanding, agreement or other
instrument or obligation of any kind to which Buyer is a party or its
properties or assets may be bound, or (C) violate any order, writ, injunction,
decree, judgment, statute, law, rule or regulation applicable to Buyer or any
of its properties or assets.
Section 4.4. No Finder's Fees. Except for Credit Suisse First
Boston Corporation, whose fees will be paid by Buyer, no broker, investment
banker, financial adviser or other Person is entitled to any broker's,
finder's, financial adviser's or other similar fee or commission in connection
with the transactions contemplated hereby based upon arrangements made by or on
behalf of Buyer.
ARTICLE 5
Covenants of the Stockholders
Each of the Stockholders hereby covenants and agrees that:
Section 5.1. Restriction on Transfer; Proxies;
Non-Interference. The Stockholder shall not, directly or indirectly: offer
for sale, sell, transfer, tender, pledge, encumber (other than by operation of
law), assign or otherwise dispose of, or enter into any contract, option or
other arrangement or understanding with respect to or consent to the offer for
sale, sale, transfer, tender, pledge, encumbrance, assignment or other
disposition of, any or all of the Stockholder Shares or any interest therein;
except as contemplated by this Agreement, grant any proxies or powers of
attorney, deposit the Stockholder Shares into a voting trust or enter into a
voting agreement with respect to the Stockholder Shares; or take any action
that would make any representation or warranty of the Stockholder contained
herein untrue or incorrect or would result in a breach by the Stockholder of
its obligations under this Agreement or a breach by Company of its obligations
under the Merger Agreement or the effect of which would be inconsistent or
violative of any provision or agreement contained in this Agreement.
Section 5.2. No Solicitation. The Stockholder shall not, and
shall cause its Affiliates and officers, directors, employees, investment
bankers, consultants and other agents of the Stockholder and such Affiliates
(such Affiliates, officers, directors, employees, investment bankers,
consultants and other agents of any Person are hereinafter collectively
referred to as the "Representatives" of such Person) not to, directly or
indirectly, take any action to initiate, solicit, encourage or facilitate the
making of any Acquisition Proposal or any inquiry with respect thereto, or
engage in discussions or negotiations with any Person (other than Buyer or any
of its Affiliates or Representatives) relating to any Acquisition Proposal or
disclose any non-public information relating to Company or any Subsidiary of
Company, or afford access to the properties, books or records of Company or any
Subsidiary of Company, to any Person that is considering making or has made
any Acquisition Proposal. The Stockholder shall notify Buyer orally and in
writing of any offers, proposals or inquiries received by the Stockholder
relating to the purchase or acquisition by any Person of the Shares and of any
Acquisition Proposal actually known to the Stockholder (including in each case
the material terms and conditions thereof and the identity of the Person making
it), within 24 hours of the receipt thereof. The Stockholder shall, and shall
cause its Representatives to, immediately cease and cause to be terminated any
and all existing activities, discussions or negotiations, if any, with any
parties conducted heretofore with respect to any Acquisition Proposal, other
than discussions or negotiations with Buyer and its Affiliates.
Notwithstanding the restrictions set forth in this Section 5.02, each of
Company and any Person who is an officer or director of Company, including any
individual Stockholder serving in capacity of director or officer, may take
any action in such capacity consistent with the terms of the Merger Agreement.
Section 5.3. Stop Transfer; Legend. (a) Each Stockholder
agrees with, and covenants to, Buyer that the Stockholder shall not request
that Company register the transfer (book-entry or otherwise) of any
certificate or uncertificated interest representing any of the Stockholder
Shares unless such transfer is made in compliance with this Agreement.
(b) Each Stockholder will, prior to the Effective Time, duly
execute and deliver to Buyer the Affiliate's letter contemplated in Section
5.11 of the Merger Agreement substantially in the form of Exhibit C-3 to the
Merger Agreement.
(c) Each Stockholder shall promptly after the date hereof
surrender to Company all certificates representing the Stockholder Shares, and
Company shall place the following legend on such certificates:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO AN OPTION AND VOTING AGREEMENT DATED AS
OF FEBRUARY 8, 1998 BY AND BETWEEN CVS CORPORATION AND
[STOCKHOLDERS] WHICH AMONG OTHER THINGS RESTRICTS THE
TRANSFER AND VOTING THEREOF."
ARTICLE 6
Miscellaneous
Section 6.1. Termination of Agreement. The provisions of
Section 1.02 shall terminate at the Effective Time of the Merger Agreement or
upon the termination of the Merger Agreement; provided that Section 1.02 shall
not terminate upon termination of the Merger Agreement (i) pursuant to Section
7.01(d) or 7.01(e) of the Merger Agreement, or (ii) pursuant to Section 7.01(b)
of the Merger Agreement where the Board of Directors of Company has failed to
recommend the Merger or modified such recommendation in a manner adverse to
Buyer.
Section 6.2. Indemnity. (a) Buyer agrees that it will
indemnify each Stockholder from and against any costs, liabilities or expenses
(including reasonable attorneys' fees and expenses) arising out of any claim
or action brought by or on behalf of any shareholder of Company (other than any
Stockholder), alleging damage by reason of the grant by such Stockholder of
the Option contemplated hereby, or the exercise of the Option, provided that
(i) such indemnity shall apply if and only to the extent that the Company's
directors and officers liability insurance policies are insufficient to cover
any such cost, liability or expense or said insurer fails to pay under such
policy upon request (it being understood that in the case of any payment by
Buyer or Company hereunder, any such payment shall not waive or otherwise
affect any rights of Buyer or Company) and (ii) Buyer shall not be obligated
to indemnify any Stockholder hereunder for any cost, liability or expense
arising from the wilful misconduct of such Stockholder.
(b) Each Stockholder indemnified under paragraph (a) above
shall, promptly after receipt of notice of a claim or action against such
Stockholder in respect of which indemnity may be sought hereunder, notify
Buyer in writing of such claim or action; provided that the failure to notify
Buyer shall not relieve it from any liability that it may have to such
Stockholder on account of the indemnity contained in paragraph (a) above
except to the extent that Buyer was actually prejudiced by such failure.
Buyer shall be entitled to assume the defense of such claim or action with
counsel of its choice at Buyer's expense. Buyer shall not be liable to
indemnify any Stockholder if such Stockholder settles such claim or action
without the consent of Buyer. Buyer may not agree to any settlement of any
such claim or action unless such settlement includes an unconditional release
of Stockholder from all claims thereunder. In any action hereunder as to which
Buyer has assumed the defense thereof, the Stockholder shall continue to be
entitled to participate in the defense thereof, with counsel of its own choice
reasonably acceptable to Buyer and at the expense of Buyer.
Section 6.3. Expenses. All costs and expenses incurred in
connection with this Agreement shall be paid by the party incurring such cost
or expense.
Section 6.4. Further Assurances. In the event Buyer exercises
the Option, Buyer and the Stockholders will each execute and deliver or cause
to be executed and delivered all further documents and instruments and use its
best efforts to secure such consents and take all such further action as may be
reasonably necessary in order to consummate the transactions contemplated
hereby or to enable Buyer to exercise and enjoy all benefits and rights of the
Stockholders with respect to the Stockholder Shares acquired pursuant to
exercise of the Option.
Section 6.5. Additional Agreements. Subject to the terms and
conditions of this Agreement, each of the parties hereto agrees to use all
reasonable efforts to take, or cause to be taken, all action and to do, or
cause to be done, all things necessary, proper or advisable under applicable
laws and regulations and which may be required under any agreements, contracts,
commitments, instruments, understandings, arrangements or restrictions of any
kind to which such party is a party or by which such party is governed or
bound, to consummate and make effective the transactions contemplated by this
Agreement, to obtain all necessary waivers, consents and approvals and effect
all necessary registrations and filings, including, but not limited to,
filings under the HSR Act, responses to requests for additional information
related to such filings, and submission of information requested by
governmental authorities, and to rectify any event or circumstances which
could impede consummation of the transactions contemplated hereby.
Section 6.6. Specific Performance. The parties hereto agree
that Buyer would be irreparably damaged if for any reason the Stockholders
failed to sell the Stockholder Shares upon exercise of the Option or to
perform any of its other obligations under this Agreement, and that Buyer
would not have an adequate remedy at law for money damages in such event.
Accordingly, Buyer shall be entitled to specific performance and injunctive
and other equitable relief to enforce the performance of this Agreement by the
Stockholders. This provision is without prejudice to any other rights that
Buyer may have against the Stockholders for any failure to perform its
obligations under this Agreement.
Section 6.7. Notices. All notices, requests, claims, demands
and other communications hereunder shall be deemed to have been duly given
when delivered in person, by cable, telegram or telecopy, or by registered or
certified mail (postage prepaid, return receipt requested) to such party at its
address set forth on the signature page hereto.
Section 6.8. Survival of Representations and Warranties. All
representations and warranties contained in this Agreement shall survive
delivery of and payment for the Stockholder Shares.
Section 6.9. Amendments. This Agreement may not be modified,
amended, altered or supplemented, except upon the execution and delivery of a
written agreement executed by the parties hereto.
Section 6.10. Successors and Assigns. The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns, provided that no party may
assign, delegate or otherwise transfer any of its rights or obligations under
this Agreement without the consent of the other parties hereto.
Section 6.11. Governing Law. This Agreement shall be
construed in accordance with and governed by the law of the State of Michigan
without giving effect to the principles of conflicts of laws thereof.
Section 6.12. 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.
Section 6.13. 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.
Section 6.14. Counterparts; Effectiveness. This Agreement may
be signed in any number of counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement shall become effective when each party hereto shall
have received counterparts hereof signed by all of the other parties hereto.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the day and year first above written.
CVS CORPORATION
By: /s/ Xxxxxx X. Xxxx
-----------------------------------
Name: Xxxxxx X. Xxxx
Title: Vice Chairman and Chief
Operating Officer
CVS Corporation
Xxx XXX Xxxxx
Xxxxxxxxxx, XX 00000
Fax: (000) 000-0000
Attention: Xxxxxx X. Xxxx, Vice
Chairman and Chief
Operating Officer
Class of Shares XXXXXX XXXXXXXXX LIVING TRUST
Stock Owned
-------- ----------
common 13,275,555 By: /s/ Xxxxxx Xxxxxxxxx
----------------------------------
Name: Xxxxxx Xxxxxxxxx
Title: Trustee
Class of Shares
Stock Owned
-------- ----------
common 265,780 /s/ Xxxxxx X. Xxxxxxxxx
----------------------------------
Xxxxxx X. Xxxxxxxxx
Class of Shares TRUST FOR THE BENEFIT OF
Stock Owned XXXX X. XXXXXXXXX
-------- ----------
common 493,593 By: /s/ Xxxxxx X. Xxxxxxxxx
----------------------------------
Name: Xxxxxx Xxxxxxxxx
Title: Trustee
Class of Shares TRUST FOR THE BENEFIT OF
Stock Owned XXXXXX X. XXXXXXXXX
-------- ----------
common 493,593 By: /s/ Xxxxxx X. Xxxxxxxxx
----------------------------------
Name: Xxxxxx Xxxxxxxxx
Title: Trustee
Stockholder notices shall be given to:
Xxxxxxxx Xxxxxx Xxxxxxxx and Xxxx
0000 Xxxxx Xxxxxxxx Xxxxxxxx
Xxxxxxx, Xxxxxxxx 00000
Fax: (000) 000-0000
Attention: Xxxx X. Xxxxxxxx, Esq.
